EXHIBIT 2.1
GENERATION EXCHANGE AGREEMENT
by and between
DUQUESNE LIGHT COMPANY, on the one hand, and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
OHIO EDISON COMPANY
and
PENNSYLVANIA POWER COMPANY
on the other
Dated as of March 25, 1999
GENERATION EXCHANGE AGREEMENT
GENERATION EXCHANGE AGREEMENT, dated as of March 25, 1999 (this
"Agreement"), by and between Duquesne Light Company, a Pennsylvania corporation
("DLC"), on the one hand, and Ohio Edison Company, an Ohio corporation ("OEC"),
Pennsylvania Power Company, a Pennsylvania corporation ("PPC"), and The
Cleveland Electric Illuminating Company, an Ohio corporation ("CEIC"), on the
other. Each of CEIC, OEC and PPC is a subsidiary (direct or indirect) of
FirstEnergy Corp., an Ohio corporation ("FE"), (each such subsidiary, an "FE
Subsidiary" and collectively, the "FE Subsidiaries"). DLC, on the one hand, and
the FE Subsidiaries, on the other, are referred to individually as a "Party,"
and collectively, as the "Parties."
W I T N E S S E T H
WHEREAS, DLC and FE, acting on behalf of the FE Subsidiaries and TEC
(as defined herein), have entered into an agreement in principle dated October
14, 1998 (the "Agreement in Principle"), regarding the exchange of interests in
certain electric generation facilities; and
WHEREAS, in order to implement the Agreement in Principle with respect
to certain fossil fuel power plants the Parties desire to set forth in this
Agreement the definitive terms and conditions pursuant to which DLC will convey
to the FE Subsidiaries its undivided interests in certain electric generation
plants operated by the FE Subsidiaries (Xxxxxx, Xxxxxxxxx and Eastlake, each as
defined herein), and the FE Subsidiaries will convey to DLC their interests in
certain electric generation plants (Avon Lake, New Castle and Niles, each as
defined herein); and
WHEREAS, in order to implement the Agreement in Principle with respect
to DLC's nuclear generating assets, which are subject to the jurisdiction of the
Nuclear Regulatory Commission, simultaneously with the execution of this
Agreement, DLC and certain of the other Parties will enter into the Nuclear
Generation Conveyance Agreement (the "Nuclear Conveyance Agreement") dated as of
the date hereof, substantially in the form of Exhibit A attached hereto,
pursuant to which, subject to the terms and conditions thereof, DLC will agree
to convey to certain of the FE Subsidiaries all of its rights, title and
undivided interest in, and such FE Subsidiaries will agree to assume those
obligations of DLC relating to, the assets specified therein (collectively, "DLC
Nuclear Assets").
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have
the meanings specified in this Section 1.1.
(1) "Accrued FE Liabilities" has the meaning set forth in
Section 4.3
(2) "Accrued Liabilities" means, with respect to a Party, the
aggregate amount of the liabilities of such Party that are fixed or
determinable as of the Exchange Closing Date and that arise out of any
of the following obligations incurred by such Party prior to the
Exchange Closing Date, except to the extent that any such obligation
is allocable to the right of such Party to receive property, services
or other benefit after the Exchange Closing Date: (1) any obligation
to repay money advanced to or for the benefit of such Party; (2) any
obligation to make an expenditure that is includible in the basis of
any asset of such Party for income tax purposes as of the Exchange
Closing Date; (3) any obligation to make an expenditure that is
deductible by such Party and is not includible in such basis; and (4)
any obligation to make any expenditure that is not described in
clauses (2) or (3).
(3) "Acquiring Party" means, with respect to the DLC Assets and
Assumed DLC Liabilities, the applicable FE Subsidiaries, and with
respect to the FE Assets and Assumed FE Liabilities, DLC as to the
Accrued FE Liabilities and otherwise as to the ownership of the FE
Assets, DLC and the applicable Winning Bidder.
(4) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
(5) "Agreement" means this Generation Exchange Agreement,
together with the Exhibits and Schedules attached hereto, as the same
may be from time to time amended.
(6) "Agreement in Principle" has the meaning set forth in the
Recitals.
(7) "Ancillary Agreements" means the Auction Agreements, the
CAPCO Settlement Agreement, the FE Assignment and Assumption
Agreements, the FE (Accrued Liability) Assignment and Assumption
Agreements, the DLC Assignment and Assumption Agreements, the
Electrical Facilities Agreement, the FE Easement and Attachment
Agreements, the FE Connection Agreements, the FE Must-Run Agreements,
the Warranty Deeds, the Xxxx of Sale, the FIRPTA Affidavits, and the
Settlement Agreement, in each case as the same may be from time to
time amended.
(8) "Assigned Agreements" means, with respect to DLC, the DLC
Agreements, and with respect to the applicable FE Subsidiary, the FE
Agreements.
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(9) "Assumed DLC Liabilities" has the meaning set forth in
Section 3.3.
(10) "Assumed FE Liabilities" has the meaning set forth in
Section 4.3.
(11) "Assumed Liabilities" means the Assumed FE Liabilities
(including the Accrued FE Liabilities) or the Assumed DLC Liabilities,
as applicable.
(12) "Auction" means the transfer and sale by auction to be
undertaken by DLC of the its generating plants (other than the DLC
Assets and the DLC Nuclear Assets) and the FE Assets conveyed to DLC
under this Agreement.
(13) "Auction Agreements" means one or more Asset Purchase
Agreements, substantially in the form of Exhibit B attached hereto, to
be entered into between DLC, the applicable FE Subsidiaries (for the
purpose of each such FE Subsidiary making certain representations,
warranties, covenants, indemnifications, assignments and deliveries
under such Asset Purchase Agreement) and the corresponding Winning
Bidders in the Auction, and the ancillary agreements related thereto.
(14) "Auction Closings" means the closings of the transactions
contemplated by the Auction Agreements.
(15) "Auction Closing Date" means the date on which the Auction
Closings occur.
(16) "Auction Participants" means the Persons qualified by DLC to
submit binding bids in the Auction.
(17) "Auction Plan" means the Generation Auction Plan of DLC
filed August 27, 1998, before the PaPUC and approved by the Opinion
and Order of the PaPUC No. R-00974104, dated December 18, 1998, as
amended from time to time.
(18) "Avon Lake" means all generating units and related assets
located at the generating station known as Avon Lake, as more fully
identified on Schedule 4.1(Avon Lake), attached hereto.
(19) "Benefit Plans" means with respect to each Party, each
deferred compensation and each bonus or other incentive compensation,
stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 3(1) of ERISA)
each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in
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each case, that is sponsored, maintained or contributed to or required
to be contributed to by such Party or by any ERISA Affiliate.
(20) "Bills of Sale" means the Bills of Sale, each substantially
in the form of Exhibit C attached hereto, to be delivered by each
Conveying Party at the respective Exchange Closing with respect to DLC
Tangible Personal Property or FE Tangible Personal Property, as the
case may be, included in the Exchange Assets transferred to the
respective Acquiring Party.
(21) "Bond Counsel" has the meaning set forth in Section 8.16(b).
(22) "Business Day" means any day other than Saturday, Sunday and
any day which is a day on which banking institutions in the
Commonwealth of Pennsylvania or the State of Ohio are authorized by
law or other governmental action to close.
(23) "CAPCO" means the Central Area Power Coordination Group.
(24) "CAPCO Agreements" means all contractual arrangements
associated with CAPCO related to the Exchange Assets, including those
listed on Schedule 1.1(24).
(25) "CAPCO Settlement Agreement" means that certain CAPCO
Settlement Agreement executed by DLC and each applicable Subsidiary of
FE, substantially in the form of Exhibit O attached hereto.
(26) "CEIC" means The Cleveland Electric Illuminating Company, a
subsidiary of FE and an Ohio corporation.
(27) "Capital Spare Parts " means any major equipment items of
significant cost that are essential to the operation of an Exchange
Asset of a Conveying Party. Such equipment is generally a long
lead-time item and, consistent with past practice, has been assigned
to the capital base of the Exchange Asset upon delivery and prior to
its placement in service. In the case of DLC, its Capital Spare Parts
are set forth in Schedule 1.1 (27-DLC) and in the case of the FE
Subsidiary's, each FE Subsidiary's Capital Spare Parts are set forth
in Schedule 1.1 (27-FE).
(28) "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as
amended.
(29) "Closing Payment" means the DLC Closing Payments or the FE
Closing Payments, as appropriate.
(30) "Closing Payment Balance" means the remaining amount payable
after the aggregation or offset of Closing Payments, as provided in
Section 5.3.
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(31) "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1984.
(32) "COBRA Continuation Coverage" means the requirements of
Section 4980B(f) of the Code.
(33) "Code" means the Internal Revenue Code of 1986, as amended.
(34) "Commercially Reasonable Efforts" means efforts by a Party
which are reasonably within the contemplation of the Parties at the
time of executing this Agreement and which do not require the
performing Party to expend any funds other than expenditures which are
customary and reasonable in transactions of the kind and nature
contemplated by this Agreement in order for the performing Party to
satisfy its obligations hereunder.
(35) "Computer Systems" means hardware, software, and firmware
product (including embedded microcontrollers in non-computer
equipment).
(36) "Continuation Period" has the meaning set forth in Section
8.11(e)(ii).
(37) "Conveying Party" means, with respect to the DLC Assets,
DLC, and with respect to the FE Assets, the applicable FE
Subsidiaries.
(38) "Direct Claim" means any claim by an Indemnitee on account
of an Indemnifiable Loss that does not result from a Third Party
Claim.
(39) "DLC" means Duquesne Light Company, a Pennsylvania
corporation.
(40) "DLC Agreements" means the CAPCO Agreements and any
contracts, agreements, licenses and personal property leases entered
into by DLC or one of its Affiliates with respect to the ownership,
operation or maintenance of the DLC Assets, whether or not disclosed
on Schedule 6.9(a), but excluding the DLC Real Property Leases.
(41) "DLC Assets" has the meaning set forth in Section 3.1.
(42) "DLC Assignment and Assumption Agreements" means the
Assignment and Assumption Agreements between DLC and each applicable
FE Subsidiary, substantially in the form of Exhibit D attached hereto.
(43) "DLC Capital Expenditures" means capital additions to or
replacements of property, plants and equipment included in the DLC
Assets and other expenditures or repairs on property, plants and
equipment included in the DLC Assets that would be capitalized by DLC
in accordance with its normal accounting policies.
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(44) "DLC Closing Payments" has the meaning set forth in Section
5.2(b).
(45) "DLC Emission Reduction Credits" means the Emission
Reduction Credits related to DLC's ownership share of the DLC Plants.
(46) "DLC Environmental Permits" means the permits,
registrations, certificates, certifications, licenses and
authorizations, consents and approvals of Governmental Authorities
required under Environmental Laws and held by DLC with respect to the
DLC Assets.
(47) "DLC Estimated Closing Payment" has the meaning set forth in
Section 5.2(d).
(48) "DLC Estimated Closing Statement" has the meaning set forth
in Section 5.2(d).
(49) "DLC Indemnifiable Loss" has the meaning set forth in
Section 10.1(a).
(50) "DLC Indemnitee" has the meaning set forth in Section
10.1(a).
(51) "DLC Inventories" means materials, spare parts, consumable
supplies and chemical inventories relating to the operation of any DLC
Plant, provided that "DLC Inventories" shall not include Capital Spare
Parts, Fuel Supplies, DLC SO2 Emission Allowances or DLC NOx Emission
Allowances, and provided further that reference to "DLC Inventories"
shall be limited to the extent of DLC's proportionate ownership
interest therein.
(52) "DLC Intellectual Property" has the meaning set forth in
Section 3.1(l).
(53) "DLC Material Adverse Effect" means any change in, or effect
on, any DLC Plant, from or after the date hereof that is materially
adverse to the operations or condition (financial or otherwise) of
such DLC Plant, other than: (a) any change affecting the
international, national, regional or local electric industry as a
whole and not specific and exclusive to such DLC Plant; (b) any change
or effect resulting from changes in the international, national,
regional or local wholesale or retail markets for electric power; (c)
any change or effect resulting from changes in the international,
national, regional or local markets for any fuel used in connection
with such DLC Plant; (d) any change or effect resulting from changes
in the North American, national, regional or local electric
transmission systems or operations thereof; (e) any materially adverse
change in or effect on such DLC Plant which is cured (including by the
payment of money) by DLC before the Termination Date; and (f) any
order of any court or Governmental Authority applicable to the
providers of generation, transmission or distribution of electricity
generally that imposes restrictions, regulations or other requirements
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thereon, including any order with respect to an independent system
operator or retail access in Pennsylvania or Ohio.
(54) "DLC Nuclear Assets" has the meaning set forth in the
Recitals.
(55) "DLC NOx Emission Allowances" means NOx Emission Allowances
related to DLC's ownership share of any of the DLC Plants.
(56) "DLC Permits" means any permits, licenses, registrations,
franchises and other authorizations, consents and approvals of
Governmental Authorities (but in each case excluding DLC Environmental
Permits) held by DLC with respect to the DLC Assets.
(57) "DLC Plants" means Sammis, Mansfield, and Eastlake.
(58) "DLC Real Property" has the meaning set forth in Section
3.1(a). Any reference to the DLC Real Property includes, by
definition, DLC's right, title and interest in and to the surface and
subsurface elements, including the soils and groundwater present at
the DLC Real Property, and any reference to items "at the DLC Real
Property" includes all items "at, on, in, upon, over, across, under
and within" the DLC Real Property.
(59) "DLC Real Property Leases" has the meaning set forth in
Section 6.5.
(60) "DLC Required Regulatory Approvals" means the Required
Regulatory Approvals listed in Schedule 6.3(b).
(61) "DLC Representatives" means DLC's authorized
representatives, including without limitation, its professional and
financial advisors and, to the extent expressly designated by DLC, any
Auction Participant and/or the Winning Bidder and their respective
professional and financial advisors.
(62) "DLC SO2 Emission Allowances" means SO2 Emission Allowances
related to DLC's ownership share of any of the DLC Plants.
(63) "DLC Tangible Personal Property" has the meaning set forth
in Section 3.1(c).
(64) "DLC Transferable Permits" means those DLC Permits and DLC
Environmental Permits with respect to the DLC Assets which may be
transferred to an FE Subsidiary without a filing with, notice to,
consent of or approval of any Governmental Authority, as set forth in
Schedule 1.1(64).
(65) "DLC Transmission Assets" means all Transmission Assets of
DLC or any of its Affiliates located on or forming a part of DLC Real
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Property, but excluding any transmission assets that are to be
transferred pursuant to the Electrical Facilities Agreement.
(66) "DQE" means DQE, Inc., a Pennsylvania corporation and the
parent company of DLC.
(67) "Easements" means the easements and access rights to be
granted by an applicable Winning Bidder to the corresponding FE
Subsidiary pursuant to an FE Easement and Attachment Agreement,
including, without limitation, easements authorizing access, use,
maintenance, construction, repair, replacement and other activities
with respect to the applicable FE Assets, as further described in such
FE Easement and Attachment Agreement.
(68) "Eastlake" means the electrical generation plant known as
Eastlake Unit No. 5.
(69) "Eastlake Litigation" has the meaning set forth in Section
5.9.
(70) "Electrical Facilities Agreement" means that certain
Electrical Facilities Agreement executed by DLC and the applicable FE
Subsidiaries, substantially in the form of Exhibit J attached hereto.
(71) "Emission Reduction Credits" means credits, in units that
are established by the Governmental Authority with jurisdiction over
the relevant Plant that has obtained the credits, resulting from
reductions in the emissions of air pollutants from an emitting source
or facility (including, without limitation, and to the extent
allowable under applicable law, reductions resulting from shutdowns or
control of emissions beyond that required by applicable law) that: (a)
have been identified by the PaDEP as complying with applicable
Pennsylvania law governing the establishment of such credits
(including, without limitation, that such emissions reductions are
enforceable, permanent, quantifiable and surplus) and listed in the
Emissions Reduction Credit Registry maintained by the PaDEP or with
respect to which such identification and listing are pending; or (b)
have been certified by any other applicable Governmental Authority as
complying with the law and regulations governing the establishment of
such credits (including, without limitation, certification that such
emissions reductions are enforceable, permanent, quantifiable and
surplus). The term includes Emission Reduction Credits that have been
approved by the PaDEP and are awaiting USEPA approval. The term also
includes certified air emissions reductions, as described above,
regardless as to whether the Governmental Authority certifying such
reductions designates such certified air emissions reductions by a
name other than "emission reduction credits."
(72) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and
use limitations, conservation easements, deed restrictions,
encumbrances and charges of any kind.
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(73) "Environmental Claim" means any and all pending and/or
threatened administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints,
requests for information, proceedings, or other written communication,
whether criminal or civil, pursuant to or relating to any applicable
Environmental Law or pursuant to a common law theory, by any Person
(including, but not limited to, any Governmental Authority, private
person and citizens' group) based upon, alleging, asserting or
claiming any actual or potential (a) violation of, or liability under,
any Environmental Law, (b) violation of any Environmental Permit, or
(c) liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, property
damage, personal injury, fines, or penalties arising out of, based on,
resulting from, or related to any Environmental Condition or any
Release or threatened Release into the environment of any Regulated
Substances at any location related to the Exchange Assets, including,
but not limited to, any Off-Site Location to which Regulated
Substances, or materials containing Regulated Substances, were sent
for handling, storage, treatment, or disposal.
(74) "Environmental Condition" means the presence or Release of a
Regulated Substance (other than a naturally-occurring substance) on or
in environmental media, or structures on Real Property, at an Off-Site
Location or other property (including the presence in surface water,
groundwater, soils or subsurface strata, or air), including the
subsequent migration of any such Regulated Substance, regardless of
when such presence or Release occurred or is discovered.
(75) "Environmental Laws" means all federal, state, local,
provincial, foreign and international civil and criminal laws,
regulations, rules, ordinances, codes, decrees, judgments, directives,
or judicial or administrative orders relating to pollution or
protection of the environment, natural resources or human health and
safety, including, without limitation, laws relating to Releases or
threatened Releases of Regulated Substances (including, without
limitation, Releases to ambient air, surface water, groundwater, land,
surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
Release, transport, disposal or handling of Regulated Substances.
"Environmental Laws" include: (a) with respect to federal law, CERCLA,
the Hazardous Materials Transportation Act (49 U.S.C. sections 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C. sections
6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C.
sections 1251 et seq.), the Clean Air Act (42 U.S.C. sections 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. sections 2601 et
seq.), the Oil Pollution Act (33 U.S.C. sections 2701 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. sections
11001 et seq.), the Occupational Safety and Health Act (29 U.S.C.
sections 651 et seq.), the Safe Drinking Water Act (42 U.S.C. section
300f et seq.), the Surface Mine Conservation and Reclamation Act (30
U.S.C. sections 1251-1279), and regulations adopted pursuant thereto,
9
and counterpart state and local laws, and regulations adopted pursuant
thereto; (b) with respect to Pennsylvania law, the Pennsylvania Clean
Streams Law (35 P.S. section 691.1 et seq.), the Pennsylvania Air
Pollution Control Act (35 P.S. section 4001 et seq.), the Pennsylvania
Solid Waste Management Act (35 P.S. section 6018.101 et seq.), the
Pennsylvania Storage Tank and Spill Prevention Act (35 P.S. section
6021.101 et seq.), the Pennsylvania Safe Drinking Water Act (35 P.S.
section 721.1 et seq.), the Pennsylvania Sewage Facilities Act (35
P.S. section 750.1 et seq.), the Pennsylvania Hazardous Sites Cleanup
Act (35 P.S. section 6020.101 et seq.), the Pennsylvania Land
Recycling and Environmental Remediation Standards Act (35 P.S. section
6026.101 et seq.), the Pennsylvania Surface Mining Conservation and
Reclamation Act (52 P.S. section 1396.1 et seq.), the Coal Refuse
Disposal Control Act (52 P.S. section 30.51 et seq.), the Non-Coal
Surface Mining and Reclamation Act, (52 P.S. section3301 et seq.), the
Pennsylvania Worker and Community Right-to-Know Act, 35 P.S. section
7301 et seq.), the Pennsylvania Hazardous Material Emergency Planning
and Response Act, 35 P.S. section 6022.101 et seq.), and regulations
adopted pursuant thereto; and (c) with respect to Ohio law, the Ohio
Rev. Code Xxx. section 1501.30 et seq. (Diversion of Waters), Ohio
Rev. Code Xxx.section 1506.01 et seq. (Coastal Management); Ohio Rev.
Code Xxx. section 1509.01 et seq. (Oil and Gas), Ohio Rev. Code Xxx.
section 1513.01 et seq. (Coal Surface Mining), Ohio Rev. Code Xxx.
section 1520.01 et seq. (Canal Lands); Ohio Rev. Code Xxx. section
3704.01 et seq. (Air Pollution Control), Ohio Rev. Code Xxx. section
3710.01 et seq. (Asbestos Abatement), Ohio Rev. Code Xxx. section
3714.01 et seq. (Construction and Demolition Debris), Ohio Rev. Code
Xxx. section 3734.01 et seq. (Solid and Hazardous Wastes), Ohio Rev.
Code Xxx. section 3737.87 et seq. (Petroleum Underground Storage
Tanks), Ohio Rev. Code Xxx. section 3742.01 et seq. (Lead Abatement
and Testing), Ohio Rev. Code Xxx. section 3746.01 et seq. (Voluntary
Cleanup of Contamination Property), Ohio Rev. Code Xxx. section
3747.01 et seq. (Low-Level Radioactive Waste), Ohio Rev. Code Xxx.
section 3748.01 et seq. (Radiation Control), Ohio Rev. Code Xxx.
section 3750.01 et seq. (Emergency Planning), Ohio Rev. Code Xxx.
section 3751.01 et seq. (Hazardous Substances), Ohio Rev. Code Xxx.
section 3752.01 et seq. (Cessation of Chemical Handling Operations),
Ohio Rev. Code Xxx. section 3767.01 et seq. (Nuisances), Ohio Rev.
Code Xxx. section 4913.01 et seq. (Public Utilities Commission-Acid
Rain Control), Ohio Rev. Code Xxx. section 6109.01 et seq. (Safe
Drinking Water), Ohio Rev. Code Xxx. section 6111.01 et seq. (Water
Pollution Control), and regulations adopted pursuant thereto.
(76) "Environmental Permits" means the DLC Environmental Permits
and the FE Environmental Permits.
(77) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(78) "ERISA Affiliate" means a trade or business, whether or not
incorporated, that together with a Party would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
(79) "Estimated Closing Payment" means the DLC Estimated Closing
Payment or the FE Estimated Closing Payment, as appropriate.
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(80) "Estimated Closing Statement" means the DLC Estimated
Closing Statement or the FE Estimated Closing Statement, as
appropriate.
(81) "Exchange Agreements" means this Agreement and the Nuclear
Conveyance Agreement.
(82) "Exchange Assets" means the DLC Assets and the FE Assets.
(83) "Exchange Closing" has the meaning set forth in Section 5.1.
(84) "Exchange Closing Date" means the date on which the Exchange
Closing occurs.
(85) "Excluded DLC Assets" has the meaning set forth in Section
3.2.
(86) "Excluded DLC Liabilities" has the meaning set forth in
Section 3.4.
(87) "Excluded FE Assets" has the meaning set forth in Section
4.2.
(88) "Excluded FE Liabilities" has the meaning set forth in
Section 4.4.
(89) "Excluded Liabilities" means the Excluded DLC Liabilities
and the Excluded FE Liabilities.
(90) "Exempt Facilities" means those DLC facilities listed in
Schedule 1.1 (90) and those FE Subsidiaries facilities listed in
Schedule 1.1 (90), as the case may be.
(91) "Facilities Act" has the meaning set forth in Section 12.13.
(92) "FE" means FirstEnergy Corp., an Ohio corporation and the
parent company of the FE Subsidiaries.
(93) "FE (Accrued Liability) Assignment and Assumption
Agreements" means the FE (Accrued Liability) Assignment and Assumption
Agreements between DLC and the applicable FE Subsidiary, substantially
in the form of Exhibit F attached hereto.
(94) "FE Agreements" means any contracts, agreements, licenses
and personal property leases entered into by an FE Subsidiary or an
Affiliate thereof with respect to the ownership, operation or
maintenance of the FE Assets, whether or not disclosed on Schedule
7.11(a), including, without limitation, the Local 140 CBA (to the
extent applicable to FE Transferred Union Employees as provided in
Section 8.11 hereof) and the Local 270 CBA (to the extent applicable
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to Local 270 Employees as provided in Section 8.11 hereof), but
excluding the FE Real Property Leases and FE Intellectual Property.
(95) "FE Assets" has the meaning set forth in Section 4.1.
(96) "FE Assignment and Assumption Agreements" means the
Assignment and Assumption Agreements between the applicable FE
Subsidiary and DLC or, if DLC so directs, the corresponding Winning
Bidder, substantially in the form of Exhibit G attached hereto.
(97) "FE Capital Expenditures" means capital additions to or
replacements of property, plants and equipment included in the FE
Assets and other expenditures or repairs on property, plants and
equipment included in the FE Assets that would be capitalized by the
FE Subsidiary making such expenditure in accordance with its normal
accounting policies.
(98) "FE Closing Payments" has the meaning set forth in Section
5.2(c).
(99) "FE Connection Agreements" means the FE Connection
Agreements to be entered into by each FE Subsidiary and DLC or, if DLC
so directs, the corresponding Winning Bidder, with respect to Avon
Lake, Niles or New Castle, as the case may be, substantially in the
form of Exhibit E attached hereto.
(100) "FE Easement and Attachment Agreements" means the Easement,
License and Attachment Agreements to be entered into by the applicable
FE Subsidiary and DLC or, if DLC so directs, the corresponding Winning
Bidder, with respect to the FE Assets to be acquired by DLC or such
Winning Bidder, as the case may be, substantially in the form of
Exhibit H attached hereto.
(101) "FE Emission Reduction Credits" means the Emission
Reduction Credits relating to any of the FE Plants.
(102) "FE Environmental Permits" means the permits,
registrations, certificates, certifications, licenses and
authorizations, consents and approvals of Governmental Authorities
required under Environmental Laws held by each FE Subsidiary with
respect to its FE Assets.
(103) "FE Environmental Reports" has the meaning set forth in
Section 7.6.
(104) "FE Estimated Closing Payment" has the meaning set forth in
Section 5.2(d).
(105) "FE Estimated Closing Statement" has the meaning set forth
in Section 5.2(d).
(106) "FE Indemnifiable Losses" has the meaning set forth in
Section 10.2.
12
(107) "FE Indemnitee" means FE Subsidiaries, their officers,
directors, employees, shareholders, Affiliates and agents.
(108) "FE Intellectual Property" has the meaning set forth in
Section 4.1(k).
(109) "FE Inventories" means materials, spare parts, consumable
supplies and chemical inventories relating to the operation of any FE
Plant, provided that "FE Inventories" shall not include Capital Spare
Parts, Fuel Supplies, FE SO2 Emission Allowances or FE NOx Emission
Allowances.
(110) "FE Material Adverse Effect" means any change in, or effect
on any FE Plant, from or after the date hereof, that is materially
adverse to the operations or condition (financial or otherwise) of
such FE Plant, taken as a whole, other than: (a) any change affecting
the international, national, regional or local electric industry as a
whole and not specific and exclusive to such FE Plant; (b) any change
or effect resulting from changes in the international, national,
regional or local wholesale or retail markets for electric power; (c)
any change or effect resulting from changes in the international,
national, regional or local markets for any fuel used in connection
with such FE Plant; (d) any change or effect resulting from changes in
the North American, national, regional or local electric transmission
systems or operations thereof; (e) any materially adverse change in or
effect on such FE Plant which is cured (including by the payment of
money) by the FE Subsidiaries before the Termination Date; and (f) any
order of any court or Governmental Authority applicable to providers
of generation, transmission or distribution of electricity generally
that imposes restrictions, regulations or other requirements thereon,
including any order with respect to an independent system operator or
retail access in Pennsylvania or Ohio.
(111) "FE Must-Run Agreements" means the FE Must-Run Agreements
to be entered into by each FE Subsidiary and DLC or, if DLC so
directs, the corresponding Winning Bidder, with respect to Avon Lake,
Niles or New Castle, as the case may be, substantially in the form of
Exhibit R attached hereto.
(112) "FE NOx Emission Allowances" means NOx Emission Allowances
related to any of the FE Plants.
(113) "FE Permits" means any permits, licenses, registrations,
franchises and other authorizations, consents and approvals of
Governmental Authorities (but in each case excluding FE Environmental
Permits) held by the FE Subsidiaries with respect to the FE Assets.
(114) "FE Plans" means any Benefit Plan of any FE Subsidiary or
any ERISA Affiliate thereof or to which any FE Subsidiary or any ERISA
Affiliate thereof contributed thereunder, including any multi-employer
plan.
13
(115) "FE Plants" means Avon Lake, New Castle and Niles.
(116) "FERC" means the Federal Energy Regulatory Commission or
any successor agency thereto.
(117) "FE Real Property" has the meaning set forth in Section
4.1(a). Any reference to the FE Real Property includes, by definition,
the right, title and interest of the applicable FE Subsidiary in and
to the surface and subsurface elements, including the soils and
groundwater present at the FE Real Property, and any reference to
items "at the FE Real Property" includes all items "at, on, in, upon,
over, across, under and within" the FE Real Property.
(118) "FE Real Property Leases" has the meaning set forth in
Section 7.5.
(119) "FE Required Regulatory Approvals" means the Required
Regulatory Approvals listed in Schedule 7.3(b).
(120) "FE Representatives" means an FE Subsidiary's authorized
representatives, including without limitation, their professional and
financial advisors.
(121) "FE Savings Plans" means any defined contribution pension
plan maintained by an FE Subsidiary or any ERISA Affiliate thereof for
the benefit of the FE Transferred Employees.
(122) "FE SO2 Emission Allowances" means SO2 Emission Allowances
related to any of the FE Plants.
(123) "FE Subsidiaries" has the meaning set forth in the
Recitals.
(124) "FE Subsidiaries SEC Reports" has the meaning set forth in
Section 7.20.
(125) "FE Tangible Personal Property" has the meaning set forth
in Section 4.1(c).
(126) "FE Transferable Permits" means those FE Permits and FE
Environmental Permits with respect to the FE Assets which may be
transferred to DLC or a Winning Bidder without a filing with, notice
to, consent of or approval of any Governmental Authority, as set forth
in Schedule 1.1(126).
(127) "FE Transferred Employee Records" means records related to
an FE Subsidiary's employees who become employees of the applicable
Winning Bidder but only to the extent such records pertain to (a)
skill and development training and biographies, (b) seniority
histories, (c) salary and benefit information, (d) Occupational,
Safety and Health Administration reports, or (e) active medical
restriction forms.
14
(128) "FE Transferred Employees" means FE Transferred Non-Union
Employees and FE Transferred Union Employees.
(129) "FE Transferred Non-Union Employees" has the meaning set
forth in Section 8.11(c).
(130) "FE Transferred Union Employees" has the meaning set forth
in Section 8.11(b).
(131) "FE Transmission Assets" means the Transmission Assets of
each FE Subsidiary or any of their Affiliates located on or forming a
part of the FE Real Property.
(132) "Final Adjustment" has the meaning set forth in Section
5.2(f).
