EXECUTION COPY
ASSET PURCHASE AND SALE AGREEMENT
FOR
GENERATING PLANTS AND RELATED ASSETS
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
SOUTHERN ENERGY, INC.
Dated as of June 7, 2000
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EXECUTION COPY
TABLE OF CONTENTS
Page
ARTICLE I - Definitions 1
Section 1.1 Definitions 1
Section 1.2 Accounting Terms 1
ARTICLE II - Purchase and Sale; Assumption of Certain
Liabilities 1
Section 2.1 Purchase and Sale 1
Section 2.2 Auctioned Assets and Retained Assets 2
Section 2.3 Assumed Obligations and Retained
Liabilities 6
Section 2.4 Third Party Consents 11
ARTICLE III - Purchase Price 11
Section 3.1 Purchase Price 11
Section 3.2 Certain Post-Closing Adjustments 12
Section 3.3 Allocation of Purchase Price 13
Section 3.4 PPA-Related Purchase Price Adjustments 14
ARTICLE IV - The Closing 15
Section 4.1 Time and Place of Closing 15
Section 4.2 Payment of Estimated Purchase Price 16
ARTICLE V - Representations and Warranties of Seller 16
Section 5.1 Organization; Qualification 17
Section 5.2 Authority Relative to This Agreement 17
Section 5.3 Consents and Approvals; No Violation 17
Section 5.4 Personal Property 18
Section 5.5 Real Estate 18
Section 5.6 Leases 18
Section 5.7 Certain Contracts and Arrangements 18
Section 5.8 Legal Proceedings 18
Section 5.9 Permits; Compliance with Law 19
Section 5.10 Environmental Matters 19
Section 5.11 Labor Matters 20
Section 5.12 ERISA; Benefit Plans 20
Section 5.13 Taxes 21
Section 5.14 Undisclosed Liabilities 21
Section 5.15 Brokers 22
Section 5.16 Insurance 22
Section 5.17 Disclaimers 22
ARTICLE VI - Representations and Warranties of Buyer 23
Section 6.1 Organization 23
Section 6.2 Authority Relative to This Agreement 23
Section 6.3 Consents and Approvals; No Violation 23
Section 6.4 Availability of Funds 24
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EXECUTION COPY
Section 6.5 Brokers 24
Section 6.6 No Knowledge of Seller's Breach 24
Section 6.7 Qualified Buyer 25
Section 6.8 WARN Act 25
Section 6.9 Financial Representations 25
Section 6.10 Legal Proceedings 25
ARTICLE VII - Covenants of the Parties 25
Section 7.1 Conduct of Business Relating to
the Auctioned Assets 25
Section 7.2 Access to Information 28
Section 7.3 Consents and Approvals; Transferable
Permits 29
Section 7.4 Further Assurances 30
Section 7.5 Public Statements 31
Section 7.6 Tax Matters 31
Section 7.7 Bulk Sales or Transfer Laws 31
Section 7.8 Witness Services 31
Section 7.9 Control of Litigation 32
Section 7.10 Confidentiality 32
Section 7.11 Risk of Loss 32
Section 7.12 Tax Exempt Financing 33
Section 7.13 Compliance with Governmental Agreements 36
Section 7.14 PJM; MAAC 36
Section 7.15 Trade Names 36
Section 7.16 Enforcement of Retained Rights 37
Section 7.17 Conduct of Business Relating to PPAs 37
ARTICLE VIII - Conditions 37
Section 8.1 Conditions Precedent to Each Party's
Obligation To Effect the Purchase
and Sale 37
Section 8.2 Conditions Precedent to Obligation
of Buyer To Effect the Purchase and Sale 38
Section 8.3 Conditions Precedent to Obligation
of Seller To Effect the Purchase and Sale 39
ARTICLE IX - Employee Matters 41
Section 9.1 Employee Matters 41
Section 9.2 Pension Plans 43
Section 9.3 Buyer's Savings Plan 43
Section 9.4 Severance Liabilities 45
Section 9.5 COBRA 45
Section 9.6 WARN Act 45
ARTICLE X - Indemnification and Dispute Resolution 46
Section 10.1 Indemnification 46
Section 10.2 Third Party Claims Procedures 48
ARTICLE XI - Termination 50
Section 11.1 Termination 50
ARTICLE XII - Miscellaneous Provisions 50
Section 12.1 Expenses 50
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EXECUTION COPY
Section 12.2 Amendment and Modification; Extension;
Waiver 51
Section 12.3 No Survival of Representations or
Warranties 51
Section 12.4 Notices 51
Section 12.5 Assignment; No Third Party Beneficiaries 52
Section 12.6 Governing Law 53
Section 12.7 Counterparts 53
Section 12.8 Interpretation 53
Section 12.9 Jurisdiction and Enforcement 54
Section 12.10 Entire Agreement 55
Section 12.11 Severability 55
Section 12.12 Conflicts 55
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EXECUTION COPY
SCHEDULES AND EXHIBITS
Schedules Title
========= ======
Schedule 1.1(a) Definitions
Schedule 1.1(c) Seller's Severance Plans
Schedule 2.2(a)(ii) Spare Parts
Schedule 2.2(a)(iii) Personal Property
Schedule 2.2(a)(iv) Assigned Contracts
Schedule 2.2(a)(v) Transferable Permits
Schedule 2.2(a)(vi) Transferred SO2 Allowances
Schedule 2.2(a)(vii) Transferred NOx Allowances
Schedule 2.2(b)(i) Retained Transmission and
Distribution Facilities
Schedule 2.2(b)(ii)(B) Communications Equipment/Related
Support Equipment
Schedule 2.3(a)(iv) Assumed Consent Order Obligations
Schedule 2.4 Retained Rights/Unassigned PPAs
Schedule 5.3(a) Contracts Approvals; No Violation
Schedule 5.3(b) Seller Required Regulatory Approvals
Schedule 5.5(a) Real Estate Legal Description
Schedule 5.5(b) Title Surveys
Schedule 5.7 Material Contract Defaults
Schedule 5.8 Legal Proceedings
Schedule 5.9 Permits
Schedule 5.10(a) Environmental Matters
Schedule 5.10(b) Environmental Notification
Schedule 5.10(c) Environmental Reports
Schedule 5.12 Benefit Plans
Schedule 6.3(b) Buyer Required Regulatory Approvals
Schedule 7.1(b)(viii) Capital Expenditures
Schedule 7.12 Exempt Facilities/Revenue Bonds
Exhibits Title
======== =====
Exhibit A Assignment and Assumption Agreement
Exhibit B Bill of Sale
Exhibit C-1, C-2, C-3 and C-4 Easements Agreements
Exhibit D Guarantee Agreement
Exhibit E-1, E-2, E-3 and E-4 Interconnection Agreements
Exhibit F Local Area Support Agreement
Exhibit G Operating Agreement
Exhibit H Potomac River Lease
Exhibit I-1 and I-2 Transition Power Agreements
Exhibit J Deeds of Conveyance
Exhibit K Opinion of Seller's Counsel
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EXECUTION COPY
Exhibit L Opinion of Buyer's Counsel
Exhibit M Opinion of Guarantor's Counsel
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ASSET PURCHASE AND SALE AGREEMENT (including the Schedules hereto,
this "Agreement"), dated as of June 7, 2000, by and between POTOMAC ELECTRIC
POWER COMPANY, a District of Columbia and Virginia corporation ("Seller"), and
SOUTHERN ENERGY, INC., a Delaware corporation ("Buyer," collectively with
Seller, the "Parties").
WHEREAS, Seller owns certain power generating facilities (described
herein as the "Generating Facilities") and other assets associated therewith;
and
WHEREAS, Buyer desires to purchase and assume, and Seller desires to
sell and assign, the Auctioned Assets (as defined in Section 2.2 below) and
certain associated liabilities, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
Definitions
SECTION 1.1 Definitions. Any capitalized terms which are used but
not defined in this Agreement shall have the meaning given to such terms in
the attached Schedule 1.1.
SECTION 1.2 Accounting Terms. Any accounting terms used in this
Agreement or the Ancillary Agreements shall, unless otherwise specifically
provided, have the meanings customarily given them in accordance with United
States generally accepted accounting principles ("GAAP") and all financial
computations hereunder or thereunder shall, unless otherwise specifically
provided, be computed in accordance with GAAP consistently applied.
ARTICLE II
Purchase and Sale; Assumption of Certain Liabilities
SECTION 2.1 Purchase and Sale. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the Closing,
Seller agrees to sell, assign, convey, transfer and deliver to Buyer (or
Buyer's permitted assignees pursuant to Section 12.5(a)), and Buyer agrees to
purchase and acquire from Seller (or shall cause Buyer's permitted assignees
pursuant to Section 12.5(a) to purchase and acquire from Seller) all of the
Auctioned Assets. In the case of any Auctioned Assets
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not located at the Generating Facilities (including supplies, materials and
spare parts inventory), Buyer agrees that from and after the Closing, Buyer
will bear all risk of casualty or loss with regard to such Auctioned Assets
(regardless of whether they remain on Seller's Real Estate or otherwise in
Seller's possession).
SECTION 2.2 Auctioned Assets and Retained Assets.
(a) Auctioned Assets. The term "Auctioned Assets" means all of
the assets, real and personal property, goodwill and rights of Seller of
whatever kind and nature, whether tangible or intangible, in each case,
primarily relating to the power generation operations of the Generating
Facilities and the Support Operations, other than the Retained Assets,
including the following:
(i) except with respect to the Potomac River Real Property, all
real property and leaseholds and other interests in real property of Seller,
together with all buildings, improvements, structures and fixtures thereon,
including the Chalk Point/Morgantown Fuel Pipeline, the Ryceville Pumping
Station, the Production Service Center, and the Ash Storage Sites, subject to
any Permitted Exceptions (the "Buyer Real Estate");
(ii) all inventories of fuels, supplies, materials and spare
parts, together with and subject to (A) all Permitted Exceptions, and (B) all
warranties against manufacturers and vendors relating thereto, including the
spare parts listed on Schedule 2.2(a)(ii), in each case, other than assets
that become obsolete or that are used, consumed, replaced or disposed of in
the ordinary course of business consistent with past practice or as permitted
by this Agreement;
(iii) the machinery, equipment (including any Revenue Meters),
facilities, furniture and other tangible personal property on the Buyer Real
Estate or the Potomac River Station Site, including any items of personal
property located on the Buyer Real Estate, the Potomac River Station Site or
temporarily removed from the Buyer Real Estate or the Potomac River Station
Site for repairs, servicing or maintenance and listed on Schedule 2.2(a)(iii),
together with and subject to (A) any Permitted Exceptions, and (B) all
warranties against manufacturers or vendors relating thereto, in each case,
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other than assets that become obsolete or that are used, consumed, replaced or
disposed of in the ordinary course of business consistent with past practice
or as permitted by this Agreement;
(iv) subject to Sections 2.2(b)(xi) and 2.4, all right, title and
interest of Seller in, to and under all contracts, agreements, personal
property leases (whether Seller is lessor or lessee thereunder), commitments
and all other legally binding arrangements (including any rights of Seller
under any PPA to sell energy to any third party power supplier) whether oral
or written, which are (A) set forth on Schedule 2.2(a)(iv), (B) not material
to the ownership and operation of the Generating Facilities, or (C) otherwise
entered into by Seller in accordance with Section 7.1 (collectively, the
"Contracts"), in each case, to the extent in full force and effect on the
Closing Date;
(v) the Permits and Environmental Permits that are transferred
or transferable by Seller to Buyer (collectively, the "Transferable Permits"),
including the Transferable Permits set forth on Schedule 2.2(a)(v), in each
case, to the extent in full force and effect on the Closing Date;
(vi) the amount of SO2 Allowances listed on Schedule 2.2(a)(vi)
attached hereto ("Transferred SO2 Allowances");
(vii) the amount of NOx Allowances listed on Schedule 2.2(a)(vii)
attached hereto ("Transferred NOx Allowances");
(viii)(A) all data, information, books, operating records,
operating, safety and maintenance manuals, engineering design plans,
blueprints and as-built plans, specifications, procedures, facility compliance
plans, environmental procedures and similar records, to the extent in Seller's
possession or readily available (collectively, the "Operating Records"), and
(B) to the extent permitted by law, all personnel files relating to the
Transferred Employees, to the extent in Seller's possession and readily
available and to the extent such files pertain to (1) skill and development
training and resumes, (2) seniority histories, (3) salary and benefit
information, (4) Occupational Safety and Health Act medical reports, (5)
active medical restriction forms and (6) any other matters, disclosure
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of which by Seller to Buyer is permitted under applicable law without the
consent of the Transferred Employee, but not including any performance
evaluations or disciplinary records (collectively, the "Transferred Employee
Records"); provided, however, that Seller shall be permitted to retain copies,
or originals to the extent it provides Buyer with copies of same, of all
Operating Records and Transferred Employee Records;
(ix) (A) except as provided in Section 2.2(b)(iv), the software
(provided, however, that Buyer acknowledges that it will require licenses from
third parties in order to be legally entitled to use such software), and (B) a
non-exclusive, royalty-free license to use solely in connection with the
Auctioned Assets the software or other copyrighted material owned by Seller
located at Buyer Real Estate; and
(x) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind in favor of the Seller arising
prior to the Closing Date relating to the Auctioned Assets other than those
pertaining to the Retained Assets.
(b) Retained Assets. The term "Retained Assets" means:
(i) the electric transmission and distribution facilities owned,
controlled or operated by Seller for purposes of providing point-to-point
transmission service, network integration service and distribution service and
other related purposes, used in controlling continuity between the Generating
Facilities and the transmission and distribution facilities and for other
purposes (including the Seller's undivided ownership interest in the Conemaugh
Switchyard and the Conemaugh Transmission Line), including those described on
Schedule 2.2(b)(i) attached hereto (the "Transmission System");
(ii) (A) except as set forth in Section 2.2(a)(iii), all
Interconnection Facilities and other transmission, distribution and substation
machinery, equipment and facilities and related support equipment located on
Buyer Real Estate or Seller Real Estate or temporarily removed from Buyer Real
Estate
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or Seller Real Estate for repairs, servicing or maintenance; (B)
Communications Equipment and related support equipment (1) located on Buyer
Real Estate or temporarily removed from Buyer Real Estate for repairs,
servicing or maintenance and listed on Schedule 2.2(b)(ii)(B) or acquired by
Seller after the date of this Agreement and designated by Seller as a Retained
Asset or (2) located on Seller Real Estate or temporarily removed from Seller
Real Estate for repairs, servicing or maintenance; and (C) all Protective
Relaying Systems not located on Buyer Real Estate;
(iii) all cash, cash equivalents, bank deposits and accounts
receivable;
(iv) (A) all mainframe computer systems of Seller and (B)
all software, copyrights, know-how or other proprietary information not
primarily relating to the power generation operations of the Generating
Facilities, including software, copyrights, know-how or other proprietary
information licensed to Buyer pursuant to Section 2.2(a)(ix)(B);
(v) the names "Pepco," "Potomac Electric Power Company," and any
related or similar trade names, trademarks, service marks or logos (and any
rights to and in the same, including any right to use the same);
(vi) any refunds or credits related to Taxes attributable to
taxable periods (or portions thereof) prior to the Closing Date, and any other
rents, charges, liabilities or obligations paid prior to the Closing Date in
respect of the Auctioned Assets;
(vii) personnel records (other than Transferred Employee Records)
and all other records (other than Operating Records);
(viii)(A) all Emission Reduction Credits or Greenhouse Gas
Emission Reduction Credits that are attributable to any emission reduction
activities of the Seller which occur following the Closing Date at any
locations, (B) any SO2 Allowances that are not Transferred SO2 Allowances, and
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(C) any NOx Allowances that are not Transferred NOx Allowances;
(ix) the Seller Real Estate (including a fee interest in the
Potomac River Real Property);
(x) all master station voltage control equipment within and
including the master station voltage control cabinets located at the
Generating Facilities;
(xi) the Retained Rights;
(xii) the Conemaugh Interest;
(xiii) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind in favor of the Seller arising
prior to the Closing Date other than those pertaining to the Assumed
Obligations; and
(xiv) any other asset that is not described with particularity in
this Agreement as an Auctioned Asset.
SECTION 2.3 Assumed Obligations and Retained Liabilities.
(a) Assumed Obligations. At the Closing, Buyer shall assume,
and from and after the Closing, shall discharge, all of the liabilities and
obligations, direct or indirect, known or unknown, absolute or contingent,
which relate to the Auctioned Assets, the Potomac River Station Site or are
otherwise specified below, other than the Retained Liabilities (collectively,
the "Assumed Obligations"), including the following:
(i) except as set forth in Section 2.3(b)(ii), any liabilities
and obligations under the Contracts (including any obligations of Seller under
any PPA to sell energy to any third party power supplier);
(ii) any liabilities and obligations for goods delivered or
services rendered on or after the Closing Date relating to the Auctioned
Assets;
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(iii) except as set forth in Section 2.3(b)(iii), (iv) or (v), any
Environmental Liability including any Environmental Liability (A) arising out
of or in connection with any violation or alleged violation of, or
noncompliance or alleged noncompliance with, any Environmental Laws, prior to,
on or after the Closing Date, relating to or arising in connection with the
Auctioned Assets and the Potomac River Station Site, (B) arising out of or in
connection with the condition of any Auctioned Assets and the Potomac River
Station Site prior to, on or after the Closing Date, including any actual or
alleged presence, Release or threatened Release of any Hazardous Substances
at, on, in, under or migrating onto or from, the Auctioned Assets and the
Potomac River Station Site, prior to, on or after the Closing Date, (C)
arising out of or in connection with any Release or threatened Release of any
Hazardous Substance prior to, on or after the Closing Date relating to any
equipment, Hazardous Substance, product or recyclable or recycled material
(collectively, the "Disposed Items") which remains on or has been removed from
the Auctioned Assets and the Potomac River Station Site, (D) in respect of any
personal injury or property damage relating to or arising from the presence,
exposure to, or proximity to any Hazardous Substance, prior to, on or after
the Closing Date, and (E) of any sort whatsoever arising or occurring on or
after the Closing Date;
(iv) any liabilities and obligations under all consent orders
including those listed on Schedule 2.3(a)(iv) (the "Assumed Consent Order
Obligations");
(v) except as set forth in Section 2.3(b)(iv), any liabilities
and obligations with respect to the Permits to the extent arising or accruing
on or after the Closing Date;
(vi) (A) all wages, overtime, employment taxes, workers
compensation benefits, occupational safety and health liabilities or other
similar liabilities and obligations in respect of Transferred Employees
arising or accruing on or after the Closing Date, and (B) all other
liabilities and obligations with respect to the Transferred Employees for
which Buyer is responsible pursuant to Article IX;
(vii) (A) any liabilities and obligations in respect of any
personal injury or property (real or personal) damage claim (including any
claim based on wrongful death) relating to, resulting from, or arising out of
the Auctioned Assets and the Potomac River Station Site, arising or occurring
on or after the Closing Date, or (B) any liabilities and obligations in
respect of any discrimination, wrongful discharge or unfair labor practice
claim by any Transferred Employee arising out of or relating to acts or
omissions occurring on or after the Closing Date;
(viii) any liabilities and obligations, with respect to the
periods that include the Closing Date, with respect to real or personal
property rent, Taxes based on the ownership or use of property, utilities
charges and similar charges that primarily relate to the Generating Facilities
(collectively, the "Prorated Items"), including (A) personal property taxes,
real estate and occupancy taxes, assessments and other charges, (B) rent and
all other items payable by Seller under any Contract, (C) any fees with
respect to any Transferable Permit and (D) sewer rents and charges for water,
telephone, electricity and other utilities, in each case calculated by
multiplying the amount of any such Prorated Item by a fraction the numerator
of which is the number of days in such period beginning on and after the
Closing Date and the denominator of which is the number of days in such
period;
(ix) any liabilities and obligations in respect of Taxes (other
than as provided for by Section 2.3 (a)(viii)) attributable to the Auctioned
Assets arising or accruing during taxable periods (or portions thereof)
beginning on or after the Closing Date;
(x) any severance costs payable under Seller's Severance Plans
with respect to those Non-Union Employees who do not receive a Qualified Offer
by the Buyer pursuant to Section 9.1 (such liabilities are the "Closing
Severance Expenses");
(xi) any liabilities and obligations of the Buyer relating to the
Potomac River Station Site as contemplated by the Potomac River Lease;
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(xii) all liabilities and obligations of Seller under the loan
agreements set forth on Schedule 7.12 attached hereto (the "Loan Agreements")
with respect to the Revenue Bonds; and
(xiii) any liabilities and obligations under the Ancillary
Agreements in respect of the Auctioned Assets arising on or after the Closing
Date.
(b) Retained Liabilities. Buyer shall not assume or be
obligated to pay, perform or otherwise discharge the following liabilities or
obligations (the "Retained Liabilities"):
(i) any liabilities and obligations of Seller exclusively
relating to any Retained Assets (other than as set forth in Section
2.3(a)(xi));
(ii) any liabilities and obligations under the Contracts which
relate to (A) goods delivered or services rendered prior to the Closing Date,
and (B) breaches by the Seller of its obligations thereunder occurring prior
to the Closing Date;
(iii) (A) any Environmental Liability of Seller arising out of or
in connection with the disposal by, or on behalf of, Seller and Release or
threatened Release, prior to the Closing Date of Hazardous Substances at any
Off-Site location, (B) any Environmental Liability of Seller arising out of or
in connection with any Release or threatened Release of any Hazardous
Substance on or after the Closing Date from the Seller Facilities or otherwise
originating from, or relating to, any equipment owned or used by Seller that
is located on Buyer Real Estate, and (C) any liability in respect of any
personal injury claims relating to the exposure of a third party to asbestos
at the Auctioned Assets or the Potomac River Station Site which have been
filed with any state or federal court having jurisdiction prior to the Closing
Date;
(iv) notwithstanding the Assumed Obligations set forth in Section
2.3(a)(iii)(A), any monetary fines or penalties (including fines or penalties
from violations of any Environmental Law) imposed by a Governmental Authority
to the extent arising out of or relating to acts or omissions of Seller
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in respect of the Auctioned Assets prior to the Closing Date;
(v) any Environmental Liability whatsoever arising out of,
related to, or otherwise associated with the Release of fuel oil from the
Ryceville-Piney Point Pipeline described in Schedule 5.10(a);
(vi) (A) all wages, overtime, employment taxes, workers
compensation benefits, occupational safety and health liabilities or other
similar liabilities and obligations in respect of Transferred Employees to the
extent arising or accruing prior to the Closing Date and (B) all other
liabilities and obligations with respect to the Transferred Employees for
which Seller is responsible pursuant to Article IX;
(vii) any liabilities and obligations (A) in respect of any
personal injury or property damage claim (other than any Environmental
Liabilities which are Assumed Obligations pursuant to Section 2.2(a)(iii)
above) relating to the Auctioned Assets arising or occurring prior to the
Closing Date, or (B) in respect of any discrimination, wrongful discharge or
unfair labor practice claim by any Transferred Employee arising out of or
relating to acts or omissions of Seller prior to the Closing Date;
(viii) any liabilities and obligations, with respect to periods
prior to the Closing Date, for the Prorated Items, calculated as set forth in
Section 2.3(a)(viii);
(ix) any liabilities and obligations in respect of Taxes (other
than as provided for by Section 2.3(b)(viii)) attributable to the Auctioned
Assets or trades or businesses associated with the Auctioned Assets arising or
accruing during taxable periods (or portions thereof) ending before the
Closing Date; and
(x) any liabilities and obligations of Seller under the Ancillary
Agreements in respect of the Retained Assets.
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SECTION 2.4 Third Party Consents.
(a) Notwithstanding Section 2.2(a)(ii), (iii) or (iv), to the
extent that Seller's rights under any Contract or warranty may not be assigned
without the consent of another person which consent has not been obtained,
this Agreement shall not constitute an agreement to assign the same if an
attempted assignment would constitute a breach thereof or be unlawful, and
Seller, at its expense, shall use its reasonable best efforts to obtain prior
to the Closing any such required consents with respect to any Material
Contracts or material warranties.
(b) Seller and Buyer agree that if any consent to an assignment
of any such Material Contract or material warranty shall not be obtained or if
any attempted assignment would in Seller's reasonable opinion be ineffective
or would impair any material rights and obligations of Buyer under such
Material Contract or material warranty, as applicable, so that Buyer would not
in effect acquire the benefit of all such rights and obligations, Seller, to
the maximum extent permitted by law and such Material Contract or material
warranty, as applicable, shall after the Closing appoint Buyer to be Seller's
representative and agent with respect to such Material Contract or material
warranty, as applicable, and Seller shall, to the maximum extent permitted by
law and such Material Contract or material warranty, as applicable, enter into
such reasonable arrangements with Buyer as are necessary to provide Buyer with
the benefits and obligations of such Material Contract or material warranty,
as applicable. Notwithstanding any of the foregoing, in the event that Seller
is unable to obtain a consent from a Power Seller to an assignment of a PPA,
such PPA shall be governed by Section II of Schedule 2.4 attached hereto.
Seller and Buyer shall cooperate and shall each use their reasonable best
efforts after the Closing to obtain an assignment of each such Material
Contract or material warranty, as applicable, to Buyer.
ARTICLE III
Purchase Price
SECTION 3.1 Purchase Price. Subject to adjustment pursuant to
Sections 3.2 and 3.4, the amount payable by Buyer to Seller for the Auctioned
Assets shall be the sum of (a) Two Billion Six Hundred Fifty Million Dollars
($2,650,000,000.00) (the "Purchase Price"), (b) an amount equal to the Final
Fuel Related Adjustment Amount, (c) an amount equal to the Final Non-Fuel
Related Adjustment Amount, and (d) an amount expended by Seller between the
date hereof and the Closing Date for Permitted Capital Expenditures pursuant
to Section 7.1(b)(viii).
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SECTION 3.2 Certain Post-Closing Adjustments.
(a) Within 60 Business Days after the last day of the month in
which Closing occurs, Seller shall prepare and deliver to Buyer a statement
(an "Adjustment Statement") which reflects (i) the book cost, as reflected on
the books of Seller as of the Closing Date, of all inventories, materials,
spare parts and supplies (excluding any fuel supplies) included in the
Auctioned Assets (the "Final Non-Fuel Related Adjustment Amount") and (ii) the
book value, as determined using Seller's historical weighted average method,
of all fuel supplies included in the Auctioned Assets (the "Final Fuel Related
Adjustment Amount"). The Final Fuel Related Adjustment Amount will be based
on the actual fuel inventory on the Closing Date, and the Final Non-Fuel
Related Adjustment Amount will be based on an inventory survey conducted
within 30 Business Days prior to the Closing Date, in each case, consistent
with the inventory procedures of Seller in effect as of the date of this
Agreement (the "Inventory Survey"). Seller will permit an employee, or
representative, of Buyer to observe the Inventory Survey. The Adjustment
Statement shall be prepared using (i) GAAP and (ii) with respect to the Final
Non-Fuel Related Adjustment Amount the same system average price that Seller
has historically used to calculate the book cost of its supplies, materials
and spare parts inventory. Buyer agrees to cooperate with Seller in
connection with the preparation of the Adjustment Statement and related
information, and shall provide to Seller such access, books, records and
information as may be reasonably requested from time to time.
(b) Buyer may dispute the quantity delivered or quality of any
inventory item shown on the Adjustment Statement, or the mathematical
calculations reflected therein, by notifying Seller in writing of the disputed
amount, and the basis of such dispute, within 20 Business Days of Buyer's
receipt of the Adjustment Statement; provided, however, that in respect of the
quality of any inventory item, Buyer may not dispute Seller's normal and
customary methods for accounting for excess inventory. Buyer shall have no
right to dispute any other matter in respect of the Adjustment Statement,
including historical system average price used to calculate the book cost of
the inventory and the Final Non-Fuel Related Adjustment Amount or the
appropriateness, under GAAP or otherwise, of using such historical system
average price to determine the book cost of any particular item of inventory.
In the event of a dispute with respect to the quantity or quality of any
inventory item shown on the Adjustment Statement, or the mathematical
calculations reflected therein, Buyer and Seller shall attempt to reconcile
their differences and any resolution by them as to any disputed amounts shall
be final, binding and conclusive on the Parties. If Buyer and Seller are
unable to reach a resolution of such differences within 20 Business Days of
receipt of Buyer's written notice of dispute to Seller, Buyer and Seller shall
submit the amounts remaining in dispute for determination and resolution to
KPMG Peat Marwick or any other accounting firm of recognized national standing
<PAGE>
reasonably acceptable to Seller and Buyer (the "Accountants"), which shall be
instructed to determine and report to the Parties, within 20 Business Days
after such submission, upon such remaining disputed amounts, and such report
shall be final, binding and conclusive on the Parties with respect to the
amounts disputed. Buyer and Seller shall each pay an amount, if any, equal to
that percentage of the fees and disbursements of the Accountants incurred in
connection with the resolution of such disputed amounts that corresponds to
the percentage of disputed amounts awarded to the other Party by the
Accountants hereunder.
(c) For purposes of this Agreement, the "Closing Adjustment
Amount" shall be the sum of (A) the amount of the Final Non-Fuel Related
Adjustment Amount, and (B) the amount of the Final Fuel Related Adjustment
Amount minus (ii) the amount of the Estimated Non-Fuel Related Adjustment
Amount. If the Closing Adjustment Amount is a positive number, then on the
Adjustment Date (as defined below), Buyer shall pay to Seller the amount of
such positive number. If the Closing Adjustment Amount is a negative number,
then on the Adjustment Date, Seller shall pay to Buyer the amount of such
negative number. For purposes of this Agreement, the "Adjustment Date" means
(1) if Buyer does not disagree in any respect with the Adjustment Statement,
the 23rd Business Day following Buyer's receipt of the Adjustment Statement or
(2) if Buyer shall disagree in any respect with the Adjustment Statement, the
third Business Day following either the resolution of such disagreement by the
Parties or a final determination by the Accountants in accordance with Section
3.2(b). Any amount paid under this Section 3.2(c) shall be paid with interest
for the period commencing on the Closing Date up to but not including the date
of payment, calculated at the prime rate of The Chase Manhattan Bank in effect
on the Closing Date, and in cash by wire transfer of immediately available
funds.
SECTION 3.3 Allocation of Purchase Price. Buyer shall deliver to
Seller at Closing a preliminary allocation among the Auctioned Assets of the
amount payable by Buyer to Seller pursuant to Section 3.1 hereof, and, as soon
as practicable following the Closing (but in any event within 30 days
following the final determination of the Closing Adjustment Amount), Buyer
shall prepare and deliver to Seller a final allocation of the amount payable
by Buyer to Seller pursuant to Section 3.1 hereof, and the post-closing
adjustment pursuant to Section 3.2, among the Auctioned Assets (the
"Allocation"). The Allocation shall be consistent with Section 1060 of the
Code and the Treasury Regulations thereunder. Seller hereby agrees to accept
Buyer's Allocation unless Seller determines that such Allocation was not
prepared in accordance with Section 1060 of the Code and the regulations
thereunder ("Applicable Law"). If Seller so determines, Seller shall within
20 Business Days thereafter propose any changes necessary to cause the
Allocation to be prepared in accordance with Applicable Law. Within 10
<PAGE>
Business Days following delivery of such proposed changes, Buyer shall provide
Seller with a statement of any objections to such proposed changes, together
with a reasonably detailed explanation of the reasons therefor. If Buyer and
Seller are unable to resolve any disputed objections within 10 Business Days
thereafter, such objections shall be referred to the Accountants, whose review
will be limited to whether Buyer's Allocation of such disputed items regarding
the Allocation was prepared in accordance with Applicable Law. The
Accountants shall be instructed to deliver to Seller and Buyer a written
determination of the proper allocation of such disputed items within 20
Business Days. Such determination shall be conclusive and binding upon the
parties hereto for all purposes, and the Allocation shall be so adjusted (the
Allocation, including the adjustment, if any, to be referred to as the "Final
Allocation"). Fees and disbursements of the Accountants attributable to the
Allocation shall be shared by Buyer and Seller on the basis of their
respective percentages of the disputed items which were allocated by the
Accountants to the other Party hereunder. Each of Buyer and Seller agrees to
timely file Internal Revenue Service Form 8594, and all Federal, state, local
and foreign Tax Returns, in accordance with such Final Allocation and to
report the transactions contemplated by this Agreement for Federal Income Tax
and all other tax purposes in a manner consistent with the Final Allocation.
Each of Buyer and Seller agrees to promptly provide the other party with any
additional information and reasonable assistance required to complete Form
8594, or compute Taxes arising in connection with (or otherwise affected by)
the transactions contemplated hereunder. Each of Buyer and Seller shall
timely notify the other Party and each shall timely provide the other Party
with reasonable assistance in the event of an examination, audit or other
proceeding regarding the Final Allocation.
SECTION 3.4 PPA-Related Purchase Price Adjustments.
(a) In the event Closing occurs hereunder with respect to the
Auctioned Assets other than the Panda PPA as contemplated by Section 4.1,
(i) at the Closing, Buyer shall deposit Two Hundred Fifty-Nine
Million Eight Hundred Twenty-Seven Thousand Dollars ($259,827,000.00) in
immediately available funds in an interest-bearing escrow account pursuant to
an escrow agreement mutually satisfactory to the Parties, providing for the
release to Seller of the remaining balance of such escrow account after the
release, if any, to Buyer pursuant to Section 3.4(a)(ii) (together with all
earnings on such remaining balance) upon the earlier to occur of completion of
the post-Closing consummation of this Agreement with respect to the Panda PPA
(the "Panda Release") or the twelve (12) month period following the Closing
<PAGE>
(after which the Panda PPA shall no longer be an "Assigned Contract" under
Schedule 2.2(a)(iv)) ; and
(ii) at the time of the Panda Release, subject to Section 3.4(b),
the escrow agent shall release to Buyer the funds deposited in the escrow
account described in Section 3.4(a)(i) (together with all earnings on the
principal released).
(b) In the event the Closing or the Panda Release occurs after
October 31, 2000, Buyer shall pay Seller at Closing or at the time of the
Panda Release, as applicable, by wire transfer of immediately available funds
(or in the case of the Panda Release, the escrow agent shall reduce the amount
released to Buyer pursuant to Section 3.4(a)(ii) above by) an amount in United
States Dollars equal to One Million Two Hundred Thousand Dollars
($1,200,000.00) per month with respect to the Panda PPA, and Two Million Seven
Hundred Thousand Dollars ($2,700,000.00) per month with respect to the OE PPA,
as applicable, (the "Adjustment Amounts") for each calendar month (prorated
for any portion of a calendar month) occurring between October 31, 2000 and
the Closing Date or the time of the Panda Release, as applicable. In the event
that the Panda Release does not occur within the twelve (12) month period
described in Section 3.4(a)(i), the escrow agent shall release to Seller the
entire amount in such escrow account (together with all earnings thereon).
The foregoing amounts shall be adjustments to the Purchase Price.
ARTICLE IV
The Closing
SECTION 4.1 Time and Place of Closing.
(a) Upon the terms and subject to the satisfaction of the
conditions contained in Article VIII, the closing of the sale of the Auctioned
Assets contemplated by this Agreement (the "Closing") will take place on such
date as the Parties may agree, which date shall be as soon as practicable, but
no later than ten Business Days, following the date on which all of the
conditions set forth in Article VIII have been satisfied or waived, at the
Washington, D.C. offices of Dickstein Shapiro Morin & Oshinsky LLP, or at such
other place or time as the Parties may agree. Notwithstanding the foregoing,
in the event all conditions set forth in Article VIII are satisfied other than
the condition set forth in Section 8.3(h), Closing will take place with
respect to all of the Auctioned Assets as set forth above, provided, however,
the Panda Release shall occur only upon satisfaction or waiver of the
condition set forth in Section 8.3(h) (which condition may only be waived by
Seller if the MDPSC has either issued an order determining that the Panda
<PAGE>
Release does not violate the Panda PPA or dismissed the proceeding listed at
Item 1 of Schedule 5.8). The date and time at which the Closing actually
occurs is hereinafter referred to as the "Closing Date".
(b) The Parties agree that in the event there is a post-Closing
Panda Release, the effect hereunder shall be limited to (i) the Purchase Price
adjustments and other payments contemplated by Section 3.4; (ii) delivery by
the Parties at the time of the Panda Release of a Novation or other
instruments of assignment and assumption in respect of the Panda PPA, or an
acknowledgement of the applicability as of the time of the Panda Release of
the provisions of Section II of Schedule 2.4 hereto to the Panda PPA; (iii)
exclusion of the Panda PPA from the scope of all representations, warranties
and opinions delivered at Closing (which representations, warranties and
opinions as to the Panda PPA will be required to be delivered at the time of
the Panda Release); and (iv) references in this Agreement and the Ancillary
Agreements to the Closing Date relating to the Panda PPA shall be deemed
references to the date of the Panda Release.
SECTION 4.2 Payment of Estimated Purchase Price. (a) At the
Closing, Buyer will pay or cause to be paid to Seller by wire transfer of
immediately available funds to an account previously designated in writing by
Seller an amount in United States dollars equal to the sum of (a) Two Billion
Six Hundred Fifty Million Dollars ($2,650,000,000.00), (b) an amount equal to
the Estimated Non-Fuel Related Adjustment Amount, (c) an amount expended by
Seller between the date hereof and the Closing Date for Permitted Capital
Expenditures pursuant to Section 7.1(b)(viii) (the "Estimated Purchase
Price"). In addition, at the Closing, Buyer will promptly pay Seller an
amount equal to the Closing Severance Expenses, as contemplated by Section
2.3(a)(x) hereof.
(b) At least 5 Business Days prior to the Closing Date, Seller
shall provide to Buyer its good faith estimate of the Final Non-Fuel Related
Adjustment Amount as of the last day of the month preceding the Closing Date,
which estimate shall be certified in writing by an appropriate officer of
Seller (the "Estimated Non-Fuel Related Adjustment Amount"). On or before the
Closing Date, Seller shall provide to Buyer a report which details the amounts
expended by Seller between the date hereof and the Closing Date for Permitted
Capital Expenditures pursuant to Section 7.1(b)(viii) (the "Permitted Capital
Expenditure Report").
ARTICLE V
Representations and Warranties of Seller
Seller represents and warrants to Buyer as follows:
<PAGE>
SECTION 5.1 Organization; Qualification. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Virginia and the District of Columbia and has all requisite
corporate power and authority to own, lease and operate the Auctioned Assets
and to carry on the business of the Auctioned Assets as currently conducted.
SECTION 5.2 Authority Relative to This Agreement. Seller has all
necessary corporate power and authority to execute and deliver this Agreement
and the Ancillary Agreements and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by Seller of this Agreement
and the Ancillary Agreements and the consummation by Seller of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of Seller or by a committee thereof to
whom such authority has been delegated and no other corporate proceedings on
the part of Seller are necessary to authorize this Agreement or the Ancillary
Agreements or the consummation of the transactions contemplated hereby or
thereby. This Agreement and the Ancillary Agreements have been duly and
validly executed and delivered by Seller and, assuming that this Agreement and
the Ancillary Agreements constitute valid and binding agreements of Buyer and
each other party thereto, subject to the receipt of the Seller Required
Regulatory Approvals and the Buyer Required Regulatory Approvals, constitute
valid and binding agreements of Seller, enforceable against Seller in
accordance with their respective terms.
SECTION 5.3 Consents and Approvals; No Violation.
(a) Subject to obtaining the Seller Required Regulatory
Approvals and the Buyer Required Regulatory Approvals, neither the execution
and delivery of this Agreement or the Ancillary Agreements by Seller nor the
consummation of the transactions contemplated hereby or thereby or the sale by
Seller of the Auctioned Assets pursuant to this Agreement will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-laws of Seller, (ii) except as set forth on Schedule
5.3(a), result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement, lease or other
instrument or obligation to which Seller is a party or by which Seller, or any
of the Auctioned Assets, may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which would not, individually or in the
aggregate, create a Material Adverse Effect, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Seller, or the
Auctioned Assets, except for such violations which would not, individually or
in the aggregate, create a Material Adverse Effect.
<PAGE>
(b) Except for (i) the filings by Seller and Buyer required by
the HSR Act and the expiration or earlier termination of all waiting periods
under the HSR Act, and (ii) the Required Regulatory Approvals set forth on
Schedule 5.3(b) attached hereto (collectively, the "Seller Required Regulatory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is necessary
for the consummation by Seller of the transactions contemplated hereby or by
the Ancillary Agreements, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals (A) which, if
not obtained or made, would not individually or in the aggregate, create a
Material Adverse Effect or (B) which relate to the Transferable Permits.
SECTION 5.4 Personal Property. Except for Permitted Exceptions,
Seller has good and marketable title, free and clear of all Encumbrances, to
all personal property included in the Auctioned Assets.
SECTION 5.5 Real Estate. Except for Permitted Exceptions, Seller
has good and marketable title, free and clear of all Encumbrances, to all
Buyer Real Estate. Schedule 5.5(a) contains legal descriptions of the Buyer
Real Estate. The most recent real property surveys in the possession of Seller
with respect to the Buyer Real Estate or any portion thereof are listed on
Schedule 5.5(b).
SECTION 5.6 Leases. As of the date of this Agreement, Seller is
not a tenant under any real property leases which are material to the
Auctioned Assets.
SECTION 5.7 Certain Contracts and Arrangements. (a) Except for
(i) any contract or agreement listed on Schedule 2.2(a)(iv) (the "Material
Contracts") and (ii) Contracts which will expire prior to the Closing Date or
that are permitted to be entered into under this Agreement, Seller is not a
party to any contract which is material to the business or operations of the
Auctioned Assets.
(b) Each Contract (i) constitutes a valid and binding obligation
of Seller, and, to the Knowledge of Seller, of the other parties thereto, and
(ii) to the Knowledge of Seller, is in full force and effect.
(c) Except as set forth on Schedule 5.7 attached hereto, to the
Knowledge of the Seller, there is not, under any of the Contracts, any default
or event which, with notice or lapse of time or both, would constitute a
material default by Seller, except for such events of default and other events
as to which requisite waivers or consents have been obtained or which would
not, individually or in the aggregate, create a Material Adverse Effect.
SECTION 5.8 Legal Proceedings. Except as set forth on Schedule
5.8 or in the Filed Seller SEC Documents, as of the date of this Agreement,
there are no claims, actions, proceedings or investigations pending or, to the
<PAGE>
Knowledge of Seller, threatened against or relating to Seller with respect to
the business or operations of the Auctioned Assets, before any Governmental
Authority which would, individually or in the aggregate, be reasonably
expected to create a Material Adverse Effect. With respect to the business or
operations of the Auctioned Assets, Seller is not, as of the date of this
Agreement, subject to any outstanding judgment, rule, order, writ, injunction
or decree of any Governmental Authority which could create a Material Adverse
Effect. The representations and warranties of Seller set forth in this
Section 5.8 shall not apply to, and do not cover, any environmental matters
which, with respect to any representations and warranties of Seller, are
exclusively governed by Section 5.10.
SECTION 5.9 Permits; Compliance with Law. Except as set forth on
Schedule 5.9 or in the Filed Seller SEC Documents, Seller is in current
compliance with all Permits necessary to conduct the business and operations
of the Auctioned Assets as currently conducted, and, to the Knowledge of
Seller, Seller is otherwise in current compliance with all laws, statutes,
orders, rules, regulations, ordinances or judgments of any Governmental
Authority applicable to the business and operations of the Auctioned Assets,
except for such failures to comply with such Permits, or such failures to be
in compliance with such laws, statutes, orders, rules, regulations, ordinances
or judgments, which would not, individually or in the aggregate, create a
Material Adverse Effect. The representations and warranties of Seller set
forth in this Section 5.9 shall not apply to, and do not cover, any
environmental matters which, with respect to any representations and
warranties of Seller, are exclusively governed by Section 5.10.
SECTION 5.10 Environmental Matters.
(a) Except as set forth in Schedule 5.10(a) or disclosed in the
Filed Seller SEC Documents, Seller holds, and is in compliance with all
Environmental Permits required for Seller to conduct the business and
operations of the Auctioned Assets as currently conducted under applicable
Environmental Laws, and, to the Knowledge of Seller, Seller is otherwise in
current compliance with all applicable Environmental Laws on the date hereof
with respect to the business and operations of the Auctioned Assets, except
for such failures to hold or comply with such Environmental Permits, or such
failures to be in compliance with such applicable Environmental Laws on the
date hereof, which would not, individually or in the aggregate, create a
Material Adverse Effect.
(b) Except as set forth in Schedule 5.10(b) or disclosed in the
Filed Seller SEC Documents, Seller has not received any written notice of a
violation of any Environmental Law, or been notified that it is a potentially
responsible party under the Federal Comprehensive Environmental Response,
Compensation, and Liability Act or any similar state law with respect to any
real property included in the
<PAGE>
Buyer Real Estate or any Off-Site location, except for such matters under such
Environmental Laws as would not, individually or in the aggregate, create a
Material Adverse Effect.
(c) To the Knowledge of Seller, no Release of Hazardous
Substances has occurred at, from, in, on, or under the real property included
in the Buyer Real Estate that has given, or could give rise to Environmental
Liabilities under Environmental Laws, except for such Environmental
Liabilities which (i) are disclosed in the environmental reports set forth on
Schedule 5.10(c) attached hereto, or (ii) would not, individually or in the
aggregate, have a Material Adverse Effect.
For purposes of the representations and warranties made in this Article V, the
Seller specifically disclaims any representations and warranties with respect
to standards of performance for new stationary sources promulgated under
Section 111 of the Federal Clean Air Act, 42 U.S.C. Section 7411. The
representations and warranties made in this Section 5.10 are the exclusive
representations and warranties of the Seller relating to environmental matters
as of the date hereof.
SECTION 5.11 Labor Matters. Seller has previously made
available to Buyer copies of all collective bargaining agreements to which
Seller is a party or is subject and which relate to the business or operations
of the Auctioned Assets. With respect to the business and operations of the
Auctioned Assets, as of the date of this Agreement, (a) Seller is in
compliance with all applicable laws regarding employment and employment
practices, terms and conditions of employment and wages and hours, (b) Seller
has not received written notice of any unfair labor practice complaint against
Seller pending before the National Labor Relations Board, (c) there is no
labor strike, slowdown or stoppage actually pending or, to the Knowledge of
Seller, threatened against or affecting Seller, (d) Seller has not received
notice that any representation petition respecting the employees of Seller has
been filed with the National Labor Relations Board, (e) no arbitration
proceeding arising out of or under collective bargaining agreements is pending
against Seller and (f) Seller has not experienced any primary work stoppage
since December 31, 1998, except, in the case of each of the foregoing clauses,
for such matters as would not, individually or in the aggregate, create a
Material Adverse Effect.
SECTION 5.12 ERISA; Benefit Plans. Schedule 5.12 sets forth
a list of all material deferred compensation, profit-sharing, retirement and
pension plans and all material bonus and other material employee benefit or
fringe benefit plans maintained, or with respect to which contributions have
been made, by Seller with respect to current or former employees employed in
connection with the power generation operations of the Generating Facilities
(collectively, "Benefit Plans").
<PAGE>
Seller and each trade or business (whether or not incorporated) which are or
have ever been under common control, or which are or have ever been treated as
a single employer, with Seller under Section 414(b), (c), (m) or (o) of the
Code (an "ERISA Affiliate") have fulfilled their respective obligations under
the minimum funding requirements of Section 302 of ERISA, and Section 412 of
the Code, with respect to each Benefit Plan which is an "employee pension
benefit plan" as defined in Section 3(2) of ERISA and each such plan is in
compliance in all respects with the presently applicable provisions of ERISA
and the Code, except for such failures to fulfill such obligations or comply
with such provisions which would not, individually or in the aggregate, create
a Material Adverse Effect. Neither Seller nor any ERISA Affiliate has
incurred any liability under Section 4062(b) of ERISA, or any withdrawal
liability under Section 4201 of ERISA, to the Pension Benefit Guaranty
Corporation in connection with any Benefit Plan which is subject to Title IV
of ERISA which liability remains outstanding, and there has not been any
reportable event (as defined in Section 4043 of ERISA) with respect to any
such Benefit Plan (other than a reportable event with respect to which the
30-day notice requirement has been waived by the PBGC). Neither Seller nor
any ERISA Affiliate or parent corporation, within the meaning of Section
4069(b) or Section 4212(c) of ERISA, has engaged in any transaction, within
the meaning of Section 4069(b) or Section 4212(c) of ERISA. No Benefit Plan
and no "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
maintained by Seller or any ERISA Affiliate or to which Seller or any ERISA
Affiliate has contributed is a multiemployer plan.
SECTION 5.13 Taxes. With respect to the Auctioned Assets and
trades or businesses associated with the Auctioned Assets, (a) all Tax Returns
required to be filed have been filed and (b) all Taxes shown to be due on such
Tax Returns, and all Taxes otherwise owed, have been paid in full, except to
the extent that any failure to file or any failure to pay any Taxes would not,
individually or in the aggregate, create a Material Adverse Effect. No written
notice of deficiency or assessment has been received from any taxing authority
with respect to liabilities for Taxes of Seller in respect of the Auctioned
Assets which has not been fully paid or finally settled or which is not being
contested in good faith through appropriate proceedings, except for any such
notices regarding Taxes which would not, individually or in the aggregate,
create a Material Adverse Effect. There are no outstanding agreements or
waivers extending the applicable statutory periods of limitation for Taxes
associated with the Auctioned Assets for any period, except for any such
agreements or waivers which would not, individually or in the aggregate,
create a Material Adverse Effect.
SECTION 5.14 Undisclosed Liabilities. With respect to the
Auctioned Assets, there are no liabilities or obligations of any nature or
kind (absolute, accrued, contingent or otherwise) that would have been
required to be set forth on a balance sheet in respect of the Auctioned Assets
or in the notes thereto prepared in
<PAGE>
accordance with GAAP, as applied by Seller in connection with its December 31,
1999 balance sheet, except for any such liabilities or obligations which (a)
are disclosed in or contemplated or permitted by this Agreement or the
Ancillary Agreements (including the Assumed Obligations), (b) are disclosed in
the Information Memorandum, (c) are disclosed in the Filed Seller SEC
Documents, (d) have been incurred in the ordinary course of business, or (e)
which would not, individually or in the aggregate, create a Material Adverse
Effect.
SECTION 5.15 Brokers. No broker, finder or other person is
entitled to any brokerage fees, commissions or finder's fees in connection
with the transaction contemplated hereby by reason of any action taken by
Seller, except Navigant Consulting, Inc. and Merrill Lynch & Co., which are
acting for and at the expense of Seller.
SECTION 5.16 Insurance. Seller carries policies of insurance
covering fire, workers' compensation, property all-risk, comprehensive bodily
injury, property damage liability, automobile liability, product liability,
completed operations, explosion, collapse, contractual liability, personal
injury liability and other forms of insurance relating to the Auctioned
Assets, or otherwise self-insures in accordance with all statutory and
regulatory criteria against any such liabilities, which insurance is in such
amounts, has such deductibles and retentions and is underwritten by such
companies as would be obtained by a reasonably prudent electric power
business.
SECTION 5.17 Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE V, THE AUCTIONED ASSETS ARE
BEING SOLD AND TRANSFERRED "AS IS, WHERE IS", AND SELLER IS NOT MAKING ANY
OTHER REPRESENTATIONS OR WARRANTIES WRITTEN OR ORAL, STATUTORY, EXPRESS OR
IMPLIED, CONCERNING SUCH AUCTIONED ASSETS (INCLUDING ANY RELATING TO
LIABILITIES, OPERATIONS OF THE GENERATING FACILITIES, CONDITION, VALUE OR
QUALITY OF THE AUCTIONED ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE),
RISKS OR OTHER INCIDENTS OF THE AUCTIONED ASSETS) OR WITH RESPECT TO THIS
AGREEMENT OR THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY. SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH
RESPECT TO THE AUCTIONED ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR
COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF ANY
GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED
<PAGE>
TO ANY ENVIRONMENTAL LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL
PROPERTY OR PERSONAL PROPERTY TO OPERATE THE AUCTIONED ASSETS. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN SECTION 5.10 HEREOF, SELLER FURTHER
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF
HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING UNDER
ENVIRONMENTAL LAWS WITH RESPECT TO THE AUCTIONED ASSETS, ALL OF WHICH ARE
HEREBY EXPRESSLY WAIVED BY BUYER. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE
INFORMATION SET FORTH IN, OR CONTEMPLATED BY, THE INFORMATION MEMORANDUM.
ARTICLE VI
Representations and Warranties of Buyer
Buyer represents and warrants to Seller as follows:
SECTION 6.1 Organization. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as is now being
conducted.
SECTION 6.2 Authority Relative to This Agreement. Buyer has
all necessary corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is party and to consummate
the transactions contemplated hereby and thereby. The execution and delivery
by Buyer of this Agreement and such Ancillary Agreements and the consummation
by Buyer of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of Buyer and no other
corporate proceedings on the part of Buyer are necessary to authorize this
Agreement or such Ancillary Agreements or the consummation of the transactions
contemplated hereby or thereby. This Agreement and such Ancillary Agreements
have been duly and validly executed and delivered by Buyer and, assuming that
this Agreement and the Ancillary Agreements constitute valid and binding
agreements of Seller and each other party thereto, subject to the receipt of
the Buyer Required Regulatory Approvals and the Seller Required Regulatory
Approvals, this Agreement and the Ancillary Agreements constitute valid and
binding agreements of Buyer, enforceable against Buyer in accordance with
their respective terms.
SECTION 6.3 Consents and Approvals; No Violation.
<PAGE>
(a) Subject to obtaining the Buyer Required Regulatory Approvals
and the Seller Required Regulatory Approvals, neither the execution and
delivery of this Agreement or the Ancillary Agreements to which it is party by
Buyer nor the consummation of the transactions contemplated hereby or thereby
or the purchase by Buyer of the Auctioned Assets pursuant to this Agreement
will (i) conflict with or result in any breach of any provision of the
[Organizational Documents] of Buyer, (ii) result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which Buyer or
any of its subsidiaries is a party or by which any of their respective assets
may be bound or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Buyer, or any of its assets, except, in the
case of clause (ii) and (iii), for such failures to obtain a necessary
consent, defaults and violations which would not, individually or in the
aggregate, have a Buyer Material Adverse Effect.
(b) Except for (i) the filings by Buyer and Seller required by
the HSR Act and the expiration or earlier termination of all waiting periods
under the HSR Act, and (ii) the Required Regulatory Approvals set forth on
Schedule 6.3(b) attached hereto (collectively, the "Buyer Required Regulatory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is necessary
for the consummation by Buyer of the transactions contemplated hereby or by
the Ancillary Agreements, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which relate to
the Transferable Permits.
SECTION 6.4 Availability of Funds. Buyer has sufficient
funds available to it or has received binding written commitments (copies of
which have heretofore been delivered to Seller) from one or more nationally
recognized financial institutions to provide sufficient funds on the Closing
Date to pay the Estimated Purchase Price.
SECTION 6.5 Brokers. No broker, finder or other person is
entitled to any brokerage fees, commissions or finder's fees in connection
with the transaction contemplated hereby by reason of any action taken by
Buyer, except Credit Suisse First Boston Corporation, which is acting for and
at the expense of Buyer.
SECTION 6.6 No Knowledge of Seller's Breach. Buyer has no
Knowledge of any breach by Seller of any representation or warranty of Seller,
or of any other condition or circumstance that would excuse Buyer from its
timely performance of its obligations hereunder. Buyer shall notify promptly
Seller, with respect to Seller's representations and warranties or such other
conditions or
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circumstances, if any such information comes to Buyer's attention prior to the
Closing.
SECTION 6.7 Qualified Buyer. Buyer is qualified to obtain
any Permits and Environmental Permits necessary for Buyer to own and operate
the Auctioned Assets as of the Closing Date. Without limiting the foregoing,
Buyer is not aware of any reason or circumstance that would prevent Buyer from
procuring the Buyer Required Regulatory Approvals.
SECTION 6.8 WARN Act. Buyer does not intend to engage in a
"Plant Closing" or "Mass Lay-off" as such terms are defined in the WARN Act
within sixty days of the Closing Date.
SECTION 6.9 Financial Representations. Buyer has provided
Seller with the most recent balance sheet, income statement and statement of
changes in cash flows and independent auditors reports for each of the
preceding three fiscal years and most recent interim period. Such financial
statements have been prepared in accordance with GAAP and fairly reflect the
financial position and results of operations of Buyer as at and for the
periods therein.
SECTION 6.10 Legal Proceedings. There are no claims,
actions, proceedings or investigations pending or, to the Knowledge of Buyer
threatened against or relating to Buyer before any Governmental Authority
which would, individually or in the aggregate, be reasonably expected to
create a Buyer Material Adverse Effect. Buyer is not subject to any
outstanding judgment, rule, order, writ, injunction or decree of any
Governmental Authority which could create a Buyer Material Adverse Effect.
ARTICLE VII
Covenants of the Parties
SECTION 7.1 Conduct of Business Relating to the Auctioned
Assets.
(a) Except with the prior written consent of Buyer (such consent
not to be unreasonably withheld) or as required to effect the purchase and
sale of the Auctioned Assets and related transactions contemplated by this
Agreement, during the period from the date of this Agreement to the Closing
Date, Seller will operate the Auctioned Assets in the usual, regular and
ordinary course and in accordance with Good Utility Practices, and continue to
pay accounts payable which relate to the Auctioned Assets in a timely manner,
consistent with past practice.
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(b) Notwithstanding the foregoing, except as contemplated in
this Agreement or the Ancillary Agreements, prior to the Closing Date, without
the prior written consent of Buyer (such consent not to be unreasonably
withheld), Seller will not:
(i) except for Permitted Exceptions, grant any Encumbrance on
the Auctioned Assets securing any indebtedness for borrowed money or guarantee
or other liability for the obligations of any Person;
(ii) make any material change in the levels of fuel inventory and
supplies, materials and spare parts inventory customarily maintained by Seller
with respect to the Auctioned Assets, other than consistent with past
practice;
(iii) sell, lease (as lessor), transfer or otherwise dispose of,
any of the Auctioned Assets, other than assets that become obsolete or assets
used, consumed or replaced in the ordinary course of business consistent with
past practice;
(iv) except as contemplated by Sections 7.9 and 7.17 with respect
to the Unassigned PPAs, terminate, materially extend or otherwise materially
amend any of the Material Contracts (other than in accordance with their
respective terms) or waive any default by, or release, settle or compromise
any material claim against, any other party thereto;
(v) amend any of the Transferable Permits, other than (A)
Transferable Permits not material to the operations of the Auctioned Assets as
currently conducted, (B) as reasonably necessary to complete the transfer of
Transferable Permits as contemplated hereby, and (C) routine renewals or
non-material modifications or amendments;
(vi) enter into any Contract for the purchase, sale or storage of
fuel (other than in the ordinary course of business) with respect to the
Auctioned Assets (whether commodity or transportation) with a term in excess
of 12 months and not terminable on or before the Closing Date either (A)
automatically, or (B) by option of Seller (or, after the
<PAGE>
Closing, by Buyer) in its sole discretion, if the aggregate payments under
such commitment for fuel and all other outstanding commitments for fuel (not
previously approved by Buyer) would exceed $5,000,000;
(vii) except in the case of capital expenditures covered by clause
(viii) below, enter into any Contract with respect to the Auctioned Assets for
goods or services not addressed in clauses (i) through (vi) with a term in
excess of 12 months, if the aggregate future liability or receivable
outstanding on the date for measurement for the purpose of this covenant for
all such Contracts would be in excess of $1,000,000, not including any such
Contract terminable by notice of not more than 30 days without penalty or cost
(other than de minimis administrative costs); provided, however, that
notwithstanding any other provision of this Agreement to the contrary, Seller
may enter into any Contract reasonably necessary to effect the physical, legal
or operational separation of the sites on which the Auctioned Assets are
located or to otherwise implement the change of ownership contemplated hereby,
or subdivision, of such sites or implement the provisions of the Ancillary
Agreements;
(viii) make, or commit to make, any capital expenditures
except (A) those capital expenditures described on Schedule 7.1(b)(viii), (B)
those capital expenditures which do not exceed in the aggregate $2,000,000 (in
addition to those other capital expenditures permitted under this subsection
(viii)), (C) those capital expenditures which are approved by Buyer, or (D)
those capital expenditures which are mandated by a law or regulation of a
Governmental Authority; provided, however, that, in the case of clause (D),
Seller will not make any such mandated capital expenditures (unless the
failure by Seller to make such capital expenditures would have an adverse
impact upon the Auctioned Assets) if (y) such mandated capital expenditures
are not required to be made by Seller prior to the Closing Date, and (z) the
Buyer assumes responsibility, at its sole cost, to make such mandated capital
expenditures after the Closing (any capital expenditures described above are
the "Permitted Capital Expenditures");
<PAGE>
(ix) enter into any Contract with Affiliates of Seller the term
of which are not indicative of arms-length negotiations;
(x) (A) amend any Benefit Plans, or (B) grant any Employee an
increase in compensation, except in the ordinary course of business consistent
with past practice;
(xi) make any tax election with respect to the Auctioned Assets;
or
(xii) enter into any Contract with respect to the Auctioned Assets
relating to any of the transactions set forth in the foregoing clauses (i)
through (xi).
(c) Without limiting the generality of Sections 7.1(a) and (b),
to the extent Section 7.1(a) or (b) prohibits Seller from entering into any
Contract for goods and services in connection with maintenance or capital
expenditures, Buyer agrees that Seller may request Buyer's consent to enter
into such Contract, such consent not to be unreasonably withheld, and to the
extent Buyer so consents, all liabilities and obligations under such Contract
shall constitute Assumed Obligations and Buyer shall otherwise reimburse
Seller for all its expenditures thereunder.
(d) Notwithstanding anything in this Section 7.1 to the
contrary, Seller may take any action, incur any expense or enter into any
obligation with respect to the Auctioned Assets to the extent that (i) all
obligations and liabilities arising with respect thereto do not constitute
Assumed Obligations, (ii) such actions are at Seller's expense and are deemed
by Seller to be necessary, or (iii) Seller otherwise provides that such
obligations and liabilities shall not be assumed or retained by Buyer.
SECTION 7.2 Access to Information.
(a) Between the date of this Agreement and the Closing Date,
Seller will, subject to the Confidentiality Agreement, during ordinary
business hours and upon reasonable notice (i) give Buyer and its
representatives reasonable access to all books, records, personnel, plants,
offices and other facilities and properties constituting the Auctioned Assets,
including for the purpose of observing the operation by Seller of the
Auctioned Assets, (ii) permit Buyer to make such reasonable inspections
thereof as Buyer may reasonably request, (iii) furnish Buyer with
such financial and operating data and other information with respect to the
Auctioned Assets as Buyer may from time to time reasonably request, (iv)
furnish
<PAGE>
Buyer upon request a copy of each material report, schedule or other document
with respect to the Auctioned Assets filed by Seller with, or received by
Seller from, any PSC or FERC; provided, however, that (A) any such activities
shall be conducted in such a manner as not to interfere unreasonably with the
operation of the Auctioned Assets, (B) Seller shall not be required to take
any action which would constitute a waiver of the attorney-client privilege
and (C) Seller need not supply Buyer with (1) any information or access which
Seller is under a legal obligation not to supply or (2) any information which
Seller has previously supplied to Buyer. Notwithstanding anything in this
Section 7.2 to the contrary, (i) Seller will not be required to provide such
information or access to any employee records other than Transferred Employee
Records, (ii) Buyer shall not have the right to perform or conduct any
environmental sampling or testing at, in, on, around or underneath the
Auctioned Assets and (iii) Seller shall not be required to provide such access
or information with respect to any Retained Asset or Retained Liabilities.
(b) From and after the Closing Date, for a period of no less
than 7 years, Buyer shall retain all Operating Records (whether in electronic
form or otherwise) relating to the Auctioned Assets on or prior to the Closing
Date. Buyer also agrees that, from and after the Closing Date, Seller shall
have the right, upon reasonable request to Buyer, to have access to, or
receive from Buyer copies of, any Operating Records or other information in
Buyer's possession relating to the Auctioned Assets on or prior to the Closing
Date and required by Seller in order to comply with applicable law. Seller
shall reimburse Buyer for its reasonable costs and expenses incurred in
connection with the foregoing sentence. If the Buyer shall desire to dispose
of any Operating Records or other information contemplated above, Buyer shall,
prior to such disposition, give Seller a reasonable opportunity to segregate
and remove such records and information as it may select.
SECTION 7.3 Consents and Approvals; Transferable Permits.
(a) Seller and Buyer shall cooperate with each other and (i)
prepare and file (or otherwise effect) as soon as practicable all
applications, notices, petitions and filings with respect to and (ii) use
their reasonable best efforts to obtain (A) the Seller Required Regulatory
Approvals and the Buyer Required Regulatory Approvals and (B) any other
consents, approvals or authorizations of any other Governmental Authorities or
third parties that are necessary to consummate the transactions contemplated
by this Agreement or the Ancillary Agreements other than such consents,
individually or in the aggregate, create a Material Adverse Effect. Without
limiting the generality of the foregoing, (1) each Party agrees to, upon the
other party's request, support such other Party's applications for regulatory
approvals of the purchase and sale of the Auctioned Assets contemplated by
this Agreement, and (2) Buyer and Seller agree to defend any lawsuits or other
legal proceedings,
<PAGE>
whether judicial or administrative, challenging this Agreement or the
Ancillary Agreements, or the consummation of the transactions contemplated
hereby or thereby, including seeking to have any stay or temporary restraining
order entered by any Governmental Authority vacated or reversed.
(b) Upon execution of this Agreement, Seller shall commence the
process of transferring to Buyer the Transferable Permits, including
completing and filing applications and related documents with the appropriate
Governmental Authorities. Seller hereby reserves the right to modify, alter
or amend any Transferable Permit or to refuse to correct violations or
deficiencies in respect of any Transferable Permit as long as such
modification, alteration, amendment or refusal would not, individually or in
the aggregate, create a Material Adverse Effect.
(c) Seller shall use its reasonable best efforts to cooperate
with Buyer in the transfer of Transferable Permits to Buyer by Closing. If in
the sole discretion of Seller, the transfer of any Transferable Permit cannot
be completed by Closing, Buyer is hereby authorized, but not required, to act
as Seller's representative and agent in respect of such Transferable Permit
and to do all things necessary for effecting transfer of such Transferable
Permit as soon after the Closing as is practicable, with Seller remaining the
Transferable Permit "holder of record" in such case until such transfer is
completed. In the case of each such Transferable Permit, Seller shall, to the
maximum extent permitted by law and such Transferable Permit, enter into such
reasonable arrangements with Buyer as are necessary to provide Buyer with the
benefits and obligations of such Transferable Permit. If in the sole
discretion of Seller, Buyer is able to complete the transfer of any
Transferable Permit after Closing without the occurrence of any event that, if
such event had occurred between the execution of this Agreement and the
Closing, would have created, individually or in the aggregate, a Material
Adverse Effect, Seller may substitute Buyer in its place and stead as the
Party responsible for completing the transfer of such Transferable Permit.
SECTION 7.4 Further Assurances. Subject to the terms and
conditions of this Agreement, each of the Parties will use its reasonable best
efforts to take, or cause to be taken, as soon as possible, all action, and to
do, or cause to be done, as soon as possible, all things necessary, proper or
advisable under applicable laws and regulations to consummate the sale of the
Auctioned Assets pursuant to this Agreement as soon as possible, including
using its reasonable best efforts to ensure satisfaction of the conditions
precedent to each Party's obligations hereunder. Prior to Buyer's submission
of any application with a Governmental Authority for a regulatory approval,
Buyer shall submit such application to Seller for review and comment and
Buyer shall incorporate into such application any revisions reasonably
requested by Seller. Neither of the Parties will, without prior written
consent of the other Party, take or fail to take, or permit their respective
Affiliates to take or fail to
<PAGE>
take, any action, which would reasonably be expected to prevent or materially
impede, interfere with or delay the consummation, as soon as possible, of the
transactions contemplated by this Agreement or the Ancillary Agreements.
SECTION 7.5 Public Statements. The Parties shall consult
with each other prior to issuing any public announcement, statement or other
disclosure with respect to this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby, and shall not issue any such
public announcement, statement or other disclosure prior to such consultation,
except as may be required by law.
SECTION 7.6 Tax Matters.
(a) All transfer and sales taxes (including (i) sales tax on the
sale or purchase of the Auctioned Assets imposed by Governmental Authorities,
(ii) transfer tax on the conveyance of interest in real property imposed by
Governmental Authorities, and (iii) any petroleum business taxes and similar
excise taxes on sales of petroleum based products imposed by Governmental
Authorities) incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by Buyer. Buyer shall prepare and file in
a timely manner any and all Tax Returns or other documentation relating to
such taxes; provided, however, that, to the extent required by applicable law,
Seller will join in the execution of any such Tax Returns or other
documentation relating to any such taxes. Buyer shall provide to Seller
copies of each Tax Return described in the proviso in the preceding sentence
at least 30 days prior to the date such Tax Return is required to be filed.
(b) At Seller's election, but on no less than 10 Business Days'
notice to Buyer, the transfer of some or all of the Auctioned Assets and the
receipt of the amount payable by Buyer to Seller pursuant to Section 3.1
hereof shall be made through a qualified intermediary in a manner satisfying
the requirements of Treasury Regulation Section 1.1031(k)-1(g); provided,
however, that Seller shall pay and be responsible for any incremental costs
associated with such use of a qualified intermediary.
SECTION 7.7 Bulk Sales or Transfer Laws. Buyer acknowledges that
Seller will not comply with the provisions of any bulk sales or transfer laws
of any jurisdiction in connection with the transactions contemplated by this
Agreement. Buyer hereby waives compliance by Seller with the provisions of
the bulk sales or transfer laws of all applicable jurisdictions.
SECTION 7.8 Witness Services. At all times from and after the
Closing Date, each Party shall use reasonable best efforts to make available
to the other
<PAGE>
Party, upon reasonable written request, its and its subsidiaries' then current
or former officers, directors, employees (including former employees of
Seller) and agents as witnesses to the extent that (i) such persons may
reasonably be required by such requesting Party in connection with any claim,
action, proceeding or investigation in which such requesting Party may be
involved and (ii) there is no conflict between Buyer and Seller in such claim,
action, proceeding or investigation. Such other Party shall be entitled to
receive from such requesting Party, upon the presentation of invoices for such
witness services, payments for such amounts, relating to supplies,
disbursements and other out-of-pocket expenses and direct and indirect costs
of employees who are witnesses, as may be reasonably incurred in providing
such witness services.
SECTION 7.9 Control of Litigation. The Buyer and Seller
agree and acknowledge that Seller shall be entitled exclusively to control,
defend and settle any litigation, administrative or regulatory proceeding, and
any investigation or remediation activity arising out of or related to any
Unassigned PPAs, Retained Assets or Retained Liabilities, and Buyer agrees to
cooperate fully in connection therewith. Without Buyer's prior written
consent, Seller shall not settle any litigation, administrative or regulatory
proceeding relating to an Unassigned PPA that would result in a material
adverse effect on the rights of Buyer hereunder. Buyer and Seller agree and
acknowledge that Buyer shall be entitled to participate at its expense and
assume control of any litigation, administrative or regulatory proceeding,
exclusively arising out of or related to any Assumed Obligations, and Seller
agrees to cooperate fully in connection therewith. Anything contained in this
Agreement to the contrary notwithstanding, no Party shall be entitled to
assume the defense of any litigation, administrative or regulatory proceeding
or investigation if such litigation, administrative or regulatory proceeding
or investigation seeks an order, injunction or other equitable relief for
other than monetary damages against the other Party which, if successful,
would materially adversely affect the business of such other Party.
SECTION 7.10 Confidentiality. Buyer hereby agrees to comply
with its obligations to keep confidential certain information in accordance
with the terms set forth in the Confidentiality Agreement.
SECTION 7.11 Risk of Loss.
(a) Except as otherwise provided for in this Section 7.11, from
the date hereof through the Closing Date, all risk of loss or damage to the
assets and properties included in the Auctioned Assets shall be borne by
Seller (other than loss or damage caused by the acts or negligence of Buyer or
any of its employees, officers, agents or representatives, which loss or
damage shall be the responsibility of Buyer).
<PAGE>
(b) If, before the Closing Date, all or any portion of the
Auctioned Assets are (1) taken by eminent domain or are the subject of a
pending or (to the Knowledge of the Seller) contemplated taking which has not
been consummated, or (2) damaged or destroyed by fire or other casualty,
Seller shall notify Buyer promptly in writing of such fact. If the fair
market value of the Auctioned Assets that are the subject of, or are adversely
affected by, such taking or loss is one percent (1%) or less of the fair
market value of the Auctioned Assets (as estimated in good faith by Seller),
Buyer and Seller agree that such taking or loss shall not have any effect on
(or otherwise impede in any manner) the transactions contemplated hereby, and
Buyer shall be entitled to an assignment of all of Seller's right, title and
interest in and to any related award or insurance proceeds. If (1) the fair
market value of the Auctioned Assets that are the subject of, are adversely
affected by such taking or loss is in excess of one percent (1%) of the fair
market value of the Auctioned Assets (as estimated in good faith by Seller in
accordance with the preceding sentence) and (2) Seller has not notified Buyer
of its intention to cure such taking or loss within 30 days after its
occurrence, Buyer and Seller shall negotiate in good faith a fair and
equitable adjustment to the Purchase Price and, upon such settlement,
consummate the transactions contemplated by this Agreement pursuant to the
terms of this Agreement. If no such settlement is reached within 60 days
after Seller has notified Buyer of such taking or casualty, Buyer or Seller
may terminate this Agreement pursuant to Section 11.1.
SECTION 7.12 Tax Exempt Financing.
(a) Buyer understands and agrees that:
(i) those certain facilities of the Seller listed on Schedule
7.12 attached hereto (the "Exempt Facilities") have been financed, and
refinanced, in whole or in part, with the proceeds of the issuance and sale by
various Governmental Authorities of industrial development revenue bonds or
private activity bonds as set forth on Schedule 7.12 attached hereto
(collectively, the "Revenue Bonds") the interest on which, with certain
exceptions, is excluded from gross income for purposes of federal income
taxation; and Seller is the economic obligor in respect of such bonds;
(ii) The basis for such exclusion is the use of the Exempt
Facilities for the purpose of (A) the abatement or control of atmospheric or
water pollution or contamination and/or (B) the collection, storage,
treatment, utilization, processing or final disposal of solid waste and/or (C)
the collection, storage, treatment, utilization, processing or
<PAGE>
final disposal of sewage, such qualifying purposes being discussed in more
detail in (b) below;
(iii) The use of the Exempt Facilities for a purpose other than a
qualifying purpose indicated in subsection (ii) above could impair (A) such
exclusion from gross income of the interest on such bonds, possibly with
retroactive effect, unless appropriate remedial action were taken (which could
include prompt defeasance or redemption of such bonds) and/or (B) the
deductibility of payment by Seller of interest based on the restrictions in
Section 150 (b) of the Code; and
(iv) Any breach by Buyer of its obligations under this Section
7.12 could result in the incurrence by Seller of additional costs and
expenses, including without limitation, increased interest costs, loss of the
interest deduction for tax purposes and transaction costs relating to any
refinancing, redemption and/or defeasance of all or part of the Revenue Bonds,
and Buyer will be liable to Seller for such additional costs and expenses.
(b) i) Buyer agrees that it shall not use, or permit the use
of, the Exempt Facilities for any purpose other than the continuing use of
such Exempt Facilities for
(A) abating or controlling atmospheric or water pollution
or contamination by removing, altering, disposing of or storing pollutants,
contaminants, waste or heat, all as contemplated in U.S. Treasury Regulations
Section 1.103-8(g);
(B) the collection, storage, treatment, utilization,
processing or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or
(C) the collection, storage, treatment, utilization,
processing or final disposal of sewage, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(f)
<PAGE>
unless Buyer has obtained at its own expense an opinion addressed to Seller of
nationally recognized bond counsel reasonably acceptable to Seller ("Bond
Counsel") that such use will not impair (x) the exclusion from gross income of
the interest on any issue of Revenue Bonds for Federal income tax purposes or
(y) the deductibility of Seller's payments of interest based on the
restrictions in Section 150(b) of the Code.
(ii) Buyer reasonably expects, as of the date of this Agreement,
that the Exempt Facilities will continue to be used for the qualifying
purposes set forth in subsection (i) above, and for no other purpose, for the
remainder of their useful lives.
(c) It is expressly understood and agreed that the provisions of
clause (b) above shall not prohibit Buyer from (i) suspending the operation of
the Exempt Facilities on a temporary basis, and/or (ii) selling exclusively
for cash Exempt Facilities consisting of personal property, in whole or in
part, including any sale for scrap, provided that the operation of the
Generating Plant served by such Exempt Facilities shall not theretofore have
been, and is not then being, terminated on a permanent basis, and provided
further that the proceeds of such sale of the Exempt Facilities shall within
six months from the date of sale be expended to acquire replacement property
to be used for the same qualifying purpose as the Exempt Facilities so sold,
and/or (iii) any other suspension or termination of operation or sale,
exchange, transfer or other disposition of Exempt Facilities, provided that
Buyer has obtained at its own expense an opinion addressed to Seller of Bond
Counsel that the failure to take this action will not impair (x) the exclusion
from gross income of the interest on any issue of Revenue Bonds for Federal
income tax purposes or (y) the deductibility of Seller's payments of interest
based on the restrictions in Section 150(b) of the Code.
(d) Buyer agrees that it shall not issue, or have issued on its
behalf, any tax-exempt bonds to finance or refinance its acquisition of the
Exempt Facilities; provided that it is expressly understood and agreed that
this clause (d) shall not prohibit the use of tax-exempt bonds to finance or
refinance any improvement to the Exempt Facilities made after the date of
acquisition or to any assets other than the Exempt Facilities.
(e) Buyer agrees that it shall give Seller at least 180 days'
prior written notice of any suspension or termination of the operation of the
Exempt Facilities, or any part thereof, and of any sale, exchange, transfer or
other disposition of the Exempt Facilities, or any part thereof, including,
but not limited to, a sale for scrap, such written notice to be provided
whether or not an opinion of Bond Counsel is required to be obtained in
accordance with clause (c).
<PAGE>
(f) If Seller shall desire to refund any Revenue Bonds, Buyer
shall cooperate with Seller and with Bond Counsel with respect to such
refunding bonds and shall provide upon request any representations, agreements
or covenants that are reasonably requested concerning its compliance to such
date and/or in the future with the representations, agreements and covenants
made herein.
(g) If Buyer shall sell, exchange, transfer or otherwise dispose
of the Exempt Facilities to a third party, Buyer shall cause to be included in
the documentation relating to such transaction covenants and agreements on the
part of such third party for the benefit of the Seller, and as requested by
the Seller, the trustee for the holders of any Revenue Bonds substantially
identical to those on the part of Buyer contained in this Section 7.12.
(h) The covenants and agreements on the part of Buyer contained
in this Section 7.12 shall continue in effect so long as any of the Revenue
Bonds, including any refunding bonds issued hereafter to refund any Revenue
Bonds, shall remain outstanding. Seller shall notify Buyer promptly when
there shall be no Revenue Bonds outstanding and, at the request of the Seller,
the Buyer shall execute further documentation to provide that such covenants
and agreements are also for the benefit of the trustee for the holders of any
Revenue Bonds.
(i) Notwithstanding any provision in this Agreement to the
contrary, from and after the Closing Date, Seller agrees that it will remain
primarily liable for, and promptly pay when due, all obligations to pay
principal and interest under the Loan Agreements.
SECTION 7.13 Compliance with Governmental Agreements. From
and after the Closing Date, Buyer agrees that it will abide by, and comply
with, all existing permit conditions, provisions in the Certificates of Public
Convenience and Necessity issued to the Seller by any PSC, and any other
agreements or arrangements between the Seller and the District of Columbia or
the State of Maryland (or any political subdivision thereof), including
provisions or agreements relating to environmental compliance and mitigation.
SECTION 7.14 PJM; MAAC. From and after the Closing Date,
Buyer shall maintain membership in good standing in PJM and MAAC, and shall
submit to the governance of the independent system operator established and
administered under the PJM Agreement.
SECTION 7.15 Trade Names. Seller shall not object to the use
by Buyer of any trade names, trademarks, service marks or logos (and any
rights to and in the same, including any right to use the same) which are not
Retained Assets in
<PAGE>
connection with its ownership and operation of the Generating Facilities. In
addition, Buyer hereby acknowledges the right of Seller to use such trade
names, trademarks, service marks or logos in connection with Seller's
ownership and operation of the Retained Assets.
SECTION 7.16 Enforcement of Retained Rights. Notwithstanding
any provision of the Agreement to the contrary, Seller shall be entitled to
enforce all rights and remedies in respect of the Retained Rights in
accordance with the terms and conditions of each PPA, including termination of
interconnection and related services to the applicable Power Seller.
SECTION 7.17 Conduct of Business Relating to PPAs. Prior to
Closing, except as expressly contemplated by this Agreement, required by the
terms of any PPA or consented to by Buyer (which shall not be unreasonably
withheld), Seller shall not amend, modify or extend any PPA, or waive
performance of the obligations of any party thereunder, which, would have a
material adverse effect on the rights of Buyer hereunder.
ARTICLE VIII
Conditions
SECTION 8.1 Conditions Precedent to Each Party's Obligation
To Effect the Purchase and Sale. The respective obligations of each Party to
effect the purchase and sale of the Auctioned Assets shall be subject to the
satisfaction or waiver by such Party on or prior to the Closing Date of the
following conditions:
(a) all Seller Required Regulatory Approvals and Buyer Required
Regulatory Approvals shall have been obtained by Seller and Buyer, as the case
may be, and all conditions to effectiveness prescribed therein or otherwise by
law, regulation or order shall have been satisfied by such Parties; provided,
that the Seller will not be required to close if any Seller Required
Regulatory Approval contains terms and conditions that create a Regulatory
Material Adverse Effect;
(b) no preliminary or permanent injunction or other order or
decree by any Federal or state court of competent jurisdiction and no statute
or regulation enacted by any Governmental Authority prohibiting the
consummation of the purchase and sale of the Auctioned Assets (collectively,
"Restraints") shall be in effect; and
(c) the execution and delivery of each Ancillary Agreement, by
each Party thereto.
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SECTION 8.2 Conditions Precedent to Obligation of Buyer To
Effect the Purchase and Sale. The obligation of Buyer to effect the purchase
and sale of the Auctioned Assets contemplated by this Agreement shall be
subject to the satisfaction or waiver by Buyer on or prior to the Closing Date
of the following additional conditions:
(a) Seller shall have performed its covenants and agreements
contained in this Agreement which are required to be performed on or prior to
the Closing Date, except where the failure to perform such covenants and
agreements would not, individually or in the aggregate, create a Material
Adverse Effect;
(b) the representations and warranties of Seller which are set
forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as
of such date), except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limitation as to
"materiality" or "Material Adverse Effect" set forth therein) would not,
individually or in the aggregate, create a Material Adverse Effect;
(c) Buyer shall have received a certificate from an authorized
officer of Seller, dated the Closing Date, to the effect that, to the best of
such officer's Knowledge, the conditions set forth in Section 8.2(a) and (b)
have been satisfied;
(d) all material Permits and Environmental Permits required for
Buyer to conduct the business and operations of the Auctioned Assets as
currently conducted shall have been transferred or will be transferable to
Buyer, or shall have been obtained or will be obtained by Buyer, except where
the failure to obtain such material Permits or Environmental Permits will not
have, individually or in the aggregate, a Material Adverse Effect;
(e) Buyer shall have received (i) the deeds of conveyance
substantially in the form of Exhibit J, and (ii) an opinion from Dickstein
Shapiro Morin & Oshinsky LLP or other counsel reasonably acceptable to Buyer,
dated the Closing Date, and reasonably satisfactory in form and substance to
Buyer covering the matters set forth in Exhibit K;
(f) Buyer shall have received a Foreign Investment in Real
Property Tax Act Certification and Affidavit, executed by Seller; and
(g) Seller shall have delivered to Buyer all such other
instruments as shall, in the reasonable opinion of the Buyer and its counsel,
be (i) necessary to transfer to
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Buyer the Auctioned Assets in accordance with this Agreement or (ii) required
to consummate the transactions contemplated by this Agreement.
SECTION 8.3 Conditions Precedent to Obligation of Seller To
Effect the Purchase and Sale. The obligation of Seller to effect the purchase
and the sale of the Auctioned Assets contemplated by this Agreement shall be
subject to the satisfaction or waiver by Seller on or prior to the Closing
Date of the following additional conditions:
(a) Buyer shall have performed its covenants and agreements
contained in this Agreement which are required to be performed on or prior to
the Closing Date, except where the failure to perform such covenants and
agreements would not, individually or in the aggregate, create a Buyer
Material Adverse Effect;
(b) the representations and warranties of Buyer which are set
forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case as
of such date), except where the failure of such representations and warranties
to be so true and correct (without giving effect to any limitation as to
"materiality" or "Buyer Material Adverse Effect" set forth therein) would not,
individually or in the aggregate, create a Buyer Material Adverse Effect;
(c) Seller shall have received a certificate from an authorized
officer of Buyer, dated the Closing Date, to the effect that, to the best of
such officer's Knowledge, the conditions set forth in Section 8.3(a) and (b)
have been satisfied;
(d) Seller shall have received an opinion from Troutman Sanders
LLP or other counsel reasonably acceptable to Seller, dated the Closing Date,
and reasonably satisfactory in form and substance to Seller covering the
matters set forth in Exhibit L;
(e) Buyer shall have provided evidence in form and substance
reasonably satisfactory to Seller of compliance by Buyer with its obligations
under Article IX (including, without limitation, a certificate from an
authorized officer of Buyer, dated the Closing Date, which identifies the
Non-Union Employees who did not receive from the Buyer a Qualified Offer
pursuant to Section 9.1(d));
(f) If a Guarantee Agreement has been entered into:
(i) the Guarantee Agreement shall be in full force and
effect;
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(ii) the Guarantor shall have performed in all material
respects its covenants and agreements contained in the Guarantee Agreement
which are required to be performed on or prior to the Closing Date;
(iii) the representations and warranties of the Guarantor
which are set forth in the Guarantee Agreement shall be true and correct as of
the date of the Guarantee Agreement and as of the Closing Date, as if made at
and as of such time (except to the extent expressly made as of an earlier
date, in which case as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "Guarantor Material Adverse
Effect" set forth therein) would not, individually or in the aggregate, create
a Guarantor Material Adverse Effect (as defined therein);
(iv) Seller shall have received a certificate from an
authorized officer of the Guarantor, dated the Closing Date, to the effect
that, to the best of such officer's Knowledge, the conditions set forth in
Sections 8.3(f)(ii) and (iii) have been satisfied;
(v) Seller shall have received an opinion from Troutman
Sanders LLP or other counsel reasonably acceptable to Seller, dated the
Closing Date, and reasonably satisfactory in form and substance to Seller
covering the matters set forth in Exhibit M.
(g) Buyer shall have delivered to Seller all such other
instruments as shall, in the reasonable opinion of the Seller and its counsel,
be (i) necessary for the Buyer to assume the Assumed Obligations in accordance
with this Agreement or (ii) required to consummate the transactions
contemplated by the Agreement.
(h) Panda shall have consented to a Novation of the Panda PPA
satisfactory in form and substance to Seller, or Seller shall have received an
order from the MDPSC determining that the transactions contemplated by Section
II of Schedule 2.4 hereto with respect to the Panda PPA do not violate the
Panda PPA, which order shall have become final and non-appealable, and which
is satisfactory in form and substance to Seller.
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ARTICLE IX
Employee Matters
SECTION 9.1 Employee Matters.
(a) Buyer shall offer employment, effective as of the Closing
Date, to all employees of Seller employed at the Generating Facilities and the
Support Operations as of the Closing Date who are covered by the IBEW
Collective Bargaining Agreement, including those employees absent from active
service due to illness or leave of absence, whether paid or unpaid, other than
those employees on long term disability as of the Closing Date who have
received written notice from Seller approving requests for long term
disability as of the Closing Date (the "Union Employees"), pursuant to and in
accordance with the IBEW Collective Bargaining Agreement and applicable law.
Each Union Employee who becomes employed by Buyer pursuant to this Section
9.1(a) is referred to herein as a "Transferred Union Employee".
(b) Any Union Employee who refuses an offer of employment from
Buyer made in accordance with the terms of this Section 9.1 shall be treated
by Seller as a terminated employee and shall not be entitled to any severance
or other benefits from Buyer in connection therewith.
(c) Buyer shall provide benefits to Transferred Union Employees
substantially equivalent to those provided under the IBEW Collective
Bargaining Agreement. In doing so, Buyer may use different providers,
establish its own benefit plans or use its existing plans. There shall be no
duplication of benefits. Buyer shall recognize service with Seller for
purposes of eligibility and vesting and benefit calculations in any benefit
plan, program, or fringe benefit arrangement. For purposes of health care
coverage, Buyer shall waive all limitations regarding pre-existing condition
exclusions, actively at work exclusions and waiting periods for Transferred
Union Employees. During the calendar year in which Closing occurs, all health
care expenses incurred by Transferred Union Employees that were qualified to
be taken into account for purposes of satisfying any deductible or
out-of-pocket limit under Seller's health care plans shall be taken into
account for purposes of satisfying any deductible or out-of-pocket limit under
Buyer's health care plans for such calendar year. Buyer shall give all
Transferred Union Employees full credit for all vacation, sick leave or comp
time benefits accrued and not used as of the Closing. The Buyer shall provide
substantially equivalent retiree medical benefits to the Transferred Union
Employees only with no duplication of benefits and such benefits shall be
subject to any limitations in existing plan documents and the IBEW Collective
Bargaining Agreement and related documents.
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(d) Buyer may, but shall not be required to, offer employment,
effective as of the Closing Date, to employees of Seller (other than Union
Employees) who are (i) employed at the Generating Facilities or (ii) corporate
support personnel engaged in the Support Operations (collectively, the
"Non-Union Employees" and, together with Union Employees, "Employees").
Within sixty (60) days after the date hereof, Buyer shall notify Seller as to
the identity of those Non-Union Employees to whom it intends to offer
employment, provided that, during such period, Seller shall, upon reasonable
notice and to the extent not disruptive to the operation of the Auctioned
Assets, provide Buyer with reasonable access to Non-Union Employees and, to
the extent permitted by applicable law, their respective Transferred Employee
Records. In the event that Buyer does not make a Qualified Offer to any
Non-Union Employees, the Buyer shall be solely responsible for the payment to
such Non-Union Employees of all severance costs payable under the Seller's
1998 Reorganization Severance Plan (treating the consummation of the sale of
the Auctioned Assets hereunder as an event entitling such Non-Union Employee
to severance benefits thereunder). The Buyer shall have no other obligations
with respect to any Non-Union Employees to which it does not make a Qualified
Offer. Each Non-Union Employee who becomes employed by Buyer pursuant to this
Section 9.1(d) shall be referred to herein as a "Transferred Non-Union
Employee" and, together with Transferred Union Employees, the "Transferred
Employees." Any offer of employment to a Non-Union Employee that satisfies
all of the following requirements is referred to herein as a "Qualified
Offer":
(1) Buyer shall pay and provide such Transferred Non-Union
Employee annual compensation, bonus and other incentive opportunities (the
"Total Cash Compensation") at a rate substantially equivalent to such
Transferred Non-Union Employee's Total Cash Compensation in the most recent
calendar year ending prior to the Closing (which shall include cash
compensation in respect of such calendar year paid or payable after such
calendar year).
(2) The location of such Transferred Non-Union Employee's
workplace must be within a fifty (50) mile radius of the District of Columbia
metropolitan area; provided, however, that if any Non-Union Employee's commute
to the Buyer's workplace following the Closing will be increased by more than
fifty (50) miles (as compared to the number of miles traveled by such
Non-Union Employee to the Seller's work place immediately prior to the
Closing), the Buyer shall be required to pay such Non-Union Employee a $3,500
relocation allowance.
(e) Buyer shall provide benefits to Transferred Non-Union
Employees substantially equivalent to those provided by Seller as of the
Closing Date. In doing so, Buyer may use different providers, establish its
own benefit plans or use its existing plans. There shall be no duplication of
benefits. Buyer shall recognize service with Seller for purposes of
eligibility and vesting and benefit calculations in
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any benefit plan, program, or fringe benefit arrangement. For purposes of
health care coverage, Buyer shall waive all limitations regarding pre-existing
condition exclusions, actively at work exclusions and waiting periods for
Transferred Non-Union Employees. During the calendar year in which Closing
occurs, all health care expenses incurred by Transferred Non-Union Employees
that were qualified to be taken into account for purposes of satisfying any
deductible or out-of-pocket limit under Seller's health care plans shall be
taken into account for purposes of satisfying any deductible or out-of-pocket
limit under Buyer's health care plans for such calendar year. Buyer shall
give all Transferred Non-Union Employees full credit for all vacation, sick
leave or comp time benefits accrued and not used as of the Closing. The Buyer
shall provide substantially equivalent retiree medical benefits to the
Transferred Non-Union Employees only with no duplication of benefits and such
benefits shall be subject to any limitations in existing plan documents.
SECTION 9.2 Pension Plans. With respect to each Transferred
Employee's accrued benefit (based on service and compensation as of the
Closing Date) (the "Closing Date Benefits"), Seller shall, effective as of the
Closing Date, amend the General Retirement Plan ("Seller's Pension Plan") to
(i) recognize service with Buyer for purposes of vesting the Closing Date
Benefits in such Seller's Pension Plan; (ii) recognize service with Buyer
toward eligibility for receipt of subsidized early retirement and optional
benefit forms with respect to the Closing Date Benefits under Seller's Pension
Plan; (iii) provide that retirement from Buyer's service shall be deemed
retirement from active employment with Seller for purposes of eligibility for
receipt of subsidized early retirement and optional benefit forms with respect
to the Closing Date Benefits under Seller's Pension Plan; and (iv) provide
that Closing Date Benefits cannot commence until the earlier of such
Transferred Employee's actual retirement from Buyer's employment or attainment
of age 65. The pension plan of Buyer ("Buyer's Pension Plan") shall recognize
all prior service with Seller for purposes of eligibility for participation,
vesting, early retirement subsidies and benefit accrual for Transferred
Employees, and may offset the Closing Date Benefits from benefit accruals
thereunder. Buyer and Seller shall provide each other with such records and
information as may be necessary or appropriate to carry out their respective
obligations under this Section 9.2 for the purposes of administration of
Buyer's Pension Plan and Seller's Pension Plan.
SECTION 9.3 Buyer's Savings Plan. As soon as practicable,
and in any event within 90 days after the Closing Date, Buyer shall establish
a defined contribution pension plan (or plans) and trust (or trusts) intended
to qualify under Sections 401(a) and 501(a) of the Code or amend an existing
plan or plans satisfying such requirements (such plan or plans referred to as
"Buyer's Savings Plan") in which all Transferred Employees shall be eligible
to participate as of the later of the Closing Date or the Buyer's Savings
Plan's effective date. Buyer's Savings Plan shall provide for deferral
options and employer matching contributions
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with respect to the Transferred Employees who are participants (or eligible to
be participants) in the Potomac Electric Power Company Savings Plan ("Seller's
Savings Plan") as of the Closing Date (such employees, the "Transferred
Savings Employees") that are no less favorable than those provided immediately
prior to the Closing Date to the Transferred Savings Employees under Seller's
Savings Plans (including an opportunity to make up for any lost deferrals
and/or employer matching contributions that were unavailable because of a
delay between the Closing Date and the effective date of Buyer's Savings
Plan). Contributions to the Seller's Savings Plans with respect to the
Transferred Savings Employees shall cease effective as of the Closing Date.
Each Transferred Savings Employee shall be afforded the option of transferring
his or her account balance into the Buyer's Savings Plan, including any
outstanding loan balances attributable to such accounts; provided, however,
that if Seller is able to obtain a favorable ruling from the Internal Revenue
Service to the effect that the consummation of the transactions contemplated
hereby shall constitute a sale of substantially all of the assets used in a
trade or business within the meaning of Section 401(k)(10) of the Code, or
that there has been a separation from service as a non-continuation of the
same trade or business within the meaning of Section 401(k)(2)(B)(i)(I) of the
Code, each Transferred Savings Employee shall be afforded the option of
maintaining his or her account balance under Seller's Savings Plan, rolling
over his or her account balance, including any outstanding loan balances
attributable to such accounts into the Buyer's Savings Plan, rolling over his
or her account balance into an individual retirement account or cashing in his
or her account balance (subject to applicable withholding taxes and
penalties). Any such transfers or rollovers shall satisfy the requirements of
Section 414(l) of the Code and Section 208 of ERISA and shall be in the form
of cash or other property, as Seller and Buyer shall mutually agree prior to
such transfer or rollover (which Buyer agrees shall include promissory notes
evidencing loans from Seller's Savings Plan to Transferred Savings Employees
that are outstanding on the Closing Date). Prior to such transfer or
rollover, Buyer will provide Seller with such documents and other information
as Seller shall reasonably request to assure itself that Buyer's Savings Plan
and the trust or trusts established pursuant thereto (i) provide for voluntary
participant after-tax contributions and (ii) contain participant loan
provisions and procedures necessary to effect the orderly transfer of
participant loan balances associated with the transfer or rollover. In the
event that a Transferred Savings Employee shall elect to leave his or her
account balance in Seller's Savings Plans, Buyer shall cooperate with Seller
in providing that any outstanding loan attributable to such account balance
shall be repaid through payroll deductions from Buyer's payroll. Upon such
transfer, Buyer's Savings Plan shall assume all liabilities and obligations
whatsoever with respect to all amounts transferred from Seller's Savings Plan
to Buyer's Savings Plan in respect of the Transferred Savings Employees and
Seller and its Affiliates and Seller's Savings Plan shall be relieved of all
such liabilities and obligations. Notwithstanding anything in this Article IX
to the contrary, no such transfer or rollover shall take place unless and
until Seller has received written evidence of the adoption of Buyer's Savings
Plan
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and the trust (or trusts) thereunder by Buyer and either (A) a copy of a
favorable determination letter issued by the Internal Revenue Service and
satisfactory to Seller's counsel with respect to Buyer's Savings Plan or (B)
an opinion, satisfactory to Seller's counsel, of Buyer's counsel to the effect
that the terms of Buyer's Savings Plan and its related trust or trusts qualify
under Sections 401(a) and 501(a) of the Code. Buyer and Seller shall provide
each other with such records and information as may be necessary or
appropriate to carry out their obligations under this Section 9.3 for the
purposes of administration of Buyer's Savings Plan, and they shall cooperate
in the filing of documents required by the transactions described herein.
SECTION 9.4 Severance Liabilities. Buyer shall provide
severance benefits (i) as contemplated by Schedule 1.1(c) attached hereto, and
(ii) as set forth in Seller's 1998 Reorganization Severance Plan (treating the
consummation of the sale of the Auctioned Assets hereunder and the events
specified in this Section as events entitling such Non-Union Employee to
severance benefits thereunder) to any Transferred Non-Union Employee (i) who,
within the 12-month period immediately following the Closing Date, is
terminated by Buyer or any of its Affiliates other than for cause (as defined
on Schedule 1.1(c)) or (ii) with respect to such Persons who have received and
accepted Qualifying Offers, whose terms and conditions of employment with
Buyer or any of its Affiliates are changed during the 12-month period
immediately following the Closing Date, such that such terms and conditions
fail to satisfy all of the requirements set forth in Section 9.1(d) above.
SECTION 9.5 COBRA. Buyer shall provide notice of and the
opportunity to purchase continuation coverage as required by COBRA to any
dependent or former dependent of a Transferred Union Employee or Transferred
Non-Union Employee who incurs a "qualifying event" (as such term is defined in
COBRA) on or after the Closing Date, or who incurs a "qualifying event" prior
to the Closing Date (other than a termination of employment or death of the
employee) as to which notice is not provided to Seller or Buyer until the
Closing Date or thereafter.
SECTION 9.6 WARN Act. Buyer shall be responsible, with
respect to the Auctioned Assets, for performing and disclosing all
requirements under the WARN Act and applicable state and local laws and
regulations for the notification of its employees of any "employment loss"
within the meaning of the WARN Act which occurs following the Closing Date.
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ARTICLE X
Indemnification and Dispute Resolution
SECTION 10.1 Indemnification.
(a) Seller will indemnify and hold harmless Buyer and its
Affiliates and their respective directors, officers, employees and agents
(collectively with Buyer and its Affiliates, the "Buyer Indemnitees") from and
against any and all claims, demands or suits by any person, and all losses,
liabilities, damages, obligations, payments, costs and expenses (including
reasonable legal fees and expenses and including costs and expenses incurred
in connection with investigations and settlement proceedings) (each, an
"Indemnifiable Loss"), as incurred, asserted against or suffered by any Buyer
Indemnitee relating to, resulting from or arising out of:
(i) any breach by Seller of any covenant or agreement of Seller
contained in this Agreement or, prior to their expiration in accordance with
Section 12.3, the representations and warranties contained in Sections 5.1,
5.2, 5.3 and 5.15 hereof;
(ii) any breach by Seller of its obligations under Section
7.12(i) hereof;
(iii) the Retained Liabilities;
(iv) the Panda Litigation; or
(v) any breach by Seller of any Ancillary Agreement.
(b) Buyer will indemnify and hold harmless Seller and its Affiliates
and their respective directors, officers, trustees, employees and agents
(collectively with Seller and its Affiliates, the "Seller Indemnitees") from
and against any and all Indemnifiable Losses, as incurred, asserted against or
suffered by any Seller Indemnitee relating to, resulting from or arising out
of:
(i) any breach by Buyer of any covenant or agreement of Buyer
contained in this Agreement or, prior to their expiration in accordance with
Section 12.3, the representations and warranties contained in Sections 6.1,
6.2, 6.3 and 6.5 hereof;
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(ii) the Assumed Obligations (other than any Indemnifiable Losses
resulting from any breach by Seller of its obligations under Section 7.12(i)
hereof);
(iii) any obligation resulting from any action or inaction of
Buyer (A) under any Contract or warranty pursuant to Section 2.4(b) or
Schedule 2.4 attached hereto (whether acting as principal or representative
and agent for Seller or otherwise) or (B) pursuant to any Transferable Permit
in respect of which Seller remains the holder of record after the Closing Date
pursuant to Section 7.3(c);
(iv) any transfer, sales or excise tax obligations imposed on the
Seller arising from the sale or transfer of the Auctioned Assets; or
(v) any breach by Buyer of any Ancillary Agreement.
(c) The amount of any Indemnifiable Loss shall be reduced to the
extent that the relevant Buyer Indemnitee or Seller Indemnitee (each, an
"Indemnitee") receives any insurance proceeds with respect to an Indemnifiable
Loss and shall be (i) increased to take account of any Tax Cost incurred by
the Indemnitee arising from the receipt of indemnity payments hereunder and
(ii) reduced to take account of any Tax Benefit realized by the Indemnitee
arising from the incurrence or payment of any such Indemnifiable Loss. If the
amount of any Indemnifiable Loss, at any time subsequent to the making of an
indemnity payment in respect thereof, is reduced by recovery, settlement or
otherwise under or pursuant to any insurance coverage, or pursuant to any
claim, recovery, settlement or payment by or against any other person, the
amount of such reduction, less any costs, expenses or premiums incurred in
connection therewith, will promptly be repaid by the Indemnitee to the Party
required to provide indemnification hereunder (the "Indemnifying Party") with
respect to such Indemnifiable Loss.
(d) To the fullest extent permitted by law, neither Party nor any
Buyer Indemnitee or any Seller Indemnitee shall be liable to the other Party
or any other Buyer Indemnitee or Seller Indemnitee for any claims, demands or
suits for consequential, incidental, special, exemplary, punitive, indirect or
multiple damages connected with or resulting from any breach after the Closing
Date of this Agreement or the Ancillary Agreements (other than breach of this
Article X or as otherwise expressly set forth in any Ancillary Agreement), or
any actions undertaken in connection with or related hereto or thereto,
including any such damages which are based upon breach of contract, tort
(including negligence and
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misrepresentation), breach of warranty, strict liability, statute, operation
of law or any other theory of recovery.
(e) The rights and remedies of Seller and Buyer under this Article X
are, solely as between Seller and Buyer, exclusive and in lieu of any and all
other rights and remedies which Seller and Buyer may have under this
Agreement, the Ancillary Agreements (except as otherwise expressly set forth
in any Ancillary Agreement) or otherwise for monetary relief with respect to
(i) any breach of, or failure to perform, any covenant or agreement set forth
in this Agreement or the Ancillary Agreements by Seller or Buyer, (ii) any
breach of any representation or warranty by Seller or Buyer, (iii) the Assumed
Obligations or the Retained Liabilities, and (iv) any obligation in respect of
Section 2.4 or Section 7.3. Each Party agrees that the previous sentence
shall not limit or otherwise affect any non-monetary right or remedy which
Party may have under this Agreement or the Ancillary Agreements or otherwise
limit or affect either Party's right to seek equitable relief, including the
remedy of specific performance.
(f) Buyer and Seller agree that, notwithstanding Section 10.1(e), each
Party shall retain, subject to the other provisions of this Agreement,
including Sections 10.1(d) and 12.3, all remedies at law or in equity with
respect to (i) fraud or willful or intentional breaches of this Agreement or
the Ancillary Agreements and (ii) gross negligence or willful or wanton acts
or omissions to act of any Indemnitee (or any contractor or subcontractor
thereof) on or after the Closing Date.
(g) Seller and Buyer agree that neither Party shall be responsible to
the other Party for any Indemnifiable Loss (relating to the breach of
representations and warranties made by such Party hereunder) pursuant to
Section 10.1(a)(i) or Section 10.1(b)(i), as the case may be, unless and until
the aggregate amount of such Party's Indemnifiable Losses exceeds $5,000,000.
Notwithstanding the foregoing, the aggregate maximum liability of the Seller
to indemnify the Buyer for Indemnifiable Losses (relating to the breach of
representations and warranties made by the Seller hereunder) pursuant to
Section 10(a)(i) shall not exceed an amount in excess of the Purchase Price
paid by the Buyer to the Seller.
SECTION 10.2 Third Party Claims Procedures.
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any claim, action, or proceeding made or
brought by any person who is not a Party or an Affiliate of a Party (a "Third
Party Claim") with respect to which indemnification is to be sought from an
Indemnifying Party, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 20
Business Days after the Indemnitee's receipt of notice of such Third Party
Claim; provided, however, that a failure to give
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timely notice will not affect the rights or obligations of any Indemnitee
except if, and only to the extent that, as a result of such failure, the
Indemnifying Party was actually prejudiced. Such notice shall describe the
nature of the Third Party Claim in reasonable detail and will indicate the
estimated amount, if practicable, of the Indemnifiable Loss that has been or
may be sustained by the Indemnitee.
(b) If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party; provided, however, that such counsel is not reasonably
objected to by the Indemnitee; and provided further that the Indemnifying
Party first admits in writing its liability to the Indemnitee with respect to
all material elements of such claim. Should the Indemnifying Party so elect
to assume the defense of a Third Party Claim, the Indemnifying Party will not
be liable to the Indemnitee for any legal expenses subsequently incurred by
the Indemnitee in connection with the defense thereof. If the Indemnifying
Party elects to assume the defense of a Third Party Claim, the Indemnitee will
(i) cooperate in all reasonable respects with the Indemnifying Party in
connection with such defense, (ii) not admit any liability with respect to, or
settle, compromise or discharge, any Third Party Claim without the
Indemnifying Party's prior written consent and (iii) agree to any settlement,
compromise or discharge of a Third Party Claim which the Indemnifying Party
may recommend and which by its terms obligates the Indemnifying Party to pay
the full amount of the liability in connection with such Third Party Claim and
releases the Indemnitee completely in connection with such Third Party Claim.
In the event the Indemnifying Party shall assume the defense of any Third
Party Claim, the Indemnitee shall be entitled to participate in (but not
control) such defense with its own counsel at its own expense. If the
Indemnifying Party does not assume the defense of any such Third Party Claim,
the Indemnitee may defend the same in such manner as it may deem appropriate,
including settling such claim or litigation after giving notice to the
Indemnifying Party of the terms of the proposed settlement and the
Indemnifying Party will promptly reimburse the Indemnitee upon written
request. Anything contained in this Agreement to the contrary
notwithstanding, no Indemnifying Party shall be entitled to assume the defense
of any Third Party Claim if such Third Party Claim seeks an order, injunction
or other equitable relief or relief for other than monetary damages against
the Indemnitee which, if successful, would materially adversely affect the
business of the Indemnitee.
<PAGE>
ARTICLE XI
Termination
SECTION 11.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing by an instrument in writing signed on behalf of each of the Parties.
(b) This Agreement may be terminated by Seller or Buyer if the
Closing shall not have occurred on or before the date that is 12 months from
the date of this Agreement (the "Termination Date"); provided, however, that
the right to terminate this Agreement pursuant to this Section 11.1(b) shall
not be available (1) to any Party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date, or (2) to Buyer if the Seller has
provided the Buyer with written notice of its election to postpone the Closing
for up to an eighteen month period from the execution date of this Agreement
in the event that all conditions precedent to Closing set forth in Article
VIII have been satisfied except with respect to those conditions set forth in
Section 8.1(a).
(c) This Agreement may be terminated by either Seller or Buyer
if any Restraint having any of the effects set forth in Section 8.1(b) shall
be in effect and shall have become final and nonappealable; provided, however,
that the Party seeking to terminate this Agreement pursuant to this Section
11.1(c) shall have used its reasonable best efforts to prevent the entry of
and to remove such Restraint.
(d) This Agreement may be terminated by the Party entitled to do
so under the provisions of Section 7.11(b).
ARTICLE XII
Miscellaneous Provisions
SECTION 12.1 Expenses. Except to the extent specifically
provided herein, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the Party
incurring such costs and expenses, whether or not the transactions
contemplated hereby are consummated.
<PAGE>
SECTION 12.2 Amendment and Modification; Extension; Waiver.
This Agreement may be amended, modified or supplemented only by an instrument
in writing signed on behalf of each of the Parties. Either Party may (i)
extend the time for the performance of any of the obligations or other acts of
the other Party, (ii) waive any inaccuracies in the representations and
warranties of the other Party contained in this Agreement or (iii) waive
compliance by the other Party with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such Party. The failure of a Party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 12.3 No Survival of Representations or Warranties.
Each and every representation and warranty contained in this Agreement, other
than the representations and warranties contained in Sections 5.1, 5.2, 5.3
and 5.15 and 6.1, 6.2, 6.3 and 6.5 (which representations and warranties shall
survive for 12 months from the Closing Date), shall expire with, and be
terminated and extinguished by the Closing and no such representation or
warranty shall survive the Closing Date. From and after the Closing Date,
none of Seller, Buyer or any officer, director, trustee or Affiliate of any of
them shall have any liability whatsoever with respect to any such
representation or warranty. The expiration of the representations and
warranties contained in Sections 5.1, 5.2, 5.3 and 5.15 and 6.1, 6.2, 6.3 and
6.5 shall not affect the Parties' obligations under Article X if the
Indemnitee provided the Indemnifying Party with proper notice of the claim or
event for which indemnification is sought prior to such expiration.
SECTION 12.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the time of
delivery or, in the case of a telecopied communication, of confirmation) if
delivered personally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the Parties at the following
addresses (or at such other address for a Party as shall be specified by like
notice):
if to Seller, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
<PAGE>
with a copy on or prior to the Closing Date to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Telecopier: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Buyer, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention: Anne Cleary
with a copy on or prior to the Closing Date to:
Troutman Sanders LLP
1300 I Street, NW
Suite 500 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
SECTION 12.5 Assignment; No Third Party Beneficiaries.
(a) This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any Party,
including by operation of law, without the prior written consent of the other
Party, except (i) in the case of Seller (A) to an Affiliate of Seller or a
third party in connection with the transfer of the Transmission System to such
Affiliate or third party or (B) to a lending institution or trustee in
connection with a pledge or granting of a security interest in all or any part
of the Transmission System and this Agreement and (ii) in the case of Buyer
(A) prior to the Closing, to one or more wholly-owned subsidiaries of Buyer or
lending institutions or other institutional investors acting as lessor to
Buyer or one or more wholly-owned subsidiaries of Buyer, so long as Buyer
shall have duly executed and delivered the Guarantee Agreement and such
assignment is for all of Buyer's rights, interests and obligations hereunder
associated with the asset(s) subject to any such assignment, (B) to an
Affiliate of Buyer in connection with the
<PAGE>
transfer of all or part of the Auctioned Assets to such Affiliate and (C) to a
lending institution or trustee in connection with a pledge or granting of a
security interest in the Auctioned Assets and this Agreement; provided,
however, that no assignment or transfer of rights or obligations by either
Party shall relieve it from the full liabilities and the full financial
responsibility, as provided for under this Agreement, unless and until the
transferee or assignee shall agree in writing to assume such obligations and
duties and the other Party has consented in writing to such assumption.
(b) Nothing in this Agreement is intended to confer upon any
other person except the Parties any rights or remedies hereunder or shall
create any third party beneficiary rights in any person, including, with
respect to continued or resumed employment, any employee or former employee of
Seller (including any beneficiary or dependent thereof). No provision of this
Agreement shall create any rights in any such persons in respect of any
benefits that may be provided, directly or indirectly, under any employee
benefit plan or arrangement except as expressly provided for thereunder.
SECTION 12.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the District of
Columbia (regardless of the laws that might otherwise govern under applicable
principles of conflicts of law).
SECTION 12.7 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.
SECTION 12.8 Interpretation. When a reference is made in
this Agreement to an Article, Section, Schedule or Exhibit, such reference
shall be to an Article or Section of, or Schedule or Exhibit to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. All terms
defined in this Agreement shall have the defined meanings when used in the
Ancillary Agreements and any certificate or other document made or delivered
pursuant hereto or thereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such term. Any agreement, instrument, statute, regulation,
rule or order defined or referred to herein or in any agreement or instrument
that is referred to herein means such agreement, instrument, statute,
regulation, rule or order as from time to time
<PAGE>
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns. Each Party acknowledges that it has been represented
by counsel in connection with the review and execution of this Agreement and,
accordingly, there shall be no presumption that this Agreement or any
provision hereof be construed against the Party that drafted this Agreement.
SECTION 12.9 Jurisdiction and Enforcement.
(a) Each of the Parties irrevocably submits to the exclusive
jurisdiction of (i) the Superior Court of the District of Columbia and (ii)
the United States District Court for the District of Columbia, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby. Each of the Parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the District of Columbia or, if such suit, action or
proceeding may not be brought in such court for jurisdictional reasons, in the
Superior Court of the District of Columbia. Each of the Parties further
agrees that service of process, summons, notice or document by hand delivery
or U.S. registered mail at the address specified for such Party in Section
12.4 (or such other address specified by such Party from time to time pursuant
to Section 12.4) shall be effective service of process for any action, suit or
proceeding brought against such Party in any such court. Each of the Parties
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Superior Court of the District of
Columbia and (ii) the United States District Court for the District of
Columbia, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum.
(b) The Parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement or any Ancillary Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement or any
Ancillary Agreement and to enforce specifically the terms and provision of
this Agreement or any Ancillary Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
<PAGE>
SECTION 12.10 Entire Agreement. This Agreement, the
Confidentiality Agreement and the Ancillary Agreements including the Exhibits,
Schedules, documents, certificates and instruments referred to herein or
therein and other contracts, agreements and instruments contemplated hereby or
thereby, embody the entire agreement and understanding of the Parties in
respect of the transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein or therein. This
Agreement and the Ancillary Agreements supersede all prior agreements and
understandings between the Parties with respect to the transactions
contemplated by this Agreement other than the Confidentiality Agreement.
SECTION 12.11 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as possible to
the fullest extent permitted by applicable law in an acceptable manner to the
end that the transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 12.12 Conflicts. Except as expressly otherwise
provided herein or therein, in the event of any conflict or inconsistency
between the terms of this Agreement and the terms of any Ancillary Agreement,
the terms of this Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to
be signed by their respective duly authorized officers as of the date first
above written.
