<PAGE>
United States
Securities and Exchange Commission
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Registrant; State of Incorporation; IRS Employer
Number Address; and Telephone No. Identification No.
1-11459 PP&L Resources, Inc. 23-2758192
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
1-905 PP&L, Inc. 23-0959590
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
PP&L Resources, Inc. Yes X No
PP&L, Inc. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
PP&L Resources, Inc. Common stock, $.01 par value,
157,164,916 shares outstanding at
October 31, 1998, excluding
17,001,100 shares held as treasury
stock
PP&L, Inc. Common stock, no par value,
157,300,382, shares outstanding and
all held by PP&L Resources, Inc. at
October 31, 1998
<PAGE>
PP&L RESOURCES, INC.
AND
PP&L, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PP&L Resources, Inc.
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Consolidated Balance Sheet
PP&L, Inc.
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Consolidated Balance Sheet
Notes to Financial Statements
PP&L Resources, Inc. and PP&L, Inc.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PP&L Resources, Inc. and PP&L, Inc.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
GLOSSARY OF TERMS AND ABBREVIATIONS
SIGNATURES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<PAGE>
<TABLE>
PP&L RESOURCES, INC. AND SUBSIDIARIES
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
In the opinion of PP&L Resources, the unaudited financial statements included herein
reflect all adjustments necessary to present fairly the Consolidated Balance Sheet as of
September 30, 1998 and December 31, 1997, and the Consolidated Statement of Income and
Consolidated Statement of Cash Flows for the periods ended September 30, 1998 and 1997. PP&L
Resources is the parent holding company of PP&L, PP&L Global, PP&L Spectrum, PP&L Capital
Funding, H. T. Lyons, Penn Fuel Gas and McClure. PP&L constitutes substantially all of PP&L
Resources' assets, revenues and earnings.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Millions of Dollars, except per share data)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Revenues
Electric operations.............................. $647 $586 $1,822 $1,790
Gas operations................................... 6 6
Wholesale energy and trading activities.......... 483 192 987 459
Energy related businesses........................ 30 14 69 31
Total Operating Revenues......................... 1,166 792 2,884 2,280
Operating Expenses
Operation
Cost of electric fuel.......................... 147 133 378 349
Cost of natural gas and propane................ 2 2
Energy purchases............................... 415 138 846 358
Other operating................................ 174 125 434 363
Maintenance...................................... 39 46 130 130
Depreciation and amortization.................... 68 94 257 279
Taxes, other than income ........................ 34 50 136 156
Energy related businesses........................ 25 5 54 14
Total Operating Expenses......................... 904 591 2,237 1,649
Operating Income................................... 262 201 647 631
Other Income and (Deductions)...................... 16 (36) 26 (31)
Income Before Interest and Income Taxes............ 278 165 673 600
Interest Expense................................... 58 53 164 163
Income Before Income Taxes and
Extraordinary Items ............................. 220 112 509 437
Income Taxes....................................... 78 64 200 197
Income Before Extraordinary Items.................. 142 48 309 240
Extraordinary Items (net of $666 income taxes)
(Note 4) ........................................ (948)
Income(Loss) Before Dividends on Preferred Stock... 142 48 (639) 240
Preferred Stock Dividend Requirements.............. 6 6 19 17
Net Income(Loss)................................... $136 $42 ($658) $223
Earnings Per Share of Common Stock
Basic and Diluted (a):
Income Before Extraordinary Items.............. $0.81 $0.25 $1.74 $1.36
Extraordinary Items (net of tax)............... (5.68)
Net Income(Loss)................................... $0.81 $0.25 $(3.94) $1.36
Dividends Declared per Share of Common Stock....... $0.2500 $0.4175 $1.085 $1.2525
(a) Based on average number of shares
outstanding (thousands)........................ 166,652 164,961 166,871 164,110
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
PP&L RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions of Dollars)
<CAPTION>
Nine Months
Ended September 30,
1998 1997
<S> <C> <C>
Net Cash Provided by Operating Activities.................... $435 $579
Cash Flows From Investing Activities
Property, plant and equipment expenditures.................. (204) (200)
Proceeds from sale of nuclear fuel to trust................. 16 24
Purchases of available-for-sale securities.................. (14) (61)
Sales and maturities of available-for-sale securities....... 16 100
Investment in electric energy projects ..................... (279) (149)
Purchases and sales of other financial investments - net.... 4 76
Other investing activities - net............................ (19) (1)
Net cash used in investing activities................. (480) (211)
Cash Flows From Financing Activities
Issuance of long-term debt.................................. 320 10
Issuance of common stock.................................... 48 53
Purchase of treasury stock ................................. (419)
Issuance of Company-obligated mandatorily redeemable
preferred securities of subsidiary trusts holding
solely parent debentures.................................. 250
Retirement of long-term debt................................ (268) (210)
Purchase of subsidiary's preferred stock (net of premium
and associated costs)..................................... (369)
Payments on capital lease obligations....................... (42) (50)
Common and preferred dividends paid......................... (228) (223)
Net increase in short-term debt............................. 629 139
Other financing activities - net ........................... (2) (20)
Net cash provided by (used in) financing activities... 38 (420)
Net Decrease In Cash and Cash Equivalents ................... (7) (52)
Cash and Cash Equivalents at Beginning of Period ............ 50 101
Cash and Cash Equivalents at End of Period .................. $43 $49
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)....................... $169 $152
Income taxes............................................... $185 $194
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
PP&L RESOURCES,INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
Electric utility plant in service - net (Notes 2 and 4)
Transmission and distribution .......................... $2,175 $2,160
Generation ............................................. 1,613 4,022
General and intangible ................................. 216 232
4,004 6,414
Construction work in progress - at cost................... 108 185
Nuclear fuel owned and leased - net....................... 140 167
Electric utility plant - net............................ 4,252 6,766
Gas utility plant - net .................................. 150
Other property - net...................................... 53 54
4,455 6,820
Investments
Electric energy projects - at equity ..................... 664 360
Nuclear plant decommissioning trust fund ................. 183 163
Financial investments..................................... 51 52
Affiliated companies - at equity ......................... 17 17
Other..................................................... 12 13
927 605
Current Assets
Cash and cash equivalents ................................ 43 50
Accounts receivable (less reserve: 1998, $17; 1997, $16)
Customers .............................................. 172 190
Other................................................... 162 48
Unbilled revenues
Customers............................................... 103 90
Other................................................... 83 37
Fuel, materials and supplies ............................. 192 200
Prepayments............................................... 50 28
Other..................................................... 72 52
877 695
Regulatory Assets and Other Noncurrent Assets (Note 4)
Recoverable transition costs.............................. 2,819
Other..................................................... 453 1,365
3,272 1,365
$9,531 $9,485
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
PP&L RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES
Capitalization
Common equity
Common stock ........................................... $2 $2
Capital in excess of par value ........................ 1,852 1,669
Treasury stock.......................................... (419)
Earnings reinvested (Note 4) ........................... 323 1,164
Capital stock expense and other ........................ (21) (26)
1,737 2,809
Preferred stock
With sinking fund requirements ......................... 47 47
Without sinking fund requirements ...................... 50 50
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
company debentures...................................... 250 250
Long-term debt ........................................... 2,835 2,585
4,919 5,741
Current Liabilities
Short-term debt........................................... 777 135
Long-term debt due within one year ....................... 1 150
Capital lease obligations due within one year ............ 57 58
Liability for above market NUG purchases due
within one year (Note 4) ............................... 105
Accounts payable ......................................... 200 140
Taxes and interest accrued ............................... 109 102
Dividends payable ........................................ 50 76
Other .................................................... 124 108
1,423 769
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits ......... 1,579 2,221
Liability for above market NUG purchases (Note 4) ........ 775
Capital lease obligations ................................ 89 113
Other .................................................... 746 641
3,189 2,975
Commitments and Contingent Liabilities ....................
$9,531 $9,485
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PP&L, INC. AND SUBSIDIARIES
In the opinion of PP&L, the unaudited financial statements included herein
reflect all adjustments necessary to present fairly the Consolidated Balance Sheet
as of September 30, 1998 and December 31, 1997, and the Consolidated Statement of
Income and Consolidated Statement of Cash Flows for the periods ended
September 30, 1998 and 1997. All nonutility operating transactions are included
in "Other Income and (Deductions)" in PP&L's Consolidated Statement of Income.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Millions of Dollars)
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Revenues
Electric operations............................. $647 $586 $1,822 $1,790
Wholesale energy and trading activities......... 483 192 987 459
Energy related businesses....................... 1 2 1
Total Operating Revenues 1,131 778 2,811 2,250
Operating Expenses
Operation
Cost of electric fuel......................... 147 133 378 349
Energy purchases.............................. 415 138 846 358
Other operating............................... 170 125 431 363
Maintenance..................................... 39 46 130 130
Depreciation and amortization................... 67 94 256 279
Taxes, other than income ....................... 33 50 135 156
Energy related businesses....................... 1 1 2 2
Total Operating Expenses........................ 872 587 2,178 1,637
Operating Income ................................. 259 191 633 613
Other Income and (Deductions)..................... 11 (1) 32 7
Income Before Interest and Income Taxes........... 270 190 665 620
Interest Expense.................................. 49 51 147 157
Income Before Income Taxes and
Extraordinary Items ............................ 221 139 518 463
Income Taxes...................................... 84 58 208 192
Income Before Extraordinary Items ................ 137 81 310 271
Extraordinary Items (net of $666 income taxes)
(Note 4) ....................................... (948)
Net Income(Loss) Before Dividends on
Preferred Stock................................. 137 81 (638) 271
Dividends on Preferred Stock...................... 12 12 36 28
Earnings Available to PP&L Resources, Inc. ...... $125 $69 $(674) $243
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
PP&L, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions of Dollars)
<CAPTION>
Nine Months
Ended September 30,
1998 1997
<S> <C> <C>
Net Cash Provided by Operating Activities.............. $483 $576
Cash Flows From Investing Activities
Property, plant and equipment expenditures........... (202) (200)
Proceeds from sales of nuclear fuel to trust......... 16 24
Purchases of available-for-sale securities .......... (14) (61)
Sales and maturities of available-for-sale
securities......................................... 15 78
Purchases and sales of other financial
investments - net.................................. 4 76
Loan to parent....................................... (375)
Other investing activities - net .................... 2 (2)
Net cash used in investing activities.......... (179) (460)
Cash Flows From Financing Activities
Issuance of long-term debt........................... 200 10
Issuance of Company-obligated mandatorily
redeemable preferred securities of subsidiary
trusts holding solely company debentures .......... 250
Retirement of long-term debt......................... (266) (210)
Payments on capital lease obligations................ (42) (50)
Common and preferred dividends paid.................. (245) (264)
Net increase in short-term debt...................... 69 84
Other financing activities - net .................... (1) (9)
Net cash used in financing activities.......... (285) (189)
Net Increase (Decrease) in Cash and Cash Equivalents... 19 (73)
Cash and Cash Equivalents at Beginning of Period....... 15 95
Cash and Cash Equivalents at End of Period............. $34 $22
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized)............... $152 $145
Income taxes....................................... $189 $197
<FN>
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
PP&L, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
Electric utility plant in service - net (Notes 2 and 4)
Transmission and distribution .......................... $2,175 $2,160
Generation ............................................. 1,613 4,022
General and intangible ................................. 216 232
4,004 6,414
Construction work in progress - at cost .................. 108 185
Nuclear fuel owned and leased - net ...................... 140 167
Electric utility plant - net ............................ 4,252 6,766
Other property - net ..................................... 50 54
4,302 6,820
Investments
Loan to parent............................................ 375 375
Nuclear plant decommissioning trust fund ................. 183 163
Financial investments .................................... 51 52
Affiliated companies - at equity ......................... 17 17
Other .................................................... 12 13
638 620
Current Assets
Cash and cash equivalents ................................ 34 15
Accounts receivable (less reserve: 1998, $16; 1997, $16)
Customers .............................................. 167 188
Other .................................................. 159 64
Unbilled revenues
Customers............................................... 102 90
Other................................................... 79 36
Fuel, materials and supplies ............................. 180 200
Prepayments............................................... 44 26
Other .................................................... 61 51
826 670
Regulatory Assets and Other Noncurrent Assets (Note 4)
Recoverable transition costs ............................. 2,819
Other..................................................... 345 1,362
3,164 1,362
$8,930 $9,472
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
PP&L, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES
Capitalization
Common equity
Common stock ........................................... $1,476 $1,476
Additional paid-in capital ............................. 64 64
Earnings reinvested (Note 4) ........................... 231 1,092
Capital stock expense and other ....................... (20) (20)
1,751 2,612
Preferred stock
With sinking fund requirements ......................... 295 295
Without sinking fund requirements ...................... 171 171
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
company debentures...................................... 250 250
Long-term debt ........................................... 2,569 2,483
5,036 5,811
Current Liabilities
Short-term debt........................................... 114 45
Long-term debt due within one year ....................... 150
Capital lease obligations due within one year ............ 57 58
Liability for above market NUG purchases due
within one year (Note 4) ............................... 105
Accounts payable ......................................... 190 148
Taxes and interest accrued ............................... 108 99
Dividends payable ........................................ 59 81
Other .................................................... 108 107
741 688
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes and investment tax credits.......... 1,566 2,221
Liability for above market NUG purchases (Note 4) ........ 775
Capital lease obligations ............................... 89 113
Other .................................................... 723 639
3,153 2,973
Commitments and Contingent Liabilities ....................
$8,930 $9,472
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
PP&L Resources, Inc. and PP&L, Inc.
Notes to Consolidated Financial Statements
Terms and abbreviations appearing in Notes to Financial Statements are
explained in the glossary.
1. Interim Financial Statements
Certain information in footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, has been condensed or omitted in this Form 10-Q
pursuant to the rules and regulations of the SEC. These financial
statements should be read in conjunction with the financial statements and
notes included in PP&L Resources' and PP&L's Annual Reports to the SEC on
Form 10-K for the year ended December 31, 1997.
Certain amounts in the September 30, 1997 and December 31, 1997
financial statements have been reclassified to conform to the presentation
in the September 30, 1998 financial statements. The most significant
reclassifications have been made in the Consolidated Statement of Income.
This Statement has been modified to better reflect the changing nature of
the business from a regulated electric utility to a full-service provider
of retail and wholesale energy and related products and services. The
revenues and expenses of PP&L Global, PP&L Spectrum, Penn Fuel Gas,
McClure, and H.T. Lyons are now reflected in "Operating Income."
Previously, the results of non-regulated affiliates were included in "Other
Income and (Deductions)" in PP&L Resources' Statement of Income. In
addition, the revenues generated by PP&L's wholesale energy and trading
activities are now separately disclosed. Finally, income taxes are no
longer reflected as "Operating Expense," which was the traditional
disclosure used by utilities. On the Consolidated Balance Sheet, "Electric
utility plant in service - net" at December 31, 1997 has been reclassified
to separately disclose generation plant, which is no longer subject to the
regulatory accounting provisions of SFAS 71, "Accounting for the Effects of
Certain Types of Regulation." See Notes 2 and 4 for further information.
2. Summary of Significant Accounting Policies
As a result of the outcome of PP&L's PUC restructuring proceeding (see
Notes 3 and 4), as well as changes in accounting standards and business
conditions, certain accounting policies of PP&L Resources and PP&L have
been changed. Following are updates to the "Summary of Significant
Accounting Policies" as detailed in PP&L Resources' and PP&L's Annual
Reports to the SEC on Form 10-K for the year ended December 31, 1997.
Management's Estimates
These financial statements have been prepared using information which
represents management's best estimates of existing conditions. Actual
results could differ from these estimates.
Significant estimates were required in recording the effect of the PUC
restructuring outcome. The impairment write-down of certain generation
plant was dependent on projections of future cash flows and capacity
factors. Cash flow projections and the resulting impact on the fair value
determination of these generating facilities are subject to future re-
evaluation. In addition, the liabilities recorded for above-market
purchases from NUGs were based on estimated generation by the NUG
facilities and estimated future market prices for this generation. Again,
these recorded amounts are subject to revision if the underlying estimates
change.
Regulation
Historically, PP&L accounted for its operations in accordance with the
provisions of SFAS 71, which requires rate-regulated entities to reflect
the effects of regulatory decisions in their financial statements. PP&L
discontinued application of SFAS 71 for the generation portion of its
business effective June 30, 1998.
Utility Plant
Following are the classes of Electric Utility Plant in Service, with
associated accumulated depreciation reserves, at September 30, 1998 and
December 31, 1997:
Transmission General Electric Utility
& & Plant In
Distribution Generation Intangible Service
September 30, 1998:
Original Cost $3,374 $6,342 $375 $10,091
Accumulated Depreciation
Reserve (1,199) (4,729) (159) (6,087)
$2,175 $1,613 $216 $ 4,004
December 31, 1997:
Original Cost $3,309 $6,306 $369 $ 9,984
Accumulated Depreciation
Reserve (1,149) (2,284) (137) (3,570)
$2,160 $4,022 $232 $ 6,414
Generation plant is reflected at the lower of cost or market value at
September 30, 1998. As noted in the "Regulation" section of this note,
PP&L discontinued application of SFAS 71 for the generation portion of its
business effective June 30, 1998. In accordance with SFAS 101, "Regulated
Enterprises-Accounting for the Discontinuation of Application of FASB
Statement No. 71," impairment tests were performed on the individual
generating facilities. These impairment tests used the provisions of SFAS
121, "Accounting For the Impairment of Long-Lived Assets and For Long-Lived
Assets to Be Disposed Of." As a result, generation plant assets were
written down by $2.357 billion in June 1998.
The other classes of Electric Utility Plant in Service continue to be
subject to SFAS 71 and are carried at historical cost.
Capitalized Interest
Effective June 30, 1998, PP&L stopped capitalizing AFUDC on
generation-related construction projects, since these assets are no longer
subject to the provisions of SFAS 71. Instead, interest is being
capitalized on generation-related projects in accordance with SFAS 34,
"Capitalizing Interest Costs."
Premium on Reacquired Long-Term Debt
In accordance with SFAS 71, PP&L in the past deferred the premiums and
expenses to redeem long-term debt and amortized these costs over the life
of the new debt. If no new debt was issued to refinance the retired debt,
these costs were amortized over the remaining life of the retired debt.
Effective June 30, 1998, losses on reacquired debt attributable to the
generation portion of PP&L's business are being recorded in accordance with
SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt."
Comprehensive Income
During 1997, the FASB issued SFAS 130, "Reporting Comprehensive
Income." This statement required disclosure of "comprehensive income,"
defined as changes in equity other than from transactions with shareowners.
Comprehensive income consists of net income, as well as holding gains and
losses of certain assets (such as available-for-sale securities) and
foreign currency translation adjustments. The comprehensive income of PP&L
Resources and PP&L is not materially different from net income for the
three and nine months ended September 30, 1998 or the corresponding periods
in 1997.
Stock Repurchase Program
In September 1998, PP&L Resources purchased approximately 17 million
shares of its common stock in a self-tender offer (refer to Note 6.) These
treasury shares are reflected on the September 30, 1998 Consolidated
Balance Sheet of PP&L Resources as an offset to common equity. The cost of
the treasury shares was $419 million ($24.50 per share plus transaction
costs.) Management has no definitive plans for the future use of these
shares. These treasury shares are not considered outstanding in
calculating earnings per share on the Consolidated Statement of Income of
PP&L Resources for the three and nine months ended September 30, 1998.
3. PUC Restructuring Proceeding
Reference is made to PP&L Resources' and PP&L's Annual Reports to the
SEC on Form 10-K for the year ended December 31, 1997, and the Quarterly
Reports on Form 10-Q for the quarter ended June 30, 1998, regarding PP&L's
restructuring proceeding before the PUC pursuant to the Customer Choice
Act.
In August 1998, the PUC entered a Final Order approving a "Joint
Petition for Full Settlement of PP&L, Inc.'s Restructuring Plan and Related
Court Proceedings" (Joint Settlement Petition). The following are the
major elements of this settlement:
1. PP&L is permitted to recover $2.97 billion (on a net present value
basis) in transition costs over 11 years -- i.e., from January 1, 1999
through December 31, 2009. PP&L is permitted a return of 10.86% on the
unamortized balance of these transition costs.
2. PP&L will reduce rates to all retail customers by 4% effective
January 1, 1999 through December 31, 1999.
3. One-third of PP&L customers will be able to choose their electric
supplier on January 1, 1999, one-third on January 2, 1999, and the
remainder on January 2, 2000.
4. Beginning on January 1, 1999, PP&L will unbundle its retail elec-
tric rates to reflect separate prices for the transmission and distribution
charges, the CTC (and, if applicable, the ITC), and a "shopping credit" for
customers choosing an alternate electric supplier. These shopping credits
vary among customer classes and will increase over the transition period to
reflect decreases in the CTC. The settlement provided for the following
unbundled rates over the transition period:
SCHEDULE OF SYSTEM AVERAGE RATES
CENTS/KWH
Effective Transmission Shopping Generation Total
Date & Distribution CTC(a) Credit Rate Cap(b) Rate(c)
Jan. 1, 1999 1.74 1.57 3.81 5.38 7.12
Jan. 1, 2000 1.74 1.55 4.13 5.68 7.42
Jan. 1, 2001 1.74 1.52 4.16 5.68 7.42
Jan. 1, 2002 1.74 1.45 4.23 5.68 7.42
Jan. 1, 2003 1.74 1.41 4.27 5.68 7.42
Jan. 1, 2004 1.74 1.35 4.33 5.68 7.42
Jan. 1, 2005 (d) 1.27 4.41 5.68 (d)
Jan. 1, 2006 (d) 1.27 4.78 6.05 (d)
Jan. 1, 2007 (d) 1.21 4.84 6.05 (d)
Jan. 1, 2008 (d) 1.14 4.91 6.05 (d)
Jan. 1, 2009(e) (d) 1.03 5.02 6.05 (d)
(a) Average CTC rates are fixed, subject to reconciliation for actual CTC
collection. Reconciliation of the CTC will be reflected in a rider, which
will be a separate credit or a separate charge to the CTC (up to the
Generation Rate Cap which is the sum of the CTC and the Shopping Credit
contained in the tariff).
(b) The Generation Rate Cap equals the sum of the CTC and Shopping Credit.
The generation portion of bills for customers who continue to be supplied
by PP&L as the supplier of last resort will not, on average, exceed the
figures in this column.
(c) The bundled rate equals the sum of Transmission & Distribution plus
Generation Rate Cap. Customers who continue to be supplied by PP&L as the
provider of last resort will, on average, pay the total rate shown in the
last column. The 1999 rate represents a 4% reduction from the existing
rate cap of 7.42 cents/kWh.
(d) The cap on PP&L's transmission and distribution rates under the
Customer Choice Act is extended from June 30, 2001 through 2004.
(e) Effective until December 31, 2009.
In addition, the settlement resulted in the following schedule for
amortization of the transition costs over the transition period:
ANNUAL STRANDED COST
AMORTIZATION AND RETURN (a)
Revenue Excluding Gross Receipts Tax
Annual CTC Amorti-
Sales Cents/ Total Return zation
Year MWh kWh ($000) ($000) ($000)
1999 33,108,701 1.57 $497,938 $310,396 $187,542
2000 33,605,332 1.55 498,027 290,796 207,231
2001 34,109,412 1.52 496,671 269,138 227,532
2002 34,621,053 1.45 481,095 245,359 235,736
2003 35,140,369 1.41 473,995 220,722 253,273
2004 35,667,474 1.35 461,682 194,252 267,430
2005 36,202,486 1.27 438,637 166,303 272,334
2006 36,745,524 1.27 447,326 137,841 309,485
2007 37,296,707 1.21 433,106 105,497 327,610
2008 37,856,157 1.14 411,419 71,258 340,161
2009(b) 38,424,000 1.03 377,373 35,708 341,665
(a) Subject to reconciliation for actual CTC collections.
(b) Through December 31, 2009.
5. The cap on the generation component of rates is extended from
December 31, 2005 until December 31, 2009. The cap on the transmission and
distribution component of rates is extended from June 30, 2001 until
December 31, 2004.
6. PP&L will recover its nuclear plant decommissioning costs through
the CTC. PP&L may seek an exception to the rate cap from customers for
increases in these decommissioning costs, but agrees not to recover more
than 96% of such increased amount.
7. PP&L is authorized to securitize up to $2.85 billion in transition
and related costs, and a PUC Qualified Rate Order authorizing this
securitization is included in the settlement. The settlement requires 75%
of the savings from securitization to be passed back to customers, while
25% would be retained by PP&L. The costs of issuing the transition bonds
and refinancing outstanding debt and equity will be reflected in the ITC
charged to all customers. As with the CTC, the ITC must terminate by the
end of the transition period; also, the ITC will offset the CTC on customer
bills.
8. On January 1, 2002, 20% of all PP&L's residential customers will
be assigned to a provider of last resort other than PP&L or an affiliate of
PP&L. These customers will be selected at random, and the supplier will be
selected on the basis of a PUC-approved bidding process.
9. Subject to a review by the PUC Bureau of Audits, effective on
January 1, 1999, alternate electric generation suppliers can provide
advanced metering and billing service to PP&L's commercial and industrial
customers. Effective on January 1, 1999, such alternate suppliers can
provide certain advanced metering service to PP&L's residential customers.
Effective on January 1, 2000, PP&L's residential customers can choose their
billing service as well from such alternate suppliers.
10. PP&L will transfer its retail marketing function to a separate,
affiliated corporation by September 15, 1998.
11. PP&L is permitted, but not required, to transfer ownership and
operation of its generating facilities to a separate corporate entity at
book value; all applicable PUC approvals for such transfer are granted in
the settlement.
12. PP&L will spend approximately $16 million annually on assistance
and energy conservation for low-income customers.
Pursuant to the Joint Settlement Petition, PP&L transferred its retail
marketing function to a new subsidiary, PP&L EnergyPlus, on September 14,
1998. In September 1998, the PUC approved PP&L EnergyPlus's application to
act as a Pennsylvania electric generation supplier (EGS). This license
permits PP&L EnergyPlus to offer retail electric supply to participating
customers in PP&L's service territory and in the service territories of
other Pennsylvania utilities. In 1999, PP&L EnergyPlus will offer such
supply to industrial and commercial customers throughout the state. At
this time, PP&L EnergyPlus has determined not to pursue residential
customers in the competitive marketplace based on economic considerations.
In September 1998, the PUC issued an Order which, in part, directed
Pennsylvania utilities which are members of PJM, including PP&L, to offer
their installed capacity at a price of $19.72 per kilowatt-year (Capacity
Order). PP&L brought an action in the District Court seeking an injunction
against the Capacity Order on the basis, among other things, that it
attempted to regulate matters within exclusive federal jurisdiction. In
October 1998, PP&L entered into a settlement agreement with the PUC under
which (i) PP&L will offer to sell capacity credits to EGS's licensed by the
PUC at the equivalent of $19.72 per kilowatt-year in 1999 for service to
PP&L residential customers; (ii) all PP&L residential customers will be
permitted to select an EGS in January 1999; (iii) the PUC will withdraw the
Capacity Order as to PP&L; and (iv) PP&L will withdraw its federal court
action against the Capacity Order.
4. Accounting for the Effects of Certain Types of Regulation
PP&L prepares its financial statements for its regulated operations in
accordance with SFAS 71, which requires rate-regulated companies to reflect
the effects of regulatory decisions in their financial statements. PP&L
has deferred certain costs pursuant to rate actions of the PUC and FERC and
is recovering, or expects to recover, such costs in electric rates charged
to customers.
The FASB's EITF has addressed the appropriateness of the continued
application of SFAS 71 by entities in states that have enacted
restructuring legislation similar to Pennsylvania's Customer Choice Act.
The EITF issued its statement No. 97-4, "Deregulation of the Pricing of
Electricity - Issues Related to the Application of FASB Statements 71 and
101," which concluded that an entity should cease to apply SFAS 71 when a
deregulation plan is in place and its terms are known. For PP&L, with
respect to the generation portion of its business, this occurred effective
June 30, 1998 based upon the outcome of the PUC restructuring proceeding.
PP&L has adopted SFAS 101 for the generation side of its business. SFAS
101 requires a determination of impairment of plant assets under SFAS 121,
and the elimination of all effects of rate regulation that have been
recognized as assets and liabilities under SFAS 71.
PP&L performed impairment tests of its electric generation assets on a
plant specific basis and determined that $2.388 billion of its generation
plant was impaired as of June 30, 1998. Impaired plant is the excess of
the net plant investment at June 30, 1998 over the present value of the net
cash flows during the remaining lives of the plants. Annual net cash flows
were determined by comparing estimated generation sustenance costs to
estimated regulated revenues for the remainder of 1998, market revenues for
1999 and beyond, and revenues from bulk power contracts. The net cash
flows were then discounted to present value.
In addition to the impaired generation plant, PP&L estimated that
there were other stranded costs totaling $1.989 billion at June 30, 1998.
This primarily included generation-related regulatory assets and
liabilities and an estimated liability for above-market purchases under NUG
contracts. The total estimated impairment to these assets was $4.377
billion. The PUC's Final Order in the restructuring proceeding, entered on
August 27, 1998, permitted the recovery of $2.819 billion through the CTC
on a present value basis, excluding amounts for nuclear decommissioning and
consumer education, resulting in a net under-recovery of $1.558 billion.
PP&L recorded an extraordinary charge for this under-recovery in June 1998.
Under FERC Order 888, 16 small utilities which have power supply
agreements with PP&L signed before July 11, 1994, requested and were
provided with PP&L's current estimate of its stranded costs applicable to
these customers if they were to terminate their agreements in 1999.
Subject to certain conditions, FERC-approved settlement agreements executed
with 15 of these customers provide for continued power supply by PP&L
through January 2004. As a result of these settlements, PP&L, in the
second quarter of 1998, recorded an extraordinary charge in the amount of
$56 million.
The extraordinary items related to the PUC restructuring proceeding
and the FERC settlement are reflected on the Statement of Income, net of
income taxes.
Details of amounts written-off in June 1998 are as follows (millions
of dollars):
Impaired generation-related assets $2,388
Above-market NUG contracts 854
Generation-related regulatory assets and other 1,135
Total 4,377
Recoverable transition costs (a) (2,819)
Extraordinary item pre-tax - PUC 1,558
- FERC 56
1,614
Tax effects (666)
Extraordinary items $ 948
(a) Excluding recoveries for nuclear decommissioning and consumer
education expenditures.
PP&L believes that the electric transmission and distribution operations
continue to meet the requirements of SFAS 71 and that regulatory assets
associated with these operations will continue to be recovered through
rates from customers. At September 30, 1998, $335 million of regulatory
assets, other than the recoverable transition costs, remain on the books.
The majority of these regulatory assets will continue to be recovered
through regulated transmission and distribution rates over periods ranging
from one to 31 years.
5. Sales to Other Electric Utilities
PP&L provided Atlantic with 125,000 kilowatts of capacity (summer
rating) and related energy from its wholly owned coal-fired stations.
Sales to Atlantic under that agreement expired in March 1998. PP&L will
provide JCP&L with 378,000 kilowatts of capacity and related energy from
all of its generating units during 1998. This amount will decline to
189,000 kilowatts in 1999. The agreement with JCP&L will terminate on
December 31, 1999. PP&L expects to be able to resell the returning
capacity and energy through its Energy Marketing Center.
Under a separate agreement, PP&L is providing additional capacity and
energy to JCP&L. This capacity and energy increased from 150,000 kilowatts
to 200,000 kilowatts in June 1998, and will increase to 300,000 kilowatts
in June 1999 through the end of the agreement in May 2004. Prices for this
capacity and energy are market-based.
6. Credit Arrangements and Financing Activity
From January through October 1998, PP&L Resources issued $55 million
of common stock through the DRIP.
In March 1998, the 364-day revolving credit agreement for PP&L and
PP&L Capital Funding was increased from $150 million to $350 million. This
increase, when added to the $300 million five-year revolving credit
agreement of PP&L and PP&L Capital Funding, brings to $650 million the
total amount of revolving credit available to PP&L and PP&L Capital Funding
under these joint agreements. Additionally, in July 1998, PP&L Capital
Funding entered into five separate $80 million, 364-day credit facilities
with five banks. As of September 30, 1998, no borrowings were outstanding
under any revolving credit agreements.
In March 1998, PP&L Capital Funding sold $60 million of medium-term
notes having a five-year term. The proceeds from this sale were used to
repay $60 million of short-term borrowings which had provided interim
financing for investments made by PP&L Global.
PP&L Capital Funding established a commercial paper program in March
1998. As with all PP&L Capital Funding debt, this commercial paper is
guaranteed by PP&L Resources. As of September 30, 1998, PP&L Capital
Funding had $656 million of commercial paper outstanding. Proceeds were
primarily used to fund PP&L Resources' Tender Offer and provide interim
financing for PP&L Global's investment activities.
In April 1998, PP&L retired $150 million principal amount of First
Mortgage Bonds, 5-1/2% series that matured on that date.
In May 1998, PP&L issued $200 million First Mortgage Bonds, 6-1/8%
Reset Put Securities Series due 2006. In connection with this issuance,
PP&L assigned to a third party the option to call the bonds from the
holders on May 1, 2001. These bonds will mature on May 1, 2006, but will
be required to be surrendered by the existing holders on May 1, 2001 either
through the exercise of the call option by the callholder or, if such
option is not exercised, through the automatic exercise of a mandatory put
by the trustee on behalf of the bondholders. If the call option is
exercised, the bonds will be remarketed and the interest rate will be reset
for the remainder of their term to the maturity date. If the call option
is not exercised, the mandatory put will be exercised and PP&L will be
required to repurchase the bonds at 100% of their principal amount on May
1, 2001. Proceeds from the sale of the bonds were used by PP&L to retire
$116 million of its unsecured term loans and to reduce its outstanding
commercial paper balances.
From August through October 1998, PP&L Capital Funding issued a total
of $235 million of medium-term notes with maturities varying from two to
seven years. The proceeds of these notes were generally used to reduce
commercial paper balances. As of October 31, 1998, $397 million of medium-
term notes were outstanding.
In August 1998, PP&L Resources announced a Tender Offer to purchase up
to 17 million shares of its common stock, or approximately 10% of the
outstanding shares at that time, from existing shareowners. The price paid
for the shares was not to be in excess of $27 nor less than $24.50 per
share. PP&L Resources made this Tender Offer through the use of a
procedure commonly referred to as a "Dutch Auction." This procedure
allowed the shareowners to select a specific price within the price range
at which they were willing to sell their shares and submit (Tender) these
shares to PP&L Resources for possible sale at their designated price. On
September 11, 1998, PP&L Resources evaluated all Tenders received up until
that date and determined that $24.50 was the lowest price within the price
range that would enable PP&L Resources to purchase approximately 17 million
shares (the Purchase Price). This Purchase Price was then paid for all
shares purchased pursuant to this Tender Offer.
Effective with the dividend payable October 1, 1998 to owners of
record on September 10, 1998, PP&L Resources' quarterly Common Stock
dividend was reduced to $.25 per share ($1.00 annualized rate) from the
previous level of $.4175 per share ($1.67 annualized rate).
Declaration of dividends on common stock are made at the discretion of
the Boards of Directors of PP&L Resources and PP&L. PP&L Resources and
PP&L will continue to consider the appropriateness of these dividend
levels, taking into account the respective financial positions, results of
operations, conditions in the industry and other factors which the
respective Boards deem relevant.
7. Financial Instruments
The fair market value of PP&L Resources' long-term debt, excluding
changes from issuances and redemptions, increased by $83 million from
December 31, 1997 to September 30, 1998. The increase is due to much lower
interest rates in 1998 when compared to 1997.
8. Commitments and Contingent Liabilities
There have been no material changes related to PP&L Resources' or
PP&L's commitments and contingent liabilities since the companies filed
their joint 1997 Form 10-K, other than the environmental remediation
contingencies of Penn Fuel Gas, which was acquired in August 1998.
For discussion pertaining to PP&L Resources' and PP&L's credit
arrangements and financing activities, see Note 6.
Nuclear Insurance
PP&L is a member of certain insurance programs which provide coverage
for property damage to members' nuclear generating stations. Facilities at
the Susquehanna station are insured against property damage losses up to
$2.75 billion under these programs. PP&L is also a member of an insurance
program which provides insurance coverage for the cost of replacement power
during prolonged outages of nuclear units caused by certain specified
conditions. Under the property and replacement power insurance programs,
PP&L could be assessed retroactive premiums in the event of the insurers'
adverse loss experience. At October 1, 1998, the maximum amount PP&L could
be assessed under these programs was about $25 million.
PP&L's public liability for claims resulting from a nuclear incident
at the Susquehanna station is limited to about $9.9 billion under
provisions of The Price Anderson Amendments Act of 1988. PP&L is protected
against this liability by a combination of commercial insurance and an
industry assessment program. In the event of a nuclear incident at any of
the reactors covered by The Price Anderson Amendments Act of 1988, PP&L
could be assessed up to $168 million per incident, payable at a rate of $20
million per year, plus an additional 5% surcharge, if applicable.
Environmental Matters
Air
The Clean Air Act deals, in part, with acid rain, attainment of
federal ambient ozone standards and toxic air emissions. PP&L has complied
with the 1995 Phase I acid rain provisions by installing continuous
emission monitors on all units, burning lower sulfur coal and installing
low NOx burners on most units. To comply with the year 2000 Phase II acid
rain provisions, PP&L plans to purchase lower sulfur coal and use banked or
purchased emission allowances instead of installing FGD on its wholly owned
units.
PP&L has met the 1995 ambient ozone requirements of the Clean Air Act
by reducing NOx emissions by nearly 50% through the use of low NOx burners.
Further seasonal (i.e., 5 month) NOx reductions to 55% and 75% of 1990
levels for 1999 and 2003, respectively, are specified under the Northeast
Ozone Transport Region's Memorandum of Understanding. The DEP has
finalized regulations which require PP&L to reduce its ozone seasonal NOx
by 57% beginning in 1999. PP&L plans to comply with this reduction with
operational initiatives that rely, to a large extent, on the existing low
NOx burners.
The EPA has finalized new national standards for ambient levels of
ground-level ozone and fine particulates. Based in part on the new ozone
standard, the EPA has finalized NOx emission limits for 22 states,
including Pennsylvania, which in effect require approximately an 80%
reduction from the 1990 level in Pennsylvania by May 2003; the state is
required by September 1999 to develop plans for implementing this
reduction. Pursuant to Section 126 of the Clean Air Act, several Northeast
states have petitioned the EPA to find that major sources of NOx emissions,
including PP&L's power plants, are significantly contributing to non-
attainment in those states. The EPA has proposed to find such contribution
and require emissions reductions at those sources if the states in which
those sources are located fail to develop plans by September 1999 to
implement the proposed 2003 limits. PP&L estimates that compliance with
these emissions reduction requirements could require installation of Nox
emissions removal systems on PP&L's three largest coal-fired units, at a
capital cost of approximately $35 million per unit. The new particulates
standard may require further reductions in SO2 and may expand the planned
seasonal NOx reductions to year round in the 2010-2012 timeframe.
Under the Clean Air Act, the EPA has been studying the health effects
of hazardous air emissions from power plants and other sources, in order to
determine whether those emissions should be regulated. Recently, the EPA
released a technical report of its findings to date. The EPA concluded
that mercury is the power plant air toxic of greatest concern, but that
more evaluation is needed before it can determine whether regulation of air
toxics from fossil fuel plants is necessary. In addition, the EPA has
announced a new enforcement initiative against older coal-fired plants.
Several of PP&L's coal-fired plants could fall into this category. These
EPA initiatives could result in compliance costs for PP&L in amounts which
are not now determinable but which could be material.
Expenditures to meet the 2000 acid rain and 1999 NOx reduction
requirements are included in the table of projected construction
expenditures in the section entitled "Financial Condition - Capital
Expenditure Requirements" in the Review of the Financial Condition and
Results of Operations in the 1997 Form 10-K. PP&L currently estimates that
additional capital expenditures and operating costs for environmental
compliance under the Clean Air Act will be incurred beyond 2002 in amounts
which are not now determinable but which could be material.
Water and Residual Waste
PP&L has installed dry fly ash handling systems at most of its power
stations, which reduces waste water discharge. In other cases, PP&L has
modified the existing facilities to allow continued operation of the ash
basins under a DEP permit. Any groundwater contamination caused by the
basins must also be addressed.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Remedial
work related to oil leakage is substantially completed at two generating
stations. At this time, the only other remedial work being planned is to
abate a localized groundwater degradation problem associated with a waste
disposal impoundment at the Montour plant.
The final NPDES permit for the Montour plant contains stringent limits
for iron and chlorine discharges. Depending on the results of a toxic
reduction study, additional water treatment facilities or operational
changes may be needed at this plant.
Capital expenditures through the year 2002 to correct groundwater
degradation at fossil-fueled generating stations, and to address waste
water control at PP&L facilities are included in the table of construction
expenditures in the section entitled "Financial Condition - Capital
Expenditure Requirements" in the Review of the Financial Condition and
Results of Operations in the 1997 Form 10-K. In this regard, PP&L
currently estimates that $5.5 million of additional capital expenditures
may be required in the next four years to close some of the ash basins and
address other ash basin issues at various generating plants. Additional
capital expenditures could be required beyond the year 2002 in amounts
which are not now determinable but which could be material. Actions taken
to correct groundwater degradation, to comply with the DEP's regulations
and to address waste water control are also expected to result in increased
operating costs in amounts which are not now determinable but which could
be material.
Superfund and Other Remediation
In 1995, PP&L entered into a consent order with the DEP to address a
number of sites where PP&L may be liable for remediation of contamination.
This may include potential PCB contamination at certain PP&L substations
and pole sites; potential contamination at a number of coal gas
manufacturing facilities formerly owned and operated by PP&L; and oil or
other contamination which may exist at some of PP&L's former generating
facilities. As of September 30, 1998, PP&L has completed work on slightly
more than half of the sites included in the consent order.
In 1996, Penn Fuel Gas entered into a similar consent order with the
DEP to address a number of its sites where Penn Fuel Gas may be liable for
remediation of contamination. The sites primarily include former coal gas
manufacturing facilities. Prior to PP&L Resources acquiring Penn Fuel Gas
on August 21, 1998, Penn Fuel Gas had obtained a "no further action"
determination from the DEP for two of the 20 sites covered by the order.
At September 30, 1998, PP&L had accrued approximately $7 million and
Penn Fuel Gas had accrued $19 million, representing the respective amounts
PP&L and Penn Fuel Gas can reasonably estimate they will have to spend to
remediate sites involving the removal of hazardous or toxic substances,
including those covered by each company's consent orders mentioned above.
Future cleanup or remediation work at sites currently under review, or at
sites not currently identified, may result in material additional operating
costs for PP&L or Penn Fuel Gas, which neither company can estimate at this
time. In addition, certain federal and state statutes, including Superfund
and the Pennsylvania Hazardous Sites Cleanup Act, empower certain
governmental agencies, such as the EPA and the DEP, to seek compensation
from the responsible parties for the lost value of damaged natural
resources. The EPA and the DEP may file such compensation claims against
the parties, including PP&L or Penn Fuel Gas, held responsible for cleanup
of such sites. Such natural resource damage claims against PP&L or Penn
Fuel Gas could result in material additional liabilities.
General
Due to the environmental issues discussed above or other environmental
matters, PP&L may be required to modify, replace or cease operating certain
facilities to comply with statutes, regulations and actions by regulatory
bodies or courts. In this regard, PP&L also may incur capital
expenditures, operating expenses and other costs in amounts which are not
now determinable but which could be material.
Loan Guarantees of Affiliated Companies
In the second quarter of 1998, PP&L guaranteed a portion of a
subsidiary's borrowings. As of September 30, 1998, $12 million of such
borrowings were guaranteed by PP&L.
PP&L Resources has guaranteed up to $10 million for energy purchases
to PJM to certify PP&L EnergyPlus's creditworthiness.
Source of Labor Supply
On June 29, 1998, IBEW members ratified a new labor agreement with
PP&L. This new agreement expires on May 12, 2002. Among other things, the
agreement provides for wage increases for IBEW members of 3.25% in 1998
(effective as of May 18) and 3% in each of the three remaining years. In
addition, IBEW members received a lump-sum ratification bonus equal to 2%
of base pay, or approximately $4 million.
9. New Accounting Standards
In February 1998, the FASB issued SFAS 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which is effective for
fiscal years beginning after December 15, 1997. The adoption of this
statement does not have a material impact on the financial statements of
PP&L Resources or PP&L.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative and the
resulting designation. PP&L Resources and PP&L intend to adopt this
statement as of January 1, 2000. The impact of the adoption of this
statement on the net income of PP&L Resources and PP&L is not yet
determinable but may be material. The EITF is currently evaluating Issue
98-10 "Accounting for Energy Trading and Risk Management Activities" and is
expected to reach a consensus prior to year-end.
10. Acquisitions
In 1998, PP&L Resources acquired H.T. Lyons and McClure, heating,
ventilating and air-conditioning firms, in cash transactions for amounts
that were not material.
In August 1998, PP&L Resources acquired Penn Fuel Gas. The
transaction was treated as a purchase for accounting and financial
reporting purposes. PP&L Resources issued approximately 5.6 million shares
of common stock with a value of approximately $135 million, to acquire all
Penn Fuel Gas common and preferred stock. Under the terms of the merger
agreement, shareowners of Penn Fuel Gas received 6.968 common shares of
PP&L Resources for each common share of Penn Fuel Gas that they owned and
0.682 common shares of PP&L Resources for each preferred share of Penn Fuel
Gas that they owned.
11. Subsequent Event
In November 1998, PP&L Global signed definitive agreements with
Montana Power Company, Portland General Electric Company and Puget Sound
Energy, Inc. to acquire 13 Montana power plants, with 2,614 MW of
generating capacity, for a purchase price of $1.586 billion. The
acquisition is subject to several conditions, including the receipt of
required state and federal regulatory approvals and third-party consents.
PP&L Global expects to complete the acquisition by the end of 1999. About
65% of the acquisition cost is expected to be financed on a project credit
basis, non-recourse to PP&L Global and PP&L Resources. The balance of the
acquisition cost is expected to be financed through a combination of debt
and equity issued by PP&L Resources, or with funds that PP&L Resources
derives from PP&L's securitization of transition costs. The agreements
also provide for PP&L Global's acquisition of related transmission assets
for $182 million, subject to certain conditions, including federal
regulatory approval.
<PAGE>
PP&L Resources, Inc. and PP&L, Inc.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The financial condition and results of operations of PP&L are
currently the principal factors affecting the financial condition and
results of operations of PP&L Resources. Unless specifically noted,
fluctuations are primarily due to activities of PP&L. This discussion
should be read in conjunction with the section entitled "Review of the
Financial Condition and Results of Operations of PP&L Resources, Inc. and
PP&L, Inc." in PP&L Resources' and PP&L's Annual Report to the SEC on Form
10-K for the year ended December 31, 1997.
Terms and abbreviations appearing in Management's Discussion and
Analysis of Financial Condition and Results of Operations are explained in
the glossary.
Forward-looking Information
Certain statements contained in this Form 10-Q concerning
expectations, beliefs, plans, objectives, goals, strategies, future events
or performance and underlying assumptions and other statements which are
other than statements of historical facts, are "forward-looking statements"
within the meaning of the federal securities laws. Although PP&L Resources
and PP&L believe that the expectations reflected in these statements are
reasonable, there can be no assurance that these expectations will prove to
have been correct. These forward-looking statements involve a number of
risks and uncertainties, and actual results may differ materially from the
results discussed in the forward-looking statements. The following are
among the important factors that could cause actual results to differ
materially from the forward-looking statements: state and federal
regulatory developments; new state or federal legislation; national or
regional economic conditions; market demand and prices for energy and
capacity; weather variations affecting customer energy usage; competition
in retail and wholesale power markets; the need for and effect of any
business or industry restructuring; PP&L Resources' and PP&L's
profitability and liquidity; new accounting requirements or new
interpretations or applications of existing requirements; operating
performance of plants and other facilities; environmental conditions and
requirements; system conditions (including actual results in achieving Year
2000 compliance by PP&L Resources, its subsidiaries and others) and
operating costs; performance of new ventures; political, regulatory or
economic conditions in foreign countries where PP&L Global makes
investments; foreign exchange rates; and PP&L Resources' and PP&L's
commitments and liabilities. Any such forward-looking statements should be
considered in light of such important factors and in conjunction with PP&L
Resources' and PP&L's other documents on file with the SEC.
New factors that could cause actual results to differ materially from
those described in forward-looking statements emerge from time to time, and
it is not possible for PP&L Resources nor PP&L to predict all of such
factors, or the extent to which any such factor or combination of factors
may cause actual results to differ from those contained in any forward-
looking statement. Any forward-looking statement speaks only as of the
date on which such statement is made, and neither PP&L Resources nor PP&L
undertakes any obligation to update the information contained in such
statement to reflect subsequent developments or information.
Results of Operations
The following discussion explains material changes in principal items
on the Consolidated Statement of Income comparing the three months and nine
months ended September 30, 1998, to the comparable periods ended September
30, 1997.
The Consolidated Statement of Income reflects the results of past
operations and is not intended as any indication of the results of future
operations. Future results of operations will necessarily be affected by
various and diverse factors and developments. Furthermore, because results
for interim periods can be disproportionately influenced by various factors
and developments and by seasonal variations, the results of operations for
interim periods are not necessarily indicative of results or trends for the
year.
Earnings
Comparison of Earnings - September 30
Three Months Ended Nine Months Ended
1998 1997 1998 1997
Earnings per share - excluding
weather variances, one-time
adjustments and other impacts
of restructuring $0.54 $0.48 $1.60 $1.63
Weather variances (0.02) (0.13) (0.06)
One-time adjustments:
PUC restructuring charge (see
Note 4) (5.49)
FERC municipalities settlement
(see Note 4) (0.19)
Penn Fuel Gas acquisition
costs (see "Other Income and
(Deductions)") 0.03 (0.03) 0.03 (0.03)
Windfall profits tax (0.24) (0.24)
U.K. tax rate reduction 0.06 0.06 0.06 0.06
Other impacts of restructuring 0.18 0.18
Earnings(loss) per share as
reported $0.81 $0.25 $(3.94) $1.36
The reported earnings of PP&L Resources and PP&L were impacted by
milder-than-normal weather and several one-time adjustments.
In the third quarter of 1998, PP&L Global recorded a $9.5 million, or
6 cents per share, one-time benefit from a reduction in the U.K. corporate
income tax rate from 31% to 30%. This was related to PP&L Global's
investment in SWEB. PP&L Global recorded a windfall profits tax in the
third quarter of 1997, which was partially offset by the benefits of
another U.K. tax cut. These one-time adjustments were discussed in PP&L
Resources' Annual Report to the SEC on Form 10-K for the year ended
December 31, 1997. The other one-time adjustments are discussed in the
Financial Notes as referenced.
The PUC restructuring adjustments provided a favorable impact of about
$.18 per share on the third quarter earnings of 1998. This reflects lower
depreciation on generation assets, reduced accruals for taxes other than
income and a regulatory adjustment to the accounting for unbilled revenues.
These favorable earnings impacts were partially offset by the expensing of
computer software costs.
Excluding the effects of weather, one-time adjustments and the other
impacts of restructuring, earnings were $.06 per share higher for the three
months ended September 30, 1998 when compared with the same period in 1997.
The adjusted earnings for the nine months ended September 30, 1998 were
$.03 lower than the comparable period in 1997. These earnings changes were
primarily the net effect of the following:
September 30, 1998 vs. September 30, 1997
Three Months Ended Nine Months Ended
(Earnings per share)
o Higher revenues from electric
sales to retail customers,
reflecting higher weather-
normalized sales in all customer
classes, particularly in the
third quarter; $0.09 $0.11
o Higher revenues from other
electric operations and the
change in regulatory treatment
of energy costs; 0.02 0.09
o Net reduction in earnings due to
the phase-down of the contract with
JCP&L and the end of the contract
with Atlantic; (0.05)
o Higher operating expenses, primarily
due to costs associated with meeting
retail competition requirements, higher
transmission costs, and expenses related
to computer information systems. The
increase in operating expenses for the
nine-month ended period is also reflects
write-offs of excess or obsolete
inventory, and additional provisions
for uncollectible accounts; and (0.05) (0.20)
o Other 0.02
Earnings Change $ 0.06 $(0.03)
Refer to the Report to the SEC on Form 8-K filed October 19, 1998 for
information regarding PP&L Resources' projected earnings for 1998 through
2000.
PUC Restructuring Proceeding
Refer to Financial Notes 3 and 4 for information regarding the PUC
restructuring proceeding.
Electric Energy Sales
Electricity sales for the three months and nine months periods ending
September 30, 1997 and 1998 were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
(Millions of kWh)
Electricity delivered
to retail customers by
PP&L, Inc. (a) 8,429 7,806 24,204 24,113
Less: Electricity
supplied during
pilot by others 520 - 1,494 -
Electricity supplied to
retail customers by
PP&L, Inc. 7,909 7,806 22,710 24,113
Electricity supplied
to retail customers
by PP&L EnergyPlus
during the pilot 469 - 1,139 -
Total electricity
supplied to retail
customers (a) 8,378 7,806 23,849 24,113
Wholesale Energy Sales 12,258 6,516 29,302 14,752
(a) kWh for customers residing in PP&L's service territory who are
receiving energy from PP&L will be reflected in both of these categories.
Under Pennsylvania's competition pilot program, customers are allowed
to choose the supplier of their electricity. Pilot customers will continue
to have the utility that serves their territory deliver electricity from
the supplier of choice. "Electricity delivered to retail customers by
PP&L, Inc." is the amount of electricity delivered by PP&L to customers in
its service territory. "Electricity supplied to retail customers by PP&L,
Inc." represents the amount of electricity supplied to PP&L service
territory customers who are not participating in the pilot program.
"Electricity supplied to retail customers by PP&L EnergyPlus" is
electricity supplied to customers within and outside PP&L service territory
who are participating in the pilot program and have chosen PP&L as their
energy supplier.
Electricity delivered to retail customers increased for both the three
and nine months ended September 30, 1998 from the comparable periods in
1997. For the three months ended September 30, 1998, electricity delivered
to retail customers was up 8% over the prior year. Weather-normalized
sales for this same period were 6.9% higher than 1997. This increase is
attributable to strong third quarter sales to all customer classes.
For the nine months ended September 30, 1998, electricity delivered to
retail customers increased 0.4%. If normal weather had been experienced in
both periods, year-to-date electricity delivered to retail customers would
have been 2.0% higher than 1997.
Electricity supplied to retail customers increased 7.3% for the three
months ended September 30, 1998. This increase reflects the stronger sales
experienced in the third quarter but is partially offset by the impact of
the competition pilot program. For the nine months ended September 30,
1998, electricity supplied to retail customers decreased 1.1% from the
prior year. This decrease was due to the mild weather experienced during
the first half of the year and the impact of the competition pilot program.
The increase in wholesale energy sales, which includes sales to other
utilities and energy marketers through contracts, spot market transactions
or power pool arrangements, was primarily the result of increased activity
of the Energy Marketing Center.
Electricity Trading Activities
PP&L, through its Energy Marketing Center, purchases and sells
electric capacity and energy at the wholesale level under its FERC market-
based tariff. PP&L has entered into agreements to sell firm capacity or
energy under its market-based tariff to certain entities located inside and
outside of the PJM power pool. If PP&L were unable to meet its obligations
under these agreements to sell firm capacity and energy, under certain
circumstances it would be required to pay damages equal to the difference
between the market price to acquire replacement capacity or energy and the
contract price of the undelivered capacity or energy. Depending on price
volatility in the wholesale energy markets, such damages could be material.
Events that could affect PP&L's ability to meet its firm capacity or energy
obligations or cause significant increases in the market price of
replacement capacity and energy include the occurrence of extreme weather
conditions, unplanned generating plant outages, transmission disruptions,
non-performance by counterparties with which it has power contracts and
other factors affecting the wholesale energy markets. Although PP&L
attempts to mitigate these risks, there can be no assurance that it will be
able to fully meet its firm obligations, that it will not be required to
pay damages for failure to perform, or that it will not experience
counterparty non-performance in the future.
PP&L's efforts to mitigate risks associated with open contract
positions include maintaining generation capacity to deliver electricity to
satisfy its net firm sales contracts and purchasing firm transmission
service. In addition, the Energy Marketing Center adheres to established
credit policies in evaluating counterparty credit risk. PP&L has not
experienced any material non-performance by counterparties to date.
The EITF is evaluating Issue 98-10, "Accounting for Energy Trading and
Risk Management Activities," which addresses the increased use, by utility
and other energy companies, of contracts for the purchase and sale of
energy, not necessarily as hedges or inventory management, but to generate
profits. The EITF agreed that much of this activity appeared to be trading
and should be accounted for as such. The EITF also agreed that settlement
accounting would not be appropriate for these activities. The EITF
commissioned a working group to further study this issue and develop an
operational definition of "trading." The working group's recommendations
included a group of indicators designed to assist in determining what
constitutes "trading activities." The indicators could be applied not only
to separate legal entities or subsidiaries but also to divisions or pieces
thereof. The EITF reached tentative consensuses that mark-to-market (fair
value) accounting should apply to activities meeting the trading definition
and that any final consensus that may occur should be applied for fiscal
years beginning after December 15, 1998. The EITF agreed that this
consensus would not change the accounting for those contracts that qualify
for hedge accounting and are designated as hedges. A final consensus is
expected at the November meeting. The consensus was labeled as "tentative"
in order to allow for additional input from the industry. PP&L enters into
contracts for the sale and purchase of energy commodities and practices
accrual accounting. Should any of these sales and purchases ultimately
meet the EITF's definition of trading activities, it appears likely that a
change in those entities' accounting practices will be required. The
ultimate impact of this change in accounting cannot immediately be
determined, but such impact may be significant.
Operating Revenues: Electric Operations
The increase (decrease) in revenues from electric operations was
attributable to the following:
September 30, 1998 vs. September 30, 1997
Three Months Ended Nine Months Ended
(Millions of Dollars)
Retail Electric Revenues
Weather effect $ 6 $(29)
Sales volume and sales mix effect 34 32
Unbilled revenues 23 28
Pilot shopping credit above market price (4) (12)
Other, net 4
Other Electric Revenues 2 9
$61 $ 32
During the third quarter of 1998, PP&L recognized increased revenues
of $23 million due to the impact on unbilled revenue resulting from a
change in the regulatory treatment of energy costs. Excluding this
benefit, revenues from electric operations would have increased $38 million
and $9 million, respectively, for the three and nine months ended September
30, 1998.
The revenue increase for both periods can be attributed to strong
retail electric sales in the third quarter of 1998. Electricity delivered
and electricity supplied to residential, commercial and industrial
customers increased from the prior year. Milder than normal weather
experienced during the first quarter of 1998 partially offset the strong
sales experienced during the third quarter of 1998.
Operating Revenues: Wholesale Energy and Trading Activities
The increase (decrease) in revenues from wholesale energy and trading
activities was attributable to the following:
September 30, 1998 vs. September 30, 1997
Three Months Ended Nine Months Ended
(Millions of Dollars)
Market-based transactions $243 $423
PJM 22 58
Cost-based contracts (9) (26)
Reservation/capacity credits 12 35
Oil & gas sales 22 38
Other 1
$291 $528
Revenues from wholesale energy and trading activities increased by
$291 million and $528 million for the three and nine months ended September
30, 1998, respectively, when compared to the same periods in 1997.
Revenues have continued to increase despite the phase-down of the capacity
and energy agreement with JCP&L and the end of the capacity and energy
agreement with Atlantic. This increase reflects PP&L's continued emphasis
on competing in wholesale markets. Energy purchases have also increased to
meet these increased sales. Refer to "Energy Purchases" for more
information.
In recent months, the national energy trading market has experienced
high prices and increased volatility. PP&L is actively managing its
portfolio to attempt to capture the opportunities and limit its exposure to
these volatile prices. Refer to "Electricity Trading Activities" for more
information.
Energy-Related Businesses
Energy-related businesses contributed $5 million and $9 million to the
operating income of PP&L Resources for the three months ended September 30,
1998 and 1997, respectively. For the nine-month periods ended September
30, 1998 and 1997, these businesses contributed a total of $15 million and
$17 million to operating income, respectively. These results are primarily
from PP&L Global's investments in SWEB and other world-wide energy
projects. Energy-related businesses -- i.e., PP&L Global, PP&L Spectrum,
H.T. Lyons and McClure -- are expected to provide an increasing share of
PP&L Resources' future earnings.
Cost of Electric Fuel
Electric fuel expense increased by $14 million and $29 million for the
three and nine months ended September 30, 1998, respectively, when compared
to the same periods in 1997. This reflects increased generation at the
coal and oil/gas-fired stations. These units, particularly Martins Creek,
were needed as a result of increased trading activities of the Energy
Marketing Center and to meet greater demand for electricity during the
summer. This increase was partially offset by lower fuel prices for all
units, especially oil/gas-fired stations.
Energy Purchases
Energy purchases increased by $277 million and $488 million for the
three and nine months ended September 30, 1998, respectively, when compared
to the same periods in 1997. These increases were primarily due to greater
quantities of energy purchased from others to meet the increased trading
activities of the Energy Marketing Center, which include increased
purchases of gas for resale. The related sales are included in wholesale
energy sales. The overall market price of purchased power has also been
higher during 1998 compared to 1997 due to the market volatility.
Other Operation Expenses
Other operation expenses increased by $49 million and $71 million,
respectively, for the three and nine months ended September 30, 1998
compared with the same periods in 1997. These increases reflect additional
costs associated with computer information systems, and additional payroll,
consultant services and other expenses to meet the requirements of retail
competition. These increases also reflect additional software expenses and
increased firm transmission costs related to the Energy Marketing Center
activities.
The increase for the nine months ended September 30, 1998 also
reflects a bonus paid to bargaining unit employees in ratifying the recent
labor agreement, and higher uncollectible account expenses. These
increases were partially offset by credits recorded in connection with the
competition pilot program. The PUC has authorized PP&L to seek future
recovery of the revenue lost on the pilot program. PP&L has established a
regulatory asset for the excess of the shopping credits provided to pilot
customers over the market price of this energy. These credits totaled $4
million and $12 million for the three and nine months ended September 30,
1998, respectively, and were recorded as offsets to "Other Operation
Expenses."
Power Plant Operations
In an effort to reduce operating costs and position itself for the
competitive marketplace, PP&L, in August 1998, announced the closing of its
Holtwood coal-fired generating station, effective May 1, 1999. The
adjacent hydroelectric plant will continue to operate. PP&L has also put
its Sunbury coal-fired generating station up for sale.
Depreciation and Amortization Expenses
Depreciation and amortization expenses decreased by $26 million and
$22 million, respectively, for the three and nine months ended September
30, 1998 compared with the same periods in 1997. These decreases were
mainly due to the write-off of impaired generation-related assets in
connection with the restructuring adjustments recorded in June 1998. See
Note 4 for additional information.
Other Income and (Deductions)
Other income of PP&L Resources increased by $52 and $57 million for
the three and nine months ended September 30, 1998, respectively, from the
comparable periods in 1997. PP&L Global's earnings for 1997 reflected a
$40 million U.K. windfall profits tax.
In addition, PP&L Resources recorded the acquisition of Penn Fuel Gas
in August 1998. The transaction was originally contemplated as a pooling
of interests, and estimated transaction costs of about $6 million were
charged against earnings in the third quarter of 1997. The transaction was
ultimately recorded under purchase accounting, and the transaction costs
were capitalized as part of the investment. Third quarter 1998 earnings
were credited by $6 million due to this change.
Lastly, the September 30, 1998 year-to-date earnings include interest
income of $6 million from a 1988 Gross Receipts Tax settlement, and a $3
million gain from sales of property.
Income Taxes
For the three months ended September 30, 1998, income tax expense
before extraordinary items increased by $14 million, or 22%, from the
comparable period in 1997. This is primarily due to an increase in PP&L
Resources' pre-tax book income before extraordinary items of $108 million.
During the second quarter of 1998, income tax benefits of $666 million
were recognized by the PUC restructuring and FERC settlement with
municipalities. These benefits relate to the pre-tax book extraordinary
charges of $1.6 billion. See Financial Note 4 which describes the
extraordinary charges.
Financial Condition
Refer to Financial Notes 3, 4 and 6 for information concerning the PUC
restructuring charge and the Tender Offer for PP&L Resources' common stock.
Financing Activities
The following financing activities have occurred to date in 1998:
o From January through October 1998, PP&L Resources issued $55
million of common stock through the DRIP.
o In March 1998, the 364-day revolving credit agreement for PP&L and
PP&L Capital Funding was increased from $150 million to $350
million. This increase, when added to the $300 million five-year
revolving credit agreement of PP&L and PP&L Capital Funding,
brings to $650 million the total amount of revolving credit
available to PP&L and PP&L Capital Funding under these joint
agreements. Additionally, in July 1998, PP&L Capital Funding
entered into five separate $80 million, 364-day credit facilities
with five banks. As of September 30, 1998, no borrowings were
outstanding under any revolving credit agreements.
o In March 1998, PP&L Capital Funding sold $60 million of medium-
term notes having a five-year term.
o In March 1998, PP&L Capital Funding established a commercial paper
program. At September 30, 1998, $656 million of commercial paper
was outstanding.
o In April 1998, PP&L retired $150 million principal amount of First
Mortgage Bonds, 5-1/2% series that matured on that date.
o In May 1998, PP&L issued $200 million First Mortgage Bonds, 6-1/8%
Reset Put Securities Series due 2006. In connection with this
issuance, PP&L assigned to a third party the option to call the
bonds from the holders on May 1, 2001. These bonds will mature on
May 1, 2006, but will be required to be surrendered by the
existing holders on May 1, 2001 either through the exercise of the
call option by the callholder or, if such option is not exercised,
through the automatic exercise of a mandatory put by the trustee
on behalf of the bondholders. If the call option is exercised,
the bonds will be remarketed and the interest rate will be reset
for the remainder of their term to the maturity date. If the call
option is not exercised, the mandatory put will be exercised and
PP&L will be required to repurchase the bonds at 100% of their
principal amount on May 1, 2001. Proceeds from the sale of the
bonds were used by PP&L to retire $116 million of its unsecured
term loans and to reduce its outstanding commercial balances.
o In September 1998, PP&L Resources repurchased approximately 17
million shares of common stock at $24.50 per share.
o In August through October 1998, PP&L Capital Funding issued a
total of $235 million of medium-term notes with maturities varying
from two to seven years.
PP&L Resources has developed a financial strategy that is intended to
position PP&L Resources for the anticipated future competitive environment
after giving effect to the PUC's Final Order, the related restructuring
charge on PP&L's books and the collection of CTC revenues during the
Transition Period. PP&L Resources' financial strategy and goals include:
(a) a reduction in PP&L Resources' permanent capitalization to a level
that is consistent with PP&L's restated asset values and the earning power
of those assets;
(b) a Common Stock dividend level based on a targeted payout ratio of
45%-55% designed to increase PP&L Resources' future financing flexibility;
(c) the temporary use of a higher degree of leverage in PP&L
Resources' capital structure during the Transition Period; and
(d) maintenance of investment grade ratings on the senior debt
securities of PP&L Resources and PP&L.
As the electric utility industry transitions to a competitive
environment, PP&L Resources anticipates the potential to achieve long-term
returns on shareowner capital that exceed the returns that have been
historically permitted in a fully regulated business environment. At the
same time, PP&L Resources' business risks are expected to increase,
resulting in an increase in the potential volatility in revenue and income
streams. As such, PP&L Resources believes that a dividend payout ratio
that is significantly lower than the 80%-90% payout ratio previously
experienced by PP&L Resources and the electric utility industry in general
is required to better position PP&L Resources to more effectively compete
in the energy markets by increasing PP&L Resources' future financing
flexibility. Accordingly, effective with the dividend payable October 1,
1998 to owners of record on September 10, 1998, PP&L Resources' quarterly
Common Stock dividend was reduced to $.25 per share ($1.00 annualized rate)
from the previous level of $.4175 per share ($1.67 annualized rate). In
addition to providing an increase in PP&L Resources' future financing
flexibility, this dividend action positions PP&L Resources' Common Stock
for potential increased growth in market value by retaining a
proportionately higher level of earnings in the business for reinvestment.
The Shares purchased pursuant to the Tender Offer received the October 1
dividend.
The reduction in PP&L Resources' permanent capitalization, as well as
the temporary increase in leverage, has been effected through this Tender
Offer, which was financed by PP&L Resources through the use of short-term
debt. The short-term debt used by PP&L Resources was made available
through the issuance of commercial paper by PP&L Capital Funding.
Declaration of dividends on common stock are made at the discretion of
the Boards of Directors of PP&L Resources and PP&L. PP&L Resources and
PP&L will continue to consider the appropriateness of these dividend
levels, taking into account the respective financial positions, results of
operations, conditions in the industry and other factors which the
respective Boards deem relevant.
Refer to Financial Note 6 for additional information on credit
arrangements, financing activities and the Tender Offer for PP&L Resources'
common stock.
Financing and Liquidity
The change in cash and cash equivalents for PP&L Resources for the
nine months ended September 30, 1998 increased $45 million from the
comparable period in 1997. The reasons for this change were:
o A $144 million decrease in cash provided by operating activities,
primarily due to an increase in receivables related to wholesale
trading activities, and a cash revenue loss associated with the
shopping credits from the competition pilot program.
o A $269 million increase in cash used in investing activities,
primarily due to an increase in the amount of investment in
electric energy projects by PP&L Global. In addition, there were
fewer sales and maturities of available-for-sale securities, as
well as other financial investments in 1998 compared with 1997.
o A $458 million increase in cash provided by financing activities,
primarily due to the commercial paper program established by PP&L
Capital Funding in 1998. At September 30, 1998, $656 million of
this short-term debt was outstanding.
Outside financing, in amounts not currently determinable, may be
required over the next five years to finance investments in world-wide
energy projects by PP&L Global. Refer to "Unregulated Investments" for
additional information.
Financial Indicators
The ratio of PP&L Resources pre-tax income to interest charges was 3.9
and 3.4 for the nine months ended September 30, 1998 and 1997,
respectively, excluding extraordinary items. The annual per share dividend
rate on common stock decreased from $1.67 per share to $1.00 per share in
the third quarter of 1998. Refer to Financial Note 6 for information
regarding the reduction of PP&L Resources' dividend and the Tender Offer
for PP&L Resources' common stock. The ratio of the market price to book
value of common stock was 234% at September 30, 1998, compared with 130% at
September 30, 1997. Excluding extraordinary items, the ratio of market
price to book value of common stock at September 30, 1998 was 151%.
Unregulated Investments
PP&L Global continues to pursue opportunities to develop and
acquire electric generation, transmission and distribution facilities in
the United States and abroad.
As of September 30, 1998, PP&L Global had investments and commitments
of approximately $725 million in distribution, transmission and generation
facilities in the United Kingdom, Bolivia, Peru, Argentina, Spain,
Portugal, Chile and El Salvador. PP&L Global's major investments to date
are SWEB, Emel and DelSur.
In 1998, PP&L Global acquired an additional 1,813,000 shares of Emel
at a cost of approximately $32 million, increasing its ownership interest
to 37.5%. In February 1998, PP&L Global and Emel acquired a 75% interest
in DelSur, an electric distribution company serving 193,000 customers in El
Salvador, for approximately $180 million. Under the purchase agreement,
PP&L Global directly acquired 37.5% of DelSur and Emel acquired the other
37.5%. DelSur is one of five electricity distribution companies in El
Salvador that are being privatized by the government. In June 1998, PP&L
Global acquired an additional 26% interest in SWEB for $170 million,
increasing its equity interest to 51% and its voting interest to 49%.
PP&L Global will acquire most of Bangor Hydro-Electric's generating
assets and certain transmission rights under an agreement reached in
September 1998. PP&L Global will purchase 100 percent of Bangor Hydro's
hydroelectric assets, as well as its interest in an oil-fired generation
facility, for $89 million. The closing, which is subject to the approval
of the Maine Public Utilities Commission and the FERC as well as certain
third-party consents, is expected to occur by mid-1999.
PP&L Global plans to build a gas-fired power plant in Arizona which
will have a nominal base load capacity of 520 megawatts and a maximum
output capability of 650 megawatts. An energy marketing company has agreed
to purchase between 240 and 520 megawatts of the electricity produced by
the facility. PP&L Global also plans to build a 500 to 600 megawatt
natural gas-fired power plant adjacent to PP&L's Martins Creek plant with
an estimated investment of $250 million.
PP&L Global has signed definitive agreements with Montana Power
Company, Portland General Electric Company and Puget Sound Energy, Inc. to
acquire 13 Montana power plants, with 2,614 MW of generating capacity, for
a purchase price of $1.586 billion. The acquisition is subject to several
conditions, including the receipt of required state and federal regulatory
approvals and third-party consents. PP&L Global expects to complete the
acquisition by the end of 1999. About 65% of the acquisition cost is
expected to be financed on a project credit basis, non-recourse to PP&L
Global and PP&L Resources. The balance of the acquisition cost is expected
to be financed through a combination of debt and equity issued by PP&L
Resources, or with funds that PP&L Resources derives from PP&L's
securitization of transition costs. The agreements also provide for PP&L
Global's acquisition of related transmission assets for $182 million,
subject to certain conditions, including federal regulatory approval.
Acquisitions
In 1998, PP&L Resources acquired H.T. Lyons and McClure, heating,
ventilating and air-conditioning firms, in cash transactions for amounts
that were not material.
In August 1998, PP&L Resources acquired Penn Fuel Gas. The
transaction was treated as a purchase for accounting and financial
reporting purposes. PP&L Resources issued approximately 5.6 million shares
of common stock with a value of approximately $135 million, to acquire all
Penn Fuel Gas common and preferred stock. Under the terms of the merger
agreement, shareowners of Penn Fuel Gas received 6.968 common shares of
PP&L Resources for each common share of Penn Fuel Gas that they owned and
0.682 common shares of PP&L Resources for each preferred share of Penn Fuel
Gas that they owned.
Commitments and Contingent Liabilities
There have been no material changes related to PP&L Resources' or
PP&L's commitments and contingent liabilities since the companies filed
their joint 1997 Form 10-K, other than the environmental remediation
contingencies of Penn Fuel Gas, which was acquired in August 1998.
Increasing Competition
Background
The electric utility industry has experienced and will continue to
experience a significant increase in the level of competition in the energy
supply market. PP&L has publicly expressed its support for full customer
choice of electricity suppliers for all customer classes. PP&L is actively
involved in efforts at both the state and federal levels to encourage a
smooth transition to full competition.
Pennsylvania Activities
Reference is made to Financial Note 3 "PUC Restructuring Proceeding"
for a discussion of the disposition of PP&L's restructuring plan under the
Customer Choice Act.
In August 1997, the PUC issued an order modifying and approving PP&L's
pilot program under the applicable provisions of the Customer Choice Act
and PUC guidelines. Retail customers participating in the PP&L and other
Pennsylvania utilities' pilot programs began to receive power from their
supplier of choice in November 1997. Under its pilot program,
approximately 60,000 PP&L residential, commercial and industrial customers
have chosen their electric supplier. PP&L will continue to provide all
transmission and distribution, customer service and back-up energy supply
services to participating customers in its service area.
Only those alternative suppliers licensed by the PUC and in compliance
with the state tax obligations set forth in the Customer Choice Act may
participate in the pilot programs. To date, approximately 80 suppliers have
obtained such licenses to participate in the pilot programs.
Reference is made to Financial Note 3 "PUC Restructuring Proceeding"
for a discussion of the settlement approved by the PUC which requires,
among other things, that PP&L transfer its retail electric marketing
function to a separate, affiliated corporation. In August 1998, PP&L
formed a new subsidiary, PP&L EnergyPlus, for this purpose. In September
1998, the PUC approved PP&L EnergyPlus's application to act as a
Pennsylvania EGS. This license permits PP&L EnergyPlus to offer retail
electric supply to participating customers in PP&L's service territory and
in the service territories of other Pennsylvania utilities. In 1999, PP&L
EnergyPlus will offer such supply to industrial and commercial customers
throughout the state. At this time, PP&L EnergyPlus has determined not to
pursue residential customers in the competitive marketplace based on
economic considerations.
In September 1998, the PUC issued an Order which, in part, directed
Pennsylvania utilities which are members of PJM, including PP&L, to offer
their installed capacity at a price of $19.72 per kilowatt-year (Capacity
Order). PP&L brought an action in the District Court seeking an injunction
against the Capacity Order on the basis, among other things, that it
attempted to regulate matters within exclusive federal jurisdiction. In
October 1998, PP&L entered into a settlement agreement with the PUC under
which (i) PP&L will offer to sell capacity credits to EGS's licensed by the
PUC at the equivalent of $19.72 per kilowatt-year in 1999 for service to
PP&L residential customers; (ii) all PP&L residential customers will be
permitted to select an EGS in January 1999; (iii) the PUC will withdraw the
Capacity Order as to PP&L; and (iv) PP&L will withdraw its federal court
action against the Capacity Order.
Federal Activities
Reference is made to Financial Note 4 for a discussion of PP&L's
settlement with 15 small utilities.
In June 1997, all of the PJM companies except PECO (the PJM Supporting
Companies) filed proposals with the FERC to amend the PJM tariff and
restructure the PJM pool. PECO filed a separate request with the FERC to
amend the PJM tariff. Furthermore, PECO and certain electric marketers
submitted significantly different proposals to restructure the PJM pool.
In November 1997, the FERC approved, with certain modifications, the
PJM Supporting Companies' proposals for transforming the PJM into an ISO.
In summary, the FERC order: (i) approved the PJM's open access
transmission rates based on geographic zones, but required PJM to file a
single PJM system-wide rate proposal by 2002; (ii) accepted the PJM
Supporting Companies' methodology to price transmission when the system is
congested and to charge these congestion costs to system users in addition
to the open access transmission rates, but ordered PJM to file an
additional proposal to address concerns raised over price certainty for
buyers and sellers during periods of congestion; (iii) determined that the
ISO is to operate both the transmission system and the power exchange which
provides for the purchase and sale of spot energy within the PJM market;
and (iv) accepted the PJM Supporting Companies' proposal regarding
mandatory installed capacity obligations for all entities serving firm
retail and wholesale load within PJM, but rejected their proposal for
allocating the capacity benefits which result from PJM's ability to import
power from other regional power pools.
The PJM Supporting Companies and numerous other parties have filed
requests for amendment and/or rehearing of virtually every portion of the
FERC's PJM ISO order. PP&L also has filed its own request for amendment
and/or rehearing. The FERC has not yet taken action on these filings.
PP&L's primary issue with the FERC's order relates to a requirement that
existing wholesale contracts for sales service and transmission service be
modified to have the new PJM transmission tariff applied to service under
these existing contracts and the requirement that PP&L modify these
contracts to ensure that customers are not assessed multiple transmission
charges. If PP&L were required to modify these existing contracts, PP&L
could lose as much as $3-4 million in transmission revenues in 1998 -- but
a lesser amount in the following years -- from several wholesale sales and
transmission service contracts that were negotiated prior to the
establishment of the PJM ISO. In an order issued in May 1998, the FERC
allowed PP&L to request an increase in the revenue requirement applicable
to transmission service over PP&L's transmission facilities to the extent
that PP&L has otherwise unrecovered transmission costs as a result of the
contract modifications. PP&L filed the proposed increase to its
transmission revenue requirement in July 1998. In October 1998, PP&L filed
a settlement agreement among the active parties in that proceeding, which
is currently under consideration by a FERC administrative law judge.
In July 1997, the FERC accepted a new wholesale power tariff that
permits PP&L to sell capacity and energy at market-based rates, both inside
and outside the PJM area, subject to certain conditions. This tariff
allows PP&L to become more active in the wholesale market with utilities
and other entities, and removes pricing restrictions which in the past had
limited PP&L to charging at or below cost-based rates.
In July 1998, the FERC accepted amendments to PP&L's market-based rate
tariff that permit PP&L to sell, assign or transfer transmission rights and
associated ancillary services. In October 1998, the FERC accepted a
proposed amendment to PP&L's market-based rate tariff to permit PP&L to
sell electric energy and/or capacity to its affiliates under specified
conditions.
In September 1998, PP&L filed its EGS Coordination Tariff with the
FERC. The EGS Coordination Tariff applies to entities licensed to serve
retail electricity customers under the Commonwealth of Pennsylvania's
retail access program. The purpose of the EGS Coordination Tariff is to
permit PP&L to provide EGS's with certain FERC-jurisdictional services
which will facilitate the ability of EGS's to meet their obligations as
transmission customers and load-serving entities under the PJM Open Access
Transmission Tariff and related agreements of the PJM.
In September 1997, PP&L filed a request with the FERC to lower the
applicable PP&L revenue requirement currently set forth in the PJM open
access transmission tariff. The new revenue requirement results from
PP&L's use of the same test year and cost support data used in the PUC
restructuring proceeding. PP&L requested that the new revenue requirement
take effect on November 1, 1997. In February 1998, the FERC accepted the
proposed rates, subject to refund, and set the amount of the decrease in
the revenue requirement for hearing. In October 1998, PP&L filed a
settlement agreement among the active parties in that proceeding, which is
currently under consideration by a FERC administrative law judge.
In January 1998, the United States Department of Energy approved
PP&L's application for an export license to sell capacity and/or energy to
electric utilities in Canada. This export license allows PP&L to sell
either its own capacity and energy not required to serve domestic
obligations or power purchased from other utilities.
Reference is made to "Pennsylvania Activities" above for a discussion
of PP&L's new retail electric marketing subsidiary, PP&L EnergyPlus. PP&L
EnergyPlus filed an application with the FERC in September 1998 for
authority to sell electric energy and capacity at market-based rates, and
for authority to sell, assign or transfer transmission rights and
associated ancillary services. The FERC has not yet ruled on PP&L
EnergyPlus's application. Also, in September 1998, PP&L filed a
notification of change in status with the FERC to report PP&L's affiliation
with PP&L EnergyPlus. Pursuant to FERC requirements, PP&L has filed a code
of conduct to govern its relationship with affiliates that engage in the
sale and/or transmission of electric energy.
Year 2000 Computer Issue
PP&L Resources and its subsidiaries utilize computer-based systems
throughout their businesses. In the year 2000, these systems will face a
potentially serious problem with recognizing calendar dates. Without
corrective action, the most reasonably worst case scenario with respect to
Year 2000 issues could result in computer shutdown or erroneous
calculations causing less than optimal operation of the generating
stations; diminished ability to monitor, control and coordinate generation
with the transmission and distribution systems; and impact the operation of
various monitoring and metering equipment utilized throughout PP&L. A
company-wide Year 2000 coordination committee was formed to raise the
awareness of the Year 2000 issue, share information and review the
progress. A seven-step approach was developed to achieve Year 2000
compliance by assessing and remediating the problem in application
software, hardware, plant control systems and devices containing embedded
microprocessors. The seven steps in the plan include awareness, inventory,
assessment, remediation, testing, implementation, and contingency planning.
PP&L Resources has also requested assurance from all critical suppliers and
business partners that they are in compliance with Year 2000 issues.
As of September 30, 1998, PP&L Resources estimates that approximately
60% of the critical mainframe applications and approximately 70% of the
non-critical mainframe applications that will remain in production have
been determined as being Year 2000 compliant. It is anticipated that this
project will be completed on a timely basis, with all mission-critical
mainframe computer applications to be compliant by March 31, 1999 and all
mainframe computer systems to be fully Year 2000 compliant by mid-1999.
PP&L has contingency plans to address issues such as blackouts on the
electrical grid, cold starts of generating facilities and disaster recovery
procedures for the computing environment. PP&L recognizes that additional
contingency plans are necessary and, as part of the seven-step remediation
process, is currently working on identifying additional contingency plans
that may be needed.
In May 1998, the NRC issued a notification requirement under which
nuclear utilities are required to inform the commission, in writing, that
they are working to solve the Year 2000 computer problem. In addition,
nuclear utilities have until July 1, 1999 to inform the NRC that their
computers are Year 2000 compliant or to submit a status report summarizing
the on-going work. PP&L filed its written response to the NRC in August
1998.
In July 1998, the PUC ordered an investigation to be conducted by the
Office of Administrative Law Judge "to accurately assess any and all steps
taken and proposed to be taken to resolve the Year 2000 compliance issue by
all jurisdictional fixed utilities and mission-critical service providers
such as the PJM." The PUC is requiring all jurisdictional utilities to
file a written response to a list of questions concerning Year 2000
compliance; and that, if mission-critical systems cannot be made Year 2000
compliant on or before March 31, 1999, to file a detailed contingency plan.
PP&L filed its written response to these questions in August 1998.
Based upon present assessments, PP&L Resources estimates that it will
incur approximately $15 million in Year 2000 remediation costs. Through
September 30, 1998, PP&L Resources spent approximately $6 million in
remediation costs, which included assistance from outside consultants.
These costs are being funded through internally generated funds and are
being expensed as incurred.
<PAGE>
PP&L RESOURCES, INC. AND
PP&L, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Notes to Financial Statements for information
concerning PP&L's restructuring under the Customer Choice Act.
Reference is made to "Increasing Competition" in the Review of the
Financial Condition and Results of Operation for information concerning
proceedings before the FERC.
The EPA has issued an order to PP&L and 12 other parites (mainly
utilities) under Section 106 of Superfund requiring clean-up of PCBs at the
Metal Bank Superfund site near Philadelphia. PP&L initially complied with
the order by joining the owner/operator of the site in performing the
remedial design. However, the EPA subsequently rejected the
owner/operator's design contractor, choosing the utility group's design
contractor instead. PP&L is negotiating with the utility group to join
them in complying with the order.
