UNITED STATES
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
Date of Report (Date of earliest event reported) November 2, 1998
THE MONTANA POWER COMPANY
(Exact name of registrant as specified in its charter)
Montana 1-4566 81-0170530
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
40 East Broadway, Butte, Montana 59701
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (406) 723-5421
Exhibit Index is found on page 5.
ITEM 5. Other Events.
Sale of Generation Assets
On November 2, 1998, The Montana Power Company (the Company) announced
that it had entered into a definitive Asset Purchase Agreement (the Agreement)
with PP&L Global, Inc., a Pennsylvania corporation (PP&L Global), a subsidiary
of PP&L Resources, Inc., a Pennsylvania corporation, in which PP&L Global
agreed to purchase for cash from the Company 1,556 megawatts of electric
generating assets in Montana and certain Colstrip associated high-voltage
transmission lines.
Under the Agreement, PP&L Global agreed to purchase the Company's
interest in: (i) eleven (11) hydroelectric facilities plus a storage
reservoir totaling 577 MW; (ii) various power purchase and exchange
agreements; (iii) the J.E. Corette coal-fired facility totaling 163 MW; (iv)
Colstrip Units 1 and 2 totaling 333 MW; and (v) Colstrip Units 3 and 4
totaling 483 MW. Proceeds from the sale will vary depending upon various
factors, and are anticipated to be between $740 million and $1.05 billion.
In two related transaction, PP&L agreed to purchase from Puget Sound
Energy, Inc., a Washington corporation, and Portland General Electric Conpany,
an Oregon corporation, their respective interests totaling 1058 MW at the
four-unit Colstrip plant. The interests of Washington Water Power and Pacific
Power & Light in the Colstrip unit totaling 402 MW were not part of this
transaction.
These sales are subject to the satisfaction of various conditions and
the receipt of required regulatory approvals. The Company anticipates this
transaction will be completed by the end of 1999.
Stock Repurchase Program
The Company's Board of Directors has authorized a share repurchase
program over the next five years to repurchase up to 10 million shares, or 18
percent, of the company's outstanding common stock. As of the end of the
third quarter of 1998, Montana Power had 55,024,778 common shares outstanding.
The repurchase of common stock may be made, from time to time, on the open
market or in privately negotiated transactions. The number of shares to be
purchased and the timing of the purchases will be based on the level of cash
balances, general business conditions and other factors, including alternative
investment opportunities.
This Form 8-K contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements should be read with the cautionary statements and important factors
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 at Item 7, "Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Safe Harbor for Forward-
Looking Statements." Forward-looking statements are all statements other than
statements of historical fact, including without limitation those that are
identified by the use of the words "expects," "believes," "anticipates" and
similar expressions.
ITEM 7. Exhibits.
2a Asset Purchase Agreement
10a Colstrip Unit #3 Wholesale Transition Service Agreement
10b Non-Colstrip Unit #3 Wholesale Transition Service Agreement
10c Generation Interconnection Agreement
10d Equity Contribution Agreement
99a Press Release - "Montana Power Announces Sale of Generating Plants"
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE MONTANA POWER COMPANY
(Registrant)
By /s/ J. P. Pederson
J. P. Pederson
Vice President and Chief
Financial and Information Officer
Dated: November 6, 1998
Exhibit Index
Exhibit Page
2a Asset Purchase Agreement 6
10a Colstrip Unit #3 Wholesale Transition Service Agreement 104
10b Non-Colstrip Unit #3 Wholesale Transition Service Agreement 131
10c Generation Interconnection Agreement 158
10d Equity Contribution Agreement 199
99b Press Release - "Montana Power Announces Sale of Generating
Plants" 299
Exhibit 2a
ASSET PURCHASE AGREEMENT
dated as of October 31, 1998
by and between
PP&L GLOBAL, INC.
and
THE MONTANA POWER COMPANY
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it
is attached but is inserted for convenience only.
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 The Sale 1
1.02 Liabilities 6
1.03 Purchase Price; Allocation 8
1.04 Purchase Price Adjustment 8
1.05 Closing; Additional Purchase Price Payments 9
1.06 Prorations 11
1.07 Further Assurances 11
1.08 Third Party Consents 13
1.09 Insurance Proceeds 13
1.10 Inclusion/Exclusion of Certain Assets 13
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Corporate Existence of Seller 16
2.02 Authority 16
2.03 No Conflicts 16
2.04 Governmental Approvals and Filings 17
2.05 Reports 17
2.06 Taxes 17
2.07 Legal Proceedings 18
2.08 Compliance with Laws and Orders 18
2.09 Benefit Plans; ERISA 18
2.10 Real Property 19
2.11 Tangible Personal Property 20
2.12 Intellectual Property Rights 20
2.13 Contracts 21
2.14 Licenses 22
2.15 Insurance 22
2.16 Labor Relations 23
2.17 Environmental Matters 23
2.18 Absence of Condemnation Proceedings 24
2.19 Regulation as a Utility 24
2.20 Brokers 24
2.21 Year 2000 24
2.22 Disclaimers Regarding Assets 24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Corporate Existence 25
3.02 Authority 25
3.03 No Conflicts 25
3.04 Governmental Approvals and Filings 26
3.05 Legal Proceedings 26
3.06 Compliance with Laws and Orders 26
3.07 Regulation as a Utility 26
3.08 Brokers 26
3.09 Financing 27
3.10 Financial Statements 27
3.11 Opportunity to Inspect Assets 27
ARTICLE IV
COVENANTS OF SELLER
4.01 Regulatory and Other Approvals 27
4.02 HSR Filings 28
4.03 Investigation by Purchaser 28
4.04 No Solicitations 29
4.05 Conduct of Business 29
4.06 Employee Matters 29
4.07 Certain Restrictions 31
4.08 Security Deposits 32
4.09 Delivery of Books and Records, etc.; Removal of Property 32
4.10 Fulfillment of Conditions 32
4.11 Observation, Inspection and Participation 32
4.12 Notice of Breach 33
4.13 Bridge Financing Fees 33
4.14 Special Maintenance and Capital Expenditures 33
ARTICLE V
COVENANTS OF PURCHASER
5.01 Regulatory and Other Approvals 34
5.02 HSR Filings 34
5.03 Employees 35
5.04 PPUC Approval for Holding Company 38
5.05 Notice of Breach 38
5.06 Fulfillment of Conditions 38
5.07 Tax-Exempt Bond Financed Pollution Control Facilities 38
5.08 Purchaser Financing 39
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
6.01 Representations and Warranties 39
6.02 Performance 39
6.03 Officers' Certificates 39
6.04 Orders and Laws 40
6.05 Regulatory Consents and Approvals 40
6.06 Third Party Consents 40
6.07 Colstrip Rights of First Refusal 40
6.08 No Seller Material Adverse Effect 40
6.09 Proceedings 40
6.10 Deliveries 40
6.11 Colstrip Operations Arrangements 40
6.12 Purchaser Financing 41
6.13 Opinion of Counsel 41
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
7.01 Representations and Warranties 41
7.02 Performance 41
7.03 Officers' Certificates 41
7.04 Orders and Laws 41
7.05 Regulatory Consents and Approvals 41
7.06 Third Party Consents 42
7.07 Collective Bargaining Agreements 42
7.08 No Purchaser Material Adverse Effect 42
7.09 Proceedings 42
7.10 Colstrip Rights of First Refusal 42
7.11 Opinion of Counsel 42
7.12 Deliveries 42
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes 43
8.02 Returns with respect to Prorated Taxes 43
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 Survival of Representations, Warranties, Covenants and Agreements 43
9.02 No Other Representations 44
ARTICLE X
INDEMNIFICATION
10.01 Other Indemnification 44
10.02 Method of Asserting Claims 47
10.03 Exclusivity 50
10.04 Purchaser's Release of Seller under the Colstrip Contracts. 50
ARTICLE XI
TERMINATION
11.01 Termination 50
11.02 Effect of Termination 51
ARTICLE XII
DEFINITIONS
12.01 Definitions 52
ARTICLE XIII
MISCELLANEOUS
13.01 Notices 68
13.02 Bulk Sales Act 69
13.03 Entire Agreement 69
13.04 Expenses 69
13.05 Public Announcements 69
13.06 Confidentiality 70
13.07 Waiver 70
13.08 Amendment 71
13.09 No Third Party Beneficiary 71
13.10 No Assignment; Binding Effect 71
13.11 Headings 71
13.12 Invalid Provisions 71
13.13 Governing Law 72
13.14 Counterparts 72
EXHIBITS
Exhibit A General Assignment and Bill of Sale
Exhibit B Assumption Agreement
Exhibit C Pollution Control Facilities
Exhibit D Officer's Certificate of Seller
Exhibit E Secretary's Certificate of Seller
Exhibit F-1 Colstrip Unit Number 3 Wholesale Transition Service
Agreement
Exhibit F-2 Non-Colstrip Unit Number 3 Wholesale Transition
Service Agreement
Exhibit G Interconnection Agreement
Exhibit H-1 Opinion of Counsel to Seller
Exhibit H-2 Opinion of General Counsel of Seller
Exhibit H-3 Opinion of Outside Montana Counsel to Seller
Exhibit I Officer's Certificate of Purchaser
Exhibit J Secretary's Certificate of Purchaser
Exhibit K Opinion of Counsel to Purchaser
Exhibit L Confirmation of Reciprocal Sharing Agreement
SCHEDULES
Schedule I Asset Groups
Schedule II Pre-Closing Known Environmental Liabilities
This ASSET PURCHASE AGREEMENT dated as of October 31, 1998 is
made and entered into by and between PP&L Global, Inc., a Pennsylvania
corporation ("Purchaser"), and The Montana Power Company, a Montana
corporation ("Seller"). Capitalized terms not otherwise defined herein have
the meanings set forth in Section 12.01.
WHEREAS, Seller and its subsidiaries engage in a number of
diversified energy and communication related businesses;
WHEREAS, Seller's principal business is the regulated utility
operations involving the generation, purchase, transmission and distribution
of electricity and the production, purchase, transportation and distribution
of natural gas in Montana; and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from Seller, the
Thermal Units (including the Colstrip 4 Transmission Assets) and the Hydro
Units (excluding the Milltown Hydroelectric Project) (each as defined herein
and together, the "Generating Assets") and certain other assets of Seller
relating to the operation of the Generating Assets, and in connection
therewith, Purchaser has agreed to assume certain of the liabilities of
Seller relating to such assets, all on the terms set forth herein;
WHEREAS, on the date hereof PP&L Resources, Inc., a Pennsylvania
corporation and the parent of Purchaser ("Parent"), has entered into an
Equity Contribution Agreement (the "Contribution Agreement") with Purchaser
and Seller;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I tc \n \l 1 "ARTICLE I"
SALE OF ASSETS AND CLOSING tc \n \l 1 "SALE OF ASSETS AND CLOSING "
1.01 The Sale
. (a) On the terms and subject to the conditions set forth in this
Agreement, Seller will sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser will purchase and pay for, at the Closing, free and
clear of all Liens other than Permitted Liens (as such term is defined with
respect to any date after the Closing), all of Seller's right, title and
interest in, to and under the Generating Assets and the Assets and Properties
of Seller used or held for use principally in connection with the operation
of the Generating Assets, except as otherwise provided in Section 1.01(b), as
the same shall exist as of the Closing including, but not limited to the
following (collectively with any proceeds and awards referred to in
Section 1.09, the "Assets"):
(i) Real Property. The real property (including all buildings,
structures, fixtures and other improvements thereon) used or held for use in
connection with or related to the operation of the Generating Assets, as
described in Section 1.01(a)(i) of the Disclosure Schedule, which real
property is held in fee, easement, permit interest or other interest, as the
case may be (the "Real Property");
(ii) Real Property Leases. (A) The leases and subleases of real
property used or held for use in connection with or related to the operation
of the Generating Assets, as described in TA \c 1 \s "1.01(a)(ii)(A)" \l
"Section 1.01(a)(ii)(A) - Real Property Leases" Section 1.01(a)(ii)(A) of the
Disclosure Schedule, as to which Seller is the lessor or sublessor and (B)
the leases and subleases of real property used in connection with or related
to the operation of the Generating Assets, as described in TA \c 2 \s
"1.01(a)(ii)(B)" \l "Section 1.01(a)(ii)(B) - Real Property Leases" TA \c 1
\s "1.01(a)(ii)(B)" \l "Section 1.01(a)(ii)(B) - Real Property
Leases" Section 1.01(a)(ii)(B) of the Disclosure Schedule, as to which Seller
is the lessee or sublessee, together with any options to purchase the
underlying property and leasehold improvements thereon, and in each case all
other rights, subleases, licenses, permits, deposits and profits appurtenant
to or related to such leases and subleases (the leases and subleases
described in subclauses (A) and (B), the "Real Property Leases");
(iii) Inventory. All inventories of fuels, supplies, materials and
spares used or held for use in connection with the operation of the
Generating Assets located on the Real Property or the real property subject
to the Real Property Leases, held for use principally in connection with, or
in transit to the Generating Assets on the date of Closing (a listing of the
fuel inventories, as of September 30, 1998, is included in Section
1.01(a)(iii) of the Disclosure Schedule) (the "Inventory");
(iv) Tangible Personal Property. All machinery, equipment,
vehicles, furniture and other personal property located where the operation
of the Generating Assets is conducted, or used or held for use in connection
with the operation of the Generating Assets (including but not limited to the
items listed in Section 1.01(a)(iv) of the Disclosure Schedule), together
with all buildings and structures ("Improvements") pertaining to Colstrip
Units 3 and 4 (as to Colstrip Unit 4 only to the extent of Seller's rights
therein), including the facilities shared by Colstrip Units 1, 2, 3 and 4
relating thereto, as to those Improvements which have been severed from the
Real Property and are to be treated as personal property, and all warranties
against manufacturers or vendors relating thereto, to the extent that such
warranties are freely transferable (the "Tangible Personal Property");
(v) Business Contracts. All contracts, agreements and personal
property leases (other than the Real Property Leases, the Transferable
Permits, the Fuel Contracts, the Colstrip Contracts and the Power
Purchase/Exchange Agreements) used primarily in the operation of the
Generating Assets that are listed in Section 1.01(a)(v) of the Disclosure
Schedule (the "Business Contracts");
(vi) Transferable Permits. All Licenses and Environmental
Permits owned or held by Seller and used or held for use in connection with
the operation of the Generating Assets that are transferable by Seller to
Purchaser as listed in Section 1.01(a)(vi) of the Disclosure Schedule and the
water rights owned or held by Seller, whether or not such rights are created
or evidenced by a License, and used or held for use in connection with the
operation of the Generating Assets including those listed in Section
1.01(a)(vi) of the Disclosure Schedule (the "Transferable Permits");
(vii) Intangible Personal Property. All Intellectual Property used
or held for use principally in connection with the operation of the
Generating Assets and all rights, privileges, claims, causes of action and
options relating or pertaining to the operation of the Generating Assets or
the Assets, including but not limited to the items listed in Section
1.01(a)(vii) of the Disclosure Schedule (the "Intangible Personal Property");
(viii) Security Deposits. All security deposits deposited by or on
behalf of Seller as lessee or sublessee under the Real Property Leases (the
"Tenant Security Deposits");
(ix) Prepaid Expenses. Except for prepaid expenses and deposits
of Seller attributable to any Excluded Asset or Retained Liabilities, all
prepaid expenses, progress payments and deposits of or by Seller, rights to
receive a prepaid expense, deposit or progress payment, and cash in transit
that constitutes a prepaid expense, progress payment or deposit, relating to
the Assets or the ownership, operation and maintenance of the Generating
Assets;
(x) Fuel Contracts. All of the fuel contracts listed in Section
1.01(a)(x) of the Disclosure Schedule (the "Fuel Contracts");
(xi) Colstrip Contracts. Seller's undivided interests in, and
all of Seller's rights under the Contracts relating to, the Thermal Units
listed in Section 1.01(a)(xi) of the Disclosure Schedule (the "Colstrip
Contracts");
(xii) Power Purchase/Exchange Agreements. All of the Power
Purchase/Exchange Agreements;
(xiii) Allowance and Emission Reduction Credits. All of the
allowances and/or emission reduction credits described in
Section 1.01(a)(xiii) of the Disclosure Schedule;
(xiv) Personnel Records of Transferring Employees. All personnel
records of the Transferring Employees;
(xv) Warranties. Any other warranties and indemnities given by third
parties relating to the Assets or to the ownership, operation and maintenance
of the Generating Assets other than in connection with any Excluded Assets or
Retained Liabilities;
(xvi) Certain Insurance Policies of Transferring Employees. All life
insurance policies of Transferring Employees owned by Seller, to the extent
such policies are transferable to Purchaser without any cost to Seller as
described in Section 1.01(a)(xvi) of the Disclosure Schedule (the
"Transferable Insurance Policies");
(xvii) Books and Records. All books, operating and maintenance records,
operating, safety and maintenance manuals, engineering or design plans,
drawings, blue prints and as-built plans, specifications, procedures and
similar items of Seller relating specifically to the aforementioned assets,
other than the minute books, stock transfer books and corporate seal of
Seller (the "Business Books and Records");
(xviii) Colstrip 4 Transmission Assets. Subject to Section 1.10, the
Colstrip 4 Transmission Assets as described in Section 1.01(a)(xviii) of the
Disclosure Schedule ("Colstrip 4 Transmission Assets"); and
(xix) Colstrip 1, 2 and 3 Transmission Assets. Subject to Section 1.10,
the Colstrip 1, 2 and 3 Transmission Assets as described in Section
1.01(a)(xix) of the Disclosure Schedule ("Colstrip 1, 2 and 3 Transmission
Assets").
To the extent any of the Business Books and Records are items
susceptible to duplication and are either (x) used in connection with any of
Seller's businesses other than the operation of the Generating Assets or (y)
are required by Law to be retained by Seller, Seller may deliver photostatic
copies or other reproductions from which, in the case of Business Books and
Records referred to in clause (x), information solely concerning Seller's
businesses other than the operation of the Generating Assets has been
deleted. To the extent that any Contract to be transferred hereunder to
Purchaser is also utilized by or is for the benefit of any of Seller's
businesses other than the operation of the Generating Assets, the rights and
obligations under such Contracts shall be to the extent practicable allocated
between the operation of the Generating Assets and such other businesses in a
fair and equitable manner that is reasonably satisfactory to the parties.
Prior to the Closing, Seller will cooperate with Purchaser to transfer the
computer equipment and software needed to operate the Generating Assets but
that can not be transferred pursuant to Section 1.01(a)(vii) due to
restrictions in third party software licenses and that are listed on Section
1.01(a) of the Disclosure Schedule or are used by Seller in connection with
its other businesses. Any computer equipment and software which cannot be
transferred to Purchaser by the Closing shall be referred to herein as the
"Non-Transferable Software". After the Closing, Seller (subject to
restrictions in third party software licenses) will process certain data of
Purchaser necessary to operate the Generating Assets on commercially
reasonable terms to be mutually agreed upon by Purchaser and Seller;
provided, however, such terms shall include the following: (x) Seller shall
process such data for the period commencing on the Closing and ending two (2)
years after the Closing, provided that Purchaser shall have no right to
modify or enhance the Non-Transferrable Software or to make derivative works
from the Non-Transferrable Software; and (y) Purchaser agrees to pay Seller
for all costs relating to future upgrades, software, hardware or otherwise
(including Year 2000 costs) relating to the Non-Transferrable Software that
are done at Purchaser's request (provided that Seller shall not be obligated
to comply with any such request) and Seller agrees to assume any Liabilities
arising therefrom.
(b) Excluded Assets. Notwithstanding anything in this Agreement
to the contrary, the Assets shall not include the following assets of Seller
(the "Excluded Assets"):
(i) Cash. All cash, commercial paper, certificates of deposit
and other bank deposits, treasury bills and other cash equivalents;
(ii) Investments. Certificates of deposit, shares of stock,
securities, evidences of Indebtedness, interest in joint ventures,
partnerships, limited liability companies and other entities;
(iii) Tax Refunds. All refunds or credits, if any, of Taxes
relating to the Assets due to Seller attributable to any period ending on or
prior to the Closing;
(iv) Real and Personal Property. The real or personal property
located at the sites where the Generating Assets are located described in
TA \c 1 \s "1.01(b)(v)" \l "Section 1.01(b)(v) - Personal Property" Section
1.01(b)(iv) of the Disclosure Schedule, the delineation and composition of
which shall be subject to the Separation Document;
(v) Corporate Records. The minute books, stock transfer books
and corporate seal of Seller;
(vi) Litigation Claims. Any rights (including indemnification)
and claims and recoveries under litigation of Seller against third parties
attributable to the period on or prior to the Closing except to the extent
relating to the Assumed Liabilities;
(vii) Excluded Obligations. The rights of Seller in, to and under
all Contracts of any nature, the obligations of Seller under which are not
expressly assumed by Purchaser pursuant to Section 1.02(b);
(viii) Tradename and Logo. All tradenames, trademarks, service
marks or logos owned by Seller or its Subsidiaries including all of Seller's
right, title and interest in, to and under the name "The Montana Power
Company" or any related or similar trade names, trademarks, service marks or
logos; provided, however, that Purchaser shall be authorized to continue to
use for internal purposes only and not for public use, materials bearing such
names, trademarks or logos (such as employee manuals) used by Seller prior to
the Closing for up to six (6) months following the Closing;
(ix) Transmission, Distribution, Communication and Software
Assets. Subject to Section 1.01(a)(xviii), the electric and gas transmission
and distribution, substation and communication facilities located at the
sites where the Generating Assets are located and related support equipment
and gas rights, interconnection rights, rights-of-way and corridor easements
related to such facilities, each as described in Section 1.01(b)(ix) of the
Disclosure Schedule; provided that communications facilities and related
support equipment that are used solely in connection with the Generating
Assets shall be a part of the Assets unless identified in Section 1.01(b)(ix)
of the Disclosure Schedule, and Purchaser shall be entitled to use
communications facilities and related support equipment that are also
utilized by Seller in connection with Seller's businesses other than the
operation of the Generating Assets pursuant to a service agreement to be
entered into between Purchaser and Seller at or prior to the Closing on
commercially reasonable mutually satisfactory terms ("Communications Service
Agreement").
(x) Accounts Receivable. All trade accounts receivable and all
notes, bonds and other evidences of Indebtedness of and rights to receive
payments arising out of sales occurring in connection with the operation of
the Generating Assets prior to the Closing and the security agreements
related thereto, including any rights of Seller with respect to any third
party collection procedures or any other Actions or Proceedings which have
been commenced in connection therewith;
(xi) Insurance. Subject to Section 1.01(a)(xvi), life insurance
policies of Transferring Employees and all other insurance policies relating
to the operation of the Generating Assets;
(xii) Employee Benefit Plans. Except as set forth in Section 5.03,
all assets owned or held by any Benefit Plans;
(xiii) Other Personnel Records. All personnel records other than
the Transferring Employee records or other records, the disclosure of which
is required by Law, legal process or subpoena;
(xiv) All Other Assets. All other Assets and Properties owned by
Seller or its Subsidiaries not used in the operation of the Generating
Assets; and
(xv) Other. Seller's rights under this Agreement and the Operative
Agreements.
1.02 Liabilities
. (a) Assumed Liabilities. In connection with the sale, transfer,
conveyance, assignment and delivery of the Assets pursuant to this Agreement,
on the terms and subject to the conditions set forth in this Agreement, at
the Closing, Purchaser will assume and agree to pay, perform and discharge
when due all of the following Liabilities of Seller, direct or indirect,
known or unknown, absolute or contingent, which arise and are attributable to
the period after the date of the Closing and relate solely to the Assets or
which arose and relate to the period on or prior to the date of the Closing
and are specifically referred to in this Section 1.02(a) as being assumed by
Purchaser (in all cases, except for Seller's Liabilities in connection with
the Pollution Control Bonds and Liabilities constituting Retained
Liabilities) (the "Assumed Liabilities"):
(i) Real Property Lease Obligations. All Liabilities of Seller
under the Real Property Leases arising and to be performed after the date of
the Closing, and excluding any such Liabilities arising or to be performed on
or prior to the date of the Closing;
(ii) Tangible Personal Property Obligations. All Liabilities of
Seller under any Contract related to the Tangible Personal Property arising
and to be performed after the date of the Closing, and excluding any such
Liabilities arising or to be performed on or prior to the date of the
Closing;
(iii) Liabilities under Business Contracts and Transferable
Permits. All Liabilities of Seller under the Business Contracts and
Transferable Permits, to the extent transferred to Purchaser, arising and to
be performed after the date of the Closing, and excluding any such
Liabilities arising or to be performed on or prior to the date of the
Closing;
(iv) Security Deposits. All Liabilities of Seller with respect to
any security deposit held by Seller as lessor or sublessor under the Real
Property Leases, to the extent and only to the extent of the respective
amount of the security deposit delivered to Purchaser at the date of the
Closing with respect to any such Real Property Lease TA \c 4 \s
"1.02(a)(viii)" \l "Section 1.02(a)(viii) - Security Deposits" TA \c 1 \s
"1.02(a)(viii)" \l "Section 1.02(a)(viii) - Security Deposits" (the "Landlord
Security Deposits");
(v) Fuel Contracts, Colstrip Contracts and Power Purchase/Exchange
Agreements. All Liabilities of Seller under the Fuel Contracts, the Colstrip
Contracts and the Power Purchase/Exchange Agreements arising and to be
performed after the date of the Closing, and excluding any such Liabilities
arising or to be performed on or prior to the date of the Closing;
(vi) Pre-Closing Colstrip Liabilities. All Liabilities of Seller
described in Section 1.02(a)(vi) of the Disclosure Schedule;.
(vii) Transferring Employee Liabilities. All Liabilities of Seller
with respect to the Transferring Employees for which Purchaser is responsible
pursuant to Section 5.03;
(viii) Transferable Insurance Policy Liabilities. All Liabilities of
Seller with respect to the Transferable Insurance Policies to the extent
transferred to Purchaser;
(ix) Certain Employment Agreement Liabilities. All Liabilities of
Seller under the Employment Agreements described on Section 1.02(a)(ix) of
the Disclosure Schedule ("Change of Control Liabilities"); and
(x) Environmental Liabilities. Subject to Section 10.01(b), all
Environmental Liabilities; provided, however, that nothing set forth in this
Section 1.02(a) shall require Purchaser to assume any Liability for (x)
payment of any fines or penalties imposed by a Governmental or Regulatory
Authority relating to the ownership operation and maintenance of the
Generating Assets on or prior to the date of the Closing ("Environmental
Fines and Penalties"), (y) any Off-Site Environmental Liabilities, or (z) any
Pre-Closing Environmental Liabilities related to the Thompson Falls
Hydroelectric Project (including the reservoir)if, at any time on or after
the Bid Date, the DEQ changes the Thompson Falls Environmental Status or
requires Purchaser to remediate metals contamination that occurred on or
prior to the date of the Closing at the Thompson Falls Hydroelectric Project
(including the reservoir) ("Thompson Falls Liabilities").
Except with respect to Environmental Liabilities that are Assumed
Liabilities, Assumed Liabilities shall not include Liabilities to the extent
such Liabilities, but for a breach or default by Seller of its obligations,
would have been paid, performed or otherwise discharged specifically by their
terms or the terms hereof on or prior to the Closing as it relates to the
Assets or to the extent the same arise out of any such breach or default.
(b) Retained Liabilities. Except for the Assumed Liabilities,
Purchaser shall not assume by virtue of this Agreement or the transactions
contemplated hereby, and shall have no liability for any Liabilities of
Seller including Seller's Liabilities under this Agreement and the Operative
Agreements and including, but not limited to the following (the "Retained
Liabilities"):
(i) any Liabilities of Seller in connection with the Pollution Control
Bonds or claims by bondholders;
(ii) any Environmental Fines and Penalties;
(iii) any Off-Site Environmental Liabilities;
(iv) any Thompson Falls Liabilities;
(v) any Liabilities of Seller in respect of any Excluded Assets;
(vi) any Liabilities of Seller for Taxes;
(vii) any Liabilities of Seller with respect to commitments for the
purchase or sale of power or fuel, other than as provided in Section 1.02(a);
(viii) except as set forth in Section 5.03, any Liabilities relating to
Seller's employment of, termination of employment of, provision of benefits
to, and compensation of employees employed at the Assets, including but not
limited to an Employee whose employment principally relates to any Assets,
and any personal injury, discrimination, harassment, wrongful discharge or
other wrongful employment practice, unfair labor practice, claims for
benefits (including claims arising under ERISA or workers' compensation
laws), or similar claims or causes of action, known or unknown, absolute or
contingent, asserted or unasserted, of any such person arising out of acts or
omissions occurring or otherwise attributable to the period on or before the
Closing; and
(ix) except as set forth in Section 5.03, any Liabilities of Seller
relating to any Benefit Plan, or to any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) of Seller, whether or not terminated,
established, maintained or contributed to by Seller or any of its ERISA
Affiliates at any time, or to which any of Seller or any of its ERISA
Affiliates are or have been obligated to contribute to at any time ("ERISA
Affiliate Plan"); including any liability (A) to the Pension Benefit Guaranty
Corporation under Title IV of ERISA; (B) relating to a multiemployer plan;
(C) with respect to noncompliance with COBRA or HIPAA; (D) with respect to
noncompliance with any other applicable provision of the Code, ERISA or any
other applicable laws; or (E) with respect to any suit, proceeding or claim
which is brought against Purchaser with respect to any such Benefit Plan or
ERISA Affiliate Plan, against any such Benefit Plan or ERISA Affiliate Plan,
or against any fiduciary or former fiduciary of any such Benefit Plan or
ERISA Affiliate Plan.
1.03 Purchase Price; Allocation
. (a) Purchase Price. Subject to any adjustment required pursuant to
Section 1.10, the aggregate purchase price for the Assets shall be an amount
equal to the sum of (x) the Base Purchase Price, as may be adjusted pursuant
to Section 1.10, (y) the Adjustment Amount and, (z) if applicable, the
Colstrip 4 Transmission Amount (collectively, the "Purchase Price"), payable
in immediately available United States funds at the Closing in the manner
provided in Section 1.05 or thereafter (as provided in Section 1.04).
(b) Allocation of Purchase Price. Purchaser and Seller shall
negotiate in good faith prior to the Closing and determine the allocation of
the consideration paid by Purchaser for the Assets. Each party hereto agrees
(i) that any such allocation shall be consistent with the requirements of
Section 1060 of the Code and the regulations thereunder, (ii) to complete
jointly and to file separately Form 8594 with its Federal Income Tax Return
consistent with such allocation for the tax year in which the Closing occurs
and (iii) that no party will take a position on any income, transfer or gains
Tax Return, before any Governmental or Regulatory Authority charged with the
collection of any such Tax or in any judicial proceeding, that is in any
manner inconsistent with the terms of any such allocation without the consent
of the other party.
1.04 Purchase Price Adjustment
. (a) Within 30 days after the Closing, Seller shall prepare and deliver to
Purchaser a statement (each, an "Adjustment Statement") which reflects (i)
the net book value, as reflected on the books of Seller as of the Closing of
all fuel inventory (FERC account no. 151) and stores inventory (FERC account
no. 154) used at or in connection with the Thermal Units or the Hydro Units,
as the case may be (the "Inventory Adjustment Amount"), and (ii) the
Maintenance and Capital Expenditures Amount applicable to the Thermal Units
or the Hydro Units, as the case may be. The Inventory Adjustment Amount and
the Maintenance and Capital Expenditures Amount for the Closing is referred
to collectively as the "Adjustment Amount." The Inventory Adjustment Amount
will be based on an inventory survey conducted by Seller within five days
prior to the Closing consistent with Seller's current inventory procedures
(the "Inventory Survey"). Seller will permit an employee, or representative,
of Purchaser to observe the Inventory Survey. Each Adjustment Statement
shall be prepared using the same generally accepted accounting principles,
policies and methods as Seller has historically used in connection with the
calculation of the items reflected on such Adjustment Statement. Purchaser
agrees to cooperate with Seller in connection with the preparation of each
Adjustment Statement and related information, and shall provide to Seller
such books, records and information as may be reasonably requested from time
to time.
(b) Purchaser may dispute an Inventory Adjustment Amount or a
Maintenance and Capital Expenditures Amount; provided, however, that
Purchaser shall notify Seller in writing of the disputed amount, and the
basis of such dispute, within ten (10) Business Days of Purchaser's receipt
of the applicable Adjustment Statement. In the event of a dispute with
respect to any part of an Adjustment Amount, Purchaser and Seller shall
attempt to reconcile their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the parties. If
Purchaser and Seller are unable to reach a resolution of such differences
within 30 days of receipt of Purchaser's written notice of dispute to Seller,
Purchaser and Seller shall submit the amounts remaining in dispute for
determination and resolution to the Independent Accounting Firm, which shall
be instructed to determine and report to the parties, within 30 days after
such submission, upon such remaining disputed amounts, and such report shall
be final, binding and conclusive on the parties hereto with respect to the
amounts disputed. The fees and disbursements of the Independent Accounting
Firm shall be shared equally by Purchaser and Seller.
(c) Within ten (10) Business Days after Purchaser's receipt of
an Adjustment Statement, Purchaser shall pay all undisputed amounts, or if
there is a dispute with respect to any amount of such Adjustment Statement
within five (5) Business Days after the final determination of any amounts on
such Adjustment Statement, Purchaser shall pay to Seller an amount equal to
the disputed Adjustment Amount as finally determined to be payable with
respect to such Adjustment Statement. All Adjustment Statement payments
shall be less the Estimated Adjustment Amount; provided, however, that if
such amount shall be less than zero, then within five (5) Business Days after
the final determination of such amount Seller will pay to Purchaser the
amount by which such amount is less than zero. Any amount paid under this
Section 1.04 shall be paid with interest for the period commencing on the
date of Closing through the date of payment, calculated at the prime rate for
domestic banks as published in The Wall Street Journal (Northeast Edition) in
the "Money Rates" section on the date of Closing, and in immediately
available United States funds.
1.05 Closing; Additional Purchase Price Payments
.
(a) Closing. The Closing will take place at the offices of Milbank,
Tweed, Hadley & McCloy, One Chase Manhattan Plaza, New York, New York 10005,
or at such other place as Purchaser and Seller mutually agree, at 10:00 A.M.
local time, on the Closing Date. At the Closing, Purchaser will pay an
amount (the "Estimated Purchase Price") in United States dollars equal to the
sum of (a) the Base Purchase Price as the same may be adjusted pursuant to
Section 1.10, and, if applicable, the Colstrip 4 Transmission Amount, and (b)
the Estimated Adjustment Amount for the Closing, by wire transfer of
immediately available United States funds to such account as Seller may
reasonably direct by written notice delivered to Purchaser by Seller at least
two (2) Business Days before the Closing. Simultaneously, (A) Seller will
assign and transfer to Purchaser good and valid title in and to the Assets
(free and clear of all Liens, other than Permitted Liens as such term is
defined with respect to periods after the Closing) by delivery of (i) a
General Assignment and Bill of Sale substantially in the form of Exhibit A
hereto (the "General Assignment"), duly executed by Seller, covering the
Personal Property comprising Assets except for the Intellectual Property,
(ii) an assignment of the Intellectual Property in form and substance
reasonably satisfactory to Purchaser, (iii) (x) special warranty deeds in
proper statutory form for recording and otherwise in form and substance
reasonably satisfactory to Purchaser conveying good and marketable title to
the Real Property in which Seller has a fee or easement interest (subject
only to Permitted Liens), (y) an assignment in form and substance reasonably
satisfactory to Purchaser conveying valid and subsisting title to the Real
Property in which Seller has a permit interest or other interest (neither fee
nor easement) (subject only to Permitted Liens) and (z) all necessary
documentation to transfer and convey to Purchaser the water rights listed in
Section 1.01(a)(vi) of the Disclosure Schedule including water rights
transfer certificates executed in proper form to be filed with the
appropriate Governmental or Regulatory Authority and (iv) such other good and
sufficient instruments of conveyance, assignment and transfer, in form and
substance reasonably acceptable to Purchaser's counsel, as shall be effective
to vest in Purchaser good and valid title to the Assets, good and marketable
title to the Real Property in which Seller has a fee or easement interest and
valid and subsisting title to the Real Property in which Seller has a permit
interest or other interest (neither fee nor easement), in each case subject
only to Permitted Liens (the General Assignment and the other instruments
referred to in clauses (A) (ii), (iii) and (iv) being collectively referred
to herein as the "Assignment Instruments"), and (B) Purchaser will assume
from Seller the due payment, performance and discharge of the Assumed
Liabilities by delivery of (i) an Assumption Agreement substantially in the
form of Exhibit B hereto (the "Assumption Agreement"), duly executed by
Purchaser, and (ii) such other good and sufficient instruments of assumption,
in form and substance reasonably acceptable to Seller's counsel, as shall be
effective to cause Purchaser to assume the Assumed Liabilities as and to the
extent provided in Section 1.02(a) (the Assumption Agreement and such other
instruments referred to in clause (B)(ii) being collectively referred to
herein as the "Assumption Instruments"). At the Closing, there shall also be
delivered to Seller and Purchaser the opinions, certificates and other
contracts, documents and instruments required to be delivered under
Articles VI and VII.
(b) Additional Purchase Price Payments. If the Closing hereunder has
occurred, then:
(i) In the event that the Puget Closing Date occurs prior to the
Portland Closing Date, on the Puget Closing Date Purchaser shall pay to
Seller the Puget Payment Amount;
(ii) In the event that the Portland Closing Date occurs prior to the
Puget Closing Date, on the Portland Closing Date Purchaser shall pay to
Seller the Portland Payment Amount; and
(iii) On the Final Closing Date, Purchaser shall pay to Seller the
Combined Payment Amount.
All payments made pursuant to this Section 1.05(b) shall be paid
by wire transfer of immediately available United States funds to such account
as Seller may reasonably direct by written notice delivered to Purchaser by
Seller at least two (2) Business Days before the applicable closing date.
1.06 Prorations
The following items relating to the Assets and the ownership and operation
of the Generating Assets will be allocated pro rata per diem for the tax year
that includes the date of Closing, with Seller liable for such items to the
extent they are allocable to the period prior to the date of the Closing and
Purchaser liable for such items to the extent they are allocable to periods
beginning with and subsequent to the Closing:
(a) Property Taxes on or with respect to the Assets.
(b) Rents, additional rents, Taxes, to the extent normally
adjusted in connection with similar transactions, and other items payable by
Seller under the Real Property Leases and the Business Contracts.
(c) The amount of rents, Taxes and charges for sewer, water,
telephone, electricity and other utilities relating to the Real Property and
the real property subject to the Real Property Leases.
(d) All other items (excluding other Taxes) normally adjusted in
connection with similar transactions.
Except as otherwise agreed by the parties, the net amount of all such
prorations will be settled and paid as of date of the Closing. At least
ninety (90) days prior to date of the Closing, Seller will provide Purchaser
with a reasonably detailed schedule showing a calculation of the estimated
prorations as if the Closing were occurring on such date. If the Closing
shall occur before a real estate Tax rate is fixed, the apportionment of
Taxes shall be based upon the Tax rate for the preceding year applied to the
latest assessed valuation and such Taxes shall be reprorated upon the request
of Seller, on the one hand, or Purchaser, on the other hand, made within
sixty (60) days after the date that the actual amounts become available.
Seller and Purchaser 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 1.06.
To the extent required by any approval of the transfer of the
FERC project licenses related to the Hydro Units, Seller agrees to pay all
annual charges accrued under such licenses as of the Closing.
1.07 Further Assurances
; Post-Closing Cooperation. (a) Subject to the terms and conditions of this
Agreement, at any time or from time to time after the Closing, at Purchaser's
request and without further consideration, Seller shall execute and deliver
to Purchaser such other instruments of sale, transfer, conveyance, assignment
and confirmation, provide such materials and information and take such other
actions as Purchaser may reasonably deem necessary or desirable in order more
effectively to transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, all of the Assets, and, to the full extent permitted by
Law, to put Purchaser in actual possession and control of the Assets and to
assist Purchaser in exercising all rights with respect thereto, and otherwise
to cause Seller to fulfill its obligations under this Agreement and the
Operative Agreements. From time to time after the Closing, at Purchaser's
request and expense, Seller will reasonably cooperate with Purchaser in its
efforts to maximize any Tax benefits associated with the Assets with respect
to periods following the Closing and to minimize the Tax costs associated
with the transactions contemplated hereby; provided such cooperation does not
adversely affect Seller's Tax position. From time to time after the Closing,
at Seller's request and expense, Purchaser will reasonably cooperate with
Seller in its efforts to maximize any Tax benefits associated with the Assets
with respect to periods prior to the Closing and to minimize the Tax costs
associated with the transactions contemplated hereby; provided such
cooperation does not adversely affect Purchaser's Tax position.
(b) Following the Closing, each party will afford the other
party, its counsel and its accountants, during normal business hours,
reasonable access to the books, records and other data relating to the
operation of the Generating Assets in its possession with respect to periods
prior to the Closing and the right to make copies and extracts therefrom, to
the extent that such access may be reasonably required by the requesting
party in connection with (i) the preparation of Tax Returns, (ii) the
determination or enforcement of rights and obligations under this Agreement,
(iii) compliance with the requirements of any Governmental or Regulatory
Authority, (iv) the determination or enforcement of the rights and
obligations of any Indemnified Party or (v) in connection with any actual or
threatened Action or Proceeding. Further each party agrees for a period
extending six (6) years after the Closing not to destroy or otherwise dispose
of any such books, records and other data unless such party shall first offer
in writing to surrender such books, records and other data to the other party
and such other party shall not agree in writing to take possession thereof
during the thirty (30) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations
hereunder, it is necessary that a party be furnished with additional
information, documents or records relating to the operation of the Generating
Assets not referred to in paragraph (b) above, and such information,
documents or records are in the possession or control of the other party,
such other party shall use its best efforts to furnish or make available such
information, documents or records (or copies thereof) at the recipient's
request, cost and expense. Any information obtained by such party in
accordance with this paragraph shall be held confidential by such party in
accordance with Section 13.06.
(d) Notwithstanding anything to the contrary contained in this
Section 1.07, if the parties are in an adversarial relationship in litigation
or arbitration, the furnishing of information, documents or records in
accordance with paragraph (c) of this Section 1.07 shall be subject to
applicable rules relating to discovery.
1.08 Third Party Consents
. To the extent that any Business Contract, Transferable Permit, Fuel
Contract, Colstrip Contract or Power Purchase/Exchange Agreement is not
assignable without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if such
assignment or attempted assignment would constitute a breach thereof. Seller
and Purchaser shall use their reasonable efforts to obtain the consent of
such other party to the assignment of any such Business Contract,
Transferable Permit, Fuel Contract, Colstrip Contract or Power
Purchase/Exchange Agreement to Purchaser in all cases in which such consent
is or may be required for such assignment. If any such consent shall not be
obtained, or if any attempted assignment would be ineffective or would impair
Purchaser's rights and obligations so that Purchaser would not in effect
acquire the benefit of substantially all of such rights and obligations,
Seller shall cooperate with Purchaser in any reasonable arrangement, to the
extent legally permissible, designed to provide for Purchaser the benefits
intended to be assigned to Purchaser under the relevant Business Contract,
Transferable Permit, Fuel Contract, Colstrip Contract or Power
Purchase/Exchange Agreement, including enforcement at the cost and for the
account of Purchaser of any and all rights of Seller against the other party
thereto arising out of the breach or cancellation thereof by such other party
or otherwise. If and to the extent that such arrangement is not made in a
manner reasonably satisfactory to Purchaser, Purchaser shall have no
obligation pursuant to Section 1.02 or otherwise only with respect to any
such Business Contract, Transferable Permit, Fuel Contract, Colstrip Contract
or Power Purchase/Exchange Agreement. The provisions of this Section 1.08
shall not affect the right of Purchaser not to consummate the transactions
contemplated by this Agreement as provided in Section 1.10(e) or if the
conditions to its obligations hereunder contained in Sections 6.05, 6.06 and
6.07 have not been fulfilled.
1.09 Insurance Proceeds
. If any of the Assets (other than an Asset excluded under Section 1.10) is
destroyed, damaged or taken in condemnation, the insurance proceeds or
condemnation award with respect thereto shall be an Asset; provided, however,
Seller agrees not to settle or compromise any amounts concerning such Assets
during negotiations with Seller's insurance company without Purchaser's prior
consent. At the Closing, Seller shall pay or credit to Purchaser any such
insurance proceeds or condemnation awards received by it on or prior to the
Closing and shall assign to or assert for the benefit of Purchaser all of its
rights against any insurance companies, Governmental or Regulatory
Authorities and others with respect to such damage, destruction or
condemnation. As and to the extent that there is available insurance under
policies maintained by Seller and its Affiliates, predecessors and successors
in respect of any Assumed Liability, except for any such insurance proceeds
with respect to which the insured is directly or indirectly self-insured or
has agreed to indemnify the insurer, Seller shall cause such insurance to be
applied toward the payment of such Assumed Liability. The provisions of this
Section 1.09 shall not affect the right of Purchaser not to consummate the
transactions contemplated by this Agreement if the condition to its
obligations hereunder contained in Sections 6.01 or 6.08 has not been
fulfilled.
1.10 Inclusion/Exclusion of Certain Assets
.
(a) Purchaser agrees to use its reasonable best efforts to obtain the
approval described in clause (iii) of the definition of Purchaser Required
Regulatory Approvals in a manner reasonably satisfactory to Purchaser that
will allow Purchaser to purchase and own, operate and maintain after the
Closing the Colstrip 4 Transmission Assets, and to consult with Seller prior
to abandoning its efforts to do so. If, notwithstanding Purchaser's
compliance with the preceding sentence and with Section 5.01, such Purchaser
Required Regulatory Approval is not obtained from FERC with respect to the
proposed purchase, ownership and operation of the Colstrip 4 Transmission
Assets, or is finally denied by FERC, within seven (7) months of the date of
execution of this Agreement, or in the event that the condition set forth in
Section 6.12 has not been satisfied on or prior to the Closing, then subject
to Section 1.10(b),(i) at the Closing Seller and Purchaser shall enter into a
transmission service agreement for firm transmission service pursuant to
Seller's open access transmission tariff (the "Colstrip 4 Transmission
Service Agreement"), (ii) the Colstrip 4 Transmission Assets shall be
Excluded Assets hereunder, (iii) Purchaser shall not be obligated to pay the
Colstrip 4 Transmission Amount at the Closing, and (iv) the condition to
Closing described in Sections 6.05 and 7.05 shall be deemed satisfied with
respect to such Purchaser Required Regulatory Approval solely with respect to
the Colstrip 4 Transmission Assets but shall not be deemed satisfied with
respect to any other Assets, provided, that Seller shall have the right, in
its sole discretion, to waive such seven (7) month period, and require
Purchaser to continue to pursue such approval, consistent with Purchaser's
obligations under Section 5.01 hereof, for such time period(s) as Seller may
determine, not to exceed the time period provided for in Section 11.01(d)
hereof. Purchaser acknowledges that, in any event, Seller shall remain the
operator of the Colstrip 4 Transmission Assets pursuant to the Colstrip
Project Transmission Agreement dated May 6, 1981, as amended February 14,
1990, December 30, 1996, and July 13, 1998, between Seller, Puget, PGE, WWP
and Pacific.
(b) In the event that, notwithstanding Seller's compliance with
Section 4.01, Seller has been unable to obtain all consents or approvals
required in connection with the transfer of the Colstrip 4 Generation Assets,
Seller may elect to exclude from the Assets being sold to Purchaser
hereunder, all of Seller's rights, title and interest in, to and under the
Colstrip 4 Generation Assets. In such event (i) the Colstrip 4 Generation
Assets shall be Excluded Assets hereunder, (ii) the Base Purchase Price shall
be reduced by an amount equal to $40,000,000, (iii) the conditions to Closing
described in Sections 6.05, 6.06, 6.07, 7.05, and 7.06, as and only to the
extent that they relate to consents and approvals required in respect of or
pursuant to any Colstrip 4 Generation Assets, shall be deemed satisfied, and
(iv) the Colstrip 4 Transmission Assets shall become Excluded Assets and all
of the provisions of Section 1.10(a)(i)through (iv) shall become operative
with respect to the Colstrip 4 Transmission Assets.
(c) In the event that, notwithstanding Seller's and Purchaser's
compliance with Sections 4.01 and 5.01, an Asset Group identified on Schedule
I hereto cannot be conveyed at the Closing due to a failure to obtain a
Seller Required Regulatory Approval and/or a Purchaser Required Regulatory
Approval with respect to such Asset Group on terms and conditions reasonably
satisfactory to Purchaser, or the Closing conditions in Sections 6.05 and
6.06 and, if applicable, Section 6.07 are not satisfied with respect to such
Asset Group, then such Asset Group shall be excluded from the Assets being
sold to Purchaser hereunder. In such event (i) such Asset Group shall be
Excluded Assets hereunder, (ii) the Base Purchase Price shall be reduced by
the amount relating to such Asset Group identified on Schedule I hereto, and
(iii) the conditions to Closing described in Sections 6.05, 6.06,7.05 and
7.06 and, if applicable, Section 6.07 as and only to the extent that they
relate to consents and approvals required in respect of or pursuant to such
Asset Group, shall be deemed satisfied;
(d) Purchaser has been provided copies of title insurance
commitments covering certain of the Assets and intends to obtain at its
expense additional title commitments and title policies. Seller agrees to
use reasonable efforts to cure title objections of which Seller is notified
by Purchaser, to the extent title would not otherwise satisfy Seller's
obligations with respect to the title to be delivered by Seller in compliance
with Section 1.05(a) of this Agreement. From and after the date hereof and
through the Closing, Seller shall use reasonable efforts to cure and remove
exceptions to title to the Real Property (other than those exceptions
referred to in the preceding sentences)of which Seller is notified by
Purchaser in writing; provided, however, that in no event shall Seller be
obligated to incur expenses or make payments of any nature in excess of
$1,100,000 in discharging its obligations set forth in this sentence. Nothing
in the two preceding sentences shall change or otherwise affect the nature of
the title to the Real Property that Seller is obligated to transfer to
Purchaser in compliance with this Agreement. In the event that (i)Seller is
unable to deliver, at the Closing, title in compliance with this Agreement
with respect to an Asset Group, (ii) an Asset Group is the subject of a
material condemnation proceeding, or (iii) an Asset Group is damaged or
destroyed in any material respect and such damage or destruction is not
remedied by Seller prior to the Closing, then the affected Asset Group shall
be Excluded Assets hereunder and the Base Purchase Price shall be adjusted by
the amount relating to such Asset Group identified on Schedule I hereto. If
any such Asset Group is treated as an Excluded Asset as provided above in
this Section 1.10(d), the conditions to Closing set forth in Articles VI and
VII shall be deemed satisfied as and only to the extent that they relate to
the title, condemnation or damage and destruction, as the case may be, with
respect to such Asset Group.
(e) In the event that the Generating Assets to be transferred
to Purchaser hereunder at the Closing do not include at a minimum (i)
Corette, (ii) Seller's undivided interests in Colstrip 1, 2 and 3 Generating
Assets, and (iii) Missouri/Madison Hydro Units with Basin/Idaho/BPA Power
Contracts, then Purchaser may elect to terminate the Agreement under Section
11.01(e).
(f) In the event the closings under the PGE Asset Purchase
Agreement and the Puget Asset Purchase Agreement do not occur by the
respective "Termination Dates" thereunder, either (i) Purchaser shall acquire
the Colstrip 1, 2 and 3 Transmission Assets owned by Seller for a purchase
price of $97,100,000 (the "Colstrip 1, 2 and 3 Transmission Amount") or (ii)
in the event Purchaser has not received the Purchaser Required Regulatory
Approval described in clause (iii) of the definition of Purchaser Required
Regulatory Approvals reasonably satisfactory to Purchaser with respect to the
proposed purchase of the Colstrip 1, 2 and 3 Transmission Assets, Purchaser
shall not acquire the Colstrip 1, 2 and 3 Transmission Assets and such Assets
shall be Excluded Assets. Purchaser acknowledges that, in any event, Seller
shall remain the operator of the Colstrip 1, 2 and 3 Transmission Assets
pursuant to the Colstrip Project Transmission Agreement dated May 6, 1981, as
amended February 14, 1990, December 30, 1996, and July 13, 1998, between
Seller, Puget, PGE, WWP and Pacific.
ARTICLE II tc \n \l 1 "ARTICLE II"
REPRESENTATIONS AND WARRANTIES OF SELLER tc \n \l 1 "REPRESENTATIONS AND
WARRANTIES OF SELLER"
Seller hereby represents and warrants to Purchaser as follows:
2.01 Corporate Existence of Seller
. Seller is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Montana, and has full corporate power
and authority to own, operate and maintain the Generating Assets as and to
the extent now conducted and to own, use, lease and operate the Assets.
Seller is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the Assets make such
qualification necessary, except in each case in those jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not
create a Seller Material Adverse Effect. Seller has heretofore made
available to Purchaser complete and correct copies of its articles of
incorporation and by-laws (or other comparable corporate charter documents),
as currently in effect.
2.02 Authority
. Seller has full corporate power and authority to execute and deliver this
Agreement and the Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby, including to sell and transfer (pursuant to
this Agreement) the Assets. The execution and delivery by Seller of this
Agreement and the Operative Agreements to which it is a party, and the
performance by Seller of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Seller, no other
corporate action on the part of Seller or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by Seller
and, subject to receipt of Seller Required Regulatory Approvals and Purchaser
Required Regulatory Approvals, constitutes, and upon the execution and
delivery by Seller of the Operative Agreements to which it is a party, such
Operative Agreements will constitute, legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their terms except as
the same may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar Laws relating to or affecting the
rights of creditors generally, or by general equitable principles.
2.03 No Conflicts
. (a) Except as set forth in Section 2.03 of the Disclosure Schedule, and
other than obtaining Seller Required Regulatory Approvals and Purchaser
Required Regulatory Approvals, the execution and delivery by Seller of this
Agreement do not, and the execution and delivery by Seller of the Operative
Agreements to which it is a party, the performance by Seller of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(i) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the restated articles of
incorporation, as amended, or by-laws, as amended (or other comparable
corporate charter documents) of Seller;
(ii) require any consent, approval, authorization or permit, or
filing with or notification to, any Governmental or Regulatory Authority,
except (x) for Seller Required Regulatory Approvals and Purchaser Required
Regulatory Approvals, or (y) for those requirements which become applicable
to Seller as a result of the specific regulatory status of Purchaser (or any
of its Affiliates) or as a result of any other facts that specifically relate
to the business or activities in which Purchaser (or any of its Affiliates)
is or proposes to be engaged;
(iii) result in a default (or give rise to any right of
termination, cancellation or acceleration or require any consent or approval)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which
Seller is a party or by which Seller, or any of the Assets may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration or any consent or approval) as to which requisite waivers or
consents have been obtained; or
(iv) conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Seller or any of its
Assets and Properties.
2.04 Governmental Approvals and Filings
. Except for Seller Required Regulatory Approvals, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority
on the part of Seller is required in connection with the execution, delivery
and performance of this Agreement or any of the Operative Agreements to which
it is a party or the consummation of the transactions contemplated hereby or
thereby, except those as would be required solely as a result of the identity
or the legal or regulatory status of Purchaser or any of its Affiliates.
2.05 Reports
. Since December 31, 1995, Seller has filed or caused to be filed with the
SEC, the applicable state or local utility commissions or regulatory bodies
and FERC, all material forms, statements, reports and documents (including
all exhibits, amendments and supplements thereto) required to be filed by it
with respect to the operation of the Generating Assets under each of the
Securities Act, the Exchange Act, the applicable state public utility Laws,
the Federal Power Act, the Holding Company Act and the respective rules and
regulations thereunder, all of which complied in all material respects with
all applicable requirements of the appropriate act and the rules and
regulations thereunder in effect on the date each such report was filed, and
there are no material misstatements or omissions in respect of such reports.
2.06 Taxes
. Seller has timely filed or will timely file all Tax Returns required to be
filed with respect to the ownership, operation and maintenance of the Assets
and has paid or will pay all Taxes shown to be due on such returns with
respect to all tax periods ending prior to the Closing. Except for the
properties financed with the Pollution Control Bonds, no other Assets have
been financed using tax exempt financing. The owners of Colstrip Units 1, 2,
3, and 4 have jointly made a timely and effective affirmative election
pursuant to Section 761(a) of the Code and Treasury Regulation Section 1.761-
2(b) to be excluded from all of subchapter K of the Code, and such election
has not been modified, revoked or otherwise altered, and remains in effect.
Seller has not taken and has not been notified that any of such owners has
taken any action inconsistent with such election.
2.07 Legal Proceedings
. Except as disclosed in Section 2.07 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Seller, threatened against, relating to or affecting Seller with
respect to the ownership, operation and maintenance of the Assets which could
reasonably be expected (i) to result in the issuance of an Order restraining,
enjoining or otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the Operative
Agreements, or (ii) individually or in the aggregate with other such Actions
or Proceedings, to create a Seller Material Adverse Effect; and
(b) there are no Orders outstanding against Seller with respect
to the ownership, operation and maintenance of the Assets which, individually
or in the aggregate with other such Orders, would have a Seller Material
Adverse Effect.
2.08 Compliance with Laws and Orders
. Except as disclosed in Section 2.08 of the Disclosure Schedule, Seller is
not in material violation of or in material default under any Law or Order
applicable to Seller or the ownership, operation and maintenance of the
Assets.
2.09 Benefit Plans; ERISA
. (a) Section 2.09(a) of the Disclosure Schedule contains a true and
complete list and description of each of the Benefit Plans and identifies
each of the Benefit Plans that is a Qualified Plan and relates to Employees.
(b) Except as disclosed in Section 2.09(b) of the Disclosure
Schedule, Seller does not maintain nor is it obligated to provide benefits
under any life, medical or health plan which provides benefits to retired or
other terminated Employees other than (i) benefit continuation rights under
the Consolidated Omnibus Budget Reconciliation of 1985, as amended, and
(ii) incidental benefits under any Qualified Plan.
(c) Neither Seller, any ERISA Affiliate nor any other
corporation or organization controlled by or under common control with any of
the foregoing within the meaning of Section 4001 of ERISA has at any time
contributed to, on behalf of any Employee, any "multiemployer plan", as that
term is defined in Section 4001 of ERISA.
(d) Each of the Benefit Plans relating to the Employees is, and
its administration is and has been since inception, in compliance with ERISA
and the Code in all material respects.
(e) All contributions and other payments required to be made by
Seller to any Benefit Plan relating to the Employees with respect to any
period ending before or at or including the Closing have been made or
reserves adequate for such contributions or other payments have been or will
be set aside therefor.
(f) (i) No transaction contemplated by this Agreement will
result in liability to the PBGC under Section 302(c)(ii), 4062, 4063, 4064 or
4069 of ERISA, or otherwise, with respect to Purchaser or any corporation or
organization controlled by or under common control with Purchaser within the
meaning of Section 4001 of ERISA, (ii) neither Seller nor any ERISA Affiliate
has incurred any liability under Title IV of ERISA (other than for the
payment of PBGC insurance premiums in the ordinary course), (iii) the Assets
are not subject to Lien under Title IV of ERISA or Section 412 of the Code,
and (iv) there does not exist any proceeding, fact or circumstance that might
reasonably be expected to result in Seller or any ERISA Affiliate incurring
liability under Title IV of ERISA (other than for the payment of PBGC
insurance premiums in the ordinary course) or the imposition of a Lien on the
Assets under Title IV of ERISA or Section 412 of the Code.
(g) There are no pending or, to the Knowledge of Seller,
threatened claims by or on behalf of any Benefit Plan, by any Person covered
thereby, or otherwise, which allege violations of Law.
(h) Complete and correct copies of the following documents have
been made available to Purchaser prior to the execution of this Agreement:
(i) the Benefit Plans and any related trust agreements and
insurance contracts;
(ii) current summary Plan descriptions of each Benefit Plan
subject to ERISA;
(iii) the most recent Form 5500 and Schedules thereto for each
Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination letter issued by the IRS with
respect to the qualified status of each Qualified Plan;
(v) the most recent accountings with respect to any Benefit
Plan funded through a trust; and
(vi) the most recent actuarial report of the qualified actuary
of any Subject Defined Benefit Plan or any other Benefit Plan with
respect to which actuarial valuations are conducted.
2.10 Real Property
. (a) Section 1.01(a)(i) of the Disclosure Schedule contains a description
of, and exhibits indicating the location of the Real Property owned by Seller
and included in the Assets, and Section 1.01(a)(ii) of the Disclosure
Schedule contains a description of, and exhibits indicating the location of
each parcel of real property leased by Seller (as lessor, sublessor, lessee
or sublessee), or as to which Seller holds easements or other rights, and
included in the Assets.
