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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 25, 1999
(Date of earliest event reported)
Duquesne Light Company
(Exact name of Registrant as specified in its charter)
Pennsylvania 1-956 25-0451600
- ------------ ----- ----------
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
411 Seventh Avenue
Pittsburgh, Pennsylvania 15219
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (412)393-6000
N/A
---
(Former name or former address, if changed since last report)
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Items 1-4. Not Applicable.
Item 5. Other Events.
Incorporated herein by reference as Exhibit 99.1 is a press release,
dated March 26, 1999 issued by Duquesne Light Company. Incorporated herein by
reference as Exhibits 2.1 and 2.2, respectively, are the Generation Exchange
Agreement and the Nuclear Generation Conveyance Agreement, discussed in the
press release.
Item 6. Not Applicable.
Item 7. Exhibits.
2.1 Generation Exchange Agreement, dated as of March 25, 1999, by and
between Duquesne Light Company, on the one hand, and The
Cleveland Electric Illuminating Company, Ohio Edison and
Pennsylvania Power Company on the other. The schedules and
exhibits to this document are not filed herewith, but will be
furnished supplementally to the SEC upon request.
2.2 Nuclear Generation Conveyance Agreement, dated as of March 25,
1999 by and between Duquesne Light Company, on the one hand, and
Pennsylvania Power Company and The Cleveland Electric
Illuminating Company, on the other. The schedules and exhibits to
this document are not filed herewith, but will be furnished
supplementally to the SEC upon request.
99.1 Press Release, dated March 26, 1999, issued by Duquesne Light
Company.
Items 8-9. Not Applicable.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Duquesne Light Company
----------------------------------------
(Registrant)
March 26, 1999 /s/ Morgan K. O'Brien
- -------------- ----------------------------------------
(Date) (Signature)
Morgan K. O'Brien
Vice President, Finance
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
2.1 Generation Exchange Agreement, dated as of March 25, 1999, by and
between Duquesne Light Company, on the one hand, and The
Cleveland Electric Illuminating Company, Ohio Edison and
Pennsylvania Power Company on the other. The schedules and
exhibits to this document are not filed herewith, but will be
furnished supplementally to the SEC upon request.
2.2 Nuclear Generation Conveyance Agreement, dated as of March 25,
1999 by and between Duquesne Light Company, on the one hand, and
Pennsylvania Power Company and The Cleveland Electric
Illuminating Company, on the other. The schedules and exhibits to
this document are not filed herewith, but will be furnished
supplementally to the SEC upon request.
99.1 Press Release, dated March 26, 1999, issued by Duquesne Light
Company.
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EXHIBIT 2.1
GENERATION EXCHANGE AGREEMENT
by and between
DUQUESNE LIGHT COMPANY, on the one hand, and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
OHIO EDISON COMPANY
and
PENNSYLVANIA POWER COMPANY
on the other
Dated as of March 25, 1999
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GENERATION EXCHANGE AGREEMENT
GENERATION EXCHANGE AGREEMENT, dated as of March 25, 1999 (this
"Agreement"), by and between Duquesne Light Company, a Pennsylvania corporation
("DLC"), on the one hand, and Ohio Edison Company, an Ohio corporation ("OEC"),
Pennsylvania Power Company, a Pennsylvania corporation ("PPC"), and The
Cleveland Electric Illuminating Company, an Ohio corporation ("CEIC"), on the
other. Each of CEIC, OEC and PPC is a subsidiary (direct or indirect) of
FirstEnergy Corp., an Ohio corporation ("FE"), (each such subsidiary, an "FE
Subsidiary" and collectively, the "FE Subsidiaries"). DLC, on the one hand, and
the FE Subsidiaries, on the other, are referred to individually as a "Party,"
and collectively, as the "Parties."
W I T N E S S E T H
WHEREAS, DLC and FE, acting on behalf of the FE Subsidiaries and TEC
(as defined herein), have entered into an agreement in principle dated October
14, 1998 (the "Agreement in Principle"), regarding the exchange of interests in
certain electric generation facilities; and
WHEREAS, in order to implement the Agreement in Principle with respect
to certain fossil fuel power plants the Parties desire to set forth in this
Agreement the definitive terms and conditions pursuant to which DLC will convey
to the FE Subsidiaries its undivided interests in certain electric generation
plants operated by the FE Subsidiaries (Sammis, Mansfield and Eastlake, each as
defined herein), and the FE Subsidiaries will convey to DLC their interests in
certain electric generation plants (Avon Lake, New Castle and Niles, each as
defined herein); and
WHEREAS, in order to implement the Agreement in Principle with respect
to DLC's nuclear generating assets, which are subject to the jurisdiction of the
Nuclear Regulatory Commission, simultaneously with the execution of this
Agreement, DLC and certain of the other Parties will enter into the Nuclear
Generation Conveyance Agreement (the "Nuclear Conveyance Agreement") dated as of
the date hereof, substantially in the form of Exhibit A attached hereto,
pursuant to which, subject to the terms and conditions thereof, DLC will agree
to convey to certain of the FE Subsidiaries all of its rights, title and
undivided interest in, and such FE Subsidiaries will agree to assume those
obligations of DLC relating to, the assets specified therein (collectively, "DLC
Nuclear Assets").
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:
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ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
the meanings specified in this Section 1.1.
(1) "Accrued FE Liabilities" has the meaning set forth in
Section 4.3
(2) "Accrued Liabilities" means, with respect to a Party, the
aggregate amount of the liabilities of such Party that are fixed or
determinable as of the Exchange Closing Date and that arise out of any
of the following obligations incurred by such Party prior to the
Exchange Closing Date, except to the extent that any such obligation
is allocable to the right of such Party to receive property, services
or other benefit after the Exchange Closing Date: (1) any obligation
to repay money advanced to or for the benefit of such Party; (2) any
obligation to make an expenditure that is includible in the basis of
any asset of such Party for income tax purposes as of the Exchange
Closing Date; (3) any obligation to make an expenditure that is
deductible by such Party and is not includible in such basis; and (4)
any obligation to make any expenditure that is not described in
clauses (2) or (3).
(3) "Acquiring Party" means, with respect to the DLC Assets and
Assumed DLC Liabilities, the applicable FE Subsidiaries, and with
respect to the FE Assets and Assumed FE Liabilities, DLC as to the
Accrued FE Liabilities and otherwise as to the ownership of the FE
Assets, DLC and the applicable Winning Bidder.
(4) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
(5) "Agreement" means this Generation Exchange Agreement,
together with the Exhibits and Schedules attached hereto, as the same
may be from time to time amended.
(6) "Agreement in Principle" has the meaning set forth in the
Recitals.
(7) "Ancillary Agreements" means the Auction Agreements, the
CAPCO Settlement Agreement, the FE Assignment and Assumption
Agreements, the FE (Accrued Liability) Assignment and Assumption
Agreements, the DLC Assignment and Assumption Agreements, the
Electrical Facilities Agreement, the FE Easement and Attachment
Agreements, the FE Connection Agreements, the FE Must-Run Agreements,
the Warranty Deeds, the Bill of Sale, the FIRPTA Affidavits, and the
Settlement Agreement, in each case as the same may be from time to
time amended.
(8) "Assigned Agreements" means, with respect to DLC, the DLC
Agreements, and with respect to the applicable FE Subsidiary, the FE
Agreements.
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(9) "Assumed DLC Liabilities" has the meaning set forth in
Section 3.3.
(10) "Assumed FE Liabilities" has the meaning set forth in
Section 4.3.
(11) "Assumed Liabilities" means the Assumed FE Liabilities
(including the Accrued FE Liabilities) or the Assumed DLC Liabilities,
as applicable.
(12) "Auction" means the transfer and sale by auction to be
undertaken by DLC of the its generating plants (other than the DLC
Assets and the DLC Nuclear Assets) and the FE Assets conveyed to DLC
under this Agreement.
(13) "Auction Agreements" means one or more Asset Purchase
Agreements, substantially in the form of Exhibit B attached hereto, to
be entered into between DLC, the applicable FE Subsidiaries (for the
purpose of each such FE Subsidiary making certain representations,
warranties, covenants, indemnifications, assignments and deliveries
under such Asset Purchase Agreement) and the corresponding Winning
Bidders in the Auction, and the ancillary agreements related thereto.
(14) "Auction Closings" means the closings of the transactions
contemplated by the Auction Agreements.
(15) "Auction Closing Date" means the date on which the Auction
Closings occur.
(16) "Auction Participants" means the Persons qualified by DLC to
submit binding bids in the Auction.
(17) "Auction Plan" means the Generation Auction Plan of DLC
filed August 27, 1998, before the PaPUC and approved by the Opinion
and Order of the PaPUC No. R-00974104, dated December 18, 1998, as
amended from time to time.
(18) "Avon Lake" means all generating units and related assets
located at the generating station known as Avon Lake, as more fully
identified on Schedule 4.1(Avon Lake), attached hereto.
(19) "Benefit Plans" means with respect to each Party, each
deferred compensation and each bonus or other incentive compensation,
stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 3(1) of ERISA)
each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in
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each case, that is sponsored, maintained or contributed to or required
to be contributed to by such Party or by any ERISA Affiliate.
(20) "Bills of Sale" means the Bills of Sale, each substantially
in the form of Exhibit C attached hereto, to be delivered by each
Conveying Party at the respective Exchange Closing with respect to DLC
Tangible Personal Property or FE Tangible Personal Property, as the
case may be, included in the Exchange Assets transferred to the
respective Acquiring Party.
(21) "Bond Counsel" has the meaning set forth in Section 8.16(b).
(22) "Business Day" means any day other than Saturday, Sunday and
any day which is a day on which banking institutions in the
Commonwealth of Pennsylvania or the State of Ohio are authorized by
law or other governmental action to close.
(23) "CAPCO" means the Central Area Power Coordination Group.
(24) "CAPCO Agreements" means all contractual arrangements
associated with CAPCO related to the Exchange Assets, including those
listed on Schedule 1.1(24).
(25) "CAPCO Settlement Agreement" means that certain CAPCO
Settlement Agreement executed by DLC and each applicable Subsidiary of
FE, substantially in the form of Exhibit O attached hereto.
(26) "CEIC" means The Cleveland Electric Illuminating Company, a
subsidiary of FE and an Ohio corporation.
(27) "Capital Spare Parts " means any major equipment items of
significant cost that are essential to the operation of an Exchange
Asset of a Conveying Party. Such equipment is generally a long
lead-time item and, consistent with past practice, has been assigned
to the capital base of the Exchange Asset upon delivery and prior to
its placement in service. In the case of DLC, its Capital Spare Parts
are set forth in Schedule 1.1 (27-DLC) and in the case of the FE
Subsidiary's, each FE Subsidiary's Capital Spare Parts are set forth
in Schedule 1.1 (27-FE).
(28) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended.
(29) "Closing Payment" means the DLC Closing Payments or the FE
Closing Payments, as appropriate.
(30) "Closing Payment Balance" means the remaining amount payable
after the aggregation or offset of Closing Payments, as provided in
Section 5.3.
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(31) "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1984.
(32) "COBRA Continuation Coverage" means the requirements of
Section 4980B(f) of the Code.
(33) "Code" means the Internal Revenue Code of 1986, as amended.
(34) "Commercially Reasonable Efforts" means efforts by a Party
which are reasonably within the contemplation of the Parties at the
time of executing this Agreement and which do not require the
performing Party to expend any funds other than expenditures which are
customary and reasonable in transactions of the kind and nature
contemplated by this Agreement in order for the performing Party to
satisfy its obligations hereunder.
(35) "Computer Systems" means hardware, software, and firmware
product (including embedded microcontrollers in non-computer
equipment).
(36) "Continuation Period" has the meaning set forth in Section
8.11(e)(ii).
(37) "Conveying Party" means, with respect to the DLC Assets,
DLC, and with respect to the FE Assets, the applicable FE
Subsidiaries.
(38) "Direct Claim" means any claim by an Indemnitee on account
of an Indemnifiable Loss that does not result from a Third Party
Claim.
(39) "DLC" means Duquesne Light Company, a Pennsylvania
corporation.
(40) "DLC Agreements" means the CAPCO Agreements and any
contracts, agreements, licenses and personal property leases entered
into by DLC or one of its Affiliates with respect to the ownership,
operation or maintenance of the DLC Assets, whether or not disclosed
on Schedule 6.9(a), but excluding the DLC Real Property Leases.
(41) "DLC Assets" has the meaning set forth in Section 3.1.
(42) "DLC Assignment and Assumption Agreements" means the
Assignment and Assumption Agreements between DLC and each applicable
FE Subsidiary, substantially in the form of Exhibit D attached hereto.
(43) "DLC Capital Expenditures" means capital additions to or
replacements of property, plants and equipment included in the DLC
Assets and other expenditures or repairs on property, plants and
equipment included in the DLC Assets that would be capitalized by DLC
in accordance with its normal accounting policies.
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(44) "DLC Closing Payments" has the meaning set forth in Section
5.2(b).
(45) "DLC Emission Reduction Credits" means the Emission
Reduction Credits related to DLC's ownership share of the DLC Plants.
(46) "DLC Environmental Permits" means the permits,
registrations, certificates, certifications, licenses and
authorizations, consents and approvals of Governmental Authorities
required under Environmental Laws and held by DLC with respect to the
DLC Assets.
(47) "DLC Estimated Closing Payment" has the meaning set forth in
Section 5.2(d).
(48) "DLC Estimated Closing Statement" has the meaning set forth
in Section 5.2(d).
(49) "DLC Indemnifiable Loss" has the meaning set forth in
Section 10.1(a).
(50) "DLC Indemnitee" has the meaning set forth in Section
10.1(a).
(51) "DLC Inventories" means materials, spare parts, consumable
supplies and chemical inventories relating to the operation of any DLC
Plant, provided that "DLC Inventories" shall not include Capital Spare
Parts, Fuel Supplies, DLC SO2 Emission Allowances or DLC NOx Emission
Allowances, and provided further that reference to "DLC Inventories"
shall be limited to the extent of DLC's proportionate ownership
interest therein.
(52) "DLC Intellectual Property" has the meaning set forth in
Section 3.1(l).
(53) "DLC Material Adverse Effect" means any change in, or effect
on, any DLC Plant, from or after the date hereof that is materially
adverse to the operations or condition (financial or otherwise) of
such DLC Plant, other than: (a) any change affecting the
international, national, regional or local electric industry as a
whole and not specific and exclusive to such DLC Plant; (b) any change
or effect resulting from changes in the international, national,
regional or local wholesale or retail markets for electric power; (c)
any change or effect resulting from changes in the international,
national, regional or local markets for any fuel used in connection
with such DLC Plant; (d) any change or effect resulting from changes
in the North American, national, regional or local electric
transmission systems or operations thereof; (e) any materially adverse
change in or effect on such DLC Plant which is cured (including by the
payment of money) by DLC before the Termination Date; and (f) any
order of any court or Governmental Authority applicable to the
providers of generation, transmission or distribution of electricity
generally that imposes restrictions, regulations or other requirements
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thereon, including any order with respect to an independent system
operator or retail access in Pennsylvania or Ohio.
(54) "DLC Nuclear Assets" has the meaning set forth in the
Recitals.
(55) "DLC NOx Emission Allowances" means NOx Emission Allowances
related to DLC's ownership share of any of the DLC Plants.
(56) "DLC Permits" means any permits, licenses, registrations,
franchises and other authorizations, consents and approvals of
Governmental Authorities (but in each case excluding DLC Environmental
Permits) held by DLC with respect to the DLC Assets.
(57) "DLC Plants" means Sammis, Mansfield, and Eastlake.
(58) "DLC Real Property" has the meaning set forth in Section
3.1(a). Any reference to the DLC Real Property includes, by
definition, DLC's right, title and interest in and to the surface and
subsurface elements, including the soils and groundwater present at
the DLC Real Property, and any reference to items "at the DLC Real
Property" includes all items "at, on, in, upon, over, across, under
and within" the DLC Real Property.
(59) "DLC Real Property Leases" has the meaning set forth in
Section 6.5.
(60) "DLC Required Regulatory Approvals" means the Required
Regulatory Approvals listed in Schedule 6.3(b).
(61) "DLC Representatives" means DLC's authorized
representatives, including without limitation, its professional and
financial advisors and, to the extent expressly designated by DLC, any
Auction Participant and/or the Winning Bidder and their respective
professional and financial advisors.
(62) "DLC SO2 Emission Allowances" means SO2 Emission Allowances
related to DLC's ownership share of any of the DLC Plants.
(63) "DLC Tangible Personal Property" has the meaning set forth
in Section 3.1(c).
(64) "DLC Transferable Permits" means those DLC Permits and DLC
Environmental Permits with respect to the DLC Assets which may be
transferred to an FE Subsidiary without a filing with, notice to,
consent of or approval of any Governmental Authority, as set forth in
Schedule 1.1(64).
(65) "DLC Transmission Assets" means all Transmission Assets of
DLC or any of its Affiliates located on or forming a part of DLC Real
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Property, but excluding any transmission assets that are to be
transferred pursuant to the Electrical Facilities Agreement.
(66) "DQE" means DQE, Inc., a Pennsylvania corporation and the
parent company of DLC.
(67) "Easements" means the easements and access rights to be
granted by an applicable Winning Bidder to the corresponding FE
Subsidiary pursuant to an FE Easement and Attachment Agreement,
including, without limitation, easements authorizing access, use,
maintenance, construction, repair, replacement and other activities
with respect to the applicable FE Assets, as further described in such
FE Easement and Attachment Agreement.
(68) "Eastlake" means the electrical generation plant known as
Eastlake Unit No. 5.
(69) "Eastlake Litigation" has the meaning set forth in Section
5.9.
(70) "Electrical Facilities Agreement" means that certain
Electrical Facilities Agreement executed by DLC and the applicable FE
Subsidiaries, substantially in the form of Exhibit J attached hereto.
(71) "Emission Reduction Credits" means credits, in units that
are established by the Governmental Authority with jurisdiction over
the relevant Plant that has obtained the credits, resulting from
reductions in the emissions of air pollutants from an emitting source
or facility (including, without limitation, and to the extent
allowable under applicable law, reductions resulting from shutdowns or
control of emissions beyond that required by applicable law) that: (a)
have been identified by the PaDEP as complying with applicable
Pennsylvania law governing the establishment of such credits
(including, without limitation, that such emissions reductions are
enforceable, permanent, quantifiable and surplus) and listed in the
Emissions Reduction Credit Registry maintained by the PaDEP or with
respect to which such identification and listing are pending; or (b)
have been certified by any other applicable Governmental Authority as
complying with the law and regulations governing the establishment of
such credits (including, without limitation, certification that such
emissions reductions are enforceable, permanent, quantifiable and
surplus). The term includes Emission Reduction Credits that have been
approved by the PaDEP and are awaiting USEPA approval. The term also
includes certified air emissions reductions, as described above,
regardless as to whether the Governmental Authority certifying such
reductions designates such certified air emissions reductions by a
name other than "emission reduction credits."
(72) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and
use limitations, conservation easements, deed restrictions,
encumbrances and charges of any kind.
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(73) "Environmental Claim" means any and all pending and/or
threatened administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints,
requests for information, proceedings, or other written communication,
whether criminal or civil, pursuant to or relating to any applicable
Environmental Law or pursuant to a common law theory, by any Person
(including, but not limited to, any Governmental Authority, private
person and citizens' group) based upon, alleging, asserting or
claiming any actual or potential (a) violation of, or liability under,
any Environmental Law, (b) violation of any Environmental Permit, or
(c) liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property
damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to any Environmental Condition or any
Release or threatened Release into the environment of any Regulated
Substances at any location related to the Exchange Assets, including,
but not limited to, any Off-Site Location to which Regulated
Substances, or materials containing Regulated Substances, were sent
for handling, storage, treatment, or disposal.
(74) "Environmental Condition" means the presence or Release of a
Regulated Substance (other than a naturally-occurring substance) on or
in environmental media, or structures on Real Property, at an Off-Site
Location or other property (including the presence in surface water,
groundwater, soils or subsurface strata, or air), including the
subsequent migration of any such Regulated Substance, regardless of
when such presence or Release occurred or is discovered.
(75) "Environmental Laws" means 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 pollution or
protection of the environment, natural resources or human health and
safety, including, without limitation, laws relating to Releases or
threatened Releases of Regulated Substances (including, without
limitation, Releases to ambient air, surface water, groundwater, land,
surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
Release, transport, disposal or handling of Regulated Substances.
"Environmental Laws" include: (a) with respect to federal law, CERCLA,
the Hazardous Materials Transportation Act (49 U.S.C. sections 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. sections
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
sections 1251 et seq.), the Clean Air Act (42 U.S.C. sections 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. sections 2601 et
seq.), the Oil Pollution Act (33 U.S.C. sections 2701 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. sections
11001 et seq.), the Occupational Safety and Health Act (29 U.S.C.
sections 651 et seq.), the Safe Drinking Water Act (42 U.S.C. section
300f et seq.), the Surface Mine Conservation and Reclamation Act (30
U.S.C. sections 1251-1279), and regulations adopted pursuant thereto,
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and counterpart state and local laws, and regulations adopted pursuant
thereto; (b) with respect to Pennsylvania law, the Pennsylvania Clean
Streams Law (35 P.S. section 691.1 et seq.), the Pennsylvania Air
Pollution Control Act (35 P.S. section 4001 et seq.), the Pennsylvania
Solid Waste Management Act (35 P.S. section 6018.101 et seq.), the
Pennsylvania Storage Tank and Spill Prevention Act (35 P.S. section
6021.101 et seq.), the Pennsylvania Safe Drinking Water Act (35 P.S.
section 721.1 et seq.), the Pennsylvania Sewage Facilities Act (35
P.S. section 750.1 et seq.), the Pennsylvania Hazardous Sites Cleanup
Act (35 P.S. section 6020.101 et seq.), the Pennsylvania Land
Recycling and Environmental Remediation Standards Act (35 P.S. section
6026.101 et seq.), the Pennsylvania Surface Mining Conservation and
Reclamation Act (52 P.S. section 1396.1 et seq.), the Coal Refuse
Disposal Control Act (52 P.S. section 30.51 et seq.), the Non-Coal
Surface Mining and Reclamation Act, (52 P.S. section3301 et seq.), the
Pennsylvania Worker and Community Right-to-Know Act, 35 P.S. section
7301 et seq.), the Pennsylvania Hazardous Material Emergency Planning
and Response Act, 35 P.S. section 6022.101 et seq.), and regulations
adopted pursuant thereto; and (c) with respect to Ohio law, the Ohio
Rev. Code Ann. section 1501.30 et seq. (Diversion of Waters), Ohio
Rev. Code Ann.section 1506.01 et seq. (Coastal Management); Ohio Rev.
Code Ann. section 1509.01 et seq. (Oil and Gas), Ohio Rev. Code Ann.
section 1513.01 et seq. (Coal Surface Mining), Ohio Rev. Code Ann.
section 1520.01 et seq. (Canal Lands); Ohio Rev. Code Ann. section
3704.01 et seq. (Air Pollution Control), Ohio Rev. Code Ann. section
3710.01 et seq. (Asbestos Abatement), Ohio Rev. Code Ann. section
3714.01 et seq. (Construction and Demolition Debris), Ohio Rev. Code
Ann. section 3734.01 et seq. (Solid and Hazardous Wastes), Ohio Rev.
Code Ann. section 3737.87 et seq. (Petroleum Underground Storage
Tanks), Ohio Rev. Code Ann. section 3742.01 et seq. (Lead Abatement
and Testing), Ohio Rev. Code Ann. section 3746.01 et seq. (Voluntary
Cleanup of Contamination Property), Ohio Rev. Code Ann. section
3747.01 et seq. (Low-Level Radioactive Waste), Ohio Rev. Code Ann.
section 3748.01 et seq. (Radiation Control), Ohio Rev. Code Ann.
section 3750.01 et seq. (Emergency Planning), Ohio Rev. Code Ann.
section 3751.01 et seq. (Hazardous Substances), Ohio Rev. Code Ann.
section 3752.01 et seq. (Cessation of Chemical Handling Operations),
Ohio Rev. Code Ann. section 3767.01 et seq. (Nuisances), Ohio Rev.
Code Ann. section 4913.01 et seq. (Public Utilities Commission-Acid
Rain Control), Ohio Rev. Code Ann. section 6109.01 et seq. (Safe
Drinking Water), Ohio Rev. Code Ann. section 6111.01 et seq. (Water
Pollution Control), and regulations adopted pursuant thereto.
(76) "Environmental Permits" means the DLC Environmental Permits
and the FE Environmental Permits.
(77) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(78) "ERISA Affiliate" means a trade or business, whether or not
incorporated, that together with a Party would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
(79) "Estimated Closing Payment" means the DLC Estimated Closing
Payment or the FE Estimated Closing Payment, as appropriate.
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(80) "Estimated Closing Statement" means the DLC Estimated
Closing Statement or the FE Estimated Closing Statement, as
appropriate.
(81) "Exchange Agreements" means this Agreement and the Nuclear
Conveyance Agreement.
(82) "Exchange Assets" means the DLC Assets and the FE Assets.
(83) "Exchange Closing" has the meaning set forth in Section 5.1.
(84) "Exchange Closing Date" means the date on which the Exchange
Closing occurs.
(85) "Excluded DLC Assets" has the meaning set forth in Section
3.2.
(86) "Excluded DLC Liabilities" has the meaning set forth in
Section 3.4.
(87) "Excluded FE Assets" has the meaning set forth in Section
4.2.
(88) "Excluded FE Liabilities" has the meaning set forth in
Section 4.4.
(89) "Excluded Liabilities" means the Excluded DLC Liabilities
and the Excluded FE Liabilities.
(90) "Exempt Facilities" means those DLC facilities listed in
Schedule 1.1 (90) and those FE Subsidiaries facilities listed in
Schedule 1.1 (90), as the case may be.
(91) "Facilities Act" has the meaning set forth in Section 12.13.
(92) "FE" means FirstEnergy Corp., an Ohio corporation and the
parent company of the FE Subsidiaries.
(93) "FE (Accrued Liability) Assignment and Assumption
Agreements" means the FE (Accrued Liability) Assignment and Assumption
Agreements between DLC and the applicable FE Subsidiary, substantially
in the form of Exhibit F attached hereto.
(94) "FE Agreements" means any contracts, agreements, licenses
and personal property leases entered into by an FE Subsidiary or an
Affiliate thereof with respect to the ownership, operation or
maintenance of the FE Assets, whether or not disclosed on Schedule
7.11(a), including, without limitation, the Local 140 CBA (to the
extent applicable to FE Transferred Union Employees as provided in
Section 8.11 hereof) and the Local 270 CBA (to the extent applicable
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to Local 270 Employees as provided in Section 8.11 hereof), but
excluding the FE Real Property Leases and FE Intellectual Property.
(95) "FE Assets" has the meaning set forth in Section 4.1.
(96) "FE Assignment and Assumption Agreements" means the
Assignment and Assumption Agreements between the applicable FE
Subsidiary and DLC or, if DLC so directs, the corresponding Winning
Bidder, substantially in the form of Exhibit G attached hereto.
(97) "FE Capital Expenditures" means capital additions to or
replacements of property, plants and equipment included in the FE
Assets and other expenditures or repairs on property, plants and
equipment included in the FE Assets that would be capitalized by the
FE Subsidiary making such expenditure in accordance with its normal
accounting policies.
(98) "FE Closing Payments" has the meaning set forth in Section
5.2(c).
(99) "FE Connection Agreements" means the FE Connection
Agreements to be entered into by each FE Subsidiary and DLC or, if DLC
so directs, the corresponding Winning Bidder, with respect to Avon
Lake, Niles or New Castle, as the case may be, substantially in the
form of Exhibit E attached hereto.
(100) "FE Easement and Attachment Agreements" means the Easement,
License and Attachment Agreements to be entered into by the applicable
FE Subsidiary and DLC or, if DLC so directs, the corresponding Winning
Bidder, with respect to the FE Assets to be acquired by DLC or such
Winning Bidder, as the case may be, substantially in the form of
Exhibit H attached hereto.
(101) "FE Emission Reduction Credits" means the Emission
Reduction Credits relating to any of the FE Plants.
(102) "FE Environmental Permits" means the permits,
registrations, certificates, certifications, licenses and
authorizations, consents and approvals of Governmental Authorities
required under Environmental Laws held by each FE Subsidiary with
respect to its FE Assets.
(103) "FE Environmental Reports" has the meaning set forth in
Section 7.6.
(104) "FE Estimated Closing Payment" has the meaning set forth in
Section 5.2(d).
(105) "FE Estimated Closing Statement" has the meaning set forth
in Section 5.2(d).
(106) "FE Indemnifiable Losses" has the meaning set forth in
Section 10.2.
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(107) "FE Indemnitee" means FE Subsidiaries, their officers,
directors, employees, shareholders, Affiliates and agents.
(108) "FE Intellectual Property" has the meaning set forth in
Section 4.1(k).
(109) "FE Inventories" means materials, spare parts, consumable
supplies and chemical inventories relating to the operation of any FE
Plant, provided that "FE Inventories" shall not include Capital Spare
Parts, Fuel Supplies, FE SO2 Emission Allowances or FE NOx Emission
Allowances.
(110) "FE Material Adverse Effect" means any change in, or effect
on any FE Plant, from or after the date hereof, that is materially
adverse to the operations or condition (financial or otherwise) of
such FE Plant, taken as a whole, other than: (a) any change affecting
the international, national, regional or local electric industry as a
whole and not specific and exclusive to such FE Plant; (b) any change
or effect resulting from changes in the international, national,
regional or local wholesale or retail markets for electric power; (c)
any change or effect resulting from changes in the international,
national, regional or local markets for any fuel used in connection
with such FE Plant; (d) any change or effect resulting from changes in
the North American, national, regional or local electric transmission
systems or operations thereof; (e) any materially adverse change in or
effect on such FE Plant which is cured (including by the payment of
money) by the FE Subsidiaries before the Termination Date; and (f) any
order of any court or Governmental Authority applicable to providers
of generation, transmission or distribution of electricity generally
that imposes restrictions, regulations or other requirements thereon,
including any order with respect to an independent system operator or
retail access in Pennsylvania or Ohio.
(111) "FE Must-Run Agreements" means the FE Must-Run Agreements
to be entered into by each FE Subsidiary and DLC or, if DLC so
directs, the corresponding Winning Bidder, with respect to Avon Lake,
Niles or New Castle, as the case may be, substantially in the form of
Exhibit R attached hereto.
(112) "FE NOx Emission Allowances" means NOx Emission Allowances
related to any of the FE Plants.
(113) "FE Permits" means any permits, licenses, registrations,
franchises and other authorizations, consents and approvals of
Governmental Authorities (but in each case excluding FE Environmental
Permits) held by the FE Subsidiaries with respect to the FE Assets.
(114) "FE Plans" means any Benefit Plan of any FE Subsidiary or
any ERISA Affiliate thereof or to which any FE Subsidiary or any ERISA
Affiliate thereof contributed thereunder, including any multi-employer
plan.
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(115) "FE Plants" means Avon Lake, New Castle and Niles.
(116) "FERC" means the Federal Energy Regulatory Commission or
any successor agency thereto.
(117) "FE Real Property" has the meaning set forth in Section
4.1(a). Any reference to the FE Real Property includes, by definition,
the right, title and interest of the applicable FE Subsidiary in and
to the surface and subsurface elements, including the soils and
groundwater present at the FE Real Property, and any reference to
items "at the FE Real Property" includes all items "at, on, in, upon,
over, across, under and within" the FE Real Property.
(118) "FE Real Property Leases" has the meaning set forth in
Section 7.5.
(119) "FE Required Regulatory Approvals" means the Required
Regulatory Approvals listed in Schedule 7.3(b).
(120) "FE Representatives" means an FE Subsidiary's authorized
representatives, including without limitation, their professional and
financial advisors.
(121) "FE Savings Plans" means any defined contribution pension
plan maintained by an FE Subsidiary or any ERISA Affiliate thereof for
the benefit of the FE Transferred Employees.
(122) "FE SO2 Emission Allowances" means SO2 Emission Allowances
related to any of the FE Plants.
(123) "FE Subsidiaries" has the meaning set forth in the
Recitals.
(124) "FE Subsidiaries SEC Reports" has the meaning set forth in
Section 7.20.
(125) "FE Tangible Personal Property" has the meaning set forth
in Section 4.1(c).
(126) "FE Transferable Permits" means those FE Permits and FE
Environmental Permits with respect to the FE Assets which may be
transferred to DLC or a Winning Bidder without a filing with, notice
to, consent of or approval of any Governmental Authority, as set forth
in Schedule 1.1(126).
(127) "FE Transferred Employee Records" means records related to
an FE Subsidiary's employees who become employees of the applicable
Winning Bidder but only to the extent such records pertain to (a)
skill and development training and biographies, (b) seniority
histories, (c) salary and benefit information, (d) Occupational,
Safety and Health Administration reports, or (e) active medical
restriction forms.
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(128) "FE Transferred Employees" means FE Transferred Non-Union
Employees and FE Transferred Union Employees.
(129) "FE Transferred Non-Union Employees" has the meaning set
forth in Section 8.11(c).
(130) "FE Transferred Union Employees" has the meaning set forth
in Section 8.11(b).
(131) "FE Transmission Assets" means the Transmission Assets of
each FE Subsidiary or any of their Affiliates located on or forming a
part of the FE Real Property.
(132) "Final Adjustment" has the meaning set forth in Section
5.2(f).
(133) "Final Order" means an action by the relevant Governmental
Authority that has not been reversed, stayed, enjoined, set aside,
annulled or suspended and/or with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired.
(134) "FIRPTA Affidavit" means the Foreign Investment in Real
Property Tax Act Certification and Affidavit to be executed by the
applicable FE Subsidiary and DLC, substantially in the form of Exhibit
I hereto.
(135) "Fuel Supplies" means the supplies of coal, fuel oil,
natural gas or alternative fuels related to the operation of any Plant
and located at or in transit to such Plant.
(136) "GAAP" means U.S. generally accepted accounting principles.
(137) "Generation Exchange" has the meaning set forth in Section
2.1.
(138) "Good Utility Practices" mean any practices, methods,
standards, guides or acts, as applicable, that are:
(a) required by any Governmental Authority, regional or
national reliability council, or national trade organization,
including NERC, ECAR, Edison Electric Institute, or American Society
of Mechanical Engineers, or the successor of any of them, whether or
not the Party whose conduct is at issue is a member thereof;
(b) otherwise engaged in or approved by a significant
portion of the electric utility industry during the relevant time
period which in the exercise of reasonable judgment in light of the
facts known or that should have been known at the time a decision was
made, could have been expected to accomplish the desired result in a
manner consistent with law, regulation, good business practices,
generation, transmission, and distribution reliability, safety,
environmental protection, economy, and expediency. Good Utility
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Practice is intended to be acceptable practices, methods, or acts
generally accepted in the region, and is not intended to be limited to
the optimum practices, methods, or acts to the exclusion of all
others; and
(c) reasonably necessary to maintain the reliability of the
Plants.
(139) "Governmental Authority" means any foreign, federal, state,
local or other governmental, regulatory or administrative agency,
court, commission, department, board, or other governmental
subdivision, legislature, rulemaking board, court, tribunal,
arbitrating body or other governmental authority.
(140) "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(141) "Income Tax" means any federal, state, local or foreign Tax
(a) based upon, measured by or calculated with respect to gross or 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.
(142) "Indemnifiable Loss" means any claim, demand, suit, loss,
liability, damage, obligation, payment, cost or expense (including,
without limitation, the cost and expense of any action, suit,
proceeding, assessment, judgment, settlement or compromise relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith).
(143) "Indemnifying Party" means a Party obligated to provide
indemnification under this Agreement.
(144) "Indemnitee" means a Person entitled to receive
indemnification under this Agreement.
(145) "Independent Accounting Firm" means such independent
accounting firm of national reputation as is mutually appointed by the
applicable FE Subsidiaries and DLC.
(146) "Information Memorandum" means the memorandum prepared by
DLC and its advisors to be distributed to potential Auction
Participants.
(147) "Inspection" means all tests, reviews, examinations,
inspections, investigations, verifications, samplings and similar
activities conducted by an Acquiring Party or its authorized
representatives, including without limitation, its professional and
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financial advisors, with respect to the Exchange Assets prior to the
Exchange Closing.
(148) "Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, inventions, copyrights and
copyright rights, and all pending applications for registrations of
patents, trademarks, and copyrights, necessary for the operation and
maintenance of the applicable Exchange Assets, as set forth as part of
Schedule 3.1(1) or 4.1(k), as the case may be.
(149) "Inventories" means the DLC Inventories and the FE
Inventories.
(150) "Knowledge" means the actual knowledge of the corporate
officers or Plant managers of the specified Person charged with
responsibility for the particular function as of the date of this
Agreement, or, with respect to any certificate delivered pursuant to
this Agreement, the date of delivery of the certificate.
(151) "Local 140 CBA" has the meaning set forth in Section
8.11(b).
(152) "Local 270 CBA" has the meaning set forth in Section
8.11(m).
(153) "Local 270 Employees" has the meaning set forth in Section
8.11(m).
(154) "Mansfield" means the electrical generation plants known as
Bruce Mansfield Units Nos. 1, 2 & 3.
(155) "Material Adverse Effect" means an FE Material Adverse
Effect or a DLC Material Adverse Effect, as applicable.
(156) "New Castle" means all generating units and related assets
located at the generating station known as New Castle as more fully
identified on Schedule 4.1(New Castle), attached hereto.
(157) "Niles" means all generating units and related assets
located at the generating station known as Niles as more fully
identified on Schedule 4.1(Niles), attached hereto.
(158) "Non-Qualifying Offer" means an offer to FE Transferred
Non-Union Employees that is either less than 100% of such employee's
current total annual cash compensation at the time the offer was made
(consisting of base salary and target incentive bonus) or requires, as
a condition of acceptance, a relocation of residence as described in
Section 8.11(f)(iii).
(159) "Non-Union Employees" has the meaning set forth in Section
8.11(c).
(160) "NOx Budget Program" means Nitrous Oxides Budget Program,
which is a statutory or regulatory program promulgated by the United
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States or a state pursuant to which the United States or state
provides for a limit on the nitrous oxides that can be emitted by all
sources covered by the program and establishes allowances or
authorizations, which in total are equal to the amount of nitrous
oxides allowed by the limit, where each allowance or authorization
represents a "right" to emit a unit of nitrous oxides, as the means
for ensuring compliance with the limit.
(161) "NOx Emission Allowance" means (a) an authorization by the
PaDEP under its NOx Budget Program authorizing the emission of one ton
of nitrous oxides during the ozone season, as such season is defined
by the PaDEP; (b) an authorization by the OEPA under any future NOx
Budget Program authorizing the emission of one ton of nitrous oxides
during the ozone season, as such season is defined by the OEPA; or (c)
an authorization by USEPA under any future NOx Budget program
promulgated by the USEPA, including, but not limited to, any future
program implemented in lieu of a state NOx Budget Program, authorizing
the emission of one ton of nitrous oxides during the ozone season, as
such season is defined by the USEPA.
(162) "Nuclear Conveyance Agreement" has the meaning set forth in
the Recitals.
(163) "OEPA" means the Ohio Environmental Protection Agency and
any successor agency thereto.
(164) "OEC" means Ohio Edison Company, a subsidiary of FE and an
Ohio corporation.
(165) "Off-Site Location" means any real property other than the
Real Property.
(166) "PaDEP" means the Pennsylvania Department of Environmental
Protection and any successor agency thereto.
(167) "PaPUC" means the Pennsylvania Public Utility Commission
and any successor agency thereto.
(168) "Party" has the meaning set forth in the Recitals.
(169) "Permits" means with respect to the Exchange Assets, any
permits, licenses, registrations, franchises and other authorizations,
consents and approvals of Governmental Authorities (but in each case
excluding Environmental Permits) held by DLC or any FE Subsidiary, as
applicable.
(170) "Permitted Encumbrances (DLC Assets)" means the permitted
liens and encumbrances as set forth in Schedule 1.1(170).
(171) "Permitted Encumbrances (FE Assets)" means with respect to
the FE Assets: (a) the Easements; (b) those exceptions to title listed
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in Schedule 7.9; (c) statutory liens for Taxes or other governmental
charges or assessments not yet due or delinquent or the validity of
which is being contested in good faith by appropriate proceedings
provided that the aggregate amount being so contested does not exceed
$100,000; (d) mechanics', carriers', workers', repairers' and other
similar liens arising or incurred in the ordinary course of business
relating to obligations as to which there is no default on the part of
the applicable FE Subsidiary or the validity of which are being
contested in good faith, and which do not, individually or in the
aggregate, exceed $100,000; (e) zoning, entitlement, conservation
restriction and other land use and environmental regulations by
Governmental Authorities; and (f) other liens, imperfections in or
failure of title, charges, easements, restrictions and Encumbrances
which do not materially, individually or in the aggregate, detract
from the value of the FE Assets as currently used or materially
interfere with the present use of the FE Assets and neither secure
indebtedness, nor individually or in the aggregate create an FE
Material Adverse Effect.
(172) "Person" means any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
organization or governmental entity or any department or agency
thereof.
(173) "Plant" means, with respect to the DLC Assets, any of the
DLC Plants, and with respect to the FE Assets, any of the FE Plants.
(174) "PPC" means Pennsylvania Power Company, a subsidiary of OEC
and a Pennsylvania corporation.
(175) "Proposed DLC Final Adjustment" has the meaning set forth
in Section 5.2(e).
(176) "Proposed FE Final Adjustment" has the meaning set forth in
Section 5.2(e).
(177) "Proposed Final Adjustment" means the Proposed DLC Final
Adjustment or the Proposed FE Final Adjustment, as appropriate.
(178) "Proprietary Information" of a Party means all information
about the Party or its Affiliates, including their respective
properties or operations, furnished to the other Party or its
Representatives by the Party or its Representatives, after the date
hereof, regardless of the manner or medium in which it is furnished
and all analyses, reports, tests or other information created or
prepared by, or on behalf of, a Party during the performance of "Phase
I" or "Phase II" environmental site assessments. 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 other Party or its Representatives; (b) was
available to the other Party on a nonconfidential basis prior to its
disclosure by the Party or its Representatives; (c) becomes available
to the other Party on a nonconfidential basis from a person, other
than the Party or its Representatives, who is not otherwise bound by a
confidentiality agreement with the Party or its Representatives, or is
not otherwise under any obligation to the Party or any of its
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Representatives not to transmit the information to the other Party or
its Representatives; or (d) is independently developed by the other
Party.
(179) "PUCO" means the Public Utilities Commission of the State
of Ohio and any successor agency thereto.
(180) "Qualifying Offer" means an offer to an FE Transferred
Non-Union Employee of the same or similar job that is at least 100% of
such employee's current total annual cash compensation at the time the
offer was made (consisting of base salary and target incentive bonus)
and does not require, as a condition of acceptance, a relocation of
residence as described in Section 8.11(f)(iii).
(181) "Real Property" means the DLC Real Property or the FE Real
Property, as applicable.
(182) "Real Property Leases" means DLC Real Property Leases and
FE Real Property Leases, as applicable.
(183) "Regulated Substances" means (a) any petrochemical or
petroleum products, oil or coal ash, radioactive materials, radon gas,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and dielectric fluid containing
polychlorinated biphenyls; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "hazardous constituents,"
"restricted hazardous materials," "extremely hazardous substances,"
"toxic substances," "contaminants," "pollutants," "toxic pollutants"
or words of similar meaning and regulatory effect under any applicable
Environmental Law; and (c) any other chemical, material or substance,
exposure to which or whose discharge, emission, disposal or Release is
prohibited, limited or regulated by any applicable Environmental Law.
(184) "Regulatory Material Adverse Effect" shall occur where a
Final Order with respect to Required Regulatory Approvals contains
terms and conditions that are materially adverse to the financial
condition, prospects, properties, operations or results of operations
of the affected Party, taken as a whole including all Subsidiaries and
Affiliates, to which the terms and conditions of such Final Order
apply; provided that, in addition to the foregoing, any such Final
Order shall be deemed to constitute a Regulatory Material Adverse
Effect (a) as to FE Subsidiaries or their Affiliates, if it prohibits
such FE Subsidiaries or Affiliates from transferring their
transmission assets to American Transmission Systems, Inc. (or its
successor and assigns), is inconsistent with the FERC's determination
in Ohio Edison Co. et al., 81 FERC P. 61,110 (1997) that "we expect
FirstEnergy to participate in the Midwest ISO or another appropriate
ISO," or requires the FE Subsidiaries or their Affiliates to divest
generating plants other than Avon Lake, Newcastle or Niles, and (b) as
to DLC, if it disallows from recovery in rates a material portion of
the expenses related to the Generation Exchange.
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(185) "Release" means release, spill, leak, discharge, dispose
of, pump, pour, emit, empty, inject, leach, dump or allow to escape
into or through the environment.
(186) "Remediation" means any action taken in the investigation,
removal, confinement, cleanup, treatment, or monitoring of an
Environmental Condition on Real Property or Off-Site Location,
including, without limitation, (a) obtaining any Permits or
Environmental Permits required for such remedial activities, and (b)
implementation of any engineering controls and institutional controls.
The term "Remediation" includes, without limitation, any action which
constitutes "removal action" or "remedial action" as defined by
Section 101 of CERCLA, 42 U.S.C. section 6901(23) and (24); any action
which constitutes a "response" as defined by Section 102 of the
Pennsylvania Hazardous Sites Cleanup Act, 35 P.S. section 6020.103; or
any action which constitutes a "remedy" or "remedial activities" as
defined by Ohio Rev. Code Ann. section 3746.01(N).
(187) "Representatives" means the DLC Representatives and the FE
Representatives, as applicable.
(188) "Required Regulatory Approvals" means with respect to a
Party, any consent or approval of, filing with, or notice to, any
Governmental Authority that is necessary for the execution and
delivery of this Agreement by such Party or the consummation of the
transactions contemplated hereby, other than such consents, approvals,
filings or notices which are not required in the ordinary course to be
obtained prior to the Exchange Closing and the transfer of the
Exchange Assets or which, if not obtained or made, will not prevent
such Party from performing its material obligations hereunder.
(189) "Revenue Bonds" has the meaning set forth in Section
8.16(a).
(190) "Sammis" means the electrical generation plant known as
W.H. Sammis Unit No. 7.
(191) "SEC" means the Securities and Exchange Commission and any
successor agency thereto.
(192) "Settlement Agreement" means the settlement agreement
pertaining to the East Lake Litigation substantially in the form of
Exhibit K attached hereto.
(193) "SO2 Emission Allowance" means an authorization by the
Administrator of the USEPA under the Clean Air Act, 42 U.S.C. section
7401, et seq., to emit one ton of sulfur dioxide during or after a
specified calendar year.
(194) "Subsidiary" when used in reference to any Person means any
entity of which outstanding securities, having ordinary voting power
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to elect a majority of the Board of Directors or other Persons
performing similar functions of such entity are owned directly or
indirectly by such Person.
(195) "Support Agreement" means that certain Support Agreement to
be executed by FE and DLC providing, among other things, that FE will
provide a financial commitment to ensure that the net proceeds of the
Auction will be sufficient, at a minimum, to maintain or reduce the
level of stranded cost recovery approved by the PaPUC in its May 29,
1998 restructuring order.
(196) "Taxes" means all taxes, charges, fees, levies, penalties
or other assessments imposed by any federal, state, local or foreign
taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, withholding, social
security, gross receipts, license, stamp, occupation, employment or
other taxes, including any interest, penalties or additions
attributable thereto.
(197) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any
schedule or related or supporting information) required to be supplied
to any taxing authority with respect to Taxes including amendments
thereto.
(198) "TEC" means The Toledo Edison Company, a subsidiary of FE
and an Ohio corporation.
(199) "Termination Benefits" has the meaning set forth in Section
8.11(g).
(200) "Termination Date" has the meaning set forth in Section
11.1(b).
(201) "Third Party Claim" means any claim, action, or proceeding
made or brought by any Person who is not (a) a Party to this
Agreement, (b) an Affiliate of a Party to this Agreement, or (c) a
Winning Bidder or one of its Affiliates.
(202) "Transfer Taxes" means any real property transfer or gains
tax, sales tax, conveyance fee, use tax, stamp tax, stock transfer tax
or other similar tax, including any related penalties, interest and
additions to tax.
(203) "Transferable Permit" means a DLC Transferable Permit or an
FE Transferable Permit, as the case may be.
(204) "Transmission Assets" means with respect to a Plant, the
electrical transmission and distribution facilities (as opposed to
generation facilities) located on Real Property or forming part of
such Plant (whether or not regarded as a "transmission" or
"generation" asset for regulatory or accounting purposes), including
all switchyard facilities, step-up transformers, substation facilities
and support equipment, as well as all permits, contracts and
warranties, to the extent they relate to such transmission and
distribution assets.
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(205) "Union Employees" has the meaning set forth in Section
8.11(b).
(206) "USEPA" means the United States Environmental Protection
Agency and any successor agency thereto.
(207) "UWUA" means Utility Workers Union of America.
(208) "WARN Act" means the Federal Worker Adjustment Retraining
and Notification Act of 1988, as amended.
(209) "Warranty Deed" means a special warranty deed or limited
warranty deed, as applicable, substantially in the form of Exhibit L
attached hereto (with respect to FE Real Property) or Exhibit M
attached hereto (with respect to DLC Real Property).
(210) "Winning Bidder" means the party or parties that enter into
an Auction Agreement. If there is more than one Winning Bidder, the
rights and obligations of each Winning Bidder described herein shall
relate to the FE Plant(s) to be acquired by that Winning Bidder and
each such Winning Bidder shall enter into an Auction Agreement with
the corresponding FE Subsidiary (for the purpose of such FE Subsidiary
making certain representations, warranties, covenants,
indemnifications, assignments and deliveries under such Auction
Agreement). For any provision which refers to or requires action by
the Winning Bidder, DLC may elect to perform as if it were the Winning
Bidder. If there shall be no Winning Bidder for any portion of the FE
Assets then, for the purposes of this Agreement, DLC shall be the
Winning Bidder with respect to such portion of the FE Assets.
(211) "Winning Bidder Indemnitee" has the meaning set forth in
Section 10.1(f).
(212) "Year 2000 Compliant" means with respect to any Party, that
the Computer Systems of such Party will correctly differentiate
between years, in different centuries, that end in the same two (2)
digits, and will accurately process date/time data (including, but not
limited to, calculating, comparing and sequencing) from, into, and
between the twentieth and twenty-first centuries, including leap year
calculations. "Year 2000 Compliance" has a meaning correlative to the
foregoing.
1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires, the singular shall include the plural, the masculine
shall include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." In addition, (i)
references to a Section, Article, Exhibit or Schedule shall mean a Section,
Article, Exhibit or Schedule of this Agreement; (ii) reference to a given
agreement or instrument shall be a reference to that agreement or instrument as
modified, amended, supplemented or restated through the date as of which such
reference is made; (iii) references to any Person shall include its permitted
successors and assigns and, in the case of any Governmental Authority, any
Person succeeding to its functions and capacities; and (iv) references to laws,
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rules and regulations shall include such laws, rules and regulations as they may
from time to time be amended, modified or supplemented.
1.3 CAPCO Agreements to Govern. The Parties agree that, unless this
Agreement expressly provides otherwise, the Parties' ownership, operation and
maintenance of each Plant shall be governed by the CAPCO Agreements up to the
Exchange Closing Date in respect of such Plant. Unless otherwise restricted
under this Agreement, the CAPCO Agreements will govern and control the Parties'
ownership, operation and maintenance of each Plant prior to the Exchange Closing
Date in respect of such Plant.
1.4 DLC's Interest in Assets. The Parties acknowledge that DLC has a
thirty-one and two-tenths percent (31.2%) undivided interest in Sammis and the
DLC Assets related thereto, a thirty-one and two tenths percent (31.2%)
undivided interest in Eastlake and the DLC Assets related thereto, a twenty-nine
and three-tenths percent (29.3%) undivided interest in Mansfield Unit No. 1 and
the DLC Assets related thereto, a twenty-eight and sixth-tenths percent (28.6%)
undivided interest in Mansfield Unit No. 2 and the DLC Assets related thereto,
and a thirteen and seventy-four hundredths percent (13.74%) undivided interest
in Mansfield Unit No. 3 and the DLC Assets related thereto. All references in
this Agreement to DLC's right, title and interest in such Plants and assets, and
rights, liabilities and obligations in connection therewith, shall be construed
in this context.
ARTICLE II
EXCHANGE OF ASSETS
2.1 Transfer of FE Assets and Assumed FE Liabilities.
(a) The Parties agree that DLC is to acquire beneficial
ownership of the FE Assets from the FE Subsidiaries as provided in Section 3.1
at the Exchange Closing, and that DLC will include the FE Assets in the Auction
and intends to convey such beneficial ownership to the Winning Bidders in the
Auction pursuant to the Auction Agreements. The FE Subsidiaries agree to
cooperate with DLC with respect to the disposition by DLC of its beneficial
ownership of the FE Assets in the Auction on the terms and conditions contained
in this Agreement, and to transfer title in and to deliver the FE Assets
directly to the Winning Bidders and to assign to the Winning Bidders the FE
Assumed Liabilities associated with the FE Assets (other than Accrued
Liabilities), each at the direction of DLC as provided in clause (b) of this
Section 2.1.
(b) In the event that the Exchange Closing and the Auction
Closing are scheduled to occur on the same day, DLC may, at its option, by
notice in writing to the applicable FE Subsidiaries, as designated in Schedule
3.1, not less than fifteen (15) days before the Exchange Closing, direct each
applicable FE Subsidiary, at the Auction Closing, acting on DLC's behalf (as the
new owner of the FE Assets pursuant to this Agreement):
(i) to execute and deliver Bill(s) of Sale with
respect to the transfer of the FE Tangible Personal Property with respect
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to the FE Assets of such FE Subsidiary and the Warranty Deed(s) with
respect to the FE Real Property relating to the FE Assets of such FE
Subsidiary and, to the extent applicable, to record title to such FE Real
Property in the name of the applicable Winning Bidder,
(ii) to execute and deliver the FE Assignment and
Assumption Agreement pursuant to which the applicable Winning Bidder, shall
assume the Assumed FE Liabilities directly from such FE Subsidiary,
provided that any Assumed FE Liabilities that are Accrued FE Liabilities
(as defined below) shall not be assigned to the applicable Winning Bidder,
but shall instead be assigned to DLC pursuant to an FE (Accrued Liability)
Assignment and Assumption Agreement, as specified by Section 4.3, and
(iii) to provide directly to the applicable Winning
Bidder, all other affidavits, instruments, documents, certificates,
consents and agreements, as specified by Section 5.6(a);
provided, however, that in the event that the Exchange Closing and the Auction
Closing do not occur on the same day, notwithstanding any direction by DLC to
the contrary pursuant to this Section 2.1(b) or otherwise, the applicable FE
Subsidiaries shall make the foregoing deliveries directly to DLC rather than to
the applicable Winning Bidder as may otherwise be contemplated herein.
2.2 Auction Agreement.
(a) Each of the FE Subsidiaries agrees that certain
representations, warranties, covenants, indemnifications, assignments and
deliveries they are making to DLC in this Agreement in respect of its FE Assets
shall run to the benefit of the Winning Bidders that will acquire such FE Assets
from DLC in the Auction, but only to the extent such representations,
warranties, covenants, indemnifications, assignments and deliveries relate to
such FE Assets, and each of the FE Subsidiaries agrees to be a party to the
Auction Agreement with each Winning Bidder that is acquiring FE Assets of such
FE Subsidiary solely for the purpose of making such representations, warranties,
covenants, indemnifications, assignments and deliveries to such Winning Bidder
insofar as they relate to the FE Assets being acquired by such Winning Bidder.
(b) No FE Subsidiary shall have any rights with respect to any
consideration paid to DLC by the Winning Bidder for the FE Assets under any
Auction Agreement, and in particular shall not have any right to receive,
pledge, borrow, or otherwise obtain the benefit of any money or other property
received by DLC from any Winning Bidder.
(c) DLC shall be liable to an FE Subsidiary for the obligations
of the Winning Bidder that acquires its FE Assets if such Winning Bidder does
not have either (i) a credit rating for its senior secured debt as assigned by
Moody's Investors Service that is equal to or greater than that of the other
parties that acquire the DLC Plants offered for sale in the Auction, but in no
case less than that of the party that acquires the DLC Plant known as the Elrama
Station, or (ii) a credit rating for its senior secured debt as assigned by
Moody's Investors Service of at least Baa3.
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ARTICLE III
TRANSFER OF DLC ASSETS
3.1 Transfer of DLC Assets. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the Exchange
Closing, DLC will assign, convey, transfer and deliver to the FE Subsidiaries,
as designated in Schedule 3.1, and each such FE Subsidiary will assume and
acquire from DLC, free and clear of all Encumbrances (except for Permitted
Encumbrances (DLC Assets)), as applicable in the case of each such FE
Subsidiary, all of DLC's right, title and interest in and to all of the assets
(except for Excluded DLC Assets) constituting, or used in and necessary to
generate electricity from, the DLC Plants and DLC's undivided percentage
ownership interest in those assets described below, each as in existence on the
Exchange Closing Date (collectively, "DLC Assets"):
(a) Those certain parcels of real property owned by DLC relating
to the DLC Plants together with all buildings, facilities and other improvements
thereon and all appurtenances thereto, as described in Schedule 6.7 (the "DLC
Real Property");
(b) All DLC Inventories, all Capital Spare Parts of DLC and,
subject to Section 3.2(h), DLC SO2 Emission Allowances and DLC NOx Emission
Allowances with a vintage year occurring during or after the year during which
the Exchange Closing occurs;
(c) All machinery (mobile or otherwise), equipment (including
communications equipment), vehicles, tools, furniture and furnishings and other
personal property related to the DLC Assets, owned by DLC and located on the DLC
Real Property on the Exchange Closing Date, including, without limitation, items
of personal property jointly owned by DLC and an FE Subsidiary included in
Schedule 3.1(c) together with all the personal property of DLC used principally
in the operation of the DLC Plants that are in the possession of DLC and whether
or not located on the DLC Real Property, as listed in such Schedule 3.1(c),
(other than property used or primarily usable as part of the DLC Transmission
Assets) (collectively, "DLC Tangible Personal Property");
(d) Subject to the provisions of Section 8.6(c), all DLC
Agreements;
(e) Subject to the provisions of Section 8.6(c), all DLC Real
Property Leases;
(f) All DLC Transferable Permits;
(g) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, documents, blueprints and
as-built plans, specifications, procedures and similar items of DLC relating
specifically to the DLC Assets and necessary for the operation of the DLC
Plants, in the possession of DLC (subject to the right of DLC to retain copies
of the same for its use), other than such items which are proprietary to third
parties and accounting records;
(h) All DLC Emission Reduction Credits that accrue on or after,
the date of this Agreement but prior to the Exchange Closing Date;
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(i) All unexpired, transferable warranties and guarantees from
third parties with respect to the DLC Assets and listed in Schedule 3.1(i):
(j) The names of the DLC Plants. It is expressly understood that
DLC is not assigning or transferring to any FE Subsidiary any right to use the
name "Duquesne," "Duquesne Light Company," "DQE," "DQE, Inc.," or other trade
names, trademarks, service marks, corporate names and logos or any part,
derivative or combination thereof;
(k) All drafts, memoranda, reports, information, technology, and
specifications relating to DLC's plans for Year 2000 Compliance with respect to
the DLC Plants; and
(l) The Intellectual Property as described on Schedule 3.1(l)
(the "DLC Intellectual Property").