PP&L challenged the DEP's right to collect air emission fees for
hazardous air pollutants (HAPs) from PP&L's coal-fired units and air
emission fees for emissions from PP&L's Phase I affected units from 1995
through 1999. (Phase I affected units are those units designated by the
Clean Air Act, or which voluntarily opt into the requirement, to make
certain reductions in SO2 and NOx emissions by 1995; all others must make
these reductions by 2000.) The HAPs emissions fees are approximately
$200,000 per year. The emission fees for Phase I affected units from 1995
through 1999 are estimated at $1.6 million. PP&L and the DEP have
finalized a settlement of this litigation, under which PP&L will pay
reduced fees for the Phase I units from 1995-1999 and will pay all HAPs
fees.
Reference is made to PP&L Resources' and PP&L's Annual Reports to the
SEC on Form 10-K for the year ended December 31, 1997 regarding citations
issued by the U.S. Department of Labor's MSHA to one of PP&L's coal-mining
subsidiaries. In August 1998, the United States Court of Appeals for the
District of Columbia Circuit affirmed the ruling of the Mine Safety and
Health Review Commission in favor of the mine operator in the test case in
this matter. In September 1998, the Secretary of Labor moved to vacate and
dismiss all of the pending cases against mine operators, including the PP&L
subsidiary. MSHA has indicated that it intends to withdraw all of its
citations, which would conclude all of these pending cases against the mine
operators, including PP&L's subsidiary.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3(ii)(a) - Bylaws of PP&L Resources, Inc.
3(ii)(b) - Bylaws of PP&L, Inc. (amended to, among other things,
require shareholders to provide PP&L with at least 75 days advance
notice of an intent to nominate a director or submit a proposal for
consideration at a shareholder's meeting).
10(a) - Asset Purchase Agreement between PP&L Global, Inc. and
The Montana Power Company
10(b) - Equity Contribution Agreement among PP&L Resources, Inc.,
PP&L Global, Inc. and The Montana Power Company
10(c) - Asset Purchase Agreement between PP&L Global, Inc. and
Portland General Electric Company
10(d) - Equity Contribution Agreement among PP&L Resources, Inc.,
PP&L Global, Inc. and Portland General Electric Company
10(e) - Asset Purchase Agreement between PP&L Global, Inc. and
Puget Sound Energy, Inc.
10(f) - Equity Contribution Agreement among PP&L Resources, Inc.,
PP&L Global, Inc. and Puget Sound Energy, Inc.
12 - Computation of Ratio of Earnings to Fixed Charges
27 - Financial Data Schedule
(b) Reports on Form 8-K
Report dated June 29, 1998
Item 5. Other Events
Information regarding the IBEW Local 1600's ratification of a new
four-year bargaining agreement with PP&L.
Report dated August 20, 1998
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
Computation of Ratio of Earnings to Fixed Charges
Report dated August 21, 1998
Item 5. Other Events
Information regarding the acquisition of Penn Fuel Gas and the
PUC's Final Order approving the Joint Settlement Petition.
Report dated September 28, 1998
Item 5. Other Events
Information regarding PP&L Global's acquisition of generating
assets and transmission resources of Bangor Hydro-Electric Company.
<PAGE>
GLOSSARY OF TERMS AND ABBREVIATIONS
AFUDC (Allowance for Funds Used During Construction) - the cost of equity
and debt funds used to finance construction projects that is capitalized as
part of construction cost.
Atlantic - Atlantic City Electric Company
Clean Air Act (Federal Clean Air Act Amendments of 1990) - legislation
enacted to address environmental issues including acid rain, ozone and
toxic air emissions.
CTC - Competitive transition charge
Customer Choice Act - (Pennsylvania Electricity Generation Customer Choice
and Competition Act) - legislation enacted to restructure the state's
electric utility industry to create retail access to a competitive market
for generation of electricity
DelSur - Distributidora de Electricidad del Sur, an electric distribution
company in El Salvador
DEP - Pennsylvania Department of Environmental Protection
District Court - United States District Court for the Eastern District of
Pennsylvania
DRIP (Dividend Reinvestment Plan) - program available to shareowners of
PP&L Resources' common stock and PP&L preferred stock to reinvest dividends
in PP&L Resources' common stock instead of receiving dividend checks.
EGS - Electric Generation Supplier
EITF - Emerging Issues Task Force
Emel - Empresas Emel, S.A., a Chilean electric distribution holding company
Energy Marketing Center - organization within PP&L responsible for
marketing and trading wholesale energy
EPA - Environmental Protection Agency
FASB (Financial Accounting Standards Board) - a rulemaking organization
that establishes financial accounting and reporting standards.
FGD - Flue gas desulfurization equipment installed at coal-fired power
plants to reduce sulfur dioxide emissions.
FERC (Federal Energy Regulatory Commission) - federal agency that regulates
interstate transmission and sale of electricity and related matters.
H.T. Lyons - H.T. Lyons, Inc., a PP&L Resources unregulated subsidiary
specializing in heating, ventilating and air-conditioning.
IBEW - International Brotherhood of Electrical Workers
ISO - Independent System Operator
ITC - Intangible transition charge
JCP&L - Jersey Central Power & Light Company
McClure - McClure Company, a PP&L Resources unregulated subsidiary
specializing in heating, ventilating and air-conditioning.
MSHA - Mine Safety and Health Administration
NOx - Nitrogen oxide
NPDES - National Pollutant Discharge Elimination System
NRC - Nuclear Regulatory Commission
NUG (Non-Utility Generator) - generating plants not owned by regulated
utilities. If the NUG meets certain criteria, its electrical output must
be purchased by public utilities as required by PURPA.
PCB (Polychlorinated Biphenyl) - additive to oil used in certain electrical
equipment up to the late-1970s. Now classified as a hazardous chemical.
PECO - PECO Energy Company
Penn Fuel Gas - Penn Fuel Gas, Inc., a PP&L Resources regulated subsidiary,
specializing in natural gas distribution, transmission and storage
services, and the sale of propane.
PJM (PJM Interconnection, L.L.C.) - operates the electric transmission
network and electric energy market in the mid-Atlantic region of U.S.
PP&L - PP&L, Inc.
PP&L Capital Funding - PP&L Capital Funding, Inc., PP&L Resources'
financing subsidiary
PP&L EnergyPlus - PP&L Energy Plus Co., a PP&L Resources subsidiary which
is involved in retail electric marketing.
PP&L Global - PP&L Global, Inc., a PP&L Resources unregulated subsidiary
which invests in and develops world-wide power projects.
PP&L Resources - PP&L Resources, Inc., the parent holding company of PP&L,
PP&L Global, PP&L Spectrum and other subsidiaries
PP&L Spectrum - PP&L Spectrum, Inc., a PP&L Resources unregulated
subsidiary which offers energy-related products and services.
PUC (Pennsylvania Public Utility Commission) - state agency that regulates
certain ratemaking, services, accounting, and operations of Pennsylvania
utilities
SEC - Securities and Exchange Commission
SER - Schuylkill Energy Resources, Inc.
SFAS (Statement of Financial Accounting Standards) - accounting and
financial reporting rules issued by the FASB.
SO2 - Sulfur dioxide
Superfund - Federal and state legislation that addresses remediation of
contaminated sites.
SWEB - South Western Electricity plc, a British regional electric utility
company.
Year 2000 - A set of date-related problems that may be experienced by a
software system or application.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized. The signature for each
undersigned company shall be deemed to relate only to matters having
reference to such company or its subsidiary.
PP&L Resources, Inc.
(Registrant)
PP&L, Inc.
(Registrant)
Date: November 12, 1998 /s/ John R. Biggar
John R. Biggar
Senior Vice President and
Chief Financial Officer
(PP&L Resources, Inc. and PP&L, Inc.)
/s/ Joseph J. McCabe
Joseph J. McCabe
Vice President & Controller
(PP&L Resources, Inc. and PP&L, Inc.)
<PAGE>
Bylaws of
PP&L Resources, Inc.
Table of Contents
Section Page
Article I: Offices and Fiscal Year
Section 1.01 Registered Office................................ 1
Section 1.02 Other Offices.................................... 1
Section 1.03 Fiscal Year...................................... 1
Article II: Notice - Waivers - Meetings Generally
Section 2.01 Manner of Giving Notice......................... 1
Section 2.02 Notice of Meetings of Board of Directors........ 2
Section 2.03 Notice of Meetings of Shareholders.............. 2
Section 2.04 Waiver of Notice................................ 3
Section 2.05 Modification of Proposal Contained in Notice.... 3
Section 2.06 Exception to Requirement of Notice.............. 3
Section 2.07 Use of Conference Telephone and Similar
Equipment....................................... 4
Article III: Shareholders
Section 3.01 Place of Meeting................................ 4
Section 3.02 Annual Meeting.................................. 4
Section 3.03 Special Meetings................................ 4
Section 3.04 Quorum and Adjournment.......................... 5
Section 3.05 Action by Shareholders.......................... 5
Section 3.06 Organization.................................... 6
Section 3.07 Voting Rights of Shareholders................... 6
Section 3.08 Voting and Other Action by Proxy................ 6
Section 3.09 Voting by Fiduciaries and Pledgees.............. 7
Section 3.10 Voting by Joint Holders of Shares............... 7
Section 3.11 Voting by Corporations.......................... 8
Section 3.12 Determination of Shareholders of Record......... 8
Section 3.13 Voting Lists.................................... 9
Section 3.14 Judges of Election.............................. 9
Section 3.15 Minors as Securityholders....................... 10
Section 3.16 Nominations for Election of Directors........... 10
Section 3.17 Other Business to be Transacted................. 11
Article IV: Board of Directors
Section 4.01 Powers; Personal Liability...................... 12
Section 4.02 Qualifications and Selection of Directors....... 13
Section 4.03 Number and Term of Office....................... 13
Section 4.04 Vacancies....................................... 14
Section 4.05 Removal of Directors............................ 14
Section 4.06 Place of Meetings............................... 15
Section 4.07 Organization of Meetings........................ 15
Section 4.08 Regular Meetings................................ 15
Section 4.09 Special Meetings................................ 15
Section 4.10 Quorum of and Action by Directors............... 15
Section 4.11 Executive and Other Committees.................. 16
Section 4.12 Compensation.................................... 17
Article V: Officers
Section 5.01 Officers Generally.............................. 17
Section 5.02 Election, Term of Office and Resignations....... 17
Section 5.03 Subordinate Officers, Committees and Agents..... 18
Section 5.04 Removal of Officers and Agents.................. 18
Section 5.05 Vacancies....................................... 18
Section 5.06 Authority....................................... 18
Section 5.07 The Chairman and Vice Chairman of the Board..... 18
Section 5.08 The President................................... 19
Section 5.09 The Vice Presidents............................. 19
Section 5.10 The Secretary................................... 19
Section 5.11 The Treasurer................................... 19
Section 5.12 Salaries........................................ 19
Article VI: Certificates of Stock, Transfer, Etc.
Section 6.01 Share Certificates.............................. 20
Section 6.02 Issuance........................................ 20
Section 6.03 Transfer........................................ 20
Section 6.04 Record Holder of Shares......................... 20
Section 6.05 Lost, Destroyed or Mutilated Certificates....... 21
Article VII: Indemnification of Directors, Officers and Other
Authorized Representatives
Section 7.01 Indemnification of Directors and Officers....... 21
Section 7.02 Indemnification of Persons Not Indemnified
Under Section 7.01.............................. 22
Article VIII: Miscellaneous
Section 8.01 Corporate Seal................................. 25
Section 8.02 Checks......................................... 25
Section 8.03 Contracts...................................... 25
Section 8.04 Interested Directors or Officers; Quorum....... 25
Section 8.05 Deposits....................................... 26
Section 8.06 Corporate Records.............................. 26
Section 8.07 Amendment of Bylaws............................ 26
BYLAWS
OF
PP&L RESOURCES, INC.
(a Pennsylvania Registered Corporation)
(as amended and restated
by the sole shareholder,
effective April 27, 1995)
_________________________________________________________________
ARTICLE I
Offices and Fiscal Year
Section 1.01. Registered Office. The registered office of
the corporation in the Commonwealth of Pennsylvania shall be at
Two North Ninth Street, Allentown, PA 18101-1179, until
otherwise established by an amendment of the articles of
incorporation (the "articles") or by the board of directors and a
record of such change is filed with the Pennsylvania Department
of State in the manner provided by law.
Section 1.02. Other Offices. The corporation may also have
offices at such other places within or without the Commonwealth
of Pennsylvania as the board of directors may from time to time
appoint or the business of the corporation may require.
Section 1.03. Fiscal Year. The fiscal year of the
corporation shall begin on the 1st day of January in each year.
ARTICLE II
Notice - Waivers - Meetings Generally
Section 2.01. Manner of Giving Notice.
(a) General Rule. Whenever written notice is required to
be given to any person under the provisions of the Business
Corporation Law or by the articles or these bylaws, it may be
given to the person either personally or by sending a copy
thereof by first class or express mail, postage prepaid, or by
telegram (with messenger service specified), telex or TWX (with
answerback received) or courier service, charges prepaid, or by
facsimile transmission to the address (or to the telex, TWX,
facsimile or telephone number) of the person appearing on the
books of the corporation or, in the case of directors, supplied
by the director to the corporation for the purpose of notice. If
the notice is sent by mail, telegraph or courier service, it
shall be deemed to have been given to the person entitled thereto
when deposited in the United States mail or with a telegraph
office or courier service for delivery to that person or, in the
case of telex or TWX, when dispatched or, in the case of
facsimile transmission when received. A notice of meeting shall
specify the place, day and hour of the meeting and any other
information required by any other provision of the Business
Corporation Law, the articles or these bylaws.
(b) Bulk Mail. Notice of any regular or special meeting of
the shareholders, or any other notice required by the Business
Corporation Law or by the articles or these bylaws to be given to
all shareholders or to all holders of a class or series of
shares, may be given by any class of postpaid mail if the notice
is deposited in the United States mail at least 20 days prior to
the day named for the meeting or any corporate or shareholder
action specified in the notice.
(c) Adjourned Shareholder Meetings. When a meeting of
shareholders is adjourned, it shall not be necessary to give any
notice of the adjourned meeting or of the business to be
transacted at an adjourned meeting, other than by announcement at
the meeting at which the adjournment is taken, unless the board
fixes a new record date for the adjourned meeting in which event
notice shall be given in accordance with Section 2.03.
Section 2.02. Notice of Meetings of Board of Directors.
Notice of a regular meeting of the board of directors need not be
given. Notice of every special meeting of the board of directors
shall be given to each director by telephone or in writing at
least 24 hours (in the case of notice by telephone, telex, TWX or
facsimile transmission) or 48 hours (in the case of notice by
telegraph, courier service or express mail) or five days (in the
case of notice by first class mail) before the time at which the
meeting is to be held. Every such notice shall state the time
and place of the meeting. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the
board need be specified in a notice of the meeting.
Section 2.03. Notice of Meetings of Shareholders.
(a) General Rule. Except as otherwise provided in Section
2.01(b), written notice of every meeting of the shareholders
shall be given by, or at the direction of, the secretary or other
authorized person to each shareholder of record entitled to vote
at the meeting at least (1) ten days prior to the day named for a
meeting (and, in case of a meeting called to consider a merger,
consolidation, share exchange or division, to each shareholder of
record not entitled to vote at the meeting) called to consider a
fundamental change under 15 Pa.C.S. Chapter 19 or (2) five days
prior to the day named for the meeting in any other case. If the
secretary neglects or refuses to give notice of a meeting, the
person or persons calling the meeting may do so. In the case of
a special meeting of shareholders, the notice shall specify the
general nature of the business to be transacted.
(b) Notice of Action by Shareholders on Bylaws. In the
case of a meeting of shareholders that has as one of its purposes
action on the bylaws, written notice shall be given to each
shareholder that the purpose, or one of the purposes, of the
meeting is to consider the adoption, amendment or repeal of the
bylaws. There shall be included in, or enclosed with, the notice
a copy of the proposed amendment or a summary of the changes to
be effected thereby.
(c) Notice of Action by Shareholders on Fundamental Change.
In the case of a meeting of the shareholders that has as one of
its purposes action with respect to any fundamental change under
15 Pa.C.S. Chapter 19, each shareholder shall be given, together
with written notice of the meeting, a copy or summary of the
amendment or plan to be considered at the meeting in compliance
with the provisions of Chapter 19.
(d) Notice of Action by Shareholders Giving Rise to
Dissenters Rights. In the case of a meeting of the shareholders
that has as one of its purposes action that would give rise to
dissenters rights under the provisions of 15 Pa.C.S. Subchapter
15D, each shareholder shall be given, together with written
notice of the meeting:
(1) a statement that the shareholders have a right to
dissent and obtain payment of the fair value of their shares by
complying with the provisions of Subchapter 15D (relating to
dissenters rights); and
(2) a copy of Subchapter 15D.
Section 2.04. Waiver of Notice.
(a) Written Waiver. Whenever any written notice is
required to be given under the provisions of the Business
Corporation Law, the articles or these bylaws, a waiver thereof
in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of the notice. Neither the
business to be transacted at, nor the purpose of, a meeting need
be specified in the waiver of notice of the meeting.
(b) Waiver by Attendance. Attendance of a person at any
meeting shall constitute a waiver of notice of the meeting except
where a person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of
any business because the meeting was not lawfully called or
convened.
Section 2.05. Modification of Proposal Contained in Notice.
Whenever the language of a proposed resolution is included in a
written notice of a meeting required to be given under the
provisions of the Business Corporation Law or the articles or
these bylaws, the meeting considering the resolution may without
further notice adopt it with such clarifying or other amendments
as do not enlarge its original purpose.
Section 2.06. Exception to Requirement of Notice.
(a) General Rule. Whenever any notice or communication is
required to be given to any person under the provisions of the
Business Corporation Law or by the articles or these bylaws or by
the terms of any agreement or other instrument or as a condition
precedent to taking any corporate action and communication with
that person is then unlawful, the giving of the notice or
communication to that person shall not be required.
(b) Shareholders Without Forwarding Addresses. Notice or
other communications need not be sent to any shareholder with
whom the corporation has been unable to communicate for more than
24 consecutive months because communications to the shareholder
are returned unclaimed or the shareholder has otherwise failed to
provide the corporation with a current address. Whenever the
shareholder provides the corporation with a current address, the
corporation shall commence sending notices and other
communications to the shareholder in the same manner as to other
shareholders.
Section 2.07. Use of Conference Telephone and Similar
Equipment. Any director may participate in any meeting of the
board of directors, and the board of directors may provide by
resolution with respect to a specific meeting or with respect to
a class of meetings that one or more persons may participate in a
meeting of the shareholders of the corporation, by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this section shall
constitute presence in person at the meeting.
ARTICLE III
Shareholders
Section 3.01. Place of Meeting. All meetings of the
shareholders of the corporation shall be held at the registered
office of the corporation or such other place as may be
designated by the board of directors in the notice of a meeting.
Section 3.02. Annual Meeting. The board of directors may
fix and designate the date and time of the annual meeting of the
shareholders, but if no such date and time is fixed and
designated by the board, the meeting for any calendar year shall
be held on the fourth Wednesday in April in such year, if not a
legal holiday under the laws of Pennsylvania, and, if a legal
holiday, then on the next succeeding business day, not a
Saturday, at 1:30 o'clock P.M., and at said meeting the
shareholders then entitled to vote shall elect directors and
shall transact such other business as may properly be brought
before the meeting. If the annual meeting shall not have been
called and held within six months after the designated time, any
shareholder may call the meeting at any time thereafter.
Section 3.03. Special Meetings. Special meetings of the
shareholders may be called at any time by the chairman of the
board, if there be one, or by resolution of the board of
directors, which may fix the date, time and place of the meeting.
If the chairman of the board or the board does not fix the date,
time or place of the meeting, it shall be the duty of the
secretary to do so. A date fixed by the secretary shall not be
more than 60 days after the date of the receipt of the request
from the chairman of the board or adoption of the resolution of
the board calling the special meeting.
Section 3.04. Quorum and Adjournment.
(a) General Rule. A meeting of shareholders of the
corporation duly called shall not be organized for the
transaction of business unless a quorum is present. The presence
of shareholders entitled to cast at least a majority of the votes
that all shareholders are entitled to cast on a particular matter
to be acted upon at the meeting shall constitute a quorum for the
purposes of consideration and action on the matter. Shares of
the corporation owned, directly or indirectly, by it and
controlled, directly or indirectly, by the board of directors of
this corporation, as such, shall not be counted in determining
the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum. The shareholders present at a
duly organized meeting can continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders
to leave less than a quorum.
(c) Adjournments Generally. Any regular or special meeting
of the shareholders, including one at which directors are to be
elected and one which cannot be organized because a quorum has
not attended, may be adjourned for such period and to such place
as the shareholders present and entitled to vote shall direct.
(d) Electing Directors at Adjourned Meeting. Those
shareholders entitled to vote who attend a meeting called for the
election of directors that has been previously adjourned for lack
of a quorum, although less than a quorum as fixed in this
section, shall nevertheless constitute a quorum for the purpose
of electing directors.
(e) Other Action in Absence of Quorum. Those shareholders
entitled to vote who attend a meeting of shareholders that has
been previously adjourned for one or more periods aggregating at
least 15 days because of an absence of a quorum, although less
than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set
forth in the notice of the meeting if the notice states that
those shareholders who attend the adjourned meeting shall
nevertheless constitute a quorum for the purpose of acting upon
the matter.
Section 3.05. Action by Shareholders.
(a) Except as otherwise provided in the Business
Corporation Law or the articles or these bylaws, whenever any
corporate action is to be taken by vote of the shareholders of
the corporation, it shall be authorized upon receiving the
affirmative vote of a majority of the votes cast by all
shareholders entitled to vote thereon and, if any shareholders
are entitled to vote thereon as a class, upon receiving the
affirmative vote of a majority of the votes cast by the
shareholders entitled to vote as a class.
(b) Except as otherwise provided in the Business
Corporation Law or the articles or these bylaws, any action
required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of
the shareholders who would be entitled to vote at a meeting for
such purpose shall be filed with the secretary of the
corporation.
Section 3.06. Organization. At every meeting of the
shareholders, the chairman of the board, if there be one, or, in
the case of vacancy in office or absence of the chairman of the
board, one of the following persons present in the order stated:
the vice chairman of the board, if there be one, the president,
the vice presidents in their order of rank and seniority, or a
person chosen by vote of the shareholders present, shall act as
chairman of the meeting. The secretary or an assistant
secretary, or, a person appointed by the chairman of the meeting,
shall act as secretary of the meeting.
Section 3.07. Voting Rights of Shareholders. Unless
otherwise provided in the articles, every shareholder of the
corporation shall be entitled to one vote for every share
standing in the name of the shareholder on the books of the
corporation.
Section 3.08. Voting and Other Action by Proxy.
(a) General Rule.
(1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the
shareholder by proxy.
(2) The presence of, or vote or other action at a meeting
of shareholders by, a proxy of a shareholder shall constitute the
presence of, or vote or action by, the shareholder.
(3) Where two or more proxies of a shareholder are
present, the corporation shall, unless otherwise expressly
provided in the proxy, accept as the vote of all shares
represented thereby the vote cast by a majority of them and, if a
majority of the proxies cannot agree whether the shares
represented shall be voted or upon the manner of voting the
shares, the voting of the shares shall be divided equally among
those persons.
(b) Execution and Filing. Every proxy shall be executed in
writing by the shareholder or by the duly authorized attorney-in-
fact of the shareholder and filed with the secretary of the
corporation. A telegram, telex, cablegram, datagram or similar
transmission from a shareholder or attorney-in-fact, or a
photographic, facsimile or similar reproduction of a writing
executed by a shareholder or attorney-in-fact:
(1) may be treated as properly executed for purposes of
this subsection; and
(2) shall be so treated if it sets forth a confidential
and unique identification number or other mark furnished by the
corporation to the shareholder for the purposes of a particular
meeting or transaction.
(c) Revocation. A proxy, unless coupled with an interest,
shall be revocable at will, notwithstanding any other agreement
or any provision in the proxy to the contrary, but the revocation
of a proxy shall not be effective until written notice thereof
has been given to the secretary of the corporation. An unrevoked
proxy shall not be valid after three years from the date of its
execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the
maker unless, before the vote is counted or the authority is
exercised, written notice of the death or incapacity is given to
the secretary of the corporation.
(d) Expenses. The corporation shall pay the reasonable
expenses of solicitation of votes, proxies or consents of
shareholders by or on behalf of the board of directors or its
nominees for election to the board, including solicitation by
professional proxy solicitors and otherwise.
Section 3.09. Voting by Fiduciaries and Pledgees. Shares
of the corporation standing in the name of a trustee or other
fiduciary and shares held by an assignee for the benefit of
creditors or by a receiver may be voted by the trustee,
fiduciary, assignee or receiver. A shareholder whose shares are
pledged shall be entitled to vote the shares until the shares
have been transferred into the name of the pledgee, or a nominee
of the pledgee, but nothing in this section shall affect the
validity of a proxy given to a pledgee or nominee.
Section 3.10. Voting by Joint Holders of Shares.
(a) General Rule. Where shares of the corporation are held
jointly or as tenants in common by two or more persons, as
fiduciaries or otherwise:
(1) if only one or more of such persons is present in
person or by proxy, all of the shares standing in the names of
such persons shall be deemed to be represented for the purpose of
determining a quorum and the corporation shall accept as the vote
of all the shares the vote cast by a joint owner or a majority of
them; and
(2) if the persons are equally divided upon whether the
shares held by them shall be voted or upon the manner of voting
the shares, the voting of the shares shall be divided equally
among the persons without prejudice to the rights of the joint
owners or the beneficial owners thereof among themselves.
(b) Exception. If there has been filed with the
secretary of the corporation a copy, certified by an attorney at
law to be correct, of the relevant portions of the agreement
under which the shares are held or the instrument by which the
trust or estate was created or the order of court appointing them
or of an order of court directing the voting of the shares, the
persons specified as having such voting power in the document
latest in date of operative effect so filed, and only those
persons, shall be entitled to vote the shares but only in
accordance therewith.
Section 3.11. Voting by Corporations.
(a) Voting by Corporate Shareholders. Any corporation that
is a shareholder of this corporation may vote at meetings of
shareholders of this corporation by any of its officers or
agents, or by proxy appointed by any officer or agent, unless
some other person, by resolution of the board of directors of the
other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by
one of its officers has been filed with the secretary of this
corporation, is appointed its general or special proxy in which
case that person shall be entitled to vote the shares.
(b) Controlled Shares. Shares of this corporation owned,
directly or indirectly, by it and controlled, directly or
indirectly, by the board of directors of this corporation, as
such, shall not be voted at any meeting and shall not be counted
in determining the total number of outstanding shares for voting
purposes at any given time.
Section 3.12. Determination of Shareholders of Record.
(a) Fixing Record Date. The board of directors may fix a
time prior to the date of any meeting of shareholders as a record
date for the determination of the shareholders entitled to notice
of, or to vote at, the meeting, which time, except in the case of
an adjourned meeting, shall be not more than 90 days prior to the
date of the meeting of shareholders. Only shareholders of record
on the date fixed shall be so entitled notwithstanding any
transfer of shares on the books of the corporation after any
record date fixed as provided in this subsection. The board of
directors may similarly fix a record date for the determination
of shareholders of record for any other purpose. When a determi-
nation of shareholders of record has been made as provided in
this section for purposes of a meeting, the determination shall
apply to any adjournment thereof unless the board fixes a new
record date for the adjourned meeting.
(b) Determination When a Record Date is Not Fixed. If a
record date is not fixed:
(1) The record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders shall be at
the close of business on the day next preceding the day on which
notice is given.
(2) The record date for determining shareholders for any
other purpose shall be at the close of business on the day on
which the board of directors adopts the resolution relating
thereto.
(c) Certification by Nominee. The board of directors may
adopt a procedure whereby a shareholder of the corporation may
certify in writing to the corporation that all or a portion of
the shares registered in the name of the shareholder are held for
the account of a specified person or persons. Upon receipt by
the corporation of a certification complying with the procedure,
the persons specified in the certification shall be deemed, for
the purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the
shareholder making the certification.
Section 3.13. Voting Lists.
(a) General Rule. The officer or agent having charge of
the transfer books for shares of the corporation shall make a
complete list of the shareholders entitled to vote at any meeting
of shareholders, arranged in alphabetical order, with the address
of and the number of shares held by each. The list shall be
produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the
whole time of the meeting for the purposes thereof except that if
the corporation has 5,000 or more shareholders, in lieu of the
making of the list, the corporation may make the information
therein available at the meeting by any other means.
(b) Effect of List. Failure to comply with the
requirements of this section shall not affect the validity of any
action taken at a meeting prior to a demand at the meeting by any
shareholder entitled to vote thereat to examine the list. The
original share register or transfer book, or a duplicate thereof
kept in the Commonwealth of Pennsylvania, shall be prima facie
evidence as to who are the shareholders entitled to examine the
list or share register or transfer book or to vote at any meeting
of shareholders.
Section 3.14. Judges of Election.
(a) Appointment. In advance of any meeting of shareholders
of the corporation, the board of directors may appoint judges of
election, who need not be shareholders, to act at the meeting or
any adjournment thereof. If judges of election are not so
appointed, the presiding officer of the meeting may, and on the
request of any shareholder shall, appoint judges of election at
the meeting. The number of judges shall be one or three. A
person who is a candidate for an office to be filled at the
meeting shall not act as a judge.
(b) Vacancies. In case any person appointed as a judge
fails to appear or fails or refuses to act, the vacancy may be
filled by appointment made by the board of directors in advance
of the convening of the meeting or at the meeting by the
presiding officer thereof.
(c) Duties. The judges of election shall determine the
number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, and
the authenticity, validity and effect of proxies, receive votes
or ballots, hear and determine all challenges and questions in
any way arising in connection with nominations by shareholders or
the right to vote, count and tabulate all votes, determine the
result and do such acts as may be proper to conduct the election
or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith,
to the best of their ability and as expeditiously as is
practical. If there are three judges of election, the decision,
act or certificate of a majority shall be effective in all
respects as the decision, act or certificate of all.
(d) Report. On request of the presiding officer of the
meeting or of any shareholder, the judges shall make a report in
writing of any challenge or question or matter determined by
them, and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence
of the facts stated therein.
Section 3.15. Minors as Securityholders. The corporation
may treat a minor who holds shares or obligations of the
corporation as having capacity to receive and to empower others
to receive dividends, interest, principal and other payments or
distributions, to vote or express consent or dissent and to make
elections and exercise rights relating to such shares or
obligations unless, in the case of payments or distributions on
shares, the corporate officer responsible for maintaining the
list of shareholders or the transfer agent of the corporation or,
in the case of payments or distributions on obligations, the
treasurer or paying officer or agent has received written notice
that the holder is a minor.
Section 3.16. Nominations for Election of Directors.
Except as otherwise provided in or fixed by or pursuant to the
provisions of Article V of the articles of incorporation,
nominations for the election of directors may be made by the
board of directors or a committee appointed by the board of
directors or by any shareholder entitled to vote in the election
of directors generally. However, any shareholder entitled to
vote in the election of directors generally may nominate one or
more persons for election as directors at a meeting only if
written notice (meeting the requirements hereinafter set forth)
of such shareholder's intent to make such nomination or
nominations has been given by the shareholder and received by the
secretary of the corporation in the manner and within the time
specified by this Section. The notice shall be delivered to the
secretary of the corporation not later than (i) with respect to
an election to be held at an annual meeting of shareholders, 75
days in advance of the date of such meeting; provided, however,
that in the event that less than 85 days' notice or prior public
disclosure of the date of the annual meeting is given, notice
from the shareholders to be timely must be received not later
than the tenth day following the date on which such notice of the
date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs, and (ii) with respect to an
election to be held at a special meeting of shareholders for the
election of directors, the close of business on the earlier of
(A) the seventh day following the date on which notice of such
meeting is first given to shareholders or (B) the fourth day
prior to the meeting. In lieu of delivery to the secretary, the
notice may be mailed to the secretary by certified mail, return
receipt requested, but shall be deemed to have been given only
upon actual receipt by the secretary. Each such notice shall set
forth: (a) the name and address of the shareholder who intends
to make the nomination and of the person or persons to be
nominated; (b) a representation that the shareholder is a holder
of record of stock of the corporation entitled to vote at such
meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings
between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d)
such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had proxies been solicited with respect to
such nominee by the management or board of directors of the
corporation; and (e) the consent of each nominee to serve as a
director of the corporation if so elected. If a judge or judges
of election shall not have been appointed pursuant to these
bylaws, the presiding officer of the meeting may, if the facts
warrant, determine and declare to the meeting that any nomination
made at the meeting was not made in accordance with the
procedures of this Section and, in such event, the nomination
shall be disregarded. Any decision by the presiding officer of
the meeting made in good faith shall be conclusive and binding
upon all shareholders of the corporation for any purpose.
Section 3.17. Other Business to be Transacted. Except as
otherwise provided in Section 3.16 of these bylaws, at any annual
meeting or special meeting of shareholders, only such business as
is properly brought before the meeting in accordance with this
Section may be transacted. To be properly brought before any
meeting, any proposed business that is to be brought pursuant to
this Section must be either (i) specified in the notice of the
meeting (or any supplement thereto) given by or at the direction
of the board of directors, (ii) otherwise properly brought before
the meeting by or at the direction of the board of directors, or
(iii) in the case of an annual meeting of shareholders, otherwise
properly brought before the meeting by a shareholder (x) who is a
shareholder of record on the date of giving notice provided for
in these bylaws and on the record date for the determination of
shareholders entitled to vote at such annual meeting, and (y) who
complies with the notice provisions set forth in this Section.
For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice
thereof in writing to the secretary of the corporation. To be
timely, a shareholder's notice must be delivered to the secretary
of the corporation not later than 75 days in advance of the date
of such meeting; provided, however, that in the event that less
than 85 days' notice or prior public disclosure of the date of
the annual meeting is given, notice from the shareholders to be
timely must be received not later than the tenth day following
the date on which such notice of the date of the annual meeting
was mailed or such public disclosure was made, whichever first
occurs. In lieu of delivery to the secretary, the notice may be
mailed to the secretary by certified mail, return receipt
requested, but shall be deemed to have been given only upon
actual receipt by the secretary. A shareholder's notice to the
secretary of the corporation, as required by this Section, shall
set forth as to each matter the shareholder proposes to bring
before the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of the shareholder proposing such business,
(iii) the class, series and number of shares of the corporation's
stock which are beneficially owned by the shareholder, (iv) a
description of all arrangements or understandings between such
shareholder and any other person or persons (including their
names) in connection with the proposal of such business by such
shareholder in such business, (v) all other information which
would be required to be included in a proxy statement or other
filing required to be filed with the Securities and Exchange
Commission if, with respect to any such item of business, such
shareholder were a participant in a solicitation subject to
Regulation 14A under the Securities Exchange Act of 1934, as
amended, and (vi) a representation that such shareholder intends
to appear in person or by proxy at the annual meeting of
shareholders to bring such business before the meeting. Except
as provided in Section 3.16 of these bylaws, notwithstanding
anything in the bylaws to the contrary, no business shall be
conducted at any meeting of shareholders except in accordance
with the procedures set forth in this Section, provided, however,
that nothing in this Section shall be deemed to preclude
discussion by any shareholders of any business properly brought
before any such meeting. The presiding officer of a meeting may,
if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting in
accordance with the provisions of this Section, and if he should
so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be
transacted. Any decision by the presiding officer of the meeting
made in good faith shall be conclusive and binding upon all
shareholders of the corporation for any purpose.
ARTICLE IV
Board of Directors
Section 4.01. Powers; Personal Liability.
(a) General Rule. Unless otherwise provided by statute,
all powers vested by law in the corporation shall be exercised by
or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of
directors.
(b) Personal Liability of Directors.
(1) To the fullest extent that the laws of the
Commonwealth of Pennsylvania, as now in effect or as hereafter
amended, permit elimination or limitation of the liability of
directors, no director of the corporation shall be personally
liable for monetary damages as such for any action taken, or any
failure to take any action, as a director.
(2) Any amendment or repeal of this Section 4.01 which
has the effect of increasing directors' liability shall operate
prospectively only, and shall not affect any action taken, or any
failure to act, prior to its adoption.
(The provisions of this subsection (b) were first adopted by the
shareholders of the corporation effective April 27, 1995.)
Section 4.02. Qualifications and Selection of Directors.
(a) Qualifications. Each director of the corporation shall
be a natural person of full age who need not be a resident of the
Commonwealth of Pennsylvania or a shareholder of the corporation.
(b) Election of Directors. In elections for directors,
voting need not be by ballot, unless required by vote of the
shareholders before the voting for the election of directors
begins. The candidates receiving the highest number of votes
from each class or group of classes, if any, entitled to elect
directors separately up to the number of directors to be elected
by the class or group of classes shall be elected. If at any
meeting of shareholders, directors of more than one class are to
be elected, each class of directors shall be elected in a
separate election.
Section 4.03. Number and Term of Office.
(a) Number. The board of directors shall consist of such
number of directors, not less than six nor more than twenty, as
may be determined from time to time by resolution of the board of
directors.
(b) Resignation. Any director may resign at any time upon
written notice to the corporation. The resignation shall be
effective upon receipt thereof by the corporation or at such
subsequent time as shall be specified in the notice of
resignation.
(c) Classification of Directors. Except as otherwise
provided in or fixed by or pursuant to the articles of
incorporation, the board of directors shall be divided into three
classes as nearly equal in number as may be. The initial term of
office of each director in the first class shall expire at the
annual meeting of shareholders in 1996; the initial term of
office of each director in the second class shall expire at the
annual meeting of shareholders in 1997; and the initial term of
office of each director in the third class shall expire at the
annual meeting of shareholders in 1998. At each annual election
commencing at the annual meeting of shareholders in 1996 and
thereafter, the successors to the class of directors whose term
expires at that time shall be elected to hold office for a term
of three years to succeed those whose term expires, so that the
term of one class of directors shall expire each year. Each
director shall hold office for the term of which he or she is
elected or appointed and until a successor has been selected and
qualified or until his or her earlier death, resignation or
removal. In the event of any increase or decrease in the
authorized number of directors, (a) each director then serving as
such shall nevertheless continue as a director of the class of
which he or she is a member until the expiration of his or her
current term, or his or her earlier death, resignation or
removal, and (b) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by
the board of directors among the three classes of directors so as
to maintain such classes as nearly equal in number as may be.
Section 4.04. Vacancies.
(a) General Rule. Vacancies in the board of directors,
including vacancies resulting from an increase in the number of
directors, may be filled by a majority vote of the remaining
members of the board though less than a quorum, or by a sole
remaining director, and each person so selected shall be a
director to serve until the next selection of the class for which
such director has been chosen, and until a successor has been
selected and qualified or until his or her earlier death,
resignation or removal.
(b) Action by Resigned Directors. When one or more
directors resign from the board effective at a future date, the
directors then in office, including those who have so resigned,
shall have power by the applicable vote to fill the vacancies,
the vote thereon to take effect when the resignations become
effective.
Section 4.05 Removal of Directors.
(a) Removal by the Shareholders. Any director may be
removed from office, but only (i) for cause, and (ii) upon the
affirmative vote of the shareholders entitled to cast at least
two-thirds of the votes which all shareholders would be entitled
to cast at any annual election of directors and upon any
additional vote of shareholders that may be required by law. In
case one or more directors are so removed, new directors may be
elected at the same meeting. The repeal of a provision of the
articles or bylaws prohibiting, or the addition of a provision to
the articles or bylaws permitting, the removal by the
shareholders of a director without assigning any cause shall not
apply to any incumbent director during the balance of the term
for which the director was selected.
(b) Removal by the Board. The board of directors may
declare vacant the office of a director who has been judicially
declared of unsound mind or who has been convicted of an offense
punishable by imprisonment for a term of more than one year or
if, within 60 days after notice of his or her selection, the
director does not accept the office either in writing or by
attending a meeting of the board of directors.
Section 4.06. Place of Meetings. Meetings of the board of
directors may be held at such place within or without the
Commonwealth of Pennsylvania as the board of directors may from
time to time appoint or as may be designated in the notice of the
meeting.
Section 4.07. Organization of Meetings. At every meeting
of the board of directors, the chairman of the board, if there be
one, or, in the case of a vacancy in the office or absence of the
chairman of the board, one of the following officers present in
the order stated: the vice chairman of the board, if there be
one, the president, the vice presidents in their order of rank
and seniority, or a person chosen by a majority of the directors
present, shall act as chairman of the meeting. The secretary or,
in the absence of the secretary, an assistant secretary, or, in
the absence of the secretary and the assistant secretaries, any
person appointed by the chairman of the meeting, shall act as
secretary of the meeting.
Section 4.08. Regular Meetings. Regular meetings of the
board of directors shall be held at such time and place as shall
be designated from time to time by resolution of the board of
directors.
Section 4.09. Special Meetings. Special meetings of the
board of directors shall be held whenever called by the chairman
or by two or more of the directors.
Section 4.10. Quorum of and Action by Directors.
(a) General Rule. A majority of the directors in office of
the corporation shall be necessary to constitute a quorum for the
transaction of business and the acts of a majority of the
directors present and voting at a meeting at which a quorum is
present shall be the acts of the board of directors.
(b) Action by Written Consent. Any action required or
permitted to be taken at a meeting of the directors may be taken
without a meeting if, prior or subsequent to the action, a
consent or consents thereto by all of the directors in office is
filed with the secretary of the corporation.
(c) Notation of Dissent. A director of the corporation who
is present at a meeting of the board of directors, or of a
committee of the board, at which action on any corporate matter
is taken on which the director is generally competent to act,
shall be presumed to have assented to the action taken unless his
or her dissent is entered in the minutes of the meeting or unless
the director files his or her written dissent to the action with
the secretary of the meeting before the adjournment thereof or
transmits the dissent in writing to the secretary of the
corporation immediately after the adjournment of the meeting.
The right to dissent shall not apply to a director who voted in
favor of the action. Nothing in this section shall bar a
director from asserting that minutes of the meeting incorrectly
omitted his or her dissent if, promptly upon receipt of a copy of
such minutes, the director notifies the secretary, in writing, of
the asserted omission or inaccuracy.
Section 4.11. Executive and Other Committees.
(a) Establishment and Powers. The board of directors may,
by resolution adopted by a majority of the directors in office,
establish one or more committees to consist of one or more
directors of the corporation. Any committee, to the extent
provided in the resolution of the board of directors, shall have
and may exercise all of the powers and authority of the board of
directors except that a committee shall not have any power or
authority as to the following:
(1) The submission to shareholders of any action
requiring approval of shareholders under the Business Corporation
Law.
(2) The creation or filling of vacancies in the board of
directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the
board that by its terms is amendable or repealable only by the
board.
(5) Action on matters committed by a resolution of the
board of directors to another committee of the board.
(b) Alternate Committee Members. The board may designate
one or more directors as alternate members of any committee who
may replace any absent or disqualified member at any meeting of
the committee or for the purposes of any written action by the
committee. In the absence or disqualification of a member and
alternate member or members of a committee, the member or members
thereof present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint
another director to act at the meeting in the place of the absent
or disqualified member.
(c) Term. Each committee of the board shall serve at the
pleasure of the board.
(d) Committee Procedures. The term "board of directors" or
"board," when used in any provision of these bylaws relating to
the organization or procedures of or the manner of taking action
by the board of directors, shall be construed to include and
refer to any executive or other committee of the board.
Section 4.12. Compensation. The board of directors shall
have the authority to fix the compensation of directors for their
services as directors and a director may be a salaried officer of
the corporation.
ARTICLE V
Officers
Section 5.01. Officers Generally.
(a) Number, Qualifications and Designation. The officers
of the corporation shall be a president, one or more vice
presidents, a secretary, a treasurer, and such other officers as
may be elected in accordance with the provisions of Section 5.03.
Officers may but need not be directors or shareholders of the
corporation. The president and secretary shall be natural
persons of full age. The treasurer may be a corporation, but if
a natural person shall be of full age. The board of directors
may elect from among the members of the board a chairman of the
board and a vice chairman of the board who may be officers of the
corporation. Any number of offices may be held by the same
person.
(b) Bonding. The corporation may secure the fidelity of
any or all of its officers by bond or otherwise.
(c) Standard of Care. In lieu of the standards of conduct
otherwise provided by law, officers of the corporation shall be
subject to the same standards of conduct, including standards of
care and loyalty and rights of justifiable reliance, as shall at
the time be applicable to directors of the corporation. An
officer of the corporation shall not be personally liable, as
such, to the corporation or its shareholders for monetary damages
(including, without limitation, any judgment, amount paid in
settlement, penalty, punitive damages or expense of any nature
(including, without limitation, attorneys' fees and
disbursements)), for any action taken, or any failure to take any
action, unless the officer has breached or failed to perform the
duties of his or her office under the articles of incorporation,
these bylaws, or the applicable provisions of law and the breach
or failure to perform constitutes self-dealing, willful
misconduct or recklessness. The provisions of this subsection
shall not apply to the responsibility or liability of an officer
pursuant to any criminal statute or for the payment of taxes
pursuant to local, state or federal law.
Section 5.02. Election, Term of Office and Resignations.
(a) Election and Term of Office. The officers of the
corporation, except those elected by delegated authority pursuant
to Section 5.03, shall be elected annually by the board of
directors, and each such officer shall hold office for a term of
one year and until a successor has been selected and qualified or
until his or her earlier death, resignation or removal.
(b) Resignations. Any officer may resign at any time upon
written notice to the corporation. The resignation shall be
effective upon receipt thereof by the corporation or at such
subsequent time as may be specified in the notice of resignation.
Section 5.03. Subordinate Officers, Committees and Agents.
The board of directors may from time to time elect such other
officers and appoint such committees, employees or other agents
as the business of the corporation may require, including one or
more assistant secretaries, and one or more assistant treasurers,
each of whom shall hold office for such period, have such
authority, and perform such duties as are provided in these
bylaws, or as the board of directors may from time to time
determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain
or appoint employees or other agents, or committees thereof, and
to prescribe the authority and duties of such subordinate
officers, committees, employees or other agents.
Section 5.04. Removal of Officers and Agents. Any officer
or agent of the corporation may be removed by the board of
directors with or without cause. The removal shall be without
prejudice to the contract rights, if any, of any person so
removed. Election or appointment of an officer or agent shall
not of itself create contract rights.
Section 5.05. Vacancies. A vacancy in any office because
of death, resignation, removal, disqualification, or any other
cause, may be filled by the board of directors or by the officer
or committee to which the power to fill such office has been
delegated pursuant to Section 5.03, as the case may be, and if
the office is one for which these bylaws prescribe a term, shall
be filled for the unexpired portion of the term.
Section 5.06. Authority.
(a) General Rule. All officers of the corporation, as
between themselves and the corporation, shall have such authority
and perform such duties in the management of the corporation as
may be provided by or pursuant to resolutions or orders of the
board of directors or, in the absence of controlling provisions
in the resolutions or orders of the board of directors, as may be
determined by or pursuant to these bylaws.
(b) Chief Executive Officer. The chairman of the board or
the president, as designated from time to time by the board of
directors, shall be the chief executive officer of the
corporation.
Section 5.07. The Chairman and Vice Chairman of the Board.
The chairman of the board or in the absence of the chairman, the
vice chairman of the board, or in the absence of a chairman or
vice chairman of the Board, a chairman appointed at the meeting,
shall preside at meetings of the shareholders and of the board of
directors, and shall perform such other duties as may from time
to time be requested by the board of directors.
Section 5.08. The President. The president shall have
general supervision over the business and operations of the
corporation, subject however, to the control of the board of
directors and the chairman of the board, if the chairman is not
also the president. The president shall sign, execute, and
acknowledge, in the name of the corporation, deeds, mortgages,
bonds, contracts or other instruments, authorized by the board of
directors, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors,
or by these bylaws, to some other officer or agent of the
corporation; and, in general, shall perform all duties incident
to the office of president and such other duties as from time to
time may be assigned by the board of directors and the chairman
of the board, if the chairman is not also the president.
Section 5.09. The Vice Presidents. The vice presidents
shall perform the duties of the president in the absence of the
president and such other duties as may from time to time be
assigned to them by the board of directors or the president.
Section 5.10. The Secretary. The secretary or an assistant
secretary shall attend all meetings of the shareholders and of
the board of directors and all committees thereof and shall
record all the votes of the shareholders and of the directors and
the minutes of the meetings of the shareholders and of the board
of directors and of committees of the board in a book or books to
be kept for that purpose; shall see that notices are given and
records and reports properly kept and filed by the corporation as
required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be
executed on behalf of the corporation under its seal; and, in
general, shall perform all duties incident to the office of
secretary, and such other duties as may from time to time be
assigned by the board of directors or the president.
Section 5.11. The Treasurer. The treasurer or an assistant
treasurer shall have or provide for the custody of the funds or
other property of the corporation; shall collect and receive or
provide for the collection and receipt of moneys earned by or in
any manner due to or received by the corporation; shall deposit
all funds in his or her custody as treasurer in banks or other
places of deposit; shall, whenever so required by the board of
directors, render an account showing all transactions as
treasurer, and the financial condition of the corporation; and,
in general, shall discharge such other duties as may from time to
time be assigned by the board of directors or the president.
Section 5.12. Salaries. The salaries or other compensation
of the officers elected by the board of directors shall be fixed
from time to time by the board of directors or in such manner as
the board of directors shall from time to time provide. The
salaries or other compensation of any other officers, employees
and other agents shall be fixed from time to time by the officer
or committee to which the power to elect such officers or to
retain or appoint such employees or other agents has been
delegated pursuant to Section 5.03. No officer shall be
prevented from receiving such salary or other compensation by
reason of the fact that the officer is also a director of the
corporation.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. Share Certificates.
(a) Form of Certificates. Certificates for shares of the
corporation shall be in such form as approved by the board of
directors, and shall state that the corporation is incorporated
under the laws of the Commonwealth of Pennsylvania, the name of
the person to whom issued, and the number and class of shares and
the designation of the series (if any) that the certificate
represents. If the corporation is authorized to issue shares of
more than one class or series, certificates for shares of the
corporation shall set forth upon the face or back of the
certificate (or shall state on the face or back of the
certificate that the corporation will furnish to any shareholder
upon request and without charge), a full or summary statement of
the designations, voting rights, preferences, limitations and
special rights of the shares of each class or series authorized
to be issued so far as they have been fixed and determined and
the authority of the board of directors to fix and determine the
designations, voting rights, preferences, limitations and special
rights of the classes and series of shares of the corporation.
(b) Share Register. The share register or transfer books
and blank share certificates shall be kept by the secretary or by
any transfer agent or registrar designated by the board of
directors for that purpose.
Section 6.02. Issuance. The share certificates of the
corporation shall be numbered and registered in the share
register or transfer books of the corporation as they are issued.
They shall be executed in such manner as the board of directors
shall determine.
Section 6.03. Transfer. Transfers of shares shall be made
on the share register or transfer books of the corporation upon
surrender of the certificate therefor, endorsed by the person
named in the certificate or by an attorney lawfully constituted
in writing.
Section 6.04. Record Holder of Shares. The corporation
shall be entitled to treat the person in whose name any share or
shares of the corporation stand on the books of the corporation
as the absolute owner thereof, and shall not be bound to
recognize any equitable or other claim to, or interest in, such
share or shares on the part of any other person.
Section 6.05. Lost, Destroyed or Mutilated Certificates.
The holder of any shares of the corporation shall immediately
notify the corporation of any loss, destruction or mutilation of
the certificate therefor, and the board of directors may, in its
discretion, cause a new certificate or certificates to be issued
to such holder, in case of mutilation of the certificate, upon
the surrender of the mutilated certificate or, in case of loss or
destruction of the certificate, upon satisfactory proof of such
loss or destruction and, if the board of directors shall so
determine, the deposit of a bond in such form and in such sum,
and with such surety or sureties, as it may direct.
ARTICLE VII
Indemnification of Directors, Officers
and Other Authorized Representatives
(The provisions of this Article VII were first adopted by the
shareholders of the corporation effective April 27, 1995.)
Section 7.01. Indemnification of Directors and Officers.
(a) Right to Indemnification. Except as prohibited by law,
every director and officer of the corporation shall be entitled
as of right to be indemnified by the corporation against
reasonable expense and any liability paid or incurred by such
person in connection with any actual or threatened claim, action,
suit or proceeding, civil, criminal, administrative,
investigative or other, whether brought by or in the right of the
corporation or otherwise, in which he or she may be involved, as
a party or otherwise, by reason of such person being or having
been a director or officer of the corporation or by reason of the
fact that such person is or was serving at the request of the
corporation as a director, officer, employee, fiduciary or other
representative of another corporation, partnership, joint
venture, trust, employee benefit plan or other entity (such
claim, action, suit or proceeding hereinafter being referred to
as "action"). Such indemnification shall include the right to
have expenses incurred by such person in connection with an
action paid in advance by the corporation prior to final
disposition of such action, subject to such conditions as may be
prescribed by law. Persons who are not directors or officers of
the corporation may be similarly indemnified in respect of
service to the corporation or to another such entity at the
request of the corporation to the extent the board of directors
at any time denominates such person as entitled to the benefits
of this Section 7.01. As used herein, "expense" shall include
fees and expenses of counsel selected by such person; and
"liability" shall include amounts of judgments, excise taxes,
fines and penalties, and amounts paid in settlement.
(b) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section 7.01 is not paid in full by the
corporation within thirty days after a written claim has been
received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the
unpaid amount of the claim, and, if successful in whole or in
part, the claimant shall also be entitled to be paid the expense
of prosecuting such claim. It shall be a defense to any such
action that the conduct of the claimant was such that under
Pennsylvania law the corporation would be prohibited from
indemnifying the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the
failure of the corporation (including its board of directors,
independent legal counsel and its shareholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because the conduct of the claimant was not such that
indemnification would be prohibited by law, nor an actual
determination by the corporation (including its board of
directors, independent legal counsel or its shareholders) that
the conduct of the claimant was such that indemnification would
be prohibited by law, shall be a defense to the action or create
a presumption that the conduct of the claimant was such that
indemnification would be prohibited by law.
(c) Insurance and Funding. The corporation may purchase
and maintain insurance to protect itself and any person eligible
to be indemnified hereunder against any liability or expense
asserted or incurred by such person in connection with any
action, whether or not the corporation would have the power to
indemnify such person against such liability or expense by law or
under the provisions of this Section 7.01. The corporation may
create a trust fund, grant a security interest, cause a letter of
credit to be issued or use other means (whether or not similar to
the foregoing) to ensure the payment of such sums as may become
necessary to effect indemnification as provided herein.
(d) Non-Exclusivity; Nature and Extent of Rights. The
right of indemnification provided for herein (1) shall not be
deemed exclusive of any other rights, whether now existing or
hereafter created, to which those seeking indemnification
hereunder may be entitled under any agreement, bylaw or charter
provision, vote of shareholders or directors or otherwise, (2)
shall be deemed to create contractual rights in favor of persons
entitled to indemnification hereunder, (3) shall continue as to
persons who have ceased to have the status pursuant to which they
were entitled or were denominated as entitled to indemnification
hereunder and shall inure to the benefit of the heirs and legal
representatives of persons entitled to indemnification hereunder
and (4) shall be applicable to actions, suits or proceedings
commenced after the adoption hereof, whether arising from acts or
omissions occurring before or after the adoption hereof. The
right of indemnification provided for herein may not be amended,
modified or repealed so as to limit in any way the
indemnification provided for herein with respect to any acts or
omissions occurring prior to the effective date of any such
amendment, modification or repeal.
Section 7.02. Indemnification of Persons Not Indemnified
Under Section 7.01.
(a) The provisions of this Section 7.02 are applicable only
to employees and other authorized representatives of the
corporation who are not entitled to the benefits of Section 7.01
pursuant to either the terms of Section 7.01 or a resolution of
the board of directors of the corporation.
(b) Employees; Third Party Actions. The corporation shall
indemnify any employee of the corporation who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such
person is or was an authorized representative of the corporation
(which, for the purposes of this Section 7.02, shall mean an
employee or agent of the corporation, or a person who is or was
serving at the request of the corporation as a director, officer,
employee, fiduciary or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise)
against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which that person reasonably believed to be in,
or not opposed to, the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable
cause to believe that his or her conduct was unlawful.
(c) Employees; Derivative Actions. The corporation shall
indemnify any employee of the corporation who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such
person is or was an authorized representative of the corporation,
against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good
faith and in a manner such person reasonably believed to be in,
or not opposed to, the best interests of the corporation and
except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the corporation unless and only
to the extent that the court of common pleas of the county in
which the registered office of the corporation is located or the
court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses
which the court of common pleas or such other court shall deem
proper.
(d) Other Authorized Representatives. To the extent that
an authorized representative of the corporation who is not an
employee of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (b) and (c) of this Section 7.02 or in defense
of any claim, issue or matter therein, such person shall be
indemnified by the corporation against expenses (including
attorneys' fees) actually and reasonably incurred by such person
in connection therewith. Such an authorized representative may,
at the discretion of the corporation, be indemnified by the
corporation in any other circumstances and to any extent if the
corporation would be required by subsections (b) and (c) of this
Section 7.02 to indemnify such person in such circumstances and
to such extent if such person were or had been an employee of the
corporation.
(e) Procedure for Effecting Indemnification.
Indemnification under subsections (b), (c) or (d) of this Section
7.02 shall be made when ordered by a court (in which case the
expenses, including attorneys' fees, of the authorized
representative in enforcing such right of indemnification shall
be added to and be included in the final judgment against the
corporation) or shall be made upon a determination that
indemnification of the authorized representative is required or
proper in the circumstances because such person has met the
applicable standard of conduct set forth in subsections (b) and
(c) of this Section 7.02. Such determination shall be made:
(1) by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such
action, suit or proceeding, or
(2) if such a quorum is not obtainable, or, even if
obtainable, a majority vote of a quorum of disinterested
directors so direct, by independent legal counsel in a written
opinion, or
(3) by the shareholders.
(f) Advancing Expenses. Expenses (including attorneys'
fees) incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding, upon
receipt of an undertaking by or on behalf of an employee to repay
such amount unless it shall ultimately be determined that such
person is entitled to be indemnified by the corporation as
required in this Section 7.02 or as authorized by law and may be
paid by the corporation in advance on behalf of any other
authorized representative when authorized by the board of
directors upon receipt of a similar undertaking.
(g) Non-Exclusivity; Nature and Extent of Rights. Each
person who shall act as an authorized representative of the
corporation and who is not entitled to the benefits of Section
7.01, shall be deemed to be doing so in reliance upon such rights
of indemnification as are provided in this Section 7.02.
The indemnification provided by this Section 7.02 shall not
be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any agreement, vote of
shareholders or disinterested directors, statute or otherwise,
both as to action in his or her official capacity and as to
action in another capacity while holding such office or position,
and shall continue as to a person who has ceased to be an
authorized representative of the corporation and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
ARTICLE VIII
Miscellaneous
Section 8.01. Corporate Seal. The corporation shall have a
corporate seal in the form of a circle containing the name of the
corporation, the year of incorporation and such other details as
may be approved by the board of directors. The affixation of the
corporate seal shall not be necessary to the valid execution,
assignment or endorsement by the corporation of any instrument or
other document.
Section 8.02. Checks. All checks, notes, bills of exchange
or other similar orders in writing shall be signed by such one or
more officers or employees of the corporation as the board of
directors may from time to time designate.
Section 8.03. Contracts. Except as otherwise provided in
the Business Corporation Law in the case of transactions that
require action by the shareholders, the board of directors may
authorize any officer or agent to enter into any contract or to
execute or deliver any instrument on behalf of the corporation,
and such authority may be general or confined to specific
instances.
Section 8.04. Interested Directors or Officers; Quorum.
(a) General Rule. A contract or transaction between the
corporation and one or more of its directors or officers or
between the corporation and another corporation, partnership,
joint venture, trust or other enterprise in which one or more of
its directors or officers are directors or officers or have a
financial or other interest, shall not be void or voidable solely
for that reason, or solely because the director or officer is
present at or participates in the meeting of the board of
directors that authorizes the contract or transaction, or solely
because his, her or their votes are counted for that purpose, if:
(1) the material facts as to the relationship or interest
and as to the contract or transaction are disclosed or are known
to the board of directors and the board authorizes the contract
or transaction by the affirmative votes of a majority of the
disinterested directors even though the disinterested directors
are less than a quorum;
(2) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or
are known to the shareholders entitled to vote thereon and the
contract or transaction is specifically approved in good faith by
vote of those shareholders; or
(3) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified
by the board of directors or the shareholders.
(b) Quorum. Common or interested directors may be counted
in determining the presence of a quorum at a meeting of the board
which authorizes a contract or transaction specified in
subsection (a).
Section 8.05. Deposits. All funds of the corporation shall
be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the board
of directors may approve or designate, and all such funds shall
be withdrawn only upon checks signed by such one or more officers
or employees of the corporation as the board of directors shall
from time to time designate.
Section 8.06. Corporate Records.
(a) Required Records. The corporation shall keep complete
and accurate books and records of account, minutes of the
proceedings of the incorporators, shareholders and directors and
a share register giving the names and addresses of all
shareholders and the number and class of shares held by each.
The share register shall be kept at either the registered office
of the corporation in the Commonwealth of Pennsylvania or at its
principal place of business wherever situated or at the office of
its registrar or transfer agent. Any books, minutes or other
records may be in written form or any other form capable of being
converted into written form within a reasonable time.
(b) Right of Inspection. Every shareholder shall, upon
written verified demand stating the purpose thereof, have a right
to examine, in person or by agent or attorney, during the usual
hours for business for any proper purpose, the share register,
books and records of account, and records of the proceedings of
the incorporators, shareholders and directors and to make copies
or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to the interest of the person as a
shareholder. In every instance where an attorney or other agent
is the person who seeks the right of inspection, the demand shall
be accompanied by a verified power of attorney or other writing
that authorizes the attorney or other agent to so act on behalf
of the shareholder. The demand shall be directed to the
corporation at its registered office in the Commonwealth of
Pennsylvania or at its principal place of business wherever
situated.
Section 8.07. Amendment of Bylaws. These bylaws may be
amended or repealed, or new bylaws may be adopted, by the
shareholders and by the board of directors of the corporation in
the manner provided in Article X of the articles. Any change in
these bylaws shall take effect when adopted unless otherwise
provided in the resolution effecting the change. See Section
2.03(b) (relating to notice of action by shareholders on bylaws).
<PAGE>
Exhibit 10(a)
ASSET PURCHASE AGREEMENT
dated as of October 31, 1998
by and between
PP&L GLOBAL, INC.
and
THE MONTANA POWER COMPANY
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 The Sale............................................... 1
1.02 The Liabilities........................................ 8
1.03 Purchase Price; Allocation.............................12
1.04 Purchase Price Adjustment..............................12
1.05 Closing; Additional Purchase Price Payments............14
1.06 Prorations.............................................16
1.07 Further Assurances.....................................17
1.08 Third Party Consents...................................18
1.09 Insurance Proceeds.....................................19
1.10 Inclusion/Exclusion of Certain Assets..................19
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Corporate Existence of Seller..........................23
2.02 Authority..............................................23
2.03 No Conflicts...........................................23
2.04 Governmental Approvals and Filings.....................24
2.05 Reports................................................25
2.06 Taxes..................................................25
2.07 Legal Proceedings......................................25
2.08 Compliance with Laws and Orders........................26
2.09 Benefit Plans; ERISA...................................26
2.10 Real Property..........................................28
2.11 Tangible Personal Property.............................29
2.12 Intellectual Property Rights...........................29
2.13 Contracts..............................................30
2.14 Licenses...............................................31
2.15 Insurance..............................................32
2.16 Labor Relations........................................32
2.17 Environmental Matters..................................33
2.18 Absences of Condemnation Proceedings...................34
2.19 Regulation as a Utility................................34
2.20 Brokers................................................34
2.21 Year 2000..............................................35
2.22 Disclaimers Regarding Assets...........................35
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Corporate Existence....................................35
3.02 Authority..............................................36
3.03 No Conflicts...........................................36
3.04 Governmental Approvals and Filings.....................37
3.05 Legal Proceedings......................................37
3.06 Compliance with Laws and Orders........................37
3.07 Regulation as a Utility................................38
3.08 Brokers................................................38
3.09 Financing..............................................38
3.10 Financial Statements...................................38
3.11 Opportunity to Inspect Assets..........................38
ARTICLE IV
COVENANTS OF SELLER
4.01 Regulatory and Other Approvals.........................39
4.02 HSR Filings............................................40
4.03 Investigation by Purchaser.............................40
4.04 No Solicitations.......................................41
4.05 Conduct of Business....................................41
4.06 Employee Matters.......................................42
4.07 Certain Restrictions...................................44
4.08 Security Deposits......................................45
4.09 Delivery of Books and Records, etc.; Removal of Property
.......................................................45
4.10 Fulfillment of Conditions..............................46
4.11 Observation, Inspection and Participation..............46
4.12 Notice of Breach.......................................47
4.13 Bridge Financing Fees..................................47
4.14 Special Maintenance and Capital Expenditures...........47
ARTICLE V
COVENANTS OF PURCHASER
5.01 Regulatory and Other Approvals.........................48
5.02 HSR Filings............................................49
5.03 Employees..............................................49
5.04 PPUC Approval for Holding Company......................54
5.05 Notice of Breach.......................................54
5.06 Fulfillment of Conditions..............................54
5.07 Tax-Exempt Bond Financed Pollution Control Facilities..54
5.08 Purchaser Financing....................................55
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
6.01 Representations and Warranties.........................56
6.02 Performance............................................56
6.03 Officers' Certificates.................................56
6.04 Orders and Laws........................................56
6.05 Regulatory Consents and Approvals......................56
6.06 Third Party Consents...................................57
6.07 Colstrip Rights of First Refusal.......................57
6.08 No Seller Material Adverse Effect......................57
6.09 Proceedings............................................57
6.10 Deliveries.............................................57
6.11 Colstrip Operations Arrangements.......................58
6.12 Purchaser Financing....................................58
6.13 Opinion of Counsel.....................................58
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
7.01 Representations and Warranties.........................58
7.02 Performance............................................58
7.03 Officers' Certificates.................................59
7.04 Orders and Laws........................................59
7.05 Regulatory Consents and Approvals......................59
7.06 Third Party Consents...................................59
7.07 Collective Bargaining Agreements.......................59
7.08 No Purchaser Material Adverse Effect...................59
7.09 Proceedings............................................60
7.10 Colstrip Rights of First Refulsal......................60
7.11 Opinion of Counsel.....................................60
7.12 Deliveries.............................................60
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes.........................................61
8.02 Returns with Respect to Prorated Taxes.................61
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 Survival of Representations, Warranties, Coventants and
Agreements............................................62
9.02 No Other Representations..............................63
ARTICLE X
INDEMNIFICATION
10.01 Other Indemnification.................................63
10.02 Method of Asserting Claims............................67
10.03 Exclusivity...........................................71
10.04 Purchaser's Release of Seller under the Colstrip
Contracts.............................................71
ARTICLE XI
TERMINATION
11.01 Termination...........................................72
11.02 Effect of Termination.................................73
ARTICLE XII
DEFINITIONS
12.01 Definitions............................................74
ARTICLE XIII
MISCELLANEOUS
13.01 Notices................................................96
13.02 Bulk Sales Act.........................................97
13.03 Entire Agreement.......................................97
13.04 Expenses...............................................98
13.05 Public Announcements...................................98
13.06 Confidentiality........................................98
13.07 Waiver.................................................99
13.08 Amendment.............................................100
13.09 No Third Party Beneficiary............................100
13.10 No Assignment; Binding Effect.........................100
13.11 Headings..............................................101
13.12 Invalid Provisions....................................101
13.13 Governing Law........................................101
13.14 Counterparts.........................................101
EXHIBITS
Exhibit A General Assignment and Bill of Sale
Exhibit B Assumption Agreement
Exhibit C Pollution Control Facilities
Exhibit D Officer's Certificate of Seller
Exhibit E Secretary's Certificate of Seller
Exhibit F-1 Colstrip Unit Number 3 Wholesale Transition
Service Agreement
Exhibit F-2 Non-Colstrip Unit Number 3 Wholesale
Transition Service Agreement
Exhibit G Interconnection Agreement
Exhibit H-1 Opinion of Counsel to Seller
Exhibit H-2 Opinion of General Counsel of Seller
Exhibit H-3 Opinion of Outside Montana counsel to Seller
Exhibit I Officer's Certificate of Purchaser
Exhibit J Secretary's Certificate of Purchaser
Exhibit K Opinion of Counsel to Purchaser
Exhibit L Confirmation of Reciprocal Sharing Agreement
SCHEDULES
Schedule I Asset Groups
Schedule II Pre-Closing Known Environmental Liabilities
<PAGE>
This ASSET PURCHASE AGREEMENT dated as of October 31, 1998
is made and entered into by and between PP&L Global, Inc., a
Pennsylvania corporation ("Purchaser"), and The Montana Power
Company, a Montana corporation ("Seller"). Capitalized terms
not otherwise defined herein have the meanings set forth in
Section 12.01.
WHEREAS, Seller and its subsidiaries engage in a number of
diversified energy and communication related businesses;
WHEREAS, Seller's principal business is the regulated
utility operations involving the generation, purchase,
transmission and distribution of electricity and the production,
purchase, transportation and distribution of natural gas in
Montana; and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from
Seller, the Thermal Units (including the Colstrip 4 Transmission
Assets) and the Hydro Units (excluding the Milltown
Hydroelectric Project) (each as defined herein and together, the
"Generating Assets") and certain other assets of Seller relating
to the operation of the Generating Assets, and in connection
therewith, Purchaser has agreed to assume certain of the
liabilities of Seller relating to such assets, all on the terms
set forth herein;
WHEREAS, on the date hereof PP&L Resources, Inc., a
Pennsylvania corporation and the parent of Purchaser ("Parent"),
has entered into an Equity Contribution Agreement (the
"Contribution Agreement") with Purchaser and Seller;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 The Sale. (a) On the terms and subject to the
conditions set forth in this Agreement, Seller will sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser
will purchase and pay for, at the Closing, free and clear of all
Liens other than Permitted Liens (as such term is defined with
respect to any date after the Closing), all of Seller's right,
title and interest in, to and under the Generating Assets and
the Assets and Properties of Seller used or held for use
principally in connection with the operation of the Generating
Assets, except as otherwise provided in Section 1.01(b), as the
same shall exist as of the Closing including, but not limited to
the following (collectively with any proceeds and awards
referred to in Section 1.09, the "Assets"):
(i) Real Property. The real property (including all
buildings, structures, fixtures and other improvements thereon)
used or held for use in connection with or related to the
operation of the Generating Assets, as described in Section
1.01(a)(i) of the Disclosure Schedule, which real property is
held in fee, easement, permit interest or other interest, as the
case may be (the "Real Property");
(ii) Real Property Leases. (A) The leases and subleases
of real property used or held for use in connection with or
related to the operation of the Generating Assets, as described
in Section 1.01(a)(ii)(A) of the Disclosure Schedule, as to
which Seller is the lessor or sublessor and (B) the leases and
subleases of real property used in connection with or related to
the operation of the Generating Assets, as described in Section
1.01(a)(ii)(B) of the Disclosure Schedule, as to which Seller is
the lessee or sublessee, together with any options to purchase
the underlying property and leasehold improvements thereon, and
in each case all other rights, subleases, licenses, permits,
deposits and profits appurtenant to or related to such leases
and subleases (the leases and subleases described in
subclauses (A) and (B), the "Real Property Leases");
(iii) Inventory. All inventories of fuels, supplies,
materials and spares used or held for use in connection with the
operation of the Generating Assets located on the Real Property
or the real property subject to the Real Property Leases, held
for use principally in connection with, or in transit to the
Generating Assets on the date of Closing (a listing of the fuel
inventories, as of September 30, 1998, is included in Section
1.01(a)(iii) of the Disclosure Schedule) (the "Inventory");
(iv) Tangible Personal Property. All machinery,
equipment, vehicles, furniture and other personal property
located where the operation of the Generating Assets is
conducted, or used or held for use in connection with the
operation of the Generating Assets (including but not limited to
the items listed in Section 1.01(a)(iv) of the Disclosure
Schedule), together with all buildings and structures
("Improvements") pertaining to Colstrip Units 3 and 4 (as to
Colstrip Unit 4 only to the extent of Seller's rights therein),
including the facilities shared by Colstrip Units 1, 2, 3 and 4
relating thereto, as to those Improvements which have been
severed from the Real Property and are to be treated as personal
property, and all warranties against manufacturers or vendors
relating thereto, to the extent that such warranties are freely
transferable (the "Tangible Personal Property");
(v) Business Contracts. All contracts, agreements and
personal property leases (other than the Real Property Leases,
the Transferable Permits, the Fuel Contracts, the Colstrip
Contracts and the Power Purchase/Exchange Agreements) used
primarily in the operation of the Generating Assets that are
listed in Section 1.01(a)(v) of the Disclosure Schedule (the
"Business Contracts");
(vi) Transferable Permits. All Licenses and Environmental
Permits owned or held by Seller and used or held for use in
connection with the operation of the Generating Assets that are
transferable by Seller to Purchaser as listed in Section
1.01(a)(vi) of the Disclosure Schedule and the water rights
owned or held by Seller, whether or not such rights are created
or evidenced by a License, and used or held for use in
connection with the operation of the Generating Assets including
those listed in Section 1.01(a)(vi) of the Disclosure Schedule
(the "Transferable Permits");
(vii) Intangible Personal Property. All Intellectual
Property used or held for use principally in connection with the
operation of the Generating Assets and all rights, privileges,
claims, causes of action and options relating or pertaining to
the operation of the Generating Assets or the Assets, including
but not limited to the items listed in Section 1.01(a)(vii) of
the Disclosure Schedule (the "Intangible Personal Property");
(viii) Security Deposits. All security deposits deposited
by or on behalf of Seller as lessee or sublessee under the Real
Property Leases (the "Tenant Security Deposits");
(ix) Prepaid Expenses. Except for prepaid expenses and
deposits of Seller attributable to any Excluded Asset or
Retained Liabilities, all prepaid expenses, progress payments
and deposits of or by Seller, rights to receive a prepaid
expense, deposit or progress payment, and cash in transit that
constitutes a prepaid expense, progress payment or deposit,
relating to the Assets or the ownership, operation and
maintenance of the Generating Assets;
(x) Fuel Contracts. All of the fuel contracts listed in
Section 1.01(a)(x) of the Disclosure Schedule (the "Fuel
Contracts");
(xi) Colstrip Contracts. Seller's undivided interests in,
and all of Seller's rights under the Contracts relating to, the
Thermal Units listed in Section 1.01(a)(xi) of the Disclosure
Schedule (the "Colstrip Contracts");
(xii) Power Purchase/Exchange Agreements. All of the
Power Purchase/Exchange Agreements;
(xiii) Allowance and Emission Reduction Credits. All of
the allowances and/or emission reduction credits described in
Section 1.01(a)(xiii) of the Disclosure Schedule;
(xiv) Personnel Records of Transferring Employees. All
personnel records of the Transferring Employees;
(xv) Warranties. Any other warranties and indemnities
given by third parties relating to the Assets or to the
ownership, operation and maintenance of the Generating Assets
other than in connection with any Excluded Assets or Retained
Liabilities;
(xvi) Certain Insurance Policies of Transferring
Employees. All life insurance policies of Transferring
Employees owned by Seller, to the extent such policies are
transferable to Purchaser without any cost to Seller as
described in Section 1.01(a)(xvi) of the Disclosure Schedule
(the "Transferable Insurance Policies");
(xvii) Books and Records. All books, operating and
maintenance records, operating, safety and maintenance manuals,
engineering or design plans, drawings, blue prints and as-built
plans, specifications, procedures and similar items of Seller
relating specifically to the aforementioned assets, other than
the minute books, stock transfer books and corporate seal of
Seller (the "Business Books and Records");
(xviii) Colstrip 4 Transmission Assets. Subject to
Section 1.10, the Colstrip 4 Transmission Assets as described in
Section 1.01(a)(xviii) of the Disclosure Schedule ("Colstrip 4
Transmission Assets"); and
(xix) Colstrip 1, 2 and 3 Transmission Assets. Subject to
Section 1.10, the Colstrip 1, 2 and 3 Transmission Assets as
described in Section 1.01(a)(xix) of the Disclosure Schedule
("Colstrip 1, 2 and 3 Transmission Assets").
To the extent any of the Business Books and Records are
items susceptible to duplication and are either (x) used in
connection with any of Seller's businesses other than the
operation of the Generating Assets or (y) are required by Law to
be retained by Seller, Seller may deliver photostatic copies or
other reproductions from which, in the case of Business Books
and Records referred to in clause (x), information solely
concerning Seller's businesses other than the operation of the
Generating Assets has been deleted. To the extent that any
Contract to be transferred hereunder to Purchaser is also
utilized by or is for the benefit of any of Seller's businesses
other than the operation of the Generating Assets, the rights
and obligations under such Contracts shall be to the extent
practicable allocated between the operation of the Generating
Assets and such other businesses in a fair and equitable manner
that is reasonably satisfactory to the parties. Prior to the
Closing, Seller will cooperate with Purchaser to transfer the
computer equipment and software needed to operate the Generating
Assets but that can not be transferred pursuant to Section
1.01(a)(vii) due to restrictions in third party software
licenses and that are listed on Section 1.01(a) of the
Disclosure Schedule or are used by Seller in connection with its
other businesses. Any computer equipment and software which
cannot be transferred to Purchaser by the Closing shall be
referred to herein as the "Non-Transferable Software." After
the Closing, Seller (subject to restrictions in third party
software licenses) will process certain data of Purchaser
necessary to operate the Generating Assets on commercially
reasonable terms to be mutually agreed upon by Purchaser and
Seller; provided, however, such terms shall include the
following: (x) Seller shall process such data for the period
commencing on the Closing and ending two (2) years after the
Closing, provided that Purchaser shall have no right to modify
or enhance the Non-Transferrable Software or to make derivative
works from the Non-Transferrable Software; and (y) Purchaser
agrees to pay Seller for all costs relating to future upgrades,
software, hardware or otherwise (including Year 2000 costs)
relating to the Non-Transferrable Software that are done at
Purchaser's request (provided that Seller shall not be obligated
to comply with any such request) and Seller agrees to assume any
Liabilities arising therefrom.
(b) Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the Assets shall not include the
following assets of Seller (the "Excluded Assets"):
(i) Cash. All cash, commercial paper, certificates
of deposit and other bank deposits, treasury bills and other
cash equivalents;
(ii) Investments. Certificates of deposit, shares of
stock, securities, evidences of Indebtedness, interest in joint
ventures, partnerships, limited liability companies and other
entities;
(iii) Tax Refunds. All refunds or credits, if any, of
Taxes relating to the Assets due to Seller attributable to any
period ending on or prior to the Closing;
(iv) Real and Personal Property. The real or personal
property located at the sites where the Generating Assets are
located described in Section 1.01(b)(iv) of the Disclosure
Schedule, the delineation and composition of which shall be
subject to the Separation Document;
(v) Corporate Records. The minute books, stock
transfer books and corporate seal of Seller;
(vi) Litigation Claims. Any rights (including
indemnification) and claims and recoveries under litigation of
Seller against third parties attributable to the period on or
prior to the Closing except to the extent relating to the
Assumed Liabilities;
(vii) Excluded Obligations. The rights of Seller in,
to and under all Contracts of any nature, the obligations of
Seller under which are not expressly assumed by Purchaser
pursuant to Section 1.02(b);
(viii) Tradename and Logo. All tradenames, trademarks,
service marks or logos owned by Seller or its Subsidiaries
including all of Seller's right, title and interest in, to and
under the name "The Montana Power Company" or any related or
similar trade names, trademarks, service marks or logos;
provided, however, that Purchaser shall be authorized to
continue to use for internal purposes only and not for public
use, materials bearing such names, trademarks or logos (such as
employee manuals) used by Seller prior to the Closing for up to
six (6) months following the Closing;
(ix) Transmission, Distribution, Communication and
Software Assets. Subject to Section 1.01(a)(xviii), the
electric and gas transmission and distribution, substation and
communication facilities located at the sites where the
Generating Assets are located and related support equipment and
gas rights, interconnection rights, rights-of-way and corridor
easements related to such facilities, each as described in
Section 1.01(b)(ix) of the Disclosure Schedule; provided that
communications facilities and related support equipment that are
used solely in connection with the Generating Assets shall be a
part of the Assets unless identified in Section 1.01(b)(ix) of
the Disclosure Schedule, and Purchaser shall be entitled to use
communications facilities and related support equipment that are
also utilized by Seller in connection with Seller's businesses
other than the operation of the Generating Assets pursuant to a
service agreement to be entered into between Purchaser and
Seller at or prior to the Closing on commercially reasonable
mutually satisfactory terms ("Communications Service
Agreement").
(x) Accounts Receivable. All trade accounts
receivable and all notes, bonds and other evidences of
Indebtedness of and rights to receive payments arising out of
sales occurring in connection with the operation of the
Generating Assets prior to the Closing and the security
agreements related thereto, including any rights of Seller with
respect to any third party collection procedures or any other
Actions or Proceedings which have been commenced in connection
therewith;
(xi) Insurance. Subject to Section 1.01(a)(xvi), life
insurance policies of Transferring Employees and all other
insurance policies relating to the operation of the Generating
Assets;
(xii) Employee Benefit Plans. Except as set forth in
Section 5.03, all assets owned or held by any Benefit Plans;
(xiii) Other Personnel Records. All personnel records
other than the Transferring Employee records or other records,
the disclosure of which is required by Law, legal process or
subpoena;
(xiv) All Other Assets. All other Assets and
Properties owned by Seller or its Subsidiaries not used in the
operation of the Generating Assets; and
(xv) Other. Seller's rights under this Agreement and
the Operative Agreements.
1.02 Liabilities. (a) Assumed Liabilities. In
connection with the sale, transfer, conveyance, assignment and
delivery of the Assets pursuant to this Agreement, on the terms
and subject to the conditions set forth in this Agreement, at
the Closing, Purchaser will assume and agree to pay, perform and
discharge when due all of the following Liabilities of Seller,
direct or indirect, known or unknown, absolute or contingent,
which arise and are attributable to the period after the date of
the Closing and relate solely to the Assets or which arose and
relate to the period on or prior to the date of the Closing and
are specifically referred to in this Section 1.02(a) as being
assumed by Purchaser (in all cases, except for Seller's
Liabilities in connection with the Pollution Control Bonds and
Liabilities constituting Retained Liabilities) (the "Assumed
Liabilities"):
(i) Real Property Lease Obligations. All Liabilities of
Seller under the Real Property Leases arising and to be
performed after the date of the Closing, and excluding any such
Liabilities arising or to be performed on or prior to the date
of the Closing;
(ii) Tangible Personal Property Obligations. All
Liabilities of Seller under any Contract related to the Tangible
Personal Property arising and to be performed after the date of
the Closing, and excluding any such Liabilities arising or to be
performed on or prior to the date of the Closing;
(iii) Liabilities under Business Contracts and
Transferable Permits. All Liabilities of Seller under the
Business Contracts and Transferable Permits, to the extent
transferred to Purchaser, arising and to be performed after the
date of the Closing, and excluding any such Liabilities arising
or to be performed on or prior to the date of the Closing;
(iv) Security Deposits. All Liabilities of Seller with
respect to any security deposit held by Seller as lessor or
sublessor under the Real Property Leases, to the extent and only
to the extent of the respective amount of the security deposit
delivered to Purchaser at the date of the Closing with respect
to any such Real Property Lease (the "Landlord Security
Deposits");
(v) Fuel Contracts, Colstrip Contracts and Power
Purchase/Exchange Agreements. All Liabilities of Seller under
the Fuel Contracts, the Colstrip Contracts and the Power
Purchase/Exchange Agreements arising and to be performed after
the date of the Closing, and excluding any such Liabilities
arising or to be performed on or prior to the date of the
Closing;
(vi) Pre-Closing Colstrip Liabilities. All Liabilities of
Seller described in Section 1.02(a)(vi) of the Disclosure
Schedule;.
(vii) Transferring Employee Liabilities. All Liabilities
of Seller with respect to the Transferring Employees for which
Purchaser is responsible pursuant to Section 5.03;
(viii) Transferable Insurance Policy Liabilities. All
Liabilities of Seller with respect to the Transferable Insurance
Policies to the extent transferred to Purchaser;
(ix) Certain Employment Agreement Liabilities. All
Liabilities of Seller under the Employment Agreements described
on Section 1.02(a)(ix) of the Disclosure Schedule ("Change of
Control Liabilities"); and
(x) Environmental Liabilities. Subject to Section
10.01(b), all Environmental Liabilities; provided, however, that
nothing set forth in this Section 1.02(a) shall require
Purchaser to assume any Liability for (x) payment of any fines
or penalties imposed by a Governmental or Regulatory Authority
relating to the ownership operation and maintenance of the
Generating Assets on or prior to the date of the Closing
("Environmental Fines and Penalties"), (y) any Off-Site
Environmental Liabilities, or (z) any Pre-Closing Environmental
Liabilities related to the Thompson Falls Hydroelectric Project
(including the reservoir)if, at any time on or after the Bid
Date, the DEQ changes the Thompson Falls Environmental Status or
requires Purchaser to remediate metals contamination that
occurred on or prior to the date of the Closing at the Thompson
Falls Hydroelectric Project (including the reservoir) ("Thompson
Falls Liabilities").
