FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
----------- ----------------------------------- ------------------
1-5324 NORTHEAST UTILITIES 04-2147929
(a Massachusetts voluntary association)
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-2010
Telephone: (413) 785-5871
0-11419 THE CONNECTICUT LIGHT AND POWER COMPANY 06-0303850
(a Connecticut corporation)
107 Selden Street
Berlin, Connecticut 06037-1616
Telephone: (860) 665-5000
1-6392 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE 02-0181050
(a New Hampshire corporation)
1000 Elm Street
Manchester, New Hampshire 03105-0330
Telephone: (603) 669-4000
0-7624 WESTERN MASSACHUSETTS ELECTRIC COMPANY 04-1961130
(a Massachusetts corporation)
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-2010
Telephone: (413) 785-5871
33-43508 NORTH ATLANTIC ENERGY CORPORATION 06-1339460
(a New Hampshire corporation)
1000 Elm Street
Manchester, New Hampshire 03105-0330
Telephone: (603) 669-4000
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date:
Company - Class of Stock Outstanding at July 31, 2000
------------------------ ----------------------------
Northeast Utilities
Common shares, $5.00 par value 148,670,036 shares
The Connecticut Light and Power Company
Common stock, $10.00 par value 7,584,884 shares
Public Service Company of New Hampshire
Common stock, $1.00 par value 1,000 shares
Western Massachusetts Electric Company
Common stock, $25.00 par value 590,093 shares
North Atlantic Energy Corporation
Common stock, $1.00 par value 1,000 shares
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms that
are found throughout this report:
COMPANIES
CL&P.......................... The Connecticut Light and Power Company
CMEEC......................... Connecticut Municipal Electric Energy
Cooperative
Con Edison.................... Consolidated Edison, Inc.
Dominion...................... Dominion Resources Inc.
Mode 1........................ Mode 1 Communications, Inc.
NAEC.......................... North Atlantic Energy Corporation
NGC........................... Northeast Generation Company
NNECO......................... Northeast Nuclear Energy Company
NU............................ Northeast Utilities
NU system..................... The Northeast Utilities system companies,
including NU and its wholly owned operating
subsidiaries: CL&P, PSNH, WMECO, NAEC,
and Yankee
NUSCO......................... Northeast Utilities Service Company
PSNH.......................... Public Service Company of New Hampshire
Select Energy................. Select Energy, Inc.
WMECO......................... Western Massachusetts Electric Company
Yankee........................ Yankee Energy System, Inc.
Yankee Gas.................... Yankee Gas Services Company
NUCLEAR UNITS
Millstone 1................... Millstone Unit No. 1, a 660 MW nuclear unit
completed in 1970 - currently in decommissioning
status
Millstone 2................... Millstone Unit No. 2, an 870 MW nuclear electric
generating unit completed in 1975
Millstone 3................... Millstone Unit No. 3, a 1,154 MW nuclear
electric generating unit completed in 1986
Seabrook...................... Seabrook Unit No. 1, a 1,148 MW nuclear electric
generating unit completed in 1986; Seabrook went
into service in 1990.
REGULATORS
CDEP.......................... Connecticut Department of Environmental
Protection
DOJ........................... U.S. Department of Justice Antitrust Division
DPUC.......................... Connecticut Department of Public Utility Control
DTE........................... Massachusetts Department of Telecommunications
and Energy
NHPUC......................... New Hampshire Public Utilities Commission
SEC........................... Securities and Exchange Commission
UOMA.......................... Utility Operations and Management Unit
OTHER
EPS........................... Earnings per share
ESPP.......................... Employee Stock Purchase Plan
Moody's....................... Moody's Investors Service
MW............................ Megawatts
NPDES......................... National Pollution Discharge Elimination System
NU 1999 Form 10-K............. The NU system combined 1999 Form 10-K as filed
with the SEC.
O&M........................... Operation and maintenance
Settlement Agreement.......... "Agreement to Settle PSNH Restructuring"
SFAS.......................... Statement of Financial Accounting Standards
Northeast Utilities and Subsidiaries
The Connecticut Light and Power Company and Subsidiaries
Public Service Company of New Hampshire
Western Massachusetts Electric Company and Subsidiary
North Atlantic Energy Corporation
TABLE OF CONTENTS
-----------------
Page
----
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
and
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the following companies:
Northeast Utilities and Subsidiaries
Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999.................. 2
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 2000 and 1999............................... 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999.............. 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 6
Report of Independent Public Accountants............. 16
The Connecticut Light and Power Company
and Subsidiaries
Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999.................. 18
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 2000 and 1999............................... 20
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999.............. 21
Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 22
Public Service Company of New Hampshire
Balance Sheets -
June 30, 2000 and December 31, 1999.................. 28
Statements of Income -
Three Months and Six Months Ended
June 30, 2000 and 1999............................... 30
Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999.............. 31
Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 32
Western Massachusetts Electric Company and Subsidiary
Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999.................. 36
Consolidated Statements of Income -
Three Months and Six Months Ended
June 30, 2000 and 1999............................... 38
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999.............. 39
Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 40
North Atlantic Energy Corporation
Balance Sheets -
June 30, 2000 and December 31, 1999.................. 46
Statements of Income -
Three Months and Six Months Ended
June 30, 2000 and 1999............................... 48
Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999.............. 49
Management's Discussion and Analysis of
Financial Condition and Results of Operations........ 50
Notes to Financial Statements
(unaudited - all companies)............................... 52
Part II. Other Information
Item 1. Legal Proceedings............................... 61
Item 4. Submission of Matters to a Vote
of Security Holders............................. 62
Item 5. Other Information............................... 65
Item 6. Exhibits and Reports on Form 8-K................ 65
Signatures.......................................................... 66
NORTHEAST UTILITIES AND SUBSIDIARIES
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
------
Utility Plant, at cost:
Electric................................................ $ 9,282,584 $ 9,185,272
Gas and other........................................... 842,077 226,002
------------- -------------
10,124,661 9,411,274
Less: Accumulated provision for depreciation......... 6,431,583 6,088,310
------------- -------------
3,693,078 3,322,964
Unamortized PSNH acquisition costs...................... 310,228 324,437
Construction work in progress........................... 183,916 177,504
Nuclear fuel, net....................................... 124,262 122,529
------------- -------------
Total net utility plant.............................. 4,311,484 3,947,434
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 739,107 711,910
Investments in regional nuclear generating
companies, at equity................................... 81,849 81,503
Other, at cost.......................................... 119,318 94,768
------------- -------------
940,274 888,181
------------- -------------
Current Assets:
Cash and cash equivalents............................... 301,636 255,154
Investments in securitizable assets..................... 65,929 107,620
Receivables, net........................................ 488,432 310,190
Unbilled revenues....................................... 87,913 75,728
Fuel, materials and supplies, at average cost........... 171,566 171,496
Recoverable energy costs, net - current portion......... 108,305 73,721
Prepayments and other................................... 223,930 77,371
------------- -------------
1,447,711 1,071,280
------------- -------------
Deferred Charges:
Regulatory assets:
Recoverable nuclear costs............................. 2,133,679 2,210,767
Income taxes, net..................................... 615,432 636,563
Deferred costs - nuclear plants....................... 71,142 111,588
Unrecovered contractual obligations................... 328,886 349,189
Recoverable energy costs, net......................... 194,904 228,166
Other................................................. 150,722 106,166
Unamortized debt expense................................ 36,480 39,192
Goodwill and other purchased intangible assets.......... 336,570 23,542
Other .................................................. 194,959 75,984
------------ ------------
4,062,774 3,781,157
------------ ------------
Total Assets.............................................. $ 10,762,243 $ 9,688,052
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common shareholders' equity:
Common shares, $5 par value - authorized
225,000,000 shares; 148,680,841 shares issued and
143,455,129 shares outstanding in 2000 and
137,393,829 shares issued and 131,870,284 shares
outstanding in 1999.................................. $ 743,404 $ 686,969
Capital surplus, paid in.............................. 1,102,334 940,726
Deferred contribution plan - employee stock
ownership plan...................................... (121,381) (127,725)
Retained earnings..................................... 639,973 581,817
Accumulated other comprehensive income................ 1,524 1,524
------------- -------------
Total common shareholders' equity.............. 2,365,854 2,083,311
Preferred stock not subject to mandatory redemption..... 136,200 136,200
Preferred stock subject to mandatory redemption......... 15,000 121,289
Long-term debt.......................................... 2,211,019 2,372,341
------------- -------------
Total capitalization........................... 4,728,073 4,713,141
------------- -------------
Minority Interest in Consolidated Subsidiary.............. 100,000 100,000
------------- -------------
Obligations Under Capital Leases.......................... 60,220 62,824
------------- -------------
Current Liabilities:
Notes payable to banks.................................. 1,104,000 278,000
Long-term debt and preferred stock - current portion.... 479,834 503,315
Obligations under capital leases - current portion...... 111,496 118,469
Accounts payable........................................ 547,509 347,321
Accrued taxes........................................... 142,890 158,684
Accrued interest........................................ 37,050 37,904
Other................................................... 109,502 126,768
------------- ------------
2,532,281 1,570,461
------------- ------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 1,699,169 1,688,114
Accumulated deferred investment tax credits............. 142,359 140,407
Decommissioning obligation - Millstone 1................ 662,209 702,351
Deferred contractual obligations........................ 326,582 358,387
Other................................................... 511,350 352,367
------------- ------------
3,341,669 3,241,626
------------- ------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities...................... $ 10,762,243 $ 9,688,052
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
(Thousands of Dollars, except share information)
<S> <C> <C> <C> <C>
Operating Revenues............................. $ 1,414,973 $ 1,038,569 $ 2,797,294 $ 2,081,976
------------- ------------- ------------- -------------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power.... 816,165 435,173 1,584,537 868,487
Other........................................ 192,960 203,261 394,421 386,637
Maintenance................................... 70,722 96,357 121,490 193,508
Depreciation.................................. 58,946 82,775 119,338 167,123
Amortization of regulatory assets, net........ 68,318 70,535 113,450 133,061
Federal and state income taxes................ 47,445 33,107 109,870 55,547
Taxes other than income taxes................. 61,325 60,869 119,687 131,483
------------- ------------- ------------- -------------
Total operating expenses............... 1,315,881 982,077 2,562,793 1,935,846
------------- ------------- ------------- -------------
Operating Income............................... 99,092 56,492 234,501 146,130
------------- ------------- ------------- -------------
Other Income/(Loss):
Equity in earnings of regional nuclear
generating and transmission companies..... 1,699 2,009 3,525 3,502
Nuclear related costs........................ (15,572) (1,313) (18,373) (2,684)
Other, net................................... (7,736) 1,157 (2,088) 785
Minority interest in loss of subsidiary...... (2,325) (2,325) (4,650) (4,650)
Income taxes................................. 21,119 14,045 28,955 20,439
------------- ------------- ------------- -------------
Other (loss)/income, net............... (2,815) 13,573 7,369 17,392
------------- ------------- ------------- -------------
Income before interest charges......... 96,277 70,065 241,870 163,522
------------- ------------- ------------- -------------
Interest Charges:
Interest on long-term debt................... 52,300 65,366 108,184 132,825
Other interest............................... 28,921 780 40,601 4,833
Deferred interest - nuclear plants........... (1,063) (2,249) (2,379) (4,689)
------------- ------------- ------------- -------------
Interest charges, net.................. 80,158 63,897 146,406 132,969
------------- ------------- ------------- -------------
Income after interest charges.......... 16,119 6,168 95,464 30,553
Preferred Dividends of Subsidiaries............ 3,913 5,940 8,671 11,881
------------- ------------- ------------- -------------
Net Income..................................... $ 12,206 $ 228 $ 86,793 $ 18,672
============= ============= ============= =============
Basic Earnings Per Common Share................ $ 0.09 $ - $ 0.62 $ 0.14
============= ============= ============= =============
Fully Diluted Earnings Per Common Share........ $ 0.08 $ - $ 0.62 $ 0.14
============= ============= ============= =============
Common Shares Outstanding (average)............ 143,284,493 131,317,892 139,476,432 131,214,191
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
2000 1999
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Income after interest charges............................. $ 95,464 $ 30,553
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation............................................ 119,338 167,123
Deferred income taxes and investment tax credits, net... (18,035) (3,961)
Amortization of regulatory assets, net.................. 113,450 133,061
Amortization of recoverable energy costs................ (1,435) (17,132)
Net other sources of cash............................... 26,903 89,449
Changes in working capital:
Receivables and unbilled revenues, net.................. (87,260) (138,976)
Fuel, materials and supplies............................ 4,595 4,323
Accounts payable........................................ 179,674 141,818
Accrued taxes........................................... (39,305) 16,251
Investments in securitizable assets..................... 41,691 113,458
Other working capital (excludes cash)................... (167,876) (66,206)
----------- -----------
Net cash provided by operating activities................... 267,204 469,761
----------- -----------
Investing Activities:
Investment in plant:
Electric, gas and other utility plant................... (137,143) (127,195)
Nuclear fuel............................................ (28,983) (37,893)
----------- -----------
Net cash flows used for investments in plant.............. (166,126) (165,088)
Investments in nuclear decommissioning trusts............. (32,911) (34,696)
Acquisition of unregulated businesses..................... - (22,985)
Other investment activities, net.......................... (25,696) (25,165)
Payment for purchase of Yankee, net of cash acquired...... (260,347) -
----------- -----------
Net cash flows used in investing activities................. (485,080) (247,934)
----------- -----------
Financing Activities:
Issuance of common shares................................. 2,456 2,962
Issuance of long-term debt................................ 26,477 6,700
Net increase in short-term debt........................... 756,000 228,000
Reacquisitions and retirements of long-term debt.......... (357,227) (336,945)
Reacquisitions and retirements of preferred stock......... (126,039) (26,500)
Cash dividends on preferred stock......................... (8,671) (11,881)
Cash dividends on common shares........................... (28,638) -
----------- -----------
Net cash flows provided by/(used in) financing activities... 264,358 (137,664)
----------- -----------
Net increase in cash and cash equivalents for the period.... 46,482 84,163
Cash and cash equivalents - beginning of period............. 255,154 136,155
----------- -----------
Cash and cash equivalents - end of period................... $ 301,636 $ 220,318
=========== ===========
Supplemental schedule of noncash investing and financing activities:
NU acquired all of the common stock of Yankee on March 1, 2000, for $712,484.
In conjunction with the acquisition, common stock was issued and debt was assumed
as follows:
Fair value of assets acquired $ 712,484
Cash paid (261,370)
NU common stock issued (217,114)
-----------
Debt assumed $ 234,000
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTHEAST UTILITIES AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This discussion should be read in conjunction with the consolidated financial
statements and footnotes in this Form 10-Q, the First Quarter 2000 Form 10-Q
and the 1999 Form 10-K.
FINANCIAL CONDITION
Overview
The financial improvement that began in 1999 continued through the six months
ended June 30, 2000. Northeast Utilities' (NU) 2000 year-to-date results
benefited from strong operating performance at the Millstone 2 and 3 and
Seabrook nuclear units, retail sales growth, continued control over operation
and maintenance (O&M) expenses, and better results in NU's unregulated
businesses.
Historically, second quarter earnings have been significantly lower due to the
seasonality of NU's retail sales. Despite this factor, NU earned $12.2
million, or $0.09 per basic share, for the three months ended June 30, 2000,
compared with essentially break-even results for the three months ended
June 30, 1999. NU earned $0.08 per share, for the three months ended June 30,
2000, on a fully diluted basis. The second quarter of 2000 results include
after-tax charges of $8 million, or $0.06 per share, associated with
Millstone-related litigation. The second quarter of 1999 had no significant
nonrecurring charges or gains.
NU earned $86.8 million, or $0.62 per share, for the six months ended June 30,
2000, compared with $18.7 million, or $0.14 per share, for the six months
ended June 30, 1999.
The impact of Yankee Energy System, Inc.'s (Yankee) results, combined with the
issuance of approximately 11.1 million NU common shares to former Yankee
shareholders and the issuance of short-term debt to finance the cash portion
of the merger, had a 5 cent per share dilutive impact on NU's earnings for the
second quarter of 2000. Typically, this quarter is the weakest for Yankee due
to the seasonality of its business.
For the three months ended June 30, 2000, NU's revenues totaled $1.41 billion,
up 36 percent from revenues of $1.04 billion for the three months ended
June 30, 1999. For the six months ended June 30, 2000, NU's revenues totaled
$2.8 billion, up 34 percent from revenues of $2.08 billion for the six months
ended June 30, 1999. This growth was primarily due to the increased revenues
of NU's unregulated energy service subsidiaries as a result of an expansion of
their electric and gas businesses and higher electric sales from NU's regulated
subsidiaries. Retail electric sales from NU's regulated subsidiaries benefited
from a 2.1 percent increase for the six months ended June 30, 2000, compared
with the six months ended June 30, 1999, despite milder weather. However, the
growth in sales was more than offset by The Connecticut Light and Power
Company's (CL&P) retail rate reduction of 5 percent in January 2000.
Aside from increased revenues, the primary reasons for better operating results
for the six months ended June 30, 2000, were the continued strong operating
performance of Millstone 2 and 3 and better results in NU's unregulated energy
service subsidiaries. During the first six months of 2000, Millstone 3
recorded a capacity factor of 100 percent. Millstone 2 returned to service
from a scheduled refueling outage in early June, nearly five days ahead of
schedule. The improvement in the unregulated energy service subsidiaries'
financial results is attributable to the ability of Select Energy, Inc.
(Select Energy) to better balance its energy purchase and sale commitments
since Select Energy's affiliate, Northeast Generation Company (NGC), obtained
1,289 megawatts (MW) of hydroelectric generation assets in March 2000.
NU's ability to continue improving its financial performance will depend
largely on continued regulated sales growth, continued control of O&M
expenses, the continued strong operating performance of the nuclear units,
and the growth and profitability of the unregulated energy businesses.
NU also hopes to complete in 2000 the majority of restructuring work remaining,
primarily the implementation of the "Agreement to Settle PSNH Restructuring"
(Settlement Agreement) in New Hampshire, the issuance of rate reduction bonds
(securitization) to lower the revenue requirements related to stranded costs
at CL&P, Public Service Company of New Hampshire (PSNH) and Western
Massachusetts Electric Company (WMECO), and the auction of NU's ownership
interests in the Millstone units. Additionally, NU plans to complete its
proposed merger with Consolidated Edison, Inc. (Con Edison) in 2000.
On August 7, 2000, CL&P, WMECO and certain other joint owners reached an
agreement to sell substantially all of the Millstone nuclear units. For
further information regarding the nuclear auction, see Note 10, "Subsequent
Event," to the consolidated financial statements.
Merger Agreement with Con Edison
On May 31, 2000, the Federal Energy Regulatory Commission approved the
proposed merger between NU and Con Edison.
On June 27, 2000, NU and Con Edison filed with the New Hampshire Public
Utilities Commission (NHPUC) a merger settlement agreement reached with the
NHPUC staff regarding the proposed merger of the two companies. The agreement
resolves issues that the NHPUC staff deemed significant and during hearings
before the NHPUC, which were held during July 2000, the staff indicated they
supported the merger.
Under the merger settlement agreement, the NHPUC is asked to determine that
the merger, subject to the conditions set forth in the agreement, is just and
reasonable, that the agreement does not set precedent as to the standard of
review for future mergers under NHPUC jurisdiction and that the acquisition
premium paid by Con Edison will not be a ratemaking item and will not in any
way impact the rates of PSNH. Additionally, PSNH customers are guaranteed to
receive 75 percent of the net estimated merger-related savings at the next
rate proceeding after the end of an initial 33-month fixed rate period
established as part of the restructuring Settlement Agreement or January 1,
2004, whichever occurs sooner. The merger settlement agreement also designates
that responsibility for certain operations of PSNH's transmission and
distribution system will remain in New Hampshire, establishes requirements
designed to maintain the current level of service reliability and establishes
requirements with the objective of maintaining the quality of PSNH's customer
service.
The merger is subject to the approval of other regulatory agencies, including
Connecticut and New York regulators, the Department of Justice, the Nuclear
Regulatory Commission, and the Securities and Exchange Commission. The
Connecticut Department of Public Utility Control is scheduled to issue a final
decision on the merger on September 13, 2000.
Liquidity
Net cash flows provided by operating activities decreased to $267.2 million
for the six months ended June 30, 2000, compared with $469.8 million for the
six months ended June 30, 1999. The primary reasons for the reduction were
the 5 percent decrease in CL&P retail rates that accompanied industry
restructuring in Connecticut on January 1, 2000, and changes in working
capital, including accrued taxes, prepayments and a reduced level of investment
in securitizable assets. Industry restructuring also resulted in lower
depreciation and amortization expense. Those factors were partially offset
by a $64.9 million increase in income after interest charges in the first six
months of 2000, compared with the same period in 1999.
Including construction expenditures, investments in nuclear decommissioning
trusts and the payment for the purchase of Yankee, net cash flows used in
investing activities were $485.1 million for the six months ended June 30,
2000, compared with $247.9 million for the six months ended June 30, 1999.
Net cash flows provided by financing activities were $264.4 million for the six
months ended June 30, 2000, compared with net cash flows used in financing
activities of $137.7 million for the six months ended June 30, 1999. The net
cash flows provided by financing activities included a net increase in
short-term debt of $756 million for the six months ended June 30, 2000,
compared with $228 million for the six months ended June 30, 1999. The
significant increase in short-term debt resulted primarily from two
transactions, the $430 million debt financing that accompanied the transfer
of 1,289 MW of hydroelectric generation assets to NGC in March 2000 and a $263
million debt financing that paid for the cash portion of the merger with
Yankee. Both were funded through bank debt that requires refinancing in late
2000 and early 2001.
The transfer of the hydroelectric generation assets to NGC produced a
significant source of cash for CL&P and WMECO, which was primarily used to
retire their long-term debt and preferred stock. NU's financing activities
for the six months ended June 30, 2000, included $483.3 million for the
retirement of long-term debt and preferred stock, compared with $363.4 million
for the six months ended June 30, 1999. Cash dividends on common shares paid
for the six months ended June 30, 2000, were $28.6 million compared with no
cash dividends paid for the six months ended June 30, 1999. Payments made for
the preferred stock dividends were $8.7 million and $11.9 million for the
six months ended June 30, 2000 and 1999, respectively.
During April 2000, Moody's Investors Service (Moody's) upgraded the debt
ratings of NU, PSNH and North Atlantic Energy Corporation (NAEC). All NU
system securities are under review for possible upgrades, or on "credit
watch" with positive implications by Standard & Poor's, Moody's and Fitch
IBCA. The Moody's upgrades will reduce the NU system's borrowing costs by
approximately $2.4 million on an annual basis.
On July 11, 2000, the NU Board of Trustees declared a 10 cent per share
dividend, payable on September 29, 2000, to shareholders of record as of
September 1, 2000.
During 2000, the NU system companies hope to receive regulatory approval to
begin the process of securitizing in excess of $2 billion of approved stranded
costs. Proceeds from securitization will be used to significantly reduce the
capitalization of NU's regulated subsidiaries and buyout or buydown certain
purchased-power contracts with a number of nonutility generators.
Restructuring
For information regarding commitments and contingencies related to
restructuring matters, see Note 2A, "Commitments and Contingencies -
Restructuring," to the consolidated financial statements.
Unregulated Energy Services
NU's unregulated energy service subsidiaries engage in a variety of energy-
related activities, primarily in the unregulated energy retail and wholesale
commodity, marketing and services fields. In addition, these subsidiaries
acquire and manage generation facilities, as well as provide services to the
electric generation market and large commercial and industrial customers in
the Northeast.
NU's unregulated energy service subsidiaries were essentially break-even in
the second quarter of 2000 and earned $3.5 million for the first six months
of 2000, compared with a net loss of $9.3 million in the second quarter of
1999 and a net loss of $14.1 million for the first six months of 1999. In
July 1999, NGC was announced as one of the winning bidders of certain CL&P and
WMECO hydroelectric generation assets. Management expected this transaction to
close by January 1, 2000. The transaction actually closed on March 14, 2000.
Had the transaction closed by January 1, 2000, management estimated the
unregulated energy service subsidiaries' earnings for the six months ended
June 30, 2000, would have been increased by approximately $6.8 million.
As a result of the delayed closing, CL&P and WMECO recognized the earnings
associated with the generation assets transferred from January 1, 2000,
through March 14, 2000. Unconsolidated revenues for the unregulated energy
service subsidiaries were $478.8 million in the second quarter of 2000 and
$916.1 million for the six months ended June 30, 2000. By comparison,
unconsolidated revenues for those businesses were $142.8 million in the second
quarter of 1999 and $244.5 million for the six months ended June 30, 1999.
CL&P's purchases from Select Energy represented $318.5 million of total
unregulated energy services' revenues for the six months ended June 30, 2000.
Nuclear Generation
Millstone Nuclear Units: During the first six months of 2000, Millstone 2 and
3 achieved capacity factors of 77 percent and 100 percent, respectively.
Millstone 2 was taken out of service on April 21, 2000, for a 45-day scheduled
refueling and maintenance outage and returned to service on June 1, 2000,
approximately five days ahead of schedule. Millstone 3 has been on-line for
398 consecutive days as of July 31, 2000. If the units operate as expected,
the revenues that result from the sale of their entitlements are expected to
recover CL&P's and WMECO's share of the nuclear operating costs including a
return of and on the remaining unrecovered nuclear plant balances. As
generation has been deregulated for CL&P and WMECO, recovery of these costs is
contingent on the plants operating.
Seabrook: Seabrook achieved a capacity factor of 96 percent for the first six
months of 2000. Seabrook's next scheduled refueling and maintenance outage is
scheduled for October 2000.
CL&P anticipates auctioning its ownership interest in Seabrook, with the
ownership interest of its affiliate NAEC, after implementation of the
Settlement Agreement. The Settlement Agreement requires divestiture prior
to December 31, 2003.
Market Risk and Risk Management Instruments
Interest Rate Risk Management Instruments: Several NU subsidiaries hold long-
term debt exposing the NU system to interest rate risk. The NU system uses
swaps and collars to reduce this interest rate risk by essentially creating
offsetting market exposures. In order to hedge some of this risk, interest
rate risk management instruments have been entered into on NAEC's $200 million
variable-rate note and on Yankee's $49 million fixed-rate bonds. Based on the
derivative instruments which are currently being utilized by the NU system
companies to hedge some of their interest rate risks, there will not be a
material impact on earnings upon adoption of Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS No. 138.
Gas Supply Risk Management Instruments: Yankee Gas Services Company (Yankee
Gas) has gas service agreements with certain customers to supply gas at fixed
prices for a 10-year term extending through 2005. Yankee Gas has hedged its
gas price risk under these agreements through commodity swap agreements. Under
these commodity swap agreements, the purchase price of a specified quantity of
gas is effectively fixed over the term of the gas service agreements, which
also extend through 2005. Based on the derivative instruments which are
currently being utilized to hedge some of these gas supply risks,
there may be an impact on earnings upon adoption of SFAS No. 133, as amended
by SFAS No. 138, which management has not estimated at this time.
Unregulated Energy Services Market Risk: NU's unregulated energy service
subsidiaries, as major providers of electricity and natural gas, have certain
market risks inherent in their business activities. Market risk represents
the risk of loss that may impact the companies' financial statements due to
adverse changes in commodity market prices. Through June 30, 2000, the
unregulated companies increased their volume of electricity and gas marketing
activities, increasing these risks. The servicing of CL&P's standard offer
load is a significant risk for Select Energy, as this contract is for a 4-year
period at a fixed price. This risk is partially mitigated by Select Energy
entering into purchase contracts with other energy providers to supply a
portion of the standard offer requirement, including the purchase of 850 MW
of output from the Millstone and Seabrook nuclear units. If Select Energy is
unable to source its remaining load requirement at prices below the standard
offer contract price as a result of energy price increases, Select Energy's
earnings would be impacted by these market fluctuations. Policies and
procedures have been established to manage these exposures, including the use
of risk management instruments and the purchase of insurance for the output
from the Millstone nuclear entitlements for June, July and August 2000.
Other Matters
Other Commitments and Contingencies: For further information regarding other
commitments and contingencies, see Note 2, "Commitments and Contingencies,"
to the consolidated financial statements.
Forward Looking Statements: This discussion and analysis includes forward
looking statements, which are statements of future expectations and not facts.
Words such as estimates, expects, anticipates, intends, plans, and similar
expressions identify forward looking statements. Actual results or outcomes
could differ materially as a result of further actions by state and federal
regulatory bodies, competition and industry restructuring, changes in economic
conditions, changes in historical weather patterns, changes in laws,
developments in legal or public policy doctrines, technological developments,
and other presently unknown or unforeseen factors.
RESULTS OF OPERATIONS
The components of significant income statement variances for the second quarter
of 2000 and the first six months of 2000 are provided in the table below.
Income Statement Variances
(Millions of Dollars)
2000 over/(under) 1999
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating Revenues $376 36% $715 34%
Fuel, purchased and net
interchange power 381 88 716 82
Other operation (10) (5) 8 2
Maintenance (26) (27) (72) (37)
Depreciation (24) (29) (48) (29)
Amortization of regulatory
assets, net (2) (3) (20) (15)
Federal and state income taxes 7 38 46 (a)
Nuclear related costs (14) (a) (16) (a)
Other, net (9) (a) (3) (a)
Interest on long-term debt (13) (20) (25) (19)
Other interest 28 (a) 36 (a)
Net Income 12 (a) 68 (a)
(a) Percent greater than 100.
Comparison of the Second Quarter of 2000 to the Second Quarter of 1999
----------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $376 million or 36 percent in the second
quarter of 2000, as compared to the same period of 1999, primarily due to
increased revenues of NU's unregulated energy service subsidiaries ($336
million), as a result of an expansion of their electric and gas businesses,
and revenues from Yankee ($63 million), partially offset by lower regulated
retail revenues ($11 million), as a result of the CL&P rate reduction, and
lower wholesale revenues.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to higher purchased energy and capacity costs for Select Energy ($311
million), Yankee expenses ($30 million) and higher purchased power for the
regulated subsidiaries ($40 million).
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to lower spending at the
nuclear units ($36 million), lower expenses due to the sale of certain CL&P
and WMECO fossil generation assets ($16 million) and higher pension credits
($19 million), partially offset by the addition of Yankee ($19 million) and
higher O&M expenses for the unregulated businesses ($13 million) primarily due
to business expansion.
Depreciation
Depreciation expense decreased in 2000, primarily due to the reclassification
of depreciable nuclear plant balances to regulatory assets ($21 million).
Federal and State Income Taxes
Federal and state income taxes increased in 2000, primarily due to higher
taxable income.
Nuclear Related Costs
Nuclear related costs increased in 2000, primarily due to the CL&P and WMECO
settlement of Millstone-related litigation, net of insurance proceeds
($12 million).
Other, Net
Other, net decreased in 2000, primarily due to costs associated with the
settlement of a Millstone-related shareholder lawsuit in 2000 ($5 million)
and the recognition in 1999 of the revenues associated with the Holyoke Water
Power Company capacity sales contract buyout ($7 million).
Interest on Long-Term Debt
Interest on long-term debt decreased in 2000, primarily due to reacquisitions
and retirements of long-term debt in 1999 and 2000.
Other Interest
Other interest expense increased in 2000, primarily due to higher short-term
borrowings associated with the NGC asset transfer and the Yankee merger.
Comparison of the First Six Months of 2000 to the First Six Months of 1999
--------------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $715 million or 34 percent for the first
six months of 2000, as compared to the same period of 1999, primarily due to
increased revenues for NU's unregulated energy service subsidiaries ($672
million), as a result of an expansion of their electric and gas businesses,
revenues from Yankee ($99 million) and higher regulated electric revenues
($7 million), partially offset by lower regulated wholesale revenues.
The regulated electric revenues are higher as a result of the impact of
Millstone 2 being returned to CL&P's rate base ($33 million) and higher retail
sales ($29 million), partially offset by a CL&P rate reduction ($55 million).
Regulated retail kilowatt-hour sales increased by 2.1 percent in 2000.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to higher purchased energy and capacity costs for Select Energy ($608
million), Yankee expenses ($46 million) and higher purchased power for the
regulated subsidiaries ($62 million).
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to lower spending at the
nuclear units ($80 million), lower expenses due to the sale of certain CL&P
and WMECO fossil generation assets ($24 million) and higher pension credits
($24 million), partially offset by higher O&M expenses for the unregulated
businesses ($30 million) primarily due to the business expansion, the addition
of Yankee ($28 million) and higher transmission expenses ($8 million).
Depreciation
Depreciation expense decreased in 2000, primarily due to the reclassification
of depreciable nuclear plant balances to regulatory assets ($42 million) and
the sale of certain CL&P and WMECO fossil generation assets.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net decreased in 2000, primarily due to
changes in amortization levels as a result of industry restructuring ($72
million) and the completion of the amortization of CL&P's cogeneration deferral
in the first quarter of 1999 ($6 million). These decreases were partially
offset by higher amortization associated with the reclassified nuclear plant
balances ($42 million) and the expiration in May 1999 of a net operating loss
carryforward (credit to expense) accounted for as a regulatory obligation ($11
million).
Federal and State Income Taxes
Federal and state income taxes increased in 2000, primarily due to higher
taxable income.
Nuclear Related Costs
Nuclear related costs increased in 2000, primarily due to the CL&P and WMECO
settlement of Millstone-related litigation, net of insurance proceeds
($14 million).
Interest on Long-Term Debt
Interest on long-term debt decreased in 2000, primarily due to reacquisitions
and retirements of long-term debt in 1999 and 2000.
Other Interest
Other interest expense increased in 2000, primarily due to higher short-term
borrowings associated with the NGC asset transfer and the Yankee merger.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Northeast Utilities:
We have reviewed the accompanying consolidated balance sheet of Northeast
Utilities (a Massachusetts trust) and subsidiaries as of June 30, 2000, and
the related consolidated statements of income for the three and six-month
periods ended June 30, 2000 and 1999, and the consolidated statements of cash
flows for the six-month periods ended June 30, 2000 and 1999. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999 and the
related consolidated statements of income, comprehensive income, shareholder's
equity and cash flows for the year then ended (not presented separately
herein), and in our report dated January 25, 2000, we expressed an unqualified
opinion on those financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 1999,
is fairly stated in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Hartford, Connecticut
August 9, 2000
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
------
Utility Plant, at original cost:
Electric................................................ $ 5,701,883 $ 5,811,126
Less: Accumulated provision for depreciation......... 4,172,959 4,234,771
------------- -------------
1,528,924 1,576,355
Construction work in progress........................... 95,737 115,529
Nuclear fuel, net....................................... 77,887 80,766
------------- -------------
Total net utility plant.............................. 1,702,548 1,772,650
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 535,111 516,796
Investments in regional nuclear generating
companies, at equity................................... 54,789 54,472
Other, at cost.......................................... 30,000 36,696
------------- -------------
619,900 607,964
------------- -------------
Current Assets:
Cash.................................................... 10,549 364
Investment in securitizable assets...................... 65,929 107,620
Notes receivable from affiliated companies.............. 36,700 -
Receivables, net........................................ 29,216 19,680
Accounts receivable from affiliated companies........... 96,856 3,390
Fuel, materials and supplies, at average cost........... 38,092 37,603
Prepayments and other................................... 201,210 148,628
------------- -------------
478,552 317,285
------------- -------------
Deferred Charges:
Regulatory assets:
Recoverable nuclear costs............................. 1,148,682 1,781,929
Income taxes,net...................................... 387,343 399,467
Unrecovered contractual obligations................... 219,240 228,944
Recoverable energy costs, net......................... 86,302 89,422
Other................................................. 65,318 64,333
Unamortized debt expense................................ 15,190 16,323
Other................................................... 41,458 19,967
------------- -------------
1,963,533 2,600,385
------------- -------------
Total Assets.............................................. $ 4,764,533 $ 5,298,284
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, $10 par value - authorized
24,500,000 shares; 7,584,884 shares outstanding in 2000
and 12,222,930 shares outstanding in 1999................ $ 75,849 $ 122,229
Capital surplus, paid in.................................. 414,955 665,598
Retained earnings......................................... 192,311 153,254
Accumulated other comprehensive income.................... 416 416
------------- -------------
Total common stockholder's equity................ 683,531 941,497
Preferred stock not subject to mandatory redemption....... 116,200 116,200
Preferred stock subject to mandatory redemption........... - 79,789
Long-term debt............................................ 1,066,669 1,241,051
------------- -------------
Total capitalization............................. 1,866,400 2,378,537
------------- -------------
Minority Interest in Consolidated Subsidiary................ 100,000 100,000
------------- -------------
Obligations Under Capital Leases............................ 50,032 50,969
------------- -------------
Current Liabilities:
Notes payable to banks.................................... 90,000 90,000
Notes payable to affiliated company....................... - 11,700
Long-term debt and preferred stock - current portion...... 160,000 178,755
Obligations under capital leases - current portion........ 88,381 93,431
Accounts payable.......................................... 179,391 101,106
Accounts payable to affiliated companies.................. 72,653 3,215
Accrued taxes............................................. 37,286 169,214
Accrued interest.......................................... 13,810 18,640
Other..................................................... 24,344 26,347
------------- -------------
665,865 692,408
------------- -------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes......................... 1,000,571 999,473
Accumulated deferred investment tax credits............... 103,418 107,064
Decommissioning obligation - Millstone 1.................. 568,088 580,320
Deferred contractual obligations.......................... 216,936 238,142
Other..................................................... 193,223 151,371
------------- -------------
2,082,236 2,076,370
------------- -------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities........................ $ 4,764,533 $ 5,298,284
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -----------------------
2000 1999 2000 1999
--------- --------- ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues................................. $683,585 $565,069 $1,431,561 $1,172,066
--------- --------- ----------- -----------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power..... 392,286 214,427 822,710 475,256
Other......................................... 99,708 123,727 201,036 236,491
Maintenance...................................... 39,122 58,007 66,701 122,807
Depreciation..................................... 28,876 52,968 61,396 108,310
Amortization of regulatory assets, net........... 18,721 37,522 26,439 72,967
Federal and state income taxes................... 27,359 14,774 65,950 24,757
Taxes other than income taxes.................... 34,790 39,274 68,585 86,696
--------- --------- ----------- -----------
Total operating expenses................... 640,862 540,699 1,312,817 1,127,284
--------- --------- ----------- -----------
Operating Income................................... 42,723 24,370 118,744 44,782
--------- --------- ----------- -----------
Other Income/(Loss):
Equity in earnings of regional nuclear
generating companies........................... 718 965 1,531 1,520
Nuclear related costs............................ (12,220) - (14,564) -
Other, net....................................... 90 (2,874) 1,600 (3,372)
Minority interest in loss of subsidiary.......... (2,325) (2,325) (4,650) (4,650)
Income taxes..................................... 14,466 7,663 15,722 11,891
--------- --------- ----------- -----------
Other income/(loss), net................... 729 3,429 (361) 5,389
--------- --------- ----------- -----------
Income before interest charges............. 43,452 27,799 118,383 50,171
--------- --------- ----------- -----------
Interest Charges:
Interest on long-term debt....................... 22,030 32,258 46,129 65,295
Other interest................................... 2,236 2,355 3,425 5,396
--------- --------- ----------- -----------
Interest charges, net...................... 24,266 34,613 49,554 70,691
--------- --------- ----------- -----------
Net Income/(Loss).................................. $ 19,186 $ (6,814) $ 68,829 $ (20,520)
========= ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
2000 1999
----------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income/(loss)......................................... $ 68,829 $ (20,520)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation............................................ 61,396 108,310
Deferred income taxes and investment tax credits, net... 11,682 (18,878)
Amortization of regulatory assets, net.................. 26,439 72,967
Amortization of demand-side-management costs, net....... - 13,891
Amortization of recoverable energy costs................ 3,120 (22,789)
Nuclear related costs................................... 14,564 -
Amortization of gain on transfer of utility plant....... 12,738 -
Allocation of ESOP benefits............................. (150) (30,170)
Net other sources of cash............................... 4,934 92,713
Changes in working capital:
Receivables............................................. (103,002) (38,150)
Fuel, materials and supplies............................ (489) 8
Accounts payable........................................ 147,723 6,490
Accrued taxes........................................... (131,928) 3,259
Investments in securitizable assets..................... 41,691 91,593
Other working capital (excludes cash)................... (59,415) (3,964)
----------- ----------
Net cash flows provided by operating activities............. 98,132 254,760
----------- ----------
Investing Activities:
Investment in plant:
Electric utility plant.................................. (80,495) (77,156)
Nuclear fuel............................................ (13,851) (23,947)
----------- ----------
Net cash flows used for investments in plant.............. (94,346) (101,103)
Investment in NU system Money Pool........................ (36,700) (77,700)
Investments in nuclear decommissioning trusts............. (24,336) (24,132)
Other investment activities, net.......................... 560 (1,401)
Net proceeds from the transfer of utility plant........... 686,807 -
----------- ----------
Net cash flows provided by/(used in) investing activities... 531,985 (204,336)
----------- ----------
Financing Activities:
Net (decrease)/increase in short-term debt................ (11,700) 170,000
Reacquisitions and retirements of long-term debt.......... (179,071) (214,010)
Reacquisitions and retirements of preferred stock......... (99,539) -
Repurchase of common shares............................... (300,000) -
Cash dividends on preferred stock......................... (4,622) (6,450)
Cash dividends on common stock............................ (25,000) -
----------- ----------
Net cash flows used in financing activities................. (619,932) (50,460)
----------- ----------
Net increase/(decrease) in cash for the period.............. 10,185 (36)
Cash - beginning of period.................................. 364 434
----------- ----------
Cash - end of period........................................ $ 10,549 $ 398
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
CL&P is a wholly owned subsidiary of NU. This discussion should be read in
conjunction with NU's management's discussion and analysis of financial
condition and results of operations, consolidated financial statements and
footnotes in this Form 10-Q, the First Quarter 2000 Form 10-Q and the NU
1999 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the second quarter
of 2000 and the first six months of 2000 are provided in the table below.
Income Statement Variances
(Millions of Dollars)
2000 over/(under) 1999
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating revenues $119 21% $259 22%
Fuel, purchased and net
interchange power 178 83 347 73
Other operation (24) (19) (35) (15)
Maintenance (19) (33) (56) (46)
Depreciation (24) (45) (47) (43)
Amortization of regulatory
assets, net (19) (50) (47) (64)
Federal and state income taxes 6 81 37 (a)
Taxes other than income taxes (4) (11) (18) (21)
Nuclear related costs (12) (a) (15) (a)
Other, net 3 (a) 5 (a)
Interest on long-term debt (10) (32) (19) (29)
Net Income 26 (a) 89 (a)
(a) Percent greater than 100.
Comparison of the Second Quarter of 2000 to the Second Quarter of 1999
----------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $119 million or 21 percent in the second
quarter of 2000, as compared to the same period of 1999, primarily due to
higher wholesale revenues ($112 million), as a result of the sale of the output
from Millstone 2 and 3, and higher transmission and other miscellaneous
revenues ($12 million), partially offset by lower retail revenues ($6 million).
Retail revenues are lower primarily as a result of a 5 percent rate reduction
($25 million), partially offset by the impact of Millstone 2 being returned to
CL&P's rate base ($13 million) and higher retail sales ($6 million). Retail
sales increased by 0.5 percent in 2000.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to the transition, under industry restructuring, of purchasing full
requirements for customers from standard offer suppliers, in addition to the
remaining fuel costs of the nuclear units and cogenerators.
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to lower spending at the
nuclear units ($14 million) and lower expenses due to the sale of certain
fossil generation assets and the transfer of certain hydroelectric generation
assets ($23 million).
Depreciation
Depreciation expense decreased in 2000, primarily due to the reclassification
of depreciable nuclear plant balances to regulatory assets ($17 million) and
the sale of certain fossil generation assets and the transfer of certain
hydroelectric generation assets.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net decreased in 2000, primarily due to
changes in amortization levels as a result of industry restructuring ($36
million). This decrease was partially offset by higher amortization associated
with the reclassified nuclear plant balances ($17 million).
Federal and State Income Taxes
Federal and state income taxes increased in 2000, primarily due to higher
taxable income.
Nuclear Related Costs
Nuclear related costs increased in 2000, primarily due to the settlement of
Millstone-related litigation, net of insurance proceeds ($9 million) and a
write-off associated with the former Connecticut Municipal Electric Energy
Cooperative (CMEEC) nuclear entitlements ($3 million).
Interest on Long-Term Debt
Interest on long-term debt decreased in 2000, primarily due to reacquisitions
and retirements of long-term debt in 1999 and 2000.
Comparison of the First Six Months of 2000 to the First Six Months of 1999
--------------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $259 million or 22 percent for the first
six months of 2000, as compared to the same period of 1999, primarily due to
higher wholesale revenues ($248 million) and higher transmission and other
miscellaneous revenues ($22 million), partially offset by lower retail
revenues ($11 million).
Wholesale revenues are higher as a result of the sale of the output from
Millstone 2 and 3. Retail revenues are lower primarily as a result of a rate
reduction ($57 million), partially offset by the impact of Millstone 2 being
returned to CL&P's rate base ($33 million) and higher retail sales. Regulated
retail kilowatt-hour sales increased by 0.8 percent in 2000.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to the transition, under industry restructuring, of purchasing full
requirements for customers from standard offer suppliers, in addition to the
remaining fuel costs of the nuclear units and cogenerators.
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to lower spending at the
nuclear units ($44 million), lower expenses due to the sale of certain fossil
generation assets and the transfer of certain hydroelectric generation assets
($33 million) and lower administrative and general expenses ($14 million)
primarily due to pension credits.
Depreciation
Depreciation expense decreased in 2000, primarily due to the reclassification
of depreciable nuclear plant balances to regulatory assets ($35 million) and
the sale of certain fossil generation assets and the transfer of certain
hydroelectric generation assets.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net decreased in 2000, primarily due to
changes in amortization levels as a result of industry restructuring ($76
million) and the completion of the amortization of CL&P's cogeneration deferral
in the first quarter of 1999 ($6 million). These decreases were partially
offset by the higher amortization associated with the reclassified nuclear
plant balances ($35 million).
Federal and State Income Taxes
Federal and state income taxes increased in 2000, primarily due to higher
taxable income.
Taxes Other Than Income Taxes
Taxes other than income taxes decreased primarily due to lower gross earnings
taxes ($10 million) and lower property taxes ($5 million).
Nuclear Related Costs
Nuclear related costs increased in 2000, primarily due to the settlement of
Millstone-related litigation, net of insurance proceeds ($9 million) and a
write-off associated with the former CMEEC nuclear entitlement ($6 million).
Other, Net
Other, net increased primarily due to higher miscellaneous income.
Interest on Long-Term Debt
Interest on long-term debt decreased in 2000, primarily due to reacquisitions
and retirements of long-term debt in 1999 and 2000.
LIQUIDITY
Net cash flows provided by operating activities decreased to $98.1 million for
the six months ended June 30, 2000, compared with $254.8 million for the six
months ended June 30, 1999. The primary reasons for the reduction were the
75 percent decrease in retail rates that accompanied industry restructuring on
January 1, 2000, and changes in working capital, including accrued taxes,
prepayments and a reduced level of investment in securitizable assets.
Industry restructuring also resulted in lower depreciation and amortization
expense. Those factors were partially offset by an $89.3 million increase
in income after interest charges in the first six months of 2000, compared
with the same period in 1999.
Including construction expenditures and investments in nuclear decommissioning
trusts, net cash flows provided by investing activities were $532 million for
the six months ended June 30, 2000, compared with net cash flows used in
investing activities of $204.3 million for the six months ended June 30, 1999.
The primary reasons for the increase were the net proceeds from the transfer
of utility plant to NGC, offset by a decreased investment in the NU system
Money Pool.
Net cash flows used in financing activities were $619.9 million for the six
months ended June 30, 2000, compared with $50.5 million for the six months
ended June 30, 1999. The net cash flows included a net decrease in short-term
debt of $11.7 million for the six months ended June 30, 2000, compared with a
net increase in short-term debt of $170 million for the six months ended
June 30, 1999.
The transfer of the hydroelectric generation assets to NGC produced a
significant source of cash for CL&P, which was primarily used to retire
short-term debt, long-term debt and preferred stock, as well as repurchase
common stock. Financing activities for the six months ended June 30, 2000,
included $578.6 million for the retirement of long-term debt and preferred
stock and the repurchase of common stock, compared with $214 million for the
six months ended June 30, 1999. Cash dividends on common shares paid for the
six months ended June 30, 2000, were $25 million, compared with no cash
dividends paid for the six months ended June 30, 1999. Payments made for the
preferred stock dividends were $4.6 million and $6.5 million for the six
months ended June 30, 2000 and 1999, respectively.
During 2000, CL&P hopes to receive regulatory approval to begin the process of
securitizing $1.4 billion of its stranded costs. Proceeds from securitization
will be used to significantly reduce the capitalization of CL&P and buyout or
buydown certain purchased-power contracts with a number of nonutility
generators.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
------
Utility Plant, at cost:
Electric................................................ $ 1,965,698 $ 1,939,856
Less: Accumulated provision for depreciation......... 695,628 674,155
------------- -------------
1,270,070 1,265,701
Unamortized acquisition costs........................... 310,228 324,437
Construction work in progress........................... 22,403 17,160
Nuclear fuel, net....................................... 1,259 1,734
------------- -------------
Total net utility plant.............................. 1,603,960 1,609,032
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 7,261 6,880
Investments in regional nuclear generating
companies and subsidiary company, at equity............ 18,409 18,855
Other, at cost.......................................... 3,009 3,149
------------- -------------
28,679 28,884
------------- -------------
Current Assets:
Cash and cash equivalents............................... 218,126 182,588
Receivables, net........................................ 71,393 79,290
Accounts receivable from affiliated companies........... 5,976 9,091
Taxes receivable from affiliated companies.............. 3,245 11,661
Accrued utility revenues................................ 51,025 48,822
Fuel, materials and supplies, at average cost........... 32,876 38,076
Recoverable energy costs - current portion.............. 108,732 73,721
Prepayments and other................................... 31,161 18,121
------------- -------------
522,534 461,370
------------- -------------
Deferred Charges:
Regulatory assets:
Recoverable energy costs............................... 102,496 120,721
Income taxes, net...................................... 155,242 166,155
Deferred costs - nuclear plant......................... 91,654 144,418
Unrecovered contractual obligations.................... 51,760 56,544
Other.................................................. 3,011 3,083
Deferred receivable from affiliated company............. 8,112 12,984
Unamortized debt expense................................ 11,635 11,896
Other................................................... 8,920 7,346
------------- -------------
432,830 523,147
------------- -------------
Total Assets.............................................. $ 2,588,003 $ 2,622,433
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, $1 par value - authorized
100,000,000 shares; 1,000 shares outstanding
in 2000 and 1999....................................... $ 1 $ 1
Capital surplus, paid in................................ 424,825 424,654
Retained earnings....................................... 348,917 319,938
Accumulated other comprehensive income.................. 1,074 1,074
------------- -------------
Total common stockholder's equity.............. 774,817 745,667
Preferred stock subject to mandatory redemption......... - 25,000
Long-term debt.......................................... 516,485 516,485
------------- -------------
Total capitalization........................... 1,291,302 1,287,152
------------- -------------
Obligations Under Seabrook Power Contracts
and Other Capital Leases................................. 579,005 624,477
------------- -------------
Current Liabilities:
Long-term debt and preferred stock - current portion.... 25,000 25,000
Obligations under Seabrook Power Contracts and other
capital leases - current portion....................... 108,499 101,676
Accounts payable........................................ 36,961 38,685
Accounts payable to affiliated companies................ 43,837 38,229
Accrued taxes........................................... 61,408 33,443
Accrued interest........................................ 6,175 6,294
Accrued pension benefits................................ 43,591 45,504
Other................................................... 8,305 10,184
------------- -------------
333,776 299,015
------------- -------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 247,546 266,644
Accumulated deferred investment tax credits............. 12,008 12,532
Deferred contractual obligations........................ 51,760 56,544
Deferred revenue from affiliated company................ 8,112 12,984
Other................................................... 64,494 63,085
------------- -------------
383,920 411,789
------------- -------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities...................... $ 2,588,003 $ 2,622,433
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues................................. $ 326,458 $ 286,824 $ 655,152 $ 573,623
---------- ---------- ---------- -----------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power..... 212,809 171,849 423,339 339,822
Other......................................... 30,520 31,166 63,542 59,329
Maintenance...................................... 12,607 15,321 24,566 28,585
Depreciation..................................... 10,727 12,195 23,049 23,957
Amortization of regulatory assets, net........... 11,469 8,719 22,939 11,933
Federal and state income taxes................... 12,759 6,778 25,812 22,145
Taxes other than income taxes.................... 11,133 11,377 22,229 22,984
---------- ---------- ---------- -----------
Total operating expenses................... 302,024 257,405 605,476 508,755
---------- ---------- ---------- -----------
Operating Income................................... 24,434 29,419 49,676 64,868
---------- ---------- ---------- -----------
Other Income/(Loss):
Equity in earnings of regional nuclear
generating companies and subsidiary company.... 275 297 591 607
Other, net....................................... 1,576 3,736 7,774 6,303
Income taxes..................................... (1,755) (2,203) (5,188) (4,202)
---------- ---------- ---------- -----------
Other income, net.......................... 96 1,830 3,177 2,708
---------- ---------- ---------- -----------
Income before interest charges............. 24,530 31,249 52,853 67,576
---------- ---------- ---------- -----------
Interest Charges:
Interest on long-term debt....................... 10,307 10,589 21,104 21,577
Other interest................................... (29) (35) 66 23
---------- ---------- ---------- -----------
Interest charges, net...................... 10,278 10,554 21,170 21,600
---------- ---------- ---------- -----------
Net Income......................................... $ 14,252 $ 20,695 $ 31,683 $ 45,976
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
2000 1999
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Operating activities:
Net income............................................... $ 31,683 $ 45,976
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation........................................... 23,049 23,957
Deferred income taxes and investment tax credits, net.. 2,129 19,932
Amortization of recoverable energy costs, net.......... (16,786) 4,118
Amortization of regulatory assets, net................. 22,939 11,933
Amortization of Seabrook capital costs................. 8,577 8,422
Allocation of ESOP benefits............................ (54) (10,450)
Net other uses of cash................................. (19,338) (14,986)
Changes in working capital:
Receivables and unbilled revenues...................... 8,809 (10,312)
Fuel, materials and supplies........................... 5,200 856
Accounts payable....................................... 3,884 11,179
Accrued taxes.......................................... 27,965 (25,058)
Other working capital (excludes cash).................. (8,535) (17,521)
----------- -----------
Net cash flows provided by operating activities............ 89,522 48,046
----------- -----------
Investing Activities:
Investment in plant:
Electric utility plant................................. (26,596) (20,162)
Nuclear fuel........................................... (4) (1,055)
----------- -----------
Net cash flows used for investments in plant............. (26,600) (21,217)
Investment in nuclear decommissioning trust.............. (320) (350)
Other investment activities, net......................... 586 (49)
----------- -----------
Net cash flows used in investing activities................ (26,334) (21,616)
----------- -----------
Financing Activities:
Issuance of long-term debt............................... - 24,500
Reacquistions and retirements of preferred stock......... (25,000) (25,000)
Cash dividends on preferred stock........................ (2,650) (3,975)
----------- -----------
Net cash flows used in financing activities................ (27,650) (4,475)
----------- -----------
Net increase in cash and cash equivalents for the period... 35,538 21,955
Cash and cash equivalents - beginning of period............ 182,588 60,885
----------- -----------
Cash and cash equivalents- end of period................... $ 218,126 $ 82,840
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
Management's Discussion and Analysis of
Financial Condition and Results of Operations
PSNH is a wholly owned subsidiary of NU. This discussion should be read in
conjunction with NU's management's discussion and analysis of financial
condition and results of operations, consolidated financial statements and
footnotes in this Form 10-Q, the First Quarter 2000 Form 10-Q and the NU 1999
Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the second quarter
of 2000 and the first six months of 2000 are provided in the table below.