(133) "Final Order" means an action by the relevant Governmental
Authority that has not been reversed, stayed, enjoined, set aside,
annulled or suspended and/or with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired.
(134) "FIRPTA Affidavit" means the Foreign Investment in Real
Property Tax Act Certification and Affidavit to be executed by the
applicable FE Subsidiary and DLC, substantially in the form of Exhibit
I hereto.
(135) "Fuel Supplies" means the supplies of coal, fuel oil,
natural gas or alternative fuels related to the operation of any Plant
and located at or in transit to such Plant.
(136) "GAAP" means U.S. generally accepted accounting principles.
(137) "Generation Exchange" has the meaning set forth in Section
2.1.
(138) "Good Utility Practices" mean any practices, methods,
standards, guides or acts, as applicable, that are:
(a) required by any Governmental Authority, regional or
national reliability council, or national trade organization,
including NERC, ECAR, Edison Electric Institute, or American Society
of Mechanical Engineers, or the successor of any of them, whether or
not the Party whose conduct is at issue is a member thereof;
(b) otherwise engaged in or approved by a significant
portion of the electric utility industry during the relevant time
period which in the exercise of reasonable judgment in light of the
facts known or that should have been known at the time a decision was
made, could have been expected to accomplish the desired result in a
manner consistent with law, regulation, good business practices,
generation, transmission, and distribution reliability, safety,
environmental protection, economy, and expediency. Good Utility
15
Practice is intended to be acceptable practices, methods, or acts
generally accepted in the region, and is not intended to be limited to
the optimum practices, methods, or acts to the exclusion of all
others; and
(c) reasonably necessary to maintain the reliability of the
Plants.
(139) "Governmental Authority" means any foreign, federal, state,
local or other governmental, regulatory or administrative agency,
court, commission, department, board, or other governmental
subdivision, legislature, rulemaking board, court, tribunal,
arbitrating body or other governmental authority.
(140) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
(141) "Income Tax" means any federal, state, local or foreign Tax
(a) based upon, measured by or calculated with respect to gross or net
income, profits or receipts (including, without limitation, capital
gains Taxes and minimum Taxes) or (b) based upon, measured by or
calculated with respect to multiple bases (including, without
limitation, corporate franchise taxes) if one or more of the bases on
which such Tax may be based, measured by or calculated with respect
to, is described in clause (a), in each case together with any
interest, penalties, or additions to such Tax.
(142) "Indemnifiable Loss" means any claim, demand, suit, loss,
liability, damage, obligation, payment, cost or expense (including,
without limitation, the cost and expense of any action, suit,
proceeding, assessment, judgment, settlement or compromise relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith).
(143) "Indemnifying Party" means a Party obligated to provide
indemnification under this Agreement.
(144) "Indemnitee" means a Person entitled to receive
indemnification under this Agreement.
(145) "Independent Accounting Firm" means such independent
accounting firm of national reputation as is mutually appointed by the
applicable FE Subsidiaries and DLC.
(146) "Information Memorandum" means the memorandum prepared by
DLC and its advisors to be distributed to potential Auction
Participants.
(147) "Inspection" means all tests, reviews, examinations,
inspections, investigations, verifications, samplings and similar
activities conducted by an Acquiring Party or its authorized
representatives, including without limitation, its professional and
16
financial advisors, with respect to the Exchange Assets prior to the
Exchange Closing.
(148) "Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, inventions, copyrights and
copyright rights, and all pending applications for registrations of
patents, trademarks, and copyrights, necessary for the operation and
maintenance of the applicable Exchange Assets, as set forth as part of
Schedule 3.1(1) or 4.1(k), as the case may be.
(149) "Inventories" means the DLC Inventories and the FE
Inventories.
(150) "Knowledge" means the actual knowledge of the corporate
officers or Plant managers of the specified Person charged with
responsibility for the particular function as of the date of this
Agreement, or, with respect to any certificate delivered pursuant to
this Agreement, the date of delivery of the certificate.
(151) "Local 140 CBA" has the meaning set forth in Section
8.11(b).
(152) "Local 270 CBA" has the meaning set forth in Section
8.11(m).
(153) "Local 270 Employees" has the meaning set forth in Section
8.11(m).
(154) "Mansfield" means the electrical generation plants known as
Xxxxx Xxxxxxxxx Units Nos. 1, 2 & 3.
(155) "Material Adverse Effect" means an FE Material Adverse
Effect or a DLC Material Adverse Effect, as applicable.
(156) "New Castle" means all generating units and related assets
located at the generating station known as New Castle as more fully
identified on Schedule 4.1(New Castle), attached hereto.
(157) "Niles" means all generating units and related assets
located at the generating station known as Niles as more fully
identified on Schedule 4.1(Niles), attached hereto.
(158) "Non-Qualifying Offer" means an offer to FE Transferred
Non-Union Employees that is either less than 100% of such employee's
current total annual cash compensation at the time the offer was made
(consisting of base salary and target incentive bonus) or requires, as
a condition of acceptance, a relocation of residence as described in
Section 8.11(f)(iii).
(159) "Non-Union Employees" has the meaning set forth in Section
8.11(c).
(160) "NOx Budget Program" means Nitrous Oxides Budget Program,
which is a statutory or regulatory program promulgated by the United
17
States or a state pursuant to which the United States or state
provides for a limit on the nitrous oxides that can be emitted by all
sources covered by the program and establishes allowances or
authorizations, which in total are equal to the amount of nitrous
oxides allowed by the limit, where each allowance or authorization
represents a "right" to emit a unit of nitrous oxides, as the means
for ensuring compliance with the limit.
(161) "NOx Emission Allowance" means (a) an authorization by the
PaDEP under its NOx Budget Program authorizing the emission of one ton
of nitrous oxides during the ozone season, as such season is defined
by the PaDEP; (b) an authorization by the OEPA under any future NOx
Budget Program authorizing the emission of one ton of nitrous oxides
during the ozone season, as such season is defined by the OEPA; or (c)
an authorization by USEPA under any future NOx Budget program
promulgated by the USEPA, including, but not limited to, any future
program implemented in lieu of a state NOx Budget Program, authorizing
the emission of one ton of nitrous oxides during the ozone season, as
such season is defined by the USEPA.
(162) "Nuclear Conveyance Agreement" has the meaning set forth in
the Recitals.
(163) "OEPA" means the Ohio Environmental Protection Agency and
any successor agency thereto.
(164) "OEC" means Ohio Edison Company, a subsidiary of FE and an
Ohio corporation.
(165) "Off-Site Location" means any real property other than the
Real Property.
(166) "PaDEP" means the Pennsylvania Department of Environmental
Protection and any successor agency thereto.
(167) "PaPUC" means the Pennsylvania Public Utility Commission
and any successor agency thereto.
(168) "Party" has the meaning set forth in the Recitals.
(169) "Permits" means with respect to the Exchange Assets, any
permits, licenses, registrations, franchises and other authorizations,
consents and approvals of Governmental Authorities (but in each case
excluding Environmental Permits) held by DLC or any FE Subsidiary, as
applicable.
(170) "Permitted Encumbrances (DLC Assets)" means the permitted
liens and encumbrances as set forth in Schedule 1.1(170).
(171) "Permitted Encumbrances (FE Assets)" means with respect to
the FE Assets: (a) the Easements; (b) those exceptions to title listed
18
in Schedule 7.9; (c) statutory liens for Taxes or other governmental
charges or assessments not yet due or delinquent or the validity of
which is being contested in good faith by appropriate proceedings
provided that the aggregate amount being so contested does not exceed
$100,000; (d) mechanics', carriers', workers', repairers' and other
similar liens arising or incurred in the ordinary course of business
relating to obligations as to which there is no default on the part of
the applicable FE Subsidiary or the validity of which are being
contested in good faith, and which do not, individually or in the
aggregate, exceed $100,000; (e) zoning, entitlement, conservation
restriction and other land use and environmental regulations by
Governmental Authorities; and (f) other liens, imperfections in or
failure of title, charges, easements, restrictions and Encumbrances
which do not materially, individually or in the aggregate, detract
from the value of the FE Assets as currently used or materially
interfere with the present use of the FE Assets and neither secure
indebtedness, nor individually or in the aggregate create an FE
Material Adverse Effect.
(172) "Person" means any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
organization or governmental entity or any department or agency
thereof.
(173) "Plant" means, with respect to the DLC Assets, any of the
DLC Plants, and with respect to the FE Assets, any of the FE Plants.
(174) "PPC" means Pennsylvania Power Company, a subsidiary of OEC
and a Pennsylvania corporation.
(175) "Proposed DLC Final Adjustment" has the meaning set forth
in Section 5.2(e).
(176) "Proposed FE Final Adjustment" has the meaning set forth in
Section 5.2(e).
(177) "Proposed Final Adjustment" means the Proposed DLC Final
Adjustment or the Proposed FE Final Adjustment, as appropriate.
(178) "Proprietary Information" of a Party means all information
about the Party or its Affiliates, including their respective
properties or operations, furnished to the other Party or its
Representatives by the Party or its Representatives, after the date
hereof, regardless of the manner or medium in which it is furnished
and all analyses, reports, tests or other information created or
prepared by, or on behalf of, a Party during the performance of "Phase
I" or "Phase II" environmental site assessments. Proprietary
Information does not include information that: (a) is or becomes
generally available to the public, other than as a result of a
disclosure by the other Party or its Representatives; (b) was
available to the other Party on a nonconfidential basis prior to its
disclosure by the Party or its Representatives; (c) becomes available
to the other Party on a nonconfidential basis from a person, other
than the Party or its Representatives, who is not otherwise bound by a
confidentiality agreement with the Party or its Representatives, or is
not otherwise under any obligation to the Party or any of its
19
Representatives not to transmit the information to the other Party or
its Representatives; or (d) is independently developed by the other
Party.
(179) "PUCO" means the Public Utilities Commission of the State
of Ohio and any successor agency thereto.
(180) "Qualifying Offer" means an offer to an FE Transferred
Non-Union Employee of the same or similar job that is at least 100% of
such employee's current total annual cash compensation at the time the
offer was made (consisting of base salary and target incentive bonus)
and does not require, as a condition of acceptance, a relocation of
residence as described in Section 8.11(f)(iii).
(181) "Real Property" means the DLC Real Property or the FE Real
Property, as applicable.
(182) "Real Property Leases" means DLC Real Property Leases and
FE Real Property Leases, as applicable.
(183) "Regulated Substances" means (a) any petrochemical or
petroleum products, oil or coal ash, radioactive materials, radon gas,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and dielectric fluid containing
polychlorinated biphenyls; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "hazardous constituents,"
"restricted hazardous materials," "extremely hazardous substances,"
"toxic substances," "contaminants," "pollutants," "toxic pollutants"
or words of similar meaning and regulatory effect under any applicable
Environmental Law; and (c) any other chemical, material or substance,
exposure to which or whose discharge, emission, disposal or Release is
prohibited, limited or regulated by any applicable Environmental Law.
(184) "Regulatory Material Adverse Effect" shall occur where a
Final Order with respect to Required Regulatory Approvals contains
terms and conditions that are materially adverse to the financial
condition, prospects, properties, operations or results of operations
of the affected Party, taken as a whole including all Subsidiaries and
Affiliates, to which the terms and conditions of such Final Order
apply; provided that, in addition to the foregoing, any such Final
Order shall be deemed to constitute a Regulatory Material Adverse
Effect (a) as to FE Subsidiaries or their Affiliates, if it prohibits
such FE Subsidiaries or Affiliates from transferring their
transmission assets to American Transmission Systems, Inc. (or its
successor and assigns), is inconsistent with the FERC's determination
in Ohio Edison Co. et al., 81 FERC P. 61,110 (1997) that "we expect
FirstEnergy to participate in the Midwest ISO or another appropriate
ISO," or requires the FE Subsidiaries or their Affiliates to divest
generating plants other than Avon Lake, Newcastle or Niles, and (b) as
to DLC, if it disallows from recovery in rates a material portion of
the expenses related to the Generation Exchange.
20
(185) "Release" means release, spill, leak, discharge, dispose
of, pump, pour, emit, empty, inject, xxxxx, dump or allow to escape
into or through the environment.
(186) "Remediation" means any action taken in the investigation,
removal, confinement, cleanup, treatment, or monitoring of an
Environmental Condition on Real Property or Off-Site Location,
including, without limitation, (a) obtaining any Permits or
Environmental Permits required for such remedial activities, and (b)
implementation of any engineering controls and institutional controls.
The term "Remediation" includes, without limitation, any action which
constitutes "removal action" or "remedial action" as defined by
Section 101 of CERCLA, 42 U.S.C. section 6901(23) and (24); any action
which constitutes a "response" as defined by Section 102 of the
Pennsylvania Hazardous Sites Cleanup Act, 35 P.S. section 6020.103; or
any action which constitutes a "remedy" or "remedial activities" as
defined by Ohio Rev. Code Xxx. section 3746.01(N).
(187) "Representatives" means the DLC Representatives and the FE
Representatives, as applicable.
(188) "Required Regulatory Approvals" means with respect to a
Party, any consent or approval of, filing with, or notice to, any
Governmental Authority that is necessary for the execution and
delivery of this Agreement by such Party or the consummation of the
transactions contemplated hereby, other than such consents, approvals,
filings or notices which are not required in the ordinary course to be
obtained prior to the Exchange Closing and the transfer of the
Exchange Assets or which, if not obtained or made, will not prevent
such Party from performing its material obligations hereunder.
(189) "Revenue Bonds" has the meaning set forth in Section
8.16(a).
(190) "Xxxxxx" means the electrical generation plant known as
X.X. Xxxxxx Unit No. 7.
(191) "SEC" means the Securities and Exchange Commission and any
successor agency thereto.
(192) "Settlement Agreement" means the settlement agreement
pertaining to the East Lake Litigation substantially in the form of
Exhibit K attached hereto.
(193) "SO2 Emission Allowance" means an authorization by the
Administrator of the USEPA under the Clean Air Act, 42 U.S.C. section
7401, et seq., to emit one ton of sulfur dioxide during or after a
specified calendar year.
(194) "Subsidiary" when used in reference to any Person means any
entity of which outstanding securities, having ordinary voting power
21
to elect a majority of the Board of Directors or other Persons
performing similar functions of such entity are owned directly or
indirectly by such Person.
(195) "Support Agreement" means that certain Support Agreement to
be executed by FE and DLC providing, among other things, that FE will
provide a financial commitment to ensure that the net proceeds of the
Auction will be sufficient, at a minimum, to maintain or reduce the
level of stranded cost recovery approved by the PaPUC in its May 29,
1998 restructuring order.
(196) "Taxes" means all taxes, charges, fees, levies, penalties
or other assessments imposed by any federal, state, local or foreign
taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, withholding, social
security, gross receipts, license, stamp, occupation, employment or
other taxes, including any interest, penalties or additions
attributable thereto.
(197) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any
schedule or related or supporting information) required to be supplied
to any taxing authority with respect to Taxes including amendments
thereto.
(198) "TEC" means The Toledo Edison Company, a subsidiary of FE
and an Ohio corporation.
(199) "Termination Benefits" has the meaning set forth in Section
8.11(g).
(200) "Termination Date" has the meaning set forth in Section
11.1(b).
(201) "Third Party Claim" means any claim, action, or proceeding
made or brought by any Person who is not (a) a Party to this
Agreement, (b) an Affiliate of a Party to this Agreement, or (c) a
Winning Bidder or one of its Affiliates.
(202) "Transfer Taxes" means any real property transfer or gains
tax, sales tax, conveyance fee, use tax, stamp tax, stock transfer tax
or other similar tax, including any related penalties, interest and
additions to tax.
(203) "Transferable Permit" means a DLC Transferable Permit or an
FE Transferable Permit, as the case may be.
(204) "Transmission Assets" means with respect to a Plant, the
electrical transmission and distribution facilities (as opposed to
generation facilities) located on Real Property or forming part of
such Plant (whether or not regarded as a "transmission" or
"generation" asset for regulatory or accounting purposes), including
all switchyard facilities, step-up transformers, substation facilities
and support equipment, as well as all permits, contracts and
warranties, to the extent they relate to such transmission and
distribution assets.
22
(205) "Union Employees" has the meaning set forth in Section
8.11(b).
(206) "USEPA" means the United States Environmental Protection
Agency and any successor agency thereto.
(207) "UWUA" means Utility Workers Union of America.
(208) "WARN Act" means the Federal Worker Adjustment Retraining
and Notification Act of 1988, as amended.
(209) "Warranty Deed" means a special warranty deed or limited
warranty deed, as applicable, substantially in the form of Exhibit L
attached hereto (with respect to FE Real Property) or Exhibit M
attached hereto (with respect to DLC Real Property).
(210) "Winning Bidder" means the party or parties that enter into
an Auction Agreement. If there is more than one Winning Bidder, the
rights and obligations of each Winning Bidder described herein shall
relate to the FE Plant(s) to be acquired by that Winning Bidder and
each such Winning Bidder shall enter into an Auction Agreement with
the corresponding FE Subsidiary (for the purpose of such FE Subsidiary
making certain representations, warranties, covenants,
indemnifications, assignments and deliveries under such Auction
Agreement). For any provision which refers to or requires action by
the Winning Bidder, DLC may elect to perform as if it were the Winning
Bidder. If there shall be no Winning Bidder for any portion of the FE
Assets then, for the purposes of this Agreement, DLC shall be the
Winning Bidder with respect to such portion of the FE Assets.
(211) "Winning Bidder Indemnitee" has the meaning set forth in
Section 10.1(f).
(212) "Year 2000 Compliant" means with respect to any Party, that
the Computer Systems of such Party will correctly differentiate
between years, in different centuries, that end in the same two (2)
digits, and will accurately process date/time data (including, but not
limited to, calculating, comparing and sequencing) from, into, and
between the twentieth and twenty-first centuries, including leap year
calculations. "Year 2000 Compliance" has a meaning correlative to the
foregoing.
1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires, the singular shall include the plural, the masculine
shall include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." In addition, (i)
references to a Section, Article, Exhibit or Schedule shall mean a Section,
Article, Exhibit or Schedule of this Agreement; (ii) reference to a given
agreement or instrument shall be a reference to that agreement or instrument as
modified, amended, supplemented or restated through the date as of which such
reference is made; (iii) references to any Person shall include its permitted
successors and assigns and, in the case of any Governmental Authority, any
Person succeeding to its functions and capacities; and (iv) references to laws,
23
rules and regulations shall include such laws, rules and regulations as they may
from time to time be amended, modified or supplemented.
1.3 CAPCO Agreements to Govern. The Parties agree that, unless this
Agreement expressly provides otherwise, the Parties' ownership, operation and
maintenance of each Plant shall be governed by the CAPCO Agreements up to the
Exchange Closing Date in respect of such Plant. Unless otherwise restricted
under this Agreement, the CAPCO Agreements will govern and control the Parties'
ownership, operation and maintenance of each Plant prior to the Exchange Closing
Date in respect of such Plant.
1.4 DLC's Interest in Assets. The Parties acknowledge that DLC has a
thirty-one and two-tenths percent (31.2%) undivided interest in Xxxxxx and the
DLC Assets related thereto, a thirty-one and two tenths percent (31.2%)
undivided interest in Eastlake and the DLC Assets related thereto, a twenty-nine
and three-tenths percent (29.3%) undivided interest in Mansfield Unit No. 1 and
the DLC Assets related thereto, a twenty-eight and sixth-tenths percent (28.6%)
undivided interest in Mansfield Unit No. 2 and the DLC Assets related thereto,
and a thirteen and seventy-four hundredths percent (13.74%) undivided interest
in Mansfield Unit No. 3 and the DLC Assets related thereto. All references in
this Agreement to DLC's right, title and interest in such Plants and assets, and
rights, liabilities and obligations in connection therewith, shall be construed
in this context.
ARTICLE II
EXCHANGE OF ASSETS
2.1 Transfer of FE Assets and Assumed FE Liabilities.
(a) The Parties agree that DLC is to acquire beneficial
ownership of the FE Assets from the FE Subsidiaries as provided in Section 3.1
at the Exchange Closing, and that DLC will include the FE Assets in the Auction
and intends to convey such beneficial ownership to the Winning Bidders in the
Auction pursuant to the Auction Agreements. The FE Subsidiaries agree to
cooperate with DLC with respect to the disposition by DLC of its beneficial
ownership of the FE Assets in the Auction on the terms and conditions contained
in this Agreement, and to transfer title in and to deliver the FE Assets
directly to the Winning Bidders and to assign to the Winning Bidders the FE
Assumed Liabilities associated with the FE Assets (other than Accrued
Liabilities), each at the direction of DLC as provided in clause (b) of this
Section 2.1.
(b) In the event that the Exchange Closing and the Auction
Closing are scheduled to occur on the same day, DLC may, at its option, by
notice in writing to the applicable FE Subsidiaries, as designated in Schedule
3.1, not less than fifteen (15) days before the Exchange Closing, direct each
applicable FE Subsidiary, at the Auction Closing, acting on DLC's behalf (as the
new owner of the FE Assets pursuant to this Agreement):
(i) to execute and deliver Xxxx(s) of Sale with
respect to the transfer of the FE Tangible Personal Property with respect
24
to the FE Assets of such FE Subsidiary and the Warranty Deed(s) with
respect to the FE Real Property relating to the FE Assets of such FE
Subsidiary and, to the extent applicable, to record title to such FE Real
Property in the name of the applicable Winning Bidder,
(ii) to execute and deliver the FE Assignment and
Assumption Agreement pursuant to which the applicable Winning Bidder, shall
assume the Assumed FE Liabilities directly from such FE Subsidiary,
provided that any Assumed FE Liabilities that are Accrued FE Liabilities
(as defined below) shall not be assigned to the applicable Winning Bidder,
but shall instead be assigned to DLC pursuant to an FE (Accrued Liability)
Assignment and Assumption Agreement, as specified by Section 4.3, and
(iii) to provide directly to the applicable Winning
Bidder, all other affidavits, instruments, documents, certificates,
consents and agreements, as specified by Section 5.6(a);
provided, however, that in the event that the Exchange Closing and the Auction
Closing do not occur on the same day, notwithstanding any direction by DLC to
the contrary pursuant to this Section 2.1(b) or otherwise, the applicable FE
Subsidiaries shall make the foregoing deliveries directly to DLC rather than to
the applicable Winning Bidder as may otherwise be contemplated herein.
2.2 Auction Agreement.
(a) Each of the FE Subsidiaries agrees that certain
representations, warranties, covenants, indemnifications, assignments and
deliveries they are making to DLC in this Agreement in respect of its FE Assets
shall run to the benefit of the Winning Bidders that will acquire such FE Assets
from DLC in the Auction, but only to the extent such representations,
warranties, covenants, indemnifications, assignments and deliveries relate to
such FE Assets, and each of the FE Subsidiaries agrees to be a party to the
Auction Agreement with each Winning Bidder that is acquiring FE Assets of such
FE Subsidiary solely for the purpose of making such representations, warranties,
covenants, indemnifications, assignments and deliveries to such Winning Bidder
insofar as they relate to the FE Assets being acquired by such Winning Bidder.
(b) No FE Subsidiary shall have any rights with respect to any
consideration paid to DLC by the Winning Bidder for the FE Assets under any
Auction Agreement, and in particular shall not have any right to receive,
pledge, borrow, or otherwise obtain the benefit of any money or other property
received by DLC from any Winning Bidder.
(c) DLC shall be liable to an FE Subsidiary for the obligations
of the Winning Bidder that acquires its FE Assets if such Winning Bidder does
not have either (i) a credit rating for its senior secured debt as assigned by
Xxxxx'x Investors Service that is equal to or greater than that of the other
parties that acquire the DLC Plants offered for sale in the Auction, but in no
case less than that of the party that acquires the DLC Plant known as the Elrama
Station, or (ii) a credit rating for its senior secured debt as assigned by
Xxxxx'x Investors Service of at least Baa3.
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ARTICLE III
TRANSFER OF DLC ASSETS
3.1 Transfer of DLC Assets. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the Exchange
Closing, DLC will assign, convey, transfer and deliver to the FE Subsidiaries,
as designated in Schedule 3.1, and each such FE Subsidiary will assume and
acquire from DLC, free and clear of all Encumbrances (except for Permitted
Encumbrances (DLC Assets)), as applicable in the case of each such FE
Subsidiary, all of DLC's right, title and interest in and to all of the assets
(except for Excluded DLC Assets) constituting, or used in and necessary to
generate electricity from, the DLC Plants and DLC's undivided percentage
ownership interest in those assets described below, each as in existence on the
Exchange Closing Date (collectively, "DLC Assets"):
(a) Those certain parcels of real property owned by DLC relating
to the DLC Plants together with all buildings, facilities and other improvements
thereon and all appurtenances thereto, as described in Schedule 6.7 (the "DLC
Real Property");
(b) All DLC Inventories, all Capital Spare Parts of DLC and,
subject to Section 3.2(h), DLC SO2 Emission Allowances and DLC NOx Emission
Allowances with a vintage year occurring during or after the year during which
the Exchange Closing occurs;
(c) All machinery (mobile or otherwise), equipment (including
communications equipment), vehicles, tools, furniture and furnishings and other
personal property related to the DLC Assets, owned by DLC and located on the DLC
Real Property on the Exchange Closing Date, including, without limitation, items
of personal property jointly owned by DLC and an FE Subsidiary included in
Schedule 3.1(c) together with all the personal property of DLC used principally
in the operation of the DLC Plants that are in the possession of DLC and whether
or not located on the DLC Real Property, as listed in such Schedule 3.1(c),
(other than property used or primarily usable as part of the DLC Transmission
Assets) (collectively, "DLC Tangible Personal Property");
(d) Subject to the provisions of Section 8.6(c), all DLC
Agreements;
(e) Subject to the provisions of Section 8.6(c), all DLC Real
Property Leases;
(f) All DLC Transferable Permits;
(g) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, documents, blueprints and
as-built plans, specifications, procedures and similar items of DLC relating
specifically to the DLC Assets and necessary for the operation of the DLC
Plants, in the possession of DLC (subject to the right of DLC to retain copies
of the same for its use), other than such items which are proprietary to third
parties and accounting records;
(h) All DLC Emission Reduction Credits that accrue on or after,
the date of this Agreement but prior to the Exchange Closing Date;
26
(i) All unexpired, transferable warranties and guarantees from
third parties with respect to the DLC Assets and listed in Schedule 3.1(i):
(j) The names of the DLC Plants. It is expressly understood that
DLC is not assigning or transferring to any FE Subsidiary any right to use the
name "Duquesne," "Duquesne Light Company," "DQE," "DQE, Inc.," or other trade
names, trademarks, service marks, corporate names and logos or any part,
derivative or combination thereof;
(k) All drafts, memoranda, reports, information, technology, and
specifications relating to DLC's plans for Year 2000 Compliance with respect to
the DLC Plants; and
(l) The Intellectual Property as described on Schedule 3.1(l)
(the "DLC Intellectual Property").
3.2 Excluded DLC Assets. Notwithstanding anything to the contrary in
this Agreement, nothing in this Agreement will constitute a transfer to any FE
Subsidiary of, or be construed as conferring on any FE Subsidiary, and no FE
Subsidiary is acquiring, any right, title or interest in or to the following
specific assets which are associated with the DLC Assets, but which are hereby
specifically excluded from the transfer to any FE Subsidiary and the definition
of DLC Assets herein (collectively, the "Excluded DLC Assets"):
(a) The DLC Transmission Assets, including those certain assets,
facilities, agreements and other property used or primarily usable as part of
the DLC Transmission Assets;
(b) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
(c) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and any income, sales, payroll or other
tax receivables;
(d) The rights of DLC and its Affiliates to the names
"Duquesne," "Duquesne Light Company," "DQE," "DQE, Inc.," or other trade names,
trademarks, service marks, corporate names or logos or any part, derivative or
combination thereof;
(e) All tariffs, agreements and arrangements to which DLC is a
party for the purchase or sale of electric capacity and/or energy or for the
purchase of transmission or ancillary services;
(f) Except as provided in Section 3.7, or in the case of causes
of action against third parties (including indemnification and contribution)
relating to an Environmental Condition or Regulated Substance or arising under
Environmental Laws, the rights of DLC in and to any causes of action against
third parties (including indemnification and contribution) relating to any DLC
Real Property or DLC Tangible Personal Property, DLC Permits, DLC Environmental
Permits, Taxes, DLC Real Property Leases or DLC Agreements, if any, and not
relating to the Assumed DLC Liabilities, including any claims for refunds,
prepayments, offsets, recoupment, insurance proceeds, condemnation awards,
27
judgments and the like, whether received as payment or credit against future
liabilities, relating specifically to the DLC Plants or the DLC Real Property
and relating to any period prior to the Exchange Closing Date;
(g) Any and all of DLC's rights and interests in any contract
that is not a DLC Agreement or that is an intercompany transaction between DLC
and an Affiliate of DLC, whether or not such intercompany transaction relates to
the provision of goods and services, payment arrangements, intercompany charges
or balances, or the like;
(h)
(i) (A) All DLC SO2 Emission Allowances with a vintage
year occurring prior to the year of the Exchange Closing and (B) any
excess DLC SO2 Emission Allowances resulting from DLC's ownership of
the DLC Plants during the year of the Exchange Closing, which shall be
calculated by summing the SO2 Emission Allowances allocated to the DLC
Plants by the USEPA for such year, multiplied by the quotient of the
number of days of DLC ownership of the DLC Plants divided by 365,
subtracting the actual tons of sulfur dioxide emitted by the DLC
Plants during such portion of such year, and multiplying the result by
DLC's ownership share in such DLC Plants. If the results of such
calculation is zero or less than zero the amount of the excess DLC SO2
Emission Allowances shall equal zero.
(ii) Any excess DLC NOx Emission Allowances resulting from
DLC's ownership of the DLC Plants located in Pennsylvania during the
year of the Exchange Closing, which shall be calculated by summing the
NOx Emission Allowances allocated to such DLC Plants by the PaDEP for
such year, multiplied by the quotient of the number of days of DLC
ownership of such DLC Plants during the ozone season (as defined by
PaDEP in its NOx Budget Program), divided by the number of days in
said ozone season, subtracting the actual tons of nitrous oxides
emitted by such DLC Plants during such portion of such ozone season
and multiplying the result by DLC's ownership share in such DLC
Plants. If the result of such calculation is zero or less then zero,
the amount of the excess DLC NOx Emission Allowances shall equal zero;
and
(i) Any DLC Nuclear Assets.