(b) Seller has good and marketable title to the Real Property
in which Seller holds a fee or easement interest and valid and subsisting
title to the Real Property in which Seller holds a permit interest or other
interest, in each case, free and clear of all Liens other than Permitted
Liens. Except for the Permitted Liens and the Real Property subject to Real
Property Leases described in Section 1.01(a)(ii)(A) of the Disclosure
Schedule, Seller is in possession of the Real Property and there are no third
party licenses or tenants at the sites of the Real Property or Real Property
Leases.
(c) Seller has a valid and subsisting leasehold estate in and
the right to quiet enjoyment of the real properties subject to the Real
Property Leases described in Section 1.01(a)(ii)(B) of the Disclosure
Schedule for the full term thereof. Each Real Property Lease is a legal,
valid and binding agreement, enforceable in accordance with its terms, of
Seller and of each other Person that is a party thereto, and except as set
forth in Section 2.10(c) of the Disclosure Schedule, there is no default (or
any condition or event which, after notice or lapse of time or both, would
constitute a default) thereunder.
(d) Seller has made available to Purchaser prior to the
execution of this Agreement true and complete copies of (i) any current
surveys in Seller's possession or any policies of title insurance currently
in force and in the possession of Seller with respect to the Real Property,
and (ii) all Real Property Leases (including any amendments and renewal
letters) and, to the extent reasonably available, all other documents
referred to in clause (i) of this paragraph (d) with respect to the real
property subject to the Real Property Leases described in Section
1.01(a)(ii)(B) of the Disclosure Schedule.
(e) Except as set forth in Section 12.01(h) of the Disclosure
Schedule, all Real Properties have access to a public road and are zoned for
their current uses. No fee ownership, lease, right of way, easement, license
or other right in real property, other than the Real Property and the Real
Property Leases and the transmission, distribution, communication and
software assets described in Section 1.01(b)(ix) of the Disclosure Schedule
(which are Excluded Assets), is necessary for the Purchaser to own, operate
or maintain the Assets substantially as currently owned, operated and
maintained by Seller. Seller has not received any written notice that any of
the improvements on any of the Real Property or Real Property Leases,
including without limitation the Easements, or any appurtenances thereto or
equipment therein or the operation or maintenance thereof, violate any
restrictive covenant or the terms, conditions or restrictions of any
easement.
2.11 Tangible Personal Property
. Seller is in possession of and has good and valid title to, or has valid
leasehold interests in or valid rights under Contract to use, all the
Tangible Personal Property used in and individually or in the aggregate with
other such property material to the ownership, operation and maintenance of
the Assets. All the Tangible Personal Property is free and clear of all
Liens, other than Permitted Liens and Liens disclosed in Section 2.11 of the
Disclosure Schedule, and is in all material respects in good working order
and condition, ordinary wear and tear excepted. The Assets are, and as of
the Closing will be, inclusive of all facilities and equipment in such
condition as will be sufficient for Purchaser to comply with its obligations
under the Interconnection Agreement after giving effect to the Separation
Document.
2.12 Intellectual Property Rights
. Section 1.01(a)(vii) of the Disclosure Schedule discloses all Intellectual
Property used or held for use or necessary in connection with, and
individually or in the aggregate with other such Intellectual Property,
material to the ownership, operation and maintenance of the Assets, each of
which Seller either has all right, title and interest in or valid and binding
rights under Contract to use without limitation or royalty burdens that are
not otherwise disclosed in Section 2.12 of the Disclosure Schedule. Except
as disclosed in Section 2.12 of the Disclosure Schedule, (i) all
registrations with and applications to Governmental or Regulatory Authorities
in respect of Intellectual Property owned by Seller and disclosed in
Section 1.01(a)(vii) of the Disclosure Schedule are valid and in full force
and effect, (ii) there are no restrictions on the direct or indirect transfer
of such Intellectual Property or any Contract, or any interest therein, held
by Seller in respect of such Intellectual Property, (iii) Seller 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) in any material respect
under any Contract to use such Intellectual Property and (iv) to the
Knowledge of Seller, such Intellectual Property is not being infringed by any
other Person. Seller has not received notice that Seller is infringing any
Intellectual Property of any other Person in connection with the Assets or
the operation of the Generating Assets, no claim is pending or has been made
to such effect that has not been resolved and, to its Knowledge, Seller is
not infringing any Intellectual Property of any other Person.
2.13 Contracts
. (a) Section 2.13(a) of the Disclosure Schedule (with paragraph references
corresponding to those set forth below) contains a true and complete list of
each of the following Contracts (true and complete copies of which, together
with all amendments and supplements thereto, have been made available to
Purchaser prior to the execution of this Agreement) to which Seller is a
party and relate to the operation of the Generating Assets or by which any of
the Assets is bound:
(i) all Contracts (excluding Benefit Plans) providing for a
commitment of employment or consultation services for a specified or
unspecified term to, or otherwise relating to employment or the
termination of employment of, any Employee, the name, position and rate
of compensation of each Employee party to such a Contract and the
expiration date of each such Contract;
(ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of Seller to engage in any
activity relating to the operation of the Generating Assets or compete
with any Person in connection with the operation of the Generating
Assets or prohibiting or limiting the ability of any Person to compete
with Seller in connection with the operation of the Generating Assets;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person in connection with the operation of
the Generating Assets;
(iv) all Contracts with distributors, dealers, manufacturer's
representatives, sales agencies or franchises with whom Seller deals in
connection with the operation of the Generating Assets which in any
case involve the payment or potential payment, pursuant to the terms of
any such Contract, by or to Seller of more than $250,000 annually;
(v) all Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or acquisitions of
Inventory in the ordinary course of business; and
(vi) all other Contracts (other than Benefit Plans, the Real
Property Leases and the collective bargaining agreements delivered to
Purchaser pursuant to Section 2.16) not described above that constitute
Assumed Liabilities with respect to the operation of the Generating
Assets that (A) involve the payment or potential payment, pursuant to
the terms of any such Contract, by or to Seller of more than $250,000
annually and (B) cannot be terminated within sixty (60) days after
giving notice of termination without resulting in any material cost or
penalty to Seller (or, after the Closing, to Purchaser).
(b) Each Contract required to be disclosed in Section 2.13(a)
of the Disclosure Schedule and each of the Colstrip Contracts, the Fuel
Contracts and the Power Purchase/Exchange Agreements and each of the Business
Contracts which involves the payment or potential payment by or to Seller of
more than $250,000 annually is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms,
of Seller and of each other party thereto; and except as disclosed in Section
2.13(b) of the Disclosure Schedule neither Seller nor, to the Knowledge of
Seller, any other party to such Contract is in violation or breach of or
default under any such Contract (or with notice or lapse of time or both,
would be in violation or breach of or default under any such Contract).
2.14 Licenses
. (a) Seller has been, and is in material compliance with, all Licenses
necessary in connection with the ownership, operation and maintenance of the
Assets as currently conducted. Except as disclosed in Section 2.14(a) of the
Disclosure Schedule, Seller has not received any written notification that it
is in violation, nor does Seller know of any violations, of any of such
Licenses, or any Law or Order of any Governmental or Regulatory Authority
applicable to it.
(b) Section 2.14(b) of the Disclosure Schedule sets forth all
material Licenses and Environmental Permits relating to the ownership,
operation and maintenance of the Assets, copies of which have been made
available to Purchaser prior to the execution of this Agreement. Such
section of the Disclosure Schedule designates those Licenses and
Environmental Permits which are Transferable Permits and those which are not
Transferable Permits and also designates those Licenses and Environmental
Permits which are not Transferable Permits but which, if not held or
maintained (individually or in the aggregate) could reasonably be expected to
impair the ownership, operation and maintenance of the Assets.
2.15 Insurance
. Except as set forth in Section 2.15 of the Disclosure Schedule, all
material policies of fire, liability, worker's compensation and other forms
of insurance owned or held by Seller and insuring the Assets are in full
force and effect, all premiums with respect thereto covering all periods up
to and including the date as of which this representation is being made have
been paid (other than retroactive premiums which may be payable with respect
to comprehensive general liability and worker's 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 set forth in
Section 2.15 of the Disclosure Schedule, Seller has not been refused any
insurance with respect to the Assets nor has its coverage been limited by any
insurance carrier to which it has applied for any such insurance or with
which it has carried insurance during the last twelve months.
2.16 Labor Relations
. Seller has previously delivered to Purchaser copies of all collective
bargaining agreements to which Seller is a party or is subject and which
relate to the ownership, operation and maintenance of the Generating Assets,
all of which agreements are listed in Section 2.16 of the Disclosure Schedule
(the "Collective Bargaining Agreements"). Solely with respect to the
operation of the Generating Assets, except as disclosed in Section 2.16 of
the Disclosure Schedule:
(a) To Seller's Knowledge, Seller is in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, collective bargaining and wages and hours;
(b) Seller has not received written notice (or otherwise has
Knowledge) of any unfair labor practice complaint against Seller pending
before the National Labor Relations Board;
(c) There is no labor strike, slowdown or stoppage actually
pending or, to the Knowledge of Seller, threatened against or affecting
Seller;
(d) Seller has not received notice (or otherwise has Knowledge)
that any representation petition respecting the Employees has been filed with
the National Labor Relations Board;
(e) No arbitration proceeding arising out of or under
collective bargaining agreements is pending against Seller; and
(f) Seller has not experienced any primary work stoppage since
1963.
2.17 Environmental Matters
. Except as disclosed in Section 2.17 of the Disclosure Schedule:
(a) Seller holds, and is in substantial compliance with, all
Licenses which are required for Seller to own, operate and maintain the
Assets under applicable Environmental Laws ("Environmental Permits"), and
Seller has not received any written notice of any violation of any
Environmental Law that has not heretofore been resolved and Seller is
otherwise in substantial compliance with applicable Environmental Laws with
respect to the ownership, operation and maintenance of the Assets.
(b) Seller has not received any written request for
information, or been notified that it is a potentially responsible party,
under any Environmental Law with respect to any on-site location relating to
the ownership, operation and maintenance of the Assets.
(c) Seller has not entered into or agreed to any consent decree
or order, and is not subject to any outstanding judgment, decree, or judicial
order relating to compliance with any Environmental Law or to investigation
or cleanup of Hazardous Materials under any Environmental Law relating to the
ownership, operation and maintenance of the Assets.
(d) There are no claims, actions, proceedings or investigations
pending or, to the Knowledge of Seller, threatened against Seller before any
court, Governmental or Regulatory Authority relating to any Environmental Law
with respect to the ownership, operation and maintenance of the Assets.
(e) To its Knowledge, Seller has made available to Purchaser:
(i) a list of all material environmental reports and/or audits prepared by or
for Seller within the past five (5) years which discuss the environmental
conditions of the Assets; and (ii) a list of all underground storage tanks
and/or surface impoundments located on the Assets which contain or have
contained Hazardous Materials.
The representations and warranties made in this Section 2.17 are Seller's
exclusive representations and warranties relating to environmental matters.
2.18 Absence of Condemnation Proceedings
. Neither the whole nor any portion of the Assets is subject to any pending
or, to Seller's Knowledge, threatened suit or order for condemnation or other
taking by any public authority.
2.19 Regulation as a Utility
. Seller is a public utility company within the meaning of the Holding
Company Act. Except as set forth in Section 2.19 of the Disclosure Schedule,
Seller is not subject to regulation as a public utility or public service
company (or similar designation) by the United States, any state of the
United States, any foreign country or any municipality or any political
subdivision of the foregoing.
2.20 Brokers
. Except for Goldman, Sachs & Co., whose fees, commissions and expenses are
the sole responsibility of Seller, Morgan Stanley Dean Witter, whose fees and
expenses are the sole responsibility of Puget and Merrill Lynch & Co., whose
fees, commissions and expenses are the sole responsibility of PGE, all
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by Seller directly with Purchaser without the
intervention of any Person on behalf of Seller in such manner as to give rise
to any valid claim by any Person against Purchaser for a finder's fee,
brokerage commission or similar payment.
2.21 Year 2000
. Seller has put into effect practices and programs which Seller reasonably
believes will enable all system critical software, hardware and equipment
(including microprocessors) that is owned or utilized by Seller in connection
with the ownership, operation and maintenance of the Assets to be capable, by
December 31, 1999, of accounting for all calculations using a century and
date sensitive algorithm for the year 2000 and the fact that the year 2000 is
a leap year. Section 2.21 of the Disclosure Schedule identifies (a) each
material "Year 2000" audit, report or investigation that has been performed
by or on behalf of Seller with respect to the Assets or the ownership,
operation and maintenance of the Assets, and (b) the plans, schedules, and
other actions contemplated for the remediation of any problems identified in
such audits, reports and investigations and the testing of the Assets in
advance of December 31, 1999, for "Year 2000" compliance, copies of which
have been made available to Purchaser.
2.22 Disclaimers Regarding Assets
. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE BEING
TRANSFERRED "AS IS, WHERE IS" AND SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS
TO THE CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS (FINANCIAL
AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS AND SELLER
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY,
USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE
ASSETS, OR ANY PART THEREOF.
ARTICLE III tc \n \l 1 "ARTICLE III"
REPRESENTATIONS AND WARRANTIES OF PURCHASER tc \n \l 1 "REPRESENTATIONS AND
WARRANTIES OF PURCHASER "
Purchaser hereby represents and warrants to Seller as follows:
3.01 Corporate Existence
. Purchaser is a corporation duly incorporated, validly existing and in good
standing under the Laws of the Commonwealth of Pennsylvania and has full
corporate power and authority to conduct its business as it is now being
conducted and to own, lease and operate its Assets and Properties. Purchaser
has full corporate power and authority to enter into this Agreement and the
Operative Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby. Purchaser has heretofore made available to Seller
complete and correct copies of its articles of incorporation and by-laws (or
other comparable corporate charter documents), as currently in effect.
3.02 Authority
. The execution and delivery by Purchaser of this Agreement and the
Operative Agreements to which it is a party, and the performance by Purchaser
of its obligations hereunder and thereunder, have been duly and validly
authorized by the Board of Directors of Purchaser, no other corporate action
on the part of Purchaser or its stockholders being necessary. This Agreement
has been duly and validly executed and delivered by Purchaser and, subject to
receipt of Seller Required Regulatory Approvals and Purchaser Required
Regulatory Approvals, constitutes, and upon the execution and delivery by
Purchaser of the Operative Agreements to which it is a party, such Operative
Agreements will constitute, legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their terms except as the
same may be limited by bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar Laws relating to or affecting the rights of
creditors generally, or by general equitable principles.
3.03 No Conflicts
. (a) Except as set forth in Section 3.03 of the Disclosure Schedule, and
other than obtaining Seller Required Regulatory Approvals and Purchaser
Required Regulatory Approvals, the execution and delivery by Purchaser of
this Agreement do not, and the execution and delivery by Purchaser of the
Operative Agreements to which it is a party, the performance by Purchaser of
its obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(i) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of incorporation or by-
laws (or other comparable corporate charter documents) of Purchaser;
(ii) require any consent, approval, authorization or permit, or
filing with or notification to, any Governmental or Regulatory Authority
except for Seller Required Regulatory Approvals and Purchaser Required
Regulatory Approvals;
(iii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which Purchaser is a party or by which any
of its Assets and Properties 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
(iv) conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Purchaser or any of its
respective Assets and Properties.
3.04 Governmental Approvals and Filings
. Except for Purchaser Required Regulatory Approvals, no consent, approval
or action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Purchaser is required in connection with the
execution, delivery and performance of this Agreement or any of the Operative
Agreements to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
3.05 Legal Proceedings
. Except as disclosed in Section 3.05 of the Disclosure Schedule (with
paragraph references corresponding to those set forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets and Properties which could reasonably be
expected (i) to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative
Agreements, or (ii) individually or in the aggregate with other such Actions
or Proceedings, to create a Purchaser Material Adverse Effect; and
(b) there are no Orders outstanding against Purchaser which,
individually or in the aggregate with other such Orders, would have a
Purchaser Material Adverse Effect.
3.06 Compliance with Laws and Orders
. Except as disclosed in Section 3.06 of the Disclosure Schedule, Purchaser
is not in violation of or in default under any Law or Order applicable to
Purchaser or its Assets and Properties.
3.07 Regulation as a Utility
. Purchaser is not a public utility company within the meaning of the
Holding Company Act. As of the Closing, Purchaser will be subject to
regulation as a public utility under the Federal Power Act. Purchaser is not
otherwise subject to regulation as a public utility or public service company
(or similar designation) by the United States, any state of the United
States, any foreign country or any municipality or any political subdivision
of the foregoing.
3.08 Brokers
. Except for Chase Securities Inc., whose fees, commissions and expenses are
the sole responsibility of Purchaser, all negotiations relative to this
Agreement and the transactions contemplated hereby have been carried out by
Purchaser directly with Seller without the intervention of any Person on
behalf of Purchaser in such manner as to give rise to any valid claim by any
Person against Purchaser for a finder's fee, brokerage commission or similar
payment.
3.09 Financing
. Purchaser has cash and/or commitments for equity contributions or credit
facilities sufficient (and has provided Seller with evidence thereof) to pay
the Base Purchase Price and the Combined Payment Amount and to make all other
necessary payments of fees and expenses in connection with the transactions
contemplated by this Agreement and the Operative Agreements.
3.10 Financial Statements
. Purchaser has delivered to Seller the financial statements of Purchaser
listed on Section 3.10 of the Disclosure Schedule, and such financial
statements and notes fairly present the financial condition and the results
of operations, changes in stockholders' equity, and cash flow of Purchaser as
of the respective dates of and for the periods referred to therein, all in
accordance with GAAP, subject, in the case of interim financial statements,
to normal recurring year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the absence of
notes and schedules.
3.11 Opportunity to Inspect Assets
. Prior to its execution of this Agreement, Purchaser has conducted an
independent investigation of the Assets. In making its decision to execute
this Agreement, and to purchase the Assets, Purchaser has relied upon the
terms and provisions of this Agreement and the results of such independent
investigation.
ARTICLE IV tc \n \l 1 "ARTICLE IV"
COVENANTS OF SELLER tc \n \l 1 " COVENANTS OF SELLER"
Seller covenants and agrees with Purchaser that, at all times
from and after the date hereof until the Closing, and, with respect to
Sections 4.06 and 4.09, thereafter Seller will comply with all covenants and
provisions of this Article IV, except to the extent Purchaser may otherwise
consent in writing.
4.01 Regulatory and Other Approvals
. Seller will (a) (i) take all reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all reasonable efforts, as
promptly as practicable to obtain all consents, approvals or actions of, to
make all filings with and to give all notices to Governmental or Regulatory
Authorities, and (ii) take all commercially reasonable steps necessary or
desirable to obtain all consents, approvals or actions, and give all notices
to, any other Person required of Seller, in each case, to consummate the
transactions contemplated hereby and by the Operative Agreements, including
those described in Section 2.03 of the Disclosure Schedule and Seller
Required Regulatory Approvals, or for Purchaser to own, operate or maintain,
on and after the Closing, the Assets substantially as such assets are
currently owned, operated and maintained by Seller, (b) provide such other
information and communications to such Governmental or Regulatory Authorities
or other Persons as such Governmental or Regulatory Authorities or other
Persons may reasonably request in connection therewith and (c) provide
reasonable cooperation (i) to Purchaser in obtaining all Purchaser Required
Regulatory Approvals and other consents, approvals or actions of, making all
filings with and giving all notices to Governmental or Regulatory Authorities
or other Persons required of Purchaser to consummate the transactions
contemplated hereby and by the Operative Agreements and (ii) to Purchaser,
and Purchaser's potential lenders in connection with Purchaser Financing for
the transactions contemplated by this Agreement. Prior to making any filings
with a Governmental or Regulatory Authority pursuant to this Section 4.01,
Seller agrees to provide copies of such filings to Purchaser. Nothing in
this Agreement shall require Seller to institute litigation or to pay or
agree to pay any sum of money or make financial accommodations (other than
the payment or incurrence of customary expenses and filing or other fees) in
order to obtain any necessary consent, approval or authorization including,
without limitation, the Seller Required Regulatory Approvals. Seller will
provide prompt notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is obtained, taken,
made or given, as applicable, and will advise Purchaser of any communications
(and, unless precluded by Law or Order, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by
this Agreement or any of the Operative Agreements.
4.02 HSR Filings
. In addition to and not in limitation of Seller's covenants contained in
Section 4.01, Seller will (a) consult with Purchaser as to appropriate timing
of filings and take promptly all actions necessary to make the filings
required of Seller or its Affiliates under the HSR Act, (b) comply at the
earliest practicable date with any request for additional information
received by Seller or its Affiliates from the Federal Trade Commission or the
Antitrust Division of the Department of Justice pursuant to the HSR Act and
(c) cooperate with Purchaser in connection with Purchaser's filing under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement commenced by
either the Federal Trade Commission or the Antitrust Division of the
Department of Justice or state attorneys general.
4.03 Investigation by Purchaser
. Seller will (a) provide Purchaser and its officers, employees, counsel,
accountants, financial advisors, potential lenders, Purchaser's and potential
lenders' consultants and other representatives (collectively,
"Representatives") with full access, upon reasonable prior notice and during
normal business hours, to the Employees and such other officers, employees
and agents of Seller who have any responsibility for the operation of the
Generating Assets, to Seller's accountants and to the Assets (including
access to the Generating Assets sites), but only to the extent that such
access does not unreasonably interfere with the operation of the Generating
Assets and (b) make available to Purchaser and its Representatives, upon
request a copy of each report, schedule or other document filed or received
by Seller between the Bid Date and the Closing with or from the SEC, FERC,
EPA, Montana Public Service Commission or any other relevant Governmental or
Regulatory Authority and relating to the ownership, operation and maintenance
of the Assets or the transactions contemplated by this Agreement, and all
such information and data (including copies of Business Contracts,
Transferable Permits, Fuel Contracts, Colstrip Contracts, Power
Purchase/Exchange Agreements, Benefit Plans and other Business Books and
Records) concerning the ownership, operation and maintenance of the Assets
and the Assumed Liabilities as Purchaser or its Representatives reasonably
may request in connection with such investigation, except to the extent that
furnishing any such report, schedule, other document, information or data
would violate any Law, Order (including any protective order or similar
confidentiality obligation), Contract or License applicable to Seller or by
which any of its Assets and Properties is bound. In furtherance of the
foregoing, Seller agrees to cooperate with Purchaser in connection with
Purchaser's efforts to obtain Purchaser Financing, as defined in Section
5.08. Seller's cooperation shall include the negotiation and execution of a
consent with the lenders with respect to the Operative Agreements, which
consent shall include providing such lenders with rights to cure a Purchaser
default under the Operative Agreements; provided, however, that Seller shall
not be obligated, in connection with such cooperation or consent, to take any
action or enter into any agreement that would have any adverse effect on
Seller or any of its rights or benefits under this Agreement or the Operative
Agreements.
4.04 No Solicitations
. Subject to the duties imposed by applicable Law, Seller will not take, nor
will it permit any Affiliate of Seller (or authorize or permit any investment
banker, financial advisor, attorney, accountant or other Person retained by
or acting for or on behalf of Seller or any such Affiliate) to take, directly
or indirectly, any action to solicit, encourage, receive, negotiate, assist
or otherwise facilitate (including by furnishing confidential information
with respect to the operation of the Generating Assets or permitting access
to the Assets and Properties and Books and Records of Seller) any offer or
inquiry from any Person concerning the acquisition of any of the Assets other
than Purchaser or its Affiliates or any of their Representatives.
4.05 Conduct of Business
. (a) From the Bid Date to the Closing, Seller has operated and maintained
and will operate and maintain the Generating Assets only in the ordinary
course consistent with Good Utility Practice. Without limiting the
generality of the foregoing, Seller will use commercially reasonable efforts,
to (i) maintain good relations with and keep available (subject to dismissals
and retirements in the ordinary course of business) the services of key
Employees, (ii) maintain the Assets in good working order and condition,
ordinary wear and tear excepted, (iii) maintain the good will of lessors,
customers, suppliers, lenders and other Persons with whom Seller otherwise
has significant business relationships in connection with the operation of
the Generating Assets, and (iv) materially comply with all Laws and Orders,
including Environmental Laws applicable to the ownership, operation and
maintenance of the Generating Assets.
(b) Without limiting the generality of the foregoing, except
with the prior written consent of Purchaser, Seller will, with respect
to the ownership, operation and maintenance of the Assets keep in force
at not less than their present limits all policies of insurance
covering the Assets to the extent reasonably practicable in light of
the prevailing market conditions in the insurance industry and promptly
notify Purchaser of the cancellation of any such policy or any material
modification thereto.
4.06 Employee Matters
. Except as may be required by Law and except as disclosed in Section 4.06
of the Disclosure Schedule, Seller will refrain from directly or indirectly:
(a) making any representation or promise, oral or written, to
any Employee concerning any Benefit Plan, except for statements as to the
rights or accrued benefits of any Employee under the terms of any Benefit
Plan or statements describing the employee related terms in this Agreement;
(b) making any increase in the salary, wages or other
compensation or benefits of any Employee, other than in the ordinary course
of business on such Employee's normal annual review date in an amount, if a
Non-Union Employee, not exceeding 5% of such Employee's salary, wages and
other compensation, or declare, pay or set aside for payment any amounts in
the nature of bonuses to any of its officers or Employees;
(c) adopting, entering into or becoming bound by any Benefit
Plan, employment-related Contract or collective bargaining agreement with
respect to the operation of the Generating Assets or any of the Employees, or
amending, modifying or terminating (partially or completely) any such Benefit
Plan, employment-related Contract or collective bargaining agreement, except
to the extent required by applicable Law and, in the event compliance with
legal requirements presents options, only to the extent that the option which
Seller reasonably believes to be the least costly is chosen;
(d) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any Benefit Plan or
any employment-related Contract or other compensation arrangement with or for
Employees or (ii) salary ranges, increase guidelines or similar provisions in
respect of any Benefit Plan or any employment-related Contract or other
compensation arrangement with or for Employees;
(e) soliciting, recruiting, making any offer of employment or
otherwise employing any of the Transferring Employees or taking any action
which could reasonably be expected to encourage or persuade the Transferring
Employees not to accept employment with Purchaser; or
(f) agreeing, whether in writing or otherwise, to take any
action described in this Section 4.06.
Seller will administer each Benefit Plan, or cause the same to be
so administered, in all material respects in accordance with the applicable
provisions of the Code, ERISA and all other applicable Laws and consistent
with past practice. Seller will promptly notify Purchaser in writing of each
receipt by Seller (and furnish Purchaser with copies) of any notice of in-
vestigation or administrative proceeding by the IRS, Department of Labor,
PBGC or other Person involving any Benefit Plan. Seller will use its
reasonable best efforts to assist Purchaser in the hiring and retention of
the Transferring Employees.
Seller agrees to timely perform and discharge all requirements
under the WARN Act, if any, and under applicable state and local laws and
regulations for the notification of its Employees arising from the sale of
the Assets to Purchaser. Seller, and not Purchaser, shall be responsible for
and shall retain any and all liability for all compensation, benefits, and
perquisites of any kind due any Transferring Employee on account of
employment by Seller before the Closing, or the termination of employment by
Seller, including, but not limited to, continuation of health care coverage
pursuant to the health continuation coverage provisions of COBRA and
compliance with HIPAA.
4.07 Certain Restrictions
. Except as set forth in Section 4.07 of the Disclosure Schedule, Seller
will refrain from:
(a) creating any Lien (other than a Permitted Lien) on the
Assets except in the ordinary course of Seller's business or as required
under Seller's instruments of Indebtedness and, in each case, as will be
removed on or prior to the Closing;
(b) selling, leasing (as lessor), transferring or otherwise
disposing of, any of the Assets, other than assets used, consumed or replaced
in the ordinary course of business consistent with Good Utility Practice;
(c) entering into, amending or modifying in any material way,
terminating (partially or completely), granting any waiver of any material
term under or giving any material consent with respect to any Business
Contract, Transferable Permit, Fuel Contract, Colstrip Contract or Power
Purchase/Exchange Agreement or other contract or agreement comprising a part
of the Assets or that relates to the Assets, the Assumed Liabilities or is
material to the operation of the Generating Assets;
(d) other than in the ordinary course of business, incurring,
purchasing, canceling, prepaying or otherwise providing for a complete or
partial discharge in advance of a scheduled payment date with respect to, or
waiving any right under, any Liability of or owing to Seller in connection
with the Assets, the Assumed Liabilities or the operation of the Generating
Assets in an aggregate principal amount exceeding $500,000;
(e) engaging with any Person in any Business Combination,
unless such Person agrees in a written instrument to adopt and comply with
the terms and conditions of this Agreement as though such Person was an
original signatory hereto;
(f) engaging in any transaction individually or in the
aggregate with other such transactions material to the operation of the
Generating Assets with any officer, director, Affiliate or Associate of
Seller, or any Associate of any such officer, director or Affiliate, that
would be an Assumed Liability and that would extend beyond the Closing other
than in the ordinary course of business on terms no less favorable to Seller
than could be obtained on an arm's-length basis with an unaffiliated third
party;
(g) making any material change in the level of fuel inventory
and stores inventory customarily maintained by Seller with respect to the
Generating Assets, other than consistent with Good Utility Practice; or
(h) entering into any commitment for the purchase or sale of
fuel having a term greater than six months and not terminable on or before
the Closing either (i) automatically, or (ii) by option of Seller (or, after
the Closing, by Purchaser) in its sole discretion, if the aggregate payment
under such commitment and all other outstanding commitments not previously
approved by Purchaser would be expected to exceed $500,000;
(i) making any tax election or entering into or amending any
real or personal property Tax agreement, treaty or settlement that would have
a negative effect on the Tax status of Purchaser with regard to the Assets;
(j) entering into any Contract to do or engage in any of the
foregoing.
The foregoing shall not preclude Seller from making (i)
Maintenance Expenditures and Capital Expenditures, and (ii) at Seller's
expense, such other maintenance and capital expenditures as Seller deems
necessary.
4.08 Security Deposits
. Seller will transfer to Purchaser at the Closing all of Seller's right,
title and interest in and to the Tenant Security Deposits and the Landlord
Security Deposits and any other deposits, prepayments or progress payments
made or held by Seller in connection with the Assets or material to the
ownership, operation and maintenance of the Generating Assets.
4.09 Delivery of Books and Records, etc.; Removal of Property
. (a) At the Closing, Seller shall deliver or make available to Purchaser
at the locations at which the Generating Assets are operated all of the
Business Books and Records and such other Assets as are in Seller's
possession at other locations, and if at any time after the Closing, Seller
discovers in its possession or under its control any other Business Books and
Records or other Assets, it will forthwith deliver such Business Books and
Records or other Assets to Purchaser.
(b) Except as set forth in Section 4.09 of the Disclosure
Schedule, within a reasonable time after the Closing, Seller shall take all
commercially reasonable steps to remove all Assets and Properties not being
sold to Purchaser hereunder from the Real Property except as contemplated by
the Separation Document. Such removal shall be at the sole cost and risk of
Seller, including risk of loss and damage to such Assets and Properties and
to the Assets conveyed to Purchaser hereby.
4.10 Fulfillment of Conditions
. Seller will execute and deliver at the Closing each Operative Agreement
that Seller is required hereby to execute and deliver as a condition to the
Closing, will take all commercially reasonable steps necessary or desirable
and proceed diligently and in good faith to satisfy each other condition to
the obligations of Purchaser contained in this Agreement and will not take or
fail to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition.
4.11 Observation, Inspection and Participation
. Between the date of this Agreement and the Closing, Purchaser shall be
entitled to have a reasonable number of representatives, all of whom shall be
employees of Purchaser or its Affiliates unless otherwise approved by Seller
in each instance, which approval shall not be unreasonably withheld ("Site
Representatives") at any of the Assets, on a full or part time basis (whether
on site or off-site), as determined by Purchaser; provided, however, that (a)
the presence and activities of the Site Representatives shall be conducted in
a manner as not to interfere unreasonably with the ownership, operation and
maintenance of the Assets, or with the activities of Seller not related to
the Assets and (b) the Site Representatives shall not have access to any
information that is unavailable pursuant to Section 4.03. Reasonable office
space and facilities will be made available by Seller to such Site
Representatives. Each Site Representative shall have the right to review
budgets and expenditures, audit records (except for personnel and medical
records unless required by law), inspect equipment, advise on repairs
required for equipment, review permits, review the progress of outages,
review maintenance and operating practices and otherwise observe all
activities at the above mentioned facilities in each case to the extent
related to the operation of the Assets. Between the date hereof and the
Closing, Seller shall exercise its reasonable efforts to invite Site
Representatives to attend internal meetings in which Seller participates and
which relate specifically to the physical operation or maintenance of the
Assets; provided, however, that such obligation shall not extend to (i)
meetings of the boards of directors, or any committees thereof, of Seller or
any of its Affiliates, (ii) meetings with counsel, or (iii) meetings the
subject matter of which, in Seller's reasonable judgment, if disclosed to
Purchaser, would likely be detrimental to Seller (including, without
limitation, information relating to Seller's proposed business activities
following the Closing or to contractual or other matters as to which the
interests of Seller and Purchaser may diverge). Site Representatives shall
also be entitled to consult with Seller and make recommendations as to all
activities relating to the management, operation, maintenance, construction,
renewal, addition, replacement, modification and disposal of the Assets,
including, without limitation, applications for authorizations, permits and
licenses, and fuel procurement and transportation.
4.12 Notice of Breach
. Seller shall promptly give notice to Purchaser upon becoming aware of the
occurrence of any event which would cause or constitute a breach of any of
the representations, warranties or covenants of Seller contained in this
Agreement.
4.13 Bridge Financing Fees
. In the event that Purchaser obtains a written commitment for bridge
financing in connection with the transactions contemplated hereby, Seller
will pay 55.88% of 50% of any financing fees payable by Purchaser in
connection with such bridge financing at the same time Purchaser pays 50% of
such financing fees; provided, however, Seller's obligation under this
Section 4.13 shall not exceed $4,322,318 in the aggregate.
4.14 Special Maintenance and Capital Expenditures
. Within thirty (30) days after the date hereof, Seller and Purchaser shall
mutually agree on a Schedule setting forth a month by month special
maintenance and capital expenditure budget relating to the Assets for
calendar years 1999 and 2000 (the "Budget"). The Budget will be divided into
two parts; Category A items and Category B items. With respect to items
listed under Category A, Seller agrees to use commercially reasonable efforts
to conduct and complete such special maintenance and capital expenditures at
the times set forth in the Budget. With respect to items listed under
Category B, Seller shall conduct and complete such special maintenance and
capital expenditures at such times as Seller shall determine in its
reasonable discretion after consultation with Purchasers. With respect to
emergency special maintenance and capital expenditure items not identified in
the Budget that arise after the date hereof and prior to the Closing, Seller
will consult with Purchaser and will conduct and complete any such emergency
special maintenance and capital expenditure items in accordance with Good
Utility Practice ("Emergency Expenditures").
ARTICLE V tc \n \l 1 "ARTICLE V"
COVENANTS OF PURCHASER tc \n \l 1 " COVENANTS OF PURCHASER"
Purchaser covenants and agrees with Seller that, at all times
from and after the date hereof until the Closing and, in the case of Sections
5.03 and 5.07, thereafter, Purchaser will comply with all covenants and
provisions of this Article V, except to the extent Seller may otherwise
consent in writing.
5.01 Regulatory and Other Approvals
. Purchaser will (a) take all reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all reasonable efforts, at the
earliest commercially practicable dates to obtain all consents, approvals or
actions of, to make all filings with and to give all notices to Governmental
or Regulatory Authorities or any other Person required of Purchaser to
consummate the transactions contemplated hereby and by the Operative
Agreements, including those described in Section 3.03 of the Disclosure
Schedule and Purchaser Required Regulatory Approvals or for Purchaser to own,
operate or maintain, on and after the Closing , the Assets substantially as
such assets are currently owned, operated and maintained by Seller, (b)
provide such other information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or Regulatory
Authorities or other Persons may reasonably request in connection therewith
and (c) provide reasonable cooperation to Seller in obtaining Seller Required
Regulatory Approvals and all other consents, approvals or actions of, making
all filings with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of Seller to consummate the
transactions contemplated hereby and by the Operative Agreements. Prior to
making any filings with a Governmental or Regulatory Authority pursuant to
Section 5.01, Purchaser agrees to provide copies of such filings to Seller.
Nothing in this Agreement shall require Purchaser to institute litigation or
to pay or agree to pay any sum of money or make financial accommodations
(other than the payment or incurrence of customary expenses and filing or
other fees) in order to obtain any necessary consent, approval or
authorization including, without limitation, the Purchaser Required
Regulatory Approvals. Purchaser will provide prompt notification to Seller
when any such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as applicable, and will
advise Seller of any communications (and, unless precluded by Law, provide
copies of any such communications that are in writing) with any Governmental
or Regulatory Authority or other Person regarding any of the transactions
contemplated by this Agreement or any of the Operative Agreements.
5.02 HSR Filings
. In addition to and without limiting Purchaser's covenants contained in
Section 5.01, Purchaser will (a) consult with Seller as to the appropriate
timing of filings and take promptly all actions necessary to make the filings
required of Purchaser or its Affiliates under the HSR Act, (b) comply at the
earliest practicable date with any request for additional information
received by Purchaser or its Affiliates from the Federal Trade Commission or
the Antitrust Division of the Department of Justice pursuant to the HSR Act
and (c) cooperate with Seller in connection with Seller's filing under the
HSR Act and in connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement commenced by
either the Federal Trade Commission or the Antitrust Division of the
Department of Justice or state attorneys general.
5.03 Employees
. (a) Section 5.03 of the Disclosure Schedule sets forth a list of all
Employees as of September 30, 1998. Purchaser shall offer employment,
effective as of the Closing, to all full-time and part-time Non-Union
Employees, including Non-Union Employees who are on disability or worker's
compensation leave or on an authorized leave of absence as of the Closing.
All such offers of employment shall be made in accordance with applicable
Law, and such employment with Purchaser shall be subject to the following
requirements for the entirety of the period commencing on the Closing and
ending no less than 18 months thereafter or such other period as set forth in
this Section 5.03:
(i) Terms of Employment. Purchaser shall offer each Non-Union
Employee a position with Purchaser similar to his or her position
immediately prior to the Closing and agrees to employ each Non-Union
Employee who accepts such employment for 18 months after the Closing
(the "Employment Term") at a location in Montana and at a base pay at
least equal to his or her base pay on the Closing; provided, however,
that nothing herein shall prevent Purchaser from terminating any
Transferring Non-Union Employee "for cause" as defined by Montana Law
(a reduction in force, however, will not be considered "for cause").
Purchaser shall afford all Transferring Non-Union Employees ten paid
holidays per year and vacation and personal time under a paid time off
program substantially similar in the aggregate to the paid time off
program of Seller; provided, however, for the calendar year during
which the Closing occurs, Purchaser shall assume all accrued vacation
and personal time payable to Transferring Non-Union Employees as of the
Closing. Purchaser shall make incentive compensation awards for
calendar year during which the Closing occurs to eligible Transferring
Non-Union Employees substantially in accordance with Seller's incentive
compensation plan in effect on the Closing (except that Purchaser shall
not be obligated to pay any incentive compensation based on the
consummation of the transactions contemplated hereby).
(ii) Severance. For the period commencing on the expiration of
the Employment Term and ending on the date which is 6 months
thereafter, Purchaser shall pay each Transferring Non-Union Employee
who is terminated from employment during such period, other than "for
cause", a severance benefit in an amount equal to $6,000 plus the
greater of two weeks of base pay times such Employee's "year of
service" up to a maximum of 52 weeks of base pay, or 12 weeks of base
pay. Purchaser shall cause any subsequent purchaser(s) of the Assets to
provide such severance benefits during such six-month period. For
purposes of the foregoing, a "for cause" termination shall be as
otherwise defined by Montana Law, and "years of service" shall mean the
Employee's aggregate whole years of service for Seller, Purchaser and
any subsequent purchaser(s) of the Assets.
(iii) Welfare Benefits. Purchaser shall provide all
Transferring Non-Union Employees (other than those terminated "for
cause" as defined above) with coverage under welfare benefit plans,
programs and arrangements ("Purchaser's Welfare Plans") maintained or
sponsored by Purchaser that provide medical, dental, vision, basic life
insurance (including dependent life options), short term disability,
long term disability, relocation benefits and worker compensation
benefits that are substantially similar in the aggregate to those
available under welfare benefit plans maintained by Seller immediately
prior to the Closing. Purchaser shall cause all pre-existing condition
exclusions and waiting periods, if any, under Purchaser's Welfare Plans
to be waived for Transferring Non-Union Employees, and shall provide
each such Employee with credit thereunder for deductible, out-of-
pocket, co-payment and similar expenses incurred under similar plans of
Seller. Purchaser shall assume under Purchaser's Welfare Plans all
liabilities for continuation coverage for Transferring Non-Union
Employees and their eligible dependents pursuant to Section 4980B of
the Code and Section 601 through 609 of ERISA and any similar state
coverage, for the required duration of such coverage, provided that
such Employee's qualifying event occurs after the Closing.
(iv) 401(k) Plan. Purchaser shall establish and maintain for
Transferring Non-Union Employees a plan pursuant to Section 401(k) of
the Code ("Purchaser's 401(k) Plan") which shall provide for the same
or substantially similar elective deferral, after-tax, and employer
matching contribution levels, and loan entitlements, that are available
under the Montana Power Company Retirement Savings Plan (401(k)) ("MPC
401(k) Plan"), and which shall further provide for the acceptance of
rollover distributions from the MPC 401(k) Plan and/or conduit
individual retirement accounts established by any such employees.
Purchaser shall take all actions required to obtain, and shall obtain,
a favorable determination letter from the IRS on the tax qualified
status of Purchaser's 401(k) Plan.
(v) Retirement Plan. Purchaser shall establish and maintain for
Transferring Non-Union Employees a retirement plan pursuant to Section
401(a) of the Code ("Purchaser's Retirement Plan") which shall contain
either a defined benefit or cash balance formula that provides a
retirement benefit that is of substantially similar in the aggregate to
the retirement benefit provided under Seller's Cash Balance Retirement
Plan ("Seller's Retirement Plan"). As soon as practicable after the
Closing, but no later than sixty (60) days after the Closing, Seller
shall cause to be transferred from Seller's Retirement Plan, and
Purchaser shall cause Purchaser's Retirement Plan to accept such
transfer, assets from Seller's Retirement Plan in respect of the
accrued benefit of each Transferring Non-Union Employee who
participates in Seller's Retirement Plan and Purchaser shall assume
Liability for such accrued benefit as of the Closing. The assets
transferred to the Purchaser's Retirement Plan shall equal the
aggregate present value of the accrued benefits of Transferring Non-
Union Employees under Seller's Retirement Plan on a termination basis
as of the Closing (within the meaning of Treasury Regulation Section
1.414(l)-1(b)(5)), as certified by Seller's actuary. After such
transfer, Purchaser's Retirement Plan shall provide a benefit for each
Transferring Non-Union Employee that is substantially similar in the
aggregate to such Employee's accrued benefit under Seller's Retirement
Plan immediately prior to the Closing. Purchaser shall take all
actions required to obtain, and shall obtain, a favorable determination
letter from the IRS on the tax qualified status of Purchaser's
Retirement Plan.
(vi) Service. Any and all plans of Purchaser described in
paragraphs (i) through (v) above that determine a participant's
eligibility to participate, waiting period for benefits, vesting or
benefit accruals based on his or her length of service with Purchaser
shall credit each Transferring Non-Union Employee's service with Seller
and its Affiliates as service with Purchaser for such purposes.
(b) Purchaser shall, effective on the Closing, assume and
fulfill all of Seller's obligations under the Collective Bargaining
Agreements to the extent related to Transferring Union Employees, including,
without limitation the Letter of Agreement between Seller and IBEW Local 44
dated July 9, 1998 and the drafts (substantially in the form provided
heretofore) of the Letter of Agreements (which have been ratified by the
unions) between Seller and IBEW Local 1638 and Teamsters Union Local No. 190
dated July 2, 1998 and July 9, 1998 respectively (copies of which have been
made available to Purchaser prior to the date hereof). Purchaser shall offer
employment, effective as of the Closing, to all Union Employees, including
Union Employees who are on disability or worker's compensation leave or on an
authorized leave of absence as of the Closing. All such offers of employment
shall be made in accordance with applicable Law and all relevant Collective
Bargaining Agreements. Without limiting the generality of the foregoing, the
Purchaser's 401(k) Plan shall provide for the acceptance of rollover
distributions from or in respect of any Transferring Union Employees from the
MPC 401(k) Plan and/or any conduit individual retirement accounts established
by any such employees. Purchaser shall establish and maintain for
Transferring Union Employees a retirement plan pursuant to Section 401(a) of
the Code ("Purchaser's Retirement Plan") which shall contain either a defined
benefit or cash balance formula that provides a retirement benefit that is of
no less value in the aggregate to the retirement benefit provided under the
Seller's Defined Benefit Retirement Plan ("Seller's DB Plan"). To the extent
permitted by the Collective Bargaining Agreements, as soon as practicable
after the Closing, but no later than sixty (60) days after the Closing,
Seller shall cause to be transferred from the Seller's DB Plan, and Purchaser
shall cause the Purchaser's Retirement Plan to accept such transfer, assets
from the Seller's DB Plan in respect of the accrued benefit of each
Transferring Union Employee who participates in the Seller's DB Plan and the
Purchaser shall assume liability for such accrued benefits as of the Closing.
The assets transferred to the Purchaser's Retirement Plan shall equal the
aggregate present value of the accrued benefits of Transferring Union
Employees under the Seller's Retirement Plan on a termination basis (within
the meaning of Treasury Regulation Section 1.414(l)-1(b)(5)), as certified by
Seller's actuary. After such transfer, but subject to the terms of any
applicable collective bargaining agreement, Purchaser's Retirement Plan shall
provide a benefit for each Transferring Union Employee that is of no less
value in the aggregate to such Employee's accrued benefit under the Seller's
Retirement Plan immediately prior to the Closing. Any and all plans of
Purchaser that determine a participant's eligibility to participate, waiting
period for benefits, vesting or benefit accruals based on his or her length
of service with Purchaser shall credit each Transferring Union Employee's
service with Seller and its Affiliates as service with Purchaser for such
purposes.
(c) Purchaser shall be responsible and shall assume any and all
Liabilities for all compensation, benefits, and perquisites of any kind due
any Transferring Employee on account of employment by Purchaser after the
Closing, or the termination of employment by Purchaser, including, but not
limited to, continuation of health care coverage pursuant to COBRA and
compliance with HIPAA.
(d) Seller will remain responsible (i) for all short-term
disability, long-term disability and workers compensation benefits payable to
Transferring Non-Union Employees who, as of the close of business on the day
immediately preceding the Closing, were determined to be disabled in
accordance with the applicable provisions of the Seller's short-term or long-
term disability benefits plans or programs and (ii) for all workers
compensation claims relating to a pre-closing injury (provided such workers
compensation claims are made on or before the date that is one year after the
Closing).
5.04 PPUC Approval for Holding Company
. From the date hereof through the Closing, Purchaser agrees not to enter
into any Contract or take any action which, when taken together with the
consummation of the transactions contemplated by this Agreement, would
violate any condition imposed by the PPUC that limits PP&L Resources, Inc.'s
investment in diversified businesses without prior PPUC approval. Purchaser
further agrees that, in seeking the approval described in clause (v) of the
definition of Purchaser Required Regulatory Approvals, Purchaser shall use
commercially reasonable efforts to seek any reasonable PPUC approval that
would allow Purchaser to consummate the transactions contemplated hereby and
to own, operate and maintain the Assets in substantially the same manner as
currently owned, operated and maintained by Seller.
5.05 Notice of Breach
. Purchaser shall promptly give notice to Seller upon becoming aware of the
occurrence of any event which would cause or constitute a breach of any of
the representations, warranties or covenants of Purchaser contained in this
Agreement.
5.06 Fulfillment of Conditions
. Purchaser will execute and deliver at the Closing each Operative Agreement
that Purchaser is hereby required to execute and deliver as a condition to
the Closing, will take all commercially reasonable steps necessary or
desirable and proceed diligently and in good faith to satisfy each other
condition to the obligations of Seller contained in this Agreement and will
not take or fail to take any action that could reasonably be expected to
result in the nonfulfillment of any such condition.
5.07 Tax-Exempt Bond Financed Pollution Control Facilities
. (a) Following the Closing until the maturity or redemption date of the
Pollution Control Bonds
(i) Except as otherwise permitted in (ii), Purchaser will not
materially change or permit to be changed the character or nature of
the use of those facilities listed in Exhibit C hereto (the "Pollution
Control Facilities") from the manner Seller has used said facilities
prior to the sale of the Assets, unless such changed use would
constitute a use or purpose of said facilities for which tax-exempt
bonds could be issued pursuant to section 1313 of the Tax Reform Act of
1986 (P.L. 99-514 or, hereinafter, the "1986 Tax Act"), to refund bonds
described in section 1312(a) of the 1986 Tax Act which, for purposes
hereof, are assumed to have been issued to finance facilities of the
same character and use or purpose as said facilities;
(ii) Purchaser will not sell or otherwise transfer any portion
of such Pollution Control Facilities unless (A) the transferee
covenants to satisfy the conditions of section 5.07(a)(i) with respect
to its ownership and use of said facilities following the date of any
such purchase or (B) the transfer relates to personal property and is
exclusively for cash the proceeds of which will be expended within six
months of the date of receipt on facilities for which tax-exempt bonds
could be issued pursuant to section 1313 of the 1986 Tax Act, to refund
bonds described in section 1312(a) of said act which, for purposes
hereof, are assumed to have been issued to finance facilities of the
same character and use or purpose as said facilities; and
(iii) Purchaser will cooperate with Seller and use commercially
reasonable efforts to permit Seller to have access to Colstrip Units
1,2,3 and 4, as the case may be, at reasonable times to examine the
Pollution Control Facilities.
Nothing herein shall be construed to prevent Purchaser from
ceasing to use any facilities or equipment that, in Purchaser's
reasonable judgment, have become obsolescent or otherwise uneconomical
to continue to use. Seller will notify Purchaser when the Pollution
Control Bonds have matured or been redeemed.
5.08 Purchaser Financing
. Purchaser will proceed in good faith and use all reasonable efforts to
obtain financing on commercially reasonable terms in amounts and structure
reasonably consistent with Purchaser's financing plan as set forth in
Purchaser's written proposal to Seller dated September 25, 1998 (the
"Purchaser Financing").
ARTICLE VI tc \n \l 1 "ARTICLE VI"
CONDITIONS TO OBLIGATIONS OF PURCHASER tc \n \l 1 " CONDITIONS TO
OBLIGATIONS OF PURCHASER"
The obligations of Purchaser hereunder to purchase the Assets and
to assume and pay, perform and discharge the Assumed Liabilities are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by
Purchaser in its sole discretion):
6.01 Representations and Warranties
. The representations and warranties made by Seller in this Agreement and
the Operative Agreements, taken as a whole, shall be true and correct, in all
material respects, on and as of the Closing as though repeated on and as of
the Closing or, in the case of representations and warranties made as of a
specified date earlier than the Closing, on and as of such earlier date.
6.02 Performance
. Seller shall have performed and complied with, in all material respects,
the agreements, covenants and obligations required by this Agreement to be so
performed or complied with by Seller at or before the Closing.
6.03 Officers' Certificates
. Seller shall have delivered to Purchaser a certificate, dated as of the
Closing and executed by the Chairman of the Board, the President or any Vice
President of Seller, substantially in the form and to the effect of Exhibit D
hereto, and a certificate, dated as of the Closing and executed by the
Secretary or any Assistant Secretary of Seller, substantially in the form and
to the effect of Exhibit E hereto.
6.04 Orders and Laws
. There shall not be in effect on the date of the Closing any Order or Law
restraining, enjoining or otherwise prohibiting or making illegal the con-
summation of any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
6.05 Regulatory Consents and Approvals
. Subject to Section 1.10, all Seller Required Regulatory Approvals and
Purchaser Required Regulatory Approvals shall have been duly obtained, made
or given and shall be in full force and effect and shall be a Final Order
reasonably satisfactory to Purchaser, and all terminations or expirations of
waiting periods imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this Agreement and
the Operative Agreements, including under the HSR Act, shall have occurred.
6.06 Third Party Consents
. The consents (or in lieu thereof waivers) listed in Section 6.06 of the
Disclosure Schedule shall have been obtained and shall be in full force and
effect and shall be reasonably satisfactory to Purchaser.
6.07 Colstrip Rights of First Refusal
. Seller shall have either received the consents required under each of the
Colstrip Rights of First Refusal or the exercise periods of such Colstrip
Rights of First Refusal shall have expired.
6.08 No Seller Material Adverse Effect
. There shall not have occurred and be continuing a Seller Material Adverse
Effect.
6.09 Proceedings
. All corporate and other proceedings to be taken by Seller in connection
with the transactions contemplated hereby and all documents incident thereto
shall be reasonably satisfactory in form and substance to Purchaser and its
counsel, and Purchaser and its counsel shall have received all such certified
or other copies of such documents as it or they may reasonably request.
6.10 Deliveries
. Seller shall have executed and delivered to Purchaser (i) the General
Assignment, (ii) the other Assignment Instruments, (iii) subject to
Section 1.10, the Colstrip Unit Number 3 Wholesale Transition Service
Agreement, dated as of the Closing, substantially in the form and to the
effect of Exhibit F-1 hereto (the "Colstrip Transition Service Agreement"),
(iv) subject to Section 1.10, the Non-Colstrip Unit Number 3 Wholesale
Transition Service Agreement, dated as of the Closing, substantially in the
form and to the effect of Exhibit F-2 hereto (the "Non-Colstrip Transition
Service Agreement"), (v) the Interconnection Agreement, dated as of the
Closing, substantially in the form and to the effect of Exhibit G hereto,
including the Separation Document (the "Interconnection Agreement") and
(vi) if the Colstrip 4 Transmission Assets are not conveyed to Purchaser at
the Closing, Seller and Purchaser shall have entered into the Colstrip 4
Transmission Service Agreement.
6.11 Colstrip Operations Arrangements
. There shall be in effect (a) arrangements reasonably satisfactory to
Purchaser pursuant to which Purchaser shall be the operator of the entire
Colstrip generating facility for a period of at least ten (10) years after
the Closing, subject only to removal for cause or (b) such other arrangements
with respect to the operation of the Colstrip generating facility as are
reasonably acceptable to Purchaser.
6.12 Purchaser Financing
. Purchaser's obligation to purchase the Colstrip 4 Transmission Assets at
the Closing is subject to the receipt by Purchaser, on or prior to the
Closing, of the Purchaser Financing or other financing reasonably
satisfactory to Purchaser.
6.13 Opinion of Counsel
. Purchaser shall have received the opinions of (i) Milbank, Tweed, Hadley &
McCloy, counsel to Seller, dated as of the Closing, substantially in the form
and to the effect of Exhibit H-1 hereto,(ii) General Counsel of Seller, dated
as of the Closing, substantially to the effect of Exhibit H-2 hereto, and
(iii) outside Montana counsel to Seller, dated as of the Closing,
substantially to the effect of Exhibit H-3 hereto.
ARTICLE VII tc \n \l 1 "ARTICLE VII"
CONDITIONS TO OBLIGATIONS OF SELLER tc \n \l 1 " CONDITIONS TO OBLIGATIONS
OF SELLER"
The obligations of Seller hereunder to sell the Assets are
subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part
by Seller in its sole discretion):
7.01 Representations and Warranties
. The representations and warranties made by Purchaser in this Agreement and
the Operative Agreements, taken as a whole, shall be true and correct, in all
material respects on and as of the Closing as though repeated on and as of
the Closing.
7.02 Performance
. Purchaser shall have performed and complied with, in all material
respects, the agreements, covenants and obligations required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.03 Officers' Certificates
. Purchaser shall have delivered to Seller a certificate, dated as of the
Closing and executed by the Chairman of the Board, the President or any
Executive or Senior Vice President of Purchaser, substantially in the form
and to the effect of Exhibit I hereto, and a certificate, dated as of the
Closing and executed by the Secretary or any Assistant Secretary of
Purchaser, substantially in the form and to the effect of Exhibit J hereto.
7.04 Orders and Laws
. There shall not be in effect on the date of the Closing any Order or Law
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any
of the Operative Agreements.
7.05 Regulatory Consents and Approvals
. Subject to Section 1.10, all Seller Required Regulatory Approvals and
Purchaser Required Regulatory Approvals shall have been duly obtained, made
or given and shall be in full force and effect and shall be a Final Order,
and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative Agreements,
including under the HSR Act, shall have occurred.
7.06 Third Party Consents
. The consents (or in lieu thereof waivers) listed in Section 7.06 of the
Disclosure Schedule shall have been obtained and shall be in full force and
effect and shall be reasonably satisfactory to Seller.
7.07 Collective Bargaining Agreements
. Purchaser shall have assumed, as set forth in Section 5.03, all of the
applicable obligations under the Collective Bargaining Agreements as they
relate to the Union Employees who are Transferring Employees.
7.08 No Purchaser Material Adverse Effect
. There shall not have occurred and be a continuing Purchaser Material
Adverse Effect.
7.09 Proceedings
. All corporate and other proceedings to be taken by Purchaser in connection
with the transactions contemplated hereby and all documents incident thereto
shall be reasonably satisfactory in form and substance to Seller and its
counsel and Seller and its counsel shall have received all such certified or
other copies of such documents as it or they may reasonably request.
7.10 Colstrip Rights of First Refusal
. Seller shall have either received the consents required under each of the
Colstrip Rights of First Refusal or the exercise periods of such Colstrip
Rights of First Refusal shall have expired.
7.11 Opinion of Counsel
. Sellers shall have received an opinion of LeBoeuf, Lamb, Greene & MacRae
L.L.P., counsel to Purchaser, dated as of the Closing, substantially to the
effect of Exhibit K hereto. Such counsel's opinion need not cover any matter
contained in the opinions required by Exhibit K to the extent such matter (i)
involves the Laws of Montana, Oregon, Washington, Pennsylvania or any other
jurisdiction other than the federal Laws of the United States or the Laws of
the State of New York or (ii) involves or is related to the Colstrip
Contracts, the Colstrip 4 Generation Assets, the Colstrip 4 Transmission
Assets, the Colstrip 1, 2 and 3 Transmission Assets and any other Colstip-
related matter, and, in lieu thereof, Seller shall have received the opinions
of other counsel covering such matters (admitted in other jurisdictions to
the extent covered in clause (i)).
7.12 Deliveries
. Purchaser shall have executed and delivered to Seller (i) Assumption
Agreement, (ii) the other Assumption Instruments, (iii) subject to
Section 1.10, the Colstrip Transition Service Agreement, (iv) the Non-
Colstrip Transition Service Agreement, (v) subject to Section 1.10, the
Interconnection Agreement, and (vi) the Confirmation of the Reciprocal
Sharing Agreement, dated as of the Closing, substantially in the form and to
effect of Exhibit L hereto.
ARTICLE VIII tc \n \l 1 "ARTICLE VIII"
TAX MATTERS AND POST-CLOSING TAXES tc \n \l 1 " TAX MATTERS AND POST-
CLOSING TAXES"
8.01 Transfer Taxes
. All Transfer Taxes incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by Purchaser, and Purchaser,
at its own expense, will file, to the extent required by applicable Law, all
necessary Tax Returns and other documentation with respect to all such
Transfer Taxes, and, if required by applicable Law, Seller will join in the
execution of any such Tax Returns or other documentation and will take such
positions therein as are reasonably requested by Purchaser. Nothing in the
foregoing sentence shall require Seller to take a position adverse to its own
posture with regard to Taxes. Prior to the Closing, Purchaser will provide
to Seller, to the extent possible, an appropriate certificate from each
applicable taxing authority to the effect that no Transfer Tax will be
incurred in connection with this Agreement and the transactions contemplated
hereby.
8.02 Returns with respect to Prorated Taxes
. With respect to those Taxes to be prorated in accordance with Section 1.06
of this Agreement, Purchaser shall prepare and timely file all Tax Returns
required to be filed after the Closing with respect the Assets and shall duly
and timely pay all such Taxes shown to be due on such Tax Returns.
Purchaser's preparation of any such Tax Return shall be subject to Seller's
approval, which approval shall not be unreasonably withheld. Purchaser shall
make such Tax Returns available for Seller's review and approval no later
than twenty (20) Business Days prior to the due date for filing such Tax
Return. Within fifteen (15) Business Days after receipt of such Tax Return,
Seller shall pay to Purchaser its proportionate share of the amount shown as
due on such Tax Return determined in accordance with Section 1.06 of this
Agreement.
