Exhibit 10(a)
ASSET PURCHASE AGREEMENT
dated as of October 31, 1998
by and between
PP&L GLOBAL, INC.
and
THE MONTANA POWER COMPANY
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 The Sale............................................... 1
1.02 The Liabilities........................................ 8
1.03 Purchase Price; Allocation.............................12
1.04 Purchase Price Adjustment..............................12
1.05 Closing; Additional Purchase Price Payments............14
1.06 Prorations.............................................16
1.07 Further Assurances.....................................17
1.08 Third Party Consents...................................18
1.09 Insurance Proceeds.....................................19
1.10 Inclusion/Exclusion of Certain Assets..................19
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.01 Corporate Existence of Seller..........................23
2.02 Authority..............................................23
2.03 No Conflicts...........................................23
2.04 Governmental Approvals and Filings.....................24
2.05 Reports................................................25
2.06 Taxes..................................................25
2.07 Legal Proceedings......................................25
2.08 Compliance with Laws and Orders........................26
2.09 Benefit Plans; ERISA...................................26
2.10 Real Property..........................................28
2.11 Tangible Personal Property.............................29
2.12 Intellectual Property Rights...........................29
2.13 Contracts..............................................30
2.14 Licenses...............................................31
2.15 Insurance..............................................32
2.16 Labor Relations........................................32
2.17 Environmental Matters..................................33
2.18 Absences of Condemnation Proceedings...................34
2.19 Regulation as a Utility................................34
2.20 Brokers................................................34
2.21 Year 2000..............................................35
2.22 Disclaimers Regarding Assets...........................35
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
3.01 Corporate Existence....................................35
3.02 Authority..............................................36
3.03 No Conflicts...........................................36
3.04 Governmental Approvals and Filings.....................37
3.05 Legal Proceedings......................................37
3.06 Compliance with Laws and Orders........................37
3.07 Regulation as a Utility................................38
3.08 Brokers................................................38
3.09 Financing..............................................38
3.10 Financial Statements...................................38
3.11 Opportunity to Inspect Assets..........................38
ARTICLE IV
COVENANTS OF SELLER
4.01 Regulatory and Other Approvals.........................39
4.02 HSR Filings............................................40
4.03 Investigation by Purchaser.............................40
4.04 No Solicitations.......................................41
4.05 Conduct of Business....................................41
4.06 Employee Matters.......................................42
4.07 Certain Restrictions...................................44
4.08 Security Deposits......................................45
4.09 Delivery of Books and Records, etc.; Removal of Property
.......................................................45
4.10 Fulfillment of Conditions..............................46
4.11 Observation, Inspection and Participation..............46
4.12 Notice of Breach.......................................47
4.13 Bridge Financing Fees..................................47
4.14 Special Maintenance and Capital Expenditures...........47
ARTICLE V
COVENANTS OF PURCHASER
5.01 Regulatory and Other Approvals.........................48
5.02 HSR Filings............................................49
5.03 Employees..............................................49
5.04 PPUC Approval for Holding Company......................54
5.05 Notice of Breach.......................................54
5.06 Fulfillment of Conditions..............................54
5.07 Tax-Exempt Bond Financed Pollution Control Facilities..54
5.08 Purchaser Financing....................................55
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
6.01 Representations and Warranties.........................56
6.02 Performance............................................56
6.03 Officers' Certificates.................................56
6.04 Orders and Laws........................................56
6.05 Regulatory Consents and Approvals......................56
6.06 Third Party Consents...................................57
6.07 Colstrip Rights of First Refusal.......................57
6.08 No Seller Material Adverse Effect......................57
6.09 Proceedings............................................57
6.10 Deliveries.............................................57
6.11 Colstrip Operations Arrangements.......................58
6.12 Purchaser Financing....................................58
6.13 Opinion of Counsel.....................................58
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
7.01 Representations and Warranties.........................58
7.02 Performance............................................58
7.03 Officers' Certificates.................................59
7.04 Orders and Laws........................................59
7.05 Regulatory Consents and Approvals......................59
7.06 Third Party Consents...................................59
7.07 Collective Bargaining Agreements.......................59
7.08 No Purchaser Material Adverse Effect...................59
7.09 Proceedings............................................60
7.10 Colstrip Rights of First Refulsal......................60
7.11 Opinion of Counsel.....................................60
7.12 Deliveries.............................................60
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes.........................................61
8.02 Returns with Respect to Prorated Taxes.................61
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 Survival of Representations, Warranties, Coventants and
Agreements............................................62
9.02 No Other Representations..............................63
ARTICLE X
INDEMNIFICATION
10.01 Other Indemnification.................................63
10.02 Method of Asserting Claims............................67
10.03 Exclusivity...........................................71
10.04 Purchaser's Release of Seller under the Colstrip
Contracts.............................................71
ARTICLE XI
TERMINATION
11.01 Termination...........................................72
11.02 Effect of Termination.................................73
ARTICLE XII
DEFINITIONS
12.01 Definitions............................................74
ARTICLE XIII
MISCELLANEOUS
13.01 Notices................................................96
13.02 Bulk Sales Act.........................................97
13.03 Entire Agreement.......................................97
13.04 Expenses...............................................98
13.05 Public Announcements...................................98
13.06 Confidentiality........................................98
13.07 Waiver.................................................99
13.08 Amendment.............................................100
13.09 No Third Party Beneficiary............................100
13.10 No Assignment; Binding Effect.........................100
13.11 Headings..............................................101
13.12 Invalid Provisions....................................101
13.13 Governing Law........................................101
13.14 Counterparts.........................................101
EXHIBITS
Exhibit A General Assignment and Bill of Sale
Exhibit B Assumption Agreement
Exhibit C Pollution Control Facilities
Exhibit D Officer's Certificate of Seller
Exhibit E Secretary's Certificate of Seller
Exhibit F-1 Colstrip Unit Number 3 Wholesale Transition
Service Agreement
Exhibit F-2 Non-Colstrip Unit Number 3 Wholesale
Transition Service Agreement
Exhibit G Interconnection Agreement
Exhibit H-1 Opinion of Counsel to Seller
Exhibit H-2 Opinion of General Counsel of Seller
Exhibit H-3 Opinion of Outside Montana counsel to Seller
Exhibit I Officer's Certificate of Purchaser
Exhibit J Secretary's Certificate of Purchaser
Exhibit K Opinion of Counsel to Purchaser
Exhibit L Confirmation of Reciprocal Sharing Agreement
SCHEDULES
Schedule I Asset Groups
Schedule II Pre-Closing Known Environmental Liabilities
This ASSET PURCHASE AGREEMENT dated as of October 31, 1998
is made and entered into by and between PP&L Global, Inc., a
Pennsylvania corporation ("Purchaser"), and The Montana Power
Company, a Montana corporation ("Seller"). Capitalized terms
not otherwise defined herein have the meanings set forth in
Section 12.01.
WHEREAS, Seller and its subsidiaries engage in a number of
diversified energy and communication related businesses;
WHEREAS, Seller's principal business is the regulated
utility operations involving the generation, purchase,
transmission and distribution of electricity and the production,
purchase, transportation and distribution of natural gas in
Montana; and
WHEREAS, Seller desires to sell, transfer and assign to
Purchaser, and Purchaser desires to purchase and acquire from
Seller, the Thermal Units (including the Colstrip 4 Transmission
Assets) and the Hydro Units (excluding the Milltown
Hydroelectric Project) (each as defined herein and together, the
"Generating Assets") and certain other assets of Seller relating
to the operation of the Generating Assets, and in connection
therewith, Purchaser has agreed to assume certain of the
liabilities of Seller relating to such assets, all on the terms
set forth herein;
WHEREAS, on the date hereof PP&L Resources, Inc., a
Pennsylvania corporation and the parent of Purchaser ("Parent"),
has entered into an Equity Contribution Agreement (the
"Contribution Agreement") with Purchaser and Seller;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE OF ASSETS AND CLOSING
1.01 The Sale. (a) On the terms and subject to the
conditions set forth in this Agreement, Seller will sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser
will purchase and pay for, at the Closing, free and clear of all
Liens other than Permitted Liens (as such term is defined with
respect to any date after the Closing), all of Seller's right,
title and interest in, to and under the Generating Assets and
the Assets and Properties of Seller used or held for use
principally in connection with the operation of the Generating
Assets, except as otherwise provided in Section 1.01(b), as the
same shall exist as of the Closing including, but not limited to
the following (collectively with any proceeds and awards
referred to in Section 1.09, the "Assets"):
(i) Real Property. The real property (including all
buildings, structures, fixtures and other improvements thereon)
used or held for use in connection with or related to the
operation of the Generating Assets, as described in Section
1.01(a)(i) of the Disclosure Schedule, which real property is
held in fee, easement, permit interest or other interest, as the
case may be (the "Real Property");
(ii) Real Property Leases. (A) The leases and subleases
of real property used or held for use in connection with or
related to the operation of the Generating Assets, as described
in Section 1.01(a)(ii)(A) of the Disclosure Schedule, as to
which Seller is the lessor or sublessor and (B) the leases and
subleases of real property used in connection with or related to
the operation of the Generating Assets, as described in Section
1.01(a)(ii)(B) of the Disclosure Schedule, as to which Seller is
the lessee or sublessee, together with any options to purchase
the underlying property and leasehold improvements thereon, and
in each case all other rights, subleases, licenses, permits,
deposits and profits appurtenant to or related to such leases
and subleases (the leases and subleases described in
subclauses (A) and (B), the "Real Property Leases");
(iii) Inventory. All inventories of fuels, supplies,
materials and spares used or held for use in connection with the
operation of the Generating Assets located on the Real Property
or the real property subject to the Real Property Leases, held
for use principally in connection with, or in transit to the
Generating Assets on the date of Closing (a listing of the fuel
inventories, as of September 30, 1998, is included in Section
1.01(a)(iii) of the Disclosure Schedule) (the "Inventory");
(iv) Tangible Personal Property. All machinery,
equipment, vehicles, furniture and other personal property
located where the operation of the Generating Assets is
conducted, or used or held for use in connection with the
operation of the Generating Assets (including but not limited to
the items listed in Section 1.01(a)(iv) of the Disclosure
Schedule), together with all buildings and structures
("Improvements") pertaining to Colstrip Units 3 and 4 (as to
Colstrip Unit 4 only to the extent of Seller's rights therein),
including the facilities shared by Colstrip Units 1, 2, 3 and 4
relating thereto, as to those Improvements which have been
severed from the Real Property and are to be treated as personal
property, and all warranties against manufacturers or vendors
relating thereto, to the extent that such warranties are freely
transferable (the "Tangible Personal Property");
(v) Business Contracts. All contracts, agreements and
personal property leases (other than the Real Property Leases,
the Transferable Permits, the Fuel Contracts, the Colstrip
Contracts and the Power Purchase/Exchange Agreements) used
primarily in the operation of the Generating Assets that are
listed in Section 1.01(a)(v) of the Disclosure Schedule (the
"Business Contracts");
(vi) Transferable Permits. All Licenses and Environmental
Permits owned or held by Seller and used or held for use in
connection with the operation of the Generating Assets that are
transferable by Seller to Purchaser as listed in Section
1.01(a)(vi) of the Disclosure Schedule and the water rights
owned or held by Seller, whether or not such rights are created
or evidenced by a License, and used or held for use in
connection with the operation of the Generating Assets including
those listed in Section 1.01(a)(vi) of the Disclosure Schedule
(the "Transferable Permits");
(vii) Intangible Personal Property. All Intellectual
Property used or held for use principally in connection with the
operation of the Generating Assets and all rights, privileges,
claims, causes of action and options relating or pertaining to
the operation of the Generating Assets or the Assets, including
but not limited to the items listed in Section 1.01(a)(vii) of
the Disclosure Schedule (the "Intangible Personal Property");
(viii) Security Deposits. All security deposits deposited
by or on behalf of Seller as lessee or sublessee under the Real
Property Leases (the "Tenant Security Deposits");
(ix) Prepaid Expenses. Except for prepaid expenses and
deposits of Seller attributable to any Excluded Asset or
Retained Liabilities, all prepaid expenses, progress payments
and deposits of or by Seller, rights to receive a prepaid
expense, deposit or progress payment, and cash in transit that
constitutes a prepaid expense, progress payment or deposit,
relating to the Assets or the ownership, operation and
maintenance of the Generating Assets;
(x) Fuel Contracts. All of the fuel contracts listed in
Section 1.01(a)(x) of the Disclosure Schedule (the "Fuel
Contracts");
(xi) Colstrip Contracts. Seller's undivided interests in,
and all of Seller's rights under the Contracts relating to, the
Thermal Units listed in Section 1.01(a)(xi) of the Disclosure
Schedule (the "Colstrip Contracts");
(xii) Power Purchase/Exchange Agreements. All of the
Power Purchase/Exchange Agreements;
(xiii) Allowance and Emission Reduction Credits. All of
the allowances and/or emission reduction credits described in
Section 1.01(a)(xiii) of the Disclosure Schedule;
(xiv) Personnel Records of Transferring Employees. All
personnel records of the Transferring Employees;
(xv) Warranties. Any other warranties and indemnities
given by third parties relating to the Assets or to the
ownership, operation and maintenance of the Generating Assets
other than in connection with any Excluded Assets or Retained
Liabilities;
(xvi) Certain Insurance Policies of Transferring
Employees. All life insurance policies of Transferring
Employees owned by Seller, to the extent such policies are
transferable to Purchaser without any cost to Seller as
described in Section 1.01(a)(xvi) of the Disclosure Schedule
(the "Transferable Insurance Policies");
(xvii) Books and Records. All books, operating and
maintenance records, operating, safety and maintenance manuals,
engineering or design plans, drawings, blue prints and as-built
plans, specifications, procedures and similar items of Seller
relating specifically to the aforementioned assets, other than
the minute books, stock transfer books and corporate seal of
Seller (the "Business Books and Records");
(xviii) Colstrip 4 Transmission Assets. Subject to
Section 1.10, the Colstrip 4 Transmission Assets as described in
Section 1.01(a)(xviii) of the Disclosure Schedule ("Colstrip 4
Transmission Assets"); and
(xix) Colstrip 1, 2 and 3 Transmission Assets. Subject to
Section 1.10, the Colstrip 1, 2 and 3 Transmission Assets as
described in Section 1.01(a)(xix) of the Disclosure Schedule
("Colstrip 1, 2 and 3 Transmission Assets").
To the extent any of the Business Books and Records are
items susceptible to duplication and are either (x) used in
connection with any of Seller's businesses other than the
operation of the Generating Assets or (y) are required by Law to
be retained by Seller, Seller may deliver photostatic copies or
other reproductions from which, in the case of Business Books
and Records referred to in clause (x), information solely
concerning Seller's businesses other than the operation of the
Generating Assets has been deleted. To the extent that any
Contract to be transferred hereunder to Purchaser is also
utilized by or is for the benefit of any of Seller's businesses
other than the operation of the Generating Assets, the rights
and obligations under such Contracts shall be to the extent
practicable allocated between the operation of the Generating
Assets and such other businesses in a fair and equitable manner
that is reasonably satisfactory to the parties. Prior to the
Closing, Seller will cooperate with Purchaser to transfer the
computer equipment and software needed to operate the Generating
Assets but that can not be transferred pursuant to Section
1.01(a)(vii) due to restrictions in third party software
licenses and that are listed on Section 1.01(a) of the
Disclosure Schedule or are used by Seller in connection with its
other businesses. Any computer equipment and software which
cannot be transferred to Purchaser by the Closing shall be
referred to herein as the "Non-Transferable Software." After
the Closing, Seller (subject to restrictions in third party
software licenses) will process certain data of Purchaser
necessary to operate the Generating Assets on commercially
reasonable terms to be mutually agreed upon by Purchaser and
Seller; provided, however, such terms shall include the
following: (x) Seller shall process such data for the period
commencing on the Closing and ending two (2) years after the
Closing, provided that Purchaser shall have no right to modify
or enhance the Non-Transferrable Software or to make derivative
works from the Non-Transferrable Software; and (y) Purchaser
agrees to pay Seller for all costs relating to future upgrades,
software, hardware or otherwise (including Year 2000 costs)
relating to the Non-Transferrable Software that are done at
Purchaser's request (provided that Seller shall not be obligated
to comply with any such request) and Seller agrees to assume any
Liabilities arising therefrom.
(b) Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the Assets shall not include the
following assets of Seller (the "Excluded Assets"):
(i) Cash. All cash, commercial paper, certificates
of deposit and other bank deposits, treasury bills and other
cash equivalents;
(ii) Investments. Certificates of deposit, shares of
stock, securities, evidences of Indebtedness, interest in joint
ventures, partnerships, limited liability companies and other
entities;
(iii) Tax Refunds. All refunds or credits, if any, of
Taxes relating to the Assets due to Seller attributable to any
period ending on or prior to the Closing;
(iv) Real and Personal Property. The real or personal
property located at the sites where the Generating Assets are
located described in Section 1.01(b)(iv) of the Disclosure
Schedule, the delineation and composition of which shall be
subject to the Separation Document;
(v) Corporate Records. The minute books, stock
transfer books and corporate seal of Seller;
(vi) Litigation Claims. Any rights (including
indemnification) and claims and recoveries under litigation of
Seller against third parties attributable to the period on or
prior to the Closing except to the extent relating to the
Assumed Liabilities;
(vii) Excluded Obligations. The rights of Seller in,
to and under all Contracts of any nature, the obligations of
Seller under which are not expressly assumed by Purchaser
pursuant to Section 1.02(b);
(viii) Tradename and Logo. All tradenames, trademarks,
service marks or logos owned by Seller or its Subsidiaries
including all of Seller's right, title and interest in, to and
under the name "The Montana Power Company" or any related or
similar trade names, trademarks, service marks or logos;
provided, however, that Purchaser shall be authorized to
continue to use for internal purposes only and not for public
use, materials bearing such names, trademarks or logos (such as
employee manuals) used by Seller prior to the Closing for up to
six (6) months following the Closing;
(ix) Transmission, Distribution, Communication and
Software Assets. Subject to Section 1.01(a)(xviii), the
electric and gas transmission and distribution, substation and
communication facilities located at the sites where the
Generating Assets are located and related support equipment and
gas rights, interconnection rights, rights-of-way and corridor
easements related to such facilities, each as described in
Section 1.01(b)(ix) of the Disclosure Schedule; provided that
communications facilities and related support equipment that are
used solely in connection with the Generating Assets shall be a
part of the Assets unless identified in Section 1.01(b)(ix) of
the Disclosure Schedule, and Purchaser shall be entitled to use
communications facilities and related support equipment that are
also utilized by Seller in connection with Seller's businesses
other than the operation of the Generating Assets pursuant to a
service agreement to be entered into between Purchaser and
Seller at or prior to the Closing on commercially reasonable
mutually satisfactory terms ("Communications Service
Agreement").
(x) Accounts Receivable. All trade accounts
receivable and all notes, bonds and other evidences of
Indebtedness of and rights to receive payments arising out of
sales occurring in connection with the operation of the
Generating Assets prior to the Closing and the security
agreements related thereto, including any rights of Seller with
respect to any third party collection procedures or any other
Actions or Proceedings which have been commenced in connection
therewith;
(xi) Insurance. Subject to Section 1.01(a)(xvi), life
insurance policies of Transferring Employees and all other
insurance policies relating to the operation of the Generating
Assets;
(xii) Employee Benefit Plans. Except as set forth in
Section 5.03, all assets owned or held by any Benefit Plans;
(xiii) Other Personnel Records. All personnel records
other than the Transferring Employee records or other records,
the disclosure of which is required by Law, legal process or
subpoena;
(xiv) All Other Assets. All other Assets and
Properties owned by Seller or its Subsidiaries not used in the
operation of the Generating Assets; and
(xv) Other. Seller's rights under this Agreement and
the Operative Agreements.
1.02 Liabilities. (a) Assumed Liabilities. In
connection with the sale, transfer, conveyance, assignment and
delivery of the Assets pursuant to this Agreement, on the terms
and subject to the conditions set forth in this Agreement, at
the Closing, Purchaser will assume and agree to pay, perform and
discharge when due all of the following Liabilities of Seller,
direct or indirect, known or unknown, absolute or contingent,
which arise and are attributable to the period after the date of
the Closing and relate solely to the Assets or which arose and
relate to the period on or prior to the date of the Closing and
are specifically referred to in this Section 1.02(a) as being
assumed by Purchaser (in all cases, except for Seller's
Liabilities in connection with the Pollution Control Bonds and
Liabilities constituting Retained Liabilities) (the "Assumed
Liabilities"):
(i) Real Property Lease Obligations. All Liabilities of
Seller under the Real Property Leases arising and to be
performed after the date of the Closing, and excluding any such
Liabilities arising or to be performed on or prior to the date
of the Closing;
(ii) Tangible Personal Property Obligations. All
Liabilities of Seller under any Contract related to the Tangible
Personal Property arising and to be performed after the date of
the Closing, and excluding any such Liabilities arising or to be
performed on or prior to the date of the Closing;
(iii) Liabilities under Business Contracts and
Transferable Permits. All Liabilities of Seller under the
Business Contracts and Transferable Permits, to the extent
transferred to Purchaser, arising and to be performed after the
date of the Closing, and excluding any such Liabilities arising
or to be performed on or prior to the date of the Closing;
(iv) Security Deposits. All Liabilities of Seller with
respect to any security deposit held by Seller as lessor or
sublessor under the Real Property Leases, to the extent and only
to the extent of the respective amount of the security deposit
delivered to Purchaser at the date of the Closing with respect
to any such Real Property Lease (the "Landlord Security
Deposits");
(v) Fuel Contracts, Colstrip Contracts and Power
Purchase/Exchange Agreements. All Liabilities of Seller under
the Fuel Contracts, the Colstrip Contracts and the Power
Purchase/Exchange Agreements arising and to be performed after
the date of the Closing, and excluding any such Liabilities
arising or to be performed on or prior to the date of the
Closing;
(vi) Pre-Closing Colstrip Liabilities. All Liabilities of
Seller described in Section 1.02(a)(vi) of the Disclosure
Schedule;.