Income Statement Variances
(Millions of Dollars)
2000 over/(under) 1999
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating revenues $40 14% $82 14%
Fuel, purchased and net
interchange power 41 24 84 25
Other operation (1) (2) 4 7
Maintenance (3) (18) (4) (14)
Amortization of regulatory
assets, net 3 32 11 92
Federal and state income taxes 6 62 5 18
Net Income (6) (31) (14) (31)
Comparison of the Second Quarter of 2000 to the Second Quarter of 1999
----------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $40 million or 14 percent in the second
quarter of 2000, as compared to the same period of 1999, primarily due to the
higher wholesale revenues from higher capacity and energy sales ($36 million)
and higher transmission revenues ($3 million).
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to higher wholesale sales.
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to lower administrative and
general expenses ($2 million) and lower expenses associated with the fossil
plants ($2 million).
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2000, primarily due to the
expiration in May 1999 of a net operating loss carryforward (credit to expense)
accounted for as a regulatory obligation.
Federal and State Income Taxes
Federal and state income taxes increased in 2000, primarily due to the
utilization in 1999 of net operating loss carryforwards.
Comparison of the First Six Months of 2000 to the First Six Months of 1999
--------------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $82 million or 14 percent for the first
six months of 2000, as compared to the same period of 1999, primarily due to
higher wholesale revenues ($62 million), higher retail revenues ($17 million)
and higher transmission revenues ($3 million).
Wholesale revenues are higher primarily as a result of higher capacity and
energy sales. Retail revenues are higher primarily as a result of higher
retail sales which increased by 4 percent in 2000.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to higher wholesale sales.
Other Operation and Maintenance
Other O&M expenses were unchanged in 2000, as compared to 1999.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2000, primarily due to
the expiration in May 1999 of a net operating loss carryforward (credit to
expense) accounted for as a regulatory obligation.
Federal and State Income Taxes
Federal and state income taxes increased in 2000, primarily due to the
utilization in 1999 of net operating loss carryforwards.
LIQUIDITY
Net cash flows provided by operating activities increased to $89.5 million for
the six months ended June 30, 2000, compared with $48 million for the six
months ended June 30, 1999. The primary reasons for the increase were due to
changes in working capital, including receivables and unbilled revenues and
accrued taxes, and higher amortization of regulatory assets, offset by a
decrease in income after interest charges of $14.3 million for the first six
months of 2000, compared with the same period in 1999, deferred taxes and the
amortization of recoverable energy costs.
Net cash flows used in investing activities were $26.3 million for the six
months ended June 30, 2000, compared with $21.6 million for the six months
ended June 30, 1999, primarily as a result of increased investments in plant.
Net cash flows used in financing activities were $27.7 million for the six
months ended June 30, 2000, compared with $4.5 million for the six months
ended June 30, 1999, primarily as a result of $24.5 million of long-term debt
issued in 1999.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- ------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
------
Utility Plant, at original cost:
Electric................................................ $ 1,107,972 $ 1,175,954
Less: Accumulated provision for depreciation......... 787,571 813,978
------------- ------------
320,401 361,976
Construction work in progress........................... 17,221 21,181
Nuclear fuel, net....................................... 18,073 18,880
------------- ------------
Total net utility plant.............................. 355,695 402,037
------------- ------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 148,815 144,567
Investments in regional nuclear generating
companies, at equity................................... 14,814 14,723
Other, at cost.......................................... 6,155 6,232
------------- ------------
169,784 165,522
------------- ------------
Current Assets:
Cash.................................................... 112 950
Notes receivable from affiliated companies.............. 9,600 -
Receivables, net........................................ 32,879 31,692
Accounts receivable from affiliated companies........... 14,473 3,918
Taxes receivable........................................ - 1,912
Accrued utility revenues................................ 11,975 13,485
Fuel, materials and supplies, at average cost........... 1,580 3,097
Prepayments and other................................... 51,331 30,119
------------- ------------
121,950 85,173
------------- ------------
Deferred Charges:
Regulatory assets:
Recoverable nuclear costs.............................. 262,287 428,838
Income taxes, net...................................... 52,124 49,008
Unrecovered contractual obligations.................... 57,886 63,701
Recoverable energy costs, net.......................... 11,577 16,319
Other.................................................. 43,738 36,934
Unamortized debt expense................................ 1,674 1,926
Other................................................... 5,362 4,146
------------- ------------
434,648 600,872
------------- ------------
Total Assets.............................................. $ 1,082,077 $ 1,253,604
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- ------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, $25 par value - 1,072,471 shares
authorized; 590,093 shares outstanding in 2000
and 1,072,471 shares outstanding in 1999............... $ 14,752 $ 26,812
Capital surplus, paid in................................ 93,880 171,691
Retained earnings....................................... 51,289 38,712
Accumulated other comprehensive income.................. 160 160
------------- ------------
Total common stockholder's equity.............. 160,081 237,375
Preferred stock not subject to mandatory redemption..... 20,000 20,000
Preferred stock subject to mandatory redemption......... 15,000 16,500
Long-term debt.......................................... 198,004 290,279
------------- ------------
Total capitalization........................... 393,085 564,154
------------- ------------
Obligations Under Capital Leases.......................... 8,327 8,106
------------- ------------
Current Liabilities:
Notes payable to banks.................................. 118,000 123,000
Notes payable to affiliated company..................... - 9,400
Long-term debt and preferred stock - current portion.... 1,500 1,500
Obligations under capital leases - current portion...... 20,505 21,866
Accounts payable........................................ 23,244 12,974
Accounts payable to affiliated companies................ 4,963 3,208
Accrued taxes........................................... 19,812 589
Accrued interest........................................ 4,653 6,046
Other................................................... 16,387 14,384
------------- ------------
209,064 192,967
------------- ------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 223,616 242,942
Accumulated deferred investment tax credits............. 18,255 19,765
Decommissioning obligation - Millstone 1................ 133,261 136,130
Deferred contractual obligations........................ 57,886 63,701
Other................................................... 38,583 25,839
------------- ------------
471,601 488,377
------------- ------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities...................... $ 1,082,077 $ 1,253,604
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues............................. $120,090 $108,829 $249,500 $ 206,515
--------- --------- --------- -----------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power. 58,383 33,565 124,628 57,889
Other..................................... 12,391 32,347 34,313 57,506
Maintenance.................................. 10,503 13,607 18,048 27,092
Depreciation................................. 4,357 9,403 8,945 19,063
Amortization of regulatory assets, net....... 17,587 2,923 21,485 5,417
Federal and state income taxes............... 2,733 3,173 8,195 7,607
Taxes other than income taxes................ 4,162 4,999 9,130 10,924
--------- --------- --------- -----------
Total operating expenses............... 110,116 100,017 224,744 185,498
--------- --------- --------- -----------
Operating Income............................... 9,974 8,812 24,756 21,017
--------- --------- --------- -----------
Other Income/(Loss):
Equity in earnings of regional nuclear
generating companies....................... 193 261 412 418
Nuclear related costs........................ (2,808) - (2,808) -
Other, net................................... 805 (408) 772 (707)
Income taxes................................. 940 443 4,600 835
--------- --------- --------- -----------
Other (loss)/income, net............... (870) 296 2,976 546
--------- --------- --------- -----------
Income before interest charges......... 9,104 9,108 27,732 21,563
--------- --------- --------- -----------
Interest Charges:
Interest on long-term debt................... 3,317 5,945 8,108 12,393
Other interest............................... 2,831 (1,020) 5,615 135
--------- --------- --------- -----------
Interest charges, net.................. 6,148 4,925 13,723 12,528
--------- --------- --------- -----------
Net Income..................................... $ 2,956 $ 4,183 $ 14,009 $ 9,035
========= ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
2000 1999
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income.................................................... $ 14,009 $ 9,035
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation................................................ 8,945 19,063
Deferred income taxes and investment tax credits, net....... (14,458) 7,886
Amortization of recoverable energy costs, net............... 4,742 1,433
Amortization of regulatory assets, net...................... 21,485 5,417
Nuclear related costs....................................... 2,808 -
Amortization of gain on transfer of utility plant........... 1,799 -
Allocation of ESOP benefits................................. (33) (6,819)
Buyout of IPP contract...................................... - (19,700)
Net other uses of cash...................................... (2,523) (6,502)
Changes in working capital:
Receivables and unbilled revenues, net...................... (10,232) (52,445)
Fuel, materials and supplies................................ 1,517 145
Accounts payable............................................ 12,025 (6,740)
Accrued taxes............................................... 19,223 (330)
Investments in securitizable assets......................... - 21,865
Other working capital (excludes cash)....................... (18,690) 1,161
----------- -----------
Net cash flows provided by/(used in) operating activities....... 40,617 (26,531)
----------- -----------
Investing Activities:
Investment in plant:
Electric utility plant...................................... (9,207) (15,873)
Nuclear fuel................................................ (2,929) (5,338)
----------- -----------
Net cash flows used for investments in plant.................. (12,136) (21,211)
Investments in nuclear decommissioning trusts................. (4,043) (6,567)
Other investment activities, net.............................. (14) (607)
Net proceeds from the transfer of utility plant............... 185,787 -
Investment in NU system Money Pool............................ (9,600) -
----------- -----------
Net cash flows provided by/(used in) investing activities....... 159,994 (28,385)
----------- -----------
Financing Activities:
Net (decrease)/increase in short-term debt.................... (14,400) 78,200
Reacquisitions and retirements of long-term debt.............. (94,150) (40,000)
Reacquisitions and retirements of preferred stock............. (1,500) (1,500)
Repurchase of common shares................................... (90,000) -
Cash dividends on preferred stock............................. (1,399) (1,456)
Capital contribution.......................................... - 20,000
----------- -----------
Net cash flows (used in)/provided by financing activities....... (201,449) 55,244
----------- -----------
Net (decrease)/increase in cash for the period.................. (838) 328
Cash - beginning of period...................................... 950 106
----------- -----------
Cash - end of period............................................ $ 112 $ 434
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
WMECO is a wholly owned subsidiary of NU. This discussion should be read in
conjunction with NU's management's discussion and analysis of financial
condition and results of operations, consolidated financial statements and
footnotes in this Form 10-Q, the First Quarter 2000 Form 10-Q and the NU
1999 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the second quarter
2000 and the first six months of 2000 are provided in the table below.
Income Statement Variances
(Millions of Dollars)
2000 over/(under) 1999
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating revenues $ 11 10% $ 43 21%
Fuel, purchased and net
interchange power 25 74 67 (a)
Other operation (20) (62) (23) (40)
Maintenance (3) (23) (9) (33)
Depreciation (5) (54) (10) (53)
Amortization of regulatory
assets, net 15 (a) 16 (a)
Federal and state income taxes (1) (34) (3) (47)
Nuclear related costs (3) (a) (3) (a)
Net Income (1) (29) 5 55
(a) Percent greater than 100.
Comparison of the Second Quarter of 2000 to the Second Quarter of 1999
----------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $11 million or 10 percent in the second
quarter of 2000, as compared to the same period of 1999, primarily due to
higher wholesale revenues ($21 million), partially offset by lower retail
revenues ($10 million).
Wholesale revenues are higher primarily as a result of the sale of the output
from Millstone 2 and 3. The retail revenues are lower primarily as a result
of lower retail sales in 2000. Retail sales decreased by 11 percent in 1999
due to an adjustment of a prior year load correction recorded in 1999. Retail
sales were essentially unchanged excluding the 1999 adjustment.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to the transition, under industry restructuring, of purchasing full
requirements for customers from standard offer suppliers, in addition to the
remaining fuel costs of the nuclear units and cogenerators.
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to lower spending at the
nuclear units ($3 million), lower expenses due to the sale of certain fossil
generation assets and the transfer of certain hydroelectric generation assets
($2 million) and lower administrative and general expenses ($13 million)
primarily due to pension credits.
Depreciation
Depreciation expense decreased in 2000, primarily due to the reclassification
of depreciable nuclear plant balances to regulatory assets ($7 million) and
the sale of certain fossil generation assets and the transfer of certain
hydroelectric generation assets.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2000, primarily due to
changes in amortization levels as a result of industry restructuring ($11
million) and higher amortization associated with the reclassified nuclear
plant balances ($3 million).
Nuclear Related Costs
Nuclear related costs increased in 2000, primarily due to the settlement of
Millstone-related litigation, net of insurance proceeds ($3 million).
Comparison of the First Six Months of 2000 to the First Six Months of 1999
--------------------------------------------------------------------------
Operating Revenues
Total operating revenues increased by $43 million or 21 percent for the first
six months of 2000, as compared to the same period of 1999, primarily due to
higher wholesale revenues ($46 million).
Wholesale revenues are higher primarily as a result of the sale of the output
from Millstone 2 and 3.
Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 2000, primarily
due to the transition, under industry restructuring, of purchasing full
requirements for customers from standard offer suppliers, in addition to the
remaining fuel costs of the nuclear units and cogenerators.
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to lower spending at the
nuclear units ($3 million), lower expenses due to the sale of certain fossil
generation assets and the transfer of certain hydroelectric generation assets
($2 million) and lower administrative and general expenses ($14 million)
primarily due to pension credits.
Depreciation
Depreciation expense decreased in 2000, primarily due to the reclassification
of depreciable nuclear plant balances to regulatory assets ($7 million) and
the sale of certain fossil generation assets and the transfer of certain
hydroelectric generation assets.
Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 2000, primarily due to
changes in amortization levels as a result of industry restructuring
($10 million) and higher amortization associated with the reclassified nuclear
plant balances ($7 million).
Federal and State Income Taxes
Federal and state income taxes decreased in 2000, primarily due to the tax
benefits resulting from the disposition of certain fossil and hydroelectric
generation assets.
Nuclear Related Costs
Nuclear related costs increased in 2000, primarily due to the settlement of
Millstone-related litigation, net of insurance proceeds ($5 million).
LIQUIDITY
Net cash flows provided by operating activities increased to $40.6 million for
the six months ended June 30, 2000, compared with net cash flows used in
operating activities of $26.5 million for the six months ended June 30, 1999.
The primary reasons for the increase were changes in working capital, including
receivables and unbilled revenues, net, accrued taxes and accounts payable,
offset by a reduced level of investment in securitizable assets. Industry
restructuring also resulted in lower depreciation and amortization expense.
Those factors also included a $5 million increase in income after interest
charges in the first six months of 2000, compared with the same period in 1999.
Including construction expenditures and investments in nuclear decommissioning
trusts, net cash flows provided by investing activities were $160 million for
the six months ended June 30, 2000, compared with net cash flows used in
investing activities of $28.4 million for the six months ended June 30, 1999.
The primary reasons for the increase were the net proceeds from the transfer
of utility plant to NGC, offset by decreased capital contributions.
Net cash flows used in financing activities were $201.4 million for the six
months ended June 30, 2000, compared with net cash flows provided by financing
activities of $55.2 million for the six months ended June 30, 1999. The net
cash flows included a net decrease in short-term debt of $14.4 million for
the six months ended June 30, 2000, compared with a net increase in short-term
debt of $78.2 million for the six months ended June 30, 1999.
The transfer of the hydroelectric generation assets to NGC produced a
significant source of cash for WMECO, which was primarily used to retire
short-term debt, long-term debt and preferred stock and repurchase common
stock. Financing activities for the six months ended June 30, 2000, included
$185.7 million for the retirement of long-term debt and preferred stock and
the repurchase of common stock, compared with $41.5 million for the six months
ended June 30, 1999. Payments made for the preferred stock dividends were
$1.4 million and $1.5 million for the six months ended June 30, 2000 and 1999,
respectively.
NORTH ATLANTIC ENERGY CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
------
Utility Plant, at original cost:
Electric................................................ $ 727,014 $ 736,472
Less: Accumulated provision for depreciation......... 210,626 196,694
------------- -------------
516,388 539,778
Construction work in progress........................... 10,243 10,274
Nuclear fuel, net....................................... 27,043 21,149
------------- -------------
Total net utility plant.............................. 553,674 571,201
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 47,920 43,667
------------- -------------
47,920 43,667
------------- -------------
Current Assets:
Notes receivable from affiliated companies.............. 17,500 56,400
Accounts receivable from affiliated companies........... 22,325 22,840
Taxes receivable........................................ 4,038 11,717
Materials and supplies, at average cost................. 13,506 13,088
Prepayments and other................................... 1,534 1,773
------------- -------------
58,903 105,818
------------- -------------
Deferred Charges:
Regulatory assets:
Deferred costs - Seabrook.............................. 56,675 88,545
Income taxes, net...................................... 29,737 35,605
Recoverable energy costs............................... 1,594 1,703
Unamortized loss on reacquired debt.................... - 3,788
Unamortized debt expense................................ 1,298 1,780
Prepaid property tax.................................... 1,792 -
Other................................................... 20 -
------------- -------------
91,116 131,421
------------- -------------
Total Assets.............................................. $ 751,613 $ 852,107
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTH ATLANTIC ENERGY CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, $1 par value - 1,000 shares
authorized and outstanding in 2000 and 1999............ $ 1 $ 1
Capital surplus, paid in................................ 160,999 160,999
Retained earnings....................................... 1,777 12,752
------------- -------------
Total common stockholder's equity.............. 162,777 173,752
Long-term debt.......................................... 65,000 135,000
------------- -------------
Total capitalization........................... 227,777 308,752
------------- -------------
Current Liabilities:
Long-term debt - current portion........................ 270,000 270,000
Accounts payable........................................ 15,061 11,694
Accounts payable to affiliated companies................ 370 806
Accrued interest........................................ 1,438 2,340
Other................................................... 396 272
------------- -------------
287,265 285,112
------------- -------------
Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 203,484 222,601
Deferred obligation to affiliated company............... 8,112 12,984
Other................................................... 24,975 22,658
------------- -------------
236,571 258,243
------------- -------------
Commitments and Contingencies (Note 2)
Total Capitalization and Liabilities...................... $ 751,613 $ 852,107
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTH ATLANTIC ENERGY CORPORATION
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues................................. $ 66,106 $ 77,203 $ 132,382 $ 147,492
---------- ---------- ---------- ----------
Operating Expenses:
Operation -
Fuel.......................................... 4,044 3,373 8,066 7,099
Other......................................... 9,670 11,921 18,305 21,232
Maintenance...................................... 2,930 9,048 5,257 14,120
Depreciation..................................... 6,945 7,372 13,889 13,853
Amortization of regulatory assets, net........... 21,294 21,372 42,588 42,744
Federal and state income taxes................... 8,597 8,705 17,395 17,412
Taxes other than income taxes.................... 1,441 3,109 4,040 6,254
---------- ---------- ---------- ----------
Total operating expenses................... 54,921 64,900 109,540 122,714
---------- ---------- ---------- ----------
Operating Income................................... 11,185 12,303 22,842 24,778
---------- ---------- ---------- ----------
Other Income/(Loss):
Deferred Seabrook return - other funds........... 603 1,173 1,349 2,481
Other, net....................................... (1,516) (1,942) (2,899) (3,488)
Income taxes..................................... 6,281 4,189 12,053 8,019
---------- ---------- ---------- ----------
Other income, net.......................... 5,368 3,420 10,503 7,012
---------- ---------- ---------- ----------
Income before interest charges............. 16,553 15,723 33,345 31,790
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt....................... 9,698 11,794 20,252 24,115
Other interest................................... (354) (65) (553) (274)
Deferred Seabrook return - borrowed funds........ (1,063) (2,249) (2,379) (4,755)
---------- ---------- ---------- ----------
Interest charges, net...................... 8,281 9,480 17,320 19,086
---------- ---------- ---------- ----------
Net Income......................................... $ 8,272 $ 6,243 $ 16,025 $ 12,704
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTH ATLANTIC ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
2000 1999
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income.................................................. $ 16,025 $ 12,704
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation.............................................. 13,889 13,853
Deferred income taxes and investment tax credits, net..... (13,249) 782
Amortization of nuclear fuel.............................. 6,413 5,887
Deferred return - Seabrook................................ (3,728) (7,236)
Amortization of regulatory assets, net.................... 42,588 42,744
Deferred obligation to affiliated company................. (4,872) (4,872)
Net other sources of cash................................. 10,441 8,963
Changes in working capital:
Receivables............................................... 515 (2,427)
Materials and supplies.................................... (418) 544
Accounts payable.......................................... 2,931 3,521
Accrued taxes............................................. - 2,976
Other working capital (excludes cash)..................... 7,140 15,975
----------- -----------
Net cash flows provided by operating activities............... 77,675 93,414
----------- -----------
Investing Activities:
Investment in plant:
Electric utility plant.................................... (3,164) (3,088)
Nuclear fuel.............................................. (12,199) (8,199)
----------- -----------
Net cash flows used for investments in plant................ (15,363) (11,287)
Investment in NU system Money Pool.......................... 38,900 21,450
Investments in nuclear decommissioning trusts............... (4,212) (3,648)
----------- -----------
Net cash flows provided by in investing activities............ 19,325 6,515
----------- -----------
Financing Activities:
Reacquisitions and retirements of long-term debt............ (70,000) (70,000)
Cash dividends on common stock.............................. (27,000) (30,000)
----------- -----------
Net cash flows used in financing activities................... (97,000) (100,000)
----------- -----------
Net increase in cash for the period........................... - (71)
Cash - beginning of period.................................... - 71
----------- -----------
Cash - end of period.......................................... $ - $ -
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NORTH ATLANTIC ENERGY CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
NAEC is a wholly owned subsidiary of NU. This discussion should be read in
conjunction with NU's management's discussion and analysis of financial
condition and results of operations, consolidated financial statements and
footnotes in this Form 10-Q, the First Quarter 2000 Form 10-Q and the NU
1999 Form 10-K.
RESULTS OF OPERATIONS
The components of significant income statement variances for the second quarter
of 2000 and the first six months of 2000 are provided in the table below.
Income Statement Variances
(Millions of Dollars)
2000 over/(under) 1999
----------------------
Second Six
Quarter Percent Months Percent
------- ------- ------ -------
Operating revenues $(11) (14)% $(15) (10)%
Other operation (2) (19) (3) (14)
Maintenance (6) (68) (9) (63)
Federal and state income taxes (2) (49) (4) (43)
Interest on long-term debt (2) (18) (4) (16)
Net Income 2 33 3 26
Comparison of the Second Quarter of 2000 to the Second Quarter of 1999
----------------------------------------------------------------------
Operating Revenues
Total operating revenues decreased by $11 million or 14 percent in the second
quarter of 2000, as compared to the same period of 1999, primarily due to
lower O&M costs billed to PSNH through the Seabrook Power Contracts.
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to the 1999 refueling
outage.
Federal and State Income Taxes
Federal and state income taxes decreased in 2000, primarily due to lower
taxable income.
Interest on Long-Term Debt
Interest on long-term debt decreased in 2000, primarily due to lower
long-term debt outstanding in 2000.
Comparison of the First Six Months of 2000 to the First Six Months of 1999
--------------------------------------------------------------------------
Operating Revenues
Total operating revenues decreased by $15 million or 10 percent for the first
six months of 2000, as compared to the same period of 1999, primarily due to
lower O&M costs billed to PSNH through the Seabrook Power Contracts.
Other Operation and Maintenance
Other O&M expenses decreased in 2000, primarily due to the 1999 refueling
outage.
Federal and State Income Taxes
Federal and state income taxes decreased in 2000, primarily due to
lower taxable income.
Interest on Long-Term Debt
Interest on long-term debt decreased in 2000, primarily due to lower long-term
debt outstanding in 2000.
LIQUIDITY
Net cash flows provided by operating activities decreased to $77.7 million for
the six months ended June 30, 2000, compared with $93.4 million for the six
months ended June 30, 1999. The primary reasons for the reduction were changes
in working capital and deferred income taxes and investment tax credits, net,
partially offset by an increase in income after interest charges of $3.3
million for the first six months of 2000, compared with the same period in
1999, and the Seabrook deferred return.
Net cash flows used in investing activities were $19.3 million for the six
months ended June 30, 2000, compared with $6.5 million for the six months
ended June 30, 1999, primarily as a result of increased investments in the
NU system Money Pool and increased investments in plant.
Net cash flows used in financing activities were $97 million for the six
months ended June 30, 2000, compared with $100 million for the six months
ended June 30, 1999, as a result of a decrease in cash dividends on common
stock.
Northeast Utilities and Subsidiaries
The Connecticut Light and Power Company and Subsidiaries
Public Service Company of New Hampshire
Western Massachusetts Electric Company and Subsidiary
North Atlantic Energy Corporation
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (All Companies)
A. Presentation
The accompanying unaudited financial statements should be read in
conjunction with management's discussion and analysis of financial
condition and results of operations in this Form 10-Q, the First
Quarter 2000 Form 10-Q and the Annual Reports of Northeast Utilities
(NU), The Connecticut Light and Power Company (CL&P), Public Service
Company of New Hampshire (PSNH), Western Massachusetts Electric
Company (WMECO), and North Atlantic Energy Corporation (NAEC), which
were filed as part of the NU 1999 Form 10-K. The accompanying
financial statements contain, in the opinion of management, all
adjustments necessary to present fairly NU's and each NU system
company's financial position as of June 30, 2000, the results of
operations for the three-month and six-month periods ended June 30,
2000 and 1999, and statements of cash flows for the six-month periods
ended June 30, 2000 and 1999. All adjustments are of a normal,
recurring nature except those described in Note 2. The results of
operations for the three-month and six-month periods ended June 30,
2000 and 1999, are not indicative of the results expected for a
full year.
The consolidated financial statements of NU and of its subsidiaries
include the accounts of all their respective wholly owned
subsidiaries. Significant intercompany transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Certain reclassifications of prior period data have been made to
conform with the current period presentation.
B. Regulatory Accounting and Assets
The accounting policies of the NU system operating companies and the
accompanying consolidated financial statements conform to generally
accepted accounting principles applicable to rate-regulated
enterprises and historically reflect the effects of the rate-making
process in accordance with Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation." As a result of final restructuring orders issued in
1999, CL&P and WMECO discontinued the application of SFAS No. 71 for
the generation portion of their businesses. Their transmission and
distribution businesses will continue to be cost-of-service based.
At this time, management continues to believe that the application of
SFAS No. 71 for PSNH and NAEC remains appropriate. If the "Agreement
to Settle PSNH Restructuring" (Settlement Agreement) is approved,
management's current expectation is that PSNH will discontinue the
application of SFAS No. 71 for the generation portion of its business
and record an after-tax write-off of $225 million. PSNH's
transmission and distribution business will continue to be rate-
regulated on a cost-of-service basis, as the Settlement Agreement
allows for the recovery of the remaining regulatory assets through
that portion of the business.
C. New Accounting Pronouncements
During June 2000, the Financial Accounting Standards Board issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an Amendment of FASB Statement No. 133," which
amends the accounting and reporting standards of SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," for
certain derivative instruments and certain hedging activities. Based
on the derivative instruments which currently are being utilized by
the NU system companies to hedge some of their interest rate risk and
certain power and gas contracts, there may be an impact on earnings
upon adoption of SFAS No. 133, as amended by SFAS No. 138, which
management has not estimated at this time.
2. COMMITMENTS AND CONTINGENCIES
A. Restructuring (CL&P, PSNH, WMECO)
Connecticut: The 1999 restructuring orders allowed for securitization
of CL&P's nonnuclear regulatory assets and the costs to buyout or
buydown the various purchased-power contracts. CL&P filed an
application with the Connecticut Department of Public Utility Control
(DPUC) on May 31, 2000, requesting authorization to securitize $1.4
billion of its stranded costs.
New Hampshire: On April 19, 2000, the New Hampshire Public Utilities
Commission (NHPUC) issued an order relating to the proposed Settlement
Agreement. While the NHPUC approved much of the Settlement Agreement,
it directed a number of changes. The changes include adjusting the
return level on certain rate base offsets, permitting the NHPUC
greater autonomy in setting a minimum bid for Seabrook, crediting
stranded costs with items identified as regulatory obligations by the
NHPUC, revising the time frame and level of the recovery of certain
stranded costs, decreasing the amount of assets that may be
securitized, adjustments to rate design and fees, changes in the
fossil and hydroelectric generation asset auction process, and
establishing a higher cost level for transition service.
On May 1, 2000, PSNH filed its response to the order with the NHPUC.
In its response, PSNH agreed to meet most of the conditions set forth
by the NHPUC and tentatively agreed to meet certain other conditions,
subject to clarification.
At the same time, PSNH filed a motion for a rehearing on the NHPUC
directive requiring PSNH to immediately reduce stranded costs with
certain regulatory obligations. On May 3, 2000, the NHPUC granted a
rehearing which was held on May 17, 2000.
On June 12, 2000, the governor of New Hampshire signed into law, a
bill, which once fully implemented, is designed to resolve all of the
outstanding restructuring issues. Chapter 246 of the 2000 Session
Laws enabled the NHPUC to issue a finance order for issuing up to
$670 million of rate reduction bonds and established the charges for
distribution and transition service. The legislation assumed $450
million in concessions on PSNH's part including the previously
discussed write-off of stranded costs. PSNH's rates will decrease
by 5 percent on October 1, 2000, for up to six months if competition
has not begun. The legislation also authorized PSNH to pay a $50
million common stock dividend on that date.
Some aspects of the bill were inconsistent with the NHPUC's April 19,
2000 order. As a result, on June 23, 2000, PSNH filed with the NHPUC
compliance tariffs, a draft securitization finance order and an
amended Settlement Agreement which conformed to the new legislation.
Hearings on these compliance filings, the draft securitization finance
order and the amended Settlement Agreement were held in July 2000.
A decision is expected in August 2000. However, petitioners will have
30 days to file motions for rehearing on any substantive changes in
the amended Settlement Agreement. If the NHPUC denies the
petitioners' motions, the petitioners would then have 30 days to file
an appeal with the New Hampshire Supreme Court. Any such appeals may
result in a substantial delay in implementation of the amended
Settlement Agreement.
Massachusetts: On April 18, 2000, WMECO filed its $261 million
securitization plan with the Massachusetts Department of
Telecommunications and Energy (DTE). Hearings regarding the
securitization plan were held in June 2000 with the briefing process
being concluded in July 2000. The securitization plan requires DTE
approval prior to implementation. A DTE decision on the
securitization plan is anticipated in August 2000.
B. Long-Term Contractual Arrangements (Select Energy)
Select Energy, Inc. (Select Energy) maintains long-term agreements
to purchase energy in the normal course of business as part of its
portfolio of resources to meet its actual or expected sales
commitments. The aggregate amount of these purchase contracts was
$3.1 billion at June 30, 2000. These contracts extend through 2004
as follows (millions of dollars):
Year
----
2000 $1,072
2001 808
2002 474
2003 448
2004 280
------
Total $3,082
======
C. Nuclear Litigation (NU, CL&P, WMECO)
The non-NU joint owners of Millstone 3 (minority owners) previously
filed demands for arbitration with CL&P and WMECO, as well as lawsuits
in Massachusetts Superior Court against NU and its current and former
trustees related to the companies' operation of Millstone 3. During
the second quarter of 2000, NU and its subsidiaries, CL&P and WMECO,
agreed in principle to settle with the remaining nonsettled minority
owners. These settlements of the joint owner claims provide for the
payment to these claimants of $27.5 million and certain contingent
payments.
3. INTEREST RATE AND GAS SUPPLY RISK MANAGEMENT INSTRUMENTS (NAEC, Yankee)
A. Interest Rate Risk Management Instruments
NAEC uses swap instruments with financial institutions to hedge
against interest rate risk associated with its $200 million variable-
rate bank note. As of June 30, 2000, NAEC had outstanding agreements
with a total notional value of $200 million and a positive mark-to-
market position of $0.6 million.
Yankee Energy System, Inc. (Yankee) uses swap instruments with
financial institutions to exchange fixed-rate interest obligations
to a blend between fixed and variable-rate obligations without
exchanging the underlying notional amounts. These instruments convert
fixed interest rate obligations to variable rates. The notional
amounts parallel the underlying debt levels and are used to measure
interest to be paid or received and do not represent the
exposure to credit loss. As of June 30, 2000, Yankee had outstanding
agreements with a total notional value of $49 million and a negative
mark-to-market position of $1 million.
B. Gas Supply Risk Management Instruments
Yankee Gas Services Company (Yankee Gas) maintains gas service
agreements with certain customers to supply gas at fixed prices for
a 10-year term extending through 2005. Yankee Gas has hedged its gas
supply risk under these agreements through commodity swap agreements.
Under these commodity swap agreements, the purchase price of a
specified quantity of gas is effectively fixed over the term of the
gas service agreements, which also extend through 2005. As of
June 30, 2000, the commodity swap agreements had a notional value of
$18.9 million and a negative mark-to-market position of $1 million.
4. COMMODITY DERIVATIVES (Select Energy)
Select Energy, primarily through trading and marketing, manages its
exposure to risk from existing contractual commitments and provides
risk management services to its customers through forward contracts,
futures, over-the-counter swap agreements, and options (collectively,
"commodity derivatives"). Select Energy engages in the trading of
commodity derivatives, and therefore experiences net open positions.
Select Energy manages these open positions with strict policies which limit
its exposure to market risk and requires daily reporting to management
of potential financial exposure. Commodity derivatives utilized for
trading purposes are accounted for using the mark-to-market method, under
Emerging Issues Task Force Issue No. 98-10, "Accounting for Energy Trading
and Risk Management Activities." Under this methodology, these instruments
are adjusted to market value, and the unrealized gains and losses are
recognized in income in the current period in the consolidated statements
of income as operating expenses - other and in the consolidated balance
sheets as prepayments and other. The mark-to-market position at June 30,
2000, was a positive $19.3 million.
5. COMPREHENSIVE INCOME (NU, CL&P, PSNH, WMECO)
The total comprehensive income/(loss), which includes all comprehensive
income items, for the NU system is as follows:
Six Months Ended June 30,
-------------------------
2000 1999
---- ----
(Millions of Dollars)
NU Consolidated $86.8 $ 18.8
CL&P 64.2 (26.8)
PSNH 29.0 42.1
WMECO 12.6 7.6
6. EARNINGS PER SHARE (NU)
Earnings per share (EPS) is computed based upon the weighted average number
of common shares outstanding during each period. Diluted EPS is computed
on the basis of the weighted average number of common shares outstanding
plus the potential dilutive effect if certain securities are converted into
common stock.
The following table sets forth the components of basic and diluted EPS:
------------------------------------------------------------------------------
(Millions of Dollars, Six Months Ended June 30,
except share information) 2000 1999
------------------------------------------------------------------------------
Income after interest charges $95.5 $30.6
Preferred dividends of subsidiaries 8.7 11.9
------------------------------------------------------------------------------
Net income $86.8 $18.7
------------------------------------------------------------------------------
Basic EPS common shares
outstanding (average) 139,476,432 131,214,191
Dilutive effect of employee
stock options 579,178 425,851
-----------------------------------------------------------------------------
Diluted EPS common shares
outstanding (average) 140,055,610 131,640,042
-----------------------------------------------------------------------------
Basic and Diluted EPS $0.62 $0.14
-----------------------------------------------------------------------------
7. SEGMENT INFORMATION (NU)
The NU system is organized between regulated utilities (electric and gas
for the six months ended June 30, 2000, and electric only for the six
months ended June 30, 1999) and unregulated energy services. The regulated
utilities segment represents approximately 87 percent and 89 percent of the
NU system's total revenues for the six months ended June 30, 2000 and 1999,
respectively, and is comprised of several business units.
Regulated utilities revenues primarily are derived from residential,
commercial and industrial customers and are not dependent on any single
customer. The unregulated energy services segment has two major customers,
one unaffiliated company and CL&P. Their purchases represented
approximately 6 percent and 35 percent, respectively, of the total
unregulated energy services revenues for the six months ended June 30,
2000. Purchases from the unaffiliated company represented approximately
52 percent of the total unregulated energy services revenues for the six
months ended June 30, 1999. There were no purchases from CL&P in 1999.
The unregulated energy services segment in the following table includes
HEC Inc., a provider of energy management, demand-side management and
related consulting services for commercial, industrial and institutional
electric companies and electric utility companies; Holyoke Water Power
Company, a company engaged in the production and distribution of electric
power; Northeast Generation Company, a corporation that acquires and
manages generation facilities; Northeast Generation Services Company, a
corporation that maintains and services any fossil or hydroelectric
facility that is acquired or contracted with for fossil or hydroelectric
generation services, and; Select Energy, a corporation engaged in the
marketing, transportation, storage, and sale of energy commodities, at
wholesale, in designated geographical areas and in the marketing of
electricity to retail customers.
Other in the following table includes the results for Mode 1
Communications, Inc. (Mode 1), an investor in a fiber-optic communications
network. Mode 1 had a net loss of $2.9 million and $1.8 million for the
six months ended June 30, 2000 and 1999, respectively. Other also includes
the results of the nonenergy related subsidiaries of Yankee. Interest
expense included in Other primarily relates to the debt of NU parent.
Inter-segment eliminations of revenues and expenses are also included in
Other.
For the Six Months Ended June 30, 2000
--------------------------------------------------------
Unregulated Eliminations
(Millions of Regulated Utilities Energy and
Dollars) Electric Gas Services Other Total
-------- --- -------- ------------ -----
Operating
revenues $ 2,332.6 $ 91.3 $ 916.1 $(542.7) $ 2,797.3
Operating
expenses (2,116.2) (84.1) (893.2) 530.7 (2,562.8)
--------- ------ ------- ------- ---------
Operating
income/(loss) 216.4 7.2 22.9 (12.0) 234.5
Other
income/
(expense) 15.9 (1.7) 2.1 (8.9) 7.4
Interest
expense (101.8) (5.1) (21.5) (18.0) (146.4)
Preferred
dividends (8.7) - - - (8.7)
--------- ------ ------- ------- ---------
Net income/
(loss) $ 121.8 $ 0.4 $ 3.5 $ (38.9) $ 86.8
========= ====== ======= ======= =========
Total assets $ 8,466.4 $848.2 $ 720.5 $ 727.1 $10,762.2
========= ====== ======= ======= =========
For the Six Months Ended June 30, 1999
-----------------------------------------------------
Regulated Unregulated Eliminations
(Millions of Electric Energy and
Dollars) Utilities Services Other Total
--------- ----------- ------------ -----
Operating revenues $ 1,850.6 $ 244.5 $(13.1) $ 2,082.0
Operating expenses (1,694.7) (261.5) 20.3 (1,935.9)
--------- ------- ------ ---------
Operating income/
(loss) 155.9 (17.0) 7.2 146.1
Other income/
(expense) 15.2 4.7 (2.5) 17.4
Interest expense (123.9) (1.8) (7.2) (132.9)
Preferred dividends (11.9) - - (11.9)
--------- ------- ------ ---------
Net income/(loss) $ 35.3 $ (14.1) $ (2.5) $ 18.7
========= ======= ====== =========
Total assets $ 9,967.2 $ 292.5 $ 88.8 $10,348.5
========= ======= ====== =========
8. EMPLOYEE BENEFITS (All Companies)
Stock-Based Compensation
Employee Stock Purchase Plan (ESPP): For the quarter ended June 30, 2000,
employees purchased 120,641 shares of NU common stock at a discounted price
of $17.48 per share under NU's ESPP. As of June 30, 2000, 1,496,035 shares
remained reserved for future issuance under the ESPP.
9. MERGER AGREEMENT WITH CONSOLIDATED EDISON, INC. (NU)
On May 31, 2000, the Federal Energy Regulatory Commission approved the
proposed merger between NU and Consolidated Edison, Inc. (Con Edison).
The merger is subject to the approval of other regulatory agencies. The
two companies expect that, following the receipt of all required regulatory
approvals, the merger will be completed in 2000.
10. SUBSEQUENT EVENT (NU, CL&P, PSNH, WMECO)
On August 7, 2000, CL&P, WMECO and certain other joint owners reached an
agreement to sell substantially all of the Millstone nuclear units, located
in Waterford, Connecticut, to Dominion Resources Inc. (Dominion), for
approximately $1.3 billion, including approximately $105 million for
nuclear fuel. Dominion has also agreed to assume responsibility for
decommissioning the three units.
Various federal and state regulatory approvals are needed before the
transaction can be finalized; these are expected to be obtained by
April 2001.
CL&P and WMECO own 81 percent and 19 percent, respectively, of Millstone 1
and 2. CL&P, PSNH and WMECO have agreements with other New England
utilities covering their joint ownership in Millstone 3. CL&P's, PSNH's
and WMECO's ownership interests in Millstone 3 are 52.93, 2.85 and 12.24
percent, respectively. All of CL&P's, PSNH's and WMECO's shares in the
Millstone units were included in the auction. All the other joint owners
of Millstone 3 except for two, representing approximately 6.5 percent of
the remaining interest in Millstone 3, participated in the auction.
If the transaction is approved and finalized as proposed, CL&P and WMECO
would receive approximately $843 million and $196 million pre-tax for their
respective ownership interests. The net gain from the sale of these
interests will be used to reduce the companies' stranded costs under
restructuring and the net proceeds will be used to reduce their capital
structures. PSNH will receive $26 million pre-tax which will be used in
accordance with the restructuring Settlement Agreement (Docket No. 099-99).
Under NU's merger agreement with Con Edison, NU shareholders will receive
an additional $1.00 of merger consideration if the agreement is recommended
by the Utility Operations and Management Unit (UOMA) of the DPUC on or
prior to the later of December 31, 2000, or the closing of the merger
(the divestiture condition). If the merger closes before the divestiture
condition is met, NU shareholders still will receive the additional $1 per
share if the divestiture condition is met prior to December 31, 2000. The
UOMA is expected to file its recommendations with the DPUC in the fall of
2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. Connecticut Superior Court - Fish Unlimited Lawsuits (NU, CL&P, WMECO)
In March 1999, certain parties brought a civil suit in Connecticut Superior
Court against Northeast Nuclear Energy Company (NNECO) and Northeast Utilities
Service Company (NUSCO) seeking a temporary and a permanent injunction to
prevent the restart of Millstone 2 until a fish return system and cooling
tower are installed. In May 1999, the superior court dismissed the lawsuit.
The plaintiffs appealed this decision. On July 24, 2000, the Connecticut
Supreme Court ruled in favor of NNECO and NUSCO, holding that it did not have
jurisdiction to consider the plaintiffs' claims for injunctive relief. The
Supreme Court vacated the prior judgment and remanded the case to the trial
court with direction to dismiss the action.
In July 1999, the Connecticut Superior Court granted NNECO's and NUSCO's motion
to dismiss an additional lawsuit that was filed by certain plaintiffs in June
1999, challenging the validity of Millstone's water discharge permit.
Millstone's National Pollution Discharge Elimination System (NPDES) permit is
currently under review for renewal, but both NNECO and the Connecticut
Department of Environmental Protection (CDEP) contend that the existing NPDES
permit is valid. The plaintiffs appealed the court's decision, and on July 24,
2000, the Connecticut Supreme Court ruled in favor of NNECO and NUSCO and
affirmed the trial court's decision.
2. Connecticut Attorney General Civil Lawsuit and Appeal (NU, CL&P, WMECO)
In November 1997, the Connecticut attorney general initiated a civil lawsuit,
on behalf of the CDEP, against NNECO and NUSCO for violations of the Millstone
water discharge permit and Connecticut water discharge regulations. In 1998,
the superior court approved a settlement between NNECO and the attorney
general. The settlement required NNECO to pay a $700,000 civil penalty and
expend $500,000 to fund three supplemental environmental projects.
Additionally, the settlement requires NNECO to perform two environmental
audits of its water compliance program, have a third-party review of the
first NNECO audit and inform the CDEP of major changes to its environmental
management system. The first audit and the third party review have been
completed.
An intervenor in the superior court proceeding appealed the settlement order.
On July 27, 2000, the Connecticut Supreme Court ruled in favor of NNECO and
NUSCO and affirmed the lower court's decision.
For more information regarding these matters, see "Part I, Item 3 - Legal
Proceedings" in NU's 1999 Annual Report on Form 10-K.
3. Millstone 3 - Joint Owner Litigation (NU, CL&P, WMECO)
For more information regarding additional settlements in this matter, see
Note 2C, "Commitments and Contingencies - Nuclear Litigation," to the
consolidated financial statements and "Part I, Item 3 - Legal Proceedings" in
NU's 1999 Annual Report on Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NU. At a Special Meeting of Shareholders of NU held on April 14, 2000,
shareholders voted to approve certain amendments to the NU Declaration of
Trust dated as of January 15, 1927, as amended. The amendments authorize
NU to consummate a merger with one or more domestic limited liability
companies in accordance with Chapter 182 of the Massachusetts General laws.
The amendments also allow the number of trustees from and after the
consummation of any such merger to be fixed by the merger agreement.
The vote approving the amendments was 114,632,395 votes in favor,
2,351,860 votes against and 1,359,408 abstentions. Shareholders also voted
to approve the merger of N Acquisition LLC, a Massachusetts limited liability
company and an indirect wholly owned subsidiary of Con Edison, into NU.
The vote approving this specific merger was 114,683,805 votes in favor,
2,718,750 votes against and 932,108 abstentions.
At the Annual Meeting of Shareholders of NU held on May 9, 2000, shareholders
voted to fix the number of trustees for the ensuing year at thirteen. The vote
fixing the number of trustees was 113,731,570 votes in favor and 1,263,594
votes against, with 923,487 abstentions and broker nonvotes.
At the Annual Meeting, the following thirteen nominees were elected to serve
on the Board of Trustees by the votes set forth below:
For Withheld Total
1. Cotton M. Cleveland 113,609,404 2,309,247 115,918,651
2. Sanford Cloud, Jr. 113,533,000 2,385,651 115,918,651
3. William F. Conway 113,728,147 2,190,504 115,918,651
4. E. Gail de Planque 113,722,963 2,195,688 115,918,651
5. John H. Forsgren 113,710,986 2,207,665 115,918,651
6. Raymond L. Golden 113,716,839 2,201,812 115,918,651
7. Elizabeth T. Kennan 113,516,502 2,402,149 115,918,651
8. Michael G. Morris 113,709,243 2,209,408 115,918,651
9. Emery G. Olcott 113,734,649 2,184,002 115,918,651
10. William J. Pape II 113,459,860 2,458,791 115,918,651
11. Robert E. Patricelli 113,669,124 2,249,527 115,918,651
12. John F. Swope 113,637,748 2,280,903 115,918,651
13. John F. Turner 113,701,646 2,217,005 115,918,651
NU's shareholders also ratified the Board of Trustees' selection of Arthur
Andersen LLP to serve as independent auditors of NU and its subsidiaries for
2000. The vote ratifying such selection was 113,818,438 votes in favor
and 1,303,156 votes against, with 797,057 abstentions and broker nonvotes.
CL&P. In a written Consent in Lieu of an Annual Meeting of Stockholders of
CL&P ("Consent") dated June 21, 2000, stockholders voted to fix the number
of directors for the ensuing year at three. The vote fixing the number of
directors at three was 12,222,930 shares in favor, representing 100 percent
of the issued and outstanding shares of common stock of CL&P. Through the
Consent, the following three directors were elected, each by a vote of
12,222,930 shares in favor, to serve on the Board of Directors for the
ensuing year: David H. Boguslawski, Hugh C. MacKenzie and Rodney O. Powell.
WMECO. In a written Consent in Lieu of a Special Meeting of Stockholders of
WMECO ("Consent") dated April 26, 2000, stockholders voted to amend the
by-laws, effective May 1, 2000, to include the following language regarding
the indemnification of Directors, officers, employees and agents:
ARTICLE XVIII
INDEMNIFICATION
Section 1. The corporation shall indemnify, to the fullest extent permitted
by applicable law, each person made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal,
by reason of the fact that such person or such person's testator or intestate
is or was a Director, officer, employee or other agent of the corporation,
is or was serving at its request as a Director, officer, employee, or other
agent of another organization, or is or was serving at its request in any
capacity with respect to any employee benefit plan against all liabilities
and expenses, including reasonable attorneys' fees, judgments, fines, penalties
and amounts paid in settlement or compromise, actually and reasonably incurred
in connection with such action, suit or proceeding, or any appeal therein,
except with respect to any matter as to which such person shall have been
adjudicated in such action, suit or proceeding not to have acted in good faith
in the reasonable belief that such person's action was in the best interests of
the corporation or, to the extent that such matter relates to service with
respect to any employee benefit plan, in the best interest of the participants
or beneficiaries of such employee benefit plan; provided, however, that as to
any matter disposed of by settlement or compromise by such Director, officer,
employee or other agent of the corporation pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless such settlement or compromise shall be
approved as in the best interests of the corporation or, to the extent that
such matter relates to service with respect to any employee benefit plan, in
the best interest of the participants or beneficiaries of such employee
benefit plan, after notice that it involves such indemnification, (a)
by a disinterested majority of the Directors then in office; or (b) by a
majority of the disinterested Directors then in office, provided that there
has been obtained an opinion in writing of independent legal counsel to the
effect that such Director, officer, employee or other agent of the corporation
appears to have acted in good faith in the reasonable belief that his action
was in the best interests of the corporation or, to the extent that such matter
relates to service with respect to any employee benefit plan, in the best
interest of the participants or beneficiaries of such employee benefit plan, or
(c) by the holders of a majority of the outstanding stock at the time entitled
to vote for Directors, voting as a single class, exclusive of any stock owned
by an interested Director, officer, employee or other agent of the corporation.
In discharging such person's duty any such Director, officer, employee or other
agent of the corporation, when acting in good faith, may rely upon the books of
account of the corporation or of such other organization, reports made to the
corporation or to such other organization by any of its officers or employees
or by counsel, accountants, appraisers or other experts selected with
reasonable care by the Board of Directors or officers, or upon other records
of the corporation or of such other organization. Expenses incurred with
respect to any such action, suit or proceeding may be advanced by the
corporation prior to the final disposition of such action, suit or proceeding,
upon receipt of a written undertaking by or on behalf of the recipient to repay
such amount if said person shall be adjudicated to be not entitled to
indemnification under this section, which undertaking may be accepted
without reference to the financial ability of such person to make repayment.
Any such indemnification may be provided although the person to be indemnified
is no longer a Director, officer, employee or other agent of the corporation
or of such other organization or no longer serves with respect to any such
employee benefit plan.
The right of indemnification hereby provided shall not be exclusive of or
affect any other right to which any Director, officer, employee or other
agent of the corporation may be entitled. As used in this paragraph, the terms
"Director," "officer," "employee" and "agent" include their respective heirs,
executors and administrators, and an "interested" Director, officer, employee
or other agent of the corporation is one against whom in such capacity the
proceedings in question or another proceeding on the same or similar grounds
is then pending. In the event any part of this Article shall be found, in any
action, suit or proceeding to be invalid or ineffective, the validity
and the effect of the remaining parts shall not be affected.
The vote adopting the amendment to the by-laws was 1,072,471 shares in
favor, representing 100 percent of the issued and outstanding shares
of common stock of WMECO.
In a written Consent in Lieu of an Annual Meeting of Stockholders of WMECO
("Consent") dated June 15, 2000, stockholders voted to fix the number of
directors for the ensuing year at eight. The vote fixing the number of
directors at eight was 1,072,471 shares in favor, representing 100 percent of
the issued and outstanding shares of common stock of WMECO. Through the
Consent the following eight directors were elected, each by a vote of
1,072,471 shares in favor, to serve on the Board of Directors for the
ensuing year: David H. Boguslawski, James E. Byrne, John H. Forsgren,
Kerry J. Kuhlman, Hugh C. MacKenzie, Paul J. McDonald, Michael G. Morris,
and Melinda M. Phelps.
PSNH. At the Annual Meeting of Stockholders of PSNH held on May 15, 2000,
stockholders voted to fix the number of directors for the ensuing year at
eight. The vote fixing the number of directors at eight was 1,000 shares
in favor, representing 100 percent of the issued and outstanding shares of
common stock of PSNH. At the Annual Meeting, the following eight directors
were elected, each by a vote of 1,000 shares in favor, to serve on the Board
of Directors for the ensuing year: David H. Boguslawski, John C. Collins,
John H. Forsgren, William T. Frain, Jr., Gerald Letendre, Hugh C. MacKenzie,
Michael G. Morris, and Jane E. Newman.
NAEC. In a written Consent in Lieu of an Annual Meeting of Stockholders of
NAEC ("Consent") dated June 1, 2000, stockholders voted to fix the number of
directors for the ensuing year at three. The vote fixing the number of
directors at three was 1,000 shares in favor, representing 100 percent of
the issued and outstanding shares of common stock of NAEC. Through the
Consent, the following three directors were elected, each by a vote of 1,000
shares in favor, to serve on the Board of Directors for the ensuing year:
William A. DiProfio, Ted C. Feigenbaum and Bruce D. Kenyon.
ITEM 5. OTHER INFORMATION
1. Department of Justice Investigation (NU)
The U.S. Department of Justice Antitrust Division (DOJ) has opened a probe
into the market for Installed Capability in the New England wholesale market.
The investigation stems from the possibility of a conspiracy to increase prices
in that market. NU has received a request for information in connection with
the DOJ's inquiry. Grid manager ISO New England and the New England Power Pool
have also received requests for information from the DOJ.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits
Exhibit No. Description
----------- -----------
3.1 WMECO's Amendment to By-laws
10.1 Purchase and Sale Agreement for the Millstone Nuclear
Power Station
15 Arthur Andersen LLP Letter Regarding Unaudited
Financial Information
27 NU Financial Data Schedule
27.1 CL&P Financial Data Schedule
27.2 PSNH Financial Data Schedule
27.3 WMECO Financial Data Schedule
27.4 NAEC Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended
June 30, 2000.
SIGNATURES
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.
NORTHEAST UTILITIES
-------------------
Registrant
Date: August 9, 2000 By /s/ John H. Forsgren
---------------------------------
John H. Forsgren
Executive Vice President
and Chief Financial Officer
Date: August 9, 2000 By /s/ John J. Roman
---------------------------------
John J. Roman
Vice President and Controller
SIGNATURES
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.
THE CONNECTICUT LIGHT AND POWER COMPANY
---------------------------------------
Registrant
Date: August 9, 2000 By /s/ Randy A. Shoop
---------------------------------
Randy A. Shoop
Treasurer
Date: August 9, 2000 By /s/ John P. Stack
---------------------------------
John P. Stack
Controller
SIGNATURES
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.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
---------------------------------------
Registrant
Date: August 9, 2000 By /s/ David R. McHale
---------------------------------
David R. McHale
Vice President and Treasurer
Date: August 9, 2000 By /s/ John J. Roman
---------------------------------
John J. Roman
Vice President and Controller
SIGNATURES
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.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
--------------------------------------
Registrant
Date: August 9, 2000 By /s/ David R. McHale
---------------------------------
David R. McHale
Vice President and Treasurer
Date: August 9, 2000 By /s/ John J. Roman
---------------------------------
John J. Roman
Vice President and Controller
SIGNATURES
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.