3.3 Assumed DLC Liabilities. On the Exchange Closing Date, each FE
Subsidiary, as designated by FE in Schedule 3.1, shall deliver to DLC a DLC
Assignment and Assumption Agreement pursuant to which such FE Subsidiary shall
assume and agree to discharge when due, without recourse to DLC, all of the
following liabilities and obligations of DLC, direct or indirect, known or
unknown, absolute or contingent, which relate to, or arise by virtue of DLC's
ownership of, the applicable DLC Assets (other than Excluded DLC Liabilities),
in accordance with the respective terms and subject to the respective conditions
thereof (collectively, "Assumed DLC Liabilities"):
(a) All liabilities and obligations of DLC arising on or after
the Exchange Closing Date under the DLC Agreements, the DLC Real Property Leases
and the DLC Transferable Permits in accordance with the terms thereof,
28
including, without limitation, the DLC Agreements entered into by DLC (i) prior
to the date hereof and (ii) after the date hereof consistent with the terms of
this Agreement, except in each case to the extent such liabilities and
obligations, but for a breach or default by DLC, would have been paid, performed
or otherwise discharged on or prior to the Exchange Closing Date or to the
extent the same arise out of any such breach or default or out of any event
which after the giving of notice or passage of time or both would constitute a
default by DLC;
(b) All liabilities and obligations associated with the DLC
Assets in respect of Taxes for which such FE Subsidiary is liable pursuant to
Sections 5.4 and 8.9(b) hereof;
(c) All liabilities, responsibilities and obligations arising
under Environmental Laws or relating to Environmental Conditions or Regulated
Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation is known or unknown, contingent or accrued, as of the Exchange
Closing Date, including, but not limited to: (i) costs of compliance (including
capital, operating and other costs) relating to any violation or alleged
violation of Environmental Laws occurring prior to, on or after the Exchange
Closing Date, with respect to the ownership or operation of the DLC Assets; (ii)
property damage or natural resource damage (whether such damages were manifested
before or after the Exchange Closing Date) arising from Environmental Conditions
or Releases of Regulated Substances at, on, in, under, adjacent to, or migrating
from any DLC Assets prior to, on, or after the Exchange Closing Date; (iii) any
Remediation (whether or not such Remediation commenced before the Exchange
Closing Date or commences after the Exchange Closing Date) of Environmental
Conditions or Regulated Substances that are present or have been Released prior
to, on or after the Exchange Closing Date, at, on, in, adjacent to or migrating
from the DLC Assets; (iv) any violations or alleged violations of Environmental
Laws occurring on or after the Exchange Closing Date with respect to the
ownership or operation of any DLC Assets; (v) any bodily injury or loss of life
arising from Environmental Conditions or Releases of Regulated Substances at,
on, in, under, adjacent to or migrating from any DLC Assets on or after the
Exchange Closing Date; (vi) any bodily injury, loss of life, property damage, or
natural resource damage arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release, at any Off-Site Location, or arising
from the arrangement for such activities, on or after the Exchange Closing Date,
of Regulated Substances generated in connection with the ownership or operation
of the DLC Assets; and (vii) any Remediation of any Environmental Condition or
Release of Regulated Substances arising from the storage, transportation,
treatment, disposal, discharge, recycling or Release, at any Off-Site Location,
or arising from the arrangement for such activities, on or after the Exchange
Closing Date, of Regulated Substances generated in connection with the ownership
or operation of the DLC Assets; provided, that nothing set forth in this Section
3.3(c) shall require any FE Subsidiary to assume any liabilities,
responsibilities or obligations that are expressly excluded in Section 3.4;
(d) All liabilities and obligations of DLC with respect to the
DLC Assets under the agreements or consent orders set forth on Schedule 3.3(d)
arising on or after the Exchange Closing;
(e) Any Tax that may be imposed by any federal, state or local
government on the ownership, sale (except as otherwise provided in Section
8.9(a)), operation or use of the DLC Assets on or after the Exchange Closing
Date, except for any Income Taxes attributable to income received by DLC; and
29
(f) All of DLC's rights (except as provided under the CAPCO
Settlement Agreement) and obligations under all CAPCO Agreements, except to the
extent otherwise specifically provided in the applicable DLC Assignment and
Assumption Agreement.
3.4 Excluded DLC Liabilities. Notwithstanding anything to the
contrary in this Agreement, no FE Subsidiary shall assume or be obligated to
pay, perform or otherwise discharge the following liabilities or obligations of
DLC, provided that, with respect to liabilities and obligations under one or
more of the CAPCO Agreements, DLC retains such liabilities and obligations only
to the extent such liabilities and obligations are imposed currently on DLC
under such CAPCO Agreements, (collectively, the "Excluded DLC Liabilities"):
(a) Any liabilities or obligations of DLC in respect of any
Excluded DLC Assets or other assets of DLC that are not DLC Assets;
(b) Any liabilities or obligations with respect to Taxes
attributable to DLC's ownership, operation or use of DLC Assets for taxable
periods, or portions thereof, ending before the Exchange Closing Date, except
for Taxes for which any FE Subsidiary is liable pursuant to Section 5.4 hereof;
(c) Any liabilities or obligations of DLC accruing under DLC
Agreements prior to the Exchange Closing Date;
(d) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for personal injury or tort,
or similar causes of action arising during or attributable to the period prior
to the Exchange Closing Date, other than liabilities or obligations assumed by
such FE Subsidiary under Section 3.3(c);
(e) Any fines, penalties and associated costs for defending
related enforcement actions resulting from any violation or alleged violation of
Environmental Laws with respect to the ownership or operation of the DLC Assets
occurring prior to the Exchange Closing Date;
(f) Any payment obligations of DLC pursuant to the DLC
Agreements for goods delivered or services rendered prior to the Exchange
Closing Date, including, but not limited to, rental payments pursuant to the DLC
Real Property Leases;
(g) Any liabilities, responsibilities and obligations of DLC
arising under Environmental Laws or relating to Environmental Conditions or
Regulated Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation was known or unknown, contingent or accrued, which relates to (i) any
bodily injury, loss of life, property damage or natural resource damage arising
from the storage, transportation, treatment, disposal, discharge, recycling or
Release of Regulated Substances generated in connection with the ownership or
operation of the DLC Assets at any Off-Site Location, or arising from the
arrangement for such activities, prior to the Exchange Closing Date; or (ii) any
Remediation of any Environmental Condition or Regulated Substance at any
Off-Site Location, arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release of Regulated Substances generated in
connection with the ownership or operation of the DLC Assets at such Off-Site
30
Location, or arising from the arrangement for such activities, prior to the
Exchange Closing Date; provided, that for purposes of this paragraph, "Off-Site
Location" does not include any location to which Regulated Substances disposed
of or Released at the DLC Assets have migrated;
(h) Any liability to third parties (including employees) for
bodily injury or loss of life, to the extent caused (or allegedly caused) by
Environmental Conditions or the Release of Regulated Substances at, on, in,
under, or adjacent to, or migrating from, the DLC Assets prior to the Exchange
Closing Date; and
(i) Any liability of DLC arising out of a breach by DLC or any
of its Affiliates of any of their respective obligations under this Agreement or
the Ancillary Agreements.
3.5 Control of Litigation. The Parties agree and acknowledge that DLC
shall be entitled exclusively to control, defend and settle any litigation,
administrative or regulatory proceeding, and any investigation or Remediation
activity (including without limitation any environmental mitigation or
Remediation activities), arising out of or related to any Excluded DLC
Liabilities, and the FE Subsidiaries agree to cooperate fully in connection
therewith.
3.6 Fuel Supplies. At the Exchange Closing, DLC will sell, assign,
convey and transfer to each applicable FE Subsidiary its right, title and
interest in and to the Fuel Supplies related to the operation of the
corresponding DLC Plants, and such FE Subsidiary shall pay to DLC an amount
equal to the actual cost of such Fuel Supplies on DLC's books and records, as
established by invoices (and reasonable supporting materials demonstrating the
actual cost of such Fuel Supplies) with such invoices and supporting materials
to be delivered to the applicable FE Subsidiary by DLC not later than three (3)
Business Days prior to the Exchange Closing; except that the cost (which the
applicable FE subsidiary shall pay to DLC) of coal inventories at Mansfield,
shall be the actual cost for such Fuel Supplies reflected on DLC's books and
records at the Exchange Closing Date reduced by an amount equal to the product
of the number of tons of coal that are in inventory at Mansfield on the Exchange
Closing Date multiplied by $9.50 to provide an adjustment to compensate for an
existing contract obligation; provided, however, that in the event the Exchange
Closing occurs after December 31, 1999 but before March 1, 2000, such cost shall
be the actual cost for such Fuel Supplies reflected on DLC's books and records
reduced by an amount equal to the product of (x) the number of tons of coal that
are in inventory at Mansfield on the Exchange Closing Date multiplied by (y) the
product of $.15835 multiplied by the number of calendar days between the
Exchange Closing Date and March 1, 2000; and, provided further that in the event
the Exchange Closing occurs on or after March 1, 2000, such cost shall be the
actual cost for such Fuel Supplies reflected on DLC's books and records without
any reduction.
3.7 Property Tax Litigation. The applicable FE Subsidiary will
receive the full benefits, including any refunds, and shall bear the full costs
incurred after October 14, 1998, related to pending litigation and appeals
regarding the property taxes for Eastlake and Xxxxxx as identified on Schedule
3.7. DLC will promptly pay to such FE Subsidiary all amounts received by DLC as
a result of such pending litigation and appeals. If the Generation Exchange as
to Eastlake or Xxxxxx is not consummated for any reason, the Parties shall
negotiate arrangements that place them in the same position as to such Plant,
with respect to any such costs or benefits, as if neither the Agreement in
Principle nor any of the Exchange Agreements had been executed. DLC will
continue to take all
31
actions necessary in such proceedings, in cooperation with the applicable FE
Subsidiary, until the Exchange Closing, subject to reimbursement at the Exchange
Closing by such FE Subsidiary of all expenses incurred by DLC for such
proceedings after October 14, 1998.
ARTICLE IV
TRANSFER OF FE ASSETS
4.1 Transfer of FE Assets. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, each applicable FE
Subsidiary, as designated in Schedules 4.1 (Avon Lake), 4.1 (New Castle) and 4.1
(Niles), agrees that all of its ownership rights and interests in and to all of
the assets (except for Excluded FE Assets) constituting, or used in, and
necessary to generate electricity from, its FE Plant, including, without
limitation, those assets identified in Schedule 4.1 and those assets described
below, each as in existence on the Exchange Closing Date (collectively, "FE
Assets"), will be assigned and conveyed to DLC, free and clear of all
Encumbrances (except for Permitted Encumbrances (FE Assets)), and DLC agrees
that it will have assumed and acquired such beneficial ownership rights and
interests in the FE Assets from the FE Subsidiaries, such assignment,
conveyance, assumption and acquisition to be effective as of the satisfaction or
waiver of the last of the conditions to the Exchange Closing set forth in
Article IX by the Party entitled to the benefit of such condition.
(a) Those certain parcels of real property owned by such FE
Subsidiary relating to its FE Plants together with all buildings, facilities and
other improvements thereon and all appurtenances thereto, as described in
Schedule 7.9 (Avon Lake), 7.9 (New Castle) and 7.9 (Niles), respectively (the
"FE Real Property");
(b) All FE Inventories of such FE Subsidiary, all Capital Spare
Parts of such FE Subsidiary and, subject to Section 4.2(j), FE SO2 Emission
Allowances and FE NOx Emission Allowances of such FE Subsidiary with a vintage
year occurring during or after the year during which the Exchange Closing
occurs;
(c) All machinery (mobile or otherwise), equipment (including
communications equipment), vehicles, tools, furniture and furnishings and other
personal property related to the FE Assets, owned by such FE Subsidiary and
located on the FE Real Property on the Exchange Closing Date, including, without
limitation, the items of personal property included in Schedules 4.1(c)(Avon
Lake), 4.1(c)(New Castle) and 4.1(c)(Niles), respectively, as the case may be,
together with all the personal property of such FE Subsidiaries used principally
in the operation of its FE Plant that are in the possession of such FE
Subsidiary whether or not located on the FE Real Property, as listed in such
Schedules 4.1(c), (other than property used or primarily usable as part of the
FE Transmission Assets) (collectively, "FE Tangible Personal Property");
(d) Subject to the provisions of Section 8.6(c), all FE
Agreements of such FE Subsidiary;
32
(e) Subject to the provisions of Section 8.6(c), all FE Real
Property Leases of such FE Subsidiary;
(f) All FE Transferable Permits of such FE Subsidiary;
(g) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, documents, blueprints and
as-built plans, specifications, procedures and similar items of such FE
Subsidiary relating specifically to its FE Assets and necessary for the
operation of its FE Plant (subject to the right of such FE Subsidiary to retain
copies of the same for its use) other than such items which are proprietary to
third parties and accounting records;
(h) All unexpired, transferable warranties and guarantees from
third parties with respect to any FE Asset of such FE Subsidiary, as of the
Exchange Closing Date;
(i) The names of the FE Plants. It is expressly understood that
no FE Subsidiary is assigning or transferring to DLC or any Winning Bidder any
right to use the name "FirstEnergy," "FE," "Ohio Edison," "Pennsylvania Power,"
"Cleveland Electric Illuminating," "Toledo Edison," "The Illuminating Company"
or other trade names, trademarks, service marks, corporate names and logos or
any part, derivative or combination thereof;
(j) All drafts, memoranda, reports, information, technology, and
specifications relating to such FE Subsidiary's plans for Year 2000 Compliance
with respect to its FE Plant;
(k) The Intellectual Property of each such FE Subsidiary, as
described on Schedule 4.1(k) (the "FE Intellectual Property"); and
(l) All FE Emission Reduction Credits of such FE Subsidiary with
respect to its FE Plant that accrue on or after the date of this Agreement but
prior to the Exchange Closing Date.
4.2 Excluded FE Assets. Notwithstanding anything to the contrary in
this Agreement, nothing in this Agreement will constitute a transfer to DLC or a
Winning Bidder of, or be construed as conferring on DLC or a Winning Bidder, and
neither DLC nor a Winning Bidder is acquiring, any right, title or interest in
or to the following specific assets of the FE Subsidiaries that are associated
with their FE Assets, but which are hereby specifically excluded from the sale
and the definition of FE Assets herein (collectively, the "Excluded FE Assets"):
(a) The FE Transmission Assets of each FE Subsidiary, including
those certain assets, facilities and agreements identified on Schedule 4.2(a)
hereto;
(b) Certain switches and meters in the FE Plants, gas
facilities, revenue meters and remote testing units, drainage pipes and systems,
as identified in the FE Easement and Attachment Agreement, and certain equipment
and systems described on Schedule 4.2(b);
(c) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities of such FE
Subsidiaries;
33
(d) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and any income, sales, payroll or other
tax receivables of such FE Subsidiaries;
(e) The rights of each FE Subsidiary and its Affiliates to the
names "FirstEnergy," "FE," "Ohio Edison," "Pennsylvania Power," "Cleveland
Electric Illuminating," "Toledo Edison," "The Illuminating Company" or any other
trade names, trademarks, service marks, corporate names or logos, or any part,
derivative or combination thereof;
(f) All tariffs, agreements and arrangements to which an FE
Subsidiary is a party for the purchase or sale of electric capacity and/or
energy or for the purchase of transmission or ancillary services;
(g) Except in the case of causes of action against third parties
(including indemnification and contribution) relating to an Environmental
Condition or Regulated Substances or arising under Environmental Laws, the
rights of any FE Subsidiary in and to any causes of action against third parties
(including indemnification and contribution) relating to any FE Real Property or
FE Tangible Personal Property, FE Permits, FE Environmental Permits, Taxes, FE
Real Property Leases or FE Agreements, if any, and not relating to the Assumed
FE Liabilities, including any claims for refunds, prepayments, offsets,
recoupment, insurance proceeds, condemnation awards, judgments and the like,
whether received as payment or credit against future liabilities, relating
specifically to the FE Plants or the FE Real Property and relating to any period
prior to the Exchange Closing Date;
(h) All personnel records of each FE Subsidiary and its
Affiliates relating to the FE Transferred Employees, other than FE Transferred
Employee Records or other records the disclosure of which is required by law, or
legal or regulatory process or subpoena;
(i) Any and all of each FE Subsidiary's rights and interests in
any contract that is not an FE Agreement or that is an intercompany transaction
between an FE Subsidiary and its Affiliate, whether or not such intercompany
transaction relates to the provision of goods and services, payment
arrangements, intercompany charges or balances, or the like;
(j)
(i) (A) All FE SO2 Emission Allowances with a vintage year
occurring prior to the year of the Exchange Closing and (B) any excess
FE SO2 Emission Allowances resulting from the FE Subsidiaries'
ownership of the FE Plants during the year of the Exchange Closing,
which shall be calculated by summing the SO2 Emission Allowances
allocated to the FE Plants by the USEPA for such year, multiplied by
the quotient of the number of days of ownership of the FE Plants by
the FE Subsidiaries divided by 365, and subtracting the actual tons of
sulfur dioxide emitted by the FE Plants during such portion of such
year. If the results of such calculation is zero or less than zero,
the amount of the excess FE SO2 Emission Allowances shall equal zero;
(ii) Any excess FE NOx Emission Allowances resulting from
the FE Subsidiaries' ownership of the FE Plants located in
34
Pennsylvania during the year of the Exchange Closing, which shall be
calculated by summing the NOx Emission Allowances allocated to such FE
Plants by the PaDEP for such year, multiplied by the quotient of the
number of days of the FE Subsidiaries' ownership of such FE Plants
during the ozone season (as defined by PaDEP in its NOx Budget
Program), divided by the number of days in said ozone season, and
subtracting the actual tons of nitrous oxides emitted by such FE
Plants during such portion of such ozone season. If the result of such
calculation is zero or less then zero, the amount of the excess FE NOx
Emission Allowances shall equal zero; and
(k) Any and all rights and obligations of the FE Subsidiaries
under the CAPCO Agreements.
4.3 Assumed FE Liabilities. At the Exchange Closing, DLC and each FE
Subsidiary shall execute and deliver to each other an FE Assignment and
Assumption Agreement with respect to all of the Assumed FE Liabilities
applicable to the FE Assets being transferred by such FE Subsidiary (including
any Accrued Liabilities of the applicable FE Subsidiary), provided, however,
that if DLC has exercised its option pursuant to Section 2.1 to direct each
applicable FE Subsidiary to execute and deliver the respective FE Assignment and
Assumption Agreement to the applicable Winning Bidder, then each such FE
Subsidiary shall execute and deliver to such Winning Bidder, subject to such
Winning Bidder executing and delivering, an FE Assignment and Assumption
Agreement with respect to all of the Assumed FE Liabilities applicable to the FE
Assets being transferred by such FE Subsidiary to such Winning Bidder, except as
otherwise provided below with respect to Accrued FE Liabilities, and provided
further, that the FE Subsidiaries agree that the obligation of DLC to execute an
FE Assignment and Assumption Agreement with respect to any of the Assumed FE
Liabilities (other than Accrued FE Liabilities) shall be discharged by the
execution of an FE Assignment and Assumption Agreement by the applicable Winning
Bidder with respect to such FE Assumed Liabilities. All of the following
liabilities and obligations of each FE Subsidiary, direct or indirect, known or
unknown, absolute or contingent, which relate to, or arise by virtue of such FE
Subsidiary's ownership of the FE Assets (other than Excluded FE Liabilities) are
referred to collectively as "Assumed FE Liabilities":
(a) All liabilities and obligations of such FE Subsidiary
associated with its FE Assets arising on or after the Exchange Closing Date
under its FE Agreements, FE Real Property Leases and FE Transferable Permits,
each in accordance with the terms thereof, including, without limitation, the FE
Agreements entered into by such FE Subsidiary (i) prior to the date hereof and
(ii) after the date hereof consistent with the terms of this Agreement, except
in each case to the extent such liabilities and obligations, but for a breach or
default of such FE Subsidiary, would have been paid, performed or otherwise
discharged on or prior to the Exchange Closing Date or to the extent the same
arise out of any such breach or default or out of any event which after the
giving of notice or passage of time or both would constitute a default by such
FE Subsidiary;
(b) All liabilities and obligations of such FE Subsidiary
associated with its FE Assets in respect of Taxes for which DLC or the
corresponding Winning Bidder is liable pursuant to Sections 5.4 or 8.9(a)
hereof;
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(c) All liabilities and obligations of the such FE Subsidiary
associated with its FE Assets with respect to the FE Transferred Employees
incurred after the Exchange Closing Date for which the corresponding Winning
Bidder is responsible pursuant to Section 8.11;
(d) All liabilities, responsibilities and obligations of such FE
Subsidiary associated with its FE Assets arising under Environmental Laws or
relating to Environmental Conditions or Regulated Substances (including common
law liabilities relating to Environmental Conditions and Regulated Substances),
whether such liability, responsibility or obligation is known or unknown,
contingent or accrued, as of the Exchange Closing Date, including, but not
limited to: (i) costs of compliance (including capital, operating and other
costs) relating to any violation or alleged violation of Environmental Laws
occurring prior to, on or after the Exchange Closing Date, with respect to the
ownership or operation of the FE Assets; (ii) property damage or natural
resource damage (whether such damages were manifested before or after the
Exchange Closing Date) arising from Environmental Conditions or Releases of
Regulated Substances at, on, in, under, adjacent to, or migrating from any FE
Assets prior to, on, or after the Exchange Closing Date; (iii) any Remediation
(whether or not such Remediation commenced before the Exchange Closing Date or
commences after the Exchange Closing Date) of Environmental Conditions or
Regulated Substances that are present or have been Released prior to, on or
after the Exchange Closing Date, at, on, in, adjacent to or migrating from the
FE Assets; (iv) any violations or alleged violations of Environmental Laws
occurring on or after the Exchange Closing Date with respect to the ownership or
operation of any FE Assets; (v) any bodily injury or loss of life arising from
Environmental Conditions or Releases of Regulated Substances at, on, in, under,
adjacent to or migrating from any FE Assets on or after the Exchange Closing
Date; (vi) any bodily injury, loss of life, property damage, or natural resource
damage arising from the storage, transportation, treatment, disposal, discharge,
recycling or Release, at any Off-Site Location, or arising from the arrangement
for such activities, on or after the Exchange Closing Date, of Regulated
Substances generated in connection with the ownership or operation of the FE
Assets; and (vii) any Remediation of any Environmental Condition or Release of
Regulated Substances arising from the storage, transportation, treatment,
disposal, discharge, recycling or Release, at any Off-Site Location, or arising
from the arrangement for such activities, on or after the Exchange Closing Date,
of Regulated Substances generated in connection with the ownership or operation
of the FE Assets; provided, that nothing set forth in this Section 4.3(d) shall
require the applicable Winning Bidder or DLC to assume any liabilities,
responsibilities or obligations that are expressly excluded in Section 4.4;
(e) All liabilities and obligations of such FE Subsidiary
associated with its FE Assets under the agreements or consent orders set forth
on Schedule 4.3(e) arising on or after the Exchange Closing Date; and
(f) With respect to the FE Assets of such FE Subsidiary, any Tax
that may be imposed by any federal, state or local government on the ownership,
sale (except as otherwise provided in Section 8.9(a)), operation or use of the
FE Assets on or after the Exchange Closing Date, except for any Income Taxes
attributable to income received by such FE Subsidiary.
Notwithstanding any other provision of this Section 4.3, to the extent that any
of the Assumed FE Liabilities that would be assigned and assumed by a Winning
Bidder pursuant to this Section 4.3 are Accrued Liabilities as of the Exchange
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Closing Date of an FE Subsidiary ("Accrued FE Liabilities"), then such Accrued
FE Liabilities shall not be assigned to and assumed by such Winning Bidder as
otherwise provided herein, but shall instead be assigned to and assumed by DLC
at the Exchange Closing pursuant to FE (Accrued Liability) Assignment and
Assumption Agreements to be entered into between DLC and such FE Subsidiaries,
and each FE Subsidiary and DLC agree to execute and deliver to each other an FE
(Accrued Liability) Assignment and Assumption Agreement with respect to the
Accrued Liabilities of such FE Subsidiary.
4.4 Excluded FE Liabilities. Notwithstanding anything to the contrary
in this Agreement, neither DLC nor the applicable Winning Bidder shall assume or
be obligated to pay, perform or otherwise discharge the following liabilities or
obligations of each of the FE Subsidiaries (collectively, the "Excluded FE
Liabilities"):
(a) Any liabilities or obligations of the applicable FE
Subsidiary in respect of any Excluded FE Assets or other assets of such FE
Subsidiary that are not its FE Assets;
(b) Any liabilities or obligations of such FE Subsidiary with
respect to Taxes attributable to such FE Subsidiary's ownership, operation or
use of its FE Assets for taxable periods, or portions thereof, ending before the
Exchange Closing Date, except for Taxes for which the applicable Winning Bidder
or DLC is liable pursuant to Sections 5.4 hereof;
(c) Any liabilities or obligations of such FE Subsidiary
accruing under any of its FE Agreements prior to the Exchange Closing Date;
(d) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for personal injury or tort,
or similar causes of action arising during or attributable to the period prior
to the Exchange Closing Date, other than liabilities or obligations assumed
under Section 4.3(d);
(e) Any fines, penalties and associated costs for defending
related enforcement actions, resulting from any violation or alleged violation
of Environmental Laws with respect to such FE Subsidiary's ownership or
operation of its FE Assets occurring prior to the Exchange Closing Date;
(f) Any payment obligations of such FE Subsidiary pursuant to
its FE Agreements for goods delivered or services rendered prior to the Exchange
Closing Date, including, but not limited to, rental payments pursuant to its FE
Real Property Leases;
(g) Any liabilities, responsibilities and obligations of such FE
Subsidiary arising under Environmental Laws or relating to Environmental
Conditions or Regulated Substances (including common law liabilities relating to
Environmental Conditions and Regulated Substances), whether such liability,
responsibility or obligation was known or unknown, contingent or accrued, which
relates to (i) any bodily injury, loss of life, property damage or natural
resource damage arising from the storage, transportation, treatment, disposal,
discharge, recycling or Release of Regulated Substances generated in connection
with such FE Subsidiary's ownership or operation of its FE Assets at any
Off-Site Location, or arising from the arrangement for such activities, prior to
the Exchange Closing Date; or (ii) any Remediation of any Environmental
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Condition or Regulated Substance at any Off-Site Location, arising from the
storage, transportation, treatment, disposal, discharge, recycling or Release of
Regulated Substances generated in connection with such FE Subsidiary's ownership
or operation of its FE Assets at such Off-Site Location, or arising from the
arrangement for such activities, prior to the Exchange Closing Date; provided,
that for purposes of this paragraph, "Off-Site Location" does not include any
location to which Regulated Substances disposed of or Released at such FE Assets
have migrated;
(h) Any liability to third parties (including employees) for
bodily injury or loss of life, to the extent caused (or allegedly caused) by
Environmental Conditions or the Release of Regulated Substances at, on, in,
under, or adjacent to, or migrating from, the FE Assets of such FE Subsidiary
prior to the Exchange Closing Date;
(i) Any liabilities or obligations of such FE Subsidiary or any
ERISA Affiliate of such FE Subsidiary relating to any FE Plan including but not
limited to any liability (i) relating to benefits payable under any FE Plan;
(ii) relating to the Pension Benefit Guaranty Corporation under Title IV of
ERISA; (iii) relating to a multi-employer plan; (iv) with respect to
non-compliance with the notice and benefit continuation requirements of COBRA;
(v) with respect to any noncompliance with ERISA or any other applicable laws;
or (vi) with respect to any suit, proceeding or claim which is brought against
DLC or the applicable Winning Bidder, any FE Plan, or any fiduciary or former
fiduciary of any such FE Plan, in each case other than liabilities or
obligations assumed under Section 8.11;
(j) Any liabilities or obligations arising from facts or
circumstances prior to the Exchange Closing Date relating to the employment or
termination of employment, including discrimination, wrongful discharge, unfair
labor practices, or constructive termination by such FE Subsidiary of any
individual, attributable to any actions or inactions by such FE Subsidiary prior
to the Exchange Closing Date, including without limitation unfair labor practice
charges relating to Avon Lake, other than those actions or inactions taken at
the written direction of DLC, other than liabilities or obligations assumed
under Section 8.11;
(k) Any obligations of such FE Subsidiary for wages, overtime,
employment taxes, severance pay, transition payments in respect of compensation
or similar benefits accruing or arising prior to the Exchange Closing Date under
any term or provision of any contract, plan, instrument or agreement relating to
any of its FE Assets, other than liabilities or obligations assumed under
Section 8.11; and
(l) Any liability of the applicable FE Subsidiary arising out of
a breach by such FE Subsidiary, or any of its Affiliates, of any of their
respective obligations under this Agreement or the Ancillary Agreements.
4.5 Control of Litigation. The Parties agree and acknowledge that the
FE Subsidiaries shall be entitled exclusively to control, defend and settle any
litigation, administrative or regulatory proceeding, and any investigation or
Remediation activity (including without limitation any environmental mitigation
or Remediation activities), arising out of or related to any Excluded FE
Liabilities and DLC shall cooperate fully in connection therewith, and the
Auction Agreements shall provide that the applicable Winning Bidder shall agree
to cooperate fully in connection therewith.
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4.6 Fuel Supplies. At the Exchange Closing, each FE Subsidiary will
sell, assign, convey, transfer and deliver to DLC its right, title and interest
in and to the Fuel Supplies related to the operation of its FE Plants, and DLC
shall pay the applicable FE Subsidiary an amount equal to the actual cost of
such Fuel Supplies on such FE Subsidiary's books and records, as established by
invoices (and reasonable supporting materials demonstrating the actual cost of
such Fuel Supplies) with such invoices and supporting materials to be delivered
to DLC by such FE Subsidiary not later than three (3) Business Days prior to the
scheduled date of the Exchange Closing.
4.7 Inventories. Schedule 4.7 lists the quantities of FE Inventories
for the Avon Lake, New Castle and Xxxxx XX Plants that will be transferred to
DLC together with the net book values of such FE Inventories. At the Exchange
Closing, as part of the FE Assets, each FE Subsidiary will transfer to DLC the
FE Inventories relating to its FE Plants. Because each FE Subsidiary has
operated its FE Plant as part of a larger, integrated utility system, not all of
such FE Inventories have actually been maintained in stock at each such FE
Plant, but are identified and dedicated as FE Assets on Schedules 4.7 (Avon
Lake), 4.7 (New Castle) and 4.7 (Niles), respectively, as the case may be. Each
FE Subsidiary shall transport and deliver all such FE Inventories to the
applicable FE Plant prior to the Exchange Closing.
ARTICLE V
THE EXCHANGE CLOSING
5.1 Exchange Closing. Upon the terms and subject to the satisfaction
of the conditions in Article IX of this Agreement, the exchange between the
Parties hereto, as contemplated by this Agreement, shall take place at a closing
(the "Exchange Closing"), to be held at the offices of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, 0000 Xxx Xxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. at 10:00 a.m.
local time on the day following the date that all of the conditions precedent to
the Exchange Closing set forth in Article IX of this Agreement have been either
satisfied or waived by the Party for whose benefit such conditions precedent
exist, or at such other time and date as the Parties may mutually agree.
5.2 Calculation of Closing Payments.
(a) No payment of any purchase price will be made by either
Party to the other for the transfer of the DLC Assets and the FE Assets. The
Parties have agreed that certain payments will be made for other specified
purposes (hereinafter, the "Closing Payments") and such Closing Payments shall
be calculated in accordance with this Section 5.2.
(b) The "DLC Closing Payments" means the sums of the following
amounts calculated for and to be paid to DLC by the applicable FE Subsidiary:
(i) the amounts expended by DLC between the date
hereof and the Exchange Closing Date for DLC Capital Expenditures
relating to the DLC Assets transferred to such FE Subsidiary that (A)
are not described in Schedule 8.1(d) and (B) satisfy one or more of
39
the tests for permitted DLC Capital Expenditures set forth in Section
8.1(d); plus or minus
(ii) the amounts by which DLC's share of the book value
of all DLC Inventories relating to the DLC Assets transferred to such
FE Subsidiary, as of the Exchange Closing Date, exceeds or falls short
of that value set forth in Schedule 5.2(b)(ii); plus or minus
(iii) the net balance payable to or by DLC, if any, of
items relating to the DLC Assets transferred to such FE Subsidiary
prorated as of the Exchange Closing Date pursuant to Section 5.4; plus
(iv) the amounts payable to DLC pursuant to Section 3.6
by such FE Subsidiary for DLC's ownership interest in the Fuel
Supplies at the DLC Plants transferred to such FE Subsidiary; plus
(v) in the case of PPC, the amount payable to DLC by
PPC pursuant to the Electrical Facilities Agreement; plus
(vi) in the case of CEIC, the amount payable to DLC by
CEIC for costs incurred in the property tax litigation pursuant to
Section 3.7.
