As filed with the Securities and Exchange Commission on July 10, 1997
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) July 9, 1997
NIAGARA MOHAWK POWER CORPORATION
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(Exact name of registrant as specified in its charter)
New York
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(State or Other Jurisdiction of Incorporation)
1-2987 15-0265555
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(Commission File Number) (IRS Employer Identification No.)
300 Erie Boulevard West, Syracuse, NY 13202
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(Address of Principal Executive Offices) (Zip Code)
(315) 474-1511
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
Page 1
Exhibit Index on Page 5
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Items 1-4. Not Applicable.
Item 5. Other Events.
On July 9, 1997, Niagara Mohawk Power Corporation (the "Company")
entered into a Master Restructuring Agreement (the "MRA") with sixteen
independent power producers (the "IPPs") who have twenty-nine power purchase
agreements with the Company. Pursuant to the MRA, such power purchase agreements
will be terminated, restated or amended, in exchange for an aggregate of
$3,555,000,000 in cash, $50,000,000 in short term notes or cash (at the
Company's option), forty-six million shares of the Company's Common Stock and
certain fixed price swap contracts. A schedule setting forth the quantities and
prices for the new contracts is filed as Exhibit 99.3 hereto and incorporated
herein by reference. The closing of the MRA is conditioned upon, among other
things, the Company and the IPPs negotiating their individual restated and
amended contracts, the receipt of all regulatory approvals, the receipt of all
consents by third parties necessary for the transactions contemplated by the MRA
(including the termination of the existing power purchase contracts and the
termination or amendment of all related third party agreements), the IPPs
entering into new third party arrangements which will enable each IPP to
restructure its projects on a reasonably satisfactory economic basis, the
Company having completed all necessary financing arrangements and the Company
and the IPPs having received all necessary approvals from their respective
boards of directors, shareholders and partners. While one or more IPPs may under
certain circumstances terminate the MRA with respect to itself, the Company's
obligation to close the MRA is subject to its determination that as a result of
any such terminations the benefits anticipated to be received by the Company
pursuant to the MRA have not been materially and adversely affected. The
foregoing is qualified in its entirety by the text of the MRA, a copy of which
is filed as Exhibit 10.28 hereto and incorporated herein by reference.
Item 6. Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) - (b) Not Applicable.
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(c) Exhibits Required by Item 601 of Regulation S-K.
Exhibit Number Description
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10.28 Master Restructuring Agreement, dated as of July 9, 1997,
between the Company and the sixteen independent power
producers signatory thereto
99.1 Press Release, dated July 10, 1997
99.2 Slide presentation to be provided to analysts on July 11,
1997 concerning Master Restructuring Agreement. (The
slide presentation contains certain forward looking
statements with respect to the financial condition,
results of operations and business of Niagara Mohawk
Power Corporation, including statements relating to (a)
energy cost savings that will be realized by consummation
of the Master Restructuring Agreement including, by
implication, market prices for energy; (b) the impact of
the transaction on cash flow; and (c) management plans
and objectives for the Company's future operations. These
forward looking statements involve certain risks and
uncertainties. Factors that may cause actual results to
differ materially from those contemplated by such forward
looking statements include, among others, the following
possibilities: (1) failure of some independent power
producers to consummate the proposed transaction; (2)
changes in market prices for electric energy; (3) changes
in financing costs; (4) federal income tax treatment of
the transaction; (5) changes in capital expenditures; (6)
general economic conditions, either nationally or in New
York state, are less favorable than expected; (7)
regulatory treatment of the transaction, including a
prudence determination, establishing appropriate price
levels, authorizing regulatory assets and stranded cost
recovery; or (8) legislative or regulatory changes
adversely affect the business in which the Company would
be engaged.)
99.3 Contract Schedule
Items 8-9. Not Applicable.
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NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereto duly authorized.
NIAGARA MOHAWK POWER CORPORATION
(Registrant)
By: /s/ Steven W. Tasker
---------------------------------
Steven W. Tasker
Vice President-Controller and
Principal Accounting Officer
Date: July 10, 1997
Page 4
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EXHIBIT INDEX
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Exhibit Number Description
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10.28 Master Restructuring Agreement, dated as of July 9, 1997,
between the Company and the sixteen independent power
producers signatory thereto
99.1 Press Release, dated July 10, 1997
99.2 Slide presentation to be provided to analysts on July 11,
1997 concerning Master Restructuring Agreement. (The
slide presentation contains certain forward looking
statements with respect to the financial condition,
results of operations and business of Niagara Mohawk
Power Corporation, including statements relating to (a)
energy cost savings that will be realized by consummation
of the Master Restructuring Agreement including, by
implication, market prices for energy; (b) the impact of
the transaction on cash flow; and (c) management plans
and objectives for the Company's future operations. These
forward looking statements involve certain risks and
uncertainties. Factors that may cause actual results to
differ materially from those contemplated by such forward
looking statements include, among others, the following
possibilities: (1) failure of some independent power
producers to consummate the proposed transaction; (2)
changes in market prices for electric energy; (3) changes
in financing costs; (4) federal income tax treatment of
the transaction; (5) changes in capital expenditures; (6)
general economic conditions, either nationally or in New
York state, are less favorable than expected; (7)
regulatory treatment of the transaction, including a
prudence determination, establishing appropriate price
levels, authorizing regulatory assets and stranded cost
recovery; or (8) legislative or regulatory changes
adversely affect the business in which the Company would
be engaged.)
99.3 Contract Schedule
Page 5
Exhibit 10.28
MASTER RESTRUCTURING AGREEMENT
BY AND BETWEEN
NIAGARA MOHAWK POWER CORPORATION
AND
INDEPENDENT POWER PRODUCERS
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JULY 9, 1997
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MASTER RESTRUCTURING AGREEMENT
TABLE OF CONTENTS
Page
RECITALS......................................................................1
1. DEFINITIONS................................................................1
2. RESTRUCTURING..............................................................8
2.1. TERMINATING PPAS......................................................8
2.2. AMENDED PPAS..........................................................9
2.3. RESTATED CONTRACTS....................................................9
2.4. FIXED PRICE SWAP CONTRACTS............................................9
2.5. NORCON...............................................................10
2.6. OXBOW................................................................10
2.7. NEGOTIATIONS.........................................................11
2.8. DELIVERY OF CONTRACTS TO ESCROW AGENT................................13
2.9. CONTRACT ADJUSTMENT..................................................14
3. ALLOCABLE CONSIDERATION; SHORT-TERM NOTES; ALLOCATION.....................14
3.1. ALLOCABLE CONSIDERATION..............................................15
3.2. SHORT-TERM NOTES; ADDITIONAL CASH PAYMENT............................15
3.3. DELIVERY OF ALLOCABLE CONSIDERATION, SHORT-TERM NOTES AND ADDITIONAL
CASH PAYMENT TO DEPOSITARY...........................................15
3.4. ALLOCATION...........................................................16
3.5. NON-DILUTION.........................................................19
3.6. PRIVATE PLACEMENT; REGISTRATION OF COMPANY SHARES....................20
3.7. SHAREHOLDER'S AGREEMENT..............................................22
3.8. BOARD OF DIRECTORS...................................................23
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................23
4.1. ORGANIZATION; STANDING...............................................23
4.2. EXECUTION; AUTHORITY; ENFORCEABILITY.................................23
4.3. NO CONFLICTS.........................................................24
4.4. LITIGATION...........................................................24
4.5. CAPITALIZATION.......................................................24
4.6. VALID ISSUANCE OF COMPANY SHARES.....................................25
4.7. SEC REPORTS AND FINANCIAL STATEMENTS.................................25
4.8. ABSENCE OF CERTAIN CHANGES OR EVENTS.................................26
4.9. NMPC RESTRUCTURING...................................................26
5. REPRESENTATIONS AND WARRANTIES OF EACH IPP................................27
5.1. ORGANIZATION; STANDING...............................................27
5.2. EXECUTION; AUTHORITY; ENFORCEABILITY.................................27
5.3. NO CONFLICTS.........................................................27
5.4. LITIGATION...........................................................27
5.5. CERTAIN TRANSFERS....................................................28
5.6. ACQUISITION OF COMPANY SHARES........................................28
5.7. FORM OF ALLOCATION, CONTRACTS ALLOCATION.............................29
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6. CONDUCT AND TRANSACTIONS PRIOR TO THE CONSUMMATION DATE...................29
6.1. DEBT SECURITIES......................................................29
6.2. SALE/LEASEBACK; TAX-FREE EXCHANGES...................................30
6.3. PROXY STATEMENT......................................................31
6.4. NMPC RESTRUCTURING...................................................31
6.5. HART-SCOTT-RODINO ACT NOTIFICATION...................................32
6.6. REGULATORY APPROVALS.................................................33
6.7. COOPERATION WITH RESPECT TO REGULATORY APPROVALS.....................34
6.8. COOPERATION WITH RESPECT TO IPP/THIRD PARTY CONSENTS AND
NMPC/THIRD PARTY RELEASES.......................................35
6.9. PERFORMANCE UNDER EXISTING PPAS......................................36
6.10. STAY OF LITIGATION..................................................37
6.11. CONDUCT OF BUSINESS.................................................39
6.12. PUBLIC DISCLOSURE...................................................39
6.13. FURTHER ASSURANCES..................................................40
6.14. NO ACCUMULATION.....................................................40
6.15. TAX RULINGS.........................................................40
7. INTENTIONALLY LEFT BLANK..................................................41
8. CONDITIONS TO EACH IPP'S OBLIGATIONS ON THE CONSUMMATION DATE.............41
8.1. REPRESENTATIONS AND WARRANTIES.......................................41
8.2. PERFORMANCE..........................................................41
8.3. REPRESENTATION LETTER; SECRETARY'S CERTIFICATE; OPINION OF
THE COMPANY'S COUNSEL...............................................41
8.4. REGULATORY APPROVALS.................................................41
8.5. NO INJUNCTION, ACTION OR PROCEEDING..................................42
8.6. NO MATERIAL ADVERSE EVENT............................................42
8.7. CONTRACTS............................................................42
8.8. GENERAL RELEASE; WITHDRAWAL OF LITIGATION............................42
8.9. INTENTIONALLY LEFT BLANK.............................................43
8.10. THIRD PARTY CONTRACTS; IPP APPROVALS................................43
8.11. GAS MITIGATION......................................................44
8.12. REGISTRATION OF COMPANY SHARES......................................44
8.13. PAYMENT OF FEES.....................................................44
9. CONDITIONS TO THE COMPANY'S OBLIGATIONS ON THE CONSUMMATION DATE..........44
9.1. REPRESENTATIONS AND WARRANTIES.......................................45
9.2. PERFORMANCE..........................................................45
9.3. REPRESENTATION LETTER; SECRETARY'S CERTIFICATE; OPINION OF
IPP'S COUNSEL........................................................45
9.4. REGULATORY APPROVALS.................................................45
9.5. NO INJUNCTION, ACTION OR PROCEEDING..................................45
9.6. CONTRACTS............................................................46
9.7. NMPC/THIRD PARTY CONSENTS AND NMPC/THIRD PARTY RELEASES..............46
9.8. GENERAL RELEASE; WITHDRAWAL OF LITIGATION............................46
9.9. BOARD AND SHAREHOLDER APPROVALS......................................47
9.10. NMPC FINANCING......................................................47
10. SATISFACTION OF CONDITIONS; CONSUMMATION.................................47
10.1. NOTICE OF SATISFACTION OR WAIVER OF CONDITIONS......................47
10.2. CONSUMMATION DATE...................................................49
10.3. DELIVERIES BY THE COMPANY...........................................49
10.4. DELIVERIES BY THE IPPS..............................................50
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10.5. DELIVERIES BY THE DEPOSITARY AND THE ESCROW AGENT...................50
11. REGULATORY AND OTHER MATTERS.............................................50
11.1. MAINTENANCE OF QF STATUS............................................50
11.2. COMPETITIVE TRANSITION CHARGE; RETAIL BYPASS........................51
11.3. CONSISTENT TAX REPORTING............................................52
12. TERMINATION OF AGREEMENT.................................................52
12.1. EVENTS OF TERMINATION OF THE AGREEMENT IN ITS ENTIRETY..............53
12.2. EVENTS OF TERMINATION WITH RESPECT TO ONE OR MORE OF THE IPPS.......54
12.3. EXPIRATION..........................................................55
12.4. EFFECT OF TERMINATION...............................................56
12.5. EFFECT ON EXISTING PPAS.............................................57
12.6. BANKRUPTCY TERMINATION..............................................58
13. NOTICES..................................................................58
14. MISCELLANEOUS............................................................60
14.1. ENTIRE AGREEMENT....................................................60
14.2. AMENDMENTS AND WAIVERS..............................................60
14.3. SUCCESSORS AND ASSIGNS..............................................60
14.4. GOVERNING LAW.......................................................60
14.5. SEVERABILITY........................................................61
14.6. CAPTIONS............................................................61
14.7. COUNTERPARTS........................................................61
14.8. FEES................................................................61
14.9. EXPENSES............................................................62
14.10. ATTORNEYS' FEES....................................................62
14.11. REMEDIES...........................................................62
14.12. SURVIVAL...........................................................62
14.13. SEVERAL OBLIGATIONS................................................63
14.14. CONFIDENTIALITY....................................................63
14.15. NO PREJUDICE.......................................................65
SCHEDULES
SCHEDULE A NAMES AND NOTICE ADDRESSES OF IPPS
SCHEDULE 2.1 EXISTING PPAS TO BE TERMINATED PURSUANT TO SECTION 2.1
SCHEDULE 2.2 EXISTING PPA TO BE AMENDED PURSUANT TO SECTION 2.2
SCHEDULE 2.3 EXISTING PPAS TO BE AMENDED AND/OR RESTATED PURSUANT TO
SECTION 2.3
SCHEDULE 3.5 CERTAIN EXCLUSIONS FROM ANTI-DILUTION PROVISIONS
SCHEDULE 3.7 IPP SPONSOR ENTITIES TO ENTER INTO SHAREHOLDER'S AGREEMENT
SCHEDULE 4.5 NMPC CAPITALIZATION
SCHEDULE 4.8 CERTAIN CHANGES OR EVENTS
SCHEDULE 5.4 CERTAIN DISCLOSED LITIGATION
SCHEDULE 6.6C MATTERS TO BE INCLUDED IN PSC APPROVAL
SCHEDULE 6.10A LITIGATION AND REGULATORY PROCEEDINGS TO BE STAYED BY THE PARTIES
SCHEDULE 6.10B CERTAIN LITIGATION AND REGULATORY PROCEEDINGS
(INVOLVING 6-CENT ISSUES)
SCHEDULE 6.11 CERTAIN PERMITTED CONDUCT
SCHEDULE 8.8 LITIGATION AND PROCEEDINGS TO BE WITHDRAWN BY THE PARTIES
SCHEDULE 9.10 NMPC FINANCING
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EXHIBITS
EXHIBIT A TERMS AND CONDITIONS OF AMENDED PPA AND RESTATED CONTRACTS
EXHIBIT 2.1 FORM OF TERMINATION AGREEMENT
EXHIBIT 3.6 FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT 3.7 FORM OF SHAREHOLDER'S AGREEMENT
EXHIBIT 5.7 BLANK FORMS OF ALLOCATION, CONTRACTS ALLOCATION AND CONTRACT
ADJUSTMENT ALLOCATION
EXHIBIT 8.3A FORM OF NMPC REPRESENTATION LETTER
EXHIBIT 8.3C FORM OF OPINION OF NMPC'S COUNSEL
EXHIBIT 9.3A FORM OF IPP REPRESENTATION LETTER
EXHIBIT 9.3C FORM OF OPINION OF IPP'S COUNSEL
EXHIBIT 14.14 FORM OF THIRD PARTY NON-DISCLOSURE AGREEMENT
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MASTER RESTRUCTURING AGREEMENT
THIS MASTER RESTRUCTURING AGREEMENT is entered into on July 9, 1997
(the "Agreement") by and between NIAGARA MOHAWK POWER CORPORATION, a New York
corporation ("NMPC" or the "Company"), and the several independent power
producers identified as such on the signature pages and on Schedule A hereto
(the "Independent Power Producers" or "IPPs").
RECITALS
(A) The Company, among other things, is a regulated utility engaged in the
business of generating, transmitting and distributing electric power to
customers in the State of New York;
(B) The Independent Power Producers are owners and operators of
co-generation and small power production facilities;
(C) The Company previously has entered into twenty-nine (29) separate power
purchase agreements with the IPPs (referred to herein as "Existing PPAs");
(D) The Company has offered to amend, amend and restate or terminate the
Existing PPAs, upon and subject to the terms and conditions contained herein;
and
(E) The IPPs are not willing to amend, amend and restate or terminate each
of the Existing PPAs, except upon and subject to the terms and conditions
contained herein.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement (including any Exhibit or Schedule
hereto, unless otherwise defined therein), the terms set forth below shall have
the following meanings:
"Additional Cash Payment" shall have the meaning set forth in Section
3.2.
"Affiliate" shall mean, with respect to any Party, any other person or
entity which controls, is controlled by, or is under common control with, such
Party, wherein the term "control" shall mean the power to direct the management
and policies by or of such Party through ownership of voting securities, by
contract or otherwise.
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"Affiliate IPPs" shall mean, with respect to any IPP, any other IPP
which is an Affiliate of such IPP.
"Agreement" or "Master Restructuring Agreement" shall mean this Master
Restructuring Agreement, including the Exhibits and Schedules hereto, as amended
and in effect from time to time.
"Allocable Consideration" shall have the meaning set forth in Section
3.1.
"Allocation" shall have the meaning set forth in Section 3.4.
"Amended PPA" shall have the meaning set forth in Section 2.2.
"Bankruptcy Code" shall mean Title 11 of the United States Code, as
amended.
"Base Share Price" shall have the meaning set forth in Section 3.5(a).
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in the State of New York are authorized or required to
be closed.
"Cash Payment" shall have the meaning set forth in Section 3.1(a).
"Class A PPAs" shall mean those Existing PPAs with respect to which an
IPP will receive a portion of the Allocable Consideration, but not the Amended
PPA or a Restated Contract.
"Class B PPAs" shall mean those Existing PPAs with respect to which an
IPP will receive a Restated Contract(s) (but not the Amended PPA), whether or
not such IPP will receive a portion of the Allocable Consideration.
"Class D PPA" shall mean the Existing PPA with respect to which the IPP
party thereto will receive a portion of the Allocable Consideration and will
receive the Amended PPA.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Company's common stock, $1.00 par value
per share.
"Company" or "NMPC" shall mean Niagara Mohawk Power Corporation, a New
York corporation.
"Company Shares" shall have the meaning set forth in Section 3.1(b).
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"Competitive Transition Charge" shall mean a charge, however
designated, for recovery of strandable costs.
"Conditions Determination Date" shall mean the date which is the later
to occur of (i) December 1, 1997 and (ii) ninety (90) days after the PSC
Approval Date, except as otherwise provided in Section 2.7(b).
"Consummation" shall have the meaning set forth in Section 10.2.
"Consummation Date" shall have the meaning set forth in Section 10.2.
"Contract Adjustment" shall have the meaning set forth in Section 2.9.
"Contract Adjustment Allocation" shall have the meaning set forth in
Section 3.4(a).
"Contract Year" shall have the meaning set forth in Exhibit A.
"Contracts" shall have the meaning set forth in Section 2.8.
"Contracts Allocation" shall have the meaning set forth in Section
3.4(a).
"Curtailment" shall mean any curtailment of electricity under the
provisions of 18 C.F.R. ss. 292.304(f) (1997), or any subsequent or similar rule
or regulation adopted by the PSC or the FERC, or any rule or order of the PSC,
the FERC, or any other Governmental Authority interpreting or applying those
provisions or authorizing the Company to reserve any rights under those
provisions.
"Debt Registration Statement" shall have the meaning set forth in
Section 6.1(b).
"Debt Securities" shall have the meaning set forth in Section 6.1.
"Deposit Agreement" shall have the meaning set forth in Section 3.3.
"Depositary" shall mean such bank or trust company as may be selected
by the Parties to act as the Depositary hereunder.
"DLJ" shall mean Donaldson, Lufkin & Jenrette Securities Corporation.
"DRIP Plan" shall mean the Company's Dividend Reinvestment and Stock
Purchase Plan.
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"Effective Time" shall mean 11:59:59 p.m. on the Consummation Date.
"Escrow Agent" shall mean Akin, Gump, Strauss, Hauer & Feld, L.L.P.
"Escrow Agreement" shall have the meaning set forth in Section 2.8.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Existing PPAs" shall mean those power purchase agreements in effect as
of the date of this Agreement between the Company and the several IPPs, as
listed on Schedules 2.1, 2.2 and 2.3 hereto.
"Expiration Date" shall mean April 1, 1998, except as otherwise
provided in Sections 2.7(b) and 12.3(b).
"EWG" shall have the meaning set forth in Section 11.1(b).
"FERC" shall mean the Federal Energy Regulatory Commission.
"Fixed Price Swap Contracts" shall have the meaning set forth in
Section 2.4.
"Gas IPPs" shall mean those IPPs which produce power using primarily
natural gas.
"Gas Mitigation Third Party" shall mean a natural gas supplier or
natural gas transporter with whom any Gas IPP has a contract or agreement as of
the date of this Agreement and any counterparty under any hedging or other
financial instrument existing as of the date of this Agreement with respect to
the supply or transportation of natural gas under any such contract or
agreement, with respect to which any Gas IPP desires that its obligations
thereunder be released, satisfied or amended in connection with the transactions
contemplated by this Agreement.
"Governmental Authority" shall mean any federal, state, municipal or
local governmental authority, department, commission, board, agency, body or
official, whether executive, legislative, administrative, regulatory or
judicial, including but not limited to the FERC and the PSC.
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Independent Power Producers" or "IPPs" shall mean the several
independent power producers identified as such on the signature pages and on
Schedule A hereto. If this Agreement shall be terminated in accordance with the
terms hereof with respect to
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one or more but less than all of the IPPs, then, except with respect to any
provisions hereof which expressly or by their terms survive any termination of
this Agreement, upon any such termination such terminated IPP shall cease to be
an "IPP" for purposes of this Agreement.
"Indexed Swap Contracts" shall have the meaning set forth in Exhibit A.
"IPP Approval" shall have the meaning set forth in Section 8.10.
"IPP Regulatory Approval" shall have the meaning set forth in Section
6.6(b).
"IPP Representatives" shall mean WP&Co., the IPPs' Special Counsel and
the IPPs' Local Regulatory Counsel.
"IPP Status Notice" shall have the meaning set forth in Section
10.1(c).
"IPP/Third Party Consent" shall have the meaning set forth in Section
8.10.
"IPPs' Local Regulatory Counsel" shall mean Read and Laniado, LLP.
"IPPs' Local Regulatory Counsel Fee Letter" shall have the meaning set
forth in Section 14.9.
"IPPs' Special Counsel" shall mean Akin, Gump, Strauss, Hauer & Feld,
L.L.P.
"IPPs' Special Counsel Fee Letter" shall have the meaning set forth in
Section 14.9.
"Material Adverse Effect" shall mean, with respect to any Party, either
(i) a material and adverse effect on the business, properties, operations or
condition (financial or otherwise) of such Party and its subsidiaries, taken as
a whole, or (ii) a material and adverse effect on such Party's ability to enter
into and perform its obligations under this Agreement or any other agreements to
be executed by such Party pursuant hereto.
"NMPC Regulatory Approval" shall have the meaning set forth in Section
6.6(a).
"NMPC Restructuring" shall have the meaning set forth in Section 6.4.
"NMPC Status Notice" shall have the meaning set forth in Section
10.1(b).
"NMPC/Third Party Agreement" shall have the meaning set forth in
Section 6.8(b).
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"NMPC/Third Party Consent" shall have the meaning set forth in Section
4.2.
"NMPC/Third Party Release" shall have the meaning set forth in Section
6.8(b).
"NorCon" shall mean NorCon Power Partners, L.P.
"NorCon Agreement" shall have the meaning set forth in Section 2.5.
"NYPSL" shall mean the New York Public Service Law, as amended.
"NYSE" shall mean the New York Stock Exchange.
"Oxbow" shall mean Oxbow Power of North Tonawanda, New York, Inc.
"Oxbow Agreement" shall have the meaning set forth in Section 2.6.
"Party(ies)" shall mean the Company and the several IPPs. If this
Agreement shall be terminated in accordance with the terms hereof with respect
to one or more but less than all of the IPPs, then, except with respect to any
provisions hereof which expressly survive any termination of this Agreement,
upon any such termination such terminated IPP shall cease to be a "Party"
hereunder.
"Power Put Contract" shall have the meaning set forth in Exhibit A.