ARTICLE IX tc \n \l 1 "ARTICLE IX"
SURVIVAL; NO OTHER REPRESENTATIONS tc \n \l 1 " SURVIVAL; NO OTHER
REPRESENTATIONS"
9.01 Survival of Representations, Warranties, Covenants and
Agreements
.
(a) Subject to Section 11.02, the representations and warranties
of Purchaser and Seller (other than the representations and warranties
(x) contained in Section 2.06 (the "Tax Representation") and 2.09 (the "ERISA
Representation"), which shall survive for the applicable period of the
applicable statute of limitation, and (y) contained in Section 2.10(b) (the
"Title Representation"), which shall survive the Closing indefinitely) (all
of the representations and warranties of Purchaser and Seller, excluding the
Tax Representation, the ERISA Representation and the Title Representation,
are hereinafter referred to as the "General Representations"), shall survive
the Closing for a period of twelve (12) months; provided, however, if
Purchaser (or any successor or assign of Purchaser) procures title insurance
with respect to the Real Property, to the extent that Purchaser (or any
successor or assign of Purchaser) actually receives proceeds from the title
insurer in respect of any matters addressed by any of the representations and
warranties contained in Section 2.10, then, only with respect to such
matters, and only to such extent, such representations and warranties shall
be deemed not to have been made.
(b) Subject to Section 11.02, the covenants and agreements of
Seller and Purchaser contained in this Agreement (other than the covenants
and agreements contained in Articles IV (excluding Sections 4.06 and 4.09)
and V (excluding Sections 5.03 and 5.07) (the "Pre-Closing Covenants"), which
covenants and agreements shall survive the Closing for a period of twelve
(12) months) (all of the covenants and agreements of Purchaser and Seller,
excluding the Pre-Closing Covenants, are hereinafter referred to as the
"Post-Closing Covenants"), shall survive the Closing indefinitely; and
(c) Any due diligence or other investigation or examination by
any party with respect to the transactions contemplated by this Agreement
shall not in any way affect or lessen the representations and warranties of
the other party contained herein or the indemnifications with respect
thereto.
9.02 No Other Representations
. Notwithstanding anything to the contrary contained in this Agreement, it
is the explicit intent of each party hereto that Seller is making no
representation or warranty whatsoever, express or implied, including but not
limited to any implied representation or warranty as to condition,
merchantability or suitability as to any of the Assets, except those
representations and warranties contained in this Agreement and the exhibits,
schedules, documents, certificates and instruments delivered in connection
with the Closing. In particular, Seller makes no representation or warranty
to Purchaser with respect to (i) the information set forth in the
Confidential Information Memorandum dated March, 1998 and the supplements
thereto, or (ii) any financial projection or forecast relating to the
operation of the Generating Assets. With respect to any such projection or
forecast delivered by or on behalf of Seller to Purchaser, Purchaser
acknowledges that (i) there are uncertainties inherent in attempting to make
such projections and forecasts, (ii) it is familiar with such uncertainties,
(iii) it is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all such projections and forecasts furnished to it
and (iv) it shall have no claim against Seller with respect to such
projections and forecasts.
ARTICLE X tc \n \l 1 "ARTICLE X"
INDEMNIFICATION tc \n \l 1 " INDEMNIFICATION"
10.01 Other Indemnification
.
(a) Subject to the other Sections of this Article X, Seller
shall indemnify Purchaser and its Affiliates and their respective directors,
officers, employees, agents and representatives ("Purchaser Group") in
respect of, and hold it harmless from and against, any and all Losses
suffered, incurred or sustained by Purchaser Group or to which Purchaser
Group becomes subject, resulting from, arising out of or relating to:
(i) any breach by Seller of any representation or
warranty of Seller contained in this Agreement (determined in all
cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein);
(ii) any breach by Seller of any covenant or agreement of
Seller contained in this Agreement (determined in all cases as if
the terms "material" or "materially" (or the capitalized versions
thereof) were not included therein);
(iii) a Retained Liability; or
(iv) any Change of Control Liabilities;
provided, however, that Seller shall have no liability for Losses under
clause (i) arising from a breach of a General Representation, a Tax
Representation or an ERISA Representation unless and until the aggregate
amount of all Losses arising from such breaches asserted by Purchaser equals
or exceeds $5.0 million in which event Seller shall be liable for all such
Losses; and provided, further, that, except with respect to Losses arising
from a breach of the Title Representation, such indemnification shall be
effective only with respect to claims written notice of which is received by
Seller with respect to Losses arising under clause (i) above relating to
General Representations (or, with respect to the Tax Representation or ERISA
Representation, the date upon which the applicable statute of limitations
expires) or clause (ii) above relating to Pre-Closing Covenants, no later
than the date that is twelve (12) months from the Closing. Except as set
forth in paragraph (b) below, in no event shall the Liability of Seller for
Losses under clause (i) of this Section 10.01(a) arising out of breaches of
the General Representations exceed, in the aggregate, fifty percent (50%) of
the Purchase Price (or, with respect to breaches of the Title Representation
and the covenants contained in Sections 1.01(a)(i) and 1.05 exceed, in the
aggregate, the Purchase Price).
(b) In addition to the indemnities contained in clause (a)
above, Seller shall indemnify Purchaser Group in respect of, and hold it
harmless from and against, all Losses suffered, incurred or sustained by
Purchaser Group arising from any Pre-Closing Environmental Liability;
provided, however, that (1) indemnification for Pre-Closing Unknown Remedial
Liabilities shall be effective only with respect to Losses arising out of a
matter described in a Claim Notice received by Seller no later than the date
that is two years from the Closing, (2) Seller's Liabilities under this
paragraph for (x) Non-Colstrip Pre-Closing Known and Unknown Remedial
Liabilities shall be limited in each case to 50% of any such Loss suffered,
incurred or sustained by Purchaser Group and (y) Colstrip Pre-Closing Known
and Unknown Remedial Liabilities shall be limited in each case to Seller's
pro-rata share (calculated pursuant to the Colstrip Contracts) of 50% of any
such Loss suffered, incurred or sustained by Purchaser Group, and such
Liabilities referred to in clauses (x) and (y) shall not, in any event,
exceed, in the aggregate, an amount equal to 10% of the Purchase Price (each
such Liability of Seller shall be paid by it at the same time that Purchaser
Group has paid its fifty percent (50%) share thereof); provided, further,
that this indemnity shall only extend to such Pre-Closing Environmental
Liabilities attributable to conditions existing at or prior to the Closing,
and Seller shall not be required to indemnify Purchaser for Losses to the
extent attributable to acts or omissions of Purchaser resulting in an
increase in or aggravation of such Environmental Liabilities, whether arising
from a change in use of the Assets or otherwise. In the event that Seller
disputes the pro rata share of any Losses attributable by Purchaser to Seller
under Section 10.01(b)(2)(y) in the Claim Notice, Seller will nevertheless
pay Purchaser the amount requested by Purchaser in the Claim Notice and
Seller shall proceed to resolve any dispute with PGE and Puget concerning
allocations of pro rata shares. If Purchaser fails to make a claim against a
Potentially Responsible Party with respect to Pre-Closing Environmental
Liabilities, then upon making an indemnity payment pursuant to this paragraph
(b), Seller shall, to the extent of such indemnity payment, be subrogated to
all rights of Purchaser against any Potentially Responsible Party in respect
of the Losses to which the indemnity payment relates. If Purchaser makes a
claim against, and recovers from, a Potentially Responsible Party with
respect to Pre-Closing Environmental Liabilities and Seller has made an
indemnity payment with respect to such Loss, then Purchaser shall reimburse
Seller 50% of such amounts recovered, net of any third party costs of
collection.
(c) Subject to the other Sections of this Article X, Purchaser
shall indemnify Seller and its Affiliates and their respective directors,
officers, employees, agents and representatives ("Seller Group") in respect
of, and hold it harmless from and against, any and all Losses suffered,
incurred or sustained by Seller Group or to which Seller Group becomes
subject, resulting from, arising out of or relating to:
(i) any breach by Purchaser of any representation or
warranty of Purchaser contained in this Agreement (determined in
all cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein),
(ii) any breach by Purchaser of any covenant or agreement
of Purchaser contained in this Agreement (determined in all cases
as if the terms "material" or "materially" (or the capitalized
versions thereof) were included therein); or
(iii) an Assumed Liability;
provided, however, that Purchaser shall have no liability for Losses under
clause (i) arising from a breach of a General Representation unless and until
the aggregate amount of all such Losses arising from such breaches asserted
by Seller equals or exceeds $5.0 million in which event Purchaser shall be
liable for all Losses; and provided, further, that such indemnification shall
be effective only with respect to claims written notice of which is received
by Purchaser with respect to Losses arising under clause (i) above relating
to General Representations or clause (ii) above relating to Pre-Closing
Covenants, no later than the date that is twelve (12) months from the
Closing. In no event shall the Liability of Purchaser for Losses under this
Article X arising out of breaches of the General Representations exceed, in
the aggregate, fifty (50%) of the Purchase Price.
(d) To the extent that an Indemnified Party has received
insurance proceeds prior to the payment of an indemnity payment on an
indemnifiable Loss, such indemnifiable Loss shall be reduced by an amount
equal to such proceeds received by the Indemnified Party. If the amount of
any indemnifiable Loss, at any time subsequent to the making of an indemnity
payment in respect thereof, is reduced by recovery, settlement or otherwise
under or pursuant to any insurance coverage or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction, less any costs, expenses or premiums incurred in connection
therewith (together with interest thereon from the date of payment thereof at
the prime rate then in effect for domestic banks as published in the Wall
Street Journal (Northeast Edition) in the "Money Rates" section), shall
promptly be repaid by the Indemnified Party to the Indemnifying Party.
Nothing in this Section 10.01(d) shall be construed to require any party
hereto to obtain or maintain any insurance coverage or make any claim under
its insurance coverage.
(e) Seller shall not be liable on account of any obligations of
any co-owners of the Colstrip Units 1, 2, 3 and 4 to Purchaser.
(f) The Indemnifying Party hereby expressly waives all rights of
subrogation in respect of any payments made by it under this Article X.
10.02 Method of Asserting Claims
. All claims for indemnification by any Indemnified Party under
Section 10.01 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Section 10.01 is asserted
against or sought to be collected from such Indemnified Party by a Person
other than Seller, Purchaser or any Affiliate of Seller or Purchaser (a
"Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with
reasonable promptness to the Indemnifying Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the Dispute Period
whether the Indemnifying Party disputes its liability to the Indemnified
Party under Section 10.01 and whether the Indemnifying Party desires, at its
sole cost and expense, to defend the Indemnified Party against such Third
Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to
this Section 10.02(a), then the Indemnifying Party will have the right
to defend, at the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which proceedings
will be vigorously and diligently prosecuted by the Indemnifying Party
to a final conclusion or will be settled at the discretion of the
Indemnifying Party (with the consent of the Indemnified Party, which
consent will not be unreasonably withheld). The Indemnifying Party
will have full control of such defense and proceedings, including any
settlement thereof; provided, however, that the Indemnified Party may,
at the sole cost and expense of the Indemnified Party, at any time
prior to the Indemnifying Party's delivery of the notice referred to in
the first sentence of this Section 10.02(a)(i), file any motion, answer
or other pleadings or take any other action that the Indemnified Party
reasonably believes to be necessary or appropriate to protect its
interests and not prejudicial to the Indemnifying Party (it being
understood and agreed that, except as provided in clause (ii) below, if
an Indemnified Party takes any such action that is prejudicial and
causes a final adjudication that is adverse to the Indemnifying Party,
the Indemnifying Party will be relieved of its obligations hereunder
with respect to the portion of such Third Party Claim prejudiced by the
Indemnified Party's action); and provided further, that if requested by
the Indemnifying Party, the Indemnified Party will, at the sole cost
and expense of the Indemnifying Party, cooperate with the Indemnifying
Party and its counsel in contesting any Third Party Claim that the
Indemnifying Party elects to contest, or, if appropriate and related to
the Third Party Claim in question, in making any counterclaim against
the Person asserting the Third Party Claim, or any cross-complaint
against any Person (other than the Indemnified Party or any of its
Affiliates). Notwithstanding the foregoing, the Indemnified Party may
take over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to indemnity under
Section 10.01 with respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 10.02(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, or if the Indemnifying
Party fails to give any notice whatsoever within the Dispute Period,
then the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnified Party to a final conclusion or
will be settled at the discretion of the Indemnified Party (with the
consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control
of such defense and proceedings, including (except as provided in the
immediately preceding sentence) any settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party,
cooperate with the Indemnified Party and its counsel in contesting any
Third Party Claim which the Indemnified Party is contesting, or, if
appropriate and related to the Third Party Claim in question, in making
any counterclaim against the Person asserting the Third Party Claim, or
any cross-complaint against any Person (other than the Indemnified
Party or any of its Affiliates). Notwithstanding the foregoing
provisions of this Section 10.02(a)(ii), if the Indemnifying Party has
notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability hereunder to the Indemnified
Party with respect to such Third Party Claim and if such dispute is
resolved in favor of the Indemnifying Party in the manner provided in
clause (iii) below, the Indemnifying Party will not be required to bear
the costs and expenses of the Indemnified Party's defense pursuant to
this Section 10.02(a)(ii) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party
will reimburse the Indemnifying Party in full for all reasonable costs
and expenses incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant
to this Section 10.02(a)(ii), and the Indemnifying Party will bear its
own costs and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under Section 10.01 or fails to notify
the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party with
respect to such Third Party Claim, the Loss in the amount specified in
the Claim Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 10.01 and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party will
proceed in good faith to negotiate a resolution of such dispute, and if
not resolved through negotiations within the Resolution Period, such
dispute shall be resolved by litigation in a court of competent
jurisdiction.
(b) In the event any Indemnified Party should have a claim under
Section 10.01 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party prior to the expiration of
the indemnification notice period described in this Section 10.02. If the
Indemnifying Party notifies the Indemnified Party that it does not dispute
the claim described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim described in such Indemnity Notice, the Loss in the amount
specified in the Indemnity Notice will be conclusively deemed a liability of
the Indemnifying Party under Section 10.01 and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on demand. If the
Indemnifying Party disputes all or any portion of its liability with respect
to such claim, it shall notify the Indemnified Party thereof in writing
during the Dispute Period, specifying the portion of the claim that is
disputed and the basis for such position. If the Indemnifying Party has
timely disputed its liability with respect to such claim, the Indemnifying
Party will be deemed to have accepted and be liable for payment of the
undisputed portion of such claim on demand and the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by litigation in a court of competent
jurisdiction.
(c) In the event of any Loss resulting from a
misrepresentation, breach of warranty or nonfulfillment or failure to be
performed of any covenant or agreement contained in this Agreement as to
which an Indemnified Party would be entitled to claim indemnity under
Section 10.01 but for the Loss limitation provisions of Section 10.01(a) and
(c), such Indemnified Party may nevertheless deliver a written notice to the
Indemnifying Party containing the information that would be required in a
Claim Notice or an Indemnity Notice, as applicable, with respect to such
Loss. In the case of a Claim Notice, the provisions of Section 10.02(a)(i)
will be applicable. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described therein or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes the claim described in such Claim Notice or Indemnity Notice, as the
case may be, the Loss specified in the notice will be conclusively deemed to
have been incurred by the Indemnified Party for purposes of making the
determination of the Loss limitations set forth in Section 10.01. If the
Indemnifying Party has timely disputed the claim described in such Claim
Notice or Indemnity Notice, as the case may be, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by litigation in a court of competent
jurisdiction.
(d) In the event of any claim for indemnity under Section
10.01(a), Purchaser agrees to give Seller and its Representatives reasonable
access to the Business Books and Records and Employees in connection with the
matters for which indemnification is sought to the extent Seller reasonably
deems necessary in connection with its rights and obligations under this
Article X.
(e) All payments made pursuant to this Article X shall be
treated as an adjustment to the Purchase Price.
(f) In the event an action, dispute, claim, counterclaim or
controversy ("Dispute") arises between the parties arising out of or relating
to this Agreement, the aggrieved party shall promptly notify the other party
of the Dispute within ten Business Days after such Dispute arises. If the
parties have failed to resolve the Dispute within ten Business Days after
delivery of such notice, each party shall, within five Business Days
thereafter, nominate a senior officer of its management to meet to attempt to
resolve the Dispute. The senior officers shall meet within twenty Business
Days after their nomination. Should the senior officers be unable to resolve
the Dispute, either party may pursue any and all available legal remedies,
unless the parties mutually agree in writing to an alternative dispute
resolution procedure.
10.03 Exclusivity
. After the Closing, to the extent permitted by Law, the indemnities set
forth in this Article X shall be the exclusive remedies of Purchaser Group
and Seller Group for any misrepresentation, breach of warranty or
nonfulfillment or failure to be performed of any covenant or agreement
contained in this Agreement, any schedule hereto, or any certificate
delivered by or on behalf of Seller or Purchaser in connection herewith, and
the parties shall not be entitled to a rescission of this Agreement or to any
further indemnification rights or claims of any nature whatsoever in respect
thereof, all of which the parties hereto hereby waive.
10.04 Purchaser's Release of Seller under the Colstrip
Contracts.
From and after the Closing, Purchaser, for itself and on behalf
of its Affiliates, does hereby release, hold harmless and forever discharge
Seller from any and all claims, demands, liabilities (including fines and
civil penalties) or causes of action at Law or in equity, whether known or
unknown, resulting from any Claim that Seller is not released from its
obligations under the Colstrip Contracts by virtue of Section 1.01(a)(xi) and
1.02(a)(vi), provided, however, that nothing in this Section 10.04 shall be
deemed to affect Seller's Retained Liabilities, Purchaser's Assumed
Liabilities or the parties' indemnification obligations hereunder.
ARTICLE XI tc \n \l 1 "ARTICLE XI"
TERMINATION tc \n \l 1 " TERMINATION"
11.01 Termination
. This Agreement may be terminated, and the transactions contemplated hereby
may be abandoned:
(a) at any time before the Closing, by mutual written agreement
of Seller and Purchaser;
(b) at any time before the Closing, by Seller or Purchaser, in
the event that any Final Order or Law becomes effective restraining,
enjoining, or otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the Operative
Agreements, upon notification of the non-terminating party by the terminating
party; or
(c) at any time before the Closing, by Seller or Purchaser, in
the event (i) of a breach hereof by the non-terminating party which gives
rise to, as applicable, either a Seller Material Adverse Effect (if Seller is
the breaching party) or a Purchaser Material Adverse Effect (if Purchaser is
the breaching party) if such non-terminating party fails to cure such breach
within forty-five (45) days following notification thereof by the terminating
party, provided that if, at the end of such forty-five (45) day period, the
non-terminating party is endeavoring in good faith, and proceeding
diligently, to cure such breach, the non-terminating party shall have an
additional forty-five (45) days in which to effect such cure or (ii) upon
notification of the non-terminating party by the terminating party that the
satisfaction of any condition to the terminating party's obligations under
this Agreement becomes impossible or impracticable with the use of
commercially reasonable efforts if the failure of such condition to be
satisfied by the terminating party is not caused by a breach hereof by the
terminating party, provided that if it is reasonably possible that the
circumstances giving rise to the impossibility or impracticability may be
removed prior to the expiration of the time periods provided in the following
subsection (d), then such notification may not be given until such time as
the removal of such circumstances is no longer reasonably possible within
such time periods; or
(d) at any time after the date which is twelve (12) months after
the date of this Agreement, by Seller or Purchaser upon notification of the
non-terminating party by the terminating party if the Closing shall not have
occurred on or before such date and such failure to consummate is not caused
by a breach of this Agreement by the terminating party; provided, however,
that if on such date Purchaser and Seller have not received all Purchaser
Required Regulatory Approvals and all Seller Required Regulatory Approvals
but all other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then neither party may terminate this Agreement
until the expiration of such date which is eighteen (18) months after the
date of this Agreement; provided, further, that if on such date Purchaser or
Seller has not received all Purchaser Required Regulatory Approvals or all
Seller Required Regulatory Approvals related to the Hydro Units but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled, then neither party may terminate this Agreement until the
expiration of such date which is twenty-four (24) months after the date of
this Agreement.
(e) in accordance with Section 1.10(e), by Purchaser.
11.02 Effect of Termination
. If this Agreement is validly terminated pursuant to Section 11.01, this
Agreement will forthwith become null and void, and there will be no liability
or obligation on the part of Seller or Purchaser (or any of their respective
officers, directors, employees, agents or other representatives or
Affiliates), except as provided in the next succeeding sentence and except
that the provisions with respect to expenses in Section 13.04 and
confidentiality in Section 13.06 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 11.01(c) or
(d), Seller will remain liable to Purchaser for any willful breach of Section
4.10 of this Agreement by Seller existing at the time of such termination,
and Purchaser will remain liable to Seller for any willful breach of Section
5.06 of this Agreement by Purchaser existing at the time of such termination,
and Seller or Purchaser may seek such remedies, including damages and fees of
attorneys, against the other with respect to any such breach as are provided
in this Agreement or as are otherwise available at Law or in equity.
ARTICLE XII tc \n \l 1 "ARTICLE XII"
DEFINITIONS tc \n \l 1 " DEFINITIONS"
12.01 Definitions
. (a) Defined Terms. As used in this Agreement, the following defined
terms have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation.
"Adjustment Amount" has the meaning ascribed to it in Section
1.04.
"Adjustment Statement" has the meaning ascribed to it in Section
1.04.
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the previous
sentence, any Person owning ten percent (10%) or more of the voting
securities of another Person shall be deemed to control that Person.
"Agreement" means this Asset Purchase Agreement and the Exhibits,
the Disclosure Schedule and the Schedules hereto and the certificates
delivered in accordance with Sections 6.03 and 7.03, as the same shall be
amended from time to time.
"Asset Group" means one or more of the categories of Assets set
forth on Schedule I hereto.
"Assets" has the meaning ascribed to it in Section 1.01(a).
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible and wherever situated),
including the goodwill related thereto, operated, owned or leased by such
Person.
"Assignment Instruments" has the meaning ascribed to it in
Section 1.05.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or
is the beneficial owner, directly or indirectly, of ten percent (10%) or more
of any class of equity securities, any trust or estate in which such Person
has a substantial beneficial interest or as to which such Person serves as a
trustee or in a similar capacity and any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person.
"Assumed Liabilities" has the meaning ascribed to it in
Section 1.02(a).
"Assumption Agreement" has the meaning ascribed to it in
Section 1.05.
"Assumption Instruments" has the meaning ascribed to it in
Section 1.05.
"Base Purchase Price" means $780,000,000.
"Benefit Plan" means any Plan established by Seller, or any
predecessor or Affiliate of Seller, existing at the Closing or at any time
within the five (5) year period prior thereto, to which Seller contributes or
has contributed on behalf of any Employee, former Employee or director, or
under which any Employee, former Employee or director of Seller or any
beneficiary thereof is covered, is eligible for coverage or has benefit
rights.
"Bid Date" means September 28, 1998.
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records relating to the business, operations,
condition of (financial or other), results of operations and Assets and
Properties of such Person, including financial statements, Tax Returns and
related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and
plans and environmental studies and plans.
"Business Books and Records" has the meaning ascribed to it in
Section 1.01(a)(xvii).
"Business Combination" means with respect to any Person, any
merger, consolidation or combination to which such Person is a party, any
sale, dividend, split or other disposition of capital stock or other equity
interests of such Person or any sale, dividend or other disposition of all or
substantially all of the Assets and Properties of such Person, provided,
however, that no activities or transactions of any Affiliate of Seller (so
long as not involving Seller) shall be considered a Business Combination
hereunder.
"Business Contracts" has the meaning ascribed to it in
Section 1.01(a)(v).
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of Montana and the Commonwealth of
Pennsylvania are authorized or obligated to close.
"Capital Expenditures" means those capital expenditures which are
identified in the Budget referred to in Section 4.14, and such other
emergency, non-budgeted capital expenditures made by Seller in accordance
with the provisions of Section 4.14.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the rules and
regulations promulgated thereunder.
"Change of Control Liabilities" has the meaning ascribed to it in
Section 1.02(a)(ix).
"Claim Notice" means written notification pursuant to
Section 10.02(a) of a Third Party Claim as to which indemnity under
Section 10.01 is sought by an Indemnified Party, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for such Third
Party Claim and for the Indemnified Party's claim against the Indemnifying
Party under Section 10.01, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such Third Party Claim.
"Closing" means the closing of the transactions contemplated by
Section 1.05.
"Closing Date" means (a) the later of (x) July 1, 1999, and (y)
the date thirty (30) days after the day on which the last of the consents,
approvals, actions, filings, notices or waiting periods described in or
related to the filings described in Sections 6.04 through 6.07 and
Sections 7.04 through 7.06 has been obtained, made or given or has expired,
as applicable; provided, that Purchaser agrees to use reasonable efforts to
be prepared to close prior to July 1, 1999, and shall give notice to Seller
in the event Purchaser determines that it is able to do so, or (b) such other
date as Purchaser and Seller mutually agree upon in writing.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, and the rules and regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Collective Bargaining Agreements" has the meaning ascribed to in
Section 2.16.
"Colstrip Contracts" has the meaning ascribed to it in Section
1.01(a)(xi).
"Colstrip 1, 2 and 3 Transmission Amount" has the meaning ascribed to it in
Section 1.10(f).
"Colstrip 1, 2 and 3 Transmission Assets" has the meaning
ascribed to it in Section 1.01(a)(xix).
"Colstrip 4 Generation Assets" means all Assets relating to
Seller's interest in Colstrip Unit 4 including, but not limited to, Real
Property Leases, Business Contracts, Transferable Permits, Fuel Contracts,
power sale or purchase agreements and allowances and/or emission reduction
credits described in Section 12.01(b) of the Disclosure Schedule.
"Colstrip 4 Transmission Amount" means an amount equal to
$55,918,674.
"Colstrip 4 Transmission Assets" has the meaning ascribed to it
in Section 1.01(a)(xviii).
"Colstrip 4 Transmission Service Agreement" has the meaning
ascribed to it in Section 1.10(a).
"Colstrip Pre-Closing Known and Unknown Remedial Liabilities"
means all Pre-Closing Known Remedial Liabilities and Pre-Closing Unknown
Remedial Liabilities arising from or relating to the ownership, operation and
maintenance of the Colstrip Units 1, 2, 3 or 4 Generating Assets or the
Colstrip Units 1, 2, 3 or 4 Transmission Assets, to the extent such Assets
are acquired by Purchaser.
"Colstrip Rights of First Refusal" means the rights described in
the following agreements: (i) Section 16(d) of the Construction and
Ownership Agreement, dated as of July 30, 1971, by and between Seller and
Puget;(ii) Sections 24(b) and 24(f) of the Ownership and Operation Agreement,
dated as of May 6, 1981, as amended, by and among Seller, Puget, The
Washington Water Power Company ("WWP"), Portland, and Pacific Power & Light
Company ("Pacific"); and (iii) Section 28(f) of the Colstrip Project
Transmission Agreement, dated as of May 6, 1981, as amended, by and among
Seller, Puget, WWP, Portland and Pacific.
"Colstrip Transition Service Agreement" has the
meaning ascribed to it in Section 6.10.
"Combined Payment Amount" means an amount equal to $932,000,000
minus (a) the amount of the Base Purchase Price (prior to any adjustment
thereto pursuant to Section 1.10) and (b) any Puget Payment Amount or
Portland Payment Amount paid to Seller prior to the Final Closing Date.
"Communications Service Agreement" has the meaning ascribed to it
in Section 1.01(b)(ix).
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract.
"Contribution Agreement" has the meaning ascribed to it in the
forepart of this Agreement.
"Defined Benefit Plan" means each Benefit Plan which is subject
to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.
"Disclosure Schedule" means, as the context requires, (a) the
record delivered to Purchaser by Seller herewith and dated as of the date
hereof, containing all lists, descriptions, exceptions and other information
and materials as are required to be included therein by Seller pursuant to
this Agreement and (b) the record delivered to Seller by Purchaser herewith
and dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein by Purchaser pursuant to this Agreement.
"Dispute" has the meaning ascribed to it in Section 10.02.
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Easements" means, with respect to the Assets, the reservations
of easements in favor of Seller to be included in the deeds of conveyance
with respect to such Assets, substantially as set forth in the
Interconnection Agreement (including the Separation Document).
"Employee" means each employee or officer of Seller or any of its
Affiliates whose employment responsibilities primarily relate to the
operation of the Generating Assets.
"Employment Term" has the meaning ascribed to it in Section 5.03.
"Environmental Fines and Penalties" has the meaning ascribed to
it in Section 1.02(a)(x).
"Environmental Law" means all Federal, state, municipal and local
laws (including common laws), regulations, rules, ordinances, codes,
licenses, decrees, judgments, directives, or judicial or administrative
orders relating to pollution, protection, preservation or restoration of
human health, the environment or natural resources, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Materials (including, without limitation, into or through ambient air,
surface water, groundwater, land, wetlands, surface and subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials,
including without limitation the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act, and
CERCLA, in each case as amended, and their local counterparts.
"Environmental Liabilities means any liabilities, obligations or
responsibilities under or related to former, current or future Environmental
Laws or the common law, whether such liability, obligation or responsibility
is known or unknown, contingent or accrued, arising as a result of or in
connection with (a) any violation or alleged violation of Environmental Laws
relating to the Assets; (b) compliance with applicable Environmental Laws
relating to the Assets; (c) loss of life, injury to persons or property or
damage to natural resources (whether or not such loss, injury or damage was
made manifest before or after the Closing) caused (or allegedly caused) by
the presence or Release of Hazardous Materials at, on, in, under, adjacent to
or migrating from the Assets; and (d) the reasonable investigation and/or
remediation required by Law or constituting a reasonable response to a
Governmental or Regulatory Authority having jurisdiction (whether or not such
investigation or remediation commenced on or before the Closing) of Hazardous
Materials that are present or have been Released at, on, in, under, adjacent
to or migrating from the Assets, including, but not limited to, Hazardous
Materials in the soil, surface water, sediments, groundwater, landfill cells,
or in other environmental media at or adjacent to the Assets ("Remedial
Liabilities"); provided, further that the liabilities, obligations or
responsibilities described in clauses (a), (b) and (c) shall not include
those described in clause (d); provided further that Environmental
Liabilities shall not include (x) Purchaser's internal costs or consequential
damages (including the value of employees' time, loss of use, downtime or
increased operating costs); (y) costs of capital improvements (including the
replacement of equipment that has reached its useful life); nor (z)
monitoring required by environmental permits or the design of the Assets,
except, in the case of clauses (y) and (z), as covered in clause (d) above.
"Environmental Permits" has the meaning ascribed to it in Section
2.17.
"EPA" means the Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" means any Person who is in the same controlled
group of corporations or who is under common control with Seller (within the
meaning of Section 414 of the Code).
"ERISA Affiliate Plan" has the meaning ascribed to it in Section
1.02(b)(ix).
"ERISA Representation" has the meaning ascribed to it in
Section 9.01(a).
"Estimated Adjustment Amount" means Seller's good faith
reasonable estimate of an Adjustment Amount for the Closing, which estimate
shall be provided to Purchaser no later than five Business Days before the
Closing.
"Estimated Purchase Price" has the meaning ascribed to it in
Section 1.05.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" has the meaning ascribed to it in
Section 1.01(b).
"Federal Power Act" means the Federal Power Act of 1935, as
amended, and the rules and regulations promulgated thereunder.
"FERC" means the Federal Energy Regulatory Commission.
"Final Closing Date" means the date on which the latter of the
Puget Closing and the Portland Closing occurs.
"Final Order" means a final Order after all opportunities for
rehearing are exhausted (whether or not any appeal thereof is pending) that
has not been further revised, stayed, enjoined, set aside, annulled or
suspended, with respect to which any required waiting period has expired, and
as to which all conditions to effectiveness prescribed therein or otherwise
by Law, regulation or Order have been satisfied.
"Fuel Contracts" has the meaning ascribed to it in Section
1.01(a)(x).
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.
"General Assignment" has the meaning ascribed to it in
Section 1.05.
"General Representations" has the meaning ascribed to it in
Section 9.01(a).
"Generating Assets" has the meaning ascribed to it in the
forepart of this Agreement.
"Good Utility Practice" means any of the applicable practices, methods and
acts:
(i) required of the party to whom Good Utility Practice is
being applied under regulations of the National Electric Safety Code
(as each of such terms is defined in the Interconnection Agreement), or
its successor, whether or not the party whose conduct is at issue is a
member thereof; or
(ii) 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 at the time the decision was made, could have been expected to
accomplish the desired result at a reasonable cost to the party being
expected to apply Good Utility Practice, consistent with law,
regulation, good business practices, generation, transmission, and
distribution reliability, safety, and expedition. Good Utility
Practice is intended to include practices, methods, or acts generally
accepted in the region, and is not intended to be limited to optimum
practices, methods, or acts to the exclusion of all others. Good
Utility Practice does not include intentional disregard of contractual
commitments, even if those commitments are uneconomic under current
market conditions.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality
of the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision or any Native American tribal
council or similar governing entity.
"Hazardous Material" means (A) any petrochemical, petroleum or
petroleum products, oil, flammable explosives, radioactive materials, radon
gas, asbestos in any form that is or could become friable, urea formaldehyde
foam insulation and transformers or other equipment that contain dielectric
fluid which may contain levels of polychlorinated biphenyls (PCBs); (B) any
chemicals or other materials or substances which are now or hereafter become
defined under any Environmental Law as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous chemicals", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "pollutants", "contaminants", "hazardous matter",
"restricted hazardous materials" or words of similar import; and (C) any
other chemical or other material or substance, the discharge, emission,
Release or exposure to which is now or hereafter prohibited, limited or
regulated by any Governmental or Regulatory Authority under any Environmental
Law.
"HIPAA" means the Health Insurance Portability and Accountability
Act of 1996, as amended, and the rules and regulations promulgated
thereunder.
"Holding Company Act" means the Public Utility Holding Company
Act of 1935, as amended, and the rules and regulations promulgated
thereunder.
"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the
rules and regulations promulgated thereunder.
"Hydro Units" means the hydroelectric generating stations owned
by Seller and associated dams and reservoirs at such locations as set forth
in Section 12.01(c) of the Disclosure Schedule.
"Improvements" has the meaning ascribed to it in Section
1.01(a)(iv).
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (iv) under capital leases and (v) in the nature of guarantees of
the obligations described in clauses (i) through (iv) above of any other
Person.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article X.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article X.
"Indemnity Notice" means written notification pursuant to Section
10.02(b) of a claim for indemnity under Article X by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount
or, if not then reasonably ascertainable, the estimated amount, determined in
good faith, of such claim.
"Indentures" means the Mortgage and Deed of Trust, dated as of
October 1, 1945, as amended and supplemented, among Seller and Guaranty Trust
Company of New York and Arthur E. Burke, as Trustees.
"Independent Accounting Firm" means PriceWaterhouseCoopers or
such other independent accounting firm of national reputation mutually
appointed by Seller and Purchaser.
"Intangible Personal Property" has the meaning ascribed to it in
Section 1.01(a)(vii).
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, copyrights and copyright rights, trade secrets, know-how,
techniques, computer programs and related documentation, and any and all
other intangible assets or proprietary information or rights (whether
registered or under common law) and all pending applications for and
registrations of patents, trademarks, service marks and copyrights.
"Interconnection Agreement" has the meaning ascribed to it in
Section 6.10.
"Inventory" has the meaning ascribed to it in
Section 1.01(a)(iii).
"Inventory Adjustment Amount" has the meaning ascribed to in
Section 1.04.
"Inventory Survey" has the meaning ascribed to in Section 1.04.
"IRS" means the United States Internal Revenue Service.
"Knowledge" or similar phrases in this Agreement means: (i) in
the case of Seller, the actual knowledge of Seller's officers and employees
who are persons generally responsible for the subject matter to which
knowledge is pertinent, such persons being listed in Section 12.01(d) of the
Disclosure Schedule at the date as of which the representation, warranty or
covenant is made or repeated, and (ii) in the case of Purchaser the actual
knowledge of Purchaser's officers and employees who are persons generally
responsible for the subject matter to which knowledge is pertinent, such
persons being listed in Section 12.01(e) of the Disclosure Schedule at the
date as of which the representation, warranty or covenant is made or
repeated.
"Landlord Security Deposits" has the meaning ascribed to it in
Section 1.02(a)(iv).
"Laws" means all laws, statutes, rules, regulations, ordinances
and other pronouncements having the effect of law of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority, other
than Environmental Permits, including applications for any of the foregoing.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of
any kind or easement, or any conditional sale Contract, title retention
Contract or other Contract to give any of the foregoing.
"Loss" means any and all damages, fines, penalties, deficiencies,
losses and expenses (including interest, court costs, reasonable fees of
attorneys, accountants and other experts or other reasonable expenses of
litigation or other proceedings or of any claim, default or assessment);
provided, however, "Loss" shall not include any consequential, incidental or
punitive damages for any reason.
"Maintenance Expenditures" means those special maintenance
expenditures which are identified in the Budget referred to in Section 4.14
and such other emergency, non-budgeted special maintenance expenditures made
by Seller in accordance with the provisions of Section 4.14 and the exercise
of Good Utility Practices.
"Maintenance and Capital Expenditures Amount" means (i) the
aggregate amount of all funds actually expended by Seller (and amounts due
from Seller to third parties at the time of the Closing in respect of work
actually performed by such third parties, to the extent such amounts are not
Assumed Liabilities) with respect to Maintenance Expenditures and Capital
Expenditures, in each case which are identified in the Budget, during the
period beginning on the date one (1) year prior to the Closing and ending on
the Closing (or such shorter period if the Closing occurs in less than one
year from the date hereof) up to but not exceeding $23 million in the
aggregate; and (ii) 85% of all Emergency Expenditures made by Seller in
accordance with Section 4.14, if any, during such one (1) year (or shorter)
period described above. The Maintenance and Capital Expenditures Amount
shall not include any Capital Expenditures or Maintenance Expenditures or
Emergency Expenditures with respect to assets or properties that are not
transferred to Purchaser under this Agreement.
"MPC 401(k) Plan" has the meaning ascribed to it in Section
5.03(a).
"Non-Colstrip Pre-Closing Known and Unknown Remedial Liabilities
means all Pre-Closing Known Remedial Liabilities and Pre-Closing Unknown
Remedial Liabilities that are not Colstrip Pre-Closing Known and Unknown
Remedial Liabilities.
"Non-Colstrip Transition Service Agreement has the meaning
ascribed to it in Section 6.10.
"Non-Transferable Software" has the meaning ascribed to it in
Section 1.01(a).
"Non-Union Employees" means all Employees, other than Union
Employees, who are employed as of the Closing in the production of
electricity at the Thermal Units or the Hydro Units, or employed in Seller's
corporate generation departments. Seller's Non-Union Employees as of the
date hereof are identified in Section 12.01(g) of the Disclosure Schedule.
"Off-Site Environmental Liabilities means any liabilities,
obligations or responsibilities under or related to former, current or future
Environmental Laws or the common law, whether such liability, obligation or
responsibility is known or unknown, contingent or accrued, arising as a
result of or in connection with Seller's storage, disposal, transportation,
discharge, Release or recycling of Hazardous Materials prior to the Closing
at or to locations other than the Real Property constituting the Assets or
properties in the vicinity of Real Property constituting the Assets to which
Hazardous Materials have migrated.
"Operative Agreements" means, collectively, this Agreement, the
General Assignment and the other Assignment Instruments, the Assumption
Agreement and the other Assumption Instruments, the Colstrip Unit Number 3
Wholesale Transition Service Agreement, the Non-Colstrip Unit Number 3
Wholesale Transition Service Agreement, the Interconnection Agreement
(including the Separation Document), the Contribution Agreement, the
Communications Service Agreement and any support or other agreements to be
entered into at the Closing in connection with the transaction.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permitted Lien" means (i) those Liens and exceptions to title to
the Assets (except Easements) set forth in Section 12.01(h) of the Disclosure
Schedule; (ii) the Easements; (iii) all exceptions, restrictions, easements,
charges, rights of way and monetary and non-monetary encumbrances which are
set forth in an applicable FERC project license, except for such encumbrances
which secure Indebtedness; (iv) when such term is used with respect to any
date before the Closing, Liens created by the Indentures; (v) any Lien for
Taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; (vi) when such term is used with respect to any date
prior to the Closing, any statutory Lien arising in the ordinary course of
business by operation of Law with respect to a Liability that is not yet due
or delinquent; (vii) zoning, entitlement, conservation restriction and other
land use and environmental regulations by any Governmental or Regulatory
Authority; and (viii) any minor imperfection of title or similar Lien,
limited in the case of items (i) -(viii) (excluding clause (ii)) to only
those matters which, individually or in the aggregate with other such Liens
do not materially detract from the value of the Assets as currently used or
materially interfere with the ownership, operation and maintenance of the
Assets.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, limited liability company
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"PGE" means Portland General Electric Company, an Oregon
corporation.
"PGE Asset Purchase Agreement" means the Asset Purchase Agreement
dated the date hereof by and between PGE and Purchaser.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, leave of
absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workmen's compensation or other
insurance, severance, separation or other employee benefit plan, practice,
policy or arrangement of any kind, whether written or oral, including, but
not limited to, any "employee benefit plan" within the meaning of
Section 3(3) of ERISA.
"Pollution Control Bonds" means those Pollution Control Revenue
Refunding Bonds, Series 1993A, due May 1, 2023, City of Forsyth, Montana in
the original principal amount of $90,205,000 and Series 1993B, due December
1, 2023, City of Forsyth, Montana in the original principal amount of
$80,000,000.
"Pollution Control Facilities" means the facilities financed with
the Pollution Control Bonds described in Exhibit C hereto.
"Portland Closing Date" means the date on which the closing of
the transactions contemplated by the Asset Purchase Agreement, dated as of
the date hereof, by and between Purchaser and PGE (the "Portland Closing")
occurs.
"Post-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Potentially Responsible Party" has the meaning ascribed to it in
CERCLA.
"Portland Payment Amount" means an amount equal to $897,000,000
minus the amount of the Base Purchase Price (prior to any adjustment thereto
pursuant to Section 1.10).
"Power Purchase/Exchange Agreements" means (i) the Power Purchase
Agreement, effective as of May 13, 1994, between Seller and Basin Electric
Power Cooperative; (ii) the BPA Peak/Energy Exchange, which is Exhibit L to
the Power Sales Agreement, dated as of August 27, 1982, between Seller and
the United States of America, Department of Energy, acting by and through the
Bonneville Power Administration; and (iii) the Exchange Agreement, dated as
of August 18, 1993, between Seller and Idaho Power Company.
"PPUC Order" means the Opinion and Order adopted by PPUC on
February 9, 1995 in Pennsylvania Power & Light Company's application for
approval of certain transactions in connection with the utility's
establishment of a holding company structure.
"Pre-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Pre-Closing Environmental Liabilities" means those Environmental
Liabilities attributable to the period on or prior to the Closing.
"Pre-Closing Known Remedial Liabilities" means the subset of Pre-
Closing Environmental Liabilities that are described in paragraph (d) of the
definition of Environmental Liabilities and that are attributable to the
matters set forth in Schedule II hereto.
"Pre-Closing Unknown Remedial Liabilities" means the subset of
Pre-Closing Environmental Liabilities that are described in paragraph (d) of
the definition of Environmental Liabilities and that are not attributable to
the matters set forth in Schedule II hereto.
"Puget" means Puget Sound Energy, Inc., a Washington corporation.
"Puget Asset Purchase Agreement" means the Asset Purchase
Agreement dated the date hereof by and between Puget and Purchaser.
"Puget Closing Date" means the date on which the closing of the
transactions contemplated by the Asset Purchase Agreement, dated as of the
date hereof, by and between Purchaser and Puget (the "Puget Closing") occurs.
"Puget Payment Amount" means an amount equal to $897,000,000
minus the amount of the Base Purchase Price (prior to any adjustment thereto
pursuant to Section 1.10).
"Purchase Price" has the meaning ascribed to it in Section
1.03(a).
"Purchaser" has the meaning ascribed to it in the forepart of
this Agreement.
"Purchaser Financing" has the meaning ascribed to it in
Section 5.08.
"Purchaser Group" has the meaning ascribed to it in Section
10.01(a).
"Purchaser Material Adverse Effect" means any change or effect
after the Bid Date that is, individually or in the aggregate, materially
adverse to (a) the business, operations, property or condition (financial or
otherwise) of Purchaser and its subsidiaries, taken as a whole, (b) the
ability of Purchaser and each of its subsidiaries, taken as a whole, to
perform their respective obligations under this Agreement or any of the other
Operative Agreements or (c) the validity or enforceability of this Agreement
or any of the other Operative Agreements, or the rights or remedies of
Purchaser hereunder or thereunder.
"Purchaser Required Regulatory Approvals" means (i) pursuant to
Part II of the Federal Power Act, acceptance for filing and effectiveness or
authorization by Final Order of the FERC, as applicable, to allow Purchaser
to (A) implement wholesale sales of electricity under the Wholesale
Transition Service Agreements, the Power Purchase/Exchange Agreements, the
Power Purchase Agreements, and any other jurisdictional agreements to be
assigned to Purchaser, (B) acquire, own and operate the Assets, and (C) sell
electricity at wholesale at market-based rates; (ii) approval by Final Order
of the FERC under Part I of the Federal Power Act for the transfer of FERC
project licenses related to, and necessary for Purchaser to acquire, own and
operate the Hydro Units; (iii) a Final Order of the FERC certifying Purchaser
as an exempt wholesale generator pursuant to Section 32 of the Holding
Company Act; provided however, that in the event Purchaser does not obtain
such certification with respect to the acquisition and ownership of either or
both of the Colstrip 4 Transmission Assets and the Colstrip 1, 2, and 3
Transmission Assets, then the provisions of Section 1.10 shall apply with
respect to such Assets; and provided, further, that in any case such
certification will be a Purchaser Required Regulatory Approval with respect
to all other Assets; (iv) a Final Order of the Montana Public Service
Commission, the Oregon Public Utility Commission and the Washington Utilities
and Transportation Commission, in each case, if required, including the
determinations required by Section 32(c) of the Holding Company Act for the
Assets to be eligible facilities of Purchaser as an exempt wholesale
generator; (v) approval or authorization by Final Order of the Pennsylvania
Public Utility Commission pursuant to the PPUC Order, if required; (vi) other
Licenses, Environmental Permits and approvals or authorizations of any other
Governmental or Regulatory Authority reasonably necessary pursuant to any Law
for Purchaser to own and operate the Assets other than authorizations or
approvals, the lack of which would not materially detract from the value of
the Assets as currently used or materially interfere with the ownership,
operation and maintenance of the Assets; (vii) acceptance for filing and
effectiveness or approval by Final Order of the FERC of the Interconnection
Agreement; and (viii) expiration or early termination of the HSR Act waiting
period.
"Purchaser's 401(k) Plan" has the meaning ascribed to it in
Section 5.03(a).
"Purchaser's Retirement Plan" has the meaning ascribed to it in
Section 5.03(a).
"Purchaser's Welfare Plans" has the meaning ascribed to it in
Section 5.03(a).
"Qualified Plan" means each Benefit Plan which is intended to
qualify under Section 401 of the Code.
"Qualified Transfer" means a sale or other disposition of the
Pollution Control Facilities to a transferee who is reasonably expected to
use the Pollution Control Facilities in such a way that they are treated as
qualified pollution control facilities within the meaning of Section
103(b)(4)(F) of the Internal Revenue Code as in effect prior to the enactment
of Public Law No. 99-514 (the "Tax Reform Act of 1986").
"Real Property" has the meaning ascribed to it in
Section 1.01(a)(i).
"Real Property Leases" has the meaning ascribed to it in
Section 1.01(a)(ii).
"Release" means any release, spill, emission, pouring, leaking,
pumping, injection, deposit, disposal, discharge, emptying, dispersal,
dumping, leaching or migration into or through the indoor or outdoor
environment, including the movement of Hazardous Materials through ambient
air, soil, surface water, ground water, wetlands, land, surface or subsurface
strata.
"Representatives" has the meaning ascribed to it in Section 4.03.
"Resolution Period" means the period ending sixty (60) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim set
forth in a Claim Notice or an Indemnity Notice.
"Retained Liabilities" has the meaning ascribed to it in
Section 1.02(b).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller" has the meaning ascribed to it in the forepart of this
Agreement.
"Seller Group" has the meaning ascribed to it in Section
10.01(b).
"Seller Material Adverse Effect" means any change in or effect on
the Assets or the operation of the Assets after the Bid Date that is
materially adverse to the ownership, business, assets, operations or
condition (financial or otherwise) of the Assets, individually or taken as a
whole, other than (i) any change resulting from changes in the international,
national, regional or local wholesale or retail markets for electricity, (ii)
any change resulting from changes in the international, national, regional or
local markets for any fuel used at the Generating Assets, (iii) any change
resulting from changes in the North American, national, regional or local
electricity transmission systems, (iv) changes in Law that apply generally to
similarly situated Persons, and (v) any materially adverse change in the
Assets which is cured (including by payment of money) by Seller before the
earlier of the Closing and the Termination Date.
"Seller's DB Plan" has the meaning ascribed to it in Section
5.03(b).
"Seller's Retirement Plan" has the meaning ascribed to it in
Section 5.03(a).
"Seller Required Regulatory Approvals" means (i) the approval
required by FERC to transfer the FERC licenses associated with the Hydro
Units, (ii) the approvals required by the appropriate regulatory agencies to
transfer the Transferable Permits, other than any such approvals the failure
of which would not materially detract from the value of the Assets as
currently used or materially interfere with the ownership, use, operation or
maintenance of the Assets, (iii) the approval, if required, of the SEC
pursuant to the Holding Company Act, (iv) the filings by Seller and Purchaser
required by the HSR Act and the expiration or earlier termination of all
waiting periods under the HSR Act, and (v) the approval by FERC pursuant to
Section 203 and 205, respectively, of the Federal Power Act relating to the
transfer of the Assets and the Interconnection Agreement.
"Separation Document" means the separation document to be
prepared under the terms of the Interconnection Agreement.
"Site Representatives" has the meaning ascribed to it in Section
4.11.
"Subject Defined Benefit Plan" means each Defined Benefit Plan
listed and described in Section 2.09(a) of the Disclosure Schedule.
"Tangible Personal Property" has the meaning ascribed to it in
Section 1.01(a)(iv).
"Tax Representation" has the meaning ascribed to it in
Section 9.01(a).
"Tax Returns" means any return, report, information return or
other document (including any related or supporting information) required to
be supplied to any taxing authority with respect to Taxes.
"Taxes" means all taxes, charges, fees, levies, penalties or
other assessments imposed by any United States Federal, state or local or
foreign taxing authority, including but not limited to, income, excise,
property, sales, transfer, franchise, payroll, withholding, social security
or other taxes, including any interest, penalties or additions attributable
thereto.
"Tenant Security Deposits" has the meaning ascribed to it in
Section 1.01(a)(viii).
"Thermal Units" means Seller's undivided interests in and
including the thermal generating stations owned by Seller at such locations
as set forth in Section 12.01(i) of the Disclosure Schedule.
"Third Party Claim" has the meaning ascribed to it in Section
10.02(a).
"Thompson Falls Environmental Status" means that Thompson Falls
Reservoir has been identified as a Low Priority Site by Montana Department of
Environmental Quality ("DEQ") under the Montana Comprehensive Environmental
Cleanup and Responsibility Act because elevated levels of copper, zinc, and
possibly arsenic were found in the bottom sediments of Thompson Falls
Reservoir.
"Thompson Falls Liabilities" has the meaning ascribed to it in
Section 1.02(a)(x).
"Title Representation" has the meaning ascribed to it in
Section 9.01(a).
"Transferable Insurance Policies" has the meaning ascribed to it
in Section 1.01(a)(xvi).
"Transferable Permits" has the meaning ascribed to it in
Section 1.01(a)(vi).
"Transferring Employee" means any Union or Non-Union Employee who
accepts Purchaser's offer of employment.
"Transferring Non-Union Employee" means a Non-Union Employee who
is a Transferring Employee.
"Transferring Union Employee" means a Union Employee who is a
Transferring Employee.
"Transfer Taxes" means all Taxes in the nature of sales, use,
transfer, recording, value added or forms of conveyance taxes.
"Union Employees" means all bargaining-unit Employees as of the
Closing represented by the International Brotherhood of Electrical Workers
("IBEW") Local No. 1638, IBEW Local No. 44 or the International Brotherhood
of Teamsters Local 190.
"WARN Act" means the Federal Worker Adjustment Retraining and
Notification Act of 1988, as amended, and the rules and regulations
promulgated thereunder.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender include
each other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) "include" or "including"
means including without limiting the generality of any description preceding
such term; and (vi) the phrase "ordinary course of business" refers to the
business of Seller in connection with the operation of the Generating Assets.
Whenever this Agreement refers to a number of days, such number shall refer
to calendar days unless Business Days are specified. All accounting terms
used herein and not expressly defined herein shall have the meanings given to
them under GAAP. Any representation or warranty contained herein as to the
enforceability of a Contract shall be subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
affecting the enforcement of creditors' rights generally and to general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at Law).
ARTICLE XIII tc \n \l 1 "ARTICLE XIII"
MISCELLANEOUS tc \n \l 1 " MISCELLANEOUS"
13.01 Notices
. All notices, requests and other communications hereunder must be in
writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
PP&L Global, Inc.
11350 Random Hills Rd, Suite 400
Fairfax, Virginia 22030
Facsimile No.: (703) 293-2659
Attn: Chief Counsel
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
Facsimile No.: (212) 424-8500
Attn: Jeffrey Meyers
If to Seller, to:
The Montana Power Company
40 East Broadway
Butte, Montana 59701-9394
Facsimile No.: 406-497-2451
Attn: General Counsel
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: 212-530-5219
Attn: John T. O'Connor
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided in this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change
its address, facsimile number or other information for the purpose of notices
to that party by giving notice specifying such change to the other party
hereto.
13.02 Bulk Sales Act
. The parties hereby waive compliance with the bulk sales act or comparable
statutory provisions of each applicable jurisdiction. Seller shall indemnify
Purchaser and its officers, directors, employees, agents and Affiliates in
respect of, and hold each of them harmless from and against, any and all
Losses suffered, occurred or sustained by any of them or to which any of them
becomes subject, resulting from, arising out of or relating to the failure of
Seller to comply with the terms of any such provisions applicable to the
transactions contemplated by this Agreement.
13.03 Entire Agreement
. This Agreement and the Operative Agreements and the other exhibits,
schedules, documents, certificates and instruments executed and delivered
pursuant to this Agreement supersede all prior discussions and agreements
between the parties with respect to the subject matter hereof and thereof,
including that certain confidentiality agreement between the parties dated
April 8, 1998, and contain the sole and entire agreement between the parties
hereto with respect to the subject matter hereof and thereof.
13.04 Expenses
. Except as otherwise expressly provided in this Agreement (including as
provided in Section 11.02), whether or not the transactions contemplated
hereby are consummated, each party will pay its own costs and expenses
incurred in connection with the negotiation, execution and closing of this
Agreement and the Operative Agreements and the transactions contemplated
hereby and thereby.
13.05 Public Announcements
. At all times at or before the Closing, Seller and Purchaser will not issue
or make any reports, statements or releases to the public or generally to the
employees, customers, suppliers or other Persons with whom Seller has
significant business relationships in connection with the operation of the
Generating Assets with respect to this Agreement or the transactions
contemplated hereby without the consent of the other, which consent shall not
be unreasonably withheld. If either party is unable to obtain the approval
of its public report, statement or release from the other party and such
report, statement or release is, in the opinion of legal counsel to such
party, required by Law in order to discharge such party's disclosure
obligations, then such party may make or issue the legally required report,
statement or release and promptly furnish the other party with a copy
thereof. Seller and Purchaser will also obtain the other party's prior
approval of any press release to be issued immediately following the Closing
announcing the consummation of the transactions contemplated by this
Agreement.
13.06 Confidentiality
. Each party hereto will hold, and will use its best efforts to cause its
Affiliates, and their respective Representatives to hold, in strict
confidence from any Person (other than any such Affiliate or Representative),
unless (i) compelled to disclose by judicial or administrative process
(including in connection with obtaining the necessary approvals of this
Agreement and the transactions contemplated hereby of Governmental or
Regulatory Authorities) or by other requirements of Law or (ii) disclosed in
an Action or Proceeding brought by a party hereto in pursuit of its rights or
in the exercise of its remedies hereunder, all documents and information
concerning the other party or any of its Affiliates furnished to it by the
other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known
by the party receiving such documents or information, (b) in the public
domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential; provided that following the
Closing the foregoing restrictions will not apply to Purchaser's use of
documents and information concerning the Assets or the Assumed Liabilities
furnished by Seller hereunder. Purchaser shall have the right to disclose
information of Seller with respect to the Assets to potential lenders and
their respective representatives in connection with financing the
transactions contemplated by this Agreement and to third parties in
connection with planning for operations of the Assets following the Closing,
provided that any such disclosure is made pursuant to confidentiality
obligations equivalent to those provided in this Section 13.06; provided,
further, if such third parties are involved in the energy industry then
Purchaser shall not disclose information of Seller to such Persons without
the written consent of Seller which shall not be unreasonably withheld. In
the event the transactions contemplated hereby are not consummated, upon the
request of the other party, each party hereto will, and will cause its
Affiliates and their respective Representatives to, promptly (and in no event
later than five (5) Business Days after such request) redeliver or cause to
be redelivered all copies of confidential documents and information furnished
by the other party in connection with this Agreement or the transactions
contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related
thereto or based thereon prepared by the party furnished such documents and
information or its Representatives.
13.07 Waiver
. Any term or condition of this Agreement may be waived at any time by the
party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on
behalf of the party waiving such term or condition. No waiver by any party
of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term
or condition of this Agreement on any future occasion. All remedies, either
under this Agreement or by Law or otherwise afforded, will be cumulative and
not alternative.
13.08 Amendment
. This Agreement may be amended, supplemented or modified only by a written
instrument duly executed by or on behalf of each party hereto.
13.09 No Third Party Beneficiary
. The terms and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors or permitted
assigns, and it is not the intention of the parties to confer third party
beneficiary rights upon any other Person other than any Person entitled to
indemnity under Article X, provided, however, that the Transferring Employees
are intended to be third party beneficiaries solely for the purpose of claims
they may have against Purchaser under Section 5.03.
13.10 No Assignment; Binding Effect
. Neither this Agreement nor any right, interest or obligation hereunder may
be assigned by any party hereto without the prior written consent of the
other party hereto and any attempt to do so will be void, except (a) for
assignments and transfers by operation of Law, (b) that Seller may assign its
rights, interests or obligations hereunder, in whole or in part, to an
Affiliate and (c) that Purchaser may assign any or all of its rights,
interests and obligations hereunder (including its rights under Article X) to
(i) a direct or indirect wholly-owned Subsidiary, provided that any such
Subsidiary agrees in writing to be bound by all of the terms, conditions and
provisions contained herein (in which event, from the date of such assignment
and subject to the other provisions of this Section 13.10, such assignee
shall be the Purchaser for the purposes of this Agreement), or (ii) any
lender providing purchase money or other financing to Purchaser from time to
time as collateral security for such financing, but no such assignment
referred to in clauses (b) or (c) shall relieve the assigning party of its
obligations hereunder; provided that no such assignment by Seller or
Purchaser adversely affects the availability or timing of any Federal, state
or local government consent or approval required for the consummation of the
transactions contemplated hereby. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
13.11 Headings
. The headings used in this Agreement have been inserted for convenience of
reference only and do not define or limit the provisions hereof. Neither
party shall be deemed to have been the drafter of this Agreement, which is
the product of detailed, arm's-length negotiations between the parties and
their respective counsel.
13.12 Invalid Provisions
. If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future Law, and if the rights or
obligations of any party hereto under this Agreement will not be materially
and adversely affected thereby, (a) such provision will be fully severable,
(b) this Agreement will be construed and enforced as if such illegal, invalid
or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision
or by its severance herefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible.
13.13 Governing Law
. This Agreement shall be governed by and construed in accordance with the
Laws of the State of New York applicable to a contract executed and performed
in such State, without giving effect to the conflicts of laws principles
thereof.
13.14 Counterparts
. This Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party as of the date first
above written.
PP&L GLOBAL, INC.