POTOMAC ELECTRIC POWER COMPANY
By: /S/ MARY SHARPE-HAYES
=============================
Name: Mary Sharpe-Hayes
Title: Vice President
SOUTHERN ENERGY, INC.
By: /S/ ANNE CLEARY
============================
Name: Anne Cleary
Title: Vice President, Southern
Energy North America,
Inc., as authorized agent
<PAGE>
Schedule 1.1
Definitions
"Accountants" shall have the meaning set forth in Section 3.2(b).
"Adjustment Amount" shall have the meaning set forth in Section 3.4.
"Adjustment Date" shall have the meaning set forth in Section 3.2(c).
"Adjustment Statement" shall have the meaning set forth in Section
3.2(a).
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.
"Agreement" shall have the meaning set forth in the Preamble.
"Allocation" shall have the meaning set forth in Section 3.3.
"Ancillary Agreements" means the Potomac River Lease, the Local Area
Support Agreement, the Transition Power Agreements, the Interconnection
Agreements, the Assignment and Assumption Agreement, Bill of Sale, Guarantee
Agreement, Operating Agreement, the deeds contemplated by Section 8.2(e)(i)
and any other agreement to which Buyer and Seller are party and which is
expressly identified by its terms as an Ancillary Agreement hereunder.
"Applicable Law" shall have the meaning set forth in Section 3.3.
"Ash Storage Sites" mean those certain ash storage sites of the
Seller located in Charles County, Maryland, Prince George's County, Maryland,
and Montgomery County, Maryland, as more fully described on Schedule
2.2(a)(iii) and Schedule 5.5(a) attached to the Agreement.
"Assignment and Assumption Agreement" means that Assignment and
Assumption Agreement, to be entered into at the Closing by Buyer and Seller,
in substantially the form as Exhibit A attached to the Agreement.
"Assumed Consent Order Obligations" shall have the meaning set forth
in Section 2.3(a)(iv).
<PAGE>
"Assumed Obligations" shall have the meaning set forth in Section
2.3(a).
"Auctioned Assets" shall have the meaning set forth in Section
2.2(a).
"Benefit Plans" shall have the meaning set forth in Section 5.12.
"Bill of Sale" means that certain Bill of Sale, to be entered into at
the Closing by Buyer (or Buyer's permitted assignees pursuant to Section
12.5(a)) and Seller, in substantially the form as Exhibit B attached to the
Agreement.
"Business Day" means any day other than Saturday, Sunday and any day
which is a legal holiday or a day on which banking institutions in Washington,
DC are authorized or required by law or other action of a Governmental
Authority to close.
"Buyer" shall have the meaning set forth in the Preamble to the
Agreement.
"Buyer Facilities" shall have the meaning given to such term in the
Easements Agreement.
"Buyer Indemnitees" shall have the meaning set forth in Section
10.1(a).
"Buyer Material Adverse Effect" means any change or event which would
have a material adverse effect on the ability of the Buyer to consummate the
transactions contemplated by, and discharge its obligations under, the
Agreement and the Ancillary Agreements.
"Buyer Real Estate" shall have the meaning set forth in Section
2.2(a)(i).
"Buyer Required Regulatory Approvals" shall have the meaning set
forth in Section 6.3(b).
"Buyer's Pension Plans" shall have the meaning set forth in Section
9.2.
"Buyer's Savings Plan" shall have the meaning set forth in Section
9.3.
"Chalk Point/Morgantown Fuel Pipeline" means the (i) 16" pipeline,
including all components, between the Piney Point petroleum terminal and the
Ryceville Pumping Station and (ii) the 12" pipelines, including all
components, between the Ryceville Pumping Station and the Chalk Point Station
<PAGE>
and Morgantown Station, as more fully described on Schedule 5.5(a) attached to
the Agreement.
"Chalk Point Station" means that certain coal, oil and gas-fueled
generating facility of the Seller located on the Patuxent River in Aquasco,
Maryland (excluding that certain combustion turbine and related assets owned
by Southern Maryland Electric Cooperative, Inc.), as more fully described on
Schedule 2.2(a)(iii) and Schedule 5.5(a) attached to the Agreement.
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Adjustment Amount" shall have the meaning set forth in
Section 3.2(c).
"Closing Date" shall have the meaning set forth in Section 4.1.
"Closing Date Benefits" shall have the meaning set forth in Section
9.2.
"Closing Severance Expenses" shall have the meaning set forth in
Section 2.3(a)(x).
"Code" means the Internal Revenue Code of 1986, as amended.
"Communications Equipment" means the equipment, systems, switches and
lines used in connection with voice, data and other communications activities.
"Conemaugh Interest" means the 9.72% undivided ownership interest
held by Seller, as a tenant-in-common, in the Conemaugh Station, together with
the Seller's undivided ownership interest in any related assets held in
undivided ownership with the other Persons having an undivided ownership
interest in the Conemaugh Station (except in the case of Seller's undivided
ownership interest in the Conemaugh Switchyard and the Conemaugh Transmission
Line).
"Conemaugh Station" means that certain coal-fired generating facility
located on the Conemaugh River in Indiana County, Pennsylvania.
"Conemaugh Switchyard" means that certain 500kV switchyard, as
described on Schedule 2.2(b)(i) attached to the Agreement.
"Conemaugh Transmission Line" means that certain 500kV transmission
line, as described on Schedule 2.2(b)(i) attached to the Agreement.
<PAGE>
"Confidentiality Agreement" means the Confidentiality Agreement dated
February 10, 2000 between Seller and Buyer.
"Contracts" shall have the meaning set forth in Section 2.2(a)(iv).
"DCPSC" means the Public Service Commission of the District of
Columbia.
"Dickerson Station" means that certain coal, oil and gas-fuel fired
generating facility of the Seller located on the Potomac River near Dickerson,
Maryland, as more fully described on Schedule 2.2(a)(iii) and Schedule 5.5(a)
attached to the Agreement.
"Disposed Items" shall have the meaning set forth in Section
2.3(a)(iii).
"Easements Agreements" mean those certain Easements Agreements, to be
entered into at the Closing by Buyer and Seller, in substantially the form as
Exhibits C-1, C-2, C-3 and C-4 attached to the Agreement.
"Emission Reduction Credits" means credits, in units that are
established by the environmental regulatory agency with jurisdiction over the
source or facility that has obtained the credits, resulting from a reduction
in the emissions of air pollutants from an emitting source or facility
(including, and to the extent allowable under applicable law, reductions from
retirements, control of emissions beyond that required by applicable law and
fuel switching), that: (i) have been certified by the Maryland Department of
the Environment or the Virginia Department of Environmental Quality, as the
case may be, as complying with the law and regulations of the State of
Maryland or the Commonwealth of Virginia, as the case may be, governing the
establishment of such credits; or (ii) have been certified by any other
applicable regulatory authority as complying with the law and regulations
governing the establishment of such credits. Emission Reduction Credits
include certified air emissions reductions, as described above, regardless of
whether the regulatory agency certifying such reductions designates such
certified air emissions reductions by a name other than "emissions reduction
credits", but do not include SO2 Allowances or Nox Allowances.
"Employees" shall have the meaning set forth in Section 9.1(d).
"Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and use
limitations, exceptions, conservation easements, rights-of-way, deed
restrictions, encumbrances and charges of any kind.
"Entitlements" means all rights of Seller to receive any capacity,
energy, ancillary services and other benefits under any PPA.
<PAGE>
"Environmental Laws" means all former, current and future Federal,
state, local and foreign laws (including common law), treaties, regulations,
rules, ordinances, codes, decrees, judgments, directives or orders (including
consent orders) and Environmental Permits, in each case, relating to pollution
or protection of the environment or natural resources, including laws relating
to Releases or threatened Releases, or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, arrangement
for disposal, transport, recycling or handling, of Hazardous Substances.
"Environmental Liability" means all liabilities, obligations,
damages, losses, claims, actions, suits, judgments, orders, fines, penalties,
fees, expenses and costs, including: (i) remediation costs, engineering costs,
environmental consultant fees, laboratory fees, permitting fees, investigation
costs and defense costs and attorneys' fees and expenses; (ii) any claims,
demands and causes of action relating to or resulting from any personal injury
(including wrongful death, pain, suffering and loss of consortium), property
damage (real or personal) (including nuisance, trespass and diminution of
value) or natural resource damage; and (iii) any penalties, fines or costs
associated with the failure to comply with any Environmental Law.
"Environmental Permits" means the permits, licenses, consents,
approvals and other governmental authorizations with respect to Environmental
Laws relating primarily to the power generation operations of the Generating
Facilities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 5.12.
"Estimated Non-Fuel Related Adjustment Amount" shall have the meaning
set forth in Section 4.2(b).
"Estimated Purchase Price" shall have the meaning set forth in
Section 4.2.
"Exempt Facilities" means those certain facilities included in the
Auctioned Assets which are listed on Schedule 7.12 attached to the Agreement.
"FERC" means the Federal Energy Regulatory Commission.
"Filed Seller SEC Documents" means the reports, schedules, forms,
statements and other documents filed by Seller with the Securities and
Exchange Commission, and publicly available prior to the date of the
Agreement.
"Final Allocation" shall have the meaning set forth in Section 3.3.
<PAGE>
"Final Fuel Related Adjustment Amount" shall have the meaning set
forth in Section 3.2(a).
"Final Non-Fuel Related Adjustment Amount" shall have the meaning set
forth in Section 3.2(a).
"GAAP" shall have the meaning set forth in Section 1.2.
"Generating Facilities" means the Generating Plants and related
facilities (including the Chalk Point/Morgantown Fuel Pipeline, the Ryceville
Pumping Station, the Production Service Center, and the Ash Storage Sites), as
more fully described on Schedule 2.2(a)(iii) and Schedule 5.5(a) attached to
the Agreement.
"Generating Plants" means the following power generating plants of
the Seller: the Potomac River Station; the Dickerson Station; the Chalk Point
Station; and the Morgantown Station.
"Good Utility Practice" means any of the applicable practices,
methods and acts:
(i) required by FERC, NERC, MAAC, PJM Interconnection LLC,
the PJM System Operator, or the successor of any of
them, whether or not the Party whose conduct is at
issue is a member thereof;
(ii) required by applicable law or regulations;
(iii) required by the Pepco Interconnection Standards or
the policies and standards of the Seller relating
to emergency operations;
(iv) otherwise engaged in or approved by a significant
portion of the electric utility industry during
the relevant time period;
which, in the exercise of reasonable judgment in light of the facts known at
the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with law, regulation, good
business practices, reliability, safety, and expedition. Good Utility
Practice is not intended to be limited to the optimum practice, method, or act
to the exclusion of all others, but rather to be acceptable practices,
methods, or acts generally accepted in the region.
<PAGE>
"Governmental Authority" means any court, administrative or
regulatory agency or commission or other governmental entity or
instrumentality, domestic, foreign or supranational or any department thereof.
"Greenhouse Gas Emission Reduction Credits" mean with respect to a
Federal or state law or regulation that imposes, or may at any time after the
Closing Date impose, a quantitative limitation on greenhouse gas emissions, or
taxes such emissions, an authorization to emit a unit of greenhouse gases or a
credit against such quantitative limit or taxes with respect to recognized
reductions in greenhouse gases, where greenhouse gases include carbon dioxide,
methane, nitrous oxide, hydrofluorcarbons, perfluorocarbons, and/or sulfur
hexafluoride.
"Guarantee Agreement" means the Guarantee Agreement to be entered
into at Closing by Guarantor and Seller, substantially in the form of Exhibit
D attached to the Agreement.
"Guarantor" means any credit-worthy entity, acceptable to Seller,
which agrees to provide an unconditional guarantee to Seller of the full and
punctual payment of Buyer's obligations hereunder and under the Ancillary
Agreements.
"Hazardous Substances" means (i) any petrochemical or petroleum
products, crude oil or any fraction thereof, ash, radioactive materials, radon
gas, asbestos in any form, urea formaldehyde foam insulation or
polychlorinated biphenyls, (ii) any chemicals, materials, substances or wastes
defined as, included in, or that are alleged or determined by any Person or
Governmental Authority to be included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances," "PCBs,"
"contaminants," "asbestos" or "pollutants" or similar term in any
Environmental Law, (iii) any other chemical, material, substance or waste
which is prohibited, limited or regulated by any Environmental Law, or (iv)
any noise, electromagnetic radiation, and any other substance or energy which
causes or is alleged to cause personal injury (including wrongful death, pain,
suffering and loss of consortium) or property damage (including nuisance,
trespass and diminution of value).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"IBEW" means Local Union #1900 of the International Brotherhood of
Electrical Workers.
"IBEW Collective Bargaining Agreement" means that certain Collective
Bargaining Agreement, between the Seller and the IBEW, effective December 8,
1998, as amended from time to time.
<PAGE>
"Income Tax" means any Federal, state, local or foreign Tax or surtax
(i) based upon, measured by or calculated with respect to income, profits or
receipts or (ii) based upon, measured by or calculated with respect to
multiple bases (including corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect
to, is described in clause (i), in each case, together with any interest,
penalties, or additions to such Tax.
"Indemnifiable Loss" shall have the meaning set forth in Section
10.1(a).
"Indemnifying Party" shall have the meaning set forth in Section
10.1(c).
"Indemnitee" shall have the meaning set forth in Section 10.01(c).
"Information Memorandum" means the Information Memoranda, prepared on
behalf of the Seller, describing the Generating Facilities and the PPAs, and
the materials delivered with such Information Memoranda, as such Information
Memoranda and such materials may have been amended or supplemented.
"Interconnection Agreements" means those certain Interconnection
Agreements, to be entered into at the Closing by Seller and Buyer,
substantially in the form of Exhibits E-1, E-2, E-3 and E-4 attached to the
Agreement.
"Interconnection Facilities" shall have the meaning given to such
term in the Interconnection Agreements.
"Interconnection Services" shall have the meaning set forth in the
Interconnection Agreements.
"Inventory Survey" shall have the meaning set forth in Section
3.2(a).
"Knowledge" means the actual knowledge of the directors and executive
officers of the specified Person, which directors and executive officers are
charged with the responsibility for the particular function as of the date of
the Agreement, or with respect to any certificate delivered pursuant to the
Agreement, the date of delivery of such certificate.
"Loan Agreements" shall have the meaning set forth in Section
2.3(a)(xii).
"Local Area Support Agreement" means that Local Area Support
Agreement, to be entered into at Closing by Seller and Buyer, substantially in
the form of Exhibit F attached to the Agreement.
<PAGE>
"MAAC" means the Mid-Atlantic Area Council.
"Material Adverse Effect" means any change, or effect on the
Auctioned Assets, that, individually or in the aggregate, causes the value of
the Auctioned Assets to decrease by more than ten percent (10%) as compared to
the value of the Auctioned Assets immediately prior to the occurrence of such
change or effect, other than (i) any change or effect resulting from changes
in the international, national, regional or local wholesale or retail energy,
capacity or ancillary services electric power markets, (ii) any change or
effect resulting from changes in the international, national, regional or
local markets for fuel, (iii) any change or effect resulting from changes in
the national, regional or local electric transmission systems, (iv) any change
or effect resulting from any bid cap, price limitation, market power
mitigation measure, or other regulatory or legislative measure in respect of
transmission services or the wholesale or retail energy, capacity or ancillary
services markets adopted or approved by FERC, any PSC or any other
Governmental Authority or proposed by any person, (v) any change or effect
resulting from any regulation, rule, procedure or order adopted or proposed by
or with respect to, or related to, the PJM, (vi) any change or effect
resulting from any action or measure taken or adopted, or proposed to be taken
or adopted, by any local, state, regional, national or international
reliability organization, (vii) any change resulting from the failure of any
Employees not to be employed by the Buyer following the Closing, (viii) any
changes in law, or any judgments, orders or decrees that apply generally to
similarly situated Persons, and (ix) any materially adverse change in or
effect on the Auctioned Assets which is cured by Seller before the Closing
Date. For purposes of determining the occurrence of a Material Adverse
Effect, the initial value of the Auctioned Assets shall be the amount set
forth in clause (a) of Section 3.1.
"Material Contracts" shall have the meaning set forth in Section
5.7(a).
"MDPSC" means the Public Service Commission of the State of Maryland.
"Morgantown Station" means that certain coal/oil-fueled generating
facility of the Seller located on the Potomac River near Newburg, Maryland, as
more fully described on Schedule 2.2(a)(iii) and Schedule 5.5(a) attached to
the Agreement.
"NERC" means North American Electric Reliability Council or any
successor thereto.
"Non-Union Employees" shall have the meaning set forth in Section
9.1(d).
"Novation" shall have the meaning set forth in Schedule 2.4 attached
hereto.
<PAGE>
"NOx Allowances" means nitrogen oxide allowances that have been
allocated to the Seller for the Generating Plants by (i) the Maryland
Department of the Environment under the State of Maryland's NOx Budget Program
authorizing the emission of one ton of nitrogen oxide during the specified
control period, or (ii) the Virginia Department of Environmental Quality under
any budget program which may be established for the Commonwealth of Virginia.
"OE PPA" collectively means those agreements identified in Item 4 of
Section I of Schedule 2.2(a)(iv) attached hereto.
"Off-Site" means any location except (i) the Auctioned Assets, the
Potomac River Station Site, and (ii) any location to or under which Hazardous
Substances present or disposed on the Auctioned Assets or the Potomac River
Station Site have migrated or may migrate in the future.
"Operating Agreement" means that certain Operating Agreement, to be
entered into at the Closing by Buyer and Seller, in substantially the form as
Exhibit G to the Agreement.
"Operating Records" shall have the meaning set forth in Section
2.2(a)(viii).
"Panda Litigation" means (i) the litigation captioned Potomac
Electric Power Company v. Panda-Brandywine, L.P., No. S00-CV-1103, filed in
the United States District Court for the District of Maryland, and (ii) the
legal proceedings referenced in Schedule 5.8 hereto.
"Panda PPA" means that certain PPA identified in Item 5 of Section I
of Schedule 2.2(a)(vi) attached hereto.
"Panda Release" shall have the meaning set forth in Section
3.4(a)(i).
"Party" shall have the meaning set forth in the Preamble.
"Pepco Interconnection Standards" means Pepco's Interconnection and
Parallel Operating Guideline as amended from time to time.
"Permits" means the permits, licenses, consents, approvals and other
governmental authorizations (other than with respect to Environmental Laws)
relating primarily to the power generation operations of the Generating
Facilities.
"Permitted Capital Expenditures" shall have the meaning set forth in
Section 7.1(b)(viii).
<PAGE>
"Permitted Exceptions" means (i) all exceptions, restrictions,
easements, charges, rights-of-way and monetary and nonmonetary encumbrances
which are set forth in any Permits or Environmental Permits, (ii) statutory
liens for current taxes or assessments not yet due or delinquent or the
validity of which is being contested in good faith by appropriate proceedings,
(iii) mechanics', carriers', workers', repairers' and other similar liens
arising or incurred in the ordinary course of business relating to obligations
as to which there is no default on the part of Seller or the validity of which
are being contested in good faith by appropriate proceedings, (iv) purchase
money security interests in respect of personal property arising or incurred
in the ordinary course of business, (v) zoning, entitlement, conservation
restriction and other land use and environmental regulations by Governmental
Authorities, (v) all matters disclosed on those surveys listed on Schedule
5.5(b) to the Agreement and any other facts that would be disclosed by an
accurate survey and physical inspection of the Buyer Real Estate, (vi)
Encumbrances, easements or other restrictions created pursuant to or
contemplated by any Ancillary Agreement, (vii) Encumbrances of record or
Encumbrances otherwise disclosed to Buyer in the Agreement or the Ancillary
Agreements with respect thereto, (viii) restrictions and regulations imposed
by the PJM, any Governmental Authority or any local, state, regional, national
or international reliability council and (ix) such other Encumbrances or
imperfections in or failure of title which would not, individually or in the
aggregate, create a Material Adverse Effect.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization or
Governmental Authority.
"PJM" means the Pennsylvania-New Jersey-Maryland interconnected power
pool operated under the PJM Agreement and any successor thereto including any
regional transmission operator, independent system operator, transco, or any
other independent system administrator that possesses operational or planning
control over the Transmission System.
"PJM Agreement" means the Amended and Restated Operating Agreement of
the PJM Interconnection LLC dated as of June 2, 1997.
"PJM Control Area" shall mean the control area recognized by NERC as
the PJM Control Area.
"PJM Interconnection LLC" means the independent system operator of
the PJM Control Area pursuant to the PJM Agreement and the PJM Tariff.
"PJM System Operator" means the PJM energy control center staff
responsible for central dispatch as provided in the PJM Agreement.
<PAGE>
"PJM Tariff" means the PJM Open Access Transmission Tariff providing
transmission service within the PJM Control Area, including schedules,
appendices, or exhibits attached thereto, as in effect from time to time and
as amended or modified.
"Potomac River Lease" means that Generating Station Lease Agreement,
to be entered into at the Closing by Seller and Buyer, substantially in the
form of Exhibit H attached to the Agreement.
"Potomac River Real Property" means that certain real property of the
Seller (which includes the Potomac River Station Site) described on Schedule
5.5(a) attached to the Agreement.
"Potomac River Station" means that certain coal-fueled generating
facility of the Seller located on the Potomac River in Alexandria, Virginia,
as more fully described on Schedule 2.2(a)(iii) and Schedule 5.5(a) attached
to the Agreement.
"Potomac River Station Site" means that portion of the Potomac River
Real Property to be leased by the Seller to the Buyer pursuant to the terms of
the Potomac River Lease.
"PPAs" collectively means those power purchase agreements of the
Seller listed in Section I of Schedule 2.2(a)(iv) attached to the Agreement.
"Production Service Center" means that primary support facility of
the Seller located near Washington, D.C., as more fully described on Schedule
2.2(a)(iii) and Schedule 5.5(a) attached to the Agreement.
"Prorated Items" shall have the meaning set forth in Section
2.3(a)(viii).
"Protective Relaying System" means the system relating to the
Generating Facilities comprised of components collectively used to detect
defective power system elements or other conditions of an abnormal nature,
initiate appropriate control circuit action in response thereto and isolate
the appropriate system elements in order to minimize damage to equipment and
interruption to service.
"PSC" means, either individually or collectively, the MDPSC, VCC, PUC
and DCPSC.
"Purchase Price" shall have the meaning set forth in Section 3.1.
"PUC" means the Pennsylvania Utility Commission.
<PAGE>
"Qualified Offer" shall have the meaning set forth in Section 9.1(d).
"Regulatory Material Adverse Effect" shall occur where the Required
Regulatory Approval contains terms and conditions that are materially adverse
to the Seller taken as a whole.
"Release" means any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.
"Required Regulatory Approvals" means with respect to a Party, any
consent or approval of, filing with, or notice to, any Governmental Authority
that is necessary for the execution and delivery of the Agreement and the
Ancillary Agreements by such Party or the consummation thereby of the
transactions contemplated hereby.
"Restraints" shall have the meaning set forth in Section 8.1(b).
"Retained Assets" shall have the meaning set forth in Section 2.2(b).
"Retained Liabilities" shall have the meaning set forth in Section
2.3(b).
"Retained Rights" shall have the meaning given to such term in
Schedule 2.4 attached hereto.
"Revenue Bonds" shall have the meaning set forth in Section
7.12(a)(i).
"Revenue Meters" means all meters measuring demand, energy and
reactive components, and all pulse isolation relays, pulse conversion relays
and associated totalizing and remote access pulse recorder equipment, in each
case, required to measure the transfer of energy between the Parties.
"Ryceville Pumping Station" means that certain pumping station and
all components located in Ryceville, Maryland, as more fully described on
Schedule 2.2(a)(iii) and Schedule 5.5(a) attached to the Agreement.
"Seller" shall have the meaning set forth in the Preamble to the
Agreement.
"Seller Facilities" means those facilities of the Seller which are
described in the Easements Agreement.
<PAGE>
"Seller Indemnitees" shall have the meaning set forth in Section
10.1(b).
"Seller Real Estate" means all real property and leaseholds or other
interests in real property of Seller (including the Potomac River Real
Property), and other than Buyer Real Estate.
"Seller Required Regulatory Approvals" shall have the meaning set
forth in Section 5.3(b).
"Seller's Pension Plans" shall have the meaning set forth in Section
9.2.
"Seller's Savings Plan" shall have the meaning set forth in Section
9.3.
"Seller's Severance Plans" mean those certain plans or policies of
the Seller, in effect on the date of Closing, which offer severance benefits
to the Non-Union Employees, as described on Schedule 1.1(c) attached to the
Agreement.
"SO2 Allowances" mean sulfur dioxide allowances that have been
allocated to Seller for the Generating Facilities by the Administrator of the
United States Environmental Protection Agency under Title IV of the Clean Air
Act authorizing the emission of one ton of sulfur dioxide per allowance during
or after a specified calendar year.
"Support Operations" mean the business operations of the Seller which
are primarily engaged in the provision of support services to the ongoing
operation of the Generating Facilities (including business planning and
strategy services, fuel supply services, bulk power management services,
generation engineering and maintenance services, and environmental services).
"Tax Benefit" means, with respect to any Indemnifiable Loss for any
person, the positive excess, if any, of the Tax liability of such person
without regard to such Indemnifiable Loss over the Tax liability of such
person taking into account such Indemnifiable Loss, with all other
circumstances remaining unchanged.
"Tax Cost" means, with respect to any indemnity payment for any
person, the positive excess, if any, of the Tax liability of such person
taking such indemnity payment into account over the Tax liability of such
person without regard to such payment, with all other circumstances remaining
unchanged.
"Tax Return" means any return, report, information return or other
document (including any related or supporting information) required to be
supplied to any authority with respect to Taxes.
<PAGE>
"Taxes" means all taxes, surtaxes, charges, fees, levies, penalties
or other assessments imposed by any United States Federal, state or local or
foreign taxing authority, including Income Taxes, excise, property, sales,
transfer, franchise, special franchise, payroll, recording, withholding,
social security or other taxes, or any liability for taxes incurred by reason
of joining in the filing of any consolidated, combined or unitary Tax Returns,
in each case including any interest, penalties or additions attributable
thereto; provided, however, that "Taxes" shall not include sewer rents or
charges for water.
"Termination Date" shall have the meaning set forth in Section
11.1(b).
"Third Party Claim" shall have the meaning set forth in Section
10.2(a).
"Total Cash Compensation" shall have the meaning set forth in Section
9.1(d).
"Transferable Permits" shall have the meaning set forth in Section
2.2(a)(v).
"Transferred NOx Allowances" shall have the meaning set forth in
Section 2.2(a)(vii).
"Transferred SO2 Allowances" shall have the meaning set forth in
Section 2.2(a)(vi).
"Transferred Employee Records" shall have the meaning set forth in
Section 2.2(a)(viii).
"Transferred Employees" shall have the meaning set forth in Section
9.1(d).
"Transferred Non-Union Employees" shall have the meaning set forth in
Section 9.1(d).
"Transferred Savings Employees" shall have the meaning set forth in
Section 9.3.
"Transferred Union Employees" shall have the meaning set forth in
Section 9.1(a).
"Transition Power Agreements" means that Transition Power Agreement
(District of Columbia) and Transition Power Agreement (Maryland), to be
entered into at Closing by Seller and Buyer, substantially in the form of
Exhibits J-1 and J-2, respectively, attached to the Agreement.
<PAGE>
"Transmission System" shall have the meaning set forth in Section
2.2(b)(i).
"Unassigned PPA" shall have the meaning set forth in Schedule 2.4
attached hereto.
"Union Employees" shall have the meaning set forth in Section 9.1(a).
"VCC" means the Virginia State Corporation Commission.
"WARN Act" means the Federal Worker Adjustment Retraining and
Notification Act of 1988, as amended.
<PAGE>
EXHIBIT A
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment Agreement")
dated as of _________, 2000 by and between Potomac Electric Power Company, a
District of Columbia and Virginia corporation ("Seller"), and ____________, a
____________ corporation ("Buyer"). Seller and Buyer are referred to
individually as a "Party," and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Seller and Buyer are parties to that certain Asset Purchase
and Sale Agreement, dated as of June 7, 2000 (as amended, supplemented or
otherwise modified from time to time, the "Asset Sale Agreement");
WHEREAS, pursuant to the Asset Sale Agreement, Buyer has agreed to
assume from Seller the Assumed Obligations (as defined in the Asset Sale
Agreement) and Seller has agreed to retain the Retained Liabilities
(as defined in the Asset Sale Agreement); and
WHEREAS, it is the intention of the Parties that by the execution and
delivery of this Assignment Agreement, Seller will assign to Buyer and Buyer
will assume and agree to discharge when due, without recourse to Seller, all
Assumed Obligations, as more particularly described and set forth in Section
2.3 of the Asset Sale Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller and Buyer hereby agree as follows:
1. Capitalized terms which are used but not defined in this
Assignment Agreement shall have the meaning ascribed to such terms in the
Asset Sale Agreement.
2. Seller hereby sells, assigns, conveys, transfers and delivers to
Buyer all of the right, title and interest that Seller possesses and has the
right to transfer in, to, and under the Transferable Permits, the Transferred
SO2 Allowances, the Transferred NOX Allowances, the Contracts, the third-party
warranties and guarantees, and all other intangible personal property included
in the Auctioned Assets.
3. Buyer hereby assumes and agrees to discharge when due, without
recourse to Seller, all liabilities and obligations of Seller constituting the
Assumed Obligations. Notwithstanding anything to the contrary herein, Buyer
shall not assume or perform any of the Retained Liabilities.
<PAGE>
4. Neither the making nor the acceptance of this Assignment Agreement
shall enlarge, restrict or otherwise modify the terms of the Asset Sale
Agreement or constitute a waiver or release by Seller or Buyer of any
liabilities, duties or obligations imposed upon either of them by the terms
of the Asset Sale Agreement, including, without limitation, the
representations and warranties and other provisions which the Asset Sale
Agreement provides shall survive the date hereof.
5. In the event that any provision of this Assignment Agreement be
construed to conflict with a provision of the Asset Sale Agreement, the
provision in the Asset Sale Agreement shall be deemed controlling.
6. This Assignment Agreement shall bind and shall inure to the
benefit of the respective Parties and their respective successors and
permitted assigns.
7. No Third Party Beneficiary. Nothing in this Assignment Agreement is
intended to confer upon any other person except Buyer and Seller any rights or
remedies hereunder or shall create any third party beneficiary rights in any
person.
8. This Assignment Agreement shall be governed and construed in
accordance with the laws of the District of Columbia (regardless of the laws
that might otherwise govern under applicable principles of conflicts of law).
9. This Assignment Agreement may be executed in two counterparts,
each of which shall be deemed an original, but both of which together will
constitute one and the same instrument.
10. Seller hereby appoints _______________, a _______________ of
Seller, to be its duly authorized Attorney-in-Fact and in Seller's name to
execute, acknowledge and deliver this Assignment Agreement as its act and deed.
Buyer hereby appoints _____________, its ______________, to be its duly
authorized Attorney-in-Fact and in Buyer's name to execute, acknowledge and
deliver this Assignment Agreement as its act and deed.
<PAGE>
IN WITNESS WHEREOF, this Assignment Agreement has been duly executed
and delivered by the Parties as of the date first above written.
Attest: POTOMAC ELECTRIC POWER
COMPANY
By____________________ By___________________________
Secretary Name:
Title:
Attest: [BUYER]
By_____________________ By___________________________
Secretary Name:
Title:
<PAGE>
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction aforesaid,
does hereby certify that ______________, personally known to me (or
satisfactorily proven) to be the person who signed as attorney-in-fact for
Seller named in the foregoing Instrument, personally appeared before me in
said jurisdiction, and as such attorney-in-fact and by virtue of the
authority vested in him by said Instrument, acknowledged the same to be the
act and deed of said corporation, and that he executed and delivered the
same as such.
WITNESS my hand and official seal this ___ day of ___________, 2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction aforesaid,
does hereby certify that ______________, personally known to me (or
satisfactorily proven) to be the person who signed as attorney-in-fact
for Buyer named in the foregoing Instrument, personally appeared before me
in said jurisdiction, and as such attorney-in-fact and by virtue of the
authority vested in him by said Instrument, acknowledged the same to be
the act and deed of said corporation, and that he executed and delivered
the same as such.
WITNESS my hand and official seal this ___ day of ___________, 2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
EXHIBIT B
BILL OF SALE
THIS BILL OF SALE is made as of the ___ day of ____________, 2000 by
Potomac Electric Power Company, a District of Columbia and Virginia
corporation ("Seller"), for the benefit of ________________, a
___________________ ("Buyer").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Purchase and Sale Agreement,
dated as of June 7, 2000 (as amended, supplemented or otherwise modified from
time to time, the "Asset Sale Agreement"), by and between Seller and Buyer,
Seller has agreed to sell, assign, convey, transfer and deliver all of its
right, title and interest in and to the Auctioned Assets (as defined in the
Asset Sale Agreement) to Buyer, and Buyer has agreed to purchase, assume and
acquire such Auctioned Assets from Seller; and
WHEREAS, pursuant to the Asset Sale Agreement, Seller has entered
into this Bill of Sale as evidence of such conveyance to Buyer.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, Seller hereby agrees as follows:
1. Defined Terms. Capitalized terms which are used but not defined
in this Bill of Sale shall have the meaning ascribed to such terms in the
Asset Sale Agreement.
2. Assignment. Seller does hereby sell, assign, convey, transfer
and deliver to Buyer all of Seller's right, title and interest in and to all
of the Auctioned Assets.
3. Retained Assets Not Assigned. Notwithstanding anything expressed
herein to the contrary, the Retained Assets are specifically excluded from the
Auctioned Assets and shall be retained by Seller following the Closing Date.
4. Disclaimers. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
EXPRESSLY SET FORTH IN ARTICLE V OF THE ASSET SALE AGREEMENT, THE AUCTIONED
ASSETS ARE BEING SOLD AND TRANSFERRED "AS IS, WHERE IS", AND SELLER IS NOT
MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, CONCERNING SUCH AUCTIONED ASSETS (INCLUDING ANY RELATING
TO LIABILITIES, OPERATIONS OF THE GENERATING FACILITIES, CONDITION, VALUE OR
QUALITY OF THE AUCTIONED ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE),
RISKS OR OTHER INCIDENTS OF THE AUCTIONED ASSETS) OR WITH RESPECT TO THE ASSET
SALE AGREEMENT OR THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED
<PAGE>
THEREBY. SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH
RESPECT TO THE AUCTIONED ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR
COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF ANY
GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL
LAWS, OR WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL
PROPERTY TO OPERATE THE AUCTIONED ASSETS. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN SECTION 5.10 OF THE ASSET SALE AGREEMENT, SELLER FURTHER
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF
HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING UNDER
ENVIRONMENTAL LAWS WITH RESPECT TO THE AUCTIONED ASSETS, ALL OF WHICH ARE
HEREBY EXPRESSLY WAIVED BY BUYER. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE
INFORMATION SET FORTH IN, OR CONTEMPLATED BY, THE INFORMATION MEMORANDUM.
5. Binding Effect; Assignment. This Bill of Sale and all of the
provisions hereof shall be binding upon Seller and its successors and
permitted assigns and shall inure to the benefit of Buyer and its successors
and permitted assigns.
6. No Third Party Beneficiary. Nothing in this Bill of Sale is
intended to confer upon any other person except Buyer and Seller any rights or
remedies hereunder or shall create any third party beneficiary rights in any
person.
7. Governing Law. This Bill of Sale shall be governed by and
construed in accordance with the laws of the District of Columbia (regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law).
8. Construction. This Bill of Sale is delivered pursuant to and is
subject to the terms of the Asset Sale Agreement. In the event of any
conflict or ambiguity between the terms of the Asset Sale Agreement and the
terms of this Bill of Sale, the terms of the Asset Sale Agreement shall
control.
9. Counterparts. This Bill of Sale may be executed in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
10. Power-of-Attorney. Seller hereby appoints _______________, a
_______________ of Seller, to be its duly authorized Attorney-in-Fact and in
Seller's name to execute, acknowledge and deliver this Agreement as its act
and deed. Buyer hereby appoints _____________, its ______________, to be its
duly authorized Attorney-in-Fact and in Buyer's name to execute, acknowledge
and deliver this Agreement as its act and deed.
<PAGE>
IN WITNESS WHEREOF, this Bill of Sale has been duly executed and
delivered by Seller as of the date first above written.
Attest: POTOMAC ELECTRIC POWER COMPANY
By____________________ By___________________________
Secretary Name:
Title:
ACCEPTED AND AGREED TO
THIS ____ DAY OF __________, 2000:
Attest: [BUYER]
By_____________________ By___________________________
Secretary Name:
Title:
<PAGE>
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction aforesaid,
does hereby certify that ______________, personally known to me (or
satisfactorily proven) to be the person who signed as attorney-in-fact for
Seller named in the foregoing Instrument, personally appeared before me in
said jurisdiction, and as such attorney-in-fact and by virtue of the authority
vested in him by said Instrument, acknowledged the same to be the act and deed
of said corporation, and that he executed and delivered the same as such.
WITNESS my hand and official seal this ___ day of ___________, 2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction aforesaid,
does hereby certify that ______________, personally known to me (or
satisfactorily proven) to be the person who signed as attorney-in-fact for
Buyer named in the foregoing Instrument, personally appeared before me in said
jurisdiction, and as such attorney-in-fact and by virtue of the authority
vested in him by said Instrument, acknowledged the same to be the act and deed
of said corporation, and that he executed and delivered the same as such.
WITNESS my hand and official seal this ___ day of ___________, 2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
EXHIBIT C-1
AFTER RECORDING PARCEL ID#
PLEASE RETURN TO: STREET ADDRESS:
_________________ _______________
_________________ _______________
_________________ _______________
EASEMENT, LICENSE AND ATTACHMENT AGREEMENT
(Potomac River)
THIS EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (the
"Agreement"), is dated as of ______________, 2000, and is entered
into by and between ________________________________________, a
corporation organized and existing under the laws of the State of
__________ and having an office at ____________________________
("Generator") and POTOMAC ELECTRIC POWER COMPANY, a District of
Columbia and Virginia corporation and having an office at 1900
Pennsylvania Avenue, N.W., Washington, DC 20068 ("Pepco").
Generator and Pepco may hereinafter be referred to individually as
a "Party" and collectively as the "Parties."
RECITALS
A. Generator and Pepco have entered into an Asset
Purchase and Sale Agreement for Generating and Related Assets (the
"Asset Sale Agreement"), dated June 7, 2000, for the sale of
Pepco's generating station known as the Potomac River Station (as
defined in the Asset Sale Agreement), which is located on that
certain parcel of real property which has been leased by Pepco to
Generator pursuant to that certain Site Lease Agreement between
Pepco and Generator of even date herewith (the "Site Lease
Agreement") and is more particularly described in Exhibit "A"
attached hereto (the "Generator's Leasehold Property"). The
Generator's Leasehold Property constitutes a portion of the overall
land comprising the Potomac River Station, which overall land is
more particularly described in Exhibit "B" attached hereto (the
"Pepco Real Property"). In connection with Pepco's sale of Potomac
River Station pursuant to the Asset Purchase Agreement, Pepco has
sold to the Generator certain improvement located upon the
Generator's Leasehold Property (excluding the Building Addition, as
described in, and leased to Generator pursuant to, the Site Lease
Agreement) (such improvements sold to Generator being referred to
herein as the "Generator's Improvements").
B. Pepco intends to continue to operate its
transmission and distribution business on and from that portion of
the Pepco Real Property which is not leased to Generator pursuant
to the Site Lease, which portion is more particularly described in
Exhibit "C" attached hereto (the "Non-Leased Pepco Real Property").
C. Pepco will continue to own and operate certain
assets used in the conduct of its transmission and distribution
business which are located upon the Generator's Leasehold Property,
and Pepco requires Access (as defined below) to, and certain other
rights with respect to, the Generator's Leasehold Property in
connection therewith.
<PAGE>
Generator, in the operation and conduct of its generation business,
will require Access to, and certain other rights with respect to,
the Non-Leased Pepco Real Property. Furthermore, Pepco and
Generator have entered into an Interconnection Agreement (the
"Connection Agreement"), dated as of __________, 2000, pursuant to
which Pepco has agreed to provide certain Interconnection Service
to Generator required for Generator's conduct of its generation
business at Potomac River Station.
D. In order for the Parties each to (i) enjoy the full
benefit of their respective property rights, real or personal, and
conduct their respective businesses thereat (ii) fulfill legal
requirements, and (iii) comply with their respective agreements
under the Connection Agreement, each Party requires certain
easements, licenses, rights-of-way and/or attachment rights in, on,
over and above, or with respect to, real and or personal property
of the other Party.
AGREEMENT
NOW, THEREFORE, the Parties, in consideration of the
mutual covenants and agreements contained herein and in the Asset
Sale Agreement and the Connection Agreement, and for One Dollar
($1.00) and other good and valuable consideration, the receipt
whereof and sufficiency of which are hereby acknowledged, each
intending to be legally bound and to bind their respective
successors and assigns, hereby mutually agree as follows:
1. DEFINITIONS
1.1 Definitions. Any capitalized terms which are
used but not defined in the body of this Agreement shall have the
meanings given to such terms in the attached Schedule 1.1.
2. EASEMENTS
2.1 Grant of Easements to Pepco. Generator does
hereby give, grant, bargain, sell, assign and convey unto Pepco,
the following easements on the Generator's Leasehold Property, the
Generator's Improvements and the Building Addition for the
following purposes:
(a) An easement for the Use, operation and
maintenance of the Retained Assets (as described in the Asset Sale
Agreement) located upon the Generator's Leasehold Property and any
other equipment of any nature or kind retained by Pepco and located
upon the Generator's Leasehold Property, together with any other
equipment used in connection with the foregoing (together with
replacements thereof and substitutions therefor).
(b) An easement which enables Pepco to keep
and maintain in their present locations, and operate, any
Transmission Facilities, Distribution Facilities and
<PAGE>
other assets owned by Pepco and located upon the Generator's
Leasehold Property, together with an easement for all purposes
reasonably deemed necessary or convenient by Pepco to exercise any
right or fulfill any obligation under the Connection Agreement,
including the right to Use any improvements constructed, maintained
or installed in connection therewith.
(c) An easement and other Generator's
Improvements and the Building Addition of Access to those certain
generating buildings (and any replacements thereof) located upon
the Generator's Leasehold Property in and upon which certain of
Pepco's Distribution Facilities and Transmission Facilities are
located. Such easement shall include, without limitation, the
right to have keys, access codes or other access methods necessary
to enter any of such generating buildings. Furthermore, the
exercise of the easement right set forth in this subparagraph shall
be subject to the provisions of the Connection Agreement including,
without limitation, Section 3.3 thereof.
(d) An easement of Access to the Generator's
Leasehold Property for the purposes of exercising any of the rights
granted in this Section 2.l, in the Connection Agreement or the
Asset Sale Agreement.
(e) An easement of Access to, and the right to
use, the parking lots, access roads, driveways and other such
facilities located upon the Generator's Leasehold Property.
(f) Pepco's exercise of the rights, easements,
privileges and licenses granted to it pursuant to this Section 2.1
shall be limited to Qualified Personnel or employees of contractors
employed by Pepco who, in either event, are under Pepco's and/or
its contractors' direct supervision and whose duties include, or
who are engaged for the purpose of, Use of the rights granted
pursuant to this Section 2.1.
(g) The easements granted pursuant to this
Section 2.1 shall expressly include Pepco's right to lease, license
or otherwise permit Affiliates or third parties to use Pepco's
facilities upon such terms and for such purposes as Pepco may
determine from time to time, subject to the terms and conditions of
this Agreement.
2.2 Reservation by Generator of Certain Rights.
Generator reserves to itself, from the easements granted pursuant
to Section 2.1 hereof, the following rights, subject, however, to
the provisions of the final paragraph of this Section 2.2:
(a) the right to (i) keep and maintain
Generator's Leasehold Property and all improvements and facilities
owned by Generator and located upon the Generator's Leasehold
Property in their present locations, and (ii) operate and maintain
all improvements and facilities owned by Generator and located upon
the Generator's Leasehold Property in a manner consistent with past
practice; and
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(b) the right to have Access to all portions
of the Generator's Leasehold Property for all purposes deemed
reasonably necessary or convenient by Generator in the operation
and conduct of its generation business or in order to perform any
act permitted, or fulfill any obligation of Generator, under the
Connection Agreement, including maintenance of the Generator's
Leasehold Property in the manner described in the Connection
Agreement.
(c) Generator's exercise of the rights
reserved to Generator in this Section 2.2, and the rights,
privileges and licenses granted to Generator in Section 2.3 shall
be exclusively limited to Qualified Personnel or employees of
contractors employed by Generator who, in either event, are under
Generator's and/or its contractors' direct supervision and whose
duties include, or who are engaged for the purpose of, Use of the
property described in clause (a) of this Section.
2.3 Grant of Easements, Right, Privilege and
License from Pepco to Generator.
(a) Pepco does hereby grant to Generator the
following easements, rights, privileges and licenses on and with
respect to the Non-Leased Pepco Real Property:
(i) An easement which enables Generator
to keep and maintain in their present locations, and operate, any
Generating Facilities and other assets owned by Generator and
located upon the Non-Leased Pepco Real Property.
(ii) An easement of Access to and upon the
Non-Leased Pepco Real Property for the purposes of exercising any
of the rights granted in the Connection Agreement or the Asset Sale
Agreement.
(b) In addition, but without limitation of
Generator's rights pursuant to the Connection Agreement, Pepco
agrees to make available to Generator (at no cost to Generator,
except as provided below) Pepco's master station voltage control
equipment (the "Equipment") located at Potomac River Station upon
the Generator's Leasehold Property during the term of this
Agreement, subject to the following terms and conditions, and
Generator agrees to comply with such terms and conditions:
(i) Generator's operation of the
Equipment shall at all times be subject to that certain Agreement
of Sale and Lease dated as of November 30, 1994 between NationsBank
Trust Company, National Association and Pepco (the "Control Center
Lease"), and Generator shall comply with the terms and conditions
thereof with respect to the use of the Equipment (including keeping
the Equipment free and clear of any liens, claims or encumbrances
of whatever nature, and identifying the Equipment as being owned by
Pepco, and shall not modify, alter, remove or add to the
Equipment);
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(ii) Generator shall operate and maintain
the Equipment in accordance with Good Utility Practice;
(iii) Generator shall be responsible
for all operating, repair and maintenance costs, taxes and the like
with respect to the Equipment, and shall reimburse Pepco promptly
upon invoicing for any such costs paid by Pepco;
(iv) Generator's Access to the Equipment
shall be in accordance with this Agreement;
(v) Generator's right to operate the
Equipment shall terminate in the event of actual or constructive
loss of the Equipment, damage rendering the Equipment beyond repair
or unfit for normal use, the condemnation or seizure of the
Equipment, the obsolescence of the Equipment or the material breach
by Generator of any of its covenants in this Section 2.3(b);
(vi) Pepco shall have no obligation to
Generator with respect to the Equipment other than to permit Access
to and operation of the Equipment in accordance with this Section
2.3(b);
(vii) The obligations of Generator
under Section 7.4 (maintenance of liability insurance coverage)
and Section 7.1 (indemnification) shall be applicable to the
Equipment; and
(viii) Pepco shall have Access to the
Equipment for purposes of complying with the terms and conditions
of the Control Center Lease and as necessary to perform any of the
obligations of Generator pursuant to this subparagraph (b) above to
the extent the same are not timely performed by Generator.
2.4 General Scope of Easements.
(a) Except as otherwise provided in Sections
2.2 and 2.3 above and Section 2.4(b) below, each easement and each
right, privilege and license granted hereby is and shall be a
perpetual grant, transfer, conveyance and right of Access to and
Use (subject to the terms of this Agreement) to the Grantee thereof
and to any future owner of the real property, improvements and
facilities benefited thereby. Notwithstanding the foregoing, all
easements, rights, privileges and licenses granted by this
Agreement are and shall be subject to the terms and conditions of
the Connection Agreement, and in the event
<PAGE>
of any inconsistency between the terms and conditions of the
Connection Agreement and the terms of this Agreement, the terms of
the Connection Agreement shall control.
(b) Any easement or right, privilege and
license granted hereunder for purposes of enabling a Party to
exercise any right or fulfill any obligation set forth in the
Connection Agreement will continue for the term of the Connection
Agreement, and thereafter if and to the extent that the right or
obligation (i) shall by its express terms survive the termination
or expiration of the Connection Agreement or (ii) is necessary for
the conduct of business by Grantee. In the event of the
termination or expiration of an easement or right, privilege and
license granted hereunder for purposes of enabling a Grantee to
exercise any right or fulfill any obligation set forth in the
Connection Agreement, all equipment and facilities installed or
maintained by such Grantee on the real property of the other Party
pursuant to said terminated or expired easement or right, privilege
and license shall, at the request of the other Party, be removed at
the sole cost and expense of such Grantee, and such Grantee shall,
at its sole cost and expense repair any damage to the real property
and/or equipment and facilities of the other Party damaged as a
result of such removal.
(c) All equipment and facilities installed or
maintained by Grantee pursuant to an easement or right, privilege
and license granted hereunder shall be maintained by Grantee in
accordance with Good Utility Practice and the Connection Agreement,
and Grantee shall make all repairs and replacements necessary to
keep such equipment and facilities in such condition.
(d) Generator may not Use any portion of
Generator's Leasehold Property burdened by any easement, right or
privilege granted to Pepco hereunder if such Use would materially
adversely affect the Use and enjoyment by Pepco of the rights
granted to it hereunder, or materially increase the costs or risks
associated with such Use.
(e) All easements granted herein shall be
deemed easements appurtenant to the parcel of real property
benefited thereby and shall run with such real property and shall
be deemed covenants running with the real property burdened
thereby.
2.5 Interpretation. The following shall apply in
interpreting any easement and any right, privilege and license
granted pursuant to this Agreement:
(a) Each easement and each right, privilege
and license granted herein is irrevocable except by written
agreement of the parties.
(b) With respect to any easement created by
this Agreement, the words "in," "upon," "to," "on," "over,"
"above," "through" and/or "under" shall be interpreted to include
all of such terms.
<PAGE>
(c) Each easement and each right, privilege
and license granted herein may be enjoyed without charge or fee to
Grantee of the easement.
(d) Each easement and each right, privilege
and license granted herein is also a grant of the additional right
of Access over Grantor's property to accomplish the purpose of such
easement or right, privilege and license, to perform any
obligations hereunder or in the Connection Agreement, and to comply
with any legal requirements affecting Grantee or its property
and/or improvements.
(e) Exercise of any easement or any right,
privilege and license granted hereunder permitting or requiring
maintenance, repairs, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal,
modification, replacement, expansion, or other work by Grantee upon
the property or improvements of Grantor shall be subject to the
following conditions:
(i) Work upon the facilities and
properties of either Party subject to
this Agreement shall be permitted only to
each Party's Qualified Personnel, and
Access to such facilities and properties
shall be permitted only to a Party's
Qualified Personnel and such consultants,
agents, contractors, subcontractors and
invitees as any Party may select or
permit; provided that any consultant,
agent, contractor, subcontractor
or invitee shall comply with all
applicable provisions of this Agreement
and the Connection Agreement.
(ii) Work shall be performed using
reasonable precautions to avoid
unreasonable interference with the
Use and enjoyment of Grantor's property
and improvements.
(iii) Except only as may be
specifically provided to the contrary
herein, Grantee shall not be
liable for damage, if any, which may be
caused by Grantee's normal and reasonable
Use of any easement, or right, privilege
or license granted hereunder.
(iv) Following completion of the work,
Grantee shall restore Grantor's property
and improvements to the same or as good a
condition as existed before the
commencement of the work.
(v) Any easement and any right,
privilege and license granted
herein which permits a Grantee
to maintain its property, equipment,
facilities and appurtenances on the
property and improvements owned by
Grantor also includes the right to
maintain in place on Grantor's property
and improvements any and all wires and
cables, connecting such property,
equipment,
<PAGE>
facilities, and appurtenances to (i) the
devices, machinery and equipment which
they measure, regulate and/or control,
and (ii) power sources.
(vi) Generator shall be solely responsible
for the maintenance of any roads, paths
and other means of entry or exit located
upon either the Generator's Real
Generator's Real Property or the Pepco
Real Property that are commonly utilized
by Generator and Pepco, and their
respective employees, agemts amd
contractors pursuant to this
Agreement or the Connection Agreement.
(f) Any easement granted pursuant to Section
2.1(a), (b) or (c) includes the right to (i) trim, cut, treat
and/or remove, by manual, mechanical, and chemical means, any and
all trees, brush, structures and other obstructions within the
easement area, as well as such trees, brush, structures and
vegetation outside of the easement area deemed reasonably necessary
or desirable by Pepco for the safe and secure operation of its
facilities; and (ii) obtain Access to Generator's Leasehold
Property for the purpose of performing the aforementioned acts.
2.6 Rules and Regulations.
Each Party may promulgate rules regulating the conduct of the
other Party in the exercise of rights under this Agreement provided
such rules and regulations do not unreasonably interfere with or
impede the affected Party's rights and easements as set forth
herein or in the Connection Agreement.
2.7 No Obstruction.
(a) No Party hereto shall obstruct the
easements or the rights, privileges and licenses granted or created
pursuant to this Agreement or render them impassable or unusable in
any way or otherwise in any way interfere with the right to the Use
and enjoyment of the easements or rights, privileges and licenses
granted or created pursuant to this Agreement.
(b) No Party hereto shall make any changes to
the topography or accesses on or to its respective property,
including grading or drainage that could reasonably be expected to
adversely affect another Party's facilities, common use drainage
systems, or pollution control systems, or the exercise of any right
or fulfillment of any obligation in this Agreement or in the
Connection Agreement, without the prior written consent of the
other Party which consent shall not unreasonably be withheld,
delayed or conditioned.
<PAGE>
3. TAXES, ASSESSMENTS AND OTHER CHARGES
3.1 Real Estate Taxes. All matters concerning the
payment of taxes, assessments and other such charges shall be
governed by the provisions of Article 6 of Site Lease, which are
incorporated herein by reference.
4. MECHANICS' LIENS
4.1 Notice Regarding Labor and Material. Notice is
hereby given that no Party hereto shall be liable for any labor or
materials furnished or to be furnished to or for another Party
hereto or to any other persons or entities claiming under such
other Party on credit, and that no mechanics' or other lien for any
such labor or material furnished to a Party or such other persons
or entities shall attach to or affect any property interest of any
other Party.
4.2 Disposition of Liens.
(a) Pepco shall forthwith take such action
necessary to discharge, remove or satisfy any lien filed against
the Generator's Leasehold Property or any portion thereof for any
labor or materials furnished or to be furnished for or on behalf of
Pepco, or any person or entity holding any portion thereof through
or under Pepco.
(b) Generator shall forthwith take such action
necessary to discharge, remove or satisfy any lien filed against
the Non-Leased Pepco Real Property or any portion thereof for any
labor or materials furnished or to be furnished for or on behalf of
Generator, or any person or entity holding any portion thereof
through or under Generator.
(c) If either Pepco or Generator, as the case
may be, shall fail to discharge, remove or satisfy any such lien
which it is obligated to discharge, remove or satisfy hereunder
within ten (10) days after notice of the existence of the lien has
been given to such defaulting Party, the non-defaulting Party or
parties may pay the amount of such lien or discharge the same by
deposit or bonding, and the amount so paid or deposited, or the
premium paid for such bond, with interest at the rate provided for
defaults in Section 6.3 hereof, shall be paid by the defaulting
Party upon demand to the non-defaulting Party who effected such
cure.
(d) The defaulting Party shall defend,
indemnify and save harmless the non-defaulting Party from and
against all liability, loss, cost or expense (including reasonable
attorneys' fees) arising out of any liens which the defaulting
Party is obligated to discharge, remove or satisfy.
<PAGE>
5. CONDEMNATION
5.1 Condemnation. All matters concerning
condemnation shall be governed by the provisions of Article 17 of
the Site Lease, which are incorporated herein by reference.
6. DEFAULTS
6.1 Events of Default. Each and every one of the
following events shall constitute an Event of Default ("Event of
Default") under this Agreement:
(a) If a Party fails to make any payment due
to the other Party hereto within twenty (20) days of written demand
for such payment;
(b) If a Party fails, within twenty (20) days
of written notice from a Party, to make any payment due from such
Party to any third party and such failure could result in the
imposition of a lien or other encumbrance on the property or
improvements of a Party, unless the payment of such amount is
contested in accordance with Section 3.5 hereof, in which case, the
provisions of Section 3.5 shall control; and
(c) If a Party fails to perform any material
non-monetary obligations hereunder, and said Party fails to cure
such default within thirty (30) days of receipt of written notice
stating with particularity the nature of the default; provided,
however, if such default is of such a nature that it cannot be
cured within thirty (30) days following receipt of such notice, an
Event of Default shall not have occurred if the defaulting Party
shall within such thirty (30) days commence the necessary cure and
shall at all times thereafter diligently and continuously prosecute
such cure to completion.
6.2 Right of Self Help. A non-defaulting Party may
at its election following the occurrence of a non-monetary Event of
Default and the thirtieth (30th) day after the receipt of the
written notice specified in paragraph 6.1(c) hereof, undertake the
cure of such default on behalf of the defaulting Party. A
non-defaulting Party is granted an easement to enter upon, through
or under the property or improvements of the defaulting Party to
effect such cure. Following the occurrence of an Event of Default
involving the payment of money to a person or entity not Party to
this Agreement, a non-defaulting Party may make such payment on
behalf of the defaulting Party. All monies paid by the
non-defaulting Party and all reasonable costs and expenses
(including, reasonable attorneys' fees) incurred by it, as the case
may be, in effecting such cure or payment, shall be paid by the
defaulting Party upon written demand, together with interest from
the date of such demand at the rate set forth in Section 6.3. This
Section 6.2 shall not limit Pepco's self-help rights pursuant to
Section 2.3(b).
6.3 Interest. Following the occurrence of an
Event of Default involving the nonpayment of money by the
defaulting Party to the non-defaulting Party, all
<PAGE>
monies owed to the non-defaulting party shall bear interest at the
rate equal to one and one-half percent (1.5%) per month accruing on
the due date, provided, however, that such late payment charge
shall not exceed the maximum charge which may be collected under
State law.
6.4 Enforcement Rights. In addition to any other
rights expressly set forth in this Agreement, but without
limitation, enforcement of this Agreement may be had by legal or
equitable proceedings against any defaulting Party either to
specifically enforce, restrain or enjoin the violation of any
restriction, covenant, agreement, term, representation or warranty
herein contained or to recover damages. The above notwithstanding,
termination of this Agreement shall not be available as a remedy in
any proceedings against any defaulting Party.
6.5 No Forfeiture. Except by enforcement of a
judgment lien against such property, nothing contained in this
Agreement shall create any reversion, condition or right of
re-entry or other provisions for forfeiture under which any Party
can be cut off, subordinated or otherwise disturbed in the
possession of its property.
6.6 Independent Covenants. None of the rights and
easement granted by this Agreement and none of the performances
required by this Agreement shall be dependent, upon the performance
of any other term, promise, or condition of this Agreement or any
documents executed concurrently or in connection with this
Agreement, and such rights, easement and requirements or
performance shall continue in effect irrespective of whether
anything else in this Agreement or such other documents has been
breached or has been terminated. The separateness and independent
survival of the right, easements and requirements of performance
under this Agreement are essential terms hereof without which this
Agreement would not have been made.
7. INDEMNIFICATION AND INSURANCE
7.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Pepco and a third party or Generator) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the
extent caused, by the breach of this Agreement by Generator or the
negligence or willful misconduct of Generator and/or its officers,
directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Generator's performance
of this Agreement, or the exercise by Generator of its rights
hereunder.
<PAGE>
7.2 Pepco's Indemnification. Pepco shall
indemnify, hold harmless, and defend Generator and its Affiliates,
as the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Generator and a third party or Pepco) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Generator's employees or any third parties, to
the extent caused by the breach of this Agreement by Pepco or the
negligence or willful misconduct of Pepco and/or its officers,
directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Pepco's performance of
this Agreement, or the exercise by Pepco of its rights hereunder.
7.3 Survival. The provisions of Sections 7.1 and
7.2 shall survive termination, cancellation, suspension, completion
or expiration of this Agreement.
7.4 Insurance Coverage. The Parties shall maintain
at their own cost the following insurance: (a) standard Commercial
General Liability insurance with limitations not less than One
Hundred Million Dollars ($100,000,000.00)in the aggregate; (b)
All-Risk Property insurance in amounts not less than one hundred
percent (100%) of the full replacement cost of the improvements
located upon each Party's real property; (c) Worker's compensation
insurance as required by prevailing law and Employer's liability
insurance with limits of not less than Twenty-five Million Dollars
($25,000,000.00); and (d) such other insurance as is customary in
the electric utility industry.
7.5 Certificate of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance coverage obtained in accordance with this Article 7, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within five (5) business
days of receiving notice of cancellation, change, amendment or
renewal of any insurance policy required pursuant to Section 7.4
above.
7.6 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
7.4, above, as regards liability under this Agreement; and each
general liability insurance policy shall contain a waiver of
subrogation and each Party shall waive its rights of recovery
against the other for any loss or damage covered by such policy.
8. MISCELLANEOUS
8.1 Effective Date. This Agreement will be
effective on the Closing Date pursuant to the Asset Sale Agreement
(the "Effective Date").
<PAGE>
8.2 Exhibits. All exhibits attached to this
Agreement are part of this Agreement and the material contained in
such exhibits shall be construed and interpreted as if contained
within the text of the Agreement.
8.3 Headings. The Article and Section headings of
this Agreement are for convenience and reference only and in no way
define, limit or describe the scope and intent of this Agreement,
nor in any way affect this Agreement.
8.4 Interpretation. When a reference is made in
this Agreement to an Article, Section, Schedule or Exhibit, such
reference shall be to an Article or Section of, or Schedule or
Exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument, statute,
regulation, rule or order defined or referred to herein or in any
agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from
time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the
case of statutes, regulations, rules or orders) by succession of
comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted
successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution
of this Agreement and, accordingly, there shall be no presumption
that this Agreement or any provision hereof be construed against
the Party that drafted this Agreement.
8.5 GOVERNING LAW. EXCEPT WITH RESPECT TO THE
CREATION, PERFECTION AND ENFORCEMENT OF THE REAL PROPERTY INTERESTS
CREATED HEREUNDER, WHICH SHALL BE GOVERNED AND CONSTRUED BY THE
LAWS OF THE STATE, THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA
EXCLUSIVE OF ITS CHOICE OF LAW RULES.
8.6 Entire Agreement. This Agreement, the Asset
Sale Agreement, the Site Lease, the Confidentiality Agreement (as
defined in the Asset Sale Agreement) and the Ancillary Agreements
(as defined in the Asset Sale Agreement) including the Exhibits,
Schedules, documents, certificates and instruments referred to
herein or therein and other contracts, agreements and instruments
contemplated hereby or thereby, embody the entire agreement
<PAGE>
and understanding of the Parties in respect of the transactions
contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein or
therein.
8.7 Amendment and Modification, Extension, Waiver.
This Agreement may be amended, modified or supplemented only by an
instrument in writing signed on behalf of each of the Parties.
Either Party may (i) extend the time for the performance of any of
the obligations or other acts of the other Party, (ii) waive any
inaccuracies in the representations and warranties of the other
Party contained in this Agreement or (iii) waive compliance by the
other Party with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure
of a Party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such
rights.
8.8 Binding Effect. The covenants, conditions,
restrictions, encumbrances, easements, license and agreements set
forth in this Agreement shall attach to, burden, and run with the
land and the Generator's Real Property and the Pepco Real Property
or the applicable portion or portions thereof, and shall be
appurtenant to the Generator's Property or the Pepco Real Property,
as appropriate and, together with the remainder of this Agreement,
shall be binding upon the Parties hereto and their respective
successors, assigns, grantees, transferees and tenants and,
together with the remainder of this Agreement, shall inure to the
benefit and Use of the Parties hereto and their respective heirs,
successors, assigns, grantees, transferees and tenants. Each
Grantee of any portion of or interest in the property and each
mortgagee which succeeds to the fee simple ownership of any portion
of the property shall be deemed, by the acceptance of the deed
conveying fee simple title to such person, to have agreed to
perform each and every undertaking created hereunder attributable
to the portion of the property in which such Grantee or mortgagee
has acquired an interest.
8.9 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.
8.10 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
<PAGE>
8.11 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Telecopy No.: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Generator, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, N.W.
Suite 500 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
The names, titles and addresses of either Party in this section may
be changed by written notification to the other Party.
<PAGE>
8.12 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
8.13 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
IN WITNESS WHEREOF, Pepco and Generator have caused this
Agreement to be signed by their respective duly authorized officers
as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By: ______________________________
Name: _________________________
Title: _____________________________
[GENERATOR]
By: ______________________________
Name: _____________________________
Title: _____________________________
<PAGE>
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County and
State, personally appeared ____________________________, an
______________________, by _____________________, its ________ who
_________ is personally known to me/________ and who acknowledged
before me that he did sign the foregoing instrument and that the
same is the free act and deed of said _______________, and his free
act and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County
and State, personally appeared _______________________, an
___________________, by ________________ its _____________________
who _______ is personally known to me/________ and who acknowledged
before me that he did sign the foregoing instrument and that the
same is the free act and deed of said corporation, and his free act
and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
<PAGE>
Schedule 1.1
Definitions
"Access" means, subject to the conditions set forth in
this Agreement and a Party's right to impose reasonable security
and safety restrictions protecting its officers, employees, agents,
consultants, contractors, subcontractors, invitees, property and
confidential information, full and unimpeded access, in common with
Grantor over and through existing roads, paths, walkways,
corridors, hallways, doorways, and other means of entry or exit, as
exist now and from time to time on Grantor's property or, where no
means of access exists, over and through those areas of Grantor's
property or improvements which are (i) reasonably necessary or
convenient for achieving Grantee's underlying purposes, and (ii)
least likely, out of the alternatives reasonably available, to
impede or damage the property or operation of any Party hereto.
Access shall also include access and right-of-way for Grantee's
employees, agents, consultants, contractors, subcontractors,
vehicles, trucks, trailers, heavy machinery, equipment, materials,
and all other items reasonably necessary or convenient for
achieving Grantee's underlying purposes.
"Affiliate" has the meaning set forth in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act
of 1934.
"Agreement" means this Easement, License and Attachment
Agreement.
"Asset Sale Agreement" has the meaning set forth in the
first recital of this Agreement, as such Asset Sale Agreement may
be amended or modified.
"Connection Agreement" means the Interconnection
Agreement (Potomac River), dated as of __________, 2000, between
Pepco and Generator.
"Distribution of Electric Current" means local
transmission and distribution of electricity to Pepco's end users.
"Distribution Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions, replacements and expansions
thereto, now or hereafter installed or located on the Generator's
Real Property for Distribution of Electric Current. Distribution
Facilities do not include Transmission Facilities.
"Effective Date" has the meaning set forth in Section
8.l.
"FERC" means the Federal Energy Regulatory Commission or
its successors.
<PAGE>
"Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
"Generator's Improvements" shall have the meaning given
it by the first recital of the Agreement.
"Generator" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Generator's Leasehold Property" means the real property
described in Exhibit A.
"Good Utility Practice" shall have the meaning given it
by the Connection Agreement.
"Grantee" means the Party or Parties who enjoy the
principal benefit of the referenced easement, license, right
(including attachment rights) privilege or right-of-way.
"Grantor" means the owner or owners of the property
and/or improvement granting the referenced easement, license, right
(including attachment rights), privilege or right-of-way.
"Interconnection Service" shall have the meaning given it
by the Connection Agreement.
"Non-Leased Pepco Real Property" means the real property
described in Exhibit C, and any improvements thereto now or
hereafter situated thereon.
"Party" or "Parties" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Pepco" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Pepco Real Property" means the real property described
in Exhibit B, and any improvements or betterments thereto now or
hereinafter situated thereon.
"Qualified Personnel" means individuals who possess any
required licenses and trained for their positions and duties by
Generator and/or Pepco pursuant to Good Utility Practice.
"State" means the Commonwealth of Virginia.
"Station" means the Potomac River Station as defined in
the Asset Sale Agreement.
<PAGE>
"Transmission of Electric Current" means the transmission
of such current typically over long distances and at voltages not
commonly used for service to end use customers.
"Transmission Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions, replacements and expansions
thereto, now or hereafter installed or located on the Generator's
Real Property and/or which Pepco may reasonably require now and
from time to time on the Generator's Real Property for the
Transmission of Electric Current. Transmission Facilities do not
include Distribution Facilities.
"Transmission System" shall have the meaning set forth in
the Connection Agreement.
"Use" means to operate, maintain, repair, upgrade, clean,
install, add to, alter, remove, inspect, construct, modify,
restore, rebuild, replace, relocate and expand (but if any such
addition, relocation or expansion would unreasonably or materially
burden Grantor's Property, in each case, the express, prior written
consent of Grantor shall be required, which consent shall not
unreasonably be withheld, delayed or conditioned) (all of the
foregoing to be in accordance with Good Utility Practice).
<PAGE>
LIST OF EXHIBITS
Exhibit A Generator's Leasehold Property
Exhibit B Pepco Real Property
Exhibit C Non-Leased Pepco Real Property
<PAGE>
EXHIBIT C-2
AFTER RECORDING PARCEL ID#
PLEASE RETURN TO: STREET ADDRESS:
_________________ ________________
_________________ _________________
_________________ _________________
EASEMENT, LICENSE AND ATTACHMENT AGREEMENT
(Dickerson Station)
THIS EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (the
"Agreement"), is dated as of ______________, 2000, and is entered
into by and between _______________________________________, a
corporation organized and existing under the laws of the State of
__________ and having an office at ____________________________
("Generator") and POTOMAC ELECTRIC POWER COMPANY, a District of
Columbia and Virginia corporation and having an office at 1900
Pennsylvania Avenue, N.W., Washington, DC 20068 ("Pepco").
Generator and Pepco may hereinafter be referred to individually as
a "Party" and collectively as the "Parties."
RECITALS
A. Generator and Pepco have entered into an Asset
Purchase and Sale Agreement for Generating and Related Assets (the
"Asset Sale Agreement"), dated June 7, 2000, for the sale of
Pepco's generating station known as the Dickerson Station (as
defined in the Asset Sale Agreement), which is located on that
certain parcel of real property which has been conveyed by Pepco to
Generator pursuant to the Asset Sale Agreement by virtue of a deed
recorded immediately prior hereto and is more particularly
described in Exhibit "A" attached hereto (the "Generator's Real
Property").
B. Pepco intends to continue to operate its
transmission and distribution business on and from that certain
parcel of real property adjoining the Generator's Real Property,
which parcel has been retained by Pepco following the conveyances
contemplated by the Asset Sale Agreement, and is more particularly
described in Exhibit "B" attached hereto (the "Pepco Real
Property").
C. Pepco will continue to own and operate certain
assets used in the conduct of its transmission and distribution
business which are located upon the Generator's Real Property, and
Pepco requires Access (as defined below) to, and certain other
rights with respect to, the Generator's Real Property in connection
therewith. Generator, in the operation and conduct of its
generation business, will require Access to, and certain other
rights with respect to, the Pepco Real Property. Furthermore,
Pepco and Generator have entered into an Interconnection Agreement
(the "Connection Agreement"), dated as of __________, 2000,
pursuant to which Pepco has agreed to provide certain
Interconnection Service to Generator required for Generator's
conduct of its generation business at Dickerson Station.
<PAGE>
D. In order for the Parties each to (i) enjoy the full
benefit of their respective property rights, real or personal, and
conduct their respective businesses thereat (ii) fulfill legal
requirements, and (iii) comply with their respective agreements
under the Connection Agreement, each Party requires certain
easements, licenses, rights-of-way and/or attachment rights in, on,
over and above, or with respect to, real and or personal property
of the other Party.
AGREEMENT
NOW, THEREFORE, the Parties, in consideration of the
mutual covenants and agreements contained herein and in the Asset
Sale Agreement and the Connection Agreement, and for One Dollar
($1.00) and other good and valuable consideration, the receipt
whereof and sufficiency of which are hereby acknowledged, each
intending to be legally bound and to bind their respective
successors and assigns, hereby mutually agree as follows:
1. DEFINITIONS
1.1 Definitions. Any capitalized terms which are
used but not defined in the body of this Agreement shall have the
meanings given to such terms in the attached Schedule 1.1.
2. EASEMENTS
2.1 Grant of Easements to Pepco. Generator does
hereby give, grant, bargain, sell, assign and convey unto Pepco,
the following easements on the Generator's Real Property for the
following purposes:
(a) A one hundred twenty-five (125) foot wide
utility easement, as more particularly described in Exhibit "C"
attached hereto, for the installation, operation, repair and
maintenance of above and/or below ground power and other utility
lines utilized in connection with the transmission and distribution
business of Pepco (as now or hereafter conducted) and other
functions as Pepco may determine from time to time.
(b) An above ground easement as more
particularly described in Exhibit "D" attached hereto, for
connection of a 230kV circuit to Generator's start-up transformer
and the operation, repair and maintenance of said connection.
(c) An easement for the Use, operation and
maintenance of the Retained Assets (as described in the Asset Sale
Agreement) located upon the Generator's Real Property and any other
equipment of any nature or kind retained by Pepco and located upon
the Generator's Real Property, together with any other equipment
used in connection with the foregoing (together with replacements
thereof and substitutions therefor).
<PAGE>
(d) An easement which enables Pepco to keep
and maintain in their present locations, and operate, any
Transmission Facilities, Distribution Facilities and other assets
owned by Pepco and located upon the Generator's Real Property,
together with an easement for all purposes reasonably deemed
necessary or convenient by Pepco to exercise any right or fulfill
any obligation under the Connection Agreement, including the right
to Use any improvements constructed, maintained or installed in
connection therewith.
(e) An easement of Access to those certain
generating buildings (and any replacements thereof) located upon
the Generator's Real Property in and upon which certain of Pepco's
Distribution Facilities and Transmission Facilities are located.
Such easement shall include, without limitation, the right to have
keys, access codes or other access methods necessary to enter any
of such generating buildings. Furthermore, the exercise of the
easement right set forth in this subparagraph shall be subject to
the provisions of the Connection Agreement including, without
limitation, Section 3.3 thereof.
(f) An easement of Access to the Generator's
Real Property for the purposes of exercising any of the rights
granted in this Section 2.l, in Section 2.3(b)(viii) hereof, in the
Connection Agreement or the Asset Sale Agreement.
(g) An easement of Access to, and the right to
use, the parking lots, access roads, driveways and other such
facilities located upon the Generator's Real Property.
(h) Pepco's exercise of the rights, easements,
privileges and licenses granted to it pursuant to this Section 2.1
shall be limited to Qualified Personnel or employees of contractors
employed by Pepco who, in either event, are under Pepco's and/or
its contractors' direct supervision and whose duties include, or
who are engaged for the purpose of, Use of the rights granted
pursuant to this Section 2.1.
(i) The easements granted pursuant to this
Section 2.1 shall expressly include Pepco's right to lease, license
or otherwise permit Affiliates or third parties to use Pepco's
facilities upon such terms and for such purposes as Pepco may
determine from time to time, subject to the terms and conditions of
this Agreement.
2.2 Reservation by Generator of Certain Rights.
Generator reserves to itself, from the easements granted pursuant
to Section 2.1 hereof, the following rights, subject, however, to
the provisions of the final paragraph of this Section 2.2:
(a) the right to (i) keep and maintain
Generator's Real Property and all improvements and facilities owned
by Generator and located upon the Generator's Real Property in
their present locations, and (ii) operate and maintain all
improvements and facilities owned by Generator and located upon the
Generator's Real Property in a manner consistent with past
practice; and
<PAGE>
(b) the right to have Access to all portions
of the Generator's Real Property for all purposes deemed reasonably
necessary or convenient by Generator in the operation and conduct
of its generation business or in order to perform any act
permitted, or fulfill any obligation of Generator, under the
Connection Agreement, including maintenance of the Generator's Real
Property in the manner described in the Connection Agreement.
(c) Generator's exercise of the rights
reserved to Generator in this Section 2.2, and the rights,
privileges and licenses granted to Generator in Section 2.3 shall
be exclusively limited to Qualified Personnel or employees of
contractors employed by Generator who, in either event, are under
Generator's and/or its contractors' direct supervision and whose
duties include, or who are engaged for the purpose of, Use of the
property described in clause (a) of this Section.
2.3 Grant of Easements, Right, Privilege and
License from Pepco to Generator.
(a) Pepco does hereby grant to Generator the
following easements, rights, privileges and licenses on and with
respect to the Pepco Real Property:
(i) An easement of Access to and upon the
Pepco Real Property from Martinsburg Road (or other public right of
way) for ingress and egress to Dickerson Station and the other
Generating Facilities.
(ii) An easement which enables Generator
to keep and maintain in their present locations, and operate, any
Generating Facilities and other assets owned by Generator and
located upon the Pepco Real Property.
(iii) An easement of Access to and
upon the Pepco Real Property for the purposes of exercising any of
the rights granted in the Connection Agreement or the Asset Sale
Agreement.
(b) In addition, but without limitation of
Generator's rights pursuant to the Connection Agreement, Pepco
agrees to make available to Generator (at no cost to Generator,
except as provided below) Pepco's master station voltage control
equipment (the "Equipment") located at Dickerson Station upon the
Generator's Real Property during the term of this Agreement,
subject to the following terms and conditions, and Generator agrees
to comply with such terms and conditions:
(i) Generator's operation of the
Equipment shall at all times be subject to that certain Agreement
of Sale and Lease dated as of November 30, 1994 between NationsBank
Trust Company, National Association and Pepco (the "Control Center
Lease"), and Generator shall comply with the terms and conditions thereof with
respect to the use of the Equipment (including keeping the Equipment free
<PAGE>
and clear of any liens, claims or encumbrances of whatever nature,
and identifying the Equipment as being owned by Pepco, and shall
not modify, alter, remove or add to the Equipment);
(ii) Generator shall operate and maintain
the Equipment in accordance with Good Utility Practice;
(iii) Generator shall be responsible
for all operating, repair and maintenance costs, taxes and the like
with respect to the Equipment, and shall reimburse Pepco promptly
upon invoicing for any such costs paid by Pepco;
(iv) Generator's Access to the Equipment
shall be in accordance with this Agreement;
(v) Generator's right to operate the
Equipment shall terminate in the event of actual or constructive
loss of the Equipment, damage rendering the Equipment beyond repair
or unfit for normal use, the condemnation or seizure of the
Equipment, the obsolescence of the Equipment or the material breach
by Generator of any of its covenants in this Section 2.3(b);
(vi) Pepco shall have no obligation to
Generator with respect to the Equipment other than to permit Access
to and operation of the Equipment in accordance with this Section
2.3(b); and
(vii) The obligations of Generator
under Section 7.4 (maintenance of liability insurance coverage) and
Section 7.1 (indemnification) shall be applicable to the Equipment.
(viii) Pepco shall have Access to the
Equipment for purposes of complying with the terms and conditions
of the Control Center Lease and as necessary to perform any of the
obligations of Generator pursuant to this subparagraph (b) above to
the extent the same are not timely performed by Generator.
2.4 General Scope of Easements.
(a) Except as otherwise provided in Sections
2.2 and 2.3 above and Section 2.4(b) below, each easement and each
right, privilege and license granted hereby is and shall be a
perpetual grant, transfer, conveyance and right of Access to and
Use (subject to the terms of this Agreement) to the Grantee thereof
and to any future owner of
<PAGE>
the real property, improvements and facilities benefited thereby.
Notwithstanding the foregoing, all easements, rights, privileges
and licenses granted by this Agreement are and shall be subject to
the terms and conditions of the Connection Agreement, and in the
event of any inconsistency between the terms and conditions of the
Connection Agreement and the terms of this Agreement, the terms of
the Connection Agreement shall control.
(b) Any easement or right, privilege and
license granted hereunder for purposes of enabling a Party to
exercise any right or fulfill any obligation set forth in the
Connection Agreement will continue for the term of the Connection
Agreement, and thereafter if and to the extent that the right or
obligation (i) shall by its express terms survive the termination
or expiration of the Connection Agreement or (ii) is necessary for
the conduct of business by Grantee. In the event of the
termination or expiration of an easement or right, privilege and
license granted hereunder for purposes of enabling a Grantee to
exercise any right or fulfill any obligation set forth in the
Connection Agreement, all equipment and facilities installed or
maintained by such Grantee on the real property of the other Party
pursuant to said terminated or expired easement or right, privilege
and license shall, at the request of the other Party, be removed at
the sole cost and expense of such Grantee, and such Grantee shall,
at its sole cost and expense repair any damage to the real property
and/or equipment and facilities of the other Party damaged as a
result of such removal.
(c) All equipment and facilities installed or
maintained by Grantee pursuant to an easement or right, privilege
and license granted hereunder shall be maintained by Grantee in
accordance with Good Utility Practice and the Connection Agreement,
and Grantee shall make all repairs and replacements necessary to
keep such equipment and facilities in such condition.
(d) Generator may not Use any portion of
Generator's Real Property burdened by any easement, right or
privilege granted to Pepco hereunder if such Use would materially
adversely affect the Use and enjoyment by Pepco of the rights
granted to it hereunder, or materially increase the costs or risks
associated with such Use.
(e) All easements granted herein shall be
deemed easements appurtenant to the parcel of real property
benefited thereby and shall run with such real property and shall
be deemed covenants running with the real property burdened
thereby.
2.5 Interpretation. The following shall apply in
interpreting any easement and any right, privilege and license
granted pursuant to this Agreement:
(a) Each easement and each right, privilege
and license granted herein is irrevocable except by written
agreement of the parties.
<PAGE>
(b) With respect to any easement created by
this Agreement, the words "in," "upon," "to," "on," "over,"
"above," "through" and/or "under" shall be interpreted to include
all of such terms.
(c) Each easement and each right, privilege
and license granted herein may be enjoyed without charge or fee to
Grantee of the easement.
(d) Each easement and each right, privilege
and license granted herein is also a grant of the additional right
of Access over Grantor's property to accomplish the purpose of such
easement or right, privilege and license, to perform any
obligations hereunder or in the Connection Agreement, and to comply
with any legal requirements affecting Grantee or its property
and/or improvements.
(e) Exercise of any easement or any right,
privilege and license granted hereunder permitting or requiring
maintenance, repairs, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal,
modification, replacement, expansion, or other work by Grantee upon
the property or improvements of Grantor shall be subject to the
following conditions:
(i) Work upon the facilities and
properties of either Party subject
to this Agreement shall be
permitted only to each Party's Qualified
Personnel, and Access to such facilities
and properties shall be permitted only to
a Party's Qualified Personnel and such
consultants, agents, contractors,
subcontractors and invitees
as any Party may select or permit;
provided that any consultant, agent,
contractor, subcontractor
or invitee shall comply with all
applicable provisions of this
Agreement and the Connection
Agreement.
(ii) Work shall be performed using
reasonable precautions to avoid
unreasonable interference with the
Use and enjoyment of Grantor's property
and improvements.
(iii) Except only as may be
specifically provided to the contrary
herein, Grantee shall not be liable
for damage, if any, which may be
caused by Grantee's normal and
reasonable Use of any easement,
or right, privilege or license
granted hereunder.
(iv) Following completion of the work,
Grantee shall restore Grantor's property
and improvements to the same or
as good a condition as existed
before the commencement of the work.
(v) Any easement and any right,
privilege and license granted herein
which permits a Grantee to
maintain its property,
<PAGE>
equipment, facilities and appurtenance on
the property and improvements owned by
Grantor also includes the right to
maintain in place on Grantor's
property and improvements any and all
wires and cables connecting such property,
equipment, facilities, and appurtenances
to (i) the devices, machinery and
equipment which they measure,
regulate and/or control, and (ii) power
sources.
(vi) Generator shall be solely responsible
for the maintenance of any roads, paths
and other means of entry or exit
located upon either the Generator's
Real Property or the Pepco Real
Property that are commonly utilized by
Generator and Pepco, and their
respective employees, agents and
contractors pursuant to this
Agreement or the Connection Agreement.
(f) Any easement granted pursuant to Section
2.1(a), (b), (c) or (d) includes the right to (i) trim, cut, treat
and/or remove, by manual, mechanical, and chemical means, any and
all trees, brush, structures and other obstructions within the
easement area, as well as such trees, brush, structures and
vegetation outside of the easement area deemed reasonably necessary
or desirable by Pepco for the safe and secure operation of its
facilities; and (ii) obtain Access to Generator's Real Property for
the purpose of performing the aforementioned acts.
2.6 Rules and Regulations.
Each Party may promulgate rules regulating the conduct of the
other Party in the exercise of rights under this Agreement provided
such rules and regulations do not unreasonably interfere with or
impede the affected Party's rights and easements as set forth
herein or in the Connection Agreement.
2.7 No Obstruction.
(a) No Party hereto shall obstruct the
easements or the rights, privileges and licenses granted or created
pursuant to this Agreement or render them impassable or unusable in
any way or otherwise in any way interfere with the right to the Use
and enjoyment of the easements or rights, privileges and licenses
granted or created pursuant to this Agreement.
(b) No Party hereto shall make any changes to
the topography or accesses on or to its respective property,
including grading or drainage that could reasonably be expected to
adversely affect another Party's facilities, common use drainage
systems, or pollution control systems, or the exercise of any right
or fulfillment of any obligation in this Agreement or in the
Connection Agreement, without the prior written consent of the
other Party which consent shall not unreasonably be withheld,
delayed or conditioned.
<PAGE>
3. TAXES, ASSESSMENTS AND OTHER CHARGES
3.1 Real Estate Taxes. Generator, with respect to
the Generator's Real Property and Pepco, with respect to the Pepco
Real Property, shall pay and discharge all of the following ("Real
Estate Taxes") whether or not now within the contemplation of the
Parties hereto: (i) all real estate taxes, assessments (both
general and special), other governmental impositions and charges,
taxes, rents, levies and sums of every kind or nature whatsoever,
extraordinary as well as ordinary, as shall at any time be imposed
by any governmental or public authority on, or become a lien in
respect of, the Generator's Real Property or the Pepco Real
Property, as the case may be, or any part thereof, or which may
become due and payable with respect thereto, and any and all taxes
assessments and charges levied, assessed or imposed upon the
Generator's Real Property or the Pepco Real Property, as the case
may be, in lieu of or in addition to, the foregoing, under or by
virtue of any present or future laws, rules, requirements, orders,
directives, ordinances or regulations of the United States of
America or of the State or of any subdivision thereof, or of any
lawful governmental authority whatsoever, and any interest or
penalties thereon, and (ii) all other taxes (excluding gains, sales
and income taxes but including occupancy taxes which are measured
by income) measured by ownership of the Generator's Real Property
or the Pepco Real Property, as the case may be. Generator shall
pay and discharge all levies and assessments for water, water meter
(including any expenses incident to the installation, repair or
replacement of any water meter) and sewer and all rents with
respect to water and sewer which provide service to the Generator's
Real Property.
3.2 Personal Property Taxes. Generator and Pepco
shall, respectively, pay and discharge all of the following
("Personal Property Taxes") whether or not now within the
contemplation of the Parties hereto: all taxes and assessments
which shall or may be charged, levied, assessed or imposed upon, or
become a lien upon, the personal property of Generator or Pepco, as
the case may be, Used in the operation or in connection with the
business conducted at the Generator's Real Property or the Pepco
Real Property, as the case may be.
3.3 Timing of Payment. Subject to the provisions
of Section 3.5, Generator and Pepco shall each comply with its
covenant to pay and discharge all Real Estate Taxes and Personal
Property Taxes by paying all such taxes directly to the appropriate
taxing authorities prior to the expiration of the period within
which payment is permitted without penalty or interest. Generator
and Pepco shall within twenty (20) days of written request of the
other Party, produce the most recent official receipts from the
appropriate taxing authorities evidencing such payment certified by
Generator or Pepco, as the case may be, to the other Party hereto.
3.4 Cooperation with respect to Tax Statements.
Generator and Pepco will cooperate with each other in obtaining
and/or retaining any tax abatement for which the Generator's Real
Property or Pepco Real Property may be eligible. Upon written
request of the Party seeking an abatement, the other Party or
Parties hereto will
<PAGE>
execute and file any and all documents and instruments reasonably
necessary to obtain and retain such abatement, without the
assumption of any liabilities or obligations, provided that the
Party seeking such abatement shall reimburse the cooperating Party
or Parties for any reasonable expenses that such cooperating Party
or Parties may incur in connection therewith.
3.5 Tax Contests. Generator, with respect to the
Generator's Real Property, and Pepco, with respect to the Pepco
Real Property:
(a) May contest in good faith by appropriate
proceedings diligently and continuously conducted, at its or their
sole cost and expense, any Real Estate Tax or charge or Personal
Property Tax or charge, or similar tax or charge and, where
permitted by law, pay the same under protest.
(b) Shall pay and discharge such contested
items as finally adjudicated or settled, with interest and
penalties, and all other charges directed to be paid in or by any
such adjudication or settlement.
(c) May, in its or their sole discretion,
consolidate any proceeding to obtain a reduction in the assessed
valuation with any similar proceeding or proceedings brought by it
or them relating to any one or more other tax years.
(d) Shall indemnify and hold the
non-contesting Party harmless from and against all liability, loss,
cost or expense arising out of the contest.
3.6 Refunds. Any refunds from any contest
undertaken pursuant to Section 3.5 shall belong wholly to the Party
or Parties that paid the tax.
4. MECHANICS' LIENS
4.1 Notice Regarding Labor and Material. Notice is
hereby given that no Party hereto shall be liable for any labor or
materials furnished or to be furnished to or for another Party
hereto or to any other persons or entities claiming under such
other Party on credit, and that no mechanics' or other lien for any
such labor or material furnished to a Party or such other persons
or entities shall attach to or affect any property interest of any
other Party.
4.2 Disposition of Liens.
(a) Pepco shall forthwith take such action
necessary to discharge, remove or satisfy any lien filed against
the Generator's Real Property or any portion thereof for any labor
or materials furnished or to be furnished for or on behalf of
Pepco, or any person or entity holding any portion thereof through
or under Pepco.
<PAGE>
(b) Generator shall forthwith take such action
necessary to discharge, remove or satisfy any lien filed against
the Pepco Real Property or any portion thereof for any labor or
materials furnished or to be furnished for or on behalf of
Generator, or any person or entity holding any portion thereof
through or under Generator.
(c) If either Pepco or Generator, as the case
may be, shall fail to discharge, remove or satisfy any such lien
which it is obligated to discharge, remove or satisfy hereunder
within ten (10) days after notice of the existence of the lien has
been given to such defaulting Party, the non-defaulting Party or
parties may pay the amount of such lien or discharge the same by
deposit or bonding, and the amount so paid or deposited, or the
premium paid for such bond, with interest at the rate provided for
defaults in Section 6.3 hereof, shall be paid by the defaulting
Party upon demand to the non-defaulting Party who effected such
cure.
(d) The defaulting Party shall defend,
indemnify and save harmless the non-defaulting Party from and
against all liability, loss, cost or expense (including reasonable
attorneys' fees) arising out of any liens which the defaulting
Party is obligated to discharge, remove or satisfy.
5. CONDEMNATION
5.1 Right to Participate. In the event the
Generator's Real Property or the Pepco Real Property, or any part
thereof, shall be taken in condemnation proceedings or by exercise
of any right of eminent domain or any agreement with those
authorized to exercise such right (any such matter being
hereinafter referred to as a "Taking" or property "Taken"), whether
such Taking be a permanent taking or a temporary Taking, any person
or entity having an interest in the award or awards shall have the
right to participate in any such condemnation proceedings or
agreement for the purpose of protecting its interest hereunder.
Each Party so participating shall pay its own expenses.
5.2 Total Taking. A "Total Taking" shall be deemed
to have occurred as to the property of any Party (which means the
Generator's Real Property, as to Generator, and the Pepco Real
Property, as to Pepco) when the entire property of such Party shall
be Taken or a substantial part of such property shall be Taken and
the untaken portion of the property would, following the completion
of restoration, be unsuitable for the operation and the Use thereof
in the manner so operated and Used prior to the Taking. Upon a
Total Taking, this Agreement shall terminate with respect to the
property Taken except with respect to the disposition of the award
and this Agreement shall continue with respect to the property not
Taken.
5.3 Disposition of Award. In the event of a
Taking, each Party shall be entitled to share in the awards to the
extent of its interest in the property subject to the
<PAGE>
Taking, and for consequential damages to and dilution of value of
the relevant property not so Taken.
5.4 Notice of Taking. In the event the Generator's
Real Property or the Pepco Real Property, or any part thereof,
shall be the subject of any condemnation proceedings or the subject
of any eminent domain proceedings, and if any Party shall receive
actual notice of such proceedings, the Party receiving such notice
shall notify the other Party of the existence of such proceedings.
Such notification shall occur within thirty (30) days of the
receipt of such actual notice.
6. DEFAULTS
6.1 Events of Default. Each and every one of the
following events shall constitute an Event of Default ("Event of
Default') under this Agreement:
(a) If a Party fails to make any payment due
within twenty (20) days of written demand for such payment;
(b) If a Party fails, within twenty (20) days
of written notice from a Party, to make any payment due from such
Party to any third party and such failure could result in the
imposition of a lien or other encumbrance on the property or
improvements of a Party, unless the payment of such amount is
contested in accordance with Section 3.5 hereof, in which case, the
provisions of Section 3.5 shall control; and
(c) If a Party fails to perform any material
non-monetary obligations hereunder, and said Party fails to cure
such default within thirty (30) days of receipt of written notice
stating with particularity the nature of the default; provided,
however, if such default is of such a nature that it cannot be
cured within thirty (30) days following receipt of such notice, an
Event of Default shall not have occurred if the defaulting Party
shall within such thirty (30) days commence the necessary cure and
shall at all times thereafter diligently and continuously prosecute
such cure to completion.
6.2 Right of Self Help. A non-defaulting Party may
at its election following the occurrence of a non-monetary Event of
Default and the thirtieth (30th) day after the receipt of the
written notice specified in paragraph 6.1(c) hereof, undertake the
cure of such default on behalf of the defaulting Party. A
non-defaulting Party is granted an easement to enter upon, through
or under the property or improvements of the defaulting Party to
effect such cure. Following the occurrence of an Event of Default
involving the payment of money to a person or entity not Party to
this Agreement, a non-defaulting Party may make such payment on
behalf of the defaulting Party. All monies paid by the
non-defaulting Party and all reasonable costs and expenses
(including, reasonable attorneys' fees) incurred by it, as the case
may be, in effecting such cure or payment, shall be paid by the
defaulting Party upon written demand, together with interest from
the date of such
<PAGE>
demand at the rate set forth in Section 6.3. This Section 6.2
shall not limit Pepco's self-help rights pursuant to Section
2.3(b).
6.3 Interest. Following the occurrence of an Event
of Default involving the nonpayment of money by the defaulting
Party to the non-defaulting Party, all monies owed to the
non-defaulting party shall bear interest at the rate equal to one
and one-half percent (1.5%) per month accruing on the due date,
provided, however, that such late payment charge shall not exceed
the maximum charge which may be collected under State law.
6.4 Enforcement Rights. In addition to any other
rights expressly set forth in this Agreement, but without
limitation, enforcement of this Agreement may be had by legal or
equitable proceedings against any defaulting Party either to
specifically enforce, restrain or enjoin the violation of any
restriction, covenant, agreement, term, representation or warranty
herein contained or to recover damages. The above notwithstanding,
termination of this Agreement shall not be available as a remedy in
any proceedings against any defaulting Party.
6.5 No Forfeiture. Except by enforcement of a
judgment lien against such property, nothing contained in this
Agreement shall create any reversion, condition or right of
re-entry or other provisions for forfeiture under which any Party
can be cut off, subordinated or otherwise disturbed in the
possession of its property.
6.6 Independent Covenants. None of the rights and
easement granted by this Agreement and none of the performances
required by this Agreement shall be dependent, upon the performance
of any other term, promise, or condition of this Agreement or any
documents executed concurrently or in connection with this
Agreement, and such rights, easement and requirements or
performance shall continue in effect irrespective of whether
anything else in this Agreement or such other documents has been
breached or has been terminated. The separateness and independent
survival of the right, easements and requirements of performance
under this Agreement are essential terms hereof without which this
Agreement would not have been made.
7. INDEMNIFICATION AND INSURANCE
7.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Pepco and a third party or Generator) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the
extent caused, by the breach of this Agreement by Generator or the
negligence or willful misconduct of
<PAGE>
Generator's and/or its officers, directors, employees, agents,
contractors, subcontractors or invitees arising out of or connected
with Generator's performance of this Agreement, or the exercise by
Generator of its rights hereunder.
7.2 Pepco's Indemnification. Pepco shall
indemnify, hold harmless, and defend Generator and its Affiliates,
as the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Generator and a third party or Pepco) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Generator's employees or any third parties, to
the extent caused by the breach of this Agreement by Pepco or the
negligence or willful misconduct of Pepco and/or its officers,
directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Pepco's performance of
this Agreement, or the exercise by Pepco of its rights hereunder.
7.3 Survival. The provisions of Sections 7.1 and
7.2 shall survive termination, cancellation, suspension, completion
or expiration of this Agreement.
7.4 Insurance Coverage. The Parties shall maintain
at their own cost the following insurance: (a) standard Commercial
General Liability insurance with limitations not less than One
Hundred Million Dollars ($100,000,000.00)in the aggregate; (b)
All-Risk Property insurance in amounts not less than one hundred
percent (100%) of the full replacement cost of the improvements
located upon each Party's real property; (c) Worker's compensation
insurance as required by prevailing law and Employer's liability
insurance with limits of not less than Twenty-five Million Dollars
($25,000,000.00); and (d) such other insurance as is customary in
the electric utility industry.
7.5 Certificate of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance coverage obtained in accordance with this Article 7, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within five (5) business
days of receiving notice of cancellation, change, amendment or
renewal of any insurance policy required pursuant to Section 7.4
above.
7.6 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
7.4, above, as regards liability under this Agreement; and each
general liability insurance policy shall contain a waiver of
subrogation and each Party shall waive its rights of recovery
against the other for any loss or damage covered by such policy.
8. MISCELLANEOUS
<PAGE>
8.1 Effective Date. This Agreement will be
effective on the Closing Date pursuant to the Asset Sale Agreement
(the "Effective Date").
8.2 Exhibits. All exhibits attached to this
Agreement are part of this Agreement and the material contained in
such exhibits shall be construed and interpreted as if contained
within the text of the Agreement.
8.3 Headings. The Article and Section headings of
this Agreement are for convenience and reference only and in no way
define, limit or describe the scope and intent of this Agreement,
nor in any way affect this Agreement.
8.4 Interpretation. When a reference is made in
this Agreement to an Article, Section, Schedule or Exhibit, such
reference shall be to an Article or Section of, or Schedule or
Exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument, statute,
regulation, rule or order defined or referred to herein or in any
agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from
time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the
case of statutes, regulations, rules or orders) by succession of
comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted
successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution
of this Agreement and, accordingly, there shall be no presumption
that this Agreement or any provision hereof be construed against
the Party that drafted this Agreement.
8.5 GOVERNING LAW. EXCEPT WITH RESPECT TO THE
CREATION, PERFECTION AND ENFORCEMENT OF THE REAL PROPERTY INTERESTS
CREATED HEREUNDER, WHICH SHALL BE GOVERNED AND CONSTRUED BY THE
LAWS OF THE STATE, THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA
EXCLUSIVE OF ITS CHOICE OF LAW RULES.
8.6 Entire Agreement. This Agreement, the Asset
Sale Agreement, the Confidentiality Agreement (as defined in the
Asset Sale Agreement) and the Ancillary
<PAGE>
Agreements (as defined in the Asset Sale Agreement) including the
Exhibits, Schedules, documents, certificates and instruments
referred to herein or therein and other contracts, agreements and
instruments contemplated hereby or thereby, embody the entire
agreement and understanding of the Parties in respect of the
transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or
undertakings other than those expressly set forth or referred to
herein or therein..
8.7 Amendment and Modification, Extension, Waiver.
This Agreement may be amended, modified or supplemented only by an
instrument in writing signed on behalf of each of the Parties.
Either Party may (i) extend the time for the performance of any of
the obligations or other acts of the other Party, (ii) waive any
inaccuracies in the representations and warranties of the other
Party contained in this Agreement or (iii) waive compliance by the
other Party with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure
of a Party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such
rights.
8.8 Binding Effect. The covenants, conditions,
restrictions, encumbrances, easements, license and agreements set
forth in this Agreement shall attach to, burden, and run with the
land and the Generator's Real Property and the Pepco Real Property
or the applicable portion or portions thereof, and shall be
appurtenant to the Generator's Property or the Pepco Real Property,
as appropriate and, together with the remainder of this Agreement,
shall be binding upon the Parties hereto and their respective
successors, assigns, grantees, transferees and tenants and,
together with the remainder of this Agreement, shall inure to the
benefit and Use of the Parties hereto and their respective heirs,
successors, assigns, grantees, transferees and tenants. Each
Grantee of any portion of or interest in the property and each
mortgagee which succeeds to the fee simple ownership of any portion
of the property shall be deemed, by the acceptance of the deed
conveying fee simple title to such person, to have agreed to
perform each and every undertaking created hereunder attributable
to the portion of the property in which such Grantee or mortgagee
has acquired an interest.
8.9 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.
8.10 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as
possible to the
<PAGE>
fullest extent permitted by applicable law in an acceptable manner
to the end that the transactions contemplated hereby are fulfilled
to the extent possible.
8.11 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Telecopy No.: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Generator, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, N.W.
Suite 500 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
<PAGE>
The names, titles and addresses of either Party in this section may
be changed by written notification to the other Party.
8.12 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
8.13 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
IN WITNESS WHEREOF, Pepco and Generator have caused this
Agreement to be signed by their respective duly authorized officers
as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By: ______________________________
Name: ______________________________
Title: ______________________________
[GENERATOR]
By: ______________________________
Name: ______________________________
Title: ______________________________
<PAGE>
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County and
State, personally appeared _________________________, an
________________________, by _____________________, its ________
who _________ is personally known to me/ _______ and who
acknowledged before me that he did sign the foregoing instrument
and that the same is the free act and deed of said ______________,
and his free act and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County
and State, personally appeared ________________________, an
___________________, by ________________ its _____________________
who _______ is personally known to me/ ________ and who
acknowledged before me that he did sign the foregoing instrument
and that the same is the free act and deed of said corporation, and
his free act and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
<PAGE>
Schedule 1.1
Definitions
"Access" means, subject to the conditions set forth in
this Agreement and a Party's right to impose reasonable security
and safety restrictions protecting its officers, employees, agents,
consultants, contractors, subcontractors, invitees, property and
confidential information, full and unimpeded access, in common with
Grantor over and through existing roads, paths, walkways,
corridors, hallways, doorways, and other means of entry or exit, as
exist now and from time to time on Grantor's property or, where no
means of access exists, over and through those areas of Grantor's
property or improvements which are (i) reasonably necessary or
convenient for achieving Grantee's underlying purposes, and (ii)
least likely, out of the alternatives reasonably available, to
impede or damage the property or operation of any Party hereto.
Access shall also include access and right-of-way for Grantee's
employees, agents, consultants, contractors, subcontractors,
vehicles, trucks, trailers, heavy machinery, equipment, materials,
and all other items reasonably necessary or convenient for
achieving Grantee's underlying purposes.
"Affiliate" has the meaning set forth in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act
of 1934.
"Agreement" means this Easement, License and Attachment
Agreement.
"Asset Sale Agreement" has the meaning set forth in the
first recital of this Agreement, as such Asset Sale Agreement may
be amended or modified.
"Connection Agreement" means the Interconnection
Agreement (Dickerson), dated as of __________, 2000, between Pepco
and Generator.
"Distribution of Electric Current" means local
transmission and distribution of electricity to Pepco's end users.
"Distribution Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions, replacements and expansions
thereto, now or hereafter installed or located on the Generator's
Real Property for Distribution of Electric Current. Distribution
Facilities do not include Transmission Facilities.
"Effective Date" has the meaning set forth in Section
8.l.
"FERC" means the Federal Energy Regulatory Commission or
its successors.
<PAGE>
"Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
"Generator" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Generator's Real Property" means the real property
described in Exhibit A, and any improvements or betterments thereto
now or hereinafter situated thereon
"Good Utility Practice" shall have the meaning given it
by the Connection Agreement.
"Grantee" means the Party or Parties who enjoy the
principal benefit of the referenced easement, license, right
(including attachment rights) privilege or right-of-way.
"Grantor" means the owner or owners of the property
and/or improvement granting the referenced easement, license, right
(including attachment rights), privilege or right-of-way.
"Interconnection Service" shall have the meaning given it
by the Connection Agreement.
"Party" or "Parties" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Pepco" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Pepco Real Property" means the real property described
in Exhibit B, and any improvements or betterments thereto nor or
hereinafter situated thereon.
"Qualified Personnel" means individuals who possess any
required licenses and trained for their positions and duties by
Generator and/or Pepco pursuant to Good Utility Practice.
"State" means the State of Maryland.
"Station" means the Dickerson Station as defined in the
Asset Sale Agreement.
"Transmission of Electric Current" means the transmission
of such current typically over long distances and at voltages not
commonly used for service to end use customers.
"Transmission Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions, replacements and expansions
thereto, now or hereafter installed or located on the Generator's
Real Property and/or which Pepco may reasonably require now and
from time to time on the
<PAGE>
Generator's Real Property for the Transmission of Electric Current.
Transmission Facilities do not include Distribution Facilities.
"Transmission System" shall have the meaning set forth in
the Connection Agreement.
"Use" means to operate, maintain, repair, upgrade, clean,
install, add to, alter, remove, inspect, construct, modify,
restore, rebuild, replace, relocate and expand (but if any such
addition, relocation or expansion would unreasonably or materially
burden Grantor's Property, in each case, the express, prior written
consent of Grantor shall be required, which consent shall not
unreasonably be withheld, delayed or conditioned) (all of the
foregoing to be in accordance with Good Utility Practice).
<PAGE>
LIST OF EXHIBITS
Exhibit A Generator's Real Property
Exhibit B Pepco Real Property
Exhibit C 125 Foot Utility Easement
Exhibit D Easement for Connection of 230kV Circuit
<PAGE>
EXHIBIT C-3
AFTER RECORDING PARCEL ID#
PLEASE RETURN TO: STREET ADDRESS:
____________________ ____________________
____________________ ____________________
____________________ ____________________
EASEMENT, LICENSE AND ATTACHMENT AGREEMENT
(Chalk Point Station)
THIS EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (the
"Agreement"), is dated as of ______________, 2000, and is entered
into by and between ________________________________, a corporation
organized and existing under the laws of the State of __________
and having an office at __________________________________
("Generator") and POTOMAC ELECTRIC POWER COMPANY, a District of
Columbia and Virginia corporation and having an office at 1900
Pennsylvania Avenue, N.W., Washington, DC 20068 ("Pepco").
Generator and Pepco may hereinafter be referred to individually as
a "Party" and collectively as the "Parties."
RECITALS
A. Generator and Pepco have entered into an Asset
Purchase and Sale Agreement for Generating and Related Assets (the
"Asset Sale Agreement"), dated June 7, 2000, for the sale of
Pepco's generating station known as the Chalk Point Station (as
defined in the Asset Sale Agreement), which is located on that
certain parcel of real property which has been conveyed by Pepco to
Generator pursuant to the Asset Sale Agreement by virtue of a deed
recorded immediately prior hereto and is more particularly
described in Exhibit "A" attached hereto (the "Generator's Real
Property").
B. Pepco intends to continue to operate its
transmission and distribution business on and from that certain
parcel of real property adjoining the Generator's Real Property,
which parcel has been retained by Pepco following the conveyances
contemplated by the Asset Sale Agreement, and is more particularly
described in Exhibit "B" attached hereto (the "Pepco Real
Property").
C. Pepco will continue to own and operate certain
assets used in the conduct of its transmission and distribution
business which are located upon the Generator's Real Property, and
Pepco requires Access (as defined below) to, and certain other
rights with respect to, the Generator's Real Property in connection
therewith. Generator, in the operation and conduct of its
generation business, will require Access to, and certain other
rights with respect to, the Pepco Real Property. Furthermore,
Pepco and Generator have entered into an Interconnection Agreement
(the "Connection Agreement"), dated as of __________, 2000,
pursuant to which Pepco has agreed to provide certain
Interconnection Service to Generator required for Generator's
conduct of its generation business at Chalk Point Station.
<PAGE>
D. In order for the Parties each to (i) enjoy the full
benefit of their respective property rights, real or personal, and
conduct their respective businesses thereat (ii) fulfill legal
requirements, and (iii) comply with their respective agreements
under the Connection Agreement, each Party requires certain
easements, licenses, rights-of-way and/or attachment rights in, on,
over and above, or with respect to, real and or personal property
of the other Party.
AGREEMENT
NOW, THEREFORE, the Parties, in consideration of the
mutual covenants and agreements contained herein and in the Asset
Sale Agreement and the Connection Agreement, and for One Dollar
($1.00) and other good and valuable consideration, the receipt
whereof and sufficiency of which are hereby acknowledged, each
intending to be legally bound and to bind their respective
successors and assigns, hereby mutually agree as follows:
1. DEFINITIONS
1.1 Definitions. Any capitalized terms which are
used but not defined in the body of this Agreement shall have the
meanings given to such terms in the attached Schedule 1.1.
2. EASEMENTS
2.1 Grant of Easements to Pepco. Generator does
hereby give, grant, bargain, sell, assign and convey unto Pepco,
the following easements on the Generator's Real Property for the
following purposes:
(a) An above ground and underground easement,
as more particularly described in Exhibit "C" attached hereto, for
the installation, operation, repair and maintenance of electrical
connections and other facilities between the existing switchyard on
Pepco Real Property and the existing combustion turbine-generator
area on Generator's Real Property.
(b) An easement as more particularly described
in Exhibit "D" attached hereto, for two (2) 69kV overhead
transmission lines from Pepco's switchyard area on Pepco Real
Property to an existing Southern Maryland Electrical Cooperative
switchyard on Generator's Real Property and the operation, repair
and maintenance of said transmission lines.
(c) An easement for the Use, operation and
maintenance of the Retained Assets (as described in the Asset Sale
Agreement) located upon the Generator's Real Property and any other
equipment of any nature or kind retained by Pepco and located upon
the Generator's Real Property, together with any other equipment
used in
<PAGE>
connection with the foregoing (together with replacements thereof
and substitutions therefor).
(d) An easement which enables Pepco to keep
and maintain in their present locations, and operate, any
Transmission Facilities, Distribution Facilities and other assets
owned by Pepco and located upon the Generator's Real Property,
together with an easement for all purposes reasonably deemed
necessary or convenient by Pepco to exercise any right or fulfill
any obligation under the Connection Agreement, including the right
to Use any improvements constructed, maintained or installed in
connection therewith.
(e) An easement of Access to those certain
generating buildings (and any replacements thereof) located upon
the Generator's Real Property in and upon which certain of Pepco's
Distribution Facilities and Transmission Facilities are located.
Such easement shall include, without limitation, the right to have
keys, access codes or other access methods necessary to enter any
of such generating buildings. Furthermore, the exercise of the
easement right set forth in this subparagraph shall be subject to
the provisions of the Connection Agreement including, without
limitation, Section 3.3 thereof.
(f) An easement of Access to the Generator's
Real Property for the purposes of exercising any of the rights
granted in this Section 2.l, in Section 2.3(b)(viii) hereof, in the
Connection Agreement or the Asset Sale Agreement.
(g) An easement of Access to, and the right to
use, the parking lots, access roads, driveways and other such
facilities located upon the Generator's Real Property.
(h) Pepco's exercise of the rights, easements,
privileges and licenses granted to it pursuant to this Section 2.1
shall be limited to Qualified Personnel or employees of contractors
employed by Pepco who, in either event, are under Pepco's and/or
its contractors' direct supervision and whose duties include, or
who are engaged for the purpose of, Use of the rights granted
pursuant to this Section 2.1.
(i) The easements granted pursuant to this
Section 2.1 shall expressly include Pepco's right to lease, license
or otherwise permit Affiliates or third parties to use Pepco's
facilities upon such terms and for such purposes as Pepco may
determine from time to time, subject to the terms and conditions of
this Agreement.
2.2 Reservation by Generator of Certain Rights.
Generator reserves to itself, from the easements granted pursuant
to Section 2.1 hereof, the following rights, subject, however, to
the provisions of the final paragraph of this Section 2.2:
(a) the right to (i) keep and maintain
Generator's Real Property and all improvements and facilities owned
by Generator and located upon the Generator's Real Property in
their present locations, and (ii) operate and maintain all
<PAGE>
improvements and facilities owned by Generator and located upon the
Generator's Real Property in a manner consistent with past
practice; and
(b) the right to have Access to all portions
of the Generator's Real Property for all purposes deemed reasonably
necessary or convenient by Generator in the operation and conduct
of its generation business or in order to perform any act
permitted, or fulfill any obligation of Generator, under the
Connection Agreement, including maintenance of the Generator's Real
Property in the manner described in the Connection Agreement.
(c) Generator's exercise of the rights
reserved to Generator in this Section 2.2, and the rights,
privileges and licenses granted to Generator in Section 2.3 shall
be exclusively limited to Qualified Personnel or employees of
contractors employed by Generator who, in either event, are under
Generator's and/or its contractors' direct supervision and whose
duties include, or who are engaged for the purpose of, Use of the
property described in clause (a) of this Section.
2.3 Grant of Easements, Right, Privilege and
License from Pepco to Generator.
(a) Pepco does hereby grant to Generator the
following easements, rights, privileges and licenses on and with
respect to the Pepco Real Property:
(i) An easement, as described on Exhibit
"E" attached hereto, for the operation and maintenance of an
existing oil pipeline (to be used solely for the transmission of
oil) on, under and across Pepco Real Property at two (2) locations.
(ii) An easement, as described on Exhibit
"F" attached hereto, for the operation and maintenance of an
existing oil pipeline (to be used solely for the transmission of
oil) on, under and across the Retained Assets.
(iii) An easement which enables
Generator to keep and maintain in their present locations, and
operate, any Generating Facilities and other assets owned by
Generator and located upon the Pepco Real Property.
(iv) An easement of Access to and upon the
Pepco Real Property for the purposes of exercising any of the
rights granted in the Connection Agreement or the Asset Sale
Agreement.
(b) In addition, but without limitation of
Generator's rights pursuant to the Connection Agreement, Pepco
agrees to make available to Generator (at no cost to Generator,
except as provided below) Pepco's master station voltage control
equipment (the "Equipment") located at Chalk Point Station upon the
Generator's Real Property during the term of this Agreement,
subject to the following terms and conditions, and Generator agrees
to comply with such terms and conditions:
<PAGE>
(i) Generator's operation of the
Equipment shall at all times be subject to that certain Agreement
of Sale and Lease dated as of November 30, 1994 between NationsBank
Trust Company, National Association and Pepco (the "Control Center
Lease"), and Generator shall comply with the terms and conditions
thereof with respect to the use of the Equipment (including keeping
the Equipment free and clear of any liens, claims or encumbrances
of whatever nature, and identifying the Equipment as being owned by
Pepco, and shall not modify, alter, remove or add to the
Equipment);
(ii) Generator shall operate and
maintain the Equipment in accordance with Good Utility Practice;
(iii) Generator shall be responsible
for all operating, repair and maintenance costs, taxes and the like
with respect to the Equipment, and shall reimburse Pepco promptly
upon invoicing for any such costs paid by Pepco;
(iv) Generator's Access to the Equipment
shall be in accordance with this Agreement;
(v) Generator's right to operate the
Equipment shall terminate in the event of actual or constructive
loss of the Equipment, damage rendering the Equipment beyond repair
or unfit for normal use, the condemnation or seizure of the
Equipment, the obsolescence of the Equipment or the material breach
by Generator of any of its covenants in this Section 2.3(b);
(vi) Pepco shall have no obligation to
Generator with respect to the Equipment other than to permit Access
to and operation of the Equipment in accordance with this Section
2.3(b);
(vii) The obligations of Generator
under Section 7.4 (maintenance of liability insurance coverage) and
Section 7.1 (indemnification) shall be applicable to the Equipment;
and
(viii) Pepco shall have Access to the
Equipment for purposes of complying with the terms and conditions
of the Control Center Lease and as necessary to perform any of the
obligations of Generator pursuant to this subparagraph (b) above to
the extent the same are not timely performed by Generator.