Except with respect to Environmental Liabilities that are
Assumed Liabilities, Assumed Liabilities shall not include
Liabilities to the extent such Liabilities, but for a breach or
default by Seller of its obligations, would have been paid,
performed or otherwise discharged specifically by their terms or
the terms hereof on or prior to the Closing as it relates to the
Assets or to the extent the same arise out of any such breach or
default.
(b) Retained Liabilities. Except for the Assumed
Liabilities, Purchaser shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall
have no liability for any Liabilities of Seller including
Seller's Liabilities under this Agreement and the Operative
Agreements and including, but not limited to the following (the
"Retained Liabilities"):
(i) any Liabilities of Seller in connection with the
Pollution Control Bonds or claims by bondholders;
(ii) any Environmental Fines and Penalties;
(iii) any Off-Site Environmental Liabilities;
(iv) any Thompson Falls Liabilities;
(v) any Liabilities of Seller in respect of any Excluded
Assets;
(vi) any Liabilities of Seller for Taxes;
(vii) any Liabilities of Seller with respect to commitments
for the purchase or sale of power or fuel, other than as
provided in Section 1.02(a);
(viii) except as set forth in Section 5.03, any Liabilities
relating to Seller's employment of, termination of employment
of, provision of benefits to, and compensation of employees
employed at the Assets, including but not limited to an Employee
whose employment principally relates to any Assets, and any
personal injury, discrimination, harassment, wrongful discharge
or other wrongful employment practice, unfair labor practice,
claims for benefits (including claims arising under ERISA or
workers' compensation laws), or similar claims or causes of
action, known or unknown, absolute or contingent, asserted or
unasserted, of any such person arising out of acts or omissions
occurring or otherwise attributable to the period on or before
the Closing; and
(ix) except as set forth in Section 5.03, any Liabilities
of Seller relating to any Benefit Plan, or to any "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) of
Seller, whether or not terminated, established, maintained or
contributed to by Seller or any of its ERISA Affiliates at any
time, or to which any of Seller or any of its ERISA Affiliates
are or have been obligated to contribute to at any time ("ERISA
Affiliate Plan"); including any liability (A) to the Pension
Benefit Guaranty Corporation under Title IV of ERISA; (B)
relating to a multiemployer plan; (C) with respect to non-
compliance with COBRA or HIPAA; (D) with respect to
noncompliance with any other applicable provision of the Code,
ERISA or any other applicable laws; or (E) with respect to any
suit, proceeding or claim which is brought against Purchaser
with respect to any such Benefit Plan or ERISA Affiliate Plan,
against any such Benefit Plan or ERISA Affiliate Plan, or
against any fiduciary or former fiduciary of any such Benefit
Plan or ERISA Affiliate Plan.
1.03 Purchase Price; Allocation. (a) Purchase Price.
Subject to any adjustment required pursuant to Section 1.10, the
aggregate purchase price for the Assets shall be an amount equal
to the sum of (x) the Base Purchase Price, as may be adjusted
pursuant to Section 1.10, (y) the Adjustment Amount and, (z) if
applicable, the Colstrip 4 Transmission Amount (collectively,
the "Purchase Price"), payable in immediately available United
States funds at the Closing in the manner provided in Section
1.05 or thereafter (as provided in Section 1.04).
(b) Allocation of Purchase Price. Purchaser and Seller
shall negotiate in good faith prior to the Closing and determine
the allocation of the consideration paid by Purchaser for the
Assets. Each party hereto agrees (i) that any such allocation
shall be consistent with the requirements of Section 1060 of the
Code and the regulations thereunder, (ii) to complete jointly
and to file separately Form 8594 with its Federal Income Tax
Return consistent with such allocation for the tax year in which
the Closing occurs and (iii) that no party will take a position
on any income, transfer or gains Tax Return, before any
Governmental or Regulatory Authority charged with the collection
of any such Tax or in any judicial proceeding, that is in any
manner inconsistent with the terms of any such allocation
without the consent of the other party.
1.04 Purchase Price Adjustment. (a) Within 30 days after
the Closing, Seller shall prepare and deliver to Purchaser a
statement (each, an "Adjustment Statement") which reflects (i)
the net book value, as reflected on the books of Seller as of
the Closing of all fuel inventory (FERC account no. 151) and
stores inventory (FERC account no. 154) used at or in connection
with the Thermal Units or the Hydro Units, as the case may be
(the "Inventory Adjustment Amount"), and (ii) the Maintenance
and Capital Expenditures Amount applicable to the Thermal Units
or the Hydro Units, as the case may be. The Inventory
Adjustment Amount and the Maintenance and Capital Expenditures
Amount for the Closing is referred to collectively as the
"Adjustment Amount." The Inventory Adjustment Amount will be
based on an inventory survey conducted by Seller within five
days prior to the Closing consistent with Seller's current
inventory procedures (the "Inventory Survey"). Seller will
permit an employee, or representative, of Purchaser to observe
the Inventory Survey. Each Adjustment Statement shall be
prepared using the same generally accepted accounting
principles, policies and methods as Seller has historically used
in connection with the calculation of the items reflected on
such Adjustment Statement. Purchaser agrees to cooperate with
Seller in connection with the preparation of each Adjustment
Statement and related information, and shall provide to Seller
such books, records and information as may be reasonably
requested from time to time.
(b) Purchaser may dispute an Inventory Adjustment Amount
or a Maintenance and Capital Expenditures Amount; provided,
however, that Purchaser shall notify Seller in writing of the
disputed amount, and the basis of such dispute, within ten (10)
Business Days of Purchaser's receipt of the applicable
Adjustment Statement. In the event of a dispute with respect to
any part of an Adjustment Amount, Purchaser and Seller shall
attempt to reconcile their differences and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive on the parties. If Purchaser and Seller are unable
to reach a resolution of such differences within 30 days of
receipt of Purchaser's written notice of dispute to Seller,
Purchaser and Seller shall submit the amounts remaining in
dispute for determination and resolution to the Independent
Accounting Firm, which shall be instructed to determine and
report to the parties, within 30 days after such submission,
upon such remaining disputed amounts, and such report shall be
final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the
Independent Accounting Firm shall be shared equally by Purchaser
and Seller.
(c) Within ten (10) Business Days after Purchaser's
receipt of an Adjustment Statement, Purchaser shall pay all
undisputed amounts, or if there is a dispute with respect to any
amount of such Adjustment Statement within five (5) Business
Days after the final determination of any amounts on such
Adjustment Statement, Purchaser shall pay to Seller an amount
equal to the disputed Adjustment Amount as finally determined to
be payable with respect to such Adjustment Statement. All
Adjustment Statement payments shall be less the Estimated
Adjustment Amount; provided, however, that if such amount shall
be less than zero, then within five (5) Business Days after the
final determination of such amount Seller will pay to Purchaser
the amount by which such amount is less than zero. Any amount
paid under this Section 1.04 shall be paid with interest for the
period commencing on the date of Closing through the date of
payment, calculated at the prime rate for domestic banks as
published in The Wall Street Journal (Northeast Edition) in the
"Money Rates" section on the date of Closing, and in immediately
available United States funds.
1.05 Closing; Additional Purchase Price Payments.
(a) Closing. The Closing will take place at the offices
of Milbank, Tweed, Hadley & McCloy, One Chase Manhattan Plaza,
New York, New York 10005, or at such other place as Purchaser
and Seller mutually agree, at 10:00 A.M. local time, on the
Closing Date. At the Closing, Purchaser will pay an amount (the
"Estimated Purchase Price") in United States dollars equal to
the sum of (a) the Base Purchase Price as the same may be
adjusted pursuant to Section 1.10, and, if applicable, the
Colstrip 4 Transmission Amount, and (b) the Estimated Adjustment
Amount for the Closing, by wire transfer of immediately
available United States funds to such account as Seller may
reasonably direct by written notice delivered to Purchaser by
Seller at least two (2) Business Days before the Closing.
Simultaneously, (A) Seller will assign and transfer to Purchaser
good and valid title in and to the Assets (free and clear of all
Liens, other than Permitted Liens as such term is defined with
respect to periods after the Closing) by delivery of (i) a
General Assignment and Bill of Sale substantially in the form of
Exhibit A hereto (the "General Assignment"), duly executed by
Seller, covering the Personal Property comprising Assets except
for the Intellectual Property, (ii) an assignment of the
Intellectual Property in form and substance reasonably
satisfactory to Purchaser, (iii) (x) special warranty deeds in
proper statutory form for recording and otherwise in form and
substance reasonably satisfactory to Purchaser conveying good
and marketable title to the Real Property in which Seller has a
fee or easement interest (subject only to Permitted Liens),
(y) an assignment in form and substance reasonably satisfactory
to Purchaser conveying valid and subsisting title to the Real
Property in which Seller has a permit interest or other interest
(neither fee nor easement) (subject only to Permitted Liens) and
(z) all necessary documentation to transfer and convey to
Purchaser the water rights listed in Section 1.01(a)(vi) of the
Disclosure Schedule including water rights transfer certificates
executed in proper form to be filed with the appropriate
Governmental or Regulatory Authority and (iv) such other good
and sufficient instruments of conveyance, assignment and
transfer, in form and substance reasonably acceptable to
Purchaser's counsel, as shall be effective to vest in Purchaser
good and valid title to the Assets, good and marketable title to
the Real Property in which Seller has a fee or easement interest
and valid and subsisting title to the Real Property in which
Seller has a permit interest or other interest (neither fee nor
easement), in each case subject only to Permitted Liens (the
General Assignment and the other instruments referred to in
clauses (A) (ii), (iii) and (iv) being collectively referred to
herein as the "Assignment Instruments"), and (B) Purchaser will
assume from Seller the due payment, performance and discharge of
the Assumed Liabilities by delivery of (i) an Assumption
Agreement substantially in the form of Exhibit B hereto (the
"Assumption Agreement"), duly executed by Purchaser, and (ii)
such other good and sufficient instruments of assumption, in
form and substance reasonably acceptable to Seller's counsel, as
shall be effective to cause Purchaser to assume the Assumed
Liabilities as and to the extent provided in Section 1.02(a)
(the Assumption Agreement and such other instruments referred to
in clause (B)(ii) being collectively referred to herein as the
"Assumption Instruments"). At the Closing, there shall also be
delivered to Seller and Purchaser the opinions, certificates and
other contracts, documents and instruments required to be
delivered under Articles VI and VII.
(b) Additional Purchase Price Payments. If the Closing
hereunder has occurred, then:
(i) In the event that the Puget Closing Date occurs prior
to the Portland Closing Date, on the Puget Closing Date
Purchaser shall pay to Seller the Puget Payment Amount;
(ii) In the event that the Portland Closing Date occurs
prior to the Puget Closing Date, on the Portland Closing Date
Purchaser shall pay to Seller the Portland Payment Amount; and
(iii) On the Final Closing Date, Purchaser shall pay to
Seller the Combined Payment Amount.
All payments made pursuant to this Section 1.05(b) shall be
paid by wire transfer of immediately available United States
funds to such account as Seller may reasonably direct by written
notice delivered to Purchaser by Seller at least two (2)
Business Days before the applicable closing date.
1.06 Prorations. The following items relating to the
Assets and the ownership and operation of the Generating Assets
will be allocated pro rata per diem for the tax year that
includes the date of Closing, with Seller liable for such items
to the extent they are allocable to the period prior to the date
of the Closing and Purchaser liable for such items to the extent
they are allocable to periods beginning with and subsequent to
the Closing:
(a) Property Taxes on or with respect to the Assets.
(b) Rents, additional rents, Taxes, to the extent normally
adjusted in connection with similar transactions, and other
items payable by Seller under the Real Property Leases and the
Business Contracts.
(c) The amount of rents, Taxes and charges for sewer,
water, telephone, electricity and other utilities relating to
the Real Property and the real property subject to the Real
Property Leases.
(d) All other items (excluding other Taxes) normally
adjusted in connection with similar transactions.
Except as otherwise agreed by the parties, the net amount of all
such prorations will be settled and paid as of date of the
Closing. At least ninety (90) days prior to date of the
Closing, Seller will provide Purchaser with a reasonably
detailed schedule showing a calculation of the estimated
prorations as if the Closing were occurring on such date. If
the Closing shall occur before a real estate Tax rate is fixed,
the apportionment of Taxes shall be based upon the Tax rate for
the preceding year applied to the latest assessed valuation and
such Taxes shall be reprorated upon the request of Seller, on
the one hand, or Purchaser, on the other hand, made within sixty
(60) days after the date that the actual amounts become
available. Seller and Purchaser agree to furnish each other
with such documents and other records as may be reasonably
requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 1.06.
To the extent required by any approval of the transfer of
the FERC project licenses related to the Hydro Units, Seller
agrees to pay all annual charges accrued under such licenses as
of the Closing.
1.07 Further Assurances; Post-Closing Cooperation.
(a) Subject to the terms and conditions of this Agreement,
at any time or from time to time after the Closing, at
Purchaser's request and without further consideration, Seller
shall execute and deliver to Purchaser such other instruments of
sale, transfer, conveyance, assignment and confirmation, provide
such materials and information and take such other actions as
Purchaser may reasonably deem necessary or desirable in order
more effectively to transfer, convey and assign to Purchaser,
and to confirm Purchaser's title to, all of the Assets, and, to
the full extent permitted by Law, to put Purchaser in actual
possession and control of the Assets and to assist Purchaser in
exercising all rights with respect thereto, and otherwise to
cause Seller to fulfill its obligations under this Agreement and
the Operative Agreements. From time to time after the Closing,
at Purchaser's request and expense, Seller will reasonably
cooperate with Purchaser in its efforts to maximize any Tax
benefits associated with the Assets with respect to periods
following the Closing and to minimize the Tax costs associated
with the transactions contemplated hereby; provided such
cooperation does not adversely affect Seller's Tax position.
From time to time after the Closing, at Seller's request and
expense, Purchaser will reasonably cooperate with Seller in its
efforts to maximize any Tax benefits associated with the Assets
with respect to periods prior to the Closing and to minimize the
Tax costs associated with the transactions contemplated hereby;
provided such cooperation does not adversely affect Purchaser's
Tax position.
(b) Following the Closing, each party will afford the
other party, its counsel and its accountants, during normal
business hours, reasonable access to the books, records and
other data relating to the operation of the Generating Assets in
its possession with respect to periods prior to the Closing and
the right to make copies and extracts therefrom, to the extent
that such access may be reasonably required by the requesting
party in connection with (i) the preparation of Tax Returns,
(ii) the determination or enforcement of rights and obligations
under this Agreement, (iii) compliance with the requirements of
any Governmental or Regulatory Authority, (iv) the determination
or enforcement of the rights and obligations of any Indemnified
Party or (v) in connection with any actual or threatened Action
or Proceeding. Further each party agrees for a period extending
six (6) years after the Closing not to destroy or otherwise
dispose of any such books, records and other data unless such
party shall first offer in writing to surrender such books,
records and other data to the other party and such other party
shall not agree in writing to take possession thereof during the
thirty (30) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns,
other documents or reports required to be filed with
Governmental or Regulatory Authorities or its financial
statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information,
documents or records relating to the operation of the Generating
Assets not referred to in paragraph (b) above, and such
information, documents or records are in the possession or
control of the other party, such other party shall use its best
efforts to furnish or make available such information, documents
or records (or copies thereof) at the recipient's request, cost
and expense. Any information obtained by such party in
accordance with this paragraph shall be held confidential by
such party in accordance with Section 13.06.
(d) Notwithstanding anything to the contrary contained in
this Section 1.07, if the parties are in an adversarial
relationship in litigation or arbitration, the furnishing of
information, documents or records in accordance with paragraph
(c) of this Section 1.07 shall be subject to applicable rules
relating to discovery.
1.08 Third Party Consents. To the extent that any
Business Contract, Transferable Permit, Fuel Contract, Colstrip
Contract or Power Purchase/Exchange Agreement is not assignable
without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if
such assignment or attempted assignment would constitute a
breach thereof. Seller and Purchaser shall use their reasonable
efforts to obtain the consent of such other party to the
assignment of any such Business Contract, Transferable Permit,
Fuel Contract, Colstrip Contract or Power Purchase/Exchange
Agreement to Purchaser in all cases in which such consent is or
may be required for such assignment. If any such consent shall
not be obtained, or if any attempted assignment would be
ineffective or would impair Purchaser's rights and obligations
so that Purchaser would not in effect acquire the benefit of
substantially all of such rights and obligations, Seller shall
cooperate with Purchaser in any reasonable arrangement, to the
extent legally permissible, designed to provide for Purchaser
the benefits intended to be assigned to Purchaser under the
relevant Business Contract, Transferable Permit, Fuel Contract,
Colstrip Contract or Power Purchase/Exchange Agreement,
including enforcement at the cost and for the account of
Purchaser of any and all rights of Seller against the other
party thereto arising out of the breach or cancellation thereof
by such other party or otherwise. If and to the extent that
such arrangement is not made in a manner reasonably satisfactory
to Purchaser, Purchaser shall have no obligation pursuant to
Section 1.02 or otherwise only with respect to any such Business
Contract, Transferable Permit, Fuel Contract, Colstrip Contract
or Power Purchase/Exchange Agreement. The provisions of this
Section 1.08 shall not affect the right of Purchaser not to
consummate the transactions contemplated by this Agreement as
provided in Section 1.10(e) or if the conditions to its
obligations hereunder contained in Sections 6.05, 6.06 and 6.07
have not been fulfilled.
1.09 Insurance Proceeds. If any of the Assets (other than
an Asset excluded under Section 1.10) is destroyed, damaged or
taken in condemnation, the insurance proceeds or condemnation
award with respect thereto shall be an Asset; provided, however,
Seller agrees not to settle or compromise any amounts concerning
such Assets during negotiations with Seller's insurance company
without Purchaser's prior consent. At the Closing, Seller shall
pay or credit to Purchaser any such insurance proceeds or
condemnation awards received by it on or prior to the Closing
and shall assign to or assert for the benefit of Purchaser all
of its rights against any insurance companies, Governmental or
Regulatory Authorities and others with respect to such damage,
destruction or condemnation. As and to the extent that there is
available insurance under policies maintained by Seller and its
Affiliates, predecessors and successors in respect of any
Assumed Liability, except for any such insurance proceeds with
respect to which the insured is directly or indirectly self-
insured or has agreed to indemnify the insurer, Seller shall
cause such insurance to be applied toward the payment of such
Assumed Liability. The provisions of this Section 1.09 shall
not affect the right of Purchaser not to consummate the
transactions contemplated by this Agreement if the condition to
its obligations hereunder contained in Sections 6.01 or 6.08 has
not been fulfilled.
1.10 Inclusion/Exclusion of Certain Assets.
(a) Purchaser agrees to use its reasonable best efforts to
obtain the approval described in clause (iii) of the definition
of Purchaser Required Regulatory Approvals in a manner
reasonably satisfactory to Purchaser that will allow Purchaser
to purchase and own, operate and maintain after the Closing the
Colstrip 4 Transmission Assets, and to consult with Seller prior
to abandoning its efforts to do so. If, notwithstanding
Purchaser's compliance with the preceding sentence and with
Section 5.01, such Purchaser Required Regulatory Approval is not
obtained from FERC with respect to the proposed purchase,
ownership and operation of the Colstrip 4 Transmission Assets,
or is finally denied by FERC, within seven (7) months of the
date of execution of this Agreement, or in the event that the
condition set forth in Section 6.12 has not been satisfied on or
prior to the Closing, then subject to Section 1.10(b),(i) at the
Closing Seller and Purchaser shall enter into a transmission
service agreement for firm transmission service pursuant to
Seller's open access transmission tariff (the "Colstrip 4
Transmission Service Agreement"), (ii) the Colstrip 4
Transmission Assets shall be Excluded Assets hereunder,
(iii) Purchaser shall not be obligated to pay the Colstrip 4
Transmission Amount at the Closing, and (iv) the condition to
Closing described in Sections 6.05 and 7.05 shall be deemed
satisfied with respect to such Purchaser Required Regulatory
Approval solely with respect to the Colstrip 4 Transmission
Assets but shall not be deemed satisfied with respect to any
other Assets, provided, that Seller shall have the right, in its
sole discretion, to waive such seven (7) month period, and
require Purchaser to continue to pursue such approval,
consistent with Purchaser's obligations under Section 5.01
hereof, for such time period(s) as Seller may determine, not to
exceed the time period provided for in Section 11.01(d) hereof.
Purchaser acknowledges that, in any event, Seller shall remain
the operator of the Colstrip 4 Transmission Assets pursuant to
the Colstrip Project Transmission Agreement dated May 6, 1981,
as amended February 14, 1990, December 30, 1996, and July 13,
1998, between Seller, Puget, PGE, WWP and Pacific.
(b) In the event that, notwithstanding Seller's compliance
with Section 4.01, Seller has been unable to obtain all consents
or approvals required in connection with the transfer of the
Colstrip 4 Generation Assets, Seller may elect to exclude from
the Assets being sold to Purchaser hereunder, all of Seller's
rights, title and interest in, to and under the Colstrip 4
Generation Assets. In such event (i) the Colstrip 4 Generation
Assets shall be Excluded Assets hereunder, (ii) the Base
Purchase Price shall be reduced by an amount equal to
$40,000,000, (iii) the conditions to Closing described in
Sections 6.05, 6.06, 6.07, 7.05, and 7.06, as and only to the
extent that they relate to consents and approvals required in
respect of or pursuant to any Colstrip 4 Generation Assets,
shall be deemed satisfied, and (iv) the Colstrip 4 Transmission
Assets shall become Excluded Assets and all of the provisions of
Section 1.10(a)(i)through (iv) shall become operative with
respect to the Colstrip 4 Transmission Assets.
(c) In the event that, notwithstanding Seller's and
Purchaser's compliance with Sections 4.01 and 5.01, an Asset
Group identified on Schedule I hereto cannot be conveyed at the
Closing due to a failure to obtain a Seller Required Regulatory
Approval and/or a Purchaser Required Regulatory Approval with
respect to such Asset Group on terms and conditions reasonably
satisfactory to Purchaser, or the Closing conditions in Sections
6.05 and 6.06 and, if applicable, Section 6.07 are not satisfied
with respect to such Asset Group, then such Asset Group shall be
excluded from the Assets being sold to Purchaser hereunder. In
such event (i) such Asset Group shall be Excluded Assets
hereunder, (ii) the Base Purchase Price shall be reduced by the
amount relating to such Asset Group identified on Schedule I
hereto, and (iii) the conditions to Closing described in
Sections 6.05, 6.06,7.05 and 7.06 and, if applicable, Section
6.07 as and only to the extent that they relate to consents and
approvals required in respect of or pursuant to such Asset
Group, shall be deemed satisfied;
(d) Purchaser has been provided copies of title insurance
commitments covering certain of the Assets and intends to obtain
at its expense additional title commitments and title policies.
Seller agrees to use reasonable efforts to cure title objections
of which Seller is notified by Purchaser, to the extent title
would not otherwise satisfy Seller's obligations with respect to
the title to be delivered by Seller in compliance with Section
1.05(a) of this Agreement. From and after the date hereof and
through the Closing, Seller shall use reasonable efforts to cure
and remove exceptions to title to the Real Property (other than
those exceptions referred to in the preceding sentences)of which
Seller is notified by Purchaser in writing; provided, however,
that in no event shall Seller be obligated to incur expenses or
make payments of any nature in excess of $1,100,000 in
discharging its obligations set forth in this sentence. Nothing
in the two preceding sentences shall change or otherwise affect
the nature of the title to the Real Property that Seller is
obligated to transfer to Purchaser in compliance with this
Agreement. In the event that (i)Seller is unable to deliver, at
the Closing, title in compliance with this Agreement with
respect to an Asset Group, (ii) an Asset Group is the subject of
a material condemnation proceeding, or (iii) an Asset Group is
damaged or destroyed in any material respect and such damage or
destruction is not remedied by Seller prior to the Closing, then
the affected Asset Group shall be Excluded Assets hereunder and
the Base Purchase Price shall be adjusted by the amount relating
to such Asset Group identified on Schedule I hereto. If any
such Asset Group is treated as an Excluded Asset as provided
above in this Section 1.10(d), the conditions to Closing set
forth in Articles VI and VII shall be deemed satisfied as and
only to the extent that they relate to the title, condemnation
or damage and destruction, as the case may be, with respect to
such Asset Group.
(e) In the event that the Generating Assets to be
transferred to Purchaser hereunder at the Closing do not include
at a minimum (i) Corette, (ii) Seller's undivided interests in
Colstrip 1, 2 and 3 Generating Assets, and (iii)
Missouri/Madison Hydro Units with Basin/Idaho/BPA Power
Contracts, then Purchaser may elect to terminate the Agreement
under Section 11.01(e).
(f) In the event the closings under the PGE Asset Purchase
Agreement and the Puget Asset Purchase Agreement do not occur by
the respective "Termination Dates" thereunder, either
(i) Purchaser shall acquire the Colstrip 1, 2 and 3 Transmission
Assets owned by Seller for a purchase price of $97,100,000 (the
"Colstrip 1, 2 and 3 Transmission Amount") or (ii) in the event
Purchaser has not received the Purchaser Required Regulatory
Approval described in clause (iii) of the definition of
Purchaser Required Regulatory Approvals reasonably satisfactory
to Purchaser with respect to the proposed purchase of the
Colstrip 1, 2 and 3 Transmission Assets, Purchaser shall not
acquire the Colstrip 1, 2 and 3 Transmission Assets and such
Assets shall be Excluded Assets. Purchaser acknowledges that,
in any event, Seller shall remain the operator of the Colstrip
1, 2 and 3 Transmission Assets pursuant to the Colstrip Project
Transmission Agreement dated May 6, 1981, as amended February
14, 1990, December 30, 1996, and July 13, 1998, between Seller,
Puget, PGE, WWP and Pacific.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as
follows:
2.01 Corporate Existence of Seller. Seller is a
corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Montana, and has full
corporate power and authority to own, operate and maintain the
Generating Assets as and to the extent now conducted and to own,
use, lease and operate the Assets. Seller is duly qualified or
licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the Assets make such
qualification necessary, except in each case in those
jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not create a Seller Material
Adverse Effect. Seller has heretofore made available to
Purchaser complete and correct copies of its articles of
incorporation and by-laws (or other comparable corporate charter
documents), as currently in effect.
2.02 Authority. Seller has full corporate power and
authority to execute and deliver this Agreement and the
Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including to sell
and transfer (pursuant to this Agreement) the Assets. The
execution and delivery by Seller of this Agreement and the
Operative Agreements to which it is a party, and the performance
by Seller of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Seller,
no other corporate action on the part of Seller or its
stockholders being necessary. This Agreement has been duly and
validly executed and delivered by Seller and, subject to receipt
of Seller Required Regulatory Approvals and Purchaser Required
Regulatory Approvals, constitutes, and upon the execution and
delivery by Seller of the Operative Agreements to which it is a
party, such Operative Agreements will constitute, legal, valid
and binding obligations of Seller enforceable against Seller in
accordance with their terms except as the same may be limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium
or other similar Laws relating to or affecting the rights of
creditors generally, or by general equitable principles.
2.03 No Conflicts. (a) Except as set forth in Section
2.03 of the Disclosure Schedule, and other than obtaining Seller
Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, the execution and delivery by Seller of this
Agreement do not, and the execution and delivery by Seller of
the Operative Agreements to which it is a party, the performance
by Seller of its obligations under this Agreement and such
Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(i) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the restated
articles of incorporation, as amended, or by-laws, as amended
(or other comparable corporate charter documents) of Seller;
(ii) require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority, except (x) for Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals, or (y)
for those requirements which become applicable to Seller as a
result of the specific regulatory status of Purchaser (or any of
its Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which
Purchaser (or any of its Affiliates) is or proposes to be
engaged;
(iii) result in a default (or give rise to any right of
termination, cancellation or acceleration or require any consent
or approval) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Seller is a party or by which
Seller, or any of the Assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration
or any consent or approval) as to which requisite waivers or
consents have been obtained; or
(iv) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to Seller
or any of its Assets and Properties.
2.04 Governmental Approvals and Filings. Except for
Seller Required Regulatory Approvals, no consent, approval or
action of, filing with or notice to any Governmental or
Regulatory Authority on the part of Seller is required in
connection with the execution, delivery and performance of this
Agreement or any of the Operative Agreements to which it is a
party or the consummation of the transactions contemplated
hereby or thereby, except those as would be required solely as a
result of the identity or the legal or regulatory status of
Purchaser or any of its Affiliates.
2.05 Reports. Since December 31, 1995, Seller has filed
or caused to be filed with the SEC, the applicable state or
local utility commissions or regulatory bodies and FERC, all
material forms, statements, reports and documents (including all
exhibits, amendments and supplements thereto) required to be
filed by it with respect to the operation of the Generating
Assets under each of the Securities Act, the Exchange Act, the
applicable state public utility Laws, the Federal Power Act, the
Holding Company Act and the respective rules and regulations
thereunder, all of which complied in all material respects with
all applicable requirements of the appropriate act and the rules
and regulations thereunder in effect on the date each such
report was filed, and there are no material misstatements or
omissions in respect of such reports.
2.06 Taxes. Seller has timely filed or will timely file
all Tax Returns required to be filed with respect to the
ownership, operation and maintenance of the Assets and has paid
or will pay all Taxes shown to be due on such returns with
respect to all tax periods ending prior to the Closing. Except
for the properties financed with the Pollution Control Bonds, no
other Assets have been financed using tax exempt financing. The
owners of Colstrip Units 1, 2, 3, and 4 have jointly made a
timely and effective affirmative election pursuant to Section
761(a) of the Code and Treasury Regulation Section 1.761-2(b) to
be excluded from all of subchapter K of the Code, and such
election has not been modified, revoked or otherwise altered,
and remains in effect. Seller has not taken and has not been
notified that any of such owners has taken any action
inconsistent with such election.
2.07 Legal Proceedings. Except as disclosed in
Section 2.07 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Seller, threatened against, relating to or
affecting Seller with respect to the ownership, operation and
maintenance of the Assets which could reasonably be expected (i)
to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the
Operative Agreements, or (ii) individually or in the aggregate
with other such Actions or Proceedings, to create a Seller
Material Adverse Effect; and
(b) there are no Orders outstanding against Seller with
respect to the ownership, operation and maintenance of the
Assets which, individually or in the aggregate with other such
Orders, would have a Seller Material Adverse Effect.
2.08 Compliance with Laws and Orders. Except as disclosed
in Section 2.08 of the Disclosure Schedule, Seller is not in
material violation of or in material default under any Law or
Order applicable to Seller or the ownership, operation and
maintenance of the Assets.
2.09 Benefit Plans; ERISA. (a) Section 2.09(a) of the
Disclosure Schedule contains a true and complete list and
description of each of the Benefit Plans and identifies each of
the Benefit Plans that is a Qualified Plan and relates to
Employees.
(b) Except as disclosed in Section 2.09(b) of the
Disclosure Schedule, Seller does not maintain nor is it
obligated to provide benefits under any life, medical or health
plan which provides benefits to retired or other terminated
Employees other than (i) benefit continuation rights under the
Consolidated Omnibus Budget Reconciliation of 1985, as amended,
and (ii) incidental benefits under any Qualified Plan.
(c) Neither Seller, any ERISA Affiliate nor any other
corporation or organization controlled by or under common
control with any of the foregoing within the meaning of
Section 4001 of ERISA has at any time contributed to, on behalf
of any Employee, any "multiemployer plan," as that term is
defined in Section 4001 of ERISA.
(d) Each of the Benefit Plans relating to the Employees
is, and its administration is and has been since inception, in
compliance with ERISA and the Code in all material respects.
(e) All contributions and other payments required to be
made by Seller to any Benefit Plan relating to the Employees
with respect to any period ending before or at or including the
Closing have been made or reserves adequate for such
contributions or other payments have been or will be set aside
therefor.
(f) (i) No transaction contemplated by this Agreement will
result in liability to the PBGC under Section 302(c)(ii), 4062,
4063, 4064 or 4069 of ERISA, or otherwise, with respect to
Purchaser or any corporation or organization controlled by or
under common control with Purchaser within the meaning of
Section 4001 of ERISA, (ii) neither Seller nor any ERISA
Affiliate has incurred any liability under Title IV of ERISA
(other than for the payment of PBGC insurance premiums in the
ordinary course), (iii) the Assets are not subject to Lien under
Title IV of ERISA or Section 412 of the Code, and (iv) there
does not exist any proceeding, fact or circumstance that might
reasonably be expected to result in Seller or any ERISA
Affiliate incurring liability under Title IV of ERISA (other
than for the payment of PBGC insurance premiums in the ordinary
course) or the imposition of a Lien on the Assets under Title IV
of ERISA or Section 412 of the Code.
(g) There are no pending or, to the Knowledge of Seller,
threatened claims by or on behalf of any Benefit Plan, by any
Person covered thereby, or otherwise, which allege violations of
Law.
(h) Complete and correct copies of the following documents
have been made available to Purchaser prior to the execution of
this Agreement:
(i) the Benefit Plans and any related trust agreements and
insurance contracts;
(ii) current summary Plan descriptions of each Benefit Plan
subject to ERISA;
(iii) the most recent Form 5500 and Schedules thereto for
each Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination letter issued by the IRS
with respect to the qualified status of each Qualified Plan;
(v) the most recent accountings with respect to any
Benefit Plan funded through a trust; and
(vi) the most recent actuarial report of the qualified
actuary of any Subject Defined Benefit Plan or any other Benefit
Plan with respect to which actuarial valuations are conducted.
2.10 Real Property. (a) Section 1.01(a)(i) of the
Disclosure Schedule contains a description of, and exhibits
indicating the location of the Real Property owned by Seller and
included in the Assets, and Section 1.01(a)(ii) of the
Disclosure Schedule contains a description of, and exhibits
indicating the location of each parcel of real property leased
by Seller (as lessor, sublessor, lessee or sublessee), or as to
which Seller holds easements or other rights, and included in
the Assets.
(b) Seller has good and marketable title to the Real
Property in which Seller holds a fee or easement interest and
valid and subsisting title to the Real Property in which Seller
holds a permit interest or other interest, in each case, free
and clear of all Liens other than Permitted Liens. Except for
the Permitted Liens and the Real Property subject to Real
Property Leases described in Section 1.01(a)(ii)(A) of the
Disclosure Schedule, Seller is in possession of the Real
Property and there are no third party licenses or tenants at the
sites of the Real Property or Real Property Leases.
(c) Seller has a valid and subsisting leasehold estate in
and the right to quiet enjoyment of the real properties subject
to the Real Property Leases described in Section 1.01(a)(ii)(B)
of the Disclosure Schedule for the full term thereof. Each Real
Property Lease is a legal, valid and binding agreement,
enforceable in accordance with its terms, of Seller and of each
other Person that is a party thereto, and except as set forth in
Section 2.10(c) of the Disclosure Schedule, there is no default
(or any condition or event which, after notice or lapse of time
or both, would constitute a default) thereunder.
(d) Seller has made available to Purchaser prior to the
execution of this Agreement true and complete copies of (i) any
current surveys in Seller's possession or any policies of title
insurance currently in force and in the possession of Seller
with respect to the Real Property, and (ii) all Real Property
Leases (including any amendments and renewal letters) and, to
the extent reasonably available, all other documents referred to
in clause (i) of this paragraph (d) with respect to the real
property subject to the Real Property Leases described in
Section 1.01(a)(ii)(B) of the Disclosure Schedule.
(e) Except as set forth in Section 12.01(h) of the
Disclosure Schedule, all Real Properties have access to a public
road and are zoned for their current uses. No fee ownership,
lease, right of way, easement, license or other right in real
property, other than the Real Property and the Real Property
Leases and the transmission, distribution, communication and
software assets described in Section 1.01(b)(ix) of the
Disclosure Schedule (which are Excluded Assets), is necessary
for the Purchaser to own, operate or maintain the Assets
substantially as currently owned, operated and maintained by
Seller. Seller has not received any written notice that any of
the improvements on any of the Real Property or Real Property
Leases, including without limitation the Easements, or any
appurtenances thereto or equipment therein or the operation or
maintenance thereof, violate any restrictive covenant or the
terms, conditions or restrictions of any easement.
2.11 Tangible Personal Property. Seller is in possession
of and has good and valid title to, or has valid leasehold
interests in or valid rights under Contract to use, all the
Tangible Personal Property used in and individually or in the
aggregate with other such property material to the ownership,
operation and maintenance of the Assets. All the Tangible
Personal Property is free and clear of all Liens, other than
Permitted Liens and Liens disclosed in Section 2.11 of the
Disclosure Schedule, and is in all material respects in good
working order and condition, ordinary wear and tear excepted.
The Assets are, and as of the Closing will be, inclusive of all
facilities and equipment in such condition as will be sufficient
for Purchaser to comply with its obligations under the
Interconnection Agreement after giving effect to the Separation
Document.
2.12 Intellectual Property Rights. Section 1.01(a)(vii)
of the Disclosure Schedule discloses all Intellectual Property
used or held for use or necessary in connection with, and
individually or in the aggregate with other such Intellectual
Property, material to the ownership, operation and maintenance
of the Assets, each of which Seller either has all right, title
and interest in or valid and binding rights under Contract to
use without limitation or royalty burdens that are not otherwise
disclosed in Section 2.12 of the Disclosure Schedule. Except as
disclosed in Section 2.12 of the Disclosure Schedule, (i) all
registrations with and applications to Governmental or
Regulatory Authorities in respect of Intellectual Property owned
by Seller and disclosed in Section 1.01(a)(vii) of the
Disclosure Schedule are valid and in full force and effect, (ii)
there are no restrictions on the direct or indirect transfer of
such Intellectual Property or any Contract, or any interest
therein, held by Seller in respect of such Intellectual
Property, (iii) Seller is not, nor has it received any notice
that it is, in default (or with the giving of notice or lapse of
time or both, would be in default) in any material respect under
any Contract to use such Intellectual Property and (iv) to the
Knowledge of Seller, such Intellectual Property is not being
infringed by any other Person. Seller has not received notice
that Seller is infringing any Intellectual Property of any other
Person in connection with the Assets or the operation of the
Generating Assets, no claim is pending or has been made to such
effect that has not been resolved and, to its Knowledge, Seller
is not infringing any Intellectual Property of any other Person.
2.13 Contracts. (a) Section 2.13(a) of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below) contains a true and complete list of each of the
following Contracts (true and complete copies of which, together
with all amendments and supplements thereto, have been made
available to Purchaser prior to the execution of this Agreement)
to which Seller is a party and relate to the operation of the
Generating Assets or by which any of the Assets is bound:
(i) all Contracts (excluding Benefit Plans) providing for
a commitment of employment or consultation services for a
specified or unspecified term to, or otherwise relating to
employment or the termination of employment of, any Employee,
the name, position and rate of compensation of each Employee
party to such a Contract and the expiration date of each such
Contract;
(ii) all Contracts with any Person containing any provision
or covenant prohibiting or limiting the ability of Seller to
engage in any activity relating to the operation of the
Generating Assets or compete with any Person in connection with
the operation of the Generating Assets or prohibiting or
limiting the ability of any Person to compete with Seller in
connection with the operation of the Generating Assets;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person in connection with the
operation of the Generating Assets;
(iv) all Contracts with distributors, dealers,
manufacturer's representatives, sales agencies or franchises
with whom Seller deals in connection with the operation of the
Generating Assets which in any case involve the payment or
potential payment, pursuant to the terms of any such Contract,
by or to Seller of more than $250,000 annually;
(v) all Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or
acquisitions of Inventory in the ordinary course of business;
and
(vi) all other Contracts (other than Benefit Plans, the
Real Property Leases and the collective bargaining agreements
delivered to Purchaser pursuant to Section 2.16) not described
above that constitute Assumed Liabilities with respect to the
operation of the Generating Assets that (A) involve the payment
or potential payment, pursuant to the terms of any such
Contract, by or to Seller of more than $250,000 annually and (B)
cannot be terminated within sixty (60) days after giving notice
of termination without resulting in any material cost or penalty
to Seller (or, after the Closing, to Purchaser).
(b) Each Contract required to be disclosed in
Section 2.13(a) of the Disclosure Schedule and each of the
Colstrip Contracts, the Fuel Contracts and the Power
Purchase/Exchange Agreements and each of the Business Contracts
which involves the payment or potential payment by or to Seller
of more than $250,000 annually is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of Seller and of each other party
thereto; and except as disclosed in Section 2.13(b) of the
Disclosure Schedule neither Seller nor, to the Knowledge of
Seller, any other party to such Contract is in violation or
breach of or default under any such Contract (or with notice or
lapse of time or both, would be in violation or breach of or
default under any such Contract).
2.14 Licenses. (a) Seller has been, and is in material
compliance with, all Licenses necessary in connection with the
ownership, operation and maintenance of the Assets as currently
conducted. Except as disclosed in Section 2.14(a) of the
Disclosure Schedule, Seller has not received any written
notification that it is in violation, nor does Seller know of
any violations, of any of such Licenses, or any Law or Order of
any Governmental or Regulatory Authority applicable to it.
(b) Section 2.14(b) of the Disclosure Schedule sets forth
all material Licenses and Environmental Permits relating to the
ownership, operation and maintenance of the Assets, copies of
which have been made available to Purchaser prior to the
execution of this Agreement. Such section of the Disclosure
Schedule designates those Licenses and Environmental Permits
which are Transferable Permits and those which are not
Transferable Permits and also designates those Licenses and
Environmental Permits which are not Transferable Permits but
which, if not held or maintained (individually or in the
aggregate) could reasonably be expected to impair the ownership,
operation and maintenance of the Assets.
2.15 Insurance. Except as set forth in Section 2.15 of
the Disclosure Schedule, all material policies of fire,
liability, worker's compensation and other forms of insurance
owned or held by Seller and insuring the Assets are in full
force and effect, all premiums with respect thereto covering all
periods up to and including the date as of which this
representation is being made have been paid (other than
retroactive premiums which may be payable with respect to
comprehensive general liability and worker's compensation
insurance policies), and no notice of cancellation or
termination has been received with respect to any such policy
which was not replaced on substantially similar terms prior to
the date of such cancellation. Except as set forth in Section
2.15 of the Disclosure Schedule, Seller has not been refused any
insurance with respect to the Assets nor has its coverage been
limited by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the
last twelve months.
2.16 Labor Relations. Seller has previously delivered to
Purchaser copies of all collective bargaining agreements to
which Seller is a party or is subject and which relate to the
ownership, operation and maintenance of the Generating Assets,
all of which agreements are listed in Section 2.16 of the
Disclosure Schedule (the "Collective Bargaining Agreements".)
Solely with respect to the operation of the Generating Assets,
except as disclosed in Section 2.16 of the Disclosure Schedule:
(a) To Seller's Knowledge, Seller is in compliance with
all applicable Laws respecting employment and employment
practices, terms and conditions of employment, collective
bargaining and wages and hours;
(b) Seller has not received written notice (or otherwise
has Knowledge) of any unfair labor practice complaint against
Seller pending before the National Labor Relations Board;
(c) There is no labor strike, slowdown or stoppage
actually pending or, to the Knowledge of Seller, threatened
against or affecting Seller;
(d) Seller has not received notice (or otherwise has
Knowledge) that any representation petition respecting the
Employees has been filed with the National Labor Relations
Board;
(e) No arbitration proceeding arising out of or under
collective bargaining agreements is pending against Seller; and
(f) Seller has not experienced any primary work stoppage
since 1963.
2.17 Environmental Matters. Except as disclosed in
Section 2.17 of the Disclosure Schedule:
(a) Seller holds, and is in substantial compliance with,
all Licenses which are required for Seller to own, operate and
maintain the Assets under applicable Environmental Laws
("Environmental Permits"), and Seller has not received any
written notice of any violation of any Environmental Law that
has not heretofore been resolved and Seller is otherwise in
substantial compliance with applicable Environmental Laws with
respect to the ownership, operation and maintenance of the
Assets.
(b) Seller has not received any written request for
information, or been notified that it is a potentially
responsible party, under any Environmental Law with respect to
any on-site location relating to the ownership, operation and
maintenance of the Assets.
(c) Seller has not entered into or agreed to any consent
decree or order, and is not subject to any outstanding judgment,
decree, or judicial order relating to compliance with any
Environmental Law or to investigation or cleanup of Hazardous
Materials under any Environmental Law relating to the ownership,
operation and maintenance of the Assets.
(d) There are no claims, actions, proceedings or
investigations pending or, to the Knowledge of Seller,
threatened against Seller before any court, Governmental or
Regulatory Authority relating to any Environmental Law with
respect to the ownership, operation and maintenance of the
Assets.
(e) To its Knowledge, Seller has made available to
Purchaser: (i) a list of all material environmental reports
and/or audits prepared by or for Seller within the past five (5)
years which discuss the environmental conditions of the Assets;
and (ii) a list of all underground storage tanks and/or surface
impoundments located on the Assets which contain or have
contained Hazardous Materials.
The representations and warranties made in this Section 2.17 are
Seller's exclusive representations and warranties relating to
environmental matters.
2.18 Absence of Condemnation Proceedings. Neither the
whole nor any portion of the Assets is subject to any pending
or, to Seller's Knowledge, threatened suit or order for
condemnation or other taking by any public authority.
2.19 Regulation as a Utility. Seller is a public utility
company within the meaning of the Holding Company Act. Except
as set forth in Section 2.19 of the Disclosure Schedule, Seller
is not subject to regulation as a public utility or public
service company (or similar designation) by the United States,
any state of the United States, any foreign country or any
municipality or any political subdivision of the foregoing.
2.20 Brokers. Except for Goldman, Sachs & Co., whose
fees, commissions and expenses are the sole responsibility of
Seller, Morgan Stanley Dean Witter, whose fees and expenses are
the sole responsibility of Puget and Merrill Lynch & Co., whose
fees, commissions and expenses are the sole responsibility of
PGE, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Seller
directly with Purchaser without the intervention of any Person
on behalf of Seller in such manner as to give rise to any valid
claim by any Person against Purchaser for a finder's fee,
brokerage commission or similar payment.
2.21 Year 2000. Seller has put into effect practices and
programs which Seller reasonably believes will enable all system
critical software, hardware and equipment (including
microprocessors) that is owned or utilized by Seller in
connection with the ownership, operation and maintenance of the
Assets to be capable, by December 31, 1999, of accounting for
all calculations using a century and date sensitive algorithm
for the year 2000 and the fact that the year 2000 is a leap
year. Section 2.21 of the Disclosure Schedule identifies
(a) each material "Year 2000" audit, report or investigation
that has been performed by or on behalf of Seller with respect
to the Assets or the ownership, operation and maintenance of the
Assets, and (b) the plans, schedules, and other actions
contemplated for the remediation of any problems identified in
such audits, reports and investigations and the testing of the
Assets in advance of December 31, 1999, for "Year 2000"
compliance, copies of which have been made available to
Purchaser.
2.22 Disclaimers Regarding Assets. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE BEING TRANSFERRED "AS
IS, WHERE IS" AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS
OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO
THE CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS
(FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE
ASSETS AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, OR ANY PART
THEREOF.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as
follows:
3.01 Corporate Existence. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the
Laws of the Commonwealth of Pennsylvania and has full corporate
power and authority to conduct its business as it is now being
conducted and to own, lease and operate its Assets and
Properties. Purchaser has full corporate power and authority to
enter into this Agreement and the Operative Agreements to which
it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated
hereby and thereby. Purchaser has heretofore made available to
Seller complete and correct copies of its articles of
incorporation and by-laws (or other comparable corporate charter
documents), as currently in effect.
3.02 Authority. The execution and delivery by Purchaser
of this Agreement and the Operative Agreements to which it is a
party, and the performance by Purchaser of its obligations
hereunder and thereunder, have been duly and validly authorized
by the Board of Directors of Purchaser, no other corporate
action on the part of Purchaser or its stockholders being
necessary. This Agreement has been duly and validly executed
and delivered by Purchaser and, subject to receipt of Seller
Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, constitutes, and upon the execution and delivery by
Purchaser of the Operative Agreements to which it is a party,
such Operative Agreements will constitute, legal, valid and
binding obligations of Purchaser enforceable against Purchaser
in accordance with their terms except as the same may be limited
by bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar Laws relating to or affecting the
rights of creditors generally, or by general equitable
principles.
3.03 No Conflicts. (a) Except as set forth in Section
3.03 of the Disclosure Schedule, and other than obtaining Seller
Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, the execution and delivery by Purchaser of this
Agreement do not, and the execution and delivery by Purchaser of
the Operative Agreements to which it is a party, the performance
by Purchaser of its obligations under this Agreement and such
Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(i) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the articles of
incorporation or by-laws (or other comparable corporate charter
documents) of Purchaser;
(ii) require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority except for Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals;
(iii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation
to which Purchaser is a party or by which any of its Assets and
Properties may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained; or
(iv) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to
Purchaser or any of its respective Assets and Properties.
3.04 Governmental Approvals and Filings. Except for
Purchaser Required Regulatory Approvals, no consent, approval or
action of, filing with or notice to any Governmental or
Regulatory Authority on the part of Purchaser is required in
connection with the execution, delivery and performance of this
Agreement or any of the Operative Agreements to which it is a
party or the consummation of the transactions contemplated
hereby or thereby.
3.05 Legal Proceedings. Except as disclosed in
Section 3.05 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which
could reasonably be expected (i) to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated
by this Agreement or any of the Operative Agreements, or (ii)
individually or in the aggregate with other such Actions or
Proceedings, to create a Purchaser Material Adverse Effect; and
(b) there are no Orders outstanding against Purchaser
which, individually or in the aggregate with other such Orders,
would have a Purchaser Material Adverse Effect.
3.06 Compliance with Laws and Orders. Except as disclosed
in Section 3.06 of the Disclosure Schedule, Purchaser is not in
violation of or in default under any Law or Order applicable to
Purchaser or its Assets and Properties.
3.07 Regulation as a Utility. Purchaser is not a public
utility company within the meaning of the Holding Company Act.
As of the Closing, Purchaser will be subject to regulation as a
public utility under the Federal Power Act. Purchaser is not
otherwise subject to regulation as a public utility or public
service company (or similar designation) by the United States,
any state of the United States, any foreign country or any
municipality or any political subdivision of the foregoing.
3.08 Brokers. Except for Chase Securities Inc., whose
fees, commissions and expenses are the sole responsibility of
Purchaser, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by
Purchaser directly with Seller without the intervention of any
Person on behalf of Purchaser in such manner as to give rise to
any valid claim by any Person against Purchaser for a finder's
fee, brokerage commission or similar payment.
3.09 Financing. Purchaser has cash and/or commitments for
equity contributions or credit facilities sufficient (and has
provided Seller with evidence thereof) to pay the Base Purchase
Price and the Combined Payment Amount and to make all other
necessary payments of fees and expenses in connection with the
transactions contemplated by this Agreement and the Operative
Agreements.
3.10 Financial Statements. Purchaser has delivered to
Seller the financial statements of Purchaser listed on Section
3.10 of the Disclosure Schedule, and such financial statements
and notes fairly present the financial condition and the results
of operations, changes in stockholders' equity, and cash flow of
Purchaser as of the respective dates of and for the periods
referred to therein, all in accordance with GAAP, subject, in
the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually
or in the aggregate, be materially adverse) and the absence of
notes and schedules.
3.11 Opportunity to Inspect Assets. Prior to its
execution of this Agreement, Purchaser has conducted an
independent investigation of the Assets. In making its decision
to execute this Agreement, and to purchase the Assets, Purchaser
has relied upon the terms and provisions of this Agreement and
the results of such independent investigation.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all
times from and after the date hereof until the Closing, and,
with respect to Sections 4.06 and 4.09, thereafter Seller will
comply with all covenants and provisions of this Article IV,
except to the extent Purchaser may otherwise consent in writing.
4.01 Regulatory and Other Approvals. Seller will
(a) (i) take all reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all reasonable
efforts, as promptly as practicable to obtain all consents,
approvals or actions of, to make all filings with and to give
all notices to Governmental or Regulatory Authorities, and
(ii) take all commercially reasonable steps necessary or
desirable to obtain all consents, approvals or actions, and give
all notices to, any other Person required of Seller, in each
case, to consummate the transactions contemplated hereby and by
the Operative Agreements, including those described in
Section 2.03 of the Disclosure Schedule and Seller Required
Regulatory Approvals, or for Purchaser to own, operate or
maintain, on and after the Closing, the Assets substantially as
such assets are currently owned, operated and maintained by
Seller, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as
such Governmental or Regulatory Authorities or other Persons may
reasonably request in connection therewith and (c) provide
reasonable cooperation (i) to Purchaser in obtaining all
Purchaser Required Regulatory Approvals and other consents,
approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other
Persons required of Purchaser to consummate the transactions
contemplated hereby and by the Operative Agreements and (ii) to
Purchaser, and Purchaser's potential lenders in connection with
Purchaser Financing for the transactions contemplated by this
Agreement. Prior to making any filings with a Governmental or
Regulatory Authority pursuant to this Section 4.01, Seller
agrees to provide copies of such filings to Purchaser. Nothing
in this Agreement shall require Seller to institute litigation
or to pay or agree to pay any sum of money or make financial
accommodations (other than the payment or incurrence of
customary expenses and filing or other fees) in order to obtain
any necessary consent, approval or authorization including,
without limitation, the Seller Required Regulatory Approvals.
Seller will provide prompt notification to Purchaser when any
such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as
applicable, and will advise Purchaser of any communications
(and, unless precluded by Law or Order, provide copies of any
such communications that are in writing) with any Governmental
or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement or any of the
Operative Agreements.
4.02 HSR Filings. In addition to and not in limitation of
Seller's covenants contained in Section 4.01, Seller will
(a) consult with Purchaser as to appropriate timing of filings
and take promptly all actions necessary to make the filings
required of Seller or its Affiliates under the HSR Act,
(b) comply at the earliest practicable date with any request for
additional information received by Seller or its Affiliates from
the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (c) cooperate
with Purchaser in connection with Purchaser's filing under the
HSR Act and in connection with resolving any investigation or
other inquiry concerning the transactions contemplated by this
Agreement commenced by either the Federal Trade Commission or
the Antitrust Division of the Department of Justice or state
attorneys general.
4.03 Investigation by Purchaser. Seller will (a) provide
Purchaser and its officers, employees, counsel, accountants,
financial advisors, potential lenders, Purchaser's and potential
lenders' consultants and other representatives (collectively,
"Representatives") with full access, upon reasonable prior
notice and during normal business hours, to the Employees and
such other officers, employees and agents of Seller who have any
responsibility for the operation of the Generating Assets, to
Seller's accountants and to the Assets (including access to the
Generating Assets sites), but only to the extent that such
access does not unreasonably interfere with the operation of the
Generating Assets and (b) make available to Purchaser and its
Representatives, upon request a copy of each report, schedule or
other document filed or received by Seller between the Bid Date
and the Closing with or from the SEC, FERC, EPA, Montana Public
Service Commission or any other relevant Governmental or
Regulatory Authority and relating to the ownership, operation
and maintenance of the Assets or the transactions contemplated
by this Agreement, and all such information and data (including
copies of Business Contracts, Transferable Permits, Fuel
Contracts, Colstrip Contracts, Power Purchase/Exchange
Agreements, Benefit Plans and other Business Books and Records)
concerning the ownership, operation and maintenance of the
Assets and the Assumed Liabilities as Purchaser or its
Representatives reasonably may request in connection with such
investigation, except to the extent that furnishing any such
report, schedule, other document, information or data would
violate any Law, Order (including any protective order or
similar confidentiality obligation), Contract or License
applicable to Seller or by which any of its Assets and
Properties is bound. In furtherance of the foregoing, Seller
agrees to cooperate with Purchaser in connection with
Purchaser's efforts to obtain Purchaser Financing, as defined in
Section 5.08. Seller's cooperation shall include the
negotiation and execution of a consent with the lenders with
respect to the Operative Agreements, which consent shall include
providing such lenders with rights to cure a Purchaser default
under the Operative Agreements; provided, however, that Seller
shall not be obligated, in connection with such cooperation or
consent, to take any action or enter into any agreement that
would have any adverse effect on Seller or any of its rights or
benefits under this Agreement or the Operative Agreements.
4.04 No Solicitations. Subject to the duties imposed by
applicable Law, Seller will not take, nor will it permit any
Affiliate of Seller (or authorize or permit any investment
banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Seller or any such
Affiliate) to take, directly or indirectly, any action to
solicit, encourage, receive, negotiate, assist or otherwise
facilitate (including by furnishing confidential information
with respect to the operation of the Generating Assets or
permitting access to the Assets and Properties and Books and
Records of Seller) any offer or inquiry from any Person
concerning the acquisition of any of the Assets other than
Purchaser or its Affiliates or any of their Representatives.
4.05 Conduct of Business. (a) From the Bid Date to the
Closing, Seller has operated and maintained and will operate and
maintain the Generating Assets only in the ordinary course
consistent with Good Utility Practice. Without limiting the
generality of the foregoing, Seller will use commercially
reasonable efforts, to (i) maintain good relations with and keep
available (subject to dismissals and retirements in the ordinary
course of business) the services of key Employees, (ii) maintain
the Assets in good working order and condition, ordinary wear
and tear excepted, (iii) maintain the good will of lessors,
customers, suppliers, lenders and other Persons with whom Seller
otherwise has significant business relationships in connection
with the operation of the Generating Assets, and (iv) materially
comply with all Laws and Orders, including Environmental Laws
applicable to the ownership, operation and maintenance of the
Generating Assets.
(b) Without limiting the generality of the foregoing,
except with the prior written consent of Purchaser, Seller will,
with respect to the ownership, operation and maintenance of the
Assets keep in force at not less than their present limits all
policies of insurance covering the Assets to the extent
reasonably practicable in light of the prevailing market
conditions in the insurance industry and promptly notify
Purchaser of the cancellation of any such policy or any material
modification thereto.
4.06 Employee Matters. Except as may be required by Law
and except as disclosed in Section 4.06 of the Disclosure
Schedule, Seller will refrain from directly or indirectly:
(a) making any representation or promise, oral or written,
to any Employee concerning any Benefit Plan, except for
statements as to the rights or accrued benefits of any Employee
under the terms of any Benefit Plan or statements describing the
employee related terms in this Agreement;
(b) making any increase in the salary, wages or other
compensation or benefits of any Employee, other than in the
ordinary course of business on such Employee's normal annual
review date in an amount, if a Non-Union Employee, not exceeding
5% of such Employee's salary, wages and other compensation, or
declare, pay or set aside for payment any amounts in the nature
of bonuses to any of its officers or Employees;
(c) adopting, entering into or becoming bound by any
Benefit Plan, employment-related Contract or collective
bargaining agreement with respect to the operation of the
Generating Assets or any of the Employees, or amending,
modifying or terminating (partially or completely) any such
Benefit Plan, employment-related Contract or collective
bargaining agreement, except to the extent required by
applicable Law and, in the event compliance with legal
requirements presents options, only to the extent that the
option which Seller reasonably believes to be the least costly
is chosen;
(d) establishing or modifying any (i) targets, goals,
pools or similar provisions in respect of any fiscal year under
any Benefit Plan or any employment-related Contract or other
compensation arrangement with or for Employees or (ii) salary
ranges, increase guidelines or similar provisions in respect of
any Benefit Plan or any employment-related Contract or other
compensation arrangement with or for Employees;
(e) soliciting, recruiting, making any offer of employment
or otherwise employing any of the Transferring Employees or
taking any action which could reasonably be expected to
encourage or persuade the Transferring Employees not to accept
employment with Purchaser; or
(f) agreeing, whether in writing or otherwise, to take any
action described in this Section 4.06.
Seller will administer each Benefit Plan, or cause the same
to be so administered, in all material respects in accordance
with the applicable provisions of the Code, ERISA and all other
applicable Laws and consistent with past practice. Seller will
promptly notify Purchaser in writing of each receipt by Seller
(and furnish Purchaser with copies) of any notice of
investigation or administrative proceeding by the IRS,
Department of Labor, PBGC or other Person involving any Benefit
Plan. Seller will use its reasonable best efforts to assist
Purchaser in the hiring and retention of the Transferring
Employees.
Seller agrees to timely perform and discharge all
requirements under the WARN Act, if any, and under applicable
state and local laws and regulations for the notification of its
Employees arising from the sale of the Assets to Purchaser.
Seller, and not Purchaser, shall be responsible for and shall
retain any and all liability for all compensation, benefits, and
perquisites of any kind due any Transferring Employee on account
of employment by Seller before the Closing, or the termination
of employment by Seller, including, but not limited to,
continuation of health care coverage pursuant to the health
continuation coverage provisions of COBRA and compliance with
HIPAA.
4.07 Certain Restrictions. Except as set forth in
Section 4.07 of the Disclosure Schedule, Seller will refrain
from:
(a) creating any Lien (other than a Permitted Lien) on the
Assets except in the ordinary course of Seller's business or as
required under Seller's instruments of Indebtedness and, in each
case, as will be removed on or prior to the Closing;
(b) selling, leasing (as lessor), transferring or
otherwise disposing of, any of the Assets, other than assets
used, consumed or replaced in the ordinary course of business
consistent with Good Utility Practice;
(c) entering into, amending or modifying in any material
way, terminating (partially or completely), granting any waiver
of any material term under or giving any material consent with
respect to any Business Contract, Transferable Permit, Fuel
Contract, Colstrip Contract or Power Purchase/Exchange Agreement
or other contract or agreement comprising a part of the Assets
or that relates to the Assets, the Assumed Liabilities or is
material to the operation of the Generating Assets;
(d) other than in the ordinary course of business,
incurring, purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, or waiving any right
under, any Liability of or owing to Seller in connection with
the Assets, the Assumed Liabilities or the operation of the
Generating Assets in an aggregate principal amount exceeding
$500,000;
(e) engaging with any Person in any Business Combination,
unless such Person agrees in a written instrument to adopt and
comply with the terms and conditions of this Agreement as though
such Person was an original signatory hereto;
(f) engaging in any transaction individually or in the
aggregate with other such transactions material to the operation
of the Generating Assets with any officer, director, Affiliate
or Associate of Seller, or any Associate of any such officer,
director or Affiliate, that would be an Assumed Liability and
that would extend beyond the Closing other than in the ordinary
course of business on terms no less favorable to Seller than
could be obtained on an arm's-length basis with an unaffiliated
third party;
(g) making any material change in the level of fuel
inventory and stores inventory customarily maintained by Seller
with respect to the Generating Assets, other than consistent
with Good Utility Practice; or
(h) entering into any commitment for the purchase or sale
of fuel having a term greater than six months and not terminable
on or before the Closing either (i) automatically, or (ii) by
option of Seller (or, after the Closing, by Purchaser) in its
sole discretion, if the aggregate payment under such commitment
and all other outstanding commitments not previously approved by
Purchaser would be expected to exceed $500,000;
(i) making any tax election or entering into or amending
any real or personal property Tax agreement, treaty or
settlement that would have a negative effect on the Tax status
of Purchaser with regard to the Assets;
(j) entering into any Contract to do or engage in any of
the foregoing.
The foregoing shall not preclude Seller from making (i)
Maintenance Expenditures and Capital Expenditures, and (ii) at
Seller's expense, such other maintenance and capital
expenditures as Seller deems necessary.
4.08 Security Deposits. Seller will transfer to Purchaser
at the Closing all of Seller's right, title and interest in and
to the Tenant Security Deposits and the Landlord Security
Deposits and any other deposits, prepayments or progress
payments made or held by Seller in connection with the Assets or
material to the ownership, operation and maintenance of the
Generating Assets.
4.09 Delivery of Books and Records, etc.; Removal of
Property. (a) At the Closing, Seller shall deliver or make
available to Purchaser at the locations at which the Generating
Assets are operated all of the Business Books and Records and
such other Assets as are in Seller's possession at other
locations, and if at any time after the Closing, Seller
discovers in its possession or under its control any other
Business Books and Records or other Assets, it will forthwith
deliver such Business Books and Records or other Assets to
Purchaser.
(b) Except as set forth in Section 4.09 of the Disclosure
Schedule, within a reasonable time after the Closing, Seller
shall take all commercially reasonable steps to remove all
Assets and Properties not being sold to Purchaser hereunder from
the Real Property except as contemplated by the Separation
Document. Such removal shall be at the sole cost and risk of
Seller, including risk of loss and damage to such Assets and
Properties and to the Assets conveyed to Purchaser hereby.
4.10 Fulfillment of Conditions. Seller will execute and
deliver at the Closing each Operative Agreement that Seller is
required hereby to execute and deliver as a condition to the
Closing, will take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy
each other condition to the obligations of Purchaser contained
in this Agreement and will not take or fail to take any action
that could reasonably be expected to result in the
nonfulfillment of any such condition.
4.11 Observation, Inspection and Participation. Between
the date of this Agreement and the Closing, Purchaser shall be
entitled to have a reasonable number of representatives, all of
whom shall be employees of Purchaser or its Affiliates unless
otherwise approved by Seller in each instance, which approval
shall not be unreasonably withheld ("Site Representatives") at
any of the Assets, on a full or part time basis (whether on site
or off-site), as determined by Purchaser; provided, however,
that (a) the presence and activities of the Site Representatives
shall be conducted in a manner as not to interfere unreasonably
with the ownership, operation and maintenance of the Assets, or
with the activities of Seller not related to the Assets and (b)
the Site Representatives shall not have access to any
information that is unavailable pursuant to Section 4.03.
Reasonable office space and facilities will be made available by
Seller to such Site Representatives. Each Site Representative
shall have the right to review budgets and expenditures, audit
records (except for personnel and medical records unless
required by law), inspect equipment, advise on repairs required
for equipment, review permits, review the progress of outages,
review maintenance and operating practices and otherwise observe
all activities at the above mentioned facilities in each case to
the extent related to the operation of the Assets. Between the
date hereof and the Closing, Seller shall exercise its
reasonable efforts to invite Site Representatives to attend
internal meetings in which Seller participates and which relate
specifically to the physical operation or maintenance of the
Assets; provided, however, that such obligation shall not extend
to (i) meetings of the boards of directors, or any committees
thereof, of Seller or any of its Affiliates, (ii) meetings with
counsel, or (iii) meetings the subject matter of which, in
Seller's reasonable judgment, if disclosed to Purchaser, would
likely be detrimental to Seller (including, without limitation,
information relating to Seller's proposed business activities
following the Closing or to contractual or other matters as to
which the interests of Seller and Purchaser may diverge). Site
Representatives shall also be entitled to consult with Seller
and make recommendations as to all activities relating to the
management, operation, maintenance, construction, renewal,
addition, replacement, modification and disposal of the Assets,
including, without limitation, applications for authorizations,
permits and licenses, and fuel procurement and transportation.
4.12 Notice of Breach. Seller shall promptly give notice
to Purchaser upon becoming aware of the occurrence of any event
which would cause or constitute a breach of any of the
representations, warranties or covenants of Seller contained in
this Agreement.
4.13 Bridge Financing Fees. In the event that Purchaser
obtains a written commitment for bridge financing in connection
with the transactions contemplated hereby, Seller will pay
55.88% of 50% of any financing fees payable by Purchaser in
connection with such bridge financing at the same time Purchaser
pays 50% of such financing fees; provided, however, Seller's
obligation under this Section 4.13 shall not exceed $4,322,318
in the aggregate.
4.14 Special Maintenance and Capital Expenditures. Within
thirty (30) days after the date hereof, Seller and Purchaser
shall mutually agree on a Schedule setting forth a month by
month special maintenance and capital expenditure budget
relating to the Assets for calendar years 1999 and 2000 (the
"Budget".) The Budget will be divided into two parts; Category
A items and Category B items. With respect to items listed
under Category A, Seller agrees to use commercially reasonable
efforts to conduct and complete such special maintenance and
capital expenditures at the times set forth in the Budget. With
respect to items listed under Category B, Seller shall conduct
and complete such special maintenance and capital expenditures
at such times as Seller shall determine in its reasonable
discretion after consultation with Purchasers. With respect to
emergency special maintenance and capital expenditure items not
identified in the Budget that arise after the date hereof and
prior to the Closing, Seller will consult with Purchaser and
will conduct and complete any such emergency special maintenance
and capital expenditure items in accordance with Good Utility
Practice ("Emergency Expenditures").
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all
times from and after the date hereof until the Closing and, in
the case of Sections 5.03 and 5.07, thereafter, Purchaser will
comply with all covenants and provisions of this Article V,
except to the extent Seller may otherwise consent in writing.
5.01 Regulatory and Other Approvals. Purchaser will (a)
take all reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all reasonable efforts, at
the earliest commercially practicable dates to obtain all
consents, approvals or actions of, to make all filings with and
to give all notices to Governmental or Regulatory Authorities or
any other Person required of Purchaser to consummate the
transactions contemplated hereby and by the Operative
Agreements, including those described in Section 3.03 of the
Disclosure Schedule and Purchaser Required Regulatory Approvals
or for Purchaser to own, operate or maintain, on and after the
Closing , the Assets substantially as such assets are currently
owned, operated and maintained by Seller, (b) provide such other
information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or
Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) provide reasonable cooperation
to Seller in obtaining Seller Required Regulatory Approvals and
all other consents, approvals or actions of, making all filings
with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of Seller to consummate
the transactions contemplated hereby and by the Operative
Agreements. Prior to making any filings with a Governmental or
Regulatory Authority pursuant to Section 5.01, Purchaser agrees
to provide copies of such filings to Seller. Nothing in this
Agreement shall require Purchaser to institute litigation or to
pay or agree to pay any sum of money or make financial
accommodations (other than the payment or incurrence of
customary expenses and filing or other fees) in order to obtain
any necessary consent, approval or authorization including,
without limitation, the Purchaser Required Regulatory Approvals.
Purchaser will provide prompt notification to Seller when any
such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as
applicable, and will advise Seller of any communications (and,
unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or
Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement or any of the
Operative Agreements.
5.02 HSR Filings. In addition to and without limiting
Purchaser's covenants contained in Section 5.01, Purchaser will
(a) consult with Seller as to the appropriate timing of filings
and take promptly all actions necessary to make the filings
required of Purchaser or its Affiliates under the HSR Act,
(b) comply at the earliest practicable date with any request for
additional information received by Purchaser or its Affiliates
from the Federal Trade Commission or the Antitrust Division of
the Department of Justice pursuant to the HSR Act and
(c) cooperate with Seller in connection with Seller's filing
under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of
Justice or state attorneys general.
5.03 Employees. (a) Section 5.03 of the Disclosure
Schedule sets forth a list of all Employees as of September 30,
1998. Purchaser shall offer employment, effective as of the
Closing, to all full-time and part-time Non-Union Employees,
including Non-Union Employees who are on disability or worker's
compensation leave or on an authorized leave of absence as of
the Closing. All such offers of employment shall be made in
accordance with applicable Law, and such employment with
Purchaser shall be subject to the following requirements for the
entirety of the period commencing on the Closing and ending no
less than 18 months thereafter or such other period as set forth
in this Section 5.03:
(i) Terms of Employment. Purchaser shall offer each Non-
Union Employee a position with Purchaser similar to his or her
position immediately prior to the Closing and agrees to employ
each Non-Union Employee who accepts such employment for 18
months after the Closing (the "Employment Term") at a location
in Montana and at a base pay at least equal to his or her base
pay on the Closing; provided, however, that nothing herein shall
prevent Purchaser from terminating any Transferring Non-Union
Employee "for cause" as defined by Montana Law (a reduction in
force, however, will not be considered "for cause".) Purchaser
shall afford all Transferring Non-Union Employees ten paid
holidays per year and vacation and personal time under a paid
time off program substantially similar in the aggregate to the
paid time off program of Seller; provided, however, for the
calendar year during which the Closing occurs, Purchaser shall
assume all accrued vacation and personal time payable to
Transferring Non-Union Employees as of the Closing. Purchaser
shall make incentive compensation awards for calendar year
during which the Closing occurs to eligible Transferring Non-
Union Employees substantially in accordance with Seller's
incentive compensation plan in effect on the Closing (except
that Purchaser shall not be obligated to pay any incentive
compensation based on the consummation of the transactions
contemplated hereby).
(ii) Severance. For the period commencing on the
expiration of the Employment Term and ending on the date which
is 6 months thereafter, Purchaser shall pay each Transferring
Non-Union Employee who is terminated from employment during such
period, other than "for cause," a severance benefit in an amount
equal to $6,000 plus the greater of two weeks of base pay times
such Employee's "year of service" up to a maximum of 52 weeks of
base pay, or 12 weeks of base pay. Purchaser shall cause any
subsequent purchaser(s) of the Assets to provide such severance
benefits during such six-month period. For purposes of the
foregoing, a "for cause" termination shall be as otherwise
defined by Montana Law, and "years of service" shall mean the
Employee's aggregate whole years of service for Seller,
Purchaser and any subsequent purchaser(s) of the Assets.
(iii) Welfare Benefits. Purchaser shall provide all
Transferring Non-Union Employees (other than those terminated
"for cause" as defined above) with coverage under welfare
benefit plans, programs and arrangements ("Purchaser's Welfare
Plans") maintained or sponsored by Purchaser that provide
medical, dental, vision, basic life insurance (including
dependent life options), short term disability, long term
disability, relocation benefits and worker compensation
benefits that are substantially similar in the aggregate to
those available under welfare benefit plans maintained by Seller
immediately prior to the Closing. Purchaser shall cause all
pre-existing condition exclusions and waiting periods, if any,
under Purchaser's Welfare Plans to be waived for Transferring
Non-Union Employees, and shall provide each such Employee with
credit thereunder for deductible, out-of-pocket, co-payment and
similar expenses incurred under similar plans of Seller.
Purchaser shall assume under Purchaser's Welfare Plans all
liabilities for continuation coverage for Transferring Non-Union
Employees and their eligible dependents pursuant to Section
4980B of the Code and Section 601 through 609 of ERISA and any
similar state coverage, for the required duration of such
coverage, provided that such Employee's qualifying event occurs
after the Closing.
(iv) 401(k) Plan. Purchaser shall establish and maintain
for Transferring Non-Union Employees a plan pursuant to Section
401(k) of the Code ("Purchaser's 401(k) Plan") which shall
provide for the same or substantially similar elective deferral,
after-tax, and employer matching contribution levels, and loan
entitlements, that are available under the Montana Power Company
Retirement Savings Plan (401(k)) ("MPC 401(k) Plan"), and which
shall further provide for the acceptance of rollover
distributions from the MPC 401(k) Plan and/or conduit individual
retirement accounts established by any such employees.
Purchaser shall take all actions required to obtain, and shall
obtain, a favorable determination letter from the IRS on the tax
qualified status of Purchaser's 401(k) Plan.
(v) Retirement Plan. Purchaser shall establish and
maintain for Transferring Non-Union Employees a retirement plan
pursuant to Section 401(a) of the Code ("Purchaser's Retirement
Plan") which shall contain either a defined benefit or cash
balance formula that provides a retirement benefit that is of
substantially similar in the aggregate to the retirement benefit
provided under Seller's Cash Balance Retirement Plan ("Seller's
Retirement Plan"). As soon as practicable after the Closing,
but no later than sixty (60) days after the Closing, Seller
shall cause to be transferred from Seller's Retirement Plan, and
Purchaser shall cause Purchaser's Retirement Plan to accept such
transfer, assets from Seller's Retirement Plan in respect of
the accrued benefit of each Transferring Non-Union Employee who
participates in Seller's Retirement Plan and Purchaser shall
assume Liability for such accrued benefit as of the Closing.
The assets transferred to the Purchaser's Retirement Plan shall
equal the aggregate present value of the accrued benefits of
Transferring Non-Union Employees under Seller's Retirement Plan
on a termination basis as of the Closing (within the meaning of
Treasury Regulation Section 1.414(l)-1(b)(5)), as certified by
Seller's actuary. After such transfer, Purchaser's Retirement
Plan shall provide a benefit for each Transferring Non-Union
Employee that is substantially similar in the aggregate to such
Employee's accrued benefit under Seller's Retirement Plan
immediately prior to the Closing. Purchaser shall take all
actions required to obtain, and shall obtain, a favorable
determination letter from the IRS on the tax qualified status of
Purchaser's Retirement Plan.
(vi) Service. Any and all plans of Purchaser described in
paragraphs (i) through (v) above that determine a participant's
eligibility to participate, waiting period for benefits, vesting
or benefit accruals based on his or her length of service with
Purchaser shall credit each Transferring Non-Union Employee's
service with Seller and its Affiliates as service with Purchaser
for such purposes.
(b) Purchaser shall, effective on the Closing, assume and
fulfill all of Seller's obligations under the Collective
Bargaining Agreements to the extent related to Transferring
Union Employees, including, without limitation the Letter of
Agreement between Seller and IBEW Local 44 dated July 9, 1998
and the drafts (substantially in the form provided heretofore)
of the Letter of Agreements (which have been ratified by the
unions) between Seller and IBEW Local 1638 and Teamsters Union
Local No. 190 dated July 2, 1998 and July 9, 1998 respectively
(copies of which have been made available to Purchaser prior to
the date hereof). Purchaser shall offer employment, effective
as of the Closing, to all Union Employees, including Union
Employees who are on disability or worker's compensation leave
or on an authorized leave of absence as of the Closing. All
such offers of employment shall be made in accordance with
applicable Law and all relevant Collective Bargaining
Agreements. Without limiting the generality of the foregoing,
the Purchaser's 401(k) Plan shall provide for the acceptance of
rollover distributions from or in respect of any Transferring
Union Employees from the MPC 401(k) Plan and/or any conduit
individual retirement accounts established by any such
employees. Purchaser shall establish and maintain for
Transferring Union Employees a retirement plan pursuant to
Section 401(a) of the Code ("Purchaser's Retirement Plan") which
shall contain either a defined benefit or cash balance formula
that provides a retirement benefit that is of no less value in
the aggregate to the retirement benefit provided under the
Seller's Defined Benefit Retirement Plan ("Seller's DB Plan").
To the extent permitted by the Collective Bargaining Agreements,
as soon as practicable after the Closing, but no later than
sixty (60) days after the Closing, Seller shall cause to be
transferred from the Seller's DB Plan, and Purchaser shall cause
the Purchaser's Retirement Plan to accept such transfer, assets
from the Seller's DB Plan in respect of the accrued benefit of
each Transferring Union Employee who participates in the
Seller's DB Plan and the Purchaser shall assume liability for
such accrued benefits as of the Closing. The assets transferred
to the Purchaser's Retirement Plan shall equal the aggregate
present value of the accrued benefits of Transferring Union
Employees under the Seller's Retirement Plan on a termination
basis (within the meaning of Treasury Regulation Section
1.414(l)-1(b)(5)), as certified by Seller's actuary. After such
transfer, but subject to the terms of any applicable collective
bargaining agreement, Purchaser's Retirement Plan shall provide
a benefit for each Transferring Union Employee that is of no
less value in the aggregate to such Employee's accrued benefit
under the Seller's Retirement Plan immediately prior to the
Closing. Any and all plans of Purchaser that determine a
participant's eligibility to participate, waiting period for
benefits, vesting or benefit accruals based on his or her length
of service with Purchaser shall credit each Transferring Union
Employee's service with Seller and its Affiliates as service
with Purchaser for such purposes.
(c) Purchaser shall be responsible and shall assume any
and all Liabilities for all compensation, benefits, and
perquisites of any kind due any Transferring Employee on account
of employment by Purchaser after the Closing, or the termination
of employment by Purchaser, including, but not limited to,
continuation of health care coverage pursuant to COBRA and
compliance with HIPAA.
(d) Seller will remain responsible (i) for all short-term
disability, long-term disability and workers compensation
benefits payable to Transferring Non-Union Employees who, as of
the close of business on the day immediately preceding the
Closing, were determined to be disabled in accordance with the
applicable provisions of the Seller's short-term or long-term
disability benefits plans or programs and (ii) for all workers
compensation claims relating to a pre-closing injury (provided
such workers compensation claims are made on or before the date
that is one year after the Closing).
5.04 PPUC Approval for Holding Company. From the date
hereof through the Closing, Purchaser agrees not to enter into
any Contract or take any action which, when taken together with
the consummation of the transactions contemplated by this
Agreement, would violate any condition imposed by the PPUC that
limits PP&L Resources, Inc.'s investment in diversified
businesses without prior PPUC approval. Purchaser further
agrees that, in seeking the approval described in clause (v) of
the definition of Purchaser Required Regulatory Approvals,
Purchaser shall use commercially reasonable efforts to seek any
reasonable PPUC approval that would allow Purchaser to
consummate the transactions contemplated hereby and to own,
operate and maintain the Assets in substantially the same manner
as currently owned, operated and maintained by Seller.
5.05 Notice of Breach. Purchaser shall promptly give
notice to Seller upon becoming aware of the occurrence of any
event which would cause or constitute a breach of any of the
representations, warranties or covenants of Purchaser contained
in this Agreement.
5.06 Fulfillment of Conditions. Purchaser will execute
and deliver at the Closing each Operative Agreement that
Purchaser is hereby required to execute and deliver as a
condition to the Closing, will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good
faith to satisfy each other condition to the obligations of
Seller contained in this Agreement and will not take or fail to
take any action that could reasonably be expected to result in
the nonfulfillment of any such condition.
5.07 Tax-Exempt Bond Financed Pollution Control
Facilities. (a) Following the Closing until the maturity or
redemption date of the Pollution Control Bonds
(i) Except as otherwise permitted in (ii), Purchaser will
not materially change or permit to be changed the character or
nature of the use of those facilities listed in Exhibit C hereto
(the "Pollution Control Facilities") from the manner Seller has
used said facilities prior to the sale of the Assets, unless
such changed use would constitute a use or purpose of said
facilities for which tax-exempt bonds could be issued pursuant
to section 1313 of the Tax Reform Act of 1986 (P.L. 99-514 or,
hereinafter, the "1986 Tax Act,") to refund bonds described in
section 1312(a) of the 1986 Tax Act which, for purposes hereof,
are assumed to have been issued to finance facilities of the
same character and use or purpose as said facilities;
(ii) Purchaser will not sell or otherwise transfer any
portion of such Pollution Control Facilities unless (A) the
transferee covenants to satisfy the conditions of section
5.07(a)(i) with respect to its ownership and use of said
facilities following the date of any such purchase or (B) the
transfer relates to personal property and is exclusively for
cash the proceeds of which will be expended within six months of
the date of receipt on facilities for which tax-exempt bonds
could be issued pursuant to section 1313 of the 1986 Tax Act, to
refund bonds described in section 1312(a) of said act which, for
purposes hereof, are assumed to have been issued to finance
facilities of the same character and use or purpose as said
facilities; and
(iii) Purchaser will cooperate with Seller and use
commercially reasonable efforts to permit Seller to have access
to Colstrip Units 1,2,3 and 4, as the case may be, at reasonable
times to examine the Pollution Control Facilities.
Nothing herein shall be construed to prevent Purchaser from
ceasing to use any facilities or equipment that, in Purchaser's
reasonable judgment, have become obsolescent or otherwise
uneconomical to continue to use. Seller will notify Purchaser
when the Pollution Control Bonds have matured or been redeemed.
5.08 Purchaser Financing. Purchaser will proceed in good
faith and use all reasonable efforts to obtain financing on
commercially reasonable terms in amounts and structure
reasonably consistent with Purchaser's financing plan as set
forth in Purchaser's written proposal to Seller dated September
25, 1998 (the "Purchaser Financing".)
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the
Assets and to assume and pay, perform and discharge the Assumed
Liabilities are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Purchaser in its sole
discretion):
6.01 Representations and Warranties. The representations
and warranties made by Seller in this Agreement and the
Operative Agreements, taken as a whole, shall be true and
correct, in all material respects, on and as of the Closing as
though repeated on and as of the Closing or, in the case of
representations and warranties made as of a specified date
earlier than the Closing, on and as of such earlier date.
6.02 Performance. Seller shall have performed and
complied with, in all material respects, the agreements,
covenants and obligations required by this Agreement to be so
performed or complied with by Seller at or before the Closing.
6.03 Officers' Certificates. Seller shall have delivered
to Purchaser a certificate, dated as of the Closing and executed
by the Chairman of the Board, the President or any Vice
President of Seller, substantially in the form and to the effect
of Exhibit D hereto, and a certificate, dated as of the Closing
and executed by the Secretary or any Assistant Secretary of
Seller, substantially in the form and to the effect of Exhibit E
hereto.
6.04 Orders and Laws. There shall not be in effect on the
date of the Closing any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the
Operative Agreements.
6.05 Regulatory Consents and Approvals. Subject to
Section 1.10, all Seller Required Regulatory Approvals and
Purchaser Required Regulatory Approvals shall have been duly
obtained, made or given and shall be in full force and effect
and shall be a Final Order reasonably satisfactory to Purchaser,
and all terminations or expirations of waiting periods imposed
by any Governmental or Regulatory Authority necessary for the
consummation of the transactions contemplated by this Agreement
and the Operative Agreements, including under the HSR Act, shall
have occurred.
6.06 Third Party Consents. The consents (or in lieu
thereof waivers) listed in Section 6.06 of the Disclosure
Schedule shall have been obtained and shall be in full force and
effect and shall be reasonably satisfactory to Purchaser.
6.07 Colstrip Rights of First Refusal. Seller shall have
either received the consents required under each of the Colstrip
Rights of First Refusal or the exercise periods of such Colstrip
Rights of First Refusal shall have expired.
6.08 No Seller Material Adverse Effect. There shall not
have occurred and be continuing a Seller Material Adverse
Effect.
6.09 Proceedings. All corporate and other proceedings to
be taken by Seller in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to Purchaser and
its counsel, and Purchaser and its counsel shall have received
all such certified or other copies of such documents as it or
they may reasonably request.