By:_______________________________
Name:
Title:
THE MONTANA POWER COMPANY
By:________________________________
Name:
Title:
(..continued)
MTHM DRAFT
10/8/98
NY1:#3152800v19
iv
73
Exhibit 10a
EXHIBIT F-1
COLSTRIP UNIT NUMBER 3
WHOLESALE TRANSITION SERVICE AGREEMENT
This Wholesale Transition Service Agreement (this "Agreement") is entered
into effective as of the _____ day of __________________, 199__ (the
"Effective Date"), by and between ____________________________, a
_____________ corporation ("Seller" or "__________"), and THE MONTANA POWER
COMPANY, a Montana corporation ("Buyer" or "MPC"). Seller and Buyer are also
referred to herein individually as a "Party" and collectively as the
"Parties."
RECITALS
1. Under the Asset Purchase Agreement, defined below, MPC has sold
its Colstrip 3 Interest and related assets to __________.
2. MPC must still provide power to its wholesale and retail customers
who have not yet chosen an alternative power supplier or who have not yet been
given the opportunity to choose an alternative power supplier.
3. Since MPC will not own any generating facilities or power
purchase/exchange contracts to serve these customers, MPC must contract with
__________ to serve, in part, MPC's remaining wholesale and retail customer
loads.
4. MPC and __________ enter into this Agreement to allow MPC to
purchase and __________ to sell defined quantities of power from Colstrip 3.
5. Since MPC must rely on the Colstrip 3 Interest to serve a portion
of the remaining wholesale and retail customer load, MPC and __________ intend
that __________'s delivery obligation is absolute and will not be excused for
any reason.
In consideration of the Parties' mutual promises, they agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below. Certain other capitalized
terms used herein are either (i) defined where they appear in this Agreement,
or (ii) defined in the Asset Purchase Agreement.
(a) "Affiliate" means any person that directly or indirectly
Controls, is Controlled by, or is under common Control with the person in
question.
(b) "Annual Maintenance Allowance" means a period of time,
advance notice of which has been provided to Buyer pursuant to Section 5.2,
occurring each calendar year during which a Unit may be non-operational for
maintenance purposes, provided that (i) such period must be during the months
of May through June only, and (ii) such period shall not exceed thirty-one
(31) continuous days for any Unit in any calendar year.
(c) "Annual Maintenance Allowance Period" means the period of
time during which a Unit is scheduled, pursuant to Section 5.2, to be non-
operational pursuant to the Annual Maintenance Allowance.
(d) "Asset Purchase Agreement" means that certain Asset
Purchase Agreement entered into between Buyer and Seller dated as of
___________, 199__, and pursuant to which Seller shall purchase and Buyer
shall sell the MPC Colstrip 3 Interest and related assets.
(e) "Claims" means all claims or actions, threatened or filed
and whether groundless, false or fraudulent, that directly or indirectly
relate to the subject matter of an indemnity, and the resulting losses,
damages, judgments, penalties, expenses, reasonable attorneys' fees and court
costs, whether incurred by settlement or otherwise, and whether such claims or
actions are threatened or filed prior to or after the termination of this
Agreement.
(f) "Contract Quantity" means the amount of energy to be
purchased and sold hereunder, as set forth in Article 3.
(g) "Contract Term" means the term of this Agreement as set
forth in Section 2.1.
(h) "Control" means the possession, directly or indirectly,
through one or more intermediaries, of the following: (i) in the case of a
corporation, 50% or more of the outstanding voting securities thereof; (ii) in
the case of a limited liability company, partnership, limited partnership or
venture, the right to 50% or more of the distributions therefrom (including,
without limitation, liquidating distributions); (iii) in the case of a trust
or estate, 50% or more of the beneficial interest therein; (iv) in the case of
any other entity, 50% or more of the economic or beneficial interest therein;
or (v) in the case of any entity, the power or authority, through the
ownership of voting securities, by contract or otherwise, to direct the
management, activities or policies of the entity.
(i) "Delivery Point" means (i) the point of interconnection of
the Unit to the Buyer's electrical system as defined in the Generation
Interconnection Agreement, or (ii) any point of interconnection with the
Buyer's transmission system at which capacity and/or energy may be available
for purchase pursuant to the Buyer's open access transmission tariff, unless
the Seller acquires the Buyer's Colstrip 1, 2 and 3 Transmission Assets as
provided in section 1.10(f) of the Asset Purchase Agreement. If the Seller
acquires the Buyers' Colstrip 1, 2 and 3 Transmission Assets as provided in
section 1.10(f) of the Asset Purchase Agreement, "Delivery Point" means (i)
the points of interconnection between the Colstrip 1, 2 and 3 Transmission
Assets and the Buyer's transmission system at Colstrip and/or Broadview and/or
Garrison, or (ii) any point of interconnection with the Buyer's transmission
system at which capacity and/or energy may be available for purchase pursuant
to the Buyer's open access transmission tariff.
(j) "Delivery Term" means the term for the purchase and sale of
energy hereunder, as set forth in Section 2.2.
(k) "Energy Charge" means the price to be paid by Buyer to
Seller each month during the Delivery Term for each kWh of the Contract
Quantity of energy delivered, as set forth on Exhibit A hereto.
(l) "FERC" means the Federal Energy Regulatory Commission, or
any successor thereto.
(m) "firm" means that the only excuse for the failure by Seller
to deliver energy as required under this Agreement is the Buyer's failure to
perform.
(n) "Force Majeure" means an event not anticipated as of the
Effective Date, which is not within the reasonable control of the Party (or in
the case of third party obligations or facilities, the third party) claiming
suspension (the "Claiming Party"), and which by the exercise of due diligence
the Claiming Party, or third party, is unable to overcome or for which the
Claiming Party is unable to obtain or cause to be obtained a commercially
reasonable substitute. Events of Force Majeure may include, but are not
restricted to: acts of God; fire; explosion; civil disturbance; labor dispute;
labor or material shortage; sabotage; action or restraint by court order or
public or governmental authority (so long as the Claiming Party has not
applied for or assisted in the application for, and has opposed where and to
the extent reasonable, such action or restraint); provided, that none of (a)
the loss of Buyer's markets nor Buyer's inability economically to use or
resell energy purchased hereunder, (b) Seller's decision not to operate the
Colstrip Facility or any Unit thereof, (c) normal operational outages at the
Colstrip Facility which are not the result of an emergency or similar
situation, (d) unless otherwise constituting an event of Force Majeure as
defined above, any other outages at the Colstrip Facility whether resulting
from an emergency or not, (e) Seller's failure to reserve sufficient firm
transmission to deliver the Contract Quantity at the Delivery Point, (f)
Seller's ability to sell energy to a market at a more advantageous price, and
(g) Buyer's failure to reserve sufficient firm transmission to deliver the
Contract Quantity from the Delivery Point, shall constitute an event of Force
Majeure. Unless otherwise constituting an event of Force Majeure as defined
above, interruption by a Transmission Provider shall not be deemed to be Force
Majeure unless (i) the Party contracting with such Transmission Provider shall
have made arrangements with such Transmission Provider for the firm point-to-
point transmission services, network integration transmission service, and/or
similar firm transmission service, as defined under the Transmission
Provider's tariff or other applicable tariff, of the energy to be delivered or
received hereunder and (ii) such interruptions is due to an interruption or
curtailment in accordance with the Transmission Provider's tariff or other
applicable tariff.
(o) "GAAP" means generally accepted accounting principles
consistently applied for the period(s) in question.
(p) "Good Utility Practice" means any practices, methods or acts
engaged in or approved by a significant portion of the electric utility
industry during the relevant time period, or any of the practices, methods and
acts which, in the exercise of reasonable judgment in light of facts known at
the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition and giving due regard for the requirements
of governmental agencies having jurisdiction. Good Utility Practice is not
intended to be limited to the optimum practice, method or act to the exclusion
of all others, but rather to be acceptable practices, methods or acts
generally accepted in the electric utility industry.
(q) "Interest Rate" means, for any date, two percent (2%) over
the per annum rate of interest equal to the prime lending rate as may from
time to time be published in the Wall Street Journal under "Money Rates";
provided, the Interest Rate shall never exceed the maximum lawful rate
permitted by applicable law.
(r) "kW" means one kilowatt.
(s) "kWh" means one kilowatt hour.
(t) "Material Adverse Change" means, in the case of (i) Buyer,
has long-term, secured, senior debt that is rated below "BBB-" by S&P and
below "Baa3" by Moody's, or (ii) Seller, has long-term, secured, senior debt
that is rated below "BBB-" by S&P and below "Baa3" by Moody's. For the
purposes of this definition, "S&P" means the Standard & Poor's Rating Group (a
division of McGraw-Hill, Inc.) or its successor, and "Moody's" means Moody's
Investors Services, Inc. or its successor.
(u) "month" means a calendar month.
(v) "MPC" means The Montana Power Company, a Montana
corporation.
(w) "MPC COLSTRIP 3 INTEREST" means the 30% interest in Colstrip
Unit 3 transferred from Buyer to Seller through the Asset Purchase Agreement.
(x) "MPC COLSTRIP 4 INTEREST" means the 30% interest in Colstrip
Unit 4 (i) retained by Buyer, or (ii) transferred from Buyer to Seller through
the Asset Purchase Agreement, or (iii) transferred from Buyer to a third
party.
(y) "MPT" means Mountain prevailing time, that is, prevailing
Standard Time or Daylight Savings Time in the Mountain Time Zone.
(z) "mW" means one megawatt.
(aa) "mWh" means megawatt hour.
(bb) "RECIPROCAL SHARING AGREEMENT" means the Colstrip Units 3&4
Generating Project Reciprocal Sharing Agreement between the Seller and the
holder of MPC Unit 4 Interest.
(cc) "Schedule" or "Scheduling" means the acts of Seller, Buyer
and/or their designated representatives, including, without limitation, each
Party's Transmission Providers, if applicable, of notifying, requesting and
confirming to each other the quantity of energy to be delivered hourly on any
given day or days during the Delivery Term at a specified Delivery Point.
(dd) "Transmission Providers" means the entity or entities
transmitting energy on behalf of Seller or Buyer to or from the Delivery
Point.
(ee) "Unit" means either (or in the plural, both) The Montana
Power Company's Colstrip 3 Interest, and through the Reciprocal Sharing
Agreement, MPC Colstrip 4 Interest.
(ff) "Work Day" means a work day observed by both Parties
beginning at 8:00 a.m. and closing at 5:00 p.m. local time for each Party's
principal place of business.
ARTICLE 2
TERM AND TERMINATION
2.1 Contract Term. Subject to the provisions of Section 16.6
regarding winding-up arrangements, the Contract Term shall begin on the day
immediately succeeding the Closing Date, as defined in the Asset Purchase
Agreement, and shall continue until the end of the Delivery Term.
2.2 Delivery Term. The purchase and sale of energy shall commence at
00:00:01 MPT on the day immediately succeeding the Closing Date and shall end
at 23:59:59 MPT on the day immediately preceding the second anniversary of the
Closing Date (the "Delivery Term"). No interruption in purchases or sales,
whether due to Force Majeure or otherwise, shall operate to extend the
Delivery Term.
2.3 Termination. Neither Party shall have the right to terminate this
Agreement except as provided in Article 9.
ARTICLE 3
QUANTITY
3.1 Contract Quantity/Seller's Obligations. Seller shall sell and
deliver, or cause to be delivered, and Buyer shall purchase and receive, or
cause to be received, an amount of firm energy equal to 200 mWh for each hour
Scheduled in the Delivery Term, except that during each Annual Maintenance
Allowance Period, for which period the amount of firm energy shall be reduced
by 100 mWh for each hour that a Unit is scheduled for maintenance (the
"Contract Quantity"), provided that at no time shall the Contract Quantity be
less than 100 mWh without the Buyer's prior written consent. Seller's
obligation to deliver, or cause to be delivered, the Contract Quantity shall
be absolute regardless of whether the Unit is operated or operable. Seller
shall not be required to provide the Contract Quantity from the Unit and shall
be entitled to provide the Contract Quantity from any source.
3.2 Deliveries. All deliveries and receipts of energy under this
Agreement shall be made at the Delivery Point as nominated by Seller.
3.3 Reserves. Seller shall be solely responsible for all reserve
requirements associated with its delivery obligation under this Agreement,
including spinning and supplemental reserves, as determined in accordance with
Western Systems Coordinating Council and Northwest Power Pool minimum
operating reliability criteria. The Seller shall ensure sufficient reserves
through sharing or other arrangements to maintain deliveries to Buyer at all
times.
ARTICLE 4
ENERGY CHARGE
4.1 Energy Charge. Buyer shall pay to Seller each month during the
Delivery Term an Energy Charge equal to the product of (i) the price set forth
on Exhibit A attached hereto (the Energy Charge reflected in mills/kWh) times
(ii) the amount of energy in kWh actually delivered in accordance with this
Agreement by Seller. The Energy Charge shall be payable in arrears pursuant
to Article 10.
4.2 Failure to Deliver. Unless excused by Buyer's failure to perform
or Force Majeure, if Seller fails to deliver all or part of the required or
otherwise Scheduled Contract Quantity of energy at the Delivery Point, Seller
shall pay Buyer, on the date payment would otherwise be due to Seller, an
amount for each kWh of such deficiency equal to the positive difference, if
any, obtained by subtracting the Energy Charge for the deficient Contract
Quantity from the Replacement Price, plus twenty percent (20%) of the
resulting amount. "Replacement Price" means the price at which Buyer, acting
in a commercially reasonable manner, purchases substitute energy not delivered
by Seller (plus additional transmission charges, if any, incurred by Buyer to
the Delivery Point) or, absent a purchase, the market price for such quantity
of energy at such Delivery Point as determined by Buyer in a commercially
reasonable manner; provided, however, in no event shall the Replacement Price
include any penalties, ratcheted demand or similar charges.
4.3 Failure to Receive. (a) Subject to subparagraph (b) below and
unless excused by Seller's failure to perform or Force Majeure, if Buyer fails
to receive all or part of the required or otherwise Scheduled Contract
Quantity of energy at the Delivery Point, Buyer shall pay Seller, on the date
payment would otherwise be due to Seller, an amount for each kWh of such
deficiency equal to the positive difference, if any, obtained by subtracting
the Replacement Price for the deficient Contract Quantity from the Energy
Charge, plus twenty percent (20%) of the resulting amount. "Replacement
Price" means the price at which Seller, acting in a commercially reasonable
manner, sells the deficiency energy not received by Buyer (plus additional
transmission charges, if any, incurred by Seller to the Delivery Point) or,
absent a purchase, the market price for such quantity of energy at such
Delivery Point as determined by Seller in a commercially reasonable manner;
provided, however, in no event shall the Replacement Price include any
penalties, ratcheted demand or similar charges.
(b) If Buyer is unable to receive all or part of the required or
otherwise Scheduled Contract Quantity of energy at the Delivery Point because
of a Force Majeure event that lasts less than fourteen (14) consecutive days,
Buyer shall pay Seller, on the date payment would otherwise be due to Seller,
an amount for each kWh of such deficiency equal to the positive difference, if
any, obtained by subtracting the greater of fuel cost savings or the
Replacement Price for the deficient Contract Quantity from the Energy Charge,
plus twenty percent (20%) of the resulting amount.
4.4 Acknowledgment of the Parties. The Parties stipulate that the
payment obligations set forth in this Article 4 are reasonable in light of the
anticipated harm and the difficulty of estimation or calculation of actual
damages and waive the right to contest such payments as an unreasonable
penalty. If either Party fails to pay amounts in accordance with this Article
4 when due, the other Party shall have the right to: (a) suspend performance
until such amounts plus interest at the Interest Rate have been paid, and/or
(b) exercise any remedy available at law or in equity to enforce payment of
such amount plus interest at the Interest Rate. With respect to the amount of
such damages only, the remedy set forth in this Article 4 shall be the sole
and exclusive remedy of the Parties for the failure of Seller to sell and
deliver, and Buyer to purchase and receive, the Contract Quantity and all
other damages and remedies are hereby waived. Disagreements with respect to
the calculation of damages pursuant to this Article 4 shall be submitted to
arbitration in accordance with the arbitration procedures set forth in
Section16.9.
4.5 Fixed Rates. The rates for service specified in this Agreement
shall remain in effect for this Agreement and shall be determined in
accordance with this Agreement for the Delivery Term, and shall not be subject
to change for his Agreement through application to FERC pursuant to the
provisions of Section 205 of the Federal Power Act absent the Agreement in
writing of both of the Parties.
ARTICLE 5
OPERATIONS, TRANSMISSION AND SCHEDULING
5.1 Operating Procedures. Seller and Buyer shall mutually develop
written operating procedures prior to the beginning of the Delivery Term.
Topics covered by such operating procedures shall include, but not be limited
to, methods of day-to-day communications, scheduling, accounting, and key
personnel lists for Seller and Buyer. Where applicable, the operating
procedures shall comply with the terms and conditions of the Buyer's open
access transmission tariff. Seller shall provide and deliver the energy and
perform its other obligations hereunder, at all times consistent with Good
Utility Practice.
5.2 Maintenance Procedures. Seller shall provide Buyer not less than
ninety (90) days advance written notice prior to any Annual Maintenance
Allowance Period for which Seller intends to reduce the Contract Quantity
pursuant to Section 3.1. After such notice, and except as the Parties may
otherwise agree in writing, the Annual Maintenance Allowance Period for any
calendar year shall be fixed for purposes of determining the Contract Quantity
that Seller is obligated to deliver in such year. If no such timely notice is
given by Seller, then there shall be no Annual Maintenance Allowance Period
considered in determining the Contract Quantity that Seller is obligated to
deliver.
5.3 Transmission. Seller shall arrange and be responsible for
transmission service to the Delivery Point and shall Schedule or arrange for
Scheduling services with its Transmission Providers to deliver the energy to
the Delivery Point. Buyer shall arrange and be responsible for transmission
service at and from the Delivery Point and shall Schedule or arrange for
Scheduling services with its Transmission Providers to receive the energy at
the Delivery Point. Each Party shall designate authorized representatives to
effect the Scheduling of the Contract Quantity.
5.4 Other Notifications. All transactions hereunder shall not be
reported to any party in determining any indexed price for electricity
including, but not limited to any Dow Jones Mid-Columbia Electricity Index.
ARTICLE 6
DELIVERY POINT; OBLIGATIONS OF THE PARTIES; TITLE
6.1 Delivery Point. Seller shall sell and deliver, or cause to be
delivered, and Buyer shall purchase and receive, or cause to be received, the
Contract Quantity at the Delivery Point.
6.2 Obligations of the Parties. Up to the Delivery Point, Seller
shall be responsible for any costs or charges imposed on or associated with
the delivery of the Contract Quantity, including, but not limited to, control
area services, inadvertent energy flows, transmission losses and loss charges
relating to the transmission of the Contract Quantity. At and from the
Delivery Point, Buyer shall be responsible for any costs or charges imposed on
or associated with the Contract Quantity, including, but not limited to,
control area services (except as provided in Section 3.3), inadvertent energy
flows, transmission losses and loss charges relating to the transmission of
the Contract Quantity.
6.3 Title; Risk of Loss; and Indemnity. As between the Parties,
Seller shall be deemed to be in exclusive control (and responsible for any
damages or injury caused thereby) of the energy prior to the Delivery Point
and Buyer shall be deemed to be in exclusive control (and responsible for any
damages or injury caused thereby) of the energy at and from the Delivery
Point. Seller warrants that it will deliver to Buyer the Contract Quantity,
free and clear of all liens, Claims and encumbrances arising prior to the
Delivery Point. Title to and risk of loss related to the Contract Quantity
shall transfer from Seller to Buyer at the Delivery Point. Seller and Buyer
shall each indemnify, defend and hold harmless the other Party from any Claims
arising from any act or incident occurring when title to the energy is vested
in the indemnifying Party.
In furtherance of the foregoing, each Party represents to the other
that it has read and understood the Agreement Limiting Liability Among Western
Interconnected Systems ("Western Systems Agreement"). If either Party is not
a party to the Western Systems Agreement or terminates its participation in
the Western Systems Agreement, then, notwithstanding, the provisions of the
Western Systems Agreement shall apply in full force and effect as between the
Parties to the extent that such provisions apply to the transactions
contemplated by this Agreement. For purposes of this paragraph, the Western
Systems Agreement is incorporated herein by the reference.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties. As a material inducement to
entering into this Agreement, each Party, with respect to itself, hereby
represents and warrants to the other Party as of the Effective Date as
follows:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation and is qualified to conduct its
business in those jurisdictions necessary to perform this Agreement;
(b) except for the regulatory approvals as provided in Section 9.4
hereof, it has all regulatory authorizations necessary for it to legally
perform its obligations under this Agreement;
(c) the execution, delivery and performance of this Agreement are
within its statutory and corporate powers, have been authorized by all
necessary action and do not violate any of the terms or conditions in its
governing documents or any contract to which it is a party or any law, rule,
regulation, order, writ, judgment, decree or other legal or regulatory
determination applicable to it;
(d) this Agreement constitutes a legal, valid and binding obligation
of such Party enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other laws affecting creditor's
rights generally, and with regard to equitable remedies, to the discretion of
the court before which proceedings to obtain same may be pending;
(e) there are no bankruptcy, insolvency, reorganization, receivership
or other arrangement proceedings pending or being contemplated by it, or to
its knowledge threatened against it; and
(f) there are no suits, proceedings, judgments, rulings or orders by
or before any court or any governmental authority that materially adversely
affect its ability to perform this Agreement.
7.2 Additional Representation and Warranty. Buyer hereby further
represents and warrants to Seller that Buyer, under this Agreement, is a
wholesale purchaser and is purchasing the energy hereunder for resale.
7.3 No Other Representations and Warranties. Each Party acknowledges
that it has entered into this Agreement based solely upon the express
representations and warranties set forth in this Agreement.
ARTICLE 8
ADDITIONAL COVENANTS
8.1 Remaking of Representations and Warranties. Each Party covenants
that it will cause its respective representations and warranties in Sections
7.1 and 7.2 to remain true and correct throughout the Contract Term.
8.2 Financial Information.
If requested by Buyer, Seller shall cause to be delivered as soon
as available and (i) within one hundred twenty (120) days following the end of
each fiscal year, a copy of the annual report of ____________ containing
audited consolidated financial statements for such fiscal year certified by
independent certified public accountants and (ii) within sixty (60) days after
the end of each of its first three fiscal quarters of each fiscal year, a copy
of the quarterly report of ___________ containing unaudited consolidated
financial statements for such fiscal quarter.
If requested by Seller, Buyer shall cause to be delivered as soon
as available and (i) within one hundred twenty (120) days following the end of
each fiscal year, a copy of the annual report of Buyer containing audited
consolidated financial statements for such fiscal year certified by
independent certified public accountants and (ii) within sixty (60) days after
the end of each of its first three fiscal quarters of each fiscal year, a copy
of the quarterly report of Buyer containing unaudited consolidated financial
statements for such fiscal quarter.
In all cases the statements required under this Section 8.2 shall
be for the most recent accounting period and prepared in accordance with GAAP;
provided that, should any such statements not be timely due to a delay in
preparation or certification, such delay shall not be considered a default so
long as such Party diligently pursues the preparation, certification and
delivery of the statements.
ARTICLE 9
EVENTS OF DEFAULT, REMEDIES AND REGULATORY APPROVALS
9.1 Events of Default. An "Event of Default" means, with respect to a
Party alleged to have taken or been affected by any of the actions set forth
below in this Section 9.1 (the "Defaulting Party"):
(a) the failure by the Defaulting Party to make, when due, any
payment required under this Agreement if such failure is not remedied within
five (5) Work Days after written notice of such failure is given to the
Defaulting Party by the other Party ("Non-Defaulting Party"), provided that
the payment is not the subject of a good faith dispute as described in the
billing and payment provisions under Article 10; or
(b) any representation or warranty made by the Defaulting Party
in this Agreement shall prove to have been false or misleading in any material
respect when made or ceases to remain true during the Contract Term; or
(c) the failure by the Defaulting Party to perform any covenant
set forth in this Agreement (other than the events that are otherwise
specifically covered in this Section 9.1 as a separate Event of Default or
Seller's obligation to sell and deliver, and Buyer's obligation to purchase
and receive, for which a separate remedy is provided in Article 4), and such
failure is not excused by Force Majeure or cured within five (5) Work Days
after written notice thereof to the Defaulting Party; or
(d) the Defaulting Party shall make an assignment (other than
any assignment permitted pursuant to Article 11) or any general arrangement
for the benefit of creditors;
(e) the Defaulting Party shall file a petition or otherwise
commence, authorize or acquiesce in the commencement of a proceeding or cause
of action under any bankruptcy or similar law for the protection of creditors,
or have such petition filed against it and such petition is not withdrawn or
dismissed within thirty (30) days after such filing;
(f) the Defaulting Party shall otherwise become bankrupt or
insolvent (however evidenced); or
(g) the Defaulting Party shall be unable to pay its debts as
they fall due;
(h) the guarantor of the Defaulting Party fails to perform any
covenant set forth in the guaranty agreement it delivered in respect of this
Agreement (if any), any representation or warranty made by such guarantor in
the guaranty agreement shall prove to have been false or misleading in any
material respect when made or when deemed to be repeated or such guarantor
shall take or suffer any actions set forth in Section 9.1(d) as applied to it;
or
(i) guarantor of the Defaulting Party shall repudiate, purport
to revoke or fail to perform any of such guarantor's obligations under such
guarantor's guaranty hereunder, or guarantor shall cease to exist; or
(j) if at any time, in the case of: (i) Buyer, Buyer shall have
defaulted on its indebtedness to third parties resulting in obligations
(whether individually or in the aggregate) of Buyer in excess of Twenty Five
Million U.S. Dollars ($25,000,000), becoming, or becoming capable of being
declared, accelerated; or (ii) Seller, Seller shall have defaulted on its
indebtedness to third parties resulting in obligations of Seller in excess of
Twenty Five Million U.S. Dollars ($25,000,000), becoming, or becoming capable
of being declared, accelerated; or
(k)
9.2 Remedies Upon an Event of Default.
(a) If an Event of Default occurs with respect to a Defaulting
Party at any time during the Contract Term, the Non-Defaulting Party may, for
so long as the Event of Default is continuing (i) establish a date (which date
shall be between five (5) and ten (10) Work Days after the Non-Defaulting
Party delivers notice) ("Early Termination Date") on which this Agreement
shall terminate if the Event of Default has not been cured and (ii) withhold
any payments due in respect of this Agreement; provided, however, upon the
occurrence of any Event of Default listed in Section 9.1(d) as it may apply to
any Party, this Agreement shall automatically terminate, without notice, and
without any other action by either Party as if an Early Termination Date had
been declared immediately prior to such event. If an Early Termination Date
has been designated, the Non-Defaulting Party shall in good faith calculate
its Gains or Losses and Costs (as hereafter defined) resulting from the
termination of this Agreement. The Gains, Losses and Costs shall be
determined by comparing the value of the remaining Contract Term and Contract
Quantity under this Agreement had it not been terminated to the equivalent
quantities and relevant market prices for the remaining term either quoted by
a bona fide third-party offer or which are reasonably expected to be available
in the market under a replacement contract for this Agreement. To ascertain
the market prices of a replacement contract, the Non-Defaulting Party may
consider, among other valuations, any or all of the settlement prices of NYMEX
electricity futures contracts, quotations from leading dealers in energy swap
contracts and other bona fide third party offers, all adjusted for the length
of the remaining term and differences in transmission. It is expressly agreed
that a Party shall not be required to enter into a replacement transaction in
order to determine the Termination Payment (as hereafter defined). The Non-
Defaulting Party shall aggregate such Gains, Losses and Costs with respect to
this Agreement into a single net amount ("Termination Payment") and notify the
Defaulting Party. If the Non-Defaulting Party's aggregate Losses and Costs
exceed its aggregate Gains, the Defaulting Party shall, within five (5) Work
Days of receipt of such notice, pay the net amount to the Non-Defaulting
Party, which amount shall bear interest at the Interest Rate from the Early
Termination Date until paid. If the Non-Defaulting Party's aggregate Gains
exceed its aggregate Losses and Costs, if any, resulting from the termination
of this Agreement, the amount of the Termination Payment shall be zero. If
the Defaulting Party disagrees with the calculation of the Termination
Payment, the issue shall be submitted to binding arbitration in accordance
with the arbitration procedures set forth in Section 16.9 and the resulting
Termination Payment shall be due and payable within ten (10) Work Days after
the award.
(b) For purposes of this Agreement:
"Costs" mean(s), with respect to a Party, brokerage fees,
commissions and other similar transaction costs and expenses, including,
without limitation, verifiable breakage costs, reasonably incurred by such
Party either in terminating any arrangement pursuant to which it has hedged
its obligations or entering into new arrangements which replace this Agreement
and attorneys' fees, if any, incurred in connection with enforcing its rights
under this Agreement.
"Gains" mean(s), with respect to a Party, an amount equal to the
present value of the economic benefit (exclusive of Costs), if any, to such
Party resulting from the termination of its obligations with respect to this
Agreement determined in a commercially reasonable manner.
"Losses" mean(s), with respect to a Party, an amount equal to the
present value of the economic loss (exclusive of Costs), if any, to such Party
resulting from the termination of its obligations with respect to this
Agreement determined in a commercially reasonable manner.
In no event, however, shall a Party's Gains, Losses or Costs
include any penalties, ratcheted demand or similar charges. At the time for
payment of any amount due under this Section 9.2, each Party shall pay to the
other Party all additional amounts payable by it pursuant to this Agreement,
but all such amounts shall be netted and aggregated with any Termination
Payment payable hereunder.
9.3 Other Events. Except with respect to the initial regulatory
approvals provided for in Section 9.4, in the event that either Party is
regulated by a federal, state or local regulatory body, and such body shall
subsequently disallow all or any portion of any costs incurred or yet to be
incurred by such Party under any provision of this Agreement, such action
shall not operate to excuse such Party from performance of any obligation nor
shall such action give rise to any right of such Party to any retroactive
adjustment of the Energy Charge. Despite the foregoing, if a Party's
activities hereunder become subject to regulation of any kind whatsoever under
any law (other than with respect to Transition Costs) to a greater or
different extent than that existing on the Effective Date and such regulation
either (a) renders all of this Agreement illegal or unenforceable or (b)
materially adversely affects the business of a Party, with respect to its
financial position or otherwise, then in the case of (a) above, either Party,
and in the case of (b) above, only the Party affected (for purposes of this
Section 9.3, the "Defaulting Party"), shall at such time have the right to
declare an Early Termination Date in accordance with the provisions hereof;
provided that notwithstanding the rights of the Parties to declare an Early
Termination Date as above stated, the Defaulting Party shall be liable for
payment of the Termination Payment calculated by the Non-Defaulting Party as
provided in Section 9.2.
9.4 Regulatory Approvals. The Seller shall file this Agreement with
FERC. The obligations of the Parties under this Agreement are subject to and
contingent upon receipt and approval by each Party (in each Party's sole
discretion) of an order of FERC accepting this Agreement for filing or
otherwise permitting this Agreement to be or become effective, including,
without limitation, rates to be charged hereunder. If the FERC or any
reviewing court or other governmental agency, including, without limitation,
the Montana Public Service Commission, imposes any condition, limitation or
qualification upon this Agreement or upon the performance by either of the
Parties of its performance hereunder which, individually or in the aggregate,
precludes either or both of the Parties from performing, in whole or in part,
this Agreement, or materially adversely affects the benefits of this Agreement
to either Party, then the precluded or affected Party may terminate this
Agreement by giving, within not less than thirty (30) days of the entry of any
such order or decree, written notice thereof to the other Party, effective as
of the date of entry of the applicable order or decree imposing such
condition, limitation or qualification. In no event shall the terminating
Party incur any liability (whether for lost revenues or lost profits or
otherwise) as a result of such termination.
ARTICLE 10
BILLING AND PAYMENT
10.1 Billing and Payment. Seller shall render to Buyer (by regular
mail, facsimile or other acceptable means pursuant to Article 14) for each
calendar month during the Delivery Term a statement setting forth the total
Energy Charges for the month and any other charges due Seller, including,
without limitation, any payment due pursuant to Article 4 during the preceding
month. Billing and payment will be based on the Energy Charge and on
Scheduled hourly quantities. Payment by Buyer shall be due on or before
thirty (30) days after receipt of Seller's statement, to the payment address
provided in Exhibit B hereto. Overdue payments shall accrue interest at the
Interest Rate from, and including, the due date to, but excluding, the date of
payment . If Buyer, in good faith, disputes a statement, Buyer shall provide
a written explanation specifying in detail the basis for the dispute and pay
the portion of such statement conceded to be correct no later than the due
date. If any amount disputed by Buyer is determined to be due to Seller, it
shall be paid within ten (10) days of such determination, along with interest
accrued at the Interest Rate from the original due date until the date paid.
10.2 Setoff. If Buyer and Seller are each required to pay to the other
an amount in the same month under this Agreement, then such amounts with
respect to each Party may be aggregated and the Parties may discharge their
obligations to pay through netting, in which case the Party, if any, owing the
greater aggregate amount may pay to the other Party the difference between the
amounts owed. Each Party reserves to itself all rights, setoffs,
counterclaims and other remedies and defenses consistent with Article 12 (to
the extent not expressly herein waived or denied) which such Party has or may
be entitled to arising from or out of this Agreement. The obligations to make
payment under this Agreement between the Parties may be setoff against each
other.
10.3 Audit. Each Party (and its representatives) has the right, at its
sole expense and during normal working hours, to examine the records of the
other Party to the extent reasonably necessary to verify the accuracy of any
statement, charge or computation made pursuant to this Agreement. If
requested, a Party shall provide to the other Party statements evidencing the
quantities of energy delivered at the Delivery Point. If any such examination
reveals any inaccuracy in any statement, the necessary adjustments in such
statement and the payments thereof will be promptly made and shall bear
interest calculated at the Interest Rate from the date the overpayment or
underpayment was made until paid; provided, however, that no adjustment for
any statement or payment will be made unless objection to the accuracy thereof
was made prior to the lapse of one (1) year from the rendition thereof; and
provided further that this Section 10.3 will survive any termination of this
Agreement for a period of one (1) year from the date of such termination for
the purpose of such statement and payment objections.
ARTICLE 11
ASSIGNMENT; BINDING EFFECT
11.1 Assignment. Neither Party shall assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of the
other Party, which consent shall not be unreasonably withheld or delayed.
Despite the foregoing, either Party may, without the need for consent from the
other Party (and without relieving itself from liability hereunder), (a)
transfer, sell, pledge, encumber or assign this Agreement or the accounts,
revenues or proceeds hereof in connection with any financing or other
financial arrangements; (b) transfer or assign this Agreement to an Affiliate
of such Party; or (c) transfer or assign this Agreement to any person or
entity succeeding to all or substantially all of the assets of such Party;
provided, however, that in the case of (b) and (c) any such assignee shall
agree in writing to be bound by the terms and conditions hereof. Assignments
or transfers not in compliance with this section shall be void.
11.2 Binding Effect. This Agreement shall inure to the benefit of and
be binding upon the Parties and their respective successors and permitted
assigns. No assignment or transfer permitted hereunder shall relieve Seller
or Buyer of any of their respective obligations under this Agreement.
ARTICLE 12
FORCE MAJEURE AND LIMITATION OF LIABILITY
12.1 Force Majeure. If either Party is rendered unable by Force
Majeure to carry out, in whole or part, its obligations under this Agreement
and such Party gives notice and full details of the event to the other Party
as soon as practicable after the occurrence of the event, then during the
pendency of such Force Majeure but for no longer period, the obligations of
the Party affected by the event (other than the obligation to make payments
then due or becoming due with respect to performance prior to the event) shall
be excused to the extent provided for herein. The Party affected by the Force
Majeure shall remedy the Force Majeure with all reasonable dispatch.
12.2 Limitation of Remedies, Liability and Damages. THE PARTIES
CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS
AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION
FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS HEREIN PROVIDED, SUCH
EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY,
THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND
ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR
MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE OBLIGOR'S LIABILITY SHALL
BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN
EQUITY ARE WAIVED. UNLESS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY
SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY OR
INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY
STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT
IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES
AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED
THERETO, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER
SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE
EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE,
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED
DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.
12.3 Duty to Mitigate. Each Party agrees that it has a duty to
mitigate damages and covenants that it will use commercially reasonable
efforts to minimize any damages it may incur as a result of the other Party's
performance or non-performance of this Agreement.
12.4 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
SELLER EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR
ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR
FITNESS FOR ANY PARTICULAR PURPOSE.
ARTICLE 13
TAXES; TRANSITION COSTS
13.1 Applicable Taxes. Seller shall be responsible for all existing
and any new sale, use, excise, ad valorem, and any other similar taxes,
imposed or levied by any federal, state or local governmental agency on the
energy generated, sold and delivered hereunder up to the delivery of such
energy to the Delivery Point. Buyer shall be responsible for all existing and
any new sale, use, excise, ad valorem, and any other similar taxes, imposed or
levied by any federal, state or local governmental agency on the energy sold
and delivered hereunder from and after the delivery of such energy to the
Delivery Point. Each Party shall indemnify, release, defend and hold harmless
the other Party from and against any and all liability for taxes imposed or
assessed by any taxing authority with respect to the energy sold, delivered
and received hereunder that are the responsibility of such Party pursuant to
this Section 13.1.
ARTICLE 14
NOTICES
14.1 Notices. All notices, requests, statements or payments shall be
made as specified in Exhibit B hereto. Notices required to be in writing
shall be delivered by letter, facsimile or other documentary form. Notice by
facsimile or hand delivery shall be deemed to have been received by the close
of the Work Day on which it was transmitted or hand delivered (unless
transmitted or hand delivered after close in which case it shall be deemed
received at the close of the next Work Day). Notice by overnight mail or
courier shall be deemed to have been received two (2) Work Days after it is
sent. A Party may change its address by providing notice of same in
accordance herewith.
ARTICLE 15
SECURITY
15.1 Security. So long as a Party does not suffer a Material Adverse
Change, it is not obligated to furnish the other Party a guaranty of its
performance hereunder. If, however, a Party suffers a Material Adverse Change
and is unable to remedy such condition within thirty (30) days after the onset
of the condition, then, in addition to any other remedies it may have, the
other Party may require the Party suffering Material Adverse Change to provide
additional credit support, such as a letter of credit, corporate guarantee or
such other collateral mutually agreeable to both Parties.
ARTICLE 16
MISCELLANEOUS
16.1 Entirety. This Agreement and the Exhibits hereto constitute the
entire agreement between the Parties. There are no prior or contemporaneous
agreements or representations affecting the same subject matter other than
those herein expressed. Except for any matters which, in accordance with the
express provisions of this Agreement, may be resolved by verbal agreement
between the Parties, no amendment, modification or change herein shall be
enforceable unless reduced to writing and executed by both Parties.
16.2 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MONTANA, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT SUCH LAWS MAY BE
PREEMPTED BY THE LAWS OF THE UNITED STATES OF AMERICA.
16.3 Non-Waiver. No waiver by any Party hereto of any one or more
defaults by the other Party in the performance of any of the provisions of
this Agreement shall be construed as a waiver of any other default or defaults
whether of a like kind or different nature.
16.4 Severability. Except as otherwise stated herein, any provision or
article declared or rendered unlawful by a court of law or regulatory agency
with jurisdiction over the Parties, or deemed unlawful because of a statutory
change, will not otherwise affect the lawful obligations that arise under this
Agreement.
16.5 Headings; Exhibits. The headings used for the sections and
articles herein are for convenience and reference purposes only and shall in
no way affect the meaning or interpretation of the provisions of this
Agreement. Any and all Exhibits referred to in this Agreement are, by such
reference, incorporated herein and made a part hereof for all purposes.
16.6 Winding Up Arrangements. All indemnity and audit rights shall
survive the termination of this Agreement. All obligations provided in this
Agreement shall remain in effect following the expiration or termination of
this Agreement to the extent necessary to give full force and effect to the
rights and obligations undertaken by the Parties herein.
16.7 No Third Party Beneficiaries. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of
the Parties that this Agreement shall not be construed as a third party
beneficiary contract.
16.8 Counterparts. This Agreement may be executed in several
counterparts, each of which is an original and all of which constitute one and
the same instrument.
16.9 Arbitration. ANY DISPUTE OR NEED OF INTERPRETATION ARISING OUT OF
THIS AGREEMENT PERTAINING TO THE CALCULATION OF A TERMINATION PAYMENT OR A
PAYMENT REQUIRED PURSUANT TO ARTICLE 4 SHALL BE SUBMITTED TO BINDING
ARBITRATION BY ONE ARBITRATOR WHO HAS NOT PREVIOUSLY BEEN EMPLOYED BY EITHER
PARTY, AND DOES NOT HAVE A DIRECT OR INDIRECT INTEREST IN EITHER PARTY OR THE
SUBJECT MATTER OF THE ARBITRATION. SUCH ARBITRATOR SHALL EITHER BE AS
MUTUALLY AGREED BY THE PARTIES WITHIN THIRTY (30) DAYS AFTER WRITTEN NOTICE
FROM EITHER PARTY REQUESTING ARBITRATION, OR FAILING AGREEMENT, SHALL BE
SELECTED UNDER THE EXPEDITED RULES OF THE AMERICAN ARBITRATION ASSOCIATION
(THE "AAA"). SUCH ARBITRATION SHALL BE HELD IN ALTERNATING LOCATIONS OF THE
HOME OFFICES OF SELLER AND BUYER, COMMENCING WITH BUYER'S OFFICE. THE RULES
OF THE AAA SHALL APPLY TO THE EXTENT NOT INCONSISTENT WITH THE RULES HEREIN
SPECIFIED. EITHER PARTY MAY INITIATE ARBITRATION BY WRITTEN NOTICE TO THE
OTHER PARTY AND THE ARBITRATION SHALL BE CONDUCTED ACCORDING TO THE FOLLOWING:
(a) NOT LATER THAN SEVEN (7) DAYS PRIOR TO THE HEARING DATE SET BY THE
ARBITRATOR EACH PARTY SHALL SUBMIT A BRIEF WITH A SINGLE PROPOSAL FOR
SETTLEMENT, (b) THE HEARING SHALL BE CONDUCTED ON A CONFIDENTIAL BASIS WITHOUT
CONTINUANCE OR ADJOURNMENT, (c) THE ARBITRATOR SHALL BE LIMITED TO SELECTING
ONLY ONE OF THE TWO PROPOSALS SUBMITTED BY THE PARTIES, (d) EACH PARTY SHALL
DIVIDE EQUALLY THE COST OF THE ARBITRATOR AND THE HEARING AND EACH PARTY SHALL
BE RESPONSIBLE FOR ITS OWN EXPENSES AND THOSE OF ITS COUNSEL AND
REPRESENTATIVES AND (e) EVIDENCE CONCERNING THE FINANCIAL POSITION OR
ORGANIZATIONAL MAKE-UP OF THE PARTIES, ANY OFFER MADE OR THE DETAILS OF ANY
NEGOTIATION PRIOR TO ARBITRATION AND THE COST TO THE PARTIES OF THEIR
REPRESENTATIVES AND COUNSEL SHALL NOT BE PERMISSIBLE. WITH RESPECT TO ALL
OTHER DISPUTES, THE PARTIES SHALL BE ENTITLED TO AVAIL THEMSELVES OF ALL
REMEDIES AVAILABLE AT LAW OR IN EQUITY.
16.10 Acknowledgment of Arbitration. EACH PARTY UNDERSTANDS THAT THIS
AGREEMENT CONTAINS AN AGREEMENT TO ARBITRATE WITH RESPECT TO ANY DISPUTE OR
NEED OF INTERPRETATION PERTAINING TO THE CALCULATION OF A TERMINATION PAYMENT
OR A PAYMENT REQUIRED PURSUANT TO ARTICLE 4 OF THIS AGREEMENT. AFTER SIGNING
THIS AGREEMENT, EACH PARTY UNDERSTANDS THAT IT WILL NOT BE ABLE TO BRING A
LAWSUIT CONCERNING ANY DISPUTE THAT MAY ARISE WHICH IS COVERED BY THE
ARBITRATION PROVISION. INSTEAD, EACH PARTY AGREES TO SUBMIT ANY SUCH DISPUTE
TO AN IMPARTIAL ARBITRATOR.
IN WITNESS WHEREOF, the Parties, by their respective duly authorized
representatives, have executed this Agreement effective as of the Effective
Date. This Agreement shall not become effective as to either Party unless and
until executed by both Parties.
By:
Name:
Title:
The Montana Power Company
By:
Name:
Title:
EXHIBIT A
to the
Wholesale Transition Service Agreement
ENERGY CHARGE
Seller will be paid a weighted monthly on-peak and off-peak Dow Jones
Mid Columbia index (as defined below, the "Index") price (computed as
described below) as long as the cumulative weighted average Index price does
not exceed 22.25 mills per kWh. The cumulative weighted average Index price
will become a rolling twelve (12) month weighted average Index price starting
in the thirteenth (13th) month after the first month of the Delivery Term. If
the weighted monthly Index price is less than 20.00 mills per kWh, then the
weighted monthly Index price will be set at 20.00 mills per kWh. If the
cumulative weighted average Index price or the twelve (12) month weighted
average Index price exceeds 22.25 mills per kWh, then the monthly Index price
will be set at an amount that makes the cumulative weighted average Index
price or the twelve (12) month weighted average Index price index equal to
22.25 mills per kWh. The weighted monthly Index price index will be computed
as the Index price weighted by the amount of energy actually delivered for
each month by Seller. See the examples included in this Exhibit for an
illustration of the weighted monthly Index price calculation (EXAMPLE 1 -
CALCULATION OF MONTHLY WEIGHTED INDEX PRICE) and an illustration of the how
the price paid will be computed using the cumulative weighted average Index
price and the twelve month rolling average Index price (EXAMPLE 2 - PRICE PAID
COMPUTATION).
For purposes of this Agreement, "Index" means the prices in the Dow
Jones Mid-Columbia Electricity Firm Index reported by Dow Jones to Dow Jones
Telerate subscribers for on-peak hours and off-peak hours for each day of the
relevant billing month. If a price for any on-peak hour is not reported in
the Index, then the price for such unreported on-peak hour period shall be
determined by calculating the average of the Index prices last reported for
the on-peak hours period immediately preceding and immediately succeeding such
unreported on-peak hour period. If a price for any off-peak hour period is
not reported in the Index, then the price of such unreported off-peak hour
period shall be determined by calculating the average of the Index prices last
reported for the off-peak hours immediately preceding and immediately
succeeding such unreported off-peak hour period. "On-peak hours" are the
hours between 6:00 a.m. and 10:00 p.m. Pacific prevailing time, Monday through
Saturday, exclusive of holidays recognized by the North American Electric
Reliability Council or its successor. Off-peak hours are hours that are not
on-peak hours provided however, the total amount of energy actually sold by
Seller and purchased by Buyer hereunder shall not be included in the
calculation of the on-peak and off-peak Dow Jones Mid-Columbia Index reported
by Dow Jones.
EXHIBIT A
Example 1
EXAMPLE 1 - CALCULATION OF MONTHLY WEIGHTED INDEX PRICE
<TABLE>
<CAPTION>
Monthly
$ per mWh Weighted
Dow Jones Mid-C Price times Average
Month Day Period $ per mWh Hours mWh Delivered mWh Delivered Price
<S> <C> <C> <C> <C> <C> <C>
January 1 Firm on-peak 21.6 16 3,200 $69,120
1 Firm off-peak 20.0 8 1,600 $32,000
January 2 Firm on-peak 23.5 16 3,168 $74,448
2 Firm off-peak 19.0 8 1,640 $31,160
. . . . . . .
. . . . . . .
. . . . . . .
January 31 Firm on-peak 18.6 16 3,168 $58,925
31 Firm off-peak 18.0 8 1,640 $29,520
January Total 148,800 $3,124,800 21.0
</TABLE>
EXHIBIT A
Example 2
Example 2 - Of Price Paid Computation
Assuming a January 1, 1999 Closing
<TABLE>
<CAPTION>
Example
Index Price Sum of
See Note Sum of Months Index Index Last 11 months
$/MWh gWh gWh in Sums Price*gWh Price*gWh Payments (K$)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1999 21.0 148.65 149 1 3,122 3,122 0
February 1999 26.0 134.27 283 2 3,491 6,613 3,122
March 1999 15.0 148.65 432 3 2,230 8,842 6,295
April 1999 20.0 143.86 575 4 2,877 11,719 9,268
May 1999 26.0 74.33 650 5 1,932 13,652 12,145
June 1999 27.0 71.93 722 6 1,942 15,594 14,078
July 1999 21.0 148.65 870 7 3,122 18,716 16,020
August 1999 26.0 148.65 1,019 8 3,865 22,581 19,141
September 1999 22.0 143.86 1,163 9 3,165 25,745 22,672
October 1999 21.0 148.65 1,311 10 3,122 28,867 25,837
November 1999 22.0 143.86 1,455 11 3,165 32,032 28,959
December 1999 25.0 148.65 1,604 12 3,716 35,748 32,124
January 2000 27.0 148.65 1,604 12 4,014 36,640 32,567
February 2000 21.0 134.27 1,604 12 2,820 35,969 32,516
March 2000 26.0 148.65 1,604 12 3,865 37,604 32,362
<FN>
<F1>
Note
The Index Price will be developed using the methodology shown in EXAMPLE - CALCULATION OF
MONTHLY WEIGHTED AVERAGE PRICE. The values shown do not represent actual prices.
</FN>
</TABLE>
EXHIBIT A (continued)
Example 2
<TABLE>
<CAPTION>
Example 2 - Of Price Paid Computation
Assuming a January 1, 1999 Closing
Annual Sum of Max. Price paid Sum of Annual
Price Cap Payments (K$) Price Paid compared to Payments Payments weighted
$/MWh Price Cap*gWh $/mWh Index Price? (K$) (K$) $/mWh
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1999 22.25 3,307 21.00 equal to 3,122 3,122 21.00
February 1999 22.25 6,295 23.63 less than 3,173 6,295 22.25
March 1999 22.25 9,602 20.00 greater than 2,973 9,268 21.48
April 1999 22.25 12,803 20.00 equal to 2,877 12,145 21.11
May 1999 22.25 14,457 26.00 equal to 1,932 14,078 21.67
June 1999 22.25 16,057 27.00 equal to 1,942 16,020 22.20
July 1999 22.25 19,365 21.00 equal to 3,122 19,141 21.99
August 1999 22.25 22,672 23.75 less than 3,531 22,672 22.25
September 1999 22.25 25,873 22.00 equal to 3,165 25,837 22.22
October 1999 22.25 29,181 21.00 equal to 3,122 28,959 22.08
November 1999 22.25 32,381 22.00 equal to 3,165 32,124 22.07
December 1999 22.25 35,689 23.98 less than 3,565 35,689 22.25
January 2000 22.25 35,689 21.00 less than 3,122 35,689 22.25
February 2000 22.25 35,689 21.00 equal to 2,820 35,335 22.03
March 2000 22.25 35,689 22.38 less than 3,327 35,689 22.25
<FN>
<F1>
Note
The Index Price will be developed using the methodology shown in EXAMPLE - CALCULATION OF MONTHLY
WEIGHTED AVERAGE PRICE. The values shown do not represent actual prices.
</FN>
</TABLE>
EXHIBIT B
to the
Wholesale Transition Service Agreement
NOTICES
NOTICES AND PAYMENT
Buyer:
NOTICES & CORRESPONDENCE: PAYMENTS:
The Montana Power Company
40 E. Broadway for The Montana Power Company
Butte, Montana 59701 ABA Routing # 092900383
Attn.: General Counsel Account # 156210000816
Facsimile No.: (406) 497-2451 [or address if wire not required]
INVOICES:
The Montana Power Company
40 E. Broadway
Butte, Montana 59701
Attn.: Resource Acquisition Director
SELLER:
NOTICES, CORRESPONDENCE, & INVOICES: PAYMENTS:
____________________________________ ______________________________
____________________________________ ______________________________
Attn.: ______________________________
Facsimile No.: (____)
19
MPC NON COLSTRIP 3 23
EXHIBIT 10b
EXHIBIT F-2
NON COLSTRIP UNIT NUMBER 3
WHOLESALE TRANSITION SERVICE AGREEMENT
This Wholesale Transition Service Agreement (this "Agreement") is entered
into effective as of the _____ day of __________________, 199__ (the
"Effective Date"), by and between ____________________________, a
_____________ corporation ("Seller" or "__________"), and THE MONTANA POWER
COMPANY, a Montana corporation ("Buyer" or "MPC"). Seller and Buyer are also
referred to herein individually as a "Party" and collectively as the
"Parties."
RECITALS
1. Under the Asset Purchase Agreement, defined below, MPC has sold
its generating facilities and/or power purchase/exchange agreements and
related assets to __________.
2. MPC must still provide power to its wholesale and retail customers
who have not yet chosen an alternative power supplier or who have not yet been
given the opportunity to choose an alternative power supplier.
3. Since MPC will not own any generating facility and/or power
purchase/exchange contracts to serve these customers, MPC must contract with
__________ to serve, in part, MPC's remaining wholesale and retail customer
loads.
4. MPC and __________ enter into this Agreement to allow MPC to
purchase and __________ to sell defined quantities of power from the
generating facilities and/or power purchase/exchange contracts.
5. Since MPC must rely on the Seller to serve a portion of the
remaining wholesale and retail customer load, MPC and __________ intend that
__________'s delivery obligation is absolute and will not be excused for any
reason.
In consideration of the Parties' mutual promises, they agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below. Certain other capitalized
terms used herein are either (i) defined where they appear in this Agreement,
or (ii) defined in the Asset Purchase Agreement.
(a) "Affiliate" means any person that directly or indirectly
Controls, is Controlled by, or is under common Control with the person in
question.
(b) "Asset Purchase Agreement" means that certain Asset
Purchase Agreement entered into between Buyer and Seller dated as of
___________, 199__, and pursuant to which Seller shall purchase and Buyer
shall sell the MPC generation facility and/or power purchase/exchange
agreements.
(c) "Claims" means all claims or actions, threatened or filed
and whether groundless, false or fraudulent, that directly or indirectly
relate to the subject matter of an indemnity, and the resulting losses,
damages, judgments, penalties, expenses, reasonable attorneys' fees and court
costs, whether incurred by settlement or otherwise, and whether such claims or
actions are threatened or filed prior to or after the termination of this
Agreement.
(d) "Contract Quantity" means the amount of energy to be
purchased and sold hereunder, as set forth in Article 3.
(e) "Contract Term" means the term of this Agreement as set
forth in Section 2.1.
(f) "Control" means the possession, directly or indirectly,
through one or more intermediaries, of the following: (i) in the case of a
corporation, 50% or more of the outstanding voting securities thereof; (ii) in
the case of a limited liability company, partnership, limited partnership or
venture, the right to 50% or more of the distributions therefrom (including,
without limitation, liquidating distributions); (iii) in the case of a trust
or estate, 50% or more of the beneficial interest therein; (iv) in the case of
any other entity, 50% or more of the economic or beneficial interest therein;
or (v) in the case of any entity, the power or authority, through the
ownership of voting securities, by contract or otherwise, to direct the
management, activities or policies of the entity.
(g) "Delivery Point" means (i) the point of interconnection of
the Unit to the Buyer's electrical system as defined in the Generation
Interconnection Agreement, or (ii) any point of interconnection with the
Buyer's transmission system at which capacity and/or energy may be available
for purchase pursuant to the Buyer's open access transmission tariff, unless
the Seller acquires the Buyer's Colstrip 1, 2 and 3 Transmission Assets as
provided in section 1.10(f) of the Asset Purchase Agreement. If the Seller
acquires the Buyers' Colstrip 1, 2 and 3 Transmission Assets as provided in
section 1.10(f) of the Asset Purchase Agreement, "Delivery Point", with
respect to Colstrip Units 1&2, means (i) the points of interconnection between
the Colstrip 1, 2 and 3 Transmission Assets and the Buyer's transmission
system at Colstrip and/or Broadview and/or Garrison, or (ii) any point of
interconnection with the Buyer's transmission system at which capacity and/or
energy may be available for purchase pursuant to the Buyer's open access
transmission tariff.
(h) "Delivery Term" means the term for the purchase and sale of
energy hereunder, as set forth in Section 2.2.
(i) "Energy Charge" means the price to be paid by Buyer to
Seller each month during the Delivery Term for each kWh of the Contract
Quantity of energy delivered, as set forth on Exhibit A hereto.
(j) "FERC" means the Federal Energy Regulatory Commission, or
any successor thereto.
(k) "firm" means that the only excuse for the failure by Seller
(l) "Force Majeure" means an event not anticipated as of the
Effective Date, which is not within the reasonable control of the Party (or in
the case of third party obligations or facilities, the third party) claiming
suspension (the "Claiming Party"), and which by the exercise of due diligence
the Claiming Party, or third party, is unable to overcome or for which the
Claiming Party is unable to obtain or cause to be obtained a commercially
reasonable substitute. Events of Force Majeure may include, but are not
restricted to: acts of God; fire; explosion; civil disturbance; labor dispute;
labor or material shortage; sabotage; action or restraint by court order or
public or governmental authority (so long as the Claiming Party has not
applied for or assisted in the application for, and has opposed where and to
the extent reasonable, such action or restraint); provided, that none of (a)
the loss of Buyer's markets nor Buyer's inability economically to use or
resell energy purchased hereunder, (b) Seller's decision not to operate the
Unit or any Unit thereof, (c) normal operational outages at the Unit which are
not the result of an emergency or similar situation, (d) unless otherwise
constituting an event of Force Majeure as defined above, any other outages at
the Unit whether resulting from an emergency or not, (e) Seller's failure to
reserve sufficient firm transmission to deliver the Contract Quantity at the
Delivery Point, (f) Seller's ability to sell energy to a market at a more
advantageous price, and (g) Buyer's failure to reserve sufficient firm
transmission to deliver the Contract Quantity from the Delivery Point, shall
constitute an event of Force Majeure. Unless otherwise constituting an event
of Force Majeure as defined above, interruption by a Transmission Provider
shall not be deemed to be Force Majeure unless (i) the Party contracting with
such Transmission Provider shall have made arrangements with such Transmission
Provider for the firm point-to-point transmission services, network
integration transmission service, and/or similar firm transmission service, as
defined under the Transmission Provider's tariff or other applicable tariff,
of the energy to be delivered or received hereunder and (ii) such
interruptions is due to an interruption or curtailment in accordance with the
Transmission Provider's tariff or other applicable tariff.
(m) "GAAP" means generally accepted accounting principles
consistently applied for the period(s) in question.
(n) "Good Utility Practice" means any practices, methods or acts
engaged in or approved by a significant portion of the electric utility
industry during the relevant time period, or any of the practices, methods and
acts which, in the exercise of reasonable judgment in light of facts known at
the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with good business practices,
reliability, safety and expedition and giving due regard for the requirements
of governmental agencies having jurisdiction. Good Utility Practice is not
intended to be limited to the optimum practice, method or act to the exclusion
of all others, but rather to be acceptable practices, methods or acts
generally accepted in the electric utility industry.
(o) "Interest Rate" means, for any date, two percent (2%) over
the per annum rate of interest equal to the prime lending rate as may from
time to time be published in the Wall Street Journal under "Money Rates";
provided, the Interest Rate shall never exceed the maximum lawful rate
permitted by applicable law.
(p) "kW" means one kilowatt.
(q) "kWh" means one kilowatt hour.
(r) "Material Adverse Change" means, in the case of (i) Buyer,
has long-term, secured, senior debt that is rated below "BBB-" by S&P and
below "Baa3" by Moody's, or (ii) Seller, has long-term, secured, senior debt
that is rated below "BBB-" by S&P and below "Baa3" by Moody's. For the
purposes of this definition, "S&P" means the Standard & Poor's Rating Group (a
division of McGraw-Hill, Inc.) or its successor, and "Moody's" means Moody's
Investors Services, Inc. or its successor.
(s) "month" means a calendar month.
(t) "MPC" means The Montana Power Company, a Montana
corporation.
(u) "MPT" means Mountain prevailing time, that is, prevailing
Standard Time or Daylight Savings Time in the Mountain Time Zone.
(v) "MPSC" means the Montana Public Service Commission, or any
successor agency thereto.
(w) "mW" means one megawatt.
(x) "mWh" means megawatt hour.
(y) "PROPORTIONAL ALLOCATION FACTOR" means the percentage to
multiply the Remaining Customer Load by to obtain the Seller's non-binding
load estimate.