(vii) Transferring Employee Liabilities. All Liabilities
of Seller with respect to the Transferring Employees for which
Purchaser is responsible pursuant to Section 5.03;
(viii) Transferable Insurance Policy Liabilities. All
Liabilities of Seller with respect to the Transferable Insurance
Policies to the extent transferred to Purchaser;
(ix) Certain Employment Agreement Liabilities. All
Liabilities of Seller under the Employment Agreements described
on Section 1.02(a)(ix) of the Disclosure Schedule ("Change of
Control Liabilities"); and
(x) Environmental Liabilities. Subject to Section
10.01(b), all Environmental Liabilities; provided, however, that
nothing set forth in this Section 1.02(a) shall require
Purchaser to assume any Liability for (x) payment of any fines
or penalties imposed by a Governmental or Regulatory Authority
relating to the ownership operation and maintenance of the
Generating Assets on or prior to the date of the Closing
("Environmental Fines and Penalties"), (y) any Off-Site
Environmental Liabilities, or (z) any Pre-Closing Environmental
Liabilities related to the Thompson Falls Hydroelectric Project
(including the reservoir)if, at any time on or after the Bid
Date, the DEQ changes the Thompson Falls Environmental Status or
requires Purchaser to remediate metals contamination that
occurred on or prior to the date of the Closing at the Thompson
Falls Hydroelectric Project (including the reservoir) ("Thompson
Falls Liabilities").
Except with respect to Environmental Liabilities that are
Assumed Liabilities, Assumed Liabilities shall not include
Liabilities to the extent such Liabilities, but for a breach or
default by Seller of its obligations, would have been paid,
performed or otherwise discharged specifically by their terms or
the terms hereof on or prior to the Closing as it relates to the
Assets or to the extent the same arise out of any such breach or
default.
(b) Retained Liabilities. Except for the Assumed
Liabilities, Purchaser shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall
have no liability for any Liabilities of Seller including
Seller's Liabilities under this Agreement and the Operative
Agreements and including, but not limited to the following (the
"Retained Liabilities"):
(i) any Liabilities of Seller in connection with the
Pollution Control Bonds or claims by bondholders;
(ii) any Environmental Fines and Penalties;
(iii) any Off-Site Environmental Liabilities;
(iv) any Thompson Falls Liabilities;
(v) any Liabilities of Seller in respect of any Excluded
Assets;
(vi) any Liabilities of Seller for Taxes;
(vii) any Liabilities of Seller with respect to commitments
for the purchase or sale of power or fuel, other than as
provided in Section 1.02(a);
(viii) except as set forth in Section 5.03, any Liabilities
relating to Seller's employment of, termination of employment
of, provision of benefits to, and compensation of employees
employed at the Assets, including but not limited to an Employee
whose employment principally relates to any Assets, and any
personal injury, discrimination, harassment, wrongful discharge
or other wrongful employment practice, unfair labor practice,
claims for benefits (including claims arising under ERISA or
workers' compensation laws), or similar claims or causes of
action, known or unknown, absolute or contingent, asserted or
unasserted, of any such person arising out of acts or omissions
occurring or otherwise attributable to the period on or before
the Closing; and
(ix) except as set forth in Section 5.03, any Liabilities
of Seller relating to any Benefit Plan, or to any "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) of
Seller, whether or not terminated, established, maintained or
contributed to by Seller or any of its ERISA Affiliates at any
time, or to which any of Seller or any of its ERISA Affiliates
are or have been obligated to contribute to at any time ("ERISA
Affiliate Plan"); including any liability (A) to the Pension
Benefit Guaranty Corporation under Title IV of ERISA; (B)
relating to a multiemployer plan; (C) with respect to non-
compliance with COBRA or HIPAA; (D) with respect to
noncompliance with any other applicable provision of the Code,
ERISA or any other applicable laws; or (E) with respect to any
suit, proceeding or claim which is brought against Purchaser
with respect to any such Benefit Plan or ERISA Affiliate Plan,
against any such Benefit Plan or ERISA Affiliate Plan, or
against any fiduciary or former fiduciary of any such Benefit
Plan or ERISA Affiliate Plan.
1.03 Purchase Price; Allocation. (a) Purchase Price.
Subject to any adjustment required pursuant to Section 1.10, the
aggregate purchase price for the Assets shall be an amount equal
to the sum of (x) the Base Purchase Price, as may be adjusted
pursuant to Section 1.10, (y) the Adjustment Amount and, (z) if
applicable, the Colstrip 4 Transmission Amount (collectively,
the "Purchase Price"), payable in immediately available United
States funds at the Closing in the manner provided in Section
1.05 or thereafter (as provided in Section 1.04).
(b) Allocation of Purchase Price. Purchaser and Seller
shall negotiate in good faith prior to the Closing and determine
the allocation of the consideration paid by Purchaser for the
Assets. Each party hereto agrees (i) that any such allocation
shall be consistent with the requirements of Section 1060 of the
Code and the regulations thereunder, (ii) to complete jointly
and to file separately Form 8594 with its Federal Income Tax
Return consistent with such allocation for the tax year in which
the Closing occurs and (iii) that no party will take a position
on any income, transfer or gains Tax Return, before any
Governmental or Regulatory Authority charged with the collection
of any such Tax or in any judicial proceeding, that is in any
manner inconsistent with the terms of any such allocation
without the consent of the other party.
1.04 Purchase Price Adjustment. (a) Within 30 days after
the Closing, Seller shall prepare and deliver to Purchaser a
statement (each, an "Adjustment Statement") which reflects (i)
the net book value, as reflected on the books of Seller as of
the Closing of all fuel inventory (FERC account no. 151) and
stores inventory (FERC account no. 154) used at or in connection
with the Thermal Units or the Hydro Units, as the case may be
(the "Inventory Adjustment Amount"), and (ii) the Maintenance
and Capital Expenditures Amount applicable to the Thermal Units
or the Hydro Units, as the case may be. The Inventory
Adjustment Amount and the Maintenance and Capital Expenditures
Amount for the Closing is referred to collectively as the
"Adjustment Amount." The Inventory Adjustment Amount will be
based on an inventory survey conducted by Seller within five
days prior to the Closing consistent with Seller's current
inventory procedures (the "Inventory Survey"). Seller will
permit an employee, or representative, of Purchaser to observe
the Inventory Survey. Each Adjustment Statement shall be
prepared using the same generally accepted accounting
principles, policies and methods as Seller has historically used
in connection with the calculation of the items reflected on
such Adjustment Statement. Purchaser agrees to cooperate with
Seller in connection with the preparation of each Adjustment
Statement and related information, and shall provide to Seller
such books, records and information as may be reasonably
requested from time to time.
(b) Purchaser may dispute an Inventory Adjustment Amount
or a Maintenance and Capital Expenditures Amount; provided,
however, that Purchaser shall notify Seller in writing of the
disputed amount, and the basis of such dispute, within ten (10)
Business Days of Purchaser's receipt of the applicable
Adjustment Statement. In the event of a dispute with respect to
any part of an Adjustment Amount, Purchaser and Seller shall
attempt to reconcile their differences and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive on the parties. If Purchaser and Seller are unable
to reach a resolution of such differences within 30 days of
receipt of Purchaser's written notice of dispute to Seller,
Purchaser and Seller shall submit the amounts remaining in
dispute for determination and resolution to the Independent
Accounting Firm, which shall be instructed to determine and
report to the parties, within 30 days after such submission,
upon such remaining disputed amounts, and such report shall be
final, binding and conclusive on the parties hereto with respect
to the amounts disputed. The fees and disbursements of the
Independent Accounting Firm shall be shared equally by Purchaser
and Seller.
(c) Within ten (10) Business Days after Purchaser's
receipt of an Adjustment Statement, Purchaser shall pay all
undisputed amounts, or if there is a dispute with respect to any
amount of such Adjustment Statement within five (5) Business
Days after the final determination of any amounts on such
Adjustment Statement, Purchaser shall pay to Seller an amount
equal to the disputed Adjustment Amount as finally determined to
be payable with respect to such Adjustment Statement. All
Adjustment Statement payments shall be less the Estimated
Adjustment Amount; provided, however, that if such amount shall
be less than zero, then within five (5) Business Days after the
final determination of such amount Seller will pay to Purchaser
the amount by which such amount is less than zero. Any amount
paid under this Section 1.04 shall be paid with interest for the
period commencing on the date of Closing through the date of
payment, calculated at the prime rate for domestic banks as
published in The Wall Street Journal (Northeast Edition) in the
"Money Rates" section on the date of Closing, and in immediately
available United States funds.
1.05 Closing; Additional Purchase Price Payments.
(a) Closing. The Closing will take place at the offices
of Milbank, Tweed, Hadley & McCloy, One Chase Manhattan Plaza,
New York, New York 10005, or at such other place as Purchaser
and Seller mutually agree, at 10:00 A.M. local time, on the
Closing Date. At the Closing, Purchaser will pay an amount (the
"Estimated Purchase Price") in United States dollars equal to
the sum of (a) the Base Purchase Price as the same may be
adjusted pursuant to Section 1.10, and, if applicable, the
Colstrip 4 Transmission Amount, and (b) the Estimated Adjustment
Amount for the Closing, by wire transfer of immediately
available United States funds to such account as Seller may
reasonably direct by written notice delivered to Purchaser by
Seller at least two (2) Business Days before the Closing.
Simultaneously, (A) Seller will assign and transfer to Purchaser
good and valid title in and to the Assets (free and clear of all
Liens, other than Permitted Liens as such term is defined with
respect to periods after the Closing) by delivery of (i) a
General Assignment and Bill of Sale substantially in the form of
Exhibit A hereto (the "General Assignment"), duly executed by
Seller, covering the Personal Property comprising Assets except
for the Intellectual Property, (ii) an assignment of the
Intellectual Property in form and substance reasonably
satisfactory to Purchaser, (iii) (x) special warranty deeds in
proper statutory form for recording and otherwise in form and
substance reasonably satisfactory to Purchaser conveying good
and marketable title to the Real Property in which Seller has a
fee or easement interest (subject only to Permitted Liens),
(y) an assignment in form and substance reasonably satisfactory
to Purchaser conveying valid and subsisting title to the Real
Property in which Seller has a permit interest or other interest
(neither fee nor easement) (subject only to Permitted Liens) and
(z) all necessary documentation to transfer and convey to
Purchaser the water rights listed in Section 1.01(a)(vi) of the
Disclosure Schedule including water rights transfer certificates
executed in proper form to be filed with the appropriate
Governmental or Regulatory Authority and (iv) such other good
and sufficient instruments of conveyance, assignment and
transfer, in form and substance reasonably acceptable to
Purchaser's counsel, as shall be effective to vest in Purchaser
good and valid title to the Assets, good and marketable title to
the Real Property in which Seller has a fee or easement interest
and valid and subsisting title to the Real Property in which
Seller has a permit interest or other interest (neither fee nor
easement), in each case subject only to Permitted Liens (the
General Assignment and the other instruments referred to in
clauses (A) (ii), (iii) and (iv) being collectively referred to
herein as the "Assignment Instruments"), and (B) Purchaser will
assume from Seller the due payment, performance and discharge of
the Assumed Liabilities by delivery of (i) an Assumption
Agreement substantially in the form of Exhibit B hereto (the
"Assumption Agreement"), duly executed by Purchaser, and (ii)
such other good and sufficient instruments of assumption, in
form and substance reasonably acceptable to Seller's counsel, as
shall be effective to cause Purchaser to assume the Assumed
Liabilities as and to the extent provided in Section 1.02(a)
(the Assumption Agreement and such other instruments referred to
in clause (B)(ii) being collectively referred to herein as the
"Assumption Instruments"). At the Closing, there shall also be
delivered to Seller and Purchaser the opinions, certificates and
other contracts, documents and instruments required to be
delivered under Articles VI and VII.
(b) Additional Purchase Price Payments. If the Closing
hereunder has occurred, then:
(i) In the event that the Puget Closing Date occurs prior
to the Portland Closing Date, on the Puget Closing Date
Purchaser shall pay to Seller the Puget Payment Amount;
(ii) In the event that the Portland Closing Date occurs
prior to the Puget Closing Date, on the Portland Closing Date
Purchaser shall pay to Seller the Portland Payment Amount; and
(iii) On the Final Closing Date, Purchaser shall pay to
Seller the Combined Payment Amount.
All payments made pursuant to this Section 1.05(b) shall be
paid by wire transfer of immediately available United States
funds to such account as Seller may reasonably direct by written
notice delivered to Purchaser by Seller at least two (2)
Business Days before the applicable closing date.
1.06 Prorations. The following items relating to the
Assets and the ownership and operation of the Generating Assets
will be allocated pro rata per diem for the tax year that
includes the date of Closing, with Seller liable for such items
to the extent they are allocable to the period prior to the date
of the Closing and Purchaser liable for such items to the extent
they are allocable to periods beginning with and subsequent to
the Closing:
(a) Property Taxes on or with respect to the Assets.
(b) Rents, additional rents, Taxes, to the extent normally
adjusted in connection with similar transactions, and other
items payable by Seller under the Real Property Leases and the
Business Contracts.
(c) The amount of rents, Taxes and charges for sewer,
water, telephone, electricity and other utilities relating to
the Real Property and the real property subject to the Real
Property Leases.
(d) All other items (excluding other Taxes) normally
adjusted in connection with similar transactions.
Except as otherwise agreed by the parties, the net amount of all
such prorations will be settled and paid as of date of the
Closing. At least ninety (90) days prior to date of the
Closing, Seller will provide Purchaser with a reasonably
detailed schedule showing a calculation of the estimated
prorations as if the Closing were occurring on such date. If
the Closing shall occur before a real estate Tax rate is fixed,
the apportionment of Taxes shall be based upon the Tax rate for
the preceding year applied to the latest assessed valuation and
such Taxes shall be reprorated upon the request of Seller, on
the one hand, or Purchaser, on the other hand, made within sixty
(60) days after the date that the actual amounts become
available. Seller and Purchaser agree to furnish each other
with such documents and other records as may be reasonably
requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 1.06.
To the extent required by any approval of the transfer of
the FERC project licenses related to the Hydro Units, Seller
agrees to pay all annual charges accrued under such licenses as
of the Closing.
1.07 Further Assurances; Post-Closing Cooperation.
(a) Subject to the terms and conditions of this Agreement,
at any time or from time to time after the Closing, at
Purchaser's request and without further consideration, Seller
shall execute and deliver to Purchaser such other instruments of
sale, transfer, conveyance, assignment and confirmation, provide
such materials and information and take such other actions as
Purchaser may reasonably deem necessary or desirable in order
more effectively to transfer, convey and assign to Purchaser,
and to confirm Purchaser's title to, all of the Assets, and, to
the full extent permitted by Law, to put Purchaser in actual
possession and control of the Assets and to assist Purchaser in
exercising all rights with respect thereto, and otherwise to
cause Seller to fulfill its obligations under this Agreement and
the Operative Agreements. From time to time after the Closing,
at Purchaser's request and expense, Seller will reasonably
cooperate with Purchaser in its efforts to maximize any Tax
benefits associated with the Assets with respect to periods
following the Closing and to minimize the Tax costs associated
with the transactions contemplated hereby; provided such
cooperation does not adversely affect Seller's Tax position.
From time to time after the Closing, at Seller's request and
expense, Purchaser will reasonably cooperate with Seller in its
efforts to maximize any Tax benefits associated with the Assets
with respect to periods prior to the Closing and to minimize the
Tax costs associated with the transactions contemplated hereby;
provided such cooperation does not adversely affect Purchaser's
Tax position.
(b) Following the Closing, each party will afford the
other party, its counsel and its accountants, during normal
business hours, reasonable access to the books, records and
other data relating to the operation of the Generating Assets in
its possession with respect to periods prior to the Closing and
the right to make copies and extracts therefrom, to the extent
that such access may be reasonably required by the requesting
party in connection with (i) the preparation of Tax Returns,
(ii) the determination or enforcement of rights and obligations
under this Agreement, (iii) compliance with the requirements of
any Governmental or Regulatory Authority, (iv) the determination
or enforcement of the rights and obligations of any Indemnified
Party or (v) in connection with any actual or threatened Action
or Proceeding. Further each party agrees for a period extending
six (6) years after the Closing not to destroy or otherwise
dispose of any such books, records and other data unless such
party shall first offer in writing to surrender such books,
records and other data to the other party and such other party
shall not agree in writing to take possession thereof during the
thirty (30) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns,
other documents or reports required to be filed with
Governmental or Regulatory Authorities or its financial
statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information,
documents or records relating to the operation of the Generating
Assets not referred to in paragraph (b) above, and such
information, documents or records are in the possession or
control of the other party, such other party shall use its best
efforts to furnish or make available such information, documents
or records (or copies thereof) at the recipient's request, cost
and expense. Any information obtained by such party in
accordance with this paragraph shall be held confidential by
such party in accordance with Section 13.06.
(d) Notwithstanding anything to the contrary contained in
this Section 1.07, if the parties are in an adversarial
relationship in litigation or arbitration, the furnishing of
information, documents or records in accordance with paragraph
(c) of this Section 1.07 shall be subject to applicable rules
relating to discovery.
1.08 Third Party Consents. To the extent that any
Business Contract, Transferable Permit, Fuel Contract, Colstrip
Contract or Power Purchase/Exchange Agreement is not assignable
without the consent of another party, this Agreement shall not
constitute an assignment or an attempted assignment thereof if
such assignment or attempted assignment would constitute a
breach thereof. Seller and Purchaser shall use their reasonable
efforts to obtain the consent of such other party to the
assignment of any such Business Contract, Transferable Permit,
Fuel Contract, Colstrip Contract or Power Purchase/Exchange
Agreement to Purchaser in all cases in which such consent is or
may be required for such assignment. If any such consent shall
not be obtained, or if any attempted assignment would be
ineffective or would impair Purchaser's rights and obligations
so that Purchaser would not in effect acquire the benefit of
substantially all of such rights and obligations, Seller shall
cooperate with Purchaser in any reasonable arrangement, to the
extent legally permissible, designed to provide for Purchaser
the benefits intended to be assigned to Purchaser under the
relevant Business Contract, Transferable Permit, Fuel Contract,
Colstrip Contract or Power Purchase/Exchange Agreement,
including enforcement at the cost and for the account of
Purchaser of any and all rights of Seller against the other
party thereto arising out of the breach or cancellation thereof
by such other party or otherwise. If and to the extent that
such arrangement is not made in a manner reasonably satisfactory
to Purchaser, Purchaser shall have no obligation pursuant to
Section 1.02 or otherwise only with respect to any such Business
Contract, Transferable Permit, Fuel Contract, Colstrip Contract
or Power Purchase/Exchange Agreement. The provisions of this
Section 1.08 shall not affect the right of Purchaser not to
consummate the transactions contemplated by this Agreement as
provided in Section 1.10(e) or if the conditions to its
obligations hereunder contained in Sections 6.05, 6.06 and 6.07
have not been fulfilled.
1.09 Insurance Proceeds. If any of the Assets (other than
an Asset excluded under Section 1.10) is destroyed, damaged or
taken in condemnation, the insurance proceeds or condemnation
award with respect thereto shall be an Asset; provided, however,
Seller agrees not to settle or compromise any amounts concerning
such Assets during negotiations with Seller's insurance company
without Purchaser's prior consent. At the Closing, Seller shall
pay or credit to Purchaser any such insurance proceeds or
condemnation awards received by it on or prior to the Closing
and shall assign to or assert for the benefit of Purchaser all
of its rights against any insurance companies, Governmental or
Regulatory Authorities and others with respect to such damage,
destruction or condemnation. As and to the extent that there is
available insurance under policies maintained by Seller and its
Affiliates, predecessors and successors in respect of any
Assumed Liability, except for any such insurance proceeds with
respect to which the insured is directly or indirectly self-
insured or has agreed to indemnify the insurer, Seller shall
cause such insurance to be applied toward the payment of such
Assumed Liability. The provisions of this Section 1.09 shall
not affect the right of Purchaser not to consummate the
transactions contemplated by this Agreement if the condition to
its obligations hereunder contained in Sections 6.01 or 6.08 has
not been fulfilled.
1.10 Inclusion/Exclusion of Certain Assets.
(a) Purchaser agrees to use its reasonable best efforts to
obtain the approval described in clause (iii) of the definition
of Purchaser Required Regulatory Approvals in a manner
reasonably satisfactory to Purchaser that will allow Purchaser
to purchase and own, operate and maintain after the Closing the
Colstrip 4 Transmission Assets, and to consult with Seller prior
to abandoning its efforts to do so. If, notwithstanding
Purchaser's compliance with the preceding sentence and with
Section 5.01, such Purchaser Required Regulatory Approval is not
obtained from FERC with respect to the proposed purchase,
ownership and operation of the Colstrip 4 Transmission Assets,
or is finally denied by FERC, within seven (7) months of the
date of execution of this Agreement, or in the event that the
condition set forth in Section 6.12 has not been satisfied on or
prior to the Closing, then subject to Section 1.10(b),(i) at the
Closing Seller and Purchaser shall enter into a transmission
service agreement for firm transmission service pursuant to
Seller's open access transmission tariff (the "Colstrip 4
Transmission Service Agreement"), (ii) the Colstrip 4
Transmission Assets shall be Excluded Assets hereunder,
(iii) Purchaser shall not be obligated to pay the Colstrip 4
Transmission Amount at the Closing, and (iv) the condition to
Closing described in Sections 6.05 and 7.05 shall be deemed
satisfied with respect to such Purchaser Required Regulatory
Approval solely with respect to the Colstrip 4 Transmission
Assets but shall not be deemed satisfied with respect to any
other Assets, provided, that Seller shall have the right, in its
sole discretion, to waive such seven (7) month period, and
require Purchaser to continue to pursue such approval,
consistent with Purchaser's obligations under Section 5.01
hereof, for such time period(s) as Seller may determine, not to
exceed the time period provided for in Section 11.01(d) hereof.
Purchaser acknowledges that, in any event, Seller shall remain
the operator of the Colstrip 4 Transmission Assets pursuant to
the Colstrip Project Transmission Agreement dated May 6, 1981,
as amended February 14, 1990, December 30, 1996, and July 13,
1998, between Seller, Puget, PGE, WWP and Pacific.
(b) In the event that, notwithstanding Seller's compliance
with Section 4.01, Seller has been unable to obtain all consents
or approvals required in connection with the transfer of the
Colstrip 4 Generation Assets, Seller may elect to exclude from
the Assets being sold to Purchaser hereunder, all of Seller's
rights, title and interest in, to and under the Colstrip 4
Generation Assets. In such event (i) the Colstrip 4 Generation
Assets shall be Excluded Assets hereunder, (ii) the Base
Purchase Price shall be reduced by an amount equal to
$40,000,000, (iii) the conditions to Closing described in
Sections 6.05, 6.06, 6.07, 7.05, and 7.06, as and only to the
extent that they relate to consents and approvals required in
respect of or pursuant to any Colstrip 4 Generation Assets,
shall be deemed satisfied, and (iv) the Colstrip 4 Transmission
Assets shall become Excluded Assets and all of the provisions of
Section 1.10(a)(i)through (iv) shall become operative with
respect to the Colstrip 4 Transmission Assets.