<PAGE>
2.4 General Scope of Easements.
(a) Except as otherwise provided in Sections
2.2 and 2.3 above and Section 2.4(b) below, each easement and each
right, privilege and license granted hereby is and shall be a
perpetual grant, transfer, conveyance and right of Access to and
Use (subject to the terms of this Agreement) to the Grantee thereof
and to any future owner of the real property, improvements and
facilities benefited thereby. Notwithstanding the foregoing, all
easements, rights, privileges and licenses granted by this
Agreement are and shall be subject to the terms and conditions of
the Connection Agreement, and in the event of any inconsistency
between the terms and conditions of the Connection Agreement and
the terms of this Agreement, the terms of the Connection Agreement
shall control.
(b) Any easement or right, privilege and
license granted hereunder for purposes of enabling a Party to
exercise any right or fulfill any obligation set forth in the
Connection Agreement will continue for the term of the Connection
Agreement, and thereafter if and to the extent that the right or
obligation (i) shall by its express terms survive the termination
or expiration of the Connection Agreement or (ii) is necessary for
the conduct of business by Grantee. In the event of the
termination or expiration of an easement or right, privilege and
license granted hereunder for purposes of enabling a Grantee to
exercise any right or fulfill any obligation set forth in the
Connection Agreement, all equipment and facilities installed or
maintained by such Grantee on the real property of the other Party
pursuant to said terminated or expired easement or right, privilege
and license shall, at the request of the other Party, be removed at
the sole cost and expense of such Grantee, and such Grantee shall,
at its sole cost and expense repair any damage to the real property
and/or equipment and facilities of the other Party damaged as a
result of such removal.
(c) All equipment and facilities installed or
maintained by Grantee pursuant to an easement or right, privilege
and license granted hereunder shall be maintained by Grantee in
accordance with Good Utility Practice and the Connection Agreement,
and Grantee shall make all repairs and replacements necessary to
keep such equipment and facilities in such condition.
(d) Generator may not Use any portion of
Generator's Real Property burdened by any easement, right or
privilege granted to Pepco hereunder if such Use would materially
adversely affect the Use and enjoyment by Pepco of the rights
granted to it hereunder, or materially increase the costs or risks
associated with such Use.
(e) All easements granted herein shall be
deemed easements appurtenant to the parcel of real property
benefited thereby and shall run with such real property and shall
be deemed covenants running with the real property burdened
thereby.
2.5 Interpretation. The following shall apply in
interpreting any easement and any right, privilege and license
granted pursuant to this Agreement:
<PAGE>
(a) Each easement and each right, privilege
and license granted herein is irrevocable except by written
agreement of the parties.
(b) With respect to any easement created by
this Agreement, the words "in," "upon," "to," "on," "over,"
"above," "through" and/or "under" shall be interpreted to include
all of such terms.
(c) Each easement and each right, privilege
and license granted herein may be enjoyed without charge or fee to
Grantee of the easement.
(d) Each easement and each right, privilege
and license granted herein is also a grant of the additional right
of Access over Grantor's property to accomplish the purpose of such
easement or right, privilege and license, to perform any
obligations hereunder or in the Connection Agreement, and to comply
with any legal requirements affecting Grantee or its property
and/or improvements.
(e) Exercise of any easement or any right,
privilege and license granted hereunder permitting or requiring
maintenance, repairs, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal,
modification, replacement, expansion, or other work by Grantee upon
the property or improvements of Grantor shall be subject to the
following conditions:
(i) Work upon the facilities and
properties of either Party
subject to this Agreement shall be
permitted only to each Party's Qualified
Personnel, and Access to such facilities
and properties shall be permitted only
to a Party's Qualified Personnel and
such consultants, agents, contractors,
subcontractors and invitees
as any Party may select or permit;
provided that any consultant,
agent, contractor, subcontractor
or invitee shall comply with all
applicable provisions of this
Agreement and the Connection
Agreement.
(ii) Work shall be performed using
reasonable precautions to avoid
unreasonable interference with
the Use and enjoyment of Grantor's
property and improvements.
(iii) Except only as may be
specifically provided to the
contrary herein, Grantee shall
not be liable for damage, if
any, which may be caused by
Grantee's normal and reasonable Use of
any easement, or right, privilege or
license granted hereunder.
(iv) Following completion of the work,
Grantee shall restore Grantor's property
and improvements to the same or as good a
<PAGE>
condition as existed before the
commencement of the work.
(v) Any easement and any right,
privilege and license granted
herein which permits a Grantee
to maintain its property, equipment,
facilities and appurtenances
on the property and improvements
owned by Grantor also includes the
right to maintain in place on Grantor's
property and improvements any and all
wires and cables connecting such
property, equipment, facilities,
and appurtenances to (i) the devices,
machiney and equipment which
they measure, regulate and/or
control, and (ii) power sources.
(vi) Generator shall be solely
responsible for the maintenance
of any roads, paths and other
means of entry or exit located
upon either the Gemerator's
Real Property or the Pepco Real
Property that are commonly
utilized by Generator and Pepco,
and their respective employees,
agents and contractors pursuant to this
Agreement or the Connection Agreement.
(f) Any easement granted pursuant to Section
2.1(a), (b), (c) or (d) includes the right to (i) trim, cut, treat
and/or remove, by manual, mechanical, and chemical means, any and
all trees, brush, structures and other obstructions within the
easement area, as well as such trees, brush, structures and
vegetation outside of the easement area deemed reasonably necessary
or desirable by Pepco for the safe and secure operation of its
facilities; and (ii) obtain Access to Generator's Real Property for
the purpose of performing the aforementioned acts.
2.6 Rules and Regulations.
Each Party may promulgate rules regulating the conduct of the
other Party in the exercise of rights under this Agreement provided
such rules and regulations do not unreasonably interfere with or
impede the affected Party's rights and easements as set forth
herein or in the Connection Agreement.
2.7 No Obstruction.
(a) No Party hereto shall obstruct the
easements or the rights, privileges and licenses granted or created
pursuant to this Agreement or render them impassable or unusable in
any way or otherwise in any way interfere with the right to the Use
and enjoyment of the easements or rights, privileges and licenses
granted or created pursuant to this Agreement.
(b) No Party hereto shall make any changes
to the topography or accesses on or to its respective property,
including grading or drainage that could reasonably be expected to
adversely affect another Party's facilities, common use drainage
<PAGE>
systems, or pollution control systems, or the exercise of any right
or fulfillment of any obligation in this Agreement or in the
Connection Agreement, without the prior written consent of the
other Party which consent shall not unreasonably be withheld,
delayed or conditioned.
3. TAXES, ASSESSMENTS AND OTHER CHARGES
3.1 Real Estate Taxes. Generator, with respect to
the Generator's Real Property and Pepco, with respect to the Pepco
Real Property, shall pay and discharge all of the following ("Real
Estate Taxes") whether or not now within the contemplation of the
Parties hereto: (i) all real estate taxes, assessments (both
general and special), other governmental impositions and charges,
taxes, rents, levies and sums of every kind or nature whatsoever,
extraordinary as well as ordinary, as shall at any time be imposed
by any governmental or public authority on, or become a lien in
respect of, the Generator's Real Property or the Pepco Real
Property, as the case may be, or any part thereof, or which may
become due and payable with respect thereto, and any and all taxes
assessments and charges levied, assessed or imposed upon the
Generator's Real Property or the Pepco Real Property, as the case
may be, in lieu of or in addition to, the foregoing, under or by
virtue of any present or future laws, rules, requirements, orders,
directives, ordinances or regulations of the United States of
America or of the State or of any subdivision thereof, or of any
lawful governmental authority whatsoever, and any interest or
penalties thereon, and (ii) all other taxes (excluding gains, sales
and income taxes but including occupancy taxes which are measured
by income) measured by ownership of the Generator's Real Property
or the Pepco Real Property, as the case may be. Generator shall
pay and discharge all levies and assessments for water, water meter
(including any expenses incident to the installation, repair or
replacement of any water meter) and sewer and all rents with
respect to water and sewer which provide service to the Generator's
Real Property.
3.2 Personal Property Taxes. Generator and Pepco
shall, respectively, pay and discharge all of the following
("Personal Property Taxes") whether or not now within the
contemplation of the Parties hereto: all taxes and assessments
which shall or may be charged, levied, assessed or imposed upon, or
become a lien upon, the personal property of Generator or Pepco, as
the case may be, Used in the operation or in connection with the
business conducted at the Generator's Real Property or the Pepco
Real Property, as the case may be.
3.3 Timing of Payment. Subject to the provisions
of Section 3.5, Generator and Pepco shall each comply with its
covenant to pay and discharge all Real Estate Taxes and Personal
Property Taxes by paying all such taxes directly to the appropriate
taxing authorities prior to the expiration of the period within
which payment is permitted without penalty or interest. Generator
and Pepco shall within twenty (20) days of written request of the
other Party, produce the most recent official receipts from the
appropriate taxing authorities evidencing such payment certified by
Generator or Pepco, as the case may be, to the other Party hereto.
<PAGE>
3.4 Cooperation with Respect to Tax Statements.
Generator and Pepco will cooperate with each other in obtaining
and/or retaining any tax abatement for which the Generator's Real
Property or Pepco Real Property may be eligible. Upon written
request of the Party seeking an abatement, the other Party or
Parties hereto will execute and file any and all documents and
instruments reasonably necessary to obtain and retain such
abatement, without the assumption of any liabilities or
obligations, provided that the Party seeking such abatement shall
reimburse the cooperating Party or Parties for any reasonable
expenses that such cooperating Party or Parties may incur in
connection therewith.
3.5 Tax Contests. Generator, with respect to the
Generator's Real Property, and Pepco, with respect to the Pepco
Real Property:
(a) May contest in good faith by appropriate
proceedings diligently and continuously conducted, at its or their
sole cost and expense, any Real Estate Tax or charge or Personal
Property Tax or charge, or similar tax or charge and, where
permitted by law, pay the same under protest.
(b) Shall pay and discharge such contested
items as finally adjudicated or settled, with interest and
penalties, and all other charges directed to be paid in or by any
such adjudication or settlement.
(c) May, in its or their sole discretion,
consolidate any proceeding to obtain a reduction in the assessed
valuation with any similar proceeding or proceedings brought by it
or them relating to any one or more other tax years.
(d) Shall indemnify and hold the
non-contesting Party harmless from and against all liability, loss,
cost or expense arising out of the contest.
3.6 Refunds. Any refunds from any contest
undertaken pursuant to Section 3.5 shall belong wholly to the Party
or Parties that paid the tax.
4. MECHANICS' LIENS
4.1 Notice Regarding Labor and Material. Notice is
hereby given that no Party hereto shall be liable for any labor or
materials furnished or to be furnished to or for another Party
hereto or to any other persons or entities claiming under such
other Party on credit, and that no mechanics' or other lien for any
such labor or material furnished to a Party or such other persons
or entities shall attach to or affect any property interest of any
other Party.
4.2 Disposition of Liens.
(a) Pepco shall forthwith take such action
necessary to discharge, remove or satisfy any lien filed against
the Generator's Real Property or any
<PAGE>
portion thereof for any labor or materials furnished or to be
furnished for or on behalf of Pepco, or any person or entity
holding any portion thereof through or under Pepco.
(b) Generator shall forthwith take such action
necessary to discharge, remove or satisfy any lien filed against
the Pepco Real Property or any portion thereof for any labor or
materials furnished or to be furnished for or on behalf of
Generator, or any person or entity holding any portion thereof
through or under Generator.
(c) If either Pepco or Generator, as the case
may be, shall fail to discharge, remove or satisfy any such lien
which it is obligated to discharge, remove or satisfy hereunder
within ten (10) days after notice of the existence of the lien has
been given to such defaulting Party, the non-defaulting Party or
parties may pay the amount of such lien or discharge the same by
deposit or bonding, and the amount so paid or deposited, or the
premium paid for such bond, with interest at the rate provided for
defaults in Section 6.3 hereof, shall be paid by the defaulting
Party upon demand to the non-defaulting Party who effected such
cure.
(d) The defaulting Party shall defend,
indemnify and save harmless the non-defaulting Party from and
against all liability, loss, cost or expense (including reasonable
attorneys' fees) arising out of any liens which the defaulting
Party is obligated to discharge, remove or satisfy.
5. CONDEMNATION
5.1 Right to Participate. In the event the
Generator's Real Property or the Pepco Real Property, or any part
thereof, shall be taken in condemnation proceedings or by exercise
of any right of eminent domain or any agreement with those
authorized to exercise such right (any such matter being
hereinafter referred to as a "Taking" or property "Taken"), whether
such Taking be a permanent taking or a temporary Taking, any person
or entity having an interest in the award or awards shall have the
right to participate in any such condemnation proceedings or
agreement for the purpose of protecting its interest hereunder.
Each Party so participating shall pay its own expenses.
5.2 Total Taking. A "Total Taking" shall be deemed
to have occurred as to the property of any Party (which means the
Generator's Real Property, as to Generator, and the Pepco Real
Property, as to Pepco) when the entire property of such Party shall
be Taken or a substantial part of such property shall be Taken and
the untaken portion of the property would, following the completion
of restoration, be unsuitable for the operation and the Use thereof
in the manner so operated and Used prior to the Taking. Upon a
Total Taking, this Agreement shall terminate with respect to the
property Taken except with respect to the disposition of the award
and this Agreement shall continue with respect to the property not
Taken.
<PAGE>
5.3 Disposition of Award. In the event of a
Taking, each Party shall be entitled to share in the awards to the
extent of its interest in the property subject to the Taking, and
for consequential damages to and dilution of value of the relevant
property not so Taken.
5.4 Notice of Taking. In the event the Generator's
Real Property or the Pepco Real Property, or any part thereof,
shall be the subject of any condemnation proceedings or the subject
of any eminent domain proceedings, and if any Party shall receive
actual notice of such proceedings, the Party receiving such notice
shall notify the other Party of the existence of such proceedings.
Such notification shall occur within thirty (30) days of the
receipt of such actual notice.
6. DEFAULTS
6.1 Events of Default. Each and every one of the
following events shall constitute an Event of Default ("Event of
Default") under this Agreement:
(a) If a Party fails to make any payment due
to a party hereto within twenty (20) days of written demand for
such payment;
(b) If a Party fails, within twenty (20) days
of written notice from a Party, to make any payment due from such
Party to any third party and such failure could result in the
imposition of a lien or other encumbrance on the property or
improvements of a Party, unless the payment of such amount is
contested in accordance with Section 3.5 hereof, in which case, the
provisions of Section 3.5 shall control; and
(c) If a Party fails to perform any material
non-monetary obligations hereunder, and said Party fails to cure
such default within thirty (30) days of receipt of written notice
stating with particularity the nature of the default; provided,
however, if such default is of such a nature that it cannot be
cured within thirty (30) days following receipt of such notice, an
Event of Default shall not have occurred if the defaulting Party
shall within such thirty (30) days commence the necessary cure and
shall at all times thereafter diligently and continuously prosecute
such cure to completion.
6.2 Right of Self Help. A non-defaulting Party may
at its election following the occurrence of a non-monetary Event of
Default and the thirtieth (30th) day after the receipt of the
written notice specified in paragraph 6.1(c) hereof, undertake the
cure of such default on behalf of the defaulting Party. A
non-defaulting Party is granted an easement to enter upon, through
or under the property or improvements of the defaulting Party to
effect such cure. Following the occurrence of an Event of Default
involving the payment of money to a person or entity not Party to
this Agreement, a non-defaulting Party may make such payment on
behalf of the defaulting Party. All monies paid by the
non-defaulting Party and all reasonable costs and expenses
(including, reasonable attorneys' fees) incurred by it,
as the case may be, in effecting such cure or payment, shall be
paid by
<PAGE>
the defaulting Party upon written demand, together with interest
from the date of such demand at the rate set forth in Section 6.3.
This Section 6.2 shall not limit Pepco's self-help rights pursuant
to Section 2.3(b).
6.3 Interest. Following the occurrence of an Event
of Default involving the nonpayment of money by the defaulting
Party to the non-defaulting Party, all monies owed to the
non-defaulting party shall bear interest at the rate equal to one
and one-half percent (1.5%) per month accruing on the due date,
provided, however, that such late payment charge shall not exceed
the maximum charge which may be collected under State law.
6.4 Enforcement Rights. In addition to any other
rights expressly set forth in this Agreement, but without
limitation, enforcement of this Agreement may be had by legal or
equitable proceedings against any defaulting Party either to
specifically enforce, restrain or enjoin the violation of any
restriction, covenant, agreement, term, representation or warranty
herein contained or to recover damages. The above notwithstanding,
termination of this Agreement shall not be available as a remedy in
any proceedings against any defaulting Party.
6.5 No Forfeiture. Except by enforcement of a
judgment lien against such property, nothing contained in this
Agreement shall create any reversion, condition or right of
re-entry or other provisions for forfeiture under which any Party
can be cut off, subordinated or otherwise disturbed in the
possession of its property.
6.6 Independent Covenants. None of the rights and
easement granted by this Agreement and none of the performances
required by this Agreement shall be dependent, upon the performance
of any other term, promise, or condition of this Agreement or any
documents executed concurrently or in connection with this
Agreement, and such rights, easement and requirements or
performance shall continue in effect irrespective of whether
anything else in this Agreement or such other documents has been
breached or has been terminated. The separateness and independent
survival of the right, easements and requirements of performance
under this Agreement are essential terms hereof without which this
Agreement would not have been made.
7. INDEMNIFICATION AND INSURANCE
7.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or
proceeding between Pepco and a third party or Generator) for damage
to property of unaffiliated third parties, injury to or death of
any person, including Pepco's employees or any third parties, to
the extent caused,
<PAGE>
by the breach of this Agreement by Generator or the negligence or
willful misconduct of Generator and/or its officers, directors,
employees, agents, contractors, subcontractors or invitees arising
out of or connected with Generator's performance of this Agreement,
or the exercise by Generator of its rights hereunder.
7.2 Pepco's Indemnification. Pepco shall
indemnify, hold harmless, and defend Generator and its Affiliates,
as the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Generator and a third party or Pepco) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Generator's employees or any third parties, to
the extent caused by the breach of this Agreement by Pepco or the
negligence or willful misconduct of Pepco and/or its officers,
directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Pepco's performance of
this Agreement, or the exercise by Pepco of its rights hereunder.
7.3 Survival. The provisions of Sections 7.1 and
7.2 shall survive termination, cancellation, suspension, completion
or expiration of this Agreement.
7.4 Insurance Coverage. The Parties shall maintain
at their own cost the following insurance: (a) standard Commercial
General Liability insurance with limitations not less than One
Hundred Million Dollars ($100,000,000.00)in the aggregate; (b)
All-Risk Property insurance in amounts not less than one hundred
percent (100%) of the full replacement cost of the improvements
located upon each Party's real property; (c) Worker's compensation
insurance as required by prevailing law and Employer's liability
insurance with limits of not less than Twenty-five Million Dollars
($25,000,000.00); and (d) such other insurance as is customary in
the electric utility industry.
7.5 Certificate of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance coverage obtained in accordance with this Article 7, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within five (5) business
days of receiving notice of cancellation, change, amendment or
renewal of any insurance policy required pursuant to Section 7.4
above.
7.6 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
7.4, above, as regards liability under this Agreement; and each
general liability insurance policy shall contain a waiver of
subrogation and each Party shall waive its rights of recovery
against the other for any loss or damage covered by such policy.
<PAGE>
8. MISCELLANEOUS
8.1 Effective Date. This Agreement will be
effective on the Closing Date pursuant to the Asset Sale Agreement
(the "Effective Date").
8.2 Exhibits. All exhibits attached to this
Agreement are part of this Agreement and the material contained in
such exhibits shall be construed and interpreted as if contained
within the text of the Agreement.
8.3 Headings. The Article and Section headings of
this Agreement are for convenience and reference only and in no way
define, limit or describe the scope and intent of this Agreement,
nor in any way affect this Agreement.
8.4 Interpretation. When a reference is made in
this Agreement to an Article, Section, Schedule or Exhibit, such
reference shall be to an Article or Section of, or Schedule or
Exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument, statute,
regulation, rule or order defined or referred to herein or in any
agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from
time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the
case of statutes, regulations, rules or orders) by succession of
comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted
successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution
of this Agreement and, accordingly, there shall be no presumption
that this Agreement or any provision hereof be construed against
the Party that drafted this Agreement.
8.5 GOVERNING LAW. EXCEPT WITH RESPECT TO THE
CREATION, PERFECTION AND ENFORCEMENT OF THE REAL PROPERTY INTERESTS
CREATED HEREUNDER, WHICH SHALL BE GOVERNED AND CONSTRUED BY THE
LAWS OF THE STATE, THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA
EXCLUSIVE OF ITS CHOICE OF LAW RULES.
<PAGE>
8.6 Entire Agreement. This Agreement, the Asset
Sale Agreement, the Confidentiality Agreement (as defined in the
Asset Sale Agreement) and the Ancillary Agreements (as defined in
the Asset Sale Agreement) including the Exhibits, Schedules,
documents, certificates and instruments referred to herein or
therein and other contracts, agreements and instruments
contemplated hereby or thereby, embody the entire agreement and
understanding of the Parties in respect of the transactions
contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein or
therein.
8.7 Amendment and Modification, Extension, Waiver.
This Agreement may be amended, modified or supplemented only by an
instrument in writing signed on behalf of each of the Parties.
Either Party may (i) extend the time for the performance of any of
the obligations or other acts of the other Party, (ii) waive any
inaccuracies in the representations and warranties of the other
Party contained in this Agreement or (iii) waive compliance by the
other Party with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure
of a Party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such
rights.
8.8 Binding Effect. The covenants, conditions,
restrictions, encumbrances, easements, license and agreements set
forth in this Agreement shall attach to, burden, and run with the
land and the Generator's Real Property and the Pepco Real Property
or the applicable portion or portions thereof, and shall be
appurtenant to the Generator's Property or the Pepco Real Property,
as appropriate and, together with the remainder of this Agreement,
shall be binding upon the Parties hereto and their respective
successors, assigns, grantees, transferees and tenants and,
together with the remainder of this Agreement, shall inure to the
benefit and Use of the Parties hereto and their respective heirs,
successors, assigns, grantees, transferees and tenants. Each
Grantee of any portion of or interest in the property and each
mortgagee which succeeds to the fee simple ownership of any portion
of the property shall be deemed, by the acceptance of the deed
conveying fee simple title to such person, to have agreed to
perform each and every undertaking created hereunder attributable
to the portion of the property in which such Grantee or mortgagee
has acquired an interest.
8.9 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.
8.10 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this
<PAGE>
Agreement so as to effect the original intent of the Parties as
closely as possible to the fullest extent permitted by applicable
law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
8.11 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Telecopy No.: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Generator, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, N.W.
Suite 500 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
<PAGE>
The names, titles and addresses of either Party in this section may
be changed by written notification to the other Party.
8.12 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
8.13 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
IN WITNESS WHEREOF, Pepco and Generator have caused this
Agreement to be signed by their respective duly authorized officers
as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By: _____________________________
Name: _____________________________
Title: _____________________________
[GENERATOR]
By: _____________________________
Name: _____________________________
Title: _____________________________
<PAGE>
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County and
State, personally appeared __________________________, an
________________________, by _____________________, its ________
who _________ is personally known to me/________ and who
acknowledged before me that he did sign the foregoing instrument
and that the same is the free act and deed of said ______________,
and his free act and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County
and State, personally appeared ___________________________, an
___________________, by ________________ its _____________________
who _______ is personally known to me/________ and who acknowledged
before me that he did sign the foregoing instrument and that the
same is the free act and deed of said corporation, and his free act
and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
<PAGE>
Schedule 1.1
Definitions
"Access" means, subject to the conditions set forth in
this Agreement and a Party's right to impose reasonable security
and safety restrictions protecting its officers, employees, agents,
consultants, contractors, subcontractors, invitees, property and
confidential information, full and unimpeded access, in common with
Grantor over and through existing roads, paths, walkways,
corridors, hallways, doorways, and other means of entry or exit, as
exist now and from time to time on Grantor's property or, where no
means of access exists, over and through those areas of Grantor's
property or improvements which are (i) reasonably necessary or
convenient for achieving Grantee's underlying purposes, and (ii)
least likely, out of the alternatives reasonably available, to
impede or damage the property or operation of any Party hereto.
Access shall also include access and right-of-way for Grantee's
employees, agents, consultants, contractors, subcontractors,
vehicles, trucks, trailers, heavy machinery, equipment, materials,
and all other items reasonably necessary or convenient for
achieving Grantee's underlying purposes.
"Affiliate" has the meaning set forth in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act
of 1934.
"Agreement" means this Easement, License and Attachment
Agreement.
"Asset Sale Agreement" has the meaning set forth in the
first recital of this Agreement, as such Asset Sale Agreement may
be amended or modified.
"Connection Agreement" means the Interconnection
Agreement (Chalk Point), dated as of __________, 2000, between
Pepco and Generator.
"Distribution of Electric Current" means local
transmission and distribution of electricity to Pepco's end users.
"Distribution Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions, replacements and expansions
thereto, now or hereafter installed or located on the Generator's
Real Property for Distribution of Electric Current. Distribution
Facilities do not include Transmission Facilities.
"Effective Date" has the meaning set forth in Section
8.l.
"FERC" means the Federal Energy Regulatory Commission or
its successors.
<PAGE>
"Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
"Generator" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Generator's Real Property" means the real property
described in Exhibit A, and any improvements or betterments thereto
now or hereinafter situated thereon.
"Good Utility Practice" shall have the meaning given it
by the Connection Agreement.
"Grantee" means the Party or Parties who enjoy the
principal benefit of the referenced easement, license, right
(including attachment rights) privilege or right-of-way.
"Grantor" means the owner or owners of the property
and/or improvement granting the referenced easement, license, right
(including attachment rights), privilege or right-of-way.
"Interconnection Service" shall have the meaning given it
by the Connection Agreement.
"Party" or "Parties" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Pepco" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Pepco Real Property" means the real property described
in Exhibit B, and any improvements or betterments thereto now or
hereinafter situated thereon.
"Qualified Personnel" means individuals who possess any
required licenses and trained for their positions and duties by
Generator and/or Pepco pursuant to Good Utility Practice.
"State" means the State of Maryland.
"Station" means the Chalk Point Station as defined in the
Asset Sale Agreement.
"Transmission of Electric Current" means the transmission
of such current typically over long distances and at voltages not
commonly used for service to end use customers.
"Transmission Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions, replacements and expansions
thereto, now or hereafter installed or located on the
<PAGE>
Generator's Real Property and/or which Pepco may reasonably require
now and from time to time on the Generator's Real Property for the
Transmission of Electric Current. Transmission Facilities do not
include Distribution Facilities.
"Transmission System" shall have the meaning set forth in
the Connection Agreement.
"Use" means to operate, maintain, repair, upgrade, clean,
install, add to, alter, remove, inspect, construct, modify,
restore, rebuild, replace, relocate and expand (but if any such
addition, relocation or expansion would unreasonably or materially
burden Grantor's Property, in each case, the express, prior written
consent of Grantor shall be required, which consent shall not
unreasonably be withheld, delayed or conditioned) (all of the
foregoing to be in accordance with Good Utility Practice).
<PAGE>
LIST OF EXHIBITS
Exhibit A Generator's Real Property
Exhibit B Pepco Real Property
Exhibit C Easement for Electrical Connections between Switchyard
and Combustion Turbine-Generator
Exhibit D Easement for Oil Pipeline on Pepco Real Property
Exhibit E Easement for Oil Pipeline on Retained Assets
<PAGE>
EXHIBIT C-4
AFTER RECORDING PARCEL ID#
PLEASE RETURN TO: STREET ADDRESS:
____________________ ____________________
____________________ ____________________
____________________ ____________________
EASEMENT, LICENSE AND ATTACHMENT AGREEMENT
(Morgantown Station)
THIS EASEMENT, LICENSE AND ATTACHMENT AGREEMENT (the
"Agreement"), is dated as of ______________, 2000, and is entered
into by and between ______________________________, a corporation
organized and existing under the laws of the State of __________
and having an office at _____________________________________
("Generator") and POTOMAC ELECTRIC POWER COMPANY, a District of
Columbia and Virginia corporation and having an office at 1900
Pennsylvania Avenue, N.W., Washington, DC 20068 ("Pepco").
Generator and Pepco may hereinafter be referred to individually as
a "Party" and collectively as the "Parties."
RECITALS
A. Generator and Pepco have entered into an Asset
Purchase and Sale Agreement for Generating and Related Assets (the
"Asset Sale Agreement"), dated June 7, 2000, for the sale of
Pepco's generating station known as the Morgantown Station (as
defined in the Asset Sale Agreement), which is located on that
certain parcel of real property which has been conveyed by Pepco to
Generator pursuant to the Asset Sale Agreement by virtue of a deed
recorded immediately prior hereto and is more particularly
described in Exhibit "A" attached hereto (the "Generator's Real
Property").
B. Pepco intends to continue to operate its
transmission and distribution business on and from that certain
parcel of real property adjoining the Generator's Real Property,
which parcel has been retained by Pepco following the conveyances
contemplated by the Asset Sale Agreement, and is more particularly
described in Exhibit "B" attached hereto (the "Pepco Real
Property").
C. Pepco will continue to own and operate certain
assets used in the conduct of its transmission and distribution
business which are located upon the Generator's Real Property, and
Pepco requires Access (as defined below) to, and certain other
rights with respect to, the Generator's Real Property in connection
therewith. Generator, in the operation and conduct of its
generation business, will require Access to, and certain other
rights with respect to, the Pepco Real Property. Furthermore,
Pepco and Generator have entered into an Interconnection Agreement
(the "Connection Agreement"), dated as of __________, 2000,
pursuant to which Pepco has agreed to provide certain
Interconnection Service to Generator required for Generator's
conduct of its generation business at Morgantown Station.
<PAGE>
D. In order for the Parties each to (i) enjoy the full
benefit of their respective property rights, real or personal, and
conduct their respective businesses thereat (ii) fulfill legal
requirements, and (iii) comply with their respective agreements
under the Connection Agreement, each Party requires certain
easements, licenses, rights-of-way and/or attachment rights in, on,
over and above, or with respect to, real and or personal property
of the other Party.
AGREEMENT
NOW, THEREFORE, the Parties, in consideration of the
mutual covenants and agreements contained herein and in the Asset
Sale Agreement and the Connection Agreement, and for One Dollar
($1.00) and other good and valuable consideration, the receipt
whereof and sufficiency of which are hereby acknowledged, each
intending to be legally bound and to bind their respective
successors and assigns, hereby mutually agree as follows:
1. DEFINITIONS
1.1 Definitions. Any capitalized terms which are
used but not defined in the body of this Agreement shall have the
meanings given to such terms in the attached Schedule 1.1.
2. EASEMENTS
2.1 Grant of Easements to Pepco. Generator does
hereby give, grant, bargain, sell, assign and convey unto Pepco,
the following easements on the Generator's Real Property for the
following purposes:
(a) A ten (10) foot wide easement, as more
particularly described in Exhibit "C" attached hereto, for the
connection and extension of overhead and underground utility
facilities and other equipment and facilities utilized in
connection with the transmission and distribution business of Pepco
(as now or hereafter conducted) and other functions as Pepco may
determine from time to time.
(b) An easement for the Use, operation and
maintenance of the Retained Assets (as described in the Asset Sale
Agreement) located upon the Generator's Real Property and any other
equipment of any nature or kind retained by Pepco and located upon
the Generator's Real Property, together with any other equipment
used in connection with the foregoing (together with replacements
thereof and substitutions therefor).
(c) An easement which enables Pepco to keep
and maintain in their present locations, and operate, any
Transmission Facilities, Distribution Facilities and other assets
owned by Pepco and located upon the Generator's Real Property,
together with an easement for all purposes reasonably deemed
necessary or convenient by Pepco to
<PAGE>
exercise any right or fulfill any obligation under the Connection
Agreement, including the right to Use any improvements constructed,
maintained or installed in connection therewith.
(d) An easement of Access to those certain
generating buildings (and any replacements thereof) located upon
the Generator's Real Property in and upon which certain of Pepco's
Distribution Facilities and Transmission Facilities are located.
Such easement shall include, without limitation, the right to have
keys, access codes or other access methods necessary to enter any
of such generating buildings. Furthermore, the exercise of the
easement right set forth in this subparagraph shall be subject to
the provisions of the Connection Agreement including, without
limitation, Section 3.3 thereof.
(e) An easement of Access to the Generator's
Real Property for the purposes of exercising any of the rights
granted in this Section 2.l, in Section 2.3(b)(viii) hereof, in the
Connection Agreement or the Asset Sale Agreement.
(f) An easement of Access to, and the right to
use, the parking lots, access roads, driveways and other such
facilities located upon the Generator's Real Property.
(g) Pepco's exercise of the rights, easements,
privileges and licenses granted to it pursuant to this Section 2.1
shall be limited to Qualified Personnel or employees of contractors
employed by Pepco who, in either event, are under Pepco's and/or
its contractors' direct supervision and whose duties include, or
who are engaged for the purpose of, Use of the rights granted
pursuant to this Section 2.1.
(h) The easements granted pursuant to this
Section 2.1 shall expressly include Pepco's right to lease, license
or otherwise permit Affiliates or third parties to use Pepco's
facilities upon such terms and for such purposes as Pepco may
determine from time to time, subject to the terms and conditions of
this Agreement.
2.2 Reservation by Generator of Certain Rights.
Generator reserves to itself, from the easements granted pursuant
to Section 2.1 hereof, the following rights, subject, however, to
the provisions of the final paragraph of this Section 2.2:
(a) the right to (i) keep and maintain
Generator's Real Property and all improvements and facilities owned
by Generator and located upon the Generator's Real Property in
their present locations, and (ii) operate and maintain all
improvements and facilities owned by Generator and located upon the
Generator's Real Property in a manner consistent with past
practice; and
(b) the right to have Access to all portions
of the Generator's Real Property for all purposes deemed reasonably
necessary or convenient by Generator in the operation and conduct
of its generation business or in order to perform any act
permitted, or fulfill any obligation of Generator, under the
Connection Agreement,
<PAGE>
including maintenance of the Generator's Real Property in the
manner described in the Connection Agreement.
(c) Generator's exercise of the rights
reserved to Generator in this Section 2.2, and the rights,
privileges and licenses granted to Generator in Section 2.3 shall
be exclusively limited to Qualified Personnel or employees of
contractors employed by Generator who, in either event, are under
Generator's and/or its contractors' direct supervision and whose
duties include, or who are engaged for the purpose of, Use of the
property described in clause (a) of this Section.
2.3 Grant of Easements, Right, Privilege and
License from Pepco to Generator.
(a) Pepco does hereby grant to Generator the
following easements, rights, privileges and licenses on and with
respect to the Pepco Real Property:
(i) An easement, as described on Exhibit
"D" attached hereto, for the operation and maintenance of an
existing oil pipeline (to be used solely for the transmission of
oil) on, under and across Pepco Real Property at two (2) locations.
(ii) An easement, as described on Exhibit
"E" attached hereto, for the operation and maintenance of an
existing oil pipeline (to be used solely for the transmission of
oil) on, under and across the Retained Assets.
(iii) An easement which enables
Generator to keep and maintain in their present locations, and
operate, any Generating Facilities and other assets owned by
Generator and located upon the Pepco Real Property.
(iv) An easement of Access to and upon the
Pepco Real Property for the purposes of exercising any of the
rights granted in the Connection Agreement or the Asset Sale
Agreement.
(b) In addition, but without limitation of
Generator's rights pursuant to the Connection Agreement, Pepco
agrees to make available to Generator (at no cost to Generator,
except as provided below) Pepco's master station voltage control
equipment (the "Equipment") located at Morgantown Station upon the
Generator's Real Property during the term of this Agreement,
subject to the following terms and conditions, and Generator agrees
to comply with such terms and conditions:
(i) Generator's operation of the
Equipment shall at all times be subject to that certain Agreement
of Sale and Lease dated as of November 30, 1994 between NationsBank
Trust Company, National Association and Pepco (the "Control Center
Lease"), and Generator shall comply with the terms and conditions
<PAGE>
thereof with respect to the use of the Equipment (including keeping
the Equipment free and clear of any liens, claims or encumbrances
of whatever nature, and identifying the Equipment as being owned by
Pepco, and shall not modify, alter, remove or add to the
Equipment);
(ii) Generator shall operate and maintain
the Equipment in accordance with Good Utility Practice;
(iii) Generator shall be responsible
for all operating, repair and maintenance costs, taxes and the like
with respect to the Equipment, and shall reimburse Pepco promptly
upon invoicing for any such costs paid by Pepco;
(iv) Generator's Access to the Equipment
shall be in accordance with this Agreement;
(v) Generator's right to operate the
Equipment shall terminate in the event of actual or constructive
loss of the Equipment, damage rendering the Equipment beyond repair
or unfit for normal use, the condemnation or seizure of the
Equipment, the obsolescence of the Equipment or the material breach
by Generator of any of its covenants in this Section 2.3(b);
(vi) Pepco shall have no obligation to
Generator with respect to the Equipment other than to permit Access
to and operation of the Equipment in accordance with this Section
2.3(b);
(vii) The obligations of Generator
under Section 7.4 (maintenance of liability insurance coverage) and
Section 7.1 (indemnification) shall be applicable to the Equipment;
and
(viii) Pepco shall have Access to the
Equipment for purposes of complying with the terms and conditions
of the Control Center Lease and as necessary to perform any of the
obligations of Generator pursuant to this subparagraph (b) above to
the extent the same are not timely performed by Generator.
2.4 General Scope of Easements.
(a) Except as otherwise provided in Sections
2.2 and 2.3 above and Section 2.4(b) below, each easement and each
right, privilege and license granted hereby is and shall be a
perpetual grant, transfer, conveyance and right of Access to and
Use
<PAGE>
(subject to the terms of this Agreement) to the Grantee thereof and
to any future owner of the real property, improvements and
facilities benefited thereby. Notwithstanding the foregoing, all
easements, rights, privileges and licenses granted by this
Agreement are and shall be subject to the terms and conditions of
the Connection Agreement, and in the event of any inconsistency
between the terms and conditions of the Connection Agreement and
the terms of this Agreement, the terms of the Connection Agreement
shall control.
(b) Any easement or right, privilege and
license granted hereunder for purposes of enabling a Party to
exercise any right or fulfill any obligation set forth in the
Connection Agreement will continue for the term of the Connection
Agreement, and thereafter if and to the extent that the right or
obligation (i) shall by its express terms survive the termination
or expiration of the Connection Agreement or (ii) is necessary for
the conduct of business by Grantee. In the event of the
termination or expiration of an easement or right, privilege and
license granted hereunder for purposes of enabling a Grantee to
exercise any right or fulfill any obligation set forth in the
Connection Agreement, all equipment and facilities installed or
maintained by such Grantee on the real property of the other Party
pursuant to said terminated or expired easement or right, privilege
and license shall, at the request of the other Party, be removed at
the sole cost and expense of such Grantee, and such Grantee shall,
at its sole cost and expense repair any damage to the real property
and/or equipment and facilities of the other Party damaged as a
result of such removal.
(c) All equipment and facilities installed or
maintained by Grantee pursuant to an easement or right, privilege
and license granted hereunder shall be maintained by Grantee in
accordance with Good Utility Practice and the Connection Agreement,
and Grantee shall make all repairs and replacements necessary to
keep such equipment and facilities in such condition.
(d) Generator may not Use any portion of
Generator's Real Property burdened by any easement, right or
privilege granted to Pepco hereunder if such Use would materially
adversely affect the Use and enjoyment by Pepco of the rights
granted to it hereunder, or materially increase the costs or risks
associated with such Use.
(e) All easements granted herein shall be
deemed easements appurtenant to the parcel of real property
benefited thereby and shall run with such real property and shall
be deemed covenants running with the real property burdened
thereby.
2.5 Interpretation. The following shall apply in
interpreting any easement and any right, privilege and license
granted pursuant to this Agreement:
(a) Each easement and each right, privilege
and license granted herein is irrevocable except by written
agreement of the parties.
<PAGE>
(b) With respect to any easement created by
this Agreement, the words "in," "upon," "to," "on," "over,"
"above," "through" and/or "under" shall be interpreted to include
all of such terms.
(c) Each easement and each right, privilege
and license granted herein may be enjoyed without charge or fee to
Grantee of the easement.
(d) Each easement and each right, privilege
and license granted herein is also a grant of the additional right
of Access over Grantor's property to accomplish the purpose of such
easement or right, privilege and license, to perform any
obligations hereunder or in the Connection Agreement, and to comply
with any legal requirements affecting Grantee or its property
and/or improvements.
(e) Exercise of any easement or any right,
privilege and license granted hereunder permitting or requiring
maintenance, repairs, alteration, restoration, rebuilding,
construction, upgrading, cleaning, installation, removal,
modification, replacement, expansion, or other work by Grantee upon
the property or improvements of Grantor shall be subject to the
following conditions:
(i) Work upon the facilities and
properties of either Party subject
to this Agreement shall be permitted
only to each Party's Qualified
Personnel, and Access to such
facilities and properties shall
be permitted only to a Party's
Qualified Personnel and such
consultants, agents, contractors,
subcontractors and invitees
as any Party may select or permit;
provided that any consultant,
agent, contractor, subcontractor
or invitee shall comply with all
applicable provisions of this
Agreement and the Connection
Agreement.
(ii) Work shall be performed using
reasonable precautions to avoid
unreasonable interference with the
Use and enjoyment of Grantor's property
and improvements.
(iii) Except only as may be
specifically provided to the
contrary herein, Grantee shall
not be liable for damage, if
any, which may be caused by
Grantee's normal and reasonable Use
of any easement, or right, privilege
or license granted hereunder.
(iv) Following completion of the
work, Grantee shall restore
Grantor's property and improvements
to the same or as good a condition
as existed before the commencement
of the work.
(v) Any easement and any right,
privilege and license granted
herein which permits a Gramtee
to maintain its property,
<PAGE>
equipment, facilities and
appurtenances on the property
and improvements owned by Grantor also
includes the right to maintain in place
on Grantor's property and improvements
any and all wires and cables connecting
such property, equipment, facilities,
and appurtenances to (i) the devices,
machinery and equipment which they
measure, regulate and/or control, and
(ii) power sources.
(vi) Generator shall be solely responsible
for the maintenance of any roads, paths
and other means of entry or exit
exit located upon either the
Generator's Real Property or
the Pepco Real Property that are
commonly utilized by Generator
and Pepco, and their respective employees,
agents and contractors pursuant to this
Agreement or the Connection Agreement.
(f) Any easement granted pursuant to Section
2.1(a), (b) or (c) includes the right to (i) trim, cut, treat
and/or remove, by manual, mechanical, and chemical means, any and
all trees, brush, structures and other obstructions within the
easement area, as well as such trees, brush, structures and
vegetation outside of the easement area deemed reasonably necessary
or desirable by Pepco for the safe and secure operation of its
facilities; and (ii) obtain Access to Generator's Real Property for
the purpose of performing the aforementioned acts.
2.6 Rules and Regulations.
Each Party may promulgate rules regulating the conduct of
the other Party in the exercise of rights under this Agreement
provided such rules and regulations do not unreasonably interfere
with or impede the affected Party's rights and easements as set
forth herein or in the Connection Agreement.
2.7 No Obstruction.
(a) No Party hereto shall obstruct the
easements or the rights, privileges and licenses granted or created
pursuant to this Agreement or render them impassable or unusable in
any way or otherwise in any way interfere with the right to the Use
and enjoyment of the easements or rights, privileges and licenses
granted or created pursuant to this Agreement.
(b) No Party hereto shall make any changes to
the topography or accesses on or to its respective property,
including grading or drainage that could reasonably be expected to
adversely affect another Party's facilities, common use drainage
systems, or pollution control systems, or the exercise of any right
or fulfillment of any obligation in this Agreement or in the
Connection Agreement, without the prior written consent of the
other Party which consent shall not unreasonably be withheld,
delayed or conditioned.
<PAGE>
3. TAXES, ASSESSMENTS AND OTHER CHARGES
3.1 Real Estate Taxes. Generator, with respect to
the Generator's Real Property and Pepco, with respect to the Pepco
Real Property, shall pay and discharge all of the following ("Real
Estate Taxes") whether or not now within the contemplation of the
Parties hereto: (i) all real estate taxes, assessments (both
general and special), other governmental impositions and charges,
taxes, rents, levies and sums of every kind or nature whatsoever,
extraordinary as well as ordinary, as shall at any time be imposed
by any governmental or public authority on, or become a lien in
respect of, the Generator's Real Property or the Pepco Real
Property, as the case may be, or any part thereof, or which may
become due and payable with respect thereto, and any and all taxes
assessments and charges levied, assessed or imposed upon the
Generator's Real Property or the Pepco Real Property, as the case
may be, in lieu of or in addition to, the foregoing, under or by
virtue of any present or future laws, rules, requirements, orders,
directives, ordinances or regulations of the United States of
America or of the State or of any subdivision thereof, or of any
lawful governmental authority whatsoever, and any interest or
penalties thereon, and (ii) all other taxes (excluding gains, sales
and income taxes but including occupancy taxes which are measured
by income) measured by ownership of the Generator's Real Property
or the Pepco Real Property, as the case may be. Generator shall
pay and discharge all levies and assessments for water, water meter
(including any expenses incident to the installation, repair or
replacement of any water meter) and sewer and all rents with
respect to water and sewer which provide service to the Generator's
Real Property.
3.2 Personal Property Taxes. Generator and Pepco
shall, respectively, pay and discharge all of the following
("Personal Property Taxes") whether or not now within the
contemplation of the Parties hereto: all taxes and assessments
which shall or may be charged, levied, assessed or imposed upon, or
become a lien upon, the personal property of Generator or Pepco, as
the case may be, Used in the operation or in connection with the
business conducted at the Generator's Real Property or the Pepco
Real Property, as the case may be.
3.3 Timing of Payment. Subject to the provisions
of Section 3.5, Generator and Pepco shall each comply with its
covenant to pay and discharge all Real Estate Taxes and Personal
Property Taxes by paying all such taxes directly to the appropriate
taxing authorities prior to the expiration of the period within
which payment is permitted without penalty or interest. Generator
and Pepco shall within twenty (20) days of written request of the
other Party, produce the most recent official receipts from the
appropriate taxing authorities evidencing such payment certified by
Generator or Pepco, as the case may be, to the other Party hereto.
3.4 Cooperation with Respect to Tax Statements.
Generator and Pepco will cooperate with each other in obtaining
and/or retaining any tax abatement for which the Generator's Real
Property or Pepco Real Property may be eligible. Upon written
request of the Party seeking an abatement, the other Party or
Parties hereto will
<PAGE>
execute and file any and all documents and instruments reasonably
necessary to obtain and retain such abatement, without the
assumption of any liabilities or obligations, provided that the
Party seeking such abatement shall reimburse the cooperating Party
or Parties for any reasonable expenses that such cooperating Party
or Parties may incur in connection therewith.
3.5 Tax Contests. Generator, with respect to the
Generator's Real Property, and Pepco, with respect to the Pepco
Real Property:
(a) May contest in good faith by appropriate
proceedings diligently and continuously conducted, at its or their
sole cost and expense, any Real Estate Tax or charge or Personal
Property Tax or charge, or similar tax or charge and, where
permitted by law, pay the same under protest.
(b) Shall pay and discharge such contested
items as finally adjudicated or settled, with interest and
penalties, and all other charges directed to be paid in or by any
such adjudication or settlement.
(c) May, in its or their sole discretion,
consolidate any proceeding to obtain a reduction in the assessed
valuation with any similar proceeding or proceedings brought by it
or them relating to any one or more other tax years.
(d) Shall indemnify and hold the
non-contesting Party harmless from and against all liability, loss,
cost or expense arising out of the contest.
3.6 Refunds. Any refunds from any contest
undertaken pursuant to Section 3.5 shall belong wholly to the Party
or Parties that paid the tax.
4. MECHANICS' LIENS
4.1 Notice Regarding Labor and Material. Notice is
hereby given that no Party hereto shall be liable for any labor or
materials furnished or to be furnished to or for another Party
hereto or to any other persons or entities claiming under such
other Party on credit, and that no mechanics' or other lien for any
such labor or material furnished to a Party or such other persons
or entities shall attach to or affect any property interest of any
other Party.
4.2 Disposition of Liens.
(a) Pepco shall forthwith take such action necessary to discharge,
remove or satisfy any lien filed against the Generator's Real
Property or any portion thereof for any labor or materials
furnished or to be furnished for or on behalf of Pepco, or any
person or entity holding any portion thereof through or under
Pepco.
<PAGE>
(b) Generator shall forthwith take such action
necessary to discharge, remove or satisfy any lien filed against
the Pepco Real Property or any portion thereof for any labor or
materials furnished or to be furnished for or on behalf of
Generator, or any person or entity holding any portion thereof
through or under Generator.
(c) If either Pepco or Generator, as the case
may be, shall fail to discharge, remove or satisfy any such lien
which it is obligated to discharge, remove or satisfy hereunder
within ten (10) days after notice of the existence of the lien has
been given to such defaulting Party, the non-defaulting Party or
parties may pay the amount of such lien or discharge the same by
deposit or bonding, and the amount so paid or deposited, or the
premium paid for such bond, with interest at the rate provided for
defaults in Section 6.3 hereof, shall be paid by the defaulting
Party upon demand to the non-defaulting Party who effected such
cure.
(d) The defaulting Party shall defend,
indemnify and save harmless the non-defaulting Party from and
against all liability, loss, cost or expense (including reasonable
attorneys' fees) arising out of any liens which the defaulting
Party is obligated to discharge, remove or satisfy.
5. CONDEMNATION
5.1 Right to Participate. In the event the
Generator's Real Property or the Pepco Real Property, or any part
thereof, shall be taken in condemnation proceedings or by exercise
of any right of eminent domain or any agreement with those
authorized to exercise such right (any such matter being
hereinafter referred to as a "Taking" or property "Taken"), whether
such Taking be a permanent Taking or a temporary Taking, any person
or entity having an interest in the award or awards shall have the
right to participate in any such condemnation proceedings or
agreement for the purpose of protecting its interest hereunder.
Each Party so participating shall pay its own expenses.
5.2 Total Taking. A "Total Taking" shall be deemed
to have occurred as to the property of any Party (which means the
Generator's Real Property, as to Generator, and the Pepco Real
Property, as to Pepco) when the entire property of such Party shall
be Taken or a substantial part of such property shall be Taken and
the untaken portion of the property would, following the completion
of restoration, be unsuitable for the operation and the Use thereof
in the manner so operated and Used prior to the Taking. Upon a
Total Taking, this Agreement shall terminate with respect to the
property Taken except with respect to the disposition of the award
and this Agreement shall continue with respect to the property not
Taken.
5.3 Disposition of Award. In the event of a
Taking, each Party shall be entitled to share in the awards to the
extent of its interest in the property subject to the
<PAGE>
Taking, and for consequential damages to and dilution of value of
the relevant property not so Taken.
5.4 Notice of Taking. In the event the Generator's
Real Property or the Pepco Real Property, or any part thereof,
shall be the subject of any condemnation proceedings or the subject
of any eminent domain proceedings, and if any Party shall receive
actual notice of such proceedings, the Party receiving such notice
shall notify the other Party of the existence of such proceedings.
Such notification shall occur within thirty (30) days of the
receipt of such actual notice.
6. DEFAULTS
6.1 Events of Default. Each and every one of the
following events shall constitute an Event of Default ("Event of
Default") under this Agreement:
(a) If a Party fails to make any payment due
to the other Party hereto within twenty (20) days of written demand
for such payment;
(b) If a Party fails, within twenty (20) days
of written notice from a Party, to make any payment due from such
Party to any third party and such failure could result in the
imposition of a lien or other encumbrance on the property or
improvements of a Party, unless the payment of such amount is
contested in accordance with Section 3.5 hereof, in which case, the
provisions of Section 3.5 shall control; and
(c) If a Party fails to perform any material
non-monetary obligations hereunder, and said Party fails to cure
such default within thirty (30) days of receipt of written notice
stating with particularity the nature of the default; provided,
however, if such default is of such a nature that it cannot be
cured within thirty (30) days following receipt of such notice, an
Event of Default shall not have occurred if the defaulting Party
shall within such thirty (30) days commence the necessary cure and
shall at all times thereafter diligently and continuously prosecute
such cure to completion.
6.2 Right of Self Help. A non-defaulting Party may
at its election following the occurrence of a non-monetary Event of
Default and the thirtieth (30th) day after the receipt of the
written notice specified in paragraph 6.1(c) hereof, undertake the
cure of such default on behalf of the defaulting Party. A
non-defaulting Party is granted an easement to enter upon, through
or under the property or improvements of the defaulting Party to
effect such cure. Following the occurrence of an Event of Default
involving the payment of money to a person or entity not Party to
this Agreement, a non-defaulting Party may make such payment on
behalf of the defaulting Party. All monies paid by the
non-defaulting Party and all reasonable costs and expenses
(including, reasonable attorneys' fees) incurred by it, as the case
may be, in effecting such cure or payment, shall be paid by the
defaulting Party upon written demand, together with interest from
the date of such
<PAGE>
demand at the rate set forth in Section 6.3. This Section 6.2
shall not limit Pepco's self-help rights pursuant to Section
2.3(b).
6.3 Interest. Following the occurrence of an Event
of Default involving the nonpayment of money by the defaulting
Party to the non-defaulting Party, all monies owed to the
non-defaulting party shall bear interest at the rate equal to one
and one-half percent (1.5%) per month accruing on the due date,
provided, however, that such late payment charge shall not exceed
the maximum charge which may be collected under State law.
6.4 Enforcement Rights. In addition to any other
rights expressly set forth in this Agreement, but without
limitation, enforcement of this Agreement may be had by legal or
equitable proceedings against any defaulting Party either to
specifically enforce, restrain or enjoin the violation of any
restriction, covenant, agreement, term, representation or warranty
herein contained or to recover damages. The above notwithstanding,
termination of this Agreement shall not be available as a remedy in
any proceedings against any defaulting Party.
6.5 No Forfeiture. Except by enforcement of a
judgment lien against such property, nothing contained in this
Agreement shall create any reversion, condition or right of
re-entry or other provisions for forfeiture under which any Party
can be cut off, subordinated or otherwise disturbed in the
possession of its property.
6.6 Independent Covenants. None of the rights and
easement granted by this Agreement and none of the performances
required by this Agreement shall be dependent, upon the performance
of any other term, promise, or condition of this Agreement or any
documents executed concurrently or in connection with this
Agreement, and such rights, easement and requirements or
performance shall continue in effect irrespective of whether
anything else in this Agreement or such other documents has been
breached or has been terminated. The separateness and independent
survival of the right, easements and requirements of performance
under this Agreement are essential terms hereof without which this
Agreement would not have been made.
7. INDEMNIFICATION AND INSURANCE
7.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Pepco and a third party or Generator) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the
extent caused, by the breach of this Agreement by Generator or the
negligence or willful misconduct of
<PAGE>
Generator and/or its officers, directors, employees, agents,
contractors, subcontractors or invitees arising out of or connected
with Generator's performance of this Agreement, or the exercise by
Generator of its rights hereunder.
7.2 Pepco's Indemnification. Pepco shall
indemnify, hold harmless, and defend Generator and its Affiliates,
as the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Generator and a third party or Pepco) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Generator's employees or any third parties, to
the extent caused by the breach of this Agreement by Pepco or the
negligence or willful misconduct of Pepco and/or its officers,
directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Pepco's performance of
this Agreement, or the exercise by Pepco of its rights hereunder.
7.3 Survival. The provisions of Sections 7.1 and
7.2 shall survive termination, cancellation, suspension, completion
or expiration of this Agreement.
7.4 Insurance Coverage. The Parties shall maintain
at their own cost the following insurance: (a) standard Commercial
General Liability insurance with limitations not less than One
Hundred Million Dollars ($100,000,000.00)in the aggregate; (b)
All-Risk Property insurance in amounts not less than one hundred
percent (100%) of the full replacement cost of the improvements
located upon each Party's real property; (c) Worker's compensation
insurance as required by prevailing law and Employer's liability
insurance with limits of not less than Twenty-five Million Dollars
($25,000,000.00); and (d) such other insurance as is customary in
the electric utility industry.
7.5 Certificate of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance coverage obtained in accordance with this Article 7, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within five (5) business
days of receiving notice of cancellation, change, amendment or
renewal of any insurance policy required pursuant to Section 7.4
above.
7.6 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
7.4, above, as regards liability under this Agreement; and each
general liability insurance policy shall contain a waiver of
subrogation and each Party shall waive its rights of recovery
against the other for any loss or damage covered by such policy.
<PAGE>
8. MISCELLANEOUS
8.1 Effective Date. This Agreement will be
effective on the Closing Date pursuant to the Asset Sale Agreement
(the "Effective Date").
8.2 Exhibits. All exhibits attached to this
Agreement are part of this Agreement and the material contained in
such exhibits shall be construed and interpreted as if contained
within the text of the Agreement.
8.3 Headings. The Article and Section headings of
this Agreement are for convenience and reference only and in no way
define, limit or describe the scope and intent of this Agreement,
nor in any way affect this Agreement.
8.4 Interpretation. When a reference is made in
this Agreement to an Article, Section, Schedule or Exhibit, such
reference shall be to an Article or Section of, or Schedule or
Exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument, statute,
regulation, rule or order defined or referred to herein or in any
agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from
time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the
case of statutes, regulations, rules or orders) by succession of
comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted
successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution
of this Agreement and, accordingly, there shall be no presumption
that this Agreement or any provision hereof be construed against
the Party that drafted this Agreement.
8.5 GOVERNING LAW. EXCEPT WITH RESPECT TO THE
CREATION, PERFECTION AND ENFORCEMENT OF THE REAL PROPERTY INTERESTS
CREATED HEREUNDER, WHICH SHALL BE GOVERNED AND CONSTRUED BY THE
LAWS OF THE STATE, THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE DISTRICT OF COLUMBIA
EXCLUSIVE OF ITS CHOICE OF LAW RULES.
<PAGE>
8.6 Entire Agreement. This Agreement, the Asset
Sale Agreement, the Confidentiality Agreement (as defined in the
Asset Sale Agreement) and the Ancillary Agreements (as defined in
the Asset Sale Agreement) including the Exhibits, Schedules,
documents, certificates and instruments referred to herein or
therein and other contracts, agreements and instruments
contemplated hereby or thereby, embody the entire agreement and
understanding of the Parties in respect of the transactions
contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein or
therein.
8.7 Amendment and Modification, Extension, Waiver.
This Agreement may be amended, modified or supplemented only by an
instrument in writing signed on behalf of each of the Parties.
Either Party may (i) extend the time for the performance of any of
the obligations or other acts of the other Party, (ii) waive any
inaccuracies in the representations and warranties of the other
Party contained in this Agreement or (iii) waive compliance by the
other Party with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure
of a Party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such
rights.
8.8 Binding Effect. The covenants, conditions,
restrictions, encumbrances, easements, license and agreements set
forth in this Agreement shall attach to, burden, and run with the
land and the Generator's Real Property and the Pepco Real Property
or the applicable portion or portions thereof, and shall be
appurtenant to the Generator's Property or the Pepco Real Property,
as appropriate and, together with the remainder of this Agreement,
shall be binding upon the Parties hereto and their respective
successors, assigns, grantees, transferees and tenants and,
together with the remainder of this Agreement, shall inure to the
benefit and Use of the Parties hereto and their respective heirs,
successors, assigns, grantees, transferees and tenants. Each
Grantee of any portion of or interest in the property and each
mortgagee which succeeds to the fee simple ownership of any portion
of the property shall be deemed, by the acceptance of the deed
conveying fee simple title to such person, to have agreed to
perform each and every undertaking created hereunder attributable
to the portion of the property in which such Grantee or mortgagee
has acquired an interest.
8.9 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.
8.10 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this
<PAGE>
Agreement so as to effect the original intent of the Parties as
closely as possible to the fullest extent permitted by applicable
law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
8.11 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Telecopy No.: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Generator, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, N.W.
Suite 500 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
<PAGE>
The names, titles and addresses of either Party in this section may
be changed by written notification to the other Party.
8.12 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
8.13 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
IN WITNESS WHEREOF, Pepco and Generator have caused this
Agreement to be signed by their respective duly authorized officers
as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By: ______________________________
Name: ______________________________
Title: ______________________________
[GENERATOR]
By: ______________________________
Name: ______________________________
Title: ______________________________
<PAGE>
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County and
State, personally appeared __________________________, an
________________________, by _____________________, its ________
who _________ is personally known to me/ ________ and who
acknowledged before me that he did sign the foregoing instrument
and that the same is the free act and deed of said
_________________, and his free act and deed personally and as such
officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, a Notary Public in and for said County
and State, personally appeared ________________________, an
___________________, by ________________ its _____________________
who _______ is personally known to me/ ________ and who
acknowledged before me that he did sign the foregoing instrument
and that the same is the free act and deed of said corporation, and
his free act and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and
official seal at __________, __________, this ____ day of
_________, ____.
____________________________
Notary Public
My Commission Expires:
<PAGE>
Schedule 1.1
Definitions
"Access" means, subject to the conditions set forth in
this Agreement and a Party's right to impose reasonable security
and safety restrictions protecting its officers, employees, agents,
consultants, contractors, subcontractors, invitees, property and
confidential information, full and unimpeded access, in common with
Grantor over and through existing roads, paths, walkways,
corridors, hallways, doorways, and other means of entry or exit, as
exist now and from time to time on Grantor's property or, where no
means of access exists, over and through those areas of Grantor's
property or improvements which are (i) reasonably necessary or
convenient for achieving Grantee's underlying purposes, and (ii)
least likely, out of the alternatives reasonably available, to
impede or damage the property or operation of any Party hereto.
Access shall also include access and right-of-way for Grantee's
employees, agents, consultants, contractors, subcontractors,
vehicles, trucks, trailers, heavy machinery, equipment, materials,
and all other items reasonably necessary or convenient for
achieving Grantee's underlying purposes.
"Affiliate" has the meaning set forth in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act
of 1934.
"Agreement" means this Easement, License and Attachment
Agreement.
"Asset Sale Agreement" has the meaning set forth in the
first recital of this Agreement, as such Asset Sale Agreement may
be amended or modified.
"Connection Agreement" means the Interconnection
Agreement (Morgantown), dated as of __________, 2000, between Pepco
and Generator.
"Distribution of Electric Current" means local
transmission and distribution of electricity to Pepco's end users.
"Distribution Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions, replacements and expansions
thereto, now or hereafter installed or located on the Generator's
Real Property for Distribution of Electric Current. Distribution
Facilities do not include Transmission Facilities.
"Effective Date" has the meaning set forth in Section
8.l.
"FERC" means the Federal Energy Regulatory Commission or
its successors.
<PAGE>
"Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
"Generator" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Generator's Real Property" means the real property
described in Exhibit A, and any improvements or betterments thereto
now or hereinafter situated thereon.
"Good Utility Practice" shall have the meaning given it
by the Connection Agreement.
"Grantee" means the Party or Parties who enjoy the
principal benefit of the referenced easement, license, right
(including attachment rights) privilege or right-of-way.
"Grantor" means the owner or owners of the property
and/or improvement granting the referenced easement, license, right
(including attachment rights), privilege or right-of-way.
"Interconnection Service" shall have the meaning given it
by the Connection Agreement.
"Party" or "Parties" shall have the meaning set forth in
the introductory paragraph of this Agreement.
"Pepco" shall have the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
"Pepco Real Property" means the real property described
in Exhibit B, and any improvements or betterments thereto now or
hereinafter situated thereon.
"Qualified Personnel" means individuals who possess any
required licenses and training for their positions and duties by
Generator and/or Pepco pursuant to Good Utility Practice.
"State" means the State of Maryland.
"Station" means the Morgantown Station as defined in the
Asset Sale Agreement.
"Transmission of Electric Current" means the transmission
of such current typically over long distances and at voltages not
commonly used for service to end use customers.
"Transmission Facilities" means towers, lines of towers,
poles, lines of poles, supporting structures, cables, crossarms,
overhead and underground wires, guys, braces, ducts, conduits,
cables, anchors, lightning protective wires, and all related
above-ground and underground facilities, appurtenances and
equipment, including all additions,
<PAGE>
replacements and expansions thereto, now or hereafter installed or
located on the Generator's Real Property and/or which Pepco may
reasonably require now and from time to time on the Generator's
Real Property for the Transmission of Electric Current.
Transmission Facilities do not include Distribution Facilities.
"Transmission System" shall have the meaning set forth in
the Connection Agreement.
"Use" means to operate, maintain, repair, upgrade, clean,
install, add to, alter, remove, inspect, construct, modify,
restore, rebuild, replace, relocate and expand (but if any such
addition, relocation or expansion would unreasonably or materially
burden Grantor's Property, in each case, the express, prior written
consent of Grantor shall be required, which consent shall not
unreasonably be withheld, delayed or conditioned) (all of the
foregoing to be in accordance with Good Utility Practice).
<PAGE>
LIST OF EXHIBITS
Exhibit A Generator's Real Property
Exhibit B Pepco Real Property
Exhibit C 10 Foot Electric Utility Easement
Exhibit D Easement for Oil Pipeline on Pepco Real Property
Exhibit E Easement for Oil Pipeline on Retained Assets
<PAGE>
EXHIBIT D
GUARANTEE AGREEMENT
THIS GUARANTEE AGREEMENT (the "Agreement"), dated as of
_____________, 2000, by and between Southern Energy, Inc., a
Delaware ("Guarantor"), and Potomac Electric Power Company, a
District of Columbia and Virginia corporation ("Seller").
Guarantor and Seller are referred to herein individually as a
"Party" and collectively as the "Parties."
WHEREAS, Seller and Guarantor have entered into an Asset
Purchase and Sale Agreement dated the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Asset
Sale Agreement"), pursuant to which Guarantor has agreed to
purchase and Seller has agreed to sell certain electric generating
assets, as more particularly set forth therein, and each of
Guarantor and Seller have undertaken certain duties,
responsibilities and obligations as set forth in the Asset Sale
Agreement and the Ancillary Agreements (as defined in the Asset
Sale Agreement);
WHEREAS, subsequent to the execution of the Asset Sale
Agreement, Guarantor has assigned to ________________, [its
direct/an indirect] wholly-owned subsidiary ("Buyer") [all/certain]
of its rights under the Asset Sale Agreement;
WHEREAS, as a condition precedent to and in consideration
of Seller's entering into the Asset Sale Agreement, Guarantor has
agreed to guarantee payment and performance of those covenants,
agreements, obligations, liabilities, representations and
warranties made by Guarantor (and subsequently assigned to Buyer)
under the Asset Sale Agreement, any Ancillary Agreement or any
other agreement or instrument related thereto or entered into in
connection therewith; and
WHEREAS, Guarantor will benefit from the transactions
contemplated by the Asset Sale Agreement.
NOW, THEREFORE, the Parties agree as follows:
SECTION 1. Definitions. Capitalized terms used
herein shall have the meanings assigned to them herein or, if not
defined herein, then such terms shall have the meanings assigned to
them in the Asset Sale Agreement.
SECTION 2. Guarantee. Guarantor absolutely,
irrevocably and unconditionally guarantees, as a primary obligor
and not merely as a surety, (a) the due and punctual payment of (i)
each payment required to be made by Buyer under the Asset Sale
Agreement or any Ancillary Agreement, when and as due, including
payments in respect of reimbursement of disbursements and interest
thereon and (ii) all other monetary
<PAGE>
obligations, including indemnities, fees, costs and expenses,
whether primary, secondary, direct, contingent, fixed or otherwise
(including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), of
Buyer under the Asset Sale Agreement, any Ancillary Agreement or
any other agreement or instrument related thereto (all such
obligations referred to in this clause (a) being collectively
referred to as the "Monetary Obligations") and (b) the due and
punctual performance and observance of, and compliance with, all
covenants, agreements, obligations, liabilities, representations
and warranties of Buyer under or pursuant to the Asset Sale
Agreement, any Ancillary Agreement or any other agreement or
instrument related thereto (all such obligations referred to in the
preceding clauses (a) and (b) being collectively referred to as the
"Obligations"). Guarantor further agrees that the Obligations may
be extended, amended, modified or renewed, in whole or in part,
without notice to or further assent from it, and that it will
remain bound upon its guarantee notwithstanding any extension,
amendment, modification or renewal of any Obligation by Seller and
Buyer.
SECTION 3. Obligations Not Waived. To the fullest
extent permitted by applicable law, Guarantor waives all notices
whatsoever with respect to this Agreement or with respect to the
Obligations, including presentment to, demand of payment from and
protest to Buyer of any of the Obligations, and notice of
acceptance of its guarantee and notice of protest for nonpayment.
To the fullest extent permitted by applicable law, the obligations
of Guarantor hereunder shall not be affected by (a) the failure of
Seller to assert any claim or demand or to enforce or exercise any
right or remedy against Buyer in respect of the Obligations or
otherwise under the provisions of the Asset Sale Agreement, any
Ancillary Agreement or otherwise or, in each case, any delay in
connection therewith, or (b) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions
of, this Agreement, the Asset Sale Agreement, any Ancillary
Agreement or any other agreement.
SECTION 4. Continuing Guarantee of Payment and
Performance. Guarantor further agrees that its guarantee
constitutes a continuing guarantee of payment and performance when
due, and not of collection, and Guarantor further waives any right
to require that any resort be had by Seller to any security.
SECTION 5. No Discharge or Diminishment of Guarantee.
(a) The obligations of Guarantor hereunder shall
not be subject to any reduction, limitation, impairment or
termination, or be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever, or otherwise be affected, for
any reason (other than the performance in full of all Obligations,
including the indefeasible payment in full in cash of all Monetary
Obligations, and the termination of all the Obligations),
including:
(i) any claim of waiver, release, surrender,
alteration or compromise of any of the Obligations;
(ii) the invalidity, illegality or unenforceability
of the Obligations;
<PAGE>
(iii) the occurrence or continuance of any event
of bankruptcy, reorganization, insolvency, receivership or other
similar proceeding with respect to Buyer or any other person (for
purposes hereof, "person" means any individual, partnership,
limited liability company, joint venture, corporation, trust,
unincorporated organization or Governmental Authority), or the
dissolution, liquidation or winding up of Buyer or any other
person;
(iv) any permitted assignment or other transfer of
this Agreement by Seller or any permitted assignment or other
transfer of the Asset Sale Agreement or any Ancillary Agreement in
whole or in part;
(v) any sale, transfer or other disposition by
Guarantor of any direct or indirect interest it may have in Buyer
or any other change in ownership or control of Buyer; or
(vi) the absence of any notice to, or knowledge on
behalf of, Guarantor of the existence or occurrence of any of the
matters or events set forth in the foregoing clauses.
(b) Without limiting the generality of the
foregoing, the obligations of Guarantor hereunder shall not be
discharged or impaired or otherwise affected by the failure of
Seller to assert any claim or demand or to enforce any remedy under
the Asset Sale Agreement, any Ancillary Agreement or any other
agreement, by any waiver or modification of any provision thereof,
by any default, failure or delay, willful or otherwise, in the
performance of the Obligations, or by any other act or omission
that may or might in any manner or to any extent vary the risk of
Guarantor or that would otherwise operate as a discharge of
Guarantor as a matter of law or equity (other than the performance
in full of all Obligations, including the indefeasible payment in
full in cash of all Monetary Obligations, and the termination of
all the Obligations).
SECTION 6. Defenses Waived. To the fullest extent
permitted by applicable law, Guarantor waives any defense based on
or arising out of the unenforceability of the Obligations or any
part thereof from any cause. Seller may compromise or adjust any
part of the Obligations, make any other accommodation with Buyer or
exercise any other right or remedy available to it against Buyer,
without affecting or impairing in any way the liability of
Guarantor hereunder except to the extent all the Obligations have
been fully and finally performed, including the indefeasible
payment in full of all Monetary Obligations, and terminated. To
the fullest extent permitted by applicable law, Guarantor waives
any defense arising out of any such election even though such
election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right
or remedy of Guarantor against Buyer or any security. Guarantor
waives each right and all defenses to which it may be entitled
under applicable law as in effect or construed from time to time.
SECTION 7. Representations and Warranties of
Guarantor. Guarantor represents and warrants to Seller as follows:
(a) Organization. Guarantor is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite
<PAGE>
corporate power and authority to own, lease and operate its
properties and to carry on its business as is now being conducted.
(b) Authority Relative to this Agreement.
Guarantor has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by Guarantor of this
Agreement and performance by Guarantor of its obligations hereunder
have been duly and validly authorized by the Board of Directors of
Guarantor and no other corporate proceedings on the part of
Guarantor are necessary to authorize this Agreement or performance
by Guarantor of its obligations hereunder. This Agreement has been
duly and validly executed and delivered by Guarantor and this
Agreement constitutes a valid and binding agreement of Guarantor,
enforceable against Guarantor in accordance with its terms.
(c) Consents and Approvals; No Violation.
(i) Subject to obtaining the Buyer Required
Regulatory Approvals, neither the execution and delivery of this
Agreement by Guarantor nor performance by Guarantor of its
obligations hereunder will (i) conflict with or result in any
breach of any provision of the organizational or governing
documents or instruments of Guarantor, (ii) result in a default (or
give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which Guarantor or any of its
subsidiaries is a party or by which any of their respective assets
may be bound or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Guarantor, or any of its
assets, except in the case of clauses (ii) and (iii) for such
failures to obtain a necessary consent, defaults and violations
which would not, individually or in the aggregate, have a material
adverse effect on the ability of Guarantor to discharge its
obligations under this Agreement (a "Guarantor Material Adverse
Effect").
(ii) No declaration, filing or registration with, or
notice to, or authorization, consent or approval of any
Governmental Authority is necessary for performance by Guarantor of
its obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Guarantor Material Adverse Effect.
SECTION 8. Agreement to Perform and Pay;
Subordination. In furtherance of the foregoing and not in
limitation of any other right that Seller has at law or in equity
against Guarantor by virtue hereof, upon the failure of Buyer, to
perform or pay any Obligation when and as the same shall become
due, Guarantor hereby promises to and will forthwith, as the case
may be, (a) perform, or cause to be performed, such unperformed
Obligations and (b) pay, or cause to be paid, to Seller
in cash the amount of such unpaid Monetary Obligations. Upon
payment by Guarantor of any sums to Seller as provided above, all
rights of Guarantor against Buyer, arising as a result thereof by
way of right of subrogation, contribution, reimbursement, indemnity
or otherwise shall in all respects be subordinate and junior in
right of payment to the prior indefeasible payment in full in cash
of all the Monetary Obligations. If any amount shall erroneously be
paid to Guarantor on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such
indebtedness of Buyer, such amount shall be held in trust for the
benefit of
<PAGE>
Seller and shall forthwith be paid to Seller to be credited against
the payment of the Monetary Obligations or performance in
accordance with the terms of the Asset Sale Agreement or any
Ancillary Agreement, as applicable.
SECTION 9. Information. Guarantor assumes all
responsibility for being and keeping itself informed of Buyer's
financial condition and assets, and of all other circumstances
bearing upon the risk of nonperformance of the Obligations
(including the nonpayment of Monetary Obligations) and the nature,
scope and extent of the risks that Guarantor assumes and incurs
hereunder, and agrees that Seller does not have any duty to advise
Guarantor of information known to it regarding such circumstances
or risks.
SECTION 10. Termination and Reinstatement. The
guarantee made hereunder (a) shall terminate when all the
Obligations have been (i) performed in full, including the
indefeasible payment in full in cash of the Monetary Obligations
and (ii) terminated and (b) shall continue to be effective or be
reinstated, as the case may be, if at any time any payment, or any
part thereof, of any Obligation is rescinded or must otherwise be
restored by Seller upon the bankruptcy or reorganization of Buyer
or Guarantor or for any other reason.
SECTION 11. Assignment; No Third Party Beneficiaries.
This Agreement and all of the provisions hereunder shall be binding
upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, and nothing herein express or
implied will give or be construed to give any person any legal or
equitable rights hereunder. Neither this Agreement nor any of the
rights, interests and obligations hereunder shall be assigned by
Guarantor, including by operation of law, without the prior written
consent of Seller; provided, however, that no assignment or
transfer of rights or obligations by Guarantor shall relieve it
from the full liabilities and the full financial responsibility, as
provided for under this Agreement, unless and until the transferee
or assignee shall agree in writing to assume such obligations and
duties and Seller has consented in writing to such assumption.
SECTION 12. Amendment and Modification; Extension;
Waiver. This Agreement may be amended, modified or supplemented
only by an instrument in writing signed on behalf of each of the
Parties. Any agreement on the part of a Party to any extension or
waiver in respect of this Agreement shall be valid only if set
forth in an instrument in writing signed on behalf of such Party.
The failure of a Party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of such rights.
SECTION 13. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
District of Columbia (regardless of the laws that might otherwise
govern under applicable principles of conflicts of law).
SECTION 14. Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given (as of the time of delivery or, in the case of a telecopied
communication, of the times of confirmation) if delivered
personally, telecopied (which is confirmed) or sent by overnight
courier (providing proof of delivery) to the Parties at the
following addresses (or at such other address for a Party as shall
be specified by like notice):
<PAGE>
if to Seller, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopy No.: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037-1526
Telecopy No.: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Buyer, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, N.W.
Suite 500 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
SECTION 15. Jurisdiction and Enforcement.
(a) Each of the Parties irrevocably submits to the
exclusive jurisdiction of (i) the Superior Court of the District of
Columbia and (ii) the United States District Court for the District
of Columbia for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of the Parties agrees to commence any
action, suit or proceeding relating hereto either in the United
States District Court for the District of Columbia or, if
such suit, action or proceeding may not be brought in such court
for jurisdictional reasons, in the Superior Court of the District
of Columbia. Each of the Parties further agrees that service of
process, summons, notice or
<PAGE>
document by hand delivery or U.S. registered mail at the address
specified for such Party in Section 14 (or such other address
specified by such Party from time to time pursuant to Section 14)
shall be effective service of process for any action, suit or
proceeding brought against such Party in any such court. Each of
the Parties irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (i)
the Superior Court of the District of Columbia and (ii) the United
States District Court for the District of Columbia and hereby
further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an
inconvenient forum.
(b) The Parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Parties
shall be entitled equitable relief, including without limitation,
an injunction or injunctions to prevent breaches of this Agreement
and to specifically enforce the terms and provisions of this
Agreement, this being in addition to any other remedy to which they
are justly entitled to, whether at law or in equity.
SECTION 16. Survival of Agreement. All covenants,
agreements, representations and warranties made by Guarantor herein
and in the certificates or other instruments prepared or delivered
in connection with or pursuant to this Agreement shall be
considered to have been relied upon by Seller and shall
unconditionally survive the consummation of the transactions
contemplated by the Asset Sale Agreement, regardless of any
investigation made by Seller or on its behalf, and shall continue
in full force and effect as long as any Obligations remain
outstanding.
SECTION 17. Effectiveness; Counterparts. This
Agreement shall become effective when executed by Guarantor and
Seller. This Agreement may be executed in two counterparts, each
of which shall be deemed an original, but both of which together
shall constitute one and the same instrument.
SECTION 18. Rules of Interpretation. The rules of
interpretation specified in Section 12.8 of the Asset Sale
Agreement shall be applicable to this Agreement.
SECTION 19. Severability.
(a) If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible to the fullest extent
permitted by applicable law, in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the
extent possible.
(b) In the event that the provisions of this
Agreement are claimed or held to be inconsistent with any other
agreement or instrument evidencing the Obligations, the terms of
this Agreement shall remain fully valid and effective.
<PAGE>
SECTION 20. Entire Agreement. This Agreement embodies
the entire agreement and understanding of the Parties in respect of
the matters contemplated hereby. There are no restrictions,
promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and understandings
between the Parties with respect to the matters contemplated
hereby.
SECTION 21. Seller hereby appoints _______________, a
_______________ of Seller, to be its duly authorized
Attorney-in-Fact and in Seller's name to execute, acknowledge and
deliver this Agreement as its act and deed. Guarantor hereby
appoints _____________, its ______________, to be its duly
authorized Attorney-in-Fact and in Buyer's name to execute,
acknowledge and deliver this Agreement as its act and deed.
IN WITNESS WHEREOF, this Guarantee Agreement has been
duly executed and delivered by the Parties as of the date first
above written.
Attest: POTOMAC ELECTRIC POWER
COMPANY
By ____________________ By _____________________
Secretary Name:
Title:
Attest: SOUTHERN ENERGY, INC.
By _____________________ By ______________________
Secretary Name:
Title:
<PAGE>
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction
aforesaid, does hereby certify that ______________, personally
known to me (or satisfactorily proven) to be the person who signed
as attorney-in-fact for Guarantor named in the foregoing
Instrument, personally appeared before me in said jurisdiction, and
as such attorney-in-fact and by virtue of the authority vested in
him by said Instrument, acknowledged the same to be the act and
deed of said corporation, and that he executed and delivered the
same as such.
WITNESS my hand and official seal this ___ day of ___________,
2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction
aforesaid, does hereby certify that ______________, personally
known to me (or satisfactorily proven) to be the person who signed
as attorney-in-fact for Seller named in the foregoing Instrument,
personally appeared before me in said jurisdiction, and as such
attorney-in-fact and by virtue of the authority vested in him by
said Instrument, acknowledged the same to be the act and deed of
said corporation, and that he executed and delivered the same as
such.
WITNESS my hand and official seal this ___ day of ___________,
2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
EXHIBIT E-1
INTERCONNECTION AGREEMENT
(Potomac River)
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
________________________________
Dated ______, 2000
<PAGE>
INTERCONNECTION AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 TERM AND TERMINATION 2
2.1 Term 2
2.2 Change in Law 2
2.3 Effect after Termination 2
ARTICLE 3 - CONTINUING OBLIGATIONS AND RESPONSIBILITIES 2
3.1 Interconnection Service 2
3.2 New Construction or Modifications 3
3.2.1 Pepco Construction or Modifications 3
3.2.2 Generator Construction or Modifications 4
3.2.3 Modifications Affecting the Transmission System
or the Station 5
3.3 Access, Easements, Conveyances, Licenses, and
Restrictions 6
3.4 Facility and Equipment Maintenance 7
3.5 Pepco Facilities and Generator Facilities 7
3.6 Equipment Testing Obligations 7
3.7 Inspections 8
3.8 Information Reporting Obligations 9
3.9 Local Services 10
3.9.1 General 10
3.9.2 Temporary Suspension of Local Services 10
3.10 Pepco Provided Services 11
3.11 Generator Provided Services 11
3.12 Optional Services 12
3.13 Metering and Telemetering 12
3.14 Emergency Procedure 12
3.15 Interconnection Service Interruptions 13
3.16 Unit Status Notification 14
3.17 Scheduled Maintenance Notification and Coordination 14
3.17.1 Local Routine Inspection and Maintenance 14
3.17.2 Transmission Sytem Maintenance 15
3.18 Safety 15
3.18.1 General 15
3.18.2 Switching Tagging and Grounding 15
3.19 Environmental Compliance and Procedures 15
3.20 Operating Committee 16
ARTICLE 4 - OPERATIONS 16
4.1 General 16
4.2 Generator's Operating Obligations 17
4.2.1 General 17
4.2.2 Voltage or Reactive Control Requirements 18
<PAGE>
4.3 Auditing of Accounts and Records 19
ARTICLE 5 -- COST RESPONSIBILITIES AND BILLING PROCEDURES 19
5.1 Cost Responsibilities for Interconnection Service 19
5.2 Cost Responsibilities for Local Services 19
5.3 Billing Procedures 20
5.4 Billing Disputes 20
ARTICLE 6 - CONFIDENTIALITY 21
6.1 Confidentiality Obligations of Pepco 21
6.2 Confidentiality Obligations of Generator 21
6.3 Confidentiality of Audits 22
6.4 Remedies 22
ARTICLE 7 - EVENTS OF DEFAULT 22
7.1 Events of Default 22
7.2 Remedies 23
ARTICLE 8 - LIMITATION OF LIABILITY 24
8.1 Limitation of Pepco's Liability 24
8.2 Limitation on Generator's Liability 24
8.3 Consequential Damages 24
ARTICLE 9 - INDEMNIFICATION FOR THIRD PARTY CLAIMS 25
9.1 Generator's Indemnification 25
9.2 Pepco's Indemnification 25
9.3 Indemnification Procedures 26
9.4 Survival 26
ARTICLE 10 - INSURANCE 26
10.1 Insurance Coverage 26
10.2 Certificates of Insurance 26
10.3 Additional Insureds and Waiver 26
ARTICLE 11 - FORCE MAJEURE 27
11.1 Effect of Force Majeure 27
11.2 Force Majeure Defined 27
11.3 Notification 27
ARTICLE 12 - DISPUTES 28
12.1 Disputes 28
12.2 Arbitration 28
12.3 FERC Dispute Resolution 29
ARTICLE 13 - REPRESENTATIONS 29
13.1 Representations of Pepco 29
13.2 Representations of Generator 30
ARTICLE 14 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY 32
14.1 Assignment 32
14.2 Release of Rights and Obligations 32
14.3 Change in Corporate Identity 33
14.4 Successors and Assigns 33
<PAGE>
ARTICLE 15 - SUBCONTRACTORS 33
ARTICLE 16 - NOTICES 34
16.1 Emergency Notices 34
16.2 Notices 34
ARTICLE 17 - AMENDMENTS 34
17.1 Amendments 34
17.2 FERC Proceedings 34
ARTICLE 18 - MISCELLANEOUS PROVISIONS 35
18.1 Waiver 35
18.2 Labor Relations 35
18.3 No Third Party Beneficiaries 35
18.4 Governing Law 35
18.5 Counterparts 36
18.6 Interpretation 36
18.7 Jurisdiction and Enforcement 36
18.8 Entire Agreement 37
18.9 Severability 37
18.10 Independent Contractor Status 37
18.11 Conflicts 37
SCHEDULE A DEFINITIONS 2
SCHEDULE B Pepco Facilities and Generator Facilities 7
SCHEDULE C - Points of Interconnection 9
SCHEDULE D - Switching, Tagging and Grounding Rules 11
SCHEDULE E - Pepco's Interconnection Standards 14
SCHEDULE F - Local Services 15
SCHEDULE G - Pepco Current Projects 17
SCHEDULE H - Real Time Telemetry List 18
<PAGE>
INTERCONNECTION AGREEMENT (Potomac River)
This Interconnection Agreement ("Agreement") dated as
of ____________, 2000 by and between Potomac Electric Power Company
("Pepco") a District of Columbia and Virginia corporation, and
__________________ ("Generator") a ___________ [corporation].
Pepco and Generator are each referred to herein as a "Party," and
collectively referred to herein as the "Parties."
WITNESSETH:
WHEREAS, Pepco, and Generator have entered into an
Asset Purchase and Sale Agreement for Generating and Related Assets
("Asset Sale Agreement") dated June 7, 2000, for the sale by Pepco
to Generator of certain assets comprising the Potomac River
electric generation station;
WHEREAS, Pepco intends to continue to operate its
transmission and distribution businesses from their present
locations;
WHEREAS, Generator needs Interconnection Service from
Pepco for the Potomac River electric generating station;
WHEREAS, Pepco needs access to parts of the Generator's
assets, and Generator needs access to parts of the Pepco's assets;
and
WHEREAS, the Parties have agreed in the Asset Sale
Agreement to execute this Agreement in order to provide
Interconnection Service to Generator and to define continuing
responsibilities and obligations of the Parties with respect to the
use of the other Party's property, assets and facilities as set
forth herein.
NOW THEREFORE, in consideration of the mutual
representations, covenants and agreements hereinafter set forth,
and intending to be legally bound hereby, the Parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the
meanings specified or referred to in Schedule A.
<PAGE>
ARTICLE 2
TERM AND TERMINATION
2.1 Term. This Agreement shall become effective upon
consummation of the Closing ("Effective Date"), and unless
terminated sooner in accordance with the terms of this Agreement,
shall continue in full force and effect until the earlier to occur
of (i) the permanent cessation by the Generator of the power
generation functions of the Station or (ii) the permanent cessation
of the interconnection functions of the Transmission System.
2.2 Change in Law. If (a) the FERC, any state or
state regulatory commission or the PJM Interconnection LLC
implements a change in any law, regulation, rule or practice, or
(b) Pepco's compliance with a change in any law or regulation,
which compliance, in either case, affects, or may reasonably be
expected to affect, Pepco's performance under this Agreement, the
Parties shall negotiate in good faith any amendments to this
Agreement that are necessary to adapt the terms of this Agreement
to such change, and Pepco shall file such amendments with the FERC.
If the Parties are unable to reach agreement on such amendments,
either Party shall have the right to make a unilateral filing with
the FERC to modify this Agreement pursuant to Sections 205 or 206
or any other applicable provision of the Federal Power Act and the
FERC rules and regulations thereunder; provided that the other
Party shall have the right to oppose such filing and to participate
fully in any proceeding established by the FERC to address such
amendments.
2.3 Effect after Termination. The applicable
provisions of this Agreement shall continue in effect after
cancellation or termination hereof to the extent necessary to
provide for final billings, billing adjustments and payments
pertaining to liability and indemnification obligations arising
from acts or events that occurred while this Agreement was in
effect.
ARTICLE 3
CONTINUING OBLIGATIONS AND RESPONSIBILITIES
3.1 Interconnection Service
3.1.1 Subject to the terms and conditions of
the Agreement, Pepco shall (a) permit the Station to continue to be
interconnected to the Transmission System at the Point of
Interconnection, and (b) provide Interconnection Service at the
Point of Interconnection. Pepco agrees to permit Generator to
interconnect
<PAGE>
Station as long as Generator continues to operate such facilities
pursuant to PJM Requirements and Good Utility Practice.
3.1.2 Interconnection Service shall not
include, and Pepco shall not be responsible under this Agreement
for (a) transmission service, losses or ancillary services
associated with the use of the Transmission System for the delivery
of capacity, energy and/or ancillary services produced by the
Generating Facilities, or (b) providing or procuring capacity,
energy and/or ancillary services to the Generator or the Generating
Facilities.
3.1.3 The Generator's interconnection to the
Transmission System of any new or expanded generating capacity of
the Station shall (a) be subject to PJM Requirements and/or FERC
requirements governing interconnections and (b) require a separate
interconnection agreement mutually agreed to by the Parties in
writing.
3.1.4 Notwithstanding anything to the contrary
in this Agreement, Pepco's performance of its obligations under
this Agreement shall be subject to Generator entering into, and
complying with, any PJM Generator Connection Agreement which may be
required pursuant to PJM Requirements with respect to
Interconnection Service or the Station.
3.2 New Construction or Modifications
3.2.1 Pepco Construction or Modifications
(a) Pepco shall make such additions,
modifications, replacements and improvements to the Interconnection
Facilities as are required by PJM Requirements or Good Utility
Practice to enable Pepco to provide Interconnection Service in
compliance with this Agreement. Generator shall pay all reasonable
Costs incurred by Pepco for such additions, modifications,
replacements or improvements.
(b) Except with respect to operation and
maintenance or ordinary maintenance done in the ordinary course of
business or to respond to abnormal or emergency conditions, if any
additions, modifications, replacements or improvements to the
Interconnection Facilities undertaken by Pepco might reasonably be
expected to affect Generator's operation of the Station, Pepco
shall provide one hundred twenty (120) days written notice to
Generator prior to undertaking such additions, modifications,
replacements or improvements. Any such additions, modifications,
replacements or improvements shall comply with PJM Requirements and
Good Utility Practice. The Parties shall mutually agree to the
<PAGE>
scheduling of such addition, modification, replacement or
improvement to minimize any adverse impact on the Station.
Generator shall be deemed to have accepted Pepco's proposed
additions, modifications, replacements or improvements unless
Generator gives Pepco written notice of its objections
within thirty (30) days after receipt of Pepco's notice.
Generator's acceptance or deemed acceptance of Pepco's proposed
additions, modifications, replacements or improvements shall not be
construed, with respect thereto, as: (i) confirmation or
endorsement of the design; (ii) a warranty of safety,
durability or reliability; or (iii) responsibility for strength,
details of design, adequacy or capability.
3.2.2 Generator Construction or Modifications
(a) In the event Generator plans to increase
the capacity of the Generating Facilities, Generator shall submit
to Pepco any and all plans and specifications that Pepco may
reasonably request related to such increase. Such specifications
and plans shall be submitted by Generator to Pepco at the time
that Generator submits its plans under the PJM Tariff related to
such expansion but no later than one hundred twenty (120) days
prior to commencing such proposed increase. Any such additions,
modifications, or replacements shall comply with PJM Requirements
and Good Utility Practice and shall be subject to Section 3.1.3 of
this Agreement.
(b) If Generator plans any additions,
modifications, or replacements to the Station that will not
increase its capacity, but could reasonably be expected to affect
the Transmission System or the Interconnection Facilities,
Generator shall give Pepco reasonable notice, but not less than one
hundred twenty (120) days prior written notice and Generator shall
comply with all applicable PJM Requirements with respect to
such proposed additions, modifications, or replacements. All such
additions, modifications, or replacements shall (i) comply with PJM
Requirements and Good Utility Practice, (ii) be accompanied by
appropriate information and operating instructions, and (iii) be
subject to the review and acceptance of Pepco, which review shall
be based on PJM Requirements and Good Utility Practice and which
acceptance shall not unreasonably be withheld or delayed.
Pepco shall be deemed to have accepted Generator's proposed
additions, modifications or replacements unless Pepco gives
Generator written notice of its objections within thirty (30) days
after receipt of the Generator's notice.
(c) Pepco's acceptance of Generator's plans
and specifications for any proposed additions, modifications, or
replacements to the Generating Facilities and Pepco's
participation in any interconnected operations with Generator are
not and shall not be construed as: (i) confirmation or endorsement
of the design of the Generating Facilities; (ii) a warranty of
safety, durability or reliability of the
<PAGE>
Generating Facilities; or (iii) responsibility for strength,
details of design, adequacy, or capability of the Generating
Facilities.
(d) Pepco, pursuant to PJM Requirements,
shall inform Generator of any additions, modifications, or
replacements to the Transmission System or Interconnection
Facilities, that will be necessary as a result of the addition,
modification, or replacement to Station made pursuant to Section
3.2.2. Generator shall compensate Pepco for all reasonable Costs
it incurs associated with any modifications, additions, or
replacements made to the Interconnection Facilities or Transmission
System related to any additions, modifications, or replacements to
the Generating Facilities. Pepco shall provide an estimate as
early as practicable, but in any event not less than sixty (60)
days prior to the initiation of such addition, modification or
replacement.
(e) Generator shall modify, at its sole cost
and expense, the Generating Facilities as may be reasonably
required to conform with PJM Requirements and Good Utility Practice
or to conform with additions, modifications, or replacements of the
Transmission System or the Interconnection Facilities, required by
PJM Requirements and Good Utility Practice or implemented in
accordance with this Agreement, (including, without limitation,
changes to the voltages at which the Transmission System
is operated) provided, however, that Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generating Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of Pepco's Facilities.
(f) Upon completion of any addition,
modification, or replacement to the Generating Facilities that may
reasonably be expected to affect the Transmission System or the
Interconnection Facilities, but no later than ninety (90) days
thereafter, Generator shall issue "as built" drawings to Pepco.
Upon completion of any addition, modification, or replacement to
the Interconnection Facilities, that may reasonably be expected to
affect the operation of the Station, but no later than ninety
(90) days thereafter, Pepco shall issue "as built" drawings to the
Generator.
3.2.3 Modifications Affecting the Transmission
System or the Station
(a) Notwithstanding anything herein to the
contrary, except with respect to the projects or construction set
forth in Schedule G, no modifications to or new construction of
facilities, or access thereto, including but not limited to rights
of way, fences, gates, shall be made by either Party which might
reasonably be expected to adversely affect the other Party with
respect to such Party's obligations
<PAGE>
and responsibilities under this Agreement, without prior
written notification as set forth in Section 3.2.3(b) below, and
without providing the other Party with sufficient information
regarding the work prior to commencement to enable such Party to
evaluate the impact of the proposed work on its operations. For
all modifications reasonably expected to adversely affect the
operations of the other Party's facilities, the Party
shall provide at least one hundred twenty (120) days written notice
to the other Party prior to undertaking such additions,
modifications or replacements. Any such additions, modifications,
or replacements shall comply with PJM Requirements and Good Utility
Practice.
(b) The Parties shall mutually agree to the
scheduling of such addition, modification, replacement or
improvement proposed pursuant to Section 3.2.3(a) to minimize any
adverse impact on the Station or the Transmission System. For all
construction work, major modifications, or circuit changes
involving new or existing facilities, equipment, systems or
circuits that could reasonably be expected to affect the operation
of either Party, the Party desiring to perform said work shall
provide the other Party with drawings, plans, specifications, and
other necessary documentation for review at least sixty (60) days
prior to the beginning of construction provided that for routine
telecommunication work, the Party doing the work shall only be
required to provide 48 hours prior notice. The Party shall be
deemed to have accepted the proposed additions, modifications,
replacements or improvements unless the Party gives written notice
of their objections within sixty (60) days after receipt of such
notice. The Party's acceptance or deemed acceptance of the
proposed additions, modifications, replacements or improvements
shall not be construed, with respect thereto, as: (i)
confirmation or endorsement of the design; (ii) a warranty of
safety, durability or reliability; or (iii) responsibility for
strength, details of design, adequacy or capability.
3.3 Access, Easements, Conveyances, Licenses, and
Restrictions
3.3.1 The Parties hereby grant to each other
such licenses, access and other rights to the Station and the
Interconnection Facilities as may be necessary for either Party's
performance of their respective obligations under this Agreement.
Such access shall be provided in a manner so as not to unreasonably
interfere with the ongoing business operations, rights, and
obligations of the other Party and shall be subject to the safety
and security practices of the Party granting such access.
Access shall only be granted to Qualified Personnel.
3.3.2 A Party shall not restrict a Party's
rights hereunder to access the other Party's property, facilities,
or equipment without prior written notification except in an
Emergency, in which case the restricted access shall last no longer
than three (3) days, unless an alternate means of access is
provided.
<PAGE>
3.3.3 The Parties' rights with respect to
access to their respective facilities properties shall also be
governed by the Easement.
3.4 Facility and Equipment Maintenance
3.4.1 Pepco shall provide Interconnection
Service at the Point of Interconnection in a safe and efficient
manner and pursuant to PJM Requirements and Good Utility Practice.
Generator shall be responsible for all reasonable Costs incurred by
Pepco to provide Interconnection Service and to Maintain the
Interconnection Facilities pursuant to the Agreement.
3.4.2 Generator shall Maintain the Generating
Facilities (including coordination of its relay protection
equipment) in a safe and efficient manner and as required by and in
accordance with PJM Requirements and Good Utility Practice,
provided, however, that Generator shall not be obligated to
modernize, expand or upgrade the Generating Facilities unless
the failure to modernize, expand or upgrade is reasonably likely to
have a material adverse affect on the operation of the
Interconnection Facilities or the Transmission System.
3.4.3 Unless otherwise specified herein, or
unless the Parties mutually agree to a different arrangement,
neither Party shall be responsible for the maintenance of the other
Party's equipment or property regardless of its location.
3.4.4 In addition to the requirements set
forth elsewhere in this Agreement, each Party shall Maintain its
equipment and facilities and perform its maintenance obligations
that could reasonably be expected to affect the operations of the
other Party in a safe and efficient manner and pursuant to PJM
Requirements and Good Utility Practice.
3.5 Pepco Facilities and Generator Facilities.
Unless otherwise agreed to by the Parties, the Party owning Pepco
Facilities or Generator Facilities shall Maintain those facilities
and shall do so pursuant to PJM Requirements and Good Utility
Practice and shall make such additions, modifications, replacements
and improvements as are required by PJM requirements and Good
Utility Practice or which are necessary to maintain Interconnection
Service, provided, however, that the Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generator Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of the Transmission System or Interconnection
Facilities.
3.6 Equipment Testing Obligations
<PAGE>
3.6.1 For reliability purposes with respect to
the Interconnection Facilities and the Transmission System, Pepco
may reasonably request, pursuant to PJM Requirements, or Good
Utility Practice, that Generator test, calibrate, verify, or
validate the Generating Facilities or its equipment, and Generator
shall promptly comply with such a request. Generator shall be
responsible for all costs of testing, calibrating, verifying or
validating its facilities.
3.6.2 At Pepco's request, Generator shall
supply to Pepco at no cost, copies of inspection reports,
installation and maintenance documents, test and calibration
records, verifications, and validations pursuant to the foregoing
Section 3.6.1. Pepco shall supply to Generator, at Generator's
request and at no cost to Generator, copies of inspection
reports, installation and maintenance documents, test and
calibration records, verifications, and validations that Pepco has
which are related to the Interconnection Facilities.
3.7 Inspections
3.7.1 Pepco shall, at its expense, have the
right to inspect or observe all maintenance activities, equipment
tests, installation work, construction work, and modification work
to the Generating Facilities. Such access by Pepco shall be
exercised in a manner which does not unreasonably interfere with
Generator's ongoing business operations, rights and obligations and
shall be subject to Generator's safety and security practices. If
Pepco observes any deficiencies or defects with respect thereto
that might reasonably be expected to adversely affect the
Transmission System or the Interconnection Facilities, Pepco shall
notify the Generator, and Generator shall immediately make any
corrections necessitated by PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this Section 3.7.1,
Pepco shall have no liability whatsoever for any failure to fully
or adequately observe any deficiency, it being agreed that
Generator shall be fully responsible and liable for all such
deficiencies, activities, equipment tests, installation,
construction or modification.
3.7.2 Generator shall, at its expense, have
the right to inspect or observe all maintenance activities,
equipment tests, installation work, construction work, and
modification work conducted by Pepco to the Interconnection
Facilities. Such access by Generator shall be exercised in a
manner which does not unreasonably interfere with Pepco's ongoing
business operations, rights and obligations and shall be subject to
Pepco's safety and security practices. If Generator observes any
deficiencies or defects with respect thereto that might reasonably
be expected to adversely affect the Station, Generator shall notify
Pepco, and Pepco shall immediately make any corrections
necessitated by applicable PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this
<PAGE>
Section 3.7.2, Generator shall have no liability whatsoever for any
failure to fully or adequately observe any deficiency, it being
agreed that Pepco shall be fully responsible and liable for all
such deficiencies, activities, equipment tests, installation,
construction or modification.
3.8 Information Reporting Obligations
3.8.1 In order to provide Interconnection
Service hereunder, Pepco may request, and Generator shall promptly
provide, all relevant information, documents, or data regarding the
Generating Facilities that would be expected to materially affect
the Transmission System, and which is reasonably requested by NERC,
MAAC, the PJM Interconnection LLC, the MDPSC, the District of
Columbia Public Service Commission and any other state
or District of Columbia agency having jurisdiction over Pepco or
Generator, the PJM System Operator, or the Transmission Operator,
which disclosure shall be subject to Article 6 of this Agreement
regarding the disclosure of commercially sensitive information.
3.8.2 Generator shall promptly supply
accurate, complete, and reliable information in response to
reasonable information requests for real time data and other data
from Pepco necessary for operations, maintenance, compliance with
PJM Requirements or regulatory requirements, or analysis of the
Interconnection Facilities or the Transmission System. Such
information may include metered values for MW and MVAR, voltage,
current, automatic voltage regulator status, automatic frequency
control, dispatch, frequency, breaker status indication, or any
other information reasonably required for reliable operation of the
Transmission System pursuant to PJM Requirements and Good Utility
Practice. At minimum, Generator shall satisfy the telemetry
requirements set forth in Schedule H.
3.8.3 Information pertaining to generation
operating parameters shall be gathered and electronically
transmitted directly to Pepco's energy management system using a
mutually acceptable communications protocol.
3.8.4 Generator shall be responsible for the
maintenance, and any required replacements or upgrades of the field
devices and equipment used to gather information regarding
generation operating parameters.
3.8.5 Generator shall Maintain, at its
expense, operating telephone links to the PJM Interconnection LLC,
PJM System Operator, Pepco and the Transmission Operator, to
provide information deemed necessary by them, or as reasonably
deemed necessary by Pepco in accordance with PJM Requirements or
Good Utility Practice to integrate operation of the Station with
the Transmission
<PAGE>
System, provided, however, that Generator shall not be obligated
under this Agreement to modernize, expand or upgrade the
Generator's facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of the Transmission System. Generator shall use
communication links at the Station consisting of the mobile radio
low band C frequency and "all call" and "red phone" systems
currently located at the Station (or successor systems as may
reasonably be required by Pepco) and shall maintain the
availability of such systems to operate during abnormal conditions
including blackouts.
3.9 Local Services
3.9.1 General
(a) The Parties agree that, due to the
integration of certain control schemes of the Station and the
Transmission System, it is cost effective to provide each other
with the services set forth in Sections 3.10 and 3.11 in accordance
with the terms and conditions set forth therein.
(b) The Parties shall ensure, in accordance
with Good Utility Practice, that services provided by one Party to
the other Party pursuant to Sections 3.10 and 3.11 shall be
available at all times and in the manner and at the prices
specified herein. Notwithstanding the foregoing, either Party may
change the services, provided that (1) there is no cost to
the receiving Party as a result of such change, (2) the quality,
reliability and integrity of the replacement services is equivalent
to the existing service, and (3) there is otherwise no materially
adverse effect on the receiving Party.
(c) Neither Party shall terminate any
services set forth in Sections 3.10 and 3.11 below that it agrees
to provide to the other Party, without the other Party's prior
written consent, which consent shall not be unreasonably withheld
or delayed, provided, however, if a Party receiving a service under
Sections 3.10 or 3.11 no longer needs or desires a particular
service, said Party shall notify the other Party and the providing
Party shall terminate said services as soon thereafter as
practicable.
3.9.2 Temporary Suspension of Local Services
(a) The Party providing a service set forth
in Sections 3.10 or 3.11 below shall notify and obtain approval,
which approval shall not be unreasonably withheld or delayed, from
the receiving Party of any scheduled temporary
<PAGE>
suspension of services at least five (5) business days in advance
of such suspension. Such notification shall include an estimated
time duration for a return to normal conditions.
(b) In the event of any unplanned or forced
suspension of the services set forth in Sections 3.10 or 3.11,
below, the providing Party shall immediately notify the other Party
first verbally and then in writing. The providing Party shall use
all reasonable efforts to minimize the duration of said suspension.
(c) The Parties agree to complete any
repairs, modifications or corrections, in accordance with Good
Utility Practice, that are necessary to restore to the other Party
as soon as reasonably practicable any services set forth in
Sections 3.10 or 3.11 below that have been suspended.
3.10 Pepco Provided Services: Schedule F sets forth
the local services Pepco shall provide to the Generator pursuant to
the terms of this Agreement. Unless otherwise specified in
Schedule F, for a period of three (3) years after the Effective
Date (the "Initial Period") and subject to Section 3.9 above, Pepco
shall provide Generator with the local services set
forth in Schedule F at no cost and in consideration of the local
services Generator shall provide Pepco in accordance with Section
3.11 below. If Generator desires the continuation of any of the
services set forth in Schedule F which are subject to the Initial
Period to continue after the Initial Period, upon Generator's
written request to Pepco made at least 60 days prior to the
expiration of the Initial Period, the Parties shall engage
in good faith negotiations to reach mutually agreeable terms and
conditions upon which such services will continue, provided,
however, that if such agreement is not reached prior to the
expiration of the Initial Period, Pepco shall cease to provide
services under Section 3.10 at the end of the Initial
Period.
3.11 Generator Provided Services. Schedule F sets
forth the local services Generator shall provide to Pepco pursuant
to the terms of this Agreement. Unless otherwise specified in
Schedule F, for the Initial Period and subject to Section 3.9
above, Generator shall provide Pepco with the local services set
forth in Schedule F at no cost and in consideration of the
local services Pepco shall provide Generator in accordance with
Section 3.10 above. If Pepco desires the continuation of any of the
services set forth in Schedule F which are subject to the Initial
Period to continue after the Initial Period, upon Pepco's written
request to Generator made at least 60 days prior to the expiration
of the Initial Period, the Parties shall engage in good faith
negotiations to reach mutually agreeable terms and conditions
upon which such services will continue, provided, however, that if
such agreement is not reached prior to the expiration of the
Initial Period, Generator shall cease to provide services under
Section 3.11 at the end of the Initial Period.
<PAGE>
3.12 Optional Services: Generator may request that
Pepco provide the following services to the Generator, provided,
however, that Pepco shall not have any obligation to provide such
services unless the Parties have mutually agreed in writing to the
price and other terms and conditions of such service:
(a) PJM interface and dispatch services through
the Pepco control center;
(b) use of Pepco's communication services;
(c) maintenance of certain auxiliary and
communications equipment at the Station;
(d) maintenance of high-voltage and
medium-voltage equipment such as power transformers and power
circuit breakers;
(e) maintenance of protective relaying, certain
control equipment, such as AGC and MSVC, plant batteries and
revenue meters owned by Generator.
3.13 Metering and Telemetering
3.13.1 Generator shall, at Generator's expense:
(a) own, Maintain, and repair, all Revenue Meters, instrument
transformers and appurtenances associated with Revenue Meters, and
real time telemetry, (b) conduct meter accuracy and tolerance
tests, and (c) prepare all calibration reports required for
equipment that measures energy transfers at the Point of
Interconnection. All meter accuracy and tolerance testing
hereunder shall be in accordance with PJM Requirements and Good
Utility Practice and shall be conducted, at Pepco's request, in the
presence of Pepco's representative.
3.13.2 Generator shall own and Maintain, at the
Generator's expense, equipment for redundant real-time
communications and transmission of telemetry, hourly MWh
information, and such other information as required by the PJM
System Operator or Transmission Operator, or as reasonably required
by Pepco in accordance with PJM Requirements and Good Utility
Practice.
3.14 Emergency Procedure
3.14.1 Pepco, through the Transmission
Operator, shall provide Generator with prompt verbal notification
of Emergencies with regard to the Transmission System which may
reasonably be expected to affect Generator's
<PAGE>
immediate operation of the Station or Generator Facilities, and
Generator shall provide Pepco with prompt verbal notification of
Emergencies with regard to the Station which may reasonably be
expected to affect Interconnection Service or the Transmission
System. Such notification shall describe the Emergency, the extent
of damage or deficiency, the anticipated length of an outage and
the corrective action taken and/or to be taken. Said verbal
notification shall be followed as soon as practicable (but no later
than 24 hours after the verbal notification) with written
notification.
3.14.2 If an Emergency in the good faith
judgment of a Party endangers or could endanger life or property,
the Party recognizing the problem shall take such action as may be
reasonable and necessary to prevent, avoid, or mitigate injury,
danger, or loss. If however the Emergency involves transmission or
electrical equipment, Generator shall notify the Transmission
Operator, and obtain the consent of such personnel, prior to
performing any switching operations.
3.14.3 Pepco may, consistent with PJM
Requirements and Good Utility Practice, have the Transmission
System Operator take whatever actions (including tripping
Generator's synchronizing breakers) or inactions it deems necessary
during an Emergency to: (a) preserve public safety; (b)
preserve the integrity of the Transmission System, (c) limit or
prevent damage; or (d) expedite restoration of service. If any
action or inaction by Pepco or the Transmission Operator under this
Section 3.14 results in the discontinuation, curtailment,
interruption or reduction of Interconnection Service, Pepco shall
use reasonable efforts consistent with PJM Requirements and Good
Utility Practice to restore Interconnection Service as promptly as
practicable and to minimize the effect of such restoration of
service on the Station.
3.15 Interconnection Service Interruptions
3.15.1 If at any time, in the reasonable
exercise of the PJM System Operator's judgment, or the Transmission
Operator's judgment exercised in accordance with PJM Requirements
or Good Utility Practice and on a non-discriminatory basis, a
condition exists, including the operation of Generator's equipment,
which might reasonably be expected to have a materially adverse
affect on the quality of service rendered by Pepco (including
services rendered to transmission or distribution customers) or
interferes with the safe and reliable operation of the Transmission
System, Pepco may discontinue, curtail, reduce and/or interrupt
Interconnection Service until the condition has been corrected.
3.15.2 Unless the PJM System Operator, the
Transmission Operator or Pepco perceives that an Emergency exists
or the risk of one is imminent, Pepco
<PAGE>
shall give Generator reasonable notice of its intention to
discontinue, curtail, interrupt or reduce Interconnection Service
in response to the interfering condition and, where practical,
allow suitable time for Generator to remove the interfering
condition if it is the result of Generator's operations, before the
discontinuation, curtailment, interruption or reduction commences.
Pepco's judgment with regard to the interruption of service under
this paragraph shall be made pursuant to PJM Requirements and
Good Utility Practice. In the case of such interruption, Pepco
shall immediately confer with Generator regarding the conditions
causing such interruption and its recommendation concerning timely
correction thereof. In the event Interconnection Service is
interrupted under this section due to Generator's failure to
operate and Maintain the Generating Facilities pursuant to PJM
Requirements or Good Utility Practice, Generator shall
compensate Pepco for all costs reasonably incurred by Pepco
attributable to the interruption and restoration of Interconnection
Service. Pepco shall use reasonable efforts consistent with PJM
Requirements and Good Utility Practice to restore Interconnection
Service interrupted, curtailed or reduced pursuant to this Section
3.15 as promptly as practicable and to minimize the effect of
such restoration of service on the Station.
3.16 Unit Status Notification
3.16.1 Generator acknowledges that Pepco
requires information regarding the status of the Station for
Transmission System reliability purposes. Accordingly, by 10:00
a.m. of each day, the Generator shall provide Pepco the following
information regarding the status of the Station for the following
day: Station availability to provide energy and capacity, the
Station's scheduled on and off times, Station synchronization,
planned outages or deratings, and generation restrictions and
limitations. Generator shall immediately notify Pepco of any
changes to the information provided pursuant to the foregoing
sentence.
3.16.2 In circumstances, such as forced
outages, Generator shall notify Pepco of its generating unit's
temporary interruption of generation as soon as practicable; and it
shall provide Pepco, as soon as practicable, with a schedule of
when generation will be resumed.
3.17 Scheduled Maintenance Notification and
Coordination
3.17.1 Local Routine Inspection and
Maintenance. The Parties agree that, due to the integration of
certain control and protective relaying schemes between the Station
and the Interconnection Facilities, it will be necessary for them
to cooperate in the inspection, maintenance and testing of these
areas of integration. Each Party will provide advance notice
to the other Party before undertaking any work in these areas,
especially in electrical circuits involving circuit breaker trip
and
<PAGE>
close contacts, current transformers or potential transformers and
such work will be performed in accordance with PJM Requirements and
Good Utility Practice.
3.17.2 Transmission System Maintenance. Pepco
shall consult with Generator regarding timing of scheduled
maintenance of the Interconnection Facilities or the transmission
facilities of the Transmission System which Pepco or the
Transmission Operator performs and which might reasonably be
expected to affect the Station. Pepco shall, to the extent
practicable, schedule any testing, shutdown, or withdrawal of said
facilities to coincide with Generator's scheduled outages for the
Station. To facilitate such consultation and to the extent the
information is not available from the PJM System Operator in a
timely manner, in June of each year, or on another date mutually
acceptable to the Parties, Generator shall furnish Pepco with
non-binding preliminary generator maintenance schedules
covering the upcoming two years and any material changes thereto.