"Project" shall mean each IPP's generation and production facilities,
including the property, plant and equipment and associated real property and
fixtures.
"Proxy Statement" shall have the meaning set forth in Section 6.3.
"PSC" shall mean the New York State Public Service Commission.
"PSC Approval" shall have the meaning set forth in Section 6.6(c).
"PSC Approval Date" shall mean the date on which the PSC issues the
order containing the PSC Approval.
"Public Offering" shall have the meaning set forth in Section 6.1.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended.
"PURPA" shall mean the Public Utility Regulatory Policies Act of 1978,
as amended.
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"QF" shall have the meaning set forth in Section 11.1.
"QF Monitoring Program" shall mean any program of the Company, whether
authorized, implemented or proposed, designed to monitor any IPP's status under
PURPA as a qualifying cogeneration or small power production facility or under
NYPSL as a co-generation facility, including any right to demand or receive
information from any IPP, third party or Governmental Authority.
"Reasonable Best Efforts" shall mean, with respect to any Party, such
Party's diligent pursuance of the course of action or result stated as
determined by such Party itself in good faith, but shall not require such Party
to pay any sum or other consideration or incur or assume any liability or
obligation that is not otherwise expressly required to be paid, incurred or
assumed pursuant to this Agreement, excluding (i) normal and customary
incidental out-of-pocket costs and expenses and (ii) attorneys' fees (except,
with respect to any IPP, attorneys' fees required to be paid by the Company
pursuant to the IPPs' Special Counsel Fee Letter or the IPPs' Local Regulatory
Counsel Fee Letter).
"Registration Rights Agreement" shall have the meaning set forth in
Section 3.6(b).
"Regulatory Approvals" shall mean the PSC Approval and all other
consents, approvals, qualifications, orders, authorizations, extensions,
waivers, exemptions and other actions or inactions of the FERC, the PSC or any
other Governmental Authority (including expirations of applicable waiting
periods under the Hart-Scott-Rodino Act) as may be required by applicable law or
desired by any Party with respect to this Agreement and the consummation of this
Agreement and the transactions contemplated hereunder, including but not limited
to the execution, delivery and performance of the Contracts. For purposes hereof
"Regulatory Approvals" shall not include any SEC approvals which may be required
in connection with the Shelf Registration Statement, Debt Registration Statement
or Proxy Statement.
"Restated Contract" shall have the meaning set forth in Exhibit A.
"Restructuring" shall have the meaning set forth in Section 2.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall mean (i) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996, as amended by Form 10-KA filed with
the SEC on May 1, 1997, (ii) the Company's Current Report on Form 8-K dated
March 10, 1997, (iii) the Company's Proxy Statement filed with the SEC on April
7, 1997, (iv) the Company's Form U-3A-2 filed pursuant to PUHCA on April 2,
1997, (v) the Company's
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Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997, and
(vi) all subsequent filings, up to the Consummation Date, required to be made by
the Company under the Exchange Act or any other securities laws applicable to
the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Scheduled Date" shall have the meaning set forth in Section 10.2.
"Shareholders Agreement" shall have the meaning set forth in Section
3.7.
"Shelf Registration Statement" shall have the meaning set forth in
Section 3.6.
"Short-Term Notes" shall have the meaning set forth in Section 3.2.
"Solid Fuel IPPs" shall mean those IPPs which produce power using
primarily coal or waste fuels.
"Terminating PPAs" shall have the meaning set forth in Section 2.1.
"Termination Agreement" shall have the meaning set forth in Section
2.1.
"Underwriters" shall have the meaning set forth in Section 6.1(c).
"WP&Co." shall mean Wasserstein Perella & Co., Inc.
"WP&Co. Fee Letter" shall have the meaning set forth in Section 14.8.
2. RESTRUCTURING
Subject to the terms and conditions of this Agreement, effective as of
the Consummation Date, the Parties shall enter into the following transactions
(referred to herein collectively as the "Restructuring"):
2.1. Terminating PPAs. The Company and each IPP which is a party to an
Existing PPA listed on Schedule 2.1 hereto (a "Terminating PPA") shall enter
into an agreement, substantially in the form annexed as Exhibit 2.1 (a
"Termination Agreement"), pursuant to which, effective as of the Effective Time,
all rights, duties and obligations of the Company and such IPP under each such
Terminating PPA and under any associated gas transportation and peak shaving
agreement and, if the IPP so elects, interconnection agreement and existing
interconnection arrangements, between the Company (or any Affiliate of the
Company) and such IPP shall be terminated, released
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and discharged, and containing such other terms and conditions as the Company
and each such IPP may mutually agree.
2.2. Amended PPAs. The Company and the IPP which is a party to the
Existing PPA listed on Schedule 2.2 hereto shall enter into an amendment to such
Existing PPA (the "Amended PPA"), as described in Exhibit A hereto, including
the related Attachments to Exhibit A, effective as of the Effective Time.
2.3. Restated Contracts. The Company and each IPP which is a party to
an Existing PPA listed on Schedule 2.3 hereto shall conduct good faith
negotiations and use their Reasonable Best Efforts to enter into a Restated
Contract, as defined in Exhibit A hereto. Each Restated Contract shall be an
amendment and/or restatement of each such Existing PPA, shall be dated as of the
date of each such Existing PPA and the terms of such amendment and/or
restatement shall be effective as of the Effective Time. As a part of such
process, the IPPs which are parties to the Existing PPAs listed on Schedule 2.3
hereto shall use their Reasonable Best Efforts to enter into Restated Contracts
which will include option provisions with respect to an aggregate of 500 GWh of
electricity per annum over a term of up to six Contract Years for periods within
each year that are mutually agreed upon; provided such option provisions include
a term, periods, contract quantities, contract prices and other terms and
conditions which are acceptable to the applicable IPP, and provided, further,
that no IPP will be obligated to include such option provisions if such
provisions, in such IPP's judgment, are not economically neutral in comparison
to the Contract Allocation of such applicable IPP before giving effect to such
option provisions. With respect to each IPP entering into a Restated Contract,
as applicable, (a) the Company shall continue to provide local gas
transportation under its existing agreements with such IPP (and, if requested by
such IPP, the Company shall conduct good faith negotiations concerning the
amendment of such gas transportation agreements, and, if requested by the
Company, the IPP shall conduct good faith negotiations to amend such existing
agreements to insure that the Company has a reasonable ability to interrupt such
transportation due to system emergencies), (b) peak shaving obligations on the
part of such IPP shall be eliminated, effective as of the Consummation Date,
without penalty to the IPP or compensation to the Company and without reducing
the value of the Allocable Consideration or in any way affecting the Restated
Contracts, (c) minimum take and demand charges in existing gas transportation
agreements between the Company and such IPP shall remain in full force and
effect (subject to the good faith negotiations described in clause (a) above)
and (d) if such IPP has eliminated its peak shaving arrangements with the
Company and will have gas supply and transportation arrangements after the
Consummation Date, it shall use Reasonable Best Efforts to assist the Company to
arrange for replacement of peak shaving services.
2.4. Fixed Price Swap Contracts. The Company also shall execute and
deliver to the Escrow Agent, for the benefit of and at the direction of all of
the IPPs or their respective designees, a series of Fixed Price Swap Contracts
as defined in and in
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accordance with the terms and conditions set forth in Exhibit A hereto,
including the related Attachments to Exhibit A (the "Fixed Price Swap
Contracts"). The Fixed Price Swap Contracts shall be in such denominations and
with such counterparties as the IPPs shall designate to the Company not later
than eight (8) Business Days prior to the Consummation Date, provided that each
such counterparty shall (i) be an IPP, (ii) be a Gas Mitigation Third Party or
(iii) meet the requirements for an "Approved Assignee" (as such term is defined
in Section 2 of the termsheet attached as Attachment A-11 to Exhibit A) of an
IPP or a Gas Mitigation Third Party.
2.5. NorCon. The Company and NorCon shall conduct separate good faith
negotiations to enter into an agreement (the "NorCon Agreement") regarding the
amendment, amendment and restatement, other restructuring or termination of
NorCon's Existing PPA. The Company and NorCon agree to commence such
negotiations, at a mutually agreeable location(s), promptly following the date
of this Agreement and to meet not less frequently than weekly during the first
month following the date of this Agreement and thereafter as the Company and
NorCon may mutually agree. Although there is no obligation on the Company's part
to agree to any further consideration to NorCon, should the Company and NorCon
mutually so determine, NorCon may receive consideration pursuant to the NorCon
Agreement which is in addition to the portion of the Allocable Consideration and
the Restated Contracts allocated to NorCon in the Allocation (the "NorCon
Allocation"). Any such additional consideration shall not affect the Allocation,
increase or reduce the Allocable Consideration payable to any other IPP (i.e.,
the Allocable Consideration less the NorCon Allocation), nor in any way affect
the Short-Term Notes or Additional Cash Payment, as applicable, or the terms of
the Amended PPAs or Restated Contracts to be received by any other IPP or the
Fixed Price Swap Contracts. In the event that the Company and NorCon should
agree that NorCon's Existing PPA shall be a Terminating PPA, then the contract
quantity and the installed capacity under the Restated Contracts each shall be
reduced by the contract quantity and the installed capacity under the Restated
Contracts allocated to NorCon pursuant to the original Allocation, and the
aggregate contract adjustment identified on Attachment A-3 to Exhibit A shall be
reduced by the portion of the Contract Adjustment allocated to NorCon pursuant
to the original Allocation, if any, and in such event such reduction shall not
affect the terms and conditions, including contract price, of any of the
Restated Contracts to be entered into by any other IPPs. In the event the
Company and NorCon are unable to agree in writing on the additional
consideration, if any, to be received by NorCon within seventy-five (75) days
after the date of this Agreement (which date may be extended with the mutual
agreement of the Company and NorCon), then (i) this Agreement shall terminate
with respect to NorCon, with the effect described in Section 12.4(b), and except
as otherwise provided in Section 6.9(d), and (ii) the provisions of Section 12.5
shall apply with respect to NorCon's Existing PPA.
2.6. Oxbow. The Company and Oxbow shall conduct separate good faith
negotiations to enter into an agreement (the "Oxbow Agreement") regarding the
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termination of Oxbow's Existing PPA pursuant to Section 2.1. Although there is
no obligation on the Company's part to agree to modify the form of consideration
to Oxbow, should the Company and Oxbow mutually so determine, Oxbow may receive
consideration pursuant to the Oxbow Agreement which is in lieu of the portion of
the Restated Contracts allocated to Oxbow in the Allocation (the "Oxbow
Allocation"). Any such substitute consideration shall not affect the Allocation,
increase or reduce the Allocable Consideration payable to any other IPP (i.e.,
the Allocable Consideration less the Oxbow Allocation), nor in any way affect
the Short-Term Notes or Additional Cash Payment, as applicable, or the terms of
the Amended PPAs or Restated Contracts to be received by any other IPP or the
Fixed Price Swap Contracts. In the event that the Company and Oxbow should agree
that Oxbow's Existing PPA shall be a Terminating PPA, then the contract quantity
and the installed capacity under the Restated Contracts shall be reduced by of
the contract quantity and the installed capacity under the Restated Contracts
allocated to Oxbow pursuant to the original Allocation, and the aggregate
contract adjustment identified on Attachment A-3 to Exhibit A shall be reduced
by the portion of the Contract Adjustment allocated to Oxbow pursuant to the
original Allocation, if any, and in such event such reduction shall not affect
the terms and conditions, including contract price, of any of the Restated
Contracts to be entered into by any other IPPs. In the event the Company and
Oxbow are unable to conclude negotiations and agree on the substitute
consideration, if any, to be received by Oxbow within seventy-five (75) days
after the date of this Agreement (which date may be extended with the mutual
agreement of the Company and Oxbow), then (i) this Agreement shall terminate
with respect to Oxbow, with the effect described in Section 12.4(b) and (ii) the
provisions of Section 12.5 shall apply with respect to Oxbow's Existing PPA.
Oxbow agrees to provide its Contracts Allocation to the Company within fifteen
(15) days after the date of this Agreement.
2.7. Negotiations.
(a) All negotiations to be conducted by the Company and any IPP pursuant to this
Article 2 shall be commenced not later than immediately following the PSC
Approval Date. Notwithstanding the foregoing, any IPP may elect in its sole
discretion to commence its own negotiations with the Company prior to the PSC
Approval Date. If an IPP so elects, the dates for the negotiation meetings shall
be scheduled by the Company and such IPP within seven (7) days after the date of
such request. If an IPP makes a request therefor, a representative of DLJ and/or
a representative of WP&Co. shall attend and participate in any or all
negotiations between the Company and such IPP. If the Company and any IPP shall
conclude negotiations and agree on a final form of the respective Termination
Agreement, Amended PPA, Restated Contract(s), NorCon Agreement or Oxbow
Agreement, as the case may be, then the Company and such IPP shall each initial
and exchange counterparts of such final form and give notice thereof to the
IPPs' Special Counsel, but no Party shall be bound thereto or obligated thereby
except as provided in Section 2.8. In addition, the Company and a
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committee of IPPs designated by notice to the Company within fourteen (14) days
after the date of this Agreement shall use Reasonable Best Efforts to commence
and conclude negotiations and agree on a final form of the Fixed Price Swap
Contracts as promptly as possible, and the Company and the chairman of such
committee of IPPs shall initial such final form to indicate that such form has
been agreed upon by the Company and on behalf of all IPPs and shall give notice
thereof to the IPPs' Special Counsel on or before the Conditions Determination
Date, but no Party shall be bound thereto or obligated thereby except with
respect to the Company as provided in Section 2.8.
(b) If the Company and any IPP shall not have sooner agreed on the
final form of their respective Contract(s) (excluding for these purposes the
Fixed Price Swap Contracts and, if this Agreement is terminated with respect to
NorCon or Oxbow pursuant to Sections 2.5 or 2.6, respectively, the NorCon
Agreement and Oxbow Agreement, respectively), the Company shall give all IPPs
notice of such fact (including the identity of the IPPs which have not agreed on
the final form of their respective Contract(s)) not later than the date which is
ten (10) Business Days prior to the Conditions Determination Date (a "Company
Notice"). The Company Notice shall include the Company's determination of
whether (x) the Company intends to terminate this Agreement pursuant to Section
12.1(d) in the event the Company and all such IPPs identified in such notice are
unable to agree on the final form of their respective Contract(s) on or before
the Conditions Determination Date, (y) the Company is willing to consummate the
transactions contemplated hereby (subject to the other conditions to the
Company's obligations contained in this Agreement) without the inclusion of
those IPPs which are unable to agree on the final form of their respective
Contract(s) on or before the Conditions Determination Date, or (z) the Company
elects to extend the Conditions Determination Date and the Expiration Date for a
period of thirty (30) days.
(i) If the Company shall notify the IPPs that it will terminate
this Agreement pursuant to Section 12.1(d) on the Conditions
Determination Date in the event the Company and all such IPPs
identified in such notice are unable to agree on the final form of
their respective Contract(s) on or before the Conditions Determination
Date (a "sub-clause (x) notice") and the Company and all such IPPs
identified in such notice are unable to agree on the final form of
their respective Contract(s) on or before the Conditions Determination
Date, then this Agreement shall terminate in its entirety on the
Conditions Determination Date pursuant to Section 12.1(d). If the
Company shall notify the IPPs that it is willing to consummate the
transactions contemplated hereby (subject to the other conditions to
the Company's obligations contained in this Agreement) without the
inclusion of those IPPs which have not agreed on the final form of
their respective Contract(s) as of the date of such notice (a
"sub-clause (y) notice"), then the provisions of clause (ii) below
shall be applicable. If the Company elects to extend the Conditions
Determination Date and the Expiration Date for a period of thirty (30)
days (a "subclause (z) notice"), or if the IPPs shall elect to extend
the
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Conditions Determination Date and the Expiration Date pursuant to
clause (ii) below, then not later than ten (10) Business Days prior to
the extended Conditions Determination Date the Company shall give all
IPPs a further Company Notice pursuant to sub-clause (x), (y) or (z)
above, provided that the Company's right to extend the Conditions
Determination Date pursuant to a sub-clause (z) notice shall be
limited such that the aggregate number of days by which the Conditions
Determination Date and the Expiration Date may be extended by the
Company pursuant to sub-clause (z) and by the IPPs pursuant to clause
(ii) below shall be sixty (60) days (the "maximum extension period").
Notwithstanding the foregoing, if the Company shall give a sub-clause
(x) notice and prior to the Conditions Determination Date the Company
shall notify the IPPs that it has agreed on the final form of their
respective Contract(s) with one or more of the IPPs with which it
previously was unable to agree, then the Company shall have the right
to convert its sub-clause (x) notice to either a subclause (y) notice
or a sub-clause (z) notice; in the event the Company gives a subclause
(y) notice pursuant to this sentence, the Conditions Determination
Date automatically shall be extended until the fifth (5th) Business
Day following the giving of such notice, subject to further extension
pursuant to clause (ii) below (and, further, in such event, the 60-day
maximum extension period described above shall be increased by any
such five (5) Business Day Period).
(ii) If the Company shall at any time give the IPPs a sub-clause
(y) notice pursuant to this Section 2.7(b) that it is willing to
proceed to consummate the transactions contemplated hereby (subject to
the other conditions to the Company's obligations contained in this
Agreement) without the inclusion of those IPPs which are unable to
agree on the final form of their respective Contract(s) if such IPPs
have not agreed on the final form of their respective Contract(s) on
or before the Conditions Determination Date, as the same may be
extended from time to time pursuant to clause (i) above, then, within
five (5) Business Days following the receipt of such notice, all IPPs
shall determine whether the IPPs desire to extend for a period of
thirty (30) days (subject to the maximum extension period) the
Conditions Determination Date and the Expiration Date. If eighty
percent (80%) of the IPPs do not so elect to extend the Conditions
Determination Date and the Expiration Date pursuant to this Section
2.7(b)(ii) on or before ten (10) Business Days after receipt of the
Company's sub-clause (y) notice (or if no such extension may be
elected because of the maximum extension period), then this Agreement
shall terminate on the Conditions Determination Date with respect to
any IPPs identified in such notice which are unable to agree on the
final form of their respective Contract(s) on or before the Conditions
Determination Date.
2.8. Delivery of Contracts to Escrow Agent. On the Conditions
Determination Date, the Company and each IPP shall execute the agreed final form
of the respective
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Termination Agreement, Amended PPA, Restated Contract(s), NorCon Agreement or
Oxbow Agreement, as the case may be, and the Company shall execute the Fixed
Price Swap Contracts (all such agreements and contracts, collectively, the
"Contracts"), and the parties thereto shall deliver all executed counterparts of
the Contracts to the Escrow Agent. Once delivered to the Escrow Agent, the
Contracts may not thereafter be amended, except by a written amendment executed
by the parties thereto and deposited with the Escrow Agent. The delivery of the
Contracts to the Escrow Agent shall be irrevocable, subject only to the
satisfaction or waiver of the conditions set forth in Sections 8 and 9 hereof in
accordance with the terms thereof, and to the provisions of Section 12.4. Upon
the satisfaction or waiver of such conditions, on the Consummation Date, the
Escrow Agent shall be authorized and instructed to deliver counterparts of the
Contracts to each of the respective parties thereto, whereupon the Contracts
(subject to any conditions as may be contained therein) shall be in full force
and effect as of the Effective Time. Upon any termination of this Agreement in
its entirety in accordance with the terms hereof, or any termination of this
Agreement with respect to any individual IPP(s) in accordance with the terms
hereof, any Contracts theretofore delivered to the Escrow Agent by any of the
Parties, or by the Company and any terminated IPP(s), as the case may be, shall
be void ab initio and shall be destroyed by the Escrow Agent. Each of the
Parties agrees to execute and deliver, as promptly as possible following the
date of this Agreement, such escrow agreement as may be reasonably requested by
the Escrow Agent or any other Party hereto setting forth the rights and
obligations of the Parties and the Escrow Agent, consistent with the terms and
conditions of this Agreement, with respect to the Contracts to be delivered to
the Escrow Agent pursuant to this Section 2.8, and the agreements and other
documents to be delivered to the Escrow Agent pursuant to Sections 10.3 and 10.4
(the "Escrow Agreement"). The Escrow Agreement shall contain customary
provisions, including customary exculpatory and indemnification provisions in
favor of the Escrow Agent.
2.9. Contract Adjustment. Not later than thirty (30) days prior to the
anticipated Conditions Determination Date, the IPPs shall demonstrate to the
Company that the annual aggregate Contract Adjustment set forth on Attachment
A-3 to Exhibit A ("Contract Adjustment"), as the same may be adjusted pursuant
to Sections 2.5, 2.6, 2.7 or 12.4(b), will be realized by the Company upon the
consummation of the transactions contemplated hereby, whether by reduction of
the aggregate contract price under the Restated Contracts or Fixed Price Swap
Contracts, by reduction of the Allocable Consideration, Short-Term Notes or
Additional Cash Payment (as applicable), or any combination thereof, or, if
mutually agreed to by the Parties, in any other manner.
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3. ALLOCABLE CONSIDERATION; SHORT-TERM NOTES; ALLOCATION
3.1. Allocable Consideration. The Company shall, on the Consummation
Date, pay and/or deliver to the Depositary on behalf of the IPPs or their
respective designees, the following (referred to herein as the "Allocable
Consideration"):
(a) Three billion five hundred fifty-five million dollars
($3,555,000,000) in immediately available funds (the "Cash Payment"); and
(b) Forty-six million (46,000,000) newly-issued, fully-paid and
nonassessable shares ("Company Shares") of Common Stock of the Company, which
number of Company Shares shall be subject to adjustment in accordance with
Section 3.5 hereof.
3.2. Short-Term Notes; Additional Cash Payment. The Company, on the
Consummation Date, shall also deliver to the Depositary, for the benefit of and
at the direction of all of the IPPs or their respective designees, either, at
the Company's option, (i) note obligations issued by the Company in the
aggregate principal amount of fifty million dollars ($50,000,000) (the
"Short-Term Notes") or (ii) the sum of fifty million dollars ($50,000,000) in
immediately available funds (the "Additional Cash Payment"). The Company shall
give the IPPs notice if it elects to deliver the Additional Cash Payment in lieu
of the Short-Term Notes, not later than the Conditions Determination Date. The
Short-Term Notes, if applicable, shall mature ninety (90) days after the
Consummation Date and shall have a yield which is at least equivalent to
commercial paper issued by comparable issuers at the time of the Consummation
Date and such other terms as may be agreed among the Parties not later than the
Conditions Determination Date. The Short-Term Notes shall not be subject to any
restrictions on transfer.
3.3. Delivery of Allocable Consideration, Short-Term Notes and
Additional Cash Payment to Depositary. The Cash Payment, Company Shares and
Short-Term Notes or Additional Cash Payment, as applicable, each shall be
irrevocably delivered by the Company on the Consummation Date to the Depositary,
which shall hold the Cash Payment and Company Shares for the benefit of and at
the direction of the several IPPs who are parties to this Agreement as of the
Consummation Date in the respective amounts set forth in the Allocation and
shall hold the Short-Term Notes or Additional Cash Payment, as applicable, for
the benefit of and at the direction of the IPPs who are parties to this
Agreement as of the Consummation Date. The Cash Payment, Company Shares and
Short-Term Notes or Additional Cash Payment, as applicable, shall be paid or
delivered without any setoff, deduction or claim whatsoever. The Cash Payment
and, if applicable, the Additional Cash Payment shall be paid by wire transfer
of federal funds to the account of the Depositary, which account shall be set
forth in a notice to the Company given not later than five (5) Business Days
prior to the Consummation Date. The Company Shares shall be issued in
certificated form (with the restrictive legend described in Section 3.6 and, if
applicable, the restrictive legend described in the Shareholder's Agreement) in
the names of the IPPs in the respective amounts set forth in the Allocation,
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or in the names of the respective designees of such IPPs in such amounts or
denominations as the respective IPPs may determine, in each case as shall be set
forth in a notice to the Company given not less than eight (8) Business Days
prior to the Consummation Date; any designee of the IPP which shall receive any
Company Shares pursuant to this Agreement shall, simultaneously with the giving
of such notice, provide the Company with a representation letter containing
substantially the same representations set forth in Section 5.6 of this
Agreement. Unless otherwise set forth in a notice to the Company given not later
than five (5) Business Days prior to the Consummation Date, the Short-Term Notes
(if applicable) shall be registered to and issued in the name of the Depositary,
as agent for the IPPs, subject to subsequent re-registration and re-issuance to
the several IPPs or their respective designees in such denominations as the
Depositary may request and which the Company shall execute, at the Company's
expense, within three (3) Business Days after receipt of any such request. Each
of the Parties agrees to execute and deliver, as promptly as possible following
the date of this Agreement, such deposit, escrow or similar agreement as may be
reasonably requested by the Depositary or any other Party hereto setting forth
the rights and obligations of the Parties and the Depositary, consistent with
the terms and conditions of this Agreement, with respect to (a) the Allocable
Consideration and Short-Term Notes or Additional Cash Payment, as applicable, to
be delivered to the Depositary pursuant to this Section 3.3 and (b) the
Allocation and the certifications of information contained in the Allocation
required to be given by the Depositary pursuant to the provisions of this
Agreement (the "Deposit Agreement"). The Deposit Agreement shall contain
customary provisions, including customary exculpatory and indemnification
provisions in favor of the Depositary.