(c) In the event that, notwithstanding Seller's and
Purchaser's compliance with Sections 4.01 and 5.01, an Asset
Group identified on Schedule I hereto cannot be conveyed at the
Closing due to a failure to obtain a Seller Required Regulatory
Approval and/or a Purchaser Required Regulatory Approval with
respect to such Asset Group on terms and conditions reasonably
satisfactory to Purchaser, or the Closing conditions in Sections
6.05 and 6.06 and, if applicable, Section 6.07 are not satisfied
with respect to such Asset Group, then such Asset Group shall be
excluded from the Assets being sold to Purchaser hereunder. In
such event (i) such Asset Group shall be Excluded Assets
hereunder, (ii) the Base Purchase Price shall be reduced by the
amount relating to such Asset Group identified on Schedule I
hereto, and (iii) the conditions to Closing described in
Sections 6.05, 6.06,7.05 and 7.06 and, if applicable, Section
6.07 as and only to the extent that they relate to consents and
approvals required in respect of or pursuant to such Asset
Group, shall be deemed satisfied;
(d) Purchaser has been provided copies of title insurance
commitments covering certain of the Assets and intends to obtain
at its expense additional title commitments and title policies.
Seller agrees to use reasonable efforts to cure title objections
of which Seller is notified by Purchaser, to the extent title
would not otherwise satisfy Seller's obligations with respect to
the title to be delivered by Seller in compliance with Section
1.05(a) of this Agreement. From and after the date hereof and
through the Closing, Seller shall use reasonable efforts to cure
and remove exceptions to title to the Real Property (other than
those exceptions referred to in the preceding sentences)of which
Seller is notified by Purchaser in writing; provided, however,
that in no event shall Seller be obligated to incur expenses or
make payments of any nature in excess of $1,100,000 in
discharging its obligations set forth in this sentence. Nothing
in the two preceding sentences shall change or otherwise affect
the nature of the title to the Real Property that Seller is
obligated to transfer to Purchaser in compliance with this
Agreement. In the event that (i)Seller is unable to deliver, at
the Closing, title in compliance with this Agreement with
respect to an Asset Group, (ii) an Asset Group is the subject of
a material condemnation proceeding, or (iii) an Asset Group is
damaged or destroyed in any material respect and such damage or
destruction is not remedied by Seller prior to the Closing, then
the affected Asset Group shall be Excluded Assets hereunder and
the Base Purchase Price shall be adjusted by the amount relating
to such Asset Group identified on Schedule I hereto. If any
such Asset Group is treated as an Excluded Asset as provided
above in this Section 1.10(d), the conditions to Closing set
forth in Articles VI and VII shall be deemed satisfied as and
only to the extent that they relate to the title, condemnation
or damage and destruction, as the case may be, with respect to
such Asset Group.
(e) In the event that the Generating Assets to be
transferred to Purchaser hereunder at the Closing do not include
at a minimum (i) Corette, (ii) Seller's undivided interests in
Colstrip 1, 2 and 3 Generating Assets, and (iii)
Missouri/Madison Hydro Units with Basin/Idaho/BPA Power
Contracts, then Purchaser may elect to terminate the Agreement
under Section 11.01(e).
(f) In the event the closings under the PGE Asset Purchase
Agreement and the Puget Asset Purchase Agreement do not occur by
the respective "Termination Dates" thereunder, either
(i) Purchaser shall acquire the Colstrip 1, 2 and 3 Transmission
Assets owned by Seller for a purchase price of $97,100,000 (the
"Colstrip 1, 2 and 3 Transmission Amount") or (ii) in the event
Purchaser has not received the Purchaser Required Regulatory
Approval described in clause (iii) of the definition of
Purchaser Required Regulatory Approvals reasonably satisfactory
to Purchaser with respect to the proposed purchase of the
Colstrip 1, 2 and 3 Transmission Assets, Purchaser shall not
acquire the Colstrip 1, 2 and 3 Transmission Assets and such
Assets shall be Excluded Assets. Purchaser acknowledges that,
in any event, Seller shall remain the operator of the Colstrip
1, 2 and 3 Transmission Assets pursuant to the Colstrip Project
Transmission Agreement dated May 6, 1981, as amended February
14, 1990, December 30, 1996, and July 13, 1998, between Seller,
Puget, PGE, WWP and Pacific.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as
follows:
2.01 Corporate Existence of Seller. Seller is a
corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Montana, and has full
corporate power and authority to own, operate and maintain the
Generating Assets as and to the extent now conducted and to own,
use, lease and operate the Assets. Seller is duly qualified or
licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the Assets make such
qualification necessary, except in each case in those
jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not create a Seller Material
Adverse Effect. Seller has heretofore made available to
Purchaser complete and correct copies of its articles of
incorporation and by-laws (or other comparable corporate charter
documents), as currently in effect.
2.02 Authority. Seller has full corporate power and
authority to execute and deliver this Agreement and the
Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby, including to sell
and transfer (pursuant to this Agreement) the Assets. The
execution and delivery by Seller of this Agreement and the
Operative Agreements to which it is a party, and the performance
by Seller of its obligations hereunder and thereunder, have been
duly and validly authorized by the Board of Directors of Seller,
no other corporate action on the part of Seller or its
stockholders being necessary. This Agreement has been duly and
validly executed and delivered by Seller and, subject to receipt
of Seller Required Regulatory Approvals and Purchaser Required
Regulatory Approvals, constitutes, and upon the execution and
delivery by Seller of the Operative Agreements to which it is a
party, such Operative Agreements will constitute, legal, valid
and binding obligations of Seller enforceable against Seller in
accordance with their terms except as the same may be limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium
or other similar Laws relating to or affecting the rights of
creditors generally, or by general equitable principles.
2.03 No Conflicts. (a) Except as set forth in Section
2.03 of the Disclosure Schedule, and other than obtaining Seller
Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, the execution and delivery by Seller of this
Agreement do not, and the execution and delivery by Seller of
the Operative Agreements to which it is a party, the performance
by Seller of its obligations under this Agreement and such
Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(i) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the restated
articles of incorporation, as amended, or by-laws, as amended
(or other comparable corporate charter documents) of Seller;
(ii) require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority, except (x) for Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals, or (y)
for those requirements which become applicable to Seller as a
result of the specific regulatory status of Purchaser (or any of
its Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which
Purchaser (or any of its Affiliates) is or proposes to be
engaged;
(iii) result in a default (or give rise to any right of
termination, cancellation or acceleration or require any consent
or approval) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which Seller is a party or by which
Seller, or any of the Assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration
or any consent or approval) as to which requisite waivers or
consents have been obtained; or
(iv) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to Seller
or any of its Assets and Properties.
2.04 Governmental Approvals and Filings. Except for
Seller Required Regulatory Approvals, no consent, approval or
action of, filing with or notice to any Governmental or
Regulatory Authority on the part of Seller is required in
connection with the execution, delivery and performance of this
Agreement or any of the Operative Agreements to which it is a
party or the consummation of the transactions contemplated
hereby or thereby, except those as would be required solely as a
result of the identity or the legal or regulatory status of
Purchaser or any of its Affiliates.
2.05 Reports. Since December 31, 1995, Seller has filed
or caused to be filed with the SEC, the applicable state or
local utility commissions or regulatory bodies and FERC, all
material forms, statements, reports and documents (including all
exhibits, amendments and supplements thereto) required to be
filed by it with respect to the operation of the Generating
Assets under each of the Securities Act, the Exchange Act, the
applicable state public utility Laws, the Federal Power Act, the
Holding Company Act and the respective rules and regulations
thereunder, all of which complied in all material respects with
all applicable requirements of the appropriate act and the rules
and regulations thereunder in effect on the date each such
report was filed, and there are no material misstatements or
omissions in respect of such reports.
2.06 Taxes. Seller has timely filed or will timely file
all Tax Returns required to be filed with respect to the
ownership, operation and maintenance of the Assets and has paid
or will pay all Taxes shown to be due on such returns with
respect to all tax periods ending prior to the Closing. Except
for the properties financed with the Pollution Control Bonds, no
other Assets have been financed using tax exempt financing. The
owners of Colstrip Units 1, 2, 3, and 4 have jointly made a
timely and effective affirmative election pursuant to Section
761(a) of the Code and Treasury Regulation Section 1.761-2(b) to
be excluded from all of subchapter K of the Code, and such
election has not been modified, revoked or otherwise altered,
and remains in effect. Seller has not taken and has not been
notified that any of such owners has taken any action
inconsistent with such election.
2.07 Legal Proceedings. Except as disclosed in
Section 2.07 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Seller, threatened against, relating to or
affecting Seller with respect to the ownership, operation and
maintenance of the Assets which could reasonably be expected (i)
to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the
Operative Agreements, or (ii) individually or in the aggregate
with other such Actions or Proceedings, to create a Seller
Material Adverse Effect; and
(b) there are no Orders outstanding against Seller with
respect to the ownership, operation and maintenance of the
Assets which, individually or in the aggregate with other such
Orders, would have a Seller Material Adverse Effect.
2.08 Compliance with Laws and Orders. Except as disclosed
in Section 2.08 of the Disclosure Schedule, Seller is not in
material violation of or in material default under any Law or
Order applicable to Seller or the ownership, operation and
maintenance of the Assets.
2.09 Benefit Plans; ERISA. (a) Section 2.09(a) of the
Disclosure Schedule contains a true and complete list and
description of each of the Benefit Plans and identifies each of
the Benefit Plans that is a Qualified Plan and relates to
Employees.
(b) Except as disclosed in Section 2.09(b) of the
Disclosure Schedule, Seller does not maintain nor is it
obligated to provide benefits under any life, medical or health
plan which provides benefits to retired or other terminated
Employees other than (i) benefit continuation rights under the
Consolidated Omnibus Budget Reconciliation of 1985, as amended,
and (ii) incidental benefits under any Qualified Plan.
(c) Neither Seller, any ERISA Affiliate nor any other
corporation or organization controlled by or under common
control with any of the foregoing within the meaning of
Section 4001 of ERISA has at any time contributed to, on behalf
of any Employee, any "multiemployer plan," as that term is
defined in Section 4001 of ERISA.
(d) Each of the Benefit Plans relating to the Employees
is, and its administration is and has been since inception, in
compliance with ERISA and the Code in all material respects.
(e) All contributions and other payments required to be
made by Seller to any Benefit Plan relating to the Employees
with respect to any period ending before or at or including the
Closing have been made or reserves adequate for such
contributions or other payments have been or will be set aside
therefor.
(f) (i) No transaction contemplated by this Agreement will
result in liability to the PBGC under Section 302(c)(ii), 4062,
4063, 4064 or 4069 of ERISA, or otherwise, with respect to
Purchaser or any corporation or organization controlled by or
under common control with Purchaser within the meaning of
Section 4001 of ERISA, (ii) neither Seller nor any ERISA
Affiliate has incurred any liability under Title IV of ERISA
(other than for the payment of PBGC insurance premiums in the
ordinary course), (iii) the Assets are not subject to Lien under
Title IV of ERISA or Section 412 of the Code, and (iv) there
does not exist any proceeding, fact or circumstance that might
reasonably be expected to result in Seller or any ERISA
Affiliate incurring liability under Title IV of ERISA (other
than for the payment of PBGC insurance premiums in the ordinary
course) or the imposition of a Lien on the Assets under Title IV
of ERISA or Section 412 of the Code.
(g) There are no pending or, to the Knowledge of Seller,
threatened claims by or on behalf of any Benefit Plan, by any
Person covered thereby, or otherwise, which allege violations of
Law.
(h) Complete and correct copies of the following documents
have been made available to Purchaser prior to the execution of
this Agreement:
(i) the Benefit Plans and any related trust agreements and
insurance contracts;
(ii) current summary Plan descriptions of each Benefit Plan
subject to ERISA;
(iii) the most recent Form 5500 and Schedules thereto for
each Benefit Plan subject to ERISA reporting requirements;
(iv) the most recent determination letter issued by the IRS
with respect to the qualified status of each Qualified Plan;
(v) the most recent accountings with respect to any
Benefit Plan funded through a trust; and
(vi) the most recent actuarial report of the qualified
actuary of any Subject Defined Benefit Plan or any other Benefit
Plan with respect to which actuarial valuations are conducted.
2.10 Real Property. (a) Section 1.01(a)(i) of the
Disclosure Schedule contains a description of, and exhibits
indicating the location of the Real Property owned by Seller and
included in the Assets, and Section 1.01(a)(ii) of the
Disclosure Schedule contains a description of, and exhibits
indicating the location of each parcel of real property leased
by Seller (as lessor, sublessor, lessee or sublessee), or as to
which Seller holds easements or other rights, and included in
the Assets.
(b) Seller has good and marketable title to the Real
Property in which Seller holds a fee or easement interest and
valid and subsisting title to the Real Property in which Seller
holds a permit interest or other interest, in each case, free
and clear of all Liens other than Permitted Liens. Except for
the Permitted Liens and the Real Property subject to Real
Property Leases described in Section 1.01(a)(ii)(A) of the
Disclosure Schedule, Seller is in possession of the Real
Property and there are no third party licenses or tenants at the
sites of the Real Property or Real Property Leases.
(c) Seller has a valid and subsisting leasehold estate in
and the right to quiet enjoyment of the real properties subject
to the Real Property Leases described in Section 1.01(a)(ii)(B)
of the Disclosure Schedule for the full term thereof. Each Real
Property Lease is a legal, valid and binding agreement,
enforceable in accordance with its terms, of Seller and of each
other Person that is a party thereto, and except as set forth in
Section 2.10(c) of the Disclosure Schedule, there is no default
(or any condition or event which, after notice or lapse of time
or both, would constitute a default) thereunder.
(d) Seller has made available to Purchaser prior to the
execution of this Agreement true and complete copies of (i) any
current surveys in Seller's possession or any policies of title
insurance currently in force and in the possession of Seller
with respect to the Real Property, and (ii) all Real Property
Leases (including any amendments and renewal letters) and, to
the extent reasonably available, all other documents referred to
in clause (i) of this paragraph (d) with respect to the real
property subject to the Real Property Leases described in
Section 1.01(a)(ii)(B) of the Disclosure Schedule.
(e) Except as set forth in Section 12.01(h) of the
Disclosure Schedule, all Real Properties have access to a public
road and are zoned for their current uses. No fee ownership,
lease, right of way, easement, license or other right in real
property, other than the Real Property and the Real Property
Leases and the transmission, distribution, communication and
software assets described in Section 1.01(b)(ix) of the
Disclosure Schedule (which are Excluded Assets), is necessary
for the Purchaser to own, operate or maintain the Assets
substantially as currently owned, operated and maintained by
Seller. Seller has not received any written notice that any of
the improvements on any of the Real Property or Real Property
Leases, including without limitation the Easements, or any
appurtenances thereto or equipment therein or the operation or
maintenance thereof, violate any restrictive covenant or the
terms, conditions or restrictions of any easement.
2.11 Tangible Personal Property. Seller is in possession
of and has good and valid title to, or has valid leasehold
interests in or valid rights under Contract to use, all the
Tangible Personal Property used in and individually or in the
aggregate with other such property material to the ownership,
operation and maintenance of the Assets. All the Tangible
Personal Property is free and clear of all Liens, other than
Permitted Liens and Liens disclosed in Section 2.11 of the
Disclosure Schedule, and is in all material respects in good
working order and condition, ordinary wear and tear excepted.
The Assets are, and as of the Closing will be, inclusive of all
facilities and equipment in such condition as will be sufficient
for Purchaser to comply with its obligations under the
Interconnection Agreement after giving effect to the Separation
Document.
2.12 Intellectual Property Rights. Section 1.01(a)(vii)
of the Disclosure Schedule discloses all Intellectual Property
used or held for use or necessary in connection with, and
individually or in the aggregate with other such Intellectual
Property, material to the ownership, operation and maintenance
of the Assets, each of which Seller either has all right, title
and interest in or valid and binding rights under Contract to
use without limitation or royalty burdens that are not otherwise
disclosed in Section 2.12 of the Disclosure Schedule. Except as
disclosed in Section 2.12 of the Disclosure Schedule, (i) all
registrations with and applications to Governmental or
Regulatory Authorities in respect of Intellectual Property owned
by Seller and disclosed in Section 1.01(a)(vii) of the
Disclosure Schedule are valid and in full force and effect, (ii)
there are no restrictions on the direct or indirect transfer of
such Intellectual Property or any Contract, or any interest
therein, held by Seller in respect of such Intellectual
Property, (iii) Seller is not, nor has it received any notice
that it is, in default (or with the giving of notice or lapse of
time or both, would be in default) in any material respect under
any Contract to use such Intellectual Property and (iv) to the
Knowledge of Seller, such Intellectual Property is not being
infringed by any other Person. Seller has not received notice
that Seller is infringing any Intellectual Property of any other
Person in connection with the Assets or the operation of the
Generating Assets, no claim is pending or has been made to such
effect that has not been resolved and, to its Knowledge, Seller
is not infringing any Intellectual Property of any other Person.
2.13 Contracts. (a) Section 2.13(a) of the Disclosure
Schedule (with paragraph references corresponding to those set
forth below) contains a true and complete list of each of the
following Contracts (true and complete copies of which, together
with all amendments and supplements thereto, have been made
available to Purchaser prior to the execution of this Agreement)
to which Seller is a party and relate to the operation of the
Generating Assets or by which any of the Assets is bound:
(i) all Contracts (excluding Benefit Plans) providing for
a commitment of employment or consultation services for a
specified or unspecified term to, or otherwise relating to
employment or the termination of employment of, any Employee,
the name, position and rate of compensation of each Employee
party to such a Contract and the expiration date of each such
Contract;
(ii) all Contracts with any Person containing any provision
or covenant prohibiting or limiting the ability of Seller to
engage in any activity relating to the operation of the
Generating Assets or compete with any Person in connection with
the operation of the Generating Assets or prohibiting or
limiting the ability of any Person to compete with Seller in
connection with the operation of the Generating Assets;
(iii) all partnership, joint venture, shareholders' or other
similar Contracts with any Person in connection with the
operation of the Generating Assets;
(iv) all Contracts with distributors, dealers,
manufacturer's representatives, sales agencies or franchises
with whom Seller deals in connection with the operation of the
Generating Assets which in any case involve the payment or
potential payment, pursuant to the terms of any such Contract,
by or to Seller of more than $250,000 annually;
(v) all Contracts relating to the future disposition or
acquisition of any Assets, other than dispositions or
acquisitions of Inventory in the ordinary course of business;
and
(vi) all other Contracts (other than Benefit Plans, the
Real Property Leases and the collective bargaining agreements
delivered to Purchaser pursuant to Section 2.16) not described
above that constitute Assumed Liabilities with respect to the
operation of the Generating Assets that (A) involve the payment
or potential payment, pursuant to the terms of any such
Contract, by or to Seller of more than $250,000 annually and (B)
cannot be terminated within sixty (60) days after giving notice
of termination without resulting in any material cost or penalty
to Seller (or, after the Closing, to Purchaser).
(b) Each Contract required to be disclosed in
Section 2.13(a) of the Disclosure Schedule and each of the
Colstrip Contracts, the Fuel Contracts and the Power
Purchase/Exchange Agreements and each of the Business Contracts
which involves the payment or potential payment by or to Seller
of more than $250,000 annually is in full force and effect and
constitutes a legal, valid and binding agreement, enforceable in
accordance with its terms, of Seller and of each other party
thereto; and except as disclosed in Section 2.13(b) of the
Disclosure Schedule neither Seller nor, to the Knowledge of
Seller, any other party to such Contract is in violation or
breach of or default under any such Contract (or with notice or
lapse of time or both, would be in violation or breach of or
default under any such Contract).
2.14 Licenses. (a) Seller has been, and is in material
compliance with, all Licenses necessary in connection with the
ownership, operation and maintenance of the Assets as currently
conducted. Except as disclosed in Section 2.14(a) of the
Disclosure Schedule, Seller has not received any written
notification that it is in violation, nor does Seller know of
any violations, of any of such Licenses, or any Law or Order of
any Governmental or Regulatory Authority applicable to it.
(b) Section 2.14(b) of the Disclosure Schedule sets forth
all material Licenses and Environmental Permits relating to the
ownership, operation and maintenance of the Assets, copies of
which have been made available to Purchaser prior to the
execution of this Agreement. Such section of the Disclosure
Schedule designates those Licenses and Environmental Permits
which are Transferable Permits and those which are not
Transferable Permits and also designates those Licenses and
Environmental Permits which are not Transferable Permits but
which, if not held or maintained (individually or in the
aggregate) could reasonably be expected to impair the ownership,
operation and maintenance of the Assets.
2.15 Insurance. Except as set forth in Section 2.15 of
the Disclosure Schedule, all material policies of fire,
liability, worker's compensation and other forms of insurance
owned or held by Seller and insuring the Assets are in full
force and effect, all premiums with respect thereto covering all
periods up to and including the date as of which this
representation is being made have been paid (other than
retroactive premiums which may be payable with respect to
comprehensive general liability and worker's compensation
insurance policies), and no notice of cancellation or
termination has been received with respect to any such policy
which was not replaced on substantially similar terms prior to
the date of such cancellation. Except as set forth in Section
2.15 of the Disclosure Schedule, Seller has not been refused any
insurance with respect to the Assets nor has its coverage been
limited by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the
last twelve months.
2.16 Labor Relations. Seller has previously delivered to
Purchaser copies of all collective bargaining agreements to
which Seller is a party or is subject and which relate to the
ownership, operation and maintenance of the Generating Assets,
all of which agreements are listed in Section 2.16 of the
Disclosure Schedule (the "Collective Bargaining Agreements".)
Solely with respect to the operation of the Generating Assets,
except as disclosed in Section 2.16 of the Disclosure Schedule:
(a) To Seller's Knowledge, Seller is in compliance with
all applicable Laws respecting employment and employment
practices, terms and conditions of employment, collective
bargaining and wages and hours;
(b) Seller has not received written notice (or otherwise
has Knowledge) of any unfair labor practice complaint against
Seller pending before the National Labor Relations Board;
(c) There is no labor strike, slowdown or stoppage
actually pending or, to the Knowledge of Seller, threatened
against or affecting Seller;
(d) Seller has not received notice (or otherwise has
Knowledge) that any representation petition respecting the
Employees has been filed with the National Labor Relations
Board;
(e) No arbitration proceeding arising out of or under
collective bargaining agreements is pending against Seller; and
(f) Seller has not experienced any primary work stoppage
since 1963.