In the event Pepco is unable to schedule the outage of its
facilities to coincide with Generator's schedule, Pepco shall
notify Generator as soon as practicable of the reasons for the
facilities' outage, of the time scheduled for the outage to take
place, and of its expected duration.
3.18 Safety
3.18.1 General. Pepco agrees with respect to
the Interconnection Facilities and the Transmission System, and
Generator agrees with respect to the Station, that all work
performed by either Party on such facilities which could reasonably
be expected to affect the operations of the other Party shall be
performed in accordance with all applicable PJM Requirements and
Good Utility Practice.
3.18.2 Switching Tagging and Grounding . Each
Party shall comply with the Switching, Tagging and Grounding Rules.
Pepco will notify Generator of any changes in its Switching,
Tagging and Grounding Rules. Generator shall be responsible for
all switching, tagging and grounding on Generator's side of the
Point of Interconnection and, except for Generator Facilities,
Pepco shall be responsible for all switching, tagging and
grounding on its side of the Point of Interconnection.
3.19 Environmental Compliance and Procedures
3.19.1 Each Party shall be responsible for
complying with all Environmental Laws applicable to it with respect
to its facilities or property.
<PAGE>
3.19.2 A Party shall notify the other Party
first verbally and then in writing, of any Releases of a Hazardous
Substance or any type of remediation activities related thereto as
soon as possible but no later than twenty-four (24) hours after the
occurrence if within the reasonable judgment of the Party said
activities could reasonably be expected to have a material adverse
effect upon the operations of the other Party and shall promptly
furnish to the other Party copies of any reports filed with
any governmental agencies covering such events. This Section
3.19.2 does not effect any allocation of liability with respect to
the Station pursuant to the Asset Sale Agreement.
3.19.3 Neither Party shall knowingly take any
actions which might reasonably be expected to have a material
adverse environmental impact upon the operations of the other Party
without prior written notification and agreement between then
Parties.
3.20 Operating Committee. The Parties shall establish
an operating committee consisting of one representative for each
Party ("Operating Committee"). The Operating Committee shall act
only by unanimous agreement or consent. The Parties shall
designate their respective representatives to the Operating
Committee, plus an alternate by written notice. Each Party's
representative on the Operating Committee is authorized
to act on behalf of such Party with respect to any matter arising
under this Agreement which is to be decided by the Operating
Committee, however, the Operating Committee shall not have any
authority to modify or otherwise alter the rights and obligations
of the Parties hereunder. The Operating Committee shall develop
and implement suitable policies and procedures with which to
coordinate the interaction of the Parties with respect to the
performance of their duties and obligations under this Agreement.
ARTICLE 4
OPERATIONS
4.1 General
4.1.1 The Parties agree to operate their
respective equipment that could reasonably be expected to have a
material effect on the operations of the other Party in a safe and
efficient manner and in accordance with PJM Requirements and Good
Utility Practice, and otherwise in accordance with the terms of
this Agreement.
4.1.2 Generator shall comply with the
requests, orders, and directives of Pepco with respect to
Interconnection Service to the extent such requests, orders
<PAGE>
or directives are (a) issued pursuant to PJM Requirements or Good
Utility Practice, (b) not discriminatory; and (c) otherwise in
accordance with this Agreement or applicable tariffs.
4.1.3 In the event Generator believes that a
request, order, or directive of Pepco exceeds the limitations in
this Section 4.1.2, it shall nevertheless comply with the request,
order, or directive pending resolution of the dispute under Article
12. The Parties agree to cooperate in good faith to expedite the
resolution of any disputes arising under this Section 4.1.
4.2 Generator's Operating Obligations
4.2.1 General. Generator shall request
permission from the Transmission Operator, the PJM System Operator
or the PJM Interconnection LLC, as applicable, prior to opening
and/or closing circuit breakers in accordance with applicable
switching and operations procedures and Good Utility Practice.
(a) Generator shall carry out all switching
orders from the Transmission Operator, the PJM System Operator, or
the PJM Interconnection LLC, in a timely manner and in accordance
with PJM Requirements and Good Utility Practice.
(b) Generator shall (i) comply with Pepco's
system restoration plan and black start criteria applicable to the
Station as configured as of the Effective Date or (ii) if the
Station's configuration is modified, provide alternative service
restoration and black start capability in accordance with PJM
Requirements. Generator shall ensure that operating personnel at
the Station are trained to implement such system restoration or
black start plans. The Generator shall test the Station's
black-start combustion-turbines annually to confirm that the
black-start combustion-turbines will start without an external
power supply. The Generator shall test the Station's steam
turbine-generators and those combustion-turbine generators that
would be required to be black-started in accordance with Pepco's
Emergency Conditions and System Restoration Manual, as revised from
time to time, and plant restoration procedures, at least once
every three years. Testing shall confirm the ability of a
generating unit or Station to go from a shut down condition to an
operating condition and start delivering power without assistance
from the Transmission System. These testing requirements shall
remain in place until PJM promulgates specific rules governing
black-start testing.
<PAGE>
(c) The electricity supplied by Generator to
the Point of Interconnection shall be in the form of three-phase 60
Hertz alternating current at the nominal system voltage.
(d) Generator's equipment shall conform with
Good Utility Practice for harmonic distortion and voltage
fluctuation.
(e) The Generator shall Maintain the
equipment to display and to follow the export/import signal on the
export/import meters when directed to do so by Pepco, the
Transmission Operator or the PJM System Operator for reliability
purposes.
4.2.2 Voltage or Reactive Control
Requirements. Unless otherwise agreed to by the Parties or
authorized or directed by the PJM Interconnection LLC, Generator
shall operate the Station with automatic voltage regulators in
service at all times. The voltage regulators will control voltage
at the Points of Interconnection consistent with the range of
voltage prescribed by Pepco or the Transmission System Operator in
accordance with PJM Requirements and Good Utility Practice.
(a) Generator will operate the Station in
accordance with prescribed voltage schedules pursuant to Section
4.2.2 to the extent the Station is operating within its reactive
generating capability and not violating any electrical constraints.
Should Generator fail to comply with such voltage schedules, Pepco
or the Transmission Operator, as applicable, shall provide written
notice to the Generator of its intent to remedy that failure. If
Generator does not promptly commence appropriate action after
receiving such notice, Pepco or the Transmission Operator may then
take any necessary action at Generator's expense to remedy such
failure, including the installation of capacitor banks or other
reactive compensation equipment necessary to ensure the proper
voltage or reactive supply at the Station including, at a minimum,
by installing such equipment outside any building housing the
Generation Facilities. Pepco shall make, to the extent feasible,
reasonable efforts to minimize the impact of such action on the
operation of the Station.
(b) Generator shall notify the Transmission
Operator if (a) any or all generating units at the Station reaches
a VAR limit, (b) there is any deviation from the voltage schedules
prescribed pursuant to Section 4.2.2 which is outside the limits
permitted by PJM Requirements or Good Utility Practice, or (c) any
automatic voltage regulator is removed from or restored to service.
(c) The Transmission Operator may from time
to time, pursuant to PJM Requirements or Good Utility Practice,
request or direct Generator to
<PAGE>
adjust generator controls that impact the Transmission System, such
as excitation, droop, and automatic generation control settings and
Generator shall comply with such request or directions.
(d) Generator acknowledges that the
Transmission Operator may have the right, to the extent authorized
or directed by the PJM Interconnection LLC, to require reduced or
increased generation of the Station in accordance with PJM
Requirements, or in accordance with applicable rules of the
Transmission Operator.
4.3 Auditing of Accounts and Records. The Parties
shall have the right, during normal business hours, to audit each
other's accounts and records pertaining to transactions under this
Agreement, upon twenty (20) days prior written notice, at the
offices where such accounts and records are maintained, provided,
however, that the audit shall be limited to those portions of the
accounts and records that are related to services provided to
the other Party under this Agreement. Any such audit of a Party's
accounts and records will be at the expense of the auditing Party,
shall not be made more frequently than once in any twelve (12)
month period, and no such audit may be made with respect to
accounts and records relating to periods more than twenty-four (24)
months prior to the date of the audit notice. The Party being
audited will be entitled to review the audit report and any
supporting materials. The Party conducting the audit shall
maintain the confidentiality of all information obtained during the
audit in compliance with Article 6 of this Agreement. To the
extent that audited information includes confidential information,
the auditing Party shall designate an independent auditor at its
expense to perform such audit.
ARTICLE 5
COST RESPONSIBILITIES AND BILLING PROCEDURES
5.1 Cost Responsibilities for Interconnection
Service. Except as otherwise expressly stated herein, Generator
shall not be responsible for any costs arising from Pepco's
provision of Interconnection Service or local services to
Generator, except for those costs specified in Sections 3.2.1,
3.2.2, 3.4.1, and 3.15 or arising from the liability or
indemnification provisions of this Agreement.
5.2 Cost Responsibilities for Local Services. Except
as otherwise expressly provided herein or agreed to by the Parties,
each Party shall be responsible for the costs for local services
provided to the other Party in Sections 3.10 and 3.11 as set forth
in said sections.
<PAGE>
5.3 Billing Procedures
(a) Within ten (10) days after the first day
of each calendar month, each Party shall provide the other Party
with a written invoice for any payments due from the other Party
for services provided in the previous month.
(b) Each invoice shall (i) delineate the
month in which the services were provided, (ii) fully describe the
services rendered, (iii) be itemized to reflect the services
performed or provided, and (iv) provide reasonable detail as to the
calculation of the amount involved.
(c) All invoices shall be paid within
fifteen (15) days after receipt, but not earlier than the 25th day
of the month in which the invoice is rendered. All payments shall
be made in immediately available funds payable to the other Party,
or by wire transfer to a bank designated in writing by such
Party. Payment of invoices shall not relieve the paying Party from
any responsibilities or obligations it has under this Agreement,
nor shall such payment constitute a waiver of any claims arising
hereunder.
5.3.2 To the extent that, for any billing
period, Generator is obligated to pay to Pepco amounts due and
calculated pursuant to Section 5.3, Pepco may use such amounts as
a set-off against any amounts owed by Pepco to Generator under this
Section 5.3.
5.3.3 Interest on any unpaid amounts shall be
calculated in accordance with the methodology specified for
interest on refunds in FERC regulations at 18 C.F.R. Section
35.19a(a)(2)(iii). Interest on delinquent amounts shall be
calculated from the due date of the bill to the date of payment.
When payments are made by mail, bills shall be considered as having
been paid on the date of receipt by the other Party.
5.4 Billing Disputes. In the event of a billing
dispute between the Parties, each Party shall continue to provide
services as long as the other Party continues to make all payments
not in dispute. Payment of invoices by either Party shall not
relieve the paying Party from any responsibilities or obligations
it has under this Agreement; nor shall it constitute a waiver of
any claims arising hereunder.
<PAGE>
ARTICLE 6
CONFIDENTIALITY
6.1 Confidentiality Obligations of Pepco. Pepco
shall hold in confidence, unless compelled to disclose by judicial
or administrative process or other provisions of law, all documents
and information furnished by Generator in connection with this
Agreement marked "Confidential" or "Proprietary." Except to the
extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure
by Pepco in breach of this Agreement, (ii) available to Pepco on a
non-confidential basis prior to disclosure to Pepco by Generator,
or (iii) available to Pepco on a non-confidential basis from a
source other than Generator, provided that such source is not
known, and by reasonable effort could not be known, by Pepco to be
bound by a confidentiality agreement with Generator or otherwise
prohibited from transmitting the information to Pepco by a
contractual, legal or fiduciary obligation, Pepco shall not release
or disclose such information to any other person, except to its
employees, representatives or agents on a need-to-know basis, in
connection with this Agreement who has not first been advised of
the confidentiality provisions of this Section 6.1 and has agreed
in writing to comply with such provisions. In no event shall such
information be disclosed in violation of the requirements of FERC
Orders 889 and 889-A, and any successor thereto. Pepco shall
promptly notify Generator if it receives notice or otherwise
concludes that the production of any information subject to this
Section 6.1 is being sought under any provision of law and Pepco
shall use reasonable efforts in cooperation with Generator to seek
confidential treatment for such confidential information provided
thereto.
6.2 Confidentiality Obligations of Generator.
Generator shall hold in confidence, unless compelled to disclose by
judicial or administrative process or other provisions of law, all
documents and information furnished by Pepco in connection with
this Agreement marked "Confidential" or "Proprietary." Except to
the extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure by
Generator in breach of this Agreement, (ii) available to
Generator on a non-confidential basis prior to disclosure to
Generator by Pepco, or (iii) available to Generator on a
non-confidential basis from a source other than Pepco, provided
that such source is not known, and by reasonable effort could not
be known, by Generator to be bound by a confidentiality agreement
with Pepco or otherwise prohibited from transmitting the
information to Generator by a contractual, legal or
fiduciary obligation, Generator shall not release or disclose such
information to any other person, except to its employees,
representatives or agents on a need-to-know basis, in connection
with this Agreement who has not first been advised of the
confidentiality provisions of this Section 6.2 and has agreed in
writing to comply with such provisions. In no
<PAGE>
event shall such information be disclosed in violation of the
requirements of FERC Orders 889 and 889-A, and any successor
thereto. Generator shall promptly notify Pepco if it receives
notice or otherwise concludes that the production of any
information subject to this Section 6.2 is being sought
under any provision of law and Generator shall use reasonable
efforts in cooperation with Pepco to seek confidential treatment
for such confidential information provided thereto.
6.3 Confidentiality of Audits. The independent
auditor performing any audit, as referred to in Section 4.3, shall
be subject to a confidentiality agreement between the auditor and
the Party being audited. Such audit information shall be treated
as confidential except to the extent that its disclosure is
required by regulatory or judicial order, for reliability purposes
pursuant to PJM Requirements or Good Utility Practice, and pursuant
to the FERC's rules and regulations. Except as provided herein,
neither Party will disclose the audit information to any third
party, without the other Party's prior written consent. Audit
information in the hands of the Party not being audited shall be
subject to all provisions of Section 6.1 or 6.2, above, as
applicable.
6.4 Remedies. The Parties agree that monetary
damages would be inadequate to compensate a Party for the other
Party's breach of its obligations under Section 6.1 or 6.2, above,
as applicable. Each Party accordingly agrees, subject to Article
8, that the other Party shall be entitled to equitable relief, by
way of injunction or otherwise, if the first Party breaches or
threatens to breach its obligations under Section 6.1 or 6.2 of
this Agreement, as applicable, which equitable relief shall be
granted without bond or proof of damages, and the receiving Party
shall not plead in defense that there would be an adequate remedy
at law.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. Each of the following shall
constitute an Event of Default by the a defaulting Party under this
Agreement:
(a) The failure by a Party to pay any amount
due within twenty (20) calendar days after receipt of written
notice of nonpayment by the other Party, unless the payment of such
amount is disputed in good faith, in which event Section 5.5 shall
apply;
(b) A Party's breach of any material term or
condition of this Agreement, including but not limited to any
material breach of a representation,
<PAGE>
warranty or covenant made in this Agreement which, after receiving
written notice of the breach from the non-breaching Party (such
notice to set forth in reasonable detail the nature of the default
and, where known and if applicable, the steps necessary to cure
such default), (i)the breaching Party fails to cure, if curable,
within thirty (30) days following receipt of the notice or (ii) if
such default is of such a nature that it cannot be cured within
thirty (30) days following receipt of such notice, the breaching
Party fails within such thirty (30) days to commence the necessary
cure and fails at any time thereafter diligently and continuously
to prosecute such cure to completion provided that the cure is
completed no later than 180 days after the receipt of the default
notice;
(c) The appointment of a receiver,
liquidator or trustee for either Party, and such receiver,
liquidator or trustee is not discharged within sixty (60) days;
(d) The entry of a decree or decrees
adjudicating a Party as bankrupt or insolvent, and such decree or
decrees are not stayed or discharged within sixty (60) days; or
(e) The filing of voluntary petitions for
bankruptcy under any federal or state bankruptcy law by a Party.
7.2 Remedies
7.2.1 If the breaching Party disputes that an
Event of Default under Section 7.1.(b) has occurred, the breaching
Party shall nonetheless comply with this Section 7.2 pending the
resolution of the dispute. If it is determined that no breach or
Event of Default under Section 7.1(b) existed, the Party alleging
the default shall pay and reimburse the other Party for all
reasonable costs and expenses incurred by it to cure the alleged
default.
7.2.2 Upon the occurrence of an Event of
Default, the non-defaulting Party may (i) exercise all such rights
and remedies as may be available to it at law or equity including
seeking to recover damages caused by such Event of Default, subject
to Article 8 of this Agreement; and/or (ii) terminate this
Agreement. The Parties shall not discontinue the performance
of any one or more of their obligations hereunder due to the
occurrence of an Event of Default during the pendency of any
dispute regarding such Event of Default and until such dispute is
finally resolved except that Pepco may suspend or interrupt service
if necessary for the safe and reliable operation of the
Interconnection Facilities or the Transmission System.
<PAGE>
7.2.3 Notwithstanding the foregoing, upon the
occurrence of any Event of Default, the non-defaulting Party shall
be entitled to commence an action to require the defaulting Party
to remedy such default by specifically performance of its duties
and obligations hereunder in accordance with the terms and
conditions hereof.
7.2.4 Notwithstanding anything in this
Agreement to the contrary, in the event the Generator's failure to
comply with the provisions of Sections 4.1 and 4.2 of this
Agreement is reasonably likely to have an immediate and material
adverse impact on Pepco or the Transmission System, Pepco shall
have the right to take immediately reasonable steps and/or to
exercise immediately all remedies available under this Agreement,
or at law or equity, including the right, after providing as much
notice as is practicable under the circumstances and complying with
the applicable FERC notice requirements regarding termination of
service, to disconnect the Station from the Transmission System.
ARTICLE 8
LIMITATION OF LIABILITY
8.1 Limitation of Pepco's Liability. Pepco does not
guarantee the non-occurrence of, or warrant against, and will have
no liability hereunder for, and the Generator will release Pepco
from all claims or damages associated with, any interruption in the
availability of the Interconnection Facilities, Interconnection
Service or local services pursuant to Section 3.10 or damages to
the Generator's facilities, except to the extent such interruption
or damage is caused by Pepco's gross negligence or willful
misconduct in the performance of its obligations under this
Agreement.
8.2 Limitation on Generator's Liability. Generator
does not guarantee the non-occurrence of, or warrant against, and
will have no liability under this Agreement for, and Pepco will
release Generator from all claims or damages arising under this
Agreement which are associated with any interruption in the
availability of the Station or local services pursuant to
Section 3.11, any reduction, curtailment, interruption or reduction
of energy from the Station, or damage to Pepco's facilities, except
to the extent such interruption or damage is caused by Generator's
gross negligence or willful misconduct in the performance of its
obligations under the Agreement.
8.3 Consequential Damages. Except for indemnity
obligations set forth in Article 9, neither Party, nor their
respective officers, directors, agents, employees, Affiliates, or
successors or assigns of any of them, shall be liable to the other
Party or its Affiliates, officers, directors, agents, employees,
successors or assigns for claims,
<PAGE>
suits, actions or causes of action for incidental, punitive,
special, indirect, multiple or consequential damages (including,
without limitation, replacement power costs, lost revenues, claims
of customers, attorneys' fees and litigation costs) connected with,
or resulting from, performance or non-performance of this
Agreement, or any actions undertaken in connection with or related
to this Agreement, including, without limitation, any such
damages which are based upon causes of action for breach of
contract, tort (including negligence and misrepresentation), breach
of warranty or strict liability. The provisions of this Section
8.3 shall apply regardless of fault and shall survive termination,
cancellation, suspension, completion, or expiration of this
Agreement.
ARTICLE 9
INDEMNIFICATION FOR THIRD PARTY CLAIMS
9.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Pepco and a third party or Generator) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the
extent caused, by the negligence or willful misconduct of
Generator's and/or its officers, directors, employees, agents,
contractors, subcontractors or invitees arising out of or connected
with Generator's performance or breach of this Agreement, or the
exercise by Generator of its rights hereunder. In furtherance of
the foregoing indemnification and not by way of limitation thereof,
Generator hereby waives any defense it might otherwise have under
applicable workers' compensation laws.
9.2 Pepco's Indemnification. Pepco shall indemnify,
hold harmless, and defend Generator and its Affiliates, as the case
may be, and their respective officers, directors, employees,
agents, contractors, subcontractors, invitees, successors and
permitted assigns from and against any and all claims, liabilities,
costs, damages, and expenses (including, without limitation,
reasonable attorney and expert fees, and disbursements incurred by
any of them in any action or proceeding between the Generator and
a third party or Pepco) for damage to property of unaffiliated
third parties, injury to or death of any person, including
Generator's employees or any third parties, to the extent caused by
the negligence or willful misconduct of Pepco and/or its officers,
directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Pepco's performance or
breach of this Agreement, or the exercise by Pepco of its rights
hereunder. In furtherance of the
<PAGE>
foregoing indemnification and not by way of limitation thereof,
Pepco hereby waives any defense it might otherwise have under
applicable workers' compensation laws.
9.3 Indemnification Procedures. If either Party
intends to seek indemnification under this Article 9 from the other
Party, the Party seeking indemnification shall give the other Party
notice of such claim within ninety (90) days of the later of the
commencement of, or the Party's actual knowledge of, such claim or
action. Such notice shall describe the claim in reasonable detail,
and shall indicate the amount (estimated if necessary) of the claim
that has been, or may be sustained by, said Party. To the extent
that the other Party will have been actually and materially
prejudiced as a result of the failure to provide such notice, such
notice will be a condition precedent to any liability of the other
Party under the provisions for indemnification contained in this
Agreement. Neither Party may settle or compromise any claim
without the prior consent of the other Party; provided, however,
said consent shall not be unreasonably withheld or delayed.
9.4 Survival. The indemnification obligations of
each Party under this Article 9 shall continue in full force and
effect regardless of whether this Agreement has either expired or
been terminated or canceled.
ARTICLE 10
INSURANCE
10.1 Insurance Coverage. The Parties shall maintain
at their own cost and expense, fire, liability, worker's
compensation, and other forms of insurance relating to their
respective property and facilities subject to this Agreement in the
manner, and amounts, and for the durations as is customary in the
electric utility industry.
10.2 Certificates of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance coverage obtained in accordance with this Article 10, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within ten (10) business
days of receiving notice of cancellation, change, amendment
or renewal of any insurance policy required pursuant to Section
10.1 above.
10.3 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
10.1, above, as regards liability under this Agreement; and
<PAGE>
each Party shall waive its rights of recovery against the other for
any loss or damage covered by such policy.
ARTICLE 11
FORCE MAJEURE
11.1 Effect of Force Majeure. Notwithstanding
anything in this Agreement to the contrary, Generator and Pepco
shall not be liable in damages or otherwise or responsible to the
other for its failure to carry out any of its obligations under
this Agreement (except for the obligation to pay sums of money due
and owing hereunder) to the extent that they are unable to so
perform or are prevented from performing by an event of Force
Majeure and has complied with Section 11.3.
11.2 Force Majeure Defined. Force Majeure means those
causes beyond the reasonable control of the Party affected, which
by the exercise of reasonable diligence, including Good Utility
Practice, that Party is unable to prevent, avoid, mitigate, or
overcome, including the following: any act of God, labor
disturbance (including a strike), act of the public enemy, war,
insurrection, riot, fire, storm or flood, explosion, breakage or
accident to machinery or equipment, electric system disturbance),
order, regulation or restriction imposed by governmental, military
or lawfully established civilian authorities, or any other cause of
a similar nature beyond a Party's reasonable control.
11.3 Notification. A Party shall not be entitled to
rely on the occurrence of an event of Force Majeure as a basis for
being excused from performance of its obligations under this
Agreement, unless the Party relying on the event or condition
shall: (a) provide prompt written notice of such Force Majeure
event to the other Party, including an estimation of its
expected duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts in
accordance with Good Utility Practice to continue to perform its
obligations under this Agreement; (c) expeditiously take action to
correct or cure the event or condition excusing performance; (d)
exercise all reasonable efforts to mitigate or limit damages to the
other Party; and (e) provide prompt notice to the other Party of
the cessation of the event or condition giving rise to its excuse
from performance. Subject to this Section 11.3, any obligation
under this Agreement shall be suspended only to the extent caused
by such Force Majeure and only during the continuance of any
inability of performance caused by such Force Majeure but for no
longer period.
<PAGE>
ARTICLE 12
DISPUTES
12.1 Disputes
12.1.1 A Party with a claim or dispute under
this Agreement shall submit to the Operating Committee a
notification of such claim or dispute within sixty (60) days after
the circumstances that gave rise to the claim or the question or
issue in dispute. The notification shall be in writing and shall
include a concise statement of the claim or the issue or question
in dispute, a statement of the relevant facts and documentation to
support the claim. In the event the Operating Committee is
unable, in good faith, to resolve their disagreement in a manner
satisfactory to both Parties within thirty (30) days after receipt
by the Operating Committee of a notification specifying the claim,
issue or question in dispute, the Parties shall refer the dispute
to their respective senior management. If, after using their good
faith best efforts to resolve the dispute, senior management cannot
resolve the dispute within thirty (30) days, the Parties shall
utilize the arbitration procedures set forth below in Section 12.2
to resolve a dispute, provided that nothing herein or therein
shall prohibit either Party from at any time requesting from a
court of competent jurisdiction a temporary restraining order,
preliminary injunction, or other similar form of equitable relief
to enforce performance of the provisions of this Agreement.
12.2 Arbitration.
(a) Unless the Parties other wise mutually
agree in writing to another form of dispute resolution such as
dispute resolution under the PJM Agreement or the MAAC agreement,
any arbitration initiated under this Agreement shall be conducted
before a single neutral arbitrator appointed by the Parties within
thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an arbitrator,
such arbitration shall be appointed by the American Arbitration
Association. Unless the Parties agree otherwise, the arbitrator
shall be an attorney or retired judge with at least fifteen (15)
years of experience, and shall not have any current or past
substantial business or financial relationships with any Party to
the arbitration. If possible, the arbitrator shall have experience
in the electric utility industry. Unless otherwise agreed, the
arbitration shall be conducted in accordance with the American
Arbitration Association's Commercial Arbitration Rules, then
in effect. Any arbitration proceedings, decision or award rendered
hereunder and the validity, effect and interpretation of this
arbitration agreement shall be governed by the Federal Arbitration
Act of the
<PAGE>
United States, 9 U.S.C. Section 1 et seq. The location of any
arbitration hereunder shall be in the District of Columbia.
(b) The arbitration shall, if possible, be
concluded not later than six (6) months after the date that it is
initiated. The arbitrator shall be authorized only to interpret
and apply the provisions of this Agreement or any related
agreements entered into under this Agreement and shall have no
power to modify or change any of the above in any manner.
The arbitrator shall have no authority to award punitive or
multiple damages or any damages inconsistent with this Agreement.
The arbitrator shall, within thirty (30) days of the conclusion of
the hearing, unless such time is extended by agreement of the
Parties, notify the Parties in writing of his or her decision,
stating his or her reasons for such decision and separately
listing his or her findings of fact and conclusions of law. The
decision of the arbitrator rendered in such a proceeding shall be
final and binding on the Parties. Judgment on the award may be
entered upon it in any court having jurisdiction.
12.3 FERC Dispute Resolution. Nothing in this
Agreement shall preclude, or be construed to preclude, any Party
from filing a petition or complaint with FERC with respect to any
arbitrable claim over which FERC has jurisdiction. In such case,
the other Party may request FERC to reject or to waive
jurisdiction. If FERC rejects or waives jurisdiction with respect
to all or a portion of the claim, the portion of the claim not so
accepted by FERC shall be resolved through arbitration, as provided
in this Agreement. To the extent that FERC asserts or accepts
jurisdiction over the claim, the decision, finding of fact or order
of FERC shall be final and binding, subject to judicial review
under the Federal Power Act, and any arbitration proceedings that
may have commenced with respect to the claim prior to the
assertion or acceptance of jurisdiction by FERC shall be
terminated.
ARTICLE 13
REPRESENTATIONS
13.1 Representations of Pepco. Pepco hereby
represents and warrants to Generator as follows:
(a) Incorporation. Pepco is a corporation duly
organized, validly existing and in good standing under the laws of
the District of Columbia and the Commonwealth of Virginia, and has
all requisite corporate power and authority to own, lease and
operate its material assets and properties and to carry on its
business as now being conducted.
<PAGE>
(b) Authority. Pepco has all necessary
corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery by Pepco of this Agreement and the
consummation by Pepco of the transactions contemplated
hereunder have been duly and validly authorized by the Board of
Directors of Pepco or by a committee thereof to whom such authority
has been delegated and no other corporate proceedings on the part
of Pepco are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Pepco and, assuming that this
Agreement constitutes a valid and binding agreement of
Generator, constitutes a valid and binding agreement of Pepco,
enforceable by Pepco in accordance with its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of
this Agreement by Pepco nor performance by Pepco of its obligations
hereunder will (A) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-laws of Pepco,
(B) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Pepco
or any of its subsidiaries is a party or by which any of their
respective assets may be bound or (C) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
Pepco, or any of its assets, except in the case of clauses (B) and
(C) for such failures to obtain a necessary consent, defaults and
violations which would not, individually or in the aggregate,
have a material adverse effect on the ability of Pepco to discharge
its obligations under this Agreement (a "Pepco Material Adverse
Effect").
(ii) No declaration, filing or
registration with, or notice to, or authorization, consent or
approval of any governmental authority is necessary for performance
by Pepco of its obligations hereunder, other than such
declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not obtained or made would
not, individually or in the aggregate, have a Pepco Material
Adverse Effect.
13.2 Representations of Generator. Generator hereby
represents and warrants to Pepco as follows:
(a) Incorporation. Generator is a
[corporation] duly [incorporated], validly existing and in good
standing under the laws of the State of __________, and has all
requisite [corporate] power and authority to own, lease and
<PAGE>
operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Generator has all necessary
[corporate] power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by the Generator of this Agreement and
the consummation by Generator of the transactions contemplated
hereby have been duly and validly authorized the [Board of
Directors] of Generator or by a committee thereof to whom such
authority has been delegated and no other [corporate] proceedings
on the part of Generator are necessary to authorize this Agreement
or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Generator and, assuming
that this Agreement constitutes a valid and binding agreement of
Pepco, constitutes a valid and binding agreement of Generator,
enforceable against Generator in accordance with its terms.
(c) Consents and Approvals.
(i) Neither the execution and delivery of
this Agreement by Generator nor performance by Generator of its
obligations hereunder will (A) conflict with or result in any
breach of any provision of the [Certificate of Incorporation or
By-laws] of Generator, (B) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or
obligation to which Generator or any of its subsidiaries is a party
or by which any of their respective assets may be bound or (C)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Generator, or any of its assets, except in
the case of clauses (B) and (C) for such failures to obtain a
necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse
effect on the ability of Generator to discharge its obligations
under this Agreement (a "Generator Material Adverse Effect").
(ii) No declaration, filing or
registration with, or notice to, or authorization, consent or
approval of any Governmental Authority is necessary for performance
by Generator of its obligations hereunder, other than such
declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not obtained or made would
not, individually or in the aggregate, have a Generator Material
Adverse Effect.
<PAGE>
ARTICLE 14
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
14.1 Assignment.
(a) Except as set forth in this Article 14,
neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by either Party hereto,
without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed.
(b) Subject to Section 14.2, upon ten (10) days
prior written notice to Generator, Pepco may assign this Agreement,
and Pepco's rights, interests and obligations hereunder, to (i) an
Affiliate of Pepco that owns all or part of Pepco's Transmission
System or (ii) an independent system operator or independent
transmission company whose control over all or part of Pepco's
Transmission System has been approved by the FERC.
(c) Subject to Section 14.2, Generator may (a)
assign any of its rights and obligations hereunder to an Affiliate
to the extent necessary for the Generator to qualify as an exempt
wholesale generator under Section 32 of the Public Utility Holding
Company Act of 1935, as amended, and (b) assign, transfer, pledge
or otherwise dispose of its rights and interests hereunder to a
trustee, lending institution, or other Person for the purposes
of financing or refinancing the Station, including upon or pursuant
to the exercise of remedies under such financing or refinancing, or
by way of assignments, transfers, conveyances of dispositions in
lieu thereof; provided, however, that no such assignment shall
relieve or in any way discharge Generator from the performance of
its duties and obligations under this Agreement. Pepco agrees to
execute and deliver, at Generator's expense, such documents as may
be reasonably necessary to accomplish any such assignment,
transfer, conveyance, pledge or disposition of rights hereunder
for purposes of the financing or refinancing of the Facility, so
long as Pepco's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
(d) Subject to Section 14.2, either Party may
assign this Agreement to a successor to all or substantially all of
the assets of such Party by way of merger, consolidation, sale or
otherwise, provided such successor assumes in writing and becomes
liable for all of such Party's duties and obligations hereunder.
14.2 Release of Rights and Obligations. No
assignment, transfer, conveyance, pledge or disposition of rights,
interests, duties or obligations under this Agreement by a Party
shall relieve that Party from liability and financial
<PAGE>
responsibility for the performance thereof after any such transfer,
assignment, conveyance, pledge or disposition unless and until (i)
the transferee or assignee shall agree in writing to assume the
obligations and duties of that Party under this Agreement and to
impose such obligations on subsequent permitted transferees and
assignees and (ii) the non-assigning Party has consented in writing
to such assumption and to a release of the assigning Party from
such liability, such consent not to be unreasonably withheld or
delayed.
14.3 Change in Corporate Identity. If Generator
terminates its existence as a [corporate] entity by merger,
acquisition, sale, consolidation or otherwise, or if all or
substantially all of Generator's assets are transferred to another
person or business entity without complying with this Article 14,
Pepco shall have the right, enforceable in a court of competent
jurisdiction, to enjoin Generator's successor from using the
Station in any manner that does not comply with the requirements of
this Agreement or that impedes Pepco's ability to carry on its
ongoing business operations.
14.4 Successors and Assigns. This Agreement and all of
the provisions hereof are binding upon, and inure to the benefit
of, the Parties and their respective successors and permitted
assigns.
ARTICLE 15
SUBCONTRACTORS
Nothing in this Agreement shall prevent the Parties
from utilizing the services of subcontractors as they deem
appropriate, provided, however, the Parties agree that, where
applicable, all said subcontractors shall comply with the terms and
conditions of this Agreement. The creation of any subcontract
relationship shall not relieve the hiring Party of any of
its obligations under this Agreement. Each Party shall be fully
responsible to the other Party for the acts and/or omission of any
subcontractor it hires as if no subcontract had been made. Any
obligation imposed by this Agreement upon the Parties, where
applicable, shall be equally binding upon and shall be construed as
having application to any subcontractor. The Parties shall each be
liable for, indemnify, and hold harmless the other Party, their
Affiliates and their officers, directors, employees, agents,
servants, and assigns from and against any and all claims, demands,
or actions, from the other Party's subcontractors; and shall pay
all costs, expenses and legal fees associated therewith and all
judgments, decrees and awards rendered therein. No subcontractor
is intended to be or shall be deemed a third-party beneficiary of
this Agreement.
<PAGE>
ARTICLE 16
NOTICES
16.1 Emergency Notices. At or prior to the Effective
Date, each Party shall indicate to the other Party, by notice, the
appropriate person during each eight-hour work shift to contact in
the event of an emergency, a scheduled or forced interruption or
reduction in services. The notice last received by a Party shall
be effective until modified in writing by the other Party.
16.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or
at such other address for a Party as shall be specified by like
notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) ________________
Attention: ___________________
if to Generator, to:
c/o Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
ARTICLE 17
AMENDMENTS
17.1 Amendments. Except as set forth in Sections 2.2
and 17.2 of this Agreement, this Agreement may be amended,
modified, or supplemented only by written agreement of both Pepco
and Generator.
17.2 FERC Proceedings
<PAGE>
(a) Pepco may unilaterally make application to
FERC under Section 205 of the Federal Power Act and pursuant to the
FERC's rules and regulations promulgated thereunder for, or
exercise any rights it may have under Section 206 of the Federal
Power Act and the regulations thereunder with respect to, a change
in any rates, terms and conditions, charges, classification of
service, rule or regulation for any services Pepco provides
under this Agreement over which FERC has jurisdiction.
(b) Generator may exercise its rights under
Section 205 or 206 of the Federal Power Act and pursuant to FERC's
rules and regulations promulgated thereunder with respect to any
rate, term, condition, charge, classification of service, rule or
regulation for any services provided under this Agreement over
which FERC has jurisdiction.
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 Waiver. Except as otherwise provided in this
Agreement, any failure of a Party to comply with any obligation,
covenant, agreement, or condition herein may be waived by the Party
entitled to the benefits thereof only by a written instrument
signed by the Party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
18.2 Labor Relations. The Parties agree to
immediately notify the other Party, verbally and then in writing,
of any labor dispute or anticipated labor dispute which may
reasonably be expected to affect the operations of the other Party.
18.3 No Third Party Beneficiaries. Nothing in this
Agreement is intended to confer upon any other person except the
Parties any rights or remedies hereunder or shall create any third
party beneficiary rights in any person. No provision of this
Agreement shall create any rights in any such persons in respect of
any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement except as expressly
provided for thereunder.
18.4 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the District of Columbia (regardless of the laws
that might otherwise govern under applicable principles of
conflicts of law).
<PAGE>
18.5 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.
18.6 Interpretation. When a reference is made in this
Agreement to an Article, Section, Schedule or exhibit, such
reference shall be to an Article or Section of, or Schedule or
exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation" or equivalent words. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The definitions contained in this
Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine
and neuter genders of such term. Unless otherwise expressly stated
otherwise herein, the word "day" shall mean any calendar day
including weekends and holidays. Any agreement, instrument,
statute, regulation, rule or order defined or referred
to herein or in any agreement or instrument that is referred to
herein means such agreement, instrument, statute, regulation, rule
or order as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes, regulations, rules or orders)
by succession of comparable successor statutes, regulations, rules
or orders and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its
permitted successors and assigns. Each Party acknowledges that it
has been represented by counsel in connection with the review and
execution of this Agreement, and, accordingly, there shall be no
presumption that this Agreement or any provision hereof be
construed against the Party that drafted this Agreement.
18.7 Jurisdiction and Enforcement. Each of the Parties
irrevocably submits to the exclusive jurisdiction of (i) the
Superior Court of the District of Columbia and (ii) the United
States District Court for the District of Columbia, for the
purposes of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby. Each of the
Parties agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the District
of Columbia or, if such suit, action or proceeding may not be
brought in such court for jurisdictional reasons, in the Superior
Court of the District of Columbia. Each of the Parties further
agrees that service of process, summons, notice or document by hand
delivery or U.S. registered mail at the address specified for such
Party in Section 16.2 (or such other address specified by such
Party from
<PAGE>
time to time pursuant to Section 16.2) shall be effective service
of process for any action, suit or proceeding brought against such
Party in any such court. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) the Superior Court of the
District of Columbia and (ii) the United States District Court for
the District of Columbia, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
18.8 Entire Agreement. This Agreement, Asset Sale
Agreement, the Confidentiality Agreement and the Ancillary
Agreements including the Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein and
other contracts, agreements and instruments contemplated hereby or
thereby, embody the entire agreement and understanding of the
Parties in respect of the transactions contemplated by this
Agreement. There are no restrictions, promises, representations,
warranties, covenants or undertakings other than those expressly
set forth or referred to herein or therein. This Agreement, the
Asset Sale Agreement and the Ancillary Agreements supersede all
prior agreements and understandings between the Parties with
respect to the transactions contemplated by this Agreement other
than the Confidentiality Agreement.
18.9 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
18.10 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
18.11 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF, Pepco and Generator have caused
this Interconnection Agreement (Potomac River) to be signed by
their respective duly authorized officers as of the date first
above written.
POTOMAC ELECTRIC POWER COMPANY
By: ____________________________
Name:
Title:
[GENERATOR]
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE A
DEFINITIONS
Part A. Capitalized terms not defined in the body of the
Agreement shall have the meaning set forth in Part A of
this Schedule A. (Part B of this Schedule A sets forth
capitalized terms defined within the Agreement.)
(1) "Affiliate" has the meaning set forth in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
(2) "Ancillary Agreements" has the meaning set forth
in the Asset Sale Agreement.
(3) "Closing" has the meaning set forth in the Asset
Sale Agreement.
(4) "Confidentiality Agreement" has the meaning set
forth in the Asset Sale Agreement.
(5) "Costs" means all costs, including without
limitation, any Taxes, costs of acquiring real property, costs and
fees for permits, franchises, licenses and regulatory approvals
except to the extent that such costs are allocated to a party or
parties other than the Generator by the PJM Interconnection LLC or
otherwise under the PJM Tariff or PJM Agreement.
(6) "Easement" means the Easement Agreement dated
__________, 2000, between the Parties with respect to the Station.
(7) "Environmental Laws" means all former, current
and future federal, state, local and foreign laws (including common
law), treaties, regulations, rules, ordinances, codes, decrees,
judgments, directives or orders (including consent orders) and
environmental permits, in each case, relating to pollution or
protection of the environment or natural resources, including laws
relating to Releases or threatened Releases, or otherwise relating
to the generation, manufacture, processing, distribution, use,
treatment, storage, arrangement for disposal, transport, recycling
or handling, of Hazardous Substances.
(8) "Emergency" means (a) with respect to Pepco, a
condition or situation which Pepco, the PJM Interconnection LLC,
the PJM System Operator or the Transmission Operator deem
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Transmission System, Pepco's
electrical system or the electrical or transmission systems of
others to which the Transmission System or Pepco's electrical
system are directly or indirectly connected and (b) with respect to
the Generator, a condition or situation which the Generator deems
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Station.
(9) "FERC" means the Federal Energy Regulatory
Commission or its successors.
<PAGE>
(10) "Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
(11) "Generator" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
(12) "Generator Facilities" mean the equipment and
facilities owned by the Generator but located on Pepco's property
which are identified in Schedule B of this Agreement.
(13) "Good Utility Practice" means any of the
applicable practices, methods and acts.
(a) required by FERC, NERC, MAAC, the PJM
Interconnection LLC, the PJM System Operator, or the successor of
any of them, whether or not the Party whose conduct is at issue is
a member thereof,
(b) required by applicable law or regulations,
(c) required by the Pepco Interconnection
Standards or the policies and standards of Pepco relating to
emergency operations;
(d) otherwise engaged in or approved by a
significant portion of the electric utility industry during the
relevant time period;
which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost consistent
with law, regulation, good business practices, reliability, safety,
and expedition. Good Utility Practice is not intended to be
limited to the optimum practice, method, or act to the exclusion of
all others, but rather to be acceptable practices, methods, or acts
generally accepted in the region.
(14) "Hazardous Substances" means (i) any
petrochemical or petroleum products, crude oil or any fraction
thereof, ash, radioactive materials, radon gas, asbestos in any
form, urea formaldehyde foam insulation or polychlorinated
biphenyls, (ii) any chemicals, materials, substances or
wastes defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted
hazardous materials," "extremely hazardous substances," "toxic
substances," "contaminants" or "pollutants" or words of similar
meaning and regulatory effect contained in any Environmental Law or
(iii) any other chemical, material, substance or waste which is
prohibited, limited or regulated by any Environmental Law.
(15) "Interconnection Facilities" means those
facilities or portions of facilities owned or operated by Pepco to
provide Interconnection Service which shall include, but not be
limited to (1) facilities the cost of which is reasonably allocated
to the Interconnection Service provided to the Station, or (2)
Attachment Facilities or Local Upgrade Facilities, as defined
in the PJM Tariff, which are associated with the Interconnection
Service and operated and maintained by Pepco.
<PAGE>
(16) "Interconnection Service" means the services
provided by Pepco which are necessary to connect the Station to the
Transmission System for parallel operation of the Station and to
enable Generator to transmit the energy and ancillary services
produced by the Station to the Transmission System and receive
Station energy service and ancillary services, including
blackstart power, from the Generator's supplier.
(17) "MAAC" means the Mid-Atlantic Area Council, a
reliability council under Section 202 of the Federal Power Act
established pursuant to the MAAC Agreement dated August 1, 1994, or
any successor thereto.
(18) "Maintain" means construct, reconstruct, install,
inspect, repair, replace, operate, patrol, maintain, use,
modernize, expand, upgrade, or other similar activities.
(19) "MDPSC" means the Maryland Public Service
Commission or any successor agency thereto.
(20) "NERC" means North American Electric Reliability
Council or any successor thereto.
(21) "Pepco" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors or assigns.
(22) "Pepco Facilities" means the equipment and
facilities owned by Pepco but located on Generator's property which
are identified in Schedule B of this Agreement.
(23) "Pepco Interconnection Standards" means Pepco's
Interconnection and Parallel Operating Guidelines as amended,
modified or replaced from time to time. A copy of the existing
Pepco Interconnection Standards is attached hereto as Schedule E.
(24) "Point of Interconnection" means each ownership
point of demarcation set forth in Schedule C where capacity, energy
and ancillary services are transferred between the Station and the
Transmission System.
(25) "Pepco Transmission Facilities" means those
transmission, substation, and communication facilities and related
equipment, including the Interconnection Facilities, and any
additions, modifications or replacements thereto, that are utilized
to provide Interconnection Service to the Station.
(26) "PJM" means the Pennsylvania New Jersey-Maryland
interconnected power pool operated under the PJM Agreement and any
successor thereto including any regional transmission operator,
independent system operator, transco, or any other independent
system administrator that possesses operational or planning control
over the T ransmission System.
(27) "PJM Agreement" means the Amended and Restated
Operating Agreement of the PJM Interconnection LLC dated as of
June 2, 1997.
<PAGE>
(28) "PJM Control Area" shall mean the control area
recognized by NERC as the PJM Control Area.
(29) "PJM Interconnection LLC" means the independent
system operator of the PJM Control Area pursuant to the PJM
Operating Agreement and the PJM Tariff.
(30) "PJM Generator Connection Agreement" means the
interconnection agreement entered into between the Generator and
the PJM Interconnection LLC pursuant to the PJM Tariff with respect
to the interconnection of the Station and the Transmission System.
(31) "PJM Reliability Agreement" means the Reliability
Assurance Agreement dated June 2, 1997 among the load serving
entities of PJM.
(32) "PJM Requirements" means the rules, regulations
or other requirements of PJM or MAAC contained in or adopted
pursuant to the PJM Agreement, the PJM Tariff or the PJM
Reliability Agreement which are applicable to Pepco, with respect
to the Transmission System or the Interconnection Service, and the
Generator with respect to the Generating Facilities.
(33) "PJM System Operator" shall mean the PJM
Interconnection LLC, energy control center staff responsible for
central dispatch as provided in the PJM Agreement.
(34) "PJM Tariff" means the PJM Open Access
Transmission Tariff providing transmission service within the PJM
Control Area.
(35) "Qualified Personnel" means individuals who
possess any required licenses and are trained for their positions
and duties by Generator and/or Pepco pursuant to Good Utility
Practice.
(36) "Release" means any release, spill, emission,
leaking, dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into the environment (including
ambient air, surface water, groundwater, land surface or subsurface
strata) or within any building, structure, facility or fixture.
(37) "Revenue Meters" means all MWh and MVArh meters,
pulse isolation relays, pulse conversion relays, transducers
required by Pepco or the PJM Interconnection or PJM System Operator
for billing or other purposes, and associated totalizing
equipment, appurtenances and compensation required to measure the
transfer of energy across the Point of Interconnection.
(38) "Station" means the Potomac River Station as
defined in the Asset Sale Agreement.
(39) "Switching, Tagging, and Grounding Rules" means
Pepco's switching, tagging and grounding rules as amended, modified
or replaced from time to time. A copy of the existing Switching,
Tagging and Grounding Rules is attached hereto as Schedule D.
<PAGE>
(40) "Taxes" means all taxes, surtaxes, charges, fees,
levies, penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including income
taxes, excise, property, sales, transfer, franchise, special
franchise, payroll, recording, withholding, social security or
other taxes, in each case including any interest, penalties or
additions attributable thereto.
(41) "Transmission System" means the facilities owned,
controlled, or operated by Pepco, for purposes of providing
transmission service, including services under the PJM Tariff, and
Interconnection Service.
(42) "Transmission Operator" means the person, or
persons designated by Pepco to coordinate the day to day
interconnection of the Station with the Transmission System.
Part B. The following terms have the meaning specified in the
section of this Agreement set forth opposite to such
term:
Term Agreement Reference
Agreement Preamble
Asset Sale Agreement Preamble
Effective Date Section 2.1
Event of Default Section 8.1
Force Majeure Section 11.1
Initial Period Section 3.10
Operating Committee Section 3.20
Party or Parties Preamble
Term Article 2
<PAGE>
EXHIBIT E-2
INTERCONNECTION AGREEMENT
(Morgantown)
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
__________________________________
Dated ____________, 2000
<PAGE>
INTERCONNECTION AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 TERM AND TERMINATION 2
2.1 Term 2
2.2 Change in Law 2
2.3 Effect after Termination 2
ARTICLE 3 - CONTINUING OBLIGATIONS AND RESPONSIBILITIES 2
3.1 Interconnection Service 2
3.2 New Construction or Modifications 3
3.2.1 Pepco Construction or Modifications 3
3.2.2 Generator Construction or Modifications 4
3.2.3 Modifications Affecting the Transmission System
or the Station 5
3.3 Access, Easements, Conveyances, Licenses,
and Restrictions 6
3.4 Facility and Equipment Maintenance 7
3.5 Pepco Facilities and Generator Facilities 7
3.6 Equipment Testing Obligations 7
3.7 Inspections 8
3.8 Information Reporting Obligations 9
3.9 Local Services 10
3.9.1 General 10
3.9.2 Temporary Suspension of Local Services 10
3.10 Pepco Provided Services 11
3.11 Generator Provided Services 11
3.12 Optional Services 12
3.13 Metering and Telemetering 12
3.14 Emergency Procedure 12
3.15 Interconnection Service Interruptions 13
3.16 Unit Status Notification 14
3.17 Scheduled Maintenance Notification and Coordination 14
3.17.1 Local Routine Inspection and Maintenance 14
3.17.2 Transmission Sytem Maintenance 15
3.18 Safety 15
3.18.1 General 15
3.18.2 Switching Tagging and Grounding 15
3.19 Environmental Compliance and Procedures 15
3.20 Operating Committee 16
ARTICLE 4 - OPERATIONS 16
4.1 General 16
4.2 Generator's Operating Obligations 17
4.2.1 General 17
4.2.2 Voltage or Reactive Control Requirements 18
<PAGE>
4.3 Auditing of Accounts and Records 19
ARTICLE 5 -- COST RESPONSIBILITIES AND BILLING PROCEDURES 19
5.1 Cost Responsibilities for Interconnection Service 19
5.2 Cost Responsibilities for Local Services 19
5.3 Billing Procedures 19
5.4 Billing Disputes 20
ARTICLE 6 - CONFIDENTIALITY 20
6.1 Confidentiality Obligations of Pepco 20
6.2 Confidentiality Obligations of Generator 21
6.3 Confidentiality of Audits 22
6.4 Remedies 22
ARTICLE 7 - EVENTS OF DEFAULT 22
7.1 Events of Default 22
7.2 Remedies 23
ARTICLE 8 - LIMITATION OF LIABILITY 24
8.1 Limitation of Pepco's Liability 24
8.2 Limitation on Generator's Liability 24
8.3 Consequential Damages 24
ARTICLE 9 - INDEMNIFICATION FOR THIRD PARTY CLAIMS 25
9.1 Generator's Indemnification 25
9.2 Pepco's Indemnification 25
9.3 Indemnification Procedures 25
9.4 Survival 26
ARTICLE 10 - INSURANCE 26
10.1 Insurance Coverage 26
10.2 Certificates of Insurance 26
10.3 Additional Insureds and Waiver 26
ARTICLE 11 - FORCE MAJEURE 27
11.1 Effect of Force Majeure 27
11.2 Force Majeure Defined 27
11.3 Notification 27
ARTICLE 12 - DISPUTES 27
12.1 Disputes 27
12.2 Arbitration 28
12.3 FERC Dispute Resolution 29
ARTICLE 13 - REPRESENTATIONS 29
13.1 Representations of Pepco 29
13.2 Representations of Generator 30
ARTICLE 14 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY 31
14.1 Assignment 31
14.2 Release of Rights and Obligations 32
14.3 Change in Corporate Identity 32
14.4 Successors and Assigns 33
<PAGE>
ARTICLE 15 - SUBCONTRACTORS 33
ARTICLE 16 - NOTICES 33
16.1 Emergency Notices 33
16.2 Notices 33
ARTICLE 17 - AMENDMENTS 34
17.1 Amendments 34
17.2 FERC Proceedings 34
ARTICLE 18 - MISCELLANEOUS PROVISIONS 35
18.1 Waiver 35
18.2 Labor Relations 35
18.3 No Third Party Beneficiaries 35
18.4 Governing Law 35
18.5 Counterparts 35
18.6 Interpretation 35
18.7 Jurisdiction and Enforcement 36
18.8 Entire Agreement 36
18.9 Severability 37
18.10 Independent Contractor Status 37
18.11 Conflicts 37
SCHEDULE A DEFINITIONS 2
SCHEDULE B Pepco Facilities and Generator Facilities 7
SCHEDULE C - Points of Interconnection 9
SCHEDULE D - Switching, Tagging and Grounding Rules 10
SCHEDULE E - Pepco's Interconnection Standards 14
SCHEDULE F - Local Services 15
SCHEDULE G - Pepco Current Projects 17
SCHEDULE H - Real Time Telemetry List 18
<PAGE>
INTERCONNECTION AGREEMENT (Morgantown)
This Interconnection Agreement ("Agreement") dated as
of _________, 2000 by and between Potomac Electric Power Company
("Pepco") a District of Columbia and Virginia corporation, and
_____________ ("Generator") a ___________ [corporation]. Pepco and
Generator are each referred to herein as a "Party," and
collectively referred to herein as the "Parties."
WITNESSETH:
WHEREAS, Pepco, and Generator have entered into an
Asset Purchase and Sale Agreement for Generating and Related Assets
("Asset Sale Agreement") dated June 7, 2000, for the sale by Pepco
to Generator of certain assets comprising the Morgantown electric
generation station;
WHEREAS, Pepco intends to continue to operate its
transmission and distribution businesses from their present
locations;
WHEREAS, Generator needs Interconnection Service from
Pepco for the Morgantown electric generating station;
WHEREAS, Pepco needs access to parts of the Generator's
assets, and Generator needs access to parts of the Pepco's assets;
and
WHEREAS, the Parties have agreed in the Asset Sale
Agreement to execute this Agreement in order to provide
Interconnection Service to Generator and to define continuing
responsibilities and obligations of the Parties with respect to the
use of the other Party's property, assets and facilities as set
forth herein.
NOW THEREFORE, in consideration of the mutual
representations, covenants and agreements hereinafter set forth,
and intending to be legally bound hereby, the Parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the
meanings specified or referred to in Schedule A.
<PAGE>
ARTICLE 2
TERM AND TERMINATION
2.1 Term. This Agreement shall become effective upon
consummation of the Closing ("Effective Date"), and unless
terminated sooner in accordance with the terms of this Agreement,
shall continue in full force and effect until the earlier to occur
of (i) the permanent cessation by the Generator of the power
generation functions of the Station or (ii) the permanent cessation
of the interconnection functions of the Transmission System.
2.2 Change in Law. If (a) the FERC, any state or
state regulatory commission or the PJM Interconnection LLC
implements a change in any law, regulation, rule or practice, or
(b) Pepco's compliance with a change in any law or regulation,
which compliance, in either case, affects, or may reasonably be
expected to affect, Pepco's performance under this Agreement, the
Parties shall negotiate in good faith any amendments to this
Agreement that are necessary to adapt the terms of this Agreement
to such change, and Pepco shall file such amendments with the FERC.
If the Parties are unable to reach agreement on such amendments,
either Party shall have the right to make a unilateral filing with
the FERC to modify this Agreement pursuant to Sections 205 or 206
or any other applicable provision of the Federal Power Act and the
FERC rules and regulations thereunder; provided that the other
Party shall have the right to oppose such filing and to participate
fully in any proceeding established by the FERC to address such
amendments.
2.3 Effect after Termination. The applicable
provisions of this Agreement shall continue in effect after
cancellation or termination hereof to the extent necessary to
provide for final billings, billing adjustments and payments
pertaining to liability and indemnification obligations arising
from acts or events that occurred while this Agreement was in
effect.
ARTICLE 3
CONTINUING OBLIGATIONS AND RESPONSIBILITIES
3.1 Interconnection Service
3.1.1 Subject to the terms and conditions of
the Agreement, Pepco shall (a) permit the Station to continue to be
interconnected to the Transmission System at the Point of
Interconnection, and (b) provide Interconnection Service at the
Point of Interconnection. Pepco agrees to permit Generator to
interconnect
<PAGE>
Station as long as Generator continues to operate such facilities
pursuant to PJM Requirements and Good Utility Practice.
3.1.2 Interconnection Service shall not
include, and Pepco shall not be responsible under this Agreement
for (a) transmission service, losses or ancillary services
associated with the use of the Transmission System for the delivery
of capacity, energy and/or ancillary services produced by the
Generating Facilities, or (b) providing or procuring capacity,
energy and/or ancillary services to the Generator or the
Generating Facilities.
3.1.3 The Generator's interconnection to the
Transmission System of any new or expanded generating capacity of
the Station shall (a) be subject to PJM Requirements and/or FERC
requirements governing interconnections and (b) require a separate
interconnection agreement mutually agreed to by the Parties in
writing.
3.1.4 Notwithstanding anything to the contrary
in this Agreement, Pepco's performance of its obligations under
this Agreement shall be subject to Generator entering into, and
complying with, any PJM Generator Connection Agreement which may be
required pursuant to PJM Requirements with respect to
Interconnection Service or the Station.
3.2 New Construction or Modifications
3.2.1 Pepco Construction or Modifications
(a) Pepco shall make such additions,
modifications, replacements and improvements to the Interconnection
Facilities as are required by PJM Requirements or Good Utility
Practice to enable Pepco to provide Interconnection Service in
compliance with this Agreement. Generator shall pay all reasonable
Costs incurred by Pepco for such additions, modifications,
replacements or improvements.
(b) Except with respect to operation and
maintenance or ordinary maintenance done in the ordinary course of
business or to respond to abnormal or emergency conditions, if any
additions, modifications, replacements or improvements to the
Interconnection Facilities undertaken by Pepco might reasonably be
expected to affect Generator's operation of the Station, Pepco
shall provide one hundred twenty (120) days written notice to
Generator prior to undertaking such additions, modifications,
replacements or improvements. Any such additions, modifications,
replacements or improvements shall comply with PJM Requirements and
Good Utility Practice. The Parties shall mutually agree to the
<PAGE>
scheduling of such addition, modification, replacement or
improvement to minimize any adverse impact on the Station.
Generator shall be deemed to have accepted Pepco's proposed
additions, modifications, replacements or improvements unless
Generator gives Pepco written notice of its objections
within thirty (30) days after receipt of Pepco's notice.
Generator's acceptance or deemed acceptance of Pepco's proposed
additions, modifications, replacements or improvements shall not be
construed, with respect thereto, as: (i) confirmation or
endorsement of the design; (ii) a warranty of safety,
durability or reliability; or (iii) responsibility for strength,
details of design, adequacy or capability.
3.2.2 Generator Construction or Modifications
(a) In the event Generator plans to increase
the capacity of the Generating Facilities, Generator shall submit
to Pepco any and all plans and specifications that Pepco may
reasonably request related to such increase. Such specifications
and plans shall be submitted by Generator to Pepco at the time
that Generator submits its plans under the PJM Tariff related to
such expansion but no later than one hundred twenty (120) days
prior to commencing such proposed increase. Any such additions,
modifications, or replacements shall comply with PJM Requirements
and Good Utility Practice and shall be subject to Section 3.1.3 of
this Agreement.
(b) If Generator plans any additions,
modifications, or replacements to the Station that will not
increase its capacity, but could reasonably be expected to affect
the Transmission System or the Interconnection Facilities,
Generator shall give Pepco reasonable notice, but not less than one
hundred twenty (120) days prior written notice and Generator shall
comply with all applicable PJM Requirements with respect to
such proposed additions, modifications, or replacements. All such
additions, modifications, or replacements shall (i) comply with PJM
Requirements and Good Utility Practice, (ii) be accompanied by
appropriate information and operating instructions, and (iii) be
subject to the review and acceptance of Pepco, which review shall
be based on PJM Requirements and Good Utility Practice and which
acceptance shall not unreasonably be withheld or delayed.
Pepco shall be deemed to have accepted Generator's proposed
additions, modifications or replacements unless Pepco gives
Generator written notice of its objections within thirty (30) days
after receipt of the Generator's notice.
(c) Pepco's acceptance of Generator's plans
and specifications for any proposed additions, modifications, or
replacements to the Generating Facilities and Pepco's participation
in any interconnected operations with Generator are not and shall
not be construed as: (i) confirmation or endorsement of the design
of the Generating Facilities; (ii) a warranty of safety,
durability or reliability of the
<PAGE>
Generating Facilities; or (iii) responsibility for strength,
details of design, adequacy, or capability of the Generating
Facilities.
(d) Pepco, pursuant to PJM Requirements,
shall inform Generator of any additions, modifications, or
replacements to the Transmission System or Interconnection
Facilities, that will be necessary as a result of the addition,
modification, or replacement to Station made pursuant to Section
3.2.2. Generator shall compensate Pepco for all reasonable Costs
it incurs associated with any modifications, additions, or
replacements made to the Interconnection Facilities or Transmission
System related to any additions, modifications, or replacements to
the Generating Facilities. Pepco shall provide an estimate as
early as practicable, but in any event not less than sixty (60)
days prior to the initiation of such addition, modification or
replacement.
(e) Generator shall modify, at its sole cost
and expense, the Generating Facilities as may be reasonably
required to conform with PJM Requirements and Good Utility Practice
or to conform with additions, modifications, or replacements of the
Transmission System or the Interconnection Facilities, required by
PJM Requirements and Good Utility Practice or implemented in
accordance with this Agreement, (including, without limitation,
changes to the voltages at which the Transmission System
is operated) provided, however, that Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generating Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of Pepco's Facilities.
(f) Upon completion of any addition,
modification, or replacement to the Generating Facilities that may
reasonably be expected to affect the Transmission System or the
Interconnection Facilities, but no later than ninety (90) days
thereafter, Generator shall issue "as built" drawings to Pepco.
Upon completion of any addition, modification, or replacement to
the Interconnection Facilities, that may reasonably be expected to
affect the operation of the Station, but no later than ninety
(90) days thereafter, Pepco shall issue "as built" drawings to the
Generator.
3.2.3 Modifications Affecting the Transmission
System or the Station
(a) Notwithstanding anything herein to the
contrary, except with respect to the projects or construction set
forth in Schedule G, no modifications to or new construction of
facilities, or access thereto, including but not limited to rights
of way, fences, gates, shall be made by either Party which might
reasonably be expected to adversely affect the other Party with
respect to such Party's obligations
<PAGE>
and responsibilities under this Agreement, without prior written
notification as set forth in Section 3.2.3(b) below, and without
providing the other Party with sufficient information regarding the
work prior to commencement to enable such Party to evaluate the
impact of the proposed work on its operations. For all
modifications reasonably expected to adversely affect the
operations of the other Party's facilities, the Party shall
provide at least one hundred twenty (120) days written notice to
the other Party prior to undertaking such additions, modifications
or replacements. Any such additions, modifications, or
replacements shall comply with PJM Requirements and Good Utility
Practice.
(b) The Parties shall mutually agree to the
scheduling of such addition, modification, replacement or
improvement proposed pursuant to Section 3.2.3(a) to minimize any
adverse impact on the Station or the Transmission System. For all
construction work, major modifications, or circuit changes
involving new or existing facilities, equipment, systems or
circuits that could reasonably be expected to affect the operation
of either Party, the Party desiring to perform said work shall
provide the other Party with drawings, plans, specifications, and
other necessary documentation for review at least sixty (60) days
prior to the beginning of construction provided that for routine
telecommunication work, the Party doing the work shall only be
required to provide 48 hours prior notice. The Party shall be
deemed to have accepted the proposed additions, modifications,
replacements or improvements unless the Party gives written notice
of their objections within sixty (60) days after receipt of such
notice. The Party's acceptance or deemed acceptance of the
proposed additions, modifications, replacements or improvements
shall not be construed, with respect thereto, as: (i) confirmation
or endorsement of the design; (ii) a warranty of safety,
durability or reliability; or (iii) responsibility for strength,
details of design, adequacy or capability.
3.3 Access, Easements, Conveyances, Licenses, and
Restrictions
3.3.1 The Parties hereby grant to each other
such licenses, access and other rights to the Station and the
Interconnection Facilities as may be necessary for either Party's
performance of their respective obligations under this Agreement.
Such access shall be provided in a manner so as not to unreasonably
interfere with the ongoing business operations, rights, and
obligations of the other Party and shall be subject to the safety
and security practices of the Party granting such access. Access
shall only be granted to Qualified Personnel.
3.3.2 A Party shall not restrict a Party's
rights hereunder to access the other Party's property, facilities,
or equipment without prior written notification except in an
Emergency, in which case the restricted access shall last no longer
than three (3) days, unless an alternate means of access is
provided.
<PAGE>
3.3.3 The Parties' rights with respect to
access to their respective facilities properties shall also be
governed by the Easement.
3.4 Facility and Equipment Maintenance
3.4.1 Pepco shall provide Interconnection
Service at the Point of Interconnection in a safe and efficient
manner and pursuant to PJM Requirements and Good Utility Practice.
Generator shall be responsible for all reasonable Costs incurred by
Pepco to provide Interconnection Service and to Maintain the
Interconnection Facilities pursuant to the Agreement.
3.4.2 Generator shall Maintain the Generating
Facilities (including coordination of its relay protection
equipment) in a safe and efficient manner and as required by and in
accordance with PJM Requirements and Good Utility Practice,
provided, however, that Generator shall not be obligated to
modernize, expand or upgrade the Generating Facilities
unless the failure to modernize, expand or upgrade is reasonably
likely to have a material adverse affect on the operation of the
Interconnection Facilities or the Transmission System.
3.4.3 Unless otherwise specified herein, or
unless the Parties mutually agree to a different arrangement,
neither Party shall be responsible for the maintenance of the other
Party's equipment or property regardless of its location.
3.4.4 In addition to the requirements set
forth elsewhere in this Agreement, each Party shall Maintain its
equipment and facilities and perform its maintenance obligations
that could reasonably be expected to affect the operations of the
other Party in a safe and efficient manner and pursuant to PJM
Requirements and Good Utility Practice.
3.5 Pepco Facilities and Generator Facilities
Unless otherwise agreed to by the Parties, the Party owning Pepco
Facilities or Generator Facilities shall Maintain those facilities
and shall do so pursuant to PJM Requirements and Good Utility
Practice and shall make such additions, modifications, replacements
and improvements as are required by PJM requirements and Good
Utility Practice or which are necessary to maintain Interconnection
Service, provided, however, that the Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generator Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of the Transmission System or Interconnection
Facilities.
3.6 Equipment Testing Obligations
<PAGE>
3.6.1 For reliability purposes with respect to
the Interconnection Facilities and the Transmission System, Pepco
may reasonably request, pursuant to PJM Requirements, or Good
Utility Practice, that Generator test, calibrate, verify, or
validate the Generating Facilities or its equipment, and Generator
shall promptly comply with such a request. Generator shall be
responsible for all costs of testing, calibrating, verifying or
validating its facilities.
3.6.2 At Pepco's request, Generator shall
supply to Pepco at no cost, copies of inspection reports,
installation and maintenance documents, test and calibration
records, verifications, and validations pursuant to the foregoing
Section 3.6.1. Pepco shall supply to Generator, at Generator's
request and at no cost to Generator, copies of inspection
reports, installation and maintenance documents, test and
calibration records, verifications, and validations that Pepco has
which are related to the Interconnection Facilities.
3.7 Inspections
3.7.1 Pepco shall, at its expense, have the
right to inspect or observe all maintenance activities, equipment
tests, installation work, construction work, and modification work
to the Generating Facilities. Such access by Pepco shall be
exercised in a manner which does not unreasonably interfere with
Generator's ongoing business operations, rights and obligations and
shall be subject to Generator's safety and security practices. If
Pepco observes any deficiencies or defects with respect thereto
that might reasonably be expected to adversely affect the
Transmission System or the Interconnection Facilities, Pepco shall
notify the Generator, and Generator shall immediately make any
corrections necessitated by PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this Section 3.7.1,
Pepco shall have no liability whatsoever for any failure to fully
or adequately observe any deficiency, it being agreed that
Generator shall be fully responsible and liable for all such
deficiencies, activities, equipment tests, installation,
construction or modification.
3.7.2 Generator shall, at its expense, have
the right to inspect or observe all maintenance activities,
equipment tests, installation work, construction work, and
modification work conducted by Pepco to the Interconnection
Facilities. Such access by Generator shall be exercised in
a manner which does not unreasonably interfere with Pepco's ongoing
business operations, rights and obligations and shall be subject to
Pepco's safety and security practices. If Generator observes any
deficiencies or defects with respect thereto that might reasonably
be expected to adversely affect the Station, Generator shall notify
Pepco, and Pepco shall immediately make any corrections
necessitated by applicable PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this
<PAGE>
Section 3.7.2, Generator shall have no liability whatsoever for any
failure to fully or adequately observe any deficiency, it being
agreed that Pepco shall be fully responsible and liable for all
such deficiencies, activities, equipment tests, installation,
construction or modification.
3.8 Information Reporting Obligations
3.8.1 In order to provide Interconnection
Service hereunder, Pepco may request, and Generator shall promptly
provide, all relevant information, documents, or data regarding the
Generating Facilities that would be expected to materially affect
the Transmission System, and which is reasonably requested by NERC,
MAAC, the PJM Interconnection LLC, the MDPSC, the District of
Columbia Public Service Commission and any other state or District
of Columbia agency having jurisdiction over Pepco or Generator,
the PJM System Operator, or the Transmission Operator, which
disclosure shall be subject to Article 6 of this Agreement
regarding the disclosure of commercially sensitive information.
3.8.2 Generator shall promptly supply accurate,
complete, and reliable information in response to reasonable
information requests for real time data and other data from Pepco
necessary for operations, maintenance, compliance with PJM
Requirements or regulatory requirements, or analysis of
the Interconnection Facilities or the Transmission System. Such
information may include metered values for MW and MVAR, voltage,
current, automatic voltage regulator status, automatic frequency
control, dispatch, frequency, breaker status indication, or any
other information reasonably required for reliable operation of the
Transmission System pursuant to PJM Requirements and Good Utility
Practice. At minimum, Generator shall satisfy the telemetry
requirements set forth in Schedule H.
3.8.3 Information pertaining to generation
operating parameters shall be gathered and electronically
transmitted directly to Pepco's energy management system using a
mutually acceptable communications protocol.
3.8.4 Generator shall be responsible for the
maintenance, and any required replacements or upgrades of the field
devices and equipment used to gather information regarding
generation operating parameters.
3.8.5 Generator shall Maintain, at its
expense, operating telephone links to the PJM Interconnection LLC,
PJM System Operator, Pepco and the Transmission Operator, to
provide information deemed necessary by them, or as reasonably
deemed necessary by Pepco in accordance with PJM Requirements or
Good Utility Practice to integrate operation of the Station with
the Transmission
<PAGE>
System, provided, however, that Generator shall not be obligated
under this Agreement to modernize, expand or upgrade the
Generator's facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of the Transmission System. Generator shall use
communication links at the Station consisting of the mobile radio
low band C frequency and "all call" and "red phone" systems
currently located at the Station (or successor systems as may
reasonably be required by Pepco) and shall maintain the
availability of such systems to operate during abnormal conditions
including blackouts.
3.9 Local Services
3.9.1 General
(a) The Parties agree that, due to the
integration of certain control schemes of the Station and the
Transmission System, it is cost effective to provide each other
with the services set forth in Sections 3.10 and 3.11 in accordance
with the terms and conditions set forth therein.
(b) The Parties shall ensure, in accordance
with Good Utility Practice, that services provided by one Party to
the other Party pursuant to Sections 3.10 and 3.11 shall be
available at all times and in the manner and at the prices
specified herein. Notwithstanding the foregoing, either Party may
change the services, provided that (1) there is no cost to
the receiving Party as a result of such change, (2) the quality,
reliability and integrity of the replacement services is equivalent
to the existing service, and (3) there is otherwise no materially
adverse effect on the receiving Party.
(c) Neither Party shall terminate any
services set forth in Sections 3.10 and 3.11 below that it agrees
to provide to the other Party, without the other Party's prior
written consent, which consent shall not be unreasonably withheld
or delayed, provided, however, if a Party receiving a service under
Sections 3.10 or 3.11 no longer needs or desires a particular
service, said Party shall notify the other Party and the
providing Party shall terminate said services as soon thereafter as
practicable.
3.9.2 Temporary Suspension of Local Services
(a) The Party providing a service set forth
in Sections 3.10 or 3.11 below shall notify and obtain approval,
which approval shall not be unreasonably withheld or delayed, from
the receiving Party of any scheduled temporary
<PAGE>
suspension of services at least five (5) business days in advance
of such suspension. Such notification shall include an estimated
time duration for return to normal conditions.
(b) In the event of any unplanned or forced
suspension of the services set forth in Sections 3.10 or 3.11,
below, the providing Party shall immediately notify the other Party
first verbally and then in writing. The providing Party shall use
all reasonable efforts to minimize the duration of said suspension.
(c) The Parties agree to complete any
repairs, modifications or corrections, in accordance with Good
Utility Practice, that are necessary to restore to the other Party
as soon as reasonably practicable any services set forth in
Sections 3.10 or 3.11 below that have been suspended.
3.10 Pepco Provided Services: Schedule F sets forth
the local services Pepco shall provide to the Generator pursuant to
the terms of this Agreement. Unless otherwise specified in
Schedule F, for a period of three (3) years after the Effective
Date (the "Initial Period") and subject to Section 3.9 above, Pepco
shall provide Generator with the local services set forth in
Schedule F at no cost and in consideration of the local
services Generator shall provide Pepco in accordance with Section
3.11 below. If Generator desires the continuation of any of the
services set forth in Schedule F which are subject to the Initial
Period to continue after the Initial Period, upon Generator's
written request to Pepco made at least 60 days prior to the
expiration of the Initial Period, the Parties shall engage
in good faith negotiations to reach mutually agreeable terms and
conditions upon which such services will continue, provided,
however, that if such agreement is not reached prior to the
expiration of the Initial Period, Pepco shall cease to provide
services under Section 3.10 at the end of the Initial
Period.
3.11 Generator Provided Services. Schedule F sets
forth the local services Generator shall provide to Pepco pursuant
to the terms of this Agreement. Unless otherwise specified in
Schedule F, for the Initial Period and subject to Section 3.9
above, Generator shall provide Pepco with the local services set
forth in Schedule F at no cost and in consideration of the
local services Pepco shall provide Generator in accordance with
Section 3.10 above. If Pepco desires the continuation of any of
the services set forth in Schedule F which are subject to the
Initial Period to continue after the Initial Period, upon Pepco's
written request to Generator made at least 60 days prior to the
expiration of the Initial Period, the Parties shall engage
in good faith negotiations to reach mutually agreeable terms and
conditions upon which such services will continue, provided,
however, that if such agreement is not reached prior to the
expiration of the Initial Period, Generator shall cease to provide
services under Section 3.11 at the end of the Initial Period.
<PAGE>
3.12 Optional Services: Generator may request that
Pepco provide the following services to the Generator, provided,
however, that Pepco shall not have any obligation to provide such
services unless the Parties have mutually agreed in writing to the
price and other terms and conditions of such service:
(a) PJM interface and dispatch services
through the Pepco control center;
(b) use of Pepco's communication services;
(c) maintenance of certain auxiliary and
communications equipment at the Station;
(d) maintenance of high-voltage and
medium-voltage equipment such as power transformers and power
circuit breakers;
(e) maintenance of protective relaying,
certain control equipment, such as AGC and MSVC, plant batteries
and revenue meters owned by Generator.
3.13 Metering and Telemetering
3.13.1 Generator shall, at Generator's expense:
(a) own, Maintain and repair, all Revenue Meters, instrument
transformers and appurtenances associated with Revenue Meters, and
real time telemetry, (b) conduct meter accuracy and tolerance
tests, and (c) prepare all calibration reports required for
equipment that measures energy transfers at the Point of
Interconnection. All meter accuracy and tolerance testing
hereunder shall be in accordance with PJM Requirements and Good
Utility Practice and shall be conducted, at Pepco's request, in the
presence of Pepco's representative.
3.13.2 Generator shall own and Maintain, at the
Generator's expense, equipment for redundant real-time
communications and transmission of telemetry, hourly MWh
information, and such other information as required by the PJM
System Operator or Transmission Operator, or as reasonably required
by Pepco in accordance with PJM Requirements and Good Utility
Practice.
3.14 Emergency Procedure
3.14.1 Pepco, through the Transmission Operator,
shall provide Generator with prompt verbal notification of
Emergencies with regard to the Transmission System which may
reasonably be expected to affect Generator's
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immediate operation of the Station or Generator Facilities, and
Generator shall provide Pepco with prompt verbal notification of
Emergencies with regard to the Station which may reasonably be
expected to affect Interconnection Service or the Transmission
System. Such notification shall describe the Emergency, the extent
of damage or deficiency, the anticipated length of an outage and
the corrective action taken and/or to be taken. Said
verbal notification shall be followed as soon as practicable (but
no later than 24 hours after the verbal notification) with written
notification.
3.14.2 If an Emergency in the good faith
judgment of a Party endangers or could endanger life or property,
the Party recognizing the problem shall take such action as may be
reasonable and necessary to prevent, avoid, or mitigate injury,
danger, or loss. If however the Emergency involves transmission or
electrical equipment, Generator shall notify the Transmission
Operator, and obtain the consent of such personnel, prior to
performing any switching operations.
3.14.3 Pepco may, consistent with PJM
Requirements and Good Utility Practice, have the Transmission
System Operator take whatever actions (including tripping
Generator's synchronizing breakers) or inactions
it deems necessary during an Emergency to: (a) preserve public
safety; (b) preserve the integrity of the Transmission System, (c)
limit or prevent damage; or (d) expedite restoration of service.
If any action or inaction by Pepco or the Transmission Operator
under this Section 3.14 results in the discontinuation,
curtailment, interruption or reduction of Interconnection
Service, Pepco shall use reasonable efforts consistent with PJM
Requirements and Good Utility Practice to restore Interconnection
Service as promptly as practicable and to minimize the effect of
such restoration of service on the Station.
3.15 Interconnection Service Interruptions
3.15.1 If at any time, in the reasonable
exercise of the PJM System Operator's judgment, or the Transmission
Operator's judgment exercised in accordance with PJM Requirements
or Good Utility Practice and on a non-discriminatory basis, a
condition exists, including the operation of Generator's equipment,
which might reasonably be expected to have a materially adverse
affect on the quality of service rendered by Pepco (including
services rendered to transmission or distribution customers) or
interferes with the safe and reliable operation of the Transmission
System, Pepco may discontinue, curtail, reduce and/or interrupt
Interconnection Service until the condition has been corrected.
3.15.2 Unless the PJM System Operator, the
Transmission Operator or Pepco perceives that an Emergency exists
or the risk of one is imminent, Pepco
<PAGE>
shall give Generator reasonable notice of its intention to
discontinue, curtail, interrupt or reduce Interconnection Service
in response to the interfering condition and, where practical,
allow suitable time for Generator to remove the interfering
condition if it is the result of Generator's operations, before the
discontinuation, curtailment, interruption or reduction commences.
Pepco's judgment with regard to the interruption of
service under this paragraph shall be made pursuant to PJM
Requirements and Good Utility Practice. In the case of such
interruption, Pepco shall immediately confer with Generator
regarding the conditions causing such interruption and its
recommendation concerning timely correction thereof. In
the event Interconnection Service is interrupted under this section
due to Generator's failure to operate and Maintain the Generating
Facilities pursuant to PJM Requirements or Good Utility Practice,
Generator shall compensate Pepco for all costs reasonably incurred
by Pepco attributable to the interruption and restoration of
Interconnection Service. Pepco shall use reasonable efforts
consistent with PJM Requirements and Good Utility Practice
to restore Interconnection Service interrupted, curtailed or
reduced pursuant to this Section 3.15 as promptly as practicable
and to minimize the effect of such restoration of service on the
Station.
3.16 Unit Status Notification
3.16.1 Generator acknowledges that Pepco
requires information regarding the status of the Station for
Transmission System reliability purposes. Accordingly, by 10:00
a.m. of each day, the Generator shall provide Pepco the following
information regarding the status of the Station for the following
day: Station availability to provide energy and capacity, the
Station's scheduled on and off times, Station synchronization,
planned outages or deratings, and generation restrictions and
limitations. Generator shall immediately notify Pepco of any
changes to the information provided pursuant to the foregoing
sentence.
3.16.2 In circumstances, such as forced
outages, Generator shall notify Pepco of its generating unit's
temporary interruption of generation as soon as practicable; and it
shall provide Pepco, as soon as practicable, with a schedule of
when generation will be resumed.
3.17 Scheduled Maintenance Notification and
Coordination
3.17.1 Local Routine Inspection and Maintenance.
The Parties agree that, due to the integration of certain control
and protective relaying schemes between the Station and the
Interconnection Facilities, it will be necessary for them to
cooperate in the inspection, maintenance and testing of these areas
of integration. Each Party will provide advance notice to the other
Party before undertaking any work in these areas, especially in
electrical circuits involving circuit breaker trip and
<PAGE>
close contacts, current transformers or potential transformers and
such work will be performed in accordance with PJM Requirements and
Good Utility Practice.
3.17.2 Transmission System Maintenance. Pepco
shall consult with Generator regarding timing of scheduled
maintenance of the Interconnection Facilities or the transmission
facilities of the Transmission System which Pepco or the
Transmission Operator performs and which might reasonably be
expected to affect the Station. Pepco shall, to the
extent practicable, schedule any testing, shutdown, or withdrawal
of said facilities to coincide with Generator's scheduled outages
for the Station. To facilitate such consultation and to the extent
the information is not available from the PJM System Operator in a
timely manner, in June of each year, or on another date mutually
acceptable to the Parties, Generator shall furnish Pepco with
non-binding preliminary generator maintenance schedules
covering the upcoming two years and any material changes thereto.
In the event Pepco is unable to schedule the outage of its
facilities to coincide with Generator's schedule, Pepco shall
notify Generator as soon as practicable of the reasons for the
facilities' outage, of the time scheduled for the outage to take
place, and of its expected duration.
3.18 Safety
3.18.1 General. Pepco agrees with respect to
the Interconnection Facilities and the Transmission System, and
Generator agrees with respect to the Station, that all work
performed by either Party on such facilities which could reasonably
be expected to affect the operations of the other Party shall be
performed in accordance with all applicable PJM Requirements and
Good Utility Practice.
3.18.2 Switching Tagging and Grounding . Each
Party shall comply with the Switching, Tagging and Grounding Rules.
Pepco will notify Generator of any changes in its Switching,
Tagging and Grounding Rules. Generator shall be responsible for
all switching, tagging and grounding on Generator's side of the
Point of Interconnection and, except for Generator Facilities,
Pepco shall be responsible for all switching, tagging and
grounding on its side of the Point of Interconnection.
3.19 Environmental Compliance and Procedures
3.19.1 Each Party shall be responsible for
complying with all Environmental Laws applicable to it with respect
to its facilities or property.
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3.19.2 A Party shall notify the other Party
first verbally and then in writing, of any Releases of a Hazardous
Substance or any type of remediation activities related thereto as
soon as possible but no later than twenty-four (24) hours after the
occurrence if within the reasonable judgment of the Party said
activities could reasonably be expected to have a material adverse
effect upon the operations of the other Party and shall promptly
furnish to the other Party copies of any reports filed with
any governmental agencies covering such events. This Section
3.19.2 does not effect any allocation of liability with respect to
the Station pursuant to the Asset Sale Agreement.
3.19.3 Neither Party shall knowingly take any
actions which might reasonably be expected to have a material
adverse environmental impact upon the operations of the other Party
without prior written notification and agreement between then
Parties.
3.20 Operating Committee. The Parties shall establish
an operating committee consisting of one representative for each
Party ("Operating Committee"). The Operating Committee shall act
only by unanimous agreement or consent. The Parties shall
designate their respective representatives to the Operating
Committee, plus an alternate by written notice. Each Party's
representative on the Operating Committee is authorized
to act on behalf of such Party with respect to any matter arising
under this Agreement which is to be decided by the Operating
Committee, however, the Operating Committee shall not have any
authority to modify or otherwise alter the rights and obligations
of the Parties hereunder. The Operating Committee shall develop
and implement suitable policies and procedures with which to
coordinate the interaction of the Parties with respect to the
performance of their duties and obligations under this Agreement.
ARTICLE 4
OPERATIONS
4.1 General
4.1.1 The Parties agree to operate their
respective equipment that could reasonably be expected to have a
material effect on the operations of the other Party in a safe and
efficient manner and in accordance with PJM Requirements and Good
Utility Practice, and otherwise in accordance with the terms of
this Agreement.
4.1.2 Generator shall comply with the requests,
orders, and directives of Pepco with respect to Interconnection
Service to the extent such requests, orders
<PAGE>
or directives are (a) issued pursuant to PJM Requirements or Good
Utility Practice, (b) not discriminatory; and (c) otherwise in
accordance with this Agreement or applicable tariffs.
4.1.3 In the event Generator believes that a
request, order, or directive of Pepco exceeds the limitations in
this Section 4.1.2, it shall nevertheless comply with the request,
order, or directive pending resolution of the dispute under Article
12. The Parties agree to cooperate in good faith to expedite the
resolution of any disputes arising under this Section 4.1.
4.2 Generator's Operating Obligations
4.2.1 General. Generator shall request
permission from the Transmission Operator, the PJM System Operator
or the PJM Interconnection LLC, as applicable, prior to opening
and/or closing circuit breakers in accordance with applicable
switching and operations procedures and Good Utility Practice.
(a) Generator shall carry out all switching
orders from the Transmission Operator, the PJM System Operator, or
the PJM Interconnection LLC, in a timely manner and in accordance
with PJM Requirements and Good Utility Practice.
(b) Generator shall (i) comply with Pepco's
system restoration plan and black start criteria applicable to the
Station as configured as of the Effective Date or (ii) if the
Station's configuration is modified, provide alternative service
restoration and black start capability in accordance with PJM
Requirements. Generator shall ensure that operating personnel at
the Station are trained to implement such system restoration or
black start plans. The Generator shall test the Station's
black-start combustion-turbines annually to confirm that the
black-start combustion-turbines will start without an external
power supply. The Generator shall test the Station's steam
turbine-generators and those combustion-turbine generators that
would be required to be black-started in accordance with Pepco's
Emergency Conditions and System Restoration Manual, as revised from
time to time, and plant restoration procedures, at least once
every three years. Testing shall confirm the ability of a
generating unit or Station to go from a shut down condition to an
operating condition and start delivering power without assistance
from the Transmission System. These testing requirements shall
remain in place until PJM promulgates specific rules governing
black-start testing.
<PAGE>
(c) The electricity supplied by Generator to
the Point of Interconnection shall be in the form of three-phase 60
Hertz alternating current at the nominal system voltage.
(d) Generator's equipment shall conform with
Good Utility Practice for harmonic distortion and voltage
fluctuation.
4.2.2 Voltage or Reactive Control
Requirements. Unless otherwise agreed to by the Parties or
authorized or directed by the PJM Interconnection LLC, Generator
shall operate the Station with automatic voltage regulators in
service at all times. The voltage regulators will control voltage
at the Points of Interconnection consistent with the range of
voltage prescribed by Pepco or the Transmission System Operator in
accordance with PJM Requirements and Good Utility Practice.
(a) Generator will operate the Station in
accordance with prescribed voltage schedules pursuant to Section
4.2.2 to the extent the Station is operating within its reactive
generating capability and not violating any electrical constraints.
Should Generator fail to comply with such voltage schedules, Pepco
or the Transmission Operator, as applicable, shall provide written
notice to the Generator of its intent to remedy that failure. If
Generator does not promptly commence appropriate action after
receiving such notice, Pepco or the Transmission Operator may then
take any necessary action at Generator's expense to remedy such
failure, including the installation of capacitor banks or other
reactive compensation equipment necessary to ensure the proper
voltage or reactive supply at the Station including, at a minimum,
by installing such equipment outside any building housing the
Generation Facilities. Pepco shall make, to the extent feasible,
reasonable efforts to minimize the impact of such action on the
operation of the Station.
(b) Generator shall notify the Transmission
Operator if (a) any or all generating units at the Station reaches
a VAR limit, (b) there is any deviation from the voltage schedules
prescribed pursuant to Section 4.2.2 which is outside the limits
permitted by PJM Requirements or Good Utility Practice, or (c) any
automatic voltage regulator is removed from or restored to service.
(c) The Transmission Operator may from time
to time, pursuant to PJM Requirements or Good Utility Practice,
request or direct Generator to adjust generator controls that
impact the Transmission System, such as excitation, droop, and
automatic generation control settings and Generator shall comply
with such request or directions.
<PAGE>
(d) Generator acknowledges that the
Transmission Operator may have the right, to the extent authorized
or directed by the PJM Interconnection LLC, to require reduced or
increased generation of the Station in accordance with PJM
Requirements, or in accordance with applicable rules of the
Transmission Operator.
4.3 Auditing of Accounts and Records. The Parties
shall have the right, during normal business hours, to audit each
other's accounts and records pertaining to transactions under this
Agreement, upon twenty (20) days prior written notice, at the
offices where such accounts and records are maintained, provided,
however, that the audit shall be limited to those portions of the
accounts and records that are related to services provided to
the other Party under this Agreement. Any such audit of a Party's
accounts and records will be at the expense of the auditing Party,
shall not be made more frequently than once in any twelve (12)
month period, and no such audit may be made with respect to
accounts and records relating to periods more than twenty-four (24)
months prior to the date of the audit notice. The Party being
audited will be entitled to review the audit report and
any supporting materials. The Party conducting the audit shall
maintain the confidentiality of all information obtained during the
audit in compliance with Article 6 of this Agreement. To the
extent that audited information includes confidential information,
the auditing Party shall designate an independent auditor at its
expense to perform such audit.
ARTICLE 5
COST RESPONSIBILITIES AND BILLING PROCEDURES
5.1 Cost Responsibilities for Interconnection
Service. Except as otherwise expressly stated herein, Generator
shall not be responsible for any costs arising from Pepco's
provision of Interconnection Service or local services to
Generator, except for those costs specified in Sections
3.2.1, 3.2.2, 3.4.1, and 3.15 or arising from the liability or
indemnification provisions of this Agreement.
5.2 Cost Responsibilities for Local Services. Except
as otherwise expressly provided herein or agreed to by the Parties,
each Party shall be responsible for the costs for local services
provided to the other Party in Sections 3.10 and 3.11 as set forth
in said sections.
5.3 Billing Procedures
<PAGE>
(a) Within ten (10) days after the first day
of each calendar month, each Party shall provide the other Party
with a written invoice for any payments due from the other Party
for services provided in the previous month.
(b) Each invoice shall (i) delineate the
month in which the services were provided, (ii) fully describe the
services rendered, (iii) be itemized to reflect the services
performed or provided, and (iv) provide reasonable detail as to the
calculation of the amount involved.
(c) All invoices shall be paid within
fifteen (15) days after receipt, but not earlier than the 25th day
of the month in which the invoice is rendered. All payments shall
be made in immediately available funds payable to the other Party,
or by wire transfer to a bank designated in writing by such Party.
Payment of invoices shall not relieve the paying Party from any
responsibilities or obligations it has under this Agreement,
nor shall such payment constitute a waiver of any claims arising
hereunder.
5.3.2 To the extent that, for any billing
period, Generator is obligated to pay to Pepco amounts due and
calculated pursuant to Section 5.3, Pepco may use such amounts as
a set-off against any amounts owed by Pepco to Generator under this
Section 5.3.
5.3.3 Interest on any unpaid amounts shall be
calculated in accordance with the methodology specified for
interest on refunds in FERC regulations at 18 C.F.R. Section
35.19a(a)(2)(iii). Interest on delinquent amounts shall be
calculated from the due date of the bill to the date of payment.
When payments are made by mail, bills shall be considered as having
been paid on the date of receipt by the other Party.
5.4 Billing Disputes. In the event of a billing
dispute between the Parties, each Party shall continue to provide
services as long as the other Party continues to make all payments
not in dispute. Payment of invoices by either Party shall not
relieve the paying Party from any responsibilities or obligations
it has under this Agreement; nor shall it constitute a waiver of
any claims arising hereunder.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidentiality Obligations of Pepco. Pepco
shall hold in confidence, unless compelled to disclose by judicial
or administrative process or other provisions of law, all documents
and information furnished by Generator in
<PAGE>
connection with this Agreement marked "Confidential" or
"Proprietary." Except to the extent that such information or
documents are (i) generally available to the public other than as
a result of a disclosure by Pepco in breach of this Agreement, (ii)
available to Pepco on a non-confidential basis prior to disclosure
to Pepco by Generator, or (iii) available to Pepco on a
non-confidential basis from a source other than Generator, provided
that such source is not known, and by reasonable effort could not
be known, by Pepco to be bound by a confidentiality agreement with
Generator or otherwise prohibited from transmitting the information
to Pepco by a contractual, legal or fiduciary obligation, Pepco
shall not release or disclose such information to any other person,
except to its employees, representatives or agents on a
need-to-know basis, in connection with this Agreement who has not
first been advised of the confidentiality provisions of this
Section 6.1 and has agreed in writing to comply with such
provisions. In no event shall such information be disclosed in
violation of the requirements of FERC Orders 889 and 889-A, and any
successor thereto. Pepco shall promptly notify Generator
if it receives notice or otherwise concludes that the production of
any information subject to this Section 6.1 is being sought under
any provision of law and Pepco shall use reasonable efforts in
cooperation with Generator to seek confidential treatment for such
confidential information provided thereto.
6.2 Confidentiality Obligations of Generator.
Generator shall hold in confidence, unless compelled to disclose by
judicial or administrative process or other provisions of law, all
documents and information furnished by Pepco in connection with
this Agreement marked "Confidential" or "Proprietary." Except to
the extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure by
Generator in breach of this Agreement, (ii) available to
Generator on a non-confidential basis prior to disclosure to
Generator by Pepco, or (iii) available to Generator on a
non-confidential basis from a source other than Pepco, provided
that such source is not known, and by reasonable effort could not
be known, by Generator to be bound by a confidentiality agreement
with Pepco or otherwise prohibited from transmitting the
information to Generator by a contractual, legal or fiduciary
obligation, Generator shall not release or disclose such
information to any other person, except to its employees,
representatives or agents on a need-to-know basis, in connection
with this Agreement who has not first been advised of the
confidentiality provisions of this Section 6.2 and has agreed in
writing to comply with such provisions. In no event shall such
information be disclosed in violation of the requirements of FERC
Orders 889 and 889-A, and any successor thereto. Generator shall
promptly notify Pepco if it receives notice or otherwise concludes
that the production of any information subject to this Section 6.2
is being sought under any provision of law and Generator shall use
reasonable efforts in cooperation with Pepco to seek confidential
treatment for such confidential information provided thereto.
<PAGE>
6.3 Confidentiality of Audits. The independent
auditor performing any audit, as referred to in Section 4.3, shall
be subject to a confidentiality agreement between the auditor and
the Party being audited. Such audit information shall be treated
as confidential except to the extent that its disclosure is
required by regulatory or judicial order, for reliability purposes
pursuant to PJM Requirements or Good Utility Practice, and pursuant
to the FERC's rules and regulations. Except as provided herein,
neither Party will disclose the audit information to any third
party, without the other Party's prior written consent. Audit
information in the hands of the Party not being audited shall be
subject to all provisions of Section 6.1 or 6.2, above, as
applicable.
6.4 Remedies. The Parties agree that monetary
damages would be inadequate to compensate a Party for the other
Party's breach of its obligations under Section 6.1 or 6.2, above,
as applicable. Each Party accordingly agrees, subject to Article
8, that the other Party shall be entitled to equitable relief, by
way of injunction or otherwise, if the first Party breaches or
threatens to breach its obligations under Section 6.1 or 6.2 of
this Agreement, as applicable, which equitable relief shall
be granted without bond or proof of damages, and the receiving
Party shall not plead in defense that there would be an adequate
remedy at law.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. Each of the following shall
constitute an Event of Default by the a defaulting Party under this
Agreement:
(a) The failure by a Party to pay any amount
due within twenty (20) calendar days after receipt of written
notice of nonpayment by the other Party, unless the payment of such
amount is disputed in good faith, in which event Section 5.5 shall
apply;
(b) A Party's breach of any material term or
condition of this Agreement, including but not limited to any
material breach of a representation, warranty or covenant made in
this Agreement which, after receiving written notice of the breach
from the non-breaching Party (such notice to set forth in
reasonable detail the nature of the default and, where known and if
applicable, the steps necessary to cure such default), (i) the
breaching Party fails to cure, if curable, within thirty (30) days
following receipt of the notice or (ii) if such default is of such
a nature that it cannot be cured within thirty (30) days following
receipt of such notice, the breaching Party fails within such
thirty (30) days to commence the necessary cure and fails at any
time thereafter diligently and continuously to
<PAGE>
prosecute such cure to completion provided that the cure is
completed no later than 180 days after the receipt of the default
notice;
(c) The appointment of a receiver,
liquidator or trustee for either Party, and such receiver,
liquidator or trustee is not discharged within sixty (60) days;
(d) The entry of a decree or decrees
adjudicating a Party as bankrupt or insolvent, and such decree or
decrees are not stayed or discharged within sixty (60) days; or
(e) The filing of voluntary petitions for
bankruptcy under any federal or state bankruptcy law by a Party.
7.2 Remedies
7.2.1 If the breaching Party disputes that an
Event of Default under Section 7.1.(b) has occurred, the breaching
Party shall nonetheless comply with this Section 7.2 pending the
resolution of the dispute. If it is determined that no breach or
Event of Default under Section 7.1(b) existed, the Party alleging
the default shall pay and reimburse the other Party for all
reasonable costs and expenses incurred by it to cure the alleged
default.
7.2.2 Upon the occurrence of an Event of
Default, the non-defaulting Party may (i) exercise all such rights
and remedies as may be available to it at law or equity including
seeking to recover damages caused by such Event of Default, subject
to Article 8 of this Agreement; and/or (ii) terminate this
Agreement. The Parties shall not discontinue the performance
of any one or more of their obligations hereunder due to the
occurrence of an Event of Default during the pendency of any
dispute regarding such Event of Default and until such dispute is
finally resolved except that Pepco may suspend or interrupt service
if necessary for the safe and reliable operation of the
Interconnection Facilities or the Transmission System.
7.2.3 Notwithstanding the foregoing, upon the
occurrence of any Event of Default, the non-defaulting Party shall
be entitled to commence an action to require the defaulting Party
to remedy such default by specifically performance of its duties
and obligations hereunder in accordance with the terms and
conditions hereof.
<PAGE>
7.2.4 Notwithstanding anything in this
Agreement to the contrary, in the event the Generator's failure to
comply with the provisions of Sections 4.1 and 4.2 of this
Agreement is reasonably likely to have an immediate and material
adverse impact on Pepco or the Transmission System, Pepco shall
have the right to take immediately reasonable steps and/or to
exercise immediately all remedies available under this Agreement,
or at law or equity, including the right, after providing as much
notice as is practicable under the circumstances and complying with
the applicable FERC notice requirements regarding termination of
service, to disconnect the Station from the Transmission System.
ARTICLE 8
LIMITATION OF LIABILITY
8.1 Limitation of Pepco's Liability. Pepco does not
guarantee the non-occurrence of, or warrant against, and will have
no liability hereunder for, and the Generator will release Pepco
from all claims or damages associated with, any interruption in the
availability of the Interconnection Facilities, Interconnection
Service or local services pursuant to Section 3.10 or damages to
the Generator's facilities, except to the extent such interruption
or damage is caused by Pepco's gross negligence or willful
misconduct in the performance of its obligations under this
Agreement.
8.2 Limitation on Generator's Liability. Generator
does not guarantee the non-occurrence of, or warrant against, and
will have no liability under this Agreement for, and Pepco will
release Generator from all claims or damages arising under this
Agreement which are associated with any interruption in the
availability of the Station or local services pursuant to
Section 3.11, any reduction, curtailment, interruption or reduction
of energy from the Station, or damage to Pepco's facilities, except
to the extent such interruption or damage is caused by Generator's
gross negligence or willful misconduct in the performance of its
obligations under the Agreement.
8.3 Consequential Damages. Except for indemnity
obligations set forth in Article 9, neither Party, nor their
respective officers, directors, agents, employees, Affiliates, or
successors or assigns of any of them, shall be liable to the other
Party or its Affiliates, officers, directors, agents, employees,
successors or assigns for claims, suits, actions or causes of
action for incidental, punitive, special, indirect, multiple or
consequential damages (including, without limitation, replacement
power costs, lost revenues, claims of customers, attorneys'
fees and litigation costs) connected with, or resulting from,
performance or non-performance of this Agreement, or any actions
undertaken in connection with or related to this Agreement,
including, without limitation, any such damages which are based
upon causes of action for
<PAGE>
breach of contract, tort (including negligence and
misrepresentation), breach of warranty or strict liability. The
provisions of this Section 8.3 shall apply regardless of fault and
shall survive termination, cancellation, suspension, completion, or
expiration of this Agreement.
ARTICLE 9
INDEMNIFICATION FOR THIRD PARTY CLAIMS
9.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Pepco and a third party or Generator) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the
extent caused, by the negligence or willful misconduct of
Generator's and/or its officers, directors, employees, agents,
contractors, subcontractors or invitees arising out of or connected
with Generator's performance or breach of this Agreement, or the
exercise by Generator of its rights hereunder. In furtherance of
the foregoing indemnification and not by way of limitation thereof,
Generator hereby waives any defense it might otherwise have under
applicable workers' compensation laws.
9.2 Pepco's Indemnification. Pepco shall indemnify,
hold harmless, and defend Generator and its Affiliates, as the case
may be, and their respective officers, directors, employees,
agents, contractors, subcontractors, invitees, successors and
permitted assigns from and against any and all claims, liabilities,
costs, damages, and expenses (including, without limitation,
reasonable attorney and expert fees, and disbursements
incurred by any of them in any action or proceeding between the
Generator and a third party or Pepco) for damage to property of
unaffiliated third parties, injury to or death of any person,
including Generator's employees or any third parties, to the extent
caused by the negligence or willful misconduct of Pepco and/or its
officers, directors, employees, agents, contractors, subcontractors
or invitees arising out of or connected with Pepco's performance or
breach of this Agreement, or the exercise by Pepco of its rights
hereunder. In furtherance of the foregoing indemnification
and not by way of limitation thereof, Pepco hereby waives any
defense it might otherwise have under applicable workers'
compensation laws.
9.3 Indemnification Procedures. If either Party
intends to seek indemnification under this Article 9 from the other
Party, the Party seeking indemnification shall give the other Party
notice of such claim within ninety (90)
<PAGE>
days of the later of the commencement of, or the Party's actual
knowledge of, such claim or action. Such notice shall describe the
claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the claim that has been, or may be
sustained by, said Party. To the extent that the other Party will
have been actually and materially prejudiced as a result of
the failure to provide such notice, such notice will be a condition
precedent to any liability of the other Party under the provisions
for indemnification contained in this Agreement. Neither Party may
settle or compromise any claim without the prior consent of the
other Party; provided, however, said consent shall not be
unreasonably withheld or delayed.
9.4 Survival. The indemnification obligations of
each Party under this Article 9 shall continue in full force and
effect regardless of whether this Agreement has either expired or
been terminated or canceled.
ARTICLE 10
INSURANCE
10.1 Insurance Coverage. The Parties shall maintain
at their own cost and expense, fire, liability, worker's
compensation, and other forms of insurance relating to their
respective property and facilities subject to this Agreement in the
manner, and amounts, and for the durations as is customary in the
electric utility industry.
10.2 Certificates of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance Coverage obtained in accordance with this Article 10, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within ten (10) business
days of receiving notice of cancellation, change, amendment
or renewal of any insurance policy required pursuant to Section
10.1 above.
10.3 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
10.1, above, as regards liability under this Agreement; and each
Party shall waive its rights of recovery against the other for any
loss or damage covered by such policy.
<PAGE>
ARTICLE 11
FORCE MAJEURE
11.1 Effect of Force Majeure. Notwithstanding
anything in this Agreement to the contrary, Generator and Pepco
shall not be liable in damages or otherwise or responsible to the
other for its failure to carry out any of its obligations under
this Agreement (except for the obligation to pay sums of money due
and owing hereunder) to the extent that they are unable to so
perform or are prevented from performing by an event of Force
Majeure and has complied with Section 11.3.
11.2 Force Majeure Defined. Force Majeure means those
causes beyond the reasonable control of the Party affected, which
by the exercise of reasonable diligence, including Good Utility
Practice, that Party is unable to prevent, avoid, mitigate, or
overcome, including the following: any act of God, labor
disturbance (including a strike), act of the public enemy, war,
insurrection, riot, fire, storm or flood, explosion, breakage or
accident to machinery or equipment, electric system disturbance),
order, regulation or restriction imposed by governmental, military
or lawfully established civilian authorities, or any other cause of
a similar nature beyond a Party's reasonable control.
11.3 Notification. A Party shall not be entitled to
rely on the occurrence of an event of Force Majeure as a basis for
being excused from performance of its obligations under this
Agreement, unless the Party relying on the event or condition
shall: (a) provide prompt written notice of such Force Majeure
event to the other Party, including an estimation of its
expected duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts in
accordance with Good Utility Practice to continue to perform its
obligations under this Agreement; (c) expeditiously take action to
correct or cure the event or condition excusing performance; (d)
exercise all reasonable efforts to mitigate or limit damages to the
other Party; and (e) provide prompt notice to the other Party of
the cessation of the event or condition giving rise to its excuse
from performance. Subject to this Section 11.3, any obligation
under this Agreement shall be suspended only to the extent caused
by such Force Majeure and only during the continuance of any
inability of performance caused by such Force Majeure but for no
longer period.
ARTICLE 12
DISPUTES
12.1 Disputes
<PAGE>
12.1.1 A Party with a claim or dispute under
this Agreement shall submit to the Operating Committee a
notification of such claim or dispute within sixty (60) days after
the circumstances that gave rise to the claim or the question or
issue in dispute. The notification shall be in writing and shall
include a concise statement of the claim or the issue or question
in dispute, a statement of the relevant facts and documentation to
support the claim. In the event the Operating Committee is
unable, in good faith, to resolve their disagreement in a manner
satisfactory to both Parties within thirty (30) days after receipt
by the Operating Committee of a notification specifying the claim,
issue or question in dispute, the Parties shall refer the dispute
to their respective senior management. If, after using their good
faith best efforts to resolve the dispute, senior management cannot
resolve the dispute within thirty (30) days, the Parties shall
utilize the arbitration procedures set forth below in Section 12.2
to resolve a dispute, provided that nothing herein or therein
shall prohibit either Party from at any time requesting from a
court of competent jurisdiction a temporary restraining order,
preliminary injunction, or other similar form of equitable relief
to enforce performance of the provisions of this Agreement.
12.2 Arbitration.
(a) Unless the Parties other wise mutually
agree in writing to another form of dispute resolution such as
dispute resolution under the PJM Agreement or the MAAC agreement,
any arbitration initiated under this Agreement shall be conducted
before a single neutral arbitrator appointed by the Parties within
thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an
arbitrator, such arbitration shall be appointed by the American
Arbitration Association. Unless the Parties agree otherwise, the
arbitrator shall be an attorney or retired judge with at least
fifteen (15) years of experience, and shall not have any current or
past substantial business or financial relationships with any Party
to the arbitration. If possible, the arbitrator shall have
experience in the electric utility industry. Unless otherwise
agreed, the arbitration shall be conducted in accordance with the
American Arbitration Association's Commercial Arbitration Rules,
then in effect. Any arbitration proceedings, decision or award
rendered hereunder and the validity, effect and interpretation of
this arbitration agreement shall be governed by the Federal
Arbitration Act of the United States, 9 U.S.C. Section 1 et seq.
The location of any arbitration hereunder shall be in the
District of Columbia.
(b) The arbitration shall, if possible, be
concluded not later than six (6) months after the date that it is
initiated. The arbitrator shall be authorized only to interpret
and apply the provisions of this Agreement or any related
agreements entered into under this Agreement and shall have no
power to modify
<PAGE>
or change any of the above in any manner. The arbitrator shall have
no authority to award punitive or multiple damages or any damages
inconsistent with this Agreement. The arbitrator shall, within
thirty (30) days of the conclusion of the hearing, unless such time
is extended by agreement of the Parties, notify the Parties in
writing of his or her decision, stating his or her reasons for such
decision and separately listing his or her findings of fact and
conclusions of law. The decision of the arbitrator rendered in such
a proceeding shall be final and binding on the Parties. Judgment
on the award may be entered upon it in any court having
jurisdiction.
12.3 FERC Dispute Resolution. Nothing in this
Agreement shall preclude, or be construed to preclude, any Party
from filing a petition or complaint with FERC with respect to any
arbitrable claim over which FERC has jurisdiction. In such case,
the other Party may request FERC to reject or to waive
jurisdiction. If FERC rejects or waives jurisdiction with
respect to all or a portion of the claim, the portion of the claim
not so accepted by FERC shall be resolved through arbitration, as
provided in this Agreement. To the extent that FERC asserts or
accepts jurisdiction over the claim, the decision, finding of fact
or order of FERC shall be final and binding, subject to judicial
review under the Federal Power Act, and any arbitration proceedings
that may have commenced with respect to the claim prior to the
assertion or acceptance of jurisdiction by FERC shall be
terminated.
ARTICLE 13
REPRESENTATIONS
13.1 Representations of Pepco. Pepco hereby
represents and warrants to Generator as follows:
(a) Incorporation. Pepco is a corporation duly
organized, validly existing and in good standing under the laws of
the District of Columbia and the Commonwealth of Virginia, and has
all requisite corporate power and authority to own, lease and
operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Pepco has all necessary
corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery by Pepco of this Agreement and the
consummation by Pepco of the transactions contemplated hereunder
have been duly and validly authorized by the Board of Directors of
Pepco or by a committee thereof to whom such authority has been
delegated and no other corporate proceedings on the part of
Pepco are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly
<PAGE>
executed and delivered by Pepco and, assuming that this Agreement
constitutes a valid and binding agreement of Generator, constitutes
a valid and binding agreement of Pepco, enforceable by Pepco in
accordance with its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of this
Agreement by Pepco nor performance by Pepco of its obligations
hereunder will (A) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-laws of Pepco,
(B) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Pepco
or any of its subsidiaries is a party or by which any of their
respective assets may be bound or (C) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
Pepco, or any of its assets, except in the case of clauses (B) and
(C) for such failures to obtain a necessary consent, defaults and
violations which would not, individually or in the aggregate,
have a material adverse effect on the ability of Pepco to discharge
its obligations under this Agreement (a "Pepco Material Adverse
Effect").
(ii) No declaration, filing or registration
with, or notice to, or authorization, consent or approval of any
governmental authority is necessary for performance by Pepco of its
obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Pepco Material Adverse Effect.
13.2 Representations of Generator. Generator hereby
represents and warrants to Pepco as follows:
(a) Incorporation. Generator is a
[corporation] duly [incorporated], validly existing and in good
standing under the laws of the State of __________, and has all
requisite [corporate] power and authority to own, lease and operate
its material assets and properties and to carry on its business as
now being conducted.
(b) Authority. Generator has all necessary
[corporate] power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by the Generator of this Agreement and
the consummation by Generator of the transactions contemplated
hereby have been duly and validly authorized the [Board of
Directors] of Generator
<PAGE>
or by a committee thereof to whom such authority has been delegated
and no other [corporate] proceedings on the part of Generator are
necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Generator and, assuming that this
Agreement constitutes a valid and binding agreement of Pepco,
constitutes a valid and binding agreement of Generator, enforceable
against Generator in accordance with its terms.
(c) Consents and Approvals.
(i) Neither the execution and delivery of this
Agreement by Generator nor performance by Generator of its
obligations hereunder will (A) conflict with or result in any
breach of any provision of the [Certificate of Incorporation or
By-laws] of Generator, (B) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or
obligation to which Generator or any of its subsidiaries is a party
or by which any of their respective assets may be bound or (C)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Generator, or any of its assets, except in
the case of clauses (B) and (C) for such failures to obtain a
necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse
effect on the ability of Generator to discharge its obligations
under this Agreement (a "Generator Material Adverse Effect").
(ii) No declaration, filing or registration
with, or notice to, or authorization, consent or approval of any
Governmental Authority is necessary for performance by Generator of
its obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Generator Material Adverse Effect.
ARTICLE 14
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
14.1 Assignment.
(a) Except as set forth in this Article 14,
neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by either Party hereto,
without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed.
<PAGE>
(b) Subject to Section 14.2, upon ten (10) days
prior written notice to Generator, Pepco may assign this Agreement,
and Pepco's rights, interests and obligations hereunder, to (i) an
Affiliate of Pepco that owns all or part of Pepco's Transmission
System or (ii) an independent system operator or independent
transmission company whose control over all or part of Pepco's
Transmission System has been approved by the FERC.
(c) Subject to Section 14.2, Generator may (a)
assign any of its rights and obligations hereunder to an Affiliate
to the extent necessary for the Generator to qualify as an exempt
wholesale generator under Section 32 of the Public Utility Holding
Company Act of 1935, as amended, and (b) assign, transfer, pledge
or otherwise dispose of its rights and interests hereunder to a
trustee, lending institution, or other Person for the purposes
of financing or refinancing the Station, including upon or pursuant
to the exercise of remedies under such financing or refinancing, or
by way of assignments, transfers, conveyances of dispositions in
lieu thereof; provided, however, that no such assignment shall
relieve or in any way discharge Generator from the performance of
its duties and obligations under this Agreement. Pepco agrees to
execute and deliver, at Generator's expense, such documents as may
be reasonably necessary to accomplish any such assignment,
transfer, conveyance, pledge or disposition of rights hereunder
for purposes of the financing or refinancing of the Facility, so
long as Pepco's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
(d) Subject to Section 14.2, either Party may
assign this Agreement to a successor to all or substantially all of
the assets of such Party by way of merger, consolidation, sale or
otherwise, provided such successor assumes in writing and becomes
liable for all of such Party's duties and obligations hereunder.
14.2 Release of Rights and Obligations. No
assignment, transfer, conveyance, pledge or disposition of rights,
interests, duties or obligations under this Agreement by a Party
shall relieve that Party from liability and financial
responsibility for the performance thereof after any such transfer,
assignment, conveyance, pledge or disposition unless and until
(i) the transferee or assignee shall agree in writing to assume the
obligations and duties of that Party under this Agreement and to
impose such obligations on subsequent permitted transferees and
assignees and (ii) the non-assigning Party has consented in writing
to such assumption and to a release of the assigning Party from
such liability, such consent not to be unreasonably withheld or
delayed.
14.3 Change in Corporate Identity. If Generator
terminates its existence as a [corporate] entity by merger,
acquisition, sale, consolidation or otherwise, or if all or
substantially all of Generator's assets are transferred to another
person or
<PAGE>
business entity without complying with this Article 14, Pepco shall
have the right, enforceable in a court of competent jurisdiction,
to enjoin Generator's successor from using the Station in any
manner that does not comply with the requirements of this Agreement
or that impedes Pepco's ability to carry on its ongoing business
operations.
14.4 Successors and Assigns. This Agreement and all of
the provisions hereof are binding upon, and inure to the benefit
of, the Parties and their respective successors and permitted
assigns.