(c) The "FE Closing Payments" means the sums of the following
amounts calculated for and to be paid to the applicable FE Subsidiary by DLC:
(i) the amount expended by such FE Subsidiary between
the date hereof and the Exchange Closing Date for FE Capital
Expenditures, with respect to its FE Assets that (A) are not described
in Schedule 8.1(c) and (B) satisfy one or more of the tests for
permitted FE Capital Expenditures set forth in Section 8.1(c); plus or
minus
(ii) the amount by which the book value of FE
Inventories for such FE Subsidiary's FE Plant, as of the Exchange
Closing Date, exceeds or falls short of that set forth in Schedule 4.7
with respect to such FE Plant; plus or minus
(iii) the net balance payable to or by such FE
Subsidiary, if any, of items relating to its FE Assets prorated
pursuant to Section 5.4.
(d) At least ten (10) Business Days prior to the Exchange
Closing Date, DLC shall prepare and deliver to each FE Subsidiary an estimated
closing statement (collectively, the "DLC Estimated Closing Statements") that
shall set forth DLC's best estimate of the estimated DLC Closing Payments
relating to such FE Subsidiary (collectively, the "DLC Estimated Closing
Payments"). At least ten (10) Business Days prior to the Exchange Closing Date,
each FE Subsidiary shall prepare and deliver to DLC an estimated closing
statement (collectively, the "FE Estimated Closing Statements") that shall set
forth such FE Subsidiary's best estimate of the estimated FE Closing Payments
relating to DLC (collectively, the "FE Estimated Closing Payments"). Within five
(5) Business Days following the delivery of an Estimated Closing Statement, the
Party receiving such Estimated Closing Statement may object in good faith to
such Estimated Closing Payment in writing. In the event of any such objection,
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the applicable Parties shall attempt to resolve their differences by
negotiation. If such Parties are unable to do so before three (3) Business Days
prior to the Exchange Closing Date, the amounts of the Estimated Closing
Payments not in dispute shall be paid at the Exchange Closing and the disputed
portions shall be paid as a Final Adjustment to the extent required by Section
5.2(f).
(e) Within sixty (60) days following the Exchange Closing Date,
(i) DLC shall prepare and deliver to each FE Subsidiary a final closing
statement setting forth the final DLC Closing Payment relating to such FE
Subsidiary including adjustments to the proration amounts specified by Section
5.4 (collectively, the "Proposed DLC Final Adjustments"), and (ii) each
applicable FE Subsidiary shall prepare and deliver to DLC a final closing
statement setting forth the final FE Closing Payment relating to DLC including
adjustments to the proration amounts specified by Section 5.4 (collectively, the
"Proposed FE Final Adjustments"). All calculations of the Closing Payments shall
be prepared using the same accounting principles, policies and methods as the
Conveying Party has historically used in connection with the calculation of the
items reflected on such Proposed Final Adjustment.
(f) Within thirty (30) days following the delivery of the
Proposed Final Adjustment, the Party receiving such Proposed Final Adjustment
may object to such Proposed Final Adjustment in writing. Each Party agrees to
cooperate with the other Party to provide such Party and its Representatives
information used to prepare such Proposed Final Adjustment and information
relating thereto. If the Party receiving a Proposed Final Adjustment objects to
such Proposed Final Adjustment, the applicable Parties shall attempt to resolve
their differences by negotiation. If such Parties are unable to do so within
thirty (30) days of any such objection, the applicable FE Subsidiary and DLC
shall appoint an Independent Accounting Firm, which shall, at their joint
expense, review the Proposed Final Adjustment and determine the appropriate
adjustment to the Closing Payment, if any, within thirty (30) days of such
appointment. The Parties agree to cooperate with the Independent Accounting Firm
and provide it with such information as it reasonably requests to enable it to
make such determination. The finding of such Independent Accounting Firm shall
be binding on the Parties. Upon determination by agreement of the Parties or by
binding determination of the Independent Accounting Firm of the appropriate
adjustment (in either case, the "Final Adjustment"), if the Final Adjustment
results in a change to the Closing Payment made by either DLC or the applicable
FE Subsidiary, the Party owing the difference shall deliver such difference to
the Party owed such amount no later than two (2) Business Days after the
determination of such Final Adjustment, in immediately available funds or in any
other manner as reasonably requested by the Party owed such amount.
5.3 Payment of Closing Payments. (a) If the DLC Closing Payment
calculated for any of the FE Subsidiaries is a positive amount, such amount
shall be payable by the applicable FE Subsidiary to DLC. If the DLC Closing
Payment calculated for any of the FE Subsidiaries is a negative amount, such
amount shall be payable by DLC to the applicable FE Subsidiary.
(b) If the FE Closing Payment calculated for DLC is a positive
amount, such amount shall be payable by DLC to the applicable FE Subsidiary. If
the FE Closing Payment calculated for DLC is a negative amount, such amount
shall be payable by the applicable FE Subsidiary to DLC.
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(c) Amounts payable with respect to each Closing Payment shall be
aggregated or offset, as appropriate (the remaining amount payable after such
aggregation or offset is referred to herein as a "Closing Payment Balance"). In
connection with the Exchange Closing, subject to Section 5.2(d), each Party
owing a Closing Payment Balance shall pay such amount to the Party to whom such
Closing Payment Balance is owed at the Exchange Closing by wire transfer of
immediately available funds denominated in U.S. dollars or by such other means
as are agreed upon by such Parties.
5.4 Prorations. Notwithstanding anything to the contrary in any of
the CAPCO Agreements:
(a) The Parties agree that all of the items normally prorated,
including those listed below (but not including Income Taxes), relating to the
business and operation of the Exchange Assets shall be prorated as of the
Exchange Closing Date, with each Conveying Party remaining liable for such items
to the extent such items relate to any time period prior to the Exchange Closing
Date, and the Party that is acquiring such Conveying Party's Exchange Assets
under this Agreement to be liable for such items to the extent such items relate
to periods commencing with the Exchange Closing Date (measured in the same units
used to compute the item in question, otherwise measured by calendar days):
(i) personal property, real estate and occupancy
Taxes, assessments and other charges, if any, on or with respect to
the business and operation of the Exchange Assets;
(ii) rent, Taxes and all other items (including prepaid
services or goods not included in Inventories) payable by or to a
Conveying Party under any of the Assigned Agreements conveyed by that
Party;
(iii) any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) sewer rents and charges for water, telephone,
electricity and other utilities with respect to the Exchange Assets;
(v) rent and Taxes payable by a Conveying Party under
the Real Property Leases assigned to the Party that is acquiring such
Real Property Leases under this Agreement; and
(vi) insurance premiums paid on or with respect to the
business and operation of the Exchange Assets.
(b) In connection with the prorations referred to in Section 5.4
(a) above, in the event that actual figures are not available at the Exchange
Closing Date, the proration shall be based upon the actual Taxes or other
amounts accrued through the Exchange Closing Date or paid for the most recent
year (or other appropriate period) for which actual Taxes or other amounts paid
are available. Such prorated Taxes or other amounts shall be re-prorated and
paid to the appropriate Party within sixty (60) days of the date that the
previously unavailable actual figures become available. The prorations shall be
based on the number of days in a year or other appropriate period (i) before the
Exchange Closing Date and (ii) including and after the Exchange Closing Date.
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The Parties agree to furnish each other with such documents and other records as
may be reasonably requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 5.4.
5.5 Audit Cooperation. Each Party shall notify and provide the other
Party with reasonable assistance in the event of an examination, audit or other
proceeding regarding any fair market value of the Exchanged Assets and Assumed
Liabilities.
5.6 Deliveries by FE Subsidiaries. At the Exchange Closing, each FE
Subsidiary with respect to its FE Assets will deliver, or cause to be delivered,
the following to DLC (or, if DLC so directs, the applicable Winning Bidder):
(a) With respect to the transfer of the FE Assets (except for
the Excluded FE Assets) and Assumed FE Liabilities (except for the Excluded FE
Liabilities):
(i) Duly executed Bills of Sale with respect to the FE
Assets of such FE Subsidiary;
(ii) Certified copies of any and all governmental and
other third party consents, waivers or approvals obtained or required
to be obtained by the applicable FE Subsidiary with respect to the
transfer of its FE Assets or the consummation of the transactions
contemplated by this Agreement;
(iii) One or more Warranty Deeds conveying title to the
FE Real Property by such FE Subsidiary to DLC or, if DLC so directs,
the corresponding Winning Bidder, duly executed and acknowledged by
such FE Subsidiaries and in recordable form;
(iv) FIRPTA Affidavits, duly executed by such FE
Subsidiary;
(v) To the extent available, originals of all of its
FE Agreements, FE Real Property Leases and FE Transferable Permits
and, if such originals are not available, true and correct copies
thereof;
(vi) All such other instruments of assignment, transfer
or conveyance as shall, in the reasonable opinion of DLC and its
counsel, be necessary or desirable to transfer the FE Assets to DLC
or, if DLC so directs, the applicable Winning Bidder, in accordance
with this Agreement and where necessary or desirable in recordable
form; and
(vii) The applicable FE Assignment and Assumption
Agreement, the FE (Accrued Liability) Assignment and Assumption
Agreement, the FE Easement and Attachment Agreement, the FE Connection
Agreement and the FE Must-Run Agreement, duly executed by the such FE
Subsidiary.
(b) With respect to the transfer of DLC Assets (except for the
Excluded DLC Assets) and the assumption of Assumed DLC Liabilities (except for
Excluded DLC Liabilities):
43
(i) The DLC Assignment and Assumption Agreements, the
CAPCO Settlement Agreement, the Electrical Facilities Agreement and
the Settlement Agreement duly executed by the applicable FE
Subsidiaries; and
(ii) All such other instruments of assignment or
assumption as shall, in the reasonable opinion of DLC and its counsel,
be necessary for the assignment of the DLC Assets to or the assumption
of the Assumed DLC Liabilities by the FE Subsidiaries, in accordance
with this Agreement.
(c) With respect to this Agreement:
(i) The documents to be delivered by such FE
Subsidiary under Section 9.2;
(ii) Copies, certified by the Secretary or Assistant
Secretary of such FE Subsidiary, of corporate resolutions authorizing
the execution and delivery of this Agreement and all of the agreements
and instruments to be executed and delivered by each of the FE
Subsidiaries in connection herewith and with the consummation of the
transactions contemplated hereby;
(iii) Certificates of the Secretary or Assistant
Secretary of such FE Subsidiary identifying the name and title and
bearing the signatures of the officers of such FE Subsidiary
authorized to execute and deliver this Agreement and the other
agreements and instruments contemplated hereby;
(iv) Certificates of Good Standing with respect to such
FE Subsidiary, issued by the Secretary of State of Ohio or the
Secretary of State of the Commonwealth of Pennsylvania, as
appropriate;
(v) Such other agreements, documents, instruments and
writings as are reasonably required to be delivered by such FE
Subsidiary at or prior to the Exchange Closing Date pursuant to this
Agreement or the Auction Agreement or otherwise reasonably required by
DLC or the applicable Winning Bidder, as the case may be, in
connection herewith; and
(vi) Certificates dated the Exchange Closing Date
executed by the duly authorized officers of such FE Subsidiary to the
effect that, to such officers' Knowledge, the conditions set forth in
Sections 9.2(b), (c) and (d) have been satisfied by such FE Subsidiary
and that each of the representations and warranties of such FE
Subsidiary made in this Agreement are true and correct in all material
respects as though made at and as of the Exchange Closing Date.
5.7 Deliveries by DLC. At the Exchange Closing, DLC will deliver, or
cause to be delivered, the following to the applicable FE Subsidiary:
(a) With respect to the transfer of the DLC Assets (except for
the Excluded DLC Assets):
44
(i) The DLC Assignment and Assumption Agreements, the
CAPCO Settlement Agreement, the Electrical Facilities Agreement and
the Settlement Agreement, duly executed by DLC;
(ii) Duly executed Bills of Sale with respect to the
DLC Assets;
(iii) Certified copies of any and all governmental and
other third party consents, waivers or approvals obtained or required
to be obtained by DLC with respect to the transfer of the DLC Assets
or the consummation of the transactions contemplated by this
Agreement;
(iv) One or more Warranty Deeds conveying title to the
DLC Real Property to the applicable FE Subsidiaries, duly executed and
acknowledged by DLC and in recordable form;
(v) FIRPTA Affidavits, duly executed by DLC;
(vi) To the extent available, originals of all DLC
Agreements, DLC Real Property Leases and DLC Transferable Permits and,
if such originals are not available, true and correct copies thereof;
and
(vii) All such other instruments of assignment, transfer
or conveyance as shall, in the reasonable opinion of the applicable FE
Subsidiaries and their counsel, be necessary or desirable to transfer
the DLC Assets to such FE Subsidiaries, in accordance with this
Agreement and where necessary or desirable in recordable form.
(b) With respect to the transfer of the FE Assets (except
for the Excluded FE Assets):
(i) The FE Assignment and Assumption Agreements, the
FE (Accrued Liability) Assignment and Assumption Agreements, the FE
Easement and Attachment Agreements, the FE Connection Agreements and
the FE Must-Run Agreements, duly executed by the corresponding Winning
Bidder or DLC, as applicable; and
(ii) All such other instruments of assignment or
assumption as shall, in the reasonable opinion of the applicable FE
Subsidiaries and their counsel, be necessary for assignment of the FE
Assets to or the assumption of the Assumed FE Liabilities by DLC or
the corresponding Winning Bidder, respectively, in accordance with
this Agreement.
(c) With respect to this Agreement:
(i) The documents to be delivered by DLC under Section
9.3;
(ii) Copies, certified by the Secretary or Assistant
Secretary of DLC, of corporate resolutions authorizing the execution
and delivery of this Agreement and all of the agreements and
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instruments to be executed and delivered by DLC in connection herewith
and with the consummation of the transactions contemplated hereby;
(iii) A certificate of the Secretary or Assistant
Secretary of DLC identifying the name and title and bearing the
signatures of the officers of DLC authorized to execute and deliver
this Agreement and the other agreements and instruments contemplated
hereby;
(iv) A certificate of Good Standing with respect to
DLC, issued by the Secretary of State of the Commonwealth of
Pennsylvania and by the Secretary of State of such other states where
DLC conducts business;
(v) Such other agreements, documents, instruments and
writings as are required to be delivered by DLC at or prior to the
Exchange Closing Date pursuant to this Agreement or otherwise
reasonably required by the FE Subsidiaries in connection herewith; and
(vi) Certificate dated the Exchange Closing Date
executed by the duly authorized officers of DLC to the effect that, to
such officers' Knowledge, the conditions set forth in Sections 9.3(b),
(c) and (d) have been satisfied by DLC and that each of the
representations and warranties of DLC made in this Agreement are true
and correct in all material respects as though made at and as of the
Exchange Closing Date.
5.8 Ancillary Agreements. The Parties acknowledge that the Ancillary
Agreements (except for the Auction Agreements, the Support Agreement, the CAPCO
Settlement Agreement and the Electrical Facilities Agreement) shall be executed
on the Exchange Closing Date or the Auction Closing Date, as applicable, and
each Party agrees to execute, in connection with the Exchange Closing or the
Auction Closing, as applicable, each such Ancillary Agreement to which it is to
be a party, substantially in the form of such Ancillary Agreements attached
hereto. Each Party further (i) acknowledges that it has executed the CAPCO
Settlement Agreement and the Electrical Facilities Agreement on the date hereof
and (ii) agrees that the Parties hereto shall make, pursuant to Section 8.7
hereof, all filings necessary or advisable to obtain any Required Regulatory
Approvals in respect of such CAPCO Settlement Agreement and such Electrical
Facilities Agreement and the transactions contemplated in each of them.
5.9 Pending Litigation. The Settlement Agreement will take effect as
of the Exchange Closing and when effective shall constitute full settlement of
the claims asserted or which could have been asserted in the Eastlake Litigation
(as defined below). Upon the execution of the Exchange Agreements, the Parties
will jointly present to the Xxxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx Xxxxxxxx of Ohio an
order in the form of Exhibit N attached hereto, to suspend the litigation
captioned The Cleveland Electric Illuminating Company v. Duquesne Light Company
under docket number 1:95 CV 2307 (the "Eastlake Litigation") while preserving
the Parties' rights to continue the Eastlake Litigation in the event that the
Exchange Closing does not occur. If the Exchange Closing does not occur, DLC
shall retain all rights with respect to such litigation, provided that execution
of the Exchange Agreements shall constitute an irrevocable waiver by DLC of
claims for money damages in the Eastlake Litigation but not for any other
remedy, including the partition or sale of the unit.
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5.10 Work in Progress. The Parties agree to work together before and
after the Exchange Closing to effect an orderly transition with respect to work
in progress.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC
DLC represents and warrants to the FE Subsidiaries as follows:
6.1 Incorporation; Qualification. DLC is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to own, lease and operate its material assets and properties and to carry on its
business as is now being conducted. DLC is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which its business, as now being conducted, shall require it to be so
qualified, except where the failure to be so qualified would not have a DLC
Material Adverse Effect. DLC has heretofore delivered to the FE Subsidiaries
true, complete and correct copies of its Articles of Incorporation and Bylaws as
currently in effect.
6.2 Authority. DLC has full corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements to which DLC is
a signatory and to consummate the transactions contemplated hereby or thereby.
The execution and delivery of this Agreement and each of the Ancillary
Agreements to which DLC is a signatory by DLC and the consummation of the
transactions contemplated hereby and thereby by DLC have been duly and validly
authorized by all necessary corporate action required on the part of DLC and
this Agreement has been duly and validly executed and delivered by DLC. Subject
to the receipt of the DLC Required Regulatory Approvals, each of this Agreement
and the Ancillary Agreements to which DLC is a signatory constitutes the legal,
valid and binding agreement of DLC, enforceable against DLC in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity).
6.3 Consents and Approvals; No Violation. (a) Except as set forth in
Schedule 6.3(a), and subject to obtaining any DLC Required Regulatory Approvals,
neither the execution, delivery and performance of this Agreement by DLC nor the
execution, delivery and performance by DLC of the Ancillary Agreements to which
it is a party will (i) conflict with or result in any breach of any provision of
the Articles of Incorporation or Bylaws of DLC, (ii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
material agreement or other instrument or obligation to which DLC is a party or
by which it, or any of the DLC Assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not, individually or in the
aggregate, create a DLC Material Adverse Effect; or (iii) constitute violations
of any law, regulation, order, judgment or decree applicable to DLC, which
violations, individually or in the aggregate, would create a DLC Material
Adverse Effect.
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(b) Except as set forth in Schedule 6.3(b) (the filings and
approvals referred to in Schedule 6.3(b) are collectively referred to as the
"DLC Required Regulatory Approvals"), no consent or approval of, filing with, or
notice to, any Governmental Authority is necessary for the execution and
delivery of this Agreement by DLC, or the consummation by DLC of the
transactions contemplated hereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent DLC from
performing its material obligations hereunder and (ii) such consents, approvals,
filings or notices which become applicable to DLC or the DLC Assets as a result
of the specific regulatory status of the FE Subsidiaries (or any of their
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which the FE Subsidiaries (or any of their Affiliates)
is or proposes to be engaged.
6.4 Insurance. Except as set forth in Schedule 6.4, all material
policies of fire, liability, workers' compensation and other forms of insurance
(if any) owned or held by, or on behalf of, DLC with respect to the business,
operations or employees at the DLC Plants or the DLC Assets are in full force
and effect, all premiums with respect thereto covering all periods up to and
including the date hereof have been paid (other than retroactive premiums which
may be payable with respect to comprehensive general liability and workers'
compensation insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy which was not replaced on
substantially similar terms prior to the date of such cancellation. Except as
described in Schedule 6.4, within the thirty-six (36) months preceding the date
of this Agreement, DLC has not been refused any insurance with respect to the
DLC Assets nor has its coverage been limited by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance
during the last twelve (12) months.
6.5 DLC Real Property Leases. Schedule 6.5 lists, as of the date of
this Agreement, all real property leases under which DLC is a lessee or lessor
and which relate to the DLC Assets ("DLC Real Property Leases"). Except as set
forth in Schedule 6.5, all such DLC Real Property Leases are valid, binding and
enforceable against DLC in accordance with their terms; there are no existing
defaults by DLC or, to DLC's Knowledge, any other party thereunder that could
reasonably be expected to result in a DLC Material Adverse Effect; and no event
has occurred which (whether with or without notice, lapse of time or both) would
constitute a default by DLC or, to DLC's Knowledge, any other party thereunder
that could reasonably be expected to result in a DLC Material Adverse Effect.
DLC has delivered to the FE Subsidiaries true, correct and complete copies of
each of the DLC Real Property Leases.
6.6 Environmental Matters. DLC is an owner but not an operator of
each of the DLC Plants, each of which is operated by an FE Subsidiary. For this
reason, both DLC's environmental responsibilities and its Knowledge of
environmental issues and concerns at the DLC Plants and the DLC Assets are
limited. Subject to this fact, and except as disclosed in Schedule 6.6:
(a) DLC holds, and is in substantial compliance with, all DLC
Environmental Permits that are required for DLC to own the DLC Assets, and DLC
is otherwise in compliance with applicable Environmental Laws with respect to
its ownership of the DLC Assets, except for such failures to hold or comply with
required DLC Environmental Permits, or such failures to be in compliance with
applicable Environmental Laws, as would not, individually or in the aggregate,
create a DLC Material Adverse Effect;
48
(b) DLC has not received any written request for information, or
been notified that it is a potentially responsible party, under CERCLA or any
similar state law, with respect to the DLC Real Property; and
(c) DLC has not entered into or agreed to any consent decree or
order relating to the DLC Assets, and is not subject to any outstanding
judgment, decree, or judicial order relating to compliance with any
Environmental Law or to Remediation of Regulated Substances under any
Environmental Law relating to the DLC Assets.
The representations and warranties made in this Section 6.6 are DLC's exclusive
representations and warranties relating to environmental matters.
6.7 Real Property. Schedule 6.7 contains a description of the DLC
Real Property included in the DLC Assets. True and correct copies of all current
surveys, abstracts, title commitments and title opinions in DLC's possession and
all policies of title insurance currently in force and in the possession of DLC
with respect to the DLC Real Property have heretofore been made available to the
FE Subsidiaries.
6.8 Condemnation. Except as set forth in Schedule 6.8, DLC has not
received any written notices of and otherwise has no Knowledge of any pending or
threatened proceedings or actions by any Governmental Authority to condemn or
take by power of eminent domain all or any part of the DLC Assets.
6.9 Contracts and Leases. (a) Schedule 6.9(a) lists each DLC
Agreement which is material to DLC for the business or operations of the DLC
Assets, other than those (i) that are expected to expire or terminate prior to
the Exchange Closing Date, (ii) that provide for annual payments by DLC after
the date hereof of less than $100,000 or payments by DLC after the date hereof
of less than $500,000 in the aggregate, or (iii) to which an FE Subsidiary is a
signatory.
(b) Except as disclosed in Schedule 6.9(b), each DLC Agreement
listed in Schedule 6.9(a), constitutes a legal, valid and binding obligation of
DLC and, to DLC's Knowledge, constitutes a valid and binding obligation of the
other parties thereto, and may be transferred to the applicable FE Subsidiary as
contemplated by this Agreement without the consent of the other parties thereto
and will continue in full force and effect thereafter, unless in any such case
the impact of such lack of legality, validity or binding nature, or inability to
transfer, would not, individually or in the aggregate, create a DLC Material
Adverse Effect.
(c) Except as set forth in Schedule 6.9(c), there is not, under
any of the DLC Agreements listed in Schedule 6.9(a), any default or event which,
with notice or lapse of time or both, would constitute a default on the part of
DLC or, to DLC's Knowledge, any of the other parties thereto, except such events
of default and other events which would not, individually or in the aggregate,
create a DLC Material Adverse Effect.
6.10 Legal Proceedings. Except as set forth in Schedule 6.10, there is
no action or proceeding pending, or, to DLC's Knowledge, threatened against DLC
before any court, arbitrator or Governmental Authority, which could,
49
individually or in the aggregate, reasonably be expected to create a DLC
Material Adverse Effect. Except as set forth in Schedule 6.10, DLC is not
subject to any outstanding judgments, rules, orders, writs, injunctions or
decrees of any court, arbitrator or Governmental Authority that would,
individually or in the aggregate, create a DLC Material Adverse Effect.
6.11 Permits. (a) DLC has all DLC Permits (other than DLC
Environmental Permits, which are addressed in Section 6.6 hereof) necessary to
own the DLC Assets except where the failure to have such DLC Permits would not,
individually or in the aggregate, create a DLC Material Adverse Effect. Except
as disclosed on Schedule 6.11(a), DLC has not received any written notification
that DLC is in violation of any such DLC Permits, except notifications of
violations which would not, individually or in the aggregate, create a DLC
Material Adverse Effect. DLC is in compliance with all such DLC Permits except
where non-compliance would not, individually or in the aggregate, create a DLC
Material Adverse Effect.
(b) Schedule 6.11(b) sets forth all material DLC Permits (other
than DLC Transferable Permits, which are set forth on Schedule 1.1(64)) related
to the DLC Assets.
6.12 Taxes. (a) DLC has filed or caused to be filed all Tax Returns
that are required to be filed by it with respect to any Tax relating to the DLC
Assets, and paid or caused to be paid all Taxes that have become due as
indicated thereon, except where such Tax is being contested in good faith by
appropriate proceedings, or where the failure to so file or pay would not create
a DLC Material Adverse Effect. All Tax Returns relating to the DLC Assets are
true, correct and complete in all material respects. There are no liens for
Taxes upon the DLC Assets except for liens for Taxes not yet due and Permitted
Encumbrances (DLC Assets).
(b) Except as set forth in Schedule 6.12(b), no notice of deficiency
or assessment has been received from any taxing authority with respect to
liabilities for Taxes of DLC in respect of the DLC Assets, which have not been
fully paid or finally settled, and any such deficiency shown in Schedule 6.12(b)
is being contested in good faith through appropriate proceedings.
(c) Except as set forth in Schedule 6.12(c), there are no outstanding
agreements or waivers extending the applicable statutory periods of limitation
for Taxes associated with the DLC Assets that will be binding upon any FE
Subsidiary after the Exchange Closing.
(d) Except as set forth in Schedule 6.12(d), none of the DLC Assets
is property that is required to be treated as being owned by any other person
pursuant to the so-called safe harbor lease provisions of former Section 168(f)
of the Code, and none of the DLC Assets is "tax-exempt use" property within the
meaning of Section 168(h) of the Code.
(e) Schedule 6.12(e) sets forth the taxing jurisdictions in which DLC
owns DLC Assets or conducts business that require a notification to a taxing
authority of the transactions contemplated by this Agreement, if the failure to
make such notification, or obtain Tax clearance certificates in connection
therewith, would either require any FE Subsidiary to withhold any portion of the
consideration or subject any FE Subsidiary to any liability for any Taxes of
DLC.
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6.13 Intellectual Property. Schedule 3.1(l) sets forth all
Intellectual Property used in and, individually or in the aggregate with other
Intellectual Property, material to the operation of the DLC Assets, each of
which DLC either has all right, title and interest in, or valid and binding
rights under contract to use in connection with its operation of the DLC Assets.
Except as disclosed in Schedule 6.13, (i) DLC is not, nor has it received any
notice that it is, in default (or with the giving of notice or lapse of time or
both, would be in default), under any contract to use such Intellectual
Property, and (ii) to DLC's Knowledge, such Intellectual Property is not being
infringed by any other Person. DLC has not received notice that it is infringing
any Intellectual Property of any other Person in connection with the operation
or business of the DLC Assets, and DLC, to its Knowledge, is not infringing any
Intellectual Property of any other Person which, individually or in the
aggregate, would have a DLC Material Adverse Effect.
6.14 Compliance With Laws. DLC is in compliance with all applicable
laws, rules and regulations with respect to its ownership of the DLC Assets
except where the failure to be in compliance would not, individually or in the
aggregate, create a DLC Material Adverse Effect.
6.15 DISCLAIMERS REGARDING DLC ASSETS. EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES SET FORTH IN THIS ARTICLE VI, THE DLC ASSETS ARE TRANSFERRED "AS
IS, WHERE IS", AND DLC EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF
ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE DLC
PLANTS, THE TITLE, CONDITION, VALUE OR QUALITY OF THE DLC ASSETS OR THE
PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE DLC
ASSETS, AND DLC SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO THE DLC ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP
THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR
COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF ANY
GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL LAWS,
OR WHETHER DLC POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL PROPERTY TO
OPERATE THE DLC ASSETS. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC
FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE
ABSENCE OF REGULATED SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING
UNDER ENVIRONMENTAL LAWS WITH RESPECT TO THE DLC ASSETS. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC
EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE
CONDITION OF THE DLC ASSETS OR THE SUITABILITY OF THE DLC ASSETS FOR OPERATION
AS A POWER PLANT AND NO SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER
MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY DLC OR DLC
REPRESENTATIVES, OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR CREATE ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF
THE DLC ASSETS.
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6.16 Year 2000 Compliance. DLC makes no warranties or representations
of any kind, whether direct or implied, that any of the Computer Systems
included in the DLC Assets to be transferred under this Agreement is Year 2000
Compliant.
6.17 SEC Filings; Financial Statements. (a) DLC has filed all forms,
reports and documents required to be filed with the SEC since January 1, 1998,
and has heretofore delivered or made available to the FE Subsidiaries in the
form filed with the SEC, together with any amendments thereto, its (i) Annual
Reports on Form 10-K for the fiscal year ended December 31, 1997, (ii) Quarterly
Reports on Form 10-Q for the fiscal quarter ended March 31, 1998, June 30, 1998
and September 30, 1998, and (iii) all other reports or registration statements
filed by DLC with the SEC since January 1, 1998 (collectively, the "DLC SEC
Reports"). The DLC SEC Reports (i) were prepared substantially in accordance
with the requirements of the Securities Act of 1933, as amended or the
Securities Exchange Act of 1934, as amended, as the case may be, and the rules
and regulations promulgated under each of such respective acts, and the DLC SEC
Reports did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the DLC SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of DLC as at the
respective dates thereof and the consolidated results of operations and cash
flows of DLC for the periods indicated in accordance with GAAP applied on a
consistent basis throughout the periods involved (except for changes in
accounting principles disclosed in the notes thereto) and subject in the case of
interim financial statements to normal year-end adjustments.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF THE FE
SUBSIDIARIES
Each FE Subsidiary severally with respect to itself and all matters
related to such FE Subsidiary obligations hereunder and as to the FE Assets to
be exchanged by such FE Subsidiary, hereby represents and warrants to DLC:
7.1 Incorporation; Qualification. Such FE Subsidiary is a corporation
duly incorporated, validly existing and in good standing under the laws of its
respective state of incorporation and has all requisite corporate power and
authority to own, lease and operate its material assets and properties and to
carry on its business as is now being conducted. Such FE Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which its business as now being conducted shall
require it to be so qualified, except where the failure to be so qualified would
not have an FE Material Adverse Effect. Such FE Subsidiary has heretofore
delivered to DLC true, complete and correct copies of its respective Articles of
Incorporation, Code of Regulations or Bylaws, as currently in effect.