2.17 Environmental Matters. Except as disclosed in
Section 2.17 of the Disclosure Schedule:
(a) Seller holds, and is in substantial compliance with,
all Licenses which are required for Seller to own, operate and
maintain the Assets under applicable Environmental Laws
("Environmental Permits"), and Seller has not received any
written notice of any violation of any Environmental Law that
has not heretofore been resolved and Seller is otherwise in
substantial compliance with applicable Environmental Laws with
respect to the ownership, operation and maintenance of the
Assets.
(b) Seller has not received any written request for
information, or been notified that it is a potentially
responsible party, under any Environmental Law with respect to
any on-site location relating to the ownership, operation and
maintenance of the Assets.
(c) Seller has not entered into or agreed to any consent
decree or order, and is not subject to any outstanding judgment,
decree, or judicial order relating to compliance with any
Environmental Law or to investigation or cleanup of Hazardous
Materials under any Environmental Law relating to the ownership,
operation and maintenance of the Assets.
(d) There are no claims, actions, proceedings or
investigations pending or, to the Knowledge of Seller,
threatened against Seller before any court, Governmental or
Regulatory Authority relating to any Environmental Law with
respect to the ownership, operation and maintenance of the
Assets.
(e) To its Knowledge, Seller has made available to
Purchaser: (i) a list of all material environmental reports
and/or audits prepared by or for Seller within the past five (5)
years which discuss the environmental conditions of the Assets;
and (ii) a list of all underground storage tanks and/or surface
impoundments located on the Assets which contain or have
contained Hazardous Materials.
The representations and warranties made in this Section 2.17 are
Seller's exclusive representations and warranties relating to
environmental matters.
2.18 Absence of Condemnation Proceedings. Neither the
whole nor any portion of the Assets is subject to any pending
or, to Seller's Knowledge, threatened suit or order for
condemnation or other taking by any public authority.
2.19 Regulation as a Utility. Seller is a public utility
company within the meaning of the Holding Company Act. Except
as set forth in Section 2.19 of the Disclosure Schedule, Seller
is not subject to regulation as a public utility or public
service company (or similar designation) by the United States,
any state of the United States, any foreign country or any
municipality or any political subdivision of the foregoing.
2.20 Brokers. Except for Goldman, Sachs & Co., whose
fees, commissions and expenses are the sole responsibility of
Seller, Morgan Stanley Dean Witter, whose fees and expenses are
the sole responsibility of Puget and Merrill Lynch & Co., whose
fees, commissions and expenses are the sole responsibility of
PGE, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Seller
directly with Purchaser without the intervention of any Person
on behalf of Seller in such manner as to give rise to any valid
claim by any Person against Purchaser for a finder's fee,
brokerage commission or similar payment.
2.21 Year 2000. Seller has put into effect practices and
programs which Seller reasonably believes will enable all system
critical software, hardware and equipment (including
microprocessors) that is owned or utilized by Seller in
connection with the ownership, operation and maintenance of the
Assets to be capable, by December 31, 1999, of accounting for
all calculations using a century and date sensitive algorithm
for the year 2000 and the fact that the year 2000 is a leap
year. Section 2.21 of the Disclosure Schedule identifies
(a) each material "Year 2000" audit, report or investigation
that has been performed by or on behalf of Seller with respect
to the Assets or the ownership, operation and maintenance of the
Assets, and (b) the plans, schedules, and other actions
contemplated for the remediation of any problems identified in
such audits, reports and investigations and the testing of the
Assets in advance of December 31, 1999, for "Year 2000"
compliance, copies of which have been made available to
Purchaser.
2.22 Disclaimers Regarding Assets. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE BEING TRANSFERRED "AS
IS, WHERE IS" AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS
OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO
THE CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS
(FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE
ASSETS AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, OR ANY PART
THEREOF.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as
follows:
3.01 Corporate Existence. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the
Laws of the Commonwealth of Pennsylvania and has full corporate
power and authority to conduct its business as it is now being
conducted and to own, lease and operate its Assets and
Properties. Purchaser has full corporate power and authority to
enter into this Agreement and the Operative Agreements to which
it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated
hereby and thereby. Purchaser has heretofore made available to
Seller complete and correct copies of its articles of
incorporation and by-laws (or other comparable corporate charter
documents), as currently in effect.
3.02 Authority. The execution and delivery by Purchaser
of this Agreement and the Operative Agreements to which it is a
party, and the performance by Purchaser of its obligations
hereunder and thereunder, have been duly and validly authorized
by the Board of Directors of Purchaser, no other corporate
action on the part of Purchaser or its stockholders being
necessary. This Agreement has been duly and validly executed
and delivered by Purchaser and, subject to receipt of Seller
Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, constitutes, and upon the execution and delivery by
Purchaser of the Operative Agreements to which it is a party,
such Operative Agreements will constitute, legal, valid and
binding obligations of Purchaser enforceable against Purchaser
in accordance with their terms except as the same may be limited
by bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar Laws relating to or affecting the
rights of creditors generally, or by general equitable
principles.
3.03 No Conflicts. (a) Except as set forth in Section
3.03 of the Disclosure Schedule, and other than obtaining Seller
Required Regulatory Approvals and Purchaser Required Regulatory
Approvals, the execution and delivery by Purchaser of this
Agreement do not, and the execution and delivery by Purchaser of
the Operative Agreements to which it is a party, the performance
by Purchaser of its obligations under this Agreement and such
Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(i) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of the articles of
incorporation or by-laws (or other comparable corporate charter
documents) of Purchaser;
(ii) require any consent, approval, authorization or
permit, or filing with or notification to, any Governmental or
Regulatory Authority except for Seller Required Regulatory
Approvals and Purchaser Required Regulatory Approvals;
(iii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation
to which Purchaser is a party or by which any of its Assets and
Properties may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained; or
(iv) conflict with or result in a violation or breach of
any term or provision of any Law or Order applicable to
Purchaser or any of its respective Assets and Properties.
3.04 Governmental Approvals and Filings. Except for
Purchaser Required Regulatory Approvals, no consent, approval or
action of, filing with or notice to any Governmental or
Regulatory Authority on the part of Purchaser is required in
connection with the execution, delivery and performance of this
Agreement or any of the Operative Agreements to which it is a
party or the consummation of the transactions contemplated
hereby or thereby.
3.05 Legal Proceedings. Except as disclosed in
Section 3.05 of the Disclosure Schedule (with paragraph
references corresponding to those set forth below):
(a) there are no Actions or Proceedings pending or, to the
Knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties which
could reasonably be expected (i) to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated
by this Agreement or any of the Operative Agreements, or (ii)
individually or in the aggregate with other such Actions or
Proceedings, to create a Purchaser Material Adverse Effect; and
(b) there are no Orders outstanding against Purchaser
which, individually or in the aggregate with other such Orders,
would have a Purchaser Material Adverse Effect.
3.06 Compliance with Laws and Orders. Except as disclosed
in Section 3.06 of the Disclosure Schedule, Purchaser is not in
violation of or in default under any Law or Order applicable to
Purchaser or its Assets and Properties.
3.07 Regulation as a Utility. Purchaser is not a public
utility company within the meaning of the Holding Company Act.
As of the Closing, Purchaser will be subject to regulation as a
public utility under the Federal Power Act. Purchaser is not
otherwise subject to regulation as a public utility or public
service company (or similar designation) by the United States,
any state of the United States, any foreign country or any
municipality or any political subdivision of the foregoing.
3.08 Brokers. Except for Chase Securities Inc., whose
fees, commissions and expenses are the sole responsibility of
Purchaser, all negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by
Purchaser directly with Seller without the intervention of any
Person on behalf of Purchaser in such manner as to give rise to
any valid claim by any Person against Purchaser for a finder's
fee, brokerage commission or similar payment.
3.09 Financing. Purchaser has cash and/or commitments for
equity contributions or credit facilities sufficient (and has
provided Seller with evidence thereof) to pay the Base Purchase
Price and the Combined Payment Amount and to make all other
necessary payments of fees and expenses in connection with the
transactions contemplated by this Agreement and the Operative
Agreements.
3.10 Financial Statements. Purchaser has delivered to
Seller the financial statements of Purchaser listed on Section
3.10 of the Disclosure Schedule, and such financial statements
and notes fairly present the financial condition and the results
of operations, changes in stockholders' equity, and cash flow of
Purchaser as of the respective dates of and for the periods
referred to therein, all in accordance with GAAP, subject, in
the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually
or in the aggregate, be materially adverse) and the absence of
notes and schedules.
3.11 Opportunity to Inspect Assets. Prior to its
execution of this Agreement, Purchaser has conducted an
independent investigation of the Assets. In making its decision
to execute this Agreement, and to purchase the Assets, Purchaser
has relied upon the terms and provisions of this Agreement and
the results of such independent investigation.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all
times from and after the date hereof until the Closing, and,
with respect to Sections 4.06 and 4.09, thereafter Seller will
comply with all covenants and provisions of this Article IV,
except to the extent Purchaser may otherwise consent in writing.
4.01 Regulatory and Other Approvals. Seller will
(a) (i) take all reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all reasonable
efforts, as promptly as practicable to obtain all consents,
approvals or actions of, to make all filings with and to give
all notices to Governmental or Regulatory Authorities, and
(ii) take all commercially reasonable steps necessary or
desirable to obtain all consents, approvals or actions, and give
all notices to, any other Person required of Seller, in each
case, to consummate the transactions contemplated hereby and by
the Operative Agreements, including those described in
Section 2.03 of the Disclosure Schedule and Seller Required
Regulatory Approvals, or for Purchaser to own, operate or
maintain, on and after the Closing, the Assets substantially as
such assets are currently owned, operated and maintained by
Seller, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as
such Governmental or Regulatory Authorities or other Persons may
reasonably request in connection therewith and (c) provide
reasonable cooperation (i) to Purchaser in obtaining all
Purchaser Required Regulatory Approvals and other consents,
approvals or actions of, making all filings with and giving all
notices to Governmental or Regulatory Authorities or other
Persons required of Purchaser to consummate the transactions
contemplated hereby and by the Operative Agreements and (ii) to
Purchaser, and Purchaser's potential lenders in connection with
Purchaser Financing for the transactions contemplated by this
Agreement. Prior to making any filings with a Governmental or
Regulatory Authority pursuant to this Section 4.01, Seller
agrees to provide copies of such filings to Purchaser. Nothing
in this Agreement shall require Seller to institute litigation
or to pay or agree to pay any sum of money or make financial
accommodations (other than the payment or incurrence of
customary expenses and filing or other fees) in order to obtain
any necessary consent, approval or authorization including,
without limitation, the Seller Required Regulatory Approvals.
Seller will provide prompt notification to Purchaser when any
such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as
applicable, and will advise Purchaser of any communications
(and, unless precluded by Law or Order, provide copies of any
such communications that are in writing) with any Governmental
or Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement or any of the
Operative Agreements.
4.02 HSR Filings. In addition to and not in limitation of
Seller's covenants contained in Section 4.01, Seller will
(a) consult with Purchaser as to appropriate timing of filings
and take promptly all actions necessary to make the filings
required of Seller or its Affiliates under the HSR Act,
(b) comply at the earliest practicable date with any request for
additional information received by Seller or its Affiliates from
the Federal Trade Commission or the Antitrust Division of the
Department of Justice pursuant to the HSR Act and (c) cooperate
with Purchaser in connection with Purchaser's filing under the
HSR Act and in connection with resolving any investigation or
other inquiry concerning the transactions contemplated by this
Agreement commenced by either the Federal Trade Commission or
the Antitrust Division of the Department of Justice or state
attorneys general.
4.03 Investigation by Purchaser. Seller will (a) provide
Purchaser and its officers, employees, counsel, accountants,
financial advisors, potential lenders, Purchaser's and potential
lenders' consultants and other representatives (collectively,
"Representatives") with full access, upon reasonable prior
notice and during normal business hours, to the Employees and
such other officers, employees and agents of Seller who have any
responsibility for the operation of the Generating Assets, to
Seller's accountants and to the Assets (including access to the
Generating Assets sites), but only to the extent that such
access does not unreasonably interfere with the operation of the
Generating Assets and (b) make available to Purchaser and its
Representatives, upon request a copy of each report, schedule or
other document filed or received by Seller between the Bid Date
and the Closing with or from the SEC, FERC, EPA, Montana Public
Service Commission or any other relevant Governmental or
Regulatory Authority and relating to the ownership, operation
and maintenance of the Assets or the transactions contemplated
by this Agreement, and all such information and data (including
copies of Business Contracts, Transferable Permits, Fuel
Contracts, Colstrip Contracts, Power Purchase/Exchange
Agreements, Benefit Plans and other Business Books and Records)
concerning the ownership, operation and maintenance of the
Assets and the Assumed Liabilities as Purchaser or its
Representatives reasonably may request in connection with such
investigation, except to the extent that furnishing any such
report, schedule, other document, information or data would
violate any Law, Order (including any protective order or
similar confidentiality obligation), Contract or License
applicable to Seller or by which any of its Assets and
Properties is bound. In furtherance of the foregoing, Seller
agrees to cooperate with Purchaser in connection with
Purchaser's efforts to obtain Purchaser Financing, as defined in
Section 5.08. Seller's cooperation shall include the
negotiation and execution of a consent with the lenders with
respect to the Operative Agreements, which consent shall include
providing such lenders with rights to cure a Purchaser default
under the Operative Agreements; provided, however, that Seller
shall not be obligated, in connection with such cooperation or
consent, to take any action or enter into any agreement that
would have any adverse effect on Seller or any of its rights or
benefits under this Agreement or the Operative Agreements.
4.04 No Solicitations. Subject to the duties imposed by
applicable Law, Seller will not take, nor will it permit any
Affiliate of Seller (or authorize or permit any investment
banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of Seller or any such
Affiliate) to take, directly or indirectly, any action to
solicit, encourage, receive, negotiate, assist or otherwise
facilitate (including by furnishing confidential information
with respect to the operation of the Generating Assets or
permitting access to the Assets and Properties and Books and
Records of Seller) any offer or inquiry from any Person
concerning the acquisition of any of the Assets other than
Purchaser or its Affiliates or any of their Representatives.
4.05 Conduct of Business. (a) From the Bid Date to the
Closing, Seller has operated and maintained and will operate and
maintain the Generating Assets only in the ordinary course
consistent with Good Utility Practice. Without limiting the
generality of the foregoing, Seller will use commercially
reasonable efforts, to (i) maintain good relations with and keep
available (subject to dismissals and retirements in the ordinary
course of business) the services of key Employees, (ii) maintain
the Assets in good working order and condition, ordinary wear
and tear excepted, (iii) maintain the good will of lessors,
customers, suppliers, lenders and other Persons with whom Seller
otherwise has significant business relationships in connection
with the operation of the Generating Assets, and (iv) materially
comply with all Laws and Orders, including Environmental Laws
applicable to the ownership, operation and maintenance of the
Generating Assets.
(b) Without limiting the generality of the foregoing,
except with the prior written consent of Purchaser, Seller will,
with respect to the ownership, operation and maintenance of the
Assets keep in force at not less than their present limits all
policies of insurance covering the Assets to the extent
reasonably practicable in light of the prevailing market
conditions in the insurance industry and promptly notify
Purchaser of the cancellation of any such policy or any material
modification thereto.
4.06 Employee Matters. Except as may be required by Law
and except as disclosed in Section 4.06 of the Disclosure
Schedule, Seller will refrain from directly or indirectly:
(a) making any representation or promise, oral or written,
to any Employee concerning any Benefit Plan, except for
statements as to the rights or accrued benefits of any Employee
under the terms of any Benefit Plan or statements describing the
employee related terms in this Agreement;
(b) making any increase in the salary, wages or other
compensation or benefits of any Employee, other than in the
ordinary course of business on such Employee's normal annual
review date in an amount, if a Non-Union Employee, not exceeding
5% of such Employee's salary, wages and other compensation, or
declare, pay or set aside for payment any amounts in the nature
of bonuses to any of its officers or Employees;
(c) adopting, entering into or becoming bound by any
Benefit Plan, employment-related Contract or collective
bargaining agreement with respect to the operation of the
Generating Assets or any of the Employees, or amending,
modifying or terminating (partially or completely) any such
Benefit Plan, employment-related Contract or collective
bargaining agreement, except to the extent required by
applicable Law and, in the event compliance with legal
requirements presents options, only to the extent that the
option which Seller reasonably believes to be the least costly
is chosen;
(d) establishing or modifying any (i) targets, goals,
pools or similar provisions in respect of any fiscal year under
any Benefit Plan or any employment-related Contract or other
compensation arrangement with or for Employees or (ii) salary
ranges, increase guidelines or similar provisions in respect of
any Benefit Plan or any employment-related Contract or other
compensation arrangement with or for Employees;
(e) soliciting, recruiting, making any offer of employment
or otherwise employing any of the Transferring Employees or
taking any action which could reasonably be expected to
encourage or persuade the Transferring Employees not to accept
employment with Purchaser; or
(f) agreeing, whether in writing or otherwise, to take any
action described in this Section 4.06.
Seller will administer each Benefit Plan, or cause the same
to be so administered, in all material respects in accordance
with the applicable provisions of the Code, ERISA and all other
applicable Laws and consistent with past practice. Seller will
promptly notify Purchaser in writing of each receipt by Seller
(and furnish Purchaser with copies) of any notice of
investigation or administrative proceeding by the IRS,
Department of Labor, PBGC or other Person involving any Benefit
Plan. Seller will use its reasonable best efforts to assist
Purchaser in the hiring and retention of the Transferring
Employees.
Seller agrees to timely perform and discharge all
requirements under the WARN Act, if any, and under applicable
state and local laws and regulations for the notification of its
Employees arising from the sale of the Assets to Purchaser.
Seller, and not Purchaser, shall be responsible for and shall
retain any and all liability for all compensation, benefits, and
perquisites of any kind due any Transferring Employee on account
of employment by Seller before the Closing, or the termination
of employment by Seller, including, but not limited to,
continuation of health care coverage pursuant to the health
continuation coverage provisions of COBRA and compliance with
HIPAA.
4.07 Certain Restrictions. Except as set forth in
Section 4.07 of the Disclosure Schedule, Seller will refrain
from:
(a) creating any Lien (other than a Permitted Lien) on the
Assets except in the ordinary course of Seller's business or as
required under Seller's instruments of Indebtedness and, in each
case, as will be removed on or prior to the Closing;
(b) selling, leasing (as lessor), transferring or
otherwise disposing of, any of the Assets, other than assets
used, consumed or replaced in the ordinary course of business
consistent with Good Utility Practice;
(c) entering into, amending or modifying in any material
way, terminating (partially or completely), granting any waiver
of any material term under or giving any material consent with
respect to any Business Contract, Transferable Permit, Fuel
Contract, Colstrip Contract or Power Purchase/Exchange Agreement
or other contract or agreement comprising a part of the Assets
or that relates to the Assets, the Assumed Liabilities or is
material to the operation of the Generating Assets;
(d) other than in the ordinary course of business,
incurring, purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a
scheduled payment date with respect to, or waiving any right
under, any Liability of or owing to Seller in connection with
the Assets, the Assumed Liabilities or the operation of the
Generating Assets in an aggregate principal amount exceeding
$500,000;
(e) engaging with any Person in any Business Combination,
unless such Person agrees in a written instrument to adopt and
comply with the terms and conditions of this Agreement as though
such Person was an original signatory hereto;
(f) engaging in any transaction individually or in the
aggregate with other such transactions material to the operation
of the Generating Assets with any officer, director, Affiliate
or Associate of Seller, or any Associate of any such officer,
director or Affiliate, that would be an Assumed Liability and
that would extend beyond the Closing other than in the ordinary
course of business on terms no less favorable to Seller than
could be obtained on an arm's-length basis with an unaffiliated
third party;
(g) making any material change in the level of fuel
inventory and stores inventory customarily maintained by Seller
with respect to the Generating Assets, other than consistent
with Good Utility Practice; or
(h) entering into any commitment for the purchase or sale
of fuel having a term greater than six months and not terminable
on or before the Closing either (i) automatically, or (ii) by
option of Seller (or, after the Closing, by Purchaser) in its
sole discretion, if the aggregate payment under such commitment
and all other outstanding commitments not previously approved by
Purchaser would be expected to exceed $500,000;
(i) making any tax election or entering into or amending
any real or personal property Tax agreement, treaty or
settlement that would have a negative effect on the Tax status
of Purchaser with regard to the Assets;
(j) entering into any Contract to do or engage in any of
the foregoing.
The foregoing shall not preclude Seller from making (i)
Maintenance Expenditures and Capital Expenditures, and (ii) at
Seller's expense, such other maintenance and capital
expenditures as Seller deems necessary.
4.08 Security Deposits. Seller will transfer to Purchaser
at the Closing all of Seller's right, title and interest in and
to the Tenant Security Deposits and the Landlord Security
Deposits and any other deposits, prepayments or progress
payments made or held by Seller in connection with the Assets or
material to the ownership, operation and maintenance of the
Generating Assets.
4.09 Delivery of Books and Records, etc.; Removal of
Property. (a) At the Closing, Seller shall deliver or make
available to Purchaser at the locations at which the Generating
Assets are operated all of the Business Books and Records and
such other Assets as are in Seller's possession at other
locations, and if at any time after the Closing, Seller
discovers in its possession or under its control any other
Business Books and Records or other Assets, it will forthwith
deliver such Business Books and Records or other Assets to
Purchaser.
(b) Except as set forth in Section 4.09 of the Disclosure
Schedule, within a reasonable time after the Closing, Seller
shall take all commercially reasonable steps to remove all
Assets and Properties not being sold to Purchaser hereunder from
the Real Property except as contemplated by the Separation
Document. Such removal shall be at the sole cost and risk of
Seller, including risk of loss and damage to such Assets and
Properties and to the Assets conveyed to Purchaser hereby.
4.10 Fulfillment of Conditions. Seller will execute and
deliver at the Closing each Operative Agreement that Seller is
required hereby to execute and deliver as a condition to the
Closing, will take all commercially reasonable steps necessary
or desirable and proceed diligently and in good faith to satisfy
each other condition to the obligations of Purchaser contained
in this Agreement and will not take or fail to take any action
that could reasonably be expected to result in the
nonfulfillment of any such condition.