ARTICLE 15
SUBCONTRACTORS
Nothing in this Agreement shall prevent the Parties
from utilizing the services of subcontractors as they deem
appropriate, provided, however, the Parties agree that, where
applicable, all said subcontractors shall comply with the terms and
conditions of this Agreement. The creation of any subcontract
relationship shall not relieve the hiring Party of any of
its obligations under this Agreement. Each Party shall be fully
responsible to the other Party for the acts and/or omission of any
subcontractor it hires as if no subcontract had been made. Any
obligation imposed by this Agreement upon the Parties, where
applicable, shall be equally binding upon and shall be construed as
having application to any subcontractor. The Parties shall
each be liable for, indemnify, and hold harmless the other Party,
their Affiliates and their officers, directors, employees, agents,
servants, and assigns from and against any and all claims, demands,
or actions, from the other Party's subcontractors; and shall pay
all costs, expenses and legal fees associated therewith and all
judgments, decrees and awards rendered therein. No subcontractor
is intended to be or shall be deemed a third-party beneficiary of
this Agreement.
ARTICLE 16
NOTICES
16.1 Emergency Notices. At or prior to the Effective
Date, each Party shall indicate to the other Party, by notice, the
appropriate person during each eight-hour work shift to contact in
the event of an emergency, a scheduled or forced interruption or
reduction in services. The notice last received by a Party shall
be effective until modified in writing by the other Party.
16.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to
<PAGE>
the Parties at the following addresses (or at such other address
for a Party as shall be specified by like notice):
if to Pepco , to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) ________________
Attention: ___________________
if to Generator, to:
c/o Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
ARTICLE 17
AMENDMENTS
17.1 Amendments. Except as set forth in Sections 2.2
and 17.2 of this Agreement, this Agreement may be amended,
modified, or supplemented only by written agreement of both Pepco
and Generator.
17.2 FERC Proceedings
(a) Pepco may unilaterally make application to
FERC under Section 205 of the Federal Power Act and pursuant to the
FERC's rules and regulations promulgated thereunder for, or
exercise any rights it may have under Section 206 of the Federal
Power Act and the regulations thereunder with respect to, a change
in any rates, terms and conditions, charges, classification of
service, rule or regulation for any services Pepco provides under
this Agreement over which FERC has jurisdiction.
(b) Generator may exercise its rights under
Section 205 or 206 of the Federal Power Act and pursuant to FERC's
rules and regulations promulgated thereunder with respect to any
rate, term, condition, charge, classification of service, rule or
regulation for any services provided under this Agreement over
which FERC has jurisdiction.
<PAGE>
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 Waiver. Except as otherwise provided in this
Agreement, any failure of a Party to comply with any obligation,
covenant, agreement, or condition herein may be waived by the Party
entitled to the benefits thereof only by a written instrument
signed by the Party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
18.2 Labor Relations. The Parties agree to
immediately notify the other Party, verbally and then in writing,
of any labor dispute or anticipated labor dispute which may
reasonably be expected to affect the operations of the other Party.
18.3 No Third Party Beneficiaries. Nothing in this
Agreement is intended to confer upon any other person except the
Parties any rights or remedies hereunder or shall create any third
party beneficiary rights in any person. No provision of this
Agreement shall create any rights in any such persons in respect of
any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement except as expressly
provided for thereunder.
18.4 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland (regardless of the laws that
might otherwise govern under applicable principles of conflicts of
law).
18.5 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.
18.6 Interpretation. When a reference is made in this
Agreement to an Article, Section, Schedule or exhibit, such
reference shall be to an Article or Section of, or Schedule or
exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "withoutlimitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this
<PAGE>
Agreement as a whole and not to any particular provision of this
Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Unless otherwise expressly stated
otherwise herein, the word "day" shall mean any calendar day
including weekends and holidays. Any agreement, instrument,
statute, regulation, rule or order defined or referred to herein or
in any agreement or instrument that is referred to herein means
such agreement, instrument, statute, regulation, rule or order as
from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and
(in the case of statutes, regulations, rules or orders) by
succession of comparable successor statutes, regulations, rules or
orders and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its
permitted successors and assigns. Each Party acknowledges that it
has been represented by counsel in connection with the review and
execution of this Agreement, and, accordingly, there shall be no
presumption that this Agreement or any provision hereof be
construed against the Party that drafted this Agreement.
18.7 Jurisdiction and Enforcement. Each of the
Parties irrevocably submits to the exclusive jurisdiction of the
federal and state courts of the State of Maryland for the purposes
of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the
Parties agrees to commence any action, suit or proceeding relating
hereto either in the federal courts of the State of Maryland or, if
such suit, action or proceeding may not be brought in such court
for jurisdictional reasons, in the state courts of the State
of Maryland. Each of the Parties further agrees that service of
process, summons, notice or document by hand delivery or U.S.
registered mail at the address specified for such Party in Section
16.2 (or such other address specified by such Party from time to
time pursuant to Section 16.2) shall be effective service of
process for any action, suit or proceeding brought against such
Party in any such court. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in the federal and state courts of
the State of Maryland and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
18.8 Entire Agreement. This Agreement, Asset Sale
Agreement, the Confidentiality Agreement and the Ancillary
Agreements including the Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein and
other contracts, agreements and instruments contemplated hereby or
thereby, embody the entire agreement and understanding of the
Parties in respect of the
<PAGE>
transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or
undertakings other than those expressly set forth or referred to
herein or therein. This Agreement, the Asset Sale Agreement and
the Ancillary Agreements supersede all prior agreements and
understandings between the Parties with respect to the transactions
contemplated by this Agreement other than the Confidentiality
Agreement.
18.9 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
18.10 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
18.11 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF, Pepco and Generator have caused
this Interconnection Agreement (Morgantown) to be signed by their
respective duly authorized officers as of the date first above
written.
POTOMAC ELECTRIC POWER COMPANY
By: ____________________________
Name:
Title:
[GENERATOR]
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE A
DEFINITIONS
Part A. Capitalized terms not defined in the body of the
Agreement shall have the meaning set forth in Part A of
this Schedule A. (Part B of this Schedule A sets forth
capitalized terms defined within the Agreement.)
(1) "Affiliate" has the meaning set forth in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
(2) "Ancillary Agreements" has the meaning set forth
in the Asset Sale Agreement.
(3) "Closing" has the meaning set forth in the Asset
Sale Agreement.
(4) "Confidentiality Agreement" has the meaning set
forth in the Asset Sale Agreement.
(5) "Costs" means all costs, including without
limitation, any Taxes, costs of acquiring real property, costs and
fees for permits, franchises, licenses and regulatory approvals
except to the extent that such costs are allocated to a party or
parties other than the Generator by the PJM Interconnection LLC or
otherwise under the PJM Tariff or PJM Agreement.
(6) "Easement" means the Easement Agreement dated
__________, 2000, between the Parties with respect to the Station.
(7) "Environmental Laws" means all former, current
and future federal, state, local and foreign laws (including common
law), treaties, regulations, rules, ordinances, codes, decrees,
judgments, directives or orders (including consent orders) and
environmental permits, in each case, relating to pollution or
protection of the environment or natural resources, including laws
relating to Releases or threatened Releases, or otherwise
relating to the generation, manufacture, processing, distribution,
use, treatment, storage, arrangement for disposal, transport,
recycling or handling, of Hazardous Substances.
(8) "Emergency" means (a) with respect to Pepco, a
condition or situation which Pepco, the PJM Interconnection LLC,
the PJM System Operator or the Transmission Operator deem
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Transmission System, Pepco's
electrical system or the electrical or transmission systems
of others to which the Transmission System or Pepco's electrical
system are directly or indirectly connected and (b) with respect to
the Generator, a condition or situation which the Generator deems
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Station.
(9) "FERC" means the Federal Energy Regulatory
Commission or its successors.
<PAGE>
(10) "Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
(11) "Generator" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
(12) "Generator Facilities" mean the equipment and
facilities owned by the Generator but located on Pepco's property
which are identified in Schedule B of this Agreement.
(13) "Good Utility Practice" means any of the
applicable practices, methods and acts.
(a) required by FERC, NERC, MAAC, the PJM
Interconnection LLC, the PJM System Operator, or the successor of
any of them, whether or not the Party whose conduct is at issue is
a member thereof,
(b) required by applicable law or regulations,
(c) required by the Pepco Interconnection
Standards or the policies and standards of Pepco relating to
emergency operations;
(d) otherwise engaged in or approved by a
significant portion of the electric utility industry during the
relevant time period;
which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost consistent
with law, regulation, good business practices, reliability, safety,
and expedition. Good Utility Practice is not intended to be
limited to the optimum practice, method, or act to the exclusion of
all others, but rather to be acceptable practices, methods, or acts
generally accepted in the region.
(14) "Hazardous Substances" means (i) any
petrochemical or petroleum products, crude oil or any fraction
thereof, ash, radioactive materials, radon gas, asbestos in any
form, urea formaldehyde foam insulation or polychlorinated
biphenyls, (ii) any chemicals, materials, substances or
wastes defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted
hazardous materials," "extremely hazardous substances," "toxic
substances," "contaminants" or "pollutants" or words of similar
meaning and regulatory effect contained in any Environmental Law or
(iii) any other chemical, material, substance or waste which is
prohibited, limited or regulated by any Environmental Law.
(15) "Interconnection Facilities" means those
facilities or portions of facilities owned or operated by Pepco to
provide Interconnection Service which shall include, but not be
limited to (1) facilities the cost of which is reasonably allocated
to the Interconnection Service provided to the Station, or (2)
Attachment Facilities or Local Upgrade Facilities, as defined
in the PJM Tariff, which are associated with the Interconnection
Service and operated and maintained by Pepco.
<PAGE>
(16) "Interconnection Service" means the services
provided by Pepco which are necessary to connect the Station to the
Transmission System for parallel operation of the Station and to
enable Generator to transmit the energy and ancillary services
produced by the Station to the Transmission System and receive
Station energy service and ancillary services, including blackstart
power, from the Generator's supplier.
(17) "MAAC" means the Mid-Atlantic Area Council, a
reliability council under Section 202 of the Federal Power Act
established pursuant to the MAAC Agreement dated August 1, 1994, or
any successor thereto.
(18) "Maintain" means construct, reconstruct, install,
inspect, repair, replace, operate, patrol, maintain, use,
modernize, expand, upgrade, or other similar activities.
(19) "MDPSC" means the Maryland Public Service
Commission or any successor agency thereto.
(20) "NERC" means North American Electric Reliability
Council or any successor thereto.
(21) "Pepco" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors or assigns.
(22) "Pepco Facilities" means the equipment and
facilities owned by Pepco but located on Generator's property which
are identified in Schedule B of this Agreement.
(23) "Pepco Interconnection Standards" means Pepco's
Interconnection and Parallel Operating Guidelines as amended,
modified or replaced from time to time. A copy of the existing
Pepco Interconnection Standards is attached hereto as Schedule E.
(24) "Point of Interconnection" means each ownership
point of demarcation set forth in Schedule C where capacity, energy
and ancillary services are transferred between the Station and the
Transmission System.
(25) "Pepco Transmission Facilities" means those
transmission, substation, and communication facilities and related
equipment, including the Interconnection Facilities, and any
additions, modifications or replacements thereto, that are utilized
to provide Interconnection Service to the Station.
(26) "PJM" means the Pennsylvania New Jersey-Maryland
interconnected power pool operated under the PJM Agreement and any
successor thereto including any regional transmission operator,
independent system operator, transco, or any other independent
system administrator that possesses operational or planning control
over the Transmission System.
(27) "PJM Agreement" means the Amended and Restated
Operating Agreement of the PJM Interconnection LLC dated as of
June 2, 1997.
<PAGE>
(28) "PJM Control Area" shall mean the control area
recognized by NERC as the PJM Control Area.
(29) "PJM Interconnection LLC" means the independent
system operator of the PJM Control Area pursuant to the PJM
Operating Agreement and the PJM Tariff.
(30) "PJM Generator Connection Agreement" means the
interconnection agreement entered into between the Generator and
the PJM Interconnection LLC pursuant to the PJM Tariff with respect
to the interconnection of the Station and the Transmission System.
(31) "PJM Reliability Agreement" means the Reliability
Assurance Agreement dated June 2, 1997 among the load serving
entities of PJM.
(32) "PJM Requirements" means the rules, regulations
or other requirements of PJM or MAAC contained in or adopted
pursuant to the PJM Agreement, the PJM Tariff or the PJM
Reliability Agreement which are applicable to Pepco, with respect
to the Transmission System or the Interconnection Service, and the
Generator with respect to the Generating Facilities.
(33) "PJM System Operator" shall mean the PJM
Interconnection LLC, energy control center staff responsible for
central dispatch as provided in the PJM Agreement.
(34) "PJM Tariff" means the PJM Open Access
Transmission Tariff providing transmission service within the PJM
Control Area.
(35) "Qualified Personnel" means individuals who
possess any required licenses and are trained for their positions
and duties by Generator and/or Pepco pursuant to Good Utility
Practice.
(36) "Release" means any release, spill, emission,
leaking, dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into the environment (including
ambient air, surface water, groundwater, land surface or subsurface
strata) or within any building, structure, facility or fixture.
(37) "Revenue Meters" means all MWh and MVArh meters,
pulse isolation relays, pulse conversion relays, transducers
required by Pepco or the PJM Interconnection or PJM System Operator
for billing or other purposes, and associated totalizing equipment
and appurtenances and compensation required to measure the transfer
of energy across the Point of Interconnection.
(38) "Station" means the Morgantown Station as defined
in the Asset Sale Agreement.
(39) "Switching, Tagging, and Grounding Rules" means
Pepco's switching, tagging and grounding rules as amended,
modified or replace from time to time. A copy of the existing
Switching, Tagging and Grounding Rules is attached hereto as
Schedule D.
<PAGE>
(40) "Taxes" means all taxes, surtaxes, charges, fees,
levies, penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including income
taxes, excise, property, sales, transfer, franchise, special
franchise, payroll, recording, withholding, social security or
other taxes, in each case including any interest, penalties or
additions attributable thereto.
(41) "Transmission System" means the facilities
owned, controlled, or operated by Pepco, for purposes of providing
transmission service, including services under the PJM Tariff, and
Interconnection Service.
(42) "Transmission Operator" means the person, or
persons designated by Pepco to coordinate the day to day
interconnection of the Station with the Transmission System.
Part B. The following terms have the meaning specified in the
section of this Agreement set forth opposite to such
term:
Term Agreement Reference
Agreement Preamble
Asset Sale Agreement Preamble
Effective Date Section 2.1
Event of Default Section 8.1
Force Majeure Section 11.1
Initial Period Section 3.10
Operating Committee Section 3.20
Party or Parties Preamble
Term Article 2
<PAGE>
EXHIBIT E-3
INTERCONNECTION AGREEMENT
(Dickerson)
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
___________________________________
Dated ____________, 2000
<PAGE>
INTERCONNECTION AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 TERM AND TERMINATION 2
2.1 Term 2
2.2 Change in Law 2
2.3 Effect after Termination 2
ARTICLE 3 - CONTINUING OBLIGATIONS AND RESPONSIBILITIES 2
3.1 Interconnection Service 2
3.2 New Construction or Modifications 3
3.2.1 Pepco Construction or Modifications 3
3.2.2 Generator Construction or Modifications 4
3.2.3 Modifications Affecting the Transmission System
or the Station 6
3.3 Access, Easements, Conveyances, Licenses,
and Restrictions 6
3.4 Facility and Equipment Maintenance 7
3.5 Pepco Facilities and Generator Facilities 8
3.6 Equipment Testing Obligations 8
3.7 Inspections 8
3.8 Information Reporting Obligations 9
3.9 Local Services 10
3.9.1 General 10
3.9.2 Temporary Suspension of Local Services 11
3.10 Pepco Provided Services 11
3.11 Generator Provided Services 12
3.12 Optional Services 12
3.13 Metering and Telemetering 13
3.14 Emergency Procedure 13
3.15 Interconnection Service Interruptions 14
3.16 Unit Status Notification 15
3.17 Scheduled Maintenance Notification and Coordination 15
3.17.1 Local Routine Inspection and Maintenance 15
3.17.2 Transmission Sytem Maintenance 15
3.18 Safety 16
3.18.1 General 16
3.18.2 Switching Tagging and Grounding 16
3.19 Environmental Compliance and Procedures 16
3.20 Operating Committee 17
ARTICLE 4 - OPERATIONS 17
4.1 General 17
4.2 Generator's Operating Obligations 18
4.2.1 General 18
4.2.2 Voltage or Reactive Control Requirements 18
<PAGE>
4.3 Auditing of Accounts and Records 19
ARTICLE 5 -- COST RESPONSIBILITIES AND BILLING PROCEDURES 20
5.1 Cost Responsibilities for Interconnection Service 20
5.2 Cost Responsibilities for Local Services 20
5.3 Billing Procedures 20
5.4 Billing Disputes 21
ARTICLE 6 - CONFIDENTIALITY 21
6.1 Confidentiality Obligations of Pepco 21
6.2 Confidentiality Obligations of Generator 22
6.3 Confidentiality of Audits 22
6.4 Remedies 23
ARTICLE 7 - EVENTS OF DEFAULT 23
7.1 Events of Default 23
7.2 Remedies 24
ARTICLE 8 - LIMITATION OF LIABILITY 25
8.1 Limitation of Pepco's Liability 25
8.2 Limitation on Generator's Liability 25
8.3 Consequential Damages 25
ARTICLE 9 - INDEMNIFICATION FOR THIRD PARTY CLAIMS 26
9.1 Generator's Indemnification 26
9.2 Pepco's Indemnification 26
9.3 Indemnification Procedures 26
9.4 Survival 27
ARTICLE 10 - INSURANCE 27
10.1 Insurance Coverage 27
10.2 Certificates of Insurance 27
10.3 Additional Insureds and Waiver 27
ARTICLE 11 - FORCE MAJEURE 28
11.1 Effect of Force Majeure 28
11.2 Force Majeure Defined 28
11.3 Notification 28
ARTICLE 12 - DISPUTES 29
12.1 Disputes 29
12.2 Arbitration 29
12.3 FERC Dispute Resolution 30
ARTICLE 13 - REPRESENTATIONS 30
13.1 Representations of Pepco 30
13.2 Representations of Generator 31
ARTICLE 14 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY 33
14.1 Assignment 33
14.2 Release of Rights and Obligations 33
14.3 Change in Corporate Identity 34
14.4 Successors and Assigns 34
<PAGE>
ARTICLE 15 - SUBCONTRACTORS 34
ARTICLE 16 - NOTICES 35
16.1 Emergency Notices 35
16.2 Notices 35
ARTICLE 17 - AMENDMENTS 35
17.1 Amendments 35
17.2 FERC Proceedings 36
ARTICLE 18 - MISCELLANEOUS PROVISIONS 36
18.1 Waiver 36
18.2 Labor Relations 36
18.3 No Third Party Beneficiaries 36
18.4 Governing Law 37
18.5 Counterparts 37
18.6 Interpretation 37
18.7 Jurisdiction and Enforcement 37
18.8 Entire Agreement 38
18.9 Severability 38
18.10 Independent Contractor Status 38
18.11 Conflicts 39
SCHEDULE A DEFINITIONS 2
SCHEDULE B Pepco Facilities and Generator Facilities 7
SCHEDULE C - Points of Interconnection 9
SCHEDULE D - Switching, Tagging and Grounding Rules 11
SCHEDULE E - Pepco's Interconnection Standards 14
SCHEDULE F - Local Services 15
SCHEDULE G - Pepco Current Projects 17
SCHEDULE H - Real Time Telemetry List 18
<PAGE>
INTERCONNECTION AGREEMENT (Dickerson)
This Interconnection Agreement ("Agreement") dated as
of _________, 2000 by and between Potomac Electric Power Company
("Pepco") a District of Columbia and Virginia corporation, and
_____________ ("Generator") a ___________ [corporation]. Pepco and
Generator are each referred to herein as a "Party," and
collectively referred to herein as the "Parties."
WITNESSETH:
WHEREAS, Pepco, and Generator have entered into an
Asset Purchase and Sale Agreement for Generating and Related Assets
("Asset Sale Agreement") dated June 7, 2000, for the sale by Pepco
to Generator of certain assets comprising the Dickerson electric
generation station;
WHEREAS, Pepco intends to continue to operate its
transmission and distribution businesses from their present
locations;
WHEREAS, Generator needs Interconnection Service from
Pepco for the Dickerson electric generating station;
WHEREAS, Pepco needs access to parts of the Generator's
assets, and Generator needs access to parts of the Pepco's assets;
and
WHEREAS, the Parties have agreed in the Asset Sale
Agreement to execute this Agreement in order to provide
Interconnection Service to Generator and to define continuing
responsibilities and obligations of the Parties with respect to the
use of the other Party's property, assets and facilities as set
forth herein.
NOW THEREFORE, in consideration of the mutual
representations, covenants and agreements hereinafter set forth,
and intending to be legally bound hereby, the Parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the
meanings specified or referred to in Schedule A.
<PAGE>
ARTICLE 2
TERM AND TERMINATION
2.1 Term. This Agreement shall become effective upon
consummation of the Closing ("Effective Date"), and unless
terminated sooner in accordance with the terms of this Agreement,
shall continue in full force and effect until the earlier to occur
of (i) the permanent cessation by the Generator of the power
generation functions of the Station or (ii) the permanent cessation
of the interconnection functions of the Transmission System.
2.2 Change in Law. If (a) the FERC, any state or
state regulatory commission or the PJM Interconnection LLC
implements a change in any law, regulation, rule or practice, or
(b) Pepco's compliance with a change in any law or regulation,
which compliance, in either case, affects, or may reasonably be
expected to affect, Pepco's performance under this Agreement, the
Parties shall negotiate in good faith any amendments to this
Agreement that are necessary to adapt the terms of this Agreement
to such change, and Pepco shall file such amendments with the FERC.
If the Parties are unable to reach agreement on such amendments,
either Party shall have the right to make a unilateral filing with
the FERC to modify this Agreement pursuant to Sections 205 or 206
or any other applicable provision of the Federal Power Act and the
FERC rules and regulations thereunder; provided that the other
Party shall have the right to oppose such filing and to participate
fully in any proceeding established by the FERC to address such
amendments.
2.3 Effect after Termination. The applicable
provisions of this Agreement shall continue in effect after
cancellation or termination hereof to the extent necessary to
provide for final billings, billing adjustments and payments
pertaining to liability and indemnification obligations arising
from acts or events that occurred while this Agreement
was in effect.
ARTICLE 3
CONTINUING OBLIGATIONS AND RESPONSIBILITIES
3.1 Interconnection Service
3.1.1 Subject to the terms and conditions of
the Agreement, Pepco shall (a) permit the Station to continue to be
interconnected to the Transmission System at the Point of
Interconnection, and (b) provide Interconnection Service at the
Point of Interconnection. Pepco agrees to permit Generator to
interconnect
<PAGE>
Station as long as Generator continues to operate such facilities
pursuant to PJM Requirements and Good Utility Practice.
3.1.2 Interconnection Service shall not
include, and Pepco shall not be responsible under this Agreement
for (a) transmission service, losses or ancillary services
associated with the use of the Transmission System for the delivery
of capacity, energy and/or ancillary services produced by the
Generating Facilities, or (b) providing or procuring capacity,
energy and/or ancillary services to the Generator or the Generating
Facilities.
3.1.3 The Generator's interconnection to the
Transmission System of any new or expanded generating capacity of
the Station shall (a) be subject to PJM Requirements and/or FERC
requirements governing interconnections and (b) require a separate
interconnection agreement mutually agreed to by the Parties in
writing.
3.1.4 Notwithstanding anything to the contrary
in this Agreement, Pepco's performance of its obligations under
this Agreement shall be subject to Generator entering into, and
complying with, any PJM Generator Connection Agreement which may be
required pursuant to PJM Requirements with respect to
Interconnection Service or the Station.
3.2 New Construction or Modifications
3.2.1 Pepco Construction or Modifications
(a) Pepco shall make such additions,
modifications, replacements and improvements to the Interconnection
Facilities as are required by PJM Requirements or Good Utility
Practice to enable Pepco to provide Interconnection Service in
compliance with this Agreement. Generator shall pay all reasonable
Costs incurred by Pepco for such additions, modifications,
replacements or improvements.
(b) Except with respect to operation and
maintenance or ordinary maintenance done in the ordinary course of
business or to respond to abnormal or emergency conditions, if any
additions, modifications, replacements or improvements to the
Interconnection Facilities undertaken by Pepco might reasonably be
expected to affect Generator's operation of the Station, Pepco
shall provide one hundred twenty (120) days written notice to
Generator prior to undertaking such additions, modifications,
replacements or improvements. Any such additions, modifications,
replacements or improvements shall comply with PJM Requirements and
Good Utility Practice. The Parties shall mutually agree to the
<PAGE>
scheduling of such addition, modification, replacement or
improvement to minimize any adverse impact on the Station.
Generator shall be deemed to have accepted Pepco's proposed
additions, modifications, replacements or improvements unless
Generator gives Pepco written notice of its objections within
thirty (30) days after receipt of Pepco's notice. Generator's
acceptance or deemed acceptance of Pepco's proposed additions,
modifications, replacements or improvements shall not be construed,
with respect thereto, as: (i) confirmation or endorsement of the
design; (ii) a warranty of safety, durability or reliability; or
(iii) responsibility for strength, details of design, adequacy or
capability.
3.2.2 Generator Construction or Modifications
(a) In the event Generator plans to increase
the capacity of the Generating Facilities, Generator shall submit
to Pepco any and all plans and specifications that Pepco may
reasonably request related to such increase. Such specifications
and plans shall be submitted by Generator to Pepco at the time
that Generator submits its plans under the PJM Tariff related to
such expansion but no later than one hundred twenty (120) days
prior to commencing such proposed increase. Any such additions,
modifications, or replacements shall comply with PJM Requirements
and Good Utility Practice and shall be subject to Section 3.1.3 of
this Agreement.
(b) If Generator plans any additions,
modifications, or replacements to the Station that will not
increase its capacity, but could reasonably be expected to affect
the Transmission System or the Interconnection Facilities,
Generator shall give Pepco reasonable notice, but not less than one
hundred twenty (120) days prior written notice and Generator shall
comply with all applicable PJM Requirements with respect to
such proposed additions, modifications, or replacements. All such
additions, modifications, or replacements shall (i) comply with PJM
Requirements and Good Utility Practice, (ii) be accompanied by
appropriate information and operating instructions, and (iii) be
subject to the review and acceptance of Pepco, which review shall
be based on PJM Requirements and Good Utility Practice and which
acceptance shall not unreasonably be withheld or delayed. Pepco
shall be deemed to have accepted Generator's proposed additions,
modifications or replacements unless Pepco gives Generator written
notice of its objections within thirty (30) days after receipt of
the Generator's notice.
(c) Pepco's acceptance of Generator's plans
and specifications for any proposed additions, modifications, or
replacements to the Generating Facilities and Pepco's participation
in any interconnected operations with Generator are not and shall
not be construed as: (i) confirmation or endorsement of the design
of the Generating Facilities; (ii) a warranty of safety, durability
or reliability of the
<PAGE>
Generating Facilities; or (iii) responsibility for strength,
details of design, adequacy, or capability of the Generating
Facilities.
(d) Pepco, pursuant to PJM Requirements,
shall inform Generator of any additions, modifications, or
replacements to the Transmission System or Interconnection
Facilities, that will be necessary as a result of the addition,
modification, or replacement to Station made pursuant to Section
3.2.2. Generator shall compensate Pepco for all reasonable Costs
it incurs associated with any modifications, additions, or
replacements made to the Interconnection Facilities or Transmission
System related to any additions, modifications, or replacements to
the Generating Facilities. Pepco shall provide an estimate as
early as practicable, but in any event not less than sixty (60)
days prior to the initiation of such addition, modification or
replacement.
(e) Generator shall modify, at its sole cost
and expense, the Generating Facilities as may be reasonably
required to conform with PJM Requirements and Good Utility Practice
or to conform with additions, modifications, or replacements of the
Transmission System or the Interconnection Facilities, required by
PJM Requirements and Good Utility Practice or implemented in
accordance with this Agreement, (including, without limitation,
changes to the voltages at which the Transmission System
is operated) provided, however, that Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generating Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of Pepco's Facilities.
(f) Upon completion of any addition,
modification, or replacement to the Generating Facilities that may
reasonably be expected to affect the Transmission System or the
Interconnection Facilities, but no later than ninety (90) days
thereafter, Generator shall issue "as built" drawings to Pepco.
Upon completion of any addition, modification, or replacement to
the Interconnection Facilities, that may reasonably be
expected to affect the operation of the Station, but no later than
ninety (90) days thereafter, Pepco shall issue "as built" drawings
to the Generator.
3.2.3 Modifications Affecting the Transmission
System or the Station
(a) Notwithstanding anything herein to the
contrary, except with respect to the projects or construction set
forth in Schedule G, no modifications to or new construction of
facilities, or access thereto, including but not limited to rights
of way, fences, gates, shall be made by either Party which might
reasonably be expected to adversely affect the other Party with
respect to such Party's obligations
<PAGE>
and responsibilities under this Agreement, without prior written
notification as set forth in Section 3.2.3(b) below, and without
providing the other Party with sufficient information regarding the
work prior to commencement to enable such Party to evaluate the
impact of the proposed work on its operations. For all
modifications reasonably expected to adversely affect the
operations of the other Party's facilities, the Party shall
provide at least one hundred twenty (120) days written notice to
the other Party prior to undertaking such additions, modifications
or replacements. Any such additions, modifications, or
replacements shall comply with PJM Requirements and Good Utility
Practice.
(b) The Parties shall mutually agree to the
scheduling of such addition, modification, replacement or
improvement proposed pursuant to Section 3.2.3(a) to minimize any
adverse impact on the Station or the Transmission System. For all
construction work, major modifications, or circuit changes
involving new or existing facilities, equipment, systems or
circuits that could reasonably be expected to affect the operation
of either Party, the Party desiring to perform said work shall
provide the other Party with drawings, plans, specifications, and
other necessary documentation for review at least sixty (60) days
prior to the beginning of construction provided that for routine
telecommunication work, the Party doing the work shall only be
required to provide 48 hours prior notice. The Party shall be
deemed to have accepted the proposed additions, modifications,
replacements or improvements unless the Party gives written notice
of their objections within sixty (60) days after receipt of such
notice. The Party's acceptance or deemed acceptance of the
proposed additions, modifications, replacements or improvements
shall not be construed, with respect thereto, as: (i)
confirmation or endorsement of the design; (ii) a warranty of
safety, durability or reliability; or (iii) responsibility for
strength, details of design, adequacy or capability.
3.3 Access, Easements, Conveyances, Licenses, and
Restrictions
3.3.1 The Parties hereby grant to each other
such licenses, access and other rights to the Station and the
Interconnection Facilities as may be necessary for either Party's
performance of their respective obligations under this Agreement.
Such access shall be provided in a manner so as not to unreasonably
interfere with the ongoing business operations, rights, and
obligations of the other Party and shall be subject to the safety
and security practices of the Party granting such access. Access
shall only be granted to Qualified Personnel.
3.3.2 A Party shall not restrict a Party's
rights hereunder to access the other Party's property, facilities,
or equipment without prior written notification except in an
Emergency, in which case the restricted access shall last no longer
than three (3) days, unless an alternate means of access is
provided.
<PAGE>
3.3.3 The Parties' rights with respect to
access to their respective facilities properties shall also be
governed by the Easement.
3.4 Facility and Equipment Maintenance
3.4.1 Pepco shall provide Interconnection
Service at the Point of Interconnection in a safe and efficient
manner and pursuant to PJM Requirements and Good Utility Practice.
Generator shall be responsible for all reasonable Costs incurred by
Pepco to provide Interconnection Service and to Maintain the
Interconnection Facilities pursuant to the Agreement.
3.4.2 Generator shall Maintain the Generating
Facilities (including coordination of its relay protection
equipment) in a safe and efficient manner and as required by and in
accordance with PJM Requirements and Good Utility Practice,
provided, however, that Generator shall not be obligated to
modernize, expand or upgrade the Generating Facilities unless
the failure to modernize, expand or upgrade is reasonably likely to
have a material adverse affect on the operation of the
Interconnection Facilities or the Transmission System.
3.4.3 Unless otherwise specified herein, or
unless the Parties mutually agree to a different arrangement,
neither Party shall be responsible for the maintenance of the other
Party's equipment or property regardless of its location.
3.4.4 In addition to the requirements set
forth elsewhere in this Agreement, each Party shall Maintain its
equipment and facilities and perform its maintenance obligations
that could reasonably be expected to affect the operations of the
other Party in a safe and efficient manner and pursuant to PJM
Requirements and Good Utility Practice.
3.5 Pepco Facilities and Generator Facilities
Unless otherwise agreed to by the Parties, the Party owning Pepco
Facilities or Generator Facilities shall Maintain those facilities
and shall do so pursuant to PJM Requirements and Good Utility
Practice and shall make such additions, modifications, replacements
and improvements as are required by PJM requirements and Good
Utility Practice or which are necessary to maintain Interconnection
Service, provided, however, that the Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generator Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of the Transmission System or Interconnection
Facilities.
3.6 Equipment Testing Obligations
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3.6.1 For reliability purposes with respect to
the Interconnection Facilities and the Transmission System, Pepco
may reasonably request, pursuant to PJM Requirements, or Good
Utility Practice, that Generator test, calibrate, verify, or
validate the Generating Facilities or its equipment, and Generator
shall promptly comply with such a request. Generator shall be
responsible for all costs of testing, calibrating, verifying or
validating its facilities.
3.6.2 At Pepco's request, Generator shall
supply to Pepco at no cost, copies of inspection reports,
installation and maintenance documents, test and calibration
records, verifications, and validations pursuant to the foregoing
Section 3.6.1. Pepco shall supply to Generator, at Generator's
request and at no cost to Generator, copies of inspection
reports, installation and maintenance documents, test and
calibration records, verifications, and validations that Pepco has
which are related to the Interconnection Facilities.
3.7 Inspections
3.7.1 Pepco shall, at its expense, have the
right to inspect or observe all maintenance activities, equipment
tests, installation work, construction work, and modification work
to the Generating Facilities. Such access by Pepco shall be
exercised in a manner which does not unreasonably interfere with
Generator's ongoing business operations, rights and obligations and
shall be subject to Generator's safety and security practices. If
Pepco observes any deficiencies or defects with respect thereto
that might reasonably be expected to adversely affect the
Transmission System or the Interconnection Facilities, Pepco shall
notify the Generator, and Generator shall immediately make any
corrections necessitated by PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this Section 3.7.1,
Pepco shall have no liability whatsoever for any failure to fully
or adequately observe any deficiency, it being agreed that
Generator shall be fully responsible and liable for all such
deficiencies, activities, equipment tests, installation,
construction or modification.
3.7.2 Generator shall, at its expense, have
the right to inspect or observe all maintenance activities,
equipment tests, installation work, construction work, and
modification work conducted by Pepco to the Interconnection
Facilities. Such access by Generator shall be exercised
in a manner which does not unreasonably interfere with Pepco's
ongoing business operations, rights and obligations and shall be
subject to Pepco's safety and security practices. If Generator
observes any deficiencies or defects with respect thereto that
might reasonably be expected to adversely affect the Station,
Generator shall notify Pepco, and Pepco shall immediately make any
corrections necessitated by applicable PJM Requirements
and Good Utility Practice. Notwithstanding the foregoing in this
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Section 3.7.2, Generator shall have no liability whatsoever for any
failure to fully or adequately observe any deficiency, it being
agreed that Pepco shall be fully responsible and liable for all
such deficiencies, activities, equipment tests, installation,
construction or modification.
3.8 Information Reporting Obligations
3.8.1 In order to provide Interconnection
Service hereunder, Pepco may request, and Generator shall promptly
provide, all relevant information, documents, or data regarding the
Generating Facilities that would be expected to materially affect
the Transmission System, and which is reasonably requested by NERC,
MAAC, the PJM Interconnection LLC, the MDPSC, the District of
Columbia Public Service Commission and any other state
or District of Columbia agency having jurisdiction over Pepco or
Generator, the PJM System Operator, or the Transmission Operator,
which disclosure shall be subject to Article 6 of this Agreement
regarding the disclosure of commercially sensitive information.
3.8.2 Generator shall promptly supply
accurate, complete, and reliable information in response to
reasonable information requests for real time data and other data
from Pepco necessary for operations, maintenance, compliance with
PJM Requirements or regulatory requirements, or analysis of the
Interconnection Facilities or the Transmission System. Such
information may include metered values for MW and MVAR, voltage,
current, automatic voltage regulator status, automatic
frequency control, dispatch, frequency, breaker status indication,
or any other information reasonably required for reliable operation
of the Transmission System pursuant to PJM Requirements and Good
Utility Practice. At minimum, Generator shall satisfy the
telemetry requirements set forth in Schedule H.
3.8.3 Information pertaining to generation
operating parameters shall be gathered and electronically
transmitted directly to Pepco's energy management system using a
mutually acceptable communications protocol.
3.8.4 Generator shall be responsible for the
maintenance, and any required replacements or upgrades of the field
devices and equipment used to gather information regarding
generation operating parameters.
3.8.5 Generator shall Maintain, at its
expense, operating telephone links to the PJM Interconnection LLC,
PJM System Operator, Pepco and the Transmission Operator, to
provide information deemed necessary by them, or as reasonably
deemed necessary by Pepco in accordance with PJM Requirements or
Good Utility Practice to integrate operation of the Station with
the Transmission
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System, provided, however, that Generator shall not be obligated
under this Agreement to modernize, expand or upgrade the
Generator's facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of the Transmission System. Generator shall use
communication links at the Station consisting of the
mobile radio low band C frequency and "all call" and "red phone"
systems currently located at the Station (or successor systems as
may reasonably be required by Pepco) and shall maintain the
availability of such systems to operate during abnormal conditions
including blackouts.
3.9 Local Services
3.9.1 General
(a) The Parties agree that, due to the
integration of certain control schemes of the Station and the
Transmission System, it is cost effective to provide each other
with the services set forth in Sections 3.10 and 3.11 in accordance
with the terms and conditions set forth therein.
(b) The Parties shall ensure, in accordance
with Good Utility Practice, that services provided by one Party to
the other Party pursuant to Sections 3.10 and 3.11 shall be
available at all times and in the manner and at the prices
specified herein. Notwithstanding the foregoing, either Party may
change the services, provided that (1) there is no cost to
the receiving Party as a result of such change, (2) the quality,
reliability and integrity of the replacement services is equivalent
to the existing service, and (3) there is otherwise no materially
adverse effect on the receiving Party.
(c) Neither Party shall terminate any
services set forth in Sections 3.10 and 3.11 below that it agrees
to provide to the other Party, without the other Party's prior
written consent, which consent shall not be unreasonably withheld
or delayed, provided, however, if a Party receiving a service under
Sections 3.10 or 3.11 no longer needs or desires a particular
service, said Party shall notify the other Party and the
providing Party shall terminate said services as soon thereafter as
practicable.
3.9.2 Temporary Suspension of Local Services
(a) The Party providing a service set forth
in Sections 3.10 or 3.11 below shall notify and obtain approval,
which approval shall not be unreasonably withheld or delayed, from
the receiving Party of any scheduled temporary
<PAGE>
suspension of services at least five (5) business days in advance
of such suspension. Such notification shall include an estimated
time duration for a return to normal conditions.
(b) In the event of any unplanned or forced
suspension of the services set forth in Sections 3.10 or 3.11,
below, the providing Party shall immediately notify the other Party
first verbally and then in writing. The providing Party shall use
all reasonable efforts to minimize the duration of said suspension.
(c) The Parties agree to complete any
repairs, modifications or corrections, in accordance with Good
Utility Practice, that are necessary to restore to the other Party
as soon as reasonably practicable any services set forth in
Sections 3.10 or 3.11 below that have been suspended.
3.10 Pepco Provided Services: Schedule F sets forth
the local services Pepco shall provide to the Generator pursuant to
the terms of this Agreement. Unless otherwise specified in
Schedule F, for a period of three (3) years after the Effective
Date (the "Initial Period") and subject to Section 3.9 above, Pepco
shall provide Generator with the local services set forth in
Schedule F at no cost and in consideration of the local
services Generator shall provide Pepco in accordance with Section
3.11 below. If Generator desires the continuation of any of the
services set forth in Schedule F which are subject to the Initial
Period to continue after the Initial Period, upon Generator's
written request to Pepco made at least 60 days prior to the
expiration of the Initial Period, the Parties shall engage
in good faith negotiations to reach mutually agreeable terms and
conditions upon which such services will continue, provided,
however, that if such agreement is not reached prior to the
expiration of the Initial Period, Pepco shall cease to provide
services under Section 3.10 at the end of the Initial
Period.
3.11 Generator Provided Services. Schedule F sets
forth the local services Generator shall provide to Pepco pursuant
to the terms of this Agreement. Unless otherwise specified in
Schedule F, for the Initial Period and subject to Section 3.9
above, Generator shall provide Pepco with the local services set
forth in Schedule F at no cost and in consideration of the local
services Pepco shall provide Generator in accordance with Section
3.10 above. If Pepco desires the continuation of any of the
services set forth in Schedule F which are subject to the Initial
Period to continue after the Initial Period, upon Pepco's written
request to Generator made at least 60 days prior to the expiration
of the Initial Period, the Parties shall engage in good faith
negotiations to reach mutually agreeable terms and conditions
upon which such services will continue, provided, however, that if
such agreement is not reached prior to the expiration of the
Initial Period, Generator shall cease to provide services under
Section 3.11 at the end of the Initial Period.
<PAGE>
3.12 Optional Services: Generator may request that
Pepco provide the following services to the Generator, provided,
however, that Pepco shall not have any obligation to provide such
services unless the Parties have mutually agreed in writing to the
price and other terms and conditions of such service:
(a) PJM interface and dispatch services through
the Pepco control center;
(b) use of Pepco's communication services;
(c) maintenance of certain auxiliary and
communications equipment at the Station;
(d) maintenance of high-voltage and
medium-voltage equipment such as power transformers and power
circuit breakers;
(e) maintenance of protective relaying, certain
control equipment, such as AGC and MSVC, plant batteries and
revenue meters owned by Generator.
3.13 Metering and Telemetering
3.13.1 Generator shall, at Generator's expense:
(a) own, Maintain and repair, all Revenue Meters, instrument
transformers and appurtenances associated with Revenue Meters, and
real time telemetry, (b) conduct meter accuracy and tolerance
tests, and (c) prepare all calibration reports required for
equipment that measures energy transfers at the Point of
Interconnection. All meter accuracy and tolerance testing
hereunder shall be in accordance with PJM Requirements and Good
Utility Practice and shall be conducted, at Pepco's request, in the
presence of Pepco's representative.
3.13.2 Generator shall own and Maintain, at the
Generator's expense, equipment for redundant real-time
communications and transmission of telemetry, hourly MWh
information, and such other information as required by the PJM
System Operator or Transmission Operator, or as reasonably required
by Pepco in accordance with PJM Requirements and Good Utility
Practice.
3.14 Emergency Procedure
3.14.1 Pepco, through the Transmission
Operator, shall provide Generator with prompt verbal notification
of Emergencies with regard to the Transmission System which may
reasonably be expected to affect Generator's
<PAGE>>
immediate operation of the Station or Generator Facilities, and
Generator shall provide Pepco with prompt verbal notification of
Emergencies with regard to the Station which may reasonably be
expected to affect Interconnection Service or the Transmission
System. Such notification shall describe the Emergency, the extent
of damage or deficiency, the anticipated length of an outage and
the corrective action taken and/or to be taken. Said verbal
notification shall be followed as soon as practicable (but
no later than 24 hours after the verbal notification) with written
notification.
3.14.2 If an Emergency in the good faith
judgment of a Party endangers or could endanger life or property,
the Party recognizing the problem shall take such action as may be
reasonable and necessary to prevent, avoid, or mitigate injury,
danger, or loss. If however the Emergency involves transmission or
electrical equipment, Generator shall notify the Transmission
Operator, and obtain the consent of such personnel, prior to
performing any switching operations.
3.14.3 Pepco may, consistent with PJM
Requirements and Good Utility Practice, have the Transmission
System Operator take whatever actions (including tripping
Generator's synchronizing breakers) or inactions it deems necessary
during an Emergency to: (a) preserve public safety; (b)
preserve the integrity of the Transmission System, (c) limit or
prevent damage; or (d) expedite restoration of service. If any
action or inaction by Pepco or the Transmission Operator under this
Section 3.14 results in the discontinuation, curtailment,
interruption or reduction of Interconnection Service, Pepco shall
use reasonable efforts consistent with PJM Requirements and Good
Utility Practice to restore Interconnection Service as promptly as
practicable and to minimize the effect of such restoration of
service on the Station.
3.15 Interconnection Service Interruptions
3.15.1 If at any time, in the reasonable
exercise of the PJM System Operator's judgment, or the Transmission
Operator's judgment exercised in accordance with PJM Requirements
or Good Utility Practice and on a non-discriminatory basis, a
condition exists, including the operation of Generator's equipment,
which might reasonably be expected to have a materially adverse
affect on the quality of service rendered by Pepco (including
services rendered to transmission or distribution customers) or
interferes with the safe and reliable operation of the Transmission
System, Pepco may discontinue, curtail, reduce and/or interrupt
Interconnection Service until the condition has been corrected.
3.15.2 Unless the PJM System Operator, the
Transmission Operator or Pepco perceives that an Emergency exists
or the risk of one is imminent, Pepco
<PAGE>
shall give Generator reasonable notice of its intention to
discontinue, curtail, interrupt or reduce Interconnection Service
in response to the interfering condition and, where practical,
allow suitable time for Generator to remove the interfering
condition if it is the result of Generator's operations, before the
discontinuation, curtailment, interruption or reduction commences.
Pepco's judgment with regard to the interruption of service under
this paragraph shall be made pursuant to PJM Requirements and
Good Utility Practice. In the case of such interruption, Pepco
shall immediately confer with Generator regarding the conditions
causing such interruption and its recommendation concerning timely
correction thereof. In the event Interconnection Service is
interrupted under this section due to Generator's failure to
operate and Maintain the Generating Facilities pursuant to PJM
Requirements or Good Utility Practice, Generator shall compensate
Pepco for all costs reasonably incurred by Pepco attributable to
the interruption and restoration of Interconnection Service. Pepco
shall use reasonable efforts consistent with PJM Requirements and
Good Utility Practice to restore Interconnection Service
interrupted, curtailed or reduced pursuant to this Section 3.15 as
promptly as practicable and to minimize the effect of such
restoration of service on the Station.
3.16 Unit Status Notification
3.16.1 Generator acknowledges that Pepco
requires information regarding the status of the Station for
Transmission System reliability purposes. Accordingly, by 10:00
a.m. of each day, the Generator shall provide Pepco the following
information regarding the status of the Station for the following
day: Station availability to provide energy and capacity, the
Station's scheduled on and off times, Station synchronization,
planned outages or deratings, and generation restrictions and
limitations. Generator shall immediately notify Pepco of any
changes to the information provided pursuant to the foregoing
sentence.
3.16.2 In circumstances, such as forced
outages, Generator shall notify Pepco of its generating unit's
temporary interruption of generation as soon as practicable; and it
shall provide Pepco, as soon as practicable, with a schedule of
when generation will be resumed.
3.17 Scheduled Maintenance Notification and
Coordination
3.17.1 Local Routine Inspection and
Maintenance. The Parties agree that, due to the integration of
certain control and protective relaying schemes between the Station
and the Interconnection Facilities, it will be necessary for them
to cooperate in the inspection, maintenance and testing of these
areas of integration. Each Party will provide advance notice to the
other Party before undertaking any work in these areas, especially
in electrical circuits involving circuit breaker trip and
<PAGE>
close contacts, current transformers or potential transformers and
such work will be performed in accordance with PJM Requirements and
Good Utility Practice.
3.17.2 Transmission System Maintenance. Pepco
shall consult with Generator regarding timing of scheduled
maintenance of the Interconnection Facilities or the transmission
facilities of the Transmission System which Pepco or the
Transmission Operator performs and which might reasonably be
expected to affect the Station. Pepco shall, to the extent
practicable, schedule any testing, shutdown, or withdrawal of said
facilities to coincide with Generator's scheduled outages for the
Station. To facilitate such consultation and to the extent the
information is not available from the PJM System Operator in a
timely manner, in June of each year, or on another date mutually
acceptable to the Parties, Generator shall furnish Pepco with
non-binding preliminary generator maintenance schedules
covering the upcoming two years and any material changes thereto.
In the event Pepco is unable to schedule the outage of its
facilities to coincide with Generator's schedule, Pepco shall
notify Generator as soon as practicable of the reasons for the
facilities' outage, of the time scheduled for the outage to take
place, and of its expected duration.
3.18 Safety
3.18.1 General. Pepco agrees with respect to
the Interconnection Facilities and the Transmission System, and
Generator agrees with respect to the Station, that all work
performed by either Party on such facilities which could reasonably
be expected to affect the operations of the other Party shall be
performed in accordance with all applicable PJM Requirements and
Good Utility Practice.
3.18.2 Switching Tagging and Grounding . Each
Party shall comply with the Switching, Tagging and Grounding Rules.
Pepco will notify Generator of any changes in its Switching,
Tagging and Grounding Rules. Generator shall be responsible for
all switching, tagging and grounding on Generator's side of the
Point of Interconnection and, except for Generator Facilities,
Pepco shall be responsible for all switching, tagging and
grounding on its side of the Point of Interconnection.
3.19 Environmental Compliance and Procedures
3.19.1 Each Party shall be responsible for
complying with all Environmental Laws applicable to it with respect
to its facilities or property.
<PAGE>
3.19.2 A Party shall notify the other Party
first verbally and then in writing, of any Releases of a Hazardous
Substance or any type of remediation activities related thereto as
soon as possible but no later than twenty-four (24) hours after the
occurrence if within the reasonable judgment of the Party said
activities could reasonably be expected to have a material adverse
effect upon the operations of the other Party and shall promptly
furnish to the other Party copies of any reports filed with
any governmental agencies covering such events. This Section
3.19.2 does not effect any allocation of liability with respect to
the Station pursuant to the Asset Sale Agreement.
3.19.3 Neither Party shall knowingly take any
actions which might reasonably be expected to have a material
adverse environmental impact upon the operations of the other Party
without prior written notification and agreement between then
Parties.
3.20 Operating Committee. The Parties shall establish
an operating committee consisting of one representative for each
Party ("Operating Committee"). The Operating Committee shall act
only by unanimous agreement or consent. The Parties shall
designate their respective representatives to the Operating
Committee, plus an alternate by written notice. Each Party's
representative on the Operating Committee is authorized
to act on behalf of such Party with respect to any matter arising
under this Agreement which is to be decided by the Operating
Committee, however, the Operating Committee shall not have any
authority to modify or otherwise alter the rights and obligations
of the Parties hereunder. The Operating Committee shall develop
and implement suitable policies and procedures with which to
coordinate the interaction of the Parties with respect to the
performance of their duties and obligations under this Agreement.
ARTICLE 4
OPERATIONS
4.1 General
4.1.1 The Parties agree to operate their
respective equipment that could reasonably be expected to have a
material effect on the operations of the other Party in a safe and
efficient manner and in accordance with PJM Requirements and Good
Utility Practice, and otherwise in accordance with the terms of
this Agreement.
4.1.2 Generator shall comply with the
requests, orders, and directives of Pepco with respect to
Interconnection Service to the extent such requests, orders
<PAGE>
or directives are (a) issued pursuant to PJM Requirements or Good
Utility Practice, (b) not discriminatory; and (c) otherwise in
accordance with this Agreement or applicable tariffs.
4.1.3 In the event Generator believes that a
request, order, or directive of Pepco exceeds the limitations in
this Section 4.1.2, it shall nevertheless comply with the request,
order, or directive pending resolution of the dispute under Article
12. The Parties agree to cooperate in good faith to expedite the
resolution of any disputes arising under this Section 4.1.
4.2 Generator's Operating Obligations
4.2.1 General. Generator shall request
permission from the Transmission Operator, the PJM System Operator
or the PJM Interconnection LLC, as applicable, prior to opening
and/or closing circuit breakers in accordance with applicable
switching and operations procedures and Good Utility Practice.
(a) Generator shall carry out all switching
orders from the Transmission Operator, the PJM System Operator, or
the PJM Interconnection LLC, in a timely manner and in accordance
with PJM Requirements and Good Utility Practice.
(b) Generator shall (i) comply with Pepco's
system restoration plan and black start criteria applicable to the
Station as configured as of the Effective Date or (ii) if the
Station's configuration is modified, provide alternative service
restoration and black start capability in accordance with PJM
Requirements. Generator shall ensure that operating
personnel at the Station are trained to implement such system
restoration or black start plans. The Generator shall test the
Station's black-start combustion-turbines annually to confirm that
the black-start combustion-turbines will start without an external
power supply. The Generator shall test the Station's steam
turbine-generators and those combustion-turbine generators that
would be required to be black-started in accordance with Pepco's
Emergency Conditions and System Restoration Manual, as revised from
time to time, and plant restoration procedures, at least once
every three years. Testing shall confirm the ability of a
generating unit or Station to go from a shut down condition to an
operating condition and start delivering power without assistance
from the Transmission System. These testing requirements shall
remain in place until PJM promulgates specific rules governing
black-start testing.
<PAGE>
(c) The electricity supplied by Generator to
the Point of Interconnection shall be in the form of three-phase 60
Hertz alternating current at the nominal system voltage.
(d) Generator's equipment shall conform with
Good Utility Practice for harmonic distortion and voltage
fluctuation.
4.2.2 Voltage or Reactive Control
Requirements. Unless otherwise agreed to by the Parties or
authorized or directed by the PJM Interconnection LLC, Generator
shall operate the Station with automatic voltage regulators in
service at all times. The voltage regulators will
control voltage at the Points of Interconnection consistent with
the range of voltage prescribed by Pepco or the Transmission System
Operator in accordance with PJM Requirements and Good Utility
Practice.
(a) Generator will operate the Station in
accordance with prescribed voltage schedules pursuant to Section
4.2.2 to the extent the Station is operating within its reactive
generating capability and not violating any electrical constraints.
Should Generator fail to comply with such voltage schedules, Pepco
or the Transmission Operator, as applicable, shall provide written
notice to the Generator of its intent to remedy that failure. If
Generator does not promptly commence appropriate action after
receiving such notice, Pepco or the Transmission Operator may then
take any necessary action at Generator's expense to remedy such
failure, including the installation of capacitor banks or other
reactive compensation equipment necessary to ensure the proper
voltage or reactive supply at the Station including, at a minimum,
by installing such equipment outside any building housing the
Generation Facilities. Pepco shall make, to the extent
feasible, reasonable efforts to minimize the impact of such action
on the operation of the Station.
(b) Generator shall notify the Transmission
Operator if (a) any or all generating units at the Station reaches
a VAR limit, (b) there is any deviation from the voltage schedules
prescribed pursuant to Section 4.2.2 which is outside the limits
permitted by PJM Requirements or Good Utility Practice, or (c) any
automatic voltage regulator is removed from or restored to service.
(c) The Transmission Operator may from time
to time, pursuant to PJM Requirements or Good Utility Practice,
request or direct Generator to adjust generator controls that
impact the Transmission System, such as excitation, droop, and
automatic generation control settings and Generator shall comply
with such request or directions.
<PAGE>
(d) Generator acknowledges that the
Transmission Operator may have the right, to the extent authorized
or directed by the PJM Interconnection LLC, to require reduced or
increased generation of the Station in accordance with PJM
Requirements, or in accordance with applicable rules of the
Transmission Operator.
4.3 Auditing of Accounts and Records. The Parties
shall have the right, during normal business hours, to audit each
other's accounts and records pertaining to transactions under this
Agreement, upon twenty (20) days prior written notice, at the
offices where such accounts and records are maintained, provided,
however, that the audit shall be limited to those portions of the
accounts and records that are related to services provided to
the other Party under this Agreement. Any such audit of a Party's
accounts and records will be at the expense of the auditing Party,
shall not be made more frequently than once in any twelve (12)
month period, and no such audit may be made with respect to
accounts and records relating to periods more than twenty-four (24)
months prior to the date of the audit notice. The Party being
audited will be entitled to review the audit report and
any supporting materials. The Party conducting the audit shall
maintain the confidentiality of all information obtained during the
audit in compliance with Article 6 of this Agreement. To the
extent that audited information includes confidential information,
the auditing Party shall designate an independent auditor at its
expense to perform such audit.
ARTICLE 5
COST RESPONSIBILITIES AND BILLING PROCEDURES
5.1 Cost Responsibilities for Interconnection
Service. Except as otherwise expressly stated herein, Generator
shall not be responsible for any costs arising from Pepco's
provision of Interconnection Service or local services to
Generator, except for those costs specified in Sections
3.2.1, 3.2.2, 3.4.1, and 3.15 or arising from the liability or
indemnification provisions of this Agreement.
5.2 Cost Responsibilities for Local Services. Except
as otherwise expressly provided herein or agreed to by the Parties,
each Party shall be responsible for the costs for local services
provided to the other Party in Sections 3.10 and 3.11 as set forth
in said sections.
5.3 Billing Procedures
<PAGE>
(a) Within ten (10) days after the first day of
each calendar month, each Party shall provide the other Party with
a written invoice for any payments due from the other Party for
services provided in the previous month.
(b) Each invoice shall (i) delineate the month
in which the services were provided, (ii) fully describe the
services rendered, (iii) be itemized to reflect the services
performed or provided, and (iv) provide reasonable detail as to the
calculation of the amount involved.
(c) All invoices shall be paid within fifteen
(15) days after receipt, but not earlier than the 25th day of the
month in which the invoice is rendered. All payments shall be made
in immediately available funds payable to the other Party, or by
wire transfer to a bank designated in writing by such Party.
Payment of invoices shall not relieve the paying Party from any
responsibilities or obligations it has under this Agreement,
nor shall such payment constitute a waiver of any claims arising
hereunder.
5.3.2 To the extent that, for any billing
period, Generator is obligated to pay to Pepco amounts due and
calculated pursuant to Section 5.3, Pepco may use such amounts as
a set-off against any amounts owed by Pepco to Generator under this
Section 5.3.
5.3.3 Interest on any unpaid amounts shall be
calculated in accordance with the methodology specified for
interest on refunds in FERC regulations at 18 C.F.R. Section
35.19a(a)(2)(iii). Interest on delinquent amounts shall be
calculated from the due date of the bill to the date of payment.
When payments are made by mail, bills shall be considered as having
been paid on the date of receipt by the other Party.
5.4 Billing Disputes. In the event of a billing
dispute between the Parties, each Party shall continue to provide
services as long as the other Party continues to make all payments
not in dispute. Payment of invoices by either Party shall not
relieve the paying Party from any responsibilities or obligations
it has under this Agreement; nor shall it constitute a waiver of
any claims arising hereunder.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidentiality Obligations of Pepco. Pepco
shall hold in confidence, unless compelled to disclose by judicial
or administrative process or other provisions of law, all documents
and information furnished by Generator in
<PAGE>
connection with this Agreement marked "Confidential" or
"Proprietary." Except to the extent that such information or
documents are (i) generally available to the public other than as
a result of a disclosure by Pepco in breach of this Agreement, (ii)
available to Pepco on a non-confidential basis prior to disclosure
to Pepco by Generator, or (iii) available to Pepco on a
non-confidential basis from a source other than Generator, provided
that such source is not known, and by reasonable effort could not
be known, by Pepco to be bound by a confidentiality agreement with
Generator or otherwise prohibited from transmitting the information
to Pepco by a contractual, legal or fiduciary obligation, Pepco
shall not release or disclose such information to any other person,
except to its employees, representatives or agents on a
need-to-know basis, in connection with this Agreement who has not
first been advised of the confidentiality provisions of this
Section 6.1 and has agreed in writing to comply with such
provisions. In no event shall such information be disclosed in
violation of the requirements of FERC Orders 889 and 889-A, and any
successor thereto. Pepco shall promptly notify Generator
if it receives notice or otherwise concludes that the production of
any information subject to this Section 6.1 is being sought under
any provision of law and Pepco shall use reasonable efforts in
cooperation with Generator to seek confidential treatment for such
confidential information provided thereto.
6.2 Confidentiality Obligations of Generator.
Generator shall hold in confidence, unless compelled to disclose by
judicial or administrative process or other provisions of law, all
documents and information furnished by Pepco in connection with
this Agreement marked "Confidential" or "Proprietary." Except to
the extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure by
Generator in breach of this Agreement, (ii) available to Generator
on a non-confidential basis prior to disclosure to Generator by
Pepco, or (iii) available to Generator on a non-confidential basis
from a source other than Pepco, provided that such source is not
known, and by reasonable effort could not be known, by Generator to
be bound by a confidentiality agreement with Pepco or otherwise
prohibited from transmitting the information to Generator by a
contractual, legal or fiduciary obligation, Generator shall not
release or disclose such information to any other person, except to
its employees, representatives or agents on a need-to-know basis,
in connection with this Agreement who has not first been advised of
the confidentiality provisions of this Section 6.2 and has agreed
in writing to comply with such provisions. In no event shall such
information be disclosed in violation of the requirements of FERC
Orders 889 and 889-A, and any successor thereto. Generator shall
promptly notify Pepco if it receives notice or otherwise concludes
that the production of any information subject to this Section 6.2
is being sought under any provision of law and Generator shall use
reasonable efforts in cooperation with Pepco to seek confidential
treatment for such confidential information provided thereto.
<PAGE>
6.3 Confidentiality of Audits. The independent
auditor performing any audit, as referred to in Section 4.3, shall
be subject to a confidentiality agreement between the auditor and
the Party being audited. Such audit information shall be treated
as confidential except to the extent that its disclosure is
required by regulatory or judicial order, for reliability purposes
pursuant to PJM Requirements or Good Utility Practice, and pursuant
to the FERC's rules and regulations. Except as provided herein,
neither Party will disclose the audit information to any third
party, without the other Party's prior written consent. Audit
information in the hands of the Party not being audited shall be
subject to all provisions of Section 6.1 or 6.2, above, as
applicable.
6.4 Remedies. The Parties agree that monetary
damages would be inadequate to compensate a Party for the other
Party's breach of its obligations under Section 6.1 or 6.2, above,
as applicable. Each Party accordingly agrees, subject to Article
8, that the other Party shall be entitled to equitable relief, by
way of injunction or otherwise, if the first Party breaches or
threatens to breach its obligations under Section 6.1 or
6.2 of this Agreement, as applicable, which equitable relief shall
be granted without bond or proof of damages, and the receiving
Party shall not plead in defense that there would be an adequate
remedy at law.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. Each of the following shall
constitute an Event of Default by the a defaulting Party under this
Agreement:
(a) The failure by a Party to pay any amount
due within twenty (20) calendar days after receipt of written
notice of nonpayment by the other Party, unless the payment of such
amount is disputed in good faith, in which event Section 5.5 shall
apply;
(b) A Party's breach of any material term or
condition of this Agreement, including but not limited to any
material breach of a representation, warranty or covenant made in
this Agreement which, after receiving written notice of the breach
from the non-breaching Party (such notice to set forth in
reasonable detail the nature of the default and, where known and if
applicable, the steps necessary to cure such default), (i) the
breaching Party fails to cure, if curable, within thirty (30) days
following receipt of the notice or (ii) if such default is of such
a nature that it cannot be cured within thirty (30) days following
receipt of such notice, the breaching Party fails within such
thirty (30) days to commence the necessary cure and fails at any
time thereafter diligently and continuously to
<PAGE>
prosecute such cure to completion provided that the cure is
completed no later than 180 days after the receipt of the default
notice;
(c) The appointment of a receiver, liquidator
or trustee for either Party, and such receiver, liquidator or
trustee is not discharged within sixty (60) days;
(d) The entry of a decree or decrees
adjudicating a Party as bankrupt or insolvent, and such decree or
decrees are not stayed or discharged within sixty (60) days; or
(e) The filing of voluntary petitions for
bankruptcy under any federal or state bankruptcy law by a Party.
7.2 Remedies
7.2.1 If the breaching Party disputes that an
Event of Default under Section 7.1.(b) has occurred, the breaching
Party shall nonetheless comply with this Section 7.2 pending the
resolution of the dispute. If it is determined that no breach or
Event of Default under Section 7.1(b) existed, the Party alleging
the default shall pay and reimburse the other Party for all
reasonable costs and expenses incurred by it to cure the alleged
default.
7.2.2 Upon the occurrence of an Event of
Default, the non-defaulting Party may (i) exercise all such rights
and remedies as may be available to it at law or equity including
seeking to recover damages caused by such Event of Default, subject
to Article 8 of this Agreement; and/or (ii) terminate this
Agreement. The Parties shall not discontinue the performance
of any one or more of their obligations hereunder due to the
occurrence of an Event of Default during the pendency of any
dispute regarding such Event of Default and until such dispute is
finally resolved except that Pepco may suspend or interrupt service
if necessary for the safe and reliable operation of the
Interconnection Facilities or the Transmission System.
7.2.3 Notwithstanding the foregoing, upon the
occurrence of any Event of Default, the non-defaulting Party shall
be entitled to commence an action to require the defaulting Party
to remedy such default by specifically performance of its duties
and obligations hereunder in accordance with the terms and
conditions hereof.
<PAGE>
7.2.4 Notwithstanding anything in this
Agreement to the contrary, in the event the Generator's failure to
comply with the provisions of Sections 4.1 and 4.2 of this
Agreement is reasonably likely to have an immediate and material
adverse impact on Pepco or the Transmission System, Pepco shall
have the right to take immediately reasonable steps and/or to
exercise immediately all remedies available under this Agreement,
or at law or equity, including the right, after providing as much
notice as is practicable under the circumstances and complying with
the applicable FERC notice requirements regarding termination of
service, to disconnect the Station from the Transmission System.
ARTICLE 8
LIMITATION OF LIABILITY
8.1 Limitation of Pepco's Liability. Pepco does not
guarantee the non-occurrence of, or warrant against, and will have
no liability hereunder for, and the Generator will release Pepco
from all claims or damages associated with, any interruption in the
availability of the Interconnection Facilities, Interconnection
Service or local services pursuant to Section 3.10 or damages to
the Generator's facilities, except to the extent such interruption
or damage is caused by Pepco's gross negligence or willful
misconduct in the performance of its obligations under this
Agreement.
8.2 Limitation on Generator's Liability. Generator
does not guarantee the non-occurrence of, or warrant against, and
will have no liability under this Agreement for, and Pepco will
release Generator from all claims or damages arising under this
Agreement which are associated with any interruption in the
availability of the Station or local services pursuant to
Section 3.11, any reduction, curtailment, interruption or reduction
of energy from the Station, or damage to Pepco's facilities, except
to the extent such interruption or damage is caused by Generator's
gross negligence or willful misconduct in the performance of its
obligations under the Agreement.
8.3 Consequential Damages. Except for indemnity
obligations set forth in Article 9, neither Party, nor their
respective officers, directors, agents, employees, Affiliates, or
successors or assigns of any of them, shall be liable to the other
Party or its Affiliates, officers, directors, agents, employees,
successors or assigns for claims, suits, actions or causes of
action for incidental, punitive, special, indirect, multiple or
consequential damages (including, without limitation,
replacement power costs, lost revenues, claims of customers,
attorneys' fees and litigation costs) connected with, or resulting
from, performance or non-performance of this Agreement, or any
actions undertaken in connection with or related to this Agreement,
including, without limitation, any such damages which are based
upon causes of action for
<PAGE>
breach of contract, tort (including negligence and
misrepresentation), breach of warranty or strict liability. The
provisions of this Section 8.3 shall apply regardless of fault and
shall survive termination, cancellation, suspension, completion, or
expiration of this Agreement.
ARTICLE 9
INDEMNIFICATION FOR THIRD PARTY CLAIMS
9.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against
any and all claims, liabilities, costs, damages, and expenses
(including, without limitation, reasonable attorney and expert
fees, and disbursements incurred by any of them in any action or
proceeding between Pepco and a third party or Generator) for damage
to property of unaffiliated third parties, injury to or death of
any person, including Pepco's employees or any third parties, to
the extent caused, by the negligence or willful misconduct of
Generator's and/or its officers, directors, employees, agents,
contractors, subcontractors or invitees arising out of or connected
with Generator's performance or breach of this Agreement, or the
exercise by Generator of its rights hereunder. In furtherance of
the foregoing indemnification and not by way of limitation thereof,
Generator hereby waives any defense it might otherwise have under
applicable workers' compensation laws.
9.2 Pepco's Indemnification. Pepco shall indemnify,
hold harmless, and defend Generator and its Affiliates, as the case
may be, and their respective officers, directors, employees,
agents, contractors, subcontractors, invitees, successors and
permitted assigns from and against any and all claims, liabilities,
costs, damages, and expenses (including, without limitation,
reasonable attorney and expert fees, and disbursements
incurred by any of them in any action or proceeding between the
Generator and a third party or Pepco) for damage to property of
unaffiliated third parties, injury to or death of any person,
including Generator's employees or any third parties, to the extent
caused by the negligence or willful misconduct of Pepco and/or its
officers, directors, employees, agents, contractors, subcontractors
or invitees arising out of or connected with Pepco's performance or
breach of this Agreement, or the exercise by Pepco of its rights
hereunder. In furtherance of the foregoing indemnification
and not by way of limitation thereof, Pepco hereby waives any
defense it might otherwise have under applicable workers'
compensation laws.
9.3 Indemnification Procedures. If either Party
intends to seek indemnification under this Article 9 from the other
Party, the Party seeking indemnification shall give the other Party
notice of such claim within ninety (90)
<PAGE>
days of the later of the commencement of, or the Party's actual
knowledge of, such claim or action. Such notice shall describe the
claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the claim that has been, or may be
sustained by, said Party. To the extent that the other Party will
have been actually and materially prejudiced as a result of the
failure to provide such notice, such notice will be a condition
precedent to any liability of the other Party under the provisions
for indemnification contained in this Agreement. Neither Party may
settle or compromise any claim without the prior consent of the
other Party; provided, however, said consent shall not be
unreasonably withheld or delayed.
9.4 Survival. The indemnification obligations of
each Party under this Article 9 shall continue in full force and
effect regardless of whether this Agreement has either expired or
been terminated or canceled.
ARTICLE 10
INSURANCE
10.1 Insurance Coverage. The Parties shall maintain
at their own cost and expense, fire, liability, worker's
compensation, and other forms of insurance relating to their
respective property and facilities subject to this Agreement in the
manner, and amounts, and for the durations as is customary in the
electric utility industry.
10.2 Certificates of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance coverage obtained in accordance with this Article 10, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within ten (10) business
days of receiving notice of cancellation, change, amendment
or renewal of any insurance policy required pursuant to Section
10.1 above.
10.3 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
10.1, above, as regards liability under this Agreement; and each
Party shall waive its rights of recovery against the other for any
loss or damage covered by such policy.
<PAGE>
ARTICLE 11
FORCE MAJEURE
11.1 Effect of Force Majeure. Notwithstanding
anything in this Agreement to the contrary, Generator and Pepco
shall not be liable in damages or otherwise or responsible to the
other for its failure to carry out any of its obligations under
this Agreement (except for the obligation to pay sums of money due
and owing hereunder) to the extent that they are unable to so
perform or are prevented from performing by an event of Force
Majeure and has complied with Section 11.3.
11.2 Force Majeure Defined. Force Majeure means those
causes beyond the reasonable control of the Party affected, which
by the exercise of reasonable diligence, including Good Utility
Practice, that Party is unable to prevent, avoid, mitigate, or
overcome, including the following: any act of God, labor
disturbance (including a strike), act of the public enemy, war,
insurrection, riot, fire, storm or flood, explosion, breakage or
accident to machinery or equipment, electric system disturbance),
order, regulation or restriction imposed by governmental, military
or lawfully established civilian authorities, or any other cause of
a similar nature beyond a Party's reasonable control.
11.3 Notification. A Party shall not be entitled to
rely on the occurrence of an event of Force Majeure as a basis for
being excused from performance of its obligations under this
Agreement, unless the Party relying on the event or condition
shall: (a) provide prompt written notice of such Force Majeure
event to the other Party, including an estimation of its expected
duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts in
accordance with Good Utility Practice to continue to perform its
obligations under this Agreement; (c) expeditiously take action to
correct or cure the event or condition excusing performance; (d)
exercise all reasonable efforts to mitigate or limit damages to the
other Party; and (e) provide prompt notice to the other Party of
the cessation of the event or condition giving rise to its excuse
from performance. Subject to this Section 11.3, any obligation
under this Agreement shall be suspended only to the extent caused
by such Force Majeure and only during the continuance of any
inability of performance caused by such Force Majeure but for no
longer period.
ARTICLE 12
DISPUTES
12.1 Disputes
<PAGE>
12.1.1 A Party with a claim or dispute under
this Agreement shall submit to the Operating Committee a
notification of such claim or dispute within sixty (60) days after
the circumstances that gave rise to the claim or the question or
issue in dispute. The notification shall be in writing and shall
include a concise statement of the claim or the issue or question
in dispute, a statement of the relevant facts and documentation to
support the claim. In the event the Operating Committee is
unable, in good faith, to resolve their disagreement in a manner
satisfactory to both Parties within thirty (30) days after receipt
by the Operating Committee of a notification specifying the claim,
issue or question in dispute, the Parties shall refer the dispute
to their respective senior management. If, after using their good
faith best efforts to resolve the dispute, senior management cannot
resolve the dispute within thirty (30) days, the Parties shall
utilize the arbitration procedures set forth below in Section 12.2
to resolve a dispute, provided that nothing herein or therein
shall prohibit either Party from at any time requesting from a
court of competent jurisdiction a temporary restraining order,
preliminary injunction, or other similar form of equitable relief
to enforce performance of the provisions of this Agreement.
12.2 Arbitration.
(a) Unless the Parties other wise mutually
agree in writing to another form of dispute resolution such as
dispute resolution under the PJM Agreement or the MAAC agreement,
any arbitration initiated under this Agreement shall be conducted
before a single neutral arbitrator appointed by the Parties within
thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an arbitrator,
such arbitration shall be appointed by the American Arbitration
Association. Unless the Parties agree otherwise, the arbitrator
shall be an attorney or retired judge with at least fifteen (15)
years of experience, and shall not have any current or past
substantial business or financial relationships with any Party to
the arbitration. If possible, the arbitrator shall have experience
in the electric utility industry. Unless otherwise agreed, the
arbitration shall be conducted in accordance with the American
Arbitration Association's Commercial Arbitration Rules, then in
effect. Any arbitration proceedings, decision or award rendered
hereunder and the validity, effect and interpretation of this
arbitration agreement shall be governed by the Federal Arbitration
Act of the United States, 9 U.S.C. Section 1 et seq. The location
of any arbitration hereunder shall be in the District of Columbia.
(b) The arbitration shall, if possible, be
concluded not later than six (6) months after the date that it is
initiated. The arbitrator shall be authorized only to interpret
and apply the provisions of this Agreement or any related
agreements entered into under this Agreement and shall have no
power to modify
<PAGE>
or change any of the above in any manner. The arbitrator shall have
no authority to award punitive or multiple damages or any damages
inconsistent with this Agreement. The arbitrator shall, within
thirty (30) days of the conclusion of the hearing, unless such time
is extended by agreement of the Parties, notify the Parties in
writing of his or her decision, stating his or her reasons for such
decision and separately listing his or her findings of fact and
conclusions of law. The decision of the arbitrator rendered in such
a proceeding shall be final and binding on the Parties. Judgment
on the award may be entered upon it in any court having
jurisdiction.
12.3 FERC Dispute Resolution. Nothing in this
Agreement shall preclude, or be construed to preclude, any Party
from filing a petition or complaint with FERC with respect to any
arbitrable claim over which FERC has jurisdiction. In such case,
the other Party may request FERC to reject or to waive
jurisdiction. If FERC rejects or waives jurisdiction with
respect to all or a portion of the claim, the portion of the claim
not so accepted by FERC shall be resolved through arbitration, as
provided in this Agreement. To the extent that FERC asserts or
accepts jurisdiction over the claim, the decision, finding of fact
or order of FERC shall be final and binding, subject to judicial
review under the Federal Power Act, and any arbitration
proceedings that may have commenced with respect to the claim prior
to the assertion or acceptance of jurisdiction by FERC shall be
terminated.
ARTICLE 13
REPRESENTATIONS
13.1 Representations of Pepco. Pepco hereby
represents and warrants to Generator as follows:
(a) Incorporation. Pepco is a corporation duly
organized, validly existing and in good standing under the laws of
the District of Columbia and the Commonwealth of Virginia, and has
all requisite corporate power and authority to own, lease and
operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Pepco has all necessary
corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery by Pepco of this Agreement and the
consummation by Pepco of the transactions contemplated hereunder
have been duly and validly authorized by the Board of Directors of
Pepco or by a committee thereof to whom such authority has been
delegated and no other corporate proceedings on the part of Pepco
are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly
<PAGE>
executed and delivered by Pepco and, assuming that this Agreement
constitutes a valid and binding agreement of Generator, constitutes
a valid and binding agreement of Pepco, enforceable by Pepco in
accordance with its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of
this Agreement by Pepco nor performance by Pepco of its obligations
hereunder will (A) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-laws of Pepco,
(B) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Pepco
or any of its subsidiaries is a party or by which any of their
respective assets may be bound or (C) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
Pepco, or any of its assets, except in the case of clauses (B) and
(C) for such failures to obtain a necessary consent, defaults and
violations which would not, individually or in the aggregate,
have a material adverse effect on the ability of Pepco to discharge
its obligations under this Agreement (a "Pepco Material Adverse
Effect").
(ii) No declaration, filing or registration
with, or notice to, or authorization, consent or approval of any
governmental authority is necessary for performance by Pepco of its
obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Pepco Material Adverse Effect.
13.2 Representations of Generator. Generator hereby
represents and warrants to Pepco as follows:
(a) Incorporation. Generator is a
[corporation] duly [incorporated], validly existing and in good
standing under the laws of the State of __________, and has all
requisite [corporate] power and authority to own, lease and operate
its material assets and properties and to carry on its business as
now being conducted.
(b) Authority. Generator has all necessary
[corporate] power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by the Generator of this Agreement and
the consummation by Generator of the transactions contemplated
hereby have been duly and validly authorized the [Board of
Directors] of Generator
<PAGE>
or by a committee thereof to whom such authority has been delegated
and no other [corporate] proceedings on the part of Generator are
necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Generator and, assuming that this
Agreement constitutes a valid and binding agreement of
Pepco, constitutes a valid and binding agreement of Generator,
enforceable against Generator in accordance with its terms.
(c) Consents and Approvals.
(i) Neither the execution and delivery of
this Agreement by Generator nor performance by Generator of its
obligations hereunder will (A) conflict with or result in any
breach of any provision of the [Certificate of Incorporation or
By-laws] of Generator, (B) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or
obligation to which Generator or any of its subsidiaries is a party
or by which any of their respective assets may be bound or (C)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Generator, or any of its assets, except in
the case of clauses (B) and (C) for such failures to obtain a
necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse
effect on the ability of Generator to discharge its obligations
under this Agreement (a "Generator Material Adverse Effect").
(ii) No declaration, filing or registration
with, or notice to, or authorization, consent or approval of any
Governmental Authority is necessary for performance by Generator of
its obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Generator Material Adverse Effect.
ARTICLE 14
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
14.1 Assignment.
(a) Except as set forth in this Article 14,
neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by either Party hereto,
without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed.
<PAGE>
(b) Subject to Section 14.2, upon ten (10) days
prior written notice to Generator, Pepco may assign this Agreement,
and Pepco's rights, interests and obligations hereunder, to (i) an
Affiliate of Pepco that owns all or part of Pepco's Transmission
System or (ii) an independent system operator or independent
transmission company whose control over all or part of Pepco's
Transmission System has been approved by the FERC.
(c) Subject to Section 14.2, Generator may (a)
assign any of its rights and obligations hereunder to an Affiliate
to the extent necessary for the Generator to qualify as an exempt
wholesale generator under Section 32 of the Public Utility Holding
Company Act of 1935, as amended, and (b) assign, transfer, pledge
or otherwise dispose of its rights and interests hereunder to a
trustee, lending institution, or other Person for the purposes
of financing or refinancing the Station, including upon or pursuant
to the exercise of remedies under such financing or refinancing, or
by way of assignments, transfers, conveyances of dispositions in
lieu thereof; provided, however, that no such assignment shall
relieve or in any way discharge Generator from the performance of
its duties and obligations under this Agreement. Pepco agrees to
execute and deliver, at Generator's expense, such documents as may
be reasonably necessary to accomplish any such assignment,
transfer, conveyance, pledge or disposition of rights hereunder
for purposes of the financing or refinancing of the Facility, so
long as Pepco's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
(d) Subject to Section 14.2, either Party may
assign this Agreement to a successor to all or substantially all of
the assets of such Party by way of merger, consolidation, sale or
otherwise, provided such successor assumes in writing and becomes
liable for all of such Party's duties and obligations hereunder.
14.2 Release of Rights and Obligations. No
assignment, transfer, conveyance, pledge or disposition of rights,
interests, duties or obligations under this Agreement by a Party
shall relieve that Party from liability and financial
responsibility for the performance thereof after any such transfer,
assignment, conveyance, pledge or disposition unless and until
(i) the transferee or assignee shall agree in writing to assume the
obligations and duties of that Party under this Agreement and to
impose such obligations on subsequent permitted transferees and
assignees and (ii) the non-assigning Party has consented in writing
to such assumption and to a release of the assigning Party from
such liability, such consent not to be unreasonably withheld or
delayed.
14.3 Change in Corporate Identity. If Generator
terminates its existence as a [corporate] entity by merger,
acquisition, sale, consolidation or otherwise, or if all or
substantially all of Generator's assets are transferred to another
person or
<PAGE>
business entity without complying with this Article 14, Pepco shall
have the right, enforceable in a court of competent jurisdiction,
to enjoin Generator's successor from using the Station in any
manner that does not comply with the requirements of this Agreement
or that impedes Pepco's ability to carry on its ongoing business
operations.
14.4 Successors and Assigns. This Agreement and all of
the provisions hereof are binding upon, and inure to the benefit
of, the Parties and their respective successors and permitted
assigns.
ARTICLE 15
SUBCONTRACTORS
Nothing in this Agreement shall prevent the Parties
from utilizing the services of subcontractors as they deem
appropriate, provided, however, the Parties agree that, where
applicable, all said subcontractors shall comply with the terms and
conditions of this Agreement. The creation of any subcontract
relationship shall not relieve the hiring Party of any of
its obligations under this Agreement. Each Party shall be fully
responsible to the other Party for the acts and/or omission of any
subcontractor it hires as if no subcontract had been made. Any
obligation imposed by this Agreement upon the Parties, where
applicable, shall be equally binding upon and shall be construed as
having application to any subcontractor. The Parties shall
each be liable for, indemnify, and hold harmless the other Party,
their Affiliates and their officers, directors, employees, agents,
servants, and assigns from and against any and all claims, demands,
or actions, from the other Party's subcontractors; and shall pay
all costs, expenses and legal fees associated therewith and all
judgments, decrees and awards rendered therein. No subcontractor
is intended to be or shall be deemed a third-party beneficiary of
this Agreement.
ARTICLE 16
NOTICES
16.1 Emergency Notices. At or prior to the Effective
Date, each Party shall indicate to the other Party, by notice, the
appropriate person during each eight-hour work shift to contact in
the event of an emergency, a scheduled or forced interruption or
reduction in services. The notice last received by a Party shall
be effective until modified in writing by the other Party.
16.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to
<PAGE>
the Parties at the following addresses (or at such other address
for a Party as shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) ________________
Attention: ___________________
if to Generator, to:
c/o Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
ARTICLE 17
AMENDMENTS
17.1 Amendments. Except as set forth in Sections 2.2
and 17.2 of this Agreement, this Agreement may be amended,
modified, or supplemented only by written agreement of both Pepco
and Generator.
17.2 FERC Proceedings
(a) Pepco may unilaterally make application to
FERC under Section 205 of the Federal Power Act and pursuant to the
FERC's rules and regulations promulgated thereunder for, or
exercise any rights it may have under Section 206 of the Federal
Power Act and the regulations thereunder with respect to, a change
in any rates, terms and conditions, charges, classification of
service, rule or regulation for any services Pepco provides
under this Agreement over which FERC has jurisdiction.
(b) Generator may exercise its rights under
Section 205 or 206 of the Federal Power Act and pursuant to FERC's
rules and regulations promulgated thereunder with respect to any
rate, term, condition, charge, classification of service, rule or
regulation for any services provided under this Agreement over
which FERC has jurisdiction.
<PAGE>
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 Waiver. Except as otherwise provided in this
Agreement, any failure of a Party to comply with any obligation,
covenant, agreement, or condition herein may be waived by the Party
entitled to the benefits thereof only by a written instrument
signed by the Party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
18.2 Labor Relations. The Parties agree to
immediately notify the other Party, verbally and then in writing,
of any labor dispute or anticipated labor dispute which may
reasonably be expected to affect the operations of the other Party.
18.3 No Third Party Beneficiaries. Nothing in this
Agreement is intended to confer upon any other person except the
Parties any rights or remedies hereunder or shall create any third
party beneficiary rights in any person. No provision of this
Agreement shall create any rights in any such persons in respect of
any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement except as expressly
provided for thereunder.
18.4 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland (regardless of the laws that
might otherwise govern under applicable principles of conflicts of
law).
18.5 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.
18.6 Interpretation. When a reference is made in this
Agreement to an Article, Section, Schedule or exhibit, such
reference shall be to an Article or Section of, or Schedule or
exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this
<PAGE>
Agreement as a whole and not to any particular provision of this
Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Unless otherwise expressly stated
otherwise herein, the word "day" shall mean any calendar day
including weekends and holidays. Any agreement, instrument,
statute, regulation, rule or order defined or referred to herein or
in any agreement or instrument that is referred to herein means
such agreement, instrument, statute, regulation, rule or order as
from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and
(in the case of statutes, regulations, rules or orders) by
succession of comparable successor statutes, regulations, rules or
orders and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its
permitted successors and assigns. Each Party acknowledges that it
has been represented by counsel in connection with the review and
execution of this Agreement, and, accordingly, there shall be no
presumption that this Agreement or any provision hereof be
construed against the Party that drafted this Agreement.
18.7 Jurisdiction and Enforcement. Each of the
Parties irrevocably submits to the exclusive jurisdiction of the
federal and state courts of the State of Maryland for the purposes
of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the
Parties agrees to commence any action, suit or proceeding relating
hereto either in the federal courts of the State of Maryland or, if
such suit, action or proceeding may not be brought in such
court for jurisdictional reasons, in the state courts of the State
of Maryland. Each of the Parties further agrees that service of
process, summons, notice or document by hand delivery or U.S.
registered mail at the address specified for such Party in Section
16.2 (or such other address specified by such Party from time to
time pursuant to Section 16.2) shall be effective service of
process for any action, suit or proceeding brought against such
Party in any such court. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in the federal and state courts of
the State of Maryland and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
18.8 Entire Agreement. This Agreement, Asset Sale
Agreement, the Confidentiality Agreement and the Ancillary
Agreements including the Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein and
other contracts, agreements and instruments contemplated hereby or
thereby, embody the entire agreement and understanding of the
Parties in respect of the
<PAGE>
transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or
undertakings other than those expressly set forth or referred to
herein or therein. This Agreement, the Asset Sale Agreement and
the Ancillary Agreements supersede all prior agreements and
understandings between the Parties with respect to the
transactions contemplated by this Agreement other than the
Confidentiality Agreement.
18.9 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
18.10 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
18.11 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF, Pepco and Generator have caused
this Interconnection Agreement (Dickerson) to be signed by their
respective duly authorized officers as of the date first above
written.
POTOMAC ELECTRIC POWER COMPANY
By: ____________________________
Name:
Title:
[GENERATOR]
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE A
DEFINITIONS
Part A. Capitalized terms not defined in the body of the
Agreement shall have the meaning set forth in Part A of
this Schedule A. (Part B of this Schedule A sets forth
capitalized terms defined within the Agreement.)
(1) "Affiliate" has the meaning set forth in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
(2) "Ancillary Agreements" has the meaning set forth
in the Asset Sale Agreement.
(3) "Closing" has the meaning set forth in the Asset
Sale Agreement.
(4) "Confidentiality Agreement" has the meaning set
forth in the Asset Sale Agreement.
(5) "Costs" means all costs, including without
limitation, any Taxes, costs of acquiring real property, costs and
fees for permits, franchises, licenses and regulatory approvals
except to the extent that such costs are allocated to a party or
parties other than the Generator by the PJM Interconnection LLC or
otherwise under the PJM Tariff or PJM Agreement.
(6) "Easement" means the Easement Agreement dated
__________, 2000, between the Parties with respect to the Station.
(7) "Environmental Laws" means all former, current
and future federal, state, local and foreign laws (including common
law), treaties, regulations, rules, ordinances, codes, decrees,
judgments, directives or orders (including consent orders) and
environmental permits, in each case, relating to pollution or
protection of the environment or natural resources, including laws
relating to Releases or threatened Releases, or otherwise
relating to the generation, manufacture, processing, distribution,
use, treatment, storage, arrangement for disposal, transport,
recycling or handling, of Hazardous Substances.
(8) "Emergency" means (a) with respect to Pepco, a
condition or situation which Pepco, the PJM Interconnection LLC,
the PJM System Operator or the Transmission Operator deem
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Transmission System, Pepco's
electrical system or the electrical or transmission systems
of others to which the Transmission System or Pepco's electrical
system are directly or indirectly connected and (b) with respect to
the Generator, a condition or situation which the Generator deems
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Station.
(9) "FERC" means the Federal Energy Regulatory
Commission or its successors.
<PAGE>
(10) "Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
(11) "Generator" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
(12) "Generator Facilities" mean the equipment and
facilities owned by the Generator but located on Pepco's property
which are identified in Schedule B of this Agreement.
(13) "Good Utility Practice" means any of the
applicable practices, methods and acts
(a) required by FERC, NERC, MAAC, the PJM
Interconnection LLC, the PJM System Operator, or the successor of
any of them, whether or not the Party whose conduct is at issue is
a member thereof,
(b) required by applicable law or regulations,
(c) required by the Pepco Interconnection
Standards or the policies and standards of Pepco relating to
emergency operations;
(d) otherwise engaged in or approved by a
significant portion of the electric utility industry during the
relevant time period;
which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost consistent
with law, regulation, good business practices, reliability, safety,
and expedition. Good Utility Practice is not intended to be
limited to the optimum practice, method, or act to the exclusion of
all others, but rather to be acceptable practices, methods, or acts
generally accepted in the region.
(14) "Hazardous Substances" means (i) any
petrochemical or petroleum products, crude oil or any fraction
thereof, ash, radioactive materials, radon gas, asbestos in any
form, urea formaldehyde foam insulation or polychlorinated
biphenyls, (ii) any chemicals, materials, substances or
wastes defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted
hazardous materials," "extremely hazardous substances," "toxic
substances," "contaminants" or "pollutants" or words of similar
meaning and regulatory effect contained in any Environmental Law or
(iii) any other chemical, material, substance or waste which is
prohibited, limited or regulated by any Environmental Law.
(15) "Interconnection Facilities" means those
facilities or portions of facilities owned or operated by Pepco to
provide Interconnection Service which shall include, but not be
limited to (1) facilities the cost of which is reasonably allocated
to the Interconnection Service provided to the Station, or (2)
Attachment Facilities or Local Upgrade Facilities, as defined
in the PJM Tariff, which are associated with the Interconnection
Service and operated and maintained by Pepco.
<PAGE>
(16) "Interconnection Service" means the services
provided by Pepco which are necessary to connect the Station to the
Transmission System for parallel operation of the Station and to
enable Generator to transmit the energy and ancillary services
produced by the Station to the Transmission System and receive
Station energy service and ancillary services, including
blackstart power, from the Generator's supplier.
(17) "MAAC" means the Mid-Atlantic Area Council, a
reliability council under Section 202 of the Federal Power Act
established pursuant to the MAAC Agreement dated August 1, 1994, or
any successor thereto.
(18) "Maintain" means construct, reconstruct, install,
inspect, repair, replace, operate, patrol, maintain, use,
modernize, expand, upgrade, or other similar activities.
(19) "MDPSC" means the Maryland Public Service
Commission or any successor agency thereto.
(20) "NERC" means North American Electric Reliability
Council or any successor thereto.
(21) "Pepco" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors or assigns.
(22) "Pepco Facilities" means the equipment and
facilities owned by Pepco but located on Generator's property which
are identified in Schedule B of this Agreement.
(23) "Pepco Interconnection Standards" means Pepco's
Interconnection and Parallel Operating Guidelines as amended,
modified or replaced from time to time. A copy of the existing
Pepco Interconnection Standards is attached hereto as Schedule E.
(24) "Point of Interconnection" means each ownership
point of demarcation set forth in Schedule C where capacity, energy
and ancillary services are transferred between the Station and the
Transmission System.
(25) "Pepco Transmission Facilities" means those
transmission, substation, and communication facilities and related
equipment, including the Interconnection Facilities, and any
additions, modifications or replacements thereto, that are utilized
to provide Interconnection Service to the Station.
(26) "PJM" means the Pennsylvania New Jersey-Maryland
interconnected power pool operated under the PJM Agreement and any
successor thereto including any regional transmission operator,
independent system operator, transco, or any other independent
system administrator that possesses operational or planning control
over the Transmission System.
(27) "PJM Agreement" means the Amended and Restated
Operating Agreement of the PJM Interconnection LLC dated as of
June 2, 1997.
<PAGE>
(28) "PJM Control Area" shall mean the control area
recognized by NERC as the PJM Control Area.
(29) "PJM Interconnection LLC" means the independent
system operator of the PJM Control Area pursuant to the PJM
Operating Agreement and the PJM Tariff.
(30) "PJM Generator Connection Agreement" means the
interconnection agreement entered into between the Generator and
the PJM Interconnection LLC pursuant to the PJM Tariff with respect
to the interconnection of the Station and the Transmission System.
(31) "PJM Reliability Agreement" means the Reliability
Assurance Agreement dated June 2, 1997 among the load serving
entities of PJM.
(32) "PJM Requirements" means the rules, regulations
or other requirements of PJM or MAAC contained in or adopted
pursuant to the PJM Agreement, the PJM Tariff or the PJM
Reliability Agreement which are applicable to Pepco, with respect
to the Transmission System or the Interconnection Service, and the
Generator with respect to the Generating Facilities.
(33) "PJM System Operator" shall mean the PJM
Interconnection LLC, energy control center staff responsible for
central dispatch as provided in the PJM Agreement.
(34) "PJM Tariff" means the PJM Open Access
Transmission Tariff providing transmission service within the PJM
Control Area.
(35) "Qualified Personnel" means individuals who
possess any required licenses and are trained for their positions
and duties by Generator and/or Pepco pursuant to Good Utility
Practice.
(36) "Release" means any release, spill, emission,
leaking, dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into the environment (including
ambient air, surface water, groundwater, land surface or subsurface
strata) or within any building, structure, facility or fixture.
(37) "Revenue Meters" means all MWh and MVArh meters,
pulse isolation relays, pulse conversion relays, transducers
required by Pepco or the PJM Interconnection or PJM System Operator
for billing or other purposes, and associated totalizing equipment
and appurtenances and compensation required to measure the transfer
of energy across the Point of Interconnection.
(38) "Station" means the Dickerson Station as defined
in the Asset Sale Agreement.
(39) "Switching, Tagging, and Grounding Rules" means
Pepco's switching, tagging and grounding rules as amended,
modified or replaced from time to time. A copy of the existing
Switching, Tagging and Grounding Rules is attached hereto as
Schedule D.
<PAGE>
(40) "Taxes" means all taxes, surtaxes, charges, fees,
levies, penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including income
taxes, excise, property, sales, transfer, franchise, special
franchise, payroll, recording, withholding, social security or
other taxes, in each case including any interest, penalties or
additions attributable thereto.
(41) "Transmission System" means the facilities owned,
controlled, or operated by Pepco, for purposes of providing
transmission service, including services under the PJM Tariff, and
Interconnection Service.
(42) "Transmission Operator" means the person, or
persons designated by Pepco to coordinate the day to day
interconnection of the Station with the Transmission System.
Part B. The following terms have the meaning specified in the
section of this Agreement set forth opposite to such
term:
Term Agreement Reference
Agreement Preamble
Asset Sale Agreement Preamble
Effective Date Section 2.1
Event of Default Section 8.1
Force Majeure Section 11.1
Initial Period Section 3.10
Operating Committee Section 3.20
Party or Parties Preamble
Term Article 2
<PAGE>
EXHIBIT E-4
INTERCONNECTION AGREEMENT
(Chalk Point)
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
___________________________________
Dated ____________, 2000
<PAGE>
INTERCONNECTION AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 TERM AND TERMINATION 2
2.1 Term 2
2.2 Change in Law 2
2.3 Effect after Termination 2
ARTICLE 3 - CONTINUING OBLIGATIONS AND RESPONSIBILITIES 2
3.1 Interconnection Service 2
3.2 New Construction or Modifications 3
3.2.1 Pepco Construction or Modifications 3
3.2.2 Generator Construction or Modifications 4
3.2.3 Modifications Affecting the Transmission System
or the Station 5
3.3 Access, Easements, Conveyances, Licenses,
and Restrictions 6
3.4 Facility and Equipment Maintenance 7
3.5 Pepco Facilities and Generator Facilities 7
3.6 Equipment Testing Obligations 8
3.7 Inspections 8
3.8 Information Reporting Obligations 9
3.9 Local Services 10
3.9.1 General 10
3.9.2 Temporary Suspension of Local Services 11
3.10 Pepco Provided Services 11
3.11 Generator Provided Services 11
3.12 Optional Services 12
3.13 Metering and Telemetering 12
3.14 Emergency Procedure 13
3.15 Interconnection Service Interruptions 14
3.21.2 SMECO CT Metering and Telemetering 14
3.16 Unit Status Notification 14
3.17 Scheduled Maintenance Notification and Coordination 15
3.17.1 Local Routine Inspection and Maintenance 15
3.17.2 Transmission Sytem Maintenance 15
3.18 Safety 15
3.18.1 General 15
3.18.2 Switching Tagging and Grounding 16
3.19 Environmental Compliance and Procedures 16
3.20 Operating Committee 16
3.21 SMECO CT 17
3.21.1 Information Reporting Obligations 17
3.21.2 SMECO CT Metering and Telemetering 17
3.21.2 SMECO CT Unit Status Notification 18
<PAGE>
3.21.4 SMECO CT Operations 18
ARTICLE 4 - OPERATIONS 20
4.1 General 20
4.2 Generator's Operating Obligations 20
4.2.1 General 20
4.2.2 Voltage or Reactive Control Requirements 21
4.3 Auditing of Accounts and Records 22
ARTICLE 5 - COST RESPONSIBILITIES AND BILLING PROCEDURES 23
5.1 Cost Responsibilities for Interconnection Service 23
5.2 Cost Responsibilities for Local Services 23
5.3 Billing Procedures 23
5.4 Billing Disputes 24
ARTICLE 6 - CONFIDENTIALITY 24
6.1 Confidentiality Obligations of Pepco 24
6.2 Confidentiality Obligations of Generator 24
6.3 Confidentiality of Audits 25
6.4 Remedies 25
ARTICLE 7 - EVENTS OF DEFAULT 26
7.1 Events of Default 26
7.2 Remedies 26
ARTICLE 8 - LIMITATION OF LIABILITY 27
8.1 Limitation of Pepco's Liability 27
8.2 Limitation on Generator's Liability 28
8.3 Consequential Damages 28
ARTICLE 9 - INDEMNIFICATION FOR THIRD PARTY CLAIMS 28
9.1 Generator's Indemnification 28
9.2 Pepco's Indemnification 29
9.3 Indemnification Procedures 29
9.4 Survival 29
ARTICLE 10 - INSURANCE 30
10.1 Insurance Coverage 30
10.2 Certificates of Insurance 30
10.3 Additional Insureds and Waiver 30
ARTICLE 11 - FORCE MAJEURE 30
11.1 Effect of Force Majeure 30
11.2 Force Majeure Defined 30
11.3 Notification 31
ARTICLE 12 - DISPUTES 31
12.1 Disputes 31
12.2 Arbitration 32
12.3 FERC Dispute Resolution 32
ARTICLE 13 - REPRESENTATIONS 33
13.1 Representations of Pepco 33
13.2 Representations of Generator 34
<PAGE>
ARTICLE 14 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY 35
14.1 Assignment 35
14.2 Release of Rights and Obligations 36
14.3 Change in Corporate Identity 36
14.4 Successors and Assigns 36
ARTICLE 15 - SUBCONTRACTORS 36
ARTICLE 16 - NOTICES 37
16.1 Emergency Notices 37
16.2 Notices 37
ARTICLE 17 - AMENDMENTS 38
17.1 Amendments 38
17.2 FERC Proceedings 38
ARTICLE 18 - MISCELLANEOUS PROVISIONS 38
18.1 Waiver 38
18.2 Labor Relations 39
18.3 No Third Party Beneficiaries 39
18.4 Governing Law 39
18.5 Counterparts 39
18.6 Interpretation 39
18.7 Jurisdiction and Enforcement 40
18.8 Entire Agreement 40
18.9 Severability 41
18.10 Independent Contractor Status 41
18.11 Conflicts 41
SCHEDULE A DEFINITIONS 2
SCHEDULE B Pepco Facilities and Generator Facilities 7
SCHEDULE C Points of Interconnection 9
SCHEDULE D Switching, Tagging and Grounding Rules 11
SCHEDULE E Pepco's Interconnection Standards 14
SCHEDULE F Local Services 15
SCHEDULE G Pepco Current Projects 17
SCHEDULE H Real Time Telemetry List for the Station 18
SCHEDULE I Real Time Telemetry List for the SMECO CT 20
<PAGE>
INTERCONNECTION AGREEMENT (Chalk Point)
This Interconnection Agreement ("Agreement") dated as
of _________, 2000 by and between Potomac Electric Power Company
("Pepco") a District of Columbia and Virginia corporation, and
_____________ ("Generator") a ___________ [corporation]. Pepco and
Generator are each referred to herein as a "Party," and
collectively referred to herein as the "Parties."
WITNESSETH:
WHEREAS, Pepco, and Generator have entered into an
Asset Purchase and Sale Agreement for Generating and Related Assets
("Asset Sale Agreement") dated June 7, 2000, for the sale by Pepco
to Generator of certain assets comprising the Chalk Point electric
generation station;
WHEREAS, Pepco intends to continue to operate its
transmission and distribution businesses from their present
locations;
WHEREAS, Generator needs Interconnection Service from
Pepco for the Chalk Point electric generating station;
WHEREAS, Pepco needs access to parts of the Generator's
assets, and Generator needs access to parts of the Pepco's assets;
and
WHEREAS, the Parties have agreed in the Asset Sale
Agreement to execute this Agreement in order to provide
Interconnection Service to Generator and to define continuing
responsibilities and obligations of the Parties with respect to the
use of the other Party's property, assets and facilities as set
forth herein.
NOW THEREFORE, in consideration of the mutual
representations, covenants and agreements hereinafter set forth,
and intending to be legally bound hereby, the Parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the
meanings specified or referred to in Schedule A.
<PAGE>
ARTICLE 2
TERM AND TERMINATION
2.1 Term. This Agreement shall become effective upon
consummation of the Closing ("Effective Date"), and unless
terminated sooner in accordance with the terms of this Agreement,
shall continue in full force and effect until the earlier to occur
of (i) the permanent cessation by the Generator of the power
generation functions of the Station or (ii) the permanent cessation
of the interconnection functions of the Transmission System.
2.2 Change in Law. If (a) the FERC, any state or
state regulatory commission or the PJM Interconnection LLC
implements a change in any law, regulation, rule or practice, or
(b) Pepco's compliance with a change in any law or regulation,
which compliance, in either case, affects, or may reasonably be
expected to affect, Pepco's performance under this Agreement, the
Parties shall negotiate in good faith any amendments to this
Agreement that are necessary to adapt the terms of this Agreement
to such change, and Pepco shall file such amendments with the FERC.
If the Parties are unable to reach agreement on such amendments,
either Party shall have the right to make a unilateral filing with
the FERC to modify this Agreement pursuant to Sections 205 or 206
or any other applicable provision of the Federal Power Act and the
FERC rules and regulations thereunder; provided that the other
Party shall have the right to oppose such filing and to
participate fully in any proceeding established by the FERC to
address such amendments.
2.3 Effect after Termination. The applicable
provisions of this Agreement shall continue in effect after
cancellation or termination hereof to the extent necessary to
provide for final billings, billing adjustments and payments
pertaining to liability and indemnification obligations arising
from acts or events that occurred while this Agreement was in
effect.
ARTICLE 3
CONTINUING OBLIGATIONS AND RESPONSIBILITIES
3.1 Interconnection Service
3.1.1 Subject to the terms and conditions of
the Agreement, Pepco shall (a) permit the Station to continue to be
interconnected to the Transmission System at the Point of
Interconnection, and (b) provide Interconnection Service at the
Point of Interconnection. Pepco agrees to permit Generator to
interconnect Station as long as Generator continues to operate such
facilities pursuant to PJM Requirements and Good Utility Practice.
<PAGE>
3.1.2 Interconnection Service shall not
include, and Pepco shall not be responsible under this Agreement
for (a) transmission service, losses or ancillary services
associated with the use of the Transmission System for the delivery
of capacity, energy and/or ancillary services produced by the
Generating Facilities, or (b) providing or procuring capacity,
energy and/or ancillary services to the Generator or the Generating
Facilities.
3.1.3 The Generator's interconnection to the
Transmission System of any new or expanded generating capacity of
the Station shall (a) be subject to PJM Requirements and/or FERC
requirements governing interconnections and (b) require a separate
interconnection agreement mutually agreed to by the Parties in
writing.
3.1.4 Notwithstanding anything to the contrary
in this Agreement, Pepco's performance of its obligations under
this Agreement shall be subject to Generator entering into, and
complying with, any PJM Generator Connection Agreement which may be
required pursuant to PJM Requirements with respect to
Interconnection Service or the Station.
3.2 New Construction or Modifications
3.2.1 Pepco Construction or Modifications
(a) Pepco shall make such additions,
modifications, replacements and improvements to the Interconnection
Facilities as are required by PJM Requirements or Good Utility
Practice to enable Pepco to provide Interconnection Service in
compliance with this Agreement. Generator shall pay all reasonable
Costs incurred by Pepco for such additions, modifications,
replacements or improvements.
(b) Except with respect to operation and
maintenance or ordinary maintenance done in the ordinary course of
business or to respond to abnormal or emergency conditions, if any
additions, modifications, replacements or improvements to the
Interconnection Facilities undertaken by Pepco might reasonably be
expected to affect Generator's operation of the Station, Pepco
shall provide one hundred twenty (120) days written notice to
Generator prior to undertaking such additions, modifications,
replacements or improvements. Any such additions, modifications,
replacements or improvements shall comply with PJM Requirements and
Good Utility Practice. The Parties shall mutually agree to the
scheduling of such addition, modification, replacement or
improvement to minimize any adverse impact on the Station.
Generator shall be deemed to have accepted Pepco's proposed
additions, modifications, replacements or improvements unless
Generator gives Pepco written notice of its objections within
thirty (30) days after
<PAGE>
receipt of Pepco's notice. Generator's acceptance or deemed
acceptance of Pepco's proposed additions, modifications,
replacements or improvements shall not be construed, with respect
thereto, as: (i) confirmation or endorsement of the design; (ii) a
warranty of safety, durability or reliability; or (iii)
responsibility for strength, details of design, adequacy or
capability.
3.2.2 Generator Construction or Modifications
(a) In the event Generator plans to increase
the capacity of the Generating Facilities, Generator shall submit
to Pepco any and all plans and specifications that Pepco may
reasonably request related to such increase. Such specifications
and plans shall be submitted by Generator to Pepco at the time
that Generator submits its plans under the PJM Tariff related to
such expansion but no later than one hundred twenty (120) days
prior to commencing such proposed increase. Any such additions,
modifications, or replacements shall comply with PJM Requirements
and Good Utility Practice and shall be subject to Section 3.1.3 of
this Agreement.
(b) If Generator plans any additions,
modifications, or replacements to the Station that will not
increase its capacity, but could reasonably be expected to affect
the Transmission System or the Interconnection Facilities,
Generator shall give Pepco reasonable notice, but not less than one
hundred twenty (120) days prior written notice and Generator shall
comply with all applicable PJM Requirements with respect to
such proposed additions, modifications, or replacements. All such
additions, modifications, or replacements shall (i) comply with PJM
Requirements and Good Utility Practice, (ii) be accompanied by
appropriate information and operating instructions, and (iii) be
subject to the review and acceptance of Pepco, which review shall
be based on PJM Requirements and Good Utility Practice and which
acceptance shall not unreasonably be withheld or delayed.
Pepco shall be deemed to have accepted Generator's proposed
additions, modifications or replacements unless Pepco gives
Generator written notice of its objections within thirty (30) days
after receipt of the Generator's notice.
(c) Pepco's acceptance of Generator's plans
and specifications for any proposed additions, modifications, or
replacements to the Generating Facilities and Pepco's participation
in any interconnected operations with Generator are not and shall
not be construed as: (i) confirmation or endorsement of the design
of the Generating Facilities; (ii) a warranty of safety, durability
or reliability of the Generating Facilities; or (iii)
responsibility for strength, details of design, adequacy, or
capability of the Generating Facilities.
(d) Pepco, pursuant to PJM Requirements,
shall inform Generator of any additions, modifications, or
replacements to the Transmission System or
<PAGE>
Interconnection Facilities, that will be necessary as a result of
the addition, modification, or replacement to Station made pursuant
to Section 3.2.2. Generator shall compensate Pepco for all
reasonable Costs it incurs associated with any modifications,
additions, or replacements made to the Interconnection Facilities
or Transmission System related to any additions, modifications, or
replacements to the Generating Facilities. Pepco shall provide an
estimate as early as practicable, but in any event not less than
sixty (60) days prior to the initiation of such addition,
modification or replacement.
(e) Generator shall modify, at its sole cost
and expense, the Generating Facilities as may be reasonably
required to conform with PJM Requirements and Good Utility Practice
or to conform with additions, modifications, or replacements of the
Transmission System or the Interconnection Facilities, required by
PJM Requirements and Good Utility Practice or implemented in
accordance with this Agreement, (including, without limitation,
changes to the voltages at which the Transmission System
is operated) provided, however, that Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generating Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of Pepco's Facilities.
(f) Upon completion of any addition,
modification, or replacement to the Generating Facilities that may
reasonably be expected to affect the Transmission System or the
Interconnection Facilities, but no later than ninety (90) days
thereafter, Generator shall issue "as built" drawings to Pepco.
Upon completion of any addition, modification, or replacement to
the Interconnection Facilities, that may reasonably be expected to
affect the operation of the Station, but no later than ninety
(90) days thereafter, Pepco shall issue "as built" drawings to the
Generator.
3.2.3 Modifications Affecting the Transmission
System or the Station
(a) Notwithstanding anything herein to the
contrary, except with respect to the projects or construction set
forth in Schedule G, no modifications to or new construction of
facilities, or access thereto, including but not limited to rights
of way, fences, gates, shall be made by either Party which might
reasonably be expected to adversely affect the other Party with
respect to such Party's obligations and responsibilities under this
Agreement, without prior written notification as set forth in
Section 3.2.3(b) below, and without providing the other Party with
sufficient information regarding the work prior to commencement to
enable such Party to evaluate the impact of the proposed work on
its operations. For all modifications reasonably expected to
adversely affect the operations of the other Party's facilities,
the Party shall provide at least one hundred twenty (120) days
<PAGE>
written notice to the other Party prior to undertaking such
additions, modifications or replacements. Any such additions,
modifications, or replacements shall comply with PJM Requirements
and Good Utility Practice.
(b) The Parties shall mutually agree to the
scheduling of such addition, modification, replacement or
improvement proposed pursuant to Section 3.2.3(a) to minimize any
adverse impact on the Station or the Transmission System. For all
construction work, major modifications, or circuit changes
involving new or existing facilities, equipment, systems or
circuits that could reasonably be expected to affect the operation
of either Party, the Party desiring to perform said work shall
provide the other Party with drawings, plans, specifications, and
other necessary documentation for review at least sixty (60) days
prior to the beginning of construction provided that for routine
telecommunications work, the Party doing the work shall only be
required to provide 48 hours prior notice. The Party shall be
deemed to have accepted the proposed additions, modifications,
replacements or improvements unless the Party gives written notice
of their objections within sixty (60) days after receipt of such
notice. The Party's acceptance or deemed acceptance of the
proposed additions, modifications, replacements or improvements
shall not be construed, with respect thereto, as: (i) confirmation
or endorsement of the design; (ii) a warranty of safety, durability
or reliability; or (iii) responsibility for strength, details of
design, adequacy or capability.
3.3 Access, Easements, Conveyances, Licenses, and
Restrictions
3.3.1 The Parties hereby grant to each other
such licenses, access and other rights to the Station and the
Interconnection Facilities as may be necessary for either Party's
performance of their respective obligations under this Agreement.
Such access shall be provided in a manner so as not to unreasonably
interfere with the ongoing business operations, rights, and
obligations of the other Party and shall be subject to the safety
and security practices of the Party granting such access. Access
shall only be granted to Qualified Personnel.
3.3.2 A Party shall not restrict a Party's
rights hereunder to access the other Party's property, facilities,
or equipment without prior written notification except in an
Emergency, in which case the restricted access shall last no longer
than three (3) days, unless an alternate means of access is
provided.
3.3.3 The Parties' rights with respect to
access to their respective facilities properties shall also be
governed by the Easement.
3.4 Facility and Equipment Maintenance
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3.4.1 Pepco shall provide Interconnection
Service at the Point of Interconnection in a safe and efficient
manner and pursuant to PJM Requirements and Good Utility Practice.
Generator shall be responsible for all reasonable Costs incurred by
Pepco to provide Interconnection Service and to Maintain the
Interconnection Facilities pursuant to the Agreement.
3.4.2 Generator shall Maintain the Generating
Facilities (including coordination of its relay protection
equipment) in a safe and efficient manner and as required by and in
accordance with PJM Requirements and Good Utility Practice,
provided, however, that Generator shall not be obligated to
modernize, expand or upgrade the Generating Facilities unless
the failure to modernize, expand or upgrade is reasonably likely to
have a material adverse affect on the operation of the
Interconnection Facilities or the Transmission System.
3.4.3 Unless otherwise specified herein, or
unless the Parties mutually agree to a different arrangement,
neither Party shall be responsible for the maintenance of the other
Party's equipment or property regardless of its location.
3.4.4 In addition to the requirements set
forth elsewhere in this Agreement, each Party shall Maintain its
equipment and facilities and perform its maintenance obligations
that could reasonably be expected to affect the operations of the
other Party in a safe and efficient manner and pursuant to PJM
Requirements and Good Utility Practice.
3.5 Pepco Facilities and Generator Facilities
Unless otherwise agreed to by the Parties, the Party owning Pepco
Facilities or Generator Facilities shall Maintain those facilities
and shall do so pursuant to PJM Requirements and Good Utility
Practice and shall make such additions, modifications, replacements
and improvements as are required by PJM requirements and Good
Utility Practice or which are necessary to maintain Interconnection
Service, provided, however, that the Generator shall not be
obligated under this Agreement to modernize, expand or upgrade the
Generator Facilities unless the failure to modernize, expand or
upgrade is reasonably likely to have a material adverse effect on
the operation of the Transmission System or Interconnection
Facilities.