6.10 Deliveries. Seller shall have executed and delivered
to Purchaser (i) the General Assignment, (ii) the other
Assignment Instruments, (iii) subject to Section 1.10, the
Colstrip Unit Number 3 Wholesale Transition Service Agreement,
dated as of the Closing, substantially in the form and to the
effect of Exhibit F-1 hereto (the "Colstrip Transition Service
Agreement"), (iv) subject to Section 1.10, the Non-Colstrip
Unit Number 3 Wholesale Transition Service Agreement, dated as
of the Closing, substantially in the form and to the effect of
Exhibit F-2 hereto (the "Non-Colstrip Transition Service
Agreement"), (v) the Interconnection Agreement, dated as of the
Closing, substantially in the form and to the effect of Exhibit
G hereto, including the Separation Document (the
"Interconnection Agreement") and (vi) if the Colstrip 4
Transmission Assets are not conveyed to Purchaser at the
Closing, Seller and Purchaser shall have entered into the
Colstrip 4 Transmission Service Agreement.
6.11 Colstrip Operations Arrangements. There shall be in
effect (a) arrangements reasonably satisfactory to Purchaser
pursuant to which Purchaser shall be the operator of the entire
Colstrip generating facility for a period of at least ten (10)
years after the Closing, subject only to removal for cause or
(b) such other arrangements with respect to the operation of the
Colstrip generating facility as are reasonably acceptable to
Purchaser.
6.12 Purchaser Financing. Purchaser's obligation to
purchase the Colstrip 4 Transmission Assets at the Closing is
subject to the receipt by Purchaser, on or prior to the Closing,
of the Purchaser Financing or other financing reasonably
satisfactory to Purchaser.
6.13 Opinion of Counsel. Purchaser shall have received
the opinions of (i) Milbank, Tweed, Hadley & McCloy, counsel to
Seller, dated as of the Closing, substantially in the form and
to the effect of Exhibit H-1 hereto,(ii) General Counsel of
Seller, dated as of the Closing, substantially to the effect of
Exhibit H-2 hereto, and (iii) outside Montana counsel to Seller,
dated as of the Closing, substantially to the effect of Exhibit
H-3 hereto.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Assets are
subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in
whole or in part by Seller in its sole discretion):
7.01 Representations and Warranties. The representations
and warranties made by Purchaser in this Agreement and the
Operative Agreements, taken as a whole, shall be true and
correct, in all material respects on and as of the Closing as
though repeated on and as of the Closing.
7.02 Performance. Purchaser shall have performed and
complied with, in all material respects, the agreements,
covenants and obligations required by this Agreement to be so
performed or complied with by Purchaser at or before the
Closing.
7.03 Officers' Certificates. Purchaser shall have
delivered to Seller a certificate, dated as of the Closing and
executed by the Chairman of the Board, the President or any
Executive or Senior Vice President of Purchaser, substantially
in the form and to the effect of Exhibit I hereto, and a
certificate, dated as of the Closing and executed by the
Secretary or any Assistant Secretary of Purchaser, substantially
in the form and to the effect of Exhibit J hereto.
7.04 Orders and Laws. There shall not be in effect on the
date of the Closing any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the
Operative Agreements.
7.05 Regulatory Consents and Approvals. Subject to
Section 1.10, all Seller Required Regulatory Approvals and
Purchaser Required Regulatory Approvals shall have been duly
obtained, made or given and shall be in full force and effect
and shall be a Final Order, and all terminations or expirations
of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements,
including under the HSR Act, shall have occurred.
7.06 Third Party Consents. The consents (or in lieu
thereof waivers) listed in Section 7.06 of the Disclosure
Schedule shall have been obtained and shall be in full force and
effect and shall be reasonably satisfactory to Seller.
7.07 Collective Bargaining Agreements. Purchaser shall
have assumed, as set forth in Section 5.03, all of the
applicable obligations under the Collective Bargaining
Agreements as they relate to the Union Employees who are
Transferring Employees.
7.08 No Purchaser Material Adverse Effect. There shall
not have occurred and be a continuing Purchaser Material Adverse
Effect.
7.09 Proceedings. All corporate and other proceedings to
be taken by Purchaser in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to Seller and its
counsel and Seller and its counsel shall have received all such
certified or other copies of such documents as it or they may
reasonably request.
7.10 Colstrip Rights of First Refusal. Seller shall have
either received the consents required under each of the Colstrip
Rights of First Refusal or the exercise periods of such Colstrip
Rights of First Refusal shall have expired.
7.11 Opinion of Counsel. Sellers shall have received an
opinion of LeBoeuf, Lamb, Greene & MacRae L.L.P., counsel to
Purchaser, dated as of the Closing, substantially to the effect
of Exhibit K hereto. Such counsel's opinion need not cover any
matter contained in the opinions required by Exhibit K to the
extent such matter (i) involves the Laws of Montana, Oregon,
Washington, Pennsylvania or any other jurisdiction other than
the federal Laws of the United States or the Laws of the State
of New York or (ii) involves or is related to the Colstrip
Contracts, the Colstrip 4 Generation Assets, the Colstrip 4
Transmission Assets, the Colstrip 1, 2 and 3 Transmission Assets
and any other Colstip-related matter, and, in lieu thereof,
Seller shall have received the opinions of other counsel
covering such matters (admitted in other jurisdictions to the
extent covered in clause (i)).
7.12 Deliveries. Purchaser shall have executed and
delivered to Seller (i) Assumption Agreement, (ii) the other
Assumption Instruments, (iii) subject to Section 1.10, the
Colstrip Transition Service Agreement, (iv) the Non-Colstrip
Transition Service Agreement, (v) subject to Section 1.10, the
Interconnection Agreement, and (vi) the Confirmation of the
Reciprocal Sharing Agreement, dated as of the Closing,
substantially in the form and to effect of Exhibit L hereto.
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes. All Transfer Taxes incurred in
connection with this Agreement and the transactions contemplated
hereby shall be borne by Purchaser, and Purchaser, at its own
expense, will file, to the extent required by applicable Law,
all necessary Tax Returns and other documentation with respect
to all such Transfer Taxes, and, if required by applicable Law,
Seller will join in the execution of any such Tax Returns or
other documentation and will take such positions therein as are
reasonably requested by Purchaser. Nothing in the foregoing
sentence shall require Seller to take a position adverse to its
own posture with regard to Taxes. Prior to the Closing,
Purchaser will provide to Seller, to the extent possible, an
appropriate certificate from each applicable taxing authority to
the effect that no Transfer Tax will be incurred in connection
with this Agreement and the transactions contemplated hereby.
8.02 Returns with respect to Prorated Taxes. With respect
to those Taxes to be prorated in accordance with Section 1.06 of
this Agreement, Purchaser shall prepare and timely file all Tax
Returns required to be filed after the Closing with respect the
Assets and shall duly and timely pay all such Taxes shown to be
due on such Tax Returns. Purchaser's preparation of any such
Tax Return shall be subject to Seller's approval, which approval
shall not be unreasonably withheld. Purchaser shall make such
Tax Returns available for Seller's review and approval no later
than twenty (20) Business Days prior to the due date for filing
such Tax Return. Within fifteen (15) Business Days after
receipt of such Tax Return, Seller shall pay to Purchaser its
proportionate share of the amount shown as due on such Tax
Return determined in accordance with Section 1.06 of this
Agreement.
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 Survival of Representations, Warranties, Covenants
and Agreements.
(a) Subject to Section 11.02, the representations and
warranties of Purchaser and Seller (other than the
representations and warranties (x) contained in Section 2.06
(the "Tax Representation") and 2.09 (the "ERISA
Representation"), which shall survive for the applicable period
of the applicable statute of limitation, and (y) contained in
Section 2.10(b) (the "Title Representation"), which shall
survive the Closing indefinitely) (all of the representations
and warranties of Purchaser and Seller, excluding the Tax
Representation, the ERISA Representation and the Title
Representation, are hereinafter referred to as the "General
Representations"), shall survive the Closing for a period of
twelve (12) months; provided, however, if Purchaser (or any
successor or assign of Purchaser) procures title insurance with
respect to the Real Property, to the extent that Purchaser (or
any successor or assign of Purchaser) actually receives proceeds
from the title insurer in respect of any matters addressed by
any of the representations and warranties contained in Section
2.10, then, only with respect to such matters, and only to such
extent, such representations and warranties shall be deemed not
to have been made.
(b) Subject to Section 11.02, the covenants and agreements
of Seller and Purchaser contained in this Agreement (other than
the covenants and agreements contained in Articles IV (excluding
Sections 4.06 and 4.09) and V (excluding Sections 5.03 and 5.07)
(the "Pre-Closing Covenants"), which covenants and agreements
shall survive the Closing for a period of twelve (12) months)
(all of the covenants and agreements of Purchaser and Seller,
excluding the Pre-Closing Covenants, are hereinafter referred to
as the "Post-Closing Covenants"), shall survive the Closing
indefinitely; and
(c) Any due diligence or other investigation or
examination by any party with respect to the transactions
contemplated by this Agreement shall not in any way affect or
lessen the representations and warranties of the other party
contained herein or the indemnifications with respect thereto.
9.02 No Other Representations. Notwithstanding anything
to the contrary contained in this Agreement, it is the explicit
intent of each party hereto that Seller is making no
representation or warranty whatsoever, express or implied,
including but not limited to any implied representation or
warranty as to condition, merchantability or suitability as to
any of the Assets, except those representations and warranties
contained in this Agreement and the exhibits, schedules,
documents, certificates and instruments delivered in connection
with the Closing. In particular, Seller makes no representation
or warranty to Purchaser with respect to (i) the information set
forth in the Confidential Information Memorandum dated March,
1998 and the supplements thereto, or (ii) any financial
projection or forecast relating to the operation of the
Generating Assets. With respect to any such projection or
forecast delivered by or on behalf of Seller to Purchaser,
Purchaser acknowledges that (i) there are uncertainties inherent
in attempting to make such projections and forecasts, (ii) it is
familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and
accuracy of all such projections and forecasts furnished to it
and (iv) it shall have no claim against Seller with respect to
such projections and forecasts.
ARTICLE X
INDEMNIFICATION
10.01 Other Indemnification.
(a) Subject to the other Sections of this Article X,
Seller shall indemnify Purchaser and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Purchaser Group") in respect of, and hold it
harmless from and against, any and all Losses suffered, incurred
or sustained by Purchaser Group or to which Purchaser Group
becomes subject, resulting from, arising out of or relating to:
(i) any breach by Seller of any representation or warranty
of Seller contained in this Agreement (determined in all cases
as if the terms "material" or "materially" (or the capitalized
versions thereof) were not included therein);
(ii) any breach by Seller of any covenant or agreement of
Seller contained in this Agreement (determined in all cases as
if the terms "material" or "materially" (or the capitalized
versions thereof) were not included therein);
(iii) a Retained Liability; or
(iv) any Change of Control Liabilities;
provided, however, that Seller shall have no liability for
Losses under clause (i) arising from a breach of a General
Representation, a Tax Representation or an ERISA Representation
unless and until the aggregate amount of all Losses arising from
such breaches asserted by Purchaser equals or exceeds $5.0
million in which event Seller shall be liable for all such
Losses; and provided, further, that, except with respect to
Losses arising from a breach of the Title Representation, such
indemnification shall be effective only with respect to claims
written notice of which is received by Seller with respect to
Losses arising under clause (i) above relating to General
Representations (or, with respect to the Tax Representation or
ERISA Representation, the date upon which the applicable statute
of limitations expires) or clause (ii) above relating to Pre-
Closing Covenants, no later than the date that is twelve (12)
months from the Closing. Except as set forth in paragraph (b)
below, in no event shall the Liability of Seller for Losses
under clause (i) of this Section 10.01(a) arising out of
breaches of the General Representations exceed, in the
aggregate, fifty percent (50%) of the Purchase Price (or, with
respect to breaches of the Title Representation and the
covenants contained in Sections 1.01(a)(i) and 1.05 exceed, in
the aggregate, the Purchase Price).
(b) In addition to the indemnities contained in clause (a)
above, Seller shall indemnify Purchaser Group in respect of, and
hold it harmless from and against, all Losses suffered, incurred
or sustained by Purchaser Group arising from any Pre-Closing
Environmental Liability; provided, however, that (1)
indemnification for Pre-Closing Unknown Remedial Liabilities
shall be effective only with respect to Losses arising out of a
matter described in a Claim Notice received by Seller no later
than the date that is two years from the Closing, (2) Seller's
Liabilities under this paragraph for (x) Non-Colstrip Pre-
Closing Known and Unknown Remedial Liabilities shall be limited
in each case to 50% of any such Loss suffered, incurred or
sustained by Purchaser Group and (y) Colstrip Pre-Closing Known
and Unknown Remedial Liabilities shall be limited in each case
to Seller's pro-rata share (calculated pursuant to the Colstrip
Contracts) of 50% of any such Loss suffered, incurred or
sustained by Purchaser Group, and such Liabilities referred to
in clauses (x) and (y) shall not, in any event, exceed, in the
aggregate, an amount equal to 10% of the Purchase Price (each
such Liability of Seller shall be paid by it at the same time
that Purchaser Group has paid its fifty percent (50%) share
thereof); provided, further, that this indemnity shall only
extend to such Pre-Closing Environmental Liabilities
attributable to conditions existing at or prior to the Closing,
and Seller shall not be required to indemnify Purchaser for
Losses to the extent attributable to acts or omissions of
Purchaser resulting in an increase in or aggravation of such
Environmental Liabilities, whether arising from a change in use
of the Assets or otherwise. In the event that Seller disputes
the pro rata share of any Losses attributable by Purchaser to
Seller under Section 10.01(b)(2)(y) in the Claim Notice, Seller
will nevertheless pay Purchaser the amount requested by
Purchaser in the Claim Notice and Seller shall proceed to
resolve any dispute with PGE and Puget concerning allocations of
pro rata shares. If Purchaser fails to make a claim against a
Potentially Responsible Party with respect to Pre-Closing
Environmental Liabilities, then upon making an indemnity payment
pursuant to this paragraph (b), Seller shall, to the extent of
such indemnity payment, be subrogated to all rights of Purchaser
against any Potentially Responsible Party in respect of the
Losses to which the indemnity payment relates. If Purchaser
makes a claim against, and recovers from, a Potentially
Responsible Party with respect to Pre-Closing Environmental
Liabilities and Seller has made an indemnity payment with
respect to such Loss, then Purchaser shall reimburse Seller 50%
of such amounts recovered, net of any third party costs of
collection.
(c) Subject to the other Sections of this Article X,
Purchaser shall indemnify Seller and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Seller Group") in respect of, and hold it
harmless from and against, any and all Losses suffered, incurred
or sustained by Seller Group or to which Seller Group becomes
subject, resulting from, arising out of or relating to:
(i) any breach by Purchaser of any representation or
warranty of Purchaser contained in this Agreement (determined in
all cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein),
(ii) any breach by Purchaser of any covenant or agreement
of Purchaser contained in this Agreement (determined in all
cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were included therein); or
(iii) an Assumed Liability;
provided, however, that Purchaser shall have no liability for
Losses under clause (i) arising from a breach of a General
Representation unless and until the aggregate amount of all such
Losses arising from such breaches asserted by Seller equals or
exceeds $5.0 million in which event Purchaser shall be liable
for all Losses; and provided, further, that such indemnification
shall be effective only with respect to claims written notice of
which is received by Purchaser with respect to Losses arising
under clause (i) above relating to General Representations or
clause (ii) above relating to Pre-Closing Covenants, no later
than the date that is twelve (12) months from the Closing. In
no event shall the Liability of Purchaser for Losses under this
Article X arising out of breaches of the General Representations
exceed, in the aggregate, fifty (50%) of the Purchase Price.
(d) To the extent that an Indemnified Party has received
insurance proceeds prior to the payment of an indemnity payment
on an indemnifiable Loss, such indemnifiable Loss shall be
reduced by an amount equal to such proceeds received by the
Indemnified Party. If the amount of any indemnifiable Loss, at
any time subsequent to the making of an indemnity payment in
respect thereof, is reduced by recovery, settlement or otherwise
under or pursuant to any insurance coverage or pursuant to any
claim, recovery, settlement or payment by or against any other
entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with
interest thereon from the date of payment thereof at the prime
rate then in effect for domestic banks as published in the Wall
Street Journal (Northeast Edition) in the "Money Rates"
section), shall promptly be repaid by the Indemnified Party to
the Indemnifying Party. Nothing in this Section 10.01(d) shall
be construed to require any party hereto to obtain or maintain
any insurance coverage or make any claim under its insurance
coverage.
(e) Seller shall not be liable on account of any
obligations of any co-owners of the Colstrip Units 1, 2, 3 and 4
to Purchaser.
(f) The Indemnifying Party hereby expressly waives all
rights of subrogation in respect of any payments made by it
under this Article X.
10.02 Method of Asserting Claims. All claims for
indemnification by any Indemnified Party under Section 10.01
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
an Indemnified Party might seek indemnity under Section 10.01 is
asserted against or sought to be collected from such Indemnified
Party by a Person other than Seller, Purchaser or any Affiliate
of Seller or Purchaser (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice with reasonable promptness to
the Indemnifying Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the Dispute
Period whether the Indemnifying Party disputes its liability to
the Indemnified Party under Section 10.01 and whether the
Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to the
Third Party Claim pursuant to this Section 10.02(a), then the
Indemnifying Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, such Third Party
Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnifying Party
to a final conclusion or will be settled at the discretion of
the Indemnifying Party (with the consent of the Indemnified
Party, which consent will not be unreasonably withheld). The
Indemnifying Party will have full control of such defense and
proceedings, including any settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and
expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the
first sentence of this Section 10.02(a)(i), file any motion,
answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests and not prejudicial to the
Indemnifying Party (it being understood and agreed that, except
as provided in clause (ii) below, if an Indemnified Party takes
any such action that is prejudicial and causes a final
adjudication that is adverse to the Indemnifying Party, the
Indemnifying Party will be relieved of its obligations hereunder
with respect to the portion of such Third Party Claim prejudiced
by the Indemnified Party's action); and provided further, that
if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party,
cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim that the Indemnifying Party
elects to contest, or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim against the
Person asserting the Third Party Claim, or any cross-complaint
against any Person (other than the Indemnified Party or any of
its Affiliates). Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement of
a Third Party Claim at any time if it irrevocably waives its
right to indemnity under Section 10.01 with respect to such
Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 10.02(a), or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or
settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then
the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnified Party to
a final conclusion or will be settled at the discretion of the
Indemnified Party (with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and
proceedings, including (except as provided in the immediately
preceding sentence) any settlement thereof; provided, however,
that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying
Party, cooperate with the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is
contesting, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim against the Person
asserting the Third Party Claim, or any cross-complaint against
any Person (other than the Indemnified Party or any of its
Affiliates). Notwithstanding the foregoing provisions of this
Section 10.02(a)(ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if
such dispute is resolved in favor of the Indemnifying Party in
the manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section
10.02(a)(ii) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party
in connection with such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section
10.02(a)(ii), and the Indemnifying Party will bear its own costs
and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability to the Indemnified
Party with respect to the Third Party Claim under Section 10.01
or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes its liability to
the Indemnified Party with respect to such Third Party Claim,
the Loss in the amount specified in the Claim Notice will be
conclusively deemed a liability of the Indemnifying Party under
Section 10.01 and the Indemnifying Party shall pay the amount of
such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability with
respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be
resolved by litigation in a court of competent jurisdiction.
(b) In the event any Indemnified Party should have a claim
under Section 10.01 against any Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver
an Indemnity Notice with reasonable promptness to the
Indemnifying Party prior to the expiration of the
indemnification notice period described in this Section 10.02.
If the Indemnifying Party notifies the Indemnified Party that it
does not dispute the claim described in such Indemnity Notice or
fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in
such Indemnity Notice, the Loss in the amount specified in the
Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 10.01 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party
on demand. If the Indemnifying Party disputes all or any
portion of its liability with respect to such claim, it shall
notify the Indemnified Party thereof in writing during the
Dispute Period, specifying the portion of the claim that is
disputed and the basis for such position. If the Indemnifying
Party has timely disputed its liability with respect to such
claim, the Indemnifying Party will be deemed to have accepted
and be liable for payment of the undisputed portion of such
claim on demand and the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within
the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.
(c) In the event of any Loss resulting from a
misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained
in this Agreement as to which an Indemnified Party would be
entitled to claim indemnity under Section 10.01 but for the Loss
limitation provisions of Section 10.01(a) and (c), such
Indemnified Party may nevertheless deliver a written notice to
the Indemnifying Party containing the information that would be
required in a Claim Notice or an Indemnity Notice, as
applicable, with respect to such Loss. In the case of a Claim
Notice, the provisions of Section 10.02(a)(i) will be
applicable. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute the claim described therein or
fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in
such Claim Notice or Indemnity Notice, as the case may be, the
Loss specified in the notice will be conclusively deemed to have
been incurred by the Indemnified Party for purposes of making
the determination of the Loss limitations set forth in
Section 10.01. If the Indemnifying Party has timely disputed
the claim described in such Claim Notice or Indemnity Notice, as
the case may be, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within
the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.
(d) In the event of any claim for indemnity under Section
10.01(a), Purchaser agrees to give Seller and its
Representatives reasonable access to the Business Books and
Records and Employees in connection with the matters for which
indemnification is sought to the extent Seller reasonably deems
necessary in connection with its rights and obligations under
this Article X.
(e) All payments made pursuant to this Article X shall be
treated as an adjustment to the Purchase Price.
(f) In the event an action, dispute, claim, counterclaim
or controversy ("Dispute") arises between the parties arising
out of or relating to this Agreement, the aggrieved party shall
promptly notify the other party of the Dispute within ten
Business Days after such Dispute arises. If the parties have
failed to resolve the Dispute within ten Business Days after
delivery of such notice, each party shall, within five Business
Days thereafter, nominate a senior officer of its management to
meet to attempt to resolve the Dispute. The senior officers
shall meet within twenty Business Days after their nomination.
Should the senior officers be unable to resolve the Dispute,
either party may pursue any and all available legal remedies,
unless the parties mutually agree in writing to an alternative
dispute resolution procedure.
10.03 Exclusivity. After the Closing, to the extent
permitted by Law, the indemnities set forth in this Article X
shall be the exclusive remedies of Purchaser Group and Seller
Group for any misrepresentation, breach of warranty or
nonfulfillment or failure to be performed of any covenant or
agreement contained in this Agreement, any schedule hereto, or
any certificate delivered by or on behalf of Seller or Purchaser
in connection herewith, and the parties shall not be entitled to
a rescission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof,
all of which the parties hereto hereby waive.
10.04 Purchaser's Release of Seller under the Colstrip
Contracts. From and after the Closing, Purchaser, for itself
and on behalf of its Affiliates, does hereby release, hold
harmless and forever discharge Seller from any and all claims,
demands, liabilities (including fines and civil penalties) or
causes of action at Law or in equity, whether known or unknown,
resulting from any Claim that Seller is not released from its
obligations under the Colstrip Contracts by virtue of Section
1.01(a)(xi) and 1.02(a)(vi), provided, however, that nothing in
this Section 10.04 shall be deemed to affect Seller's Retained
Liabilities, Purchaser's Assumed Liabilities or the parties'
indemnification obligations hereunder.
ARTICLE XI
TERMINATION
11.01 Termination. This Agreement may be terminated, and
the transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser;
(b) at any time before the Closing, by Seller or
Purchaser, in the event that any Final Order or Law becomes
effective restraining, enjoining, or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements, upon notification of the non-terminating party by
the terminating party; or
(c) at any time before the Closing, by Seller or
Purchaser, in the event (i) of a breach hereof by the non-
terminating party which gives rise to, as applicable, either a
Seller Material Adverse Effect (if Seller is the breaching
party) or a Purchaser Material Adverse Effect (if Purchaser is
the breaching party) if such non-terminating party fails to cure
such breach within forty-five (45) days following notification
thereof by the terminating party, provided that if, at the end
of such forty-five (45) day period, the non-terminating party is
endeavoring in good faith, and proceeding diligently, to cure
such breach, the non-terminating party shall have an additional
forty-five (45) days in which to effect such cure or (ii) upon
notification of the non-terminating party by the terminating
party that the satisfaction of any condition to the terminating
party's obligations under this Agreement becomes impossible or
impracticable with the use of commercially reasonable efforts if
the failure of such condition to be satisfied by the terminating
party is not caused by a breach hereof by the terminating party,
provided that if it is reasonably possible that the
circumstances giving rise to the impossibility or
impracticability may be removed prior to the expiration of the
time periods provided in the following subsection (d), then such
notification may not be given until such time as the removal of
such circumstances is no longer reasonably possible within such
time periods; or
(d) at any time after the date which is twelve (12) months
after the date of this Agreement, by Seller or Purchaser upon
notification of the non-terminating party by the terminating
party if the Closing shall not have occurred on or before such
date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party; provided, however, that
if on such date Purchaser and Seller have not received all
Purchaser Required Regulatory Approvals and all Seller Required
Regulatory Approvals but all other conditions to the Closing
shall be fulfilled or shall be capable of being fulfilled, then
neither party may terminate this Agreement until the expiration
of such date which is eighteen (18) months after the date of
this Agreement; provided, further, that if on such date
Purchaser or Seller has not received all Purchaser Required
Regulatory Approvals or all Seller Required Regulatory Approvals
related to the Hydro Units but all other conditions to the
Closing shall be fulfilled or shall be capable of being
fulfilled, then neither party may terminate this Agreement until
the expiration of such date which is twenty-four (24) months
after the date of this Agreement.
(e) in accordance with Section 1.10(e), by Purchaser.
11.02 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 11.01, this Agreement will
forthwith become null and void, and there will be no liability
or obligation on the part of Seller or Purchaser (or any of
their respective officers, directors, employees, agents or other
representatives or Affiliates), except as provided in the next
succeeding sentence and except that the provisions with respect
to expenses in Section 13.04 and confidentiality in Section
13.06 will continue to apply following any such termination.
Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section
11.01(c) or (d), Seller will remain liable to Purchaser for any
willful breach of Section 4.10 of this Agreement by Seller
existing at the time of such termination, and Purchaser will
remain liable to Seller for any willful breach of Section 5.06
of this Agreement by Purchaser existing at the time of such
termination, and Seller or Purchaser may seek such remedies,
including damages and fees of attorneys, against the other with
respect to any such breach as are provided in this Agreement or
as are otherwise available at Law or in equity.
ARTICLE XII
DEFINITIONS
12.01 Definitions. (a) Defined Terms. As used in this
Agreement, the following defined terms have the meanings
indicated below:
"Actions or Proceedings" means any action, suit,
proceeding, arbitration or Governmental or Regulatory Authority
investigation.
"Adjustment Amount" has the meaning ascribed to it in
Section 1.04.
"Adjustment Statement" has the meaning ascribed to it in
Section 1.04.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by
or is under common control with the Person specified. For
purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the
previous sentence, any Person owning ten percent (10%) or more
of the voting securities of another Person shall be deemed to
control that Person.
"Agreement" means this Asset Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and
the certificates delivered in accordance with Sections 6.03 and
7.03, as the same shall be amended from time to time.
"Asset Group" means one or more of the categories of Assets
set forth on Schedule I hereto.
"Assets" has the meaning ascribed to it in Section 1.01(a).
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or intangible
and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person.
"Assignment Instruments" has the meaning ascribed to it in
Section 1.05.
"Associate" means, with respect to any Person, any
corporation or other business organization of which such Person
is an officer or partner or is the beneficial owner, directly or
indirectly, of ten percent (10%) or more of any class of equity
securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person
serves as a trustee or in a similar capacity and any relative or
spouse of such Person, or any relative of such spouse, who has
the same home as such Person.
"Assumed Liabilities" has the meaning ascribed to it in
Section 1.02(a).
"Assumption Agreement" has the meaning ascribed to it in
Section 1.05.
"Assumption Instruments" has the meaning ascribed to it in
Section 1.05.
"Base Purchase Price" means $780,000,000.
"Benefit Plan" means any Plan established by Seller, or any
predecessor or Affiliate of Seller, existing at the Closing or
at any time within the five (5) year period prior thereto, to
which Seller contributes or has contributed on behalf of any
Employee, former Employee or director, or under which any
Employee, former Employee or director of Seller or any
beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Bid Date" means September 28, 1998.
"Books and Records" of any Person means all files,
documents, instruments, papers, books and records relating to
the business, operations, condition of (financial or other),
results of operations and Assets and Properties of such Person,
including financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and
environmental studies and plans.
"Business Books and Records" has the meaning ascribed to it
in Section 1.01(a)(xvii).
"Business Combination" means with respect to any Person,
any merger, consolidation or combination to which such Person is
a party, any sale, dividend, split or other disposition of
capital stock or other equity interests of such Person or any
sale, dividend or other disposition of all or substantially all
of the Assets and Properties of such Person, provided, however,
that no activities or transactions of any Affiliate of Seller
(so long as not involving Seller) shall be considered a Business
Combination hereunder.
"Business Contracts" has the meaning ascribed to it in
Section 1.01(a)(v).
"Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the State of Montana and the
Commonwealth of Pennsylvania are authorized or obligated to
close.
"Capital Expenditures" means those capital expenditures
which are identified in the Budget referred to in Section 4.14,
and such other emergency, non-budgeted capital expenditures made
by Seller in accordance with the provisions of Section 4.14.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the
rules and regulations promulgated thereunder.
"Change of Control Liabilities" has the meaning ascribed to
it in Section 1.02(a)(ix).
"Claim Notice" means written notification pursuant to
Section 10.02(a) of a Third Party Claim as to which indemnity
under Section 10.01 is sought by an Indemnified Party, enclosing
a copy of all papers served, if any, and specifying the nature
of and basis for such Third Party Claim and for the Indemnified
Party's claim against the Indemnifying Party under
Section 10.01, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in
good faith, of such Third Party Claim.
"Closing" means the closing of the transactions
contemplated by Section 1.05.
"Closing Date" means (a) the later of (x) July 1, 1999, and
(y) the date thirty (30) days after the day on which the last of
the consents, approvals, actions, filings, notices or waiting
periods described in or related to the filings described in
Sections 6.04 through 6.07 and Sections 7.04 through 7.06 has
been obtained, made or given or has expired, as applicable;
provided, that Purchaser agrees to use reasonable efforts to be
prepared to close prior to July 1, 1999, and shall give notice
to Seller in the event Purchaser determines that it is able to
do so, or (b) such other date as Purchaser and Seller mutually
agree upon in writing.
"COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the rules and
regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Collective Bargaining Agreements" has the meaning ascribed
to in Section 2.16.
"Colstrip Contracts" has the meaning ascribed to it in
Section 1.01(a)(xi).
"Colstrip 1, 2 and 3 Transmission Amount" has the meaning
ascribed to it in Section 1.10(f).
"Colstrip 1, 2 and 3 Transmission Assets" has the meaning
ascribed to it in Section 1.01(a)(xix).
"Colstrip 4 Generation Assets" means all Assets relating to
Seller's interest in Colstrip Unit 4 including, but not limited
to, Real Property Leases, Business Contracts, Transferable
Permits, Fuel Contracts, power sale or purchase agreements and
allowances and/or emission reduction credits described in
Section 12.01(b) of the Disclosure Schedule.
"Colstrip 4 Transmission Amount" means an amount equal to
$55,918,674.
"Colstrip 4 Transmission Assets" has the meaning ascribed
to it in Section 1.01(a)(xviii).
"Colstrip 4 Transmission Service Agreement" has the meaning
ascribed to it in Section 1.10(a).
"Colstrip Pre-Closing Known and Unknown Remedial
Liabilities" means all Pre-Closing Known Remedial Liabilities
and Pre-Closing Unknown Remedial Liabilities arising from or
relating to the ownership, operation and maintenance of the
Colstrip Units 1, 2, 3 or 4 Generating Assets or the Colstrip
Units 1, 2, 3 or 4 Transmission Assets, to the extent such
Assets are acquired by Purchaser.
"Colstrip Rights of First Refusal" means the rights
described in the following agreements: (i) Section 16(d) of the
Construction and Ownership Agreement, dated as of July 30, 1971,
by and between Seller and Puget;(ii) Sections 24(b) and 24(f) of
the Ownership and Operation Agreement, dated as of May 6, 1981,
as amended, by and among Seller, Puget, The Washington Water
Power Company ("WWP"), Portland, and Pacific Power & Light
Company ("Pacific"); and (iii) Section 28(f) of the Colstrip
Project Transmission Agreement, dated as of May 6, 1981, as
amended, by and among Seller, Puget, WWP, Portland and Pacific.
"Colstrip Transition Service Agreement" has the
meaning ascribed to it in Section 6.10.
"Combined Payment Amount" means an amount equal to
$932,000,000 minus (a) the amount of the Base Purchase Price
(prior to any adjustment thereto pursuant to Section 1.10) and
(b) any Puget Payment Amount or Portland Payment Amount paid to
Seller prior to the Final Closing Date.
"Communications Service Agreement" has the meaning ascribed
to it in Section 1.01(b)(ix).
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other
contract.
"Contribution Agreement" has the meaning ascribed to it in
the forepart of this Agreement.
"Defined Benefit Plan" means each Benefit Plan which is
subject to Part 3 of Title I of ERISA, Section 412 of the Code
or Title IV of ERISA.
"Disclosure Schedule" means, as the context requires, (a)
the record delivered to Purchaser by Seller herewith and dated
as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required
to be included therein by Seller pursuant to this Agreement and
(b) the record delivered to Seller by Purchaser herewith and
dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required
to be included therein by Purchaser pursuant to this Agreement.
"Dispute" has the meaning ascribed to it in Section 10.02.
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim
Notice or an Indemnity Notice.
"Easements" means, with respect to the Assets, the
reservations of easements in favor of Seller to be included in
the deeds of conveyance with respect to such Assets,
substantially as set forth in the Interconnection Agreement
(including the Separation Document).
"Employee" means each employee or officer of Seller or any
of its Affiliates whose employment responsibilities primarily
relate to the operation of the Generating Assets.
"Employment Term" has the meaning ascribed to it in Section
5.03.
"Environmental Fines and Penalties" has the meaning
ascribed to it in Section 1.02(a)(x).
"Environmental Law" means all Federal, state, municipal and
local laws (including common laws), regulations, rules,
ordinances, codes, licenses, decrees, judgments, directives, or
judicial or administrative orders relating to pollution,
protection, preservation or restoration of human health, the
environment or natural resources, including, without limitation,
laws relating to Releases or threatened Releases of Hazardous
Materials (including, without limitation, into or through
ambient air, surface water, groundwater, land, wetlands, surface
and subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, including without
limitation the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act,
and CERCLA, in each case as amended, and their local
counterparts.
"Environmental Liabilities" means any liabilities,
obligations or responsibilities under or related to former,
current or future Environmental Laws or the common law, whether
such liability, obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in
connection with (a) any violation or alleged violation of
Environmental Laws relating to the Assets; (b) compliance with
applicable Environmental Laws relating to the Assets; (c) loss
of life, injury to persons or property or damage to natural
resources (whether or not such loss, injury or damage was made
manifest before or after the Closing) caused (or allegedly
caused) by the presence or Release of Hazardous Materials at,
on, in, under, adjacent to or migrating from the Assets; and
(d) the reasonable investigation and/or remediation required by
Law or constituting a reasonable response to a Governmental or
Regulatory Authority having jurisdiction (whether or not such
investigation or remediation commenced on or before the Closing)
of Hazardous Materials that are present or have been Released
at, on, in, under, adjacent to or migrating from the Assets,
including, but not limited to, Hazardous Materials in the soil,
surface water, sediments, groundwater, landfill cells, or in
other environmental media at or adjacent to the Assets
("Remedial Liabilities"); provided, further that the
liabilities, obligations or responsibilities described in
clauses (a), (b) and (c) shall not include those described in
clause (d); provided further that Environmental Liabilities
shall not include (x) Purchaser's internal costs or
consequential damages (including the value of employees' time,
loss of use, downtime or increased operating costs); (y) costs
of capital improvements (including the replacement of equipment
that has reached its useful life); nor (z) monitoring required
by environmental permits or the design of the Assets, except, in
the case of clauses (y) and (z), as covered in clause (d) above.
"Environmental Permits" has the meaning ascribed to it in
Section 2.17.
"EPA" means the Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any Person who is in the same
controlled group of corporations or who is under common control
with Seller (within the meaning of Section 414 of the Code).
"ERISA Affiliate Plan" has the meaning ascribed to it in
Section 1.02(b)(ix).
"ERISA Representation" has the meaning ascribed to it in
Section 9.01(a).
"Estimated Adjustment Amount" means Seller's good faith
reasonable estimate of an Adjustment Amount for the Closing,
which estimate shall be provided to Purchaser no later than five
Business Days before the Closing.
"Estimated Purchase Price" has the meaning ascribed to it
in Section 1.05.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated
thereunder.
"Excluded Assets" has the meaning ascribed to it in
Section 1.01(b).
"Federal Power Act" means the Federal Power Act of 1935, as
amended, and the rules and regulations promulgated thereunder.
"FERC" means the Federal Energy Regulatory Commission.
"Final Closing Date" means the date on which the latter of
the Puget Closing and the Portland Closing occurs.
"Final Order" means a final Order after all opportunities
for rehearing are exhausted (whether or not any appeal thereof
is pending) that has not been further revised, stayed, enjoined,
set aside, annulled or suspended, with respect to which any
required waiting period has expired, and as to which all
conditions to effectiveness prescribed therein or otherwise by
Law, regulation or Order have been satisfied.
"Fuel Contracts" has the meaning ascribed to it in Section
1.01(a)(x).
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the
immediately prior comparable period.
"General Assignment" has the meaning ascribed to it in
Section 1.05.
"General Representations" has the meaning ascribed to it in
Section 9.01(a).
"Generating Assets" has the meaning ascribed to it in the
forepart of this Agreement.
"Good Utility Practice" means any of the applicable
practices, methods and acts:
(i) required of the party to whom Good Utility Practice is
being applied under regulations of the National Electric Safety
Code (as each of such terms is defined in the Interconnection
Agreement), or its successor, whether or not the party whose
conduct is at issue is a member thereof; or
(ii) otherwise engaged in or approved by a significant
portion of the electric utility industry during the relevant
time period; which, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made,
could have been expected to accomplish the desired result at a
reasonable cost to the party being expected to apply Good
Utility Practice, consistent with law, regulation, good business
practices, generation, transmission, and distribution
reliability, safety, and expedition. Good Utility Practice is
intended to include practices, methods, or acts generally
accepted in the region, and is not intended to be limited to
optimum practices, methods, or acts to the exclusion of all
others. Good Utility Practice does not include intentional
disregard of contractual commitments, even if those commitments
are uneconomic under current market conditions.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of the United States, any foreign country
or any domestic or foreign state, county, city or other
political subdivision or any Native American tribal council or
similar governing entity.
"Hazardous Material" means (A) any petrochemical, petroleum
or petroleum products, oil, flammable explosives, radioactive
materials, radon gas, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid
which may contain levels of polychlorinated biphenyls (PCBs);
(B) any chemicals or other materials or substances which are now
or hereafter become defined under any Environmental Law as or
included in the definition of "hazardous substances," "hazardous
wastes", "hazardous chemicals," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "pollutants," "contaminants," "hazardous
matter," "restricted hazardous materials" or words of similar
import; and (C) any other chemical or other material or
substance, the discharge, emission, Release or exposure to which
is now or hereafter prohibited, limited or regulated by any
Governmental or Regulatory Authority under any Environmental
Law.
"HIPAA" means the Health Insurance Portability and
Accountability Act of 1996, as amended, and the rules and
regulations promulgated thereunder.
"Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended, and the rules and regulations
promulgated thereunder.
"HSR Act" means Section 7A of the Clayton Act (Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended) and the rules and regulations promulgated thereunder.
"Hydro Units" means the hydroelectric generating stations
owned by Seller and associated dams and reservoirs at such
locations as set forth in Section 12.01(c) of the Disclosure
Schedule.
"Improvements" has the meaning ascribed to it in Section
1.01(a)(iv).
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred
purchase price of goods or services (other than trade payables
or accruals incurred in the ordinary course of business), (iv)
under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any
other Person.
"Indemnified Party" means any Person claiming
indemnification under any provision of Article X.
"Indemnifying Party" means any Person against whom a claim
for indemnification is being asserted under any provision of
Article X.
"Indemnity Notice" means written notification pursuant to
Section 10.02(b) of a claim for indemnity under Article X by an
Indemnified Party, specifying the nature of and basis for such
claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith,
of such claim.
"Indentures" means the Mortgage and Deed of Trust, dated as
of October 1, 1945, as amended and supplemented, among Seller
and Guaranty Trust Company of New York and Arthur E. Burke, as
Trustees.
"Independent Accounting Firm" means PricewaterhouseCoopers
or such other independent accounting firm of national reputation
mutually appointed by Seller and Purchaser.
"Intangible Personal Property" has the meaning ascribed to
it in Section 1.01(a)(vii).
"Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, trade names and trade
name rights, service marks and service mark rights, service
names and service name rights, brand names, inventions,
copyrights and copyright rights, trade secrets, know-how,
techniques, computer programs and related documentation, and any
and all other intangible assets or proprietary information or
rights (whether registered or under common law) and all pending
applications for and registrations of patents, trademarks,
service marks and copyrights.
"Interconnection Agreement" has the meaning ascribed to it
in Section 6.10.
"Inventory" has the meaning ascribed to it in
Section 1.01(a)(iii).
"Inventory Adjustment Amount" has the meaning ascribed to
in Section 1.04.
"Inventory Survey" has the meaning ascribed to in Section
1.04.
"IRS" means the United States Internal Revenue Service.
"Knowledge" or similar phrases in this Agreement means: (i)
in the case of Seller, the actual knowledge of Seller's officers
and employees who are persons generally responsible for the
subject matter to which knowledge is pertinent, such persons
being listed in Section 12.01(d) of the Disclosure Schedule at
the date as of which the representation, warranty or covenant is
made or repeated, and (ii) in the case of Purchaser the actual
knowledge of Purchaser's officers and employees who are persons
generally responsible for the subject matter to which knowledge
is pertinent, such persons being listed in Section 12.01(e) of
the Disclosure Schedule at the date as of which the
representation, warranty or covenant is made or repeated.
"Landlord Security Deposits" has the meaning ascribed to it
in Section 1.02(a)(iv).
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of
the United States, any foreign country or any domestic or for-
eign state, county, city or other political subdivision or of
any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent,
fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises
and similar consents granted or issued by any Governmental or
Regulatory Authority, other than Environmental Permits,
including applications for any of the foregoing.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other
encumbrance of any kind or easement, or any conditional sale
Contract, title retention Contract or other Contract to give any
of the foregoing.
"Loss" means any and all damages, fines, penalties,
deficiencies, losses and expenses (including interest, court
costs, reasonable fees of attorneys, accountants and other
experts or other reasonable expenses of litigation or other
proceedings or of any claim, default or assessment); provided,
however, "Loss" shall not include any consequential, incidental
or punitive damages for any reason.
"Maintenance Expenditures" means those special maintenance
expenditures which are identified in the Budget referred to in
Section 4.14 and such other emergency, non-budgeted special
maintenance expenditures made by Seller in accordance with the
provisions of Section 4.14 and the exercise of Good Utility
Practices.
"Maintenance and Capital Expenditures Amount" means (i) the
aggregate amount of all funds actually expended by Seller (and
amounts due from Seller to third parties at the time of the
Closing in respect of work actually performed by such third
parties, to the extent such amounts are not Assumed Liabilities)
with respect to Maintenance Expenditures and Capital
Expenditures, in each case which are identified in the Budget,
during the period beginning on the date one (1) year prior to
the Closing and ending on the Closing (or such shorter period if
the Closing occurs in less than one year from the date hereof)
up to but not exceeding $23 million in the aggregate; and
(ii) 85% of all Emergency Expenditures made by Seller in
accordance with Section 4.14, if any, during such one (1) year
(or shorter) period described above. The Maintenance and
Capital Expenditures Amount shall not include any Capital
Expenditures or Maintenance Expenditures or Emergency
Expenditures with respect to assets or properties that are not
transferred to Purchaser under this Agreement.
"MPC 401(k) Plan" has the meaning ascribed to it in Section
5.03(a).
"Non-Colstrip Pre-Closing Known and Unknown Remedial
Liabilities" means all Pre-Closing Known Remedial Liabilities
and Pre-Closing Unknown Remedial Liabilities that are not
Colstrip Pre-Closing Known and Unknown Remedial Liabilities.
"Non-Colstrip Transition Service Agreement" has the meaning
ascribed to it in Section 6.10.
"Non-Transferable Software" has the meaning ascribed to it
in Section 1.01(a).
"Non-Union Employees" means all Employees, other than Union
Employees, who are employed as of the Closing in the production
of electricity at the Thermal Units or the Hydro Units, or
employed in Seller's corporate generation departments. Seller's
Non-Union Employees as of the date hereof are identified in
Section 12.01(g) of the Disclosure Schedule.
"Off-Site Environmental Liabilities" means any liabilities,
obligations or responsibilities under or related to former,
current or future Environmental Laws or the common law, whether
such liability, obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in
connection with Seller's storage, disposal, transportation,
discharge, Release or recycling of Hazardous Materials prior to
the Closing at or to locations other than the Real Property
constituting the Assets or properties in the vicinity of Real
Property constituting the Assets to which Hazardous Materials
have migrated.
"Operative Agreements" means, collectively, this Agreement,
the General Assignment and the other Assignment Instruments, the
Assumption Agreement and the other Assumption Instruments, the
Colstrip Unit Number 3 Wholesale Transition Service Agreement,
the Non-Colstrip Unit Number 3 Wholesale Transition Service
Agreement, the Interconnection Agreement (including the
Separation Document), the Contribution Agreement, the
Communications Service Agreement and any support or other
agreements to be entered into at the Closing in connection with
the transaction.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in
each such case whether preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Permitted Lien" means (i) those Liens and exceptions to
title to the Assets (except Easements) set forth in Section
12.01(h) of the Disclosure Schedule; (ii) the Easements;
(iii) all exceptions, restrictions, easements, charges, rights
of way and monetary and non-monetary encumbrances which are set
forth in an applicable FERC project license, except for such
encumbrances which secure Indebtedness; (iv) when such term is
used with respect to any date before the Closing, Liens created
by the Indentures; (v) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in
accordance with GAAP; (vi) when such term is used with respect
to any date prior to the Closing, any statutory Lien arising in
the ordinary course of business by operation of Law with respect
to a Liability that is not yet due or delinquent; (vii) zoning,
entitlement, conservation restriction and other land use and
environmental regulations by any Governmental or Regulatory
Authority; and (viii) any minor imperfection of title or similar
Lien, limited in the case of items (i) -(viii) (excluding clause
(ii)) to only those matters which, individually or in the
aggregate with other such Liens do not materially detract from
the value of the Assets as currently used or materially
interfere with the ownership, operation and maintenance of the
Assets.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, limited
liability company other business organization, trust, union,
association or Governmental or Regulatory Authority.
"PGE" means Portland General Electric Company, an Oregon
corporation.
"PGE Asset Purchase Agreement" means the Asset Purchase
Agreement dated the date hereof by and between PGE and
Purchaser.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day
or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice,
policy or arrangement of any kind, whether written or oral,
including, but not limited to, any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
"Pollution Control Bonds" means those Pollution Control
Revenue Refunding Bonds, Series 1993A, due May 1, 2023, City of
Forsyth, Montana in the original principal amount of $90,205,000
and Series 1993B, due December 1, 2023, City of Forsyth, Montana
in the original principal amount of $80,000,000.
"Pollution Control Facilities" means the facilities
financed with the Pollution Control Bonds described in Exhibit C
hereto.
"Portland Closing Date" means the date on which the closing
of the transactions contemplated by the Asset Purchase
Agreement, dated as of the date hereof, by and between Purchaser
and PGE (the "Portland Closing") occurs.
"Post-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Potentially Responsible Party" has the meaning ascribed to
it in CERCLA.
"Portland Payment Amount" means an amount equal to
$897,000,000 minus the amount of the Base Purchase Price (prior
to any adjustment thereto pursuant to Section 1.10).
"Power Purchase/Exchange Agreements" means (i) the Power
Purchase Agreement, effective as of May 13, 1994, between Seller
and Basin Electric Power Cooperative; (ii) the BPA Peak/Energy
Exchange, which is Exhibit L to the Power Sales Agreement, dated
as of August 27, 1982, between Seller and the United States of
America, Department of Energy, acting by and through the
Bonneville Power Administration; and (iii) the Exchange
Agreement, dated as of August 18, 1993, between Seller and Idaho
Power Company.
"PPUC Order" means the Opinion and Order adopted by PPUC on
February 9, 1995 in Pennsylvania Power & Light Company's
application for approval of certain transactions in connection
with the utility's establishment of a holding company structure.
"Pre-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Pre-Closing Environmental Liabilities" means those
Environmental Liabilities attributable to the period on or prior
to the Closing.
"Pre-Closing Known Remedial Liabilities" means the subset
of Pre-Closing Environmental Liabilities that are described in
paragraph (d) of the definition of Environmental Liabilities and
that are attributable to the matters set forth in Schedule II
hereto.
"Pre-Closing Unknown Remedial Liabilities" means the subset
of Pre-Closing Environmental Liabilities that are described in
paragraph (d) of the definition of Environmental Liabilities and
that are not attributable to the matters set forth in Schedule
II hereto.
"Puget" means Puget Sound Energy, Inc., a Washington
corporation.
"Puget Asset Purchase Agreement" means the Asset Purchase
Agreement dated the date hereof by and between Puget and
Purchaser.
"Puget Closing Date" means the date on which the closing of
the transactions contemplated by the Asset Purchase Agreement,
dated as of the date hereof, by and between Purchaser and Puget
(the "Puget Closing") occurs.
"Puget Payment Amount" means an amount equal to
$897,000,000 minus the amount of the Base Purchase Price (prior
to any adjustment thereto pursuant to Section 1.10).
"Purchase Price" has the meaning ascribed to it in Section
1.03(a).
"Purchaser" has the meaning ascribed to it in the forepart
of this Agreement.
"Purchaser Financing" has the meaning ascribed to it in
Section 5.08.
"Purchaser Group" has the meaning ascribed to it in Section
10.01(a).
"Purchaser Material Adverse Effect" means any change or
effect after the Bid Date that is, individually or in the
aggregate, materially adverse to (a) the business, operations,
property or condition (financial or otherwise) of Purchaser and
its subsidiaries, taken as a whole, (b) the ability of Purchaser
and each of its subsidiaries, taken as a whole, to perform their
respective obligations under this Agreement or any of the other
Operative Agreements or (c) the validity or enforceability of
this Agreement or any of the other Operative Agreements, or the
rights or remedies of Purchaser hereunder or thereunder.
"Purchaser Required Regulatory Approvals" means (i)
pursuant to Part II of the Federal Power Act, acceptance for
filing and effectiveness or authorization by Final Order of the
FERC, as applicable, to allow Purchaser to (A) implement
wholesale sales of electricity under the Wholesale Transition
Service Agreements, the Power Purchase/Exchange Agreements, the
Power Purchase Agreements, and any other jurisdictional
agreements to be assigned to Purchaser, (B) acquire, own and
operate the Assets, and (C) sell electricity at wholesale at
market-based rates; (ii) approval by Final Order of the FERC
under Part I of the Federal Power Act for the transfer of FERC
project licenses related to, and necessary for Purchaser to
acquire, own and operate the Hydro Units; (iii) a Final Order of
the FERC certifying Purchaser as an exempt wholesale generator
pursuant to Section 32 of the Holding Company Act; provided
however, that in the event Purchaser does not obtain such
certification with respect to the acquisition and ownership of
either or both of the Colstrip 4 Transmission Assets and the
Colstrip 1, 2, and 3 Transmission Assets, then the provisions of
Section 1.10 shall apply with respect to such Assets; and
provided, further, that in any case such certification will be a
Purchaser Required Regulatory Approval with respect to all other
Assets; (iv) a Final Order of the Montana Public Service
Commission, the Oregon Public Utility Commission and the
Washington Utilities and Transportation Commission, in each
case, if required, including the determinations required by
Section 32(c) of the Holding Company Act for the Assets to be
eligible facilities of Purchaser as an exempt wholesale
generator; (v) approval or authorization by Final Order of the
Pennsylvania Public Utility Commission pursuant to the PPUC
Order, if required; (vi) other Licenses, Environmental Permits
and approvals or authorizations of any other Governmental or
Regulatory Authority reasonably necessary pursuant to any Law
for Purchaser to own and operate the Assets other than
authorizations or approvals, the lack of which would not
materially detract from the value of the Assets as currently
used or materially interfere with the ownership, operation and
maintenance of the Assets; (vii) acceptance for filing and
effectiveness or approval by Final Order of the FERC of the
Interconnection Agreement; and (viii) expiration or early
termination of the HSR Act waiting period.
"Purchaser's 401(k) Plan" has the meaning ascribed to it in
Section 5.03(a).
"Purchaser's Retirement Plan" has the meaning ascribed to
it in Section 5.03(a).
"Purchaser's Welfare Plans" has the meaning ascribed to it
in Section 5.03(a).
"Qualified Plan" means each Benefit Plan which is intended
to qualify under Section 401 of the Code.
"Qualified Transfer" means a sale or other disposition of
the Pollution Control Facilities to a transferee who is
reasonably expected to use the Pollution Control Facilities in
such a way that they are treated as qualified pollution control
facilities within the meaning of Section 103(b)(4)(F) of the
Internal Revenue Code as in effect prior to the enactment of
Public Law No. 99-514 (the "Tax Reform Act of 1986").
"Real Property" has the meaning ascribed to it in
Section 1.01(a)(i).
"Real Property Leases" has the meaning ascribed to it in
Section 1.01(a)(ii).
"Release" means any release, spill, emission, pouring,
leaking, pumping, injection, deposit, disposal, discharge,
emptying, dispersal, dumping, leaching or migration into or
through the indoor or outdoor environment, including the
movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land, surface or
subsurface strata.
"Representatives" has the meaning ascribed to it in Section
4.03.
"Resolution Period" means the period ending sixty (60) days
following receipt by an Indemnified Party of a written notice
from an Indemnifying Party stating that it disputes all or any
portion of a claim set forth in a Claim Notice or an Indemnity
Notice.
"Retained Liabilities" has the meaning ascribed to it in
Section 1.02(b).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Seller" has the meaning ascribed to it in the forepart of
this Agreement.
"Seller Group" has the meaning ascribed to it in Section
10.01(b).
"Seller Material Adverse Effect" means any change in or
effect on the Assets or the operation of the Assets after the
Bid Date that is materially adverse to the ownership, business,
assets, operations or condition (financial or otherwise) of the
Assets, individually or taken as a whole, other than (i) any
change resulting from changes in the international, national,
regional or local wholesale or retail markets for electricity,
(ii) any change resulting from changes in the international,
national, regional or local markets for any fuel used at the
Generating Assets, (iii) any change resulting from changes in
the North American, national, regional or local electricity
transmission systems, (iv) changes in Law that apply generally
to similarly situated Persons, and (v) any materially adverse
change in the Assets which is cured (including by payment of
money) by Seller before the earlier of the Closing and the
Termination Date.
"Seller's DB Plan" has the meaning ascribed to it in
Section 5.03(b).
"Seller's Retirement Plan" has the meaning ascribed to it
in Section 5.03(a).
"Seller Required Regulatory Approvals" means (i) the
approval required by FERC to transfer the FERC licenses
associated with the Hydro Units, (ii) the approvals required by
the appropriate regulatory agencies to transfer the Transferable
Permits, other than any such approvals the failure of which
would not materially detract from the value of the Assets as
currently used or materially interfere with the ownership, use,
operation or maintenance of the Assets, (iii) the approval, if
required, of the SEC pursuant to the Holding Company Act,
(iv) the filings by Seller and Purchaser required by the HSR Act
and the expiration or earlier termination of all waiting periods
under the HSR Act, and (v) the approval by FERC pursuant to
Section 203 and 205, respectively, of the Federal Power Act
relating to the transfer of the Assets and the Interconnection
Agreement.
"Separation Document" means the separation document to be
prepared under the terms of the Interconnection Agreement.
"Site Representatives" has the meaning ascribed to it in
Section 4.11.
"Subject Defined Benefit Plan" means each Defined Benefit
Plan listed and described in Section 2.09(a) of the Disclosure
Schedule.
"Tangible Personal Property" has the meaning ascribed to it
in Section 1.01(a)(iv).
"Tax Representation" has the meaning ascribed to it in
Section 9.01(a).
"Tax Returns" means any return, report, information return
or other document (including any related or supporting
information) required to be supplied to any taxing authority
with respect to Taxes.
"Taxes" means all taxes, charges, fees, levies, penalties
or other assessments imposed by any United States Federal, state
or local or foreign taxing authority, including but not limited
to, income, excise, property, sales, transfer, franchise,
payroll, withholding, social security or other taxes, including
any interest, penalties or additions attributable thereto.
"Tenant Security Deposits" has the meaning ascribed to it
in Section 1.01(a)(viii).
"Thermal Units" means Seller's undivided interests in and
including the thermal generating stations owned by Seller at
such locations as set forth in Section 12.01(i) of the
Disclosure Schedule.
"Third Party Claim" has the meaning ascribed to it in
Section 10.02(a).
"Thompson Falls Environmental Status" means that Thompson
Falls Reservoir has been identified as a Low Priority Site by
Montana Department of Environmental Quality ("DEQ") under the
Montana Comprehensive Environmental Cleanup and Responsibility
Act because elevated levels of copper, zinc, and possibly
arsenic were found in the bottom sediments of Thompson Falls
Reservoir.
"Thompson Falls Liabilities" has the meaning ascribed to it
in Section 1.02(a)(x).
"Title Representation" has the meaning ascribed to it in
Section 9.01(a).
"Transferable Insurance Policies" has the meaning ascribed
to it in Section 1.01(a)(xvi).
"Transferable Permits" has the meaning ascribed to it in
Section 1.01(a)(vi).
"Transferring Employee" means any Union or Non-Union
Employee who accepts Purchaser's offer of employment.
"Transferring Non-Union Employee" means a Non-Union
Employee who is a Transferring Employee.
"Transferring Union Employee" means a Union Employee who is
a Transferring Employee.
"Transfer Taxes" means all Taxes in the nature of sales,
use, transfer, recording, value added or forms of conveyance
taxes.
"Union Employees" means all bargaining-unit Employees as of
the Closing represented by the International Brotherhood of
Electrical Workers ("IBEW") Local No. 1638, IBEW Local No. 44 or
the International Brotherhood of Teamsters Local 190.
"WARN Act" means the Federal Worker Adjustment Retraining
and Notification Act of 1988, as amended, and the rules and
regulations promulgated thereunder.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any
gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement;
(iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; (v) "include" or
"including" means including without limiting the generality of
any description preceding such term; and (vi) the phrase
"ordinary course of business" refers to the business of Seller
in connection with the operation of the Generating Assets.
Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified.
All accounting terms used herein and not expressly defined
herein shall have the meanings given to them under GAAP. Any
representation or warranty contained herein as to the
enforceability of a Contract shall be subject to the effect of
any bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting the enforcement of creditors' rights
generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at Law).
ARTICLE XIII
MISCELLANEOUS
13.01 Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed
to have been duly given only if delivered personally or by
facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
PP&L Global, Inc.
11350 Random Hills Rd, Suite 400
Fairfax, Virginia 22030
Facsimile No.: (703) 293-2659
Attn: Chief Counsel
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
Facsimile No.: (212) 424-8500
Attn: Jeffrey Meyers
If to Seller, to:
The Montana Power Company
40 East Broadway
Butte, Montana 59701-9394
Facsimile No.: 406-497-2451
Attn: General Counsel
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: 212-530-5219
Attn: John T. O'Connor
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this
Section, be deemed given upon receipt, and (iii) if delivered by
mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of
such notice, request or other communication is to be delivered
pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
13.02 Bulk Sales Act. The parties hereby waive compliance
with the bulk sales act or comparable statutory provisions of
each applicable jurisdiction. Seller shall indemnify Purchaser
and its officers, directors, employees, agents and Affiliates in
respect of, and hold each of them harmless from and against, any
and all Losses suffered, occurred or sustained by any of them or
to which any of them becomes subject, resulting from, arising
out of or relating to the failure of Seller to comply with the
terms of any such provisions applicable to the transactions
contemplated by this Agreement.
13.03 Entire Agreement. This Agreement and the Operative
Agreements and the other exhibits, schedules, documents,
certificates and instruments executed and delivered pursuant to
this Agreement supersede all prior discussions and agreements
between the parties with respect to the subject matter hereof
and thereof, including that certain confidentiality agreement
between the parties dated April 8, 1998, and contain the sole
and entire agreement between the parties hereto with respect to
the subject matter hereof and thereof.
13.04 Expenses. Except as otherwise expressly provided in
this Agreement (including as provided in Section 11.02), whether
or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in
connection with the negotiation, execution and closing of this
Agreement and the Operative Agreements and the transactions
contemplated hereby and thereby.
13.05 Public Announcements. At all times at or before the
Closing, Seller and Purchaser will not issue or make any
reports, statements or releases to the public or generally to
the employees, customers, suppliers or other Persons with whom
Seller has significant business relationships in connection with
the operation of the Generating Assets with respect to this
Agreement or the transactions contemplated hereby without the
consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of
its public report, statement or release from the other party and
such report, statement or release is, in the opinion of legal
counsel to such party, required by Law in order to discharge
such party's disclosure obligations, then such party may make or
issue the legally required report, statement or release and
promptly furnish the other party with a copy thereof. Seller
and Purchaser will also obtain the other party's prior approval
of any press release to be issued immediately following the
Closing announcing the consummation of the transactions
contemplated by this Agreement.
13.06 Confidentiality. Each party hereto will hold, and
will use its best efforts to cause its Affiliates, and their
respective Representatives to hold, in strict confidence from
any Person (other than any such Affiliate or Representative),
unless (i) compelled to disclose by judicial or administrative
process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated
hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding
brought by a party hereto in pursuit of its rights or in the
exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates
furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the trans-
actions contemplated hereby, except to the extent that such
documents or information can be shown to have been (a)
previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after
the furnishing of such documents or information hereunder)
through no fault of such receiving party or (c) later acquired
by the receiving party from another source if the receiving
party is not aware that such source is under an obligation to
another party hereto to keep such documents and information
confidential; provided that following the Closing the foregoing
restrictions will not apply to Purchaser's use of documents and
information concerning the Assets or the Assumed Liabilities
furnished by Seller hereunder. Purchaser shall have the right
to disclose information of Seller with respect to the Assets to
potential lenders and their respective representatives in
connection with financing the transactions contemplated by this
Agreement and to third parties in connection with planning for
operations of the Assets following the Closing, provided that
any such disclosure is made pursuant to confidentiality
obligations equivalent to those provided in this Section 13.06;
provided, further, if such third parties are involved in the
energy industry then Purchaser shall not disclose information of
Seller to such Persons without the written consent of Seller
which shall not be unreasonably withheld. In the event the
transactions contemplated hereby are not consummated, upon the
request of the other party, each party hereto will, and will
cause its Affiliates and their respective Representatives to,
promptly (and in no event later than five (5) Business Days
after such request) redeliver or cause to be redelivered all
copies of confidential documents and information furnished by
the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon
prepared by the party furnished such documents and information
or its Representatives.
13.07 Waiver. Any term or condition of this Agreement may
be waived at any time by the party that is entitled to the
benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver
of the same or any other term or condition of this Agreement on
any future occasion. All remedies, either under this Agreement
or by Law or otherwise afforded, will be cumulative and not
alternative.
13.08 Amendment. This Agreement may be amended,
supplemented or modified only by a written instrument duly
executed by or on behalf of each party hereto.
13.09 No Third Party Beneficiary. The terms and
provisions of this Agreement are intended solely for the benefit
of each party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to
confer third party beneficiary rights upon any other Person
other than any Person entitled to indemnity under Article X,
provided, however, that the Transferring Employees are intended
to be third party beneficiaries solely for the purpose of claims
they may have against Purchaser under Section 5.03.
13.10 No Assignment; Binding Effect. Neither this
Agreement nor any right, interest or obligation hereunder may be
assigned by any party hereto without the prior written consent
of the other party hereto and any attempt to do so will be void,
except (a) for assignments and transfers by operation of Law,
(b) that Seller may assign its rights, interests or obligations
hereunder, in whole or in part, to an Affiliate and (c) that
Purchaser may assign any or all of its rights, interests and
obligations hereunder (including its rights under Article X) to
(i) a direct or indirect wholly-owned Subsidiary, provided that
any such Subsidiary agrees in writing to be bound by all of the
terms, conditions and provisions contained herein (in which
event, from the date of such assignment and subject to the other
provisions of this Section 13.10, such assignee shall be the
Purchaser for the purposes of this Agreement), or (ii) any
lender providing purchase money or other financing to Purchaser
from time to time as collateral security for such financing, but
no such assignment referred to in clauses (b) or (c) shall
relieve the assigning party of its obligations hereunder;
provided that no such assignment by Seller or Purchaser
adversely affects the availability or timing of any Federal,
state or local government consent or approval required for the
consummation of the transactions contemplated hereby. Subject
to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
13.11 Headings. The headings used in this Agreement have
been inserted for convenience of reference only and do not
define or limit the provisions hereof. Neither party shall be
deemed to have been the drafter of this Agreement, which is the
product of detailed, arm's-length negotiations between the
parties and their respective counsel.
13.12 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under
any present or future Law, and if the rights or obligations of
any party hereto under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as
if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or
by its severance herefrom and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
13.13 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of New
York applicable to a contract executed and performed in such
State, without giving effect to the conflicts of laws principles
thereof.
13.14 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officer of each
party as of the date first above written.
PP&L GLOBAL, INC.
By:_______________________________
Name:
Title:
THE MONTANA POWER COMPANY
By:________________________________
Name:
Title:
<PAGE>
Exhibit 10(b)
EQUITY CONTRIBUTION AGREEMENT
EQUITY CONTRIBUTION AGREEMENT (this "Agreement") dated as of
October 31, 1998 by and among PP&L Global, Inc. ("Purchaser"),
PP&L Resources, Inc. ("Parent"), and The Montana Power Company
("Seller").
R E C I T A L S
WHEREAS, Purchaser and Seller are parties to that certain
Asset Purchase Agreement, dated as of the date hereof (the
"Purchase Agreement");
WHEREAS, Purchaser is directly wholly-owned by Parent;
NOW, THEREFORE, in consideration of the premises and as an
inducement for Seller to enter into the Purchase Agreement, the
parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein and
not otherwise defined herein shall have the respective meanings
given to them in the Purchase Agreement.
Section 2. Equity Contribution.
(a) Seller may, in its sole discretion and without the
concurrence of Purchaser or any of its Affiliates, give written
notice to be received by Parent (i) on a date that is six (6)
Business Days prior to the Closing Date (the "Notice Date"),
which notice shall certify that, as of the Notice Date, the
Montana Conditions are satisfied and that, if the Closing were
to occur on the Notice Date, Seller would be prepared to satisfy
the conditions to Closing that are solely within the control of
Seller; and (ii) on a date that is six (6) Business Days prior
to the Closing Date under either of the Portland Purchase
Agreement or the Puget Purchase Agreement (as the term "Closing
Date" is defined under each of those agreements) (an "Additional
Notice Date"), which notice shall certify that Seller has been
notified by Portland and/or Puget, as applicable that, as of any
such Additional Notice Date, the Portland Conditions and/or the
Puget Conditions, as applicable, are satisfied and that, if the
Closing were to occur on the Notice Date, Portland and/or Puget,
as applicable, would be prepared to satisfy the conditions to
Closing that are solely within the control of such party.
Parent hereby irrevocably promises and agrees that, upon receipt
of the notice referred to in clause (i) of the preceding
sentence, Parent will make or cause to be made, on the date of
the Closing, a contribution in immediately available funds to
Purchaser in the amount of the Base Purchase Price, adjusted to
take into account additional Excluded Assets, if any, pursuant
to Section 1.10 of the Purchase Agreement and that, upon receipt
of any notice referred to in clause (ii) of the preceding
sentence, Parent will make or cause to be made, on the date of
the Closing under the Portland Purchase Agreement or the Puget
Purchase Agreement, as applicable, a contribution in immediately
available Funds in the amount of the Puget Payment Amount, the
Portland Payment Amount or the Combined Payment Amount, as
applicable, pursuant to Section 1.05(b) of the Purchase
Agreement (the amount required to be contributed by Parent
pursuant to each individual notice referred to in clauses (i)
and (ii) of the preceding sentence is sometimes hereinafter
referred to as the "Required Contribution Amount").
(b) If Purchaser breaches its obligation to effect the
Closing as and when required by the Purchase Agreement (or any
Closing under the Portland Purchase Agreement or the Puget
Purchase Agreement as and when required under such agreements),
and, if as a result thereof, Purchaser is the subject of a final
and binding order of a court of competent jurisdiction
obligating it to pay any damages, costs, and expenses incurred
by Seller (a "Liability"), Seller may, in its sole discretion
and without the concurrence of Purchaser or any of its
Affiliates, give written notice to Parent that such Liability
was incurred. Parent irrevocably promises and agrees that it
shall make or cause to be made a contribution in immediately
available funds to Purchaser within five (5) Business Days after
receipt of such notice in an amount sufficient for Purchaser to
fully satisfy and discharge the Liability up to but not to
exceed the applicable Required Contribution Amount.
(c) If a court of competent jurisdiction enters a final
and binding order to the effect that Seller was not entitled to
give any notice provided for in subsection (a) or (b) hereof,
then Seller shall be liable to pay Parent, as liquidated damages
and in full satisfaction of any claim of Purchaser or any of its
Affiliates arising out of such notice or order insofar as such
order relates to Seller giving such notice, an amount equal to
the documented out-of-pocket costs of Parent (including, without
limitation, Parent's cost of capital after giving effect to
related income taxes) incurred in connection with Parent's
contribution (or arrangements made to cause such contribution)
to Purchaser as a result of such wrongful notice by Seller.
(d) Notwithstanding any other provision of this Agreement
to the contrary, Parent shall have no obligation to make or
cause to be made any contribution to Purchaser under this
Agreement to the extent its aggregate contributions to Purchaser
made or cause to be made as a result of a notice given by Seller
hereunder or otherwise contributed (provided such funds have
been segregated in accordance with Section 4 hereunder or are
otherwise available for payment by Purchaser of the Purchase
Price under the Purchase Agreement) equal or exceed the
aggregate of the Required Contribution Amounts.
(e) Any payments made or cause to be made by Parent
directly to Seller in satisfaction of Parent's obligations to
make or cause to be made a contribution to Purchaser hereunder
shall be deemed to be on behalf of, and to satisfy the
obligations of, Purchaser to Seller under the Purchase Agreement
(to the extent of the amount paid or caused to be paid by
Parent).
(f) If, prior to receipt of a notice from Seller
requesting a contribution to Purchaser, Parent makes or causes
to be made a contribution to Purchaser as contemplated herein,
it shall promptly notify Seller in writing of such contribution,
which notice shall state that such contribution has been
segregated as provided in Section 4 herein.
(g) Upon written request of Seller given to Purchaser at
any time after Parent has made or caused to be made a
contribution to Purchaser contemplated herein, Purchaser agrees
to return such contribution to Parent.
(h) If, following the making by Parent of a Required
Contribution Amount hereunder, the Closing in respect of which
such contribution was made fails to occur as scheduled (other
than any such failure caused solely by a breach by Purchaser of
its obligation to effect such Closing), any Funds so contributed
to Purchaser may be returned to Parent; provided, that this
Agreement shall continue in effect until termination in
accordance with the provisions of Section 5 hereof.
Section 3. Representations and Warranties.
(a) Parent and Purchaser represent and warrant to Seller
as follows:
(i) Each of Parent and Purchaser is a corporation,
duly organized, validly existing and in good standing under the
laws of Commonwealth of Pennsylvania and has full corporate
power and authority to enter into this Agreement and to perform
its obligations hereunder.
(ii) The execution and delivery by each of Parent and
Purchaser of this Agreement, and the performance of its
obligations hereunder, have been duly authorized by all
necessary corporate action on the part of Parent and Purchaser,
as the case may be.
(iii) Each of Parent and Purchaser has duly executed
and delivered this Agreement. Assuming due authorization,
execution and delivery of this Agreement by Seller, this
Agreement constitutes the valid and binding obligation of each
of Parent and Purchaser, enforceable in accordance with its
terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws of general applicability affecting the enforcement
of creditors' rights and the application of general principles
of equity.
(iv) All consents, authorizations and other approvals
of any governmental authority which are necessary for the
execution and delivery by each of Parent and Purchaser of this
Agreement and the performance by it of its obligations hereunder
have been obtained and are in full force and effect, are final
and not subject to any appeal.
(v) Execution, delivery and performance by Parent of
this Agreement will not conflict with or result in a violation
or default under any contract, agreement or order of any court
or regulatory authority binding upon Parent or any of its
Affiliates.
(b) Seller represents and warrants to Parent as follows:
(i) Seller is a corporation, duly organized, validly
existing and in good standing under the laws of the State of
Montana, and has full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder.
(ii) The execution an delivery by Seller of this
Agreement, and the performance of its obligations hereunder,
have been duly authorized by all necessary corporate action on
the part of Seller.
(iii) Seller has duly executed and delivered this
Agreement. Assuming due authorization, execution and delivery
of this Agreement by Purchaser and Parent, this Agreement
constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
applicability affecting the enforcement of creditors' rights and
the application of general principles of equity.
(iv) All consents, authorizations and other approvals
of any governmental authority which are necessary for the
execution and delivery by Seller of this Agreement and the
performance by Seller of its obligations hereunder have been
obtained and are in full force and effect, are final and not
subject to any appeal.
(v) Execution, delivery and performance by Seller of
this Agreement will not conflict with or result in a violation
or default under any contract, agreement or order of any court
or regulatory authority binding upon Seller or any of its
Affiliates.
Section 4. Restriction on Use. Purchaser shall segregate
from its general funds any contributions made or caused to be
made by Parent hereunder and shall use such funds for the
purpose, and only for the purpose, of satisfying its obligations
to Seller under the Purchase Agreement. Such contribution shall
be placed in a segregated account at an independent financial
institution, the name of which account makes reference to the
restrictions contained herein.
Section 5. Termination. The obligation of Parent under
this Agreement shall terminate upon the earliest to occur of:
(a) contribution made or caused to be made by Parent
to Purchaser of an amount equal to or exceeding the aggregate of
the Required Contribution Amounts in response to a notices given
by Seller hereunder or otherwise contributed (provided such
funds have been segregated in accordance with Section 4 or are
otherwise available for payment by Purchaser of the Purchase
Price under the Purchase Agreement and any necessary notice has
been given pursuant to Section 2(f));
(b) five business days after notice of termination of
the Purchase Agreement is given pursuant to Article XI thereof,
unless prior to the close of business on the fifth business day
after such notice Parent receives written notice from Purchaser
or Seller that either of them in good faith believes that the
Purchase Agreement is still in full force and effect or has been
improperly terminated, and that Seller is actively pursuing a
Liability claim, in which case this Agreement shall terminate
upon the settlement or other determination of such claim in
accordance with Section 2(b) hereof and the making of the
required contribution by or caused by Parent; or
(c) the occurrence of the Closing under the Purchase
Agreement.
Section 6. Miscellaneous
(a) This Agreement shall be binding upon, shall inure
to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and permitted assigns.
In the event that Purchaser assigns its rights under the
Purchase Agreement to a special purpose corporation, then the
term "Purchaser" herein shall refer to such special purpose
corporation and Parent shall make or cause to be made its
required contribution hereunder directly to such special purpose
corporation. Seller shall be entitled to enforce the
obligations of Parent hereunder without the concurrence of
Purchaser and regardless of any claims by Purchaser against
Seller, including any claims under, or the satisfaction or non-
satisfaction of any obligations of Seller under the Purchase
Agreement. Neither this Agreement nor any right hereunder may
be assigned by any party without the prior written consent of
the parties hereto, which consent (except in the case of a
transfer by Parent of its obligations hereunder) shall not be
unreasonably withheld.
(b) This Agreement contains the entire understanding
of the parties with respect to the matters herein and supersedes
all prior agreements and understandings between the parties with
respect to the subject matter hereof.
(c) All notices and other communications required or
permitted by this Agreement or by law to be served upon or given
to a party hereto by any other party hereto shall be addressed
as provided in the Purchase Agreement and, if to Parent, to the
address for notices set forth beneath Parent's signature below.
(d) This Agreement may not be amended or otherwise
modified except by a written agreement signed by each party
hereto.
(e) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE NEW YORK EXCLUDING ITS
CONFLICTS OF LAWS PROVISIONS.
(f) If any provision of this Agreement shall be
unenforceable, void or otherwise contrary to law, such provision
shall in no manner operate to render any other provision of the
Agreement unenforceable, invalid or contrary to law, and this
Agreement shall continue to be operative and enforceable in
accordance with the remaining terms and provisions hereof.
(g) The terms, conditions, covenants, representations
and warranties hereof may be waived only by a written instrument
executed by the party waiving compliance. The failure of a
party at any time or from time to time to require performance of
any provisions hereof shall in no manner affect its rights at a
later time to enforce the same. No waiver by a party of any
condition or any breach of term, covenant, representation or
warranty contained in this Agreement in any one or more
instances shall be deemed to be, or be construed as, a further
or continuing waiver of any such condition or breach of any
term, covenant, representation or warranty.
(h) No person other than the parties hereto, or their
successors or permitted assigns shall have any rights hereunder.
(i) The term "Montana Conditions" means all
conditions to the obligations of Seller and Purchaser to
consummate the Closing as set forth in Articles VI and VII of
the Purchase Agreement (except those conditions solely within
the control of the Seller or Purchaser). The term "Puget
Conditions" means all conditions to the obligations of Puget and
Purchaser under the Puget Asset Purchase Agreement (except those
conditions solely within the control of the Puget or Purchaser).
The term "Portland Conditions" means all conditions to the
obligations of Portland and Purchaser under the Portland Asset
Purchase Agreement (except those conditions solely within the
control of the Portland or Purchaser).
<PAGE>
(j) This Agreement may be signed in counterparts,
each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
PP&L RESOURCES, INC.
By: ___________________________
Name: John R. Biggar
Title: Senior Vice-President &
Chief Financial Officer
Address for Notices: Two North Ninth
Street
Allentown, Pennsylvania 18101
PP&L GLOBAL, INC.
By: ____________________________
Name: Paul T. Champagne
Title: Vice President
Address for Notices: 11350 Random
Hills Road
Suite 400
Fairfax, Virginia 22030
MONTANA POWER COMPANY
By: ____________________________
Name: Perry J. Cole
Title: Vice President
Address for Notices: 40 East Broadway
Street
Butte, Montana 59701-9394
<PAGE>
Exhibit 10(c)
ASSET PURCHASE AGREEMENT
dated as of November 1, 1998
by and between
PP&L GLOBAL, INC.
and
PORTLAND GENERAL ELECTRIC COMPANY
<PAGE>
CONTENTS
Page
ARTICLE I SALE OF ASSETS AND CLOSING 1
1.01 The Sale 1
1.02 Liabilities 5
1.03 Purchase Price; Allocation 6
1.04 Purchase Price Adjustment 7
1.05 Closing 8
1.06 Prorations 9
1.07 Further Assurances; Post-Closing Cooperation 10
1.08 Third Party Consents 11
1.09 Insurance Proceeds 11
1.10 Inclusion/Exclusion of Certain Assets 12
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER 13
2.01 Corporate Existence of Seller 13
2.02 Authority 13
2.03 No Conflicts 13
2.04 Governmental Approvals and Filings 14
2.05 Reports 14
2.06 Taxes 15
2.07 Legal Proceedings 15
2.08 Compliance with Laws and Orders 15
2.09 Real Property 15
2.10 Tangible Personal Property 16
2.11 Intellectual Property Rights 17
2.12 Contracts 17
2.13 Licenses 18
2.14 Insurance 18
2.15 Environmental Matters 19
2.16 Absence of Condemnation Proceedings 19
2.17 Regulation as a Utility 20
2.18 Brokers 20
2.19 Acknowledgment of Purchaser 20
2.20 Disclaimers Regarding Assets 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER 21
3.01 Corporate Existence 21
3.02 Authority 21
3.03 No Conflicts 21
3.04 Governmental Approvals and Filings 22
3.05 Legal Proceedings 22
3.06 Compliance with Laws and Orders 22
3.07 Regulation as a Utility 23
3.08 Brokers 23
3.09 Financing 23
3.10 Financial Statements 23
3.11 Opportunity to Inspect Assets 23
ARTICLE IV COVENANTS OF SELLER 24
4.01 Regulatory and Other Approvals 24
4.02 HSR Filings 25
4.03 Investigation by Purchaser 25
4.04 No Solicitations 26
4.05 Conduct of Business 26
4.06 Certain Restrictions 26
4.07 Security Deposits 28
4.08 Delivery of Books and Records, etc.; Removal of
Property 28
4.09 Fulfillment of Conditions 28
4.10 Observation, Inspection and Participation 28
4.11 Notice of Breach 29
4.12 Bridge Financing Fees 29
4.13 Special Maintenance and Capital Expenditures 29
ARTICLE V COVENANTS OF PURCHASER 30
5.01 Regulatory and Other Approvals 30
5.02 HSR Filings 31
5.03 PPUC Approval for Holding Company 31
5.04 Notice of Breach 31
5.05 Fulfillment of Conditions 31
5.06 Tax-Exempt Bond Financed Pollution Control
Facilities 32
5.07 Purchaser Financing 32
5.08 Transmission 32
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER 33
6.01 Representations and Warranties 33
6.02 Performance 34
6.03 Officers' Certificates 34
6.04 Orders and Laws 34
6.05 Regulatory Consents and Approvals 34
6.06 Colstrip Rights of First Refusal 34
6.07 Third Party Consents 34
6.08 No Seller Material Adverse Effect 35
6.09 Proceedings 35
6.10 Deliveries 35
6.11 Colstrip Operations Arrangements 35
6.12 Purchaser Financing 35
6.13 Opinion of Counsel 35
6.14 Transfer of MPC Generation Assets 35
6.15 Transmission Agreements 36
ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLER 36
7.01 Representations and Warranties 36
7.02 Performance 36
7.03 Officers' Certificates 36
7.04 Orders and Laws 37
7.05 Regulatory Consents and Approvals 37
7.06 Third Party Consents 37
7.07 Opinion of Counsel 37
7.08 No Purchaser Material Adverse Effect 37
7.09 Proceedings 37
7.10 Colstrip Rights of First Refusal 38
7.11 Deliveries 38
7.12 Transmission Agreements 38
ARTICLE VIII TAX MATTERS AND POST-CLOSING TAXES 38
8.01 Transfer Taxes 38
8.02 Returns with respect to Prorated Taxes 38
ARTICLE IX SURVIVAL; NO OTHER REPRESENTATIONS 39
9.01 Survival of Representations, Warranties, Covenants
and Agreements 39
9.02 No Other Representations 39
ARTICLE X INDEMNIFICATION 40
10.01 Other Indemnification 40
10.02 Method of Asserting Claims 42
10.03 Exclusivity 45
10.04 Purchaser's Release of Seller Under the Colstrip
Contracts 45
ARTICLE XI TERMINATION 46
11.01 Termination 46
11.02 Effect of Termination 47
ARTICLE XII DEFINITIONS 47
12.01 Definitions 47
ARTICLE XIII MISCELLANEOUS 61
13.01 Notices 61
13.02 Bulk Sales Act 62
13.03 Entire Agreement 62
13.04 Expenses 62
13.05 Public Announcements 63
13.06 Confidentiality 63
13.07 Waiver 64
13.08 Amendment 64
13.09 No Third Party Beneficiary 64
13.10 No Assignment; Binding Effect 64
13.11 Headings 65
13.12 Invalid Provisions 65
13.13 Governing Law 65
13.14 Counterparts 65
<PAGE>
SCHEDULES
Schedule I Pre-Closing Known Remedial Liabilities
EXHIBITS
Exhibit A General Assignment and Bill of Sale
Exhibit B Assumption Agreement
Exhibit C Pollution Control Facilities
Exhibit D Officer's Certificate of Seller
Exhibit E Secretary's Certificate of Seller
Exhibit F [Intentionally Omitted]
Exhibit G-1 Opinion of Counsel to Seller
Exhibit G-2 Opinion of General Counsel of Seller
Exhibit G-3 Opinion of Outside Montana Counsel to Seller
Exhibit H Officer's Certificate of Purchaser
Exhibit I Secretary's Certificate of Purchaser
Exhibit J Opinion of Counsel to Purchaser
Exhibit K Transmission Service Agreement Principles
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of November 1, 1998
is made and entered into by and between PP&L Global, Inc., a
Pennsylvania corporation ("Purchaser"), and Portland General
Electric Company, an Oregon corporation ("Seller"). Capitalized
terms not otherwise defined herein have the meanings set forth
in Section 12.01.