4.11 Observation, Inspection and Participation. Between
the date of this Agreement and the Closing, Purchaser shall be
entitled to have a reasonable number of representatives, all of
whom shall be employees of Purchaser or its Affiliates unless
otherwise approved by Seller in each instance, which approval
shall not be unreasonably withheld ("Site Representatives") at
any of the Assets, on a full or part time basis (whether on site
or off-site), as determined by Purchaser; provided, however,
that (a) the presence and activities of the Site Representatives
shall be conducted in a manner as not to interfere unreasonably
with the ownership, operation and maintenance of the Assets, or
with the activities of Seller not related to the Assets and (b)
the Site Representatives shall not have access to any
information that is unavailable pursuant to Section 4.03.
Reasonable office space and facilities will be made available by
Seller to such Site Representatives. Each Site Representative
shall have the right to review budgets and expenditures, audit
records (except for personnel and medical records unless
required by law), inspect equipment, advise on repairs required
for equipment, review permits, review the progress of outages,
review maintenance and operating practices and otherwise observe
all activities at the above mentioned facilities in each case to
the extent related to the operation of the Assets. Between the
date hereof and the Closing, Seller shall exercise its
reasonable efforts to invite Site Representatives to attend
internal meetings in which Seller participates and which relate
specifically to the physical operation or maintenance of the
Assets; provided, however, that such obligation shall not extend
to (i) meetings of the boards of directors, or any committees
thereof, of Seller or any of its Affiliates, (ii) meetings with
counsel, or (iii) meetings the subject matter of which, in
Seller's reasonable judgment, if disclosed to Purchaser, would
likely be detrimental to Seller (including, without limitation,
information relating to Seller's proposed business activities
following the Closing or to contractual or other matters as to
which the interests of Seller and Purchaser may diverge). Site
Representatives shall also be entitled to consult with Seller
and make recommendations as to all activities relating to the
management, operation, maintenance, construction, renewal,
addition, replacement, modification and disposal of the Assets,
including, without limitation, applications for authorizations,
permits and licenses, and fuel procurement and transportation.
4.12 Notice of Breach. Seller shall promptly give notice
to Purchaser upon becoming aware of the occurrence of any event
which would cause or constitute a breach of any of the
representations, warranties or covenants of Seller contained in
this Agreement.
4.13 Bridge Financing Fees. In the event that Purchaser
obtains a written commitment for bridge financing in connection
with the transactions contemplated hereby, Seller will pay
55.88% of 50% of any financing fees payable by Purchaser in
connection with such bridge financing at the same time Purchaser
pays 50% of such financing fees; provided, however, Seller's
obligation under this Section 4.13 shall not exceed $4,322,318
in the aggregate.
4.14 Special Maintenance and Capital Expenditures. Within
thirty (30) days after the date hereof, Seller and Purchaser
shall mutually agree on a Schedule setting forth a month by
month special maintenance and capital expenditure budget
relating to the Assets for calendar years 1999 and 2000 (the
"Budget".) The Budget will be divided into two parts; Category
A items and Category B items. With respect to items listed
under Category A, Seller agrees to use commercially reasonable
efforts to conduct and complete such special maintenance and
capital expenditures at the times set forth in the Budget. With
respect to items listed under Category B, Seller shall conduct
and complete such special maintenance and capital expenditures
at such times as Seller shall determine in its reasonable
discretion after consultation with Purchasers. With respect to
emergency special maintenance and capital expenditure items not
identified in the Budget that arise after the date hereof and
prior to the Closing, Seller will consult with Purchaser and
will conduct and complete any such emergency special maintenance
and capital expenditure items in accordance with Good Utility
Practice ("Emergency Expenditures").
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all
times from and after the date hereof until the Closing and, in
the case of Sections 5.03 and 5.07, thereafter, Purchaser will
comply with all covenants and provisions of this Article V,
except to the extent Seller may otherwise consent in writing.
5.01 Regulatory and Other Approvals. Purchaser will (a)
take all reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all reasonable efforts, at
the earliest commercially practicable dates to obtain all
consents, approvals or actions of, to make all filings with and
to give all notices to Governmental or Regulatory Authorities or
any other Person required of Purchaser to consummate the
transactions contemplated hereby and by the Operative
Agreements, including those described in Section 3.03 of the
Disclosure Schedule and Purchaser Required Regulatory Approvals
or for Purchaser to own, operate or maintain, on and after the
Closing , the Assets substantially as such assets are currently
owned, operated and maintained by Seller, (b) provide such other
information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or
Regulatory Authorities or other Persons may reasonably request
in connection therewith and (c) provide reasonable cooperation
to Seller in obtaining Seller Required Regulatory Approvals and
all other consents, approvals or actions of, making all filings
with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of Seller to consummate
the transactions contemplated hereby and by the Operative
Agreements. Prior to making any filings with a Governmental or
Regulatory Authority pursuant to Section 5.01, Purchaser agrees
to provide copies of such filings to Seller. Nothing in this
Agreement shall require Purchaser to institute litigation or to
pay or agree to pay any sum of money or make financial
accommodations (other than the payment or incurrence of
customary expenses and filing or other fees) in order to obtain
any necessary consent, approval or authorization including,
without limitation, the Purchaser Required Regulatory Approvals.
Purchaser will provide prompt notification to Seller when any
such consent, approval, action, filing or notice referred to in
clause (a) above is obtained, taken, made or given, as
applicable, and will advise Seller of any communications (and,
unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or
Regulatory Authority or other Person regarding any of the
transactions contemplated by this Agreement or any of the
Operative Agreements.
5.02 HSR Filings. In addition to and without limiting
Purchaser's covenants contained in Section 5.01, Purchaser will
(a) consult with Seller as to the appropriate timing of filings
and take promptly all actions necessary to make the filings
required of Purchaser or its Affiliates under the HSR Act,
(b) comply at the earliest practicable date with any request for
additional information received by Purchaser or its Affiliates
from the Federal Trade Commission or the Antitrust Division of
the Department of Justice pursuant to the HSR Act and
(c) cooperate with Seller in connection with Seller's filing
under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions
contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of
Justice or state attorneys general.
5.03 Employees. (a) Section 5.03 of the Disclosure
Schedule sets forth a list of all Employees as of September 30,
1998. Purchaser shall offer employment, effective as of the
Closing, to all full-time and part-time Non-Union Employees,
including Non-Union Employees who are on disability or worker's
compensation leave or on an authorized leave of absence as of
the Closing. All such offers of employment shall be made in
accordance with applicable Law, and such employment with
Purchaser shall be subject to the following requirements for the
entirety of the period commencing on the Closing and ending no
less than 18 months thereafter or such other period as set forth
in this Section 5.03:
(i) Terms of Employment. Purchaser shall offer each Non-
Union Employee a position with Purchaser similar to his or her
position immediately prior to the Closing and agrees to employ
each Non-Union Employee who accepts such employment for 18
months after the Closing (the "Employment Term") at a location
in Montana and at a base pay at least equal to his or her base
pay on the Closing; provided, however, that nothing herein shall
prevent Purchaser from terminating any Transferring Non-Union
Employee "for cause" as defined by Montana Law (a reduction in
force, however, will not be considered "for cause".) Purchaser
shall afford all Transferring Non-Union Employees ten paid
holidays per year and vacation and personal time under a paid
time off program substantially similar in the aggregate to the
paid time off program of Seller; provided, however, for the
calendar year during which the Closing occurs, Purchaser shall
assume all accrued vacation and personal time payable to
Transferring Non-Union Employees as of the Closing. Purchaser
shall make incentive compensation awards for calendar year
during which the Closing occurs to eligible Transferring Non-
Union Employees substantially in accordance with Seller's
incentive compensation plan in effect on the Closing (except
that Purchaser shall not be obligated to pay any incentive
compensation based on the consummation of the transactions
contemplated hereby).
(ii) Severance. For the period commencing on the
expiration of the Employment Term and ending on the date which
is 6 months thereafter, Purchaser shall pay each Transferring
Non-Union Employee who is terminated from employment during such
period, other than "for cause," a severance benefit in an amount
equal to $6,000 plus the greater of two weeks of base pay times
such Employee's "year of service" up to a maximum of 52 weeks of
base pay, or 12 weeks of base pay. Purchaser shall cause any
subsequent purchaser(s) of the Assets to provide such severance
benefits during such six-month period. For purposes of the
foregoing, a "for cause" termination shall be as otherwise
defined by Montana Law, and "years of service" shall mean the
Employee's aggregate whole years of service for Seller,
Purchaser and any subsequent purchaser(s) of the Assets.
(iii) Welfare Benefits. Purchaser shall provide all
Transferring Non-Union Employees (other than those terminated
"for cause" as defined above) with coverage under welfare
benefit plans, programs and arrangements ("Purchaser's Welfare
Plans") maintained or sponsored by Purchaser that provide
medical, dental, vision, basic life insurance (including
dependent life options), short term disability, long term
disability, relocation benefits and worker compensation
benefits that are substantially similar in the aggregate to
those available under welfare benefit plans maintained by Seller
immediately prior to the Closing. Purchaser shall cause all
pre-existing condition exclusions and waiting periods, if any,
under Purchaser's Welfare Plans to be waived for Transferring
Non-Union Employees, and shall provide each such Employee with
credit thereunder for deductible, out-of-pocket, co-payment and
similar expenses incurred under similar plans of Seller.
Purchaser shall assume under Purchaser's Welfare Plans all
liabilities for continuation coverage for Transferring Non-Union
Employees and their eligible dependents pursuant to Section
4980B of the Code and Section 601 through 609 of ERISA and any
similar state coverage, for the required duration of such
coverage, provided that such Employee's qualifying event occurs
after the Closing.
(iv) 401(k) Plan. Purchaser shall establish and maintain
for Transferring Non-Union Employees a plan pursuant to Section
401(k) of the Code ("Purchaser's 401(k) Plan") which shall
provide for the same or substantially similar elective deferral,
after-tax, and employer matching contribution levels, and loan
entitlements, that are available under the Montana Power Company
Retirement Savings Plan (401(k)) ("MPC 401(k) Plan"), and which
shall further provide for the acceptance of rollover
distributions from the MPC 401(k) Plan and/or conduit individual
retirement accounts established by any such employees.
Purchaser shall take all actions required to obtain, and shall
obtain, a favorable determination letter from the IRS on the tax
qualified status of Purchaser's 401(k) Plan.
(v) Retirement Plan. Purchaser shall establish and
maintain for Transferring Non-Union Employees a retirement plan
pursuant to Section 401(a) of the Code ("Purchaser's Retirement
Plan") which shall contain either a defined benefit or cash
balance formula that provides a retirement benefit that is of
substantially similar in the aggregate to the retirement benefit
provided under Seller's Cash Balance Retirement Plan ("Seller's
Retirement Plan"). As soon as practicable after the Closing,
but no later than sixty (60) days after the Closing, Seller
shall cause to be transferred from Seller's Retirement Plan, and
Purchaser shall cause Purchaser's Retirement Plan to accept such
transfer, assets from Seller's Retirement Plan in respect of
the accrued benefit of each Transferring Non-Union Employee who
participates in Seller's Retirement Plan and Purchaser shall
assume Liability for such accrued benefit as of the Closing.
The assets transferred to the Purchaser's Retirement Plan shall
equal the aggregate present value of the accrued benefits of
Transferring Non-Union Employees under Seller's Retirement Plan
on a termination basis as of the Closing (within the meaning of
Treasury Regulation Section 1.414(l)-1(b)(5)), as certified by
Seller's actuary. After such transfer, Purchaser's Retirement
Plan shall provide a benefit for each Transferring Non-Union
Employee that is substantially similar in the aggregate to such
Employee's accrued benefit under Seller's Retirement Plan
immediately prior to the Closing. Purchaser shall take all
actions required to obtain, and shall obtain, a favorable
determination letter from the IRS on the tax qualified status of
Purchaser's Retirement Plan.
(vi) Service. Any and all plans of Purchaser described in
paragraphs (i) through (v) above that determine a participant's
eligibility to participate, waiting period for benefits, vesting
or benefit accruals based on his or her length of service with
Purchaser shall credit each Transferring Non-Union Employee's
service with Seller and its Affiliates as service with Purchaser
for such purposes.
(b) Purchaser shall, effective on the Closing, assume and
fulfill all of Seller's obligations under the Collective
Bargaining Agreements to the extent related to Transferring
Union Employees, including, without limitation the Letter of
Agreement between Seller and IBEW Local 44 dated July 9, 1998
and the drafts (substantially in the form provided heretofore)
of the Letter of Agreements (which have been ratified by the
unions) between Seller and IBEW Local 1638 and Teamsters Union
Local No. 190 dated July 2, 1998 and July 9, 1998 respectively
(copies of which have been made available to Purchaser prior to
the date hereof). Purchaser shall offer employment, effective
as of the Closing, to all Union Employees, including Union
Employees who are on disability or worker's compensation leave
or on an authorized leave of absence as of the Closing. All
such offers of employment shall be made in accordance with
applicable Law and all relevant Collective Bargaining
Agreements. Without limiting the generality of the foregoing,
the Purchaser's 401(k) Plan shall provide for the acceptance of
rollover distributions from or in respect of any Transferring
Union Employees from the MPC 401(k) Plan and/or any conduit
individual retirement accounts established by any such
employees. Purchaser shall establish and maintain for
Transferring Union Employees a retirement plan pursuant to
Section 401(a) of the Code ("Purchaser's Retirement Plan") which
shall contain either a defined benefit or cash balance formula
that provides a retirement benefit that is of no less value in
the aggregate to the retirement benefit provided under the
Seller's Defined Benefit Retirement Plan ("Seller's DB Plan").
To the extent permitted by the Collective Bargaining Agreements,
as soon as practicable after the Closing, but no later than
sixty (60) days after the Closing, Seller shall cause to be
transferred from the Seller's DB Plan, and Purchaser shall cause
the Purchaser's Retirement Plan to accept such transfer, assets
from the Seller's DB Plan in respect of the accrued benefit of
each Transferring Union Employee who participates in the
Seller's DB Plan and the Purchaser shall assume liability for
such accrued benefits as of the Closing. The assets transferred
to the Purchaser's Retirement Plan shall equal the aggregate
present value of the accrued benefits of Transferring Union
Employees under the Seller's Retirement Plan on a termination
basis (within the meaning of Treasury Regulation Section
1.414(l)-1(b)(5)), as certified by Seller's actuary. After such
transfer, but subject to the terms of any applicable collective
bargaining agreement, Purchaser's Retirement Plan shall provide
a benefit for each Transferring Union Employee that is of no
less value in the aggregate to such Employee's accrued benefit
under the Seller's Retirement Plan immediately prior to the
Closing. Any and all plans of Purchaser that determine a
participant's eligibility to participate, waiting period for
benefits, vesting or benefit accruals based on his or her length
of service with Purchaser shall credit each Transferring Union
Employee's service with Seller and its Affiliates as service
with Purchaser for such purposes.
(c) Purchaser shall be responsible and shall assume any
and all Liabilities for all compensation, benefits, and
perquisites of any kind due any Transferring Employee on account
of employment by Purchaser after the Closing, or the termination
of employment by Purchaser, including, but not limited to,
continuation of health care coverage pursuant to COBRA and
compliance with HIPAA.
(d) Seller will remain responsible (i) for all short-term
disability, long-term disability and workers compensation
benefits payable to Transferring Non-Union Employees who, as of
the close of business on the day immediately preceding the
Closing, were determined to be disabled in accordance with the
applicable provisions of the Seller's short-term or long-term
disability benefits plans or programs and (ii) for all workers
compensation claims relating to a pre-closing injury (provided
such workers compensation claims are made on or before the date
that is one year after the Closing).
5.04 PPUC Approval for Holding Company. From the date
hereof through the Closing, Purchaser agrees not to enter into
any Contract or take any action which, when taken together with
the consummation of the transactions contemplated by this
Agreement, would violate any condition imposed by the PPUC that
limits PP&L Resources, Inc.'s investment in diversified
businesses without prior PPUC approval. Purchaser further
agrees that, in seeking the approval described in clause (v) of
the definition of Purchaser Required Regulatory Approvals,
Purchaser shall use commercially reasonable efforts to seek any
reasonable PPUC approval that would allow Purchaser to
consummate the transactions contemplated hereby and to own,
operate and maintain the Assets in substantially the same manner
as currently owned, operated and maintained by Seller.
5.05 Notice of Breach. Purchaser shall promptly give
notice to Seller upon becoming aware of the occurrence of any
event which would cause or constitute a breach of any of the
representations, warranties or covenants of Purchaser contained
in this Agreement.
5.06 Fulfillment of Conditions. Purchaser will execute
and deliver at the Closing each Operative Agreement that
Purchaser is hereby required to execute and deliver as a
condition to the Closing, will take all commercially reasonable
steps necessary or desirable and proceed diligently and in good
faith to satisfy each other condition to the obligations of
Seller contained in this Agreement and will not take or fail to
take any action that could reasonably be expected to result in
the nonfulfillment of any such condition.
5.07 Tax-Exempt Bond Financed Pollution Control
Facilities. (a) Following the Closing until the maturity or
redemption date of the Pollution Control Bonds
(i) Except as otherwise permitted in (ii), Purchaser will
not materially change or permit to be changed the character or
nature of the use of those facilities listed in Exhibit C hereto
(the "Pollution Control Facilities") from the manner Seller has
used said facilities prior to the sale of the Assets, unless
such changed use would constitute a use or purpose of said
facilities for which tax-exempt bonds could be issued pursuant
to section 1313 of the Tax Reform Act of 1986 (P.L. 99-514 or,
hereinafter, the "1986 Tax Act,") to refund bonds described in
section 1312(a) of the 1986 Tax Act which, for purposes hereof,
are assumed to have been issued to finance facilities of the
same character and use or purpose as said facilities;
(ii) Purchaser will not sell or otherwise transfer any
portion of such Pollution Control Facilities unless (A) the
transferee covenants to satisfy the conditions of section
5.07(a)(i) with respect to its ownership and use of said
facilities following the date of any such purchase or (B) the
transfer relates to personal property and is exclusively for
cash the proceeds of which will be expended within six months of
the date of receipt on facilities for which tax-exempt bonds
could be issued pursuant to section 1313 of the 1986 Tax Act, to
refund bonds described in section 1312(a) of said act which, for
purposes hereof, are assumed to have been issued to finance
facilities of the same character and use or purpose as said
facilities; and
(iii) Purchaser will cooperate with Seller and use
commercially reasonable efforts to permit Seller to have access
to Colstrip Units 1,2,3 and 4, as the case may be, at reasonable
times to examine the Pollution Control Facilities.
Nothing herein shall be construed to prevent Purchaser from
ceasing to use any facilities or equipment that, in Purchaser's
reasonable judgment, have become obsolescent or otherwise
uneconomical to continue to use. Seller will notify Purchaser
when the Pollution Control Bonds have matured or been redeemed.
5.08 Purchaser Financing. Purchaser will proceed in good
faith and use all reasonable efforts to obtain financing on
commercially reasonable terms in amounts and structure
reasonably consistent with Purchaser's financing plan as set
forth in Purchaser's written proposal to Seller dated September
25, 1998 (the "Purchaser Financing".)
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder to purchase the
Assets and to assume and pay, perform and discharge the Assumed
Liabilities are subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Purchaser in its sole
discretion):
6.01 Representations and Warranties. The representations
and warranties made by Seller in this Agreement and the
Operative Agreements, taken as a whole, shall be true and
correct, in all material respects, on and as of the Closing as
though repeated on and as of the Closing or, in the case of
representations and warranties made as of a specified date
earlier than the Closing, on and as of such earlier date.
6.02 Performance. Seller shall have performed and
complied with, in all material respects, the agreements,
covenants and obligations required by this Agreement to be so
performed or complied with by Seller at or before the Closing.
6.03 Officers' Certificates. Seller shall have delivered
to Purchaser a certificate, dated as of the Closing and executed
by the Chairman of the Board, the President or any Vice
President of Seller, substantially in the form and to the effect
of Exhibit D hereto, and a certificate, dated as of the Closing
and executed by the Secretary or any Assistant Secretary of
Seller, substantially in the form and to the effect of Exhibit E
hereto.
6.04 Orders and Laws. There shall not be in effect on the
date of the Closing any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the
Operative Agreements.
6.05 Regulatory Consents and Approvals. Subject to
Section 1.10, all Seller Required Regulatory Approvals and
Purchaser Required Regulatory Approvals shall have been duly
obtained, made or given and shall be in full force and effect
and shall be a Final Order reasonably satisfactory to Purchaser,
and all terminations or expirations of waiting periods imposed
by any Governmental or Regulatory Authority necessary for the
consummation of the transactions contemplated by this Agreement
and the Operative Agreements, including under the HSR Act, shall
have occurred.
6.06 Third Party Consents. The consents (or in lieu
thereof waivers) listed in Section 6.06 of the Disclosure
Schedule shall have been obtained and shall be in full force and
effect and shall be reasonably satisfactory to Purchaser.
6.07 Colstrip Rights of First Refusal. Seller shall have
either received the consents required under each of the Colstrip
Rights of First Refusal or the exercise periods of such Colstrip
Rights of First Refusal shall have expired.
6.08 No Seller Material Adverse Effect. There shall not
have occurred and be continuing a Seller Material Adverse
Effect.
6.09 Proceedings. All corporate and other proceedings to
be taken by Seller in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to Purchaser and
its counsel, and Purchaser and its counsel shall have received
all such certified or other copies of such documents as it or
they may reasonably request.
6.10 Deliveries. Seller shall have executed and delivered
to Purchaser (i) the General Assignment, (ii) the other
Assignment Instruments, (iii) subject to Section 1.10, the
Colstrip Unit Number 3 Wholesale Transition Service Agreement,
dated as of the Closing, substantially in the form and to the
effect of Exhibit F-1 hereto (the "Colstrip Transition Service
Agreement"), (iv) subject to Section 1.10, the Non-Colstrip
Unit Number 3 Wholesale Transition Service Agreement, dated as
of the Closing, substantially in the form and to the effect of
Exhibit F-2 hereto (the "Non-Colstrip Transition Service
Agreement"), (v) the Interconnection Agreement, dated as of the
Closing, substantially in the form and to the effect of Exhibit
G hereto, including the Separation Document (the
"Interconnection Agreement") and (vi) if the Colstrip 4
Transmission Assets are not conveyed to Purchaser at the
Closing, Seller and Purchaser shall have entered into the
Colstrip 4 Transmission Service Agreement.
6.11 Colstrip Operations Arrangements. There shall be in
effect (a) arrangements reasonably satisfactory to Purchaser
pursuant to which Purchaser shall be the operator of the entire
Colstrip generating facility for a period of at least ten (10)
years after the Closing, subject only to removal for cause or
(b) such other arrangements with respect to the operation of the
Colstrip generating facility as are reasonably acceptable to
Purchaser.