3.4. Allocation.
(a) Each of (i) the Allocable Consideration, (ii) the contract quantity
and contract price under the Amended PPA, (iii) the aggregate contract
quantities of electricity and aggregate capacity for a term of ten Contract
Years and weighted average contract prices for the first two Contract Years
under the Restated Contracts and (iv) the Contract Adjustment have been
allocated by and among the several IPPs in accordance with an allocation
separately agreed to by the IPPs and deposited by the IPPs with WP&Co. and in a
sealed envelope with the Escrow Agent on or before the date of this Agreement
(clauses (i), (ii), (iii) and (iv) are referred to herein as the "Allocation",
clauses (ii) and (iii) only are referred to herein as the "Contracts Allocation"
and clause (iv) only is referred to herein as the "Contract Adjustment
Allocation"). Promptly following the execution of the Deposit Agreement, the
Escrow Agent shall deliver the Allocation to the Depositary. If the Deposit
Agreement is not executed by the Parties and the Depositary within thirty (30)
days after the date of this Agreement, the Escrow Agent shall, unless otherwise
directed in writing by the Parties to deliver the Allocation to a successor
escrow agent, destroy the Allocation. Upon such delivery to the Depositary or
successor escrow agent or destruction of the Allocation, as the case may be, the
Escrow
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Agent shall have no further obligation with respect to the Allocation, and the
Escrow Agent shall have no obligation with respect to the Allocation except as
set forth in this Section 3.4(a). Subject to the following sentence, the Company
agrees that the Allocation shall not be subject to challenge or modification by
the Company, and that the Company shall not initiate, encourage or support any
such challenge or attempted modification by any Governmental Authority or other
third party. The IPPs may modify the Allocation only with the prior written
consent of all IPPs; except that (i) the Company and any IPP may mutually agree
to increase or reduce the Allocable Consideration or contract quantity and
contract price under the Amended PPA or a Restated Contract to be paid to or
received by such IPP and (ii) any IPP may, in its sole discretion, adjust the
components of the Allocable Consideration allocated collectively to such IPP and
its Affiliate IPPs as among such IPP's and Affiliate IPP's Existing PPAs;
provided, however, in any such case such adjustment (x) shall not affect any
other non-Affiliate IPP's allocation of the Allocable Consideration or contract
quantity and contract price under the Amended PPA or a Restated Contract and (y)
shall not reduce the Cash Payment and Company Shares payable with respect to
Class A PPAs to less than two billion dollars ($2,000,000,000) (except to the
extent that such amount is reduced as a result of the termination of this
Agreement with respect to any IPPs which are parties to Class A PPAs). For
purposes of the foregoing determination of whether the Cash Payment and Company
Shares payable with respect to Class A PPAs is at least $2,000,000,000 pursuant
to any provision of this Agreement, the Company Shares shall be valued at the
Base Share Price. The affected IPP shall notify the Depositary and WP&Co. of any
such permitted adjustment, whereupon the Allocation shall be amended
accordingly. The Depositary shall maintain a schedule of all such adjustments to
the Allocation.
(b) Neither the Allocation, nor any portion thereof nor any
information contained therein shall be furnished or disclosed to the Company or
any Governmental Authority, except that:
(i) any individual IPP shall be free to disclose its own
portion of the Allocation (x) to the Company, (y) to any Governmental
Authority or (z) to any third party; and NorCon and any other
individual IPP which elects to commence its own negotiations with the
Company prior to the PSC Approval Date shall disclose to the Company
its own portion of the Contracts Allocation not later than five (5)
Business Days prior to the commencement of such negotiations, provided
that the Company is willing to commence negotiations regarding
non-economic terms with any IPP prior to receiving the Contracts
Allocation.
(ii) the IPPs shall cause WP&Co. to furnish in writing to the
Company (and each IPP) immediately following the execution of this
Agreement:
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(x) a schedule setting forth (A) the number of IPPs
(considered on an aggregate basis with any IPPs which are
Affiliates of such IPPs) which, pursuant to the Allocation, will
acquire pursuant to Section 3.1(b) less than 1,903,906 Company
Shares; 1,903,906 or more but less than 3,807,812
Company Shares; 3,807,812 or more but less than
5,711,718 Company Shares; 5,711,718 or more but less than
7,615,624 Company Shares; 7,615,624 or more but less than
9,519,531 Company Shares; and 9,519,531 or more but less than
10,650,000 Company Shares, respectively, as of the date of this
Agreement, which together shall constitute all of the IPPs
acquiring Company Shares pursuant to Section 3.1(b), and (B) the
aggregate amount, if any, of the Allocable Consideration allocated
to Class A PPAs and collectively to Class B PPAs and the Class D
PPA, respectively, as of the date of this Agreement (it being
agreed that the portion of the Cash Payment and Company Shares
allocated to Class A PPAs pursuant to the Allocation as of the
date of this Agreement shall not be less than two billion dollars
($2,000,000,000));
(y) a certification that the contract quantity of
electricity and capacity for a term of ten Contract Years under
the Restated Contracts allocated to each Class B PPA on the
Contracts Allocation when added together will equal the aggregate
quantity of electricity (rounded to the nearest GWh) and capacity
under the Restated Contracts on Attachment A-3 to Exhibit A and
that the contract price for a term of ten Contract Years under the
Restated Contracts allocated to each Class B PPA on the Contracts
Allocation when weight averaged will yield the weighted average
price (rounded to the nearest penny per MWh) under the Restated
Contracts under the columns "weighted average price" and "example
of weighted average price" on Attachment A-3 to Exhibit A; and
(z) a certification that the Contract Adjustment
allocated to each Class B PPA on the Contract Adjustment
Allocation when added together will equal the amounts under the
column "aggregate contract adjustment" (rounded to the nearest
$1,000) set forth on Attachment A-3 to Exhibit A.
(iii) the IPPs shall cause WP&Co. to furnish in writing to
the Company within three (3) Business Days after the PSC Approval Date
a schedule setting forth the Contracts Allocation; and
(iv) the IPPs shall cause WP&Co. to furnish in writing to the
Company, on the Consummation Date, a schedule setting forth the
aggregate amount, if any, of the Cash Payment and Company Shares
allocated to Class A PPAs, Class B PPAs and Class D PPA, respectively,
as of the Consummation
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Date (it being agreed that the portion of the Cash Payment and Company
Shares allocated to Class A PPAs shall not be less than
$2,000,000,000, except to the extent that such amount is reduced as a
result of the termination of this Agreement with respect to any IPPs
which are parties to Class A PPAs).
The Company may, in coordination with such IPP or WP&Co., confirm with the
Depositary any information disclosed by any IPP or WP&Co., respectively, to the
Company pursuant to this clause (b). Any information disclosed to the Company
pursuant to this Section 3.4(b) shall be subject to the confidentiality
provisions of Section 14.14.
(c) Subject to Section 6.2, the information contained in the Allocation
which is furnished to the Company pursuant to Section 3.4(b) shall be utilized
by the Parties for all tax reporting purposes (subject to any adjustments
mutually agreed between the Company and any individual IPP in the Amended PPA,
any Restated Contract, or otherwise).
3.5. Non-Dilution. It is understood that the number of Company Shares to
be issued and delivered by the Company pursuant to Section 3.1(b) represents
approximately 24.16% of the Company's fully-diluted Common Stock outstanding as
of September 30, 1996, after giving effect to the issuance of the Company Shares
pursuant to Section 3.1(b). Accordingly, if at any time between September 30,
1996 and the Consummation Date there shall have occurred any of the following
(it being understood that there shall be sequential adjustments for each
transaction described below):
(a) any (i) issuance of shares of Common Stock for a consideration per
share which is less than $8.70 (the "Base Share Price"), then the number of
Company Shares to be acquired by the IPPs pursuant to Section 3.1(b) shall be
increased by the amount equal to the number of shares of Common Stock issued for
a consideration less than the Base Share Price, multiplied by the difference
between the Base Share Price and the issue price, and then dividing the product
by the Base Share Price; or (ii) issuance of options, warrants or rights to
purchase shares of Common Stock for a consideration per share of Common Stock
which is less than the Base Share Price, or the issuance of other securities of
the Company (or any subsidiary of the Company) convertible into Common Stock at
a conversion price per share of Common Stock which is less than the Base Share
Price, then the number of Company Shares to be acquired by the IPPs pursuant to
Section 3.1(b) shall be increased by the amount equal to the number of shares of
Common Stock deliverable upon the exercise or conversion of such options,
warrants, rights or other securities, multiplied by the difference between the
Base Share Price and the exercise or conversion price, and then dividing the
product by the Base Share Price;
(b) any change in the number of shares of Common Stock (or options,
warrants or rights, or other securities of the Company exercisable, exchangeable
or
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convertible into Common Stock) as a result of a reclassification, combination,
exchange, subdivision, stock split (including a reverse stock split), stock
dividend or distribution, recapitalization, merger, issuer tender or exchange
offer, or other similar transaction, then the number of Company Shares to be
acquired by the IPPs pursuant to Section 3.1(b) shall be appropriately and
equitably adjusted; or
(c) any (i) reorganization (other than as provided in subsection (b)
above), (ii) merger or consolidation of the Company with or into another
corporation in which the Company is not the surviving entity, or a reverse
triangular merger in which the Company is the surviving entity but the shares of
the Company's capital stock outstanding immediately prior to the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise or (iii) sale or transfer of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the IPPs shall thereafter be entitled to
receive the number of shares of stock or other securities or property of the
successor corporation or corporations resulting from such reorganization,
merger, consolidation, sale or transfer that the IPPs would have been entitled
to receive in such reorganization, consolidation, merger, sale or transfer if
the Consummation Date had occurred and the Company Shares had been acquired by
the IPPs immediately before such reorganization, merger, consolidation, sale or
transfer.
Notwithstanding the foregoing, there shall be no adjustment pursuant to this
Section 3.5 for any shares of Common Stock issued with respect to any of the
transactions described on Schedule 3.5 hereto. Any additional shares of Common
Stock delivered by the Company pursuant to this Section 3.5 shall be received by
the IPPs, pro rata, based on the Company Shares allocated to each of the IPPs
pursuant to the Allocation.
3.6. Private Placement; Registration of Company Shares.
(a) The issuance of the Company Shares to the IPPs hereunder shall be
effected as a private placement pursuant to Section 4(2) of the Securities Act.
The certificates evidencing the Company Shares shall bear a legend in
substantially the following form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(1) PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT,
(2) IN ACCORDANCE WITH RULE 144 UNDER THE SECURITIES ACT OR (3) IN
ACCORDANCE WITH
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ANOTHER APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.
Upon issuance, the Company Shares shall not be subject to any restrictions on
transfer other than as may be required by the federal securities laws and, if
applicable, as may be set forth in the Shareholder's Agreement. The Company
shall use its Reasonable Best Efforts to cause the Company Shares to be
registered for sale from time to time by the IPPs (or their assigns) on a shelf
registration statement on Form S-3 (the "Shelf Registration Statement"), which
Shelf Registration Statement shall (i) be declared effective by the SEC on or
prior to the Consummation Date, (ii) remain effective for a period of two (2)
years following the Consummation Date and (iii) permit as an intended method of
distribution of the Company Shares (among others) an underwritten offering by an
underwriter selected by the holders of the Company Shares that is reasonably
satisfactory to the Company. The Company covenants and agrees that, as of its
effective date and as of the Consummation Date, none of the Shelf Registration
Statement, any document incorporated by reference therein, any prospectus
included therein or filed with the SEC, or any amendment thereof or supplement
thereto, shall contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(b) In connection with the preparation and filing of the Shelf
Registration Statement under the Securities Act, the Company shall give the
IPPs' Special Counsel the opportunity to participate in the preparation of
(including, but not limited to, reviewing, commenting on and attending all
meetings with underwriters, if any, with respect to) the Shelf Registration
Statement, each prospectus included therein or filed with the SEC, each
amendment thereof or supplement thereto, and will provide the IPP's Special
Counsel the opportunity to comment on the description of the transactions
contemplated hereunder to be contained in the current, quarterly or annual
report filed by the Company in connection with the consummation of the
transactions contemplated hereunder, and will make available for inspection by
the IPPs' Special Counsel and any attorney, accountant or other agent retained
by any IPP, all documents incorporated by reference therein, all pertinent
financial and other records, pertinent corporate documents and properties of the
Company, as shall be reasonably necessary to enable each IPP to conduct a
reasonable investigation within the meaning of the Securities Act, and shall
cause the Company's officers, directors and employees to supply all information
which any IPP may reasonably request for purposes of such investigation;
provided that any records, information or documents that are designated by the
Company in writing as confidential (and which are not generally available to the
public, have not become available to such person on a nonconfidential basis from
a source which has represented to such person that such source is entitled to
disclose same or which was known to such person on a nonconfidential basis prior
to its disclosure by the Company) shall be kept confidential by such person
unless disclosure of such records, information or documents is required by court
or administrative order or any Governmental Authority having
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<PAGE>
jurisdiction. The Company shall permit the IPPs' Special Counsel to review and
comment on the Shelf Registration Statement and each such prospectus, amendment
or supplement, as the case may be, a reasonable period of time prior to the
filing of same with the SEC, shall not file same in a form to which such counsel
reasonably objects within five (5) Business Days of the receipt thereof, and
shall provide the IPPs' Special Counsel with copies of all correspondence from
or with the SEC incidental to the Shelf Registration Statement or any such
prospectus, amendment or supplement. All expenses incident to the registration
of the Company Shares including, without limitation, all registration,
qualification and filing fees, "blue sky" fees and expenses, printing and
related expenses, fees and expenses of listing the Company Shares on the NYSE,
fees and expenses of counsel and independent certified public accountants of the
Company and fees and expenses of the IPPs' Special Counsel shall be borne by the
Company. In addition, on the Consummation Date, the Company and each IPP
receiving Company Shares pursuant to the Allocation (or its designee) shall
enter into a registration rights agreement in the form annexed as Exhibit 3.6
hereto ("Registration Rights Agreement").
3.7. Shareholder's Agreement. On the Consummation Date, each IPP listed
on Schedule 3.7 hereto (unless, as a result of any reallocation of Company
Shares prior to the Consummation Date or as a result of any designation of third
parties pursuant to Sections 3.3. and 5.6 to receive Company Shares on the
Consummation Date, such IPP, together with its Affiliate IPPs, members of its
Sponsor Group and its Excluded Affiliates (as said latter two capitalized terms
are defined in the Shareholder's Agreement), shall acquire on the Consummation
Date Company Shares representing less than two percent (2%) of the outstanding
Common Stock of the Company) shall cause the corresponding entity or entities
listed on Schedule 3.7 to enter into a shareholder's agreement with the Company
in the form annexed as Exhibit 3.7 hereto (each, a "Shareholder's Agreement").
If any IPP not listed on Schedule 3.7, as a result of any reallocation of
Company Shares prior to the Consummation Date, shall receive, together with its
Affiliates, Company Shares representing two percent (2%) or more of the
outstanding Common Stock of the Company, then such IPP shall notify the Company
and shall identify such sponsor entities as may be appropriate (consistent with
the sponsor entities listed on Schedule 3.7) to enter into, and such IPP and
sponsor entities shall enter into, a Shareholder's Agreement with the Company on
the Consummation Date. If any designee of one or more IPPs with respect to the
Company Shares in accordance with Sections 3.3 and 5.6 shall receive Company
Shares representing more than four and nine-tenths percent (4.9%) of the
outstanding Common Stock of the Company, then such designee shall enter into a
Shareholder's Agreement with the Company on the Consummation Date, unless the
Company shall otherwise agree. The IPP shall cause any such designee with
respect to Company Shares in accordance with Sections 3.3 and 5.6 (if not an
Affiliate of the IPP) to provide a representation letter to the Company (which
shall survive the Consummation Date) representing that, together with its
Affiliates, such designee shall not, immediately following the Consummation, be
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of more than nine and nine-tenths percent (9.9%) of the
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<PAGE>
outstanding Common Stock of the Company. If any Excluded Affiliate (as defined
in the Shareholder's Agreement) receives Company Shares pursuant to this
Agreement on the Consummation Date then, for purposes of the Shareholder's
Agreement, such Company Shares shall be treated as if they were transferred to
the Excluded Affiliate following the Consummation Date.
3.8. Board of Directors. Promptly after the date of this Agreement, the
Company and the IPPs shall jointly select a nationally recognized executive
search firm, whose fees and expenses will be paid by the Company, to develop a
list of individuals unaffiliated with the Company or any IPP who are qualified
to serve as directors of the Company. Both the Company and the IPPs may propose
potential directors to the search firm, but the search firm shall decide which
individuals will be included on the search firm's list. Once the search firm's
list has been prepared and presented simultaneously to the Company and the IPPs,
the Company and the IPPs shall mutually agree upon a final list of ten (10)
individuals who are mutually acceptable to the Company and the IPPs. The Company
shall select two (2) individuals from the final list to serve on the Board of
Directors of the Company, effective immediately following the Consummation Date.
Each such individual shall stand for reelection for a three (3) year term at the
Company's next annual meeting of shareholders. Each such individual shall be
proposed and supported by the Company for election to the Board. In the event
either such individual shall be unable to serve or continue to serve on the
Board, such individual's replacement shall be selected by the Company from the
final list. The provisions of this Section 3.8 shall survive the Consummation
Date until fully performed.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each IPP, as follows:
4.1. Organization; Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and has all requisite corporate power and authority to own its
properties and assets and to carry on its business in the manner now conducted
and, subject to receipt of the NMPC Regulatory Approvals, as proposed to be
conducted in accordance with this Agreement and the Contracts. The Company is
duly qualified to transact business and is in good standing in each jurisdiction
except where the failure so to qualify would not have a Material Adverse Effect
on the Company.
4.2. Execution; Authority; Enforceability. Subject in each case to (i)
receipt of the NMPC Regulatory Approvals and applicable federal and state
securities laws and the rules of the NYSE, (ii) receipt of required consents to
the transactions contemplated by this Agreement by the third parties whose names
are disclosed in a notice given by the Company to all IPPs within thirty (30)
days after the date of this Agreement, which notice
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<PAGE>
shall not include NMPC/Third Party Releases (each, an "NMPC/Third Party
Consent"), (iii) receipt of the NMPC/Third Party Releases and (iv) approval of
this Agreement and the transactions contemplated hereby by the Company's Board
of Directors and, to the extent required, by the Company's shareholders, (a) the
Company has all requisite corporate power and authority to execute and deliver
this Agreement and all other agreements to be executed by it pursuant hereto,
and to carry out the provisions of this Agreement in accordance with the terms
hereof, and all other agreements to be executed by it pursuant hereto,
including, but not limited to, the power and authority to issue and sell the
Company Shares and Short-Term Notes, and to enter into and perform the
Contracts; (b) this Agreement has been and all other agreements to be executed
by the Company pursuant hereto will be, duly and validly executed and delivered
by the Company; and (c) this Agreement constitutes, and all other agreements to
be executed by the Company pursuant hereto will constitute, valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
4.3. No Conflicts. Subject to (i) receipt of the NMPC Regulatory
Approvals, (ii) receipt of the NMPC/Third Party Consents, (iii) receipt of the
NMPC/Third Party Releases and (iv) approval of this Agreement and the
transactions contemplated hereby by the Company's Board of Directors and, to the
extent required, by the Company's shareholders, the execution, delivery, and
performance by the Company of this Agreement, any other agreements to be
executed by the Company pursuant hereto, and the consummation of the
transactions contemplated hereby and thereby, will not result in a violation or
default of any provision of its Certificate of Incorporation or By-Laws.
4.4 Litigation. Except as set forth in Schedules 6.10A and 6.10B or in
the SEC Reports, as of the date of this Agreement there is no action, suit,
arbitration, or other legal or administrative proceeding pending or, to the best
knowledge of the Company, any investigation pending or any action, suit,
arbitration, or other legal or administrative proceeding or investigation
threatened against the Company or any of its subsidiaries which (a) questions
the validity of this Agreement, the agreements to be executed by the Company
pursuant hereto or the right of the Company to enter into this Agreement or such
other agreements, or to consummate the transactions contemplated hereby or
thereby or (b) if adversely determined, would be likely to have a Material
Adverse Effect on the Company. The Company is not a party to or subject to any
order, writ, injunction, decree, judgment or other restriction of any
Governmental Authority which has or is reasonably likely to have a material
adverse effect on the Company's ability to enter into and perform its
obligations under this Agreement or any other agreements to be entered into by
the Company pursuant hereto.
4.5. Capitalization. Schedule 4.5 sets forth (i) the authorized capital
of the Company, (ii) the number of shares of Common Stock issued and outstanding
and (iii) the number of shares of Common Stock issuable upon the exercise of any
options, warrants or rights, or upon conversion or exchange of any other
securities outstanding, in
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each case as of (x) September 30, 1996 and (y) June 27, 1997. The Company is not
obligated to repurchase, redeem or otherwise acquire any shares of its capital
stock, other than as set forth in Schedule 4.8.
4.6. Valid Issuance of Company Shares. The Company Shares to be
acquired by the IPPs hereunder, when issued, sold and delivered in accordance
with the terms of this Agreement for the consideration expressed herein, will be
duly and validly issued, fully paid, and nonassessable, will be free of
restrictions on transfer other than restrictions on transfer required by federal
securities laws and, if applicable, as may be set forth in the Shareholder's
Agreement, and will be duly listed on the NYSE. The Company Shares to be
acquired by the IPPs hereunder are not and will not be subject to any preemptive
rights or rights of first refusal. Assuming the truth and accuracy of each IPP's
representations set forth in Section 5.6 (or, with respect to any designee of an
IPP, such designee's representations set forth in a representation letter
containing substantially the same representations set forth in Section 5.6), the
offer, sale and issuance of the Company Shares pursuant to this Agreement (i)
will not require registration under the Securities Act and (ii) will not require
registration or qualification under such of the "blue sky" or securities laws of
the jurisdictions in the United States (or will be in compliance therewith) as
shall be applicable to the offer, sale and issuance of the Company Shares
(subject to the last two sentences of Section 5.6 and subject further to the
limitation that the Company makes no representation or warranty with respect to
any offer by any IPP to any designee of such IPP as contemplated by Sections 3.3
and 5.6), and neither the Company nor any authorized agent acting on its behalf
will take any action hereafter that would require such registration.
4.7. SEC Reports and Financial Statements. Since January 1, 1995, the
Company has made all filings required to be made by it under the Exchange Act
and any other securities laws applicable to the Company and is otherwise
eligible to file a registration statement on Form S-3 covering the offering and
sale of the Company Shares and the Debt Securities. As of their respective dates
or, if amended, as of the date of such amendment, the SEC Reports complied in
all material respects with the requirements of the Exchange Act, and the rules
and regulations of the SEC thereunder. As of their respective dates or, if
amended, as of the date of such amendment, the SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 and the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 31, 1997 comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles as stated in such
financial statements applied on a consistent basis during the period covered and
fairly present, in all material respects, the financial position
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of the Company as of the date thereof and the results of operations and changes
in financial position of the Company for the period then ended subject, in the
case of unaudited statements, to notes and normal year-end audit adjustments,
none of which shall be material in amount or effect.
4.8. Absence of Certain Changes or Events. Except as set forth in the
SEC Reports or in Schedule 4.8, between December 31, 1996 and the date of this
Agreement there has not been nor has the Company incurred: (a) any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting any material portion of its assets; (b) any satisfaction or
discharge of any material lien, claim or encumbrance or payment of any material
obligation by the Company, except in the ordinary course of business; (c) any
material change to, or cancellation of, a material contract, agreement, lease or
commitment by which the Company or any of its material assets is bound or
subject; (d) other than in the ordinary course of business, any material change
or increase in any compensation arrangement or agreement with any officer,
director or executive employee of the Company, including any grant of stock
appreciation rights; (e) any sale or other disposition of any material portion
of the Company's assets; (f) any mortgage, pledge, security interest or lien
created by the Company, with respect to any material portion of its assets; (g)
any material change in the manner of keeping the Company's books, accounts or
records or the accounting practices therein reflected; (h) as of the date of
this Agreement, any merger or consolidation of the Company with or into any
other entity, or any issuance, sale or other disposition of any shares of the
Company's capital stock; or (i) any declaration, setting aside, or payment or
other distribution in cash or property in respect of any of the Company's
capital stock, or any direct or indirect redemption, purchase, or other
acquisition of any of such stock by the Company, other than pursuant to the
operation of the DRIP Plan or as required by the terms of the Company's
preferred stock.