3.2 Excluded DLC Assets. Notwithstanding anything to the contrary in
this Agreement, nothing in this Agreement will constitute a transfer to any FE
Subsidiary of, or be construed as conferring on any FE Subsidiary, and no FE
Subsidiary is acquiring, any right, title or interest in or to the following
specific assets which are associated with the DLC Assets, but which are hereby
specifically excluded from the transfer to any FE Subsidiary and the definition
of DLC Assets herein (collectively, the "Excluded DLC Assets"):
(a) The DLC Transmission Assets, including those certain assets,
facilities, agreements and other property used or primarily usable as part of
the DLC Transmission Assets;
(b) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
(c) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and any income, sales, payroll or other
tax receivables;
(d) The rights of DLC and its Affiliates to the names
"Duquesne," "Duquesne Light Company," "DQE," "DQE, Inc.," or other trade names,
trademarks, service marks, corporate names or logos or any part, derivative or
combination thereof;
(e) All tariffs, agreements and arrangements to which DLC is a
party for the purchase or sale of electric capacity and/or energy or for the
purchase of transmission or ancillary services;
(f) Except as provided in Section 3.7, or in the case of causes
of action against third parties (including indemnification and contribution)
relating to an Environmental Condition or Regulated Substance or arising under
Environmental Laws, the rights of DLC in and to any causes of action against
third parties (including indemnification and contribution) relating to any DLC
Real Property or DLC Tangible Personal Property, DLC Permits, DLC Environmental
Permits, Taxes, DLC Real Property Leases or DLC Agreements, if any, and not
relating to the Assumed DLC Liabilities, including any claims for refunds,
prepayments, offsets, recoupment, insurance proceeds, condemnation awards,
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judgments and the like, whether received as payment or credit against future
liabilities, relating specifically to the DLC Plants or the DLC Real Property
and relating to any period prior to the Exchange Closing Date;
(g) Any and all of DLC's rights and interests in any contract
that is not a DLC Agreement or that is an intercompany transaction between DLC
and an Affiliate of DLC, whether or not such intercompany transaction relates to
the provision of goods and services, payment arrangements, intercompany charges
or balances, or the like;
(h)
(i) (A) All DLC SO2 Emission Allowances with a vintage
year occurring prior to the year of the Exchange Closing and (B) any
excess DLC SO2 Emission Allowances resulting from DLC's ownership of
the DLC Plants during the year of the Exchange Closing, which shall be
calculated by summing the SO2 Emission Allowances allocated to the DLC
Plants by the USEPA for such year, multiplied by the quotient of the
number of days of DLC ownership of the DLC Plants divided by 365,
subtracting the actual tons of sulfur dioxide emitted by the DLC
Plants during such portion of such year, and multiplying the result by
DLC's ownership share in such DLC Plants. If the results of such
calculation is zero or less than zero the amount of the excess DLC SO2
Emission Allowances shall equal zero.
(ii) Any excess DLC NOx Emission Allowances resulting from
DLC's ownership of the DLC Plants located in Pennsylvania during the
year of the Exchange Closing, which shall be calculated by summing the
NOx Emission Allowances allocated to such DLC Plants by the PaDEP for
such year, multiplied by the quotient of the number of days of DLC
ownership of such DLC Plants during the ozone season (as defined by
PaDEP in its NOx Budget Program), divided by the number of days in
said ozone season, subtracting the actual tons of nitrous oxides
emitted by such DLC Plants during such portion of such ozone season
and multiplying the result by DLC's ownership share in such DLC
Plants. If the result of such calculation is zero or less then zero,
the amount of the excess DLC NOx Emission Allowances shall equal zero;
and
(i) Any DLC Nuclear Assets.
3.3 Assumed DLC Liabilities. On the Exchange Closing Date, each FE
Subsidiary, as designated by FE in Schedule 3.1, shall deliver to DLC a DLC
Assignment and Assumption Agreement pursuant to which such FE Subsidiary shall
assume and agree to discharge when due, without recourse to DLC, all of the
following liabilities and obligations of DLC, direct or indirect, known or
unknown, absolute or contingent, which relate to, or arise by virtue of DLC's
ownership of, the applicable DLC Assets (other than Excluded DLC Liabilities),
in accordance with the respective terms and subject to the respective conditions
thereof (collectively, "Assumed DLC Liabilities"):
(a) All liabilities and obligations of DLC arising on or after
the Exchange Closing Date under the DLC Agreements, the DLC Real Property Leases
and the DLC Transferable Permits in accordance with the terms thereof,
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including, without limitation, the DLC Agreements entered into by DLC (i) prior
to the date hereof and (ii) after the date hereof consistent with the terms of
this Agreement, except in each case to the extent such liabilities and
obligations, but for a breach or default by DLC, would have been paid, performed
or otherwise discharged on or prior to the Exchange Closing Date or to the
extent the same arise out of any such breach or default or out of any event
which after the giving of notice or passage of time or both would constitute a
default by DLC;
(b) All liabilities and obligations associated with the DLC
Assets in respect of Taxes for which such FE Subsidiary is liable pursuant to
Sections 5.4 and 8.9(b) hereof;
(c) All liabilities, responsibilities and obligations arising
under Environmental Laws or relating to Environmental Conditions or Regulated
Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation is known or unknown, contingent or accrued, as of the Exchange
Closing Date, including, but not limited to: (i) costs of compliance (including
capital, operating and other costs) relating to any violation or alleged
violation of Environmental Laws occurring prior to, on or after the Exchange
Closing Date, with respect to the ownership or operation of the DLC Assets; (ii)
property damage or natural resource damage (whether such damages were manifested
before or after the Exchange Closing Date) arising from Environmental Conditions
or Releases of Regulated Substances at, on, in, under, adjacent to, or migrating
from any DLC Assets prior to, on, or after the Exchange Closing Date; (iii) any
Remediation (whether or not such Remediation commenced before the Exchange
Closing Date or commences after the Exchange Closing Date) of Environmental
Conditions or Regulated Substances that are present or have been Released prior
to, on or after the Exchange Closing Date, at, on, in, adjacent to or migrating
from the DLC Assets; (iv) any violations or alleged violations of Environmental
Laws occurring on or after the Exchange Closing Date with respect to the
ownership or operation of any DLC Assets; (v) any bodily injury or loss of life
arising from Environmental Conditions or Releases of Regulated Substances at,
on, in, under, adjacent to or migrating from any DLC Assets on or after the
Exchange Closing Date; (vi) any bodily injury, loss of life, property damage, or
natural resource damage arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release, at any Off-Site Location, or arising
from the arrangement for such activities, on or after the Exchange Closing Date,
of Regulated Substances generated in connection with the ownership or operation
of the DLC Assets; and (vii) any Remediation of any Environmental Condition or
Release of Regulated Substances arising from the storage, transportation,
treatment, disposal, discharge, recycling or Release, at any Off-Site Location,
or arising from the arrangement for such activities, on or after the Exchange
Closing Date, of Regulated Substances generated in connection with the ownership
or operation of the DLC Assets; provided, that nothing set forth in this Section
3.3(c) shall require any FE Subsidiary to assume any liabilities,
responsibilities or obligations that are expressly excluded in Section 3.4;
(d) All liabilities and obligations of DLC with respect to the
DLC Assets under the agreements or consent orders set forth on Schedule 3.3(d)
arising on or after the Exchange Closing;
(e) Any Tax that may be imposed by any federal, state or local
government on the ownership, sale (except as otherwise provided in Section
8.9(a)), operation or use of the DLC Assets on or after the Exchange Closing
Date, except for any Income Taxes attributable to income received by DLC; and
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(f) All of DLC's rights (except as provided under the CAPCO
Settlement Agreement) and obligations under all CAPCO Agreements, except to the
extent otherwise specifically provided in the applicable DLC Assignment and
Assumption Agreement.
3.4 Excluded DLC Liabilities. Notwithstanding anything to the
contrary in this Agreement, no FE Subsidiary shall assume or be obligated to
pay, perform or otherwise discharge the following liabilities or obligations of
DLC, provided that, with respect to liabilities and obligations under one or
more of the CAPCO Agreements, DLC retains such liabilities and obligations only
to the extent such liabilities and obligations are imposed currently on DLC
under such CAPCO Agreements, (collectively, the "Excluded DLC Liabilities"):
(a) Any liabilities or obligations of DLC in respect of any
Excluded DLC Assets or other assets of DLC that are not DLC Assets;
(b) Any liabilities or obligations with respect to Taxes
attributable to DLC's ownership, operation or use of DLC Assets for taxable
periods, or portions thereof, ending before the Exchange Closing Date, except
for Taxes for which any FE Subsidiary is liable pursuant to Section 5.4 hereof;
(c) Any liabilities or obligations of DLC accruing under DLC
Agreements prior to the Exchange Closing Date;
(d) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for personal injury or tort,
or similar causes of action arising during or attributable to the period prior
to the Exchange Closing Date, other than liabilities or obligations assumed by
such FE Subsidiary under Section 3.3(c);
(e) Any fines, penalties and associated costs for defending
related enforcement actions resulting from any violation or alleged violation of
Environmental Laws with respect to the ownership or operation of the DLC Assets
occurring prior to the Exchange Closing Date;
(f) Any payment obligations of DLC pursuant to the DLC
Agreements for goods delivered or services rendered prior to the Exchange
Closing Date, including, but not limited to, rental payments pursuant to the DLC
Real Property Leases;
(g) Any liabilities, responsibilities and obligations of DLC
arising under Environmental Laws or relating to Environmental Conditions or
Regulated Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation was known or unknown, contingent or accrued, which relates to (i) any
bodily injury, loss of life, property damage or natural resource damage arising
from the storage, transportation, treatment, disposal, discharge, recycling or
Release of Regulated Substances generated in connection with the ownership or
operation of the DLC Assets at any Off-Site Location, or arising from the
arrangement for such activities, prior to the Exchange Closing Date; or (ii) any
Remediation of any Environmental Condition or Regulated Substance at any
Off-Site Location, arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release of Regulated Substances generated in
connection with the ownership or operation of the DLC Assets at such Off-Site
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Location, or arising from the arrangement for such activities, prior to the
Exchange Closing Date; provided, that for purposes of this paragraph, "Off-Site
Location" does not include any location to which Regulated Substances disposed
of or Released at the DLC Assets have migrated;
(h) Any liability to third parties (including employees) for
bodily injury or loss of life, to the extent caused (or allegedly caused) by
Environmental Conditions or the Release of Regulated Substances at, on, in,
under, or adjacent to, or migrating from, the DLC Assets prior to the Exchange
Closing Date; and
(i) Any liability of DLC arising out of a breach by DLC or any
of its Affiliates of any of their respective obligations under this Agreement or
the Ancillary Agreements.
3.5 Control of Litigation. The Parties agree and acknowledge that DLC
shall be entitled exclusively to control, defend and settle any litigation,
administrative or regulatory proceeding, and any investigation or Remediation
activity (including without limitation any environmental mitigation or
Remediation activities), arising out of or related to any Excluded DLC
Liabilities, and the FE Subsidiaries agree to cooperate fully in connection
therewith.
3.6 Fuel Supplies. At the Exchange Closing, DLC will sell, assign,
convey and transfer to each applicable FE Subsidiary its right, title and
interest in and to the Fuel Supplies related to the operation of the
corresponding DLC Plants, and such FE Subsidiary shall pay to DLC an amount
equal to the actual cost of such Fuel Supplies on DLC's books and records, as
established by invoices (and reasonable supporting materials demonstrating the
actual cost of such Fuel Supplies) with such invoices and supporting materials
to be delivered to the applicable FE Subsidiary by DLC not later than three (3)
Business Days prior to the Exchange Closing; except that the cost (which the
applicable FE subsidiary shall pay to DLC) of coal inventories at Mansfield,
shall be the actual cost for such Fuel Supplies reflected on DLC's books and
records at the Exchange Closing Date reduced by an amount equal to the product
of the number of tons of coal that are in inventory at Mansfield on the Exchange
Closing Date multiplied by $9.50 to provide an adjustment to compensate for an
existing contract obligation; provided, however, that in the event the Exchange
Closing occurs after December 31, 1999 but before March 1, 2000, such cost shall
be the actual cost for such Fuel Supplies reflected on DLC's books and records
reduced by an amount equal to the product of (x) the number of tons of coal that
are in inventory at Mansfield on the Exchange Closing Date multiplied by (y) the
product of $.15835 multiplied by the number of calendar days between the
Exchange Closing Date and March 1, 2000; and, provided further that in the event
the Exchange Closing occurs on or after March 1, 2000, such cost shall be the
actual cost for such Fuel Supplies reflected on DLC's books and records without
any reduction.
3.7 Property Tax Litigation. The applicable FE Subsidiary will
receive the full benefits, including any refunds, and shall bear the full costs
incurred after October 14, 1998, related to pending litigation and appeals
regarding the property taxes for Eastlake and Sammis as identified on Schedule
3.7. DLC will promptly pay to such FE Subsidiary all amounts received by DLC as
a result of such pending litigation and appeals. If the Generation Exchange as
to Eastlake or Sammis is not consummated for any reason, the Parties shall
negotiate arrangements that place them in the same position as to such Plant,
with respect to any such costs or benefits, as if neither the Agreement in
Principle nor any of the Exchange Agreements had been executed. DLC will
continue to take all
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actions necessary in such proceedings, in cooperation with the applicable FE
Subsidiary, until the Exchange Closing, subject to reimbursement at the Exchange
Closing by such FE Subsidiary of all expenses incurred by DLC for such
proceedings after October 14, 1998.
ARTICLE IV
TRANSFER OF FE ASSETS
4.1 Transfer of FE Assets. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, each applicable FE
Subsidiary, as designated in Schedules 4.1 (Avon Lake), 4.1 (New Castle) and 4.1
(Niles), agrees that all of its ownership rights and interests in and to all of
the assets (except for Excluded FE Assets) constituting, or used in, and
necessary to generate electricity from, its FE Plant, including, without
limitation, those assets identified in Schedule 4.1 and those assets described
below, each as in existence on the Exchange Closing Date (collectively, "FE
Assets"), will be assigned and conveyed to DLC, free and clear of all
Encumbrances (except for Permitted Encumbrances (FE Assets)), and DLC agrees
that it will have assumed and acquired such beneficial ownership rights and
interests in the FE Assets from the FE Subsidiaries, such assignment,
conveyance, assumption and acquisition to be effective as of the satisfaction or
waiver of the last of the conditions to the Exchange Closing set forth in
Article IX by the Party entitled to the benefit of such condition.
(a) Those certain parcels of real property owned by such FE
Subsidiary relating to its FE Plants together with all buildings, facilities and
other improvements thereon and all appurtenances thereto, as described in
Schedule 7.9 (Avon Lake), 7.9 (New Castle) and 7.9 (Niles), respectively (the
"FE Real Property");
(b) All FE Inventories of such FE Subsidiary, all Capital Spare
Parts of such FE Subsidiary and, subject to Section 4.2(j), FE SO2 Emission
Allowances and FE NOx Emission Allowances of such FE Subsidiary with a vintage
year occurring during or after the year during which the Exchange Closing
occurs;
(c) All machinery (mobile or otherwise), equipment (including
communications equipment), vehicles, tools, furniture and furnishings and other
personal property related to the FE Assets, owned by such FE Subsidiary and
located on the FE Real Property on the Exchange Closing Date, including, without
limitation, the items of personal property included in Schedules 4.1(c)(Avon
Lake), 4.1(c)(New Castle) and 4.1(c)(Niles), respectively, as the case may be,
together with all the personal property of such FE Subsidiaries used principally
in the operation of its FE Plant that are in the possession of such FE
Subsidiary whether or not located on the FE Real Property, as listed in such
Schedules 4.1(c), (other than property used or primarily usable as part of the
FE Transmission Assets) (collectively, "FE Tangible Personal Property");
(d) Subject to the provisions of Section 8.6(c), all FE
Agreements of such FE Subsidiary;
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(e) Subject to the provisions of Section 8.6(c), all FE Real
Property Leases of such FE Subsidiary;
(f) All FE Transferable Permits of such FE Subsidiary;
(g) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, documents, blueprints and
as-built plans, specifications, procedures and similar items of such FE
Subsidiary relating specifically to its FE Assets and necessary for the
operation of its FE Plant (subject to the right of such FE Subsidiary to retain
copies of the same for its use) other than such items which are proprietary to
third parties and accounting records;
(h) All unexpired, transferable warranties and guarantees from
third parties with respect to any FE Asset of such FE Subsidiary, as of the
Exchange Closing Date;
(i) The names of the FE Plants. It is expressly understood that
no FE Subsidiary is assigning or transferring to DLC or any Winning Bidder any
right to use the name "FirstEnergy," "FE," "Ohio Edison," "Pennsylvania Power,"
"Cleveland Electric Illuminating," "Toledo Edison," "The Illuminating Company"
or other trade names, trademarks, service marks, corporate names and logos or
any part, derivative or combination thereof;
(j) All drafts, memoranda, reports, information, technology, and
specifications relating to such FE Subsidiary's plans for Year 2000 Compliance
with respect to its FE Plant;
(k) The Intellectual Property of each such FE Subsidiary, as
described on Schedule 4.1(k) (the "FE Intellectual Property"); and
(l) All FE Emission Reduction Credits of such FE Subsidiary with
respect to its FE Plant that accrue on or after the date of this Agreement but
prior to the Exchange Closing Date.
4.2 Excluded FE Assets. Notwithstanding anything to the contrary in
this Agreement, nothing in this Agreement will constitute a transfer to DLC or a
Winning Bidder of, or be construed as conferring on DLC or a Winning Bidder, and
neither DLC nor a Winning Bidder is acquiring, any right, title or interest in
or to the following specific assets of the FE Subsidiaries that are associated
with their FE Assets, but which are hereby specifically excluded from the sale
and the definition of FE Assets herein (collectively, the "Excluded FE Assets"):
(a) The FE Transmission Assets of each FE Subsidiary, including
those certain assets, facilities and agreements identified on Schedule 4.2(a)
hereto;
(b) Certain switches and meters in the FE Plants, gas
facilities, revenue meters and remote testing units, drainage pipes and systems,
as identified in the FE Easement and Attachment Agreement, and certain equipment
and systems described on Schedule 4.2(b);
(c) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities of such FE
Subsidiaries;
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(d) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and any income, sales, payroll or other
tax receivables of such FE Subsidiaries;
(e) The rights of each FE Subsidiary and its Affiliates to the
names "FirstEnergy," "FE," "Ohio Edison," "Pennsylvania Power," "Cleveland
Electric Illuminating," "Toledo Edison," "The Illuminating Company" or any other
trade names, trademarks, service marks, corporate names or logos, or any part,
derivative or combination thereof;
(f) All tariffs, agreements and arrangements to which an FE
Subsidiary is a party for the purchase or sale of electric capacity and/or
energy or for the purchase of transmission or ancillary services;
(g) Except in the case of causes of action against third parties
(including indemnification and contribution) relating to an Environmental
Condition or Regulated Substances or arising under Environmental Laws, the
rights of any FE Subsidiary in and to any causes of action against third parties
(including indemnification and contribution) relating to any FE Real Property or
FE Tangible Personal Property, FE Permits, FE Environmental Permits, Taxes, FE
Real Property Leases or FE Agreements, if any, and not relating to the Assumed
FE Liabilities, including any claims for refunds, prepayments, offsets,
recoupment, insurance proceeds, condemnation awards, judgments and the like,
whether received as payment or credit against future liabilities, relating
specifically to the FE Plants or the FE Real Property and relating to any period
prior to the Exchange Closing Date;
(h) All personnel records of each FE Subsidiary and its
Affiliates relating to the FE Transferred Employees, other than FE Transferred
Employee Records or other records the disclosure of which is required by law, or
legal or regulatory process or subpoena;
(i) Any and all of each FE Subsidiary's rights and interests in
any contract that is not an FE Agreement or that is an intercompany transaction
between an FE Subsidiary and its Affiliate, whether or not such intercompany
transaction relates to the provision of goods and services, payment
arrangements, intercompany charges or balances, or the like;
(j)
(i) (A) All FE SO2 Emission Allowances with a vintage year
occurring prior to the year of the Exchange Closing and (B) any excess
FE SO2 Emission Allowances resulting from the FE Subsidiaries'
ownership of the FE Plants during the year of the Exchange Closing,
which shall be calculated by summing the SO2 Emission Allowances
allocated to the FE Plants by the USEPA for such year, multiplied by
the quotient of the number of days of ownership of the FE Plants by
the FE Subsidiaries divided by 365, and subtracting the actual tons of
sulfur dioxide emitted by the FE Plants during such portion of such
year. If the results of such calculation is zero or less than zero,
the amount of the excess FE SO2 Emission Allowances shall equal zero;
(ii) Any excess FE NOx Emission Allowances resulting from
the FE Subsidiaries' ownership of the FE Plants located in
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Pennsylvania during the year of the Exchange Closing, which shall be
calculated by summing the NOx Emission Allowances allocated to such FE
Plants by the PaDEP for such year, multiplied by the quotient of the
number of days of the FE Subsidiaries' ownership of such FE Plants
during the ozone season (as defined by PaDEP in its NOx Budget
Program), divided by the number of days in said ozone season, and
subtracting the actual tons of nitrous oxides emitted by such FE
Plants during such portion of such ozone season. If the result of such
calculation is zero or less then zero, the amount of the excess FE NOx
Emission Allowances shall equal zero; and
(k) Any and all rights and obligations of the FE Subsidiaries
under the CAPCO Agreements.
4.3 Assumed FE Liabilities. At the Exchange Closing, DLC and each FE
Subsidiary shall execute and deliver to each other an FE Assignment and
Assumption Agreement with respect to all of the Assumed FE Liabilities
applicable to the FE Assets being transferred by such FE Subsidiary (including
any Accrued Liabilities of the applicable FE Subsidiary), provided, however,
that if DLC has exercised its option pursuant to Section 2.1 to direct each
applicable FE Subsidiary to execute and deliver the respective FE Assignment and
Assumption Agreement to the applicable Winning Bidder, then each such FE
Subsidiary shall execute and deliver to such Winning Bidder, subject to such
Winning Bidder executing and delivering, an FE Assignment and Assumption
Agreement with respect to all of the Assumed FE Liabilities applicable to the FE
Assets being transferred by such FE Subsidiary to such Winning Bidder, except as
otherwise provided below with respect to Accrued FE Liabilities, and provided
further, that the FE Subsidiaries agree that the obligation of DLC to execute an
FE Assignment and Assumption Agreement with respect to any of the Assumed FE
Liabilities (other than Accrued FE Liabilities) shall be discharged by the
execution of an FE Assignment and Assumption Agreement by the applicable Winning
Bidder with respect to such FE Assumed Liabilities. All of the following
liabilities and obligations of each FE Subsidiary, direct or indirect, known or
unknown, absolute or contingent, which relate to, or arise by virtue of such FE
Subsidiary's ownership of the FE Assets (other than Excluded FE Liabilities) are
referred to collectively as "Assumed FE Liabilities":
(a) All liabilities and obligations of such FE Subsidiary
associated with its FE Assets arising on or after the Exchange Closing Date
under its FE Agreements, FE Real Property Leases and FE Transferable Permits,
each in accordance with the terms thereof, including, without limitation, the FE
Agreements entered into by such FE Subsidiary (i) prior to the date hereof and
(ii) after the date hereof consistent with the terms of this Agreement, except
in each case to the extent such liabilities and obligations, but for a breach or
default of such FE Subsidiary, would have been paid, performed or otherwise
discharged on or prior to the Exchange Closing Date or to the extent the same
arise out of any such breach or default or out of any event which after the
giving of notice or passage of time or both would constitute a default by such
FE Subsidiary;
(b) All liabilities and obligations of such FE Subsidiary
associated with its FE Assets in respect of Taxes for which DLC or the
corresponding Winning Bidder is liable pursuant to Sections 5.4 or 8.9(a)
hereof;
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(c) All liabilities and obligations of the such FE Subsidiary
associated with its FE Assets with respect to the FE Transferred Employees
incurred after the Exchange Closing Date for which the corresponding Winning
Bidder is responsible pursuant to Section 8.11;
(d) All liabilities, responsibilities and obligations of such FE
Subsidiary associated with its FE Assets arising under Environmental Laws or
relating to Environmental Conditions or Regulated Substances (including common
law liabilities relating to Environmental Conditions and Regulated Substances),
whether such liability, responsibility or obligation is known or unknown,
contingent or accrued, as of the Exchange Closing Date, including, but not
limited to: (i) costs of compliance (including capital, operating and other
costs) relating to any violation or alleged violation of Environmental Laws
occurring prior to, on or after the Exchange Closing Date, with respect to the
ownership or operation of the FE Assets; (ii) property damage or natural
resource damage (whether such damages were manifested before or after the
Exchange Closing Date) arising from Environmental Conditions or Releases of
Regulated Substances at, on, in, under, adjacent to, or migrating from any FE
Assets prior to, on, or after the Exchange Closing Date; (iii) any Remediation
(whether or not such Remediation commenced before the Exchange Closing Date or
commences after the Exchange Closing Date) of Environmental Conditions or
Regulated Substances that are present or have been Released prior to, on or
after the Exchange Closing Date, at, on, in, adjacent to or migrating from the
FE Assets; (iv) any violations or alleged violations of Environmental Laws
occurring on or after the Exchange Closing Date with respect to the ownership or
operation of any FE Assets; (v) any bodily injury or loss of life arising from
Environmental Conditions or Releases of Regulated Substances at, on, in, under,
adjacent to or migrating from any FE Assets on or after the Exchange Closing
Date; (vi) any bodily injury, loss of life, property damage, or natural resource
damage arising from the storage, transportation, treatment, disposal, discharge,
recycling or Release, at any Off-Site Location, or arising from the arrangement
for such activities, on or after the Exchange Closing Date, of Regulated
Substances generated in connection with the ownership or operation of the FE
Assets; and (vii) any Remediation of any Environmental Condition or Release of
Regulated Substances arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release, at any Off-Site Location, or arising
from the arrangement for such activities, on or after the Exchange Closing Date,
of Regulated Substances generated in connection with the ownership or operation
of the FE Assets; provided, that nothing set forth in this Section 4.3(d) shall
require the applicable Winning Bidder or DLC to assume any liabilities,
responsibilities or obligations that are expressly excluded in Section 4.4;
(e) All liabilities and obligations of such FE Subsidiary
associated with its FE Assets under the agreements or consent orders set forth
on Schedule 4.3(e) arising on or after the Exchange Closing Date; and
(f) With respect to the FE Assets of such FE Subsidiary, any Tax
that may be imposed by any federal, state or local government on the ownership,
sale (except as otherwise provided in Section 8.9(a)), operation or use of the
FE Assets on or after the Exchange Closing Date, except for any Income Taxes
attributable to income received by such FE Subsidiary.
Notwithstanding any other provision of this Section 4.3, to the extent that any
of the Assumed FE Liabilities that would be assigned and assumed by a Winning
Bidder pursuant to this Section 4.3 are Accrued Liabilities as of the Exchange
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Closing Date of an FE Subsidiary ("Accrued FE Liabilities"), then such Accrued
FE Liabilities shall not be assigned to and assumed by such Winning Bidder as
otherwise provided herein, but shall instead be assigned to and assumed by DLC
at the Exchange Closing pursuant to FE (Accrued Liability) Assignment and
Assumption Agreements to be entered into between DLC and such FE Subsidiaries,
and each FE Subsidiary and DLC agree to execute and deliver to each other an FE
(Accrued Liability) Assignment and Assumption Agreement with respect to the
Accrued Liabilities of such FE Subsidiary.
4.4 Excluded FE Liabilities. Notwithstanding anything to the contrary
in this Agreement, neither DLC nor the applicable Winning Bidder shall assume or
be obligated to pay, perform or otherwise discharge the following liabilities or
obligations of each of the FE Subsidiaries (collectively, the "Excluded FE
Liabilities"):
(a) Any liabilities or obligations of the applicable FE
Subsidiary in respect of any Excluded FE Assets or other assets of such FE
Subsidiary that are not its FE Assets;
(b) Any liabilities or obligations of such FE Subsidiary with
respect to Taxes attributable to such FE Subsidiary's ownership, operation or
use of its FE Assets for taxable periods, or portions thereof, ending before the
Exchange Closing Date, except for Taxes for which the applicable Winning Bidder
or DLC is liable pursuant to Sections 5.4 hereof;
(c) Any liabilities or obligations of such FE Subsidiary
accruing under any of its FE Agreements prior to the Exchange Closing Date;
(d) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for personal injury or tort,
or similar causes of action arising during or attributable to the period prior
to the Exchange Closing Date, other than liabilities or obligations assumed
under Section 4.3(d);
(e) Any fines, penalties and associated costs for defending
related enforcement actions, resulting from any violation or alleged violation
of Environmental Laws with respect to such FE Subsidiary's ownership or
operation of its FE Assets occurring prior to the Exchange Closing Date;
(f) Any payment obligations of such FE Subsidiary pursuant to
its FE Agreements for goods delivered or services rendered prior to the Exchange
Closing Date, including, but not limited to, rental payments pursuant to its FE
Real Property Leases;
(g) Any liabilities, responsibilities and obligations of such FE
Subsidiary arising under Environmental Laws or relating to Environmental
Conditions or Regulated Substances (including common law liabilities relating to
Environmental Conditions and Regulated Substances), whether such liability,
responsibility or obligation was known or unknown, contingent or accrued, which
relates to (i) any bodily injury, loss of life, property damage or natural
resource damage arising from the storage, transportation, treatment, disposal,
discharge, recycling or Release of Regulated Substances generated in connection
with such FE Subsidiary's ownership or operation of its FE Assets at any
Off-Site Location, or arising from the arrangement for such activities, prior to
the Exchange Closing Date; or (ii) any Remediation of any Environmental
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Condition or Regulated Substance at any Off-Site Location, arising from the
storage, transportation, treatment, disposal, discharge, recycling or Release of
Regulated Substances generated in connection with such FE Subsidiary's ownership
or operation of its FE Assets at such Off-Site Location, or arising from the
arrangement for such activities, prior to the Exchange Closing Date; provided,
that for purposes of this paragraph, "Off-Site Location" does not include any
location to which Regulated Substances disposed of or Released at such FE Assets
have migrated;
(h) Any liability to third parties (including employees) for
bodily injury or loss of life, to the extent caused (or allegedly caused) by
Environmental Conditions or the Release of Regulated Substances at, on, in,
under, or adjacent to, or migrating from, the FE Assets of such FE Subsidiary
prior to the Exchange Closing Date;
(i) Any liabilities or obligations of such FE Subsidiary or any
ERISA Affiliate of such FE Subsidiary relating to any FE Plan including but not
limited to any liability (i) relating to benefits payable under any FE Plan;
(ii) relating to the Pension Benefit Guaranty Corporation under Title IV of
ERISA; (iii) relating to a multi-employer plan; (iv) with respect to
non-compliance with the notice and benefit continuation requirements of COBRA;
(v) with respect to any noncompliance with ERISA or any other applicable laws;
or (vi) with respect to any suit, proceeding or claim which is brought against
DLC or the applicable Winning Bidder, any FE Plan, or any fiduciary or former
fiduciary of any such FE Plan, in each case other than liabilities or
obligations assumed under Section 8.11;
(j) Any liabilities or obligations arising from facts or
circumstances prior to the Exchange Closing Date relating to the employment or
termination of employment, including discrimination, wrongful discharge, unfair
labor practices, or constructive termination by such FE Subsidiary of any
individual, attributable to any actions or inactions by such FE Subsidiary prior
to the Exchange Closing Date, including without limitation unfair labor practice
charges relating to Avon Lake, other than those actions or inactions taken at
the written direction of DLC, other than liabilities or obligations assumed
under Section 8.11;
(k) Any obligations of such FE Subsidiary for wages, overtime,
employment taxes, severance pay, transition payments in respect of compensation
or similar benefits accruing or arising prior to the Exchange Closing Date under
any term or provision of any contract, plan, instrument or agreement relating to
any of its FE Assets, other than liabilities or obligations assumed under
Section 8.11; and
(l) Any liability of the applicable FE Subsidiary arising out of
a breach by such FE Subsidiary, or any of its Affiliates, of any of their
respective obligations under this Agreement or the Ancillary Agreements.
4.5 Control of Litigation. The Parties agree and acknowledge that the
FE Subsidiaries shall be entitled exclusively to control, defend and settle any
litigation, administrative or regulatory proceeding, and any investigation or
Remediation activity (including without limitation any environmental mitigation
or Remediation activities), arising out of or related to any Excluded FE
Liabilities and DLC shall cooperate fully in connection therewith, and the
Auction Agreements shall provide that the applicable Winning Bidder shall agree
to cooperate fully in connection therewith.
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4.6 Fuel Supplies. At the Exchange Closing, each FE Subsidiary will
sell, assign, convey, transfer and deliver to DLC its right, title and interest
in and to the Fuel Supplies related to the operation of its FE Plants, and DLC
shall pay the applicable FE Subsidiary an amount equal to the actual cost of
such Fuel Supplies on such FE Subsidiary's books and records, as established by
invoices (and reasonable supporting materials demonstrating the actual cost of
such Fuel Supplies) with such invoices and supporting materials to be delivered
to DLC by such FE Subsidiary not later than three (3) Business Days prior to the
scheduled date of the Exchange Closing.
4.7 Inventories. Schedule 4.7 lists the quantities of FE Inventories
for the Avon Lake, New Castle and Niles FE Plants that will be transferred to
DLC together with the net book values of such FE Inventories. At the Exchange
Closing, as part of the FE Assets, each FE Subsidiary will transfer to DLC the
FE Inventories relating to its FE Plants. Because each FE Subsidiary has
operated its FE Plant as part of a larger, integrated utility system, not all of
such FE Inventories have actually been maintained in stock at each such FE
Plant, but are identified and dedicated as FE Assets on Schedules 4.7 (Avon
Lake), 4.7 (New Castle) and 4.7 (Niles), respectively, as the case may be. Each
FE Subsidiary shall transport and deliver all such FE Inventories to the
applicable FE Plant prior to the Exchange Closing.
ARTICLE V
THE EXCHANGE CLOSING
5.1 Exchange Closing. Upon the terms and subject to the satisfaction
of the conditions in Article IX of this Agreement, the exchange between the
Parties hereto, as contemplated by this Agreement, shall take place at a closing
(the "Exchange Closing"), to be held at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 1440 New York Avenue, N.W., Washington, D.C. at 10:00 a.m.
local time on the day following the date that all of the conditions precedent to
the Exchange Closing set forth in Article IX of this Agreement have been either
satisfied or waived by the Party for whose benefit such conditions precedent
exist, or at such other time and date as the Parties may mutually agree.
5.2 Calculation of Closing Payments.
(a) No payment of any purchase price will be made by either
Party to the other for the transfer of the DLC Assets and the FE Assets. The
Parties have agreed that certain payments will be made for other specified
purposes (hereinafter, the "Closing Payments") and such Closing Payments shall
be calculated in accordance with this Section 5.2.
(b) The "DLC Closing Payments" means the sums of the following
amounts calculated for and to be paid to DLC by the applicable FE Subsidiary:
(i) the amounts expended by DLC between the date
hereof and the Exchange Closing Date for DLC Capital Expenditures
relating to the DLC Assets transferred to such FE Subsidiary that (A)
are not described in Schedule 8.1(d) and (B) satisfy one or more of
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the tests for permitted DLC Capital Expenditures set forth in Section
8.1(d); plus or minus
(ii) the amounts by which DLC's share of the book value
of all DLC Inventories relating to the DLC Assets transferred to such
FE Subsidiary, as of the Exchange Closing Date, exceeds or falls short
of that value set forth in Schedule 5.2(b)(ii); plus or minus
(iii) the net balance payable to or by DLC, if any, of
items relating to the DLC Assets transferred to such FE Subsidiary
prorated as of the Exchange Closing Date pursuant to Section 5.4; plus
(iv) the amounts payable to DLC pursuant to Section 3.6
by such FE Subsidiary for DLC's ownership interest in the Fuel
Supplies at the DLC Plants transferred to such FE Subsidiary; plus
(v) in the case of PPC, the amount payable to DLC by
PPC pursuant to the Electrical Facilities Agreement; plus
(vi) in the case of CEIC, the amount payable to DLC by
CEIC for costs incurred in the property tax litigation pursuant to
Section 3.7.
(c) The "FE Closing Payments" means the sums of the following
amounts calculated for and to be paid to the applicable FE Subsidiary by DLC:
(i) the amount expended by such FE Subsidiary between
the date hereof and the Exchange Closing Date for FE Capital
Expenditures, with respect to its FE Assets that (A) are not described
in Schedule 8.1(c) and (B) satisfy one or more of the tests for
permitted FE Capital Expenditures set forth in Section 8.1(c); plus or
minus
(ii) the amount by which the book value of FE
Inventories for such FE Subsidiary's FE Plant, as of the Exchange
Closing Date, exceeds or falls short of that set forth in Schedule 4.7
with respect to such FE Plant; plus or minus
(iii) the net balance payable to or by such FE
Subsidiary, if any, of items relating to its FE Assets prorated
pursuant to Section 5.4.
(d) At least ten (10) Business Days prior to the Exchange
Closing Date, DLC shall prepare and deliver to each FE Subsidiary an estimated
closing statement (collectively, the "DLC Estimated Closing Statements") that
shall set forth DLC's best estimate of the estimated DLC Closing Payments
relating to such FE Subsidiary (collectively, the "DLC Estimated Closing
Payments"). At least ten (10) Business Days prior to the Exchange Closing Date,
each FE Subsidiary shall prepare and deliver to DLC an estimated closing
statement (collectively, the "FE Estimated Closing Statements") that shall set
forth such FE Subsidiary's best estimate of the estimated FE Closing Payments
relating to DLC (collectively, the "FE Estimated Closing Payments"). Within five
(5) Business Days following the delivery of an Estimated Closing Statement, the
Party receiving such Estimated Closing Statement may object in good faith to
such Estimated Closing Payment in writing. In the event of any such objection,
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the applicable Parties shall attempt to resolve their differences by
negotiation. If such Parties are unable to do so before three (3) Business Days
prior to the Exchange Closing Date, the amounts of the Estimated Closing
Payments not in dispute shall be paid at the Exchange Closing and the disputed
portions shall be paid as a Final Adjustment to the extent required by Section
5.2(f).
(e) Within sixty (60) days following the Exchange Closing Date,
(i) DLC shall prepare and deliver to each FE Subsidiary a final closing
statement setting forth the final DLC Closing Payment relating to such FE
Subsidiary including adjustments to the proration amounts specified by Section
5.4 (collectively, the "Proposed DLC Final Adjustments"), and (ii) each
applicable FE Subsidiary shall prepare and deliver to DLC a final closing
statement setting forth the final FE Closing Payment relating to DLC including
adjustments to the proration amounts specified by Section 5.4 (collectively, the
"Proposed FE Final Adjustments"). All calculations of the Closing Payments shall
be prepared using the same accounting principles, policies and methods as the
Conveying Party has historically used in connection with the calculation of the
items reflected on such Proposed Final Adjustment.
(f) Within thirty (30) days following the delivery of the
Proposed Final Adjustment, the Party receiving such Proposed Final Adjustment
may object to such Proposed Final Adjustment in writing. Each Party agrees to
cooperate with the other Party to provide such Party and its Representatives
information used to prepare such Proposed Final Adjustment and information
relating thereto. If the Party receiving a Proposed Final Adjustment objects to
such Proposed Final Adjustment, the applicable Parties shall attempt to resolve
their differences by negotiation. If such Parties are unable to do so within
thirty (30) days of any such objection, the applicable FE Subsidiary and DLC
shall appoint an Independent Accounting Firm, which shall, at their joint
expense, review the Proposed Final Adjustment and determine the appropriate
adjustment to the Closing Payment, if any, within thirty (30) days of such
appointment. The Parties agree to cooperate with the Independent Accounting Firm
and provide it with such information as it reasonably requests to enable it to
make such determination. The finding of such Independent Accounting Firm shall
be binding on the Parties. Upon determination by agreement of the Parties or by
binding determination of the Independent Accounting Firm of the appropriate
adjustment (in either case, the "Final Adjustment"), if the Final Adjustment
results in a change to the Closing Payment made by either DLC or the applicable
FE Subsidiary, the Party owing the difference shall deliver such difference to
the Party owed such amount no later than two (2) Business Days after the
determination of such Final Adjustment, in immediately available funds or in any
other manner as reasonably requested by the Party owed such amount.
5.3 Payment of Closing Payments. (a) If the DLC Closing Payment
calculated for any of the FE Subsidiaries is a positive amount, such amount
shall be payable by the applicable FE Subsidiary to DLC. If the DLC Closing
Payment calculated for any of the FE Subsidiaries is a negative amount, such
amount shall be payable by DLC to the applicable FE Subsidiary.
(b) If the FE Closing Payment calculated for DLC is a positive
amount, such amount shall be payable by DLC to the applicable FE Subsidiary. If
the FE Closing Payment calculated for DLC is a negative amount, such amount
shall be payable by the applicable FE Subsidiary to DLC.
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(c) Amounts payable with respect to each Closing Payment shall be
aggregated or offset, as appropriate (the remaining amount payable after such
aggregation or offset is referred to herein as a "Closing Payment Balance"). In
connection with the Exchange Closing, subject to Section 5.2(d), each Party
owing a Closing Payment Balance shall pay such amount to the Party to whom such
Closing Payment Balance is owed at the Exchange Closing by wire transfer of
immediately available funds denominated in U.S. dollars or by such other means
as are agreed upon by such Parties.
5.4 Prorations. Notwithstanding anything to the contrary in any of
the CAPCO Agreements:
(a) The Parties agree that all of the items normally prorated,
including those listed below (but not including Income Taxes), relating to the
business and operation of the Exchange Assets shall be prorated as of the
Exchange Closing Date, with each Conveying Party remaining liable for such items
to the extent such items relate to any time period prior to the Exchange Closing
Date, and the Party that is acquiring such Conveying Party's Exchange Assets
under this Agreement to be liable for such items to the extent such items relate
to periods commencing with the Exchange Closing Date (measured in the same units
used to compute the item in question, otherwise measured by calendar days):
(i) personal property, real estate and occupancy
Taxes, assessments and other charges, if any, on or with respect to
the business and operation of the Exchange Assets;
(ii) rent, Taxes and all other items (including prepaid
services or goods not included in Inventories) payable by or to a
Conveying Party under any of the Assigned Agreements conveyed by that
Party;
(iii) any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) sewer rents and charges for water, telephone,
electricity and other utilities with respect to the Exchange Assets;
(v) rent and Taxes payable by a Conveying Party under
the Real Property Leases assigned to the Party that is acquiring such
Real Property Leases under this Agreement; and
(vi) insurance premiums paid on or with respect to the
business and operation of the Exchange Assets.
(b) In connection with the prorations referred to in Section 5.4
(a) above, in the event that actual figures are not available at the Exchange
Closing Date, the proration shall be based upon the actual Taxes or other
amounts accrued through the Exchange Closing Date or paid for the most recent
year (or other appropriate period) for which actual Taxes or other amounts paid
are available. Such prorated Taxes or other amounts shall be re-prorated and
paid to the appropriate Party within sixty (60) days of the date that the
previously unavailable actual figures become available. The prorations shall be
based on the number of days in a year or other appropriate period (i) before the
Exchange Closing Date and (ii) including and after the Exchange Closing Date.
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The Parties agree to furnish each other with such documents and other records as
may be reasonably requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 5.4.
5.5 Audit Cooperation. Each Party shall notify and provide the other
Party with reasonable assistance in the event of an examination, audit or other
proceeding regarding any fair market value of the Exchanged Assets and Assumed
Liabilities.
5.6 Deliveries by FE Subsidiaries. At the Exchange Closing, each FE
Subsidiary with respect to its FE Assets will deliver, or cause to be delivered,
the following to DLC (or, if DLC so directs, the applicable Winning Bidder):
(a) With respect to the transfer of the FE Assets (except for
the Excluded FE Assets) and Assumed FE Liabilities (except for the Excluded FE
Liabilities):
(i) Duly executed Bills of Sale with respect to the FE
Assets of such FE Subsidiary;
(ii) Certified copies of any and all governmental and
other third party consents, waivers or approvals obtained or required
to be obtained by the applicable FE Subsidiary with respect to the
transfer of its FE Assets or the consummation of the transactions
contemplated by this Agreement;
(iii) One or more Warranty Deeds conveying title to the
FE Real Property by such FE Subsidiary to DLC or, if DLC so directs,
the corresponding Winning Bidder, duly executed and acknowledged by
such FE Subsidiaries and in recordable form;
(iv) FIRPTA Affidavits, duly executed by such FE
Subsidiary;
(v) To the extent available, originals of all of its
FE Agreements, FE Real Property Leases and FE Transferable Permits
and, if such originals are not available, true and correct copies
thereof;
(vi) All such other instruments of assignment, transfer
or conveyance as shall, in the reasonable opinion of DLC and its
counsel, be necessary or desirable to transfer the FE Assets to DLC
or, if DLC so directs, the applicable Winning Bidder, in accordance
with this Agreement and where necessary or desirable in recordable
form; and
(vii) The applicable FE Assignment and Assumption
Agreement, the FE (Accrued Liability) Assignment and Assumption
Agreement, the FE Easement and Attachment Agreement, the FE Connection
Agreement and the FE Must-Run Agreement, duly executed by the such FE
Subsidiary.
(b) With respect to the transfer of DLC Assets (except for the
Excluded DLC Assets) and the assumption of Assumed DLC Liabilities (except for
Excluded DLC Liabilities):
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(i) The DLC Assignment and Assumption Agreements, the
CAPCO Settlement Agreement, the Electrical Facilities Agreement and
the Settlement Agreement duly executed by the applicable FE
Subsidiaries; and
(ii) All such other instruments of assignment or
assumption as shall, in the reasonable opinion of DLC and its counsel,
be necessary for the assignment of the DLC Assets to or the assumption
of the Assumed DLC Liabilities by the FE Subsidiaries, in accordance
with this Agreement.
(c) With respect to this Agreement:
(i) The documents to be delivered by such FE
Subsidiary under Section 9.2;
(ii) Copies, certified by the Secretary or Assistant
Secretary of such FE Subsidiary, of corporate resolutions authorizing
the execution and delivery of this Agreement and all of the agreements
and instruments to be executed and delivered by each of the FE
Subsidiaries in connection herewith and with the consummation of the
transactions contemplated hereby;
(iii) Certificates of the Secretary or Assistant
Secretary of such FE Subsidiary identifying the name and title and
bearing the signatures of the officers of such FE Subsidiary
authorized to execute and deliver this Agreement and the other
agreements and instruments contemplated hereby;
(iv) Certificates of Good Standing with respect to such
FE Subsidiary, issued by the Secretary of State of Ohio or the
Secretary of State of the Commonwealth of Pennsylvania, as
appropriate;
(v) Such other agreements, documents, instruments and
writings as are reasonably required to be delivered by such FE
Subsidiary at or prior to the Exchange Closing Date pursuant to this
Agreement or the Auction Agreement or otherwise reasonably required by
DLC or the applicable Winning Bidder, as the case may be, in
connection herewith; and
(vi) Certificates dated the Exchange Closing Date
executed by the duly authorized officers of such FE Subsidiary to the
effect that, to such officers' Knowledge, the conditions set forth in
Sections 9.2(b), (c) and (d) have been satisfied by such FE Subsidiary
and that each of the representations and warranties of such FE
Subsidiary made in this Agreement are true and correct in all material
respects as though made at and as of the Exchange Closing Date.
5.7 Deliveries by DLC. At the Exchange Closing, DLC will deliver, or
cause to be delivered, the following to the applicable FE Subsidiary:
(a) With respect to the transfer of the DLC Assets (except for
the Excluded DLC Assets):
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(i) The DLC Assignment and Assumption Agreements, the
CAPCO Settlement Agreement, the Electrical Facilities Agreement and
the Settlement Agreement, duly executed by DLC;
(ii) Duly executed Bills of Sale with respect to the
DLC Assets;
(iii) Certified copies of any and all governmental and
other third party consents, waivers or approvals obtained or required
to be obtained by DLC with respect to the transfer of the DLC Assets
or the consummation of the transactions contemplated by this
Agreement;
(iv) One or more Warranty Deeds conveying title to the
DLC Real Property to the applicable FE Subsidiaries, duly executed and
acknowledged by DLC and in recordable form;
(v) FIRPTA Affidavits, duly executed by DLC;
(vi) To the extent available, originals of all DLC
Agreements, DLC Real Property Leases and DLC Transferable Permits and,
if such originals are not available, true and correct copies thereof;
and
(vii) All such other instruments of assignment, transfer
or conveyance as shall, in the reasonable opinion of the applicable FE
Subsidiaries and their counsel, be necessary or desirable to transfer
the DLC Assets to such FE Subsidiaries, in accordance with this
Agreement and where necessary or desirable in recordable form.
(b) With respect to the transfer of the FE Assets (except
for the Excluded FE Assets):
(i) The FE Assignment and Assumption Agreements, the
FE (Accrued Liability) Assignment and Assumption Agreements, the FE
Easement and Attachment Agreements, the FE Connection Agreements and
the FE Must-Run Agreements, duly executed by the corresponding Winning
Bidder or DLC, as applicable; and
(ii) All such other instruments of assignment or
assumption as shall, in the reasonable opinion of the applicable FE
Subsidiaries and their counsel, be necessary for assignment of the FE
Assets to or the assumption of the Assumed FE Liabilities by DLC or
the corresponding Winning Bidder, respectively, in accordance with
this Agreement.
(c) With respect to this Agreement:
(i) The documents to be delivered by DLC under Section
9.3;
(ii) Copies, certified by the Secretary or Assistant
Secretary of DLC, of corporate resolutions authorizing the execution
and delivery of this Agreement and all of the agreements and
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instruments to be executed and delivered by DLC in connection herewith
and with the consummation of the transactions contemplated hereby;
(iii) A certificate of the Secretary or Assistant
Secretary of DLC identifying the name and title and bearing the
signatures of the officers of DLC authorized to execute and deliver
this Agreement and the other agreements and instruments contemplated
hereby;
(iv) A certificate of Good Standing with respect to
DLC, issued by the Secretary of State of the Commonwealth of
Pennsylvania and by the Secretary of State of such other states where
DLC conducts business;
(v) Such other agreements, documents, instruments and
writings as are required to be delivered by DLC at or prior to the
Exchange Closing Date pursuant to this Agreement or otherwise
reasonably required by the FE Subsidiaries in connection herewith; and
(vi) Certificate dated the Exchange Closing Date
executed by the duly authorized officers of DLC to the effect that, to
such officers' Knowledge, the conditions set forth in Sections 9.3(b),
(c) and (d) have been satisfied by DLC and that each of the
representations and warranties of DLC made in this Agreement are true
and correct in all material respects as though made at and as of the
Exchange Closing Date.
5.8 Ancillary Agreements. The Parties acknowledge that the Ancillary
Agreements (except for the Auction Agreements, the Support Agreement, the CAPCO
Settlement Agreement and the Electrical Facilities Agreement) shall be executed
on the Exchange Closing Date or the Auction Closing Date, as applicable, and
each Party agrees to execute, in connection with the Exchange Closing or the
Auction Closing, as applicable, each such Ancillary Agreement to which it is to
be a party, substantially in the form of such Ancillary Agreements attached
hereto. Each Party further (i) acknowledges that it has executed the CAPCO
Settlement Agreement and the Electrical Facilities Agreement on the date hereof
and (ii) agrees that the Parties hereto shall make, pursuant to Section 8.7
hereof, all filings necessary or advisable to obtain any Required Regulatory
Approvals in respect of such CAPCO Settlement Agreement and such Electrical
Facilities Agreement and the transactions contemplated in each of them.
5.9 Pending Litigation. The Settlement Agreement will take effect as
of the Exchange Closing and when effective shall constitute full settlement of
the claims asserted or which could have been asserted in the Eastlake Litigation
(as defined below). Upon the execution of the Exchange Agreements, the Parties
will jointly present to the Federal District Court, Northern District of Ohio an
order in the form of Exhibit N attached hereto, to suspend the litigation
captioned The Cleveland Electric Illuminating Company v. Duquesne Light Company
under docket number 1:95 CV 2307 (the "Eastlake Litigation") while preserving
the Parties' rights to continue the Eastlake Litigation in the event that the
Exchange Closing does not occur. If the Exchange Closing does not occur, DLC
shall retain all rights with respect to such litigation, provided that execution
of the Exchange Agreements shall constitute an irrevocable waiver by DLC of
claims for money damages in the Eastlake Litigation but not for any other
remedy, including the partition or sale of the unit.
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5.10 Work in Progress. The Parties agree to work together before and
after the Exchange Closing to effect an orderly transition with respect to work
in progress.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC
DLC represents and warrants to the FE Subsidiaries as follows:
6.1 Incorporation; Qualification. DLC is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to own, lease and operate its material assets and properties and to carry on its
business as is now being conducted. DLC is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which its business, as now being conducted, shall require it to be so
qualified, except where the failure to be so qualified would not have a DLC
Material Adverse Effect. DLC has heretofore delivered to the FE Subsidiaries
true, complete and correct copies of its Articles of Incorporation and Bylaws as
currently in effect.
6.2 Authority. DLC has full corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements to which DLC is
a signatory and to consummate the transactions contemplated hereby or thereby.
The execution and delivery of this Agreement and each of the Ancillary
Agreements to which DLC is a signatory by DLC and the consummation of the
transactions contemplated hereby and thereby by DLC have been duly and validly
authorized by all necessary corporate action required on the part of DLC and
this Agreement has been duly and validly executed and delivered by DLC. Subject
to the receipt of the DLC Required Regulatory Approvals, each of this Agreement
and the Ancillary Agreements to which DLC is a signatory constitutes the legal,
valid and binding agreement of DLC, enforceable against DLC in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity).
6.3 Consents and Approvals; No Violation. (a) Except as set forth in
Schedule 6.3(a), and subject to obtaining any DLC Required Regulatory Approvals,
neither the execution, delivery and performance of this Agreement by DLC nor the
execution, delivery and performance by DLC of the Ancillary Agreements to which
it is a party will (i) conflict with or result in any breach of any provision of
the Articles of Incorporation or Bylaws of DLC, (ii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
material agreement or other instrument or obligation to which DLC is a party or
by which it, or any of the DLC Assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not, individually or in the
aggregate, create a DLC Material Adverse Effect; or (iii) constitute violations
of any law, regulation, order, judgment or decree applicable to DLC, which
violations, individually or in the aggregate, would create a DLC Material
Adverse Effect.
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(b) Except as set forth in Schedule 6.3(b) (the filings and
approvals referred to in Schedule 6.3(b) are collectively referred to as the
"DLC Required Regulatory Approvals"), no consent or approval of, filing with, or
notice to, any Governmental Authority is necessary for the execution and
delivery of this Agreement by DLC, or the consummation by DLC of the
transactions contemplated hereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent DLC from
performing its material obligations hereunder and (ii) such consents, approvals,
filings or notices which become applicable to DLC or the DLC Assets as a result
of the specific regulatory status of the FE Subsidiaries (or any of their
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which the FE Subsidiaries (or any of their Affiliates)
is or proposes to be engaged.
6.4 Insurance. Except as set forth in Schedule 6.4, all material
policies of fire, liability, workers' compensation and other forms of insurance
(if any) owned or held by, or on behalf of, DLC with respect to the business,
operations or employees at the DLC Plants or the DLC Assets are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the date hereof have been paid (other than retroactive premiums which
may be payable with respect to comprehensive general liability and workers'
compensation insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy which was not replaced on
substantially similar terms prior to the date of such cancellation. Except as
described in Schedule 6.4, within the thirty-six (36) months preceding the date
of this Agreement, DLC has not been refused any insurance with respect to the
DLC Assets nor has its coverage been limited by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance
during the last twelve (12) months.
6.5 DLC Real Property Leases. Schedule 6.5 lists, as of the date of
this Agreement, all real property leases under which DLC is a lessee or lessor
and which relate to the DLC Assets ("DLC Real Property Leases"). Except as set
forth in Schedule 6.5, all such DLC Real Property Leases are valid, binding and
enforceable against DLC in accordance with their terms; there are no existing
defaults by DLC or, to DLC's Knowledge, any other party thereunder that could
reasonably be expected to result in a DLC Material Adverse Effect; and no event
has occurred which (whether with or without notice, lapse of time or both) would
constitute a default by DLC or, to DLC's Knowledge, any other party thereunder
that could reasonably be expected to result in a DLC Material Adverse Effect.
DLC has delivered to the FE Subsidiaries true, correct and complete copies of
each of the DLC Real Property Leases.
6.6 Environmental Matters. DLC is an owner but not an operator of
each of the DLC Plants, each of which is operated by an FE Subsidiary. For this
reason, both DLC's environmental responsibilities and its Knowledge of
environmental issues and concerns at the DLC Plants and the DLC Assets are
limited. Subject to this fact, and except as disclosed in Schedule 6.6:
(a) DLC holds, and is in substantial compliance with, all DLC
Environmental Permits that are required for DLC to own the DLC Assets, and DLC
is otherwise in compliance with applicable Environmental Laws with respect to
its ownership of the DLC Assets, except for such failures to hold or comply with
required DLC Environmental Permits, or such failures to be in compliance with
applicable Environmental Laws, as would not, individually or in the aggregate,
create a DLC Material Adverse Effect;
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(b) DLC has not received any written request for information, or
been notified that it is a potentially responsible party, under CERCLA or any
similar state law, with respect to the DLC Real Property; and
(c) DLC has not entered into or agreed to any consent decree or
order relating to the DLC Assets, and is not subject to any outstanding
judgment, decree, or judicial order relating to compliance with any
Environmental Law or to Remediation of Regulated Substances under any
Environmental Law relating to the DLC Assets.
The representations and warranties made in this Section 6.6 are DLC's exclusive
representations and warranties relating to environmental matters.
6.7 Real Property. Schedule 6.7 contains a description of the DLC
Real Property included in the DLC Assets. True and correct copies of all current
surveys, abstracts, title commitments and title opinions in DLC's possession and
all policies of title insurance currently in force and in the possession of DLC
with respect to the DLC Real Property have heretofore been made available to the
FE Subsidiaries.
6.8 Condemnation. Except as set forth in Schedule 6.8, DLC has not
received any written notices of and otherwise has no Knowledge of any pending or
threatened proceedings or actions by any Governmental Authority to condemn or
take by power of eminent domain all or any part of the DLC Assets.
6.9 Contracts and Leases. (a) Schedule 6.9(a) lists each DLC
Agreement which is material to DLC for the business or operations of the DLC
Assets, other than those (i) that are expected to expire or terminate prior to
the Exchange Closing Date, (ii) that provide for annual payments by DLC after
the date hereof of less than $100,000 or payments by DLC after the date hereof
of less than $500,000 in the aggregate, or (iii) to which an FE Subsidiary is a
signatory.
(b) Except as disclosed in Schedule 6.9(b), each DLC Agreement
listed in Schedule 6.9(a), constitutes a legal, valid and binding obligation of
DLC and, to DLC's Knowledge, constitutes a valid and binding obligation of the
other parties thereto, and may be transferred to the applicable FE Subsidiary as
contemplated by this Agreement without the consent of the other parties thereto
and will continue in full force and effect thereafter, unless in any such case
the impact of such lack of legality, validity or binding nature, or inability to
transfer, would not, individually or in the aggregate, create a DLC Material
Adverse Effect.
(c) Except as set forth in Schedule 6.9(c), there is not, under
any of the DLC Agreements listed in Schedule 6.9(a), any default or event which,
with notice or lapse of time or both, would constitute a default on the part of
DLC or, to DLC's Knowledge, any of the other parties thereto, except such events
of default and other events which would not, individually or in the aggregate,
create a DLC Material Adverse Effect.