6.12 Purchaser Financing. Purchaser's obligation to
purchase the Colstrip 4 Transmission Assets at the Closing is
subject to the receipt by Purchaser, on or prior to the Closing,
of the Purchaser Financing or other financing reasonably
satisfactory to Purchaser.
6.13 Opinion of Counsel. Purchaser shall have received
the opinions of (i) Milbank, Tweed, Hadley & McCloy, counsel to
Seller, dated as of the Closing, substantially in the form and
to the effect of Exhibit H-1 hereto,(ii) General Counsel of
Seller, dated as of the Closing, substantially to the effect of
Exhibit H-2 hereto, and (iii) outside Montana counsel to Seller,
dated as of the Closing, substantially to the effect of Exhibit
H-3 hereto.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder to sell the Assets are
subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in
whole or in part by Seller in its sole discretion):
7.01 Representations and Warranties. The representations
and warranties made by Purchaser in this Agreement and the
Operative Agreements, taken as a whole, shall be true and
correct, in all material respects on and as of the Closing as
though repeated on and as of the Closing.
7.02 Performance. Purchaser shall have performed and
complied with, in all material respects, the agreements,
covenants and obligations required by this Agreement to be so
performed or complied with by Purchaser at or before the
Closing.
7.03 Officers' Certificates. Purchaser shall have
delivered to Seller a certificate, dated as of the Closing and
executed by the Chairman of the Board, the President or any
Executive or Senior Vice President of Purchaser, substantially
in the form and to the effect of Exhibit I hereto, and a
certificate, dated as of the Closing and executed by the
Secretary or any Assistant Secretary of Purchaser, substantially
in the form and to the effect of Exhibit J hereto.
7.04 Orders and Laws. There shall not be in effect on the
date of the Closing any Order or Law restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any
of the transactions contemplated by this Agreement or any of the
Operative Agreements.
7.05 Regulatory Consents and Approvals. Subject to
Section 1.10, all Seller Required Regulatory Approvals and
Purchaser Required Regulatory Approvals shall have been duly
obtained, made or given and shall be in full force and effect
and shall be a Final Order, and all terminations or expirations
of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions
contemplated by this Agreement and the Operative Agreements,
including under the HSR Act, shall have occurred.
7.06 Third Party Consents. The consents (or in lieu
thereof waivers) listed in Section 7.06 of the Disclosure
Schedule shall have been obtained and shall be in full force and
effect and shall be reasonably satisfactory to Seller.
7.07 Collective Bargaining Agreements. Purchaser shall
have assumed, as set forth in Section 5.03, all of the
applicable obligations under the Collective Bargaining
Agreements as they relate to the Union Employees who are
Transferring Employees.
7.08 No Purchaser Material Adverse Effect. There shall
not have occurred and be a continuing Purchaser Material Adverse
Effect.
7.09 Proceedings. All corporate and other proceedings to
be taken by Purchaser in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to Seller and its
counsel and Seller and its counsel shall have received all such
certified or other copies of such documents as it or they may
reasonably request.
7.10 Colstrip Rights of First Refusal. Seller shall have
either received the consents required under each of the Colstrip
Rights of First Refusal or the exercise periods of such Colstrip
Rights of First Refusal shall have expired.
7.11 Opinion of Counsel. Sellers shall have received an
opinion of LeBoeuf, Lamb, Greene & MacRae L.L.P., counsel to
Purchaser, dated as of the Closing, substantially to the effect
of Exhibit K hereto. Such counsel's opinion need not cover any
matter contained in the opinions required by Exhibit K to the
extent such matter (i) involves the Laws of Montana, Oregon,
Washington, Pennsylvania or any other jurisdiction other than
the federal Laws of the United States or the Laws of the State
of New York or (ii) involves or is related to the Colstrip
Contracts, the Colstrip 4 Generation Assets, the Colstrip 4
Transmission Assets, the Colstrip 1, 2 and 3 Transmission Assets
and any other Colstip-related matter, and, in lieu thereof,
Seller shall have received the opinions of other counsel
covering such matters (admitted in other jurisdictions to the
extent covered in clause (i)).
7.12 Deliveries. Purchaser shall have executed and
delivered to Seller (i) Assumption Agreement, (ii) the other
Assumption Instruments, (iii) subject to Section 1.10, the
Colstrip Transition Service Agreement, (iv) the Non-Colstrip
Transition Service Agreement, (v) subject to Section 1.10, the
Interconnection Agreement, and (vi) the Confirmation of the
Reciprocal Sharing Agreement, dated as of the Closing,
substantially in the form and to effect of Exhibit L hereto.
ARTICLE VIII
TAX MATTERS AND POST-CLOSING TAXES
8.01 Transfer Taxes. All Transfer Taxes incurred in
connection with this Agreement and the transactions contemplated
hereby shall be borne by Purchaser, and Purchaser, at its own
expense, will file, to the extent required by applicable Law,
all necessary Tax Returns and other documentation with respect
to all such Transfer Taxes, and, if required by applicable Law,
Seller will join in the execution of any such Tax Returns or
other documentation and will take such positions therein as are
reasonably requested by Purchaser. Nothing in the foregoing
sentence shall require Seller to take a position adverse to its
own posture with regard to Taxes. Prior to the Closing,
Purchaser will provide to Seller, to the extent possible, an
appropriate certificate from each applicable taxing authority to
the effect that no Transfer Tax will be incurred in connection
with this Agreement and the transactions contemplated hereby.
8.02 Returns with respect to Prorated Taxes. With respect
to those Taxes to be prorated in accordance with Section 1.06 of
this Agreement, Purchaser shall prepare and timely file all Tax
Returns required to be filed after the Closing with respect the
Assets and shall duly and timely pay all such Taxes shown to be
due on such Tax Returns. Purchaser's preparation of any such
Tax Return shall be subject to Seller's approval, which approval
shall not be unreasonably withheld. Purchaser shall make such
Tax Returns available for Seller's review and approval no later
than twenty (20) Business Days prior to the due date for filing
such Tax Return. Within fifteen (15) Business Days after
receipt of such Tax Return, Seller shall pay to Purchaser its
proportionate share of the amount shown as due on such Tax
Return determined in accordance with Section 1.06 of this
Agreement.
ARTICLE IX
SURVIVAL; NO OTHER REPRESENTATIONS
9.01 Survival of Representations, Warranties, Covenants
and Agreements.
(a) Subject to Section 11.02, the representations and
warranties of Purchaser and Seller (other than the
representations and warranties (x) contained in Section 2.06
(the "Tax Representation") and 2.09 (the "ERISA
Representation"), which shall survive for the applicable period
of the applicable statute of limitation, and (y) contained in
Section 2.10(b) (the "Title Representation"), which shall
survive the Closing indefinitely) (all of the representations
and warranties of Purchaser and Seller, excluding the Tax
Representation, the ERISA Representation and the Title
Representation, are hereinafter referred to as the "General
Representations"), shall survive the Closing for a period of
twelve (12) months; provided, however, if Purchaser (or any
successor or assign of Purchaser) procures title insurance with
respect to the Real Property, to the extent that Purchaser (or
any successor or assign of Purchaser) actually receives proceeds
from the title insurer in respect of any matters addressed by
any of the representations and warranties contained in Section
2.10, then, only with respect to such matters, and only to such
extent, such representations and warranties shall be deemed not
to have been made.
(b) Subject to Section 11.02, the covenants and agreements
of Seller and Purchaser contained in this Agreement (other than
the covenants and agreements contained in Articles IV (excluding
Sections 4.06 and 4.09) and V (excluding Sections 5.03 and 5.07)
(the "Pre-Closing Covenants"), which covenants and agreements
shall survive the Closing for a period of twelve (12) months)
(all of the covenants and agreements of Purchaser and Seller,
excluding the Pre-Closing Covenants, are hereinafter referred to
as the "Post-Closing Covenants"), shall survive the Closing
indefinitely; and
(c) Any due diligence or other investigation or
examination by any party with respect to the transactions
contemplated by this Agreement shall not in any way affect or
lessen the representations and warranties of the other party
contained herein or the indemnifications with respect thereto.
9.02 No Other Representations. Notwithstanding anything
to the contrary contained in this Agreement, it is the explicit
intent of each party hereto that Seller is making no
representation or warranty whatsoever, express or implied,
including but not limited to any implied representation or
warranty as to condition, merchantability or suitability as to
any of the Assets, except those representations and warranties
contained in this Agreement and the exhibits, schedules,
documents, certificates and instruments delivered in connection
with the Closing. In particular, Seller makes no representation
or warranty to Purchaser with respect to (i) the information set
forth in the Confidential Information Memorandum dated March,
1998 and the supplements thereto, or (ii) any financial
projection or forecast relating to the operation of the
Generating Assets. With respect to any such projection or
forecast delivered by or on behalf of Seller to Purchaser,
Purchaser acknowledges that (i) there are uncertainties inherent
in attempting to make such projections and forecasts, (ii) it is
familiar with such uncertainties, (iii) it is taking full
responsibility for making its own evaluation of the adequacy and
accuracy of all such projections and forecasts furnished to it
and (iv) it shall have no claim against Seller with respect to
such projections and forecasts.
ARTICLE X
INDEMNIFICATION
10.01 Other Indemnification.
(a) Subject to the other Sections of this Article X,
Seller shall indemnify Purchaser and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Purchaser Group") in respect of, and hold it
harmless from and against, any and all Losses suffered, incurred
or sustained by Purchaser Group or to which Purchaser Group
becomes subject, resulting from, arising out of or relating to:
(i) any breach by Seller of any representation or warranty
of Seller contained in this Agreement (determined in all cases
as if the terms "material" or "materially" (or the capitalized
versions thereof) were not included therein);
(ii) any breach by Seller of any covenant or agreement of
Seller contained in this Agreement (determined in all cases as
if the terms "material" or "materially" (or the capitalized
versions thereof) were not included therein);
(iii) a Retained Liability; or
(iv) any Change of Control Liabilities;
provided, however, that Seller shall have no liability for
Losses under clause (i) arising from a breach of a General
Representation, a Tax Representation or an ERISA Representation
unless and until the aggregate amount of all Losses arising from
such breaches asserted by Purchaser equals or exceeds $5.0
million in which event Seller shall be liable for all such
Losses; and provided, further, that, except with respect to
Losses arising from a breach of the Title Representation, such
indemnification shall be effective only with respect to claims
written notice of which is received by Seller with respect to
Losses arising under clause (i) above relating to General
Representations (or, with respect to the Tax Representation or
ERISA Representation, the date upon which the applicable statute
of limitations expires) or clause (ii) above relating to Pre-
Closing Covenants, no later than the date that is twelve (12)
months from the Closing. Except as set forth in paragraph (b)
below, in no event shall the Liability of Seller for Losses
under clause (i) of this Section 10.01(a) arising out of
breaches of the General Representations exceed, in the
aggregate, fifty percent (50%) of the Purchase Price (or, with
respect to breaches of the Title Representation and the
covenants contained in Sections 1.01(a)(i) and 1.05 exceed, in
the aggregate, the Purchase Price).
(b) In addition to the indemnities contained in clause (a)
above, Seller shall indemnify Purchaser Group in respect of, and
hold it harmless from and against, all Losses suffered, incurred
or sustained by Purchaser Group arising from any Pre-Closing
Environmental Liability; provided, however, that (1)
indemnification for Pre-Closing Unknown Remedial Liabilities
shall be effective only with respect to Losses arising out of a
matter described in a Claim Notice received by Seller no later
than the date that is two years from the Closing, (2) Seller's
Liabilities under this paragraph for (x) Non-Colstrip Pre-
Closing Known and Unknown Remedial Liabilities shall be limited
in each case to 50% of any such Loss suffered, incurred or
sustained by Purchaser Group and (y) Colstrip Pre-Closing Known
and Unknown Remedial Liabilities shall be limited in each case
to Seller's pro-rata share (calculated pursuant to the Colstrip
Contracts) of 50% of any such Loss suffered, incurred or
sustained by Purchaser Group, and such Liabilities referred to
in clauses (x) and (y) shall not, in any event, exceed, in the
aggregate, an amount equal to 10% of the Purchase Price (each
such Liability of Seller shall be paid by it at the same time
that Purchaser Group has paid its fifty percent (50%) share
thereof); provided, further, that this indemnity shall only
extend to such Pre-Closing Environmental Liabilities
attributable to conditions existing at or prior to the Closing,
and Seller shall not be required to indemnify Purchaser for
Losses to the extent attributable to acts or omissions of
Purchaser resulting in an increase in or aggravation of such
Environmental Liabilities, whether arising from a change in use
of the Assets or otherwise. In the event that Seller disputes
the pro rata share of any Losses attributable by Purchaser to
Seller under Section 10.01(b)(2)(y) in the Claim Notice, Seller
will nevertheless pay Purchaser the amount requested by
Purchaser in the Claim Notice and Seller shall proceed to
resolve any dispute with PGE and Puget concerning allocations of
pro rata shares. If Purchaser fails to make a claim against a
Potentially Responsible Party with respect to Pre-Closing
Environmental Liabilities, then upon making an indemnity payment
pursuant to this paragraph (b), Seller shall, to the extent of
such indemnity payment, be subrogated to all rights of Purchaser
against any Potentially Responsible Party in respect of the
Losses to which the indemnity payment relates. If Purchaser
makes a claim against, and recovers from, a Potentially
Responsible Party with respect to Pre-Closing Environmental
Liabilities and Seller has made an indemnity payment with
respect to such Loss, then Purchaser shall reimburse Seller 50%
of such amounts recovered, net of any third party costs of
collection.
(c) Subject to the other Sections of this Article X,
Purchaser shall indemnify Seller and its Affiliates and their
respective directors, officers, employees, agents and
representatives ("Seller Group") in respect of, and hold it
harmless from and against, any and all Losses suffered, incurred
or sustained by Seller Group or to which Seller Group becomes
subject, resulting from, arising out of or relating to:
(i) any breach by Purchaser of any representation or
warranty of Purchaser contained in this Agreement (determined in
all cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were not included therein),
(ii) any breach by Purchaser of any covenant or agreement
of Purchaser contained in this Agreement (determined in all
cases as if the terms "material" or "materially" (or the
capitalized versions thereof) were included therein); or
(iii) an Assumed Liability;
provided, however, that Purchaser shall have no liability for
Losses under clause (i) arising from a breach of a General
Representation unless and until the aggregate amount of all such
Losses arising from such breaches asserted by Seller equals or
exceeds $5.0 million in which event Purchaser shall be liable
for all Losses; and provided, further, that such indemnification
shall be effective only with respect to claims written notice of
which is received by Purchaser with respect to Losses arising
under clause (i) above relating to General Representations or
clause (ii) above relating to Pre-Closing Covenants, no later
than the date that is twelve (12) months from the Closing. In
no event shall the Liability of Purchaser for Losses under this
Article X arising out of breaches of the General Representations
exceed, in the aggregate, fifty (50%) of the Purchase Price.
(d) To the extent that an Indemnified Party has received
insurance proceeds prior to the payment of an indemnity payment
on an indemnifiable Loss, such indemnifiable Loss shall be
reduced by an amount equal to such proceeds received by the
Indemnified Party. If the amount of any indemnifiable Loss, at
any time subsequent to the making of an indemnity payment in
respect thereof, is reduced by recovery, settlement or otherwise
under or pursuant to any insurance coverage or pursuant to any
claim, recovery, settlement or payment by or against any other
entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with
interest thereon from the date of payment thereof at the prime
rate then in effect for domestic banks as published in the Wall
Street Journal (Northeast Edition) in the "Money Rates"
section), shall promptly be repaid by the Indemnified Party to
the Indemnifying Party. Nothing in this Section 10.01(d) shall
be construed to require any party hereto to obtain or maintain
any insurance coverage or make any claim under its insurance
coverage.
(e) Seller shall not be liable on account of any
obligations of any co-owners of the Colstrip Units 1, 2, 3 and 4
to Purchaser.
(f) The Indemnifying Party hereby expressly waives all
rights of subrogation in respect of any payments made by it
under this Article X.
10.02 Method of Asserting Claims. All claims for
indemnification by any Indemnified Party under Section 10.01
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which
an Indemnified Party might seek indemnity under Section 10.01 is
asserted against or sought to be collected from such Indemnified
Party by a Person other than Seller, Purchaser or any Affiliate
of Seller or Purchaser (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice with reasonable promptness to
the Indemnifying Party. The Indemnifying Party will notify the
Indemnified Party as soon as practicable within the Dispute
Period whether the Indemnifying Party disputes its liability to
the Indemnified Party under Section 10.01 and whether the
Indemnifying Party desires, at its sole cost and expense, to
defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to the
Third Party Claim pursuant to this Section 10.02(a), then the
Indemnifying Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, such Third Party
Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnifying Party
to a final conclusion or will be settled at the discretion of
the Indemnifying Party (with the consent of the Indemnified
Party, which consent will not be unreasonably withheld). The
Indemnifying Party will have full control of such defense and
proceedings, including any settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and
expense of the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to in the
first sentence of this Section 10.02(a)(i), file any motion,
answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests and not prejudicial to the
Indemnifying Party (it being understood and agreed that, except
as provided in clause (ii) below, if an Indemnified Party takes
any such action that is prejudicial and causes a final
adjudication that is adverse to the Indemnifying Party, the
Indemnifying Party will be relieved of its obligations hereunder
with respect to the portion of such Third Party Claim prejudiced
by the Indemnified Party's action); and provided further, that
if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party,
cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim that the Indemnifying Party
elects to contest, or, if appropriate and related to the Third
Party Claim in question, in making any counterclaim against the
Person asserting the Third Party Claim, or any cross-complaint
against any Person (other than the Indemnified Party or any of
its Affiliates). Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement of
a Third Party Claim at any time if it irrevocably waives its
right to indemnity under Section 10.01 with respect to such
Third Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party Claim
pursuant to Section 10.02(a), or if the Indemnifying Party gives
such notice but fails to prosecute vigorously and diligently or
settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then
the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnified Party to
a final conclusion or will be settled at the discretion of the
Indemnified Party (with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and
proceedings, including (except as provided in the immediately
preceding sentence) any settlement thereof; provided, however,
that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying
Party, cooperate with the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is
contesting, or, if appropriate and related to the Third Party
Claim in question, in making any counterclaim against the Person
asserting the Third Party Claim, or any cross-complaint against
any Person (other than the Indemnified Party or any of its
Affiliates). Notwithstanding the foregoing provisions of this
Section 10.02(a)(ii), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if
such dispute is resolved in favor of the Indemnifying Party in
the manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this Section
10.02(a)(ii) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party
in connection with such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this Section
10.02(a)(ii), and the Indemnifying Party will bear its own costs
and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability to the Indemnified
Party with respect to the Third Party Claim under Section 10.01
or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes its liability to
the Indemnified Party with respect to such Third Party Claim,
the Loss in the amount specified in the Claim Notice will be
conclusively deemed a liability of the Indemnifying Party under
Section 10.01 and the Indemnifying Party shall pay the amount of
such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability with
respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be
resolved by litigation in a court of competent jurisdiction.
(b) In the event any Indemnified Party should have a claim
under Section 10.01 against any Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver
an Indemnity Notice with reasonable promptness to the
Indemnifying Party prior to the expiration of the
indemnification notice period described in this Section 10.02.
If the Indemnifying Party notifies the Indemnified Party that it
does not dispute the claim described in such Indemnity Notice or
fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in
such Indemnity Notice, the Loss in the amount specified in the
Indemnity Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 10.01 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party
on demand. If the Indemnifying Party disputes all or any
portion of its liability with respect to such claim, it shall
notify the Indemnified Party thereof in writing during the
Dispute Period, specifying the portion of the claim that is
disputed and the basis for such position. If the Indemnifying
Party has timely disputed its liability with respect to such
claim, the Indemnifying Party will be deemed to have accepted
and be liable for payment of the undisputed portion of such
claim on demand and the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within
the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.
(c) In the event of any Loss resulting from a
misrepresentation, breach of warranty or nonfulfillment or
failure to be performed of any covenant or agreement contained
in this Agreement as to which an Indemnified Party would be
entitled to claim indemnity under Section 10.01 but for the Loss
limitation provisions of Section 10.01(a) and (c), such
Indemnified Party may nevertheless deliver a written notice to
the Indemnifying Party containing the information that would be
required in a Claim Notice or an Indemnity Notice, as
applicable, with respect to such Loss. In the case of a Claim
Notice, the provisions of Section 10.02(a)(i) will be
applicable. If the Indemnifying Party notifies the Indemnified
Party that it does not dispute the claim described therein or
fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in
such Claim Notice or Indemnity Notice, as the case may be, the
Loss specified in the notice will be conclusively deemed to have
been incurred by the Indemnified Party for purposes of making
the determination of the Loss limitations set forth in
Section 10.01. If the Indemnifying Party has timely disputed
the claim described in such Claim Notice or Indemnity Notice, as
the case may be, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within
the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.
(d) In the event of any claim for indemnity under Section
10.01(a), Purchaser agrees to give Seller and its
Representatives reasonable access to the Business Books and
Records and Employees in connection with the matters for which
indemnification is sought to the extent Seller reasonably deems
necessary in connection with its rights and obligations under
this Article X.
(e) All payments made pursuant to this Article X shall be
treated as an adjustment to the Purchase Price.
(f) In the event an action, dispute, claim, counterclaim
or controversy ("Dispute") arises between the parties arising
out of or relating to this Agreement, the aggrieved party shall
promptly notify the other party of the Dispute within ten
Business Days after such Dispute arises. If the parties have
failed to resolve the Dispute within ten Business Days after
delivery of such notice, each party shall, within five Business
Days thereafter, nominate a senior officer of its management to
meet to attempt to resolve the Dispute. The senior officers
shall meet within twenty Business Days after their nomination.
Should the senior officers be unable to resolve the Dispute,
either party may pursue any and all available legal remedies,
unless the parties mutually agree in writing to an alternative
dispute resolution procedure.
10.03 Exclusivity. After the Closing, to the extent
permitted by Law, the indemnities set forth in this Article X
shall be the exclusive remedies of Purchaser Group and Seller
Group for any misrepresentation, breach of warranty or
nonfulfillment or failure to be performed of any covenant or
agreement contained in this Agreement, any schedule hereto, or
any certificate delivered by or on behalf of Seller or Purchaser
in connection herewith, and the parties shall not be entitled to
a rescission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof,
all of which the parties hereto hereby waive.