4.9. NMPC Restructuring. As of the date of this Agreement, the Company
has disclosed to the IPPs all material plans and proposals concerning the NMPC
Restructuring which have been disclosed to any Governmental Authority or
approved by the Board of Directors of the Company and which could reasonably
have a material adverse effect on any IPP or the Restructuring, including but
not limited to the Contracts or any of the consideration to be received by the
IPPs hereunder. As of the date of this Agreement, the Company has not been
authorized by its Board of Directors, nor is the Company seeking such
authorization, to file a petition under the Bankruptcy Code or otherwise to
commence, authorize or acquiesce in the commencement of a proceeding under any
bankruptcy or similar law for the protection of creditors, or to make a general
assignment or any general arrangement or compromise for the benefit of
creditors, nor has the Company made, commenced, authorized or acquiesced in the
commencement of any such proceeding or assignment or had any such petition,
proceeding or assignment commenced against it.
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5. REPRESENTATIONS AND WARRANTIES OF EACH IPP
Each IPP (severally and not jointly) hereby represents and warrants to
the Company, as follows:
5.1. Organization; Standing. The IPP is a corporation, partnership or
other entity duly organized, validly existing and in good standing under the
laws of its state of incorporation or formation, and, subject to receipt of the
IPP Regulatory Approvals, has all requisite corporate or partnership power and
authority, as the case may be, to own its properties and assets and to carry on
its business in the manner now conducted and as proposed to be conducted in
accordance with this Agreement and the Contracts.
5.2. Execution; Authority; Enforceability. Subject in each case to
receipt of (i) the IPP Regulatory Approvals, (ii) the IPP/Third Party Consents
and (iii) the IPP Approvals, (a) the IPP has all requisite corporate or
partnership power and authority, as the case may be, to execute and deliver this
Agreement and all other agreements to be executed by it pursuant hereto, and to
carry out the provisions of this Agreement in accordance with the terms hereof,
and all other agreements to be executed by it pursuant hereto, including, but
not limited to, the power and authority to enter into and perform the Contracts
to which it is a party; (b) this Agreement has been, and all other agreements to
be executed by the IPP pursuant hereto will be, duly and validly executed and
delivered by the IPP; and (c) this Agreement constitutes, and all other
agreements to be executed by the IPP pursuant hereto will constitute, valid and
legally binding obligations of the IPP, enforceable against the IPP in
accordance with their respective terms.
5.3. No Conflicts. Subject to receipt of (i) the IPP Regulatory
Approvals, (ii) the IPP/Third Party Consents and (iii) the IPP Approvals, the
execution, delivery, and performance by the IPP of this Agreement, any other
agreements to be executed by the IPP pursuant hereto, and the consummation of
the transactions contemplated hereby and thereby, will not result in a violation
or default of any provision of its Certificate of Incorporation or By-Laws or
partnership agreement, as applicable.
5.4. Litigation. Except as set forth in Schedules 5.4, 6.10A and 6.10B,
as of the date of this Agreement there is no action, suit, arbitration, or other
legal or administrative proceeding pending or, to the best knowledge of the IPP,
any investigation pending or any action, suit, arbitration, or other legal or
administrative proceeding or investigation threatened against the IPP which (a)
questions the validity of this Agreement, the agreements to be executed by the
IPP pursuant hereto or the right of the IPP to enter into this Agreement or such
other agreements, or to consummate the transactions contemplated hereby or
thereby or (b) if adversely determined, would be likely to have a material and
adverse effect on the IPP's ability to enter into and perform its obligations
under this Agreement or any other agreements to be executed by the IPP
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<PAGE>
pursuant hereto. The IPP is not a party to or subject to any order, writ,
injunction, decree, judgment or other restriction of any Governmental Authority
which has or is reasonably likely to have a material and adverse effect on the
IPP's ability to enter into and perform its obligations under this Agreement or
any other agreements to be executed by the IPP pursuant hereto.
5.5. Certain Transfers. As of the date of this Agreement, the IPP does
not have any agreement or understanding with any other IPP to (i) re-allocate or
transfer to such other IPP (excluding for these purposes any Affiliate IPP of
such IPP), whether before or after the Consummation Date, any portion of the
Cash Payment or Company Shares allocated to the IPP pursuant to the Allocation
or (ii) assign or transfer a Restated Contract or Amended PPA to any IPP whose
Existing PPA is a Class A PPA.
5.6. Acquisition of Company Shares. If the IPP, pursuant to the
Allocation, will acquire any Company Shares pursuant to Section 3.1(b): (a) the
Company Shares to be acquired by such IPP shall be acquired for its own account
and without a view to the resale or distribution thereof or shall be issued (in
whole or in part) to designees of such IPP, consisting of partners and
shareholders (at any tier), Affiliates, lenders, steam hosts or Gas Mitigation
Third Parties (provided any such designee shall provide the Company with a
letter containing substantially the same representations set forth in this
Section 5.6 and, if applicable, designating a suitable purchaser representative,
which letter shall be reasonably satisfactory to the Company and its counsel);
provided, however, that the foregoing shall not preclude the IPP from
transferring or selling the Company Shares to be acquired by it in the manner
described in clauses (c)(i), (ii) or (iii) below; (b) such IPP is either (x) an
"accredited investor" as such term is defined in Rule 501(a) of Regulation D
under the Securities Act or (y) if not an "accredited investor", either alone or
with its purchaser representative, has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Company Shares, within the meaning of Rule
506(b)(2)(ii) of Regulation D under the Securities Act; and (c) such IPP
understands that the sale of the Company Shares to such IPP has not been
registered under the Securities Act or any applicable state securities laws and,
therefore, the Company Shares cannot be transferred, sold, pledged or otherwise
disposed of, except (i) pursuant to the Shelf Registration Statement or another
effective registration statement under the Securities Act and in compliance with
the prospectus-delivery requirement under the Securities Act, (ii) in accordance
with Rule 144 under the Securities Act after the applicable time period
specified therein or (iii) in accordance with another exemption from the
registration requirements of the Securities Act. For purposes hereof, the IPPs'
purchaser representative, if any, is WP&Co. or another equivalent investment
banker. Not later than ten (10) Business Days prior to the Consummation Date,
the IPP shall give a notice to WP&Co. stating the number of non-accredited
investors to which such IPP shall designate that any part of the Company Shares
to be acquired by such IPP pursuant to Section 3.1(b) shall be issued on the
Consummation Date. The IPP acknowledges that such number of non-accredited
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investors, together with the number of non-accredited investors to which any
other IPP shall designate that any part of its Company Shares to be acquired by
any such other IPP pursuant to Section 3.1(b) shall be issued on the
Consummation Date, shall not exceed thirty-five (35). Notwithstanding the
foregoing, without the Company's consent, no person may be a designee of an IPP
with respect to any Company Shares if the acquisition of Company Shares by such
person would (i) require the Company to qualify as a foreign corporation or as a
dealer in securities in any jurisdiction in which it is not so qualified, (ii)
subject the Company to taxation in respect of doing business in any jurisdiction
in which it is not so subject or (iii) require the Company to make filings with
any state securities commissioners other than notice filings. The IPP agrees to
give the Company notice of the identity of any proposed designee as soon as
practicable in order to permit the Company to make a determination pursuant to
the preceding sentence.
5.7. Form of Allocation, Contracts Allocation. Annexed as Exhibit 5.7
are blank forms of the Allocation, Contracts Allocation and Contract Allocation
deposited with the Escrow Agent and WP&Co. prior to the date of this Agreement,
which forms, as delivered to the Escrow Agent and WP&Co., do not and will not
include any formulas, notations, conditions or other qualifications with respect
to the determination of the respective amounts, quantities or prices allocated
to the IPP (with the exception of the NorCon Allocation, a copy of which has
been delivered to the Company simultaneously with the execution of this
Agreement).
6. CONDUCT AND TRANSACTIONS PRIOR TO THE CONSUMMATION DATE
6.1. Debt Securities.
(a) The Company has advised the IPPs of its intention to finance the
payment of up to three billion two hundred million ($3,200,000,000) dollars of
the Cash Payment by issuing debt securities of the Company ("Debt Securities")
in an underwritten public offering registered with the SEC to be consummated on
or prior to the Consummation Date (the "Public Offering"). The Parties agree
that the successful consummation of the Public Offering is of material
importance to the successful consummation of the Restructuring pursuant to this
Agreement and that the terms and conditions of the Debt Securities issued
therein are of material importance to the IPPs in their capacities as holders of
Company Shares and/or Short-Term Notes, and as parties to the Contracts. The
terms and conditions of the Debt Securities shall be developed by the Company in
conjunction with the Underwriters. The Company agrees that the material terms
and conditions of the Debt Securities shall be subject to the approval of a
majority of a committee consisting equally of representatives of the Company,
Sterling Power Partners, Ltd. and East Syracuse Generating Company, L.P.
provided that (i) such committee shall not be entitled to demand specific terms
and conditions and (ii) the
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approval of such committee, if unanimously recommended by the Underwriters,
shall not be unreasonably withheld. The Company agrees that (x) the aggregate
principal amount of the Debt Securities issued in connection with the Public
Offering shall not exceed three billion two hundred million ($3,200,000,000)
dollars, (y) the Debt Securities shall be priced to trade initially at par and
(z) unless applicable securitization legislation is enacted in the State of New
York and the Debt Securities are securitized pursuant thereto, the Debt
Securities shall be general unsecured obligations of the Company.
(b) The Company covenants and agrees that, as of its effective date and
as of the Consummation Date, none of the registration statement prepared by the
Company in connection with the offering of the Debt Securities (the "Debt
Registration Statement"), any document incorporated by reference therein, any
prospectus included therein or filed with the SEC, or any amendment thereof or
supplement thereto, shall contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Company shall provide the IPPs'
Special Counsel with all drafts of the Debt Registration Statement and any such
prospectus, amendment or supplement, as the case may be, which are provided to
the Underwriters a reasonable period of time prior to the filing of same with
the SEC, and shall provide the IPPs' Special Counsel with copies of all
correspondence from or with the SEC incidental to the Debt Registration
Statement or any such prospectus, amendment or supplement.
(c) If the Debt Securities are to receive a credit rating of less than
investment grade, the Debt Securities shall be underwritten by (i) DLJ, acting
as lead manager, (ii) WP&Co., acting as a co-manager, and (iii) by such
additional investment banking firms selected by the Company, acting as
co-managers (collectively, the "Underwriters"). The Public Offering shall bear
the usual and customary fees and expenses, consistent with high-yield financings
of similar type, which fees and expenses shall be borne solely by the Company.
DLJ and WP&Co. shall have the right to attend all material presentations to
rating agencies and investors in connection with the Public Offering.
6.2. Sale/Leaseback; Tax-Free Exchanges. Upon the request of any IPP
made within sixty (60) days after the date of this Agreement containing a
specific proposal by such IPP with respect thereto, the Company shall conduct
good faith negotiations and use its Reasonable Best Efforts to modify the
transactions contemplated by this Agreement with respect to such IPP in a
mutually acceptable manner in order to effect the Restructuring through (a) sale
and leaseback arrangements of the Project facilities of such IPP or (b) a
transaction that qualifies as a "reorganization" under Section 368(a) of the
Code (and any corresponding provision of applicable state or local law),
provided, however, that the Company will not be obligated to modify the
transactions contemplated by this Agreement with respect to such IPP if (i) in
the Company's reasonable judgment, such modification would have a material
adverse effect on the timing of the Restructuring
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contemplated by this Agreement, the anticipated tax effect on the Company of the
Restructuring, the implementation of the NMPC Restructuring, or the Company's
ability to complete the sale of the Debt Securities on terms reasonably
satisfactory to it, or would require the Company to incur additional costs or
liabilities, including contingent liabilities (net of the value of any asset
assumed), other than normal and customary incidental out-of-pocket costs and
expenses and attorneys' fees or (ii) as a result thereof, IPPs would receive (in
the aggregate), with respect to Class A PPAs, a portion of the Cash Payment and
Company Shares of less than $2,000,000,000 (except to the extent that such
amount is reduced as a result of the termination of this Agreement with respect
to any IPPs which are parties to Class A PPAs).
6.3. Proxy Statement. In connection with the preparation and filing of
the proxy statement to be distributed in connection with the special meeting of
the Company's shareholders to be called to consider for approval certain of the
transactions contemplated by this Agreement under the Exchange Act (the "Proxy
Statement"), the Company shall provide the IPPs' Special Counsel with all drafts
of the Proxy Statement and each amendment of the Proxy Statement, in each case
which are provided to the Underwriters, a reasonable period of time prior to the
filing of same with the SEC, and shall provide the IPPs' Special Counsel with
copies of all correspondence from or with the SEC incidental to the Proxy
Statement and any such amendment. The Company covenants and agrees that, as of
its distribution date, none of the Proxy Statement or any amendment thereof, or
any document incorporated by reference therein, shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Subject to applicable fiduciary duties, the Proxy Statement shall contain a
statement of the Company's Board of Directors recommending approval of this
Agreement and the transactions contemplated hereunder to the Company's
shareholders.
6.4. NMPC Restructuring.
(a) The Parties acknowledge the existence of the Company's
proposed corporate restructuring and disaggregation in connection with its
PowerChoice proposal (the "NMPC Restructuring") and agree that the Restructuring
contemplated by this Agreement is an integral and substantial part of the NMPC
Restructuring. The Company shall disclose to the IPPs all material plans and
proposals concerning the NMPC Restructuring which are disclosed to any
Governmental Authority (including but not limited to PSC staff) or approved by
the Board of Directors of the Company, and which could reasonably have a
material adverse effect on any IPP or the Restructuring, including but not
limited to the Contracts or any of the consideration to be received by the IPPs
hereunder. Except as expressly set forth in this Agreement, each IPP shall be
free to oppose or challenge any aspect of the NMPC Restructuring which such IPP
deems to be adverse to the interests of such IPP or its Affiliates.
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(b) If at any time, whether before or after the Consummation Date, the
Company restructures its corporate structure or assets, including by creating
any new entities that hold significant assets, whether in connection with the
NMPC Restructuring or otherwise, then in no event shall the IPPs or their
assigns, in their respective capacities as holders of Common Stock or Short-Term
Notes or as parties to the Contracts, be treated less favorably in any material
respect than other similarly-situated holders of Common Stock or Short-Term
Notes or parties to comparable agreements (including comparable agreements
between the Company and/or its Affiliates) are treated in their capacities as
such. In addition, in the event of any such restructuring, each of the Contracts
will be assigned to and assumed by the entity or entities owning all or
substantially all of the Company's electric transmission and distribution assets
or, if separated from the Company's electric transmission assets pursuant to the
restructuring, the Company's electric distribution assets, provided that, upon
the effective date of the restructuring, (i) the assuming entity's performance
under the Contracts shall be unconditionally guaranteed, pursuant to a guarantee
in form and substance reasonably satisfactory to the IPP (or its assign) under
any such Contract, by each of the other entities arising out of the
restructuring, including any entity(ies) spun-off to the Company's shareholders
or any Affiliate of the Company holding significant assets held by the Company
(or any subsidiary of the Company) prior to the restructuring, unless the
assuming entity's long-term unsecured debt credit rating issued by Moody's
Investors Service, Standard & Poor's Corporation or another nationally
recognized rating agency is at least as favorable as the Company's long-term
unsecured debt credit rating immediately prior to the effective date of the
restructuring, and (ii) if the assuming entity is not the entity which will
collect from customers the Competitive Transition Charge approved by the PSC
pursuant to the PSC Approval, the assuming entity's performance under the
Contracts shall be unconditionally guaranteed, pursuant to a guarantee in form
and substance reasonably satisfactory to the IPP (or its assign) under any such
Contract, by the entity(ies) which will collect from customers the Competitive
Transition Charge approved by the PSC pursuant to the PSC Approval. In the event
of any such restructuring, the IPP (or its assign) under any such Contract(s)
shall have the right to replace its Contract(s), as applicable, with power
purchase and/or hedging contractual arrangements substantially equivalent to
those that are entered into between the entity(ies) holding the transmission
and/or distribution assets of the Company or which will collect from customers
the Competitive Transition Charge approved by the PSC pursuant to the PSC
Approval and the entity(ies) holding the non-nuclear generating assets of the
Company, whether or not such assets are spun-off to the Company's shareholders
(a "Genco Contract"), provided that the term, price and quantity under such
IPP's Contract(s) shall not be altered thereby, unless any of such terms are
materially and expressly conditioned by certain provisions in the Genco
Contract, in which case appropriate and equitable adjustments in such terms
shall be mutually agreed upon.
6.5. Hart-Scott-Rodino Act Notification. Each IPP or its designee with
respect to Company Shares shall make its own determination of whether it (or any
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of its Affiliates) is required to file the Notification and Report Form for
Certain Mergers and Acquisitions pursuant to the Hart-Scott-Rodino Act in
connection with the transactions contemplated by this Agreement. Any IPP or
designee that determines it (or any of its Affiliates) is so required shall file
such Notification and Report Form in a timely manner, and shall give notice
thereof to the Company. The Parties shall make all required filings and shall
cooperate with each other in connection with such filings and any responses
thereto. The Company shall pay all filing fees required to be paid under the
Hart-Scott-Rodino Act in connection with the acquisition of the Company Shares
hereunder, as and when the applicable filings are made; the Company's obligation
to pay any such fee incurred by an IPP prior thereto shall survive the
Consummation Date or any termination of this Agreement (either in its entirety
or with respect to such IPP).
6.6. Regulatory Approvals.
(a) The Company shall use Reasonable Best Efforts to seek and
obtain, on or before the Expiration Date, each Regulatory Approval which is set
forth in a notice given to the IPPs' Special Counsel promptly after it
determines that such Regulatory Approval is desired or required, specifying the
need therefor and the nature thereof in reasonable detail (collectively, the
"NMPC Regulatory Approvals"). All NMPC Regulatory Approvals shall be sought in
the order and in the manner which the Company, after consultation with the IPP
Representatives, believes will be most likely to result in receipt of the NMPC
Regulatory Approvals prior to the Expiration Date.
(b) Each IPP shall use Reasonable Best Efforts to seek and obtain,
on or before the Expiration Date, each Regulatory Approval applicable to such
IPP which is set forth in a notice given to the Company promptly after it
determines that such Regulatory Approval is desired or required, specifying the
need therefor and the nature thereof in reasonable detail (collectively, the
"IPP Regulatory Approvals"). All IPP Regulatory Approvals shall be sought in the
order and in the manner which each IPP, after consultation with the IPP
Representatives and, with respect to any filings to be made to the PSC or the
FERC (excluding any filings pertaining to an IPP's status, rights or obligations
as a QF or EWG or any of such IPP's rights or obligations pursuant to PURPA),
after consultation with the Company, believes will be most likely to result in
receipt of the IPP Regulatory Approvals prior to the Expiration Date.
(c) Notwithstanding anything to the contrary contained in Sections
6.6(a) or 6.6(b), the Company shall use its Reasonable Best Efforts to submit
this Agreement, together with all other requisite documents and instruments, to
the PSC within fourteen (14) days following the date of this Agreement, for
purposes of obtaining the PSC's approval and order solely with respect to the
matters set forth in Schedule 6.6C hereto (such approval and order being
referred to herein as the "PSC Approval").
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(d) In the event that this Agreement and/or any of the transactions
contemplated hereby could reasonably subject any IPP, its partners or
Affiliates, individually or collectively, to become subject to any regulation or
jurisdiction of any Governmental Authority from which they were previously
exempt (including but not limited to SEC or FERC regulation under PUHCA, PSC
regulation under NYPSL, and FERC regulation under the Federal Power Act), then
(i) such IPP and the Company shall use their Reasonable Best Efforts to seek and
obtain appropriate exemptions or waivers prior to the Consummation Date
(provided the Company shall not be required to use its Reasonable Best Efforts
to assist an IPP in obtaining an exemption from PUHCA with respect to such IPP's
and/or such IPP's Affiliates' ownership of 10% or more of the Common Stock of
the Company, if applicable), (ii) if such exemptions or waivers cannot be
obtained, such IPP and the Company shall use their Reasonable Best Efforts to
conform this Agreement and/or the transactions contemplated hereby prior to the
Consummation Date in a manner mutually satisfactory to such IPP and the Company
and the other Parties hereto as may be necessary in order for such IPP, its
partners or Affiliates, to avoid becoming subject to such regulation or
jurisdiction and (iii) if such exemptions or waivers cannot be obtained and if
this Agreement and/or the transactions contemplated hereby cannot be so
conformed, the provisions of Section 12.2(c)(iii) shall be applicable.
6.7 Cooperation with respect to Regulatory Approvals.
(a) From the date of this Agreement until the earlier to occur of
(x) the Effective Time, (y) the termination of this Agreement in its entirety or
(z) with respect to any individual IPP, the termination of this Agreement with
respect to such IPP, the Parties shall cooperate with each other in preparing
and filing any and all submissions to the FERC, PSC, SEC and other Governmental
Authorities in order to obtain any Regulatory Approvals. The Parties, in
conjunction with the IPP Representatives and DLJ, shall form a committee to
prepare and make a joint presentation to the PSC and/or the PSC staff (if the
PSC so permits) in connection with the submission of this Agreement to the PSC
pursuant to Section 6.6(c). The Company shall consult with the IPP
Representatives on a regular basis in developing overall regulatory strategies,
and shall provide the IPP Representatives with a draft copy of each filing for
NMPC Regulatory Approvals to be made by the Company with the PSC, FERC, SEC or
any other Governmental Authority in connection with the Restructuring, a
reasonable period of time prior to the anticipated filing of same, and shall
inform the IPP Representatives of any material changes therein. The Company
shall at all times keep the IPP Representatives fully apprised of the status of
all applications for NMPC Regulatory Approvals, including with respect to all
material discussions with Governmental Authorities (including PSC staff), and
shall provide the IPPs with copies of all correspondence given to or received
from any Governmental Authority in connection therewith. Each IPP shall provide
the Company with a draft copy of each filing to be made by such IPP concerning
NMPC Regulatory Approvals a reasonable period of time
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prior to the anticipated filing of same, shall inform the Company of any
material changes therein, and shall at all times keep the Company fully apprised
of all applications made by such IPP concerning NMPC Regulatory Approvals,
including with respect to all material discussions with Governmental Authorities
(including PSC staff) concerning NMPC Regulatory Approvals. Except as expressly
set forth in this Agreement, nothing contained herein shall limit or restrict
any IPP from opposing or challenging any application for an NMPC Regulatory
Approval which such IPP deems to be adverse to the interests of such IPP or its
Affiliates, and nothing contained herein shall limit or restrict the Company
from opposing or challenging any application for an IPP Regulatory Approval
which the Company deems to be adverse to its interests. Nothing contained in
this Agreement shall require any IPP to disclose the Allocation, any portion
thereof or any information contained therein to any Governmental Authority
except as set forth in Section 3.4.
(b) The Company, upon request and at the expense of any requesting
IPP, and each IPP, upon request and at the expense of the Company, shall use
Reasonable Best Efforts to assist the other Party to obtain any Regulatory
Approval that is required to be obtained, provided, however, that (i) a Party
that is exempt from regulation or jurisdiction of any Governmental Authority as
of the date of this Agreement shall not be required to take any steps in
assistance to another Party that could reasonably subject it, its partners or
Affiliates to the regulation or jurisdiction of any Governmental Authority from
which it or they were previously exempt, (ii) no Party shall be required
pursuant to this Section 6.7 to support any position taken by any other Party
except as may otherwise be expressly set forth in this Agreement and (iii) the
Company shall not be required to use its Reasonable Best Efforts to assist an
IPP in obtaining an exemption from PUHCA with respect to such IPP's and/or such
IPP's Affiliates' ownership of 10% or more of the Common Stock of the Company,
if applicable.
(c) The Parties shall endeavor to maintain the confidentiality of
any information that one or more Parties deem commercially sensitive (which the
Parties agree shall include, without limitation, the designation of which
Existing PPAs are set forth on Schedules 2.1, 2.2 and 2.3 hereof, respectively),
and shall cooperate in seeking trade secret protection or other appropriate
confidential treatment for commercially sensitive information that is submitted
to any Governmental Authority in the course of obtaining any Regulatory
Approval. Any Party seeking to maintain confidentiality of such information
shall notify the other Parties of such desire upon delivery of such information.
6.8. Cooperation with respect to IPP/Third Party Consents and
NMPC/Third Party Releases.