6.10 Legal Proceedings. Except as set forth in Schedule 6.10, there is
no action or proceeding pending, or, to DLC's Knowledge, threatened against DLC
before any court, arbitrator or Governmental Authority, which could,
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individually or in the aggregate, reasonably be expected to create a DLC
Material Adverse Effect. Except as set forth in Schedule 6.10, DLC is not
subject to any outstanding judgments, rules, orders, writs, injunctions or
decrees of any court, arbitrator or Governmental Authority that would,
individually or in the aggregate, create a DLC Material Adverse Effect.
6.11 Permits. (a) DLC has all DLC Permits (other than DLC
Environmental Permits, which are addressed in Section 6.6 hereof) necessary to
own the DLC Assets except where the failure to have such DLC Permits would not,
individually or in the aggregate, create a DLC Material Adverse Effect. Except
as disclosed on Schedule 6.11(a), DLC has not received any written notification
that DLC is in violation of any such DLC Permits, except notifications of
violations which would not, individually or in the aggregate, create a DLC
Material Adverse Effect. DLC is in compliance with all such DLC Permits except
where non-compliance would not, individually or in the aggregate, create a DLC
Material Adverse Effect.
(b) Schedule 6.11(b) sets forth all material DLC Permits (other
than DLC Transferable Permits, which are set forth on Schedule 1.1(64)) related
to the DLC Assets.
6.12 Taxes. (a) DLC has filed or caused to be filed all Tax Returns
that are required to be filed by it with respect to any Tax relating to the DLC
Assets, and paid or caused to be paid all Taxes that have become due as
indicated thereon, except where such Tax is being contested in good faith by
appropriate proceedings, or where the failure to so file or pay would not create
a DLC Material Adverse Effect. All Tax Returns relating to the DLC Assets are
true, correct and complete in all material respects. There are no liens for
Taxes upon the DLC Assets except for liens for Taxes not yet due and Permitted
Encumbrances (DLC Assets).
(b) Except as set forth in Schedule 6.12(b), no notice of deficiency
or assessment has been received from any taxing authority with respect to
liabilities for Taxes of DLC in respect of the DLC Assets, which have not been
fully paid or finally settled, and any such deficiency shown in Schedule 6.12(b)
is being contested in good faith through appropriate proceedings.
(c) Except as set forth in Schedule 6.12(c), there are no outstanding
agreements or waivers extending the applicable statutory periods of limitation
for Taxes associated with the DLC Assets that will be binding upon any FE
Subsidiary after the Exchange Closing.
(d) Except as set forth in Schedule 6.12(d), none of the DLC Assets
is property that is required to be treated as being owned by any other person
pursuant to the so-called safe harbor lease provisions of former Section 168(f)
of the Code, and none of the DLC Assets is "tax-exempt use" property within the
meaning of Section 168(h) of the Code.
(e) Schedule 6.12(e) sets forth the taxing jurisdictions in which DLC
owns DLC Assets or conducts business that require a notification to a taxing
authority of the transactions contemplated by this Agreement, if the failure to
make such notification, or obtain Tax clearance certificates in connection
therewith, would either require any FE Subsidiary to withhold any portion of the
consideration or subject any FE Subsidiary to any liability for any Taxes of
DLC.
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6.13 Intellectual Property. Schedule 3.1(l) sets forth all
Intellectual Property used in and, individually or in the aggregate with other
Intellectual Property, material to the operation of the DLC Assets, each of
which DLC either has all right, title and interest in, or valid and binding
rights under contract to use in connection with its operation of the DLC Assets.
Except as disclosed in Schedule 6.13, (i) DLC is not, nor has it received any
notice that it is, in default (or with the giving of notice or lapse of time or
both, would be in default), under any contract to use such Intellectual
Property, and (ii) to DLC's Knowledge, such Intellectual Property is not being
infringed by any other Person. DLC has not received notice that it is infringing
any Intellectual Property of any other Person in connection with the operation
or business of the DLC Assets, and DLC, to its Knowledge, is not infringing any
Intellectual Property of any other Person which, individually or in the
aggregate, would have a DLC Material Adverse Effect.
6.14 Compliance With Laws. DLC is in compliance with all applicable
laws, rules and regulations with respect to its ownership of the DLC Assets
except where the failure to be in compliance would not, individually or in the
aggregate, create a DLC Material Adverse Effect.
6.15 DISCLAIMERS REGARDING DLC ASSETS. EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES SET FORTH IN THIS ARTICLE VI, THE DLC ASSETS ARE TRANSFERRED "AS
IS, WHERE IS", AND DLC EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF
ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE DLC
PLANTS, THE TITLE, CONDITION, VALUE OR QUALITY OF THE DLC ASSETS OR THE
PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE DLC
ASSETS, AND DLC SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO THE DLC ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR
COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF ANY
GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL LAWS,
OR WHETHER DLC POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL PROPERTY TO
OPERATE THE DLC ASSETS. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC
FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE
ABSENCE OF REGULATED SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING
UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE DLC ASSETS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC
EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE
CONDITION OF THE DLC ASSETS OR THE SUITABILITY OF THE DLC ASSETS FOR OPERATION
AS A POWER PLANT AND NO SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER
MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY DLC OR DLC
REPRESENTATIVES, OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR CREATE ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF
THE DLC ASSETS.
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6.16 Year 2000 Compliance. DLC makes no warranties or representations
of any kind, whether direct or implied, that any of the Computer Systems
included in the DLC Assets to be transferred under this Agreement is Year 2000
Compliant.
6.17 SEC Filings; Financial Statements. (a) DLC has filed all forms,
reports and documents required to be filed with the SEC since January 1, 1998,
and has heretofore delivered or made available to the FE Subsidiaries in the
form filed with the SEC, together with any amendments thereto, its (i) Annual
Reports on Form 10-K for the fiscal year ended December 31, 1997, (ii) Quarterly
Reports on Form 10-Q for the fiscal quarter ended March 31, 1998, June 30, 1998
and September 30, 1998, and (iii) all other reports or registration statements
filed by DLC with the SEC since January 1, 1998 (collectively, the "DLC SEC
Reports"). The DLC SEC Reports (i) were prepared substantially in accordance
with the requirements of the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, as the case may be, and the rules
and regulations promulgated under each of such respective acts, and the DLC SEC
Reports did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the DLC SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of DLC as at the
respective dates thereof and the consolidated results of operations and cash
flows of DLC for the periods indicated in accordance with GAAP applied on a
consistent basis throughout the periods involved (except for changes in
accounting principles disclosed in the notes thereto) and subject in the case of
interim financial statements to normal year-end adjustments.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF THE FE
SUBSIDIARIES
Each FE Subsidiary severally with respect to itself and all matters
related to such FE Subsidiary obligations hereunder and as to the FE Assets to
be exchanged by such FE Subsidiary, hereby represents and warrants to DLC:
7.1 Incorporation; Qualification. Such FE Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
respective state of incorporation and has all requisite corporate power and
authority to own, lease and operate its material assets and properties and to
carry on its business as is now being conducted. Such FE Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which its business as now being conducted shall
require it to be so qualified, except where the failure to be so qualified would
not have an FE Material Adverse Effect. Such FE Subsidiary has heretofore
delivered to DLC true, complete and correct copies of its respective Articles of
Incorporation, Code of Regulations or Bylaws, as currently in effect.
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7.2 Authority. Such FE Subsidiary has full corporate power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements to which it is a signatory and to consummate the transactions
contemplated hereby or thereby. The execution and delivery of this Agreement and
each of the Ancillary Agreements to which it is a signatory by such FE
Subsidiary and the consummation of the transactions contemplated hereby and
thereby by such FE Subsidiary have been duly and validly authorized by all
necessary corporate action required on the part of such FE Subsidiary and this
Agreement and each Ancillary Agreement to which it is a signatory has been duly
and validly executed and delivered by such FE Subsidiary. Subject to the receipt
of the FE Required Regulatory Approvals, each of this Agreement and each of the
Ancillary Agreements to which it is a signatory constitutes the legal, valid and
binding agreement of such FE Subsidiary, enforceable against such FE Subsidiary
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
7.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 7.3(a), and subject to
obtaining any FE Required Regulatory Approvals, neither the execution, delivery
and performance by such FE Subsidiary of this Agreement nor the execution,
delivery and performance by such FE Subsidiary of the Ancillary Agreements to
which such FE Subsidiary is a signatory will (i) conflict with or result in any
breach of any provision of the Articles of Incorporation, Code of Regulations or
Bylaws of such FE Subsidiary, (ii) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which such FE Subsidiary is a
party or by which such FE Subsidiary, or any of its FE Assets may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
that would not, individually or in the aggregate, create an FE Material Adverse
Effect; or (iii) constitute violations of any law, regulation, order, judgment
or decree applicable to such FE Subsidiary, which violations, individually or in
the aggregate, would create an FE Material Adverse Effect.
(b) Except as set forth in Schedule 7.3(b) (the filings and
approvals referred to in Schedule 7.3(b) are collectively referred to as "FE
Required Regulatory Approvals"), no consent or approval of, filing with, or
notice to, any Governmental Authority is necessary for the execution and
delivery of this Agreement, or the consummation by such FE Subsidiary of the
transactions contemplated hereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent such FE
Subsidiary from performing its material obligations hereunder and (ii) such
consents, approvals, filings or notices which become applicable to such FE
Subsidiary or its FE Assets as a result of the specific regulatory status of DLC
(or any of its Affiliates) or any Winning Bidder to which such FE Subsidiary is
directed to make any delivery hereunder or as a result of any other facts that
specifically relate to the business or activities in which DLC (or any of its
Affiliates) or any Winning Bidder to which such FE Subsidiary is directed to
make any delivery hereunder is or proposes to be engaged.
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7.4 Insurance. Except as set forth in Schedule 7.4, all material
policies of fire, liability, workers' compensation and other forms of insurance
(if any) owned or held by, or on behalf of, such FE Subsidiary with respect to
the business, operations or employees at its FE Plants or its FE Assets are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date hereof have been paid (other than retroactive premiums
which may be payable with respect to comprehensive general liability and
workers' compensation insurance policies), and no notice of cancellation or
termination has been received with respect to any such policy which was not
replaced on substantially similar terms prior to the date of such cancellation.
Except as described in Schedule 7.4, within the thirty-six (36) months preceding
the date of this Agreement, such FE Subsidiary has not been refused any
insurance with respect to its FE Assets nor has its coverage been limited by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last twelve (12) months.
7.5 FE Real Property Leases. Schedule 7.5 lists, as of the date of
this Agreement, all real property leases under which such FE Subsidiary is a
lessee or lessor and which relate to its FE Assets ("FE Real Property Leases").
Except as set forth in Schedule 7.5, all such Real Property Leases are valid,
binding and enforceable against such FE Subsidiary in accordance with their
terms; there are no existing defaults by such FE Subsidiary or, to such FE
Subsidiary's Knowledge, any other party thereunder that could reasonably be
expected to result in an FE Material Adverse Effect; and no event has occurred
which (whether with or without notice, lapse of time or both) would constitute a
default by such FE Subsidiary or, to such FE Subsidiary's Knowledge, any other
party thereunder that could reasonably be expected to result in an FE Material
Adverse Effect. Such FE Subsidiary has delivered to DLC, and DLC shall deliver
to the applicable Winning Bidder, true, correct and complete copies of each of
its FE Real Property Leases.
7.6 Environmental Matters. Except as disclosed in Schedule 7.6 or
4.3(e) or in the "Phase I" and "Phase II" environmental site assessments
prepared by the independent environmental consultants and made available for
inspection by DLC ("FE Environmental Reports"):
(a) Such FE Subsidiary holds, and is in substantial compliance
with, all FE Environmental Permits that are required for such FE Subsidiary to
conduct the business and operations of its FE Assets, and such FE Subsidiary is
otherwise in compliance with applicable Environmental Laws with respect to the
business and operations of its FE Assets, except for such failures to hold or
comply with required FE Environmental Permits, or such failures to be in
compliance with applicable Environmental Laws, as would not, individually or in
the aggregate, create an FE Material Adverse Effect;
(b) Such FE Subsidiary has not received any written request for
information, or been notified that it is a potentially responsible party, under
CERCLA or any similar state law with respect to its FE Real Property;
(c) Such FE Subsidiary has not entered into or agreed to any
consent decree or order relating to its FE Assets, or is subject to any
outstanding judgment, decree, or judicial order relating to compliance with any
Environmental Law or to Remediation of Regulated Substances under any
Environmental Law relating to its FE Assets; and
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(d) To the Knowledge of such FE Subsidiary, no Release of
Regulated Substances has occurred at, from, in, on, or under its FE Real
Property and no Regulated Substances are present in, on, about or migrating from
its FE Real Property that could give rise to an Environmental Claim related to
its FE Assets for which Remediation reasonably could be required, except in any
such case to the extent that any such Release or Environmental Claim would not,
individually or in aggregate, create an FE Material Adverse Effect.
The representations and warranties made in this Section 7.6 are the exclusive
representations and warranties of such FE Subsidiary relating to environmental
matters as of the date hereof.
7.7 Labor Matters. Such FE Subsidiary previously delivered to DLC
true and correct copies of all collective bargaining agreements to which such FE
Subsidiary is a party or is subject to and which relate to the business and
operations of its FE Assets. With respect to the business or operations of its
FE Assets, except to the extent set forth in Schedule 7.7 and except for such
matters as will not, individually or in aggregate, create an FE Material Adverse
Effect, (a) such FE Subsidiary is in compliance with all applicable laws
respecting employment and employment practices, occupational safety and health,
plant closing, mass layoffs, terms and conditions of employment and wages and
hours; (b) such FE Subsidiary has not received any written notice of any unfair
labor practice complaint against any FE Subsidiary pending before the National
Labor Relations Board; (c) no arbitration proceeding arising out of or under any
collective bargaining agreement is pending against such FE Subsidiary; and (d)
such FE Subsidiary has not experienced any work stoppage within the three-year
period prior to the date hereof and to the Knowledge of such FE Subsidiary none
is currently threatened.
7.8 Benefit Plans: ERISA. (a) Schedule 7.8(a) lists all FE Plans
maintained for, or in which the employees of such FE Subsidiary connected with
its FE Assets participate. True and complete copies of all such FE Plans have
been made available to DLC.
(b) No liability under Title IV or Section 302 of ERISA has been
incurred by any FE Subsidiary or any ERISA Affiliate of such FE Subsidiary that
has not been satisfied in full, and no condition exists that presents a material
risk to such FE Subsidiary or any ERISA Affiliate thereof incurring any such
liability, other than liability for premiums due the Pension Benefit Guaranty
Corporation (which premiums have been paid when due). Insofar as the
representation made in this Section 7.8(b) applies to Sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which such FE
Subsidiary or any ERISA Affiliate of such FE Subsidiary made, or was required to
make, contributions during the five (5)-year period ending on the last day of
the most recent plan year ended prior to the Exchange Closing Date.
(c) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of such FE Subsidiary or any
ERISA Affiliate of such FE Subsidiary to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
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(d) There has been no material failure of any of the FE Plans
that is a group health plan (as defined in Section 5000(b)(1) of the Code) to
meet the requirements of Section 4980B(f) of the Code with respect to a
qualified beneficiary (as defined in Section 4980B(g) of the Code). Neither such
FE Subsidiary nor any ERISA Affiliate of such FE Subsidiary has contributed to a
nonconforming group health plan (as defined in Section 5000(c) of the Code) and
no ERISA Affiliate of such FE Subsidiary has incurred a Tax under Section
5000(e) of the Code that is or could become a liability of the Acquiring Party.
(e) There are no pending, threatened or anticipated claims by or
on behalf of any FE Plans, by any employee or beneficiary covered under any such
FE Plans, or otherwise involving any such FE Plans (other than routine claims
for benefits).
7.9 Real Property. Schedule 7.9 contains a description of the FE Real
Property of such FE Subsidiary included in the FE Assets. True and correct
copies of all current surveys, abstracts, title commitments and title opinions
in such FE Subsidiary's possession and all policies of title insurance currently
in force and in the possession of such FE Subsidiary with respect to its FE Real
Property have heretofore been made available to DLC.
7.10 Condemnation. Except as set forth in Schedule 7.10, such FE
Subsidiary has not received any written notices of and otherwise has no
Knowledge of any pending or threatened proceedings or actions by any
Governmental Authority to condemn or take by power of eminent domain all or any
part of its FE Assets.
7.11 Contracts and Leases. (a) Schedule 7.11(a) lists each FE
Agreement which is material to such FE Subsidiary for the business or operations
of its FE Assets, other than those (i) that are expected to expire or terminate
prior to the Exchange Closing Date, or (ii) that provide for annual payments by
any FE Subsidiary after the date hereof of less than $100,000 or payments by
such FE Subsidiary after the date hereof of less than $500,000 in the aggregate.
(b) Except as disclosed in Schedule 7.11(b), each FE Agreement
listed in Schedule 7.11(a) constitutes a legal, valid and binding obligation of
such FE Subsidiary and, to the Knowledge of such FE Subsidiary, constitutes a
valid and binding obligation of the other parties thereto, and may be
transferred to the Acquiring Party as contemplated by this Agreement without the
consent of the other parties thereto and will continue in full force and effect
thereafter, unless in any such case the impact of such lack of legality,
validity or binding nature, or inability to transfer, would not, individually or
in the aggregate, create an FE Material Adverse Effect.
(c) Except as set forth in Schedule 7.11(c), there is not, under
any of its FE Agreements listed on Schedule 7.11(a), any default or event which,
with notice or lapse of time or both, would constitute a default on the part of
such FE Subsidiary or to its Knowledge, any of the other parties thereto, except
such events of default and other events which would not, individually or in the
aggregate, create an FE Material Adverse Effect.
7.12 Legal Proceedings. Except as set forth in Schedule 7.12, there is
no action or proceeding pending, or, to the Knowledge of such FE Subsidiary,
threatened against such FE Subsidiary before any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
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reasonably be expected to create an FE Material Adverse Effect. Except as set
forth in Schedule 7.12, such FE Subsidiary is not subject to any outstanding
judgments, rules, orders, writs, injunctions or decrees of any court, arbitrator
or Governmental Authority that would, individually or in the aggregate, create
an FE Material Adverse Effect.
7.13 Permits. (a) Such FE Subsidiary has all FE Permits (other than FE
Environmental Permits, which are addressed in Section 7.6 hereof) necessary to
own and operate its FE Assets except where the failure to have such FE Permits
would not, individually or in the aggregate, create an FE Material Adverse
Effect. Except as disclosed on Schedule 7.13(a), such FE Subsidiary has not
received any notification that such FE Subsidiary is in violation of any such FE
Permits, except notifications of violations which would not, individually or in
the aggregate, create an FE Material Adverse Effect. Such FE Subsidiary is in
compliance with all its FE Permits except where non-compliance would not,
individually or in the aggregate, create an FE Material Adverse Effect.
(b) Schedule 7.13(b) sets forth all material FE Permits (other
than FE Transferable Permits, which are set forth on Schedule 1.1(126)), related
to the FE Assets of such FE Subsidiary.
7.14 Taxes. (a) Such FE Subsidiary has filed or caused to be filed all
Tax Returns that are required to be filed by it with respect to any Tax relating
to the FE Assets or to such FE Subsidiary's operation of the FE Assets, and paid
or caused to be paid all Taxes that have become due as indicated thereon, except
where such Tax is being contested in good faith by appropriate proceedings, or
where the failure to so file or pay would not create an FE Material Adverse
Effect. Such FE Subsidiary has complied in all material respects with all
applicable laws, rules and regulations relating to withholding Taxes relating to
its FE Transferred Employees. All Tax Returns relating to its FE Assets are
true, correct and complete in all material respects. There are no liens for
Taxes upon its FE Assets except for liens for Taxes not yet due and Permitted
Encumbrances (FE Assets).
(b) Except as set forth in Schedule 7.14(b), no notice of deficiency
or assessment has been received from any taxing authority with respect to
liabilities for Taxes of such FE Subsidiary in respect of its FE Assets, which
have not been fully paid or finally settled, and any such deficiency shown in
Schedule 7.14(b) is being contested in good faith through appropriate
proceedings.
(c) Except as set forth in Schedule 7.14(c), there are no outstanding
agreements or waivers extending the applicable statutory periods of limitation
for Taxes associated with is FE Assets that will be binding upon the Acquiring
Party after the Exchange Closing.
(d) Except as set forth in Schedule 7.14(d), none of its FE Assets is
property that is required to be treated as being owned by any other person
pursuant to the so-called safe harbor lease provisions of former Section 168(f)
of the Code, and none of its FE Assets is "tax-exempt use" property within the
meaning of Section 168(h) of the Code.
(e) Schedule 7.14(e) sets forth the taxing jurisdictions in which
such FE Subsidiary owns assets or conducts business that require a notification
to a taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearance certificates in
connection therewith, would either require the Acquiring Party to withhold any
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portion of the consideration or subject the Acquiring Party to any liability for
any Taxes of such FE Subsidiary.
7.15 Intellectual Property. Schedule 4.1(k) sets forth all
Intellectual Property used in and, individually or in the aggregate with other
Intellectual Property, material to the operation or business by such FE
Subsidiary of its FE Assets, each of which such FE Subsidiary or its Affiliates
either has all right, title and interest in or valid and binding rights under
contract to use in connection with its operation of its FE Assets. Except as
disclosed in Schedule 7.15, (i) such FE Subsidiary is not, nor has received any
notice that it is in default (or with the giving of notice or lapse of time or
both, would be in default), under any contract to use such Intellectual
Property, and (ii) to the Knowledge of such FE Subsidiary, such Intellectual
Property is not being infringed by any other Person. Such FE Subsidiary has not
received notice that it is infringing any Intellectual Property of any other
Person in connection with the operation or business of its FE Assets, and such
FE Subsidiary to its Knowledge, is not infringing any Intellectual Property of
any other Person which, individually or in the aggregate, would have an FE
Material Adverse Effect.
7.16 FE Capital Expenditures. Except as set forth in Schedule 8.1(a),
there are no FE Capital Expenditures that are planned by such FE Subsidiary with
respect to its FE Assets through December 31, 1999.
7.17 Compliance With Laws. Such FE Subsidiary is in compliance with
all applicable laws, rules and regulations with respect to the ownership or
operation of its FE Assets, except where the failure to be in compliance would
not, individually or in the aggregate, create an FE Material Adverse Effect.
7.18 DISCLAIMERS REGARDING FE ASSETS. EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES SET FORTH IN THIS ARTICLE VII, THE FE ASSETS ARE TRANSFERRED "AS
IS, WHERE IS", AND SUCH FE SUBSIDIARY EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES,
OPERATIONS OF ITS FE PLANTS, THE TITLE, CONDITION, VALUE OR QUALITY OF ITS FE
ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF
ITS FE ASSETS, AND SUCH FE SUBSIDIARY SPECIFICALLY DISCLAIMS ANY REPRESENTATION
OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE WITH RESPECT TO ITS FE ASSETS, OR ANY PART THEREOF, OR AS TO THE
WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR
PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF
ANY GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL
LAWS, OR WHETHER SUCH FE SUBSIDIARY POSSESSES SUFFICIENT REAL PROPERTY OR
PERSONAL PROPERTY TO OPERATE ITS FE ASSETS. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, SUCH FE SUBSIDIARY FURTHER SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF REGULATED SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO ITS FE ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS
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OTHERWISE EXPRESSLY PROVIDED HEREIN, SUCH FE SUBSIDIARY EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF ITS FE ASSETS
OR THE SUITABILITY OF ITS FE ASSETS FOR OPERATION AS A POWER PLANT AND NO
SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION
PROVIDED BY OR COMMUNICATIONS MADE BY SUCH FE SUBSIDIARY OR ITS REPRESENTATIVES,
OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR CREATE ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF ITS FE
ASSETS.
7.19 Year 2000 Compliance. Such FE Subsidiary, with respect to all
Computer Systems included in its FE Assets to be transferred under this
Agreement, has plans to achieve Year 2000 Compliance with respect to such
Computer Systems, and is using its Commercially Reasonable Efforts to execute
and carry out such plans.
7.20 SEC Filings; Financial Statements. (a) Such FE Subsidiary has
filed all forms, reports and documents required to be filed by such FE
Subsidiary with the SEC since January 1, 1998, and has heretofore delivered or
made available to DLC in the form filed with the SEC, together with any
amendments thereto, its (i) Annual Reports on Form 10-K for the fiscal year
ended December 31, 1997, (ii) all proxy statements relating to its meetings of
stockholders (whether annual or special) held since January 1, 1997, (iii)
Quarterly Reports on Form 10-Q for the fiscal quarter ended March 31, 1998, June
30, 1998 and September 30, 1998, and (iv) all other reports or registration
statements filed by such FE Subsidiary with the SEC since January 1, 1998
(collectively, "FE Subsidiaries SEC Reports"). The FE Subsidiaries SEC Reports
were prepared substantially in accordance with the requirements of the
Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations promulgated under
each of such respective acts, and did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements, including all related notes and
schedules, contained in the FE Subsidiaries SEC Reports (or incorporated by
reference therein) fairly present the consolidated financial position of the FE
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of the FE Subsidiaries for the periods indicated in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the notes
thereto) and subject in the case of interim financial statements to normal
year-end adjustments.
ARTICLE VIII
COVENANTS OF THE PARTIES
8.1 Conduct of Business Relating to the Exchange Assets. The Parties
understand and agree that the existing CAPCO Agreements regarding the Plants
remain in full force and effect during the period from the date of this
Agreement through the Exchange Closing Date, and that during such period,
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except as modified by this Agreement, the ownership, operation and maintenance
of the Plants shall be as provided in the existing CAPCO Agreements.
(a) Except as described in Schedule 8.1(a) or as expressly
contemplated by this Agreement or to the extent DLC otherwise consents in
writing, during the period from the date of this Agreement to the Exchange
Closing Date, each FE Subsidiary that is operating one or more of the FE Assets,
(i) will operate such FE Assets in the ordinary course of business consistent
with its past practices and Good Utility Practices, (ii) shall use all
Commercially Reasonable Efforts to preserve intact such FE Assets, and endeavor
to preserve the goodwill and relationships with customers, suppliers and others
having business dealings with it, (iii) shall maintain adequate insurance
coverage relating to such FE Assets, including insurance described in Section
7.4, and (iv) shall comply with all applicable laws relating to such FE Assets,
including without limitation, all Environmental Laws, except, with respect to
such FE Assets, where the failure to so comply would not result in an FE
Material Adverse Effect.
(b) Each Party that is operating one or more of the Exchange
Assets, shall continue its program to install such equipment or Computer Systems
relating to its Exchange Assets (except for such equipment and systems described
on Schedule 4.2(b)) with respect to Year 2000 Compliance in accordance with the
plans referred to in Sections 3.1(k) or 4.1(j), as the case may be; provided
that if the Acquiring Party requests reasonable changes in such plans the
Conveying Party will alter its plans provided that (i) all incremental costs of
the Conveying Party shall be promptly reimbursed by the Acquiring Party and (ii)
the Acquiring Party shall, to the Conveying Party's reasonable satisfaction,
indemnify, defend and hold harmless the Conveying Party from and against any and
all Indemnifiable Losses in any way relating to, resulting from or arising out
of such requested changes to such plans.
(c) Without limiting the generality of Section 8.1(a) and,
except as contemplated in this Agreement or as described in Schedule 8.1(c), or
as required under applicable law or by any Governmental Authority, prior to the
Exchange Closing Date, without the prior written consent of DLC, no FE
Subsidiary shall as to its FE Assets:
(i) Make any material change in the levels of the FE
Inventories customarily maintained by such FE Subsidiary with respect
to its FE Asset, other than changes which are consistent with Good
Utility Practices;
(ii) Sell, lease (as lessor), encumber, pledge,
transfer or otherwise dispose of, any FE Asset (except for FE
Inventories or Fuel Supplies used, consumed or replaced in the
ordinary course of business consistent with past practices of such FE
Subsidiary or Good Utility Practices) other than to encumber any such
FE Asset with Permitted Encumbrances (FE Assets);
(iii) Modify, amend or voluntarily terminate, prior to
the respective expiration date of any of the Assigned Agreements or
Real Property Leases or any of its FE Permits or FE Environmental
Permits with respect to any of its FE Assets in any material respect,
other than (A) in the ordinary course of business, to the extent
consistent with the past practices of such FE Subsidiary and with Good
Utility Practices, (B) with cause, to the extent consistent with past
practices of such FE Subsidiary and with Good Utility Practices, or
(C) as may be required in connection with transferring of any such FE
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Subsidiary's rights or obligations thereunder to the Acquiring Party
pursuant to this Agreement;
(iv) Except as otherwise provided herein, enter into
any commitment for the purchase, sale, or transportation of fuel for
any FE Asset having a term greater than six months and not terminable
on or before the Exchange Closing Date either (A) automatically, or
(B) by option of such FE Subsidiary (or, after the Exchange Closing,
by the Acquiring Party) in its sole discretion, if the aggregate
payment under such commitment for fuel and all other outstanding
commitments for fuel for that FE Asset not previously approved by DLC
would exceed $1,000,000;
(v) Sell, lease or otherwise dispose of FE SO2
Emission Allowances or FE NOx Emission Allowances or FE Emission
Reduction Credits, except to the extent necessary to operate such FE
Assets in accordance with this Section 8.1;
(vi) Except as otherwise provided herein, enter into
any contract, agreement, commitment or arrangement relating to any FE
Asset that individually exceeds $250,000 or in the aggregate exceeds
$1,000,000 unless it is terminable by such FE Subsidiary (or, after
the Exchange Closing, by the Acquiring Party) without penalty or
premium upon no more than sixty (60) days notice;
(vii) Except as otherwise required by the terms of any
collective bargaining agreement or as otherwise provided under Section
8.11 hereof, (A) hire at, or transfer to such FE Asset, any new
employees prior to the Exchange Closing, other than to fill vacancies
in existing positions in the reasonable discretion of such FE
Subsidiary, (B) materially increase salaries or wages of employees
employed in connection with such FE Assets prior to the Exchange
Closing, (C) take any action prior to the Exchange Closing to affect a
material change in any collective bargaining agreement, or (D) take
any action prior to the Exchange Closing to materially increase the
aggregate benefits payable to the employees employed in connection
with such FE Assets;
(viii) Make any FE Capital Expenditures except (A) as
described on Schedule 8.1(c)(viii); (B) as mandated after the date of
this Agreement by any Governmental Authority (provided that DLC may
direct such FE Subsidiary to delay making such FE Capital Expenditures
and contest such mandates by appropriate proceedings at DLC's expense,
unless such delay would have an adverse impact on the FE Assets); or
(C) those which are prudent in amount but do not exceed in the
aggregate $500,000 for any Exchange Asset, in addition to those
identified in (A) or (B) above; or
(ix) Except as otherwise provided herein, enter into
any written or oral contract, agreement, commitment or arrangement
with respect to any of the proscribed transactions set forth in the
foregoing paragraphs (i) through (viii).
(d) Prior to the Exchange Closing Date, without the prior
written consent of DLC, no FE Subsidiary shall as to the DLC Assets make any DLC
Capital Expenditure except (A) as described on Schedule 8.1(d); (B) as mandated
after the date of this Agreement by any Governmental Authority (provided that
the DLC may direct any FE Subsidiary to delay making such DLC Capital
Expenditures and contests such mandate by appropriate proceedings at DLC's
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expense, unless such delay would have an adverse impact on the DLC Assets); (C)
as necessary to restore the DLC Asset to service or to avoid serious damage; or
(D) those which are prudent in amount but do not exceed in the aggregate
$500,000 for any DLC Asset, in addition to those identified in (A) or (B) above.
(e) Except as contemplated in this Agreement, as described in
Schedule 8.1(e), or as required under applicable law or by any Governmental
Authority, prior to the Exchange Closing Date, without the prior written consent
of the applicable FE Subsidiaries, DLC shall not:
(i) Sell, lease (as lessor), encumber, pledge,
transfer or otherwise dispose of, any DLC Asset (except for DLC
Inventories or Fuel Supplies used, consumed or replaced in the
ordinary course of business consistent with past practices of DLC or
Good Utility Practices) other than to encumber any such DLC Asset with
Permitted Encumbrances (DLC Assets);
(ii) Enter into any contract, agreement, commitment or
arrangement relating to any DLC Asset that individually exceeds
$250,000 or in the aggregate exceeds $1,000,000 unless it is
terminable by DLC (or, after the Exchange Closing, by an FE
Subsidiary) without penalty or premium upon no more than sixty (60)
days notice; or
(iii) Enter into any written or oral contract,
agreement, commitment or arrangement with respect to any of the
proscribed transactions set forth in the foregoing paragraphs (i) and
(ii).
8.2 Access to Information.
(a) Between the date of this Agreement and the Exchange
Closing Date, the FE Subsidiaries will, at reasonable times and upon reasonable
notice, provide DLC, the DLC Representatives, the Auction Participants and the
Winning Bidders:
(i) reasonable access to their managerial personnel
and to all books, records, plans, equipment, offices and other
facilities and properties constituting the FE Assets;
(ii) such historical financial and operating data and
other information with respect to the FE Assets as they may from time
to time reasonably request;
(iii) upon request, a copy of each material report,
schedule or other document filed by FE or any FE Subsidiary with
respect to the FE Assets with the SEC, FERC, PUCO, PaPUC, PaDEP or any
other Governmental Authority;
(iv) access to each FE Asset for Inspection by DLC, DLC
Representatives, Auction Participants and Winning Bidders at
reasonable times during regular business hours scheduled for such
Inspections, and shall provide qualified management, engineering,
operations and maintenance and other personnel to make presentations
as required, to escort such Persons and to assist in all aspects of
conducting the Inspections, provided that each of DLC, the Auction
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Participants, the Winning Bidders and the FE Subsidiaries shall bear
their own costs of participating in the Inspections; and
(v) with all such other information in the possession
or control of an FE Subsidiary as shall be reasonably necessary to
enable DLC, the DLC Representatives and the Auction Participants to
assemble the information reasonably necessary or appropriate for the
Auction or to verify the accuracy of the representations and
warranties of the FE Subsidiaries contained in this Agreement;
provided, however, that (A) any such Inspections shall be conducted in
such a manner as not to interfere unreasonably with the operation of
the FE Assets, (B) the applicable FE Subsidiary shall not be required
to take any action which would constitute a waiver of any legal
privilege, including, but not limited to, the attorney-client
privilege, the work product privilege, and the self critical
investigation privilege, and (C) the applicable FE Subsidiary need not
supply DLC, any Auction Participant or any Winning Bidder with any
information which such FE Subsidiary are under a legal or contractual
obligation to withhold from disclosure.
Notwithstanding anything in this Section 8.2(a) to the contrary, with respect to
employee records the FE Subsidiaries will only furnish or provide such access to
FE Transferred Employee Records and will not furnish or provide access to other
employee personnel records or medical information unless required by law or
specifically authorized by the affected employee.
(b)
(i) DLC, the DLC Representatives, the Auction
Participants and the Winning Bidders shall be entitled to conduct
Inspections, in accordance with this Section 8.2(b), of all of the FE
Assets located adjacent to any Connection Point (as defined in the FE
Connection Agreements) to verify and/or determine the accuracy of the
data, drawings, and records described in the FE Connection Agreements.
The Parties shall cooperate to schedule DLC's, the Auction
Participants' and the applicable Winning Bidder's Inspections of the
FE Assets so that any interference with the operation of each FE Plant
is minimized, to the extent reasonably feasible, and so that DLC, the
Auction Participants and such Winning Bidder may complete their
Inspections of the FE Assets within thirty (30) working days of
commencement of Inspections and within two (2) months after the
execution of the Auction Agreements.
(ii) At a mutually convenient time not more than one
(1) month after DLC, the Auction Participants and the Winning Bidders
have completed their Inspections, the Parties shall meet to discuss
whether, as a result of the Inspections, it is appropriate to modify
the exhibits to the FE Connection Agreements to portray more
accurately the Connection Points. Any modification to any portion of
the exhibits to any FE Connection Agreement to which the respective
Parties agree shall thereafter be deemed part of such exhibit for all
purposes under such FE Connection Agreement.
(c) The FE Subsidiaries agree that in order to satisfy the
requirements of the Auction, it is necessary and hereby agree (i) to complete
surveys and title reports for the FE Real Property, (ii) to subdivide the FE
Real Property appropriately to prepare it for sale, in each case as soon as
practicable following the execution of this Agreement, and (iii) to provide DLC
with a copy of preliminary title reports and surveys for the FE Real Property as
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soon as such preliminary title reports and surveys are available. DLC agrees to
provide the applicable FE Subsidiaries with a copy of preliminary title reports
and surveys for the DLC Real Property as soon as such preliminary title reports
and surveys are available.
(d) For seven (7) years after the Exchange Closing Date (or such
longer period as may be required by applicable law), each Party and its
Representatives (and under the terms of the respective Auction Agreement, the
applicable Winning Bidder and its Representatives) shall have reasonable access
to all of the books and records of the Exchange Assets, including all FE
Transferred Employee Records in the possession of any Party to the extent that
such access may reasonably be required in connection with the Assumed
Liabilities or the Excluded Liabilities, or regarding other matters relating to
or affected by the operation of the Exchange Assets. Such access shall be
afforded by the applicable Winning Bidder or the Party in possession of any such
books and records upon receipt of reasonable advance notice and during normal
business hours. The Person exercising this right of access shall be solely
responsible for any costs or expenses incurred by it or the holder of the
information with respect to such access pursuant to this Section 8.2(d). If the
Person in possession of such books and records shall desire to dispose of any
books and records upon or prior to the expiration of such seven-year period (or
any such longer period), such Person shall, prior to such disposition, give the
other Person a reasonable opportunity, at the latter's expense, to segregate and
remove such books and records as it may select.
(e) Each Party agrees that, prior to the Exchange Closing Date,
neither it nor its Representatives will contact any vendors, suppliers,
employees, or other contracting parties of a Conveying Party or its Affiliates
with respect to any aspect of the Conveying Party's Exchange Assets or the
transactions contemplated hereby, without the prior written consent of the
applicable Conveying Party, which consent shall not be unreasonably withheld.
For avoidance of doubt, if the Conveying Party is an FE Subsidiary, consent will
only be needed from such FE Subsidiary.
(f) Each Party shall provide the other with (i) copies of its
Annual Report on Form 10-K filed with the SEC for the fiscal year ended December
31, 1998, as soon as practicable but in no event later than March 31, 1999, and
(ii) copies of its Quarterly Reports on Form 10-Q filed with the SEC for those
quarters ended March 31, 1999, June 30, 1999 and September 30, 1999, as soon as
practicable after each such report is filed with the SEC.
8.3 Confidentiality. (a) Each Party shall, and shall use its best
efforts to cause its Representatives to, (i) keep all Proprietary Information of
the other Party confidential and not to disclose or reveal any such Proprietary
Information to any person other than such Party's Representatives and (ii) not
use such Proprietary Information other than in connection with the consummation
of the transactions contemplated hereby. After the Exchange Closing Date, any
Proprietary Information, to the extent related to the Exchange Assets acquired
by an Acquiring Party, shall no longer be subject to the restrictions set forth
herein. The obligations of the Parties under this Section 8.3(a) shall be in
full force and effect for three (3) years from the date hereof and will survive
the termination of this Agreement, the discharge of all other obligations owed
by the Parties to each other and the Exchange Closing Date.
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(b) Notwithstanding the terms of Section 8.3(a) above, the FE
Subsidiaries agree that prior to the Exchange Closing, DLC may reveal or
disclose Proprietary Information to any other Persons in connection with the
Auction; provided that such Persons agree in writing to maintain the
confidentiality of the Proprietary Information in accordance with this
Agreement.
(c) Upon the other Party's prior written approval (which shall
not be unreasonably withheld), either Party or the applicable Winning Bidder may
provide Proprietary Information of the other Party to the PUCO, PaPUC, SEC, FERC
or any other Governmental Authority with jurisdiction or any stock exchange, as
may be necessary to obtain Required Regulatory Approvals, or to comply generally
with any relevant law or regulation. The disclosing Party, or the applicable
Winning Bidder (as required by the respective Auction Agreement), will seek
confidential treatment for the Proprietary Information provided to any
Governmental Authority and the disclosing Party, or the Winning Bidder (as
required by the respective Auction Agreement), will notify the other Party as
far in advance as is practicable of its intention to release to any Governmental
Authority any Proprietary Information.
8.4 Public Statements. Subject to the requirements imposed by law,
any Governmental Authority or stock exchange, prior to the Exchange Closing
Date, no press release or other public announcement or public statement or
comment in response to any inquiry relating to the transactions contemplated by
this Agreement shall be issued or made by any Party without the prior approval
of the other Party (which approval shall not be unreasonably withheld). The
Parties agree to cooperate in preparing any such announcements.
8.5 Expenses. Except to the extent specifically provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses. Notwithstanding anything to the contrary herein, each Acquiring Party
will be responsible for (a) all costs and expenses associated with obtaining any
title insurance policy and all endorsements thereto that such Acquiring Party
elects to obtain and (b) all filing fees under the HSR Act relating to the
Exchange Assets that such Acquiring Party would acquire hereunder.
8.6 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
Party shall use its best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Generation
Exchange and the assumption of the Assumed Liabilities pursuant to this
Agreement and the Auction Agreements. Such actions shall include, without
limitation, each Party using its best efforts to ensure satisfaction of the
conditions precedent to its obligations hereunder, including obtaining all
necessary consents, approvals, and authorizations of third parties and
Governmental Authorities required to be obtained in order to consummate the
transactions hereunder, and as a Conveying Party to effectuate a transfer of the
Transferable Permits to any Acquiring Party. The Conveying Party shall cooperate
with the Acquiring Party in its efforts to obtain all other Permits and
Environmental Permits necessary for the Acquiring Party to operate the Exchanged
Assets. As an Acquiring Party, each Party agrees to perform promptly all
conditions required of such Acquiring Party in connection with the Conveying
Party's Required Regulatory Approvals, other than those conditions which would
create for it a Material Adverse Effect. Neither of the Parties hereto shall,
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without prior written consent of the other Party, take or fail to take any
action which might reasonably be expected to prevent or materially impede,
interfere with or delay the transactions contemplated by this Agreement or the
Auction Agreements.
(b)
(i) In the event that any Exchange Asset to be
assigned, conveyed, transferred and delivered hereunder to any
Acquiring Party shall not have been so assigned, conveyed, transferred
and delivered to such Acquiring Party at the Exchange Closing, the
Conveying Party shall, subject to Section 8.6(c), use Commercially
Reasonable Efforts to so assign, convey, transfer and deliver such
asset to such Acquiring Party as promptly as is practicable after the
Exchange Closing.
(ii) In the event that any Easement shall not have been
granted by an Acquiring Party to the applicable Conveying Party at the
Exchange Closing, such Acquiring Party shall use Commercially
Reasonable Efforts to grant such Easement to the applicable Conveying
Party as promptly as is practicable after the Exchange Closing.
(c)
(i) To the extent that a Conveying Party's rights
under any material (as such term is defined in Section 8.6(c)(iii)
below) Assigned Agreement or Real Property Lease may not be assigned
without the consent of another Person which consent has not been
obtained by the Exchange 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.
(ii) The Parties agree that if any consent to an
assignment of any material Assigned Agreement or Real Property Lease
shall not be obtained or if any attempted assignment would be
ineffective or would impair the Acquiring Party's rights and
obligations under the material Assigned Agreement or Real Property
Lease in question, so that the Acquiring Party would not in effect
acquire the benefit of all such rights and obligations, the Conveying
Party, at the Acquiring Party's option and to the maximum extent
permitted by law and by such material Assigned Agreement or Real
Property Lease shall, after the Exchange Closing Date, appoint the
Acquiring Party to be the Conveying Party's agent with respect to such
material Assigned Agreement or Real Property Lease, or, to the maximum
extent permitted by law and by such material Assigned Agreement or
Real Property Lease, enter into such reasonable arrangements with the
Acquiring Party or take such other actions as are necessary to provide
the Acquiring Party with the same or substantially similar rights and
obligations of such material Assigned Agreement or Real Property Lease
as the Acquiring Party may reasonably request. The Parties shall
cooperate and shall each use Commercially Reasonable Efforts prior to
and after the Exchange Closing Date to obtain an assignment of such
material Assigned Agreement or Real Property Lease to the Acquiring
Party.
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(iii) For purposes of this Section 8.6(c), all Real
Property Leases and Assigned Agreements listed on Schedules 7.5 and
7.11(a) are deemed to be "material." Without limitation of the
foregoing, to the extent that any fuel supply contract relating to an
FE Plant is not assignable, then the applicable FE Subsidiary will
agree to continue to purchase fuel pursuant to such contract and to
resell it to the applicable Acquiring Party at the FE Subsidiary's
purchase price for the remainder of the term of that contract;
provided that, the term of such fuel supply contract shall not be
extended and the respective Auction Agreement shall require such
Winning Bidder to make payment to the FE Subsidiary in this
circumstance on an as-incurred basis.
(d) To the extent that a Conveying Party's rights under any
warranty or guaranty described in Section 3.1(i) or 4.1(i) may not be assigned
without the consent of another Person, which consent has not been obtained by
the Exchange 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. DLC and each FE Subsidiary agree that if any consent to an
assignment of any such warranty or guaranty shall not be obtained, or if any
attempted assignment would be ineffective or would impair the Acquiring Party's
rights and obligations under the warranty or guaranty in question, so that the
Acquiring Party would not in effect acquire the benefit of all such rights and
obligations, the Conveying Party, at the Acquiring Party's option and expense,
shall use Commercially Reasonable Efforts, to the maximum extent permitted by
law and by such warranty or guaranty, to enforce such warranty or guaranty for
the benefit of the Acquiring Party so as to provide Acquiring Party to the
maximum extent possible with the benefits and obligations of such warranty or
guaranty.
8.7 Consents and Approvals.
(a) As promptly as advisable after the date of execution of this
Agreement, DLC and each of the FE Subsidiaries 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 HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. The Parties shall use their respective best efforts to respond promptly
to any requests for additional information made by either of such agencies, and
to cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date after the date of filing of such notification. Each
Acquiring Party will pay all filing fees under the HSR Act relating to the
Exchange Assets to be acquired thereby, but each Party will bear its own costs
of the preparation of any such filing.
(b) As promptly as advisable after the date of this Agreement,
DLC and the FE Subsidiaries, as applicable, shall make any filings required by
the Federal Power Act. Prior to filings with the FERC, the filing Party shall
submit such filings to the other Party for review and comment and shall
incorporate into the application any revisions reasonably requested. The Party
making the filing shall be solely responsible for the cost of preparing and
filing the application, any petition(s) for rehearing, or any reapplication. If
the initial filing is rejected by the FERC, the Party that made the filing
agrees to petition the FERC for rehearing and/or to re-submit an application
with the FERC, provided that in either case this action does not create a
Material Adverse Effect with respect to the Party that made the filing and has
been approved by the other Party.
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(c) As promptly as advisable, and in any case within sixty (60)
days after the date of this Agreement, the Parties, as applicable, shall make or
cause to be made any filings required by law with the PUCO, PaPUC and any other
Governmental Authority, and make or cause to be made any other filings required
to be made with respect to the transactions contemplated hereby. The Parties
shall respond promptly to any requests for additional information made by such
agencies, and use their respective commercially reasonable efforts to cause
regulatory approval to be obtained at the earliest possible date after the date
of any such filing. Each Party will bear its own costs of the preparation of any
such filing.
(d) The Parties 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 Closing
Payment may be required to be withheld or in which the Acquiring Party would
otherwise be liable for any Tax liabilities of the Conveying Party pursuant to
such state and local Tax law.
(e) Each Acquiring Party shall have the primary responsibility
for securing the transfer, reissuance or procurement of the Permits and
Environmental Permits (other than Transferable Permits) effective as of the
Exchange Closing Date. Each Conveying Party shall cooperate with the Acquiring
Party's efforts in this regard and assist in any transfer or reissuance of a
Permit or Environmental Permit held by such Conveying Party or the procurement
of any other Permit or Environmental Permit when so requested by the Acquiring
Party.
8.8 Fees and Commissions. Each Party represents and warrants to the
other Party that, except for Lehman Brothers Inc., which is acting for and at
the expense of DLC, no broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by the Party making such
representation. Each Party will pay to the other Party or otherwise discharge,
and will indemnify and hold the other harmless from and against, any and all
claims or liabilities for all brokerage fees, commissions and finder's fees
(other than the fees, commissions and finder's fees payable to the parties
listed above) incurred by reason of any action taken by the indemnifying party.
8.9 Tax Matters.
(a) All Transfer Taxes incurred in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, (i) Pennsylvania or Ohio sales tax; (ii) the Pennsylvania or Ohio
transfer tax, conveyance fees or conveyances of interests in real and/or
personal property; and (iii) Pennsylvania or Ohio sales tax and transfer tax on
deeds shall be borne by the applicable Conveying Party. Each Conveying Party
shall file, to the extent required by, or permissible under, applicable law, all
necessary Tax Returns and other documentation with respect to all such Transfer
Taxes, and, if required by applicable law, the Acquiring Party shall join in the
execution of any such Tax Returns and other documentation, except to the extent
that such execution is inconsistent with the Party's commitments in the Auction
Agreements. Prior to the Exchange Closing Date, to the extent applicable, each
Acquiring Party shall provide to the applicable Conveying Party appropriate
certificates of Tax exemption from each applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with
Section 5.4 of this Agreement, each Party shall prepare and timely file and the
Auction Agreement shall require the Winning Bidders to prepare and timely file
all Tax Returns required to be filed after the Exchange Closing Date with
respect to the Exchange Assets, if any, and shall duly and timely pay all such
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Taxes shown to be due on such Tax Returns. Each Party's preparation of any such
Tax Returns shall be subject to the other Party's approval, which approval shall
not be unreasonably withheld, except if such approval is inconsistent with such
Party's obligations under the applicable Auction Agreements. Each Party shall
make such Tax Returns available for the other Party's review and approval no
later than fifteen (15) Business Days prior to the due date for filing each such
Tax Return.
(c) Each Party shall provide the other Party with such
assistance as may reasonably be requested by such 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 shall retain and provide the requesting Party with any
records or information which may be relevant to such return, audit, examination
or proceedings. Any information obtained pursuant to this Section 8.9(c) or
pursuant to any other Section hereof providing for the sharing of information or
review of any Tax Return or other instrument relating to Taxes shall be kept
confidential by the Parties hereto.
8.10 Advice of Changes. Prior to the Exchange Closing, each Party will
advise the other in writing with respect to any matter arising after execution
of this Agreement of which that Party obtains Knowledge and which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth in this Agreement, including any of the Schedules or Exhibits hereto. Each
Party may at any time notify the other Party, in writing, of any development
causing a breach of any of its representations and warranties in Article VI, in
the case of DLC, or Article VII, in the case of the FE Subsidiaries. Unless a
Party has the right to terminate this Agreement pursuant to Section 11.1(e) or
(f) below by reason of such developments and exercises that right within the
period of fifteen (15) days after receipt of such written notice, said written
notice will be deemed to have amended this Agreement, including the appropriate
Schedule or Exhibit, to have qualified the representations and warranties
contained in Articles VI and VII above, as applicable, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
8.11 FE Subsidiaries' Employees.
(a) Each FE Subsidiary shall identify the employees at its FE
Plant on Schedule 8.11(a), which schedule shall also set forth such employees'
level of seniority, classification and Plant location. The FE Subsidiaries may
submit an offer of continuing employment with an FE Subsidiary to those
employees identified on Schedule 8.11(a), provided that such offer shall not be
contingent on any such employee waiving his or her rights to consider a
competing offer of employment from the Winning Bidder. Upon the acceptance by
any such employee of an FE Subsidiary's offer of continuing employment, the
applicable FE Subsidiary shall provide written notice thereof to DLC and shall
modify Schedule 8.11(a) to reflect the same. The Parties agree that the Auction
Agreement shall include provisions containing the terms set forth in paragraphs
(b) through (p) of this Section 8.11.
(b) At least 90 days prior to the Auction Closing Date, Winning
Bidder shall provide the applicable FE Subsidiary with notice of its staffing
level requirements, listed by classification and operation, and shall be
required to offer employment only to that number of employees of the applicable
FE Subsidiary who are covered by the UWUA, Local 140 collective bargaining
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agreement with FE ("Local 140 CBA") and who are either (i) employed in positions
relating to the FE Plant, New Castle (collectively, "Union Employees") or (ii)
if employed at another location, perform substantially all their work in support
of the New Castle plant, and in each case, who are necessary to satisfy Winning
Bidder's staffing level requirements. In each classification, FE Union Employees
shall be so offered employment in order of their seniority as provided for in
the Local 140 CBA. Each employee who becomes employed by Winning Bidder pursuant
to this section shall be referred herein as a "FE Transferred Union Employee."
(c) At least 90 days prior to the Auction Closing Date, Winning
Bidder shall provide the applicable FE Subsidiary with notice of its staffing
level requirements, listed by classification and operation, and shall be
required to make either a Non-Qualifying or a Qualifying Offer of employment
only to that number of salaried employees of the applicable FE Subsidiary who
are listed in, or are in a function or whose employment responsibilities are
listed in, Schedule 8.11(c) (collectively, "Non-Union Employees"), which
Schedule 8.11(c) shall also set forth such employees' salary and
responsibilities, and who are necessary to satisfy Winning Bidder's staffing
level requirements. Each employee who becomes employed by Winning Bidder
pursuant to this section shall be referred herein as a "FE Transferred Non-Union
Employee." Winning Bidder shall inform the FE Subsidiaries of those Non-Union
Employees to whom Winning Bidder has made offers of employment not later than 90
days prior to the Auction Closing Date.
(d) All offers of employment made by a Winning Bidder pursuant
to Sections 8.11 (b) and (c) shall be made in accordance with all applicable
laws and regulations and shall remain open for a period of ten (10) working
days. Any such offer which is accepted within such ten (10) working day period
shall thereafter be irrevocable until the earlier of the Auction Closing Date or
the termination of this Agreement pursuant to its terms. Following the
acceptance of such offers the Winning Bidder shall provide written notice
thereof to the applicable FE Subsidiary and the applicable FE Subsidiary shall
provide Winning Bidder with access to the files and records of employees
accepting such offers, to the extent permitted by contract, the Local 140 CBA
and/or applicable law. Schedule 8.11(d) sets forth the collective bargaining
agreements, and amendments thereto, to which the applicable FE Subsidiary is a
party in connection with the Exchange Assets.
(e) With respect to FE Transferred Union Employees and FE
Transferred NonUnion Employees, the following shall be applicable:
(i) For such FE Transferred Union Employees, the Winning Bidder
shall be required to recognize UWUA, Local 140 as the exclusive collective
bargaining representative and shall assume the terms and conditions of the Local
140 CBA to the extent applicable to such FE Transferred Union Employees until
the expiration of said agreement and will further comply with all applicable
legal obligations with respect to collective bargaining under federal labor law
thereafter. Moreover, should the Winning Bidder subsequently sell, convey or
otherwise transfer its interest in the New Castle Plant to any other entity
prior to the expiration of the Local 140 CBA, the Winning Bidder shall make the
foregoing commitments a condition of such sale, conveyance or transfer.
(ii) The Winning Bidder will establish and maintain benefit plans
(including a severance plan) for Transferred FE Union Employees and FE
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Transferred Non-Union Employees under either the Local 140 CBA or any similar FE
document which are comparable to the FE Plans in effect for such employees
immediately prior to the Auction Closing Date and provide at least the same
level of benefits or coverage as the FE Plans for the duration of the Local 140
CBA, in the case of FE Transferred Union Employees, or December 31, 2001, in the
case of FE Transferred Non-Union Employees (such period being hereinafter
referred to as the "Continuation Period"). Subject to applicable law and the
Local 140 CBA, nothing in the foregoing shall prevent the Winning Bidder from
using different benefit providers or from establishing new benefit plans or
using its existing benefit plans as the means of meeting its obligation
hereunder. The commitments under this paragraph shall, however, require the
following during the Continuation Period:
(A) With respect to the applicable FE Subsidiary's health care plans,
the Winning Bidder agrees to waive all limitations as to pre-existing
conditions and actively-at-work exclusions and waiting periods for
such employees, except that the Winning Bidder may require the
employee or his/her dependent who, on the Auction Closing Date, is
then in the process of satisfying any similar exclusion or waiting
period under the FE Subsidiary's health care plans to satisfy fully
the balance of the applicable time period for such exclusion or
waiting period under the Winning Bidder's plan. With respect to the
calendar year in which the Auction Closing Date occurs, all health
care expenses incurred by any such employees and/or any eligible
dependent thereof in the portion of the calendar year preceding the
Auction Closing Date that were qualified to be taken into account for
purposes of satisfying any deductible or out-of-pocket limit under the
FE Subsidiary's health care plans shall be taken into account for
purposes of satisfying any deductible or out-of-pocket limit under the
Winning Bidder's health care plan for such calendar year.
(B) With respect to service and seniority, the Winning Bidder shall
recognize each such employee's service and seniority with the FE
Subsidiary for all non-pension purposes, including the determination
of eligibility and extent of service or seniority-related welfare
benefits such as vacation and sick pay benefits and to agree to give
each such employee full credit for all vacation benefits banked,
accrued, and unused, as of the Auction Closing Date.
(C) With respect to pension benefits, the Winning Bidder shall provide
each such employee with a pension benefit that, when combined with the
benefit accrued by such employee under the FE Subsidiary's pension
plan as it exists on the date hereof, is at least equal in value to
the pension benefit such employee would have accrued if such employee
had remained employed with the FE Subsidiary and continued to be
covered by such FE Subsidiary's pension plan (as it exists on the date
hereof) during the Continuation Period. In providing such benefits,
the Winning Bidder shall recognize each such employee's combined
service and earnings with the applicable FE Subsidiary and the Winning
Bidder. Further, the Winning Bidder shall provide to any such employee
who is laid off by the Winning Bidder during the Continuation Period
and who, at the time of such layoff, is between the ages of 50-54 and
has ten or more years of combined service with the applicable FE
Subsidiary and the Winning Bidder, a retirement benefit from the
Winning Bidder's pension plan, beginning at age 55, that is at least
equal to the subsidized early retirement benefit that such employee
would have received under the FE Subsidiary's pension plan had such
employee continued to be covered by such plan as it exists on the date
hereof. The determination of the benefit required by this Section
8.11(e)(ii)(C) shall be made in good faith by the accounting firm then
acting as the independent auditor of Winning Bidder, which
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determination shall be final and binding on the parties hereto and
each affected employee.
(D) With respect to post-retirement medical and life insurance
programs, the Winning Bidder shall provide to any such employee who
retires from the Winning Bidder's employment prior to the expiration
of the Local 140 CBA with respect to FE Transferred Union Employees,
and December 31, 2001 with respect to FE Transferred Non-Union
Employees, and is at least age 55 and has ten or more years of
combined service with the FE Subsidiary and the Winning Bidder,
benefits, to the extent possible, that are substantially equivalent to
the FE Subsidiary's post-retirement medical and life insurance
programs that such employee would have received, if such employee had
continued to be covered by the FE Subsidiary's programs as they
existed on the date hereof.
(E) With respect to the FE Subsidiary's Savings Plan, the Winning
Bidder shall take any and all necessary action to cause the trustee of
any defined contribution plan of the Winning Bidder in which any such
employee becomes a participant by virtue of this section, to accept a
direct "rollover" of all or a portion of said employee's "eligible
rollover distribution" within the meaning of Section 402 of the Code
from the FE Savings Plan, if requested to do so by such employee, or
to accept a direct plan-to-plan transfer from the FE Savings Plan of
the account balances of any such employee and the assets of such plans
related thereto, if requested to do so by the applicable FE Subsidiary
or by such employee. The Winning Bidder agrees that the property so
rolled over and the assets so transferred may include (i) promissory
notes evidencing loans from the FE Savings Plan to such employees that
are outstanding as of the Auction Closing Date, and (ii) shares of FE
common stock in which the account balances of such employees are
invested as of the Auction Closing Date. However, any defined
contribution plan of the Winning Bidder or its Affiliates accepting
such a rollover or transfer shall not be required to (i) make any
further loans to any such employee after the Auction Closing Date or
(ii) permit any additional investment to be made in FE common stock on
behalf of any such employee after the Auction Closing Date. The FE
Subsidiaries hereby represent to DLC and the Winning Bidder that the
FE Savings Plan is intended to be qualified within the meaning of
Section 402 of the Code.