(z) "REMAINING CUSTOMER LOAD" means the Seller's load obligation
to the Buyer. The Remaining Customer Load is a portion of the Buyer's load
obligation ("Residual Load") for customers who have not chosen, or been given
an opportunity to choose, a power supplier other than the Montana Power
Company MPSC regulated Communication and Energy Services Division power
supply. Exhibit D provides an initial estimate of the non-binding Remaining
Customer Load which the Seller can determine a non-binding estimate of their
load obligation by multiplying the Remaining Customer Load by the appropriate
Proportional Allocation Factor. Exhibit D shows the calculations used to
compute the Remaining Customer Load as the Buyer's Residual Load less
deliveries from Colstrip 3 and other possible purchases (purchases from the
Bonneville Power Administration and/or Qualifying Facilities).
(aa) "Schedule" or "Scheduling" means the acts of Seller, Buyer
and/or their designated representatives, including, without limitation, each
Party's Transmission Providers, if applicable, of notifying, requesting and
confirming to each other the quantity of energy to be delivered hourly on any
given day or days during the Delivery Term at a specified Delivery Point.
(bb) "Transmission Providers" means the entity or entities
transmitting energy on behalf of Seller or Buyer to or from the Delivery
Point.
(cc) "Unit" means either (or in the plural, all) The Montana
Power Company's generating unit or units and/or power purchase/exchange
contracts that the Buyer sold and the Seller purchased pursuant to the Asset
Purchase Agreement.
(dd) "Work Day" means a work day observed by both Parties
beginning at 8:00 a.m. and closing at 5:00 p.m. local time for each Party's
principal place of business.
ARTICLE 2
TERM AND TERMINATION
2.1 Contract Term. Subject to the provisions of Section 16.6
regarding winding-up arrangements, the Contract Term shall begin on the day
immediately succeeding the Closing Date, as defined in the Asset Purchase
Agreement, and shall continue until the end of the Delivery Term.
2.2 Delivery Term. The purchase and sale of energy shall commence at
00:00:01 MPT on the day immediately succeeding the Closing Date and shall end
when the Buyer's Remaining Customer Load is zero or no later than 23:59:59
MPT June 30, 2002. No interruption in purchases or sales shall operate to
extend the Delivery Term.
2.3 Termination. Neither Party shall have the right to terminate this
Agreement except as provided in Article 9.
ARTICLE 3
QUANTITY
3.1 Contract Quantity/Seller's Obligations. Seller shall sell and
deliver, or cause to be delivered, and Buyer shall purchase and receive, or
cause to be received, an amount of firm energy measured in mWh per hour equal
to the Seller's proportional allocation of Buyers actual Remaining Customer
Load. An initial non-binding estimate of the Seller's share of the Buyer's
Remaining Load Obligation can be computed by multiplying the initial estimate
of the Remaining Customer Load shown in Exhibit D by the appropriate
Proportional Allocation Factor in Exhibit C. The Proportional Allocation
Factor defined in Exhibit C assumes the same Closing Date, which will be
defined, for all assets and power purchase agreements. The Proportional
Allocation Factor may change if the generation asset and contract sale results
in multiple Closing Dates, or a different mix of resources available to serve
the Remaining Customer Load. Seller's obligation to deliver, or cause to be
delivered, the Contract Quantity shall be absolute, regardless of whether the
Unit is operated or operable. Seller shall not be required to provide the
Contract Quantity from the Unit, and shall be entitled to provide the Contract
Quantity from any source.
3.2 Deliveries. All deliveries and receipts of energy under this
Agreement shall be made at the Delivery Point as nominated by Seller.
3.3 Reserves. Seller shall be solely responsible for all reserve
requirements associated with its delivery obligation under this Agreement,
including spinning and supplemental reserves, as determined in accordance with
Western Systems Coordinating Council and Northwest Power Pool minimum
operating reliability criteria. The Seller shall ensure sufficient reserves
through sharing or other arrangements to maintain deliveries to Buyer at all
times.
ARTICLE 4
ENERGY CHARGE
4.1 Energy Charge. Buyer shall pay to Seller each month during the
Delivery Term an Energy Charge equal to the product of (i) the price set forth
on Exhibit A attached hereto (the Energy Charge reflected in mills/kWh) times
(ii) the amount of energy in kWh actually delivered in accordance with this
Agreement by Seller. The Energy Charge shall be payable in arrears pursuant
to Article 10.
4.2 Failure to Deliver. Unless excused by Buyer's failure to perform
or Force Majeure, if Seller fails to deliver all or part of the required or
otherwise Scheduled Contract Quantity of energy at the Delivery Point, Seller
shall pay Buyer, on the date payment would otherwise be due to Seller, an
amount for each kWh of such deficiency equal to the positive difference, if
any, obtained by subtracting the Energy Charge for the deficient Contract
Quantity from the Replacement Price, plus twenty percent (20%) of the
resulting amount. "Replacement Price" means the price at which Buyer, acting
in a commercially reasonable manner, purchases substitute energy not delivered
by Seller (plus additional transmission charges, if any, incurred by Buyer to
the Delivery Point) or, absent a purchase, the market price for such quantity
of energy at such Delivery Point as determined by Buyer in a commercially
reasonable manner; provided, however, in no event shall the Replacement Price
include any penalties, ratcheted demand or similar charges.
4.3 Failure to Receive. Unless excused by Seller's failure to perform
or Force Majeure, if Buyer fails to receive all or part of the required or
otherwise Scheduled Contract Quantity of energy at the Delivery Point, Buyer
shall pay Seller, on the date payment would otherwise be due to Seller, an
amount for each kWh of such deficiency equal to the positive difference, if
any, obtained by subtracting the Replacement Price for the deficient Contract
Quantity from the Energy Charge, plus twenty percent (20%) of the resulting
amount. "Replacement Price" means the price at which Seller, acting in a
commercially reasonable manner, sells the deficiency energy not received by
Buyer (plus additional transmission charges, if any, incurred by Seller to the
Delivery Point) or, absent a purchase, the market price for such quantity of
energy at such Delivery Point as determined by Seller in a commercially
reasonable manner; provided, however, in no event shall the Replacement Price
include any penalties, ratcheted demand or similar charges.
4.4 Acknowledgment of the Parties. The Parties stipulate that the
payment obligations set forth in this Article 4 are reasonable in light of
the anticipated harm and the difficulty of estimation or calculation of
actual damages and waive the right to contest such payments as an
unreasonable penalty. If either Party fails to pay amounts in accordance
with this Article 4 when due, the other Party shall have the right to: (a)
suspend performance until such amounts plus interest at the Interest Rate
have been paid, and/or (b) exercise any remedy available at law or in equity
to enforce payment of such amount plus interest at the Interest Rate. With
respect to the amount of such damages only, the remedy set forth in this
Article 4 shall be the sole and exclusive remedy of the Parties for the
failure of Seller to sell and deliver, and Buyer to purchase and receive, the
Contract Quantity and all other damages and remedies are hereby waived.
Disagreements with respect to the calculation of damages pursuant to this
Article 4 shall be submitted to arbitration in accordance with the
arbitration procedures set forth in Section16.9.
4.5 Fixed Rates. The rates for service specified in this Agreement
shall remain in effect for this Agreement and shall be determined in
accordance with this Agreement for the Delivery Term, and shall not be subject
to change for his Agreement through application to FERC pursuant to the
provisions of Section 205 of the Federal Power Act absent the Agreement in
writing of both of the Parties.
ARTICLE 5
OPERATIONS, TRANSMISSION AND SCHEDULING
5.1 Operating Procedures. Seller and Buyer shall mutually develop
written operating procedures prior to the beginning of the Delivery Term.
Topics covered by such operating procedures shall include, but not be limited
to, methods of day-to-day communications, scheduling, accounting, and key
personnel lists for Seller and Buyer. Where applicable, the operating
procedures shall comply with the terms and conditions of the Buyer's open
access transmission tariff. Seller shall provide and deliver the energy and
perform its other obligations hereunder, at all times consistent with Good
Utility Practice
5.2 Transmission. Seller shall arrange and be responsible for
transmission service to the Delivery Point and shall Schedule or arrange for
Scheduling services with its Transmission Providers to deliver the energy to
the Delivery Point. Buyer shall arrange and be responsible for transmission
service at and from the Delivery Point and shall Schedule or arrange for
Scheduling services with its Transmission Providers to receive the energy at
the Delivery Point. Each Party shall designate authorized representatives to
effect the Scheduling of the Contract Quantity.
5.3 Long-term Notification. The Seller will be provided non-binding
estimates of the Buyer's Remaining Customer Load obligation in the following
manner: Upon completion of the sale, Seller will be notified of Buyer's non-
binding Remaining Customer Load monthly capacity and energy obligation through
the Contract Term if different than Exhibit D. These will be the Buyer's best
estimates and will not be guaranteed schedules. By the fifteenth of each
month during the Contract Term, the Buyer will notify the Seller of the non-
binding monthly energy and peak estimates for the Remaining Customer Load
provided the non-binding Remaining Customer Load estimate have changed from
previously provided estimates. The Seller will be responsible to serve its
proportional allocation of the Buyer's actual Remaining Customer Load as
defined in Section 3.1 and will be notified of this obligation pursuant to
Section 5.4.
5.4 Short-term Notification. Each day the Seller will be provided a
preschedule for the next day's hourly loads; on weekends and holidays,
however, the preschedule will be provided to the Seller consistent with
regional scheduling practices. The hourly prescheduled amounts will be the
firm schedule if no changes are necessary. If MPC deems necessary a change to
the preschedule in order to balance Seller's resources to the Remaining
Customer Load, then the preschedule will be provided to the Seller consistent
with regional scheduling practices. If the schedule, as provided and modified
through time by MPC, is different from the actual load requirements; MPC will
be responsible for the forecast error, including acquiring the power necessary
to meet the difference and any associated cost of the power acquired to meet
the difference. The Seller is obligated to meet the schedule provided by the
Buyer as described in Section 5.1.
5.5 Other Notifications. All transactions hereunder shall not be
reported to any party in determining any indexed price for electricity
including, but not limited to any Dow Jones Mid-Columbia Electricity Index.
ARTICLE 6
DELIVERY POINT; OBLIGATIONS OF THE PARTIES; TITLE
6.1 Delivery Point. Seller shall sell and deliver, or cause to be
delivered, and Buyer shall purchase and receive, or cause to be received, the
Contract Quantity at the Delivery Point.
6.2 Obligations of the Parties. Up to the Delivery Point, Seller
shall be responsible for any costs or charges imposed on or associated with
the delivery of the Contract Quantity, including, but not limited to, control
area services, inadvertent energy flows, transmission losses and loss charges
relating to the transmission of the Contract Quantity. At and from the
Delivery Point, Buyer shall be responsible for any costs or charges imposed on
or associated with the Contract Quantity, including, but not limited to,
control area services (except as provided in Section 3.3), inadvertent energy
flows, transmission losses and loss charges relating to the transmission of
the Contract Quantity.
6.3 Title; Risk of Loss; and Indemnity. As between the Parties,
Seller shall be deemed to be in exclusive control (and responsible for any
damages or injury caused thereby) of the energy prior to the Delivery Point
and Buyer shall be deemed to be in exclusive control (and responsible for any
damages or injury caused thereby) of the energy at and from the Delivery
Point. Seller warrants that it will deliver to Buyer the Contract Quantity,
free and clear of all liens, Claims and encumbrances arising prior to the
Delivery Point. Title to and risk of loss related to the Contract Quantity
shall transfer from Seller to Buyer at the Delivery Point. Seller and Buyer
shall each indemnify, defend and hold harmless the other Party from any Claims
arising from any act or incident occurring when title to the energy is vested
in the indemnifying Party.
In furtherance of the foregoing, each Party represents to the other
that it has read and understood the Agreement Limiting Liability Among Western
Interconnected Systems ("Western Systems Agreement"). If either Party is not
a party to the Western Systems Agreement or terminates its participation in
the Western Systems Agreement, then, notwithstanding, the provisions of the
Western Systems Agreement shall apply in full force and effect as between the
Parties to the extent that such provisions apply to the transactions
contemplated by this Agreement. For purposes of this paragraph, the Western
Systems Agreement is incorporated herein by the reference.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties. As a material inducement to
entering into this Agreement, each Party, with respect to itself, hereby
represents and warrants to the other Party as of the Effective Date as
follows:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation and is qualified to conduct its
business in those jurisdictions necessary to perform this Agreement;
(b) except for the regulatory approvals as provided in Section 9.4
hereof, it has all regulatory authorizations necessary for it to legally
perform its obligations under this Agreement;
(c) the execution, delivery and performance of this Agreement are
within its statutory and corporate powers, have been authorized by all
necessary action and do not violate any of the terms or conditions in its
governing documents or any contract to which it is a party or any law, rule,
regulation, order, writ, judgment, decree or other legal or regulatory
determination applicable to it;
(d) this Agreement constitutes a legal, valid and binding obligation
of such Party enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other laws affecting creditor's
rights generally, and with regard to equitable remedies, to the discretion of
the court before which proceedings to obtain same may be pending;
(e) there are no bankruptcy, insolvency, reorganization, receivership
or other arrangement proceedings pending or being contemplated by it, or to
its knowledge threatened against it; and
(f) there are no suits, proceedings, judgments, rulings or orders by
or before any court or any governmental authority that materially adversely
affect its ability to perform this Agreement.
7.2 Additional Representation and Warranty. Buyer hereby further
represents and warrants to Seller that Buyer, under this Agreement, is a
wholesale purchaser and is purchasing the energy hereunder for resale.
7.3 No Other Representations and Warranties. Each Party acknowledges
that it has entered into this Agreement based solely upon the express
representations and warranties set forth in this Agreement.
ARTICLE 8
ADDITIONAL COVENANTS
8.1 Remaking of Representations and Warranties. Each Party covenants
that it will cause its respective representations and warranties in Sections
7.1 and 7.2 to remain true and correct throughout the Contract Term.
8.2 Financial Information.
If requested by Buyer, Seller shall cause to be delivered as soon
as available and (i) within one hundred twenty (120) days following the end of
each fiscal year, a copy of the annual report of ____________ containing
audited consolidated financial statements for such fiscal year certified by
independent certified public accountants and (ii) within sixty (60) days after
the end of each of its first three fiscal quarters of each fiscal year, a copy
of the quarterly report of ___________ containing unaudited consolidated
financial statements for such fiscal quarter.
If requested by Seller, Buyer shall cause to be delivered as soon
as available and (i) within one hundred twenty (120) days following the end of
each fiscal year, a copy of the annual report of Buyer containing audited
consolidated financial statements for such fiscal year certified by
independent certified public accountants and (ii) within sixty (60) days after
the end of each of its first three fiscal quarters of each fiscal year, a copy
of the quarterly report of Buyer containing unaudited consolidated financial
statements for such fiscal quarter.
In all cases the statements required under this Section 8.2 shall
be for the most recent accounting period and prepared in accordance with GAAP;
provided that, should any such statements not be timely due to a delay in
preparation or certification, such delay shall not be considered a default so
long as such Party diligently pursues the preparation, certification and
delivery of the statements.
ARTICLE 9
EVENTS OF DEFAULT, REMEDIES AND REGULATORY APPROVALS
9.1 Events of Default. An "Event of Default" means, with respect to a
Party alleged to have taken or been affected by any of the actions set forth
below in this Section 9.1 (the "Defaulting Party"):
(a) the failure by the Defaulting Party to make, when due, any
payment required under this Agreement if such failure is not remedied within
five (5) Work Days after written notice of such failure is given to the
Defaulting Party by the other Party ("Non-Defaulting Party"), provided that
the payment is not the subject of a good faith dispute as described in the
billing and payment provisions under Article 10; or
(b) any representation or warranty made by the Defaulting Party
in this Agreement shall prove to have been false or misleading in any material
respect when made or ceases to remain true during the Contract Term; or
(c) the failure by the Defaulting Party to perform any covenant
set forth in this Agreement (other than the events that are otherwise
specifically covered in this Section 9.1 as a separate Event of Default or
Seller's obligation to sell and deliver, and Buyer's obligation to purchase
and receive, for which a separate remedy is provided in Article 4), and such
failure is not cured within five (5) Work Days after written notice thereof to
the Defaulting Party; or
(d) the Defaulting Party shall make an assignment (other than
any assignment permitted pursuant to Article 11) or any general arrangement
for the benefit of creditors;
(e) the Defaulting Party shall file a petition or otherwise
commence, authorize or acquiesce in the commencement of a proceeding or cause
of action under any bankruptcy or similar law for the protection of creditors,
or have such petition filed against it and such petition is not withdrawn or
dismissed within thirty (30) days after such filing;
(f) the Defaulting Party shall otherwise become bankrupt or
insolvent (however evidenced); or
(g) the Defaulting Party shall be unable to pay its debts as
they fall due;
(h) the guarantor of the Defaulting Party fails to perform any
covenant set forth in the guaranty agreement it delivered in respect of this
Agreement (if any), any representation or warranty made by such guarantor in
the guaranty agreement shall prove to have been false or misleading in any
material respect when made or when deemed to be repeated or such guarantor
shall take or suffer any actions set forth in Section 9.1(d) as applied to it;
or
(i) guarantor of the Defaulting Party shall repudiate, purport
to revoke or fail to perform any of such guarantor's obligations under such
guarantor's guaranty hereunder, or guarantor shall cease to exist; or
(j) if at any time, in the case of: (i) Buyer, Buyer shall have
defaulted on its indebtedness to third parties resulting in obligations
(whether individually or in the aggregate) of Buyer in excess of Twenty Five
Million U.S. Dollars ($25,000,000), becoming, or becoming capable of being
declared, accelerated; or (ii) Seller, Seller shall have defaulted on its
indebtedness to third parties resulting in obligations of Seller in excess of
Twenty Five Million U.S. Dollars ($25,000,000), becoming, or becoming capable
of being declared, accelerated; or
9.2 Remedies Upon an Event of Default.
(a) If an Event of Default occurs with respect to a Defaulting
Party at any time during the Contract Term, the Non-Defaulting Party may, for
so long as the Event of Default is continuing (i) establish a date (which date
shall be between five (5) and ten (10) Work Days after the Non-Defaulting
Party delivers notice) ("Early Termination Date") on which this Agreement
shall terminate if the Event of Default has not been cured and (ii) withhold
any payments due in respect of this Agreement; provided, however, upon the
occurrence of any Event of Default listed in Section 9.1(d) as it may apply to
any Party, this Agreement shall automatically terminate, without notice, and
without any other action by either Party as if an Early Termination Date had
been declared immediately prior to such event. If an Early Termination Date
has been designated, the Non-Defaulting Party shall in good faith calculate
its Gains or Losses and Costs (as hereafter defined) resulting from the
termination of this Agreement. The Gains, Losses and Costs shall be
determined by comparing the value of the remaining Contract Term and Contract
Quantity under this Agreement had it not been terminated to the equivalent
quantities and relevant market prices for the remaining term either quoted by
a bona fide third-party offer or which are reasonably expected to be available
in the market under a replacement contract for this Agreement. To ascertain
the market prices of a replacement contract, the Non-Defaulting Party may
consider, among other valuations, any or all of the settlement prices of NYMEX
electricity futures contracts, quotations from leading dealers in energy swap
contracts and other bona fide third party offers, all adjusted for the length
of the remaining term and differences in transmission. It is expressly agreed
that a Party shall not be required to enter into a replacement transaction in
order to determine the Termination Payment (as hereafter defined). The Non-
Defaulting Party shall aggregate such Gains, Losses and Costs with respect to
this Agreement into a single net amount ("Termination Payment") and notify the
Defaulting Party. If the Non-Defaulting Party's aggregate Losses and Costs
exceed its aggregate Gains, the Defaulting Party shall, within five (5) Work
Days of receipt of such notice, pay the net amount to the Non-Defaulting
Party, which amount shall bear interest at the Interest Rate from the Early
Termination Date until paid. If the Non-Defaulting Party's aggregate Gains
exceed its aggregate Losses and Costs, if any, resulting from the termination
of this Agreement, the amount of the Termination Payment shall be zero. If
the Defaulting Party disagrees with the calculation of the Termination
Payment, the issue shall be submitted to binding arbitration in accordance
with the arbitration procedures set forth in Section 16.9 and the resulting
Termination Payment shall be due and payable within ten (10) Work Days after
the award.
(b) For purposes of this Agreement:
"Costs" mean(s), with respect to a Party, brokerage fees,
commissions and other similar transaction costs and expenses, including,
without limitation, verifiable breakage costs, reasonably incurred by such
Party either in terminating any arrangement pursuant to which it has hedged
its obligations or entering into new arrangements which replace this Agreement
and attorneys' fees, if any, incurred in connection with enforcing its rights
under this Agreement.
"Gains" mean(s), with respect to a Party, an amount equal to the
present value of the economic benefit (exclusive of Costs), if any, to such
Party resulting from the termination of its obligations with respect to this
Agreement determined in a commercially reasonable manner.
"Losses" mean(s), with respect to a Party, an amount equal to the
present value of the economic loss (exclusive of Costs), if any, to such Party
resulting from the termination of its obligations with respect to this
Agreement determined in a commercially reasonable manner.
In no event, however, shall a Party's Gains, Losses or Costs
include any penalties, ratcheted demand or similar charges. At the time for
payment of any amount due under this Section 9.2, each Party shall pay to the
other Party all additional amounts payable by it pursuant to this Agreement,
but all such amounts shall be netted and aggregated with any Termination
Payment payable hereunder.
9.3 Other Events. Except with respect to the initial regulatory
approvals provided for in Section 9.4, in the event that either Party is
regulated by a federal, state or local regulatory body, and such body shall
subsequently disallow all or any portion of any costs incurred or yet to be
incurred by such Party under any provision of this Agreement, such action
shall not operate to excuse such Party from performance of any obligation nor
shall such action give rise to any right of such Party to any retroactive
adjustment of the Energy Charge. Despite the foregoing, if a Party's
activities hereunder become subject to regulation of any kind whatsoever under
any law (other than with respect to Transition Costs) to a greater or
different extent than that existing on the Effective Date and such regulation
either (a) renders all of this Agreement illegal or unenforceable or (b)
materially adversely affects the business of a Party, with respect to its
financial position or otherwise, then in the case of (a) above, either Party,
and in the case of (b) above, only the Party affected (for purposes of this
Section 9.3, the "Defaulting Party"), shall at such time have the right to
declare an Early Termination Date in accordance with the provisions hereof;
provided that notwithstanding the rights of the Parties to declare an Early
Termination Date as above stated, the Defaulting Party shall be liable for
payment of the Termination Payment calculated by the Non-Defaulting Party as
provided in Section 9.2.
9.4 Regulatory Approvals. The Seller shall file this Agreement with
FERC. The obligations of the Parties under this Agreement are subject to and
contingent upon receipt and approval by each Party (in each Party's sole
discretion) of an order of FERC accepting this Agreement for filing or
otherwise permitting this Agreement to be or become effective, including,
without limitation, rates to be charged hereunder. If the FERC or any
reviewing court or other governmental agency, including, without limitation,
the Montana Public Service Commission, imposes any condition, limitation or
qualification upon this Agreement or upon the performance by either of the
Parties of its performance hereunder which, individually or in the aggregate,
precludes either or both of the Parties from performing, in whole or in part,
this Agreement, or materially adversely affects the benefits of this Agreement
to either Party, then the precluded or affected Party may terminate this
Agreement by giving, within not less than thirty (30) days of the entry of any
such order or decree, written notice thereof to the other Party, effective as
of the date of entry of the applicable order or decree imposing such
condition, limitation or qualification. In no event shall the terminating
Party incur any liability (whether for lost revenues or lost profits or
otherwise) as a result of such termination.
ARTICLE 10
BILLING AND PAYMENT
10.1 Billing and Payment. Seller shall render to Buyer (by regular
mail, facsimile or other acceptable means pursuant to Article14) for each
calendar month during the Delivery Term a statement setting forth the total
Energy Charges for the month and any other charges due Seller, including,
without limitation, any payment due pursuant to Article 4 during the preceding
month. Billing and payment will be based on the Energy Charge and on
Scheduled hourly quantities. Payment by Buyer shall be due on or before
thirty (30) days after receipt of Seller's statement, to the payment address
provided in Exhibit B hereto. Overdue payments shall accrue interest at the
Interest Rate from, and including, the due date to, but excluding, the date of
payment. If Buyer, in good faith, disputes a statement, Buyer shall provide a
written explanation specifying in detail the basis for the dispute and pay the
portion of such statement conceded to be correct no later than the due date.
If any amount disputed by Buyer is determined to be due to Seller, it shall be
paid within ten (10) days of such determination, along with interest accrued
at the Interest Rate from the original due date until the date paid.
10.2 Setoff. If Buyer and Seller are each required to pay to the other
an amount in the same month under this Agreement, then such amounts with
respect to each Party may be aggregated and the Parties may discharge their
obligations to pay through netting, in which case the Party, if any, owing the
greater aggregate amount may pay to the other Party the difference between the
amounts owed. Each Party reserves to itself all rights, setoffs,
counterclaims and other remedies and defenses consistent with Article 12 (to
the extent not expressly herein waived or denied) which such Party has or may
be entitled to arising from or out of this Agreement. The obligations to make
payment under this Agreement between the Parties may be setoff against each
other.
10.3 Audit. Each Party (and its representatives) has the right, at its
sole expense and during normal working hours, to examine the records of the
other Party to the extent reasonably necessary to verify the accuracy of any
statement, charge or computation made pursuant to this Agreement. If
requested, a Party shall provide to the other Party statements evidencing the
quantities of energy delivered at the Delivery Point. If any such examination
reveals any inaccuracy in any statement, the necessary adjustments in such
statement and the payments thereof will be promptly made and shall bear
interest calculated at the Interest Rate from the date the overpayment or
underpayment was made until paid; provided, however, that no adjustment for
any statement or payment will be made unless objection to the accuracy thereof
was made prior to the lapse of one (1) year from the rendition thereof; and
provided further that this Section 10.3 will survive any termination of this
Agreement for a period of one (1) year from the date of such termination for
the purpose of such statement and payment objections.
ARTICLE 11
ASSIGNMENT; BINDING EFFECT
11.1 Assignment. Neither Party shall assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of the
other Party, which consent shall not be unreasonably withheld or delayed.
Despite the foregoing, either Party may, without the need for consent from the
other Party (and without relieving itself from liability hereunder), (a)
transfer, sell, pledge, encumber or assign this Agreement or the accounts,
revenues or proceeds hereof in connection with any financing or other
financial arrangements; (b) transfer or assign this Agreement to an Affiliate
of such Party; or (c) transfer or assign this Agreement to any person or
entity succeeding to all or substantially all of the assets of such Party;
provided, however, that in the case of (b) and (c) any such assignee shall
agree in writing to be bound by the terms and conditions hereof. Assignments
or transfers not in compliance with this section shall be void.
11.2 Binding Effect. This Agreement shall inure to the benefit of and
be binding upon the Parties and their respective successors and permitted
assigns. No assignment or transfer permitted hereunder shall relieve Seller
or Buyer of any of their respective obligations under this Agreement.
ARTICLE 12
FORCE MAJEURE AND LIMITATION OF LIABILITY
12.1 Force Majeure. If either Party is rendered unable by Force
Majeure to carry out, in whole or part, its obligations under this Agreement
and such Party gives notice and full details of the event to the other Party
as soon as practicable after the occurrence of the event, then during the
pendency of such Force Majeure but for no longer period, the obligations of
the Party affected by the event (other than the obligation to make payments
then due or becoming due with respect to performance prior to the event) shall
be excused to the extent provided for herein. The Party affected by the Force
Majeure shall remedy the Force Majeure with all reasonable dispatch.
12.2 Limitation of Remedies, Liability and Damages. THE PARTIES
CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS
AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION
FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS HEREIN PROVIDED, SUCH
EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY,
THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND
ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR
MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE OBLIGOR'S LIABILITY SHALL
BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN
EQUITY ARE WAIVED. UNLESS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY
SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY OR
INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY
STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT
IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES
AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED
THERETO, INCLUDING, WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER
SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE
EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE,
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED
DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.
12.3 Duty to Mitigate. Each Party agrees that it has a duty to
mitigate damages and covenants that it will use commercially reasonable
efforts to minimize any damages it may incur as a result of the other Party's
performance or non-performance of this Agreement.
12.4 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
SELLER EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR
ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR
FITNESS FOR ANY PARTICULAR PURPOSE.
ARTICLE 13
TAXES; TRANSITION COSTS
13.1 Applicable Taxes. Seller shall be responsible for all existing
and any new sale, use, excise, ad valorem, and any other similar taxes,
imposed or levied by any federal, state or local governmental agency on the
energy generated, sold and delivered hereunder up to the delivery of such
energy to the Delivery Point. Buyer shall be responsible for all existing and
any new sale, use, excise, ad valorem, and any other similar taxes, imposed or
levied by any federal, state or local governmental agency on the energy sold
and delivered hereunder from and after the delivery of such energy to the
Delivery Point. Each Party shall indemnify, release, defend and hold harmless
the other Party from and against any and all liability for taxes imposed or
assessed by any taxing authority with respect to the energy sold, delivered
and received hereunder that are the responsibility of such Party pursuant to
this Section 13.1.
ARTICLE 14
NOTICES
14.1 Notices. All notices, requests, statements or payments shall be
made as specified in Exhibit B hereto. Notices required to be in writing
shall be delivered by letter, facsimile or other documentary form. Notice by
facsimile or hand delivery shall be deemed to have been received by the close
of the Work Day on which it was transmitted or hand delivered (unless
transmitted or hand delivered after close in which case it shall be deemed
received at the close of the next Work Day). Notice by overnight mail or
courier shall be deemed to have been received two (2) Work Days after it is
sent. A Party may change its address by providing notice of same in
accordance herewith.
ARTICLE 15
SECURITY
15.1 Security. So long as a Party does not suffer a Material Adverse
Change, it is not obligated to furnish the other Party a guaranty of its
performance hereunder. If, however, a Party suffers a Material Adverse Change
and is unable to remedy such condition within thirty (30) days after the onset
of the condition, then, in addition to any other remedies it may have, the
other Party may require the Party suffering Material Adverse Change to provide
additional credit support, such as a letter of credit, corporate guarantee or
such other collateral mutually agreeable to both Parties.
ARTICLE 16
MISCELLANEOUS
16.1 Entirety. This Agreement and the Exhibits hereto constitute the
entire agreement between the Parties. There are no prior or contemporaneous
agreements or representations affecting the same subject matter other than
those herein expressed. Except for any matters which, in accordance with the
express provisions of this Agreement, may be resolved by verbal agreement
between the Parties, no amendment, modification or change herein shall be
enforceable unless reduced to writing and executed by both Parties.
16.2 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MONTANA, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT SUCH LAWS MAY BE
PREEMPTED BY THE LAWS OF THE UNITED STATES OF AMERICA.
16.3 Non-Waiver. No waiver by any Party hereto of any one or more
defaults by the other Party in the performance of any of the provisions of
this Agreement shall be construed as a waiver of any other default or defaults
whether of a like kind or different nature.
16.4 Severability. Except as otherwise stated herein, any provision or
article declared or rendered unlawful by a court of law or regulatory agency
with jurisdiction over the Parties, or deemed unlawful because of a statutory
change, will not otherwise affect the lawful obligations that arise under this
Agreement.
16.5 Headings; Exhibits. The headings used for the sections and
articles herein are for convenience and reference purposes only and shall in
no way affect the meaning or interpretation of the provisions of this
Agreement. Any and all Exhibits referred to in this Agreement are, by such
reference, incorporated herein and made a part hereof for all purposes.
16.6 Winding Up Arrangements. All indemnity and audit rights shall
survive the termination of this Agreement. All obligations provided in this
Agreement shall remain in effect following the expiration or termination of
this Agreement to the extent necessary to give full force and effect to the
rights and obligations undertaken by the Parties herein.
16.7 No Third Party Beneficiaries. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of
the Parties that this Agreement shall not be construed as a third party
beneficiary contract.
16.8 Counterparts. This Agreement may be executed in several
counterparts, each of which is an original and all of which constitute one and
the same instrument.
16.9 Arbitration. ANY DISPUTE OR NEED OF INTERPRETATION ARISING OUT OF
THIS AGREEMENT PERTAINING TO THE CALCULATION OF A TERMINATION PAYMENT OR A
PAYMENT REQUIRED PURSUANT TO ARTICLE 4 SHALL BE SUBMITTED TO BINDING
ARBITRATION BY ONE ARBITRATOR WHO HAS NOT PREVIOUSLY BEEN EMPLOYED BY EITHER
PARTY, AND DOES NOT HAVE A DIRECT OR INDIRECT INTEREST IN EITHER PARTY OR THE
SUBJECT MATTER OF THE ARBITRATION. SUCH ARBITRATOR SHALL EITHER BE AS
MUTUALLY AGREED BY THE PARTIES WITHIN THIRTY (30) DAYS AFTER WRITTEN NOTICE
FROM EITHER PARTY REQUESTING ARBITRATION, OR FAILING AGREEMENT, SHALL BE
SELECTED UNDER THE EXPEDITED RULES OF THE AMERICAN ARBITRATION ASSOCIATION
(THE "AAA"). SUCH ARBITRATION SHALL BE HELD IN ALTERNATING LOCATIONS OF THE
HOME OFFICES OF SELLER AND BUYER, COMMENCING WITH BUYER'S OFFICE. THE RULES
OF THE AAA SHALL APPLY TO THE EXTENT NOT INCONSISTENT WITH THE RULES HEREIN
SPECIFIED. EITHER PARTY MAY INITIATE ARBITRATION BY WRITTEN NOTICE TO THE
OTHER PARTY AND THE ARBITRATION SHALL BE CONDUCTED ACCORDING TO THE FOLLOWING:
(a) NOT LATER THAN SEVEN (7) DAYS PRIOR TO THE HEARING DATE SET BY THE
ARBITRATOR EACH PARTY SHALL SUBMIT A BRIEF WITH A SINGLE PROPOSAL FOR
SETTLEMENT, (b) THE HEARING SHALL BE CONDUCTED ON A CONFIDENTIAL BASIS WITHOUT
CONTINUANCE OR ADJOURNMENT, (c) THE ARBITRATOR SHALL BE LIMITED TO SELECTING
ONLY ONE OF THE TWO PROPOSALS SUBMITTED BY THE PARTIES, (d) EACH PARTY SHALL
DIVIDE EQUALLY THE COST OF THE ARBITRATOR AND THE HEARING AND EACH PARTY SHALL
BE RESPONSIBLE FOR ITS OWN EXPENSES AND THOSE OF ITS COUNSEL AND
REPRESENTATIVES AND (e) EVIDENCE CONCERNING THE FINANCIAL POSITION OR
ORGANIZATIONAL MAKE-UP OF THE PARTIES, ANY OFFER MADE OR THE DETAILS OF ANY
NEGOTIATION PRIOR TO ARBITRATION AND THE COST TO THE PARTIES OF THEIR
REPRESENTATIVES AND COUNSEL SHALL NOT BE PERMISSIBLE. WITH RESPECT TO ALL
OTHER DISPUTES, THE PARTIES SHALL BE ENTITLED TO AVAIL THEMSELVES OF ALL
REMEDIES AVAILABLE AT LAW OR IN EQUITY.
16.10 Acknowledgment of Arbitration. EACH PARTY UNDERSTANDS THAT THIS
AGREEMENT CONTAINS AN AGREEMENT TO ARBITRATE WITH RESPECT TO ANY DISPUTE OR
NEED OF INTERPRETATION PERTAINING TO THE CALCULATION OF A TERMINATION PAYMENT
OR A PAYMENT REQUIRED PURSUANT TO ARTICLE 4 OF THIS AGREEMENT. AFTER SIGNING
THIS AGREEMENT, EACH PARTY UNDERSTANDS THAT IT WILL NOT BE ABLE TO BRING A
LAWSUIT CONCERNING ANY DISPUTE THAT MAY ARISE WHICH IS COVERED BY THE
ARBITRATION PROVISION. INSTEAD, EACH PARTY AGREES TO SUBMIT ANY SUCH DISPUTE
TO AN IMPARTIAL ARBITRATOR.
IN WITNESS WHEREOF, the Parties, by their respective duly authorized
representatives, have executed this Agreement effective as of the Effective
Date. This Agreement shall not become effective as to either Party unless and
until executed by both Parties.
By:
Name:
Title:
The Montana Power Company
By:
Name:
Title:
EXHIBIT A
to the
Wholesale Transition Service Agreement
ENERGY CHARGE
Seller will be paid a weighted monthly on-peak and off-peak Dow Jones
Mid Columbia index (as defined below, the "Index") price (computed as
described below) as long as the cumulative weighted average Index price does
not exceed 22.25 mills per kWh. The cumulative weighted average Index price
will become a rolling twelve (12) month weighted average Index price starting
in the thirteenth (13th) month after the first month of the Delivery Term. If
the weighted monthly Index price is less than 20.00 mills per kWh, then the
weighted monthly Index price will be set at 20.00 mills per kWh. If the
cumulative weighted average Index price or the twelve (12) month weighted
average Index price exceeds 22.25 mills per kWh, then the monthly Index price
will be set at an amount that makes the cumulative weighted average Index
price or the twelve (12) month weighted average Index price index equal to
22.25 mills per kWh. The weighted monthly Index price index will be computed
as the Index price weighted by the amount of energy actually delivered for
each month by Seller. See the examples included in this Exhibit for an
illustration of the weighted monthly Index price calculation (EXAMPLE 1 -
CALCULATION OF MONTHLY WEIGHTED INDEX PRICE) and an illustration of the how
the price paid will be computed using the cumulative weighted average Index
price and the twelve month rolling average Index price (EXAMPLE 2 - PRICE PAID
COMPUTATION).
For purposes of this Agreement, "Index" means the prices in the Dow
Jones Mid-Columbia Electricity Firm Index reported by Dow Jones to Dow Jones
Telerate subscribers for on-peak hours and off-peak hours for each day of the
relevant billing month. If a price for any on-peak hour is not reported in
the Index, then the price for such unreported on-peak hour period shall be
determined by calculating the average of the Index prices last reported for
the on-peak hours period immediately preceding and immediately succeeding such
unreported on-peak hour period. If a price for any off-peak hour period is
not reported in the Index, then the price of such unreported off-peak hour
period shall be determined by calculating the average of the Index prices last
reported for the off-peak hours immediately preceding and immediately
succeeding such unreported off-peak hour period. "On-peak hours" are the
hours between 6:00 a.m. and 10:00 p.m. Pacific prevailing time, Monday through
Saturday, exclusive of holidays recognized by the North American Electric
Reliability Council or its successor. Off-peak hours are hours that are not
on-peak hours provided however, the total amount of energy actually sold by
Seller and purchased by Buyer hereunder shall not be included in the
calculation of the on-peak and off-peak Dow Jones Mid-Columbia Index reported
by Dow Jones.
EXHIBIT A
Example 1
EXAMPLE 1 - CALCULATION OF MONTHLY WEIGHTED INDEX PRICE
<TABLE>
<CAPTION>
Monthly
$ per mWh Weighted
Dow Jones Mid-C Price times Average
Month Day Period $ per mWh Hours mWh Delivered mWh Delivered Price
<S> <C> <C> <C> <C> <C> <C>
January 1 Firm on-peak 21.6 16 3,200 $69,120
1 Firm off-peak 20.0 8 1,600 $32,000
January 2 Firm on-peak 23.5 16 3,168 $74,448
2 Firm off-peak 19.0 8 1,640 $31,160
. . . . . . .
. . . . . . .
. . . . . . .
January 31 Firm on-peak 18.6 16 3,168 $58,925
31 Firm off-peak 18.0 8 1,640 $29,520
January Total 148,800 $3,124,800 21.0
</TABLE>
EXHIBIT A
Example 2
Example 2 - Of Price Paid Computation
Assuming a January 1, 1999 Closing
<TABLE>
<CAPTION>
Example
Index Price Sum of
See Note Sum of Months Index Index Last 11 months
$/MWh gWh gWh in Sums Price*gWh Price*gWh Payments (K$)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1999 21.0 148.65 149 1 3,122 3,122 0
February 1999 26.0 134.27 283 2 3,491 6,613 3,122
March 1999 15.0 148.65 432 3 2,230 8,842 6,295
April 1999 20.0 143.86 575 4 2,877 11,719 9,268
May 1999 26.0 74.33 650 5 1,932 13,652 12,145
June 1999 27.0 71.93 722 6 1,942 15,594 14,078
July 1999 21.0 148.65 870 7 3,122 18,716 16,020
August 1999 26.0 148.65 1,019 8 3,865 22,581 19,141
September 1999 22.0 143.86 1,163 9 3,165 25,745 22,672
October 1999 21.0 148.65 1,311 10 3,122 28,867 25,837
November 1999 22.0 143.86 1,455 11 3,165 32,032 28,959
December 1999 25.0 148.65 1,604 12 3,716 35,748 32,124
January 2000 27.0 148.65 1,604 12 4,014 36,640 32,567
February 2000 21.0 134.27 1,604 12 2,820 35,969 32,516
March 2000 26.0 148.65 1,604 12 3,865 37,604 32,362
<FN>
<F1>
Note
The Index Price will be developed using the methodology shown in EXAMPLE - CALCULATION OF MONTHLY
WEIGHTED AVERAGE PRICE. The values shown do not represent actual prices.
</FN>
</TABLE>
EXHIBIT A (continued)
Example 2
<TABLE>
<CAPTION>
Example 2 - Of Price Paid Computation
Assuming a January 1, 1999 Closing
Annual Sum of Max. Price paid Sum of Annual
Price Cap Payments (K$) Price Paid compared to Payments Payments weighted
$/MWh Price Cap*gWh $/mWh Index Price? (K$) (K$) $/mWh
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1999 22.25 3,307 21.00 equal to 3,122 3,122 21.00
February 1999 22.25 6,295 23.63 less than 3,173 6,295 22.25
March 1999 22.25 9,602 20.00 greater than 2,973 9,268 21.48
April 1999 22.25 12,803 20.00 equal to 2,877 12,145 21.11
May 1999 22.25 14,457 26.00 equal to 1,932 14,078 21.67
June 1999 22.25 16,057 27.00 equal to 1,942 16,020 22.20
July 1999 22.25 19,365 21.00 equal to 3,122 19,141 21.99
August 1999 22.25 22,672 23.75 less than 3,531 22,672 22.25
September 1999 22.25 25,873 22.00 equal to 3,165 25,837 22.22
October 1999 22.25 29,181 21.00 equal to 3,122 28,959 22.08
November 1999 22.25 32,381 22.00 equal to 3,165 32,124 22.07
December 1999 22.25 35,689 23.98 less than 3,565 35,689 22.25
January 2000 22.25 35,689 21.00 less than 3,122 35,689 22.25
February 2000 22.25 35,689 21.00 equal to 2,820 35,335 22.03
March 2000 22.25 35,689 22.38 less than 3,327 35,689 22.25
<FN>
<F1>
Note
The Index Price will be developed using the methodology shown in EXAMPLE - CALCULATION OF MONTHLY
WEIGHTED AVERAGE PRICE. The values shown do not represent actual prices.
</FN>
</TABLE>
EXHIBIT B
to the
Wholesale Transition Service Agreement
NOTICES
NOTICES AND PAYMENT
Buyer:
NOTICES & CORRESPONDENCE:
The Montana Power Company
40 E. Broadway
Butte, Montana 59701
Attn.: General Counsel
Facsimile No.: (406) 497-2451
PAYMENTS:
__________________________
for The Montana Power Company
ABA Routing # 092900383
Account # 156210000816
[or address if wire not required
INVOICES:
The Montana Power Company
40 E. Broadway
Butte, Montana 59701
Attn.: Resource Acquisition Director
SELLER:
NOTICES, CORRESPONDENCE, & INVOICES: PAYMENTS:
Attn:
Facsimile No.: (____)
EXHIBIT C
to the
Wholesale Transition Service Agreement
PROPORTIONAL ALLOCATION FACTOR
Allocation Factor (%)
Colstrip Units 1 and 2 31.16
Colstrip Unit 3 Fixed Delivery Requirement
Colstrip Unit 4 0.00
Corette 15.05
Hydro + Basin + Exchanges 44.41
Kerr
Thompson Falls
Milltown
Mystic
Hebgen
Madison
Hauser
Holter
Black Eagle
Rainbow
Cochrane
Ryan
Morony
Basin
BPA Exchange
Idaho Exchange
QF Resources 9.38
BGI
Broadwater
Montana One
Small QF (12)
Total 100.00
The allocation factors may change if the Generating Asset sale results in
multiple Closing Dates or in a different mix of resources available to serve
the remaining customer load.
EXHIBIT D
to the
Wholesale Transition Service Agreement
<TABLE>
<CAPTION>
NON-BINDING ESTIMATE OF REMAINING CUSTOMER LOAD
Page 1 of 2
Energy Load (gWh) Peak Load (Mw) Load Factor
Remaining Remaining Remaining
Residual CS3 & Other Customer Residual CS3 & Other Customer Customer
Load Deliveries Load Load Deliveries Load Load
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 Aug 667 0 667 1175 0 1175
Sep 608 0 608 1000 0 1000
Oct 556 0 556 987 0 987
Nov 620 0 620 1169 0 1169
Dec 651 0 651 1162 0 1162
Annual 3102 0 3102 1175 0 1175 72%
1999 Jan 623 149 475 1167 200 967
Feb 543 134 408 1148 200 948
Mar 501 149 353 851 200 651
Apr 419 144 275 774 200 574
May 434 74 360 703 100 603
Jun 433 72 361 791 100 691
Jul 419 149 270 775 200 575
Aug 406 149 257 753 200 553
Sep 361 144 217 614 200 414
Oct 372 149 223 690 200 490
Nov 425 144 281 851 200 651
Dec 456 149 307 854 200 654
Annual 5391 1604 3787 1167 200 967
45%
2000 Jan 426 149 277 849 200 649
Feb 368 134 234 842 200 642
Mar 381 149 233 662 200 462
Apr 311 144 167 574 200 374
May 320 74 246 502 100 402
Jun 320 72 248 569 100 469
Jul 292 149 143 542 200 342
Aug 279 149 130 522 200 322
Sep 248 144 104 415 200 215
Oct 254 149 106 472 200 272
Nov 293 144 149 593 200 393
Dec 312 149 164 592 200 392
Annual 3805 1604 2201 849 200 649 39%
</TABLE>
EXHIBIT D
to the
Wholesale Transition Service Agreement
<TABLE>
<CAPTION>
NON-BINDING ESTIMATE OF REMAINING CUSTOMER LOAD
Page 2 of 2
Energy Load (gWh) Peak Load (mW) Load Factor
Remaining Remaining Remaining
Residual CS3 & Other Customer Residual CS3 & Other Customer Customer
Load Deliveries Load Load Deliveries Load Load
<S> <C> <C> <C> <C> <C> <C> <C>
2001 Jan 326 0 326 659 0 659
Feb 278 0 278 645 0 645
Mar 291 0 291 500 0 500
Apr 238 0 238 430 0 430
May 245 0 245 379 0 379
Jun 245 0 245 436 0 436
Jul 268 0 268 497 0 497
Aug 256 0 256 478 0 478
Sep 228 0 228 379 0 379
Oct 233 0 233 433 0 433
Nov 269 0 269 546 0 546
Dec 287 0 287 545 0 545
Annual 3164 0 3164 659 0 659 55%
2002 Jan 298 0 298 605 0 605
Feb 254 0 254 593 0 593
Mar 266 0 266 458 0 458
Apr 216 0 216 391 0 391
May 216 0 216 328 0 328
Jun 204 0 204 362 0 362
Jul 0 0 0 0 0 0
Annual 1454 0 1454 605 0 60 55%
<FN>
<F1>
Note: This example assumes that Colstrip 3 deliveries begin in January 1999 and follow
monthly amounts as shown. This Colstrip 3 beginning date and/or monthly amounts may
vary.
</FN>
</TABLE>
MPC NON COLSTRIP 3 26
Exhibit 10c
Exhibit G to the
Asset Purchase Agreement
GENERATION INTERCONNECTION AGREEMENT
BETWEEN
THE MONTANA POWER COMPANY
AND
GENERATION INTERCONNECTION AGREEMENT
BETWEEN
THE MONTANA POWER COMPANY
AND
TABLE OF CONTENTS
Page
RECITALS 1
1. Definitions 1
1.1. AGC 1
1.2. AGC Scan Cycle 1
1.3. Agreement 1
1.4. Ancillary Services 1
1.5. Asset Purchase Agreement 2
1.6. Automatic Data Transfer 2
1.7. Closing Date 2
1.8. Company's Electric System 2
1.9. Company Tariffs 2
1.10. Confidential Information 2
1.11. Control Area 2
1.12. Control Center 3
1.13. Effective Date 3
1.14. Electric Disturbance 3
1.15. Electric Losses 3
1.16. Electric System 3
1.17. Energy Imbalance Service 3
1.18. FERC 3
1.19. Generation Facility 4
1.20. Generation Redispatch 4
1.21. Good Utility Practice 4
1.22. Governor 4
1.23. Interconnected Plant 4
1.24. Interconnected Unit 4
1.25. Interconnection Date 4
1.26. Interconnection Facilities 5
1.27. Large Generation Facility 5
1.28. Loss or Losses 5
1.29. NERC 5
1.30. OASIS 5
1.31. Point of Interconnection 5
1.32. Reactive Power 5
1.33. Reactive Supply and Voltage Support Service 5
1.34. Regulation and Frequency Support Service 5
1.35. Remedial Action Scheme 5
1.36. Safety and Reliability Requirements 5
1.37. Scheduling, System Control and Dispatch Service 6
1.38. Separation Document 6
1.39. Significant Events List 6
1.40. Small Generation Facility 6
1.41. SOCC 6
1.42. Spinning Reserve Service 6
1.43. Spinning Reserves 6
1.44. Supplemental Reserve Service 6
1.45. Supplemental Reserves 6
1.46. Transmission Service 7
1.47. Uncontrollable Force 7
1.48. Willful Action 7
1.49. WIS Agreement 7
1.50. WSCC 7
1.51. WSCC Interconnection 7
1.52. WSCC Regional Security Plan 7
2. Effective Date; Term and Termination 7
2.1. Effective Date 7
2.2. Termination 7
3. Agreement's Application 8
3.1. All Interconnected Units Covered 8
3.2. New Agreements Relating to Interconnected Generation Facilities 8
3.3. New or Additional Generation Facilities 8
3.4. Transfers of Control over Interconnected Units 9
3.5. The Generating Party's Responsibility To Protect Its Electric System 9
3.6. Compliance with NERC, WSCC, FERC, Etc 9
4. Interconnections, Metering Systems, Communications, and Data 9
4.1. Interconnections and Metering System Locations 9
4.2. Metering System Requirements 10
4.2.1. Application 10
4.2.2. Interchange Metering 11
4.2.3. Accuracy of Metering Systems 11
4.2.4. Calibration and Testing 11
4.2.5. Adjustment for Electric Losses 13
4.2.6. Additional Metering 13
4.3. Data Requirements 13
4.3.1. Application 13
4.3.2. MWh Data 13
4.3.3. Data by Automatic Data Transfer 14
4.3.4. Additional Data 14
4.4. Communications Capabilities 14
5. The Company's Obligations 15
5.1. Operation of The Company's Electric System 15
5.2. Interconnected Plant Scheduling 15
5.3. Maintenance Scheduling 15
5.4. The Company Confidentiality Obligations 15
5.4.1. Protection of Confidential Information 16
5.4.2. Disclosure Pursuant to Administrative or Judicial Order 16
5.4.3. Return of Confidential Information 16
5.4.4. Survival of the Company's Confidentiality Obligations 16
6. Capabilities, Operation, Maintenance, and Performance of Interconnected
Units 16
6.1. Safety and Reliability Requirements 16
6.1.1. WSCC Reliability Management System Agreement 17
6.2. Specific Capability and Operating Requirements 17
6.2.1. Clearances/Safety Issues 17
6.2.2. Synchronization 18
6.2.3. Reporting 18
6.2.4. Remedial Action Schemes 19
6.2.5. Maintenance 19
6.2.6. Protective Devices and Schemes 19
6.2.7. Opening of Interconnection Facilities 19
6.2.8. Electric Disturbance Response Procedures 20
6.3. Excitation System Requirements for Synchronous Generation Facilities 20
6.4. Governor Speed and Frequency Control 21
6.5. Voltage Regulation, Frequency, and Reactive Power Requirements 21
6.6. Provision of Data for Company Planning 22
6.7. The Generating Party's Liability for Noncompliance 22
6.8. Operational Communications 22
7. Ancillary Services 22
7.1 Reactive Power 22
7.2 Selling or Self-Provision of Ancillary Services 22
8. Generation Redispatch 23
9. Generating Party to Comply With All Future ISO Requirements 23
10. Special Arrangements and Access to Facilities 23
10.1. Special Arrangements 23
10.2 Access to Facilities 23
10.3 Additonal Facilities 24
11. Limitation of Liability and Insurance 24
11.1. Liability - Interconnected System Operation 24
11.1.1. Limitation of Liability for Loss to Electric Systems 24
11.1.2. Limitation of Liability for WIS Parties 24
11.1.3. Consistency With Insurance Policies 24
11.1.4. Not Applicable to Willful Action 24
11.1.5. Effect of Prior Arbitration Awards 25
11.2. Responsibility - Interconnected System Design and Operation 25
11.2.1. Operation to Minimize Electric Disturbances 25
11.2.1.1. The Generating Party's Operation of its Electric
System to Minimize Electric Disturbances 25
11.2.1.2. The Company's Operation of The Company's Electric
Dystem to Minimize Electric Disturbances 25
11.2.2. No Duties Created to Non-Party 26
11.2.3. Resolution of Differences 26
11.2.4. Covenants Independent 26
12. Assignments and Conveyances 26
12.1. Assignment of The Company's Rights and Obligations 26
12.2. Assignment of the Generating Party's Rights and Obligations 27
12.3. Transfer of Rights Affecting Interconnected Units 27
12.4. Assignment for Security Purposes 27
12.5. Effect of Permitted Assignment 28
12.6. Successors and Assigns 28
12.7. Consent Not Unreasonably Denied or Delayed 28
12.8. Unauthorized Assignment 28
13. No Guarantee of Uninterrupted Transmission Service 28
14. Billing and Payment 28
15. Uncontrollable Force 28
16. Dispute Resolution 29
17. Notices 29
17.1. Permitted Methods of Notice 29
17.2. Change of Notices Address 29
17.3. Specific Provision Controls 29
18. Amendments 29
19. Construction of Agreement 29
20. Integration 29
21. Preservation of Obligations 30
22. Existing Agreements Preserved 30
23. Governing Law 30
24. Severability 30
25. Singular and Plural; Use of "Or" 30
26. Headings for Convenience Only 30
27. Relationship of the Parties 30
27.1. No Partnership, Etc 30
27.2. Rights Several 31
28. No Third Party Beneficiaries 31
29. No Dedication of Facilities 31
30. Non-Waiver 31
31. Exhibits Incorporated 31
32. Further Actions and Documents 31
33. Counterparts 31
Exhibit A - The Montana Power Company Transmission Facility Clearance
Procedures
Exhibit B - Interconnected Units and Points of Interconnection
Exhibit C - Interconnection Facilities
Exhibit D - Metering Locations
Exhibit E - Remedial Action Schemes
Exhibit F - Protective Devices and Terminal Voltage Regulators
Exhibit G - Special Arrangements and Access to Facilities
Exhibit H - Dispute Resolution
Exhibit I - Operating Representatives
Exhibit J - Operating Procedures
Exhibit K - WSCC Reliability Management System Agreement (Draft)
Exhibit L - Non-Compliance with Safety and Reliability Requirements
Exhibit M - Separation Principles
Exhibit Diagrams
GENERATION INTERCONNECTION AGREEMENT
This Agreement, dated as of , is by and
between The Montana Power Company ("Company"), a Montana corporation, and
("Generating
Party"), . The Company and
the Generating Party each shall be referred to as a "Party" and collectively
shall be referred to as the "Parties."
RECITALS
The Generating Party owns and operates Generation Facilities that are,
or will be, interconnected with the Company's Electric System; and
The Company provides transmission services under its FERC Open Access
Transmission Tariff; and
The Generating Party requires such transmission services from the
Company to transmit power from the Generating Party's Generation Facilities to
locations within, and external to, the Company's Electric System; and
Control over the interconnection and certain operations of Generation
Facilities operating within the Company's Electric System as provided herein
is necessary for the Company to meet its responsibilities to provide safe and
reliable transmission services; and
This Agreement establishes various requirements for the capabilities and
operation of the Generating Party's Generation Facilities operating within the
Company's Electric System, as well as the Company's obligations with respect
to them; and
Such requirements are established to provide for reliable operation of
the Company's Electric System and the Generating Party's Electric System.
In order to carry out the transactions contemplated by the Separation
Document, the Asset Purchase Agreement and this Agreement, and in
consideration of the mutual benefits set forth in the recitals above, the
Parties agree as follows:
AGREEMENT
1. Definitions TC "1. Definitions" \f C \l "1" . For purposes of this
Agreement, capitalized terms not defined in this Section 1 or elsewhere in
this Agreement shall have the meaning set forth in the Asset Purchase
Agreement.
1.1. AGC TC "1.1. AGC" \f C \l "2" : Automatic generation
control.
1.2. AGC Scan Cycle TC "1.2. AGC Scan Cycle" \f C \l "2" The
time interval used to scan data for AGC calculations, typically four
seconds.
1.3. Agreement TC "1.3. Agreement" \f C \l "2" : This Generation
Interconnection Agreement.
1.4. Ancillary Services TC "1.4. Ancillary Services" \f C \l
"2" : Energy Imbalance Service, Spinning Reserve Service,
Supplemental Reserve Service, Reactive Supply and Voltage Control
Service, Regulation and Frequency Response Service, and Scheduling,
System Control and Dispatch Service provided over the Company's
Electric System, together with such other interconnected operation
services as the Company may offer to support the use of its
Transmission Services, and which shall include all ancillary services
a transmission provider is required by FERC to provide, while
maintaining reliable operation of the Company's Electric System in
accordance with Good Utility Practice.
1.5. Asset Purchase Agreement TC "1.5. Asset Purchase
Agreement" \f C \l "2" : That certain asset purchase agreement dated
as of___________ by and between the Company as Seller and Generating
Party as Purchaser pursuant to which the Generating Party acquired
ownership of the Interconnected Units previously owned by the
Company.
1.6. Automatic Data Transfer TC "1.6. Automatic Data Transfer"
\f C \l "2" : The provision of data to the Company either: (1) by
direct telemetry between the applicable Interconnected Unit or
Interconnected Plant and the Company's SOCC, or (2) by a data channel
from the Control Center for the applicable Interconnected Unit or
Interconnected Plant to the Company's SOCC.
1.7. Closing Date TC "1.7. Closing Date" \f C \l "2" : The
date on which the Closing occurs under the Asset Purchase Agreement.
1.8. Company's Electric System TC "1.8. Company's Electric
System" \f C \l "2" : An Electric System comprised of those
facilities owned, operated, leased or controlled by the Company.
1.9. Company Tariffs TC "1.9. Company Tariffs" \f C \l "2" :
Those tariffs of the Company for the provision of Transmission
Services, including Ancillary Services, as in effect and accepted for
filing or approved by FERC.
1.10. Confidential Information TC "1.10. Confidential
Information" \f C \l "2" : Any documents, data or other information
received by the Company, whether in written, oral or machine readable
form, which the provider has identified in writing to be
confidential, and information related to the operational
characteristics of any Interconnected Unit, that the Company
otherwise obtains in the performance of its obligations under this
Agreement; provided, however, that Confidential Information shall not
include (1) information that FERC requires to be disclosed on the
Company's OASIS, (2) information that becomes available to the public
on a non-confidential basis, other than as a result of the Company's
breach of its confidentiality obligations, (3) information received
by the Company from a third party provided that such source is not
known and by reasonable effort could not be known by the Company to
be bound by a confidentiality agreement with the Generating Party or
otherwise prohibited from transmitting the information to the Company
by a contractual, legal or fiduciary obligation, or (4) information
independently developed by the Company.
1.11. Control Area TC "1.11. Control Area" \f C \l "2" : An
Electric System or combination of Electric Systems to which a common
automatic generation control scheme is applied in order to: (1)
match, at all times, the power output of the generators within the
Electric System(s) and capacity and energy purchased from entities
outside the Electric System(s) with the load within the Electric
System(s); (2) maintain scheduled interchange with other Control
Areas, within the limits of Good Utility Practice; (3) maintain the
frequency of the Electric System(s) within reasonable limits in
accordance with Good Utility Practice; and (4) provide sufficient
generating capacity to maintain operating reserves in accordance with
Good Utility Practice.
1.12. Control Center TC "1.12. Control Center" \f C \l "2" : The central
operations control facilities that perform operational control
functions for a given Generation Facility.