3.6 Equipment Testing Obligations
3.6.1 For reliability purposes with respect to
the Interconnection Facilities and the Transmission System, Pepco
may reasonably request, pursuant to PJM Requirements, or Good
Utility Practice, that Generator test, calibrate, verify, or
validate the Generating Facilities or its equipment, and Generator
shall promptly
<PAGE>
comply with such a request. Generator shall be responsible for all
costs of testing, calibrating, verifying or validating its
facilities.
3.6.2 At Pepco's request, Generator shall
supply to Pepco at no cost, copies of inspection reports,
installation and maintenance documents, test and calibration
records, verifications, and validations pursuant to the foregoing
Section 3.6.1. Pepco shall supply to Generator, at Generator's
request and at no cost to Generator, copies of inspection reports,
installation and maintenance documents, test and calibration
records, verifications, and validations that Pepco has which are
related to the Interconnection Facilities.
3.7 Inspections
3.7.1 Pepco shall, at its expense, have the
right to inspect or observe all maintenance activities, equipment
tests, installation work, construction work, and modification work
to the Generating Facilities. Such access by Pepco shall be
exercised in a manner which does not unreasonably interfere with
Generator's ongoing business operations, rights and obligations and
shall be subject to Generator's safety and security practices. If
Pepco observes any deficiencies or defects with respect thereto
that might reasonably be expected to adversely affect the
Transmission System or the Interconnection Facilities, Pepco shall
notify the Generator, and Generator shall immediately make any
corrections necessitated by PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this Section 3.7.1,
Pepco shall have no liability whatsoever for any failure to fully
or adequately observe any deficiency, it being agreed that
Generator shall be fully responsible and liable for all such
deficiencies, activities, equipment tests, installation,
construction or modification.
3.7.2 Generator shall, at its expense, have
the right to inspect or observe all maintenance activities,
equipment tests, installation work, construction work, and
modification work conducted by Pepco to the Interconnection
Facilities. Such access by Generator shall be exercised in a
manner which does not unreasonably interfere with Pepco's ongoing
business operations, rights and obligations and shall be subject to
Pepco's safety and security practices. If Generator observes any
deficiencies or defects with respect thereto that might reasonably
be expected to adversely affect the Station, Generator shall notify
Pepco, and Pepco shall immediately make any corrections
necessitated by applicable PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this Section 3.7.2,
Generator shall have no liability whatsoever for any failure to
fully or adequately observe any deficiency, it being agreed that
Pepco shall be fully responsible and liable for all such
deficiencies, activities, equipment tests, installation,
construction or modification.
<PAGE>
3.8 Information Reporting Obligations
3.8.1 In order to provide Interconnection
Service hereunder, Pepco may request, and Generator shall promptly
provide, all relevant information, documents, or data regarding the
Generating Facilities that would be expected to materially affect
the Transmission System, and which is reasonably requested by NERC,
MAAC, the PJM Interconnection LLC, the MDPSC, the District of
Columbia Public Service Commission and any other state
or District of Columbia agency having jurisdiction over Pepco or
Generator, the PJM System Operator, or the Transmission Operator,
which disclosure shall be subject to Article 6 of this Agreement
regarding the disclosure of commercially sensitive information.
3.8.2 Generator shall promptly supply
accurate, complete, and reliable information in response to
reasonable information requests for real time data and other data
from Pepco necessary for operations, maintenance, compliance with
PJM Requirements or regulatory requirements, or analysis of the
Interconnection Facilities or the Transmission System. Such
information may include metered values for MW and MVAR, voltage,
current, automatic voltage regulator status, automatic frequency
control, dispatch, frequency, breaker status indication, or any
other information reasonably required for reliable operation of the
Transmission System pursuant to PJM Requirements and Good Utility
Practice. At minimum, Generator shall satisfy the telemetry
requirements set forth in Schedule H.
3.8.3 Information pertaining to generation
operating parameters shall be gathered and electronically
transmitted directly to Pepco's energy management system using a
mutually acceptable communications protocol.
3.8.4 Generator shall be responsible for the
maintenance, and any required replacements or upgrades of the field
devices and equipment used to gather information regarding
generation operating parameters.
3.8.5 Generator shall Maintain, at its
expense, operating telephone links to the PJM Interconnection LLC,
PJM System Operator, Pepco and the Transmission Operator, to
provide information deemed necessary by them, or as reasonably
deemed necessary by Pepco in accordance with PJM Requirements or
Good Utility Practice to integrate operation of the Station with
the Transmission System, provided, however, that Generator
shall not be obligated under this Agreement to modernize, expand or
upgrade the Generator's facilities unless the failure to modernize,
expand or upgrade is reasonably likely to have a material adverse
effect on the operation of the Transmission System. Generator
shall use communication links at the Station consisting of the
mobile radio low band C frequency and "all call" and "red phone"
systems currently located at the Station (or successor systems as
may reasonably be required by Pepco) and shall maintain the
<PAGE>
availability of such systems to operate during abnormal conditions
including blackouts.
3.9 Local Services
3.9.1 General
(a) The Parties agree that, due to the
integration of certain control schemes of the Station and the
Transmission System, it is cost effective to provide each other
with the services set forth in Sections 3.10 and 3.11 in accordance
with the terms and conditions set forth therein.
(b) The Parties shall ensure, in accordance
with Good Utility Practice, that services provided by one Party to
the other Party pursuant to Sections 3.10 and 3.11 shall be
available at all times and in the manner and at the prices
specified herein. Notwithstanding the foregoing, either Party may
change the services, provided that (1) there is no cost to
the receiving Party as a result of such change, (2) the quality,
reliability and integrity of the replacement services is equivalent
to the existing service, and (3) there is otherwise no materially
adverse effect on the receiving Party.
(c) Neither Party shall terminate any
services set forth in Sections 3.10 and 3.11 below that it agrees
to provide to the other Party, without the other Party's prior
written consent, which consent shall not be unreasonably withheld
or delayed, provided, however, if a Party receiving a service under
Sections 3.10 or 3.11 no longer needs or desires a particular
service, said Party shall notify the other Party and the providing
Party shall terminate said services as soon thereafter as
practicable.
3.9.2 Temporary Suspension of Local Services
(a) The Party providing a service set forth
in Sections 3.10 or 3.11 below shall notify and obtain approval,
which approval shall not be unreasonably withheld or delayed, from
the receiving Party of any scheduled temporary suspension of
services at least five (5) business days in advance of such
suspension. Such notification shall include an estimated time
duration for a return to normal conditions.
(b) In the event of any unplanned or forced
suspension of the services set forth in Sections 3.10 or 3.11,
below, the providing Party shall immediately notify the other Party
first verbally and then in writing. The providing Party shall use
all reasonable efforts to minimize the duration of said suspension.
<PAGE>
(c) The Parties agree to complete any
repairs, modifications or corrections, in accordance with Good
Utility Practice, that are necessary to restore to the other Party
as soon as reasonably practicable any services set forth in
Sections 3.10 or 3.11 below that have been suspended.
3.10 Pepco Provided Services: Schedule F sets forth
the local services Pepco shall provide to the Generator pursuant to
the terms of this Agreement. Unless otherwise specified in
Schedule F, for a period of three (3) years after the Effective
Date (the "Initial Period") and subject to Section 3.9 above, Pepco
shall provide Generator with the local services set forth in
Schedule F at no cost and in consideration of the local services
Generator shall provide Pepco in accordance with Section 3.11
below. If Generator desires the continuation of any of the
services set forth in Schedule F which are subject to the Initial
Period to continue after the Initial Period, upon Generator's
written request to Pepco made at least 60 days prior to the
expiration of the Initial Period, the Parties shall engage
in good faith negotiations to reach mutually agreeable terms and
conditions upon which such services will continue, provided,
however, that if such agreement is not reached prior to the
expiration of the Initial Period, Pepco shall cease to provide
services under Section 3.10 at the end of the Initial
Period.
3.11 Generator Provided Services. Schedule F sets
forth the local services Generator shall provide to Pepco pursuant
to the terms of this Agreement. Unless otherwise specified in
Schedule F, for the Initial Period and subject to Section 3.9
above, Generator shall provide Pepco with the local services set
forth in Schedule F at no cost and in consideration of the
local services Pepco shall provide Generator in accordance with
Section 3.10 above. If Pepco desires the continuation of any of
the services set forth in Schedule F which are subject to the
Initial Period to continue after the Initial Period, upon Pepco's
written request to Generator made at least 60 days prior to the
expiration of the Initial Period, the Parties shall engage
in good faith negotiations to reach mutually agreeable terms and
conditions upon which such services will continue, provided,
however, that if such agreement is not reached prior to the
expiration of the Initial Period, Generator shall cease to provide
services under Section 3.11 at the end of the Initial Period.
3.12 Optional Services: Generator may request that
Pepco provide the following services to the Generator, provided,
however, that Pepco shall not have any obligation to provide such
services unless the Parties have mutually agreed in writing to the
price and other terms and conditions of such service:
(a) PJM interface and dispatch services through
the Pepco control center;
(b) use of Pepco's communication services;
<PAGE>
(c) maintenance of certain auxiliary and
communications equipment at the Station;
(d) maintenance of high-voltage and
medium-voltage equipment such as power transformers and power
circuit breakers;
(e) maintenance of protective relaying, certain
control equipment, such as AGC and MSVC, plant batteries and
revenue meters owned by Generator.
3.13 Metering and Telemetering
3.13.1 Generator shall, at Generator's expense:
(a) own, Maintain and repair, all Revenue Meters, instrument
transformers and appurtenances associated with Revenue Meters, and
real time telemetry, (b) conduct meter accuracy and tolerance
tests, and (c) prepare all calibration reports required for
equipment that measures energy transfers at the Point of
Interconnection. All meter accuracy and tolerance testing
hereunder shall be in accordance with PJM Requirements and Good
Utility Practice and shall be conducted, at Pepco's request, in the
presence of Pepco's representative.
3.13.2 Generator shall own and Maintain, at the
Generator's expense, equipment for redundant real-time
communications and transmission of telemetry, hourly MWh
information, and such other information as required by the PJM
System Operator or Transmission Operator, or as reasonably required
by Pepco in accordance with PJM Requirements and Good Utility
Practice.
3.14 Emergency Procedure
3.14.1 Pepco, through the Transmission
Operator, shall provide Generator with prompt verbal notification
of Emergencies with regard to the Transmission System which may
reasonably be expected to affect Generator's immediate operation of
the Station or Generator Facilities, and Generator shall provide
Pepco with prompt verbal notification of Emergencies
with regard to the Station which may reasonably be expected to
affect Interconnection Service or the Transmission System. Such
notification shall describe the Emergency, the extent of damage or
deficiency, the anticipated length of an outage and the corrective
action taken and/or to be taken. Said verbal notification shall be
followed as soon as practicable (but no later than 24 hours after
the verbal notification) with written notification.
3.14.2 If an Emergency in the good faith
judgment of a Party endangers or could endanger life or property,
the Party recognizing the problem
<PAGE>
shall take such action as may be reasonable and necessary to
prevent, avoid, or mitigate injury, danger, or loss. If however
the Emergency involves transmission or electrical equipment,
Generator shall notify the Transmission Operator, and obtain the
consent of such personnel, prior to performing any switching
operations.
3.14.3 Pepco may, consistent with PJM
Requirements and Good Utility Practice, have the Transmission
System Operator take whatever actions (including tripping
Generator's synchronizing breakers) or inactions it deems necessary
during an Emergency to: (a) preserve public safety; (b) preserve
the integrity of the Transmission System, (c) limit or prevent
damage; or (d) expedite restoration of service. If any action or
inaction by Pepco or the Transmission Operator under this Section
3.14 results in the discontinuation, curtailment, interruption or
reduction of Interconnection Service, Pepco shall use reasonable
efforts consistent with PJM Requirements and Good Utility Practice
to restore Interconnection Service as promptly as practicable and
to minimize the effect of such restoration of service on the
Station.
3.15 Interconnection Service Interruptions
3.15.1 If at any time, in the reasonable
exercise of the PJM System Operator's judgment, or the Transmission
Operator's judgment exercised in accordance with PJM Requirements
or Good Utility Practice and on a non-discriminatory basis, a
condition exists, including the operation of Generator's equipment,
which might reasonably be expected to have a materially adverse
affect on the quality of service rendered by Pepco (including
services rendered to transmission or distribution customers) or
interferes with the safe and reliable operation of the Transmission
System, Pepco may discontinue, curtail, reduce and/or interrupt
Interconnection Service until the condition has been corrected.
3.15.2 Unless the PJM System Operator, the
Transmission Operator or Pepco perceives that an Emergency exists
or the risk of one is imminent, Pepco shall give Generator
reasonable notice of its intention to discontinue, curtail,
interrupt or reduce Interconnection Service in response to the
interfering condition and, where practical, allow suitable
time for Generator to remove the interfering condition if it is the
result of Generator's operations, before the discontinuation,
curtailment, interruption or reduction commences. Pepco's judgment
with regard to the interruption of service under this paragraph
shall be made pursuant to PJM Requirements and Good Utility
Practice. In the case of such interruption, Pepco shall
immediately confer with Generator regarding the conditions causing
such interruption and its recommendation concerning timely
correction thereof. In the event Interconnection Service is
interrupted under this section due to Generator's failure to
operate and Maintain the Generating Facilities pursuant to PJM
Requirements or Good Utility Practice, Generator shall compensate
Pepco for all
<PAGE>
costs reasonably incurred by Pepco attributable to the interruption
and restoration of Interconnection Service. Pepco shall use
reasonable efforts consistent with PJM Requirements and Good
Utility Practice to restore Interconnection Service interrupted,
curtailed or reduced pursuant to this Section 3.15 as promptly as
practicable and to minimize the effect of such restoration of
service on the Station.
3.16 SMECO CT Metering and Telemetering
3.16.1 Generator acknowledges that Pepco
requires information regarding the status of the Station for
Transmission System reliability purposes. Accordingly, by 10:00
a.m. of each day, the Generator shall provide Pepco the following
information regarding the status of the Station for the following
day: Station availability to provide energy and capacity, the
Station's scheduled on and off times, Station synchronization,
planned outages or deratings, and generation restrictions and
limitations. Generator shall immediately notify Pepco of any
changes to the information provided pursuant to the foregoing
sentence.
3.16.2 In circumstances, such as forced
outages, Generator shall notify Pepco of its generating unit's
temporary interruption of generation as soon as practicable; and it
shall provide Pepco, as soon as practicable, with a schedule of
when generation will be resumed.
3.17 Scheduled Maintenance Notification and
Coordination
3.17.1 Local Routine Inspection and
Maintenance. The Parties agree that, due to the integration of
certain control and protective relaying schemes between the Station
and the Interconnection Facilities, it will be necessary for them
to cooperate in the inspection, maintenance and testing of these
areas of integration. Each Party will provide advance notice
to the other Party before undertaking any work in these areas,
especially in electrical circuits involving circuit breaker trip
and close contacts, current transformers or potential transformers
and such work will be performed in accordance with PJM Requirements
and Good Utility Practice.
3.17.2 Transmission System Maintenance. Pepco
shall consult with Generator regarding timing of scheduled
maintenance of the Interconnection Facilities or the transmission
facilities of the Transmission System which Pepco or the
Transmission Operator performs and which might reasonably be
expected to affect the Station. Pepco shall, to the extent
practicable, schedule any testing, shutdown, or withdrawal of said
facilities to coincide with Generator's scheduled outages for the
Station. To facilitate such consultation and to the extent the
information is not available from the PJM System Operator in a
timely manner, in June of each year, or on another date mutually
acceptable to the Parties, Generator
<PAGE>
shall furnish Pepco with non-binding preliminary generator
maintenance schedules covering the upcoming two years and any
material changes thereto. In the event Pepco is unable to schedule
the outage of its facilities to coincide with Generator's schedule,
Pepco shall notify Generator as soon as practicable of the reasons
for the facilities' outage, of the time scheduled for the outage to
take place, and of its expected duration.
3.18 Safety
3.18.1 General. Pepco agrees with respect to
the Interconnection Facilities and the Transmission System, and
Generator agrees with respect to the Station, that all work
performed by either Party on such facilities which could reasonably
be expected to affect the operations of the other Party shall be
performed in accordance with all applicable PJM Requirements and
Good Utility Practice.
3.18.2 Switching Tagging and Grounding . Each
Party shall comply with the Switching, Tagging and Grounding Rules.
Pepco will notify Generator of any changes in its Switching,
Tagging and Grounding Rules. Generator shall be responsible for
all switching, tagging and grounding on Generator's side of the
Point of Interconnection and, except for Generator Facilities,
Pepco shall be responsible for all switching, tagging and grounding
on its side of the Point of Interconnection.
3.19 Environmental Compliance and Procedures
3.19.1 Each Party shall be responsible for
complying with all Environmental Laws applicable to it with respect
to its facilities or property.
3.19.2 A Party shall notify the other Party
first verbally and then in writing, of any Releases of a Hazardous
Substance or any type of remediation activities related thereto as
soon as possible but no later than twenty-four (24) hours after the
occurrence if within the reasonable judgment of the Party said
activities could reasonably be expected to have a material adverse
effect upon the operations of the other Party and shall promptly
furnish to the other Party copies of any reports filed with
any governmental agencies covering such events. This Section
3.19.2 does not effect any allocation of liability with respect to
the Station pursuant to the Asset Sale Agreement.
3.19.3 Neither Party shall knowingly take any
actions which might reasonably be expected to have a material
adverse environmental impact upon the operations of the other Party
without prior written notification and agreement between then
Parties.
<PAGE>
3.20 Operating Committee. The Parties shall establish
an operating committee consisting of one representative for each
Party ("Operating Committee"). The Operating Committee shall act
only by unanimous agreement or consent. The Parties shall
designate their respective representatives to the Operating
Committee, plus an alternate by written notice. Each Party's
representative on the Operating Committee is authorized
to act on behalf of such Party with respect to any matter arising
under this Agreement which is to be decided by the Operating
Committee, however, the Operating Committee shall not have any
authority to modify or otherwise alter the rights and obligations
of the Parties hereunder. The Operating Committee shall develop
and implement suitable policies and procedures with which to
coordinate the interaction of the Parties with respect to the
performance of their duties and obligations under this Agreement.
3.21 SMECO CT To the extent that Generator owns,
operates and/or controls the SMECO CT, Generator shall be subject
to the provisions set forth in this Section 3.21.
3.21.1 Information Reporting Obligations
(a) For Transmission System reliability
purposes, Pepco may request, and Generator shall promptly provide,
all relevant information, documents, or data regarding the SMECO CT
that would be expected to materially affect the Transmission
System, and which is reasonably requested by NERC, MAAC, the PJM
Interconnection LLC, the MDPSC, any other state or District of
Columbia agency having jurisdiction over Pepco or Generator, the
PJM System Operator, or the Transmission Operator, which disclosure
shall be subject to Article 6 of this Agreement regarding the
disclosure of commercially sensitive information.
(b) Generator shall promptly supply
accurate, complete, and reliable information in response to
reasonable information requests for real time data and other data
from Pepco necessary for operations, maintenance, compliance with
PJM Requirements or regulatory requirements, or analysis of the
Transmission System. Such information may include metered values
for MW and MVAR, voltage, current, automatic voltage regulator
status, automatic frequency control, dispatch, frequency, breaker
status indication, or any other information reasonably required for
reliable operation of the Transmission System pursuant to PJM
Requirements and Good Utility Practice. At minimum, Generator
shall satisfy the telemetry requirements set forth in Schedule I
for the SMECO CT.
(c) Generator shall comply with Sections
3.8.3, 3.8.4 and 3.8.5 with respect to the SMECO CT.
<PAGE>
3.21.2 SMECO CT Metering and Telemetering
(a) With respect to the SMECO CT, Generator
shall, at Generator's expense: (a) own, Maintain and repair, all
meters, instrument transformers and appurtenances associated with
meters, and real time telemetry, (b) conduct meter accuracy and
tolerance tests, and (c) prepare all calibration reports required
for equipment that measures energy transfers at the interconnection
points with Pepco's or any other parties' facilities. All meter
accuracy and tolerance testing hereunder shall be in accordance
with PJM Requirements and Good Utility Practice and shall be
conducted, at Pepco's request, in the presence of Pepco's
representative.
(b) With respect to the SMECO CT, Generator
shall own and Maintain, at the Generator's expense, equipment for
redundant real-time communications and transmission of telemetry,
hourly MWh information, and such other information as required by
the PJM System Operator or Transmission Operator, or as reasonably
required by Pepco in accordance with PJM Requirements and Good
Utility Practice.
3.21.3 SMECO CT Unit Status Notification
Generator shall provide the information described in Article 16
with respect to the status of the SMECO CT at the times set forth
in Article 16.
3.21.4 SMECO Operations
(a) Generator agrees that to the extent the
SMECO CT could reasonably be expected to have a material effect on
the operations of Pepco, it shall operate the SMECO CT in a safe
and efficient manner and in accordance with PJM Requirements and
Good Utility Practice, and otherwise in accordance with the terms
of this Agreement.
(b) Generator shall comply with the
requests, orders, and directives of Pepco with respect to the SMECO
CT to the extent such requests, orders or directives are (a) issued
pursuant to PJM Requirements or Good Utility Practice, (b) not
discriminatory; and (c) otherwise in accordance with this Agreement
or applicable tariffs. In the event Generator believes that a
request, order, or directive of Pepco exceeds the limitations
in this Section 3.21.4(b), it shall nevertheless comply with the
request, order, or directive pending resolution of the dispute
under Article 12. The Parties agree to cooperate in good faith to
expedite the resolution of any disputes arising under this Section
3.21.4(b).
<PAGE>
(c) Generator shall (i) comply with Pepco's
system restoration plan and black start criteria applicable to the
SMECO CT as configured as of the Effective Date or (ii) if the
SMECO CT's configuration is modified, provide alternative service
restoration and black start capability in accordance with PJM
Requirements. Generator shall ensure that operating personnel at
the SMECO CT are trained to implement such system restoration or
black start plans. The Generator shall test the SMECO CT's
black-start combustion-turbines annually to confirm that the
black-start combustion-turbines will start without an external
power supply. To the extent that the SMECO CT would be required to
be black-started in accordance with Pepco's Emergency Conditions
and System Restoration Manual, as revised from time to time, and
plant restoration procedures, Generator shall test the SMECO CT at
least once every three years. Testing shall confirm the ability
of the SMECO CT to go from a shut down condition to an operating
condition and start delivering power without assistance from the
Transmission System or SMECO's system. These testing requirements
shall remain in place until PJM promulgates specific rules
governing black-start testing.
(d) Unless otherwise agreed to by the
Parties or authorized or directed by the PJM Interconnection LLC,
Generator shall operate the SMECO CT with automatic voltage
regulators in service at all times. The voltage regulators will
control voltage consistent with the range of voltage prescribed by
Pepco or the Transmission System Operator in accordance with PJM
Requirements and Good Utility Practice.
(i) Generator will operate the SMECO
CT in accordance with prescribed voltage schedules pursuant to
Section 3.21.4(d) to the extent the SMECO CT is operating within
its reactive generating capability and not violating any electrical
constraints. Should Generator fail to comply with such voltage
schedules, Pepco or the Transmission Operator, as applicable, shall
provide written notice to the Generator of its intent to remedy
that failure. If Generator does not promptly commence appropriate
action after receiving such notice, Pepco or the Transmission
Operator may then take any necessary action at Generator's expense
to remedy such failure, including the installation of capacitor
banks or other reactive compensation equipment necessary to ensure
the proper voltage or reactive supply at the Station including, at
a minimum, by installing such equipment outside any building
housing the SMECO CT. Pepco shall make, to the extent feasible,
reasonable efforts to minimize the impact of such action on the
operation of the SMECO CT.
(ii) Generator shall notify the
Transmission Operator if (a) any or all generating units at the
SMECO CT reaches a VAR limit, (b) there is any deviation from the
voltage schedules prescribed pursuant to Section 3.21.4(d) which is
outside the limits permitted by PJM Requirements or Good Utility
<PAGE>
Practice, or (c) any automatic voltage regulator is removed from or
restored to service.
(iii) The Transmission Operator may from
time to time, pursuant to PJM Requirements or Good Utility
Practice, request or direct Generator to adjust generator controls
that impact the Transmission System, such as excitation, droop, and
automatic generation control settings and Generator shall comply
with such request or directions.
(iv) Generator acknowledges that the
Transmission Operator may have the right, to the extent authorized
or directed by the PJM Interconnection LLC, to require reduced or
increased generation of the SMECO CT in accordance with PJM
Requirements, or in accordance with applicable rules of the
Transmission Operator.
ARTICLE 4
OPERATIONS
4.1 General
4.1.1 The Parties agree to operate their
respective equipment that could reasonably be expected to have a
material effect on the operations of the other Party in a safe and
efficient manner and in accordance with PJM Requirements and Good
Utility Practice, and otherwise in accordance with the terms of
this Agreement.
4.1.2 Generator shall comply with the
requests, orders, and directives of Pepco with respect to
Interconnection Service to the extent such requests, orders or
directives are (a) issued pursuant to PJM Requirements or Good
Utility Practice, (b) not discriminatory; and (c) otherwise in
accordance with this Agreement or applicable tariffs.
4.1.3 In the event Generator believes that a
request, order, or directive of Pepco exceeds the limitations in
this Section 4.1.2, it shall nevertheless comply with the request,
order, or directive pending resolution of the dispute under Article
12. The Parties agree to cooperate in good faith to expedite the
resolution of any disputes arising under this Section 4.1.
4.2 Generator's Operating Obligations
4.2.1 General. Generator shall request
permission from the Transmission Operator, the PJM System Operator
or the PJM Interconnection
<PAGE>
LLC, as applicable, prior to opening and/or closing circuit
breakers in accordance with applicable switching and operations
procedures and Good Utility Practice.
(a) Generator shall carry out all switching
orders from the Transmission Operator, the PJM System Operator, or
the PJM Interconnection LLC, in a timely manner and in accordance
with PJM Requirements and Good Utility Practice.
(b) Generator shall (i) comply with Pepco's
system restoration plan and black start criteria applicable to the
Station as configured as of the Effective Date or (ii) if the
Station's configuration is modified, provide alternative service
restoration and black start capability in accordance with PJM
Requirements. Generator shall ensure that operating personnel at
the Station are trained to implement such system restoration or
black start plans. The Generator shall test the Station's
black-start combustion-turbines annually to confirm that the
black-start combustion-turbines will start without an external
power supply. The Generator shall test the Station's steam
turbine-generators and those combustion-turbine generators that
would be required to be black-started in accordance with Pepco's
Emergency Conditions and System Restoration Manual, as revised from
time to time, and plant restoration procedures, at least once
every three years. Testing shall confirm the ability of a
generating unit or Station to go from a shut down condition to an
operating condition and start delivering power without assistance
from the Transmission System. These testing requirements shall
remain in place until PJM promulgates specific rules governing
black-start testing.
(c) The electricity supplied by Generator to
the Point of Interconnection shall be in the form of three-phase 60
Hertz alternating current at the nominal system voltage.
(d) Generator's equipment shall conform with
Good Utility Practice for harmonic distortion and voltage
fluctuation.
4.2.2 Voltage or Reactive Control
Requirements. Unless otherwise agreed to by the Parties or
authorized or directed by the PJM Interconnection LLC, Generator
shall operate the Station with automatic voltage regulators in
service at all times. The voltage regulators will control voltage
at the Points of Interconnection consistent with the range of
voltage prescribed by Pepco or the Transmission System Operator in
accordance with PJM Requirements and Good Utility Practice.
(a) Generator will operate the Station in
accordance with prescribed voltage schedules pursuant to Section
4.2.2 to the extent the Station is operating within its reactive
generating capability and not violating any electrical
<PAGE>
constraints. Should Generator fail to comply with such voltage
schedules, Pepco or the Transmission Operator, as applicable, shall
provide written notice to the Generator of its intent to remedy
that failure. If Generator does not promptly commence appropriate
action after receiving such notice, Pepco or the Transmission
Operator may then take any necessary action at Generator's expense
to remedy such failure, including the installation of capacitor
banks or other reactive compensation equipment necessary to ensure
the proper voltage or reactive supply at the Station including, at
a minimum, by installing such equipment outside any building
housing the Generation Facilities. Pepco shall make, to the extent
feasible, reasonable efforts to minimize the impact of such action
on the operation of the Station.
(b) Generator shall notify the Transmission
Operator if (a) any or all generating units at the Station reaches
a VAR limit, (b) there is any deviation from the voltage schedules
prescribed pursuant to Section 4.2.2 which is outside the limits
permitted by PJM Requirements or Good Utility Practice, or (c) any
automatic voltage regulator is removed from or restored to service.
(c) The Transmission Operator may from time
to time, pursuant to PJM Requirements or Good Utility Practice,
request or direct Generator to adjust generator controls that
impact the Transmission System, such as excitation, droop, and
automatic generation control settings and Generator shall comply
with such request or directions.
(d) Generator acknowledges that the
Transmission Operator may have the right, to the extent authorized
or directed by the PJM Interconnection LLC, to require reduced or
increased generation of the Station in accordance with PJM
Requirements, or in accordance with applicable rules of the
Transmission Operator.
4.3 Auditing of Accounts and Records. The Parties
shall have the right, during normal business hours, to audit each
other's accounts and records pertaining to transactions under this
Agreement, upon twenty (20) days prior written notice, at the
offices where such accounts and records are maintained, provided,
however, that the audit shall be limited to those portions of the
accounts and records that are related to services provided to the
other Party under this Agreement. Any such audit of a Party's
accounts and records will be at the expense of the auditing Party,
shall not be made more frequently than once in any twelve (12)
month period, and no such audit may be made with respect to
accounts and records relating to periods more than twenty-four (24)
months prior to the date of the audit notice. The Party being
audited will be entitled to review the audit report and any
supporting materials. The Party conducting the audit shall
maintain the confidentiality of all information obtained during the
audit in compliance with Article 6 of this Agreement. To the
extent that audited information includes confidential
<PAGE>
information, the auditing Party shall designate an independent
auditor at its expense to perform such audit.
ARTICLE 5
COST RESPONSIBILITIES AND BILLING PROCEDURES
5.1 Cost Responsibilities for Interconnection
Service. Except as otherwise expressly stated herein, Generator
shall not be responsible for any costs arising from Pepco's
provision of Interconnection Service or local services to
Generator, except for those costs specified in Sections 3.2.1,
3.2.2, 3.4.1, and 3.15 or arising from the liability or
indemnification provisions of this Agreement.
5.2 Cost Responsibilities for Local Services. Except
as otherwise expressly provided herein or agreed to by the Parties,
each Party shall be responsible for the costs for local services
provided to the other Party in Sections 3.10 and 3.11 as set forth
in said sections.
5.3 Billing Procedures
(a) Within ten (10) days after the first day
of each calendar month, each Party shall provide the other Party
with a written invoice for any payments due from the other Party
for services provided in the previous month.
(b) Each invoice shall (i) delineate the month
in which the services were provided, (ii) fully describe the
services rendered, (iii) be itemized to reflect the services
performed or provided, and (iv) provide reasonable detail as to the
calculation of the amount involved.
(c) All invoices shall be paid within fifteen
(15) days after receipt, but not earlier than the 25th day of the
month in which the invoice is rendered. All payments shall be made
in immediately available funds payable to the other Party, or by
wire transfer to a bank designated in writing by such Party.
Payment of invoices shall not relieve the paying Party from any
responsibilities or obligations it has under this Agreement,
nor shall such payment constitute a waiver of any claims arising
hereunder.
5.3.2 To the extent that, for any billing
period, Generator is obligated to pay to Pepco amounts due and
calculated pursuant to Section 5.3, Pepco may use such amounts as
a set-off against any amounts owed by Pepco to Generator under this
Section 5.3.
<PAGE>
5.3.3 Interest on any unpaid amounts shall be
calculated in accordance with the methodology specified for
interest on refunds in FERC regulations at 18 C.F.R. Section
35.19a(a)(2)(iii). Interest on delinquent amounts shall be
calculated from the due date of the bill to the date of payment.
When payments are made by mail, bills shall be considered as having
been paid on the date of receipt by the other Party.
5.4 Billing Disputes. In the event of a billing
dispute between the Parties, each Party shall continue to provide
services as long as the other Party continues to make all payments
not in dispute. Payment of invoices by either Party shall not
relieve the paying Party from any responsibilities or obligations
it has under this Agreement; nor shall it constitute a waiver of
any claims arising hereunder.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidentiality Obligations of Pepco. Pepco
shall hold in confidence, unless compelled to disclose by judicial
or administrative process or other provisions of law, all documents
and information furnished by Generator in connection with this
Agreement marked "Confidential" or "Proprietary." Except to the
extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure
by Pepco in breach of this Agreement, (ii) available to Pepco on a
non-confidential basis prior to disclosure to Pepco by Generator,
or (iii) available to Pepco on a non-confidential basis from a
source other than Generator, provided that such source is not
known, and by reasonable effort could not be known, by Pepco to be
bound by a confidentiality agreement with Generator or otherwise
prohibited from transmitting the information to Pepco by a
contractual, legal or fiduciary obligation, Pepco shall not release
or disclose such information to any other person, except to its
employees, representatives or agents on a need-to-know basis, in
connection with this Agreement who has not first been advised of
the confidentiality provisions of this Section 6.1 and has agreed
in writing to comply with such provisions. In no event shall such
information be disclosed in violation of the requirements of FERC
Orders 889 and 889-A, and any successor thereto. Pepco shall
promptly notify Generator if it receives notice or otherwise
concludes that the production of any information subject to this
Section 6.1 is being sought under any provision of law and Pepco
shall use reasonable efforts in cooperation with Generator to seek
confidential treatment for such confidential information provided
thereto.
6.2 Confidentiality Obligations of Generator.
Generator shall hold in confidence, unless compelled to disclose by
judicial or administrative process or other provisions of law, all
documents and information furnished by Pepco in connection with
this Agreement marked "Confidential" or "Proprietary." Except to
<PAGE>
the extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure by
Generator in breach of this Agreement, (ii) available to Generator
on a non-confidential basis prior to disclosure to Generator by
Pepco, or (iii) available to Generator on a non-confidential basis
from a source other than Pepco, provided that such source is not
known, and by reasonable effort could not be known, by Generator to
be bound by a confidentiality agreement with Pepco or otherwise
prohibited from transmitting the information to Generator by a
contractual, legal or fiduciary obligation, Generator shall not
release or disclose such information to any other person, except to
its employees, representatives or agents on a need-to-know basis,
in connection with this Agreement who has not first been advised of
the confidentiality provisions of this Section 6.2 and has agreed
in writing to comply with such provisions. In no event shall such
information be disclosed in violation of the requirements of FERC
Orders 889 and 889-A, and any successor thereto. Generator shall
promptly notify Pepco if it receives notice or otherwise concludes
that the production of any information subject to this Section 6.2
is being sought under any provision of law and Generator shall use
reasonable efforts in cooperation with Pepco to seek confidential
treatment for such confidential information provided thereto.
6.3 Confidentiality of Audits. The independent
auditor performing any audit, as referred to in Section 4.3, shall
be subject to a confidentiality agreement between the auditor and
the Party being audited. Such audit information shall be treated
as confidential except to the extent that its disclosure is
required by regulatory or judicial order, for reliability purposes
pursuant to PJM Requirements or Good Utility Practice, and pursuant
to the FERC's rules and regulations. Except as provided herein,
neither Party will disclose the audit information to any third
party, without the other Party's prior written consent. Audit
information in the hands of the Party not being audited shall be
subject to all provisions of Section 6.1 or 6.2, above, as
applicable.
6.4 Remedies. The Parties agree that monetary
damages would be inadequate to compensate a Party for the other
Party's breach of its obligations under Section 6.1 or 6.2, above,
as applicable. Each Party accordingly agrees, subject to Article
8, that the other Party shall be entitled to equitable relief, by
way of injunction or otherwise, if the first Party breaches or
threatens to breach its obligations under Section 6.1 or 6.2 of
this Agreement, as applicable, which equitable relief shall be
granted without bond or proof of damages, and the receiving Party
shall not plead in defense that there would be an adequate remedy
at law.
<PAGE>
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. Each of the following shall
constitute an Event of Default by the a defaulting Party under this
Agreement:
(a) The failure by a Party to pay any amount
due within twenty (20) calendar days after receipt of written
notice of nonpayment by the other Party, unless the payment of such
amount is disputed in good faith, in which event Section 5.5 shall
apply;
(b) A Party's breach of any material term or
condition of this Agreement, including but not limited to any
material breach of a representation, warranty or covenant made in
this Agreement which, after receiving written notice of the breach
from the non-breaching Party (such notice to set forth in
reasonable detail the nature of the default and, where known and if
applicable, the steps necessary to cure such default), (i) the
breaching Party fails to cure, if curable, within thirty (30) days
following receipt of the notice or (ii) if such default is of such
a nature that it cannot be cured within thirty (30) days following
receipt of such notice, the breaching Party fails within such
thirty (30) days to commence the necessary cure and fails at any
time thereafter diligently and continuously to prosecute such cure
to completion provided that the cure is completed no later than 180
days after the receipt of the default notice;
(c) The appointment of a receiver, liquidator
or trustee for either Party, and such receiver, liquidator or
trustee is not discharged within sixty (60) days;
(d) The entry of a decree or decrees
adjudicating a Party as bankrupt or insolvent, and such decree or
decrees are not stayed or discharged within sixty (60) days; or
(e) The filing of voluntary petitions for
bankruptcy under any federal or state bankruptcy law by a Party.
7.2 Remedies
7.2.1 If the breaching Party disputes that an
Event of Default under Section 7.1.(b) has occurred, the breaching
Party shall nonetheless comply with this Section 7.2 pending the
resolution of the dispute. If it is determined that no breach or
Event of Default under Section 7.1(b) existed, the Party alleging
the default shall
<PAGE>
pay and reimburse the other Party for all reasonable costs and
expenses incurred by it to cure the alleged default.
7.2.2 Upon the occurrence of an Event of
Default, the non-defaulting Party may (i) exercise all such rights
and remedies as may be available to it at law or equity including
seeking to recover damages caused by such Event of Default, subject
to Article 8 of this Agreement; and/or (ii) terminate this
Agreement. The Parties shall not discontinue the performance of
any one or more of their obligations hereunder due to the
occurrence of an Event of Default during the pendency of any
dispute regarding such Event of Default and until such dispute is
finally resolved except that Pepco may suspend or interrupt service
if necessary for the safe and reliable operation of the
Interconnection Facilities or the Transmission System.
7.2.3 Notwithstanding the foregoing, upon the
occurrence of any Event of Default, the non-defaulting Party shall
be entitled to commence an action to require the defaulting Party
to remedy such default by specifically performance of its duties
and obligations hereunder in accordance with the terms and
conditions hereof.
7.2.4 Notwithstanding anything in this
Agreement to the contrary, in the event the Generator's failure to
comply with the provisions of Sections 4.1 and 4.2 of this
Agreement is reasonably likely to have an immediate and material
adverse impact on Pepco or the Transmission System, Pepco shall
have the right to take immediately reasonable steps and/or to
exercise immediately all remedies available under this Agreement,
or at law or equity, including the right, after providing as much
notice as is practicable under the circumstances and complying with
the applicable FERC notice requirements regarding termination of
service, to disconnect the Station from the Transmission System.
ARTICLE 8
LIMITATION OF LIABILITY
8.1 Limitation of Pepco's Liability. Pepco does not
guarantee the non-occurrence of, or warrant against, and will have
no liability hereunder for, and the Generator will release Pepco
from all claims or damages associated with, any interruption in the
availability of the Interconnection Facilities, Interconnection
Service or local services pursuant to Section 3.10 or damages to
the Generator's facilities, except to the extent such interruption
or damage is caused by Pepco's gross negligence or willful
misconduct in the performance of its obligations under this
Agreement.
<PAGE>
8.2 Limitation on Generator's Liability. Generator
does not guarantee the non-occurrence of, or warrant against, and
will have no liability under this Agreement for, and Pepco will
release Generator from all claims or damages arising under this
Agreement which are associated with any interruption in the
availability of the Station or local services pursuant to
Section 3.11, any reduction, curtailment, interruption or reduction
of energy from the Station, or damage to Pepco's facilities, except
to the extent such interruption or damage is caused by Generator's
gross negligence or willful misconduct in the performance of its
obligations under the Agreement.
8.3 Consequential Damages. Except for indemnity
obligations set forth in Article 9, neither Party, nor their
respective officers, directors, agents, employees, Affiliates, or
successors or assigns of any of them, shall be liable to the other
Party or its Affiliates, officers, directors, agents, employees,
successors or assigns for claims, suits, actions or causes of
action for incidental, punitive, special, indirect, multiple or
consequential damages (including, without limitation, replacement
power costs, lost revenues, claims of customers, attorneys' fees
and litigation costs) connected with, or resulting from,
performance or non-performance of this Agreement, or any actions
undertaken in connection with or related to this Agreement,
including, without limitation, any such damages which are based
upon causes of action for breach of contract, tort (including
negligence and misrepresentation), breach of warranty or strict
liability. The provisions of this Section 8.3 shall apply
regardless of fault and shall survive termination, cancellation,
suspension, completion, or expiration of this Agreement.
ARTICLE 9
INDEMNIFICATION FOR THIRD PARTY CLAIMS
9.1 Generator's Indemnification. Generator shall
indemnify, hold harmless, and defend Pepco and its Affiliates, as
the case may be, and their respective officers, directors,
employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all
claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and
disbursements incurred by any of them in any action or proceeding
between Pepco and a third party or Generator) for damage to
property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the
extent caused, by the negligence or willful misconduct of
Generator's and/or its officers, directors, employees, agents,
contractors, subcontractors or invitees arising out of or connected
with Generator's performance or breach of this Agreement, or the
exercise by Generator of its rights hereunder. In furtherance of
the foregoing indemnification and not by way of limitation thereof,
Generator hereby waives any defense it might otherwise have under
applicable workers' compensation laws.
<PAGE>
9.2 Pepco's Indemnification. Pepco shall indemnify,
hold harmless, and defend Generator and its Affiliates, as the case
may be, and their respective officers, directors, employees,
agents, contractors, subcontractors, invitees, successors and
permitted assigns from and against any and all claims, liabilities,
costs, damages, and expenses (including, without limitation,
reasonable attorney and expert fees, and disbursements incurred by
any of them in any action or proceeding between the Generator and
a third party or Pepco) for damage to property of unaffiliated
third parties, injury to or death of any person, including
Generator's employees or any third parties, to the extent caused by
the negligence or willful misconduct of Pepco and/or its officers,
directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Pepco's performance or
breach of this Agreement, or the exercise by Pepco of its rights
hereunder. In furtherance of the foregoing indemnification and not
by way of limitation thereof, Pepco hereby waives any defense it
might otherwise have under applicable workers' compensation laws.
9.3 Indemnification Procedures. If either Party
intends to seek indemnification under this Article 9 from the other
Party, the Party seeking indemnification shall give the other Party
notice of such claim within ninety (90) days of the later of the
commencement of, or the Party's actual knowledge of, such claim or
action. Such notice shall describe the claim in reasonable detail,
and shall indicate the amount (estimated if necessary) of the claim
that has been, or may be sustained by, said Party. To the extent
that the other Party will have been actually and materially
prejudiced as a result of the failure to provide such notice, such
notice will be a condition precedent to any liability of the other
Party under the provisions for indemnification contained in this
Agreement. Neither Party may settle or compromise any claim
without the prior consent of the other Party; provided, however,
said consent shall not be unreasonably withheld or delayed.
9.4 Survival. The indemnification obligations of
each Party under this Article 9 shall continue in full force and
effect regardless of whether this Agreement has either expired or
been terminated or canceled.
ARTICLE 10
INSURANCE
10.1 Insurance Coverage. The Parties shall maintain
at their own cost and expense, fire, liability, worker's
compensation, and other forms of insurance relating to their
respective property and facilities subject to this Agreement in the
manner, and amounts, and for the durations as is customary in the
electric utility industry.
<PAGE>>
10.2 Certificates of Insurance. The Parties agree to
furnish each other with certificates of insurance evidencing the
insurance coverage obtained in accordance with this Article 10, and
the Parties agree to notify and send copies to the other of any
policies maintained hereunder upon written request by a Party.
Each Party must notify the other Party within ten (10) business
days of receiving notice of cancellation, change, amendment
or renewal of any insurance policy required pursuant to Section
10.1 above.
10.3 Additional Insureds and Waiver. Each Party and
its affiliates shall be named as additional insureds on the general
liability insurance policies obtained in accordance with Section
10.1, above, as regards liability under this Agreement; and each
Party shall waive its rights of recovery against the other for any
loss or damage covered by such policy.
ARTICLE 11
FORCE MAJEURE
11.1 Effect of Force Majeure. Notwithstanding
anything in this Agreement to the contrary, Generator and Pepco
shall not be liable in damages or otherwise or responsible to the
other for its failure to carry out any of its obligations under
this Agreement (except for the obligation to pay sums
of money due and owing hereunder) to the extent that they are
unable to so perform or are prevented from performing by an event
of Force Majeure and has complied with Section 11.3.
11.2 Force Majeure Defined. Force Majeure means those
causes beyond the reasonable control of the Party affected, which
by the exercise of reasonable diligence, including Good Utility
Practice, that Party is unable to prevent, avoid, mitigate, or
overcome, including the following: any act of God, labor
disturbance (including a strike), act of the public enemy, war,
insurrection, riot, fire, storm or flood, explosion, breakage or
accident to machinery or equipment, electric system disturbance),
order, regulation or restriction imposed by governmental, military
or lawfully established civilian authorities, or any other cause of
a similar nature beyond a Party's reasonable control.
11.3 Notification. A Party shall not be entitled to
rely on the occurrence of an event of Force Majeure as a basis for
being excused from performance of its obligations under this
Agreement, unless the Party relying on the event or condition
shall: (a) provide prompt written notice of such Force Majeure
event to the other Party, including an estimation of its expected
duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts in
accordance with Good Utility Practice to continue to perform its
obligations under this Agreement; (c) expeditiously take action to
correct or cure the event or condition excusing performance; (d)
exercise all reasonable efforts to mitigate or
<PAGE>
limit damages to the other Party; and (e) provide prompt notice to
the other Party of the cessation of the event or condition giving
rise to its excuse from performance. Subject to this Section 11.3,
any obligation under this Agreement shall be suspended only to the
extent caused by such Force Majeure and only during the continuance
of any inability of performance caused by such Force Majeure but
for no longer period.
ARTICLE 12
DISPUTES
12.1 Disputes
12.1.1 A Party with a claim or dispute under
this Agreement shall submit to the Operating Committee a
notification of such claim or dispute within sixty (60) days after
the circumstances that gave rise to the claim or the question or
issue in dispute. The notification shall be in writing and shall
include a concise statement of the claim or the issue or question
in dispute, a statement of the relevant facts and documentation to
support the claim. In the event the Operating Committee is
unable, in good faith, to resolve their disagreement in a manner
satisfactory to both Parties within thirty (30) days after receipt
by the Operating Committee of a notification specifying the claim,
issue or question in dispute, the Parties shall refer the dispute
to their respective senior management. If, after using their good
faith best efforts to resolve the dispute, senior management cannot
resolve the dispute within thirty (30) days, the Parties shall
utilize the arbitration procedures set forth below in Section 12.2
to resolve a dispute, provided that nothing herein or therein
shall prohibit either Party from at any time requesting from a
court of competent jurisdiction a temporary restraining order,
preliminary injunction, or other similar form of equitable relief
to enforce performance of the provisions of this Agreement.
12.2 Arbitration.
(a) Unless the Parties other wise mutually
agree in writing to another form of dispute resolution such as
dispute resolution under the PJM Agreement or the MAAC agreement,
any arbitration initiated under this Agreement shall be conducted
before a single neutral arbitrator appointed by the Parties within
thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an arbitrator,
such arbitration shall be appointed by the American Arbitration
Association. Unless the Parties agree otherwise, the arbitrator
shall be an attorney or retired judge with at least fifteen (15)
years of experience, and shall not have any current or past
substantial business or financial relationships with any Party to
the arbitration. If possible, the arbitrator shall
<PAGE>
have experience in the electric utility industry. Unless otherwise
agreed, the arbitration shall be conducted in accordance with the
American Arbitration Association's Commercial Arbitration Rules,
then in effect. Any arbitration proceedings, decision or award
rendered hereunder and the validity, effect and interpretation of
this arbitration agreement shall be governed by the Federal
Arbitration Act of the United States, 9 U.S.C. Section 1 et seq.
The location of any arbitration hereunder shall be in the
District of Columbia.
(b) The arbitration shall, if possible, be
concluded not later than six (6) months after the date that it is
initiated. The arbitrator shall be authorized only to interpret
and apply the provisions of this Agreement or any related
agreements entered into under this Agreement and shall have no
power to modify or change any of the above in any manner.
The arbitrator shall have no authority to award punitive or
multiple damages or any damages inconsistent with this Agreement.
The arbitrator shall, within thirty (30) days of the conclusion of
the hearing, unless such time is extended by agreement of the
Parties, notify the Parties in writing of his or her decision,
stating his or her reasons for such decision and separately
listing his or her findings of fact and conclusions of law. The
decision of the arbitrator rendered in such a proceeding shall be
final and binding on the Parties. Judgment on the award may be
entered upon it in any court having jurisdiction.
12.3 FERC Dispute Resolution. Nothing in this
Agreement shall preclude, or be construed to preclude, any Party
from filing a petition or complaint with FERC with respect to any
arbitrable claim over which FERC has jurisdiction. In such case,
the other Party may request FERC to reject or to waive
jurisdiction. If FERC rejects or waives jurisdiction with respect
to all or a portion of the claim, the portion of the claim not so
accepted by FERC shall be resolved through arbitration, as provided
in this Agreement. To the extent that FERC asserts or accepts
jurisdiction over the claim, the decision, finding of fact or order
of FERC shall be final and binding, subject to judicial review
under the Federal Power Act, and any arbitration proceedings that
may have commenced with respect to the claim prior to the assertion
or acceptance of jurisdiction by FERC shall be terminated.
ARTICLE 13
REPRESENTATIONS
13.1 Representations of Pepco. Pepco hereby
represents and warrants to Generator as follows:
(a) Incorporation. Pepco is a corporation duly
organized, validly existing and in good standing under the laws
of the District of Columbia and the Commonwealth of Virginia,
and has all requisite corporate power and authority to
<PAGE>
own, lease and operate its material assets and properties and to
carry on its business as now being conducted.
(b) Authority. Pepco has all necessary
corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The
execution and delivery by Pepco of this Agreement and the
consummation by Pepco of the transactions contemplated
hereunder have been duly and validly authorized by the Board of
Directors of Pepco or by a committee thereof to whom such authority
has been delegated and no other corporate proceedings on the part
of Pepco are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Pepco and, assuming that this
Agreement constitutes a valid and binding agreement of
Generator, constitutes a valid and binding agreement of Pepco,
enforceable by Pepco in accordance with its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of this
Agreement by Pepco nor performance by Pepco of its obligations
hereunder will (A) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-laws of Pepco,
(B) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Pepco
or any of its subsidiaries is a party or by which any of their
respective assets may be bound or (C) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
Pepco, or any of its assets, except in the case of clauses (B) and
(C) for such failures to obtain a necessary consent, defaults and
violations which would not, individually or in the aggregate,
have a material adverse effect on the ability of Pepco to discharge
its obligations under this Agreement (a "Pepco Material Adverse
Effect").
(ii) No declaration, filing or registration
with, or notice to, or authorization, consent or approval of any
governmental authority is necessary for performance by Pepco of its
obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Pepco Material Adverse Effect.
13.2 Representations of Generator. Generator hereby
represents and warrants to Pepco as follows:
<PAGE>
(a) Incorporation. Generator is a
[corporation] duly [incorporated], validly existing and in good
standing under the laws of the State of __________, and has all
requisite [corporate] power and authority to own, lease and operate
its material assets and properties and to carry on its business as
now being conducted.
(b) Authority. Generator has all necessary
[corporate] power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by the Generator of this Agreement and
the consummation by Generator of the transactions contemplated
hereby have been duly and validly authorized the [Board of
Directors] of Generator or by a committee thereof to whom such
authority has been delegated and no other [corporate] proceedings
on the part of Generator are necessary to authorize this Agreement
or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Generator and, assuming
that this Agreement constitutes a valid and binding agreement of
Pepco, constitutes a valid and binding agreement of Generator,
enforceable against Generator in accordance with its terms.
(c) Consents and Approvals.
(i) Neither the execution and delivery of this
Agreement by Generator nor performance by Generator of its
obligations hereunder will (A) conflict with or result in any
breach of any provision of the [Certificate of Incorporation or
By-laws] of Generator, (B) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or
obligation to which Generator or any of its subsidiaries is a party
or by which any of their respective assets may be bound or (C)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Generator, or any of its assets, except in
the case of clauses (B) and (C) for such failures to obtain a
necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse
effect on the ability of Generator to discharge its obligations
under this Agreement (a "Generator Material Adverse Effect").
(ii) No declaration, filing or registration
with, or notice to, or authorization, consent or approval of any
Governmental Authority is necessary for performance by Generator of
its obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Generator Material Adverse Effect.
ARTICLE 14
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
14.1 Assignment.
(a) Except as set forth in this Article 14,
neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by either Party hereto,
without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed.
(b) Subject to Section 14.2, upon ten (10) days
prior written notice to Generator, Pepco may assign this Agreement,
and Pepco's rights, interests and obligations hereunder, to (i) an
Affiliate of Pepco that owns all or part of Pepco's Transmission
System or (ii) an independent system operator or independent
transmission company whose control over all or part of Pepco's
Transmission System has been approved by the FERC.
(c) Subject to Section 14.2, Generator may (a)
assign any of its rights and obligations hereunder to an Affiliate
to the extent necessary for the Generator to qualify as an exempt
wholesale generator under Section 32 of the Public Utility Holding
Company Act of 1935, as amended, and (b) assign, transfer, pledge
or otherwise dispose of its rights and interests hereunder to a
trustee, lending institution, or other Person for the purposes
of financing or refinancing the Station, including upon or pursuant
to the exercise of remedies under such financing or refinancing, or
by way of assignments, transfers, conveyances of dispositions in
lieu thereof; provided, however, that no such assignment shall
relieve or in any way discharge Generator from the performance of
its duties and obligations under this Agreement. Pepco agrees to
execute and deliver, at Generator's expense, such documents as may
be reasonably necessary to accomplish any such assignment,
transfer, conveyance, pledge or disposition of rights hereunder
for purposes of the financing or refinancing of the Facility, so
long as Pepco's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
(d) Subject to Section 14.2, either Party may
assign this Agreement to a successor to all or substantially all of
the assets of such Party by way of merger, consolidation, sale or
otherwise, provided such successor assumes in writing and becomes
liable for all of such Party's duties and obligations hereunder.
14.2 Release of Rights and Obligations. No
assignment, transfer, conveyance, pledge or disposition of rights,
interests, duties or obligations under this Agreement by a Party
shall relieve that Party from liability and financial
responsibility for the performance thereof after any such transfer,
assignment,
<PAGE>
conveyance, pledge or disposition unless and until (i) the
transferee or assignee shall agree in writing to assume the
obligations and duties of that Party under this Agreement and to
impose such obligations on subsequent permitted transferees and
assignees and (ii) the non-assigning Party has consented in writing
to such assumption and to a release of the assigning Party from
such liability, such consent not to be unreasonably withheld or
delayed.
14.3 Change in Corporate Identity. If Generator
terminates its existence as a [corporate] entity by merger,
acquisition, sale, consolidation or otherwise, or if all or
substantially all of Generator's assets are transferred to another
person or business entity without complying with this Article 14,
Pepco shall have the right, enforceable in a court of competent
jurisdiction, to enjoin Generator's successor from using the
Station in any manner that does not comply with the requirements of
this Agreement or that impedes Pepco's ability to carry on its
ongoing business operations.
14.4 Successors and Assigns. This Agreement and all of
the provisions hereof are binding upon, and inure to the benefit
of, the Parties and their respective successors and permitted
assigns.
ARTICLE 15
SUBCONTRACTORS
Nothing in this Agreement shall prevent the Parties
from utilizing the services of subcontractors as they deem
appropriate, provided, however, the Parties agree that, where
applicable, all said subcontractors shall comply with the terms and
conditions of this Agreement. The creation of any subcontract
relationship shall not relieve the hiring Party of any of
its obligations under this Agreement. Each Party shall be fully
responsible to the other Party for the acts and/or omission of any
subcontractor it hires as if no subcontract had been made. Any
obligation imposed by this Agreement upon the Parties, where
applicable, shall be equally binding upon and shall be construed as
having application to any subcontractor. The Parties shall each be
liable for, indemnify, and hold harmless the other Party, their
Affiliates and their officers, directors, employees, agents,
servants, and assigns from and against any and all claims, demands,
or actions, from the other Party's subcontractors; and shall pay
all costs, expenses and legal fees associated therewith and all
judgments, decrees and awards rendered therein. No subcontractor
is intended to be or shall be deemed a third-party beneficiary of
this Agreement.
ARTICLE 16
NOTICES
16.1 Emergency Notices. At or prior to the Effective
Date, each Party shall indicate to the other Party, by notice, the
appropriate person during each
<PAGE>
eight-hour work shift to contact in the event of an emergency, a
scheduled or forced interruption or reduction in services. The
notice last received by a Party shall be effective until modified
in writing by the other Party.
16.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (as of the
time of delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or
at such other address for a Party as shall be specified by like
notice):
if to Pepco , to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) ________________
Attention: ___________________
if to Generator, to:
c/o Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
ARTICLE 17
AMENDMENTS
17.1 Amendments. Except as set forth in Sections 2.2
and 17.2 of this Agreement, this Agreement may be amended,
modified, or supplemented only by written agreement of both Pepco
and Generator.
17.2 FERC Proceedings
(a) Pepco may unilaterally make application to
FERC under Section 205 of the Federal Power Act and pursuant to the
FERC's rules and regulations promulgated thereunder for, or
exercise any rights it may have under Section 206 of the Federal
Power Act and the regulations thereunder with respect to, a change
in any rates, terms and conditions, charges, classification of
service, rule or regulation for any services Pepco provides
under this Agreement over which FERC has jurisdiction.
<PAGE>
(b) Generator may exercise its rights under
Section 205 or 206 of the Federal Power Act and pursuant to FERC's
rules and regulations promulgated thereunder with respect to any
rate, term, condition, charge, classification of service, rule or
regulation for any services provided under this Agreement over
which FERC has jurisdiction.
ARTICLE 18
MISCELLANEOUS PROVISIONS
18.1 Waiver. Except as otherwise provided in this
Agreement, any failure of a Party to comply with any obligation,
covenant, agreement, or condition herein may be waived by the Party
entitled to the benefits thereof only by a written instrument
signed by the Party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
18.2 Labor Relations. The Parties agree to
immediately notify the other Party, verbally and then in writing,
of any labor dispute or anticipated labor dispute which may
reasonably be expected to affect the operations of the other Party.
18.3 No Third Party Beneficiaries. Nothing in this
Agreement is intended to confer upon any other person except the
Parties any rights or remedies hereunder or shall create any third
party beneficiary rights in any person. No provision of this
Agreement shall create any rights in any such persons in respect of
any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement except as expressly
provided for thereunder.
18.4 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland (regardless of the laws that
might otherwise govern under applicable principles of conflicts of
law).
18.5 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.
18.6 Interpretation. When a reference is made in this
Agreement to an Article, Section, Schedule or exhibit, such
reference shall be to an Article or Section of, or Schedule or
exhibit to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for
reference
<PAGE>
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such term. Unless otherwise expressly stated otherwise
herein, the word "day" shall mean any calendar day including
weekends and holidays. Any agreement, instrument, statute,
regulation, rule or order defined or referred to herein or in any
agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from
time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the
case of statutes, regulations, rules or orders) by succession of
comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted
successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution
of this Agreement, and, accordingly, there shall be no presumption
that this Agreement or any provision hereof be construed against
the Party that drafted this Agreement.
18.7 Jurisdiction and Enforcement. Each of the
Parties irrevocably submits to the exclusive jurisdiction of the
federal and state courts of the State of Maryland for the purposes
of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the
Parties agrees to commence any action, suit or proceeding relating
hereto either in the federal courts of the State of Maryland or, if
such suit, action or proceeding may not be brought in such
court for jurisdictional reasons, in the state courts of the State
of Maryland. Each of the Parties further agrees that service of
process, summons, notice or document by hand delivery or U.S.
registered mail at the address specified for such Party in Section
16.2 (or such other address specified by such Party from time to
time pursuant to Section 16.2) shall be effective service of
process for any action, suit or proceeding brought against such
Party in any such court. Each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in the federal and state courts of
the State of Maryland and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
<PAGE>
18.8 Entire Agreement. This Agreement, Asset Sale
Agreement, the Confidentiality Agreement and the Ancillary
Agreements including the Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein and
other contracts, agreements and instruments contemplated hereby or
thereby, embody the entire agreement and understanding of the
Parties in respect of the transactions contemplated by this
Agreement. There are no restrictions, promises, representations,
warranties, covenants or undertakings other than those expressly
set forth or referred to herein or therein. This Agreement, the
Asset Sale Agreement and the Ancillary Agreements supersede all
prior agreements and understandings between the Parties with
respect to the transactions contemplated by this Agreement other
than the Confidentiality Agreement.
18.9 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
18.10 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between
Pepco and Generator other than that of independent contractors.
18.11 Conflicts. Except with respect to the
amendments, indemnification, liability, default and remedies
provisions contained herein or as otherwise expressly provided
herein, in the event of any conflict or inconsistency between the
terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF, Pepco and Generator have caused
this Interconnection Agreement (Chalk Point) to be signed by their
respective duly authorized officers as of the date first above
written.
POTOMAC ELECTRIC POWER COMPANY
By: ____________________________
Name:
Title:
[GENERATOR]
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE A
DEFINITIONS
Part A. Capitalized terms not defined in the body of the
Agreement shall have the meaning set forth in Part A of
this Schedule A. (Part B of this Schedule A sets forth
capitalized terms defined within the Agreement.)
(1) "Affiliate" has the meaning set forth in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934.
(2) "Ancillary Agreements" has the meaning set forth
in the Asset Sale Agreement.
(3) "Closing" has the meaning set forth in the Asset
Sale Agreement.
(4) "Confidentiality Agreement" has the meaning set
forth in the Asset Sale Agreement.
(5) "Costs" means all costs, including without
limitation, any Taxes, costs of acquiring real property, costs and
fees for permits, franchises, licenses and regulatory approvals
except to the extent that such costs are allocated to a party or
parties other than the Generator by the PJM Interconnection LLC or
otherwise under the PJM Tariff or PJM Agreement.
(6) "Easement" means the Easement Agreement dated
__________, 2000, between the Parties with respect to the Station.
(7) "Environmental Laws" means all former, current
and future federal, state, local and foreign laws (including common
law), treaties, regulations, rules, ordinances, codes, decrees,
judgments, directives or orders (including consent orders) and
environmental permits, in each case, relating to pollution or
protection of the environment or natural resources, including laws
relating to Releases or threatened Releases, or otherwise
relating to the generation, manufacture, processing, distribution,
use, treatment, storage, arrangement for disposal, transport,
recycling or handling, of Hazardous Substances.
(8) "Emergency" means (a) with respect to Pepco, a
condition or situation which Pepco, the PJM Interconnection LLC,
the PJM System Operator or the Transmission Operator deem
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Transmission System, Pepco's
electrical system or the electrical or transmission systems of
others to which the Transmission System or Pepco's electrical
system are directly or indirectly connected and (b) with respect to
the Generator, a condition or situation which the Generator deems
imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Station.
(9) "FERC" means the Federal Energy Regulatory
Commission or its successors.
<PAGE>
(10) "Generating Facilities" means the Station and any
additional generating plants, turbines or other generating
facilities constructed by Generator after the Effective Date at the
site of the Station.
(11) "Generator" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors and assigns.
(12) "Generator Facilities" mean the equipment and
facilities owned by the Generator but located on Pepco's property
which are identified in Schedule B of this Agreement.
(13) "Good Utility Practice" means any of the
applicable practices, methods and acts.
(a) required by FERC, NERC, MAAC, the PJM
Interconnection LLC, the PJM System Operator, or the successor of
any of them, whether or not the Party whose conduct is at issue is
a member thereof,
(b) required by applicable law or regulations,
(c) required by the Pepco Interconnection
Standards or the policies and standards of Pepco relating to
emergency operations;
(d) otherwise engaged in or approved by a
significant portion of the electric utility industry during the
relevant time period;
which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost consistent
with law, regulation, good business practices, reliability, safety,
and expedition. Good Utility Practice is not intended to be
limited to the optimum practice, method, or act to the exclusion of
all others, but rather to be acceptable practices, methods, or acts
generally accepted in the region.
(14) "Hazardous Substances" means (i) any
petrochemical or petroleum products, crude oil or any fraction
thereof, ash, radioactive materials, radon gas, asbestos in any
form, urea formaldehyde foam insulation or polychlorinated
biphenyls, (ii) any chemicals, materials, substances or
wastes defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted
hazardous materials," "extremely hazardous substances," "toxic
substances," "contaminants" or "pollutants" or words of similar
meaning and regulatory effect contained in any Environmental Law or
(iii) any other chemical, material, substance or waste which is
prohibited, limited or regulated by any Environmental Law.
(15) "Interconnection Facilities" means those
facilities or portions of facilities owned or operated by Pepco to
provide Interconnection Service which shall include, but not be
limited to (1) facilities the cost of which is reasonably allocated
to the Interconnection Service provided to the Station, or (2)
Attachment Facilities or Local Upgrade Facilities, as defined
in the PJM Tariff, which are associated with the Interconnection
Service and operated and maintained by Pepco.
<PAGE>
(16) "Interconnection Service" means the services
provided by Pepco which are necessary to connect the Station to the
Transmission System for parallel operation of the Station and to
enable Generator to transmit the energy and ancillary services
produced by the Station to the Transmission System and receive
Station energy service and ancillary services, including
blackstart power, from the Generator's supplier.
(17) "MAAC" means the Mid-Atlantic Area Council, a
reliability council under Section 202 of the Federal Power Act
established pursuant to the MAAC Agreement dated August 1, 1994, or
any successor thereto.
(18) "Maintain" means construct, reconstruct, install,
inspect, repair, replace, operate, patrol, maintain, use,
modernize, expand, upgrade, or other similar activities.
(19) "MDPSC" means the Maryland Public Service
Commission or any successor agency thereto.
(20) "NERC" means North American Electric Reliability
Council or any successor thereto.
(21) "Pepco" has the meaning set forth in the
introductory paragraph of this Agreement and shall include its
permitted successors or assigns.
(22) "Pepco Facilities" means the equipment and
facilities owned by Pepco but located on Generator's property which
are identified in Schedule B of this Agreement.
(23) "Pepco Interconnection Standards" means Pepco's
Interconnection and Parallel Operating Guidelines as amended,
modified or replaced from time to time. A copy of the existing
Pepco Interconnection Standards is attached hereto as Schedule E.
(24) "Point of Interconnection" means each ownership
point of demarcation set forth in Schedule C where capacity, energy
and ancillary services are transferred between the Station and the
Transmission System.
(25) "Pepco Transmission Facilities" means those
transmission, substation, and communication facilities and related
equipment, including the Interconnection Facilities, and any
additions, modifications or replacements thereto, that are utilized
to provide Interconnection Service to the Station.
(26) "PJM" means the Pennsylvania New Jersey-Maryland
interconnected power pool operated under the PJM Agreement and any
successor thereto including any regional transmission operator,
independent system operator, transco, or any other independent
system administrator that possesses operational or planning control
over the Transmission System.
(27) "PJM Agreement" means the Amended and Restated
Operating Agreement of the PJM Interconnection LLC dated as of
June 2, 1997.
<PAGE>
(28) "PJM Control Area" shall mean the control area
recognized by NERC as the PJM Control Area.
(29) "PJM Interconnection LLC" means the independent
system operator of the PJM Control Area pursuant to the PJM
Operating Agreement and the PJM Tariff.
(30) "PJM Generator Connection Agreement" means the
interconnection agreement entered into between the Generator and
the PJM Interconnection LLC pursuant to the PJM Tariff with respect
to the interconnection of the Station and the Transmission System.
(31) "PJM Reliability Agreement" means the Reliability
Assurance Agreement dated June 2, 1997 among the load serving
entities of PJM.
(32) "PJM Requirements" means the rules, regulations
or other requirements of PJM or MAAC contained in or adopted
pursuant to the PJM Agreement, the PJM Tariff or the PJM
Reliability Agreement which are applicable to Pepco, with respect
to the Transmission System or the Interconnection Service, and the
Generator with respect to the Generating Facilities.
(33) "PJM System Operator" shall mean the PJM
Interconnection LLC, energy control center staff responsible for
central dispatch as provided in the PJM Agreement.
(34) "PJM Tariff" means the PJM Open Access
Transmission Tariff providing transmission service within the PJM
Control Area.
(35) "Qualified Personnel" means individuals who
possess any required licenses and are trained for their positions
and duties by Generator and/or Pepco pursuant to Good Utility
Practice.
(36) "Release" means any release, spill, emission,
leaking, dumping, injection, pouring, deposit, disposal, discharge,
dispersal, leaching or migration into the environment (including
ambient air, surface water, groundwater, land surface or subsurface
strata) or within any building, structure, facility or fixture.
(37) "Revenue Meters" means all MWh and MVArh meters,
pulse isolation relays, pulse conversion relays, transducers
required by Pepco or the PJM Interconnection or PJM System Operator
for billing or other purposes, and associated totalizing equipment
and appurtenances and compensation required to measure the transfer
of energy across the Point of Interconnection.
(38) "SMECO CT" means the approximately 84 MW
generating facility and related assets owned by the Southern
Maryland Electric Cooperative, or its successors or assigns, which
is located at or near the site of the Station.
(39) "Station" means the Chalk Point Station as
defined in the Asset Sale Agreement (excluding the SMECO CT).
<PAGE>
(40) "Switching, Tagging, and Grounding Rules" means
Pepco's switching, tagging and grounding rules as amended,
modified or replace from time to time. A copy of the existing
Switching Tagging and Grounding Rules is attached hereto as
Schedule D.
(41) "Taxes" means all taxes, surtaxes, charges, fees,
levies, penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including income
taxes, excise, property, sales, transfer, franchise, special
franchise, payroll, recording, withholding, social security or
other taxes, in each case including any interest, penalties or
additions attributable thereto.
(42) "Transmission System" means the facilities owned,
controlled, or operated by Pepco, for purposes of providing
transmission service, including services under the PJM Tariff, and
Interconnection Service.
(43) "Transmission Operator" means the person, or
persons designated by Pepco to coordinate the day to day
interconnection of the Station with the Transmission System.
Part B. The following terms have the meaning specified in the
section of this Agreement set forth opposite to such
term:
Term Agreement Reference
Agreement Preamble
Asset Sale Agreement Preamble
Effective Date Section 2.1
Event of Default Section 8.1
Force Majeure Section 11.1
Initial Period Section 3.10
Operating Committee Section 3.20
Party or Parties Preamble
Term Article 2
<PAGE>
EXHIBIT F
LOCAL AREA SUPPORT AGREEMENT
BY AND BETWEEN
POTOMAC ELECTRIC POWER COMPANY
and
____________________________________
Dated ______________, 2000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS 1
ARTICLE II TERM; TERMINATION 1
2.1 - Term 1
2.2 - Termination 1
2.3 - Continuation 2
ARTICLE III - OPERATING REQUIREMENTS 2
3.1 - PJM; MAAC 2
3.2 - Obligations of Generator 2
3.3 - Violations 4
3.4 - Billing Procedures 4
ARTICLE IV RETIREMENT OR REMOVAL FROM SERVICE OF
THE FACILITY 5
4.1 - Conditions Precedent to Retirement or Removal 5
4.2 - Notice Requirement 5
4.3 - PJM Studies 6
4.4 - Termination Fee 6
ARTICLE V - REPRESENTATIONS OF THE PARTIES 7
5.1 - Representations of Pepco 7
5.2 - Representations of Generator 8
ARTICLE VI - DEFAULT 9
6.1 - Event of Default 9
6.2 - Remedies 9
6.3 - Additional Remedies 10
6.4 - Reimbursement for Replacement Costs 10
6.5 - Limitation of Liability 10
ARTICLE VII - ASSIGNMENT 11
7.1 - Assignment 11
7.2 - Release of Rights and Obligations 11
7.3 - Transfer of Facility 11
7.4 - Change in Corporate Identity 12
7.5 - Successors and Assigns 12
ARTICLE VIII - FORCE MAJEURE 12
8.1 - Force Majeure 12
8.2 - Definition of Force Majeure 12
8.3 - Force Majeure Procedures 12
ARTICLE IX - INDEMNIFICATION 13
9.1 - Generator's Indemnification 13
9.2 - Pepco's Indemnification 13
9.3 - Indemnification Procedures 13
9.4 - Survival 13
ARTICLE X - CONFIDENTIALITY 14
10.1 - Confidentiality Obligations of Pepco 14
<PAGE>
10.2 - Confidentiality Obligations of Generator 14
10.3 - Remedies 15
ARTICLE XI DISPUTE RESOLUTION 15
11.1 - Disputes 15
11.2 - Arbitration 15
11.3 - FERC Jurisdiction 16
ARTICLE XII - MISCELLANEOUS 16
12.1 - Amendment and Modification; Extension; Waiver 16
12.2 - Notices 16
12.3 - No Third Party Beneficiaries 17
12.4 - Independent Contractors 17
12.5 - Governing Law 18
12.6 - Jurisdiction and Enforcement 18
12.7 - Counterparts 18
12.8 - Interpretation 18
12.9 - Entire Agreement 19
12.10 - Severability 19
12.11 - Conflicts 19
12.12 - Further Assurances 19
<PAGE>
LOCAL AREA SUPPORT AGREEMENT
THIS LOCAL AREA SUPPORT AGREEMENT (as amended from time
to time, this "Agreement") is made and entered into as of
___________, 2000 by and between Potomac Electric Power Company, a
District of Columbia and Virginia corporation ("Pepco"), and
______________________ ("Generator"), a __________ [corporation].
Pepco and Generator are referred to individually as a "Party" and
collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, Pepco and Generator have entered into an Asset
Purchase and Sale Agreement, dated June 7, 2000 (as amended from
time to time, the "Asset Sale Agreement"), for the sale by Pepco to
Generator of the Facility (as defined herein);
WHEREAS, Pepco requires local generation support from the
Facility in order to maintain reliability of electric service in
the local area of the Facility, including the reliable transmission
and delivery of Energy (as defined herein) to loads connected
radially to the Facility switchyard; and
WHEREAS, the provisions of this Agreement are essential
to maintaining the reliability of electric service in the local
area of the Facility.
NOW THEREFORE, in consideration of the mutual covenants,
representations, warranties, and agreements contained herein, and
intending to be legally bound hereby, the Parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement shall have the
respective meanings set forth in Appendix A hereto.
ARTICLE II
TERM; TERMINATION
2.1 Term. This Agreement shall become effective upon
consummation of the Closing (the "Effective Date"). The Agreement
shall continue in full force and effect for a term of twenty (20)
years (the "Term") unless terminated earlier in accordance with
Section 2.2.
2.2 Termination. Subject to any required regulatory
approval, this Agreement may be terminated prior to the end of the
Term: (a) by either Party pursuant to Section 6.2; or
<PAGE>
(b) upon written notice by Pepco that Substitute Resources
satisfactory to PJM and Pepco have become operational.
2.3 Continuation. The applicable provisions of this
Agreement shall continue in effect after cancellation, termination
or expiration hereof to the extent necessary to provide for final
billings, billing adjustments and payments pertaining to liability
and indemnification obligations arising from acts or events that
occurred while this Agreement was in effect.
ARTICLE III
OPERATING REQUIREMENTS
3.1 PJM; MAAC.
(a) From and after the Effective Date and for so
long as PJM Interconnection LLC is the control area operator for
the System, Generator shall maintain membership in good standing in
PJM and MAAC and shall execute, deliver and perform all agreements
required by PJM and MAAC, including the PJM Agreement and the MAAC
Agreement.
(b) If PJM Interconnection LLC ceases to be the
control area operator for the System, then Generator shall be
obligated to enter into comparable operating arrangements with any
succeeding control area operator for the System, or with Pepco, to
achieve the same local area reliability goals, subject to
equivalent terms, set forth in this Agreement.
3.2 Obligations of Generator. Provided the Facility's
switchyard remains in the PJM Control Area, Generator shall operate
and maintain the Facility in the following manner:
(a) Operation and Compensation.
(i) Generator shall make the Facility Available and
shall follow the generation unit commitment procedures and dispatch
orders (including requests for Ancillary Services) of PJM
Interconnection LLC and, in order to maintain local area
reliability as provided in Section 3.2(a)(iii) below, of Pepco.
Generator shall make the Facility Available and shall follow such
generation unit commitments and dispatch orders (including requests
for Ancillary Services) even if operation of the Facility is not
required for energy sales scheduled by Generator.
(ii) When PJM Interconnection LLC orders a change in
operation of the Facility for any reason, including local area
reliability, PJM compensation rules will apply. Pepco will have no
obligation under this Agreement to compensate Generator for such
operation.
(iii) Pepco may order operation and dispatch
level of the Facility for local area reliability in accordance with
Pepco Transmission Procedures No. 28 and No. 29 at any time when
PJM Interconnection LLC has not ordered such operation. When Pepco
<PAGE>
orders operation of the Facility for local area reliability in
accordance with Pepco Transmission Procedures No. 28 and No. 29 at
a time when PJM Interconnection LLC has not ordered such operation,
Generator shall schedule the appropriate operation of the Facility
in accordance with PJM procedures. Pepco shall pay Generator the
excess, if any, of (A) the compensation Generator would have
received if PJM Interconnection LLC had ordered such operation for
local area reliability minus (B) the compensation actually received
by Generator from PJM Interconnection LLC for such operation.
(iv) Generator shall not retire or indefinitely
remove from service the Facility or any of its Units except as
permitted pursuant to Article IV. Until the retirement or
indefinite removal from service of the Facility or any of its Units
in accordance with Article IV, Generator shall (A) maintain the
capacity of each Unit in accordance with Good Utility Practice and
(B) shall otherwise operate and maintain the Facility, or cause the
Facility to be operated and maintained, in accordance with Good
Utility Practice.
(v) Notwithstanding any provision of this Section
3.2(a) to the contrary, in the event Abnormal Conditions exist for
any period of twenty-one (21) consecutive days, then during the
period commencing on the twenty-first (21st) day of such Abnormal
Conditions and ending with the termination of such Abnormal
Conditions, Generator must use best efforts to comply with Pepco
Transmission Procedure No. 28 pursuant to Sections 3.2(a)(i) and
3.2(a)(iii).
(b) Maintenance. Generator shall abide by PJM rules
and cooperate with PJM Interconnection LLC and Pepco in scheduling
maintenance of the Facility and each Unit and any other equipment
outages affecting the operation of the Facility or any Unit.
(c) Notification of Pepco.
(i) Generator shall promptly notify Pepco of any
condition, incident or occurrence that will, or is reasonably
likely to, cause Generator to fail to provide Energy or Ancillary
Services during such periods and in such amounts as required by
Section 3.2(a), along with the anticipated duration of the
condition, incident or occurrence. Such notice shall not excuse
performance by Generator of any of its obligation hereunder nor
shall it deprive Pepco of any of its remedies under this Agreement.
(ii) Generator shall, unless specifically waived by
Pepco in writing, (A) promptly provide Pepco copies of any written
correspondence, notices and agreements and arrangements between
Generator and PJM Interconnection LLC and/or MAAC and (B) permit
Pepco to attend any meetings or discussions between Generator and
PJM Interconnection LLC and/or MAAC, in each case to the extent any
such correspondence, notices, agreements, arrangements, meetings or
discussions concern any operation, outage or shutdown of the
Facility or any Unit that has or is reasonably expected to have an
impact on Pepco's local area reliability.
<PAGE>
3.3 Violations.
(a) Normal Condition Violation. If Pepco Sheds
Load as a result of a Normal Condition Violation, Generator shall
pay to Pepco an amount equal to one million dollars ($1,000,000)
for each such violation.
(b) Abnormal Condition Violation.
(i) If Generator commits an Abnormal Condition
Violation, Generator shall pay to Pepco an amount equal to one
thousand dollars per megawatt hour ($1,000/MWh) for the difference
(whether positive or negative) in any hour during such Abnormal
Condition Violation between the Target Output and the Actual
Output.
(ii) In addition to any amount payable by Generator
pursuant to Section 3.3(b)(i), if Generator has supplied Excess
Output during an Abnormal Condition Violation, then Generator shall
pay to Pepco an amount equal to all revenues derived by Generator
from supplying such Excess Output.
(iii) Notwithstanding any provision of this
Section 3.3(b) to the contrary, in the event Abnormal Conditions
exist for any period of twenty-one (21) consecutive days, then
Generator shall not be required to pay Pepco the amounts otherwise
due under Section 3.3(b)(i) or 3.3(b)(ii) for the period commencing
on the twenty-first (21st) day of such Abnormal Conditions and
ending with the termination of such Abnormal Conditions.
(c) All amounts payable under this Section 3.3
shall be paid in accordance with the billing procedures set forth
in Section 3.4.
(d) The Parties agree that the foregoing payment
provisions are an integral part of this Agreement and forms a
portion of the consideration for executing the Asset Sale
Agreement; that the amounts set forth in this Section 3.3 represent
a reasonable estimate of the damages incurred by Pepco for a Normal
Condition Violation and an Abnormal Condition Violation; that the
payment by Generator of such amounts is an appropriate remedy; and
that such payments constitute liquidated damages and not a
forfeiture or penalty. Generator irrevocably and unconditionally
waives any claim that these payments are or may be unenforceable as
to Generator.
3.4 Billing Procedures.
(a) Within ten (10) calendar days after the first
day of each month immediately following the month in which one or
more Transaction Days have occurred, Generator shall provide to
Pepco a written invoice for any payments due to Generator from
Pepco pursuant to Section 3.2(a)(iii). Pepco shall submit invoices
to Generator whenever necessary under this Agreement.
(b) Each invoice shall (i) delineate the month in
which the Services were provided, (ii) fully describe the Services
rendered, (iii) be itemized to reflect the Services
<PAGE>
performed or provided, and (iv) provide reasonable detail as to the
calculation of the amount involved.
(c) All invoices shall be paid within fifteen (15)
calendar days of receipt, but not earlier than the 25th day of the
month in which the invoice is rendered. All payments shall be made
in immediately available funds payable to the other Party, by wire
transfer to a bank account designated in writing by such Party.
Payment of invoices shall not relieve the paying Party from any
responsibilities or obligations it has under this Agreement, nor
shall such payment constitute a waiver of any claims arising
hereunder.
(d) To the extent that, for any billing period,
Generator is obligated to pay to Pepco amounts due and calculated
pursuant to Section 3.3, Pepco may use such amounts as a set-off
against any amounts owed by Pepco to Generator under Section
3.2(a)(iii). If such amounts due and calculated pursuant to
Section 3.3 exceed the amounts due to Generator under Section
3.2(a)(iii) for any billing period, Pepco shall submit an invoice
to Generator and Generator shall pay such invoice within fifteen
(15) calendar days of receipt.
(e) In the event of a billing dispute hereunder,
(i) Generator shall continue to provide Services in accordance with
the terms of this Agreement and (ii) the Party required to make
payments hereunder shall pay to the other Party all invoiced
amounts, net of any set-offs permitted under Section 3.4(d), that
are not in dispute.
ARTICLE IV
RETIREMENT OR REMOVAL FROM SERVICE OF THE FACILITY
4.1 Conditions Precedent to Retirement or Removal.
Prior to the retirement or indefinite removal from service of the
Facility or any of its Units, Generator shall: (i) comply with all
applicable MAAC requirements in connection with such retirement or
indefinite removal from service; (ii) if applicable, enter into an
agreement with PJM Interconnection LLC providing for studies
relating to the impact of the retirement or indefinite removal from
service on the Facility, as more particularly described in Section
4.3 below; and (iii) either (A) pay any applicable termination fee,
as more particularly described in Section 4.4 below, or (B) provide
(at Generator's expense) substitute resources satisfactory to PJM
and Pepco for the remaining term of the Agreement to maintain the
reliability of the Facility (the "Substitute Resources").
4.2 Notice Requirement. Generator shall not be
permitted to shut down the Facility or applicable Unit until the
later of (x) the date specified by Generator in a written notice to
PJM Interconnection LLC and Pepco indicating Generator's intent to
shut down the Facility or Unit, such notice to be provided at least
five (5) years prior to the date of shutdown (the "Termination
Notice") and (y) the date on which PJM notifies Generator
in writing that transmission reinforcements or other appropriate
measures necessitated by the shutdown are in commercial operation.
PJM Interconnection LLC may reduce or eliminate the five (5) year
notice requirement if PJM Interconnection LLC determines, following
consideration of Generator's commitment to provide Substitute
Resources and other applicable factors,
that the reliability of the PJM Control Area no longer requires
<PAGE>
such advance notice. In addition to PJM's determination, Generator
must obtain Pepco's consent to reduce or eliminate the advance
notice requirement, such consent not to be unreasonably withheld.
4.3 PJM Studies. In the event Generator does not intend
to provide Substitute Resources, Generator shall enter into an
agreement with PJM Interconnection LLC to perform a system impact
study and, if indicated by the system impact study, a facilities
study, of the proposed retirement or indefinite removal from
service of the Facility or applicable Unit in order to determine
the PJM transmission additions or upgrades required, if any, to
accommodate such retirement or indefinite removal from service.
Alternatively, if Generator does intend to provide Substitute
Resources, Generator shall (i) commission a study to evaluate the
feasibility of the proposed Substitute Resources and (ii) at the
request of PJM Interconnection LLC, enter into an agreement with
PJM Interconnection LLC to perform any system impact and facilities
studies required by PJM Interconnection LLC. Generator shall pay
all costs and deposits required in connection with the performance
of any such studies consistent with Part IV of the PJM Tariff.
4.4 Termination Fee. Based on the results of the
studies required by PJM Interconnection LLC, PJM Interconnection
LLC may determine that certain transmission system additions or
upgrades are necessary to accommodate the retirement or indefinite
removal from service of the Facility or applicable Unit. As a
termination fee (the "Termination Fee"), Generator shall contribute
to the transmission owner(s) constructing the additions or upgrades
(through PJM or directly), an amount equal to that portion of the
installed cost of such additions or upgrades calculated as follows:
(i) if the Termination Notice specifies a retirement or
indefinite removal from service date which is prior to the sixth
anniversary of the Closing Date, the portion shall be 100%;
(ii) if the specified retirement or indefinite removal
from service date is on or after the sixth anniversary but prior to
the seventh anniversary of the Closing Date, the portion shall be
80%;
(iii) if the specified retirement or indefinite
removal from service date is on or after the seventh anniversary
but prior to the eighth anniversary of the Closing Date, the
portion shall be 60%;
(iv) if the specified retirement or indefinite removal
from service date is on or after the eighth anniversary but prior
to the ninth anniversary of the Closing Date, the portion shall be
40%;
(v) if the specified retirement or indefinite removal
from service date is on or after the ninth anniversary but prior to
the tenth anniversary of the Closing Date, the portion shall be
20%; and
(vi) if the specified retirement or indefinite removal
from service date is on or after the tenth anniversary of the
Closing Date, Generator shall have no obligation under
<PAGE>
this Agreement to reimburse PJM Interconnection LLC for the cost of
the additions and upgrades found necessary by PJM Interconnection
LLC.
ARTICLE V
REPRESENTATIONS OF THE PARTIES
5.1 Representations of Pepco. Pepco hereby represents
and warrants to Generator as follows:
(a) Incorporation. Pepco is a corporation duly
incorporated, validly existing and in good standing under the laws
of the District of Columbia and Commonwealth of Virginia, and has
all requisite corporate power and authority to own, lease and
operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Pepco has all necessary corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery by Pepco of this Agreement and the consummation by Pepco
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Pepco or by a committee
thereof to whom such authority has been delegated and no other
corporate proceedings on the part of Pepco are necessary to
authorize this Agreement or the transactions contemplated hereby.
The Agreement has been duly and validly executed and delivered by
Pepco and, assuming that this Agreement constitutes a valid and
binding agreement of Generator, constitutes a valid and binding
agreement of Pepco, enforceable against Pepco in accordance with
its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of this
Agreement by Pepco nor performance by Pepco of its obligations
hereunder will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-laws of Pepco,
(ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Pepco
or any of its subsidiaries is a party or by which any of their
respective assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
Pepco, or any of its assets, except in the case of clauses (ii) and
(iii) for such failures to obtain a necessary consent, defaults and
violations which would not, individually or in the aggregate, have
a material adverse effect on the ability of Pepco to discharge its
obligations under this Agreement (a "Pepco Material Adverse
Effect").
(ii) No declaration, filing or registration with, or
notice to, or authorization, consent or approval of any
Governmental Authority is necessary for performance by Pepco of its
obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Pepco Material Adverse Effect.
<PAGE>
5.2 Representations of Generator. Generator represents
and warrants to Pepco as follows:
(a) Incorporation. Generator is a [corporation]
duly [incorporated], validly existing and in good standing under
the laws of the State of ______________ and has all requisite
[corporate] power and authority to own, lease and operate its
material assets and properties, including the Facility, and to
carry on its business as now being conducted.
(b) Authority. Generator has all necessary
[corporate] power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by Generator of this Agreement and the
consummation by Generator of the transactions contemplated hereby
have been duly and validly authorized by the [Board of Directors]
of Generator or by a committee thereof to whom such authority has
been delegated and no other [corporate] proceedings on the part of
Generator are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Generator and, assuming that this
Agreement constitutes a valid and binding agreement of Pepco,
constitutes a valid and binding agreement of Generator, enforceable
against Generator in accordance with its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of this
Agreement by Generator nor performance by Generator of its
obligations hereunder will (i) conflict with or result in any
breach of any provision of the [Certificate of Incorporation or
By-laws] of Generator, (ii) result in a default (or give rise to
any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or
obligation to which Generator or any of its subsidiaries is a party
or by which any of their respective assets may be bound or (iii)
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Generator, or any of its assets, except in
the case of clauses (ii) and (iii) for such failures to obtain a
necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse effect on
the ability of Generator to discharge its obligations under this
Agreement (a "Generator Material Adverse Effect").
(ii) No declaration, filing or registration with, or
notice to, or authorization, consent or approval of any
Governmental Authority is necessary for performance by Generator of
its obligations hereunder, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals
which, if not obtained or made would not, individually or in the
aggregate, have a Generator Material Adverse Effect.
<PAGE>
ARTICLE VI
DEFAULT
6.1 Event of Default. Unless excused by Force Majeure,
each of the following events shall constitute an event of default
(an "Event of Default") under this Agreement:
(a) The failure by a Party to pay any amount due
hereunder within thirty (30) days after receipt of written notice
of nonpayment by the other Party, unless the payment of such amount
is disputed in good faith, in which event Section 3.4(e) and
Article XI shall apply;
(b) A Party's breach of any material term or
condition of this Agreement, including but not limited to any
material breach of a representation, warranty or covenant made in
this Agreement which, after receiving written notice of the breach
from the non-breaching Party (such notice to set forth in
reasonable detail the nature of the default and, where known and if
applicable, the steps necessary to cure such default), (i) the
breaching Party fails to cure the default, if curable, within
thirty (30) days following receipt of the notice or (ii) if such
default is of such a nature that it cannot be cured within thirty
(30) days following receipt of such notice, the breaching Party
fails within such thirty (30) days to commence the necessary cure
and fails at any time thereafter diligently and continuously to
prosecute such cure to completion, provided that the cure is
completed no later than one hundred eighty (180) days after receipt
of the default notice; provided, that no notice or cure period
shall be applicable with respect to any breach by Generator of
Section 3.2(a)(v);
(c) The appointment of a receiver or liquidator or
trustee for either Party, and such receiver, liquidator or trustee
is not discharged within sixty (60) days;
(d) The entry of a decree adjudicating a Party as
bankrupt or insolvent, and such decree is continued undischarged
and unstayed for a period of sixty (60) days; or
(e) The filing of a voluntary or involuntary
petition in bankruptcy under any provision of any federal or state
bankruptcy law by a Party or against it, and, with respect to an
involuntary petition in bankruptcy, such petition continues
undischarged and unstayed for a period of sixty (60) days.
6.2 Remedies. Upon the occurrence of an Event of
Default, the non-defaulting Party may (i) exercise all such rights
and remedies as may be available to it at law or equity including
seeking to recover damages caused by such Event of Default, subject
to Section 6.5 of this Agreement, and/or (ii) terminate this
Agreement. The Parties shall not discontinue the performance of
any one or more of their obligations hereunder due to the
occurrence of an Event of Default during the pendency of any
dispute regarding such Event of Default and until such dispute is
finally resolved.
<PAGE>
6.3 Additional Remedies. Generator acknowledges and
specifically agrees that its obligations under this Agreement are
essential to ensure the reliability of the System; that breach of
Generator's obligations may result in irreparable harm and damage
to Pepco which cannot adequately be compensated by a monetary
award; and that, as a consequence thereof, Pepco shall, in addition
to any other remedy to which Pepco may be entitled by reason of
Generator's breach of this Agreement, be entitled to seek and
obtain temporary, preliminary and permanent injunctive relief from
any court or Governmental Authority of competent jurisdiction
restraining Generator from committing or continuing any breach of
this Agreement.
6.4 Reimbursement for Replacement Costs. Upon an Event
of Default, Generator shall be liable to Pepco for all costs
reasonably incurred by Pepco as a direct result of Generator's
failure to deliver Energy or Ancillary Services pursuant to the
terms of this Agreement. Such costs shall include all reasonable
costs associated with the procurement of replacement Energy,
including Energy, Ancillary Services, demand, capacity, or
reservation charges, any transmission costs associated with
procuring such replacement Energy and any costs of constructing the
additions or upgrades necessary to provide the Energy to be
supplied by Generator hereunder. In addition to the amounts
associated with the purchase of replacement Energy, Generator shall
be liable for reasonable administrative and legal expenses incurred
as a result of Generator's failure to perform. The Parties
expressly agree that such amounts do not constitute liquidated
damages and that the obligations of Generator under this Section
6.4 shall survive and continue in full force and effect regardless
of whether this Agreement expires or terminates or is canceled,
surrendered or completed.
6.5 Limitation of Liability. Except as provided in
Sections 3.3, 4.4 and 6.4, neither Party nor their respective
officers, directors, agents, employees, parents, Affiliates,
successors, assign, contractors or subcontractors shall be liable
to the other Party or its shareholders, subsidiaries, Affiliates,
officers, directors, agents, employees, successors, assigns,
contractors or subcontractors for any claims, demands or suits for
consequential, incidental, special, exemplary, punitive, indirect
or multiple damages connected with or resulting from any breach of
this Agreement (other than breach of Article IX), or any actions
undertaken in connection with or related hereto or thereto,
including any such damages which are based upon breach of contract,
tort (including negligence and misrepresentation), breach of
warranty, strict liability, statute, operation of law or any other
theory of recovery. The foregoing shall not prevent any Party from
recovering damages of the foregoing nature in a claim for
indemnification hereunder for such damages asserted by a third
party.
<PAGE>
ARTICLE VII
ASSIGNMENT
7.1 Assignment.
(a) Except as set forth in Sections 7.1(b), 7.1(c)
and 7.1(d), neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by either
Party hereto, without the prior written consent of the other Party,
which consent shall not be unreasonably withheld or delayed.
(b) Upon ten (10) days prior written notice to
Generator, Pepco may assign this Agreement, and Pepco's rights,
interests and obligations hereunder, to (i) an Affiliate of Pepco
that owns all or part of Pepco's transmission system or (ii) an
Independent System Operator or independent transmission company
whose control over all or part of Pepco's transmission system has
been approved by the FERC.
(c) Generator may assign, transfer, pledge or
otherwise dispose of its rights and interests hereunder to a
trustee, lending institution, or other Person for the purposes of
financing or refinancing the Facility, including upon or pursuant
to the exercise of remedies under such financing or refinancing, or
by way of assignments, transfers, conveyances of dispositions in
lieu thereof; provided, however, that no such assignment or
disposition shall relieve or in any way discharge Generator from
the performance of its duties and obligations under this Agreement.
Pepco agrees to execute and deliver, at Generator's expense, such
documents as may be reasonably necessary to accomplish any such
assignment, transfer, conveyance, pledge or disposition of rights
hereunder for purposes of the financing or refinancing of the
Facility, so long as Pepco's rights under this Agreement are not
thereby altered, amended, diminished or otherwise impaired.
(d) Either Party may assign this Agreement to a
successor to all or substantially all of the assets of such Party
by way of merger, consolidation, sale or otherwise, provided such
successor assumes in writing and becomes liable for all of such
Party's duties and obligations hereunder.
7.2 Release of Rights and Obligations. No assignment,
transfer, conveyance, pledge or disposition of rights, interests,
duties or obligations under this Agreement by a Party shall relieve
that Party from liability and financial responsibility for the
performance thereof after any such transfer, assignment,
conveyance, pledge or disposition unless and until (i) the
transferee or assignee shall agree in writing to assume the
obligations and duties of that Party under this Agreement and to
impose such obligations on subsequent permitted transferees and
assignees and (ii) the non-assigning Party has consented in writing
to such assumption and to a release of the assigning Party from
such liability, such consent not to be unreasonably withheld or
delayed.
7.3 Transfer of Facility. Any direct or indirect
assignment, sale, conveyance, lease, or other transfer by Generator
of the Facility, any Unit or Generator's direct or indirect
<PAGE>
owner thereof, whether by operation of law or otherwise, shall be
null and void unless, with Pepco's prior written consent, which
shall not be unreasonably withheld or delayed, the transferee of
the Facility or such Unit assumes in writing all of Generator's
right, title and interest in and to this Agreement, and all of
Generator's rights, interests, duties and obligations hereunder.
7.4 Change in Corporate Identity. If Generator
terminates its existence as a corporate entity by merger,
acquisition, sale, consolidation or otherwise, or if all or
substantially all of Generator's assets are transferred to another
person or business entity without complying with this Article VII,
Pepco shall have the right, enforceable in a court of competent
jurisdiction, to enjoin Generator's successor from using the
Facility in any manner that does not comply with the requirements
of this Agreement or that impedes Pepco's ability to carry on its
ongoing business operations.
7.5 Successors and Assigns. This Agreement and all of
the provisions hereof are binding upon, and inure to the benefit
of, the Parties and their respective successors and permitted
assigns.
ARTICLE VIII
FORCE MAJEURE
8.1 Force Majeure. Notwithstanding anything in this
Agreement to the contrary, the Parties shall be excused from
performing their respective obligations hereunder and shall not be
liable in damages or otherwise to the extent that a Party is unable
to perform or is prevented from performing by an event of Force
Majeure and has complied with Section 8.3. The Parties recognize
and agree that an event of Force Majeure will not relieve any Party
of its obligation to make payments when due hereunder.
8.2 Definition of Force Majeure. The term "Force
Majeure" as used herein means those causes beyond the reasonable
control of the Party affected, that, by the exercise of reasonable
diligence, including Good Utility Practice, such Party is unable to
prevent, avoid, mitigate, or overcome, including the following: any
act of God, act of the public enemy, war, civil disturbance,
insurrection, riot, fire (unless resulting from the fault or
negligence of the Party asserting Force Majeure), storm or flood,
lightning or explosion (unless resulting from the fault or
negligence of the Party asserting Force Majeure) or any other cause
of a similar nature beyond such Party's reasonable control.
Neither the cost to operate and maintain the Facility nor any
mechanical or electrical breakdown or failure of machinery or plant
owned or operated by Generator due to any reason other than an
event which itself constitutes an event of Force Majeure shall be
deemed an event of Force Majeure.
8.3 Force Majeure Procedures. A Party shall not be
entitled to rely on the occurrence of an event of Force Majeure as
a basis for being excused from performance of its obligations under
this Agreement unless the Party relying on the event or condition
shall: (a) provide prompt written notice of such Force Majeure
event to the other Party, including an estimation of its expected
duration and the probable impact on the
<PAGE>
performance of its obligations hereunder; (b) exercise all
reasonable efforts in accordance with Good Utility Practice to
continue to perform its obligations under this Agreement; (c)
expeditiously take action to correct or cure the event or condition
excusing performance; (d) exercise all reasonable efforts to
mitigate or limit damages to the other Party; and (e) provide
prompt notice to the other Party of the cessation of the event or
condition giving rise to its excuse from performance. Subject to
this Section 8.3, any obligation under this Agreement shall be
suspended only to the extent caused by such Force Majeure and only
during the continuance of any inability of performance caused by
such Force Majeure but for no longer period.
ARTICLE IX
INDEMNIFICATION
9.1 Generator's Indemnification. Generator shall
indemnify, hold harmless and defend Pepco, its Affiliates, and
their respective officers, directors, employees, agents,
contractors, subcontractors, invitees and successors, from and
against any and all claims, demands, suits, obligations, payments,
liabilities, costs, losses, judgments, damages and expenses
(including the costs and expenses of any and all actions, suits,
proceedings, assessments, judgments, settlements, and compromises
relating thereto, reasonable attorneys' and expert fees and
reasonable disbursements in connection therewith) for any loss or
liability arising out of or relating to Generator's breach of any
covenant, representation or warranty of Generator in this
Agreement.
9.2 Pepco's Indemnification. Pepco shall indemnify,
hold harmless and defend Generator, its Affiliates, and their
respective officers, directors, employees, agents, contractors,
subcontractors, invitees and successors, from and against any and
all claims, demands, suits, obligations, payments, liabilities,
costs, losses, judgments, damages and expenses (including the costs
and expenses of any and all actions, suits, proceedings,
assessments, judgments, settlements, and compromises relating
thereto reasonable attorneys' and expert fees and reasonable
disbursements in connection therewith) for any loss or liability
arising out of or relating to Pepco's breach of any covenant,
representation or warranty of Pepco in this Agreement.
9.3 Indemnification Procedures. Any Party seeking
indemnification under this Agreement shall give the other Party
notice of such claim within ninety (90) days of the later of the
commencement of, or the Party's actual knowledge of, such claim or
action. Such notice shall describe the claim in reasonable detail,
and shall indicate the amount (estimated if necessary) of the claim
that has been, or may be sustained by, said Party. The failure to
provide such notice shall not excuse any Party from its continuing
obligations hereunder; however, any claim shall be reduced by the
damages resulting from such Party's delay or failure to provide
such notice. Neither Party may settle or compromise any claim for
which indemnification is sought under this Agreement without the
prior consent of the other Party; provided, however, said consent
shall not be unreasonably withheld or delayed.
9.4 Survival. The indemnification obligations of each
Party under this Article IX for acts or occurrences that occur
prior to expiration, termination, or cancellation of this
<PAGE>
Agreement shall survive the Effective Date and continue in full
force and effect regardless of whether this Agreement expires or
terminates, or is canceled, surrendered or completed.
ARTICLE X
CONFIDENTIALITY
10.1 Confidentiality Obligations of Pepco. Pepco shall hold
in confidence, unless compelled to disclose by judicial or
administrative process or other provisions of law, all documents
and information furnished by Generator in connection with this
Agreement marked "Confidential" or "Proprietary." Except to the
extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure by
Pepco in breach of this Agreement, (ii) available to Pepco on a
non-confidential basis prior to disclosure to Pepco by Generator,
or (iii) available to Pepco on a non-confidential basis from a
source other than Generator, provided that such source is not
known, and by reasonable effort could not be known, by Pepco to be
bound by a confidentiality agreement with Generator or otherwise
prohibited from transmitting the information to Pepco by a
contractual, legal or fiduciary obligation, Pepco shall not release
or disclose such information to any other person, except to its
employees, representatives or agents on a need-to-know basis, in
connection with this Agreement who has not first been advised of
the confidentiality provisions of this Section 10.1 and has agreed
in writing to comply with such provisions. In no event shall such
information be disclosed in violation of the requirements of FERC
Orders 889 and 889-A, and any successor thereto. Pepco shall
promptly notify Generator if it receives notice or otherwise
concludes that the production of any information subject to this
Section 10.1 is being sought under any provision of law and Pepco
shall use reasonable efforts in cooperation with Generator to seek
confidential treatment for such confidential information provided
thereto.
10.2 Confidentiality Obligations of Generator. Generator
shall hold in confidence, unless compelled to disclose by judicial
or administrative process or other provisions of law, all documents
and information furnished by Pepco in connection with this
Agreement marked "Confidential" or "Proprietary." Except to the
extent that such information or documents are (i) generally
available to the public other than as a result of a disclosure by
Generator in breach of this Agreement, (ii) available to Generator
on a non-confidential basis prior to disclosure to Generator by
Pepco, or (iii) available to Generator on a non-confidential basis
from a source other than Pepco, provided that such source is not
known, and by reasonable effort could not be known, by Generator to
be bound by a confidentiality agreement with Pepco or otherwise
prohibited from transmitting the information to Generator by a
contractual, legal or fiduciary obligation, Generator shall not
release or disclose such information to any other person, except to
its employees, representatives or agents on a need-to-know basis,
in connection with this Agreement who has not first been advised of
the confidentiality provisions of this Section 10.2 and has agreed
in writing to comply with such provisions. In no event shall such
information be disclosed in violation of the requirements of FERC
Orders 889 and 889-A, and any successor thereto. Generator shall
promptly notify Pepco if it receives notice or otherwise concludes
that the production of any information subject to this Section 10.2
is being sought under any provision of law and Generator shall use
reasonable efforts in cooperation
<PAGE>
with Pepco to seek confidential treatment for such confidential
information provided thereto.
10.3 Remedies. The Parties agree that monetary damages would
be inadequate to compensate a Party for the other Party's breach of
its obligations under Section 10.1 or 10.2, above, as applicable.
Each Party accordingly agrees, that the other Party shall be
entitled to equitable relief, by way of injunction or otherwise, if
a Party breaches or threatens to breach its obligations under
Section 10.1 or 10.2 of this Agreement, as applicable, which
equitable relief shall be granted without bond or proof of damages,
and the receiving Party shall not plead in defense that there would
be an adequate remedy at law.
ARTICLE XI
DISPUTE RESOLUTION
11.1 Disputes. A Party with a claim or dispute under this
Agreement shall submit to the other Party a notification of such
claim or dispute within sixty (60) days after the circumstances
that gave rise to the claim or the question or issue in dispute.
The notification shall be in writing and shall include a concise
statement of the claim or the issue or question in dispute, a
statement of the relevant facts and documentation to support the
claim. In the event the Parties are unable, in good faith, to
resolve their disagreement in a manner satisfactory to both Parties
within thirty (30) days after receipt by a Party of a notification
specifying the claim, issue or question in dispute, the Parties
shall refer the dispute to their respective senior management. If,
after using their good faith best efforts to resolve the dispute,
senior management cannot resolve the dispute within thirty (30)
days, the Parties shall utilize the arbitration procedures set
forth below in Section 11.2 to resolve a dispute, provided that
nothing herein or therein shall prohibit Pepco or Generator from
at any time requesting from a court of competent jurisdiction a
temporary restraining order, preliminary injunction, or other
similar form of equitable relief to enforce performance of the
provisions of this Agreement.
11.2 Arbitration.
(a) Unless the Parties otherwise mutually agree in
writing to another form of dispute resolution, such as dispute
resolution under the PJM Agreement or the MAAC Agreement, any
arbitration initiated under this Agreement shall be conducted
before a single neutral arbitrator appointed by the Parties within
thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an arbitrator,
such arbitration shall be appointed by the American Arbitration
Association. Unless the Parties agree otherwise, the arbitrator
shall be an attorney or retired judge with at least fifteen (15)
years of experience, and shall not have any current or past
substantial business or financial relationships with any Party to
the arbitration. If possible, the arbitrator shall have experience
in the electric utility industry. Unless otherwise agreed, the
arbitration shall be conducted in accordance with the American
Arbitration Association's Commercial Arbitration Rules, then in
effect, in the District of Columbia. Any arbitration proceedings,
decision or award rendered hereunder and the validity, effect and
<PAGE>
interpretation of this arbitration agreement shall be governed by
the Federal Arbitration Act of the United States, 9 U.S.C. Section
1 et seq.
(b) The arbitration shall, if possible, be
concluded not later than six (6) months after the date that it is
initiated. The arbitrator shall be authorized only to interpret
and apply the provisions of this Agreement or any related
agreements entered into under this Agreement and shall have no
power to modify or change any of the above in any manner. The
arbitrator shall have no authority to award punitive or multiple
damages or any damages inconsistent with this Agreement. The
arbitrator shall, within thirty (30) days of the conclusion of the
hearing, unless such time is extended by agreement of the Parties,
notify the Parties in writing of his or her decision, stating his
or her reasons for such decision and separately listing his or her
findings of fact and conclusions of law. The decision of the
arbitrator rendered in such a proceeding shall be final and binding
on the Parties. Judgment on the award may be entered upon it in
any court having jurisdiction.
11.3 FERC Jurisdiction. Nothing in this Agreement shall
preclude, or be construed to preclude, any Party from filing a
petition or complaint with FERC with respect to any arbitrable
claim over which FERC has jurisdiction. In such case, the other
Party may request FERC to reject or to waive jurisdiction. If FERC
rejects or waives jurisdiction with respect to all or a portion of
the claim, the portion of the claim not so accepted by FERC shall
be resolved through arbitration, as provided in this Agreement. To
the extent that FERC asserts or accepts jurisdiction over the
claim, the decision, finding of fact or order of FERC shall be
final and binding, subject to judicial review under the Federal
Power Act, and any arbitration proceedings that may have commenced
with respect to the claim prior to the assertion or acceptance of
jurisdiction by FERC shall be terminated.
ARTICLE XII
MISCELLANEOUS
12.1 Amendment and Modification; Extension; Waiver. This
Agreement may be amended, modified or supplemented only by an
instrument in writing signed on behalf of each of the Parties.
Either Party may (i) extend the time for the performance of any of
the obligations or other acts of the other Party, (ii) waive any
inaccuracies in the representations and warranties of the other
Party contained in this Agreement or (iii) waive compliance by the
other Party with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such Party. The failure
of a Party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such
rights.
12.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (as of the time of
delivery or, in the case of a telecopied communication, of
confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):
<PAGE>
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, NW
Washington, DC 20037
Telecopier: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Generator, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, NW
Suite 300 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin Israel, Esq.
12.3 No Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer on any other person
except the Parties hereto any rights, interests, obligations or
remedies hereunder.
12.4 Independent Contractors. The Parties acknowledge and
agree that: (i) they are independent contractors, (ii) neither
Party shall have any right, power or authority to enter into any
agreement or commitment, act on behalf of, or otherwise bind the
other
<PAGE>
Party in any way, and (iii) nothing contained in this Agreement
shall create any relationship between Pepco and Generator other
than that of independent contractors.
12.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the District of Columbia
(regardless of the laws that might otherwise govern under
applicable principles of conflicts of law).
12.6 Jurisdiction and Enforcement. Except as provided in
Article XI, each of the Parties irrevocably submits to the
exclusive jurisdiction of (i) the Superior Court of the District of
Columbia and (ii) the United States District Court for the District
of Columbia, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby. Except as provided in Article XI, each of the
Parties agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the District
of Columbia or, if such suit, action or proceeding may not be
brought in such court for jurisdictional reasons, in the Superior
Court for the District of Columbia. Except as provided in Article
XI, each of the Parties further agrees that service of process,
summons, notice or document by hand delivery or U.S. registered
mail at the address specified for such Party in Section 12.2 (or
such other address specified by such Party from time to time
pursuant to Section 12.2) shall be effective service of process for
any action, suit or proceeding brought against such Party in any
such court. Except as provided in Article XI, each of the Parties
irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (i) the
Superior Court of the District of Columbia and (ii) the United
States District Court for the District of Columbia, and hereby
further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an
inconvenient forum.
12.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but both
of which together shall constitute one and the same instrument.
12.8 Interpretation. When a reference is made in this
Agreement to an Article or Section, such reference shall be to an
Article or Section of this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation" or equivalent words. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The definitions contained in this
Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine
and neuter genders of such term. Any agreement, instrument,
statute, regulation, rule or order defined or referred to herein or
in any agreement or instrument that is referred to herein means
such agreement, instrument, statute, regulation, rule or order as
from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in
the case of statutes,
<PAGE>
regulations, rules or orders) by succession of comparable successor
statutes, regulations, rules or orders and references to all
attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and
assigns. Each Party acknowledges that it has been represented by
counsel in connection with the review and execution of this
Agreement, and, accordingly, there shall be no presumption that
this Agreement or any provision hereof be construed against the
Party that drafted this Agreement.
12.9 Entire Agreement. This Agreement, including the
documents, certificates and instruments referred to herein and
other contracts, agreements and instruments contemplated hereby,
embody the entire agreement and understanding of the Parties in
respect of the transactions contemplated by this Agreement. There
are no restrictions, promises, representations, warranties,
covenants or undertakings other than those expressly set forth or
referred to herein or therein. This Agreement supersedes all prior
agreements and understandings between the Parties with respect to
the transactions contemplated by this Agreement.
12.10 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced
by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as
possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
12.11 Conflicts. Except with respect to the
indemnification, liability, default and remedies provisions
contained herein or as otherwise expressly provided herein, in the
event of any conflict or inconsistency between the terms of this
Agreement and the terms of the Asset Sale Agreement, the terms of
the Asset Sale Agreement shall prevail.
12.12 Further Assurances. The Parties hereto agree to
execute and deliver promptly, at the expense of the Party
requesting such action, any and all other and further instruments,
documents and information which may be reasonably requested in
order to effectuate the transactions contemplated hereby. Each
Party agrees to cooperate with, assist and accommodate all
reasonable requests made by the other Party in respect of any
regulatory approval necessary for, or any regulatory proceeding
relating to, the execution, delivery or performance of this
Agreement. Each Party further agrees to comply in all material
respects with all Laws of Governmental Authorities relating to this
Agreement and the consummation of the transactions contemplated
hereby.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Pepco and Generator have caused this
Local Area Support Agreement to be signed by their respective duly
authorized representatives on the date first above written.
POTOMAC ELECTRIC POWER
COMPANY
By: ________________________
Name:
Title:
[GENERATOR]
By: ________________________
Name:
Title:
<PAGE>
APPENDIX A
As used in this Agreement, the following terms have the
meanings set forth below:
(a) "Abnormal Conditions" means Abnormal Conditions
as described in Pepco Transmission Procedure No. 28.
(b) "Abnormal Condition Violation" means any
failure by Generator during Abnormal Conditions to comply during
any hour with the operation and dispatch orders specified by PJM
Interconnection LLC or Pepco for that hour pursuant to Section
3.2(a); provided, however, Generator shall not have committed an
Abnormal Condition Violation if the Actual Output is no more than
five megawatts (5 MW) greater than or five megawatts (5 MW) less
than the Target Output based on instantaneous meter readings.
(c) "Actual Output" means the actual output
supplied in any hour during Abnormal Conditions by Generator from
the Facility pursuant to the operation and dispatch orders of PJM
Interconnection LLC or Pepco in accordance with Section 3.2(a).
(d) "Affiliate" shall have the meaning set forth in
Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
(e) "Ancillary Services" means all services or
requirements necessary to support the transmission of capacity and
Energy from resources to loads while maintaining reliable operation
of the System in accordance with Good Utility Practice. Ancillary
Services includes, but is not limited to, scheduling, system
control and dispatch, reactive supply and voltage control from
generation sources, regulation and frequency response, energy
imbalance, operating reserve, emergency energy, spinning reserve
and supplemental reserve.
(f) "Available" means, in relation to the Facility,
that the Facility or any Unit thereof is capable, in real time, of
producing Energy and Ancillary Services which will be delivered
into the System.
(g) "Closing" shall have the meaning set forth in
the Asset Sale Agreement.
(h) "Closing Date" means the date on which the
Closing with respect to the Facility actually occurs.
(i) "Effective Date" means the date upon which this
Agreement becomes effective as determined pursuant to Section 2.1.