(f) The Winning Bidder shall pay or provide to FE Transferred
Union Employees and/or FE Transferred Non-Union Employees the benefits more
particularly described in paragraphs (i), (ii) and (iii), as applicable:
(i) With respect to severance benefits, the Winning Bidder
is required to provide for any such employee who is terminated as a result of an
overall reduction in work force due to decreased employment needs of the Winning
Bidder prior to the expiration of the Local 140 CBA, with respect to FE
Transferred Union Employees, and December 31, 2001, with respect to FE
Transferred Non-Union Employees, severance benefits at the level for such
employees in effect as of the date hereof. FE Transferred Non-Union Employees
shall also be entitled to such severance benefits if, prior to December 31,
2001, the Winning Bidder reduces the pay rate for such employee and such
employee within seven (7) days thereafter terminates employment. Any employee
provided severance benefits under this section may be required to execute a
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release of claims against DLC or the Winning Bidder, in such form as the Winning
Bidder shall prescribe, as a condition for the receipt of such benefits.
(ii) Each FE Transferred Union or FE Transferred Non-Union
Employee who accepts employment with the Winning Bidder, shall be provided by
the Winning Bidder with a transition bonus of $2,500, less applicable taxes,
payable as soon as practicable following the Auction Closing Date. In no event
shall any such employee receive more than one transition bonus as a result of
the transfer of employment from an FE Subsidiary to the Winning Bidder.
(iii) Each FE Transferred Non-Union Employee who is initially
assigned, or assigned within 12 months of the Auction Closing Date, by the
Winning Bidder to a principal place of work that requires such employee to
relocate his/her residence will be reimbursed for all relocation expenses in
accordance with the FE Subsidiary's relocation plans in effect as of the date
hereof. For purposes of the foregoing, a required relocation of residence shall
include a change in the principal place of work that is more than 30 miles
farther from such employee's principal place of work immediately prior to the
Auction Closing Date and requires a commute from his/her current residence of at
least one hour in each direction.
(g) With respect to any FE Union Employees who do not receive an
offer of employment from the Winning Bidder pursuant to subsection (b) hereof
and with respect to any Non-Union Employees who decline a Non-Qualifying Offer
pursuant to subsection (c) hereof, and are thereafter terminated, the Winning
Bidder shall reimburse the applicable FE Subsidiary for the aggregate estimated
cost that FE Subsidiary will or may incur in providing the severance, pension,
and banked, accrued or unused vacation benefits described in Schedule 7.8(a) to
the FE Union Employees and FE Non-Union Employees therein described
(collectively the "Termination Benefits"). The estimated cost of such pension
benefits shall be calculated by the actuarial firm regularly engaged to provide
actuarial services to the applicable FE Subsidiary with respect to its pension
plans, and shall be determined using the same assumptions as to mortality,
turnover, interest rate and other actuarial assumption as used by such firm in
determining the cost of benefits under the FE Subsidiary's pension plans for
purposes of their most recently issued financial statements prior to the Auction
Closing Date.
(h) The applicable FE Subsidiary shall be responsible, with respect
to the Exchange Assets, for performing and discharging all requirements under
the WARN Act and under applicable state and local laws and regulations for the
notification of its employees of any "employment loss" within the meaning of the
WARN Act which occurs prior to the Auction Closing Date.
(i) Winning Bidder shall not be responsible for extending COBRA
Continuation Coverage to any employees and former employees of any of the FE
Subsidiaries, or to any qualified beneficiaries of such employees and former
employees, who become or became entitled to COBRA continuation coverage on or
before the Auction Closing Date, including those for whom the Auction Closing
Date occurs during their COBRA election period.
(j) Individuals who are otherwise Union Employees, as defined in
Section 8.11(b) or NonUnion Employees, as defined in Section 8.11(c) but who on
any date are not actively at work due to a leave of absence covered by the
Family and Medical Leave Act (FMLA), or due to any other authorized leave of
absence, shall nevertheless be treated as "Union Employees" or as "Non-Union
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Employees", as the case may be, on such date if they are able (i) to return to
work within the protected period under the FMLA or such other leave (which in
any event shall not extend more than twelve (12) weeks after the Auction Closing
Date), whichever is applicable, and (ii) to perform the essential functions of
their job, with or without a reasonable accommodation.
(k) The FE Subsidiaries are responsible for extending and continuing
to extend COBRA Continuation Coverage to all employees and former employees, and
qualified beneficiaries of such employees and former employees of the FE
Subsidiaries, who become or became entitled to such COBRA Continuation Coverage
on or before the Auction Closing Date, including those for whom the Auction
Closing Date occurs during their COBRA election period.
(l) The FE Subsidiaries shall pay to each employee of such FE
Subsidiaries to whom the Winning Bidder offers employment pursuant to this
Section 8.11, all unpaid salary, bonus, and holiday compensation, workers'
compensation or other compensation or employment benefits that are payable in
cash which have accrued to such employees through and including the Auction
Closing Date, at such times as provided under the terms of the applicable
compensation or benefit programs. With respect to workers compensation claims of
such employees that require payments that continue beyond the Auction Closing
Date, the Winning Bidder shall be responsible for such payments. The FE
Subsidiaries shall be responsible for initiating the transfer of the claims and
the associated risk and liability to the Winning Bidder with either the Ohio or
the Pennsylvania Bureau of Workers' Compensation, as appropriate.
(m) The following provisions shall apply with respect to employees
who are covered by the UWUA Local 270 Collective Bargaining Agreement ("Local
270 CBA") who are employed in positions at the FE Plant of Avon Lake or, if
employed at another location, perform substantially all their work in support of
the FE Plant of Avon Lake "Local 270 Employees").
(i) Subject to Section (m)(ii) hereof, the Winning Bidder
shall not be obligated to assume the Local 270 CBA or to recognize UWUA Local
270 as the exclusive collective bargaining agent for Local 270 Employees unless
otherwise required by federal law as a result of the actions of the Winning
Bidder. The Winning Bidder further shall not be required to make offers of
employment to Local 270 Employees. The Winning Bidder shall inform the FE
Subsidiaries of those Local 270 Employees, if any, to whom the Winning Bidder
has made offers of employment not later than 90 days prior to the Auction
Closing Date.
(ii) In the event that, not less than fifteen (15) days
prior to the date for submission of final, binding bids in the Auction, UWUA
Local 270 and the applicable FE Subsidiary modify the Local 270 CBA, the Winning
Bidder shall be required to assume such Local 270 CBA so modified to the extent
applicable to Local 270 Employees, provided that the Local 270 CBA as amended or
modified permits the Winning Bidder to determine its staffing level requirements
and does not require the Winning Bidder to offer employment to Local 270
Employees in excess of such staffing level requirements; and provided further
that the Local 270 CBA as amended or modified does not, taken as a whole,
materially exceed the provisions of the Local 140 CBA, including, without
limitation, the provisions of the Local 140 CBA with respect to cash
compensation, fringe benefits, health care, and pension benefits, as of the date
of this Agreement.
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(o) The provisions of this Section 8.11 shall not be construed as
being for the benefit for any person other than the Parties hereto, and shall
not be enforceable by persons other than such Parties (including, without
limitations, the Union Employees and Non-Union Employees).
(p) The applicable FE Subsidiaries agree to indemnify and hold
harmless the Winning Bidder and DLC from any and all remedies or damages that
may be applied or charged to, or imposed on, the Winning Bidder and/or DLC as
the result of any unfair labor practice charges (i) filed by UWUA Local 270 or
its members against FE and/or an FE Subsidiary, or to which Winning Bidder
and/or DLC is added as a party, or (ii) filed against Winning Bidder and/or DLC
arising out of facts and circumstances that gave rise to unfair labor practice
charges filed against FE and/or an FE Subsidiary.
8.12 Risk of Loss.
(a) From the date hereof through the Exchange Closing Date, all
risk of loss or damage to the assets included in the Exchange Assets shall be
borne by the Conveying Party, other than loss or damage caused by the acts or
negligence of the Acquiring Party, which loss or damage shall be the
responsibility of the Acquiring Party.
(b) If, before the Exchange Closing Date, all or any portion of
the Exchange Assets are (i) taken by eminent domain or are the subject of a
pending or (to the Knowledge of the Conveying Party with respect such Exchange
Assets) contemplated taking which has not been consummated or (ii) damaged or
destroyed by fire or other casualty, such Conveying Party shall (x) notify the
Acquiring Party (or, if the Acquiring Party is the Winning Bidder, DLC) promptly
in writing of such fact, (y) assign or pay, as the case may be, any proceeds
thereof to the Acquiring Party (or, if the Acquiring Party is the Winning
Bidder, DLC) at the Exchange Closing, and (z) either restore the damage or
assign the insurance proceeds therefor (and pay the amount of any deductible
and/or self-insured amount in respect of such casualty) to the Acquiring Party
(or, if the Acquiring Party is the Winning Bidder, DLC) at the Exchange Closing.
Notwithstanding the above, if such taking, casualty or loss results, or would
result, in a Material Adverse Effect to the Conveying Party (with respect to the
Exchange Assets being conveyed by the Conveying Party), the Parties shall,
unless the procedures contained in Section 11.1(h) shall have been elected,
negotiate to settle the loss resulting from such taking, casualty or loss (and
such negotiation shall include, without limitation, the negotiation of a fair
and equitable payment to the Acquiring Party (or, if the Acquiring Party is the
Winning Bidder, DLC) to offset such taking, casualty or loss). If no such
settlement is reached within sixty (60) days after the Conveying Party has
notified the Acquiring Party (or, if the Acquiring Party is the Winning Bidder,
DLC) of such taking, casualty or loss, then the Acquiring Party (or, if the
Acquiring Party is the Winning Bidder, DLC) may terminate this Agreement
pursuant to Section 11.1(g). In the event of damage or destruction which the
Conveying Party elects to restore, the Conveying Party will have the right (with
respect to the Exchange Assets being conveyed by the Conveying Party) to
postpone the Exchange Closing for up to six (6) months, and the Acquiring Party
(or, if the Acquiring Party is the Winning Bidder, DLC) will have the right to
inspect and observe, or have its Representatives inspect or observe, all repairs
necessitated by any such damage or destruction.
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8.13 Cooperation in Auction.
(a) The FE Subsidiaries will cooperate with DLC in a
commercially reasonable manner to provide for the timely and successful
completion of the Auction, including providing the access to information
specified in Section 8.2 and designating a person or persons having engineering
and operational familiarity with respect to each of the FE Plants to be the
principal contact person(s) for the Auction and causing such person(s) to make
sufficient time available for such purpose as reasonably required by DLC or DLC
Representatives.
(b) The FE Subsidiaries shall not submit a bid in the Auction.
(c) The FE Subsidiaries shall promptly review information
concerning the FE Assets to be included in the Information Memorandum and
supporting materials concerning the FE Assets and provide DLC with written
confirmation of the accuracy and completeness of such information as provided to
the FE Subsidiaries, with the understanding that such information will be used
in connection with the delivery of the Information Memorandum to potential
Auction Participants, and the FE Subsidiaries shall advise DLC from time to time
if any such information as provided to the FE Subsidiaries becomes inaccurate or
misleading. The FE Subsidiaries shall respond promptly to requests from DLC or
DLC Representatives for additional information concerning the FE Assets.
(d) The FE Subsidiaries shall not participate in the management,
planning or implementation of the Auction and shall have no right to do so
despite its assistance in providing information.
(e) The FE Subsidiaries acknowledge and agree that Inspections
and documentation must be completed with respect to the FE Assets to satisfy
conditions to the Exchange Closing and the Auction Closings, including the
subdivision of the FE Real Property to prepare it for sale and the preparation
of title reports and surveys for the FE Real Property in connection with
preparing ALTA title owner's insurance policies. The FE Subsidiaries agree to
cooperate and assist in the preparation and completion of the foregoing and to
use their reasonable efforts (i) to address any Environmental Conditions and
(ii) to eliminate any material exception to title, in each case provided that
the failure to do so is reasonably likely to substantially and adversely affect
the marketability of the FE Assets.
(f) The Auction Agreements shall include provisions requiring
the Winning Bidder to perform all obligations such Winning Bidder would have as
an Acquiring Party under this Agreement with respect to the FE Assets to be
acquired by such Winning Bidder in the Auction.
8.14 Additional Agreements. In connection with the Auction
Agreements and each respective Auction Closing, each applicable FE Subsidiary or
DLC, as the case may be, with respect to its FE Assets shall enter into the
respective Auction Agreement, the FE Assignment and Assumption Agreement, the
Bills of Sale, the FE Easement and Attachment Agreement, the FIRPTA Affidavit,
the FE Connection Agreement, the FE Must-Run Agreement and the Warranty Deeds
contemplated by this Agreement, all substantially in the form of the respective
Exhibits attached hereto, with the applicable Winning Bidder.
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8.15 Reserved.
8.16 Tax Exempt Financing.
(a) Each Acquiring Party understands and agrees that:
(i) the Exempt Facilities have been financed, and
refinanced, in whole or in part, with the proceeds of the issuance and
sale by various governmental agencies or authorities of industrial
development revenue bonds or private activity bonds (collectively, the
"Revenue Bonds") the interest on which, with certain exceptions, is
excluded from gross income for purposes of federal income taxation;
and DLC or an FE Subsidiary, as the case may be, is the economic
obligor in respect of such bonds;
(ii) the basis for such exclusion is the use of the
Exempt Facilities for the purpose of (A) the abatement or control of
atmospheric pollution or contamination (B) the abatement or control of
water pollution or contamination, (C) sewage disposal and/or (D) the
disposal of solid waste, such qualifying purposes being discussed in
more detail in (b) below;
(iii) the use of the Exempt Facilities for a purpose
other than a qualifying purpose indicated in subsection (ii) above
could impair (A) such exclusion from gross income of the interest on
such bonds, possibly with retroactive affect, unless appropriate
remedial action (which could include prompt redemption or defeasance
of such bonds) were taken and/or (B) the deductibility of the
Conveying Party's payment of interest based on the restrictions in
Section 150(b) of the Code; and
(iv) any breach by the Acquiring Party of its
obligations under this Article could result in the incurrence by the
Conveying Party of additional costs and expenses, including without
limitation, increased interest costs, loss of the interest deduction
for tax purposes and transaction costs relating to any refinancing
redemption and/or defeasance of all or part of the Revenue Bonds, and
such Acquiring Party will be liable to the Conveying Party for such
additional costs and expenses.
(b)
(i) Each Acquiring Party agrees that it shall not use,
or permit the use of, the Exempt Facilities for any purpose other
than:
(A) abating or controlling atmospheric or water pollution or
contamination by removing, altering, disposing of or storing
pollutants, contaminants, waste or heat, all as contemplated in
U.S. Treasury Regulations Section 1.103-8(g);
(B) the collection, storage, treatment, utilization, processing
or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or
(C) the collection, storage, treatment, utilization, processing
or final disposal of sewage, all as contemplated in U.S. Treasury
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Regulations Section 1.103-8(f) unless such Acquiring Party has
obtained at its own expense an opinion addressed to the Conveying
Party of nationally recognized bond counsel reasonably acceptable
to such Conveying Party ("Bond Counsel") that such use will not
impair (x) the exclusion from gross income of the interest on any
issue of Revenue Bonds for federal income tax purposes or (y) the
deductibility of the Conveying Party's payments of interest based
on the restrictions in Section 150(b) of the Code.
(ii) Each Acquiring Party reasonably expects, as of the
date of this Agreement, that the Exempt Facilities will continue to be
used for the qualifying purposes set forth in subsection (i) above,
and for no other purpose, for the remainder of their useful lives.
(c) It is expressly understood and agreed that the provisions
of clause (b) above shall not prohibit the Acquiring Party from suspending the
operation of the Exempt Facilities on a temporary basis, or from terminating the
operation of the Exempt Facilities on a permanent basis and shutting down,
retiring, abandoning and/or decommissioning the Exempt Facilities; provided,
however, that if the Exempt Facilities, in whole or in part, are dismantled and
sold, including any sale for scrap, and if the operation of the Plant served by
such Exempt Facilities shall not theretofore have been, and is not then being,
terminated on a permanent basis, then the proceeds of such sale of the Exempt
Facilities shall, within six months from the date of sale, be expended to
acquire replacement property to be used for the same qualifying purpose as the
Exempt Facilities so sold, unless such Acquiring Party has obtained, at its own
expense, an opinion addressed to the Conveying Party of Bond Counsel that the
failure to take this action will not impair (x) the exclusion from gross income
of the interest on any issue of Revenue Bonds for federal income tax purposes or
(y) the deductibility of the Conveying Party's payments of interest based on the
restrictions in Section 150(b) of the Code.
(d) Each Acquiring Party agrees that it shall not issue, or have
issued on its behalf, any tax-exempt bonds to finance or refinance its
acquisition of the Exempt Facilities; provided that it is expressly understood
and agreed that this clause (d) shall not prohibit the use of tax-exempt bonds
to finance or refinance any improvement to the Exempt Facilities made after the
date of acquisition or to any assets other than the Exempt Facilities.
(e) Each Acquiring Party agrees that it shall give the Conveying
Party at least 180 days' prior written notice of any suspension or termination
of the operation of the Exempt Facilities, or any part thereof, and of any sale,
exchange, transfer or other disposition of the Exempt Facilities, or any part
thereof, including, but not limited to, a sale for scrap.
(f) If the Conveying Party shall desire to refund any Revenue
Bonds, the Acquiring Party shall cooperate with the Conveying Party and with
Bond Counsel with respect to the refunding bonds and shall provide upon request
any representations, agreements or covenants that are reasonably requested
concerning its compliance to such date and/or in the future with the
representations, agreements and covenants made herein.
(g) If the Acquiring Party shall sell, exchange, transfer or
otherwise dispose of the Exempt Facilities to a third party, such Acquiring
Party shall cause to be included in the documentation relating to such
transaction covenants and agreements on the part of such third party
substantially identical to those on the part of such Acquiring Party contained
in this Section 8.16.
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(h) The covenants and agreements on the part of the Acquiring
Party contained in this Section 8.16 shall continue in effect so long as any
Revenue Bonds, including any refunding bonds issued hereafter to refund any
Revenue Bonds, shall remain outstanding. The Conveying Party shall notify the
Acquiring Party promptly when there shall be no Revenue Bonds outstanding.
(i) The Parties hereto agree that the Auction Agreements shall
include a provision substantially similar to this Section 8.16 covering "Exempt
Facilities" (as defined in the Auction Agreements) relating to the "Purchased
Assets" (as defined in the Auction Agreements) for the benefit of DLC or the FE
Subsidiaries, as the case may be.
ARTICLE IX
CONDITIONS
9.1 Conditions to Obligations of the Parties. The obligation of the
Parties to effect the Generation Exchange and the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Exchange Closing Date, of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the exchange of the Exchange Assets contemplated hereby shall
have expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
exchange of the Exchange Assets contemplated herein shall have been issued and
remain in effect (each Party agreeing to use its reasonable best efforts to have
any such injunction, order or decree lifted) and no statute, rule or regulation
shall have been enacted by any state or federal government or Governmental
Authority prohibiting the consummation of the exchange of the Exchange Assets;
(c) The DLC Nuclear Closing as defined in the Nuclear Conveyance
Agreement shall have occurred;
(d) The CAPCO Settlement Agreement shall have been executed by
DLC, the FE Subsidiaries and TEC;
(e) The Support Agreement shall have been executed by FE and
DLC;
(f) All consents or approvals, filings with, or notices to any
Governmental Authority that are necessary for the consummation of the
transactions contemplated by each of the CAPCO Settlement Agreement and the
Electrical Facilities Agreement shall have been obtained or made, other than
such consents, approvals, filings or notices which are not required in the
ordinary course to be obtained or made prior to the consummation of the
transactions thereunder or which, if not obtained or made, will not prevent the
parties thereto from performing their material obligations thereunder; and
(g) There shall be no court order requiring DQE to consummate
the transactions contemplated under the Agreement and Plan of Merger between DQE
and Allegheny Energy, Inc.
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9.2 Conditions to Obligations of DLC. The obligation of DLC to effect
the exchange of the DLC Assets and the other transactions contemplated by this
Agreement shall be subject to the fulfillment of the following conditions, or
the waiver thereof by the DLC, at or prior to the Exchange Closing Date:
(a) DLC shall have received all DLC Required Regulatory
Approvals, in form and substance reasonably satisfactory to it and on terms and
conditions that do not create a Regulatory Material Adverse Effect for DLC;
(b) All consents and approvals for the execution, delivery and
performance of this Agreement and the Ancillary Agreements, and for the
consummation of the transfer of the FE Assets contemplated hereby as required
under the terms of any note, bond, mortgage, indenture, material agreement or
other instrument or obligation to which an FE Subsidiary is a party or by which
any FE Subsidiary, or any of the FE Assets, may be bound, shall have been
obtained, other than those which if not obtained, would not, individually or in
the aggregate, create an FE Material Adverse Effect;
(c) Each FE Subsidiary shall have in all material respects
performed and complied with the covenants and agreements contained in this
Agreement which are required to be performed and complied with by each such FE
Subsidiary on or prior to the Exchange Closing Date;
(d) The representations and warranties of each FE Subsidiary set
forth in this Agreement shall be true and correct in all material respects as of
the Exchange Closing Date as though made at and as of the Exchange Closing Date;
(e) DLC shall have received certificates from authorized
officers of each FE Subsidiary, dated the Exchange Closing Date, to the effect
that, to such officers' Knowledge, the conditions set forth in Sections 9.2(b),
(c) and (d) have been satisfied by each such FE Subsidiary;
(f) DLC shall have received an opinion from the FE Subsidiaries'
counsel, dated the Exchange Closing Date and reasonably satisfactory in form and
substance to DLC and its counsel, substantially to the effect that:
(i) Each FE Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its organization and is qualified to do business in any other
state in which it operates any of the FE Assets or will operate DLC
Assets and has the full corporate power and authority to own, lease
and operate its material assets and properties and to carry on its
business as is now conducted, and to execute and deliver the Agreement
and each of the Ancillary Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby; and the
execution and delivery of the Agreement and the Ancillary Agreements
by such FE Subsidiary, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary corporate action required on the part of such FE
Subsidiary;
(ii) The Agreement and each of the Ancillary Agreements
to which it is a party have been duly and validly executed and
delivered by each applicable FE Subsidiary and constitute legal, valid
and binding agreements of each such FE Subsidiary, enforceable against
such FE Subsidiary in accordance with their terms, except as may be
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limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity);
(iii) The execution, delivery and performance of the
Agreement and each of the Ancillary Agreements to which it is a party
by each applicable FE Subsidiary does not (A) conflict with the
Articles of Incorporation, Bylaws or Code of Regulations, as currently
in effect, of such FE Subsidiary or (B) to the knowledge of such
counsel, constitute a violation of or default under those agreements
or instruments set forth on a schedule attached to the opinion and
which have been identified to such counsel as all the agreements and
instruments which are material to the business or financial condition
of such FE Subsidiary;
(iv) The Bills of Sale, the FE (Accrued Liability)
Assignment and Assumption Agreements and the FE Assignment and
Assumption Agreements, the Warranty Deeds and other transfer
instruments described in Section 5.6 are in proper form to transfer to
DLC, or the applicable Winning Bidder, as appropriate, such title as
was held by each applicable FE Subsidiary to its FE Assets;
(v) The DLC Assignment and Assumption Agreements and
other transfer documents described in Section 5.6 are in proper form
for the FE Subsidiary, as applicable, to assume the Assumed DLC
Liabilities; and
(vi) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and
delivery by each applicable FE Subsidiary of this Agreement, and each
of the Ancillary Agreements to which such FE Subsidiary is a party or
the consummation by such FE Subsidiary of the transactions
contemplated hereby and thereby, other than (A) such consents,
approvals, filings or notices set forth in Schedules 7.3(a) or 7.3(b)
or which, if not obtained or made, will not prevent each such FE
Subsidiary from performing its material obligations under this
Agreement and each of the Ancillary Agreements and (B) such consents,
approvals, filings or notices which become applicable to such FE
Subsidiary or its respective FE Assets as a result of the specific
regulatory status of DLC (or any of its Affiliates) or as a result of
any other facts that specifically relate to the business or activities
in which DLC (or any of its Affiliates) is or proposes to be engaged.
In rendering the foregoing opinion, FE Subsidiaries' counsel may rely on
opinions of local law reasonably acceptable to DLC;
(g) Each FE Subsidiary shall have delivered, or caused to be
delivered, to DLC at the Exchange Closing, the FE Subsidiary's closing
deliveries described in Section 5.6;
(h) The FE Subsidiaries, as applicable, shall have delivered, or
caused to be delivered, to each applicable Acquiring Party a title insurance
company ALTA title owner's policies on the FE Real Property insuring title,
subject only to Permitted Encumbrances (FE Assets), standard printed exceptions
and such other Encumbrances as are reasonably acceptable to such Acquiring
Party. A Permitted Encumbrance (FE Assets) which is not removed prior to the
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Auction Closing shall be deemed reasonably acceptable to DLC as aforesaid unless
such Permitted Encumbrance (FE Assets) would have an FE Material Adverse Effect;
(i) All conditions to consummation of the respective Auction
Agreement with the applicable Winning Bidder shall have been satisfied or waived
by DLC and DLC shall be reasonably satisfied that such Winning Bidder will
perform its obligations thereunder; and
(j) FE shall have paid, or caused to be paid, the financial
commitment contemplated by, and required to be provided to DLC pursuant to the
terms of, the Support Agreement.
9.3 Conditions to Obligations of the FE Subsidiaries. The obligation
of the FE Subsidiaries to effect the exchange of the FE Assets and the other
transactions contemplated by this Agreement shall be subject to the fulfillment
of the following conditions, or the waiver thereof, by the FE Subsidiaries at or
prior to the Exchange Closing Date:
(a) Each FE Subsidiary shall have received all applicable FE
Required Regulatory Approvals on terms and conditions that do not create a
Regulatory Material Adverse Effect for such FE Subsidiary;
(b) All consents and approvals for the execution, delivery and
performance of this Agreement and the Ancillary Agreements, and for the
consummation of the transfer of the DLC Assets contemplated hereby as required
under the terms of any note, bond, mortgage, indenture, material agreement or
other instrument or obligation to which DLC is a party or by which DLC, or any
of the DLC Assets, may be bound, shall have been obtained, other than those
which if not obtained, would not, individually or in the aggregate, create a DLC
Material Adverse Effect;
(c) DLC shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by DLC on or prior to the Exchange
Closing Date;
(d) The representations and warranties of DLC set forth in this
Agreement shall be true and correct in all material respects as of the Exchange
Closing Date as though made at and as of the Exchange Closing Date;
(e) The FE Subsidiaries shall have received certificates from
the authorized officers of DLC, dated the Exchange Closing Date, to the effect
that, to such officers' Knowledge, the conditions set forth in Sections 9.3(b),
(c) and (d) have been satisfied by DLC;
(f) The FE Subsidiaries shall have received an opinion from
DLC's counsel, dated the Exchange Closing Date and reasonably satisfactory in
form and substance to the FE Subsidiaries and their counsel, substantially to
the effect that:
(i) DLC is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has the full corporate power and authority to own,
lease and operate its material assets and properties and to carry on
its business as is now conducted, and to execute and deliver the
Agreement and each of the Ancillary Agreements to which it is a party
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and to consummate the transactions contemplated hereby and thereby;
and the execution and delivery of the Agreement and the Ancillary
Agreements by DLC, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary corporate action required on the part of DLC;
(ii) The Agreement and each of the Ancillary Agreements
to which DLC is a party have been duly and validly executed and
delivered by DLC and constitute legal, valid and binding agreements of
DLC, enforceable against DLC in accordance with their terms, except as
may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity);
(iii) The execution, delivery and performance of the
Agreement and each of the Ancillary Agreements to which DLC is a party
by DLC does not (A) conflict with the Articles of Incorporation or
Bylaws, as currently in effect, of DLC or (B) to the knowledge of such
counsel, constitute a violation of or default under those agreements
or instruments set forth on a Schedule attached to the opinion and
which have been identified to such counsel as all the agreements and
instruments which are material to the business or financial condition
of DLC;
(iv) The DLC Assignment and Assumption Agreements, the
Bills of Sale, the deeds, and other transfer instruments described in
Section 5.7 are in proper form to transfer to the FE Subsidiaries such
title as was held by DLC to the DLC Assets;
(v) The FE (Accrued Liability) Assignment and
Assumption Agreement and other transfer documents described in Section
5.7 are in proper form for DLC to assume the Assumed FE Liabilities;
and
(vi) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and
delivery of this Agreement and each of the Ancillary Agreements to
which DLC is a party by DLC, or the consummation by DLC of the
transactions contemplated hereby and thereby, other than (A) such
consents, approvals, filings or notices set forth in Schedules 6.3(a)
or 6.3(b) or which, if not obtained or made, will not prevent DLC from
performing its material obligations under this Agreement and each of
the Ancillary Agreements to which DLC is a party and (B) such
consents, approvals, filings or notices which become applicable to DLC
or the DLC Assets as a result of the specific regulatory status of the
FE Subsidiaries (or any of their Affiliates) or as a result of any
other facts that specifically relate to the business or activities in
which the FE Subsidiaries (or any of their Affiliates) is or proposes
to be engaged.
In rendering the foregoing opinion, DLC's counsel may rely on opinions of local
law reasonably acceptable to the FE Subsidiaries;
(g) DLC shall have delivered, or caused to be delivered, to the
FE Subsidiaries at the Exchange Closing, DLC's closing deliveries described in
Section 5.7; and
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(h) The FE Subsidiaries shall have received from a title
insurance company ALTA title owner's policies on the DLC Real Property insuring
title, subject only to Permitted Encumbrances (DLC Assets), standard printed
exceptions and such other Encumbrances as are reasonably acceptable to the FE
Subsidiaries. A Permitted Encumbrance (DLC Assets) that is not removed prior to
the Exchange Closing shall be deemed reasonably acceptable to the FE
Subsidiaries as aforesaid unless such Permitted Encumbrance (DLC Assets) would
have a DLC Material Adverse Effect.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification of DLC by FE Subsidiaries.
(a) Each FE Subsidiary severally with respect to itself under
this Agreement and all its obligations related to the Exchange Assets to be
exchanged by such FE Subsidiary pursuant to this Agreement, shall indemnify,
defend and hold harmless DLC, its officers, directors, employees, shareholders,
Affiliates and agents (each, a "DLC Indemnitee") from and against any and all
Indemnifiable Losses asserted against or suffered by any DLC Indemnitee (each, a
"DLC Indemnifiable Loss") in any way relating to, resulting from or arising out
of (i) any breach by such FE Subsidiary of any covenant or agreement of such FE
Subsidiary as an Acquiring Party contained in this Agreement or the
representations and warranties contained in Sections 7.1, 7.2 and 7.3, and (ii)
the Assumed DLC Liabilities.
(b) Each FE Subsidiary severally with respect to itself under
this Agreement and all its obligations related to the Exchange Assets to be
exchanged by such FE Subsidiary pursuant to this Agreement, shall indemnify,
defend and hold harmless the DLC Indemnitees from and against any and all DLC
Indemnifiable Losses in any way relating to, resulting from or arising out of
(i) any breach by such FE Subsidiary of any covenant or agreement of such FE
Subsidiary contained in this Agreement, except those related solely to its
obligations as an Acquiring Party, or the representations and warranties
contained in Sections 7.1, 7.2 and 7.3, (ii) the Excluded FE Liabilities, (iii)
noncompliance by such FE Subsidiary with any bulk sales or transfer laws as
provided in Section 12.14, and (iv) any Third Party Claims against a DLC
Indemnitee arising out of or in connection with the FE Subsidiary's ownership or
operation of the Excluded FE Assets.
(c) Each FE Subsidiary, severally with respect to itself under
this Agreement and all its obligations related to the Exchange Assets to be
exchanged by such FE Subsidiary pursuant to this Agreement, shall indemnify,
defend and hold harmless each DLC Indemnitee from and against any and all DLC
Indemnifiable Losses in any way relating to, resulting from or arising out of
any claim by the applicable Winning Bidder or any Third Party against a DLC
Indemnitee arising out of or in connection with the FE Assets or the Assumed FE
Liabilities; provided, however, that after the Auction Closing has occurred, DLC
cannot enforce this indemnity against any of the FE Subsidiaries if such claim
is in any way relating to, resulting from or arising out of the liabilities
assumed by such Winning Bidder in the respective Auction Agreement.
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(d) Each FE Subsidiary, jointly and severally, with respect to
itself and all matters related to the Exchange Assets to be exchanged by each FE
Subsidiary pursuant to this Agreement, shall indemnify, defend and hold harmless
each DLC Indemnitee from and against any and all DLC Indemnifiable Losses in any
way relating to, resulting from or arising out of any Third Party Claim against
a DLC Indemnitee asserting that DLC's execution of the Agreement in Principle,
this Agreement or the Nuclear Conveyance Agreement constitutes an interference
with contractual obligation of any FE Subsidiary.
(e) Except as otherwise provided in Section 10.1(c), DLC, for
itself and on behalf of DLC Representatives and DLC's Affiliates, does hereby
release, hold harmless and forever discharge the FE Subsidiaries, their
Representatives and Affiliates, from any and all DLC Indemnifiable Losses
resulting from, arising out of or relating to Assumed FE Liabilities. Except as
otherwise provided in Section 10.1(c), DLC hereby waives any and all rights and
benefits with respect to such DLC Indemnifiable Losses that it now has, or in
the future may have conferred upon it 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 executing
the release, if Knowledge of such claims would have materially affected such
party's settlement with the obligor. In this connection, DLC hereby acknowledges
that it is aware that factual matters now unknown to it may have given or may
hereafter give rise to DLC Indemnifiable Losses that are currently unknown,
unanticipated and unsuspected, and it further agrees that this release has been
negotiated and agreed upon in light of that awareness and nevertheless hereby
intends to release the FE Subsidiaries, their Representatives and Affiliates
from the DLC Indemnifiable Losses in the manner contemplated by this paragraph.
(f) Each FE Subsidiary with respect to itself and all matters
related to such FE Subsidiary and to its FE Assets shall indemnify, defend and
hold harmless each Winning Bidder, its officers, directors, employees,
shareholders, Affiliates and agents (each, a "Winning Bidder Indemnitee") from
and against any and all Indemnifiable Losses asserted against or suffered by any
Winning Bidder Indemnitee arising out of or in connection with (i) any breach by
such FE Subsidiary of any covenant or agreement of such FE Subsidiary contained
in the representations and warranties contained in Article VII hereof, (ii) the
Excluded FE Liabilities, (iii) noncompliance by such FE Subsidiary with any bulk
sales or transfer laws as provided in Section 12.14, and (iv) any Third Party
Claims against a Winning Bidder Indemnitee arising solely out of or in
connection with such FE Subsidiary's ownership or operation of the Excluded FE
Assets on or after the Auction Closing Date.
10.2 Indemnification of FE Subsidiaries by DLC.
(a) DLC shall indemnify, defend and hold harmless the FE
Subsidiaries, their officers, directors, employees, shareholders, Affiliates and
agents (each, an "FE Indemnitee") from and against any and all Indemnifiable
Losses asserted against or suffered by any FE Indemnitee (each, an "FE
Indemnifiable Loss") in any way relating to, resulting from or arising out of
(i) any breach by DLC of any covenant or agreement of DLC as an Acquiring Party
contained in this Agreement or the representations and warranties contained in
Sections 6.1, 6.2 and 6.3, (ii) any loss or damages resulting from or arising
out of DLC's Inspection of the FE Assets and (iii) the Accrued FE Liabilities.
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(b) DLC shall indemnify, defend and hold harmless the FE
Indemnitees from and against any and all FE Indemnifiable Losses in any way
relating to, resulting from or arising out of (i) any breach by DLC of any
covenant or agreement of DLC contained in this Agreement, except those related
solely to its obligations as an Acquiring Party, or the representations and
warranties contained in Sections 6.1, 6.2 and 6.3, (ii) the Excluded DLC
Liabilities, (iii) noncompliance by DLC with any bulk sales or transfer laws as
provided in Section 12.14, and (iv) any Third Party Claims against an FE
Indemnitee arising out of or in connection with DLC's ownership or operation of
the Excluded DLC Assets.
(c) DLC shall indemnify, defend and hold harmless each FE
Indemnitee from and against any and all FE Indemnifiable Losses in any way
relating to, resulting from or arising out of any Third Party Claim against an
FE Indemnitee (i) asserting that the transactions contemplated by the Agreement
in Principle, this Agreement or the Nuclear Conveyance Agreement contravene any
contractual obligations of DLC or (ii) requesting a temporary restraining order
or a preliminary or permanent injunction in respect of such transactions.
(d) Each FE Subsidiary, for itself and on behalf of its
Representatives and Affiliates, do hereby release, hold harmless and forever
discharge DLC, DLC Representatives and DLC's Affiliates, from any and all FE
Indemnifiable Losses resulting from, arising out of or relating to (i) Assumed
DLC Liabilities, and (ii) from and after the Exchange Closing, Assumed FE
Liabilities (other than the Accrued FE Liabilities). Each FE Subsidiary hereby
waives any and all rights and benefits with respect to such FE Indemnifiable
Losses that it now has, or in the future may have conferred upon it 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 executing the release, if Knowledge of such claims would
have materially affected such party's settlement with the obligor. In this
connection, each FE Subsidiary hereby acknowledges that it is aware that factual
matters now unknown to it may have given or may hereafter give rise to FE
Indemnifiable Losses that are currently unknown, unanticipated and unsuspected,
and it further agrees that this release has been negotiated and agreed upon in
light of that awareness and nevertheless hereby intends to release DLC, DLC
Representatives and DLC's Affiliates from the FE Indemnifiable Losses in the
manner contemplated by this paragraph.
10.3 Certain Indemnifications to be Required of the Winning Bidder.
DLC shall require that each applicable Winning Bidder provide the
following indemnifications:
(a) indemnification of the FE Indemnitees as follows:
(i) Winning Bidder shall indemnify, defend and hold
harmless the FE Indemnitee from and against any and all Indemnifiable
Losses in any way relating to, resulting from or arising out of (A)
any breach by the Winning Bidder of any covenant or agreement of the
Winning Bidder contained in the respective Auction Agreement or the
representations and warranties contained in Section 6.1, 6.2 and 6.3
of such Auction Agreement, (B) the Assumed FE Liabilities (other than
the Accrued FE Liabilities) with respect to the FE Assets acquired by
such Winning Bidder, and (C) any loss or damages resulting from or
arising solely out of any Inspection of such FE Assets, and (D) any
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Third Party Claims against an FE Indemnitee arising solely out of or
in connection with Winning Bidder's ownership or operation of the FE
Plants and other FE Assets acquired by such Winning Bidder in the
Auction, on or after the Auction Closing Date; and
(ii) Winning Bidder, for itself and on behalf of its
representatives and Affiliates, shall release, hold harmless and
forever discharge the FE Subsidiaries, their Representatives and
Affiliates, from any and all Indemnifiable Losses of any kind or
character, whether known or unknown, hidden or concealed, resulting
from or arising out of any Environmental Condition or violation of
Environmental Law relating to its purchased FE Assets, other than any
liabilities or obligations described in Sections 2.4A(g)and (h) of the
respective Auction Agreement. Winning Bidder hereby waives any and all
rights and benefits with respect to such Indemnifiable Losses that it
now has, or in the future may have conferred upon it 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 executing the release, if Knowledge
of such claims would have materially affected such party's settlement
with the obligor. In this connection, Winning Bidder hereby
acknowledges that it is aware that factual matters now unknown to it
may have given or may hereafter give rise to Indemnifiable Losses that
are currently unknown, unanticipated and unsuspected, and it further
agrees that this release has been negotiated and agreed upon in light
of that awareness and nevertheless hereby intends to release the FE
Subsidiaries and their Representatives and Affiliates from the
Indemnifiable Losses in the manner contemplated by this paragraph.
(b) indemnification of the DLC Indemnitees as follows:
(i) indemnification of the DLC Indemnitees from and
against any DLC Indemnifiable Loss in any way relating to, resulting
from or arising out of (A) any breach by the applicable Winning Bidder
of any covenant or agreement of such Winning Bidder contained in the
respective Auction Agreement or the representations and warranties
contained in Section 6.1, 6.2 and 6.3 of such Auction Agreement, (B)
the Assumed FE Liabilities, and (C) any loss or damage resulting from
or arising out of any Inspection of the DLC Assets; and
(ii) In addition, DLC shall require that the applicable
Winning Bidder provide a release of DLC and each applicable FE
Subsidiary in substantially the form of Sections 10.1(e) and 10.2(d)
hereof.
10.4 Certain Limitations on Indemnification.
(a) Notwithstanding anything to the contrary contained herein:
(i) Any Indemnitee shall use Commercially Reasonable
Efforts to mitigate all losses, damages and the like relating to a
claim under these indemnification provisions, including availing
itself of any defenses, limitations, rights of contribution, claims
against third persons and other rights at law or equity. The
Indemnitee's Commercially Reasonable Efforts shall include the
reasonable expenditure of money to mitigate or otherwise reduce or
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eliminate any loss or expenses for which indemnification would
otherwise be due, and the Indemnifying Party shall reimburse the
Indemnitee for the Indemnitee's reasonable expenditures in undertaking
the mitigation; and
(ii) Any Indemnifiable Loss shall be net of (A) the
dollar amount of any insurance or other proceeds actually receivable
by the Indemnitee or any of its Affiliates with respect to the
Indemnifiable Loss, and (B) income tax benefits to the Indemnitee, to
the extent realized by the Indemnitee. Any Person seeking indemnity
hereunder shall use Commercially Reasonable Efforts to seek coverage
(including both costs of defense and indemnity) under applicable
insurance policies with respect to any such Indemnifiable Loss.
(b) The expiration, termination or extinguishment of any
covenant or agreement shall not affect the Parties' obligations under Sections
10.1, 10.2, and 10.3 hereof if the Indemnitee provided the Indemnifying Party
with proper notice of the claim or event for which indemnification is sought
prior to such expiration, termination or extinguishment.
(c) Except to the extent otherwise provided in Article XI, the
rights and remedies of DLC and the FE Subsidiaries under this Article X are
exclusive and in lieu of any and all other rights and remedies which DLC and the
FE Subsidiaries may have under this Agreement for monetary relief, with respect
to (i) any breach of or failure to perform any covenant, agreement, or
representation or warranty set forth in this Agreement, after the occurrence of
the Exchange Closing, or (ii) the Assumed Liabilities or the Excluded
Liabilities, as the case may be. The indemnification obligations of the Parties
set forth in this Article X apply only to matters arising out of this Agreement
but do not extend to matters arising out of the other Ancillary Agreements. Any
Indemnifiable Loss arising under or pursuant to any other Ancillary Agreement
shall be governed by the indemnification obligations, if any, contained in such
Ancillary Agreement under which the Indemnifiable Loss arises.
(d) Notwithstanding anything to the contrary contained herein,
no Party (including an Indemnitee) shall be entitled to recover from any other
Party (including an Indemnifying Party) for any liabilities, damages,
obligations, payments, losses, costs, or expenses under this Agreement any
amount in excess of the actual compensatory damages, court costs and reasonable
attorney's and other advisor fees suffered by such Party. Each Party waives any
right to recover punitive, incidental, special, exemplary and consequential
damages arising in connection with or with respect to this Agreement. The
provisions of this Section 10.4(d) shall not apply to indemnification for a
Third Party Claim.
10.5 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion or
commencement of any Third Party Claim made or brought by any Person who is not a
party to this Agreement or any Affiliate of a Party to this Agreement or the
applicable Winning Bidder with respect to which indemnification is to be sought
from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party
reasonably prompt written notice thereof, but in any event such notice shall not
be given later than ten (10) calendar days after the Indemnitee's receipt of
notice of such Third Party Claim. Such notice shall describe the nature of the
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Third Party Claim in reasonable detail and shall indicate the estimated amount,
if practicable, of the Indemnifiable Loss that has been or may be sustained by
the Indemnitee. The Indemnifying Party will have the right to participate in or,
by giving written notice to the Indemnitee, to elect to assume the defense of
any Third Party Claim at such Indemnifying Party's expense and by such
Indemnifying Party's own counsel, provided that the counsel for the Indemnifying
Party who shall conduct the defense of such Third Party Claim shall be
reasonably satisfactory to the Indemnitee. The Indemnitee shall cooperate in
good faith in such defense at such Indemnitee's own expense. If an Indemnifying
Party elects not to assume the defense of any Third Party Claim, the Indemnitee
may compromise or settle such Third Party Claim over the objection of the
Indemnifying Party, which settlement or compromise shall conclusively establish
the Indemnifying Party's liability pursuant to this Agreement.
(b)
(i) If, within ten (10) calendar days after an
Indemnitee provides written notice to the Indemnifying Party of any
Third Party Claims, the Indemnitee receives written notice from the
Indemnifying Party that such Indemnifying Party has elected to assume
the defense of such Third Party Claim as provided in Section 10.5(a),
the Indemnifying Party will not be liable for any legal expenses
subsequently incurred by the Indemnitee in connection with the defense
thereof; provided, however, that if the Indemnifying Party shall fail
to take reasonable steps necessary to defend diligently such Third
Party Claim within twenty (20) calendar days after receiving notice
from the Indemnitee that the Indemnitee believes the Indemnifying
Party has failed to take such steps, the Indemnitee may assume its own
defense and the Indemnifying Party shall be liable for all reasonable
expenses thereof.
(ii) Without the prior written consent of the
Indemnitee, the Indemnifying Party shall not enter into any settlement
of any Third Party Claim which would lead to liability or create any
financial or other obligation on the part of the Indemnitee for which
the Indemnitee is not entitled to indemnification hereunder. If a firm
offer is made to settle a Third Party Claim without leading to
liability or the creation of a financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept
and agree to such offer, the Indemnifying Party shall give written
notice to the Indemnitee to that effect. If the Indemnitee fails to
consent to such firm offer within ten (10) calendar days after its
receipt of such notice, the Indemnifying Party shall be relieved of
its obligations to defend such Third Party Claim and the Indemnitee
may contest or defend such Third Party Claim. In such event, the
maximum liability of the Indemnifying Party as to such Third Party
Claim will be the amount of such settlement offer plus reasonable
costs and expenses paid or incurred by Indemnitee up to the date of
said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event such notice shall not be
given later than ten (10) calendar days after the Indemnitee becomes aware of
such Direct Claim, and the Indemnifying Party shall have a period of thirty (30)
calendar days within which to respond to such Direct Claim. If the Indemnifying
Party does not respond within such thirty (30) calendar day period, the
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Indemnifying Party shall be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its right to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by, from or
against any other entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with interest thereon
from the date of payment thereof at the publicly announced prime rate then in
effect of The Chase Manhattan Bank) shall promptly be repaid by the Indemnitee
to the Indemnifying Party.
(e) A failure to give timely notice as provided in this Section
10.5 shall not affect the rights or obligations of any Party hereunder except
if, and only to the extent that, as a result of such failure, the Party which
was entitled to receive such notice was actually prejudiced as a result of such
failure.
ARTICLE XI
TERMINATION
11.1 Termination. (a) This Agreement may be terminated at any time
prior to the Exchange Closing Date by mutual written consent of DLC and the FE
Subsidiaries.
(b) This Agreement may be terminated by either Party if (i) any
federal or state court of competent jurisdiction shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the Exchange Closing, and such order, judgment or decree shall have become final
and nonappeallable; (ii) any statute, rule, order or regulation shall have been
enacted or issued by any Governmental Authority which prohibits the consummation
of the Exchange Closing; or (iii) the Exchange Closing contemplated hereby shall
have not occurred on or before the day which is 12 months from the date of this
Agreement (the "Termination Date"), provided that the right to terminate this
Agreement under this Section 11.1(b)(iii) shall not be available to any Party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Exchange Closing to occur on or before
such date, and provided, further, that if on the Termination Date (x) the
conditions to the Exchange Closing set forth in Sections 9.1(b), 9.2(a) and
9.3(a) hereof shall not have been fulfilled but all other conditions to the
Exchange Closing shall be fulfilled or shall be capable of being fulfilled, or
(y) the conditions to the Auction Closings set forth in Sections 8.1(b), 8.2(c)
and 8.2(d) of the Auction Agreements shall not have been fulfilled but all other
conditions to the Auction Closings shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be the day which is 18 months
from the date of this Agreement.
(c) This Agreement may be terminated by DLC if it shall have
received a Final Order that has caused the conditions set forth in Section
9.2(a) not to be satisfied.
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(d) This Agreement may be terminated by the FE Subsidiaries if
any of them shall have received a Final Order that has caused the conditions set
forth in Section 9.3(a) not to be satisfied.
(e) This Agreement may be terminated by DLC if there has been a
violation or breach by an FE Subsidiary of any covenant, representation or
warranty contained in this Agreement which has resulted in an FE Material
Adverse Effect and such violation or breach is not cured by the earlier of the
Exchange Closing Date or the date which is thirty (30) days after receipt by the
FE Subsidiary of notice specifying particularly such violation or breach, and
such violation or breach has not been waived by DLC.
(f) This Agreement may be terminated by the FE Subsidiaries if
there has been a violation or breach by DLC of any covenant, representation or
warranty contained in this Agreement which has resulted in a DLC Material
Adverse Effect and such violation or breach is not cured by the earlier of the
Exchange Closing Date or the date which is thirty (30) days after receipt by DLC
of notice specifying particularly such violation or breach, and such violation
or breach has not been waived by the FE Subsidiaries.
(g) This Agreement may be terminated, in the event of a casualty
or loss to the Exchange Assets, by the Party entitled to so terminate this
Agreement under the provisions of Section 8.12(b).
(h) If before the Exchange Closing Date, all or any portion of
the Exchange Assets are (i) taken by eminent domain or are the subject of a
pending or (to the Knowledge of the Conveying Party with respect to such
Exchange Assets) contemplated taking which has not been consummated or (ii)
damaged or destroyed by fire or other casualty and, in either case, such taking,
loss or casualty results (or would result) in the substantial likelihood that
the Conveying Party (by conveying to the Acquiring Party the Exchange Assets not
otherwise affected by such taking, loss or casualty) will suffer adverse Tax
consequences with respect to the Plant to which such Exchange Assets relate,
then the Conveying Party shall notify the Acquiring Party (or, if the Acquiring
Party is the Winning Bidder, DLC) promptly in writing of such fact. Upon such
notification, the Acquiring Party (or, if the Acquiring Party is the Winning
Bidder, DLC) may, at its sole option, provide the Conveying Party with a written
indemnity, in form and substance reasonably satisfactory to the Conveying Party,
indemnifying the Conveying Party against any such adverse Tax consequences
resulting from the Conveying Party's conveyance to the Acquiring Party of such
Exchange Assets, upon receipt of which the Conveying Party shall remain
obligated to convey such Exchange Assets to the Acquiring Party at the Exchange
Closing as contemplated by this Agreement. In the event that following such
notification, however, the Acquiring Party (or, if the Acquiring Party is the
Winning Bidder, DLC) does not provide the Conveying Party with such indemnity on
or before the tenth day following such notification, the Conveying Party may, at
its sole option, terminate this Agreement.
11.2 Procedure and Effect of No-Default Termination. In the event
of termination of this Agreement by either or both of the Parties pursuant to
any of Section 11.1, written notice thereof shall forthwith be given by the
terminating Party to the other Party, whereupon the liabilities of the Parties
hereunder will terminate, except as otherwise expressly provided in this
Agreement, and thereafter neither Party shall have any recourse against the
other Party by reason of this Agreement.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Liability of FE Subsidiaries. Each FE Subsidiary shall be
individually responsible for its own obligations, covenants, representations and
warranties under this Agreement.
12.2 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of the Parties.
12.3 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but any such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
12.4 No Survival.
(a) Except as provided in Section 12.4(b) and 12.4(c), each and
every representation, warranty and covenant contained in this Agreement shall
expire with, and be terminated and extinguished by the consummation of the sale
of the Exchange Assets and shall merge into the deed(s) pursuant hereto and the
transfer of the Assumed Liabilities pursuant to this Agreement and such
representations, warranties and covenants shall not survive the Exchange Closing
Date; and none of DLC, any FE Subsidiary or any officer, director, trustee,
Affiliate or agent of any of them shall be under any liability whatsoever with
respect to any such representation, warranty or covenant.
(b) The covenants contained in Sections 5.2(e), 5.2(f), 5.4,
5.5, 8.2(d), 8.3(a), 8.5, 8.6, 8.7(e), 8.8, 8.9, 8.11, 8.14, 8.16, 11.2, and in
Articles X and XII shall survive the delivery of the deed(s) and the Exchange
Closing in accordance with their terms.
(c) The representations, warranties and disclaimers contained in
Sections 6.1, 6.2, 6.3, 7.1, 7.2, 7.3, and claims arising under Sections 8.1 and
8.7(e) shall survive the Exchange Closing for eighteen (18) months from the
Exchange Closing Date.
12.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
specified by like notice; provided however, that notices of a change of address
shall be effective only upon receipt thereof):
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(a) If to DLC, to:
Duquesne Light Company
411 Seventh Avenue
Pittsburgh, PA 15219
Telephone: (412) 393-6000
Fax: (412) 393-6760
Attention: Morgan O'Brien
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC 20005
Telephone: (202) 371-7000
Fax: (202) 393-5760
Attention: Erica A. Ward
(b) if to the FE Subsidiaries, to:
FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone: (330) 384-5793
Fax: (330) 384-3875
Attention: Anthony J. Alexander
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Telephone: (212) 858-1000
Fax: (212) 858-1500
Attention: Michael F. Cusick
12.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any Party
hereto, including by operation of law, without the prior written consent of the
other Party, nor is this Agreement intended to confer upon any other Person
except the Parties hereto any rights, interests, obligations or remedies
hereunder. Notwithstanding the foregoing, the Winning Bidder may (i) assign all
of its rights and obligations hereunder to any wholly owned Subsidiary (direct
or indirect) or (ii) make a security assignment to any lender providing
financing in respect of the Winning Bidder's acquisition of the FE Assets, and
in either case upon the applicable FE Subsidiary's receipt of notice from the
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Winning Bidder of any such assignment, such assignee will be deemed to have
assumed, ratified, agreed to be bound by and perform all such obligations, and
all references herein to "Winning Bidder" shall thereafter be deemed to be
references to such assignee, in each case without the necessity for further act
or evidence by the Parties hereto or such assignee, provided, however, that no
such assignment shall relieve or discharge the assignor (the original Winning
Bidder hereunder) from any of its obligations as the Winning Bidder hereunder.
Except as expressly provided herein with respect to the applicable Winning
Bidder, no provision of this Agreement shall create any third party beneficiary
rights in any employee or former employee of a Conveying Party (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 except as expressly
provided for thereunder. Each Conveying Party agrees, at any Acquiring 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 such Conveying Party's rights under this
Agreement are not thereby altered, amended, diminished or otherwise impaired.
12.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the Commonwealth of Pennsylvania
(without giving effect to conflict of law principles) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies (except as to such matters of real estate law that must
be governed by the law of the State of Ohio). THE PARTIES HERETO AGREE THAT
VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF
THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN AND FOR PITTSBURGH,
PENNSYLVANIA, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE,
AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN
ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9 Interpretation. The articles, section and schedule headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
12.10 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
12.11 Entire Agreement. This Agreement, the Ancillary Agreements, and
the Exhibits, Schedules, documents, certificates and instruments referred to
herein or therein, embody the entire agreement and understanding of the Parties
hereto in respect of the transactions contemplated by this Agreement. There are
no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein or
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therein. This Agreement and the Ancillary Agreements supersede all prior
agreements and understandings between the Parties (except for that certain
Confidentiality Agreement, dated August 17, 1998, by and between FE (including
its affiliates) and DQE (including its affiliates) as it relates to Confidential
Information (as defined therein) from the date thereof until the date hereof)
with respect to such transactions.
12.12 U.S. Dollars. Unless otherwise stated, all dollar amounts set
forth herein are United States (U.S.) dollars.
12.13 Sewage Facilities. Pursuant to the provisions of Section 7a of
the Pennsylvania Sewage Facilities Act, 35 P.S. section 750 (the "Facilities
Act"), each Acquiring Party is notified that a "community sewage system" (as
defined by Section 2 of the Facilities Act) is not available on one or more lots
comprising part of the Real Property at the facilities listed in Schedule 12.13.
Prior to construction of any buildings on such lots, a permit to connect to a
community sewage system or permit for installation of an individual sewage
system must be obtained pursuant to Section 7 of the Facilities Act. Before
signing this Agreement, the Acquiring Party should contact the local agency
charged with administering the Facilities Act in the area of each such facility
and lot(s) to determine the procedure and requirements for obtaining a permit
for an individual or community sewage system to service such lot(s), if required
for the intended uses and purposes of such lot(s).
12.14 Bulk Sales Laws. Each Acquiring Party acknowledges that,
notwithstanding anything in this Agreement to the contrary, the Conveying Party
will not comply with the provision of the bulk sales laws of any jurisdiction in
connection with the transactions contemplated by this Agreement. Each Acquiring
Party hereby waives compliance by the Conveying Party with the provisions of the
bulk sales laws of all applicable jurisdictions to the extent permitted by law.
12.15 Tax Matters
The Parties have entered into the Exchange Agreements with the
intention that, to the extent eligible under the Code, the transfers of
generating assets from the applicable FE Subsidiaries to DLC and from DLC to
such FE Subsidiaries, as provided for in the Exchange Agreements, shall occur
without recognition of a tax gain or loss by the FE Subsidiaries.