1.13. Effective Date: TC "1.13. Effective Date" \f C \l "2" The
effective date of this agreement as defined in Section 2.1.
1.14. Electric Disturbance TC "1.14. Electric Disturbance" \f C \l "2" :
Any sudden, unexpected, changed or abnormal electric condition
occurring in or on an Electric System that may cause damage or that
requires immediate action to maintain the reliability of transmission
services over the Electric System. A single Electric Disturbance
shall be deemed to continue from its inception until all affected
Electric Systems are restored to a stable condition of normal voltage
and frequency and are capable of carrying normal electrical loads.
The effects of a single Electric Disturbance shall be deemed to
include: (1) all effects of such Electric Disturbance on the
Electric System in or on which such Electric Disturbance originates;
and (2) all effects of such Electric Disturbance on all Electric
Systems directly or indirectly interconnected with such Electric
System.
1.15. Electric Losses TC "1.15. Electric Losses" \f C \l "2" : The power
and energy consumed in the transmission of electric power and energy
over an electric transmission system due to the effect of electrical
resistance in the facilities and equipment that make up the electric
transmission system.
1.16. Electric System TC "1.16. Electric System" \f C \l "2" : A single
integrated electric power grid usually characterized by ownership,
rental, lease, control, or operation by a single person or entity. An
"Electric System" consists of electric distribution facilities or
generating facilities or transmission facilities, or any combination
of the three, and includes transmission lines, distribution lines,
substations, switching stations, generating plants and all associated
equipment for generating, transmitting, distributing or controlling
flow of power. The term "Electric System" shall include any devices
or equipment by which information is originated on an electric system
or by the person operating such system, by which such information is
transmitted, and by which such information is received either for
information or for operation of the system, whether by the
originating system or by another system.
1.17. Energy Imbalance Service TC "1.17. Energy Imbalance Service" \f C
\l "2" : Energy correction for the difference between the scheduled
and the actual delivery of electric energy to a transmission
customer's load.
1.18. FERC TC "1.18. FERC" \f C \l "2" : The Federal Energy
Regulatory Commission or its successor.
1.19. Generation Facility TC "1.19. Generation Facility" \f C \l "2" :
Any facility used for the generation of electricity for sale at
wholesale or retail.
1.20. Generation Redispatch TC "1.20. Generation Redispatch" \f C \l "2"
: An increase or decrease in electric generation output at one or
more specified Generation Facilities required to permit or to
maintain the provision of reliable Transmission Service over the
Company's Electric System.
1.21. Good Utility Practice TC "1.21. Good Utility Practice" \f C \l "2"
: Any of the applicable practices, methods, and acts: (i) required
of the party to whom Good Utility Practice is being applied under
regulations of the National Electric Safety Code, NERC, or the
successor of either of them, whether or not the party whose conduct
is at issue is a member thereof; or (ii) otherwise engaged in or
approved by a significant portion of the electric utility industry
during the relevant time period, or any of the practices, methods,
and acts which, in the exercise of reasonable judgment in light of
the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost to the
party being expected to apply Good Utility Practice, consistent with
law regulation, good business practices, generation, transmission and
distribution reliability, safety, and expedition. Good Utility
Practice is intended to include practices, methods, or acts generally
accepted in the WSCC Interconnection, and is not intended to be
limited to optimum practices, methods, or acts to the exclusion of
all others.. Good Utility Practice does not include intentional
disregard of contractual commitments, even if those commitments are
uneconomic under current market conditions.
1.22. Governor TC "1.22. Governor" \f C \l "2" : Any device that
regulates the output of an electric generator as a function of
Electric System frequency for the purposes of helping to maintain
Electric System stability.
1.23. Interconnected Plant TC "1.23. Interconnected Plant" \f C \l "2" :
One or more Interconnected Units operated within the Company's
Electric System as a single Generation Facility.
1.24. Interconnected Unit TC "1.24. Interconnected Unit" \f C \l "2" :
Any Generation Facility, or any part of any Generation Facility, or
any part of the output of any Generation Facility, to the extent that
(1) the Generation Facility is operated within the Company's Electric
System (whether as of the Interconnection Date or upon the occurrence
of the events described in Section 3.3 or Section 3.4) and (2) the
Generating Party has the ability (whether through ownership, by
contract, or otherwise) to cause compliance with any of this
Agreement's obligations with respect to such Generation Facility or
output.
1.25. Interconnection Date TC "1.25. Interconnection Date" \f C \l "2"
With respect to those Interconnected Units purchased by the
Generating Party from the Company pursuant to the Asset Purchase
Agreement, the Closing Date; otherwise, the date upon which the
Generating Party's new or additional Generation Facilities, added
pursuant to Section 3.3, become interconnected with the Company's
Electric System.
1.26. Interconnection Facilities TC "1.26. Interconnection Facilities" \f
C \l "2" : Electric transmission and distribution equipment owned,
operated and maintained by the Generating Party and required for the
operation of any Point of Interconnection.
1.27. Large Generation Facility TC "1.27. Large Generation Facility" \f
C \l "2" : (1) any Interconnected Unit with a rated capacity of 5 MW
or greater and (2) any Interconnected Plant for which the aggregate
rated capacity of all its Interconnected Units is 5 MW or greater.
1.28. Loss or Losses TC "1.28. Loss or Losses" \f C \l "2" : Physical
damage to an Electric System; loss or damage resulting from making an
Electric System or any portion thereof inoperable; and loss or damage
consequential to either such loss or damage, including loss of use.
1.29. NERC TC "1.29. NERC" \f C \l "2" : The North American Electric
Reliability Council or its successor organization.
1.30. OASIS TC "1.30. OASIS" \f C \l "2" : An open access same-time
information system as prescribed by FERC, or any successor or revised
system to OASIS prescribed by FERC
1.31. Point of Interconnection TC "1.31. Point of Interconnection" \f C
\l "2" : The point of change in operational control between an
Interconnected Unit or Interconnected Plant and the Company's
Electric System, and except for (i) Colstrip 4, and (ii) if the
Generating Party purchases the Colstrip 1, 2 and 3 Transmission
Assets as discussed in Section 1.10(f) of the Asset Purchase
Agreement, Colstrip 1, 2 and 3, at a facility subject to the
Company's FERC Open Access Transmission Tariff.
1.32. Reactive Power TC "1.32. Reactive Power" \f C \l "2" : The portion
of apparent power that is measured in VArs and that is supplied or
absorbed by rotating electrical equipment or by electrostatic
equipment, such as capacitors, reactors or power lines.
1.33. Reactive Supply and Voltage Control Service TC "1.33. Reactive
Supply and Voltage Support Service" \f C \l "2" : Service needed to
maintain acceptable voltage levels on the Company's Electric System
and to meet reactive capacity requirements at points of
interconnection on the Company's Electric System.
1.34. Regulation and Frequency Response Service TC "1.34. Regulation
and Frequency Support Service" \f C \l "2" : Following the moment-
to-moment variations in the electric energy supplies and demands in a
Control Area in order to maintain the scheduled interconnection
frequency at sixty cycles per second (60 Hz).
1.35. Remedial Action Scheme TC "1.35. Remedial Action Scheme" \f C
\l "2" : Protective systems that typically utilize a combination of
conventional protective relays, computer-based processors, and
telecommunications to accomplish rapid, automated response to any
Electric Disturbance.
1.36. Safety and Reliability Requirements TC "1.36. Safety and
Reliability Requirements" \f C \l "2" : All that is required by Good
Utility Practice, together with all applicable laws and governmental
rules, regulations, orders, and all applicable provisions of the
reliability criteria, standards, guidelines and operating procedures
of NERC, FERC, WSCC, Institute of Electrical and Electronic
Engineers, National Electric Safety Code and other organizations that
govern the planning, design, and operation of a Party's Electrical
System.
1.37. Scheduling, System Control and Dispatch Service TC "1.37.
Scheduling, System Control and Dispatch Service" \f C \l "2" :
The services required for the Company to schedule the movement of
electric power through, out of, within, or into its Control Area.
1.38. Separation Document TC "1.38. Separation Document" \f C \l "2" :
The Separation Document to be agreed upon by the Parties, prior to
the execution of this Agreement, in the manner provided below and in
accordance with the Separation Principles provided as Exhibit M to
this Agreement, including any documents, drawings or exhibits
referred to or incorporated by reference in the Separation Document,
which, among other things, defines and identifies the ownership and
dispatch points of demarcation of the assets acquired or retained
under the Asset Purchase Agreement, consists of various drawings and
other items and provisions in accordance with the Separation
Principles and contains reciprocal grants of easements and related
agreements in respect of the Real Property.
1.39. Significant Events List TC "1.39. Significant Events List" \f C
\l "2" : (1) with respect to the Company, a list of significant
operating events and conditions of which the Company, in the event of
the occurrence or existence of any such events or conditions on the
Generating Party's Electric System, wishes to receive notice, and (2)
with respect to the Generating Party, a list of significant operating
events and conditions of which the Generating Party, in the event of
the occurrence or existence of any such event or condition on the
Company's Electric System, wishes to receive notice.
1.40. Small Generation Facility TC "1.40. Small Generation Facility" \f
C \l "2" : Any Interconnected Unit that (1) has a rated capacity of
less than 5 MW and (2) is part of an Interconnected Plant for which
the aggregate rated capacity of all its Interconnected Units is less
than 5 MW.
1.41. SOCC TC "1.41. SOCC" \f C \l "2" : Acronym for System
Operations Control Center, the central operations control facilities
that are staffed 24 hours a day year-round and perform operational
control functions for the Company's Electric System.
1.42. Spinning Reserve Service TC "1.42. Spinning Reserve Service" \f C
\l "2" : The provision of Spinning Reserves.
1.43. Spinning Reserves TC "1.43. Spinning Reserves" \f C \l "2" :
Additional electric capacity from partially or wholly unloaded
synchronized Generation Facilities capable of beginning to ramp
immediately upon demand.
1.44. Supplemental Reserve Service TC "1.44. Supplemental Reserve
Service" \f C \l "2" : Provision of Supplemental Reserves.
1.45. Supplemental Reserves TC "1.45. Supplemental Reserves" \f C \l "2"
: Additional electric capacity from Generation Facilities that are
capable of being synchronized and ramped to a specified load on ten
(10) minutes' notice, or load that is capable of being interrupted on
ten (10) minutes' notice.
1.46. Transmission Service TC "1.46. Transmission Service" \f C \l "2" :
As defined in the Company's FERC Open Access Transmission Tariff.
1.47. Uncontrollable Force TC "1.47. Uncontrollable Force" \f C \l "2" :
Any act of God, labor disturbance, act of the public enemy, war,
insurrection, riot, fire, storm or flood, earthquake, explosion,
accident to or breakage, failure or malfunction of machinery or
equipment, any curtailment, order, regulation or restriction imposed
by governmental military or lawfully established civilian
authorities, or any other cause beyond a Party's reasonable control
and to the extent without such Party's fault or negligence.
1.48. Willful Action TC "1.48. Willful Action" \f C \l "2" : An action
taken or not taken by a Party, which action is knowingly or
intentionally taken or failed to be taken, with intent that injury or
damage would result therefrom or which action is wantonly reckless.
Willful Action does not include any act or failure to act which is
involuntary, accidental, negligent or grossly negligent.
1.49. WIS Agreement TC "1.49. WIS Agreement" \f C \l "2" : The
Agreement Limiting Liability Among Western Interconnected Systems, as
amended from time to time.
1.50. WSCC TC "1.50. WSCC" \f C \l "2" : The Western Systems
Coordinating Council or its successor organization.
1.51. WSCC Interconnection TC "1.51. WSCC Interconnection" \f C \l "2" :
The WSCC geographic region as defined by NERC.
1.52. WSCC Regional Security Plan TC "1.52. WSCC Regional Security Plan"
\f C \l "2" : A plan adopted and approved by the WSCC to meet NERC
requirements for a security process for Control Area operations
within the WSCC.
2. Effective Date, Term and Termination TC "2. Effective Date; Term and
Termination" \f C \l "1" .
2.1. Effective Date TC "2.1. Effective Date" \f C \l "2" . This
Agreement shall become effective upon the Closing Date; provided,
however, if FERC's acceptance for filing or approval of this
Agreement is, as a result of rehearing or judicial review thereof,
subsequently revised or modified in a manner unacceptable to either
Party, the Parties shall work together in good faith to amend the
Agreement so that it is acceptable to both Parties and FERC. Any such
revision or modification of this Agreement shall be deemed
unacceptable to a Party only if that Party provides notice to the
other Party within thirty (30) days of issuance of the applicable
FERC action or judicial order that such action or order is
unacceptable. The obligations of the Generating Party and the Company
described in Sections 4 through 9 shall commence on the
Interconnection Date.
2.2. Termination TC "2.2. Termination" \f C \l "2" . This Agreement
shall terminate: (1) upon termination of all agreements between the
Company and the Generating Party for the provision of Transmission
Services; (2) upon mutual written agreement, or (3) upon the
effective date of an agreement between an Independent System Operator
(ISO) and the Company as described in Section 9 of this Agreement. In
addition, this Agreement shall cease to be applicable to any
Interconnected Unit as of the date and time that the Interconnected
Unit permanently ceases to operate within the Company's Electric
System. The Generating Party shall provide the Company with at least
6 months' notice before effecting any operating change that would
cause an Interconnected Unit to permanently cease operating within
the Company's Electric System. At any time the Generating Party is
purchasing any transmission service or ancillary service under the
Company's FERC Open Access Transmission Tariff related to an
Interconnected Unit, that Interconnected Unit shall be deemed to
operate within the Company's Electric System.
3. Agreement's Application TC "3. Agreement's Application" \f C \l "1" .
3.1. All Interconnected Units Covered TC "3.1. All Interconnected Units
Covered" \f C \l "2" . This Agreement shall apply to all
Interconnected Units identified in Exhibit B as such Exhibit may be
amended from time to time pursuant to Section 3.3 below. The
Generating Party represents and warrants to the Company that all
Interconnected Units are included on Exhibit B to this Agreement.
With respect to assets purchased by the Generating Party from the
Company pursuant to the Asset Purchase Agreement and within the scope
of this Agreement, the Company represents and warrants that: (1) as
of the Closing Date the Interconnected Units, Interconnection
Facilities and related facilities meet the Safety and Reliability
Requirements except as described in Exhibit L; (2) as of the Closing
Date the Interconnected Units, Interconnection Facilities and related
facilities include all equipment in such condition and with such
capabilities as to fully comply with each and all of the requirements
and obligations of the Generating Party set forth in this Agreement,
except for those requirements and obligations of the Generating Party
set forth in Sections 4 and 6 of this Agreement; (3) except for (i)
Colstrip 4 and (ii) if the Generating Party purchases the Colstrip 1,
2 and 3 Transmission Assets as discussed in Section 1.10(f) of the
Asset Purchase Agreement, Colstrip 1, 2 and 3, , each Point of
Interconnection is at a facility subject to the Company's FERC Open
Access Transmission Tariff; (4) as of the Closing Date the Company's
Electric System has sufficient available transmission capacity to
integrate into the Company's Electric System the output of each of
the Interconnected Units acquired by the Generating Party pursuant to
the Asset Purchase Agreement.
3.2. New Agreements Relating to Interconnected Generation Facilities TC
"3.2. New Agreements Relating to Interconnected Generation
Facilities" \f C \l "2" . Whenever during the term of this Agreement
the Generating Party enters into any new agreement or other
arrangement with respect to the ownership or operation of any
Generation Facility that is or will become an Interconnected Unit,
the Generating Party shall cause such new agreement or arrangement to
contain terms that require full compliance with all provisions of
this Agreement.
3.3. New or Additional Generation Facilities TC "3.3. New or Additional
Generation Facilities" \f C \l "2" . Whenever during the term of
this Agreement the Generating Party acquires control over any new or
additional Generation Facility that is or will be an Interconnected
Unit, whether by construction, acquisition, contract or otherwise,
the Generating Party shall provide the Company 12 months notice prior
to the time the Generating Party desires to interconnect the new or
additional Generation Facility with the Company's Electric System.
Upon request of the Generating Party for a shorter notice period, the
Company, in its sole discretion, which shall not be unreasonably
withheld, may agree to a shorter notice period. The Generating Party
shall comply with the terms and conditions of the Company Tariffs as
required to obtain the additional transmission services necessary for
the new or additional generation. If the Company determines that the
new or additional Generation Facility can be an Interconnected Unit,
the parties shall amend Exhibit B to this Agreement to add the
additional Interconnected Unit and the Interconnected Unit shall be
subject to this Agreement upon commencing operations within the
Company's Electric System.
3.4. Transfers of Control over Interconnected Units TC "3.4. Transfers of
Control over Interconnected Units" \f C \l "2" . Except in strict
compliance with the provisions of Section 12, the Generating Party
shall not in any manner, directly or indirectly transfer or assign
any interest in, or otherwise impair or diminish any rights to cause
compliance with the obligations of this Agreement by, any
Interconnected Unit. Despite the foregoing, no transfer or assignment
of any rights or interests in any formerly Interconnected Unit that
has ceased to operate within the Company's Electric System as
described in Section 2.2 above shall be deemed to violate the
provisions of this Section 3.5 provided that the Generating Party has
complied with the notice provisions of Section 2.2 with respect to
termination of the applicable Generation Facility's status as an
Interconnected Unit.
3.5. The Generating Party's Responsibility To Protect Its Electric System
TC "3.5. The Generating Party's Responsibility To Protect Its
Electric System" \f C \l "2" . Under no circumstances shall the
Generating Party's execution of this Agreement be interpreted as
relieving the Generating Party from any responsibilities to protect
its Electric System or as imposing any responsibility or liability on
the Company for damage to the Generating Party's Electric System or
to any person or property, except to the extent of the Company's
Willful Action.
3.6. Compliance with NERC, WSCC, FERC, Etc TC "3.6. Compliance with
NERC, WSCC, FERC, Etc" \f C \l "2" . In carrying out the
requirements of this Agreement, neither Party shall be required to
take actions that would violate the Safety and Reliability
Requirements or its FERC licenses (if any).
4. Interconnections, Metering Systems, Communications, and Data TC "4.
Interconnections, Metering Systems, Communications, and Data" \f C \l
"1" .
4.1. Interconnections and Metering System Locations TC "4.1.
Interconnections and Metering System Locations" \f C \l "2" .
4.1.1. The Points of Interconnection between the Interconnected Units
and the Company's Electric System (including their location and
any related equipment) are as listed in Exhibit B to this
Agreement. The Generating Party shall, upon the Company's
request, make available to the Company corresponding maps and
single-line diagrams of all Points of Interconnection and
related equipment listed on Exhibit B. The Company shall mark
the Points of Interconnection in the field by a means
acceptable to both Parties. The Parties shall amend Exhibit B
as necessary to reflect additions or modifications to any
Points of Interconnection. As of the Closing Date, and except
for (i) Colstrip 4 and (ii) if the Generating Party purchases
the Colstrip 1, 2 and 3 Transmission Assets as discussed in
Section 1.10(f) of the Asset Purchase Agreement, Colstrip 1, 2
and 3, , each Point of Interconnection shall be at a facility
subject to the Company's FERC Open Access Transmission Tariff.
4.1.2. Exhibit C to this Agreement provides the Interconnection
Facilities that must be in place for the Generating Party's
Generation Facilities to be interconnected to the Company's
Electric System. The Generating Party cannot degrade, remove,
or otherwise reduce the capacity of the Interconnection
Facilities without a like reduction in generating capacity. The
Parties shall amend Exhibit C as necessary to reflect additions
or modifications to any Interconnection Facilities that have
been approved by the Company.
4.1.3. Exhibit D to this Agreement specifies the locations of all
metering systems, and any necessary adjustment factors if the
location of a metering system is not at the Point of
Interconnection. With respect to the Interconnected Units
purchased by the Generating Party from the Company pursuant to
the Asset Purchase Agreement, any and all costs incurred to
upgrade the metering at those Interconnected Units to meet the
requirements of Section 4.2 below will be borne by the
Generating Party. The Parties agree to keep this information
current and to advise each other of any additions or
modification made to a metering system at the time any such
modification or addition is made. The Parties further agree to
amend Exhibit D as necessary and appropriate to reflect such
additions or modifications.
4.2. Metering System Requirements TC "4.2. Metering System Requirements"
\f C \l "2" .
4.2.1. Application TC "4.2.1. Application" \f C \l "3" . The
metering system requirements set forth in Section 4.2 of this
Agreement shall apply as follows:
4.2.1.1. Any Large Generation Facility shall be required to
comply with all metering system requirements in
Section 4.2 immediately as of the Interconnection Date
unless otherwise mutually agreed. Any Large Generation
Facility that the Parties agree does not have to
comply with the requirements of this Section 4.2 and
the acceptable metering arrangements shall be listed
in Exhibit D.
4.2.1.2. Any Small Generation Facility shall be required to
comply with the metering system requirements of
Section 4.2 only to the extent that metering systems
in place at the Small Generation Facility as of the
Interconnection Date satisfies the requirements of
Section 4.2; provided, however, that any metering
system for a Small Generation Facility that is
replaced or installed after the Interconnection Date
shall be required to satisfy all the requirements of
Section 4.2.
4.2.1.3. Any metering system requirement of this Section 4.2
shall be deemed to be satisfied with respect to any
Interconnected Unit if either: (1) the metering
system for the Interconnected Unit itself satisfies
the applicable requirement, or (2) the Interconnected
Unit is part of an Interconnected Plant that has a
metering system that satisfies the applicable
requirement.
4.2.2. Interchange Metering TC "4.2.2. Interchange Metering" \f C \l
"3" . Each Interconnected Unit shall have an interchange
metering system at or near the Point(s) of Interconnection. The
interchange metering system shall measure:
(a) MW of electrical capacity delivered from and received by
the Interconnected Unit, metering shall be on a four
second AGC scan cycle unless otherwise agreed to;
(b) MWh of energy delivered from and received by the
Interconnected Unit; and
(c) MVArs of Reactive Power produced or absorbed by the
Interconnected Unit.
4.2.3. Accuracy of Metering Systems TC "4.2.3. Accuracy of
Metering Systems" \f C \l "3" . The Generating Party shall
make all reasonable efforts to cause all metering systems
(collectively, the meter, instrument transformers, and
interconnecting leads) required under this Agreement to
function at all times with 100 percent accuracy, but all such
metering systems shall in any case be within the accuracy
limits set by the Company in accordance with Good Utility
Practice or one half of one percent (as measured on a kW, kWh,
kVAr basis at full load in any case), whichever is less.
4.2.4. Calibration and Testing TC "4.2.4. Calibration and Testing"
\f C \l "3" .
4.2.4.1. Subject to the requirements of Section 4.2.4.3 below,
the Generating Party shall cause all interchange
metering systems to be calibrated every two years,
unless otherwise agreed in writing by the Parties. The
Generating Party shall provide the Company with
sufficient notice of the time and place of all
metering system calibrations to enable the Company to
arrange for its representative to attend if it so
chooses. The Generating Party shall make calibration
records available to the Company. The Generating Party
shall ensure that interchange metering system
calibration standards and methods are in accordance
with Good Utility Practice.
4.2.4.2. Subject to the requirements of Section 4.2.4.3 below,
the Generating Party shall cause such tests or
inspections of metering systems subject to this
Agreement to be made as may be requested by the
Company from time to time or at any time. The Company
shall be responsible for the costs and expenses of any
such tests or inspections unless the results thereof
demonstrate that any such metering systems fail to
comply with any of the requirements of Section 4.2, in
which event the Generating Party shall have sole
responsibility for the costs and expenses of such
tests or inspections. The Generating Party shall
provide the Company with sufficient notice of the time
and place of any metering systems test or inspection
to enable the Company to arrange for its
representative to attend if it so chooses. The
Generating Party shall adjust, repair, or replace any
component of any metering system found to be defective
or inaccurate, and promptly notify the Company
thereof. The Generating Party shall perform all
metering system tests and inspections in accordance
with Good Utility Practice and shall provide to the
Company a copy of all records and documentation of any
tests and inspections.
4.2.4.3. In carrying out any metering system calibrations,
tests, or inspections as provided in Section 4.2.4.1
or Section 4.2.4.2, the Generating Party shall (1) use
only personnel who meet the technical qualifications
approved in advance by the Company in the exercise of
its reasonable discretion, such qualifications to be
no more stringent than the qualifications applied to
personnel used to perform such activities for the
Company's own metering facilities, and (2) either (a)
use only third-party personnel whom both the
Generating Party and the Company, in the exercise of
their reasonable discretion, have determined to be
sufficiently independent, or (b) in any instance in
which the Generating Party elects to use its own
personnel to perform any of such responsibilities,
permit a representative of the Company to be present
for the performance of such responsibilities. Without
in any way limiting the foregoing, neither any
approval by the Company of any personnel used by the
Generating Party in carrying out any such
responsibilities, nor the presence of any the Company
representatives during the performance of any such
responsibilities, shall relieve the Generating Party
in any manner whatsoever of any responsibility or
liability for any failure to comply with each and all
of the requirements of Section 4.2.
4.2.4.4. The Generating Party shall ensure that all metering
systems at the locations set forth in Exhibit D are at
all times sealed or otherwise secured against
tampering, and that any seals on such systems are
opened only when the systems are calibrated,
inspected, tested or adjusted in accordance with the
requirements of this Agreement.
4.2.4.5. The Company shall have the right at any time to audit
the Generating Party's compliance with the
requirements of Section 4.2 of this Agreement. The
Company shall provide the Generating Party with
reasonable notice of any such audit, and the
Generating Party shall cooperate with the audit. The
Company shall be responsible for the costs and
expenses of any such audit unless the results thereof
demonstrate that the Generating Party has failed to
comply with any of the requirements of Section 4.2, in
which event the Generating Party shall have sole
responsibility for the costs and expenses of such
audit.
4.2.5. Adjustment for Electric Losses TC "4.2.5. Adjustment for
Electric Losses" \f C \l "3" . In any case where metering
systems required under this Agreement are not located at the
Point of Interconnection between the applicable Interconnected
Unit or Interconnected Plant and the Company's Electric System,
the Generating Party shall cause meter readings to be adjusted,
in the manner agreed to by the Parties, for Electric Losses
between the metering point and the Point of Interconnection.
4.2.6. Additional Metering TC "4.2.6. Additional Metering" \f C \l
"3" . To the extent required by changes after the
Interconnection Date to the Safety and Reliability Requirements
in effect on the Interconnection Date, the Generating Party
shall install any additional metering systems reasonably
requested by the Company to enable the Company to operate its
Control Area and the Company's Electric System in accordance
with the Safety and Reliability Requirements
4.3. Data Requirements TC "4.3. Data Requirements" \f C \l "2" .
4.3.1. Application TC "4.3.1. Application" \f C \l "3" . The data
requirements set forth in Section 4.3 of this Agreement shall
apply as follows:
4.3.1.1. Any Large Generation Facility shall be required to
comply with all data requirements in Section 4.3
immediately as of the Interconnection Date.
4.3.1.2. Any Small Generation Facility shall be required to
comply with the data requirements of Section 4.3 only
to the extent that equipment in place at the Small
Generation Facility as of the Interconnection Date
enables the Generating Party to meet the data
requirements of Section 4.3; provided, however, the
data from metering systems shall be subject to the
provisions of Section 4.2.1.2, and further provided,
that the Generating Party shall make good faith,
commercially reasonable efforts to upgrade any other
equipment needed to comply with the data requirements
of Section 4.3 wherever appropriate in accordance with
Good Utility Practice.
4.3.1.3. The Generating Party may provide data required under
this Section 4.3 either on an Interconnected Unit
basis or on an Interconnected Plant basis, except for
data concerning the number of Interconnected Units
available and on line, which the Generating Party
shall provide on an individual Interconnected Unit
basis.
4.3.2. MWh Data TC "4.3.2. MWh Data" \f C \l "3" . The Generating
Party shall provide to the Company MWh data for all
Interconnected Units on at least a monthly basis, subject to
Section 4.3.3.
4.3.3. Data by Automatic Data Transfer TC "4.3.3. Data by Automatic
Data Transfer" \f C \l "3" . For any Large Generation Facility
the Generating Party shall provide the following data to the
SOCC by Automatic Data Transfer pursuant to data transfer
protocols required by the Company:
(a) MW data, at a data rate of at least once every AGC scan
cycle, for purposes of this agreement an AGC scan cycle
is four seconds unless otherwise agreed to;
(b) MVArs, at a data rate of at least once every AGC scan
cycle;
(c) Voltage at the Point of Interconnection, at a data rate
of at least once every AGC scan cycle;
(d) Indication of the number of Interconnected Units, both
available and on line, at a data rate of at least once
every AGC scan cycle;
(e) MW of Spinning Reserves available and MW of Non-Spinning
Reserves controlled by the Generating Party, at a data
rate of a least once every ten (10) minutes, or, if the
Company requests a greater data rate to comply with the
Safety and Reliability Requirements, at the data rate
specified by the Company; and
(f) MWh data on an hourly basis.
4.3.4. Additional Data TC "4.3.4. Additional Data" \f C \l "3"
. The Generating Party shall provide to the Company any
additional data reasonably requested by the Company to enable
the Company to operate its Control Area and the Company's
Electric System in accordance with the Safety and Reliability
Requirements, or as required by the WSCC Regional Security
Plan.
4.4. Communications Capabilities TC "4.4. Communications Capabilities"
\f C \l "2" .
4.4.1. For any Interconnected Plant connected to the Company's
Electric System at 230 kV or higher, the Generating Party shall
have dedicated telecommunication facilities (or equipment of
equivalent reliability) for the Interconnected Plant's Remedial
Action Schemes, relay communications, and other critical
control functions.
4.4.2. In any case in which this Agreement requires an Interconnected
Unit to have any type of Automatic Data Transfer facilities,
the Generating Party shall also provide voice communications
between the SOCC and: (1) the applicable Interconnected Unit;
(2) the Interconnected Plant that encompasses the applicable
Interconnected Unit; or (3) the Control Center for the
applicable Interconnected Unit or Interconnected Plant.
4.4.2.1. For (1) any Large Generation Facility and (2) any
Interconnected Unit that provides rapid automated
generation response as part of a Remedial Actions
Scheme, the Generating Party shall have a dedicated,
direct, automatic ringdown trunk (or equipment of
equivalent reliability) voice circuit between the SOCC
and: (a) the applicable Interconnected Unit; (b) the
Interconnected Plant that encompasses the applicable
Interconnected Unit; or (c) the Control Center for the
applicable Interconnected Unit or Interconnected
Plant.
4.4.3. All Automatic Data Transfer facilities and any other control
and protection communications facilities required by this
Agreement shall be designed and maintained to function at their
full performance levels before, during, and after any Electric
Disturbance.
4.4.4. The Generating Party shall install any additional Automatic
Data Transfer facilities or other communications facilities
reasonably requested by the Company to enable the Company to
operate its Control Area and the Company's Electric System in
accordance with the Safety and Reliability Requirements.
5. The Company's Obligations TC "5. The Company's Obligations" \f C \l
"1" .
5.1. Operation of the Company's Electric System TC "5.1. Operation of
The Company's Electric System" \f C \l "2" . The Company shall
operate the Company's Electric System in accordance with the Safety
and Reliability Requirements. Subject to the provisions of
Section 11, the sole remedy available to the Generating Party for or
as a result of any breach or violation of this Section 5.1 by the
Company shall be (1) specific performance and (2) reimbursement by
the Company of any fines or other monetary penalties incurred by the
Generating Party as a result of such breach or violation. If the
Generating Party determines that the Company may be or become liable
for reimbursement of any such fines or penalties under this
Section 5.1, the Generating Party shall provide notice to the Company
at the earliest practicable opportunity so that the Company may
contest or take other available action to avoid or minimize such
fines or penalties.
5.2. Interconnected Plant Scheduling TC "5.2. Interconnected Plant
Scheduling" \f C \l "2" . The Company shall perform scheduling with
respect to any requested transmission of capacity and energy from any
Interconnected Plant (or the Control Center for any Interconnected
Plant) in accordance with the Company Tariffs and applicable laws,
regulations, and procedures.
5.3. Maintenance Scheduling TC "5.3. Maintenance Scheduling" \f C \l "2"
. The Company shall notify the Generating Party before finalizing
any proposed schedule for performing maintenance of the Company's
Electric System which maintenance may affect any Generating Party's
Interconnected Plant, and shall consult with and make reasonable
efforts to schedule such maintenance to coincide with Generating
Party's scheduled outages and otherwise to accommodate the needs of
the Generating Party in scheduling maintenance of the Company's
Electric System in accordance with applicable Safety and Reliability
Requirements.
5.4. The Company's Confidentiality Obligations TC "5.4. The Company
Confidentiality Obligations" \f C \l "2" .
5.4.1. Protection of Confidential Information TC "5.4.1. Protection
of Confidential Information" \f C \l "3" . Except with the
prior written authorization of the Generating Party, or to the
extent required by applicable law, regulation, administrative
or judicial order or pursuant to the terms of this Agreement,
the Company shall not disclose to a third party the
Confidential Information of the Generating Party; provided,
however, that the Company shall be entitled to disclose such
Confidential Information if: (1) the Company reasonably
determines that such Confidential Information must be disclosed
only to such persons and only to the extent necessary to avert
unplanned Transmission Service interruptions or to more
speedily restore Transmission Service; or (2) required to
comply with the Safety and Reliability Requirements or WSCC
Regional Security Plan.
5.4.2. Disclosure Pursuant to Administrative or Judicial Order TC
"5.4.2. Disclosure Pursuant to Administrative or Judicial
Order" \f C \l "3" . The Company shall promptly notify the
Generating Party if it receives notice or otherwise concludes
that the production of any Confidential Information is being
sought under any provision of law or in any administrative or
judicial proceeding. The Generating Party may, in its sole
discretion and at its sole cost and expense, undertake any
challenge to such disclosure. The Company shall reasonably
cooperate with the Generating Party, at the Generating Party's
sole cost and expense, to minimize or eliminate any such
disclosure requirement consistent with applicable law, and to
obtain proprietary or confidential treatment of Confidential
Information by any person to whom such information is disclosed
pursuant to Section 5.4.1.
5.4.3. Return of Confidential Information TC "5.4.3. Return of
Confidential Information" \f C \l "3" . Upon termination or
expiration of this Agreement, the Company shall promptly return
to the Generating Party all specific written Confidential
Information requested by the Generating Party that the Company
has in its possession and is not required to retain by law,
regulation or the Safety and Reliability Requirements. Prior to
termination or expiration of this Agreement, this provision
does not prevent the Company from disposing of written
Confidential Information consistent with its record retention
policies.
5.4.4. Survival of the Company's Confidentiality Obligations TC
"5.4.4. Survival of the Company's Confidentiality Obligations"
\f C \l "3" . The provisions of this Section 5.4 shall survive
the termination or expiration of this Agreement for a period of
three years.
6. Capabilities, Operation, Maintenance, and Performance of Interconnected
Units TC "6. Capabilities, Operation, Maintenance, and Performance of
Interconnected Units" \f C \l "1" .
6.1. Safety and Reliability Requirements TC "6.1. Safety and
Reliability Requirements" \f C \l "1" \f C \l "2" . Despite any
other provision of this Agreement except Section 6.4, the Generating
Party shall cause each Interconnected Unit to have the capabilities
required by, and to be operated in accordance with, the Safety and
Reliability Requirements. Subject to the provisions of Section 11,
the sole remedy available to the Company for or as a result of any
breach or violation of this Section 6.1 by the Generating Party shall
be (1) specific performance and (2) reimbursement by the Generating
Party of any fines or other monetary penalties incurred by the
Company as a result of such breach or violation. Any fines or other
monetary penalties incurred as a result of violation of the Safety
and Reliability Requirements related to governor speed and frequency
control as discussed in Section 6.4 shall be the obligation of the
Company prior to the Reference Date and the obligation of the
Generating Party on or after the Reference Date; provided, however,
at the Company's option, prior to the Reference Date the Company can
elect to make modifications to the governor systems at the Company's
expense to bring them into compliance with the Safety and Reliability
Requirements. For purposes of this Section 6.1, the Reference Date
shall be the later of (i) January 1, 2001 or (ii) 12 months after the
Closing Date. If the Company determines that the Generating Party may
be or become liable for reimbursement of any such costs or expenses
under this Section 6.1, the Company shall provide notice thereof to
the Generating Party at the earliest practical opportunity so that
the Interconnecting Party may contest or take other available action
to avoid or minimize such fines or penalties.
6.1.1. WSCC Reliability Management System Agreement. TC "6.1.1.
WSCC Reliability Management System Agreement" \f C \l "2"
If the Company participates in the WSCC Reliability Management
System upon its approval by FERC, the Generating Party agrees
to execute an agreement to participate in such program as
approved by FERC. Drafts of such agreements are included in
Exhibit K.
6.2. Specific Capability and Operating Requirements TC "6.2. Specific
Capability and Operating Requirements" \f C \l "2" . Without
limiting the generality of Section 6.1 above, the Generating Party
shall comply with the following specific requirements with respect to
all Interconnected Units:
6.2.1. Clearances/Safety Issues TC "6.2.1. Clearances/Safety
Issues" \f C \l "3" .
6.2.1.1. Without limiting the provisions of Section 6.2.5, the
Generating Party shall cooperate with the Company to
facilitate maintenance of the Company's Electric
System by disconnecting any Interconnected Unit from
the Company's Electric System when so requested by the
Company for maintenance purposes. Whenever
disconnecting an Interconnected Unit from the
Company's Electric System, the Generating Party shall
perform such disconnection in accordance with Good
Utility Practice and in compliance with the Company's
transmission facility clearance procedures attached
hereto as Exhibit A as may be amended, reasonably and
without discrimination to the Generating Party, by the
Company in its sole discretion from time to time. If
the Company amends its transmission facility clearance
procedures, it will notify the Generating Party as
soon as practicable thereafter, and provide to the
Generating Party a new Exhibit A to this Agreement.
6.2.1.2. The Generating Party acknowledges that following an
Electric Disturbance, certain equipment on the
Company's Electric System may reclose in accordance
with Good Utility Practice. The Generating Party shall
have sole responsibility for protecting its Electric
System and all Interconnected Units and related
equipment from any damage resulting from such
reclosure. To the extent not prohibited by applicable
law, the Generating Party hereby indemnifies and
agrees to hold harmless the Company and its trustees,
officers, employees and agents from and against any
and all losses, liabilities, injuries, damages, costs
and expenses caused by, resulting from or arising out
of (1) any damage to any of the Generating Party's
Electric System or any Interconnected Unit (or related
equipment) to the extent caused by, resulting from, or
arising out of any such reclosure and (2) death or
injury of any persons to the extent caused by,
resulting from, or arising out of any impact or effect
of any such reclosure upon the Generating Party's
Electric System or any Interconnected Unit (or related
equipment).
6.2.1.3. The Generating Party shall not energize a de-energized
transmission line on the Company's Electric System
unless the energization is approved by the Company.
If, for any reason, any Interconnected Plant is
disconnected from the Company's Electric System (by
Electric Disturbance, line switching, or otherwise),
the Generating Party shall cause the switching device
connecting the Interconnected Plant to the Company's
Electric System to become and remain open and not
reclose until the Company approves the reclosure.
6.2.2. Synchronization TC "6.2.2. Synchronization" \f C \l "3"
. The Generating Party shall be responsible for ensuring that
whenever an Interconnected Unit is brought on-line, such
Interconnected Unit is synchronized to the Company's Electric
System before connection to the Company's Electric System.
6.2.3. Reporting TC "6.2.3. Reporting" \f C \l "3" .
6.2.3.1. Promptly after execution of this Agreement, and after
consulting with the Generating Party, the Company
shall provide to the Generating Party its Significant
Events List. The Company shall have the right to amend
such list from time to time and at any time, in each
instance after consulting with the Generating Party.
The Generating Party shall notify the Company promptly
in the event of the existence or occurrence of any of
the events or conditions listed on the Company's
Significant Events List.
6.2.3.2. Promptly after execution of this Agreement, and after
consulting with the Company, the Generating Party
shall provide to the Company its Significant Events
List. The Generating Party shall have the right to
amend such list from time to time and at any time, in
each instance after consulting with the Company. The
Company shall notify the Generating Party promptly in
the event of the existence or occurrence of any of the
events or conditions listed on the Generating Party's
Significant Events List.
6.2.3.3. Exhibit J to this Agreement defines additional
reporting requirements related to the operation of the
Generation Facility.
6.2.4. Remedial Action Schemes TC "6.2.4. Remedial Action Schemes"
\f C \l "3" . The Generating Party shall participate in the
Remedial Action Schemes, if any, described in Exhibit E to this
Agreement.
6.2.5. Maintenance TC "6.2.5. Maintenance" \f C \l "3" . The
Generating Party shall maintain all Interconnected Units and
all related equipment in accordance with all applicable Safety
and Reliability Requirements; provided, however, that nothing
in this Section 6.2.5 shall require a standard relating to
upgrading the governor systems of the Interconnected Units
listed in Exhibit L except as set forth in Section 6.4. The
Generating Party shall notify the Company as soon as practical
in advance of any scheduled maintenance that will require an
Interconnected Unit to be taken off-line. If the Company
requests that the Generating Party adjust its proposed
maintenance schedule because of Safety and Reliability
Requirements, the Generating Party shall make all reasonable
efforts to adjust its maintenance schedule in accordance with
the Company's request. By January 1 each year, the Generating
Party shall provide to the Company a schedule of annual
maintenance for all Interconnected Units. The Generating Party
shall notify the Company if the schedule changes.
6.2.6. Protective Devices and Schemes TC "6.2.6. Protective Devices
and Schemes" \f C \l "3" . Each Party reserves the right to
install, maintain, and operate (or cause to be installed,
maintained, and operated) such protective devices as it deems
necessary for separating the Interconnected Units from the
Company's Electric System to avoid injury or damage, subject to
the following conditions:
(a) Each Party shall install, maintain, and operate (or cause
to be installed, maintained, and operated) such
protective devices in accordance with all applicable
Safety and Reliability Requirements; and
(b) If the Generating Party proposes to add or modify any
protective relays or control schemes in a manner that
could materially affect the operation of the Company's
Control Area or the Company's Electric System, the
Generating Party shall not proceed with such addition or
modification unless the protective relays or control
schemes: (i) are compatible with the Company's existing
protective relay schemes and (ii) have been approved in
writing by the Company.
6.2.7. Opening of Interconnection Facilities TC "6.2.7. Opening of
Interconnection Facilities" \f C \l "3" . The Generating Party
shall have the unilateral right to open Interconnection
Facilities in the event of, and for the duration of, any
emergency on its Electric System, if such separation would
reasonably be expected to mitigate or remedy the emergency. The
Generating Party shall promptly notify the Company of any such
opening of Interconnection Facilities unless such information
has already been provided to the Company by Automatic Data
Transfer. During an Electric Disturbance, the Company shall
have the right to open, or order opened, any Interconnection
Facility in accordance with the Safety and Reliability
Requirements.
6.2.8. Electric Disturbance Response Procedures TC "6.2.8.
Electric Disturbance Response Procedures" \f C \l "3" . The
Company and the Generating Party shall work together to develop
a mutually acceptable set of specific actions that each Party
shall take in response to Electric Disturbances affecting the
Generating Party, and shall make good faith efforts to
incorporate these specific actions into a written set of
operating guidelines specifying how each Party shall respond
following any such Electric Disturbance.
6.3. Excitation System Requirements for Synchronous Generation Facilities
TC "6.3. Excitation System Requirements for Synchronous Generation
Facilities" \f C \l "2" .
6.3.1. Each Interconnected Unit that is a synchronous Generation
Facility shall meet the following excitation system
requirements:
6.3.1.1. If the Interconnected Unit was in operation before the
Effective Date, the Interconnected Unit's excitation
system shall have the best voltage response time
permitted by existing equipment; provided, however,
that if the excitation system's response time is
greater than allowed under the Safety and Reliability
Requirements, the Generating Party shall make good
faith, commercially reasonable efforts to upgrade the
excitation system to a response time to comply with
the Safety and Reliability Requirements or less as
appropriate in accordance with Good Utility Practice.
6.3.1.2. If the Interconnected Unit was not in operation before
the Effective Date, the Interconnected Unit's
excitation system shall have a voltage response time
which complies with the Safety and Reliability
Requirements or less.
6.3.1.3. The protective devices and terminal voltage regulators
for each Interconnected Unit shall be as described in
Exhibit F to this Agreement. Unless otherwise directed
by the Company, the Generating Party shall cause all
excitation systems' mode of operation to be automatic
terminal voltage regulation.
6.3.1.4. Each Interconnected Unit shall meet the power system
stabilizer (PSS) requirements of the Safety and
Reliability Requirements. The Generating Party shall
cause the applicable PSS to be in service and properly
calibrated as required by the Safety and Reliability
Requirements.
6.4. Governor Speed and Frequency Control TC "6.4. Governor Speed and
Frequency Control" \f C \l "2" . To the extent required by the
Safety and Reliability Requirements, each Interconnected Unit shall
have an operational governor system meeting the Safety and
Reliability Requirements. Subject to the preceding sentence, the
Generating Party shall set the governor for each Interconnected Unit
according to the Company's directions and within the machine's
capabilities. If an Interconnected Unit was in operation before the
Effective Date and the Interconnected Unit's governor system does not
meet the Safety and Reliability Requirements, the Generating Party
shall make good faith, commercially reasonable efforts to upgrade the
governor system to comply with the Safety and Reliability
Requirements in accordance with Good Utility Practice. Interconnected
Units with governor systems that do not meet the Safety and
Reliability Requirements as of the Closing Date are listed in Exhibit
L.
6.5. Voltage Regulation, Frequency, and Reactive Power Requirements TC
"6.5. Voltage Regulation, Frequency, and Reactive Power
Requirements" \f C \l "2" . Each Interconnected Unit shall meet or
exceed the following requirements concerning voltage regulation,
frequency, and Reactive Power:
6.5.1. Each Interconnected Unit shall produce or absorb Reactive
Power, as measured at its generator terminals, between 0.90
leading and 0.90 lagging power factor for steady state
conditions to meet voltage schedules specified by the Company.
Each Interconnected Unit also shall produce or absorb Reactive
Power up to the temporary overload capability of the
Interconnected Unit during Electric Disturbances. An
Interconnected Unit may satisfy its Reactive Power and voltage
requirements either by its operation or by using separate
devices.
6.5.2. Each Interconnected Unit shall be capable, at all times
(including during an Electric Disturbance), of continuous
operation at 0.95 to 1.05 per unit (pu) voltage, as measured at
the Point of Interconnection, and at 59.5 to 60.5 Hz, and shall
be kept online and in operation during frequency deviations
beyond the range of 59.5 to 60.5 Hz to the extent required by
the Safety and Reliability Requirements.
6.5.3. Each Interconnected Unit's time delays for setting over/under
voltage and over/under frequency relays shall be as approved by
the Company.
6.5.4. If an Interconnected Unit was in operation before the Effective
Date and cannot meet a condition specified in Sections 6.5.1,
6.5.2, or 6.5.3 without installing additional equipment, then
such Interconnected Unit shall not be required to meet that
condition unless such condition is a Safety and Reliability
Requirement; provided, however, that upon repair or replacement
of related equipment, the Generating Party shall make good
faith, commercially reasonable efforts to upgrade the
Interconnected Unit's voltage regulation, frequency, or
Reactive Power capabilities as necessary to meet the conditions
specified in Sections 6.5.1, 6.5.2, and 6.5.3 as appropriate in
accordance with Good Utility Practice.
6.5.5. Nothing in this Agreement is intended to modify existing
obligations, if any, regarding generator tripping associated
with existing Remedial Action Schemes, or other generator
tripping agreements. All Remedial Action Schemes and generator
tripping agreements to which any Interconnected Unit is subject
(other than those entered into pursuant to this Agreement) are
listed on Exhibit E.
6.6. Provision of Data for Company Planning TC "6.6. Provision of Data
for Company Planning" \f C \l "2" . The Generating Party shall
furnish to the Company such data, reports, and available forecasts
(including but not limited to available computer-generated
simulations) as the Company reasonably requests from time to time to
be used solely in connection with the Company's electric transmission
and distribution operations and planning functions. These operations
and planning functions include, but are not limited to, the Company's
obligations to others associated with Safety and Reliability
Requirements. In addition, the Generating Party shall furnish to the
Company such data, reports, and available forecasts (including
without limitation technical data regarding Interconnected Units'
characteristics necessary for the Company to comply with Safety and
Reliability Requirements for system analysis studies) as the Company
reasonably requests from time to time in connection with the
Company's reliability functions. The Generating Party shall provide
any such requested data, reports and available forecasts, in the form
specified by the Company, within a reasonable time following any such
request. Any Confidential Information of the Generating Party
included in such data, reports, or forecasts shall be subject to the
provisions of Section 5.4.
6.7. The Generating Party's Liability for Noncompliance TC "6.7. The
Generating Party's Liability for Noncompliance" \f C \l "2" .
Without in any way limiting any provision of Section 4 or Section 6
of this Agreement, the Generating Party shall, subject to the
provisions of Section 11, have sole responsibility for any losses,
liabilities, damages, costs and expenses to the Generating Party's
Electric System to the extent caused by, resulting from or arising
out of any failure on the part of the Generating Party to comply with
any of its obligations under Section 4 or Section 6.
6.8. Operational Communications TC "6.8. Operational Communications" \f
C \l "2" . Without limiting the notice provisions elsewhere in this
agreement, at all times, the Generating Party shall keep the Company
informed of the status of the operation of the Generating Party's
Generating Facilities and shall report to the Company (i) any change
or expected change in status, and (ii) the continuation of outages
beyond their expected duration at the earliest practicable
opportunity.
7. Ancillary Services TC "7. Ancillary Services" \f C \l "1" .
7.1. Reactive Power TC "7.1 Reactive Power" \f C \l "2" . The
Generating Party shall provide reactive power as required in Section
6.5 of this Agreement at no charge to the Company.
7.2. Selling or Self-Provision of Ancillary Services TC "7.2 Selling or
Self-Provision of Ancillary Services" \f C \l "2" . If the
Generating Party wishes to sell or self-provide any Ancillary
Services (as set forth in the Company Tariffs), the Generating Party
shall install (if necessary) and maintain all equipment, and provide
to the Company all data (at the intervals specified by the Company)
necessary to monitor, verify, and facilitate billing for any such
Ancillary Services. Upon reasonable requests by the Company, the
Generating Party shall be required to test Interconnected Units to
demonstrate and verify their ability to provide such ancillary
services.
8. Generation Redispatch TC "8. Generation Redispatch" \f C \l "1" . In
an Electric Disturbance, the Company shall be entitled, whether pursuant to
the WSCC Regional Security Plan or otherwise, to order Generation
Redispatch of any Interconnected Unit which the Generating Party has the
legal right to cause Generation Redispatch. The Generating Party shall
comply with any and all Company emergency Generation Redispatch orders.
9. Generating Party to Comply with All Future ISO Requirements TC "9.
Generating Party to Comply With All Future ISO Requirements" \f C \l "1"
. If the Company enters into an agreement with an ISO under which the ISO
acquires the right to control the Company's Electric System, the Generating
Party shall enter into a new interconnection agreement with the ISO, and
this Agreement shall terminate.
10. Special Arrangements and Access to Facilities TC "10. Special
Arrangements and Access to Facilities" \f C \l "1" .
10.1. Special Arrangements TC "10.1. Special Arrangements" \f C \l "2" .
Despite any other provision of this Agreement, the Parties may agree
in the Separation Document to specific arrangements that differ from
the requirements of this Agreement including arrangements
contemplated in the Separation Principles or as necessary to
accommodate operational requirements (including, but not limited to,
must run generation), technical limitations or legal requirements
(whether statutory, regulatory, or contractual) specific to the
Generating Party. Any such arrangements shall be set forth in the
Separation Document which shall become Exhibit G to this Agreement,
superseding the form of Exhibit G attached hereto; provided, however,
that the provisions italicized in the Exhibit G hereto shall survive
and be incorporated in the Separation Document unless otherwise
mutually agreed.
10.2. Access to Facilities TC "10.2 Access to Facilities" \f C \l "2" .
If a Party (the "Facility Owning Party") owns facilities located on
the other Party's (the "Premises Owning Party") property, the
Premises Owning Party shall provide Facility Owning Party-authorized
personnel with access to such Facility Owning Party's owned
facilities. The Facility Owning Party, where practicable, shall
enclose and lock such facilities to limit access to Facility Owning
Party-authorized personnel. Facility Owning Party-authorized
personnel shall at all times conduct themselves in a manner that will
not interfere with the operation of the Premises Owning Party's
facilities except as permitted in Section 6.2.7. Reciprocal access
rights and related agreements in respect of the Real Property shall
be set forth in the Separation Document which shall become Exhibit G
to this Agreement, superseding the form of Exhibit G attached hereto;
provided, however, that the provisions italicized in the Exhibit G
hereto shall survive and be incorporated in the Separation Document
unless otherwise mutually agreed. The Premises Owning Party shall not
charge any costs whatsoever for rent of the space or for access to
Facility Owning Party's facilities.
10.3. Additional Facilities. TC "10.3 Additonal Facilities" \f C \l
"2" If the Company reasonably determines additional facilities are
required to meet the Company's requirements in this agreement and the
most suitable location for such facilities is on the Generating
Facility property, the Generating Party will provide space at a
mutually agreeable location for such facilities. Installation of
such facilities will be at the expense of the Company. The
Generating Party will not charge any costs whatsoever for rent of the
space or for access to such facilities.
11. Limitation of Liability and Insurance TC "11. Limitation of Liability
and Insurance" \f C \l "1" .
11.1. Liability - Interconnected System Operation TC "11.1. Liability -
Interconnected System Operation" \f C \l "2" .
11.1.1. Limitation of Liability for Loss to Electric Systems TC
"11.1.1. Limitation of Liability for Loss to Electric Systems"
\f C \l "3" . Despite the provisions of Section 11.2, except
as set forth in Sections 11.1.4. and 11.1.5, neither the
Company, nor its directors, officers or employees, shall be
liable to the Generating Party for any Loss to the Electric
System of the Generating Party caused by or arising out of an
Electric Disturbance, whether or not such Electric Disturbance
results from the negligent, grossly negligent or wrongful act
or omission of the Company or its directors, officers or
employees in the performance or non-performance of any
obligation under this Agreement; and the Generating Party
hereby releases the Company and its directors, officers and
employees, from any such liability.
11.1.2. Limitation of Liability for WIS Parties TC "11.1.2.
Limitation of Liability for WIS Parties" \f C \l "3" .
Despite the provisions of Section 11.2, except as set forth in
Sections 11.1.4. and 11.1.5, if the Generating Party is a party
to the WIS Agreement, then neither the Generating Party nor its
directors, commissioners, officers or employees, shall be
liable to the Company for any Loss to the Company caused by or
arising out of an Electric Disturbance, whether or not such
Electric Disturbance results from the negligent, grossly
negligent or wrongful act or omission of the Generating Party
or its directors, officers or employees, in the design,
construction, operation, maintenance, use or ownership of the
Generating Party's Electric System, or the performance or
nonperformance of any obligation under this Agreement; and the
Company hereby releases the Generating Party and its
directors, officers and employees from any such liability.
11.1.3. Consistency With Insurance Policies TC "11.1.3.
Consistency With Insurance Policies" \f C \l "3" . If a
Party holds or obtains any insurance policy that is
inconsistent with the provisions of Sections 11.1.1 and 11.1.2,
such Party shall, to the extent not prohibited by applicable
law, indemnify and hold harmless the other Party from all costs
and damages to the other Party resulting from such
inconsistency, including but not necessarily limited to the
other Party's costs of defending against subrogated claims.
11.1.4. Not Applicable to Willful Action TC "11.1.4. Not
Applicable to Willful Action" \f C \l "3" . The provisions of
Sections 11.1.1 and 11.1.2 do not apply to Losses resulting
from Willful Action.
11.1.5. Effect of Prior Arbitration Awards TC "11.1.5. Effect of
Prior Arbitration Awards" \f C \l "3" . The provisions of
Sections 11.1.1. and 11.1.2. do not apply to Losses resulting
from an action taken or not taken by a Party which action or
non-action (1) has been determined by arbitration award to be a
violation of Section 11.2.1. of this Agreement and (2) occurs
or continues beyond the period specified in such arbitration
award for curing such violation or, if no cure period is
specified, occurs or continues beyond a reasonable period to
cure such violation. Each Party agrees to pay for Losses that
both (a) occur while such Party is a party to this Agreement
and (b) result from violation by such Party that occurs or
continues beyond the period specified in such arbitration award
for curing such violation or, if no cure period is specified,
occurs or continues beyond a reasonable period to cure such
violation.
11.2. Responsibility - Interconnected System Design and Operation TC
"11.2. Responsibility - Interconnected System Design and Operation"
\f C \l "2" .
11.2.1. Operation to Minimize Electric Disturbances TC "11.2.1.
Operation to Minimize Electric Disturbances" \f C \l "3" .
11.2.1.1. The Generating Party's Operation of its Electric
System to Minimize Electric Disturbances TC
"11.2.1.1. The Generating Party's Operation of its
Electric System to Minimize Electric Disturbances" \f
C \l "4" . The Generating Party shall design,
construct, operate, maintain, and use its Electric
System and perform its other obligations under this
Agreement in conformance with Good Utility Practice to
minimize to the extent practical:
(a) Electric Disturbances originating on the
Generating Party's Electric System;
(b) The effect on the Generating Party's Electric
System of any Electric Disturbance that
originates on the Generating Party's Electric
System or another party's Electric System; and
(c) The effect on any other party's Electric System
of any Electric Disturbance that: (i)
originates on the Generating Party's Electric
System or (ii) although not originating on the
Generating Party's Electric System, reaches or
could reach the Electric System of the other
party through the Generating Party's Electric
System.
11.2.1.2. The Company's Operation of the Company's Electric
System to Minimize Electric Disturbances TC
"11.2.1.2. The Company's Operation of The Company's
Electric Dystem to Minimize Electric Disturbances" \f
C \l "4" . The Company shall design, construct,
operate, maintain, and use the Company's Electric
System and perform its other obligations under this
Agreement in conformance with Good Utility Practice to
minimize to the extent practical:
(a) Electric Disturbances originating on the
Company's Electric System;
(b) The effect on the Company's Electric System of
any Electric Disturbance that originates on the
Company's Electric System or another party's
Electric System; and
(c) The effect on any other party's Electric System
of any Electric Disturbance that: (i)
originates on the Company's Electric System or
(ii) although not originating on the Company's
Electric System, reaches or could reach the
Electric System of the other party through the
Company's Electric System.
11.2.2. No Duties Created to Non-Party TC "11.2.2. No Duties
Created to Non-Party" \f C \l "3" . Nothing in this Agreement
shall be construed to create any duty to, any standard of care
with reference to, or any liability to any person other than
the Company and the Generating Party.
11.2.3. Resolution of Differences TC "11.2.3. Resolution of
Differences" \f C \l "3" . Should differences arise between
the Parties regarding the implementation of Section 11.2.1,
they shall seek an equitable solution and shall perform
necessary technical studies, which shall not be unreasonably
delayed. If agreement cannot be reached, and if in the
judgement of either Party to the disagreement the necessary
technical studies have been performed, such Party may demand
the matter be resolved in accordance with the dispute
resolution provisions of Exhibit H to this Agreement. This
provision shall not be used to resolve differences among or
with persons or entities that are not Parties.
11.2.4. Covenants Independent TC "11.2.4. Covenants Independent"
\f C \l "3" . Except as and to the extent set forth in Section
11.1.5, the mutual releases and covenants of Sections 11.1.1
and 11.1.2 are independent of and divisible from the covenants
of Section 11.2.1 and are not affected by nonperformance under
Section 11.2.1. It is the intent of this Agreement that the
obligations of Section 11.2.1 shall be enforceable only by a
Party assuming the risk of liability for Loss resulting from a
failure to comply with an arbitration award as provided in
Section 11.1.5.
12. Assignments and Conveyances TC "12. Assignments and Conveyances" \f C \l
"1" .
12.1. Assignment of the Company's Rights and Obligations TC "12.1.
Assignment of The Company's Rights and Obligations" \f C \l "2" .
Except as otherwise provided in Section 12.4, the Company shall not,
without the prior written consent of the Generating Party, assign,
pledge or transfer all or any part of, or any right or obligation
under, this Agreement, whether voluntarily or by operation of law;
provided, however, that the Company may, without the consent of the
Generating Party, assign its rights and obligations under this
Agreement to any person or entity (1) with which the Company is
merged or consolidated, or (2) to which the Company sells, transfers,
or assigns all or substantially all of the Company's Electric System,
or 3) with which the Company's control area is merged, so long as the
survivor in any such merger or consolidation, or the purchaser,
transferee or assignee of such Company's Electric System provides to
the Generating Party a valid and binding written agreement expressly
assuming and agreeing to be bound by all obligations of the Company
under this Agreement.