NORTH ATLANTIC ENERGY CORPORATION
---------------------------------
Registrant
Date: August 9, 2000 By /s/ David R. McHale
--------------------------------
David R. McHale
Vice President and Treasurer
Date: August 9, 2000 By /s/ John J. Roman
--------------------------------
John J. Roman
Vice President and Controller
EXHIBIT 3.1
WESTERN MASSACHUSETTS ELECTRIC COMPANY
BY-LAWS
Amended and Restated:
April 1, 1999
Further Amended:
May 1, 2000
WESTERN MASSACHUSETTS ELECTRIC COMPANY
BY-LAWS
-------
ARTICLE I
---------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Each meeting of the stockholders, annual or special, shall be
held at such hour of the day, and at such place within the United States, or at
such other place as shall then be permitted by law, as may be designated by the
Board of Directors, by the Chairman of the Board or by the President.
Section 2. The Annual Meeting of Stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held by June 30 each year. In the event
that no date for the annual meeting is established or said meeting has not been
held on the date so fixed or determined, a special meeting in lieu of the
annual meeting may be held with all of the force and effect of an annual
meeting.
Section 3. Special meetings of the stockholders may be called by the
President or by the Directors, and shall be called by the Clerk, or in case of
the death, absence, incapacity or refusal of the Clerk, by any other officer,
upon written application of any stockholder or stockholders who hold at least
ten percent of the capital stock entitled to vote thereat, stating the time,
place and purpose of the meeting.
Section 4. Notice of the date, time and place of any annual or special
meeting of stockholders, stating the purposes of the meeting, shall be given by
the Clerk or an Assistant Clerk at least seven days before the meeting to each
stockholder entitled to vote thereat, by leaving such notice with him or at his
residence or usual place of business, or by mailing it, postage prepaid, and
addressed to such stockholder at his address as it appears in the records of
the corporation.
Section 5. A majority in interest of all the shares of stock of the
corporation outstanding and entitled to vote present in person or by proxy
shall constitute a quorum for the transaction of business but less than a
quorum may adjourn either sine die or to a date certain.
Section 6. Any action required or permitted to be taken at any meeting
of the stockholders may be taken without a meeting if all stockholders entitled
to vote on the matter consent to the action in writing and the written consents
are filed with the records of the meetings of stockholders. Such consents
shall be treated for all purposes as a vote at a meeting.
ARTICLE II
----------
DIRECTORS
---------
Section 1. The business, property and affairs of the Company shall be
managed by a Board of not less than three nor more than sixteen Directors.
Notwithstanding the foregoing, the business, property and affairs of the
Company shall be managed by a Board of one Director, if only one Director has
been elected and qualified, provided there is only one stockholder of the
Company at such time. Within these limits, the number of positions on the
Board of Directors for any year shall be the number fixed by resolution of
the stockholders or of the Board of Directors, or, in the absence of such a
resolution, shall be the number of Directors elected at the preceding Annual
Meeting of Stockholders. The Directors so elected shall continue in office
until their successors have been elected and qualified, except that a Director
shall cease to be in office upon his death, resignation, lawful removal or
court order decreeing that he is no longer a Director in office.
Section 2. The Board of Directors shall have power to fill vacancies
that may occur in the Board, or any other office, by death, resignation or
otherwise, by a majority vote of the remaining members of the Board, and the
person so chosen shall hold the office until the next Annual Meeting of
Stockholders and until his successor shall be elected and qualified.
Section 3. The Board of Directors shall have power to employ such and so
many agents and factors or employees as the interests of the Company may
require, and to fix the compensation and define the duties of all of the
officers, agents, factors and employees of the Company. All the officers,
agents, factors and employees of the Company shall be subject to the order of
said Board, shall hold their offices at the pleasure of said Board, and may be
removed at any time by said Board at its discretion.
Section 4. The Board of Directors shall have power to fix from time to
time the compensation of the Directors and the method of payment thereof.
Section 5. Any one or more Directors may be removed from office at any
time with or without any showing of cause by affirmative vote of the holders of
a majority of the Company's issued and outstanding stock entitled to vote.
ARTICLE III
-----------
MEETINGS OF DIRECTORS
---------------------
Section 1. A regular meeting of the Board of Directors shall be held
annually, without notice, directly following the Annual Meeting of
Stockholders, for the election of officers and the transaction of other
business.
Section 2. All other regular meetings of the Board of Directors may be
held at such time and place as the Board may from time to time determine and
fix by resolution. Special meetings of the Board may be held at any place
upon call of the Chairman (if there be one) or the President, or, in the event
of the absence or inability of either to act, of a Vice President, or upon call
of any three or more directors.
Section 3. Oral or written notice of the time and place of each special
meeting of the Board of Directors shall be given to each director personally,
by telephone, voice mail or other electronic means, or by mail at his last-
known post office address, at least twenty-four hours prior to the time of the
meeting; provided that any director may waive such notice in writing or by
attendance at such meeting.
Section 4. One-third of the Directors then in office shall constitute a
quorum, except that no quorum shall consist of less than two Directors.
Notwithstanding the foregoing, a quorum shall consist of one Director if only
one Director has been elected and qualified, provided there is only one
stockholder of the Company at such time. A number less than a quorum may
adjourn from time to time until a quorum is present. In the event of such an
adjournment, notice of the adjourned meeting shall be given to all Directors.
Section 5. Except as otherwise provided by these By-Laws, the act of a
majority of the Directors present at a meeting at which a quorum is present at
the time of the act shall be the act of the Board of Directors.
Section 6. Any resolution in writing concerning action to be taken by the
Company, which resolution is approved and signed by all of the Directors,
severally or collectively, whose number shall constitute a quorum for such
action, shall have the same force and effect as if such action were authorized
at a meeting of the Board of Directors duly called and held for that purpose,
and such resolution, together with the Directors' written approval thereof,
shall be recorded by the Clerk in the minute book of the Company.
Section 7. A Director or a member of a committee of the Board of
Directors may participate in a meeting of the Board of Directors or of such
committee by means of conference telephone or similar communications equipment
enabling all Directors participating in the meeting to hear one another, and
participation in a meeting in such manner shall constitute presence in person
at such meeting.
ARTICLE IV
----------
OFFICERS
--------
Section 1. At its annual meeting the Board of Directors shall elect a
President, a Clerk, a Treasurer and, if the Board shall so determine, a
Chairman, each of whom shall, subject to the provisions of Article IV,
Section 3, hold office until the next annual election of officers and until his
successor shall have been elected and qualified. Any two or more offices may
be held by the same person except that the offices of the President and Clerk
may not be simultaneously held by the same person. The Board shall also elect
at such annual meeting, and may elect at any regular or special meeting, such
other officers as may be required for the prompt and orderly transaction of
the business of the Company, and each such officer shall have such authority
and shall perform such duties as may be assigned to him from time to time by
the Board of Directors. Any vacancy occurring in any office may be filled at
any regular meeting of the Board or at any special meeting of the Board held
for that purpose.
Section 2. In addition to such powers and duties as these By-Laws and the
Board of Directors may prescribe, and except as may be otherwise provided by
the Board, each officer shall have the powers and perform the duties which by
law and general usage appertain to his particular office.
Section 3. Any officer may be removed, with or without cause, at any time
by the Board in its discretion. Vacancies among the officers by reason of
death, resignation, removal (with or without cause) or other reason shall be
filled by the Board of Directors.
ARTICLE V
---------
CHAIRMAN
--------
Section 1. The Chairman, if such office shall be provided for and filled
by the Directors, shall, when present, preside at all meetings of said Board
and of the stockholders. He shall have such other authority and shall perform
such additional duties as may be assigned to him from time to time by the Board
of Directors.
ARTICLE VI
----------
PRESIDENT
---------
Section 1. The President shall be responsible for the general
supervision, direction and control of the business and affairs of the Company.
If the Chairman shall be absent or unable to perform the duties of his office,
or if the office of the Chairman shall not have been filled by the Directors,
the President shall preside at meetings of the Board of Directors and of the
stockholders. He shall have such other authority and shall perform such
additional duties as may be assigned to him from time to time by the Board of
Directors.
ARTICLE VII
-----------
CLERK
-----
Section 1. The Clerk shall be a resident of Massachusetts, unless the
corporation shall have a registered agent appointed pursuant to the laws of
the Commonwealth. He shall keep the minutes of all meetings of the
stockholders and of the Board of Directors. He shall give notice of all
meetings of the stockholders and of said Board. He shall record all votes
taken at such meetings. He shall perform such additional duties as may be
assigned to him from time to time by the Board of Directors, the Chairman,
the President or by law.
Section 2. The Clerk shall have the custody of the Corporate Seal of the
Company and shall affix the same to all instruments requiring a seal except as
otherwise provided in these By-Laws.
ARTICLE VIII
------------
ASSISTANT CLERKS
----------------
Section 1. One or more Assistant Clerks, if such office shall be provided
for and filled by the Directors, shall perform the duties of the Clerk if the
Clerk shall be absent or unable to perform the duties of his office. The
Assistant Clerks shall perform such additional duties as may be assigned to
them from time to time by the Board of Directors, the Chairman, the President
or the Clerk.
ARTICLE IX
----------
TREASURER
---------
Section 1. The Treasurer shall have charge of all receipts and
disbursements of the Company, and shall be the custodian of the Company's
funds. He shall have full authority to receive and give receipts for all
moneys due and payable to the Company from any source whatever, and give full
discharge for the same, and to endorse checks, drafts and warrants in its name
and on its behalf. He shall sign all checks, notes, drafts and similar
instruments, except as otherwise provided for by the Board of Directors.
Section 2. The Treasurer shall perform such additional duties as may be
assigned to him from time to time by the Board of Directors, the Chairman, the
President or by law.
ARTICLE X
---------
ASSISTANT TREASURERS
--------------------
Section 1. One or more Assistant Treasurers, if such office shall be
provided for and filled by the Directors, shall perform the duties of the
Treasurer if the Treasurer shall be absent or unable to perform the duties of
his office. The Assistant Treasurers shall perform such additional duties as
may assigned to them form time to time by the Board of Directors, the Chairman,
the President or the Treasurer.
ARTICLE XI
----------
COMMITTEES
----------
Section 1. The Board of Directors may designate two or more Directors to
constitute an executive committee or other committees, which committees shall
have and may exercise all such authority of the Board of Directors as shall be
provided in such resolution, subject to those powers expressly reserved to the
Board of Directors under law. At the time of such appointment, the Board of
Directors may also appoint, in respect to each member of any such committee,
another Director to serve as his alternate at any meeting of such committee
which such member is unable to attend. Each alternate shall have, during his
attendance at a meeting of such committee, all the rights and obligations of a
regular member thereof. Any vacancy on any such committee or among alternate
members thereof may be filled by the Board of Directors.
ARTICLE XII
-----------
STOCK CERTIFICATES
------------------
Section 1. All stock certificates shall be signed by the Chairman, the
President or any Vice President and by the Treasurer or any Assistant
Treasurer. Such signatures may be by facsimiles if the certificate is signed
by a transfer agent, or by a registrar, other than a director, officer or
employee of the Company.
ARTICLE XIII
------------
CORPORATE SEAL
--------------
Section 1. The corporate seal of the Company shall be circular in form
with the name of the Company inscribed therein.
ARTICLE XIV
-----------
FISCAL YEAR
-----------
Section 1. The fiscal year of the corporation shall end on the
thirty-first day of December in each year.
ARTICLE XV
----------
TRANSFER AGENT AND REGISTRAR
----------------------------
Section 1. If the Board of Directors deem it advisable to have a transfer
agent other than the Treasurer, they may appoint any Bank or Trust Company to
that office. They may appoint the same or any other Bank or Trust Company as
Registrar of stock certificates if it appear desirable to have the stock
registered. They may terminate the authority of any Bank acting in either
capacity whenever it shall seem wise.
ARTICLE XVI
-----------
SENIOR STOCK PROVISIONS
-----------------------
The Company's capital stock includes a class of capital stock designated
"Common Stock," a class of capital stock designated "Preferred Stock," and a
class of capital stock designated "Class A Preferred Stock." The authorized
shares of Common Stock, Preferred Stock and Class A Preferred Stock are the
number of shares authorized in the Company's articles of organization, as
amended from time to time. The Preferred Stock and the Class A Preferred Stock
are hereinafter for convenience of reference sometimes collectively referred to
as the "Senior Stock," and either class may hereinafter individually be
referred to as "Senior Stock." Shares of Preferred Stock and shares of Class A
Preferred Stock shall rank on a parity in respect of dividends or payment in
case of liquidation, and, to the extent not fixed and determined by these
by-laws or the Company's articles of organization or otherwise by law, shall
have the same rights, preferences and powers. The general terms, limitations
and relative rights and preferences of each share of Preferred Stock and each
share of Class A Preferred Stock shall be determined in accordance with the
following Sections:
Section 1. Issuance of Senior Stock
Shares of Preferred Stock may be issued from time to time in one or more
series on such terms and for such consideration as may be determined by the
Board of Directors. Shares of Class A Preferred Stock may be issued from time
to time in one or more series on such terms and for such consideration as may
be determined by the Board of Directors. The series designation, dividend
rate, redemption prices, and any other terms, limitations and relative rights
and preferences of each series of either class of Senior Stock shall be
determined by the Board of Directors to the extent not fixed and determined
by this Article or the Company's articles of organization.
Section 2. Dividends
A. The holders of either class of the Senior Stock shall receive, but
only when and as declared by the Board of Directors, cumulative dividends at
the rate provided for the particular series and payable on such dividend
payment dates in each year as said Board may determine, such dividends to be
payable to holders of record on such dates as may be fixed by said Board but
not more than 45 days before each dividend date, provided, however, that
dividends shall not be declared and set apart for payment, or paid, on Senior
Stock of any one class and series, for any dividend period, unless dividends
have been or are contemporaneously declared and set apart for payment, or paid,
on Senior Stock of all series for all dividend periods terminating on the
same or an earlier date.
B. Dividends on each share of Senior Stock shall be cumulative from the
date of issue thereof or from such earlier date as the Board of Directors may
determine therefor. Unless full cumulative dividends to the last preceding
dividend date shall have been paid or set apart for payment on all outstanding
shares of Senior Stock, no dividend shall be paid on any junior stock. The
term "junior stock" means Common Stock or any other stock of the Company
subordinate to the Senior Stock in respect of dividends or payments in
liquidation.
C. So long as any shares of Senior Stock are outstanding, the Company
shall not declare any dividends or make any other distributions in respect of
outstanding shares of any junior stock of the Company, other than dividends or
distributions in shares of junior stock, or purchase or otherwise acquire for
value any outstanding shares of junior stock (the declaration of any such
dividend or the making of any such distribution, purchase or acquisition being
herein called a "junior stock payment") in contravention of the following:
(1) If and so long as the junior stock equity (hereinafter
defined), adjusted to reflect the proposed junior stock payment, at the end of
the calendar month immediately preceding the calendar month in which the
proposed junior stock payment is to be made is less than 20% of total
capitalization (hereinafter defined) at that date, as so adjusted, the Company
shall not make such junior stock payment in an amount which, together with all
other junior stock payments made within the year ending with and including the
date on which the proposed junior stock payment is to be made, exceeds 50% of
the net income of the Company available for dividends on junior stock for the
12 full calendar months immediately preceding the calendar month in which such
junior stock payment is made, except in an amount not exceeding the aggregate
of junior stock payments which under the restrictions set forth above in this
paragraph (1) could have been, and have not been, made.
(2) If and so long as the junior stock equity, adjusted to reflect
the proposed junior stock payment, at the end of the calendar month immediately
preceding the calendar month in which the proposed junior stock payment is to
be made, is less than 25% but not less than 20% of the total capitalization at
that date, as so adjusted, the Company shall not make such junior stock payment
in an amount which, together with all other junior stock payments made within
the year ending with and including the date on which the proposed junior stock
payment is to be made, exceeds 75% of the net income of the Company available
for dividends on the junior stock for the 12 full calendar months immediately
preceding the calendar month in which such junior stock payment is made, except
in an amount not exceeding the aggregate of junior stock payments which under
the restrictions set forth above in this paragraph (2) could have been, and
have not been, made.
D. The term "junior stock equity" means the aggregate of the part value
of or stated capital represented by, the outstanding shares of junior stock,
all earned surplus, capital or paid-in surplus, and any premiums on the junior
stock then carried on the books of the Company, less:
(1) the excess, if any, of the aggregate amount payable on
involuntary liquidation of the Company upon all outstanding shares of Senior
Stock over the sum of (i) the aggregate par or stated value of such shares and
(ii) any premiums thereon;
(2) any amounts on the books of the Company known, or estimated if
not known, to represent the excess, if any, of recorded value over original
cost of used or useful utility plant; and
(3) any intangible items set forth on the asset side of the balance
sheet of the Company as a result of accounting convention, such as unamortized
debt discount and expense; provided, however, that no deductions shall be
required to be made in respect of items referred to in clauses (2) and (3) of
this subsection D in cases in which such items are being amortized or are
provided for, or are being provided for, by reserves.
E. The term "total capitalization" means the aggregate of:
(1) the principal amount of all outstanding indebtedness of the
Company maturing more than 12 months after the date of issue thereof; and
(2) the par value or stated capital represented by, and any premiums
carried on the books of the Company in respect of, the outstanding shares of
all classes of the capital stock of the Company, earned surplus, and capital
or paid-in surplus, less any amounts required to be deducted pursuant to
clauses (2) and (3) of subsection D of this Section 2 in the determination of
junior stock equity.
Section 3. Redemption or Purchase of Senior Stock
A. All or any part of any series of Senior Stock may by vote of the
Board of Directors be called for redemption at any time at the redemption price
provided for the particular series and in the manner hereinbelow provided.
Subject to the provisions of subsection B of this Section 3, all or any part
of any series of Senior Stock may be called for redemption without calling all
or any part of any other series of Senior Stock. If less than all of any
series of Senior Stock is so called, the Transfer Agent shall determine by lot
or in some other manner approved by the Board of Directors the shares of such
series of Senior Stock to be called.
B. No call for redemption of less than all shares of Senior Stock
outstanding shall be made if the Company shall be in arrears in respect of
payment of dividends on any shares of Senior Stock outstanding.
C. The sums payable in respect of any shares of Senior Stock so called
shall be payable at the office of an incorporated bank or trust company in good
standing. Notice of such call stating the redemption date shall be mailed not
less than 30 days before the redemption date to each holder of record of shares
of Senior Stock so called at his address as it appears upon the books of the
Company.
D. The Company shall, before the redemption date, deposit with said bank
or trust company all sums payable with respect to shares of Senior Stock so
called. After such mailing and deposit the holders of shares of Senior Stock
so called for redemption shall cease to have any right to future dividends or
other rights or privileges as stockholders in respect of such shares and shall
be entitled to look for payment on and after the redemption date only to the
sums so deposited with said bank or trust company for their respective amounts.
Shares so redeemed may be reissued but only subject to the limitations imposed
upon the issue of Senior Stock.
E. The Company may at any time purchase all or any of the then
outstanding shares of Senior Stock of any class and series upon the best terms
reasonably obtainable, but not exceeding the then current redemption price of
such shares, except that no such purchase shall be made if the Company shall be
in arrears in respect of payment of dividends on any shares of Senior Stock
outstanding or if there shall exist an event of default as defined in Section 5
hereof.
Section 4. Amounts Payable on Liquidation
A. The holders of any series of Senior Stock shall receive upon any
voluntary liquidation, dissolution or winding up of the Company the then
current redemption price of the particular series and if such action is
involuntary $100 per share in the case of the Preferred Stock and $25 per
share in the case of the Class A Preferred Stock, plus in each case all
dividends accrued and unpaid to the date of such payment, before any
payment in liquidation is made on any junior stock.
B. If the net assets of the Company available for distribution on
liquidation to the holders of Senior Stock shall be insufficient to pay said
amounts in full, then such net assets shall be distributed among the holders
of Senior Stock, who shall receive a common percentage of the full respective
preferential amounts.
Section 5. Voting Powers
A. Except as provided in this Article or in the Company's articles of
organization and as provided by law, the holders of Senior Stock shall have
no voting power or right to notice of any meeting.
B. Whenever the holders of the Senior Stock shall have the right to
vote or consent to an action as provided in these Articles or the Company's
articles of organization or as provided by law, both classes of Senior Stock
shall (except as provided below) vote together as a single class, each
outstanding share of Preferred Stock entitled to vote and each outstanding
share of Class A Preferred Stock entitled to vote having such voting
rights as are proportionate to the ratio of (i) the par value represented
by such share to (ii) the par value represented by all shares of Senior Stock
then outstanding. Whenever only one class of the Senior Stock shall have the
right to vote or consent to an action as provided in these Articles or the
Company's articles of organization or as provided by law, or whenever each
class of the Senior Stock shall be entitled or be required to vote as a
separate class on a matter, each outstanding share of such class entitled
to vote shall be entitled to one vote on each such matter.
C. Whenever dividends on any share of Senior Stock shall be in arrears
in an amount equal to or exceeding four quarterly dividend payments, or
whenever there shall have occurred some default in the observance of any of
the provisions of this Article, or some default on which action has been taken
by debentureholders, bondholders or the trustee of any deed of trust or
mortgage of the Company, or whenever the Company shall have been declared
bankrupt or a receiver of its property shall have been appointed (any of said
conditions being herein called an "event of default"), then the holders of
Senior Stock shall be given notice of all stockholders' meetings and shall have
the right voting together as a class to elect the smallest number of directors
necessary to constitute a majority of the Board of Directors of the Company and
the exclusive right voting together as a class to amend the by-laws to make
such appropriate increase in the number of directorships as may be required
to effect such election. When all arrears of dividends shall have been paid
and such event of default shall have been terminated, all the rights and powers
of the holders of Senior Stock to receive notice and to vote shall cease,
subject to being again revived on any subsequent event of default.
D. Whenever the right to elect directors shall have accrued to the
holders of Senior Stock the Company shall call a meeting of stockholders for
the election of directors and, if necessary, the amendment of the by-laws to
permit the holders of Senior Stock to exercise their rights pursuant to
subsection C of this Section 5, such meeting to be held not less than 45 days
and not more than 90 days after the accrual of such rights. When such rights
shall cease, the Company shall, within seven days from the delivery to the
Company of a written request therefor by any stockholder, cause a meeting of
the stockholders to be held within 30 days from the delivery of such request
for the purpose of electing a new Board of Directors. Forthwith, upon the
election of such new Board of Directors, the directors in office immediately
prior to such election (other than persons elected directors in such election)
shall be deemed removed from office without further action by the Company.
Section 6. Action Requiring Certain Consent of Senior Stockholders
A. So long as any Senior Stock is outstanding, the Company, without the
affirmative vote or written consent of at least a majority in interest of the
Senior Stock then outstanding voting or giving consent together as a class
shall not:
(1) Issue or assume any unsecured notes, unsecured debentures or
other securities representing unsecured debt (other than for the purpose of
refunding or renewing outstanding unsecured securities issued or assumed by the
Company resulting in equal or longer maturities or redeeming or otherwise
retiring all outstanding shares of Senior Stock) if immediately after such
issue or assumption (a) the total outstanding principal amount of all unsecured
notes, unsecured debentures or other securities representing unsecured debt of
the Company will thereby exceed 20% of the aggregate of all outstanding secured
debt of the Company and the capital stock, premiums thereon, and surplus of
the Company, as stated on its books, or (b) the total outstanding principal
amount of all unsecured debt of the Company of maturities of less than 10 years
will thereby exceed 10% of the aggregate of all outstanding secured debt of the
Company and the capital stock, premiums thereon, and surplus of the Company,
as stated on its books. For the purposes of this subsection A, the payment
due upon the maturity of unsecured debt having an original single stated
maturity of 10 years or more shall not be regarded as unsecured debt with a
maturity of less than 10 years until within three years of the maturity
thereof, and none of the payments due upon any unsecured serial debt having
an original stated maturity for the final serial payment of 10 years or more
shall be regarded as unsecured debt of a maturity of less than 10 years until
within three years of the maturity of the final serial payment.
(2) Issue, sell or otherwise dispose of any shares of the then
authorized but unissued Senior Stock or any other stock ranking on a parity
with or having a priority over Senior Stock in respect of dividends or of
payments in liquidation, or reissue, sell or otherwise dispose of any
reacquired shares of Senior Stock or such other stock, other than to refinance
an equal par value or stated value of Senior Stock or of stock ranking on a
parity with or having priority over Senior Stock in respect of dividends or of
payments in liquidation, if:
(a) For a period of 12 consecutive calendar months within
15 calendar months immediately preceding the calendar month in which any such
shares shall be issued, the Income before Interest Charges of the Company for
said period available for the payment of interest determined in accordance
with the systems of accounts then prescribed for the Company by the Department
of Public Utilities of the Commonwealth of Massachusetts (or by such other
official body as may then have authority to prescribe such systems of accounts)
but in any event after deducting depreciation charges and taxes (including
income taxes) and including, in any case in which such stock is to be
issued, sold or otherwise disposed of in connection with the acquisition of
any property, the Income before Interest Charges of the property to be so
acquired, computed as nearly as practicable in the manner specified above,
shall not have been at least one and one-half (1 1/2) times the sum of (i)
the interest charges for one year on all indebtedness which shall then be
outstanding (excluding interest charges on any indebtedness, proposed to be
retired in connection with the issue, sale or other disposition of such
shares), and (ii) an amount equal to all annual dividend requirements on all
outstanding shares of Senior Stock and all other stock, if any, ranking on a
parity with or having priority over Senior Stock in respect of dividends
or of payments in liquidation, including the shares proposed to be issued,
but not including any shares proposed to be retired in connection with such
issue, sale or other disposition; or if
(b) Such issue, sale or disposition would bring the
aggregate of the amount payable in connection with an involuntary liquidation
of the Company with respect to all shares of Senior Stock and all shares of
stock, if any, ranking on a parity with or having priority over Senior Stock
in respect of dividends or of payments in liquidation to an amount in excess
of the sum of the junior stock equity. If for the purposes of meeting the
requirements of this clause (b), it shall have been necessary to take into
consideration any earned surplus of the Company, the Company shall not
thereafter pay any dividends on or make any distributions in respect of, or
make any payment for the purchase or other acquisition of, junior stock which
would result in reducing the junior stock equity to an amount less than the
amount payable on involuntary liquidation of the Company in respect of Senior
Stock and all shares ranking on a parity with or having a priority over Senior
Stock in respect of dividends or of payments in liquidation at the time
outstanding.
If during the period for which Income before Interest Charges is to be
determined for the purpose set forth in this paragraph (2), the amount, if any,
required to be expended by the Company during such period for property
additions pursuant to a renewal and replacement fund or similar fund
established under any indenture of mortgage or deed of trust of the Company
shall exceed the amount deducted during such period in the determination of
such Income before Interest Charges on account of depreciation and amortization
of electric plan acquisition adjustments, such excess shall also be deducted
in determining such Income before Interest Charges.
B. So long as any Senior Stock is outstanding, the Company, without the
affirmative vote or written consent of at least two-thirds in interest of the
Senior Stock then outstanding voting or giving consent together as a class
shall not authorize any shares of any class of stock having a priority over the
Senior Stock in respect of dividends or of payments in liquidation or issue any
shares of any such prior ranking stock more than 12 months after the date of
the vote or consent authorizing such prior ranking stock.
C. The provisions of this Article may be changed only by the
affirmative vote or written consent of at least two-thirds in interest of the
issued and outstanding shares of each class of capital stock of the Company
voting or giving their consent in each case separately as a class; provided,
however, that if any such change or proposed change would affect only one class
of Senior Stock, then such change may be effected only by the affirmative vote
or written consent of at least two-thirds in interest of the issued and
outstanding shares of Common Stock and at least two-thirds in interest of the
issued and outstanding shares of the class of Senior Stock that is affected,
voting or giving their consent in each case separately as a class; and
provided further, however, the holders of Senior Stock shall not be entitled
to vote on an increase in the number of authorized shares of Preferred Stock
or Class A Preferred Stock. In no event shall any reduction of the dividend
rate or of the amounts payable upon redemption or liquidation with respect to
any share of Senior Stock be made without the consent of the holder thereof,
and no such reduction in respect of the shares of any particular series of
Senior Stock shall be made without the consent of all the holders of shares
of such series.
D. No share of Senior Stock shall be deemed to be "outstanding" within
the meaning of this Section 6 or of Section 7 if, at or prior to the time when
the approval herein or therein referred to would otherwise be required,
provision shall be made for its redemption, including a deposit complying with
the requirements of subsection D of Section 3.
Section 7. Merger, Consolidation or Sale of All Assets
Except with the affirmative vote or written consent of a majority in
interest of Senior Stock then outstanding voting or giving consent together as
a class, the Company shall not merge or consolidate with or into any other
corporation or sell or otherwise dispose of all or substantially all of its
assets (except by mortgage or pledge) unless such merger, consolidation,
sale or other disposition, or the issuance or assumption of securities in
the effectuation thereof shall have been ordered, approved or permitted under
the Public Utility Holding Company Act of 1935.
Section 8. No Preemptive Right
Except as otherwise expressly provided by law, the holders of Senior
Stock shall have no preemptive right to subscribe to any further issue of
additional shares of Senior Stock or of any other class of stock now or
hereafter authorized, nor for any future issue of bonds, debentures, notes
or other evidence of indebtedness or other security convertible into stock.
If it is expressly required by law that, notwithstanding the provisions of
the preceding sentence, any such further or future issue be offered
proportionately to the stockholders, the holders of Preferred Stock only shall
be entitled to subscribe for new or additional Preferred Stock, the holders
of Class A Preferred Stock only shall be entitled to subscribe for new or
additional Class A Preferred Stock and the holders of Common Stock only
shall be entitled to subscribe for new or additional Common Stock; and notice
of such increase as required by law need be given and the new shares need be
offered proportionately only to the stockholders who are so entitled to
subscribe.
Section 9. Immunity of Directors, Officers and Agents
No director, officer or agent of the Company shall be held personally
responsible for any action taken in good faith though subsequently adjudged to
be in violation of this Article.
Section 10. Transfer Agent
The Company shall always have at least one transfer agent for Senior
Stock, which shall be an incorporated bank or trust company of good standing.
ARTICLE XVII
------------
PROVISIONS WITH RESPECT TO THE SERIES OF PREFERRED STOCK
--------------------------------------------------------
1. 7.72% Preferred Stock, Series B
There shall be a series of Preferred Stock designated "7.72% Preferred
Stock, Series B," and consisting of 200,000 shares with an aggregate par value
of $20,000,000 and a par value per share of $100. The dividend rate and
redemption prices as to said 7.72% Preferred Stock, Series B, shall be as
follows:
(a) Dividends on said 7.72% Preferred Stock, Series B, shall be at
the rate of 7.72% per share per annum, and no more, and shall be cumulative
from October 1, 1971. Said dividends, when declared, shall be payable on
the first days of January, April, July and October in each year.
(b) Redemption Prices of said 7.72% Preferred Stock, Series B, shall
be $109.30 per share if redeemed on or before October 1, 1976, $107.37 per
share if redeemed after October 1, 1976 and on or before October 1, 1981,
$105.44 per share if redeemed after October 1, 1981 and on or before October 1,
1986, and $103.51 per share if redeemed after October 1, 1986, plus in all
cases that portion of the quarterly dividend accrued thereon to the redemption
date and all unpaid dividends thereon, if any, provided, however, that none of
the 7.72% Preferred Stock, Series B shall be redeemed prior to October 1, 1976,
if such redemption is for the purpose of or in anticipation of refunding such
7.72% Preferred Stock, Series B through the use, directly or indirectly, of
finds borrowed by the Company or of the proceeds of the issue by the Company of
shares of any stock ranking prior to or on a parity with the 7.72% Preferred
Stock, Series B as to dividends or assets, if such borrowed funds or such
shares have an effective interest cost or effective dividend cost to the
Company (computed in accordance with generally accepted financial principles),
as the case may be, of less than 7.69% per annum.
2. 7.60% Class A Preferred Stock, 1987 Series
There shall be a series of Preferred Stock designated "7.60% Class A
Preferred Stock, 1987 Series," and consisting of 1,200,000 shares with an
aggregate par value of $30,000,000 and a par value per share of $25. The
dividend rate and redemption prices as to said 7.60% Class A Preferred Stock,
1987 Series, shall be as follows:
(a) Dividends on said 7.60% Class A Preferred Stock, 1987 Series, shall
be at the rate of 7.60% per share per annum, and no more, and shall be
cumulative from the date of issuance. Said dividends, when declared, shall
be payable on the first days of February, May, August and November in each
year, commencing May 1, 1987.
(b) For each of the twelve month periods commencing February 1, 1987,
the redemption prices of said 7.60% Class A Preferred Stock, 1987 Series,
shall be the amount per share set forth below:
Twelve Twelve
Months Redemption Months Redemption
Beginning Price Beginning Price
February 1 Per Share February 1 Per Share
---------- ---------- ---------- ----------
1987 $26.90 2000 $25.26
1988 26.90 2001 25.13
1989 26.90 2002 25.00
1990 26.90 2003 25.00
1991 26.90 2004 25.00
1992 26.27 2005 25.00
1993 26.14 2006 25.00
1994 26.02 2007 25.00
1995 25.89 2008 25.00
1996 25.76 2009 25.00
1997 25.64 2010 25.00
1998 25.51 2011 25.00
1999 25.38
plus in all cases that portion of the quarterly dividend accrued thereon to
the redemption date and all unpaid dividends thereon, if any; provided,
however, that none of the 7.60% Class A Preferred Stock, 1987 Series, shall
be redeemed prior to February 1, 1992, if such redemption is for the purpose
of or in anticipation of refunding such 7.60% Class A Preferred Stock, 1987
Series, through the use, directly or indirectly, of funds borrowed by the
Company or of the proceeds of the issue by the Company of shares of any stock
ranking prior to or on a parity with the 7.60% Class A Preferred Stock, 1987
Series, as to dividends or assets, if such borrowed funds or such shares have
an effective interest cost or effective dividend cost to the Company (computed
in accordance with generally accepted financial principles), as the case may
be, of less than 7.69% per annum.
(c) As and for a sinking fund for said 7.60% Class A Preferred Stock,
1987 Series, commencing on February 1, 1992, and on each February 1 in each
year thereafter so long as any shares of the 7.60% Class A Preferred Stock,
1987 Series, remain outstanding, the Company shall, to the extent of any
funds of the Company legally available therefor and except as otherwise
restricted by the Company's Statement of Preferred Stock Provisions, redeem
60,000 shares of 7.60% Class A Preferred Stock, 1987 Series (or such lesser
number of such shares as remain outstanding) at $25 per share plus accrued
dividends to the date of redemption; provided, however, that if in any year
the Company does not redeem the full number of shares of 7.60% Class A
Preferred Stock, 1987 Series, required to be redeemed pursuant to this sinking
fund, the deficiency shall be made good on the next succeeding February 1 on
which the Company has funds legally available for, and is otherwise permitted
to effect, the redemption of shares of 7.60% Class A Preferred Stock, 1987
Series, pursuant to this sinking fund. At the option of the Company, the
number of shares of 7.60% Class A Preferred Stock, 1987 Series, redeemed on
any February 1 may be reduced by the number of such shares purchased and
canceled by the Company during the preceding twelve-month period or redeemed
during such period pursuant to subsection (b) hereof. Any shares so redeemed
or purchased and canceled may be given the status of authorized but unissued
shares of Senior Stock, but none of such shares shall be reissued as shares
of 7.60% Class A Preferred Stock, 1987 Series. The Company shall have the
option, which shall be noncumulative, to redeem on February 1, 1992 and on
each February 1 thereafter up to an additional 60,000 shares of 7.60%
Class A Preferred Stock, 1987 Series, at the sinking fund redemption price.
No such optional sinking fund shall operate to reduce the number of shares
of the 7.60% Class A Preferred Stock, 1987 Series, required to be redeemed
pursuant to the mandatory sinking fund provisions hereinabove set forth.
In the event that the Company shall at any time fail to make a full mandatory
sinking fund payment on any sinking fund payment date, the Company shall not
pay any dividends or make any other distributions in respect of outstanding
shares of any junior stock (as that term is defined in Subsection 2D of
Section 2 of Article XVI of the by-laws of the Company) of the Company,
other than dividends or distributions in shares of junior stock, or purchase
or otherwise acquire for value any outstanding shares of junior stock, until
all such payments have been made.
ARTICLE XVIII
-------------
INDEMNIFICATION
---------------
Section 1. The corporation shall indemnify, to the fullest extent
permitted by applicable law, each person made or threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, and whether formal or
informal, by reason of the fact that such person or such person's testator
or intestate is or was a director, officer, employee or other agent of the
corporation, is or was serving at its request as a Director, officer, employee,
or other agent of another organization, or is or was serving at its request
in any capacity with respect to any employee benefit plan against all
liabilities and expenses, including reasonable attorneys' fees, judgments,
fines, penalties and amounts paid in settlement or compromise, actually and
reasonably incurred in connection with such action, suit or proceeding, or any
appeal therein, except with respect to any matter as to which such person shall
have been adjudicated in such action, suit or proceeding not to have acted in
good faith in the reasonable belief that such person's action was in the best
interests of the corporation or, to the extent that such matter relates to
service with respect to any employee benefit plan, in the best interest of the
participants or beneficiaries of such employee benefit plan; provided, however,
that as to any matter disposed of by settlement or compromise by such Director,
officer, employee or other agent of the corporation pursuant to a consent
decree or otherwise, no indemnification either for said payment or for any
other expenses shall be provided unless such settlement or compromise shall be
approved as in the best interests of the corporation or, to the extent that
such matter relates to service with respect to any employee benefit plan, in
the best interest of the participants or beneficiaries of such employee benefit
plan, after notice that it involves such indemnification, (a) by a
disinterested majority of the Directors then in office; or (b) by a majority of
the disinterested Directors then in office, provided that there has been
obtained an opinion in writing of independent legal counsel to the effect that
such Director, officer, employee or other agent of the corporation appears to
have acted in good faith in the reasonable belief that his action was in the
best interests of the corporation or, to the extent that such matter relates to
service with respect to any employee benefit plan, in the best interest of the
participants or beneficiaries of such employee benefit plan, or (c) by the
holders of a majority of the outstanding stock at the time entitled to vote for
Directors, voting as a single class, exclusive of any stock owned by an
interested Director, officer, employee or other agent of the corporation.
In discharging such person's duty any such Director, officer, employee or other
agent of the corporation, when acting in good faith, may rely upon the books of
account of the corporation or of such other organization, reports made to the
corporation or to such other organization by any of its officers or employees
or by counsel, accountants, appraisers or other experts selected with
reasonable care by the Board of Directors or officers, or upon other records
of the corporation or of such other organization. Expenses incurred with
respect to any such action, suit or proceeding may be advanced by the
corporation prior to the final disposition of such action, suit or
proceeding, upon receipt of a written undertaking by or on behalf of the
recipient to repay such amount if said person shall be adjudicated to be not
entitled to indemnification under this section, which undertaking may be
accepted without reference to the financial ability of such person to make
repayment.
Any such indemnification may be provided although the person to be
indemnified is no longer a Director, officer, employee or other agent of the
corporation or of such other organization or no longer serves with respect to
any such employee benefit plan.
The right of indemnification hereby provided shall not be exclusive of or
affect any other right to which any Director, officer, employee or other agent
of the corporation may be entitled. As used in this paragraph, the terms
"Director", "officer", "employee" and "agent" include their respective heirs,
executors and administrators, and an "interested" Director, officer, employee
or other agent of the corporation is one against whom in such capacity the
proceedings in question or another proceeding on the same or similar grounds is
then pending. In the event any part of this Article shall be found, in any
action, suit or proceeding to be invalid or ineffective, the validity and the
effect of the remaining parts shall not be affected.
ARTICLE XIX
-----------
AMENDMENTS
----------
Section 1. Except as otherwise provided in Article XVI hereof, these
By-Laws may be altered, amended or repealed at any meeting of the stockholders
called for such purpose by vote of a majority of stock present and voting
thereon, or if the Articles of Organization so provide, by a vote of a majority
of the Board of Directors at any meeting of the Board of Directors called for
the purpose.
---------------
I HEREBY CERTIFY that the foregoing copy of the By-Laws of Western
Massachusetts Electric Company is a true and correct copy of said By-Laws in
full force and effect as of this day of
------ --------------, --------.
/s/ O. Kay Comendul
---------------
O. Kay Comendul
Assistant Clerk
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
for the
MILLSTONE NUCLEAR POWER STATION
by and among
THE CONNECTICUT LIGHT AND POWER COMPANY,
WESTERN MASSACHUSETTS ELECTRIC COMPANY,
THE UNITED ILLUMINATING COMPANY,
CENTRAL MAINE POWER COMPANY,
CHICOPEE MUNICIPAL LIGHTING PLANT,
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY,
VILLAGE OF LYNDONVILLE ELECTRIC DEPARTMENT,
NEW ENGLAND POWER COMPANY,
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE,
VERMONT ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE
and
NORTHEAST NUCLEAR ENERGY COMPANY
as Sellers
and
DOMINION RESOURCES, INC.
as Buyer
dated
August 7, 2000
PURCHASE AND SALE AGREEMENT
1. Preamble
This Purchase and Sale Agreement (the "Agreement") is entered into on
August 7, 2000, by and among Dominion Resources, Inc., a Virginia corporation
(the "Buyer"), and The Connecticut Light and Power Company, a Connecticut
corporation ("CL&P"), Western Massachusetts Electric Company, a Massachusetts
corporation ("WMECO"), The United Illuminating Company, a Connecticut
corporation ("UI"), Central Maine Power Company, a Maine corporation ("CMP"),
Chicopee Municipal Lighting Plant, a Massachusetts municipal utility
("CMLP"), Fitchburg Gas and Electric Light Company, a Massachusetts
corporation ("Fitchburg"), Village of Lyndonville Electric Department, a
Vermont municipal utility ("Lyndonville"), New England Power Company, a
Massachusetts corporation and successor by merger to Montaup Electric Company
("NEP"), Public Service Company of New Hampshire, a New Hampshire corporation
("PSNH"), Vermont Electric Generation and Transmission Cooperative, a
liquidated cooperative utility acting by and through its bankruptcy trustee
("VEG&T"), and Northeast Nuclear Energy Company, a Connecticut corporation
("NNECO") (CL&P, WMECO, UI, CMP, CMLP, Fitchburg, Lyndonville, NEP, PSNH,
VEG&T, and NNECO are each individually referred to herein as a "Seller" and
are referred to collectively herein as "Sellers"). Each of the Sellers and
the Buyer are referred to herein as a "Party" or, collectively, as the
"Parties". Terms used herein in capitalized form shall have the meanings
ascribed in Section 13 hereof or as otherwise set forth in this Agreement.
WHEREAS, each Seller owns, as a tenant-in-common, in the percentage set
forth on Schedule 1 hereto, an undivided fee simple ownership interest in one
or more of the Facilities (as hereinafter defined) located at Millstone
Nuclear Power Station, in Waterford, Connecticut ("Millstone"), and certain
other facilities and assets associated therewith and ancillary thereto,
excepting the portion thereof consisting of the real property, Improvements
thereon and appurtenances thereto described in Schedule A-7 to Schedule
2.1(a)(i) hereto, all of which is owned in fee simple solely by CL&P; and for
the avoidance of doubt, except for CL&P, WMECO and NNECO, all other Sellers
(including UI) own an Ownership Share in Millstone Unit 3 only;
WHEREAS, CL&P and WMECO, as the sole owners of Millstone Units 1 and 2
and as the "Lead Participants" under the Sharing Agreement (as hereinafter
defined) for Millstone Unit 3 (CL&P and WMECO are referred to collectively
herein as the "Lead Participants") have appointed NNECO as operator to be
responsible for the operation, maintenance and management of Millstone;
WHEREAS, the Sellers (other than the Lead Participants and UI) have
appointed the Lead Participants to act as their agents under the
Authorization Agreements for purposes of the transactions contemplated by
this Agreement and, to the extent a party thereto, the Related Agreements (as
hereinafter defined);
WHEREAS, UI has authorized the Lead Participants to (a) act as its agent
under the Sharing Agreement with respect to decommissioning funding matters
in connection with Millstone Unit 3 and (b) act as its agent under that
certain agreement dated the date hereof between the Lead Participants and UI
for purposes of the performance of certain agreements and covenants by the
Lead Participants on its behalf in connection with the transactions
contemplated by this Agreement (including, without limitation, the covenants
made by the Lead Participants on its behalf (as a Seller) under Section 5
hereof) and, to the extent a party thereto, the Related Agreements;
WHEREAS, the Buyer desires to purchase and assume, and the Sellers
desire to sell and assign the Acquired Assets (as defined in Section 2.1
below) and certain associated liabilities upon the Initial Closing and each
Subsequent Closing as more fully described herein, upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
2. Acquisition of Assets by Buyer.
2.1. Purchase and Sale of Assets. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement at the Initial
Closing and each Subsequent Closing, each of the Required Sellers or the
Remaining Sellers, as the case may be, shall sell, assign, convey, transfer
and deliver or cause to be sold, assigned, conveyed, transferred and
delivered, to the Buyer, and the Buyer shall purchase, assume and acquire
from such Sellers, free and clear of any Lien (except for Permitted
Encumbrances), such Seller's Ownership Share of the properties and assets
constituting, related to, used or held for use in the operation of the
Facilities, including, but not limited to the following (collectively,
together with the assets of NNECO set forth in Schedule 2.1, the "Acquired
Assets"):
(a) the real property, Improvements thereon, easements and other
rights in real property described in Schedule 2.1(a)(i), and all rights
arising out of the ownership thereof or appurtenant thereto, including,
without limitation, all related rights of ingress and egress, subject only to
the Permitted Encumbrances, including the matters set forth in Schedule
2.1(a)(ii) (the "Real Property");
(b) all Spent Nuclear Fuel, in the quantity set forth in Schedule
2.1(b), and all High Level Waste at the Sites on such Closing Date, and all
Low Level Waste, in the quantity set forth in Schedule 2.1(b), at the Sites
on such Closing Date;
(c) all machinery, mobile or otherwise, equipment, computer
hardware and software, communications equipment, tools, spare parts,
fixtures, furniture, furnishings, work in process, and other personal
property owned by the Sellers and which is used in or relates to the
operation or maintenance of the Facilities, and the Inventories owned by the
Sellers which are held at or are in transit from or to the Facilities and the
Sites, including, without limitation, the items of personal property set
forth in Schedule 2.1(c), as well as all applicable warranties and guaranties
from Third Parties relating thereto to the extent such warranties and
guaranties are transferable to the Buyer, or to the extent any such items are
leased, an assignment of the applicable leases for such items (as well as all
applicable warranties and guaranties from Third Parties relating thereto to
the extent transferable to the Buyer);
(d) all of the Sellers' rights with respect to leasehold interests
and subleases and rights thereunder relating to the Real Property, including,
without limitation, with respect to the leases set forth in Schedule 2.1(d)
(the "Leases");
(e) all Permits, which are transferable by the Sellers to the
Buyer by assignment or otherwise (including, without limitation, upon request
or application to a Governmental Authority, or which will pass to the Buyer
as successor in title to the Acquired Assets by operation of Law), including,
without limitation, those Permits set forth in Schedule 2.1(e) (the
"Transferable Permits");
(f) except as specifically provided in Sections 2.2(e), 2.2(f) and
2.2(g), all rights of the Sellers under the contracts, agreements, the
Sharing Agreement, the Transmission Support Agreement, the DOE Standard
Contracts (including all rights to any claims of Sellers related to DOE
defaults thereunder), the Nuclear Fuel Contracts, software and other
Intellectual Property licenses and personal property leases which relate to
the operation of the Facilities set forth in Schedule 2.1(f) and all
warranties and guaranties relating to the Acquired Assets (the "Material
Contracts");
(g) to the extent permitted by applicable Law, all documents,
correspondence, books, records, medical records, operating, safety and
maintenance manuals, inspection reports, drawings, models, engineering
designs, blueprints, as-built plans, specifications, procedures, studies,
reports, quality assurance records, purchasing records and equipment repair,
data, safety, maintenance or service records of the Sellers relating to the
design, construction, licensing, regulation, operation or Decommissioning of
the Facilities and the other Acquired Assets, which documents are in the
possession or control of the Lead Participants or NNECO, wherever located and
whether existing in hard copy or magnetic or electronic form, including,
without limitation, all Sellers' rights in and license or other right to use
(in the case of those not owned by Sellers) any drawings, designs,
specifications and other documents owned by Third Parties and licensed to
Sellers which are used in or necessary to the licensing, operation or
Decommissioning of the Facilities;
(h) to the extent permitted by applicable Law, all Acquired Assets
Employee Records;
(i) all rights of the Sellers in and to the words "Millstone
Nuclear Power Station" and any related or similar tradename, trademark,
service mark, copyright, corporate name, logo or any part, derivative or
combination;
(j) all assignable right, title and interest of the Sellers to the
NRC Licenses;
(k) all right, title and interest of the Sellers in Nuclear Fuel
wherever located;
(l) the assets comprising the Decommissioning Funds, including all
income, interest and earnings accrued thereon, together with all related tax
accounting, decommissioning studies and cost estimates, and all other books
and records related thereto;
(m) without limiting the generality of Sections 2.1(a) and 2.1(c), all rights
of the Sellers in the property and assets used or usable in providing emergency
warning or associated with emergency preparedness as set forth in Schedule
2.1(m)(i) (the "Emergency Preparedness Assets") and all rights of the Sellers
under the contracts and agreements associated with such emergency preparedness
as set forth in Schedule 2.1(m)(ii) (the "Emergency Preparedness Agreements");
(n) all right, title and interest of the Sellers in the vehicles
set forth in Schedule 2.1(n) (the "Vehicles");
(o) all assignable rights, benefits and interest of the Sellers
under purchase orders, licenses or contracts that are not Emergency
Preparedness Agreements, Material Contracts or Leases but that (i) relate to
the operation of the Facilities, (ii) are identified in writing by the
Parties during the Interim Period, and (iii) are set forth in a schedule to
be attached to the Assignment and Assumption Agreement at such Closing (the
"Other Assigned Contracts");
(p) all Owned Intellectual Property; provided that the Sellers
shall retain an irrevocable, perpetual, non-exclusive and fully paid-up
license to use such Intellectual Property; provided, further, that each Party
shall have no obligation after the relevant Closing Date to provide the other
Parties with any updates, maintenance or technical support with respect to
such Intellectual Property;
(q) to the extent transferable, all Nuclear Insurance Policies set
forth in Schedule 2.1(q) and the rights to proceeds from insurance policies
for coverage of Acquired Assets and Assumed Liabilities, including all rights
to collect premium refunds made after the relevant Closing Date pursuant to
the ANI nuclear industry credit rating plan (other than refunds that relate
to premiums paid on or prior to such Closing Date);
(r) all contracts, instruments or other agreements set forth in
Schedule 2.1(r) relating to the sale by the Lead Participants of electric
capacity, energy or ancillary products or services from the Facilities under
wholesale rates or otherwise subject to regulation by the FERC;
(s) the Sellers' claims, rights or causes of actions against any
Third Parties arising out of or relating to Sellers' right, title and
interest in and to any of the Acquired Assets or the Assumed Liabilities, or
any portion thereof, whether received as a payment or credit against future
liabilities, including, without limitation, insurance proceeds, condemnation
awards and cash payments under warranties covering the Acquired Assets to the
extent such payments relate to Assumed Liabilities or Acquired Assets;
(t) all Sellers' memoranda, reports, information, technology and
specifications existing on such Closing Date relating to plans for Year 2000
Compliance with respect to the Acquired Assets;
(u) all other assets of the Sellers constituting, used or held for
use in the operation of, the Facilities, as set forth on Schedule 2.1(u), as
amended by the Parties during the Interim Period pursuant to Section 5.6 (the
"Other Related Assets");
(v) all emission reduction credits owned by the Sellers that
relate to the operation of the Facilities, as set forth in Schedule 2.1(v);
and
(w) an assignment of all licenses for the Licensed Intellectual
Property (to the extent transferable to the Buyer), including any related
maintenance agreements for such Licensed Intellectual Property; provided,
however, that to the extent any licenses for the Licensed Intellectual
Property may not be assignable to the Buyer on commercially reasonable terms
the Lead Participants shall take Commercially Reasonable Efforts consistent
with the terms and conditions of such licenses to make such Licensed
Intellectual Property available for use by the Buyer.
2.2. Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, there shall be excluded from the Acquired Assets to be sold,
assigned, transferred, conveyed or delivered to the Buyer hereunder, and
there shall be retained by the Sellers, any and all right, title and interest
to the following assets, properties and rights (collectively, the "Excluded
Assets"):
(a) the property comprising or constituting any or all of the T&D
Assets located at any Site (whether or not regarded as a "transmission,"
"distribution," "general plant" or "generation" asset for regulatory or
accounting purposes and whether such assets are real or personal property),
including the 345-kV switchyard facilities and support equipment, certain
telecommunications equipment, all four 345-kV transmission lines and portions
of 23-kV distribution lines, as well as all Permits and contracts, to the
extent relating to the T&D Assets, all as set forth in Schedule 2.2(a), all
of which shall be retained by CL&P, but not including the real property on
which such T&D Assets are located;
(b) all Cash, accounts and notes receivable, checkbooks and
canceled checks, bank deposits and property or income tax receivables (except
for any property tax abatements to be apportioned) or any other Tax refunds
to the extent allocable to a period ending on or prior to the Initial Closing
Date (including, without limitation, the Sellers' account balances with NEIL
and any future annual distributions from NEIL that relate to premiums paid by
the Sellers on or prior to such Closing Date), except the assets comprising
the Decommissioning Funds;
(c) all rights of the Sellers in and to any causes of action,
claims and defenses against Third Parties arising out of or relating to any
of the Excluded Assets or Excluded Liabilities, whether payable in Cash or as
a credit against future liabilities, including, without limitation, insurance
proceeds and condemnation awards claims for contribution or indemnity, tort
claims, causes of action, contract rights and refunds accrued and owing;
(d) all rights of the Sellers to the words set forth in Schedule
2.2(d) and any related or similar tradename, trademark, service mark,
copyright, corporate name, logo or any part, derivative or combination;
(e) any claims of CL&P and WMECO in connection with Pre-1983 Spent
Nuclear Fuel related or pertaining to the DOE's defaults under the DOE
Standard Contracts accrued as of the Initial Closing Date;
(f) (i) all rights of the Sellers for indemnity, defense or
exculpation under any Material Contract, Lease or Other Assigned Contract
expressly providing the Sellers with continued indemnity, defense or
exculpation rights for occurrences on or prior to the Initial Closing Date or
any claims for which the Sellers remain liable under Section 9 and (ii) all
rights and obligations of the Sellers under the Authorization Agreements and
the Release and Settlement Agreements;
(g)all rights (but not the Liabilities) of the Lead Participants
to receive payments under the Transmission Support Agreement;
(h) all rights of CL&P and WMECO under the Fuel Trust;
(i) any and all of the Sellers' rights in any contract
representing an intercompany transaction between a Seller and an Affiliate of
such Seller, whether or not such transaction relates to the provision of
goods and services, payment arrangements, intercompany charges or balances,
or the like;
(j) Seller Reserved Easements in favor of CL&P as set forth in
Schedule 2.2(j); and
(k) all rights, benefits and interest in (i) all purchase orders,
licenses or contracts not included in Acquired Assets and not assigned to the
Buyer as set forth in Schedule 2.2(k) and (ii) those Nuclear Fuel Contracts
which are designated by the Buyer and which can be terminated without
liability to the Sellers or the Lead Participants (the "Non-Assigned
Contracts").