(a) Upon an IPP's request, the Company agrees to use its
Reasonable Best Efforts, in a timely manner, to assist the IPP (including,
without limitation,
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by providing relevant consents, representations and
warranties) to amend, restructure, assign or terminate its existing third party
agreements, including but not limited to fuel supply, transportation, financing,
lease, operations and steam supply agreements, relating to or arising out of
such IPP's Project or Existing PPA or the termination, amendment or amendment
and restatement, as the case may be, of such IPP's Existing PPA, in each case in
a manner that (i) will enable such IPP to obtain the IPP/Third Party Consents
required or desired to be obtained by such IPP and (ii) will accommodate the
terms of this Agreement without reducing its economic value to such IPP and
otherwise in a manner reasonably satisfactory to such IPP.
(b) Upon the Company's request, each IPP agrees to use its
Reasonable Best Efforts, in a timely manner, to assist the Company (including,
without limitation, by providing relevant consents, representations and
warranties) in connection with the Company's efforts to obtain a waiver,
release, amendment or termination of the Company's obligations under existing
third party agreements with lenders, suppliers and other third parties which the
Company previously has entered into at the request or on behalf of any IPP and
which relate to or arise out of such IPP's Project or Existing PPA (each, an
"NMPC/Third Party Agreement") and which waiver, release, amendment or
termination is desired by the Company to be obtained in connection with the
termination, amendment or amendment and restatement, as the case may be, of such
IPP's Existing PPA as contemplated by this Agreement. Each IPP agrees to perform
a diligent review of its files and provide to the Company, within thirty (30)
days after the date of this Agreement, a schedule of all NMPC/Third Party
Agreements disclosed by such review, but the IPP shall have no liability to the
Company or any third party in the event such review does not disclose all
NMPC/Third Party Agreements with respect to which the Company may desire to
obtain a waiver, release, amendment or termination as a result of the
transactions contemplated hereby. Any waiver, release, amendment or termination
required to be obtained with respect to any NMPC/Third Party Agreement is
referred to herein as an "NMPC/Third Party Release."
6.9. Performance under Existing PPAs.
(a) From the date of this Agreement until the earlier to occur of
(x) the Effective Time, (y) the termination of this Agreement in its entirety or
(z) with respect to any individual IPP, the termination of this Agreement with
respect to such IPP, the Parties agree and stipulate that the Existing PPAs
shall continue with the same force and effect as if this Agreement had not been
executed by any Party, and the Parties (respectively) shall continue to perform
all obligations, covenants and agreements required to be performed by them
pursuant to the terms of the Existing PPAs, provided that no IPP, regardless of
the terms of its Existing PPA, shall be subject to (i) any Curtailment or (ii)
any claim that electricity produced and delivered to the Company by such IPP
exceeds the estimates of energy in megawatt-hours and capacity in megawatts set
forth in its Existing PPA.
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(b) From the date of this Agreement until the earlier to occur of (x)
the Effective Time, (y) the termination of this Agreement in its entirety or (z)
with respect to any individual IPP, the termination of this Agreement with
respect to such IPP, the Company (i) shall not initiate or continue any request
for regulatory authorization or any regulatory proceeding with respect to, and
if authorized to do so (whether before or after the date of this Agreement) will
not implement or enforce, any Curtailment, adequate assurances (including firm
security) or other regulatory initiative which is reasonably likely to have a
material adverse effect on any IPP or the Restructuring, including but not
limited to the Contracts or any of the consideration to be received by any IPP
hereunder and (ii) shall not implement or continue to implement any QF
Monitoring Program as to any IPP.
(c) Notwithstanding the provisions of Section 6.9(a) and (b), in
the event that the PSC mandates that the Company implement or enforce any
Curtailment with respect to any IPP that is a Party to this Agreement, the
Company agrees that it shall jointly seek, with any such affected IPP, a PSC
and, if necessary, judicial stay of such Curtailment, on the grounds that the
Curtailment would result in substantial injury to the IPP and, to the extent it
could affect the consummation of the transactions contemplated by this
Agreement, the Parties. In addition, each of the Company and any such affected
IPP shall be free to assert any other grounds it deems appropriate in order to
oppose the Curtailment. The Company shall oppose any effort of the PSC to
mandate Curtailments with respect to any IPP which is a Party to this Agreement.
If, notwithstanding the Company's and such IPP's joint efforts, the PSC or a
court of competent jurisdiction mandates such Curtailment, then nothing
contained in this Agreement shall prohibit the Company from implementing or
enforcing such Curtailment to the minimum extent required by such mandate,
provided that the foregoing shall not be deemed to waive any rights such IPP may
have under this Agreement, pursuant to law or otherwise to restrict, limit or
oppose the implementation or enforcement of such Curtailment. Nothing contained
in this Section 6.9(c) shall be deemed to authorize the Company to implement or
enforce any Curtailment with respect to any Existing PPA to the extent such
Existing PPA prohibits or limits the Company from implementing or enforcing such
Curtailment.
(d) Notwithstanding the provisions of sub-clause (z) in each of
Section 6.9(a) and (b) and in Section 6.10(b), if this Agreement shall terminate
with respect to NorCon pursuant to Section 2.5, the provisions of Sections
6.9(a) and (b) shall continue to apply to NorCon (subject to sub-clauses (x) and
(y) thereof) until December 1, 1997, and the provisions of Section 6.10(b),
insofar as they may pertain to Curtailment, shall continue to apply to NorCon
(subject to sub-clauses (x) and (y) thereof) until December 1, 1997.
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6.10. Stay of Litigation.
(a) Promptly following the date of this Agreement, each Party shall use
Reasonable Best Efforts to stay the pending litigation and regulatory
proceedings listed in Schedules 6.10A and 6.10B, if applicable to such Party,
with such stays to remain in effect until the earlier to occur of (x) the
Effective Time, (y) the termination of this Agreement in its entirety or (z)
with respect to any individual IPP, the termination of this Agreement with
respect to such IPP. With respect to those proceedings listed in Schedule 6.10B,
each Party shall (i) use Reasonable Best Efforts to stay the pending proceedings
and (ii) whether or not such stay is granted, if any Party desires to continue
its participation in such proceeding as a result of the last sentence of this
Section 6.10(a), each Party shall use Reasonable Best Efforts to obtain an order
from the court in each such proceeding stating that the disposition of such
proceeding will not have any material adverse impact on the Existing PPAs or on
the claims asserted by the Company with respect to the Existing PPAs in such
proceedings. The Parties, as promptly as practicable after the date of this
Agreement, shall determine the appropriate judicial or regulatory bodies to
which to apply, and the text of the necessary notices, motions or applications
to be filed, in order to effectuate the stays and/or obtain the orders
contemplated by the provisions of this Section, and promptly shall file the same
with such bodies. Notwithstanding whether any such litigation or proceedings
shall be stayed, the rights and obligations of the Parties pursuant to this
Agreement shall not be affected by any judgment, ruling, order, decision or
other action which may be issued or rendered in any such litigation or
proceeding between the date of this Agreement and the Consummation Date except
as otherwise provided in Sections 8.5 and 9.5, and no Party shall seek to
enforce such judgment, ruling, order, decision or other action against any other
Party. The obligations of the Parties pursuant to this Section 6.10(a) shall be
subject to the condition that no Party shall be required to take any action or
suffer any inaction, that would lead to forfeiture, loss of rights, imposition
of sanctions or penalties, or otherwise cause a material adverse impact on its
prospects for success with respect to any such litigation or regulatory
proceeding with respect to itself or third parties; but any action necessary to
avoid any such result shall to the maximum extent possible avoid any material
adverse impact (including the incurrence of any cost or expense) upon any other
Party.
(b) From the date of this Agreement until the earlier to occur of (x)
the Effective Time, (y) the termination of this Agreement in its entirety or (z)
with respect to any individual IPP, the termination of this Agreement with
respect to such IPP, (i) the Company shall refrain from commencing any new
litigation or regulatory proceeding the outcome of which could have a material
adverse effect on any IPP or any IPP's rights or obligations under its Existing
PPA, including the purchase of power thereunder, (ii) each IPP shall refrain
from commencing any new litigation or regulatory proceeding potentially
adversely affecting the Company or the Company's rights or obligations under the
Existing PPAs, including the purchase of power thereunder, except that an IPP
may commence any such litigation or proceeding, or assert any claim, in response
to any action or proceeding, including but not limited to any proceeding with
respect to
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Curtailment, initiated (whether before or after the date of this Agreement) by
the Company or any Governmental Authority and except, further, that each Party
may commence any litigation or proceeding, or assert any claim, arising out of
any breach of this Agreement or of any Existing PPA or other agreement relating
to the delivery of power under an Existing PPA, and (iii) each Party accordingly
agrees to waive any statute of limitations for such period that would otherwise
bar such proceedings unless commenced during such period.
(c) The Parties, within thirty-five (35) days after the date of this
Agreement, also shall determine the appropriate judicial and regulatory bodies
to which to apply, and the text of the necessary notices, motions or
applications to be filed, in order to effectuate the dismissals and withdrawals
contemplated by the provisions of Sections 8.8(b) and 9.8(b), which are to be
delivered and subsequently filed pursuant to such Sections as of the
Consummation Date.
6.11. Conduct of Business. Except as expressly permitted by this
Agreement or set forth in Schedule 6.11, from the date of this Agreement until
the Consummation Date, the Company (a) shall conduct the business and operations
of the Company in accordance with past practice and in the ordinary course of
business; (b) shall not enter into any transaction or perform (or fail to
perform) any act which would constitute a material breach of the
representations, warranties, covenants and agreements of the Company contained
herein, whether as of the date of this Agreement or as of the Consummation Date;
(c) shall not make any amendment or modification of the Certificate of
Incorporation or By-Laws of the Company which would be reasonably likely to have
a material and adverse effect on any rights of the IPPs pursuant to this
Agreement or any agreement to be entered into pursuant hereto; (d) shall not
effect any issuance, sale or other disposition of any shares of the Company's
capital stock; (e) shall not make any declaration, setting aside, or payment or
other distribution in cash or property in respect of any of the Company's
capital stock, or any direct or indirect redemption, purchase, or other
acquisition of any of such stock by the Company; and (f) shall not make any
material change or increase in any compensation arrangement or agreement
(including but not limited to any grant of stock appreciation rights) with any
officer, director or executive employee of the Company outside the ordinary
course of business. In addition, the Company shall promptly notify the IPPs of
any happening or event which has, or which is reasonably likely to result in, a
Material Adverse Effect on the Company.
6.12. Public Disclosure. Except as otherwise provided in this
Agreement, from the date of this Agreement until the Consummation Date or sooner
termination of this Agreement in its entirety, no Party to this Agreement shall
directly or indirectly make or cause to be made any public announcement or issue
any public notice in any form with respect to this Agreement or the transactions
contemplated hereby, without the consent of the other Parties except if in the
opinion of such Party's counsel it is required by the securities laws of the
United States or the rules of the NYSE or any other securities
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exchange or market on which the securities of such Party or its Affiliates are
quoted or traded to make such disclosure. The Parties agree, to the extent
practicable, to consult with each other regarding any such public announcement
in advance thereof.
6.13. Further Assurances. Subject to the terms and conditions herein
provided, each of the Parties hereto agrees to use its Reasonable Best Efforts
to take promptly, or cause to be taken promptly, all actions and to do promptly,
or cause to be done promptly, all things necessary, proper or advisable under
applicable laws to consummate and make effective the transactions contemplated
by this Agreement, and to satisfy all of the conditions to the consummation of
the transactions contemplated by this Agreement to be satisfied by such Party,
including using its Reasonable Best Efforts to obtain all necessary consents,
approvals, qualifications, orders, authorizations, extensions, waivers,
exemptions and other actions or inactions from all applicable Governmental
Authorities, third parties, boards of directors, shareholders and partners, and
effecting all necessary registrations and filings.
6.14. No Accumulation. Each IPP covenants and agrees that from the date
of this Agreement until the earlier to occur of (x) the Effective Time, (y) the
termination of this Agreement in its entirety or (z) the termination of this
Agreement with respect to such IPP, it shall not, directly or indirectly, alone
or in concert with others, except for the acquisition of the Company Shares
pursuant to this Agreement, acquire, offer to acquire or agree to acquire, by
purchase, gift or otherwise, beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of any of the Company's outstanding Common Stock.
Each IPP covenants and agrees that such IPP, together with any Affiliates of
such IPP (to the knowledge of such IPP, without any duty of inquiry, with
respect to any Affiliates of such IPP), shall not, on the Consummation Date, be
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of more than five percent (5%) of the then outstanding Common Stock of the
Company (assuming the number of shares of Common Stock outstanding as of the
Consummation Date is not less than 190,390,600 shares) except for a certain
group of Affiliate IPPs who shall be the beneficial owners of not more than five
and six-tenths percent (5.6%) of the then outstanding Common Stock of the
Company.
6.15. Tax Rulings. The Company agrees to permit the IPPs' Special
Counsel, and each IPP agrees to permit the Company's tax counsel, to review and
comment on all requests for federal, state or local tax rulings to be made in
connection with the Restructuring, and to provide to such other Party's counsel
copies of all tax ruling requests a reasonable period of time prior to the
submission of same. The Company hereby consents to the IPPs seeking such tax
rulings within the meaning of, and agrees to pay the fees and expenses of the
IPPs' Special Counsel in connection with any such tax ruling requests pursuant
to, the IPPs' Special Counsel Fee Letter.
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7. INTENTIONALLY LEFT BLANK
8. CONDITIONS TO EACH IPP'S OBLIGATIONS ON THE CONSUMMATION DATE
The obligations of each IPP (severally and not jointly) to consummate
the Restructuring and make the deliveries specified in Section 10 to be made by
it on the Consummation Date are subject to the satisfaction on or before the
Consummation Date (or, if otherwise set forth in Section 10.1(c), the Conditions
Determination Date) of each of the following conditions, the waiver of which
shall not be effective against any IPP unless such IPP gives its consent in
writing thereto or such waiver is deemed to be given pursuant to Section
10.1(c):
8.1. Representations and Warranties. The representations and warranties
of the Company contained in Section 4 shall be true in all material respects on
and as of the Consummation Date with the same effect as though such
representations and warranties had been made on and as of the Consummation Date
(or on the date when made in the case of any representation or warranty which
expressly relates to an earlier date).
8.2. Performance. The Company shall have performed and complied in all
material respects with all agreements, obligations, covenants and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Consummation Date.
8.3. Representation Letter; Secretary's Certificate; Opinion of the
Company's Counsel. The IPP shall have received on the Consummation Date (a) a
representation letter executed by the Company in substantially the form annexed
as Exhibit 8.3A, (b) a certificate of the Secretary of the Company certifying
(i) the Certificate of Incorporation and By-Laws of the Company, (ii) the
resolutions of the Board of Directors and shareholders of the Company
authorizing the transactions contemplated by this Agreement and (iii) the
incumbency of any officers of the Company executing this Agreement or any
agreements to be executed by the Company pursuant hereto, in form and substance
reasonably satisfactory to such IPP, and (c) an opinion, from Sullivan &
Cromwell and/or Swidler & Berlin, outside counsel for the Company, dated the
Consummation Date, in substantially the form annexed as Exhibit 8.3C.
8.4. Regulatory Approvals. The IPP shall have received on or before the
Consummation Date each IPP Regulatory Approval and, if the IPP will benefit
therefrom or be affected thereby, any NMPC Regulatory Approval set forth in the
NMPC Status Notice, in a form reasonably acceptable to the IPP, and each such
Regulatory Approval shall be in full force and effect and either (i) shall be
final and non-appealable or (ii) if not final and non-appealable, shall not be
subject to the possibility of appeal, review or
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reconsideration which, in the opinion of the IPP, is reasonably likely to be
successful and, if successful, would have a Material Adverse Effect on such IPP.
8.5. No Injunction, Action or Proceeding. (a) No court or Governmental
Authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, statute, ordinance, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
that is in effect on the Consummation Date and which restrains, enjoins or
otherwise prohibits consummation of the transactions contemplated hereby and (b)
no claim, action, suit, investigation or other proceeding brought by a
Governmental Authority or third party concerning the transactions contemplated
by this Agreement shall be pending which in the opinion of such IPP is
reasonably likely to be successful and which, if adversely determined, would
grant relief from or against such IPP which is reasonably likely to have a
Material Adverse Effect on such IPP.
8.6. No Material Adverse Event. Between September 30, 1996 and the
Consummation Date, there shall not have occurred any event or condition
(including but not limited to any action or inaction of any Governmental
Authority) which has had or may reasonably be expected to have a Material
Adverse Effect on the Company (provided, however, that neither (i) the impact of
the Existing PPAs nor (ii) the transactions contemplated by this Agreement shall
constitute a Material Adverse Effect on the Company).
8.7. Contracts. The Company and the IPP shall have executed and
delivered to the Escrow Agent the respective Termination Agreement, Amended PPA,
Restated Contract(s), NorCon Agreement or Oxbow Agreement, as applicable, in
accordance with Section 2.8, on or before the Conditions Determination Date.
8.8. General Release; Withdrawal of Litigation.
(a) The IPP shall have received from the Company on the Consummation
Date a general release, in form and substance reasonably satisfactory to the
IPP, of all claims, liabilities or obligations of or against the IPP which the
Company had, has or may have with respect to facts, circumstances or occurrences
existing on or arising at any time through and including the Effective Time
arising out of or in connection with such IPP's Existing PPA, except claims,
liabilities or obligations (i) arising out of or in connection with this
Agreement, (ii) arising out of or in connection with any litigation, regulatory
proceedings or pleadings which are not to be dismissed and withdrawn (or
effectively withdrawn) by the Company pursuant to Section 8.8(b) and (iii)
unless dismissed or withdrawn pursuant to Section 8.8(b), arising out of or in
connection with any payment due to the Company, whether or not disputed, for any
services provided by the Company pursuant to the Existing PPA or any related gas
transportation, peak shaving, interconnection or other related agreement between
the Company and the
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IPP, provided that if such payment relates to any period more than sixty (60)
days prior to the date of this Agreement the Company's entitlement to such
payment shall have been set forth in a writing given to the IPP on or before
June 15, 1997. The Parties acknowledge and agree that all claims, liabilities
and obligations relating to tracking, adjustment or advance payment account
provisions under any Existing PPA shall be extinguished as of the Effective Time
(and such extinguishment shall be reflected in the general release).
(b) In addition, the IPP shall have received from the Company (i) an
original counterpart of a stipulation or other appropriate document(s), in form
and substance reasonably satisfactory to the IPP, sufficient to dismiss or
withdraw as to the IPP (except as otherwise provided in the footnotes thereto)
the litigation, proceedings and pleadings, as the case may be, listed on
Schedule 8.8 with respect to such IPP and (ii) with respect to the proceedings
listed on Schedule 6.10B, an original counterpart of a stipulation or other
appropriate document(s), in form and substance reasonably satisfactory to the
IPP, sufficient to effectively withdraw such proceedings as to the IPP, in each
case by the Company, with prejudice and with no costs awarded, as of the
Consummation Date. Following the Consummation Date the Company shall take
promptly, or cause to be taken promptly, all actions and to do promptly, or
cause to be done promptly, all things necessary, proper or advisable as may be
requested by the IPP to file all such documents and fully effectuate all such
dismissals and withdrawals.
8.9. Intentionally Left Blank.
8.10. Third Party Contracts; IPP Approvals. The IPP (a) (i) shall have
obtained a satisfactory amendment, restructuring, assignment or termination of,
or consents or approvals with respect to, or releases from, its existing third
party agreements, including but not limited to fuel supply, transportation,
financing, lease, operations and steam supply agreements, relating to or arising
out of such IPP's Existing PPA or the termination, amendment or amendment and
restatement, as the case may be, of such IPP's Existing PPA and (ii) with
respect to any IPP which is not entering into a Termination Agreement, shall
have entered into new third party agreements with fuel suppliers, transporters,
lenders, lessors, power and fuel marketers and other third parties, in the case
of both (i) and (ii) in a manner that (x) will enable such IPP to restructure
its Project on an economic basis reasonably satisfactory to such IPP and (y)
will accommodate the terms of this Agreement without reducing the economic value
of the transactions contemplated by this Agreement to such IPP and otherwise in
a manner reasonably satisfactory to such IPP (each, an "IPP/Third Party
Consent") and (b) shall have obtained all other necessary or appropriate
approvals, including corporate and partnership approvals of the IPP and its
partners of the transactions contemplated by this Agreement (each, an "IPP
Approval").
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8.11. Gas Mitigation. The IPP shall be reasonably satisfied that all
liabilities and obligations of all Gas IPPs to all Gas Mitigation Third Parties
have been released, satisfied or amended or will be released, satisfied or
amended as of the Consummation Date, in a manner that (x) will enable such IPP
to restructure its Project on an economic basis reasonably satisfactory to such
IPP and (y) will accommodate the terms of this Agreement without reducing its
economic value to such IPP and otherwise in a manner reasonably satisfactory to
such IPP.
8.12. Registration of Company Shares. With respect to the Company
Shares, (a) the Shelf Registration Statement (in accordance with the terms set
forth in Section 3.6) shall have been declared effective by the SEC, shall be
effective as of the Consummation Date, no stop order or similar proceeding
relating to the Shelf Registration Statement shall be pending or threatened, and
there shall be no happening or event which requires the Company to amend or
supplement the Shelf Registration Statement (unless such amendment or supplement
has been filed) or which otherwise prevents the sale by the IPP of any Company
Shares pursuant to the Shelf Registration Statement as of and after the
Consummation Date (and, in furtherance thereof, the Company shall file not later
than the next Business Day following the Consummation Date its Current Report on
Form 8-K disclosing the consummation of the Restructuring), (b) the Company
shall have taken such action as shall be necessary to qualify, or to obtain an
exemption for, the sale to the IPPs pursuant to this Agreement of the Company
Shares under such of the securities laws of jurisdictions in the United States
as shall be applicable to the sale of the Company Shares pursuant to the Shelf
Registration Statement and (c) the Company Shares shall have been duly listed on
the NYSE.
8.13. Payment of Fees. The fees and expenses of WP&Co., the IPPs'
Special Counsel and the IPPs' Local Regulatory Counsel incurred through and
including the Consummation Date that the Company has agreed to pay pursuant to
the WP&Co. Fee Letter, the IPPs' Special Counsel Fee Letter and the IPPs' Local
Regulatory Counsel Fee Letter, respectively, and the fees and expenses of the
Depositary incurred through and including the Consummation Date, shall have been
paid in full at or prior to the Consummation Date.
9. CONDITIONS TO THE COMPANY'S OBLIGATIONS ON THE
CONSUMMATION DATE
The obligations of the Company to consummate the Restructuring and make
the deliveries specified in Section 10 to be made by it on the Consummation Date
with respect to each IPP (severally but not jointly) are subject to the
satisfaction on or before the Consummation Date (or, if otherwise set forth in
Section 10.1(b), the Conditions Determination Date) of each of the following
conditions, the waiver of which shall not be
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effective against the Company unless the Company gives its consent in writing
thereto or such waiver is deemed to be given pursuant to Section 10.1(b):
9.1. Representations and Warranties. The representations and warranties
of such IPP contained in Section 5 shall be true in all material respects on and
as of the Consummation Date with the same effect as though such representations
and warranties had been made on and as of the date of the Consummation Date (or
on the date when made in the case of any representation or warranty which
expressly relates to an earlier date).
9.2. Performance. Such IPP shall have performed and complied in all
material respects with all agreements, obligations, covenants and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Consummation Date.
9.3. Representation Letter; Secretary's Certificate; Opinion of IPP's
Counsel. The Company shall have received on the Consummation Date (a) a
representation letter executed by such IPP in substantially the form annexed as
Exhibit 9.3A, (b) a certificate of the Secretary of such IPP (or the managing
general partner of such IPP) certifying (i) the resolutions of the Board of
Directors and shareholders of such IPP (or such managing general partner) or
partners of such IPP authorizing the transactions contemplated by this Agreement
and (ii) the incumbency of the officers of such IPP executing this Agreement or
any agreements to be executed by such IPP pursuant hereto, in form and substance
reasonably satisfactory to the Company, and (c) an opinion or opinions from
counsel for such IPP (which may be such IPP's in-house counsel), dated the
Consummation Date, in substantially the form annexed as Exhibit 9.3C.
9.4. Regulatory Approvals. The Company shall have received on or before
the Consummation Date each NMPC Regulatory Approval and, if the Company will
benefit therefrom or be affected thereby, any IPP Approval set forth in any IPP
Status Notice, in a form reasonably acceptable to the Company, and each such
Regulatory Approval shall be in full force and effect and either (i) shall be
final and non-appealable or (ii) if not final and non-appealable, shall not be
subject to the possibility of appeal, review or reconsideration which, in the
opinion of the Company, is reasonably likely to be successful and, if
successful, would have a Material Adverse Effect on the Company.