12.2. Assignment of the Generating Party's Rights and Obligations TC
"12.2. Assignment of the Generating Party's Rights and Obligations"
\f C \l "2" . Except as otherwise provided in Section 12.4, the
Generating Party shall not, without the prior written consent of the
Company, assign, pledge or transfer all or any part of, or any right
or obligation under, this Agreement, whether voluntarily or by
operation of law; provided, however, that the Generating Party may,
without the consent of the Company, assign its rights and obligations
under this Agreement to any person or entity (1) with which the
Generating Party is merged or consolidated, or (2) to which the
Generating Party sells, transfers, or assigns all or substantially
all of the Interconnected Units, so long as the survivor in any such
merger or consolidation, or the purchaser, transferee or assignee of
such Interconnected Units provides to the Company a valid and binding
written agreement expressly assuming and agreeing to be bound by all
obligations of the Generating Party under this Agreement.
12.3. Transfer of Rights Affecting Interconnected Units TC "12.3.
Transfer of Rights Affecting Interconnected Units" \f C \l "2" .
Unless otherwise approved by the Company in writing, the Generating
Party shall not sell, transfer or assign any rights that affect the
Generating Party's ability to perform its obligations under this
Agreement with respect to any Interconnected Unit unless (1) the
purchaser, transferee or assignee of such rights provides to the
Company a valid and binding written agreement expressly assuming and
agreeing to be bound by all obligations of the Generating Party under
this Agreement with respect to the affected Interconnected Unit, or
(2) the Company and the transferee have entered an agreement
comparable to this Agreement with respect to the affected
Interconnected Unit. Despite the foregoing, the provisions of this
Section 12.3 shall not apply to any Interconnected Unit that, upon
completion of a proposed sale, transfer, or assignment of rights,
would no longer be operated within the Company's Electric System
provided that the Generating Party has given the Company at least 6
months' notice of the date on which the applicable Interconnected
Unit will cease to operate within the Company's Electric System.
12.4. Assignment for Security Purposes TC "12.4. Assignment for Security
Purposes" \f C \l "2" . Despite any other provision of this
Agreement, (1) the Generating Party may, without the Company's
consent, pledge or assign all or any portion of its Electric System,
or rights or interests with respect to Generator's Electric System
(including this agreement) for financing or refinancing purposes, and
(2) the Company may, without the Generating Party's consent, pledge
or assign, for financing or refinancing purposes, all or any portion
of its rights or interests with respect to the Company's Electric
System.
12.5. Effect of Permitted Assignment TC "12.5. Effect of Permitted
Assignment" \f C \l "2" . In the event of any permitted sale,
transfer or assignment hereunder, the transferor or assignor shall to
the extent of the transferred or assigned obligations, and only to
such extent, be relieved of obligations accruing from and after the
effective date of such transfer or assignment; provided, however,
that under no circumstances shall any sale, transfer or assignment
relieve the transferor or assignor of any liability for any breach of
this Agreement occurring before the effective date of such transfer
or assignment.
12.6. Successors and Assigns TC "12.6. Successors and Assigns" \f C
\l "2" . This Agreement is binding on and shall inure to the benefit
of the Parties and their respective successors, permitted assigns and
legal representatives.
12.7. Consent Not Unreasonably Denied or Delayed TC "12.7. Consent Not
Unreasonably Denied or Delayed" \f C \l "2" . Consents to
assignment, pledge or transfer requested pursuant to this Section 12
shall not be unreasonably denied or delayed.
12.8. Unauthorized Assignment TC "12.8. Unauthorized Assignment" \f C
\l "2" . Any assignment of this Agreement in violation of the
provisions of this Section 12 shall be, at the option of the non-
assigning party, void.
13. No Guarantee of Uninterrupted Transmission Service TC "13. No Guarantee
of Uninterrupted Transmission Service" \f C \l "1" . Nothing in this
Agreement shall be construed to imply a guarantee by the Company, to the
Generating Party or any other person, of uninterrupted Transmission
Service.
14. Billing and Payment TC "14. Billing and Payment" \f C \l "1" . The
Company and the Generating Party shall comply with the billing and payment
provisions as set forth in the applicable Company Tariffs.
15. Uncontrollable Force TC "15. Uncontrollable Force" \f C \l "1" . A
Party shall not be in breach of this Agreement as a result of such Party's
failure to perform its obligations under this Agreement when such failure
is caused by an Uncontrollable Force which such Party, despite the exercise
of due diligence, is unable to remove with reasonable dispatch; provided,
however, that such Party shall have the right to suspend performance of
such obligations only to the extent and for the duration that the
Uncontrollable Force actually and reasonably prevents the performance of
such obligations by such Party. In the event of the occurrence of an
Uncontrollable Force that prevents a Party from performing any of its
obligations under this Agreement, such Party shall: (1) immediately notify
the other Party of such Uncontrollable Force with such notice to be
confirmed in writing as soon as reasonably practicable; (2) use its best
efforts to mitigate the effects of such Uncontrollable Force, remedy its
inability to perform, and resume full performance of its obligations
hereunder; (3) keep the other Party apprised of such efforts on an ongoing
basis; and (4) provide written notice of the resumption of performance
hereunder. Despite any of the foregoing, the settlement of any strike,
lockout, or labor dispute constituting an Uncontrollable Force shall be
within the sole discretion of the Party to this Agreement involved in such
strike, lockout, or labor dispute and the requirement that a Party must use
its best efforts to remedy the cause of the Uncontrollable Force or
mitigate its effects and resume full performance hereunder shall not apply
to strikes, lockouts, or labor disputes.
16. Dispute Resolution TC "16. Dispute Resolution" \f C \l "1" . Either
Party may invoke the dispute resolution provisions of Exhibit H to this
Agreement to resolve any dispute arising under this Agreement.
17. Notices TC "17. Notices" \f C \l "1" .
17.1. Permitted Methods of Notice TC "17.1. Permitted Methods of Notice"
\f C \l "2" . Any notice, demand, or request required or permitted
under this Agreement shall be in writing and shall be deemed properly
served, given, or made to the address of the receiving Party set
forth below: (1) upon delivery if delivered in person; (2) five days
after deposit in the mail, if sent by first class United States or
Canadian mail, postage prepaid; (3) upon receipt of confirmation by
return electronic facsimile if sent by facsimile; or (4) upon
delivery if delivered by prepaid commercial courier service.
The address of the Company for notices shall be:
The Montana Power Company
40 E Broadway St.
Butte, MT 59701
Attn: Director of Transmission Operations
Fax: (406) 497-4209
The address of the Generating Party for notices shall be:
PP&L Global, Inc.
11350 Random Hills Road
Suite 400
Fairfax, VA 22030
Attn: Vice President and Chief Operating Officer
Fax: (703) 293-2659
17.2. Change of Notices Address TC "17.2. Change of Notices Address" \f
C \l "2" . Either Party may at any time, by notice to the other
Party in the manner set forth above, change the designation, address,
or fax number of the person specified to receive notice on its
behalf.
17.3. Specific Provision Controls TC "17.3. Specific Provision Controls"
\f C \l "2" . Despite the requirements of Section 17.1, where any
provision of this Agreement requires a Party to furnish any
particular data, information, or notice in a specific manner or
within a specific time period, such provision shall control.
18. Amendments TC "18. Amendments" \f C \l "1" . This Agreement may not be
modified by either Party except by subsequent mutual written agreement duly
executed by the Parties.
19. Construction of Agreement TC "19. Construction of Agreement" \f C \l
"1" . Ambiguities or uncertainties in the wording of this Agreement shall
not be construed for or against any Party, but shall be construed in a
manner that most accurately reflects the purpose of this Agreement and the
nature of the rights and obligations of the Parties with respect to the
matter being construed.
20. Integration TC "20. Integration" \f C \l "1" . This Agreement, including
the exhibits hereto, constitute the complete agreement of the Parties with
respect to the subject matter hereof, and all prior or contemporaneous
representations, statements, negotiations, understandings and inducements
are fully merged and incorporated in this Agreement.
21. Preservation of Obligations TC "21. Preservation of Obligations" \f C \l
"1" . Upon termination of this Agreement, all unsatisfied obligations of
each Party shall be preserved until satisfied.
22. Existing Agreements Preserved TC "22. Existing Agreements Preserved" \f C
\l "1" . Nothing in this Agreement shall be interpreted to supersede the
requirements of any existing agreement including the Asset Purchase
Agreement unless otherwise expressly stated herein.
23. Governing Law TC "23. Governing Law" \f C \l "1" . This Agreement
shall in all respects be interpreted, construed and enforced in accordance
with the laws of the State of Montana without regard to its conflict of
laws principles and in accordance with federal law where applicable.
24. Severability TC "24. Severability" \f C \l "1" . The rights of each
Party shall be as set forth in Section 2.1 if this Agreement is (1) not
accepted for filing or approved by FERC, (2) accepted for filing or
approved by FERC with changes unacceptable to either Party, or (3) accepted
for filing or approved by FERC, but such acceptance or approval is, as a
result of judicial review, subsequently reversed or modified in a manner
unacceptable to either Party. If this Agreement is not rendered void in
accordance with the provisions of Section 2.1, and thereafter any term,
covenant, or condition of this Agreement or the application or effect of
any such term, covenant, or condition is held invalid as to any person,
entity, or circumstance, or is determined to be unjust, unreasonable,
unlawful, imprudent, or otherwise not in the public interest by any court
or government agency of competent jurisdiction, then such term, covenant,
or condition shall remain in force and effect to the maximum extent not
prohibited by law, and all other terms, covenants, and conditions of this
Agreement, and the application thereof, shall not be affected thereby, but
shall remain in force and effect and the Parties shall be relieved of their
obligations only to the extent necessary to eliminate such regulatory or
other determination unless a court or governmental agency of competent
jurisdiction holds that such provisions are not separable from all other
provisions of this Agreement.
25. Singular and Plural; Use of "Or" TC "25. Singular and Plural; Use of
\"Or\"" \f C \l "1" . Any use of the singular in this Agreement also
includes the plural and any use of the plural also includes the singular,
and references to "or" shall be deemed to be disjunctive but not
necessarily exclusive.
26. Headings for Convenience Only TC "26. Headings for Convenience Only" \f C
\l "1" . The section headings in this Agreement are intended for
convenience and reference only, and are not intended to define, limit, or
describe the scope or intent of any provisions of this Agreement.
27. Relationship of the Parties TC "27. Relationship of the Parties" \f C \l
"1" .
27.1. No Partnership, Etc TC "27.1. No Partnership, Etc" \f C \l "2" .
Nothing contained in this Agreement is intended to create, or shall
be deemed or construed to create any relationship between the Parties
other than that of independent entities contracting solely for the
purpose of effectuating the provisions of this Agreement. Neither the
Parties nor any of their respective agents or employees shall be
construed to be the agent, partner, co-venturer, employee, or
representative of the other Party. Each Party shall be individually
responsible for its own covenants, obligations, and liabilities under
this Agreement.
27.2. Rights Several TC "27.2. Rights Several" \f C \l "2" . All rights
of the Parties are several, not joint. Except as expressly provided
in this Agreement, neither Party shall have a right or power to bind
the other Party without that Party's express written consent.
28. No Third Party Beneficiaries TC "28. No Third Party Beneficiaries" \f C
\l "1" . Except for the rights of intervenors as specified in Exhibit H,
this Agreement shall not be construed to create rights in, or to grant
remedies to, any third party as a beneficiary of this Agreement or of any
duty, obligation, or undertaking established herein.
29. No Dedication of Facilities TC "29. No Dedication of Facilities" \f C \l
"1" . No undertaking by either Party to the other Party under or pursuant
to any provision of this Agreement shall constitute or be deemed to
constitute a dedication of all or any portion of the Company's Electric
System to the public or to the Generating Party or a dedication of all or
any portion of the Generating Party's Electric System to the public or to
the Company.
30. Non-Waiver TC "30. Non-Waiver" \f C \l "1" . Any waiver at any time by
any Party of its rights with respect to any default under this Agreement,
or with respect to any other matter arising in connection with this
Agreement, shall not constitute or be deemed a waiver with respect to any
other default or other matter arising in connection with this Agreement.
Any waiver must be delivered in writing, executed by an authorized
representative of the Party granting such waiver. Any delay short of the
statutory period of limitations in asserting or enforcing any right shall
not constitute or be deemed a waiver.
31. Exhibits Incorporated TC "31. Exhibits Incorporated" \f C \l "1" . The
exhibits to this Agreement, as they may be amended or revised from time to
time, are attached to this Agreement and are incorporated by reference as
if herein fully set forth.
32. Further Actions and Documents TC "32. Further Actions and Documents" \f C
\l "1" . Each Party agrees to do all things, including but not limited to
the preparation, execution, delivery, filing and recording of any
instruments or agreements, reasonably requested by the other Party to carry
out the provisions of this Agreement.
33. Counterparts TC "33. Counterparts" \f C \l "1" . This Agreement may
be executed in one or more counterparts, which may be executed at different
times. Each counterpart shall constitute an original but all counterparts
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their respective names.
THE MONTANA POWER COMPANY [______________________________]
By: By:
Name: Name:
Title: Title:
Exhibit A
The Montana Power Company
Transmission Facility
Clearance Procedures
I. Standard
All work within minimum safe working distances of electric
conductors or equipment, shall be performed with the
equipment de-energized and isolated from all known sources of
electrical power and with the conductive portions safely
grounded. When this is not possible, work shall be
accomplished through hot work methods with the protective
devices on all sources of power set to provide reclose
protection for personnel.
This standard is divided into two main sections. The first
Section, A., is for Clearances through dispatchers for
transmission lines. The second Section, B., is for local
clearances or self-protection on distribution lines and some
remote sections of 50 kV or 69 kV equipment.
II. Definitions
A. Central station power: Power that originates from
generating stations designed to feed distribution and
or transmission systems. It does not include small
standby generator sets owned by customers that cannot
energize the equipment involved in the clearance
because the connected load greatly exceeds the
generator capacity.
B. Designated person: A qualified person who directs
switching activities associated with the clearance
process.
C. Dispatcher: Persons located at the system control
center (the System Operations Control Center (SOCC) in
Butte or the Rainbow plant in Great Falls, or another
group having dispatching authority delegated to them by
SOCC) who issue switching orders, clearances, or hot
line holds to MPC personnel or qualified line
contractors on MPC electric power lines or equipment.
D. Equipment: All devices, apparatus, equipment,
conductors, lines, and the like that could expose
workers to electrical shock hazards when in operation
for the production, transmission, and distribution of
electrical power.
E. Qualified person: A person who adequately understands
the installation, construction, and operation of the
electrical system being worked on and who can perform
assigned duties safely.
F. Switches: Any equipment that provides a visual open
and isolates electrical circuits. These include air
break switches, single blade disconnects, fused
disconnects, tired open jumpers, cutouts, underground
load break elbows, and the like.
G. Tags: One of two devices used to indicate that a
clearance has been taken by qualified workers. A
"shepherds hook tag" is an orange cylinder about
1 1/2 inches in diameter and 6 inches long with a hook on
one end that can be attached to the operating loop of a
disconnect blade using a switch stick. A "flat tag" is
a highly visible card with warnings printed on it and
where the name of the person taking the clearance and
the time it was placed on the switch is written.
III. Scope and Jurisdiction
A. The System Operations Control Center (SOCC): is the
dispatching authority for all lines and equipment shown
on the SOCC control board or on the electric
transmission system one-line diagram, except the
equipment that does not have switching devices shown on
the system one-line diagram that allows isolation from
distribution systems. Also excluded is all equipment
on the plant side of the switches at generating plants
that connect the plant to the transmission system. They
have the authority to delegate portions of the system
to others, as mutually agreed upon.
B. Rainbow: Is the dispatching authority on all 50 kV
thru 161 kV equipment in the Great Falls Division and
the Lewistown area.
C. Division or district: Shall be responsible for
clearance on lines and equipment that are not under the
jurisdiction of a dispatcher (or generation plant) or
any equipment on the system one-line diagram that does
not have switching devices shown on the system one-line
diagram that allow isolation from distribution systems.
Lines under SOCC jurisdiction where dispatching
authority has been delegated to the division or
district by SOCC.
E. Generation plant: All equipment associated with a
generation plant on the plant side of the switches
connecting the plant to the transmission system. For
terminal clearances involving a generation plant, the
plant operator may be considered a dispatcher.
IV. Standard Provisions
To effectively perform any specific clearance there should be
good cooperation and communication between all parties.
Often, it will be necessary to apply common sense and good
judgment to adaptations of the procedures to fit a particular
situation; however, all parties should stay within the realm
of logic set forth by these procedures. Any party to a
clearance in process may refuse to proceed if the party feels
that there has been an error or if the party does not
understand the conditions or boundaries of the clearance.
V. Procedures
A. Clearances Through Dispatchers (Switching Assurances on
Transmission)
1. Definitions
a. Clearance: This is the process of
completely isolating a given section of
line or equipment from all other lines or
equipment through tagged, and if possible,
locked switching devices that provide a
visible open. Normally, a clearance will
only be given by a dispatcher when all
distribution substations fed from the line
being requested have been isolated from the
line. When this is very difficult to
accomplish a local supervisor may arrange
for clearances on specific line sections
that have substations still connected, if
the local supervisor has a clear knowledge
there are no sources of feedback power on
the distribution system. The clearance
issued by a dispatcher on the transmission
lines with substations still connected to
them shall include the substations as part
of the clearance. The clearance shall then
be issued with the following statement:
"You are responsible for taking your own
protection from any sources of feedback
from the distribution systems fed by the
substations named in this clearance."
Clearances are required any time personnel
or equipment are within minimum safe
working distances of energized conductors
or equipment. The use of grounding devices
is mandatory when working on de-energized
equipment.
b. Hot line hold: This is the process of
setting relays or reclosers on sources of
central-station power to provide protection
for the crew on energized equipment by
blocking and tagging reclose actions.
A hot line hold is required any time
personnel are working on conductors or
equipment that cannot be de-energized and
there is reclose protection available. No
one shall re-energize equipment on a hot
line hold until the person holding the hot
line hold gives permission. The person
with the hot line hold shall immediately
contact the dispatcher if a contact or arc
occurs or if the person detects that the
circuit has become de-energized.
c. Terminal clearances: This is the process
of opening, tagging, and locking switches
interconnecting two or more dispatching
jurisdictions.
A terminal clearance is required any time
personnel require a clearance on equipment
that has a power source from a system under
the jurisdiction of another dispatch
center/generation plant. The terminal
clearance will only occur between the
dispatchers involved. The personnel
requesting a clearance to work on equipment
will only communicate with the dispatcher
having jurisdiction over the equipment
requested.
d. Terminal hold: This is the process of
blocking recloser relays, ensuring that
protective relays cannot re-energize
equipment.
A terminal hold is required any time
personnel require a hot line hold on
equipment that has a power source from a
system under the jurisdiction of another
dispatch center. The terminal hold will
only occur between the dispatchers
involved. The personnel requesting a hot
line hold to work on equipment will only
communicate with the dispatcher having
jurisdiction over the equipment requested.
e. Relay clearances: This is the process of
an employee securing authorization from a
dispatcher before making alterations to
relay settings at a substation. This is
mandatory in all cases when the employee is
using a remote control device to change
settings.
A relay clearance is required when an
employee is working with relays that are
installed in a substation and are normally
in-service (considered operational vs. new
construction).
2. Issuing and Releasing a Clearance
a. Dispatcher
(1) Shall record and issue all switching
orders.
(2) Shall record and issue all clearances
u
(3) Shall indicate the system status
through board tags and markers.
(4) Shall determine if lines can be taken
out of service or shall initiate the
modification of a clearance due to
changes in system requirements.
(5) Shall determine which switching
devices shall be used and in what
sequence.
b. Subforeman or Lineman (On Transmission
Equipment)
(1) Establishing a Clearance
(a) Whenever possible, shall
request clearances two to four
days in advance.
(b) Shall inform the dispatcher if
the work planned will affect
the system one-line diagram or
the equipment's operational
capability.
(c) Shall use names and
identifications from the system
one-line diagram to describe
equipment needed in the
clearance.
(d) Shall indicate the time to
start and the overall duration
needed, for a clearance.
(e) Shall hold a tail-board
conference to inform all crew
members about the job plans.
(f) Shall install protective
working grounds as appropriate
for the work.
(g) Shall ensue that all sources of
distribution power feedback
have been eliminated. (Follow
local clearance procedures
outlined in this standard.)
(h) Shall take appropriate
precautions for induced
voltages from nearby parallel
lines or from distribution
underbuild.
(2) Releasing a Clearance
(a) Shall ensure that the equipment
is operational and fit for use.
(b) Shall ensure that all grounds
are removed.
(c) Shall ensure that all men and
equipment are in the clear.
(d) Shall inform the dispatcher of
any operational limitations.
(e) Shall release a clearance at
the end of the shift or the
job, whichever comes first.
(f) Shall release a clearance upon
turning the job over to another
person and leaving the area.
(g) Shall issue the following
statement to release a
clearance: "All personnel and
equipment are in the clear. All
working grounds have been
removed. I am releasing this
clearance, and as far as I am
concerned, this line
(equipment) is ready for
service."
c. During Emergencies
When the person holding a clearance cannot
release a clearance, a local MPC supervisor
or a journeyman working under the clearance
shall assume responsibility for the
clearance as approved by the dispatcher.
d. Third Parties
When direct communication with the
dispatcher is impossible, a clearance can
be relayed through a third party when:
(1) The third party is considered capable
by the dispatcher and the person
requesting the clearance.
(2) The third party writes down the words
of the dispatcher and the subforeman
and repeats the wording exactly.
e. Multiple Crews Under a General Foreman
The general foreman may take the clearance
for all of the crews under his/her
direction.
f. Multiple Clearances on the Same Line
When multiple crews are working on the same
equipment, but not under a general foreman,
each subforeman shall be issued a separate
clearance.
3. Switching Responsibilities (Clearances on
Transmission Equipment)
a. Switching Orders
All switching on equipment under the
jurisdiction of a dispatcher shall be done
as follows:
(1) The dispatcher shall instruct a
qualified person to operate a
switching device as identified or
named on the system one-line diagram
and ask him to check all three phases
open/closed.
(2) The switchman shall perform the
designated switching operation and
tag/untag, and if possible, lock the
switch and shall check all three
phases open/closed.
(3) The switchman shall report the switch
status as tagged/untagged, and as
appropriate, locked and report that
all three phases checked open/closed.
(4) All phases of a circuit must be
switched on transmission lines.
(5) All switches, points of visible
break, shall be tagged, and if
possible, locked as explained below.
4. Using Tags and Locks
a. Tags or magnetic flags shall be placed on a
dispatching board by the dispatcher to show
the existing status of the switches.
b. Supervisory control buttons, or their
escutcheons, (means covers or guards) shall
be appropriately tagged that a clearance or
hot line hold has been issued through that
switch.
c. Gang operated air break switches shall be
locked and tagged with a completed "flat
tag."
d. A "flat tag" shall be placed on any remote
operating handle (ABS or OCB) that would
normally be used to energize the equipment
under the clearance. Anyone looking at a
control panel in a control house/room
should readily understand that there is a
clearance out.
e. When an overhead single-blade switching
device must be operated, one phase at a
time, with a switch stick or similar
device, a "shepherds hook tag" shall be
placed on each of the blades being
switched, and a completed "flat tag" shall
be attached to one of the "shepherds hook
tags" or attached on the supporting
structure near the ground (not accessible
to the public).
f. A completed "flat tag" shall be placed on,
or adjacent to, the blocking-control handle
(toggle switch) of reclosers.
5. Switching and Clearance Records or Logs (on
Transmission Equipment)
The dispatcher shall record all switching orders
on a switching log that includes the times, the
operation, who performed the switching, which
switch was operated, and who is taking the
clearance. In most substation control
houses/rooms there is a log that should be filled
out by the switchman.
B. Local Clearances or Self-Protection (Normally
Distribution Equipment)
These are clearances handled within a Division or
District on equipment not under the jurisdiction of
SOCC or other dispatch center. This normally includes
Distribution Voltage Equipment but in some cases
involves some 50 or 69 kV equipment delegated to them.
Self-protection is the term to be used in
conversations. The word "clearance" is added in
parenthesis to clarify meaning.
1. Definition of Local Clearances
a. Self-protection or (clearance): This is
the process of isolating all sources of
central-station power from a given section
of line or equipment through tagged, and if
possible, locked switching devices that
provide a visible open. Self-protection
could be provided by opening one air break
switch that is the only feed from a
substation to a radial line that has no
generating sources beyond the air break
switch. If the above line had any places
that it could be connected to another power
source (another feeder, a generator, or a
transformer that could provide feedback
from a secondary source or another
energized phase), those points would have
to be included in the self-protection
(clearance) process.
Self-protection is required any time
personnel or equipment are within minimum
safe working distances of energized
conductors or equipment. The use of
protective grounding devices is mandatory
while working on de-energized equipment.
b. Hot line hold: This is the process of
setting relays or reclosers on sources of
central-station power to provide protection
for the crew working on energized equipment
by blocking and tagging reclose actions or
automatic switches.
No one shall re-energize equipment on a hot
line hold until the person holding the hot
line hold gives permission. The person
with the hot line hold shall immediately
contact the local supervisor if a contact
or arc occurs.
2. Taking and Releasing Self-Protection (Clearance
on Distribution)
The subforeman (journeyman/leadman/patrolman)
shall have the following responsibilities:
a. Notifying
Whenever possible shall notify the local
service dispatcher, office attendant, town
manager, Butte operator, or supervisor what
action is being taken in an area.
b. Taking Self-Protection
(1) Shall have adequate knowledge of the
system (through experience or
accurate maps/drawings) or shall
patrol the system to gain the
knowledge necessary to perform the
self-protection (clearance) process
safely.
(2) Shall hold a tail-board conference to
inform all crew members about the job
plans.
(3) Shall ensure that all sources of
power are isolated (by visible opens
for a self-protection (clearance) or
blocking reclosers for hot line holds
from the equipment/lines to be worked
on.
(4) Shall tag, and if possible, lock all
switches.
(5) Shall install grounding, as
appropriate, for the work.
(6) Shall take the appropriate
precautions for induced voltages from
nearby parallel lines or from
underbuild.
c. Releasing
(1) Shall ensure that the equipment is
operational and fit for use.
(2) Shall ensure that all grounds are
removed.
(3) Shall ensure that all men and
equipment are in the clear.
3. Switching Responsibilities For Self-Protection
(Clearance on Distribution)
a. Switching Orders
All switching on equipment for
self-protection shall be ordered by the
designated person (workman in charge of the
job or by a plant operator, for specific
parts of some divisions) as follows:
(1) The switchman shall perform the
designated switching operation, check
open/closed and tag/untag, and if
possible, lock the switch.
(2) The switchman shall report back the
switch status as checked open/closed
and tagged/untagged, and as
appropriate, locked.
(3) Each phase of a circuit (normally
three) involved in self-protection
(clearance) shall be tagged/untagged,
and if possible, locked.
b. Using Tags and Locks
(1) When there are "shepherds hook tags"
in place and the crew with the
self-protection (clearance) is
working in circumstances that any
qualified worker in the area could
easily identify who has the
self-protection (clearance), "flat
tags" do not have to be used.
(2) Gang-operated switches (OH or UG)
shall be locked and tagged with a
completed "flat tag."
(3) A "flat tag" shall be placed on any
remote operating handle that would
normally be used to energize the
equipment under the self-protection
(clearance).
(4) When an overhead single-blade
switching device must be operated,
one phase at a time, with a switch
stick or similar device, a
"shepherds hook tag" shall be placed
on each of the blades or phases being
switched. A "flat tag" should be
completed and attached to one of the
"shepherds hook tags or attached on
the supporting structure near the
ground, not accessible to the public,
when it is needed to identify who has
the self-protection (clearance).
(5) Distribution cut-out blades shall be
removed and tied in the pole position
for local clearance. Tying a "flat
tag" to one of the blades is a valid
method of tagging.
(6) When an underground single-blade
switching device must be operated,
one phase at a time, with a switch
stick or similar device, a "shepherds
hook tag" shall be placed on each
phase being switched. (A "flat tag"
should be completed and attached to
one of the "shepherds hook tags" when
it is needed to identify who has the
self-protection (clearance).)
(7) To block a recloser at the recloser,
a "shepherds hook tag" shall be
placed in the hook of the operating
handle. (A "flat tag" should be
completed and attached to the
"shepherds hook tag" or attached on
the supporting structure near the
ground, not accessible to the public,
when it is needed to identify who has
the self-protection (clearance).)
(8) To block a recloser from a relay
panel, a "flat tag" should be
completed and placed on, or adjacent
to, the blocking control handle
(toggle switch).
c. Switching Records or Logs
A switchman is responsible for recording
all activity in the substation log as
required by local supervision.
d. Multiple Crews on the Same Line or
Equipment
One qualified person shall be designated to
be in charge of all of the self-protection
(clearance) activities.
V. References
A. OSHA CFR29 1910.333
B. CFR29 1926.950 THROUGH 957
C. NESC Work Rule 442 through 446
Exhibit B
Interconnected Units and Points of Interconnection
Interconnected Units
The Interconnected Units are more fully described in the Asset Purchase
Agreement.
Points of Interconnection
The points of interconnection for this sale are shown on the attached diagrams
and described as the Generation Point of Receipt (GPOR) for the Interconnected
Units. Within 60 days of the Closing Date, these points will be identified in
the field as described in Section 4.1.1 of this Agreement.
Kerr
Interconnected Units: Units 1-3, 60 MW generators
Point of Interconnection: the 100 kV bus in the Kerr Switchyard.
Thompson Falls
Interconnected Units: Units 1-6, 6.25 MW generators
Unit 7, 50 MW generator
Point of Interconnection: the 100 kV bus in the original Powerhouse.
Mystic
Interconnected Units: Units 1-2, 5.5 MW generators
Point of Interconnection: the 50 kV bus at the Company's Line Creek
Subsation.
Madison
Interconnected Units: Units 1-4, 2.25 MW generators
Point of Interconnection: the 100 kV bus in the Company's Bradley Creek
Substation.
Hauser
Interconnected Units: Units 1-5, 2.8 MW generators
Unit 6, 4.0 MW generator
Point of Interconnection: the 69 kV bus located in the Hauser powerhouse.
Holter
Interconnected Units: Units 1-4, 12.5 MW generators
Point of Interconnection: the 100 kV bus located in the Holter Powerhouse.
Black Eagle
Interconnected Units: Units 1-3, 6 MW generators
Point of Interconnection: the 100 kV bus at the Company's Riverview
Substation.
Rainbow
Interconnected Units: Units 1-6, 4 MW generators
Units 7-8, 5 MW generators
Point of Interconnection: the 100 kV bus at the Company's Rainbow
Substation.
Cochrane
Interconnected Units: Units 1-2, 25 MW generators
Point of Interconnection: the 100 kV bus at the Company's Rainbow
Substation.
Ryan
Interconnected Units: Units 1-6, 10 MW generators
Point of Interconnection: the 100 kV bus at the Company's Rainbow
Substation.
Morony
Interconnected Units: Units 1-2, 23 MW generators
Point of Interconnection: the 100 kV bus at the Company's Great Falls 230
kV Switchyard.
Colstrip Units #1 and #2
Interconnected Units: Units 1-2, 330 MW generators
Point of Interconnection: the 230 kV bus in the Company's Colstrip
Switchyard
Colstrip Units #3 and #4
Interconnected Units: Units 3-4, 740 MW generators
Point of Interconnection: the 500 kV bus in the Company's Colstrip
Switchyard
Corette
Interconnected Units: Unit 1, 160 MW generator
Point of Interconnection: the 100kV bus in the Company's Billings Steam
Plant Switchyard
This Schedule is subject to modification, by mutual agreement, consistent with
the development of the Separation Document.
Exhibit C
Interconnection Facilities
The following are the Interconnection Facilities owned and/or controlled by
the Generating Party. If necessary, Interconnection Facilities will be
described for each generation facility in more detail prior to the Closing
Date.
Kerr
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step up transformers, associated air break switches, PCBs
100-53, 100-54 and 100-65, and the approximately 0.4 mile of 100 kV
transmission lines connecting the Interconnected Units to the 100 kV bus in
the Company's Kerr Switchyard (see attached one-line diagram).
Thompson Falls
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers, PCB 100-245 and the associated air
break switch, and the approximately 0.3 miles of 100 kV transmission line
connecting Interconnected Unit #7 to the 100 kV bus on the third floor of the
old powerhouse (see attached one-line diagram).
Mystic
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers, PCBs 50-18 and 50-19 and associated
disconnect switches at the project, the two approximately 5.3-mile 50 kV
transmission lines connecting the project to the Company's Line Creek
Switchyard, and PCBs 50-115 and 50-116 and associated disconnect switches at
Line Creek Switchyard (see attached one-line diagram).
Madison
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switches, PCBs
50-29 and 50-30 and the 100/50 kV autotransformer and associated air break
switches at Madison, the approximately 3.2 miles of 100 kV transmission line
connecting the project to the Company's Bradley Creek Switchyard, and PCB 100-
190 and associated disconnect switches at the Company's Bradley Creek
Switchyard (see attached one-line diagram).
Hauser
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switches, and
bus air break switches #1, #3 and #4 (see attached one-line diagram).
Holter
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switches, and
the leads and/or bus work between the step-up transformers and the Company's
100 kV bus inside the Holter powerhouse (see attached one-line diagram).
Black Eagle
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switch, the
approximately 1 mile of 100 kV transmission line connecting Black Eagle to the
Company's Great Falls Riverview Substation, and PCB 100-X and associated
disconnect switches at the Company's Great Falls Riverview Substation (see
attached one-line diagram).
Rainbow
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break and disconnect
switches, PCBs 100-6 and 69-33 and associated air break and disconnect
switches (see attached one-line diagram).
Cochrane
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switches,
approximately 2.9 miles of 100 kV transmission line connecting the generating
plant to the Company's Rainbow Switchyard, and PCB 100-77 and associated air
break switches at the Company's Rainbow Switchyard (see attached one-line
diagram).
Ryan
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and PCB 100-4 and associated disconnect
and air break switches, approximately 9.0 miles of 100 kV transmission lines
and associated air break switches connecting the generating plant to the
Rainbow Switchyard, and PCB 100-2 and associated air break switches at Rainbow
Switchyard (see attached one-line diagram).
Morony
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switches,
approximately 9.5 miles of 100 kV transmission line and associated air break
switches connecting the generating plant to the Company's Great Falls 230 kV
Switchyard, PCB 100-5 and associated disconnect switches at Great Falls 230 kV
Switchyard, and the Morony Rural Substation and associated distribution
facilities serving Morony and other generating plants (see attached one-line
diagram).
Colstrip Units #1 & #2
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switches, two
approximately 0.4 mile 230 kV transmission lines connecting the Interconnected
Units to the Company's Colstrip Switchyard, the start-up transformer, all
facilities connecting the low side of the start-up transformer to the
Interconnected Plant, air break switch #105, and approximately 0.5 mile 100 kV
transmission line connecting the start-up transformer to the Company's
Colstrip Switchyard (see attached one-line diagram).
Colstrip Units #3 & #4
The leads and/or bus work between each Interconnected Unit and its step-up
transformer, the step-up transformers and associated air break switches, two
approximately 0.4 mile 500 kV transmission lines connecting the Interconnected
Units to the Company's Colstrip Switchyard, the start-up transformers and
associated air break switches (#108 and #109), all facilities connecting the
low side of the start-up transformer to the Interconnected Plant, PCBs 230-20
and 230-64 and the associated air break switches (X, Y, L and B), 230/100 kV
autotransformer #6, PCBs 100-202 and 100-204, air break switches #206, #106
and #107 and approximately 0.5 mile 100 kV transmission line connecting the
start-up transformer to the Company's Colstrip Switchyard (see attached one-
line diagram).
Corette
The leads and/or bus work between the Interconnected Unit and its step-up
transformer, the step-up transformer and associated air break switch, PCB 100-
98, the transmission line between PCB 100-98 and the 100 kV bus in the
Company's Billings Steam Plant Switchyard, the start-up transformer, the bus
work connecting the start-up transformer to the 50 kV bus in the Company's
Billings Steam Plant Switchyard, and all facilities connecting the low side of
the start-up transformer to the Interconnected Plant (see attached one-line
diagram).
This Schedule is subject to modification, by mutual agreement, consistent with
the development of the Separation Document.
Exhibit D
Metering Locations
Metering locations are shown and described on the attached diagrams.
This Schedule is subject to modification, by mutual agreement, consistent with
the development of the Separation Document
Exhibit E
Remedial Action Schemes
There are two major remedial action schemes (RAS) that affect the Montana
Power Company (MPC) generation. These are the Acceleration Trend Relay (ATR)
at Colstrip and Bonneville Power Administration's (BPA) Garrison RAS. Both of
these RAS were developed to enhance the transfers from Colstrip to the
Northwest.
The ATR monitors the acceleration and speed of the Colstrip generators and
from this data can determine which Colstrip units to trip for system
disturbances that require Colstrip unit tripping. The device has the
capability also to trip Western Area Power Administration's DC Intertie at
Miles City and the Montana One generator near Colstrip. Neither of these
channels is active as of the date upon which this Agreement was signed. The
MPC Electric Transmission Planning Group determines the characteristics of the
trip logic.
The BPA RAS at Garrison is armed based on system flows on the 500 kV system in
the Garrison area and the generation at Cabinet Gorge, Hungry Horse, Libby and
Noxon. The RAS can trip 500 kV bus reactors at Garrison, the Miles City DC
Intertie, Libby generation, Noxon generation, and Dworshak generation for loss
of predefined facilities. Also a channel to Colstrip can be activated at
Colstrip that will allow the RAS to trip Colstrip generation in excess of 1400
mw. As of the date upon which this Agreement was signed, this feature is
deactivated.
Exhibit F
Protective Devices and Terminal Voltage Regulators
Black Eagle Generation Facilities:
Reference: "Black Eagle Hydro Project" one-line sketch.
Riverview Substation:
All the protective relaying in the Riverview Substation will be owned,
operated and maintained by The Montana Power Company (MPC). The exception
would be the relaying for the new 100 kV line connecting Black Eagle. MPC
needs use of the line side CTs of the new PCB for the 100 kV bus protection.
Switchyard auxiliary power and battery are available for the new PCB. Remote
control of the PCB is available from SOCC.
Voltage Regulation:
The 100 kV side of the Black Eagle step-up transformer is the reference for
voltage control.
Black Eagle Plant:
All protective relaying in the Black Eagle Plant is sold with the facilities.
Cochrane Generation Facilities:
Reference: "Cochrane Hydro Project" one-line sketch.
Great Falls Rainbow Switchyard:
All the protective relaying in the Great Falls Rainbow Switchyard will be
owned, operated and maintained by MPC. The exception would be the line
relaying connecting the Cochrane, Ryan and Rainbow Plants to the MPC system.
MPC needs the use of the line side CTs of PCB 100-077 for the 100 kV bus
protection.
Switchyard auxiliary power and battery are available for the PCBs 100-077.
Voltage Regulation:
The 13.8 kV bus in the Cochrane Plant is the reference for voltage control.
Hauser Generation Facilities:
Reference: "Hauser Hydro Project" one-line sketch.
Hauser Plant:
All the protective relaying associated with the two 69 kV transmission lines,
the 69 kV bus, the grounding/distribution transformers and the feeders will be
owned, operated and maintained by the MPC. The relaying for the three
generator step-up transformers, the generators and auxiliary equipment will
belong to the new owners. MPC needs to share use of each 69 kV high side CT
closest to the winding of each step-up transformer for the 69 kV bus
protection.
Plant auxiliary power and battery will need to be provided by the new owners
for MPC's equipment.
Voltage Regulation:
Presently, there is no voltage regulator. The reference used for the manual
setting would be the 2 kV bus.
Holter Generation Facilities:
Reference: "Holter Hydro Project" one-line sketch.
Holter Plant:
All the protective relaying associated with the three 100 kV transmission
lines and the 100 kV bus will be owned, operated and maintained by MPC. The
relaying for the four generator step-up transformers, the generators and
auxiliary equipment will belong to the new owners. MPC needs use of each 100
kV high side CT closest to the winding of each step-up transformer for the 100
kV bus protection.
The transmission SCADA/communications equipment will be owned, operated and
maintained by MPC.
Plant auxiliary power and battery will need to be provided by the new owners
for MPC's equipment.
Voltage Regulation:
The 100 kV bus is the reference for voltage control. There is a VT (owned by
MPC) available as a reference source.
Kerr Generation Facilities:
Reference: "Kerr Hydro Project" one-line sketch.
Kerr Switchyard:
All the protective relaying and SCADA in the Kerr Switchyard will be owned,
operated and maintained by MPC. The exception would be the backup relays for
the generators. MPC needs to share use of the line side CTs of the generator
PCBs for the 100 kV bus protection.
Switchyard auxiliary power and battery are available for the generator PCBs.
Voltage Regulation:
The 100 kV bus is the reference for voltage control. There is a VT (owned by
MPC) available as a reference source.
Kerr Plant:
All protective relaying in the Kerr Plant is sold with the facilities.
Madison Generation Facilities:
Bradley Creek Substation:
All the protective relaying and SCADA in the Bradley Creek Substation will be
owned, operated and maintained by MPC. The exception would be the line
relaying for the protection of the 100 kV line connecting the Madison Plant to
the MPC system. MPC needs the use of the line side CTs of PCB 100-190 for the
100 kV bus protection.
Switchyard auxiliary power and battery are available for the PCB 100-190.
Remote control of PCB 100-190 is available from SOCC.
Voltage Regulation:
The 4 kV bus in the Madison Plant is the reference for voltage control.
Madison Plant:
All protective relaying in the Madison Plant is sold with the facilities.
Morony Generation Facilities:
Reference: "Morony Hydro Project" one-line sketch.
Great Falls 230 kV Substation:
All the protective relaying and SCADA in the Great Falls 230 kV Substation
will be owned, operated and maintained by MPC. The exception would be the
line relaying for the protection of the 100 kV line connecting the Morony
Plant to the MPC system. MPC needs the use of the line side CTs of PCB 100-
005 for the 100 kV bus protection.
There is a metallic cable for a transfer trip between Morony that uses the
cable system from the Great Falls Service Center through Black Eagle-230 kV
Switchyard-Rainbow-Cochrane-Ryan-Morony.
Switchyard auxiliary power and battery are available for the PCB 100-005.
Remote control of PBC 100-005 is available from SOCC.
Voltage Regulation:
The 13.8 kV bus in the Morony Plant is the reference for voltage control.
Morony Plant:
All protective relaying in the Morony Plant is sold with the facilities.
Mystic Generation Facilities:
Line Creek Substation:
All the protective relaying and SCADA in the Line Creek Substation will be
owned, operated and maintained by MPC. The exception would be the line
relaying for the protection of the 50 kV lines connecting the Mystic Plant to
the MPC system. MPC needs the use of the line side CTs of PCBs 50-115 and 50-
116 for the 50 kV bus protection.
Switchyard auxiliary power and battery are available for the PCBs 50-115 and
50-116. Remote control of these PCBs is available from SOCC.
Voltage Regulation:
The 6.6 kV bus in the Mystic Plant is the reference for voltage control.
Mystic Plant:
All protective relaying in the Mystic Plant is sold with the facilities.
Rainbow Generation Facilities:
Reference: "Rainbow Hydro Project" one-line sketch.
Great Falls Rainbow Switchyard:
All the protective relaying in the Great Falls Rainbow Switchyard will be
owned, operated and maintained by MPC. The exception would be the relaying
associated with the protection of the 100 kV and 69 kV lines connecting the
Rainbow Plant to the MPC system. MPC needs the use of the plant side CTs of
PCBs 100-006 and 69-33 for the 100 kV and 69 kV respective bus protection.
Switchyard auxiliary power and battery are available for the PCBs 100-006 and
69-33
Voltage Regulation:
The 100 kV bus in the Rainbow Switchyard is the reference for voltage control.
Rainbow Plant:
All protective relaying in the Rainbow Plant is sold with the facilities.
Ryan Generation Facilities:
Reference: "Ryan Hydro Project" one-line sketch.
Great Falls Rainbow Switchyard:
All the protective relaying in the Great Falls Rainbow Switchyard will be
owned, operated and maintained by MPC. The exception would be the line
relaying for the protection of the 100 kV line connecting the Ryan Plant to
the MPC system. MPC needs the use of the line side CTs of PCB 100-002 for the
100 kV bus protection.
Switchyard auxiliary power and battery are available for the PCB 100-002.
Remote control of PCB 100-002 is available from SOCC.
Voltage Regulation:
The 100 kV bus in the Ryan Plant is the reference for voltage control.
Ryan Plant:
All protective relaying in the Ryan Plant is sold with the facilities.
Thompson Falls Generation Facilities:
Reference: "Thompson Falls Hydro Project" one-line sketch.
Thompson Falls Plant:
All the protective relaying associated with the four 115 kV transmissions
lines and the 115 kV bus will be owned, operated and maintained by MPC. The
relaying for the three generator step-up transformers, the generators and
auxiliary equipment will belong to the new owners. MPC needs to use the
generator side CTs of Unit #7's PCB and the 115 kV high side CT closest to the
winding of each step-up transformer of Units #1 through #6 for the 115 kV bus
protection.
The transmission SCADA/communications equipment and communication cabling
leaving the plant for the City will be owned, operated and maintained by MPC.
Plant auxiliary power and battery will need to be provided by the new owners
for MPC's equipment.
Voltage Regulation:
The 115 kV bus is the reference for voltage control. There is a VT (owned by
MPC) available as a reference source.
Colstrip Units #1 and #2 Generation Facilities:
Reference: "Colstrip Units #1 and #2 Thermal Project" one-line sketch.
Colstrip 230 kV Switchyard:
All the protective relaying and SCADA in the Colstrip 230 kV Switchyard will
be owned, operated and maintained by MPC. The exception would be MPC's share
of the relaying for the two 230 kV lines connecting Colstrip Units #1 and #2
to the Switchyard and the 115 kV start-up line that exits the 115 kV portion
of the yard. The new owners will have the use of "x" and "b" CTs of the PCBs
used for synchronizing the Units for the line protection. The new owners will
have the use of the "bus" CTs of PCBs 100-142 and 100-201 for the 115 kV line
protection of the start-up line.
MPC's share of the cable system connecting the Switchyard to the Plants would
be part of the generation plants. This cabling is for communication, relaying
and control.
Voltage Regulation:
The generator bus of each plant is the reference for voltage control, but the
Switchyard bus voltage is "set point" reference.
Colstrip Units #1 and #2 Plants:
All of MPC's share of the protective relaying in the Colstrip Units #1 and #2
Plants are sold with the facilities.
Start-up Metering:
The generator owners will be required to install a metering set on the start-
up line before it leaves the 115kV portion of the Switchyard.
Colstrip Unit # 3 Generation Facilities:
Reference: "Colstrip Unit 3 Thermal Project" one-line sketch.
Colstrip 500 kV Switchyard:
MPC's share of the relaying for the 500 kV line connecting Colstrip Unit #3 to
the Switchyard will be sold to the new owners. They will have the use of
"532X" and "535B" CTs of the PCBs used for synchronizing the Unit for the line
protection.
One half of the MPC's share of the protective relaying for the start-up system
that uses "x" and "b" CTs of PCBs 230-64 and 230-20, the autotransformer Bank
#6 and the 115 kV start-up for the Units #3 and #4 line including the control
house and relaying for PCB 100-204 is included in the sale.
MPC's share of the cable system connecting the Switchyard to the Plants would
be part of the generation plants. This cabling is for communication, relaying
and control.
Voltage Regulation:
The generator bus is the reference for voltage control, but the Switchyard bus
voltage is "set point" reference.
Colstrip Unit #3 Plant:
MPC's share of the protective relaying in the Colstrip Unit #3 Plant is sold
with the facilities.
Start-up Metering:
The generation owners will be required to install a 230 kV metering set on the
start-up line before it leaves the Colstrip 230 kV Switchyard.
Colstrip # 4 Generation Facilities:
Reference: "Colstrip Unit #4 Thermal Project" one-line sketch.
Colstrip 500 kV Switchyard:
MPC's share of the relaying for the 500 kV line connecting Colstrip Unit #4 to
the Switchyard will be sold to the new owners. They will have the use of
"540B" and "545B" CTs of the PCBs used for synchronizing the Unit for the line
protection.
One half of MPC's share of the protective relaying for the start-up system
that uses "x" and "b" CTs of PCBs 230-64 and 230-20, the autotransformer Bank
#6 and the 115 kV start-up for the Units #3 and #4 line including the control
house and relaying for PCB 100-204 is included in the sale.
MPC's share of the cable system connecting the Switchyard to the Plants would
be part of the generation plants. This cabling is for communication, relaying
and control.
Voltage Regulation:
The generator bus is the reference for voltage control, but the Switchyard bus
voltage is "set point" reference.
Colstrip Unit #4 Plant:
MPC's share of the protective relaying in the Colstrip Unit #4 Plant is sold
with the facilities.
Start-up Metering:
The generator owners will be required to install a 230 kV metering set on the
start-up line before it leaves the Colstrip 230 kV Switchyard.
Corette Generation Facilities:
Reference: "Corette Thermal Project" one-line sketch.
Billings Steam Plant Switchyard:
There is no relay protection directly associated with the Corette Steam Plant.
MPC needs the use of the plant side CTs of PCB 100-98 for the switchyard bus
protection.
The ownership of the metallic cable between the Switchyard control house and
the Plant would belong to the Plant. The fiber optic cable will remain in
MPC's ownership.
Voltage Regulation:
The generator bus is the reference for voltage control, but the Switchyard bus
voltage is "set point" reference.
Corette Plant:
All of the protective relaying in the Corette Plant is sold with the
facilities.
Start-up Metering:
The generator owners will be required to install a 50 kV metering set on the
start-up tap.
This Schedule is subject to modification, by mutual agreement, consistent with
the development of the Separation Document.
Exhibit G
Special Arrangements and Access to Facilities
Company Access to Generating Party Facilities
Kerr
Thompson Falls
Mystic
Madison
Hauser
Holter
Black Eagle
Rainbow
Cochrane
Ryan
Morony
Colstrip Units #1 and #2
Colstrip Units #3 and #4
Corette
As part of the Sale and at the Generating Party's expense, the following
facilities will have to be installed or removed:
Black Eagle
A new interconnection will be established at the Great Falls Riverview
Substation, including approximately 1 mile of new 100 kV transmission line,
PCBs 100-X and 100-Y and associated disconnect switches (see the attached one-
line diagram).
Rainbow
The 100 kV tie to the 69 kV potion of Rainbow Switchyard and air break switch
#102 will be removed.
Must Run Generation
Except in the case of Uncontrollable Force, at least one Interconnected Unit
at Kerr and one Interconnected Unit at Mystic must be on line and generating
power at all times unless the Company gives its consent otherwise, such
consent not to be unreasonably withheld; provided, however, if the Company, in
its sole judgment, determines that the reliability of its Electric System is
jeopardized by having all generation off line at either Kerr or Mystic, then
its decision to withhold consent shall be deemed to be reasonable.
Transmission Service to the Flathead Irrigation Project
Pursuant to the Kerr project license issued by FERC, the Generating Party
provides electrical energy and capacity to the Flathead Irrigation Project
across the 115 kV bus in the Company's Kerr switchyard. Because the
transmission arrangements related to this transaction were in place prior to
FERC Order 888, the Company will continue to provide to the Generating Party
transmission service for that transaction for no charge; provided, however, if
at any time such arrangement is deemed by the FERC to be unacceptable for any
reason, the Company and the Generating Party will enter into a transmission
services agreement acceptable to FERC.
Generating Party Access to Company Facilities
Rainbow Switchyard:
Great Falls 230 kV Switchyard:
Colstrip Switchyard:
Et al
This Schedule is subject to modification, by mutual agreement, consistent with
the development of the Separation Document
Exhibit H
Dispute Resolution
1. Definitions. In addition to the capitalized terms defined in the
attached Agreement, the following additional terms used in this Exhibit H have
the meanings specified below:
1.1 "FPA" means the Federal Power Act, 16 USC S 824 et seq., as
amended and the rules and regulations promulgated thereunder.
1.2 "WRTA" means the Western Regional Transmission Association or its
successor.
2. Dispute Resolution.
2.1 Preconditions to Arbitration.
2.1.1 Informal Settlement. Each Party shall make all reasonable
efforts to settle all disputes governed by this Exhibit H. If any such dispute
is not settled, either Party may request in writing that the manager of WRTA
(or its successor organization) appoint an impartial facilitator to aid the
parties in reaching a mutually acceptable resolution to the dispute; such
appointment shall be made within 10 days of receipt of the request. The
facilitator and representatives of the Parties with authority to settle the
dispute shall meet within 21 days after the facilitator has been appointed to
attempt to negotiate a resolution of the dispute. Settlement offers shall not
be admissible in any subsequent dispute resolution process. With the consent
of all Parties, resolution may include referring the matter to a technical
body for resolution or for an advisory opinion.
2.1.2 Impasse. If the Parties have not succeeded in negotiating a
resolution of the dispute within 30 days after first meeting with the
facilitator or if the facilitator is not appointed within ten days pursuant to
Section 2.1.1 of this Exhibit H, unless otherwise agreed, the Parties shall be
deemed to be at an impasse and any such disputing Party may commence the
arbitration process provided hereunder by notice to the other Party. The
Company shall post on the OASIS notice of the commencement of such dispute
resolution process with respect to any Generating Party within forty-eight
(48) hours after the Company sends or receives such notice.
2.1.3 Statements of Dispute. Within 14 days of a Party's request
that the arbitration process be commenced, each Party shall submit a statement
in writing to the other Party, which statement shall set forth in reasonable
detail the nature of the dispute, the issues to be arbitrated, and the
proposed arbitrator's award sought through such arbitration proceedings. To
the extent Parties do not agree on the terms of a required contract provision,
each submittal shall include proposed contract language for those issues in
dispute.
2.1.4 Selection of an Arbitrator. Within 10 days following the
submission of their statements, the Parties shall select an arbitrator
familiar with and knowledgeable about the policies and criteria used in the
Parties' Control Areas, transmission systems, and regulatory requirements. If
the Parties cannot agree upon an arbitrator, the Parties shall take turns
striking names from a list of ten qualified individuals supplied by the WRTA
Arbitration Committee from the list maintained by the WRTA Board, with a Party
chosen by lot first striking a name. The last-remaining name not stricken
shall be designated as the arbitrator. If that individual is unable or
unwilling to serve, the individual last stricken from the list shall be
designated and the process repeated until an individual is selected who is
able and willing to serve. Absent the express written consent of all Parties
as to any particular individual, no person shall be eligible for selection as
an arbitrator who is a past or present officer, member of the governing body,
employee of or consultant to any of the Parties, or of an entity related to or
affiliated with any of the Parties, or whose interests are otherwise affected
by the matter to be arbitrated. Any individual designated as an arbitrator
shall make known to the Parties any such disqualifying relationship and a new
arbitrator shall be designated in accordance with the provisions of this
Section 2.1.4.
2.1.5 Procedural Rules. The arbitrator shall determine discovery
procedures, intervention rights, how evidence shall be taken, what written
submittals may be made, and other such procedural matters, taking into account
the complexity of the issues involved, the extent to which factual matters are
disputed and the extent to which the credibility of witnesses is relevant to a
resolution of the dispute. Each party to the dispute shall produce all
evidence determined by the arbitrator to be relevant to the issues presented.
To the extent such evidence involves proprietary or confidential information,
the arbitrator shall issue an appropriate protective order which shall be
complied with by all parties to the dispute. The arbitrator may elect to
resolve the arbitration matter solely on the basis of written evidence and
arguments.
2.1.6 Evidence. The arbitrator shall take evidence submitted by
the disputing parties in accordance with procedures established by the
arbitrator and may request additional information, including the opinion of
recognized technical bodies. All disputing parties shall be afforded a
reasonable opportunity to rebut any such additional information. Other
affected entities may request in writing that the arbitrator consider
additional information and the arbitrator may consider such additional
information, subject to a right of the parties to have a reasonable
opportunity to rebut such additional information.
2.2 Substantive Standards and Decision. As soon as practicable but in
no event later than 115 days of his or her selection as arbitrator, the
arbitrator shall select, by written notice to the Parties, the proposed award
of a Party, which best meets the terms and intent of this Agreement, of any
provisions of the Company Tariff not inconsistent with this Agreement, other
applicable agreements, laws, or regulations, or applicable technical standards
and criteria not inconsistent with this Agreement and any other policies or
determinations by the arbitrator not inconsistent with this Agreement;
provided, however, if the arbitrator concludes that no proposed award is
consistent with the applicable considerations or that no proposed award
addresses all issues in dispute, the arbitrator shall specify how each
proposed award is deficient and request that the disputing parties submit new
proposed awards that cure the deficiency perceived by the arbitrator. A
written decision, including specific findings of fact, explaining the basis
for the award shall be provided by the arbitrator with written notice to
parties. Awards shall be based only on the evidence on the record before the
arbitrator. No award that is not appealed shall be deemed to be precedential
in any other arbitration related to a different dispute.
2.3 Compliance and Costs.
2.3.1 Compliance with the Arbitrator's Award. Immediately upon the
decision by the arbitrator, except during the period of appeal as provided for
in Sections 2.4 or 2.5 of this Exhibit H, the Parties shall commence to take,
and thereafter diligently prosecute to completion, whatever action is required
to comply with the selected award to the extent the selected award does not
require regulatory action and shall pursue no avenue of appeal. To the extent
the award requires local, state, or federal approval or regulatory action, or
a FERC filing by a transmission provider subject Sections 205 or 206 of the
Federal Power Act, 16 USC SS 824 d. and e.), the affected Party or intervenor
shall promptly submit and support that portion of the award with the
appropriate authority except as provided in Section 2.4 or Section 2.5. Any
and all costs associated with the arbitration (but not including the parties'
costs associated with attorney and witness fees) shall be borne by the party
or parties whose proposed award was not selected, unless the parties agree to
an alternate method of allocating costs.
2.4 FERC Appeal.
2.4.1 Grounds for Appeal. Within thirty (30) days of the issuance
of any arbitration award, any party to an arbitration may apply to FERC to
hear an appeal of such award with respect to matters to which FERC has
jurisdiction, but only upon the grounds that the award is contrary to or
beyond the scope of this Agreement or is unjust, unreasonable, unduly
discriminatory or preferential or otherwise inconsistent with the FPA or
FERC's then applicable standards or policies. Any appeal to FERC shall be
based solely upon the record assembled by the arbitrator; provided, however,
that any order by an arbitrator excluding material from the arbitration record
or any ruling which is alleged to violate due process may be explicitly
appealed to FERC by a Party as a part of an appeal under this Section 2.4.
Parties to arbitrations intend that: (1) FERC should afford substantial
deference to the factual findings of the arbitrator; (2) the portion, if any,
of the award relating to issues not of first impression (i.e., matters
previously decided by FERC or a court of competent jurisdiction in cases
involving comparable facts and circumstances) should be afforded appropriate
deference by FERC; and (3) the portion, if any, of the award relating to
issues of first impression should be afforded no deference by FERC.
Implementation of the award shall be stayed pending an appeal to FERC unless
and until, at the request of a disputing party, FERC issues an order
shortening or extending the stay.
2.4.2 No Expansion of Factual Record. No Party to an arbitration
shall seek to expand the factual record before FERC beyond that offered to the
arbitrator.
2.5 Judicial Review. Subject to the right of any party to appeal to
and exhaustion of remedies at FERC, as provided in Section 2.4 of this Exhibit
H, any party shall be entitled to seek enforcement of the Award in any court
of competent jurisdiction. Except for appeals of any decision by FERC,
judicial challenges to an award under this Exhibit H shall be limited to the
grounds specified in the Federal Arbitration Act, Title 9, U.S.C., as amended.
Exhibit I
Operating Representatives
For Company:
LeRoy Patterson
Director of Transmission Operations
For Generating Party:
Roger L. Petersen
Vice President and Chief Operating Officer
Exhibit J
Operating Procedures
Further Details
Further details will be addressed following discussions with the purchaser
before the Closing Date.