2.3. Assumption of Liabilities. On the terms and subject to the
conditions set forth herein, after the Initial Closing Date and each
Subsequent Closing Date, as the case may be, the Buyer shall assume, satisfy
or perform the Total Relevant Percentage of the following Liabilities of the
Required Sellers or the Remaining Sellers participating in such Closing, in
each case, in respect of, or otherwise arising from the operation or use of
the Acquired Assets, other than the Excluded Liabilities (as set forth in
Section 2.4 below) (the "Assumed Liabilities"):
(a) all Environmental Liabilities, other than those included in
the Excluded Liabilities (as set forth in Section 2.4);
(b) except as specifically provided in Section 2.4(u), all
Liabilities under (i) the Material Contracts, Leases, Other Assigned
Contracts, Emergency Preparedness Agreements and the Transferable Permits in
accordance with the terms thereof, except in each case, to the extent such
Liabilities relate to periods ending on or prior to such Closing Date, or to
the extent the same arise out of any breach or default by any Seller, and
(ii) the contracts, leases, commitments and other agreements entered into by
the Sellers with respect to the Acquired Assets during the Interim Period to
the extent permitted by Section 5.3(a);
(c) Liabilities in respect of or otherwise arising from those
Permitted Encumbrances listed in Schedule 2.3(c) which accrue or arise after
the Initial Closing Date and do not result from a default or failure to act
under the Permitted Encumbrances by the Sellers prior to the Initial Closing
Date; provided, however, Permitted Encumbrances as to which a Seller's
liability terminates as a matter of law upon such Seller's sale of its
interest in the Real Property shall not be Assumed Liabilities;
(d) with respect to the Acquired Assets, any Tax that may be
imposed by any federal, state or local government on the ownership, sale,
operation or use of the Acquired Assets by the Sellers after such Closing
Date, except for (i) any Income Taxes attributable to income received by the
Sellers and (ii) any Taxes allocable to the Sellers in accordance with the
proration under Section 2.9;
(e) all Liabilities in respect of (i) the Decommissioning of the
Facilities following permanent cessation of operations of such Facilities,
(ii) the management, storage, transportation and disposal of Spent Nuclear
Fuel (including, without limitation, all fees payable to DOE under the DOE
Standard Contracts accrued after the relevant Closing Date), except for any
fees payable to DOE for Pre-1983 Spent Nuclear Fuel under the DOE Standard
Contracts for which CL&P and WMECO shall be responsible to provide the Buyer
with the funds necessary to make any payments owing to DOE pursuant to
Sections 5.18 and 9.3, and (iii) any other decommissioning or post-operative
disposition of the Facilities or any other Acquired Assets;
(f) any Liability for any Price-Anderson secondary financial
protection retrospective premium obligations for (i) the Sellers' nuclear
worker Liability attributable to employment on or prior to such Closing Date
or (ii) for any third-party nuclear Liability arising out of any nuclear
incident on or prior to such Closing Date (it being agreed that if the
Sellers are unable to cause the assignment of all or any part of such
retrospective premium obligations, the Sellers shall remain primarily liable
for such indemnification obligations and the Buyer shall indemnify the
Sellers therefor pursuant to Section 9.4);
(g) all Liabilities of Sellers for retrospective premium
obligations under each such Seller's NEIL policy for the Facilities arising
out of any occurrence after such Closing Date;
(h) except as provided in Section 2.4(n), all Liabilities accruing
after such Closing Date under the NRC Licenses including fees or charges;
(i) all other Liabilities expressly allocated to or assumed by the
Buyer in this Agreement or in any of the Related Agreements; and
(j) all other Liabilities (including, without limitation, all
Liabilities arising under or relating to Nuclear Laws or relating to any
claim in respect of Nuclear Material) of any nature whatsoever to the extent
arising from the ownership or operation of the Facilities, Acquired Assets
and Assumed Liabilities and relating to the period after such Closing Date,
unless expressly excluded pursuant to Section 2.4.
2.4. Liabilities Not Assumed. Notwithstanding anything to the contrary
in this Agreement, the Buyer shall not assume, satisfy or perform any
Liabilities that are not expressly identified in Section 2.3 as Assumed
Liabilities, including, without limitation, the following excluded
Liabilities (the "Excluded Liabilities"):
(a) any Liability in respect of, in connection with, or otherwise
arising from the operation or use of the Excluded Assets or any other assets
of the Sellers that are not Acquired Assets;
(b) any Liability including, without limitation, any Environmental
Liability, in respect of, in connection with, or arising from the Seller
Reserved Easements;
(c) any Liabilities, including, without limitation, any
Environmental Liabilities, relating to the off-Site disposal, storage,
transportation, discharge, Release, recycling, or the arrangement for such
activities, by the Sellers, of Hazardous Substances that were generated at
any of the Sites, at any Offsite Hazardous Substance Facility or at any
location other than the Sites (other than as a result of subsurface migration
from the Sites), where the initial disposal, storage, transportation,
discharge, Release or recycling of such Hazardous Substances at such Offsite
Hazardous Substance Facility occurred on or prior to any Closing Date;
(d) any Liability arising from the execution, delivery or
performance of this Agreement or a Related Agreement or the transactions
contemplated hereby or thereby;
(e) any Liability to make payments in addition to or in lieu of
property Taxes, and any Liability in respect of Taxes attributable to the
Acquired Assets (or their ownership, sale, operation or use) with respect to
periods prior to the relevant Closing Date, whether for taxable periods
ending before, on or after the Initial Closing Date or a Subsequent Closing
Date, as the case may be, except those Taxes expressly allocated to the Buyer
pursuant to Section 8;
(f) any Liability for claims of Participants in Millstone Unit 3
against the Lead Participants or NNECO or any Affiliate arising out of events
occurring on or prior to the relevant Closing Date, or any Liability for
claims of Participants arising under the Authorization Agreements or the
Release and Settlement Agreements;
(g) any Liability which is or would be required to be accrued by
any Seller on a balance sheet of such Seller as of the Initial Closing Date
or a Subsequent Closing Date, as the case may be, prepared in accordance with
GAAP, other than those Liabilities which are expressly set forth as Assumed
Liabilities in Section 2.3;
(h) subject to the provisions of Section 5.7, any Liability
arising out of any Employee Benefit Plan established or maintained in whole
or in part by the Lead Participants (or any of their Affiliates) or to which
the Lead Participants (or any of their Affiliates) contributes or
contributed, or is or was required to contribute, at any time on or prior to
the relevant Closing Date and any Liability for the termination or
discontinuance of, or the Lead Participants' or their Affiliates' withdrawal
from, any such Employee Benefit Plan;
(i) all Liabilities of CL&P and WMECO under the Fuel Trust;
(j) any Liabilities of the Lead Participants or any of their
Affiliates for any compensation or any benefits, whether in relation to any
of the Plant Employees, independent contractors or any other individuals who
are later determined by a court or governmental agency to have been employees
of the Lead Participants or its Affiliates, including, without limitation,
(i) wages, bonuses, incentive compensation, shift or work schedule adders,
on-call pay, call-out pay, vacation pay, sick pay, paid time off, workers
compensation, unemployment compensation, withholding obligations, employment
taxes or similar obligations accruing or related to work performed on or
prior to the Initial Closing Date; (ii) severance pay, other termination pay,
post-retirement benefits and COBRA coverage, accruing or related to work
performed on or prior to the Initial Closing Date; or (iii) any other form of
compensation or benefits accruing or related to work performed on or prior to
the Initial Closing Date under the terms or provisions of any Employee
Benefit Plan of any Seller or such Affiliate, or any other agreement, plan,
practice, policy, instrument or document relating to any of the Acquired
Assets Employees, or any applicable Law, other than the Liabilities expressly
assumed by the Buyer under Section 5.7;
(k) with respect to the Acquired Assets Employees or any
independent contractors, or any other individuals and subject to Section 5.7,
any Liabilities or obligations relating to the employment or engagement or
termination of employment or engagement, including personal injury, tort,
discrimination (including claims for whistleblowing under the Atomic Energy
Act and the Energy Reorganization Act of 1974 as amended, as well as claims
under Title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act, as amended, the Americans with Disabilities
Act, and/or any other federal, state or local statute, ordinance, regulation
or order prohibiting discrimination), wrongful discharge, breach of implied
or express contract, unfair labor practices, or constructive termination by
any Seller or its Affiliate of any individual, or similar claim or cause of
action attributable to any action or inaction by any Seller or any of its
Affiliates where the material facts of such claim or cause of action occurred
on or prior to the Initial Closing Date; provided that the Sellers shall not
have any liability for similar actions or inactions by the Buyer after the
Initial Closing Date;
(l) any Liabilities of Sellers accrued or related to or
attributable to the period prior to the Initial Closing Date under any
contract, license, Permit or other instrument relating to the Acquired Assets
(including, without limitation, the Leases, Material Contracts, Emergency
Preparedness Agreements, Sharing Agreement and Other Assigned Contracts);
(m) as provided in Section 5.19, all Liabilities for assessments
for decommissioning and decontamination fund fees relating to Nuclear Fuel
purchased and consumed at the Facilities and accrued on or prior to the
Initial Closing Date or a Subsequent Closing Date, as the case may be, under
42 U.S.C. Section 2297g-1;
(n) any costs or Liabilities relating to, or imposed under the NRC
Licenses or any other Permits accruing prior to the relevant Closing Date ,
including without limitation those relating to (i) any investigation,
proceeding, request for information or inspection arising out of acts or
omissions of the Sellers or their employees, agents or contractors occurring
on or prior to the relevant Closing Date or (ii) any illegal acts or willful
misconduct of the Sellers or their employees, agents or contractors;
(o) any Environmental Liability to the extent such Environmental
Liability arises out of or relates to any allegation or any investigation by
any Governmental Authority of any criminal violations of Environmental Laws
by the Sellers or any of their Affiliates occurring on or prior to the
Initial Closing Date;
(p) any Environmental Liability to the extent such Environmental
Liability derives from the same facts which form the basis of a conviction
of, or plea of nolo contendere by, the Sellers or any of their Affiliates for
a violation of Environmental Laws which conviction or plea arises out of a
Governmental Authority's investigation of criminal violations of
Environmental Laws by the Sellers or any of their Affiliates;
(q) all Liabilities for fees payable to DOE under the DOE Standard
Contracts accrued or related to electricity generated and sold, on or prior
to the Initial Closing Date, including, without limitation, subject to
Section 5.18, all Liabilities for fees, late fees, penalties and other
amounts payable to DOE in connection with the disposal of Pre-1983 Spent
Nuclear Fuel, and interest accrued thereon as set forth in Article VIII of
the DOE Standard Contracts;
(r) any Liabilities relating to the Connecticut Development
Authority Pollution Control Revenue Bonds (as set forth in Schedule 2.4(r),
the "Pollution Control Bonds") and any agreements relating thereto, other
than those arising out of the breach by the Buyer of the covenants contained
in Section 5.8(d);
(s) any Liens on the Acquired Assets;
(t) except as otherwise expressly set forth in this Agreement, any
other Liability, obligation, claim, action, complaint, debt, suit, cause of
action, investigation, or proceeding of any kind whatsoever asserted by any
Third Party, against or relating to any of the Buyer, the Sellers or the
Acquired Assets, for damages suffered by such Third Party arising from or
relating to the use, ownership or lease of the Acquired Assets or operation
of the Facilities on or prior to any Closing Date;
(u) all Liabilities of the Lead Participants under the Transmission Support
Agreement;
(v) any Liabilities, fines, or penalties imposed by a Governmental
Authority, including, without limitation, criminal penalties, civil fines,
administrative settlement costs, costs to achieve continuous compliance and
costs of remediation to the extent such obligations arise out of or relate to
such Governmental Authority's investigation of any alleged criminal
violations occurring or alleged to have occurred on or prior to the Initial
Closing Date;
(w) any Liabilities with respect to accounts payable for
Inventory, except to the extent such accounts payable are netted against the
value of the Inventory set forth in Section 2.6(a)(iv);
(x) any Liabilities with respect to any Acquired Asset, the
transfer of which requires consent of a Third Party, which consent has not
been obtained and/or the rights and benefits under which have not been
lawfully provided to the Buyer pursuant to Section 5.6; and
(y) all Liabilities which are not Assumed Liabilities.
It is expressly agreed among the Sellers and acknowledged by the Buyer that
the Excluded Liabilities (other than such Excluded Liabilities described in
clause(r) of this Section 2.4) shall be retained by the Lead Participants and
the Excluded Liabilities described in clause (r) of this Section 2.4 shall be
retained by CL&P, WMECO and UI.
2.5. Consideration for Acquired Assets.
(a) Facilities Purchase Price; Fuel Purchase Price. Subject to
the satisfaction or waiver of all conditions contained herein, the Buyer
shall pay (i)(A) for all of the interests of the Sellers in the Acquired
Assets (other than Nuclear Fuel) comprising Millstone Unit 1, $1,000,000 (the
"Unit 1 Facilities Purchase Price"), (B) for all of the interests of the
Sellers in the Acquired Assets (other than Nuclear Fuel) comprising Millstone
Unit 2, $401,500,000 (the "Unit 2 Facilities Purchase Price") and (C) for all
of the interests of the Sellers in the Acquired Assets (other than Nuclear
Fuel) comprising Millstone Unit 3, $781,299,971 (the "Unit 3 Facilities
Purchase Price", and together with the Unit 1 Facilities Purchase Price and
the Unit 2 Facilities Purchase Price, the "Facilities Purchase Price") and
(ii)(A) for all of the interests of the Sellers in the Nuclear Fuel
attributable to Millstone Unit 1, $0 (the "Unit 1 Fuel Purchase Price"), (B)
for all of the interests of the Sellers in the Nuclear Fuel attributable to
Millstone Unit 2, $41,900,000 (the "Unit 2 Fuel Purchase Price") and (C) for
all of the interests of the Sellers in the Nuclear Fuel attributable to
Millstone Unit 3, $62,067,658 (the "Unit 3 Fuel Purchase Price", and together
with the Unit 1 Fuel Purchase Price and the Unit 2 Fuel Purchase Price, the
"Fuel Purchase Price").
(b) Payment of Purchase Price. At each Closing the Buyer shall
(i) pay to CL&P, on behalf of the Required Sellers or the Remaining Sellers,
as the case may be, for the Acquired Assets other than Nuclear Fuel
purchased, sold, assigned or transferred at such Closing, a payment in
immediately available funds equal to the sum of (A) the Unit 1 Relevant
Percentage of the Unit 1 Facilities Purchase Price, (B) the Unit 2 Relevant
Percentage of the Unit 2 Facilities Purchase Price and (C) the Unit 3
Relevant Percentage of the Unit 3 Facilities Purchase Price (collectively,
the "Relevant Facilities Purchase Price") and (ii) pay to CL&P, on behalf of
the Required Sellers or the Remaining Sellers, as the case may be, for the
Nuclear Fuel, a payment in immediately available funds equal to the sum of
(A) the Unit 1 Relevant Percentage of the Unit 1 Fuel Purchase Price, (B) the
Unit 2 Relevant Percentage of the Unit 2 Fuel Purchase Price and (C) the Unit
3 Relevant Percentage of the Unit 3 Fuel Purchase Price (collectively, the
"Relevant Fuel Purchase Price").
For the avoidance of doubt, an example setting forth the
calculation of the Relevant Facilities Purchase Price and the Relevant Fuel
Purchase Price as of a Closing is set forth in Schedule X.
(c) Acceptable Credit Support. At the Initial Closing, the Buyer
shall deliver to CL&P, on behalf of the Sellers, an Acceptable Credit
Support, and shall, pursuant to Section 5.21, maintain such Acceptable Credit
Support to secure the payments of the Facilities Purchase Price and the Fuel
Purchase Price.
2.6. Adjustment to Facilities Purchase Price and Fuel Purchase Price.
On the Initial Closing Date, the Facilities Purchase Price and Fuel Purchase
Price shall be increased or reduced as follows:
(a) Facilities Payment Adjustments. With respect to the Buyer,
(i) the Facilities Purchase Price for each Unit shall be
increased by an amount equal to the costs of Required Nuclear
Expenditures for such Unit which have been completed and actually paid
by the Sellers during the Interim Period and consented to in writing by
the Buyer, which consent shall not be unreasonably withheld; provided,
however, Required Nuclear Expenditures which cannot be attributed to a
particular Unit shall be allocated among the Units pro rata based on the
Facilities Purchase Price for each Unit.
(ii) the Facilities Purchase Price for a Unit shall be
decreased to the extent any of the Pre-Approved Capital Expenditures for
such Unit have not been completed and paid for prior to the Initial
Closing Date, which decrease shall be in an amount equal to the greater
of (A) the budgeted amount for the incomplete portion of the Pre-
Approved Capital Expenditure as set forth in Schedule 5.3 and (B) the
market-based cost that the Buyer would be required to pay for the
incomplete portion following the Initial Closing Date; provided,
however, Pre-Approved Capital Expenditures which cannot be attributed to
a particular Unit shall be allocated among the Units pro rata based on
the Facilities Purchase Price for each Unit.
(iii) the Facilities Purchase Price and the Fuel Purchase
Price shall be adjusted as provided in Section 5.11(c) in the event of
any Major Loss;
(iv) the Facilities Purchase Price shall be (A) increased if
and to the extent the book value of all Inventories (excluding the value
of items that are no longer useable at or for the Facilities) on the
Initial Closing Date is greater than $56,604,600, and (B) decreased if
and to the extent the book value of such Inventories (excluding the
value of items that are no longer useable at or for the Facilities) on
the Initial Closing Date is less than $56,604,600 (for purposes hereof,
the calculation of the book value of all Inventories shall be performed
by an Independent Accounting Firm and such book value shall be
determined in accordance with GAAP, consistent with the Lead
Participants' and NNECO's past practices) and through the conduct of an
audit of the Inventories, using such processes and procedures as such
Independent Accounting Firm shall deem advisable;
(v) to the extent the Lead Participants or NNECO have not
disposed prior to the Initial Closing Date of all of the Radioactive
Waste Material whether at the Sites or at an Offsite Hazardous Substance
Facility and the cost of such disposal is in excess of $500,000, the
Facilities Purchase Price for the Units to which such excess disposal
cost is allocable shall be decreased by the excess over such amount (the
cost of such disposal to be determined based on the prevailing industry
costs as close to the Initial Closing Date as practicable); provided,
however, any such disposal costs which cannot be attributed to a
particular Unit shall be allocated among the Units pro rata based on the
Facilities Purchase Price for each Unit;
(vi) the Facilities Purchase Price for each Unit shall be
decreased for accrued and unpaid obligations for vacation pay, sick pay,
floating holidays or personal days as may be due to any Acquired Assets
Employee as of the Initial Closing Date (for purposes hereof, such
adjustment shall be determined in accordance with GAAP consistent with
the Lead Participants' and NNECO's past practices) attributable to such
Unit; provided, however, any such obligations which cannot be attributed
to a particular Unit shall be allocated among the Units pro rata based
on the Facilities Purchase Price for each Unit; and
(vii) the Facilities Purchase Price for each Unit shall be
increased by an amount equal to the aggregate cost of Proposed
Improvements attributable to such Unit, to the extent implemented and
actually paid by the Lead Participants and NNECO during the Interim
Period; provided, however, any such costs which cannot be attributed to
a particular Unit shall be allocated among the Units pro rata based on
the Facilities Purchase Price for each Unit.
With respect to any adjustment described in this Section 2.6(a), as among the
Sellers, the determination of what constitutes common facilities shall be
consistent with historical practices.
(b) Fuel Purchase Price Adjustments.
(i) The Fuel Purchase Price for the appropriate Unit shall be
(i) increased if and to the extent the book value of all of the Sellers'
Nuclear Fuel on the Initial Closing Date is greater than $0 for Unit 1,
$41,900,000 for Unit 2 and $62,067,658 for Unit 3, and (ii) decreased if
and to the extent the book value of such Nuclear Fuel on the Initial
Closing Date is less than $0 for Unit 1, $41,900,000 for Unit 2 and
$62,067,658 for Unit 3, (for purposes hereof, such adjustment shall be
determined in accordance with GAAP, consistent with the Lead
Participants' and NNECO's past practices).
(c) Determination of Purchase Price Adjustments.
(i) At least twenty (20) Business Days prior to the Initial
Closing Date, the Lead Participants shall prepare and deliver to the
Buyer an estimated closing statement (the "Estimated Closing
Statement") that shall set forth the best estimate of the Sellers of any
adjustments to the Facilities Purchase Price required by Section
2.6(a)(i) through (vii) (the "Estimated Facilities Purchase Price
Adjustment") and any adjustments to the Fuel Purchase Price required by
Section 2.6(b) (the "Estimated Fuel Purchase Price Adjustment," together
with the Estimated Facilities Purchase Price Adjustment the "Estimated
Adjustments") as of the Initial Closing Date, together with reasonably
detailed back-up information concerning the calculation of the Estimated
Adjustments. Within ten (10) Business Days following the delivery of
the Estimated Closing Statement by the Lead Participants to the Buyer,
the Buyer may object in good faith to either or both of the Estimated
Adjustments in writing. If the Buyer objects to either or both of the
Estimated Adjustments, the Parties shall attempt to resolve such dispute
by negotiation. If the Parties are unable to resolve such dispute
before five (5) Business Days prior to such Initial Closing Date or if
no objection is made by the Buyer with respect to either or both of the
Estimated Adjustments, the Facilities Purchase Price and/or the Fuel
Purchase Price shall each be adjusted for such Initial Closing Date by
the net amount of the Estimated Facilities Purchase Price Adjustment and
the Estimated Fuel Purchase Price Adjustment respectively, not in
dispute, and the amount in dispute shall be withheld for resolution in
accordance with Section 2.6(c)(ii); and
(ii) Within thirty (30) days following the Initial Closing
Date, the Lead Participants shall prepare and deliver to the Buyer a
closing statement (the "Post-Closing Statement") that shall set forth
the completion by the Sellers of the Facilities Purchase Price
adjustment in accordance with Section 2.6(a)(i) through (vii) as of such
Initial Closing Date (the "Facilities Purchase Price Adjustment") and
the components thereof and the Fuel Purchase Price adjustment in
accordance with Section 2.6(b) as of such Initial Closing Date (the
"Fuel Purchase Price Adjustment") and the components thereof. Within
twenty (20) days following the delivery of the Post-Closing Statement by
the Lead Participants to the Buyer, the Buyer may object to the Post-
Closing Statement in writing. The Sellers agree to cooperate with the
Buyer to provide to the Buyer or its Representatives information used to
prepare the Post-Closing Statement. If the Buyer objects to the Post-
Closing Statement, the Parties shall attempt to resolve such dispute by
negotiation. If the Parties are unable to resolve such dispute within
twenty (20) days of any objection by the Buyer, the Parties shall
appoint an Independent Accounting Firm, who shall review the Post-
Closing Statement and determine within thirty (30) days after its
appointment the appropriate Facilities Purchase Price Adjustment and
Fuel Purchase Price Adjustment under this Section 2.6(c) as of such
Initial Closing Date. The fees, costs and expenses of the Independent
Accounting Firm shall be borne by the Party which in the conclusive
judgment of the Independent Accounting Firm is not the prevailing party,
or if such Independent Accounting Firm determines that neither Party
could be fairly found to be the prevailing party, then such fees, costs
and expenses shall be borne equally by the Buyer and the Sellers. The
agreed upon Post-Closing Statement or the finding of such Independent
Accounting Firm, as the case may be, shall be the Facilities Purchase
Price Adjustment as to Section 2.6(a)(i) through (vii) and the Fuel
Purchase Price Adjustment as to Section 2.6(b), and shall be binding on
the Parties. The acceptance by the Buyer and the Sellers of such
Facilities Purchase Price Adjustment and Fuel Purchase Price Adjustment
shall not constitute or be deemed to constitute a waiver of the rights
of such Party in respect of any other provision of this Agreement.
2.7. Payment of Purchase Price Adjustments. The Estimated Adjustments,
to the extent not in dispute, shall be aggregated at the Initial Closing Date
and each Subsequent Closing Date and the Party or Parties which owe(s) the
other(s) an adjustment to the Facilities Purchase Price and/or the Fuel
Purchase Price shall make a cash payment of such adjustment in immediately
available funds by wire transfer to an account designated by the Buyer or
CL&P, as the case may be. Following the Initial Closing Date, if necessary,
the Parties shall aggregate the Facilities Purchase Price Adjustment and the
Fuel Purchase Price Adjustment and if, after taking into account the payment,
if any, made at the Initial Closing Date pursuant to the preceding sentence,
the Party or Parties which owe(s) the other(s) an adjustment to the
Facilities Purchase Price and/or the Fuel Purchase Price shall make a cash
payment of such adjustment in immediately available funds by wire transfer to
an account designated by the Buyer or CL&P, as the case may be.
2.8. Allocation of Consideration. The Buyer and the Lead Participants
shall use Commercially Reasonable Efforts to agree upon an allocation among
the Acquired Assets (other than the Nuclear Fuel) of the sum of the
Facilities Purchase Price and the Assumed Liabilities consistent with Section
1060 of the Code and the Treasury Regulations thereunder within one hundred
and twenty (120) days of the Effective Date (or such later date as the
Parties may mutually agree) but in no event fewer than thirty (30) days prior
to the Initial Closing Date. In the event the Buyer and the Lead
Participants cannot agree to an allocation, the Buyer and the Lead
Participants shall obtain the services of an independent engineer or
appraiser (the "Independent Appraiser") to assist in determining the fair
value of the Acquired Assets solely for purposes of such allocation under
this Section 2.8. If such an appraisal is made, the Buyer and the Sellers
agree to accept the Independent Appraiser's determination of the fair value
of the Acquired Assets. The cost of the appraisal shall be borne equally by
the Buyer and the Sellers. To the extent such filings are required, the
Buyer and the Sellers agree to file IRS Form 8594 and all federal, state,
local and foreign Tax Returns in accordance with such agreed allocation.
Except to the extent required to comply with audit determinations by any
Governmental Authority with jurisdiction over a Party, the Buyer and the
Sellers shall report the transactions contemplated by this Agreement and the
Related Agreements for all required federal Income Tax and all other Tax
purposes in a manner consistent with the allocation determined pursuant to
this Section 2.8. The Buyer and the Sellers agree to provide each other
promptly with any other information required to complete IRS Form 8594. The
Buyer and the Sellers shall notify and provide each other with reasonable
assistance in the event of an examination, audit or other proceeding
regarding the agreed upon allocation of the Relevant Purchase Price. The
Buyer and the Sellers shall treat the transactions contemplated by this
Agreement as the acquisition by the Buyer of a trade or business for United
States Federal Income Tax purposes and agree that no portion of the
consideration therefor shall be treated in whole or in part as the payment
for services or future services.
2.9. Proration.
(a) The Buyer and the Sellers agree that all of the items normally
prorated in a sale of assets of the type contemplated by this Agreement and
the Related Agreements, relating to the business and operations of the
Acquired Assets, will be prorated as of the Initial Closing Date and each
Subsequent Closing Date, with Sellers party to the relevant Closing liable to
the extent such items relate to any period on or prior to the relevant
Closing Date on which such Seller transfers its Ownership Share, and the
Buyer liable to the extent such items relate to periods after such relevant
Closing Date which items shall include: (i) any personal property, real
property, occupancy and water Taxes, assessments and other charges of the
type that could give rise to a Permitted Encumbrance, if any, on or
associated with the Acquired Assets; (ii) any rent, Taxes and other items
payable by or to the Sellers under any of the Material Contracts, Emergency
Preparedness Agreements, Leases or Other Assigned Contracts assigned to and
assumed by the Buyer hereunder (except for prepayments for Nuclear Fuel or
Inventories); (iii) any Permit, license, registration or fees with respect to
any Transferable Permit assigned to the Buyer associated with the Acquired
Assets; (iv) sewer rents and charges for water, telephone, electricity and
other utilities and insurance; (v) any amounts scheduled to be paid into the
Decommissioning Funds by a Seller relating to the time period that includes
the Initial Closing Date or a Subsequent Closing Date, as the case may be;
and (vi) any fees or charges imposed by INPO, NEI, the NRC or any other
Governmental Authority or any association that the Buyer chooses to join.
(b) In connection with the prorations referred to in Section
2.9(a), if the actual figures are not available on the Initial Closing Date
and each Subsequent Closing Date, the proration shall be based upon the
actual payments for the preceding year (or appropriate period) for which
actual payments are available and such payments shall be re-prorated upon
request of either Lead Participants or the Buyer made within sixty (60) days
of the date the actual amounts become available. If the Taxes which are
apportioned are thereafter reduced by abatement or award, the amount of such
abatement or award, less the reasonable cost of obtaining the same and any
amounts due to tenants under leases due to such abatement or award, shall be
apportioned between the applicable Parties; provided that no Party shall be
obligated to institute or prosecute an abatement or appellate proceeding
unless otherwise agreed in writing. The Sellers and the Buyer agree to
furnish each other with such documents and other records that may be
reasonably requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 2.9.
2.10. The Closings. Unless otherwise agreed to by the Parties, the
Initial Closing and each Subsequent Closing of the transactions contemplated
by this Agreement (collectively, the "Closing") shall take place at the
offices of counsel to the Lead Participants or such other place as may be
agreed to by the Parties commencing at 9:00 a.m. eastern time on the date
that is fifteen (15) days (or, if the fifteenth day is not a Business Day,
then the next Business Day following such fifteenth day) following the date
on which all of the applicable conditions set forth in Sections 6.1 and 6.2
(excluding deliveries contemplated by Sections 2.11 and 2.12) have either
been satisfied or waived by the Party for whose benefit such condition
exists, such satisfaction or waiver to conform to Section 11.12; provided
that such date shall not be earlier than the Coordination Date. The date of
the Initial Closing (the "Initial Closing Date") and the date of each
Subsequent Closing (the "Subsequent Closing Date") is each herein called a
"Closing Date" and shall be effective for all purposes herein as of the time
of funding on such Closing Date. The conditions set forth in Sections 6.1
and 6.2 shall be deemed to have been satisfied or waived in writing by a
Party upon a Closing but only with respect to such Closing and such Parties
participating in such Closing (and not with respect to any Subsequent Closing
or any other Parties); provided such satisfaction or waiver shall not be
deemed to limit a Party's right to indemnification pursuant to Section 9.
2.11. Deliveries by the Sellers at the Closings.
(a) Initial Closing. At the Initial Closing (unless otherwise
indicated), the Lead Participants or the Required Sellers, as appropriate,
shall deliver the following to the Buyer, duly executed and properly
acknowledged, relating to the Total Relevant Percentage of the Acquired
Assets being sold, assigned or transferred at such Initial Closing (provided,
however, if a form referred to is not attached to this Agreement, then such
form shall be a form reasonably acceptable to the Buyer and the Lead
Participants):
(i) a Deed for the Real Property and Improvements,
substantially in the form of Exhibit A hereto, and any owner's
affidavits or similar documents required by the Title Company;
(ii) a Bill of Sale, substantially in the form of Exhibit B
hereto;
(iii) the Asset Demarcation Agreement, substantially in
the form of Exhibit C hereto;
(iv) an Assignment and Assumption Agreement, substantially in
the form of Exhibit D hereto, in recordable form if necessary;
(v) in the case of CL&P, the Interconnection Agreement,
substantially in the form of Exhibit E hereto;
(vi) the termination of the Plant Agreement;
(vii) the Release of Mortgage Indenture, in the case of
CL&P, substantially in the form of Exhibit F hereto, and in the case of
all Sellers, a release of all Liens in such other form as meets the
requirements of such Seller's Lien or mortgage indenture, if any;
(viii) the Lead Participant Rights Agreement, substantially
in the form of Exhibit J hereto;
(ix) the Interim Services Agreement, substantially in the form
of Exhibit L hereto;
(x) originals, or copies certified to the Buyer's
satisfaction, of the Transferable Permits, Material Contracts,
Emergency Preparedness Agreements, Other Assigned Contracts, Leases
and Estoppel Certificates, which shall be delivered to the Buyer at the
Facilities or such other location as the Buyer shall request;
(xi) the consents, waivers or approvals set forth on Schedule
2.11(a)(xi) and all other consents, waivers and approvals necessary for
the transfer of the Total Relevant Percentage of the Acquired Assets or
the consummation of the transactions contemplated by this Agreement and
the Related Agreements, including those with respect to the Transferable
Permits, Material Contracts, Leases, Emergency Preparedness Agreements
and Other Assigned Contracts;
(xii) a certificate from an authorized officer of each
such Required Seller, dated the Closing Date, to the effect that the
conditions with respect to such Seller in its individual capacity set
forth in Sections 6.1(a)(i), 6.1(b), 6.1(d), 6.1(e), 6.1(f), 6.1(g) and
6.1(j) (to the extent the Related Agreements are applicable to such
Seller) have been satisfied;
(xiii) a copy, certified by an authorized officer of each
such Required Seller, of resolutions authorizing the execution and
delivery of this Agreement and the Related Agreements and instruments
attached as exhibits hereto and thereto, and the consummation of the
transactions contemplated hereby and thereby;
(xiv) a certificate of an authorized officer of each such
Required Seller which shall identify by name and title and bear the
signature of the officers of such Seller authorized to execute and
deliver this Agreement and the Related Agreements and instruments
attached as exhibits hereto and thereto;
(xv) an opinion or opinions from one or more internal or
outside counsel to each such Required Seller (who shall be reasonably
satisfactory to the Buyer), dated the Closing Date and reasonably
satisfactory in form to the Buyer and its counsel, covering
substantially the matters set forth on Schedule 2.11(a)(xv);
(xvi) the Title Commitments to be delivered by the Lead
Participants pursuant to Section 3.2(r);
(xvii) such Required Seller's FIRPTA Affidavit;
(xviii) in the case of CL&P, certificates of title for all
vehicles listed on Schedule 2.1(n) acquired by the Buyer;
(xix) amounts due from each such Required Seller, if any,
for the Estimated Adjustment pursuant to Section 2.6(c);
(xx) the items and documents listed in Section 2.1(g);
provided, in the case of documents located at the Facilities, the
Required Sellers may furnish a certificate authorizing the Buyer to take
possession thereof in lieu of physical delivery at the Initial Closing
Date, and provided further that in the event that applicable Law
prohibits transfer of the original documents on the Initial Closing
Date, the Required Sellers shall provide certified copies of the items
and documents, and provide the original documents at such time allowable
under applicable Law;
(xxi) a certificate of good standing with respect to each
such Required Seller, to the extent applicable (dated within five (5)
Business Days of such Closing Date), issued by the appropriate Secretary
of State for each such Required Seller;
(xxii) if applicable, the assets of each such Seller's
Decommissioning Funds;
(xxiii) a certificate from an authorized officer of the Lead
Participants participating in the Initial Closing, dated the Closing
Date, to the effect that the conditions set forth in Sections
6.1(a)(ii), 6.1(h) and 6.1(i) have been satisfied;
(xxiv) if WMECO does not sell its Ownership Share in
Millstone Units 1 and 2 on the Initial Closing Date, an agreement in
form and substance reasonably satisfactory to the Buyer and WMECO,
pursuant to which WMECO grants to the Buyer and the Buyer agrees to
perform, such rights and obligations with respect to such Units as are
comparable to the rights and obligations granted to the Lead
Participants under the Sharing Agreement for Millstone Unit 3 and to
manage the use of Nuclear Fuel; and
(xxv) such other agreements, consents, documents,
instruments and writings as are reasonably required to be delivered by
each such Required Seller at or prior to the Initial Closing Date
pursuant to this Agreement or the Related Agreements or otherwise
reasonably required in connection herewith or therewith, including all
such other instruments of sale, transfer, conveyance, assignment or
assumption as the Buyer or its counsel may reasonably request in
connection with the sale and transfer of the Acquired Assets or the
transactions contemplated hereby; provided, however, that this
subsection (xxv) shall not require such Required Seller to prepare or
obtain any surveys relating to the Real Property.
(b) Subsequent Closing. At each Subsequent Closing (unless
otherwise indicated), if appropriate, the Remaining Sellers participating in
such Closing shall deliver the following to the Buyer, duly executed and
properly acknowledged, relating to the Total Relevant Percentage of the
Acquired Assets being sold, assigned or transferred at such Subsequent
Closing:
(i) a Deed for the Real Property and Improvements and any
owner's affidavits or similar documents required by the Title Company;
(ii) a Bill of Sale;
(iii) an Assignment and Assumption Agreement, if
appropriate;
(iv) a Release of Mortgage Indenture, with such modifications
as may be necessary to meet the requirements of such Remaining Seller's
mortgage, if any;
(v) originals, or copies certified to the Buyer's
satisfaction, to the extent not delivered to the Buyer at the Initial
Closing or any prior Subsequent Closing, of the Transferable Permits,
Material Contracts, Emergency Preparedness Agreements, Other Assigned
Contracts, Leases and Estoppel Certificates, which shall be delivered to
the Buyer at the Facilities or such other location as the Buyer shall
request;
(vi) the consents, waivers or approvals set forth on Schedule
2.11(a)(xi) and all other consents, waivers and approvals necessary for
the transfer of the Total Relevant Percentage of the Acquired Assets or
the consummation of the transactions contemplated by this Agreement and
the Related Agreements;
(vii) a certificate from an authorized officer of each
such Remaining Seller, dated the relevant Closing Date, to the effect
that the conditions with respect to such Seller in its individual
capacity set forth in Sections 6.1(a)(i), 6.1(b), 6.1(d), 6.1(e),
6.1(f), 6.1(g), and 6.1(j) have been satisfied;
(viii) a copy, certified by an authorized officer of each
such Remaining Seller, of resolutions authorizing the execution and
delivery of this Agreement and the Related Agreements and instruments
attached as exhibits hereto and thereto, and the consummation of the
transactions contemplated hereby and thereby;
(ix) a certificate of an authorized officer of each such
Remaining Seller which shall identify by name and title and bear the
signature of the officers of such Remaining Seller authorized to execute
and deliver this Agreement and the Related Agreements and instruments
attached as exhibits hereto and thereto;
(x) an opinion or opinions from one or more internal or
outside counsel to each such Remaining Seller (who shall be reasonably
satisfactory to the Buyer), dated the Closing Date and reasonably
satisfactory in form to the Buyer and its counsel, covering
substantially the matters set forth in Schedule 2.11(a)(xv);
(xi) the items and documents listed in Section 2.1(g);
provided, in the case of documents located at the Facilities, to the
extent not delivered to the Buyer at the Initial Closing or any prior
Subsequent Closing, the Remaining Sellers may furnish a certificate
authorizing the Buyer to take possession thereof in lieu of physical
delivery at the relevant Closing Date, and provided further that in the
event that applicable Law prohibits transfer of the original documents
on such Closing Date, the Remaining Sellers shall provide certified
copies of the items and documents and provide the original documents at
such time allowable under applicable Law;
(xii) the Title Commitment to be delivered by the Lead
Participants pursuant to Section 3.2(r);
(xiii) such Remaining Seller's FIRPTA Affidavit;
(xiv) a certificate of good standing with respect to each
such Remaining Seller, to the extent applicable (dated within five (5)
Business Days of such Closing Date), issued by the appropriate Secretary
of State for each such Remaining Seller;
(xv) if applicable, the assets of each such Remaining Seller's
Decommissioning Funds;
(xvi) a certificate from an authorized officer of the Lead
Participants, dated the Closing Date, to the effect that the conditions
set forth in Sections 6.1(a)(ii), 6.1(h) and 6.1(i) have been satisfied;
and
(xvii) such other agreements, consents, documents,
instruments and writings as are reasonably required to be delivered by
each such Remaining Seller at or prior to such Closing Date pursuant to
this Agreement or the Related Agreements or otherwise reasonably
required in connection herewith or therewith, including all such other
instruments of sale, transfer, conveyance, assignment or assumption as
the Buyer or its counsel may reasonably request in connection with the
sale and transfer of the Acquired Assets or the transactions
contemplated hereby; provided, however, that this subsection (xvii)
shall not require such Seller to prepare or obtain any surveys relating
to the Real Property.
2.12. Deliveries by the Buyer at the Closing Date.
(a) Initial Closing. At the Initial Closing, if appropriate, the
Buyer shall deliver to the Required Sellers duly executed and properly
acknowledged, relating to the Total Relevant Percentage of the Acquired
Assets being sold, assigned or transferred at such Closing:
(i) the Relevant Facilities Purchase Price, the Relevant Fuel
Purchase Price and amounts due from the Buyer, if any, for the Estimated
Adjustment pursuant to Section 2.6(c);
(ii) an Assignment and Assumption Agreement;
(iii) the Asset Demarcation Agreement;
(iv) the Interconnection Agreement;
(v) if applicable, the DTC Guarantee;
(vi) the Acceptable Credit Support;
(vii) evidence of the Buyer's membership in NEPOOL;
(viii) a certificate from an authorized officer of the
Buyer, dated the Initial Closing Date, to the effect that the conditions
set forth in Sections 6.2(a), 6.2(b), 6.2(d), 6.2(e), 6.2(f), 6.2(g),
6.2(h) and 6.2(i) have been satisfied;
(ix) a copy, certified by an authorized officer of the Buyer,
of resolutions authorizing the execution and delivery of this Agreement
and the Related Agreements to which the Buyer is a party and instruments
attached as exhibits hereto and thereto, and the consummation of the
transactions contemplated hereby and thereby;
(x) a certificate of an authorized officer of the Buyer which
shall identify by name and title and bear the signature of the officers
of the Buyer authorized to execute and deliver this Agreement and the
Related Agreements to which the Buyer is a party and instruments
attached as exhibits hereto and thereto;
(xi) an opinion or opinions from one or more internal or
outside counsel to the Buyer (who shall be reasonably satisfactory to
the Lead Participants), dated the Initial Closing Date and reasonably
satisfactory in form to the Lead Participants and their counsel,
covering substantially the matters set forth in Schedule 2.12(a);
(xii) a certificate of good standing with respect to the
Buyer (dated within five (5) Business Days of such Closing Date) issued
by the Secretary of State of the jurisdiction of its organization; and
(xiii) such other agreements, consents, documents,
instruments and writings as are reasonably required to be delivered by
the Buyer at or prior to such Closing Date pursuant to this Agreement or
the Related Agreements or otherwise reasonably required in connection
herewith or therewith, including all such other instruments of
assumption as the Lead Participants or their counsel may reasonably
request in connection with the purchase of the Acquired Assets or the
transactions contemplated hereby.
(b) Subsequent Closing. At each Subsequent Closing, if
appropriate, the Buyer shall deliver to the Remaining Sellers participating
at such Closing, duly executed and properly acknowledged, relating to the
Total Relevant Percentage of the Acquired Assets being sold, assigned or
transferred at such Closing:
(i) the Relevant Facilities Purchase Price, the Relevant Fuel
Purchase Price and amounts due from the Buyer, if any, for the Estimated
Adjustment pursuant to Section 2.6(c);
(ii) an Assignment and Assumption Agreement;
(iii) a certificate from an authorized officer of the
Buyer, dated such Closing Date, to the effect that the conditions set
forth in Sections 6.2(a), 6.2(b), 6.2(e), 6.2(f), 6.2(g), 6.2(d), 6.2(h)
and 6.2(i) have been satisfied;
(iv) a copy, certified by an authorized officer of the Buyer,
of resolutions authorizing the execution and delivery of this Agreement
and the Related Agreements to which the Buyer is a party and instruments
attached as exhibits hereto and thereto, and the consummation of the
transactions contemplated hereby and thereby;
(v) a certificate of an authorized officer of the Buyer which
shall identify by name and title and bear the signature of the officers
of the Buyer authorized to execute and deliver this Agreement and the
Related Agreements to which the Buyer is a party and instruments
attached as exhibits hereto and thereto;
(vi) an opinion or opinions from one or more counsel to the
Buyer (who shall be reasonably satisfactory to the Lead Participants),
dated such Closing Date and reasonably satisfactory in form to the Lead
Participants and their counsel, covering substantially the matters set
forth in Schedule 2.12(a);
(vii) a certificate of good standing with respect to the
Buyer (dated within five (5) Business Days of such Closing Date) issued
by the Secretary of State of the jurisdiction of its organization; and
(viii) such other agreements, consents, documents,
instruments and writings as are reasonably required to be delivered by
the Buyer at or prior to such Closing Date pursuant to this Agreement or
the Related Agreements or otherwise reasonably required in connection
herewith or therewith, including all such other instruments of
assumption as the Lead Participants or their counsel may reasonably
request in connection with the purchase of the Acquired Assets or the
transactions contemplated hereby.
3. Representations, Warranties and Disclaimers.
3.1. Representations and Warranties of Each Seller. Each of the Lead
Participants and NNECO (as Sellers), jointly and severally, and each other
Seller, individually with respect to itself and neither jointly nor jointly
and severally, with respect to such Seller's Ownership Share in Millstone
Unit 3 only, hereby represents and warrants to the Buyer as of the Effective
Date and the applicable Closing Date as follows, except in the case of the
representation in Section 3.2(v), which shall only be given by those Sellers
which have Qualified Decommissioning Funds:
(a) Organization. Except in the case of VEG&T, such Seller is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation 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. Copies of the charter and by-laws of
such Seller, each as amended to date, will have been delivered to the Buyer
prior to the Closing Date to which such Seller is a Party and will be
accurate and complete. To the extent such Seller is not a Connecticut
entity, such Seller is qualified to do business in Connecticut.
(b) Authorization, Execution and Enforceability of Transactions.
Such Seller has the full power and authority to execute and deliver this
Agreement and the Related Agreements and, subject to receipt of its Seller
Regulatory Approvals, to perform its obligations hereunder and thereunder.
All necessary actions or proceedings to be taken by or on the part of such
Seller to authorize and permit the due execution and valid delivery by such
Seller of this Agreement and the Related Agreements and the instruments
required to be duly executed and validly delivered by such Seller pursuant
hereto and thereto, the performance by such Seller of its obligations
hereunder and thereunder, and the consummation by such Seller of the
transactions contemplated herein and therein, have been duly and properly
taken. This Agreement has been duly executed and validly delivered by such
Seller, and assuming due execution and delivery by the Buyer and receipt of
all Seller Regulatory Approvals, constitutes the valid and legally binding
obligation of such Seller, enforceable in accordance with its terms and
conditions, subject to applicable bankruptcy, insolvency, moratorium and
other laws affecting the rights of creditors generally and the application of
general principles of equity (regardless of whether such enforceability is
sought in equity or at law). When each Related Agreement has been executed
and delivered by the Buyer and such Seller and each other party thereto, such
Related Agreement will constitute a valid and legally binding obligation of
such Seller, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium and other laws affecting the rights of
creditors generally and the application of general principles of equity
(regardless of whether such enforceability is sought in equity or at law).
Such Seller acknowledges the receipt and sufficiency of consideration with
respect to this Agreement and each of the Related Agreements.
(c) Noncontravention. Subject to such Seller obtaining its Seller
Regulatory Approvals, neither the execution and delivery by such Seller of
this Agreement or any of the Related Agreements, or any other instrument,
document or agreement required hereby to be executed and delivered by such
Seller at or prior to any Closing, nor the consummation of the transactions
contemplated hereby and thereby will (i) violate or breach any Law to which
such Seller or any of its property is subject or any provision of the charter
or by-laws of such Seller, or (ii) conflict with, result in a breach or
forfeiture of, constitute a default under, result in the acceleration of,
create in any Person the right to accelerate, terminate, modify, revoke,
suspend or cancel, or require any notice under, or create in any Person the
right to acquire all or any part of the Acquired Assets under any agreement,
contract, lease, Permit, license, instrument, or other arrangement to which
such Seller is bound or to which any of its assets is subject (or result in
the imposition of any Lien upon any of the Acquired Assets), except for
matters that, (x) in the aggregate, could not reasonably be expected to have
a material adverse effect on such Seller or its ability to perform its
obligations under this Agreement and the Related Agreements or for which a
consent or waiver shall have been obtained, (y) are disclosed on Schedule
3.1(c), or (z) arise in relation to any non-assigned rights under Permits,
Material Contracts, Leases or Other Assigned Contracts or other agreements or
matters which have been expressly disclosed to the Buyer.
(d) Consents and Approvals. Except for Seller Regulatory
Approvals, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is necessary
for the execution and delivery of this Agreement or the Related Agreements by
such Seller, or the consummation of the transactions contemplated hereby or
thereby.
(e) [RESERVED]
(f) Regulation as a Utility. To the extent described in Schedule
3.1(f)(i), such Seller is a public service company and an electric company or
other similar entity subject to regulation by a Governmental Authority, as
specified in Schedule 3.1(f)(i). To the extent described in Schedule
3.1(f)(ii), such Seller is an "electric utility company" and a "subsidiary
company" of a "holding company" which is registered or exempt from
registration under the Public Utility Holding Company Act of 1935, as
amended. Such Seller is an "electric utility" subject to regulation by FERC
under the Federal Power Act, as amended, and is a power reactor and materials
licensee subject to regulation by the NRC under the Atomic Energy Act (as
such terms are defined therein).
(g) Brokers' Fees. Such Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
(h) [RESERVED]
(j) [RESERVED]
(k) Disclosure. The representations, warranties and statements
contained in this Agreement, the Related Agreements and in the certificates,
exhibits and schedules delivered by such Seller pursuant hereto and thereto
to the Buyer do not contain any untrue statement of a material fact, and,
when taken together, do not omit to state a material fact required to be
stated therein or necessary in order to make such representations, warranties
or statements not misleading in light of the circumstances under which they
were made.
(l) [RESERVED]
(m) No Partnership. The Sellers' ownership of the Facilities as
tenants in common does not constitute as of the date hereof, will not
constitute as of any Closing Date and has not constituted at any time, a
partnership for federal income tax purposes.
3.2. Representations and Warranties of Lead Participants. Each of the
Lead Participants and NNECO, hereby represents and warrants to the Buyer
jointly and severally as of the Effective Date and each Closing Date as
follows:
(a) No Defects. Except as set forth in Schedule 3.2(a), there are
no defects in the physical condition of any Improvements that constitute a
part of the Real Property which could reasonably be expected to have a
Material Adverse Effect.
(b) Absence of Certain Changes or Events. Since December 31,
1999, except as set forth in Schedule 3.2(b), there has not been: (a) any
Material Adverse Effect, or (b) any damage, destruction or casualty loss,
whether or not covered by insurance, which, individually or in the aggregate,
created or could reasonably be expected to create, a Material Adverse Effect.
(c) Legal and Other Compliance. Neither such Lead Participant
nor, to such Lead Participant's and NNECO's Knowledge, any other Seller, has
received any written notice from any Governmental Authority that such Lead
Participant or Seller is not in compliance with all Laws (other than
Environmental Laws) applicable to the Acquired Assets or the Assumed
Liabilities other than as disclosed in Schedule 3.2(c)(i), and neither such
Lead Participant nor, to such Lead Participant's and NNECO's Knowledge, any
other Seller, has violated such Laws, except for any violations that,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Material Adverse Effect. The Sellers have obtained all
Permits necessary for the ownership and operation of the Acquired Assets as
presently owned and operated. Except as described in Schedule 3.2(c)(iii),
all reports and returns required to be filed in connection with the Acquired
Assets or the Acquired Assets Employees with the NRC and other Governmental
Authorities have been filed and all Permits which are required in connection
with the business of owning and/or operating the Acquired Assets have been
obtained, other than those the failure of which to file and obtain, have not
had and could not reasonably be expected to have a Material Adverse Effect.
Except as set forth on Schedule 3.2(c)(ii), (i) all of such Permits are in
full force and effect and no proceedings for the suspension or cancellation
of any of them is pending or, to such Lead Participant's and NNECO's
Knowledge, threatened and (ii) no notice of violation of any of such Permits
has been received, except for notices of violation which, individually or in
the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect. All Permits are being complied with, except for
violations which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Schedule 2.1(e) sets forth all
Transferable Permits and Schedule 3.2(c)(ii) sets forth all other Permits
that are required by Law in order to own or operate the Acquired Assets. No
Governmental Authority has taken any action (including NRC orders or
confirmatory action letters) that would prevent the Facilities from operating
at their full rated capacity at or after any Closing, and to such Lead
Participant's and NNECO's Knowledge, there has been no noncompliance by the
Sellers with NRC requirements that would prevent full power operations of the
Facilities at or after the Closing.
(d) Utilities. To such Lead Participant's and NNECO's Knowledge,
the sewer and water systems and all other utilities that currently service
the Real Property are sufficient for the operation of the Facilities. Such
Lead Participant and NNECO have no reason to believe that such systems and
utilities will not be sufficient to continue to operate the Facilities, and
such services exist on the Initial Closing Date. Such Lead Participant and
NNECO have no Knowledge of and have not received any notice of the
curtailment of any utility service supplied to the Real Property. To such
Lead Participant's and NNECO's Knowledge, all water and all gas, electrical,
steam, telecommunication, sanitary and storm sewer and drainage lines,
systems and hook-ups and all other utilities and public and quasi-public
improvements located upon, under, at or adjacent to the Real Property
required by law, ordinance, rule, code or necessary for the normal operation
of the Facilities, are installed, are connected under valid permits, are in
good working order, are fully paid for and enter onto the Real Property
either through publicly dedicated rights of way or valid easements.
(e) Contracts and Leases.
(i) Except (A) as listed in Schedules 2.1(c), 2.1(d), 2.1(f),
2.1(m)(ii) or 2.1(r) or any other Schedule, (B) for contracts,
agreements, personal property leases, commitments, understandings,
promises or instruments which will be fully performed or terminated on
or prior to the Initial Closing Date, (C) for agreements with suppliers
entered into in the ordinary course of business that may be assumed by
and assigned to the Buyer in the absence of a Third Party consent
thereto and (D) the Other Assigned Contracts and Non-Assigned Contracts,
there is no written contract, agreement, personal property lease,
commitment, understanding, promise or instrument which is (x) material
to the ownership or operation of the Acquired Assets or (y) provides for
the sale of any amount of ancillary services, capacity or energy from
any of the Acquired Assets (whether or not entered into in the ordinary
course of business). The Schedule of Leases attached as Schedule 2.1(d)
(the "Lease Schedule") contains a description of all Leases now in
effect, whether written or oral, including all amendments, extensions,
modifications and supplements thereto, pursuant to which any Person uses
or occupies any part of the Real Property or Improvements. There are no
Leases other than those set forth on the Lease Schedule. None of the
Non-Assigned Contracts are material to the ownership or operation of the
Acquired Asset or provide for the sale of any amount of capacity or energy
from any of the Acquired Assets.
(ii) Each of the Material Contracts, Emergency Preparedness
Agreements, Leases and Other Assigned Contracts constitutes a valid and
binding obligation enforceable in accordance with its terms, of the Lead
Participants and Sellers party thereto and, to such Lead Participant's
and NNECO's Knowledge, of the other parties thereto and is in full force
and effect.
(iii) All of the material provisions of each Material
Contract (other than the default of DOE under the DOE Standard
Contract), Lease, Emergency Preparedness Agreement and Other Assigned
Contract have been complied with and there does not exist any breach,
violation or event of default under any such Material Contract (other
than the default of DOE under the DOE Standard Contract), Lease,
Emergency Preparedness Agreement and Other Assigned Contract on the part
of the Sellers, or to such Lead Participant's and NNECO's Knowledge, any
other party thereto, or any event which after notice of lapse of time or
both, could constitute an event of default under any such Material
Contract, Lease, Emergency Preparedness Agreement and Other Assigned
Contract, except for such non-compliance or default as could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as disclosed in Schedule 3.2(g), there
is no action, suit, proceeding or investigation pending, or to such Lead
Participant's and NNECO's Knowledge, threatened before any court or
before any Governmental Authority for the renegotiation of or any other
adjustment of or otherwise relating to any such Material Contract,
Lease, Emergency Preparedness Agreement or Other Assigned Contract
(except for such matters as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect).