WHEREAS, Seller and its Affiliates engage in a number of
diversified energy related businesses;
WHEREAS, Seller's principal business is regulated utility
operations involving the generation, purchase, transmission and
distribution of electricity in Oregon; and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from
Seller, Seller's undivided interests in Colstrip Units 3 & 4 and
related transmission assets (as defined herein, the "PGE
Colstrip Interests"), Seller's rights under the Colstrip
Contracts (as defined herein) and certain other assets of Seller
relating to the PGE Colstrip Interests, and in connection
therewith, Purchaser has agreed to assume certain of the
liabilities of Seller relating to such assets, all on the terms
set forth herein;
WHEREAS, on the date hereof PP&L Resources, a Pennsylvania
corporation and the parent of Purchaser ("Parent"), has entered
into an Equity Contribution Agreement (the "Contribution
Agreement") with Purchaser and Seller;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
I.1 The Sale
(a) On the terms and subject to the conditions set forth
in this Agreement, Seller will sell, transfer, convey, assign
and deliver to Purchaser, and Purchaser will purchase and pay
for, at the Closing, free and clear of all Liens other than
Permitted Liens (as such term is defined with respect to any
date after the Closing), all of Seller's right, title and
interest in, to and under the PGE Colstrip Interests and the
Assets and Properties used or held for use principally in
connection with the operation of the Colstrip Facilities, except
as otherwise provided in Section 1.01(b), as the same shall
exist as of the Closing including, but not limited to the
following (collectively with any proceeds and awards referred to
in Section 1.09, the "Assets"):
(i) Real Property. The real property (including all
buildings, structures, fixtures and other improvements thereon)
used or held for use in connection with or related to the
operation of the Colstrip Facilities, as described in
Section 1.01(a)(i) of the Disclosure Schedule, which real
property is held in fee, easement, permit interest or other
interest, as the case may be (the "Real Property");
(ii) Real Property Leases. (A) The leases and subleases
of real property used or held for use in connection with or
related to the operation of the Colstrip Facilities, as
described in Section 1.01(a)(ii)(A) of the Disclosure Schedule,
as to which Seller is the lessor or sublessor and (B) the leases
and subleases of real property used in connection with or
related to the operation of the Colstrip Facilities, as
described in Section 1.01(a)(ii)(B) of the Disclosure Schedule,
as to which Seller is the lessee or sublessee, together with any
options to purchase the underlying property and leasehold
improvements thereon, and in each case all other rights,
subleases, licenses, permits, deposits and profits appurtenant
to or related to such leases and subleases (the leases and
subleases described in subclauses (A) and (B), the "Real
Property Leases");
(iii) Inventory. All inventories of fuels, supplies,
materials and spares used or held for use in connection with the
operation of the Colstrip Facilities located on the Real
Property or the real property subject to the Real Property
Leases, held for use principally in connection with, or in
transit to the Colstrip Facilities on the date of the Closing (a
listing of the fuel inventories, as of September 30, 1998, is
included in Section 1.01(a)(iii) of the Disclosure Schedule)
(the "Inventory");
(iv) Tangible Personal Property. All machinery,
equipment, vehicles, furniture and other personal property
located where the operation of the Colstrip Facilities is
conducted, or used or held for use in connection with the
operation of the Colstrip Facilities (including but not limited
to the items listed in Section 1.01(a)(iv) of the Disclosure
Schedule), together with all buildings and structures
("Improvements") pertaining to Colstrip Units 3 and 4, including
Seller's interest in the facilities shared by Colstrip Units 1,
2, 3 and 4 relating thereto, as to those Improvements which have
been severed from the Real Property and are to be treated as
personal property, and all warranties against manufacturers or
vendors relating thereto, to the extent that such warranties are
freely transferable (the "Tangible Personal Property");
(v) Business Contracts. All contracts, agreements and
personal property leases (other than the Real Property Leases,
the Transferable Permits, the Fuel Contracts, and the Colstrip
Contracts) used primarily in the operation of the Colstrip
Facilities, that are listed in Section 1.01(a)(v) of the
Disclosure Schedule (the "Business Contracts");
(vi) Transferable Permits. All Licenses and
Environmental Permits owned or held by Seller and used or held
for use in connection with the operation of the Colstrip
Facilities that are transferable by Seller to Purchaser as
listed in Section 1.01(a)(vi) of the Disclosure Schedule, and
the water rights owned or held by Seller, whether or not such
rights are created or evidenced by a License, and used or held
for use in connection with the operation of the Colstrip
Facilities including those listed in Section 1.01(a)(vi) of the
Disclosure Schedule (the "Transferable Permits");
(vii) Intangible Personal Property. All Intellectual
Property used or held for use principally in connection with the
operation of the Colstrip Facilities and all rights, privileges,
claims, causes of action and options relating or pertaining to
the operation of the Colstrip Facilities or the Assets,
including but not limited to the items listed in
Section 1.01(a)(vii) of the Disclosure Schedule (the "Intangible
Personal Property");
(viii) Security Deposits. All security deposits
deposited by or on behalf of Seller as lessee or sublessee under
the Real Property Leases (the "Tenant Security Deposits");
(ix) Prepaid Expenses. Except for prepaid expenses and
deposits of Seller attributable to any Excluded Asset or
Retained Liabilities, all prepaid expenses, progress payments
and deposits of or by Seller, rights to receive a prepaid
expense, deposit or progress payment, and cash in transit that
constitutes a prepaid expense, progress payment or deposit,
relating to the Assets or the ownership, operation and
maintenance of the Colstrip Facilities;
(x) Fuel Contracts. All of the fuel contracts listed
in Section 1.01(a)(x) of the Disclosure Schedule (the "Fuel
Contracts");
(xi) Colstrip Contracts. Seller's undivided interests
in and all of Seller's rights under the Contracts relating to
the Colstrip Facilities listed in Section 1.01(a)(xi) of the
Disclosure Schedule (the "Colstrip Contracts");
(xii) Allowance and Emission Reduction Credits. All of
the allowances and/or emission reduction credits described in
Section 1.01(a)(xii) of the Disclosure Schedule;
(xiii) Warranties. Any other warranties and
indemnities given by third parties relating to the Assets or to
the ownership, operation and maintenance of the Colstrip
Facilities other than in connection with any Excluded Assets or
Retained Liabilities;
(xiv) Colstrip Books and Records. All books, operating
and maintenance records, operating, safety and maintenance
manuals, engineering or design plans, drawings, blue prints and
as-built plans, specifications, procedures and similar items of
Seller relating specifically to the Colstrip Facilities (the
"Colstrip Books and Records"); and
(xv) PGE Colstrip Transmission Assets. Subject to
Sections 1.10 and 6.12, the PGE Colstrip Transmission Assets as
described in Section 1.01(a)(xv) of the Disclosure Schedule.
To the extent any of the Colstrip Books and Records are
items susceptible to duplication and are either (x) used in
connection with any of Seller's businesses other than the
Colstrip Facilities or (y) are required by Law to be retained by
Seller, Seller may deliver photostatic copies or other
reproductions from which, in the case of Colstrip Books and
Records referred to in clause (x), information solely concerning
Seller's businesses other than the Colstrip Facilities has been
deleted. To the extent that any Contract to be transferred
hereunder to Purchaser is also utilized by or is for the benefit
of any of Seller's businesses other than the Colstrip
Facilities, the rights and obligations under such Contracts
shall be to the extent practicable allocated between the
Colstrip Facilities and such other businesses in a fair and
equitable manner that is reasonably satisfactory to the parties.
(b) Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the Assets shall not include the
following assets of Seller (the "Excluded Assets"):
(i) Cash. All cash, commercial paper, certificates of
deposit and other bank deposits, treasury bills and other cash
equivalents;
(ii) Investments. Certificates of deposit, shares of
stock, securities, evidences of Indebtedness, interest in joint
ventures, partnerships, limited liability companies and other
entities;
(iii) Tax Refunds. All refunds or credits, if any, of
Taxes relating to the Assets due to Seller attributable to any
period ending on or prior to the Closing;
(iv) Real and Personal Property. The real or personal
property forming part of the Assets described in
Section 1.01(b)(iv) of the Disclosure Schedule, the delineation
and composition of which shall be subject to the Separation
Document;
(v) Corporate Records. All Books and Records of
Seller other than the Colstrip Books and Records;
(vi) Litigation Claims. Any rights (including
indemnification) and claims and recoveries under litigation of
Seller against third parties attributable to the period on or
prior to the Closing except to the extent relating to the
Assumed Liabilities;
(vii) Excluded Obligations. The rights of Seller in,
to and under all Contracts of any nature, the obligations of
Seller under which are not expressly assumed by Purchaser
pursuant to Section 1.02(a);
(viii) Tradename and Logo. All tradenames,
trademarks, service marks or logos owned by Seller or its
Subsidiaries including all of Seller's right, title and interest
in, to and under the names "PGE" "Portland General Electric
Company" or "Enron" or any related or similar trade names,
trademarks, service marks or logos;
(ix) Accounts Receivable. All trade accounts
receivable and all notes, bonds and other evidences of
Indebtedness of and rights to receive payments arising out of
sales occurring in connection with the operation of the Colstrip
Facilities prior to the Closing and the security agreements
related thereto, including any rights of Seller with respect to
any third party collection procedures or any other Actions or
Proceedings which have been commenced in connection therewith;
(x) Insurance. Life insurance policies of Seller's
Employees and all other insurance policies relating to the
Colstrip Interests;
(xi) Allowance and Emission Reduction Credits. All of
Seller's excess allowances and/or emission reduction credits
relating to the Colstrip Facilities that are not described in
Section 1.01(a)(xii) of the Disclosure Schedule;
(xii) All Other Assets. All other Assets and
Properties owned by Seller or its Affiliates not used in the
operation of the Colstrip Facilities; and
(xiii) Other. Seller's rights under this Agreement
and the Operative Agreements.
I.2 Liabilities
(a) Assumed Liabilities. In connection with the sale,
transfer, conveyance, assignment and delivery of the Assets
pursuant to this Agreement, on the terms and subject to the
conditions set forth in this Agreement, at the Closing,
Purchaser will assume and agree to pay, perform and discharge
when due all of the following Liabilities of Seller, direct or
indirect, known or unknown, absolute or contingent, which arise
and are attributable to the period after the date of the Closing
and relate solely to the Assets or which arose and relate to the
period on or prior to the date of the Closing and are
specifically referred to in this Section 1.02(a) as being
assumed by Purchaser (in all cases, except for Seller's
Liabilities in connection with the Pollution Control Bonds and
Liabilities constituting Retained Liabilities) (the "Assumed
Liabilities"):
(i) Real Property Lease Obligations. All Liabilities
of Seller under the Real Property Leases arising and to be
performed after the date of the Closing, and excluding any such
Liabilities arising or to be performed on or prior to the date
of the Closing;
(ii) Tangible Personal Property Obligations. All
Liabilities of Seller under any Contract related to the Tangible
Personal Property arising and to be performed after the date of
the Closing, and excluding any such Liabilities arising or to be
performed on or prior to the date of the Closing;
(iii) Liabilities under Business Contracts and
Transferable Permits. All Liabilities of Seller under the
Business Contracts and Transferable Permits, to the extent
transferred to Purchaser, arising and to be performed after the
date of the Closing, and excluding any such Liabilities arising
or to be performed on or prior to the date of the Closing;
(iv) Security Deposits. All Liabilities of Seller
with respect to any security deposit held by Seller as lessor or
sublessor under the Real Property Leases, to the extent and only
to the extent of the respective amount of the security deposit
delivered to Purchaser at the Closing with respect to any such
Real Property Lease (the "Landlord Security Deposits");
(v) Fuel Contracts and Colstrip Contracts. All
Liabilities of Seller under the Fuel Contracts and the Colstrip
Contracts arising and to be performed after the date of the
Closing and excluding any such Liabilities arising or to be
performed on or prior to the date of the Closing;
(vi) Pre-Closing Colstrip Contracts Liabilities. All
Liabilities of Seller described in Section 1.02(a)(vi) of the
Disclosure Schedule; and
(vii) Environmental Liabilities. Subject to
Section 10.01(b), all Environmental Liabilities; provided,
however, that nothing set forth in this Section 1.02(a) shall
require Purchaser to assume any Liability for (x) payment of any
fines or penalties imposed by a Governmental or Regulatory
Authority relating to the ownership, operation and maintenance
of the Colstrip Facilities on or prior to the Closing
("Environmental Fines and Penalties"), or (y) any Off-Site
Environmental Liabilities).
Except with respect to Environmental Liabilities that are
Assumed Liabilities, Assumed Liabilities shall not include
Liabilities to the extent such Liabilities, but for a breach or
default by Seller of its obligations, would have been paid,
performed or otherwise discharged specifically by their terms or
the terms hereof on or prior to the Closing as it relates to the
Assets or to the extent the same arise out of any such breach or
default.
(b) Retained Liabilities. Except for the Assumed
Liabilities, Purchaser shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall
have no liability for, any Liabilities of Seller, including
Seller's Liabilities under this Agreement and the Operative
Agreements including, but not limited to, the following (the
"Retained Liabilities"):
(i) any Liabilities of Seller in connection with the
Pollution Control Bonds or claims by bondholders;
(ii) any Environmental Fines and Penalties;
(iii) any Off-Site Environmental Liabilities;
(iv) any Liabilities of Seller in respect of any
Excluded Assets;
(v) any Liabilities of Seller for Taxes;
(vi) any Liabilities of Seller with respect to
commitments for the purchase or sale of power or fuel, other
than as provided in Section 1.02(a); and
(vii) any Liabilities of Seller relating to any
Employee of Seller.
I.3 Purchase Price; Allocation
(a) Purchase Price. Subject to any adjustment required
pursuant to Sections 1.10 or 4.12, the aggregate purchase price
for the Assets shall be an amount equal to the sum of (x) the
Base Purchase Price, (y) the Adjustment Amount, and (z) subject
to Sections 1.10 and 6.12, the PGE Transmission Amount
(collectively, the "Purchase Price"), payable in immediately
available United States funds at the Closing in the manner
provided in Section 1.05 or thereafter (as provided in
Section 1.04).
(b) Allocation of Purchase Price. Purchaser and Seller
shall negotiate in good faith prior to the Closing and determine
the allocation of the consideration paid by Purchaser for the
Assets. Each party hereto agrees (i) that any such allocation
shall be consistent with the requirements of Section 1060 of the
Code and the regulations thereunder, (ii) to complete jointly
and to file separately Form 8594 with its Federal Income Tax
Return consistent with such allocation for the tax year in which
the Closing occurs and (iii) that no party will take a position
on any income, transfer or gains Tax Return, before any
Governmental or Regulatory Authority charged with the collection
of any such Tax or in any judicial proceeding, that is in any
manner inconsistent with the terms of any such allocation
without the consent of the other party.
I.4 Purchase Price Adjustment
(a) Within 30 days after the Closing, Seller shall obtain
from MPC and deliver to Purchaser a statement (each, an
"Adjustment Statement") which reflects (i) the net book value,
as reflected on the books of Seller as of the Closing of all
fuel inventory (FERC account no. 151) and stores inventory (FERC
account no. 154) used at or in connection with the PGE Colstrip
Interests (the "Inventory Adjustment Amount"), and (ii) the
Maintenance and Capital Expenditures Amount applicable to the
PGE Colstrip Interests. The Inventory Adjustment Amount and the
Maintenance and Capital Expenditures Amount for the Closing are
referred to collectively as the "Adjustment Amount." The
Inventory Adjustment Amount will be based on an inventory survey
conducted by MPC within five days prior to the Closing
consistent with MPC's current inventory procedures (the
"Inventory Survey"). Seller will request that MPC permit an
employee, or representative, of Purchaser to observe the
Inventory Survey. Each Adjustment Statement shall be prepared
using the same generally accepted accounting principles,
policies and methods as MPC has historically used in connection
with the calculation of the items reflected on such Adjustment
Statement. Purchaser agrees to cooperate with Seller and MPC in
connection with the preparation of each Adjustment Statement and
related information, and shall provide to Seller and MPC such
books, records and information as may be reasonably requested
from time to time.
(b) Purchaser may dispute an Inventory Adjustment Amount
or a Maintenance and Capital Expenditures Amount; provided,
however, that Purchaser shall notify Seller and MPC in writing
of the disputed amount, and the basis of such dispute, within
ten (10) Business Days of Purchaser's receipt of the applicable
Adjustment Statement. In the event of a dispute with respect to
any part of an Adjustment Amount, Purchaser and Seller shall
attempt to reconcile their differences and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive on the parties. If Purchaser and Seller are unable
to reach a resolution of such differences within 30 days of
receipt of Purchaser's written notice of dispute to Seller,
Purchaser and Seller shall submit the amounts remaining in
dispute for determination and resolution to the Independent
Accounting Firm, which shall be instructed to determine and
report to the parties, within 30 days after such submission,
upon such remaining disputed amounts, and such report shall be
final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the
Independent Accounting Firm shall be shared equally by Purchaser
and Seller.
(c) Within ten (10) Business Days after Purchaser's
receipt of an Adjustment Statement, Purchaser shall pay all
undisputed amounts, or if there is a dispute with respect to any
amount of such Adjustment Statement within five (5) Business
Days after the final determination of any amounts on such
Adjustment Statement, Purchaser shall pay to Seller an amount
equal to the disputed Adjustment Amount as finally determined to
be payable with respect to such Adjustment Statement. All
Adjustment Statement payments shall be less the Estimated
Adjustment Amount; provided, however, that if such amount shall
be less than zero then within five (5) Business Days after the
final determination of such amount Seller will pay to Purchaser
the amount by which such amount is less than zero. Any amount
paid under this Section 1.04 shall be paid with interest for the
period commencing on the date of the Closing through the date of
payment, calculated at the prime rate for domestic banks as
published in the Wall Street Journal (Northeast Edition) in the
"Money Rates" section on the date of the Closing, and in
immediately available United States funds.
I.5 Closing
The Closing will take place at the offices of LeBoeuf,
Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York,
New York 10019, or at such other place as Purchaser and Seller
mutually agree, at 10:00 A.M. local time on the Closing Date.
At the Closing, Purchaser will pay an amount (the "Estimated
Purchase Price") in United States dollars equal to the sum of
(x) the Base Purchase Price, as the same may be adjusted
pursuant to Sections 1.10 and 4.12, and (y) the Estimated
Adjustment Amount for the Closing, by wire transfer of
immediately available United States funds to such account as
Seller may reasonably direct by written notice delivered to
Purchaser by Seller at least two (2) Business Days before the
Closing. Simultaneously, (a) Seller will assign and transfer to
Purchaser good and valid title in and to the Assets (free and
clear of all Liens, other than Permitted Liens, as such term is
defined with respect to periods after the Closing) by delivery
of (i) a General Assignment and Bill of Sale substantially in
the form of Exhibit A hereto (the "General Assignment"), duly
executed by Seller, covering the Personal Property comprising
the Assets except for the Intellectual Property, (ii) an
assignment of the Intellectual Property in form and substance
reasonably satisfactory to Purchaser, (iii) (A) special warranty
deeds in proper statutory form for recording and otherwise in
form and substance reasonably satisfactory to Purchaser
conveying good and marketable title to the Real Property in
which Seller has a fee or easement interest (subject only to
Permitted Liens), (B) an assignment in form and substance
reasonably satisfactory to Purchaser conveying valid and
subsisting title to the Real Property in which Seller has a
permit interest or other interest (neither fee nor
easement)(subject only to Permitted Liens), and (C) all
necessary documentation to transfer and convey to Purchaser the
water rights listed in Section 1.01(a)(vi) of the Disclosure
Schedule including water rights transfer certificates executed
in proper form to be filed with the appropriate Governmental or
Regulatory Authority, and (iv) such other good and sufficient
instruments of conveyance, assignment and transfer, in form and
substance reasonably acceptable to Purchaser's counsel, as shall
be effective to vest in Purchaser good and valid title to the
Assets, good and marketable title to the Real Property in which
Seller has a fee or easement interest and valid and subsisting
title to the Real Property in which Seller has a permit interest
or other interest (neither fee nor easement), in each case
subject only to Permitted Liens (the General Assignment and the
other instruments referred to in clauses (a) (ii), (iii) and
(iv) being collectively referred to herein as the "Assignment
Instruments"), and (b) Purchaser will assume from Seller the due
payment, performance and discharge of the Assumed Liabilities by
delivery of (i) an Assumption Agreement substantially in the
form of Exhibit B hereto (the "Assumption Agreement"), duly
executed by Purchaser, and (ii) such other good and sufficient
instruments of assumption, in form and substance reasonably
acceptable to Seller's counsel, as shall be effective to cause
Purchaser to assume the Assumed Liabilities as and to the extent
provided in Section 1.02(a) (the Assumption Agreement and such
other instruments referred to in clause (b) (ii) being
collectively referred to herein as the "Assumption
Instruments"). At the Closing, there shall also be delivered to
Seller and Purchaser the opinions, certificates and other
contracts, documents and instruments required to be delivered
under Articles VI and VII.
I.6 Prorations
The following items relating to the Assets, the ownership
of the PGE Colstrip Interests, and the operation of the Colstrip
Facilities, will be allocated pro rata per diem for the tax year
that includes the date of the Closing, with Seller liable for
such items to the extent they are allocable to the period prior
to the date of the Closing and Purchaser liable for such items
to the extent they are allocable to periods beginning with and
subsequent to the date of the Closing:
(a) Property Taxes on or with respect to the Assets.
(b) Rents, additional rents, Taxes, to the extent normally
adjusted in connection with similar transactions, and other
items payable by Seller under the Real Property Leases and the
Business Contracts.
(c) The amount of rents, Taxes and charges for sewer,
water, telephone, electricity and other utilities relating to
the Real Property and the real property subject to the Real
Property Leases.
(d) All other items (excluding other Taxes) normally
adjusted in connection with similar transactions.
Except as otherwise agreed by the parties, the net amount
of all such prorations will be settled and paid on the date of
the Closing. At least ninety (90) days prior to the Closing
Date, Seller will provide Purchaser with a reasonably detailed
schedule showing a calculation of the estimated prorations as if
the Closing were occurring on such date. If the Closing shall
occur before a real estate Tax rate is fixed, the apportionment
of Taxes shall be based upon the Tax rate for the preceding year
applied to the latest assessed valuation and such Taxes shall be
reprorated upon the request of Seller, on the one hand, or
Purchaser, on the other hand, made within sixty (60) days after
the date that the actual amounts become available. Seller and
Purchaser agree to furnish each other with such documents and
other records as may be reasonably requested in order to confirm
all adjustment and proration calculations made pursuant to this
Section 1.06.
I.7 Further Assurances; Post-Closing Cooperation
(a) Subject to the terms and conditions of this Agreement,
at any time or from time to time after the Closing, at
Purchaser's request and without further consideration, Seller
shall execute and deliver to Purchaser such other instruments of
sale, transfer, conveyance, assignment and confirmation, provide
such materials and information and take such other actions as
Purchaser may reasonably deem necessary or desirable in order
more effectively to transfer, convey and assign to Purchaser,
and to confirm Purchaser's title to, all of the Assets, and, to
the full extent permitted by Law, to put Purchaser in actual
possession and control of the Assets and to assist Purchaser in
exercising all rights with respect thereto, and otherwise to
cause Seller to fulfill its obligations under this Agreement and
the Operative Agreements. From time to time after the Closing,
at Purchaser's request and expense, Seller will reasonably
cooperate with Purchaser in its efforts to maximize any Tax
benefits associated with the Assets with respect to periods
following the Closing and to minimize the Tax costs associated
with the transactions contemplated hereby; provided such
cooperation does not adversely affect Seller's Tax position.
From time to time after the Closing, at Seller's request and
expense, Purchaser will reasonably cooperate with Seller in its
efforts to maximize any Tax benefits associated with the Assets
with respect to periods prior to the Closing and to minimize the
Tax costs associated with the transactions contemplated hereby;
provided such cooperation does not adversely affect Purchaser's
Tax position.
(b) Following the Closing, each party will afford the
other party, its counsel and its accountants, during normal
business hours, reasonable access to the books, records and
other data relating to the PGE Colstrip Interests in its
possession with respect to periods prior to the Closing and the
right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by the requesting party
in connection with (i) the preparation of Tax Returns, (ii) the
determination or enforcement of rights and obligations under
this Agreement, (iii) compliance with the requirements of any
Governmental or Regulatory Authority, (iv) the determination or
enforcement of the rights and obligations of any Indemnified
Party or (v) in connection with any actual or threatened Action
or Proceeding. Further each party agrees for a period extending
six (6) years after the Closing not to destroy or otherwise
dispose of any such books, records and other data unless such
party shall first offer in writing to surrender such books,
records and other data to the other party and such other party
shall not agree in writing to take possession thereof during the
thirty (30) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns,
other documents or reports required to be filed with
Governmental or Regulatory Authorities or its financial
statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information,
documents or records relating to the PGE Colstrip Interests not
referred to in paragraph (b) above, and such information,
documents or records are in the possession or control of the
other party, such other party shall use its best efforts to
furnish or make available such information, documents or records
(or copies thereof) at the recipient's request, cost and
expense. Any information obtained by such party in accordance
with this paragraph shall be held confidential by such party in
accordance with Section 13.06.
(d) Notwithstanding anything to the contrary contained in
this Section 1.07, if the parties are in an adversarial
relationship in litigation or arbitration, the furnishing of
information, documents or records in accordance with paragraph
(c) of this Section 1.07 shall be subject to applicable rules
relating to discovery.
I.8 Third Party Consents
To the extent that any Business Contract, Transferable
Permit, Fuel Contract or Colstrip Contract is not assignable
without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if
such assignment or attempted assignment would constitute a
breach thereof. Seller and Purchaser shall use their reasonable
efforts to obtain the consent of such other party to the
assignment of any such Business Contract, Transferable Permit,
Fuel Contract or Colstrip Contract to Purchaser in all cases in
which such consent is or may be required for such assignment.
If any such consent shall not be obtained, or if any attempted
assignment would be ineffective or would impair Purchaser's
rights and obligations so that Purchaser would not in effect
acquire the benefit of substantially all of such rights and
obligations, Seller shall cooperate with Purchaser in any
reasonable arrangement, to the extent legally permissible,
designed to provide for Purchaser the benefits intended to be
assigned to Purchaser under the relevant Business Contract,
Transferable Permit, Fuel Contract or Colstrip Contract,
including enforcement at the cost and for the account of
Purchaser of any and all rights of Seller against the other
party thereto arising out of the breach or cancellation thereof
by such other party or otherwise. If and to the extent that
such arrangement is not made in a manner reasonably satisfactory
to Purchaser, Purchaser shall have no obligation pursuant to
Section 1.02 or otherwise only with respect to any such Business
Contract, Transferable Permit, Fuel Contract or Colstrip
Contract. The provisions of this Section 1.08 shall not affect
the right of Purchaser not to consummate the transactions
contemplated by this Agreement as provided in Section 1.10 or if
the conditions to its obligations hereunder contained in
Sections 6.05, 6.06 and 6.07 have not been fulfilled.
I.9 Insurance Proceeds
If any of the Assets (other than an Asset excluded under
Section 1.10) is destroyed, damaged or taken in condemnation,
the insurance proceeds or condemnation award with respect
thereto shall be an Asset; provided, however, Seller agrees not
to settle or compromise any amounts concerning such Assets
during negotiations with Seller's insurance company without
Purchaser's prior consent. At the Closing, Seller shall pay or
credit to Purchaser any such insurance proceeds or condemnation
awards received by it on or prior to the Closing and shall
assign to or assert for the benefit of Purchaser all of its
rights against any insurance companies, Governmental or
Regulatory Authorities and others with respect to such damage,
destruction or condemnation. As and to the extent that there is
available insurance under policies maintained by Seller and its
Affiliates, predecessors and successors in respect of any
Assumed Liability, except for any such insurance proceeds with
respect to which the insured is directly or indirectly self-
insured or has agreed to indemnify the insurer, Seller shall
cause such insurance to be applied toward the payment of such
Assumed Liability. The provisions of this Section 1.09 shall
not affect the right of Purchaser not to consummate the
transactions contemplated by this Agreement if the conditions to
its obligations hereunder contained in Sections 6.01 or 6.08
have not been fulfilled.
I.10 Inclusion/Exclusion of Certain Assets
(a) Purchaser agrees to use its reasonable best efforts to
obtain the approval described in clause (ii) of the definition
of Purchaser Required Regulatory Approvals in a manner
reasonably satisfactory to Purchaser that will allow Purchaser
to purchase and own, operate and maintain after the Closing the
PGE Colstrip Transmission Assets, and to consult with Seller
prior to abandoning its efforts to do so. If, notwithstanding
Purchaser's compliance with the preceding sentence and with
Section 5.01, such Purchaser Required Regulatory Approval is not
obtained from FERC with respect to the proposed purchase,
ownership or operation of the PGE Colstrip Transmission Assets,
or is finally denied by FERC, within seven (7) months from the
date of execution of this Agreement or, in the event that the
condition set forth in Section 6.12 has not been satisfied on or
prior to the Closing, then (i) at the Closing, Seller and
Purchaser shall enter into the Transmission Service Agreement
and the Separation Document, (ii) the PGE Colstrip Transmission
Assets shall be Excluded Assets hereunder, (iii) the Purchase
Price shall be reduced by the PGE Colstrip Transmission Amount,
and (iv) the conditions to Closing described in Sections 6.05
and 7.05 shall be deemed satisfied with respect to such
Purchaser Required Regulatory Approval solely with respect to
the PGE Colstrip Transmission Assets but shall not be deemed
satisfied with respect to any other Assets, provided that Seller
shall have the right, in its sole discretion, to waive such
seven (7) month period and require Purchaser to continue to
pursue such approval, consistent with Purchaser's obligations
under this Section 5.01 hereof, for such time period(s) as
Seller may determine, not to exceed the time period provided for
in Section 11.01(d) hereof.
(b) Purchaser has been provided copies of title insurance
commitments covering certain of the Assets and intends to obtain
at its expense additional title commitments and title policies.
Seller agrees to use reasonable efforts to cure title objections
of which Seller is notified by Purchaser, to the extent title
would not otherwise satisfy Seller's obligations with respect to
the title to be delivered by Seller in compliance with Section
1.05(a) of this Agreement. From and after the date hereof and
through the Closing, Seller shall use reasonable efforts to cure
and remove exceptions to title to the Real Property (other than
those exceptions referred to in the preceding sentence) of which
Seller is notified by Purchaser in writing; provided, however,
that in no event shall Seller be obligated to incur expenses or
make payments of any nature in excess of $150,000 in discharging
its obligations set forth in this sentence. Nothing in the two
preceding sentences shall change or otherwise affect the nature
of the title to the Real Property that Seller is obligated to
transfer to Purchaser in compliance with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as
follows:
II.1 Corporate Existence of Seller
Seller is a corporation duly incorporated, validly existing
and in good standing under the Laws of the State of Oregon, and
has full corporate power and authority to own, use and lease the
Assets. Seller is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each
jurisdiction in which the Assets make such qualification
necessary, except in each case in those jurisdictions where the
failure to be so duly qualified or licensed and in good standing
would not create a Seller Material Adverse Effect. Seller has
heretofore made available to Purchaser complete and correct
copies of its articles of incorporation, as amended, and bylaws
(or other comparable corporate charter documents), as currently
in effect.
II.2 Authority
Seller has full corporate power and authority to execute
and deliver this Agreement and the Operative Agreements to which
it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated
hereby and thereby, including to sell and transfer (pursuant to
this Agreement) the Assets. The execution and delivery by
Seller of this Agreement and the Operative Agreements to which
it is a party, and the performance by Seller of its obligations
hereunder and thereunder, have been duly and validly authorized
by the Board of Directors of Seller, no other corporate action
on the part of Seller or its shareholder being necessary. This
Agreement has been duly and validly executed and delivered by
Seller and, subject to receipt of Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals,
constitutes, and upon the execution and delivery by Seller of
the Operative Agreements to which it is a party, such Operative
Agreements will constitute, legal, valid and binding obligations
of Seller enforceable against Seller in accordance with their
terms except as the same may be limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium or other
similar Laws relating to or affecting the rights of creditors
generally, or by general equitable principles.
II.3 No Conflicts
Except as set forth in Section 2.03 of the Disclosure
Schedule, and other than obtaining Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals, the
execution and delivery by Seller of this Agreement do not, and
the execution and delivery by Seller of the Operative Agreements
to which it is a party, the performance by Seller of its
obligations under this Agreement and such Operative Agreements
and the consummation of the transactions contemplated hereby and
thereby will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the articles of
incorporation, as amended, or bylaws, as amended (or other
comparable corporate charter documents) of Seller;
(b) require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority, except (x) for the Seller Required
Regulatory Approvals and the Purchaser Required Regulatory
Approvals, or (y) for those requirements which become applicable
to Seller as a result of the specific regulatory status of
Purchaser (or any of its Affiliates) or as a result of any other
facts that specifically relate to the business or activities in
which Purchaser (or any of its Affiliates) is or proposes to be
engaged;
(c) result in a default (or give rise to any right of
termination, cancellation or acceleration or require any consent
or approval) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Seller is a party or by which
Seller, or any of the Assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration
or any consent or approval) as to which requisite waivers or
consents have been obtained; or
(d) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to Seller
or any of its Assets and Properties.
II.4 Governmental Approvals and Filings
Except for (i) Seller Required Regulatory Approvals and
(ii) with respect to the PGE Colstrip Transmission Assets as set
forth in Section 1.01(a)(xv) of the Disclosure Schedule, no
consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority on the part of Seller is
required in connection with the execution, delivery and
performance of this Agreement or any of the Operative Agreements
to which it is a party or the consummation of the transactions
contemplated hereby or thereby, except those as would be
required solely as a result of the identity or the legal or
regulatory status of Purchaser or any of its Affiliates.
II.5 Reports
Since December 31, 1995, Seller has filed or caused to be
filed with the SEC, the applicable state or local utility
commissions or regulatory bodies and FERC, all material forms,
statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by it
with respect to the PGE Colstrip Interests under each of the
Securities Act, the Exchange Act, the applicable state public
utility Laws, the Federal Power Act, the Holding Company Act and
the respective rules and regulations thereunder, all of which
complied in all material respects with all applicable
requirements of the appropriate act and the rules and
regulations thereunder in effect on the date each such report
was filed, and there are no material misstatements or omissions
in respect of such reports.
II.6 Taxes
Seller has timely filed or will timely file all Tax Returns
required to be filed by Seller with respect to the ownership,
operation and maintenance of the Assets and has paid or will pay
all Taxes shown to be due on such returns with respect to all
tax periods ending prior to the Closing. Except for the
properties financed with the Pollution Control Bonds, no other
Assets have been financed using tax exempt financing. The
owners of the Colstrip Facilities have jointly made a timely and
effective affirmative election pursuant to Section 761(a) of the
Code and Treasury Regulation Section 1.761-2(b) to be excluded
from all of subchapter K of the Code, and such election has not
been modified, revoked or otherwise altered, and remains in
effect. Seller has not taken and has not been notified that any
of such owners has taken any action inconsistent with such
election.
II.7 Legal Proceedings
Except as disclosed in Section 2.07 of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Seller, threatened against, relating to or
affecting Seller with respect to the ownership, operation or
maintenance of the Assets which could reasonably be expected
(i) to result in the issuance of an Order restraining, enjoining
or otherwise prohibiting or making illegal the consummation of
any of the transactions contemplated by this Agreement or any of
the Operative Agreements, or (ii) individually or in the
aggregate with other such Actions or Proceedings, to create a
Seller Material Adverse Effect; and
(b) there are no Orders outstanding against Seller with
respect to the ownership, operation and maintenance of the
Assets which, individually or in the aggregate with other such
Orders, would have a Seller Material Adverse Effect.
II.8 Compliance with Laws and Orders
Except as disclosed in Section 2.08 of the Disclosure
Schedule, Seller is not in material violation of or in material
default under any Law or Order applicable to Seller's ownership
of the Assets or, to Seller's Knowledge, the operation and
maintenance of the Assets.
II.9 Real Property
(a) Section 1.01(a)(i) of the Disclosure Schedule contains
a description of, and exhibits indicating the location of, the
Real Property owned by Seller and included in the Assets, and
Section 1.01(a)(ii)(A) of the Disclosure Schedule contains a
description of, and exhibits indicating the location of, each
parcel of real property leased by Seller (as lessor, sublessor,
lessee or sublessee), or as to which Seller holds easements or
other rights, and included in the Assets.
(b) Seller, or with respect to Real Property described in
Exhibit D to Section 1.01(a)(i) of the Disclosure Schedule, MPC
or its Affiliates, as the case may be, has, and at Closing
Seller will have, good and marketable title to the Real Property
in which Seller (or with respect to the Real Property described
in the aforementioned Exhibit D, MPC or its Affiliates, as the
case may be) holds a fee or easement interest. Pursuant to the
terms and conditions of the Colstrip Contracts, Seller has, and
to Seller's Knowledge, MPC or its Affiliates has, valid and
subsisting title to the Real Property in which Seller (or MPC or
its Affiliates, as the case may be) holds a permit interest or
other interest, in each case, free and clear of all Liens other
than Permitted Liens. Except for the Permitted Liens and the
Real Property subject to Real Property Leases described in
Section 1.01(a)(ii)(A) of the Disclosure Schedule, Seller,
subject to the terms and conditions of the Colstrip Contracts,
is in possession of the Real Property and there are no third
party licenses or tenants at the sites of the Real Property or
Real Property Leases.
(c) Seller has a valid and subsisting leasehold estate in
and the right to quiet enjoyment of the real properties subject
to the Real Property Leases described in Section 1.01(a)(ii)(B)
of the Disclosure Schedule for the full term thereof. Each Real
Property Lease to which Seller is a party is a legal, valid and
binding agreement, enforceable in accordance with its terms, of
Seller and of each other Person that is a party thereto, and
except as set forth in Section 2.09(c) of the Disclosure
Schedule, there is no default (or any condition or event which,
after notice or lapse of time or both, would constitute a
default) thereunder.
(d) Seller has made available to Purchaser prior to the
execution of this Agreement true and complete copies of (i) any
current surveys in Seller's possession or any policies of title
insurance currently in force and in the possession of Seller
with respect to the Real Property, and (ii) all Real Property
Leases (including any amendments and renewal letters) and, to
the extent reasonably available, all other documents referred to
in clause (i) of this paragraph (d) with respect to the real
property subject to the Real Property Leases described in
Section 1.01(a)(ii)(B) of the Disclosure Schedule.
(e) Except set forth in Section 12.01(e) of the Disclosure
Schedule, to Seller's Knowledge all Real Properties have access
to a public road and are zoned for their current uses. No fee
ownership, lease, right of way, easement, license or other right
in real property, other than the Real Property and the Real
Property Leases, is necessary for the Purchaser to own, operate
and maintain the Asssets substantially as currently owned,
operated and maintained by or on behalf of Seller. Seller or to
Seller's Knowledge, MPC or its Affiliates, has not received any
written notice that any of the improvements on any of the Real
Property or Real Property Leases, including without limitation
the Easements, or any appurtenances thereto or equipment therein
or the operation or maintenance thereof, violate any restrictive
covenant or the terms, conditions or restrictions of any
easement.
II.10 Tangible Personal Property
Seller, subject to the terms and conditions of the Colstrip
Contracts, or, to Seller's Knowledge, MPC or its Affiliates, is
in possession of and has good and valid title to, or has valid
leasehold interests in or valid rights under Contract to use,
all the Tangible Personal Property used in and individually or
in the aggregate with other such property material to the
ownership, operation and maintenance of the Colstrip Facilities.
To Seller's Knowledge all the Tangible Personal Property is free
and clear of all Liens, other than Permitted Liens and Liens
disclosed in Section 2.10 of the Disclosure Schedule, and is in
all material respects in good working order and condition,
ordinary wear and tear excepted; provided, however, that if the
PGE Transmission Assets are not purchased by Purchaser, the
Separation Document will be considered a Permitted Lien with
respect to the property subject thereto.
II.11 Intellectual Property Rights
Seller has not received notice that Seller is infringing
any Intellectual Property of any other Person in connection with
the Assets or the operation of the Colstrip Facilities, no claim
is pending or has been made against Seller to such effect that
has not been resolved and, to its Knowledge, Seller is not
infringing any Intellectual Property of any other Person.
II.12 Contracts
(a) Section 2.12(a) of the Disclosure Schedule (with
paragraph references corresponding to those set forth below)
contains a true and complete list of each of the following
Contracts (true and complete copies of which, together with all
amendments and supplements thereto, have been made available to
Purchaser prior to the execution of this Agreement) to which
Seller is a party (other than indirectly pursuant to Seller's
obligations under the Colstrip Contracts) and which relate to
the operation of the Colstrip Facilities or by which any of the
Assets are bound:
(i) all Contracts with any Person containing any pro-
vision or covenant prohibiting or limiting the ability of Seller
to engage in any activity relating to the operation of the
Colstrip Facilities or compete with any Person in connection
with the operation of the Colstrip Facilities or prohibiting or
limiting the ability of any Person to compete with Seller in
connection with the operation of the Colstrip Facilities;
(ii) all partnership, joint venture, shareholders' or
other similar Contracts with any Person in connection with the
operation of the Colstrip Facilities;
(iii) all Contracts with distributors, dealers,
manufacturer's representatives, sales agencies or franchises
with whom Seller deals in connection with the operation of the
Colstrip Facilities which in any case involve the payment or
potential payment, pursuant to the terms of any such Contract,
by or to Seller of more than $250,000 annually;
(iv) all Contracts relating to the future disposition
or acquisition of any Assets, other than dispositions or
acquisitions of Inventory in the ordinary course of business;
and
(v) all other Contracts (other than the Real Property
Leases) not described above that constitute Assumed Liabilities
with respect to the operation of the Colstrip Facilities that
(A) involve the payment or potential payment, pursuant to the
terms of any such Contract, by or to Seller of more than
$250,000 annually and (B) cannot be terminated within sixty (60)
days after giving notice of termination without resulting in any
material cost or penalty to Seller (or, after the Closing, to
Purchaser).
(b) Each Contract required to be disclosed in
Section 2.12(a) of the Disclosure Schedule and each of the
Colstrip Contracts, the Fuel Contracts and each of the Business
Contracts which involves the payment or potential payment by or
to Seller of more than $250,000 annually is in full force and
effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms, of Seller and of each
other party thereto; and except as disclosed in Section 2.12(b)
of the Disclosure Schedule neither Seller nor, to the Knowledge
of Seller, any other party to such Contract is in violation or
breach of or default under any such Contract (or with notice or
lapse of time or both, would be in violation or breach of or
default under any such Contract).
II.13 Licenses
(a Seller has been and is in material compliance with all
Licenses, including without limitation those Licenses listed in
Section 2.13(b) of the Disclosure Schedule, necessary to allow
Seller to obtain the benefits of the PGE Colstrip Interests as
currently enjoyed by Seller. Except as disclosed in
Section 2.13(a) of the Disclosure Schedule, Seller has not
received any written notification that it is in violation, nor
does Seller otherwise have Knowledge of any violations, of any
of such Licenses, or any Law or Order of any Governmental or
Regulatory Authority applicable to it.
(b Section 2.13(b) of the Disclosure Schedule sets forth
all material Licenses and Environmental Permits relating to the
ownership, operation and maintenance of the Colstrip Facilities
to which Seller is a named licensee or permittee.
II.14 Insurance
Except as set forth in Section 2.14 of the Disclosure
Schedule, all material policies of fire, liability, worker's
compensation and other forms of insurance owned or held by
Seller (other than indirectly through Seller's obligations under
the Colstrip Contracts) and insuring the Assets are in full
force and effect, all premiums with respect thereto covering all
periods up to and including the date as of which this
representation is being made have been paid (other than
retroactive premiums which may be payable with respect to
comprehensive general liability and worker's compensation
insurance policies), and no notice of cancellation or
termination has been received by Seller with respect to any such
policy which was not replaced on substantially similar terms
prior to the date of such cancellation. Except as set forth in
Section 2.14 of the Disclosure Schedule, Seller has not been
refused any insurance with respect to the Assets nor has its
coverage been limited by any insurance carrier to which it has
applied for any such insurance or with which it has carried
insurance during the last twelve months.
II.15 Environmental Matters
With respect to its ownership interest in the PGE Colstrip
Interests, except as disclosed in Section 2.15 of the Disclosure
Schedule:
(a Seller and, to Seller's Knowledge, MPC, holds, and is
in substantial compliance with, all Licenses which are required
for Seller to own, and for MPC to operate and maintain, the
Assets under applicable Environmental Laws ("Environmental
Permits"), and Seller has not received any written notice of any
violation of any Environmental Law that has not heretofore been
resolved and Seller, and, to Seller's Knowledge, MPC, is
otherwise in substantial compliance with applicable
Environmental Laws with respect to the ownership, operation and
maintenance of the Assets.
(b Seller has not received any written request for
information, or been notified that it is a potentially
responsible party, under any Environmental Law with respect to
any on-site location relating to the ownership, operation and
maintenance of the Assets.
(c Seller has not entered into or agreed to any consent
decree or order, and is not subject to any outstanding judgment,
decree, or judicial order relating to compliance with any
Environmental Law or to investigation or cleanup of Hazardous
Materials under any Environmental Law relating to the ownership,
operation and maintenance of the Assets.
(d There are no claims, actions, proceedings or
investigations pending or, to the Knowledge of Seller,
threatened against Seller before any court, Governmental or
Regulatory Authority relating to any Environmental Law relating
to the PGE Colstrip Interests with respect to the ownership,
operation and maintenance of the Assets.
(e To its Knowledge, Seller or MPC has made available to
Purchaser: (i) a list of all material environmental reports
and/or audits prepared by or for Seller within the past five (5)
years which discuss the environmental conditions of the Assets;
and (ii) a list of all underground storage tanks and/or surface
impoundments located on the Assets which contain or have
contained Hazardous Materials.
The representations and warranties made in this
Section 2.15 are Seller's exclusive representations and
warranties relating to environmental matters.
II.16 Absence of Condemnation Proceedings
Neither the whole nor any portion of the PGE Colstrip
Interests is subject to any pending or, to Seller's Knowledge,
threatened suit or Order for condemnation or other taking by any
public authority.
II.17 Regulation as a Utility
Seller is a public utility company within the meaning of
the Holding Company Act. Except as set forth in Section 2.17 of
the Disclosure Schedule, Seller is not subject to regulation as
a public utility or public service company (or similar
designation) by the United States, any state of the United
States, any foreign country or any municipality or any political
subdivision of the foregoing.
II.18 Brokers
Except for Goldman, Sachs & Co., whose fees, commissions
and expenses are the sole responsibility of MPC, Morgan Stanley
Dean Witter, whose fees, commissions and expenses are the sole
responsibility of Puget and Merrill Lynch & Co., whose fees,
commissions and expenses are the sole responsibility of Seller,
all negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Seller directly
with Purchaser without the intervention of any Person on behalf
of Seller in such manner as to give rise to any valid claim by
any Person against Purchaser for a finder's fee, brokerage
commission or similar payment.
II.19 Acknowledgment of Purchaser
Purchaser expressly acknowledges that Seller is the holder
of a non-controlling interest in the Colstrip Facilities
pursuant to the Colstrip Contracts, and that Seller (i) did not
manage the construction of the Colstrip Facilities, (ii) is not
now and has never been the operator (or otherwise in physical
possession) of the Colstrip Facilities, including with respect
to issues involving the year 2000 compliance, and (iii) was not
involved in or responsible for the creation or provision of data
or information about the Colstrip Facilities by MPC or any other
co-owner of the Colstrip Facilities.
II.20 Disclaimers Regarding Assets
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE ASSETS
ARE BEING TRANSFERRED "AS IS, WHERE IS" AND SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR
QUALITY OF THE ASSETS OR THE PROSPECTS (FINANCIAL AND
OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS AND SELLER
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, OR ANY PART
THEREOF.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as
follows:
III.1 Corporate Existence
Purchaser is a corporation duly incorporated, validly
existing and in good standing under the Laws of the Commonwealth
of Pennsylvania and has full corporate power and authority to
conduct its business as it is now being conducted and to own,
lease and operate its Assets and Properties. Purchaser has full
corporate power and authority to enter into this Agreement and
the Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Purchaser has
heretofore made available to Seller complete and correct copies
of its articles of incorporation and by-laws (or other
comparable corporate charter documents), as currently in effect.
III.2 Authority
The execution and delivery by Purchaser of this Agreement
and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and
thereunder, have been duly and validly authorized by the Board
of Directors of Purchaser, no other corporate action on the part
of Purchaser or its stockholders being necessary. This
Agreement has been duly and validly executed and delivered by
Purchaser and, subject to receipt of Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals,
constitutes, and upon the execution and delivery by Purchaser of
the Operative Agreements to which it is a party, such Operative
Agreements will constitute, legal, valid and binding obligations
of Purchaser enforceable against Purchaser in accordance with
their terms except as the same may be limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium or other
similar Laws relating to or affecting the rights of creditors
generally, or by general equitable principles.
III.3 No Conflicts
Except as set forth in Section 3.03 of the Disclosure
Schedule, and other than obtaining Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals, the
execution and delivery by Purchaser of this Agreement do not,
and the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, the performance by Purchaser
of its obligations under this Agreement and such Operative
Agreements and the consummation of the transactions contemplated
hereby and thereby will not:
(a conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the articles of
incorporation or by-laws (or other comparable corporate charter
documents) of Purchaser;
(b require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority except for Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals;
(c result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation
to which Purchaser is a party or by which any of its Assets and
Properties may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained; or
(d conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to
Purchaser or any of its Assets and Properties.
III.4 Governmental Approvals and Filings
Except for Purchaser Required Regulatory Approvals, no
consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority on the part of Purchaser is
required in connection with the execution, delivery and
performance of this Agreement or any of the Operative Agreements
to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
III.5 Legal Proceedings
Except as disclosed in Section 3.05 of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below):
(a there are no Actions or Proceedings pending or, to
the Knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which
could reasonably be expected (i) to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated
by this Agreement or any of the Operative Agreements, or
(ii) individually or in the aggregate with other such Actions or
Proceedings, to create a Purchaser Material Adverse Effect; and
(b there are no Orders outstanding against Purchaser
which, individually or in the aggregate with other such Orders,
would have a Purchaser Material Adverse Effect.
III.6 Compliance with Laws and Orders
Except as disclosed in Section 3.06 of the Disclosure
Schedule, Purchaser is not in violation of or in default under
any Law or Order applicable to Purchaser or its Assets and
Properties.
III.7 Regulation as a Utility
Purchaser is not a public utility company within the
meaning of the Holding Company Act. As of the Closing,
Purchaser will be subject to regulation as a public utility and
as a licensee under the Federal Power Act. Purchaser is not
otherwise subject to regulation as a public utility or public
service company (or similar designation) by the United States,
any state of the United States (except to the extent that assets
acquired by Purchaser under the MPC Purchase Agreement and
related activities in connection therewith will subject
Purchaser to regulation under Montana law), any foreign country
or any municipality or any political subdivision of the
foregoing.
III.8 Brokers
Except for Chase Securities Inc., whose fees, commissions
and expenses are the sole responsibility of Purchaser, all
negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Purchaser directly
with Seller without the intervention of any Person on behalf of
Purchaser in such manner as to give rise to any valid claim by
any Person against Purchaser for a finder's fee, brokerage
commission or similar payment.
III.9 Financing
Purchaser has cash and/or commitments for equity
contributions or credit facilities sufficient (and has provided
Seller with evidence thereof) to pay the Base Purchase Price and
to make all related payments of fees and expenses in connection
with the transactions contemplated by this Agreement and the
Operative Agreements.
III.10 Financial Statements
Purchaser has delivered to Seller the financial statements
of Purchaser listed on Section 3.10 of the Disclosure Schedule,
and such financial statements and notes fairly present the
financial condition and the results of operations, changes in
stockholders' equity, and cash flow of Purchaser as of the
respective dates of and for the periods referred to therein, all
in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments
(the effect of which will not, individually or in the aggregate,
be materially adverse) and the absence of notes and schedules.
III.11 Opportunity to Inspect Assets
Prior to its execution of this Agreement, Purchaser has
conducted an independent investigation of the Assets. In making
its decision to execute this Agreement, and to purchase the
Assets, Purchaser has relied upon the terms and provisions of
this Agreement and the results of such independent
investigation.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all
times from and after the date hereof until the Closing, and,
with respect to Section 4.08 thereafter, Seller will comply with
all covenants and provisions of this Article IV, except to the
extent Purchaser may otherwise consent in writing.
IV.1 Regulatory and Other Approvals
Seller will (a)(i) take all reasonable steps necessary or
desirable, and proceed diligently and in good faith and use all
reasonable efforts, as promptly as practicable to obtain all
consents, approvals (including Final Orders) or actions of, to
make all filings with and to give all notices to Governmental or
Regulatory Authorities provided that the Final Order(s) of the
OPUC approving the transaction and the terms and conditions of
each of the Operative Agreements and the respective regulatory
treatment of any and all financial impacts thereof in each case
shall be in form and substance satisfactory to Seller in its
reasonable discretion and (ii) take all commercially reasonable
steps necessary or desirable to obtain all consents, approvals
or actions, and give all notices to, any other Person required
of Seller, in each case, to consummate the transactions
contemplated hereby and by the Operative Agreements, including
those described in Section 2.03 of the Disclosure Schedule and
Seller Required Regulatory Approvals, or required for Purchaser
to own, operate or maintain, on and after the Closing, the
Assets substantially as such assets are currently owned,
operated and maintained by Seller, (b) provide such other
information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or
Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) provide reasonable cooperation
(i) to Purchaser in obtaining all Purchaser Required Regulatory
Approvals and other consents, approvals or actions of, making
all filings with and giving all notices to Governmental or
Regulatory Authorities or other Persons required of Purchaser to
consummate the transactions contemplated hereby and by the
Operative Agreements and (ii) to Purchaser and Purchaser's
potential lenders in connection with Purchaser Financing for the
transactions contemplated by this Agreement. Prior to making
any filings with a Governmental or Regulatory Authority pursuant
to this Section 4.01, Seller agrees to provide copies of such
filings to Purchaser. Nothing in this Agreement shall require
Seller to institute litigation or to pay or agree to pay any sum
of money or make financial accommodations (other than the
payment or incurrence of customary expenses and filing or other
fees) in order to obtain any necessary consent, approval or
authorization including, without limitation, the Seller Required
Regulatory Approvals. Seller will provide prompt notification
to Purchaser when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made
or given, as applicable, and will advise Purchaser of any
communications (and, unless precluded by Law or Order, provide
copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding
any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
IV.2 HSR Filings
In addition to and not in limitation of Seller's covenants
contained in Section 4.01, Seller will (a) consult with
Purchaser as to appropriate timing of filings and take promptly
all actions necessary to make the filings required of Seller or
its Affiliates under the HSR Act, (b) comply at the earliest
practicable date with any request for additional information
received by Seller or its Affiliates from the Federal Trade
Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and (c) cooperate with Purchaser
in connection with Purchaser's filing under the HSR Act and in
connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement
commenced by either the Federal Trade Commission or the
Antitrust Division of the Department of Justice or state
attorneys general.
IV.3 Investigation by Purchaser
Seller will (a) provide Purchaser and its officers,
employees, counsel, accountants, financial advisors, potential
lenders, Purchaser's and potential lenders' consultants and
other representatives (collectively, "Representatives") with
full access, upon reasonable prior notice and during normal
business hours, to the Employees and such other officers,
employees and agents of Seller who have any responsibility for
the PGE Colstrip Interests, to Seller's accountants, and,
subject to the terms and conditions of the Colstrip Contracts,
to the Assets (including, to the extent it is within Seller's
power to do so, access to the Colstrip Facilities site), but
only to the extent that such access does not unreasonably
interfere with Seller's business and the operation of the
Assets, (b) make available to Purchaser and its Representatives,
upon request, a copy of each report, schedule or other document
filed or received by Seller between the Bid Date and the Closing
with or from the SEC, FERC, EPA, OPUC or any other relevant
Governmental or Regulatory Authority and relating to the
ownership, operation and maintenance of the Assets or the
transactions contemplated by this Agreement, and all such
information and data (including copies of Business Contracts,
Transferable Permits, Fuel Contracts, Colstrip Contracts, and
other Books and Records) concerning the ownership, operation and
maintenance of the PGE Colstrip Interests and the Assets and the
Assumed Liabilities as Purchaser or its Representatives
reasonably may request in connection with such investigation,
except to the extent that furnishing any such report, schedule,
other documents, information or data would violate any Law,
Order (including any protective order or similar confidentiality
obligation), Contract, License or Environmental Permit
applicable to Seller or by which any of its Assets and
Properties is bound. In furtherance of the foregoing, Seller
agrees to cooperate with Purchaser in connection with
Purchaser's efforts to obtain Purchaser Financing, as defined in
Section 5.07. Seller's cooperation shall include the
negotiation and execution of a consent with the lenders with
respect to the Operative Agreements, which consent shall include
providing such lenders with rights to cure a Purchaser default
under the Operative Agreements; provided, however, that Seller
shall not be obligated, in connection with such cooperation or
consent, to take any action or enter into any agreement that
would have any adverse effect on Seller or any of its rights or
benefits under this Agreement or the Operative Agreements.
IV.4 No Solicitations
Subject to the duties imposed by applicable Law, Seller
will not take, nor will it permit any Affiliate of Seller (or
authorize or permit any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for
or on behalf of Seller or any such Affiliate) to take, directly
or indirectly, any action to solicit, encourage, receive,
negotiate, assist or otherwise facilitate (including by
furnishing confidential information with respect to the Colstrip
Facilities or permitting access to the Assets and Properties and
Books and Records of Seller) any offer or inquiry from any
Person concerning the acquisition of any of the Assets other
than Purchaser or its Affiliates or any of their
Representatives.
IV.5 Conduct of Business
(a From the Bid Date to the Closing, Seller shall,
consistent with the terms and conditions of the Colstrip
Contracts and to the extent such matters are presented to Seller
by MPC thereunder, vote or cause to be voted its Project Share
(as defined in the Colstrip Contracts) in favor of (i) the
continued operation of the Colstrip Facilities only in the
ordinary course of business consistent with Good Utility
Practice, (ii) causing MPC to use commercially reasonable
efforts to (A) maintain good relations with and keep available
(subject to dismissals and retirements in the ordinary course of
business) the services of key Employees, (B) maintain the Assets
in good working order and condition, ordinary wear and tear
excepted, (C) maintain the good will of lessors, customers,
suppliers, lenders and other Persons with whom MPC otherwise has
significant business relationships in connection with the
operation of the Colstrip Facilities, (D) materially comply with
all Laws and Orders, including Environmental Laws applicable to
the ownership, operation and maintenance of the Colstrip
Facilities and (E) keep in force at not less than their present
limits all material policies of insurance covering the Assets to
the extent reasonably practicable in light of the prevailing
market conditions in the insurance industry.
(b Without limiting the generality of the foregoing,
except with the prior written consent of Purchaser, Seller will,
with respect to the Colstrip Facilities promptly notify
Purchaser if Seller becomes aware of the cancellation of any
material insurance policy or any material modification thereto.
IV.6 Certain Restrictions
Except as set forth in Section 4.06 of the Disclosure
Schedule, Seller will refrain from agreeing to any of the
following actions:
(a creating any Lien (other than a Permitted Lien) on
the Assets except in the ordinary course of Seller's business or
as required under Seller's instruments of Indebtedness as in
effect on the date hereof and, in each case, as will be removed
on or prior to the Closing;
(b selling, leasing (as lessor), transferring or
otherwise disposing of, any of the Assets (except as
contemplated by Exhibit D to Section 1.01(a)(i) of the
Disclosure Schedule), other than Assets used, consumed or
replaced in the ordinary course of business consistent with Good
Utility Practice;
(c entering into, amending or modifying in any material
way, terminating (partially or completely), granting any waiver
of any material term under or giving any material consent with
respect to any Business Contract, Transferable Permit, Fuel
Contract, Colstrip Contract or other contract or agreement
comprising a part of the Assets or that relates to the Assets,
the Assumed Liabilities or is material to the operation of the
Colstrip Facilities;
(d other than in the ordinary course of business,
incurring, purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, or waiving any right
under, any Liability of or owing to Seller in connection with
the Assets, the Assumed Liabilities or the operation of the
Colstrip Facilities in an aggregate principal amount exceeding
$500,000;
(e engaging with any Person in any Business Combination,
unless such Person agrees in a written instrument to adopt and
comply with the terms and conditions of this Agreement as though
such Person was an original signatory hereto;
(f engaging in any transaction individually or in the
aggregate with other such transactions material to the ownership
or operation of the Assets with any officer, director, Affiliate
or Associate of Seller, or any Associate of any such officer,
director or Affiliate, that would be an Assumed Liability and
that would extend beyond the Closing other than in the ordinary
course of business on terms no less favorable to Seller than
could be obtained on an arm's-length basis with an unaffiliated
third party;
(g to the extent it has notice thereof and the authority
to do so pursuant to the Colstrip Contracts, making any material
change in the level of fuel inventory and stores inventory
customarily maintained by Seller with respect to the PGE
Colstrip Interests, other than consistent with Good Utility
Practice;
(h to the extent it has notice thereof and the authority
to do so pursuant to the Colstrip Contracts, entering into any
commitment for the purchase or sale of fuel having a term
greater than six months and not terminable on or before the
Closing either (i) automatically, or (ii) by option of Seller
(or, after the Closing, by Purchaser) in its sole discretion, if
the aggregate payment under such commitment and all other
outstanding commitments not previously approved by Purchaser
would be expected to exceed $500,000;
(i making any tax election or entering into or amending
any real or personal property Tax agreement, treaty or
settlement that would have a negative effect on the Tax status
of Purchaser with regard to the Assets; or
(j entering into any Contract to do or engage in any of
the foregoing.
The foregoing shall not preclude Seller from making, or
agreeing to the making of (i) Maintenance Expenditures and
Capital Expenditures and (ii) at Seller's expense under the
Colstrip Contracts, such other maintenance and capital
expenditures as Seller or MPC deems necessary, subject in all
cases to the applicable provisions of the Colstrip Contracts.
IV.7 Security Deposits
Seller will transfer to Purchaser at the Closing all of
Seller's right, title and interest in and to the Tenant Security
Deposits and the Landlord Security Deposits and any other
deposits, prepayments or progress payments made or held by
Seller in connection with the Assets or material to the
ownership, operation and maintenance of the Colstrip Facilities.
IV.8 Delivery of Books and Records, etc.; Removal of Property
(a At the Closing, Seller shall deliver or make
available to Purchaser at Seller's place of business in
Portland, Oregon, all of the Books and Records relating to the
PGE Colstrip Interests as are in Seller's possession, and if at
any time after the Closing Seller discovers in its possession or
under its control any other such Books and Records or other
Assets, it will forthwith deliver such Books and Records or
other Assets to Purchaser.
(b Except as set forth in Section 4.08(b) of the
Disclosure Schedule, within a reasonable time after the Closing,
Seller shall take all commercially reasonable steps to remove
any of Seller's Assets and Properties not being sold to
Purchaser hereunder from the Real Property except as
contemplated by the Separation Document. Such removal shall be
at the sole cost and risk of Seller, including risk of loss and
damage to such Assets and Properties and to the Assets conveyed
to Purchaser hereby.
IV.9 Fulfillment of Conditions
Seller will execute and deliver at the Closing each
Operative Agreement that Seller is required hereby to execute
and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each other condition to
the obligations of Purchaser contained in this Agreement and
will not take or fail to take any action that could reasonably
be expected to result in the nonfulfillment of any such
condition.
IV.10 Observation, Inspection and Participation
Seller agrees, subject to its rights and obligations under
the Colstrip Contracts, that between the date of this Agreement
and the date of the Closing, Purchaser shall be entitled to have
a reasonable number of representatives, all of whom shall be
employees of Purchaser or its Affiliates unless otherwise
approved by Seller in each instance, which approval shall not be
unreasonably withheld ("Site Representatives") at any of the
Assets, on a full or part time basis (whether on site or off-
site), as determined by Purchaser; provided, however, that
(a) the presence and activities of the Site Representatives
shall be conducted in a manner as not to interfere unreasonably
with the ownership, operation and maintenance of the Assets, or
with the activities of Seller and MPC not related to the Assets
and (b) the Site Representatives shall not have access to any
information that is unavailable pursuant to Section 4.03.
Reasonable office space and facilities will be made available by
Seller to such Site Representatives. Each Site Representative
shall have the right to review budgets and expenditures, audit
records (except for personnel and medical records unless
required by law), inspect equipment, advise on repairs required
for equipment, review permits, review the progress of outages,
review maintenance and operating practices and otherwise observe
all activities at the above mentioned facilities in each case to
the extent related to the operation of the Assets. Between the
date hereof and the Closing, Seller shall, to the extent it is
able to do so under the Colstrip Contracts, exercise its
reasonable efforts to invite Site Representatives to attend
internal meetings in which Seller participates and which relate
specifically to the physical operation or maintenance of the
Assets; provided, however, that such obligation shall not extend
to (i) meetings of the boards of directors, or any committees
thereof, of Seller or any of its Affiliates, (ii) meetings with
counsel, or (iii) meetings the subject matter of which, in
Seller's reasonable judgment, if disclosed to Purchaser, would
likely be detrimental to Seller (including, without limitation,
information relating to Seller's proposed business activities
following the Closing or to contractual or other matters as to
which the interests of Seller and Purchaser may diverge). Site
Representatives shall also be entitled to consult with Seller
and make recommendations as to all activities relating to the
management, operation, maintenance, construction, renewal,
addition, replacement, modification and disposal of the Assets,
including, without limitation, applications for authorizations,
permits and licenses, and fuel procurement and transportation.
IV.11 Notice of Breach
Seller shall promptly give notice to Purchaser upon
becoming aware of the occurrence of any event which would cause
or constitute a breach of any of the representations, warranties
or covenants of Seller contained in this Agreement.
IV.12 Bridge Financing Fees
In the event that Purchaser obtains bridge financing
directly or indirectly from a non-Affiliated third party in
connection with the transactions contemplated hereby, Seller
will deduct from the Base Purchase Price at the time of Closing
an amount equal to 13.01% of any financing fees paid by
Purchaser in connection with such bridge financing; provided,
however, that the deduction under this Section 4.12 shall not
exceed $2,012,647 in the aggregate.
4.13 Special Maintenance and Capital Expenditures
Within thirty (30) days after the date hereof, Seller and
Purchaser shall mutually agree on a Schedule setting forth a
month by month special maintenance and capital expenditure
budget relating to the Assets for calendar years 1999 and 2000
(the "Budget"). The Budget will be divided into two parts;
Category A items and Category B items. With respect to items
listed under Category A, Seller agrees to use commercially
reasonable efforts to cause MPC, to the extent Seller has the
right to do so under the Colstrip Contracts, to conduct and
complete such special maintenance and capital expenditures at
the times set forth in the Budget. With respect to items listed
under Category B, Seller shall cause MPC, to the extent Seller
has the right to do so under the Colstrip Contracts, to conduct
and complete such special maintenance and capital expenditures
at such times as Seller and MPC shall determine in their
reasonable discretion after consultation with Purchaser. With
respect to emergency special maintenance and capital expenditure
items not identified in the Budget that arise after the date
hereof and prior to the Closing, Seller will cause MPC, to the
extent Seller has the right to do so under the Colstrip
Contracts, to consult with Purchaser and to conduct and complete
any such emergency special maintenance and capital expenditure
items in accordance with Good Utility Practice ("Emergency
Expenditures").
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all
times from and after the date hereof until the Closing and, in
the case of Section 5.06, thereafter, Purchaser will comply with
all covenants and provisions of this Article V, except to the
extent Seller may otherwise consent in writing.
V.1 Regulatory and Other Approvals
Purchaser will (a) take all reasonable steps necessary or
desirable, and proceed diligently and in good faith and use all
reasonable efforts, at the earliest commercially practicable
dates, to obtain all consents, approvals or actions of, to make
all filings with and to give all notices to Governmental or
Regulatory Authorities or any other Person required of Purchaser
to consummate the transactions contemplated hereby and by the
Operative Agreements, including those described in Section 3.03
of the Disclosure Schedule and Purchaser Required Regulatory
Approvals or for Purchaser to own, operate or maintain, on and
after the Closing, the Assets substantially as such assets are
currently owned, operated and maintained by Seller, (b) provide
such other information and communications to such Governmental
or Regulatory Authorities or other Persons as such Governmental
or Regulatory Authorities or other Persons may reasonably
request in connection therewith and (c) provide reasonable
cooperation to Seller in obtaining Seller Required Regulatory
Approvals and all other consents, approvals or actions of,
making all filings with and giving all notices to Governmental
or Regulatory Authorities or other Persons required of Seller to
consummate the transactions contemplated hereby and by the
Operative Agreements. Prior to making any filings with a
Governmental or Regulatory Authority pursuant to this
Section 5.01, Purchaser agrees to provide copies of such filings
to Seller. Nothing in this Agreement shall require Purchaser to
institute litigation or to pay or agree to pay any sum of money
or make financial accommodations (other than the payment or
incurrence of customary expenses and filing or other fees) in
order to obtain any necessary consent, approval or authorization
including, without limitation, the Purchaser Required Regulatory
Approvals. Purchaser will provide prompt notification to Seller
when any such consent, approval, action, filing or notice
referred to in clause (a) above is obtained, taken, made or
given, as applicable, and will advise Seller of any
communications (and, unless precluded by Law, provide copies of
any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding
any of the transactions contemplated by this Agreement or any of
the Operative Agreements.
V.2 HSR Filings
In addition to and without limiting Purchaser's covenants
contained in Section 5.01, Purchaser will (a) consult with
Seller as to the appropriate timing of filings and take promptly
all actions necessary to make the filings required of Purchaser
or its Affiliates under the HSR Act, (b) comply at the earliest
practicable date with any request for additional information
received by Purchaser or its Affiliates from the Federal Trade
Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and (c) cooperate with Seller in
connection with Seller's filing under the HSR Act and in
connection with resolving any investigation or other inquiry
concerning the transactions contemplated by this Agreement
commenced by either the Federal Trade Commission or the
Antitrust Division of the Department of Justice or state
attorneys general.
V.3 PPUC Approval for Holding Company
From the date hereof through the Closing, Purchaser agrees
not to enter into any Contract or take any action which, when
taken together with the consummation of the transactions
contemplated by this Agreement, would violate any condition
imposed by the PPUC that limits Parent's investment in
diversified businesses without prior PPUC approval. Purchaser
further agrees that, in seeking the approval described in clause
(v) of the definition of Purchaser Required Regulatory
Approvals, Purchaser shall use commercially reasonable efforts
to seek any reasonable PPUC approval that would allow Purchaser
to consummate the transactions contemplated hereby and to own,
operate and maintain the Assets in substantially the same manner
as currently owned, operated and maintained by Seller.
V.4 Notice of Breach
Purchaser shall promptly give notice to Seller upon
becoming aware of the occurrence of any event which would cause
or constitute a breach of any of the representations, warranties
or covenants of Purchaser contained in this Agreement.
V.5 Fulfillment of Conditions
Purchaser will execute and deliver at the Closing each
Operative Agreement that Purchaser is hereby required to execute
and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each other condition to
the obligations of Seller contained in this Agreement and will
not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
V.6 Tax-Exempt Bond Financed Pollution Control Facilities
(a Following the Closing until the maturity or
redemption date of the Pollution Control Bonds,
(i) Except as otherwise permitted in (ii), Purchaser
will not materially change or permit to be changed the character
or nature of the use of those facilities listed in Exhibit C
hereto (the "Pollution Control Facilities") from the manner
Seller has used said facilities prior to the sale of the Assets,
unless such changed use would constitute a use or purpose of
said facilities for which tax-exempt bonds could be issued
pursuant to section 1313 of the Tax Reform Act of 1986 (P.L. 99-
514 or, hereinafter, the "1986 Tax Act"), to refund bonds
described in section 1312(a) of the 1986 Tax Act which, for
purposes hereof, are assumed to have been issued to finance
facilities of the same character and use or purpose as said
facilities;
(ii) Purchaser will not sell or otherwise transfer
any portion of such Pollution Control Facilities unless (A) the
transferee covenants to satisfy the conditions of
Section 5.06(a)(i) and with respect to its ownership and use of
said facilities following the date of any such purchase or (B)
the transfer relates to personal property and is exclusively for
cash the proceeds of which will be expended within six months of
the date of receipt on facilities for which tax-exempt bonds
could be issued pursuant to section 1313 of the 1986 Tax Act, to
refund bonds described in section 1312(a) of said act which, for
purposes hereof, are assumed to have been issued to finance
facilities of the same character and use or purpose as said
facilities; and
(iii) Purchaser will cooperate with Seller and use
commercially reasonable efforts to permit Seller to have access
to the Colstrip Facilities at reasonable times to examine the
Pollution Control Facilities.
Nothing herein shall be construed to prevent Purchaser from
ceasing to use any facilities or equipment that, in Purchaser's
reasonable judgment, have become obsolescent or otherwise
uneconomical to continue to use. Seller will notify Purchaser
when the Pollution Control Bonds have matured or been redeemed.
V.7 Purchaser Financing
Purchaser will proceed in good faith and use all reasonable
efforts to obtain financing on commercially reasonable terms in
amounts and structure reasonably consistent with Purchaser's
financing plan as set forth in Purchaser's written proposal to
Seller dated September 25, 1998 (the "Purchaser Financing").
V.8 Transmission
(a) Transmission Path from Colstrip Units 3 & 4 to
Townsend. If, notwithstanding Purchaser's compliance with
Section 1.10(a) and with Section 5.01, the Purchaser Required
Regulatory Approval described in clause (ii) of the definition
of Purchaser Required Regulatory Approvals is not obtained from
FERC with respect to the proposed purchase, ownership or
operation of the PGE Colstrip Transmission Assets, or is finally
denied by FERC, then the Parties contemplate that they will
enter into a Transmission Service Agreement, negotiation of
which has yet to be completed. Immediately following the date
hereof, and for the next sixty (60) days, the Parties covenant
to use their reasonable best efforts, working diligently and
cooperatively, to complete negotiations and the drafting of a
definitive Transmission Service Agreement consistent with the
Transmission Service Agreement Principles as set forth on
Exhibit K and reasonably satisfactory to both Parties.
(b) Transmission Path from Townsend to Garrison.
Immediately following the date hereof, as contemplated by
Sections 6.07 and 7.06, and for the next sixty (60) days, the
Parties covenant to use their reasonable best efforts, working
diligently and cooperatively to negotiate with the Bonneville
Power Administration for its consent to the assignment at
Closing from Seller to Purchaser of the Montana Intertie
Agreement, as described on Exhibit K.
(c) Transmission Path from Garrison to Portland.
Immediately following the date hereof, and for the next sixty
(60) days, the Parties covenant to use their reasonable best
efforts, working diligently and cooperatively, to negotiate with
the Bonneville Power Administration to convert Seller's
transmission rights under its Integration of Resources Contract
(Contract No. DE-MS79-89BP92273 of December 5, 1989) to a point
to point transmission agreement reasonably satisfactory to
Purchaser and to negotiate a release of Seller's obligations
under such contract reasonably satisfactory to Seller.
V.9 Wholesale Transition Service Agreement
The Parties shall enter into good faith negotiations
following the date hereof with respect to an agreement for the
sale by Purchaser of energy from the Colstrip Facility to
Seller, in a quantity approximately equivalent to that of the
PGE Colstrip Interests, and having a term of up to two (2) years
("Wholesale Transition Service Agreement"), provided, however,
that neither Party shall be obligated for any reason to enter
into such an agreement.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the
Assets and to assume and pay, perform and discharge the Assumed
Liabilities are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Purchaser in its sole
discretion):
VI.1 Representations and Warranties
The representations and warranties made by Seller in this
Agreement and the Operative Agreements, taken as a whole, shall
be true and correct, in all material respects, on and as of the
Closing as though repeated on and as of the Closing or, in the
case of representations and warranties made as of a specified
date earlier than the Closing, on and as of such earlier date.
VI.2 Performance
Seller shall have performed and complied with, in all
material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with
by Seller at or before the Closing.
VI.3 Officers' Certificates
Seller shall have delivered to Purchaser a certificate,
dated as of the Closing and executed by the Chairman of the
Board, the President or any Vice President of Seller,
substantially in the form and to the effect of Exhibit D hereto,
and a certificate, dated as of the Closing and executed by the
Secretary or any Assistant Secretary of Seller, substantially in
the form and to the effect of Exhibit E hereto.
VI.4 Orders and Laws
There shall not be in effect on the date of the Closing any
Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements.
VI.5 Regulatory Consents and Approvals
Subject to Section 1.10, all Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals shall have
been duly obtained, made or given and shall be in full force and
effect and shall be Final Orders reasonably satisfactory to
Purchaser and all terminations or expirations of waiting periods
imposed by any Governmental or Regulatory Authority necessary
for the consummation of the transactions contemplated by this
Agreement and the Operative Agreements, including under the HSR
Act, shall have occurred.
VI.6 Colstrip Rights of First Refusal
Seller shall have either received the consents required
under each of the Colstrip Rights of First Refusal or the
exercise periods of such Colstrip Rights of First Refusal shall
have expired.
VI.7 Third Party Consents
The consents (or in lieu thereof waivers) listed in
Section 6.07 of the Disclosure Schedule shall have been obtained
and shall be in full force and effect and shall be reasonably
satisfactory to Purchaser.
VI.8 No Seller Material Adverse Effect
There shall not have occurred and be continuing a Seller
Material Adverse Effect.
VI.9 Proceedings
All corporate and other proceedings to be taken by Seller
in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in
form and substance to Purchaser and its counsel, and Purchaser
and its counsel shall have received all such certified or other
copies of such documents as it or they may reasonably request.
VI.10 Deliveries
Seller shall have executed and delivered to Purchaser
(i) the General Assignment, (ii) the other Assignment
Instruments, and (iii) if the PGE Colstrip Transmission Assets
are not conveyed to Purchaser at the Closing, Seller and
Purchaser shall have entered into the Separation Document.
VI.11 Colstrip Operations Arrangements
There shall be in effect (a) arrangements reasonably
satisfactory to Purchaser pursuant to which Purchaser shall be
the operator of the entire Colstrip generating facility for a
period of at least ten (10) years after the Closing, subject
only to removal for cause or (b) such other arrangements with
respect to the operation of the Colstrip generating facility as
are reasonably acceptable to Purchaser.
VI.12 Purchaser Financing
Purchaser's obligation to purchase the PGE Colstrip
Transmission Assets at the Closing is subject to the receipt by
Purchaser, on or prior to the Closing, of the Purchaser
Financing or other financing reasonably satisfactory to
Purchaser.
VI.13 Opinion of Counsel
Purchaser shall have received the opinion of (i) LeBoeuf,
Lamb, Greene & MacRae, L.L.P., counsel to Seller, dated as of
the Closing, substantially in the form and to the effect of
Exhibit G-1 hereto, (ii) General Counsel of Seller, dated as of
the Closing, substantially in the form and to the effect of
Exhibit G-2 hereto, and (iii) outside Montana counsel to Seller,
dated as of the Closing, substantially in the form and to the
effect of Exhibit G-3 hereto.
VI.14 Transfer of MPC Generation Assets
That portion of the Generation Assets (as such term is
defined in the MPC Purchase Agreement) to be transferred to
Purchaser at the Closing under the MPC Purchase Agreement
consisting of, at a minimum, (i) Corette, (ii) MPC's undivided
interest in Colstrip 1, 2, and 3, and (iii) the Missouri/Madison
Hydro Units with Basin/Idaho/BPA Power Contracts (in each case
of (i), (ii), and (iii), as such terms are defined in the MPC
Purchase Agreement shall have been purchased by Purchaser,
unless such purchase has not occurred solely as a result of a
breach by Purchaser of the MPC Purchase Agreement.
6.15 Transmission Agreements
If the PGE Colstrip Transmission Assets are not conveyed to
Purchaser at Closing, then (i) Seller and Purchaser shall have
entered into a Transmission Service Agreement, (ii) MPC shall
have purchased the PGE Colstrip Transmission Assets, or (iii)
other arrangements reasonably satisfactory to Purchaser shall
have been entered into with respect to the transmission of
electric energy for the PGE Colstrip Interests.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Assets are
subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in
whole or in part by Seller in its sole discretion):
VII.1 Representations and Warranties
The representations and warranties made by Purchaser in
this Agreement and the Operative Agreements, taken as a whole,
shall be true and correct, in all material respects on and as of
the Closing as though repeated on and as of the Closing.
VII.2 Performance
Purchaser shall have performed and complied with, in all
material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with
by Purchaser at or before the Closing.
VII.3 Officers' Certificates
Purchaser shall have delivered to Seller a certificate,
dated as of the Closing and executed by the Chairman of the
Board, the President or any Executive or Senior Vice President
of Purchaser, substantially in the form and to the effect of
Exhibit H hereto, and a certificate, dated as of the Closing and
executed by the Secretary or any Assistant Secretary of
Purchaser, substantially in the form and to the effect of
Exhibit I hereto.
VII.4 Orders and Laws
There shall not be in effect on the date of the Closing any
Order or Law restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements.
VII.5 Regulatory Consents and Approvals
Subject to Section 1.10, all Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals shall have
been duly obtained, made or given and shall be in full force and
effect and shall be a Final Order, and all terminations or
expirations of waiting periods imposed by any Governmental or
Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement and the Operative
Agreements, including under the HSR Act, shall have occurred.
VII.6 Third Party Consents
The consents (or in lieu thereof waivers) listed in
Section 7.06 of the Disclosure Schedule shall have been
obtained and shall be in full force and effect and shall be
reasonably satisfactory to Seller.
VII.7 Opinion of Counsel
Seller shall have received the opinions of (i) Winthrop,
Stimson, Putnam & Roberts, counsel to Purchaser, dated as of the
Closing, substantially in the form and to the effect of
Exhibit J hereto, and (ii) internal counsel to Parent, under
Pennsylvania laws and the federal laws of the United States,
dated as of the Closing, with respect to the due authorization,
execution, delivery and enforceability of the Contribution
Agreement. Such counsel's opinion as provided for in clause (i)
in the preceding sentence need not cover any matter contained in
the opinions required by Exhibit J to the extent such matter
involves the laws of Montana, Oregon, Washington, Pennsylvania
or any other jurisdiction other than the federal laws of the
United States or the laws of the State of New York, and, in lieu
thereof, Seller shall have received the opinions of counsel
admitted in such other jurisdictions covering such matter.
VII.8 No Purchaser Material Adverse Effect
There shall not have occurred and be continuing a Purchaser
Material Adverse Effect.
VII.9 Proceedings
All corporate and other proceedings to be taken by
Purchaser in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Seller and its counsel and
Seller and its counsel shall have received all such certified or
other copies of such documents as it or they may reasonably
request.
VII.10 Colstrip Rights of First Refusal
Seller shall have either received the consents required
under each of the Colstrip Rights of First Refusal or the
exercise periods of such Colstrip Rights of First Refusal shall
have expired.
VII.11 Deliveries
Purchaser shall have delivered to Seller (i) the Assumption
Agreement and (ii) the other Assumption Instruments.
VII.12 Transmission Agreements
If the PGE Colstrip Transmission Assets are not conveyed to
Purchaser at Closing, then (i) Seller and Purchaser shall have
entered into a Transmission Service Agreement, (ii) MPC shall
have purchased the PGE Colstrip Transmission Assets, or (iii)
other arrangements reasonably satisfactory to Seller shall have
been entered into with respect to the transmission of electric
energy for the PGE Colstrip Interests.
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
VIII.1 Transfer Taxes
All Transfer Taxes incurred in connection with this
Agreement and the transactions contemplated hereby shall be
borne by Purchaser, and Purchaser, at its own expense, will
file, to the extent required by applicable Law, all necessary
Tax Returns and other documentation with respect to all such
Transfer Taxes, and, if required by applicable Law, Seller will
join in the execution of any such Tax Returns or other
documentation and will take such positions therein as are
reasonably requested by Purchaser. Nothing in the foregoing
sentence shall require Seller to take a position adverse to its
own posture with regard to Taxes. Prior to the Closing,
Purchaser will provide to Seller, to the extent possible, an
appropriate certificate from each applicable taxing authority to
the effect that no Transfer Tax will be incurred in connection
with this Agreement and the transactions contemplated hereby.
VIII.2 Returns with respect to Prorated Taxes
With respect to those Taxes to be prorated in accordance
with Section 1.06 of this Agreement, Purchaser shall prepare and
timely file all Tax Returns required to be filed after the
Closing with respect to the Assets and shall duly and timely pay
all such Taxes shown to be due on such Tax Returns. Purchaser's
preparation of any such Tax Return shall be subject to Seller's
approval, which approval shall not be unreasonably withheld.
Purchaser shall make such Tax Returns available for Seller's
review and approval no later than twenty (20) Business Days
prior to the due date for filing such Tax Return. Within fifteen
(15) Business Days after receipt of such Tax Return, Seller
shall pay to Purchaser its proportionate share of the amount
shown as due on such Tax Return determined in accordance with
Section 1.06 of this Agreement.
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
IX.1 Survival of Representations, Warranties, Covenants and
Agreements
(a) Subject to Section 11.02, the representations and
warranties of Purchaser and Seller (other than the
representations and warranties, (x) contained in Section 2.06
(the "Tax Representation") which shall survive for the
applicable period of the applicable statute of limitation), and
(y) contained in Section 2.09(b) (the "Title Representation")
which shall survive the Closing indefinitely) (all of the
representations and warranties of Purchaser and Seller,
excluding the Tax Representation and the Title Representation,
are hereinafter referred to as the "General Representations"),
shall survive the Closing for a period of twelve (12) months;
provided, however, if Purchaser (or any successor or assign of
Purchaser) procures title insurance with respect to the Real
Property, to the extent that Purchaser (or any successor or
assign of Purchaser) actually receives proceeds from the title
insurer in respect of any matters addressed by any of the
representations and warranties contained in Section 2.09, then,
only with respect to such matters, and only to such extent, such
representations and warranties shall be deemed not to have been
made;
(b) Subject to Section 11.02, the covenants and agreements
of Seller and Purchaser contained in this Agreement (other than
the covenants and agreements contained in Articles IV (excluding
Section 4.08) and V (excluding Section 5.06) (the "Pre-Closing
Covenants"), which covenants and agreements shall survive the
Closing for a period of twelve (12) months) (all of the
covenants and agreements of Purchaser and Seller, excluding the
Pre-Closing Covenants, are hereinafter referred to as the "Post-
Closing Covenants"), shall survive the Closing indefinitely; and
(c) Any due diligence or other investigation or
examination by any party with respect to the transactions
contemplated by this Agreement shall not in any way affect or
lessen the representations and warranties of the other party
contained herein or the indemnifications with respect thereto.