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IN WITNESS WHEREOF, DLC and each FE Subsidiary have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
DUQUESNE LIGHT COMPANY THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By: /s/ Morgan K. O'Brien By: /s/ Anthony J. Alexander
------------------------------- ------------------------------
Name: Morgan K. O'Brien Name: Anthony J. Alexander
Title: Vice President, Finance Title: Executive Vice President
and General Counsel
OHIO EDISON COMPANY
By: /s/ Anthony J. Alexander
------------------------------
Name: Anthony J. Alexander
Title: Executive Vice President
and General Counsel
PENNSYLVANIA POWER COMPANY
By: /s/ Anthony J. Alexander
------------------------------
Name: Anthony J. Alexander
Title: Executive Vice President
and General Counsel
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Nuclear Generation Conveyance Agreement
Exhibit B Form of Asset Purchase Agreement
Exhibit C Form of Bill of Sale
Exhibit D Form of DLC Assignment and Assumption Agreement
Exhibit E Form of FE Connection Agreement
Exhibit F Form FE (Accrued Liability) Assignment and
Assumption Agreement
Exhibit G Form of FE Assignment and Assumption Agreement
Exhibit H Form of FE Easement and Attachment Agreement
Exhibit I Form of FIRPTA Affidavit
Exhibit J Form of Electrical Facilities Agreement
Exhibit K Form of Settlement Agreement
Exhibit L Form of Warranty Deed - FE
Exhibit M Form of Warranty Deed - DLC
Exhibit N Form of Order
Exhibit O Form of CAPCO Settlement Agreement
Exhibit P Form of Support Agreement
Exhibit Q Form of FE Must-Run Agreement
SCHEDULES
1.1(24) CAPCO Agreements
1.1 (27-DLC) DLC Capital Spare Parts
1.1(27-FE) FE Subsidiaries Capital Spare Parts
1.1(64) DLC Transferable Permits (environmental and non-environmental)
1.1(90) DLC Exempt Facilities
1.1 (126) FE Transferable Permits (environmental and non-environmental)
1.1(170) Permitted Encumbrances (DLC Assets)
3.1 Schedule of Designation of FE Subsidiaries receiving DLC Assets
and conveying FE Assets
3.1(c) Schedule of DLC Tangible Personal Property to be Conveyed to
Acquiring Party
3.1(i) Schedule of Unexpired Warranties and Guarantees
3.1(l) Schedule of DLC Intellectual Property
3.3(d) Schedule of Agreements and Consent Orders regarding Assumed DLC
Liabilities
3.7 Schedule of Sammis and East Lake Property Tax Litigation
4.1 Schedule of FE Assets (Avon Lake)(New Castle)(Niles)
4.1(c) Schedule of FE Tangible Personal Property to be Conveyed to
Acquiring Party (Avon Lake)(New Castle)(Niles)
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4.1(k) Schedule of FE Intellectual Property (Avon Lake)(New Castle)
(Niles)
4.2(a) Description of Excluded FE Transmission and other Assets of each
FE Subsidiary
4.2(b) Excluded FE Equipment and Systems
4.3(e) Schedule of Agreements and Consent Orders regarding Assumed FE
Liabilities
(Avon Lake)(New Castle)(Niles)
4.7 Schedule of FE Inventories (Avon Lake)(New Castle)(Niles)
5.2(b)(ii) Value of DLC Inventories
6.3(a)(i) DLC Conflicts, Third Party Consents and Breaches of
Articles/Bylaws
6.3(a)(ii) DLC Defaults, Termination or Acceleration of Notes, Bonds or
Mortgages
6.3(a)(iii) DLC Violations of Law, Regulations
6.3(b) DLC Required Regulatory Approvals
6.4 DLC Insurance Exceptions
6.5 DLC Real Property Leases
6.6(a) DLC Environmental Exceptions
6.6(b) DLC Written Requests Under CERCLA
6.6(c) DLC Consents, Decrees/Orders related to Environmental Laws or
Remediation
6.7 Description of DLC Real Property
6.8 DLC Notices of Condemnation
6.9(a) Certain DLC Material Agreements
6.9(b) Certain Non-Assignable DLC Material Agreements
6.9(c) Defaults under Certain DLC Material Agreements
6.10 Legal Proceedings Involving DLC
6.11(a) List of DLC Permit Violations
6.11(b) List of DLC Material Permits (other than DLC Transferable
Permits)
6.12(b) DLC Notices of Tax Deficiencies or Assessments
6.12(c) DLC Outstanding Agreements or Waivers Extending Statute of
Limitations for Taxes
6.12(d) DLC Safe Harbor Lease/Tax Exempt Use Property
6.12(e) Taxing Jurisdictions for DLC Assets
6.13 DLC Intellectual Property Default or Infringement
7.3(a) FE Conflicts/Defaults/Violations (Avon Lake)(New Castle)(Niles)
7.3(b) FE Required Regulatory Approvals (Avon Lake)(New Castle)(Niles)
7.4 FE Insurance Exceptions (Avon Lake)(New Castle)(Niles)
7.5 FE Real Property Leases (Avon Lake)(New Castle)(Niles)
7.6 Schedule of FE Environmental Matters (Avon Lake)(New Castle)
(Niles)
7.7 Schedule of FE Labor Matters
7.8(a) Schedule of FE Benefit Plans
7.9 Description of FE Real Property (Avon Lake)(New Castle)(Niles)
7.10 FE Notices of Condemnation
7.11(a) Certain FE Material Agreements (Avon Lake)(New Castle)(Niles)
7.11(b) Certain Non-Assignable FE Material Agreements (Avon Lake)(New
Castle)(Niles)
7.11(c) Defaults under Certain FE Material Agreements (Avon Lake)(New
Castle)(Niles)
7.12 Legal Proceedings Involving FE
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7.13(a) List of FE Permit Violations (Avon Lake)(New Castle)(Niles)
7.13(b) List of FE Material Permits (other than FE Transferable Permits)
(Avon Lake)(New Castle)(Niles)
7.14(b) FE Notices of Tax Deficiencies or Assessments
7.14(c) FE Outstanding Agreements or Waivers Extending Statute of
Limitations for Taxes
7.14(d) FE Safe Harbor Lease/Tax Exempt Use Property
7.14(e) Taxing Jurisdictions for FE Assets
7.15 FE Intellectual Property Default or Infringement (Avon Lake)(New
Castle)(Niles)
8.1(a) Schedule of Permitted FE Activities prior to Closing (Avon Lake)
New Castle)(Niles)
8.1(c) Schedule of Exceptions to Permitted FE Activities prior to
Closing
8.1(c)(viii) Schedule of Permitted FE Capital Expenditures
8.1(d) Schedule of Permitted DLC Capital Expenditures
8.1(e) Schedule of Permitted DLC Activities prior to Closing
8.11(a) Employees at FE Plants
8.11(c) FE Non-Union Employees
8.11(d) FE Collective Bargaining Agreements
12.13 Status of Sewage Facilities on Subject Lots
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
1.1 Definitions........................................ 2
1.2 Certain Interpretive Matters....................... 23
1.3 CAPCO Agreements to Govern......................... 24
1.4 DLC's Interest in Assets........................... 24
ARTICLE II EXCHANGE OF ASSETS
2.1 Transfer of FE Assets and Assumed FE Liabilities... 24
2.2 Auction Agreement.................................. 25
ARTICLE III TRANSFER OF DLC ASSETS
3.1 Transfer of DLC Assets............................. 26
3.2 Excluded DLC Assets. ............................. 27
3.3 Assumed DLC Liabilities............................ 28
3.4 Excluded DLC Liabilities........................... 30
3.5 Control of Litigation.............................. 31
3.6 Fuel Supplies...................................... 31
3.7 Property Tax Litigation. ......................... 31
ARTICLE IV TRANSFER OF FE ASSETS
4.1 Transfer of FE Assets. ............................ 32
4.2 Excluded FE Assets................................. 33
4.3 Assumed FE Liabilities............................. 35
4.4 Excluded FE Liabilities............................ 37
4.5 Control of Litigation.............................. 38
4.6 Fuel Supplies...................................... 39
4.7 Inventories........................................ 39
ARTICLE V THE EXCHANGE CLOSING
5.1 Exchange Closing................................... 39
5.2 Calculation of Closing Payments.................... 39
5.3 Payment of Closing Payments........................ 41
5.4 Prorations......................................... 42
5.5 Audit Cooperation.................................. 43
5.6 Deliveries by FE Subsidiaries...................... 43
5.7 Deliveries by DLC.................................. 44
5.8 Ancillary Agreements............................... 46
5.9 Pending Litigation................................. 46
5.10 Work in Progress................................... 47
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ARTICLE VI REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC
6.1 Incorporation; Qualification....................... 47
6.2 Authority.......................................... 47
6.3 Consents and Approvals; No Violation............... 47
6.4 Insurance.......................................... 48
6.5 DLC Real Property Leases........................... 48
6.6 Environmental Matters.............................. 48
6.7 Real Property...................................... 49
6.8 Condemnation....................................... 49
6.9 Contracts and Leases............................... 49
6.10 Legal Proceedings.................................. 49
6.11 Permits............................................ 50
6.12 Taxes.............................................. 50
6.13 Intellectual Property.............................. 51
6.14 Compliance With Laws............................... 51
6.15 Disclaimers Regarding DLC Assets................... 51
6.16 Year 2000 Compliance............................... 52
6.17 SEC Filings; Financial Statements.................. 52
ARTICLE VII REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF THE FE
SUBSIDIARIES
7.1 Incorporation; Qualification....................... 52
7.2 Authority.......................................... 53
7.3 Consents and Approvals; No Violation............... 53
7.4 Insurance.......................................... 54
7.5 FE Real Property Leases............................ 54
7.6 Environmental Matters.............................. 54
7.7 Labor Matters...................................... 55
7.8 Benefit Plans: ERISA.............................. 55
7.9 Real Property...................................... 56
7.10 Condemnation....................................... 56
7.11 Contracts and Leases............................... 56
7.12 Legal Proceedings.................................. 56
7.13 Permits............................................ 57
7.14 Taxes.............................................. 57
7.15 Intellectual Property.............................. 58
7.16 FE Capital Expenditures............................ 58
7.17 Compliance With Laws............................... 58
7.18 Disclaimers Regarding FE Assets.................... 58
7.19 Year 2000 Compliance............................... 59
7.20 SEC Filings; Financial Statements.................. 59
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ARTICLE VIII COVENANTS OF THE PARTIES
8.1 Conduct of Business Relating to the Exchange
Assets............................................. 59
8.2 Access to Information.............................. 62
8.3 Confidentiality.................................... 64
8.4 Public Statements.................................. 65
8.5 Expenses........................................... 65
8.6 Further Assurances................................. 65
8.7 Consents and Approvals............................. 67
8.8 Fees and Commissions............................... 68
8.9 Tax Matters........................................ 68
8.10 Advice of Changes.................................. 69
8.11 FE Subsidiaries' Employees......................... 69
8.12 Risk of Loss....................................... 75
8.13 Cooperation in Auction............................. 76
8.14 Additional Agreements.............................. 76
8.15 Reserved........................................... 77
8.16 Tax Exempt Financing............................... 77
ARTICLE IX CONDITIONS
9.1 Conditions to Obligations of the Parties........... 79
9.2 Conditions to Obligations of DLC................... 80
9.3 Conditions to Obligations of the FE Subsidiaries... 82
ARTICLE X INDEMNIFICATION
10.1 Indemnification of DLC by FE Subsidiaries.......... 84
10.2 Indemnification of FE Subsidiaries by DLC.......... 85
10.3 Certain Indemnifications to be Required of the
Winning Bidder..................................... 86
10.4 Certain Limitations on Indemnification............. 87
10.5 Defense of Claims.................................. 88
ARTICLE XI TERMINATION
11.1 Termination........................................ 90
11.2 Procedure and Effect of No-Default Termination..... 91
ARTICLE XII MISCELLANEOUS PROVISIONS
12.1 Liability of FE Subsidiaries....................... 92
12.2 Amendment and Modification......................... 92
12.3 Waiver of Compliance; Consents..................... 92
12.4 No Survival........................................ 92
12.5 Notices............................................ 92
12.6 Assignment......................................... 93
12.7 Governing Law...................................... 94
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12.8 Counterparts....................................... 94
12.9 Interpretation..................................... 94
12.10 Schedules and Exhibits............................. 94
12.11 Entire Agreement................................... 94
12.12 U.S. Dollars....................................... 95
12.13 Sewage Facilities.................................. 95
12.14 Bulk Sales Laws.................................... 95
12.15 Tax Matters........................................ 92
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EXHIBIT 2.2
NUCLEAR GENERATION CONVEYANCE AGREEMENT
by and between
DUQUESNE LIGHT COMPANY, on the one hand, and
PENNSYLVANIA POWER COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, on the other
Dated as of March 25, 1999
<PAGE>
NUCLEAR GENERATION CONVEYANCE AGREEMENT
NUCLEAR GENERATION CONVEYANCE AGREEMENT, dated as of March 25, 1999
("Agreement"), by and between Duquesne Light Company ("DLC"), a Pennsylvania
corporation, on the one hand, and Pennsylvania Power Company ("Penn Power"), a
Pennsylvania corporation and The Cleveland Electric Illuminating Company
("CEIC"), an Ohio corporation, on the other. DLC, on the one hand, and Penn
Power and CEIC, on the other, are referred to individually as a "Party," and
collectively as the "Parties."
W I T N E S S E T H
WHEREAS, DLC and FE (as hereinafter defined), acting on behalf of the
FE Subsidiaries (as hereinafter defined) have entered into an agreement in
principle dated October 14, 1998 (the "Agreement in Principle"), regarding the
exchange of interests in certain electric generation facilities; and
WHEREAS, in order to implement the Agreement in Principle with respect
to DLC's nuclear generating assets which are subject to the jurisdiction of the
NRC (as hereinafter defined), the Parties desire to set forth in this Agreement
the definitive terms and conditions pursuant to which DLC agrees to transfer to
and convey, and Penn Power and CEIC agree to assume, all of DLC's right, title
and interest in and to certain plants (Beaver Valley Unit 1, Beaver Valley Unit
2, SAPS and Perry Unit 1, as each is hereinafter defined), as well as DLC's
rights and obligations as operator of Beaver Valley Unit 1 and Beaver Valley
Unit 2; and
WHEREAS, in order to implement the Agreement in Principle with respect
to certain fossil fueled power plants, simultaneously with the execution of this
Agreement, DLC and the FE Subsidiaries will enter into the Generation Exchange
Agreement (the "Exchange Agreement") dated as of the date hereof, in the form of
Exhibit A, pursuant to which DLC will exchange its undivided interests in
certain electric generation plants operated by the FE Subsidiaries (W.H. Sammis
Unit No. 7, Bruce Mansfield Units Nos. 1, 2 & 3, and Eastlake Unit No. 5) for
the interests of certain of the FE Subsidiaries in electric generation plants in
Avon Lake, Ohio, New Castle, Pennsylvania and Niles, Ohio; and
WHEREAS, simultaneously with the execution of this Agreement, DLC and
FE will enter into the FE Support Agreement, and DLC, FE and the FE Subsidiaries
will enter into the CAPCO Settlement Agreement and the Electric Facilities
Agreement (as each is hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
have the meanings specified in this Section 1.1.
(1) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
(2) "Agreement" means this Nuclear Generation Conveyance
Agreement, together with the Schedules and Exhibits hereto, as the
same may be from time to time amended.
(3) "Agreement in Principle" has the meaning set forth in the
preamble to this Agreement.
(3A) "Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement"
means the Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement,
substantially in the form of Exhibit J hereto, to be entered into
between DLC and CEIC at the time this Agreement is executed.
(4) "Ancillary Agreements" means the CAPCO Settlement Agreement
and the Electric Facilities Agreement and, in respect of each Plant,
the Assignment and Assumption Agreement, the Bill of Sale, the FIRPTA
Affidavit, the Warranty Deed(s) with respect to such Plant and, in the
case of Beaver Valley, the Beaver Valley Omnibus Services Agreement,
in each case as the same may be from time to time amended.
(5) "ANI" means American Nuclear Insurance, or any successor
entity.
(6) "Assignment and Assumption Agreement" means an Assignment
and Assumption Agreement in respect of each Plant between DLC and the
applicable Specified FE Subsidiary, substantially in the form of
Exhibit B hereto, by which DLC shall, subject to the terms and
conditions hereof, assign the DLC Nuclear Agreements, certain
intangible assets and other DLC Nuclear Assets in respect of each
Plant to the applicable Specified FE Subsidiary, and whereby such
Specified FE Subsidiary shall assume the Assumed Liabilities in
respect of each Plant.
(7) "Assumed Decommissioning Liabilities" has the meaning set
forth in Section 2.3(f).
(8) "Assumed Environmental Liabilities" has the meaning set
forth in Section 2.3(c).
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(9) "Assumed Liabilities" has the meaning set forth in Section
2.3.
(10) "Assumed Nuclear Liabilities" has the meaning set forth in
Section 2.3(g).
(11) "Assumed Spent Fuel Liabilities" has the meaning set forth
in Section 2.3(h).
(12) "Atomic Energy Act" means the Atomic Energy Act of 1954, as
amended.
(13) "Beaver Valley" means, collectively, Beaver Valley Unit 1,
Beaver Valley Unit 2 and SAPS.
(14) [Intentionally Omitted.]
(15) "Beaver Valley CAPCO Agreements" means all the contractual
arrangements associated with CAPCO relating to Beaver Valley,
including those contracts listed on Schedule 1.1 (15).
(16) "Beaver Valley Switchyard Assets" means the real and
personal assets described in Schedule 2.2(a).
(17) [Intentionally Omitted.]
(18) "Beaver Valley Omnibus Services Agreement" means the Beaver
Valley Omnibus Services Agreement substantially in the form of Exhibit
F hereto, to be entered into between Penn Power and DLC as of the DLC
Nuclear Closing Date.
(19) "Beaver Valley Unit 1" means the nuclear generating plant
known as Beaver Valley Power Station Unit No. l, including such
plant's fifty percent (50%) undivided interest in the Common Facility
Assets.
(20) "Beaver Valley Unit 1 Decommissioning Amount" has the
meaning set forth in Section 6.19.1 (a) (i).
(21) "Beaver Valley Unit 1 Decommissioning Shortfall" has the
meaning set forth in Section 6.19.1 (a) (i).
(22) "Beaver Valley Unit 1 Nonqualified Decommissioning Funds"
means one or more external trust funds that do not meet the
requirements of Code section 468A and Treasury Regulations section
1.468A-5, maintained by DLC with respect to Beaver Valley Unit 1 prior
to the DLC Nuclear Closing.
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(23) "Beaver Valley Unit 1 Qualified Decommissioning Fund" means
the external trust fund that meets the requirements of Code section
468A and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Beaver Valley Unit 1 prior to the DLC Nuclear Closing.
(24) "Beaver Valley Unit 2" means the nuclear generating plant
known as Beaver Valley Power Station Unit No. 2, including such
plant's fifty percent (50%) undivided interest in the Common Facility
Assets.
(25) "Beaver Valley Unit 2 Decommissioning Amount" has the
meaning set forth in Section 6.19.2 (a)(i).
(26) "Beaver Valley Unit 2 Decommissioning Shortfall" has the
meaning set forth in Section 6.19.2 (a) (i).
(27) "Beaver Valley Unit 2 Facility Leases" means, collectively,
the seven (7) facility leases with respect to Beaver Valley Unit 2,
dated as of September 15, 1987, each by and between the Beaver Valley
Unit 2 Owner Trustee and DLC, as amended.
(28) "Beaver Valley Unit 2 Foreclosure" means any foreclosure,
forfeiture or similar proceeding the occurrence of which is pursuant
to the Beaver Valley Unit 2 Lease Indentures.
(29) "Beaver Valley Unit 2 Indentures Notes" has the meaning set
forth in Section 6.16(a).
(30) "Beaver Valley Unit 2 Indentures Support Agreement" means
the Beaver Valley Unit 2 Indentures Support Agreement substantially in
the form of Exhibit I.
(31) "Beaver Valley Unit 2 Indentures Trustee" means Irving Trust
Company, as indenture trustee, under each of the Beaver Valley Unit 2
Lease Indentures, and any successor indenture trustee appointed in
accordance with the terms of the Beaver Valley Unit 2 Lease
Indentures.
(32) "Beaver Valley Unit 2 Lease Indentures" means, collectively,
the seven (7) trust indenture, mortgage, security agreements and
assignments of facility lease, dated as of September 15, 1987, between
State Street Bank and Trust Company (successor in interest to The
First National Bank of Boston), a national banking association, not in
its individual capacity, but solely as trustee under those certain
trust agreements dated as of September 15, 1987 with the owner
participants thereto as set forth therein, and The Bank of New York
(successor in interest to Irving Trust Company), a New York banking
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corporation, as the indenture trustee, as such may be amended,
modified, supplemented or restated from time to time.
(33) "Beaver Valley Unit 2 Lease Indentures Documents" means all
contractual arrangements implementing the sale-leaseback in respect of
Beaver Valley Unit 2, including those documents described in Schedule
1.1(33).
(34) "Beaver Valley Unit 2 Nonqualified Decommissioning Funds"
means the external trust funds that do not meet the requirements of
Code section 468A and Treasury Regulations section 1.468A-5,
maintained by DLC with respect to Beaver Valley Unit 2.
(35) "Beaver Valley Unit 2 Operating Agreement" means the
Operating Agreement -- Beaver Valley Unit 1 and Beaver Valley Unit 2,
as amended and restated as of September 15, 1987, by and between CEIC,
DLC, Ohio Edison Company, an Ohio corporation, Penn Power, and The
Toledo Edison Company, an Ohio corporation, as such may be amended,
modified, supplemented or restated from time to time.
(36) "Beaver Valley Unit 2 Owner Trustee" means First National
Bank of Boston, as owner trustee under each of the Beaver Valley Unit
2 Facility Leases.
(37) "Beaver Valley Unit 2 Qualified Decommissioning Funds" means
the external trust funds that meet the requirements of Code section
468A and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Beaver Valley Unit 2.
(38) "Benefit Plans" means with respect to each Party, each
deferred compensation and each bonus or other incentive compensation,
stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 3(1) of ERISA)
each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to or required
to be contributed to by such Party or by any ERISA Affiliate.
(39) "Bill of Sale" means a Bill of Sale, substantially in the
form of Exhibit C hereto, to be delivered by DLC to each of Penn Power
and CEIC at the DLC Nuclear Closing, with respect to Tangible Personal
Property included in the DLC Nuclear Assets transferred to such
Specified FE Subsidiary at the DLC Nuclear Closing.
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(40) "Bond Counsel" has the meaning assigned thereto in Section
6.17(b)(i).
(41) "Business Day" means any day other than Saturday, Sunday and
any day which is a day on which banking institutions in the
Commonwealth of Pennsylvania or the State of Ohio are authorized by
law or other governmental action to close.
(42) "Byproduct Material" means any radioactive material (except
Special Nuclear Material) yielded in, or made radioactive by, exposure
to radiation in the process of producing or utilizing Special Nuclear
Material.
(43) "CAPCO" means the Central Area Power Coordination Group.
(44) "CAPCO Agreements" means, collectively, the Beaver Valley
CAPCO Agreements and the Perry CAPCO Agreements.
(45) "CAPCO Settlement Agreement" means that certain CAPCO
Settlement Agreement executed by DLC and each applicable FE
Subsidiary, substantially in the form of Exhibit H hereto.
(46) "Capital Expenditures" means capital additions to or
replacements of property, plant and equipment included in the DLC
Nuclear Assets and other expenditures or repairs on property, plant
and equipment included in the DLC Nuclear Assets that would be
capitalized by a party in accordance with its normal accounting
policies.
(47) "CEIC" means The Cleveland Electric Illuminating Company, an
Ohio corporation.
(48) "CEIC Nonqualified Decommissioning Funds" means the external
trust funds that do not meet the requirements of Code section 468A and
Treasury Regulations section 1.468A-5, maintained by CEIC.
(49) "CEIC Qualified Decommissioning Funds" means the external
trust funds that meet the requirements of Code section 468A and
Treasury Regulations section 1.468A-5, maintained by CEIC with respect
to Perry Unit 1.
(50) "CERCLA" means the Federal Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et
seq., as amended.
(51) "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1984.
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(52) "COBRA Continuous Coverage" means the requirements of
Section 4980B(f) of the Code.
(53) "Code" means the Internal Revenue Code of 1986, as amended.
(54) "Collective Bargaining Agreement" has the meaning set forth
in Section 6.11(d).
(55) "Commercially Reasonable Efforts" means efforts which are
reasonably within the contemplation of the Parties at the time of
executing this Agreement and which do not require the performing Party
to expend any funds other than expenditures which are customary and
reasonable under the circumstances in transactions of the kind and
nature contemplated by this Agreement in order for the performing
Party to satisfy its obligations hereunder.
(56) "Common CAPCO Agreements" means those CAPCO Agreements
relating to both any portion of the Exchange Assets and any portion of
the DLC Nuclear Assets, including those listed in Schedule 1.1(56).
(57) "Common Facility Assets" means those assets located at
Beaver Valley and used in common by Beaver Valley Unit 1 and Beaver
Valley Unit 2 and listed in Schedule 1.1(57).
(58) "Computer Systems" means hardware, software, and firmware
product (including embedded microcontrollers in non-computer
equipment).
(59) "Continuation Period" has the meaning set forth in Section
6.11(e)(ii).
(60) "Decommissioning" means the complete retirement and removal
of a Plant from service and the restoration of the Real Property
relating to such Plant, as well as any planning and administrative
activities incidental thereto, including but not limited to (a) the
dismantlement, decontamination, storage, and/or entombment of the
Plant, in whole or in part, and any reduction or removal, whether
before or after termination of the NRC license for the Plant, of
radioactivity at the Real Property relating to such Plant, and (b) all
activities necessary for the retirement, dismantlement and
decontamination of the Plant to comply with all applicable laws,
including applicable Nuclear Laws and Environmental Laws, including
the applicable requirements of the Atomic Energy Act and the NRC's
rules, regulations, orders and pronouncements thereunder, the NRC
operating license for the Plant and any related decommissioning plan.
(61) "Decommissioning Costs" means the costs of Decommissioning
the DLC Nuclear Assets in accordance with all applicable laws,
including the applicable Nuclear Laws and Environmental Laws.
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(62) "Decommissioning Funds" means collectively, the Qualified
Decommissioning Funds and the Nonqualified Decommissioning Funds.
(63) "Department of Energy" means the United States Department of
Energy and any successor agency thereto.
(64) "Department of Energy Decommissioning and Decontamination
Fees" means all fees related to the Department of Energy's Special
Assessment of utilities for the Uranium Enrichment Decontamination and
Decommissioning Fund pursuant to Sections 1801, 1802 and 1803 of the
Atomic Energy Act, 42 U.S.C. 2297(g)-(g-2), and the Department of
Energy's implementing regulations at 10 CFR Part 766, or any similar
fees assessed under amended or superseding statutes or regulations
applicable to separative work units purchased from the Department of
Energy in order to decontaminate and decommission the Department of
Energy's gaseous diffusion enrichment facilities.
(65) "Department of Energy Standard Contract" means the Contracts
for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive
Waste, No. DE- CR01-83NE44380, dated as of June 13, 1983 between the
United States of America, represented by the United States Department
of Energy, and DLC; and No. DE- CR01-84RW00004, dated as of June 26,
1984, between the Unites States of America, represented by the United
States Department of Energy, and DLC and OEC.
(66) "Direct Claim" means any claim by an Indemnitee on account
of an Indemnifiable Loss that does not result from a Third Party
Claim.
(67) "DLC" means Duquesne Light Company, a Pennsylvania
corporation.
(68) "DLC Beaver Valley Emergency Preparedness Agreements" means
those agreements listed in Schedule 1.1(68).
(69) "DLC Indemnifiable Loss" means an Indemnifiable Loss
asserted against or suffered by any DLC Indemnitee.
(70) "DLC Indemnitee" means DLC, its officers, directors,
employees, shareholders, Affiliates and agents.
(70A) "DLC Interim Fuel Requirements" has the meaning set forth
in Section 2.6(b)(i).
(71) "DLC Nonqualified Decommissioning Funds" means,
collectively, the Beaver Valley Unit 1 Nonqualified Decommissioning
Fund, the Beaver Valley Unit 2 Nonqualified Decommissioning Fund and
the Perry Unit 1 Nonqualified Decommissioning Fund.
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(72) "DLC Non-Union Employees" has the meaning set forth in
Section 6.11(c).
(73) "DLC Nuclear Agreements" means any contracts, agreements,
licenses and personal property leases entered into by DLC with respect
to the ownership, operation or maintenance of the DLC Nuclear Assets,
whether or not disclosed on Schedule 4.9(a)(i) and (ii) or Schedule
4.9(b)(i) and (ii), including the DLC Beaver Valley Emergency
Preparedness Agreements, but shall not include the Beaver Valley Unit
2 Lease Indentures Documents.
(74) "DLC Nuclear Assets" has the meaning set forth in Section
2.1, to the extent of DLC's undivided percentage interest in such
assets.
(75) "DLC Nuclear Closing" means the closing at which the
assignment, conveyance, transfer and delivery of some or all of the
DLC Nuclear Assets to Penn Power and CEIC, as contemplated by this
Agreement, shall take place.
(76) "DLC Nuclear Closing Date" has the meaning set forth in
Section 3.1.
(77) "DLC Nuclear Closing Payment" has the meaning set forth in
Section 3.2(a).
(78) "DLC Nuclear Insurance Policies" means any insurance
policies carried by or for the benefit of DLC with respect to the
ownership, operation or maintenance of the DLC Nuclear Assets,
including all ANI and NEIL nuclear liability, property damage or
business interruption policies in respect thereof.
(79) "DLC Qualified Decommissioning Funds" means, collectively,
the Beaver Valley Unit 1 Qualified Decommissioning Fund, the Beaver
Valley Unit 2 Qualified Decommissioning Fund and the Perry Unit 1
Qualified Decommissioning Fund.
(80) "DLC Representatives" means DLC's authorized
representatives, including its professional and financial advisors.
(81) "DLC Required Regulatory Approvals" means the Required
Regulatory Approvals referred to in Schedule 4.3(b).
(82) "DLC Savings Plans" has the meaning set forth in Section
6.11(e)(ii)(E).
(83) "DLC Transferred Non-Union Employees" has the meaning set
forth in Section 6.11(c).
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(84) "DLC Transferred Union Employee" has the meaning set forth
in Section 6.11(b).
(85) "DLC Transmission Assets" means DLC's seventy-six and
one-tenth percent (76.1%) undivided interest in the Beaver Valley
Switchyard Assets.
(86) "DLC Union Employees" has the meaning set forth in Section
6.11(b).
(87) "ECAR" means the East Central Area Reliability Council, a
regional reliability counsel established pursuant to the East Central
Area Reliability Coordination Agreement, and any successor entity
thereto.
(88) "Electric Facilities Agreement" has the meaning assigned
thereto in the Exchange Agreement.
(89) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and
use limitations, conservation easements, deed restrictions,
encumbrances and charges of any kind.
(90) "Environmental Claim" means any and all pending and/or
threatened administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints,
requests for information, proceedings, or other written
communications, whether criminal or civil (each, a "Claim"), pursuant
to or relating to any applicable Environmental Law or pursuant to a
common law theory, by any Person (including any Governmental
Authority, private person and citizens' group) based upon, alleging,
asserting, or claiming any actual or potential (a) violation of, or
liability under any Environmental Law, (b) violation of any
Environmental Permit, or (c) liability for investigatory costs,
cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or
penalties arising out of, based on, resulting from, or related to any
Environmental Condition or any Release or threatened Release into the
environment of any Regulated Substances at any location related to the
DLC Nuclear Assets, including, but not limited to, any Off-Site
Location to which Regulated Substances, or materials (other than
Nuclear Materials) containing Regulated Substances, were sent for
handling, storage, treatment, or disposal.
(91) "Environmental Condition" means the presence or Release of a
Regulated Substance (other than a naturally-occurring substance) on or
in environmental media, or structures on Real Property, at an Off-Site
Location or other property (including the presence in surface water,
groundwater, soils or subsurface strata, or air), including the
subsequent migration of any such Regulated Substance, regardless of
when such presence or Release occurred or is discovered.
(92) "Environmental Laws" means all Federal, state, local,
provincial, foreign and international civil and criminal laws,
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regulations, rules, ordinances, codes, decrees, judgments, directives,
or judicial or administrative orders relating to pollution or
protection of the environment, natural resources or human health and
safety, including laws relating to Releases or threatened Releases of
Regulated Substances (including Releases to ambient air, surface
water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, transport, disposal or handling of Regulated
Substances, but shall not include Nuclear Laws. "Environmental Laws"
include: (a) with respect to Federal law, CERCLA, the Hazardous
Materials Transportation Act (49 U.S.C. sections 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. sections 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. sections
1251 et seq.), the Clean Air Act (42 U.S.C. sections 7401 et seq.),
the Toxic Substances Control Act (15 U.S.C. sections 2601 et seq.),
Atomic Energy Act, 42 U.S.C. section 2011 et seq.; the Oil Pollution
Act (33 U.S.C. sections 2701 et seq.), the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. sections 11001 et seq.), the
Occupational Safety and Health Act (29 U.S.C. sections 651 et
seq.),the Safe Drinking Water Act (42 U.S.C. section 300f et seq.),
the Surface Mine Conservation and Reclamation Act (30 U.S.C. sections
1251-1279), and regulations adopted pursuant thereto; and counterpart
state and local laws, and regulations adopted thereto; (b) with
respect to Pennsylvania law, the Pennsylvania Clean Streams Law (35
P.S. section 691.1 et seq.) the Pennsylvania Air Pollution Control Act
(35 P.S. section 4001 et seq.), the Pennsylvania Solid Waste
Management Act (35 P.S. section 6018.101 et seq.), the Pennsylvania
Storage Tank and Spill Prevention Act (35 P.S. section 6021.101 et
seq.), the Pennsylvania Safe Drinking Water Act (35 P.S. section 721.1
et seq.), the Pennsylvania Sewage Facilities Act (35 P.S. section
750.1 et seq.), the Pennsylvania Hazardous Sites Cleanup Act (35 P.S.
section 6020.101 et seq.), the Pennsylvania Land Recycling and
Environmental Remediation Standards Act (35 P.S. section 6026.101 et
seq.), the Pennsylvania Surface Mining Conservation and Reclamation
Act (52 P.S. section 1396.1 et seq.), the Coal Refuse Disposal Control
Act (52 P.S. section 30.51 et seq.), the Non-Coal Surface Mining and
Reclamation Act (52 P.S. section 3301 et seq.), the Pennsylvania
Worker and Community Right-to-Know Act (35 P.S. section 7301 et seq.),
the Pennsylvania Hazardous Material Emergency Planning and Response
Act (35 P.S. section 6022.101 et seq.), and regulations adopted
pursuant thereto; and (c) with respect to Ohio law, Ohio Rev. Code
Ann. section 1501.30 et seq. (Diversion of Waters), Ohio Rev. Code
Ann. section 1506.01 et seq. (Coastal Management), Ohio Rev. Code Ann.
section 1509.01 et seq. (Oil and Gas), Ohio Rev. Code Ann. section
1513.01 et seq. (Coal Surface Mining), Ohio Rev. Code Ann. section
1520.01 et seq. (Canal Lands), Ohio Rev. Code Ann. section 3704.01 et
seq. (Air Pollution Control), Ohio Rev. Code Ann. section 3710.01 et
seq. (Asbestos Abatement), Ohio Rev. Code Ann. section 3714.01 et seq.
(Construction and Demolition Debris), Ohio Rev. Code Ann. section
3734.01 et seq. (Solid and Hazardous Wastes), Ohio Rev. Code Ann.
section 3737.87 et seq. (Petroleum Underground Storage Tanks), Ohio
Rev. Code Ann. section 3742.01 et seq. (Lead Abatement and Testing),
Ohio Rev. Code Ann. section 3750.01 et seq. (Emergency Planning), Ohio
Rev. Code Ann. section 3751.01 et seq. (Hazardous Substances), Ohio
Rev. Code Ann. section 3752.01 et seq. (Cessation of Chemical Handling
Operations), Ohio Rev. Code Ann. section 3767.01 et seq. (Nuisances),
Ohio Rev. Code Ann. section 4913.01 et seq. (Public Utilities
Commission - Acid Rain Control), Ohio Rev. Code Ann. section 6109.01
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et seq. (Safe Drinking Water), Ohio Rev. Code Ann. section 6111.01 et
seq. (Water Pollution Control), and regulations adopted pursuant
thereto.
(93) "Environmental Permits" means any permits, registrations,
certificates, certifications, licenses and authorizations, consents
and approvals of Governmental Authorities required under Environmental
Laws with respect to the DLC Nuclear Assets.
(94) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(95) "ERISA Affiliate" means a trade or business, whether or not
incorporated, that together with a Party would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
(96) "Estimated DLC Nuclear Closing Payment" has the meaning set
forth in Section 3.2(b).
(97) "Estimated DLC Nuclear Closing Statement" has the meaning
set forth in Section 3.2(b).
(98) "Exchange Agreement" has the meaning set forth in the
preamble to this Agreement.
(99) "Exchange Assets" has the meaning assigned thereto in the
Exchange Agreement.
(100) "Exchange Closing" has the meaning assigned thereto in the
Exchange Agreement.
(101) "Exchange Date" has the meaning assigned thereto in the
Exchange Agreement.
(102) "Excluded Assets" has the meaning set forth in Section 2.2.
(103) "Excluded Liabilities" has the meaning set forth in Section
2.4.
(104) "Exempt Facilities" means those DLC facilities listed in
Schedule 1.1(104).
(105) "Facilities Act" has the meaning set forth in Section
10.12.
(106) "FE" means FirstEnergy Corp., an Ohio corporation and
parent company of the FE Subsidiaries.
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(107) "FE Subsidiaries" means, collectively, Ohio Edison Company,
Penn Power, CEIC and The Toledo Edison Company.
(108) "FE Support Agreement" means the FE Support Agreement
substantially in the form of Exhibit D hereto, to be entered into
between FE and DLC on the date hereof.
(109) "FENOC" means FirstEnergy Nuclear Operating Company, an
Ohio corporation.
(110) "FERC" means the Federal Energy Regulatory Commission or
any successor agency thereto.
(111) "Final Adjustment" has the meaning set forth in Section
3.2(d).
(112) "Final DLC Nuclear Closing Statement" has the meaning set
forth in Section 3.2(c).
(113) "Final Order" means an action by the relevant Governmental
Authority that has not been reversed, stayed, enjoined, set aside,
annulled or suspended or with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired.
(114) "FIRPTA Affidavit" means the Foreign Investment in Real
Property Tax Act Certification and Affidavit in respect of each Plant,
substantially in the form of Exhibit E hereto.
(115) "Fuel Supplies" means the supplies of nuclear fuel in
reactor core, natural uranium, converted uranium, enriched uranium
and/or any other form of nuclear fuel, under contract, or in
inventory, related to the operation of either Plant.
(116) "GE Settlement Agreement" means the Settlement Agreement
between Plaintiffs FE Subsidiaries and DLC and Defendant General
Electric Company, executed on January 20, 1994 in settlement of
litigation concerning Perry Unit 1.
(117) "Good Utility Practices" mean any of the applicable
practices, methods, standards, guides or acts:
(a) required by any Governmental Authority, regional or national
reliability council, or national trade organization, including NERC,
ECAR, Edison Electric Institute, or American Society of Mechanical
Engineers, or the successor of any of them, whether or not the Party
whose conduct is at issue is a member thereof;
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(b) otherwise engaged in or approved by a significant portion of
the electric utility industry during the relevant time period which in
the exercise of reasonable judgment in light of the facts known or
that should have been known at the time a decision was made, could
have been expected to accomplish the desired result in a manner
consistent with law, regulation, good business practices, generation,
transmission, and distribution reliability, safety, environmental
protection, economy, and expediency. Good Utility Practices is
intended to be acceptable practices, methods, or acts generally
accepted in the region, and is not intended to be limited to the
optimum practices, methods, or acts to the exclusion of all others;
and
(c) such other acts or practices as are reasonably necessary to
maintain the reliability of the Plants.
(118) "Governmental Authority" means any foreign, Federal, state,
local or other governmental, regulatory or administrative agency,
court, commission, department, board, or other governmental
subdivision, legislature, rulemaking board, court, tribunal,
arbitrating body or other governmental authority.
(119) "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(120) "High Level Waste" means (1) irradiated nuclear reactor
fuel, (2) liquid wastes resulting from the operation of the first
cycle solvent extraction system, or its equivalent, and the
concentrated wastes from subsequent extraction cycles, or their
equivalent, in a facility for reprocessing irradiated reactor fuel,
and (3) solids into which such liquid wastes have been converted.
(121) "High Level Waste Repository" means a facility which is
designed, constructed and operated by or on behalf of the Department
of Energy for the storage and disposal of Spent Nuclear Fuel and other
High Level Waste in accordance with the requirements set forth in the
Nuclear Waste Policy Act.
(122) "IBEW" has the meaning set forth in Section 6.11(b).
(123) "IBEW CBA" has the meaning set forth in Section 6.11(b).
(124) "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 capital gains Taxes and minimum Taxes)
or (b) based upon, measured by or calculated with respect to multiple
bases (including corporate franchise taxes) if one or more of 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.
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(125) "Indemnifiable Loss" means any claim, demand, suit, loss,
liability, damage, obligation, payment, cost or expense (including the
cost and expense of any action, suit, proceeding, assessment,
judgment, settlement or compromise relating thereto and reasonable
attorneys' fees and reasonable disbursements in connection therewith).
(126) "Indemnifying Party" means a Party obligated to provide
indemnification under this Agreement.
(127) "Indemnitee" means a Person entitled to receive
indemnification under this Agreement.
(128) "Independent Accounting Firm" means such independent
accounting firm of national reputation as is mutually appointed by DLC
and Specified FE Subsidiaries.
(128A) "Interim Period" has the meaning set forth in Section
6.1.1(a).
(129) "Inspection" means all tests, reviews, examinations,
inspections, investigations, verifications, samplings and similar
activities conducted by Specified FE Subsidiaries (or either one of
them) or their agents or Representatives with respect to the DLC
Nuclear Assets prior to the DLC Nuclear Closing.
(130) "Intellectual Property" means patents and patent rights,
trademarks and trademark rights, inventions, copyrights and copyright
rights and all pending applications for registrations of patents,
trademarks, and copyrights.
(131) "Inventories" means materials, spare parts, capital spare
parts, consumable supplies and chemical inventories relating to the
operation of any Plant, provided, that "Inventories" shall not include
Fuel Supplies, and provided further, that reference to "Inventories"
shall be limited to the extent of DLC's proportionate interest
therein.
(132) "IRS" means the Internal Revenue Service and any successor
agency thereto.
(133) "J&L Specialty Steel Transformer" means the 345/138 Kv auto
transformer located at the site on which the Beaver Valley Switchyard
Assets are located and owned by J&L Specialty Steel Company.
(134) "Knowledge" means the actual knowledge of the corporate
officers and/or Plant managers of the specified Person charged with
responsibility for the particular function as of the date of this
Agreement, or, with respect to any certificate delivered pursuant to
this Agreement, the date of delivery of the certificate.
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(135) "Low Level Waste" means waste material which contains
radioactive nuclides emitting primarily beta or gamma radiation, or
both, in concentrations or quantities which exceed applicable Federal
or state standards for unrestricted release. Low Level Waste does not
include waste containing more than ten (10) nanocuries of transuranic
contaminants per gram of material, nor Spent Nuclear Fuel, nor
material classified as either high-level waste or waste which is
unsuited for disposal by near-surface burial under any applicable
Federal regulations.
(136) "Material Adverse Effect" means any change in, or effect on
DLC's proportionate interest in any Plant, from or after the date
hereof that is materially adverse to the operations or condition
(financial or otherwise) of DLC's proportionate interest in such
Plant, other than: (a) any change affecting the international,
national, regional or local electric or nuclear industry as a whole
and not specific and exclusive to DLC's proportionate interest in such
Plant; (b) any change or effect resulting from changes in the
international, national, regional or local wholesale or retail markets
for electric or nuclear power; (c) any change or effect resulting from
changes in the international, national, regional or local markets for
any fuel used in connection with DLC's proportionate interest in such
Plant; (d) any change or effect resulting from changes in the North
American, national, regional or local electric transmission systems or
operations thereof; (e) any materially adverse change in or effect on
DLC's proportionate interest in such Plant which is cured (including
by the payment of money) before the Termination Date; and (f) any
order of any court or Governmental Authority applicable to the
providers of generation, transmission or distribution of electricity
generally that imposes restrictions, regulations or other requirements
thereon, including any order with respect to an independent system
operator or retail access in Pennsylvania or Ohio.
(137) "Microwave Tower" shall mean the microwave tower at Beaver
Valley reserved by DLC pursuant to the Electric Facilities Agreement.
(138) "NEIL" means Nuclear Electric Insurance Limited, or any
successor entity.
(139) "NERC" means North American Electric Reliability Council,
and any successor entity thereto.
(140) "Nonqualified Funds" mean any funds not eligible for
contribution to an external trust meeting the requirements of Code
section 468A and Treasury Regulations section 1.468A-5.
(141) "Non-Qualifying Offer" means an offer to a DLC Transferred
NonUnion Employee that is either less than 100% of such employee's
current total annual cash compensation at the time the offer was made
(consisting of base salary and target incentive bonus) or requires, as
a condition of acceptance, a relocation of residence as described in
Section 6.11(g).
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(142) "NRC" means the United States Nuclear Regulatory Commission
and any successor agency thereto.
(143) "NRC Approvals" means the consent of the NRC pursuant to
Section 184 of the Atomic Energy Act and 10 C.F.R. section 50.80 to
the transfer of DLC's undivided ownership interests in Beaver Valley
Unit 1 and Beaver Valley Unit 2 to Penn Power, DLC's undivided
ownership interest in Perry to CEIC, and DLC's operating
responsibility for Beaver Valley to FENOC, NRC approval of all
conforming administrative license amendments associated with such
transfers, NRC consent to the transfer of, and approval of any related
amendments to, any nuclear materials licenses associated with such
transfers and any other NRC reviews or approvals required in
connection with the consummation of the transactions contemplated by
this Agreement.
(144) "Nuclear Laws" means all Federal, state, local, provincial,
foreign and international civil and criminal laws, regulations, rules,
ordinances, codes, decrees, judgements, directives, or judicial or
administrative orders relating to the regulation of nuclear power
plants, nuclear source, byproduct and Special Nuclear Materials; the
regulation of Low Level Waste and High Level Wastes; 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 radioactive waste,
and spent nuclear fuel; contracts for and payments into the Nuclear
Waste Fund; and as applicable, the Antitrust Laws and Section 5 of the
Federal Trade Commission Act to specified activities or proposed
activities of certain licensees 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.); the Low-Level Radioactive Waste Policy
Amendments Act of 1985 (42 U.S.C. section 2021d, 471); the Energy
Policy Act of 1992 (4 U.S.C. section 13201 et seq.); the Pennsylvania
Radiation Protection Act, 35 P.S. 7110.101 et seq.; the Appalachian
States Low-Level Radioactive Waste Compact, 35 P.S. section 7125.1 et
seq.; the Pennsylvania Low-Level Radioactive Waste Disposal Act., 35
P.S. section 7130.101 et seq.; the Pennsylvania Radiation Protection
Act, 35 P.S.7110.101 et seq.; the Pennsylvania Low-Level Radioactive
Waste Disposal Act, 35 P.S. section 7130.101 et seq.; the Ohio
Low-Level Radioactive Waste Act, ORC Chapter 3747; Ohio Radiation
Control Law, ORC Chapter 3748.
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(145) "Nuclear Material" means Source Material, Special Nuclear
Material, Low Level Waste, Byproduct Material and Spent Nuclear Fuel.
(146) "Nuclear Waste Fund" means the fund established by the
Department of Energy under the Nuclear Waste Policy Act in which the
Spent Nuclear Fuel Fees to be used for the design, construction and
operation of a High Level Waste Repository and other activities
related to the storage and disposal of Spent Nuclear Fuel and/or High
Level Waste are deposited.
(147) "Nuclear Waste Policy Act" means the Nuclear Waste Policy
Act of 1982, as amended.
(148) "Off-Site Location" means any real property other than the
Real Property.
(149) "PaDEP" means the Pennsylvania Department of Environmental
Protection and any successor agency thereto.
(150) "PaPUC" means the Pennsylvania Public Utility Commission
and any successor agency thereto.
(151) "Party" has the meaning set forth in the preamble to this
Agreement.
(151 A) "Penn Fuel Lease Arrangements" means the Second Amended
and Restated Fuel Lease, dated December 1, 1981, with Amendment No. 1
dated January 22, 1992 between Penn Fuel Corporation, as lessor, and
DLC, as lessee, and certain financing arrangements in connection with
such Second Amended and Restated Fuel Lease.
(152) "Penn Power" means Pennsylvania Power Company, a
Pennsylvania corporation.
(153) "Penn Power Nonqualified Decommissioning Funds" means the
external trust funds that do not meet the requirements of Code section
468A and Treasury Regulations section 1.468-5 maintained by Penn
Power.
(154) "Penn Power Qualified Decommissioning Funds" means the
external trust funds that meet the requirements of Code section 468A
and Treasury Regulations section 1.468-5, maintained by Penn Power
with respect to Beaver Valley.
(155) "Permits" mean, with respect to the DLC Nuclear Assets, any
permits, licenses (including the NRC 10 C.F.R. Part 50 Nuclear
Licenses), registrations, franchises and other authorizations,
consents and approvals of Governmental Authorities (but in each case
excluding Environmental Permits).
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(156) "Permitted Encumbrances" means the permitted liens and
encumbrances as set forth in Schedule 1.1 (156).
(157) "Perry CAPCO Agreements" means all the contractual
arrangements associated with CAPCO relating to Perry Unit 1, including
those contracts listed in Schedule 1.1(157).
(158) "Perry Unit 1" means the nuclear generation plant known as
Perry Unit No. 1.
(159) "Perry Unit 1 Decommissioning Amount" has the meaning set
forth in Section 6.19.3 (a) (i).
(160) "Perry Unit 1 Decommissioning Shortfall" has the meaning
set forth in Section 6.19.3 (a) (i).
(161) "Perry Unit 1 Nonqualified Decommissioning Funds" means the
external trust funds that do not meet the requirements of Code section
468A and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Perry Unit 1.
(162) "Perry Unit 1 Qualified Decommissioning Funds" means the
external trust funds that meet the requirements of Code section 468A
and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Perry Unit 1.
(163) "Person" means any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
organization, or Governmental Authority.
(164) "Plant" means Beaver Valley or Perry Unit 1.
(165) "Plants" mean, collectively, Beaver Valley and Perry Unit
1.
(166) "Proposed Final Adjustment" has the meaning set forth in
Section 3.2(c).
(167) "Proprietary Information" of a Party means all information
about the Party or its Affiliates, including their respective
properties or operations, furnished to the other Party or its
Representatives by the Party or its Representatives, in connection
with this Agreement, whether before or after the date hereof,
regardless of the manner or medium in which it is furnished and all
analyses, reports, tests or other information created or prepared by,
or on behalf of, a Party during the performance of "Phase I" or "Phase
II" environmental site assessments. 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 other Party or
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its Representatives; (b) was available to the other Party on a
nonconfidential basis prior to its disclosure by the Party or its
Representatives; (c) becomes available to the other Party on a
nonconfidential basis from a Person, other than the Party or its
Representatives, who is not otherwise bound by a confidentiality
agreement with the Party or its Representatives, or is not otherwise
under any obligation to the Party or any of its Representatives not to
transmit the information to the other Party or its Representatives; or
(d) is independently developed by the other Party.
(168) "PUCO" means the Public Utilities Commission of the State
of Ohio and any successor agency thereto.
(169) "Qualified Funds" mean any funds eligible for contribution
to an external trust meeting the requirements of Code section 468A and
Treasury Regulations section 1.468A-5.
(170) "Qualifying Offer" means an offer to a DLC Transferred
Non-Union Employee of the same or similar job that is at least 100% of
such employee's current total annual cash compensation at the time the
offer was made (consisting of base salary and target incentive bonus).
(171) "Real Property" has the meaning set forth in Section
2.1(a). Any reference to the Real Property includes, by definition,
the surface and subsurface elements, including the soils and
groundwater present at the Real Property, and any reference to items
"at the Real Property" shall include all items "at, on, in, upon,
over, across, under and within" the Real Property.
(172) "Real Property Leases" means all real property leases
listed in Schedule 4.5 under which DLC is a lessee or lessor and which
relate to the DLC Nuclear Assets.
(173) "Regulated Substances" means (a) any petrochemical or
petroleum products, oil or coal ash, radioactive materials, radon gas,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and dielectric fluid containing
polychlorinated biphenyls; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "hazardous constituents,"
"restricted hazardous materials," "extremely hazardous substances,"
"toxic substances," "contaminants," "pollutants," "toxic pollutants"
or words of similar meaning and regulatory effect under any applicable
Environmental Law; and (c) any other chemical, material or substance,
exposure to which or whose discharge, emission, disposal or Release is
prohibited, limited or regulated by any applicable Environmental Law,
but in all events shall exclude any Nuclear Material.
(174) "Regulatory Approvals" means any consent or approval of,
filing with, or notice to, any Governmental Authority that is
necessary for the execution and delivery of this Agreement by the
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referenced Party or the consummation thereby of the transactions
contemplated hereby, other than such consents, approvals, filings or
notices which, if not obtained or made, will not prevent such Party
from performing its material obligations hereunder.
(175) "Regulatory Material Adverse Effect" shall occur where a
Final Order with respect to Required Regulatory Approvals contains
terms and conditions that are materially adverse to the financial
condition, prospects, properties, operations or results of operations
of the affected Party, taken as a whole including all Subsidiaries and
Affiliates, to which the terms and conditions of such Final Order
apply, provided that, in addition to the foregoing, a Final Order with
respect to Required Regulatory Approvals shall be deemed to constitute
a Regulatory Material Adverse Effect (i) as to FE Subsidiaries or
their Affiliates, if it prohibits such FE Subsidiaries or Affiliates
from transferring their transmission assets to American Transmission
Systems, Inc. (or its successor and assigns), is inconsistent with the
FERC's determination in Ohio Edison Co. et al., 81 FERC P. 61,110
(1997) that "we expect FirstEnergy to participate in the Midwest ISO
or another appropriate ISO," or requires the FE Subsidiaries or their
Affiliates to divest generating plants other than Avon Lake, Newcastle
or Niles, and (ii) as to DLC, if it disallows from recovery in rates a
material portion of the expenses related to the Generation Exchange
(as such term is defined in the Exchange Agreement).
(176) "Release" means release, spill, leak, discharge, dispose
of, pump, pour, emit, empty, inject, leach, dump or allow to escape
into or through the environment.
(177) "Remediation" means any action taken in the investigation,
removal, confinement, cleanup, treatment, or monitoring of an
Environmental Condition on Real Property or Off-Site Location,
including, (i) obtaining any Permits or Environmental Permits required
for such remedial activities, and (ii) implementation of any
engineering controls and institutional controls. The term
"remediation" includes (1) any action which constitutes "removal"
action or "remedial action" as defined by Section 101 of CERCLA, 42
U.S.C. section 6901(23) and (24); (2) any action which constitutes a
"response" as defined by Section 102 of the Pennsylvania Hazardous
Sites Cleanup Act, 35 P.S. section 6020.103 or (3) any action which
constitutes a "remedy" or "remedial activities" as defined by Ohio
Rev. Code Ann. section 3746.01(N).
(178) "Representatives" means the DLC Representatives and the
Specified FE Subsidiaries' Representatives, as applicable.
(179) "Required Regulatory Approvals" means with respect to a
Party, any consent or approval of, filing with, or notice to, any
Governmental Authority that is necessary for the execution and
delivery of this Agreement by such Party or the consummation by such
Party of the transactions contemplated hereby and thereby, other than
such consents, approvals, filings or notices which are not required in
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the ordinary course to be obtained prior to the DLC Nuclear Closing
and transfer of the DLC Nuclear Assets or which, if not obtained or
made, will not prevent such Party from performing its material
obligations hereunder.
(180) "Revenue Bonds" has the meaning assigned thereto in Section
6.17(a)(i).
(181) "Safeguards Information" means information not otherwise
classified as National Security Information or Restricted Data under
NRC's regulations which specifically identifies an NRC licensee's
detailed (1) security measures for the physical protection of Special
Nuclear Material, or (2) security measures for the physical protection
and location of certain plant equipment vital to the safety of
production or utilization facilities.
(182) "SAPS" means the real and personal property comprising the
decommissioned Shippingport Atomic Power Station described in Schedule
1.1(182).
(183) "SEC" means the Securities and Exchange Commission and any
successor agency thereto.
(184) "Shippingport Contract" means Contract DE-AC11-76PN00292,
as redesignated (36-1)-292, or No. 76-C-11-0292 between DLC and the
United States Energy Research and Development Administration, and its
successor the Department of Energy.
(185) "Shippingport Site Buildings" means those buildings
described in Schedule 1.1(185).
(186) "Source Material" means: (1) uranium or thorium; or any
combination thereof, in any physical or chemical form, or (2) ores
which contain by weight one-twentieth of one percent (0.05%) or more
of: (i) uranium, (ii) thorium, or (iii) any combination thereof.
Source Material does not include Special Nuclear Material.
(187) "Special Nuclear Material" means plutonium, uranium-233,
uranium enriched in the isotope-233 or in the isotope-235, and any
other material that the NRC determines to be "Special Nuclear
Material." Special Nuclear Material also refers to any material
artificially enriched by any of the above-listed materials or
isotopes.
(188) "Specified FE Subsidiaries" means, collectively, Penn Power
and CEIC, and "Specified FE Subsidiary" means either one of them.
(189) "Specified FE Subsidiaries' Indemnifiable Losses" has the
meaning set forth in Section 8.3.
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(190) "Specified FE Subsidiaries' Indemnitee" means each
Specified FE Subsidiary, its officers, directors, employees,
shareholders, Affiliates and agents.
(191) [Intentionally omitted.]
(192) "Specified FE Subsidiaries' Representatives" means the
authorized representatives of each Specified FE Subsidiary, including
its professional and financial advisors.
(193) "Specified FE Subsidiaries' Required Regulatory Approvals"
means, the Required Regulatory Approvals referred to in Schedule
5.3(b).
(194) "Spent Nuclear Fuel" means fuel that has been withdrawn
from a nuclear reactor following irradiation and has not been
chemically separated into its constituent elements by reprocessing.
Spent Nuclear Fuel includes the Special Nuclear Material, Byproduct
Material, source material, and other radioactive materials associated
with nuclear fuel assemblies.
(195) "Spent Nuclear Fuel Fees" means these fees assessed on
electricity generated at the Plants and sold pursuant to the
Department of Energy Standard Contract for Disposal of Spent Nuclear
Fuel and/or High Level Waste, as provided in Section 302 of the
Nuclear Waste Policy Act and 10 C.F.R. Part 961, as the same may be
amended from time to time.
(196) "Subsidiary" when used in reference to any Person means any
entity of which outstanding securities, having ordinary voting power
to elect a majority of the Board of Directors or other Persons
performing similar functions of such entity are owned directly or
indirectly by such Person.
(197) "Tangible Personal Property" has the meaning set forth in
Section 2.1(c).
(198) "Taxes" means all taxes, charges, fees, levies, penalties
or other assessments imposed by any Federal, state, local or foreign
taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, withholding, social
security, gross receipts, license, stamp, occupation, employment or
other taxes, including any interest, penalties or additions
attributable thereto.
(199) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any
schedule or related or supporting information) required to be supplied
to any taxing authority with respect to Taxes including amendments
thereto.
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(200) "Termination Date" has the meaning set forth in section
9.1(b).
(201) "Third Party Claim" means any claim, action, or proceeding
made or brought by any Person who is not (i) a Party to this
Agreement, or (ii) an Affiliate of a Party to this Agreement.
(202) "Transferable Permits" means those Permits and
Environmental Permits which may be transferred by DLC to Specified FE
Subsidiaries without a filing with, notice to, consent of or approval
of any Governmental Authority, as set forth in Schedule 1.1(202).
(203) "Transfer Taxes" means any real property transfer or gains
tax, sales tax, conveyance fee, use tax, stamp tax, stock transfer tax
or other similar tax, including any related penalties, interest and
additions to tax.
(203A) "Transition Committee" has the meaning set forth in
Section 6.1.1(b)(i).
(203B) "Transition Plan" has the meaning set forth in Section
6.1.1(b)(i).
(203C) "Transition Team" has the meaning set forth in Section
6.1.1(b)(i).
(204) "USEPA" means the United States Environmental Protection
Agency and any successor agency thereto.
(205) "WARN Act" means the Federal Worker Adjustment Retraining
and Notification Act of 1988, as amended.
(206) "Warranty Deed" means a special warranty deed, in the Form
of Exhibit G hereto.
(207) "Year 2000 Compliant" means, with respect to any Party,
that the Computer Systems of such Party will correctly differentiate
between years, in different centuries, that end in the same two
digits, and will accurately process date/time data (including, but not
limited to, calculating, comparing, and sequencing) from, into, and
between the twentieth and twenty-first centuries, including leap year
calculations. "Year 2000 Compliance" has a meaning correlative to the
foregoing.