Exhibit K
Western Systems Coordinating Council
Reliability Management System Agreement
(Draft)
Draft - October 5, 1998
[Contract to be entered into between the WSCC and each FERC-jurisdictional
Transmission Operator within the WSCC to implement the RMS]
RELIABILITY MANAGEMENT SYSTEM AGREEMENT
by and between
WESTERN SYSTEMS COORDINATING COUNCIL
and
______________________________
THIS RELIABILITY MANAGEMENT SYSTEM AGREEMENT (the "Agreement") is
entered into this ____ day of _____________, 1998, by and between the Western
Systems Coordinating Council, Inc. (the "WSCC"), and
_______________________________________ (the "Transmission Operator"). The
Transmission Operator enters into this Agreement (i) in its capacity as an
operator of a Control Area and/or as an operator of transmission facilities
and (ii) with respect to any generation which it Controls (as defined below).
WHEREAS, there is a need to maintain the reliability of the
interconnected electric systems encompassed by the WSCC in a restructured and
competitive electric utility industry;
WHEREAS, with the transition of the electric industry to a more
competitive structure, it is desirable to have a uniform set of electric
system operating rules within the Western Interconnection, applicable in a
fair, comparable and non-discriminatory manner, with which all market
participants comply; and
WHEREAS, the members of the WSCC, including the Transmission Operator,
have determined that a contractual Reliability Management System based upon a
set of mutual agreements between the WSCC and its Members provides a
reasonable, currently available means of maintaining such reliability.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the agreements between other transmission operators and the WSCC, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the WSCC and the Transmission Operator agree as follows:
1. PURPOSE OF AGREEMENT
The purpose of this Agreement is to maintain the reliable operation of the
Western Interconnection through the Transmission Operator's commitment to
comply with certain reliability standards and, to the extent provided in this
Agreement, to cause Generators to enter into commitments to comply with those
standards.
2. DEFINITIONS
In addition to terms defined in the beginning of this Agreement and in the
Recitals and Appendices hereto, for purposes of this Agreement the following
terms shall have the meanings set forth beside them below.
Control or Controlled, when used in this Agreement to refer to
generation facilities, means that a person has the right (whether
through ownership, by contract, or otherwise) to cause the generation
facilities to comply with the criteria applicable to generators
contained in Annex A of the WSCC Reliability Criteria Agreement (other
than as a result of entering into new or amended interconnection
agreements in accordance with Section 5 of this Agreement); provided
however, that a person shall not be deemed to Control a third party's
generation facilities solely on the basis of providing control area
services to the third party.
Control Area means an electric system or systems, bounded by
interconnection metering and telemetry, capable of controlling
generation to maintain its interchange schedule with other Control Areas
and contributing to frequency regulation of the Western Interconnection.
FERC means the Federal Energy Regulatory Commission or a successor
agency.
Generator means any entity (i) that Controls generating facilities
interconnected with the transmission system of a Participating
Transmission Operator or located within the Control Area of a
Participating Transmission Operator, and (ii) that is a party to an
interconnection agreement or is responsible for obtaining an
interconnection agreement with a Participating Transmission Operator.
Member means any party to the WSCC Agreement.
NERC means the North American Electric Reliability Council or any
successor entity.
Other RMS Agreement means an agreement between the WSCC and an operator
(other than the Transmission Operator) of a Control Area or one or more
transmission paths in the WSCC Path Rating Catalog requiring such
operator to comply with the reliability criteria contained in the WSCC
Reliability Criteria Agreement.
Participating Transmission Operator means the Transmission Operator and
any other transmission operator that has entered into an Other RMS
Agreement.
Party means either the WSCC or the Transmission Operator and Parties
means both of the WSCC and the Transmission Operator.
Reliability Management System or RMS means the contractual reliability
management program implemented through this Agreement and through each
of the Other RMS Agreements.
Western Interconnection means the area comprising those states and
provinces, or portions thereof, in Western Canada, Northern Mexico and
the Western United States in which Members of the WSCC operate
synchronously connected transmission systems.
Working Day means Monday through Friday except for recognized legal
holidays in the state or province in which any notice is received
pursuant to Section 11.
WSCC means the Western Systems Coordinating Council or a successor
entity.
WSCC Path Rating Catalog means the document maintained by the WSCC
identifying all transfer paths rated or subject to being rated by the
WSCC.
WSCC Agreement means the Western Systems Coordinating Council Agreement
dated March 20, 1967, as such may be amended from time to time.
WSCC Reliability Criteria Agreement means the Western Systems
Coordinating Council Reliability Criteria Agreement dated ___________,
1998 among the WSCC and certain of its member transmission operators, as
such may be amended from time to time.
WSCC Staff means those employees of the WSCC, including personnel hired
by the WSCC on a contract basis, designated as responsible for the
administration of the RMS.
3. TERM AND TERMINATION
3.1 Term. This Agreement shall become effective on the later of:
(a) thirty (30) days after the date of issuance of a final FERC order
accepting this Agreement for filing without requiring any changes
to this Agreement unacceptable to either Party; or
(b) thirty (30) days after the date of issuance of a final FERC order
accepting the WSCC Reliability Criteria Agreement for filing
without requiring any changes to the WSCC Reliability Criteria
Agreement unacceptable to either Party.
Changes required by FERC to this Agreement or to the WSCC Reliability
Criteria Agreement shall be deemed unacceptable to a Party only if that
Party provides notice to the other Party, within fifteen (15) days of
issuance of the applicable FERC order, that such order is unacceptable,
provided that if any other party to an Other RMS Agreement or the WSCC
Reliability Criteria Agreement gives notice within the fifteen (15) day
period to the WSCC that FERC-ordered changes to its Other RMS Agreement
or to the WSCC Reliability Criteria Agreement are unacceptable, the WSCC
shall promptly notify the Transmission Operator of such notice and in
such case the Transmission Operator shall have until twenty-five (25)
days after issuance of the applicable FERC order to give notice that
such order is unacceptable.
3.2 Termination by the Transmission Operator. The Transmission Operator may
terminate this Agreement:
(a) in the case of any amendment to the WSCC Reliability Criteria
Agreement which would cause the Transmission Operator to comply
with revised or new reliability criteria, on fifteen (15) days'
written notice to the WSCC, provided that the notice of
termination is given within forty-five (45) days of the date of
issuance of a FERC order accepting such amendment for filing,
provided further that the 45 day period within which notice of
termination is required may be extended by the Transmission
Provider for an additional 45 days if the Transmission Provider
gives written notice to WSCC of such requested extension within
the initial 45 day period; or
(b) on thirty (30) days' written notice to the WSCC at such time that
the Transmission Operator no longer operates a Control Area within
the Western Interconnection or a transmission path in the WSCC
Path Rating Catalog; or
(c) for any reason on one year's written notice to the WSCC.
3.3 Termination by the WSCC. The WSCC may terminate this Agreement for any
reason on one year's written notice to the Transmission Operator.
3.4 Termination by Mutual Agreement. This Agreement may be terminated at
any time by mutual agreement of the Parties.
3.5 Termination of the WSCC Reliability Criteria Agreement. This Agreement
shall terminate upon termination of the WSCC Reliability Criteria
Agreement.
3.6 Notice to FERC. A terminating Party shall notify FERC if this Agreement
is to terminate pursuant to this Section 3. Such termination shall be
effective in accordance with the terms of this Agreement without further
action by FERC.
3.7 Suspension. This Agreement and the obligations hereunder shall be
suspended at any time that the WSCC Reliability Criteria Agreement is
suspended.
4. COMPLIANCE WITH AND AMENDMENT OF WSCC
RELIABILITY CRITERIA
4.1 Compliance with Reliability Criteria. The Transmission Operator agrees
to comply with the requirements of the WSCC Reliability Criteria
Agreement including the applicable WSCC reliability criteria contained
in Section III and Section IV to Annex A thereof, and, in the event of
failure to comply, agrees to be subject to the sanctions applicable to
such failure. The Transmission Operator shall comply with such
reliability criteria: (i) in its capacity as an operator of a Control
Area and/or as an operator of one or more transmission paths in the WSCC
Path Rating Catalog; and (ii) with respect to generation which it
Controls.
4.2 Amendment of WSCC Reliability Criteria Agreement. All amendments to the
WSCC Reliability Criteria Agreement shall be pursuant to Section 12 of
the WSCC Reliability Criteria Agreement. Until this Agreement is
terminated pursuant to Section 3, the Transmission Operator shall be
subject to the WSCC Reliability Criteria Agreement, as modified pursuant
to Section 12 of the WSCC Reliability Criteria Agreement, regardless of
Transmission Operator's support for or challenge to any such
modification.
5. INTERCONNECTION AGREEMENTS
5.1 New Interconnection Agreements. The Transmission Operator agrees,
except where precluded by law, to include in any new interconnection agreement
that is executed by the Transmission Operator after the effective date of this
Agreement with a Generator that Controls generating facilities located within
the Transmission Operator's Control Area or interconnected directly with the
Transmission Operator's transmission system provisions in the form of Appendix
A or such other form as may be convenient provided that such form binds the
Generator to all of the obligations and agreements set out in Section 2 of
Appendix A.
5.2 Existing Interconnection Agreements.
(a) With respect to a Generator that has an interconnection agreement
with the Transmission Operator that is in effect prior to the
effective date of this Agreement, the Transmission Operator
agrees, to the extent permitted under its existing interconnection
agreement or where it otherwise has the legal right to do so, to
enter into either: (i) an amendment to such existing
interconnection agreement in the form set forth in Appendix A to
this Agreement; (ii) a separate agreement with such Generator in
the form set forth in Appendix B to this Agreement or (iii) such
other amendment or agreement as may be convenient provided that
such amendment or agreement binds the Generator to all of the
obligations and agreements set out in Section 2 of Appendix A or
in Sections 3, 4, and 5 of Appendix B. If the Transmission
Operator is unable to reach a negotiated agreement with the
Generator pursuant to this subsection and if such interconnection
agreement permits the Transmission Operator to file unilaterally
an amendment to such agreement pursuant to the just and reasonable
standard of Section 205 of the Federal Power Act, the Transmission
Operator shall file with FERC an amendment to such agreement in
the form of Appendix A to this Agreement.
(b) With respect to a Generator for which the Transmission Operator
does not have contractual or legal authority to file unilaterally
with FERC such an amendment or separate agreement, the
Transmission Operator agrees to undertake a good faith effort to
enter into an amendment or separate agreement in the respective
forms set forth in Appendix A or B to this Agreement or such other
form as may be convenient provided that such form binds the
Generator to all of the obligations and agreements set out in
Section 2 of Appendix A or in Sections 3, 4, and 5 of Appendix B.
Good faith may be demonstrated by a written request to the
Generator and documentation of the Generator's response.
5.3 Generators Without Interconnection Agreements. With respect to a
generator that Controls generating facilities located within the
Transmission Operator's Control Area that: (i) does not have an
interconnection agreement with the Transmission Operator (e.g., a
generator having facilities directly connected to another transmission
owner within the Transmission Operator's Control Area); and (ii) is not
otherwise obligated to comply with the WSCC Reliability Criteria
Agreement, the Transmission Operator (if an operator of a Control Area)
agrees to undertake a good faith effort to negotiate and execute a
separate agreement with such generator in the form set forth in
Appendix B to this Agreement or such other form as may be convenient
provided that such form binds the generator to all of the obligations
and agreements set out in Sections 3, 4, and 5 of Appendix B. Good
faith may be demonstrated by a written request to the generator and
documentation of the generator's response.
5.4 Sale of Controlled Generation. In any sale or transfer of generation
which it Controls, the Transmission Operator shall require the acquiring
party to enter into an agreement requiring such transferee to comply
with the requirements of the WSCC Reliability Criteria Agreement as a
Generator with respect to the transferred generation. Such agreement
shall be in the form set forth in Appendix B to this Agreement or such
other form as may be convenient provided that such form binds the
transferee to all of the obligations and agreements set out in Sections
3, 4 and 5 of Appendix B.
5.5 Transfer of Control or Sale of Transmission Facilities. In any sale or
transfer of control of any transmission facilities subject to this
Agreement, the Transmission Operator shall as a condition of such sale
or transfer require the acquiring party or transferee to either assume
the obligations of the Transmission Operator pursuant to this Agreement
or to enter into an Other RMS Agreement with respect to the transferred
facilities [and any generation Controlled by the transferee and
interconnected with the transferred transmission facilities]. [Note: A
slight majority of the participants at the 9/22 Policy Group would
delete the bracketed language.]
5.6 Single Agreement. A Generator at its option may enter into a single
agreement with any Participating Transmission Operator binding the
Generator to comply with the requirements of the RMS with respect to all
generation the Generator Controls within the Western Interconnection.
Such agreement shall be in the form of Appendix B [or such other form as
may be convenient provided that such form binds the Generator to all of
the obligations and agreements set out in Sections 3, 4, and 5 of
Appendix B]. Written notice by the Generator to the Transmission
Operator that the Generator has entered into and is bound by such
agreement to comply with the requirements of the RMS shall suffice to
discharge the Transmission Operator and the Generator from any
obligation to enter into any separate agreement or amendment to any
existing interconnection agreement pursuant to this Section 5.
5.7 Other Agreements. Nothing in this Agreement shall be construed as
prohibiting a Transmission Operator from imposing such other reliability
conditions in any interconnection agreement which the Transmission
Operator deems appropriate including the requirement that the Generator
comply with any future reliability criteria adopted as part of the WSCC
Reliability Criteria Agreement.
6. SANCTIONS
6.1 Payment of Monetary Sanctions. The Transmission Operator shall be
responsible for payment to the WSCC of any monetary sanction assessed
against the Transmission Operator pursuant to this Agreement and the
WSCC Reliability Criteria Agreement. Any such payment shall be made
pursuant to the procedures specified in the WSCC Reliability Criteria
Agreement.
6.2 Responsibility for Sanctions. Sanctions shall be assessed against the
Transmission Operator only for non-compliance by the Transmission
Operator with the reliability criteria contained in the WSCC Reliability
Criteria Agreement. The Transmission Operator will have the right to
challenge such assessment as specified in the WSCC Reliability Criteria
Agreement. Sanctions for non-compliance with the reliability criteria
by a Generator with whom the Transmission Operator has entered into an
agreement pursuant to Section 5 shall be assessed by the WSCC directly
against the Generator, and the Transmission Operator shall have no
liability with respect to such sanctions.
6.3 Publication. The Transmission Operator consents to the release by the
WSCC of information related to the Transmission Operator's compliance
with this Agreement only in accordance with the WSCC Reliability
Criteria Agreement.
7. COSTS OF ADMINISTERING RMS
Moneys collected by the WSCC through monetary sanctions shall be applied
directly against the costs of administering the RMS. Any remaining costs
shall be recovered in accordance with and pursuant to Article VIII (or any
successor provision) of the WSCC Agreement. If in any calendar year moneys
collected by the WSCC through monetary sanctions exceed the costs of
administering the RMS, any such excess amounts shall be rebated to Members
that are participants in the RMS to offset their costs of compliance, such
rebates to be allocated among such participating Members pursuant to the dues
allocation methodology specified in Article VIII (or any successor provision)
of the WSCC Agreement or otherwise as determined by the WSCC Board of
Trustees. A participating member that has been assessed a monetary sanction
pursuant to the WSCC Reliability Criteria Agreement and that has failed to pay
such sanction within the time period specified in the WSCC Reliability
Criteria Agreement shall not be eligible for such rebates.
8. THIRD PARTIES
This Agreement creates contractual rights and obligations solely between the
Parties. Nothing in this Agreement shall create between the Parties: (1) any
obligation or liability whatsoever (other than as expressly provided in this
Agreement), or (2) any duty or standard of care whatsoever. In addition,
nothing in this Agreement shall create any duty, liability, or standard of
care whatsoever as to any third party. No third party shall have any rights
whatsoever with respect to enforcement of any provision of this Agreement.
9. REMEDIES.
Each Party shall be entitled to seek specific performance of this Agreement
including the payment of sanctions determined in accordance with this
Agreement and the Reliability Criteria Agreement. Specific performance shall
be the sole remedy available to either Party pursuant to this Agreement and
the WSCC Reliability Criteria Agreement unless the WSCC Reliability Criteria
Agreement specifically provides otherwise. In particular, neither Party shall
be liable pursuant to this Agreement to the other Party for damages of any
kind whatsoever (other than the payment of sanctions, if so construed) whether
direct, compensatory, special, consequential, or punitive. No order for
specific performance of this Agreement shall (i) require a Transmission
Operator to construct or dedicate facilities for the benefit of any other
person, or (ii) impair the ability of a Transmission Operator to take such
action as it deems necessary to maintain reliable service to its customers or
to fulfill its obligations to others.
10. REGULATORY APPROVALS
This Agreement shall be filed with FERC by the Transmission Operator under
Section 205 of the Federal Power Act. In such filing, the Transmission
Operator shall request that FERC accept this Agreement for filing without
modification to become effective as of the date provided for in Section 3.1 of
this Agreement.
11. NOTICES
Any notice, demand or request required or authorized by this Agreement to be
given in writing to a Party shall be delivered by hand, courier or overnight
delivery service, mailed by certified mail (return receipt requested) postage
prepaid, faxed, or delivered by mutually agreed electronic means to such Party
at the following address:
WSCC: Executive Director
Western Systems Coordinating Council
University of Utah Research Park
540 Arapeen Drive, Suite 203
Salt Lake City, Utah 84108-1288
Fax: 801-582-3918
_______: _____________________________
_____________________________
_____________________________
_____________________________
Fax: _____________
The designation of such person and/or address may be changed at any time by
either Party upon receipt by the other of written notice. Such a notice
served by mail shall be effective upon receipt. Notice transmitted by
facsimile shall be effective upon receipt if received prior to 5:00 p.m. on a
Working Day, and if not received prior to 5:00 p.m. on a Working Day, receipt
shall be effective on the next Working Day.
12. APPLICABILITY
This Agreement (including all appendices hereto and, by reference, the WSCC
Reliability Criteria Agreement) constitutes the entire understanding between
the Parties hereto with respect to the subject matter hereof, supersedes any
and all previous understandings between the Parties with respect to the
subject matter hereof, and binds and inures to the benefit of the Parties and
their successors.
13. AMENDMENT
No amendment of all or any part of this Agreement shall be valid unless it is
reduced to writing and signed by both Parties hereto. The terms and
conditions herein specified shall remain in effect throughout the term and
shall not be subject to change through application to FERC or other
governmental body or authority, absent the agreement of the Parties.
14. INTERPRETATION
Article and section headings are for convenience only and shall not affect the
interpretation of this Agreement. References to articles, sections and
appendices are, unless the context otherwise requires, references to articles,
sections and appendices of this Agreement.
15. ASSIGNMENT
This Agreement may not be assigned by either Party, except that the
Transmission Operator, upon notice to the WSCC and subject to any necessary
FERC approval, may assign: (i) this Agreement to any entity acquiring all or
substantially all of the Transmission Operator's transmission assets
(including an acquisition by merger or consolidation and whether to an
affiliate or an unaffiliated party); (ii) the obligations of the Transmission
Operator pursuant to this Agreement to a transferee with respect to any
obligations assumed by the transferee by virtue of Section 5.5 of this
Agreement; or (iii) to an independent system operator those obligations of the
Transmission Operator pursuant to this Agreement which are assumed by the
independent system operator.
16. COUNTERPARTS
This Agreement may be executed in counterparts and each shall have the same
force and effect as an original.
IN WITNESS WHEREOF, the WSCC and the Transmission Operator have each
caused this Reliability Management System Agreement to be executed by their
respective duly authorized officers as of the date first above written.
WESTERN SYSTEMS COORDINATING COUNCIL
By: _____________________________
Name:
Title:
____________________________________________________
By: _____________________________
Name:
Title:
APPENDIX A
EXISTING INTERCONNECTION AGREEMENT AMENDMENT AND LANGUAGE FOR INCLUSION IN NEW
INTERCONNECTION AGREEMENTS
1. Definitions:
Add the following definitions to Section __:
_.__ Member: Any party to the WSCC Agreement.
_.__ Reliability Management System or RMS: The contractual reliability
management program implemented through the WSCC Reliability
Criteria Agreement, Section 2 of this Agreement, and any similar
contractual arrangement.
_.__ Western Interconnection: The area comprising those states and
provinces, or portions thereof, in Western Canada, Northern Mexico
and the Western United States in which Members of the WSCC operate
synchronously connected transmission systems.
_.__ WSCC: The Western Systems Coordinating Council or any successor
entity.
_.__ WSCC Agreement: The Western Systems Coordinating Council
Agreement dated March 20, 1967, as such may be amended from time
to time.
_.__ WSCC Reliability Criteria Agreement: The Western Systems
Coordinating Council Reliability Criteria Agreement dated
___________, 1998 among the WSCC and certain of its member
transmission operators, as such may be amended from time to time.
_.__ WSCC Staff: Those employees of the WSCC, including personnel
hired by the WSCC on a contract basis, designated as responsible
for the administration of the RMS.
2. Add new Section [2] to agreement:
2 Reliability Management System
2.1 Purpose: In order to maintain the reliable operation of the
transmission grid, the WSCC Reliability Criteria Agreement sets forth
reliability criteria adopted by the WSCC to which [Generator] and
[Transmission Operator] shall be required to comply.
2.2 Compliance: [Generator] shall comply with the requirements of the
WSCC Reliability Criteria Agreement, including the applicable WSCC reliability
criteria set forth in Section IV of Annex A thereof, and, in the event of
failure to comply, agrees to be subject to the sanctions applicable to such
failure. Such sanctions shall be assessed pursuant to the procedures
contained in the WSCC Reliability Criteria Agreement.
2.3 Payment of Sanctions: [Generator] shall be responsible for
payment of any monetary sanction assessed against [Generator] by WSCC pursuant
to the WSCC Reliability Criteria Agreement. Any such payment shall be made
pursuant to the procedures specified in the WSCC Reliability Criteria
Agreement.
2.4 Transfer of Control or Sale of Generation Facilities. In any sale
or transfer of control of any generation facilities subject to this Agreement,
[Generator] shall as a condition of such sale or transfer require the
acquiring party or transferee with respect to the transferred facilities
either to assume the obligations of the [Generator] with respect to this
Agreement or to enter into an agreement with the Transmission Operator
imposing on the acquiring party or transferee the same obligations applicable
to [Generator] pursuant to this Section 2.
2.5 Publication: The [Generator] consents to the release by the WSCC
of information related to the [Generator]'s compliance with this Agreement
only in accordance with the WSCC Reliability Criteria Agreement..
2.6 Third Parties. Except for the rights and obligations between the
WSCC and [Generator] specified in this Section 2, this Agreement creates
contractual rights and obligations solely between the Parties. Nothing in
this Agreement shall create, between the Parties or with respect to the WSCC:
(1) any obligation or liability whatsoever (other than as expressly provided
in this Agreement), or (2) or any duty or standard of care whatsoever. In
addition, nothing in this Agreement shall create any duty, liability, or
standard of care whatsoever as to any other party. Except for the rights, as
a third-party beneficiary under this Section 2, of the WSCC against
[Generator], no third party shall have any rights whatsoever with respect to
enforcement of any provision of this Agreement. [Transmission Operator] and
[Generator] expressly intend that the WSCC is a third-party beneficiary to
this Section 2, and the WSCC shall have the right to seek to enforce against
[Generator] any provision of this Section 2.
2.7 Reserved Rights. Nothing in the RMS or the WSCC Reliability
Criteria Agreement shall affect the right of the Transmission Operator,
subject to any necessary regulatory approval, to take such other measures to
maintain reliability, including disconnection, which the Transmission Operator
may otherwise be entitled to take.
2.8 Severability. If one or more provisions of this Section 2 shall
be invalid, illegal or unenforceable in any respect, it shall be given effect
to the extent permitted by applicable law, and such invalidity, illegality or
unenforceability shall not affect the validity of the other provisions of this
Agreement.
[2.9 Termination. The [Generator] may terminate its obligations
pursuant to this Section 2 if after the effective date of this Section 2, the
requirements of the WSCC Reliability Criteria Agreement applicable to
[Generator] are amended so as to materially adversely affect the [Generator],
provided that [Generator] gives notice of such termination to the Transmission
Operator and the WSCC within thirty (30) days of the effective date of such
amendment.] [Note: The Policy Group at its 9/22 meeting approved by a slight
majority the inclusion of this section 5.7 at the option of each individual
Transmission Operator.]
APPENDIX B
MODEL STAND-ALONE GENERATOR AGREEMENT
[Contract to be entered into between the Transmission Operator and a
Generator]
RELIABILITY MANAGEMENT SYSTEM AGREEMENT
by and between
[TRANSMISSION OPERATOR]
and
[GENERATOR]
THIS RELIABILITY MANAGEMENT SYSTEM AGREEMENT (the "Agreement"), is
entered into this ____ day of _____________, 1998, by and between
________________________ (the "Transmission Operator") and
________________________ (the "Generator").
WHEREAS, there is a need to maintain the reliability of the
interconnected electric systems encompassed by the WSCC in a restructured and
competitive electric utility industry;
WHEREAS, with the transition of the electric industry to a more
competitive structure, it is desirable to have a uniform set of electric
system operating rules within the Western Interconnection, applicable in a
fair, comparable and non-discriminatory manner, with which all market
participants comply; and
WHEREAS, the members of the WSCC, including the Transmission Operator,
have determined that a contractual Reliability Management System provides a
reasonable, currently available means of maintaining such reliability.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Transmission Operator and the Generator
agree as follows:
1. PURPOSE OF AGREEMENT
The purpose of this Agreement is to maintain the reliable operation of the
Western Interconnection through the Generator's commitment to comply with
certain reliability standards.
2. DEFINITIONS
In addition to terms defined in the beginning of this Agreement and in the
Recitals hereto, for purposes of this Agreement the following terms shall have
the meanings set forth beside them below.
Control Area means an electric system or systems, bounded by
interconnection metering and telemetry, capable of controlling
generation to maintain its interchange schedule with other Control Areas
and contributing to frequency regulation of the Western Interconnection.
FERC means the Federal Energy Regulatory Commission or a successor
agency.
Member means any party to the WSCC Agreement.
Party means either the Generator or the Transmission Operator and
Parties means both of the Generator and the Transmission Operator.
Reliability Management System or RMS means the contractual reliability
management program implemented through the WSCC Reliability Criteria
Agreement, the WSCC RMS Agreement, this Agreement, and any similar
contractual arrangement.
Western Interconnection means the area comprising those states and
provinces, or portions thereof, in Western Canada, Northern Mexico and
the Western United States in which Members of the WSCC operate
synchronously connected transmission systems.
Working Day means Monday through Friday except for recognized legal
holidays in the state in which any notice is received pursuant to
Section 8.
WSCC means the Western Systems Coordinating Council or a successor
entity.
WSCC Agreement means the Western Systems Coordinating Council Agreement
dated March 20, 1967, as such may be amended from time to time.
WSCC Reliability Criteria Agreement means the Western Systems
Coordinating Council Reliability Criteria Agreement dated ___________,
1998 among the WSCC and certain of its member transmission operators, as
such may be amended from time to time.
WSCC RMS Agreement means an agreement between the WSCC and the
Transmission Operator requiring the Transmission Operator to comply with
the reliability criteria contained in the WSCC Reliability Criteria
Agreement.
WSCC Staff means those employees of the WSCC, including personnel hired
by the WSCC on a contract basis, designated as responsible for the
administration of the RMS.
3. TERM AND TERMINATION
3.1 Term. This Agreement shall become effective [thirty (30) days after the
date of issuance of a final FERC order accepting this Agreement for
filing without requiring any changes to this Agreement unacceptable to
either Party. Required changes to this Agreement shall be deemed
unacceptable to a Party only if that Party provides notice to the other
Party within fifteen (15) days of issuance of the applicable FERC order
that such order is unacceptable]. [Note: if the interconnection
agreement is not FERC jurisdictional, replace bracketed language with:
[on the later of: (a) the date of execution; or (b) the effective date
of the WSCC RMS Agreement.]]
3.2 Notice of Termination of WSCC RMS Agreement. The Transmission Operator
shall give the Generator notice of any termination of the WSCC RMS
Agreement by the WSCC or by the Transmission Operator within fifteen
(15) days of such termination.
3.3 Termination by the Generator. The Generator may terminate this
Agreement on thirty (30) days' written notice to the Transmission
Operator and the WSCC following:
(a) the termination of the WSCC RMS Agreement for any reason by the
WSCC or by the Transmission Operator, provided such notice is
provided within thirty (30) days of the termination of the WSCC
RMS Agreement; or
[(b) the effective date of an amendment to the requirements of the
WSCC Reliability Criteria Agreement that materially adversely
affects the Generator, provided such notice is provided within
thirty (30) days of such effective date.] [Note: Transmission
Operator may choose to delete this subsection.]
3.4 Termination by the Transmission Operator. The Transmission Operator may
terminate this Agreement on thirty (30) days' written notice following
the termination of the WSCC RMS Agreement for any reason by the WSCC or
by the Transmission Operator, provided such notice is provided within
thirty (30) days of the termination of the WSCC RMS Agreement.
4. COMPLIANCE WITH AND AMENDMENT OF
WSCC RELIABILITY CRITERIA
4.1 Compliance with Reliability Criteria. The Generator agrees to comply
with the requirements of the WSCC Reliability Criteria Agreement,
including the applicable WSCC reliability criteria contained in Section
IV of Annex A thereof, and, in the event of failure to comply, agrees to
be subject to the sanctions applicable to such failure.
4.2 Modifications to WSCC Reliability Criteria Agreement. The Transmission
Operator shall notify the Generator within fifteen (15) days of the
receipt of notice from the WSCC of the initiation of any WSCC process to
modify the WSCC Reliability Criteria Agreement. The WSCC RMS Agreement
specifies that such process shall comply with the procedures, rules, and
regulations then applicable to the WSCC for modifications to reliability
criteria.
4.3 Notice of Modifications to WSCC Reliability Criteria Agreement. If,
following the process specified in Section 4.2, any modification to the
WSCC Reliability Criteria Agreement is to take effect, the Transmission
Operator shall provide notice to the Generator at least forty-five (45)
days before such modification is scheduled to take effect.
4.4 Effective Date. Any modification to the WSCC Reliability Criteria
Agreement shall take effect on the date specified by FERC in an order
accepting such modification for filing.
4.5 Transfer of Control or Sale of Generation Facilities. In any sale or
transfer of control of any generation facilities subject to this
Agreement, the Generator shall as a condition of such sale or transfer
require the acquiring party or transferee with respect to the
transferred facilities either to assume the obligations of the Generator
with respect to this Agreement or to enter into an agreement with the
Control Area Operator in substantially the form of this Agreement.
5. SANCTIONS
5.1 Payment of Monetary Sanctions. The Generator shall be responsible for
payment directly to the WSCC of any monetary sanction assessed against
the Generator pursuant to this Agreement and the WSCC Reliability
Criteria Agreement. Any such payment shall be made pursuant to the
procedures specified in the WSCC Reliability Criteria Agreement.
5.2 Publication. The Generator consents to the release by the WSCC of
information related to the Generator's compliance with this Agreement
only in accordance with the WSCC Reliability Criteria Agreement.
5.3 Reserved Rights. Nothing in the RMS or the WSCC Reliability Criteria
Agreement shall affect the right of the Transmission Operator, subject
to any necessary regulatory approval, to take such other measures to
maintain reliability, including disconnection, which the Transmission
Operator may otherwise be entitled to take.
6. THIRD PARTIES
Except for the rights and obligations between the WSCC and Generator specified
in Sections 4 and 5, this Agreement creates contractual rights and obligations
solely between the Parties. Nothing in this Agreement shall create, between
the Parties or with respect to the WSCC: (1) any obligation or liability
whatsoever (other than as expressly provided in this Agreement), or (2) or any
duty or standard of care whatsoever. In addition, nothing in this Agreement
shall create any duty, liability, or standard of care whatsoever as to any
other party. Except for the rights, as a third-party beneficiary with respect
to Sections 4 and 5, of the WSCC against Generator, no third party shall have
any rights whatsoever with respect to enforcement of any provision of this
Agreement. Transmission Operator and Generator expressly intend that the WSCC
is a third-party beneficiary to this Agreement, and the WSCC shall have the
right to seek to enforce against Generator any provisions of Sections 4 and 5.
7. REGULATORY APPROVALS
This Agreement shall be filed with FERC by the Transmission Operator under
Section 205 of the Federal Power Act. In such filing, the Transmission
Operator shall request that FERC accept this Agreement for filing without
modification to become effective on the day after the date of a FERC order
accepting this Agreement for filing.
8. NOTICES
Any notice, demand or request required or authorized by this Agreement to be
given in writing to a Party shall be delivered by hand, courier or overnight
delivery service, mailed by certified mail (return receipt requested) postage
prepaid, faxed, or delivered by mutually agreed electronic means to such Party
at the following address:
_______: _____________________________
_____________________________
_____________________________
_____________________________
Fax: _____________
_______: _____________________________
_____________________________
_____________________________
_____________________________
Fax: _____________
The designation of such person and/or address may be changed at any time by
either Party upon receipt by the other of written notice. Such a notice
served by mail shall be effective upon receipt. Notice transmitted by
facsimile shall be effective upon receipt if received prior to 5:00 p.m. on a
Working Day, and if not received prior to 5:00 p.m. on a Working Day, receipt
shall be effective on the next Working Day.
9. APPLICABILITY
This Agreement (including all appendices hereto and, by reference, the WSCC
Reliability Criteria Agreement) constitutes the entire understanding between
the Parties hereto with respect to the subject matter hereof, supersedes any
and all previous understandings between the Parties with respect to the
subject matter hereof, and binds and inures to the benefit of the Parties and
their successors.
10. AMENDMENT
No amendment of all or any part of this Agreement shall be valid unless it is
reduced to writing and signed by both Parties hereto. The terms and
conditions herein specified shall remain in effect throughout the term and
shall not be subject to change through application to the FERC or other
governmental body or authority, absent the agreement of the Parties.
11. INTERPRETATION
Interpretation and performance of this Agreement shall be in accordance with,
and shall be controlled by, the laws of the State of ______________ but
without giving effect to the provisions thereof relating to conflicts of law.
Article and section headings are for convenience only and shall not affect the
interpretation of this Agreement. References to articles, sections and
appendices are, unless the context otherwise requires, references to articles,
sections and appendices of this Agreement.
12. PROHIBITION ON ASSIGNMENT
This Agreement may not be assigned by either Party without the consent of the
other Party, which consent shall not be unreasonably withheld; provided that
the Generator may without the consent of the WSCC assign the obligations of
the Generator pursuant to this Agreement to a transferee with respect to any
obligations assumed by the transferee by virtue of Section 4.5 of this
Agreement.
13. SEVERABILITY
If one or more provisions herein shall be invalid, illegal or unenforceable in
any respect, it shall be given effect to the extent permitted by applicable
law, and such invalidity, illegality or unenforceability shall not affect the
validity of the other provisions of this Agreement.
14. COUNTERPARTS
This Agreement may be executed in counterparts and each shall have the same
force and effect as an original.
IN WITNESS WHEREOF, the Transmission Operator and the Generator have
each caused this Reliability Management System Agreement to be executed by
their respective duly authorized officers as of the date first above written.
____________________________________________________
By: _____________________________
Name:
Title:
____________________________________________________
By: _____________________________
Name:
Title:
Exhibit L
Non-Compliance with Safety and Reliability Requirements
Western Systems Coordinating Council
Minimum Operating Reliability Criteria
Governors. To provide an equitable and coordinated system response to
load/generation imbalances, governor droop shall be set at 5%. Governors
shall not be operated with excessive deadbands, and governors shall not be
blocked unless required by regulatory mandates.
The following plants or units may not comply with this criterion regarding
governors:
Ryan Plant (Five units, and two exciters).
Holter Plant (all units).
Thompson Falls (units 1 through 6, and two exciters)
Hauser Plant (all units)
Madison Plant (all units)
Rainbow Plant (all units)
Mystic Plant (all units)
Exhibit M
Separation Principles
Over the years, Company has built an integrated generation, transmission
and distribution system designed to serve the electric energy requirements of
its retail and wholesale customers in an efficient and reliable manner. In
order to achieve maximum economic efficiency and reliability, there are many
instances in which communications, metering, control, operations and other
equipment have been integrated to serve a combination of generation,
transmission and distribution functions. In addition, there are many
instances in which equipment or facilities used for one function are
physically located within structures that are primarily used for another
function.
Complete physical separation of generation facilities from transmission
and distribution facilities would be prohibitively expensive and of little or
no value to Company or Generating Party. Instead, Company and Generating Party
intend, through the Interconnection Agreement and related documents, to
establish a regime that will allow the continued operation of generation,
transmission and distribution facilities in an efficient manner regardless of
ownership.
The Interconnection Agreement generally defines the operational
procedures, certain access rights, maintenance duties and other rights and
obligations of Company and Generating Party. Exhibit B of the
Interconnection Agreement describes the Points of Receipt on Company's T&D
System and provides additional information regarding each generation site. The
Separation Document will, pursuant to these Separation Principles, provide the
detailed system descriptions necessary to facilitate the separation of
ownership between assets that will be retained by Company and those that will
be transferred to Generating Party, as well as the continued coordinated use,
where necessary, of certain generation, transmission and distribution
facilities without the need for physical separation. The Separation Document
may also further identify conditions, operations, procedures and practices,
maintenance and other issues that are site specific and therefore are not
identified in the Interconnection Agreement, and to provide for
indemnification with respect to loss of life or injury to persons or property.
The requirement of the Separation Document may result in the need to amend or
modify by mutual agreement certain Exhibits to the Interconnection Agreement
or certain Schedules to the Asset Purchase Agreement to reflect inadvertent or
erroneous references or omissions or other matters arising out of the
development of the Separation Document. The Separation Document must be
signed at the Closing under the Asset Purchase Agreement. In the absence of
agreement of the Parties, unresolved disputes under the Separation Document
will be resolved as provided in Exhibit H (Dispute Resolution).
In the event of a conflict between the Interconnection Agreement and the
Separation Document, the Separation Document will control.
The Separation Document: (a) will consist, among other things, of one-
line drawings, elementary diagrams, three-line diagrams, relay and control
panel front view and wiring diagrams, and other physical drawings showing
equipment layout and site plans (in each case, where available), (b) will be
consistent with Schedules 1.01(a)(i), through 1.01(a) (xix) to the Asset
Purchase Agreement, and (c) will be developed in accordance with the
Separation Principles, including the following:
1. RECORDS: The drawings and property records contained in the
Separation Document will identify ownership and dispatch points of
demarcation.
2. JOINT OWNERSHIP: Joint ownership will be avoided.
3. VISIBLE DISCONNECT: The Purchaser will own the visible disconnect
whenever possible. The visible disconnect will be lockable and
capable of tagging.
4. PROTECTION SYSTEMS: Protection systems, including fault
interrupting devices, will be owned by the Party whose equipment
is protected by the system or device.
5. SCADA: Shared SCADA systems will be owned by Seller.
6. BATTERIES: Battery systems will be owned by the Purchaser.
Systems used for SCADA and radio will be owned by the Seller.
7. STATION SERVICE: Purchaser will own those station service
transformers that serve generation loads.
8. ACCESS: Purchaser will own access roads, gates and fences that
are used exclusively by Purchaser. Ownership of those that are
used jointly by Seller and Purchaser will be determined as part of
the Separation Document.
The Parties acknowledge that there may be specific instances in which
the Separation Document will vary from the foregoing principles, either by
mutual agreement or pursuant to Exhibit H (Dispute Resolution) of the
Interconnection Agreement.
Exhibit Diagrams
Page 5
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page A-12
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page B-2
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page C-3
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page D-1
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page E-1
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page F-4
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page G-2
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page H-3
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page I-1
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page J-1
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
1
Page K-21
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page L-1
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
Page M-2
GENERATION INTERCONNECTION AGREEMENT BETWEEN
THE MONTANA POWER COMPANY AND
EXHIBIT 10d
EQUITY CONTRIBUTION AGREEMENT
EQUITY CONTRIBUTION AGREEMENT (this "Agreement") dated as of October 31, 1998
by and among PP&L Global, Inc. ("Purchaser"), PP&L Resources, Inc.
("Parent"), and The Montana Power Company ("Seller").
R E C I T A L S
WHEREAS, Purchaser and Seller are parties to that certain Asset
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement");
WHEREAS, Purchaser is directly wholly-owned by Parent;
NOW, THEREFORE, in consideration of the premises and as an
inducement for Seller to enter into the Purchase Agreement, the parties
hereto agree as follows:
Section 1. Definitions.Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings given to them in the
Purchase Agreement.
Section 2. Equity Contribution.
(a) Seller may, in its sole discretion and without the concurrence
of Purchaser or any of its Affiliates, give written notice to be received by
Parent (i) on a date that is six (6) Business Days prior to the Closing Date
(the "Notice Date"), which notice shall certify that, as of the Notice Date,
the Montana Conditions are satisfied and that, if the Closing were to occur
on the Notice Date, Seller would be prepared to satisfy the conditions to
Closing that are solely within the control of Seller; and (ii) on a date that
is six (6) Business Days prior to the Closing Date under either of the
Portland Purchase Agreement or the Puget Purchase Agreement (as the term
"Closing Date" is defined under each of those agreements) (an "Additional
Notice Date"), which notice shall certify that Seller has been notified by
Portland and/or Puget, as applicable that, as of any such Additional Notice
Date, the Portland Conditions and/or the Puget Conditions, as applicable, are
satisfied and that, if the Closing were to occur on the Notice Date, Portland
and/or Puget, as applicable, would be prepared to satisfy the conditions to
Closing that are solely within the control of such party. Parent hereby
irrevocably promises and agrees that, upon receipt of the notice referred to
in clause (i) of the preceding sentence, Parent will make or cause to be
made, on the date of the Closing, a contribution in immediately available
funds to Purchaser in the amount of the Base Purchase Price, adjusted to take
into account additional Excluded Assets, if any, pursuant to Section 1.10 of
the Purchase Agreement and that, upon receipt of any notice referred to in
clause (ii) of the preceding sentence, Parent will make or cause to be made,
on the date of the Closing under the Portland Purchase Agreement or the Puget
Purchase Agreement, as applicable, a contribution in immediately available
Funds in the amount of the Puget Payment Amount, the Portland Payment Amount
or the Combined Payment Amount, as applicable, pursuant to Section 1.05(b) of
the Purchase Agreement (the amount required to be contributed by Parent
pursuant to each individual notice referred to in clauses (i) and (ii) of the
preceding sentence is sometimes hereinafter referred to as the "Required
Contribution Amount").
(b) If Purchaser breaches its obligation to effect the Closing as
and when required by the Purchase Agreement (or any Closing under the
Portland Purchase Agreement or the Puget Purchase Agreement as and when
required under such agreements), and, if as a result thereof, Purchaser is
the subject of a final and binding order of a court of competent jurisdiction
obligating it to pay any damages, costs, and expenses incurred by Seller (a
"Liability"), Seller may, in its sole discretion and without the concurrence
of Purchaser or any of its Affiliates, give written notice to Parent that
such Liability was incurred. Parent irrevocably promises and agrees that it
shall make or cause to be made a contribution in immediately available funds
to Purchaser within five (5) Business Days after receipt of such notice in an
amount sufficient for Purchaser to fully satisfy and discharge the Liability
up to but not to exceed the applicable Required Contribution Amount.
(c) If a court of competent jurisdiction enters a final and
binding order to the effect that Seller was not entitled to give any notice
provided for in subsection (a) or (b) hereof, then Seller shall be liable to
pay Parent, as liquidated damages and in full satisfaction of any claim of
Purchaser or any of its Affiliates arising out of such notice or order
insofar as such order relates to Seller giving such notice, an amount equal
to the documented out-of-pocket costs of Parent (including, without
limitation, Parent's cost of capital after giving effect to related income
taxes) incurred in connection with Parent's contribution (or arrangements
made to cause such contribution) to Purchaser as a result of such wrongful
notice by Seller.
(d) Notwithstanding any other provision of this Agreement to the
contrary, Parent shall have no obligation to make or cause to be made any
contribution to Purchaser under this Agreement to the extent its aggregate
contributions to Purchaser made or cause to be made as a result of a notice
given by Seller hereunder or otherwise contributed (provided such funds have
been segregated in accordance with Section 4 hereunder or are otherwise
available for payment by Purchaser of the Purchase Price under the Purchase
Agreement) equal or exceed the aggregate of the Required Contribution
Amounts.
(e) Any payments made or cause to be made by Parent directly to
Seller in satisfaction of Parent's obligations to make or cause to be made a
contribution to Purchaser hereunder shall be deemed to be on behalf of, and
to satisfy the obligations of, Purchaser to Seller under the Purchase
Agreement (to the extent of the amount paid or caused to be paid by Parent).
(f) If, prior to receipt of a notice from Seller requesting a
contribution to Purchaser, Parent makes or causes to be made a contribution
to Purchaser as contemplated herein, it shall promptly notify Seller in
writing of such contribution, which notice shall state that such contribution
has been segregated as provided in Section 4 herein.
(g) Upon written request of Seller given to Purchaser at any time
after Parent has made or caused to be made a contribution to Purchaser
contemplated herein, Purchaser agrees to return such contribution to Parent.
(h) If, following the making by Parent of a Required Contribution
Amount hereunder, the Closing in respect of which such contribution was made
fails to occur as scheduled (other than any such failure caused solely by a
breach by Purchaser of its obligation to effect such Closing), any Funds so
contributed to Purchaser may be returned to Parent; provided, that this
Agreement shall continue in effect until termination in accordance with the
provisions of Section 5 hereof.
Section 3. Representations and Warranties.
(a) Parent and Purchaser represent and warrant to Seller as
follows:
(i) Each of Parent and Purchaser is a corporation, duly
organized, validly existing and in good standing under
the laws of Commonwealth of Pennsylvania and has full
corporate power and authority to enter into this
Agreement and to perform its obligations hereunder.
(ii) The execution and delivery by each of Parent and
Purchaser of this Agreement, and the performance of its
obligations hereunder, have been duly authorized by all
necessary corporate action on the part of Parent and
Purchaser, as the case may be.
(iii) Each of Parent and Purchaser has duly executed and
delivered this Agreement. Assuming due authorization,
execution and delivery of this Agreement by Seller,
this Agreement constitutes the valid and binding
obligation of each of Parent and Purchaser, enforceable
in accordance with its terms, except as such
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar
laws of general applicability affecting the enforcement
of creditors' rights and the application of general
principles of equity.
(iv) All consents, authorizations and other approvals of any
governmental authority which are necessary for the
execution and delivery by each of Parent and Purchaser
of this Agreement and the performance by it of its
obligations hereunder have been obtained and are in
full force and effect, are final and not subject to any
appeal.
(v) Execution, delivery and performance by Parent of this
Agreement will not conflict with or result in a
violation or default under any contract, agreement or
order of any court or regulatory authority binding upon
Parent or any of its Affiliates.
(b) Seller represents and warrants to Parent as follows:
(i) Seller is a corporation, duly organized, validly
existing and in good standing under the laws of the
State of Montana, and has full corporate power and
authority to enter into this Agreement and to perform
its obligations hereunder.
(ii) The execution an delivery by Seller of this Agreement,
and the performance of its obligations hereunder, have
been duly authorized by all necessary corporate action
on the part of Seller.
(iii) Seller has duly executed and delivered this Agreement.
Assuming due authorization, execution and delivery of
this Agreement by Purchaser and Parent, this Agreement
constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar
laws of general applicability affecting the enforcement
of creditors' rights and the application of general
principles of equity.
(iv) All consents, authorizations and other approvals of any
governmental authority which are necessary for the
execution and delivery by Seller of this Agreement and
the performance by Seller of its obligations hereunder
have been obtained and are in full force and effect,
are final and not subject to any appeal.
(v) Execution, delivery and performance by Seller of this
Agreement will not conflict with or result in a
violation or default under any contract, agreement or
order of any court or regulatory authority binding upon
Seller or any of its Affiliates.
Section 4. Restriction on Use. Purchaser shall segregate from its
general funds any contributions made or caused to be made by Parent hereunder
and shall use such funds for the purpose, and only for the purpose, of
satisfying its obligations to Seller under the Purchase Agreement. Such
contribution shall be placed in a segregated account at an independent
financial institution, the name of which account makes reference to the
restrictions contained herein.
Section 5. Termination. The obligation of Parent under this Agreement
shall terminate upon the earliest to occur of:
(a) contribution made or caused to be made by Parent to Purchaser
of an amount equal to or exceeding the aggregate of the Required Contribution
Amounts in response to a notices given by Seller hereunder or otherwise
contributed (provided such funds have been segregated in accordance with
Section 4 or are otherwise available for payment by Purchaser of the Purchase
Price under the Purchase Agreement and any necessary notice has been given
pursuant to Section 2(f));
(b) five business days after notice of termination of the Purchase
Agreement is given pursuant to Article XI thereof, unless prior to the close
of business on the fifth business day after such notice Parent receives
written notice from Purchaser or Seller that either of them in good faith
believes that the Purchase Agreement is still in full force and effect or has
been improperly terminated, and that Seller is actively pursuing a Liability
claim, in which case this Agreement shall terminate upon the settlement or
other determination of such claim in accordance with Section 2(b) hereof and
the making of the required contribution by or caused by Parent; or
(c) the occurrence of the Closing under the Purchase Agreement.
Section 6. Miscellaneous
(a) This Agreement shall be binding upon, shall inure to the
benefit of, and shall be enforceable by, the parties hereto and their
respective successors and permitted assigns. In the event that Purchaser
assigns its rights under the Purchase Agreement to a special purpose
corporation, then the term "Purchaser" herein shall refer to such special
purpose corporation and Parent shall make or cause to be made its required
contribution hereunder directly to such special purpose corporation. Seller
shall be entitled to enforce the obligations of Parent hereunder without the
concurrence of Purchaser and regardless of any claims by Purchaser against
Seller, including any claims under, or the satisfaction or non-satisfaction
of any obligations of Seller under the Purchase Agreement. Neither this
Agreement nor any right hereunder may be assigned by any party without the
prior written consent of the parties hereto, which consent (except in the
case of a transfer by Parent of its obligations hereunder) shall not be
unreasonably withheld.
(b) This Agreement contains the entire understanding of the
parties with respect to the matters herein and supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof.
(c) All notices and other communications required or permitted by
this Agreement or by law to be served upon or given to a party hereto by any
other party hereto shall be addressed as provided in the Purchase Agreement
and, if to Parent, to the address for notices set forth beneath Parent's
signature below.
(d) This Agreement may not be amended or otherwise modified except
by a written agreement signed by each party hereto.
(e) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE NEW YORK EXCLUDING ITS CONFLICTS OF LAWS
PROVISIONS.
(f) If any provision of this Agreement shall be unenforceable,
void or otherwise contrary to law, such provision shall in no manner operate
to render any other provision of the Agreement unenforceable, invalid or
contrary to law, and this Agreement shall continue to be operative and
enforceable in accordance with the remaining terms and provisions hereof.
(g) The terms, conditions, covenants, representations and
warranties hereof may be waived only by a written instrument executed by the
party waiving compliance. The failure of a party at any time or from time to
time to require performance of any provisions hereof shall in no manner
affect its rights at a later time to enforce the same. No waiver by a party
of any condition or any breach of term, covenant, representation or warranty
contained in this Agreement in any one or more instances shall be deemed to
be, or be construed as, a further or continuing waiver of any such condition
or breach of any term, covenant, representation or warranty.
(h) No person other than the parties hereto, or their successors
or permitted assigns shall have any rights hereunder.
(i) The term "Montana Conditions" means all conditions to the
obligations of Seller and Purchaser to consummate the Closing as set forth in
Articles VI and VII of the Purchase Agreement (except those conditions solely
within the control of the Seller or Purchaser). The term "Puget Conditions"
means all conditions to the obligations of Puget and Purchaser under the
Puget Asset Purchase Agreement (except those conditions solely within the
control of the Puget or Purchaser). The term "Portland Conditions" means all
conditions to the obligations of Portland and Purchaser under the Portland
Asset Purchase Agreement (except those conditions solely within the control
of the Portland or Purchaser).
(j) This Agreement may be signed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same Agreement.
PP&L RESOURCES, INC.
By: ____________________ _______
Name: John R. Biggar
Title: Senior Vice-President &
Chief Financial Officer
Address for Notices: Two North Ninth Street
Allentown,Pennsylvania 18101
PP&L GLOBAL, INC.
By: _________________________ ___
Name: Paul T. Champagne
Title: Vice President
Address for Notices: 11350 Random Hills Road
Suite 400
Fairfax, Virginia 22030
MONTANA POWER COMPANY
By: ___________________________ _
Name: Perry J. Cole
Title: Vice President
Address for Notices: 40 East Broadway Street
Butte, Montana 59701-9394
NY1:#3188819v5 6
NY1:#3188819v5
Exhibit 99a
News from The Montana Power Company Contacts:
Butte, Montana Cort Freeman 1.406.497.2368
November 2, 1998 Dean Conklin 1.406.497.2706
Linda McGillen 1.406.496.5211
www.mtpower.com
MONTANA POWER ANNOUNCES SALE OF GENERATING PLANTS
BUTTE, Montana - The Montana Power Company (NYSE: MTP) said Monday
(Nov. 2) that it has reached a definitive agreement with PP&L Global, Inc.,
of Fairfax, Va., a subsidiary of PP&L Resources, Inc. (NYSE: PPL) based in
Allentown, Pa., for PP&L Global to purchase 1,556 megawatts of Montana
Power's electric generating assets in Montana , and certain associated high-
voltage transmission lines.
The total consideration is $988 million, marking conclusion of a
process begun last December 9, 1997, when the company announced it would sell
its in-state generating plants and redeploy the sales proceeds.
"We are delighted with these results," said Robert P Gannon, chairman,
president and chief executive of The Montana Power Company. "This is a
terrific outcome for our shareholders and for our customers in Montana, who
stand to benefit from this sale.
"This is a step that will help to enhance competition among electric
suppliers in Montana, and help to bring the benefits of competition to
Montanans."
In separate actions that were part of the transaction, Puget Sound
Energy (NYSE: PSD) of Bellevue, Washington and Portland General Electric
(PGE) of Portland also sold their interests totaling 1,058 megawatts (gross)
at the four-unit Colstrip plant. Coupled with Montana Power's 816-megawatt
(gross) interest in the four plants, PP&L Global is acquiring 1,874 megawatts
(gross) at Colstrip, which is the second-largest coal-fired generating
facility west of the Mississippi River. The Colstrip interests of Washington
Water Power and Pacific Power & Light, totaling 402 megawatts (gross) are not
part of this sale.
PP&L Global said it had identified synergies in owning and operating a
larger interest in the Colstrip units, so Montana Power's final proceeds are
dependent upon the sale to PP&L by all three Colstrip owners, as well as the
sale of various 500-kilovolt transmission interests.
Gannon listed these benefits from the sale:
? Montana Power shareholders benefit, because proceeds up to the book
value of the regulated assets sold plus Colstrip 4 lease and
transmission proceeds - a total of about $650 million -- can be used
to meet the company's strategic objectives, including reinvestment
in the existing, successful businesses such as the fast-growing
telecommunications business of Touch America.
? Both shareholders and Montana Power customers benefit because the
sale eliminates a $160-million item to cover four years of
transition expenses anticipated in the company's 1997 transition
filing before the Montana Public Service Commission (PSC) related to
customer choice.
? Montana Power customers should benefit further. The company expects
that the PSC will first apply amounts above the book value mentioned
earlier to reduce $156 million of regulatory assets created by the
PSC, which presently are being recovered in rates. Any additional
proceeds above book value (from regulated assets that are sold)
could offset long-term contract costs for electricity purchased from
independent producers - primarily privately owned plants at Colstrip
and Billings as well as the state of Montana's Missouri River dam at
Toston. Those contract prices, set by the PSC, are now above market
levels.
"For more than 282,000 electric customers in Montana," Gannon said, "we
will continue to be the regulated transmission and distribution provider of
electric service to their homes and businesses, as part of our continuing
investment of more than $1 billion in Montana."
Gannon said the agreement is not subject to any financing contingency
for the generation portion of the sale. Montana Power will use proceeds to
focus on Touch America's telecommunications business and possibly oil and gas
exploration and production, and its core regulated transmission and
distribution operations, as well as other existing businesses. The company
also intends to reduce debt and buy back common stock. Montana Power
announced in August that it was exiting the business of trading and marketing
electricity, while continuing to produce and market natural gas.
The agreement covers all of Montana Power's 979 megawatts (gross)
generation at five coal-fired generating facilities - 816 megawatts at the
four units at Colstrip and 163 megawatts at the Corette plant in Billings -
as well as 577 megawatts (gross) at Montana Power's hydroelectric dams.
The total price represents a multiple of 1.55 for the book value of the
assets, and approximately $600 per kilowatt.
The sale includes 11 of the company's 12 hydroelectric facilities plus
a storage reservoir at Hebgen Lake. Also included are three contracts for
the purchase or exchange of power. Not included is a 3-megawatt facility,
Milltown Dam near Missoula, which will remain with the company and be handled
separately.
PP&L Global owns, or is acquiring or developing about 1,500 megawatts
of generation elsewhere in the United States, including plants in Maine and
developments in Arizona, Connecticut and Pennsylvania. The company also owns
interests in electric generating facilities in Spain, Portugal, Bolivia and
Peru, and has ownership interests in electric distribution companies in the
United Kingdom, Argentina, Brazil, Chile, Peru and El Salvador.
The parent company, PP&L Resources, has a subsidiary, PP&L, Inc., that
serves 1.2 million customers in Pennsylvania and owns and operates nearly
8,000 megawatts of electric generation facilities. Through another
subsidiary, it markets or trades wholesale energy in 26 states and Canada.
"PP&L Global's sister company, PP&L, Inc., not only has extensive
experience in plant operation, it also has a strong heritage of community
involvement and environmental sensitivity," Gannon said. "We believe that
PP&L Global will be a welcome addition to the business community in Montana."
He added that the execution of agreements announced today is the first
step toward completion of the sale, which is subject to, among other things,
the receipt of various regulatory approvals, including approval by the
Federal Energy Regulatory Commission (FERC). Settlement of the transaction
is expected within nine to 12 months.
Proceeds for Montana Power's regulated generation could be as much as
$892 million; the inclusion of an unregulated lease and associated 500-
kilovolt transmission for Colstrip Unit 4 would make the total $988 million.
The precise amount Montana Power will receive at closing will be
affected by the closing of the Puget and PGE interests, which require
regulatory approval in Washington and Oregon. Without that approval, Montana
Power's proceeds would be reduced, but the company would then sell its
Colstrip 1-3 rights in the 500-kilovolt transmission lines for $93 million.
Gannon said that the agreements reached with PP&L Global provide for
continued employment of Montana Power workers at the generating plants
purchased by PP&L Global.
The Montana Power Company has annual sales in excess of $1 billion, and
assets of $2.8 billion.
Safe Harbor for Forward-Looking Statements:
The Company is including the following cautionary statements to make
applicable and take advantage of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements
made by, or on behalf, of the Company. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements which are other
than statements of historical facts. Such forward-looking statements may be
identified, without limitation, by the use of the words "anticipates,"
"estimates," "expects," "intends," "believes" and similar expressions. From
time to time, the Company may publish or otherwise make available forward-
looking statements of this nature. All such forward-looking statements,
whether written or oral, and whether made by or on behalf of the Company or
its subsidiaries, are expressly qualified by these cautionary statements and
any other cautionary statements which may accompany the forward-looking
statements. In addition, the Company disclaims any obligation to update any
forward-looking statements to reflect events or circumstances after the date
hereof.
Forward-looking statements made by the Company are subject to risks and
uncertainties that could cause actual results or events to differ materially
from those expressed in, or implied by, the forward-looking statements. These
forward-looking statements include, among others, statements concerning the
Company's revenue and cost trends, cost recovery, cost-reduction strategies
and anticipated outcomes, pricing strategies, planned capital expenditures,
financing needs, and availability, changes in the utility industry and the
impacts of the year 2000 issue. Investors or other users of forward-looking
statements are cautioned that such statements are not a guarantee of future
performance by the Company; such forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those expressed in, or implied by, such statements. Some, but not all,
of the risks and uncertainties include: General economic and weather
conditions in the areas in which the Company has operations, competitive
factors and the impact of restructuring initiatives in the electric and gas
industry, market prices, environmental laws and policies, federal and state
regulatory and legislative actions, drilling successes in oil and natural gas
operations, changes in foreign trade and monetary policies, laws and
regulations related to foreign operations, tax rates and policies, rates of
interest and changes in accounting principles or the application of such
principles to the Company.
OTHER NEWS CONTACTS:
For PP&L Resources:
Dan McCarthy (610) 774-5758
For Puget Sound Energy:
Media: Dorothy Bracken 1-888-831-7250
Analysts: Bob Adams (425) 462-3808