(j) "Energy" means electrical energy.
(k) "Event of Default" has the meaning set forth in
Section 6.1.
<PAGE>
(l) "Excess Output" means the amount, if any, by
which the Actual Output exceeds the Target Output based on
instantaneous meter readings.
(m) "Facility" means the Potomac River Station
electric generating facility, which consists of Units 1, 2, 3, 4
and 5 and associated generating facilities, located in Alexandria,
Virginia.
(n) "FERC" means the Federal Energy Regulatory
Commission or its successor.
(o) "Force Majeure" has the meaning set forth in
Section 8.2.
(p) "Generator Material Adverse Effect" has the
meaning set forth in Section 5.2.
(q) "Good Utility Practice" means any of the
applicable practices, methods and acts:
(i) required by FERC, NERC, MAAC, PJM
Interconnection LLC, the PJM System Operator, or the successor of
any of them, whether or not the Party whose conduct is at issue is
a member thereof;
(ii) required by applicable Law;
(iii) required by the Pepco Interconnection
Standards or the policies and standards of Pepco relating to
emergency operations;
(iv) otherwise engaged in or approved by a
significant portion of the electric utility industry during the
relevant time period;
which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost consistent
with applicable Law, good business practices, reliability, safety,
and expedition. Good Utility Practice is not intended to be
limited to the optimum practice, method, or act to the exclusion of
all others, but rather to be acceptable practices, methods, or acts
generally accepted in the region.
(r) "Governmental Authority" means any court,
administrative or regulatory agency or commission or other
governmental entity or instrumentality, domestic, foreign or
supranational or any department thereof.
(s) "Independent System Operator" means an entity,
other than Pepco or any affiliate or associate company, including
any regional transmission operator, independent system operator,
transco, or any other independent system administrator, that
possess operational or planning control over the System.
<PAGE>
(t) "Law" means any law, statute, treaty, code,
rule, regulation, or order judgement or determination of an
arbitrator, court or other Governmental Authority, or any
franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, right or approval binding on
a Party or any of its property.
(u) "MAAC" means the Mid-Atlantic Area Council, a
reliability council under Section 202 of the Federal Power Act
established pursuant to the MAAC Agreement, dated August 1, 1994
(the "MAAC Agreement"), and any successor thereto.
(v) "NERC" means the North American Electric
Reliability Council and any successor entity thereto.
(w) "Normal Conditions" means Normal Conditions as
described in Pepco Transmission Procedure No. 28.
(x) "Normal Condition Violation" means any failure
by Generator to comply with Pepco Transmission Procedure No. 28
during Normal Conditions, any failure to have at least one (1) Unit
at full rated capacity during Normal Conditions or both.
(y) "PJM" means the Pennsylvania New
Jersey-Maryland interconnected power pool operated under the PJM
Agreement and any successor thereto including any regional
transmission operator, independent system operator, transco, or any
other independent system administrator that possesses operational
or planning control over the System.
(z) "PJM Agreement" means the Amended and Restated
Operating Agreement of the PJM Interconnection LLC, dated as of
June 2, 1997.
(aa) "PJM Control Area" means the control area recognized
by NERC as the PJM Control Area.
(bb) "PJM Interconnection LLC" means the independent
system operator of the PJM Control Area pursuant to the PJM
Agreement and the PJM Tariff.
(cc) "PJM System Operator" means the PJM Interconnection
LLC energy control center staff responsible for central dispatch as
provided in the PJM Agreement.
(dd) "PJM Tariff" means the PJM Open Access Transmission
Tariff providing transmission service within the PJM Control Area.
(ee) "Pepco Interconnection Standards" means Pepco's
Interconnection and Parallel Operating Guidelines as amended from
time to time. A copy of the existing Pepco Interconnection
Standards is attached hereto as Exhibit A.
(ff) "Pepco Transmission Procedure No. 28" means Pepco's
Transmission System Operations Procedure No. 28, and any
modification or successor procedure accepted by PJM. A copy of the
existing Pepco Transmission Procedure No. 28 is attached
<PAGE>
hereto as Exhibit B. The Parties shall revise Exhibit B from time
to time to conform to any changes made to Pepco Transmission
Procedure No. 28.
(gg) "Pepco Transmission Procedure No. 29" means Pepco's
Transmission System Operations Procedure No. 29, and any
modification or successor procedure accepted by PJM. A copy of the
existing Pepco Transmission Procedure No. 29 is attached hereto as
Exhibit C. The Parties shall revise Exhibit C from time to time to
conform to any changes made to Pepco Transmission Procedure No. 29.
(hh) "Pepco Material Adverse Effect" has the meaning set
forth in Section 5.1.
(ii) "Person" means any individual, partnership, limited
liability company, joint venture, corporation, trust,
unincorporated organization, or governmental entity or any
department or agency thereof.
(jj) "Services" means Generator's operation of the
Facility or any Unit thereof in accordance with Section 3.2(a).
(kk) "Shed Load" means the process of deliberately
removing firm load from the System, whether manually, automatically
or through requiring location-specific load reductions, in
accordance with Good Utility Practice to maintain the integrity of
the System.
(ll) "Substitute Resources" has the meaning set forth in
Section 4.1.
(mm) "System" means Pepco's electric system in the
electrical vicinity of the Facility.
(nn) "Target Output" means the output required to be
supplied in any hour during Abnormal Conditions by Generator from
the Facility pursuant to the operation and dispatch orders of PJM
Interconnection LLC or Pepco in accordance with Section 3.2(a).
(oo) "Term" has the meaning set forth in Section 2.1.
(pp) "Termination Fee" has the meaning set forth in
Section 4.4.
(qq) "Termination Notice" has the meaning set forth in
Section 4.2.
(rr) "Transaction Day" means any day during which the
Facility is required to, and in fact does, provide Services.
(ss) "Unit" or "Units" means one or more individual
electricity generating unit or units constituting a part of the
Facility.
<PAGE>
EXHIBIT G
OPERATION AND MAINTENANCE AGREEMENT
FOR
BUZZARD POINT AND BENNING FACILITIES
LOCATED IN WASHINGTON, D.C.
By and Between
POTOMAC ELECTRIC POWER COMPANY, As Owner
And
________________________________, As Operator
Dated as of _________, 2000
<PAGE>
EXHIBIT G
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 SCOPE OF SERVICES 1
ARTICLE 3 PEPCO RESPONSIBILITIES 8
ARTICLE 4 BUDGET 9
ARTICLE 5 OPERATOR'S FEE, INVOICING AND PAYMENTS 11
ARTICLE 6 FACILITIES CUSTODY 12
ARTICLE 7 TERM AND TERMINATION 14
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF PEPCO 16
ARTICLE 9 REPRESENTATIONS AND WARRANTIES OF OPERATOR 18
ARTICLE 10 COVENANTS OF THE PARTIES 20
ARTICLE 11 EMPLOYEE MATTERS 21
ARTICLE 12 INDEMNIFICATION 21
ARTICLE 13 FORCE MAJEURE 23
ARTICLE 14 CONFIDENTIALITY 24
ARTICLE 15 DISPUTE RESOLUTION 25
ARTICLE 16 MISCELLANEOUS PROVISIONS 26
APPENDICES AND EXHIBITS
Appendix A Definitions
Exhibit I Facility Sites
Exhibit II Budget for First Contract Year
Exhibit III Employee Matters
Exhibit IV Pepco Interconnection Standards
<PAGE>
EXHIBIT G
OPERATION AND MAINTENANCE AGREEMENT
THIS OPERATION AND MAINTENANCE AGREEMENT (including the Appendices,
Exhibits and Schedules hereto, this "Agreement"), dated as of ____________,
2000 (the "Effective Date"), by and between Potomac Electric Power Company, a
District of Columbia and Virginia corporation ("Pepco"), and ________________,
a _____________ ("Operator") (individually, a "Party"; collectively, the
"Parties").
WHEREAS, Pepco is the owner of two electric generation facilities
located in Washington, DC, namely the Buzzard Point Generating Station and the
Benning Generation Station (collectively, the "Facilities");
WHEREAS, Pepco is desirous of having Operator operate and maintain
the Facilities, and Operator is willing to operate and maintain the
Facilities, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and
intending to be legally bound hereby, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the respective
meanings set forth in Appendix A hereto.
ARTICLE 2
SCOPE OF SERVICES
2.1 Applicable Principles.
2.1.1 Operator shall operate and maintain the Facilities for the
Term of this Agreement. Operator shall perform all Services specified herein,
and all other Services that are reasonably necessary to support operation of
the Facilities, it being understood that a principal purpose of this Agreement
is to relieve Pepco of the necessity of engaging or supplying any labor,
service or material to support operation of the Facilities unless the labor,
service or material is specifically itemized in this Agreement as being
furnished by Pepco to Operator. Pepco shall retain responsibility for the
disposition and sale of the entire capacity and energy output of the
Facilities.
<PAGE>
EXHIBIT G
2.1.2 Operator shall perform the Services in accordance with Good
Utility Practices and pursuant to all applicable PJM Requirements and dispatch
orders.
2.2 Operator's Performance. Operator's responsibilities and
obligations to Pepco shall include the following, from and after the Turnover
Date until the Termination Date:
2.2.1 Operate and maintain the Facilities.
2.2.2 Respond to and operate the Facilities as directed by Pepco
and in a manner consistent with this Agreement.
2.2.3 Be responsible for all costs and Taxes associated with
operating and maintaining the Facilities; with the exception of capital
expenditures to be funded by Pepco pursuant to Section 4.2 below and Income
Taxes and property taxes imposed on Pepco.
2.2.4 Arrange for the procurement, delivery, storage and
redelivery of all material, equipment, chemicals and other consumables and
supplies associated with operating and maintaining the Facilities, including
fuel, water, sewer, electricity (except to the extent provided by Pepco
pursuant to Section 3.1) and telecommunications service.
2.2.5 Retain all operating and maintenance records (whether in
electronic form or otherwise) relating to the Facilities. Operator shall
provide to Pepco, upon reasonable request, copies of any records or other
information in Operator's possession relating to the Facilities and required
by Pepco in order to comply with Applicable Law.
2.2.6 Implement and maintain a program of planned maintenance for
the Facilities.
2.2.7 Develop, implement and enforce a preventative maintenance
program that will ensure that the Facilities (a) experience no more than a 20%
derating of either Facility (except for maintenance) so as to support
requirements for local area reliability by demonstration of generation during
the semi-annual PJM Net Capability Test, and (b) can meet the performance
requirements on the Termination Date (as provided in Section 6.2 below).
2.2.8 Perform all routine maintenance.
2.2.9 Coordinate arrangements with Pepco for maintenance outages,
planned and unplanned outages including outages requiring major capital
expenses by Pepco.
EXHIBIT G
<PAGE>
2.2.10 Maintain an effective work force at the Facilities, assuming
and discharging as appropriate any outstanding responsibilities of Pepco under
any collective bargaining agreements as set forth in Exhibit III.
2.2.11 Conduct appropriate inspections and make the Facilities
available at reasonable times for inspections by Pepco and others designated
by Pepco.
2.2.12 Develop, implement and enforce programs for safety, quality
assurance and quality control.
2.2.13 Dispose of all discharge water and other waste, including
wastewater, spent chemicals, and Hazardous Substances, in compliance with all
applicable Environmental Laws. Costs incurred by Operator associated with
such substances existing at the Facility Sites prior to the Turnover Date
shall be reimbursed to Operator by Pepco.
2.2.14 Immediately notify the Pepco representative of any
environmental violation, serious personal injury, equipment damage that would
not be encompassed within the scope of routine operations and maintenance,
citizen complaint, Governmental Authority complaint or inspection.
2.2.15 Comply with reporting requirements of all applicable
Environmental Laws.
2.2.16 Obtain, comply with and maintain in force all necessary
Operator Required Regulatory Approvals and any Permits and Environmental
Permits required for the performance of its duties hereunder other than
Permits and Environmental Permits to be procured by Pepco pursuant to Section
3.1.6.
2.2.17 Maintain comprehensive records relating to Facilities
performance and submit reports (monthly during Peak Season, quarterly
otherwise, and additional reports as may be appropriate) to Pepco regarding
performance (which records shall be the property of Pepco and shall be
delivered to Pepco on the Termination Date).
2.2.18 Pay (i) all fines, penalties or other levies imposed by any
Governmental Authority relating to the operation of the Facilities after the
Turnover Date, and (ii) all costs incurred in remedying the consequences of
any such failure to comply with Applicable Law after the Turnover Date, unless
the imposition related solely to the gross negligence or willful misconduct of
Pepco.
<PAGE>
EXHIBIT G
2.2.19 Cooperate with Pepco for purposes of maintaining good
relationships with Governmental Authorities and the general public (including
tours, community relations programs, etc.).
2.2.20 Comply with requirements and cooperate in processes relating
to Budgeting (Article 4), Facilities Custody (Article 6), and other matters as
provided in this Agreement.
2.2.21 Conduct training for and follow applicable system
restoration procedures in system emergencies and in all system restoration
drills as implemented by PJM and local Pepco control centers.
2.2.22 Designate a duly authorized representative as a point of
contact for Pepco.
2.2.23 Cooperate with Pepco to ensure the smooth transitions of
operational responsibility for the Facilities (i) from Pepco to Operator
effective the Turnover Date and (ii) from Operator to Pepco effective the
Termination Date.
2.2.24 Cooperate generally with Pepco.
Operator may, without the consent of Pepco, enter into subcontracts for the
performance of the obligations set forth in this Section 2.2, provided however
any subcontract or series of subcontracts with any subcontractor of a value
greater than five hundred thousand dollars ($500,000) shall be subject to the
prior written approval of Pepco, not to be unreasonably withheld or delayed.
2.3 Operator's Commitments Related to Facility Performance -
Generally. Operator shall comply with the following performance commitments,
except with respect to, and while, a Facility is on an approved maintenance
outage or during, and to the extent of interference by, an event of Force
Majeure declared in accordance with Article 13:
2.3.1 Maintain black start capability.
2.3.2 Maintain response capability in accordance with the
following requirements:
During a system emergency, Buzzard Point Station must be online
within two (2) hours notice, thirty (30) minutes during Peak Season.
<PAGE>
EXHIBIT G
For a local area emergency, Benning Station must be online within
twenty-four (24) hours notice, eighteen (18) hours during Peak Season.
On a prescheduled basis, as determined by Pepco, the Facilities must
be online within seventy-two (72) hours notice, twenty-four (24) hours during
Peak Season.
2.3.3 Follow the generation unit commitment procedures and
dispatch orders of PJM as remitted through Pepco or, to maintain local area
reliability.
2.3.4 Respond when PJM orders a change in operation of a Facility
for any reason, including local area reliability.
2.3.5 Conduct training for and follow applicable system
restoration procedures in system emergencies and in all system restoration
drills as implemented by PJM and local Pepco control centers.
2.3.6 Respond when Pepco orders operation of the Facility for
local area reliability at a time when PJM has not ordered such operation.
2.3.7 Assure that the Units experience no more than a twenty
percent (20%) derating at either Facility (except for maintenance).
2.4 Operator's Commitments Related to Facility Performance Damages and
Bonuses.
2.4.1 EFORD. Operator shall satisfy the EFORD Standard during
each Contract Year. In the event of a failure to satisfy the EFORD Standard
during any Contract Year, Operator shall pay to Pepco as liquidated damages
and not as a penalty an amount determined pursuant to the following formula:
(a) EFORD Liquidated Damages = [EFORD for the Contract
Year] minus [EFORD Standard] multiplied by [$200,000 per point at Benning,
$80,000 per point at Buzzard].
(b) In the event Facilities performance exceeds the EFORD
Standard during any Contract Year, Pepco shall pay to Operator as a
performance bonus an amount determined pursuant to the following formula
(provided such amount is greater than zero):
EFORD Performance Bonus = [EFORD Standard] minus [EFORD for the
Contract Year] multiplied by [$100,000 per point at Benning, $40,000 per point
at Buzzard].
PAGE>
EXHIBIT G
2.4.2 Net Revenues Bonus. Operator shall exercise reasonable
commercial efforts to support maximization of net revenues earned from
Facilities operations. Operator shall be eligible for a Net Revenues Bonus
determined as follows:
Net Revenues Bonus= (.05) x [(M1xLMP1) + (M2-M1)xLMP2)
(M2xQe)]
Where
M1 = quantity of energy scheduled by PJM for each hour for the Unit for
the first settlement for that day during the 16-hour peak period.
M2 = quantity of energy delivered real time for each hour during the
16-hour peak period.
LMP1 = the first settlement hourly integrated Pepco zone LMP for each
hour.
LMP2 = the real time hourly integrated Pepco zone LMP for each hour.
Qe = the fuel cost of the Unit as specified in Section 4.1.2 hereof.
2.4.3 Limitation. Operator's obligation for Liquidated Damages
hereunder shall not exceed one million dollars ($1,000,000) per Contract Year.
In the event the calculation of Operator's Net Revenues Bonus pursuant to
section 2.4.2 is negative, Operator shall not be obligated to make payment
thereof to Pepco provided, however, the amount of any EFORD Performance Bonus
may be offset to the extent of any negative Net Revenue balance as determined
above.
2.5 Insurance.
2.5.1 Operator shall procure and maintain in force from the
Turnover Date through the Termination Date the following insurance coverages.
(a) Workers Compensation with statutory limits and in
compliance with District of Columbia law.
(b) Employer's Liability with minimum limits of one
million dollars ($1,000,000).
(c) General Liability with minimum limits of one million
dollars ($1,000,000) per occurrence, including broad form endorsement,
products/completed operations, contractual liability and personal injury
coverage. Pepco shall be named an additional insured on Operator's policy.
Fellow employee and explosion, collapse and underground exclusions shall be
deleted, if they exist.
<PAGE>
EXHIBIT G
(d) Automobile Liability with minimum limits of one
million dollars ($1,000,000) combined single limit, including coverage for
owned, non-owned and hired vehicles. All coverages required by the District
of Columbia shall be provided.
(e) Umbrella Coverage with respect to the coverages in
subparts (b), (c) and (d) above, in the amount of five million dollars
($5,000,000).
All coverages provided shall be primary without right of contribution
from any insurance that Pepco may have in force from time to time. Any
insurance maintained by Pepco shall be in excess of Operator's insurance and
will not pay on any claim until Operator's insurance is exhausted. If
Operator chooses to maintain any deductibles or retention with respect to any
required coverages, Operator shall pay all costs that would have been paid by
insurance until the deductible or retention is satisfied. Any deductibles or
retentions shall be disclosed to Pepco, which will retain the right to
disapprove such deductibles or retentions. All insurers proposed to be used
by Operator shall be either rated [A] or better or first approved by Pepco.
(f) Environmental Coverages Contractors/Operators
Pollution Legal Liability with at least minimum limits as follows:
fifty million dollars ($50,000,000) per occurrence/
one hundred million dollars $100,000,000) in the annual
aggregate
and will cover pollution losses arising out of Operator's operations and
completed operations, associated with work performed under this Agreement.
Minimum Scope of Coverage for Pollution Legal Liability: For losses
covered by pollution conditions that arise from Operator activities during the
Term, the policy shall include the following coverage arising from pollution
from covered operations:
bodily injury, sickness, disease, mental anguish or shock
sustained by any person, including death;
property damage including physical injury to or destruction of
tangible property including the resulting loss of use thereof, the loss of use
of tangible property and natural resource damage liability that has not been
physically injured or destroyed;
<PAGE>
EXHIBIT G
clean-up costs including investigation, testing, detoxification,
neutralization, for release on and off the insured property; and
defense including costs, charges and expenses incurred in the
investigation, adjustment or defense of claims for such compensation damages.
If the above insurance policy is on a "claims made" basis, it shall be
maintained for a period of not less than two (2) years with the retroactive
date to be held constant with the Turnover Date.
2.5.2 Prior to the Turnover Date, Operator shall provide a
certificate and a broker's opinion letter indicating compliance with the above
requirements to:
Manager, Corporate Insurance & Risk Management Department
Potomac Electric Power Company
1900 Pennsylvania Avenue, NW
Washington, DC 20068
ARTICLE 3
PEPCO RESPONSIBILITIES
3.1 Pepco's Duties Generally. Pepco shall be responsible, at its own
expense, for providing information, materials and other items described in
this Article 3. All such items shall be made available at such times and in
such manner as may be reasonably required for the orderly performance of those
Services provided hereunder by Operator. Pepco's responsibilities and
obligations to Operator shall include the following:
3.1.1 Market and arrange for the sale or other disposition of, and
any necessary transmission service for, the entire capacity and energy output
of the Facilities as Pepco may determine from time to time in its discretion.
3.1.2 Provide access to the Facilities and the Facility Sites.
3.1.3 Provide access to property adjacent to the Facilities under
the control of Pepco, as necessary for the performance of the Services.
3.1.4 Allow Operator to operate and maintain the Facilities.
3.1.5 Schedule the operation of the Units in accordance with Good
Utility Practices, equipment warranties, the operating procedures for the
Facilities, and otherwise as necessary to provide reasonable advance notice to
<PAGE>
EXHIBIT G
allow for the staffing and start-up of the Units.
3.1.6 Obtain and maintain in force all necessary Pepco Required
Regulatory Approvals and Permits required for the Facilities that are usually
and customarily maintained in force by owners of power generation facilities.
3.1.7 Provide all relevant equipment warranties or support
agreements to Operator for administration.
3.1.8 Provide existing operations and maintenance manuals and
records to Operator for use in operating and maintaining the Facilities.
3.1.9 Make available to Operator an allocated share of fuel
storage capacity at the M Street Terminal under such agreements as shall be
executed for extension of Pepco's rights pursuant to a Throughput and Storage
Agreement presently under negotiation.
3.1.10 Provide station electrical service as reasonably necessary
to support operation of the Facilities in standby condition during
non-dispatch periods.
3.1.11 Make available emissions allowances or credits required for
the operation of the Facilities.
3.1.12 Designate a duly authorized representative as a point of
contact for Operator.
3.1.13 Cooperate in accomplishing smooth operating transitions of
responsibility for the Facilities (i) from Pepco to Operator effective the
Turnover Date and (ii) from Operator to Pepco effective the Termination Date.
3.1.14 Cooperate generally with Operator.
ARTICLE 4
BUDGET
4.1 Establishment of Operating Budget.
4.1.1 The Operating Budget for the First Contract Year is
attached hereto as Exhibit IIA.
<PAGE>
EXHIBIT G
4.1.2 For years subsequent to the First Contract Year, Operator
shall submit a proposed operating budget to Pepco by August 31. Pepco shall
provide a written response thereto within forty-five (45) days of receipt of
Operator's proposed operating budget. The parties shall establish the
Operating Budget through good faith negotiations thereafter. If the Parties
are unable to agree upon an operating budget, the Operating Budget shall be
established at an amount equal to the Operating Budget for the prior Contract
Year, escalated pursuant to the Escalation Index; and either Party may seek
modification of the Operating Budget pursuant to mediation procedures of the
American Arbitration Association. Mediation shall be the exclusive dispute
resolution mechanism with respect to the matters addressed in this Article 4.
For purposes of the Operating Budget, the cost of fuel shall be
determined as follows:
Pepco will compensate Operator each month for fuel use on the following
basis:
FP = ((Qe x E) + (Qs x S)) x Fi
Where
FP = Fuel Payment
Qe = Specified amount of fuel per MWh
E = MWh produced in the month
Qs = Specified amount of fuel used per start
S = Number of starts initiated per month
Fi = Fuel index price (Platts' is suggested; for Benning, Fi will be
a composite representative of No. 4 Fuel Oil.)
Qe, Qs and Fi will be established for each Facility.
4.1.3 Budget Adjustments.
(a) In the event of an Emergency situation requiring the
incurrence of costs not provided for by the Operating Budget, Operator shall
notify Pepco of (i) the costs incurred or to be incurred and (ii) the reasons
for those costs. The Parties shall negotiate in good faith the requirement
for, and the terms of, any amendment to the Operating Budget required by the
Emergency situation.
(b) In the event Pepco directs a material modification in
plans for Facilities operations for an Operation Year from the plans existing
at the time of establishment of the Operating Budget for that Contract Year,
<PAGE>
EXHIBIT G
(e.g., postponing a planned maintenance event or scheduling an unanticipated
maintenance event), the Operating Budget shall be appropriately modified.
4.2 Capital Budget
4.2.1 The Capital Budget for the First Contract Year is attached
hereto as Exhibit IIB.
4.2.2 Regular Capital Budget. In conjunction with the Operating
Budget process set forth in Section 4.1.2 above, Operator may submit a
proposal for a Capital Budget for the ensuing Contract Year. Such request
shall describe, with reasonable particularity (i) the capital expenditures
requested, (ii) the anticipated cost thereof, supported by the basis for the
cost determination, (iii) the benefit to be achieved by such expenditures and,
(iv) a discussion as to whether the result could be achieved through
alternative means. The Capital Budget shall be established in conjunction and
in accordance with the procedures for the Operating Budget set forth in
Section 4.1.2 above.
4.2.3 Exceptional Capital Expenditures. In the event of an
emergency situation requiring a capital expenditure not provided for by the
Capital Budget, Operator shall provide a description of the proposed capital
expenditure in accordance with the provisions of Section 4.2.1 above. The
Capital Budget shall be amended as appropriate in accordance with the
procedures for establishing the original Capital Budget for the Contract Year.
ARTICLE 5
OPERATOR'S FEE, INVOICING AND PAYMENTS
Operator shall be entitled to payment of the Operator's Fee and to
reimbursement of costs incurred consistent with the approved Operating Budget
and, to the extent funded by Operator, of costs incurred consistent with the
approved Capital Budget.
5.1 Operator's Fee.
Operator shall be entitled to a base Operator's Fee in each Contract
Year for the performance of the Services hereunder. Such Operator's Fee may
be supplemented in each Contract Year by bonuses paid to Operator pursuant to
Section 2.4 hereof. The Operator's Fee is intended to compensate Operator for
(i) performance of all of its obligations under the Agreement other than costs
items to be reimbursed to Operator, and (ii) its profit.
<PAGE>
EXHIBIT G
For each Contract Year of the Initial Term, Pepco shall pay to
Operator an Operator's Fee of five hundred thousand dollars ($500,000). The
Operator's Fee for Contract Years in periods subsequent to the Initial Term
shall be determined by mutual agreement.
5.2 Invoicing and Payments.
Operator shall deliver to Pepco an invoice and performance report by
the tenth day of each calendar month, covering the preceding calendar month
("Period"). The invoice shall describe in reasonable detail the costs
incurred consistent with the Operating Budget during the Period. The invoice
shall identify one-twelfth of the Operating Fee for the Contract Year.
Pepco shall make payments to Operator within forty-five (45) days of
receipt of Operator's invoice and performance report.
5.2.1 Year End Adjustments.
Subject to Section 4.1.3, Operator shall not be entitled to
reimbursement of costs incurred by Operator in excess of costs approved in the
Operating Budget or Capital Budget for the Contract Year, except to the extent
such costs were reasonably incurred due to an event of Force Majeure. In the
event Operator incurs costs in any Contract Year less than the costs approved
in the Operating Budget, Pepco shall pay to Operator one-half of the cost
savings, such amount to be paid in conjunction with the payment for the
December invoice.
Any liquidated damages or performance bonus due pursuant to Section
2.3 shall be paid or adjusted, as appropriate, in conjunction with the payment
for the December invoice.
ARTICLE 6
FACILITIES CUSTODY
6.1 Transfer from Pepco to Operator at Term Commencement.
6.1.1 Pepco shall transfer custody of the Facilities to Operator
effective the Turnover Date. Pepco shall provide to Operator notice of its
good faith estimate of the Turnover Date on or about thirty (30) days prior to
<PAGE>
EXHIBIT G
the estimated Turnover Date. Pepco shall provide to Operator notice of the
actual Turnover Date at least ten (10) days prior to the actual Turnover Date.
Pepco and Operator shall work cooperatively to establish a smooth transition
of responsibilities for the Facilities.
6.1.2 The baseline for assessment of Unit's performance subsequent to
the Turnover Date shall be the final Capability Demonstration Test conducted
during the 2000 Peak Season. Pepco shall give Operator reasonable advance
notice of the timing of such Capability Demonstration Test. On or about the
Turnover Date, in the event Operator has reasonable cause to believe that
circumstances may have caused the Facilities performance to have diminished
subsequent to the performance of that Capability Demonstration Test, the
Parties shall mutually agree upon procedures to determine the existence of
such circumstances and to establish a revised baseline for assessment of a
Unit's performance. Operator and Pepco shall conduct a joint inspection of
the Units to determine whether any other circumstances exist that might
adversely affect a Unit's performance.
6.1.3 On or about the Turnover Date, Pepco and Operator shall conduct
an inventory survey of fuel materials, parts, consumables and supplies at the
Facilities. The results of the inventory survey shall be mutually agreed by
the Parties.
6.1.4 Pepco and Operator shall undertake an inventory of contracts
primarily relating to the operations and maintenance of the Facilities, and
Pepco shall, to the extent assignable, assign to Operator such contracts as
are selected by Operator for assignment and the costs to be incurred
thereunder shall be included in the Operating Budget. To the extent contracts
selected by Operator are unassignable, Pepco shall designate Operator as its
agent for performance thereunder.
6.2 Return from Operator to Pepco at Term Conclusion.
6.2.1 Effective the Termination Date, Operator shall return
custody of the Facilities to Pepco in the same condition as received from
Pepco, normal wear and tear from operation in accordance with Good Utility
Practices excepted. Operator and Pepco shall work cooperatively to establish
a smooth return of responsibility for the Facilities.
6.2.2 Except as provided in this Section 6.2.2, the performance of
the Units effective the Termination Date shall be the final Capability
Demonstration Test conducted during the most recent Peak Season. Operator
shall give Pepco reasonable advance notice of the timing of such Capability
Demonstration Test. On or about the Termination Date, in the event Pepco has
_________________
1Pepco currently anticipates that the Turnover Date shall be on or about
the date of the closing of the transactions contemplated by the Asset Purchase
and Sale Agreement to be entered into by Pepco and the purchaser of certain of
Pepco's other generating facilities.
<PAGE>
EXHIBIT G
reasonable cause to believe that circumstances may have caused a Unit's
performance to have diminished subsequent to the performance of that
Capability Demonstration Test, the Parties shall mutually agree upon
procedures to determine the existence of such circumstances and to establish a
revised assessment of the Unit's performance. Pepco and Operator shall
conduct a joint inspection of the Unit to determine whether any other
circumstances exist that might adversely affect a Unit's performance.
ARTICLE 7
TERM AND TERMINATION
7.1 Term. This Agreement shall be effective for a period running
from the Effective Date until December 31, 2003 ("Initial Term"). It shall
renew automatically thereafter for three (3) year terms, (the Initial Term
and any renewals, collectively the "Term") unless terminated by either party by
written notice delivered at least one (1) year prior to the expiration of the
then current Term or as otherwise provided in this Article. In the event
Pepco terminates this Agreement upon the conclusion of the Initial Term, Pepco
shall pay to Operator a termination fee of two hundred fifty thousand dollars
($250,000).
7.2 Termination for Default.
7.2.1 Termination by Pepco for Operator Default.
The occurrence of any of the events set forth below shall constitute
an Operator Event of Default under this Agreement:
(a) Operator materially fails to satisfy the performance
commitments set forth in Section 2.3;
(b) Operator voluntarily commences bankruptcy, insolvency,
reorganization, stay, moratorium or similar debtor-relief proceedings, or
shall have become insolvent or generally does not pay its debts as they become
due, or admits in writing its inability to pay its debts, or makes an
assignment for the benefit of creditors;
(c) Insolvency, receivership, reorganization, bankruptcy,
or similar proceedings shall have been commenced against Operator and such
proceedings remain undismissed or unstayed for a period of sixty (60) days;
(d) Operator fails to maintain the insurance coverages
required under Section 2.4; or
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EXHIBIT G
(e) Operator breaches any other material term or condition
of this Agreement, including but not limited to any material breach of a
representation, warranty or covenant made in this Agreement which, after
receiving written notice of the breach from Pepco (such notice to set forth in
reasonable detail the nature of the default and, where known and if
applicable, the steps necessary to cure such default), (i) Operator fails to
cure the default, if curable, within thirty (30) days following receipt of the
notice or (ii) if such default is of such a nature that it cannot be cured
within thirty (30) days following receipt of such notice, Operator fails
within such thirty (30) days to commence the necessary cure and fails at any
time thereafter diligently and continuously to prosecute such cure to
completion.
7.2.2 Pepco's Default Remedies Against Operator. If an Operator
Event of Default shall have occurred and be continuing, Pepco shall have the
right to terminate this Agreement by Notice to Operator. In the event of such
termination:
(a) If requested by Pepco, Operator shall withdraw from
the Facility Site, shall assign to Pepco (without future recourse to Operator)
such of Operator's subcontracts as Pepco may request, and shall remove such
materials, equipment, tools and instruments used and any debris or waste
materials generated by Operator in the performance of the Services as Pepco
may direct, and Pepco may take possession of any and all facilities, materials
and equipment at the Facility Site or in transit thereto.
(b) Operator's liability hereunder is in addition to any
other liabilities of Operator provided for or relating to this Agreement.
7.2.3 Termination by Operator for Pepco Default.
The occurrence of any of the events set forth below shall constitute
a Pepco Event of Default under this Agreement:
(a) Pepco shall have failed to make any payment to
Operator when due hereunder within thirty (30) days after receipt of written
notice of nonpayment by Operator, unless the payment of such amount is
disputed in good faith;
(b) Pepco voluntarily commences bankruptcy, insolvency,
reorganization, stay, moratorium or similar debtor-relief proceedings, or
shall have become insolvent, or generally does not pay its debts as they
become due, or admits in writing its inability to pay its debts, or makes a
deed of trust or assignment for the benefit of creditors;
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EXHIBIT G
(c) Insolvency, receivership, reorganization, bankruptcy,
or similar proceedings shall have been commenced against Pepco and such
proceedings remain undismissed or unstayed for a period of sixty (60) days; or
(d) Pepco breaches any other material term or condition of
this Agreement, including but not limited to any material breach of a
representation, warranty or covenant made in this Agreement which, after
receiving written notice of the breach from Operator (such notice to set forth
in reasonable detail the nature of the default and, where known and if
applicable, the steps necessary to cure such default), (i) Pepco fails to cure
the default, if curable, within thirty (30) days following receipt of the
notice or (ii) if such default is of such a nature that it cannot be cured
within thirty (30) days following receipt of such notice, Pepco fails within
such thirty (30) days to commence the necessary cure and fails at any time
thereafter diligently and continuously to prosecute such cure to completion.
7.2.4 Operator's Rights Against Pepco. If a Pepco Event of
Default shall have occurred and be continuing, Operator shall have the right
to terminate this Agreement by Notice to Pepco. In such event, Operator shall
promptly submit to Pepco an accounting of Operator's costs and Pepco shall pay
Operator amounts due and owing, including associated fee, not later than
thirty (30) days after receipt of Operator's accounting. The foregoing
remedies shall constitute Operator's sole and exclusive remedies against Pepco
with respect to a Pepco Event of Default.
7.3 Termination for Abandonment. In the event Pepco determines to
retire any of the Facilities from service, which Pepco shall have the right to
do in its sole discretion, Pepco shall provide Notice to Operator. In such
event, Operator shall promptly submit to Pepco an accounting of Operator's
costs and Pepco shall pay Operator amounts due and owing, including associated
fee, not later than thirty (30) days after receipt of Operator's accounting.
The foregoing remedies shall constitute Operator's sole and exclusive remedies
against Pepco for termination pursuant to this Section 7.3.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF PEPCO
Pepco represents and warrants to Operator as follows:
8.1 Incorporation. Pepco is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of Virginia
and the District of Columbia and has all requisite corporate power and
authority to own, operate and contract for Services for the Facilities and to
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EXHIBIT G
carry on the business of the Facilities as now being conducted.
8.2 Authority Relative to This Agreement. Pepco has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
by Pepco of this Agreement and the consummation by Pepco of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Pepco or by a committee thereof to whom such authority has been
delegated and no other corporate proceedings on the part of Pepco are
necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Pepco and, assuming that this Agreement constitutes a valid and
binding agreement of Operator, subject to the receipt of the Pepco Required
Regulatory Approvals and the Operator Required Regulatory Approvals,
constitutes a valid and binding agreement of Pepco, enforceable against Pepco
in accordance with its terms.
8.3 Consents and Approvals; No Violation.
(a) Subject to obtaining the Pepco Required Regulatory
Approvals and the Operator Required Regulatory Approvals, neither the
execution and delivery of this Agreement by Pepco nor the performance by Pepco
of its obligations hereunder will (i) conflict with or result in any breach of
any provision of the Certificate of Incorporation or By-laws of Pepco, (ii)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement, lease or other instrument or
obligation to which Pepco or any of its subsidiaries is a party or by which
any of the Facilities may be bound, or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Pepco or the
Facilities, except in the case of clauses (ii) and (iii) for such failures to
obtain a necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse effect on the
ability of Pepco to discharge its obligations under this Agreement (a "Pepco
Material Adverse Effect").
(b) Except for the Required Regulatory Approvals set forth
on Schedule 8.3(b) attached hereto (collectively, the "Pepco Required
Regulatory Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of any Governmental Authority is
necessary for the performance by Pepco of its obligations hereunder, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not obtained or made, would not individually
or in the aggregate, create a Pepco Material Adverse Effect.
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8.4 Labor Matters. Pepco has previously made available to Operator
copies of all collective bargaining agreements to which Pepco is a party or is
subject and which relate to the business or operations of the Facilities.
With respect to the business and operations of the Facilities, as of the date
of this Agreement, Pepco is in compliance with all Applicable Laws regarding
employment and employment practices, terms and conditions of employment and
wages and hours, except, for such matters as would not, individually or in the
aggregate, create a Pepco Material Adverse Effect or an Operator Material
Adverse Effect.
8.5 Survival. The representations and warranties in this Article 8
shall continue in full force and effect for the Term of this Agreement.
8.6 THE FACILITIES ARE BEING MADE AVAILABLE AND CUSTODY THEREOF IS
TRANSFERRED "AS IS, WHERE IS", AND PEPCO IS NOT MAKING ANY REPRESENTATIONS OR
WARRANTIES WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING SUCH
FACILITIES (INCLUDING ANY RELATING TO LIABILITIES, OPERATION, CONDITION, VALUE
OR QUALITY OF THE FACILITIES OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS
OR OTHER INCIDENTS OF THE FACILITIES) OR WITH RESPECT TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. PEPCO SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, WITH RESPECT TO THE FACILITIES, OR ANY PART THEREOF,
OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN,
WHETHER LATENT OR PATENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
PEPCO MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION SET
FORTH IN, OR CONTEMPLATED BY, THE INFORMATION MEMORANDUM.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF OPERATOR
Operator represents and warrants to Pepco as follows:
9.1 Organization. Operator is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
______________ and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as is now being
conducted.
<PAGE>
9.2 Authority Relative to This Agreement. Operator has all necessary
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
by Operator of this Agreement and the consummation by Operator of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Operator and no other corporate proceedings on the part
of Operator are necessary to authorize this Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Operator and, assuming that this Agreement
constitutes a valid and binding agreement of Pepco, subject to the receipt of
the Operator Required Regulatory Approvals and the Pepco Required Regulatory
Approvals, this Agreement constitutes a valid and binding agreement of
Operator, enforceable against Operator in accordance with its terms.
9.3 Consents and Approvals; No Violation.
(a) Subject to obtaining the Operator Required Regulatory
Approvals and the Pepco Required Regulatory Approvals, neither the execution
and delivery of this Agreement by Operator nor the performance by Operator of
its obligations hereunder will (i) conflict with or result in any breach of
any provision of the [Certificate of Incorporation or By-laws] of Operator,
(ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement, lease or other
instrument or obligation to which Operator or any of its subsidiaries is a
party or by which any of their respective assets may be bound or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Operator, or any of its assets, except, in the case of clauses (ii) and (iii),
for such failures to obtain a necessary consent, defaults and violations which
would not, individually or in the aggregate, have a material adverse effect on
the ability of Operator to discharge its obligations under this Agreement (an
"Operator Material Adverse Effect").
(b) Except for the Required Regulatory Approvals set forth
on Schedule 9.3(b) attached hereto (collectively, the "Operator Required
Regulatory Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of any Governmental Authority is
necessary for the performance by Operator of its obligations hereunder, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not obtained or made, would not individually
or in the aggregate, create an Operator Material Adverse Effect.
9.4 Facility Sites Inspection. Operator has had a full and effective
opportunity to inspect the Facilities and the Facility Sites, to determine to
the extent pertinent to operate all pertinent surface and subsurface
conditions of Hazardous Substances at the Facility Sites. Operator accepts
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EXHIBIT G
the existing conditions and shall not be entitled to any relief hereunder
based upon such conditions, including the existence of conditions contrary to
Operator's expectations based upon inspections prior to execution of this
Agreement or subsequent thereto.2
9.5 Qualified Operator. Operator is qualified to obtain any Permits
and Environmental Permits necessary for Operator to operate the Facilities as
of the Turnover Date. Without limiting the foregoing, Operator is not aware
of any reason or circumstance that would prevent Operator from procuring the
Operator Required Regulatory Approvals.
ARTICLE 10
COVENANTS OF THE PARTIES
10.1 Conduct of Business Relating to the Facilities. Except with
the prior written consent of Operator (such consent not to be unreasonably
withheld) or as required to effect the transactions contemplated by this
Agreement, during the period from the Effective Date to the Turnover Date,
Pepco will operate the Facilities in the usual, regular and ordinary course in
compliance with Applicable Law and in accordance with Good Utility Practices,
and pursuant to all applicable PJM Requirements, and continue to pay accounts
payable which relate to the Facilities in a timely manner, consistent with
past practice.
10.2 Consents and Approvals. Pepco and Operator shall cooperate
with each other and (i) prepare and file (or otherwise effect) as soon as
practicable all applications, notices, petitions and filings with respect to
and (ii) use their reasonable best efforts to obtain (A) the Pepco Required
Regulatory Approvals and the Operator Required Regulatory Approvals and (B)
any other consents, approvals or authorizations of any other Governmental
Authorities or third parties that are necessary to consummate the transactions
contemplated by this Agreement, other than such consents, approvals or
authorizations which, if not obtained or made, would not, individually or in
the aggregate, create a Pepco Material Adverse Effect or an Operator Material
Adverse Effect. Without limiting the generality of the foregoing, (1) each
Party agrees to, upon the other Party's request, support such other Party's
applications for regulatory approvals of the transactions contemplated by this
Agreement, and (2) Pepco and Operator agree to defend any lawsuits or other
legal proceedings, whether judicial or administrative, challenging this
Agreement, or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by
_____________________
2 Additional inspections may be undertaken by Operator prior to
Agreement execution whether before or after bid award.
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EXHIBIT G
any Governmental Authority vacated or reversed.
ARTICLE 11
EMPLOYEE MATTERS
The Parties shall provide for the employment and pay and benefits of the
employees at the Facilities in accordance with the provisions set forth in
Exhibit III hereto. On the Turnover Date, Pepco shall provide Operator all
personnel files relating to the Transferred Employees, to the extent in
Pepco's possession and readily available and to the extent such files pertain
to (1) skill and development training and resumes, (2) seniority histories,
(3) salary and benefit information, (4) Occupational Safety and Health Act
medical reports, (5) active medical restriction forms and (6) any other
matters, disclosure of which by Pepco to Operator is permitted under
Applicable Law without the consent of the Transferred Employee, but not
including any performance evaluations or disciplinary records (collectively,
the "Transferred Employee Records"); provided, however, that Pepco shall be
permitted to retain copies, or originals to the extent it provides Operator
with copies of same, of all Transferred Employee Records.
ARTICLE 12
INDEMNIFICATION
12.1 Operator's Indemnification. Operator shall indemnify, hold
harmless and defend Pepco, its Affiliates, and their respective officers,
directors, employees, agents, contractors, subcontractors, invitees and
successors, from and against any and all claims, demands, suits, obligations,
payments, liabilities, costs, losses, judgments, damages and expenses
(including the costs and expenses of any and all actions, suits, proceedings,
assessments, judgments, settlements, and compromises relating thereto,
reasonable attorneys' and expert fees and reasonable disbursements in
connection therewith) for any loss or liability, damage to property, injury to
or death of any person, including Pepco's employees, Operator's employees and
their Affiliates' employees, or any third parties, to the extent caused wholly
or in part by any act or omission, negligent or otherwise, by Operator or its
officers, directors, employees, agents, contractors, subcontractors and
invitees arising out of or connected with Operator's performance or breach of
this Agreement, or the exercise by Operator of its rights hereunder.
12.2 Pepco's Indemnification. Pepco shall indemnify, hold
harmless and defend Operator, its Affiliates, and their respective officers,
directors, employees, agents, contractors, subcontractors, invitees and
successors, from and against any and all claims, demands, suits, obligations,
payments, liabilities, costs, losses, judgments, damages and expenses
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EXHIBIT G
(including the costs and expenses of any and all actions, suits, proceedings,
assessments, judgments, settlements, and compromises relating thereto
reasonable attorneys' and expert fees and reasonable disbursements in
connection therewith) for any loss or liability damage to property, injury to
or death of any person, including Operator's employees, Pepco's employees and
their Affiliates' employees, or any third parties, to the extent caused wholly
or in part by (i) any negligent act or omission by Pepco or its officers,
directors, employees, agents, contractors, subcontractors and invitees arising
out of or connected with Pepco's performance of this Agreement, or (ii) the
presence of Hazardous Substances on the Facility Sites prior to the Turnover
Date.
12.3 Indemnification Procedures. Any Party seeking
indemnification under this Agreement shall give the other Party notice of such
claim promptly but in no event later than ninety (90) days from the later of
the commencement of, or the Party's actual knowledge of, such claim or action.
Such notice shall describe the claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the claim that has been, or may be
sustained by, said Party. The failure to provide such notice shall not excuse
any Party from its continuing obligations hereunder; however, any claim shall
be reduced by the damages resulting from such Party's delay or failure to
provide such notice. Neither Party may settle or compromise any claim for
which indemnification is sought under this Agreement without the prior consent
of the other Party; provided, however, said consent shall not be unreasonably
withheld or delayed.
12.4 Survival. The indemnification obligations of each Party
under this Article 12 for acts or occurrences that occur prior to expiration,
termination, or cancellation of this Agreement shall survive the Effective
Date and continue in full force and effect regardless of whether this
Agreement expires or terminates, or is canceled, surrendered or completed.
12.5 Limitation of Liability. Except as provided in Section 2.3,
neither Party nor their respective officers, directors, agents, employees,
parents, Affiliates, successors, assigns, contractors or subcontractors shall
be liable to the other Party or its shareholders, subsidiaries, Affiliates,
officers, directors, agents, employees, successors, assigns, contractors or
subcontractors for any claims, demands or suits for consequential, incidental,
special, exemplary, punitive, indirect or multiple damages connected with or
resulting from any breach after the Effective Date of this Agreement (other
than breach of this Article 12), or any actions undertaken in connection with
or related hereto or thereto, including any such damages which are based upon
breach of contract, tort (including negligence and misrepresentation), breach
of warranty, strict liability, statute, operation of law or any other theory
of recovery. In any Contract Year, the aggregate liability of Operator for
claims of Pepco arising out of or relating to the performance or
non-performance of this Agreement shall be limited to one million dollars
($1,000,000) per Contract Year.
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EXHIBIT G
The foregoing limitations shall not prevent any Party from recovering
damages of the foregoing nature in a claim for indemnification hereunder for
such damages asserted by a third party.
ARTICLE 13
FORCE MAJEURE
13.1 Force Majeure. Notwithstanding anything in this Agreement
to the contrary, the Parties shall be excused from performing their respective
obligations hereunder and shall not be liable in damages or otherwise to the
extent that a Party is unable to perform or is prevented from performing by an
event of Force Majeure and has complied with Section 13.3. The Parties
recognize and agree that an event of Force Majeure will not relieve any Party
of its obligation to make payments when due hereunder.
13.2 Definition of Force Majeure. The term "Force Majeure" as
used herein means those causes beyond the reasonable control of the Party
affected, that, by the exercise of reasonable diligence, including Good
Utility Practices, such Party is unable to prevent, avoid, mitigate, or
overcome, including the following: any act of God, changes in Applicable Law,
act of the public enemy, war, civil disturbance, insurrection, riot, fire
(unless resulting from the fault or negligence of the Party asserting Force
Majeure), storm or flood, lightning or explosion (unless resulting from the
fault or negligence of the Party asserting Force Majeure) or any other cause
of a similar nature beyond such Party's reasonable control. Neither the cost
to operate and maintain the Facilities, lack of economic feasibility, adverse
general economic conditions nor economic hardship affecting a Party's
performance hereunder due to any reason other than an event which itself
constitutes an event of Force Majeure shall be deemed an event of Force
Majeure.
13.3 Force Majeure Procedures. A Party shall not be entitled to
rely on the occurrence of an event of Force Majeure as a basis for being
excused from performance of its obligations under this Agreement unless the
Party relying on the event or condition shall: (a) provide prompt written
notice of such Force Majeure event to the other Party, including an estimation
of its expected duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts in accordance with
Good Utility Practice to continue to perform its obligations under this
Agreement; (c) expeditiously take action to correct or cure the event or
condition excusing performance; (d) exercise all reasonable efforts to
mitigate or limit damages to the other Party; and (e) provide prompt notice to
the other Party of the cessation of the event or condition giving rise to its
excuse from performance. Subject to this Section 13.3, any obligation under
this Agreement shall be suspended only to the extent caused by such Force
Majeure and only during the continuance of any inability of performance caused
by such Force Majeure but for no longer period.
<PAGE>
ARTICLE 14
CONFIDENTIALITY
14.1 Confidentiality Obligations of Pepco. Pepco shall hold in
confidence, unless compelled to disclose by judicial or administrative process
or other provisions of law, all documents and information furnished by
Operator in connection with this Agreement. Except to the extent that such
information or documents are (i) generally available to the public other than
as a result of a disclosure by Pepco in breach of this Agreement, (ii)
available to Pepco on a non-confidential basis prior to disclosure to Pepco by
Operator, or (iii) available to Pepco on a non-confidential basis from a
source other than Operator, provided that such source is not known, and by
reasonable effort could not be known, by Pepco to be bound by a
confidentiality agreement with Operator or otherwise prohibited from
transmitting the information to Pepco by a contractual, legal or fiduciary
obligation, Pepco shall not release or disclose such information to any other
person, except to its employees, representatives or agents on a need-to-know
basis, in connection with this Agreement who has not first been advised of the
confidentiality provisions of this Section 14.1 and has agreed in writing to
comply with such provisions. Pepco shall promptly notify Operator if it
receives notice or otherwise concludes that the production of any information
subject to this Section 14.1 is being sought under any provision of law and
Pepco shall use reasonable efforts in cooperation with Operator to seek
confidential treatment for such confidential information provided thereto.
14.2 Confidentiality Obligations of Operator. Operator shall
hold in confidence, unless compelled to disclose by judicial or administrative
process or other provisions of law, all documents and information furnished by
Pepco in connection with this Agreement. Except to the extent that such
information or documents are (i) generally available to the public other than
as a result of a disclosure by Operator in breach of this Agreement, (ii)
available to Operator on a non-confidential basis prior to disclosure to
Operator by Pepco, or (iii) available to Operator on a non-confidential basis
from a source other than Pepco, provided that such source is not known, and by
reasonable effort could not be known, by Operator to be bound by a
confidentiality agreement with Pepco or otherwise prohibited from transmitting
the information to Operator by a contractual, legal or fiduciary obligation,
Operator shall not release or disclose such information to any other person,
except to its employees, representatives or agents on a need-to-know basis, in
connection with this Agreement who has not first been advised of the
confidentiality provisions of this Section 14.2 and has agreed in writing to
comply with such provisions. Operator shall promptly notify Pepco if it
receives notice or otherwise concludes that the production of any information
subject to this Section 14.2 is being sought under any provision of law and
Operator shall use reasonable efforts in cooperation with Pepco to seek
confidential treatment for such confidential information provided thereto.
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EXHIBIT G
14.3 Remedies. The Parties agree that monetary damages would be
inadequate to compensate a Party for the other Party's breach of its
obligations under Section 14.1 or 14.2, above, as applicable. Each Party
accordingly agrees, that the other Party shall be entitled to equitable
relief, by way of injunction or otherwise, if a Party breaches or threatens to
breach its obligations under Section 14.1 or 14.2 of this Agreement, as
applicable, which equitable relief shall be granted without bond or proof of
damages, and the receiving Party shall not plead in defense that there would
be an adequate remedy at law.
ARTICLE 15
DISPUTE RESOLUTION
15.1 Disputes. Except as provided in Article 4, a Party with a
claim or dispute under this Agreement shall submit to the other Party a
notification of such claim or dispute within sixty (60) days after the
circumstances that gave rise to the claim or the question or issue in dispute.
The notification shall be in writing and shall include a concise statement of
the claim or the issue or question in dispute, a statement of the relevant
facts and documentation to support the claim. In the event the Parties are
unable, in good faith, to resolve their disagreement in a manner satisfactory
to both Parties within thirty (30) days after receipt by a Party of a
notification specifying the claim, issue or question in dispute, the Parties
shall refer the dispute to their respective senior management. If, after
using their good faith best efforts to resolve the dispute, senior management
cannot resolve the dispute within thirty (30) days, the Parties shall, except
as provide in Article 4, utilize the arbitration procedures set forth below in
Section 15.2 to resolve a dispute, provided that nothing herein or therein
shall prohibit Pepco or Operator from at any time requesting from a court of
competent jurisdiction a temporary restraining order, preliminary injunction,
or other similar form of equitable relief to enforce performance of the
provisions of this Agreement.
15.2 Arbitration.
(a) Any arbitration initiated under this Agreement shall
be conducted before a single neutral arbitrator appointed by the Parties
within thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an arbitrator, such
arbitration shall be appointed by the American Arbitration Association.
Unless the Parties agree otherwise, the arbitrator shall be an attorney or
retired judge with at least fifteen (15) years of experience, and shall not
have any current or past substantial business or financial relationships with
any Party to the arbitration. If possible, the arbitrator shall have
experience in the electric utility industry. Unless otherwise agreed, the
arbitration shall be conducted in accordance with the American Arbitration
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EXHIBIT G
Association's Commercial Arbitration Rules, then in effect, in the District of
Columbia. Any arbitration proceedings, decision or award rendered hereunder
and the validity, effect and interpretation of this arbitration agreement
shall be governed by the Federal Arbitration Act of the United States, 9
U.S.C. Sections 1 et seq.
(b) The arbitration shall, if possible, be concluded not
later than six (6) months after the date that it is initiated. The arbitrator
shall be authorized only to interpret and apply the provisions of this
Agreement or any related agreements entered into under this Agreement and
shall have no power to modify or change any of the above in any manner. The
arbitrator shall have no authority to award punitive or multiple damages or
any damages inconsistent with this Agreement. The arbitrator shall, within
thirty (30) days of the conclusion of the hearing, unless such time is
extended by agreement of the Parties, notify the Parties in writing of his or
her decision, stating his or her reasons for such decision and separately
listing his or her findings of fact and conclusions of law. The decision of
the arbitrator rendered in such a proceeding shall be final and binding on the
Parties. Judgment on the award may be entered upon it in any court having
jurisdiction.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Expenses. Except to the extent specifically provided
herein, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be borne by the Party incurring
such costs and expenses, whether or not the transactions contemplated hereby
are consummated.
16.2 Amendment and Modification; Extension; Waiver. This
Agreement may be amended, modified or supplemented only by an instrument in
writing signed on behalf of each of the Parties. Either Party may (i) extend
the time for the performance of any of the obligations or other acts of the
other Party, (ii) waive any inaccuracies in the representations and warranties
of the other Party contained in this Agreement or (iii) waive compliance by
the other Party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a Party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party. The failure of a Party to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such
rights.
16.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (as of the time of delivery or,
in the case of a telecopied communication, of confirmation) if delivered
personally, telecopied (which is confirmed) or sent by overnight courier
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EXHIBIT G
(providing proof of delivery) to the Parties at the following addresses (or at
such other address for a Party as shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Telecopier: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
if to Operator, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, NW
Suite 300 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
16.4 Assignment; No Third Party Beneficiaries.
(a) This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any Party,
<PAGE>
EXHIBIT G
including by operation of law, without the prior written consent of the other
Party, except (i) in the case of Pepco, (A) to an Affiliate of Pepco, (B) to a
third party in connection with the transfer of Pepco's transmission system to
such third party or (C) to a lending institution or trustee in connection with
a pledge or granting of a security interest in all or any part of the this
Agreement, and (ii) in the case of Operator, to a lending institution or
trustee in connection with a pledge or granting of a security interest in this
Agreement; provided, however, that no assignment or transfer of rights or
obligations by either Party shall relieve it from the full liabilities and the
full financial responsibility, as provided for under this Agreement, unless
and until the transferee or assignee shall agree in writing to assume such
obligations and duties and the other Party has consented in writing to such
assumption.
(b) Nothing in this Agreement is intended to confer upon
any other person except the Parties any rights or remedies hereunder or shall
create any third party beneficiary rights in any person, including, with
respect to continued or resumed employment, any employee or former employee of
Pepco (including any beneficiary or dependent thereof). No provision of this
Agreement shall create any rights in any such persons in respect of any
benefits that may be provided, directly or indirectly, under any employee
benefit plan or arrangement except as expressly provided for thereunder.
16.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the District of Columbia (regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law).
16.6 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
16.7 Interpretation. When a reference is made in this Agreement
to an Article, Section, Appendix, Exhibit or Schedule, such reference shall be
to an Article or Section of, or Appendix, Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation" or
equivalent words. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The definitions
contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such term. Any agreement, instrument, statute, regulation,
rule or order defined or referred to herein or in any agreement or instrument
<PAGE>
EXHIBIT G
that is referred to herein means such agreement, instrument, statute,
regulation, rule or order as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver
or consent and (in the case of statutes, regulations, rules or orders) by
succession of comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns. Each
Party acknowledges that it has been represented by counsel in connection with
the review and execution of this Agreement, and, accordingly, there shall be
no presumption that this Agreement or any provision hereof be construed
against the Party that drafted this Agreement.
16.8 Jurisdiction and Enforcement. Except as provided in
Articles 4 and 15, each of the Parties irrevocably submits to the exclusive
jurisdiction of (i) the Superior Court of the District of Columbia, and (ii)
the United States District Court for the District of Columbia, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby. Except as provided in Articles 4 and
15, each of the Parties agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the District of
Columbia or, if such suit, action or proceeding may not be brought in such
court for jurisdictional reasons, in the Superior Court for the District of
Columbia. Except as provided in Articles 4 and 15, each of the Parties
further agrees that service of process, summons, notice or document by hand
delivery or U.S. registered mail at the address specified for such Party in
Section 16.3 (or such other address specified by such Party from time to time
pursuant to Section 16.3) shall be effective service of process for any
action, suit or proceeding brought against such Party in any such court.
Except as provided in Articles 4 and 15, each of the Parties irrevocably and
unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Superior Court for the District of Columbia, or
(ii) the United States District Court for the District of Columbia, and hereby
further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
16.9 Entire Agreement. This Agreement and the Asset Sale
Agreement, including the Appendices, Exhibits, Schedules, documents,
certificates and instruments referred to herein or therein and other
contracts, agreements and instruments contemplated hereby or thereby, embodies
the entire agreement and understanding of the Parties in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings other than
those expressly set forth or referred to herein or therein. This Agreement
and the Asset Sale Agreement supersede all prior agreements and understandings
between the Parties with respect to the transactions contemplated by this
Agreement.
<PAGE>
EXHIBIT G
16.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as possible to
the fullest extent permitted by Applicable Law in an acceptable manner to the
end that the transactions contemplated hereby are fulfilled to the extent
possible.
16.11 Conflicts. Except with respect to the indemnification,
liability, default and remedies provisions contained herein or as otherwise
expressly provided herein, in the event of any conflict or inconsistency
between the terms of this Agreement and the terms of the Asset Sale Agreement,
the terms of the Asset Sale Agreement shall prevail.
16.12 Attorney-in-Fact. Pepco hereby appoints _______________, a
_______________ of Pepco, to be its duly authorized Attorney-in-Fact and in
Pepco's name to execute, acknowledge and deliver this Agreement as its act and
deed. Operator hereby appoints _____________, its ______________, to be its
duly authorized Attorney-in-Fact and in Operator's name to execute,
acknowledge and deliver this Agreement as its act and deed.
<PAGE>
EXHIBIT G
IN WITNESS WHEREOF, Pepco and Operator have caused this Operation and
Maintenance Agreement to be signed by their respective duly authorized
officers as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By:_________________________________
Name:
Title:
[OPERATOR]
By:_________________________________
Name:
Title:
<PAGE>
EXHIBIT G
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction aforesaid,
does hereby certify that ______________, personally known to me (or
satisfactorily proven) to be the person who signed as attorney-in-fact for
Pepco as named in the foregoing Instrument, personally appeared before me in
said jurisdiction, and as such attorney-in-fact and by virtue of the authority
vested in him by said Instrument, acknowledged the same to be the act and deed
of said corporation, and that he executed and delivered the same as such.
WITNESS my hand and official seal this ___ day of ___________, 2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
EXHIBIT G
)
DISTRICT OF COLUMBIA ) SS:
)
The undersigned, a Notary Public in and for the jurisdiction aforesaid,
does hereby certify that ______________, personally known to me (or
satisfactorily proven) to be the person who signed as attorney-in-fact for
Operator named in the foregoing Instrument, personally appeared before me in
said jurisdiction, and as such attorney-in-fact and by virtue of the authority
vested in him by said Instrument, acknowledged the same to be the act and deed
of said corporation, and that he executed and delivered the same as such.
WITNESS my hand and official seal this ___ day of ___________, 2000.
______________________________
My Commission Expires: Notary Public in and for
the District of Columbia
<PAGE>
APPENDIX A
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.
"Agreement" means this Operation and Maintenance Agreement dated
_____, 2000 and any schedules, appendices or exhibits attached thereto.
"Applicable Law" means all current and future Federal, state and
local laws (including common law and Environmental Laws), treaties,
regulations, rules, ordinances, codes, decrees, judgments, directives or
orders (including consent orders) and Permits, in each case, relating to the
Services or the Facilities or otherwise related to the transactions
contemplated by this Agreement.
"Business Day" means any day other than Saturday, Sunday and any day
which is a legal holiday or a day on which banking institutions in Washington,
D.C. are authorized or required by law or other action of a Governmental
Authority to close.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1984.
"Capability Demonstration Test" means the PJM Summer Capability
Demonstration Test.
"Capital Budget" shall have the meaning set forth in Section 4.2.
Improvement projects with a cost of greater than $500,000 shall be included in
the Capital Budget, as such amount may be revised by Pepco in consideration of
accounting or tax regulations.
"Cause" means (a) the commission of any act by an employee
constituting financial dishonesty against Operator (or any of its affiliates),
or (b) substantial violations of directions from a supervising executive,
repeated poor performance or nonperformance of such employee's duties,
responsibilities or activities; provided that, in the case of clause (b) only,
Operator (or any of its affiliates) has given the employee written notice of
such violations, poor performance or nonperformance and the employee has
failed to cure.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Contract Year" means a calendar year, provided however that the
first Contract Year shall commence on the Turnover Date and end on December
31, 2001 ("First Contract Year") and any financial obligations stated on the
<PAGE>
EXHIBIT G
basis of a Contract Year shall be adjusted by multiplying those obligations by
a fraction of which the numerator shall be number of days in that Contract
Year and the denominator shall be 365.
"Effective Date" means the date set forth in the preamble hereto.
"EFORD" means the "Equivalent Forced Outage Rate Demand" as
determined in accordance with PJM procedures.
"EFORD Standard" means an average EFORD rating, calculated as the
average of the EFORDS of all Units of a Facility in a Contract Year: for
purposes of determining liquidated damages pursuant to Section 2.4.1(a) for
Benning, eighteen percent (18%), and for Buzzard, twelve percent (12%); and
for purposes of determining Performance Bonus pursuant to Sections 2.4.1(b)
ten percent (10%).
"Emergency" means any event or circumstance arising in the course of
the operations and maintenance of the Facilities which: (i) requires prompt
actions; and (ii) in the reasonable opinion of Operator in accordance with
Good Utility Practices, could be expected to: (A) endanger the health or
safety of any employee or any person at or in the vicinity of the Facilities
or the Facility Sites, (B) have a material adverse effect on the transmission
system, or (C) have a material adverse effect on the Facilities or the
Facility Sites.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Employees" shall have the meaning set forth in Exhibit III.
"Environmental Laws" means all current and future Federal, state,
local and foreign laws (including common law), treaties, regulations, rules,
ordinances, codes, decrees, judgments, directives or orders (including consent
orders) and Environmental Permits, in each case, relating to pollution or
protection of the environment or natural resources, including laws relating to
Releases or threatened Releases, or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, arrangement
for disposal, transport, recycling or handling, of Hazardous Substances.
"Environmental Permits" means the permits, licenses, consents,
approvals and other governmental authorizations with respect to Environmental
Laws relating primarily to the power generation operations of the Facilities.
"Escalation Index" means three percent (3%) per Contract Year.
"FERC" means the Federal Energy Regulatory Commission or its
successor.
<PAGE>
EXHIBIT G
"Facilities" means the Buzzard Point Generating Station and the
Benning Generating Station.
"Facility Sites" means the real property on which the Facilities are
located as set forth in Exhibit I.
"Force Majeure" shall have the meaning set forth in Section 13.2.
"Good Utility Practices" means any of the applicable practices,
methods and acts:
(i) required by FERC, NERC, MAAC, PJM, the PJM
System Operator, or the successor of any of them, whether or not the Party
whose conduct is at issue is a member thereof;
(ii) required by Applicable Law;
(iii) required by the Pepco Interconnection Standards
or the policies and standards of Pepco relating to emergency operations;
(iv) otherwise engaged in or approved by a
significant portion of the electric utility industry during the relevant time
period; which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected to
accomplish the desired result at a reasonable cost consistent with law,
regulation, good business practices, reliability, safety, and expedition.
Good Utility Practices are not intended to be limited to the optimum practice,
method, or act to the exclusion of all others, but rather to be acceptable
practices, methods, or acts generally accepted in the region.
"Governmental Authority" means any court, administrative or
regulatory agency or commission or other governmental entity or
instrumentality or any department thereof.
"Hazardous Substances" means (i) any petrochemical or petroleum
products, crude oil or any fraction thereof, ash, radioactive materials, radon
gas, asbestos in any form, urea formaldehyde foam insulation or
polychlorinated biphenyls, (ii) any chemicals, materials, substances or wastes
defined as, included in, or that are alleged or determined by any Person or
Governmental Authority to be included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted hazardous
materials," "extremely hazardous substances," "toxic substances," "PCBs,"
"contaminants," "asbestos" or "pollutants" or similar term in any
Environmental Law, (iii) any other chemical, material, substance or waste
which is prohibited, limited or regulated by any Environmental Law or (iv) any
noise, electromagnetic radiation, and any other substance or energy which
causes or is alleged to cause personal injury (including wrongful death, pain,
<PAGE>
EXHIBIT G
suffering and loss of consortium) or property damage (including nuisance,
trespass and diminution of value).
"IBEW" means Local Union #1900 of the International Brotherhood of
Electrical Workers.
"IBEW Collective Bargaining Agreement" means that certain Collective
Bargaining Agreement, between Pepco and the IBEW, effective December 8, 1998,
as amended from time to time.
"Income Tax" means any Federal, state and local Tax or surtax (i)
based upon, measured by or calculated with respect to income, profits or
receipts, or (ii) based upon, measured by or calculated with respect to
multiple bases (including corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect
to, is described in clause (i), in each case, together with any interest,
penalties, or additions to such Tax.
"Information Memorandum" means the Information Memorandum, prepared
on behalf of Pepco, describing the Facilities, and the materials delivered
with such Information Memorandum, as such Information Memorandum and such
materials may have been amended or supplemented.
"Initial Term" shall have the meaning set forth in Section 7.1.
"MAAC" means the Mid-Atlantic Area Council, a reliability council
under Section 202 of the Federal Power Act established pursuant to the MAAC
Agreement, dated August 1, 1994, as amended from time to time, and any
successor entity thereto.
"NERC" means the North American Electric Reliability Council and any
successor entity thereto.
"Non-Union Employees" shall have the meaning set forth in Exhibit
III.
"Notice" shall mean a written notice satisfying the requirements of
Section 16.3.
"Operating Budget" shall have the meaning set forth in Section 4.1.
"Operator Event of Default" shall have the meaning set forth in
Section 7.2.1.
"Operator Material Adverse Effect" shall have the meaning set forth
in Section 9.3(a).
<PAGE>
EXHIBIT G
"Operator Required Regulatory Approvals" shall have the meaning set
forth in Section 9.3(b).
"Operator's Fee" shall have the meaning set forth in Section 5.1.
"Operator's Pension Plan" shall have the meanings set forth in
Exhibit III.
"Operator's Savings Plan" shall have the meaning set forth in Exhibit
III.
"Party or Parties" shall have the meaning set forth in the Preamble.
"Peak Season" shall mean the months of May, June, July, August and
September of any Contract Year.
"Pepco Event of Default" shall have the meaning set forth in Section
7.2.3.
"Pepco Interconnection Standards" means Pepco's Interconnection and
Parallel Operating Guidelines as amended from time to time. A copy of the
existing Pepco Interconnection Standards is attached hereto as Exhibit IV.
"Pepco Material Adverse Effect" shall have the meaning set forth in
Section 8.3(a).
"Pepco Required Regulatory Approvals" shall have the meaning set
forth in Section 8.3(b).
"Pepco's Pension Plan" shall have the meaning set forth in Exhibit
III.
"Pepco's Savings Plan" shall have the meaning set forth in Exhibit
III.
"Period" shall have the meaning set forth in Section 5.2.
"Permits" means the permits, licenses, consents, approvals and other
governmental authorizations (other than with respect to Environmental Laws)
primarily relating to the power generation operations of the Facilities.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization or
Governmental Authority.
"PJM" means the Pennsylvania-New Jersey-Maryland interconnected power
pool operated under the PJM Agreement and any successor thereto, including any
regional transmission operator/independent system operator, transco or any
other independent system administrator that possesses operational or planning
<PAGE>
EXHIBIT G
control over Pepco's transmission system.
"PJM Agreement" means the Amended and Restated Operating Agreement of
the PJM Interconnection LLC, dated as of June 2, 1997.
"PJM Control Area" shall mean the control area recognized by NERC as
the PJM Control Area.
"PJM Interconnection LLC" means the independent system operator of
the PJM Control Area pursuant to the PJM Agreement and the PJM Tariff.
"PJM Reliability Agreement" means the Reliability Assurance Agreement
dated June 2, 1997 among the load serving entities of PJM.
"PJM Requirements" means the rules, regulations or other requirements
of PJM or MAAC contained or adopted pursuant to the PJM Agreement, the PJM
Reliability Agreement or the PJM Tariff which are applicable to Pepco and
Operator, with respect to the Facilities.
"PJM System Operator" shall mean the PJM Interconnection energy
control center staff responsible for central dispatch as provided in the PJM
Agreement.
"PJM Tariff" means the PJM Open Access Transmission Tariff providing
transmission service within the PJM Control Area.
"Qualified Offer" shall have the meaning set forth in Exhibit III.
"Regulatory Approval" means with respect to a Party, any consent or
approval of, filing with, or notice to, any Governmental Authority that is
necessary for the execution and delivery of the Agreement by such Party or the
consummation thereby of the transactions contemplated hereby.
"Release" means any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.
"Services" means all activities to be performed by Operator
hereunder.
"Taxes" means all taxes, surtaxes, charges, fees, levies, penalties
or other assessments imposed by any United States Federal, state or local or
foreign taxing authority, including Income Taxes, excise, property, sales,
transfer, franchise, special franchise, payroll, recording, withholding,
<PAGE>
EXHIBIT G
social security or other taxes, including any interest, penalties or additions
attributable thereto.
"Term" shall have the meaning set forth in Section 7.1.
"Termination Date" means the last day of the Term.
"Total Cash Compensation" shall have the meaning set forth in Exhibit
III.
"Transferred Employee Records" shall have the meaning set forth in
Article 11.
"Transferred Employees" shall have the meaning set forth in Exhibit
III.
"Transferred Non-Union Employees" shall have the meaning set forth in
Exhibit III.
"Transferred Savings Employees" shall have the meaning set forth in
Exhibit III.
"Transferred Union Employees" shall have the meaning set forth in
Exhibit III.
"Turnover Date" shall mean the date established pursuant to Section
6.1.
"Turnover Date Benefits" shall have the meaning set forth in Exhibit
III.
"Union Employees" shall have the meaning set forth in Exhibit III.
"Units" shall mean each of (i) the two (2) steam turbines at Benning
and (ii) the sixteen (16) combustion turbines at Buzzard Point.
"WARN Act" means the Federal Worker Adjustment Retraining and
Notification Act of 1988, as amended.
<PAGE>
EXHIBIT H
SITE LEASE AGREEMENT
by and between
POTOMAC ELECTRIC POWER COMPANY
and
________________________________
<PAGE>
EXHIBIT H
TABLE OF CONTENTS
Page
ARTICLE 1 PREMISES 1
ARTICLE 2 TERM 2
ARTICLE 3 DELIVERY OF THE PREMISES TO TENANT 2
ARTICLE 4 ACCEPTANCE OF THE PREMISES BY TENANT 2
ARTICLE 5 RENTAL 3
ARTICLE 6 PAYMENT OF REAL ESTATE TAXES 4
ARTICLE 7 OPERATION, MANAGEMENT AND MAINTENANCE 6
ARTICLE 8 UTILITIES 6
ARTICLE 9 USE 6
ARTICLE 10 LAWS, ORDINANCES AND REQUIREMENTS OF PUBLIC
AUTHORITIES 7
ARTICLE 11 QUIET ENJOYMENT 7
ARTICLE 12 ALTERATIONS 8
ARTICLE 13 LIENS 8
ARTICLE 14 REPAIRS 9
ARTICLE 15 INSURANCE 9
ARTICLE 16 DAMAGE BY FIRE OR OTHER CASUALTY 10
ARTICLE 17 CONDEMNATION 10
ARTICLE 18 ASSIGNMENT AND SUBLETTING 11
ARTICLE 19 INDEMNIFICATION 11
ARTICLE 20 SURRENDER OF THE PREMISES 11
ARTICLE 21 LEASEHOLD MORTGAGES 12
ARTICLE 22 PRIORITY 14
ARTICLE 23 DEFAULT AND REMEDIES 15
ARTICLE 24 ESTOPPEL CERTIFICATES 15
ARTICLE 25 SECURITY DEPOSIT 16
ARTICLE 26 FORCE MAJEURE 16
ARTICLE 27 NOTICES 17
ARTICLE 28 MISCELLANEOUS 18
Appendix and Exhibits:
Appendix A Definitions
Exhibit A Legal Description of the Premises
Exhibit A-1 Description of the Building Addition
Exhibit B Legal Description of the Landlord's Land
Exhibit C Form of Easement Agreement
<PAGE>
EXHIBIT H
SITE LEASE AGREEMENT
THIS SITE LEASE AGREEMENT (as amended from time to time and with all
Appendices and Exhibits attached hereto, this "Lease") is made as of the ___
day of ______________, 2000 by and between Potomac Electric Power Company, a
District of Columbia and Virginia corporation ("Landlord"), and
_______________________________ ("Tenant"). Landlord and Tenant are sometimes
hereafter collectively referred to herein as the "Parties."
W I T N E S S E T H
WHEREAS, Landlord and Tenant have entered into an Asset Purchase and
Sale Agreement for Generating Plants and Related Assets, dated June 7, 2000
(as amended from time to time, the "Asset Sale Agreement"), for the sale by
Landlord to Tenant of, among other things, the Potomac River Station
generating facility and associated generating assets (the "Generating
Station"); and
WHEREAS, Tenant desires to lease from Landlord the land upon which the
Generating Station is located, consisting of approximately ___ acres and as
more particularly described in Exhibit A hereto, together with all
appurtenances thereto including, without limitation, that certain Building
Addition more particularly described in Exhibit A-1 attached hereto (the
"Building Addition"), but excluding the Generating Station and all other
improvements besides the Building Addition located upon such land
(collectively, the "Premises").
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to
be legally bound hereby, the Parties hereto agree as follows:
ARTICLE 1
PREMISES
Section 1.01 Lease of Premises. Landlord leases to Tenant, and
Tenant leases from Landlord, for the Term (as defined below) and subject to
the provisions hereof, to each of which Landlord and Tenant mutually agree,
the Premises. The Premises adjoins a parcel of land owned by Landlord upon
which is located a transmission and distribution substation and certain other
transmission and distribution facilities owned by Landlord (collectively, the
"Transmission and Distribution Facilities"). The overall parcel owned by
Landlord that includes the Premises and the adjoining land upon which the
Transmission and Distribution Facilities are located is more particularly
described in Exhibit B (the "Landlord's Land"). Tenant shall grant to
Landlord certain access and other rights to the Premises, and Landlord shall
<PAGE>
EXHIBIT H
grant to Tenant certain access and other rights to the Landlord's Land,
pursuant to an Easement Agreement substantially in the form attached hereto as
Exhibit C.
ARTICLE 2
TERM
Section 2.01 Term. The term of this Lease (the "Term") shall
commence upon consummation of the Closing (as defined in the Asset Sale
Agreement) (the "Commencement Date") and shall continue for a term of
ninety-nine (99) years unless sooner terminated as provided herein.
The first "Lease Year" shall be twelve (12) months, commencing on the
Commencement Date, except if the Commencement Date is not the first day of a
month, the first "Lease Year" shall include the partial month in which the
Commencement Date occurs plus the ensuing twelve (12) month period. Each
subsequent "Lease Year" shall mean each subsequent twelve (12) month period
commencing immediately upon the expiration of the prior Lease Year.
Section 2.02 Quiet Enjoyment. Provided Tenant performs all of
Tenant's obligations under this Lease, including the payment of Rental (as
defined below), Tenant shall, during the Term, enjoy the Premises without
disturbance from Landlord or any other persons claiming or acting by, through,
or under Landlord; subject, however, to the terms of this Lease. This
covenant and all other covenants of Landlord now or hereafter in this Lease
shall be binding upon Landlord and its successors.
ARTICLE 3
DELIVERY OF THE PREMISES TO TENANT
Tenant hereby acknowledges Landlord's delivery of possession of the
Premises to Tenant in the condition required pursuant to this Lease.
ARTICLE 4
ACCEPTANCE OF THE PREMISES BY TENANT
Tenant hereby acknowledges and agrees that the Premises are in good and
tenantable condition, and accepts same in "as is" condition, and agrees that
Landlord has no obligation to perform any work in connection with the Premises
to make same fit for Tenant's use and occupancy pursuant to this Lease.
<PAGE>
EXHIBIT H
ARTICLE 5
RENTAL
Section 5.01 Payment of Annual Base Rental. Commencing on the
Commencement Date, Tenant shall pay to Landlord for each Lease Year, an annual
rental ("Annual Base Rental") in the amount set forth in Section 5.02 hereof.
Section 5.02 Annual Base Rental. Tenant hereby covenants and
agrees to pay Landlord, as Annual Base Rental for the Premises on the first
day of each Lease Year and in the manner provided herein, an amount equal to
$1.00. Tenant may prepay the Annual Base Rental for the Term (or portions
thereof) at any time.
Section 5.03 Payment of Rental. All Rental shall be paid to
Landlord by Tenant when due, without deduction, offset or counterclaims unless
otherwise permitted herein, or by applicable state law, in lawful money of the
United States, at Landlord's address for notices as specified in Article 27
hereof, or such other place as Landlord may from time to time designate. The
term "Rental" as used herein means the then applicable Annual Base Rental and
Real Estate Taxes (as hereinafter described) to the extent such Real Estate
Taxes are required to be paid by Tenant to Landlord pursuant to Section
6.01(c). All past due amounts of Rental shall bear interest, which interest
shall be deemed to be Rental, from the date due until paid at a rate per annum
equal to two (2) percentage points above the prime rate of interest (the
"Prime Rate") charged by U.S. money center commercial banks as published in
The Wall Street Journal, such prime rate to change from time to time as and
when the change is reported; provided, however, that any interest payable
pursuant to this Section 5.03 shall never exceed the maximum rate of interest
from time to time permitted to be charged under applicable law to Tenant with
respect to the indebtedness for which such interest is charged under this
Lease (the "The Highest Lawful Rate"). If The Wall Street Journal ceases to
publish the prime rate of interest charged by U.S. money center commercial
banks, Landlord shall have the right to reasonably substitute the prime rate
of interest published by another reasonably comparable financial newspaper.
In addition, if any amount of Rental is not paid within ten (10) days after
written notice that the same is due and payable, Tenant shall pay to Landlord
a late charge, which late charge shall be deemed to be Rental, in the amount
of four percent (4%) of the amount in default.
Section 5.04 Rental Not Based on Income. It is agreed by Landlord
and Tenant that no Rental for the use, occupancy or utilization of the
Premises shall be, or is, based in whole or in part on the net income or
profits derived by any person from the Generating Station or the Premises.
Section 5.05 Application of Rental. Payment by Tenant or receipt
by Landlord of lesser amounts of Rental than that stipulated in this Lease
shall be applied to amounts owing by Tenant to Landlord in any order
<PAGE>
EXHIBIT H
determined by Landlord. No endorsement or statement on any check or any
letter accompanying any check or payment as Rental shall be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Rental or pursue
any other remedy provided in this Lease. Any credit due to Tenant hereunder
by reason of overpayment of Rental shall first be applied to any Rental owed
to Landlord by Tenant if Tenant shall be in default when said credit shall be
owed.
ARTICLE 6
PAYMENT OF REAL ESTATE TAXES
Section 6.01 Real Estate Taxes.
(a) The term "Real Estate Taxes" means the total of all taxes
and assessments, general and special, ordinary and extraordinary, foreseen and
unforeseen, including assessments for public improvements and betterments
assessed, levied or imposed, directly or indirectly, with respect to the
Premises. Real Estate Taxes shall not include any income taxes, inheritance
taxes or gift taxes.
(b) To the extent that the Premises and the Generating Station
constitute a separate tax lot or parcel (or separate tax lots or parcels):
(i) Tenant shall pay directly to the pertinent taxing authority all Real
Estate Taxes due with respect to the Premises and the Generating Station
during the Term, such payment obligations to commence upon the Commencement
Date (subject to adjustment between Landlord and Tenant during the first and
last years of the Term if such Lease years do not coincide with the pertinent
fiscal year for Real Estate Taxes); (ii) Tenant shall timely provide evidence
to Landlord of the timely payment of said Real Estate Taxes; and (iii) Tenant
shall have the right to contest any Real Estate Taxes (in Landlord's name,
provided Tenant indemnifies Landlord on account thereof), provided it does so
at its own cost and expense by appropriate proceedings conducted in good
faith. In the event Tenant contests any such Real Estate Taxes, it shall
furnish Landlord with a detailed description of the contested matter and all
actions taken by it in connection therewith. To the extent that the Premises
constitutes a separate tax lot, but the Real Estate Taxes attributable thereto
(including the Generating Station) are not billed separately to Tenant,
Landlord shall promptly, upon its receipt of the same, submit to Tenant copies
of all bills for such Real Estate Taxes for direct payment by Tenant to the
pertinent taxing authority. Landlord shall be solely responsible for any
penalties which may be assessed as a result of its failure to promptly submit
to Tenant the bills required pursuant to this Section 6.01(b).
(c) To the extent that the Premises and the Generating Station
do not constitute a separate tax lot or parcel (or separate tax lots or
parcels), and are taxed as part of a larger tax lot or parcel which consists
of or includes Landlord's Land: (i) the Real Estate Taxes attributable to the
Premises and the Generating Station shall be that portion of the overall Real
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EXHIBIT H
Estate Taxes payable with respect to such larger tax lot that the aggregate
assessed tax value of the Generating Station and the Premises bears to the
aggregate assessed tax value of the larger tax lot and all improvements
located within said larger tax lot, provided that if such assessed tax values
are not separately stated, such Real Estate Taxes shall be based upon relative
fair market values as reasonably determined by Landlord in good faith; (ii)
Landlord shall periodically provide to Tenant a written statement showing the
amount of Real Estate Taxes attributable to the Premises and the Generating
Station (determined as aforesaid) then due and payable, which statement shall
attach a copy of the tax bill due and payable, and shall show in reasonable
detail the amount thereof attributable to the Premises (determined as
aforesaid); and (iii) Tenant shall pay to Landlord the amount of Real Estate
Taxes attributable to the Premises and the Generating Station within thirty
(30) days of receipt of Landlord's statement. Landlord shall provide Tenant
with reasonable proof of payment of Real Estate Taxes attributable to the
larger tax lot reasonably promptly after Tenant's request therefor. Landlord
shall have the right to contest the amount of Real Estate Taxes attributable
to the larger tax lot or parcel by appropriate proceedings diligently
conducted in good faith and provided Landlord shall have satisfactorily bonded
the amount of contested Real Estate Taxes or set up reserves therefor adequate
under generally accepted accounting principles, and Tenant shall continue to
pay to Landlord, as and when required hereunder, Tenant's proportionate share
(determined as aforesaid) of the Real Estate Taxes attributable to the
Premises and the Generating Station, and shall also pay to Landlord Tenant's
proportionate share (determined as aforesaid) of the reasonable costs of any
such contest. The benefit of any refund of Real Estate Taxes obtained as a
result of any such contest shall be shared by Landlord and Tenant in the
proportion that such refunded Real Estate Taxes were paid (or payable) by
Landlord and Tenant. In the event Landlord contests any such Real Estates
Taxes, it shall furnish Tenant with a description of the contested matter and
all actions to be taken by it in connection therewith. In the event Tenant
desires to contest the amount of Real Estate Taxes attributable to the larger
tax lot or parcel, Tenant shall furnish to Landlord a detailed description of
the contested matter and all actions to be taken by it in connection with such
contest, and Tenant shall continue to pay to Landlord, as and when required
hereunder, Tenant's proportionate share (determined as aforesaid) of the Real
Estate Taxes attributable to the Premises and the Generating Station. Any
such contest by Tenant shall be conducted pursuant to appropriate proceedings
diligently conducted by Tenant in good faith and at Tenant's own cost and
expense. Any refund of Real Estate Taxes obtained as a result of any such
contest by Tenant (after reimbursement to Tenant of the reasonable costs of
any such contest) shall be shared by Landlord and Tenant in the proportion
that such refunded Real Estate Taxes were paid (or payable) by Landlord and
Tenant.
(d) Tenant may, at its sole cost and expense, seek to have the
Premises treated as a separate tax lot or parcel provided such new tax lot or
parcel does not have an adverse effect on the remainder of the Landlord's Land
or the Transmission and Distribution Facilities. Landlord shall reasonably
cooperate with Tenant, at Tenant's sole cost and expense, in obtaining the
separate tax lot or parcel for the Premises.
<PAGE>
EXHIBIT H
ARTICLE 7
OPERATION, MANAGEMENT AND MAINTENANCE
Section 7.01 Operation and Maintenance.
(a) Tenant shall operate and maintain the entirety of the
Premises, including landscaping, during the Term of this Lease at its sole
cost and expense, and shall be responsible for payment for all utilities and
other costs associated with its occupancy and use of the Premises.
(b) Without limitation of the foregoing, Tenant shall at all
times use, operate and maintain the Premises in compliance with all Legal
Requirements now or hereinafter in effect and any recorded covenants,
conditions and restrictions affecting the Premises.
ARTICLE 8
UTILITIES
Section 8.01 Utility Capacity. Tenant acknowledges that all
necessary mains, conduits and other facilities necessary to supply water,
electricity, gas, telecommunication service, sewer service and other utilities
necessary for the operation of the Generating Station are available to the
Premises and in place, and are of sufficient quantity and quality, as of the
Commencement Date. Tenant shall pay directly all costs associated with its
consumption of such service at the Premises. Tenant shall immediately cause
all such utility service to be billed directly to Tenant.
Section 8.02 No Landlord Liability. No cessation or interruption
of any services to the Premises will make Landlord liable in any respect for
damages to either person, property or business, nor be construed as an
eviction of Tenant, nor relieve Tenant from any of its obligations under this
Lease, except to the extent caused by the negligence of Landlord, its agents,
employees or contractors.
ARTICLE 9
USE
Tenant agrees to use and maintain the Premises in a lawful and proper
manner, and in a manner which does not interfere with Landlord's operation of
its Transmission and Distribution Facilities or that portion of the Landlord's
Land that is not the subject of this Lease. Landlord agrees to use and
maintain its Transmission and Distribution Facilities and that portion of the
Landlord's Land that is not the subject of this Lease in a manner which does
not materially interfere with Tenant's operation of the Generating Station or
the Premises.
<PAGE>
EXHIBIT H
ARTICLE 10
LAWS, ORDINANCES AND REQUIREMENTS OF PUBLIC AUTHORITIES
Except as otherwise provided in this Lease and subject to Tenant's
obligations in respect of the Assumed Obligations in accordance with the terms
of the Asset Sale Agreement, Tenant shall, at its sole expense, in its use of
the Premises and in its operation and maintenance of the Premises during the
Term: (i) comply with, and be responsible under, all laws (including the
Americans with Disabilities Act, 42 U.S.C. Sections 12101 et seq., as amended),
all Environmental Laws (as defined in the Asset Sale Agreement) and other
laws, regulations, ordinances and orders of Federal, state, county, municipal
and other authorities having jurisdiction over the Premises (collectively, the
"Legal Requirements") as such Legal Requirements relate to the Premises, and
(ii) comply with any direction, order or request (subject to Tenant's right to
reasonably protest such direction, order or request) made pursuant to law by
any court or public officers requiring abatement of any nuisance or responses
to any presence or release of materials, or which imposes upon Landlord or
Tenant any duty or obligation arising from conditions which have been created
by Tenant or which otherwise exist with respect to the Premises (except for
any such obligations expressly retained by Landlord as Retained Obligations
pursuant to the Asset Sale Agreement or any such condition directly caused by
Landlord, its agents, employees or invitees after the Commencement Date). If
Tenant receives notice of any such direction or of violation of any such law,
order, ordinance, or regulation, it shall promptly notify Landlord thereof.
Tenant agrees that all alterations developed by it in the Premises pursuant to
Article 12 hereof shall be developed in compliance with all such Legal
Requirements. Without limitation of the foregoing, the Tenant will, at its
sole cost and expense, keep the Premises and every part thereof free from
contamination from any Hazardous Substances (as defined in the Asset Sale
Agreement).
ARTICLE 11
QUIET ENJOYMENT
Landlord covenants and agrees that Tenant, upon paying the Annual Base
Rental and all other charges herein provided for and performing and observing
the covenants, conditions and agreements on the part of the Tenant hereunder
to be performed and observed, shall and may peaceably hold and enjoy the
Premises during the Term hereof for all purposes set forth herein, subject to
such limitations as are set forth herein.
<PAGE>
EXHIBIT H
ARTICLE 12
ALTERATIONS
Section 12.01 Alterations. Tenant may, at all times during the Term,
make alterations to the Premises. The above notwithstanding, Tenant may not,
without Landlord's prior written consent, make any alterations which in any
way interfere with the Landlord's operation of its Transmission and
Distribution Facilities or that portion of the Landlord's Land that is not
subject to this Lease.
All alterations shall be made at Tenant's sole cost and expense. All
such construction, alterations, and maintenance work done by, or for, Tenant
shall (a) not adversely affect the structure or the safety of the Transmission
and Distribution Facilities, (b) comply with all building, safety, fire,
plumbing, electrical, and other codes and governmental and insurance
requirements, (c) be completed in a good and workmanlike manner, and (d) be
performed by reputable contractors. Landlord agrees hereby to reasonably
cooperate, at no cost or liability to Landlord, in Tenant's efforts to obtain
such governmental consents, approvals and land permits as may be required for
any alterations to the Premises made by Tenant pursuant to this Article 12.
All alterations constructed by Tenant hereunder shall be constructed
and maintained in accordance with all Legal Requirements.
ARTICLE 13
LIENS
Tenant shall keep the Premises free from any liens arising from any
work performed, materials furnished, or obligations incurred by or at the
request of Tenant. All persons either contracting with Tenant or furnishing
or rendering labor and materials to Tenant shall be notified in writing by
Tenant that they must look only to Tenant for payment. If any lien is filed
against the Premises or Tenant's leasehold interest therein, Tenant shall
discharge the same by payment or bonding within sixty (60) days after receipt
of notice of its filing. To the extent Tenant desires to contest the
application or validity of any lien filed against the Premises or Tenant's
leasehold interest therein, it may do so by appropriate proceedings diligently
conducted by Tenant in good faith provided it adequately bonds off, or sets
aside sufficient reserves for payment of, any such contested lien.
<PAGE>
EXHIBIT H
ARTICLE 14
REPAIRS
Subject to Tenant's obligations to satisfy the Assumed Obligations
pursuant to the Asset Sale Agreement and to maintain the Premises in
compliance with said Assumed Obligations, and except as may be otherwise
expressly set forth herein, Tenant shall keep the Premises and every part
thereof in such condition and repair as Tenant deems appropriate during the
Term, at Tenant's sole cost and expense. Landlord has no obligation, and has
made no promise, to alter, remodel, improve, repair, redecorate, or paint the
Premises or any part thereof. No representations respecting the condition of
the Premises have been made by Landlord to Tenant (other than those, if any,
which may be set forth in the Asset Sale Agreement).
ARTICLE 15
INSURANCE
Section 15.01 Tenant's Insurance. During the Term, Tenant, at its
sole expense, shall obtain and keep in force such insurance as is customarily
carried by owners of comparable facilities in the geographic area which the
Premises are located.
All policies under this Section 15.01 shall be issued by insurers that
are authorized to do business in the Commonwealth of Virginia and shall name
the Landlord as an additional insured and shall contain an undertaking by the
insurers to notify the parties in writing, by certified or registered United
States mail, return receipt requested, not less than thirty (30) days before
any material adverse change, reduction in coverage, cancellation, or other
termination thereof.
Section 15.02 Waiver of Subrogation. All policies covering real or
personal property which Tenant obtains affecting the Premises or the
Generating Station shall include a clause or endorsement denying the insurer
any rights of subrogation against the Landlord. Landlord shall not be liable
or responsible for, and Tenant hereby releases the Landlord, the partners,
employees, officers, directors and agents of the other from any and all
liability and responsibility to the Tenant, or any person claiming by, through
or under the Tenant, by way of subrogation or otherwise for any damage or loss
to property due to hazards covered or which should be covered by policies of
insurance obtained or which should be or have been obtained pursuant to this
Lease, to the extent of the injury or loss covered or which should have been
covered thereby, assuming that any deductible shall be deemed to be insurance
coverage. All policies of insurance covering the Transmission and
Distribution Facilities and that portion of Landlord's Land not subject to
<PAGE>
EXHIBIT H
this Lease shall include a clause or endorsement denying any insurer any
rights of subrogation against Tenant.
ARTICLE 16
DAMAGE BY FIRE OR OTHER CASUALTY
Tenant shall promptly notify Landlord of any material damage to the
Premises by fire or other casualty. If the Premises is damaged by fire or
other casualty, Tenant may, at its option, repair the damage to the Premises
at its own expense. There shall be no abatement of Rental after the
occurrence of any casualty and/or during the period of any repairs.
ARTICLE 17
CONDEMNATION
Section 17.01 Condemnation of All or Materially All of the Premises.
In the event that all or materially all of the Premises are taken or condemned
for any public purpose, this Lease shall terminate as of the date of such
taking; provided, however, that those provisions of this Lease which are
designated to cover matters of termination and the period thereafter shall
survive the termination hereof.
Section 17.02 Condemnation of Part of Premises. In the event that a
portion, but less than all or materially all, of the Premises should be taken
or condemned for any public purpose, then this Lease shall terminate as of the
date of such taking as to the portion of the Premises so taken but this Lease
shall remain in full force and effect as to the remainder of the Premises. In
the event of a taking of a portion of the Premises which does not result in a
termination of the Lease, the Rental shall not be adjusted to take into
account the portion of the Premises so taken.
Section 17.03 Condemnation Award. Tenant shall be entitled to
receive the entire award in any condemnation proceeding or action for the
value of its leasehold interest in the Premises, and any other losses suffered
by Tenant that are attributable to such taking.
Section 17.04 Temporary Condemnation. If the temporary use or
occupancy of all or any part of the Premises shall be condemned or taken for
any public or quasi-public use during the Term, this Lease shall be and remain
unaffected by such condemnation or taking and Tenant shall continue to pay in
full the Rental payable hereunder for any period during such temporary use or
occupancy during the Term. In the event of any such condemnation or taking,
Tenant shall be entitled to appear, claim, prove and receive the portion of
the award for such taking that represents compensation for use or occupancy of
the Premises during the Term.
<PAGE>
EXHIBIT H
ARTICLE 18
ASSIGNMENT AND SUBLETTING
This Lease and all of the provisions hereof shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns, but neither this Lease nor any of the rights, interests or
obligations hereunder shall be assigned by Tenant, including by operation of
law, nor shall the Premises or any portion thereof be sublet by Tenant, in
each case, without the prior written consent of Landlord, except (i) prior to
the Closing, to a wholly-owned subsidiary so long as Tenant shall have duly
executed and delivered the Guarantee Agreement and such assignment is for all
of Tenant's rights, interests and obligations hereunder, (ii) to an Affiliate
(as defined in the Asset Sale Agreement) of Tenant in connection with the
transfer of the Generating Station to such Affiliate and (iii) to the extent
permitted under Article 21 hereto; provided, however, that no assignment,
transfer or sublet of rights or obligations by Tenant shall relieve it from
the full liabilities and the full financial responsibility, as provided for
under this Lease, unless and until the transferee or assignee shall agree in
writing to assume such obligations and duties and Landlord has consented in
writing to such assumption. To the extent Landlord's consent is required
pursuant to the provisions of this Article 18, such consent shall not be
unreasonably withheld, delayed or conditioned.
Nothing in this Lease is intended to confer upon any other person except
the Parties any rights or remedies hereunder or shall create any third party
beneficiary rights in any person.
ARTICLE 19
INDEMNIFICATION
This Lease is an Ancillary Agreement (as defined in the Asset Sale
Agreement) and the provisions of Article X of the Asset Sale Agreement shall
apply ceteris paribus to this Agreement.
ARTICLE 20
SURRENDER OF THE PREMISES
Section 20.01 Surrender. Upon the expiration of the Term or other
termination of this Lease for any cause whatsoever, except as otherwise
provided in Article 16 hereof, Tenant shall peacefully vacate the Premises in
the same condition as they were at the beginning of the Term (as same may
thereafter have been improved by Tenant and subject to Tenant's obligations
pursuant to the Asset Sale Agreement), condemnation, reasonable use and wear
and tear thereof excepted. Should Tenant continue to hold the Premises after
the termination of this Lease, whether the termination occurs by lapse of time
or otherwise, such holding over shall constitute and be construed as a tenancy
<PAGE>
EXHIBIT H
from month-to-month at a rental equal to the fair market value of such
month-to-month tenancy, as determined by an independent appraiser chosen by
Landlord in good faith, and subject to all of the other terms set forth herein
except any right to renew this Lease, but the foregoing shall not constitute a
consent by Landlord to such holding over and shall not prevent Landlord from
exercising any of its remedies under this Lease or applicable law by reason of
such holding over. Tenant shall be liable to Landlord for all direct damage,
which Landlord suffers because of any holding over by Tenant.
Section 20.02 Removal of Personal Property and Alterations. Prior
to the expiration of the Term, or promptly upon the earlier termination of
this Lease, Tenant shall remove, at Tenant's expense, all of its furniture,
furnishings, personal property, trade fixtures and shall promptly repair all
damage done to the Premises by such removal. Any items not so removed shall
be deemed abandoned and shall thereupon become the property of Landlord.
ARTICLE 21
LEASEHOLD MORTGAGES
Section 21.01 Leasehold Mortgages. Tenant is hereby given the right
by Landlord, in addition to any other rights herein granted, with or without
Landlord's prior written consent, to mortgage its interests in this Lease,
including, without limitation, any easements granted by Landlord for the
benefit of the Premises, under one or more leasehold deed(s) of trust or
mortgage(s) (individually, a "Mortgage" and collectively, the "Mortgages"),
and to give to the holder of any such Mortgage (a "Mortgagee") a lien,
assignment and/or security interest in (i) any personal property included
within this Lease, (ii) the rents, income, receipts, revenues and profits of
the Premises, (iii) any assignment, subleases or other transfer of all or any
part of Tenant's rights under this Lease (iv) any rights of extension, renewal
or expansion contained in this Lease, as collateral security for such
Mortgage(s), upon the condition that all rights acquired under such
Mortgage(s) shall be subject to each and all of the covenants, conditions and
restrictions set forth in this Lease and to all rights and interests of
Landlord herein, none of which covenants, conditions, restrictions, rights and
interests is or shall be waived by Landlord by reason of the right so given to
Tenant to mortgage such interest in this Lease, except as expressly provided
herein. If Tenant shall mortgage this Lease and if the Mortgagee under such
Mortgage shall send to Landlord a true copy of any such Mortgage, together
with a written notice specifying the name and addresses of the Mortgagee and
the pertinent recording date with respect to such Mortgage(s), Landlord agrees
that so long as any obligations secured by such leasehold Mortgage(s) shall
remain unsatisfied, the following provisions shall apply:
(a) If at any time there shall be more than one Mortgage, the holder
of the Mortgage prior in lien, shall be vested with the rights of the
<PAGE>
EXHIBIT H
Mortgagee under this Article 21 (including, without limitation, the right to
give consents or approval or any other right vested in any Mortgagee by this
Lease) to the exclusion of the holder of any junior Mortgage.
(b) Landlord shall, upon sending Tenant any notice of default,
simultaneously send a copy of such notice to the Mortgagee, using such
reasonable method and to such address as may be designated in a written notice
from such Mortgagee to Landlord. No notice given by Landlord to Tenant shall
be binding upon or affect a Mortgagee or Tenant unless a copy of such notice
shall be given to the Mortgagee pursuant to this subsection (b) of this
Section 21.01 and Article 27 hereof. In addition to the other rights of the
Mortgagee set forth in this Article 21, the Mortgagee shall, after service of
any such notice upon it, have the right to cure or cause the cure of any
default by Tenant hereunder, and Landlord shall accept such performance by or
at the instigation of such Mortgagee as if the same had been done by Tenant.
All notices to the Mortgagee shall be sent return receipt requested and shall
not be effective until received by such Mortgagee.
(c) Landlord shall allow the Mortgagee concurrently the same cure
period given to Tenant hereunder to cure such default, plus an additional
thirty (30) days within which to cure the default, or, in the case of
non-monetary default or other condition which cannot in the exercise of due
diligence be cured by Mortgagee prior to the expiration of such additional
thirty (30) day period, shall allow the Mortgagee such additional days as is
reasonably necessary for the curing of the default, in which event Landlord
may not exercise any remedies on account of such default so long as the
Mortgagee is diligently and with continuity engaged in curing the default.
The rights of the Mortgagee under this subsection (c) are in addition to the
rights provided to the Mortgagee under subsection (d) of this Section 21.01.
(d) If the Mortgagee, its nominee, or a purchaser at a foreclosure or
other sale shall acquire title to Tenant's interest in this Lease and shall
cure all of Tenant's defaults under this Lease which are susceptible of being
cured by such Mortgagee or by such nominee or purchaser, as the case may be,
within the time reasonably required therefor, then the defaults of any prior
holder of Tenant's interest in this Lease which are not susceptible of being
cured by such Mortgagee (or by such nominee or purchaser) shall not be deemed
to be defaults under this Lease as between Landlord and the Mortgagee, its
nominee or such purchaser. If Mortgagee does obtain possession of the
Premises, Landlord agrees to acknowledge Mortgagee, or its nominee as a
successor to Tenant under this Lease, provided Mortgagee agrees to be bound by
the terms and provisions of all other agreements between Landlord and Tenant
relating to the Premises existing both as of the Commencement Date and the
date of succession.
(e) To the extent permitted by law, Landlord acknowledges that as
between Landlord and the Mortgagee, its nominee or a purchaser at a
foreclosure or other sale, this Lease shall not be deemed to be terminated
<PAGE>
EXHIBIT H
notwithstanding the rejection of this Lease by operation of law, by Tenant or
by its representative, or by any trustee appointed in Tenant's bankruptcy
case, pursuant to the U.S. Bankruptcy Code (Title 11 of the United States
Code) or any other insolvency law. The Mortgagee shall be deemed to have
satisfied its obligation to commence foreclosure proceedings or cause Tenant's
interest in this Lease to be sold under a power of sale by asserting a claim
in Tenant's case under the U.S. Bankruptcy Code or other insolvency
proceeding, and the Mortgagee shall not be deemed to have failed to satisfy
such obligation if the Mortgagee is unable to do so as a result of the
provisions of Section 362 of the U.S. Bankruptcy Code or similar provisions of
any other insolvency law.
(f) No Mortgagee or its nominee shall become liable under the
provisions of this Lease unless and until such time as it becomes, and then
only for as long as it remains, the owner of Tenant's interest in this Lease,
and such liability shall be limited to such Mortgagee's or nominee's interest
in the Premises.
(g) Landlord shall, upon request, execute, acknowledge and deliver
to each leasehold Mortgagee(s) an agreement (prepared at the sole cost and
expense of Tenant and in form reasonably satisfactory to Landlord and such
leasehold Mortgagee(s)) among Landlord, Tenant and the leasehold Mortgagee(s),
agreeing to all of the provisions of this Article 21.
ARTICLE 22
PRIORITY
Section 22.01 Priority of Lease. This Lease and all Mortgages shall
be superior in all respects to the lien of any deeds of trust, mortgages or
other security instruments securing indebtedness of Landlord (collectively,
"Subordinate Instruments") which may hereafter from time to time during the
Term cover the Premises, or any interest of Landlord therein, and to any
advances made on the security thereof, and to any refinancings, increases,
renewals, modifications, consolidations, replacements and extensions thereof.
As of the date hereof, the Premises shall not be subject to the lien,
operation and effect of any deeds of trust, mortgages or other security
instruments securing indebtedness of Landlord.
Section 22.02 Attornment. At any time that any mortgagee (which,
for these purposes, shall include the beneficiary under a deed of trust or any
Subordinate Instruments), foreclosure purchaser or other party acquires the
interest of Landlord in the Premises, Tenant shall attorn to such mortgagee or
purchaser upon any such sale or the grantee under any deed in lieu of such
foreclosure and shall recognize such mortgagee, purchaser or grantee as the
case may be, as Landlord under this Lease. The foregoing agreement of Tenant
to attorn shall survive any such foreclosure sale, trustee's sale, or
conveyance in lieu thereof. Tenant shall, upon demand at any time, before or
after any such foreclosure sale, trustee's sale, or conveyance in lieu
thereof, execute, acknowledge, and deliver to Landlord's mortgagee or any
<PAGE>
EXHIBIT H
successor thereof or any then owner of the Premises, any written instruments
and certificates evidencing such attornment as such mortgagee, successor or
owner may reasonably require.
ARTICLE 23
DEFAULT AND REMEDIES
Section 23.01 Tenant Default and Landlord Remedies. In the event:
(a) Tenant shall fail to pay any Rental or other sums payable by Tenant
hereunder as and when such Rental or other sums become due and payable and
such failure shall continue for more than sixty (60) days after written notice
from Landlord; or (b) Tenant shall fail to perform or observe any other
material covenant or obligation hereunder and such failure shall continue for
more than sixty (60) days after written notice from Landlord, provided,
however, that if Tenant has commenced curative action prior to the expiration
of the sixty (60) day period and diligently pursues same to completion
thereafter, Tenant shall have such longer period of time as is reasonably
necessary to cure such default, then Landlord may do whatever Tenant is
obligated to do under this Lease and enter the Premises (in accordance with
applicable judicial procedures) without being liable to prosecution or any
claim for damages therefor to accomplish this purpose. Tenant shall reimburse
Landlord immediately upon demand for any reasonable expenses which Landlord
incurs in thus effecting compliance with this Lease on Tenant's behalf, and
Landlord shall not be liable for any damages suffered by Tenant from such
action, unless caused by the gross negligence or willful conduct of Landlord,
its agents, employees or contractors.
Section 23.02 No Acceptance of Surrender. No act or thing done by
Landlord or its agents during the Term shall constitute an acceptance of an
attempted surrender of the Premises, and no agreement to accept a surrender of
the Premises shall be valid unless made in writing and signed by Landlord..
No waiver by either Party of any breach of this Lease shall constitute a
waiver of any other violation or breach of any of the terms hereof.
Forbearance by either Party to enforce one or more of the remedies herein
provided upon a breach hereof shall not constitute a waiver of any other
breach of this Lease.
Section 23.03 Rights Cumulative. The rights granted to either Party
in this Lease shall be cumulative of every other right or remedy which either
Party may otherwise have at law or in equity or by statute, and the exercise
of one or more rights or remedies shall not prejudice or impair the concurrent
or subsequent exercise of other rights or remedies.
ARTICLE 24
ESTOPPEL CERTIFICATES
Upon the request of Landlord, Tenant or a Mortgagee, Landlord and/or
Tenant will execute and deliver to the requesting party an instrument stating,
<PAGE>
EXHIBIT H
if the same be true, that this Lease has not been modified or amended (or
stating what modifications or amendments may be in effect), that the Lease is
then in full force and effect and that, to the best of such Party's knowledge,
there are then no offsets, defenses or counterclaims with respect to the
payment of rent reserved hereunder or in the performance of any of the other
terms, covenants and conditions hereof on the part of such Party to be
performed, and that as of such date no default has been declared hereunder by
either Party hereto and that such Party at the time has no knowledge of any
fact or circumstance which might reasonably give rise to a default by either
Party.
ARTICLE 25
SECURITY DEPOSIT
No security deposit shall be required in connection with this Lease.
ARTICLE 26
FORCE MAJEURE
Section 26.01 Force Majeure. Notwithstanding anything in this Lease
to the contrary, the Parties shall be excused from performing their respective
obligations hereunder, and shall not be liable in damages or otherwise, to the
extent that a Party is unable to perform or is prevented from performing by an
event of Force Majeure and has complied with Section 26.03. The Parties
recognize and agree that an event of Force Majeure will not relieve any Party
of its obligation to make payments when due hereunder.
Section 26.02 Definition of Force Majeure. The term "Force Majeure"
as used herein means those causes beyond the reasonable control of the Party
affected, that, by the exercise of reasonable diligence, such Party is unable
to prevent, avoid, mitigate, or overcome, including the following: any act of
God, act of the public enemy, war, civil disturbance, insurrection, riot, fire
(unless resulting from the fault or negligence of the Party asserting Force
Majeure), storm or flood, lightning or explosion (unless resulting from the
fault or negligence of the Party asserting Force Majeure) or any other cause
of a similar nature beyond such Party's reasonable control.
Section 26.03 Force Majeure Procedures. A Party shall not be
entitled to rely on the occurrence of an event of Force Majeure as a basis for
being excused from performance of its obligations under this Lease unless the
Party relying on the event or condition shall: (a) provide prompt written
notice of such Force Majeure event to the other Party, including an estimation
of its expected duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts to continue to
perform its obligations under this Lease; (c) expeditiously take action to
correct or cure the event or condition excusing performance; (d) exercise all
reasonable efforts to mitigate or limit damages to the other Party; and (e)
provide prompt notice to the other Party of the cessation of the event or
<PAGE>
EXHIBIT H
condition giving rise to its excuse from performance. Subject to this Section
26.03, any obligation under this Lease shall be suspended only to the extent
caused by such Force Majeure and only during the continuance of any inability
of performance caused by such Force Majeure but for no longer period.
ARTICLE 27
NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given (as of the time of delivery or, in the case of a
telecopied communication, of confirmation) if delivered personally, telecopied
(which is confirmed) or sent by overnight courier (providing proof of
delivery) to the Parties at the following addresses (or at such other address
for a Party as shall be specified by like notice):
if to Landlord, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
with a copy to:
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
Telecopy No.: (202) 887-0689
Attention: Kenneth M. Simon, Esq.
<PAGE>
EXHIBIT H
if to Tenant, to:
Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
with a copy to:
Troutman Sanders LLP
1300 I Street, N.W.
Suite 500 East
Washington, DC 20005
Telecopier: (202) 274-2994
Attention: Benjamin L. Israel, Esq.
ARTICLE 28
MISCELLANEOUS
Section 28.01 Payments and Reimbursements. Where this Lease
requires either Party to pay or to reimburse directly to other Party for any
item, such payment or reimbursement will be the actual costs (unless
"reasonable" costs are otherwise specified) incurred therefor by the Party
entitled to reimbursement. The party requesting reimbursement shall provide
reasonable back-up for the reimbursement amount requested. Failure by Tenant
to pay any such amounts shall be considered as a failure to pay Rental, and,
as a result, Landlord shall be entitled to all applicable rights and remedies.
Section 28.02 No Merger. There shall be no merger of this Lease or
of the leasehold estate hereby created with the fee estate in the Premises or
any part thereof by reason of the fact that the same person may acquire or
hold, directly or indirectly, this Lease or the leasehold estate hereby
created or any interest in this Lease or in such leasehold estate as well as
the fee estate in the Premises or any interest in such fee estate. In the
event of a voluntary or other surrender of this Lease, or a mutual
cancellation hereof, Landlord may, at its option, terminate all subleases.
<PAGE>
EXHIBIT H
Section 28.03 No Representations. Neither Landlord nor Landlord's
agents or brokers, nor Tenant nor Tenant's agents or brokers, have made any
representations or promises with respect to the Premises or this Lease except
as herein expressly set forth or as set forth in the Asset Sale Agreement and
all reliance with respect to any representations or promises is based solely
on those contained herein or therein. No rights, easements, or licenses are
acquired by Tenant under this Lease by implication or otherwise except as
expressly set forth in this Lease.
Section 28.04 No Offer. The submission of this Lease to Tenant
shall not be construed as an option, reservation or offer, nor shall Tenant
have any rights with respect thereto unless both Landlord and Tenant execute
and receive a copy of this Lease.
Section 28.05 Light, Air and View Obstruction. Any elimination or
shutting off of light, air, or view by any structure which may be erected on
lands (other than the Premises) adjacent to the Premises shall in no way
affect this Lease or impose any liability on Landlord.
Section 28.06 Time of the Essence. Time is of the essence with
respect to Tenant's and Landlord's obligations under this Lease.
Section 28.07 Recordation. At the request of either Party, this
Lease, or a memorandum thereof, may be recorded among the pertinent land
records by either party. All costs associated with such recordation shall be
borne by the party desiring recordation.
Section 28.08 Expenses. Except to the extent specifically provided
herein, all costs and expenses incurred in connection with this Lease and the
transactions contemplated hereby shall be borne by the Party incurring such
costs and expenses, whether or not the transactions contemplated hereby are
consummated.
Section 28.09 Amendment and Modification; Extension; Wavier. This
Lease may be amended, modified or supplemented only by an instrument in
writing signed on behalf of each of the Parties. Either Party may (i) extend
the time for the performance of any of the obligations or other acts of the
other Party, or (ii) waive compliance by the other Party with any of the
agreements or conditions contained in this Lease. Any agreement on the part
of a Party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such Party. The failure of a
Party to this Lease to assert any of its rights under this Lease or otherwise
shall not constitute a waiver of such rights.
Section 28.10 Governing Law. This Lease shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia
(regardless of the laws that might otherwise govern under applicable
principles of conflicts of law).
Section 28.11 Jurisdiction and Enforcement.