1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires, the singular shall include the plural, the masculine
shall include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." In addition, (i)
references to a Section, Article, Exhibit or Schedule shall mean a Section,
Article, Exhibit or Schedule of this Agreement; (ii) reference to a given
agreement or instrument shall be a reference to that agreement or instrument as
modified, amended, supplemented or restated through the date as of which such
reference is made; (iii) references to any Person shall include its permitted
successors and assigns and, in the case of any Governmental Authority, any
Person succeeding to its functions and capacities; and (iv) references to laws,
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rules and regulations shall include such laws, rules and regulations as they may
from time to time be amended, modified or supplemented.
1.3 CAPCO Agreements to Govern. The Parties agree that, unless this
Agreement expressly provides otherwise, the Parties' ownership, operation and
maintenance of each Plant shall be governed by the CAPCO Agreements up to the
DLC Nuclear Closing Date in respect of such Plant. Unless otherwise restricted
under this Agreement, the CAPCO Agreements will govern and control the Parties'
ownership, operation and maintenance of each Plant prior to the DLC Nuclear
Closing Date in respect of such Plant.
1.4 DLC's Interest in Assets. The Parties acknowledge that DLC has a
forty-seven and one-half percent (47.5%) undivided interest in Beaver Valley
Unit 1 and the DLC Nuclear Assets relating thereto, a thirteen and seventy-four
hundredths percent (13.74%) undivided interest in Beaver Valley Unit 2 and the
DLC Nuclear Assets relating thereto and a thirteen and seventy-four hundredths
percent (13.74%) undivided interest in Perry Unit 1 and the DLC Nuclear Assets
relating thereto. All references in this Agreement to DLC's right, title and
interest in such Plants and assets, and rights, liabilities and obligations in
connection therewith, shall be construed in this context.
ARTICLE II
CONVEYANCE OF DLC NUCLEAR ASSETS
2.1 Transfer of DLC Nuclear Assets. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the DLC Nuclear
Closing DLC will assign, convey, transfer and deliver to Penn Power, in respect
of Beaver Valley, and CEIC, in respect of Perry Unit 1, and Penn Power, in
respect of Beaver Valley, and CEIC, in respect of Perry Unit 1, will assume and
acquire from DLC, free and clear of all Encumbrances (except for Permitted
Encumbrances), all right, title and interest of DLC in and to all of the assets
(except for Excluded Assets) constituting the Plants, or used in and necessary
to generate electricity from the Plants and DLC's undivided percentage ownership
interest in those assets described below, each as in existence on the DLC
Nuclear Closing Date (collectively, "DLC Nuclear Assets"):
(a) Those certain parcels of real property owned by DLC
relating to the Plants, together with all building, facilities and other
improvements thereon and all appurtenances thereto, as described in Schedule
2.1(a) (the "Real Property");
(b) All Inventories related exclusively to the Plants;
(c) All machinery ( mobile or otherwise), equipment (including
communications equipment), vehicles, tools, furniture and furnishings and other
personal property included in the DLC Nuclear Assets that are owned by DLC and
located on the Real Property on the DLC Nuclear Closing Date, including the
items of personal property jointly owned by DLC and FE Subsidiaries and used
principally in the operation of the Plants that are in the possession of DLC and
listed in Schedule 2.1(c), other than property used or primarily usable as part
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of the DLC Transmission Assets or otherwise constituting part of the Excluded
Assets (collectively, "Tangible Personal Property");
(d) Subject to the provisions of Section 6.6(c), all DLC Nuclear
Agreements, provided, however, in the event the Exchange Closing and the DLC
Nuclear Closing do not occur on the same day, for the Common CAPCO Agreements
which shall not be assigned and assumed as otherwise contemplated hereunder but
shall be so assigned and assumed at the later of such Exchange Closing or DLC
Nuclear Closing and then pursuant to a separate Assignment and Assumption
Agreement, and, provided further, however, that DLC shall not assign its
interest as operator under the Beaver Valley Unit 2 Operating Agreement to Penn
Power on the DLC Nuclear Closing Date but DLC shall make arrangements to provide
that Penn Power (or its designee) will be responsible for operation and
maintenance of Beaver Valley after the DLC Nuclear Closing, and DLC shall
terminate all involvement under the Beaver Valley Unit 2 Operating Agreement on
the date on which the Beaver Valley Unit 2 Lease Indentures are terminated;
(e) Subject to the provisions of Section 6.6(c), all Real
Property Leases;
(f) All Transferable Permits;
(g) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, documents, blueprints and
as-built plans, specifications, procedures and similar items of DLC relating
specifically to the design, construction, licensing, regulation, operation or
Decommissioning of the DLC Nuclear Assets and necessary for the licensing,
operation and Decommissioning of the Plants in the possession of DLC other than
such items which are proprietary to third parties and accounting records;
(h) Fuel Supplies and Spent Nuclear Fuel;
(i) All unexpired, transferable warranties and guarantees from
third parties with respect to any DLC Nuclear Asset and listed in Schedule
2.1(i);
(j) The names of the Plants. It is expressly understood that DLC
is not assigning or transferring to Specified FE Subsidiaries any right to use
the name "Duquesne," "Duquesne Light Company," "DQE", "DQE, Inc.", or other
trade names, trademarks, service marks, corporate names and logos or any part,
derivative or combination thereof;
(k) All drafts, memoranda, reports, information, technology, and
specifications relating to DLC's plans for Year 2000 Compliance with respect to
the Plants;
(l) The Intellectual Property described on Schedule 2.1(l);
(m) The DLC Qualified Decommissioning Funds and the DLC
Nonqualified Decommissioning Funds;
(n) The GE Settlement Agreement;
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(o) The DLC Nuclear Insurance Policies and DLC's member account
balance in respect of all ANI and NEIL nuclear liabilities, property damage or
business interruption policies; and
(p) All right, title and interest of DLC in and to the 10 C.F.R.
Part 50 Nuclear Licenses.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement will constitute a transfer to Penn Power,
in respect of Beaver Valley, and CEIC, in respect of Perry Unit 1 of, or be
construed as conferring on Penn Power, in respect of Beaver Valley, and CEIC, in
respect of Perry Unit 1, and Penn Power, in respect of Beaver Valley, and CEIC,
in respect of Perry Unit 1 is not acquiring, any right, title or interest in or
to the following specific assets which are associated with the DLC Nuclear
Assets, but which are hereby specifically excluded from the transfer to Penn
Power, in respect of Beaver Valley, and CEIC, in respect of Perry Unit 1 and the
definition of DLC Nuclear Assets herein (the "Excluded Assets"):
(a) The DLC Transmission Assets and the assets being transferred
by DLC pursuant to the Electric Facilities Agreement (including those certain
assets, facilities, agreements, and other property used or primarily usable as
part of the DLC Transmission Assets);
(b) Certain switches and meters in the Plants, gas facilities,
revenue meters and remote testing units, drainage pipes and systems and certain
transmission towers and poles, as identified as being retained by DLC in the
Electric Facilities Agreement;
(c) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
(d) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and any income, sales, payroll or other
tax receivables;
(e) The rights of DLC and its Affiliates to the names
"Duquesne," "Duquesne Light Company," "DQE", "DQE, Inc.", or other trade names,
trademarks, service marks, corporate names or logos, or any part, derivative or
combination thereof;
(f) All tariffs, agreements and arrangements to which DLC is a
party for the purchase or sale of electric capacity and/or energy or for the
purchase of transmission or ancillary services;
(g) Except as provided in Section 2.11, or in the case of causes
of action against third parties (including indemnification and contribution)
relating to an Environmental Condition or Regulated Substance or arising under
Environmental Laws, the rights of DLC in and to any causes of action against
third parties (including indemnification and contribution) relating to any Real
Property or Tangible Personal Property, Permits, Environmental Permits, Taxes,
Real Property Leases or DLC Nuclear Agreements, if any, and not relating to the
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Assumed Liabilities including any claims for refunds, prepayments, offsets,
recoupment, insurance proceeds, condemnation awards, judgments and the like,
whether received as payment or credit against future liabilities, relating
specifically to the Plants or the Real Property and relating to any period prior
to the applicable DLC Nuclear Closing Date;
(h) Any and all of DLC's rights and interests in any contract
that is not a DLC Nuclear Agreement or that is an intercompany transaction
between DLC and an Affiliate of DLC, whether or not such intercompany
transaction relates to the provision of goods and services, payment
arrangements, intercompany charges or balances, or the like;
(i) DLC's accrued interest in refunds of reserve premiums and/or
dividends and/or distributions of earnings based on membership account
balance(s) and insurance premiums in respect of all ANI and NEIL nuclear
liabilities, property damage or business interruption policies in respect of the
Plants up to and including the DLC Nuclear Closing Date, irrespective of when
such refunds and/or dividends are actually paid;
(j) The J&L Specialty Steel Transformer;
(k) The Beaver Valley Unit 2 Lease Indentures Documents;
(l) The telecommunication equipment listed in Schedule 2.2(l);
and
(m) The Microwave Tower.
2.3 Assumed Liabilities. On the DLC Nuclear Closing Date with respect
to the Plants, each Specified FE Subsidiary shall deliver to DLC an Assignment
and Assumption Agreement pursuant to which each Specified FE Subsidiary (Penn
Power, in respect of Beaver Valley, and CEIC, in respect of Perry Unit 1) shall
assume and agree to discharge when due, without recourse to DLC, and shall
release DLC from all of the following liabilities and obligations of DLC, direct
or indirect, known or unknown, absolute or contingent, which relate to, or arise
by virtue of DLC's ownership of the DLC Nuclear Assets (other than Excluded
Liabilities) with respect to the Plants (Penn Power, in respect of Beaver
Valley, and CEIC, in respect of Perry Unit 1), in accordance with the respective
terms and subject to the respective conditions thereof (collectively, "Assumed
Liabilities"):
(a) All liabilities and obligations of DLC arising on or after
the DLC Nuclear Closing Date under the DLC Nuclear Agreements (except, in the
event the Exchange Closing and the DLC Nuclear Closing do not occur on the same
day, for the Common CAPCO Agreements which shall not be assigned and assumed as
otherwise contemplated hereunder but shall be so assigned and assumed at the
later of such Exchange Closing or such DLC Nuclear Closing and then pursuant to
a separate Assignment and Assumption Agreement), the Real Property Leases and
the Transferable Permits in accordance with the terms thereof, including the DLC
Nuclear Agreements entered into by DLC (i) prior to the date hereof and (ii)
after the date hereof consistent with the terms of this Agreement, except in
each case to the extent such liabilities and obligations, but for a breach or
default by DLC, would have been paid, performed or otherwise discharged on or
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prior to such DLC Nuclear Closing Date or to the extent the same arise out of
any such breach or default or out of any event which after the giving of notice
or passage of time would constitute a default by DLC;
(b) All liabilities and obligations associated with the DLC
Nuclear Assets in respect of Taxes for which Specified FE Subsidiaries are
liable pursuant to Sections 3.4 or 6.9(a) hereof;
(c) All liabilities, responsibilities and obligations arising
under Environmental Laws or relating to Environmental Conditions or Regulated
Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation is known or unknown, contingent or accrued, as of the applicable DLC
Nuclear Closing Date, including: (i) costs of compliance (including capital,
operating and other costs) relating to any violation or alleged violation of
Environmental Laws occurring prior to, on or after such DLC Nuclear Closing
Date, with respect to the ownership or operation of the applicable DLC Nuclear
Assets; (ii) property damage or natural resource damage (whether such damages
were manifested before or after the applicable DLC Nuclear Closing Date) arising
from Environmental Conditions or Releases of Regulated Substances at, on, in,
under, adjacent to, or migrating from any DLC Nuclear Assets prior to, on, or
after the applicable DLC Nuclear Closing Date; (iii) any Remediation (whether or
not such Remediation commenced before the applicable DLC Nuclear Closing Date or
commences after the applicable DLC Nuclear Closing Date) of Environmental
Conditions or Regulated Substances that are present or have been Released prior
to, on or after such DLC Nuclear Closing Date, at, on, in, adjacent to or
migrating from the DLC Nuclear Assets; (iv) any violations or alleged violations
of Environmental Laws occurring on or after the applicable DLC Nuclear Closing
Date with respect to the ownership or operation of any DLC Nuclear Assets; (v)
any bodily injury or loss of life arising from Environmental Conditions or
Releases of Regulated Substances at, on, in, under, adjacent to or migrating
from any DLC Nuclear Assets on or after the applicable DLC Nuclear Closing Date;
(vi) any bodily injury, loss of life, property damage, or natural resource
damage arising from the storage, transportation, treatment, disposal, discharge,
recycling or Release, at any Off-Site Location, or arising from the arrangement
for such activities, on or after the applicable DLC Nuclear Closing Date, of
Regulated Substances generated in connection with the ownership or operation of
the DLC Nuclear Assets; and (vii) any Remediation of any Environmental Condition
or Release of Regulated Substances arising from the storage, transportation,
treatment, disposal, discharge, recycling or Release, at any Off-Site Location,
or arising from the arrangement for such activities, on or after the applicable
DLC Nuclear Closing Date, of Regulated Substances generated in connection with
the ownership or operation of the DLC Nuclear Assets (collectively, "Assumed
Environmental Liabilities");
(d) All liabilities and obligations of DLC with respect to the
DLC Nuclear Assets under the agreements or consent orders with Governmental
Authorities set forth on Schedule 2.3(d) after the applicable DLC Nuclear
Closing;
(e) Any Tax that may be imposed by any Federal, state or local
government on the ownership, sale (except with respect to Transfer Taxes as
provided in Section 6.9(a)), operation or use of the applicable DLC Nuclear
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Assets on or after the DLC Nuclear Closing Date, except for any Income Taxes
attributable to income received by DLC;
(f) All liabilities and obligations of DLC in respect of
Decommissioning the DLC Nuclear Assets, and the Decommissioning Costs relating
thereto whether arising prior to, on or after the applicable DLC Nuclear Closing
Date (collectively, "Assumed Decommissioning Liabilities");
(g) All liabilities, responsibilities and obligations arising
under or relating to Nuclear Laws or relating to any claim in respect of Nuclear
Materials based on common law or Environmental Laws, whether such liability,
responsibility or obligation is known or unknown, contingent or accrued and
whether arising or occurring prior to, on or after the DLC Nuclear Closing Date,
including any and all asserted or unasserted liabilities or obligations to third
parties (including employees) for personal injury or tort, or similar causes of
action arising out of the ownership or operation of the DLC Nuclear Assets prior
to, on or after the DLC Nuclear Closing Date, including liabilities,
responsibilities and obligations arising out of or resulting from the
transportation, treatment, storage or disposal of Low Level Waste or other
Nuclear Materials, including liabilities, responsibilities and obligations
arising out of or resulting from a "nuclear incident" or "precautionary
evacuation" (as such terms are defined in the Atomic Energy Act) at the Plants,
or any other licensed nuclear reactor site in the United States, or in the
course of the transportation of Nuclear Materials to or from the Plants or any
other site prior to, on or after the DLC Nuclear Closing Date, including
liability for any deferred premiums assessed in connection with such a nuclear
incident or precautionary evacuation under any applicable NRC or industry
retrospective rating plan or insurance policy, including any mutual insurance
pools established in compliance with the requirements imposed under Section 170
of the Atomic Energy Act and 10 C.F.R. Part 140 or 10 C.F.R. section 50.54(w),
provided, however, that in respect of liabilities, responsibilities and
obligations under Section 211 of the Energy Reorganization Act and 10 C.F.R.
50.7 in respect of Beaver Valley, Penn Power as transferee hereunder shall only
be responsible for liabilities, responsibilities or obligations arising or
occurring on or after the DLC Nuclear Closing (collectively, "Assumed Nuclear
Liabilities");
(h) All liabilities, responsibilities and obligations in respect
of Spent Nuclear Fuel, whether such liability, responsibility or obligation is
known or unknown, contingent or accrued and whether arising or occurring prior
to, on or after the DLC Nuclear Closing Date except as specified in the first
sentence of Section 2.9 (collectively, "Assumed Spent Fuel Liabilities"); and
(i) All of DLC's rights (except as provided under the CAPCO
Settlement Agreement) and obligations under all CAPCO Agreements, except to the
extent otherwise specifically provided in the applicable DLC Assignment and
Assumption Agreement and except, in the event the Exchange Closing and the DLC
Nuclear Closing do not occur on the same day, for the Common CAPCO Agreements
which shall not be assigned and assumed as otherwise contemplated hereunder but
shall be so assigned and assumed at the later of such Exchange Closing or such
DLC Nuclear Closing and then pursuant to a separate Assignment and Assumption
Agreement.
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2.4 Excluded Liabilities. Notwithstanding anything to the contrary in
this Agreement, no Specified FE Subsidiary shall assume or be obligated to pay,
perform or otherwise discharge the following specified liabilities or
obligations of DLC, (provided, however, that DLC retains such liabilities and
obligations only to the extent these liabilities and obligations currently are
imposed on DLC under the CAPCO Agreements and provided, further, that nothing in
this Section 2.4 shall be construed to impose any continuing liability or
obligation on DLC in respect of Assumed Decommissioning Liabilities, Assumed
Environmental Liabilities (except as expressly provided in Sections 2.4(e), (g)
and (h)), Assumed Nuclear Liabilities and Assumed Spent Fuel Liabilities) (the
"Excluded Liabilities"):
(a) Any liabilities or obligations of DLC in respect of any
Excluded Assets or other assets of DLC that are not DLC Nuclear Assets;
(b) Any liabilities or obligations of DLC with respect to Taxes
attributable to DLC's ownership, operation or use of DLC Nuclear Assets for
taxable periods, or portions thereof, ending before the DLC Nuclear Closing
Date, except for Taxes for which Specified FE Subsidiaries are liable pursuant
to Section 3.4 hereof and except for liabilities described in Section 2.3 that
may be characterized as "Taxes";
(c) Any liabilities or obligations of DLC accruing under any of
the DLC Nuclear Agreements prior to the DLC Nuclear Closing Date;
(d) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for personal injury or tort,
or similar causes of action arising during or attributable to the period prior
to the DLC Nuclear Closing Date, to the extent these liabilities or obligations
are not assumed by Specified FE Subsidiaries by operation of law;
(e) Any fines, penalties and associated costs for defending
related enforcement actions, resulting from any violation or alleged violation
of Environmental Laws or Nuclear Laws with respect to the ownership or operation
of the DLC Nuclear Assets occurring prior to the DLC Nuclear Closing Date;
(f) Any payment obligations of DLC pursuant to DLC Nuclear
Agreements for goods delivered or services rendered prior to the DLC Nuclear
Closing Date, including, but not limited to, rental payments pursuant to the
Real Property Leases;
(g) Any liabilities, responsibilities and obligations of DLC
arising under Environmental Laws or relating to Environmental Conditions or
Regulated Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation was known or unknown, contingent or accrued, which relates to (i) any
bodily injury, loss of life, property damage or natural resource damage arising
from the storage, transportation, treatment, disposal, discharge, recycling or
Release, at any Off-Site Location, or arising from the arrangement for such
activities, prior to the DLC Nuclear Closing Date, of Regulated Substances
generated in connection with the ownership or operation of the DLC Nuclear
Assets; or (ii) any Remediation of any Environmental Condition or Regulated
Substance at any Off-Site Location, arising from the storage, transportation,
treatment, disposal, discharge, recycling or Release, at such Off-Site Location,
or arising from the arrangement for such activities, prior to the DLC Nuclear
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Closing Date, of Regulated Substances generated in connection with, in each
case, the ownership or operation of the DLC Nuclear Assets; provided, that for
purposes of this paragraph, "Off-Site Location" does not include any location to
which Regulated Substances disposed of or Released at the DLC Nuclear Assets
have migrated;
(h) Any liability to third parties (including employees) for
bodily injury or loss of life (whether or not such injury or loss arose or was
made manifest on or after the DLC Nuclear Closing Date), to the extent caused
(or allegedly caused) by Environmental Conditions or the Release of Regulated
Substances at, on, in, under, or adjacent to, or migrating from, the DLC Nuclear
Assets prior to the DLC Nuclear Closing Date;
(i) Any liability of DLC arising out of a breach by DLC or any
Affiliates of DLC of any of their respective obligations under this Agreement or
the Ancillary Agreements;
(j) Any liability of DLC in respect of Department of Energy
Decontamination and Decommissioning fees due up to the time of the DLC Nuclear
Closing as described in (and limited by) Section 2.10;
(k) Any liability in respect of Spent Nuclear Fuel specified as
belonging to DLC in the first sentence of Section 2.9; and
(l) Any liability specified as belonging to DLC pursuant to
Section 6.11(o).
2.5 Control of Litigation. The Parties agree and acknowledge that DLC
shall be entitled exclusively to control, defend and settle any litigation,
administrative or regulatory proceeding, and any investigation or Remediation
activity (including without limitation any environmental mitigation or
Remediation activities), (i) arising out of or related to any Excluded
Liabilities or (ii) in respect of Beaver Valley, where DLC, as operator of the
Plant, would have been entitled to control such litigation under the CAPCO
Agreements as in effect as of the DLC Nuclear Closing Date in respect of Beaver
Valley, and in each case Specified FE Subsidiaries shall agree to cooperate
fully in connection therewith, provided, however, that, in respect of any such
activity described in clause (ii), DLC shall give the applicable Specified FE
Subsidiary reasonable advance notice and opportunity to comment upon any
settlement, which comments shall be fully considered.
2.6 Fuel Supplies. (a) At the DLC Nuclear Closing, DLC will sell,
assign, convey, transfer and deliver to each Specified FE Subsidiary its rights,
title and interest in and to the Fuel Supplies related to the operation of the
applicable DLC Nuclear Assets (Beaver Valley in respect of Penn Power, and Perry
Unit 1, in respect of CEIC) and the applicable Specified FE Subsidiary shall pay
DLC an amount equal to the actual cost of such Fuel Supplies on DLC's books and
records, as established by invoices (and reasonable supporting materials
establishing the actual cost of such Fuel Supplies) with such invoices and
supporting materials to be delivered to the Specified FE Subsidiaries not later
than three (3) Business Days prior to the scheduled date of the DLC Nuclear
Closing.
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(b)(i) The Parties acknowledge that, absent exercise by the
Specified FE Subsidiaries of the option provided in clause (ii) below, DLC shall
not be obligated to renew the Penn Fuel Lease Arrangements which are due to
expire on September 29, 1999, but DLC may, at its option, elect to renew such
arrangements to provide for DLC's requirements for Fuel Supplies from such
expiration date through the DLC Nuclear Closing Date (the "DLC Interim Fuel
Requirements").
(ii) DLC agrees that if the Specified FE Subsidiaries
request, in writing, prior to July 10, 1999 that DLC renew the Penn Fuel Lease
Arrangements for a period after the DLC Nuclear Closing Date, and agree in
writing to pay any incremental costs associated with the renewal by DLC and
obtaining all consents in respect of such arrangements, DLC will use
Commercially Reasonable Efforts to effect such renewal and to obtain any
consents required in connection therewith.
(iii) In connection with the DLC Interim Fuel Requirements,
the Parties agree to discuss whether it would be mutually economically
advantageous for DLC to obtain such requirements from Specified FE Subsidiaries
(or an Affiliate of either of them), provided, however, that this clause shall
neither require DLC to obtain such requirements from Specified FE Subsidiaries
(or an Affiliate of either of them) nor obligate Specified FE Subsidiaries (or
an Affiliate of either of them) to supply such requirements to DLC.
2.7 Inventories. Schedule 2.7 lists the Inventories that exist as of
the date of this Agreement, together with the net book values of such
Inventories. At the DLC Nuclear Closing, as part of the DLC Nuclear Assets in
respect of the applicable Plant, DLC will transfer to each Specified FE
Subsidiary (Penn Power in respect of Beaver Valley and CEIC in respect of Perry
Unit 1) DLC's interest in Inventories at such Plant.
2.8 [Intentionally Omitted.]
2.9 Spent Nuclear Fuel Fees and Ownership Between the date hereof and
the DLC Nuclear Closing Date for the Plants, DLC will pay all Spent Nuclear Fuel
Fees and any other fees associated with its share of electricity generated at
such Plant and sold prior to such closing date, and Specified FE Subsidiaries
shall have no liability or responsibility in respect thereof. Specified FE
Subsidiaries shall pay and discharge all fees and expenses associated with their
share of the nuclear fuel consumed in the Plants and sold from and after such
closing date, and DLC shall have no liability or responsibility in respect
thereof. Specified FE Subsidiaries shall assume title to, and responsibility for
the storage and disposal of Spent Nuclear Fuel presently stored at each Plant
(including any such fuel which may have been used in connection with generating
DLC's share of electricity at such Plant) as of the DLC Nuclear Closing Date for
such Plant. DLC shall assign to each Specified FE Subsidiary the applicable
Department of Energy's Standard Spent Fuel Disposal Contract for each Plant and
shall provide the required notice to the Department of Energy within 90 days of
transfer of title to Spent Nuclear Fuel.
2.10 Department of Energy Decontamination and Decommissioning Fees.
DLC will continue to pay all Department of Energy Decontamination and
Decommissioning Fees relating to its share of the nuclear fuel purchased and
consumed at each Plant prior to the DLC Nuclear Closing Date for such Plant,
including all annual Special Assessment invoices to be issued after such closing
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date by the Department of Energy, as contemplated by its regulations at 10
C.F.R. Part 766 implementing Sections 1801, 1802, and 1803 of the Atomic Energy
Act, but DLC shall have no liability in respect of any such fees thereafter,
whether such fees are assessed with respect to the period prior to, on or after
the DLC Nuclear Closing Date.
2.11 Property Tax Litigation. Notwithstanding the provisions of the
Perry CAPCO Agreements, CEIC will receive the full benefits, including any
refunds, and shall bear the full costs incurred after October 14, 1998, related
to pending litigation and appeals regarding the real and personal property taxes
for Perry Unit 1 as identified on Schedule 2.11. DLC will continue to take all
actions necessary in such proceedings, in cooperation with CEIC until the DLC
Nuclear Closing, subject to reimbursement at the DLC Nuclear Closing by CEIC of
all expenses incurred by DLC for such proceedings after October 14, 1998. DLC
will promptly pay to CEIC all amounts received by DLC as a result of such
pending litigation and appeals. If the conveyance as to Perry Unit 1 is not
consummated for any reason, the Parties shall negotiate arrangements that place
them in the same position as to such Plant, with respect to any such costs or
benefits, as if neither the Agreement in Principle nor this Agreement had been
executed.
ARTICLE III
THE DLC NUCLEAR CLOSING
3.1 DLC Nuclear Closing. Upon the terms and subject to the
satisfaction of the conditions in Article VII of this Agreement, the conveyance,
assignment, transfer and delivery of the DLC Nuclear Assets to Penn Power, in
respect of Beaver Valley, and CEIC, in respect of Perry Unit 1, and the
assumption of the Assumed Liabilities by Penn Power, in respect of Beaver
Valley, and CEIC, in respect of Perry Unit 1, in respect of such DLC Nuclear
Assets, as contemplated by this Agreement shall take place at a closing (the
"DLC Nuclear Closing"), to be held at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 1440 New York Avenue, NW, Washington, D.C. at 10:00 a.m.
local time, on the day following the date the conditions precedent to the DLC
Nuclear Closing set forth in ArticleVII of this Agreement in respect of the
Plants have been either satisfied or waived by the Party for whose benefit such
conditions precedent exist, or at such other time and date as the Parties may
mutually agree. The date of the DLC Nuclear Closing in respect of the Plants is
hereinafter called the "DLC Nuclear Closing Date".
3.2 Calculation of DLC Nuclear Closing Payments.
(a) The "DLC Nuclear Closing Payment" means the total of
payments due under the Beaver Valley CAPCO Agreements and the Perry CAPCO
Agreements, the amounts due to DLC from the Specified FE Subsidiaries in respect
of Fuel Supplies pursuant to Section 2.6 and the amounts due pursuant to Section
3.4.
(b) At least ten (10) Business Days prior to the DLC Nuclear
Closing Date, DLC shall prepare and deliver to Penn Power, in respect of Beaver
Valley, and CEIC, in respect of Perry Unit 1, an estimated closing statement
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(each, an "Estimated DLC Nuclear Closing Statement") that shall set forth DLC's
best estimate of all estimated DLC Nuclear Closing Payments due from Penn Power,
in respect of Beaver Valley, and CEIC, in respect of Perry Unit 1, to DLC (the
"Estimated DLC Nuclear Closing Payment") in respect of the DLC Nuclear Closing.
Within five (5) Business Days following the delivery of the Estimated DLC
Nuclear Closing Statement to Specified FE Subsidiaries, either Specified FE
Subsidiary may object in good faith to the Estimated DLC Nuclear Closing Payment
in writing. If either Specified FE Subsidiary objects to the Estimated DLC
Nuclear Closing Payment, the Parties shall attempt to resolve their differences
by negotiation. If the Parties are unable to do so before three (3) Business
Days prior to the DLC Nuclear Closing Date, the amounts of the Estimated DLC
Nuclear Closing Payment not in dispute shall be paid at the DLC Nuclear Closing.
The disputed portion shall be paid as a Final Adjustment to the extent required
by Section 3.2(c).
(c) Within sixty (60) days following the DLC Nuclear Closing
Date, DLC shall prepare and deliver to Penn Power, in respect of Beaver Valley,
and CEIC, in respect of Perry Unit 1, a final closing statement including
adjustments to the proration amounts specified by Section 3.4 and any disputed
portion of the DLC Nuclear Closing Payment described in clause (a) above (the
"Final DLC Nuclear Closing Statement") setting forth the final DLC Nuclear
Closing Payment in respect of the DLC Nuclear Closing and identifying the amount
of any adjustment necessary to conform such Final DLC Nuclear Closing Statement
with payments made at the DLC Nuclear Closing ("Proposed Final Adjustment"). All
calculations of any DLC Nuclear Closing Payments shall be prepared using the
same accounting principles, policies and methods as DLC has historically used in
connection with the calculation of the items reflected on such Final DLC Nuclear
Closing Statement.
(d) Within thirty (30) days following the delivery of a Final
DLC Nuclear Closing Statement, Penn Power, in respect of Beaver Valley, and
CEIC, in respect of Perry Unit 1, may object to such Proposed Final Adjustment
in writing. DLC agrees to cooperate to provide the applicable Specified FE
Subsidiary and its Representatives information used to prepare any Final DLC
Nuclear Closing Statement and information relating thereto. If either Specified
FE Subsidiary objects to the Proposed Final Adjustment in respect of its Plant,
the Parties shall attempt to resolve such dispute by negotiation. If the Parties
are unable to resolve such dispute within thirty (30) days of any objection by
the applicable Specified FE Subsidiary, such Specified FE Subsidiary and DLC
shall appoint the Independent Accounting Firm, which shall, at their joint
expense, review the Proposed Final Adjustment and determine the appropriate
adjustment to the applicable DLC Nuclear Closing Payment, if any, within thirty
(30 days) of such appointment. The Parties agree to cooperate with the
Independent Accounting Firm and provide it with such information as it
reasonably requests to enable it to make such determination. The finding of such
Independent Accounting Firm shall be binding on the applicable Specified FE
Subsidiary and DLC. Upon determination of the appropriate adjustment (the "Final
Adjustment") by agreement of the Parties or by binding determination of the
Independent Accounting Firm, if the Final Adjustment results in a change to any
DLC Nuclear Closing Payment, the Party owing the difference shall deliver such
difference to the other Party no later than two (2) Business Days after such
determination, in immediately available funds or in any other manner as
reasonably requested by the payee.
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3.3 Payment of DLC Nuclear Closing Payment. If any DLC Nuclear
Closing Payment is a positive amount, such amount shall be payable by the
applicable Specified FE Subsidiary to DLC. If any DLC Nuclear Closing Payment is
a negative amount, such amount shall be payable by DLC to the applicable
Specified FE Subsidiary. In connection with the DLC Nuclear Closing, subject to
Section 3.2(b), the Party owing the DLC Nuclear Closing Payment shall pay such
amount to the other Party by wire transfer of immediately available funds
denominated in U.S. dollars or by such other means as are agreed upon by the
Parties. In addition to DLC Nuclear Closing Payments, the Parties recognize that
monies will be owed under the terms of the CAPCO Agreements related to the DLC
Nuclear Assets for obligations through the DLC Nuclear Closing Date.
Notwithstanding any contrary provisions herein, the Parties will follow existing
CAPCO billing procedures and the applicable Party will take all actions
necessary to cause final bills to be rendered within ninety (90) days after the
DLC Nuclear Closing Date.
3.4 Prorations. Notwithstanding anything to the contrary in any CAPCO
Agreement:
(a) The Parties agree that all of the items normally prorated,
including those listed below (but not including Income Taxes), relating to the
business and operation of the DLC Nuclear Assets shall be prorated as of the DLC
Nuclear Closing Date, with DLC liable to the extent such items relate to any
time period prior to the DLC Nuclear Closing Date, and the applicable Specified
FE Subsidiary liable to the extent such items relate to periods commencing with
the DLC Nuclear Closing Date (measured in the same units used to compute the
item in question, otherwise measured by calendar days):
(i) Personal property, real estate and occupancy
Taxes, assessments and other charges, if any, on or with respect to the business
and operation of the DLC Nuclear Assets;
(ii) Rent, Taxes and all other items (including prepaid
services or goods not included in Inventory) payable by or to a DLC under any of
the DLC Nuclear Agreements;
(iii) Any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities with respect to the DLC Nuclear Assets;
(v) Rent and Taxes payable by DLC under the Real
Property Leases assigned to the applicable Specified FE Subsidiary; and
(vi) ANI and NEIL insurance premiums for the current
year or other applicable policy period;
(vii) Impositions and fees payable to the Department of
Energy and the NRC; and
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(viii) Membership fees in respect of the Institute for
Nuclear Power Operator, the Nuclear Energy Institute and similar organizations
involved solely in nuclear matters.
(b) In connection with the prorations referred to in Section 3.4
(a) above, in the event that actual figures are not available at the DLC Nuclear
Closing Date, the proration shall be based upon the actual Taxes or other
amounts accrued through the DLC Nuclear Closing Date or paid for the most recent
year (or other appropriate period) for which actual Taxes or other amounts paid
are available. Such prorated Taxes or other amounts shall be re-prorated and
paid to the appropriate Party within sixty (60) days of the date that the
previously unavailable actual figures become available. The prorations shall be
based on the number of days in a year or other appropriate period (i) before the
DLC Nuclear Closing Date and (ii) including and after the DLC Nuclear Closing
Date. The Parties agree to furnish each other with such documents and other
records as may be reasonably requested in order to confirm all adjustment and
proration calculations made pursuant to this Section 3.4.
3.5 Audit Cooperation. Each of Specified FE Subsidiaries and DLC
shall notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding any fair market value of the
DLC Nuclear Assets and the Assumed Liabilities.
3.6 Deliveries by Specified FE Subsidiaries. At the DLC Nuclear
Closing, each Specified FE Subsidiary will deliver, or cause to be delivered,
the following to DLC:
(a) With respect to the transfer of the applicable DLC Nuclear
Assets:
(i) The Assignment and Assumption Agreement in respect
of such assets, duly executed by each Specified FE Subsidiary (Penn Power in
respect of Beaver Valley and CEIC in respect of Perry Unit 1);
(ii) All such other instruments of assumption as shall,
in the reasonable opinion of DLC and its counsel, be necessary for Penn Power to
assume the Assumed Liabilities in respect of Beaver Valley and CEIC to assume
the Assumed Liabilities in respect of Perry Unit 1, in each case in accordance
with this Agreement; and
(iii) Certificates of insurance relating to the insurance
policies required pursuant to Section 6.16 of this Agreement and
pursuant to 10 C.F.R. Parts 50 and 140.
(b) With respect to this Agreement:
(i) The documents to be delivered by Specified FE
Subsidiaries under Section 7.2;
(ii) Copies, certified by the Secretary or Assistant
Secretary of each Specified FE Subsidiary, of corporate resolutions authorizing
the execution and delivery of this Agreement and all of the agreements and
instruments to be executed and delivered by such Specified FE Subsidiary in
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connection herewith, and the consummation of the transactions contemplated
hereby;
(iii) Certificates of the Secretary or Assistant
Secretary of each Specified FE Subsidiary identifying the name and title and
bearing the signatures of the officers of such Specified FE Subsidiary
authorized to execute and deliver this Agreement and the other agreements and
instruments contemplated hereby;
(iv) Certificates of good standing with respect to each
Specified FE Subsidiary, issued by the jurisdiction of incorporation of such
Specified FE Subsidiary; and
(v) Such other agreements, documents, instruments and
writings as are required to be delivered by such Specified FE Subsidiary at or
prior to the applicable DLC Nuclear Closing Date pursuant to this Agreement or
otherwise reasonably required in connection herewith.
(vi) Certificates dated the DLC Nuclear Closing Date
executed by the duly authorized officers of each Specified FE Subsidiary to the
effect that, to such officers' Knowledge, the conditions set forth in Section
7.3 have been satisfied by each Specified FE Subsidiary and that each of the
representations and warranties of each Specified FE Subsidiary made in this
Agreement are true and correct in all material respects as though made at and as
of the DLC Nuclear Closing Date.
3.7 Deliveries by DLC. At the DLC Nuclear Closing, DLC will deliver,
or cause to be delivered, the following to the applicable Specified FE
Subsidiary (Penn Power in respect of Beaver Valley and CEIC in respect of Perry
Unit 1):
(a) With respect to the transfer of the applicable DLC
Nuclear Assets :
(i) The Assignment and Assumption Agreement in respect
of such assets, duly executed by DLC;
(ii) The duly executed Bill of Sale with respect to the
applicable DLC Nuclear Assets;
(iii) Copies of any and all governmental and other third
party consents, waivers or approvals obtained or required to be obtained by DLC
with respect to the transfer of the applicable DLC Nuclear Assets or the
consummation of the transactions contemplated by this Agreement;
(iv) One or more Warranty Deeds conveying the Real
Property, duly executed and acknowledged by DLC and in recordable form;
(v) FIRPTA Affidavits, duly executed by DLC;
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(vi) To the extent available, originals of all DLC
Nuclear Agreements, Real Property Leases and Transferable Permits and, if not
available, true and correct copies thereof which agreements, leases and permits
shall be located at the applicable Plant, with a list thereof being provided at
the applicable DLC Nuclear Closing;
(vii) All such other instruments of assignment, transfer
or conveyance as shall, in the reasonable opinion of the applicable Specified FE
Subsidiary and its counsel, be necessary or desirable to transfer the applicable
DLC Nuclear Assets to the applicable Specified FE Subsidiary, in accordance with
this Agreement and where necessary or desirable in recordable form; and
(viii) The DLC Nuclear Insurance Policies.
(b) With respect to this Agreement:
(i) The documents to be delivered by DLC under Section
7.3;
(ii) Copies, certified by the Secretary or Assistant
Secretary of DLC, of corporate resolutions authorizing the execution and
delivery of this Agreement and all of the agreements and instruments to be
executed and delivered by DLC in connection herewith, and the consummation of
the transactions contemplated hereby;
(iii) A certificate of the Secretary or Assistant
Secretary of DLC identifying the name and title and bearing the signatures of
the officers of DLC authorized to execute and deliver this Agreement and the
other agreements and instruments contemplated hereby;
(iv) A certificate of good standing with respect to
DLC, issued by the Secretary of State of the Commonwealth of Pennsylvania and
the State of Ohio; and
(v) Such other agreements, documents, instruments and
writings as are required to be delivered by DLC at or prior to the applicable
DLC Nuclear Closing Date pursuant to this Agreement or otherwise reasonably
required in connection herewith.
(vi) Certificate dated the DLC Nuclear Closing Date
executed by the duly authorized officers of DLC to the effect that, to such
officers' Knowledge, the conditions set forth in Section 7.2 have been satisfied
by DLC and that each of the representations and warranties of DLC made in this
Agreement are true and correct in all material respects as though made at and as
of the DLC Nuclear Closing Date.
3.8 Work in Progress. The Parties agree to work together before and
after the DLC Nuclear Closing Date to effect an orderly transition with respect
to work in progress.
3.9 Ancillary Agreements. The Parties acknowledge that the Ancillary
Agreements (except for the Electric Facilities Agreement and the CAPCO
Settlement Agreement) shall be executed on the DLC Nuclear Closing Date and each
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Party agrees to execute, in connection with the DLC Nuclear Closing, each such
Ancillary Agreement to which it is to be a party, substantially in the form of
such Ancillary Agreements attached hereto. Each Party further (i) acknowledges
that it has executed the CAPCO Settlement Agreement and the Electric Facilities
Agreement on the date hereof and (ii) agrees that the Parties hereto shall make,
pursuant to Section 6.7 hereof, all filings necessary or advisable to obtain any
Required Regulatory approvals in respect of the CAPCO Settlement Agreement and
the Electric Facilities Agreement and the transactions contemplated thereby.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC
DLC represents and warrants to Penn Power, in respect of Beaver Valley, and
to CEIC, in respect of Perry Unit 1 as follows:
4.1 Incorporation; Qualification. DLC is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to own, lease and operate its material assets and properties and to carry on its
business as is now being conducted. DLC is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which its business, as now being conducted, shall require it to be so
qualified, except where the failure to be so qualified would not have a Material
Adverse Effect. DLC has heretofore delivered to Specified FE Subsidiaries true,
complete and correct copies of its Articles of Incorporation and Bylaws as
currently in effect.
4.2 Authority. DLC has full corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements to which DLC is
a signatory and to consummate the transactions contemplated hereby or thereby.
The execution and delivery of this Agreement and each of the Ancillary
Agreements to which DLC is a signatory by DLC and the consummation of the
transactions contemplated hereby and thereby by DLC have been duly and validly
authorized by all necessary corporate action required on the part of DLC and
this Agreement and each of the Ancillary Agreements to which it is a signatory
have been duly and validly executed and delivered by DLC. Subject to the receipt
of the DLC Required Regulatory Approvals, each of this Agreement and each of the
Ancillary Agreements to which DLC is a signatory constitutes the legal, valid
and binding agreement of DLC, enforceable against DLC in accordance with its
terms, except that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation. (a) Except as set forth in
Schedule 4.3(a), and subject to obtaining any DLC Required Regulatory Approvals,
neither the execution, delivery and performance of this Agreement by DLC nor the
execution, delivery and performance by DLC of the Ancillary Agreements will (i)
conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws of DLC, (ii) result in a default (or give rise to any
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right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which DLC is a party or by which
it, or any of the DLC Nuclear Assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not, individually or in the
aggregate, create a Material Adverse Effect; or (iii) constitute violations of
any law, regulation, order, judgment or decree applicable to DLC, which
violations, individually or in the aggregate, would create a Material Adverse
Effect.
(b) Other than the Required Regulatory Approvals set forth in
Schedule 4.3(b) (the "DLC Required Regulatory Approvals"), no consent or
approval of, filing with, or notice to, any Governmental Authority is necessary
for the execution and delivery of this Agreement, or the consummation by DLC of
the transactions contemplated thereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent DLC from
performing its material obligations hereunder and (ii) such consents, approvals,
filings or notices which become applicable to DLC or the DLC Nuclear Assets as a
result of the specific regulatory status of Specified FE Subsidiaries (or any of
their Affiliates) or as a result of any other facts that specifically relate to
the business or activities in which Specified FE Subsidiaries (or any of their
Affiliates) is or proposes to be engaged.
4.4 Insurance. (a) DLC has obtained and is maintaining policies of
liability and other forms of insurance as required by the applicable CAPCO
Agreements.
(b) DLC has obtained and is maintaining the policies of
liability and other forms of insurance in respect of SAPS as described in
Schedule 4.4(b).
4.5 DLC Real Property Leases. Schedule 4.5 lists, as of the date of
the Agreement, all Real Property Leases. Except as set forth in Schedule 4.5,
the Real Property Leases are valid, binding and enforceable against DLC in
accordance with their terms; there are no existing material defaults by DLC or,
to DLC's Knowledge, any other party thereunder; and no event has occurred which
(whether with or without notice, lapse of time or both) would constitute a
material default by DLC or, to DLC's Knowledge, any other party thereunder. DLC
has delivered to each Specified FE Subsidiary true, correct and complete copies
of each of the Real Property Leases applicable to the Plant it is to acquire.
4.6 Environmental Matters. (a) DLC is an owner but not an operator of
Perry Unit 1 which is operated by an FE Subsidiary. For this reason, both DLC's
environmental responsibilities and its Knowledge of environmental issues and
concerns at Perry Unit 1 and the related DLC Nuclear Assets are limited and its
representations are accordingly limited or excluded as set forth in this Section
4.6(a). Subject to this fact and except as disclosed in Schedule 4.6(a):
(i) DLC holds, and is in substantial compliance with,
all Environmental Permits that are required for DLC to own its undivided
interest in Perry Unit 1, and DLC is otherwise in compliance with applicable
Environmental Laws with respect to its ownership of Perry Unit 1 except for such
failures to hold or comply with required Environmental Permits, or such
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failures to be in compliance with applicable Environmental Laws, as would not,
individually or in the aggregate, create a Material Adverse Effect;
(ii) DLC has not received any written request for
information, or been notified that it is a potentially responsible party, under
CERCLA or any similar state law with respect to Perry Unit 1; and
(iii) DLC has not entered into or agreed to any consent
decree or order relating to Perry Unit 1, and is not subject to any outstanding
judgment, decree, or judicial order relating to compliance with any
Environmental Law or to Remediation of Regulated Substances under any
Environmental Law relating to Perry Unit 1.
(b) Except as disclosed in Schedule 4.6(b):
(i) DLC holds, and is in substantial compliance with,
all Environmental Permits that are required for DLC to own its undivided
interest in Beaver Valley and to conduct the business and operations of the DLC
Nuclear Assets in respect of Beaver Valley, and is otherwise in compliance with
applicable Environmental Laws with respect to the business and operations of the
DLC Nuclear Assets in respect of Beaver Valley, except for such failures to hold
or comply with required Environmental Permits, or such failures to be in
compliance with applicable Environmental Laws, as would not, individually or in
aggregate, create a Material Adverse Effect;
(ii) DLC has not received any written request for
information, or been notified that it is a potentially responsible party, under
CERCLA or any similar state law with respect to the Real Property in respect of
Beaver Valley;
(iii) DLC has not entered into or agreed to any consent
decree or order relating to the Real Property in respect of Beaver Valley, nor
is it subject to any outstanding judgment, decree, or judicial order relating to
compliance with any Environmental Law or to Remediation of Regulated Substances
under any Environmental Law relating to Beaver Valley.
(iv) To DLC's Knowledge, no Release of Regulated
Substances has occurred at the Real Property in respect of Beaver Valley and no
Regulated Substances are present in, on, about or migrating from the Real
Property in respect of Beaver Valley that could (absent a Release of such
substances) give rise to an Environmental Claim related to the DLC Nuclear
Assets in respect of Beaver Valley for which Remediation reasonably could be
required, except in any such case to the extent that any such Release or
Environmental Claim would not, individually or in aggregate, create a Material
Adverse Effect.
(c) The representations and warranties made in this Section 4.6
are DLC's exclusive representations and warranties relating to environmental
matters.
4.7 Real Property. Schedule 4.7 contains a description of the Real
Property included in the DLC Nuclear Assets . True and correct copies of any
current surveys, abstracts, title commitments or title opinions in DLC's
possession and all policies of title insurance currently in force and in the
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possession of DLC with respect to the Real Property have heretofore been made
available to Specified FE Subsidiaries.
4.8 Condemnation. Except as set forth in Schedule 4.8, DLC has not
received any written notices of and otherwise has no Knowledge of any pending or
threatened proceedings or actions by any Governmental Authority to condemn or
take by power of eminent domain all or any part of the DLC Nuclear Assets.
4.9 Contracts and Leases. (a) With respect to Perry Unit 1:
(i) Schedule 4.9(a)(i) lists each written contract,
license, agreement, or personal property lease which is material to DLC's
ownership interest in the DLC Nuclear Assets relating to Perry Unit 1, other
than (A) those listed or described on another Schedule, (B) that are expected to
expire or terminate prior to the DLC Nuclear Closing Date, (C) that provide for
annual payments by DLC after the date hereof of less than $500,000, or (iv) to
which FE or a FE Subsidiary is a signatory.
(ii) Except as disclosed in Schedule 4.9(a)(ii), each
DLC Nuclear Agreement listed in Schedule 4.9(a)(i) (A) constitutes a legal,
valid and binding obligation of DLC and, to DLC's Knowledge, constitutes a valid
and binding obligation of the other parties thereto, and (B) may be transferred
to CEIC pursuant to this Agreement without the consent of the other parties
thereto and will continue in full force and effect thereafter, unless in any
such case the impact of such lack of legality, validity or binding nature, or
inability to transfer, would not, individually or in the aggregate, create a
Material Adverse Effect.
(iii) Except as set forth in Schedule 4.9(a)(iii), there
is not, under any of the DLC Nuclear Agreements listed in Schedule 4.9(a)(i),
any default or event which, with notice or lapse of time or both, would
constitute a default on the part of DLC or, to DLC's Knowledge, any of the other
parties thereto, except such events of default and other events which would not,
individually or in the aggregate, create a Material Adverse Effect.
(b) With respect to Beaver Valley:
(i) Schedule 4.9(b)(i) lists each DLC Nuclear
Agreement in respect of Beaver Valley which is material to the business or
operations of the DLC Nuclear Assets in respect of Beaver Valley, other than
those (A) that are listed or described on another Schedule, (B) that are
expected to expire or terminate prior to the DLC Nuclear Closing Date, or (C)
that provide for annual payments by DLC after the date hereof of less than
$500,000.
(ii) Except as disclosed in Schedule 4.9(b)(ii), each
DLC Nuclear Agreement in respect of Beaver Valley (A) constitutes a legal, valid
and binding obligation of DLC and, to DLC's Knowledge, constitutes a valid and
binding obligation of the other parties thereto, and (B) may be transferred to
Penn Power pursuant to this Agreement without the consent of the other parties
thereto and will continue in full force and effect thereafter, unless in any
such case the impact of such lack of legality, validity or binding nature, or
inability to transfer, would not, individually or in the aggregate, create a
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Material Adverse Effect, with the understanding that the DLC Nuclear Assets
associated with Beaver Valley Unit 2 will be subject to the Encumbrances
associated with the Beaver Valley Unit 2 Lease Indentures.
(iii) Except as set forth in Schedule 4.9(b)(iii), there
is not, under the DLC Nuclear Agreements in respect of Beaver Valley, any
default or event which, with notice or lapse of time or both, would constitute a
default on the part of DLC or to DLC's Knowledge, any of the other parties
thereto, except such events of default and other events which would not,
individually or in the aggregate, create a Material Adverse Effect.
4.10 Legal Proceedings. Except as set forth in Schedule 4.10, there is
no action or proceeding pending or, to DLC's Knowledge, threatened against DLC
before any court, arbitrator or Governmental Authority, which could,
individually or in the aggregate, reasonably be expected to create a Material
Adverse Effect. Except as set forth in Schedule 4.10, DLC is not subject to any
outstanding judgments, rules, orders, writs, injunctions or decrees of any
court, arbitrator or Governmental Authority that would, individually or in the
aggregate, create a Material Adverse Effect.
4.11 Permits. (a) With respect to Perry Unit 1:
(i) DLC has all Permits necessary to own the DLC
Nuclear Assets relating to Perry Unit 1 except where the failure to have such
Permits would not, individually or in the aggregate, create a Material Adverse
Effect. Except as disclosed on Schedule 4.11(a)(i), DLC has not received any
notification that DLC is in violation of any such Permits, except notifications
of violations which would not, individually or in the aggregate, create a
Material Adverse Effect. DLC is in compliance with all such Permits except where
non-compliance would not, individually or in the aggregate, create a Material
Adverse Effect.
(ii) Schedule 4.11(a)(ii) sets forth all material
Permits, other than Transferable Permits related to the DLC Nuclear Assets
relating to Perry Unit 1 held by DLC.
(b) With respect to Beaver Valley:
(i) DLC has all Permits (other than Environmental
Permits, which are addressed in Section 4.6 hereof) necessary to own and operate
the DLC Nuclear Assets relating to Beaver Valley except where the failure to
have such Permits would not, individually or in the aggregate, create a Material
Adverse Effect. Except as disclosed on Schedule 4.11(b)(i), DLC has not received
any notification that DLC is in violation of any such Permits, except
notifications of violations which would not, individually or in the aggregate,
create a Material Adverse Effect. DLC is in compliance with all such Permits
except where non-compliance would not, individually or in the aggregate, create
a Material Adverse Effect.
(ii) Schedule 4.11(b)(ii) sets forth all material
Permits, other than Transferable Permits related to the DLC Nuclear Assets
relating to Beaver Valley.
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4.12 Taxes. DLC has filed or caused to be filed all Tax Returns that
are required to be filed by it with respect to any Tax relating to the DLC
Nuclear Assets, and paid or caused to be paid all Taxes that have become due as
indicated thereon, except where such Tax is being contested in good faith by
appropriate proceedings, or where the failure to so file or pay would not create
a Material Adverse Effect. All Tax Returns relating to the DLC Nuclear Assets
are true, correct and complete in all material respects. There are no liens for
Taxes upon the DLC Nuclear Assets except for liens for Taxes not yet due and
Permitted Encumbrances. Except as set forth in Schedule 4.12, no notice of
deficiency or assessment has been received from any taxing authority with
respect to liabilities for Taxes of DLC in respect of the DLC Nuclear Assets,
which have not been fully paid or finally settled, and any such deficiency shown
in Schedule 4.12 is being contested in good faith through appropriate
proceedings. Except as set forth in Schedule 4.12, there are no outstanding
agreements or waivers extending the applicable statutory periods of limitation
for Taxes associated with the DLC Nuclear Assets that will be binding upon the
applicable Specified FE Subsidiary after the DLC Nuclear Closing. Except as set
forth in Schedule 4.12, none of the DLC Nuclear Assets is property that is
required to be treated as being owned by any other person pursuant to the
so-called safe harbor lease provisions of former Section 168(f) of the Code, and
none of the DLC Nuclear Assets is "tax-exempt use" property within the meaning
of Section 168(h) of the Code. Schedule 4.12 sets forth the taxing jurisdictions
in which DLC owns assets or conducts business that require a notification to a
taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearance certificates in
connection therewith, would either require either Specified FE Subsidiary to
withhold any portion of the consideration or subject either Specified FE
Subsidiary to any liability for any Taxes of DLC.
4.13 Intellectual Property. Schedule 4.13 sets forth all Intellectual
Property used in and, individually or in the aggregate with other Intellectual
Property, material to the operation or business of the DLC Nuclear Assets, each
of which DLC either has all right, title and interest in or valid and binding
rights under contract to use. Except as disclosed in Schedule 4.13, (i) DLC is
not, nor has it received any notice that it is, in default (or with the giving
of notice or lapse of time or both, would be in default), under any contract to
use such Intellectual Property, and (ii) to DLC's Knowledge, such Intellectual
Property is not being infringed by any other Person. DLC has not received notice
that it is infringing any Intellectual Property of any other Person in
connection with the operation or business of DLC Nuclear Assets, and DLC, to its
Knowledge, is not infringing any Intellectual Property of any other Person
which, individually or in the aggregate, would have a Material Adverse Effect.
4.14 Compliance With Laws. DLC is in compliance with all applicable
laws, rules and regulations with respect to its ownership or, in the case of
Beaver Valley, operation of DLC Nuclear Assets except where the failure to be in
compliance would not, individually or in the aggregate, create a Material
Adverse Effect.
4.15 DISCLAIMERS REGARDING DLC NUCLEAR ASSETS. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, THE DLC NUCLEAR
ASSETS ARE TRANSFERRED "AS IS, WHERE IS", AND DLC EXPRESSLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO
LIABILITIES, OPERATIONS OF THE PLANTS, THE TITLE, CONDITION, VALUE OR QUALITY OF
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THE DLC NUCLEAR ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND
OTHER INCIDENTS OF THE DLC NUCLEAR ASSETS AND DLC SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE DLC NUCLEAR ASSETS, OR ANY PART
THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS
THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL REQUIREMENTS, INCLUDING
BUT NOT LIMITED TO ANY ENVIRONMENTAL LAWS, OR WHETHER DLC POSSESSES SUFFICIENT
REAL PROPERTY OR PERSONAL PROPERTY TO OPERATE THE DLC NUCLEAR ASSETS. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC FURTHER SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF REGULATED SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO THE DLC NUCLEAR ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF THE DLC
NUCLEAR ASSETS OR THE SUITABILITY OF THE DLC NUCLEAR ASSETS FOR OPERATION AS A
POWER PLANT AND NO SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL
OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY DLC OR DLC REPRESENTATIVES,
OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR CREATE ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE DLC
NUCLEAR ASSETS.
4.16 Year 2000 Compliance. DLC, with respect to the Computer Systems
at Beaver Valley that may be included in the DLC Nuclear Assets, has plans to
achieve Year 2000 Compliance, and is using Commercially Reasonable Efforts to
execute and carry out such plans.
4.17 [Intentionally Omitted.]
4.18 Capital Expenditures. The only capital expenditures associated
with the DLC Nuclear Assets relating to Beaver Valley that are planned by DLC
are those capital expenditures approved in accordance with the Beaver Valley
CAPCO Agreements.
4.19 Labor Matters. DLC has previously delivered to Penn Power or its
Representatives true and correct copies of all collective bargaining agreements
to which DLC is a party or is subject and which relate to the business and
operations of the DLC Nuclear Assets relating to Beaver Valley. With respect to
the business or operations of the DLC Assets relating to Beaver Valley, except
to the extent set forth in Schedule 4.19 and except for such matters as will
not, individually or in aggregate, create a Material Adverse Effect, (a) DLC is
in compliance with all applicable laws respecting employment and employment
practices, occupational safety and health, plant closing, mass layoffs, terms
and conditions of employment and wages and hours; (b) DLC has not received any
written notice of any unfair labor practice complaint against DLC pending before
the National Labor Relations Board; (c) no arbitration proceeding arising out of
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or under any collective bargaining agreement is pending against DLC; and (d) DLC
has not experienced any work stoppage within the three-year period prior to the
date hereof and to DLC's Knowledge none is currently threatened.
4.20 Benefit Plans; ERISA. (a) Schedule 4.20 lists all DLC Benefit
Plans maintained for, or in which the employees of DLC connected with the DLC
Nuclear Assets relating to Beaver Valley participate. True and complete copies
of all such DLC Benefit Plans have been made available to Penn Power or its
Representatives.
(b) No liability under Title IV or Section 302 of ERISA has been
incurred by DLC or any ERISA Affiliate of DLC that has not been satisfied in
full, and no condition exists that presents a material risk to DLC or any ERISA
Affiliate of DLC of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation (which premiums have been
paid when due). Insofar as the representation made in this Section 4.20(b)
applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with
respect to any employee benefit plan, program, agreement or arrangement subject
to Title IV of ERISA to which DLC or any ERISA Affiliate of DLC made, or was
required to make, contributions during the five (5)-year period ending on the
last day of the most recent plan year ended prior to the DLC Nuclear Closing
Date.
(c) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event through
the DLC Nuclear Closing Date, (i) entitle any current or former employee or
officer of DLC or any ERISA Affiliate of DLC to severance pay, unemployment
compensation or any other payment that is not the responsibility of DLC pursuant
to Section 6.11(o), or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer that is not
the responsibility of DLC pursuant to Section 6.11(o).
(d) There has been no material failure of a DLC Benefit Plan
that is a group health plan (as defined in Section 5000(b)(1) of the Code) to
meet the requirements of Section 4980B(f) of the Code with respect to a
qualified beneficiary (as defined in Section 4980B(g) of the Code). Neither DLC
nor any ERISA Affiliate of DLC has contributed to a nonconforming group health
plan (as defined in Section 5000(c) of the Code) and no ERISA Affiliate of DLC
has incurred a tax under Section 5000(e) of the Code that is or could become a
liability of Specified FE Subsidiaries.