9.5. No Injunction, Action or Proceeding. (a) No court or Governmental
Authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, statute, ordinance, rule, regulation, judgment,
decree, injunction or other order (whether temporary, preliminary or permanent)
that is in effect on the Consummation Date and which restrains, enjoins or
otherwise prohibits consummation of the transactions contemplated hereby and (b)
no claim, action, suit, investigation or other proceeding brought by a
Governmental Authority or a third party concerning the
45
<PAGE>
transactions contemplated by this Agreement shall be pending which in the
opinion of the Company is reasonably likely to be successful and which, if
adversely determined, would grant relief from or against the Company which is
reasonably likely to have a Material Adverse Effect on the Company.
9.6. Contracts. The Company and such IPP shall have executed and
delivered to the Escrow Agent the respective Termination Agreement, Amended PPA,
Restated Contract(s), NorCon Agreement or Oxbow Agreement, as applicable, in
accordance with Section 2.8, on or before the Conditions Determination Date.
9.7. NMPC/Third Party Consents and NMPC/Third Party Releases. The
Company shall have received (a) the NMPC/Third Party Consents, in form and
substance reasonably satisfactory to the Company and (b) the NMPC/Third Party
Releases with respect to such IPP, in form and substance reasonably satisfactory
to the Company, provided, however, that an NMPC/Third Party Release shall be
deemed to have been received by the Company in the event such IPP shall elect,
in its sole discretion, to provide the Company with an indemnity, in form and
substance reasonably satisfactory to the Company, against any claims of the
third party under the NMPC/Third Party Agreement resulting from the termination,
amendment or amendment and restatement, as the case may be, of such IPP's
Existing PPA.
9.8. General Release; Withdrawal of Litigation.
(a) The Company shall have received from the IPP on the Consummation
Date a general release, in form and substance reasonably satisfactory to the
Company, of all claims, liabilities or obligations of or against the Company
which the IPP had, has or may have with respect to facts, circumstances or
occurrences existing on or arising at any time through and including the
Effective Time, arising out of or in connection with such IPP's Existing PPA,
except claims, liabilities or obligations (i) arising out of or in connection
with this Agreement, (ii) arising out of or in connection with any litigation or
regulatory proceedings which are not to be dismissed and withdrawn by the IPP
pursuant to Section 9.8(b) and (iii) unless dismissed or withdrawn pursuant to
Section 9.8(b), arising out of or in connection with any payment due to the IPP,
whether or not disputed, for any power or services purchased by the Company
pursuant to the Existing PPA or any related gas transportation, peak shaving,
interconnection or other related agreement between the Company and the IPP,
provided that if such payment relates to any period more than sixty (60) days
prior to the date of this Agreement, the IPP's entitlement to such payment shall
have been set forth in a writing given to the Company on or before June 15,
1997. The Parties acknowledge and agree that all claims, liabilities and
obligations relating to tracking, adjustment or advance payment account
provisions under any Existing PPA shall be extinguished as of the Effective Time
(and such extinguishment shall be reflected in the general release).
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(b) In addition, the Company shall have received from the IPP an
original counterpart of a stipulation or other appropriate document(s), in form
and substance reasonably satisfactory to the Company, sufficient to dismiss or
withdraw as to the Company by the IPP (except as otherwise provided in the
footnotes thereto) the litigation, proceedings and pleadings, if any, as the
case may be, listed on Schedule 8.8 with respect to such IPP, with prejudice and
with no costs awarded, as of the Consummation Date. Following the Consummation
Date the IPP shall take promptly, or cause to be taken promptly, all actions and
to do promptly, or cause to be done promptly, all things necessary, proper or
advisable as may be requested by the Company to file all such documents and
fully effectuate all such dismissals and withdrawals.
9.9. Board and Shareholder Approvals. This Agreement and the
transactions contemplated hereby shall have been approved by (a) the Company's
Board of Directors and, (b) to the extent required, by the Company's
shareholders.
9.10 NMPC Financing. The Company shall have consummated (a) the Public
Offering of the Debt Securities and (b) the other financing transactions set
forth on Schedule 9.10 hereto, on terms reasonably satisfactory to the Company.
10. SATISFACTION OF CONDITIONS; CONSUMMATION
10.1. Notice of Satisfaction or Waiver of Conditions.
(a) The Company shall notify the IPPs' Special Counsel, and each IPP
shall notify the Company and the IPPs' Special Counsel, (i) not less frequently
than monthly, of the satisfaction of any of the conditions to the obligations of
such Party pursuant to Sections 8 or 9 of this Agreement and/or (ii) promptly,
in the event such Party shall receive notice or information from any
Governmental Authority or third party indicating that the conditions to the
obligations of such Party pursuant to Sections 8 or 9 of this Agreement cannot
be, or are not reasonably likely to be, satisfied on or before the Expiration
Date.
(b) On or within three (3) Business Days before the Conditions
Determination Date, the Company shall give a notice to each IPP (the "NMPC
Status Notice") setting forth:
(i) a description of each NMPC Regulatory Approval
which the Company has obtained or is seeking to obtain pursuant to the
provisions of Section 6.6(a) or (c), including the name of the
Governmental Authority, the specific findings, approvals and
authorizations obtained or sought to be obtained, all notices given or
received and all actions taken in connection therewith, and the status
thereof, together with a representation and warranty of the Company
that to
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the best knowledge of the Company the NMPC Regulatory Approvals
described therein are the only Regulatory Approvals required as of such
date with respect to the consummation of the Company's obligations
hereunder;
(ii) whether the conditions to the Company's obligations set
forth in Sections 9.7 (NMPC/Third Party Consents and NMPC/Third Party
Releases) have been satisfied. In the event any condition set forth in
Section 9.7 has not been satisfied by the Conditions Determination
Date, then the Company, pursuant to the NMPC Status Notice, either (x)
shall be deemed to have waived any such condition (except that any
such waiver shall not be deemed a waiver of any condition in Section
9.9(b) or Section 9.10) or (y) shall elect to terminate this Agreement
pursuant to Section 12.1(e);
(iii) the status of (x) the Shelf Registration
Statement with respect to the Company Shares, (y) the Debt Registration
Statement with respect to the Public Offering of the Debt Securities
and the other financing transactions set forth on Schedule 9.10 and (z)
the Proxy Statement and the shareholder approval to be obtained
thereby; and
(iv) whether, to the best of the Company's knowledge, there is
any reason why any other condition to either the Company's or any
IPP's obligations pursuant to Sections 8 or 9 will not be satisfied on
or before the Expiration Date (excluding any condition the
satisfaction of which is solely within the control of any IPP).
(c) On or within three (3) Business Days before the Conditions
Determination Date, each IPP shall give a notice to the Company and the IPPs'
Special Counsel (an "IPP Status Notice") setting forth:
(i) a description of each IPP Regulatory Approval which the IPP
has obtained or is seeking to obtain pursuant to the provisions of
Section 6.6(b), including the name of the Governmental Authority, the
specific findings, approvals and authorizations obtained or sought to
be obtained, all notices given or received and all actions taken in
connection therewith, and the status thereof, together with a
representation and warranty by the IPP that to the best knowledge of
such IPP the IPP Regulatory Approvals described therein and, at such
IPP's option, in the NMPC Status Notice are the only Regulatory
Approvals required as of such date with respect to the consummation of
the IPP's obligations hereunder;
(ii) whether the conditions to the IPP's obligations set forth in
Sections 8.10 (IPP/Third Party Consents; IPP Approvals) and 8.11 (Gas
Mitigation) have been satisfied. In the event any condition set forth
in Section 8.10 or 8.11 has not been satisfied by the Conditions
Determination Date, then the
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IPP, pursuant to the IPP Status Notice, either (x) shall be deemed to
have waived any such condition or (y) shall elect to terminate this
Agreement pursuant to Section 12.2(c) as of the Conditions
Determination Date;
(iii) whether, to the best of the IPP's knowledge, there is any
reason why any other condition to either the Company's or such IPP's
obligations pursuant to Sections 8 or 9 will not be satisfied on or
before the Expiration Date (excluding any condition the satisfaction
of which is solely within the control of the Company or any other
IPP).
(d) Within ten (10) days after the Conditions Determination Date, the
Company either (x) shall be deemed to have waived the condition set forth in
Section 9.9(a) or (y) by notice given on or before such date shall elect to
terminate this Agreement pursuant to Section 12.1(e), effective as of the date
of such notice.
10.2. Consummation Date. The consummation of the Restructuring and
other transactions contemplated by this Agreement (the "Consummation") shall
take place at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590
Madison Avenue, New York, New York. Within fifteen (15) days after the
Conditions Determination Date, the Parties shall mutually agree on a schedule to
achieve the Consummation by a date certain (the "Scheduled Date") and thereafter
the Parties shall use their Reasonable Best Efforts to achieve the Consummation
by the Scheduled Date. The Consummation shall occur on the later to occur of (i)
the Scheduled Date and (ii) the third (3rd) Business Day following the
satisfaction or waiver of all of the Parties' conditions set forth in Sections 8
and 9, or shall take place at such other place or on such other date as the
Parties may mutually agree. In no event shall the Consummation occur sooner than
December 31, 1997 or later than the Expiration Date. The date on which the
Restructuring and other transactions contemplated by this Agreement actually are
consummated is referred to herein as the "Consummation Date."
10.3. Deliveries by the Company.
(a) On the Consummation Date, the Company shall deliver to the
Depositary, on behalf of the IPPs, (i) the Cash Payment, in the manner described
in Section 3.3; (ii) the Company Shares, in the manner described in Sections 3.3
and 3.6; and (iii) the Short-Term Notes or Additional Cash Payment, as
applicable, in the manner described in Section 3.3.
(b) On the Consummation Date, the Company shall deliver to the Escrow
Agent, on behalf of the IPPs, all other agreements, instruments, certificates,
resolutions, opinions and other documents (including but not limited to the
general releases and the dismissals and withdrawals of litigations, regulatory
proceedings and pleadings contemplated by Section 8.8(b)) required to be
delivered by the Company on or
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before the Consummation Date pursuant to this Agreement, either in the
respective form annexed as an Exhibit to this Agreement, if applicable, or in
form and substance reasonably satisfactory to each IPP and the IPPs' Special
Counsel.
10.4. Deliveries by the IPPs. On the Consummation Date, each IPP (as
applicable) shall deliver to the Escrow Agent, on behalf of the Company, all
other agreements, instruments, certificates, resolutions, opinions and other
documents (including but not limited to the general releases and the dismissals
and withdrawals of litigations and regulatory proceedings contemplated by
Section 9.8(b)) required to be delivered by such IPP on or before the
Consummation Date pursuant to this Agreement, either in the respective form
annexed as an Exhibit to this Agreement, if applicable, or in form and substance
reasonably satisfactory to the Company and its counsel.
10.5. Deliveries by the Depositary and the Escrow Agent. On the
Consummation Date, the Parties shall execute and deliver to the Depositary and
the Escrow Agent such authorizations and instructions as may be required to
cause the Depositary and the Escrow Agent to deliver (i) counterparts of the
Contracts, the Shareholder's Agreement, the Registration Rights Agreement and
all other agreements, instruments, certificates, resolutions, opinions and other
documents delivered by the Parties to the Escrow Agent pursuant to this
Agreement (excluding the Allocation) to the Company and the respective IPPs, as
applicable, and (ii) the Cash Payment, Company Shares, Short-Term Notes and/or
Additional Cash Payment, as applicable, delivered by the Company to the
Depositary pursuant to this Agreement, to the respective IPPs or their
designees.
11. REGULATORY AND OTHER MATTERS
11.1. Maintenance of QF Status.
(a) Each IPP (whether or not it is to enter into the Amended PPA or
Restated Contract) shall have the right, but not the obligation, to obtain
and/or maintain its status as a state and/or federal qualifying facility ("QF")
under New York law (including compliance with NYPSL ss.2(2-a)) and/or PURPA,
respectively, but the Company's obligations under each Contract shall continue
as a matter of contract right regardless of whether the IPP maintains its state
or federal QF status. Following the Consummation Date, the Company shall not
implement or continue to implement any QF Monitoring Program with respect to any
IPP. Notwithstanding the foregoing, failure to comply with the requirements
applicable to state and/or federal QF status under New York law (including
compliance with NYPSL ss.2(2-a)) shall have no adverse effect on the IPP or the
Company's continuing performance under any Contract.
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(b) In the event an IPP (whether or not it is to enter into the Amended
PPA or Restated Contract) wishes to qualify or perform as an Exempt Wholesale
Generator ("EWG") under Section 32 of PUHCA and the FERC's regulations
promulgated thereunder, as the same may be amended, modified or restated from
time to time, whether before or after the Consummation Date, the Company shall
cooperate with (including, without limitation, by providing consents and
affidavits), and shall not take any action to oppose, impede or subvert, such
IPP's efforts to obtain appropriate regulatory exemptions and approvals,
including market-based rate approval.
(c) Each IPP shall have the right to have the Company wheel the output
of its Project to third parties pursuant to applicable law, or the Company's, or
other companies', duly filed transmission and distribution tariffs or schedules.
(d) Except to the extent that the contract price under the Amended PPA
or Restated Contract is or may be based thereon, from and after the Consummation
Date (i) each IPP shall waive any statutory right it may have under Section 66-c
of NYPSL pursuant to which such IPP may demand a 6(cent) per KWh minimum power
purchase rate from the Company and (ii) each IPP shall waive, for itself and for
the successors and assigns of its respective Project, with respect to its
Project, any statutory right it may have under PURPA or NYPSL to require the
Company to enter into a power purchase contract or otherwise take the output of
such IPP's Project, provided, however, that prior to the end of the Proxy-Market
Price Period the Company agrees, at the IPP's request, to act as agent for each
IPP (or, if necessary to effectuate such sales to the New York Power Pool, by
purchase and resale of each IPP's capacity and energy, at no cost to the
Company), for the sale on up to a monthly basis, of each such Project's capacity
and energy to the New York Power Pool or any third party, in each case on a
nondiscriminatory basis with respect to the Company's or any third party's
capacity and energy, at no cost to such IPP. The Company agrees to use its
Reasonable Best Efforts to effect such sales on the most favorable terms,
including price, to the IPP, giving consideration to the quantity, term and
market conditions prevailing at the time of sale. For purposes of this Section
11.1(d), the Proxy-Market Price Period shall have the meaning set forth in
Exhibit A, except that the Proxy-Market Price Period shall commence as of the
Effective Time, the last sentence of the definition contained in Exhibit A shall
not be applicable, and this provision shall apply whether or not such IPP is to
enter into the Amended PPA or a Restated Contract. Further, nothing herein shall
be construed to constitute a waiver by any IPP of any other rights it may have
under PURPA, NYPSL or applicable law, including rights with respect to back-up
services, interconnection, reactive power or similar rights, whether or not a
contract is required or desirable.
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11.2. Competitive Transition Charge; Retail Bypass.
(a) Each IPP covenants not to take any action to oppose, impede or
subvert the Company's entitlement to recover Competitive Transition Charges from
any party other than an IPP and its Affiliates (except in their capacities as
retail customers), including the level, design or duration of such charges, and
the imposition of such charges on backup power services (including services to
self-generators); provided, however, that each IPP reserves the right to
challenge any proposal that discriminates against one source of generation
relative to another or places any IPP or its Affiliates at a competitive
disadvantage as compared to other generators or suppliers. Each IPP agrees not
to support in any regulatory or judicial proceeding any effort by a customer of
the Company to avoid payment of a Competitive Transition Charge. The provisions
of this Section shall not apply to any IPP following (x) the termination of this
Agreement in its entirety or (y) the termination of this Agreement with respect
to such IPP.
(b) Each IPP agrees that, between the date of this Agreement
and the earlier to occur of (x) the Effective Time, (y) the termination of this
Agreement in its entirety or (z) the termination of this Agreement with respect
to such IPP, it will not (other than to the Company or any Affiliate of the
Company) provide electric power directly or indirectly to an existing retail
customer of the Company located in the Company's retail service territory or to
a person or entity which directly or indirectly provides electric power to any
such retail customer, unless pursuant to an agreement approved by the PSC. The
provisions of this Section 11.2(b) shall not apply to (i) sales by any IPP
permitted as of the date of this Agreement, (ii) the sale of electricity by any
IPP to a utility, including the Company, (iii) the provision by any IPP of its
internal auxiliary load or (iv) any sales by any power marketing or retail
energy services Affiliate of any IPP.
11.3. Consistent Tax Reporting. The Company and each applicable IPP
agree that the terms and conditions to be contained in each Restated Contract
and Fixed Price Swap Contract are and shall be the result of arms-length
negotiations. The Company will not treat the Restated Contracts or Fixed Price
Swap Contracts in a manner that is inconsistent with the character of such
Restated Contracts or Fixed Price Swap Contracts, as the case may be, for income
tax and reporting purposes as bona fide hedging or delivery agreements and will
not claim a deduction or loss for income tax purposes in respect of such
Restated Contracts or Fixed Price Swap Contracts prior to a taxable year in
which (i) payments pursuant to such Restated Contracts or Fixed Price Swap
Contracts are paid or accrue pursuant to the terms thereof or (ii) such Restated
Contracts or Fixed Price Swap Contracts lapse, terminate or are canceled, unless
required to do so pursuant to a "determination" within the meaning of Section
1313(a) of the Code.
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12. TERMINATION OF AGREEMENT
12.1. Events of Termination of the Agreement in its Entirety. This
Agreement may be terminated, and the transactions contemplated hereby may be
abandoned, at any time prior to the Consummation Date:
(a) by the mutual written consent of all the Parties, or pursuant to
Section 2.7(b);
(b) by the IPPs, acting unanimously, if the Company breaches in any
material respect any of its covenants or agreements contained in this Agreement,
or any of its representations or warranties contained in this Agreement is
inaccurate in any material respect when made, and such breach or
misrepresentation is not cured to the reasonable satisfaction of the IPPs,
acting unanimously, within ten (10) days after the date notice of such breach or
misrepresentation is given to the Company (or, if such breach or
misrepresentation is not reasonably capable of cure within such ten (10) day
period but is capable of cure, such longer period as may be reasonably necessary
to effect such cure, not to exceed thirty (30) days in the aggregate, provided
that during the period of such extension the Company uses Reasonable Best
Efforts to effect such cure);
(c) by the Company, if all of the IPPs breach in any material respect
any of their respective covenants or agreements contained in this Agreement, or
any of their respective representations or warranties contained in this
Agreement is inaccurate in any material respect when made, and such breach or
misrepresentation is not cured to the reasonable satisfaction of the Company for
more than ten (10) days after the date notice of such breach or
misrepresentation is given to all IPPs (or, if such breach or misrepresentation
is not reasonably capable of cure within such ten (10) day period but is capable
of cure, such longer period as may be reasonably necessary to effect such cure,
not to exceed thirty (30) days in the aggregate, provided that during the period
of such extension the IPPs use Reasonable Best Efforts to effect such cure);
(d) by the Company, if the Company determines, in its sole discretion,
that, as a result of the termination of this Agreement with respect to one or
more but not necessarily all of the IPPs, the benefits anticipated to be
received by the Company as a result of the transactions contemplated by this
Agreement have been materially and adversely affected (provided that any notice
of termination solely as a result of the termination of this Agreement with
respect to NorCon and/or Oxbow pursuant to Sections 2.5 or 2.6, respectively,
shall be made not later than ten (10) Business Days after receipt of the
Depositary's certification pursuant to Section 12.4(b) following the termination
of this Agreement with respect to NorCon and/or Oxbow, as the case may be; and
provided, further, that the Company may not terminate this Agreement pursuant to
this Section 12.1(d) following delivery by the Company of a sub-clause (y)
notice pursuant to Section 2.7(b), unless any of the IPPs which are not
identified in such sub-clause (y) notice shall thereafter have been terminated
from this Agreement prior to the Consummation Date; or
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(e) by the Company, if the Company determines, in the Company's sole
discretion, that any of the conditions (which have not previously been waived)
to the Company's obligations set forth in Section 9 are not reasonably likely to
be satisfied (and the Company is not willing to waive same) on or before the
Expiration Date, provided that the Company may not terminate this Agreement
pursuant to this Section 12.1(e) prior to the Conditions Determination Date,
except that the Company may terminate this Agreement prior to the Conditions
Determination Date if the PSC Approval has been denied or if no PSC action has
been taken as of a date at which it is no longer possible for the Consummation
to occur by the Expiration Date.
12.2. Events of Termination with respect to One or More of the IPPs.
This Agreement may be terminated by or with respect to any one or more but not
necessarily all of the IPPs, and the transactions contemplated hereby may be
abandoned by or with respect to any one or more but not necessarily all of the
IPPs, at any time prior to the Consummation Date:
(a) by the mutual written consent of the Company and any one or more
IPPs or pursuant to Sections 2.5, 2.6 or 2.7(b) hereof; provided, however, that
in the case of any termination pursuant to this Section 12.2(a), this Agreement
shall be terminated with respect to such terminating or terminated IPP(s) only;
(b) by any one or more IPPs, acting singly, if the Company breaches in
any material respect any of its covenants or agreements contained in this
Agreement or any of its representations or warranties contained in this
Agreement is inaccurate in any material respect when made, and such breach or
misrepresentation is not cured to the reasonable satisfaction of such IPP(s)
within ten (10) days after the date notice of such breach or misrepresentation
is given to the Company (or, if such breach or misrepresentation is not
reasonably capable of cure within such ten (10) day period but is capable of
cure, such longer period as may be reasonably necessary to effect such cure, not
to exceed thirty (30) days in the aggregate, provided that during the period of
such extension the Company uses Reasonable Best Efforts to effect such cure);
provided, however, that in the case of any termination pursuant to this Section
12.2(b), this Agreement shall terminate with respect to such terminating IPP(s)
only;
(c) by any one or more IPPs, acting singly, if any such IPP
determines, in such IPP's sole discretion, (i) that any of the conditions (which
have not previously been waived) to such IPP's obligations set forth in Sections
8 are not reasonably likely to be satisfied (and such IPP is not willing to
waive same) on or before the Expiration Date, (ii) that the NMPC Restructuring,
as implemented or proposed to be implemented by the Company at any time, has had
or is reasonably likely to have a material adverse effect on such IPP with
respect to the transactions contemplated hereby, (iii) that appropriate
exemptions or waivers from the regulation or jurisdiction of any Governmental
Authority
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resulting from this Agreement or any of the transactions contemplated hereby
with respect to such IPP, its partners or Affiliates, individually or
collectively, from which it or they were previously exempt, including but not
limited to SEC or FERC regulation under PUHCA, PSC regulation under the NYPSL,
and FERC regulation under the Federal Power Act, are not reasonably likely to be
obtained on or before the Expiration Date, and this Agreement is not conformed
prior to the Consummation Date in a manner mutually satisfactory to the Parties
as may be necessary in order for the IPP, its partners or Affiliates, to avoid
becoming subject to such regulation or jurisdiction, (iv) that such IPP is, or
is reasonably likely to be, subject to any Curtailment with respect to its
Existing PPA (whether authorized to do so before or after the date of this
Agreement), or (v) that such IPP is unable to effect the Restructuring in a
manner contemplated by Section 6.2; or upon any merger or consolidation of the
Company with or into any other entity (except as permitted by Schedule 6.11);
provided, however, that in the case of any termination pursuant to this Section
12.2(c), this Agreement shall terminate with respect to such terminating IPP(s)
only; or
(d) by the Company, if any IPP breaches in any material respect any of
its covenants or agreements contained in this Agreement or any of its
representations or warranties contained in this Agreement is inaccurate in any
material respect when made, and such breach or misrepresentation is not cured to
the reasonable satisfaction of the Company for more than ten (10) days after
notice of such breach or misrepresentation is given to all IPPs (or, if such
breach or misrepresentation is not reasonably capable of cure within such ten
(10) day period but is capable of cure, such longer period as may be reasonably
necessary to effect such cure, not to exceed thirty (30) days in the aggregate,
provided that during the period of such extension the IPP uses Reasonable Best
Efforts to effect such cure); provided, however, that in the case of any uncured
breach by less than all of the IPPs, the Company may terminate this Agreement
with respect to any such breaching IPP(s) only.
12.3. Expiration.
(a) This Agreement shall be terminated, and the transactions
contemplated hereby shall be abandoned, without further notice or consent, if
for any reason (including but not limited to the non-satisfaction and non-waiver
of any of the conditions set forth in Sections 8 and 9 hereof) the Consummation
Date has not occurred on or prior to the Expiration Date unless, by mutual
written consent of all the Parties, the Parties elect to extend the Expiration
Date.