(iv) The Persons holding interests in each of Millstone Unit
1, 2 and 3 and their respective Ownership Shares are as set forth in
Schedule 1. Other than as set forth in the Sharing Agreement or
otherwise disclosed in Schedule 3.1(c), there are (A) no restrictions on
the transfer of Sellers' interests in Millstone Unit 1, 2 or 3 (other
than Buyer Regulatory Approvals and Seller Regulatory Approvals) and (B)
no options or other rights to acquire Sellers' interests in Millstone
Unit 1, 2 or 3. The Acquired Assets owned by CL&P and WMECO being
transferred hereunder are substantially all of CL&P's and WMECO's
respective generating facilities. The sale to and purchase by the Buyer
of the Acquired Assets will not entitle any Person to exercise any
purchase options, rights of first refusal, or similar rights with
respect to the Acquired Assets or the interest therein to be purchased
by the Buyer under this Agreement.
(f) Insurance. Except as set forth in Schedule 3.2(f), all
policies of nuclear property damage, nuclear liability, public liability,
worker's compensation and other forms of insurance owned or held by the
Sellers or their Affiliates and insuring the Acquired 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 retrospective premiums which may be payable with
respect to nuclear liability, nuclear property damage, public liability,
worker's compensation insurance and other similar insurance policies as to
which Sellers have received no notice), 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 3.2(f), none of the Sellers
has been refused any insurance with respect to the Acquired Assets nor has
the coverage of such insurance 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.
(g) Litigation. Except as set forth on Schedule 3.2(g), (i) there
are no claims, actions, proceedings or investigations pending or, to such
Lead Participant's and NNECO's Knowledge, threatened before any court or
Governmental Authority which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or that question the
validity of this Agreement or the Related Agreements or of any action taken
or to be taken pursuant to or in connection with the provisions of this
Agreement or the Related Agreements and which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect;
(ii) neither such Lead Participant nor, to such Lead Participant's and
NNECO's Knowledge, any other Seller is subject to any outstanding judgment,
rule, order, citation, fine, penalty, writ, injunction or decree of any court
or Governmental Authority which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect; and (iii) neither
such Lead Participant nor, to such Lead Participant's and NNECO's Knowledge,
any other Seller has received any written notification that it is in
violation of any Laws or Permits with respect to the Acquired Assets or
Assumed Liabilities, except for notifications of violations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. As at the Effective Date, no petition is filed or is pending
under 10 C.F.R. Section 2.206 or Section 2.802, or any claim for review of
any action thereon. Subject to the preceding sentence, a petition filed or
pending under 10 C.F.R. Section 2.206 or Section 2.802, or any claim for
review of any action thereon, shall not be considered to be within the scope
of this representation.
(h) Employees. There are no collective bargaining agreements
which relate to employees of each Lead Participant, NNECO, NUSCO, and their
Affiliates where employment involves the Acquired Assets (the "Collective
Bargaining Agreements"). No Plant Employees are represented by a labor union
or other authorized bargaining representative. Schedule 5.7(b)(i) contains a
true and complete list of the Plant Employees. The Lead Participants and
NNECO have delivered to the Buyer prior to the Effective Date a true and
complete list of the lowest level of the wages and overall compensation of
each Plant Employee in effect during the six-month period prior to the
Effective Date (the "Plant Employee Disclosure Letter"). Except as described
in Schedule 3.2(h): (i) there has been no work stoppage due to labor
disagreements experienced at the Facilities in the past five (5) years; (ii)
such Lead Participant, NNECO, and their Affiliates are in compliance in all
material respects with all applicable Laws respecting employment and
employment practices, terms and conditions of employment (including, without
limitation, Employee Benefit Plans) and wages and hours relating to the Plant
Employees; (iii) such Lead Participant and its Affiliates have not received
written notice from any Governmental Authority of any unfair labor practice
charge or complaint against such Lead Participant pending or, to such Lead
Participant's and NNECO's Knowledge, threatened before the National Labor
Relations Board or any other Governmental Authority with respect to such
Plant Employees; (iv) no arbitration proceeding arising out of or under any
Collective Bargaining Agreement with respect to the Acquired Assets other
than proceedings arising in connection with individual employee grievance
procedures, is pending against such Lead Participant or its Affiliates; (v)
there is no labor strike, slowdown or stoppage actually pending or, to such
Lead Participant's and NNECO's Knowledge, threatened by any union or
authorized representative of employees of such Lead Participant or its
Affiliates related to the Acquired Assets against or affecting such Lead
Participant or its Affiliates; and (vi) except as set forth in Schedule
3.2(g), there are no charges of discrimination pending with the Equal
Employment Opportunity Commission or state or local counterpart, the U.S.
Department of Labor, the NRC or any other Government Authority related to
services performed in connection with the Acquired Assets.
(i) Environmental Matters. Except as disclosed in Schedule
3.2(i), such Lead Participant and its Affiliates, and to such Lead
Participant's and NNECO's Knowledge, each of the other Sellers, has not
received any written notice from any Governmental Authority, nor do they have
Knowledge of any condition that would reasonably be expected to lead to such
a notice, that it is not or has not been in compliance with Environmental
Laws the violation of which could reasonably be expected to have a Material
Adverse Effect. There are no Environmental Liabilities existing at any Site,
except as disclosed in Schedule 3.2(i), that, in the aggregate, could
reasonably be expected to (x) have a Material Adverse Effect or (y) require
Remediation in excess of One Million Dollars ($1,000,000). Except as
disclosed in Schedule 3.2(i), there are no underground storage tanks, active
or abandoned or polychlorinated-biphenyl containing equipment located on any
Site. All environmental audits or assessments conducted on or after
January 1, 1990 by, or on behalf of, or which are in the possession of such
Lead Participants or their Affiliates, have been made available to the Buyer
prior to execution of this Agreement and all environmental audits or
assessments conducted prior to such date by, on behalf of, or which are in
the possession of such Lead Participant or its Affiliates have also been made
available to the Buyer prior to execution of this Agreement.
(j) Condemnation. Except as set forth on Schedule 3.2(j), there
is no pending or, to such Lead Participant's and NNECO's Knowledge,
threatened proceeding by any Governmental Authority to condemn or take by
power of eminent domain or otherwise, all or any part of the Acquired Assets,
which could reasonably be expected to constitute a Material Adverse Effect.
(k) Intellectual Property. Except as set forth in Schedule
3.2(k), such Lead Participant or its Affiliates has ownership of, or license
to use, all of the Intellectual Property relating to the Acquired Assets and
the rights of the Sellers in all of such (i) Owned Intellectual Property
relating to the Acquired Assets are freely transferable and (ii) Licensed
Intellectual Property relating to the Acquired Assets are freely assignable.
There are no claims or demands of any other Person pertaining to any such
Intellectual Property and no proceedings have been instituted, or are pending
or, to such Lead Participant's and NNECO's Knowledge, threatened, which
challenge the rights of the Sellers in respect thereof. All licenses or
other agreements under which the Sellers are granted rights in Intellectual
Property relating to the Acquired Assets are listed on Schedule 3.2(k). All
licenses or other agreements under which the Sellers have granted rights to
others in Intellectual Property relating to the Acquired Assets owned or
licensed by the Sellers are listed on Schedule 3.2(k). Except as set forth
in Schedule 3.2(k), all of such licenses or other agreements are in full
force and effect, there is no material default by any party thereto, and, all
of the Sellers' rights thereunder are freely assignable. The business and
activities of such Lead Participant and any other Sellers related primarily
to the Facilities do not infringe any Intellectual Property of any other
Person. None of the Owned Intellectual Property or, to such Lead
Participant's and NNECO's Knowledge, the Licensed Intellectual Property
infringe any Intellectual Property of any other Person. Neither such Lead
Participant nor, to such Lead Participant's and NNECO's Knowledge, any other
Seller is making unauthorized use of any confidential information or trade
secrets of any Person, including without limitation any former employer of
any past or present employee of the Sellers.
(l) Accounting Methods. Since December 31, 1999, such Lead
Participant and NNECO have not materially changed, and during the Interim
Period shall not materially change, its accounting methods or practices,
credit practices or collection policies.
(m) Complete Copies. True and complete copies of the Material
Contracts, the Leases, the Emergency Preparedness Agreements, the
Transferable Permits, the Title Commitment and the Other Assigned Contracts
have been delivered to the Buyer.
(n) Operability. Except to the extent any Other Assigned Contract
may not be assigned or assignable in whole or part to the Buyer or any Permit
may not be transferable to the Buyer, and subject to such amendments to
Schedule 2.1(u) as the Parties may agree to make during the Interim Period
and other provisions, limitations and conditions expressly set forth in this
Agreement and the Related Agreements, the Acquired Assets constitute all of
the assets that are necessary and sufficient to own and operate the
Facilities by the Sellers in the manner in which they have been operated
during the twelve-month period immediately prior to the Initial Closing Date.
(o) Employees Benefit Programs. Schedule 5.7(d) lists as of the
Effective Date, all Employee Benefit Plans established, sponsored, maintained
or contributed to (or to which there is an obligation to contribute) by such
Lead Participant or its Affiliates in respect of the Acquired Assets
Employees. Accurate and complete copies of all such Employee Benefit Plans
have been made available to the Buyer. No Employee Benefit Plan and no
"employee pension benefit plan" (as defined in Section 3(2) of ERISA)
maintained by the Sellers or any trade or business (whether or not
incorporated) which are or have ever been under common control, or which are
or have ever been treated as a single employer, with any of the Sellers under
Section 414(b), (c), (m) or (o) of the Code, or to which the Sellers or any
such ERISA affiliate has contributed, is a Multiemployer Plan. Except as
disclosed in Schedule 5.7(d) with respect to the Acquired Assets Employees,
each of such Lead Participant or its Affiliates does not contribute to, and
has no obligation to contribute to, any Multiemployer Plan. No liability
under Title IV or Section 302 of ERISA or Section 412 of the Code has been
incurred by such Lead Participants or their Affiliates, with respect to the
Acquired Assets Employees that has not been satisfied in full, and no
condition exists that presents a material risk to the Buyer of incurring any
such liability, other than liability for premiums due the Pension Benefit
Guaranty Corporation, which premiums have been paid to the extent due on or
prior to the Initial Closing Date.
Except as set forth in the preceding paragraph, (i) none of the
Sellers or their Affiliates establishes, sponsors, maintains or contributes
to (nor is there an obligation to contribute to) any Employee Benefit Plans
in respect of the Acquired Assets Employees and (ii) none of the Sellers or
their Affiliates have any Liabilities for any form of compensation or
benefits under any Employee Benefit Plan of any such Seller or such
Affiliate, or any other agreement, plan, practice, policy, instrument or
document, in any such case, relating to any of the Acquired Assets Employee,
any applicable Law or otherwise.
(p) Zoning. The Real Property is currently zoned in zoning
categories which presently permit, and which after giving effect to the
Closing, will continue to permit the operation of the Facilities. The Lead
Participants have not requested, applied for, or given its consent to, and
the Lead Participants have no knowledge of, any pending zoning variance or
change with respect to the zoning of the Real Property. To such Lead
Participant's and NNECO's Knowledge, there exist no outstanding covenants or
agreements in connection with the zoning of the Real Property or any portion
thereof which would bind or require Buyer to perform any actions or pay any
monies in connection therewith.
(q) Real Property; Plant and Equipment. Schedule 2.1(c) contains
a complete description of the major equipment components and personal
property comprising the Acquired Assets. Except for the exceptions listed in
Schedule 3.2(q), the Acquired Assets conform in all respects to the Technical
Specifications and the Final Safety Analysis Report (FSAR) and are being
operated in all respects in conformance with all applicable requirements
under Nuclear Laws, and the rules, regulations, orders and licenses issued
thereunder, except for such non-conformance thereof which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(r) Title to Acquired Assets. Subject to Permitted Encumbrances,
each of the Sellers holds good and marketable title to its tenant-in-common
interest (as set forth on Schedule 1 hereto) in the Real Property to the
extent, and only to the extent, specified in Schedule A to the title
insurance commitments attached hereto as in Schedule 3.2(r) (the "Title
Commitments"). The Real Property constitutes all of the real property
necessary for the use and operation of the Acquired Assets. Except as set
forth in Schedule 3.2(r) and except for Permitted Encumbrances, each of the
Sellers has good and valid title to, a valid leasehold interest in, valid
rights under contract to use, or license for, its tenant-in-common interest
in the other Acquired Assets, free and clear of all Liens. Each of the
Sellers owns a tenant-in-common interest in the Acquired Assets in a
percentage equal to its Ownership Share as set forth in Schedule 1, or, in
the case of NNECO's assets, a beneficial interest held indirectly through the
Lead Participants, acting on behalf of the Associate Participants. There are
no public or private special assessments levied or, to the Knowledge of such
the Lead Participants, threatened against the Acquired Assets except for
those items, if any, as to which the Lead Participants will indemnify the
Buyer pursuant to Section 9.3. Complete and correct copies of any current
surveys of the Real Property in the Lead Participants' possession and any
policies of title insurance (including copies of exceptions reflected
thereon) currently in force and in the possession of the Lead Participants
with respect to any Seller's interest in the Real Property have been
delivered to Buyer.
(s) Disclosure. There are no facts which presently may or in the
future could reasonably be expected to have a Material Adverse Effect which
have not been specifically disclosed herein or in the Related Agreements, and
in the exhibits and schedules thereto and certificates referenced therein,
other than general economic conditions affecting the Sellers' industry.
(t) Taxes. All Tax Returns of the Sellers required to be filed
regarding the ownership or operation of the Acquired Assets have been filed,
and all Taxes due as indicated thereon have been paid, except where (as
described in Schedule 3.2(t)) such Taxes are being contested in good faith by
appropriate proceedings, or where the failure to file or pay, in either case,
could not reasonably be expected to have a Material Adverse Effect. There is
no unpaid Tax on any Seller's ownership, operation or use of the Acquired
Assets for which the Buyer could become liable. There are no Liens for Taxes
upon such Seller's Ownership Share of the Acquired Assets, except for Liens
for Taxes not yet due and payable and Liens for Taxes that are being
contested in good faith and for which adjusted reserves have been established
in accordance with GAAP (as described in Schedule 3.2(t)). Except as
disclosed in Schedule 3.2(t), (i) none of the Sellers has waived any statute
of limitations in respect of Taxes or agreed to any extension with respect to
a Tax assessment or deficiency in connection with the Acquired Assets and
(ii) there is no material dispute or claim concerning any Tax either (A)
claimed or raised by any Governmental Authority in writing or (B) as to which
any of the directors or officers of the Seller have Knowledge based upon a
personal contact with any agent of such Governmental Authority.
(u) Volume Discount. The Lead Participants make no representation
or warranty that any volume discounts or other special pricing available to
such Lead Participants prior to such Closing Date under any Material
Contract, Lease, Emergency Preparedness Agreement or Other Assigned Contract
will be available to the Buyer following the assignment and assumption
thereof.
(v) Qualified Decommissioning Fund.
As to each Seller that has a Qualified Decommissioning Fund,
(i) With respect to all periods ending on or prior to the
Closing Date on which such Seller transfers its Ownership Share: (A)
the Qualified Decommissioning Fund(s) of such Seller are trust(s),
validly existing under the laws of the State of Connecticut with all
requisite authority to conduct its affairs as it now does; (B) the
Qualified Decommissioning Fund(s) of such Seller satisfy the
requirements necessary for each such Qualified Decommissioning Fund to
be treated as a "Nuclear Decommissioning Reserve Fund" within the
meaning of Section 468A(a) of the Code and as a "nuclear decommissioning
fund" and a "qualified nuclear decommissioning fund" within the meaning
of Treas. Reg. Section 1.468A-1(b)(3); (C) each such Qualified Decommissioning
Fund is in compliance in all material respects with all applicable Laws
of any Governmental Authority having jurisdiction (including, without
limitation, the NRC, the DPUC and the IRS), and the Qualified
Decommissioning Fund(s) of such Seller have not engaged in any acts of
"self-dealing" as defined in Treas. Reg. Section 1.468A-5(b)(2); (D) no
"excess contribution," as defined in Treas. Reg. Section 1.468A-5(c)(2)(ii),
has been made to any Qualified Decommissioning Fund(s) of such Seller
which has not been withdrawn within the period provided under Treas.
Reg. Section 1.468A-5(c)(2)(i); and (E) such Seller has made timely and valid
elections to make annual contributions to its Qualified Decommissioning
Fund(s) since and including such Seller's taxable year ending after July
18, 1984 (and in the case of the Qualified Decommissioning Fund
maintained for Millstone Unit 3, since and including such Seller's
taxable year ending after April, 1986) and has heretofore delivered
copies of such elections to the Buyer. Such Seller has heretofore
delivered to the Buyer a copy of its Decommissioning Trust Agreement(s)
as in effect on the Effective Date. Such Seller agrees not to amend its
Decommissioning Trust Agreement(s) between the Effective Date and the
Closing Date on which such Seller transfers its Ownership Share without
the Buyer's prior written consent, which shall not be unreasonably
withheld.
(ii) Subject only to Seller Regulatory Approvals, such Seller
and the Trustee(s) have or shall have prior to the Initial Closing Date
or Subsequent Closing Date, as the case may be, all requisite right,
power and authority to cause the assets of each Qualified
Decommissioning Fund to be transferred to the Buyer's Qualified
Decommissioning Fund in accordance with the provisions of this
Agreement.
(iii) With respect to all periods ending on or prior to
the Closing Date on which such Seller transfers its Ownership Share, (A)
such Seller and/or the Trustee(s) of the Qualified Decommissioning Funds
has/have filed or caused to be filed with the NRC, the IRS and all other
applicable Governmental Authorities all material forms, statements,
reports, documents (including all exhibits, amendments and supplements
thereto) required to be filed by such entities; and (B) there are no
interim rate orders that may be retroactively adjusted or retroactive
adjustments to interim rate orders that may affect amounts to be
contributed by the Buyer to the Qualified Decommissioning Funds or to be
transferred from such Seller's Qualified Decommissioning Funds to the
Buyer's Qualified Decommissioning Fund. Such Seller has delivered to
the Buyer a copy of the schedules of ruling amounts (the "IRS Ruling
Amounts") most recently issued by the IRS for each of the Qualified
Decommissioning Funds, a copy of the requests that were filed to obtain
such IRS Ruling Amounts and a copy of any pending request for revised
IRS Ruling Amounts, in each case together with all exhibits, amendments
and supplements thereto. Any excess amounts contributed to the
Qualified Decommissioning Funds while such request(s) is/are pending
before the IRS which exceed the applicable amounts provided in the IRS
Ruling Amounts issued by the IRS will be withdrawn by the applicable
Seller from the Qualified Decommissioning Funds within the period
provided under Treas. Reg. Section 1.468A-5(c)(2)(i).
(iv) Such Seller has made available to the Buyer a statement
of assets and liabilities verified by the Trustee(s) for its Qualified
Decommissioning Fund(s) as of June 30, 2000, and such statement of
assets or liabilities will be updated by such Trustee as of the second
Business Day before such Closing Date on which such Seller transfers its
Ownership Share, which statement of assets and liabilities presents
fairly as of June 30, 2000, and which updated statement will fairly
present as of the last Business Day prior to such Closing Date on which
such Seller transfers its Ownership Share, the financial position of
each Qualified Decommissioning Fund. Each Seller will make available to
the Buyer information from which the Buyer can determine the Tax Basis
of all assets in such Seller's Qualified Decommissioning Fund(s) as of
the second Business Day prior to the Closing Date on which such Seller
transfers its Ownership Share. There are no Liabilities (whether
absolute, accrued, contingent or otherwise and whether due or to become
due), including, but not limited to, any acts of "self-dealing" as
defined in Treas. Reg. Section 1.468A-5(b)(2) or agency or other legal
proceedings that may materially affect the financial position of the
Qualified Decommissioning Funds other than those, if any, that are
disclosed on Schedule 3.2(v).
(v) Such Seller has made available to the Buyer copies of all
contracts and agreements to which the Trustee(s) of the Qualified
Decommissioning Fund(s), in its capacity as such, is a party.
(vi) With respect to all periods ending on or prior to the
Closing Date on which such Seller transfers its Ownership Shares, such
Seller's Qualified Decommissioning Fund(s) have filed all Tax Returns
required to be filed and all material Taxes shown to be due on such Tax
Returns have been paid in full. Except as shown in Schedule 3.2(v), no
notice of deficiency or assessment has been received from any taxing
authority with respect to liability for Taxes of any such Seller's
Qualified Decommissioning Fund(s) which have not been fully paid or
finally settled, and any such deficiency shown in such Schedule 3.2(v)
is being contested in good faith through appropriate proceedings.
Except as set forth in Schedule 3.2(v), there are no outstanding
agreements or waivers extending the applicable statutory periods of
limitations for Taxes associated with the Qualified Decommissioning
Funds for any period and none of the Qualified Decommissioning Funds
currently is the beneficiary of any extension of time within which to
file any Tax Returns. All such Tax Returns are true, complete and
accurate. All Taxes owed by or with respect to such Qualified
Decommissioning Fund(s) with respect to periods ending on or prior to
the Closing Date on which such Seller transfers its Ownership Share have
been paid in full (regardless of whether such Taxes are shown to be due
on the Tax Returns filed by such Qualified Decommissioning Fund(s))
(vii) To the extent such Seller has pooled the assets of
the Qualified Decommissioning Fund(s) with those of any other assets for
investment purposes in periods prior to Closing, such pooling
arrangement is not taxable as a corporation for federal income tax
purposes and all Tax Returns required to be filed with respect to such
pooling arrangement have been filed.
(w) Nonqualified Decommissioning Funds.
(i) With respect to all periods ending on or prior to the
Closing Date on which a Seller transfers its Ownership Share, the
Nonqualified Decommissioning Fund(s) of such Seller are trust(s) validly
existing under the laws of the State of Connecticut with all requisite
authority to conduct their affairs as they now do. The Nonqualified
Decommissioning Fund(s) of such Seller are (i) in compliance in all
material respects with applicable Laws of any Governmental Authority
having jurisdiction (including, without limitation, the NRC, the DPUC
and the IRS) and (ii) considered grantor trusts under Sections 671
through 677 of the Code and such Seller is the grantor of such trusts.
Such Seller has delivered to Buyer a copy of its Decommissioning Trust
Agreement as in effect on the Effective Date. Such Seller agrees not to
amend its Decommissioning Trust Agreement(s) between the Effective Date
and the Closing Date on which such Seller transfers its Ownership Share
without the Buyer's prior written consent, which shall not be
unreasonably withheld.
(ii) Subject only to Seller Regulatory Approvals, such Seller
and the Trustee(s) have or shall have prior to the Initial Closing Date
or Subsequent Closing Date, as the case may be, all requisite right,
power and authority to cause the assets of each Nonqualified
Decommissioning Fund to be transferred to the Buyer's Nonqualified
Decommissioning Fund in accordance with the provisions of this
Agreement.
(iii) With respect to all periods ending on or prior to
the Closing Date on which such Seller transfers its Ownership Share,
such Seller and the Trustee of the Nonqualified Decommissioning Fund(s)
have filed or caused to be filed with the NRC, the IRS and all other
applicable Governmental Authorities all material forms, statements,
reports, documents (including all exhibits, amendments and supplements
thereto) required to be filed by any of them.
(iv) Each Seller has made available to the Buyer a statement
of assets and liabilities verified by the Trustee(s) for its
Nonqualified Decommissioning Fund(s) as of June 30, 2000, and such
statement of assets and liabilities will be updated by such Trustee as
of the last Business Day before the Closing Date on which such Seller
transfers its Ownership Share, which statement of assets and liabilities
presents fairly as of June 30, 2000, and which updated statement will
fairly present as of the last Business Day before the Closing Date on
which such Seller transfers its Ownership Share, the financial position
of each Nonqualified Decommissioning Fund. Each Seller will make
available to the Buyer information from which the Buyer can determine
the Tax Basis of all assets in such Seller's Nonqualified
Decommissioning Fund(s) as of the second Business Day prior to the
Closing Date on which such Seller transfers its Ownership Share. There
are no Liabilities (whether absolute, accrued, contingent or otherwise
and whether due or to become due) including, but not limited to, agency,
administrative or other legal proceedings, that may materially affect
the financial position of the Nonqualified Decommissioning Fund(s) other
than those, if any, that are disclosed on Schedule 3.2(w).
(v) Each Seller has made available to the Buyer all contracts
and agreements to which the Trustee of the Nonqualified Decommissioning
Funds, in its capacity as such, is a party.
(vi) To the extent any Seller has pooled the assets of the
Nonqualified Decommissioning Funds with any other assets for investment
purposes in periods ending on or prior to the Closing Date on which such
Seller transfers its Ownership Share, such pooling arrangement is not
taxable as a corporation for federal income tax purposes and all Tax
Returns required to be filed with respect to such pooling arrangement
have been filed.
(x) Undisclosed Liabilities. Except as otherwise disclosed in
this Agreement, the Acquired Assets are not subject to any material Liability
or obligation (whether absolute, accrued, contingent or otherwise and whether
due or to become due) that has not been accrued or reserved against in each
Seller's financial statements as of the end of the most recent fiscal quarter
for which such statements are available or disclosed in the notes thereto in
accordance with GAAP.
(y) Authority of the Lead Participants. The Lead Participants have
been authorized to act as the agent on behalf of the Sellers pursuant to the
terms of the Authorization Agreements or otherwise and to enter into such
agreements and covenants set forth herein.
3.3. Disclaimers Regarding Acquired Assets. EXCEPT FOR ANY
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
RELATED AGREEMENTS OR ANY CERTIFICATES, EXHIBITS OR SCHEDULES HERETO AND
THERETO, (A) THE ACQUIRED ASSETS ARE SOLD "AS IS, WHERE IS AND WITH ALL
FAULTS," AND (B) THE SELLERS SPECIFICALLY DISCLAIM ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE WITH RESPECT TO THE ACQUIRED ASSETS, OR ANY PART THEREOF,
OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN ANY RELATED AGREEMENT,
THE SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF ANY KIND
REGARDING THE SUITABILITY OF THE FACILITIES FOR OPERATION AS POWER PLANTS.
NO OTHER MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY THE
SELLERS OR ANY REPRESENTATIVE, OR BY ANY BROKER OR INVESTMENT BANKER, INCLUD-
ING WITHOUT LIMITATION ANY INFORMATION OR MATERIAL CONTAINED IN ANY OFFERING
MEMORANDUM OR REQUEST FOR BIDS AND ANY ORAL, WRITTEN OR ELECTRONIC RESPONSE
TO ANY INFORMATION REQUEST PROVIDED TO THE BUYER, WILL CAUSE OR CREATE ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF
THE ACQUIRED ASSETS OR ANY PART THEREOF.
THE PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED BY THE PARTIES
HERETO AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION
AND NEGATION OF ANY REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR
IMPLIED OR STATUTORY, OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN THIS AGREEMENT, THE RELATED AGREEMENTS OR ANY
CERTIFICATE, EXHIBITS OR SCHEDULES HERETO AND THERETO THAT MAY ARISE PURSUANT
TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE. The disclaimers
contained in this section are "conspicuous" disclaimers. Any covenants
implied by law or by the use of the words "contribute," "grant," "convey,"
"assign," "transfer," or "deliver," or any other words used in this Agreement
are hereby expressly disclaimed, waived and negated.
4. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers as of the Effective Date and each Closing Date as
follows:
4.1. Organization of the Buyer. The Buyer is a corporation, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Copies of the certificate of incorporation
and by-laws of the Buyer, as amended to date, have been heretofore delivered
to the Sellers and are accurate and complete. The Buyer is, or on the
Initial Closing Date will be, qualified to conduct business in the State of
Connecticut.
4.2. Authority, Execution and Enforceability of Transactions. The Buyer
has the power and authority to execute and deliver this Agreement and the
Related Agreements and, subject to receipt of all Buyer Regulatory Approvals,
to perform its obligations hereunder and thereunder. All actions or
proceedings to be taken by or on the part of the Buyer to authorize and
permit the due execution and valid delivery by the Buyer of this Agreement,
the Related Agreements and the instruments required to be duly executed and
validly delivered by Buyer pursuant hereto and thereto, the performance by
the Buyer of its obligations hereunder and thereunder, and the consummation
by the Buyer of the transactions contemplated herein and therein, have been
duly and properly taken. This Agreement has been duly executed and validly
delivered by the Buyer, and assuming due execution and delivery by the
Sellers and receipt of all Buyer Regulatory Approvals, constitutes the valid
and legally binding obligation of the Buyer, enforceable in accordance with
its terms and conditions, subject to applicable bankruptcy, insolvency,
moratorium and other laws affecting the rights of creditors generally and the
application of general principles of equity (regardless of whether such
enforceability is sought in equity or at law). When each Related Agreement
has been executed and delivered by the Buyer and the Sellers and each other
party thereto, such Related Agreement will constitute a valid and legally
binding obligation of the Buyer, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium and other laws
affecting the rights of creditors generally and the application of general
principles of equity (regardless of whether such enforceability is sought in
equity or at law). The Buyer acknowledges receipt and sufficiency of
consideration in regard to this Agreement and each of the Related Agreements.
4.3. Noncontravention. Subject to the Buyer obtaining its Buyer
Regulatory Approvals, neither the execution and delivery of this Agreement or
any of the Related Agreements, or any other instrument, document or agreement
required hereby to be executed and delivered by the Buyer at or prior to any
Closing nor the consummation of the transactions contemplated hereby and
thereby will (a) violate or breach any Law to which the Buyer is subject or
any provision of its organizational documents or (b) conflict with, result in
a breach or forfeiture of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, revoke, suspend or cancel, or require any notice under any agreement,
contract, lease, Permit, license, instrument or other arrangement to which
Buyer is bound or to which any of its assets is subject, except for matters
that could not reasonably be expected to constitute a material adverse effect
on Buyer or its ability to perform its obligations under this Agreement and
the Related Agreements or that are disclosed on Schedule 4.3.
4.4. Consents and Approvals. Except for Buyer Regulatory Approvals, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of any Governmental Authority is necessary for the
execution and delivery of this Agreement or the Related Agreements by the
Buyer, or the consummation of the transactions contemplated hereby or thereby
by the Buyer.
4.5. Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could
become liable or obligated.
4.6. Litigation. There are no claims, actions, proceedings or
investigations pending or, to the Buyer's Knowledge, threatened before any
court or Governmental Authority which, individually or in the aggregate,
could reasonably be expected to have a material adverse effect on Buyer or
its ability to perform its obligations under this Agreement and the Related
Agreements or that question the validity of this Agreement or the Related
Agreements or of any action taken or to be taken pursuant to or in connection
with the provisions of this Agreement or the Related Agreements and which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Buyer or its ability to perform its obligations
under this Agreement and the Related Agreements. The Buyer is not subject to
any outstanding judgment, rule, order, citation, fine, penalty, writ,
injunction or decree of any court or Governmental Authority which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on Buyer or its ability to perform its obligations
under this Agreement and the Related Agreements, and the Buyer has not
received any written notification that it is in violation of any Laws or
Permits with respect to its assets, except for notifications which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on Buyer or its ability to perform its obligations under this
Agreement and the Related Agreements. A petition filed or pending under 10
C.F.R. Section 2.206 or Section 2.802, or any claim for review of any action
thereon, shall not be considered to be within the scope of this
representation.
4.7. Qualified Buyer. The Buyer is qualified or will be qualified as of
the Initial Closing Date, to obtain any Permits necessary for the Buyer to
own and operate the Acquired Assets as of the Initial Closing Date, to the
extent such operation is either required by any Related Agreement or this
Agreement, or is contemplated by the Buyer.
4.8. WARN Act. The Buyer does not intend with respect to the Acquired
Assets or Acquired Assets Employees to engage in a "plant closing" or "mass
layoff," as such terms are defined in the WARN Act, within sixty (60) days
after the Initial Closing Date.
4.9. No Implied Warranties. THE BUYER IS NOT RELYING ON ANY
REPRESENTATION OR WARRANTY MADE BY ANY SELLER OR ITS AGENTS OR
REPRESENTATIVES, OR ANY BROKER OR INVESTMENT BANKER, EXCEPT FOR
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH HEREIN, IN THE RELATED
AGREEMENTS, IN CERTIFICATES, EXHIBITS AND SCHEDULES HERETO AND THERETO AND IN
THE INSTRUMENTS OF TRANSFER AND CONVEYANCE (SUBJECT TO THE DISCLAIMERS AND
LIMITATIONS OF WARRANTIES SET FORTH HEREIN OR THEREIN).
4.10. Absence of Certain Events. Since December 31, 1999, to the
Buyer's Knowledge, there has not been any event which may reasonably be
expected to have a material adverse effect on the Buyer's ability to perform
this Agreement or any Related Agreement.
5. Covenants. The Parties agree as follows:
5.1. General. Without limiting the rights of any Party to exercise its
rights hereunder, each of the Parties will use Commercially Reasonable
Efforts to take all actions and to do all things necessary, proper or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement and the Related Agreements pursuant to this
Agreement prior to a date which is eight (8) months from the Effective Date
(including satisfaction of the Closing Date conditions set forth in Section 6).
5.2. Notices, Consents and Approvals.
(a) Hart-Scott-Rodino. Each of the Sellers and the Buyer shall
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
Hart-Scott-Rodino Act and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby and in the Related
Agreements. The Parties shall cooperate with each other and use Commercially
Reasonable Efforts to make such filings as promptly as possible after the
Effective Date, and to respond promptly to any requests for additional
information made by either of such agencies. The Buyer will pay all filing
fees under the Hart-Scott-Rodino Act, but each Party will bear its own costs
for the preparation of any filing. The Parties shall use Commercially
Reasonable Efforts to cause any waiting period under the Hart-Scott-Rodino
Act with respect to the transactions contemplated by this Agreement and the
Related Agreements to expire or terminate at the earliest possible time.
(b) Consents and Approvals.
(i) Each of the Parties shall cooperate and use Commercially
Reasonable Efforts with respect to their respective obligations to (A)
promptly prepare and file all necessary documentation, (B) effect all
necessary applications, notices, petitions and filings and execute all
agreements and documents, (C) obtain the transfer, issuance or
reissuance to the Buyer of all necessary Permits, (D) facilitate the
substitution of the Buyer for the Sellers where appropriate on pending
Permits and (E) obtain all necessary consents, waivers, approvals and
authorizations of all other parties necessary or advisable to consummate
the transactions contemplated by this Agreement or in any of the Related
Agreements (including, without limitation, Seller Regulatory Approvals
and Buyer Regulatory Approvals) or approvals required by the terms of
any note, bond, mortgage, indenture, deed of trust, license, franchise,
Permit, concession, contract, lease, warranty or other instrument to
which any Seller or Buyer is a party or by which any of them is bound.
Without limiting the generality of the foregoing, the Lead Participants
shall use Commercially Reasonable Efforts to obtain from the non-selling
co-owners of Unit 3 (i) a waiver of any rights of first refusal such co-
owners may possess, or (ii) a written acknowledgment or opinion of
counsel, in form and substance reasonably acceptable to Buyer, that no
such rights of first refusal exist or apply to the transactions
contemplated by this Agreement.
(ii) The Buyer and the Lead Participants shall have the right
to review and comment in advance on all filings relating to the
transactions contemplated by this Agreement or any of the Related
Agreements made by any Party in connection with the transactions
contemplated hereby or thereby. The Parties shall in good faith
consider such comments before making any such filings.
(iii) The Lead Participants, for themselves and on behalf
of the other Sellers, shall use all Commercially Reasonable Efforts to
obtain all necessary consents for assignment of Material Contracts,
Permits, Leases, and Emergency Preparedness Agreements. The Buyer shall
cooperate with the Lead Participants and use Commercially Reasonable
Efforts to facilitate the obtaining of such consents. To the extent any
Material Contract relates to assets or services which are both related
to the operation of the Facilities and used by any Seller in its other
operations, the Parties shall cooperate and use Commercially Reasonable
Efforts in the obtaining of such partial assignment, apportionment or
other arrangement as may be necessary and practicable to permit the
Buyer to obtain such portion of the assets or services necessary for
continued operation of the Facilities after the Initial Closing Date or
any Subsequent Closing Date, as the case may be, and to permit such
Seller to retain such other rights or portion of the assets or services
to continue its other operations after such Closing Date, it being
understood that such portion of the Material Contracts as may relate to
the Buyer's continued operation of the Facilities after the Initial
Closing Date must be assigned to or otherwise obtained by the Buyer as
of the Initial Closing Date pursuant to Section 2.11(a)(ix); provided,
that (A) any cost of obtaining any such partial assignment,
apportionment or other arrangement shall be for such Seller's account,
and (B) any subsequent cost resulting from any such partial assignment,
apportionment or other arrangement shall be for the Buyer's account but
any such cost or expense may be considered in determining whether there
exists a Material Adverse Effect, and in no instance shall any Seller
commit to any arrangements affecting the Buyer without the Buyer's
consent, not to be unreasonably withheld.
(iv) The Lead Participants, for themselves and on behalf of
the other Sellers, shall use their Commercially Reasonable Efforts to
obtain the necessary consents to assignment of the Other Assigned
Contracts, including the forwarding of notices of assignment or
termination to vendors or invoking the right to terminate Other Assigned
Contracts, in each case, in cooperation with the Buyer. Pursuant to an
agreed protocol and form letters to be sent by Lead Participants or
NNECO to all parties to Other Assigned Contracts, the Lead Participants,
for themselves and on behalf of the other Sellers, shall take all steps
reasonably necessary in obtaining necessary consents to assignment,
including the forwarding of notices of assignment or termination to
vendors or invoking the right to terminate Other Assigned Contracts for
the Sellers' convenience in cooperation with the Buyer. The Buyer shall
use Commercially Reasonable Efforts to assist the Sellers in obtaining
all such consents to assignment.
(v) The Lead Participants, for themselves and on behalf of
the other Sellers, agree that if any consent to an assignment of any
Material Contract shall not be obtained or if any attempted assignment
would in the Lead Participants' reasonable opinion be ineffective or
would impair any material rights and obligations of the Buyer under such
Material Contract, so that the Buyer would not in effect acquire the
benefit of all such rights and obligations, the Lead Participants, to
the maximum extent permitted by law and such Material Contract, shall
enter into such other reasonable arrangements with the Buyer as are
necessary to provide the Buyer with the benefits and obligations of such
Material Contract, including enforcement for the benefit of the Buyer of
any and all rights of the Sellers against the other contract party
arising out of the default or cancellation by such contract party or
otherwise. The Lead Participants and the Buyer shall cooperate and
shall each use Commercially Reasonable Efforts after the Initial Closing
Date to obtain an assignment of each such Material Contract to the Buyer.
(vi) The Sellers and the Buyer shall cooperate with each other
and promptly prepare and file notifications with, and request tax
clearances from state and local taxing authorities in jurisdictions in
which a portion of the Facilities Purchase Price or the Fuel Purchase
Price may be required to be withheld or in which Buyer would otherwise
be liable for any Tax Liabilities of the Sellers pursuant to state or
local Tax Laws.
(c) Nuclear Regulatory Commission Approval.
(i) Application. As promptly after the Effective Date as may
be feasible, the Buyer and the Lead Participants, for themselves and on
behalf of the other Sellers, shall jointly prepare and file with the NRC
an Application. Thereafter, the Buyer and Lead Participants, for
themselves and on behalf of the other Sellers, shall cooperate with one
another to facilitate review of the Application by the NRC Staff,
including but not limited to the prompt provision to the NRC Staff of
any and all documents or information that the NRC Staff may reasonably
request or require any of the Parties to provide or generate.
(ii) Prosecution of Application. The Application shall
identify the Buyer and the Sellers collectively as separate parties to
the Application. In the processing of such Application the Buyer and
the Lead Participants, for themselves and on behalf of the other
Sellers, shall separately appear therein by their own counsel (or common
counsel if mutually agreed), and shall continue to cooperate with each
other to facilitate a favorable result.
(iii) Costs of Application and Prosecution. The Buyer and
the Lead Participants, for themselves and on behalf of the other
Sellers, will each bear their own costs of the preparation, submission
and processing of the Application, including any Contested Proceeding
that may occur in respect thereof; provided, however, that the Buyer
shall bear the costs of all NRC Staff fees payable in connection with
the Application. In the event that the Parties agree upon the use of
common counsel, they shall share equally the fees and expenses of such
counsel and those of any consultants or experts that may jointly be
retained in connection with the prosecution of the Application.
5.3. Operation of Business During Interim Period.
(a)(I) During the Interim Period, the Lead Participants and
NNECO will operate and maintain the Acquired Assets in the ordinary course
consistent with Good Utility Practices, unless otherwise contemplated by this
Agreement or with the prior written consent of the Buyer. Without limiting
the generality of the foregoing, the Sellers shall not, without the prior
written consent of the Buyer, during the Interim Period, with respect to the
Acquired Assets:
(i) sell, lease (as lessor), transfer or otherwise dispose
of, any of the Acquired Assets, other than as used, consumed or replaced
in the ordinary course of business consistent with Good Utility
Practices, or encumber, pledge, mortgage or suffer to be imposed on any
of the Acquired Assets any encumbrance other than Permitted Encumbrances
which are not material, and other than such additional financing under
the Mortgage Indentures as shall not prevent the Sellers from obtaining
a Mortgage Indenture release with respect to the Acquired Assets;
(ii) make any material change in the operations of the
Acquired Assets (including, without limitation, the levels of
Inventories customarily maintained by the Sellers with respect to the
Acquired Assets), except for such changes that are consistent with Good
Utility Practices;
(iii) enter into, amend, make any waivers under, or
otherwise modify any real or personal property Tax agreement, treaty or
settlement or make any new, or change any current, election with respect
to Taxes affecting the Acquired Assets;
(iv) enter into any commitment for the purchase or sale of
Nuclear Fuel without the consent of the Buyer, which consent shall not
be unreasonably withheld;
(v) terminate, make any waiver under, extend or amend any of
the Material Contracts, Emergency Preparedness Agreements, Leases, Other
Assigned Contracts or the Transferable Permits, except for such
terminations, extension or amendments as are in the ordinary course of
business and consistent with Good Utility Practices;
(vi) enter into for itself or through its agents any contract
or commitment which individually exceeds $500,000 or in the aggregate
exceeds $5,000,000, unless each such contract or commitment is (A) to be
fully performed prior to the Initial Closing Date or (B) can be assigned
to the Buyer and terminated by the Buyer at its option at any time
following the Initial Closing Date without penalty or cancellation
charge;
(vii) knowingly engage in any practice, take any action,
fail to take any action, or enter into any transaction that will result
or could reasonably be expected to result in any misrepresentation or
breach of warranty under Section 3 as of a Closing Date;
(viii) fail to take reasonably appropriate steps to pursue
currently pending regulatory approvals relating to the Facilities;
(ix) amend in any material respect or cancel any property,
liability or casualty insurance policies related thereto, or fail to
maintain by self insurance, or with financially responsible insurance
companies, insurance in such amounts and against such risks and losses
as are customary for such assets and businesses;
(x) change, in any material respect, its accounting methods
or accounting methods or practices, credit practices or collection
policies;
(xi) enter into or adopt any new agreement, plan, arrangement
or practice or amend any existing agreement, plan, arrangement or
practice relating to Plant Employees (other than the existing program
for retirement eligibility for Plant Employees whose age are between 50
and 54 can be extended beyond December 31, 2000 at the sole discretion
of the Lead Participants), including that the Sellers will permit the
Buyer and the Buyer's Representatives to have input in any collective
bargaining agreement negotiations during the Interim Period; or
(xii) fail to take any actions required to be taken in
order to insure that the Acquired Assets are being owned, operated and
maintained in all material respects in a manner that is in compliance
with Good Utility Practice and all applicable Laws or Permits.
(II) During the Interim Period, the Lead Participants and NNECO
shall, unless mutually agreed to the contrary, between the Lead Participants
and the Buyer, with respect to the Acquired Assets:
(i) use Commercially Reasonable Efforts to: (A) preserve
intact the present legal entity and reputation of the business of the
Facilities, and (B) maintain the Acquired Assets in good working order
and condition, ordinary wear and tear excepted;
(ii) except to the extent required by applicable Law, (A)
cause the books and records of the business to be maintained in the
usual, regular and ordinary manner, and (B) not permit any material
change in any pricing, investment, accounting, financial reporting,
inventory, credit, allowance or Tax practice or policy of Sellers that
would materially and adversely affect the business, the Facilities, the
Acquired Assets or the Assumed Liabilities;
(iii) use Commercially Reasonable Efforts to maintain in
full force and effect until the Initial Closing substantially the same
levels of insurance coverage as afforded prior to the Initial Closing Date;
Notwithstanding anything in this Section 5.3(a) to the contrary, the Lead
Participants or NNECO may, in its sole discretion, make or incur an
obligation to the extent relating to the Pre-Approved Capital Expenditures or
Required Nuclear Expenditures and any repairs or modifications to the
Facilities reasonably required in accordance with Good Utility Practices.
During the Interim Period, the Lead Participants and/or NNECO shall consult
with the Buyer prior to making (A) any Required Nuclear Expenditures which
are expected to be in excess of $1,000,000 or (B) any NRC Commitments which
(i) cannot be completed prior to the Initial Closing Date and (ii) are
expected to be in excess of $1,000,000. Without limiting the generality of
the foregoing, the Lead Participants or NNECO shall retain exclusive control
over all aspects of the operation, maintenance, refueling, shutdown or other
matters relating to the Facilities during the Interim Period, all in
accordance with Good Utility Practices.
(b) During the Interim Period, in the interest of facilitating an
orderly transition of the management of the Acquired Assets and the Transfer
of Licenses and permitting informed action by the Buyer regarding its rights
under Section 5.3(a), the Parties shall, as promptly as is practicable after
the Effective Date, establish a committee comprised of four persons, two to
be designated by the Lead Participants and two to be designated by the Buyer,
and such additional persons as may be appointed by the persons originally
appointed to such committee (the "Transition Committee"). From time to time,
the Transition Committee shall report to the senior management of the Lead
Participants and the Buyer. The Transition Committee shall have no authority
to bind or make agreements on behalf of the Sellers or the Buyer or to issue
instructions to or direct or exercise authority over the Sellers or the Buyer
or any of their respective officers, employees, advisors or agents or to
waive or modify any provision thereof. The Buyer in its sole discretion may
send its management personnel to the Facilities at the Buyer's expense to
continue the Buyer's transition efforts with respect to the Acquired Assets.
The Lead Participants shall provide the Buyer, at no cost to the Buyer,
interim furnished office space, utilities and HVAC at the Facilities
reasonably necessary to allow the Buyer and its representatives to conduct
their transition efforts during the Interim Period; provided that the Buyer
shall be responsible for all other costs relating thereto, including
telecommunications expenses, the cost of workers' compensation and employer's
liability coverage, which will be maintained by the Buyer for its employees.
The Buyer anticipates approximately eight of its employees or representatives
will be present at such interim office space at any one time.
(c) The Buyer may from time to time request that the Lead
Participants take certain actions to improve or enhance the operation and
maintenance of the Acquired Assets during the Interim Period (the "Proposed
Improvements"). To the extent such Proposed Improvements (i) will not
interfere with safety or reliability in the operation and maintenance of the
Facilities or the Acquired Assets, (ii) are not inconsistent with the
Business Plan, (iii) do not violate Good Utility Practices, applicable Laws
or other obligations of the Lead Participants under NEPOOL or ISO-NE, the
Lead Participants shall reasonably consider such Proposed Improvements and
take such action to implement such Proposed Improvements as they deem
appropriate in their sole discretion. In the event the Lead Participants
shall determine that the costs for such Proposed Improvements shall exceed
the Pre-Approved Capital Expenditures or are otherwise excessive under Good
Utility Practices, then the Lead Participants shall so inform the Buyer in
writing and the Buyer may submit the request for such Proposed Improvements
to dispute resolution pursuant to Section 12.1.
(d) During the Interim Period, the Lead Participants shall use
Commercially Reasonable Efforts to assist the Buyer with its efforts to plan
for and implement the transition of ownership and operation of the Acquired
Assets from the Sellers to the Buyer.
(e) In the event the Buyer or the Lead Participants believe that
either Party has breached any of its obligations under this Section 5.3, the
Buyer or the Lead Participants shall submit such dispute to dispute
resolution pursuant to Section 12.1.
5.4. Access and Investigations During Interim Period. During the
Interim Period, the Sellers will permit a reasonable number of designated
officers, employees, consultants, representatives or agents of the Buyer (the
"Buyer's Representatives") including, without limitation, the Buyer's
Representatives in the Transition Committee, to have access, pursuant to the
procedures set forth in Section 5.4(b), to observe and inspect all premises,
properties, management, personnel, books, records (including tax records),
and other information, including, without limitation, all information
reasonably necessary to enable the Buyer and the Buyer's Representatives to
conduct environmental inspection, assessment and testing of the Sites and the
Facilities, to verify the Sellers' representations and warranties as set
forth herein, to confirm that the Sellers have complied with the covenants
set forth herein, to obtain any other information or documents associated
with or pertaining to the Acquired Assets and to plan for and facilitate an
orderly transition of ownership and operation of the Acquired Asset from the
Sellers to the Buyer. All access and inspections by the Buyer are subject to
the following provisions:
(a) Costs. All costs of such investigations and observations,
including but not limited to the compensation paid to the Buyer's
Representatives and their expenses, and other discrete incremental costs
reasonably incurred by the Sellers in connection with such investigation and
observation, shall be borne by the Buyer.
(b) Physical Access (Escorted and Unescorted).
(i) The Buyer shall, with respect to each Person designated
by the Buyer to have escorted access to the Facility, provide the
following information for each such Person to the Divestiture Site
Manager for the Facility (or his designee) no later than twenty-four
(24) hours prior to the proposed time of access by such Person: name,
date of birth, social security number, and the name of each nuclear
power plant at which such Person has a current badge for unescorted
access. The Lead Participants, for themselves and on behalf of the
other Sellers, reserve the right where necessary to limit the number of
Persons to whom escorted access is provided at any one time on account
of reasonable logistical considerations.
(ii) Subject to the immediately succeeding sentence, the Buyer
shall, with respect to each Person designated by the Buyer to have
unescorted access to any Facility, provide reasonable notice to the
Divestiture Site Manager for such Facility (or his designee), so as not
to interfere with the normal business operations of such Facility, and
such Person shall comply with all existing requirements of such Facility
and NRC for unescorted access, including, but not limited to, background
investigation, training requirements, fitness-for-duty requirements, a
psychological assessment and behavioral observation.
(iii) In the event that the Buyer shall have a fitness-
for-duty program meeting the requirements of 10 C.F.R., Part 26, the
Buyer may request that any Person be subject to such program in lieu of
the fitness-for-duty program of NNECO, in which event the provisions of
10 C.F.R. Section 26.23 shall be applicable to such Person designated by
the Buyer to have unescorted access to the Facility. The Buyer shall
reimburse NNECO for the reasonable cost of reviewing and auditing the
Buyer's fitness-for-duty program, as required by 10 C.F.R. Section
26.23.
(iv) Irrespective of whether a Person has qualified for
escorted or unescorted access, pursuant to this Section 5.4(b), NNECO
shall have the right to withhold access to any area of the Facilities
that would reveal "Safeguards Information," "Classified National
Security Information" or "Restricted Data," as defined in 10 C.F.R. Part
73, to any Person to whom such information is not to be made available
under Section 5.4(c).
(c) Access to Records and Information.
(i) Under no circumstances shall any Seller be required to
provide access to any documents or information constituting or
containing "Classified National Security Information" or "Restricted
Data", as defined in 10 C.F.R. Part 73, and the Lead Participants shall
advise the Buyer promptly after the Effective Date whether any such
documents or information exists at the Sites and negotiate with the
Buyer a protocol for either their removal from the Sites (if not
reasonably necessary for the operation of the Facilities) or their
turnover to the Buyer at the Initial Closing Date. The Sellers shall
not be required to provide access to any documents or information
constituting or containing "Safeguards Information", as defined in 10
C.F.R. Part 73, except to any Person designated by the Buyer to have
access to such information in accordance with the provisions of 10
C.F.R. Section 73.21(c).
(ii) Except as provided in clause (i) above, the Buyer shall
have the right to receive copies of all documentary information and
records associated with the Acquired Assets subject to the provisions of
Section 7.
(d)Limitations. Notwithstanding anything to the contrary in this
Section 5.4, each Seller shall: (i) in the absence of employee consent, only
furnish or provide such access to confidential personnel records and medical
records as is allowed by applicable Laws, (ii) not provide any information
that such Seller or such Seller's counsel reasonably believes constitutes or
could reasonably be deemed to constitute a waiver of the attorney-client
privilege, and (iii) not be required to supply the Buyer with any information
that such Seller is under a legal obligation not to supply; provided that the
Sellers shall use Commercially Reasonable Efforts to obtain the consent to
disclose all material information otherwise described under this Section 5.4.
(e) Contact with Seller-Related Persons. Prior to the Initial
Closing Date, the Buyer shall not contact any vendors, suppliers,
contractors, customers or employees of the Sellers regarding the Facilities,
the Acquired Assets or the transactions contemplated in this Agreement and
the Related Agreements without prior consent of the relevant Seller, which
shall not be unreasonably withheld or delayed, and any such permitted
contacts shall be conducted in a manner which will not materially adversely
interfere with the operations or business relationships of the relevant
Seller with such Persons. Notwithstanding the foregoing, the Buyer may,
after consultation with the Lead Participants, make any contacts with Persons
expressly contemplated by this Agreement, including, without limitation,
contacts with vendors, suppliers and contractors for the purpose of obtaining
assignments and partial assignments of contracts, and contacts with organized
labor, employee representatives or employees for the purposes set forth in
section 5.7.
5.5. Certain Notices.
(a) Each Remaining Seller shall notify the Buyer of the existence
of any matter, which if in existence on the Effective Date, the Initial
Closing Date or any Subsequent Closing Date would or might cause any of the
representations or warranties in Section 3.1 to be materially untrue or
incorrect, and the Lead Participants shall notify the Buyer of the existence
of any matter, which if in existence on the Effective Date or the Initial
Closing Date would or might cause any of the representations or warranties in
Section 3.1 or Section 3.2 to be materially untrue or incorrect. Unless the
Buyer terminates this Agreement pursuant to Section 10.1(c)(vii), the written
notice pursuant to this Section 5.5(a) shall be set forth on an amended
Schedule or Schedules acceptable to the Parties which shall be deemed to
replace the original Schedule or Schedules as of the Effective Date and such
Closing Date, to have qualified the representations and warranties contained
in Section 3 as of the Effective Date and such Closing Date, and to have
cured any misrepresentation or breach of warranty that otherwise might have
existed hereunder by reason of the existence of such matter.
(b) The Buyer shall notify the Lead Participants of the existence
of any matter, which if in existence on the Effective Date, the Initial
Closing Date or any Subsequent Closing Date would or might cause any of the
representations or warranties in Section 4 to be untrue or incorrect. Unless
the Lead Participants terminate this Agreement pursuant to Section
10.1(d)(vi) or 10.1(e)(vi) by reason of such notice, the written notice
pursuant to this Section 5.5(b) shall be deemed to replace the original
Schedule or Schedules as of the Effective Date and such Closing Date, to have
qualified the representations and warranties contained in Section 4 as of the
Effective Date and such Closing Date, and to have cured any misrepresentation
or breach of warranty that otherwise might have existed hereunder by reason
of the existence of such matter.