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7.2 Authority. Such FE Subsidiary has full corporate power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements to which it is a signatory and to consummate the transactions
contemplated hereby or thereby. The execution and delivery of this Agreement and
each of the Ancillary Agreements to which it is a signatory by such FE
Subsidiary and the consummation of the transactions contemplated hereby and
thereby by such FE Subsidiary have been duly and validly authorized by all
necessary corporate action required on the part of such FE Subsidiary and this
Agreement and each Ancillary Agreement to which it is a signatory has been duly
and validly executed and delivered by such FE Subsidiary. Subject to the receipt
of the FE Required Regulatory Approvals, each of this Agreement and each of the
Ancillary Agreements to which it is a signatory constitutes the legal, valid and
binding agreement of such FE Subsidiary, enforceable against such FE Subsidiary
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity).
7.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 7.3(a), and subject to
obtaining any FE Required Regulatory Approvals, neither the execution, delivery
and performance by such FE Subsidiary of this Agreement nor the execution,
delivery and performance by such FE Subsidiary of the Ancillary Agreements to
which such FE Subsidiary is a signatory will (i) conflict with or result in any
breach of any provision of the Articles of Incorporation, Code of Regulations or
Bylaws of such FE Subsidiary, (ii) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which such FE Subsidiary is a
party or by which such FE Subsidiary, or any of its FE Assets may be bound,
except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
that would not, individually or in the aggregate, create an FE Material Adverse
Effect; or (iii) constitute violations of any law, regulation, order, judgment
or decree applicable to such FE Subsidiary, which violations, individually or in
the aggregate, would create an FE Material Adverse Effect.
(b) Except as set forth in Schedule 7.3(b) (the filings and
approvals referred to in Schedule 7.3(b) are collectively referred to as "FE
Required Regulatory Approvals"), no consent or approval of, filing with, or
notice to, any Governmental Authority is necessary for the execution and
delivery of this Agreement, or the consummation by such FE Subsidiary of the
transactions contemplated hereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent such FE
Subsidiary from performing its material obligations hereunder and (ii) such
consents, approvals, filings or notices which become applicable to such FE
Subsidiary or its FE Assets as a result of the specific regulatory status of DLC
(or any of its Affiliates) or any Winning Bidder to which such FE Subsidiary is
directed to make any delivery hereunder or as a result of any other facts that
specifically relate to the business or activities in which DLC (or any of its
Affiliates) or any Winning Bidder to which such FE Subsidiary is directed to
make any delivery hereunder is or proposes to be engaged.
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7.4 Insurance. Except as set forth in Schedule 7.4, all material
policies of fire, liability, workers' compensation and other forms of insurance
(if any) owned or held by, or on behalf of, such FE Subsidiary with respect to
the business, operations or employees at its FE Plants or its FE Assets are in
full force and effect, all premiums with respect thereto covering all periods up
to and including the date hereof have been paid (other than retroactive premiums
which may be payable with respect to comprehensive general liability and
workers' compensation insurance policies), and no notice of cancellation or
termination has been received with respect to any such policy which was not
replaced on substantially similar terms prior to the date of such cancellation.
Except as described in Schedule 7.4, within the thirty-six (36) months preceding
the date of this Agreement, such FE Subsidiary has not been refused any
insurance with respect to its FE Assets nor has its coverage been limited by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last twelve (12) months.
7.5 FE Real Property Leases. Schedule 7.5 lists, as of the date of
this Agreement, all real property leases under which such FE Subsidiary is a
lessee or lessor and which relate to its FE Assets ("FE Real Property Leases").
Except as set forth in Schedule 7.5, all such Real Property Leases are valid,
binding and enforceable against such FE Subsidiary in accordance with their
terms; there are no existing defaults by such FE Subsidiary or, to such FE
Subsidiary's Knowledge, any other party thereunder that could reasonably be
expected to result in an FE Material Adverse Effect; and no event has occurred
which (whether with or without notice, lapse of time or both) would constitute a
default by such FE Subsidiary or, to such FE Subsidiary's Knowledge, any other
party thereunder that could reasonably be expected to result in an FE Material
Adverse Effect. Such FE Subsidiary has delivered to DLC, and DLC shall deliver
to the applicable Winning Bidder, true, correct and complete copies of each of
its FE Real Property Leases.
7.6 Environmental Matters. Except as disclosed in Schedule 7.6 or
4.3(e) or in the "Phase I" and "Phase II" environmental site assessments
prepared by the independent environmental consultants and made available for
inspection by DLC ("FE Environmental Reports"):
(a) Such FE Subsidiary holds, and is in substantial compliance
with, all FE Environmental Permits that are required for such FE Subsidiary to
conduct the business and operations of its FE Assets, and such FE Subsidiary is
otherwise in compliance with applicable Environmental Laws with respect to the
business and operations of its FE Assets, except for such failures to hold or
comply with required FE Environmental Permits, or such failures to be in
compliance with applicable Environmental Laws, as would not, individually or in
the aggregate, create an FE Material Adverse Effect;
(b) Such FE Subsidiary has not received any written request for
information, or been notified that it is a potentially responsible party, under
CERCLA or any similar state law with respect to its FE Real Property;
(c) Such FE Subsidiary has not entered into or agreed to any
consent decree or order relating to its FE Assets, or is subject to any
outstanding judgment, decree, or judicial order relating to compliance with any
Environmental Law or to Remediation of Regulated Substances under any
Environmental Law relating to its FE Assets; and
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(d) To the Knowledge of such FE Subsidiary, no Release of
Regulated Substances has occurred at, from, in, on, or under its FE Real
Property and no Regulated Substances are present in, on, about or migrating from
its FE Real Property that could give rise to an Environmental Claim related to
its FE Assets for which Remediation reasonably could be required, except in any
such case to the extent that any such Release or Environmental Claim would not,
individually or in aggregate, create an FE Material Adverse Effect.
The representations and warranties made in this Section 7.6 are the exclusive
representations and warranties of such FE Subsidiary relating to environmental
matters as of the date hereof.
7.7 Labor Matters. Such FE Subsidiary previously delivered to DLC
true and correct copies of all collective bargaining agreements to which such FE
Subsidiary is a party or is subject to and which relate to the business and
operations of its FE Assets. With respect to the business or operations of its
FE Assets, except to the extent set forth in Schedule 7.7 and except for such
matters as will not, individually or in aggregate, create an FE Material Adverse
Effect, (a) such FE Subsidiary is in compliance with all applicable laws
respecting employment and employment practices, occupational safety and health,
plant closing, mass layoffs, terms and conditions of employment and wages and
hours; (b) such FE Subsidiary has not received any written notice of any unfair
labor practice complaint against any FE Subsidiary pending before the National
Labor Relations Board; (c) no arbitration proceeding arising out of or under any
collective bargaining agreement is pending against such FE Subsidiary; and (d)
such FE Subsidiary has not experienced any work stoppage within the three-year
period prior to the date hereof and to the Knowledge of such FE Subsidiary none
is currently threatened.
7.8 Benefit Plans: ERISA. (a) Schedule 7.8(a) lists all FE Plans
maintained for, or in which the employees of such FE Subsidiary connected with
its FE Assets participate. True and complete copies of all such FE Plans have
been made available to DLC.
(b) No liability under Title IV or Section 302 of ERISA has been
incurred by any FE Subsidiary or any ERISA Affiliate of such FE Subsidiary that
has not been satisfied in full, and no condition exists that presents a material
risk to such FE Subsidiary or any ERISA Affiliate thereof incurring any such
liability, other than liability for premiums due the Pension Benefit Guaranty
Corporation (which premiums have been paid when due). Insofar as the
representation made in this Section 7.8(b) applies to Sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which such FE
Subsidiary or any ERISA Affiliate of such FE Subsidiary made, or was required to
make, contributions during the five (5)-year period ending on the last day of
the most recent plan year ended prior to the Exchange Closing Date.
(c) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event, (i)
entitle any current or former employee or officer of such FE Subsidiary or any
ERISA Affiliate of such FE Subsidiary to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
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(d) There has been no material failure of any of the FE Plans
that is a group health plan (as defined in Section 5000(b)(1) of the Code) to
meet the requirements of Section 4980B(f) of the Code with respect to a
qualified beneficiary (as defined in Section 4980B(g) of the Code). Neither such
FE Subsidiary nor any ERISA Affiliate of such FE Subsidiary has contributed to a
nonconforming group health plan (as defined in Section 5000(c) of the Code) and
no ERISA Affiliate of such FE Subsidiary has incurred a Tax under Section
5000(e) of the Code that is or could become a liability of the Acquiring Party.
(e) There are no pending, threatened or anticipated claims by or
on behalf of any FE Plans, by any employee or beneficiary covered under any such
FE Plans, or otherwise involving any such FE Plans (other than routine claims
for benefits).
7.9 Real Property. Schedule 7.9 contains a description of the FE Real
Property of such FE Subsidiary included in the FE Assets. True and correct
copies of all current surveys, abstracts, title commitments and title opinions
in such FE Subsidiary's possession and all policies of title insurance currently
in force and in the possession of such FE Subsidiary with respect to its FE Real
Property have heretofore been made available to DLC.
7.10 Condemnation. Except as set forth in Schedule 7.10, such FE
Subsidiary has not received any written notices of and otherwise has no
Knowledge of any pending or threatened proceedings or actions by any
Governmental Authority to condemn or take by power of eminent domain all or any
part of its FE Assets.
7.11 Contracts and Leases. (a) Schedule 7.11(a) lists each FE
Agreement which is material to such FE Subsidiary for the business or operations
of its FE Assets, other than those (i) that are expected to expire or terminate
prior to the Exchange Closing Date, or (ii) that provide for annual payments by
any FE Subsidiary after the date hereof of less than $100,000 or payments by
such FE Subsidiary after the date hereof of less than $500,000 in the aggregate.
(b) Except as disclosed in Schedule 7.11(b), each FE Agreement
listed in Schedule 7.11(a) constitutes a legal, valid and binding obligation of
such FE Subsidiary and, to the Knowledge of such FE Subsidiary, constitutes a
valid and binding obligation of the other parties thereto, and may be
transferred to the Acquiring Party as contemplated by this Agreement without the
consent of the other parties thereto and will continue in full force and effect
thereafter, unless in any such case the impact of such lack of legality,
validity or binding nature, or inability to transfer, would not, individually or
in the aggregate, create an FE Material Adverse Effect.
(c) Except as set forth in Schedule 7.11(c), there is not, under
any of its FE Agreements listed on Schedule 7.11(a), any default or event which,
with notice or lapse of time or both, would constitute a default on the part of
such FE Subsidiary or to its Knowledge, any of the other parties thereto, except
such events of default and other events which would not, individually or in the
aggregate, create an FE Material Adverse Effect.
7.12 Legal Proceedings. Except as set forth in Schedule 7.12, there is
no action or proceeding pending, or, to the Knowledge of such FE Subsidiary,
threatened against such FE Subsidiary before any court, arbitrator or
Governmental Authority, which could, individually or in the aggregate,
56
reasonably be expected to create an FE Material Adverse Effect. Except as set
forth in Schedule 7.12, such FE Subsidiary is not subject to any outstanding
judgments, rules, orders, writs, injunctions or decrees of any court, arbitrator
or Governmental Authority that would, individually or in the aggregate, create
an FE Material Adverse Effect.
7.13 Permits. (a) Such FE Subsidiary has all FE Permits (other than FE
Environmental Permits, which are addressed in Section 7.6 hereof) necessary to
own and operate its FE Assets except where the failure to have such FE Permits
would not, individually or in the aggregate, create an FE Material Adverse
Effect. Except as disclosed on Schedule 7.13(a), such FE Subsidiary has not
received any notification that such FE Subsidiary is in violation of any such FE
Permits, except notifications of violations which would not, individually or in
the aggregate, create an FE Material Adverse Effect. Such FE Subsidiary is in
compliance with all its FE Permits except where non-compliance would not,
individually or in the aggregate, create an FE Material Adverse Effect.
(b) Schedule 7.13(b) sets forth all material FE Permits (other
than FE Transferable Permits, which are set forth on Schedule 1.1(126)), related
to the FE Assets of such FE Subsidiary.
7.14 Taxes. (a) Such FE Subsidiary has filed or caused to be filed all
Tax Returns that are required to be filed by it with respect to any Tax relating
to the FE Assets or to such FE Subsidiary's operation of the FE Assets, and paid
or caused to be paid all Taxes that have become due as indicated thereon, except
where such Tax is being contested in good faith by appropriate proceedings, or
where the failure to so file or pay would not create an FE Material Adverse
Effect. Such FE Subsidiary has complied in all material respects with all
applicable laws, rules and regulations relating to withholding Taxes relating to
its FE Transferred Employees. All Tax Returns relating to its FE Assets are
true, correct and complete in all material respects. There are no liens for
Taxes upon its FE Assets except for liens for Taxes not yet due and Permitted
Encumbrances (FE Assets).
(b) Except as set forth in Schedule 7.14(b), no notice of deficiency
or assessment has been received from any taxing authority with respect to
liabilities for Taxes of such FE Subsidiary in respect of its FE Assets, which
have not been fully paid or finally settled, and any such deficiency shown in
Schedule 7.14(b) is being contested in good faith through appropriate
proceedings.
(c) Except as set forth in Schedule 7.14(c), there are no outstanding
agreements or waivers extending the applicable statutory periods of limitation
for Taxes associated with is FE Assets that will be binding upon the Acquiring
Party after the Exchange Closing.
(d) Except as set forth in Schedule 7.14(d), none of its FE Assets is
property that is required to be treated as being owned by any other person
pursuant to the so-called safe harbor lease provisions of former Section 168(f)
of the Code, and none of its FE Assets is "tax-exempt use" property within the
meaning of Section 168(h) of the Code.
(e) Schedule 7.14(e) sets forth the taxing jurisdictions in which
such FE Subsidiary owns assets or conducts business that require a notification
to a taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearance certificates in
connection therewith, would either require the Acquiring Party to withhold any
57
portion of the consideration or subject the Acquiring Party to any liability for
any Taxes of such FE Subsidiary.
7.15 Intellectual Property. Schedule 4.1(k) sets forth all
Intellectual Property used in and, individually or in the aggregate with other
Intellectual Property, material to the operation or business by such FE
Subsidiary of its FE Assets, each of which such FE Subsidiary or its Affiliates
either has all right, title and interest in or valid and binding rights under
contract to use in connection with its operation of its FE Assets. Except as
disclosed in Schedule 7.15, (i) such FE Subsidiary is not, nor has received any
notice that it is in default (or with the giving of notice or lapse of time or
both, would be in default), under any contract to use such Intellectual
Property, and (ii) to the Knowledge of such FE Subsidiary, such Intellectual
Property is not being infringed by any other Person. Such FE Subsidiary has not
received notice that it is infringing any Intellectual Property of any other
Person in connection with the operation or business of its FE Assets, and such
FE Subsidiary to its Knowledge, is not infringing any Intellectual Property of
any other Person which, individually or in the aggregate, would have an FE
Material Adverse Effect.
7.16 FE Capital Expenditures. Except as set forth in Schedule 8.1(a),
there are no FE Capital Expenditures that are planned by such FE Subsidiary with
respect to its FE Assets through December 31, 1999.
7.17 Compliance With Laws. Such FE Subsidiary is in compliance with
all applicable laws, rules and regulations with respect to the ownership or
operation of its FE Assets, except where the failure to be in compliance would
not, individually or in the aggregate, create an FE Material Adverse Effect.
7.18 DISCLAIMERS REGARDING FE ASSETS. EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES SET FORTH IN THIS ARTICLE VII, THE FE ASSETS ARE TRANSFERRED "AS
IS, WHERE IS", AND SUCH FE SUBSIDIARY EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES,
OPERATIONS OF ITS FE PLANTS, THE TITLE, CONDITION, VALUE OR QUALITY OF ITS FE
ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF
ITS FE ASSETS, AND SUCH FE SUBSIDIARY SPECIFICALLY DISCLAIMS ANY REPRESENTATION
OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE WITH RESPECT TO ITS FE ASSETS, OR ANY PART THEREOF, OR AS TO THE
WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR
PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR THE APPLICABILITY OF
ANY GOVERNMENTAL REQUIREMENTS, INCLUDING BUT NOT LIMITED TO ANY ENVIRONMENTAL
LAWS, OR WHETHER SUCH FE SUBSIDIARY POSSESSES SUFFICIENT REAL PROPERTY OR
PERSONAL PROPERTY TO OPERATE ITS FE ASSETS. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, SUCH FE SUBSIDIARY FURTHER SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF REGULATED SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO ITS FE ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS
58
OTHERWISE EXPRESSLY PROVIDED HEREIN, SUCH FE SUBSIDIARY EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF ITS FE ASSETS
OR THE SUITABILITY OF ITS FE ASSETS FOR OPERATION AS A POWER PLANT AND NO
SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION
PROVIDED BY OR COMMUNICATIONS MADE BY SUCH FE SUBSIDIARY OR ITS REPRESENTATIVES,
OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR CREATE ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF ITS FE
ASSETS.
7.19 Year 2000 Compliance. Such FE Subsidiary, with respect to all
Computer Systems included in its FE Assets to be transferred under this
Agreement, has plans to achieve Year 2000 Compliance with respect to such
Computer Systems, and is using its Commercially Reasonable Efforts to execute
and carry out such plans.
7.20 SEC Filings; Financial Statements. (a) Such FE Subsidiary has
filed all forms, reports and documents required to be filed by such FE
Subsidiary with the SEC since January 1, 1998, and has heretofore delivered or
made available to DLC in the form filed with the SEC, together with any
amendments thereto, its (i) Annual Reports on Form 10-K for the fiscal year
ended December 31, 1997, (ii) all proxy statements relating to its meetings of
stockholders (whether annual or special) held since January 1, 1997, (iii)
Quarterly Reports on Form 10-Q for the fiscal quarter ended March 31, 1998, June
30, 1998 and September 30, 1998, and (iv) all other reports or registration
statements filed by such FE Subsidiary with the SEC since January 1, 1998
(collectively, "FE Subsidiaries SEC Reports"). The FE Subsidiaries SEC Reports
were prepared substantially in accordance with the requirements of the
Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations promulgated under
each of such respective acts, and did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements, including all related notes and
schedules, contained in the FE Subsidiaries SEC Reports (or incorporated by
reference therein) fairly present the consolidated financial position of the FE
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of the FE Subsidiaries for the periods indicated in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the notes
thereto) and subject in the case of interim financial statements to normal
year-end adjustments.
ARTICLE VIII
COVENANTS OF THE PARTIES
8.1 Conduct of Business Relating to the Exchange Assets. The Parties
understand and agree that the existing CAPCO Agreements regarding the Plants
remain in full force and effect during the period from the date of this
Agreement through the Exchange Closing Date, and that during such period,
59
except as modified by this Agreement, the ownership, operation and maintenance
of the Plants shall be as provided in the existing CAPCO Agreements.
(a) Except as described in Schedule 8.1(a) or as expressly
contemplated by this Agreement or to the extent DLC otherwise consents in
writing, during the period from the date of this Agreement to the Exchange
Closing Date, each FE Subsidiary that is operating one or more of the FE Assets,
(i) will operate such FE Assets in the ordinary course of business consistent
with its past practices and Good Utility Practices, (ii) shall use all
Commercially Reasonable Efforts to preserve intact such FE Assets, and endeavor
to preserve the goodwill and relationships with customers, suppliers and others
having business dealings with it, (iii) shall maintain adequate insurance
coverage relating to such FE Assets, including insurance described in Section
7.4, and (iv) shall comply with all applicable laws relating to such FE Assets,
including without limitation, all Environmental Laws, except, with respect to
such FE Assets, where the failure to so comply would not result in an FE
Material Adverse Effect.
(b) Each Party that is operating one or more of the Exchange
Assets, shall continue its program to install such equipment or Computer Systems
relating to its Exchange Assets (except for such equipment and systems described
on Schedule 4.2(b)) with respect to Year 2000 Compliance in accordance with the
plans referred to in Sections 3.1(k) or 4.1(j), as the case may be; provided
that if the Acquiring Party requests reasonable changes in such plans the
Conveying Party will alter its plans provided that (i) all incremental costs of
the Conveying Party shall be promptly reimbursed by the Acquiring Party and (ii)
the Acquiring Party shall, to the Conveying Party's reasonable satisfaction,
indemnify, defend and hold harmless the Conveying Party from and against any and
all Indemnifiable Losses in any way relating to, resulting from or arising out
of such requested changes to such plans.
(c) Without limiting the generality of Section 8.1(a) and,
except as contemplated in this Agreement or as described in Schedule 8.1(c), or
as required under applicable law or by any Governmental Authority, prior to the
Exchange Closing Date, without the prior written consent of DLC, no FE
Subsidiary shall as to its FE Assets:
(i) Make any material change in the levels of the FE
Inventories customarily maintained by such FE Subsidiary with respect
to its FE Asset, other than changes which are consistent with Good
Utility Practices;
(ii) Sell, lease (as lessor), encumber, pledge,
transfer or otherwise dispose of, any FE Asset (except for FE
Inventories or Fuel Supplies used, consumed or replaced in the
ordinary course of business consistent with past practices of such FE
Subsidiary or Good Utility Practices) other than to encumber any such
FE Asset with Permitted Encumbrances (FE Assets);
(iii) Modify, amend or voluntarily terminate, prior to
the respective expiration date of any of the Assigned Agreements or
Real Property Leases or any of its FE Permits or FE Environmental
Permits with respect to any of its FE Assets in any material respect,
other than (A) in the ordinary course of business, to the extent
consistent with the past practices of such FE Subsidiary and with Good
Utility Practices, (B) with cause, to the extent consistent with past
practices of such FE Subsidiary and with Good Utility Practices, or
(C) as may be required in connection with transferring of any such FE
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Subsidiary's rights or obligations thereunder to the Acquiring Party
pursuant to this Agreement;
(iv) Except as otherwise provided herein, enter into
any commitment for the purchase, sale, or transportation of fuel for
any FE Asset having a term greater than six months and not terminable
on or before the Exchange Closing Date either (A) automatically, or
(B) by option of such FE Subsidiary (or, after the Exchange Closing,
by the Acquiring Party) in its sole discretion, if the aggregate
payment under such commitment for fuel and all other outstanding
commitments for fuel for that FE Asset not previously approved by DLC
would exceed $1,000,000;
(v) Sell, lease or otherwise dispose of FE SO2
Emission Allowances or FE NOx Emission Allowances or FE Emission
Reduction Credits, except to the extent necessary to operate such FE
Assets in accordance with this Section 8.1;
(vi) Except as otherwise provided herein, enter into
any contract, agreement, commitment or arrangement relating to any FE
Asset that individually exceeds $250,000 or in the aggregate exceeds
$1,000,000 unless it is terminable by such FE Subsidiary (or, after
the Exchange Closing, by the Acquiring Party) without penalty or
premium upon no more than sixty (60) days notice;
(vii) Except as otherwise required by the terms of any
collective bargaining agreement or as otherwise provided under Section
8.11 hereof, (A) hire at, or transfer to such FE Asset, any new
employees prior to the Exchange Closing, other than to fill vacancies
in existing positions in the reasonable discretion of such FE
Subsidiary, (B) materially increase salaries or wages of employees
employed in connection with such FE Assets prior to the Exchange
Closing, (C) take any action prior to the Exchange Closing to affect a
material change in any collective bargaining agreement, or (D) take
any action prior to the Exchange Closing to materially increase the
aggregate benefits payable to the employees employed in connection
with such FE Assets;
(viii) Make any FE Capital Expenditures except (A) as
described on Schedule 8.1(c)(viii); (B) as mandated after the date of
this Agreement by any Governmental Authority (provided that DLC may
direct such FE Subsidiary to delay making such FE Capital Expenditures
and contest such mandates by appropriate proceedings at DLC's expense,
unless such delay would have an adverse impact on the FE Assets); or
(C) those which are prudent in amount but do not exceed in the
aggregate $500,000 for any Exchange Asset, in addition to those
identified in (A) or (B) above; or
(ix) Except as otherwise provided herein, enter into
any written or oral contract, agreement, commitment or arrangement
with respect to any of the proscribed transactions set forth in the
foregoing paragraphs (i) through (viii).
(d) Prior to the Exchange Closing Date, without the prior
written consent of DLC, no FE Subsidiary shall as to the DLC Assets make any DLC
Capital Expenditure except (A) as described on Schedule 8.1(d); (B) as mandated
after the date of this Agreement by any Governmental Authority (provided that
the DLC may direct any FE Subsidiary to delay making such DLC Capital
Expenditures and contests such mandate by appropriate proceedings at DLC's
61
expense, unless such delay would have an adverse impact on the DLC Assets); (C)
as necessary to restore the DLC Asset to service or to avoid serious damage; or
(D) those which are prudent in amount but do not exceed in the aggregate
$500,000 for any DLC Asset, in addition to those identified in (A) or (B) above.
(e) Except as contemplated in this Agreement, as described in
Schedule 8.1(e), or as required under applicable law or by any Governmental
Authority, prior to the Exchange Closing Date, without the prior written consent
of the applicable FE Subsidiaries, DLC shall not:
(i) Sell, lease (as lessor), encumber, pledge,
transfer or otherwise dispose of, any DLC Asset (except for DLC
Inventories or Fuel Supplies used, consumed or replaced in the
ordinary course of business consistent with past practices of DLC or
Good Utility Practices) other than to encumber any such DLC Asset with
Permitted Encumbrances (DLC Assets);
(ii) Enter into any contract, agreement, commitment or
arrangement relating to any DLC Asset that individually exceeds
$250,000 or in the aggregate exceeds $1,000,000 unless it is
terminable by DLC (or, after the Exchange Closing, by an FE
Subsidiary) without penalty or premium upon no more than sixty (60)
days notice; or
(iii) Enter into any written or oral contract,
agreement, commitment or arrangement with respect to any of the
proscribed transactions set forth in the foregoing paragraphs (i) and
(ii).
8.2 Access to Information.
(a) Between the date of this Agreement and the Exchange
Closing Date, the FE Subsidiaries will, at reasonable times and upon reasonable
notice, provide DLC, the DLC Representatives, the Auction Participants and the
Winning Bidders:
(i) reasonable access to their managerial personnel
and to all books, records, plans, equipment, offices and other
facilities and properties constituting the FE Assets;
(ii) such historical financial and operating data and
other information with respect to the FE Assets as they may from time
to time reasonably request;
(iii) upon request, a copy of each material report,
schedule or other document filed by FE or any FE Subsidiary with
respect to the FE Assets with the SEC, FERC, PUCO, PaPUC, PaDEP or any
other Governmental Authority;
(iv) access to each FE Asset for Inspection by DLC, DLC
Representatives, Auction Participants and Winning Bidders at
reasonable times during regular business hours scheduled for such
Inspections, and shall provide qualified management, engineering,
operations and maintenance and other personnel to make presentations
as required, to escort such Persons and to assist in all aspects of
conducting the Inspections, provided that each of DLC, the Auction
62
Participants, the Winning Bidders and the FE Subsidiaries shall bear
their own costs of participating in the Inspections; and
(v) with all such other information in the possession
or control of an FE Subsidiary as shall be reasonably necessary to
enable DLC, the DLC Representatives and the Auction Participants to
assemble the information reasonably necessary or appropriate for the
Auction or to verify the accuracy of the representations and
warranties of the FE Subsidiaries contained in this Agreement;
provided, however, that (A) any such Inspections shall be conducted in
such a manner as not to interfere unreasonably with the operation of
the FE Assets, (B) the applicable FE Subsidiary shall not be required
to take any action which would constitute a waiver of any legal
privilege, including, but not limited to, the attorney-client
privilege, the work product privilege, and the self critical
investigation privilege, and (C) the applicable FE Subsidiary need not
supply DLC, any Auction Participant or any Winning Bidder with any
information which such FE Subsidiary are under a legal or contractual
obligation to withhold from disclosure.
Notwithstanding anything in this Section 8.2(a) to the contrary, with respect to
employee records the FE Subsidiaries will only furnish or provide such access to
FE Transferred Employee Records and will not furnish or provide access to other
employee personnel records or medical information unless required by law or
specifically authorized by the affected employee.
(b)
(i) DLC, the DLC Representatives, the Auction
Participants and the Winning Bidders shall be entitled to conduct
Inspections, in accordance with this Section 8.2(b), of all of the FE
Assets located adjacent to any Connection Point (as defined in the FE
Connection Agreements) to verify and/or determine the accuracy of the
data, drawings, and records described in the FE Connection Agreements.
The Parties shall cooperate to schedule DLC's, the Auction
Participants' and the applicable Winning Bidder's Inspections of the
FE Assets so that any interference with the operation of each FE Plant
is minimized, to the extent reasonably feasible, and so that DLC, the
Auction Participants and such Winning Bidder may complete their
Inspections of the FE Assets within thirty (30) working days of
commencement of Inspections and within two (2) months after the
execution of the Auction Agreements.
(ii) At a mutually convenient time not more than one
(1) month after DLC, the Auction Participants and the Winning Bidders
have completed their Inspections, the Parties shall meet to discuss
whether, as a result of the Inspections, it is appropriate to modify
the exhibits to the FE Connection Agreements to portray more
accurately the Connection Points. Any modification to any portion of
the exhibits to any FE Connection Agreement to which the respective
Parties agree shall thereafter be deemed part of such exhibit for all
purposes under such FE Connection Agreement.
(c) The FE Subsidiaries agree that in order to satisfy the
requirements of the Auction, it is necessary and hereby agree (i) to complete
surveys and title reports for the FE Real Property, (ii) to subdivide the FE
Real Property appropriately to prepare it for sale, in each case as soon as
practicable following the execution of this Agreement, and (iii) to provide DLC
with a copy of preliminary title reports and surveys for the FE Real Property as
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soon as such preliminary title reports and surveys are available. DLC agrees to
provide the applicable FE Subsidiaries with a copy of preliminary title reports
and surveys for the DLC Real Property as soon as such preliminary title reports
and surveys are available.
(d) For seven (7) years after the Exchange Closing Date (or such
longer period as may be required by applicable law), each Party and its
Representatives (and under the terms of the respective Auction Agreement, the
applicable Winning Bidder and its Representatives) shall have reasonable access
to all of the books and records of the Exchange Assets, including all FE
Transferred Employee Records in the possession of any Party to the extent that
such access may reasonably be required in connection with the Assumed
Liabilities or the Excluded Liabilities, or regarding other matters relating to
or affected by the operation of the Exchange Assets. Such access shall be
afforded by the applicable Winning Bidder or the Party in possession of any such
books and records upon receipt of reasonable advance notice and during normal
business hours. The Person exercising this right of access shall be solely
responsible for any costs or expenses incurred by it or the holder of the
information with respect to such access pursuant to this Section 8.2(d). If the
Person in possession of such books and records shall desire to dispose of any
books and records upon or prior to the expiration of such seven-year period (or
any such longer period), such Person shall, prior to such disposition, give the
other Person a reasonable opportunity, at the latter's expense, to segregate and
remove such books and records as it may select.