IX.2 No Other Representations
Notwithstanding anything to the contrary contained in this
Agreement, it is the explicit intent of each party hereto that
Seller is making no representation or warranty whatsoever,
express or implied, including but not limited to any implied
representation or warranty as to condition, merchantability or
suitability as to any of the Assets, except those
representations and warranties contained in this Agreement and
the exhibits, schedules, documents, certificates and instruments
delivered in connection with the Closing. In particular, Seller
makes no representation or warranty to Purchaser with respect to
(i) the information set forth in the Confidential Information
Memorandum dated March 1998 and the supplements thereto, or (ii)
any financial projection or forecast relating to the PGE
Colstrip Interests or the Colstrip Facilities. With respect to
any such projection or forecast delivered by or on behalf of
Seller to Purchaser, Purchaser acknowledges that (i) there are
uncertainties inherent in attempting to make such projections
and forecasts, (ii) it is familiar with such uncertainties,
(iii) it is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all such projections
and forecasts furnished to it and (iv) it shall have no claim
against Seller with respect to such projections and forecasts.
ARTICLE X
INDEMNIFICATION
X.1 Other Indemnification
(a) Subject to the other Sections of this Article X,
Seller shall indemnify Purchaser and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Purchaser Group") in respect of, and hold
Purchaser Group harmless from and against, any and all Losses
suffered, incurred or sustained by Purchaser Group or to which
Purchaser Group becomes subject, resulting from, arising out of
or relating to:
(i) any breach by Seller of any representation or
warranty of Seller contained in this Agreement (determined in
all cases as if the terms "material" or "materially" or the
capitalized versions thereof, were not included therein);
(ii) any breach by Seller of any covenant or
agreement of Seller contained in this Agreement (determined in
all cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein); or
(iii) Retained Liability;
provided, however, that Seller shall have no liability for
Losses under clause (i) arising from a breach of a General
Representation or the Tax Representation unless and until the
aggregate amount of all Losses arising from such breaches
asserted by Purchaser equals or exceeds $1,000,000 in which
event Seller shall be liable for all such Losses; and provided,
further, that, except with respect to Losses arising from a
breach of the Title Representation, such indemnification shall
be effective only with respect to claims written notice of which
is received by Seller with respect to Losses arising under
clause (i) above relating to General Representations (or, with
respect to the Tax Representation, the date upon which the
applicable statute of limitations expires) or clause (ii) above
relating to Pre-Closing Covenants, no later than the date that
is twelve (12) months from the Closing. Except as set forth in
paragraph (b) below in, no event shall the Liability of Seller
for Losses under clause (i) of this Section 10.01(a) arising out
of breaches of the General Representations exceed, in the
aggregate, fifty percent (50%) of the Purchase Price, (or, with
respect to breaches of the Title Representation and the
covenants contained in Sections 1.01(a)(i) and 1.05 exceed, in
the aggregate, the Purchase Price).
(b) In addition to the indemnities contained in clause (a)
above, Seller shall indemnify Purchaser Group in respect of, and
hold it harmless from and against, all Losses suffered, incurred
or sustained by Purchaser Group arising from any Pre-Closing
Environmental Liability; provided, however, that
(1) indemnification for Pre-Closing Unknown Remedial Liabilities
shall be effective only with respect to Losses arising out of a
matter described in a Claim Notice received by Seller no later
than the date that is two years from the Closing, (2) Seller's
Liabilities under this paragraph for Pre-Closing Known and
Unknown Remedial Liabilities shall be limited in each case to
Seller's pro rata share (calculated pursuant to the Colstrip
Contracts) of fifty percent (50%) of any such Loss suffered,
incurred or sustained by Purchaser Group, and shall not, in any
event, exceed, in the aggregate, an amount equal to ten percent
(10%) of the Purchase Price (each such Liability of Seller shall
be paid by it at the same time that Purchaser Group has paid its
fifty percent (50%) share thereof); provided, further, that this
indemnity shall only extend to such Pre-Closing Environmental
Liabilities attributable to conditions existing at or prior to
the Closing, and Seller shall not be required to indemnify
Purchaser for Losses to the extent attributable to acts or
omissions of Purchaser resulting in an increase in or
aggravation of such Environmental Liabilities, whether arising
from a change in use of the Assets or otherwise. In the event
that Seller disputes the pro rata share of any Losses
attributable by Purchaser to Seller under this Section
10.01(b)(2) in the Claim Notice, Seller will nevertheless pay
Purchaser the amount requested by Purchaser in the Claim Notice
and Seller shall proceed to resolve any dispute with MPC and
Puget concerning allocations of pro rata shares. If Purchaser
fails to make a claim against a Potentially Responsible Party
with respect to Pre-Closing Environmental Liabilities, then upon
making an indemnity payment pursuant to this paragraph (b),
Seller shall, to the extent of such indemnity payment, be
subrogated to all rights of Purchaser against any Potentially
Responsible Party in respect of the Losses to which the
indemnity payment relates. If Purchaser makes a claim against,
and recovers from, a Potentially Responsible Party with respect
to Pre-Closing Environmental Liabilities and Seller has made an
indemnity payment with respect to such Loss, then Purchaser
shall reimburse Seller fifty percent (50%) of such amounts
recovered, net of any third party costs of collection.
(c) Subject to the other Sections of this Article X,
Purchaser shall indemnify Seller and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Seller Group") in respect of, and hold Seller
Group harmless from and against, any and all Losses suffered,
incurred or sustained by Seller Group or to which Seller Group
becomes subject, resulting from, arising out of or relating to:
(i) any breach by Purchaser of any representation or
warranty of Purchaser contained in this Agreement (determined in
all cases as if the terms "material" or "materially" (or the
capitalized versions thereof), were not included therein);
(ii) any breach by Purchaser of any covenant or
agreement of Purchaser contained in this Agreement (determined
in all cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein); or
(iii) an Assumed Liability; provided, however, that
Purchaser shall have no liability for Losses under clause (i)
arising from a breach of a General Representation unless and
until the aggregate amount of all such Losses arising from such
breaches asserted by Seller equals or exceeds $1,000,000 in
which event Purchaser shall be liable for all Losses; and
provided, further, that such indemnification shall be effective
only with respect to claims written notice of which is received
by Purchaser with respect to Losses arising under clause (i)
above relating to General Representations or clause (ii) above
relating to Pre-Closing Covenants, no later than the date that
is twelve (12) months from the Closing. In no event shall the
Liability of Purchaser for Losses under this Article X arising
out of breaches of the General Representations exceed, in the
aggregate, fifty percent (50%) of the Purchase Price.
(d) To the extent that an Indemnified Party has received
insurance proceeds prior to the payment of an indemnity payment
on an indemnifiable Loss, such indemnifiable Loss shall be
reduced by an amount equal to such proceeds received by the
Indemnified Party. If the amount of any indemnifiable Loss, at
any time subsequent to the making of an indemnity payment in
respect thereof, is reduced by recovery, settlement or otherwise
under or pursuant to any insurance coverage or pursuant to any
claim, recovery, settlement or payment by or against any other
entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with
interest thereon from the date of payment thereof at the prime
rate then in effect for domestic banks as published in the Wall
Street Journal (Northeast Edition) in the "Money Rates"
section), shall promptly be repaid by the Indemnified Party to
the Indemnifying Party. Nothing in this Section 10.01(d) shall
be construed to require any party hereto to obtain or maintain
any insurance coverage or make any claim under its insurance
coverage.
(e) Seller shall not be liable on account of any
obligations of any co-owners of the Colstrip Facilities to
Purchaser.
(f) Except as expressly provided above in this Section
10.01, the Indemnifying Party hereby expressly waives all rights
of subrogation in respect of any payments made by it under this
Article X.
X.2 Method of Asserting Claims
All claims for indemnification by any Indemnified Party
under Section 10.01 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
an Indemnified Party might seek indemnity under Section 10.01 is
asserted against or sought to be collected from such Indemnified
Party by a Person other than Seller, Purchaser or any Affiliate
of Seller or Purchaser (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice with reasonable promptness to
the Indemnifying Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the Dispute
Period whether the Indemnifying Party disputes its liability to
the Indemnified Party under Section 10.01 and whether the
Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Indemnified Party with
respect to the Third Party Claim pursuant to this
Section 10.02(a), then the Indemnifying Party will have the
right to defend, at the sole cost and expense of the
Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently
prosecuted by the Indemnifying Party to a final conclusion or
will be settled at the discretion of the Indemnifying Party
(with the consent of the Indemnified Party, which consent will
not be unreasonably withheld). The Indemnifying Party will have
full control of such defense and proceedings, including any
settlement thereof; provided, however, that the Indemnified
Party may, at the sole cost and expense of the Indemnified
Party, at any time prior to the Indemnifying Party's delivery of
the notice referred to in the first sentence of this
Section 10.02(a)(i), file any motion, answer or other pleadings
or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate to protect its interests
and not prejudicial to the Indemnifying Party (it being
understood and agreed that, except as provided in clause
(ii) below, if an Indemnified Party takes any such action that
is prejudicial and causes a final adjudication that is adverse
to the Indemnifying Party, the Indemnifying Party will be
relieved of its obligations hereunder with respect to the
portion of such Third Party Claim prejudiced by the Indemnified
Party's action); and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the sole cost
and expense of the Indemnifying Party, cooperate with the
Indemnifying Party and its counsel in contesting any Third Party
Claim that the Indemnifying Party elects to contest, or, if
appropriate and related to the Third Party Claim in question, in
making any counterclaim against the Person asserting the Third
Party Claim, or any cross-complaint against any Person (other
than the Indemnified Party or any of its Affiliates).
Notwithstanding the foregoing, the Indemnified Party may take
over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to
indemnity under Section 10.01 with respect to such Third Party
Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 10.02(a), or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or
settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then
the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnified Party to
a final conclusion or will be settled at the discretion of the
Indemnified Party (with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and
proceedings, including (except as provided in the immediately
preceding sentence) any settlement thereof; provided, however,
that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying
Party, cooperate with the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is
contesting, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim against the Person
asserting the Third Party Claim, or any cross-complaint against
any Person (other than the Indemnified Party or any of its
Affiliates). Notwithstanding the foregoing provisions of this
Section 10.02(a)(ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if
such dispute is resolved in favor of the Indemnifying Party in
the manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this
Section 10.02(a)(ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and
the Indemnified Party will reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party
pursuant to this Section 10.02(a)(ii), and the Indemnifying
Party will bear its own costs and expenses with respect to such
participation.
(iii) If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability to the
Indemnified Party with respect to the Third Party Claim under
Section 10.01 or fails to notify the Indemnified Party within
the Dispute Period whether the Indemnifying Party disputes its
liability to the Indemnified Party with respect to such Third
Party Claim, the Loss in the amount specified in the Claim
Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 10.01 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party
on demand. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be
resolved by litigation in a court of competent jurisdiction.
(b) In the event any Indemnified Party should have a claim
under Section 10.01 against any Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver
an Indemnity Notice with reasonable promptness to the
Indemnifying Party prior to the expiration of the
indemnification notice period described in this Section 10.02.
If the Indemnifying Party notifies the Indemnified Party that it
does not dispute the claim described in such Indemnity Notice or
fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in
such Indemnity Notice, the Loss in the amount specified in the
Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 10.01 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party
on demand. If the Indemnifying Party disputes all or any
portion of its liability with respect to such claim, it shall
notify the Indemnified Party thereof in writing during the
Dispute Period, specifying the portion of the claim that is
disputed and the basis for such position. If the Indemnifying
Party has timely disputed its liability with respect to such
claim, the Indemnifying Party will be deemed to have accepted
and be liable for payment of the undisputed portion of such
claim on demand and the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within
the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.
(c) In the event of any Loss resulting from a
misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained
in this Agreement as to which an Indemnified Party would be
entitled to claim indemnity under Section 10.01 but for the Loss
limitation provisions of Section 10.01(a) and (c), such
Indemnified Party may nevertheless deliver a written notice to
the Indemnifying Party containing the information that would be
required in a Claim Notice or an Indemnity Notice, as
applicable, with respect to such Loss. In the case of a Claim
Notice, the provisions of Section 10.02(a)(i) will be
applicable. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute the claim described therein or
fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in
such Claim Notice or Indemnity Notice, as the case may be, the
Loss specified in the notice will be conclusively deemed to have
been incurred by the Indemnified Party for purposes of making
the determination of the Loss limitations set forth in
Section 10.01. If the Indemnifying Party has timely disputed the
claim described in such Claim Notice or Indemnity Notice, as the
case may be, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by litigation
in a court of competent jurisdiction.
(d) In the event of any claim for indemnity under
Section 10.01(a), Purchaser agrees to give Seller and its
Representatives reasonable access to the Books and Records and
Employees in connection with the matters for which
indemnification is sought to the extent Seller reasonably deems
necessary in connection with its rights and obligations under
this Article X.
(e) All payments made pursuant to this Article X shall be
treated as an adjustment to the Purchase Price.
(f) In the event an action, dispute, claim, counterclaim
or controversy ("Dispute") arises between the parties arising
out of or relating to this Agreement, the aggrieved party shall
promptly notify the other party of the Dispute within ten
Business Days after such Dispute arises. If the parties have
failed to resolve the Dispute within ten Business Days after
delivery of such notice, each party shall, within five Business
Days thereafter, nominate a senior officer of its management to
meet to attempt to resolve the Dispute. The senior officers
shall meet within twenty Business Days after their nomination.
Should the senior officers be unable to resolve the Dispute,
either party may pursue any and all available legal remedies,
unless the parties mutually agree in writing to an alternative
dispute resolution procedure.
X.3 Exclusivity
After the Closing, to the extent permitted by Law, the
indemnities set forth in this Article X shall be the exclusive
remedies of Purchaser Group and Seller Group, or any member of
either of them, for any misrepresentation, breach of warranty or
nonfulfillment or failure to be performed of any covenant or
agreement contained in this Agreement, any schedule hereto, or
any certificate delivered by or on behalf of Seller or Purchaser
in connection herewith, and the parties shall not be entitled to
a rescission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof,
all of which the parties hereto hereby waive.
X.4 Purchaser's Release of Seller Under the Colstrip Contracts
From and after the Closing, Purchaser, for itself and on
behalf of its Affiliates, does hereby release, hold harmless and
forever discharge Seller and its Affiliates from any and all
claims, demands, liabilities (including fines and civil
penalties) or causes of action at Law or in equity, whether
known or unknown, resulting from any claim that Seller is not
released from its obligations under the Colstrip Contracts by
virtue of Sections 1.01(a)(xi) and 1.02(a)(v); provided,
however, that nothing in this Section 10.04 shall be deemed to
affect Seller's Retained Liabilities, Purchaser's Assumed
Liabilities or the parties' indemnification obligations
hereunder.
ARTICLE XI
TERMINATION
XI.1 Termination
This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser; or
(b) at any time before the Closing, by Seller or
Purchaser, in the event that any Final Order or Law becomes
effective restraining, enjoining, or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements, upon notification of the non-terminating party by
the terminating party; or
(c) at any time before the Closing, by Seller or
Purchaser, in the event (i) of a breach hereof by the non-
terminating party which gives rise to, as applicable, either a
Seller Material Adverse Effect (if Seller is the breaching
party) or a Purchaser Material Adverse Effect (if Purchaser is
the breaching party) if such non-terminating party fails to cure
such breach within forty-five (45) days following notification
thereof by the terminating party, provided that if, at the end
of such forty-five (45) day period, the non-terminating party is
endeavoring in good faith, and proceeding diligently, to cure
such breach, the non-terminating party shall have an additional
forty-five (45) days in which to effect such cure or (ii) upon
notification of the non-terminating party by the terminating
party that the satisfaction of any condition to the terminating
party's obligations under this Agreement becomes impossible or
impracticable with the use of commercially reasonable efforts if
the failure of such condition to be satisfied by the terminating
party is not caused by a breach hereof by the terminating party,
provided that if it is reasonably possible that the
circumstances giving rise to the impossibility or
impracticability may be removed prior to the expiration of the
time periods provided in the following subsection (d), then such
notification may not be given until such time as the removal of
such circumstances is no longer reasonably possible within such
time periods; or
(d) at any time after the date which is twelve (12) months
after the date of this Agreement, by Seller or Purchaser upon
notification of the non-terminating party by the terminating
party if the Closing shall not have occurred on or before such
date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party; provided, however, that
if on such date Purchaser and Seller have not received all
Purchaser Required Regulatory Approvals and all Seller Required
Regulatory Approvals but all other conditions to the Closing
shall be fulfilled or shall be capable of being fulfilled, then
neither party may terminate this Agreement until the expiration
of such date which is eighteen (18) months after the date of
this Agreement, provided further, that if on such date Purchaser
or MPC has not received all Purchaser Required Regulatory
Approvals or all Seller Required Regulatory Approvals (in each
case as defined in the MPC Purchase Agreement) related to the
Hydro Units (as defined in the MPC Purchase Agreement) but all
other conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then neither party may terminate
this Agreement until the expiration of the date which is twenty-
four (24) months after the date of this Agreement.
XI.2 Effect of Termination
If this Agreement is validly terminated pursuant to
Section 11.01, this Agreement will forthwith become null and
void, and there will be no liability or obligation on the part
of Seller or Purchaser (or any of their respective officers,
directors, employees, agents or other representatives or
Affiliates), except as provided in the next succeeding sentence
and except that the provisions with respect to expenses in
Section 13.04 and confidentiality in Section 13.06 will continue
to apply following any such termination. Notwithstanding any
other provision in this Agreement to the contrary, upon
termination of this Agreement pursuant to Section 11.01(c) or
(d), Seller will remain liable to Purchaser for any willful
breach of Section 4.09 of this Agreement by Seller existing at
the time of such termination, and Purchaser will remain liable
to Seller for any willful breach of Section 5.05 of this
Agreement by Purchaser existing at the time of such termination,
and Seller or Purchaser may seek such remedies, including
damages and fees of attorneys, against the other with respect to
any such breach as are provided in this Agreement or as are
otherwise available at Law or in equity.
ARTICLE XII
DEFINITIONS
XII.1 Definitions
(a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"Actions or Proceedings" means any action, suit,
proceeding, arbitration or Governmental or Regulatory Authority
investigation.
"Adjustment Amount" has the meaning ascribed to it in
Section 1.04.
"Adjustment Statement" has the meaning ascribed to it in
Section 1.04.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by
or is under common control with the Person specified. For
purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the
previous sentence, any Person owning ten percent (10%) or more
of the voting securities of another Person shall be deemed to
control that Person.
"Agreement" means this Asset Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and
the certificates delivered in accordance with Sections 6.03 and
7.03, as the same shall be amended from time to time.
"Assets" has the meaning ascribed to it in Section 1.01(a).
"Asset Group" means one or more of the categories of Assets
set forth on Schedule I to the MPC Purchase Agreement.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or intangible
and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person.
"Assignment Instruments" has the meaning ascribed to it in
Section 1.05.
"Associate" means, with respect to any Person, any
corporation or other business organization of which such Person
is an officer or partner or is the beneficial owner, directly or
indirectly, of ten percent (10%) or more of any class of equity
securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person
serves as a trustee or in a similar capacity and any relative or
spouse of such Person, or any relative of such spouse, who has
the same home as such Person.
"Assumed Liabilities" has the meaning ascribed to it in
Section 1.02(a).
"Assumption Agreement" has the meaning ascribed to it in
Section 1.05.
"Assumption Instruments" has the meaning ascribed to it in
Section 1.05.
"Base Purchase Price" means an amount equal to
$192,979,000.
"Bid Date" means September 28, 1998.
"Books and Records" of any Person means all files,
documents, instruments, papers, books and records relating to
the business, operations, condition of (financial or other),
results of operations and Assets and Properties of such Person,
including financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and
environmental studies and plans.
"Budget" has the meaning ascribed to it in Section 4.13.
"Business Combination" means with respect to any Person,
any merger, consolidation or combination to which such Person is
a party, any sale, dividend, split or other disposition of
capital stock or other equity interests of such Person or any
sale, dividend or other disposition of all or substantially all
of the Assets and Properties of such Person, provided, however,
that neither (i) a divestiture by Seller of all or part of its
generating assets (provided, that no such divestiture will
operate as a release of Seller from its obligations under this
Agreement) nor (ii) any activities or transactions of any
Affiliate of Seller (so long as not involving Seller), shall be
considered a Business Combination hereunder.
"Business Contracts" has the meaning ascribed to it in
Section 1.01(a)(v).
"Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the State of Oregon and the
Commonwealth of Pennsylvania are authorized or obligated to
close.
"Capital Expenditures" means those capital expenditures
which are identified in the Budget referred to in Section 4.13,
and such other emergency, non-budgeted capital expenditures made
by Seller in accordance with the provisions of Section 4.13.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the
rules and regulations promulgated thereunder.
"Claim Notice" means written notification pursuant to
Section 10.02(a) of a Third Party Claim as to which indemnity
under Section 10.01 is sought by an Indemnified Party, enclosing
a copy of all papers served, if any, and specifying the nature
of and basis for such Third Party Claim and for the Indemnified
Party's claim against the Indemnifying Party under
Section 10.01, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in
good faith, of such Third Party Claim.
"Closing" means the closing of the transactions
contemplated by Section 1.05.
"Closing Date" means (a) the later of (x) July 1, 1999 and
(y) the date thirty (30) days after the day on which the last of
the consents, approvals, actions, filings, notices or waiting
periods described in or related to the filings described in
Sections 6.04 through 6.07 and Sections 7.04 through 7.06 has
been obtained, made or given or has expired, as applicable;
provided, that Purchaser agrees to use reasonable efforts to be
prepared to close prior to July 1, 1999, and shall give notice
to Seller in the event Purchaser determines that it is able to
do so, or (b) such other date as Purchaser and Seller mutually
agree upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Colstrip Books and Records" has the meaning ascribed to it
in Section 1.01(a)(xiv).
"Colstrip Contracts" has the meaning ascribed to it in
Section 1.01(a)(xi).
"Colstrip Facilities" means the thermal electric generating
facilities known as Colstrip Units 3 & 4 located near Colstrip,
Montana, including the Common Facilities (as defined in the
Colstrip Contracts) and the PGE Colstrip Transmission Assets..
"Colstrip Rights of First Refusal" means the rights
described in the following agreements: (i) Sections 24(b) and
24(f) of the Ownership and Operation Agreement, dated as of
May 6, 1981, as amended, by and among Seller, MPC, WWP, Puget,
and Pacific Power & Light Company ("Pacific"); and (ii)
Section 28(f) of the Colstrip Project Transmission Agreement,
dated as of May 6, 1981, as amended, by and among Seller, MPC,
WWP, Puget and Pacific.
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other
contract.
"Contribution Agreement" has the meaning ascribed to it in
the forepart of this Agreement.
"Disclosure Schedule" means, as the context requires,
(a) the record delivered to Purchaser by Seller herewith and
dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required
to be included therein by Seller pursuant to this Agreement and
(b) the record delivered to Seller by Purchaser herewith and
dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required
to be included therein by Purchaser pursuant to this Agreement.
"Dispute" has the meaning ascribed to it in
Section 10.02(f).
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim
Notice or an Indemnity Notice.
"Easements" means, with respect to the Assets, the
reservations of easements in favor of Seller to be included in
the deeds of conveyance with respect to such Assets,
substantially as set forth in Section 12.01(b) of the Disclosure
Schedule.
"Employee" means each employee or officer of Seller,
Purchaser or MPC, as the context may require, or any of their
Affiliates, whose employment responsibilities relate to the PGE
Colstrip Interests or the Colstrip Facilities.
"Environmental Fines and Penalties" has the meaning
ascribed to it in Section 1.02(a)(vii).
"Environmental Law" means all Federal, state, municipal and
local laws (including common laws), regulations, rules,
ordinances, codes, licenses, decrees, judgments, directives, or
judicial or administrative orders relating to pollution,
protection, preservation or restoration of human health, the
environment or natural resources, including, without limitation,
laws relating to Releases or threatened Releases of Hazardous
Materials (including, without limitation, into or through
ambient air, surface water, groundwater, land, wetlands, surface
and subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials,
including without limitation the Clean Water Act, the Clean Air
Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act, and CERCLA, in each case as amended, and
their local counterparts.
"Environmental Liabilities" means any liabilities,
obligations or responsibilities under or related to former,
current or future Environmental Laws, or the common law, whether
such liability, obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in
connection with (a) any violation or alleged violation of
Environmental Laws relating to the Assets; (b) compliance with
applicable Environmental Laws relating to the Assets; (c) loss
of life, injury to persons or property or damage to natural
resources (whether or not such loss, injury or damage was made
manifest before or after the Closing) caused (or allegedly
caused) by the presence or Release of Hazardous Materials at,
on, in, under, adjacent to or migrating from the Assets; and (d)
the reasonable investigation and/or remediation required by Law
or constituting a reasonable response to a Governmental or
Regulatory Authority having jurisdiction (whether or not such
investigation or remediation commenced on or before the Closing)
of Hazardous Materials that are present or have been Released
at, on, in, under, adjacent to or migrating from the Assets,
including, but not limited to, Hazardous Materials in the soil,
surface water, sediments, groundwater, landfill cells, or in
other environmental media at or adjacent to the Assets
("Remedial Liabilities"); provided further that the liabilities,
obligations or responsibilities described in clauses (a), (b)
and (c) shall not include those described in clause (d);
provided further that Environmental Liabilities shall not
include (x) Purchaser's internal costs or consequential damages
(including the value of employees' time, loss of use, downtime
or increased operating costs); (y) costs of capital improvements
(including the replacement of equipment that has reached its
useful life); nor (z) monitoring required by environmental
permits or the design of the Assets, except in the case of
clauses (y) and (z), as covered in clause (d) above.
"Environmental Permits" has the meaning ascribed in
Section 2.15.
"EPA" means the Environmental Protection Agency.
"Estimated Adjustment Amount" means Seller's good faith
reasonable estimate of an Adjustment Amount for the Closing,
which estimate shall be provided to Purchaser no later than five
Business Days before the Closing.
"Estimated Purchase Price" has the meaning ascribed to it
in Section 1.05.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated
thereunder.
"Excluded Assets" has the meaning ascribed to it in Section
1.01(b).
"Federal Power Act" means the Federal Power Act of 1935, as
amended, and the rules and regulations promulgated thereunder.
"FERC" means the Federal Energy Regulatory Commission.
"Final Order" means a final Order after all opportunities
for rehearing are exhausted (whether or not any appeal thereof
is pending) that has not been further revised, stayed, enjoined,
set aside, annulled or suspended, with respect to which any
required waiting period has expired, and as to which all
conditions to effectiveness prescribed therein or otherwise by
Law, regulation or Order have been satisfied.
"Fuel Contracts" has the meaning ascribed to it in
Section 1.01(a)(x).
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the
immediately prior comparable period.
"General Assignment" has the meaning ascribed to it in
Section 1.05.
"General Representations" has the meaning ascribed to it in
Section 9.01(a).
"Good Utility Practice" means any of the applicable
practices, methods and acts:
(i) required of the party to whom Good Utility
Practice is being applied under regulations of the National
Electric Safety Code (as each of such terms is defined in the
Interconnection Agreement (as such term is defined in the MPC
Purchase Agreement)) or its successor, whether or not the party
whose conduct is at issue is a member thereof; or
(ii) otherwise engaged in or approved by a
significant portion of the electric utility industry during the
relevant time period; which, in the exercise of reasonable
judgment in light of the facts known at the time the decision
was made, could have been expected to accomplish the desired
result at a reasonable cost to the party being expected to apply
Good Utility Practice, consistent with law, regulation, good
business practices, generation, transmission, and distribution
reliability, safety, and expedition. Good Utility Practice is
intended to include practices, methods, or acts generally
accepted in the region, and is not intended to be limited to
optimum practices, methods, or acts to the exclusion of all
others. Good Utility Practice does not include intentional
disregard of contractual commitments, even if those commitments
are uneconomic under current market conditions.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of the United States, any foreign country
or any domestic or foreign state, county, city or other
political subdivision or any Native American tribal council or
similar governing entity.
"Hazardous Material" means (A) any petrochemical, petroleum
or petroleum products, oil, flammable explosives, radioactive
materials, radon gas, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid
which may contain levels of polychlorinated biphenyls (PCBs);
(B) any chemicals or other materials or substances which are now
or hereafter become defined under any Environmental Law as or
included in the definition of "hazardous substances," "hazardous
wastes," "hazardous chemicals," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "pollutants," "contaminants," "hazardous
matter," "restricted hazardous materials" or words of similar
import ; and (C) any other chemical or other material or
substance, the discharge, emission, Release or exposure to which
is now or hereafter prohibited, limited or regulated by any
Governmental or Regulatory Authority under any Environmental
Law.
"Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended, and the rules and regulations
promulgated thereunder.
"HSR Act" means Section 7A of the Clayton Act (Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended) and the rules and regulations promulgated thereunder.
"Improvements" has the meaning ascribed to it in
Section 1.01(a)(iv).
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred
purchase price of goods or services (other than trade payables
or accruals incurred in the ordinary course of business), (iv)
under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any
other Person.
"Indemnified Party" means any Person claiming
indemnification under any provision of Article X.
"Indemnifying Party" means any Person against whom a claim
for indemnification is being asserted under any provision of
Article X.
"Indemnity Notice" means written notification pursuant to
Section 10.02(b) of a claim for indemnity under Article X by an
Indemnified Party, specifying the nature of and basis for such
claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith,
of such claim.
"Indenture" means the Supplemental Indenture, dated as of
July 1, 1945, as amended and supplemented, between Seller and
The Marine Midland Trust Company of New York, Trustee.
"Independent Accounting Firm" means PriceWaterhouseCoopers
or such other independent accounting firm of national reputation
mutually appointed by Seller and Purchaser.
"Intangible Personal Property" has the meaning ascribed to
it in Section 1.01(a)(vii).
"Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, trade names and trade
name rights, service marks and service mark rights, service
names and service name rights, brand names, inventions,
copyrights and copyright rights, trade secrets, know-how,
techniques, computer programs and related documentation, and any
and all other intangible assets or proprietary information or
rights (whether registered or under common law) and all pending
applications for and registrations of patents, trademarks,
service marks and copyrights.
"Inventory" has the meaning ascribed to it in
Section 1.01(a)(iii).
"Inventory Adjustment Amount" has the meaning ascribed to
in Section 1.04.
"Inventory Survey" has the meaning ascribed to in
Section 1.04.
"IRS" means the United States Internal Revenue Service.
"Knowledge" or similar phrases in this Agreement means:
(i) in the case of Seller, the actual knowledge of Seller's
officers and employees who are persons generally responsible for
the subject matter to which knowledge is pertinent, such persons
being listed in Section 12.01(d) of the Disclosure Schedule at
the date as of which the representation, warranty or covenant is
made or repeated, and (ii) in the case of Purchaser the actual
knowledge of Purchaser's officers and employees who are persons
generally responsible for the subject matter to which knowledge
is pertinent, such persons being listed in Section 12.01(d) of
the Disclosure Schedule at the date as of which the
representation, warranty or covenant is made or repeated.
"Landlord Security Deposits" has the meaning ascribed to it
in Section 1.02(a)(iv).
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of
the United States, any foreign country or any domestic or for-
eign state, county, city or other political subdivision or of
any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent,
fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises
and similar consents granted or issued by any Governmental or
Regulatory Authority, other than Environmental Permits,
including applications for any of the foregoing.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other
encumbrance of any kind, or easement, or any conditional sale
Contract, title retention Contract or other Contract to give any
of the foregoing.
"Loss" means any and all damages, fines, penalties,
deficiencies, losses and expenses (including interest, court
costs, reasonable fees of attorneys, accountants and other
experts or other reasonable expenses of litigation or other
proceedings or of any claim, default or assessment); provided,
however, "Loss" shall not include any consequential, incidental
or punitive damages for any reason other than in the case of
willful misconduct.
"Maintenance Expenditures" means those special maintenance
expenditures (including for plant overhauls) which are
identified in the Budget referred to in Section 4.13, and such
other emergency, non-budgeted special maintenance expenditures
made by Seller in accordance with the provisions of Section 4.13
in the exercise of Good Utility Practices.
"Maintenance and Capital Expenditures Amount" means (i) the
aggregate amount of all funds actually expended by Seller (and
amounts due from Seller to third parties at the time of the
Closing in respect of work actually performed by such third
parties, to the extent such amounts are not Assumed Liabilities)
with respect to Maintenance Expenditures and Capital
Expenditures, in each case which are identified in the Budget,
during the period beginning on the date one (1) year prior to
the Closing and ending on the Closing (or such shorter period if
the Closing occurs less than one year from the date hereof) up
to but not exceeding $1,620,000 in the aggregate; and (ii) 85%
of all Emergency Expenditures made by Seller in accordance with
Section 4.13 if any, during such one (1) year (or shorter)
period described above. The Maintenance and Capital
Expenditures Amount shall not include any Capital Expenditures,
Maintenance Expenditures or Emergency Expenditures with respect
to assets or properties that are not transferred to Purchaser
under this Agreement.
"MPC" means The Montana Power Company, a Montana
corporation and the operator of the Colstrip Facilities.
"MPC Purchase Agreement" means the Asset Purchase
Agreement, dated as of the date hereof, by and between Purchaser
and MPC, together with any amendments thereto.
"Off-Site Environmental Liabilities" means any liabilities,
obligations or responsibilities under or related to former,
current or future Environmental Laws or the common law, whether
such liability, obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in
connection with Seller's storage, disposal, transportation,
discharge, Release or recycling of Hazardous Materials prior to
the Closing at or to locations other than the Real Property
constituting Assets, provided that liabilities attributable to
migration of Hazardous Materials from the Real Property
constituting the Assets shall not constitute Off-Site
Environmental Liabilities.
"Operative Agreements" means, collectively, this Agreement,
the General Assignment and the other Assignment Instruments, the
Assumption Agreement, the other Assumption Instruments, the
Contribution Agreement, the Wholesale Transition Service
Agreement (if entered into by the Parties), the Transmission
Service Agreement (if entered into by the Parties) and any
support or other agreements to be entered into at the Closing in
connection with the transaction.
"OPUC" means the Oregon Public Utility Commission.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in
each such case whether preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of
this Agreement.
"Permitted Lien" means (i) those Liens and exceptions to
title to the Assets (except Easements) set forth in Section
12.01(e) of the Disclosure Schedule; (ii) the Easements;
(iii) when such term is used with respect to any date before the
Closing, Liens created by the Indenture; (iv) any Lien for Taxes
not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been
established in accordance with GAAP; (v) when such term is used
with respect to any date prior to the Closing, any statutory
Lien arising in the ordinary course of business by operation of
Law with respect to a Liability that is not yet due or
delinquent; (vi) zoning, entitlement, conservation restriction
and other land use and environmental regulations by any
Governmental or Regulatory Authority; and (vii) any minor
imperfection of title or similar Lien, limited in the case of
items (i) - (vii) (excluding clause (ii)) to only those matters
which, individually or in the aggregate with other such Liens do
not materially detract from the value of the Assets as currently
used or materially interfere with the ownership, operation and
maintenance of the Assets.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, limited
liability company, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"PGE Colstrip Interests" means Seller's undivided 20%
interest in Colstrip Units 3 & 4, together with PGE's interest
in the Common Facilities as provided in the Colstrip Contracts
and its interest in the PGE Colstrip Transmission Assets.
"PGE Colstrip Transmission Amount" means an amount equal to
$37,464,656.
"PGE Colstrip Transmission Assets" means Seller's right,
title and interest in and to the 500 kV transmission system,
including related facilities, real property and property rights,
for the transmission of power from the Colstrip Facilities to
Bonneville Power Administration's transmission system near
Townsend, Montana, as described in Section 1.01(a)(xv) of the
Disclosure Schedule.
"Pollution Control Bonds" means those Pollution Control
Revenue Refunding Bonds, dated May 1, 1998, Series 1998 A (Non-
AMT) City of Forsyth, Montana in the original principal amount
of $97,800,000 and Series 1998 B (AMT) City of Forsyth, Montana
in the original principal amount of $21,000,000.
"Pollution Control Facilities" means the facilities
financed with the Pollution Control Bonds described in Exhibit H
hereto.
"Post-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Potentially Responsible Party" has the meaning ascribed to
it in CERCLA.
"PPUC Order" means the Opinion and Order adopted by PPUC on
February 9, 1995 in Pennsylvania Power & Light Company's
application for approval of certain transactions in connection
with the utility's establishment of a holding company structure.
"Pre-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Pre-Closing Environmental Liabilities" means those
Environmental Liabilities attributable to the period on or prior
to the Closing;
"Pre-Closing Known Remedial Liabilities" means the subset
of Pre-Closing Environmental Liabilities that are described in
paragraph (d) of the definition of Environmental Liabilities and
that are attributable to the matters set forth in Schedule I
hereto.
"Pre-Closing Known and Unknown Remedial Liabilities" means
all Pre-Closing Known Remedial Liabilities and Pre-Closing
Unknown Remedial Liabilities arising from or relating to the
ownership, operation and maintenance of the PGE Colstrip
Interests, to the extent such PGE Colstrip Interests or any
portion thereof are acquired by Purchaser.
"Pre-Closing Unknown Remedial Liabilities" means the subset
of Pre-Closing Environmental Liabilities that are described in
paragraph (d) of the definition of Environmental Liabilities and
that are not attributable to the matters set forth in Schedule I
hereto.
"Proceedings" has the meaning ascribed in Section 13.13.
"Puget" means Puget Sound Energy, Inc., a Washington
corporation.
"Purchase Price" has the meaning ascribed to it in
Section 1.03(a).
"Purchaser" has the meaning ascribed to it in the forepart
of this Agreement.
"Purchaser Financing" has the meaning ascribed to it in
Section 5.07.
"Purchaser Group" has the meaning ascribed to it in Section
10.01(a).
"Purchaser Material Adverse Effect" means any change or
effect after the Bid Date that is individually or in the
aggregate, materially adverse to (a) the business, operations,
property or condition (financial or otherwise) of Purchaser and
its subsidiaries, taken as a whole, (b) the ability of Purchaser
and each of its subsidiaries, taken as a whole, to perform their
respective obligations under this Agreement or any of the other
Operative Agreements or (c) the validity or enforceability of
this Agreement or any of the other Operative Agreements, or the
rights or remedies of Purchaser hereunder or thereunder.
"Purchaser Required Regulatory Approvals" means (i)
pursuant to Part II of the Federal Power Act, acceptance for
filing and effectiveness or authorization by Final Order of
FERC, as applicable, to allow Purchaser to (A) implement
wholesale sales of electricity under a Wholesale Transition
Service Agreement (if one is entered into pursuant to Section
5.09) and any other jurisdictional agreements to be assigned to
Purchaser, (B) acquire, own and operate the Assets, and (C) sell
electricity at wholesale at market-based rates; (ii) a Final
Order of FERC certifying Purchaser as an exempt wholesale
generator pursuant to Section 32 of the Holding Company Act,
provided however, that in the event Purchaser does not obtain
such certification with respect to the acquisition and ownership
of the PGE Colstrip Transmission Assets, then the provisions of
Section 1.10 shall apply with respect to such Assets and
provided further, that in any case such certification will be a
Purchaser Required Regulatory Approval with respect to all other
Assets, (iii) subject to the provision of Section 1.10, a Final
Order of the FERC accepting for filing and effectiveness or
approving the Transmission Service Agreement in form and
substance satisfactory to Purchaser in its reasonable discretion
and providing for the payment by Purchaser of rates not in
excess of those as set forth on Exhibit K, (iv) a Final Order of
the OPUC, Montana Public Service Commission and the WUTC, in
each case if required, including the determinations required by
Section 32(c) of the Holding Company Act for the Assets to be
eligible facilities of Purchaser as an exempt wholesale
generator; (v) approval or authorization by Final Order of the
Pennsylvania Public Utility Commission pursuant to the PPUC
Order, if required; (vi) other Licenses, Environmental Permits
and approvals or authorizations of any other Governmental or
Regulatory Authority reasonably necessary pursuant to any Law
for Purchaser to own and operate the Assets other than
authorizations or approvals, the lack of which would not
materially detract from the value of the Assets as currently
used or materially interfere with the ownership, operation and
maintenance of the Assets; and (vii) expiration or early
termination of the HSR Act waiting period.
"Qualified Transfer" means a sale or other disposition of
the Pollution Control Facilities to a transferee who is
reasonably expected to use the Pollution Control Facilities in
such a way that they are treated as qualified pollution control
facilities within the meaning of Section 103(b)(4)(F) of the
Internal Revenue Code as in effect prior to the enactment of
Public Law No. 99-514 (the "Tax Reform Act of 1986").
"Real Property" has the meaning ascribed to it in
Section 1.01(a)(i).
"Real Property Leases" has the meaning ascribed to it in
Section 1.01(a)(ii).
"Release" means any release, spill, emission, pouring,
leaking, pumping, injection, deposit, disposal, discharge,
emptying, dispersal, dumping, leaching or migration into or
through the indoor or outdoor environment, including the
movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land, surface or
subsurface strata.
"Representatives" has the meaning ascribed to it in
Section 4.03.
"Resolution Period" means the period ending sixty (60) days
following receipt by an Indemnified Party of a written notice
from an Indemnifying Party stating that it disputes all or any
portion of a claim set forth in a Claim Notice or an Indemnity
Notice.
"Retained Liabilities" has the meaning ascribed to it in
Section 1.02(b).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Seller" has the meaning ascribed to it in the forepart of
this Agreement.
"Seller Group" has the meaning ascribed to it in Section
10.01(c).
"Seller Material Adverse Effect" means any change in or
effect on any of the Assets or the operation of any of the
Assets after the Bid Date that is materially adverse to the
ownership, business, operations or condition (financial or
otherwise) of (A) in the case of the PGE Colstrip Interests, the
PGE Colstrip Interests, or (B) in the case of the PGE Colstrip
Transmission Assets (unless the provisions of Section 1.10 or
6.12 have become effective), the PGE Colstrip Interests or the
PGE Colstrip Transmission Assets, in each case taken as a whole,
other than (i) any change resulting from changes in the
international, national, regional or local wholesale or retail
markets for electricity, (ii) any change resulting from changes
in the international, national, regional or local markets for
any fuel used at the Colstrip Facilities, (iii) any change
resulting from changes in the North American, national, regional
or local electricity transmission systems, (iv) changes in Law
that apply generally to similarly situated Persons, and (v) any
materially adverse change in the Assets which is cured
(including by payment of money) by Seller before the earlier of
the Closing and the Termination Date.
"Seller Required Regulatory Approvals" means (i) the
approval, if required, of the SEC pursuant to the Holding
Company Act, (ii) the filings by Seller and Purchaser required
by the HSR Act and the expiration or earlier termination of all
waiting periods under the HSR Act, (iii) a Final Order(s) of the
OPUC approving the transaction and the terms and conditions of
each of the Operative Agreements and the respective regulatory
treatment of any and all financial impacts thereof, in each case
in form and substance satisfactory to Seller in its reasonable
discretion, and (iv) a Final Order(s) of the FERC approving the
transaction or any aspects thereof over which FERC has
jurisdiction, including the approval, if necessary, of the
Transmission Service Agreement, and the respective regulatory
treatment of any and all financial impacts of such Final
Order(s) of FERC in form and substance satisfactory to Seller in
its reasonable discretion.
"Separation Document" means the separation document to be
agreed to by the parties in the event the PGE Transmission
Assets are not purchased by Purchaser.
"Site Representatives" has the meaning ascribed to it in
Section 4.10.
"Tangible Personal Property" has the meaning ascribed to it
in Section 1.01(a)(iv).
"Tax Representation" has the meaning ascribed to it in
Section 9.01(a).
"Tax Returns" means any return, report, information return
or other document (including any related or supporting
information) required to be supplied to any taxing authority
with respect to Taxes.
"Taxes" means all taxes, charges, fees, levies, penalties,
or other assessments imposed by any United States Federal, state
or local or foreign taxing authority, including but not limited
to, income, excise, property, sales, transfer, franchise,
payroll, withholding, social security or other taxes, including
any interest, penalties or additions attributable thereto.
"Tenant Security Deposits" has the meaning ascribed to it
in Section 1.01(a)(viii).
"Third Party Claim" has the meaning ascribed to it in
Section 10.02(a).
"Title Representation" has the meaning ascribed to it in
Section 9.01(a).
"Transferable Permits" has the meaning ascribed to it in
Section 1.01(a)(vi).
"Transfer Taxes" means all Taxes in the nature of sales,
use, transfer, recording, value added or forms of conveyance
taxes.
"Transmission Service Agreement" means an agreement between
Seller and Purchaser completed pursuant to Section 5.08 under
which Purchaser shall purchase firm point-to-point transmission
service from Seller on the PGE Colstrip Transmission Assets
pursuant to the Transmission Service Agreement Principles set
forth on Exhibit K.
"Wholesale Transition Service Agreement" has the meaning
ascribed to it in Section 5.09.
"WUTC" means the Washington Utilities and Transportation
Commission.
"WWP" means The Washington Water Power Company, a
Washington corporation.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any
gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement;
(iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; (v) "include" or
"including" means including without limiting the generality of
any description preceding such term, and (vi) the phrase
"ordinary course of business" refers to the business of Seller
in connection with the ownership of the PGE Colstrip Interests
and the performance of its obligations under the Colstrip
Contracts. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days
are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them
under GAAP. Any representation or warranty contained herein as
to the enforceability of a Contract shall be subject to the
effect of any bankruptcy, insolvency, reorganization, moratorium
or other similar law affecting the enforcement of creditors'
rights generally and to general equitable principles (regardless
of whether such enforceability is considered in a proceeding in
equity or at Law).
ARTICLE XIII
MISCELLANEOUS
XIII.1 Notices
All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given
only if delivered personally or by facsimile transmission or
mailed (first class postage prepaid) to the parties at the
following addresses or facsimile numbers:
If to Purchaser, to:
PP&L Global, Inc.
11350 Random Hills Rd, Suite 400
Fairfax, Virginia 22030
Facsimile No.: (703) 293-2659
Attn: Chief Counsel
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Facsimile No.: 212-858-1500
Attn: David P. Falck
If to Seller, to:
Portland General Electric Company
121 SW Salmon Street
Portland, Oregon 97204
Facsimile No.: 503-464-2200
Attn: General Counsel
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
Facsimile No.: (212) 424-8500
Attn: John G. Klauberg
All such notices, requests and other communications will
(i) if delivered personally to the address as provided in this
Section, be deemed given upon delivery, (ii) if delivered by
facsimile transmission to the facsimile number as provided in
this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt (in
each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of
such notice, request or other communication is to be delivered
pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
XIII.2 Bulk Sales Act
The parties hereby waive compliance with the bulk sales act
or comparable statutory provisions of each applicable
jurisdiction. Seller shall indemnify Purchaser and its officers,
directors, employees, agents and Affiliates in respect of, and
hold each of them harmless from and against, any and all Losses
suffered, occurred or sustained by any of them or to which any
of them becomes subject, resulting from, arising out of or
relating to the failure of Seller to comply with the terms of
any such provisions applicable to the transactions contemplated
by this Agreement.
XIII.3 Entire Agreement
This Agreement and the Operative Agreements and the other
exhibits, schedules, documents, certificates and instruments
executed and delivered pursuant to this Agreement supersede all
prior discussions and agreements between the parties with
respect to the subject matter hereof and thereof, including that
certain confidentiality agreement between Purchaser and MPC
dated April 8, 1998, as agreed to include Seller, and contain
the sole and entire agreement between the parties hereto with
respect to the subject matter hereof and thereof.
XIII.4 Expenses
Except as otherwise expressly provided in this Agreement
(including as provided in Section 11.02), whether or not the
transactions contemplated hereby are consummated, each party
will pay its own costs and expenses incurred in connection with
the negotiation, execution and closing of this Agreement and the
Operative Agreements and the transactions contemplated hereby
and thereby.
XIII.5 Public Announcements
At all times at or before the Closing, Seller and Purchaser
will not issue or make any reports, statements or releases to
the public or generally to the employees, customers, suppliers
or other Persons with whom Seller has significant business
relationships in connection with the PGE Colstrip Interests with
respect to this Agreement or the transactions contemplated
hereby without the consent of the other, which consent shall not
be unreasonably withheld. If either party is unable to obtain
the approval of its public report, statement or release from the
other party and such report, statement or release is, in the
opinion of legal counsel to such party, required by Law in order
to discharge such party's disclosure obligations, then such
party may make or issue the legally required report, statement
or release and promptly furnish the other party with a copy
thereof. Seller and Purchaser will also obtain the other party's
prior approval of any press release to be issued immediately
following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
XIII.6 Confidentiality
Each party hereto will hold, and will use its best efforts
to cause its Affiliates, and their respective Representatives to
hold, in strict confidence from any Person (other than any such
Affiliate or Representative), unless (i) compelled to disclose
by judicial or administrative process (including in connection
with obtaining the necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental or Regulatory
Authorities) or by other requirements of Law or (ii) disclosed
in an Action or Proceeding brought by a party hereto in pursuit
of its rights or in the exercise of its remedies hereunder, all
documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other
party's Representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such
documents or information can be shown to have been
(a) previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after
the furnishing of such documents or information hereunder)
through no fault of such receiving party or (c) later acquired
by the receiving party from another source if the receiving
party is not aware that such source is under an obligation to
another party hereto to keep such documents and information
confidential; provided that following the Closing the foregoing
restrictions will not apply to Purchaser's use of documents and
information concerning the Assets or the Assumed Liabilities
furnished by Seller hereunder. Purchaser shall have the right to
disclose Information of Seller with respect to the Assets to
potential lenders and their respective representatives in
connection with financing the transactions contemplated by this
Agreement and to third parties in connection with planning for
operations of the Assets following the Closing, provided that
any such disclosure is made pursuant to confidentiality
obligations equivalent to those provided in this Section 13.06;
provided, further, if such third parties are involved in the
energy industry then Purchaser shall not disclose information of
Seller to such Persons without the written consent of Seller
which shall not be unreasonably withheld. In the event the
transactions contemplated hereby are not consummated, upon the
request of the other party, each party hereto will, and will
cause its Affiliates and their respective Representatives to,
promptly (and in no event later than five (5) Business Days
after such request) redeliver or cause to be redelivered all
copies of confidential documents and information furnished by
the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon
prepared by the party furnished such documents and information
or its Representatives.
XIII.7 Waiver
Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any
term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any
future occasion. All remedies, either under this Agreement or by
Law or otherwise afforded, will be cumulative and not
alternative.
XIII.8 Amendment
This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of
each party hereto.
XIII.9 No Third Party Beneficiary
The terms and provisions of this Agreement are intended
solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of
the parties to confer third party beneficiary rights upon any
other Person other than any Person entitled to indemnity under
Article X.
XIII.10 No Assignment; Binding Effect
Neither this Agreement nor any right, interest or
obligation hereunder may be assigned by any party hereto without
the prior written consent of the other party hereto and any
attempt to do so will be void, except (a) for assignments and
transfers by operation of Law, (b) that Seller may assign its
rights, interests or obligations hereunder, in whole or in part,
to an Affiliate and (c) that Purchaser may assign any or all of
its rights, interests and obligations hereunder (including its
rights under Article X) to (i) a direct or indirect wholly-owned
subsidiary, provided that any such subsidiary agrees in writing
to be bound by all of the terms, conditions and provisions
contained herein (in which event, from the date of such
assignment and subject to the other provisions of this Section
13.10, such assignee shall be the Purchaser for the purposes of
this Agreement), or (ii) any lender providing purchase money or
other financing to Purchaser from time to time as collateral
security for such financing, but no such assignment referred to
in clauses (b) or (c) shall relieve the assigning party of its
obligations hereunder provided that no such assignment by Seller
or Purchaser adversely affects the availability or timing of any
Federal, state or local government consent or approval required
for the consummation of the transactions contemplated hereby.
Subject to the preceding sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
XIII.11 Headings
The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the
provisions hereof. Neither party shall be deemed to have been
the drafter of this Agreement, which is the product of detailed,
arm's-length negotiations between the parties and their
respective counsel.
XIII.12 Invalid Provisions
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby,
(a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom
and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may
be possible.
XIII.13 Governing Law
This Agreement shall be governed by and construed in
accordance with the Laws of the State of New York.
XIII.14 Counterparts
This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
[THE REST OF THIS PAGE INTENTIONALLLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officer of each party as of
the date first above written.
PP&L GLOBAL, INC.
By:______________________________
Name:
Title:
PORTLAND GENERAL ELECTRIC COMPANY
By:______________________________
Name:
Title:
<PAGE>
Exhibit 10(d)
EQUITY CONTRIBUTION AGREEMENT
This EQUITY CONTRIBUTION AGREEMENT (this "Agreement") dated
as of November 1, 1998 by and among PP&L Global, Inc.
("Purchaser"), PP&L Resources, Inc. ("Parent"), and Portland
General Electric Company, ("Seller").
R E C I T A L S
WHEREAS, Purchaser and Seller are parties to that certain
Asset Purchase Agreement, dated as of the date hereof (the
"Purchase Agreement");
WHEREAS, Purchaser is directly wholly-owned by Parent;
NOW, THEREFORE, in consideration of the premises and as an
inducement for Seller to enter into the Purchase Agreement, the
parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein and
not otherwise defined herein shall have the respective meanings
given to them in the Purchase Agreement.
Section 2. Equity Contribution.
(a) Seller may, in its sole discretion and without the
concurrence of Purchaser or any of its Affiliates, give written
notice to be received by Parent on a date that is six (6)
Business Days prior to the Closing Date (the "Notice Date"),
which notice shall certify that as of the Notice Date, the
Portland Conditions are satisfied and that, if the Closing were
to occur on the Notice Date, Seller would be prepared to satisfy
the conditions to Closing that are solely within the control of
Seller. Parent hereby irrevocably promises and agrees that, upon
receipt of the notice referred to in the preceding sentence,
Parent will make or cause to be made, on the date of the Closing,
a contribution in immediately available funds to Purchaser in the
amount of the Base Purchase Price, adjusted to take into account
additional Excluded Assets (the amount required to be contributed
by Parent pursuant to the notice referred to in the preceding
sentence is sometimes hereinafter referred to as the "Required
Contribution Amount").
(b) If Purchaser breaches its obligation to effect the
Closing as and when required by the Purchase Agreement, and, if
as a result thereof, Purchaser is the subject of a final and
binding order of a court of competent jurisdiction obligating it
to pay any damages, costs, and expenses incurred by Seller (a
"Liability"), Seller may, in its sole discretion and without the
concurrence of Purchaser or any of its Affiliates, give written
notice to Parent that such Liability was incurred. Parent
irrevocably promises and agrees that it shall make or cause to be
made a contribution in immediately available funds to Purchaser
within (5) five Business Days after receipt of such notice in an
amount sufficient for Purchaser to fully satisfy and discharge
the Liability up to but not to exceed the Required Contribution
Amount.
(c) If a court of competent jurisdiction enters a
final and binding order to the effect that Seller was not
entitled to give any notice provided for in subsection (a) or (b)
hereof, then Seller shall be liable to pay Parent, as liquidated
damages and in full satisfaction of any claim of Purchaser or any
of its Affiliates arising out of such notice or order insofar as
such order relates to Seller giving such notice, an amount equal
to the documented out-of-pocket costs of Parent (including,
without limitation, Parent's cost of capital after giving effect
to related income taxes) incurred in connection with Parent's
contribution (or arrangements made to cause such contribution) to
Purchaser as a result of such wrongful notice by Seller.
(d) Notwithstanding any other provision of this
Agreement to the contrary, Parent shall have no obligation to
make or cause to be made any contribution to Purchaser under this
Agreement to the extent its aggregate contributions to Purchaser
made or cause to be made as a result of a notice given by Seller
hereunder or otherwise contributed (provided such funds have been
segregated in accordance with Section 4 hereunder or are
otherwise available for payment by Purchaser of the Purchase
Price under the Purchase Agreement) equal or exceed the aggregate
of the Required Contribution Amounts.
(e) Any payments made or caused to be made by Parent
directly to Seller in satisfaction of Parent's obligations to
make or cause to be made a contribution to Purchaser hereunder
shall be deemed to be on behalf of, and to satisfy the
obligations of, Purchaser to Seller under the Purchase Agreement
(to the extent of the amount paid or caused to be paid by
Parent).
(f) If, prior to receipt of a notice from Seller
requesting a contribution to Purchaser, Parent makes or causes to
be made a contribution to Purchaser as contemplated herein, it
shall promptly notify Seller in writing of such contribution,
which notice shall state that such contribution has been
segregated as provided in Section 4 herein.
(g) Upon written request of Seller given to Purchaser
at any time after Parent has made or caused to be made a
contribution to Purchaser contemplated herein, Purchaser agrees
to return such contribution to Parent.
(h) If, following the making by Parent of the Required
Contribution Amount hereunder, the Closing in respect of which
such contribution was made fails to occur as scheduled (other
than any such failure caused solely by a breach by Purchaser of
its obligation to effect such Closing), any Funds so contributed
to Purchaser may be returned to Parent; provided, that this
Agreement shall continue in effect until termination in
accordance with the provisions of Section 5 hereof.
Section 3. Representations and Warranties.
(a) Parent and Purchaser represent and warrant to
Seller as follows:
(i) Each of Parent and Purchaser is a corporation,
duly organized, validly existing and in good standing under the
laws of Commonwealth of Pennsylvania and has full corporate power
and authority to enter into this Agreement and to perform its
obligations hereunder.
(ii) The execution and delivery by each of Parent
and Purchaser of this Agreement, and the performance of its
obligations hereunder, have been duly authorized by all necessary
corporate action on the part of Parent and Purchaser, as the case
may be.
(iii) Each of Parent and Purchaser has duly
executed and delivered this Agreement. Assuming due
authorization, execution and delivery of this Agreement by
Seller, this Agreement constitutes the valid and binding
obligation of each of Parent and Purchaser, enforceable in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general applicability affecting the
enforcement of creditors' rights and the application of general
principles of equity.
(iv) All consents, authorizations and other
approvals of any governmental authority which are necessary for
the execution and delivery by each of Parent and Purchaser of
this Agreement and the performance by it of its obligations
hereunder have been obtained and are in full force and effect,
are final and not subject to any appeal.
(v) Execution, delivery and performance by Parent
of this Agreement will not conflict with or result in a violation
or default under any contract, agreement or order of any court or
regulatory authority binding upon Parent or any of its
Affiliates.
(b) Seller represents and warrants to Parent as
follows:
(i) Seller is a corporation, duly organized,
validly existing and in good standing under the laws of the State
of Oregon, and has full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder.
(ii) The execution and delivery by Seller of this
Agreement, and the performance of its obligations hereunder, have
been duly authorized by all necessary corporate action on the
part of Seller.
(iii) Seller has duly executed and delivered this
Agreement. Assuming due authorization, execution and delivery of
this Agreement by Purchaser and Parent, this Agreement
constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
applicability affecting the enforcement of creditors' rights and
the application of general principles of equity.
(iv) All consents, authorizations and other
approvals of any governmental authority which are necessary for
the execution and delivery by Seller of this Agreement and the
performance by Seller of its obligations hereunder have been
obtained and are in full force and effect, are final and not
subject to any appeal.
(v) Execution, delivery and performance by Seller
of this Agreement will not conflict with or result in a violation
or default under any contract, agreement or order of any court or
regulatory authority binding upon Seller or any of its
Affiliates.
Section 4. Restriction on Use. Purchaser shall segregate
from its general funds any contributions made or caused to be
made by Parent hereunder and shall use such funds for the
purpose, and only for the purpose, of satisfying its obligations
to Seller under the Purchase Agreement. Such contribution shall
be placed in a segregated account at an independent financial
institution, the name of which account makes reference to the
restrictions contained herein.
Section 5. Termination. The obligation of Parent under
this Agreement shall terminate upon the earliest to occur of:
(a) contribution made or caused to be made by Parent
to Purchaser of an amount equal to or exceeding the Required
Contribution Amount in response to notice given by Seller
hereunder or otherwise contributed (provided such funds have been
segregated in accordance with Section 4 or are otherwise
available for payment by Purchaser of the Purchase Price under
the Purchase Agreement and any necessary notice has been given
pursuant to Section 2(f));
(b) five (5) Business Days after notice of termination
of the Purchase Agreement is given pursuant to Article XI
thereof, unless prior to the close of business on the fifth
business day after such notice Parent receives written notice
from Purchaser or Seller that either of them in good faith
believes that the Purchase Agreement is still in full force and
effect or has been improperly terminated, and that Seller is
actively pursuing a Liability claim, in which case this Agreement
shall terminate upon the settlement or other determination of
such claim in accordance with Section 2(b) hereof and the making
or causing to be made of the required contribution by Parent; or
(c) the occurrence of the Closing under the Purchase
Agreement.
Section 6. Miscellaneous.
(a) This Agreement shall be binding upon, shall inure
to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and permitted assigns. In
the event that Purchaser assigns its rights under the Purchase
Agreement to a special purpose corporation, then the term
"Purchaser" herein shall refer to such special purpose
corporation and Parent shall make or cause to be made its
required contribution hereunder directly to such special purpose
corporation. Seller shall be entitled to enforce the obligations
of Parent hereunder without the concurrence of Purchaser and
regardless of any claims by Purchaser against Seller, including
any claims under, or the satisfaction or non-satisfaction of any
obligations of Seller under the Purchase Agreement. Neither this
Agreement nor any right hereunder may be assigned by any party
without the prior written consent of the parties hereto, which
consent (except in the case of a transfer by Parent of its
obligations hereunder) shall not be unreasonably withheld.
(b) This Agreement contains the entire understanding
of the parties with respect to the matters herein and supersedes
all prior agreements and understandings between the parties with
respect to the subject matter hereof.
(c) All notices and other communications required or
permitted by this Agreement or by law to be served upon or given
to a party hereto by any other party hereto shall be addressed as
provided in the Purchase Agreement and, if to Parent, to the
address for notices set forth beneath Parent's signature below.
(d) This Agreement may not be amended or otherwise
modified except by a written agreement signed by each party
hereto.
(e) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE NEW YORK EXCLUDING ITS
CONFLICTS OF LAWS PROVISIONS.
(f) If any provision of this Agreement shall be
unenforceable, void or otherwise contrary to law, such provision
shall in no manner operate to render any other provision of the
Agreement unenforceable, invalid or contrary to law, and this
Agreement shall continue to be operative and enforceable in
accordance with the remaining terms and provisions hereof.
(g) The terms, conditions, covenants, representations
and warranties hereof may be waived only by a written instrument
executed by the party waiving compliance. The failure of a party
at any time or from time to time to require performance of any
provisions hereof shall in no manner affect its rights at a later
time to enforce the same. No waiver by a party of any condition
or any breach of term, covenant, representation or warranty
contained in this Agreement in any one or more instances shall be
deemed to be, or be construed as, a further or continuing waiver
of any such condition or breach of any term, covenant,
representation or warranty.
(h) No person other than the parties hereto, or their
successors or permitted assigns shall have any rights hereunder.
(i) The term "Portland Conditions" means all
conditions to the obligations of Seller and Purchaser to
consummate the Closing as set forth in Articles VI and VII of the
Purchase Agreement (except those conditions solely within the
control of the Seller or Purchaser).
(j) This Agreement may be signed in counterparts, each
of which shall be deemed an original and all of which together
shall constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officer of each party as of
the date first above written.
PP&L RESOURCES, INC.
By:__________________________
Name: John R. Biggar
Title: Senior Vice President & Chief Financial Officer
Address for Notices:
Two North Ninth Street
Allentown, Pennsylvania 18101
PP&L GLOBAL, INC.
By:__________________________
Name: Paul T. Champagne
Title: Vice President
Address for Notices:
11350 Random Hills Road
Suite 400
Fairfax, Virginia 22030
PORTLAND GENERAL ELECTRIC
COMPANY
By:__________________________
Name: James Piro
Title: Vice President
Address for Notices:
121 SW Salmon Street
Portland, Oregon 97204
<PAGE>
Exhibit 10(e)
ASSET PURCHASE AGREEMENT
dated as of November 1, 1998
by and between
PP&L GLOBAL, INC.
And
PUGET SOUND ENERGY, INC.
<PAGE>
CONTENTS
ARTICLE I SALE OF ASSETS AND CLOSING........................ 2
1.01 The Sale..........................................2
1.02 Liabilities.......................................7
1.03 Purchase Price; Allocation........................9
1.04 Purchase Price Adjustment.........................9
1.05 Closing..........................................10
1.06 Prorations.......................................12
1.07 Further Assurances; Post-Closing Cooperation.....13
1.08 Third Party Consents.............................14
1.09 Insurance Proceeds...............................15
1.10 Inclusion/Exclusion of Certain Assets............15
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER.........16
2.01 Corporate Existence of Seller....................16
2.02 Authority........................................17
2.03 No Conflicts.....................................17
2.04 Governmental Approvals and Filings...............18
2.05 Reports..........................................18
2.06 Taxes............................................19
2.07 Legal Proceedings................................19
2.08 Compliance with Laws and Orders..................19
2.09 Real Property....................................20
2.10 Tangible Personal Property.......................21
2.11 Intellectual Property Rights.....................21
2.12 Contracts........................................21
2.13 Licenses.........................................23
2.14 Insurance........................................23
2.15 Environmental Matters............................23
2.16 Absence of Condemnation Proceedings..............24
2.17 Regulation as a Utility..........................24
2.18 Brokers..........................................25
2.19 Acknowledgment of Purchaser......................25
2.20 Disclaimers Regarding Assets.....................25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.....25
3.01 Corporate Existence..............................26
3.02 Authority........................................26
3.03 No Conflicts.....................................26
3.04 Governmental Approvals and Filings...............27
3.05 Legal Proceedings................................27
3.06 Compliance with Laws and Orders..................28
3.07 Regulation as a Utility..........................28
3.08 Brokers..........................................28
3.09 Financing........................................28
3.10 Financial Statements.............................28
3.11 Opportunity to Inspect Assets....................29
ARTICLE IV COVENANTS OF SELLER..............................29
4.01 Regulatory and Other Approvals...................29
4.02 HSR Filings......................................30
4.03 Investigation by Purchaser.......................30
4.04 No Solicitations.................................31
4.05 Conduct of Business..............................31
4.06 Certain Restrictions.............................32
4.07 Security Deposits................................34
4.08 Delivery of Books and Records, etc.; Removal of
Property.........................................34
4.09 Fulfillment of Conditions........................34
4.10 Observation, Inspection and Participation........34
4.11 Notice of Breach.................................35
4.12 Bridge Financing Fees............................35
4.13 Special Maintenance and Capital Expenditures.....36
ARTICLE V COVENTANTS OF PURCHASER...........................36
5.01 Regulatory and Other Approvals...................36
5.02 HSR Filings......................................37
5.03 PPUC Approval for Holding Company................37
5.04 Notice of Breach.................................38
5.05 Fulfillment of Conditions........................38
5.06 Tax-Exempt Bond Financed Pollution Control
Facilities.......................................38
5.07 Purchaser Financing..............................39
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER...........39
6.01 Representations and Warranties...................39
6.02 Performance......................................40
6.03 Officers' Certificates...........................40
6.04 Orders and Laws..................................40
6.05 Regulatory Consents and Approvals................40
6.06 Colstrip Rights of First Refusal.................40
6.07 Third Party Consents.............................40
6.08 No Seller Material Adverse Effect................41
6.09 Proceedings......................................41
6.10 Deliveries.......................................41
6.11 Colstrip Operations Arrangements.................41
6.12 Purchaser Financing..............................41
6.13 Opinion of Counsel...............................41
6.14 Transfer of MPC Generation Assets................41
ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLER.............42
7.01 Representations and Warranties...................42
7.02 Performance......................................42
7.03 Officers' Certificates...........................42
7.04 Orders and Laws..................................42
7.05 Regulatory Consents and Approvals................43
7.06 Third Party Consents.............................43
7.07 Opinion of Counsel...............................43
7.08 No Purchaser Material Adverse Effect.............43
7.09 Proceedings......................................43
7.10 Colstrip Rights of First Refusal.................44
7.11 Deliveries.......................................44
ARTICLE VIII TAX MATTERS AND POST-CLOSING TAXES.............44
8.01 Transfer Taxes...................................44
8.02 Returns with Respect to Prorated Taxes...........44
ARTICLE IX SURVIVAL; NO OTHER REPRESENTATIONS...............45
9.01 Survival of Representations, Warranties, Covenants
and Agreements 45
9.02 No Other Representations.........................45
ARTICLE X INDEMNIFICATION...................................46
10.01 Other Indemnification...........................46
10.02 Method of Asserting Claims......................49
10.03 Exclusivity.....................................53
10.04 Purchaser's Release of Seller Under the Colstrip
Contracts.......................................53
ARTICLE XI TERMINATION......................................53
11.01 Termination.....................................53
11.02 Effect of Termination...........................54
ARTICLE XII DEFINITIONS.....................................55
12.01 Definitions.....................................55
ARTICLE XIII MISCELLANEOUS..................................71
13.01 Notices.........................................71
13.02 Bulk Sales Act..................................72
13.03 Entire Agreement................................72
13.04 Expenses........................................72
13.05 Public Announcements............................73
13.06 Confidentiality.................................73
13.07 Waiver..........................................74
13.08 Amendment.......................................74
13.09 No Third Party Beneficiary......................74
13.10 No Assignment; Binding Effect...................75
13.11 Headings........................................75
13.12 Invalid Provisions..............................75
13.13 Governing Law...................................76
13.14 Counterparts....................................76
13.15 Consent to Assignment...........................76
SCHEDULES
Schedule I Pre-Closing Known Remedial Liabilities
EXHIBITS
Exhibit A General Assignment and Bill of Sale
Exhibit B Assumption Agreement
Exhibit C Pollution Control Facilities
Exhibit D Officer's Certificate of Seller
Exhibit E Secretary's Certificate of Seller
Exhibit F Wholesale Transition Service Agreement
Exhibit G-1 Opinion of Counsel to Seller
Exhibit G-2 Opinion of Montana Counsel to Seller
Exhibit H Officer's Certificate of Purchaser
Exhibit I Secretary's Certificate of Purchaser
Exhibit J Opinion of Counsel to Purchaser
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT dated as of November 1,
1998 is made and entered into by and between PP&L Global,
Inc., a Pennsylvania corporation ("Purchaser"), and Puget
Sound Energy, Inc., a Washington corporation ("Seller").
Capitalized terms not otherwise defined herein have the
meanings set forth in Section 12.01.
WHEREAS, Seller and its subsidiaries engage in a number
of diversified energy related businesses;
WHEREAS, Seller's principal business is regulated utility
operations involving the generation, purchase, transmission
and distribution of electricity and the purchase,
transportation and distribution of natural gas in Washington;
and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from
Seller, Seller's undivided interests in Colstrip Units 1&2 and
Colstrip Units 3&4 and related transmission assets (as defined
herein, the "PSE Colstrip Interests"), Seller's rights under
the Colstrip Contracts (as defined herein) and certain other
assets of Seller relating to the PSE Colstrip Interests, and
in connection therewith, Purchaser has agreed to assume
certain of the liabilities of Seller relating to such assets,
all on the terms set forth herein;
WHEREAS, on the date hereof PP&L Resources, Inc., a
Pennsylvania corporation and the parent of Purchaser
("Parent"), has entered into an Equity Contribution Agreement
(the "Contribution Agreement") with Purchaser and Seller;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 The Sale
(a) On the terms and subject to the conditions set forth
in this Agreement, Seller will sell, transfer, convey, assign
and deliver to Purchaser, and Purchaser will purchase and pay
for, at the Closing, free and clear of all Liens other than
Permitted Liens (as such term is defined with respect to any
date after the Closing), all of Seller's right, title and
interest in, to and under the PSE Colstrip Interests and the
Assets and Properties used or held for use principally in
connection with the operation of the Colstrip Facilities,
except as otherwise provided in Section 1.01(b), as the same
shall exist as of the Closing including, but not limited to
the following (collectively with any proceeds and awards
referred to in Section 1.09, the "Assets"):
(i) Real Property. The real property (including all
buildings, structures, fixtures and other improvements
thereon) used or held for use in connection with or related to
the operation of the Colstrip Facilities, as described in
Section 1.01(a)(i) of the Disclosure Schedule, which real
property is held in fee, easement, permit interest or other
interest, as the case may be (the "Real Property");
(ii) Real Property Leases. (A) The leases and subleases
of real property used or held for use in connection with or
related to the operation of the Colstrip Facilities, as
described in Section 1.01(a)(ii)(A) of the Disclosure
Schedule, as to which Seller is the lessor or sublessor and
(B) the leases and subleases of real property used in
connection with or related to the operation of the Colstrip
Facilities, as described in Section 1.01(a)(ii)(B) of the
Disclosure Schedule, as to which Seller is the lessee or
sublessee, together with any options to purchase the
underlying property and leasehold improvements thereon, and in
each case all other rights, subleases, licenses, permits,
deposits and profits appurtenant to or related to such leases
and subleases (the leases and subleases described in
subclauses (A) and (B), the "Real Property Leases");
(iii) Inventory. All inventories of fuels, supplies,
materials and spares used or held for use in connection with
the operation of the Colstrip Facilities located on the Real
Property or the real property subject to the Real Property
Leases, held for use principally in connection with, or in
transit to the Colstrip Facilities on the date of the Closing
(a listing of the fuel inventories, as of September 30, 1998,
is included in Section 1.01(a)(iii) of the Disclosure
Schedule) (the "Inventory");
(iv) Tangible Personal Property. All machinery,
equipment, vehicles, furniture and other personal property
located where the operation of the Colstrip Facilities is
conducted, or used or held for use in connection with the
operation of the Colstrip Facilities (including but not
limited to the items listed in Section 1.01(a)(iv) of the
Disclosure Schedule), together with all buildings and
structures ("Improvements") pertaining to Colstrip Units 3 and
4, including Seller's interest in the facilities shared by
Colstrip Units 1, 2, 3 and 4 relating thereto, as to those
Improvements which have been severed from the Real Property
and are to be treated as personal property, and all warranties
against manufacturers or vendors relating thereto, to the
extent that such warranties are freely transferable (the
"Tangible Personal Property");
(v) Business Contracts. All contracts, agreements and
personal property leases (other than the Real Property Leases,
the Transferable Permits, the Fuel Contracts and the Colstrip
Contracts) used primarily in the operation of the Colstrip
Facilities, that are listed in Section 1.01(a)(v) of the
Disclosure Schedule (the "Business Contracts");
(vi) Transferable Permits. All Licenses and
Environmental Permits owned or held by Seller and used or held
for use in connection with the operation of the Colstrip
Facilities that are transferable by Seller to Purchaser as
listed in Section 1.01(a)(vi) of the Disclosure Schedule, and
the water rights owned or held by Seller, whether or not such
rights are created or evidenced by a License, and used or held
for use in connection with the operation of the Colstrip
Facilities including those listed in Section 1.01(a)(vi) of
the Disclosure Schedule (the "Transferable Permits");
(vii) Intangible Personal Property. All Intellectual
Property used or held for use principally in connection with
the operation of the Colstrip Facilities and all rights,
privileges, claims, causes of action and options relating or
pertaining to the operation of the Colstrip Facilities or the
Assets, including but not limited to the items listed in
Section 1.01(a)(vii) of the Disclosure Schedule (the
"Intangible Personal Property");
(viii) Security Deposits. All security deposits
deposited by or on behalf of Seller as lessee or sublessee
under the Real Property Leases (the "Tenant Security
Deposits");
(ix) Prepaid Expenses. Except for prepaid expenses and
deposits of Seller attributable to any Excluded Asset or
Retained Liabilities, all prepaid expenses, progress payments
and deposits of or by Seller, rights to receive a prepaid
expense, deposit or progress payment, and cash in transit that
constitutes a prepaid expense, progress payment or deposit,
relating to the Assets or the ownership, operation and
maintenance of the Colstrip Facilities;
(x) Fuel Contracts. All of the fuel contracts listed in
Section 1.01(a)(x) of the Disclosure Schedule (the "Fuel
Contracts");
(xi) Colstrip Contracts. Seller's undivided interests
in, and all of Seller's rights under the Contracts relating
to, the Colstrip Facilities listed in Section 1.01(a)(xi) of
the Disclosure Schedule (the "Colstrip Contracts");
(xii) Allowance and Emission Reduction Credits. All of
the allowances and/or emission reduction credits described in
Section 1.01(a)(xii) of the Disclosure Schedule;
(xiii) Warranties. Any other warranties and indemnities
given by third parties relating to the Assets or to the
ownership, operation and maintenance of the Colstrip
Facilities other than in connection with any Excluded Assets
or Retained Liabilities;
(xiv) Colstrip Books and Records. All books, operating
and maintenance records, operating, safety and maintenance
manuals, engineering or design plans, drawings, blue prints
and as-built plans, specifications, procedures and similar
items of Seller relating specifically to the Colstrip
Facilities (the "Colstrip Books and Records"); and
(xv) PSE Colstrip Transmission Assets. Subject to
Sections 1.10 and 6.12, the PSE Colstrip Transmission Assets
as described in Section 1.01(a)(xv) of the Disclosure
Schedule.
To the extent any of the Colstrip Books and Records are
items susceptible to duplication and are either (x) used in
connection with any of Seller's businesses other than the PSE
Colstrip Interests or (y) are required by Law to be retained
by Seller, Seller may deliver photostatic copies or other
reproductions from which, in the case of Colstrip Books and
Records referred to in clause (x), information solely
concerning Seller's businesses other than the PSE Colstrip
Interests has been deleted. To the extent that any Contract
to be transferred hereunder to Purchaser is also utilized by
or is for the benefit of any of Seller's businesses other than
the PSE Colstrip Interests, the rights and obligations under
such Contracts shall be to the extent practicable allocated
between the PSE Colstrip Interests and such other businesses
in a fair and equitable manner that is reasonably satisfactory
to the parties.
(b) Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the Assets shall not include the
following assets of Seller (the "Excluded Assets"):
(i) Cash. All cash, commercial paper, certificates of
deposit and other bank deposits, treasury bills and other cash
equivalents;
(ii) Investments. Certificates of deposit, shares of
stock, securities, evidences of Indebtedness, interest in
joint ventures, partnerships, limited liability companies and
other entities;
(iii) Tax Refunds. All refunds or credits, if any, of
Taxes relating to the Assets due to or from Seller
attributable to any period ending on or prior to the Closing;
(iv) Real and Personal Property. The real or personal
property forming a part of the Assets described in
Section 1.01(b)(iv) of the Disclosure Schedule, the
delineation and composition of which shall be subject to the
Separation Document;
(v) Corporate Records. All Books and Records of
Seller other than the Colstrip Books and Records;
(vi) Litigation Claims. Any rights (including
indemnification) and claims and recoveries under litigation of
Seller against third parties attributable to the period on or
prior to the Closing except to the extent relating to the
Assumed Liabilities;
(vii) Excluded Obligations. The rights of Seller in,
to and under all Contracts of any nature, the obligations of
Seller under which are not expressly assumed by Purchaser
pursuant to Section 1.02(a);
(viii) Tradename and Logo. All tradenames,
trademarks, service marks or logos owned by Seller or its
Subsidiaries including all of Seller's right, title and
interest in, to and under the names "Puget Sound Energy,
Inc.," "Puget Sound Power & Light Company," "Puget Power" or
any related or similar trade names, trademarks, service marks
or logos;
(ix) Accounts Receivable. All trade accounts
receivable and all notes, bonds and other evidences of
Indebtedness of and rights to receive payments arising out of
sales occurring in connection with the operation of the
Colstrip Facilities prior to the Closing and the security
agreements related thereto, including any rights of Seller
with respect to any third party collection procedures or any
other Actions or Proceedings which have been commenced in
connection therewith;
(x) Insurance. Life insurance policies of Seller's
Employees and all other insurance policies relating to the PSE
Colstrip Interests;
(xi) Allowance and Emission Reduction Credits. All of
Seller's excess allowances and/or emission reduction credits
relating to the Colstrip Facilities that are not described in
Section 1.01(a)(xii) of the Disclosure Schedule;
(xii) All Other Assets. All other Assets and
Properties owned by Seller or its Affiliates not used in the
operation of the Colstrip Facilities; and
(xiii) Other. Seller's rights under this Agreement
and the Operative Agreements.
1.02 Liabilities
(a) Assumed Liabilities. In connection with the sale,
transfer, conveyance, assignment and delivery of the Assets
pursuant to this Agreement, on the terms and subject to the
conditions set forth in this Agreement, at the Closing,
Purchaser will assume and agree to pay, perform and discharge
when due all of the following Liabilities of Seller, direct or
indirect, known or unknown, absolute or contingent, which
arise and are attributable to the period after the date of the
Closing and relate solely to the Assets or which arose and
relate to the period on or prior to the date of the Closing
and are specifically referred to in this Section 1.02(a) as
being assumed by Purchaser (in all cases, except for Seller's
Liabilities in connection with the Pollution Control Bonds and
Liabilities constituting Retained Liabilities) (the "Assumed
Liabilities"):
(i) Real Property Lease Obligations. All Liabilities
of Seller under the Real Property Leases arising and to be
performed after the date of the Closing, and excluding any
such Liabilities arising or to be performed on or prior to the
date of the Closing;
(ii) Tangible Personal Property Obligations. All
Liabilities of Seller under any Contract related to the
Tangible Personal Property arising and to be performed after
the date of the Closing, and excluding any such Liabilities
arising or to be performed on or prior to the date of the
Closing;
(iii) Liabilities under Business Contracts and
Transferable Permits. All Liabilities of Seller under the
Business Contracts and Transferable Permits, to the extent
transferred to Purchaser, arising and to be performed after
the date of the Closing, and excluding any such Liabilities
arising or to be performed on or prior to the date of the
Closing;
(iv) Security Deposits. All Liabilities of Seller
with respect to any security deposit held by Seller as lessor
or sublessor under the Real Property Leases, to the extent and
only to the extent of the respective amount of the security
deposit delivered to Purchaser at the Closing with respect to
any such Real Property Lease (the "Landlord Security
Deposits");
(v) Fuel Contracts and Colstrip Contracts. All
Liabilities of Seller under the Fuel Contracts and the
Colstrip Contracts arising and to be performed after the date
of the Closing, and excluding any such Liabilities arising or
to be performed on or prior to the date of the Closing;
(vi) Pre-Closing Colstrip Liabilities. All
Liabilities of Seller described in Section 1.02(a)(vi) of the
Disclosure Schedule; and
(vii) Environmental Liabilities. Subject to
Section 10.01(b), all Environmental Liabilities; provided,
however, that nothing set forth in this Section 1.02(a) shall
require Purchaser to assume any Liability for (x) payment of
any fines or penalties imposed by a Governmental or Regulatory
Authority relating to the ownership, operation and maintenance
of the Colstrip Facilities on or prior to the Closing
("Environmental Fines and Penalties"), or (y) any Off-Site
Environmental Liabilities).
Except with respect to Environmental Liabilities that are
Assumed Liabilities, Assumed Liabilities shall not include
Liabilities to the extent such Liabilities, but for a breach
or default by Seller of its obligations, would have been paid,
performed or otherwise discharged specifically by their terms
or the terms hereof on or prior to the Closing as it relates
to the Assets or to the extent the same arise out of any such
breach or default.
(b) Retained Liabilities. Except for the Assumed
Liabilities, Purchaser shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall
have no liability for, any Liabilities of Seller including
Seller's Liabilities under this Agreement and the Operative
Agreements and including, but not limited to, the following
(the "Retained Liabilities"):
(i) any Liabilities of Seller in connection with the
Pollution Control Bonds or claims by bondholders;
(ii) any Environmental Fines and Penalties;
(iii) any Off-Site Environmental Liabilities;
(iv) any Liabilities of Seller in respect of any
Excluded Assets;
(v) any Liabilities of Seller for Taxes;
(vi) any Liabilities of Seller with respect to
commitments for the purchase or sale of power or fuel, other
than as provided in Section 1.02(a);
(vii) any Liabilities of Seller relating to any
Employee of Seller.
1.03 Purchase Price; Allocation
(a) Purchase Price. Subject to any adjustment required
pursuant to Sections 1.10 or 4.12, the aggregate purchase
price for the Assets shall be an amount equal to the sum of
(x) the Base Purchase Price, (y) the Adjustment Amount and
(z) subject to Sections 1.10(a) and 6.12, the PSE Transmission
Amount (collectively, the "Purchase Price"), payable in
immediately available United States funds at the Closing in
the manner provided in Section 1.05 or thereafter (as provided
in Section 1.04).
(b) Allocation of Purchase Price. Purchaser and Seller
shall negotiate in good faith prior to the Closing Date and
determine the allocation of the consideration paid by
Purchaser for the Assets. Each party hereto agrees (i) that
any such allocation shall be consistent with the requirements
of Section 1060 of the Code and the regulations thereunder,
(ii) to complete jointly and to file separately Form 8594 with
its Federal Income Tax Return consistent with such allocation
for the tax year in which the Closing occurs and (iii) that no
party will take a position on any income, transfer or gains
Tax Return, before any Governmental or Regulatory Authority
charged with the collection of any such Tax or in any judicial
proceeding, that is in any manner inconsistent with the terms
of any such allocation without the consent of the other party.