(c) The Buyer shall notify the Lead Participants if any
information comes to its attention which would or might cause any of the
representations or warranties of the Sellers in Section 3 above to be
materially untrue or incorrect.
(d) Each of the Lead Participants shall notify the Buyer if any
information comes to its attention which would or might cause any of the
representations and warranties of the Buyer in Section 4 above to be
materially untrue or incorrect.
5.6. Further Assurances.
(a) On and after the Initial Closing Date or any Subsequent
Closing Date, without further payment, at the request of a Closing Party, the
other Closing Party will execute and deliver such additional instruments of
sale, transfer, conveyance, assignment and confirmation and take such
additional action as is necessary to transfer, convey and assign to the Buyer
and for the Buyer to assume and accept, in each case in accordance with the
terms hereof, the Total Relevant Percentage of the Acquired Assets and
Assumed Liabilities or to put the Buyer in actual possession and operating
control of the Acquired Assets and or to cause the Sellers to be released
from the Relevant Percentages of the Assumed Liabilities.
(b) To the extent that, after the Initial Closing Date or any
Subsequent Closing Date, as the case may be, it is determined that any asset
that is an Acquired Asset shall not have been conveyed to the Buyer on such
Closing Date, the Lead Participants shall, subject to Section 5.6(c), use
their best efforts to have conveyed the Relevant Percentage of the Sellers'
right, title and interest in such asset to the Buyer as promptly as is
practicable after the Initial Closing Date or such Subsequent Closing Date,
as the case may be. In the event that any Seller Reserved Easement shall not
have been retained by CL&P on the Initial Closing Date, the Buyer shall use
its best efforts to grant such Seller Reserved Easement to CL&P as promptly
as is practicable after such Closing Date. In the event that any other
access, transmission, distribution or communication easements necessary or
useful to CL&P in connection with the operation or maintenance of the T&D
Assets, including, without limitation, the transmission or distribution of
power, shall not have been retained by CL&P on the Initial Closing Date, the
Buyer shall use its best efforts to grant such easements to CL&P as promptly
as practicable after such Closing Date.
(c) To the extent the rights of any Seller under any contract or
Permit included as an Acquired Asset other than a Material Contract,
Transferable Permit, Emergency Preparedness Agreement or Lease, may not be
assigned without the consent of another Person which consent has not been
obtained on or prior to the Initial Closing Date, this Agreement shall not
constitute an agreement to assign same if an attempted assignment would
constitute a breach thereof or be unlawful. The Sellers and the Buyer agree
that if any consent to an assignment shall not be obtained, or if any
attempted assignment would be ineffective or would impair the Buyer's rights
and obligations under the applicable contract, so that the Buyer would not in
effect acquire the benefit of all such rights and obligations, (i) the Lead
Participants, to the maximum extent permitted by Law and such contract, shall
appoint the Buyer to be the Sellers' agent with respect to such contract or
Permit for the purpose of obtaining an assignment thereof to the Buyer,
following which the Buyer shall use its best efforts to obtain such
assignment, and (ii) the Lead Participants shall, to the maximum extent
permitted by Law and such contract or Permit, enter into such reasonable
agreements with the Buyer as are necessary to permit the Buyer to obtain the
benefits and obligations of such contract or Permit; provided, that the
exercise by the Buyer and the Lead Participants of the terms of this Section
5.6(c) shall in no event constitute a waiver of the condition to Closing set
forth in Section 6.1(g) with respect to the delivery of the consents, waivers
and approvals described in Section 2.11(a)(ix). The Lead Participants and
the Buyer shall cooperate and shall each use their Commercially Reasonable
Efforts after the Initial Closing Date to obtain an assignment of such
contracts to the Buyer including the Buyer's express written agreement to
assume and perform such Seller's obligations thereunder from and after
Closing.
(d) To the extent that during the Interim Period or after the
Initial Closing Date the Parties shall identify any additional assets of the
Sellers or portions thereof (including, without limitation, software or other
Intellectual Property) which are (i) related to the operation of any
Facility, (ii) reasonably necessary for the Buyer's operation of the
Facilities, and (iii) omitted from Schedule 2.1(u) (other than by agreement
of the Parties), the Parties shall amend Schedule 2.1(u) to include such
assets. The Lead Participants shall use their best efforts to convey such
additional assets to the Buyer or facilitate the acquisition thereof from a
Third Party; provided, that any cost or increased cost of obtaining such
assets or rights from a Third Party (x) arising on or prior to the Initial
Closing Date shall be for the Sellers' account and (y) arising after the
Initial Closing Date shall be for the Buyer's account, in each case it being
understood that such increased cost may be considered in determining whether
there exists any Material Adverse Effect.
(e) To the extent that the rights of any Seller under any warranty
or guaranty described in Section 2.1(c) (except for warranties in Material
Contracts and Leases) may not be assigned without the consent of another
Person, which consent has not been obtained by the Initial Closing Date, this
Agreement shall not constitute an agreement to assign the same, if an
attempted assignment would constitute a breach thereof or be unlawful. The
Sellers and the Buyer agree that if any consent to an assignment of any such
warranty or guaranty would be ineffective or would impair the Buyer's rights
and obligations under the warranty or guaranty in question, so that the Buyer
would not in effect acquire the benefit of all such rights and obligations,
the Lead Participants, to the extent permitted by Law and such warranty and
guaranty, shall appoint the Buyer to be the Sellers' agent for the purpose of
enforcing such warranty or guaranty so as to the maximum extent possible
provide the Buyer with the benefits and obligations of such warranty or
guaranty. Notwithstanding the foregoing, the Lead Participants shall not be
obligated to bring or file suit against any Third Party; provided that if the
Lead Participants shall determine not to bring or file suit after being
requested by the Buyer to do so, the Lead Participants shall, to the maximum
extent permitted by Law and any applicable agreement or contract, enter into
such reasonable agreements with the Buyer so that the Buyer may bring or file
such suit with respect to the rights of such Seller.
5.7. Employee Matters.
(a) [RESERVED]
(b) The Buyer agrees to offer employment, commencing as of 12:00
a.m. on the Initial Closing Date, for a period of at least twelve (12) months
(the "Minimum Employment Period") from such date, to all employees of the
Lead Participants or their Affiliates who were employed in the operation of
the Acquired Assets at any time during the three-month period prior to the
Initial Closing Date, as set forth in Schedule 5.7(b)(i) (the "Plant
Employees"), at levels of wages and overall compensation not lower than the
lowest level of wages and overall compensation of each such Plant Employee in
effect during the six-month period prior to the Effective Date. The Plant
Employees who accept such offer of employment are hereinafter referred to as
the "Acquired Assets Employees." The Buyer shall provide to any Acquired
Assets Employee who is terminated without cause as a result of work force
reduction or reorganization during the five (5) year period immediately
following the Initial Closing Date out-placement assistance and tuition
reimbursement consistent with that described in Schedule 5.7(b)(ii).
(c) The Buyer shall establish and maintain for the Acquired Assets
Employees for the Minimum Employment Period a tax qualified pension plan for
the Acquired Assets Employees (the "Buyer's Plan"), which Buyer's Plan shall
provide for the following:
(i) The Buyer shall provide a level of pension benefits not
lower than such level of pension benefits calculated using the pension
benefit formula applicable to each relevant Acquired Assets Employee
under the NUSCO Retirement Plan (the "Plan") as of the Effective Date.
The Buyer's obligation under the Buyer's Plan will be calculated as the
difference between (A) the total pension benefit of such Acquired Assets
Employee as calculated as of such Acquired Assets Employee's retirement
date using (1) the pension benefit formula under the Plan applicable to
such Acquired Assets Employee as of the Effective Date, (2) the "final
average earnings" (as defined in the Plan) as of such Acquired Assets
Employee's retirement date, taking into account compensation credited
under the Plan through the Initial Closing Date and earned from the Lead
Participants or any of their Affiliates and the Buyer, (3) such Acquired
Assets Employee's total years of service under the Plan as of the
Initial Closing Date plus years of service with the Buyer as of such
Acquired Asset Employee's retirement date, and (4) "covered
compensation" (as defined in the Plan) as of such Acquired Assets
Employee's retirement date, and (B) the pension benefit payable to such
Acquired Assets Employee by the Lead Participants or any of their
Affiliates at retirement determined as follows: the pension benefit
payable to each Acquired Assets Employee at age 65 by the Lead
Participants or any of their Affiliates shall be calculated by the Lead
Participants as of the Initial Closing Date, based upon (1) the pension
benefit formula under the Plan applicable to such Acquired Assets
Employee as of the Initial Closing Date, (2) years of credited service
of such Acquired Assets Employee under the Plan as of the Initial
Closing Date, (3) the "final average earnings" (as defined in the Plan)
of such Acquired Asset Employee as of the Initial Closing Date, and (4)
the "covered compensation" (as defined in the Plan) as of the Initial
Closing Date.
(ii) The Lead Participants shall provide each Acquired Assets
Employee with a vested and non-forfeitable right to a benefit equal to
his/her accrued benefit under the Plan determined as of the Initial
Closing Date as described in Section 5.7(c)(i) above.
(iii) Effective on the Initial Closing Date, the Buyer
shall permit all Acquired Asset Employees whose age is 55 and older as
of the Initial Closing Date to retire on or after the Initial Closing
Date and within twelve (12) months of the Initial Closing Date with full
pension benefits if the sum of such Acquired Assets Employee's age and
years of credited service (credited under the Plan as of the Initial
Closing Date plus years of service with the Buyer) equals 85 at such
Acquired Assets Employee's termination date (the "Rule of 85").
(iv) If the Buyer terminates the employment of any Eligible
Acquired Assets Employee within twelve (12) months of the Initial
Closing Date, the Buyer shall provide the benefits described in Schedule
5.7(c)(iv) to such Eligible Acquired Assets Employee.
(d) The Buyer shall establish and maintain for the Acquired Assets
Employees for the Minimum Employment Period plans and programs which shall be
generally comparable to the plans and programs provided to such Acquired
Assets Employees by Lead Participants or any of their Affiliates as of the
Effective Date as listed on Schedule 5.7(d). Further, the Buyer shall
provide benefits as described in Schedule 5.7(d) under the "Severance Pay
Plan" to any Acquired Assets Employee who is terminated without cause as a
result of work force reduction or reorganization during the five (5) year
period immediately following the Initial Closing Date.
(e) The Buyer shall apply the period of each Acquired Assets
Employee's prior service with the Lead Participant or any of their Affiliates
or any other service credited under the Lead Participants' applicable
employee benefit plan toward any eligibility, vesting or other waiting period
requirements under the Buyer's Employee Benefit Plans (including the Buyer's
Plan). The Buyer shall waive, with respect to the Acquired Assets Employees
and their spouses and dependents, if applicable, all limitations with respect
to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements under the Buyer's Employee Benefit
Plans. The Buyer shall vest each Acquired Assets Employee to the extent such
Acquired Assets Employee is vested under the Plans as of the Initial Closing
Date.
(f) Within a reasonable time prior to the Closing Date, the Lead
Participants shall provide the Buyer with such pertinent data or information
as the Buyer shall reasonably require to determine each Acquired Assets
Employee's service, compensation and accrued benefits under the Plan before
the Initial Closing Date. To the extent the consent of an Acquired Assets
Employee is required in order for the Lead Participants to deliver any such
pertinent data or information or such other Acquired Assets Employee Records
to the Buyer, the Lead Participants, for themselves and on behalf of the
other Sellers, agree to use Commercially Reasonable Efforts to secure such
consent.
(g) The Sellers shall provide and remain liable for any and all
continuation of coverage under the Employee Benefit Plans of such Sellers as
required under Section 601 through 608 of ERISA and Section 4980B of the Code
with respect to any person as to whom a "qualifying event" as defined in
Section 4980B of the Code occurred on or prior to the Initial Closing Date.
(h) On or before the Initial Closing Date, the Lead Participants
or NNECO shall cause to be terminated the employment of the Acquired Assets
Employees and shall be solely responsible for the payment of all wages and
compensation thereupon legally owing to or with respect to the Acquired
Assets Employees including, without limitation, accrued and payable vacation
pay, bonuses, severance pay, overtime, and all benefits under any Employee
Benefit Plan that became payable on account of such termination of employment
or any other amounts to which the Acquired Assets Employees may be entitled
for services rendered prior to their termination or by virtue of their
termination. The Lead Participants shall retain any and all Liability under
the Employee Benefit Plans of the Sellers for retirees as of the Initial
Closing Date.
(i) The Lead Participants shall timely perform and discharge all
requirements under the WARN Act and under applicable state and local Laws for
the notification of employees arising from the sale of the Acquired Assets to
the Buyer up to and including the Initial Closing Date, including those Plant
Employees who will become Acquired Assets Employees effective as of the
Initial Closing Date. After the Initial Closing Date, the Buyer shall be
responsible for performing and discharging all requirements under the WARN
Act and under all applicable Laws and regulations for the notification of its
employees, whether Acquired Assets Employees or otherwise. All severance and
other costs associated with workforce restructuring activities associated
with the Acquired Assets and/or the Acquired Assets Employees subsequent to
the Initial Closing Date shall be borne solely by the Buyer.
5.8. Cooperation after Initial Closing Date.
(a) Records and Support. After the Initial Closing Date, the Lead
Participants, for themselves and on behalf of the other Sellers, shall have
reasonable access to and rights to copy all of the records, books and
documents related to the Acquired Assets to the extent that such access may
reasonably be required by the Sellers in connection with matters relating to
or affected by the ownership or operation of the Facilities by the Sellers on
or prior to the Initial Closing Date. Such access shall be afforded by the
Buyer upon receipt of reasonable advance notice and during normal business
hours. The Sellers shall be solely responsible for any costs or expenses
incurred by them pursuant to this Section 5.8(a). If the Buyer desires to
dispose of any records, books or documents that may relate to operation of
the Facilities on or prior to the Initial Closing Date, the Buyer shall,
prior to such disposition, give the Lead Participants a period of ninety (90)
days, at the Lead Participants' expense, to segregate and remove such
records, books or documents as the Lead Participants may select; provided,
that the Buyer shall not have any obligation to the Sellers to maintain any
such records, books or documents relating to the operation of the Facilities
on or prior to the Initial Closing Date beyond five (5) years following the
Initial Closing Date.
(b) Employees. After the Initial Closing Date, the Parties shall
have reasonable access to the employees of the other Parties, for purposes of
consultation or otherwise, to the extent that such access may reasonably be
required, in the case of the Buyer, in connection with matters relating to or
affected by the operations of the Lead Participants on or prior to the
Initial Closing Date or in the case of the Sellers, operations of the Buyer
during the period following the Initial Closing Date and prior to the date of
the last Closing. The Buyer shall cooperate with the Lead Participants after
the Initial Closing Date to provide employee-related information as may be
reasonably required by the Sellers for rate making purposes and to the extent
allowable under Law.
(c) Investigations and Litigation. The Parties agree to cooperate
in connection with any audit, investigation, hearing or inquiry by any
Governmental Authority, litigation or regulatory or other proceeding which
may arise following the Initial Closing Date and which relates to the
ownership and operation of the Facilities by the Sellers or NNECO on or prior
to the Initial Closing Date or ownership and operation of the Facilities by
the Buyer after the Initial Closing Date, including litigation or regulatory
or other proceedings relating or pertaining to the DOE's defaults under the
DOE Standard Contracts. Such cooperation among the Parties shall include,
but not be limited to, giving reasonable access to each other's employees for
purpose of consultation or otherwise to the extent it may be reasonably
required. Notwithstanding any other provision of this Agreement to the
contrary, each Party shall bear its own expenses, including fees of attorneys
or other representatives, in connection with any such matter described in
this Section 5.8(c) in which the Sellers and the Buyer or their respective
Affiliates are subjects or parties or in which they have a material interest.
(d) Pollution Control Revenue Bonds.
(i) The Buyer acknowledges that:
(A) The facilities listed in Schedule 5.8(d) hereto (the "Pollution
Control Facilities") have been financed, and refinanced, in whole or in part,
with proceeds of the issuance and sale of the Pollution Control Bonds;
(B) UI, CL&P and WMECO are each the economic obligor and conduit
borrower in respect of certain of the Pollution Control Bonds, as specified
in Schedule 2.4(r);
(C) The interest paid or accrued on the Pollution Control Bonds, with
certain exceptions, is not included in the gross income of the holders of the
Pollution Control Bonds (the "PC Bondholders") for purposes of federal income
taxation;
(D) Pursuant to the Internal Revenue Code of 1954, as amended, and the
Code, the basis for the federal income tax exclusion for interest payable to
the PC Bondholders is the use of the Pollution Control Facilities for certain
qualified purposes which include (I) the abatement or control of air or
atmospheric pollution or contamination, (II) the abatement or control of
water pollution or contamination, (III) sewage disposal and/or (IV) the
disposal of solid waste;
(E) The use of all or part of the Pollution Control Facilities for a
purpose other than the qualifying purpose or purposes described in subclause
(D) above for which the Pollution Control Bonds that financed or refinanced
them were issued may cause (I) the interest payable on all or part of the
Pollution Control Bonds to be includable in the federal gross income of the
PC Bondholders possibly with retroactive effect, unless remedial action is
taken to promptly redeem or defease the Pollution Control Bonds or a portion
thereof, and/or (II) the deductibility of the interest payable by UI, CL&P or
WMECO on all or part of the Pollution Control Bonds to be disallowed by
Section 150(b) of the Code; and
(F) Any breach by the Buyer of its obligations under this Section
5.8(d) could result in the incurrence by UI, CL&P or WMECO of additional
costs and expenses, including, but not limited to, an increase in the rate of
interest required to be paid to the PC Bondholders, liability to some or all
of the PC Bondholders for their failure to include interest payable on the
Pollution Control Bonds in their respective federal gross income in the event
of a final determination of taxability by the IRS, loss of the interest
deduction to UI, CL&P or WMECO under Section 150(b) of the Code and
transaction costs relating to any refinancing, redemption and/or defeasance
of all or part of the Pollution Control Bonds.
(ii) In order to avoid any or all of the consequences
described in clauses (E) and (F) above, the Buyer agrees that it will
not use, or permit the use of, all or part of the Pollution Control
Facilities for any purpose except (x) the current use of such Pollution
Control Facilities or (y) as contemplated by the tax compliance
documents or non-arbitrage certificates for the Pollution Control Bonds
that financed or refinanced such Pollution Control Facilities (copies of
which with respect to all of the Pollution Control Facilities, have been
provided to the Buyer by UI, CL&P and WMECO), unless the Buyer shall
have obtained at its own expense an opinion addressed to UI, CL&P and
WMECO of nationally recognized bond counsel reasonably acceptable to UI,
CL&P and WMECO ("Bond Counsel") that such proposed change in use of the
Pollution Control Facilities or part thereof will not impair (x) the
exclusion from gross income of the interest on any Pollution Control
Bonds for federal income tax purposes or (y) the deductibility of the
interest payable on any Pollution Control Bonds by UI, CL&P or WMECO
under Section 150(b) of the Code.
(iii) Notwithstanding any other provision in this Section
5.8(d), it is expressly understood and agreed that the provisions of
this Section 5.8(d) shall not prohibit the Buyer from ceasing to
operate, maintain or repair any element or item of the Pollution Control
Facilities, suspending the operation of the Pollution Control Facilities
on a temporary basis, or terminating the operation of the Pollution
Control Facilities on a permanent basis and shutting down, retiring
and/or decommissioning the Pollution Control Facilities; provided,
however, that the Pollution Control Facilities, in whole or in part,
shall not be dismantled or sold as scrap unless the Buyer has obtained
at its own expense an opinion of Bond Counsel addressed to CL&P and
WMECO that this action will not impair either (x) the exclusion from
gross income of the interest on any Pollution Control Bonds for federal
income tax purposes or (y) the deductibility of the interest payable
with respect to any Pollution Control Bonds by UI, CL&P or WMECO under
Section 150(b) of the Code. To the extent possible, the Buyer shall
provide to UI, CL&P and WMECO the written notice at least thirty (30)
days in advance of any permanent shut-down, retirement, abandonment or
decommissioning of Millstone Unit 2 or 3 or the Pollution Control
Facilities in whole or in part and shall in good faith by written notice
to UI, CL&P and WMECO describe the affected property so that UI, CL&P
and WMECO can determine which issue or issues of Pollution Control Bonds
financed or refinanced such affected property.
(iv) It is expressly understood and agreed that this Section
5.8(d) shall not prohibit the use by the Buyer of tax-exempt bonds to
finance or refinance any improvements to the Pollution Control
Facilities made after the Initial Closing Date or any assets other than
the Pollution Control Facilities.
(v) The Buyer shall indemnify UI, CL&P and WMECO for any
additional costs and expenses incurred by UI, CL&P and WMECO,
respectively, solely as a result of any breach by the Buyer of its
covenants in Sections 5.8(d)(ii) or failure to provide the notice in
Section 5.8(d)(iii).
(vi) UI, CL&P or WMECO shall notify the Buyer in writing of
the maturity or redemption of any issue of the Pollution Control Bonds.
(vii) If UI, CL&P or WMECO shall have notified the Buyer
that it has refinanced any of the Pollution Control Bonds with new
bonds, the provisions of this Section 5.8(d), if applicable, shall apply
with respect to such new bonds as though they were Pollution Control
Bonds; provided that the provisions of this Section 5.8(d)(vii) shall
not operate to require that (x) the Buyer provide any additional
certificates or covenants in connection with such refinancing, (y) the
Buyer extend its compliance with the provisions of Section 5.8(d) with
respect to any Pollution Control Facilities beyond the maturity date of
the related issue of Pollution Control Bonds and (z) the use of any
Pollution Control Facilities be subject to any requirements of the
Internal Revenue Code of 1954, as amended, or the Code that are more
restrictive than those in effect and applicable to the related issue of
Pollution Control Bonds as of the issue date of such issue.
(viii) The Buyer and any transferee which becomes subject
to this Section 5.8(d) by reason of clause (ix) will not sell or
otherwise transfer all or part of the Pollution Control Facilities
unless the transferee covenants in writing for the benefit of UI, CL&P
and WMECO to comply with and to satisfy the conditions of this Section
5.8(d) with respect to its ownership and use of such Pollution Control
Facilities.
(ix) The covenants of this Section 5.8(d) shall survive
Closing and shall continue in effect and bind the Buyer and any
subsequent transferee of all or part of the Pollution Control Facilities
so long as any of the Pollution Control Bonds remain outstanding.
5.9. NEPOOL. At the Initial Closing Date, the Buyer shall be a member
in good standing in NEPOOL. Except as otherwise provided in any Related
Agreement, the Sellers shall not interfere with the Buyer's efforts to expand
or modify generation capacity at the Sites.
5.10. Funding of the Decommissioning Trusts.
(a) Buyer's Decommissioning Fund. To the extent permitted by Law,
the Buyer shall have established as of the Initial Closing Date a qualified
decommissioning fund (the "Buyer's Qualified Decommissioning Fund") and a
nonqualified decommissioning fund (the "Buyer's Nonqualified Decommissioning
Fund," Buyer's Nonqualified Decommissioning Fund, together with Buyer's
Qualified Decommissioning Fund, being collectively referred to as the
"Buyer's Decommissioning Fund") for each of the Facilities into which, as set
forth below, the assets of the Sellers' Qualified Decommissioning Fund and
Nonqualified Decommissioning Fund, as applicable, shall be transferred.
(b) The Decommissioning Trust Closing Amount. On the Initial
Closing Date and each Subsequent Closing Date, the Lead Participants, for
themselves and on behalf of each Seller participating in such Closing, shall
transfer to the Buyer's Qualified Decommissioning Fund and Buyer's
Nonqualified Decommissioning Fund, in accordance with this Section 5.10 and
Section 6.3, the assets of the Sellers participating in such Closing as set
forth in Schedule 5.10(b) comprising each Seller's Qualified Decommissioning
Fund and such Seller's Nonqualified Decommissioning Fund, as applicable, the
aggregate of which for all such Closings shall be equal to $765,346,033, on a
Net Cash Value basis (which is comprised of $268,288,160, $252,944,583 and
$244,113,290 for Millstone Units 1, 2 and 3, respectively) (the
"Decommissioning Trust Closing Amount").
(c) Qualified Deposits, Top Off Amount, etc. (i) On or prior to
the Initial Closing Date and each Subsequent Closing Date, the Lead
Participants, for themselves and on behalf of each Seller which has a
Qualified Decommissioning Fund and is participating in such Closing shall
make, from time to time, such additional cash contributions to the relevant
Seller's Qualified Decommissioning Fund(s) as are eligible or required to be
contributed to the Qualified Decommissioning Fund(s) under Code Section 468A
and applicable Treasury Regulations as in effect as of the relevant Closing
Date, but in no event less than deposits necessary to obtain the appropriate
Qualified Decommissioning Funding Amount(s) set forth in Schedule 5.10(b) on
the Initial Closing Date (the "Qualified Deposits").
(ii) On or prior to the Initial Closing Date and each Subsequent
Closing Date, the Lead Participants, for themselves and on behalf of each
Seller participating in such Closing, shall make additional cash
contributions from time to time to the Sellers' Nonqualified Decommissioning
Fund(s) necessary to obtain the appropriate Nonqualified Decommissioning
Funding Amount(s) set forth in Schedule 5.10(b) on the Initial Closing Date
(the "Top Off Amount").
(iii) In the event that compliance with Code Section 468A and
applicable Treasury Regulations or other reasons prevent the Lead
Participants or a Seller, as applicable, from making Qualified Deposits in
accordance with Section 5.10(c)(i) above, the Top Off Amount shall be
adjusted to compensate the Buyer for the shortfall in the Qualified Deposits
and the tax consequences of the shortfall in the Qualified Deposits.
Specifically, the Top Off Amount will be increased by 1.4 times the amount of
the shortfall in the Qualified Deposits.
(d) Adjustment of Decommissioning Trust Closing Amount. (i) In
the event that any Closing Date occurs after April 1, 2001, the Net Cash
Value of each applicable Qualified Decommissioning Funding Amount and
Nonqualified Decommissioning Funding Amount shall escalate from April 1, 2001
at an after-tax rate of 0.5% per month until the Closing Date. If there is a
partial month, the interest rate applied to such month shall be equal to (A)
the quotient of the number of days elapsed in such month prior to Closing
divided by the total number of days in such month, multiplied by (B) 0.5%.
For the purposes of this Section, the after-tax rate of 0.5% shall mean, in
the case of the Qualified Decommissioning Funding Amount, a pre-tax rate of
0.5% multiplied by 1.2 and in the case of the Nonqualified Decommissioning
Funding Amount, a pre-tax rate of 0.5% multiplied by 1.37. The
Decommissioning Trust Closing Amount shall increase by the sum of the
increases to the Qualified Decommissioning Funding Amount(s) and the
Nonqualified Decommissioning Funding Amount(s).
(ii) The Parties agree and acknowledge that the Decommissioning
Trust Closing Amount set forth in Section 5.10(b) may be less than the NRC
decommissioning funding assurance requirements for Millstone. To the extent
that the Decommissioning Trust Closing Amount is less than the amount
required by the NRC, the Parties agree to use Commercially Reasonable Efforts
to obtain NRC approval to allow Dominion Resources, Inc. to meet such funding
deficit by providing a guarantee of up to $61,000,000 to the NRC at the time
of the Initial Closing (the "DTC Guarantee"). If the NRC approves the
request for the provision of a DTC Guarantee, Dominion Resources, Inc. will
provide such guarantee for amounts up to $61,000,000 and the Sellers will
provide funds for deficit amounts in excess of the DTC Guarantee. If the NRC
does not approve the request for provision of a DTC Guarantee, the Buyer will
fund twenty (20) percent of the deficit amounts needed to meet the NRC's
decommissioning funding assurance requirements for Millstone which shall not
exceed $12,000,000 in any event and the Lead Participants will fund the
difference between the additional amounts required by NRC and the amounts
funded hereunder by the Buyer.
(iii) The Parties agree and acknowledge that the
Decommissioning Trust Closing Amount agreed to among the Parties is based on
the assumption that the "Cold and Dark" status of Millstone Unit 1 will be
achieved by the Lead Participants prior to the Initial Closing Date. If the
Cold and Dark status of Millstone Unit 1 has not been achieved by the Initial
Closing Date, the Lead Participants shall promptly, upon the achievement of
the Cold and Dark status of Millstone Unit 1, reimburse the Buyer for any
additional costs incurred by the Buyer to achieve such Cold and Dark status,
including, without limitation, any additional costs incurred by the Buyer
under the Entergy Contract; provided, however, that the Buyer shall achieve
the Cold and Dark status of Millstone Unit 1 consistent with the past
practices of the Lead Participants or their Affiliates at Millstone and Good
Utility Practices. In the event such reimbursement arrangement is found to
be impracticable prior to the Initial Closing Date, then the Net Cash Value
of the Decommissioning Trust Closing Amount attributable to Millstone Unit 1
shall be increased by an amount equal to the amount that the Buyer reasonably
believes to be necessary to achieve the Cold and Dark status of Millstone
Unit 1 (the "Cold and Dark Adjustment"), which amount shall be paid by the
Lead Participants. The amount of the Cold and Dark Adjustment, if any, shall
be set forth in a notice delivered to the Lead Participants in accordance
with Section 11.8 no later than seven (7) days prior to the Initial Closing
Date.
(iv) Nothing contained in this Section 5.10 shall be deemed to
prohibit the Sellers and the Lead Participants from entering into agreements
among themselves with respect to such Parties' obligations under this Section
5.10.
(e) Amendment. Prior to the last Closing to occur for a Facility,
the Decommissioning Trust Agreements shall not be amended by any Seller to
provide for the consolidation of its Qualified Decommissioning Funds and
Nonqualified Decommissioning Funds, and shall not be amended in any other
manner if and to the extent such amendment would constitute a
Disqualification Event. Except as otherwise required by the IRS, the NRC or
any other Governmental Authority having jurisdiction, following the last
Closing to occur for a Facility and prior to the date which is six months
from the last Subsequent Closing Date to occur for the Facility, the
Decommissioning Trust Agreements shall not be amended by the Buyer to provide
for the consolidation of its Qualified Decommissioning Funds and Nonqualified
Decommissioning Funds, and shall not be amended in any other manner if and to
the extent such amendment would constitute a Disqualification Event, as
defined herein. The execution and delivery of the Supplemental Indenture by
the Buyer and the Sellers shall not be deemed an amendment prohibited by this
Section 5.10(e).
(f) Assets of the Nonqualified Decommissioning Fund. Except as
otherwise directed by the Buyer, the Lead Participants, for themselves and on
behalf of each Seller shall direct the Trustee(s) of the Nonqualified
Decommissioning Fund(s) to ensure, to the extent consistent with the
applicable fiduciary duty owed by the Trustee(s), that such Nonqualified
Decommissioning Fund(s) do not include cash or general deposit accounts or
other "Class I Assets" as defined under Treas. Reg. 1.338-6T(b)(1) on the
Initial Closing Date, and on each Subsequent Closing Date thereafter.
Further, if requested by the Buyer, the Lead Participants, for themselves and
on behalf of each Seller shall direct the Trustee(s) of the Nonqualified
Decommissioning Fund(s), to the extent consistent with the applicable
fiduciary duty owed by the Trustee(s), to invest the assets of the
Nonqualified Decommissioning Funds in a manner reflecting the desired
investment structure of the Buyer within five (5) Business Days prior to the
respective Closing Date as described in a prior written notice from the Buyer
to the Lead Participants; provided that the Buyer shall indemnify and hold
harmless the Lead Participants for any loss resulting from such investment
instructions or other direction provided by the Buyer under this Section
5.10(f).
5.11. Risk of Loss. Except as otherwise provided in this Section
5.11, during the Interim Period all risk of loss or damage to the property
included in the Acquired Assets shall be borne by the Sellers. If during the
Interim Period the Acquired Assets are damaged by fire or other casualty
(each such event, an "Event of Loss"), or are taken by a Governmental
Authority by exercise of the power of eminent domain (each, a "Taking"), the
following provisions shall apply:
(a) the occurrence of (i) any one or more Events of Loss, as a
result of which the aggregate costs to restore, repair or replace, less any
insurance proceeds received or payable to the Sellers in connection with such
Event or Events of Loss (provided that any insurance proceeds received or
payable in connection with the Event or Events of Loss are either used to
restore, repair or replace such Event or Events of Loss or are made available
to the Buyer) are reasonably estimated to be equal to or less than
$10,000,000, and/or (ii) any one or more Takings, as a result of which the
aggregate condemnation proceeds equal an amount reasonably estimated to be
equal to or less than $10,000,000, shall have no effect on the transactions
contemplated hereby; provided that any condemnation proceeds received or
payable in connection with the Taking or Takings are made available to the
Buyer;
(b) upon the occurrence of (i) any one or more Events of Loss, as
a result of which the aggregate costs to restore, repair or replace, less any
insurance proceeds received or payable to the Sellers in connection with such
Event or Events of Loss (provided that any insurance proceeds received or
payable in connection with the Event or Events of Loss are either used to
restore, repair or replace such Event or Events of Loss or are made available
to the Buyer) are reasonably estimated to be greater than $10,000,000, and/or
(ii) any one or more Takings, as a result of which the aggregate condemnation
proceeds are reasonably estimated to be greater than $10,000,000 (a "Major
Loss"), the Lead Participants, for themselves and on behalf of the other
Sellers, shall have, in the case of a Major Loss relating to one or more
Events of Loss, the option, exercised by notice to the Buyer, to restore,
repair or replace the affected Acquired Assets. If Lead Participants elect
to restore, repair or replace the Acquired Assets relating to a Major Loss,
which election shall be made by notice to the Buyer prior to the Initial
Closing Date and as soon as practicable following the occurrence of the Major
Loss, the Buyer will have the option of (x) making the completion of the
repair, replacement or restoration of the affected Acquired Assets a
condition to the Initial Closing and the Initial Closing Date shall be
postponed at its election for the amount of time reasonably necessary for the
Lead Participants to complete the restoration, repair or replacement of such
affected Acquired Assets, such time period to be agreed upon by the Buyer and
the Lead Participants or (y) allowing the Initial Closing to occur prior to
the completion of the repair, replacement or restoration of such affected
Acquired Assets; provided that the Lead Participant shall have agreed to
complete such repair, replacement or restoration which covenant shall survive
the Closings. If the Lead Participants elect not to restore, repair or
replace the Acquired Assets affected by a Major Loss, or such Major Loss is
the result of one or more Takings, the provisions of Section 5.11(c) will
apply;
(c) in the event that the Lead Participants elect not to restore,
repair or replace a Major Loss, or in the event that the Lead Participants,
having elected to repair, replace or restore the Major Loss, fail to complete
such repair, replacement or restoration within the period of time as agreed
upon by the Parties pursuant to the penultimate sentence of Section 5.11(b),
or in the event that a Major Loss is the result of one or more Takings, then
the Parties shall, within thirty (30) days following the Lead Participants'
election not to restore, repair or replace, failure to complete, or the
occurrence of such Takings, as the case may be, negotiate in good faith an
equitable adjustment in the Facilities Purchase Price, pursuant to Section
2.6(a)(iii) to reflect the impact of the Major Loss, as mitigated by any
repair, replacement or restoration work actually completed by the Lead
Participants, on the Acquired Assets being sold to Buyer, and proceed to the
Initial Closing. To assist the Buyer in its evaluation of any and all Events
of Loss, the Lead Participants shall provide the Buyer such access to the
Acquired Assets and such information as the Buyer may reasonably request in
connection therewith; and
(d) in the event that the Parties fail to reach agreement on an
equitable adjustment of the Facilities Purchase Price, within the thirty (30)
days provided in Section 5.11(c), then the Buyer shall have the right to
elect, exercisable by notice to the Lead Participants within fifteen (15)
days immediately following the expiration of the thirty (30) day period, to
(i) proceed with the consummation of the transaction at the Initial Closing,
with a reduction in the Facilities Purchase Price, consistent with the Lead
Participants' last offer of equitable adjustment thereto as contemplated by
the penultimate sentence of Section 5.11(c) communicated to the Buyer, in
which event the Sellers shall assign over or deliver to the Buyer at the
Initial Closing all condemnation proceeds or insurance proceeds which the
Sellers receive, or to which the Sellers become entitled by virtue of the
Events of Loss or Taking with respect to the Acquired Assets, less any costs
and expenses reasonably incurred by the Sellers in connection with such
Events of Loss or Taking or in obtaining such condemnation proceeds or
insurance proceeds, (ii) terminate this Agreement, in which event this
Agreement shall terminate or (iii) submit the matter to dispute resolution
pursuant to Section 12.1 to determine the adjustment, if any, in the
Facilities Purchase Price, which determination shall be binding on all
Parties. If the Buyer fails to make the election within the fifteen (15) day
period described in the preceding sentence, the Buyer will, subject to
Section 5.11(d), be deemed to have made the election to proceed with the
Initial Closing.
5.12. Connecticut Transfer Act. The Buyer acknowledges that the Sites on which
the Facilities are located are subject to the Connecticut Transfer Act (C.G.S.
Section 22a-134 et seq.) (the "Transfer Act"), and that it is
the Buyer's sole and exclusive responsibility (a) to determine the
applicability of the Transfer Act and the appropriate form required to be
filed with the Connecticut Department of Environmental Protection (the "DEP")
pursuant to the Transfer Act for the Sites and the Facilities; (b) to
prepare, execute as the certifying party, and file all required forms with
the DEP; (c) to investigate, remediate and monitor the Sites as required by
the Transfer Act; and (d) to pay any and all costs, fees, and expenses of,
associated with, or relating to the compliance with the Transfer Act with
respect to the Sites and the Facilities, including, but not limited to, all
fees due the DEP, and all costs of investigation, remediation and monitoring
of the Sites as required pursuant to the Transfer Act; provided, however,
that the Lead Participants shall pay to and indemnify the Buyer for any costs
of compliance with the Transfer Act as applied to industrial properties to
the extent they relate to any Environmental Liability which is an Excluded
Liability or in respect of or otherwise arising from the exercise of the
Seller Reserved Easements, and the Sellers shall provide the Buyer with any
information in its possession that would assist the Buyer in meeting its
obligations hereunder. Nothing in this Section 5.12 shall be deemed to
affect in any respect the representations and warranties of the Lead
Participants as set forth in Section 3.2(i) or the indemnity obligations of
the Lead Participants under Section 9.3(a).
5.13. Discharge of Environmental Liabilities. With respect to
Environmental Liabilities which constitute Excluded Liabilities, after the
Initial Closing Date, pursuant to Section 2.3(a), the Buyer will use
Commercially Reasonable Efforts not to prejudice or impair the rights of any
Seller under Environmental Laws or interfere with the ability of any Seller
to contest in appropriate administrative, judicial or other proceedings its
liability, if any, for Environmental Claims or Remediation (the "Seller
Environmental Liabilities"). To the extent relevant to the Seller
Environmental Liabilities, (i) the Buyer further agrees to provide to the
Sellers draft copies of all plans and studies prepared in connection with any
Site investigation or Remediation prior to their submission to the
Governmental Authority with jurisdiction under Environmental Laws, (ii) the
Lead Participants shall have the right, without the obligation, to attend all
meetings between the Buyer, its agents or representatives, and such
Governmental Authorities and (iii) the Buyer shall promptly provide to the
Lead Participants copies of all written information, plans, documents and
material correspondence submitted to or received from such Governmental
Authorities relating to the Buyer's discharge of any Environmental
Liabilities assumed pursuant to this Agreement.
5.14. Nuclear Insurance. The Buyer shall obtain and maintain
policies of liability and property insurance with respect to the ownership,
operation, and maintenance of the Facilities which shall afford protection
against the insurable hazards and risks which meets the requirements of 10
C.F.R. 50.54(w) and is consistent with Good Utility Practices. Such coverage
shall include nuclear liability insurance from ANI, NEIL or any other
provider (or a combination of providers) in such form and in such amount as
will meet the financial protection requirements of the Atomic Energy Act, and
an agreement of indemnification as contemplated by Section 170 of the Atomic
Energy Act. In the event that the nuclear liability protection system
contemplated by Section 170 of the Atomic Energy Act is repealed or changed,
the Buyer shall obtain and maintain, to the extent commercially available on
reasonable terms, alternate protection against nuclear liability. In
addition, the Buyer shall provide to the NRC assurance of its ability to pay
the retrospective premiums for the Facilities as prescribed and to the extent
required by Section 170 of the Atomic Energy Act and 10 C.F.R. Section 140.21.
5.15. Nonwaiver of Third Party Environmental Liabilities. In the
event that the Buyer, either before or after the Initial Closing Date, shall
determine that the cause that gives rise to the Environmental Liabilities
assumed pursuant to Section 2.3(a) occurred, in whole or in part, prior to
the Initial Closing Date, the Lead Participants agree to cooperate and
provide the Buyer with any information in their possession that will assist
the Buyer in locating any Third Party who may be responsible or share
responsibility for any Environmental Liability, and the Lead Participants
shall not waive or excuse the liability of any such Third Party to the extent
any such Environmental Liabilities would have a Material Adverse Effect.
5.16. Control of Litigation. The Parties agree and acknowledge that
the Lead Participants shall be entitled exclusively to control, defend and
settle any litigation, administrative or regulatory proceeding, and any
investigative or Remediation activities (including without limitation any
environmental mitigation) arising out of or related to any Excluded
Liabilities, so long as such defense, settlement or other activities do not
unreasonably interfere with the Buyer's operation of the Facilities or
materially impair the value of the Facilities, and the Buyer agrees to use
Commercially Reasonable Efforts to cooperate with the Lead Participants in
connection therewith. Subject to Section 9.6, the Parties agree and
acknowledge that the Buyer shall be entitled exclusively to control, defend
and settle any litigation, administrative or regulatory proceeding, and any
investigative or remediation activities arising out of or related to any
Acquired Assets or Assumed Liabilities, so long as such defense, settlement
or other activities do not unreasonably interfere with the Sellers'
respective businesses, and the Lead Participants agree to use Commercially
Reasonable Efforts to cooperate with the Buyer in connection therewith.
5.17. Availability of Funds. On or before the Effective Date, the
Buyer shall have delivered to the Sellers (a) evidence of sufficient funds
available to it as of the Initial Closing Date or binding written commitments
from responsible financial institutions to provide sufficient immediately
available funds as of the Initial Closing Date to pay the Relevant Facilities
Purchase Price, the Relevant Fuel Purchase Price and any Estimated Adjustment
and (b) evidence of the availability of the Acceptable Credit Support in
accordance with Section 2.5.
5.18. Cost of Disposal of Pre-1983 Spent Nuclear Fuel.
(a)(i) Each of the Lead Participants hereby appoints the Buyer
as its agent and attorney-in-fact to represent it in all matters involving
the Pre-1983 Spent Nuclear Fuel and to prosecute such claims or negotiate on
their behalf a settlement of such claims by and against DOE; provided that no
such settlement shall be entered into by the Buyer without the prior written
consent of the Lead Participants (such consent not to be unreasonably
withheld), and the Buyer shall inform the Lead Participants in writing of any
material developments regarding any such matter involving the Pre-1983 Spent
Nuclear Fuel; and provided further, that the Lead Participants shall
indemnify and hold the Buyer harmless from any claims, costs or damages
arising from the Buyer's acts as the Lead Participants' agent and attorney-
in-fact under this paragraph.
(ii) The Lead Participants shall, within sixty days after the
occurrence of an ACS Trigger Event, provide the Buyer a DOE Acceptable Credit
Support.
(b) Prior to the Initial Closing Date, the Lead Participants have
reserved certain amounts against future payment of Pre-1983 Spent Nuclear
Fuel disposal charges in an amount equal to the "one-time fee" amount
provided under Article VIII(A)(2) of the DOE Standard Contracts, together
with accrued interest at the rate provided in Article VIII(B)(2)(b) thereof
(the "DOE Contract Amount"). The Parties agree as follows with respect to
such matters:
(i) At such time as the Buyer may be lawfully required to pay
to DOE the fee for disposal of Pre-1983 Spent Nuclear Fuel under Article
VIII of the DOE Standard Contracts (the "DOE Payment Date"), subject to
any reduction as provided in Section 5.18(b)(ii), the Lead Participants
shall, upon not less than thirty (30) days' prior notice from the Buyer,
pay or cause to be paid to the Buyer in immediately available funds a
sum equal to the amount of such payment (the "DOE Payment Amount")
pursuant to wire transfer instructions to be furnished by the Buyer to
the Lead Participants at least five (5) days prior to the DOE Payment
Date. Upon payment of the DOE Payment Amount, the DOE Acceptable Credit
Support shall be terminated and the Buyer shall return such DOE
Acceptable Credit Support to the Lead Participants. In the event the
Lead Participants fail to reimburse the Buyer in full of the DOE Payment
Amount, the Buyer shall have the right to exercise its remedies under
the DOE Acceptable Credit Support to the extent necessary to cover any
deficiency in the reimbursement of the payment by Buyer of the DOE
Payment Amount.
(ii) In the event any pending claims of the Lead Participants
with respect to the DOE Standard Contracts for disposal of Pre-1983
Spent Nuclear Fuel are adjudicated, settled by the Buyer or otherwise
liquidated pursuant to the terms hereof at any time prior to the DOE
Payment Date, and as a result of such adjudication, settlement or
liquidation, the DOE Payment Amount is reduced, or a credit is available
against such amount, such credit shall be used by the Buyer to reduce
the obligations of the Lead Participants under Section 5.18(b)(i), on a
pro rata basis, by the amount of any such credit. In the event that
upon such adjudication, settlement or liquidation of any such claims of
the Lead Participants with respect to the DOE Standard Contracts, the
Lead Participants shall be entitled to receive any cash payment from
DOE, the Lead Participants shall retain such cash and no portion thereof
shall be applied to reduce the DOE Payment Amount.
(iii) The Parties shall provide the DOE with notice of
assignment of the DOE Standard Contracts to the Buyer pursuant to
Article XIV thereof and the appointment of the Buyer to act as the agent
and attorney-in-fact of CL&P and WMECO in prosecuting or settling any
claims against DOE
5.19. Department of Energy Decontamination and Decommissioning Fees.
Each Seller will continue to pay its Ownership Share of all DOE
decontamination and decommissioning fund fees relating to Nuclear Fuel
purchased and consumed at the Facilities on or prior to the Initial Closing
Date or any Subsequent Closing Date, as the case may be, including but not
limited to all annual special assessment invoices to be issued after the
Initial Closing Date, by the DOE, as contemplated by its regulations at 10
C.F.R. Part 766 implementing Sections 1801, 1802, and 1803 of the Atomic
Energy Act. After the Initial Closing and each Subsequent Closing, the Buyer
will pay such DOE decontamination and decommissioning fund fees relating to
Nuclear Fuel purchased or consumed at each Unit after the relevant Closing
for the appropriate Relevant Percentage acquired by the Buyer.
5.20. Cooperation Relating to Insurance and Price-Anderson Act.
Until the Initial Closing, the Sellers will maintain in effect the same level
of property damage and liability insurance for the Facilities as in effect on
the Effective Date. The Lead Participants shall cooperate with the Buyer's
efforts to obtain insurance, including insurance required under the Price
Anderson Act or other Nuclear Laws with respect to the Acquired Assets.
Subject to Section 9.4, the Sellers agree to use Commercially Reasonable
Efforts to assist the Buyer in making any claims against pre-Closing
insurance policies of the Sellers that may provide coverage related to
Assumed Liabilities. The Buyer agrees to indemnify the Sellers for their
reasonable out of pocket expenses incurred in providing such assistance and
cooperation and not to take any action which shall adversely affect any
residual rights of the Sellers in such insurance policies.
5.21. Acceptable Credit Support.
At the Initial Closing the Buyer shall deliver to CL&P, on behalf
of the Remaining Sellers an Acceptable Guaranty and at all times thereafter
until the earlier of (x) the termination date of the Agreement pursuant to
Section 10.1(c)(ii)(B) or Section 10.1(e)(ii) and (y) the payment in full of
the Facilities Purchase Price and the Fuel Purchase Price, the Buyer shall
maintain such Acceptable Guaranty in full force and effect. If at any time
the guarantor under such Acceptable Guaranty shall cease to be an Acceptable
Guarantor, then the Buyer shall, within ten (10) days after the earlier of
the date on which (i) the Buyer shall have been given notice of such
cessation by the Lead Participants and (ii) the Buyer shall have Knowledge of
such cessation, deliver to the Lead Participants a replacement Acceptable
Guaranty to be issued by an Acceptable Guarantor.
5.22. Private Letter Ruling Requests. The Parties agree to
cooperate in good faith in the preparation and filing of any private letter
ruling requests to be made by the Buyer and the Sellers in order to obtain
the tax treatment desired by the Parties with respect to the transfer of the
Decommissioning Funds pursuant to the terms of this Agreement (the "Private
Letter Ruling Requests"). Without limiting the generality of the foregoing,
the Buyer and the Sellers shall use Commercially Reasonable Efforts to obtain
one or more private letter ruling(s) from the IRS determining that (i) the
transfer of assets from the Sellers' Qualified Decommissioning Funds to the
Buyer's Qualified Decommissioning Fund is a disposition that, pursuant to the
IRS' authority under Treas. Reg. 1.468A-6(g)(1), satisfies the requirements
of Treas. Reg. 1.468A-6(b), (ii) the Buyer will not recognize gain or
otherwise take into account any income for U.S. federal income tax purposes
by reason of the receipt of the assets of the Sellers' Nonqualified
Decommissioning Funds, including any Top Off Amounts contributed thereto, and
(iii) each Seller shall be entitled to a current deduction equal to the total
of any amounts realized by such Seller as a result of the Buyer's assumption
of the decommissioning obligations with regard to the Acquired Assets (the
"Requested Rulings"), and further the Buyer and the Sellers shall use
Commercially Reasonable Efforts to obtain separate private letter ruling(s)
from the IRS determining that each Seller's net operating loss attributable
to the decommissioning obligations assumed by the Buyer will qualify for
specified liability loss treatment under section 172 of the Code. Neither
the Buyer nor the Sellers shall take any action that would cause the transfer
of assets from the Sellers' Qualified Decommissioning Funds to the Buyer's
Qualified Decommissioning Fund to fail to satisfy the requirements of Treas.
Reg. 1.468A-6(b) (assuming solely for purposes of this sentence that the
interest acquired by the Buyer constitutes a "qualified interest" in a
"nuclear power plant" as defined in Treas. Reg. 1.468A-5(b)), or cause the
Buyer and the Sellers to fail to obtain such a private letter ruling.
5.23. Credit Rating of Acceptable Guarantor. The Buyer shall, upon
request therefor, during the term of the Acceptable Guaranty (i) deliver to
the Lead Participants, reports from each of S&P and Moody's as to the credit
rating and such other pertinent information with respect to the credit rating
of the Acceptable Guarantor and (ii) promptly notify the Lead Participants of
any downgrade in the credit rating of such Acceptable Guarantor.
5.24. NRC Commitments. The Buyer shall maintain, and operate the
Facilities in accordance with the NRC Commitments and shall not modify or
otherwise amend such NRC Commitments, except in accordance with applicable
Law.
5.25. Exclusivity. Each of the Lead Participants and the Sellers
will not take, nor will it permit any of its Affiliates (or authorize or
permit any investment banker, financial advisor, attorney, accountant or
other Person retained by or acting for or on behalf of the Lead Participants
or the Sellers) to take, directly or indirectly, any action to initiate,
assist, solicit, receive, negotiate, encourage or accept any offer or inquiry
from any Person (i) to reach any agreement or understanding (whether or not
such agreement or understanding is absolute, revocable, contingent or
conditional) for, or otherwise attempt to consummate, the sale of the
Acquired Assets and the Facilities to any Person other than the Buyer or its
Affiliates, or (ii) to furnish or cause to be furnished any information with
respect to the Acquired Assets, the Facilities and the Sites to any Person
for the purpose of soliciting offers for the acquisition of the Acquired
Assets or the Facilities. If the Lead Participants or any Seller (or any
such Person acting for or on their behalf) receives from any Person (other
than the Buyer or Buyer's Representatives) any offer, inquiry or
informational request referred to above, the Lead Participants will promptly
advise such Person, by written notice, of the terms of this Section 5.25 and
will promptly, orally and in writing, advise the Buyer of such offer, inquiry
or request and deliver a copy of such notice to the Buyer.
5.26. Outages. During the Interim Period, the Lead Participants and
NNECO shall use Commercially Reasonable Efforts to complete, in all material
respects in accordance with Good Utility Practices and in conformity with
applicable Laws, the refueling outage for Millstone Unit 3 presently
anticipated to commence in the first quarter of 2001 and all work required to
be accomplished in regard to any outage (including without limitation, any
other refueling outage) in order to return the Facilities to full licensed
thermal power operation.
5.27 Nuclear Fuel. On the Initial Closing Date and the Subsequent
Closing Date, if any, on which WMECO's Ownership Share in the Facilities is
conveyed, the Lead Participants shall cause the Total Relevant Percentage of
the Nuclear Fuel to be transferred from the Fuel Trust to the Buyer, free and
clear of any Lien or encumbrances.
6. Conditions Precedent to Obligation to Close.
6.1. Conditions Precedent to Obligation of the Buyer to Close. The
obligation of the Buyer to consummate the transactions to be performed by it
in connection with the Initial Closing and each Subsequent Closing is subject
to satisfaction of the following conditions with respect to such Initial
Closing or Subsequent Closing, as the case may be:
(a) Representations and Warranties.