10.04 Purchaser's Release of Seller under the Colstrip
Contracts. From and after the Closing, Purchaser, for itself
and on behalf of its Affiliates, does hereby release, hold
harmless and forever discharge Seller from any and all claims,
demands, liabilities (including fines and civil penalties) or
causes of action at Law or in equity, whether known or unknown,
resulting from any Claim that Seller is not released from its
obligations under the Colstrip Contracts by virtue of Section
1.01(a)(xi) and 1.02(a)(vi), provided, however, that nothing in
this Section 10.04 shall be deemed to affect Seller's Retained
Liabilities, Purchaser's Assumed Liabilities or the parties'
indemnification obligations hereunder.
ARTICLE XI
TERMINATION
11.01 Termination. This Agreement may be terminated, and
the transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser;
(b) at any time before the Closing, by Seller or
Purchaser, in the event that any Final Order or Law becomes
effective restraining, enjoining, or otherwise prohibiting or
making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Operative
Agreements, upon notification of the non-terminating party by
the terminating party; or
(c) at any time before the Closing, by Seller or
Purchaser, in the event (i) of a breach hereof by the non-
terminating party which gives rise to, as applicable, either a
Seller Material Adverse Effect (if Seller is the breaching
party) or a Purchaser Material Adverse Effect (if Purchaser is
the breaching party) if such non-terminating party fails to cure
such breach within forty-five (45) days following notification
thereof by the terminating party, provided that if, at the end
of such forty-five (45) day period, the non-terminating party is
endeavoring in good faith, and proceeding diligently, to cure
such breach, the non-terminating party shall have an additional
forty-five (45) days in which to effect such cure or (ii) upon
notification of the non-terminating party by the terminating
party that the satisfaction of any condition to the terminating
party's obligations under this Agreement becomes impossible or
impracticable with the use of commercially reasonable efforts if
the failure of such condition to be satisfied by the terminating
party is not caused by a breach hereof by the terminating party,
provided that if it is reasonably possible that the
circumstances giving rise to the impossibility or
impracticability may be removed prior to the expiration of the
time periods provided in the following subsection (d), then such
notification may not be given until such time as the removal of
such circumstances is no longer reasonably possible within such
time periods; or
(d) at any time after the date which is twelve (12) months
after the date of this Agreement, by Seller or Purchaser upon
notification of the non-terminating party by the terminating
party if the Closing shall not have occurred on or before such
date and such failure to consummate is not caused by a breach of
this Agreement by the terminating party; provided, however, that
if on such date Purchaser and Seller have not received all
Purchaser Required Regulatory Approvals and all Seller Required
Regulatory Approvals but all other conditions to the Closing
shall be fulfilled or shall be capable of being fulfilled, then
neither party may terminate this Agreement until the expiration
of such date which is eighteen (18) months after the date of
this Agreement; provided, further, that if on such date
Purchaser or Seller has not received all Purchaser Required
Regulatory Approvals or all Seller Required Regulatory Approvals
related to the Hydro Units but all other conditions to the
Closing shall be fulfilled or shall be capable of being
fulfilled, then neither party may terminate this Agreement until
the expiration of such date which is twenty-four (24) months
after the date of this Agreement.
(e) in accordance with Section 1.10(e), by Purchaser.
11.02 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 11.01, this Agreement will
forthwith become null and void, and there will be no liability
or obligation on the part of Seller or Purchaser (or any of
their respective officers, directors, employees, agents or other
representatives or Affiliates), except as provided in the next
succeeding sentence and except that the provisions with respect
to expenses in Section 13.04 and confidentiality in Section
13.06 will continue to apply following any such termination.
Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section
11.01(c) or (d), Seller will remain liable to Purchaser for any
willful breach of Section 4.10 of this Agreement by Seller
existing at the time of such termination, and Purchaser will
remain liable to Seller for any willful breach of Section 5.06
of this Agreement by Purchaser existing at the time of such
termination, and Seller or Purchaser may seek such remedies,
including damages and fees of attorneys, against the other with
respect to any such breach as are provided in this Agreement or
as are otherwise available at Law or in equity.
ARTICLE XII
DEFINITIONS
12.01 Definitions. (a) Defined Terms. As used in this
Agreement, the following defined terms have the meanings
indicated below:
"Actions or Proceedings" means any action, suit,
proceeding, arbitration or Governmental or Regulatory Authority
investigation.
"Adjustment Amount" has the meaning ascribed to it in
Section 1.04.
"Adjustment Statement" has the meaning ascribed to it in
Section 1.04.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by
or is under common control with the Person specified. For
purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of
the management and policies of such Person whether by Contract
or otherwise and, in any event and without limitation of the
previous sentence, any Person owning ten percent (10%) or more
of the voting securities of another Person shall be deemed to
control that Person.
"Agreement" means this Asset Purchase Agreement and the
Exhibits, the Disclosure Schedule and the Schedules hereto and
the certificates delivered in accordance with Sections 6.03 and
7.03, as the same shall be amended from time to time.
"Asset Group" means one or more of the categories of Assets
set forth on Schedule I hereto.
"Assets" has the meaning ascribed to it in Section 1.01(a).
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description
(whether real, personal or mixed, whether tangible or intangible
and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person.
"Assignment Instruments" has the meaning ascribed to it in
Section 1.05.
"Associate" means, with respect to any Person, any
corporation or other business organization of which such Person
is an officer or partner or is the beneficial owner, directly or
indirectly, of ten percent (10%) or more of any class of equity
securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person
serves as a trustee or in a similar capacity and any relative or
spouse of such Person, or any relative of such spouse, who has
the same home as such Person.
"Assumed Liabilities" has the meaning ascribed to it in
Section 1.02(a).
"Assumption Agreement" has the meaning ascribed to it in
Section 1.05.
"Assumption Instruments" has the meaning ascribed to it in
Section 1.05.
"Base Purchase Price" means $780,000,000.
"Benefit Plan" means any Plan established by Seller, or any
predecessor or Affiliate of Seller, existing at the Closing or
at any time within the five (5) year period prior thereto, to
which Seller contributes or has contributed on behalf of any
Employee, former Employee or director, or under which any
Employee, former Employee or director of Seller or any
beneficiary thereof is covered, is eligible for coverage or has
benefit rights.
"Bid Date" means September 28, 1998.
"Books and Records" of any Person means all files,
documents, instruments, papers, books and records relating to
the business, operations, condition of (financial or other),
results of operations and Assets and Properties of such Person,
including financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute
books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and
environmental studies and plans.
"Business Books and Records" has the meaning ascribed to it
in Section 1.01(a)(xvii).
"Business Combination" means with respect to any Person,
any merger, consolidation or combination to which such Person is
a party, any sale, dividend, split or other disposition of
capital stock or other equity interests of such Person or any
sale, dividend or other disposition of all or substantially all
of the Assets and Properties of such Person, provided, however,
that no activities or transactions of any Affiliate of Seller
(so long as not involving Seller) shall be considered a Business
Combination hereunder.
"Business Contracts" has the meaning ascribed to it in
Section 1.01(a)(v).
"Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the State of Montana and the
Commonwealth of Pennsylvania are authorized or obligated to
close.
"Capital Expenditures" means those capital expenditures
which are identified in the Budget referred to in Section 4.14,
and such other emergency, non-budgeted capital expenditures made
by Seller in accordance with the provisions of Section 4.14.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and the
rules and regulations promulgated thereunder.
"Change of Control Liabilities" has the meaning ascribed to
it in Section 1.02(a)(ix).
"Claim Notice" means written notification pursuant to
Section 10.02(a) of a Third Party Claim as to which indemnity
under Section 10.01 is sought by an Indemnified Party, enclosing
a copy of all papers served, if any, and specifying the nature
of and basis for such Third Party Claim and for the Indemnified
Party's claim against the Indemnifying Party under
Section 10.01, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in
good faith, of such Third Party Claim.
"Closing" means the closing of the transactions
contemplated by Section 1.05.
"Closing Date" means (a) the later of (x) July 1, 1999, and
(y) the date thirty (30) days after the day on which the last of
the consents, approvals, actions, filings, notices or waiting
periods described in or related to the filings described in
Sections 6.04 through 6.07 and Sections 7.04 through 7.06 has
been obtained, made or given or has expired, as applicable;
provided, that Purchaser agrees to use reasonable efforts to be
prepared to close prior to July 1, 1999, and shall give notice
to Seller in the event Purchaser determines that it is able to
do so, or (b) such other date as Purchaser and Seller mutually
agree upon in writing.
"COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the rules and
regulations promulgated thereunder.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Collective Bargaining Agreements" has the meaning ascribed
to in Section 2.16.
"Colstrip Contracts" has the meaning ascribed to it in
Section 1.01(a)(xi).
"Colstrip 1, 2 and 3 Transmission Amount" has the meaning
ascribed to it in Section 1.10(f).
"Colstrip 1, 2 and 3 Transmission Assets" has the meaning
ascribed to it in Section 1.01(a)(xix).
"Colstrip 4 Generation Assets" means all Assets relating to
Seller's interest in Colstrip Unit 4 including, but not limited
to, Real Property Leases, Business Contracts, Transferable
Permits, Fuel Contracts, power sale or purchase agreements and
allowances and/or emission reduction credits described in
Section 12.01(b) of the Disclosure Schedule.
"Colstrip 4 Transmission Amount" means an amount equal to
$55,918,674.
"Colstrip 4 Transmission Assets" has the meaning ascribed
to it in Section 1.01(a)(xviii).
"Colstrip 4 Transmission Service Agreement" has the meaning
ascribed to it in Section 1.10(a).
"Colstrip Pre-Closing Known and Unknown Remedial
Liabilities" means all Pre-Closing Known Remedial Liabilities
and Pre-Closing Unknown Remedial Liabilities arising from or
relating to the ownership, operation and maintenance of the
Colstrip Units 1, 2, 3 or 4 Generating Assets or the Colstrip
Units 1, 2, 3 or 4 Transmission Assets, to the extent such
Assets are acquired by Purchaser.
"Colstrip Rights of First Refusal" means the rights
described in the following agreements: (i) Section 16(d) of the
Construction and Ownership Agreement, dated as of July 30, 1971,
by and between Seller and Puget;(ii) Sections 24(b) and 24(f) of
the Ownership and Operation Agreement, dated as of May 6, 1981,
as amended, by and among Seller, Puget, The Washington Water
Power Company ("WWP"), Portland, and Pacific Power & Light
Company ("Pacific"); and (iii) Section 28(f) of the Colstrip
Project Transmission Agreement, dated as of May 6, 1981, as
amended, by and among Seller, Puget, WWP, Portland and Pacific.
"Colstrip Transition Service Agreement" has the
meaning ascribed to it in Section 6.10.
"Combined Payment Amount" means an amount equal to
$932,000,000 minus (a) the amount of the Base Purchase Price
(prior to any adjustment thereto pursuant to Section 1.10) and
(b) any Puget Payment Amount or Portland Payment Amount paid to
Seller prior to the Final Closing Date.
"Communications Service Agreement" has the meaning ascribed
to it in Section 1.01(b)(ix).
"Contract" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other
contract.
"Contribution Agreement" has the meaning ascribed to it in
the forepart of this Agreement.
"Defined Benefit Plan" means each Benefit Plan which is
subject to Part 3 of Title I of ERISA, Section 412 of the Code
or Title IV of ERISA.
"Disclosure Schedule" means, as the context requires, (a)
the record delivered to Purchaser by Seller herewith and dated
as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required
to be included therein by Seller pursuant to this Agreement and
(b) the record delivered to Seller by Purchaser herewith and
dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required
to be included therein by Purchaser pursuant to this Agreement.
"Dispute" has the meaning ascribed to it in Section 10.02.
"Dispute Period" means the period ending thirty (30) days
following receipt by an Indemnifying Party of either a Claim
Notice or an Indemnity Notice.
"Easements" means, with respect to the Assets, the
reservations of easements in favor of Seller to be included in
the deeds of conveyance with respect to such Assets,
substantially as set forth in the Interconnection Agreement
(including the Separation Document).
"Employee" means each employee or officer of Seller or any
of its Affiliates whose employment responsibilities primarily
relate to the operation of the Generating Assets.
"Employment Term" has the meaning ascribed to it in Section
5.03.
"Environmental Fines and Penalties" has the meaning
ascribed to it in Section 1.02(a)(x).
"Environmental Law" means all Federal, state, municipal and
local laws (including common laws), regulations, rules,
ordinances, codes, licenses, decrees, judgments, directives, or
judicial or administrative orders relating to pollution,
protection, preservation or restoration of human health, the
environment or natural resources, including, without limitation,
laws relating to Releases or threatened Releases of Hazardous
Materials (including, without limitation, into or through
ambient air, surface water, groundwater, land, wetlands, surface
and subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, including without
limitation the Clean Water Act, the Clean Air Act, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act,
and CERCLA, in each case as amended, and their local
counterparts.
"Environmental Liabilities" means any liabilities,
obligations or responsibilities under or related to former,
current or future Environmental Laws or the common law, whether
such liability, obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in
connection with (a) any violation or alleged violation of
Environmental Laws relating to the Assets; (b) compliance with
applicable Environmental Laws relating to the Assets; (c) loss
of life, injury to persons or property or damage to natural
resources (whether or not such loss, injury or damage was made
manifest before or after the Closing) caused (or allegedly
caused) by the presence or Release of Hazardous Materials at,
on, in, under, adjacent to or migrating from the Assets; and
(d) the reasonable investigation and/or remediation required by
Law or constituting a reasonable response to a Governmental or
Regulatory Authority having jurisdiction (whether or not such
investigation or remediation commenced on or before the Closing)
of Hazardous Materials that are present or have been Released
at, on, in, under, adjacent to or migrating from the Assets,
including, but not limited to, Hazardous Materials in the soil,
surface water, sediments, groundwater, landfill cells, or in
other environmental media at or adjacent to the Assets
("Remedial Liabilities"); provided, further that the
liabilities, obligations or responsibilities described in
clauses (a), (b) and (c) shall not include those described in
clause (d); provided further that Environmental Liabilities
shall not include (x) Purchaser's internal costs or
consequential damages (including the value of employees' time,
loss of use, downtime or increased operating costs); (y) costs
of capital improvements (including the replacement of equipment
that has reached its useful life); nor (z) monitoring required
by environmental permits or the design of the Assets, except, in
the case of clauses (y) and (z), as covered in clause (d) above.
"Environmental Permits" has the meaning ascribed to it in
Section 2.17.
"EPA" means the Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any Person who is in the same
controlled group of corporations or who is under common control
with Seller (within the meaning of Section 414 of the Code).
"ERISA Affiliate Plan" has the meaning ascribed to it in
Section 1.02(b)(ix).
"ERISA Representation" has the meaning ascribed to it in
Section 9.01(a).
"Estimated Adjustment Amount" means Seller's good faith
reasonable estimate of an Adjustment Amount for the Closing,
which estimate shall be provided to Purchaser no later than five
Business Days before the Closing.
"Estimated Purchase Price" has the meaning ascribed to it
in Section 1.05.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated
thereunder.
"Excluded Assets" has the meaning ascribed to it in
Section 1.01(b).
"Federal Power Act" means the Federal Power Act of 1935, as
amended, and the rules and regulations promulgated thereunder.
"FERC" means the Federal Energy Regulatory Commission.
"Final Closing Date" means the date on which the latter of
the Puget Closing and the Portland Closing occurs.
"Final Order" means a final Order after all opportunities
for rehearing are exhausted (whether or not any appeal thereof
is pending) that has not been further revised, stayed, enjoined,
set aside, annulled or suspended, with respect to which any
required waiting period has expired, and as to which all
conditions to effectiveness prescribed therein or otherwise by
Law, regulation or Order have been satisfied.
"Fuel Contracts" has the meaning ascribed to it in Section
1.01(a)(x).
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the
immediately prior comparable period.
"General Assignment" has the meaning ascribed to it in
Section 1.05.
"General Representations" has the meaning ascribed to it in
Section 9.01(a).
"Generating Assets" has the meaning ascribed to it in the
forepart of this Agreement.
"Good Utility Practice" means any of the applicable
practices, methods and acts:
(i) required of the party to whom Good Utility Practice is
being applied under regulations of the National Electric Safety
Code (as each of such terms is defined in the Interconnection
Agreement), or its successor, whether or not the party whose
conduct is at issue is a member thereof; or
(ii) otherwise engaged in or approved by a significant
portion of the electric utility industry during the relevant
time period; which, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made,
could have been expected to accomplish the desired result at a
reasonable cost to the party being expected to apply Good
Utility Practice, consistent with law, regulation, good business
practices, generation, transmission, and distribution
reliability, safety, and expedition. Good Utility Practice is
intended to include practices, methods, or acts generally
accepted in the region, and is not intended to be limited to
optimum practices, methods, or acts to the exclusion of all
others. Good Utility Practice does not include intentional
disregard of contractual commitments, even if those commitments
are uneconomic under current market conditions.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of the United States, any foreign country
or any domestic or foreign state, county, city or other
political subdivision or any Native American tribal council or
similar governing entity.
"Hazardous Material" means (A) any petrochemical, petroleum
or petroleum products, oil, flammable explosives, radioactive
materials, radon gas, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and
transformers or other equipment that contain dielectric fluid
which may contain levels of polychlorinated biphenyls (PCBs);
(B) any chemicals or other materials or substances which are now
or hereafter become defined under any Environmental Law as or
included in the definition of "hazardous substances," "hazardous
wastes", "hazardous chemicals," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "pollutants," "contaminants," "hazardous
matter," "restricted hazardous materials" or words of similar
import; and (C) any other chemical or other material or
substance, the discharge, emission, Release or exposure to which
is now or hereafter prohibited, limited or regulated by any
Governmental or Regulatory Authority under any Environmental
Law.
"HIPAA" means the Health Insurance Portability and
Accountability Act of 1996, as amended, and the rules and
regulations promulgated thereunder.
"Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended, and the rules and regulations
promulgated thereunder.
"HSR Act" means Section 7A of the Clayton Act (Title II of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended) and the rules and regulations promulgated thereunder.
"Hydro Units" means the hydroelectric generating stations
owned by Seller and associated dams and reservoirs at such
locations as set forth in Section 12.01(c) of the Disclosure
Schedule.
"Improvements" has the meaning ascribed to it in Section
1.01(a)(iv).
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred
purchase price of goods or services (other than trade payables
or accruals incurred in the ordinary course of business), (iv)
under capital leases and (v) in the nature of guarantees of the
obligations described in clauses (i) through (iv) above of any
other Person.
"Indemnified Party" means any Person claiming
indemnification under any provision of Article X.
"Indemnifying Party" means any Person against whom a claim
for indemnification is being asserted under any provision of
Article X.
"Indemnity Notice" means written notification pursuant to
Section 10.02(b) of a claim for indemnity under Article X by an
Indemnified Party, specifying the nature of and basis for such
claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith,
of such claim.
"Indentures" means the Mortgage and Deed of Trust, dated as
of October 1, 1945, as amended and supplemented, among Seller
and Guaranty Trust Company of New York and Arthur E. Burke, as
Trustees.
"Independent Accounting Firm" means PricewaterhouseCoopers
or such other independent accounting firm of national reputation
mutually appointed by Seller and Purchaser.
"Intangible Personal Property" has the meaning ascribed to
it in Section 1.01(a)(vii).
"Intellectual Property" means all patents and patent
rights, trademarks and trademark rights, trade names and trade
name rights, service marks and service mark rights, service
names and service name rights, brand names, inventions,
copyrights and copyright rights, trade secrets, know-how,
techniques, computer programs and related documentation, and any
and all other intangible assets or proprietary information or
rights (whether registered or under common law) and all pending
applications for and registrations of patents, trademarks,
service marks and copyrights.
"Interconnection Agreement" has the meaning ascribed to it
in Section 6.10.
"Inventory" has the meaning ascribed to it in
Section 1.01(a)(iii).
"Inventory Adjustment Amount" has the meaning ascribed to
in Section 1.04.
"Inventory Survey" has the meaning ascribed to in Section
1.04.
"IRS" means the United States Internal Revenue Service.
"Knowledge" or similar phrases in this Agreement means: (i)
in the case of Seller, the actual knowledge of Seller's officers
and employees who are persons generally responsible for the
subject matter to which knowledge is pertinent, such persons
being listed in Section 12.01(d) of the Disclosure Schedule at
the date as of which the representation, warranty or covenant is
made or repeated, and (ii) in the case of Purchaser the actual
knowledge of Purchaser's officers and employees who are persons
generally responsible for the subject matter to which knowledge
is pertinent, such persons being listed in Section 12.01(e) of
the Disclosure Schedule at the date as of which the
representation, warranty or covenant is made or repeated.
"Landlord Security Deposits" has the meaning ascribed to it
in Section 1.02(a)(iv).
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of
the United States, any foreign country or any domestic or for-
eign state, county, city or other political subdivision or of
any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent,
fixed or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises
and similar consents granted or issued by any Governmental or
Regulatory Authority, other than Environmental Permits,
including applications for any of the foregoing.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other
encumbrance of any kind or easement, or any conditional sale
Contract, title retention Contract or other Contract to give any
of the foregoing.
"Loss" means any and all damages, fines, penalties,
deficiencies, losses and expenses (including interest, court
costs, reasonable fees of attorneys, accountants and other
experts or other reasonable expenses of litigation or other
proceedings or of any claim, default or assessment); provided,
however, "Loss" shall not include any consequential, incidental
or punitive damages for any reason.
"Maintenance Expenditures" means those special maintenance
expenditures which are identified in the Budget referred to in
Section 4.14 and such other emergency, non-budgeted special
maintenance expenditures made by Seller in accordance with the
provisions of Section 4.14 and the exercise of Good Utility
Practices.
"Maintenance and Capital Expenditures Amount" means (i) the
aggregate amount of all funds actually expended by Seller (and
amounts due from Seller to third parties at the time of the
Closing in respect of work actually performed by such third
parties, to the extent such amounts are not Assumed Liabilities)
with respect to Maintenance Expenditures and Capital
Expenditures, in each case which are identified in the Budget,
during the period beginning on the date one (1) year prior to
the Closing and ending on the Closing (or such shorter period if
the Closing occurs in less than one year from the date hereof)
up to but not exceeding $23 million in the aggregate; and
(ii) 85% of all Emergency Expenditures made by Seller in
accordance with Section 4.14, if any, during such one (1) year
(or shorter) period described above. The Maintenance and
Capital Expenditures Amount shall not include any Capital
Expenditures or Maintenance Expenditures or Emergency
Expenditures with respect to assets or properties that are not
transferred to Purchaser under this Agreement.
"MPC 401(k) Plan" has the meaning ascribed to it in Section
5.03(a).