1.04 Purchase Price Adjustment
(a) Within 30 days after the Closing, Seller shall
obtain from MPC and deliver to Purchaser a statement (each, an
"Adjustment Statement") which reflects (i) the net book value,
as reflected on the books of Seller as of the Closing of all
fuel inventory (FERC account no. 151) and stores inventory
(FERC account no. 154) used at or in connection with the PSE
Colstrip Interests (the "Inventory Adjustment Amount"), and
(ii) the Maintenance and Capital Expenditures Amount
applicable to the PSE Colstrip Interests. The Inventory
Adjustment Amount and the Maintenance and Capital Expenditures
Amount for the Closing are referred to collectively as the
"Adjustment Amount." The Inventory Adjustment Amount will be
based on an inventory survey conducted by MPC within five days
prior to the Closing consistent with MPC's current inventory
procedures (the "Inventory Survey"). Seller will request that
MPC permit an employee, or representative, of Purchaser to
observe the Inventory Survey. Each Adjustment Statement shall
be prepared using the same generally accepted accounting
principles, policies and methods as MPC, has historically used
in connection with the calculation of the items reflected on
such Adjustment Statement. Purchaser agrees to cooperate with
Seller and MPC in connection with the preparation of each
Adjustment Statement and related information, and shall
provide to Seller and MPC such books, records and information
as may be reasonably requested from time to time.
(b) Purchaser may dispute an Inventory Adjustment Amount
or a Maintenance and Capital Expenditures Amount; provided,
however, that Purchaser shall notify Seller and MPC in writing
of the disputed amount, and the basis of such dispute, within
ten (10) Business Days of Purchaser's receipt of the
applicable Adjustment Statement. In the event of a dispute
with respect to any part of an Adjustment Amount, Purchaser
and Seller shall attempt to reconcile their differences and
any resolution by them as to any disputed amounts shall be
final, binding and conclusive on the parties. If Purchaser
and Seller are unable to reach a resolution of such
differences within 30 days of receipt of Purchaser's written
notice of dispute to Seller, Purchaser and Seller shall submit
the amounts remaining in dispute for determination and
resolution to the Independent Accounting Firm, which shall be
instructed to determine and report to the parties, within 30
days after such submission, upon such remaining disputed
amounts, and such report shall be final, binding and
conclusive on the parties hereto with respect to the amounts
disputed. The fees and disbursements of the Independent
Accounting Firm shall be shared equally by Purchaser and
Seller.
(c) Within ten (10) Business Days after Purchaser's
receipt of an Adjustment Statement, Purchaser shall pay all
undisputed amounts, or if there is a dispute with respect to
any amount of such Adjustment Statement within five (5)
Business Days after the final determination of any amounts on
such Adjustment Statement, Purchaser shall pay to Seller an
amount equal to the disputed Adjustment Amount as finally
determined to be payable with respect to such Adjustment
Statement. All Adjustment Statement payments shall be less
the Estimated Adjustment Amount; provided, however, that if
such amount shall be less than zero then within five (5)
Business Days after the final determination of such amount
Seller will pay to Purchaser the amount by which such amount
is less than zero. Any amount paid under this Section 1.04
shall be paid with interest for the period commencing on the
date of the Closing through the date of payment, calculated at
the prime rate for domestic banks as published in the Wall
Street Journal (Northeast Edition) in the "Money Rates"
section on the date of the Closing, and in immediately
available United States funds.
1.05 Closing
(a) Closing. The Closing will take place at the offices
of Perkins Coie LLP, 1201 Third Avenue, Seattle, Washington
98101, or at such other place as Purchaser and Seller mutually
agree, at 7:00 A.M. local time, on the Closing Date. At the
Closing, Purchaser will pay an amount (the "Estimated Purchase
Price") in United States dollars equal to the sum of (x) the
Base Purchase Price, as the same may be adjusted pursuant to
Sections 1.10 and 4.12, and (y) the Estimated Adjustment
Amount for the Closing, by wire transfer of immediately
available United States funds to such account as Seller may
reasonably direct by written notice delivered to Purchaser by
Seller at least two (2) Business Days before the Closing.
Simultaneously, (a) Seller will assign and transfer to
Purchaser good and valid title in and to the Assets (free and
clear of all Liens, other than Permitted Liens, as such term
is defined with respect to periods after the Closing) by
delivery of (i) a General Assignment and Bill of Sale
substantially in the form of Exhibit A hereto (the "General
Assignment"), duly executed by Seller, covering the Personal
Property comprising Assets except for the Intellectual
Property, (ii) an assignment of the Intellectual Property in
form and substance reasonably satisfactory to Purchaser,
(iii) (A) special warranty deeds in proper statutory form for
recording and otherwise in form and substance reasonably
satisfactory to Purchaser conveying good and marketable title
to the Real Property in which Seller has a fee or easement
interest (subject only to Permitted Liens), (B) an assignment
in form and substance reasonably satisfactory to Purchaser
conveying valid and subsisting title to the Real Property in
which Seller has a permit interest or other interest (neither
fee nor easement) (subject only to Permitted Liens) and (C)
all necessary documentation to transfer and convey to
Purchaser the water rights listed in Section 1.01(a)(vi) of
the Disclosure Schedule including water rights transfer
certificates executed in proper form to be filed with the
appropriate Governmental or Regulatory Authority, and
(iv) such other good and sufficient instruments of conveyance,
assignment and transfer, in form and substance reasonably
acceptable to Purchaser's counsel, as shall be effective to
vest in Purchaser good and valid title to the Assets, good and
marketable title to the Real Property in which Seller has a
fee or easement interest and valid and subsisting title to the
Real Property in which Seller has a permit interest or other
interest (neither fee nor easement), in each case subject only
to Permitted Liens (the General Assignment and the other
instruments referred to in clauses (a) (ii), (iii) and (iv)
being collectively referred to herein as the "Assignment
Instruments"), and (b) Purchaser will assume from Seller the
due payment, performance and discharge of the Assumed
Liabilities by delivery of (i) an Assumption Agreement
substantially in the form of Exhibit B hereto (the "Assumption
Agreement"), duly executed by Purchaser, and (ii) such other
good and sufficient instruments of assumption, in form and
substance reasonably acceptable to Seller's counsel, as shall
be effective to cause Purchaser to assume the Assumed
Liabilities as and to the extent provided in Section 1.02(a)
(the Assumption Agreement and such other instruments referred
to in clause (b) (ii) being collectively referred to herein as
the "Assumption Instruments"). At the Closing, there shall
also be delivered to Seller and Purchaser the opinions,
certificates and other contracts, documents and instruments
required to be delivered under Articles VI and VII.
(b) Additional Purchase Price Payments.
(i) In the event that the Portland Closing Date
occurs either prior to or on the Closing Date, on the Closing
Date Purchaser shall pay to Seller the Combined Payment
Amount; and
(ii) In the event that the Portland Closing Date
occurs after the Closing Date, on the Portland Closing Date
Purchaser shall pay to Seller the Combined Payment Amount.
All payments made pursuant to this Section 1.05(b) shall
be paid by wire transfer of immediately available United
States funds to such account as Seller may reasonably direct
by written notice delivered to Purchaser by Seller at least
two (2) Business Days before the applicable closing date.
1.06 Prorations
The following items relating to the Assets, the
ownership of the PSE Colstrip Interests, and the operation of
the Colstrip Facilities will be allocated pro rata per diem
for the tax year that includes the date of the Closing, with
Seller liable for such items to the extent they are allocable
to the period prior to the date of the Closing and Purchaser
liable for such items to the extent they are allocable to
periods beginning with and subsequent to the date of the
Closing:
(a) Property Taxes on or with respect to the Assets.
(b) Rents, additional rents, Taxes, to the extent
normally adjusted in connection with similar transactions, and
other items payable by Seller under the Real Property Leases
and the Business Contracts.
(c) The amount of rents, Taxes and charges for sewer,
water, telephone, electricity and other utilities relating to
the Real Property and the real property subject to the Real
Property Leases.
(d) All other items (excluding other Taxes) normally
adjusted in connection with similar transactions.
Except as otherwise agreed by the parties, the net amount
of all such prorations will be settled and paid as of the date
of the Closing. At least ninety (90) days prior to the date
of the Closing, Seller will provide Purchaser with a
reasonably detailed schedule showing a calculation of the
estimated prorations as if the Closing were occurring on such
date. If the Closing shall occur before a real estate Tax
rate is fixed, the apportionment of Taxes shall be based upon
the Tax rate for the preceding year applied to the latest
assessed valuation and such Taxes shall be reprorated upon the
request of Seller, on the one hand, or Purchaser, on the other
hand, made within sixty (60) days after the date that the
actual amounts become available. Seller and Purchaser agree
to furnish each other with such documents and other records as
may be reasonably requested in order to confirm all adjustment
and proration calculations made pursuant to this Section 1.06.
1.07 Further Assurances; Post-Closing Cooperation
(a) Subject to the terms and conditions of this
Agreement, at any time or from time to time after the Closing,
at Purchaser's request and without further consideration,
Seller shall execute and deliver to Purchaser such other
instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take
such other actions as Purchaser may reasonably deem necessary
or desirable in order more effectively to transfer, convey and
assign to Purchaser, and to confirm Purchaser's title to, all
of the Assets, and, to the full extent permitted by Law, to
put Purchaser in actual possession and control of the Assets
and to assist Purchaser in exercising all rights with respect
thereto, and otherwise to cause Seller to fulfill its
obligations under this Agreement and the Operative Agreements.
From time to time after the Closing, at Purchaser's request
and expense, Seller will reasonably cooperate with Purchaser
in its efforts to maximize any Tax benefits associated with
the Assets with respect to periods following the Closing and
to minimize the Tax costs associated with the transactions
contemplated hereby; provided such cooperation does not
adversely affect Seller's Tax position. From time to time
after the Closing, at Seller's request and expense, Purchaser
will reasonably cooperate with Seller in its efforts to
maximize any Tax benefits associated with the Assets with
respect to periods prior to the Closing and to minimize the
Tax costs associated with the transactions contemplated
hereby; provided such cooperation does not adversely affect
Purchaser's Tax position.
(b) Following the Closing, each party will afford the
other party, its counsel and its accountants, during normal
business hours, reasonable access to the books, records and
other data relating to the PSE Colstrip Interests in its
possession with respect to periods prior to the Closing and
the right to make copies and extracts therefrom, to the extent
that such access may be reasonably required by the requesting
party in connection with (i) the preparation of Tax Returns,
(ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the
requirements of any Governmental or Regulatory Authority,
(iv) the determination or enforcement of the rights and
obligations of any Indemnified Party or (v) in connection with
any actual or threatened Action or Proceeding. Further, each
party agrees for a period extending six (6) years after the
Closing not to destroy or otherwise dispose of any such books,
records and other data unless such party shall first offer in
writing to surrender such books, records and other data to the
other party and such other party shall not agree in writing to
take possession thereof during the thirty (30) day period
after such offer is made.
(c) If, in order properly to prepare its Tax Returns,
other documents or reports required to be filed with
Governmental or Regulatory Authorities or its financial
statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional
information, documents or records relating to the PSE Colstrip
Interests not referred to in paragraph (b) above, and such
information, documents or records are in the possession or
control of the other party, such other party shall use its
best efforts to furnish or make available such information,
documents or records (or copies thereof) at the recipient's
request, cost and expense. Any information obtained by such
party in accordance with this paragraph shall be held
confidential by such party in accordance with Section 13.06.
(d) Notwithstanding anything to the contrary contained
in this Section 1.07, if the parties are in an adversarial
relationship in litigation or arbitration, the furnishing of
information, documents or records in accordance with paragraph
(c) of this Section 1.07 shall be subject to applicable rules
relating to discovery.
1.08 Third Party Consents
To the extent that any Business Contract, Transferable
Permit, Fuel Contract or Colstrip Contract is not assignable
without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if
such assignment or attempted assignment would constitute a
breach thereof. Seller and Purchaser shall use their
reasonable efforts to obtain the consent of such other party
to the assignment of any such Business Contract, Transferable
Permit, Fuel Contract or Colstrip Contract to Purchaser in all
cases in which such consent is or may be required for such
assignment. If any such consent shall not be obtained, or if
any attempted assignment would be ineffective or would impair
Purchaser's rights and obligations so that Purchaser would not
in effect acquire the benefit of substantially all of such
rights and obligations, Seller shall cooperate with Purchaser
in any reasonable arrangement, to the extent legally
permissible, designed to provide for Purchaser the benefits
intended to be assigned to Purchaser under the relevant
Business Contract, Transferable Permit, Fuel Contract or
Colstrip Contract, including enforcement at the cost and for
the account of Purchaser of any and all rights of Seller
against the other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise. If and
to the extent that such arrangement is not made in a manner
reasonably satisfactory to Purchaser, Purchaser shall have no
obligation pursuant to Section 1.02 or otherwise only with
respect to any such Business Contract, Transferable Permit,
Fuel Contract or Colstrip Contract. The provisions of this
Section 1.08 shall not affect the right of Purchaser not to
consummate the transactions contemplated by this Agreement as
provided in Section 1.10 or if the conditions to its
obligations hereunder contained in Sections 6.05, 6.06 and
6.07 have not been fulfilled.
1.09 Insurance Proceeds
If any of the Assets (other than an Asset excluded under
Section 1.10) are destroyed, damaged or taken in condemnation,
the insurance proceeds or condemnation award with respect
thereto shall be an Asset; provided, however, Seller agrees
not to settle or compromise any amounts concerning such Assets
during negotiations with Seller's insurance company without
Purchaser's prior consent. At the Closing, Seller shall pay
or credit to Purchaser any such insurance proceeds or
condemnation awards received by it on or prior to the Closing
and shall assign to or assert for the benefit of Purchaser all
of its rights against any insurance companies, Governmental or
Regulatory Authorities and others with respect to such damage,
destruction or condemnation. As and to the extent that there
is available insurance under policies maintained by Seller and
its Affiliates, predecessors and successors in respect of any
Assumed Liability, except for any such insurance proceeds with
respect to which the insured is directly or indirectly self-
insured or has agreed to indemnify the insurer, Seller shall
cause such insurance to be applied toward the payment of such
Assumed Liability. The provisions of this Section 1.09 shall
not affect the right of Purchaser not to consummate the
transactions contemplated by this Agreement if the conditions
to its obligations hereunder contained in Sections 6.01 or
6.08 have not been fulfilled.
1.10 Inclusion/Exclusion of Certain Assets
(a) Purchaser agrees to use its reasonable best efforts
to obtain the approval described in clause (ii) of the
definition of Purchaser Required Regulatory Approvals in a
manner reasonably satisfactory to Purchaser that will allow
Purchaser to purchase and own, operate and maintain after the
Closing the PSE Colstrip Transmission Assets, and to consult
with Seller prior to abandoning its efforts to do so. If,
notwithstanding Purchaser's compliance with the preceding
sentence and with Section 5.01, such Purchaser Required
Regulatory Approval is not obtained from FERC with respect to
the proposed purchase, ownership or operation of the PSE
Colstrip Transmission Assets, or is finally denied by FERC,
within seven (7) months from the date of execution of this
Agreement, or in the event that the condition set forth in
Section 6.12 has not been satisfied on or prior to the
Closing, then (i) at the Closing, Seller and Purchaser shall
enter into the Transmission Service Agreement and the
Separation Document, (ii) the PSE Colstrip Transmission Assets
shall be Excluded Assets hereunder, (iii) the Purchase Price
shall be reduced by the PSE Transmission Amount and (iv) the
conditions to Closing described in Sections 6.05 and 7.05
shall be deemed satisfied with respect to such Purchaser
Required Regulatory Approval solely with respect to the PSE
Colstrip Transmission Assets but shall not be deemed satisfied
with respect to any other Assets, provided that Seller shall
have the right, in its sole discretion, to waive such seven
(7) month period and to require Purchaser to continue to
pursue such approval, consistent with Purchaser's obligations
under Section 5.01 hereof, for such time period(s) as Seller
may determine, not to exceed the time period provided for in
Section 11.01(d) hereof.
(b) Purchaser has been provided copies of title
insurance commitments covering certain of the Assets and
intends to obtain at its expense additional title commitments
and title policies. Seller agrees to use reasonable efforts
to cure title objections of which Seller is notified by
Purchaser, to the extent title would not otherwise satisfy
Seller's obligations with respect to the title to be delivered
by Seller in compliance with Section 1.05(a) of this
Agreement. From and after the date hereof and through the
Closing, Seller shall use reasonable efforts to cure and
remove exceptions to title to the Real Property (other than
those exceptions referred to in the preceding sentence) of
which Seller is notified by Purchaser in writing; provided,
however, that in no event shall Seller be obligated to incur
expenses or make payments of any nature in excess of $620,000
in discharging its obligations set forth in this sentence.
Nothing in the two preceding sentences shall change or
otherwise affect the nature of the title to the Real Property
that Seller is obligated to transfer to Purchaser in
compliance with this Agreement.
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as
follows:
2.01 Corporate Existence of Seller
Seller is a corporation duly incorporated, validly
existing and in good standing under the Laws of the State of
Washington, and has full corporate power and authority to own,
use and lease the Assets. Seller is duly qualified or
licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the Assets make
such qualification necessary, except in each case in those
jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not create a Seller
Material Adverse Effect. Seller has heretofore made available
to Purchaser complete and correct copies of its restated
articles of incorporation, as amended, and bylaws (or other
comparable corporate charter documents), as currently in
effect.
2.02 Authority
Seller has full corporate power and authority to execute
and deliver this Agreement and the Operative Agreements to
which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated
hereby and thereby, including to sell and transfer (pursuant
to this Agreement) the Assets. The execution and delivery by
Seller of this Agreement and the Operative Agreements to which
it is a party, and the performance by Seller of its
obligations hereunder and thereunder, have been duly and
validly authorized by the Board of Directors of Seller, no
other corporate action on the part of Seller or its
shareholders being necessary. This Agreement has been duly
and validly executed and delivered by Seller and, subject to
receipt of Seller Required Regulatory Approvals and Purchaser
Required Regulatory Approvals, constitutes, and upon the
execution and delivery by Seller of the Operative Agreements
to which it is a party, such Operative Agreements will
constitute, legal, valid and binding obligations of Seller
enforceable against Seller in accordance with their terms
except as the same may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar Laws
relating to or affecting the rights of creditors generally, or
by general equitable principles.
2.03 No Conflicts
Except as set forth in Section 2.03 of the Disclosure
Schedule, and other than obtaining Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals, the
execution and delivery by Seller of this Agreement do not, and
the execution and delivery by Seller of the Operative
Agreements to which it is a party, the performance by Seller
of its obligations under this Agreement and such Operative
Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the restated
articles of incorporation, as amended, or restated bylaws, as
amended (or other comparable corporate charter documents) of
Seller;
(b) require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority, except (x) for the Seller Required
Regulatory Approvals and the Purchaser Required Regulatory
Approvals, or (y) for those requirements which become
applicable to Seller as a result of the specific regulatory
status of Purchaser (or any of its Affiliates) or as a result
of any other facts that specifically relate to the business or
activities in which Purchaser (or any of its Affiliates) is or
proposes to be engaged;
(c) result in a default (or give rise to any right of
termination, cancellation or acceleration or require any
consent or approval) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Seller is
a party or by which Seller, or any of the Assets may be bound,
except for such defaults (or rights of termination,
cancellation or acceleration or any consent or approval) as to
which requisite waivers or consents have been obtained; or
(d) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to Seller
or any of its Assets and Properties.
2.04 Governmental Approvals and Filings
Except for (i) Seller Required Regulatory Approvals and
(ii) with respect to the PSE Colstrip Transmission Assets as
set forth in Section 1.01(a)(xv) of the Disclosure Schedule,
no consent, approval or action of, filing with or notice to
any Governmental or Regulatory Authority on the part of Seller
is required in connection with the execution, delivery and
performance of this Agreement or any of the Operative
Agreements to which it is a party or the consummation of the
transactions contemplated hereby or thereby, except those as
would be required solely as a result of the identity or the
legal or regulatory status of Purchaser or any of its
Affiliates.
2.05 Reports
Since December 31, 1995, Seller has filed or caused to be
filed with the SEC, the applicable state or local utility
commissions or regulatory bodies and FERC, all material forms,
statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by it
with respect to the PSE Colstrip Interests under each of the
Securities Act, the Exchange Act, the applicable state public
utility Laws, the Federal Power Act, the Holding Company Act
and the respective rules and regulations thereunder, all of
which complied in all material respects with all applicable
requirements of the appropriate act and the rules and
regulations thereunder in effect on the date each such report
was filed, and there are no material misstatements or
omissions in respect of such reports.
2.06 Taxes
Seller has timely filed or will timely file all Tax
Returns required to be filed by Seller with respect to the
ownership, operation and maintenance of the Assets and has
paid or will pay all Taxes shown to be due on such returns
with respect to all tax periods ending prior to the Closing
Date. Except for the properties financed with the Pollution
Control Bonds, no other Assets have been financed using tax
exempt financing. The owners of Colstrip Units 1, 2, 3 and 4
have jointly made a timely and effective affirmative election
pursuant to Section 761(a) of the Code and Treasury Regulation
Section 1.761-2(b) to be excluded from all of subchapter K of
the Code, and such election has not been modified, revoked or
otherwise altered, and remains in effect. Seller has not
taken and has not been notified that any of such owners has
taken any action inconsistent with such election.
2.07 Legal Proceedings
Except as disclosed in Section 2.07 of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below):
(a) there are no Actions or Proceedings pending or, to
the Knowledge of the Seller, threatened against, relating to
or affecting Seller with respect to the ownership, operation
or maintenance of the Assets which could reasonably be
expected (i) to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements, or (ii) individually or in the aggregate with
other such Actions or Proceedings, to create a Seller Material
Adverse Effect; and
(b) there are no Orders outstanding against Seller with
respect to the ownership, operation and maintenance of the
Assets which, individually or in the aggregate with other such
Orders, would have a Seller Material Adverse Effect.
2.08 Compliance with Laws and Orders
Except as disclosed in Section 2.08 of the Disclosure
Schedule, Seller is not in material violation of or in
material default under any Law or Order applicable to Seller's
ownership of the Assets or, to Seller's Knowledge, the
operation and maintenance of the Assets.
2.09 Real Property
(a) Section 1.01(a)(i) of the Disclosure Schedule
contains a description of, and exhibits indicating the
location of, the Real Property owned by Seller and included in
the Assets, and Section 1.01(a)(ii)(A) of the Disclosure
Schedule contains a description of, and exhibits indicating
the location of, each parcel of real property leased by Seller
(as lessor, sublessor, lessee or sublessee), or as to which
Seller holds easements or other rights, and included in the
Assets.
(b) Seller, or with respect to Real Property described
in Exhibit D to Section 1.01(a)(i) of the Disclosure Schedule,
MPC or its Affiliates, as the case may be, has, and at Closing
Seller will have, good and marketable title to the Real
Property in which Seller (or with respect to the Real Property
described in the aforementioned Exhibit D, MPC or its
Affiliates, as the case may be) holds a fee or easement
interest. Pursuant to the terms and conditions of the
Colstrip Contracts, Seller has, and, to Seller's Knowledge,
MPC or its Affiliates has, valid and subsisting title to the
Real Property in which Seller (or MPC or its Affiliates, as
the case may be) holds a permit interest or other interest, in
each case, free and clear of all Liens other than Permitted
Liens. Except for the Permitted Liens and the Real Property
subject to Real Property Leases described in
Section 1.01(a)(ii)(A) of the Disclosure Schedule, Seller,
subject to the terms and conditions of the Colstrip Contracts,
is in possession of the Real Property and there are no third
party licenses or tenants at the sites of the Real Property or
Real Property Leases.
(c) Seller, has a valid and subsisting leasehold estate
in and the right to quiet enjoyment of the real properties
subject to the Real Property Leases described in
Section 1.01(a)(ii)(B) of the Disclosure Schedule for the full
term thereof. Each Real Property Lease to which Seller is a
party is a legal, valid and binding agreement, enforceable in
accordance with its terms, of Seller and of each other Person
that is a party thereto, and except as set forth in
Section 2.09(c) of the Disclosure Schedule, there is no
default (or any condition or event which, after notice or
lapse of time or both, would constitute a default) thereunder.
(d) Seller has made available to Purchaser prior to the
execution of this Agreement true and complete copies of
(i) any current surveys in Seller's possession or any policies
of title insurance currently in force and in the possession of
Seller with respect to the Real Property, and (ii) all Real
Property Leases (including any amendments and renewal letters)
and, to the extent reasonably available, all other documents
referred to in clause (i) of this paragraph (d) with respect
to the real property subject to the Real Property Leases
described in Section 1.01(a)(ii)(B) of the Disclosure
Schedule.
(e) Except set forth in Section 12.01(e) of the
Disclosure Schedule, all Real Properties have access to a
public road and are zoned for their current uses. No fee
ownership, lease, right of way, easement, license or other
right in real property, other than the Real Property and the
Real Property Leases, is necessary for the Purchaser to own,
operate or maintain the Assets substantially as currently
owned, operated and maintained by Seller. Seller or to
Seller's knowledge, MPC or its Affiliates, has not received
any written notice that any of the improvements on any of the
Real Property or Real Property Leases, including without
limitation the Easements, or any appurtenances thereto or
equipment therein or the operation or maintenance thereof,
violate any restrictive covenant or the terms, conditions or
restrictions of any easement.
2.10 Tangible Personal Property
Seller, subject to the terms and conditions of the
Colstrip Contracts, or, to Seller's Knowledge, MPC or its
Affiliates, is in possession of and has good and valid title
to, or has valid leasehold interests in or valid rights under
Contract to use, all the Tangible Personal Property used in
and individually or in the aggregate with other such property
material to the ownership, operation and maintenance of the
Colstrip Facilities. All the Tangible Personal Property is
free and clear of all Liens, other than Permitted Liens and
Liens disclosed in Section 2.10 of the Disclosure Schedule,
and is in all material respects in good working order and
condition, ordinary wear and tear excepted; provided, however,
that if the PSE Transmission Assets are not purchased by
Purchaser, the Separation Document will be considered a
Permitted Lien with respect to the property, subject thereto.
2.11 Intellectual Property Rights
Seller has not received notice that Seller is infringing
any Intellectual Property of any other Person in connection
with the Assets or the operation of the Colstrip Facilities,
no claim is pending or has been made against Seller to such
effect that has not been resolved and, to its Knowledge,
Seller is not infringing any Intellectual Property of any
other Person.
2.12 Contracts
(a) Section 2.12(a) of the Disclosure Schedule (with
paragraph references corresponding to those set forth below)
contains a true and complete list of each of the following
Contracts (true and complete copies of which, together with
all amendments and supplements thereto, have been made
available to Purchaser prior to the execution of this
Agreement) to which Seller is a party (other than indirectly
pursuant to Seller's obligations under the Colstrip Contracts)
and which relate to the operation of the Colstrip Facilities
or by which any of the Assets are bound:
(i) all Contracts with any Person containing any
provision or covenant prohibiting or limiting the ability of
Seller to engage in any activity relating to the operation of
the Colstrip Facilities or compete with any Person in
connection with the operation of the Colstrip Facilities or
prohibiting or limiting the ability of any Person to compete
with Seller in connection with the operation of the Colstrip
Facilities;
(ii) all partnership, joint venture, shareholders' or
other similar Contracts with any Person in connection with the
operation of the Colstrip Facilities;
(iii) all Contracts with distributors, dealers,
manufacturer's representatives, sales agencies or franchises
with whom Seller deals in connection with the operation of the
Colstrip Facilities which in any case involve the payment or
potential payment, pursuant to the terms of any such Contract,
by or to Seller of more than $250,000 annually;
(iv) all Contracts relating to the future disposition
or acquisition of any Assets, other than dispositions or
acquisitions of Inventory in the ordinary course of business;
and
(v) all other Contracts (other than the Real Property
Leases) not described above that constitute Assumed
Liabilities with respect to the operation of the Colstrip
Facilities that (A) involve the payment or potential payment,
pursuant to the terms of any such Contract, by or to Seller of
more than $250,000 annually and (B) cannot be terminated
within sixty (60) days after giving notice of termination
without resulting in any material cost or penalty to Seller
(or, after the Closing, to Purchaser).
(b) Each Contract required to be disclosed in
Section 2.12(a) of the Disclosure Schedule and each of the
Colstrip Contracts and the Fuel Contracts and each of the
Business Contracts which involves the payment or potential
payment by or to Seller of more than $250,000 annually is in
full force and effect and constitutes a legal, valid and
binding agreement, enforceable in accordance with its terms,
of Seller and of each other party thereto; and except as
disclosed in Section 2.12(b) of the Disclosure Schedule
neither Seller nor, to the Knowledge of Seller, any other
party to such Contract is in violation or breach of or default
under any such Contract (or with notice or lapse of time or
both, would be in violation or breach of or default under any
such Contract).
2.13 Licenses
(a) Seller has been, and is, in material compliance with
all Licenses, including without limitation those described on
Section 2.13(b) of the Disclosure Schedule, necessary to allow
Seller to obtain the benefits of the PSE Colstrip Interests as
currently enjoyed by Seller. Except as disclosed in
Section 2.13(a) of the Disclosure Schedule, Seller has not
received any written notification that it is in violation, nor
does Seller otherwise have Knowledge of any violations, of any
of such Licenses, or any Law or Order of any Governmental or
Regulatory Authority applicable to it.
(b) Section 2.13(b) of the Disclosure Schedule sets
forth all material Licenses and Environmental Permits relating
to the ownership, operation and maintenance of the Colstrip
Facilities and to which Seller is a named licensee or
permittee.
2.14 Insurance
Except as set forth in Section 2.14 of the Disclosure
Schedule, all material policies of fire, liability, worker's
compensation and other forms of insurance owned or held by
Seller (other than indirectly through Seller's obligations
under the Colstrip Contracts) and insuring the Assets are in
full force and effect, all premiums with respect thereto
covering all periods up to and including the date as of which
this representation is being made have been paid (other than
retroactive premiums which may be payable with respect to
comprehensive general liability and worker's compensation
insurance policies), and no notice of cancellation or
termination has been received by Seller with respect to any
such policy which was not replaced on substantially similar
terms prior to the date of such cancellation. Except as set
forth in Section 2.14 of the Disclosure Schedule, Seller has
not been refused any insurance with respect to the Assets nor
has its coverage been limited by any insurance carrier to
which it has applied for any such insurance or with which it
has carried insurance during the last twelve months.
2.15 Environmental Matters
With respect to its ownership interest in the PSE
Colstrip Interests, except as disclosed in Section 2.15 of the
Disclosure Schedule:
(a) Seller and to Seller's Knowledge, MPC, holds, and is
in substantial compliance with, all Licenses which are
required for Seller to own, and for MPC to operate and
maintain, the Assets under applicable Environmental Laws
("Environmental Permits"), and Seller has not received any
written notice of any violation of any Environmental Law that
has not heretofore been resolved and Seller and, to Seller's
Knowledge, MPC, is otherwise in substantial compliance with
applicable Environmental Laws with respect to the ownership,
operation and maintenance of the Assets.
(b) Seller has not received any written request for
information, or been notified that it is a potentially
responsible party, under any Environmental Law with respect to
any on-site location relating to the ownership, operation and
maintenance of the Assets.
(c) Seller has not entered into or agreed to any consent
decree or order, and is not subject to any outstanding
judgment, decree, or judicial order relating to compliance
with any Environmental Law or to investigation or cleanup of
Hazardous Materials under any Environmental Law relating to
the ownership, operation and maintenance of the Assets.
(d) There are no claims, actions, proceedings or
investigations pending or, to the Knowledge of Seller,
threatened against Seller before any court, Governmental or
Regulatory Authority relating to any Environmental Law
relating to the PSE Colstrip Interests with respect to the
ownership, operation and maintenance of the Assets.
(e) To its Knowledge, Seller or MPC has made available
to Purchaser: (i) a list of all material environmental reports
and/or audits prepared by or for Seller within the past five
(5) years which discuss the environmental conditions of the
Assets; and (ii) a list of all underground storage tanks
and/or surface impoundments located on the Assets which
contain or have contained Hazardous Materials.
The representations and warranties made in this
Section 2.15 are Seller's exclusive representations and
warranties relating to environmental matters.
2.16 Absence of Condemnation Proceedings
Neither the whole nor any portion of the PSE Colstrip
Interests is subject to any pending or, to Seller's Knowledge,
threatened suit or Order for condemnation or other taking by
any public authority.
2.17 Regulation as a Utility
Seller is a public utility company within the meaning of
the Holding Company Act. Except as set forth in Section 2.17
of the Disclosure Schedule, Seller is not subject to
regulation as a public utility or public service company (or
similar designation) by the United States, any state of the
United States, any foreign country or any municipality or any
political subdivision of the foregoing.
2.18 Brokers
Except for Goldman, Sachs & Co., whose fees, commissions
and expenses are the sole responsibility of MPC, Morgan
Stanley Dean Witter, whose fees, commissions and expenses are
the sole responsibility of Seller and Merrill Lynch & Co.,
whose fees, commissions and expenses are the sole
responsibility of PGE, all negotiations relative to this
Agreement and the transactions contemplated hereby have been
carried out by Seller directly with Purchaser without the
intervention of any Person on behalf of Seller in such manner
as to give rise to any valid claim by any Person against
Purchaser for a finder's fee, brokerage commission or similar
payment.
2.19 Acknowledgment of Purchaser
Purchaser expressly acknowledges that Seller is the
holder of a non-controlling interest in the Colstrip
Facilities pursuant to the Colstrip Contracts, and that Seller
(i) did not manage the construction of the PSE Colstrip
Interests, (ii) is not now and has never been the operator (or
otherwise in physical possession) of the Colstrip Facilities
and (iii) was not involved in or responsible for the creation
or provision of data or information about the Colstrip
Facilities by MPC or any other co-owner of Colstrip Units 1,
2, 3 and 4.
2.20 Disclaimers Regarding Assets
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE ASSETS
ARE BEING TRANSFERRED "AS IS, WHERE IS" AND SELLER EXPRESSLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR
QUALITY OF THE ASSETS OR THE PROSPECTS (FINANCIAL AND
OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS AND SELLER
SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, OR ANY PART
THEREOF.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as
follows:
3.01 Corporate Existence
Purchaser is a corporation duly incorporated, validly
existing and in good standing under the Laws of the
Commonwealth of Pennsylvania and has full corporate power and
authority to conduct its business as it is now being conducted
and to own, lease and operate its Assets and Properties.
Purchaser has full corporate power and authority to enter into
this Agreement and the Operative Agreements to which it is a
party, to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and
thereby. Purchaser has heretofore made available to Seller
complete and correct copies of its articles of incorporation
and by-laws (or other comparable corporate charter documents),
as currently in effect.
3.02 Authority
The execution and delivery by Purchaser of this Agreement
and the Operative Agreements to which it is a party, and the
performance by Purchaser of its obligations hereunder and
thereunder, have been duly and validly authorized by the Board
of Directors of Purchaser, no other corporate action on the
part of Purchaser or its stockholders being necessary. This
Agreement has been duly and validly executed and delivered by
Purchaser and, subject to receipt of Seller Required
Regulatory Approvals and Purchaser Required Regulatory
Approvals, constitutes, and upon the execution and delivery by
Purchaser of the Operative Agreements to which it is a party,
such Operative Agreements will constitute, legal, valid and
binding obligations of Purchaser enforceable against Purchaser
in accordance with their terms except as the same may be
limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar Laws relating to or
affecting the rights of creditors generally, or by general
equitable principles.
3.03 No Conflicts
Except as set forth in Section 3.03 of the Disclosure
Schedule, and other than obtaining Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals, the
execution and delivery by Purchaser of this Agreement do not,
and the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, the performance by
Purchaser of its obligations under this Agreement and such
Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the articles of
incorporation or by-laws (or other comparable corporate
charter documents) of Purchaser;
(b) require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority except for Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals;
(c) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or
obligation to which Purchaser is a party or by which any of
its Assets and Properties may be bound, except for such
defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have
been obtained; or
(d) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to
Purchaser or any of its Assets and Properties.
3.04 Governmental Approvals and Filings
Except for Purchaser Required Regulatory Approvals, no
consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority on the part of Purchaser
is required in connection with the execution, delivery and
performance of this Agreement or any of the Operative
Agreements to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
3.05 Legal Proceedings
Except as disclosed in Section 3.05 of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below):
(a) there are no Actions or Proceedings pending or, to
the Knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which
could reasonably be expected (i) to result in the issuance of
an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements, or (ii) individually or in the aggregate with
other such Actions or Proceedings, to create a Purchaser
Material Adverse Effect; and
(b) there are no Orders outstanding against Purchaser
which, individually or in the aggregate with other such
Orders, would have a Purchaser Material Adverse Effect.
3.06 Compliance with Laws and Orders
Except as disclosed in Section 3.06 of the Disclosure
Schedule, Purchaser is not in violation of or in default under
any Law or Order applicable to Purchaser or its Assets and
Properties.
3.07 Regulation as a Utility
Purchaser is not a public utility company within the
meaning of the Holding Company Act. As of the Closing,
Purchaser will be subject to regulation as a public utility
and as a Licensee under the Federal Power Act. Purchaser is
not otherwise subject to regulation as a public utility or
public service company (or similar designation) by the United
States, any state of the United States (except to the extent
that the assets acquired by Purchaser under the MPC Purchase
Agreement and related activities in connection therewith make
Purchaser subject to regulation under Montana law), any
foreign country or any municipality or any political
subdivision of the foregoing.
3.08 Brokers
Except for Chase Securities Inc., whose fees, commissions
and expenses are the sole responsibility of Purchaser, all
negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Purchaser
directly with Seller without the intervention of any Person on
behalf of Purchaser in such manner as to give rise to any
valid claim by any Person against Purchaser for a finder's
fee, brokerage commission or similar payment.
3.09 Financing
Purchaser has cash and/or commitments for equity
contributions or credit facilities sufficient (and has
provided Seller with evidence thereof) to pay the Base
Purchase Price and the Combined Payment Amount and to make all
related payments of fees and expenses in connection with the
transactions contemplated by this Agreement and the Operative
Agreements.
3.10 Financial Statements
Purchaser has delivered to Seller the financial
statements of Purchaser listed on Section 3.10 of the
Disclosure Schedule, and such financial statements and notes
fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of
Purchaser as of the respective dates of and for the periods
referred to therein, all in accordance with GAAP, subject, in
the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and
the absence of notes and schedules.
3.11 Opportunity to Inspect Assets
Prior to its execution of this Agreement, Purchaser has
conducted an independent investigation of the Assets. In
making its decision to execute this Agreement, and to purchase
the Assets, Purchaser has relied upon the terms and provisions
of this Agreement and the results of such independent
investigation.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all
times from and after the date hereof until the Closing, and,
with respect to Section 4.08, thereafter Seller will comply
with all covenants and provisions of this Article IV, except
to the extent Purchaser may otherwise consent in writing.
4.01 Regulatory and Other Approvals
Seller will (a)(i) take all reasonable steps necessary or
desirable, and proceed diligently and in good faith and use
all reasonable efforts, as promptly as practicable to obtain
all consents, approvals (including Final Orders) or actions
of, to make all filings with and to give all notices to
Governmental or Regulatory Authorities provided that the Final
Order(s) of the WUTC approving the transaction and the terms
and conditions of each of the Operative Agreements and the
respective regulatory treatment of any and all financial
impacts thereof in each case shall be in form and substance
satisfactory to Seller in its reasonable discretion and (ii)
take all commercially reasonable steps necessary or desirable
to obtain all consents, approvals or actions, and give all
notices to, any other Person required of Seller, in each case,
to consummate the transactions contemplated hereby and by the
Operative Agreements, including those described in
Section 2.03 of the Disclosure Schedule and Seller Required
Regulatory Approvals, or required for Purchaser to own,
operate or maintain, on and after the Closing, the Assets
substantially as such assets are currently owned, operated and
maintained by Seller, (b) provide such other information and
communications to such Governmental or Regulatory Authorities
or other Persons as such Governmental or Regulatory
Authorities or other Persons may reasonably request in
connection therewith and (c) provide reasonable cooperation
(i) to Purchaser in obtaining all Purchaser Required
Regulatory Approvals and other consents, approvals or actions
of, making all filings with and giving all notices to
Governmental or Regulatory Authorities or other Persons
required of Purchaser to consummate the transactions
contemplated hereby and by the Operative Agreements and (ii)
to Purchaser and Purchaser's potential lenders in connection
with Purchaser Financing for the transactions contemplated by
this Agreement. Prior to making any filings with a
Governmental or Regulatory Authority pursuant to this
Section 4.01, Seller agrees to provide copies of such filings
to Purchaser. Nothing in this Agreement shall require Seller
to institute litigation or to pay or agree to pay any sum of
money or make financial accommodations (other than the payment
or incurrence of customary expenses and filing or other fees)
in order to obtain any necessary consent, approval or
authorization including, without limitation, the Seller
Required Regulatory Approvals. Seller will provide prompt
notification to Purchaser when any such consent, approval,
action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable, and will advise
Purchaser of any communications (and, unless precluded by Law
or Order, provide copies of any such communications that are
in writing) with any Governmental or Regulatory Authority or
other Person regarding any of the transactions contemplated by
this Agreement or any of the Operative Agreements.
4.02 HSR Filings
In addition to and not in limitation of Seller's
covenants contained in Section 4.01, Seller will (a) consult
with Purchaser as to appropriate timing of filings and take
promptly all actions necessary to make the filings required of
Seller or its Affiliates under the HSR Act, (b) comply at the
earliest practicable date with any request for additional
information received by Seller or its Affiliates from the
Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (c)
cooperate with Purchaser in connection with Purchaser's filing
under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department
of Justice or state attorneys general.
4.03 Investigation by Purchaser
Seller will (a) provide Purchaser and its officers,
employees, counsel, accountants, financial advisors, potential
lenders, Purchaser's and potential lenders' consultants and
other representatives (collectively, "Representatives") with
full access, upon reasonable prior notice and during normal
business hours, to the Employees and such other officers,
employees and agents of Seller who have any responsibility for
the PSE Colstrip Interests, to Seller's accountants and,
subject to the terms and conditions of the Colstrip Contracts,
to the Assets (including, to the extent it is within Seller's
power to do so, access to the Colstrip 1, 2, 3 and 4 site),
but only to the extent that such access does not unreasonably
interfere with Seller's business and the operation of the
Assets, (b) make available to Purchaser and its
Representatives, upon request, a copy of each report, schedule
or other document filed or received by Seller between the Bid
Date and the Closing with or from the SEC, FERC, EPA, WUTC or
any other relevant Governmental or Regulatory Authority and
relating to the ownership, operation and maintenance of the
Assets or the transactions contemplated by this Agreement, and
all such information and data (including copies of Business
Contracts, Transferable Permits, Fuel Contracts, Colstrip
Contracts, and other Books and Records) concerning the
ownership, operation and maintenance of the PSE Colstrip
Interests and the Assets and the Assumed Liabilities as
Purchaser or its Representatives reasonably may request in
connection with such investigation, except to the extent that
furnishing any such report, schedule, other documents,
information or data would violate any Law, Order (including
any protective order or similar confidentiality obligation),
Contract, License or Environmental Permit applicable to Seller
or by which any of its Assets and Properties is bound. In
furtherance of the foregoing, Seller agrees to cooperate with
Purchaser in connection with Purchaser's efforts to obtain
Purchaser Financing, as defined in Section 5.07. Seller's
cooperation shall include the negotiation and execution of a
consent with the lenders with respect to the Operative
Agreements, which consent shall include providing such lenders
with rights to cure a Purchaser default under the Operative
Agreements; provided, however, that Seller shall not be
obligated, in connection with such cooperation or consent, to
take any action or enter into any agreement that would have
any adverse effect on Seller or any of its rights or benefits
under this Agreement or the Operative Agreements.
4.04 No Solicitations
Subject to the duties imposed by applicable Law, Seller
will not take, nor will it permit any Affiliate of Seller (or
authorize or permit any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for
or on behalf of Seller or any such Affiliate) to take,
directly or indirectly, any action to solicit, encourage,
receive, negotiate, assist or otherwise facilitate (including
by furnishing confidential information with respect to the PSE
Colstrip Interests or permitting access to the Assets and
Properties and Books and Records of Seller) any offer or
inquiry from any Person concerning the acquisition of any of
the Assets other than Purchaser or its Affiliates or any of
their Representatives.
4.05 Conduct of Business
(a) From the Bid Date to the Closing, Seller shall,
consistent with the terms and conditions of the Colstrip
Contracts and to the extent such matters are presented to
Seller by MPC thereunder, vote or cause to be voted its
Project Share (as defined in the Colstrip Contracts) in favor
of (i) the continued operation of the Colstrip Facilities only
in the ordinary course of business consistent with Good
Utility Practice, (ii) causing MPC to use commercially
reasonable efforts, to (A) maintain good relations with and
keep available (subject to dismissals and retirements in the
ordinary course of business) the services of key Employees,
(B) maintain the Assets in good working order and condition,
ordinary wear and tear excepted, (C) maintain the good will of
lessors, customers, suppliers, lenders and other Persons with
whom MPC otherwise has significant business relationships in
connection with the operation of the Colstrip Facilities, (D)
materially comply with all Laws and Orders, including
Environmental Laws applicable to the ownership, operation and
maintenance of the Colstrip Facilities and (E) keep in force
at not less than their present limits all material policies of
insurance covering the Assets to the extent reasonably
practicable in light of the prevailing market conditions in
the insurance industry.
(b) Without limiting the generality of the foregoing,
except with the prior written consent of Purchaser, Seller
will, with respect to the Colstrip Facilities promptly notify
Purchaser if Seller becomes aware of the cancellation of any
material insurance policy or any material modification
thereto.
4.06 Certain Restrictions
Except as set forth in Section 4.06 of the Disclosure
Schedule, Seller will refrain from agreeing to any of the
following actions:
(a) creating any Lien (other than a Permitted Lien) on
the Assets except in the ordinary course of Seller's business
or as required under Seller's instruments of Indebtedness as
in effect on the date hereof and, in each case, as will be
removed on or prior to the Closing;
(b) selling, leasing (as lessor), transferring or
otherwise disposing of, any of the Assets (except as
contemplated by Exhibit D to Section 1.01(a)(i) of the
Disclosure Schedule), other than Assets used, consumed or
replaced in the ordinary course of business consistent with
Good Utility Practice;
(c) entering into, amending or modifying in any material
way, terminating (partially or completely), granting any
waiver of any material term under or giving any material
consent with respect to any Business Contract, Transferable
Permit, Fuel Contract, Colstrip Contract or other contract or
agreement comprising a part of the Assets or that relates to
the Assets, the Assumed Liabilities or is material to the
operation of the Colstrip Facilities;
(d) other than in the ordinary course of business,
incurring, purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, or waiving any right
under, any Liability of or owing to Seller in connection with
the Assets, the Assumed Liabilities or the operation of the
Colstrip Facilities in an aggregate principal amount exceeding
$500,000;
(e) engaging with any Person in any Business
Combination, unless such Person agrees in a written instrument
to adopt and comply with the terms and conditions of this
Agreement as though such Person was an original signatory
hereto;
(f) engaging in any transaction individually or in the
aggregate with other such transactions material to the
ownership or operation of the Assets with any officer,
director, Affiliate or Associate of Seller, or any Associate
of any such officer, director or Affiliate, that would be an
Assumed Liability and that would extend beyond the Closing
other than in the ordinary course of business on terms no less
favorable to Seller than could be obtained on an arm's-length
basis with an unaffiliated third party;
(g) to the extent it has notice thereof and the
authority to do so pursuant to the Colstrip Contracts, making
any material change in the level of fuel inventory and stores
inventory customarily maintained by Seller with respect to the
PSE Colstrip Interests, other than consistent with Good
Utility Practice;
(h) to the extent it has notice thereof and the
authority to do so pursuant to the Colstrip Contracts,
entering into any commitment for the purchase or sale of fuel
having a term greater than six months and not terminable on or
before the Closing either (i) automatically, or (ii) by option
of Seller (or, after the Closing, by Purchaser) in its sole
discretion, if the aggregate payment under such commitment and
all other outstanding commitments not previously approved by
Purchaser would be expected to exceed $500,000;
(i) making any tax election or entering into or amending
any real or personal property Tax agreement, treaty or
settlement that would have a negative effect on the Tax status
of Purchaser with regard to the Assets; or
(j) entering into any Contract to do or engage in any of
the foregoing.
The foregoing shall not preclude Seller from making, or
agreeing to the making of (i) Maintenance Expenditures and
Capital Expenditures and (ii) at Seller's expense under the
Colstrip Contracts, such other maintenance and capital
expenditures as Seller or MPC deems necessary, subject in all
cases to the applicable provisions of the Colstrip Contracts.
4.07 Security Deposits
Seller will transfer to Purchaser at the Closing all of
Seller's right, title and interest in and to the Tenant
Security Deposits and the Landlord Security Deposits and any
other deposits, prepayments or progress payments made or held
by Seller in connection with the Assets or material to the
ownership, operation and maintenance of the Colstrip
Facilities.
4.08 Delivery of Books and Records, etc.; Removal of Property
(a) At the Closing, Seller shall deliver or make
available to Purchaser at Seller's place of business in
Bellevue, Washington, all of the Books and Records relating to
the PSE Colstrip Interests as are in Seller's possession, and
if at any time after the Closing Seller discovers in its
possession or under its control any other such Books and
Records or other Assets, it will forthwith deliver such Books
and Records or other Assets to Purchaser.
(b) Except as set forth in Section 4.08(b) of the
Disclosure Schedule, within a reasonable time after the
Closing, Seller shall take all commercially reasonable steps
to remove any of Seller's Assets and Properties not being sold
to Purchaser hereunder from the Real Property except as
contemplated by the Separation Document. Such removal shall
be at the sole cost and risk of Seller, including risk of loss
and damage to such Assets and Properties and to the Assets
conveyed to Purchaser hereby.
4.09 Fulfillment of Conditions
Seller will execute and deliver at the Closing each
Operative Agreement that Seller is required hereby to execute
and deliver as a condition to the Closing, will take all
commercially reasonable steps necessary or desirable and
proceed diligently and in good faith to satisfy each other
condition to the obligations of Purchaser contained in this
Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment
of any such condition.
4.10 Observation, Inspection and Participation
Seller agrees, subject to its rights and obligations
under the Colstrip Contracts that between the date of this
Agreement and the date of the Closing , Purchaser shall be
entitled to have a reasonable number of representatives, all
of whom shall be employees of Purchaser or its Affiliates
unless otherwise approved by Seller in each instance, which
approval shall not be unreasonably withheld ("Site
Representatives") at any of the Assets, on a full or part time
basis (whether on site or off-site), as determined by
Purchaser; provided, however, that (a) the presence and
activities of the Site Representatives shall be conducted in a
manner as not to interfere unreasonably with the ownership,
operation and maintenance of the Assets, or with the
activities of Seller and MPC not related to the Assets and
(b) the Site Representatives shall not have access to any
information that is unavailable pursuant to Section 4.03.
Reasonable office space and facilities will be made available
by Seller to such Site Representatives. Each Site
Representative shall have the right to review budgets and
expenditures, audit records (except for personnel and medical
records unless required by law), inspect equipment, advise on
repairs required for equipment, review permits, review the
progress of outages, review maintenance and operating
practices and otherwise observe all activities at the above
mentioned facilities in each case to the extent related to the
operation of the Assets. Between the date hereof and the
Closing, Seller shall, to the extent it is able to do so under
the Colstrip Contracts, exercise its reasonable efforts to
invite Site Representatives to attend internal meetings in
which Seller participates and which relate specifically to the
physical operation or maintenance of the Assets; provided,
however, that such obligation shall not extend to (i) meetings
of the boards of directors, or any committees thereof, of
Seller or any of its Affiliates, (ii) meetings with counsel,
or (iii) meetings the subject matter of which, in Seller's
reasonable judgment, if disclosed to Purchaser, would likely
be detrimental to Seller (including, without limitation,
information relating to Seller's proposed business activities
following the Closing or to contractual or other matters as to
which the interests of Seller and Purchaser may diverge).
Site Representatives shall also be entitled to consult with
Seller and make recommendations as to all activities relating
to the management, operation, maintenance, construction,
renewal, addition, replacement, modification and disposal of
the Assets, including, without limitation, applications for
authorizations, permits and licenses, and fuel procurement and
transportation.
4.11 Notice of Breach
Seller shall promptly give notice to Purchaser upon
becoming aware of the occurrence of any event which would
cause or constitute a breach of any of the representations,
warranties or covenants of Seller contained in this Agreement.
4.12 Bridge Financing Fees
In the event that Purchaser obtains bridge financing
directly or indirectly from a non-Affiliated third party in
connection with the transactions contemplated hereby, Seller
will deduct from the Base Purchase Price at the time of
Closing an amount equal to 31.11% of any financing fees paid
by Purchaser in connection with such bridge financing;
provided, however, that the deduction under this Section 4.12
shall not exceed $4,812,717 in the aggregate.
4.13 Special Maintenance and Capital Expenditures
Within thirty (30) days after the date hereof, Seller and
Purchaser shall mutually agree on a Schedule setting forth a
month by month special maintenance and capital expenditure
budget relating to the Assets for calendar years 1999 and 2000
(the "Budget"). The Budget will be divided into two parts;
Category A items and Category B items. With respect to items
listed under Category A, Seller agrees to use commercially
reasonable efforts to cause MPC, to the extent Seller has the
right to do so under the Colstrip Contracts, to conduct and
complete such special maintenance and capital expenditures at
the times set forth in the Budget. With respect to items
listed under Category B, Seller shall cause MPC, to the extent
Seller has the right to do so under the Colstrip Contracts, to
conduct and complete such special maintenance and capital
expenditures at such times as Seller and MPC shall determine
in their reasonable discretion after consultation with
Purchaser. With respect to emergency special maintenance and
capital expenditure items not identified in the Budget that
arise after the date hereof and prior to the Closing, Seller
will cause MPC, to the extent Seller has the right to do so
under the Colstrip Contracts, to consult with Purchaser and to
conduct and complete any such emergency special maintenance
and capital expenditure items in accordance with Good Utility
Practice ("Emergency Expenditures").
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all
times from and after the date hereof until the Closing and, in
the case of Section 5.06, thereafter, Purchaser will comply
with all covenants and provisions of this Article V, except to
the extent Seller may otherwise consent in writing.
5.01 Regulatory and Other Approvals
Purchaser will (a) take all reasonable steps necessary or
desirable, and proceed diligently and in good faith and use
all reasonable efforts, at the earliest commercially
practicable dates, to obtain all consents, approvals or
actions of, to make all filings with and to give all notices
to Governmental or Regulatory Authorities or any other Person
required of Purchaser to consummate the transactions
contemplated hereby and by the Operative Agreements, including
those described in Section 3.03 of the Disclosure Schedule and
Purchaser Required Regulatory Approvals or for Purchaser to
own, operate or maintain, on and after the Closing, the Assets
substantially as such assets are currently owned, operated and
maintained by Seller, (b) provide such other information and
communications to such Governmental or Regulatory Authorities
or other Persons as such Governmental or Regulatory
Authorities or other Persons may reasonably request in
connection therewith and (c) provide reasonable cooperation to
Seller in obtaining Seller Required Regulatory Approvals and
all other consents, approvals or actions of, making all
filings with and giving all notices to Governmental or
Regulatory Authorities or other Persons required of Seller to
consummate the transactions contemplated hereby and by the
Operative Agreements. Prior to making any filings with a
Governmental or Regulatory Authority pursuant to this
Section 5.01, Purchaser agrees to provide copies of such
filings to Seller. Nothing in this Agreement shall require
Purchaser to institute litigation or to pay or agree to pay
any sum of money or make financial accommodations (other than
the payment or incurrence of customary expenses and filing or
other fees) in order to obtain any necessary consent, approval
or authorization including, without limitation, the Purchaser
Required Regulatory Approvals. Purchaser will provide prompt
notification to Seller when any such consent, approval,
action, filing or notice referred to in clause (a) above is
obtained, taken, made or given, as applicable, and will advise
Seller of any communications (and, unless precluded by Law,
provide copies of any such communications that are in writing)
with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this
Agreement or any of the Operative Agreements.
5.02 HSR Filings
In addition to and without limiting Purchaser's covenants
contained in Section 5.01, Purchaser will (a) consult with
Seller as to the appropriate timing of filings and take
promptly all actions necessary to make the filings required of
Purchaser or its Affiliates under the HSR Act, (b) comply at
the earliest practicable date with any request for additional
information received by Purchaser or its Affiliates from the
Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and
(c) cooperate with Seller in connection with Seller's filing
under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department
of Justice or state attorneys general.
5.03 PPUC Approval for Holding Company
From the date hereof through the Closing, Purchaser
agrees not to enter into any Contract or take any action
which, when taken together with the consummation of the
transactions contemplated by this Agreement, would violate any
condition imposed by the PPUC that limits Parent's investment
in diversified businesses without prior PPUC approval.
Purchaser further agrees that, in seeking the approval
described in clause (iv) of the definition of Purchaser
Required Regulatory Approvals, Purchaser shall use
commercially reasonable efforts to seek any reasonable PPUC
approval that would allow Purchaser to consummate the
transactions contemplated hereby and to own, operate and
maintain the Assets in substantially the same manner as
currently owned, operated and maintained by Seller.
5.04 Notice of Breach
Purchaser shall promptly give notice to Seller upon
becoming aware of the occurrence of any event which would
cause or constitute a breach of any of the representations,
warranties or covenants of Purchaser contained in this
Agreement.
5.05 Fulfillment of Conditions
Purchaser will execute and deliver at the Closing each
Operative Agreement that Purchaser is hereby required to
execute and deliver as a condition to the Closing, will take
all commercially reasonable steps necessary or desirable and
proceed diligently and in good faith to satisfy each other
condition to the obligations of Seller contained in this
Agreement and will not take or fail to take any action that
could reasonably be expected to result in the nonfulfillment
of any such condition.
5.06 Tax-Exempt Bond Financed Pollution Control Facilities
(a) Following the Closing until the maturity or
redemption date of the Pollution Control Bonds,
(i) Except as otherwise permitted in (ii),
Purchaser will not materially change or permit to be changed
the character or nature of the use of those facilities listed
in Exhibit C hereto (the "Pollution Control Facilities") from
the manner Seller has used said facilities prior to the sale
of the Assets, unless such changed use would constitute a use
or purpose of said facilities for which tax-exempt bonds could
be issued pursuant to section 1313 of the Tax Reform Act of
1986 (P.L. 99-514 or, hereinafter, the "1986 Tax Act"), to
refund bonds described in section 1312(a) of the 1986 Tax Act
which, for purposes hereof, are assumed to have been issued to
finance facilities of the same character and use or purpose as
said facilities;
(ii) Purchaser will not sell or otherwise transfer
any portion of such Pollution Control Facilities unless (A)
the transferee covenants to satisfy the conditions of Section
5.06(a)(i) and with respect to its ownership and use of said
facilities following the date of any such purchase or (B) the
transfer relates to personal property and is exclusively for
cash the proceeds of which will be expended within six months
of the date of receipt on facilities for which tax-exempt
bonds could be issued pursuant to section 1313 of the 1986 Tax
Act, to refund bonds described in section 1312(a) of said act
which, for purposes hereof, are assumed to have been issued to
finance facilities of the same character and use or purpose as
said facilities; and
(iii) Purchaser will cooperate with Seller and use
commercially reasonable efforts to permit Seller to have
access to the Colstrip Facilities at reasonable times to
examine the Pollution Control Facilities.
Nothing herein shall be construed to prevent Purchaser
from ceasing to use any facilities or equipment that, in
Purchaser's reasonable judgment, have become obsolescent or
otherwise uneconomical to continue to use. Seller will notify
Purchaser when the Pollution Control Bonds have matured or
been redeemed.
5.07 Purchaser Financing
Purchaser will proceed in good faith and use all
reasonable efforts to obtain financing on commercially
reasonable terms in amounts and structure reasonably
consistent with Purchaser's financing plan as set forth in
Purchaser's written proposal to Seller dated September 25,
1998 (the "Purchaser Financing").
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the
Assets and to assume and pay, perform and discharge the
Assumed Liabilities are subject to the fulfillment, at or
before the Closing, of each of the following conditions (all
or any of which may be waived in whole or in part by Purchaser
in its sole discretion):
6.01 Representations and Warranties
The representations and warranties made by Seller in this
Agreement and the Operative Agreements, taken as a whole,
shall be true and correct, in all material respects, on and as
of the Closing as though repeated on and as of the Closing or,
in the case of representations and warranties made as of a
specified date earlier than the Closing, on and as of such
earlier date.
6.02 Performance
Seller shall have performed and complied with, in all
material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with
by Seller at or before the Closing.
6.03 Officers' Certificates
Seller shall have delivered to Purchaser a certificate,
dated as of the Closing and executed by the Chairman of the
Board, the President or any Vice President of Seller,
substantially in the form and to the effect of Exhibit D
hereto, and a certificate, dated as of the Closing and
executed by the Secretary or any Assistant Secretary of
Seller, substantially in the form and to the effect of Exhibit
E hereto.
6.04 Orders and Laws
There shall not be in effect on the date of the Closing
any Order or Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the
Operative Agreements.
6.05 Regulatory Consents and Approvals
Subject to Section 1.10, all Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals shall
have been duly obtained, made or given and shall be in full
force and effect and shall be Final Orders reasonably
satisfactory to Purchaser, and all terminations or expirations
of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements,
including under the HSR Act, shall have occurred.
6.06 Colstrip Rights of First Refusal
Seller shall have either received the consents required
under each of the Colstrip Rights of First Refusal or the
exercise periods of such Colstrip Rights of First Refusal
shall have expired.
6.07 Third Party Consents
The consents (or in lieu thereof waivers) listed in
Section 6.07 of the Disclosure Schedule shall have been
obtained and shall be in full force and effect and shall be
reasonably satisfactory to Purchaser.
6.08 No Seller Material Adverse Effect
There shall not have occurred and be continuing a Seller
Material Adverse Effect.
6.09 Proceedings
All corporate and other proceedings to be taken by Seller
in connection with the transactions contemplated hereby and
all documents incident thereto shall be reasonably
satisfactory in form and substance to Purchaser and its
counsel, and Purchaser and its counsel shall have received all
such certified or other copies of such documents as it or they
may reasonably request.
6.10 Deliveries
Seller shall have executed and delivered to Purchaser
(i) the General Assignment, (ii) the other Assignment
Instruments, (iii) the Wholesale Transition Service Agreement,
dated as of the Closing, with Purchaser substantially in the
form and to the effect of Exhibit F hereto (the "Wholesale
Transition Service Agreement"), and (iv) if the PSE
Transmission Assets are not conveyed to Purchaser at the
Closing, Seller and Purchaser shall have entered into the
Transmission Service Agreement and the related Separation
Document.
6.11 Colstrip Operations Arrangements
There shall be in effect (a) arrangements reasonably
satisfactory to Purchaser pursuant to which Purchaser shall be
the operator of the entire Colstrip generating facility for a
period of at least ten (10) years after the Closing, subject
only to removal for cause or (b) such other arrangements with
respect to the operation of the Colstrip generating facility
as are reasonably acceptable to Purchaser.
6.12 Purchaser Financing
Purchaser's obligation to purchase the PSE Colstrip
Transmission Assets at the Closing is subject to the receipt
by Purchaser, on or prior to the Closing, of the Purchaser
Financing or other financing reasonably satisfactory to
Purchaser.
6.13 Opinion of Counsel
Purchaser shall have received the opinion of (i) Perkins
Coie LLP, counsel to Seller, dated as of the Closing,
substantially to the effect of Exhibit G-1 hereto, and
(ii) outside Montana counsel to Seller, dated as of the
Closing, substantially to the effect of Exhibit G-2 hereto.
6.14 Transfer of MPC Generation Assets
That portion of the Generation Assets (as such term is
defined in the MPC Purchase Agreement) to be transferred to
Purchaser at the Closing under the MPC Purchase Agreement
consisting of, at a minimum, (i) Corette, (ii) MPC's undivided
interest in Colstrip 1,2 and 3, and (iii) the Missouri/Madison
Hydro Units with Basin/Idaho/BPA Power Contracts (in each case
of (i), (ii) and (iii), as such terms are defined in the MPC
Purchase Agreement) shall have been purchased by Purchaser,
unless such purchase has not occurred solely as a result of a
breach by Purchaser of the MPC Purchase Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Assets
are subject to the fulfillment, at or before the Closing, of
each of the following conditions (all or any of which may be
waived in whole or in part by Seller in its sole discretion):
7.01 Representations and Warranties
The representations and warranties made by Purchaser in
this Agreement and the Operative Agreements, taken as a whole,
shall be true and correct, in all material respects on and as
of the Closing as though repeated on and as of the Closing.
7.02 Performance
Purchaser shall have performed and complied with, in all
material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with
by Purchaser at or before the Closing.
7.03 Officers' Certificates
Purchaser shall have delivered to Seller a certificate,
dated as of the Closing and executed by the Chairman of the
Board, the President or any Executive or Senior Vice President
of Purchaser, substantially in the form and to the effect of
Exhibit H hereto, and a certificate, dated as of the Closing
and executed by the Secretary or any Assistant Secretary of
Purchaser, substantially in the form and to the effect of
Exhibit I hereto.
7.04 Orders and Laws
There shall not be in effect on the date of the Closing
any Order or Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the
Operative Agreements.
7.05 Regulatory Consents and Approvals
Subject to Section 1.10, all Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals shall
have been duly obtained, made or given and shall be in full
force and effect and shall be a Final Order, and all
terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the
consummation of the transactions contemplated by this
Agreement and the Operative Agreements, including under the
HSR Act, shall have occurred.
7.06 Third Party Consents
The consents (or in lieu thereof waivers) listed in
Section 7.06 of the Disclosure Schedule shall have been
obtained and shall be in full force and effect and shall be
reasonably satisfactory to Seller.
7.07 Opinion of Counsel
Seller shall have received the opinion of Winthrop,
Stimson, Putnam & Roberts, counsel to Purchaser, dated as of
the Closing, substantially to the effect of Exhibit J hereto.
Such counsel's opinion need not cover any matter contained in
the opinions required by Exhibit J to the extent such matter
involves the laws of Montana, Oregon, Washington, Pennsylvania
or any other jurisdiction other than the federal laws of the
United States or the laws of the State of New York, and in
lieu thereof, Seller shall have received the opinions of
counsel admitted in such other jurisdictions covering such
matters.
7.08 No Purchaser Material Adverse Effect
There shall not have occurred and be continuing a
Purchaser Material Adverse Effect.
7.09 Proceedings
All corporate and other proceedings to be taken by
Purchaser in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to Seller and its counsel
and Seller and its counsel shall have received all such
certified or other copies of such documents as it or they may
reasonably request.
7.10 Colstrip Rights of First Refusal
Seller shall have either received the consents required
under each of the Colstrip Rights of First Refusal or the
exercise periods of such Colstrip Rights of First Refusal
shall have expired.
7.11 Deliveries
Purchaser shall have delivered to Seller (i) the
Assumption Agreement (ii) the other Assumption Instruments,
(iii) the Wholesale Transition Service Agreement ,and (iv)
subject to Section 1.10, the Transmission Service Agreement
and Separation Document.
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes
All Transfer Taxes incurred in connection with this
Agreement and the transactions contemplated hereby shall be
borne by Purchaser, and Purchaser, at its own expense, will
file, to the extent required by applicable Law, all necessary
Tax Returns and other documentation with respect to all such
Transfer Taxes, and, if required by applicable Law, Seller
will join in the execution of any such Tax Returns or other
documentation and will take such positions therein as are
reasonably requested by Purchaser. Nothing in the foregoing
sentence shall require Seller to take a position adverse to
its own posture with regard to Taxes. Prior to the Closing,
Purchaser will provide to Seller, to the extent possible, an
appropriate certificate from each applicable taxing authority
to the effect that no Transfer Tax will be incurred in
connection with this Agreement and the transactions
contemplated hereby.
8.02 Returns with respect to Prorated Taxes
With respect to those Taxes to be prorated in accordance
with Section 1.06 of this Agreement, Purchaser shall prepare
and timely file all Tax Returns required to be filed after the
Closing with respect to the Assets and shall duly and timely
pay all such Taxes shown to be due on such Tax Returns.
Purchaser's preparation of any such Tax Return shall be
subject to Seller's approval, which approval shall not be
unreasonably withheld. Purchaser shall make such Tax Returns
available for Seller's review and approval no later than
twenty (20) Business Days prior to the due date for filing
such Tax Return. Within fifteen (15) Business Days after
receipt of such Tax Return, Seller shall pay to Purchaser its
proportionate share of the amount shown as due on such Tax
Return determined in accordance with Section 1.06 of this
Agreement.
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 Survival of Representations, Warranties, Covenants and
Agreements
(a) Subject to Section 11.02, the representations and
warranties of Purchaser and Seller (other than the
representations and warranties , (x) contained in Section 2.06
(the "Tax Representation") which shall survive for the
applicable period of the applicable statute of limitation),
and (y) contained in Section 2.09(b) (the "Title
Representation") which shall survive the Closing indefinitely)
(all of the representations and warranties of Purchaser and
Seller, excluding the Tax Representation and the Title
Representation, are hereinafter referred to as the "General
Representations"), shall survive the Closing for a period of
twelve (12) months; provided, however, if Purchaser (or any
successor or assign of Purchaser) procures title insurance
with respect to the Real Property, to the extent that
Purchaser (or any successor or assign of Purchaser) actually
receives proceeds from the title insurer in respect of any
matters addressed by any of the representations and warranties
contained in Section 2.09, then, only with respect to such
matters, and only to such extent, such representations and
warranties shall be deemed not to have been made;
(b) Subject to Section 11.02, the covenants and
agreements of Seller and Purchaser contained in this Agreement
(other than the covenants and agreements contained in
Articles IV (excluding Section 4.08) and V (excluding
Section 5.06) (the "Pre-Closing Covenants"), which covenants
and agreements shall survive the Closing for a period of
twelve (12) months) (all of the covenants and agreements of
Purchaser and Seller, excluding the Pre-Closing Covenants, are
hereinafter referred to as the "Post-Closing Covenants"),
shall survive the Closing indefinitely; and
(c) Any due diligence or other investigation or
examination by any party with respect to the transactions
contemplated by this Agreement shall not in any way affect or
lessen the representations and warranties of the other party
contained herein or the indemnifications with respect thereto.
9.02 No Other Representations
Notwithstanding anything to the contrary contained in
this Agreement, it is the explicit intent of each party hereto
that Seller is making no representation or warranty
whatsoever, express or implied, including but not limited to
any implied representation or warranty as to condition,
merchantability or suitability as to any of the Assets, except
those representations and warranties contained in this
Agreement and the exhibits, schedules, documents, certificates
and instruments delivered in connection with the Closing. In
particular, Seller makes no representation or warranty to
Purchaser with respect to (i) the information set forth in the
Confidential Information Memorandum dated March 1998 and the
supplements thereto, or (ii) any financial projection or
forecast relating to the Colstrip Facilities. With respect to
any such projection or forecast delivered by or on behalf of
Seller to Purchaser, Purchaser acknowledges that (i) there are
uncertainties inherent in attempting to make such projections
and forecasts, (ii) it is familiar with such uncertainties,
(iii) it is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all such
projections and forecasts furnished to it and (iv) it shall
have no claim against Seller with respect to such projections
and forecasts.
ARTICLE X
INDEMNIFICATION
10.01 Other Indemnification
(a) Subject to the other Sections of this Article X,
Seller shall indemnify Purchaser and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Purchaser Group") in respect of, and hold
Purchaser Group harmless from and against, any and all Losses
suffered, incurred or sustained by Purchaser Group or to which
Purchaser Group becomes subject, resulting from, arising out
of or relating to:
(i) any breach by Seller of any representation or
warranty of Seller contained in this Agreement (determined in
all cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein);
(ii) any breach by Seller of any covenant or
agreement of Seller contained in this Agreement (determined in
all cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein); or
(iii) Retained Liability;
provided, however, that Seller shall have no liability for
Losses under clause (i) arising from a breach of a General
Representation or the Tax Representation unless and until the
aggregate amount of all Losses arising from such breaches
asserted by Purchaser equals or exceeds $2,500,000 in which
event Seller shall be liable for all such Losses; and
provided, further, that, except with respect to Losses arising
from a breach of the Title Representation, such
indemnification shall be effective only with respect to claims
written notice of which is received by Seller with respect to
Losses arising under clause (i) above relating to General
Representations (or, with respect to the Tax Representation,
the date upon which the applicable statute of limitations
expires) or clause (ii) above relating to Pre-Closing
Covenants, no later than the date that is twelve (12) months
from the Closing. Except as set forth in paragraph (b) below
in, no event shall the Liability of Seller for Losses under
clause (i) of this Section 10.01(a) arising out of breaches of
the General Representations exceed, in the aggregate, fifty
percent (50%) of the Purchase Price, (or, with respect to
breaches of the Title Representation and the covenants
contained in Sections 1.01(a)(i) and 1.05 exceed, in the
aggregate, the Purchase Price).
(b) In addition to the indemnities contained in clause
(a) above, Seller shall indemnify Purchaser Group in respect
of, and hold it harmless from and against, all Losses
suffered, incurred or sustained by Purchaser Group arising
from any Pre-Closing Environmental Liability; provided,
however, that (1) indemnification for Pre-Closing Unknown
Remedial Liabilities shall be effective only with respect to
Losses arising out of a matter described in a Claim Notice
received by Seller no later than the date that is two years
from the Closing, (2) Seller's Liabilities under this
paragraph for Pre-Closing Known and Unknown Remedial
Liabilities shall be limited in each case to Seller's pro rata
share (calculated pursuant to the Colstrip Contracts) of 50%
of any such Loss suffered, incurred or sustained by Purchaser
Group, and shall not, in any event, exceed, in the aggregate,
an amount equal to 10% of the Purchase Price (each such
Liability of Seller shall be paid by it at the same time that
Purchaser Group has paid its 50% share thereof); provided,
further, that this indemnity shall only extend to such Pre-
Closing Environmental Liabilities attributable to conditions
existing at or prior to the Closing, and Seller shall not be
required to indemnify Purchaser for Losses to the extent
attributable to acts or omissions of Purchaser resulting in an
increase in or aggravation of such Environmental Liabilities,
whether arising from a change in use of the Assets or
otherwise. In the event that Seller disputes the pro rata
share of any Losses attributable by Purchaser to Seller under
this Section 10.01(b)(2) in the Claim Notice, Seller will
nevertheless pay Purchaser the amount requested by Purchaser
in the Claim Notice and Seller shall proceed to resolve any
dispute with MPC and PGE concerning allocations of pro rata
shares. If Purchaser fails to make a claim against a
Potentially Responsible Party with respect to Pre-Closing
Environmental Liabilities, then upon making an indemnity
payment pursuant to this paragraph (b), Seller shall, to the
extent of such indemnity payment, be subrogated to all rights
of Purchaser against any Potentially Responsible Party in
respect of the Losses to which the indemnity payment relates.
If Purchaser makes a claim against, and recovers from, a
Potentially Responsible Party with respect to Pre-Closing
Environmental Liabilities and Seller has made an indemnity
payment with respect to such Loss, then Purchaser shall
reimburse Seller 50% of such amounts recovered, net of any
third party costs of collection.
(c) Subject to the other Sections of this Article X,
Purchaser shall indemnify Seller and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Seller Group") in respect of, and hold
Seller Group harmless from and against, any and all Losses
suffered, incurred or sustained by Seller Group or to which
Seller Group becomes subject, resulting from, arising out of
or relating to:
(i) any breach by Purchaser of any representation
or warranty of Purchaser contained in this Agreement
(determined in all cases as if the terms "material" or
"materially," or the capitalized versions thereof, were not
included therein);
(ii) any breach by Purchaser of any covenant or
agreement of Purchaser contained in this Agreement (determined
in all cases as if the terms "material" or "materially" (or
the capitalized versions thereof) were not included therein);
or
(iii) an Assumed Liability;
provided, however, that Purchaser shall have no liability for
Losses under clause (i) arising from a breach of a General
Representation unless and until the aggregate amount of all
such Losses arising from such breaches asserted by Seller
equals or exceeds $2,500,000 in which event Purchaser shall be
liable for all Losses; and provided, further, that such
indemnification shall be effective only with respect to claims
written notice of which is received by Purchaser with respect
to Losses arising under clause (i) above relating to General
Representations or clause (ii) above relating to Pre-Closing
Covenants, no later than the date that is twelve (12) months
from the Closing. In no event shall the Liability of
Purchaser for Losses under this Article X arising out of
breaches of the General Representations exceed, in the
aggregate, fifty percent (50%) of the Purchase Price.
(d) To the extent that an Indemnified Party has received
insurance proceeds prior to the payment of an indemnity
payment on an indemnifiable Loss, such indemnifiable Loss
shall be reduced by an amount equal to such proceeds received
by the Indemnified Party. If the amount of any indemnifiable
Loss, at any time subsequent to the making of an indemnity
payment in respect thereof, is reduced by recovery, settlement
or otherwise under or pursuant to any insurance coverage or
pursuant to any claim, recovery, settlement or payment by or
against any other entity, the amount of such reduction, less
any costs, expenses or premiums incurred in connection
therewith (together with interest thereon from the date of
payment thereof at the prime rate then in effect for domestic
banks as published in the Wall Street Journal (Northeast
Edition) in the "Money Rates" section), shall promptly be
repaid by the Indemnified Party to the Indemnifying Party.
Nothing in this Section 10.01(d) shall be construed to require
any party hereto to obtain or maintain any insurance coverage
or make any claim under its insurance coverage.
(e) Seller shall not be liable on account of any
obligations of any co-owners of Colstrip Units 1, 2, 3 and 4
to Purchaser.
(f) Except as expressly provided above in this Section
10.01, the Indemnifying Party hereby expressly waives all
rights of subrogation in respect of any payments made by it
under this Article X.
10.02 Method of Asserting Claims
All claims for indemnification by any Indemnified Party
under Section 10.01 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
an Indemnified Party might seek indemnity under Section 10.01
is asserted against or sought to be collected from such
Indemnified Party by a Person other than Seller, Purchaser or
any Affiliate of Seller or Purchaser (a "Third Party Claim"),
the Indemnified Party shall deliver a Claim Notice with
reasonable promptness to the Indemnifying Party. The
Indemnifying Party will notify the Indemnified Party as soon
as practicable within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified
Party under Section 10.01 and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Indemnified Party
with respect to the Third Party Claim pursuant to this
Section 10.02(a), then the Indemnifying Party will have the
right to defend, at the sole cost and expense of the
Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the
Indemnifying Party (with the consent of the Indemnified Party,
which consent will not be unreasonably withheld). The
Indemnifying Party will have full control of such defense and
proceedings, including any settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and
expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the
first sentence of this Section 10.02(a)(i), file any motion,
answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests and not prejudicial to
the Indemnifying Party (it being understood and agreed that,
except as provided in clause (ii) below, if an Indemnified
Party takes any such action that is prejudicial and causes a
final adjudication that is adverse to the Indemnifying Party,
the Indemnifying Party will be relieved of its obligations
hereunder with respect to the portion of such Third Party
Claim prejudiced by the Indemnified Party's action); and
provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of
the Indemnifying Party, cooperate with the Indemnifying Party
and its counsel in contesting any Third Party Claim that the
Indemnifying Party elects to contest, or, if appropriate and
related to the Third Party Claim in question, in making any
counterclaim against the Person asserting the Third Party
Claim, or any cross-complaint against any Person (other than
the Indemnified Party or any of its Affiliates).
Notwithstanding the foregoing, the Indemnified Party may take
over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to
indemnity under Section 10.01 with respect to such Third Party
Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 10.02(a), or if the Indemnifying Party
gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the
Indemnifying Party fails to give any notice whatsoever within
the Dispute Period, then the Indemnified Party will have the
right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and
diligently prosecuted by the Indemnified Party to a final
conclusion or will be settled at the discretion of the
Indemnified Party (with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and
proceedings, including (except as provided in the immediately
preceding sentence) any settlement thereof; provided, however,
that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying
Party, cooperate with the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party
is contesting, or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim against
the Person asserting the Third Party Claim, or any cross-
complaint against any Person (other than the Indemnified Party
or any of its Affiliates). Notwithstanding the foregoing
provisions of this Section 10.02(a)(ii), if the Indemnifying
Party has notified the Indemnified Party within the Dispute
Period that the Indemnifying Party disputes its liability
hereunder to the Indemnified Party with respect to such Third
Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii)
below, the Indemnifying Party will not be required to bear the
costs and expenses of the Indemnified Party's defense pursuant
to this Section 10.02(a)(ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and
the Indemnified Party will reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation. The
Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party
pursuant to this Section 10.02(a)(ii), and the Indemnifying
Party will bear its own costs and expenses with respect to
such participation.
(iii) If the Indemnifying Party notifies the
Indemnified Party that it does not dispute its liability to
the Indemnified Party with respect to the Third Party Claim
under Section 10.01 or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party with respect
to such Third Party Claim, the Loss in the amount specified in
the Claim Notice will be conclusively deemed a liability of
the Indemnifying Party under Section 10.01 and the
Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has
timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute, and if
not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by litigation in a
court of competent jurisdiction.
(b) In the event any Indemnified Party should have a
claim under Section 10.01 against any Indemnifying Party that
does not involve a Third Party Claim, the Indemnified Party
shall deliver an Indemnity Notice with reasonable promptness
to the Indemnifying Party prior to the expiration of the
indemnification notice period described in this Section 10.02.
If the Indemnifying Party notifies the Indemnified Party that
it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the
claim described in such Indemnity Notice, the Loss in the
amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under
Section 10.01 and the Indemnifying Party shall pay the amount
of such Loss to the Indemnified Party on demand. If the
Indemnifying Party disputes all or any portion of its
liability with respect to such claim, it shall notify the
Indemnified Party thereof in writing during the Dispute
Period, specifying the portion of the claim that is disputed
and the basis for such position. If the Indemnifying Party
has timely disputed its liability with respect to such claim,
the Indemnifying Party will be deemed to have accepted and be
liable for payment of the undisputed portion of such claim on
demand and the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.
(c) In the event of any Loss resulting from a
misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained
in this Agreement as to which an Indemnified Party would be
entitled to claim indemnity under Section 10.01 but for the
Loss limitation provisions of Section 10.01(a) and (c), such
Indemnified Party may nevertheless deliver a written notice to
the Indemnifying Party containing the information that would
be required in a Claim Notice or an Indemnity Notice, as
applicable, with respect to such Loss. In the case of a Claim
Notice, the provisions of Section 10.02(a)(i) will be
applicable. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute the claim described therein or
fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes the claim
described in such Claim Notice or Indemnity Notice, as the
case may be, the Loss specified in the notice will be
conclusively deemed to have been incurred by the Indemnified
Party for purposes of making the determination of the Loss
limitations set forth in Section 10.01. If the Indemnifying
Party has timely disputed the claim described in such Claim
Notice or Indemnity Notice, as the case may be, the
Indemnifying Party and the Indemnified Party will proceed in
good faith to negotiate a resolution of such dispute, and if
not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by litigation in a
court of competent jurisdiction.
(d) In the event of any claim for indemnity under
Section 10.01(a), Purchaser agrees to give Seller and its
Representatives reasonable access to the Books and Records and
Employees in connection with the matters for which
indemnification is sought to the extent Seller reasonably
deems necessary in connection with its rights and obligations
under this Article X.
(e) All payments made pursuant to this Article X shall
be treated as an adjustment to the Purchase Price.
(f) In the event an action, dispute, claim, counterclaim
or controversy ("Dispute") arises between the parties arising
out of or relating to this Agreement, the aggrieved party
shall promptly notify the other party of the Dispute within
ten Business Days after such Dispute arises. If the parties
have failed to resolve the Dispute within ten Business Days
after delivery of such notice, each party shall, within five
Business Days thereafter, nominate a senior officer of its
management to meet to attempt to resolve the Dispute. The
senior officers shall meet within twenty Business Days after
their nomination. Should the senior officers be unable to
resolve the Dispute, either party may pursue any and all
available legal remedies, unless the parties mutually agree in
writing to an alternative dispute resolution procedure.
10.03 Exclusivity
After the Closing, to the extent permitted by Law, the
indemnities set forth in this Article X shall be the exclusive
remedies of Purchaser Group and Seller Group, or any member of
either of them, for any misrepresentation, breach of warranty
or nonfulfillment or failure to be performed of any covenant
or agreement contained in this Agreement, any schedule hereto,
or any certificate delivered by or on behalf of Seller or
Purchaser in connection herewith, and the parties shall not be
entitled to a rescission of this Agreement or to any further
indemnification rights or claims of any nature whatsoever in
respect thereof, all of which the parties hereto hereby waive.
10.04 Purchaser's Release of Seller Under the Colstrip
Contracts
From and after the Closing, Purchaser, for itself and on
behalf of its Affiliates, does hereby release, hold harmless
and forever discharge Seller from any and all claims, demands,
liabilities (including fines and civil penalties) or causes of
action at Law or in equity, whether known or unknown,
resulting from any Claim that Seller is not released from its
obligations under the Colstrip Contracts by virtue of Sections
1.01(a)(xi) and 1.02(a)(v); provided, however, that nothing in
this Section 10.04 shall be deemed to affect Seller's Retained
Liabilities, Purchaser's Assumed Liabilities or the parties'
indemnification obligations hereunder.