(e) Each Party agrees that, prior to the Exchange Closing Date,
neither it nor its Representatives will contact any vendors, suppliers,
employees, or other contracting parties of a Conveying Party or its Affiliates
with respect to any aspect of the Conveying Party's Exchange Assets or the
transactions contemplated hereby, without the prior written consent of the
applicable Conveying Party, which consent shall not be unreasonably withheld.
For avoidance of doubt, if the Conveying Party is an FE Subsidiary, consent will
only be needed from such FE Subsidiary.
(f) Each Party shall provide the other with (i) copies of its
Annual Report on Form 10-K filed with the SEC for the fiscal year ended December
31, 1998, as soon as practicable but in no event later than March 31, 1999, and
(ii) copies of its Quarterly Reports on Form 10-Q filed with the SEC for those
quarters ended March 31, 1999, June 30, 1999 and September 30, 1999, as soon as
practicable after each such report is filed with the SEC.
8.3 Confidentiality. (a) Each Party shall, and shall use its best
efforts to cause its Representatives to, (i) keep all Proprietary Information of
the other Party confidential and not to disclose or reveal any such Proprietary
Information to any person other than such Party's Representatives and (ii) not
use such Proprietary Information other than in connection with the consummation
of the transactions contemplated hereby. After the Exchange Closing Date, any
Proprietary Information, to the extent related to the Exchange Assets acquired
by an Acquiring Party, shall no longer be subject to the restrictions set forth
herein. The obligations of the Parties under this Section 8.3(a) shall be in
full force and effect for three (3) years from the date hereof and will survive
the termination of this Agreement, the discharge of all other obligations owed
by the Parties to each other and the Exchange Closing Date.
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(b) Notwithstanding the terms of Section 8.3(a) above, the FE
Subsidiaries agree that prior to the Exchange Closing, DLC may reveal or
disclose Proprietary Information to any other Persons in connection with the
Auction; provided that such Persons agree in writing to maintain the
confidentiality of the Proprietary Information in accordance with this
Agreement.
(c) Upon the other Party's prior written approval (which shall
not be unreasonably withheld), either Party or the applicable Winning Bidder may
provide Proprietary Information of the other Party to the PUCO, PaPUC, SEC, FERC
or any other Governmental Authority with jurisdiction or any stock exchange, as
may be necessary to obtain Required Regulatory Approvals, or to comply generally
with any relevant law or regulation. The disclosing Party, or the applicable
Winning Bidder (as required by the respective Auction Agreement), will seek
confidential treatment for the Proprietary Information provided to any
Governmental Authority and the disclosing Party, or the Winning Bidder (as
required by the respective Auction Agreement), will notify the other Party as
far in advance as is practicable of its intention to release to any Governmental
Authority any Proprietary Information.
8.4 Public Statements. Subject to the requirements imposed by law,
any Governmental Authority or stock exchange, prior to the Exchange Closing
Date, no press release or other public announcement or public statement or
comment in response to any inquiry relating to the transactions contemplated by
this Agreement shall be issued or made by any Party without the prior approval
of the other Party (which approval shall not be unreasonably withheld). The
Parties agree to cooperate in preparing any such announcements.
8.5 Expenses. Except to the extent specifically provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses. Notwithstanding anything to the contrary herein, each Acquiring Party
will be responsible for (a) all costs and expenses associated with obtaining any
title insurance policy and all endorsements thereto that such Acquiring Party
elects to obtain and (b) all filing fees under the HSR Act relating to the
Exchange Assets that such Acquiring Party would acquire hereunder.
8.6 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
Party shall use its best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Generation
Exchange and the assumption of the Assumed Liabilities pursuant to this
Agreement and the Auction Agreements. Such actions shall include, without
limitation, each Party using its best efforts to ensure satisfaction of the
conditions precedent to its obligations hereunder, including obtaining all
necessary consents, approvals, and authorizations of third parties and
Governmental Authorities required to be obtained in order to consummate the
transactions hereunder, and as a Conveying Party to effectuate a transfer of the
Transferable Permits to any Acquiring Party. The Conveying Party shall cooperate
with the Acquiring Party in its efforts to obtain all other Permits and
Environmental Permits necessary for the Acquiring Party to operate the Exchanged
Assets. As an Acquiring Party, each Party agrees to perform promptly all
conditions required of such Acquiring Party in connection with the Conveying
Party's Required Regulatory Approvals, other than those conditions which would
create for it a Material Adverse Effect. Neither of the Parties hereto shall,
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without prior written consent of the other Party, take or fail to take any
action which might reasonably be expected to prevent or materially impede,
interfere with or delay the transactions contemplated by this Agreement or the
Auction Agreements.
(b)
(i) In the event that any Exchange Asset to be
assigned, conveyed, transferred and delivered hereunder to any
Acquiring Party shall not have been so assigned, conveyed, transferred
and delivered to such Acquiring Party at the Exchange Closing, the
Conveying Party shall, subject to Section 8.6(c), use Commercially
Reasonable Efforts to so assign, convey, transfer and deliver such
asset to such Acquiring Party as promptly as is practicable after the
Exchange Closing.
(ii) In the event that any Easement shall not have been
granted by an Acquiring Party to the applicable Conveying Party at the
Exchange Closing, such Acquiring Party shall use Commercially
Reasonable Efforts to grant such Easement to the applicable Conveying
Party as promptly as is practicable after the Exchange Closing.
(c)
(i) To the extent that a Conveying Party's rights
under any material (as such term is defined in Section 8.6(c)(iii)
below) Assigned Agreement or Real Property Lease may not be assigned
without the consent of another Person which consent has not been
obtained by the Exchange Closing Date, this Agreement shall not
constitute an agreement to assign the same, if an attempted assignment
would constitute a breach thereof or be unlawful.
(ii) The Parties agree that if any consent to an
assignment of any material Assigned Agreement or Real Property Lease
shall not be obtained or if any attempted assignment would be
ineffective or would impair the Acquiring Party's rights and
obligations under the material Assigned Agreement or Real Property
Lease in question, so that the Acquiring Party would not in effect
acquire the benefit of all such rights and obligations, the Conveying
Party, at the Acquiring Party's option and to the maximum extent
permitted by law and by such material Assigned Agreement or Real
Property Lease shall, after the Exchange Closing Date, appoint the
Acquiring Party to be the Conveying Party's agent with respect to such
material Assigned Agreement or Real Property Lease, or, to the maximum
extent permitted by law and by such material Assigned Agreement or
Real Property Lease, enter into such reasonable arrangements with the
Acquiring Party or take such other actions as are necessary to provide
the Acquiring Party with the same or substantially similar rights and
obligations of such material Assigned Agreement or Real Property Lease
as the Acquiring Party may reasonably request. The Parties shall
cooperate and shall each use Commercially Reasonable Efforts prior to
and after the Exchange Closing Date to obtain an assignment of such
material Assigned Agreement or Real Property Lease to the Acquiring
Party.
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(iii) For purposes of this Section 8.6(c), all Real
Property Leases and Assigned Agreements listed on Schedules 7.5 and
7.11(a) are deemed to be "material." Without limitation of the
foregoing, to the extent that any fuel supply contract relating to an
FE Plant is not assignable, then the applicable FE Subsidiary will
agree to continue to purchase fuel pursuant to such contract and to
resell it to the applicable Acquiring Party at the FE Subsidiary's
purchase price for the remainder of the term of that contract;
provided that, the term of such fuel supply contract shall not be
extended and the respective Auction Agreement shall require such
Winning Bidder to make payment to the FE Subsidiary in this
circumstance on an as-incurred basis.
(d) To the extent that a Conveying Party's rights under any
warranty or guaranty described in Section 3.1(i) or 4.1(i) may not be assigned
without the consent of another Person, which consent has not been obtained by
the Exchange Closing Date, this Agreement shall not constitute an agreement to
assign the same, if an attempted assignment would constitute a breach thereof,
or be unlawful. DLC and each FE Subsidiary agree that if any consent to an
assignment of any such warranty or guaranty shall not be obtained, or if any
attempted assignment would be ineffective or would impair the Acquiring Party's
rights and obligations under the warranty or guaranty in question, so that the
Acquiring Party would not in effect acquire the benefit of all such rights and
obligations, the Conveying Party, at the Acquiring Party's option and expense,
shall use Commercially Reasonable Efforts, to the maximum extent permitted by
law and by such warranty or guaranty, to enforce such warranty or guaranty for
the benefit of the Acquiring Party so as to provide Acquiring Party to the
maximum extent possible with the benefits and obligations of such warranty or
guaranty.
8.7 Consents and Approvals.
(a) As promptly as advisable after the date of execution of this
Agreement, DLC and each of the FE Subsidiaries shall file or cause to be filed
with the Federal Trade Commission and the United States Department of Justice
any notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. The Parties shall use their respective best efforts to respond promptly
to any requests for additional information made by either of such agencies, and
to cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date after the date of filing of such notification. Each
Acquiring Party will pay all filing fees under the HSR Act relating to the
Exchange Assets to be acquired thereby, but each Party will bear its own costs
of the preparation of any such filing.
(b) As promptly as advisable after the date of this Agreement,
DLC and the FE Subsidiaries, as applicable, shall make any filings required by
the Federal Power Act. Prior to filings with the FERC, the filing Party shall
submit such filings to the other Party for review and comment and shall
incorporate into the application any revisions reasonably requested. The Party
making the filing shall be solely responsible for the cost of preparing and
filing the application, any petition(s) for rehearing, or any reapplication. If
the initial filing is rejected by the FERC, the Party that made the filing
agrees to petition the FERC for rehearing and/or to re-submit an application
with the FERC, provided that in either case this action does not create a
Material Adverse Effect with respect to the Party that made the filing and has
been approved by the other Party.
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(c) As promptly as advisable, and in any case within sixty (60)
days after the date of this Agreement, the Parties, as applicable, shall make or
cause to be made any filings required by law with the PUCO, PaPUC and any other
Governmental Authority, and make or cause to be made any other filings required
to be made with respect to the transactions contemplated hereby. The Parties
shall respond promptly to any requests for additional information made by such
agencies, and use their respective commercially reasonable efforts to cause
regulatory approval to be obtained at the earliest possible date after the date
of any such filing. Each Party will bear its own costs of the preparation of any
such filing.
(d) The Parties shall cooperate with each other and promptly
prepare and file notifications with, and request Tax clearances from, state and
local taxing authorities in jurisdictions in which a portion of the Closing
Payment may be required to be withheld or in which the Acquiring Party would
otherwise be liable for any Tax liabilities of the Conveying Party pursuant to
such state and local Tax law.
(e) Each Acquiring Party shall have the primary responsibility
for securing the transfer, reissuance or procurement of the Permits and
Environmental Permits (other than Transferable Permits) effective as of the
Exchange Closing Date. Each Conveying Party shall cooperate with the Acquiring
Party's efforts in this regard and assist in any transfer or reissuance of a
Permit or Environmental Permit held by such Conveying Party or the procurement
of any other Permit or Environmental Permit when so requested by the Acquiring
Party.
8.8 Fees and Commissions. Each Party represents and warrants to the
other Party that, except for Xxxxxx Brothers Inc., which is acting for and at
the expense of DLC, no broker, finder or other Person is entitled to any
brokerage fees, commissions or finder's fees in connection with the transactions
contemplated hereby by reason of any action taken by the Party making such
representation. Each Party will pay to the other Party or otherwise discharge,
and will indemnify and hold the other harmless from and against, any and all
claims or liabilities for all brokerage fees, commissions and finder's fees
(other than the fees, commissions and finder's fees payable to the parties
listed above) incurred by reason of any action taken by the indemnifying party.
8.9 Tax Matters.
(a) All Transfer Taxes incurred in connection with this
Agreement and the transactions contemplated hereby, including, without
limitation, (i) Pennsylvania or Ohio sales tax; (ii) the Pennsylvania or Ohio
transfer tax, conveyance fees or conveyances of interests in real and/or
personal property; and (iii) Pennsylvania or Ohio sales tax and transfer tax on
deeds shall be borne by the applicable Conveying Party. Each Conveying Party
shall file, to the extent required by, or permissible under, applicable law, all
necessary Tax Returns and other documentation with respect to all such Transfer
Taxes, and, if required by applicable law, the Acquiring Party shall join in the
execution of any such Tax Returns and other documentation, except to the extent
that such execution is inconsistent with the Party's commitments in the Auction
Agreements. Prior to the Exchange Closing Date, to the extent applicable, each
Acquiring Party shall provide to the applicable Conveying Party appropriate
certificates of Tax exemption from each applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with
Section 5.4 of this Agreement, each Party shall prepare and timely file and the
Auction Agreement shall require the Winning Bidders to prepare and timely file
all Tax Returns required to be filed after the Exchange Closing Date with
respect to the Exchange Assets, if any, and shall duly and timely pay all such
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Taxes shown to be due on such Tax Returns. Each Party's preparation of any such
Tax Returns shall be subject to the other Party's approval, which approval shall
not be unreasonably withheld, except if such approval is inconsistent with such
Party's obligations under the applicable Auction Agreements. Each Party shall
make such Tax Returns available for the other Party's review and approval no
later than fifteen (15) Business Days prior to the due date for filing each such
Tax Return.
(c) Each Party shall provide the other Party with such
assistance as may reasonably be requested by such other Party in connection with
the preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each shall retain and provide the requesting Party with any
records or information which may be relevant to such return, audit, examination
or proceedings. Any information obtained pursuant to this Section 8.9(c) or
pursuant to any other Section hereof providing for the sharing of information or
review of any Tax Return or other instrument relating to Taxes shall be kept
confidential by the Parties hereto.
8.10 Advice of Changes. Prior to the Exchange Closing, each Party will
advise the other in writing with respect to any matter arising after execution
of this Agreement of which that Party obtains Knowledge and which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth in this Agreement, including any of the Schedules or Exhibits hereto. Each
Party may at any time notify the other Party, in writing, of any development
causing a breach of any of its representations and warranties in Article VI, in
the case of DLC, or Article VII, in the case of the FE Subsidiaries. Unless a
Party has the right to terminate this Agreement pursuant to Section 11.1(e) or
(f) below by reason of such developments and exercises that right within the
period of fifteen (15) days after receipt of such written notice, said written
notice will be deemed to have amended this Agreement, including the appropriate
Schedule or Exhibit, to have qualified the representations and warranties
contained in Articles VI and VII above, as applicable, and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
8.11 FE Subsidiaries' Employees.
(a) Each FE Subsidiary shall identify the employees at its FE
Plant on Schedule 8.11(a), which schedule shall also set forth such employees'
level of seniority, classification and Plant location. The FE Subsidiaries may
submit an offer of continuing employment with an FE Subsidiary to those
employees identified on Schedule 8.11(a), provided that such offer shall not be
contingent on any such employee waiving his or her rights to consider a
competing offer of employment from the Winning Bidder. Upon the acceptance by
any such employee of an FE Subsidiary's offer of continuing employment, the
applicable FE Subsidiary shall provide written notice thereof to DLC and shall
modify Schedule 8.11(a) to reflect the same. The Parties agree that the Auction
Agreement shall include provisions containing the terms set forth in paragraphs
(b) through (p) of this Section 8.11.
(b) At least 90 days prior to the Auction Closing Date, Winning
Bidder shall provide the applicable FE Subsidiary with notice of its staffing
level requirements, listed by classification and operation, and shall be
required to offer employment only to that number of employees of the applicable
FE Subsidiary who are covered by the UWUA, Local 140 collective bargaining
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agreement with FE ("Local 140 CBA") and who are either (i) employed in positions
relating to the FE Plant, New Castle (collectively, "Union Employees") or (ii)
if employed at another location, perform substantially all their work in support
of the New Castle plant, and in each case, who are necessary to satisfy Winning
Bidder's staffing level requirements. In each classification, FE Union Employees
shall be so offered employment in order of their seniority as provided for in
the Local 140 CBA. Each employee who becomes employed by Winning Bidder pursuant
to this section shall be referred herein as a "FE Transferred Union Employee."
(c) At least 90 days prior to the Auction Closing Date, Winning
Bidder shall provide the applicable FE Subsidiary with notice of its staffing
level requirements, listed by classification and operation, and shall be
required to make either a Non-Qualifying or a Qualifying Offer of employment
only to that number of salaried employees of the applicable FE Subsidiary who
are listed in, or are in a function or whose employment responsibilities are
listed in, Schedule 8.11(c) (collectively, "Non-Union Employees"), which
Schedule 8.11(c) shall also set forth such employees' salary and
responsibilities, and who are necessary to satisfy Winning Bidder's staffing
level requirements. Each employee who becomes employed by Winning Bidder
pursuant to this section shall be referred herein as a "FE Transferred Non-Union
Employee." Winning Bidder shall inform the FE Subsidiaries of those Non-Union
Employees to whom Winning Bidder has made offers of employment not later than 90
days prior to the Auction Closing Date.
(d) All offers of employment made by a Winning Bidder pursuant
to Sections 8.11 (b) and (c) shall be made in accordance with all applicable
laws and regulations and shall remain open for a period of ten (10) working
days. Any such offer which is accepted within such ten (10) working day period
shall thereafter be irrevocable until the earlier of the Auction Closing Date or
the termination of this Agreement pursuant to its terms. Following the
acceptance of such offers the Winning Bidder shall provide written notice
thereof to the applicable FE Subsidiary and the applicable FE Subsidiary shall
provide Winning Bidder with access to the files and records of employees
accepting such offers, to the extent permitted by contract, the Local 140 CBA
and/or applicable law. Schedule 8.11(d) sets forth the collective bargaining
agreements, and amendments thereto, to which the applicable FE Subsidiary is a
party in connection with the Exchange Assets.
(e) With respect to FE Transferred Union Employees and FE
Transferred NonUnion Employees, the following shall be applicable:
(i) For such FE Transferred Union Employees, the Winning Bidder
shall be required to recognize UWUA, Local 140 as the exclusive collective
bargaining representative and shall assume the terms and conditions of the Local
140 CBA to the extent applicable to such FE Transferred Union Employees until
the expiration of said agreement and will further comply with all applicable
legal obligations with respect to collective bargaining under federal labor law
thereafter. Moreover, should the Winning Bidder subsequently sell, convey or
otherwise transfer its interest in the New Castle Plant to any other entity
prior to the expiration of the Local 140 CBA, the Winning Bidder shall make the
foregoing commitments a condition of such sale, conveyance or transfer.
(ii) The Winning Bidder will establish and maintain benefit plans
(including a severance plan) for Transferred FE Union Employees and FE
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Transferred Non-Union Employees under either the Local 140 CBA or any similar FE
document which are comparable to the FE Plans in effect for such employees
immediately prior to the Auction Closing Date and provide at least the same
level of benefits or coverage as the FE Plans for the duration of the Local 140
CBA, in the case of FE Transferred Union Employees, or December 31, 2001, in the
case of FE Transferred Non-Union Employees (such period being hereinafter
referred to as the "Continuation Period"). Subject to applicable law and the
Local 140 CBA, nothing in the foregoing shall prevent the Winning Bidder from
using different benefit providers or from establishing new benefit plans or
using its existing benefit plans as the means of meeting its obligation
hereunder. The commitments under this paragraph shall, however, require the
following during the Continuation Period:
(A) With respect to the applicable FE Subsidiary's health care plans,
the Winning Bidder agrees to waive all limitations as to pre-existing
conditions and actively-at-work exclusions and waiting periods for
such employees, except that the Winning Bidder may require the
employee or his/her dependent who, on the Auction Closing Date, is
then in the process of satisfying any similar exclusion or waiting
period under the FE Subsidiary's health care plans to satisfy fully
the balance of the applicable time period for such exclusion or
waiting period under the Winning Bidder's plan. With respect to the
calendar year in which the Auction Closing Date occurs, all health
care expenses incurred by any such employees and/or any eligible
dependent thereof in the portion of the calendar year preceding the
Auction Closing Date that were qualified to be taken into account for
purposes of satisfying any deductible or out-of-pocket limit under the
FE Subsidiary's health care plans shall be taken into account for
purposes of satisfying any deductible or out-of-pocket limit under the
Winning Bidder's health care plan for such calendar year.
(B) With respect to service and seniority, the Winning Bidder shall
recognize each such employee's service and seniority with the FE
Subsidiary for all non-pension purposes, including the determination
of eligibility and extent of service or seniority-related welfare
benefits such as vacation and sick pay benefits and to agree to give
each such employee full credit for all vacation benefits banked,
accrued, and unused, as of the Auction Closing Date.
(C) With respect to pension benefits, the Winning Bidder shall provide
each such employee with a pension benefit that, when combined with the
benefit accrued by such employee under the FE Subsidiary's pension
plan as it exists on the date hereof, is at least equal in value to
the pension benefit such employee would have accrued if such employee
had remained employed with the FE Subsidiary and continued to be
covered by such FE Subsidiary's pension plan (as it exists on the date
hereof) during the Continuation Period. In providing such benefits,
the Winning Bidder shall recognize each such employee's combined
service and earnings with the applicable FE Subsidiary and the Winning
Bidder. Further, the Winning Bidder shall provide to any such employee
who is laid off by the Winning Bidder during the Continuation Period
and who, at the time of such layoff, is between the ages of 50-54 and
has ten or more years of combined service with the applicable FE
Subsidiary and the Winning Bidder, a retirement benefit from the
Winning Bidder's pension plan, beginning at age 55, that is at least
equal to the subsidized early retirement benefit that such employee
would have received under the FE Subsidiary's pension plan had such
employee continued to be covered by such plan as it exists on the date
hereof. The determination of the benefit required by this Section
8.11(e)(ii)(C) shall be made in good faith by the accounting firm then
acting as the independent auditor of Winning Bidder, which
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determination shall be final and binding on the parties hereto and
each affected employee.
(D) With respect to post-retirement medical and life insurance
programs, the Winning Bidder shall provide to any such employee who
retires from the Winning Bidder's employment prior to the expiration
of the Local 140 CBA with respect to FE Transferred Union Employees,
and December 31, 2001 with respect to FE Transferred Non-Union
Employees, and is at least age 55 and has ten or more years of
combined service with the FE Subsidiary and the Winning Bidder,
benefits, to the extent possible, that are substantially equivalent to
the FE Subsidiary's post-retirement medical and life insurance
programs that such employee would have received, if such employee had
continued to be covered by the FE Subsidiary's programs as they
existed on the date hereof.
(E) With respect to the FE Subsidiary's Savings Plan, the Winning
Bidder shall take any and all necessary action to cause the trustee of
any defined contribution plan of the Winning Bidder in which any such
employee becomes a participant by virtue of this section, to accept a
direct "rollover" of all or a portion of said employee's "eligible
rollover distribution" within the meaning of Section 402 of the Code
from the FE Savings Plan, if requested to do so by such employee, or
to accept a direct plan-to-plan transfer from the FE Savings Plan of
the account balances of any such employee and the assets of such plans
related thereto, if requested to do so by the applicable FE Subsidiary
or by such employee. The Winning Bidder agrees that the property so
rolled over and the assets so transferred may include (i) promissory
notes evidencing loans from the FE Savings Plan to such employees that
are outstanding as of the Auction Closing Date, and (ii) shares of FE
common stock in which the account balances of such employees are
invested as of the Auction Closing Date. However, any defined
contribution plan of the Winning Bidder or its Affiliates accepting
such a rollover or transfer shall not be required to (i) make any
further loans to any such employee after the Auction Closing Date or
(ii) permit any additional investment to be made in FE common stock on
behalf of any such employee after the Auction Closing Date. The FE
Subsidiaries hereby represent to DLC and the Winning Bidder that the
FE Savings Plan is intended to be qualified within the meaning of
Section 402 of the Code.
(f) The Winning Bidder shall pay or provide to FE Transferred
Union Employees and/or FE Transferred Non-Union Employees the benefits more
particularly described in paragraphs (i), (ii) and (iii), as applicable:
(i) With respect to severance benefits, the Winning Bidder
is required to provide for any such employee who is terminated as a result of an
overall reduction in work force due to decreased employment needs of the Winning
Bidder prior to the expiration of the Local 140 CBA, with respect to FE
Transferred Union Employees, and December 31, 2001, with respect to FE
Transferred Non-Union Employees, severance benefits at the level for such
employees in effect as of the date hereof. FE Transferred Non-Union Employees
shall also be entitled to such severance benefits if, prior to December 31,
2001, the Winning Bidder reduces the pay rate for such employee and such
employee within seven (7) days thereafter terminates employment. Any employee
provided severance benefits under this section may be required to execute a
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release of claims against DLC or the Winning Bidder, in such form as the Winning
Bidder shall prescribe, as a condition for the receipt of such benefits.
(ii) Each FE Transferred Union or FE Transferred Non-Union
Employee who accepts employment with the Winning Bidder, shall be provided by
the Winning Bidder with a transition bonus of $2,500, less applicable taxes,
payable as soon as practicable following the Auction Closing Date. In no event
shall any such employee receive more than one transition bonus as a result of
the transfer of employment from an FE Subsidiary to the Winning Bidder.
(iii) Each FE Transferred Non-Union Employee who is initially
assigned, or assigned within 12 months of the Auction Closing Date, by the
Winning Bidder to a principal place of work that requires such employee to
relocate his/her residence will be reimbursed for all relocation expenses in
accordance with the FE Subsidiary's relocation plans in effect as of the date
hereof. For purposes of the foregoing, a required relocation of residence shall
include a change in the principal place of work that is more than 30 miles
farther from such employee's principal place of work immediately prior to the
Auction Closing Date and requires a commute from his/her current residence of at
least one hour in each direction.
(g) With respect to any FE Union Employees who do not receive an
offer of employment from the Winning Bidder pursuant to subsection (b) hereof
and with respect to any Non-Union Employees who decline a Non-Qualifying Offer
pursuant to subsection (c) hereof, and are thereafter terminated, the Winning
Bidder shall reimburse the applicable FE Subsidiary for the aggregate estimated
cost that FE Subsidiary will or may incur in providing the severance, pension,
and banked, accrued or unused vacation benefits described in Schedule 7.8(a) to
the FE Union Employees and FE Non-Union Employees therein described
(collectively the "Termination Benefits"). The estimated cost of such pension
benefits shall be calculated by the actuarial firm regularly engaged to provide
actuarial services to the applicable FE Subsidiary with respect to its pension
plans, and shall be determined using the same assumptions as to mortality,
turnover, interest rate and other actuarial assumption as used by such firm in
determining the cost of benefits under the FE Subsidiary's pension plans for
purposes of their most recently issued financial statements prior to the Auction
Closing Date.
(h) The applicable FE Subsidiary shall be responsible, with respect
to the Exchange Assets, for performing and discharging all requirements under
the WARN Act and under applicable state and local laws and regulations for the
notification of its employees of any "employment loss" within the meaning of the
WARN Act which occurs prior to the Auction Closing Date.
(i) Winning Bidder shall not be responsible for extending COBRA
Continuation Coverage to any employees and former employees of any of the FE
Subsidiaries, or to any qualified beneficiaries of such employees and former
employees, who become or became entitled to COBRA continuation coverage on or
before the Auction Closing Date, including those for whom the Auction Closing
Date occurs during their COBRA election period.
(j) Individuals who are otherwise Union Employees, as defined in
Section 8.11(b) or NonUnion Employees, as defined in Section 8.11(c) but who on
any date are not actively at work due to a leave of absence covered by the
Family and Medical Leave Act (FMLA), or due to any other authorized leave of
absence, shall nevertheless be treated as "Union Employees" or as "Non-Union
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Employees", as the case may be, on such date if they are able (i) to return to
work within the protected period under the FMLA or such other leave (which in
any event shall not extend more than twelve (12) weeks after the Auction Closing
Date), whichever is applicable, and (ii) to perform the essential functions of
their job, with or without a reasonable accommodation.
(k) The FE Subsidiaries are responsible for extending and continuing
to extend COBRA Continuation Coverage to all employees and former employees, and
qualified beneficiaries of such employees and former employees of the FE
Subsidiaries, who become or became entitled to such COBRA Continuation Coverage
on or before the Auction Closing Date, including those for whom the Auction
Closing Date occurs during their COBRA election period.
(l) The FE Subsidiaries shall pay to each employee of such FE
Subsidiaries to whom the Winning Bidder offers employment pursuant to this
Section 8.11, all unpaid salary, bonus, and holiday compensation, workers'
compensation or other compensation or employment benefits that are payable in
cash which have accrued to such employees through and including the Auction
Closing Date, at such times as provided under the terms of the applicable
compensation or benefit programs. With respect to workers compensation claims of
such employees that require payments that continue beyond the Auction Closing
Date, the Winning Bidder shall be responsible for such payments. The FE
Subsidiaries shall be responsible for initiating the transfer of the claims and
the associated risk and liability to the Winning Bidder with either the Ohio or
the Pennsylvania Bureau of Workers' Compensation, as appropriate.
(m) The following provisions shall apply with respect to employees
who are covered by the UWUA Local 270 Collective Bargaining Agreement ("Local
270 CBA") who are employed in positions at the FE Plant of Avon Lake or, if
employed at another location, perform substantially all their work in support of
the FE Plant of Avon Lake "Local 270 Employees").
(i) Subject to Section (m)(ii) hereof, the Winning Bidder
shall not be obligated to assume the Local 270 CBA or to recognize UWUA Local
270 as the exclusive collective bargaining agent for Local 270 Employees unless
otherwise required by federal law as a result of the actions of the Winning
Bidder. The Winning Bidder further shall not be required to make offers of
employment to Local 270 Employees. The Winning Bidder shall inform the FE
Subsidiaries of those Local 270 Employees, if any, to whom the Winning Bidder
has made offers of employment not later than 90 days prior to the Auction
Closing Date.
(ii) In the event that, not less than fifteen (15) days
prior to the date for submission of final, binding bids in the Auction, UWUA
Local 270 and the applicable FE Subsidiary modify the Local 270 CBA, the Winning
Bidder shall be required to assume such Local 270 CBA so modified to the extent
applicable to Local 270 Employees, provided that the Local 270 CBA as amended or
modified permits the Winning Bidder to determine its staffing level requirements
and does not require the Winning Bidder to offer employment to Local 270
Employees in excess of such staffing level requirements; and provided further
that the Local 270 CBA as amended or modified does not, taken as a whole,
materially exceed the provisions of the Local 140 CBA, including, without
limitation, the provisions of the Local 140 CBA with respect to cash
compensation, fringe benefits, health care, and pension benefits, as of the date
of this Agreement.
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(o) The provisions of this Section 8.11 shall not be construed as
being for the benefit for any person other than the Parties hereto, and shall
not be enforceable by persons other than such Parties (including, without
limitations, the Union Employees and Non-Union Employees).
(p) The applicable FE Subsidiaries agree to indemnify and hold
harmless the Winning Bidder and DLC from any and all remedies or damages that
may be applied or charged to, or imposed on, the Winning Bidder and/or DLC as
the result of any unfair labor practice charges (i) filed by UWUA Local 270 or
its members against FE and/or an FE Subsidiary, or to which Winning Bidder
and/or DLC is added as a party, or (ii) filed against Winning Bidder and/or DLC
arising out of facts and circumstances that gave rise to unfair labor practice
charges filed against FE and/or an FE Subsidiary.
8.12 Risk of Loss.
(a) From the date hereof through the Exchange Closing Date, all
risk of loss or damage to the assets included in the Exchange Assets shall be
borne by the Conveying Party, other than loss or damage caused by the acts or
negligence of the Acquiring Party, which loss or damage shall be the
responsibility of the Acquiring Party.