<PAGE>
EXHIBIT H
(a) Each of the parties irrevocably submits to the exclusive
jurisdiction of (i) the Superior Court of the District of Columbia and (ii)
the United States District Court for the District of Columbia, for the
purposes of any suit, action or other proceeding arising out of this Lease or
any transaction contemplated hereby. Each of the parties agrees to commence
any action, suit or proceeding relating hereto either in the United States
District Court for the District of Columbia or, if such suit, action or
proceeding may not be brought in such court for jurisdictional reasons, in the
Superior Court of the District of Columbia. Each of the parties further
agrees that service of process, summons, notice or document by hand delivery
or U.S. registered mail at the address specified for such Party in Article 27
(or such other address specified by such Party from time to time pursuant to
Article 27) shall be effective service of process for any action, suit or
proceeding brought against such Party in any such court. Each of the parties
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Lease or the transactions
contemplated hereby in (i) the Superior Court of the District of Columbia and
(ii) the United States District Court for the District of Columbia, and hereby
further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
(b) The Parties agree that irreparable damage would occur in the event
that any of the provisions of this Lease were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed
that the Parties shall be entitled to an injunction or injunctions to prevent
breaches of this Lease and to enforce specifically the terms and provisions of
this Lease, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 28.12 Counterparts. This Lease may be executed in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
Section 28.13 Interpretation. When a reference is made in this
Lease to an Article or Section, such reference shall be to an Article or
Section of this Lease unless otherwise indicated. The table of contents and
headings contained in this Lease are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Lease. Whenever the
words "include", "includes" or "including" are used in this Lease, they shall
be deemed to be followed by the words "without limitation" or equivalent
words. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Lease shall refer to this Lease as a whole and not to
any particular provision of this Lease. The definitions contained in this
Lease are applicable to the singular as well as the plural forms of such terms
and to the masculine as well as to the feminine and neuter genders of such
term. Any agreement, instrument, statute, regulation, rule or order defined
or referred to herein or in any agreement or instrument that is referred to
herein means such agreement, instrument, statute, regulation, rule or order as
from time to time amended, modified or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of statutes,
<PAGE>
EXHIBIT H
regulations, rules or orders) by succession of comparable successor statutes,
regulations, rules or orders and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution of this
Lease, and, accordingly, there shall be no presumption that this Lease or any
provision hereof be construed against the Party that drafted this Lease.
Section 28.14 Entire Agreement. This Lease, including the
documents, certificates and instruments referred to herein and other
contracts, agreements and instruments contemplated hereby, embody the entire
agreement and understanding of the parties in respect of the transactions
contemplated by this Lease. There are no restrictions, promises,
representations, warranties, covenants or undertakings other than those
expressly set forth or referred to herein or therein. This Lease supersedes
all prior agreements and understandings between the parties with respect to
the transactions contemplated by this Lease.
Section 28.15 Severability. If any term or other provision of this
Lease is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Lease shall
nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Lease so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent
possible.
Section 28.16 Conflicts. Except as expressly provided otherwise
herein or therein, in the event of any conflict or inconsistency between the
terms of this Lease and the terms of the Asset Sale Agreement, the terms of
the Asset Sale Agreement shall prevail.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
signed by their respective duly authorized officers as of the date first above
written.
ATTEST: LANDLORD
POTOMAC ELECTRIC POWER COMPANY
By:____________________________ By:____________________________ (SEAL)
Name:_________________________ Name:_________________________
Title:________________________ Title:________________________
ATTEST: TENANT
<PAGE>
EXHIBIT H
_______________________________
By:__________________________ By:____________________________ (SEAL)
Name:________________________ Name:__________________________
Title:_______________________ Title:_________________________
<PAGE>
EXHIBIT H
APPENDIX A
DEFINITIONS
The following terms have the meanings specified in the references set
forth opposite each such term:
Term Reference
"Annual Base Rental" Section 5.01
"Asset Sale Agreement" Recitals
"Building Addition" Recitals
"Closing" Asset Sale Agreement
"Commencement Date" Section 2.01
"Environmental Laws" Asset Sale Agreement
"Force Majeure" Section 26.02
"Generating Station" Recitals
"Hazardous Substances" Asset Sale Agreement
"Highest Lawful Rate" Section 5.3
"Landlord" Preamble
"Landlord's Land" Section 1.01
"Lease" Preamble
"Lease Year" Section 2.01
"Legal Requirements" Article 10
"Mortgagee" Section 21.01
"Mortgages" Section 21.01
"New Lease" Section 21.01
"Premises" Recitals
"Prime Rate" Section 5.03
<PAGE>
EXHIBIT H
"Real Estate Taxes" Section 6.01
"Rental" Section 5.03
"Subordinate Instruments" Section 22.01
"Tenant" Preamble
"Term" Section 2.01
"Transmission and Distribution Facilities" Section 1.01
<PAGE>
EXHIBIT - I-1
TRANSITION POWER AGREEMENT
(District of Columbia)
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
_________________________________________
Dated ____________, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - TERM AND TERMINATION 2
2.1 - Term 2
2.2 - Termination 2
ARTICLE 3 - CAPACITY RESOURCES 2
3.1 - Capacity Resources Obligations 2
3.2 - Capacity Resources Information Requirements 3
ARTICLE 4 - ANCILLARY SERVICES 4
ARTICLE 5 - ENERGY 4
5.1 - Required Energy 4
5.2 - Optional Energy 4
5.3 - Determination of Energy Requirements; Losses 5
ARTICLE 6 - PRICING 5
6.1 - Compensation for Services 5
6.2 - Taxes 6
ARTICLE 7 - SERVICES OBTAINED BY GENERATOR FROM PJM 7
ARTICLE 8 - ALTERNATIVE SERVICES AND LIMITED LIABILITY 7
8.1 - Alternative Services 7
8.2 - Limitation on Liability 7
ARTICLE 9 - FORCE MAJEURE 8
9.1 - Effect of Force Majeure 8
9.2 - Force Majeure Defined 8
9.3 - Notification 8
ARTICLE 10 - INDEMNIFICATION FOR THIRD PARTY CLAIMS 9
10.1 - Generator's Indemnification 9
10.2 - Pepco's Indemnification 9
10.3 - Indemnification Procedures 10
10.4 - Survival 10
ARTICLE 11 - DEFAULT 10
11.1 - Event of Default 10
11.2 - Remedies 11
ARTICLE 12 - PROJECTIONS AND OPERATING COMMITTEE 11
12.1 - Projections 11
12.2 - Operating Committee 11
ARTICLE 13 - COST RESPONSIBILITIES AND BILLING PROCEDURES 12
13.1 - Billing Procedures 12
13.2 - Billing Disputes 13
13.3 - Interest on Unpaid Balances 13
<PAGE>
ARTICLE 14 - CONFIDENTIALITY 13
14.1 - Confidentiality Obligations of Pepco 13
14.2 - Confidentiality of Audits 14
14.3 - Remedies 14
ARTICLE 15 - DISPUTE RESOLUTION 14
15.1 - Disputes 14
15.2 - Arbitration 15
ARTICLE 16 - REPRESENTATIONS 16
16.1 - Representations of Pepco 16
16.2 - Representations of Generator 17
ARTICLE 17 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY 19
17.1 - Generally 19
17.2 - Pepco's Assignment Rights 19
17.3 - Generator's Assignment Rights 19
17.4 - Mergers or Consolidations 19
17.5 - Limitations 19
17.6 - Successors 20
ARTICLE 18 - NOTICES 20
ARTICLE 19 - AMENDMENTS 21
19.1 - Amendments 21
19.2 - PJM Agreement Modifications 21
ARTICLE 20 - AUDITS 22
ARTICLE 21 - MISCELLANEOUS PROVISIONS 22
21.1 - Waiver 22
21.2 - No Third Party Beneficiaries 22
21.3 - Governing Law 23
21.4 - Counterparts 23
21.5 - Interpretation 23
21.6 - Jurisdiction and Enforcement 23
21.7 - Entire Agreement 24
21.8 - Severability 24
21.9 - Further Assurances 25
21.10-Independent Contractor Status 25
21.11-Conflicts 25
SCHEDULE 1 - DEFINITIONS 27
EXHIBIT A - Pepco's Non-Binding Estimate for Calendar Year 2001 of Capacity
Resources for the Service Load 31
EXHIBIT B - Capacity Resources Plan for Contract Year 1 32
<PAGE>
EXHIBIT I-1
TRANSITION POWER AGREEMENT (District of Columbia)
This Transition Power Agreement ("Agreement") dated as of _________,
2000 by and between Potomac Electric Power Company ("Pepco") a District of
Columbia and Virginia corporation, and _____________ ("Generator") a
___________ [corporation]. Pepco and Generator are each referred to herein as
a "Party," and collectively referred to herein as the "Parties."
WITNESSETH:
WHEREAS, Pepco and Generator have entered into an Asset Sale and
Purchase Agreement ("Asset Sale Agreement") dated June 7, 2000 for (i) the
sale and purchase of certain of Pepco's generating resources and (ii) the
assignment of rights and obligations under five power purchase agreements
("PPAs") or for alternative arrangements relating to such PPAs;
WHEREAS, certain of the PPAs provide for the purchase and sale of
renewable energy resources;
WHEREAS, Pepco will continue to operate its transmission and
distribution businesses which includes obligations to sell power to its retail
customers; and
WHEREAS, the Parties have agreed in the Asset Sale Agreement to
execute this Agreement in order to provide for the sale by Generator, and
purchase by Pepco, of capacity, electric energy and certain ancillary services
in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined herein, capitalized terms used in this
Agreement shall have the meanings specified or referred to in Schedule 1 of
this Agreement.
ARTICLE 2
TERM AND TERMINATION
2.1 Term. This Agreement shall become effective upon consummation of
the Closing ("Effective Date"). Unless terminated sooner in accordance with
the
<PAGE>
terms of this Agreement, this Agreement shall continue in full force and
effect from the Effective Date until the end of Contract Year 4.
2.2 Termination. The applicable provisions of this Agreement shall
continue in effect after cancellation or termination hereof to the extent
necessary to provide for final billings, billing adjustments and payments
pertaining to liability and indemnification obligations arising from acts or
events that occurred while this Agreement was in effect.
ARTICLE 3
CAPACITY RESOURCES
3.1 Capacity Resources Obligations
(a) During the term of this Agreement, Generator shall supply to
Pepco and make available within PJM on Pepco's behalf, and Pepco shall
purchase from Generator, Pepco's full requirements for Capacity Resources to
serve the Service Load ("Capacity Resource Requirements") at the prices set
forth in Article 6 of this Agreement. Capacity Resources shall be determined,
and provided by the Generator, in accordance with the PJM Reliability
Agreement and other applicable PJM requirements. Capacity Resource
Requirements shall mean the portion of Pepco's Accounted-For Obligation, as
that term is defined and determined in accordance with the PJM Reliability
Agreement and applicable PJM requirements, that is located in the District of
Columbia.
(b) To the extent that PJM assigns to Pepco Fixed Transmission
Rights for Capacity Resources contained in a Capacity Resource Plan and
designated for Fixed Transmission Rights, Pepco shall transfer such Fixed
Transmission Rights to Generator pursuant to PJM's procedures for assigning
Fixed Transmission Rights
(c) Generator shall provide to the PJM System Operator or PJM
Interconnection LLC, as applicable, all information and data required with
respect to the Capacity Resources Requirements, with copies to Pepco, and
Generator shall be responsible for any charges levied by the PJM System
Operator or the PJM Interconnection LLC on Pepco or Generator due to the
delayed receipt of such information and data in accordance with the PJM
Reliability Agreement unless the delay is due to Pepco's delay in providing
Generator with information that Pepco is required to provide.
<PAGE>
3.2 Capacity Resources Information Requirements
(a) Generator shall provide in accordance with this Section 3.2
its proposed plan to satisfy its obligations hereunder to provide the Capacity
Resources Requirements under this Agreement ("Capacity Resources Plan").
(b) Exhibit A hereto sets forth Pepco's non-binding estimate of
the Capacity Resources required to supply the Service Load for each month
during the 2001 calendar year. On or before April 1 preceding each Planning
Period thereafter, Pepco shall provide Generator with a non-binding estimate
of the Capacity Resources required to supply the Service Load for each month
in the following Planning Period.
(c) Exhibit B hereto sets forth the Generator's Capacity
Resources Plan for Contract Year 1.
(d) On or before May 1 preceding each Planning Period thereafter
during the term of this Agreement, the Generator shall provide to the
Operating Committee, for review and approval (such approval not to be
unreasonably withheld or delayed), its proposed Capacity Resources Plan
(including Generator's proposed designation of Capacity Resources for
associated Fixed Transmission Rights) to be submitted to the PJM
Interconnection LLC in accordance with Schedule 6 of the PJM Reliability
Agreement for the upcoming Planning Period.
(e) If the Generator intends to propose any material change to a
Capacity Resources Plan (including any change in a designation of Capacity
Resources eligible for Fixed Transmission Rights) which has previously been
approved by the Operating Committee, the Generator shall provide such proposed
changes to the Operating Committee before it is submitted for approval
pursuant to the PJM Reliability Agreement and such change shall be subject to
the Operating Committee for review and approval (such approval not to be
unreasonably withheld or delayed) if the change (1) adds a resource other than
(x) capacity already certified by the PJM Interconnection LLC or PJM System
Operator, as applicable, as a Capacity Resource or (y) Capacity Credits, or
(2) proposes to change a designation of Capacity Resources eligible for Fixed
Transmission Rights.
<PAGE>
ARTICLE 4
ANCILLARY SERVICES
During the term of this Agreement, Generator shall supply to Pepco and
deliver within PJM on Pepco's behalf, and Pepco shall purchase, Pepco's full
requirements for Ancillary Services for the Service Load ("Ancillary Services
Requirements") at the prices set forth in Article 6 of this Agreement.
Ancillary Services mean Regulation and Frequency Response Service (as defined
in Schedule 3 of the PJM Tariff) and Operating Reserves (as defined in
Schedules 5 and 6 of the PJM Tariff).
ARTICLE 5
ENERGY
5.1 Required Energy. During the term of this Agreement, Generator
shall supply to Pepco at the Delivery Points, and Pepco shall purchase, the
following percentages of Pepco's Full Energy Requirements in the year
indicated below (the "Required Energy Percent") at the prices set forth in
Article 6 of this Agreement:
Year Required Energy Percent
Contract Year 1 100%
Contract Year 2 75%
5.2 Optional Energy
(a) For the duration of each of Contract Year 2, Contract Year 3
and Contract Year 4, Pepco shall have the right to purchase from Generator
(the "Call Options") the percentages of the Full Energy Requirements indicated
below (the "Optional Energy Percent"). To the extent Pepco exercises a Call
Option for a given year, Generator shall supply to Pepco at the Delivery
Points the Optional Energy Percent at the price set forth in Article 6 of this
Agreement.
Year Optional Energy Percent
Contract Year 2 25%
<PAGE>
Contract Year 3 100% (in 25% increments)
Contract Year 4 100% (in 25% increments)
Notwithstanding the foregoing, the total of Pepco's Call Options
exercised with respect to the Optional Energy Percent for Contract Year 3 and
Contract Year 4, respectively, shall not exceed the percentage of the Full
Energy Requirements that Pepco elected to purchase in the immediately
preceding contract year.
(b) By each October 1 prior to the contract year in which
the applicable Optional Energy Percent is deliverable ("Strike Date"), Pepco
shall notify Generator in writing whether it is exercising any of its Call
Options for the upcoming contract year, and if so, the percentage of its Full
Energy Requirements it elects to purchase.
5.3 Determination of Energy Requirements. The amount of Full Energy
Requirements shall be as determined by PJM in accordance with Schedule 1,
Section 3.2 of the PJM Operating Agreement at the respective PJM load buses
measured by PJM for the Service Load served by Pepco (the "Delivery Points").
Generator shall be responsible for all energy losses (including allocated PJM
losses, unaccounted-for energy and distribution losses) associated with
delivery of Required Energy Percent and Optional Energy Percent to the Service
Load.
ARTICLE 6
PRICING
6.1 Compensation for Services Subject to the terms of this Agreement,
Pepco shall be obligated to make a monthly payment to Generator for the
Services it provides which shall be comprised of the following components:
(a) For each Month during the term of the Agreement, a
Capacity Payment for the Capacity Resources Requirements and Ancillary
Services Requirements that Generator provides to Pepco in such Month
calculated as follows:
Capacity Payment = (Capacity Price + Ancillary Services Price) x Metered
Energy Requirements
Where:
<PAGE>
Capacity Price = $3.50/MWh
Ancillary Services Price = $0.50/MWh
(b) For each Month during the term of the Agreement, an
Energy Payment for the Required Energy Percent and Optional Energy Percent, if
any, that Generator delivers to Pepco at the Delivery Points in each Month
calculated as follows:
Energy Payment = [Metered Energy Requirements x (Required
Energy Percent + Optional Energy Percent)] x Energy Price
Where:
Energy Price = $35.50/MWh during a Summer Month
and $25.30/MWh during a Winter Month.
(c) Pepco's monthly payment to Generator will be decreased
by (i) any PJM charges for transmission congestion, allocated losses and
unaccounted-for energy that Pepco incurs in connection with the Services
Generator delivers to Pepco pursuant to Articles 4, 5 and 6 of this Agreement,
and (ii) the amounts of any payments Generator owes to Pepco pursuant to
Article 8 of this Agreement.
6.2 Taxes. Generator shall be responsible for taxes related to the
sale or provision of Services hereunder.
ARTICLE 7
SERVICES OBTAINED BY GENERATOR FROM PJM
Pepco shall, upon Generator's request, reasonably cooperate with
Generator to facilitate its acquisition in the PJM marketplace and resale to
Pepco of the Services Generator is obligated to provide to Pepco under this
Agreement. Pepco shall follow Generator's instructions with respect to
scheduling load in the day ahead PJM market.
<PAGE>
ARTICLE 8
ALTERNATIVE SERVICES AND LIMITATION OF LIABILITY
8.1 Alternative Services. To the extent that Generator does not
provide Capacity Resources Requirements, Ancillary Services Requirements, the
Required Energy and/or Optional Energy ("Services") to Pepco as required under
this Agreement, Generator, as an alternative method of performing such
obligations, shall pay Pepco the positive difference between the price Pepco
pays for such Services in the appropriate PJM marketplace, or if not available
in the PJM market, any other market ("Alternative Services") and the price
Pepco would have paid to Generator for such Services under this Agreement,
plus penalties and nonperformance charges, if any, assessed on Pepco by the
PJM Interconnection LLC or PJM System Operator as a result of the Generator
not providing the Services. Calculation of the cost of Alternative Services
hereunder shall include all reasonable direct costs associated with the
procurement and delivery of Alternative Services, including legal or
transactional costs and expenses; taxes, energy, demand, capacity, or
reservation charges; energy losses; emergency energy; and any transmission or
congestion costs but does not include the cost of PJM network service. For
purposes of determining the amount of Alternative Services Pepco purchases to
satisfy its energy requirements, energy requirements for any day shall be the
net amount of energy Pepco purchases for the Service Load in the PJM day-ahead
and second settlement markets.
8.2 Limitation of Liability. Except for indemnity obligations set
forth in Article 10 and the damages, charges or penalties set forth in
Sections 3.1(c), 5.3, 8.1 and 13.3 of this Agreement, neither Party, nor their
respective officers, directors, agents, employees, Affiliates, or successors
or assigns of any of them, shall be liable to the other Party or its
Affiliates, officers, directors, agents, employees, successors or assigns for
claims, suits, actions or causes of action for incidental, punitive, special,
indirect, multiple or consequential damages (including, without limitation,
lost revenues, claims of customers, attorneys' fees and litigation costs)
connected with, or resulting from, performance or non-performance of this
Agreement, or any actions undertaken in connection with or related to this
Agreement, including, without limitation, any such damages which are based
upon causes of action for breach of contract, tort (including negligence and
misrepresentation), breach of warranty or strict liability. The provisions of
this Section 8.2 shall apply regardless of fault and shall survive
termination, cancellation, suspension, completion, or expiration of this
Agreement.
<PAGE>
ARTICLE 9
FORCE MAJEURE
9.1 Effect of Force Majeure. Notwithstanding anything in this
Agreement to the contrary, the Parties shall be excused from performing their
respective obligations hereunder (except for the obligation to pay sums of
money due and owing hereunder) and shall not be liable in damages or
otherwise, to the extent that a Party is unable to perform or is prevented
from performing by an event of Force Majeure and has complied with Section
9.3.
9.2 Force Majeure Defined. Force Majeure includes, without
limitation, storm, flood, lightning, drought, earthquake, fire, explosion,
civil disturbance, acts of God or the public enemy, civil disturbance, or any
other cause beyond a Party's reasonable control but only if and to the extent
that the event directly affects the availability of the transmission or
distribution facilities of PJM or Pepco which are necessary to deliver
capacity or energy to the Service Load. Force Majeure shall not include
events affecting the availability or cost of operating any generating facility
or resource.
9.3 Notification. A Party shall not be entitled to rely on the
occurrence of an event of Force Majeure as a basis for being excused from
performance of its obligations under this Agreement unless the Party relying
on the event or condition shall: (a) provide prompt written notice of such
Force Majeure event to the other Party, including an estimation of its
expected duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts to continue to
perform its obligations under this Agreement; (c) expeditiously take action to
correct or cure the event or condition excusing performance; (d) exercise all
reasonable efforts to mitigate or limit damages to the other Party; and (e)
provide prompt notice to the other Party of the cessation of the event or
condition giving rise to its excuse from performance. Subject to this Section
9.3, any obligation under this Agreement shall be suspended only to the extent
caused by such Force Majeure and only during the continuance of any inability
of performance caused by such Force Majeure but for no longer period.
ARTICLE 10
INDEMNIFICATION FOR THIRD PARTY CLAIMS
10.1 Generator's Indemnification. Generator shall indemnify, hold
harmless, and defend Pepco and its Affiliates, as the case may be, and their
respective
<PAGE>
officers, directors, employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all claims,
liabilities, costs, damages, and expenses (including, without limitation,
reasonable attorney and expert fees, and disbursements incurred by any of them
in any action or proceeding between Pepco and a third party or Generator) for
damage to property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the extent
caused, by the negligence or willful misconduct of Generator's and/or its
officers, directors, employees, agents, contractors, subcontractors or
invitees arising out of or connected with Generator's performance or breach of
this Agreement, or the exercise by Generator of its rights hereunder.
10.2 Pepco's Indemnification. Pepco shall indemnify, hold harmless,
and defend Generator and its Affiliates, as the case may be, and their
respective officers, directors, employees, agents, contractors,
subcontractors, invitees, successors and permitted assigns from and against
any and all claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and disbursements
incurred by any of them in any action or proceeding between the Generator and
a third party or Pepco) for damage to property of unaffiliated third parties,
injury to or death of any person, including Generator's employees or any third
parties, to the extent caused by the negligence or willful misconduct of Pepco
and/or its officers, directors, employees, agents, contractors, subcontractors
or invitees arising out of or connected with Pepco's performance or breach of
this Agreement, or the exercise by Pepco of its rights hereunder.
10.3 Indemnification Procedures. If either Party intends to seek
indemnification under this Article 10 from the other Party, the Party seeking
indemnification shall give the other Party notice of such claim within ninety
(90) days of the later of the commencement of, or the Party's actual knowledge
of, such claim or action. Such notice shall describe the claim in reasonable
detail, and shall indicate the amount (estimated if necessary) of the claim
that has been, or may be sustained by, said Party. To the extent that the
other Party will have been actually and materially prejudiced as a result of
the failure to provide such notice, such notice will be a condition precedent
to any liability of the other Party under the provisions for indemnification
contained in this Agreement. Neither Party may settle or compromise any claim
without the prior consent of the other Party; provided, however, said consent
shall not be unreasonably withheld or delayed.
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10.4 Survival. The indemnification obligations of each Party under
this Article 10 shall continue in full force and effect regardless of whether
this Agreement has either expired or been terminated or canceled.
ARTICLE 11
DEFAULT
11.1 Event of Default. Unless excused by Force Majeure, each of the
following events shall constitute an event of default (an "Event of Default")
under this Agreement:
(a) the failure by a Party to pay any amount due within thirty
(30) days after receipt of written notice of nonpayment by the other Party,
unless the payment of such amount is disputed in good faith;
(b) a Party's breach of any material term or condition of this
Agreement including any material breach of a representation, warranty or
covenant made in this Agreement which, after receiving written notice of the
breach from the non-breaching Party (such notice to set forth in reasonable
detail the nature of the default and, where known and if applicable, the steps
necessary to cure such default), (i) the breaching Party fails to cure within
thirty (30) days following receipt of the notice or (ii) if such default is of
such a nature that it cannot be cured within thirty (30) days following
receipt of such notice, the breaching Party fails within such thirty (30) days
to commence the necessary cure and fails at any time thereafter diligently and
continuously to prosecute such cure to completion provided that the cure is
completed no later than 180 days after the receipt of the default notice;
(c) the appointment of a receiver or liquidator or trustee for
either Party and such receiver, liquidator or trustee is not discharged within
sixty (60) days;
(d) the entry of a decree adjudicating a Party as bankrupt or
insolvent, and such decree is continued undischarged and unstayed for a period
of sixty (60) days; or
(e) the filing of a voluntary or involuntary petition in
bankruptcy under any provision of any federal or state bankruptcy law by a
Party or against it, and, with respect to an involuntary petition in
bankruptcy, such petition continues undischarged and unstayed for a period of
sixty (60) days.
<PAGE>
11.2 Remedies. Upon the occurrence of an Event of Default, the
non-defaulting Party may (a) terminate this Agreement by providing sixty (60)
days' prior written notice to the defaulting Party and this Agreement shall
thereupon terminate upon receipt of regulatory approval for such termination,
but not before the date specified in the notice, and/or (b) subject to Section
8.2 of this Agreement, exercise all such rights and remedies as may be
available to it under this Agreement or at law or equity with respect to such
Event of Default.
ARTICLE 12
PROJECTIONS AND OPERATING COMMITTEE
12.1 Projections. No later than three (3) business days prior to each
Monday during the term of this Agreement, Pepco shall provide Generator with
non-binding projections of the Services to be provided by Generator to Pepco
under this Agreement for the week beginning that Monday.
12.2 Operating Committee. The Parties shall establish an operating
committee consisting of one representative for each Party ("Operating
Committee"). The Operating Committee shall act only by unanimous agreement or
consent. The Parties shall designate their respective representatives to the
Operating Committee, plus an alternate by written notice. Each Party's
representative on the Operating Committee is authorized to act on behalf of
such Party with respect to any matter arising under this Agreement which is to
be decided by the Operating Committee, however, the Operating Committee shall
not have any authority to modify or otherwise alter the rights and obligations
of the Parties hereunder. The Operating Committee shall develop and implement
suitable policies and procedures with to coordinate the interaction of the
Parties with respect to the performance of their duties and obligations under
this Agreement.
ARTICLE 13
COST RESPONSIBILITIES AND BILLING PROCEDURES
13.1 Billing Procedures.
(a) Within ten (10) days after the first day of each Month Pepco
shall provide to Generator a written invoice setting forth (a) the amount
Pepco owes to Generator pursuant to Article 6 of this Agreement for Services
and any other payments which may be due hereunder, and (b) the amounts, if
any, that Generator owes to Pepco pursuant to this Agreement. Each invoice
shall (i) delineate
<PAGE>
the Month in which the Services or Alternative Services were provided or
reimbursable charges were incurred, (ii) fully describe the Services or
Alternative Services rendered or reimbursable charges incurred, (iii) be
itemized to reflect the Services or Alternative Services performed or provided
or reimbursable charges incurred, and (iv) provide reasonable detail as to the
calculation of the amounts involved.
(b) All invoices shall be paid within fifteen (15) days after
the date of issuance, but not earlier than the 25th day of the month in which
the invoice is rendered. All payments shall be made by wire transfer to a
bank designated in writing by such Party. Payment of invoices shall not
relieve the paying Party from any responsibilities or obligations it has under
this Agreement, nor shall such payment constitute a waiver of any claims
arising hereunder.
(c) To the extent that, for any billing period, Generator is
obligated to pay to Pepco amounts due and calculated pursuant to this Section
13.1, Pepco may use such amounts as a set-off against any amounts owed by
Pepco to Generator.
13.2 Billing Disputes. In the event of a billing dispute between the
Parties, (i) each Party shall continue to perform its obligations in
accordance with the terms of this Agreement subject to the other Party's
rights hereunder, and (ii) the Party required to make payments hereunder shall
pay to the other Party all invoiced amounts when due, net of any set-offs
permitted under Section 13.1(d), that are not in dispute. Payment of invoices
by either Party shall not relieve the paying Party from any responsibilities
or obligations it has under this Agreement; nor shall it constitute a waiver
of any claims arising hereunder.
13.3 Interest on Unpaid Balances. Interest on any unpaid amounts shall
be calculated in accordance with the methodology specified for interest on
refunds in FERC regulations at 18 C.F.R. Section35.19a(a)(2)(iii). Interest
on delinquent amounts shall be calculated from the due date of the bill to the
date of payment. When payments are made by mail, bills shall be considered as
having been paid on the date of receipt by the other Party.
ARTICLE 14
CONFIDENTIALITY
14.1 Confidentiality Obligations of Pepco. Each Party shall hold in
confidence, unless compelled to disclose by judicial or administrative process
or
<PAGE>
other provisions of law, all documents and information furnished by one Party
to the other Party in connection with this Agreement marked "Confidential" or
"Proprietary." Except to the extent that such information or documents are
(i) generally available to the public other than as a result of a disclosure
by a receiving Party in breach of this Agreement, (ii) available to the
receiving Party on a non-confidential basis prior to disclosure by the other
Party , or (iii) available to the receiving Party on a non-confidential basis
from a source other than the other Party, provided that such source is not
known, and by reasonable effort could not be known, by the receiving Party to
be bound by a confidentiality agreement with the other Party or otherwise
prohibited from transmitting the information to the receiving Party by a
contractual, legal or fiduciary obligation, the receiving Party shall not
release or disclose such information to any other person, except to its
employees, representatives or agents on a need-to-know basis, in connection
with this Agreement who has not first been advised of the confidentiality
provisions of this Section 14.1 and has agreed in writing to comply with such
provisions. In no event shall such information be disclosed in violation of
the requirements of FERC Orders 889 and 889-A, and any successor thereto. The
Party receiving confidential information from the other Party shall promptly
notify the other Party if it receives notice or otherwise concludes that the
production of any information subject to this Section 14.1 is being sought
under any provision of law and the receiving Party shall use reasonable
efforts in cooperation with the other Party to seek confidential treatment for
such confidential information provided thereto.
14.2 Confidentiality of Audits. The independent auditor performing any
audit, as referred to in Article 20, shall be subject to a confidentiality
agreement between the auditor and the Party being audited. Such audit
information shall be treated as confidential except to the extent that its
disclosure is required by regulatory or judicial order, for reliability
purposes pursuant to PJM requirements and pursuant to the FERC's rules and
regulations. Except as provided herein, neither Party will disclose the audit
information to any third party, without the other Party's prior written
consent. Audit information in the hands of the Party not being audited shall
be subject to all provisions of Article 20.
14.3 Remedies. The Parties agree that monetary damages would be
inadequate to compensate a Party for the other Party's breach of its
obligations under Sections 14.1 and 14.2. Each Party accordingly agrees,
subject to Section 8.2, that the other Party shall be entitled to equitable
relief, by way of injunction or otherwise, if the first Party breaches or
threatens to breach its obligations under Sections 14.1 or 14.2 of this
Agreement, as applicable, which equitable relief
<PAGE>
shall be granted without bond or proof of damages, and the receiving Party
shall not plead in defense that there would be an adequate remedy at law.
ARTICLE 15
DISPUTE RESOLUTION
15.1 Disputes. A Party with a claim or dispute under this Agreement
shall submit to the Operating Committee a notification of such claim or
dispute within sixty (60) days after the circumstances that gave rise to the
claim or the question or issue in dispute. The notification shall be in
writing and shall include a concise statement of the claim or the issue or
question in dispute, a statement of the relevant facts and documentation to
support the claim. In the event the Operating Committee is unable, in good
faith, to resolve their disagreement in a manner satisfactory to both Parties
within thirty (30) days after receipt by the Operating Committee of a
notification specifying the claim, issue or question in dispute, the Parties
shall refer the dispute to their respective senior management. If, after
using their good faith best efforts to resolve the dispute, senior management
cannot resolve the dispute within thirty (30) days, the Parties shall utilize
the arbitration procedures set forth below in Section 15.2 to resolve a
dispute, provided that nothing herein or therein shall prohibit a Party from
at any time requesting from a court of competent jurisdiction a temporary
restraining order, preliminary injunction, or other similar form of equitable
relief to enforce performance of the provisions of this Agreement.
15.2 Arbitration.
(a) Unless the Parties otherwise mutually agree in writing to
another form of dispute resolution such as dispute resolution under the PJM
Agreement or the MAAC agreement, any arbitration initiated under this
Agreement shall be conducted before a single neutral arbitrator appointed by
the Parties within thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an arbitrator, such
arbitrator shall be appointed by the American Arbitration Association. Unless
the Parties agree otherwise, the arbitrator shall be an attorney or retired
judge with at least fifteen (15) years of experience, and shall not have any
current or past substantial business or financial relationships with any Party
to the arbitration. If possible, the arbitrator shall have experience in the
electric utility industry. Unless otherwise agreed, the arbitration shall be
conducted in accordance with the American Arbitration Association's Commercial
<PAGE>
Arbitration Rules, then in effect. Any arbitration proceedings, decision or
award rendered hereunder and the validity, effect and interpretation of this
arbitration agreement shall be governed by the Federal Arbitration Act of the
United States, 9 U.S.C. Sections 1 et seq. The location of any arbitration
hereunder shall be in the District of Columbia.
(b) The arbitration shall, if possible, be concluded not later
than six (6) months after the date that it is initiated. The arbitrator shall
be authorized only to interpret and apply the provisions of this Agreement or
any related agreements entered into under this Agreement and shall have no
power to modify or change any of the above in any manner. The arbitrator shall
have no authority to award punitive or multiple damages or any damages
inconsistent with this Agreement. The arbitrator shall, within thirty (30)
days of the conclusion of the hearing, unless such time is extended by
agreement of the Parties, notify the Parties in writing of his or her
decision, stating his or her reasons for such decision and separately listing
his or her findings of fact and conclusions of law. The decision of the
arbitrator rendered in such a proceeding shall be final and binding on the
Parties. Judgment on the award may be entered upon it in any court having
jurisdiction.
(c) Nothing in this Agreement shall preclude, or be construed to
preclude, any Party from filing a petition or complaint with FERC with respect
to any arbitrable claim over which FERC has jurisdiction. In such case, the
other Party may request FERC to reject or to waive jurisdiction. If FERC
rejects or waives jurisdiction with respect to all or a portion of the claim,
the portion of the claim not so accepted by FERC shall be resolved through
arbitration, as provided in this Agreement. To the extent that FERC asserts
or accepts jurisdiction over the claim, the decision, finding of fact or order
of FERC shall be final and binding, subject to judicial review under the
Federal Power Act, and any arbitration proceedings that may have commenced
with respect to the claim prior to the assertion or acceptance of jurisdiction
by FERC shall be terminated.
ARTICLE 16
REPRESENTATIONS
16.1 Representations of Pepco. Pepco hereby represents and warrants to
Generator as follows:
<PAGE>
(a) Incorporation. Pepco is a corporation duly organized,
validly existing and in good standing under the laws of the District of
Columbia and the Commonwealth of Virginia, and has all requisite corporate
power and authority to own, lease and operate its material assets and
properties and to carry on its business as now being conducted.
(b) Authority. Pepco has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Pepco of this
Agreement and the consummation by Pepco of the transactions contemplated
hereunder have been duly and validly authorized by the Board of Directors of
Pepco or by a committee thereof to whom such authority has been delegated and
no other corporate proceedings on the part of Pepco are necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Pepco and, assuming that this
Agreement constitutes a valid and binding agreement of Generator, constitutes
a valid and binding agreement of Pepco, enforceable by Pepco in accordance
with its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of this Agreement by
Pepco nor performance by Pepco of its obligations hereunder will (A) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-laws of Pepco, (B) result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which Pepco or
any of its subsidiaries is a party or by which any of their respective assets
may be bound or (C) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Pepco, or any of its assets, except in the case of
clauses (B) and (C) for such failures to obtain a necessary consent, defaults
and violations which would not, individually or in the aggregate, have a
material adverse effect on the ability of Pepco to discharge its obligations
under this Agreement (a "Pepco Material Adverse Effect").
(ii) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any governmental authority is
necessary for performance by Pepco of its obligations hereunder, other than
such declarations, filings, registrations, notices, authorizations, consents
or approvals which, if not
<PAGE>
obtained or made would not, individually or in the aggregate, have a Pepco
Material Adverse Effect.
16.2 Representations of Generator. Generator hereby represents and
warrants to Pepco as follows:
(a) Incorporation. Generator is a [corporation] duly
[incorporated], validly existing and in good standing under the laws of the
State of __________, and has all requisite [corporate] power and authority to
own, lease and operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Generator has all necessary [corporate] power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by the Generator
of this Agreement and the consummation by Generator of the transactions
contemplated hereby have been duly and validly authorized the [Board of
Directors] of Generator or by a committee thereof to whom such authority has
been delegated and no other [corporate] proceedings on the part of Generator
are necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Generator and, assuming that this Agreement constitutes a valid and binding
agreement of Pepco, constitutes a valid and binding agreement of Generator,
enforceable against Generator in accordance with its terms.
(c) Consents and Approvals.
(i) Neither the execution and delivery of this Agreement by
Generator nor performance by Generator of its obligations hereunder will (A)
conflict with or result in any breach of any provision of the [Certificate of
Incorporation or By-laws] of Generator, (B) result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which Generator
or any of its subsidiaries is a party or by which any of their respective
assets may be bound or (C) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Generator, or any of its assets,
except in the case of clauses (B) and (C) for such failures to obtain a
necessary consent, defaults and violations which would not, individually or in
the aggregate, have a material adverse effect on the ability of Generator to
discharge its obligations under this Agreement (a "Generator Material Adverse
Effect").
<PAGE>
(ii) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any Governmental Authority is
necessary for performance by Generator of its obligations hereunder, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not obtained or made would not, individually
or in the aggregate, have a Generator Material Adverse Effect.
ARTICLE 17
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
17.1 Generally. Except as otherwise set forth in this Article 17,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by either Party hereto, without the prior written
consent of the other Party, which consent shall not be unreasonably withheld
or delayed.
17.2 Pepco's Assignment Rights. Subject to Section 17.5 below, upon ten
(10) days prior written notice to Generator, Pepco may assign this Agreement,
and Pepco's rights, interests and obligations hereunder, to an Affiliate of
Pepco that assumes Pepco's obligations to provide Services to the Service
Load.
17.3 Generator's Assignment Rights. Subject to Section 17.5 below,
Generator may assign, transfer, pledge or otherwise dispose of its rights and
interests hereunder to a trustee, lending institution, or other Person for the
purposes of financing or refinancing the Auctioned Assets, including upon or
pursuant to the exercise of remedies under such financing or refinancing, or
by way of assignments, transfers, conveyances of dispositions in lieu thereof;
provided, however, that no such assignment in accordance with this Section
17.3 shall relieve or in any way discharge Generator from the performance of
its duties and obligations under this Agreement. Pepco agrees to execute and
deliver, at Generator's expense, such documents as may be reasonably necessary
to accomplish any such assignment, transfer, conveyance, pledge or disposition
of rights hereunder for purposes of the financing or refinancing of the
Facility, so long as Pepco's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
17.4 Mergers or Consolidations. Subject to Section 17.5 below, either
Party may assign this Agreement to a successor to all or substantially all of
the assets of such Party by way of merger, consolidation, sale or otherwise,
provided such successor assumes in writing and becomes liable for all of such
Party's duties and obligations hereunder.
<PAGE>
17.5 Limitations
(a) No assignment, transfer, conveyance, pledge or disposition
of rights, interests, duties or obligations under this Agreement by a Party
shall relieve that Party from liability and financial responsibility for the
performance thereof after any such transfer, assignment, conveyance, pledge or
disposition unless and until (i) the transferee or assignee shall agree in
writing to assume the obligations and duties of that Party under this
Agreement and to impose such obligations on subsequent permitted transferees
and assignees and (ii) the non-assigning Party has consented in writing to
such assumption and to a release of the assigning Party from such liability,
such consent not to be unreasonably withheld or delayed.
(b) If Generator terminates its existence as a [corporate]
entity by merger, acquisition, sale, consolidation or otherwise, or if all or
substantially all of Generator's assets are transferred to another person or
business entity without complying with this Article 17, Pepco shall have the
right, enforceable in a court of competent jurisdiction, to enjoin Generator's
successor from using its assets in any manner that does not comply with the
requirements of this Agreement or that impedes Pepco's ability to carry on its
ongoing business operations.
17.6 Successors. This Agreement and all of the provisions hereof are
binding upon, and inure to the benefit of, the Parties and their respective
successors and permitted assigns.
ARTICLE 18
NOTICES
Except as otherwise expressly set forth in this Agreement, all notices
and other communications hereunder shall be in writing and shall be deemed
given (as of the time of delivery or, in the case of a telecopied
communication, of confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to the
Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):
<PAGE>
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) ________________
Attention: ___________________
if to Generator, to:
c/o Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
ARTICLE 19
AMENDMENTS
19.1 Amendments. Except as provided in Section 19.2, this Agreement
shall not be amended, modified, or supplemented unless mutually agreed to by
the Parties in writing. Except as provided in Section 19.2(b) below, the
rates, terms and conditions contained in this Agreement are not subject to
change under Sections 205 or 206 of the Federal Power Act absent the mutual
written agreement of the Parties. It is the intent of this Section 19.1 that,
except as provided in Section 19.2(b) below, the rates, terms and conditions
of this Agreement shall not be subject to change except by mutual written
agreement by the Parties.
19.2 PJM Agreement Modifications
(a) If the PJM Agreements are amended or modified so that any
schedule or section references herein to such agreements is changed, such
schedule or section references herein shall be deemed to automatically (and
without any further action by the Parties) refer to the new or successor
schedule or section in the PJM Agreements which replaces that originally
referred to in this Agreement.
(b) If the applicable provisions of the PJM Agreements
referenced herein, or any other PJM rules relating to the implementation of
this Agreement, are changed materially from those in effect on May 31, 2000,
the Operating
<PAGE>
Committee shall cooperate to make conforming changes to this Agreement to
fulfill the purposes of this Agreement; provided that no such changes shall
alter the economic benefits of this Agreement between the Parties. If the
Operating Committee fails to agree on such changes within 15 days, Pepco may
unilaterally make conforming changes to this Agreement to fulfill the purposes
of this Agreement, and shall file such changes with the FERC on behalf of both
Parties; provided that nothing herein shall prejudice the Generator's rights
to protest such change.
ARTICLE 20
AUDITS
The Parties shall have the right, during normal business hours, to
audit each other's accounts and records pertaining to transactions under this
Agreement, upon twenty (20) days prior written notice, at the offices where
such accounts and records are maintained. Any such audit of a Party's
accounts and records will be at the expense of the auditing Party, shall not
be made more frequently than once in any twelve (12) month period, and no such
audit may be made with respect to accounts and records relating to periods
more than twenty-four (24) months prior to the date of the audit notice. The
Party being audited will be entitled to review the audit report and any
supporting materials. The Party conducting the audit shall maintain the
confidentiality of all information obtained during the audit in compliance
with Section 14.2 of this Agreement. To the extent that audited information
includes confidential information, the auditing Party shall designate an
independent auditor at its expense to perform such audit.
ARTICLE 21
MISCELLANEOUS PROVISIONS
21.1 Waiver. Except as otherwise provided in this Agreement, any
failure of a Party to comply with any obligation, covenant, agreement, or
condition herein may be waived by the Party entitled to the benefits thereof
only by a written instrument signed by the Party granting such waiver, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
21.2 No Third Party Beneficiaries. Nothing in this Agreement is
intended to confer upon any other person except the Parties any rights or
remedies hereunder or shall create any third party beneficiary rights in any
person. No
<PAGE>
provision of this Agreement shall create any rights in any such persons in
respect of any benefits that may be provided, directly or indirectly, under
any employee benefit plan or arrangement except as expressly provided for
thereunder.
21.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the District of Columbia (regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law).
21.4 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.
21.5 Interpretation. When a reference is made in this Agreement to an
article, section, schedule or exhibit, such reference shall be to an article
or section of, or schedule or exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation" or equivalent words. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term.
Unless otherwise expressly stated otherwise herein, the word "day" shall mean
any calendar day including weekends and holidays. Any agreement, instrument,
statute, regulation, rule or order defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument, statute, regulation, rule or order as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes, regulations, rules or
orders) by succession of comparable successor statutes, regulations, rules or
orders and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and
assigns. Each Party acknowledges that it has been represented by counsel in
connection with the review and execution of this Agreement, and, accordingly,
there shall be no presumption that this Agreement or any provision hereof be
construed against the Party that drafted this Agreement.
<PAGE>
21.6 Jurisdiction and Enforcement. Each of the Parties irrevocably
submits to the exclusive jurisdiction of (i) the Superior Court of the
District of Columbia and (ii) the United States District Court for the
District of Columbia, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the Parties agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the District of Columbia or, if
such suit, action or proceeding may not be brought in such court for
jurisdictional reasons, in the Superior Court of the District of Columbia.
Each of the Parties further agrees that service of process, summons, notice or
document by hand delivery or U.S. registered mail at the address specified for
such Party in Article 18 (or such other address specified by such Party from
time to time pursuant to Article 18) shall be effective service of process for
any action, suit or proceeding brought against such Party in any such court.
Each of the Parties irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in (i) the Superior Court of
the District of Columbia and (ii) the United States District Court for the
District of Columbia, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such
action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
21.7 Entire Agreement. This Agreement, the Asset Sale Agreement, the
Confidentiality Agreement and the Ancillary Agreements including the exhibits,
schedules, documents, certificates and instruments referred to herein or
therein and other contracts, agreements and instruments contemplated hereby or
thereby, embody the entire agreement and understanding of the Parties in
respect of the transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein or therein. This
Agreement, the Asset Sale Agreement and the Ancillary Agreements supersede all
prior agreements and understandings between the Parties with respect to the
transactions contemplated by this Agreement other than the Confidentiality
Agreement.
21.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as possible to
the fullest extent permitted by applicable law in an acceptable
<PAGE>
manner to the end that the transactions contemplated hereby are fulfilled to
the extent possible.
21.9 Further Assurances. The Parties hereto agree to execute and
deliver promptly, at the expense of the Party requesting such action, any and
all other and further instruments, documents and information which may be
reasonably requested in order to effectuate the transactions contemplated
hereby. Each Party agrees to cooperate with, assist and accommodate all
reasonable requests made by the other Party in respect of any regulatory
approval necessary for, or any regulatory proceeding relating to, the
execution, delivery or performance of this Agreement. Each Party further
agrees to comply in all material respects with all laws of governmental
authorities relating to this Agreement and the consummation of the
transactions contemplated hereby.
21.10 Independent Contractor Status. Nothing in this Agreement shall
be construed as creating any relationship between Pepco and Generator other
than that of independent contractors.
21.11 Conflicts. Except with respect to the amendments,
indemnification, liability, default and remedies provisions contained herein
or as otherwise expressly provided herein, in the event of any conflict or
inconsistency between the terms of this Agreement and the terms of the Asset
Sale Agreement, the terms of the Asset Sale Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF, Pepco and Generator have caused this Transition
Power Agreement (District of Columbia) to be signed by their respective duly
authorized officers as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By:____________________________
Name:
Title:
[GENERATOR]
By:____________________________
Name:
Title:
<PAGE>
SCHEDULE 1
DEFINITIONS
Part A. Capitalized terms not defined in the body of the Agreement
shall have the meaning set forth in Part A of this
Schedule 1. (Part B of this Schedule 1 sets forth
capitalized terms defined within the Agreement.)
1. " Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934.
2. "Auctioned Assets" has the meaning set forth in the Asset Sale
Agreement.
3. "Capacity Credits" has the meaning set forth in the PJM
Reliability Agreement.
4. "Capacity Resources" has the meaning set forth in the PJM
Reliability Agreement.
5. "Contract Year 1" means the period beginning on the Effective
Date and ending thirteen calendar months thereafter.
6. "Contract Year 2" means the period beginning immediately after
the end of Contract Year 1 and ending twelve calendar months thereafter.
7. "Contract Year 3" means the period beginning immediately after
the end of Contract Year 2 and ending twelve calendar months thereafter.
8. "Contract Year 4" means the period beginning immediately after
the end of Contract Year 3 and ending twelve calendar months thereafter.
9. "Closing" has the meaning set forth in the Asset Sale Agreement.
10. "Confidentiality Agreement" has the meaning set forth in the Asset
Sale Agreement.
11. "FERC" means the Federal Energy Regulatory Commission or its
successors.
12. "Fixed Transmission Rights" has the meaning set forth in the PJM
Operating Agreement.
<PAGE>
13. "Full Energy Requirements" means the full electric energy
requirements of the Service Load in any hour, measured in megawatt hours at
the Delivery Points.
14. "Generator" has the meaning set forth in the preamble of this
Agreement and shall include its permitted successors and assigns.
15. "Metered Energy Requirements" means the full electric energy
requirements of the Service Load in any hour, measured in megawatt hours at
the retail (customer revenue meter) level. For customers without, interval
metering, Pepco will use customer or retail class profiles in accordance with
the District of Columbia Public Service Commission regulations to distribute
periodic metered energy usage to obtain hourly customer energy usage. When
Pepco curtailable load programs are operated, customer loads which are
curtailed will be increased by Pepco to reflect the hourly energy usage which
would have occurred if curtailments had not taken place.
16. "Month" means a calendar month.
17. "Network Customer" has the meaning set forth in the PJM Tariff.
18. "Network Load" has the meaning set forth in the PJM Tariff.
19. "Optional Energy" means the Optional Energy Percent, as elected by
Pepco through the exercise of its Call Options, of Pepco's Full Energy
Requirements.
20. "Pepco" has the meaning set forth in the preamble of this
Agreement and shall include its permitted successors or assigns.
21. "PJM" means the Pennsylvania New Jersey-Maryland interconnected
power pool operated under the PJM Operating Agreement and any successor
thereto including any regional transmission organization, independent system
operator, transco, or any other independent system administrator that
possesses operational control or planning control over Pepco's transmission
system.
22. "PJM Agreements" means the PJM Operating Agreement, PJM
Reliability Agreement, and PJM Tariff.
23. "PJM Control Area" has the meaning set forth in the PJM
Reliability Agreement.
24. "PJM Operating Agreement" means the Amended and Restated Operating
Agreement of the PJM Interconnection LLC dated as of June 2, 1997.
<PAGE>
25. "PJM Interconnection LLC" means the independent system operator of
the PJM Control Area pursuant to the PJM Operating Agreement and the PJM
Tariff.
26. "PJM Reliability Agreement" means the PJM Reliability Assurance
Agreement dated June 2, 1997, establishing obligations, standards and
procedures for maintaining the reliable operation of the PJM Control Area.
27. "PJM System Operator" means the PJM Interconnection LLC energy
control center staff responsible for central dispatch as provided in the PJM
Agreement.
28. "PJM Tariff" means the PJM Open Access Transmission Tariff
providing transmission service within the PJM Control Area.
29. "Planning Period" has the meaning set forth in the PJM Reliability
Agreement.
30. "Required Energy" means the Required Energy Percent of Pepco's
Full Energy Requirements.
31. "Service Load" means (i) all of Pepco's default service retail
electric energy customers located in Pepco's service territory, as such
territory exists on the Effective Date, in the District of Columbia, and (ii)
the energy requirements of the Washington Metropolitan Area Transit Authority
in the Commonwealth of Virginia which Pepco is required to provide.
32. "Summer Month" means each Month during the period of May 1 through
September 30.
33. "Winter Month" means each Month during the period of October 1
through April 30.
Part B. The following terms have the meaning specified in the section of
this Agreement set forth opposite to such term:
Term Agreement Reference
Agreement Preamble
Alternative Services Section 8.1
Ancillary Services Article 4
Ancillary Services Requirements Article 4
Asset Sale Agreement First Recital
Call Options Section 5.2(a)
<PAGE>
Capacity Resources Plan Section 3.2(a)
Capacity Resources Requirements Section 3.1(a)
Delivery Points Section 5.3
Effective Date Section 2.1
Event of Default Section 11.1
Force Majeure Section 9.2
Generator Material Adverse Effect Section 16.2(c)(i)
Operating Committee Article 12
Optional Energy Percent Section 5.2(a)
Pepco Material Adverse Effect Section 16.1(c)(i)
Party or Parties Preamble
PPAs First Recital
Required Energy Percent Section 5.1
Services Section 8.1
<PAGE>
EXHIBIT I-2
TRANSITION POWER AGREEMENT
(Maryland)
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
_________________________________________
Dated ____________, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - TERM AND TERMINATION 2
2.1 - Term 2
2.2 - Termination 2
ARTICLE 3 - CAPACITY RESOURCES 2
3.1 - Capacity Resources Obligations 2
3.2 - Capacity Resources Information Requirements 3
ARTICLE 4 - ANCILLARY SERVICES 4
ARTICLE 5 - ENERGY 4
5.1 - Required Energy 4
5.2 - Optional Energy 5
5.3 - Determination of Energy Requirements; Losses 5
ARTICLE 6 - PRICING 6
6.1 Compensation for Services 6
6.2 - Taxes 7
ARTICLE 7 SERVICES OBTAINED BY GENERATOR FROM PJM 7
ARTICLE 8 ALTERNATIVE SERVICES AND LIMITED LIABILITY 7
8.1 Alternative Services 7
8.2 - Limitation on Liability 8
ARTICLE 9 - FORCE MAJEURE 9
9.1 - Effect of Force Majeure 9
9.2 - Force Majeure Defined 9
9.3 - Notification 9
ARTICLE 10 - INDEMNIFICATION FOR THIRD PARTY CLAIMS 10
10.1 - Generator's Indemnification 10
10.2 - Pepco's Indemnification 10
10.3 - Indemnification Procedures 10
10.4 - Survival 11
ARTICLE 11 - DEFAULT 11
11.1 - Event of Default 11
11.2 - Remedies 12
ARTICLE 12 PROJECTIONS AND OPERATING COMMITTEE 12
12.1 - Projections 12
12.2 Operating Committee 12
ARTICLE 13 - COST RESPONSIBILITIES AND BILLING PROCEDURES 13
13.1 - Billing Procedures 13
13.2 - Billing Disputes 14
<PAGE>
13.3 - Interest on Unpaid Balances 14
ARTICLE 14 - CONFIDENTIALITY 14
14.1 - Confidentiality Obligations of Pepco 14
14.2 - Confidentiality of Audits 15
14.3 - Remedies 15
ARTICLE 15 - DISPUTE RESOLUTION 15
15.1 - Disputes 15
15.2 - Arbitration 16
ARTICLE 16 - REPRESENTATIONS 17
16.1 - Representations of Pepco 17
16.2 - Representations of Generator 18
ARTICLE 17 - ASSIGNMENT/CHANGE IN CORPORATE IDENTITY 20
17.1 - Generally 20
17.2 - Pepco's Assignment Rights 20
17.3 - Generator's Assignment Rights 20
17.4 - Mergers or Consolidations 20
17.5 - Limitations 20
17.6 - Successors 21
ARTICLE 18 - NOTICES 21
ARTICLE 19 - AMENDMENTS 22
19.1 - Amendments 22
19.2 - PJM Agreement Modifications 22
ARTICLE 20 - AUDITS 23
ARTICLE 21 - MISCELLANEOUS PROVISIONS 23
21.1 - Waiver 23
21.2 - No Third Party Beneficiaries 23
21.3 - Governing Law 24
21.4 - Counterparts 24
21.5 - Interpretation 24
21.6 - Jurisdiction and Enforcement 25
21.7 - Entire Agreement 25
21.8 - Severability 26
21.9 - Further Assurances 26
21.10-Independent Contractor Status 26
21.11-Conflicts 26
SCHEDULE 1 - DEFINITIONS 28
EXHIBIT A - Pepco's Non-Binding Estimate for Calendar Year 2001 of
Capacity Resources for the Service Load 32
EXHIBIT B - Capacity Resources Plan for Contract Year 1 33
<PAGE>
EXHIBIT I-2
TRANSITION POWER AGREEMENT (Maryland)
This Transition Power Agreement ("Agreement") dated as of _________,
2000 by and between Potomac Electric Power Company ("Pepco") a District of
Columbia and Virginia corporation, and _____________ ("Generator") a
___________ [corporation]. Pepco and Generator are each referred to herein as
a "Party," and collectively referred to herein as the "Parties."
WITNESSETH:
WHEREAS, Pepco and Generator have entered into an Asset Sale and
Purchase Agreement ("Asset Sale Agreement") dated June 7, 2000 for (i) the
sale and purchase of certain of Pepco's generating resources and (ii) the
assignment of rights and obligations under five power purchase agreements
("PPAs") or for alternative arrangements relating to such PPAs;
WHEREAS, certain of the PPAs provide for the purchases and sale of
Renewable Energy Resources;
WHEREAS, Pepco will continue to operate its transmission and
distribution businesses which includes obligations to sell power to its retail
customers; and
WHEREAS, the Parties have agreed in the Asset Sale Agreement to
execute this Agreement in order to provide for the sale by Generator, and
purchase by Pepco, of capacity, electric energy and certain ancillary services
in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise defined herein, capitalized terms used in this
Agreement shall have the meanings specified or referred to in Schedule 1 of
this Agreement.
ARTICLE 2
TERM AND TERMINATION
2.1 Term. This Agreement shall become effective upon the
consummation of the Closing ("Effective Date"). Unless terminated sooner in
<PAGE>
accordance with the terms of this Agreement, this Agreement shall continue in
full force and effect from the Effective Date through and including June 30,
2004.
2.2 Termination. The applicable provisions of this Agreement
shall continue in effect after cancellation or termination hereof to the
extent necessary to provide for final billings, billing adjustments and
payments pertaining to liability and indemnification obligations arising from
acts or events that occurred while this Agreement was in effect.
ARTICLE 3
CAPACITY RESOURCES
3.1 Capacity Resources Obligations
(a) During the term of this Agreement, Generator shall
supply to Pepco and make available within PJM on Pepco's behalf, and Pepco
shall purchase from Generator, Pepco's full requirements for Capacity
Resources to serve the Service Load ("Capacity Resource Requirements") at the
prices set forth in Article 6 of this Agreement. Capacity Resources shall be
determined, and provided by the Generator, in accordance with the PJM
Reliability Agreement and other applicable PJM requirements. Capacity
Resource Requirements shall mean the portion of Pepco's Accounted-For
Obligation, as that term is defined and determined in accordance with the PJM
Reliability Agreement and applicable PJM requirements, that is located in the
State of Maryland.
(b) To the extent that PJM assigns to Pepco Fixed
Transmission Rights for Capacity Resources contained in a Capacity Resource
Plan and designated for Fixed Transmission Rights, Pepco shall transfer such
Fixed Transmission Rights to Generator pursuant to PJM's procedures for
assigning Fixed Transmission Rights
(c) Generator shall provide to the PJM System Operator or
PJM Interconnection LLC, as applicable, all information and data required with
respect to the Capacity Resources Requirements, with copies to Pepco, and
Generator shall be responsible for any charges levied by the PJM System
Operator or the PJM Interconnection LLC on Pepco or Generator due to the
delayed receipt of such information and data in accordance with the PJM
Reliability Agreement unless the delay is due to Pepco's delay in providing
Generator with information that Pepco is required to provide.
<PAGE>
3.2 Capacity Resources Information Requirements
(a) Generator shall provide in accordance with this
Section 3.2 its proposed plan to satisfy its obligations hereunder to provide
the Capacity Resources Requirements under this Agreement ("Capacity Resources
Plan").
(b) Exhibit A hereto sets forth Pepco's non-binding
estimate of the Capacity Resources required to supply the Service Load for
each month during the 2001 calendar year. On or before April 1 preceding each
Planning Period thereafter, Pepco shall provide Generator with a non-binding
estimate of the Capacity Resources required to supply the Service Load for
each month in the following Planning Period.
(c) Exhibit B hereto sets forth the Generator's Capacity
Resources Plan for Contract Year 1.
(d) On or before May 1 preceding each Planning Period
thereafter during the term of this Agreement, the Generator shall provide to
the Operating Committee, for review and approval (such approval not to be
unreasonably withheld or delayed), its proposed Capacity Resources Plan
(including Generator's proposed designation of Capacity Resources for
associated Fixed Transmission Rights) to be submitted to the PJM
Interconnection LLC in accordance with Schedule 6 of the PJM Reliability
Agreement for the upcoming Planning Period.
(e) If the Generator intends to propose any material
change to a Capacity Resources Plan (including any change in a designation of
Capacity Resources eligible for Fixed Transmission Rights) which has
previously been approved by the Operating Committee, the Generator shall
provide such proposed changes to the Operating Committee before it is
submitted for approval pursuant to the PJM Reliability Agreement and such
change shall be subject to the Operating Committee for review and approval
(such approval not to be unreasonably withheld or delayed) if the change (1)
adds a resource other than (x) capacity already certified by the PJM
Interconnection LLC or PJM System Operator, as applicable, as a Capacity
Resource or (y) Capacity Credits, or (2) proposes to change a designation of
Capacity Resources eligible for Fixed Transmission Rights.
<PAGE>
ARTICLE 4
ANCILLARY SERVICES
During the term of this Agreement, Generator shall supply to Pepco and
deliver within PJM on Pepco's behalf, and Pepco shall purchase, Pepco's full
requirements for Ancillary Services for the Service Load ("Ancillary Services
Requirements") at the prices set forth in Article 6 of this Agreement.
Ancillary Services mean Regulation and Frequency Response Service (as defined
in Schedule 3 of the PJM Tariff) and Operating Reserves (as defined in
Schedules 5 and 6 of the PJM Tariff).
ARTICLE 5
ENERGY
5.1 Required Energy.
(a) During the term of this Agreement, Generator shall
supply to Pepco at the Delivery Points, and Pepco shall purchase, the
following percentages of Pepco's Full Energy Requirements in the year
indicated below (the "Required Energy Percent"), including the applicable
Renewable Energy Percent, at the prices set forth in Article 6 of this
Agreement:
Year Required Energy Percent
Contract Year 1 100%
Contract Year 2 75%
5.2 Optional Energy
(a) For the duration of each of Contract Year 2, Contract
Year 3 and Contract Year 4, Pepco shall have the right to purchase from
Generator (the "Call Options") the percentages of the Full Energy Requirements
indicated below (the "Optional Energy Percent"), including the applicable
Renewable Energy Percent. To the extent Pepco exercises a Call Option for a
given year, Generator shall supply to Pepco at the Delivery Points the
Optional Energy Percent at the price set forth in Article 6 of this Agreement.
<PAGE>
Year Optional Energy Percent
Contract Year 2 25%
Contract Year 3 100% (in 25% increments)
Contract Year 4 100% (in 25% increments)
Notwithstanding the foregoing, the total of Pepco's Call Options
exercised with respect to the Optional Energy Percent for Contract Year 3 and
Contract Year 4, respectively, shall not exceed the percentage of the Full
Energy Requirements that Pepco elected to purchase in the immediately
preceding contract year.
(b) By each October 1 prior to the contract year in which
the applicable Optional Energy Percent is deliverable ("Strike Date"), Pepco
shall notify Generator in writing whether it is exercising any of its Call
Options for the upcoming contract year, and if so, the percentage of its Full
Energy Requirements it elects to purchase.
5.3 Determination of Energy Requirements. The amount of Full
Energy Requirements shall be as determined by PJM in accordance with Schedule
1, Section 3.2 of the PJM Operating Agreement at the respective PJM load buses
measured by PJM for the Service Load served by Pepco (the "Delivery Points").
Generator shall be responsible for all energy losses (including allocated PJM
losses, unaccounted-for energy and distribution losses) associated with
delivery of Required Energy Percent and Optional Energy Percent to the Service
Load.
5.4 Renewable Energy Resources Reporting Requirements.
Generator acknowledges that under Maryland law and MDPSC requirements, Pepco
is required to provide the Renewable Energy Percentage to its Service Load and
to satisfy MDPSC reporting requirement with respect thereto. Upon Pepco's
written request, Generator shall provide to Pepco in writing no later than
thirty (30) days after such request, the information and data requested by
Pepco to demonstrate that Generator has provided the Renewable Energy Percent
required under this Agreement and if Generator has failed to provide all of
such Renewable Energy Percent, the reasons for such failure.
<PAGE>
ARTICLE 6
PRICING
6.1 Compensation for Services Subject to the terms of this
Agreement, Pepco shall be obligated to make a monthly payment to Generator for
the Services it provides which shall be comprised of the following components:
(a) For each Month during the term of the Agreement, a
Capacity Payment for the Capacity Resources Requirements and Ancillary
Services Requirements that Generator provides to Pepco in such Month
calculated as follows:
Capacity Payment = (Capacity Price + Ancillary Services Price) x Metered
Energy Requirements
Where:
Capacity Price = $3.50/MWh
Ancillary Services Price = $0.50/MWh
(b) For each Month during the term of the Agreement, an Energy
Payment for the Required Energy Percent and Optional Energy Percent, if any,
that Generator delivers to Pepco at the Delivery Points in each Month
calculated as follows:
Energy Payment = [Metered Energy Requirements x (Required Energy Percent
+ Optional Energy Percent)] x Energy Price
Where:
Energy Price = $40.00/MWh during a Summer Month and $22.20/MWh
during a Winter Month.
(c) Pepco's monthly payment to Generator will be decreased
by (i) any PJM charges for transmission congestion, allocated losses and
unaccounted-for energy that Pepco incurs in connection with the Services
Generator delivers to Pepco pursuant to Articles 4, 5 and 6 of this Agreement,
and (ii) the amounts of any payments Generator owes to Pepco pursuant to
Article 8 of this Agreement.
<PAGE>
6.2 Taxes. Generator shall be responsible for taxes related to
the sale or provision of Services hereunder.
ARTICLE 7
SERVICES OBTAINED BY GENERATOR FROM PJM
Pepco shall, upon Generator's request, reasonably cooperate with
Generator to facilitate its acquisition in the PJM marketplace and resale to
Pepco of the Services Generator is obligated to provide to Pepco under this
Agreement. Pepco shall follow Generator's instructions with respect to
scheduling load in the day ahead PJM market.
ARTICLE 8
ALTERNATIVE SERVICES AND LIMITATION OF LIABILITY
8.1 Alternative Services. To the extent that Generator does not
provide Capacity Resources Requirements, Ancillary Services Requirements, the
Required Energy and/or the Optional Energy ("Services") to Pepco as required
under this Agreement, Generator, as an alternative method of performing such
obligations, shall pay Pepco the positive difference between the price Pepco
pays for such Services in the appropriate PJM marketplace, or if not available
in the PJM market, any other market ("Alternative Services") and the price
Pepco would have paid to Generator for such Services under this Agreement,
plus penalties and nonperformance charges, if any, assessed on Pepco by the
PJM Interconnection LLC or PJM System Operator as a result of the Generator
not providing the Services. Calculation of the cost of Alternative Services
hereunder shall include all reasonable direct costs associated with the
procurement and delivery of Alternative Services, including legal or
transactional costs and expenses; taxes, energy, demand, capacity, or
reservation charges; energy losses; emergency energy; and any transmission or
congestion costs but does not include the cost of PJM network service. For
purposes of determining the amount of Alternative Services Pepco purchases to
satisfy its energy requirements, energy requirements for any day shall be the
net amount of energy Pepco purchases for the Service Load in the PJM day-ahead
and second settlement markets. Notwithstanding the foregoing, Generator shall
not have satisfied its obligations to provide electricity from Renewable
Energy Resources under the provisions of this Section 8.1 unless Pepco
acquires such electricity in the PJM market or such other market in which
Pepco acquires Services.
<PAGE>
8.2 Limitation of Liability. Except for indemnity obligations
set forth in Article 10 and the damages, charges or penalties set forth in
Sections 3.1(c), 5.3, 8.1 and 13.3 of this Agreement, neither Party, nor their
respective officers, directors, agents, employees, Affiliates, or successors
or assigns of any of them, shall be liable to the other Party or its
Affiliates, officers, directors, agents, employees, successors or assigns for
claims, suits, actions or causes of action for incidental, punitive, special,
indirect, multiple or consequential damages (including, without limitation,
lost revenues, claims of customers, attorneys' fees and litigation costs)
connected with, or resulting from, performance or non-performance of this
Agreement, or any actions undertaken in connection with or related to this
Agreement, including, without limitation, any such damages which are based
upon causes of action for breach of contract, tort (including negligence and
misrepresentation), breach of warranty or strict liability. The provisions of
this Section 8.2 shall apply regardless of fault and shall survive
termination, cancellation, suspension, completion, or expiration of this
Agreement.
ARTICLE 9
FORCE MAJEURE
9.1 Effect of Force Majeure. Notwithstanding anything in this
Agreement to the contrary, the Parties shall be excused from performing their
respective obligations hereunder (except for the obligation to pay sums of
money due and owing hereunder) and shall not be liable in damages or
otherwise, to the extent that a Party is unable to perform or is prevented
from performing by an event of Force Majeure and has complied with Section
9.3.
9.2 Force Majeure Defined. Force Majeure includes, without
limitation, storm, flood, lightning, drought, earthquake, fire, explosion,
civil disturbance, acts of God or the public enemy, civil disturbance, or any
other cause beyond a Party's reasonable control but only if and to the extent
that the event directly affects the availability of the transmission or
distribution facilities of PJM or Pepco which are necessary to deliver
capacity or energy to the Service Load. Force Majeure shall not include
events affecting the availability or cost of operating any generating facility
or resource.
9.3 Notification. A Party shall not be entitled to rely on the
occurrence of an event of Force Majeure as a basis for being excused from
performance of its obligations under this Agreement unless the Party relying
on the event or condition shall: (a) provide prompt written notice of such
<PAGE>
Force Majeure event to the other Party, including an estimation of its
expected duration and the probable impact on the performance of its
obligations hereunder; (b) exercise all reasonable efforts to continue to
perform its obligations under this Agreement; (c) expeditiously take action to
correct or cure the event or condition excusing performance; (d) exercise all
reasonable efforts to mitigate or limit damages to the other Party; and (e)
provide prompt notice to the other Party of the cessation of the event or
condition giving rise to its excuse from performance. Subject to this Section
9.3, any obligation under this Agreement shall be suspended only to the extent
caused by such Force Majeure and only during the continuance of any inability
of performance caused by such Force Majeure but for no longer period.
ARTICLE 10
INDEMNIFICATION FOR THIRD PARTY CLAIMS
10.1 Generator's Indemnification. Generator shall indemnify,
hold harmless, and defend Pepco and its Affiliates, as the case may be, and
their respective officers, directors, employees, agents, contractors,
subcontractors, invitees, successors and permitted assigns from and against
any and all claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and disbursements
incurred by any of them in any action or proceeding between Pepco and a third
party or Generator) for damage to property of unaffiliated third parties,
injury to or death of any person, including Pepco's employees or any third
parties, to the extent caused, by the negligence or willful misconduct of
Generator's and/or its officers, directors, employees, agents, contractors,
subcontractors or invitees arising out of or connected with Generator's
performance or breach of this Agreement, or the exercise by Generator of its
rights hereunder.
10.2 Pepco's Indemnification. Pepco shall indemnify, hold
harmless, and defend Generator and its Affiliates, as the case may be, and
their respective officers, directors, employees, agents, contractors,
subcontractors, invitees, successors and permitted assigns from and against
any and all claims, liabilities, costs, damages, and expenses (including,
without limitation, reasonable attorney and expert fees, and disbursements
incurred by any of them in any action or proceeding between the Generator and
a third party or Pepco) for damage to property of unaffiliated third parties,
injury to or death of any person, including Generator's employees or any third
parties, to the extent caused by the negligence or willful misconduct of Pepco
and/or its officers, directors, employees, agents, contractors, subcontractors
<PAGE>
or invitees arising out of or connected with Pepco's performance or breach of
this Agreement, or the exercise by Pepco of its rights hereunder.
10.3 Indemnification Procedures. If either Party intends to seek
indemnification under this Article 10 from the other Party, the Party seeking
indemnification shall give the other Party notice of such claim within ninety
(90) days of the later of the commencement of, or the Party's actual knowledge
of, such claim or action. Such notice shall describe the claim in reasonable
detail, and shall indicate the amount (estimated if necessary) of the claim
that has been, or may be sustained by, said Party. To the extent that the
other Party will have been actually and materially prejudiced as a result of
the failure to provide such notice, such notice will be a condition precedent
to any liability of the other Party under the provisions for indemnification
contained in this Agreement. Neither Party may settle or compromise any claim
without the prior consent of the other Party; provided, however, said consent
shall not be unreasonably withheld or delayed.
10.4 Survival. The indemnification obligations of each Party
under this Article 10 shall continue in full force and effect regardless of
whether this Agreement has either expired or been terminated or canceled.
ARTICLE 11
DEFAULT
11.1 Event of Default. Unless excused by Force Majeure, each of
the following events shall constitute an event of default (an "Event of
Default") under this Agreement:
(a) the failure by a Party to pay any amount due within
thirty (30) days after receipt of written notice of nonpayment by the other
Party, unless the payment of such amount is disputed in good faith;
(b) a Party's breach of any material term or condition of
this Agreement including any material breach of a representation, warranty or
covenant made in this Agreement which, after receiving written notice of the
breach from the non-breaching Party (such notice to set forth in reasonable
detail the nature of the default and, where known and if applicable, the steps
necessary to cure such default), (i) the breaching Party fails to cure within
thirty (30) days following receipt of the notice or (ii) if such default is of
<PAGE>
such a nature that it cannot be cured within thirty (30) days following
receipt of such notice, the breaching Party fails within such thirty (30) days
to commence the necessary cure and fails at any time thereafter diligently and
continuously to prosecute such cure to completion provided that the cure is
completed no later than 180 days after the receipt of the default notice ;
(c) the appointment of a receiver or liquidator or trustee
for either Party and such receiver, liquidator or trustee is not discharged
within sixty (60) days;
(d) the entry of a decree adjudicating a Party as bankrupt
or insolvent, and such decree is continued undischarged and unstayed for a
period of sixty (60) days; or
(e) the filing of a voluntary or involuntary petition in
bankruptcy under any provision of any federal or state bankruptcy law by a
Party or against it, and, with respect to an involuntary petition in
bankruptcy, such petition continues undischarged and unstayed for a period of
sixty (60) days.
11.2 Remedies. Upon the occurrence of an Event of Default, the
non-defaulting Party may (a) terminate this Agreement by providing sixty (60)
days' prior written notice to the defaulting Party and this Agreement shall
thereupon terminate upon receipt of regulatory approval for such termination,
but not before the date specified in the notice, and/or (b) subject to Section
8.2 of this Agreement, exercise all such rights and remedies as may be
available to it under this Agreement or at law or equity with respect to such
Event of Default.
ARTICLE 12
PROJECTIONS AND OPERATING COMMITTEE
12.1 Projections. No later than three (3) business days prior
to each Monday during the term of this Agreement, Pepco shall provide
Generator with non-binding projections of the Services to be provided by
Generator to Pepco under this Agreement for the week beginning that Monday.
12.2 Operating Committee. The Parties shall establish an
operating committee consisting of one representative for each Party
<PAGE>
("Operating Committee"). The Operating Committee shall act only by unanimous
agreement or consent. The Parties shall designate their respective
representatives to the Operating Committee, plus an alternate by written
notice. Each Party's representative on the Operating Committee is authorized
to act on behalf of such Party with respect to any matter arising under this
Agreement which is to be decided by the Operating Committee, however, the
Operating Committee shall not have any authority to modify or otherwise alter
the rights and obligations of the Parties hereunder. The Operating Committee
shall develop and implement suitable policies and procedures with to
coordinate the interaction of the Parties with respect to the performance of
their duties and obligations under this Agreement.
ARTICLE 13
COST RESPONSIBILITIES AND BILLING PROCEDURES
13.1 Billing Procedures.
(a) Within ten (10) days after the first day of each Month
Pepco shall provide to Generator a written invoice setting forth (a) the
amount Pepco owes to Generator pursuant to Article 6 of this Agreement for
Services and any other payments which may be due hereunder, and (b) the
amounts, if any, that Generator owes to Pepco pursuant to this Agreement.
Each invoice shall (i) delineate the Month in which the Services or
Alternative Services were provided or reimbursable charges were incurred, (ii)
fully describe the Services or Alternative Services rendered or reimbursable
charges incurred, (iii) be itemized to reflect the Services or Alternative
Services performed or provided or reimbursable charges incurred, and (iv)
provide reasonable detail as to the calculation of the amounts involved.
(b) All invoices shall be paid within fifteen (15) days
after the date of issuance, but not earlier than the 25th day of the month in
which the invoice is rendered. All payments shall be made by wire transfer to
a bank designated in writing by such Party. Payment of invoices shall not
relieve the paying Party from any responsibilities or obligations it has under
this Agreement, nor shall such payment constitute a waiver of any claims
arising hereunder.
(c) To the extent that, for any billing period, Generator
is obligated to pay to Pepco amounts due and calculated pursuant to this
Section 13.1, Pepco may use such amounts as a set-off against any amounts owed
by Pepco to Generator.
<PAGE>
13.2 Billing Disputes. In the event of a billing dispute between
the Parties, (i) each Party shall continue to perform its obligations in
accordance with the terms of this Agreement subject to the other Party's
rights hereunder, and (ii) the Party required to make payments hereunder shall
pay to the other Party all invoiced amounts when due, net of any set-offs
permitted under Section 13.1(d), that are not in dispute. Payment of invoices
by either Party shall not relieve the paying Party from any responsibilities
or obligations it has under this Agreement; nor shall it constitute a waiver
of any claims arising hereunder.
13.3 Interest on Unpaid Balances. Interest on any unpaid amounts
shall be calculated in accordance with the methodology specified for interest
on refunds in FERC regulations at 18 C.F.R. Section 35.19a(a)(2)(iii).
Interest on delinquent amounts shall be calculated from the due date of the
bill to the date of payment. When payments are made by mail, bills shall
be considered as having been paid on the date of receipt by the other Party.
ARTICLE 14
CONFIDENTIALITY
14.1 Confidentiality Obligations of Pepco. Each Party shall hold
in confidence, unless compelled to disclose by judicial or administrative
process or other provisions of law, all documents and information furnished by
one Party to the other Party in connection with this Agreement marked
"Confidential" or "Proprietary." Except to the extent that such information
or documents are (i) generally available to the public other than as a result
of a disclosure by a receiving Party in breach of this Agreement, (ii)
available to the receiving Party on a non-confidential basis prior to
disclosure by the other Party , or (iii) available to the receiving Party on a
non-confidential basis from a source other than the other Party, provided that
such source is not known, and by reasonable effort could not be known, by the
receiving Party to be bound by a confidentiality agreement with the other
Party or otherwise prohibited from transmitting the information to the
receiving Party by a contractual, legal or fiduciary obligation, the receiving
Party shall not release or disclose such information to any other person,
except to its employees, representatives or agents on a need-to-know basis, in
connection with this Agreement who has not first been advised of the
confidentiality provisions of this Section 14.1 and has agreed in writing to
comply with such provisions. In no event shall such information be disclosed
in violation of the requirements of FERC Orders 889 and 889-A, and any
successor thereto. The Party receiving confidential information from the
<PAGE>
other Party shall promptly notify the other Party if it receives notice or
otherwise concludes that the production of any information subject to this
Section 14.1 is being sought under any provision of law and the receiving
Party shall use reasonable efforts in cooperation with the other Party to seek
confidential treatment for such confidential information provided thereto.
14.2 Confidentiality of Audits. The independent auditor
performing any audit, as referred to in Article 20, shall be subject to a
confidentiality agreement between the auditor and the Party being audited.
Such audit information shall be treated as confidential except to the extent
that its disclosure is required by regulatory or judicial order, for
reliability purposes pursuant to PJM requirements and pursuant to the FERC's
rules and regulations. Except as provided herein, neither Party will disclose
the audit information to any third party, without the other Party's prior
written consent. Audit information in the hands of the Party not being
audited shall be subject to all provisions of Article 20.
14.3 Remedies. The Parties agree that monetary damages would be
inadequate to compensate a Party for the other Party's breach of its
obligations under Sections 14.1 and 14.2. Each Party accordingly agrees,
subject to Section 8.2, that the other Party shall be entitled to equitable
relief, by way of injunction or otherwise, if the first Party breaches or
threatens to breach its obligations under Sections 14.1 or 14.2 of this
Agreement, as applicable, which equitable relief shall be granted without bond
or proof of damages, and the receiving Party shall not plead in defense that
there would be an adequate remedy at law.
ARTICLE 15
DISPUTE RESOLUTION
15.1 Disputes. A Party with a claim or dispute under this
Agreement shall submit to the Operating Committee a notification of such claim
or dispute within sixty (60) days after the circumstances that gave rise to
the claim or the question or issue in dispute. The notification shall be in
writing and shall include a concise statement of the claim or the issue or
question in dispute, a statement of the relevant facts and documentation to
support the claim. In the event the Operating Committee is unable, in good
faith, to resolve their disagreement in a manner satisfactory to both Parties
within thirty (30) days after receipt by the Operating Committee of a
notification specifying the claim, issue or question in dispute, the Parties
<PAGE>
shall refer the dispute to their respective senior management. If, after
using their good faith best efforts to resolve the dispute, senior management
cannot resolve the dispute within thirty (30) days, the Parties shall utilize
the arbitration procedures set forth below in Section 15.2 to resolve a
dispute, provided that nothing herein or therein shall prohibit a Party from
at any time requesting from a court of competent jurisdiction a temporary
restraining order, preliminary injunction, or other similar form of equitable
relief to enforce performance of the provisions of this Agreement.
15.2 Arbitration.
(a) Unless the Parties otherwise mutually agree in writing
to another form of dispute resolution such as dispute resolution under the PJM
Agreement or the MAAC agreement, any arbitration initiated under this
Agreement shall be conducted before a single neutral arbitrator appointed by
the Parties within thirty (30) days of receipt by respondent of the demand for
arbitration. If the Parties are unable to agree on an arbitrator, such
arbitrator shall be appointed by the American Arbitration Association. Unless
the Parties agree otherwise, the arbitrator shall be an attorney or retired
judge with at least fifteen (15) years of experience, and shall not have any
current or past substantial business or financial relationships with any Party
to the arbitration. If possible, the arbitrator shall have experience in the
electric utility industry. Unless otherwise agreed, the arbitration shall be
conducted in accordance with the American Arbitration Association's Commercial
Arbitration Rules, then in effect. Any arbitration proceedings, decision or
award rendered hereunder and the validity, effect and interpretation of this
arbitration agreement shall be governed by the Federal Arbitration Act of the
United States, 9 U.S.C. Sections 1 et seq. The location of any arbitration
hereunder shall be in the District of Columbia.
(b) The arbitration shall, if possible, be concluded not
later than six (6) months after the date that it is initiated. The arbitrator
shall be authorized only to interpret and apply the provisions of this
Agreement or any related agreements entered into under this Agreement and
shall have no power to modify or change any of the above in any manner. The
arbitrator shall have no authority to award punitive or multiple damages or
any damages inconsistent with this Agreement. The arbitrator shall, within
thirty (30) days of the conclusion of the hearing, unless such time is
extended by agreement of the Parties, notify the Parties in writing of his or
her decision, stating his or her reasons for such decision and separately
<PAGE>
listing his or her findings of fact and conclusions of law. The decision of
the arbitrator rendered in such a proceeding shall be final and binding on the
Parties. Judgment on the award may be entered upon it in any court having
jurisdiction.
(c) Nothing in this Agreement shall preclude, or be
construed to preclude, any Party from filing a petition or complaint with FERC
with respect to any arbitrable claim over which FERC has jurisdiction. In
such case, the other Party may request FERC to reject or to waive
jurisdiction. If FERC rejects or waives jurisdiction with respect to all or a
portion of the claim, the portion of the claim not so accepted by FERC shall
be resolved through arbitration, as provided in this Agreement. To the extent
that FERC asserts or accepts jurisdiction over the claim, the decision,
finding of fact or order of FERC shall be final and binding, subject to
judicial review under the Federal Power Act, and any arbitration proceedings
that may have commenced with respect to the claim prior to the assertion or
acceptance of jurisdiction by FERC shall be terminated.
ARTICLE 16
REPRESENTATIONS
16.1 Representations of Pepco. Pepco hereby represents and
warrants to Generator as follows:
(a) Incorporation. Pepco is a corporation duly organized,
validly existing and in good standing under the laws of the District of
Columbia and the Commonwealth of Virginia, and has all requisite corporate
power and authority to own, lease and operate its material assets and
properties and to carry on its business as now being conducted.
(b) Authority. Pepco has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Pepco of this
Agreement and the consummation by Pepco of the transactions contemplated
hereunder have been duly and validly authorized by the Board of Directors of
Pepco or by a committee thereof to whom such authority has been delegated and
no other corporate proceedings on the part of Pepco are necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Pepco and, assuming that this
Agreement constitutes a valid and binding agreement of Generator, constitutes
<PAGE>
a valid and binding agreement of Pepco, enforceable by Pepco in accordance
with its terms.
(c) Consents and Approvals; No Violation.
(i) Neither the execution and delivery of this Agreement by
Pepco nor performance by Pepco of its obligations hereunder will (A) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-laws of Pepco, (B) result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which Pepco or
any of its subsidiaries is a party or by which any of their respective assets
may be bound or (C) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Pepco, or any of its assets, except in the case of
clauses (B) and (C) for such failures to obtain a necessary consent, defaults
and violations which would not, individually or in the aggregate, have a
material adverse effect on the ability of Pepco to discharge its obligations
under this Agreement (a "Pepco Material Adverse Effect").
(ii) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any governmental authority is
necessary for performance by Pepco of its obligations hereunder, other than
such declarations, filings, registrations, notices, authorizations, consents
or approvals which, if not obtained or made would not, individually or in the
aggregate, have a Pepco Material Adverse Effect.
16.2 Representations of Generator. Generator hereby represents
and warrants to Pepco as follows:
(a) Incorporation. Generator is a [corporation] duly
[incorporated], validly existing and in good standing under the laws of the
State of __________, and has all requisite [corporate] power and authority to
own, lease and operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Generator has all necessary [corporate]
power and authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery by the
Generator of this Agreement and the consummation by Generator of the
<PAGE>
transactions contemplated hereby have been duly and validly authorized the
[Board of Directors] of Generator or by a committee thereof to whom such
authority has been delegated and no other [corporate] proceedings on the part
of Generator are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Generator and, assuming that this Agreement constitutes a valid
and binding agreement of Pepco, constitutes a valid and binding agreement of
Generator, enforceable against Generator in accordance with its terms.
(c) Consents and Approvals.
(i) Neither the execution and delivery of this Agreement by
Generator nor performance by Generator of its obligations hereunder will (A)
conflict with or result in any breach of any provision of the [Certificate of
Incorporation or By-laws] of Generator, (B) result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which Generator
or any of its subsidiaries is a party or by which any of their respective
assets may be bound or (C) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Generator, or any of its assets,
except in the case of clauses (B) and (C) for such failures to obtain a
necessary consent, defaults and violations which would not, individually or in
the aggregate, have a material adverse effect on the ability of Generator to
discharge its obligations under this Agreement (a "Generator Material Adverse
Effect").
(ii) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any Governmental Authority is
necessary for performance by Generator of its obligations hereunder, other
than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not obtained or made would not, individually
or in the aggregate, have a Generator Material Adverse Effect.
ARTICLE 17
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
17.1 Generally. Except as otherwise set forth in this Article
17, neither this Agreement nor any of the rights, interests, or obligations
<PAGE>
hereunder shall be assigned by either Party hereto, without the prior written
consent of the other Party, which consent shall not be unreasonably withheld
or delayed.
17.2 Pepco's Assignment Rights. Subject to Section 17.5 below,
upon ten (10) days prior written notice to Generator, Pepco may assign this
Agreement, and Pepco's rights, interests and obligations hereunder, to an
Affiliate of Pepco that assumes Pepco's obligations to provide Services to the
Service Load.
17.3 Generator's Assignment Rights. Subject to Section 17.5
below, Generator may assign, transfer, pledge or otherwise dispose of its
rights and interests hereunder to a trustee, lending institution, or other
Person for the purposes of financing or refinancing the Auctioned Assets,
including upon or pursuant to the exercise of remedies under such financing or
refinancing, or by way of assignments, transfers, conveyances of dispositions
in lieu thereof; provided, however, that no such assignment in accordance with
this Section 17.3 shall relieve or in any way discharge Generator from the
performance of its duties and obligations under this Agreement. Pepco agrees
to execute and deliver, at Generator's expense, such documents as may be
reasonably necessary to accomplish any such assignment, transfer, conveyance,
pledge or disposition of rights hereunder for purposes of the financing or
refinancing of the Facility, so long as Pepco's rights under this Agreement
are not thereby altered, amended, diminished or otherwise impaired.
17.4 Mergers or Consolidations. Subject to Section 17.5 below,
either Party may assign this Agreement to a successor to all or substantially
all of the assets of such Party by way of merger, consolidation, sale or
otherwise, provided such successor assumes in writing and becomes liable for
all of such Party's duties and obligations hereunder.
17.5 Limitations
(a) No assignment, transfer, conveyance, pledge or
disposition of rights, interests, duties or obligations under this Agreement
by a Party shall relieve that Party from liability and financial
responsibility for the performance thereof after any such transfer,
assignment, conveyance, pledge or disposition unless and until (i) the
transferee or assignee shall agree in writing to assume the obligations and
duties of that Party under this Agreement and to impose such obligations on
subsequent permitted transferees and assignees and (ii) the non-assigning
<PAGE>
Party has consented in writing to such assumption and to a release of the
assigning Party from such liability, such consent not to be unreasonably
withheld or delayed.
(b) If Generator terminates its existence as a [corporate]
entity by merger, acquisition, sale, consolidation or otherwise, or if all or
substantially all of Generator's assets are transferred to another person or
business entity without complying with this Article 17, Pepco shall have the
right, enforceable in a court of competent jurisdiction, to enjoin Generator's
successor from using its assets in any manner that does not comply with the
requirements of this Agreement or that impedes Pepco's ability to carry on its
ongoing business operations.
17.6 Successors. This Agreement and all of the provisions hereof
are binding upon, and inure to the benefit of, the Parties and their
respective successors and permitted assigns.
ARTICLE 18
NOTICES
Except as otherwise expressly set forth in this Agreement, all notices
and other communications hereunder shall be in writing and shall be deemed
given (as of the time of delivery or, in the case of a telecopied
communication, of confirmation) if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to the
Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson
General Counsel
<PAGE>
if to Generator, to:
c/o Southern Energy, Inc.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338-4780
Telecopier: (770) 821-6575
Attention:
ARTICLE 19
AMENDMENTS
19.1 Amendments. Except as provided in Section 19.2, this
Agreement shall not be amended, modified, or supplemented unless mutually
agreed to by the Parties in writing. Except as provided in Section 19.2(b)
below, the rates, terms and conditions contained in this Agreement are not
subject to change under Sections 205 or 206 of the Federal Power Act absent
the mutual written agreement of the Parties. It is the intent of this Section
19.1 that, except as provided in Section 19.2(b) below, the rates, terms and
conditions of this Agreement shall not be subject to change except by mutual
written agreement by the Parties.
19.2 PJM Agreement Modifications
(a) If the PJM Agreements are amended or modified so that
any schedule or section references herein to such agreements is changed, such
schedule or section references herein shall be deemed to automatically (and
without any further action by the Parties) refer to the new or successor
schedule or section in the PJM Agreements which replaces that originally
referred to in this Agreement.
(b) If the applicable provisions of the PJM Agreements
referenced herein, or any other PJM rules relating to the implementation of
this Agreement, are changed materially from those in effect on May 31, 2000,
the Operating Committee shall cooperate to make conforming changes to this
Agreement to fulfill the purposes of this Agreement; provided that no such
changes shall alter the economic benefits of this Agreement between the
Parties. If the Operating Committee fails to agree on such changes within 15
days, Pepco may unilaterally make conforming changes to this Agreement to
fulfill the purposes of this Agreement, and shall file such changes with the
<PAGE>
FERC on behalf of both Parties; provided that nothing herein shall prejudice
the Generator's rights to protest such change.
ARTICLE 20
AUDITS
The Parties shall have the right, during normal business hours, to
audit each other's accounts and records pertaining to transactions under this
Agreement, upon twenty (20) days prior written notice, at the offices where
such accounts and records are maintained. Any such audit of a Party's
accounts and records will be at the expense of the auditing Party, shall not
be made more frequently than once in any twelve (12) month period, and no such
audit may be made with respect to accounts and records relating to periods
more than twenty-four (24) months prior to the date of the audit notice. The
Party being audited will be entitled to review the audit report and any
supporting materials. The Party conducting the audit shall maintain the
confidentiality of all information obtained during the audit in compliance
with Section 14.2 of this Agreement. To the extent that audited information
includes confidential information, the auditing Party shall designate an
independent auditor at its expense to perform such audit.
ARTICLE 21
MISCELLANEOUS PROVISIONS
21.1 Waiver. Except as otherwise provided in this Agreement, any
failure of a Party to comply with any obligation, covenant, agreement, or
condition herein may be waived by the Party entitled to the benefits thereof
only by a written instrument signed by the Party granting such waiver, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
21.2 No Third Party Beneficiaries. Nothing in this Agreement is
intended to confer upon any other person except the Parties any rights or
remedies hereunder or shall create any third party beneficiary rights in any
person. No provision of this Agreement shall create any rights in any such
persons in respect of any benefits that may be provided, directly or
indirectly, under any employee benefit plan or arrangement except as expressly
provided for thereunder.
<PAGE>
21.3 Governing Law This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland (regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law).
21.4 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.
21.5 Interpretation. When a reference is made in this Agreement
to an article, section, schedule or exhibit, such reference shall be to an
article or section of, or schedule or exhibit to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation" or equivalent words. The words
"hereof", "herein" and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter genders of
such term. Unless otherwise expressly stated otherwise herein, the word
"day" shall mean any calendar day including weekends and holidays. Any
agreement, instrument, statute, regulation, rule or order defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument, statute, regulation, rule or order as from time to
time amended, modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of statutes,
regulations, rules or orders) by succession of comparable successor statutes,
regulations, rules or orders and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution of this
Agreement, and, accordingly, there shall be no presumption that this Agreement
or any provision hereof be construed against the Party that drafted this
Agreement.
21.6 Jurisdiction and Enforcement. Each of the Parties
irrevocably submits to the exclusive jurisdiction of the federal and state
courts of the State of Maryland for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated
<PAGE>
hereby. Each of the Parties agrees to commence any action, suit or proceeding
relating hereto either in the federal courts of the State of Maryland or, if
such suit, action or proceeding may not be brought in such court for
jurisdictional reasons, in the state courts of the State of Maryland. Each of
the Parties further agrees that service of process, summons, notice or
document by hand delivery or U.S. registered mail at the address specified for
such Party in Article 18 (or such other address specified by such Party from
time to time pursuant to Article 18) shall be effective service of process for
any action, suit or proceeding brought against such Party in any such court.
Each of the Parties irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or the transactions contemplated hereby in the federal and state
courts of the State of Maryland and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
21.7 Entire Agreement. This Agreement, the Asset Sale Agreement,
the Confidentiality Agreement and the Ancillary Agreements including the
exhibits, schedules, documents, certificates and instruments referred to
herein or therein and other contracts, agreements and instruments contemplated
hereby or thereby, embody the entire agreement and understanding of the
Parties in respect of the transactions contemplated by this Agreement. There
are no restrictions, promises, representations, warranties, covenants or
undertakings other than those expressly set forth or referred to herein or
therein. This Agreement, the Asset Sale Agreement and the Ancillary
Agreements supersede all prior agreements and understandings between the
Parties with respect to the transactions contemplated by this Agreement other
than the Confidentiality Agreement.
21.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the Parties shall negotiate in good faith to modify this Agreement
so as to effect the original intent of the Parties as closely as possible to
the fullest extent permitted by applicable law in an acceptable manner to the
end that the transactions contemplated hereby are fulfilled to the extent
possible.
<PAGE>
21.9 Further Assurances. The Parties hereto agree to execute and
deliver promptly, at the expense of the Party requesting such action, any and
all other and further instruments, documents and information which may be
reasonably requested in order to effectuate the transactions contemplated
hereby. Each Party agrees to cooperate with, assist and accommodate all
reasonable requests made by the other Party in respect of any regulatory
approval necessary for, or any regulatory proceeding relating to, the
execution, delivery or performance of this Agreement. Each Party further
agrees to comply in all material respects with all laws of governmental
authorities relating to this Agreement and the consummation of the
transactions contemplated hereby.
21.10 Independent Contractor Status. Nothing in this
Agreement shall be construed as creating any relationship between Pepco and
Generator other than that of independent contractors.
21.11 Conflicts. Except with respect to the amendments,
indemnification, liability, default and remedies provisions contained herein
or as otherwise expressly provided herein, in the event of any conflict or
inconsistency between the terms of this Agreement and the terms of the Asset
Sale Agreement, the terms of the Asset Sale Agreement shall prevail.
<PAGE>
IN WITNESS WHEREOF, Pepco and Generator have caused this Transition
Power Agreement (Maryland) to be signed by their respective duly authorized
officers as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By:____________________________
Name:
Title:
[GENERATOR]
By:____________________________
Name:
Title:
<PAGE>
SCHEDULE 1
DEFINITIONS
Part A. Capitalized terms not defined in the body of the Agreement
shall have the meaning set forth in Part A of this Schedule 1. (Part B of
this Schedule 1 sets forth capitalized terms defined within the Agreement.)
1. " Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934.
2. "Auctioned Assets" has the meaning set forth in the Asset
Sale Agreement.
3. "Capacity Credits" has the meaning set forth in the PJM
Reliability Agreement.
4. "Capacity Resources" has the meaning set forth in the PJM
Reliability Agreement.
5. "Contract Year 1" means the period between the Effective
Date through and including December 31, 2001.
6. "Contract Year 2" means the period between January 1, 2002
through and including December 31, 2002.
7. "Contract Year 3" means the period between January 1, 2003
through and including December 31, 2003.
8. "Contract Year 4" means the period between January 1, 2004
through and including June 30, 2004.
9. "Closing" has the meaning set forth in the Asset Sale
Agreement.
10. "Confidentiality Agreement" has the meaning set forth in the
Asset Sale Agreement.
11. "FERC" means the Federal Energy Regulatory Commission or its
successors.
12. "Fixed Transmission Rights" has the meaning set forth in the
PJM Operating Agreement.
<PAGE>
13. "Full Energy Requirements" means the full electric energy
requirements of the Service Load in any hour, measured in megawatt hours at
the Delivery Points.
14. "Generator" has the meaning set forth in the preamble of
this Agreement and shall include its permitted successors and assigns.
15. "MDPSC" means the Maryland Public Services Commission or its
successor.
16. "Metered Energy Requirements" means the full electric energy
requirements of the Service Load in any hour, measured in megawatt hours at
the retail (customer revenue meter) level. For customers without, interval
metering, Pepco will use customer or retail class profiles in accordance with
the MDPSC regulations to distribute periodic metered energy usage to obtain
hourly customer energy usage. When Pepco curtailable load programs are
operated, customer loads which are curtailed will be increased by Pepco to
reflect the hourly energy usage which would have occurred if curtailments had
not taken place.
17. "Month" means a calendar month.
18. "Network Customer" has the meaning set forth in the PJM
Tariff.
19. "Network Load" has the meaning set forth in the PJM Tariff.
20. "Optional Energy" means the Optional Energy Percent, as
elected by Pepco through the exercise of its Call Options, of Pepco's Full
Energy Requirements, including the Renewable Energy Percent.
21. "Pepco" has the meaning set forth in the preamble of this
Agreement and shall include its permitted successors or assigns.
22. "PJM" means the Pennsylvania New Jersey-Maryland
interconnected power pool operated under the PJM Operating Agreement and any
successor thereto including any regional transmission organization,
independent system operator, transco, or any other independent system
administrator that possesses operational control or planning control over
Pepco's transmission system.
23. "PJM Agreements" means the PJM Operating Agreement, PJM
Reliability Agreement, and PJM Tariff.
24. "PJM Control Area" has the meaning set forth in the PJM
Reliability Agreement.
<PAGE>
25. "PJM Operating Agreement" means the Amended and Restated
Operating Agreement of the PJM Interconnection LLC dated as of June 2, 1997.
26. "PJM Interconnection LLC" means the independent system
operator of the PJM Control Area pursuant to the PJM Operating Agreement and
the PJM Tariff.
27. "PJM Reliability Agreement" means the PJM Reliability
Assurance Agreement dated June 2, 1997, establishing obligations, standards
and procedures for maintaining the reliable operation of the PJM Control Area.
28. "PJM System Operator" means the PJM Interconnection LLC
energy control center staff responsible for central dispatch as provided in
the PJM Agreement.
29. "PJM Tariff" means the PJM Open Access Transmission Tariff
providing transmission service within the PJM Control Area.
30. "Planning Period" has the meaning set forth in the PJM
Reliability Agreement.
31. "Renewable Energy Resources" means renewable energy resource
as defined in MD CODE, PUBLIC UTILITY COMPANIES Section 1.01(z).
32. "Renewable Energy Percent" means electricity from Renewable
Energy Resources which is equal to 0.997 percent of the Required Energy or
Optional Energy, as applicable.
33. "Required Energy" means the Required Energy Percent of
Pepco's Full Energy Requirements, including the Renewable Energy Percent.
34. "Service Load" means (i) all of Pepco's default service
retail electric energy customers located in Pepco's service territory, as such
territory exists on the Effective Date, in the State of Maryland and (ii)
qualifying facilities to which Pepco is obligated to sell energy pursuant to
the rates and terms set forth in Pepco's qualifying facilities tariff on file
with the Maryland Public Service Commission which is currently designated as
MD-CG-SPP.
35. "Summer Month" means each Month during the period of May 1
through September 30.
<PAGE>
36. "Winter Month" means each Month during the period of October
1 through April 30.
Part B. The following terms have the meaning specified in the section
of this Agreement set forth opposite to such term:
Term Agreement Reference
Agreement Preamble
Alternative Services Section 8.1
Ancillary Services Article 4
Ancillary Services Requirements Article 4
Asset Sale Agreement First Recital
Call Options Section 5.2(a)
Capacity Resources Plan Section 3.2(a)
Capacity Resources Requirements Section 3.1(a)
Delivery Points Section 5.3
Effective Date Section 2.1
Event of Default Section 11.1
Force Majeure Section 9.2
Generator Material Adverse Effect Section 16.2(c)(i)
Operating Committee Article 12
Optional Energy Percent Section 5.2(a)
Pepco Material Adverse Effect Section 16.1(c)(i)
Party or Parties Preamble
PPAs First Recital
Required Energy Percent Section 5.1
Services Section 8.1
<PAGE>
EXHIBIT J
AFTER RECORDING, RETURN TO: PARCEL ID
_________________________________ _________________
_________________________________ _________________
_________________________________
STREET ADDRESS:
_________________
_________________
SPECIAL WARRANTY DEED
THIS SPECIAL WARRANTY DEED, is made as of ______________, 2000
and is by and between POTOMAC ELECTRIC POWER COMPANY, a District of
Columbia and Virginia corporation (the "Grantor") and
__________________________________ (the "Grantee").
WITNESSETH:
THAT, for and in consideration of the sum of Ten Dollars
($10.00), cash in hand paid, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Grantor does hereby grant, bargain, sell and
convey, with Special Warranty of Title, unto the Grantee, those
certain parcels of land situate in the County of ______________,
State of Maryland (the "Real Estate"), and being more particularly
described in Exhibit A attached hereto and incorporated herein by
reference (the "Property"), together with all improvements located
thereon and all appurtenances thereunto belonging.
This conveyance is made subject to all recorded covenants,
restrictions, easements, reservations, agreements and rights-of-way
applicable to the Real Estate or any part thereof.
TO HAVE AND TO HOLD the Real Estate, together with all rights,
privileges, and advantages thereunto belonging or appertaining to
the Grantee, its successors and assigns, forever.
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Special
Warranty Deed to be executed as of the date first above written.
WITNESS: GRANTOR:
POTOMAC ELECTRIC POWER COMPANY
________________________ By: ________________________
Name: ________________________
Title: ________________________
State of _____________________)
)
County of ________________ )
On this ___ day of ______________, 2000, before me, the
undersigned Notary Public, personally appeared ___________________
who acknowledged himself/herself to be the _____________ of Potomac
Electric Power Company, and that he/she, as ____________ of such
corporation, being authorized so to do, executed the foregoing
Instrument for the purposes therein contained, by signing his/her
name, as _____________ of Potomac Electric Power Company.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
______________________________
Notary Public
My commission expires: __________________
<PAGE>
MARYLAND CERTIFICATION
This is to certify that the foregoing instrument was prepared
by or under the supervision of the undersigned, an attorney duly
admitted to practice before the Court of Appeals of the State of
Maryland.
__________________________________
_______________, Attorney at Law
<PAGE>
EXHIBIT A
All that certain land situate in ____________ County, Maryland, and
more particularly described as follows:
<PAGE>
EXHIBIT K
OPINION OF COUNSEL TO SELLER
1. Seller is a corporation validly existing and in good
standing under the laws of the District of Columbia
and the Commonwealth of Virginia. Seller has all
necessary corporate power and authority to execute
and deliver the Agreement and each of the Ancillary
Agreements to which Seller is a party and to
consummate the transactions contemplated thereby;
and the execution and delivery of the Agreement
and each of the Ancillary Agreements to which
Seller is a party and the consummation by Seller of
the transactions contemplated thereby have been duly
and validly authorized by all necessary corporate
action required on the part of Seller.
2. The Agreement and each of the Ancillary Agreements
to which Seller is a party have been duly and
validly executed and delivered by Seller,
and assuming that the Agreement and each such
Ancillary Agreement constitutes a valid and
binding obligation of each other party thereto,
subject to receipt of all Required Regulatory
Approvals, constitute valid and binding
obligations of Seller, enforceable against
Seller in accordance with their respective terms,
except as may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting or
relating to enforcement of cerditor's rights
generally and general principles of equity,
including without limitation, concepts of
materiality, reasonableness, good faith and fair
dealing (regardless of whether enforcement is
considered in a proceeding at law or in equity).
With respect to the foregoing opinion,
(i) insofar as provisions contained in
the Agreement and the Ancillary Agreements
provide for indemnification, exoneration or
limitations of liability, the enforceability
thereof may be limited by public policy
considerations and (ii) the availability of
a decree for specific performance or an
injunction is subject to the discretion of
the court requested to issue any such decree
or injunction.
3. The execution, delivery and performance of the
Agreement and each Ancillary Agreement to which
Seller is a party does not (a) conflict with the
Articles of Incorporation or Bylaws of Seller,
(b) to the knowledge of Seller's counsel, constitute
a violation of or default under those agreements or
instruments set forth on a Schedule attached to the
opinion and which have been identified to such
counsel by Seller as all the agreements and
instruments which are material to the business
or financial condition of Seller, or
(c) violate any order, writ, injunction, decree,
statute, rule or regulation, of which Seller's
counsel has knowledge, applicable to Seller or
the Auctioned Assets, except for such violatons
which
<PAGE>
would not, individually or in the aggregate,
create a Material Adverse Effect.
4. Except for the Seller Required Regulatory
Approvals, no declaration, filing or registration
with, or notice to, or authorization, consent or
approval of any Governmental Authority is
necessary for the consummation by Seller of the
transactions contemplated by the Agreement and
each of the Ancillary Agreements to which
Seller is a party, other than such declarations,
filings, registrations, notices, authorizations,
consents or approvals (i) which, if not obtained
or made, would not, individually or in the
aggregate, create a Material Adverse Effect or
(ii) which relate to the Transferable Permits.
In rendering such opinion, such counsel may (A) rely in
respect of matters of fact upon certificates of officers and
employees of Seller and upon information obtained from public
officials, (B) assume that all documents submitted to counsel as
originals are authentic, that all copies submitted to counsel
conform to the originals thereof, and that the signatures on all
documents examined by counsel are genuine, (C) state that the
opinion is limited to federal laws, the Virginia Stock Corporation
Act and the laws of the District of Columbia, (D) state that
counsel expresses no opinion with respect to the title of Seller to
any of the Auctioned Assets, (E) state that counsel expresses no
opinion with respect to state or local taxes or tax statutes to
which Seller or the Auctioned Assets may be subject, (F) state
that counsel expresses no opinion with respect to any bulk sales,
bulk transfer or similar laws to which Seller or the Auctioned
Assets may be subject, (G) state that counsel expresses no opinion
with respect to provisions of the Agreement and the Ancillary
Agreements relating to subject matter jurisdiction of the United
States District Court for the District of Columbia or relating to
the waiver of an inconvenient forum, and (H) with respect to the
opinions expressed in paragraphs 3 and 4 above, state that
counsel is relying as to such matters on the opinions of in-house,
local and other special counsel to Seller to the extent of the
matters set forth in such opinions. Certificates and opinions
relied upon by Seller's counsel shall be delivered to Buyer
together with the opinion of Seller's counsel.
<PAGE>
EXHIBIT L
OPINION OF COUNSEL TO BUYER
1. Buyer is a corporation validly existing and in good
standing under the laws of its jurisdiction of
incorporation. Buyer has all necessary corporate
power and authority to execute and deliver the
Agreement and each of the Ancillary Agreements
to which Buyer is a party and to consummate the
transactions contemplated thereby; and the execution
and delivery of the Agreement and each of the
Ancillary Agreements to which Buyer is a party
and the consummation by Buyer of the
transactions contemplated thereby have been
duly and validly authorized by all necessary
corporate action required on the part of Buyer.
2. The Agreement and each of the Ancillary Agreements
to which Buyer is a party have been duly and
validly executed and delivered by Buyer, and
assuming that the Agreement and each such
Ancillary Agreement constitutes a valid and binding
obligation of the other parties thereto, subject to
receipt of all Required Regulatory Approvals,
constitute valid and binding obligations of
Buyer, enforceable against Buyer in accordance
with their respective terms, except as may be
limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization,
moratorium or other similar laws affectomg or
relating to enforcement of creditors' rights
generally and general principles of equity,
including without limitation, concepts of
materiality, reasonableness, good faith and
fair dealing (regardless of whether enforcement
is considered in a proceeding at law or in
equity). With respect to the foregoing opinion,
(i) insofar as provisions contained in the
Agreement and the Ancillary Agreements
provide for indemnification, exoneration or
limitations of liability, the enforceability
thereof may be limited by public policy
considerations and (ii) the availability of
a decree for specific performance or an
injunction is subject to the discretion of the court
requested to issue any such decree or injunction.
3. The execution, delivery and performance of the
Agreement and each Ancillary Agreement to
which Buyer is a party does not (a) conflict
with the Articles of Incorporation or Bylaws of
Buyer, (b) to the knowledge of Buyer's counsel,
constitute a violation of or default under
those agreements or instruments set forth
on a Schedule attached to the opinion
and which have been identified to such
counsel by Buyer as all the agreements
and instruments which are material to
the business or financial condition of
Buyer, or (c) violate any order, writ
injunction, decree, statute, rule or
regulation, of which Buyer's counsel has
knowledge, applicable to Buyer or any of its
assets, except for such violations which would
<PAGE>
not, individually or in the aggregate, create
a Buyer Material Adverse Effect.
4. Except for the Buyer Required Regulatory
Approvals, no declaration, filing or
registration with, or notice to, or
authorization, consent or approval of
any Governmental Authority is necessary
for the consummation by Buyer of the
transactions contemplated by the Agreement
and each of the Ancillary Agreements
to which Buyer is a party, other than
such declarations, filings, registrations, notices,
authorizations, consents or approvals which
relate to the Transferable Permits.
In rendering such opinion, such counsel may (A) rely in
respect of matters of fact upon certificates of officers and
employees of Buyer and upon information obtained from public
officials, (B) assume that all documents submitted to counsel as
originals are authentic, that all copies submitted to counsel
conform to the originals thereof, and that the signatures on all
documents examined by counsel are genuine, (C) state that the
opinion is limited to federal laws, the [corporate statute of
Buyer's jurisdiction of incorporation] and the laws of the District
of Columbia, (D) state that counsel expresses no opinion with
respect to provisions of the Agreement and the Ancillary Agreements
relating to the subject matter jurisdiction of the United States
District Court for the District of Columbia and relating to the
waiver of an inconvenient forum, and (E) with respect to the
opinions expressed in paragraphs 3 and 4 above, state that counsel
is relying as to such matters on the opinions of in-house, local
and other special counsel to Buyer to the extent of the matters set
forth in such opinions. Certificates and opinions relied upon by
Buyer's counsel shall be delivered to Seller together with the
opinion of Buyer's counsel.
<PAGE>
EXHIBIT M
OPINION OF COUNSEL TO GUARANTOR
1. Guarantor is a corporation validly existing
and in good standing under the laws of its
jurisdiction of incorporation. Guarantor has
all necessary corporate power and authority to
execute and deliver the Guarantee Agreement
and to consummate the transactions contemplated
thereby; and the execution and delivery of the
Guarantee Agreement and the consummation by
by Guarantor of the transactions contemplated
thereby have been duly and validly authorized
by all necessary corporate action required on
the part of Guarantor.
2. The Guarantee Agreement has been duly and validly
executed and delivered by Guarantor and, assuming
that the Guarantee Agreement constitutes a valid
and binding obligation of Seller, constitutes a
valid and binding obligation of Guarantor,
enforceable against Guarantor in accordance with
its terms, except as may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors'
rights generally and general principles of
equity, including without limitation, concepts
of materiality, reasonableness, good faith and
fair dealing (regardless of whether enforcement is
considered in a proceeding at law or in equity).
With respect to the foregoing opinion, the
availability of a decree for specific performance
or an injunction is subject to the discretion
of the court requested to issue any such
decree or injunction.
3. The execution, delivery and performance of the
Guarantee Agreement does not (a) conflict with
the Articles of Incorporation or Bylaws of
Guarantor, (b) to the knowledge of Guarantor's
counsel, constitute a violation of or default
under those agreements or instruments set forth on
a Schedule attached to the opinion and which have
been identified to such counsel by Guarantor as
all the agreements and instruments which are
material to the business or financial condition
of Guarantor, or (c) violate any order, writ,
injunction, decree, statute, rule or
regulation, of which Guarantor's counsel has
knowledge, applicable to Guarantor or the
Auctioned Assets, except for such violations
which would not, individually or in the
aggregate, have a material adverse effect
on the ability of Guarantor to consummate the
transactions by, and discharge its
obligations under, the Guarantee Agreement.
4. No declaration, filing or registration with, or
notice to, or authorization, consent or
approval of any Governmental Authority
<PAGE>
is necessary for the consummation by Guarantor of
the transactions contemplated by the Guarantee
Agreement.
In rendering such opinion, such counsel may (A) rely in
respect of matters of fact upon certificates of officers and
employees of Guarantor and upon information obtained from public
officials, (B) assume that all documents submitted to counsel as
originals are authentic, that all copies submitted to counsel
conform to the originals thereof, and that the signatures on all
documents examined by counsel are genuine, (C) state that the
opinion is limited to federal laws, the [corporate statute of the
Guarantor's jurisdiction of incorporation] and the laws of the
District of Columbia, (D) state that counsel expresses no opinion
with respect to provisions of the Guarantee Agreement relating to
the subject matter jurisdiction of the United States District Court
for the District of Columbia and relating to the waiver of an
inconvenient forum, and (E) with respect to the opinions expressed
in paragraphs 3 and 4 above, state that counsel is relying as to
such matters on the opinions of in-house, local and other special
counsel to Guarantor to the extent of the matters set forth in such
opinions. Certificates and opinions relied upon by Guarantor's
counsel shall be delivered to Seller together with the opinion of
Guarantor's counsel.
<PAGE>