(b) Notwithstanding the provisions of Section 12.3(a), if the Company
and less than all the IPPs desire to extend the Expiration Date (other than as
provided in Section 2.7(b), which shall govern any extension pursuant to that
Section), this Agreement shall not be terminated and shall instead be extended
by the mutual written consent of such Parties; in such event, this Agreement
shall be deemed to be terminated
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(with the effect described in Section 12.4(b)) with respect to any IPP which
does not desire to extend the Expiration Date.
12.4. Effect of Termination.
(a) In the event that this Agreement shall terminate in its entirety
pursuant to Section 12.1, 12.2 or 12.3(a), then (i) this Agreement shall
forthwith terminate and have no further effect, (ii) any Contracts theretofore
executed by the Company and any IPPs shall be void ab initio and, if theretofore
delivered to the Escrow Agent , shall be destroyed by the Escrow Agent and (iii)
no Party shall have any further obligation or liability hereunder (except with
respect to any provisions hereof which by their terms expressly survive any
termination of this Agreement).
(b) In the event that this Agreement shall terminate with respect to
one or more but less than all of the IPPs pursuant to Section 2.5, 2.6, 2.7(b),
12.2 or 12.3(b), then (i) this Agreement shall terminate forthwith and have no
further effect with respect to any such IPP (except with respect to any
provisions hereof which expressly survive any termination of this Agreement),
(ii) the Allocable Consideration and the contract quantity under the Amended PPA
shall be reduced by the portion of the Allocable Consideration and the contract
quantity under the Amended PPA allocated to such IPP pursuant to the original
Allocation, (iii) the Allocable Consideration, the contract quantity of energy
and the contract quantity of installed capacity under the Restated Contracts
shall be reduced by the portion of the Allocable Consideration, the contract
quantity of energy and the contract quantity of installed capacity under the
Restated Contracts allocated to such IPP pursuant to the original Allocation,
(iv) the aggregate Contract Adjustment shall be reduced by the portion of the
Contract Adjustment allocated to such IPP pursuant to the original Allocation,
if any, (v) any Contracts theretofore executed by such IPP shall be void ab
initio and, if theretofore delivered to the Escrow Agent, shall be destroyed by
the Escrow Agent and (vi) the Company shall not have any further obligation or
liability to such IPP hereunder and such IPP shall not have any further
obligation or liability to the Company or any other IPP hereunder (except with
respect to any provisions hereof which expressly survive any termination of this
Agreement). In such event, the Depositary shall certify to the Company and the
other IPPs the portion of the Allocable Consideration, the contract quantity,
the installed capacity and the contract adjustment, as applicable, under the
Amended PPA or the Restated Contracts which pursuant to the original Allocation
(without regard to any amendment thereof, if any) had been allocated to the IPP
so terminated. For purposes hereof, any reduction in the Allocable Consideration
due to the termination of this Agreement with respect to an individual IPP shall
mean a reduction in both the Cash Payment and Company Shares allocated to such
individual IPP pursuant to the Allocation. Except as expressly set forth in this
Section 12.4(b), the termination of this Agreement with respect to one or more
but less than all of the IPPs shall not increase or reduce the portion of the
Allocable Consideration payable to the remaining IPPs, nor in any way affect the
Short-Term Notes
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or Additional Cash Payment, as applicable, or the terms and conditions,
including contract price, of the Contracts, nor in any way affect any other
terms of this Agreement with respect to any other IPP, all of which terms shall
continue in full force and effect.
(c) The termination of this Agreement in its entirety pursuant to
Section 12.1, 12.2 or 12.3(a), or the termination of this Agreement pursuant to
Section 2.5, 2.6, 2.7(b), 12.2 or 12.3(b) with respect to one or more but less
than all of the IPPs, shall not relieve the Company of any liability to any IPP,
or any IPP of any liability to the Company, for damages directly resulting from
the breach in any material respect of any covenant or obligation of such Party,
or any inaccuracy in any material respect of any representation or warranty of
such Party, in each case occurring prior to such termination; and any such
termination shall not be deemed to be a waiver of any available remedy for any
such breach or misrepresentation. Notwithstanding any other provision contained
in this Agreement to the contrary, provided such Party uses its Reasonable Best
Efforts with respect to the pursuance of any course of action or result stated
herein as requiring the use of Reasonable Best Efforts by such Party, such Party
shall not have any liability to any other Party for any failure to achieve such
course of action or result. In no event shall (i) any IPP have any liability to
any other IPP hereunder or (ii) any Party have any liability for consequential,
special or other indirect damages resulting from any breach or
misrepresentation. The provisions of this Section 12.4(c) shall survive any
termination of this Agreement (either in its entirety or with respect to less
than all of the IPPs).
12.5. Effect on Existing PPAs. In the event of termination of this
Agreement as to any IPP for any reason on or prior to the Consummation Date,
notwithstanding any other provision of this Agreement, the Parties agree and
stipulate that the Existing PPA of such IPP shall continue with the same force
and effect as if this Agreement had not been executed by such IPP, and that
nothing contained herein shall in any way reduce, mitigate or modify the amount
or types of claims, whether asserted or unasserted on the date of this
Agreement, that such IPP may have which arise out of or are related to its
Existing PPA, and all rights and obligations of the Parties with respect to such
Existing PPA shall in no manner be affected or compromised by the terms of this
Agreement. Without limiting the foregoing, the Parties acknowledge and agree
that none of (i) the execution and delivery of this Agreement or any agreement
executed or to be executed pursuant hereto by the Parties, (ii) the submission
of this Agreement or any agreement executed or to be executed pursuant hereto to
any Governmental Authority for its review and/or approval or (iii) any of the
Parties' discussions, negotiations or actions occurring in anticipation of, or
subsequent to, the execution of this Agreement or any agreement executed or to
be executed pursuant hereto shall (excepting, with respect to any individual
IPP, the actual consummation of the Restructuring and other transactions
contemplated by this Agreement pertaining to such IPP's Existing PPA),
constitute or be deemed or asserted to constitute an amendment or modification
to, or a termination, cancellation, rejection, invalidation, suspension or
waiver of, any provision, term,
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condition, right, obligation or requirement contained in or applicable to any
Existing PPA or any other contract, instrument or document relating thereto.
12.6. Bankruptcy Termination. In the event that the Company, at any
time on or before the Consummation Date, makes a general assignment or any
general arrangement or compromise for the benefit of creditors, files a petition
under the Bankruptcy Code or otherwise commences, authorizes or acquiesces in
the commencement of a proceeding under any bankruptcy or similar law for the
protection of creditors, or has a petition commenced against it, then (i) this
Agreement shall terminate forthwith, with the effect described in Section
12.4(a), and (ii) the provisions of Section 12.5 shall apply with respect to the
Existing PPAs The Parties agree and stipulate that this Agreement is a contract
to (i) extend debt financing to or for the benefit of the Company, (ii) extend
financial accommodations to or for the benefit of the Company and (iii) issue
one or more securities of the Company. As a consequence, the Parties further
agree and stipulate that the provisions of Sections 365(c)(2) and (e)(2)(B) of
the Bankruptcy Code, among others, would be applicable and binding on the
Parties in the event the Company becomes a debtor under the Bankruptcy Code.
13. NOTICES
Unless otherwise provided, any notice, consent, approval,
authorization, waiver or other communication required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the Party to be notified, on the next Business Day after
delivery to a nationally recognized overnight courier service, upon confirmation
of receipt of a facsimile transmission or five days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, and
addressed to the Party to be notified at the address or facsimile number
indicated below for such Party, or at such other address as such Party may
designate upon written notice to the other Parties (except that notice of change
of address shall be deemed given upon receipt). Notices may be given to the
Company on behalf of any or all IPPs by the IPPs' Special Counsel.
(a) In the case of the Company:
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, NY 13202
Facsimile: (315) 428-3406
Attn: William F. Edwards
with a copy to:
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Donaldson Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, NY 10172
Facsimile: (212) 892-7272
Attn: Michael Ranger
and with a copy to:
Sullivan & Cromwell
1701 Pennsylvania Avenue, N.W.
Washington, DC 20006
Facsimile: (202) 293-6330
Attn: Janet T. Geldzahler
and
Swidler & Berlin
3000 K Street, N.W., Suite 300
Washington, DC 20007
Facsimile: (202) 424-7643
Attn: Steven J. Agresta
(b) In the case of the IPPs, at the addresses set forth on Schedule A
hereto,
with a copy to:
Wasserstein Perella & Co., Inc.
31 West 52nd Street
New York, NY 10019
Facsimile: (212) 969-7971
Attn: Kenneth A. Buckfire
and with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, NY 10022
Facsimile: (212) 872-1002
Attn: Steven H. Scheinman
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14. MISCELLANEOUS
14.1. Entire Agreement. This Agreement, the Exhibits and Schedules
annexed hereto, and the documents and agreements referred to herein or to be
executed and delivered pursuant hereto, constitute the entire agreement among
the Parties with respect to the subject matter hereof, supersede all prior
agreements and understandings, written or oral, among the Parties with respect
thereto, and no Party shall be liable or bound to any other Party in any manner
by any promises, conditions, warranties, representations, or covenants except as
specifically set forth herein or therein. Notwithstanding the foregoing, neither
this Agreement, the Exhibits and Schedules hereto, nor the documents and
agreements referred to herein or to be executed and delivered pursuant hereto
shall be deemed to supersede, terminate, amend or modify any existing written
agreement between the Company (or any Affiliate of the Company) and any IPP,
unless such existing written agreement is expressly superseded, terminated,
amended or modified pursuant to the terms of this Agreement. The provisions of
this Section 14.1 notwithstanding, the terms of that certain Agreement to
Protect Confidential Information and Discussions executed by, among others, the
Company, on June 10, 1996 shall survive in accordance with their terms with
respect to all information disclosed thereunder prior to the date of this
Agreement.
14.2. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only by
an instrument in writing and signed by the Party against whom such amendment or
waiver is sought to be enforced; provided that the provisions of Section
14.14(c) may be amended by the IPPs without the consent of the Company.
14.3. Successors and Assigns. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and permitted assigns of the
Parties. Except as otherwise expressly provided herein, the rights and
obligations of the Parties pursuant to this Agreement may not be assigned (other
than by operation of law). Nothing in this Agreement, express or implied, is
intended to confer upon any person or entity other than the Parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as may be expressly
provided in this Agreement.
14.4. Governing Law. This Agreement, including the validity hereof and
the rights and obligations of the parties hereunder, and all amendments and
supplements hereof and all waivers and consents hereunder, shall be construed in
accordance with and governed by the domestic substantive laws of the State of
New York without giving
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effect to any choice of law or conflicts of law provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
14.5. Severability. If any provisions of this Agreement as applied to
any part or to any circumstance or to any Party shall be adjudged by a court to
be invalid or unenforceable, the same shall in no way affect any other provision
of this Agreement, the application of such provision in any other circumstances
or to any other Party or the validity or enforceability of this Agreement, and
the Parties affected thereby shall use Reasonable Best Efforts to negotiate in
good faith to make such equitable adjustments to this Agreement as may be
appropriate, so as to effect the original intent of such Parties as closely as
possible in a mutually acceptable manner.
14.6. Captions. The table of contents, headings and captions used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. Unless otherwise specified, all
references herein to "Sections" refer to Sections in this Agreement.
14.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.8. Fees. Except for (i) DLJ, the fees and expenses of which the
Company has agreed to pay pursuant to a separate agreement, and (ii) WP&Co., the
fees and expenses of which the Company has agreed to pay pursuant to a separate
agreement dated May 15, 1996, as amended as of the date hereof (as amended, the
"WP&Co. Fee Letter"), each Party represents that it neither is nor will be
obligated for any investment banking fee, commission or similar fee in
connection with the transactions contemplated by this Agreement. The Company
agrees to indemnify and hold harmless each IPP from any liability for any
commission or compensation in the nature of an investment banking fee,
commission or similar fee, and associated expenses (and the costs and expenses
of defending against such liability or asserted liability) which is (x) payable
to DLJ, (y) payable to WP&Co. pursuant to the WP&Co. Fee Letter or (z) for which
the Company or any of the Company's officers, employees or representatives
otherwise is responsible. Each IPP (severally and not jointly) agrees to
indemnify and hold harmless the Company from any liability for any commission or
compensation in the nature of an investment banking fee, commission or similar
fee, and associated expenses (and the costs and expenses of defending against
such liability of asserted liability) for which such IPP or any of such IPP's
respective officers, employees or representatives is responsible, other than any
such fee or expense which is (x) payable to DLJ, (y) payable to WP&Co. pursuant
to the WP&Co. Fee Letter or (z) for which the Company or any of the Company's
officers, employees or representatives otherwise is responsible. The provisions
of this Section 14.8 shall survive the Consummation Date and any termination of
this Agreement (either in its entirety or with respect to less than all of the
IPPs). By its
61
<PAGE>
execution hereof, each IPP hereby agrees to the terms of the amendment to the
WP&Co. Fee Letter dated as of the date hereof.
14.9. Expenses. Irrespective of whether the Consummation Date shall
occur or whether any Regulatory Approval is obtained, and except as otherwise
expressly provided herein or therein, each Party shall pay all costs and
expenses (including, but not limited to, legal and accounting fees and expenses)
that it incurs with respect to the negotiation and execution of this Agreement
and any other agreements to be executed pursuant hereto, and the performance of
any covenants to be performed by such Party and satisfaction of any conditions
to be satisfied by such Party which are contained herein or therein.
Notwithstanding the foregoing, (i) pursuant to an agreement dated January 31,
1997 (the "IPPs' Special Counsel Fee Letter"), the Company shall pay certain
fees and expenses of the IPPs' Special Counsel, (ii) pursuant to an agreement
dated June 30, 1997 (the "IPPs' Local Regulatory Counsel Fee Letter"), the
Company shall pay certain fees and expenses of the IPPs' Local Regulatory
Counsel and (iii) the Company shall pay all fees and expenses of the Depositary
with respect to the transactions contemplated by this Agreement. The provisions
of this Section 14.9 shall survive the Consummation Date and any termination of
this Agreement (either in its entirety or with respect to less than all of the
IPPs).
14.10. Attorneys' Fees. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement or any other agreement or
document to be executed or delivered pursuant hereto, the prevailing Party shall
be entitled to reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which such Party may be entitled.
14.11. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by any Party
hereto, the Party or Parties entitled to the benefit of such covenants or
agreements may, except as may otherwise be expressly provided in this Agreement,
proceed to protect and enforce their rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Agreement. Except as otherwise provided
herein, the rights, powers and remedies of the Parties under this Agreement are
cumulative and not exclusive of any other right, power or remedy which such
Parties may have under any other agreement or law. No single or partial
assertion or exercise of any right, power or remedy of a Party hereunder shall
preclude any other or further assertion or exercise thereof.
14.12. Survival. Except as set forth in the representation letters to
be delivered by the Parties pursuant to Sections 8.3(a) and 9.3(a), and except
as may be set forth in any of the Contracts, the representations and warranties
of the Company contained in Section 4, and the representations and warranties of
each IPP contained in Section 5, shall not
62
<PAGE>
survive the Consummation Date, provided that any rights, obligations or
liabilities existing pursuant to law (including, without limitation, pursuant to
the Securities Act) shall survive until the expiration of any applicable statute
of limitations. Without limiting the survival of any other provision of this
Agreement which may expressly or by its terms survive the Consummation Date, the
provisions of Sections 3.8, 6.4, 6.7(c), 8.8, 9.8, 11 and 14 of this Agreement
shall survive the Consummation Date until fully performed.
14.13. Several Obligations. The obligations of the IPPs contained in
this Agreement are several and not joint. No IPP shall be responsible for the
performance or failure on the part of any other IPP to perform its obligations
contained in this Agreement.
14.14. Confidentiality.
(a) Each Party agrees that it will not, at any time before or
after the Consummation Date, divulge, disclose, use, publish or in any other
manner reveal, directly or indirectly, by any means whatsoever, to any person,
firm or corporation (i) any confidential or proprietary information of any other
Party obtained by such Party from the other Party, whether orally or in writing,
at any time, including prior to the date of this Agreement, during the course of
or as a result of the negotiation, execution or performance of this Agreement,
any other agreement, document or instrument relating hereto or any of the
transactions contemplated hereby or thereby and known by such Party to be
confidential or proprietary information or (ii) any of the terms or conditions
of this Agreement, any other agreement, document or instrument relating hereto
or any of the transactions contemplated hereby or thereby, or the progress,
status or schedule of any discussions or negotiations relating hereto or
thereto. In the event that any Party is requested or becomes legally compelled
(by oral questions, interrogatories, request for information or documents,
subpoena, criminal or civil investigative demand or similar process) to disclose
any such confidential or proprietary information, such Party will provide the
other Party with prompt written notice so that the other Party may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section, and such Party will cooperate with the other Party
in any effort the other Party undertakes to obtain a protective order or other
remedy. In the event that such protective order or other remedy is not obtained,
or that the other Party waives compliance with the provisions of this Section,
such Party will furnish only that portion of the information which is legally
required and will use Reasonable Best Efforts to obtain reliable assurance that
confidential treatment will be accorded the information, provided, however, if
such efforts involve any expense the other Party, if it has received prior
notice thereof, will reimburse such Party for same. The provisions of this
Section shall not preclude any Party from making a disclosure of any information
if in the opinion of such Party's counsel such disclosure is required by the
securities laws of the United States or the rules of the NYSE or any other
securities exchange or market on which the securities of such Party (or its
Affiliates) are quoted or traded, provided that such Party
63
<PAGE>
shall disclose only that portion of the information which is required to be
disclosed and, to the extent practicable, the disclosing Party shall consult
with the Party which provided such information in advance of making any such
disclosure.
(b) Notwithstanding the provisions of Section 14.14(a), no Party hereto
or representative thereof shall be precluded from, and each Party agrees that it
shall not assert any breach or violation of this Agreement with respect to or as
a result of, the furnishing of any confidential or proprietary information to
(i) any consultant, advisor or other third party retained by any Party to
prepare reports, studies, analyses or memoranda or (ii) any fuel supplier,
transporter, lender, steam host or other third party, in each case in connection
with such Party's efforts to obtain any IPP/Third Party Consent, NMPC/Third
Party Consent or NMPC/Third Party Release. Each Party shall, prior to the
disclosure of any information to any person pursuant to this Section 14.14(b),
execute and cause such person to execute a Third Party Non-Disclosure Agreement
substantially in the form annexed hereto as Exhibit 14.14.
(c) Without limiting in any manner the foregoing provisions of this
Section 14.14, each IPP agrees with each other IPP that such IPP will only
divulge, disclose, use or in any other manner reveal any confidential or
proprietary information of any other IPP or Affiliate of any other IPP regarding
this Agreement, any other agreement, document or instrument relating hereto, or
the transactions contemplated hereby or thereby, which was or is obtained at any
time, including prior to the date of this Agreement, during the course of or as
a result of the negotiation, execution or performance of this Agreement, any
other agreement, document or instrument relating hereto, or any of the
transactions contemplated hereby or thereby (collectively, "Confidential IPP
Information"), to its Affiliates and to those of its and its Affiliates'
respective directors, officers, shareholders and partners (at any tier), and
their respective employees, financial advisors, attorneys, accountants and
consultants ("IPP Participants"), who need to know the Confidential IPP
Information for purposes of participating in the transactions contemplated by
this Agreement or any other agreement, document or instrument relating hereto,
and who are informed by such IPP of the confidential nature of the Confidential
IPP Information and who shall agree to be bound by and to act only in accordance
with the terms and conditions of this Section 14.14(c). Notwithstanding the
foregoing, in the event that any IPP's IPP Participant is a Conflicted Person
(as hereinafter defined), such IPP shall (x) not permit such Conflicted Person
to participate in the negotiation or performance of any agreement, document or
instrument relating hereto or any of the transactions contemplated hereby or
thereby, (y) segregate all files, work papers, reports, analyses, data or other
documents based, in whole or in part, on any Confidential IPP Information and
shall not allow any Conflicted Person to have access thereto, and (z) not
communicate or exchange any Confidential IPP Information to or with any such
Conflicted Person, except, with respect to each of (x), (y) and (z) above, to
the extent necessary for such IPP to obtain its own IPP/Third Party Consents or
IPP Approvals, if any, from such Conflicted Person. A "Conflicted Person" shall
mean,
64
<PAGE>
collectively, any IPP Participant that is a financial institution, steam
host, fuel supplier or fuel transporter and which is or has a material interest
in a person (or Affiliate of such person) from whom any IPP is required to
obtain an IPP/Third Party Consent or IPP Approval from such IPP Participant.
Each IPP shall be responsible for any failure by such IPP's IPP Participant to
comply with the terms of this Section 14.14(c).
(d) The provisions of this Section 14.14 shall be inoperative as to any
information which (i) is or becomes generally available to the public other than
as a result of any breach of this Section by any person subject hereto or its
representatives, (ii) becomes available to a person subject hereto on a
nonconfidential basis from a source (other than any other person subject hereto
or its representatives) which has represented to such person subject hereto that
such source is entitled to disclose it or (iii) was known to such person subject
hereto on a nonconfidential basis prior to its disclosure to such person subject
hereto by any other person subject hereto or its representatives.
(e) Each Party acknowledges that unauthorized disclosure of information
may result in liability for judicial judgments including, but not limited to,
monetary damages, and that any Party harmed by such disclosure is entitled to
pursue any legal and equitable remedies in the event of an unauthorized
disclosure. Each Party hereby waives any objections to the immediate issuance by
a court of competent jurisdiction of injunctive or other equitable relief
barring the further disclosure or use of any information in the event of an
unauthorized disclosure.
(f) The provisions of this Section 14.14 shall survive the Consummation
Date and any termination of this Agreement (either in its entirety or with
respect to less than all of the IPPs).
14.15. No Prejudice. The Parties agree that this Agreement has been
entered into in the context of litigation settlement negotiations. All
evidentiary rules, whether federal or state, applicable to the rights and claims
of the Parties, including but not limited to Rule 408 of the Federal Rules of
Evidence, shall be applicable. The Parties agree and stipulate that this
Agreement and any written or oral statement made in connection with this
Agreement by a Party or its representatives were made in compromise
negotiations, and if asserted to be evidence of (i) furnishing or offering or
promising to furnish or (ii) accepting or offering or promising to accept, a
valuable consideration in compromising or attempting to compromise a claim which
was disputed as to either validity or amount, are not admissible to prove
liability for or invalidity of such claims or their amounts.
[SIGNATURES APPEAR ON FOLLOWING SIGNATURE PAGES]
65
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
IN WITNESS WHEREOF, the parties hereto have entered into this Master
Restructuring Agreement as of the date first above written.
Niagara Mohawk Power Corporation
By: /s/ William E. Davis
--------------------------------------
Name: William E. Davis
Title: Chairman of the Board and
Chief Executive Officer
American Ref-Fuel Company of Niagara, L.P.
By: /s/ Richard Oliver
---------------------------------------
Name: Richard Oliver
Title: Vice President - Development
Onondaga Cogeneration Limited Partnership
By: Geddes Cogeneration Corporation,
Its General Partner
By: /s/ David C. Brauer
-------------------------------
Name: David C. Brauer
Title: Vice President
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
Project Orange Associates, L.P.
By: NCP Syracuse, Inc.,
Its General Partner
By: NCP Energy, Inc.,
Its Attorney-in-Fact
By: /s/ David C. Brauer
-------------------------------
Name: David C. Brauer
Title: Vice President
Fulton Cogeneration Associates, a
New York limited partnership
By: ANR Venture Fulton Company,
Its Managing General Partner
By: /s/ Mark P. Barry
-------------------------------
Name: Mark P. Barry
Title: Vice President
Cogen Energy Technology L.P.
By: Cogen Energy Technology, Inc.,
Its General Partner
By: /s/ John E. Guinness
-------------------------------
Name: John E. Guinness
Title: President
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
Lyonsdale Energy Limited Partnership, a
Delaware Limited Partnership
By: Moose River Energy, Inc.,
Its Managing General Partner
By: /s/ Mr. Yojiro Okazaki
-------------------------------
Name: Mr. Yojiro Okazaki
Title: President
Encogen Four Partners, L.P.
By: EDC Four Inc.,
Its General Partner
By: /s/ Melvin E. Wentz
-------------------------------
Name: Melvin E. Wentz
Title: President
NorCon Power Partners, L.P.