(i) The representations and warranties of each Seller set
forth in Section 3.1 shall be true and correct in all material respects
(except if such representation or warranty is subject to a "material
adverse effect", Material Adverse Effect or other materiality threshold,
in which case such representation or warranty shall be true and correct
in all respects) as though made at and as of the relevant Closing Date
on which such Seller transfers its Ownership Share (except with respect
to any representation or warranty expressly made as of the Effective
Date, which shall be deemed made as of the Effective Date and in the
case of any Subsequent Closing Date, except with respect to any breach
of any such representation or warranty to the extent that such breach
arises from the acts or omissions of the Buyer or its Affiliates after
the Initial Closing Date);
(ii) The representations and warranties of the Lead
Participants set forth in Section 3.2 shall be true and correct in all
material respects (except if such representation is subject to a
"material adverse effect", Material Adverse Effect or other materiality
threshold, in which case such representation or warranty shall be true
and correct in all respects) as though made at and as of the Initial
Closing Date and each Subsequent Closing Date (except with respect to
any representation or warranty expressly made as of the Effective Date,
which shall be made as of the Effective Date and in the case of any
Subsequent Closing Date, except with respect to any breach of any such
representation or warranty to the extent that such breach arises from
the acts or omissions of the Buyer or its Affiliates after the Initial
Closing Date);
(b) Performance by the Sellers. The Required Sellers or the
Remaining Sellers, as the case may be, shall have performed and complied in
all material respects with all of their covenants, agreements and obligations
hereunder through the relevant Closing Date;
(c) Buyer Regulatory Approval. Buyer shall have received the
consents, waivers, approvals and authorizations referenced in Section 5.2(b)
and the Buyer Regulatory Approvals specified in Schedule 6.1(c) in each case
without terms and conditions that, either singly or in the aggregate, are
reasonably likely to have a Material Adverse Effect or a material adverse
effect on the Buyer or its Affiliates and such approvals shall be final and
non-appealable;
(d) Seller Regulatory Approvals. The Required Sellers or the
Remaining Sellers shall have received the applicable Seller Regulatory
Approvals specified in Schedule 6.2(c), in each case without terms and
conditions that, either singly or in the aggregate, are reasonably likely to
have a Material Adverse Effect or a material adverse effect on the Buyer or
its Affiliates and such approvals shall be final and non-appealable;
(e) Absence of Litigation. No suit, action or other proceeding
against any Party or its Affiliates or any of the Acquired Assets shall be
pending before any Governmental Authority which seeks to restrain or prohibit
any of the transactions contemplated by this Agreement or any Related
Agreement or to obtain damages or other relief in connection with this
Agreement or any Related Agreement or the actions contemplated hereby or
thereby, except for matters, in the case of suits, actions or pleadings that
seek damages that, in the aggregate, could not reasonably be expected to
result in damages causing a Material Adverse Effect. There shall not be any
injunction, judgment, order, decree, ruling, charge or laws in effect on the
relevant Closing Date preventing consummation of any of the transactions
contemplated by this Agreement or the Related Agreements, except as could not
reasonably be expected to have a Material Adverse Effect;
(f) Anti-trust Matters. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated or it shall have been determined to the Parties'
mutual satisfaction that all transactions between the Parties are exempt from
the Hart-Scott-Rodino Act;
(g) Deliveries. The Required Sellers or the Remaining Sellers, as
the case may be, shall have complied in all material respects with the
delivery requirements of Section 2.11;
(h) Title Commitments. The issuer of the Title Commitments shall
have made available to the Buyer title insurance policies in an amount
satisfactory to the Buyer insuring good and marketable fee simple title to
the Total Relevant Percentage of Acquired Assets consisting of real estate
and Improvements as of the relevant Closing Date substantially in the form of
the Title Commitments, with such changes therefrom as shall not in the
aggregate have a Material Adverse Effect and with the exceptions for parties
in possession (other than those disclosed in Schedule 2.1(a)(ii), if any) and
unfiled mechanics' and materialmen's liens (other than those that arise from
any act of the Buyer or arise under Good Utility Practices and are not
material to the operation or use of the Acquired Assets in the business of
the Sellers as conducted through the relevant Closing Date) removed;
provided, that the Buyer shall be under no obligation to pay any amounts to
the issuer of such title insurance policies in order to cause an exception
not contained in the Title Commitments to be removed from such title
insurance policies if the amount of such payment would constitute a Material
Adverse Effect; all easements necessary for Buyer's access to the Real
Property and use and operation of the Improvements thereon as shown in
Schedule 2.1(a)(i) shall be in full force and effect and shall be insured as
part of Buyer's title policy;
(i) Material Adverse Effect. Since the Effective Date, there
shall not have occurred and be continuing a Material Adverse Effect, other
than (i) to the extent such Material Adverse Effect is the direct and
foreseeable consequence of facts or circumstances that were disclosed on
Schedule 3.2(a), 3.2(c)(ii), 3.2(g) or 3.2(i) and were not required to be
corrected or remediated before the relevant Closing Date by this Agreement or
(ii) such Material Adverse Effect which is the direct and sole result of acts
or omissions on the part of the Buyer after the Initial Closing Date;
(j) Related Agreements. The Related Agreements shall be in full
force and effect on each Closing Date;
(k) [RESERVED];
(l) No Shutdown. Neither Unit 2 or 3 of the Facilities have been
shut down or have had their outputs significantly reduced by virtue of the
action, or as a result of actions, taken by the NRC or other Governmental
Authority.
(m) Certain Consents. The Sellers shall have received third party
consents to assignment of all Material Contracts, except those for which
arrangements reasonably satisfactory to the Buyer have been made pursuant to
Section 5.2(b);
(n) Release of Lien of Mortgage Indenture. The Lien of the
Mortgage Indenture and any other mortgages, deeds of trust and security
interests on the Acquired Assets shall have been released and any documents
necessary to evidence such release shall have been delivered to the Title
Company;
(o) Decommissioning Funds. The Net Cash Value of each of the
Decommissioning Funds shall be as set forth in Schedule 5.10(b);
(p) Requested Rulings. The Buyer shall have received the
Requested Rulings;
(q) Right of First Refusal. To the extent a Lead Participant will
not close on the Initial Closing Date, the Buyer shall have received an
assignment of all of the Lead Participants' rights under the Sharing
Agreement pursuant to the Lead Participants Rights Agreement or such other
agreement in form and substance reasonably satisfactory to it, and such
evidence as may be reasonably satisfactory to the Buyer of a waiver of rights
of first refusal from any other owners of Unit 3;
(r) Outages. Prior to the Initial Closing Date, the Lead
Participants and NNECO shall have completed, in all material respects in
accordance with Good Utility Practices and in conformity with applicable
Laws, the refueling outage for Millstone Unit 3 presently anticipated to
commence during the first quarter of 2001 and all work required to be
accomplished in regard to any outage (including, without limitation, any
other refueling outage) in order to return the Facilities to full licensed
thermal power operation; and
(s) Other Matters Affecting Acquired Assets. The Buyer shall have
received such other documents, agreements or instruments, and the Required
Sellers or the Remaining Sellers, as the case may be, shall have performed
such acts, as the Buyer or its counsel may reasonably request in order to
accomplish the acquisition of the Total Relevant Percentage of the Acquired
Assets and the operation of the Facilities in a safe and reliable fashion.
The Buyer may waive any condition specified in this Section 6.1 if
it executes a writing so stating on or prior to the relevant Closing Date and
such waiver shall not be considered a waiver of any other provision in this
Agreement unless the writing so states.
6.2. Conditions Precedent to Obligation of the Sellers to Close. The
obligation of each Required Seller or Remaining Sellers, as the case may be,
to consummate the transactions to be performed by it in connection with the
Initial Closing or Subsequent Closing, as the case may be, is subject to
satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Buyer set forth in Section 4 shall be true and correct in
all material respects (except if such representation or warranty is subject
to a "material adverse effect," Material Adverse Effect or other materiality
threshold, in which case such representation or warranty shall be true and
correct in all respects) at and as of the Initial Closing Date or Subsequent
Closing Date, as the case may be (except with respect to any representation
or warranty expressly made as of the Effective Date, which shall be deemed
made as of the Effective Date);
(b) Performance by the Buyer. The Buyer shall have performed and
complied in all material respects with all of its covenants, agreements and
obligations hereunder through the relevant Closing Date;
(c) Seller Regulatory Approvals. Each Required Seller or Remaining
Seller, as the case may be, shall have received the Seller Regulatory
Approvals specified in Schedule 6.2(c), in each case without terms and
conditions that either singly or in the aggregate are reasonably likely to
have a Material Adverse Effect or a material adverse effect on such Seller or
its Affiliates and such approvals shall be final and nonappealable;
(d) Buyer Regulatory Approval. The Buyer shall have received the
consents, waivers, approvals and authorizations referenced in Section 5.2(b)
and the Buyer Regulatory Approvals specified in Schedule 6.1(c) in each case
without terms and conditions that, either singly or in the aggregate, are
reasonably likely to have a material adverse effect on any Seller or its
Affiliates and such approvals shall be final and nonappealable;
(e) Absence of Litigation. No suit, action or other proceeding
against any Party or its Affiliates or any of the Acquired Assets shall be
pending before any Governmental Authority which seeks to restrain or prohibit
any of the transactions contemplated by this Agreement or to obtain damages
or other relief in connection with this Agreement or the actions contemplated
hereby, except for matters that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. There shall not be any
injunction, judgment, order, decree, ruling, charge or laws in effect on the
relevant Closing Date preventing consummation of any of the transactions
contemplated by this Agreement or the Related Agreements, except as could not
reasonably be expected to have a Material Adverse Effect;
(f) Deliveries. The Buyer shall have complied in all material
respects with the delivery requirements of Section 2.12;
(g) Anti-trust Matters. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated or it shall have been determined to the Parties'
mutual satisfaction that all transactions between the Parties are exempt from
the Hart-Scott-Rodino Act;
(h) NEPOOL. The Buyer shall be a member in good standing of
NEPOOL;
(i) Related Agreements. The Related Agreements shall be in full
force and effect as of the relevant Closing Date; and
(j) Requested Rulings. The Sellers shall have received the
Requested Rulings.
Each of the Sellers may with respect to itself waive any condition
specified in this Section 6.2 if it executes a writing so stating at or prior
to the relevant Closing Date and such waiver shall not be considered a waiver
of any other provision in this Agreement unless the writing specifically so
states or by any other Seller.
6.3. Initial and Subsequent Closings.
(a) Coordination and Initial Closing. The Buyer and the Sellers
desire to effect a coordinated closing with respect to all of the Sellers'
interests in the Acquired Assets. To that end, in order to provide
sufficient time for the Sellers to obtain necessary Seller Regulatory
Approvals, no Closing including, without limitation, the Initial Closing,
shall occur until the date (the "Coordination Date") which is the earlier of
(1) the date which is eight (8) months after the Effective Date or (2) the
date on which all Seller Regulatory Approvals have been obtained. Anything
provided in this Agreement to the contrary notwithstanding, if the
Coordination Date has occurred and the conditions precedent set forth in
Section 6.1 are satisfied with respect to NNECO and any Seller or Sellers
(NNECO and such Sellers, collectively, the "Required Sellers") holding
individually, or in the aggregate with other Required Sellers, not less than
eighty-one percent (81%) of the Ownership Shares of Millstone Units 1 and 2
and not less than fifty-two and ninety-three one hundredths percent (52.93%)
of the Ownership Shares of Millstone Unit 3 (the "Required Assets"), then the
Buyer and the Required Sellers shall proceed to Closing in accordance with
Section 2.10 with respect to such Required Sellers (the "Initial Closing").
If all conditions precedent as set forth in Section 6 other than the
conditions precedent as set forth in Section 6.1(d) or Section 6.2(c) (the
"Specified Conditions Precedent") are satisfied (and remain so satisfied)
with respect to any Seller or Sellers (the "Remaining Sellers"), then the
Buyer and the Remaining Sellers shall proceed to Closing in accordance with
Section 2.10 with respect to such Remaining Sellers on a date no later than
fifteen (15) days (or, if the fifteenth day is not a Business Day, then the
next Business Day following such fifteenth day) after satisfaction of such
Specified Conditions Precedent (the "Subsequent Closing").
(b) Initial Closing. At the Initial Closing (i) the Required
Sellers shall sell and transfer to the Buyer and the Buyer shall purchase and
acquire from the Required Sellers the Total Relevant Percentage of the
Acquired Assets, (ii) the Buyer shall assume liability for the Total Relevant
Percentage of the Assumed Liabilities, (iii) the Lead Participants shall make
the transfer to the Buyer's Decommissioning Fund pursuant to Section 5.10,
and (iv) the Buyer shall become a party to, and shall succeed to the rights
and obligations of the Lead Participants under the Sharing Agreement as
amended in accordance with Section 6.3(d).
(c) Subsequent Closings. At each Subsequent Closing (i) the
relevant Remaining Seller shall sell and transfer to the Buyer and the Buyer
shall purchase and acquire from the Remaining Seller the Total Relevant
Percentage of the Acquired Assets, (ii) the Buyer shall assume liability for
the Total Relevant Percentage of the Assumed Liabilities, (iii) the Lead
Participants shall make the transfer to the Buyer's Decommissioning Trust
Fund pursuant to Section 5.10, and (iv) the Buyer shall succeed to the rights
and obligations of such Remaining Seller under the Sharing Agreement as
amended in accordance with Section 6.3(d).
(d) Sharing Agreement. On or before the Initial Closing, the
Sellers shall cause the Sharing Agreement to be amended to provide that the
Sharing Agreement shall remain in full force and effect following the Initial
Closing and each Subsequent Closing and that the Buyer shall succeed to the
status of and the rights and obligations of the "Lead Participants" under the
Sharing Agreement as of the Initial Closing.
(e) Indemnified Parties. Following the Initial Closing and any
Subsequent Closing, and until such time as the Buyer shall have acquired all
of the Ownership Shares in the Acquired Assets, the term "Seller Indemnified
Parties" shall mean the Required Sellers and, each Remaining Seller as to
which a Subsequent Closing has occurred and their respective Affiliates and
any of their officers, directors and employees, agents and representatives.
7. Confidentiality.
(a) Each Receiving Party and each Representative thereof will
treat and hold as confidential all Proprietary Information, refrain from
using any such Proprietary Information except in connection with this
Agreement, the Related Agreements and transactions contemplated hereby and
thereby, and, if this Agreement is terminated prior to Closing, deliver
promptly to the Disclosing Party or destroy, at the request and option of the
Disclosing Party, all tangible embodiments and all copies, summaries or
abstracts of any Proprietary Information received from such Disclosing Party
which are in his or its possession. All Proprietary Information relating to
the Acquired Assets as may be delivered to the Buyer prior to the Initial
Closing shall become Buyer's Proprietary Information and the Buyer shall be
deemed to be the Disclosing Party with respect thereto upon consummation of
the Initial Closing, and the Sellers shall not thereafter disclose any such
Proprietary Information except to the extent allowed herein; provided,
however, that, subject to Section 7(b), any such information which was not
treated as confidential or proprietary by any of the Sellers prior to Closing
shall not become confidential or Proprietary Information of the Buyer after
the Closing. In the event that the Receiving Party or any Representative
thereof is requested or required (including, without limitation, (i) pursuant
to any rule or regulation of any stock exchange or other self-regulatory
organization upon which any of the Receiving Party's securities are listed,
or (ii) by request for information or documents in any legal proceeding,
including, without limitation, Buyer Regulatory Approval and Seller
Regulatory Approval processes, interrogatory, subpoena, civil investigative
demand, or similar process or pursuant to any freedom of information or open
meeting law applicable to any Seller) to disclose any Proprietary
Information, the Receiving Party will notify the Disclosing Party promptly of
the request or requirement so that the Disclosing Party may seek an
appropriate protective order or waive compliance with the provisions of this
Section 7. If, in the absence of a protective order or the receipt of a
waiver hereunder, the Receiving Party is, on the advice of counsel, compelled
to disclose any Proprietary Information to any tribunal or else stand liable
for contempt or to disclose any Proprietary Information to any Person in
compliance with any freedom of information or open meeting law, the Receiving
Party may disclose the Proprietary Information to the tribunal or such
Person; provided, however, that the Receiving Party shall use its best
efforts to obtain, at the request of the Disclosing Party and at the
Disclosing Party's cost, a voluntary agreement or other assurance that
confidential treatment will be accorded to such portion of the Proprietary
Information required to be disclosed as the Disclosing Party shall designate.
(b) After the Initial Closing Date, the Buyer will notify the
Sellers of any information related to the Acquired Assets that was not
confidential prior to the Initial Closing Date that the Buyer wishes to treat
as Proprietary Information after the Initial Closing and the Sellers will
treat such information as Proprietary Information after receiving such
notice.
(c) The obligations of the Parties contained in this Section 7
shall remain in full force and effect for three (3) years from the date
hereof and will survive the termination of this Agreement, the discharge of
all other obligations owed by the Parties to each other and any transfer of
title to the Acquired Assets. Notwithstanding the foregoing, the Parties
shall continue to keep confidential any information as required by applicable
Laws.
(d) Upon the Disclosing Party's prior written approval, which will
not be unreasonably withheld, the Receiving Party may provide Proprietary
Information to the DPUC, the FERC, the NRC, the SEC, the United States
Department of Justice, the United States Federal Trade Commission or any
other Governmental Authority with jurisdiction, as necessary, to obtain any
consents, waivers or approvals as may be required for the Parties to
undertake the transactions contemplated hereby. The Receiving Party will
seek confidential treatment for such Proprietary Information provided to any
such Governmental Authority and the Receiving Party will notify the
Disclosing Party as far in advance as is practicable of its intention to
release to any such Governmental Authority any such Proprietary Information,
so as to permit such Disclosing Party a reasonable opportunity to obtain a
protective order.
(e) Notwithstanding anything set forth herein, nothing in this
Agreement shall be interpreted as precluding any Party from reporting or
disclosing any information (i) to the NRC concerning any perceived safety
issue within the NRC's regulatory jurisdiction, (ii) with the prior written
consent of the Disclosing Party, or (iii) to its Affiliates, attorneys,
financial advisors and accountants who are assisting such Party in connection
with the transactions contemplated by this Agreement, provided that such
Affiliates, attorneys, financial advisors and accountants acknowledge the
provisions of this Section 7 and agree to be bound hereby.
8. Taxes.
(a) All transfer and sales Taxes incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the
Buyer, including, without limitation, Connecticut state sales tax and
Connecticut and local real estate, transfer, personal property and conveyance
taxes, and the Buyer, at its own expense, will file, to the extent required
by applicable Laws, all necessary Tax Returns and other documentation with
respect to all such Taxes, and, if required by applicable Laws, the Lead
Participants and other Sellers, if required, will join in the execution of
any such Tax Returns or other documentation. Prior to the Initial Closing
Date and any Subsequent Closing Dates, the Buyer will provide to the Required
Sellers or the Remaining Sellers, as the case may be, 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 2.9, the Buyer shall prepare and timely file all Tax Returns required
to be filed after the Closing Dates with respect to the Acquired Assets
transferred as of such Closing Dates 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 Lead Participants' approval to the
extent that such Tax Returns relate to any period, allocation or other amount
for which the Sellers are responsible, which approval shall not be
unreasonably withheld. No later than fifteen (15) Business Days prior to the
due date of any such Tax Return, the Buyer shall make such Tax Return
available for the Lead Participants' review and approval. Lead Participants
shall respond no later than ten (10) Business Days prior to the due date for
filing such Tax Return. With respect to such Tax Return, the Sellers shall
pay to the Buyer their appropriate share of the amount shown as due on the
Tax Returns determined in accordance with Section 2.9 of this Agreement.
(c) Each of the Buyer and the Sellers 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 Tax Return, audit or examination, proceedings or determination. Any
information obtained pursuant to this Section 8 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 deemed to be and shall be
Proprietary Information.
(d) In the event that a dispute arises between the Buyer and any
Seller regarding Taxes or any amount due under this Section 8, the Buyer and
the Lead Participants shall attempt in good faith to resolve such dispute and
any agreed upon amount shall be promptly paid to the appropriate Party. If
any such dispute is not resolved within thirty (30) days after notice thereof
is given to any Party, upon the written request of any Party, the Parties
shall submit the dispute to the Independent Accounting Firm for resolution,
which resolution shall be final, binding and conclusive on such Parties, and
the non-prevailing Party shall make payment of such Taxes or any amount due
under this Section 8 with accrued interest, if any, within ten (10) days
after the date of such resolution. Notwithstanding anything in this
Agreement to the contrary, the fees and expenses of the Independent
Accounting Firm in resolving the dispute shall be borne equally by the Buyer
and the Lead Participants.
9. Non-Survival; Effect of Closing and Indemnification.
9.1. Survival of Representation and Warranties; Survival Covenants and
Agreements. The representations and warranties of the Sellers, Lead
Participants and NNECO set forth in Sections 3.1 and 3.2 and the
representations and warranties of the Buyer set forth in Section 4 shall
survive the Initial Closing for a period of the shorter of (x) eighteen (18)
months from the Initial Closing or (y) twelve (12) months from the last
Subsequent Closing to occur. The covenants of the Parties contained in this
Agreement, other than those which by their terms survive any termination of
this Agreement, shall terminate at such termination of this Agreement
pursuant to Section 10.
9.2. Effect of Closing. Except as otherwise provided elsewhere in this
Agreement, or as otherwise agreed by the Parties, upon the Initial Closing or
any Subsequent Closing, as the case may be, any condition in favor of either
the Buyer, the Required Sellers, or the Remaining Sellers, as the case may be
(each, a "Closing Party" and collectively the "Closing Parties") that has not
been satisfied will be deemed waived by the Closing Parties as of such
Closing Date (but only with respect to those Closing Parties and such Closing
Date and not to any other Closing Parties or any Subsequent Closing), and
each Closing Party will be deemed to fully release and forever discharge the
other Closing Parties with respect to the conditions precedent to Closing.
Nothing in this Section 9.2 shall affect or cause to be waived the rights of
the Buyer or the Sellers under Section 9.3 or 9.4 or with respect to those
other matters specifically stated to survive or to occur after such Closing
Date pursuant to this Agreement.
9.3. Indemnity by Lead Participants. The Lead Participants hereby
jointly and severally agree to indemnify, defend and hold harmless the Buyer,
its Affiliates and any of their respective members, officers, directors and
employees, agents and Representatives ("Buyer Indemnified Parties") against
and in respect of all claims, Liabilities, obligations, judgments, Liens,
injunctions, charges, orders, decrees, rulings, damages, dues, assessments,
Taxes, losses, fines, penalties, damages, expenses, fees, costs, amounts paid
in settlement (including reasonable attorneys' and expert witness fees and
disbursements in connection with investigating, defending or settling any
action or threatened action), arising out of any claim, complaint, demand,
cause of action, action, audit, investigation, hearing, suit or other
proceeding asserted or initiated or otherwise existing in respect of any
matter (collectively, the "Losses"); provided that such Losses result or
arise from:
(a) the untruth, inaccuracy or incompleteness of any
representation or warranty of any Seller, Lead Participants or NNECO
contained in this Agreement or the Schedules hereto or in any document,
writing, certificate or data delivered by such Seller, Lead Participants or
NNECO under this Agreement; provided that Buyer's loss therefrom exceeds
$1,000,000 in the aggregate (except as expressly provided in clause (f)
below);
(b) Liabilities of the Sellers (whether known or unknown) other
than Assumed Liabilities, including, but not limited to, Excluded Liabilities
(including any Excluded Liabilities retained by UI);
(c) any Third Party Claim against the Buyer Indemnified Parties
based on or relating to the Sellers' ownership, operation or use of the
Acquired Assets prior to the Initial Closing Date or any Subsequent Closing
Date, as the case may be, that is not an Assumed Liability;
(d) the Excluded Assets;
(e) any breach by any Seller, Lead Participant or NNECO of any
covenant, agreement or obligation of such Seller, Lead Participant or NNECO
contained in this Agreement or any certificate required to be delivered by
such Seller, Lead Participant or NNECO pursuant to this Agreement, or any
intentional misrepresentation or fraudulent breach of representation or
warranty inducing the Buyer to proceed to a Closing Date and causing any
Buyer Indemnified Party to suffer Losses;
(f) the untruth, inaccuracy or incompleteness of any
representation or warranty of the Lead Participants or NNECO contained in
Section 3.2(e)(iv) of this Agreement and any claims of any owners in
Millstone Unit 3 against the Lead Participants, the Sellers or NNECO or any
Affiliate thereof; provided, that the indemnity obligation in this clause (f)
shall not be subject to the following limitations: (i) the $1,000,000
threshold in clause (a) to the extent such threshold would otherwise have
applied to the representations contained in Section 3.2(e)(iv), (ii) the cap
on liability set forth in Section 9.5 or (iii) the survival period set forth
in Section 9.1; or
(g) any noncompliance with any bulk sales or fraudulent transfer
laws in respect of the transaction contemplated by this Agreement or any of
the Related Agreements.
9.4. Indemnity by Buyer. The Buyer hereby agrees to indemnify, defend
and hold harmless the Sellers and their Affiliates and any of their
respective members, officers, directors and employees, agents and
Representatives ("Seller Indemnified Parties") against and in respect of all
Losses; provided that such Losses result or arise from:
(a) the untruth, inaccuracy or incompleteness of any
representation or warranty of the Buyer contained in this Agreement or the
Schedules hereto or in any document, writing, certificate or data delivered
by the Buyer under this Agreement; provided that Sellers' Loss therefrom
exceeds $1,000,000 in the aggregate;
(b) any Third Party Claim against the Seller Indemnified Parties
based on or relating to the Buyer's ownership, operation or use of the
Acquired Assets after the Initial Closing Date and any Subsequent Closing
Date, as the case may be, that is not an Excluded Liability;
(c) any Third Party Claim arising out of, or related to the
contracts, warranties or guaranties, or any other agreements that have been
properly transferred or assigned to the Buyer by any Seller, except to the
extent the Third Party Claim arises out of events occurring on or prior to
the Initial Closing Date or the Subsequent Closing Date on which such Seller
transferred its Ownership Share, as the case may be;
(d) the Assumed Liabilities; or
(e) any breach by the Buyer of any covenant, agreement or
obligation of the Buyer contained in this Agreement or any certificate
required to be delivered by the Buyer pursuant to this Agreement, or any
intentional misrepresentation or fraudulent breach of representation or
warranty inducing the Seller to proceed to a Closing and causing any Seller
Indemnified Party to suffer Losses.
9.5. Exclusive and Limited Remedies. Except for the dispute resolution
process as set forth in Section 12 and the termination rights under Section
10, from and after the Initial Closing Date, the remedies set forth in this
Section 9 shall constitute the sole and exclusive remedy for any and all
claims, damages, complaints, demands, causes of action, investigations,
hearings, actions, suits or other proceedings relating to this Agreement and
are in lieu of any and all other rights and remedies which the Sellers or the
Buyer may have under this Agreement or otherwise for monetary relief with
respect to any breach or failure to perform or with respect to the Assumed
Liabilities or Excluded Liabilities. Each Party waives any provision of law
to the extent that it would limit or restrict the agreements contained in
this Section 9. Nothing herein shall prevent the Buyer or the Lead
Participants, for themselves and on behalf of the other Sellers, from
terminating this Agreement in accordance with Section 10. The maximum
aggregate exposure for indemnity by the Buyer or the Lead Participants for
any and all claims of breach of express warranties or representations
hereunder and indemnification of claims relating thereto shall be
$20,000,000; provided, however, that in the event such breach of
representation or warranty arises under Section 9.3(e) or 9.4(e) on the basis
of any intentional misrepresentation or fraud inducing a Party to proceed to
Closing, such limitation shall not apply. Subject to the obligations of the
Parties under this Section 9 to indemnify any other Person for losses arising
from a Third Party claim or liability, no Party shall be entitled to recover
lost profits, consequential, indirect, punitive or exemplary damages in
regard to any claim against the other Party.
9.6. Notice; Defense of Claims.
(a) The Party which is entitled to indemnification hereunder (for
purposes of this Section 9.6, the "Indemnified Party") may make claims for
indemnification hereunder by giving written notice thereof to the Party
required to indemnify (for purposes of this Section 9.6, the "Indemnifying
Party") within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by
a Third Party, the Indemnified Party shall also give written notice thereof
to the Indemnifying Party promptly after it receives notice of the claim or
liability being asserted, but the failure to do so, or any delay in doing so,
shall not relieve the Indemnifying Party from any liability, unless, and then
only to the extent that, the rights and remedies of the Indemnifying Party
are prejudiced as a result of the failure to give, or delay in giving, such
notice. Such notice shall summarize the bases for the claim for
indemnification and any claim or liability being asserted by a Third Party.
Within thirty (30) days after receiving such notice, the Indemnifying Party
shall give written notice to the Indemnified Party stating whether it
disputes the claim for indemnification and whether it will defend against any
Third Party Claim or liability at its own cost and expense. If the
Indemnifying Party fails to give notice to the Indemnified Party that it
disputes an indemnification claim within thirty (30) days after receipt of
notice thereof it shall be deemed to have accepted and agreed to the claim,
which shall become immediately due and payable.
(b) The Indemnifying Party shall be entitled to direct the defense
against a Third Party claim or litigation with counsel selected by it
(subject to the consent of the Indemnified Party, which consent shall not be
unreasonably withheld), as long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within thirty (30) days after receiving notice
of the Third Party Claim that the Indemnifying Party will indemnify, defend
and hold harmless the Indemnified Party from and against the entirety of any
Losses the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence acceptable to
the Indemnified Party that the Indemnifying Party will have the financial
resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief
against the Indemnified Party, and (iv) settlement of, or any adverse
judgment with respect to, the third Party Claim, in the good faith judgment
of the Indemnified Party, is not likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified
Party, and (v) the Indemnifying Party is conducting a good faith and diligent
defense. Notwithstanding the foregoing, the obligations of the Indemnifying
Party hereunder as to such Third Party claim or litigation shall include
taking all steps reasonably necessary in the defense, settlement, or
compromise of such claim or litigation and holding the Indemnified Party
harmless from and against any and all Losses caused by or arising out of any
settlement or compromise approved by the Indemnifying Party or any judgment
in connection with such claim or litigation. The Indemnifying Party shall
not, in the defense of such Third Party claim or any litigation resulting
therefrom, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) except with the written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), or
enter into any settlement or compromise (except with the written consent of
the Indemnified Party, which consent shall not be unreasonably withheld)
which does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party a full release from all
liability in respect of such claim or litigation. The Indemnified Party
shall at all times have the right to fully participate in the defense of a
Third Party claim or liability at its own expense directly or through
counsel; provided, however, that if the named parties to the action or
proceeding include both the Indemnifying Party and the Indemnified Party and
the Indemnified Party is advised by counsel that representation of both
parties by the same counsel would be inappropriate under applicable standards
of professional conduct, the Indemnified Party may engage one separate
counsel at the expense of the Indemnifying Party.
(c) If the Indemnifying Party does not give notice of its intent
to dispute and defend a Third Party claim or liability or litigation
resulting therefrom after receipt of notice from the Indemnified Party, or if
such good faith and diligent defense is not being or ceases to be conducted
by the Indemnifying Party, the Indemnified Party shall have the right, at the
expense of the Indemnifying Party, to undertake the defense of such claim or
liability in such manner as it deems appropriate (with counsel selected by
the Indemnified Party and reasonably acceptable to the Indemnifying Party),
and to compromise or settle such claim or litigation on such terms as it may
deem appropriate, exercising reasonable business judgment.
(d) The Indemnifying Party shall promptly reimburse the
Indemnified Party for all Losses incurred by the Indemnified Party in
connection with the defense against such claim or litigation, whether or not
resulting from, arising out of, or incurred with respect to, the act of a
Third Party.
(e) The Indemnified Party shall make available such information
and assistance in connection with the defense by the Indemnifying Party, as
the Indemnifying Party may reasonably request and shall cooperate with the
Indemnifying Party in such defense at the expense of the Indemnifying Party.
(f) The expiration or termination of any representation or
warranty shall not affect the Parties' obligations under this Section 9 if
the Indemnified Party provided the Indemnifying Party with proper notice of
the claim or event for which indemnification is sought prior to such
expiration, termination or extinguishment.
9.7. Net of Taxes and Insurance. Any calculation of a Loss under this
Section 9 shall, in each case, give full effect to (a) any and all income Tax
benefits and costs to the Indemnified Party in respect of the Loss to the
extent realized by the Indemnified Party but such amounts shall be increased
to give effect to income Taxes attributable to the receipt of any
indemnification payment hereunder, and (b) any and all insurance or other
proceeds actually received by the Indemnified Party in respect of the Loss.
Any Party seeking indemnity hereunder shall use Commercially Reasonable
Efforts to seek coverage for both costs of defense and indemnity under
applicable insurance policies.
9.8. Release. Except as provided in Section 9.3, the Buyer hereby
releases, holds harmless and forever discharges the Sellers from any and all
claims, damages, complaints, demands, causes of action, investigations,
hearings, actions, suits or other proceedings of any kind or character
whether known or unknown, hidden or concealed resulting from or arising from
any Environmental Liability with respect to the purchase hereunder of the
Acquired Assets, except for the Environmental Liabilities retained by the
Sellers pursuant to Section 2.4(c). The Buyer hereby waives any and all
rights and benefits that it now has, or in the future may have conferred upon
it with respect to any Environmental Claim it may have as contemplated by the
preceding sentence by virtue of any statute or common law principle which
provides that a general release does not extend to claims which a Party does
not know or suspect to exist in its favor at the time of such release, which
if known, would have materially affected such Party's settlement with the
other Party. In this connection, the Buyer hereby acknowledges that factual
matters now unknown to it with respect to the purchase hereunder of the
Acquired Assets may have given or may hereafter give rise to claims, damages,
complaints, demands, causes of action, investigations, hearings, actions,
suits or other proceedings that are presently unknown, unanticipated and
unsuspected, and it further agrees that this Section 9.8 has been negotiated
and agreed upon in light of that awareness and it nevertheless hereby intends
to release the Sellers as set forth in the first sentence of this Section 9.8.
9.9. No Recourse. To the extent the transfer, conveyance, assignment
and delivery of the Acquired Assets to the Buyer as provided in this
Agreement is accomplished by deeds, assignments, easements, leases, licenses,
bills of sale, or other instruments of transfer and conveyance, whether
executed on the Initial Closing Date or any Subsequent Closing Date, as the
case may be, or thereafter, such instruments are made without representation
or warranty by, or recourse against, the Sellers, except as expressly
provided in this Agreement or in any such instrument.
10. Termination.
10.1. Termination of Agreement. The Buyer and the Lead
Participants, for themselves and on behalf of the other Sellers, may
terminate this Agreement as provided below:
(a) The Buyer and the Lead Participants, for themselves, may
terminate this Agreement by mutual written consent at any time prior to the
Initial Closing Date.
(b) The Buyer and the Lead Participants, on behalf of the
Remaining Sellers, if any, at the written authorization and direction of such
Remaining Sellers, a copy of which shall be furnished to the Buyer, may
terminate this Agreement with respect to those Remaining Sellers who have not
transferred their Ownership Shares at a Subsequent Closing, by mutual written
consent at any time during the period following the Initial Closing and prior
to a Subsequent Closing with respect to such Remaining Sellers.
(c) The Buyer may terminate this Agreement by giving written
notice to the Lead Participants or any other Sellers, as the case may be, at
any time prior to the Initial Closing Date or any Subsequent Closing Date, as
the case may be, if any of the following has occurred:
(i) any Required Seller or Remaining Seller, as the case may
be, has breached any representation, warranty or covenant contained in
this Agreement in any material respect, and the Buyer has notified the
Lead Participants of the breach, and the breach has continued without
cure for a period of sixty (60) days after the notice of breach
provided, however, that the Buyer shall not have the right to terminate
this Agreement pursuant to this clause (i) if such breach can be cured
within a reasonable additional time period, in which case such Seller
shall have, within such sixty (60) day period, commenced and diligently
continued, in good faith, actions to cure such breach within a
reasonable time period, which period shall in no event (A) in the case
of the Required Sellers, exceed twelve (12) months from the Effective
Date, or (B) in the case of the Remaining Sellers, exceed eighteen (18)
months from the Effective Date;
(ii) (A) in the case of the Initial Closing, the Initial
Closing shall not have occurred on or before a date which is eight (8)
months and fifteen (15) days after the Effective Date, which date shall
be extended to a date which is twelve (12) months from the Effective
Date if the Initial Closing shall not have occurred due to failure of
any condition precedent under Section 6.1, unless such condition
precedent cannot reasonably be expected to be satisfied within such
additional period, or (B) in the case of any Subsequent Closing, such
Subsequent Closing shall not have occurred on or before a date which is
nine (9) months from the Effective Date, which date shall be extended to
a date which is no more than eighteen (18) months from the Effective
Date, if such Subsequent Closing shall not have occurred due to failure
of any condition precedent under Section 6.1, unless such condition
precedent cannot reasonably be expected to be satisfied within such
additional period; provided, however, that the Buyer shall not have the
right to terminate this Agreement pursuant to this clause (ii) if such
failure results primarily from the breach by the Buyer of any
representation, warranty or covenant contained in this Agreement;
(iii) any Buyer Regulatory Approvals shall have been
finally denied or shall have been granted subject to terms or conditions
that, in such Buyer's reasonable determination, either singly or in the
aggregate, are reasonably likely to have a Material Adverse Effect or a
material adverse effect on the Buyer or its Affiliates, and all appeals
of such determination shall have been taken and have been unsuccessful;
(iv) one or more courts of competent jurisdiction shall have
issued an order, judgment or decree permanently restraining, enjoining
or otherwise prohibiting the consummation of any of the transactions
contemplated hereby, which order, judgment or decree shall have become
final and non-appealable;
(v) any statute, rule or regulation shall have been enacted
or promulgated by any Governmental Authority which, directly or
indirectly, prohibits the consummation of any of the transactions
contemplated hereby;
(vi) the Buyer elects to terminate the Agreement in accordance
with Section 5.11(d); or
(vii) (A) any Seller has within the then-previous fifteen
(15) days given the Buyer any notice pursuant to Section 5.5(a), (B) the
Buyer has notified the Lead Participants of its intent to terminate
pursuant to this Section 10.1(c)(vii), and (C) the matter that is the
subject of such notice continues to exist for a period of 30 days after
such notice by the Buyer without such Seller having commenced and
diligently continued in good faith actions to cure such matter within a
reasonable time.
(d) The Lead Participants, for themselves and on behalf of the
other Sellers, may terminate this Agreement by giving written notice to the
Buyer at any time prior to the Initial Closing if any of the following has
occurred:
(i) the Buyer has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, and the
Lead Participants have notified the Buyer of the breach, and the breach
has continued without cure for a period of sixty (60) days after the
notice of breach; provided, however, that the Lead Participants shall
not have the right to terminate this Agreement pursuant to this clause
(i) if the Buyer shall have, within such sixty (60)-day period,
commenced and diligently continued in good faith actions to cure such
breach within a reasonable time which period shall in no event exceed
twelve (12) months from the Effective Date;
(ii) the Initial Closing shall not have occurred on or before
a date which is eight (8) months and fifteen (15) days after the
Effective Date, which date shall be extended to a date which is twelve
(12) months from the Effective Date if the Closing shall not have
occurred due to failure of any condition precedent under Section 6.2,
unless such condition precedent cannot reasonably be expected to be
satisfied within such additional period; provided, however, that the
Lead Participants shall not have the right to terminate this Agreement
pursuant to this clause (ii) if such failure results primarily from the
breach by any Seller or Lead Participant of any representation, warranty
or covenant contained in this Agreement;
(iii) any Seller Regulatory Approvals shall have been
finally denied or shall have been granted subject to terms or conditions
that in the Lead Participants' reasonable determination, either singly
or in the aggregate, are reasonably likely to have a Material Adverse
Effect or a material adverse effect on any Seller or its Affiliates, and
all appeals of such determination shall have been taken and have been
unsuccessful;
(iv) one or more courts of competent jurisdiction shall have
issued an order, judgment or decree permanently restraining, enjoining
or otherwise prohibiting the consummation of any of the transactions
contemplated hereby, which order, judgment or decree shall have become
final and non-appealable;
(v) any statute, rule or regulation shall have been enacted
or promulgated by any Governmental Authority which, directly or
indirectly, prohibits the consummation of any of the transactions
contemplated hereby; or
(vi) (A) the Buyer has within the then-previous fifteen (15)
days given the Lead Participants any notice pursuant to Section 5.5(b),
(B) Lead Participants for themselves and on behalf of the other Sellers,
have notified the Buyer of their intent to terminate pursuant to this
Section 10.1(d)(vi), and (C) the matter that is the subject of such
notice continues to exist for a period of thirty (30) days after such
notice by the Lead Participants without the Buyer having commenced and
diligently continued in good faith actions to cure such matter within a
reasonable time; or
(e) the Lead Participants on behalf of the Remaining Sellers, if
any, at the written authorization and direction of such Remaining Sellers, a
copy of which shall be furnished to the Buyer, may terminate this Agreement
by giving written notice to the Buyer at any time following the Initial
Closing and prior to any Subsequent Closing if any of the following has
occurred:
(i) The Buyer has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, and the
Lead Participants have notified the Buyer of the breach, and the breach
has continued without cure for a period of sixty (60) days after the
notice of breach; provided, however, that the Lead Participants shall
not have the right to terminate this Agreement pursuant to this clause
(i) if the Buyer shall have, within such sixty (60)-day period,
commenced and diligently continued in good faith actions to cure such
breach within a reasonable time which period shall in no event exceed
twelve (12) months from the Effective Date;
(ii) Such Subsequent Closing shall not have occurred on or
before a date which is nine (9) months from the Effective Date, which
date shall be extended to a date which is eighteen (18) months from the
Effective Date if such Subsequent Closing shall not have occurred due to
failure of any condition precedent under Section 6.2, unless such
condition precedent cannot reasonably be expected to be satisfied within
such additional period; provided, however, that the Lead Participants
shall not have the right to terminate this Agreement pursuant to this
clause (ii) if such failure results primarily from the breach by any
Remaining Seller of any representation, warranty or covenant contained
in this Agreement;
(iii) any Seller Regulatory Approvals shall have been
finally denied or shall have been granted subject to terms or conditions
that in such Lead Participant's reasonable determination, either singly
or in the aggregate, are reasonably likely to have a material adverse
effect on such Seller, and all appeals of such determination shall have
been taken and have been unsuccessful;
(iv) one or more courts of competent jurisdiction shall have
issued an order, judgment or decree permanently restraining, enjoining
or otherwise prohibiting the consummation of any of the transactions
contemplated hereby, which order, judgment or decree shall have become
final and non-appealable;
(v) any statute, rule or regulation shall have been enacted
or promulgated by any Governmental Authority which, directly or
indirectly, prohibits the consummation of any of the transactions
contemplated hereby; or
(vi) (A) the Buyer has within the then-previous fifteen (15)
days given the Lead Participants any notice pursuant to Section 5.5(b),
(B) the Lead Participants, on behalf of the other Sellers, have notified
the Buyer of their intent to terminate pursuant to this Section
10.1(e)(vi), and (C) the matter that is the subject of such notice
continues to exist for a period of thirty (30) days after such notice by
the Sellers without the Buyer having commenced and diligently continued
in good faith actions to cure such matter within a reasonable time; or
(f) It is expressly understood and agreed that in the event the
Initial Closing has not occurred by the dates set forth in Sections
10.1(c)(ii) and 10.1(d)(ii), without regard to any extensions relating to
Buyer Regulatory Approvals or Seller Regulatory Approvals as set forth
therein, the Parties reserve the right to renegotiate any provisions of this
Agreement which may be materially affected by such passage of time.
10.2. Effect of Termination. If either Party terminates this
Agreement pursuant to Section 10.1, all rights and obligations of the Sellers
whose Closing has not occurred and the Buyer (with respect to such Sellers)
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach and except as provided in
Section 9.1 and Section 7, which Liability, and any corresponding rights and
obligations of the affected Parties shall survive any such termination).
11. Miscellaneous.
11.1. Press Releases and Public Announcements. The Buyer shall not
issue or make, or allow to be issued or made, any press release or make any
public announcement relating to the subject matter of this Agreement without
the prior approval of the Lead Participants; provided, however, that either
Party may make any public disclosure it believes in good faith is required by
applicable Law, or any listing or trading agreement concerning its publicly-
traded securities (in which case the disclosing Party, to the extent
possible, shall provide the other Party with the opportunity to review in
advance the disclosure). No Seller shall issue or make, or allow to be
issued or made, any press release or make any public announcement relating to
the subject matter of this Agreement without the prior approval of the Lead
Participants and the Buyer; provided, however, that the Seller may make any
public disclosure it believes in good faith is required by applicable Law, or
any listing or trading agreement concerning its publicly-traded securities
(in which case the disclosing Party, to the extent possible, shall provide
the other Party with the opportunity to review in advance the disclosure).
11.2. No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Third Party.
11.3. No Joint Venture. Nothing in this Agreement creates or is
intended to create an association, trust, partnership, joint venture or other
entity or similar legal relationship among the Parties, or impose a trust,
partnership or fiduciary duty, obligation, or liability on or with respect to
the Parties. Except as expressly provided herein, none of the Parties is or
shall act as or be the agent or representative of any of the other Parties.
It is expressly agreed and acknowledged that the Lead Participants act as the
agent of the Sellers pursuant to the Authorization Agreements and any and all
actions taken by the Lead Participants, or any agreement or covenant entered
into by the Lead Participants under this Agreement shall be binding upon all
the Sellers and the Buyer may rely upon any such action, agreement or
covenant of the Lead Participants, as the act, agreement or covenant of the
Sellers.
11.4. Entire Agreement. This Agreement, including the Related
Agreements and any other documents incorporated by reference herein,
constitutes the entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof. All conflicts or inconsistencies between the terms hereof and the
terms of any of the Related Agreements, if any, shall be resolved in favor of
this Agreement.
11.5. Succession and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns, but neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any Party, including by operation of law, without the
prior written consent of the other Parties, such consent not to be
unreasonably withheld or delayed, nor is this Agreement intended to confer
upon any other Person except the Parties any rights, interests, benefits,
obligations or remedies hereunder. Any assignment in contravention of the
foregoing sentence shall be null and void and without legal effect on the
rights and obligations of the Parties hereunder. No provision of this
Agreement shall create any third party beneficiary rights in any employee or
former employee of any Seller (including any beneficiary or dependent
thereof) in respect of continued employment or resumed employment, and no
provision of this Agreement shall create any rights in any such Persons in
respect of any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement. Notwithstanding the foregoing, but
subject to all applicable Laws, (i) the Buyer or its permitted assignee may
assign, transfer, pledge or otherwise dispose of (absolutely or as security)
its rights and interests hereunder to a trustee, lending institutions or
other party for the purposes of leasing, financing or refinancing the
Acquired Assets, and (ii) the Buyer or its permitted assignee may assign,
transfer, pledge or otherwise dispose of (absolutely or as security) its
rights and interests hereunder to an Affiliate of the Buyer; provided,
however, except as set forth in the following sentence, in each case that no
such assignment shall relieve or discharge the assigning Party from any of
its obligations hereunder or shall be made if it would reasonably be expected
to prevent or materially impede, interfere with or delay the transactions
contemplated by this Agreement or materially increase the cost of the
transactions contemplated by this Agreement. Notwithstanding the foregoing,
immediately prior to the Initial Closing, Dominion Resources, Inc. may assign
its rights and obligations under this Agreement to an Affiliate thereof
pursuant to an assignment and assumption agreement in form and substance
reasonably satisfactory to the Lead Participants, and upon such assignment
and the delivery of the Acceptable Guaranty for the benefit of the Remaining
Sellers, if any, Dominion Resources, Inc. shall be released of all liability
and obligation hereunder and such assignee shall thereafter be deemed in all
respects the Buyer for all purposes of this Agreement. Each Party agrees, at
the assigning Party's expense, to execute and deliver such documents as may
be reasonably necessary to accomplish any such assignment, transfer, pledge
or other disposition of rights and interests hereunder so long as the
nonassigning Party's rights under this Agreement are not thereby materially
altered, amended, diminished or otherwise impaired. Notwithstanding the
foregoing, in no event shall the rights or obligations acquired hereunder by
the Buyer or the Sellers be conveyed to any Third Party, directly or
indirectly, pursuant to the exercise of a right of first refusal under the
Sharing Agreement.
11.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.7. Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
11.8. Notices. All notices, requests, demands, consents,
authorizations, claims, and other communications hereunder must be in
writing. Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given (a) upon confirmation of facsimile, (b)
one (1) Business Day following the date sent when sent by overnight delivery
and (c) five (5) Business Days following the date mailed when mailed by
registered or certified mail return receipt requested and postage prepaid at
the following address:
If to the Sellers:
The Connecticut Light and Power Company
107 Selden Street
Berlin, Connecticut 06037
Attn: Vice President - Administration
Copy to:
The Connecticut Light and Power Company
107 Selden Street
Berlin, Connecticut 06037
Attn: Vice President, Secretary and General Counsel
If to the Buyer:
Dominion Resources, Inc.
120 Tredegar Street
Richmond, VA 23219
Attn: James K. Martin
Vice President, Business Development
Copy to:
Dominion Resources, Inc.
120 Tredegar Street
Richmond, VA 23219
Attn: Christine Schwab
Managing Counsel
McGuireWoods, LLP
901 East Cary Street
Richmond, VA 23219
Attn: Michael J. Schewel
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
11.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Connecticut
without giving effect to any choice or conflict of law provision or rule
(whether of Connecticut or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than Connecticut.
11.10. Change in Law. If and to the extent that, during the Interim
Period, any laws or regulations that govern any aspect of this Agreement
shall change, so as to make any aspect of this transaction unlawful, then the
Parties agree to make such modifications to this Agreement as may be
reasonably necessary for this Agreement to accommodate any such legal or
regulatory changes, without materially changing the overall benefits or
consideration expected hereunder by either party.
11.11. Consent to Jurisdiction and Venue. Subject to and without
limiting the dispute resolution procedure set forth in Section 12, each of
the Sellers and the Buyer consent to the exclusive jurisdiction and venue of
any state or federal court within the City of Hartford, Connecticut for
adjudication of any suit, claim, action or other proceeding at law or in
equity relating to this Agreement, or to any transaction contemplated hereby.
Each of the Sellers and the Buyer accepts, generally and unconditionally, the
exclusive jurisdiction and venue of the aforesaid courts and waive any
objection as to venue, and any defense of forum non conveniens.
11.12. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
11.13. Severability. Any term or provision of this Agreement that is
held invalid or unenforceable in any situation shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation; provided, however, that the remaining terms and provisions of this
Agreement may be enforced only to the extent that such enforcement in the
absence of any invalid terms and provisions would not result in (a)
deprivation of a Party of a material aspect of its original bargain upon
execution of this Agreement or any Related Agreement, (b) unjust enrichment
of a Party, or (c) any other manifestly unfair or inequitable result.
11.14. Expenses. Except as otherwise expressly provided herein, each
of the Sellers and the Buyer will each bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
11.15. Construction. Ambiguities or uncertainties in the wording of
this Agreement will not be construed for or against any Party. The Parties
acknowledge that they have been represented by counsel in connection with the
review and execution of this Agreement, and, accordingly, there shall be no
presumption that this Agreement or any provision hereof be construed against
the Party that drafted this Agreement or any portion hereof.
11.16. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
11.17. Specific Performance. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter in addition to any other
remedy to which it may be entitled, at law or in equity.
11.18. Dispute Negotiation. Prior to instituting any arbitration or
other dispute resolution as provided herein, the Parties will attempt in good
faith to resolve any dispute or claim by referring any such matter within ten
(10) days of written notice of any such dispute or claim, to their respective
chief executive officers for resolution. The chief executive officers of the
relevant Parties shall attempt to resolve the dispute or claim within thirty
(30) days.
11.19. Good Faith Covenant. The Parties agree that their actions and
dealings with each other shall be subject to an express covenant of good
faith and fair dealing.
11.20. Set-Off. Notwithstanding any provisions hereof to the
contrary, in the event a Party shall be delinquent in the payment of any sum
due any other Parties under any note, this Agreement or any Related
Agreement, in addition to and without waiving any other remedies hereunder,
the Party to whom the obligation is owed shall be entitled to set off any
sums due from the delinquent Party under this Agreement or any Related
Agreement, or any other obligations of the delinquent Party, in full or
partial satisfaction of such sum due from the delinquent Party.
11.21. Bulk Transfer Act. The Parties hereby waive compliance with
the bulk sales act or comparable statutory provisions of each applicable
jurisdiction.
11.22. Release and Settlement Agreements. The Buyer acknowledges
receipt of copies of the Release and Settlement Agreements and the terms
thereof regarding certain agreements among the Sellers with respect to the
transactions contemplated by this Agreement and the other Related Agreements.
12. Dispute Resolution and Arbitration.
12.1. Dispute Resolution. Any dispute arising out of this Agreement
or any of the Related Agreements, or the consummation of the transactions
contemplated hereby or thereby involving a monetary claim of less than
$50,000, or at the election of the Lead Participants and the Buyer, except as
otherwise provided herein or therein, shall be submitted to binding dispute
resolution in the following manner. Within ten (10) days following receipt
of a written request by one Party to the other, the Lead Participants and the
Buyer will each select one representative with the particular knowledge and
expertise relevant to the technical, financial or other matter in dispute
(the "Dispute Representative") to serve on a dispute resolution panel (the
"Panel"). Each Party will notify the other in writing of its Dispute
Representative within such ten (10) day period. Within ten (10) days
following the selection of the Dispute Representatives, the Dispute
Representatives shall mutually agree upon the selection of a third member of
the Panel who shall also possess the particular knowledge and expertise
relevant to the subject matter of the dispute. If the Dispute
Representatives cannot agree on the selection of a third member of the Panel
within ten (10) days after their selection, they will obtain a list of
qualified individuals from a mutually agreeable professional association or
society and each shall have the option of removing names from such list until
an acceptable individual is selected as the third member of the Panel. If
necessary, this process will be repeated until an acceptable individual is
selected as the third member of the Panel. Within fifteen (15) days after
the selection of the third member of the Panel, the Buyer and the Lead
Participants will agree upon a process which is appropriate for the
resolution of the dispute, including the presentation of live testimony or
documentary evidence, as they deem appropriate, and shall further agree upon
such other procedures, such as the presentation of summation papers or
closing argument, as they deem appropriate. The Panel will render a binding
decision no later than thirty (30) days following the selection of the third
member of such Panel, unless the Parties agree upon an extension of such
thirty (30)-day period. The decision of the Panel shall be final and binding
on all Parties. All dispute resolution proceedings shall be held in
Hartford, Connecticut. All documents, information and other evidence
produced for or in connection with such proceeding shall be held in
confidence by the Parties. Each Party shall bear the compensation and
expenses of its chosen Dispute Representative, and the expenses of the third
member of the Panel shall be borne equally by the Buyer, on the one hand, and
the Sellers, on the other hand. Each Party shall bear the compensation and
expenses of its legal counsel, witnesses and employees.
12.2. Arbitration. Any dispute arising out of this Agreement or any
Related Agreements, or the consummation of the transactions contemplated
hereby or thereby that is not subject to Section 12.1 or resolved under
Section 11.8 or Section 12.1 or otherwise, shall be settled by arbitration
administered by American Arbitration Association under the Commercial
Arbitration Rules (the "Commercial Arbitration Rules"). The arbitration
tribunal shall be composed of three arbitrators (one arbitrator selected by
each Party with the third selected by the other two arbitrators). The
arbitration proceedings shall be held in Hartford, Connecticut. The
decision, judgment and order of the arbitration tribunal shall be final,
binding and conclusive as to the Parties involved in such dispute, and their
respective Affiliates, and may be entered in any court having jurisdiction
thereof. All documents, information and other evidence produced for or in
connection with such arbitration proceedings shall be held in confidence by
the Parties. Other than the fees and expenses of the arbitrators, which
shall be shared equally by the Parties, each Party shall bear the
compensation and expenses of its own legal counsel, witnesses and employees.
13. Definitions.
"Acceptable Credit Support" means an Acceptable Guaranty.
"Acceptable Guarantor" means any Person with a rating of its long-term
unsecured debt obligations of not less than both BBB- by S&P and Baa3 by
Moody's.
"Acceptable Guaranty" means a guaranty issued by an Acceptable
Guarantor, guaranteeing to the Remaining Sellers the obligations of the Buyer
after the Initial Closing (a) to pay the unpaid portion of the Facilities
Purchase Price and the Fuel Purchase Price and (b) to perform the Buyer's
obligations under the Sharing Agreement, substantially in the form of Exhibit
H attached hereto.
"Acquired Assets" has the meaning set forth in Section 2.1.
"Acquired Assets Employee Records" means all personnel records
maintained by Sellers, wherever located and whether existing in hard copy or
electronic format relating to the Acquired Assets Employees, including, but
not limited to (a) names, addresses, dates of birth, job titles and
descriptions; (b) starting dates of employment; (c) salary and benefits
information; (d) resumes, job applications and biographies; (e) Occupational
Safety and Health Administration reports (or the equivalent); (f) active
medical restriction forms; (g) fitness for duty and disciplinary action
information; (h) skill and development training; (i) seniority histories; (j)
access authorization information and (k) any other documents relating to
Acquired Assets Employees.
"Acquired Assets Employees" has the meaning set forth in Section 5.7(b).