(e) There are no pending, or to DLC's Knowledge, threatened or
anticipated claims by or on behalf of any DLC Benefit Plans, by any employee or
beneficiary covered under any such DLC Benefit Plans, or otherwise involving any
such DLC Benefit Plans (other than routine claims for benefits).
4.21 DLC Qualified Decommissioning Funds.
(a) Each DLC Qualified Decommissioning Fund is a trust, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
with all requisite authority to conduct its affairs as it now does. Each DLC
Qualified Decommissioning Fund satisfies the requirements necessary for such
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fund to be treated as a "Nuclear Decommissioning Reserve Fund" within the
meaning of Code section 468A(a) and as a "nuclear decommissioning fund" and a
"qualified nuclear decommissioning fund" within the meaning of Treas. Reg.
section 1.468A-1(b)(3). Each such fund is in compliance in all material respects
with all applicable rules and regulations of the NRC, the PaPUC, and the IRS. No
DLC Qualified Decommissioning Fund has engaged in any acts of "self-dealing" as
defined in Treas. Reg. section 1.468A-5(b)(2). No "excess contribution," as
defined in Treas. Reg. section 1.468A-5(c)(2)(ii), has been made to any DLC
Qualified Decommissioning Fund which has not been withdrawn within the period
provided under Treas. Reg. section 1.468A-5(c)(1). DLC has made timely and valid
elections to make annual contributions to the DLC Qualified Decommissioning
Funds for each year in which such Funds have been in existence. DLC has
heretofore delivered copies of such elections to Specified FE Subsidiaries.
(b) Subject only to DLC's Required Regulatory Approvals, DLC has
all requisite authority to cause the assets of the DLC Qualified Decommissioning
Funds to be transferred to the applicable Specified FE Subsidiaries in
accordance with the provisions of this Agreement.
(c) DLC and/or the trustee of each of the DLC Qualified
Decommissioning Funds have filed or caused to be filed with the NRC, the IRS and
any state or local authority all material forms, statements, reports, documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them. DLC has delivered to Specified FE Subsidiaries a copy
of the schedule of ruling amounts most recently issued by the IRS for each of
the DLC Qualified Decommissioning Funds, a copy of the request that was filed to
obtain such schedule of ruling amounts and a copy of any pending requests for
revised ruling amounts, in each case together with all exhibits, amendments and
supplements thereto. As of the DLC Nuclear Closing, DLC will have timely filed
all requests for revised schedules of ruling amounts for the DLC Qualified
Decommissioning Funds in accordance with Treas. Reg. section 1.468A-3(i). DLC
shall furnish Specified FE Subsidiaries with copies of such requests for revised
schedules of ruling amounts, together with all exhibits, amendments and
supplementals thereto, promptly after they have been filed with the IRS. Any
amounts contributed to the DLC Qualified Decommissioning Funds while such
requests are pending before the IRS and which turn out to be in excess of the
applicable amounts provided in the schedule of ruling amounts issued by the IRS
will be withdrawn from the DLC Qualified Decommissioning Funds within the period
provided under Treas. Reg. section 1.468A-5(c)(2) for withdrawals of excess
contributions to be made without resulting in a disqualification of the Funds
under Treas. Reg. section 1.468A-5(c)(1). Except as provided in Section 6.19 of
this Agreement, there are no interim rate orders that may be retroactively
adjusted or retroactive adjustments to interim rate orders that may affect
amounts that Specified FE Subsidiaries may contribute to the DLC Qualified
Decommissioning Funds or may require distributions to be made from the DLC
Qualified Decommissioning Funds.
(d) DLC has made available to Specified FE Subsidiaries the
balance sheets for each of the DLC Qualified Decommissioning Funds as of
December 31, 1998 and as of the last Business Day before the DLC Nuclear Closing
Date, and they present fairly as of December 31, 1998 and as of the last
Business Day before closing, the financial position of each of the DLC Qualified
Decommissioning Funds in conformity with generally accepted accounting
principles applied on a consistent basis, except as otherwise noted there. DLC
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has made available to Specified FE Subsidiaries information from which Specified
FE Subsidiaries can determine the Tax Basis of all assets in the DLC Qualified
Decommissioning Funds as of the last Business Day before the DLC Nuclear Closing
Date. 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 each of the DLC Qualified Decommissioning Funds other than those, if
any, that are disclosed on Schedule 4.21.
(e) DLC has made available to Specified FE Subsidiaries all
contracts and agreements to which the Trustee of each of the DLC Qualified
Decommissioning Funds, in its capacity as such, is a party.
(f) Each of the DLC Qualified Decommissioning Funds has 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 where such Tax is being contested
in good faith by appropriate proceedings or where the failure to so file or pay
would not create a Material Adverse Effect. Except as shown in Schedule 4.21, no
notice of deficiency or assessment has been received from any taxing authority
with respect to liability for Taxes of each of the DLC Qualified Decommissioning
Funds which have not been fully paid or finally settled, and any such deficiency
shown in such Schedule 4.21 is being contested in good faith through appropriate
proceedings. Except as set forth in Schedule 4.21, there are no outstanding
agreements or waivers extending the applicable statutory periods of limitations
for Taxes associated with each of the DLC Qualified Decommissioning Funds that
will be binding on Specified FE Subsidiaries after the DLC Nuclear Closing Date.
(g) To the extent DLC have pooled the assets of the DLC
Qualified Decommissioning Funds for investment purposes in periods prior to the
DLC Nuclear Closing, such pooling arrangement is a partnership for federal
income tax purposes and DLC has filed all Tax Returns required to be filed with
respect to such pooling arrangement for such periods.
4.22 DLC Nonqualified Decommissioning Funds.
(a) Each DLC Nonqualified Decommissioning Fund is a trust
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania with all requisite authority to conduct its affairs as it now does.
Each of DLC Nonqualified Decommissioning Fund is in full compliance with all
applicable rules and regulations of the NRC, and the PaPUC.
(b) Subject only to DLC's Required Regulatory Approvals, DLC has
all requisite authority to cause the assets of the DLC Nonqualified
Decommissioning Funds to be transferred to the applicable Specified FE
Subsidiaries in accordance with the provisions of this Agreement.
(c) DLC and/or the Trustee of the DLC Nonqualified
Decommissioning Funds have filed or caused to be filed with the NRC and any
state or local authority all material forms, statements, reports, documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them.
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(d) DLC has made available to Specified FE Subsidiaries the
balance sheets for the DLC Nonqualified Decommissioning Funds as of December 31,
1998 and as of the last Business Day before the DLC Nuclear Closing Date, and
they present fairly as of December 31, 1998 and as of the last Business Day
before closing, the financial position of the DLC Nonqualified Decommissioning
Funds in conformity with generally accepted accounting principles applied on a
consistent basis, except as otherwise noted therein. DLC has made available to
Specified FE Subsidiaries information from which Specified FE Subsidiaries can
determine the Tax Basis as of the last Business Day before closing of all assets
(other than cash) of the DLC Nonqualified Decommissioning Funds transferred to
Specified FE Subsidiaries pursuant to Section 6.19. There are no liabilities
(whether absolute, accrued, contingent or otherwise and whether due or to become
due) including, but not limited, agency or other legal proceedings, that may
materially affect the financial position of the DLC Nonqualified Decommissioning
Funds other than those, if any, that are disclosed on Schedule 4.22.
(e) DLC has made available to Specified FE Subsidiaries all
contracts and agreements to which the trustee of the Nonqualified
Decommissioning Funds, in its capacity as such, is a party.
4.23 DLC Nuclear Law Matters.
(a) DLC is a licensed co-owner, but not an operator of Perry
Unit 1, which is operated by an Affiliate of Specified FE Subsidiaries. Subject
to this fact, and except as disclosed in Schedule 4.23(a):
(i) DLC holds, and is in substantial compliance with
all Permits in respect of Nuclear Laws that are required for DLC to own Perry
Unit 1 and DLC is otherwise in compliance with all Nuclear Laws with respect to
its ownership of Perry Unit 1 except for such failures to hold or comply with
regard to Permits in respect of Nuclear Laws, or such failures to be in
compliance with applicable Nuclear Laws, as would not, individually or in the
aggregate, create a Material Adverse Effect; and
(ii) DLC has not entered into or agreed to any consent
decree or order relating to Perry Unit 1, and is not subject to any outstanding
judgment, decree or judicial order relating to any Nuclear Law relating to Perry
Unit 1.
(b) Except as disclosed in Schedule 4.23(b):
(i) DLC holds, and is in substantial compliance with,
all Permits in respect of Nuclear Laws that are required for DLC to conduct the
business of and operate the DLC Nuclear Assets in respect of Beaver Valley, and
is otherwise in substantial compliance with applicable Nuclear Laws with respect
to the business and operations of the DLC Nuclear Assets in respect of Beaver
Valley except for such failures to hold or comply with required Permits in
respect of Nuclear Laws, or such failures to be in compliance with applicable
Nuclear Laws, as would not, individually or in aggregate, create a Material
Adverse Effect; and
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(ii) DLC is not subject to any outstanding judgment,
decree, or judicial order relating to compliance with any Nuclear Law relating
to Beaver Valley.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SPECIFIED FE
SUBSIDIARIES
Each Specified FE Subsidiary hereby, for itself, represents and warrants to
DLC as follows:
5.1 Incorporation; Qualification. Such Specified FE Subsidiary is a
corporation duly incorporated, 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 material assets and properties and
to carry on its business as is now being conducted. Such Specified FE Subsidiary
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which its business as now being
conducted shall require it to be so qualified, except where the failure to be so
qualified would not have an Material Adverse Effect. Such Specified FE
Subsidiary has heretofore delivered to DLC true, complete and correct copies of
its Articles of Incorporation and Bylaws as currently in effect.
5.2 Authority. Such Specified FE Subsidiary has full corporate power
and authority to execute and deliver this Agreement and each of the Ancillary
Agreements to which it is a signatory and to consummate the transactions
contemplated hereby or thereby. The execution and delivery of this Agreement and
each of the Ancillary Agreements to which it is a signatory by such Specified FE
Subsidiary and the consummation of the transactions contemplated hereby and
thereby by such Specified FE Subsidiary have been duly and validly authorized by
all necessary corporate action required on the part of such Specified FE
Subsidiary and this Agreement and each of the Ancillary Agreements to which it
is a signatory has been duly and validly executed and delivered by such
Specified FE Subsidiary. Subject to the receipt of the applicable Specified FE
Subsidiaries' Required Regulatory Approvals, each of this Agreement and each of
the Ancillary Agreements to which it is a signatory constitutes the legal, valid
and binding agreement of such Specified FE Subsidiary, enforceable against such
Specified FE Subsidiary in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and general principles of
equity (regardless of whether enforcement is considered in a proceeding at law
or in equity).
5.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 5.3(a), and subject to
obtaining any applicable Specified FE Subsidiaries' Required Regulatory
Approvals, neither the execution and delivery of this Agreement nor the
execution and delivery of the Ancillary Agreements to which it is a signatory
will (i) conflict with or result in any breach of any provision of the Articles
of Incorporation or Bylaws of such Specified FE Subsidiary, (ii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, material agreement or other instrument or obligation to which such
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Specified FE Subsidiary is a party or by which it, or any of the DLC Nuclear
Assets may be bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or that would not, individually or in the aggregate, create a
Material Adverse Effect; or (iii) constitute violations of any law, regulation,
order, judgment or decree applicable to such Specified FE Subsidiary, which
violations, individually or in the aggregate, would create a Material Adverse
Effect.
(b) Other than the Required Regulatory Approvals set forth in
Schedule 5.3(b) in respect of such Specified FE Subsidiary (collectively, the
"Specified FE Subsidiaries' Required Regulatory Approvals"), no consent or
approval of, filing with, or notice to, any Governmental Authority is necessary
for the execution and delivery of this Agreement by such Specified FE
Subsidiary, or the consummation by such Specified FE Subsidiary of the
transactions contemplated hereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent such
Specified FE Subsidiary from performing its material obligations hereunder and
(ii) such consents, approvals, filings or notices which become applicable to
such Specified FE Subsidiary or the DLC Nuclear Assets as a result of the
specific regulatory status of DLC (or any of its Affiliates) or as a result of
any other facts that specifically relate to the business or activities in which
DLC (or any of its Affiliates) is or proposes to be engaged.
5.4 Legal Proceedings. Except as set forth in Schedule 5.4, there is
no action or proceeding pending or, to the knowledge of such Specified FE
Subsidiary, threatened, against such Specified FE Subsidiary before any court,
arbitrator or Governmental Authority, which could, individually or in the
aggregate, reasonably be expected to create an Material Adverse Effect. Except
as set forth in Schedule 5.4, such Specified FE Subsidiary is not subject to any
outstanding judgments, rules, orders, writs, injunctions or decrees of any
court, arbitrator or Governmental Authority that would, individually or in the
aggregate, create an Material Adverse Effect.
5.5 [Intentionally Omitted].
5.6 WARN Act. Specified FE Subsidiaries do not intend to engage in a
"Plant Closing" or "Mass Layoff" as such terms are defined in the WARN Act with
respect to any Plant within sixty days of the DLC Nuclear Closing Date in
respect of the Plants.
5.7 Regulatory Status of Specified FE Subsidiaries. Each Specified FE
Subsidiary is an "electric utility" within the meaning of 10 C.F.R. section 50.2
and an "eligible taxpayer" under Code Section 468A).
5.8 Specified FE Subsidiaries' Nuclear Law Matters.
(a) Penn Power is a licensed co-owner, but not an operator, of
Beaver Valley, which is operated by DLC. Subject to this fact, and except as
disclosed in Schedule 5.8(a):
(i) Penn Power holds, and is in substantial compliance
with all Permits in respect of Nuclear Laws that are required for Penn Power to
own Beaver Valley and Penn Power is otherwise in compliance with all Nuclear
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Laws with respect to its ownership of Beaver Valley except for such failures to
hold or comply with regard to Permits in respect of Nuclear Laws, or such
failures to be in compliance with applicable Nuclear Laws, as would not,
individually or in the aggregate, create a Material Adverse Effect; and
(ii) Penn Power has not entered into or agreed to any
consent decree or order relating to Beaver Valley, and is not subject to any
outstanding judgment, decree or judicial order relating to any Nuclear Law
relating to Beaver Valley.
(b) Except as disclosed in Schedule 5.8(b):
(i) CEIC holds, and is in substantial compliance with,
all Permits in respect of Nuclear Laws that are required for CEIC to conduct the
business of and operate the CEIC Nuclear Assets in respect of Perry Unit 1, and
is otherwise in substantial compliance with applicable Nuclear Laws with respect
to the business and operations of the CEIC Nuclear Assets in respect of Perry
Unit 1 except for such failures to hold or comply with required Permits in
respect of Nuclear Laws, or such failures to be in compliance with applicable
Nuclear Laws, as would not, individually or in aggregate, create a Material
Adverse Effect; and
(ii) CEIC is not subject to any outstanding judgment,
decree, or judicial order relating to compliance with any Nuclear Law relating
to Perry Unit 1.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1.1 Interim Operation of Beaver Valley. (a) The Parties understand
and agree that the CAPCO Agreements remain in full force and effect from the
date of this Agreement through the DLC Nuclear Closing Date (the "Interim
Period"), and, except as modified by this Section 6.1, the ownership and
operating responsibility for Beaver Valley shall be as provided in the CAPCO
Agreements.
(b) During the Interim Period, in the interest of facilitating
an orderly transition and permitting informed action by FENOC in furtherance of
the action contemplated by Section 6.15 hereof, the Parties agree as follows:
(i) A transition team led by one individual designated
by DLC and one individual designated by FENOC (the "Transition Team")
will be established as soon after execution of this Agreement as
practicable to examine all aspects of the operation of Beaver Valley,
including but not limited to operations and maintenance, engineering,
regulatory, procedural, staffing, support services, fuel purchasing
and business issues affecting Beaver Valley. The Transition Team shall
appoint individuals from each Party's organization representing the
key nuclear functional areas as such areas are mutually defined by the
Transition Team. The appointed individuals and the Transition Team
shall comprise the Beaver Valley Transition Committee (the "Transition
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Committee") which shall meet, during the Interim Period, on a regular
basis to create a definitive transition plan which will enable the
Parties to effect an orderly transition in furtherance of the action
contemplated by Section 6.15 hereof (the "Transition Plan").
(ii) From time to time, but at least once every two
weeks, the Transition Committee shall report its progress on the
Transition Plan to the senior management of both DLC and FENOC. The
Transition Committee shall be provided access to such information and
site facilities as may be necessary to enable it to perform its
responsibilities hereunder. The Transition Committee shall have no
authority to bind or make agreements on behalf of any of DLC, FENOC or
Penn Power, or to issue instructions to or direct or exercise
authority over their respective officers, employees, advisors or
agents.
(iii) Nothing in this Section 6.1.1(b) is intended to
modify DLC's ownership or operating responsibility or authority with
respect to Beaver Valley as provided for in the CAPCO Agreements or in
any way affect DLC's authority to conduct its business at Beaver
Valley in accordance with its own judgement and discretion in
accordance with the CAPCO Agreements.
(c) Notwithstanding Section 6.1(a) above, unless Penn Power
otherwise consents in writing, during the period from the date of this Agreement
to the DLC Nuclear Closing Date, DLC shall not:
(i) except as otherwise provided herein (including as provided in
Section 6.1(d) below), enter into any commitment for the purchase, sale, or
transportation of fuel for Beaver Valley having a term greater than six months
and not terminable on or before the DLC Nuclear Closing Date either (i)
automatically, or (ii) by option of Penn Power in its sole discretion, if the
aggregate payment under such commitment for fuel and all other outstanding
commitments for fuel for Beaver Valley not previously approved by Penn Power
would exceed $3,000,000;
(ii) except as otherwise provided herein, enter into
any contract, agreement, commitment or arrangement relating to Beaver Valley
that individually exceeds $1,000,000 unless it is terminable by DLC without
penalty or premium upon no more than sixty (60) days notice;
(iii) except as otherwise required by the terms of any
collective bargaining agreement or as otherwise provided in Section 6.11 hereof
or as currently contemplated by the plans and budgets in place under the CAPCO
Agreements, (i) hire at, or transfer to Beaver Valley, any new employees prior
to the DLC Nuclear Closing, other than to fill vacancies in existing positions
in the reasonable discretion of DLC, (ii) materially increase salaries or wages
of employees employed in connection with Beaver Valley prior to the DLC Nuclear
Closing, (iii) take any action prior to the DLC Nuclear Closing to affect a
material change in any collective bargaining agreement, or (iv) take any action
prior to the DLC Nuclear Closing to materially increase the aggregate benefits
payable to the employees employed in connection with Beaver Valley; or
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(iv) except as otherwise provided herein, enter into
any written or oral contract, agreement, commitment or arrangement with respect
to any of the proscribed transactions set forth in the foregoing paragraphs
(i)-(iii).
(d) Notwithstanding Section 6.1(c) above, DLC is permitted to
enter into commitments with respect to uranium enrichment services in respect to
the Plants satisfactory to it in its sole discretion from the date of this
Agreement through the DLC Nuclear Closing Date in respect of each Plant;
provided, however, that if DLC expects to include such commitments in the DLC
Nuclear Agreements, it shall obtain the written consent of Specified FE
Subsidiaries prior to entering into such commitments.
6.1.2 Interim Operation of Perry Unit 1. The Parties understand and
agree that the Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement
executed in accordance with Section 6.15(b) hereof shall remain in full force
and effect during the Interim Period, and, except as modified by this Agreement,
the ownership, operation and maintenance of Perry shall be as provided in the
amended CAPCO Perry Unit 1 Operating Agreement.
6.2 Access to Information.
(a) For a period of seven (7) years after the DLC Nuclear
Closing Date (or such longer period as may be required by applicable law), each
Party and their Representatives shall have reasonable access to all of the books
and records of the DLC Nuclear Assets, including all Transferred Employee
Records in the possession of any Party to the extent that such access may
reasonably be required in connection with the Assumed Liabilities or the
Excluded Liabilities, or other matters relating to or affected by the operation
of the DLC Nuclear Assets . Such access shall be afforded by the Party in
possession of any such books and records upon receipt of reasonable advance
notice and during normal business hours. The Party exercising this right of
access shall be solely responsible for any costs or expenses incurred by it or
the holder of the information with respect to such access pursuant to this
Section 6.2(a). If the Party in possession of such books and records shall
desire to dispose of any books and records upon or prior to the expiration of
such seven-year period (or any such longer period), such Party shall, prior to
such disposition, give the other Party a reasonable opportunity at the latter's
expense, to segregate and remove such books and records as it may select.
(b) Penn Power agrees that, prior to the DLC Nuclear Closing
Date, it will not contact any vendors, suppliers, employees, or other
contracting parties of DLC or its Affiliates with respect to any aspect of the
DLC Nuclear Assets relating to Beaver Valley or the transactions contemplated
hereby, without the prior written consent of DLC, which consent shall not be
unreasonably withheld.
6.3 Confidentiality. (a) Each Party shall, and shall use its best
efforts to cause its Representatives to, (i) keep all Proprietary Information of
the other Party confidential and not to disclose or reveal any such Proprietary
Information to any Person other than such Party's Representatives and (ii) not
use such Proprietary Information other than in connection with the consummation
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of the transactions contemplated hereby. After the DLC Nuclear Closing Date, any
Proprietary Information to the extent related to the DLC Nuclear Assets acquired
by Specified FE Subsidiaries shall no longer be subject to the restrictions set
forth herein. The obligations of the Parties under this Section 6.3(a) shall be
in full force and effect for three (3) years from the date hereof and will
survive the termination of this Agreement, the discharge of all other
obligations owed by the Parties to each other and the DLC Nuclear Closing Date.
(b) Upon the other Party's prior written approval (which shall
not be unreasonably withheld), either Party may provide Proprietary Information
of the other Party to the PUCO, the PaPUC, the SEC, the FERC, the NRC or any
other Governmental Authority with jurisdiction or any stock exchange, as may be
necessary to obtain Regulatory Approvals required by a Party, or to comply
generally with any relevant law or regulation. The disclosing Party will seek
confidential treatment for the Proprietary Information provided to any
Governmental Authority and the disclosing Party will notify the other Party as
far in advance as is practicable of its intention to release to any Governmental
Authority any Proprietary Information.
6.4 Public Statements. Subject to the requirements imposed by law,
any Governmental Authority or stock exchange, prior to the DLC Nuclear Closing
Date, no press release or other public announcement or public statement or
comment in response to any inquiry relating to the transactions contemplated by
this Agreement shall be issued or made by any Party without the prior approval
of the other Party (which approval shall not be unreasonably withheld). The
Parties agree to cooperate in preparing such announcements.
6.5 Expenses. Except to the extent specifically provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses, including the costs of any state or local Transfer Taxes associated
with its transfer of the Real Property. Notwithstanding anything to the contrary
herein, Specified FE Subsidiaries will be responsible for (a) all costs and
expenses associated with the obtaining of any title insurance policy and all
endorsements thereto that such Party elects to obtain and (b) all filing fees
under the HSR Act relating to the DLC Nuclear Assets it would acquire hereunder.
6.6 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
Party hereto shall use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and achieve the
DLC Nuclear Closing in respect of all the Plants pursuant to this Agreement and
the assumption of the Assumed Liabilities, including using its best efforts to
ensure satisfaction of the conditions precedent to each Party's obligations
hereunder, including obtaining all necessary consents, approvals, and
authorizations of third parties and Governmental Authorities required to be
obtained in order to consummate the transactions hereunder, and to effectuate a
transfer of the Transferable Permits to Specified FE Subsidiaries. Specified FE
Subsidiaries agree to perform promptly all conditions required of Specified FE
Subsidiaries in connection with DLC's Required Regulatory Approvals. None of the
Parties hereto shall, without prior written consent of the other Parties, take
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or fail to take any action, which might reasonably be expected to prevent or
materially impede, interfere with or delay the transactions contemplated by this
Agreement.
(b) In the event that any DLC Nuclear Asset shall not have been
conveyed to the applicable Specified FE Subsidiary at the DLC Nuclear Closing,
DLC shall, subject to Section 6.6(c), use Commercially Reasonable Efforts to
convey such asset to the applicable Specified FE Subsidiary as promptly as is
practicable after the DLC Nuclear Closing.
(c) (i) To the extent that DLC's rights under any material DLC
Nuclear Agreement or Real Property Lease may not be assigned without the consent
of another Person which consent has not been obtained by the DLC Nuclear 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.
(ii) If any consent to an assignment of any material DLC Nuclear
Agreement or Real Property Lease shall not be obtained or if any attempted
assignment would be ineffective or would impair either Specified FE
Subsidiaries' rights and obligations under the material DLC Nuclear Agreement or
Real Property Lease in question, so that such Specified FE Subsidiary would not
in effect acquire the benefit of all such rights and obligations, DLC, at the
option of such Specified FE Subsidiary and to the maximum extent permitted by
law and such material DLC Nuclear Agreement or Real Property Lease shall, after
the DLC Nuclear Closing Date, appoint such Specified FE Subsidiary to be DLC's
agent with respect to such material DLC Nuclear Agreement or Real Property
Lease, or, to the maximum extent permitted by law and such material DLC Nuclear
Agreement or Real Property Lease, enter into such reasonable arrangements with
such Specified FE Subsidiary or take such other actions as are necessary to
provide such Specified FE Subsidiary with the same or substantially similar
rights and obligations of such material DLC Nuclear Agreement or Real Property
Lease as such Specified FE Subsidiary may reasonably request. The Parties shall
cooperate and shall each use Commercially Reasonable Efforts prior to and after
the DLC Nuclear Closing Date to obtain an assignment of such material DLC
Nuclear Agreement or Real Property Lease to such Specified FE Subsidiary. For
purposes of this Section 6.6(c), without limitation, all DLC Nuclear Agreements
listed on Schedules 4.5 and 4.9(a)(i) and 4.9(b)(i) are deemed to be "material."
(d) To the extent that DLC's rights under any warranty or
guaranty described in Section 2.1(i) may not be assigned without the consent of
another Person, which consent has not been obtained by the DLC Nuclear 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. If any
consent to an assignment of any such warranty or guaranty shall not be obtained,
or if any attempted assignment would be ineffective or would impair the rights
and obligations of the applicable Specified FE Subsidiary under the warranty or
guaranty in question, so that such Specified FE Subsidiary would not in effect
acquire the benefit of all such rights and obligations, DLC, at the expense of
such Specified FE Subsidiary, shall use Commercially Reasonable Efforts, to the
extent permitted by law and such warranty or guaranty, to enforce such warranty
or guaranty for the benefit of such Specified FE Subsidiary so as to provide
such Specified FE Subsidiary to the maximum extent possible with the benefits
and obligations of such warranty or guaranty.
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6.7 Consents and Approvals.
(a) As promptly as advisable after the date of this Agreement,
DLC and Specified FE Subsidiaries shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice any
notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. The Parties shall use their respective best efforts to respond promptly
to any requests for additional information made by either of such agencies, and
to cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date after the date of filing. Specified FE Subsidiaries will
pay all filing fees under the HSR Act relating to the DLC Nuclear Assets to be
acquired thereby, but each Party will bear its own costs of the preparation of
any filing.
(b) As promptly as advisable after the date hereof, Specified FE
Subsidiaries shall make any filings required by the Federal Power Act. Prior
filings with the FERC, Specified FE Subsidiaries shall submit such application
to DLC for review and comment and shall incorporate into the application any
revisions reasonably requested. Specified FE Subsidiaries shall be solely
responsible for the cost of preparing and filing the application, any
petition(s) for rehearing, or any reapplication. If the filing is rejected by
the FERC, Specified FE Subsidiaries agrees to petition the FERC for rehearing
and/or to re-submit an application with the FERC, provided that in either case
this action does not create a Material Adverse Effect on Specified FE
Subsidiaries and that it has been approved by DLC.
(c) As promptly as advisable, and in any case within sixty (60)
days after the date of this Agreement, DLC and Specified FE Subsidiaries, as
applicable, shall make any filings required by the PUCO, the PaPUC and any other
Governmental Authority, and make or cause to be made any other filings required
to be made with respect to the transactions contemplated hereby. The Parties
shall respond promptly to any requests for additional information made by such
agencies, and use their respective Commercially Reasonable Efforts to cause
regulatory approval to be obtained at the earliest possible date after the date
of filing. Each Party will bear its own costs of the preparation of any such
filing.
(d) The Parties 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
consideration may be required to be withheld or in which Specified FE
Subsidiaries would otherwise be liable for any Tax liabilities of DLC pursuant
to such state and local Tax law.
(e) Specified FE Subsidiaries shall have the primary
responsibility for securing the transfer, reissuance or procurement of the
Permits and Environmental Permits (other than Transferable Permits) effective as
of the DLC Nuclear Closing Date. DLC shall cooperate with Specified FE
Subsidiaries' efforts in this regard and assist in any transfer or reissuance of
a Permit or Environmental Permit held by DLC or the procurement of any other
Permit or Environmental Permit when so requested by Specified FE Subsidiaries,
to the extent such cooperation does not entail payment of money by DLC.
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(f) As promptly as possible after the date hereof, DLC and
Specified FE Subsidiaries shall file with the NRC joint applications requesting
the NRC Approvals. The Parties shall respond promptly to any requests for
additional information made by the NRC, cooperate in connection with any
presentation or proceeding associated with the NRC application and use their
respective best efforts to cause such NRC Approvals to be obtained at the
earliest possible date after the date of filing. Each Party will bear its own
costs of the preparation of any such filing and the NRC filing and processing
fees in respect of such filing shall be paid fifty percent (50%) by DLC and
fifty percent (50%) by the Specified FE Subsidiaries.
6.8 Fees and Commissions. Each Party represents and warrants to the
other Party that, no broker, finder or other Person is entitled to any brokerage
fees, commissions or finder's fees in connection with the transaction
contemplated hereby by reason of any action taken by the Party making such
representation. DLC and Specified FE Subsidiaries will pay to the other or
otherwise discharge, and will indemnify and hold the other harmless from and
against, any and all claims or liabilities for all brokerage fees, commissions
and finder's fees (other than the fees, commissions and finder's fees payable to
the parties listed above) incurred by reason of any action taken by the
indemnifying party.
6.9 Tax Matters.
(a) All Transfer Taxes incurred in connection with this
Agreement and the transactions contemplated hereby, including, (i) Pennsylvania
or Ohio sales tax; (ii) the Pennsylvania or Ohio transfer tax, conveyance fees
or conveyances of interests in real and/or personal property; and (iii)
Pennsylvania or Ohio sales tax and transfer tax on deeds shall be borne by DLC.
DLC shall file, to the extent required by, or permissible under, applicable law,
all necessary Tax Returns and other documentation with respect to all such
Transfer Taxes, and, if required by applicable law, Specified FE Subsidiaries
shall join in the execution of any such Tax Returns and other documentation.
Prior to the applicable DLC Nuclear Closing Date, to the extent applicable,
Specified FE Subsidiaries shall provide to DLC appropriate certificates of Tax
exemption from each applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.4 of this Agreement, Specified FE Subsidiaries shall prepare and
timely file all Tax Returns required to be filed after the DLC Nuclear Closing
Date with respect to the DLC Nuclear Assets, if any, and shall duly and timely
pay all such Taxes shown to be due on such Tax Returns. Specified FE
Subsidiaries agrees that preparation of any such Tax Returns shall be subject to
DLC's approval, which approval shall not be unreasonably withheld. Specified FE
Subsidiaries shall make such Tax Returns available for DLC's review and approval
no later than fifteen (15) Business Days prior to the due date for filing each
such Tax Return.
(c) Specified FE Subsidiaries and DLC shall provide each 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 shall retain and provide
the requesting party with any records or information which may be relevant to
such return, audit, examination or proceedings. Any information obtained
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pursuant to this Section 6.9(c) or pursuant to any other Section hereof
providing for the sharing of information or review of any Tax Return or other
instrument relating to Taxes shall be kept confidential by the Parties.
(d) In the event that a dispute arises between DLC and either
Specified FE Subsidiary regarding Taxes, or any amount due under this Section
6.9, the Parties shall attempt in good faith to resolve such dispute and any
agreed upon amount shall be paid to the appropriate Party. If such dispute is
not resolved within 30 days, the Parties shall submit the dispute to the
Independent Accounting Firm for resolution, which resolution shall be final,
conclusive and binding on the Parties. Notwithstanding anything in this
Agreement to the contrary, the fees and expenses of the Independent Accounting
Firm in resolving the dispute shall be borne 50% by DLC and 50% by the
applicable Specified FE Subsidiary. Any payment required to be made as a result
of the resolution of the dispute by the Independent Accounting Firm shall be
made within ten days after such resolution, together with any interest
determined by the Independent Accounting Firm to be appropriate.
6.10 Advice of Changes. Prior to the DLC Nuclear Closing, each Party
will advise the other in writing with respect to any matter arising after
execution of this Agreement of which that Party obtains Knowledge and which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth in this Agreement, including any of the Schedules hereto. DLC may
at any time notify Specified FE Subsidiaries of any development causing a breach
of any of its representations and warranties in Article IV, and Specified FE
Subsidiaries may at any time notify DLC of any development causing a breach of
any of its representations and warranties in Article V. Unless DLC or the
Specified FE Subsidiaries have the right to terminate this Agreement pursuant to
Section 9.1(f) or (g) below (after the expiration of the applicable cure period
provided therein) by reason of the developments and exercises that right within
the period of fifteen (15) days after such right accrues, the written notice
pursuant to this Section 6.10 will be deemed to have amended this Agreement,
including the appropriate Schedule, to have qualified the representations and
warranties contained in Articles IV and V above, as applicable and to have cured
any misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
6.11 DLC Employees.
(a) DLC shall identify the employees at the Plants on Schedule
6.11(a), which schedule shall also set forth such employees level of seniority,
classification and Plant location. DLC may submit an offer of continuing
employment with DLC or a DLC Subsidiary or an Affiliate thereof to those
employees identified on Schedule 6.11(a), provided that such offer shall not be
contingent on any such employee waiving his or her rights to consider a
competing offer of employment from either Specified FE Subsidiary. Upon the
acceptance by any such employee of DLC's offer of continuing employment, DLC
shall provide written notice thereof to Specified FE Subsidiaries and shall
modify Schedule 6.11(a) to reflect the same.
(b) At least 120 days prior to the DLC Nuclear Closing Date,
each Specified FE Subsidiary shall provide DLC with notice of its respective
staffing level requirements, listed by classification and operation, and shall
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be required to offer employment only to that number of employees of DLC who are
covered by the International Brotherhood of Electrical Workers ("IBEW"), Local
Unions 140, 142, 144, 147, 148, 149 collective bargaining agreement with DLC
("IBEW CBA") and are either (i) employed in positions relating to the Plants or
(ii) if employed at another location, perform substantially all their work in
support of the Plants, and in each case, who are necessary to satisfy such
Specified FE Subsidiary's staffing level requirements (collectively, "DLC Union
Employees"). In each classification, DLC Union Employees shall be so offered
employment in order of their seniority as provided for in the IBEW CBA. Each
person who becomes employed by such Specified FE Subsidiary pursuant to this
section shall be referred herein as a "DLC Transferred Union Employee."
(c) At least 120 days prior to the DLC Nuclear Closing Date,
each Specified FE Subsidiary shall provide DLC with notice of its respective
staffing level requirements, listed by classification and operation, and shall
be required to make either a Non-Qualifying or a Qualifying Offer of employment
only to that number of salaried employees of DLC who are employed in connection
with the DLC Nuclear Assets and who are listed in, or are in a function or whose
employment responsibilities are listed in, Schedule 6.11(c) (collectively, "DLC
Non-Union Employees"), which schedule shall also set forth such employees'
salary and responsibilities and who are necessary to satisfy the staffing level
requirements of a Specified FE Subsidiary or Affiliate. Each employee employed
by a Specified FE Subsidiary or Affiliate pursuant to this section shall be
referred herein as a "DLC Transferred Non-Union Employee." To the extent that a
Specified FE Subsidiary takes an employee from Beaver Valley and relocates the
employee to another plant owned by any Specified FE Subsidiary or any Affiliate
of any of them, such employee shall receive the same relocation allowance as if
he or she had been an FE employee.
(d) All offers of employment made by a Specified FE Subsidiary
pursuant to Sections 6.11 (b) and (c) shall be made in accordance with all
applicable laws and regulations (including the joint application to be made by
DLC and Penn Power to the NRC in respect of Beaver Valley), and for DLC Union
Employees, in accordance with the IBEW CBA and shall remain open for a period of
ten (10) working days. Any such offer which is accepted within such ten (10)
working day period shall thereafter be irrevocable until the earlier of the DLC
Nuclear Closing Date or the termination of this Agreement pursuant to its terms.
Following acceptance of such offers, such Specified FE Subsidiary shall provide
written notice thereof to DLC, and DLC shall provide such Specified FE
Subsidiary with access to the files and records of employees accepting such
offers, to the extent permitted by contract, the IBEW CBA and/or applicable law.
Schedule 6.11(d) sets forth the collective bargaining agreements, and amendments
thereto, to which DLC is a party in connection with the DLC Nuclear Assets.
(e) With respect to DLC Transferred Union Employees and DLC
Transferred Non-Union Employees, the following shall be applicable:
(i) For such DLC Transferred Union Employees, a
Specified FE Subsidiary shall recognize IBEW Local Unions 140, 142, 144, 147,
148, 149 as the exclusive collective bargaining representative and shall assume
the terms and conditions of the IBEW CBA until the expiration of said agreement,
and will further comply with all applicable legal obligations with respect to
collective bargaining under federal labor law thereafter.
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(ii) A Specified FE Subsidiary or Affiliate will
establish and maintain benefit plans (including a severance plan) for
Transferred DLC Non-Union Employees and DLC Transferred Union Employees under
either the IBEW CBA or any similar DLC document which are comparable to the DLC
Plant Benefit Plans in effect for such employees immediately prior to the DLC
Nuclear Closing Date and provide at least the same level of benefits or coverage
as the DLC Plant Benefit Plans in accordance with and for the duration of the
IBEW CBA, in the case of DLC Transferred Union Employees, or until December 31,
2001, in the case of DLC Transferred NonUnion Employees (such period being
hereinafter referred to as the "Continuation Period"). Subject to applicable law
and the IBEW CBA, nothing in the foregoing shall prevent a Specified FE
Subsidiary or FE Affiliate from using different benefit providers or from
establishing new benefit plans or using its existing benefit plans as the means
of meeting its obligation hereunder. The commitments under this paragraph shall,
however, require the following during the Continuation Period:
(A) With respect to health care plans, any Specified FE
Subsidiary agrees to waive or to cause the waiver of all limitations
as to pre-existing conditions and actively-at-work exclusions and
waiting periods for such employees, except that a Specified FE
Subsidiary may require the employee or his/her dependents who, on the
DLC Nuclear Closing Date, is then in the process of satisfying any
similar exclusion or waiting period under the DLC health care plans to
satisfy fully the balance of the applicable time period for such
exclusion or waiting period under the applicable FE plan. With respect
to the calendar year in which the DLC Nuclear Closing Date occurs, all
health care expenses incurred by any such employees and/or any
eligible dependent thereof in the portion of the calendar year
preceding the DLC Nuclear Closing Date that were qualified to be taken
into account for purposes of satisfying any deductible or
out-of-pocket limit under any DLC health care plans shall be taken
into account for purposes of satisfying any deductible or
out-of-pocket limit under the health care plan of a Specified FE
Subsidiary or Affiliate of FE for such calendar year.
(B) With respect to service and seniority, a Specified FE
Subsidiary shall recognize each such employee's service and seniority
with DLC for all non-pension purposes, including the determination of
eligibility and extent of service or seniority-related welfare
benefits such as vacation and sick pay benefits and to agree to give
each such employee full credit for all vacation benefits banked,
accrued, and unused, as of the DLC Nuclear Closing Date.
(C) With respect to pension benefits, a Specified FE Subsidiary
or Affiliate of FE shall provide each employee with a pension benefit
that, when combined with the benefit accrued by such employee under
the DLC pension plan as it exists on the DLC Nuclear Closing Date, is
at least equal in value to the pension benefit such employee would
have accrued if such employee had remained employed with DLC and
continued to be covered by such DLC pension plan (as it exists on the
DLC Nuclear Closing Date) during the Continuation Period. In providing
such benefits, a Specified FE Subsidiary or Affiliate of FE shall
recognize each such employee's combined service and earnings with DLC
and a Specified FE Subsidiary or Affiliate of FE. The determination of
the benefit required by this Section 6.11(e)(ii)(C) shall be made in
good faith by the accounting firm then acting as the independent
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auditor of the Specified FE Subsidiary or Affiliate of FE, which
determination shall be final and binding on the parties hereto and
each affected employee.
(D) With respect to post-retirement medical and life insurance
programs, a Specified FE Subsidiary shall provide to any such employee
who retires from a Specified FE Subsidiary's employment prior to the
expiration of the IBEW CBA with respect to DLC Transferred Union
Employees, and December 31, 2001 with respect to DLC Transferred
Non-Union Employees, and is at least age 55 and has ten or more years
of combined service with DLC and a Specified FE Subsidiary or
Affiliate of FE, benefits, to the extent possible, that are
substantially equivalent to the DLC post-retirement medical and life
insurance programs that such employee would have received, if such
employee had continued to be covered by the DLC programs as they
existed on the DLC Nuclear Closing Date.
(E) With respect to the DLC 401(k) Retirement Savings Plan for
Management or the DLC 401(k) Retirement Savings Plan for the IBEW
(collectively, the "DLC Savings Plan"), a Specified FE Subsidiary
shall take any and all necessary action to cause the trustee of any
defined contribution plan of a Specified FE Subsidiary in which any
such employee becomes a participant by virtue of this section, to
accept a direct "rollover" of all or a portion of said employee's
"eligible rollover distribution" within the meaning of Section 402 of
the Code from the DLC Savings Plan, if requested to do so by such
employee, or to accept a direct plan-to-plan transfer from the DLC
Savings Plan of the account balances of any such employee and the
assets of such plans related thereto, if requested to do so by DLC or
by any such employee. Each Specified FE Subsidiary agrees that the
property so rolled over and the assets so transferred may include (i)
promissory notes evidencing loans from the DLC Savings Plan to such
employees that are outstanding as of the DLC Nuclear Closing Date, and
(ii) shares of DLC common stock in which the account balances of such
employees are invested as of the DLC Nuclear Closing Date. However,
any defined contribution plan of FE or its Subsidiaries or Affiliates
accepting such a rollover or transfer shall not be required to (i)
make any further loans to any such employee after the DLC Nuclear
Closing Date or (ii) permit any additional investment to be made in
DLC common stock on behalf of any such employee after the DLC Nuclear
Closing Date. DLC hereby represents to each FE Subsidiary that the DLC
Savings Plan is intended to be qualified within the meaning of Section
402 of the Code.
(f) With respect to severance benefits, each Specified FE
Subsidiary, as applicable, is required to provide for any DLC Transferred
Non-Union Employee who is terminated as a result of an overall reduction in work
force due to decreased employment need of such Specified FE Subsidiary prior to
the date which is one year following the DLC Nuclear Closing Date severance
benefits at the level for such employees in effect as of the date hereof. DLC
Transferred Non-Union Employees shall also be entitled to severance benefits if,
prior to the date which is one year following the DLC Nuclear Closing Date, the
applicable Specified FE Subsidiary reduces the pay rate for such employee and
such employee within seven days thereafter terminates employment. Any employee
provided severance benefits under this section may be required to execute a
release of claims against DLC and such Specified FE Subsidiary, in such form as
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each Specified FE Subsidiary shall prescribe, as a condition for the receipt of
such benefits.
(g) Each DLC Transferred Non-Union Employee who is initially
assigned, or assigned within 12 months of the DLC Nuclear Closing Date, by each
Specified FE Subsidiary, to a principal place of work that requires such
employee to relocate his residence will be reimbursed by the applicable
Specified FE Subsidiary for all relocation expenses in accordance with the DLC
relocation plans in effect as of the date hereof. For purposes of the foregoing
a required relocation of residence shall include a change in the principal place
of work that is more than 30 miles farther from such employee's principal place
of work immediately prior to the DLC Nuclear Closing Date and requires a commute
from his current residence of at least one hour in each direction.
(h) DLC shall be responsible, with respect to the DLC Nuclear
Assets, for performing and discharging all requirements under the WARN Act and
under applicable state and local laws and regulations for the notification of
its employees of any "employment loss" within the meaning of the WARN Act which
occurs prior to the DLC Nuclear Closing Date.
(i) Neither Specified FE Subsidiary shall be responsible for
extending COBRA Continuous Coverage to any employees and former employees of
DLC, or to any qualified beneficiaries of such employees and former employees,
who become or became entitled to COBRA Continuous Coverage on or before the DLC
Nuclear Closing Date, including those for whom the DLC Nuclear Closing Date
occurs during their COBRA election period.
(j) DLC or its Affiliates shall pay to all DLC Transferred Union
and DLC Transferred Non-Union Employees, all compensation, bonus, vacation and
holiday compensation, workers' compensation or other employment benefits to
which they are entitled under the terms of the applicable compensation or DLC
benefit plans or programs. The Specified FE Subsidiaries shall pay to each
employee offered employment pursuant to this Section 6.11, all unpaid salary,
bonus, vacation and holiday compensation, workers' compensation or other
compensation or employment benefits that are payable in cash which have accrued
to such employees following the DLC Nuclear Closing Date, at such times as
provided under the terms of the applicable compensation or benefit programs.
(k) Individuals who are otherwise DLC Union Employees or DLC
Non-Union Employees, but who on any date are not actively at work due to a leave
of absence covered by the Family and Medical Leave Act (FMLA), or due to any
other authorized leave of absence, shall nevertheless be treated as "Union
Employees" or as "Non-Union Employees", as the case may be, on such date if they
are able (i) to return to work within the protected period under the FMLA or
such other leave (which in any event shall not extend more than twelve (12)
weeks after the DLC Nuclear Closing Date), whichever is applicable, and (ii) to
perform the essential functions of their job, with or without a reasonable
accommodation.
(l) The Specified FE Subsidiaries shall be responsible, with
respect to the Exchange Assets, for performing and discharging all requirements
under the WARN Act and under applicable state and local laws and regulations for
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the notification of its employees of any "employment loss" within the meaning of
the WARN Act which occurs following the DLC Nuclear Closing Date.
(m) The Specified FE Subsidiaries are responsible for extending
and continuing to extend COBRA Continuation Coverage to all DLC Transferred
Union and DLC Transferred NonUnion Employees, and qualified beneficiaries of
such employees who become entitled to such COBRA Continuation Coverage following
the DLC Nuclear Closing Date.
(n) The provisions of this Section 6.11 shall not be construed
as being for the benefit for any person other than the Parties hereto, and shall
not be enforceable by persons other than such Parties (including, without
limitations, the DLC Transferred Union Employees and DLC Transferred Non-Union
Employees.)
(o) Notwithstanding any provision of the Beaver Valley CAPCO
Agreements, with respect to any DLC Union Employees who do not receive an offer
of employment from a Specified FE Subsidiary pursuant to subsection (b) hereof
and with respect to any DLC Non-Union Employees who decline a Non-Qualifying
Offer pursuant to subsection (c) hereof, and are thereafter terminated, DLC will
be responsible for paying for the aggregate cost incurred in providing the
severance, pension and banked, accrued and unused vacation benefits due to such
employees.
6.12 Risk of Loss.
From the date hereof through the DLC Nuclear Closing Date, all
risk of loss or damage to the property included in the DLC Nuclear Assets shall
be governed by the Perry CAPCO Agreements or Beaver Valley CAPCO Agreements, as
applicable.
6.13 CAPCO Agreements. Administration of the CAPCO Agreements shall be
conducted in accordance with the terms of such CAPCO Agreements and the CAPCO
Settlement Agreement.
6.14 Refund of Accrued Interest in Insurance Premiums. At the request
of DLC, each Specified FE Subsidiary shall enter into and/or cause other
appropriate FE Subsidiaries to enter into any agreement with ANI and/or NEIL and
DLC reasonably requested by DLC to assure that the refunds in respect of ANI and
NEIL reserve premiums and/or dividends and/or distributions of earnings based on
membership account balance(s) and insurance premiums described in Section 2.2(i)
are paid directly by ANI and/or NEIL to DLC.
6.15 Operating Control. (a) Subject to the terms and conditions hereof
and receipt of the applicable DLC Required Regulatory Approvals, at the DLC
Nuclear Closing DLC shall transfer to FENOC, and FENOC shall assume from DLC,
responsibility for the operation and maintenance of Beaver Valley and FENOC
shall become the operator, all as described in Section 2.1(d).
(b) As of the date of this Agreement, DLC has provided written
notification to FE that it supports the pending NRC application by FENOC to
assume responsibility for the operation and maintenance of Perry Unit 1.
Promptly upon the execution of this Agreement, DLC shall (i) provide its
consent, pursuant to the operating agreement in respect of Perry Unit 1, to the
assignment of operating responsibility to FENOC and (ii) the parties to
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Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement shall execute and
deliver that amendment.
6.16 Beaver Valley Unit 2 Facility Leases.
(a) Prior to the DLC Nuclear Closing Date, DLC will terminate
the Beaver Valley Unit 2 Facility Leases and will be responsible for all
payments and expenses associated with such termination. In addition, pursuant to
Section 3.9(b) of the Beaver Valley Unit 2 Lease Indentures, DLC will assume all
of the obligations of the Beaver Valley Unit 2 Owner Trustees under those
indenture and the notes issued and outstanding thereunder (the "Beaver Valley
Unit 2 Indentures Notes") and shall make all payments required thereby. DLC
further agrees that it will redeem the Beaver Valley Unit 2 Indentures Notes in
full no later than December 1, 2002. In connection with such termination and
assumption, Penn Power agrees to cooperate and/or to cause other appropriate FE
Subsidiaries to cooperate to the extent reasonably necessary or appropriate to
effect such termination and assumption by DLC, including taking those actions
described in Schedule 6.16(a) and taking actions reasonably acceptable to it
that may be required by third parties in connection with such termination and
assumption.
(b) Until the Beaver Valley Unit 2 Indentures Notes have been
paid in full, Penn Power agrees that it:
(i) will not terminate the Beaver Valley Unit 2
Operating Agreement, and will not sell, transfer, assign or dispose of
(collectively, "transfer") all or any material portion of its rights or interest
in and to Beaver Valley Unit 2 and the Beaver Valley Unit 2 Operating Agreement,
unless such transfer is made subject to the Encumbrance of the Beaver Valley
Unit 2 Lease Indentures, as provided in this Agreement, and the transferee
assumes all obligations in connection with accepting the transfer subject to
such Encumbrance as provided in this Agreement;
(ii) will keep Beaver Valley Unit 2 and the Beaver
Valley Unit 2 Operating Agreement free and clear of any Encumbrances that would
be superior to the Encumbrance of the Beaver Valley Unit 2 Lease Indentures;
(iii) cause Beaver Valley Unit 2 to be used and operated
under and in compliance with all applicable laws, rules regulations and orders
of any applicable Governmental Authority, Good Utility Practices and the Beaver
Valley Unit 2 Operating Agreement, except where failure to do so would not
result in a Material Adverse Effect; and
(iv) maintain insurance policies in respect of Beaver
Valley Unit 2 comparable to those maintained in respect thereof by DLC as of the
DLC Nuclear Closing Date in respect of Beaver Valley, cause DLC to be a named
insured in respect of such liability insurance policies maintained in respect of
Beaver Valley, cause the Beaver Valley Unit 2 Lease Indentures Trustee to be a
named insured on such insurance policies and the loss payee in respect of
thirteen and seventy-four one hundredths percent (13.74%) of the "all risk"
property insurance portion of such insurance policies, and provide a copy of a
certificate evidencing such insurance coverage to DLC on or before September 1
of each year.
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6.17 Tax Exempt Financing.
(a) Specified FE Subsidiaries understand and agree that:
(i) the Exempt Facilities have been financed, and
refinanced, in whole or in part, with the proceeds of the issuance and sale by
various governmental authorities of industrial development revenue bonds or
private activity bonds (collectively, the "Revenue Bonds") the interest on
which, with certain exceptions, is excluded from gross income for purposes of
federal income taxation; and DLC is the economic obligor in respect of such
bonds;
(ii) the basis for such exclusion is the use of the
Exempt Facilities for the purpose of (A) the abatement or control of atmospheric
pollution or contamination (B) the abatement or control of water pollution or
contamination, (C) sewage disposal and/or (D) the disposal of solid waste, such
qualifying purposes being discussed in more detail in (b) below;
(iii) the use of the Exempt Facilities for a purpose
other than the qualifying purpose indicated in subsection (ii) above could
impair (a) such exclusion from gross income of the interest on such bonds,
possibly with retroactive affect, unless appropriate remedial action were taken
(which could include prompt defeasance and /or redemption of such bonds) and/or
(b) the deductibility of DLC's payment of interest based on the restrictions in
Section 150(b) of the Code; and
(iv) any breach by Specified FE Subsidiaries of their
obligations under this Article could result in the incurrence by DLC of
additional costs and expenses, including without limitation, increased interest
costs, loss of the interest deduction for tax purposes and transaction costs
relating to any refinancing redemption and/or defeasance of all or part of the
Revenue Bonds, and Specified FE Subsidiaries will be liable to DLC for such
additional costs and expenses.
(b) (i) Specified FE Subsidiaries shall not use, or permit
the use of, the Exempt Facilities for any purpose other than:(A) abating or
controlling atmospheric or water pollution or contamination by removing,
altering, disposing of or storing pollutants, contaminants, waste or heat, all
as contemplated in U.S. Treasury Regulations Section 1.103-8(g); (B) the
collection, storage, treatment, utilization, processing or final disposal of
solid waste, all as contemplated in U.S. Treasury Regulations Section
1.103-8(f); or (C) the collection, storage, treatment, utilization, processing
or final disposal of sewage, all as contemplated in U.S. Treasury Regulations
Section 1.103-8(f); unless Specified FE Subsidiaries have obtained at their own
expense an opinion addressed to DLC of nationally recognized bond counsel
reasonably acceptable to DLC ("Bond Counsel") that such use will not impair (x)
the exclusion from gross income of the interest on any issue of Revenue Bonds
for Federal income tax purposes or (y) the deductibility of DLC's payments of
interest based on the restrictions in Section 150(b) of the Code.
(ii) Specified FE Subsidiaries reasonably expect, as of
the date of this Agreement, that the Exempt Facilities will continue to be used
for the qualifying purposes set forth in subsection (i) above, and for no other
purpose, for the remainder of their useful lives.
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(c) It is expressly understood and agreed the provisions of
clause (b) above shall not prohibit Specified FE Subsidiaries from suspending
the operation of the Exempt Facilities on a temporary basis, or from terminating
the operation of the Exempt Facilities on a permanent basis and shutting down,
retiring, abandoning and/or decommissioning the Exempt Facilities; provided,
however, that if the Exempt Facilities, in whole or in part, are dismantled and
sold, including any sale for scrap, and if the operation of the Plant served by
such Exempt Facilities shall not theretofore have been, and is not then being,
terminated on a permanent basis, then the proceeds of such sale of the Exempt
Facilities shall within six months from the date of sale be expended to acquire
replacement property to be used for the same qualifying purpose as the Exempt
Facilities so sold, unless Specified FE Subsidiaries have obtained at their own
expense an opinion addressed to DLC Bond Counsel that no taking this action will
not impair (x) the exclusion from gross income of the interest on any issue of
Revenue Bonds for Federal income tax purposes or (y) the deductibility of DLC's
payments of interest based on the restrictions in Section 150(b) of the Code.
(d) Specified FE Subsidiaries shall not issue, or have issued on
their behalf, any tax-exempt bonds to finance or refinance its acquisition of
the Exempt Facilities; provided that it is expressly understood and agreed that
this clause (d) shall not prohibit the use of tax-exempt bonds to finance or
refinance any improvement to the Exempt Facilities made after the date of
acquisition or any assets other than the Exempt Facilities.
(e) Specified FE Subsidiaries shall give DLC at least 180 days'
prior written notice of any suspension or termination of the operation of the
Exempt Facilities, or any part thereof, and of any sale, exchange, transfer or
other disposition of the Exempt Facilities, or any part thereof, including, but
not limited to, a sale for scrap.
(f) If DLC shall desire to refund any Revenue Bonds, Specified
FE Subsidiaries shall cooperate with DLC and with Bond Counsel with respect to
the refunding bonds and shall provide upon request any representations,
agreements or covenants that are reasonably requested concerning its compliance
to such date and/or in the future with the representations, agreements and
covenants made herein.
(g) If Specified FE Subsidiaries shall sell, exchange, transfer
or otherwise dispose of the Exempt Facilities to a third party, Specified FE
Subsidiaries shall cause to be included in the documentation relating to such
transaction covenants and agreements on the part of such third party
substantially identical to those on the part of Specified FE Subsidiaries
contained in this Section 6.17.
(h) The covenants and agreements on the part of Specified FE
Subsidiaries contained in this Section 6.17 shall continue in effect so long as
any Revenue Bonds, including any refunding bonds issued hereafter to refund any
Revenue Bonds, shall remain outstanding. DLC shall notify Specified FE
Subsidiaries promptly when there shall be no Revenue bonds outstanding.
6.18 Removal at Shippingport Site Buildings. Prior to the DLC Nuclear
Closing in respect of Beaver Valley, DLC will remove all Regulated Substances
and Nuclear Material from the Shippingport Site Buildings to the reasonable
satisfaction of Penn Power. In addition, DLC agrees to use Commercially
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Reasonable Efforts to assign its rights under the Shippingport Contract to Penn
Power and take appropriate steps to delete the SAPS site from the definition of
the Beaver Valley site boundaries set forth in the Updated Safety Analysis
Reports for Beaver Valley Unit 1 and Beaver Valley Unit 2 and other related
licensing documentation on or prior to the DLC Nuclear Closing.
6.19 Decommissioning Funds.
6.19.1 Beaver Valley Unit 1 Decommissioning Funds
(a) Beaver Valley Unit 1 Qualified Funds.
(i) As soon as practicable after execution of this Agreement,
DLC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS substantially to the
effect that DLC be permitted to make an additional single
contribution in the same calendar year as the DLC Nuclear
Closing Date to the Beaver Valley Unit 1 Qualified
Decommissioning Fund in an amount equal to the Beaver Valley
Unit 1 Decommissioning Shortfall. As used herein, the
"Beaver Valley Unit 1 Decommissioning Shortfall" shall mean
$25.5 million (the "Beaver Valley Unit 1 Decommissioning
Amount") less the amount of any additional qualifying fund
deposits made by DLC to the Beaver Valley Unit 1 Qualified
Decommissioning Fund between January 1, 1999 and the DLC
Nuclear Closing Date. If necessary to obtain such IRS
ruling, DLC will request from the PaPUC an appropriate order
with respect to the rate treatment of such contribution.
(ii) If DLC is informed by the IRS that the IRS will not issue a
favorable ruling or DLC determines that it is otherwise
unable to obtain the private letter ruling described in
paragraph (i) above prior to the DLC Nuclear Closing Date,
DLC may notify Penn Power, in writing, that DLC is unable to
obtain the IRS ruling. Upon receiving such notification,
Penn Power shall use Commercially Reasonable Efforts to
obtain a private letter ruling from the IRS prior to the DLC
Nuclear Closing Date substantially to the effect that Penn
Power be permitted to make an additional single contribution
to the Penn Power Qualified Decommissioning Funds for Beaver
Valley Unit 1 in the same calendar year as the DLC Nuclear
Closing Date in an amount equal to the Beaver Valley Unit 1
Decommissioning Shortfall and, if necessary to obtain such
ruling, Penn Power shall also request from the PaPUC an
appropriate order with respect to the rate treatment of such
contribution. To the extent that Penn Power obtains the
private letter ruling referenced in this paragraph (ii), DLC
shall agree to pay in cash to Penn Power an amount equal to
the Beaver Valley Unit 1 Decommissioning Shortfall.