(b) If, before the Exchange Closing Date, all or any portion of
the Exchange Assets are (i) taken by eminent domain or are the subject of a
pending or (to the Knowledge of the Conveying Party with respect such Exchange
Assets) contemplated taking which has not been consummated or (ii) damaged or
destroyed by fire or other casualty, such Conveying Party shall (x) notify the
Acquiring Party (or, if the Acquiring Party is the Winning Bidder, DLC) promptly
in writing of such fact, (y) assign or pay, as the case may be, any proceeds
thereof to the Acquiring Party (or, if the Acquiring Party is the Winning
Bidder, DLC) at the Exchange Closing, and (z) either restore the damage or
assign the insurance proceeds therefor (and pay the amount of any deductible
and/or self-insured amount in respect of such casualty) to the Acquiring Party
(or, if the Acquiring Party is the Winning Bidder, DLC) at the Exchange Closing.
Notwithstanding the above, if such taking, casualty or loss results, or would
result, in a Material Adverse Effect to the Conveying Party (with respect to the
Exchange Assets being conveyed by the Conveying Party), the Parties shall,
unless the procedures contained in Section 11.1(h) shall have been elected,
negotiate to settle the loss resulting from such taking, casualty or loss (and
such negotiation shall include, without limitation, the negotiation of a fair
and equitable payment to the Acquiring Party (or, if the Acquiring Party is the
Winning Bidder, DLC) to offset such taking, casualty or loss). If no such
settlement is reached within sixty (60) days after the Conveying Party has
notified the Acquiring Party (or, if the Acquiring Party is the Winning Bidder,
DLC) of such taking, casualty or loss, then the Acquiring Party (or, if the
Acquiring Party is the Winning Bidder, DLC) may terminate this Agreement
pursuant to Section 11.1(g). In the event of damage or destruction which the
Conveying Party elects to restore, the Conveying Party will have the right (with
respect to the Exchange Assets being conveyed by the Conveying Party) to
postpone the Exchange Closing for up to six (6) months, and the Acquiring Party
(or, if the Acquiring Party is the Winning Bidder, DLC) will have the right to
inspect and observe, or have its Representatives inspect or observe, all repairs
necessitated by any such damage or destruction.
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8.13 Cooperation in Auction.
(a) The FE Subsidiaries will cooperate with DLC in a
commercially reasonable manner to provide for the timely and successful
completion of the Auction, including providing the access to information
specified in Section 8.2 and designating a person or persons having engineering
and operational familiarity with respect to each of the FE Plants to be the
principal contact person(s) for the Auction and causing such person(s) to make
sufficient time available for such purpose as reasonably required by DLC or DLC
Representatives.
(b) The FE Subsidiaries shall not submit a bid in the Auction.
(c) The FE Subsidiaries shall promptly review information
concerning the FE Assets to be included in the Information Memorandum and
supporting materials concerning the FE Assets and provide DLC with written
confirmation of the accuracy and completeness of such information as provided to
the FE Subsidiaries, with the understanding that such information will be used
in connection with the delivery of the Information Memorandum to potential
Auction Participants, and the FE Subsidiaries shall advise DLC from time to time
if any such information as provided to the FE Subsidiaries becomes inaccurate or
misleading. The FE Subsidiaries shall respond promptly to requests from DLC or
DLC Representatives for additional information concerning the FE Assets.
(d) The FE Subsidiaries shall not participate in the management,
planning or implementation of the Auction and shall have no right to do so
despite its assistance in providing information.
(e) The FE Subsidiaries acknowledge and agree that Inspections
and documentation must be completed with respect to the FE Assets to satisfy
conditions to the Exchange Closing and the Auction Closings, including the
subdivision of the FE Real Property to prepare it for sale and the preparation
of title reports and surveys for the FE Real Property in connection with
preparing ALTA title owner's insurance policies. The FE Subsidiaries agree to
cooperate and assist in the preparation and completion of the foregoing and to
use their reasonable efforts (i) to address any Environmental Conditions and
(ii) to eliminate any material exception to title, in each case provided that
the failure to do so is reasonably likely to substantially and adversely affect
the marketability of the FE Assets.
(f) The Auction Agreements shall include provisions requiring
the Winning Bidder to perform all obligations such Winning Bidder would have as
an Acquiring Party under this Agreement with respect to the FE Assets to be
acquired by such Winning Bidder in the Auction.
8.14 Additional Agreements. In connection with the Auction
Agreements and each respective Auction Closing, each applicable FE Subsidiary or
DLC, as the case may be, with respect to its FE Assets shall enter into the
respective Auction Agreement, the FE Assignment and Assumption Agreement, the
Bills of Sale, the FE Easement and Attachment Agreement, the FIRPTA Affidavit,
the FE Connection Agreement, the FE Must-Run Agreement and the Warranty Deeds
contemplated by this Agreement, all substantially in the form of the respective
Exhibits attached hereto, with the applicable Winning Bidder.
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8.15 Reserved.
8.16 Tax Exempt Financing.
(a) Each Acquiring Party understands and agrees that:
(i) the Exempt Facilities have been financed, and
refinanced, in whole or in part, with the proceeds of the issuance and
sale by various governmental agencies or authorities of industrial
development revenue bonds or private activity bonds (collectively, the
"Revenue Bonds") the interest on which, with certain exceptions, is
excluded from gross income for purposes of federal income taxation;
and DLC or an FE Subsidiary, as the case may be, is the economic
obligor in respect of such bonds;
(ii) the basis for such exclusion is the use of the
Exempt Facilities for the purpose of (A) the abatement or control of
atmospheric pollution or contamination (B) the abatement or control of
water pollution or contamination, (C) sewage disposal and/or (D) the
disposal of solid waste, such qualifying purposes being discussed in
more detail in (b) below;
(iii) the use of the Exempt Facilities for a purpose
other than a qualifying purpose indicated in subsection (ii) above
could impair (A) such exclusion from gross income of the interest on
such bonds, possibly with retroactive affect, unless appropriate
remedial action (which could include prompt redemption or defeasance
of such bonds) were taken and/or (B) the deductibility of the
Conveying Party's payment of interest based on the restrictions in
Section 150(b) of the Code; and
(iv) any breach by the Acquiring Party of its
obligations under this Article could result in the incurrence by the
Conveying Party of additional costs and expenses, including without
limitation, increased interest costs, loss of the interest deduction
for tax purposes and transaction costs relating to any refinancing
redemption and/or defeasance of all or part of the Revenue Bonds, and
such Acquiring Party will be liable to the Conveying Party for such
additional costs and expenses.
(b)
(i) Each Acquiring Party agrees that it shall not use,
or permit the use of, the Exempt Facilities for any purpose other
than:
(A) abating or controlling atmospheric or water pollution or
contamination by removing, altering, disposing of or storing
pollutants, contaminants, waste or heat, all as contemplated in
U.S. Treasury Regulations Section 1.103-8(g);
(B) the collection, storage, treatment, utilization, processing
or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or
(C) the collection, storage, treatment, utilization, processing
or final disposal of sewage, all as contemplated in U.S. Treasury
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Regulations Section 1.103-8(f) unless such Acquiring Party has
obtained at its own expense an opinion addressed to the Conveying
Party of nationally recognized bond counsel reasonably acceptable
to such Conveying Party ("Bond Counsel") that such use will not
impair (x) the exclusion from gross income of the interest on any
issue of Revenue Bonds for federal income tax purposes or (y) the
deductibility of the Conveying Party's payments of interest based
on the restrictions in Section 150(b) of the Code.
(ii) Each Acquiring Party reasonably expects, as of the
date of this Agreement, that the Exempt Facilities will continue to be
used for the qualifying purposes set forth in subsection (i) above,
and for no other purpose, for the remainder of their useful lives.
(c) It is expressly understood and agreed that the provisions
of clause (b) above shall not prohibit the Acquiring Party from suspending the
operation of the Exempt Facilities on a temporary basis, or from terminating the
operation of the Exempt Facilities on a permanent basis and shutting down,
retiring, abandoning and/or decommissioning the Exempt Facilities; provided,
however, that if the Exempt Facilities, in whole or in part, are dismantled and
sold, including any sale for scrap, and if the operation of the Plant served by
such Exempt Facilities shall not theretofore have been, and is not then being,
terminated on a permanent basis, then the proceeds of such sale of the Exempt
Facilities shall, within six months from the date of sale, be expended to
acquire replacement property to be used for the same qualifying purpose as the
Exempt Facilities so sold, unless such Acquiring Party has obtained, at its own
expense, an opinion addressed to the Conveying Party of Bond Counsel that the
failure to take this action will not impair (x) the exclusion from gross income
of the interest on any issue of Revenue Bonds for federal income tax purposes or
(y) the deductibility of the Conveying Party's payments of interest based on the
restrictions in Section 150(b) of the Code.
(d) Each Acquiring Party agrees that it shall not issue, or have
issued on its behalf, any tax-exempt bonds to finance or refinance its
acquisition of the Exempt Facilities; provided that it is expressly understood
and agreed that this clause (d) shall not prohibit the use of tax-exempt bonds
to finance or refinance any improvement to the Exempt Facilities made after the
date of acquisition or to any assets other than the Exempt Facilities.
(e) Each Acquiring Party agrees that it shall give the Conveying
Party at least 180 days' prior written notice of any suspension or termination
of the operation of the Exempt Facilities, or any part thereof, and of any sale,
exchange, transfer or other disposition of the Exempt Facilities, or any part
thereof, including, but not limited to, a sale for scrap.
(f) If the Conveying Party shall desire to refund any Revenue
Bonds, the Acquiring Party shall cooperate with the Conveying Party and with
Bond Counsel with respect to the refunding bonds and shall provide upon request
any representations, agreements or covenants that are reasonably requested
concerning its compliance to such date and/or in the future with the
representations, agreements and covenants made herein.
(g) If the Acquiring Party shall sell, exchange, transfer or
otherwise dispose of the Exempt Facilities to a third party, such Acquiring
Party shall cause to be included in the documentation relating to such
transaction covenants and agreements on the part of such third party
substantially identical to those on the part of such Acquiring Party contained
in this Section 8.16.
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(h) The covenants and agreements on the part of the Acquiring
Party contained in this Section 8.16 shall continue in effect so long as any
Revenue Bonds, including any refunding bonds issued hereafter to refund any
Revenue Bonds, shall remain outstanding. The Conveying Party shall notify the
Acquiring Party promptly when there shall be no Revenue Bonds outstanding.
(i) The Parties hereto agree that the Auction Agreements shall
include a provision substantially similar to this Section 8.16 covering "Exempt
Facilities" (as defined in the Auction Agreements) relating to the "Purchased
Assets" (as defined in the Auction Agreements) for the benefit of DLC or the FE
Subsidiaries, as the case may be.
ARTICLE IX
CONDITIONS
9.1 Conditions to Obligations of the Parties. The obligation of the
Parties to effect the Generation Exchange and the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Exchange Closing Date, of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the exchange of the Exchange Assets contemplated hereby shall
have expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
exchange of the Exchange Assets contemplated herein shall have been issued and
remain in effect (each Party agreeing to use its reasonable best efforts to have
any such injunction, order or decree lifted) and no statute, rule or regulation
shall have been enacted by any state or federal government or Governmental
Authority prohibiting the consummation of the exchange of the Exchange Assets;
(c) The DLC Nuclear Closing as defined in the Nuclear Conveyance
Agreement shall have occurred;
(d) The CAPCO Settlement Agreement shall have been executed by
DLC, the FE Subsidiaries and TEC;
(e) The Support Agreement shall have been executed by FE and
DLC;
(f) All consents or approvals, filings with, or notices to any
Governmental Authority that are necessary for the consummation of the
transactions contemplated by each of the CAPCO Settlement Agreement and the
Electrical Facilities Agreement shall have been obtained or made, other than
such consents, approvals, filings or notices which are not required in the
ordinary course to be obtained or made prior to the consummation of the
transactions thereunder or which, if not obtained or made, will not prevent the
parties thereto from performing their material obligations thereunder; and
(g) There shall be no court order requiring DQE to consummate
the transactions contemplated under the Agreement and Plan of Merger between DQE
and Allegheny Energy, Inc.
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9.2 Conditions to Obligations of DLC. The obligation of DLC to effect
the exchange of the DLC Assets and the other transactions contemplated by this
Agreement shall be subject to the fulfillment of the following conditions, or
the waiver thereof by the DLC, at or prior to the Exchange Closing Date:
(a) DLC shall have received all DLC Required Regulatory
Approvals, in form and substance reasonably satisfactory to it and on terms and
conditions that do not create a Regulatory Material Adverse Effect for DLC;
(b) All consents and approvals for the execution, delivery and
performance of this Agreement and the Ancillary Agreements, and for the
consummation of the transfer of the FE Assets contemplated hereby as required
under the terms of any note, bond, mortgage, indenture, material agreement or
other instrument or obligation to which an FE Subsidiary is a party or by which
any FE Subsidiary, or any of the FE Assets, may be bound, shall have been
obtained, other than those which if not obtained, would not, individually or in
the aggregate, create an FE Material Adverse Effect;
(c) Each FE Subsidiary shall have in all material respects
performed and complied with the covenants and agreements contained in this
Agreement which are required to be performed and complied with by each such FE
Subsidiary on or prior to the Exchange Closing Date;
(d) The representations and warranties of each FE Subsidiary set
forth in this Agreement shall be true and correct in all material respects as of
the Exchange Closing Date as though made at and as of the Exchange Closing Date;
(e) DLC shall have received certificates from authorized
officers of each FE Subsidiary, dated the Exchange Closing Date, to the effect
that, to such officers' Knowledge, the conditions set forth in Sections 9.2(b),
(c) and (d) have been satisfied by each such FE Subsidiary;
(f) DLC shall have received an opinion from the FE Subsidiaries'
counsel, dated the Exchange Closing Date and reasonably satisfactory in form and
substance to DLC and its counsel, substantially to the effect that:
(i) Each FE Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its organization and is qualified to do business in any other
state in which it operates any of the FE Assets or will operate DLC
Assets and has the full corporate power and authority to own, lease
and operate its material assets and properties and to carry on its
business as is now conducted, and to execute and deliver the Agreement
and each of the Ancillary Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby; and the
execution and delivery of the Agreement and the Ancillary Agreements
by such FE Subsidiary, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary corporate action required on the part of such FE
Subsidiary;
(ii) The Agreement and each of the Ancillary Agreements
to which it is a party have been duly and validly executed and
delivered by each applicable FE Subsidiary and constitute legal, valid
and binding agreements of each such FE Subsidiary, enforceable against
such FE Subsidiary in accordance with their terms, except as may be
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limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity);
(iii) The execution, delivery and performance of the
Agreement and each of the Ancillary Agreements to which it is a party
by each applicable FE Subsidiary does not (A) conflict with the
Articles of Incorporation, Bylaws or Code of Regulations, as currently
in effect, of such FE Subsidiary or (B) to the knowledge of such
counsel, constitute a violation of or default under those agreements
or instruments set forth on a schedule attached to the opinion and
which have been identified to such counsel as all the agreements and
instruments which are material to the business or financial condition
of such FE Subsidiary;
(iv) The Bills of Sale, the FE (Accrued Liability)
Assignment and Assumption Agreements and the FE Assignment and
Assumption Agreements, the Warranty Deeds and other transfer
instruments described in Section 5.6 are in proper form to transfer to
DLC, or the applicable Winning Bidder, as appropriate, such title as
was held by each applicable FE Subsidiary to its FE Assets;
(v) The DLC Assignment and Assumption Agreements and
other transfer documents described in Section 5.6 are in proper form
for the FE Subsidiary, as applicable, to assume the Assumed DLC
Liabilities; and
(vi) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and
delivery by each applicable FE Subsidiary of this Agreement, and each
of the Ancillary Agreements to which such FE Subsidiary is a party or
the consummation by such FE Subsidiary of the transactions
contemplated hereby and thereby, other than (A) such consents,
approvals, filings or notices set forth in Schedules 7.3(a) or 7.3(b)
or which, if not obtained or made, will not prevent each such FE
Subsidiary from performing its material obligations under this
Agreement and each of the Ancillary Agreements and (B) such consents,
approvals, filings or notices which become applicable to such FE
Subsidiary or its respective FE Assets as a result of the specific
regulatory status of DLC (or any of its Affiliates) or as a result of
any other facts that specifically relate to the business or activities
in which DLC (or any of its Affiliates) is or proposes to be engaged.
In rendering the foregoing opinion, FE Subsidiaries' counsel may rely on
opinions of local law reasonably acceptable to DLC;
(g) Each FE Subsidiary shall have delivered, or caused to be
delivered, to DLC at the Exchange Closing, the FE Subsidiary's closing
deliveries described in Section 5.6;
(h) The FE Subsidiaries, as applicable, shall have delivered, or
caused to be delivered, to each applicable Acquiring Party a title insurance
company ALTA title owner's policies on the FE Real Property insuring title,
subject only to Permitted Encumbrances (FE Assets), standard printed exceptions
and such other Encumbrances as are reasonably acceptable to such Acquiring
Party. A Permitted Encumbrance (FE Assets) which is not removed prior to the
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Auction Closing shall be deemed reasonably acceptable to DLC as aforesaid unless
such Permitted Encumbrance (FE Assets) would have an FE Material Adverse Effect;
(i) All conditions to consummation of the respective Auction
Agreement with the applicable Winning Bidder shall have been satisfied or waived
by DLC and DLC shall be reasonably satisfied that such Winning Bidder will
perform its obligations thereunder; and
(j) FE shall have paid, or caused to be paid, the financial
commitment contemplated by, and required to be provided to DLC pursuant to the
terms of, the Support Agreement.
9.3 Conditions to Obligations of the FE Subsidiaries. The obligation
of the FE Subsidiaries to effect the exchange of the FE Assets and the other
transactions contemplated by this Agreement shall be subject to the fulfillment
of the following conditions, or the waiver thereof, by the FE Subsidiaries at or
prior to the Exchange Closing Date:
(a) Each FE Subsidiary shall have received all applicable FE
Required Regulatory Approvals on terms and conditions that do not create a
Regulatory Material Adverse Effect for such FE Subsidiary;
(b) All consents and approvals for the execution, delivery and
performance of this Agreement and the Ancillary Agreements, and for the
consummation of the transfer of the DLC Assets contemplated hereby as required
under the terms of any note, bond, mortgage, indenture, material agreement or
other instrument or obligation to which DLC is a party or by which DLC, or any
of the DLC Assets, may be bound, shall have been obtained, other than those
which if not obtained, would not, individually or in the aggregate, create a DLC
Material Adverse Effect;
(c) DLC shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by DLC on or prior to the Exchange
Closing Date;
(d) The representations and warranties of DLC set forth in this
Agreement shall be true and correct in all material respects as of the Exchange
Closing Date as though made at and as of the Exchange Closing Date;
(e) The FE Subsidiaries shall have received certificates from
the authorized officers of DLC, dated the Exchange Closing Date, to the effect
that, to such officers' Knowledge, the conditions set forth in Sections 9.3(b),
(c) and (d) have been satisfied by DLC;
(f) The FE Subsidiaries shall have received an opinion from
DLC's counsel, dated the Exchange Closing Date and reasonably satisfactory in
form and substance to the FE Subsidiaries and their counsel, substantially to
the effect that:
(i) DLC is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has the full corporate power and authority to own,
lease and operate its material assets and properties and to carry on
its business as is now conducted, and to execute and deliver the
Agreement and each of the Ancillary Agreements to which it is a party
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and to consummate the transactions contemplated hereby and thereby;
and the execution and delivery of the Agreement and the Ancillary
Agreements by DLC, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized
by all necessary corporate action required on the part of DLC;
(ii) The Agreement and each of the Ancillary Agreements
to which DLC is a party have been duly and validly executed and
delivered by DLC and constitute legal, valid and binding agreements of
DLC, enforceable against DLC in accordance with their terms, except as
may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
or relating to enforcement of creditors' rights generally and general
principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity);
(iii) The execution, delivery and performance of the
Agreement and each of the Ancillary Agreements to which DLC is a party
by DLC does not (A) conflict with the Articles of Incorporation or
Bylaws, as currently in effect, of DLC or (B) to the knowledge of such
counsel, constitute a violation of or default under those agreements
or instruments set forth on a Schedule attached to the opinion and
which have been identified to such counsel as all the agreements and
instruments which are material to the business or financial condition
of DLC;
(iv) The DLC Assignment and Assumption Agreements, the
Bills of Sale, the deeds, and other transfer instruments described in
Section 5.7 are in proper form to transfer to the FE Subsidiaries such
title as was held by DLC to the DLC Assets;
(v) The FE (Accrued Liability) Assignment and
Assumption Agreement and other transfer documents described in Section
5.7 are in proper form for DLC to assume the Assumed FE Liabilities;
and
(vi) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and
delivery of this Agreement and each of the Ancillary Agreements to
which DLC is a party by DLC, or the consummation by DLC of the
transactions contemplated hereby and thereby, other than (A) such
consents, approvals, filings or notices set forth in Schedules 6.3(a)
or 6.3(b) or which, if not obtained or made, will not prevent DLC from
performing its material obligations under this Agreement and each of
the Ancillary Agreements to which DLC is a party and (B) such
consents, approvals, filings or notices which become applicable to DLC
or the DLC Assets as a result of the specific regulatory status of the
FE Subsidiaries (or any of their Affiliates) or as a result of any
other facts that specifically relate to the business or activities in
which the FE Subsidiaries (or any of their Affiliates) is or proposes
to be engaged.
In rendering the foregoing opinion, DLC's counsel may rely on opinions of local
law reasonably acceptable to the FE Subsidiaries;
(g) DLC shall have delivered, or caused to be delivered, to the
FE Subsidiaries at the Exchange Closing, DLC's closing deliveries described in
Section 5.7; and
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(h) The FE Subsidiaries shall have received from a title
insurance company ALTA title owner's policies on the DLC Real Property insuring
title, subject only to Permitted Encumbrances (DLC Assets), standard printed
exceptions and such other Encumbrances as are reasonably acceptable to the FE
Subsidiaries. A Permitted Encumbrance (DLC Assets) that is not removed prior to
the Exchange Closing shall be deemed reasonably acceptable to the FE
Subsidiaries as aforesaid unless such Permitted Encumbrance (DLC Assets) would
have a DLC Material Adverse Effect.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification of DLC by FE Subsidiaries.
(a) Each FE Subsidiary severally with respect to itself under
this Agreement and all its obligations related to the Exchange Assets to be
exchanged by such FE Subsidiary pursuant to this Agreement, shall indemnify,
defend and hold harmless DLC, its officers, directors, employees, shareholders,
Affiliates and agents (each, a "DLC Indemnitee") from and against any and all
Indemnifiable Losses asserted against or suffered by any DLC Indemnitee (each, a
"DLC Indemnifiable Loss") in any way relating to, resulting from or arising out
of (i) any breach by such FE Subsidiary of any covenant or agreement of such FE
Subsidiary as an Acquiring Party contained in this Agreement or the
representations and warranties contained in Sections 7.1, 7.2 and 7.3, and (ii)
the Assumed DLC Liabilities.
(b) Each FE Subsidiary severally with respect to itself under
this Agreement and all its obligations related to the Exchange Assets to be
exchanged by such FE Subsidiary pursuant to this Agreement, shall indemnify,
defend and hold harmless the DLC Indemnitees from and against any and all DLC
Indemnifiable Losses in any way relating to, resulting from or arising out of
(i) any breach by such FE Subsidiary of any covenant or agreement of such FE
Subsidiary contained in this Agreement, except those related solely to its
obligations as an Acquiring Party, or the representations and warranties
contained in Sections 7.1, 7.2 and 7.3, (ii) the Excluded FE Liabilities, (iii)
noncompliance by such FE Subsidiary with any bulk sales or transfer laws as
provided in Section 12.14, and (iv) any Third Party Claims against a DLC
Indemnitee arising out of or in connection with the FE Subsidiary's ownership or
operation of the Excluded FE Assets.
(c) Each FE Subsidiary, severally with respect to itself under
this Agreement and all its obligations related to the Exchange Assets to be
exchanged by such FE Subsidiary pursuant to this Agreement, shall indemnify,
defend and hold harmless each DLC Indemnitee from and against any and all DLC
Indemnifiable Losses in any way relating to, resulting from or arising out of
any claim by the applicable Winning Bidder or any Third Party against a DLC
Indemnitee arising out of or in connection with the FE Assets or the Assumed FE
Liabilities; provided, however, that after the Auction Closing has occurred, DLC
cannot enforce this indemnity against any of the FE Subsidiaries if such claim
is in any way relating to, resulting from or arising out of the liabilities
assumed by such Winning Bidder in the respective Auction Agreement.
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(d) Each FE Subsidiary, jointly and severally, with respect to
itself and all matters related to the Exchange Assets to be exchanged by each FE
Subsidiary pursuant to this Agreement, shall indemnify, defend and hold harmless
each DLC Indemnitee from and against any and all DLC Indemnifiable Losses in any
way relating to, resulting from or arising out of any Third Party Claim against
a DLC Indemnitee asserting that DLC's execution of the Agreement in Principle,
this Agreement or the Nuclear Conveyance Agreement constitutes an interference
with contractual obligation of any FE Subsidiary.
(e) Except as otherwise provided in Section 10.1(c), DLC, for
itself and on behalf of DLC Representatives and DLC's Affiliates, does hereby
release, hold harmless and forever discharge the FE Subsidiaries, their
Representatives and Affiliates, from any and all DLC Indemnifiable Losses
resulting from, arising out of or relating to Assumed FE Liabilities. Except as
otherwise provided in Section 10.1(c), DLC hereby waives any and all rights and
benefits with respect to such DLC Indemnifiable Losses that it now has, or in
the future may have conferred upon it by virtue of any statute or common law
principle which provides that a general release does not extend to claims which
a party does not know or suspect to exist in its favor at the time of executing
the release, if Knowledge of such claims would have materially affected such
party's settlement with the obligor. In this connection, DLC hereby acknowledges
that it is aware that factual matters now unknown to it may have given or may
hereafter give rise to DLC Indemnifiable Losses that are currently unknown,
unanticipated and unsuspected, and it further agrees that this release has been
negotiated and agreed upon in light of that awareness and nevertheless hereby
intends to release the FE Subsidiaries, their Representatives and Affiliates
from the DLC Indemnifiable Losses in the manner contemplated by this paragraph.
(f) Each FE Subsidiary with respect to itself and all matters
related to such FE Subsidiary and to its FE Assets shall indemnify, defend and
hold harmless each Winning Bidder, its officers, directors, employees,
shareholders, Affiliates and agents (each, a "Winning Bidder Indemnitee") from
and against any and all Indemnifiable Losses asserted against or suffered by any
Winning Bidder Indemnitee arising out of or in connection with (i) any breach by
such FE Subsidiary of any covenant or agreement of such FE Subsidiary contained
in the representations and warranties contained in Article VII hereof, (ii) the
Excluded FE Liabilities, (iii) noncompliance by such FE Subsidiary with any bulk
sales or transfer laws as provided in Section 12.14, and (iv) any Third Party
Claims against a Winning Bidder Indemnitee arising solely out of or in
connection with such FE Subsidiary's ownership or operation of the Excluded FE
Assets on or after the Auction Closing Date.
10.2 Indemnification of FE Subsidiaries by DLC.
(a) DLC shall indemnify, defend and hold harmless the FE
Subsidiaries, their officers, directors, employees, shareholders, Affiliates and
agents (each, an "FE Indemnitee") from and against any and all Indemnifiable
Losses asserted against or suffered by any FE Indemnitee (each, an "FE
Indemnifiable Loss") in any way relating to, resulting from or arising out of
(i) any breach by DLC of any covenant or agreement of DLC as an Acquiring Party
contained in this Agreement or the representations and warranties contained in
Sections 6.1, 6.2 and 6.3, (ii) any loss or damages resulting from or arising
out of DLC's Inspection of the FE Assets and (iii) the Accrued FE Liabilities.
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(b) DLC shall indemnify, defend and hold harmless the FE
Indemnitees from and against any and all FE Indemnifiable Losses in any way
relating to, resulting from or arising out of (i) any breach by DLC of any
covenant or agreement of DLC contained in this Agreement, except those related
solely to its obligations as an Acquiring Party, or the representations and
warranties contained in Sections 6.1, 6.2 and 6.3, (ii) the Excluded DLC
Liabilities, (iii) noncompliance by DLC with any bulk sales or transfer laws as
provided in Section 12.14, and (iv) any Third Party Claims against an FE
Indemnitee arising out of or in connection with DLC's ownership or operation of
the Excluded DLC Assets.
(c) DLC shall indemnify, defend and hold harmless each FE
Indemnitee from and against any and all FE Indemnifiable Losses in any way
relating to, resulting from or arising out of any Third Party Claim against an
FE Indemnitee (i) asserting that the transactions contemplated by the Agreement
in Principle, this Agreement or the Nuclear Conveyance Agreement contravene any
contractual obligations of DLC or (ii) requesting a temporary restraining order
or a preliminary or permanent injunction in respect of such transactions.
(d) Each FE Subsidiary, for itself and on behalf of its
Representatives and Affiliates, do hereby release, hold harmless and forever
discharge DLC, DLC Representatives and DLC's Affiliates, from any and all FE
Indemnifiable Losses resulting from, arising out of or relating to (i) Assumed
DLC Liabilities, and (ii) from and after the Exchange Closing, Assumed FE
Liabilities (other than the Accrued FE Liabilities). Each FE Subsidiary hereby
waives any and all rights and benefits with respect to such FE Indemnifiable
Losses that it now has, or in the future may have conferred upon it by virtue of
any statute or common law principle which provides that a general release does
not extend to claims which a party does not know or suspect to exist in its
favor at the time of executing the release, if Knowledge of such claims would
have materially affected such party's settlement with the obligor. In this
connection, each FE Subsidiary hereby acknowledges that it is aware that factual
matters now unknown to it may have given or may hereafter give rise to FE
Indemnifiable Losses that are currently unknown, unanticipated and unsuspected,
and it further agrees that this release has been negotiated and agreed upon in
light of that awareness and nevertheless hereby intends to release DLC, DLC
Representatives and DLC's Affiliates from the FE Indemnifiable Losses in the
manner contemplated by this paragraph.