ARTICLE XI
TERMINATION
11.01 Termination
This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser; or
(b) at any time before the Closing, by Seller or
Purchaser, in the event that any Final Order or Law becomes
effective restraining, enjoining, or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements, upon notification of the non-terminating party by
the terminating party; or
(c) at any time before the Closing, by Seller or
Purchaser, in the event (i) of a breach hereof by the non-
terminating party which gives rise to, as applicable, either a
Seller Material Adverse Effect (if Seller is the breaching
party) or a Purchaser Material Adverse Effect (if Purchaser is
the breaching party) if such non-terminating party fails to
cure such breach within forty-five (45) days following
notification thereof by the terminating party, provided that
if, at the end of such forty-five (45) day period, the non-
terminating party is endeavoring in good faith, and proceeding
diligently, to cure such breach, the non-terminating party
shall have an additional forty-five (45) days in which to
effect such cure or (ii) upon notification of the non-
terminating party by the terminating party that the
satisfaction of any condition to the terminating party's
obligations under this Agreement becomes impossible or
impracticable with the use of commercially reasonable efforts
if the failure of such condition to be satisfied by the
terminating party is not caused by a breach hereof by the
terminating party, provided that if it is reasonably possible
that the circumstances giving rise to the impossibility or
impracticability may be removed prior to the expiration of the
time periods provided in the following subsection (d), then
such notification may not be given until such time as the
removal of such circumstances is no longer reasonably possible
within such time periods; or
(d) at any time after the date which is twelve (12)
months after the date of this Agreement, by Seller or
Purchaser upon notification of the non-terminating party by
the terminating party if the Closing shall not have occurred
on or before such date and such failure to consummate is not
caused by a breach of this Agreement by the terminating party;
provided, however, that if on such date Purchaser and Seller
have not received all Purchaser Required Regulatory Approvals
and all Seller Required Regulatory Approvals but all other
conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then neither party may terminate
this Agreement until the expiration of such date which is
eighteen (18) months after the date of this Agreement;
provided further that if on such date Purchaser or MPC has not
received all Purchaser Required Regulatory Approvals or all
Seller Required Regulatory Approvals (in each case as defined
in the MPC Purchase Agreement) related to the Hydro Units (as
defined in the MPC Purchase Agreement) but all other
conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then neither party may terminate
this Agreement until the expiration of the date which is
twenty-four (24) months after the date of this Agreement.
11.02 Effect of Termination
If this Agreement is validly terminated pursuant to
Section 11.01, this Agreement will forthwith become null and
void, and there will be no liability or obligation on the part
of Seller or Purchaser (or any of their respective officers,
directors, employees, agents or other representatives or
Affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to
expenses in Section 13.04 and confidentiality in Section 13.06
will continue to apply following any such termination.
Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to
Section 11.01(c) or (d), Seller will remain liable to
Purchaser for any willful breach of Section 4.09 of this
Agreement by Seller existing at the time of such termination,
and Purchaser will remain liable to Seller for any willful
breach of Section 5.05 of this Agreement by Purchaser existing
at the time of such termination, and Seller or Purchaser may
seek such remedies, including damages and fees of attorneys,
against the other with respect to any such breach as are
provided in this Agreement or as are otherwise available at
Law or in equity.
ARTICLE XII
DEFINITIONS
12.01 Definitions
(a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:
"Actions or Proceedings" means any action, suit,
proceeding, arbitration or Governmental or Regulatory
Authority investigation.
"Adjustment Amount" has the meaning ascribed to it in
Section 1.04.
"Adjustment Statement" has the meaning ascribed to it in
Section 1.04.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled
by or is under common control with the Person specified. For
purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the
previous sentence, any Person owning ten percent (10%) or more
of the voting securities of another Person shall be deemed to
control that Person.
"Agreement" means this Asset Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and
the certificates delivered in accordance with Sections 6.03
and 7.03, as the same shall be amended from time to time.
"Assets" has the meaning ascribed to it in
Section 1.01(a).
"Asset Group" means one or more of the categories of
Assets set forth on Schedule I to the MPC Purchase Agreement.
"Assets and Properties" of any Person means all assets
and properties of every kind, nature, character and
description (whether real, personal or mixed, whether tangible
or intangible and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person.
"Assignment Instruments" has the meaning ascribed to it
in Section 1.05.
"Associate" means, with respect to any Person, any
corporation or other business organization of which such
Person is an officer or partner or is the beneficial owner,
directly or indirectly, of ten percent (10%) or more of any
class of equity securities, any trust or estate in which such
Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar capacity and
any relative or spouse of such Person, or any relative of such
spouse, who has the same home as such Person.
"Assumed Liabilities" has the meaning ascribed to it in
Section 1.02(a).
"Assumption Agreement" has the meaning ascribed to it in
Section 1.05.
"Assumption Instruments" has the meaning ascribed to it
in Section 1.05.
"Base Purchase Price" means $441,000,000.
"Bid Date" means September 28, 1998.
"Books and Records" of any Person means all files,
documents, instruments, papers, books and records relating to
the business, operations, condition of (financial or other),
results of operations and Assets and Properties of such
Person, including financial statements, Tax Returns and
related work papers and letters from accountants, budgets,
pricing guidelines, ledgers, journals, deeds, title policies,
minute books, stock certificates and books, stock transfer
ledgers, Contracts, Licenses, customer lists, computer files
and programs, retrieval programs, operating data and plans and
environmental studies and plans.
"Budget" has the meaning ascribed to it in Section 4.13.
"Business Combination" means with respect to any Person,
any merger, consolidation or combination to which such Person
is a party, any sale, dividend, split or other disposition of
capital stock or other equity interests of such Person or any
sale, dividend or other disposition of all or substantially
all of the Assets and Properties of such Person, provided,
however, that neither (i) a divestiture by Seller of all or
part of its generating assets (provided that no such
divestiture will operate as release of Seller from its
obligations pursuant to this Agreement) nor (ii) any
activities or transactions of any Affiliate of Seller (so long
as not involving Seller), shall be considered a Business
Combination hereunder.
"Business Contracts" has the meaning ascribed to it in
Section 1.01(a)(v).
"Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the State of Washington and
the Commonwealth of Pennsylvania are authorized or obligated
to close.
"Capital Expenditures" means those capital expenditures
which are identified in the Budget referred to in
Section 4.13, and such other emergency, non-budgeted capital
expenditures made by Seller in accordance with the provisions
of Section 4.13.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the
rules and regulations promulgated thereunder.
"Claim Notice" means written notification pursuant to
Section 10.02(a) of a Third Party Claim as to which indemnity
under Section 10.01 is sought by an Indemnified Party,
enclosing a copy of all papers served, if any, and specifying
the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under
Section 10.01, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in
good faith, of such Third Party Claim.
"Closing" means the closing of the transactions
contemplated by Section 1.05.
"Closing Date" means (a) the later of (x) July 1, 1999
and (y) the date thirty (30) days after the day on which the
last of the consents, approvals, actions, filings, notices or
waiting periods described in or related to the filings
described in Sections 6.04 through 6.07 and Sections 7.04
through 7.06 has been obtained, made or given or has expired,
as applicable; provided, that Purchaser agrees to use
reasonable efforts to be prepared to close prior to July 1,
1999, and shall give notice to Seller in the event Purchaser
determines that it is able to do so, or (b) such other date as
Purchaser and Seller mutually agree upon in writing.
"Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Colstrip Books and Records" has the meaning ascribed to
it in Section 1.01(a)(xii).
"Colstrip Contracts" has the meaning ascribed to it in
Section 1.01(a)(xi).
"Colstrip Facilities" means the thermal electric
generating facilities known as Colstrip Units 1, 2, 3&4
located near Colstrip, Montana, including the Common
Facilities (as defined in the Colstrip Contracts) and the PSE
Colstrip Transmission Assets.
"Colstrip Rights of First Refusal" means the rights
described in the following agreements: (i) Section 16(d) of
the Construction and Ownership Agreement, dated as of July 30,
1971, by and between Seller and MPC; (ii) Sections 24(b) and
24(f) of the Ownership and Operation Agreement, dated as of
May 6, 1981, as amended, by and among Seller, MPC, WWP, PGE,
and Pacific Power & Light Company ("Pacific"); and
(ii) Section 28(f) of the Colstrip Project Transmission
Agreement, dated as of May 6, 1981, as amended, by and among
Seller, MPC, WWP, PGE and Pacific.
"Combined Payment Amount" means an amount equal to
$461,000,000 minus the amount of the Base Purchase Price
(prior to any adjustment thereto pursuant to Section 1.10).
"Contract" means any agreement, lease, license, evidence
of Indebtedness, mortgage, indenture, security agreement or
other contract.
"Contribution Agreement" has the meaning ascribed to it
in the forepart of this Agreement.
"Disclosure Schedule" means, as the context requires,
(a) the record delivered to Purchaser by Seller herewith and
dated as of the date hereof, containing all lists,
descriptions, exceptions and other information and materials
as are required to be included therein by Seller pursuant to
this Agreement and (b) the record delivered to Seller by
Purchaser herewith and dated as of the date hereof, containing
all lists, descriptions, exceptions and other information and
materials as are required to be included therein by Purchaser
pursuant to this Agreement.
"Dispute" has the meaning ascribed to it in
Section 10.02(f).
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim
Notice or an Indemnity Notice.
"Easements" means, with respect to the Assets, the
reservations of easements in favor of Seller to be included in
the deeds of conveyance with respect to such Assets,
substantially as set forth in Section 12.01(b) of the
Disclosure Schedule.
"Employee" means each employee or officer of Seller,
Purchaser or MPC, as the context may require, or any of their
Affiliates, whose employment responsibilities relate to the
PSE Colstrip Interests or the Colstrip Facilities.
"Environmental Fines and Penalties" has the meaning
ascribed to it in Section 1.02(a)(vii).
"Environmental Law" means all Federal, state, municipal
and local laws (including common laws), regulations, rules,
ordinances, codes, licenses, decrees, judgments, directives,
or judicial or administrative orders relating to pollution,
protection, preservation or restoration of human health, the
environment or natural resources, including, without
limitation, laws relating to Releases or threatened Releases
of Hazardous Materials (including, without limitation, into or
through ambient air, surface water, groundwater, land,
wetlands, surface and subsurface strata), or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Hazardous Materials, including without limitation the Clean
Water Act, the Clean Air Act, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, and CERCLA, in
each case as amended, and their local counterparts.
"Environmental Liabilities" means any liabilities,
obligations or responsibilities under or related to former,
current or future Environmental Laws or the common law,
whether such liability, obligation or responsibility is known
or unknown, contingent or accrued, arising as a result of or
in connection with (a) any violation or alleged violation of
Environmental Laws relating to the Assets; (b) compliance with
applicable Environmental Laws relating to the Assets; (c) loss
of life, injury to persons or property or damage to natural
resources (whether or not such loss, injury or damage was made
manifest before or after the Closing) caused (or allegedly
caused) by the presence or Release of Hazardous Materials at,
on, in, under, adjacent to or migrating from the Assets; and
(d) the reasonable investigation and/or remediation required
by Law or constituting a reasonable response to a Governmental
or Regulatory Authority having jurisdiction (whether or not
such investigation or remediation commenced on or before the
Closing) of Hazardous Materials that are present or have been
Released at, on, in, under, adjacent to or migrating from the
Assets, including, but not limited to, Hazardous Materials in
the soil, surface water, sediments, groundwater, landfill
cells, or in other environmental media at or adjacent to the
Assets ("Remedial Liabilities"); provided, further that the
liabilities, obligations or responsibilities described in
clauses (a), (b) and (c) shall not include those described in
clause (d); provided further that Environmental Liabilities
shall not include (x) Purchaser's internal costs or
consequential damages (including the value of employees' time,
loss of use, downtime or increased operating costs); (y) costs
of capital improvements (including the replacement of
equipment that has reached its useful life); nor (z)
monitoring required by environmental permits or the design of
the Assets, except, in the case of clauses (y) and (z), as
covered in clause (d) above.
"Environmental Permits" has the meaning ascribed in
Section 2.15.
"EPA" means the Environmental Protection Agency.
"Estimated Adjustment Amount" means Seller's good faith
reasonable estimate of an Adjustment Amount for the Closing,
which estimate shall be provided to Purchaser no later than
five Business Days before the Closing.
"Estimated Purchase Price" has the meaning ascribed to it
in Section 1.05.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated
thereunder.
"Excluded Assets" has the meaning ascribed to it in
Section 1.01(b).
"Federal Power Act" means the Federal Power Act of 1935,
as amended, and the rules and regulations promulgated
thereunder.
"FERC" means the Federal Energy Regulatory Commission.
"Final Order" means a final Order after all opportunities
for rehearing are exhausted (whether or not any appeal thereof
is pending) that has not been further revised, stayed,
enjoined, set aside, annulled or suspended, with respect to
which any required waiting period has expired, and as to which
all conditions to effectiveness prescribed therein or
otherwise by Law, regulation or Order have been satisfied.
"Fuel Contracts" has the meaning ascribed to it in
Section 1.01(a)(x).
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in
the immediately prior comparable period.
"General Assignment" has the meaning ascribed to it in
Section 1.05.
"General Representations" has the meaning ascribed to it
in Section 9.01(a).
"Good Utility Practice" means any of the applicable
practices, methods and acts:
(i) required of the party to whom Good Utility
Practice is being applied under regulations of the National
Electric Safety Code (as each of such terms is defined in the
Interconnection Agreement (as such term is defined in the MPC
Purchase Agreement)), or its successor, whether or not the
party whose conduct is at issue is a member thereof; or
(ii) otherwise engaged in or approved by a
significant portion of the electric utility industry during
the relevant time period; which, in the exercise of reasonable
judgment in light of the facts known at the time the decision
was made, could have been expected to accomplish the desired
result at a reasonable cost to the party being expected to
apply Good Utility Practice, consistent with law, regulation,
good business practices, generation, transmission, and
distribution reliability, safety, and expedition. Good
Utility Practice is intended to include practices, methods, or
acts generally accepted in the region, and is not intended to
be limited to optimum practices, methods, or acts to the
exclusion of all others. Good Utility Practice does not
include intentional disregard of contractual commitments, even
if those commitments are uneconomic under current market
conditions.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official
or other instrumentality of the United States, any foreign
country or any domestic or foreign state, county, city or
other political subdivision or any Native American tribal
council or similar governing entity.
"Hazardous Material" means (A) any petrochemical,
petroleum or petroleum products, oil, flammable explosives,
radioactive materials, radon gas, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid
which may contain levels of polychlorinated biphenyls (PCBs);
(B) any chemicals or other materials or substances which are
now or hereafter become defined under any Environmental Law as
or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous chemicals," "hazardous
materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "pollutants,"
"contaminants," "hazardous matter," "restricted hazardous
materials" or words of similar import ; and (C) any other
chemical or other material or substance, the discharge,
emission, Release or exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental or
Regulatory Authority under any Environmental Law.
"Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended, and the rules and regulations
promulgated thereunder.
"HSR Act" means Section 7A of the Clayton Act (Title II
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended) and the rules and regulations promulgated
thereunder.
"Improvements" has the meaning ascribed to it in
Section 1.01(a)(iv).
"Indebtedness" of any Person means all obligations of
such Person (i) for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) for the
deferred purchase price of goods or services (other than trade
payables or accruals incurred in the ordinary course of
business), (iv) under capital leases and (v) in the nature of
guarantees of the obligations described in clauses (i) through
(iv) above of any other Person.
"Indemnified Party" means any Person claiming
indemnification under any provision of Article X.
"Indemnifying Party" means any Person against whom a
claim for indemnification is being asserted under any
provision of Article X.
"Indemnity Notice" means written notification pursuant to
Section 10.02(b) of a claim for indemnity under Article X by
an Indemnified Party, specifying the nature of and basis for
such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in
good faith, of such claim.
"Indenture" means the Fortieth Supplemental Indenture,
dated as of September 1, 1954, as amended and supplemented,
between Seller and State Street Bank and Trust Company, as
successor trustee.
"Independent Accounting Firm" means Price
WaterhouseCoopers or such other independent accounting firm of
national reputation mutually appointed by Seller and
Purchaser.
"Intangible Personal Property" has the meaning ascribed
to it in Section 1.01(a)(vii).
"Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, trade names and trade
name rights, service marks and service mark rights, service
names and service name rights, brand names, inventions,
copyrights and copyright rights, trade secrets, know-how,
techniques, computer programs and related documentation, and
any and all other intangible assets or proprietary information
or rights (whether registered or under common law) and all
pending applications for and registrations of patents,
trademarks, service marks and copyrights.
"Inventory" has the meaning ascribed to it in
Section 1.01(a)(iii).
"Inventory Adjustment Amount" has the meaning ascribed to
in Section 1.04.
"Inventory Survey" has the meaning ascribed to in Section
1.04.
"IRS" means the United States Internal Revenue Service.
"Knowledge" or similar phrases in this Agreement means:
(i) in the case of Seller, the actual knowledge of Seller's
officers and employees who are persons generally responsible
for the subject matter to which knowledge is pertinent, such
persons being listed in Section 12.01(c) of the Disclosure
Schedule at the date as of which the representation, warranty
or covenant is made or repeated, and (ii) in the case of
Purchaser the actual knowledge of Purchaser's officers and
employees who are persons generally responsible for the
subject matter to which knowledge is pertinent, such persons
being listed in Section 12.01(d) of the Disclosure Schedule at
the date as of which the representation, warranty or covenant
is made or repeated.
"Landlord Security Deposits" has the meaning ascribed to
it in Section 1.02(a)(iv).
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law
of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision or
of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and
other liabilities of a Person (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become
due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations,
franchises and similar consents granted or issued by any
Governmental or Regulatory Authority, other than Environmental
Permits, including applications for any of the foregoing.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other
encumbrance of any kind, or easement, any conditional sale
Contract, title retention Contract or other Contract to give
any of the foregoing.
"Loss" means any and all damages, fines, penalties,
deficiencies, losses and expenses (including interest, court
costs, reasonable fees of attorneys, accountants and other
experts or other reasonable expenses of litigation or other
proceedings or of any claim, default or assessment); provided,
however, "Loss" shall not include any consequential,
incidental or punitive damages for any reason, other than in
the case of willful misconduct.
"Maintenance Expenditures" means those special
maintenance expenditures which are identified in the Budget
referred to in Section 4.13 and such other emergency, non-
budgeted special maintenance expenditures made by Seller in
accordance with the provisions of Section 4.13 and the
exercise of Good Utility Practices.
"Maintenance and Capital Expenditures Amount" means
(i) the aggregate amount of all funds actually expended by
Seller (and amounts due from Seller to third parties at the
time of the Closing in respect of work actually performed by
such third parties, to the extent such amounts are not Assumed
Liabilities) with respect to Maintenance Expenditures and
Capital Expenditures in each case which are identified in the
Budget during the period beginning on the date one (1) year
prior to the Closing and ending on the Closing (or such
shorter period if the Closing occurs less than one year from
the date hereof) up to but not exceeding $6,380,000 in the
aggregate; and (ii) 85% of all Emergency Expenditures made by
Seller in accordance with Section 4.13 (if any, during such
one (1) year (or shorter) period described above). The
Maintenance and Capital Expenditures Amount shall not include
any Capital Expenditures ,Maintenance Expenditures or
Emergency Expenditures with respect to assets or properties
that are not transferred to Purchaser under this Agreement.
"MPC" means The Montana Power Company, a Montana
corporation and the operator of the Colstrip Facilities.
"MPC Purchase Agreement" means the Asset Purchase
Agreement, dated as of the date hereof, by and between
Purchaser and MPC, together with any amendments thereto.
"Off-Site Environmental Liabilities" means any
liabilities, obligations or responsibilities under or related
to former, current or future Environmental Laws or the common
law, whether such liability, obligation or responsibility is
known or unknown, contingent or accrued, arising as a result
of or in connection with Seller's storage, disposal,
transportation, discharge, Release or recycling of Hazardous
Materials prior to the Closing at or to locations other than
the Real Property constituting the Assets, provided that
liabilities attributable to migration of Hazardous Materials
from the Real Property constituting the Assets shall not
constitute Off-Site Environmental Liabilities.
"Operative Agreements" means, collectively, this
Agreement, the General Assignment and the other Assignment
Instruments, the Assumption Agreement, the other Assumption
Instruments, the Wholesale Transition Service Agreement, the
Contribution Agreement, the Transmission Service Agreement (if
required), and any support or other agreements to be entered
into at the Closing in connection with the transaction.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in
each such case whether preliminary or final).
"Parent" has the meaning ascribed to it in the forepart
of this Agreement.
"Permitted Lien" means (i) those Liens and exceptions to
title to the Assets (except Easements) set forth in Section
12.01(e) of the Disclosure Schedule; (ii) the Easements;
(iii) when such term is used with respect to any date before
the Closing, Liens created by the Indenture; (iv) any Lien for
Taxes not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP; (v) when such
term is used with respect to any date prior to the Closing,
any statutory Lien arising in the ordinary course of business
by operation of Law with respect to a Liability that is not
yet due or delinquent; (vi) zoning, entitlement, conservation
restriction and other land use and environmental regulations
by any Governmental or Regulatory Authority; and (vii) any
minor imperfection of title or similar Lien, limited in the
case of items (i) - (vii) (excluding clause (ii)) to only
those matters which, individually or in the aggregate with
other such Liens do not materially detract from the value of
the Assets as currently used or materially interfere with the
ownership, operation and maintenance of the Assets.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, limited
liability company, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"PGE" means Portland General Electric Company, an Oregon
corporation.
"Pollution Control Bonds" means (a) Pollution Control
Revenue Refunding Bonds, Series 1993, due March 1, 2020, of
the City Forsyth, Montana ("Forsyth") in the original
principal amount of $23,460,000, (b) Pollution Control Revenue
Refunding Bonds, Series 1992, due March 1, 2022, of Forsyth in
the original principal amount of $87,500,000, and
(c) Pollution Control Revenue Refunding Bonds, Series 1991A
and 1991B (AMT), due August 1, 2021 of Forsyth in the original
principal amounts of $27,500,000 and $23,400,000,
respectively.
"Pollution Control Facilities" means the facilities
financed with the Pollution Control Bonds described in
Exhibit C hereto.
"Portland Closing Date" means the date on which the
closing of the transactions contemplated by the Asset Purchase
Agreement, dated as of the date hereof, by and between
Purchaser and PGE occurs.
"Post-Closing Covenants" has the meaning ascribed to it
in Section 9.01(b).
"Potentially Responsible Party" has the meaning ascribed
to it in CERCLA.
"PPUC Order" means the Opinion and Order adopted by PPUC
on February 9, 1995 in Pennsylvania Power & Light Company's
application for approval of certain transactions in connection
with the utility's establishment of a holding company
structure.
"Pre-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Pre-Closing Environmental Liabilities" means those
Environmental Liabilities attributable to the period on or
prior to the Closing;
"Pre-Closing Known Remedial Liabilities" means the subset
of Pre-Closing Environmental Liabilities that are described in
paragraph (d) of the definition of Environmental Liabilities
and that are attributable to the matters set forth in Schedule
I hereto.
"Pre-Closing Known and Unknown Remedial Liabilities"
means all Pre-Closing Known Remedial Liabilities and Pre-
Closing Unknown Remedial Liabilities arising from or relating
to the ownership, operation and maintenance of the PSE
Colstrip Interests, to the extent such PSE Colstrip Interests
or any portion thereof are acquired by Purchaser.
"Pre-Closing Unknown Remedial Liabilities" means the
subset of Pre-Closing Environmental Liabilities that are
described in paragraph (d) of the definition of Environmental
Liabilities and that are not attributable to the matters set
forth in Schedule I hereto.
"PSE Colstrip Interests" means Seller's undivided 50%
interest in Colstrip Units 1&2 and Seller's undivided 25%
interest in Colstrip Units 3&4, together with its interest in
the Common Facilities as provided in the Colstrip Contracts
and the PSE Colstrip Transmission Assets.
"PSE Colstrip Transmission Assets" means Seller's right,
title and interest in and to the 500 kV transmission system,
including related facilities, real property and property
rights, for the transmission of power from the PSE Colstrip
Interests to Bonneville Power Administration's transmission
system near Townsend, Montana, as described in Section
1.01(a)(xv) of the Disclosure Schedule.
"PSE Transmission Amount" means an amount equal to
$88,600,000.
"Purchase Price" has the meaning ascribed to it in
Section 1.03(a).
"Purchaser" has the meaning ascribed to it in the
forepart of this Agreement.
"Purchaser Financing" has the meaning ascribed to it in
Section 5.07.
"Purchaser Group" has the meaning ascribed to it in
Section 10.01(a).
"Purchaser Material Adverse Effect" means any change or
effect after the Bid Date that is individually, or in the
aggregate, materially adverse to (a) the business, operations,
property or condition (financial or otherwise) of Purchaser
and its subsidiaries, taken as a whole, (b) the ability of
Purchaser and each of its subsidiaries, taken as a whole, to
perform their respective obligations under this Agreement or
any of the other Operative Agreements or (c) the validity or
enforceability of this Agreement or any of the other Operative
Agreements, or the rights or remedies of Purchaser hereunder
or thereunder.
"Purchaser Required Regulatory Approvals" means
(i) pursuant to Part II of the Federal Power Act, acceptance
for filing and effectiveness or authorization by Final Order
of FERC, as applicable, to allow Purchaser to (A) implement
wholesale sales of electricity under the Wholesale Transition
Service Agreement and any other jurisdictional agreements to
be assigned to Purchaser, (B) acquire, own and operate the
Assets, and (C) sell electricity at wholesale at market-based
rates; (ii) a Final Order of FERC certifying Purchaser as an
exempt wholesale generator pursuant to Section 32 of the
Holding Company Act; provided however, that in the event
Purchaser does not obtain such certification with respect to
the acquisition and ownership of the PSE Transmission Assets,
then the provisions of Section 1.10 shall apply with respect
to such Assets, and provided further that in any case such
certification will be a Purchaser Required Regulatory Approval
with respect to all other Assets; (iii) Final Orders of the
WUTC, Montana Public Service Commission and the Oregon Public
Utility Commission, if required, including the determinations
required by Section 32(c) of the Holding Company Act for the
Assets to be eligible facilities of Purchaser as an exempt
wholesale generator; (iv) approval or authorization by Final
Order of the Pennsylvania Public Utility Commission pursuant
to the PPUC Order, if required; (v) other Licenses,
Environmental Permits and approvals or authorizations of any
other Governmental or Regulatory Authority reasonably
necessary pursuant to any Law for Purchaser to own and operate
the Assets other than authorizations or approvals, the lack of
which would not materially detract from the value of the
Assets as currently used or materially interfere with the
ownership, operation and maintenance of the Assets; and (vi)
expiration or early termination of the HSR Act waiting period.
"Qualified Transfer" means a sale or other disposition of
the Pollution Control Facilities to a transferee who is
reasonably expected to use the Pollution Control Facilities in
such a way that they are treated as qualified pollution
control facilities within the meaning of Section 103(b)(4)(F)
of the Internal Revenue Code as in effect prior to the
enactment of Public Law No. 99-514 (the "Tax Reform Act of
1986").
"Real Property" has the meaning ascribed to it in Section
1.01(a)(i).
"Real Property Leases" has the meaning ascribed to it in
Section 1.01(a)(ii).
"Release" means any release, spill, emission, pouring,
leaking, pumping, injection, deposit, disposal, discharge,
emptying, dispersal, dumping, leaching or migration into or
through the indoor or outdoor environment, including the
movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land, surface or
subsurface strata.
"Representatives" has the meaning ascribed to it in
Section 4.03.
"Resolution Period" means the period ending sixty (60)
days following receipt by an Indemnified Party of a written
notice from an Indemnifying Party stating that it disputes all
or any portion of a claim set forth in a Claim Notice or an
Indemnity Notice.
"Retained Liabilities" has the meaning ascribed to it in
Section 1.02(b).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Seller" has the meaning ascribed to it in the forepart
of this Agreement.
"Seller Group" has the meaning ascribed to it in Section
10.01(c).
"Seller Material Adverse Effect" means any change in or
effect on any of the Assets or the operation of any of the
Assets after the Bid Date that is materially adverse to the
ownership, business, assets, operations or condition
(financial or otherwise) of (A) in the case of the PSE
Colstrip Interests, the PSE Colstrip Interests or (B) in the
case of the PSE Colstrip Transmission Assets, (unless the
provisions of Section 1.10 or 6.12 have become effective) the
PSE Colstrip Interests or the PSE Colstrip Transmission
Assets, in each case taken as a whole, other than (i) any
change resulting from changes in the international, national,
regional or local wholesale or retail markets for electricity,
(ii) any change resulting from changes in the international,
national, regional or local markets for any fuel used at the
Colstrip Facilities, (iii) any change resulting from changes
in the North American, national, regional or local electricity
transmission systems, and (iv) changes in Law that apply
generally to similarly situated persons, and (v) any
materially adverse change in the Assets which is cured
(including by payment of money) by Seller before the earlier
of the Closing Date and the Termination Date.
"Seller Required Regulatory Approvals" means (i) the
approval, if required, of the SEC pursuant to the Holding
Company Act, (ii) the filings by Seller and Purchaser required
by the HSR Act and the expiration or earlier termination of
all waiting periods under the HSR Act, (iii) a Final Order(s)
of the WUTC approving the transaction and the terms and
conditions of each of the Operative Agreements and the
respective regulatory treatment of any and all financial
impacts thereof, in each case in form and substance
satisfactory to Seller in its reasonable discretion, and (iv)
a Final Order(s) of the FERC approving the transaction or any
aspects thereof over which FERC has jurisdiction, including
the approval, if necessary, of the Transmission Service
Agreement, in form and substance reasonably satisfactory to
Seller.
"Separation Document" means the separation document to be
agreed to by the parties in the event the PSE Transmission
Assets are not purchased by Purchaser.
"Site Representatives" has the meaning ascribed to it in
Section 4.10.
"Tangible Personal Property" has the meaning ascribed to
it in Section 1.01(a)(iv).
"Tax Representation" has the meaning ascribed to it in
Section 9.01(a).
"Tax Returns" means any return, report, information
return or other document (including any related or supporting
information) required to be supplied to any taxing authority
with respect to Taxes.
"Taxes" means all taxes, charges, fees, levies,
penalties, or other assessments imposed by any United States
Federal, state or local or foreign taxing authority, including
but not limited to, income, excise, property, sales, transfer,
franchise, payroll, withholding, social security or other
taxes, including any interest, penalties or additions
attributable thereto.
"Tenant Security Deposits" has the meaning ascribed to it
in Section 1.01(a)(viii).
"Third Party Claim" has the meaning ascribed to it in
Section 10.02(a).
"Title Representation" has the meaning ascribed to it in
Section 9.01(a).
"Transferable Permits" has the meaning ascribed to it in
Section 1.01(a)(vi).
"Transfer Taxes" means all Taxes in the nature of sales,
use, transfer, recording, value added or forms of conveyance
taxes.
"Transmission Service Agreement" means an agreement
between Seller and Purchaser for Purchaser to purchase firm
point-to-point transmission service from Seller on the PSE
Colstrip Transmission Assets for a term of twenty-five (25)
year pursuant to the terms and conditions of Seller's Open
Access Transmission Tariff from time to time in effect and
accepted for filing by the FERC.
"Wholesale Transition Service Agreement" has the meaning
ascribed to it in Section 6.10.
"WUTC" means the Washington Utilities and Transportation
Commission.
"WWP" means The Washington Water Power Company, a
Washington corporation.
(b) Construction of Certain Terms and Phrases. Unless
the context of this Agreement otherwise requires, (i) words of
any gender include each other gender; (ii) words using the
singular or plural number also include the plural or singular
number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire
Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; (v) "include"
or "including" means including without limiting the generality
of any description preceding such term, and (vi) the phrase
"ordinary course of business" refers to the business of Seller
in connection with the ownership of the PSE Colstrip Interests
and the performance of its obligations under the Colstrip
Contracts. Whenever this Agreement refers to a number of days,
such number shall refer to calendar days unless Business Days
are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them
under GAAP. Any representation or warranty contained herein as
to the enforceability of a Contract shall be subject to the
effect of any bankruptcy, insolvency, reorganization,
moratorium or other similar law affecting the enforcement of
creditors' rights generally and to general equitable
principles (regardless of whether such enforceability is
considered in a proceeding in equity or at Law).
ARTICLE XIII
MISCELLANEOUS
13.01 Notices
All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given
only if delivered personally or by facsimile transmission or
mailed (first class postage prepaid) to the parties at the
following addresses or facsimile numbers:
If to Purchaser, to:
PP&L Global, Inc.
11350 Random Hills Rd, Suite 400
Fairfax, Virginia 22030
Facsimile No.: (703) 293-2659
Attn: Chief Counsel
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Facsimile No.: (212) 858-1500
Attn: David P. Falck
If to Seller, to:
Puget Sound Energy, Inc.
411 - 108th Avenue N.E.
Bellevue, WA 98104-5515
Facsimile No.: (425) 462-3300
Attn: Stephen A. McKeon
with a copy to:
Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3089
Facsimile No.: (206) 583-8500
Attn: Andrew Bor
All such notices, requests and other communications will
(i) if delivered personally to the address as provided in this
Section, be deemed given upon delivery, (ii) if delivered by
facsimile transmission to the facsimile number as provided in
this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt (in
each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy
of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to
time may change its address, facsimile number or other
information for the purpose of notices to that party by giving
notice specifying such change to the other party hereto.
13.02 Bulk Sales Act
The parties hereby waive compliance with the bulk sales
act or comparable statutory provisions of each applicable
jurisdiction. Seller shall indemnify Purchaser and its
officers, directors, employees, agents and Affiliates in
respect of, and hold each of them harmless from and against,
any and all Losses suffered, occurred or sustained by any of
them or to which any of them becomes subject, resulting from,
arising out of or relating to the failure of Seller to comply
with the terms of any such provisions applicable to the
transactions contemplated by this Agreement.
13.03 Entire Agreement
This Agreement and the Operative Agreements and the other
exhibits, schedules, documents, certificates and instruments
executed and delivered pursuant to this Agreement supersede
all prior discussions and agreements between the parties with
respect to the subject matter hereof and thereof, including
that certain confidentiality agreement between Purchaser and
MPC dated April 8, 1998, as agreed to include Seller, and
contain the sole and entire agreement between the parties
hereto with respect to the subject matter hereof and thereof.
13.04 Expenses
Except as otherwise expressly provided in this Agreement
(including as provided in Section 11.02), whether or not the
transactions contemplated hereby are consummated, each party
will pay its own costs and expenses incurred in connection
with the negotiation, execution and closing of this Agreement
and the Operative Agreements and the transactions contemplated
hereby and thereby.
13.05 Public Announcements
At all times at or before the Closing, Seller and
Purchaser will not issue or make any reports, statements or
releases to the public or generally to the employees,
customers, suppliers or other Persons with whom Seller has
significant business relationships in connection with the PSE
Colstrip Interests with respect to this Agreement or the
transactions contemplated hereby without the consent of the
other, which consent shall not be unreasonably withheld. If
either party is unable to obtain the approval of its public
report, statement or release from the other party and such
report, statement or release is, in the opinion of legal
counsel to such party, required by Law in order to discharge
such party's disclosure obligations, then such party may make
or issue the legally required report, statement or release and
promptly furnish the other party with a copy thereof. Seller
and Purchaser will also obtain the other party's prior
approval of any press release to be issued immediately
following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
13.06 Confidentiality
Each party hereto will hold, and will use its best
efforts to cause its Affiliates, and their respective
Representatives to hold, in strict confidence from any Person
(other than any such Affiliate or Representative), unless (i)
compelled to disclose by judicial or administrative process
(including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated
hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or
Proceeding brought by a party hereto in pursuit of its rights
or in the exercise of its remedies hereunder, all documents
and information concerning the other party or any of its
Affiliates furnished to it by the other party or such other
party's Representatives in connection with this Agreement or
the transactions contemplated hereby, except to the extent
that such documents or information can be shown to have been
(a) previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or
after the furnishing of such documents or information
hereunder) through no fault of such receiving party or (c)
later acquired by the receiving party from another source if
the receiving party is not aware that such source is under an
obligation to another party hereto to keep such documents and
information confidential; provided that following the Closing
the foregoing restrictions will not apply to Purchaser's use
of documents and information concerning the Assets or the
Assumed Liabilities furnished by Seller hereunder. Purchaser
shall have the right to disclose Information of Seller with
respect to the Assets to potential lenders and their
respective representatives in connection with financing the
transactions contemplated by this Agreement and to third
parties in connection with planning for operations of the
Assets following the Closing, provided that any such
disclosure is made pursuant to confidentiality obligations
equivalent to those provided in this Section 13.06; provided,
further, if such third parties are involved in the energy
industry then Purchaser shall not disclose information of
Seller to such Persons without the written consent of Seller
which shall not be unreasonably withheld. In the event the
transactions contemplated hereby are not consummated, upon the
request of the other party, each party hereto will, and will
cause its Affiliates and their respective Representatives to,
promptly (and in no event later than five (5) Business Days
after such request) redeliver or cause to be redelivered all
copies of confidential documents and information furnished by
the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based
thereon prepared by the party furnished such documents and
information or its Representatives.
13.07 Waiver
Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any
term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of
the same or any other term or condition of this Agreement on
any future occasion. All remedies, either under this Agreement
or by Law or otherwise afforded, will be cumulative and not
alternative.
13.08 Amendment
This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by or on behalf of
each party hereto.
13.09 No Third Party Beneficiary
The terms and provisions of this Agreement are intended
solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the
intention of the parties to confer third party beneficiary
rights upon any other Person other than any Person entitled to
indemnity under Article X.
13.10 No Assignment; Binding Effect
Neither this Agreement nor any right, interest or
obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto
and any attempt to do so will be void, except (a) for
assignments and transfers by operation of Law, (b) that Seller
may assign its rights, interests or obligations hereunder, in
whole or in part, to an Affiliate, and (c) that Purchaser may
assign any or all of its rights, interests and obligations
hereunder (including without limitation, its rights under
Article X) to (i) a direct or indirect wholly-owned
subsidiary, provided that any such subsidiary agrees in
writing to be bound by all of the terms, conditions and
provisions contained herein (in which event, from the date of
such assignment and subject to the other provisions of this
Section 13.10, such assignee shall be the Purchaser for the
purposes of this Agreement), or (ii) any lender providing
purchase money or other financing to Purchaser from time to
time as collateral security for such financing, but no such
assignment referred to in clauses (b) or (c) shall relieve the
assigning party of its obligations hereunder provided that no
such assignment by Seller or Purchaser adversely affects the
availability or timing of any Federal, state or local
government consent or approval required for the consummation
of the transactions contemplated hereby. Subject to the
preceding sentence, this Agreement is binding upon, inures to
the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.
13.11 Headings
The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit
the provisions hereof. Neither party shall be deemed to have
been the drafter of this Agreement, which is the product of
detailed, arm's-length negotiations between the parties and
their respective counsel.
13.12 Invalid Provisions
If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law, and
if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part
hereof, (c) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by
the illegal, invalid or unenforceable provision or by its
severance herefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically as
a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
13.13 Governing Law
This Agreement shall be governed by and construed in
accordance with the Laws of the State of New York applicable
to a contract executed and performed in such State, without
giving effect to the conflicts of laws principles thereof.
13.14 Counterparts
This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but
all of which together will constitute one and the same
instrument.
13.15 Consent to Assignment
Seller agrees to consent, effective as of the closing
under the MPC Purchase Agreement, to the assignment by MPC to
Purchaser of MPC's rights and obligations under the Power
Sales Agreement dated October 1, 1989, as amended, between
Seller and MPC, provided that the terms of such assignment are
reasonably satisfactory to Seller.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the duly authorized officer of each party as
of the date first above written.
PP&L GLOBAL, INC.
By: /s/ PAUL T. CHAMPAGNE
Name: Paul T. Champagne
Title: Vice President
PUGET SOUND ENERGY, INC.
By: /s/ STEVE MCKEON
Name: Stephen A. McKeon
Title: Vice President
<PAGE>
Schedule I
Pre-Closing Known Remedial Liabilities
Hazardous contamination identified in the report entitled
Phase II Investigation dated August 1998 for the Colstrip
Project prepared for Montana Power Company by Pilko &
Associates, Inc.
<PAGE>
EXHIBIT A
GENERAL ASSIGNMENT AND BILL OF SALE
THIS GENERAL ASSIGNMENT AND BILL OF SALE is entered into
this ____ day of ________, [1999] by and between [PP&L Global,
Inc.], a Pennsylvania corporation ("Purchaser"), and Puget
Sound Energy, Inc., a Washington corporation ("Seller").
WHEREAS, Purchaser and Seller have entered into an Asset
Purchase Agreement, dated as of October __, 1998 (the "Asset
Purchase Agreement"; capitalized terms not defined herein
shall have the meanings ascribed to them in the Asset Purchase
Agreement), pursuant to which Seller has agreed to sell,
transfer, convey, assign and deliver to Purchaser and
Purchaser has agreed to purchase and acquire from Seller the
PSE Colstrip Interests and certain other assets of Seller used
or held for use principally in connection with the operation
of the PSE Colstrip Interests, and Purchaser has agreed, in
partial consideration therefor, to assume certain obligations
in connection therewith by executing an Assumption Agreement
of even date herewith;
WHEREAS, Seller desires to transfer and assign to
Purchaser the assets described below pursuant to Section 1.05
of the Asset Purchase Agreement and Purchaser desires to
accept the sale, transfer, conveyance, assignment and delivery
thereof;
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein and other good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, Seller hereby irrevocably sells, transfers,
conveys, assigns and delivers to Purchaser all of Seller's
right, title and interest in, to and under the Assets, free
and clear of all Liens except Permitted Liens (as such term is
defined in the Asset Purchase Agreement with respect to
periods after the Closing Date), TO HAVE AND TO HOLD the same
unto Purchaser, its successors and assigns, forever.
Purchaser hereby accepts the sale, transfer, conveyance,
assignment and delivery of the Assets. Notwithstanding
anything herein to the contrary, the Excluded Assets are
specifically excluded from the Assets and shall be retained by
Seller at and following the Closing Date.
At any time or from time to time after the date hereof,
at Purchaser's request and without further consideration,
Seller shall execute and deliver to Purchaser such other
instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take
such other actions as Purchaser may reasonably deem necessary
or desirable in order more effectively to transfer, convey and
assign to Purchaser, and to confirm Purchaser's title to, all
of the Assets, and, to the full extent permitted by Law, to
put Purchaser in actual possession and operating control of
the Assets and to assist Purchaser in exercising all rights
with respect thereto.
Seller hereby constitutes and appoints Purchaser the true
and lawful attorney of Seller, with full power of
substitution, in the name of Seller or Purchaser, but on
behalf of and for the benefit of Purchaser: (i) to demand and
receive from time to time any and all of the Assets and to
make endorsements and give receipts and releases for and in
respect of the same and any part thereof; (ii) to institute,
prosecute, compromise and settle any and all Actions or
Proceedings that Purchaser may deem proper in order to
collect, assert or enforce any claim, right or title of any
kind in or to the Assets; (iii) to defend or compromise any or
all Actions or Proceedings in respect of any of the Assigned
Assets; and (iv) to do all such acts and things in relation to
the matters set forth in the preceding clauses (i) through
(iii) as Purchaser shall deem desirable. Seller hereby
acknowledges that the appointment hereby made and the powers
hereby granted are coupled with an interest and are not and
shall not be revocable by it in any manner or for any reason.
Purchaser shall indemnify and hold harmless Seller and its
officers, directors, employees, agents and Affiliates from any
and all Losses caused by or arising out of any breach of Law
by Purchaser in its exercise of the aforesaid powers.
This General Assignment and Bill of Sale may be executed
in any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and
the same instrument.
This General Assignment and Bill of Sale and all of the
provisions hereof shall be binding upon and shall inure to the
benefit of the respective parties and their assigns,
transferees and successors.
This General Assignment and Bill of Sale shall be
governed by and construed in accordance with the laws of the
State of New York applicable to a contract executed and
performed in such State without giving effect to the conflicts
of laws principles thereof, except that if it is necessary in
any other jurisdiction to have the law of such other
jurisdiction govern this General Assignment and Bill of Sale
in order for this General Assignment and Bill of Sale to be
effective in any respect, then the laws of such other
jurisdiction shall govern this General Assignment and Bill of
Sale to such extent.
This General Assignment and Bill of Sale is delivered
pursuant to and is subject to the Asset Purchase Agreement.
In the event of any conflict between the terms of the Asset
Purchase Agreement and the terms of this General Assignment
and Bill of Sale, the terms of the Asset Purchase Agreement
shall prevail.
IN WITNESS WHEREOF, the undersigned have caused their
duly authorized officers to execute this General Assignment
and Bill of Sale on the day and year first above written.
[PP&L GLOBAL, INC.]
By:____________________________
Name:
Title:
PUGET SOUND ENERGY, INC.
By:____________________________
Name:
Title:
<PAGE>
EXHIBIT B
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT is entered into this ____ day
of _______, [1999] by and between [PP&L Global, Inc.], a
Pennsylvania corporation ("Purchaser"), and Puget Sound
Energy, Inc., a Washington corporation ("Seller").
WHEREAS, Purchaser and Seller have entered into an Asset
Purchase Agreement, dated as of October __, 1998 (the "Asset
Purchase Agreement"; capitalized terms not defined herein
shall have the meanings ascribed to them in the Asset Purchase
Agreement), pursuant to which Seller has agreed to sell,
transfer, convey, assign and deliver to Purchaser and
Purchaser has agreed to purchase from Seller the PSE Colstrip
Interests and certain other assets of Seller used or held for
use principally in connection with the operation of the PSE
Colstrip Interests, and Purchaser has agreed, in partial
consideration therefor, to assume certain obligations in
connection therewith by executing this Assumption Agreement;
WHEREAS, pursuant to Section 1.05 of the Asset Purchase
Agreement, Purchaser is required to execute and deliver to
Seller this Agreement whereby Purchaser assumes the Assumed
Liabilities;
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein and other good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, Purchaser hereby undertakes and agrees from and
after the date hereof, subject to the limitations contained
herein, to assume and to pay, perform and discharge when due
the Assumed Liabilities.
Nothing contained herein shall require Purchaser to pay
or discharge any debts or obligations expressly assumed hereby
so long as Purchaser shall in good faith contest or cause to
be contested the amount or validity thereof.
Except for the Assumed Liabilities, Purchaser assumes no
debt, liability or obligation of Seller, including without
limitation the Retained Liabilities, by this Assumption
Agreement, and it is expressly understood and agreed that all
debts, liabilities and obligations not assumed hereby by
Purchaser shall remain the sole obligation of Seller, its
successors and assigns.
No Person other than Seller, its successors and assigns
shall have any rights under this Assumption Agreement or the
provisions contained herein.
This Assumption Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but
all of which together will constitute one and the same
instrument.
This Assumption Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the
respective parties and their assigns, transferees and
successors.
This Assumption Agreement shall be governed by and
construed in accordance with the laws of the State of New York
applicable to a contract executed and performed in such State
without giving effect to the conflicts of laws principles
thereof, except that if it is necessary in any other
jurisdiction to have the law of such other jurisdiction govern
this Assumption Agreement in order for this Assumption
Agreement to be effective in any respect, then the laws of
such other jurisdiction shall govern this Assumption Agreement
to such extent.
This Assumption Agreement is delivered pursuant to and is
subject to the Asset Purchase Agreement. In the event of any
conflict between the terms of the Asset Purchase Agreement and
the terms of this Assumption Agreement, the terms of the Asset
Purchase Agreement shall prevail.
IN WITNESS WHEREOF, the undersigned have caused their
duly authorized officers to execute this Assumption Agreement
on the day and year first above written.
[PP&L GLOBAL, INC.]
By:____________________________
Name:
Title:
PUGET SOUND ENERGY, INC.
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT C
POLLUTION CONTROL FACILITIES
1. POLLUTION CONTROL EQUIPMENT
Scrubber System
The air pollution control facilities employed on Units #3 and
#4 consist of a complete scrubber system, including duct work,
plenums, scrubber vessels, reheaters and induced draft fans,
together with infrastructures, monitoring and electrical
controls and instrumentation therefore, for the purpose of
removing the sulfur dioxide (SO2) and particulate matter from
the flue gas. The scrubber system also includes a scrubber
maintenance facility, including a machine shop and laboratory
dedicated to the scrubber system and an environment monitoring
laboratory for the pollution control facilities. The scrubber
system utilizes the Wet Venturi Principle and consists of
eight modules for each unit through which the steam generator
gases from the burned coal must pass.
The gases in the scrubber are contacted with finely atomized
scrubber slurry. Within the stated performance of the system,
fly ash particulates are removed by the slurry droplets. The
sulfur dioxide reacts with the alkali contained in the slurry
which results from the mixing of water, fly ash particulates,
hydrated high calcium lime and hydrated dolomitic lime. A
major portion of the sulfur dioxide is converted to solid
sulfate compounds which are retained in the scrubber liquid
and can, therefore, be piped to and deposited in an ash pond
together with the particulate.
After the flue gas passes through the venturi section,
absorption sprays and wash trays, it is processed through a
demister which removes any entrained slurry and is then
reheated and discharged through the stack.
The slurry system in the Units #3 and #4 scrubber system
consists of recycle tanks, regenerators, agitators, pumps and
pipelines. The slurry from the Units #3 and #4 scrubber system
is transported to an effluent holding pond and involves the
use of effluent holding tanks, agitators, pumps and pipelines.
A separate wash tray pond System is used to store the
suspended solids collected from the wash tray system.
Reclaimed water from the clear water section of these ponds is
circulated back to the scrubber system.
Lime Storage
The sole purpose of the lime system is to supply the lime
slurry requirements of the scrubber regeneration system. There
is one lime system that serves the sixteen scrubbers for Units
#3 and #4. Major components of the system include four
slakers, in which calcined high calcium lime is reacted with
water to produce a hydrated lime slurry, slurry transfer
tanks, where the slurry is diluted with water and mixed with
dry hydrated dolomitic lime, slurry feed storage tanks, where
the slurry will be held for use by the regenerators as needed,
hydrators, for mixing calcined dolomitic lime with water, and
agitators.
Scrubber Sludge Disposal
Effluent slurry is pumped from the plant to the sludge
disposal pond located approximately three miles southeast of
the plant. The suspended solids settle to the pond bottom and
the clear water is pumped back to the plant.
There are two phases in the development of this pond. The
first phase requires the construction of one dam 108 feet high
and 1,100 feet in length. A saddle dam must also be added. The
saddle dam will vary in height with a maximum height for this
phase of 36 feet and be approximately 2,800 feet in length.
The capacity of Phase I will be 6,650 acre-feet and it will
last approximately 10 years.
The development of the second phase will require that the
original dam be raised to 138 feet in height and increased to
a length of 2,500 feet. The saddle dam will be raised to a
maximum height of 66 feet and a total length of 3,500 feet.
The capacity of the second phase will be an additional 7,000
acre-feet and it will last approximately 12 years, for a total
life of 22 years.
The sludge disposal pond design takes into account a permit
requirement for minimum seepage, by providing low permeability
plastic concrete filled trenches around the periphery of the
pond constructed during the course of Phase I work.
Coal Dust Control System
The coal dust control system is designed to collect, store and
treat coal dust resulting from mining, crushing, handling and
storing coal in the course of normal Units #3 and #4
operations. To control coal dust air pollution the points
where coal is transferred between conveyors or placed in coal
piles have been enclosed. The coal transfer stations between
conveyors are enclosed with steel framed structures with metal
siding. The structures are equipped with vacuum filtration
systems, consisting of ducts, blowers, dust removal filters
and associated equipment, to remove coal dust from exhaust air
from the structures, and are also equipped with mechanical
dust collectors. The mainline 45,000 ton coal storage pile is
enclosed with a 340' long A-frame precast panel concrete
structure designed to contain coal dust, thereby allowing its
removal and treatment.
Cooling Tower Drift Containment Control Facility
Operation of the cooling towers produces exhaust air emissions
containing circulating water, particulates and other
pollutants generally known as cooling tower drift. To control
release of these air pollutants, the cooling towers are
provided with high efficiency drift eliminators, located at
the top of the cooling tower structures, which remove drift
from the cooling tower exhaust air.
2. SOLID WASTE DISPOSAL
Bottom Ash Disposal
The function of the bottom ash disposal system is to remove
accumulations of furnace bottom ash, pulverizer pyrites,
economizer ash, and air preheater fly ash by means of a water-
ash slurry to a disposal pond located approximately 2,000 feet
southeast of the plant site. The system consists generally of
three sets of fly ash hoppers, (economizer, air heater, and
flue gas duct hoppers) pyrite hoppers, the bottom ash hopper,
an 18,000 gallon transfer tank, a settling pond, a clear water
pond and various pumps, and pipelines.
Clinker grinders are used to grind the bottom ash which is
then mixed with water and sluiced to the ash transfer tank.
The economizer ash collected in economizer hoppers falls by
gravity to the ash transfer tank.
The pyrites are collected in local tanks and sluiced to the
ash transfer tank.
Ash collected in the flue gas duct hoppers and air preheater
hoppers is sluiced to the ash transfer tank.
These ashes are pumped from the ash transfer tank to the
bottom ash pond. Reclaimed water is returned from the bottom
ash disposal pond and redistributed to the various sections of
the bottom ash disposal system.
3. WATER POLLUTION CONTROL
North Plant Sediment Pond
The north plant sediment pond is designed to collect and store
the storm runoff from the general north plant area. These
waters are retrained in the pond, allowing natural evaporation
to desiccate the pond. This prevents high quantities of
suspended solids from being discharged to Armells Creek or
other state surface waters.
North Plant Area Drainage System
The north plant area drainage system is designed to collect
and store storm runoff from the water treatment building, fuel
oil handling area and the cooling tower area in the north
plant area drain pond. The pond also serves as a storage
facility for one cooling tower basin drain, cooling tower
overflow, water treatment filter backwash, and for the cooling
tower blowdown water not used in the flue gas scrubbing
process. These waters are potentially contaminated with oil
and high suspended and dissolved solids and this system stores
these discharges preventing any discharge to Armells Creek or
other state surface waters. The north plant area drainage
system consists of collection basins, piping, concrete
culverts, yard drains, manholes and special yard gradings
(berms) which route these discharges to the north plant area
sump and north plant area drain pond. The north plant area
drain pond incorporates a hypalon liner to comply with a
permit requirement for minimum seepage. The oil separator
section of the sump receives oily surface collection drains.
The oil and water are separated. The oil from the sump is
then trucked away for disposal.
The water discharges are either pumped to the scrubber
effluent holding pond via a 6" diameter pipeline, 19,000 feet
in length for evaporation, to the circulating water system, or
to the plant oily waste sump as appropriate. Each discharge
arrangement has its own set of sump pumps.
Chemical and Oily Waste System
The chemical and oily waste system is designed to collect,
store, treat and dispose of chemical and oily wastes resulting
from the normal operation of Units #3 and #4. This system
consists of drains and pipes, oil separators, chemical waste
sumps, chemical waste neutralizing tanks, neutralizing
chemical storage tanks, chemical inspection equipment, and
associated mechanical and electrical control equipment.
The chemical waste drainage system includes drains and
neutralization tanks for collection and treatment of chemical
waste. Chemical waste drains are located throughout Units #3
and #4, and are used to collect and transfer chemical waste to
holding sumps and neutralization tanks. The neutralization
equipment includes chemical storage and injection equipment as
well as controls and instrumentation.
The oily waste drainage system is made up of a network of
drains which connect oily waste from throughout Units #3 and
#4, and dispose of the wastes in the Units #3 and #4 main
water-oil sump. Oil separation chambers in the sump allow for
oil removal. The treated water is monitored for trace oil
levels and released. After separation, the waste oil is
removed by a contractor to an offsite disposal area.
Cooling Tower Blowdown System
The cooling tower blowdown system consists of a 6" pipeline
from the cooling tower to the waste disposal pond where the
blowdown is treated by settlement and evaporation in
accordance with water pollution control requirements.
Groundwater Monitoring Wells
Groundwater monitoring wells have been installed around the
various ponds associated with the plant operation. These ponds
include the scrubber effluent holding pond, the scrubber drain
pond, the scrubber wash tray pond, the bottom ash pond, and
the north plant area effluent pond. These groundwater
monitoring wells provide the ability through sampling to
detect and quantify accidental discharges from the above
mentioned plant storage and waste ponds. This is necessary to
show compliance with State Groundwater Standards and with
permit requirements for minimum seepage.
<PAGE>
EXHIBIT D
PUGET SOUND ENERGY, INC.
Officer's Certificate
Puget Sound Energy, Inc., a Washington corporation
("Seller"), pursuant to Section 6.03 of the Asset Purchase
Agreement dated as of October __, 1998 (the "Asset Purchase
Agreement"; capitalized terms not defined herein shall have
the meanings ascribed to them in the Asset Purchase Agreement)
between PP&L Global, Inc., a Pennsylvania corporation, and
Seller, HEREBY CERTIFIES that:
(1) The representations and warranties made by Seller in
the Asset Purchase Agreement, taken as a whole, are true and
correct, in all material respects, on and as of the date
hereof as though made on and as of the date hereof or, in the
case of representations and warranties made by Seller as of a
specified date earlier than the date hereof, on and as of such
earlier date.
(2) The agreements, covenants and obligations required
by the Asset Purchase Agreement to be performed or complied
with by Seller at or before the Closing have been duly
performed or complied with in all material respects.
IN WITNESS WHEREOF, Seller has caused this Certificate to
be executed on its behalf by the undersigned on and as of the
____ day of ______, 1999.
PUGET SOUND ENERGY, INC.
By:_____________________
Name:
Title:
<PAGE>
EXHIBIT E
PUGET SOUND ENERGY, INC.
[Assistant] Secretary's Certificate
I, __________, [Assistant] Secretary of Puget Sound
Energy, Inc., a Washington corporation ("Seller"), pursuant to
Section 6.03 of the Asset Purchase Agreement dated as of
October __, 1998 (the "Asset Purchase Agreement") between PP&L
Global, Inc., a Pennsylvania corporation, and Seller, DO
HEREBY CERTIFY on behalf of Seller as follows:
(1) Attached hereto as Exhibit A is a true, complete and
correct copy of the Restated Articles of Incorporation of
Seller and all amendments thereto (as so amended, the
"Articles of Incorporation"), and no amendment to the Articles
of Incorporation has been authorized or become effective since
the date of the last of such amendments, no amendment or other
document relating to or affecting the Articles of
Incorporation has been filed in the office of the Secretary of
State of the State of Washington since such date and no action
has been taken by Seller, its shareholders, directors or
officers in contemplation of the filing of any such amendment
or other document or in contemplation of the liquidation or
dissolution of Seller.
(2) Attached hereto as Exhibit B is a true, complete and
correct copy of the Bylaws of Seller, inclusive of all
amendments thereto as in full force and effect on the date
hereof and at all times since [date of last amendment].
(3) Attached hereto as Exhibit C is a true, complete and
correct copy of resolutions adopted by the Board of Directors
of Seller with respect to the Asset Purchase Agreement and the
Operative Agreements to which it is a party and the
transactions contemplated thereby, which resolutions were duly
and validly adopted at a meeting of the Board of Directors of
Seller on __________, 1998, at which a quorum was present and
acting throughout. All such resolutions are in full force and
effect on the date hereof in the form in which adopted and no
other resolutions have been adopted by the Board of Directors
of Seller or any committee thereof relating to the Asset
Purchase Agreement and the Operative Agreements to which it is
a party and the transactions contemplated thereby.
(4) Each of the following named individuals is a duly
elected or appointed, qualified and acting officer of Seller
who holds, and at all times since October __, 1998 [date of
execution of Asset Purchase Agreement] has held, the offices
set opposite such individual's name, and the signature written
opposite the name and title of such officer is such officer's
genuine signature:
[Name] [Title] ______________________________
[Name] [Title] ______________________________
[Name] [Title] ______________________________
[Name] [Title] ______________________________
IN WITNESS WHEREOF, Seller has caused this Certificate to
be executed on its behalf by the undersigned on and as of the
____ day of ________, [1999].
PUGET SOUND ENERGY, INC.
By:_______________________
Name:
Title:
I, __________, [title of officer] of Seller, DO HEREBY
CERTIFY on behalf of Seller that __________ is the duly
elected or appointed, qualified and acting [Assistant]
Secretary of Seller, and the signature set forth above is the
genuine signature of such officer.
_________________________
Name:
Title:
_______ __, [1999]
<PAGE>
EXHIBIT G-1
Opinion of Counsel to Seller
(1) Seller is a corporation organized, existing and in
good standing under the laws of the State of Washington and
each state or other jurisdiction in which it is qualified to
do business as a foreign corporation by virtue of owning the
Assets or the PSE Colstrip Interests, and Seller has the
corporate power and authority to execute and deliver the Asset
Purchase Agreement and the Operative Agreements and to
consummate the transactions contemplated thereby; and the
execution and delivery of the Asset Purchase Agreement and the
Operative Agreements and the consummation of the sale of the
Assets contemplated thereby have been duly authorized by all
requisite corporate action taken on the part of Seller;
(2) the Asset Purchase Agreement and the Operative
Agreements have been duly executed and delivered by Seller and
(assuming that the Seller Required Regulatory Approvals and
the Purchaser Required Regulatory Approvals are obtained) are
valid and binding obligations of Seller, enforceable against
Seller in accordance with their terms;
(3) the execution, delivery and performance of the Asset
Purchase Agreement and the Operative Agreements by Seller will
not constitute a violation of the Restated Articles of
Incorporation or Bylaws, as currently in effect, of Seller;
(4) the General Assignment and Bill of Sale and other
documents described in Section 1.05(a) are in proper form to
transfer to Purchaser title to the Assets; and
(5) 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 Closing other than (i) the Seller Required
Regulatory Approvals, all of which have been obtained and are
Final Orders and (ii) such declarations, filings,
registrations, notices, authorizations, consents or approvals
which if not obtained or made, would not, in the aggregate,
have a Seller Material Adverse Effect.
<PAGE>
EXHIBIT G-2
Opinion of Outside Montana Counsel to Seller
(1) The Agreement and the Operative Agreements to which
Seller is a party and which by its terms are governed by
Montana Law have been duly and validly executed and delivered
by Seller and, subject to receipt of Seller Required
Regulatory Approvals, Purchaser Required Regulatory Approvals
and third party consents specified in Section 6.07 of the
Disclosure Schedules and Section 6.07 of the Agreement, are
legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their terms, except as the
same may be limited by bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar Laws relating to or
affecting the rights of creditors generally, and except as the
enforceability of the Purchase Agreement is subject to the
application of general principles of equity (regardless of
whether considered in a proceeding in equity or at law),
including without limitation (i) the possible unavailability
of specific performance, injunctive relief or any other
equitable remedy and (ii) concepts of materiality,
reasonableness, good faith and fair dealing;
(2) The Assignment Instruments which by their terms are
governed by Montana Law are in proper form and are effective
to transfer to Purchaser title to the Assets; and
(3) Except for Seller Required Regulatory Approvals, no
consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority on the part of Seller is
required in connection with the execution, delivery and
performance of the Agreement or any of the Operative
Agreements to which it is a party or the consummation of the
transactions contemplated thereby, except those as would be
required solely as a result of the identity or the legal or
regulatory status of Purchaser or any of its Affiliates.
As to any matter contained in such opinion which involves
the laws of any jurisdiction other than the federal laws of
the United States or the laws of the State of Montana, such
counsel may, in lieu of rendering an opinion as to such
matter, deliver the opinions of counsel admitted in such other
jurisdictions. Such opinions may expressly rely as to matters
of fact upon certificates furnished by Seller and appropriate
officers and directors of Seller and by public officials.
Capitalized terms used but not defined herein shall have the
respective meanings given to such terms in the Purchase
Agreement.
<PAGE>
EXHIBIT H
PP&L GLOBAL, INC.
Officer's Certificate
PP&L Global, Inc., a Pennsylvania corporation
("Purchaser"), pursuant to Section 7.03 of the Asset Purchase
Agreement dated as of October __, 1998 (the "Asset Purchase
Agreement"; capitalized terms not defined herein shall have
the meanings ascribed to them in the Asset Purchase Agreement)
between Purchaser and Puget Sound Energy, Inc., a Washington
corporation, HEREBY CERTIFIES that:
(1) The representations and warranties made by Purchaser
in the Asset Purchase Agreement, taken as a whole, are true
and correct in all material respects on and as of the date
hereof as though made on and as of the date hereof.
(2) The agreements, covenants and obligations required
by the Asset Purchase Agreement to be performed or complied
with by Purchaser at or before the Closing have been duly
performed or complied with in all material respects.
IN WITNESS WHEREOF, Purchaser has caused this Certificate
to be executed on its behalf by the undersigned on and as of
the ____ day of ________, [1999].
PP&L GLOBAL, INC.
By:______________________
Name:
Title:
<PAGE>
EXHIBIT I
PP&L GLOBAL, INC.
[Assistant] Secretary's Certificate
I, __________, [Assistant] Secretary of PP&L Global,
Inc., a Pennsylvania corporation ("Purchaser"), pursuant to
Section 7.03 of the Asset Purchase Agreement dated as of
October __, 1998 (the "Asset Purchase Agreement") between
Purchaser and Puget Sound Energy, Inc., a Washington
corporation, DO HEREBY CERTIFY on behalf of Purchaser as
follows:
(1) Attached hereto as Exhibit A is a true, complete and
correct copy of the [Restated] Articles of Incorporation of
Purchaser and all amendments thereto (as so amended, the
"Articles of Incorporation"), and no amendment to the Articles
of Incorporation has been authorized or become effective since
the date of the last of such amendments, no amendment or other
document relating to or affecting the Articles of
Incorporation has been filed in the office of the Secretary of
State of the Commonwealth of Pennsylvania since such date and
no action has been taken by Purchaser, its stockholders,
directors or officers in contemplation of the filing of any
such amendment or other document or in contemplation of the
liquidation or dissolution of Purchaser.
(2) Attached hereto as Exhibit B is a true, complete and
correct copy of the By-Laws of Purchaser, inclusive of all
amendments thereto, as in full force and effect on the date
hereof and at all times since [date of last amendment].
(3) Attached hereto as Exhibit C is a true, complete and
correct copy of resolutions adopted by the Board of Directors
of Purchaser and PP&L Resources, Inc. ("Parent") with respect
to the Asset Purchase Agreement and the Operative Agreements
to which Purchaser is a party and the transactions
contemplated thereby, which resolutions were duly and validly
adopted at a meeting of the Board of Directors of Purchaser on
__________, 1998, and a meeting of the Board of Directors of
Parent on ________, 1998 at each of which a quorum was present
and acting throughout. All such resolutions are in full force
and effect on the date hereof in the form in which adopted and
no other resolutions have been adopted by the Board of
Directors of Purchaser or any committee thereof or the Board
of Directors of Parent or any committee thereof relating to
the Asset Purchase Agreement and the Operative Agreements to
which it is a party and the transactions contemplated thereby.
(4) Each of the following named individuals is a duly
elected or appointed, qualified and acting officer of
Purchaser who holds, and at all times since October __, 1998
[date of execution of Asset Purchase Agreement] has held, the
office set opposite such individual's name, and the signature
written opposite the name and title of such officer is such
officer's genuine signature:
[Name] [Title] ________________________________
[Name] [Title] ________________________________
[Name] [Title] ________________________________
IN WITNESS WHEREOF, Purchaser has caused this Certificate
to be executed on its behalf by the undersigned on and as of
the ____ day of ________, [1999].
PP&L GLOBAL, INC.
By:________________________
Name:
Title:
I, __________, [title of officer] of Purchaser, DO HEREBY
CERTIFY on behalf of Purchaser that __________ is the duly
elected or appointed, qualified and acting [Assistant]
Secretary of Purchaser, and the signature set forth above is
the genuine signature of such officer.
_________________________
Name:
Title:
_________ __, [1999]
<PAGE>
EXHIBIT J
Opinion of Counsel to Purchaser
(1) Purchaser is a corporation organized, existing and
in good standing under the laws of the Commonwealth of
Pennsylvania, and has the corporate power and authority to
execute and deliver the Asset Purchase Agreement and the
Operative Agreements and to consummate the transactions
contemplated thereby; and the execution and delivery of the
Asset Purchase Agreement and the Operative Agreements and the
consummation of the sale and purchase of the Assets
contemplated thereby have been duly authorized by all
requisite corporate action taken on the part of the Purchaser;
(2) the Asset Purchase Agreement and the Operative
Agreements have been duly executed and delivered by Purchaser
and (assuming that the Seller Required Regulatory Approvals
and the Purchaser Required Regulatory Approvals are obtained)
are valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their
terms;
(3) the execution, delivery and performance of the Asset
Purchase Agreement and the Operative Agreements by Purchaser
will not constitute a violation of the Certificate of
Incorporation or Bylaws (or other similar governing
documents), as currently in effect, of the Purchaser;
(4) the Assumption Agreement and other instruments
described in Section 1.05(b) are in proper form and are
effective for Purchaser to assume the Assumed Liabilities; and
(5) no declaration, filing or registration with, or
notice to, or authorization, consent or approval of any
governmental authority is necessary for the consummation by
Purchaser of the Closing other than (i) the Purchaser Required
Regulatory Approvals, all of which have been obtained and are
Final Orders and (ii) such declarations, filings,
registrations, notices, authorizations, consents or approvals
which if not obtained would not prevent the payment by
Purchaser of the Purchase Price.
<PAGE>
Exhibit 10(f)
EQUITY CONTRIBUTION AGREEMENT
This EQUITY CONTRIBUTION AGREEMENT (this "Agreement") dated
as of November 1, 1998 by and among PP&L Global, Inc.
("Purchaser"), PP&L Resources, Inc. ("Parent"), and Puget Sound
Energy, Inc., ("Seller").
R E C I T A L S
WHEREAS, Purchaser and Seller are parties to that certain
Asset Purchase Agreement, dated as of the date hereof (the
"Purchase Agreement");
WHEREAS, Purchaser is directly wholly-owned by Parent;
NOW, THEREFORE, in consideration of the premises and as an
inducement for Seller to enter into the Purchase Agreement, the
parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein and
not otherwise defined herein shall have the respective meanings
given to them in the Purchase Agreement.
Section 2. Equity Contribution.
(a) Seller may, in its sole discretion and without
the concurrence of Purchaser or any of its Affiliates, give
written notice to be received by Parent (i) on a date that is
six (6) Business Days prior to the Closing Date (the "Notice
Date"), which notice shall certify that, as of the Notice Date,
the Puget Conditions are satisfied and that, if the Closing were
to occur on the Notice Date, Seller would be prepared to satisfy
the conditions to Closing that are solely within the control of
Seller; and (ii) on a date that is six (6) Business Days prior
to the Closing Date under the PGE Purchase Agreement (as the
term "Closing Date" is defined under such Agreement) (an
"Additional Notice Date"), which notice shall certify that
Seller has been notified by PGE that, as of any Additional
Notice Date, the PGE Conditions are satisfied and that, if the
Closing were to occur on such Additional Notice Date, PGE would
be prepared to satisfy the conditions to Closing that are solely
within the control of PGE. Parent hereby irrevocably promises
and agrees that, upon receipt of the notice referred to in
clause (i) of the preceding sentence, Parent will make or cause
to be made on the date of the Closing, a contribution in
immediately available funds to Purchaser in the amount of the
Base Purchase Price plus, in the event that the notice referred
to in clause (i) states that the PGE Conditions are satisfied,
the Combined Payment Amount, adjusted to take into account
additional Excluded Assets, if any, pursuant to Section 1.10 of
the Purchase Agreement and that, upon receipt of any notice
referred to in clause (ii) of the preceding sentence, Parent
will, unless theretofore paid, make or cause to be made on the
date of the Closing under the PGE Purchase Agreement a
contribution in immediately available funds in the amount of the
the Combined Payment Amount, as applicable pursuant to Section
1.05 of the Purchase Agreement (the amount required to be
contributed by Parent pursuant to each individual notice
referred to in clauses (i) and (ii) of the preceding sentence is
sometimes hereinafter referred to as the "Required Contribution
Amount").
(b) If Purchaser breaches its obligation to effect
the Closing as and when required by the Purchase Agreement (or
any Closing under the MPC Purchase Agreement or the PGE Purchase
Agreement as and when required under such agreements), and, if
as a result thereof, Purchaser is the subject of a final and
binding order of a court of competent jurisdiction obligating it
to pay any damages, costs, and expenses incurred by Seller (a
"Liability"), Seller may, in its sole discretion and without the
concurrence of Purchaser or any of its Affiliates, give written
notice to Parent that such Liability was incurred. Parent
irrevocably promises and agrees that it shall make or cause to
be made a contribution in immediately available funds to
Purchaser within five (5) Business Days after receipt of such
notice in an amount sufficient for Purchaser to fully satisfy
and discharge such Liability up to but not to exceed the
applicable Required Contribution Amount.
(c) If a court of competent jurisdiction enters a
final and binding order to the effect that Seller was not
entitled to give any notice provided for in subsection (a) or
(b) hereof, then Seller shall be liable to pay Parent, as
liquidated damages and in full satisfaction of any claim of
Purchaser or any of its Affiliates arising out of such notice or
order insofar as such order relates to Seller giving such
notice, an amount equal to the documented out-of-pocket costs of
Parent (including, without limitation, Parent's cost of capital
after giving effect to related income taxes) incurred in
connection with Parent's contribution (or arrangements made to
cause such contribution) to Purchaser as a result of such
wrongful notice by Seller.
(d) Notwithstanding any other provision of this
Agreement to the contrary, Parent shall have no obligation to
make or cause to be made any contribution to Purchaser under
this Agreement to the extent its aggregate contributions to
Purchaser made or cause to be made as a result of a notice given
by Seller hereunder or otherwise contributed (provided such
funds have been segregated in accordance with Section 4
hereunder or are otherwise available for payment by Purchaser of
the Purchase Price under the Purchase Agreement) equal or exceed
the aggregate of the Required Contribution Amounts.
(e) Any payments made or caused to be made by Parent
directly to Seller in satisfaction of Parent's obligations to
make or cause to be made a contribution to Purchaser hereunder
shall be deemed to be on behalf of, and to satisfy the
obligations of, Purchaser to Seller under the Purchase Agreement
(to the extent of the amount paid or caused to be paid by
Parent).
(f) If, prior to receipt of a notice from Seller
requesting a contribution to Purchaser, Parent makes or causes
to be made a contribution to Purchaser as contemplated herein,
it shall promptly notify Seller in writing of such contribution,
which notice shall state that such contribution has been
segregated as provided in Section 4 herein.
(g) Upon written request of Seller given to Purchaser
at any time after Parent has made or caused to be made a
contribution to Purchaser contemplated herein, Purchaser agrees
to return such contribution to Parent.
(h) If, following the making by Parent of a Required
Contribution Amount hereunder, the Closing in respect of which
such contribution was made fails to occur as scheduled (other
than any such failure caused solely by a breach by Purchaser of
its obligation to effect such Closing), any funds so contributed
to Purchaser may be returned to Parent; provided, that this
Agreement shall continue in effect until termination in
accordance with the provisions of Section 5 hereof.
Section 3. Representations and Warranties.
(a) Parent and Purchaser represent and warrant to
Seller as follows:
(i) Each of Parent and Purchaser is a
corporation, duly organized, validly existing and in good
standing under the laws of Commonwealth of Pennsylvania and has
full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder.
(ii) The execution and delivery by each of Parent
and Purchaser of this Agreement, and the performance of its
obligations hereunder, have been duly authorized by all
necessary corporate action on the part of Parent and Purchaser,
as the case may be.
(iii) Each of Parent and Purchaser has duly
executed and delivered this Agreement. Assuming due
authorization, execution and delivery of this Agreement by
Seller, this Agreement constitutes the valid and binding
obligation of each of Parent and Purchaser, enforceable in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general applicability affecting the
enforcement of creditors' rights and the application of general
principles of equity.
(iv) All consents, authorizations and other
approvals of any governmental authority which are necessary for
the execution and delivery by each of Parent and Purchaser of
this Agreement and the performance by it of its obligations
hereunder have been obtained and are in full force and effect,
are final and not subject to any appeal.
(v) Execution, delivery and performance by
Parent of this Agreement will not conflict with or result in a
violation or default under any contract, agreement or order of
any court or regulatory authority binding upon Parent or any of
its Affiliates.
(b) Seller represents and warrants to Parent as
follows:
(i) Seller is a corporation, duly organized,
validly existing and in good standing under the laws of the
State of Washington, and has full corporate power and authority
to enter into this Agreement and to perform its obligations
hereunder.
(ii) The execution and delivery by Seller of this
Agreement, and the performance of its obligations hereunder,
have been duly authorized by all necessary corporate action on
the part of Seller.
(iii) Seller has duly executed and delivered this
Agreement. Assuming due authorization, execution and delivery
of this Agreement by Purchaser and Parent, this Agreement
constitutes the valid and binding obligation of Seller,
enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general
applicability affecting the enforcement of creditors' rights and
the application of general principles of equity.
(iv) All consents, authorizations and other
approvals of any governmental authority which are necessary for
the execution and delivery by Seller of this Agreement and the
performance by Seller of its obligations hereunder have been
obtained and are in full force and effect, are final and not
subject to any appeal.
(v) Execution, delivery and performance by Seller
of this Agreement will not conflict with or result in a
violation or default under any contract, agreement or order of
any court or regulatory authority binding upon Seller or any of
its Affiliates.
Section 4. Restriction on Use. Purchaser shall segregate
from its general funds any contributions made or caused to be
made by Parent hereunder and shall use such funds for the
purpose, and only for the purpose, of satisfying its obligations
to Seller under the Purchase Agreement. Such contributions
shall be placed in a segregated account at an independent
financial institution, the name of which account makes reference
to the restrictions contained herein.
Section 5. Termination. The obligations of Parent under
this Agreement shall terminate upon the earliest to occur of:
(a) contribution made or caused to be made by Parent
to Purchaser of an amount equal to or exceeding the aggregate of
the Required Contribution Amounts in response to notices given
by Seller hereunder or otherwise contributed (provided such
funds have been segregated in accordance with Section 4 or are
otherwise available for payment by Purchaser of the Purchase
Price under the Purchase Agreement and any necessary notice has
been given pursuant to Section 2(f));
(b) five (5) Business Days after notice of
termination of the Purchase Agreement is given pursuant to
Article XI thereof, unless prior to the close of business on the
fifth Business Day after such notice Parent receives written
notice from Purchaser or Seller that either of them in good
faith believes that the Purchase Agreement is still in full
force and effect or has been improperly terminated, and that
Seller is actively pursuing a Liability claim, in which case
this Agreement shall terminate upon the settlement or other
determination of such claim in accordance with Section 2(b)
hereof and the making or causing to be made of the required
contribution by Parent.
(c) the occurrence of the Closing under the Purchase
Agreement.
Section 6. Miscellaneous
(a) This Agreement shall be binding upon, shall inure
to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and permitted assigns.
In the event that Purchaser assigns its rights under the
Purchase Agreement to a special purpose corporation, then the
term "Purchaser" herein shall refer to such special purpose
corporation and Parent shall make or cause to be made its
required contribution hereunder directly to such special purpose
corporation. Seller shall be entitled to enforce the
obligations of Parent hereunder without the concurrence of
Purchaser and regardless of any claims by Purchaser against
Seller, including any claims under, or the satisfaction or non-
satisfaction of any obligations of Seller under, the Purchase
Agreement. Neither this Agreement nor any right hereunder may
be assigned by any party without the prior written consent of
the other parties hereto, which consent (except in the case of a
transfer by Parent of its obligations hereunder) shall not be
unreasonably withheld.
(b) This Agreement contains the entire understanding
of the parties with respect to the matters herein and supersedes
all prior agreements and understandings between the parties with
respect to the subject matter hereof.
(c) All notices and other communications required or
permitted by this Agreement or by law to be served upon or given
to a party hereto by any other party hereto shall be addressed
as provided in the Purchase Agreement and, if to Parent, to the
address for notices set forth beneath Parent's signature below.
(d) This Agreement may not be amended or otherwise
modified except by a written agreement signed by each party
hereto.
(e) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE LAWS OF THE NEW YORK EXCLUDING ITS
CONFLICTS OF LAWS PROVISIONS.
(f) If any provision of this Agreement shall be
unenforceable, void or otherwise contrary to law, such provision
shall in no manner operate to render any other provision of this
Agreement unenforceable, invalid or contrary to law, and this
Agreement shall continue to be operative and enforceable in
accordance with the remaining terms and provisions hereof.
(g) (1) The terms, conditions, covenants,
representations and warranties hereof may be waived only by a
written instrument executed by the party waiving compliance.
The failure of a party at any time or from time to time to
require performance of any provisions hereof shall in no manner
affect its rights at a later time to enforce the same. No
waiver by a party of any condition or any breach of term,
covenant, representation or warranty contained in this Agreement
in any one or more instances shall be deemed to be, or be
construed as, a further or continuing waiver of any such
condition or breach of any term, covenant, representation or
warranty.
(2) The term "Puget Conditions" means all
conditions to the obligations of Seller and Purchaser to
consummate the Closing as set forth in Articles VI and VII of
the Purchase Agreement (except those conditions solely within
the control of Seller or Purchaser). The term "MPC Conditions"
means all conditions to the obligations of MPC and Purchaser
under the MPC Purchase Agreement (except those conditions solely
within the control of MPC or Purchaser). The term "PGE
Conditions" means all conditions to the obligations of PGE and
Purchaser under the PGE Purchase Agreement (except those
conditions solely within the control of PGE or Purchaser).
(h) No person other than the parties hereto, or their
successors or permitted assigns shall have any rights hereunder.
<PAGE>
(i) This Agreement may be signed in counterparts,
each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
PP&L RESOURCES, INC.
By: /s/ JOHN R. BIGGER_________
Name: John R. Bigger
Title: Senior Vice President
and Chief Financial
Officer
Address for Notices:
Two North Ninth Street
Allentown, Pennsylvania 18101
PP&L GLOBAL, INC.
By: /s/ PAUL T. CHAMPAGNE_______
Name: Paul T. Champagne
Title: Vice President
PUGET SOUND ENERGY, INC.
By: /s/ STEVE MCKEON
Name: Stephen A. McKeon
Title: Vice President
<PAGE>
<TABLE>
Exhibit 12
PP&L RESOURCES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)
<CAPTION>
12 Months
Ended 12 Months Ended
September 30, December 31,
1998(a) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt .......... $198 $196 $207 $213 $214 $226
Interest on short-term debt
and other interest ............... 28 25 17 18 18 13
Amortization of debt discount, expense
and premium - net.................. 2 2 2 2 2 2
Interest on capital lease obligations
Charged to expense .............. 8 9 13 15 12 9
Capitalized ..................... 2 2 2 2 1 1
Estimated interest component of
operating rentals ................. 18 15 8 8 6 5
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons ........................... 1 1 1 1 1 1
Total fixed charges ......... $257 $250 $250 $259 $254 $257
Earnings, as defined:
Net income .......................... $363 $296 $329 $323 $216 $314
Preferred and Preference Stock
Dividend Requirements.............. 26 24 28 28 28 34
Less undistributed income of less
than 50-percent-owned persons ..... - - - - - -
389 320 357 351 244 348
Add (Deduct):
Federal income taxes ................ 173 169 189 195 198 163
State income taxes .................. 54 59 64 62 77 64
Deferred income taxes ............... 29 29 10 15 (45) 22
Investment tax credit - net ......... (6) (10) (10) (10) (12) (14)
Income taxes on other income and
deductions - net .................. - (9) - 24 (38) (1)
Amortization of capitalized
interest on capital leases ........ 2 2 4 5 9 12
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations) ..... 255 248 248 257 253 256
Total earnings .............. $896 $808 $862 $899 $686 $850
Ratio of earnings to fixed
charges ............................. 3.49 3.23 3.45 3.47 2.70 3.31
<FN>
(a) Excluding extraordinary items.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of income, consolidated balance sheet, and consolidated
statement of cash flows for the form 10-Q dated September 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000922224
<NAME> PP&L RESOURCES, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,402
<OTHER-PROPERTY-AND-INVEST> 980
<TOTAL-CURRENT-ASSETS> 877
<TOTAL-DEFERRED-CHARGES> 3,272
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,531
<COMMON> 2
<CAPITAL-SURPLUS-PAID-IN> 1,412<F1>
<RETAINED-EARNINGS> 323
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,737
47
50
<LONG-TERM-DEBT-NET> 3,085
<SHORT-TERM-NOTES> 7
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 770
<LONG-TERM-DEBT-CURRENT-PORT> 1
0
<CAPITAL-LEASE-OBLIGATIONS> 89
<LEASES-CURRENT> 57
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,688
<TOT-CAPITALIZATION-AND-LIAB> 9,531
<GROSS-OPERATING-REVENUE> 2,884
<INCOME-TAX-EXPENSE> 200
<OTHER-OPERATING-EXPENSES> 2,237
<TOTAL-OPERATING-EXPENSES> 2,437
<OPERATING-INCOME-LOSS> 447
<OTHER-INCOME-NET> 26
<INCOME-BEFORE-INTEREST-EXPEN> 473
<TOTAL-INTEREST-EXPENSE> 164
<NET-INCOME> (639)<F2>
19
<EARNINGS-AVAILABLE-FOR-COMM> (658)
<COMMON-STOCK-DIVIDENDS> 183
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 435
<EPS-PRIMARY> (3.94)
<EPS-DILUTED> (3.94)
<FN>
<F1>Net of $419 million of treasury stock.
<F2>Net income includes an extraordinary item of ($948) million ($1,614) million
net of $666 million of income taxes) reflecting the effects of a Pennsylvania
Public Utility Commission Restructuring Order and deregulation PP&L's electric
generation operations.
</FN>
</TABLE>