(iii) If DLC determines that the private letter rulings described
in paragraphs (i)-(ii) will not be obtained, Penn Power
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shall, at the request of DLC, cooperate with DLC in
requesting such private letter rulings from the IRS or
authorizations from any other Governmental Authority prior
to the DLC Nuclear Closing Date that would permit DLC to
transfer to Penn Power or permit DLC or Penn Power, as
applicable, to make one or more contributions, as soon as
possible after January 1, 1999, to the Beaver Valley Unit 1
Qualified Decommissioning Funds or the Penn Power Qualified
Decommissioning Funds, as applicable, in such amounts that
would provide to Penn Power in Qualified Funds, the
equivalent, on an after-tax present value basis, of the
Beaver Valley Unit 1 Decommissioning Amount as determined in
paragraphs (i) and (ii) above. In the event that the rulings
or authorizations in this paragraph (iii) are not able to be
obtained or DLC otherwise determines not to pursue the
provisions of this paragraph (iii), DLC shall transfer to
Penn Power such amounts as provided pursuant to the
provisions of paragraphs (v)(A) and (B) below.
(iv) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 1 Qualified Decommissioning
Funds to be transferred to Penn Power (or, if directed in
writing to do so by Penn Power, to the trustee of any trust
specified in such written direction), provided that (A) Penn
Power shall contribute all amounts received from the Beaver
Valley Unit 1 Qualified Decommissioning Funds into the Penn
Power Qualified Decommissioning Funds, and (B) each of DLC
and Penn Power shall have received private letter rulings
from the IRS, or opinions of counsel satisfactory to each of
DLC and Penn Power, substantially to the effect that,
pursuant to Treas. Reg. section 1.468A-6, neither DLC nor
Penn Power nor any of the applicable DLC Qualified
Decommissioning Funds or Penn Power Qualified
Decommissioning Funds shall recognize any gain or otherwise
take into account any income for federal income tax purposes
by reason of the transfer of the assets of the Beaver Valley
Unit 1 Qualified Decommissioning Funds.
(v) At the DLC Nuclear Closing Date, DLC shall, in respect of
any amounts for which an IRS private letter ruling pursuant
to paragraphs (i), (ii) or (iii) has not been received,
transfer an additional decommissioning payment to Penn Power
as follows:
(A) If receipt of the additional decommissioning
payment by Penn Power from DLC is not included in income for
federal income tax purposes or Penn Power receives a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPNet") shall be ($25.5 million - AQF) (1.436).
As used in this paragraph (A) and paragraph (B) below, AQF
shall mean the additional qualifying fund deposits
authorized by any IRS ruling, including any qualified fund
deposits made between January 1, 1999 and the DLC Nuclear
Closing Date; provided, however, that ADPNet shall not be
less than zero.
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(B) If receipt of the additional decommissioning
payment by Penn Power is included in income for federal
income tax purposes and Penn Power does not receive a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPGross") shall be ($25.5 million - AQF) (1.436)
divided by 0.65; provided, however, that ADPGross shall not
be less than zero.
Any additional decommissioning payment shall be payable in
cash or in additional Nonqualified Funds, and at the request
of DLC, Penn Power shall contribute all payments received
from DLC into the Penn Power Nonqualified Decommissioning
Funds or the Penn Power Qualified Decommissioning Funds.
(b) Beaver Valley Unit 1 Nonqualified Funds.
(i) DLC and Penn Power shall use Commercially Reasonable Efforts
to obtain a private letter ruling from the IRS prior to the
DLC Nuclear Closing Date substantially to the effect that
Penn Power shall not recognize any gain or otherwise take
into account any income for federal income tax purposes by
reason of the transfer of the assets of the Beaver Valley
Unit 1 Nonqualified Decommissioning Funds.
(ii) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 1 Nonqualified
Decommissioning Funds to be transferred to Penn Power (or,
if directed in writing to do so by Penn Power, to the
trustee of any trust specified in such written direction),
provided that, to the extent required by any IRS private
letter ruling received pursuant to paragraph (i), Penn Power
shall contribute all amounts received from the Beaver Valley
Unit 1 Nonqualified Decommissioning Funds into the Penn
Power Nonqualified or Qualified Decommissioning Funds, as
applicable.
(iii) If the receipt by Penn Power of the Beaver Valley Unit 1
Nonqualified Decommissioning Funds is included in income for
federal income tax purposes and Penn Power does not receive
a deduction for federal income tax purposes for the same
year in which it has such income, DLC shall transfer to Penn
Power an amount equal to the assets of the Beaver Valley
Unit 1 Nonqualified Decommissioning Funds as of the DLC
Nuclear Closing Date divided by 0.65.
(c) Reporting
Commencing on the date of this Agreement until the DLC
Nuclear Closing Date, DLC shall provide (or cause the
investment manager to provide) to Penn Power quarterly
unaudited statements of earnings, contributions, market
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values, investment allocations and performance reports and
such other information for the Beaver Valley Unit 1
Qualified and Nonqualified Decommissioning Funds as
reasonably requested by Penn Power.
6.19.2 Beaver Valley Unit 2 Decommissioning Funds
(a) Beaver Valley Unit 2 Qualified Funds.
(i) As soon as practicable after execution of this Agreement,
DLC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS substantially to the
effect that DLC be permitted to make an additional single
contribution in the same calendar year as the DLC Nuclear
Closing Date to the Beaver Valley Unit 2 Qualified
Decommissioning Fund in an amount equal to the Beaver Valley
Unit 2 Decommissioning Shortfall. As used herein, the
"Beaver Valley Unit 2 Decommissioning Shortfall" shall mean
$10.3 million (the "Beaver Valley Unit 2 Decommissioning
Amount") less the amount of any additional qualifying fund
deposits made by DLC to the Beaver Valley Unit 2 Qualified
Decommissioning Fund between January 1, 1999 and the DLC
Nuclear Closing Date. If necessary to obtain such IRS
ruling, DLC will request from the PaPUC an appropriate order
with respect to the rate treatment of such contribution.
(ii) If DLC is informed by the IRS that the IRS will not issue a
favorable ruling or DLC determines that it is otherwise
unable to obtain the private letter ruling described in
paragraph (i) above prior to the DLC Nuclear Closing Date,
DLC may notify Penn Power, in writing, that DLC is unable to
obtain the IRS ruling. Upon receiving such notification,
Penn Power shall use Commercially Reasonable Efforts to
obtain a private letter ruling from the IRS prior to the DLC
Nuclear Closing Date substantially to the effect that Penn
Power be permitted to make an additional single contribution
to the Penn Power Qualified Decommissioning Funds for Beaver
Valley Unit 2 in the same calendar year as the DLC Nuclear
Closing Date in an amount equal to the Beaver Valley Unit 2
Decommissioning Shortfall and, if necessary to obtain such
ruling, Penn Power shall also request from the PaPUC an
appropriate order with respect to the rate treatment of such
contribution. To the extent that Penn Power obtains the
private letter ruling referenced in this paragraph (ii), DLC
shall agree to pay in cash to Penn Power an amount equal to
the Beaver Valley Unit 2 Decommissioning Shortfall.
(iii) If DLC determines that the private letter rulings described
in paragraphs (i)-(ii) will not be obtained, Penn Power
shall, at the request of DLC, cooperate with DLC in
requesting such private letter rulings from the IRS or
authorizations from any other Governmental Authority prior
to the DLC Nuclear Closing Date that would permit DLC to
transfer to Penn Power or permit DLC or Penn Power, as
applicable, to make one or more contributions, as soon as
possible after January 1, 1999, to the Beaver Valley Unit 2
Qualified Decommissioning Funds or the Penn Power Qualified
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Decommissioning Funds, as applicable, in such amounts that
would provide to Penn Power in Qualified Funds, the
equivalent, on an after-tax present value basis, of the
Beaver Valley Unit 2 Decommissioning Amount as determined in
paragraphs (i) and (ii) above. In the event that the rulings
or authorizations in this paragraph (iii) are not able to be
obtained or DLC otherwise determines not to pursue the
provisions of this paragraph (iii), DLC shall transfer to
Penn Power such amounts as provided pursuant to the
provisions of paragraphs (v)(A) and (B) below.
(iv) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 2 Qualified Decommissioning
Funds to be transferred to Penn Power (or, if directed in
writing to do so by Penn Power, to the trustee of any trust
specified in such written direction), provided that (A) Penn
Power shall contribute all amounts received from the Beaver
Valley Unit 2 Qualified Decommissioning Funds into the Penn
Power Qualified Decommissioning Funds, and (B) each of DLC
and Penn Power shall have received private letter rulings
from the IRS, or opinions of counsel satisfactory to each of
DLC and Penn Power, substantially to the effect that,
pursuant to Treas. Reg. section 1.468A-6, neither DLC nor
Penn Power nor any of the applicable DLC Qualified
Decommissioning Funds or Penn Power Qualified
Decommissioning Funds shall recognize any gain or otherwise
take into account any income for federal income tax purposes
by reason of the transfer of the assets of the Beaver Valley
Unit 2 Qualified Decommissioning Funds.
(v) At the DLC Nuclear Closing Date, DLC shall, in respect of
any amounts for which an IRS private letter ruling pursuant
to paragraphs (i), (ii) or (iii) has not been received,
transfer an additional decommissioning payment to Penn Power
as follows:
(A) If receipt of the additional decommissioning
payment by Penn Power from DLC is not included in income for
federal income tax purposes or Penn Power receives a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPNet") shall be ($10.3 million - AQF) (1.436).
As used in this paragraph (A) and paragraph (B) below, AQF
shall mean the additional qualifying fund deposits
authorized by any IRS ruling, including any qualified fund
deposits made between January 1, 1999 and the DLC Nuclear
Closing Date; provided, however, that ADPNet shall not be
less than zero.
(B) If receipt of the additional decommissioning
payment by Penn Power is included in income for federal
income tax purposes and Penn Power does not receive a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPGross") shall be ($10.3 million - AQF) (1.436)
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divided by 0.65; provided, however, that ADPGross shall not
be less than zero.
Any additional decommissioning payment shall be payable in
cash, or in additional Nonqualified Funds, and at the
request of DLC, Penn Power shall contribute all payments
received from DLC into the Penn Power Nonqualified
Decommissioning Funds or the Penn Power Qualified
Decommissioning Funds.
(b) Beaver Valley Unit 2 Nonqualified Funds.
(i) DLC and Penn Power shall use Commercially Reasonable Efforts
to obtain a private letter ruling from the IRS prior to the
DLC Nuclear Closing Date substantially to the effect that
Penn Power shall not recognize any gain or otherwise take
into account any income for federal income tax purposes by
reason of the transfer of the assets of the Beaver Valley
Unit 2 Nonqualified Decommissioning Funds.
(ii) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 2 Nonqualified
Decommissioning Funds to be transferred to Penn Power (or,
if directed in writing to do so by Penn Power, to the
trustee of any trust specified in such written direction),
provided that, to the extent required by any IRS private
letter ruling received pursuant to paragraph (i), Penn Power
shall contribute all amounts received from the Beaver Valley
Unit 2 Nonqualified Decommissioning Funds into the Penn
Power Nonqualified or Qualified Decommissioning Funds, as
applicable.
(iii) If the receipt by Penn Power of the Beaver Valley Unit 2
Nonqualified Decommissioning Funds is included in income for
federal income tax purposes and Penn Power does not receive
a deduction for federal income tax purposes for the same
year in which it has such income, DLC shall transfer to Penn
Power an amount equal to the assets of the Beaver Valley
Unit 2 Nonqualified Decommissioning Funds as of the DLC
Nuclear Closing Date divided by 0.65.
(c) Reporting
Commencing on the date of this Agreement until the DLC
Nuclear Closing Date, DLC shall provide (or cause the
investment manager to provide) to Penn Power quarterly
unaudited statements of earnings, contributions, market
values, investment allocations and performance reports and
such other information for the Beaver Valley Unit 2
Qualified and Nonqualified Decommissioning Funds as
reasonably requested by Penn Power.
6.19.3 Perry Unit 1 Decommissioning Funds
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(a) Perry Unit 1 Qualified Funds.
(i) As soon as practicable after execution of this Agreement,
DLC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS substantially to the
effect that DLC be permitted to make an additional single
contribution in the same calendar year as the DLC Nuclear
Closing Date to the Perry Unit 1 Qualified Decommissioning
Fund in an amount equal to the Perry Unit 1 Decommissioning
Shortfall. As used herein, the "Perry Unit 1 Decommissioning
Shortfall" shall mean $21.6 million (the "Perry Unit 1
Decommissioning Amount") less the amount of any additional
qualifying fund deposits made by DLC to the Perry Unit 1
Qualified Decommissioning Fund between January 1, 1999 and
the DLC Nuclear Closing Date. If necessary to obtain such
IRS ruling, DLC will request from the PaPUC an appropriate
order with respect to the rate treatment of such
contribution.
(ii) If DLC is informed by the IRS that the IRS will not issue a
favorable ruling or DLC determines that it is otherwise
unable to obtain the private letter ruling described in
paragraph (i) above prior to the DLC Nuclear Closing Date,
DLC may notify CEIC, in writing, that DLC is unable to
obtain the IRS ruling. Upon receiving such notification,
CEIC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS prior to the DLC Nuclear
Closing Date substantially to the effect that CEIC be
permitted to make an additional single contribution to the
CEIC Qualified Decommissioning Funds for Perry Unit 1 in the
same calendar year as the DLC Nuclear Closing Date in an
amount equal to the Perry Unit 1 Decommissioning Shortfall
and, if necessary to obtain such ruling, CEIC shall also
request from the PUCO an appropriate order with respect to
the rate treatment of such contribution. To the extent that
CEIC obtains the private letter ruling referenced in this
paragraph (ii), DLC shall agree to pay in cash to CEIC an
amount equal to the Perry Unit 1 Decommissioning Shortfall.
(iii) If DLC determines that the private letter rulings described
in paragraphs (i)- (ii) will not be obtained, CEIC shall, at
the request of DLC, cooperate with DLC in requesting such
private letter rulings from the IRS or authorizations from
any other Governmental Authority prior to the DLC Nuclear
Closing Date that would permit DLC to transfer to CEIC or
permit DLC or CEIC, as applicable, to make one or more
contributions, as soon as possible after January 1, 1999, to
the Perry Unit 1 Qualified Decommissioning Funds or the CEIC
Qualified Decommissioning Funds, as applicable, in such
amounts that would provide to CEIC in Qualified Funds, the
equivalent, on an after-tax present value basis, of the
Perry Unit 1 Decommissioning Amount as determined in
paragraphs (i) and (ii) above. In the event that the rulings
or authorizations in this paragraph (iii) are not able to be
obtained or DLC otherwise determines not to pursue the
provisions of this paragraph (iii), DLC shall transfer to
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CEIC such amounts as provided pursuant to the provisions of
paragraphs (v)(A) and (B) below.
(iv) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Perry Unit 1 Qualified Decommissioning Funds
to be transferred to CEIC (or, if directed in writing to do
so by CEIC, to the trustee of any trust specified in such
written direction), provided that (A) CEIC shall contribute
all amounts received from the Perry Unit 1 Qualified
Decommissioning Funds into the CEIC Qualified
Decommissioning Funds, and (B) each of DLC and CEIC shall
have received private letter rulings from the IRS, or
opinions of counsel satisfactory to each of DLC and CEIC,
substantially to the effect that, pursuant to Treas. Reg.
section 1.468A-6, neither DLC nor CEIC nor any of the
applicable DLC Qualified Decommissioning Funds or CEIC
Qualified Decommissioning Funds shall recognize any gain or
otherwise take into account any income for federal income
tax purposes by reason of the transfer of the assets of the
Perry Unit 1 Qualified Decommissioning Funds.
(v) At the DLC Nuclear Closing Date, DLC shall, in respect of
any amounts for which an IRS private letter ruling pursuant
to paragraphs (i), (ii) or (iii) has not been received,
transfer an additional decommissioning payment to CEIC as
follows:
(A) If receipt of the additional decommissioning
payment by CEIC from DLC is not included in income for
federal income tax purposes or CEIC receives a deduction for
federal income tax purposes for the same year in which it
has such income, the additional decommissioning payment
("ADPNet") shall be ($21.6 million - AQF) (1.436). As used
in this paragraph (A) and paragraph (B)below, AQF shall mean
the additional qualifying fund deposits authorized by any
IRS ruling, including any qualified fund deposits made
between January 1, 1999 and the DLC Nuclear Closing Date;
provided, however, that ADPNet shall not be less than zero.
(B) If receipt of the additional decommissioning
payment by CEIC is included in income for federal income tax
purposes and CEIC does not receive a deduction for federal
income tax purposes for the same year in which it has such
income, the additional decommissioning payment ("ADPGross")
shall be ($21.6 million - AQF) (1.436) divided by 0.65;
provided, however, that ADPGross shall not be less than
zero.
Any additional decommissioning payment shall be payable in
cash or in additional Nonqualified Funds, and at the request
of DLC, CEIC shall contribute all payments received from DLC
into the CEIC Nonqualified Decommissioning Funds or the CEIC
Qualified Decommissioning Funds.
(b) Reporting
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Commencing on the date of this Agreement until the DLC
Nuclear Closing Date, DLC shall provide (or cause the
investment manager to provide) to CEIC quarterly unaudited
statements of earnings, contributions, market values,
investment allocations and performance reports and such
other information for the Perry Unit 1 Qualified
Decommissioning Funds as reasonably requested by CEIC.
6.20 Employee Morale. The Parties agree to work together in good faith
to preserve the morale of the employees at Beaver Valley prior to the DLC
Nuclear Closing Date in respect of Beaver Valley.
6.21 Beaver Valley Omnibus Services Agreement and Related Easements.
The Parties agree that they will work together in good faith during the Interim
Period to finalize the Beaver Valley Omnibus Services Agreement (including
Exhibit A thereto), and that the form thereof attached hereto may need to be
modified in order to take into account the reasonable operating needs of Beaver
Valley following the DLC Nuclear Closing Date. The Parties further agree that
they will work together to agree on an easement and access agreement,
substantially in the form of Exhibit K, to be executed at the time the Beaver
Valley Omnibus Services Agreement is executed, to provide DLC with the access
rights reasonably necessary to enable it to perform its obligations under the
Beaver Valley Omnibus Services Agreement.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of the Parties. The obligation of the
Parties to effect the transfer of the DLC Nuclear Assets in respect of each
Plant and the other transactions contemplated by this Agreement shall be subject
to the fulfillment or waiver by each of Specified FE Subsidiaries and DLC at or
prior to the DLC Nuclear Closing Date, of the following conditions in respect of
each Plant:
(a) The waiting period under the HSR Act applicable to the
consummation of the transfer of the DLC Nuclear Assets contemplated hereby shall
have expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transfer of the applicable DLC Nuclear Assets contemplated herein shall have
been issued and remain in effect (each Party agreeing to use its reasonable best
efforts to have any such injunction, order or decree lifted) and no statute,
rule or regulation shall have been enacted by any state or federal government or
Governmental Authority prohibiting the consummation of the transfer of the DLC
Nuclear Assets;
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(c) In respect of the DLC Nuclear Closing in respect of Beaver
Valley, DLC shall have terminated the Beaver Valley Facilities Leases and
assumed the Beaver Valley Unit 2 Indentures Notes issued pursuant to the Beaver
Valley Unit 2 Lease Indentures;
(d) The Applicable NRC Approval(s) shall have been obtained in
respect of the transfer of such Plant;
(e) The CAPCO Settlement Agreement shall have been executed by
DLC, the FE Subsidiaries and TEC;
(f) The Support Agreement shall have been executed by FE and
DLC;
(g) All consents or approvals, filings with, or notices to any
Governmental Authority that are necessary for the consummation of the
transactions contemplated by each of the CAPCO Settlement Agreement and the
Electric Facilities Agreement shall have been obtained or made, other than such
consents, approvals, filings or notices which are not required in the ordinary
course to be obtained or made prior to the consummation of the transactions
thereunder or which, if not obtained or made, will not prevent the parties
thereto from performing their material obligations thereunder; and
(h) There shall be no court order requiring DQE to consummate
the transactions contemplated under the Agreement and Plan of Merger between DQE
and Allegheny Energy, Inc.
7.2 Conditions to Obligations of DLC. The obligation of DLC to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment of the following conditions or the waiver thereof by DLC at or
prior to the DLC Nuclear Closing Date of the following conditions:
(a) DLC shall have received all Required Regulatory Approvals
applicable to DLC, in form and substance reasonably satisfactory to it and on
terms and conditions that do not create a Regulatory Material Adverse Effect for
DLC;
(b) All consents and approvals for the consummation of the
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the transfer of the applicable DLC Nuclear Assets contemplated
hereby required under the terms of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which Specified FE Subsidiaries
is a party or by which Specified FE Subsidiaries, or any of the applicable DLC
Nuclear Assets, may be bound, shall have been obtained, other than those which
if not obtained, would not, individually or in the aggregate, create a Material
Adverse Effect;
(c) Specified FE Subsidiaries shall have in all material
respects performed and complied with the covenants and agreements contained in
this Agreement which are required to be performed and complied with by Specified
FE Subsidiaries on or prior to the DLC Nuclear Closing Date;
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(d) The representations and warranties of Specified FE
Subsidiaries set forth in this Agreement shall be true and correct in all
material respects as of the DLC Nuclear Closing Date as though made at and as of
the DLC Nuclear Closing Date;
(e) DLC shall have received a certificate from authorized
officers of Specified FE Subsidiaries, dated the DLC Nuclear Closing Date, to
the effect that, to such officers' Knowledge, the conditions set forth in
Sections 7.2(c) and (d) have been satisfied by Specified FE Subsidiaries;
(f) DLC shall have received an opinion from counsel to each
Specified FE Subsidiary, dated the DLC Nuclear Closing Date and reasonably
satisfactory in form and substance to DLC and its counsel, substantially to the
effect that:
(i) Such Specified FE Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization and is qualified to do business in the Commonwealth of Pennsylvania
or State of Ohio, as the case may be, and has the full corporate power and
authority to own, lease and operate its material assets and properties and to
carry on its business as is now conducted, and to execute and deliver the
Agreement and each of the Ancillary Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby; and the execution
and delivery of the Agreement and the Ancillary Agreements to which it is a
party by such Specified FE Subsidiary, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action required on the part of such Specified FE Subsidiary;
(ii) The Agreement and each of the Ancillary Agreements
to which it is a party have been duly and validly executed and delivered by such
Specified FE Subsidiary and constitute legal, valid and binding agreements of
such Specified FE Subsidiary, enforceable against such Specified FE Subsidiary
in accordance with their terms, except that such enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity);
(iii) The execution, delivery and performance of the
Agreement and each of the Ancillary Agreements to which it is a party by the
applicable Specified FE Subsidiary does not (A) conflict with the Articles of
Incorporation or Bylaws, as currently in effect, of such Specified FE Subsidiary
or (B) to the knowledge of such counsel, constitute a violation of or default
under those agreements or instruments set forth on a Schedule attached to the
opinion and which have been identified to such counsel as all the agreements and
instruments which are material to the business or financial condition of such
Specified FE Subsidiary;
(iv) The Assignment and Assumption Agreement and other
transfer documents described in Section 3.6 are in proper form for each
Specified FE Subsidiary to assume its respective Assumed Liabilities; and
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(v) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and delivery of
this Agreement and each of the Ancillary Agreements by Specified FE Subsidiaries
or the consummation by Specified FE Subsidiaries of the transactions
contemplated hereby and thereby, other than (i) such consents, approvals,
filings or notices set forth in Schedules 4.3(a) or 4.3(b) or which, if not
obtained or made, will not prevent Specified FE Subsidiaries from performing
their material obligations under this Agreement and each of the Ancillary
Agreements to which it is a party and (ii) such consents, approvals, filings or
notices which become applicable to each Specified FE Subsidiary or the
applicable DLC Nuclear Assets as a result of the specific regulatory status of
DLC (or any of its Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which DLC (or any of its
Affiliates) is or proposes to be engaged.
In rendering the foregoing opinion, counsel to each Specified FE
Subsidiary may rely on opinions of local law reasonably acceptable to DLC.
(g) Specified FE Subsidiaries shall have delivered, or caused to
be delivered, to DLC at the DLC Nuclear Closing, Specified FE Subsidiaries
closing deliveries described in Section 3.6.
7.3 Conditions to Obligations of Specified FE Subsidiaries. The
obligation of Specified FE Subsidiaries to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or waiver by
Specified FE Subsidiaries at or prior to the DLC Nuclear Closing Date of the
following conditions:
(a) Specified FE Subsidiaries shall have received all Required
Regulatory Approvals applicable to Specified FE Subsidiaries on terms and
conditions that do not create a Regulatory Material Adverse Effect for Specified
FE Subsidiaries;
(b) All consents and approvals for the execution, delivery, and
performance of this Agreement and the Ancillary Agreements, and for the
consummation of the transfer of the applicable DLC Nuclear Assets contemplated
hereby required under the terms of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which DLC is a party or by which
DLC, or any of the DLC Nuclear Assets, may be bound, shall have been obtained,
other than those which if not obtained, would not, individually or in the
aggregate, create a Material Adverse Effect;
(c) DLC shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by DLC on or prior to the DLC Nuclear
Closing Date (including its covenant under Section 6.16(a) to terminate the
Beaver Valley Unit 2 Facility Leases and assume the obligations in respect of
the Beaver Valley Unit 2 Indentures Notes);
(d) The representations and warranties of DLC set forth in this
Agreement shall be true and correct in all material respects as of the DLC
Nuclear Closing Date as though made at and as of the DLC Nuclear Closing Date;
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(e) Specified FE Subsidiaries shall have received a certificate
from an authorized officer of DLC, dated the DLC Nuclear Closing Date, to the
effect that, to such officer's Knowledge, the conditions set forth in Sections
7.3(c) and (d) have been satisfied by DLC;
(f) Specified FE Subsidiaries shall have received an opinion
from DLC's counsel, dated the DLC Nuclear Closing Date and reasonably
satisfactory in form and substance to Specified FE Subsidiaries and its counsel,
substantially to the effect that:
(i) DLC is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has the full corporate power and authority to own, lease and operate its
material assets and properties and to carry on its business as is now conducted,
and to execute and deliver the Agreement and each of the Ancillary Agreements
and to consummate the transactions contemplated hereby and thereby; and the
execution and delivery of the Agreement and the Ancillary Agreements by DLC, and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action required on the
part of DLC;
(ii) The Agreement and each of the Ancillary Agreements
have been duly and validly executed and delivered by DLC and constitute legal,
valid and binding agreements of DLC, enforceable against DLC in accordance with
their terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity);
(iii) The execution, delivery and performance of the
Agreement and each of the Ancillary Agreements by DLC does not conflict with the
Articles of Incorporation or Bylaws, as currently in effect, of DLC;
(iv) The Assignment and Assumption Agreement, the Bill
of Sale, the Warranty Deeds, and other transfer documents described in Section
3.7 are in proper form to transfer to Specified FE Subsidiaries such title as
was held by DLC to the applicable DLC Nuclear Assets; and
(v) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and delivery of
this Agreement and each of the Ancillary Agreements by DLC, or the consummation
by DLC of the transactions contemplated hereby and thereby, other than (i) such
consents, approvals, filings or notices set forth in Schedules 4.3(a) or 4.3(b)
or which, if not obtained or made, will not prevent DLC from performing its
material obligations under this Agreement and each of the Ancillary Agreements
and (ii) such consents, approvals, filings or notices which become applicable to
DLC or the DLC Nuclear Assets as a result of the specific regulatory status of
Specified FE Subsidiaries (or any of their Affiliates) or as a result of any
other facts that specifically relate to the business or activities in which
Specified FE Subsidiaries (or any of their Affiliates) is or proposes to be
engaged.
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In rendering the foregoing opinion, DLC's counsel may rely on opinions
of local law reasonably acceptable to Specified FE Subsidiaries.
(g) DLC shall have delivered, or caused to be delivered, to
Specified FE Subsidiaries at the applicable DLC Nuclear Closing, DLC's closing
deliveries described in Section 3.7.
(h) With respect to Beaver Valley only, Penn Power shall have
received from a title insurance company ALTA title owner's insurance policies on
the Real Property, subject only to Permitted Encumbrances, standard printed
exceptions and such other Encumbrances as are reasonably acceptable to Penn
Power. Any Permitted Encumbrance not removed prior to the DLC Nuclear Closing
shall be deemed reasonably acceptable to Specified FE Subsidiaries as aforesaid
unless such Permitted Encumbrance would have a Material Adverse Effect. DLC
shall provide Specified FE Subsidiaries with a copy of a preliminary title
report and survey for the Real Property as soon as they are available.
ARTICLE VIII
INDEMNIFICATION
8.1 General Indemnification Obligations. Up to the DLC Nuclear
Closing Date, the indemnification provisions of the CAPCO Agreements shall be
applicable.
8.2 Indemnification and Release of DLC by Specified FE Subsidiaries.
(a) Each Specified FE Subsidiary severally with respect to
itself under this Agreement shall indemnify, defend and hold harmless DLC, its
officers, directors, employees, shareholders, Affiliates and agents (each, a
"DLC Indemnitee") from and against any and all Indemnifiable Losses asserted
against or suffered by any DLC Indemnitee (each, a "DLC Indemnifiable Loss") in
any way relating to, resulting from or arising out of (i) any breach by such
Specified FE Subsidiary of any covenant or agreement of such Specified FE
Subsidiary contained in this Agreement or the representations and warranties
contained in Sections 5.1, 5.2 and 5.3, (ii) the Assumed Liabilities, or (iii)
any Third Party Claims against a DLC Indemnitee arising out of or in connection
with such Specified FE Subsidiary's ownership or operation of the Plants and
other DLC Nuclear Assets on or after the DLC Nuclear Closing Date.
(b) Each Specified FE Subsidiary severally with respect to
itself under this Agreement, on behalf of its Representatives and Affiliates,
does hereby release, hold harmless and forever discharge DLC, DLC
Representatives and Affiliates of DLC, from any and all Specified FE
Subsidiaries Indemnifiable Losses resulting from, arising out of or relating to
Assumed Liabilities. Each Specified FE Subsidiary hereby waives for itself any
and all rights and benefits with respect to such Specified FE Subsidiaries'
Indemnifiable Losses that it now has, or in the future may have conferred upon
it 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 executing the release, if Knowledge of such
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claims would have materially affected such Party's settlement with the obligor.
In this connection, each Specified FE Subsidiary hereby acknowledges that it is
aware that factual matters now unknown to it may have given or may hereafter
give rise to Specified FE Subsidiaries' Indemnifiable Losses that are presently
unknown, unanticipated and unsuspected, and it further agrees that this release
has been negotiated and agreed upon in light of that awareness and nevertheless
hereby intends to release DLC, DLC Representatives and DLC Affiliates from the
Specified FE Subsidiaries' Indemnifiable Losses described in the first sentence
of this paragraph.
8.3 Indemnification of Specified FE Subsidiaries by DLC.
DLC shall indemnify, defend and hold harmless Specified FE
Subsidiaries, their officers, directors, employees, shareholders, Affiliates and
agents (each, a "Specified FE Subsidiaries' Indemnitee") from and against any
and all Indemnifiable Losses asserted against or suffered by any Specified FE
Subsidiaries' Indemnitee (each, a "Specified FE Subsidiaries' Indemnifiable
Loss") in any way relating to, resulting from or arising out of (i) any breach
by DLC of any covenant or agreement of DLC contained in this Agreement or the
representations and warranties contained in Sections 4.1, 4.2 and 4.3, (ii) the
Excluded Liabilities, (iii) noncompliance by DLC with any bulk sales or transfer
laws as provided in Section 10.13, and (iv) claims and liabilities associated
with the termination of the Beaver Valley Unit 2 Facility Leases as contemplated
by Section 6.16.
8.4 Certain Limitations on Indemnification.
(a) Notwithstanding anything to the contrary contained herein:
(i) Any Indemnitee shall use Commercially Reasonable
Efforts to mitigate all losses, damages and the like relating to a claim under
these indemnification provisions, including availing itself of any defenses,
limitations, rights of contribution, claims against third Persons and other
rights at law or equity. The Indemnitee's Commercially Reasonable Efforts shall
include the reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any loss or expenses for which indemnification would otherwise be due,
and the Indemnifying Party shall reimburse the Indemnitee for the Indemnitee's
reasonable expenditures in undertaking the mitigation.
(ii) Any Indemnifiable Loss shall be net of (i) the
dollar amount of any insurance or other proceeds actually receivable by the
Indemnitee or any of its Affiliates with respect to the Indemnifiable Loss, and
(ii) income tax benefits to the Indemnitee, to the extent realized by the
Indemnitee. Any Party seeking indemnity hereunder shall use Commercially
Reasonable Efforts to seek coverage (including both costs of defense and
indemnity) under applicable insurance policies with respect to any such
Indemnifiable Loss.
(b) The expiration, termination or extinguishment of any
covenant or agreement shall not affect the Parties' obligations under Sections
8.2 and 8.3 hereof if the Indemnitee provided the Indemnifying Party with proper
notice of the claim or event for which indemnification is sought prior to such
expiration, termination or extinguishment.
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(c) Except to the extent otherwise provided in Article VII, the
rights and remedies of DLC and each DLC Indemnitee and each of the Specified FE
Subsidiaries and each Specified FE Subsidiaries' Indemnitee under this Article
VIII are exclusive and in lieu of any and all other rights and remedies which
DLC and Specified FE Subsidiaries may have under this Agreement or otherwise for
monetary relief, with respect to (i) any breach of or failure to perform any
covenant, agreement, or representation or warranty set forth in this Agreement,
after the occurrence of the DLC Nuclear Closing, or (ii) the Assumed Liabilities
or the Excluded Liabilities, as the case may be. The indemnification obligations
of the Parties set forth in this Article VIII apply only to matters arising out
of this Agreement, but do not extend to matters arising out of the Ancillary
Agreements. Any Indemnifiable Loss arising under or pursuant to an Ancillary
Agreement shall be governed by the indemnification obligations, if any,
contained in the Ancillary Agreement under which the Indemnifiable Loss arises.
(d) Notwithstanding anything to the contrary contained herein,
no Party (including an Indemnitee) shall be entitled to recover from any other
Party (including an Indemnifying Party) for any liabilities, damages,
obligations, payments, losses, costs, or expenses under this Agreement any
amount in excess of the actual compensatory damages, court costs and reasonable
attorney's and other advisor fees suffered by such Party. DLC and Specified FE
Subsidiaries waive any right to recover punitive, incidental, special, exemplary
and consequential damages arising in connection with or with respect to this
Agreement. The provisions of this Section 8.4(d) shall not apply to
indemnification for a Third Party Claim.
8.5 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion or
commencement of any Third Party Claim made or brought by any Person who is not a
Party to this Agreement or any Affiliate of a Party to this Agreement with
respect to which indemnification is to be sought from an Indemnifying Party, the
Indemnitee shall give such Indemnifying Party reasonably prompt written notice
thereof, but in any event such notice shall not be given later than ten (10)
calendar days after the Indemnitee's receipt of notice of such Third Party
Claim. Such notice shall describe the nature of the Third Party Claim in
reasonable detail and shall indicate the estimated amount, if practicable, of
the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The
Indemnifying Party will have the right to participate in or, by giving written
notice to the Indemnitee, to elect to assume the defense of any Third Party
Claim at such Indemnifying Party's expense and by such Indemnifying Party's own
counsel, provided that the counsel for the Indemnifying Party who shall conduct
the defense of such Third Party Claim shall be reasonably satisfactory to the
Indemnitee. The Indemnitee shall cooperate in good faith in such defense at such
Indemnitee's own expense. If an Indemnifying Party elects not to assume the
defense of any Third Party Claim, the Indemnitee may compromise or settle such
Third Party Claim over the objection of the Indemnifying Party, which settlement
or compromise shall conclusively establish the Indemnifying Party's liability
pursuant to this Agreement.
(b) (i) If, within ten (10) calendar days after an
Indemnitee provides written notice to the Indemnifying Party of any Third Party
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Claims, the Indemnitee receives written notice from the Indemnifying Party that
such Indemnifying Party has elected to assume the defense of such Third Party
Claim as provided in Section 8.5(a), the Indemnifying Party will not be liable
for any legal expenses subsequently incurred by the Indemnitee in connection
with the defense thereof; provided, however, that if the Indemnifying Party
shall fail to take reasonable steps necessary to defend diligently such Third
Party Claim within twenty (20) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense and the Indemnifying
Party shall be liable for all reasonable expenses thereof.
(ii) Without the prior written consent of the
Indemnitee, the Indemnifying Party shall not enter into any settlement of any
Third Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder. If a firm offer is made to settle a Third
Party Claim without leading to liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party shall give written notice
to the Indemnitee to that effect. If the Indemnitee fails to consent to such
firm offer within ten (10) calendar days after its receipt of such notice, the
Indemnifying Party shall be relieved of its obligations to defend such Third
Party Claim and the Indemnitee may contest or defend such Third Party Claim. In
such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will be the amount of such settlement offer plus reasonable costs
and expenses paid or incurred by Indemnitee up to the date of said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event such notice shall not be
given later than ten (10) calendar days after the Indemnitee becomes aware of
such Direct Claim, and the Indemnifying Party shall have a period of thirty (30)
calendar days within which to respond to such Direct Claim. If the Indemnifying
Party does not respond within such thirty (30) calendar day period, the
Indemnifying Party shall be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its right to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by, from or
against any other entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with interest thereon
from the date of payment thereof at the publicly announced prime rate then in
effect of The Chase Manhattan Bank) shall promptly be repaid by the Indemnitee
to the Indemnifying Party.
(e) A failure to give timely notice as provided in this Section
8.5 shall not affect the rights or obligations of any Party hereunder except if,
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and only to the extent that, as a result of such failure, the Party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.
ARTICLE IX
TERMINATION
9.1 Termination. (a) This Agreement may be terminated at any time
prior to the DLC Nuclear Closing Date by mutual written consent of DLC and the
Specified FE Subsidiaries.
(b) This Agreement may be terminated by either Party if (i) any
Federal or state court of competent jurisdiction shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the DLC Nuclear Closing, and such order, judgment or decree shall have become
final and nonappeallable; (ii) any statute, rule, order or regulation shall have
been enacted or issued by any Governmental Authority which prohibits the
consummation of the DLC Nuclear Closing; or (iii) the DLC Nuclear Closing
contemplated hereby shall have not occurred on or before the day which is 12
months from the date of this Agreement (the "Termination Date"); provided that
the right to terminate this Agreement under this Section 9.1(b) (iii) shall not
be available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the DLC Nuclear
Closing to occur on or before such date; and provided, further, that if on the
Termination Date the conditions to the DLC Nuclear Closing set forth in Section
7.1(b) or 7.2(a) or 7.3(a), shall not have been fulfilled but all other
conditions to the DLC Nuclear Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be the day which is 18 months
from the date of this Agreement.
(c) This Agreement may be terminated by DLC if it shall have
received a Final Order that has caused the conditions set forth in Section
7.2(a) not to be satisfied.
(d) This Agreement may be terminated by Specified FE
Subsidiaries if they (or either one of them) shall have received a Final Order
that has caused the conditions set forth in Section 7.3(a) not to be satisfied.
(e) This Agreement may be terminated by either Party if, before
the DLC Nuclear Closing Date, all or any portion of the DLC Nuclear Assets are
(i) taken by eminent domain or are the subject of a pending or (to the Knowledge
of DLC with respect such DLC Nuclear Assets) contemplated taking which has not
been consummated or (ii) damaged or destroyed by fire or other casualty, DLC
shall (x) notify the applicable Specified FE Subsidiary promptly in writing of
such fact, (y) assign or pay, as the case may be, any proceeds thereof to the
applicable Specified FE Subsidiary at the DLC Nuclear Closing, and (z) either
restore the damage or assign the insurance proceeds therefor (and pay the amount
of any deductible and/or self-insured amount in respect of such casualty) to the
applicable Specified FE Subsidiary at the DLC Nuclear Closing. Notwithstanding
the above, if such casualty or loss results in a Material Adverse Effect to DLC
with respect to the DLC Nuclear Assets being conveyed by DLC, the Parties shall
negotiate to settle the loss resulting from such taking (and such negotiation
shall include, without limitation, the negotiation of a fair and equitable
payment to the applicable Specified FE Subsidiary to offset such casualty or
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loss). If no such settlement is reached within sixty (60) days after DLC has
notified the applicable Specified FE Subsidiary of such casualty or loss, then
DLC may terminate this Agreement. In the event of damage or destruction which
DLC elects to restore, DLC will have the right (with respect to the DLC Nuclear
Assets being conveyed by DLC) to postpone the DLC Nuclear Closing for up to six
(6) months, and the applicable Specified FE Subsidiary will have the right to
inspect and observe, or have its Representatives inspect or observe, all repairs
necessitated by any such damage or destruction.
(f) This Agreement may be terminated by DLC if there has been a
violation or breach by a Specified FE Subsidiary of any covenant, representation
or warranty contained in this Agreement which has resulted in a Material Adverse
Effect and such violation or breach is not cured (and the applicable Material
Adverse Effect remedied) by the earlier of the DLC Nuclear Closing Date or the
date which is thirty (30) days after receipt by Specified FE Subsidiaries of
notice specifying particularly such violation or breach, and such violation or
breach has not been waived by DLC.
(g) This Agreement may be terminated by Specified FE
Subsidiaries if there has been a violation or breach by DLC of any covenant,
representation or warranty contained in this Agreement which has resulted in a
Material Adverse Effect and such violation or breach is not cured (and the
applicable Material Adverse Effect remedied) by the earlier of the DLC Nuclear
Closing Date or the date which is thirty (30) days after receipt by DLC of
notice specifying particularly such violation or breach, and such violation or
breach has not been waived by Specified FE Subsidiaries provided, however, that
in no event shall DLC's entry into a commitment described in Section 6.1(d)
constitute a basis for termination under this clause (g).
9.2 Procedure and Effect of No-Default Termination. In the event of
termination of this Agreement by either or both of the Parties pursuant to any
of Section 9.1(a) through (e), written notice thereof shall forthwith be given
by the terminating party to the other party, whereupon the liabilities of the
Parties hereunder will terminate, except as otherwise expressly provided in this
Agreement, and thereafter neither Party shall have any recourse against the
other by reason of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of DLC and Specified FE
Subsidiaries.
10.2 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
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10.3 No Survival. (a) Except as provided in Section 10.3(b) and
10.3(c), each and every representation, warranty and covenant contained in this
Agreement shall expire with, and be terminated and extinguished by the
consummation of the sale of the DLC Nuclear Assets and shall merge into the
deed(s) pursuant hereto and the transfer of the Assumed Liabilities pursuant to
this Agreement and such representations, warranties and covenants shall not
survive the DLC Nuclear Closing Date; and none of DLC, either Specified FE
Subsidiary or any officer, director, trustee or Affiliate of any of them shall
be under any liability whatsoever with respect to any such representation,
warranty or covenant.
(b) The covenants contained in Sections 3.2(c), 3.2(d), 3.4,
3.5, 6.2(a), 6.3(a), 6.5, 6.6, 6.7(e), 6.7(f), 6.8, 6.9, 6.11, 6.14, 6.16, 6.17,
9.2, and in Articles VIII and IX shall survive the delivery of the deed(s) and
the DLC Nuclear Closing in accordance with their terms.
(c) The representations, warranties and disclaimers contained in
Sections 4.1, 4.2, 4.3, 5.1, 5.2, 5.3, and claims arising under 6.7(e) shall
survive the DLC Nuclear Closing for eighteen (18) months from the DLC Nuclear
Closing Date.
10.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
specified by like notice; provided however, that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to DLC, to:
Duquesne Light Company
411 Seventh Avenue
Pittsburgh, PA 15219
Telephone: (412) 393-6000
Fax: (412) 393-6760
Attention: Morgan O'Brien
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, DC 20005
Telephone: (202) 371-7000
Fax: (202) 393-5760
Attention: Erica A. Ward
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(b) if to either Specified FE Subsidiary, to:
FirstEnergy Corp.
76 South Main Street
Akron, OH 44308
Telephone:
Fax:
Attention: Anthony J. Alexander
with a copy to:
Winthrop, Stimpson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Telephone: (212) 858-1000
Fax: (212) 858-1500
Attention: Michael F. Cusick
10.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any Party
hereto, including by operation of law, without the prior written consent of each
other Party, nor is this Agreement intended to confer upon any other Person
except the Parties hereto any rights, interests, obligations or remedies
hereunder. Except as expressly provided herein, no provision of this Agreement
shall create any third party beneficiary rights in any employee or former
employee of DLC (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 except as expressly provided for thereunder. DLC agrees, at the
expense of Specified FE Subsidiaries, 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 DLC's
rights under this Agreement are not thereby altered, amended, diminished or
otherwise impaired.
10.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the Commonwealth of Pennsylvania (without giving
effect to conflict of law principles) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies
(except to such matters of real estate law that must be governed by the laws of
the State of Ohio). THE PARTIES HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS
AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE
STATE AND FEDERAL COURTS IN AND FOR PITTSBURGH, PENNSYLVANIA, WHICH COURTS SHALL
HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
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PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN ANY MANNER RECOGNIZED BY SUCH
COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Interpretation. The articles, section and schedule headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
10.9 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
10.10 Entire Agreement. This Agreement and the Ancillary Agreements,
including the Exhibits, Schedules, documents, certificates and instruments
referred to herein or therein, embody the entire agreement and understanding of
the Parties hereto in respect of the transactions contemplated by this
Agreement. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein or therein. This Agreement and the Ancillary Agreements supersede all
prior agreements and understandings between the Parties with respect to such
transactions (including the Agreement in Principle).
10.11 U.S. Dollars. Unless otherwise stated, all dollar amounts set
forth herein are United States (U.S.) dollars.
10.12 Sewage Facilities. Pursuant to the provisions of the Pennsylvania
Sewage Facilities Act, 35 P.S. section 750.7a, Penn Power is notified that a
"community sewage system" (as defined in Section 2 of the Sewage Facilities Act,
35 P.S. section 750.2) is not available on one or more lots comprising part of
the Real Property at the facilities list in Schedule 10.12. Prior to
construction of any buildings on such lots, a permit to connect to a community
sewage system or a permit for installation of an individual sewage system must
be obtained pursuant to Section 7 of the Sewage Facilities Act, 35 P.S. section
750.7. Before signing this Agreement, Penn Power should contact the local agency
charged with administering the Sewage Facilities Act in the area of each such
facility and lot(s) to determine the procedure and requirements for obtaining a
permit for an individual or community sewage system to service such lot(s), if
required for the intended uses and purposes of such lot(s).
10.13 Bulk Sales Laws. Each Specified FE Subsidiary acknowledges that,
notwithstanding anything in this Agreement to the contrary, DLC will not comply
with the provision of the bulk sales laws of any jurisdiction in connection with
the transactions contemplated by this Agreement. Each Specified FE Subsidiary
hereby waives compliance by DLC with the provisions of the bulk sales laws of
all applicable jurisdictions.
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IN WITNESS WHEREOF, DLC and Specified FE Subsidiaries have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
DUQUESNE LIGHT COMPANY
By: /s/ Morgan K. O'Brien
-----------------------------------
Name: Morgan K. O'Brien
Title: Vice President, Finance
PENNSYLVANIA POWER COMPANY
By: /s/ Anthony J. Alexander
-----------------------------------
Name: Anthony J. Alexander
Title: Executive Vice President
and General Counsel
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By: /s/ Anthony J. Alexander
-----------------------------------
Name: Anthony J. Alexander
Title: Executive Vice President
and General Counsel
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Exchange Agreement
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of Bill of Sale
Exhibit D Form of FE Support Agreement
Exhibit E Form of FIRPTA Affidavit
Exhibit F Form of Beaver Valley Omnibus Services Agreement
Exhibit G Form of Special Warranty Deed
Exhibit H Form of CAPCO Settlement Agreement
Exhibit I Form of Beaver Valley Unit 2 Indentures Support
Agreement
Exhibit J Form of Amendment 2 to the CAPCO Perry Unit 1 Operating
Agreement
Exhibit K Form of Easement Agreement
SCHEDULES
1.1(15) Beaver Valley CAPCO Agreements
1.1(33) Beaver Valley Unit 2 Lease Indentures Documents
1.1(56) Common CAPCO Agreements
1.1(57) Common Facility Assets
1.1(68) DLC Beaver Valley Emergency Preparedness Agreements
1.1(104) Exempt Facilities
1.1(156) Permitted Encumbrances
1.1(157) Perry CAPCO Agreements
1.1(182) Real and Personal Property Comprising the Decommissioned
Shippingport Atomic Power Station
1.1(202) Transferable Permits (both environmental and non-environmental)
2.1(a) DLC Real Property
2.1(c) Tangible Personal Property
2.1(i) Unexpired, Transferrable Warranties and Guarantees from Third
Parties
2.1(l) Intellectual Property
2.2(a) Beaver Valley Switchyard Assets
2.2(l) Excepted Beaver Valley Telecommunications Equipment
2.3(d) Agreements or Consent Orders
2.7 Inventories to be Transferred and Total Net Book Value
2.11 Perry Unit 1 Property Tax Litigation
4.3(a) DLC Conflicts/Defaults/Violations
4.3(b) DLC Required Regulatory Approvals
4.4(b) Shippingport Atomic Power Station Insurance Coverage
4.5 Real Property Leases
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4.6(a) Perry Unit 1 Environmental Matters
4.6(b) Beaver Valley Environmental Matters
4.7 Description of Real Property
4.8 Notices of Condemnation
4.9(a)(i) Perry Unit 1 List of Contracts
4.9(a)(ii) Material Exceptions and Required Consents to Perry Unit 1
Contracts
4.9(a)(iii) Material Defaults under Perry Unit 1 Contracts
4.9(b)(i) Beaver Valley List of Contracts
4.9(b)(ii) Material Exceptions and Required Consents to Beaver Valley
Contracts
4.9(b)(iii) Material Defaults under Beaver Valley Contracts
4.10 Legal Proceedings
4.11(a)(i) Perry Unit 1 Permit Violations
4.11(a)(ii) Perry Unit 1 Material Permits
4.11(b)(i) Beaver Valley Permit Violations
4.11(b)(ii) Beaver Valley Material Permits
4.12 Tax Matters
4.13 Intellectual Property
4.19 Beaver Valley Labor Matters
4.20 Beaver Valley Benefit Plans
4.21 Matters Relating to Qualified Decommissioning Funds
4.22 Matters Relating to Nonqualified Decommissioning Funds
4.23(a) DLC Nuclear Law Matters Relating to Perry Unit 1
4.23(b) DLC Nuclear Law Matters Relating to Beaver Valley
5.3(a) Specified FE Subsidiaries' Conflicts/Defaults/Violations
5.3(b) Specified FE Subsidiaries' Required Regulatory Approvals
5.4 List of Specified FE Subsidiaries' Litigation
5.8(a) Specified FE Subsidiaries' Nuclear Law Matters Relating to Beaver
Valley
5.8(b) Specified FE Subsidiaries' Nuclear Law Matters Relating to Perry
Unit 1
6.11(a) Specified Individual Employees
6.11(c) DLC Non-Union Employees
6.11(d) DLC Collective Bargaining Agreements for DLC Nuclear Assets
6.16(a) Penn Power Actions in Respect of Beaver Valley Unit 2 Lease
Indentures
10.12 Sewage Facilities
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................ 2
1.1 Definitions............................................. 2
1.2 Certain Interpretive Matters............................ 24
1.3 CAPCO Agreements to Govern.............................. 24
1.4 DLC's Interest in Assets................................ 24
ARTICLE II
CONVEYANCE OF DLC NUCLEAR ASSETS....................................... 25
2.1 Transfer of DLC Nuclear Assets.......................... 25
2.2 Excluded Assets......................................... 26
2.3 Assumed Liabilities..................................... 28
2.4 Excluded Liabilities.................................... 30
2.5 Control of Litigation................................... 31
2.6 Fuel Supplies........................................... 32
2.7 Inventories............................................. 32
2.8 [Intentionally Omitted.]................................ 32
2.9 Spent Nuclear Fuel Fees and Ownership .................. 32
2.10 Department of Energy Decontamination and
Decommissioning Fees.................................... 33
2.11 Property Tax Litigation................................. 33
ARTICLE III
THE DLC NUCLEAR CLOSING................................................ 33
3.1 DLC Nuclear Closing..................................... 33
3.2 Calculation of DLC Nuclear Closing Payments............. 34
3.3 Payment of DLC Nuclear Closing Payment.................. 35
3.4 Prorations.............................................. 35
3.5 Audit Cooperation....................................... 36
3.6 Deliveries by Specified FE Subsidiaries................. 36
3.7 Deliveries by DLC....................................... 37
3.8 Work in Progress........................................ 39
3.9 Ancillary Agreements.................................... 39
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC..................... 39
4.1 Incorporation; Qualification............................ 39
4.2 Authority............................................... 39
4.3 Consents and Approvals; No Violation.................... 40
4.4 Insurance............................................... 40
4.5 DLC Real Property Leases................................ 40
4.6 Environmental Matters................................... 40
4.7 Real Property........................................... 42
4.8 Condemnation............................................ 42
4.9 Contracts and Leases.................................... 42
4.10 Legal Proceedings....................................... 43
4.11 Permits................................................. 43
4.12 Taxes................................................... 44
4.13 Intellectual Property................................... 44
4.14 Compliance With Laws.................................... 44
4.15 DISCLAIMERS REGARDING DLC NUCLEAR ASSETS................ 44
4.16 Year 2000 Compliance.................................... 45
4.17 [Intentionally Omitted.]................................ 45
4.18 Capital Expenditures.................................... 45
4.19 Labor Matters........................................... 45
4.20 Benefit Plans; ERISA.................................... 46
4.21 DLC Qualified Decommissioning Funds..................... 46
4.22 DLC Nonqualified Decommissioning Funds.................. 48
4.23 DLC Nuclear Law Matters................................. 49
ARTICLE V
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SPECIFIED FE
SUBSIDIARIES........................................................... 50
5.1 Incorporation; Qualification............................ 50
5.2 Authority............................................... 50
5.3 Consents and Approvals; No Violation.................... 50
5.4 Legal Proceedings....................................... 51
5.5 [Intentionally Omitted]................................. 51
5.6 WARN Act................................................ 51
5.7 Regulatory Status of Specified FE Subsidiaries.......... 51
5.8 Specified FE Subsidiaries' Nuclear Law Matters.......... 51
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ARTICLE VI
COVENANTS OF THE PARTIES............................................... 52
6.1.1 Interim Operation of Beaver Valley...................... 52
6.1.2 Interim Operation of Perry Unit 1....................... 54
6.2 Access to Information................................... 54
6.3 Confidentiality......................................... 54
6.4 Public Statements....................................... 55
6.5 Expenses................................................ 55
6.6 Further Assurances...................................... 55
6.7 Consents and Approvals.................................. 56
6.8 Fees and Commissions.................................... 58
6.9 Tax Matters............................................. 58
6.10 Advice of Changes....................................... 59
6.11 DLC Employees........................................... 59
6.12 Risk of Loss............................................ 64
6.13 CAPCO Agreements........................................ 64
6.14 Refund of Accrued Interest in Insurance Premiums........ 64
6.15 Operating Control....................................... 64
6.16 Beaver Valley Unit 2 Facility Leases.................... 64
6.17 Tax Exempt Financing.................................... 65
6.18 Removal at Shippingport Site Buildings.................. 67
6.19 Decommissioning Funds................................... 67
6.19.1 Beaver Valley Unit 1 Decommissiong Funds................ 67
6.19.2 Beaver Valley Unit 2 Decommissiong Funds................ 70
6.19.3 Perry Unit 1 Decommissioning Funds...................... 73
6.20 Employee Morale......................................... 75
6.21 Beaver Valley Omnibus Services Agrement and Related
Easements............................................... 75
ARTICLE VII
CONDITIONS............................................................. 76
7.1 Conditions to Obligations of the Parties................ 76
7.2 Conditions to Obligations of DLC........................ 76
7.3 Conditions to Obligations of Specified FE Subsidiaries.. 78
ARTICLE VIII
INDEMNIFICATION........................................................ 80
8.1 General Indemnification Obligations..................... 80
8.2 Indemnification and Release of DLC by Specified FE
Subsidiaries............................................ 80
8.3 Indemnification of Specified FE Subsidiaries by DLC..... 81
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8.4 Certain Limitations on Indemnification.................. 81
8.5 Defense of Claims....................................... 82
ARTICLE IX
TERMINATION............................................................ 84
9.1 Termination............................................. 84
9.2 Procedure and Effect of No-Default Termination.......... 85
ARTICLE X
MISCELLANEOUS PROVISIONS............................................... 86
10.1 Amendment and Modification.............................. 86
10.2 Waiver of Compliance; Consents.......................... 86
10.3 No Survival............................................. 86
10.4 Notices................................................. 86
10.5 Assignment.............................................. 87
10.6 Governing Law........................................... 87
10.7 Counterparts............................................ 88
10.8 Interpretation.......................................... 88
10.9 Schedules and Exhibits.................................. 88
10.10 Entire Agreement........................................ 88
10.11 U.S. Dollars............................................ 88
10.12 Sewage Facilities....................................... 88
10.13 Bulk Sales Laws. ...................................... 89
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EXHIBIT 99.1
NEWS Duquesne
Light
411 Seventh Avenue
Pittsburgh, PA 15219
CONTACT: Barry Kukovich FOR IMMEDIATE RELEASE
(412)-393-4060
DUQUESNE LIGHT, FIRSTENERGY EXCHANGE POWER PLANT INTERESTS
Pittsburgh, PA -- March 26, 1999 - Duquesne Light Company announced today that
it has executed definitive agreements providing for the exchange of its partial
interests in five power generation stations for three wholly-owned generating
facilities from FirstEnergy Corp. The three fossil-fired plants that Duquesne
will receive have an aggregate net demonstrated capacity of 1,323 MW and two of
those plants, Avon Lake and Niles, are located in Ohio while the other facility,
New Castle, is located in Western Pennsylvania. The ownership interests
transferred by Duquesne to FirstEnergy include the Beaver Valley and Perry
nuclear stations and the fossil-fired Mansfield, Eastlake and Sammis plants
which represent an aggregate net demonstrated capacity of 1,400 MW. The five
plants are all co-owned by FirstEnergy which operates each of the facilities
with the exception of Beaver Valley.
The generation swap with FirstEnergy is another significant step in Duquesne's
effort to strategically reposition the company. Duquesne will incorporate its
three new facilities into a portfolio of generating assets totaling 2,614 MW to
be divested in a formal auction process set to begin in April 1999. Duquesne
will also include four wholly-owned, fossil-fired stations (Cheswick, Elrama,
Brunot Island and Phillips) located in and around the city of Pittsburgh in its
auction. Duquesne's asset auction will be the first of its kind in the ECAR
market, which serves customers in all or a portion of seven Midwestern states.
The proceeds from the auction will be used to mitigate Duquesne's stranded
costs.
Duquesne will also be conducting a parallel auction process for all its retail
supply business, which represents the opportunity to supply the provider of last
resort service (POLR), at pre-determined fixed rates, for all of Duquesne's
580,000 customers who do not choose an alternative generation supplier. The
auction of Duquesne's retail supply business is notable because it is the first
auction of its type outside of the New England region and it would be one of the
largest single market transactions ever. The concurrent auction of Duquesne's
generating assets and retail supply business is a unique opportunity for a
purchaser to acquire the first competitive integrated energy supply business in
the U.S.
Certain aspects of the generation swap are subject to regulatory approvals by
agencies including the Pennsylvania Public Utility Commission, Federal Energy
Regulatory Commission and the Nuclear Regulatory Commission. Duquesne
anticipates making the requisite regulatory filings before these agencies in
April 1999. The swap is expected to close by year end 1999.