10.3 Certain Indemnifications to be Required of the Winning Bidder.
DLC shall require that each applicable Winning Bidder provide the
following indemnifications:
(a) indemnification of the FE Indemnitees as follows:
(i) Winning Bidder shall indemnify, defend and hold
harmless the FE Indemnitee from and against any and all Indemnifiable
Losses in any way relating to, resulting from or arising out of (A)
any breach by the Winning Bidder of any covenant or agreement of the
Winning Bidder contained in the respective Auction Agreement or the
representations and warranties contained in Section 6.1, 6.2 and 6.3
of such Auction Agreement, (B) the Assumed FE Liabilities (other than
the Accrued FE Liabilities) with respect to the FE Assets acquired by
such Winning Bidder, and (C) any loss or damages resulting from or
arising solely out of any Inspection of such FE Assets, and (D) any
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Third Party Claims against an FE Indemnitee arising solely out of or
in connection with Winning Bidder's ownership or operation of the FE
Plants and other FE Assets acquired by such Winning Bidder in the
Auction, on or after the Auction Closing Date; and
(ii) Winning Bidder, for itself and on behalf of its
representatives and Affiliates, shall release, hold harmless and
forever discharge the FE Subsidiaries, their Representatives and
Affiliates, from any and all Indemnifiable Losses of any kind or
character, whether known or unknown, hidden or concealed, resulting
from or arising out of any Environmental Condition or violation of
Environmental Law relating to its purchased FE Assets, other than any
liabilities or obligations described in Sections 2.4A(g)and (h) of the
respective Auction Agreement. Winning Bidder hereby waives any and all
rights and benefits with respect to such Indemnifiable Losses that it
now has, or in the future may have conferred upon it by virtue of any
statute or common law principle which provides that a general release
does not extend to claims which a party does not know or suspect to
exist in its favor at the time of executing the release, if Knowledge
of such claims would have materially affected such party's settlement
with the obligor. In this connection, Winning Bidder hereby
acknowledges that it is aware that factual matters now unknown to it
may have given or may hereafter give rise to Indemnifiable Losses that
are currently unknown, unanticipated and unsuspected, and it further
agrees that this release has been negotiated and agreed upon in light
of that awareness and nevertheless hereby intends to release the FE
Subsidiaries and their Representatives and Affiliates from the
Indemnifiable Losses in the manner contemplated by this paragraph.
(b) indemnification of the DLC Indemnitees as follows:
(i) indemnification of the DLC Indemnitees from and
against any DLC Indemnifiable Loss in any way relating to, resulting
from or arising out of (A) any breach by the applicable Winning Bidder
of any covenant or agreement of such Winning Bidder contained in the
respective Auction Agreement or the representations and warranties
contained in Section 6.1, 6.2 and 6.3 of such Auction Agreement, (B)
the Assumed FE Liabilities, and (C) any loss or damage resulting from
or arising out of any Inspection of the DLC Assets; and
(ii) In addition, DLC shall require that the applicable
Winning Bidder provide a release of DLC and each applicable FE
Subsidiary in substantially the form of Sections 10.1(e) and 10.2(d)
hereof.
10.4 Certain Limitations on Indemnification.
(a) Notwithstanding anything to the contrary contained herein:
(i) Any Indemnitee shall use Commercially Reasonable
Efforts to mitigate all losses, damages and the like relating to a
claim under these indemnification provisions, including availing
itself of any defenses, limitations, rights of contribution, claims
against third persons and other rights at law or equity. The
Indemnitee's Commercially Reasonable Efforts shall include the
reasonable expenditure of money to mitigate or otherwise reduce or
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eliminate any loss or expenses for which indemnification would
otherwise be due, and the Indemnifying Party shall reimburse the
Indemnitee for the Indemnitee's reasonable expenditures in undertaking
the mitigation; and
(ii) Any Indemnifiable Loss shall be net of (A) the
dollar amount of any insurance or other proceeds actually receivable
by the Indemnitee or any of its Affiliates with respect to the
Indemnifiable Loss, and (B) income tax benefits to the Indemnitee, to
the extent realized by the Indemnitee. Any Person seeking indemnity
hereunder shall use Commercially Reasonable Efforts to seek coverage
(including both costs of defense and indemnity) under applicable
insurance policies with respect to any such Indemnifiable Loss.
(b) The expiration, termination or extinguishment of any
covenant or agreement shall not affect the Parties' obligations under Sections
10.1, 10.2, and 10.3 hereof if the Indemnitee provided the Indemnifying Party
with proper notice of the claim or event for which indemnification is sought
prior to such expiration, termination or extinguishment.
(c) Except to the extent otherwise provided in Article XI, the
rights and remedies of DLC and the FE Subsidiaries under this Article X are
exclusive and in lieu of any and all other rights and remedies which DLC and the
FE Subsidiaries may have under this Agreement for monetary relief, with respect
to (i) any breach of or failure to perform any covenant, agreement, or
representation or warranty set forth in this Agreement, after the occurrence of
the Exchange Closing, or (ii) the Assumed Liabilities or the Excluded
Liabilities, as the case may be. The indemnification obligations of the Parties
set forth in this Article X apply only to matters arising out of this Agreement
but do not extend to matters arising out of the other Ancillary Agreements. Any
Indemnifiable Loss arising under or pursuant to any other Ancillary Agreement
shall be governed by the indemnification obligations, if any, contained in such
Ancillary Agreement under which the Indemnifiable Loss arises.
(d) Notwithstanding anything to the contrary contained herein,
no Party (including an Indemnitee) shall be entitled to recover from any other
Party (including an Indemnifying Party) for any liabilities, damages,
obligations, payments, losses, costs, or expenses under this Agreement any
amount in excess of the actual compensatory damages, court costs and reasonable
attorney's and other advisor fees suffered by such Party. Each Party waives any
right to recover punitive, incidental, special, exemplary and consequential
damages arising in connection with or with respect to this Agreement. The
provisions of this Section 10.4(d) shall not apply to indemnification for a
Third Party Claim.
10.5 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion or
commencement of any Third Party Claim made or brought by any Person who is not a
party to this Agreement or any Affiliate of a Party to this Agreement or the
applicable Winning Bidder with respect to which indemnification is to be sought
from an Indemnifying Party, the Indemnitee shall give such Indemnifying Party
reasonably prompt written notice thereof, but in any event such notice shall not
be given later than ten (10) calendar days after the Indemnitee's receipt of
notice of such Third Party Claim. Such notice shall describe the nature of the
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Third Party Claim in reasonable detail and shall indicate the estimated amount,
if practicable, of the Indemnifiable Loss that has been or may be sustained by
the Indemnitee. The Indemnifying Party will have the right to participate in or,
by giving written notice to the Indemnitee, to elect to assume the defense of
any Third Party Claim at such Indemnifying Party's expense and by such
Indemnifying Party's own counsel, provided that the counsel for the Indemnifying
Party who shall conduct the defense of such Third Party Claim shall be
reasonably satisfactory to the Indemnitee. The Indemnitee shall cooperate in
good faith in such defense at such Indemnitee's own expense. If an Indemnifying
Party elects not to assume the defense of any Third Party Claim, the Indemnitee
may compromise or settle such Third Party Claim over the objection of the
Indemnifying Party, which settlement or compromise shall conclusively establish
the Indemnifying Party's liability pursuant to this Agreement.
(b)
(i) If, within ten (10) calendar days after an
Indemnitee provides written notice to the Indemnifying Party of any
Third Party Claims, the Indemnitee receives written notice from the
Indemnifying Party that such Indemnifying Party has elected to assume
the defense of such Third Party Claim as provided in Section 10.5(a),
the Indemnifying Party will not be liable for any legal expenses
subsequently incurred by the Indemnitee in connection with the defense
thereof; provided, however, that if the Indemnifying Party shall fail
to take reasonable steps necessary to defend diligently such Third
Party Claim within twenty (20) calendar days after receiving notice
from the Indemnitee that the Indemnitee believes the Indemnifying
Party has failed to take such steps, the Indemnitee may assume its own
defense and the Indemnifying Party shall be liable for all reasonable
expenses thereof.
(ii) Without the prior written consent of the
Indemnitee, the Indemnifying Party shall not enter into any settlement
of any Third Party Claim which would lead to liability or create any
financial or other obligation on the part of the Indemnitee for which
the Indemnitee is not entitled to indemnification hereunder. If a firm
offer is made to settle a Third Party Claim without leading to
liability or the creation of a financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept
and agree to such offer, the Indemnifying Party shall give written
notice to the Indemnitee to that effect. If the Indemnitee fails to
consent to such firm offer within ten (10) calendar days after its
receipt of such notice, the Indemnifying Party shall be relieved of
its obligations to defend such Third Party Claim and the Indemnitee
may contest or defend such Third Party Claim. In such event, the
maximum liability of the Indemnifying Party as to such Third Party
Claim will be the amount of such settlement offer plus reasonable
costs and expenses paid or incurred by Indemnitee up to the date of
said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event such notice shall not be
given later than ten (10) calendar days after the Indemnitee becomes aware of
such Direct Claim, and the Indemnifying Party shall have a period of thirty (30)
calendar days within which to respond to such Direct Claim. If the Indemnifying
Party does not respond within such thirty (30) calendar day period, the
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Indemnifying Party shall be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its right to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by, from or
against any other entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with interest thereon
from the date of payment thereof at the publicly announced prime rate then in
effect of The Chase Manhattan Bank) shall promptly be repaid by the Indemnitee
to the Indemnifying Party.
(e) A failure to give timely notice as provided in this Section
10.5 shall not affect the rights or obligations of any Party hereunder except
if, and only to the extent that, as a result of such failure, the Party which
was entitled to receive such notice was actually prejudiced as a result of such
failure.
ARTICLE XI
TERMINATION
11.1 Termination. (a) This Agreement may be terminated at any time
prior to the Exchange Closing Date by mutual written consent of DLC and the FE
Subsidiaries.
(b) This Agreement may be terminated by either Party if (i) any
federal or state court of competent jurisdiction shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the Exchange Closing, and such order, judgment or decree shall have become final
and nonappeallable; (ii) any statute, rule, order or regulation shall have been
enacted or issued by any Governmental Authority which prohibits the consummation
of the Exchange Closing; or (iii) the Exchange Closing contemplated hereby shall
have not occurred on or before the day which is 12 months from the date of this
Agreement (the "Termination Date"), provided that the right to terminate this
Agreement under this Section 11.1(b)(iii) shall not be available to any Party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Exchange Closing to occur on or before
such date, and provided, further, that if on the Termination Date (x) the
conditions to the Exchange Closing set forth in Sections 9.1(b), 9.2(a) and
9.3(a) hereof shall not have been fulfilled but all other conditions to the
Exchange Closing shall be fulfilled or shall be capable of being fulfilled, or
(y) the conditions to the Auction Closings set forth in Sections 8.1(b), 8.2(c)
and 8.2(d) of the Auction Agreements shall not have been fulfilled but all other
conditions to the Auction Closings shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be the day which is 18 months
from the date of this Agreement.
(c) This Agreement may be terminated by DLC if it shall have
received a Final Order that has caused the conditions set forth in Section
9.2(a) not to be satisfied.
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(d) This Agreement may be terminated by the FE Subsidiaries if
any of them shall have received a Final Order that has caused the conditions set
forth in Section 9.3(a) not to be satisfied.
(e) This Agreement may be terminated by DLC if there has been a
violation or breach by an FE Subsidiary of any covenant, representation or
warranty contained in this Agreement which has resulted in an FE Material
Adverse Effect and such violation or breach is not cured by the earlier of the
Exchange Closing Date or the date which is thirty (30) days after receipt by the
FE Subsidiary of notice specifying particularly such violation or breach, and
such violation or breach has not been waived by DLC.
(f) This Agreement may be terminated by the FE Subsidiaries if
there has been a violation or breach by DLC of any covenant, representation or
warranty contained in this Agreement which has resulted in a DLC Material
Adverse Effect and such violation or breach is not cured by the earlier of the
Exchange Closing Date or the date which is thirty (30) days after receipt by DLC
of notice specifying particularly such violation or breach, and such violation
or breach has not been waived by the FE Subsidiaries.
(g) This Agreement may be terminated, in the event of a casualty
or loss to the Exchange Assets, by the Party entitled to so terminate this
Agreement under the provisions of Section 8.12(b).
(h) If before the Exchange Closing Date, all or any portion of
the Exchange Assets are (i) taken by eminent domain or are the subject of a
pending or (to the Knowledge of the Conveying Party with respect to such
Exchange Assets) contemplated taking which has not been consummated or (ii)
damaged or destroyed by fire or other casualty and, in either case, such taking,
loss or casualty results (or would result) in the substantial likelihood that
the Conveying Party (by conveying to the Acquiring Party the Exchange Assets not
otherwise affected by such taking, loss or casualty) will suffer adverse Tax
consequences with respect to the Plant to which such Exchange Assets relate,
then the Conveying Party shall notify the Acquiring Party (or, if the Acquiring
Party is the Winning Bidder, DLC) promptly in writing of such fact. Upon such
notification, the Acquiring Party (or, if the Acquiring Party is the Winning
Bidder, DLC) may, at its sole option, provide the Conveying Party with a written
indemnity, in form and substance reasonably satisfactory to the Conveying Party,
indemnifying the Conveying Party against any such adverse Tax consequences
resulting from the Conveying Party's conveyance to the Acquiring Party of such
Exchange Assets, upon receipt of which the Conveying Party shall remain
obligated to convey such Exchange Assets to the Acquiring Party at the Exchange
Closing as contemplated by this Agreement. In the event that following such
notification, however, the Acquiring Party (or, if the Acquiring Party is the
Winning Bidder, DLC) does not provide the Conveying Party with such indemnity on
or before the tenth day following such notification, the Conveying Party may, at
its sole option, terminate this Agreement.
11.2 Procedure and Effect of No-Default Termination. In the event
of termination of this Agreement by either or both of the Parties pursuant to
any of Section 11.1, written notice thereof shall forthwith be given by the
terminating Party to the other Party, whereupon the liabilities of the Parties
hereunder will terminate, except as otherwise expressly provided in this
Agreement, and thereafter neither Party shall have any recourse against the
other Party by reason of this Agreement.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Liability of FE Subsidiaries. Each FE Subsidiary shall be
individually responsible for its own obligations, covenants, representations and
warranties under this Agreement.
12.2 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of the Parties.
12.3 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but any such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
12.4 No Survival.
(a) Except as provided in Section 12.4(b) and 12.4(c), each and
every representation, warranty and covenant contained in this Agreement shall
expire with, and be terminated and extinguished by the consummation of the sale
of the Exchange Assets and shall merge into the deed(s) pursuant hereto and the
transfer of the Assumed Liabilities pursuant to this Agreement and such
representations, warranties and covenants shall not survive the Exchange Closing
Date; and none of DLC, any FE Subsidiary or any officer, director, trustee,
Affiliate or agent of any of them shall be under any liability whatsoever with
respect to any such representation, warranty or covenant.
(b) The covenants contained in Sections 5.2(e), 5.2(f), 5.4,
5.5, 8.2(d), 8.3(a), 8.5, 8.6, 8.7(e), 8.8, 8.9, 8.11, 8.14, 8.16, 11.2, and in
Articles X and XII shall survive the delivery of the deed(s) and the Exchange
Closing in accordance with their terms.
(c) The representations, warranties and disclaimers contained in
Sections 6.1, 6.2, 6.3, 7.1, 7.2, 7.3, and claims arising under Sections 8.1 and
8.7(e) shall survive the Exchange Closing for eighteen (18) months from the
Exchange Closing Date.
12.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
specified by like notice; provided however, that notices of a change of address
shall be effective only upon receipt thereof):
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(a) If to DLC, to:
Duquesne Light Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X'Xxxxx
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxx
(b) if to the FE Subsidiaries, to:
FirstEnergy Corp.
00 Xxxxx Xxxx Xxxxxx
Xxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx
with a copy to:
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
12.6 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any Party
hereto, including by operation of law, without the prior written consent of the
other Party, nor is this Agreement intended to confer upon any other Person
except the Parties hereto any rights, interests, obligations or remedies
hereunder. Notwithstanding the foregoing, the Winning Bidder may (i) assign all
of its rights and obligations hereunder to any wholly owned Subsidiary (direct
or indirect) or (ii) make a security assignment to any lender providing
financing in respect of the Winning Bidder's acquisition of the FE Assets, and
in either case upon the applicable FE Subsidiary's receipt of notice from the
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Winning Bidder of any such assignment, such assignee will be deemed to have
assumed, ratified, agreed to be bound by and perform all such obligations, and
all references herein to "Winning Bidder" shall thereafter be deemed to be
references to such assignee, in each case without the necessity for further act
or evidence by the Parties hereto or such assignee, provided, however, that no
such assignment shall relieve or discharge the assignor (the original Winning
Bidder hereunder) from any of its obligations as the Winning Bidder hereunder.
Except as expressly provided herein with respect to the applicable Winning
Bidder, no provision of this Agreement shall create any third party beneficiary
rights in any employee or former employee of a Conveying Party (including any
beneficiary or dependent thereof) in respect of continued employment or resumed
employment, and no provision of this Agreement shall create any rights in any
such Persons in respect of any benefits that may be provided, directly or
indirectly, under any employee benefit plan or arrangement except as expressly
provided for thereunder. Each Conveying Party agrees, at any Acquiring Party's
expense, to execute and deliver such documents as may be reasonably necessary to
accomplish any such assignment, transfer, pledge or other disposition of rights
and interests hereunder so long as such Conveying Party's rights under this
Agreement are not thereby altered, amended, diminished or otherwise impaired.
12.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the Commonwealth of Pennsylvania
(without giving effect to conflict of law principles) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies (except as to such matters of real estate law that must
be governed by the law of the State of Ohio). THE PARTIES HERETO AGREE THAT
VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF
THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS IN AND FOR PITTSBURGH,
PENNSYLVANIA, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE,
AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN
ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9 Interpretation. The articles, section and schedule headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
12.10 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
12.11 Entire Agreement. This Agreement, the Ancillary Agreements, and
the Exhibits, Schedules, documents, certificates and instruments referred to
herein or therein, embody the entire agreement and understanding of the Parties
hereto in respect of the transactions contemplated by this Agreement. There are
no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein or
94
therein. This Agreement and the Ancillary Agreements supersede all prior
agreements and understandings between the Parties (except for that certain
Confidentiality Agreement, dated August 17, 1998, by and between FE (including
its affiliates) and DQE (including its affiliates) as it relates to Confidential
Information (as defined therein) from the date thereof until the date hereof)
with respect to such transactions.
12.12 U.S. Dollars. Unless otherwise stated, all dollar amounts set
forth herein are United States (U.S.) dollars.
12.13 Sewage Facilities. Pursuant to the provisions of Section 7a of
the Pennsylvania Sewage Facilities Act, 35 P.S. section 750 (the "Facilities
Act"), each Acquiring Party is notified that a "community sewage system" (as
defined by Section 2 of the Facilities Act) is not available on one or more lots
comprising part of the Real Property at the facilities listed in Schedule 12.13.
Prior to construction of any buildings on such lots, a permit to connect to a
community sewage system or permit for installation of an individual sewage
system must be obtained pursuant to Section 7 of the Facilities Act. Before
signing this Agreement, the Acquiring Party should contact the local agency
charged with administering the Facilities Act in the area of each such facility
and lot(s) to determine the procedure and requirements for obtaining a permit
for an individual or community sewage system to service such lot(s), if required
for the intended uses and purposes of such lot(s).
12.14 Bulk Sales Laws. Each Acquiring Party acknowledges that,
notwithstanding anything in this Agreement to the contrary, the Conveying Party
will not comply with the provision of the bulk sales laws of any jurisdiction in
connection with the transactions contemplated by this Agreement. Each Acquiring
Party hereby waives compliance by the Conveying Party with the provisions of the
bulk sales laws of all applicable jurisdictions to the extent permitted by law.
12.15 Tax Matters
The Parties have entered into the Exchange Agreements with the
intention that, to the extent eligible under the Code, the transfers of
generating assets from the applicable FE Subsidiaries to DLC and from DLC to
such FE Subsidiaries, as provided for in the Exchange Agreements, shall occur
without recognition of a tax gain or loss by the FE Subsidiaries.
95
IN WITNESS WHEREOF, DLC and each FE Subsidiary have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
DUQUESNE LIGHT COMPANY THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By: /s/ Xxxxxx X. X'Xxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------- ------------------------------
Name: Xxxxxx X. X'Xxxxx Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President, Finance Title: Executive Vice President
and General Counsel
OHIO EDISON COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Executive Vice President
and General Counsel
PENNSYLVANIA POWER COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Executive Vice President
and General Counsel
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Nuclear Generation Conveyance Agreement
Exhibit B Form of Asset Purchase Agreement
Exhibit C Form of Xxxx of Sale
Exhibit D Form of DLC Assignment and Assumption Agreement
Exhibit E Form of FE Connection Agreement
Exhibit F Form FE (Accrued Liability) Assignment and
Assumption Agreement
Exhibit G Form of FE Assignment and Assumption Agreement
Exhibit H Form of FE Easement and Attachment Agreement
Exhibit I Form of FIRPTA Affidavit
Exhibit J Form of Electrical Facilities Agreement
Exhibit K Form of Settlement Agreement
Exhibit L Form of Warranty Deed - FE
Exhibit M Form of Warranty Deed - DLC
Exhibit N Form of Order
Exhibit O Form of CAPCO Settlement Agreement
Exhibit P Form of Support Agreement
Exhibit Q Form of FE Must-Run Agreement
SCHEDULES
1.1(24) CAPCO Agreements
1.1 (27-DLC) DLC Capital Spare Parts
1.1(27-FE) FE Subsidiaries Capital Spare Parts
1.1(64) DLC Transferable Permits (environmental and non-environmental)
1.1(90) DLC Exempt Facilities
1.1 (126) FE Transferable Permits (environmental and non-environmental)
1.1(170) Permitted Encumbrances (DLC Assets)
3.1 Schedule of Designation of FE Subsidiaries receiving DLC Assets
and conveying FE Assets
3.1(c) Schedule of DLC Tangible Personal Property to be Conveyed to
Acquiring Party
3.1(i) Schedule of Unexpired Warranties and Guarantees
3.1(l) Schedule of DLC Intellectual Property
3.3(d) Schedule of Agreements and Consent Orders regarding Assumed DLC
Liabilities
3.7 Schedule of Xxxxxx and East Lake Property Tax Litigation
4.1 Schedule of FE Assets (Avon Lake)(New Castle)(Niles)
4.1(c) Schedule of FE Tangible Personal Property to be Conveyed to
Acquiring Party (Avon Lake)(New Castle)(Niles)
1
4.1(k) Schedule of FE Intellectual Property (Avon Lake)(New Castle)
(Niles)
4.2(a) Description of Excluded FE Transmission and other Assets of each
FE Subsidiary
4.2(b) Excluded FE Equipment and Systems
4.3(e) Schedule of Agreements and Consent Orders regarding Assumed FE
Liabilities
(Avon Lake)(New Castle)(Niles)
4.7 Schedule of FE Inventories (Avon Lake)(New Castle)(Niles)
5.2(b)(ii) Value of DLC Inventories
6.3(a)(i) DLC Conflicts, Third Party Consents and Breaches of
Articles/Bylaws
6.3(a)(ii) DLC Defaults, Termination or Acceleration of Notes, Bonds or
Mortgages
6.3(a)(iii) DLC Violations of Law, Regulations
6.3(b) DLC Required Regulatory Approvals
6.4 DLC Insurance Exceptions
6.5 DLC Real Property Leases
6.6(a) DLC Environmental Exceptions
6.6(b) DLC Written Requests Under CERCLA
6.6(c) DLC Consents, Decrees/Orders related to Environmental Laws or
Remediation
6.7 Description of DLC Real Property
6.8 DLC Notices of Condemnation
6.9(a) Certain DLC Material Agreements
6.9(b) Certain Non-Assignable DLC Material Agreements
6.9(c) Defaults under Certain DLC Material Agreements
6.10 Legal Proceedings Involving DLC
6.11(a) List of DLC Permit Violations
6.11(b) List of DLC Material Permits (other than DLC Transferable
Permits)
6.12(b) DLC Notices of Tax Deficiencies or Assessments
6.12(c) DLC Outstanding Agreements or Waivers Extending Statute of
Limitations for Taxes
6.12(d) DLC Safe Harbor Lease/Tax Exempt Use Property
6.12(e) Taxing Jurisdictions for DLC Assets
6.13 DLC Intellectual Property Default or Infringement
7.3(a) FE Conflicts/Defaults/Violations (Avon Lake)(New Castle)(Niles)
7.3(b) FE Required Regulatory Approvals (Avon Lake)(New Castle)(Niles)
7.4 FE Insurance Exceptions (Avon Lake)(New Castle)(Niles)
7.5 FE Real Property Leases (Avon Lake)(New Castle)(Niles)
7.6 Schedule of FE Environmental Matters (Avon Lake)(New Castle)
(Niles)
7.7 Schedule of FE Labor Matters
7.8(a) Schedule of FE Benefit Plans
7.9 Description of FE Real Property (Avon Lake)(New Castle)(Niles)
7.10 FE Notices of Condemnation
7.11(a) Certain FE Material Agreements (Avon Lake)(New Castle)(Niles)
7.11(b) Certain Non-Assignable FE Material Agreements (Avon Lake)(New
Castle)(Niles)
7.11(c) Defaults under Certain FE Material Agreements (Avon Lake)(New
Castle)(Niles)
7.12 Legal Proceedings Involving FE
2
7.13(a) List of FE Permit Violations (Avon Lake)(New Castle)(Niles)
7.13(b) List of FE Material Permits (other than FE Transferable Permits)
(Avon Lake)(New Castle)(Niles)
7.14(b) FE Notices of Tax Deficiencies or Assessments
7.14(c) FE Outstanding Agreements or Waivers Extending Statute of
Limitations for Taxes
7.14(d) FE Safe Harbor Lease/Tax Exempt Use Property
7.14(e) Taxing Jurisdictions for FE Assets
7.15 FE Intellectual Property Default or Infringement (Avon Lake)(New
Castle)(Niles)
8.1(a) Schedule of Permitted FE Activities prior to Closing (Avon Lake)
New Castle)(Niles)
8.1(c) Schedule of Exceptions to Permitted FE Activities prior to
Closing
8.1(c)(viii) Schedule of Permitted FE Capital Expenditures
8.1(d) Schedule of Permitted DLC Capital Expenditures
8.1(e) Schedule of Permitted DLC Activities prior to Closing
8.11(a) Employees at FE Plants
8.11(c) FE Non-Union Employees
8.11(d) FE Collective Bargaining Agreements
12.13 Status of Sewage Facilities on Subject Lots
3
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
1.1 Definitions........................................ 2
1.2 Certain Interpretive Matters....................... 23
1.3 CAPCO Agreements to Govern......................... 24
1.4 DLC's Interest in Assets........................... 24
ARTICLE II EXCHANGE OF ASSETS
2.1 Transfer of FE Assets and Assumed FE Liabilities... 24
2.2 Auction Agreement.................................. 25
ARTICLE III TRANSFER OF DLC ASSETS
3.1 Transfer of DLC Assets............................. 26
3.2 Excluded DLC Assets. ............................. 27
3.3 Assumed DLC Liabilities............................ 28
3.4 Excluded DLC Liabilities........................... 30
3.5 Control of Litigation.............................. 31
3.6 Fuel Supplies...................................... 31
3.7 Property Tax Litigation. ......................... 31
ARTICLE IV TRANSFER OF FE ASSETS
4.1 Transfer of FE Assets. ............................ 32
4.2 Excluded FE Assets................................. 33
4.3 Assumed FE Liabilities............................. 35
4.4 Excluded FE Liabilities............................ 37
4.5 Control of Litigation.............................. 38
4.6 Fuel Supplies...................................... 39
4.7 Inventories........................................ 39
ARTICLE V THE EXCHANGE CLOSING
5.1 Exchange Closing................................... 39
5.2 Calculation of Closing Payments.................... 39
5.3 Payment of Closing Payments........................ 41
5.4 Prorations......................................... 42
5.5 Audit Cooperation.................................. 43
5.6 Deliveries by FE Subsidiaries...................... 43
5.7 Deliveries by DLC.................................. 44
5.8 Ancillary Agreements............................... 46
5.9 Pending Litigation................................. 46
5.10 Work in Progress................................... 47
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ARTICLE VI REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC
6.1 Incorporation; Qualification....................... 47
6.2 Authority.......................................... 47
6.3 Consents and Approvals; No Violation............... 47
6.4 Insurance.......................................... 48
6.5 DLC Real Property Leases........................... 48
6.6 Environmental Matters.............................. 48
6.7 Real Property...................................... 49
6.8 Condemnation....................................... 49
6.9 Contracts and Leases............................... 49
6.10 Legal Proceedings.................................. 49
6.11 Permits............................................ 50
6.12 Taxes.............................................. 50
6.13 Intellectual Property.............................. 51
6.14 Compliance With Laws............................... 51
6.15 Disclaimers Regarding DLC Assets................... 51
6.16 Year 2000 Compliance............................... 52
6.17 SEC Filings; Financial Statements.................. 52
ARTICLE VII REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF THE FE
SUBSIDIARIES
7.1 Incorporation; Qualification....................... 52
7.2 Authority.......................................... 53
7.3 Consents and Approvals; No Violation............... 53
7.4 Insurance.......................................... 54
7.5 FE Real Property Leases............................ 54
7.6 Environmental Matters.............................. 54
7.7 Labor Matters...................................... 55
7.8 Benefit Plans: ERISA.............................. 55
7.9 Real Property...................................... 56
7.10 Condemnation....................................... 56
7.11 Contracts and Leases............................... 56
7.12 Legal Proceedings.................................. 56
7.13 Permits............................................ 57
7.14 Taxes.............................................. 57
7.15 Intellectual Property.............................. 58
7.16 FE Capital Expenditures............................ 58
7.17 Compliance With Laws............................... 58
7.18 Disclaimers Regarding FE Assets.................... 58
7.19 Year 2000 Compliance............................... 59
7.20 SEC Filings; Financial Statements.................. 59
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ARTICLE VIII COVENANTS OF THE PARTIES
8.1 Conduct of Business Relating to the Exchange
Assets............................................. 59
8.2 Access to Information.............................. 62
8.3 Confidentiality.................................... 64
8.4 Public Statements.................................. 65
8.5 Expenses........................................... 65
8.6 Further Assurances................................. 65
8.7 Consents and Approvals............................. 67
8.8 Fees and Commissions............................... 68
8.9 Tax Matters........................................ 68
8.10 Advice of Changes.................................. 69
8.11 FE Subsidiaries' Employees......................... 69
8.12 Risk of Loss....................................... 75
8.13 Cooperation in Auction............................. 76
8.14 Additional Agreements.............................. 76
8.15 Reserved........................................... 77
8.16 Tax Exempt Financing............................... 77
ARTICLE IX CONDITIONS
9.1 Conditions to Obligations of the Parties........... 79
9.2 Conditions to Obligations of DLC................... 80
9.3 Conditions to Obligations of the FE Subsidiaries... 82
ARTICLE X INDEMNIFICATION
10.1 Indemnification of DLC by FE Subsidiaries.......... 84
10.2 Indemnification of FE Subsidiaries by DLC.......... 85
10.3 Certain Indemnifications to be Required of the
Winning Bidder..................................... 86
10.4 Certain Limitations on Indemnification............. 87
10.5 Defense of Claims.................................. 88
ARTICLE XI TERMINATION
11.1 Termination........................................ 90
11.2 Procedure and Effect of No-Default Termination..... 91
ARTICLE XII MISCELLANEOUS PROVISIONS
12.1 Liability of FE Subsidiaries....................... 92
12.2 Amendment and Modification......................... 92
12.3 Waiver of Compliance; Consents..................... 92
12.4 No Survival........................................ 92
12.5 Notices............................................ 92
12.6 Assignment......................................... 93
12.7 Governing Law...................................... 94
iii
12.8 Counterparts....................................... 94
12.9 Interpretation..................................... 94
12.10 Schedules and Exhibits............................. 94
12.11 Entire Agreement................................... 94
12.12 U.S. Dollars....................................... 95
12.13 Sewage Facilities................................. 95
12.14 Bulk Sales Laws.................................... 95
12.15 Tax Matters........................................ 92
iv