By: Northern Consolidated Power, Inc.,
Its General Partner
By: /s/ J. Douglas Divine
-------------------------------
Name: J. Douglas Divine
Title: Vice President - Strategic Planning
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
Indeck-Ilion Limited Partnership
By: Indeck Energy Services of Ilion, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
-------------------------------
Name: Thomas M. Campone
Title: President
Indeck-Yerkes Limited Partnership
By: Indeck Energy Services of Yerkes, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
-------------------------------
Name: Thomas M. Campone
Title: President
Indeck-Olean Limited Partnership
By: Indeck Energy Services of Oleon, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
-------------------------------
Name: Thomas M. Campone
Title: President
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
Indeck-Oswego Limited Partnership
By: Indeck Energy Services of Oswego, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
-------------------------------
Name: Thomas M. Campone
Title: President
Black River Limited Partnership
By: Jones Black River Services, Inc.,
Its Managing General Partner
By: /s/ William A. Garnett
-------------------------------
Name: William A. Garnett
Title: President
LG&E Westmoreland Rensselaer, a
California general partnership
By: LG&E Power 15 Incorporated,
A General Partner
By: /s/ George Basinger
-------------------------------
Name: George Basinger
Title: President
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
By: Westmoreland-Rensselaer, L.P.,
A General Partner
By: WEI-Rensselaer, Inc.
A General Partner
By: /s/ Michael Lepchitz
--------------------------
Name: Michael Lepchitz
Title: President
Oxbow Power of North Tonawanda, New York, Inc.
By: /s/ Bernard H. Cherry
---------------------------
Name: Bernard H. Cherry
Title: President
Salt City Energy Venture, L.P.
By: Salt City Energy, LLC,
Its General Partner
By: /s/ Edward Barno
---------------------------
Name: Edward Barno
Title: Member
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
AG-Energy, L.P.
By: AG-Energy, Inc.,
Its General Partner
By: /s/ Steven D. Burton
---------------------------
Name: Steven D. Burton
Title: Secretary\General Counsel
Seneca Power Partners, L.P.
By: Seneca Power Corporation,
Its General Partner
By: /s/ Steven D. Burton
---------------------------
Name: Steven D. Burton
Title: Secretary\General Counsel
Sterling Power Partners, L.P.
By: Sterling Power, Ltd.,
Its General Partner
By: /s/ Steven D. Burton
---------------------------
Name: Steven D. Burton
Title: Secretary\General Counsel
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
Power City Partners, L.P.
By: Power City Generating, Inc.,
Its General Partner
By: /s/ Steven D. Burton
---------------------------
Name: Steven D. Burton
Title: Secretary\General Counsel
P&N Partners, L.P.
By: P&N Energy Systems, Inc.,
Its General Partner
By: /s/ Steven D. Burton
---------------------------
Name: Steven D. Burton
Title: Secretary\General Counsel
Selkirk Cogen Partners, L.P.
By: JMC Selkirk, Inc.,
Managing General Partner
By: /s/ George J. Grunbeck
---------------------------
Name: George J. Grunbeck
Title: Vice President
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
East Syracuse Generating Company, L.P.
By: /s/ George J. Grunbeck
- ---------------------------
Name: George J. Grunbeck
Title: Vice President
Kamine/Besicorp Carthage L.P.
By: Kamine Carthage Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
---------------------------
Name: Harold N. Kamine
Title: President
By: Beta Carthage, Inc.,
Its General Partner
By: /s/ Michael J. Daley
---------------------------
Name: Michael J. Daley
Title: Vice President\Secretary\Treasurer
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
Kamine/Besicorp South Glens Falls L.P.
By: Kamine South Glens Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
---------------------------
Name: Harold N. Kamine
Title: President
By: Beta South Glens Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
---------------------------
Name: Michael J. Daley
Title: Vice President\Secretary\Treasurer
Kamine/Besicorp Natural Dam L.P.
By: Kamine Natural Dam Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
---------------------------
Name: Harold N. Kamine
Title: President
By: Beta Natural Dam, Inc.,
Its General Partner
By: /s/ Michael J. Daley
---------------------------
Name: Michael J. Daley
Title: Vice President\Secretary\Treasurer
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
Kamine/Besicorp Syracuse, L.P.
By: Kamine Syracuse Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
---------------------------
Name: Harold N. Kamine
Title: President
By: Beta Syracuse, Inc.,
Its General Partner
By: /s/ Michael J. Daley
---------------------------
Name: Michael J. Daley
Title: Vice President\Secretary\Treasurer
Kamine/Besicorp Beaver Falls, L.P.
By: Kamine Beaver Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
---------------------------
Name: Harold N. Kamine
Title: President
By: Beta Beaver Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
---------------------------
Name: Michael J. Daley
Title: Vice President\Secretary\Treasurer
<PAGE>
MASTER RESTRUCTURING AGREEMENT
SIGNATURE PAGES
United Development Group - Niagara, L.P.
By: United Development Group - Niagara, Inc.,
Its General Partner
By: /s/ W. John Fair
---------------------------
Name: W. John Fair
Title: President
from Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, New York 13202
FOR MORE INFORMATION CONTACT:
Media Inquiries: Kerry P. Burns (315) 428-5266
Financial Inquiries: Leon T. Mazur (315) 428-5876
NIAGARA MOHAWK, 16 INDEPENDENT POWER PRODUCERS
SIGN MASTER RESTRUCTURING AGREEMENT
Pact Formalizes Agreement in Principle To Terminate Or Restructure
IPP Contracts; Transaction Is Expected to Reduce Customer Prices and Pave The
Way For PowerChoice Competition Plan
SYRACUSE, July 10 -- Niagara Mohawk Power Corp. (NYSE:NMK) and 16 independent
power producers (IPPs) today said they have signed a master restructuring
agreement to terminate or restructure 29 IPP contracts representing more than 80
percent of Niagara Mohawk's above-market IPP costs.
In exchange for terminating or restructuring these contracts, the IPPs will
receive approximately $3.6 billion in cash and 46 million shares of Niagara
Mohawk stock. Niagara Mohawk and certain IPPs also will enter into restructured
financial and physical contracts on terms more favorable to the company than the
existing contracts. The parties to the agreement said the transaction will
reduce electricity prices for Niagara Mohawk customers and help expedite utility
competition.
The master restructuring agreement formalizes an agreement in principle
announced March 10 between Niagara Mohawk and 19 developers representing 44
contracts. Since then, Niagara Mohawk withdrew its offer with respect to a
subgroup of three developers representing 15 hydro contracts. Because the
agreement in principle called for the subgroup to be compensated solely through
restructured contracts, their departure will not change the amount of cash and
stock in the overall agreement, nor will it materially impact the cost
reductions associated with the agreement. Niagara Mohawk said it hopes to
achieve settlements with the subgroup separately.
"The consummation of this agreement will arrest the growth in Niagara Mohawk's
IPP payments, helping to stabilize our
<PAGE>
financial condition," said William E. Davis, chairman and chief executive
officer of Niagara Mohawk. "We are replacing a large and growing financial
commitment with a defined debt obligation. The improved cash flow we expect to
realize should allow us to begin immediately to reduce that debt. As we do, we
will seek to rebuild shareholder value, reduce prices for our customers and
implement our plans to create a competitive power market for New York
electricity consumers."
"This agreement signals the dawn of an exciting new era of competition in New
York state's electric power industry," said Carol Murphy, executive director,
Independent Power Producers of New York, the trade group that represents
independent power producers in the state. "With Niagara Mohawk's experience
providing reliable electric service and the independent producers' skill in
producing clean, competitive energy, consumers will benefit long into the
future."
"The signing of the master restructuring agreement is a key milestone," said
Kenneth A. Buckfire, the Wasserstein Perella & Co. investment banker advising
the IPPs, "and will help the IPPs successfully negotiate with their third
parties including lenders and suppliers. The support of Niagara Mohawk and the
PSC will be critical in this process."
Davis noted that the consummation of the agreement is subject to a number of
conditions that require the approval of a large number of third parties,
including regulatory approvals, amendment or termination of the IPPs' existing
third-party arrangements, creation of new IPP third-party arrangements,
shareholder approval and Niagara Mohawk's successful completion of financing
required to accomplish the transaction.
"Legislation pending in Albany can reduce costs for customers further by
lowering the cost of financing required to execute this restructuring
agreement," Davis said. "the Electric Ratepayer Relief Act, or an asset
securitization bill like it, can reduce the overall cost of the financing by
more than $200 million. But if the legislature doesn't act soon, those customer
savings will be lost."
The parties agreed to use their best efforts to achieve expedited PSC review of
the transaction and associated rate
-2-
<PAGE>
treatment. The parties hope to close the transaction by early 1998.
The 46 million common shares to be distributed to the IPPs will constitute
approximately 25 percent of Niagara Mohawk's fully diluted shares. IPPs that
receive 2 percent or more of Niagara Mohawk's outstanding shares will be subject
to a five-year standstill agreement. In addition, Niagara Mohawk will fill two
recently vacated seats on its board of directors by selecting two individuals
from a list of 10 candidates mutually agreed to by the IPPs and the company.
Davis said more details on the master restructuring agreement will be available
once the company completes an 8K filing with the SEC, expected in the next
several days.
-3-
NIAGARA MOHAWK
POWER CORPORATION
IPP MASTER RESTRUCTURING AGREEMENT
<PAGE>
FORWARD LOOKING STATEMENTS
This presentation contains certain forward looking statements with
respect to the financial condition, results of operations and business of
Niagara Mohawk Power Corporation, including statements relating to (a) energy
cost savings that will be realized by consummation of the Master Restructuring
Agreement including, by implication, market prices for energy; (b) the impact of
the transaction on cash flow; and (c) management plans and objectives for the
Company's future operations. These forward looking statements involve certain
risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward looking statements include,
among others, the following possibilities: (1) failure of some independent power
producers to consummate the proposed transaction; (2) changes in market prices
for electric energy; (3) changes in financing costs; (4) federal income tax
treatment of the transaction; (5) changes in capital expenditures; (6) general
economic conditions, either nationally or in New York state, are less favorable
than expected; (7) regulatory treatment of the transaction, including a prudence
determination, establishing appropriate price levels, authorizing regulatory
assets and stranded cost recovery; or (8) legislative or regulatory changes
adversely affect the business in which the Company would be engaged.
<PAGE>
INTRODUCTION
o October 1995 - POWERCHOICE proposal put focus on mandated payments to
IPPs. Contracts need to be dramatically restructured, or NM will require
substantial rate increases to cover rising annual IPP obligations
o August 1996 - NM proposes to buy out 44 contracts from 19 developers
representing about 90% of above-market IPP costs
o March 1997 - NM reaches Agreement-in-Principle with 19 developers to
terminate or restructure 44 contracts
o July 1997 - NM signs Master Restructuring Agreement (MRA) with 16
developers to terminate or restructure 29 contracts
<PAGE>
SUMMARY OF AGREEMENT
o Master Restructuring Agreement with 16 developers representing 29 IPP
contracts
o improves NM's cash flow and financial position
o addresses over 80% of above-market IPP costs
o will pursue separate settlements with 3 developers representing 15
hydro contracts
o the agreement-in-principle with these developers was comprised
solely of restructured contracts
o their departure from the MRA does not change the amount of
cash and stock in the agreement
<PAGE>
SUMMARY OF AGREEMENT (continued)
o 29 IPP contracts terminated or restructured in exchange for:
o $3.6 billion cash
o Up to $3.2 billion raised through sale of NM senior unsecured debt
o Balance from cash on hand and tax refund
o 46 million shares of NM common stock
o 25% of pro forma shares outstanding
<PAGE>
SUMMARY OF AGREEMENT (continued)
o New electric contracts
o financial and physical contracts
o shorter terms
o more market-drive pricing
o provide price hedge to deliver near-term price certainty and
to manage regulatory risk
<PAGE>
CORPORATE GOVERNANCE
o Shareholder Agreement
o any IPP that holds more than 2% of NM stock will enter into
Shareholder Agreement
o 5-year standstill restrictions
o Board Representation
o NM will fill two recently vacated seats on its Board of Directors
o NM will select 2 individuals from a list of 10 candidates
mutually agreed to by the IPPs and NM
<PAGE>
CONDITIONS TO CONSUMMATION
o Each party has the right to withdraw from the agreement based on a broad
set of conditions:
o anticipated economic outcome must be reasonably achieved
o required regulatory approvals must be obtained
o Stranded cost recovery is critical
o third party consents, releases and waivers must be obtained
<PAGE>
CONDITIONS TO CONSUMMATION (continued)
o If not yet consummated, agreement will expire on April 1, 1998
unless extended by mutual agreement of the parties
o provides all parties with sufficient time to satisfy
conditions
<PAGE>
KEY OBJECTIVES ACHIEVED
o Preserves Shareholder Value
o replaces problematic long-term IPP contracts with a manageable
obligation which amortizes over 7-8 yrs
o permanent solution for the majority of above-market IPP costs
o once debt is paid down, IPP problem will be resolved
o stabilizes annual cash flow by eliminating escalating IPP payments
in existing contracts
o allows management to focus on the core business
<PAGE>
KEY OBJECTIVES ACHIEVED (continued)
o Protects creditors
o terms of first mortgage bonds unchanged
o provides funds to satisfy IPP contract claims
o Provides price reductions for all major classes of customers
o final levels subject to approval by the PSC
<PAGE>
KEY OBJECTIVES ACHIEVED (continued)
o Restructured contracts facilitate transition to competitive generation
market
o over 1000 MW of purchased capacity will be terminated and replaced
with market purchases
o this represents over 50% of the capacity associated with the 29 IPP
contracts
<PAGE>
FINANCIAL IMPLICATIONS
o Cash Flow
o results in annual energy cost savings of approximately $600 million
o the additional cash flow will allow the new debt to be retired on an
aggressive basis over the next 7 to 8 years
<PAGE>
Pro Forma IPP Cash Flow Savings
($ millions)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Existing IPP Payments (1) 1,186 1,227 1,250 1,319 1,348 1,388 1,434 1,459 1,473 1,366
Equivalent Energy Payment
Post-Restructuring (1) 601 621 625 670 681 761 888 925 948 930
---------------------------------------------------------------------------------------------
ENERGY COST SAVINGS 585 606 625 649 667 627 546 534 525 436
=============================================================================================
Less New Financing Costs (2)
Interest Expense 272 245 218 190 163 136 109 82 54 27
Amortization of Principal 320 320 320 320 320 320 320 320 320 320
---------------------------------------------------------------------------------------------
Total New Financing Costs 592 565 538 510 483 456 429 402 374 347
NET CASH FLOW AVAILABLE (7) 41 87 139 184 171 117 132 151 89
Cash on Balance Sheet (3) (7) 34 121 260 444 615 732 864 1,015 1,104
Unsecured Notes 3,200 2,880 2,560 2,240 1,920 1,600 1,280 960 640 320 -
<FN>
Notes:
(1) Based on Company's forecast of IPP generation and future market prices
(2) Assumes the new debt will have an average cost of 8.5% and will be amortized over ten years for illustrative
purposes only
(3) Does not reflect the Company's opening cash balance, nor the cash flow generated by the underlying business
</FN>
</TABLE>
<PAGE>
FINANCIAL IMPLICATIONS (continued)
o NM is seeking approval to record a regulatory asset for the IPP buyout and
amortize the asset over a ten-year period
o the non-cash amortization of the regulatory asset will reduce
reported book earnings by approximately $250 million per year, but
will have no impact on cash flow
<PAGE>
FINANCIAL IMPLICATIONS (continued)
o Pro forma valuation
o NM believes that as the electric utility industry transitions to
competition, cash flow valuation parameters will becomes more
relevant
o NM reported earnings will be depressed by the non-cash amortization
of the regulatory asset and the interest costs associated with
additional leverage
o earnings will become less meaningful and less predictable
making cash flow a better valuation metric
<PAGE>
FINANCIAL IMPLICATIONS (continued)
o given the recurring non-cash charges resulting from the
agreement (amortization of the regulatory asset), NM believes
the best way to measure its value is by using cash flow-EBITDA
(Earnings Before Interest, Taxes, Depreciation and
Amortization)
<PAGE>
PRO FORMA EBITDA/CASH FLOW
($ millions)
ACTUAL Pro Forma Pro Forma %
-------------------------------------------------
Operating Revenues $3,991 $3,991(6)
IPP Payments 1,089 (585)(1) 504 -54%
Other Operating Expenses 2,050 2,050
------------- ------------ ----------- -------
EBITDA 852 585 1,437 69%
Less: Cash Interest
Expense 286 272(2) 558 95%
Less: Cash Fit 96 (77)(3) 19 -80%
Less: Capital
Expenditures 297 297
Less: Preferred Stock
Dividends 38 38
Plus: Other Non-Cash
Items 23 23
------------- ------------ ----------- -------
CASH FLOW AVAILABLE FOR
DEBT REPAYMENT 158 390 548 247%
Cash Balance 325 115(4) 440
Debt 3,526 3,200(5) 6,726
Preferred Stock 527 527
NOTES:
(1) Energy cost savings resulting from IPP contract restructuring,
reflecting reduced IPP payments net of new market purchases
(2) Interest costs associated with $3.2 billion of debt at an assumed
interest rate of 8.5%
(3) Lower FIT expense resulting from IPP agreement
(4) Increase in cash net of: cash paid to IPPs, decrease in energy costs,
lower FIT, higher interest costs, debt insurance costs, and tax refund
related to the net operating loss carryback
(5) Reflects the issuance of $3.2 billion of unsecured debt
(6) Operating revenues do not reflect anticipated retail customer price
reductions
<PAGE>
PRO FORMA FINANCIAL VALUATION
($ Millions)
Actual
EBITDA Based Valuation 1996 Pro Forma 1996
- ---------------------- ------ ---------------------
Current NMK Stock Price $8.50
NMK Shares Outstanding (millions) 144.4 190.4
----- -----
NMK Equity Market Capitalization 1,227
First Mortgage Bonds and Other 3,201 3,086
Unsecured Notes - 3,200
Preferred Stock 527 527
----- -----
Net Debt and Preferred Stock 3,728 6,813
----- -----
Enterprise Value 4,955
EBITDA 852 1,437
Enterprise Value / EBITDA (1) 5.8x
NOTE:
(1) Actual 1996 Enterprise Value/EBITDA multiple reflects the current market
price of NMK and year end balance sheet data. Comparable companies in the
industry trade at an average of 7.0x.
<PAGE>
FINANCIAL IMPLICATIONS (continued)
o Dividend Considerations
o NM's Board of Directors recognizes the significance of a dividend to
its equity investors
o upon completion of the POWERCHOICE restructuring, the Board will
regularly review its dividend policy in light of likely constraints
and will take action as appropriate.
<PAGE>
RESTRUCTURED CONTRACTS
o Role of New Contracts
o replaces existing contracts with a balanced portfolio of new
contracts, amended contracts and market purchases
o allocates risks between generators and customers
o provides stability in purchased power costs to support retail price
goals
o transitions generating assets from regulation to competitive market
<PAGE>
RESTRUCTURED CONTRACTS (continued)
o Types of contracts:
o Solid Fuel Contracts
o 17-year contracts
o market-based prices
o Indexed Gas Contracts
o 10-year contracts
o energy prices are responsive to gas market prices
o includes both financial and physical contract structures
<PAGE>
RESTRUCTURED CONTRACTS (continued)
o Fixed Price Gas Contracts (Financial Swaps)
o 7-year contracts starting in 2003
o energy prices are fixed, IPPs bear gas price risk
<PAGE>
CONTRACT SCHEDULE
ADDITIONAL FINANCIAL
COAL AND WASTE GAS CONTRACTS (GAS)
--------------------- ---------------------- ----------------------
QUANTITY PRICE(1) QUANTITY PRICE(2) QUANTITY PRICE(1)
YEAR GWH $/MWH GWH $/MWH GWH $/MWH
- ----- -------- -------- -------- -------- -------- --------
1 353 28.50 4,640 46.40 -- --
2 353 29.40 4,640 46.79 -- --
3 353 30.30 4,640 43.86 -- --
4 353 31.20 4,730 45.92 -- --
5 353 32.10 4,736 47.22 -- --
6 353 33.10 4,755 49.59 2,000 54.58
7 353 34.10 4,765 51.51 3,000 56.51
8 353 35.10 4,778 53.02 4,000 58.01
9 353 36.10 4,786 55.49 4,000 60.48
10 353 37.20 4,798 60.21 4,000 62.30
11 353 38.30 -- -- 8,000 61.99
12 353 39.50 -- -- 8,000 62.06
13 353 40.70 -- -- -- --
14 353 41.90 -- -- -- --
15 353 43.20 -- -- -- --
16 353 44.50 -- -- -- --
17 176 45.84 -- -- -- --
18 -- -- -- -- -- --
19 -- -- -- -- -- --
20 -- -- -- -- -- --
- ---------------
(1) Fixed price schedule.
(2) Fixed price schedule for years 1-2 with years 3-10 indexed.
<PAGE>
REGULATORY APPROVAL
o Within 2 weeks, NM will file the MRA in the context of a revised
POWERCHOICE proposal
o Several issues are critical to the approval of the MRA:
o determination that IPP agreement is prudent
o establishment of price levels going forward
o authorization to record a regulatory asset for the buyout
<PAGE>
REGULATORY APPROVAL (continued)
o establishment of non-bypassable transition cost recovery mechanism
o authorization to do financing necessary to complete the IPP
agreement
<PAGE>
REGULATORY APPROVAL (continued)
o Will seek to obtain risk protection mechanisms
o non-bypassable transition cost recovery
o EBITDA coverage floor
o force majeure
o Hope to obtain regulatory approval during the 4th quarter
<PAGE>
TIMING OF NEXT STEPS
o IPPs hope to complete 3rd party negotiations during the 4th quarter
o Will seek shareholder approvals following receipt of regulatory approval
o Hope to close transaction by early 1998
<PAGE>
CORPORATE BUSINESS STRATEGY
o Overview
o IPP settlement repositions the company, providing it with improved
cash flow and the resources to rebuild shareholder value
o IPP settlement gives Niagara Mohawk the opportunity to concentrate
on its business and capitalize on its opportunities
<PAGE>
ENERGY DELIVERY BUSINESS
Wires and pipes company will be the economic foundation going forward, providing
the bulk of the revenue and cash flow and providing a mechanism for recovering
stranded costs
o Basic strategy is to provide high quality, low-cost delivery services
(high reliability, excellent customer service)
o Two-year re-engineering effort to focus on customer processes and field
operations
<PAGE>
GENERATION BUSINESS
o Fossil/Hydro Assets
o we will explore several options for maximizing shareholder value
while minimizing bondholder issues
o sale of assets
o spin-off into a separate company
o retained in a wholly owned subsidiary
o primary strategy has been to become the low-cost producer of energy,
capacity and ancillary services
<PAGE>
GENERATION BUSINESS (continued)
o Nuclear Assets
o will remain regulated for now
o strategy is to ensure safe operation while maximizing output and
minimizing costs
o working on forming a state-wide nuclear operating company - NYNOC
<PAGE>
PLUM STREET ENTERPRISES
o Unregulated subsidiary focused on participation in evolving markets
o Current geographic scope: Northeastern U.S. and Canada with niche
opportunities in international markets
o Primary products and services:
o energy marketing and brokering
o new technology development and international opportunities
o mass market business development and energy services
<PAGE>
SUMMARY
o MRA improves NM's cash flow and financial position
o Allows NM to focus on core business and complete POWERCHOICE plan
o Energy delivery business will be the economic foundation of the company
going forward
o NM recognizes the significance of a common stock dividend to its equity
investors
Exhibit 99.3
CONTRACT SCHEDULE
<TABLE>
<CAPTION>
ADDITIONAL FINANCIAL
COAL AND WASTE GAS CONTRACTS (GAS)
-------------- --- ---------------
<S> <C> <C> <C> <C> <C> <C>
QUANTITY PRICE (1) QUANTITY PRICE(2) QUANTITY PRICE (1)
YEAR GWH $/MWH GWH $/MWH GWH $/MWH
- ---- --- ----- --- ----- --- -----
1 353 28.50 4,640 46.40 - -
2 353 29.40 4,640 46.79 - -
3 353 30.30 4,690 43.86 - -
4 353 31.20 4,730 45.92 - -
5 353 32.10 4,736 47.22 - -
6 353 33.10 4,755 49.59 2,000 54.58
7 353 34.10 4,765 51.51 3,000 56.51
8 353 35.10 4,778 53.02 4,000 58.01
9 353 36.10 4,786 55.49 4,000 60.48
10 353 37.20 4,798 60.21 4,000 62.30
11 353 38.30 - - 8,000 61.99
12 353 39.50 - - 8,000 62.06
13 353 40.70 - - - -
14 353 41.90 - - - -
15 353 43.20 - - - -
16 353 44.50 - - - -
17 176 45.84 - - - -
18 - - - - - -
19 - - - - - -
20 - - - - - -
<FN>
- --------
(1) Fixed price schedule.
(2) Fixed price schedule for years 1-2 with years 3-10 indexed.
</FN>
</TABLE>