"ACS Trigger Event" means at any time, the rating of the long-term
senior secured obligations of the Lead Participants shall be less than either
BBB- by S&P or Baa3 by Moody's.
"Act of Bankruptcy" means the filing of a petition in bankruptcy (or
other commencement of a bankruptcy or similar proceeding) by or against the
Buyer under the Bankruptcy Code or other applicable bankruptcy, insolvency or
similar law, whether federal or state, as now or hereafter in effect.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Agreement" has the meaning set forth in the preamble to this
Agreement, together with the Schedules and Exhibits hereto, as the same may
be amended from time to time.
"ANI" means American Nuclear Insurers.
"Announcement Date" means August 7, 2000.
"Application" means all necessary or appropriate actions to request NRC
approval in respect of a Transfer of License for a Facility, including a
change in the operator of such Facility.
"Asset Demarcation Agreement" means the Asset Demarcation Agreement
between the Buyer and the Lead Participants, for themselves and on behalf of
the other Sellers, in substantially the form attached hereto as Exhibit C.
"Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement between the Buyer and the relevant party thereto, in
substantially the form attached hereto as Exhibit D.
"Associate Participants" has the meaning set forth in the Sharing
Agreement.
"Assumed Liabilities" has the meaning set forth in Section 2.3.
"Atomic Energy Act" means the Atomic Energy Act of 1954, as amended, 42
U.S.C. Section 2011 et seq., or any successor statute.
"Authorization Agreements" means those agreements between CL&P and
another Seller, in which such other Seller has appointed CL&P as its agent
for the purposes of the transactions contemplated by this Agreement and the
Related Agreements.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor statute.
"Bill of Sale" means the Bill of Sale, in substantially the form of
Exhibit B attached hereto.
"Bond Counsel" has the meaning set forth in Section 5.8(d)(ii).
"Business Day" means any day other than a Saturday, Sunday or day on
which banks are legally closed for business in New York, New York.
"Business Plan" means the program of NNECO referred to as "Focus 2000".
"Buyer" has the meaning set forth in the preamble above, and includes
any Person who becomes the Buyer pursuant to Section 11.5.
"Buyer Indemnified Parties" has the meaning set forth in Section 9.3.
"Buyer Regulatory Approvals" means those approvals identified on
Schedule 6.1(c) attached hereto to be obtained by the Buyer as a condition to
the Buyer's obligations under this Agreement.
"Buyer's Decommissioning Fund" has the meaning set forth in Section
5.10.
"Buyer's Nonqualified Decommissioning Fund" has the meaning set forth in
Section 5.10(a).
"Buyer's Plan" has the meaning set forth in Section 5.7(c).
"Buyer's Qualified Decommissioning Fund" has the meaning set forth in
Section 5.10(a).
"Buyer's Representative" has the meaning set forth in Section 5.4.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP.
"C.G.S." means Connecticut General Statutes.
"CL&P" has the meaning set forth in the preamble of this Agreement.
"Closing" has the meaning set forth in Section 2.10.
"Closing Date" has the meaning set forth in Section 2.10.
"Closing Party" and "Closing Parties" have the meanings as set forth in
Section 9.2.
"CMLP" has the meaning set forth in the preamble to this Agreement.
"CMP" has the meaning set forth in the preamble to this Agreement.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended and the applicable regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Cold and Dark" means that Millstone Unit 1 has been placed in a SAFSTOR
condition (as defined in Article 1.14 of the Entergy Contract) and includes
completion of the following activities: (i) all Millstone Unit 1 systems,
other than those required to support the spent fuel pool cooling or, as
appropriate, continuing decommissioning activities including SAFSTOR, shall
be deenergized, drained of fluids, and placed in a secure and stable
configuration; (ii) all loose waste, debris and hazardous or flammable
materials for Millstone Unit 1 have been removed, (iii) all plant separation
projects for Millstone Unit 1 have been completed, and (iv) Millstone Unit 1
has been placed in a safe and secure storage condition.
"Cold and Dark Adjustment" has the meaning set forth in Section 5.10(d).
"Collective Bargaining Agreements" has the meaning set forth in Section
3.2(h).
"Commercial Arbitration Rules" has the meaning set forth in Section
12.2.
"Commercially Reasonable Efforts" means efforts which are designed to
enable a Party, directly or indirectly, to satisfy its obligations hereunder
or otherwise assist in the consummation of the transactions contemplated by
this Agreement and which do not require the performing Party to expend any
funds or assume liabilities other than expenditures and liabilities which are
customary and reasonable in nature and amount in transactions of the kind and
nature contemplated by this Agreement.
"Contested Proceeding" when used in connection with a Transfer of
License, means a proceeding commenced by the issuance of a "notice of
hearing" under 10 C.F.R. Section 2.104 or Section 2.105 Subsection (e)(2), as
the case may be.
"Coordination Date" has the meaning set forth in Section 6.3(a).
"Decommissioning" means the complete retirement and removal of the
Facilities from service and the restoration of the Site of such Facility, as
well as any planning and administrative activities incidental thereto,
including but not limited to (a) the dismantlement, decontamination and/or
safe storage of the Facilities, in whole or in part, and any reduction or
removal, whether before or after termination of the applicable NRC License,
of radioactivity at the Site, and (b) all activities, necessary for the
retirement, dismantlement, and decontamination of the Facilities to comply
with all applicable requirements of the Atomic Energy Act, the NRC's rules,
regulations, orders and pronouncements thereunder, the NRC Licenses, any
related decommissioning plan, Environmental Laws and other applicable Laws.
"Decommissioning Funds" means the Qualified Decommissioning Funds and
the Nonqualified Decommissioning Funds.
"Decommissioning Trust Agreements" means for each Facility, the Trust
Agreement dated December 1, 1999 among CL&P and WMECO, and Mellon Bank, N.A.,
as Trustee.
"Decommissioning Trust Closing Amount" means the amount determined
pursuant to Section 5.10(b).
"Decommissioning Trusts" means the irrevocable trusts created pursuant
to the Decommissioning Trust Agreement, consisting of assets held in
Qualified Decommissioning Funds and Nonqualified Decommissioning Funds.
"Deed" means the Deed for the Real Property and Improvements
substantially in the form of Exhibit A attached hereto.
"DEP" has the meaning set forth in Section 5.12.
"Disclosing Party" has the meaning set forth in the definition of
"Proprietary Information".
"Dispute Representative" has the meaning set forth in Section 12.1.
"Disqualification Event" means any amendment to the Decommissioning
Trust Agreements which, assuming that the Qualified Decommissioning Funds
were not disqualified at the Closing Date, would disqualify such Qualified
Decommissioning Funds under (a) Section 468A of the Code and the Regulations
promulgated thereunder as in effect on the Closing Date; (b) any final,
temporary or proposed regulations published by the Department of Treasury; or
(c) any other written guidance published by the IRS.
"Divestiture Site Manager" means the project manager for the Millstone
divestiture.
"DOE" means the U.S. Department of Energy or any successor thereto.
"DOE Acceptable Credit Support" means (a) a DOE Acceptable Letter of
Credit or (b) a DOE Acceptable Guaranty.
"DOE Acceptable Guarantor" means a Person with a rating of its long-term
unsecured debt obligations of not less than both BBB-by S&P and Baa3 by
Moody's.
"DOE Acceptable Guaranty" means a guaranty issued by a DOE Acceptable
Guarantor, substantially in the form of Exhibit M attached hereto.
"DOE Acceptable Letter of Credit" means an irrevocable, unconditional
standby letter of credit issued by an Eligible Financial Institution for the
benefit of the Buyer having a drawing amount which shall be at least equal to
the Estimated DOE Payment Amount that is payable or negotiable at an office
of the Issuing Bank (or a corresponding bank thereof) in New York City,
Connecticut or such other place as shall be acceptable to the Buyer.
"DOE Contract Amount" has the meaning set forth in Section 5.18.
"DOE Payment Amount" has the meaning set forth in Section 5.18.
"DOE Payment Date" has the meaning set forth in Section 5.18.
"DOE Standard Contracts" means the Contracts for Disposal of Spent
Nuclear Fuel and/or High Level Radioactive Waste, Nos. DE-CR-01-
83NE44399.000, DE-CR-01-83NE44467.000 and DE-CR-01-83NE44468.000, dated as of
June 30, 1983, between the United States of America, represented by the
United States Department of Energy, and the Seller or its Affiliate.
"Dollars" or "$" means lawful currency of the United States of America.
"DPUC" means the Connecticut Department of Public Utility Control.
"DTC Guarantee" has the meaning set forth in Section 5.10(d)(ii).
"Effective Date" means the date on which this Agreement has been duly
executed and validly delivered by the Parties.
"Eligible Acquired Assets Employees" means an Acquired Assets Employee
whose age is between 50 and 54 as of the Announcement Date, and whose age
plus years of credited service as determined under the Plan as of such
Announcement Date equals or exceeds 65.
"Eligible Financial Institution" means a banking or other financial
institution, the long term senior unsecured debt obligations of which is
rated at least AA by S&P or Aa2 by Moody's.
"Emergency Preparedness Agreements" has the meaning set forth in Section
2.1(m).
"Emergency Preparedness Assets" has the meaning set forth in Section
2.1(m).
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan, (d) Employee
Welfare Benefit Plan or material fringe benefit plan, program or arrangement
or (e) profit sharing, bonus, stock option, stock purchase, equity, stock
appreciation, deferred compensation, incentive, severance plan or other
benefit plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3 Subsection (2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3 Subsection (1).
"Entergy Contract" means the Decommissioning Management Agreement, dated
as of May 14, 1999, between NNECO and Entergy Nuclear, Inc., as amended by
memorandum dated November 18, 1999 and by letters dated December 2, 1999 and
December 15, 1999.
"Environment" means soil, land surface or subsurface strata, real
property, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwater, water body sediments,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life (including fish and all other aquatic life) and any
other environmental medium or natural resource.
"Environmental Claim" means a claim by any Person based upon a breach of
Environmental Law or an Environmental Liability alleging loss of life, injury
to persons, property or business, damage to natural resources or trespass to
property.
"Environmental Laws" means all applicable Laws and any binding
administrative or judicial interpretations thereof relating to: (a) the
regulation, protection and use of the Environment; (b) the conservation,
management, development, control and/or use of land (including zoning laws
and ordinances), natural resources and wildlife; (c) the management,
manufacture, possession, presence, use, generation, transportation,
treatment, storage, disposal, release, threatened release, abatement,
removal, remediation, or handling of, or exposure to, any Hazardous
Substances; or (d) noise; and includes, without limitation, the following
federal statutes (and their implementing regulations): the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended;
the Solid Waste Disposal Act, as amended, 42 U.S.C. Section 6901 et seq.; the
Federal Water Pollution Control Act of 1972, as amended, 33 U.S.C. Section
1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C.
Section 2601 et seq.; the Clean Air Act of 1966, as amended, 42 U.S.C. Section
7401 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, as
amended, 7 U.S.C. Section 136 et seq.; the Coastal Zone Management Act of 1972,
as amended, 16 U.S.C. Section 1451 et seq.; the Oil Pollution Act of 1990, as
amended, 33 U.S.C. Section 2701 et seq.; the Rivers and Harbors Act of 1899, as
amended, 33 U.S.C. Section 401 et seq.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. Section 1801 et seq.; the Endangered Species Act of
1973, as amended, 16 U.S.C. Section 1531 et seq.; the Safe Drinking Water Act
of 1974, as amended, 42 U.S.C. Section 300(f) et seq.; and all analogous or
comparable state statutes and regulations, including, without limitation, the
Connecticut Transfer Act, as amended, C.G.S. Section 22a-134 et seq.; and the
Connecticut Remediation Standard Regulations, R.C.S.A. Section 22a-133k-1 et
seq.
"Environmental Liabilities" means any Liability under or related to
former or current 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 Laws, prior to, on or after any Closing
Date, with respect to the ownership, operation or use of the Acquired Assets;
(b) loss of life, injury to persons, property or business or damage to
natural resources (whether or not such loss, injury or damage arose or was
made manifest before any Closing Date or arises or becomes manifest after any
Closing Date), caused (or allegedly caused) by the presence or Release of
Hazardous Substances at, on, in, under, above, adjacent to or migrating from
the Acquired Assets prior to, on or after any Closing Date, including, but
not limited to, Hazardous Substances contained in building materials at the
Acquired Assets or in the atmosphere, soil, surface water, sediments,
groundwater, landfill cells, or in other environmental media at or adjacent
to the Acquired Assets; (c) the investigation and/or Remediation (whether or
not such investigation or Remediation commenced before any Closing Date or
commences after any Closing Date) of Hazardous Substances that are present or
have been Released prior to, on or after any Closing Date at, on, in, under,
above, adjacent to or migrating from the Acquired Assets, including, but not
limited to, Hazardous Substances contained in building materials at the
Acquired Assets or in the atmosphere, soil, surface water, sediments,
groundwater, landfill cells, or in other environmental media at or adjacent
to the Acquired Assets; (d) subject to the provisions of Section 5.15,
compliance with applicable Environmental Laws prior to, on or after any
Closing Date with respect to the ownership or operation or use of the
Acquired Assets; (e) loss of life, injury to persons, property or business or
damage to natural resources caused (or allegedly caused) by the offsite
disposal, storage, transportation, discharge, Release or recycling, or the
arrangement for such activities, of Hazardous Substances, prior to, on or
after any Closing Date, in connection with the ownership or operation of the
Acquired 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, prior to, on or after the
Closing Date, in connection with the ownership or operation of the Acquired
Assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Adjustment" has the meaning set forth in Section 2.6(c)(i).
"Estimated Closing Statement" has the meaning set forth in Section
2.6(c)(i).
"Estimated DOE Payment Amount" means, with respect to a DOE Letter of
Credit, the estimated amount determined pursuant to the DOE Standard
Contract, that would be payable for the one time fee obligation to the DOE
assuming that such payment is due on the date six months after the issuance
of such DOE Acceptable Letter of Credit, or such lesser amount as shall be
agreed upon by the Buyer and the Lead Participants.
"Estimated Facilities Purchase Price Adjustment" has the meaning set
forth in Section 2.6(c)(i).
"Estimated Fuel Purchase Price Adjustment" has the meaning as set forth
in Section 2.6(c)(i).
"Estoppel Certificate" means the Estoppel Certificate executed by the
parties to the Leases and Material Contracts, which Leases and Material
Contracts having a remaining unperformed value greater than $50,000 (other
than the Sellers), substantially in the form of Exhibit K attached hereto.
"Event of Loss" has the meaning set forth in Section 5.11.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Liabilities" has the meaning set forth in Section 2.4.
"Exhibits" means the exhibits to this Agreement.
"Facilities Purchase Price" has the meaning set forth in Section 2.5(a).
"Facilities Purchase Price Adjustment" has the meaning set forth in
Section 2.6(c)(ii).
"Facility" means any of Millstone Units 1, 2 or 3 and "Facilities" means
any two or more of Millstone Units 1, 2 and 3.
"FERC" means the Federal Energy Regulatory Commission, or its regulatory
successor, as applicable.
"Final Safety Analysis Report" or "FSAR" means the report, as updated,
that is required for the Facilities in accordance with the requirements of 10
C.F.R. Section 50.71(e).
"FIRPTA Affidavit" means the affidavit to be delivered by each Seller at
the Closing at which it is transferring its Ownership Shares in substantially
the form of Exhibit G attached hereto.
"Fitchburg" has the meaning set forth in the preamble to this Agreement.
"Fuel Purchase Price" has the meaning set forth in Section 2.5(a).
"Fuel Purchase Price Adjustment" has the meaning set forth in Section
2.6(c)(ii).
"Fuel Trust" means the Niantic Bay Fuel Trust financing arrangements
entered into by CL&P and WMECO.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Good Utility Practices" means any of the practices, methods and acts
engaged in or approved by a significant portion of the electric utility
industry during the relevant time period, or any of the practices, methods or
acts which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected to
accomplish the desired result at a reasonable cost consistent with good
business practices, reliability, safety and expedition. Good Utility
Practices are not intended to be limited to the optimum practice, method or
act to the exclusion of all others, but rather to be acceptable practices,
methods or acts generally accepted in the region.
"Governmental Authority" means any federal, state, local or other
governmental, regulatory or administrative agency, commission, department,
board, or other governmental subdivision, court, tribunal, arbitral body or
other governmental authority.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hazardous Material" or "Hazardous Materials" means oil and hazardous
materials or wastes, air emissions, hazardous or toxic substances, wastewater
discharges and any chemical, material or substance or other emissions that
may give rise to Liability under, or is listed or regulated under, applicable
Environmental Laws as a "hazardous" or "toxic" substance or waste, or as a
"contaminant," or is otherwise listed or regulated under applicable Laws
because it poses a hazard to human health or the environment.
"Hazardous Substance" means any Hazardous Material or Radioactive
Material, including any substance that may be both a Hazardous Material and a
Radioactive Material.
"High Level Waste" means (a) Spent Nuclear Fuel and other radioactive
material that constitutes greater than Class C material, (b) liquid wastes
resulting from the operation of the first cycle solvent extraction system, or
its equivalent, and the concentrated wastes from subsequent extraction
cycles, or their equivalent, in a facility for reprocessing irradiated
reactor fuel, or (c) solids into which such liquid wastes have been
converted.
"Improvements" means all buildings, structures (including all fuel
handling and storage facilities), machinery and equipment, fixtures,
construction in progress, including all piping, cables and similar equipment
forming part of the mechanical, electrical, plumbing or HVAC infrastructure
of any building, structure or equipment, located on and affixed to the Sites,
or used in or for the operation of the Facilities.
"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.
"Indemnified Party" has the meaning set forth in Section 9.6(a).
"Indemnifying Party" has the meaning set forth in Section 9.6(a).
"Independent Accounting Firm" means an independent accounting firm of
national standing as is mutually appointed by the Buyer and the Sellers.
"Independent Appraiser" has the meaning set forth in Section 2.8.
"Initial Closing" has the meaning set forth in Section 6.3.
"Initial Closing Date" has the meaning set forth in Section 2.10.
"INPO" means Institute of Nuclear Power Operations.
"Intellectual Property" means all trade secrets, copyrights, copyright
applications, patents, patent applications, patent rights, trademarks,
trademark applications, trade names, service marks, service mark
applications, computer programs and other computer software, inventions,
designs, samples, specifications, schematics, know-how, proprietary
processes, domain names, websites, source and object code and other
intellectual property rights.
"Interconnection Agreement" means the Interconnection Agreement between
the Buyer and CL&P substantially in the form of Exhibit E attached hereto.
"Interim Period" means that period of time commencing on the Effective
Date and ending on the Initial Closing Date.
"Interim Services Agreement" means the Interim Services Agreement
between the Buyer and the Lead Participants or their Affiliates,
substantially in the form of Exhibit L attached hereto.
"Inventory" or "Inventories" means all materials and supplies
(designated as "Materials and Supplies" in books and records of the Sellers)
including fuel inventories (excluding Nuclear Fuel or Spent Nuclear Fuel),
materials, spare parts, consumable supplies and chemical and gas inventories
located at the Sites, in transit to the Sites or identified in any Schedule
to the extent owned and paid for by the Sellers for use at the Sites prior to
Closing.
"IRS" means the Internal Revenue Service or any successor agency.
"IRS Ruling Amount" has the meaning set forth in Section 3.2(v).
"ISO-NE" means ISO New England Inc., or its successor.
"Issuing Bank" means, as of a Closing Date and at anytime thereafter,
any Eligible Financial Institution that issues a DOE Acceptable Letter of
Credit.
"Knowledge" means the actual, current knowledge of a Party's board of
directors, board of trustees, plant managers, and directors, any of its
statutory or non-statutory officers charged with responsibility for the
function, or any person who reports directly to such board, trustees, plant
managers, directors or officers, at the relevant time or, with respect to any
certificate delivered pursuant to this Agreement, on the date of delivery of
the certificate.
"Laws" means all laws, rules, regulations, codes, injunctions,
judgments, orders, decrees, rulings, interpretations, constitution,
ordinance, common law, or treaty, of any Governmental Authority.
"Lead Participant Rights Agreement" means the Lead Participant Rights
Agreement between the Buyer and the Lead Participants, in substantially the
form of Exhibit J attached hereto.
"Lead Participants" has the meaning set forth in the third clause of the
preamble to this Agreement. Solely for the purposes of this Agreement, "Lead
Participants" shall mean CL&P and WMECO regardless of whether either CL&P or
WMECO has transferred its status under the Sharing Agreement to the other or
to the Buyer.
"Leases" has the meaning set forth in Section 2.1(d).
"Liability" or "Liabilities" means any liability or obligation (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
whether incurred, consequential or punitive and whether due or to become
due), including any liability for Taxes. Without limiting the generality of
the foregoing, in the case of the NRC Licenses "Liabilities" shall include
NRC Commitments.
"Licensed Intellectual Property" means the Intellectual Property that
Sellers have licensed from third parties as set forth on Schedule 2.1(w).
"Lien" means any mortgage, pledge, lien, security interest, charge,
claim, equitable interest, infringement of a third party patent, copyright,
trade secret or other intellectual property right, encumbrance, restriction
on transfer, conditional sale or other title retention device or arrangement
(including, without limitation, a capital lease), transfer for the purpose of
subjection to the payment of any indebtedness, or restriction on the creation
of any of the foregoing, whether relating to any property or right or the
income or profits therefrom; provided, however, that the term "Lien" shall
not include any Permitted Encumbrances.
"Losses" has the meaning set forth in Section 9.3.
"Low Level Waste" means waste material which contains radioactive
nuclides emitting either or both primarily beta or gamma radiation, in
concentrations or quantities which exceed applicable federal or state
standards for unrestricted release; provided that Low Level Waste shall not
include any waste containing more than ten (10) nanocuries of transuranic
contaminants per gram of material, Spent Nuclear Fuel, or material classified
as either High Level Waste or waste which is unsuited for disposal by near-
surface burial under any applicable federal regulations.
"Lyndonville" has the meaning set forth in the preamble to this
Agreement.
"Major Loss" has the meaning set forth in Section 5.11(b).
"Material Adverse Effect" means any loss, claim, or occurrence related
to the Acquired Assets (i) which would reasonably be expected to require the
expenditure within five years following the Effective Date or the Closing
Date of singly in excess of $1,000,000, or in excess of $5,000,000 in the
aggregate or (ii) which would reasonably be expected to result in a
cumulative loss of the generating capacity of the Facilities of 330,000 MwH
or more over an eighteen (18) month period, other than normal and routine
operating events and evolutions; provided, however, that Material Adverse
Effect shall not include any change (or changes taken together) generally
affecting the international, national, regional or local wholesale or retail
electric industry as a whole or nuclear generating facilities or their
operators as a whole which does not affect the Acquired Assets or the Parties
in any manner or degree significantly different than the industry as a whole,
including (a) changes in markets for electric power or fuel used in
connection with the Acquired Assets or (b) changes (individually or taken
together) in the North American, national, regional or local electric
transmission systems or operations thereof; provided, further, that any loss,
claim, occurrence, change or effect that is cured prior to the Closing Date
at the Sellers' expense shall not be considered a Material Adverse Effect.
"Material Contracts" has the meaning set forth in Section 2.1(f).
"Millstone" has the meaning set forth in the preamble to this Agreement.
"Minimum Employment Period" has the meaning set forth in Section 5.7(b).
"Moody's" means Moody's Investors Service, Inc. or any successor or
organization thereto.
"Mortgage Indenture" means the First Mortgage Indenture and Deed of
Trust dated May 1, 1921 between CL&P and the trustee named therein, as
amended and supplemented to the date hereof and any other similar instrument
or agreement entered into by any Seller.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"NEI" means Nuclear Energy Institute.
"NEIL" means Nuclear Electric Insurance Limited.
"NEP" has the meaning set forth in the preamble to this Agreement.
"NEPOOL" means the New England Power Pool, established by the NEPOOL
Agreement, or its successor.
"NEPOOL Agreement" means the New England Power Pool Agreement, dated
September 1, 1971, as amended by the Restated New England Power Pool
Agreement filed with FERC on June 22, 1998, as finally approved by FERC and
as further amended from time to time.
"Net Cash Value" means, as applied to the assets of the Decommissioning
Funds, the Qualified Decommissioning Fund or the Nonqualified Decommissioning
Fund, the liquidated, after-tax value of the underlying assets in the hands
of the Buyer.
"NNECO" has the meaning set forth in the preamble to this Agreement.
"Non-Assigned Contract" has the meaning set forth in Section 2.2(k).
"Nonqualified Decommissioning Funding Amount" means the Net Cash Values
shown for each Seller for each Unit in the column titled "Non-qualified" on
Schedule 5.10(b).
"Nonqualified Decommissioning Funds" means the external trust funds that
do not meet the requirements of Code Section 468A or Treas. Reg. Section
1.468A-5, maintained by the Sellers with respect to the Facilities prior
to the Closing pursuant to such Seller's Decommissioning Trust Agreement.
"NRC" means the United States Nuclear Regulatory Commission, as
established by Section 201 of the Energy Reorganization Act of 1974, as
amended, 42 U.S.C. Section 5841, or any successor commission, agency or
officer.
"NRC Commitments" means all written commitments made by the Lead
Participants or NNECO, as documented in their NRC commitment tracking system,
to the NRC.
"NRC Licenses" means any and all licenses, Permits, approvals or other
official acts by the NRC on the basis of which the Sellers are authorized to
own, possess and operate the Facilities and Nuclear Materials prior to the
Closing Date, including but not limited to Facility Operating License Nos.
DPR-21, DPR-65 and NPF-49, and on the basis of which the Buyer is authorized
to own, possess and operate the Facilities and Nuclear Materials after the
Closing Date.
"NRC Staff" means the regulatory staff of the NRC.
"Nuclear Fuel" means all fuel assemblies in the Facility reactors on a
Closing Date and any irradiated fuel assemblies that have been temporarily
removed from the Facility reactors as of a Closing Date and all unirradiated
fuel assemblies awaiting insertion into the Facility reactors, as well as all
fuel constituents in any stage of the fuel cycle which are in the process of
fabrication for use in a Facility, which are owned by the Sellers on a
Closing Date or which have been or will be purchased by the Sellers pursuant
to the Material Contracts listed in Schedule 2.1(f).
"Nuclear Fuel Contracts" means contracts between the Lead Participants
or any Affiliate and a Third Party providing for the purchase and sale of
Nuclear Fuel for one or more of the Facilities.
"Nuclear Insurance Policies" means all insurance policies carried by or
for the benefit of the Sellers with respect to the ownership, operation or
maintenance of the Facilities, including all liability, property damage and
business interruption policies in respect thereof. Without limiting the
generality of the foregoing, the term "Nuclear Insurance Policies" includes
all policies issued or administered by ANI or NEIL.
"Nuclear Laws" mean all Federal, state, local, provincial, foreign and
international civil and criminal laws, regulations, rules, ordinances, codes,
decrees, judgments, directives, or judicial or administrative orders relating
to the regulation of nuclear power plants, source material, byproduct
material and special nuclear materials (as defined in the Atomic Energy Act);
the regulation of Low Level Waste and High Level Waste; the transportation
and storage of Nuclear Materials; the regulation of safeguards information;
the regulation of nuclear fuel; the enrichment of uranium; the disposal and
storage of High Level Waste and Spent Nuclear Fuel; contracts for any
payments into the Nuclear Waste Fund; and as applicable, the antitrust laws
and the Federal Trade Commission Act to specified activities or proposed
activities of certain licenses of commercial nuclear reactors, but shall not
include Environmental Laws. "Nuclear Laws" include the Atomic Energy Act of
1954, as amended (42 U.S.C. Section 2011 et seq.); the Price-Anderson Act
(Section 170 of the Atomic Energy Act of 1954, as amended); the Energy
Reorganization Act of 1974 (42 U.S.C. Section 5801 et seq.); Convention on
the Physical Protection of Nuclear Material Implementation Act of 1982
(Public Law 97-351; 96 Stat. 1663); the Foreign Assistance Act of 1961
(22 U.S.C. Section 2429 et seq.); the Nuclear Non-Proliferation Act of 1978
(22 U.S.C. Section 3201); the Low-Level Radioactive Waste Policy Act
(42 U.S.C. Section 2021b et seq.); the Nuclear Waste Policy Act, (42 U.S.C.
Section 10101 et seq., as amended); the Low-Level Radioactive Waste Policy
Amendments Act of 1985 (42 U.S.C. Section 2021d, 471); and the Energy Policy
Act of 1992 (4 U.S.C. Section 13201 et seq.); and any state or local laws
analogous to the foregoing.
"Nuclear Material" means any source, special nuclear or byproduct
material, as defined in the Atomic Energy Act of 1954, as amended.
"NUSCO" means Northeast Utilities Service Company, a wholly owned
subsidiary of Northeast Utilities and an Affiliate of CL&P and WMECO.
"Offsite Hazardous Substance Facility" means a location, other than a
Site or Facility, which regularly accepts or accepted Hazardous Substances
from the Sellers and other Persons.
"Other Assigned Contracts" has the meaning set forth in Section 2.1(o).
"Other Related Assets" has the meaning set forth in Section 2.1(u).
"Owned Intellectual Property" means the Intellectual Property that was
developed by or is otherwise owned by the Sellers as set forth on Schedule
2.1(p).
"Ownership Share" means, with respect to each Seller and expressed as a
percentage, the undivided ownership interest and obligation, as tenant in
common of such Seller in the Acquired Assets as set forth in Schedule 1 and
for the avoidance of doubt, except for CL&P and WMECO, the other Sellers
(including UI) own an Ownership Share in Millstone Unit 3 only.
"Panel" has the meaning set forth in Section 12.1.
"Participants" means those Persons that are parties to the Sharing
Agreement.
"Party" and "Parties" have the meanings set forth in the preamble to
this Agreement.
"PC Bondholders" has the meaning set forth in Section 5.8(d).
"Permits" means all certificates, licenses, permits, franchises,
approvals, consents, orders, exemptions, decisions and other actions of a
Governmental Authority pertaining to a particular Acquired Asset, the
Facilities and the Sites or the ownership, operation or use thereof.
"Permitted Encumbrances" means and includes: (a) liens for Taxes or
other charges or assessments by any Governmental Authority to the extent that
the payment thereof is not in arrears or otherwise not due or is being
contested in good faith by appropriate proceedings provided that no lien
will attach to any of the Acquired Asset during such contest; (b) encum-
brances in the nature of zoning restrictions, building and land use laws,
ordinances, orders, decrees, restrictions or any other conditions imposed by
or pursuant to any agreement with any Governmental Authority provided the
same do not materially detract from operation or use of such property or in
the business conducted at the Facilities; (c) easements (including without
limitation, the Seller Reserved Easements) granted or reserved by an
instrument executed in connection with this Agreement or the Related
Agreements or the transactions contemplated hereby or thereby, but excluding
such encumbrances that secure indebtedness; (d) deposits or pledges made in
connection with, or to secure payment of, workers' compensation, unemployment
insurance, pension programs mandated under applicable laws or other social
security regulations; (e) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, statutory or common law liens to
secure claims for labor, materials or supplies and other like liens, which
secure obligations to the extent that payment thereof is not in arrears or
otherwise due; (f) any lien or title imperfection with respect to the
Acquired Assets created by or resulting from any act or omission of the
Buyer; and (g) any exception set forth in Schedule 2.1(a)(ii) as could not
reasonably be expected to have a Material Adverse Effect, other than the
exceptions for (i) parties in possession (other than those disclosed in
Schedule 2.1(a)(ii), if any), (ii) unfiled mechanics' and materialmen's
liens; and (iii) any first mortgage indentures or other mortgages or security
interests.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, a limited
liability company, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Plan" has the meaning set forth in Section 5.7(c)(i).
"Plant Agreement" means the Amended and Restated Plant Agreement dated
as of December 1, 1984 among NNECO, CL&P and WMECO.
"Plant Employee" has the meaning set forth in Section 5.7(b).
"Plant Employee Disclosure Letter" has the meaning set forth in Section
3.2(h).
"Pollution Control Facilities" has the meaning set forth in Section
5.8(d).
"Pollution Control Bonds" has the meaning set forth in Section 2.4(r).
"Post-Closing Statement" has the meaning set forth in Section
2.6(c)(ii).
"Pre-1983 Spent Nuclear Fuel" means any spent nuclear fuel assemblies or
portions thereof and in-core burned fuel accumulated at the Facilities prior
to June 17, 1983.
"Pre-Approved Capital Expenditures" means those capital expenditures set
forth on Schedule 5.3.
"Private Letter Ruling Requests" has the meaning set forth in Section
5.22.
"Proposed Improvements" has the meaning set forth in Section 5.3(c).
"Proprietary Information" means this Agreement, the Related Agreements,
and all information about a Party or its properties or operations furnished
by such Party (the "Disclosing Party") or its Representatives to the other
Party (the "Receiving Party") or its Representatives, and marked or
designated in writing by the Disclosing Party as "confidential," regardless
of the manner or medium in which it is furnished. Proprietary Information
does not include information that (a) is or becomes generally available to
the public, other than as a result of a disclosure by the Receiving Party or
its Representatives in violation of this Agreement; (b) was available to the
Receiving Party on a nonconfidential basis prior to its disclosure by the
Disclosing Party or its Representatives; (c) becomes available to the
Receiving Party on a nonconfidential basis from a Person, other than the
Disclosing Party or its Representatives, each of whom, to the Receiving
Party's Knowledge, is not otherwise bound by a confidentiality agreement with
the Disclosing Party or its Representatives, or is not otherwise under any
obligation to the Disclosing Party or any of its Representatives not to
transmit the information to the Receiving Party or its Representatives, or
(d) the Disclosing Party discloses to others on a non-confidential basis.
"PSNH" has the meaning set forth in the preamble to this Agreement.
"Qualified Decommissioning Funding Amount" means the Net Cash Values
shown for each Seller for each Unit in the Column titled "Qualified" on
Schedule 5.10(b).
"Qualified Decommissioning Funds" means the external trust funds that
meet the requirements of Code Section 468A and Treas. Reg. Section 1.468A-5,
maintained by the Sellers with respect to the Facilities prior to the Closing
pursuant to such Seller's Decommissioning Trust Agreement.
"Qualified Deposits" has the meaning set forth in Section 5.10(c).
"Radioactive Material" means any material that is radioactive or
contaminated with radioactivity.
"Radioactive Waste Material" means Radioactive Material which is no
longer fit for its intended purpose or has been disposed of or Released into
the Environment except as authorized by applicable Laws. Radioactive Waste
Material shall include any substance that is both Hazardous Material and
Radioactive Material but shall not include Spent Nuclear Fuel.
"Real Property" has the meaning set forth in Section 2.1(a).
"Receiving Party" has the meaning set forth in the definition of
Proprietary Information.
"Related Agreements" means the Deeds, Assignment and Assumption
Agreements, Bills of Sale, Asset Demarcation Agreement, Interconnection
Agreement, Releases of Mortgage Indenture, Interim Services Agreement, Lead
Participant Rights Agreement, Acceptable Credit Support and, if applicable,
the DTC Guarantee and the DOE Acceptable Credit Support.
"Release" means any actual, threatened or alleged spilling, leaking,
pumping, pouring, emitting, dispersing, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing of any Hazardous Substance into the
Environment or within any building, structure, facility or fixture, that may
cause an Environmental Liability (including the disposal or abandonment of
barrels, containers, tanks or other receptacles containing or previously
containing any Hazardous Substance).
"Release and Settlement Agreements" means those Release and Settlement
Agreements, as amended, between Northeast Utilities, CL&P and WMECO and
another Seller, in which the parties thereto have set forth certain
agreements with respect to the transactions as contemplated by this Agreement
and the other Related Agreements.
"Release of Mortgage Indenture" means a release of mortgage indenture,
in the case of CL&P, substantially in the form of Exhibit F attached hereto.
"Relevant Facilities Purchase Price" has the meaning set forth in
Section 2.5(b).
"Relevant Fuel Purchase Price" has the meaning set forth in Section
2.5(b).
"Relevant Percentage" means the Unit 1 Relevant Percentage, the Unit 2
Relevant Percentage or the Unit 3 Relevant Percentage, as the case may be.
"Relevant Purchase Price" means the Relevant Facilities Purchase Price
and the Relevant Fuel Purchase Price.
"Remaining Sellers" has the meaning set forth in Section 6.3
"Remediate" or "Remediation" means any or all of the following
activities to the extent required to address the presence or Release of
Hazardous Substances: (a) monitoring, investigation, assessment, treatment,
cleanup containment, removal, mitigation, response or restoration work as
well as obtaining any permits, consents, approvals or authorizations of any
Governmental Authority necessary to conduct any such activity; (b) preparing
and implementing any plans or studies for any such activity; (c) obtaining a
written notice from a Governmental Authority with competent jurisdiction
under Environmental Laws or a written opinion of a Licensed Environmental
Professional (as defined in C.G.S. Section 22a - 133v) as contemplated by the
relevant Environmental Laws and in lieu of a written notice from a
Governmental Authority, that no material additional work is required; and (d)
any other activities reasonably determined by a party to be necessary or
appropriate or required under Environmental Laws.
"Representative" means, as to any Person, such Person's Affiliates and
its and their directors, trustees, officers, employees, agents, consultants,
advisors (including, without limitation, financial advisors, counsel and
accountants).
"Requested Rulings" has the meaning set forth in Section 5.22.
"Required Assets" has the meaning set forth in Section 6.3.
"Required Nuclear Expenditure" means a capital expenditure that is (a)
required in order to satisfy an order from the NRC, (b) required in order to
preclude, forestall, or satisfy any form of NRC enforcement action
(including, without limiting the generality of the foregoing, a so-called
"confirmatory action letter"), or (c) necessary in order to cause the
Facilities to meet NRC regulations. Notwithstanding the foregoing, in no
event shall capital expenditures for the repair or replacement of existing
equipment, or to remedy the Sellers' past non-compliance with laws, be
considered Required Nuclear Expenditures.
"Required Sellers" has the meaning set forth in Section 6.3.
"Rule of 85" has the meaning set forth in Section 5.7(c)(iii).
"Schedule" means a schedule to this Agreement.
"S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill
Corporation, or any successor organization thereto.
"SEC" means the Securities and Exchange Commission.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Seller Environmental Liabilities" has the meaning set forth in Section
5.13.
"Seller Indemnified Parties" has the meaning specified in Section 9.4.
"Seller Regulatory Approvals" means those approvals identified on
Schedule 6.2(c) hereto to be obtained by each Seller as a condition to such
Seller's obligations under this Agreement.
"Seller Reserved Easement" means an easement for use of any Real
Property set forth in Schedule 2.2(j).
"Seller" or Sellers" has the meaning set forth in the preamble to this
Agreement.
"Sharing Agreement" means the Sharing Agreement - Connecticut Nuclear
Plant, dated as of September 1, 1973, as supplemented and amended, among the
Participants in Millstone Unit 3.
"Site" means the Real Property forming part of, or used or usable in
connection with, the operation of a Facility. "Sites" includes all Real
Property described in Schedule 2.1(a)(i). Any reference to a Site shall
include, by definition, the surface and subsurface elements, including the
soils and groundwater present at such Site, and any reference to items "at
the Site" shall include all items "at, on, in, upon, over, across, under and
within" the Site.
"Specified Conditions Precedent" has the meaning set forth in Section
6.3.
"Spent Nuclear Fuel" means fuel and other radioactive materials
associated with nuclear fuel assemblies that has been withdrawn from a
nuclear reactor following irradiation, and has not been chemically separated
into its constituent elements by reprocessing.
"Subsequent Closing" has the meaning set forth in Section 6.3
"Subsequent Closing Date" has the meaning set forth in Section 2.10.
"Supplemental Indenture" means a supplemental indenture between each
Seller, the Buyer and the trustee named therein amending and supplementing
the Decommissioning Trust Agreement in a manner acceptable to the Buyer and
the Sellers, pursuant to which (a) the Buyer shall agree to assume the due
and punctual performance of all Liabilities of each Seller arising after the
relevant Closing Date under the relevant trust agreement, (b) the Buyer shall
succeed to and be substituted for such Seller thereunder, and (c) the
relevant trust agreement shall be amended as necessary to ensure that the
Buyer has the right to appoint and remove the trustee and the investment
manger and the ability to direct the investment of funds in the
Decommissioning Trust in any investment permitted by applicable law, rule or
regulation.
"T&D Assets" means those transmission and distribution assets described
on Schedule 2.2(a).
"Taking" has the meaning set forth in Section 5.11.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar, including FICA), unemployment,
disability, real property, recordation, personal property, sales, use,
transfer, registration, value added, alternative or add- on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Basis" means the adjusted tax basis determined for federal income
tax purposes under Section 1011(a) of the Code.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Technical Specifications" means the technical specifications included
in the NRC License for the Facilities in accordance with the requirements of
10 C.F.R. Section 50.36.
"Third Party" means a Person who is not a Party, an Affiliate of a
Party, a Representative of a Party, a Representative of an Affiliate of a
Party or a shareholder of any of a Party, a Party's Affiliate or a Party's
Representative.
"Third Party Claim" means any claim asserted by a Third Party.
"Title Commitment" has the meaning set forth in Section 3.2(r).
"Title Company" means, collectively, Commonwealth Land Title Insurance
Company and Lawyers Title Insurance Company.
"Top Off Amount" has the meaning set forth in Section 5.10(c).
"Total Relevant Percentage" means, collectively, the Unit 1 Relevant
Percentage, the Unit 2 Relevant Percentage and the Unit 3 Relevant
Percentage.
"Transfer Act" has the meaning set forth in Section 5.12.
"Transfer of License" means the transfer of any of the NRC Licenses from
the Sellers to the Buyer and includes any act for which the approval of the
NRC is required by Atomic Energy Act Section 184 and 10 C.F.R. Section 50.80
or otherwise.
"Transferable Permits" has the meaning set forth in Section 2.1(e).
"Transition Committee" has the meaning set forth in Section 5.3(b).
"Transmission Support Agreement" means the Transmission Support
Agreement dated as of August 9, 1974, among CL&P, WMECO and the other
Participants in Millstone Unit 3.
"Trustee" means the trustee of the Qualified Decommissioning Funds and
the Nonqualified Decommissioning Funds.
"UI" has the meaning set forth in the preamble to this Agreement.
"Unit 1 Relevant Percentage" means for any Closing in which a Seller's
Ownership Share in Unit 1 is being purchased by the Buyer, a percentage equal
to the sum of the quotients of the Ownership Share of each Seller
participating in such Closing divided by 100%.
"Unit 2 Relevant Percentage" means for any Closing in which a Seller's
Ownership Share in Unit 2 is being purchased by the Buyer, a percentage equal
to the sum of the quotients of the Ownership Share of each Seller
participating in such Closing divided by 100%.
"Unit 3 Relevant Percentage" means for any Closing in which a Seller's
Ownership Share in Unit 3 is being purchased by the Buyer, a percentage equal
to the sum of the quotients of the Ownership Share of each Seller
participating in such Closing divided by 92.38%.
"Unit 1 Facilities Purchase Price" has the meaning set forth in Section
2.5(a).
"Unit 2 Facilities Purchase Price" has the meaning set forth in Section
2.5(a).
"Unit 3 Facilities Purchase Price" has the meaning set forth in Section
2.5(a).
"Unit 1 Fuel Purchase Price" has the meaning set forth in Section
2.5(a).
"Unit 2 Fuel Purchase Price" has the meaning set forth in Section
2.5(a).
"Unit 3 Fuel Purchase Price" has the meaning set forth in Section
2.5(a).
"VEG&T" has the meaning set forth in the preamble to this Agreement.
"Vehicles" has the meaning set forth in Section 2.1(n).
"WARN Act" means the Workers Adjustment and Retraining Notification Act
of 1988, as amended.
"WMECO" has the meaning set forth in the preamble to this Agreement.
"Year 2000 Compliance" means actions taken or to be taken by a Party to
assure that any computer system, hardware, software, database, device and/or
equipment (a) is designed (or has been modified) to be used prior to and
after January 1, 2000, assuming that all other computer system hardware,
software, devices or other equipment used in combination therewith will
properly exchange data with it, (b) is operating and will operate without
error with respect to dates or date-based, date-dependent or date-Related
data prior to and after January 1, 2000, assuming that all other computer
system hardware, software, devices or other equipment used in combination
therewith will properly exchange date data with it, and (c) has not and will
not be affected adversely by the advent of the year 2000 or subsequent years.
[signature pages follow]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
on the date first above written.
DOMINION RESOURCES, INC.
By /s/ Thomas F. Farrell
Name: Thomas F. Farrell
Title: Executive Vice President
THE CONNECTICUT LIGHT AND POWER COMPANY
By /s/ Cheryl W. Grise
Name: Cheryl W. Grise
Title: Senior Vice President, Secretary and General Counsel of Northeast
Utilities Service Company, as Agent for THE CONNECTICUT LIGHT AND
POWER COMPANY
WESTERN MASSACHUSETTS ELECTRIC COMPANY
By /s/ Cheryl W. Grise
Name: Cheryl W. Grise
Title: Senior Vice President, Secretary and General Counsel of Northeast
Utilities Service Company, as Agent for WESTERN MASSACHUSETTS
ELECTRIC COMPANY
THE UNITED ILLUMINATING COMPANY
By /s/ James F. Crowe
Name: James F. Crowe
Title: Group Vice President
CENTRAL MAINE POWER COMPANY
By /s/ Michael R. Cutter
Name: Michael R. Cutter
Title: Vice President
CHICOPEE MUNICIPAL LIGHTING PLANT
By /s/ Barry W. Soden
Name: Barry W. Soden
Title: General Manager
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
By /s/ Mark H. Collin
Name: Mark H. Collin
Title: Vice President and Treasurer of Unitil
VILLAGE OF LYNDONVILLE ELECTRIC DEPARTMENT
By /s/ Clay O. Bailey
Name: Clay O. Bailey
Title: Office Manager
NEW ENGLAND POWER COMPANY
By /s/ Terry L. Schwennesen
Name: Terry L. Schwennesen
Title: Vice President
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
By /s/ Cheryl W. Grise
Name: Cheryl W. Grise
Title: Senior Vice President, Secretary and General Counsel of Northeast
Utilities Service Company, as Agent for PUBLIC SERVICE COMPANY OF
NEW HAMPSHIRE
VERMONT ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE
By /s/ Gleb Glinka, Esq,
Name: Gleb Glinka
Title: Attorney, Glinka & Schwidde
NORTHEAST NUCLEAR ENERGY COMPANY
By /s/ Cheryl W. Grise
Name: Cheryl W. Grise
Title: Senior Vice President, Secretary and General Counsel of Northeast
Utilities Service Company, as Agent for NORTHEAST NUCLEAR
ENERGY COMPANY
TABLE OF CONTENTS
-----------------
Page
----
1. Preamble 1
2. Acquisition of Assets by Buyer. 2
2.1. Purchase and Sale of Assets. 2
2.2. Excluded Assets. 5
2.3. Assumption of Liabilities. 7
2.4. Liabilities Not Assumed. 8
2.5. Consideration for Acquired Assets. 12
2.6. Adjustment to Facilities Purchase Price and Fuel Purchase Price. 13
2.7. Payment of Purchase Price Adjustments. 16
2.8. Allocation of Consideration. 17
2.9. Proration. 17
2.10. The Closings. 18
2.11. Deliveries by the Sellers at the Closings. 19
2.12. Deliveries by the Buyer at the Closing Date. 24
3. Representations, Warranties and Disclaimers. 26
3.1. Representations and Warranties of Each Seller. 26
3.2. Representations and Warranties of Lead Participants. 29
3.3. Disclaimers Regarding Acquired Assets. 40
4. Representations and Warranties of the Buyer. 41
4.1. Organization of the Buyer. 41
4.2. Authority, Execution and Enforceability of Transactions. 42
4.3. Noncontravention. 42
4.4. Consents and Approvals. 42
4.5. Brokers' Fees. 43
4.6. Litigation. 43
4.7. Qualified Buyer. 43
4.8. WARN Act. 43
4.9. No Implied Warranties. 43
4.10. Absence of Certain Events. 44
5. Covenants. 44
5.1. General. 44
5.2. Notices, Consents and Approvals. 44
5.3. Operation of Business During Interim Period. 47
5.4. Access and Investigations During Interim Period. 50
5.5. Certain Notices. 53
5.6. Further Assurances. 54
5.7. Employee Matters. 56
5.8. Cooperation after Initial Closing Date. 58
5.9. NEPOOL. 62
5.10. Funding of the Decommissioning Trusts. 62
5.11. Risk of Loss. 65
5.12. Connecticut Transfer Act. 67
5.13. Discharge of Environmental Liabilities. 67
5.14. Nuclear Insurance. 68
5.15. Nonwaiver of Third Party Environmental Liabilities. 68
5.16. Control of Litigation. 68
5.17. Availability of Funds. 69
5.18. Cost of Disposal of Pre-1983 Spent Nuclear Fuel. 69
5.19. Department of Energy Decontamination and Decommissioning Fees. 70
5.20. Cooperation Relating to Insurance and Price-Anderson Act. 70
5.21. Acceptable Credit Support. 71
5.22. Private Letter Ruling Requests. 71
5.23. Credit Rating of Acceptable Guarantor. 72
5.24. NRC Commitments. 72
5.25. Exclusivity. 72
5.26. Outages. 72
5.27 Nuclear Fuel 72
6. Conditions Precedent to Obligation to Close. 73
6.1. Conditions Precedent to Obligation of the Buyer to Close. 73
6.2. Conditions Precedent to Obligation of the Sellers to Close. 76
6.3. Initial and Subsequent Closings. 78
7. Confidentiality. 79
8. Taxes. 80
9. Non-Survival; Effect of Closing and Indemnification. 82
9.1. Survival of Representation and Warranties;
Survival Covenants and Agreements. 82
9.2. Effect of Closing. 82
9.3. Indemnity by Lead Participants. 82
9.4. Indemnity by Buyer. 83
9.5. Exclusive and Limited Remedies. 84
9.6. Notice; Defense of Claims. 85
9.7. Net of Taxes and Insurance. 86
9.8. Release. 87
9.9. No Recourse. 87
10. Termination. 87
10.1. Termination of Agreement. 87
10.2. Effect of Termination. 91
11. Miscellaneous. 92
11.1. Press Releases and Public Announcements. 92
11.2. No Third Party Beneficiaries. 92
11.3. No Joint Venture. 92
11.4. Entire Agreement. 92
11.5. Succession and Assignment. 92
11.6. Counterparts. 93
11.7. Headings. 93
11.8. Notices. 94
11.9. Governing Law. 95
11.10. Change in Law. 95
11.11. Consent to Jurisdiction and Venue. 95
11.12. Amendments and Waivers. 95
11.13. Severability. 95
11.14. Expenses. 96
11.15. Construction. 96
11.16. Incorporation of Exhibits and Schedules. 96
11.17. Specific Performance. 96
11.18. Dispute Negotiation. 96
11.19. Good Faith Covenant. 96
11.20. Set-Off. 96
11.21. Bulk Transfer Act. 96
11.22. Release and Settlement Agreements 97
12. Dispute Resolution and Arbitration. 97
12.1. Dispute Resolution. 97
12.2. Arbitration. 97
13. Definitions. 98
Exhibits
A Form of Deed
B Form of Bill of Sale
C Form of Asset Demarcation Agreement
D Form of Assignment and Assumption Agreement
E Form of Interconnection Agreement
F Form of Release of Mortgage Indenture
G Form of FIRPTA Affidavit
H Form of Acceptable Guaranty
I [RESERVED]
J Form of Lead Participant Rights Agreement
K Form of Estoppel Certificate
L Form of Interim Services Agreement
M Form of DOE Acceptable Guaranty
Schedules
Schedule 1 - Sellers Ownership Shares
Schedule 2.1 NNECO Assets
Schedule 2.1(a)(i) Real Property
Schedule 2.1(a)(ii) Permitted Encumbrances
Schedule 2.1(b) Spent Nuclear Fuel and Low Level Nuclear Waste
Schedule 2.1(c) Personal Property
Schedule 2.1(d) Leases
Schedule 2.1(e) Transferable Permits
Schedule 2.1(f) Material Contracts
Schedule 2.1(m)(i) Emergency Preparedness Assets
Schedule 2.1(m)(ii) Emergency Preparedness Agreements
Schedule 2.1(n) Vehicles
Schedule 2.1(p) Owned Intellectual Property
Schedule 2.1(q) Nuclear Insurance Policies
Schedule 2.1(r) Agreements for the Sale of Capacity or Energy
Schedule 2.1(u) Other Related Assets
Schedule 2.1(v) Emission Reduction Credits
Schedule 2.1(w) Licensed Intellectual Property
Schedule 2.2(a) T&D Assets
Schedule 2.2(d) Rights to Sellers' Names
Schedule 2.2(j) Seller Reserved Easements
Schedule 2.2(k) Non-Assigned Contracts
Schedule 2.3(c) Certain Assumed Liabilities
Schedule 2.4(r) Pollution Control Bonds
Schedule 2.11(a)(xi) Consents, Waivers and Approvals
Schedule 2.11(a)(xv) Matters for Opinion from Counsel to Seller
Schedule 2.12(a) Matters for Opinion from Counsel to Buyer
Schedule 3.1(c) Matters of Contravention
Schedule 3.1(f)(i) Regulation as a Utility
Schedule 3.1(f)(ii) Regulation under PUHCA
Schedule 3.2(a) Physical Condition of Improvements
Schedule 3.2(b) Certain Changes or Events
Schedule 3.2(c)(i) Compliance with Laws
Schedule 3.2(c)(ii) Other Permits
Schedule 3.2(c)(iii) Reporting Compliance
Schedule 3.2(f) Insurance
Schedule 3.2(g) Litigation
Schedule 3.2(h) Labor Matters
Schedule 3.2(i) Environmental
Schedule 3.2(j) Condemnation
Schedule 3.2(k) Intellectual Property
Schedule 3.2(q) Plant and Equipment
Schedule 3.2(r) Title Commitments
Schedule 3.2(t) Tax
Schedule 3.2(v) Qualified Decommissioning Funds
Schedule 3.2(w) Nonqualified Decommissioning Funds
Schedule 4.3 Matters of Contravention
Schedule 5.3 Pre-Approved Capital Expenditures
Schedule 5.7(b)(i) Plant Employees
Schedule 5.7(b)(ii) Certain Acquired Assets Employee Benefits and Severance
Schedule 5.7(c)(iv) Pension Benefits
Schedule 5.7(d) Employee Benefits Packages
Schedule 5.8(d) Pollution Control Facilities
Schedule 5.10(b) Decommissioning Trust Closing Amount
Schedule 6.1(c) Buyer Regulatory Approvals
Schedule 6.2(c) Seller Regulatory Approvals
Schedule Example of Calculation of Relevant Percentage of the
Facilities Purchase Price and the Fuel Purchase Price
EXHIBIT 15
To Northeast Utilities:
We are aware that Northeast Utilities has incorporated by reference in its
Registration Statements No. 33-34622, No. 33-40156, No. 33-44814, No. 33-63023,
No. 33-55279, No. 33-56537, No. 333-52413, No. 333-52415, and No. 333-85613,
its Form 10-Q for the quarter ended June 30, 2000, which includes our report
dated August 9, 2000, covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933, that
report is not considered a part of the registration statement prepared or
certified by our firm within the meaning of Sections 7 and 11 of the Act.
/s/ Arthur Andersen LLP
-------------------
Arthur Andersen LLP
Hartford, Connecticut
August 9, 2000