"Non-Colstrip Pre-Closing Known and Unknown Remedial
Liabilities" means all Pre-Closing Known Remedial Liabilities
and Pre-Closing Unknown Remedial Liabilities that are not
Colstrip Pre-Closing Known and Unknown Remedial Liabilities.
"Non-Colstrip Transition Service Agreement" has the meaning
ascribed to it in Section 6.10.
"Non-Transferable Software" has the meaning ascribed to it
in Section 1.01(a).
"Non-Union Employees" means all Employees, other than Union
Employees, who are employed as of the Closing in the production
of electricity at the Thermal Units or the Hydro Units, or
employed in Seller's corporate generation departments. Seller's
Non-Union Employees as of the date hereof are identified in
Section 12.01(g) of the Disclosure Schedule.
"Off-Site Environmental Liabilities" means any liabilities,
obligations or responsibilities under or related to former,
current or future Environmental Laws or the common law, whether
such liability, obligation or responsibility is known or
unknown, contingent or accrued, arising as a result of or in
connection with Seller's storage, disposal, transportation,
discharge, Release or recycling of Hazardous Materials prior to
the Closing at or to locations other than the Real Property
constituting the Assets or properties in the vicinity of Real
Property constituting the Assets to which Hazardous Materials
have migrated.
"Operative Agreements" means, collectively, this Agreement,
the General Assignment and the other Assignment Instruments, the
Assumption Agreement and the other Assumption Instruments, the
Colstrip Unit Number 3 Wholesale Transition Service Agreement,
the Non-Colstrip Unit Number 3 Wholesale Transition Service
Agreement, the Interconnection Agreement (including the
Separation Document), the Contribution Agreement, the
Communications Service Agreement and any support or other
agreements to be entered into at the Closing in connection with
the transaction.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in
each such case whether preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Permitted Lien" means (i) those Liens and exceptions to
title to the Assets (except Easements) set forth in Section
12.01(h) of the Disclosure Schedule; (ii) the Easements;
(iii) all exceptions, restrictions, easements, charges, rights
of way and monetary and non-monetary encumbrances which are set
forth in an applicable FERC project license, except for such
encumbrances which secure Indebtedness; (iv) when such term is
used with respect to any date before the Closing, Liens created
by the Indentures; (v) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate
proceedings for which adequate reserves have been established in
accordance with GAAP; (vi) when such term is used with respect
to any date prior to the Closing, any statutory Lien arising in
the ordinary course of business by operation of Law with respect
to a Liability that is not yet due or delinquent; (vii) zoning,
entitlement, conservation restriction and other land use and
environmental regulations by any Governmental or Regulatory
Authority; and (viii) any minor imperfection of title or similar
Lien, limited in the case of items (i) -(viii) (excluding clause
(ii)) to only those matters which, individually or in the
aggregate with other such Liens do not materially detract from
the value of the Assets as currently used or materially
interfere with the ownership, operation and maintenance of the
Assets.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, limited
liability company other business organization, trust, union,
association or Governmental or Regulatory Authority.
"PGE" means Portland General Electric Company, an Oregon
corporation.
"PGE Asset Purchase Agreement" means the Asset Purchase
Agreement dated the date hereof by and between PGE and
Purchaser.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day
or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice,
policy or arrangement of any kind, whether written or oral,
including, but not limited to, any "employee benefit plan"
within the meaning of Section 3(3) of ERISA.
"Pollution Control Bonds" means those Pollution Control
Revenue Refunding Bonds, Series 1993A, due May 1, 2023, City of
Forsyth, Montana in the original principal amount of $90,205,000
and Series 1993B, due December 1, 2023, City of Forsyth, Montana
in the original principal amount of $80,000,000.
"Pollution Control Facilities" means the facilities
financed with the Pollution Control Bonds described in Exhibit C
hereto.
"Portland Closing Date" means the date on which the closing
of the transactions contemplated by the Asset Purchase
Agreement, dated as of the date hereof, by and between Purchaser
and PGE (the "Portland Closing") occurs.
"Post-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Potentially Responsible Party" has the meaning ascribed to
it in CERCLA.
"Portland Payment Amount" means an amount equal to
$897,000,000 minus the amount of the Base Purchase Price (prior
to any adjustment thereto pursuant to Section 1.10).
"Power Purchase/Exchange Agreements" means (i) the Power
Purchase Agreement, effective as of May 13, 1994, between Seller
and Basin Electric Power Cooperative; (ii) the BPA Peak/Energy
Exchange, which is Exhibit L to the Power Sales Agreement, dated
as of August 27, 1982, between Seller and the United States of
America, Department of Energy, acting by and through the
Bonneville Power Administration; and (iii) the Exchange
Agreement, dated as of August 18, 1993, between Seller and Idaho
Power Company.
"PPUC Order" means the Opinion and Order adopted by PPUC on
February 9, 1995 in Pennsylvania Power & Light Company's
application for approval of certain transactions in connection
with the utility's establishment of a holding company structure.
"Pre-Closing Covenants" has the meaning ascribed to it in
Section 9.01(b).
"Pre-Closing Environmental Liabilities" means those
Environmental Liabilities attributable to the period on or prior
to the Closing.
"Pre-Closing Known Remedial Liabilities" means the subset
of Pre-Closing Environmental Liabilities that are described in
paragraph (d) of the definition of Environmental Liabilities and
that are attributable to the matters set forth in Schedule II
hereto.
"Pre-Closing Unknown Remedial Liabilities" means the subset
of Pre-Closing Environmental Liabilities that are described in
paragraph (d) of the definition of Environmental Liabilities and
that are not attributable to the matters set forth in Schedule
II hereto.
"Puget" means Puget Sound Energy, Inc., a Washington
corporation.
"Puget Asset Purchase Agreement" means the Asset Purchase
Agreement dated the date hereof by and between Puget and
Purchaser.
"Puget Closing Date" means the date on which the closing of
the transactions contemplated by the Asset Purchase Agreement,
dated as of the date hereof, by and between Purchaser and Puget
(the "Puget Closing") occurs.
"Puget Payment Amount" means an amount equal to
$897,000,000 minus the amount of the Base Purchase Price (prior
to any adjustment thereto pursuant to Section 1.10).
"Purchase Price" has the meaning ascribed to it in Section
1.03(a).
"Purchaser" has the meaning ascribed to it in the forepart
of this Agreement.
"Purchaser Financing" has the meaning ascribed to it in
Section 5.08.
"Purchaser Group" has the meaning ascribed to it in Section
10.01(a).
"Purchaser Material Adverse Effect" means any change or
effect after the Bid Date that is, individually or in the
aggregate, materially adverse to (a) the business, operations,
property or condition (financial or otherwise) of Purchaser and
its subsidiaries, taken as a whole, (b) the ability of Purchaser
and each of its subsidiaries, taken as a whole, to perform their
respective obligations under this Agreement or any of the other
Operative Agreements or (c) the validity or enforceability of
this Agreement or any of the other Operative Agreements, or the
rights or remedies of Purchaser hereunder or thereunder.
"Purchaser Required Regulatory Approvals" means (i)
pursuant to Part II of the Federal Power Act, acceptance for
filing and effectiveness or authorization by Final Order of the
FERC, as applicable, to allow Purchaser to (A) implement
wholesale sales of electricity under the Wholesale Transition
Service Agreements, the Power Purchase/Exchange Agreements, the
Power Purchase Agreements, and any other jurisdictional
agreements to be assigned to Purchaser, (B) acquire, own and
operate the Assets, and (C) sell electricity at wholesale at
market-based rates; (ii) approval by Final Order of the FERC
under Part I of the Federal Power Act for the transfer of FERC
project licenses related to, and necessary for Purchaser to
acquire, own and operate the Hydro Units; (iii) a Final Order of
the FERC certifying Purchaser as an exempt wholesale generator
pursuant to Section 32 of the Holding Company Act; provided
however, that in the event Purchaser does not obtain such
certification with respect to the acquisition and ownership of
either or both of the Colstrip 4 Transmission Assets and the
Colstrip 1, 2, and 3 Transmission Assets, then the provisions of
Section 1.10 shall apply with respect to such Assets; and
provided, further, that in any case such certification will be a
Purchaser Required Regulatory Approval with respect to all other
Assets; (iv) a Final Order of the Montana Public Service
Commission, the Oregon Public Utility Commission and the
Washington Utilities and Transportation Commission, in each
case, if required, including the determinations required by
Section 32(c) of the Holding Company Act for the Assets to be
eligible facilities of Purchaser as an exempt wholesale
generator; (v) approval or authorization by Final Order of the
Pennsylvania Public Utility Commission pursuant to the PPUC
Order, if required; (vi) other Licenses, Environmental Permits
and approvals or authorizations of any other Governmental or
Regulatory Authority reasonably necessary pursuant to any Law
for Purchaser to own and operate the Assets other than
authorizations or approvals, the lack of which would not
materially detract from the value of the Assets as currently
used or materially interfere with the ownership, operation and
maintenance of the Assets; (vii) acceptance for filing and
effectiveness or approval by Final Order of the FERC of the
Interconnection Agreement; and (viii) expiration or early
termination of the HSR Act waiting period.
"Purchaser's 401(k) Plan" has the meaning ascribed to it in
Section 5.03(a).
"Purchaser's Retirement Plan" has the meaning ascribed to
it in Section 5.03(a).
"Purchaser's Welfare Plans" has the meaning ascribed to it
in Section 5.03(a).
"Qualified Plan" means each Benefit Plan which is intended
to qualify under Section 401 of the Code.
"Qualified Transfer" means a sale or other disposition of
the Pollution Control Facilities to a transferee who is
reasonably expected to use the Pollution Control Facilities in
such a way that they are treated as qualified pollution control
facilities within the meaning of Section 103(b)(4)(F) of the
Internal Revenue Code as in effect prior to the enactment of
Public Law No. 99-514 (the "Tax Reform Act of 1986").
"Real Property" has the meaning ascribed to it in
Section 1.01(a)(i).
"Real Property Leases" has the meaning ascribed to it in
Section 1.01(a)(ii).
"Release" means any release, spill, emission, pouring,
leaking, pumping, injection, deposit, disposal, discharge,
emptying, dispersal, dumping, leaching or migration into or
through the indoor or outdoor environment, including the
movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land, surface or
subsurface strata.
"Representatives" has the meaning ascribed to it in Section
4.03.
"Resolution Period" means the period ending sixty (60) days
following receipt by an Indemnified Party of a written notice
from an Indemnifying Party stating that it disputes all or any
portion of a claim set forth in a Claim Notice or an Indemnity
Notice.
"Retained Liabilities" has the meaning ascribed to it in
Section 1.02(b).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Seller" has the meaning ascribed to it in the forepart of
this Agreement.
"Seller Group" has the meaning ascribed to it in Section
10.01(b).
"Seller Material Adverse Effect" means any change in or
effect on the Assets or the operation of the Assets after the
Bid Date that is materially adverse to the ownership, business,
assets, operations or condition (financial or otherwise) of the
Assets, individually or taken as a whole, other than (i) any
change resulting from changes in the international, national,
regional or local wholesale or retail markets for electricity,
(ii) any change resulting from changes in the international,
national, regional or local markets for any fuel used at the
Generating Assets, (iii) any change resulting from changes in
the North American, national, regional or local electricity
transmission systems, (iv) changes in Law that apply generally
to similarly situated Persons, and (v) any materially adverse
change in the Assets which is cured (including by payment of
money) by Seller before the earlier of the Closing and the
Termination Date.
"Seller's DB Plan" has the meaning ascribed to it in
Section 5.03(b).
"Seller's Retirement Plan" has the meaning ascribed to it
in Section 5.03(a).
"Seller Required Regulatory Approvals" means (i) the
approval required by FERC to transfer the FERC licenses
associated with the Hydro Units, (ii) the approvals required by
the appropriate regulatory agencies to transfer the Transferable
Permits, other than any such approvals the failure of which
would not materially detract from the value of the Assets as
currently used or materially interfere with the ownership, use,
operation or maintenance of the Assets, (iii) the approval, if
required, of the SEC pursuant to the Holding Company Act,
(iv) the filings by Seller and Purchaser required by the HSR Act
and the expiration or earlier termination of all waiting periods
under the HSR Act, and (v) the approval by FERC pursuant to
Section 203 and 205, respectively, of the Federal Power Act
relating to the transfer of the Assets and the Interconnection
Agreement.
"Separation Document" means the separation document to be
prepared under the terms of the Interconnection Agreement.
"Site Representatives" has the meaning ascribed to it in
Section 4.11.
"Subject Defined Benefit Plan" means each Defined Benefit
Plan listed and described in Section 2.09(a) of the Disclosure
Schedule.
"Tangible Personal Property" has the meaning ascribed to it
in Section 1.01(a)(iv).
"Tax Representation" has the meaning ascribed to it in
Section 9.01(a).
"Tax Returns" means any return, report, information return
or other document (including any related or supporting
information) required to be supplied to any taxing authority
with respect to Taxes.
"Taxes" means all taxes, charges, fees, levies, penalties
or other assessments imposed by any United States Federal, state
or local or foreign taxing authority, including but not limited
to, income, excise, property, sales, transfer, franchise,
payroll, withholding, social security or other taxes, including
any interest, penalties or additions attributable thereto.
"Tenant Security Deposits" has the meaning ascribed to it
in Section 1.01(a)(viii).
"Thermal Units" means Seller's undivided interests in and
including the thermal generating stations owned by Seller at
such locations as set forth in Section 12.01(i) of the
Disclosure Schedule.
"Third Party Claim" has the meaning ascribed to it in
Section 10.02(a).
"Thompson Falls Environmental Status" means that Thompson
Falls Reservoir has been identified as a Low Priority Site by
Montana Department of Environmental Quality ("DEQ") under the
Montana Comprehensive Environmental Cleanup and Responsibility
Act because elevated levels of copper, zinc, and possibly
arsenic were found in the bottom sediments of Thompson Falls
Reservoir.
"Thompson Falls Liabilities" has the meaning ascribed to it
in Section 1.02(a)(x).
"Title Representation" has the meaning ascribed to it in
Section 9.01(a).
"Transferable Insurance Policies" has the meaning ascribed
to it in Section 1.01(a)(xvi).
"Transferable Permits" has the meaning ascribed to it in
Section 1.01(a)(vi).
"Transferring Employee" means any Union or Non-Union
Employee who accepts Purchaser's offer of employment.
"Transferring Non-Union Employee" means a Non-Union
Employee who is a Transferring Employee.
"Transferring Union Employee" means a Union Employee who is
a Transferring Employee.
"Transfer Taxes" means all Taxes in the nature of sales,
use, transfer, recording, value added or forms of conveyance
taxes.
"Union Employees" means all bargaining-unit Employees as of
the Closing represented by the International Brotherhood of
Electrical Workers ("IBEW") Local No. 1638, IBEW Local No. 44 or
the International Brotherhood of Teamsters Local 190.
"WARN Act" means the Federal Worker Adjustment Retraining
and Notification Act of 1988, as amended, and the rules and
regulations promulgated thereunder.
(b) Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any
gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement;
(iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; (v) "include" or
"including" means including without limiting the generality of
any description preceding such term; and (vi) the phrase
"ordinary course of business" refers to the business of Seller
in connection with the operation of the Generating Assets.
Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified.
All accounting terms used herein and not expressly defined
herein shall have the meanings given to them under GAAP. Any
representation or warranty contained herein as to the
enforceability of a Contract shall be subject to the effect of
any bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting the enforcement of creditors' rights
generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at Law).
ARTICLE XIII
MISCELLANEOUS
13.01 Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed
to have been duly given only if delivered personally or by
facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
PP&L Global, Inc.
11350 Random Hills Rd, Suite 400
Fairfax, Virginia 22030
Facsimile No.: (703) 293-2659
Attn: Chief Counsel
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
Facsimile No.: (212) 424-8500
Attn: Jeffrey Meyers
If to Seller, to:
The Montana Power Company
40 East Broadway
Butte, Montana 59701-9394
Facsimile No.: 406-497-2451
Attn: General Counsel
with a copy to:
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: 212-530-5219
Attn: John T. O'Connor
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this
Section, be deemed given upon receipt, and (iii) if delivered by
mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of
such notice, request or other communication is to be delivered
pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying
such change to the other party hereto.
13.02 Bulk Sales Act. The parties hereby waive compliance
with the bulk sales act or comparable statutory provisions of
each applicable jurisdiction. Seller shall indemnify Purchaser
and its officers, directors, employees, agents and Affiliates in
respect of, and hold each of them harmless from and against, any
and all Losses suffered, occurred or sustained by any of them or
to which any of them becomes subject, resulting from, arising
out of or relating to the failure of Seller to comply with the
terms of any such provisions applicable to the transactions
contemplated by this Agreement.
13.03 Entire Agreement. This Agreement and the Operative
Agreements and the other exhibits, schedules, documents,
certificates and instruments executed and delivered pursuant to
this Agreement supersede all prior discussions and agreements
between the parties with respect to the subject matter hereof
and thereof, including that certain confidentiality agreement
between the parties dated April 8, 1998, and contain the sole
and entire agreement between the parties hereto with respect to
the subject matter hereof and thereof.
13.04 Expenses. Except as otherwise expressly provided in
this Agreement (including as provided in Section 11.02), whether
or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in
connection with the negotiation, execution and closing of this
Agreement and the Operative Agreements and the transactions
contemplated hereby and thereby.
13.05 Public Announcements. At all times at or before the
Closing, Seller and Purchaser will not issue or make any
reports, statements or releases to the public or generally to
the employees, customers, suppliers or other Persons with whom
Seller has significant business relationships in connection with
the operation of the Generating Assets with respect to this
Agreement or the transactions contemplated hereby without the
consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of
its public report, statement or release from the other party and
such report, statement or release is, in the opinion of legal
counsel to such party, required by Law in order to discharge
such party's disclosure obligations, then such party may make or
issue the legally required report, statement or release and
promptly furnish the other party with a copy thereof. Seller
and Purchaser will also obtain the other party's prior approval
of any press release to be issued immediately following the
Closing announcing the consummation of the transactions
contemplated by this Agreement.
13.06 Confidentiality. Each party hereto will hold, and
will use its best efforts to cause its Affiliates, and their
respective Representatives to hold, in strict confidence from
any Person (other than any such Affiliate or Representative),
unless (i) compelled to disclose by judicial or administrative
process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated
hereby of Governmental or Regulatory Authorities) or by other
requirements of Law or (ii) disclosed in an Action or Proceeding
brought by a party hereto in pursuit of its rights or in the
exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates
furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the trans-
actions contemplated hereby, except to the extent that such
documents or information can be shown to have been (a)
previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after
the furnishing of such documents or information hereunder)
through no fault of such receiving party or (c) later acquired
by the receiving party from another source if the receiving
party is not aware that such source is under an obligation to
another party hereto to keep such documents and information
confidential; provided that following the Closing the foregoing
restrictions will not apply to Purchaser's use of documents and
information concerning the Assets or the Assumed Liabilities
furnished by Seller hereunder. Purchaser shall have the right
to disclose information of Seller with respect to the Assets to
potential lenders and their respective representatives in
connection with financing the transactions contemplated by this
Agreement and to third parties in connection with planning for
operations of the Assets following the Closing, provided that
any such disclosure is made pursuant to confidentiality
obligations equivalent to those provided in this Section 13.06;
provided, further, if such third parties are involved in the
energy industry then Purchaser shall not disclose information of
Seller to such Persons without the written consent of Seller
which shall not be unreasonably withheld. In the event the
transactions contemplated hereby are not consummated, upon the
request of the other party, each party hereto will, and will
cause its Affiliates and their respective Representatives to,
promptly (and in no event later than five (5) Business Days
after such request) redeliver or cause to be redelivered all
copies of confidential documents and information furnished by
the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon
prepared by the party furnished such documents and information
or its Representatives.
13.07 Waiver. Any term or condition of this Agreement may
be waived at any time by the party that is entitled to the
benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver
of the same or any other term or condition of this Agreement on
any future occasion. All remedies, either under this Agreement
or by Law or otherwise afforded, will be cumulative and not
alternative.
13.08 Amendment. This Agreement may be amended,
supplemented or modified only by a written instrument duly
executed by or on behalf of each party hereto.
13.09 No Third Party Beneficiary. The terms and
provisions of this Agreement are intended solely for the benefit
of each party hereto and their respective successors or
permitted assigns, and it is not the intention of the parties to
confer third party beneficiary rights upon any other Person
other than any Person entitled to indemnity under Article X,
provided, however, that the Transferring Employees are intended
to be third party beneficiaries solely for the purpose of claims
they may have against Purchaser under Section 5.03.
13.10 No Assignment; Binding Effect. Neither this
Agreement nor any right, interest or obligation hereunder may be
assigned by any party hereto without the prior written consent
of the other party hereto and any attempt to do so will be void,
except (a) for assignments and transfers by operation of Law,
(b) that Seller may assign its rights, interests or obligations
hereunder, in whole or in part, to an Affiliate and (c) that
Purchaser may assign any or all of its rights, interests and
obligations hereunder (including its rights under Article X) to
(i) a direct or indirect wholly-owned Subsidiary, provided that
any such Subsidiary agrees in writing to be bound by all of the
terms, conditions and provisions contained herein (in which
event, from the date of such assignment and subject to the other
provisions of this Section 13.10, such assignee shall be the
Purchaser for the purposes of this Agreement), or (ii) any
lender providing purchase money or other financing to Purchaser
from time to time as collateral security for such financing, but
no such assignment referred to in clauses (b) or (c) shall
relieve the assigning party of its obligations hereunder;
provided that no such assignment by Seller or Purchaser
adversely affects the availability or timing of any Federal,
state or local government consent or approval required for the
consummation of the transactions contemplated hereby. Subject
to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
13.11 Headings. The headings used in this Agreement have
been inserted for convenience of reference only and do not
define or limit the provisions hereof. Neither party shall be
deemed to have been the drafter of this Agreement, which is the
product of detailed, arm's-length negotiations between the
parties and their respective counsel.
13.12 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under
any present or future Law, and if the rights or obligations of
any party hereto under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as
if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or
by its severance herefrom and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added
automatically as a part of this Agreement a legal, valid and
enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
13.13 Governing Law. This Agreement shall be governed by
and construed in accordance with the Laws of the State of New
York applicable to a contract executed and performed in such
State, without giving effect to the conflicts of laws principles
thereof.
13.14 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officer of each
party as of the date first above written.
PP&L GLOBAL, INC.
By:_______________________________
Name:
Title:
THE MONTANA POWER COMPANY
By:________________________________
Name:
Title: