EXHIBIT 2
STOCK PURCHASE AGREEMENT
BETWEEN
PECO ENERGY COMPANY
AND
DELMARVA POWER & LIGHT COMPANY
May 24, 1994
TABLE OF CONTENTS
Page
----
ARTICLE I................................................... 1
1.1. The Sale......................................... 1
1.2. Consideration.................................... 2
1.3. Calculation of Adjustments....................... 2
1.4. Payment of Adjustment to Purchase Price.......... 6
ARTICLE II.................................................. 7
2.1. Time and Place of Closing........................ 7
2.2. Deliveries by PECO Energy........................ 8
2.3. Deliveries by the Buyer.......................... 8
ARTICLE III................................................. 9
3.1. Organization; Qualification...................... 9
3.2. The Company's Capitalization..................... 11
3.3. Title to Stock................................... 11
3.4. Authority Relative to this Agreement............. 12
3.5. Consents and Approvals; No Violation............. 13
3.6. Reports.......................................... 16
3.7. Financial Statements............................. 17
3.8. Undisclosed Liabilities.......................... 18
3.9. Absence of Certain Changes or Events............. 18
3.10. Title and Related Matters........................ 20
3.11. Leases........................................... 21
3.12. Insurance........................................ 21
3.13. Environmental Matters............................ 22
3.14. Labor Matters.................................... 27
3.15. ERISA; Benefit Plans............................. 28
3.16. Certain Contracts and Arrangements............... 31
3.17. Legal Proceedings, etc........................... 32
3.18. Permits.......................................... 33
3.19. Regulation as a Utility.......................... 34
3.20. Taxes............................................ 35
3.21. Disclosure....................................... 38
ARTICLE IV.................................................. 39
4.1. Organization..................................... 39
4.2. Authority Relative to this Agreement............. 39
Page
----
4.3. Consents and Approvals; No Violation............. 40
4.4. Regulation as a Utility.......................... 43
4.5. Acquisition of Stock for Investment.............. 43
4.6. Financing........................................ 44
ARTICLE V................................................... 44
5.1. Conduct of Business of the Company............... 44
5.2. Access to Information............................ 50
5.3. Expenses......................................... 52
5.4. Further Assurances............................... 52
5.5. Public Statements................................ 53
5.6. Consents and Approvals........................... 54
5.7. Fees and Commissions............................. 56
5.8. Sales and Transfer Taxes......................... 57
5.9. Supplements to Schedules......................... 57
5.10. Employees........................................ 58
5.11. No Negotiations.................................. 66
5.12. Post-Closing Assistance.......................... 67
5.13. Record Retention Procedures...................... 68
5.14. Section 338(h)(10) Election...................... 69
5.15. Other Tax Matters................................ 70
5.16. Transfer of Certain Assets, Properties and
Other Items.................................... 71
5.17. Termination of Tax Sharing Agreements............ 72
5.18. Power Purchase Arrangements...................... 73
ARTICLE VI.................................................. 73
6.1. Conditions to Each Party's Obligations to
Effect the Transactions Contemplated
Hereby......................................... 73
6.2. Conditions to Obligations of the Buyer........... 75
6.3. Conditions to Obligations of PECO Energy......... 79
ARTICLE VII................................................. 82
7.1. Termination...................................... 82
7.2. Procedure and Effect of Termination.............. 84
ARTICLE VIII................................................ 85
8.1. Indemnification.................................. 85
8.2. Defense of Claims................................ 88
Page
----
8.3. Tax Indemnification.............................. 93
8.4. Tax Exclusivity.................................. 103
ARTICLE IX.................................................. 103
9.1. Amendment and Modification....................... 104
9.2. Waiver of Compliance; Consents................... 104
9.3. Survival of Representations and Warranties....... 104
9.4. Indemnification and Adjustment Payments.......... 105
9.5. Notices.......................................... 105
9.6. Assignment....................................... 107
9.7. Governing Law.................................... 107
9.8. Counterparts..................................... 107
9.9. Interpretation................................... 107
9.10. Entire Agreement................................. 110
9.11. No Third Party Beneficiary Rights................ 110
STOCK PURCHASE AGREEMENT
------------------------
STOCK PURCHASE AGREEMENT, dated as of May 24, 1994, between PECO Energy
Company, a Pennsylvania corporation ("PECO Energy"), and Delmarva Power & Light
Company, a Delaware and Virginia corporation (the "Buyer").
WHEREAS, the Buyer desires to purchase, and PECO Energy desires to sell,
all of the outstanding common stock (the "Company Common Stock") of the
Conowingo Power Company, a Maryland corporation (the "Company") upon the terms
and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements hereinafter set forth, and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
SALE OF STOCK AND TERMS OF PAYMENT
----------------------------------
1.1. The Sale. Upon the terms and subject to the satisfaction of the
---------
conditions contained in this Agreement, at the Closing (as hereinafter defined)
PECO Energy will sell, assign, transfer and deliver to the
1
Buyer, and the Buyer will purchase and acquire from PECO Energy, the Company
Common Stock.
1.2. Consideration. (a) Upon the terms and subject to the satisfaction of
-------------
the conditions contained in this Agreement, in consideration of the aforesaid
sale, assignment, transfer and delivery of the Company Common Stock, at the
Closing the Buyer will pay or cause to be paid to PECO Energy an amount equal to
$150,000,000.00 (the "Purchase Price") on the Closing Date (as hereinafter
defined).
(b) on the 90th day after the Closing Date (the "Adjustment Date"), the
Purchase Price will be increased or decreased by the sum of the adjustments set
forth on Annex 1 hereto (the "Adjustment Amount").
(c) The Buyer will pay the Purchase Price by delivery of funds which are
immediately available or, upon the mutual agreement of the parties hereto, in a
combination of immediately available funds and assets of the Buyer.
1.3. Calculation of Adjustments. (a) As promptly as practicable after the
---------------------------
Closing Date, PECO Energy will deliver to the Buyer a copy of a balance sheet of
the Company as of the Closing Date (the "Closing Balance Sheet"), together with
PECO Energy's calculation of the Adjustment Amount. The parties hereto agree
that the
2
closing Balance Sheet will be prepared in accordance with generally accepted
accounting principles on a basis consistent with the presentations in the
Company Balance Sheet and the Company's 1993, 1992 and 1991 balance sheets,
respectively (such presentation is referred to herein as the "PECO Energy
Closing Balance Sheet Preparation Method.")
(b) Within twenty business days after the Buyer's receipt of the Closing
Balance Sheet, the Buyer will provide PECO Energy with written notice
indicating whether the Buyer agrees or disagrees with PECO Energy's calculation
of the Adjustment Amount. If the Buyer agrees with PECO Energy's calculation of
the Adjustment Amount, or if the Buyer fails to deliver to PECO Energy such
written notice within such 20-day period, PECO Energy's calculation of the
Adjustment Amount will be deemed to be conclusive, final and binding on the
parties to this Agreement.
(c) Within five business days after PECO Energy's receipt of any notice of
the Buyer's disagreement with PECO Energy's calculation of the Adjustment
Amount, PECO Energy and the Buyer will begin good faith negotiations to resolve
such disagreement. If PECO Energy and the Buyer are able to resolve such
disagreement within ten business days after such negotiations begin, PECO
3
Energy's calculation of the Adjustment Amount will be adjusted accordingly to
reflect such resolution and, as adjusted, will be deemed to be conclusive, final
and binding on the parties to this Agreement. If PECO Energy and the Buyer are
unable to resolve such disagreement within ten business days after such
negotiations begin, such disagreement will be submitted to a nationally
recognized independent auditing firm (other than the regular auditing firms for
PECO Energy, any subsidiary thereof or the Buyer) that PECO Energy and the Buyer
may agree upon (the "Settlement Auditor") for resolution. PECO Energy and the
Buyer will cooperate with the Settlement Auditor and will proceed in good faith
to cause the Settlement Auditor to resolve such disagreement on or before the
Adjustment Date. The fees of the Settlement Auditor shall be borne by PECO
Energy and the Buyer with each party bearing a portion of such fees equal to
(i) the total fees multiplied by (ii) a fraction, (A) the numerator of which is
the difference between such party's determination of the Adjustment Amount and
the Settlement Auditor's determination of the Adjustment Amount and (B) the
denominator of which is the difference between PECO Energy's and the Buyer's
determination of the Adjustment Amount.
4
(d) The Settlement Auditor, in its sole discretion, will determine (i)
the nature and extent of the participation by PECO Energy, the Buyer, and their
respective independent auditors in connection with the resolution of any
disagreement submitted to the Settlement Auditor, (ii) the nature and extent of
information that PECO Energy and the Buyer may submit to the Settlement Auditor
for consideration in connection with such resolution and (iii) the personnel of
the Settlement Auditor who will review such information and resolve such
disagreement. All elements of the Adjustment Amount that are disputed by PECO
Energy and the Buyer shall be subject to review and recalculation by the
Settlement Auditor. In any such calculation of the Adjustment Amount, the
Settlement Auditor shall comply with the PECO Energy Closing Balance Sheet
Preparation Method. Notwithstanding the foregoing sentence, in any determination
of the Adjustment Amount by the Settlement Auditor, the result so obtained
shall be no greater or less than the range of amounts proposed by PECO Energy
and the Buyer, respectively. The Settlement Auditor's resolution of any such
dispute will be reflected in a written report which will be delivered promptly
to, and will be final and binding upon, PECO Energy and the Buyer. PECO
Energy's calculation of the
5
Adjustment Amount will be adjusted accordingly to reflect such resolution and,
as adjusted, will be deemed to be conclusive, final and binding on the parties
to this Agreement.
(e) From the Closing Date to the Adjustment Date, the Buyer will give to
the Settlement Auditor, PECO Energy and their respective representatives such
access during ordinary business hours to the records and personnel of the
Company as is necessary to prepare the Closing Balance Sheet and the calculation
of the Adjustment Amount.
1.4. Payment of Adjustment to Purchase Price. On the Adjustment Date, or
--------------------------------- -----
if the resolution of the calculation of the Adjustment Amount pursuant to
Section 1.3 has not occurred by such date, as soon as is reasonably possible
following a conclusive, final and binding determination of the Adjustment Amount
pursuant to Section 1.3, but no later than five (5) business days thereafter,
(a) if the Adjustment Amount is payable to the Buyer, then PECO Energy shall pay
to the Buyer such amount, and (b) if the Adjustment Amount is payable to PECO
Energy, then the Buyer shall pay to PECO Energy such amount. Any such payment
shall be made by wire transfer of immediately available funds to such account as
shall have been designated in writing by the
6
recipient thereof, with interest on the amount due from the Closing Date to the
date of payment at a rate calculated based on a per annum rate computed on the
basis of a 365 day year and equal to the average of the high and low bid rates
for federal funds on the Closing Date as such bid rates were published in
The Wall Street Journal (Eastern Edition).
- -----------------------
ARTICLE II
THE CLOSING
-----------
2.1. Time and Place of Closing. Upon the terms and subject to the
-------------------------
satisfaction of the conditions contained in this Agreement, the closing of the
transactions contemplated by this Agreement (the "Closing") will take place at
the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York,
New York 10022, at 9:00 A.M. (local time) on the first business day following
the date on which all of the conditions to each party's obligations hereunder
have been satisfied or waived; or at such other place or time as the parties may
agree. The date and time at which the Closing actually occurs is hereinafter
referred to as the "Closing Date."
7
2.2. Deliveries by PECO Energy. At the Closing, PECO Energy will deliver
-------------------------
the following to the Buyer:
(a) Stock certificates representing all of the Company Common Stock, duly
executed in blank or accompanied by duly executed instruments of transfer, and
any other documents that are necessary to transfer to the Buyer good and
marketable title to the Company Common Stock;
(b) The stock book, stock ledger, minute book and corporate seal of the
Company;
(c) The opinion and certificate contemplated by Section 6.2; and
(d) Such other documents, instruments and writings as are required to be
delivered by PECO Energy at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith or as may be reasonably
requested by the Buyer.
2.3. Deliveries by the Buyer. At the Closing, the Buyer will deliver the
-----------------------
following to PECO Energy:
(a) The Purchase Price by (i) interbank transfer of immediately available
funds or (ii) such other means as are agreed upon by PECO Energy and the Buyer;
8
(b) The opinion and certificate contemplated by Section 6.3; and
(c) Such other documents, instruments and writings as are required to be
delivered by the Buyer at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith or as may be reasonably
requested by PECO Energy.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PECO ENERGY
---------------------------------------------
PECO Energy represents and warrants to the Buyer as follows:
3.1. Organization; Qualification. (a) PECO Energy is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite power to own and to dispose
of the Company Common Stock.
(b) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland, and has all requisite
corporate power and authority to own, lease, and operate its properties and to
carry on its business as now being conducted. The Company is duly qualified or
licensed
9
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes 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 in the aggregate have a Material
Adverse Effect (as hereinafter defined). Schedule 3.1 sets forth, as of the
date of this Agreement, each jurisdiction in which the Company is qualified to
do business as a foreign corporation. PECO Energy has heretofore delivered to
the Buyer complete and correct copies of the Certificate of Incorporation and
Bylaws as currently in effect of the Company.
The term "Material Adverse Effect" as used in this Agreement, shall mean a
material adverse effect on the business, results of operations or financial
condition of the Company.
For purposes of this Agreement, the loss of Employees (as defined in
Section 5.10 hereof) pursuant to the Voluntary Retirement Incentive Program
("VRIP") or the Voluntary Separation Incentive Program ("VSIP") is deemed not
to be a "Material Adverse Effect."
10
(c) The Company does not own the majority of the outstanding voting
capital stock or other interest of any corporation, partnership, proprietorship,
trust, association or other business organization.
3.2. The Company's Capitalization. The authorized capital stock of the
------------------------------
Company consists of 100,000 shares of common stock, 51,143 shares of which are
issued and outstanding and owned by PECO Energy. All outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable. Other than this Agreement, there is no subscription, option,
warrant, call, right, agreement or commitment relating to the issuance, sale,
delivery or transfer by the Company or PECO Energy (including any right of
conversion or exchange under any outstanding security or other instrument) of
any capital stock of the Company. There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
outstanding shares of capital stock of the Company.
3.3. Title to Stock. PECO Energy owns the Company Common Stock, free and
--------------
clear of all pledges, security interests, liens, charges, encumbrances, claims,
options or limitations affecting its abilities to vote such shares or to
transfer such shares to the
11
Buyer. At the Closing, the Buyer will acquire good title to the Company Common
Stock, free and clear of all pledges, security interests, liens, charges,
encumbrances, claims, options or limitations of any nature whatsoever.
3.4. Authority Relative to this Agreement. PECO Energy has full
------------------------------------
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of PECO Energy and no
other corporate proceedings on the part of PECO Energy are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by PECO Energy,
and assuming that this Agreement constitutes a valid and binding agreement of
Buyer, subject to the receipt of the PECO Energy Required Regulatory Approvals
(as hereinafter defined), and the Buyer Required Regulatory Approvals (as
hereinafter defined), constitutes a valid and binding agreement of PECO Energy,
enforceable against PECO Energy in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy,
12
insolvency, moratorium or other similar laws affecting or relating to
enforcement of creditors, rights generally or general principles of equity.
3.5. Consents and Approvals; No Violation. (a) Except as set forth in
------------------------------------
Schedule 3.5, and other than obtaining the PECO Energy Required Regulatory
Approvals and the Buyer Required Regulatory Approvals, neither the execution and
delivery of this Agreement by PECO Energy nor the performance by PECO Energy of
its obligations under this Agreement will (i) conflict with or result in any
breach of any provision of the Articles of Incorporation or Bylaws of PECO
Energy or the Certificate of Incorporation or Bylaws of the Company, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (a) where the
failure to obtain any such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not have, in the aggregate, a Material
Adverse Effect or (b) for those requirements which become applicable to PECO
Energy as a result of the specific regulatory status of the Buyer (or any of its
affiliates) or as a result of any other facts that specifically relate to the
business or activities in which the Buyer (or any of its affiliates) is or
13
proposes to be engaged; (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, deed of trust, franchise,
permit, concession, contract, license, agreement or other instrument or
obligation to which PECO Energy or the Company is a party or by which PECO
Energy or the Company, or any of their respective assets may be bound, except
for such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or which would not have,
in the aggregate, a Material Adverse Effect or a material adverse effect on the
ability of PECO Energy to perform its obligations under this Agreement; or (iv)
violate any law, order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, or any of its assets, which violation together with
all other violations would have a Material Adverse Effect.
(b) Except as set forth in Schedule 3.5 and except for (i) any required
approvals under the Federal Power Act of 1935 (the "Federal Power Act"), (ii)(A)
application by PECO Energy to and an order by the Maryland Public Service
Commission (the "MPSC") approving the transactions contemplated by this
14
Agreement and (B) the approval, if required, of the Pennsylvania Public Utility
Commission and any municipalities or other local governmental bodies in the
State of Maryland and Commonwealth of Pennsylvania, in the case of each of (A)
and (B), pursuant to the Public Service Commission Law of Maryland and the
Public Utility Code of Pennsylvania, respectively (the "Utility Codes"), (iii)
the approval, if required, of the Securities and Exchange Commission
(the "SEC") pursuant to the Public Utility Holding Company Act of 1935, as
amended (the "Holding Company Act"), (iv) the filings by PECO Energy and the
Buyer required by Title II of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") and (v) all approvals of any governmental
authority, including the Federal Energy Regulatory Commission (the "FERC"),
with respect to the transactions contemplated by the parties in connection with
the Power Purchase Agreement (as defined herein) (the applications, filings and
approvals referred to in clauses (i) through (v) are collectively referred to as
the "PECO Energy Required Regulatory Approvals"), no declaration, application,
filing or registration with, or notice to, or authorization, consent or approval
of any governmental or regulatory body or authority is necessary for the
15
consummation by PECO Energy of the transactions contemplated hereby, other than
such declarations, applications, filings, registrations, notices,
authorizations, consents or approvals which, if not obtained or made, will not,
in the aggregate, have a Material Adverse Effect.
3.6. Reports. Since January 1, 1991, PECO Energy and the Company, pursuant
-------
to the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the applicable State and
Commonwealth public utility laws, the Federal Power Act and the Holding Company
Act, have filed or caused to be filed with the SEC, the applicable state or
local utility commissions or regulatory bodies, or the FERC, as the case may
be, all material forms, statements, reports and documents (including all
exhibits, amendments and supplements thereto) required to be filed by them with
respect to the business and operations of the Company under each of the
Securities Act, the Exchange Act, the applicable Utility Codes, the Federal
Power Act and 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
16
appropriate act and the rules and regulations thereunder in effect on the date
each such report was filed.
3.7. Financial Statements. PECO Energy has previously furnished to the
---------------------
Buyer (i) audited balance sheets of the Company as of December 31, 1991, 1992
and 1993, and (ii) the related audited statements of income and retained
earnings and changes in financial position of the Company for each of the
fiscal years then ended, together with the respective reports thereon of
Coopers & Lybrand, the Company's independent auditors. The balance sheet of the
Company as of December 31, 1993 is hereinafter referred to as the "Company
Balance Sheet." The Company has also furnished an unaudited balance sheet of
the Company for the quarter ended March 31, 1994, together with the related
unaudited statement of income. Each of the balance sheets included in the
financial statements referred to in this Section 3.7 (including the related
notes thereto) presents fairly the financial position of the Company as of their
respective dates, and the other related statements included therein (including
the related notes thereto) present fairly the results of operations and changes
in financial position for the periods then ended, all in conformity with
generally
17
accepted accounting principles applied on a consistent basis, except as
otherwise noted therein.
3.8. Undisclosed Liabilities. Except as set forth in Schedule 3.8, the
-----------------------
Company has no liability or obligation, secured or unsecured (whether absolute,
accrued, contingent or otherwise, and whether due or to become due), which are
not accrued or reserved against in the Company Balance Sheet or disclosed in the
notes thereto in accordance with generally accepted accounting principles,
except those which either were incurred in the ordinary course of business,
whether before or after the date of the Company Balance Sheet, or those which in
the aggregate would not have a Material Adverse Effect.
3.9. Absence of Certain Changes or Events. Except (i) as set forth in
------------------------------------
Schedule 3.9, or in the reports, schedules, registration statements and
definitive proxy statements filed by the Company or PECO Energy with respect to
the Company since December 31, 1990 (the "PECO Energy SEC Reports") and (ii) as
otherwise contemplated by this Agreement, since the date of the Company Balance
Sheet there has not been: (a) any Material Adverse Effect; (b) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock, property or any combination
18
thereof) in respect of the Company Common Stock, or any redemption or other
acquisition by the Company of any shares of capital stock of the Company, or any
payment by the Company to PECO Energy; (c) any damage, destruction or casualty
losses, whether covered by insurance or not, which, in the aggregate, had a
Material Adverse Effect; (d) (i) any increase in the rate or terms of
compensation or benefits payable or to become payable by the Company to its
directors, officers or employees, except increases occurring in the ordinary
course of business and consistent with past practice (which shall include normal
periodic performance reviews and related compensation and benefit increases)
and except pursuant to the VRIP or the VSIP according to the terms of such
programs on the date hereof, (ii) any adoption, amendment or termination of any
Company Plan, except any adoption, amendment or termination occurring in the
ordinary course of business and consistent with past practice or to comply with
any applicable law or regulation or except pursuant to the VRIP or the VSIP;
(e) any entry into any agreement, commitment or transaction (including without
limitation any borrowing, capital expenditure or capital financing) or the
incurrence of any obligation or liability, whether absolute, accrued, contingent
or otherwise and whether
19
due or to become due, by the Company in excess of $250,000, except agreements,
commitments, transactions, obligations or liabilities entered into or incurred
in the ordinary course of business and consistent with past practice or as
contemplated herein; (f) any material change by PECO Energy or the Company, with
respect to the Company, in accounting methods, principles or practices except as
required by generally accepted accounting principles; (g) any strike, concerted
work stoppage or slow-down or any material charges or complaints of unfair labor
practices related to the Company filed with any authority; or (h) any written
communication to PECO Energy or the Company from any customers or suppliers or
agencies regulating the Company which, in the aggregate, would reasonably lead
PECO Energy or the Company to expect a Material Adverse Effect therefrom.
3.10. Title and Related Matters. Schedule 3.10 sets forth all of the
---------------------------
real property owned in fee by the Company. Except as set forth in Schedule
3.10 and except for Permitted Exceptions (as defined in Section 9.9), the
Company has good and marketable title to all of the real property listed on
Schedule 3.10 and all other assets which it purports to own that are reflected
in the Company Balance Sheet (other than those which
20
have been disposed of since the date thereof in the ordinary course of
business), free and clear of all security interests, liens, claims, charges, or
other encumbrances. There is no pending condemnation, expropriation, eminent
domain or similar proceeding affecting all or any portion of the real property
listed on Schedule 3.10 and to PECO Energy's knowledge, no such proceeding is
threatened or contemplated.
3.11. Leases. Schedule 3.11 lists, as of the date of this Agreement, all
------
real property leases under which the Company is a lessee or lessor and which (i)
provide for annual payments of more than $100,000 or (ii) are material to the
business, operations or financial condition of the Company. Except as set
forth in Schedule 3.11, all such leases are valid, binding and enforceable in
accordance with their terms, and are in full force and effect; there are no
existing material defaults by the Company thereunder; no event has occurred
which (whether with or without notice, lapse of time or both) would constitute a
material default thereunder.
3.12. Insurance. Except as set forth in Schedule 3.12, all material
---------
policies of fire, liability, workmen's compensation and other forms of insurance
owned or held by and insuring the Company are in full
21
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 retrospective premiums which may be payable with respect to
comprehensive general liability and workmen'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. Such policies are valid, outstanding and
enforceable policies and will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement. The
insurance policies to which the Company is a party are sufficient for
compliance with all material requirements of law and of all material agreements
to which the Company is a party. Except as described in Schedule 3.12, as of
the date of this Agreement the Company has not been refused any insurance with
respect to its assets or operations 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.
3.13. Environmental Matters. (a) For purposes of this Section 3.13:
---------------------
22
(i) "Environmental Law" means any Federal, state or local statute,
regulation or ordinance, and any permits and legally binding decisions, orders,
directives, rules and regulations of federal, state and local governmental
agencies and authorities thereunder, relating to the protection of any water or
water vapor, any land, including land surface or subsurface, air, fish,
wildlife, biota and all other natural resources, and/or governing the use,
storage, treatment, generation, transportation, processing, handling,
production, clean-up or disposal of Hazardous Materials.
(ii) "Hazardous Material", means, without limitation, any flammable,
explosive or radioactive material, radon, asbestos, ureaformaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane and any other material or substance which is defined as a "hazardous
waste," "hazardous material," "hazardous substance," "extremely hazardous
waste," "restricted hazardous waste," "pollutant," "toxic waste" or "toxic
substance" under
23
any provision of the comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") (42 U.S.C. (S) 9601 et seq.), the Resource Conservation
------
and Recovery Act (42 U.S.C. (S) 6901 et seq.), the Toxic Substances Control Act
------
(15 U.S.C. (S) 2601 et seq.), or any other applicable Environmental Law or any
------
regulations promulgated pursuant thereto.
(iii) "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge or dispersal, into the environment, at
or from any property owned or operated by the Company or related to Hazardous
Materials generated by the Company.
(iv) "Remedial Action" means all actions required to (x) clean up, remove
or treat any Hazardous Material; (y) prevent the Release or threat of Release,
or minimize the further Release of any Hazardous Material so it does not
endanger or threaten to endanger public health or welfare or the environment; or
(z) perform preremedial studies and investigations or post-remedial
24
monitoring and care directly related to or in connection with any such remedial
action.
(b) With respect to applicable Environmental Laws, except as set forth in
Schedule 3.13
(i) The Company is in substantial compliance with all applicable
Environmental Laws;
(ii) Under applicable Environmental Laws, the Company has obtained or has
submitted timely applications for all environmental permits required for the
operation of its businesses as presently conducted on the date hereof;
(iii) Neither PECO Energy, the Company nor any other subsidiary of PECO
Energy has received any written communication with any governmental authority
or other party with respect to (A) the actual or alleged violation by the
Company of any Environmental Laws, (B) any actual or proposed Remedial Action
relating to the Company or (C) any Release or threatened Release by the Company
of a Hazardous Material;
25
(iv) To PECO Energy's knowledge, there are no underground storage tanks,
active or abandoned, at any property owned, operated or leased by the Company;
(v) No written notification of a Release of a Hazardous Material has been
filed by or on behalf of the Company with respect to any property when owned,
operated or leased by the Company. To PECO Energy's knowledge, no property of
the Company is listed or proposed for listing on the National Priority List
promulgated pursuant to CERCLA or on any similar state list of sites requiring
investigation or clean-up;
(vi) To PECO Energy's knowledge, the Company is not required by any
applicable Environmental Law to place any notice or restriction relating to the
presence or disposal of Hazardous Material in the deed to any property owned by
it; and
(vii) To PECO Energy's knowledge, no Release of any polychlorinated
biphenyls, and no Release of petroleum or petroleum products, other than minor
spills
26
and leaks occurring in the ordinary course of business, has occurred at, on or
under any property now or when formerly owned, operated or leased by the
Company, except for Releases that have been remediated in accordance with
applicable Environmental Laws.
3.14. Labor Matters. The Company is neither party to nor subject to any
-------------
labor union or collective bargaining agreements. Except to the extent set forth
in Schedule 3.14 and except for such matters as will not individually have a
Material Adverse Effect: (a) the Company is in compliance with all applicable
laws, regulations, rules, and orders respecting employment and employment
practices, wages and hours, and any terms or conditions of employment; (b)
there is no unfair labor practice charge or complaint pending against the
Company before the National Labor Relations Board; (c) there is no charge of
unlawful discrimination pending against the Company before the Equal Employment
Opportunity Commission or any State fair employment practices agency; (d) there
is no audit or other investigation of the Company being conducted by the Office
of Federal Contract Compliance Programs of the United States Department of
Labor; (e) there is no investigation of the Company being conducted by the Wage
and Hour
27
Division of the United States Department of Labor; (f) there is no labor
strike, dispute, work slowdown or stoppage actually pending or threatened
against or affecting the Company, and the Company has not experienced any
primary work stoppage since December 31, 1991; (g) no representation petition
respecting any employees of the Company has been filed with the National
Labor Relations Board; and (h) there is no proceeding or litigation of any sort
whatsoever pending or threatened against the Company involving employees of the
Company and their wages, hours, or any terms or conditions of their employment
(including any benefits relating thereto but excluding any claims for benefits
made in the ordinary course of business and consistent with past practice under
the Company's employee benefit plans).
3.15. ERISA; Benefit Plans.
--------------------
(a) There is no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code"), with respect to any Plan (as hereinafter
defined) that is subject to such Sections. Each Company Plan (as
28
hereinafter defined), except for such matters as will not, in the aggregate,
have a Material Adverse Effect, is and has been operated in compliance in all
respects with the presently applicable provisions of ERISA and the Code. The
Company has not incurred any liability under Title IV of ERISA to the Pension
Benefit Guaranty Corporation in connection with any Plan which is subject to
Title IV of ERISA which has not been fully paid prior to the date hereof, other
than liability for premiums due the Pension Benefit Guaranty Corporation (the
"PBGC"), which premiums have been or will be paid when due. Except as set
forth in Schedule 3.15, the Internal Revenue Service has issued, with respect to
each Company Plan intended to be tax qualified under Sections 401(a) and 501(a)
of the Code, a letter determining that such Plan is qualified and its related
trust is exempt from United States Federal Income Tax under Sections 401(a) and
501(a) of the Code, respectively, and there has been no occurrence since the
date of any such determination letter which has adversely affected such
qualification. Except as set forth in Schedule 3.15, no Plan is a "multiple
employer plan" (within the meaning of Section 413(c) of the Code) or a
"multiemployer plan" (as defined in Section 3(37) of ERISA), and no withdrawal
liability has been incurred by or asserted
29
against the Company with respect to any employee pension benefit plan which is a
multiple employer plan or a multiemployer plan.
(b) Schedule 3.15 lists all Company Plans. Accurate and complete copies
of all Company Plans and the summary descriptions, the most recent annual
reports on Internal Revenue Service Form 5500 and actuarial reports, if
applicable, have been previously provided to the Buyer.
(c) Each Plan that is a "group health plan" (as defined in Section 4980B of
the Code) has been operated in compliance with Section 4980B of the Code at all
times, except for such matters as will not have a Material Adverse Effect.
Except as provided in Schedule 3.15 and except as required by Section 4980B of
the Code, the Company does not maintain any plan that provides medical benefits
or life insurance benefits in respect of any employees or former employees of
the Company beyond their retirement. Except as set forth in Schedule 3.15, no
Plan provides for severance pay, unemployment compensation or any similar
payment with respect to any current or former employee, officer, director, or
agent of the Company. The consummation of the transactions contemplated by this
Agreement will not: (i) entitle
30
any such individual to severance pay, unemployment compensation or other
similar payment; (ii) accelerate the time of payment or vesting of any amount;
(iii) increase the amount of compensation due to any such individual; or (iv)
constitute a "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code).
(d) For purposes of this Agreement, "Plan" shall mean all employee plans,
practices and arrangements, including without limitation, all employee benefit
plans (within the meaning of Section 3(3) of ERISA), employee pension benefit
plans, programs, arrangements or agreements, all health, medical, welfare,
disability, life insurance, bonus, severance pay and other employee benefit or
fringe benefit plans maintained by or with respect to which the Company has any
fixed or contingent, direct or indirect liability, and "Company Plans" shall
mean all Plans that provide benefits to or in respect of employees or former
employees of the Company or their beneficiaries.
3.16. Certain Contracts and Arrangements. Except as listed in Schedule
----------------------------------
3.16 or as reflected in the Company Balance Sheet, as of the date of this
Agreement, the Company is not a party to any written: (1) employment
agreement; (2) indenture, mortgage, note,
31
installment obligation, agreement or other instrument relating to the borrowing
of money in excess of $100,000 by the Company or the guaranty of any obligation
for the borrowing of money in excess of $100,000 by the Company; or (3)
agreement which (i) is not terminable by the Company on ninety or fewer days'
notice at any time without penalty, (ii) has a remaining term, as of the date of
this Agreement, of over one year in length of obligation on the part of the
Company; and (iii) involves the receipt or payment by the Company of more than
$100,000, except for agreements with suppliers, distributors and sales
representatives entered into in the ordinary course of business and consistent
with past practice. Except as set forth in Schedule 3.16, there is not, under
any of the aforesaid obligations, any default or event which, with notice or
lapse of time or both, would constitute a default on the part of the Company,
except such events of default and other events as to which requisite waivers or
consents have been obtained or which would not, in the aggregate, have a
Material Adverse Effect.
3.17. Legal Proceedings, etc. Except as set forth in Schedule 3.17, there
-----------------------
are no claims, actions, or proceedings pending or investigation pending or, to
PECO Energy's knowledge, threatened against or relating to
32
the Company before any court, governmental or regulatory authority or body
acting in an adjudicative capacity, which, if adversely determined, would have a
Material Adverse Effect. Except as set forth in schedule 3.17, the Company is
not subject to any outstanding judgment, rule, order, writ, injunction or
decree of any court, governmental or regulatory authority or other body acting
in an adjudicative capacity which has, or is reasonably likely to have in the
aggregate, a Material Adverse Effect.
3.18. Permits. The Company has all material permits, licenses,
-------
franchises and other governmental authorizations, consents and approvals (other
than with respect to Environmental Laws) (collectively, "Permits") necessary to
conduct its business as presently conducted, except where the failure to have
such Permits does not have a Material Adverse Effect. Except as set forth in
Schedule 3.18, the Company has not received any written notification that it is
in violation of any of such Permits, or any law, statute, order, rule,
regulation, ordinance or judgment of any governmental or regulatory body or
authority applicable to it, except for notifications of violations which would
not, in the aggregate, have a Material Adverse Effect. The Company is in
compliance with all Permits, laws, statutes,
33
orders, rules, regulations, ordinances, or judgments of any governmental or
regulatory body or authority applicable to it, except for violations which, in
the aggregate, do not have, and are not reasonably likely to have, a Material
Adverse Effect.
3.19. Regulation as a Utility. (a) The Company is an operating public
-----------------------
utility not subject to registration under the Holding Company Act and is not a
subsidiary of a registered public utility holding company under the Holding
Company Act. Except as set forth on Schedule 3.19(a), the Company is not
subject to regulation as a public utility or public service company (or similar
designation) by the United States, any State or Commonwealth of the United
States, any foreign country or any municipality or any political subdivision of
the foregoing.
(b) PECO Energy is a public utility holding company exempt from
registration under the Holding Company Act and is not a subsidiary of a public
utility holding company registered under the Holding Company Act. Except as set
forth on Schedule 3.19(b), PECO Energy is not subject to regulation as a public
utility or public service company (or similar designation) by the United States,
any State or Commonwealth of the United States,
34
any foreign country or any municipality or any political subdivision of the
foregoing.
3.20. Taxes. (a) The Company, or PECO Energy on the Company's behalf,
-----
has (i) filed all Tax Returns (as hereinafter defined) required to be filed by
or with respect to the Company as of the date hereof, other than those Tax
Returns the failure of which to file would not have a Material Adverse Effect,
and all such filed Tax Returns are true and complete in all material respects
and (ii) duly paid in full (or there has been paid on its behalf) or made
adequate provision for on the appropriate books and records (in accordance with
generally accepted accounting principles) all Taxes (as hereinafter defined)
shown to be due on such filed Tax Returns. Except as set forth in Schedule
3.20, (A) neither PECO Energy nor the Company has received any written notice of
deficiency or assessment from any taxing authority with respect to liabilities
for Taxes of the Company which have not been fully paid or finally settled, (B)
any such deficiency shown in such Schedule 3.20 is being contested in good faith
through appropriate proceedings, and (C) neither PECO Energy nor the Company has
any knowledge of any pending or threatened action or proceeding by any taxing
authority with respect to liabilities for Taxes of the Company.
35
The federal income and material state income Tax Returns of PECO Energy, which
include the Company, have been examined or the applicable statutory periods of
limitations have expired for all periods to and including those set forth in
Schedule 3.20, and except as set forth in Schedule 3.20, there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitation for such Taxes for any period.
(b) Except as set forth in Schedule 3.20, no power of attorney or similar
instrument granted by the Company or PECO Energy with respect to matters
affecting Taxes of the Company is currently in force.
(c) Except as set forth in Schedule 3.20, there are no material liens with
respect to Taxes (except for liens with respect to real property Taxes not yet
due) upon any of the assets of the Company.
(d) Except as set forth in Schedule 3.20, (i) no consent to the
application of Section 341(f)(2) of the Code (or any predecessor provision) has
been made or filed by or with respect to the Company or any of its assets, (ii)
none of the assets of the Company is an asset or property that is (A) required
to be treated as being owned by any person (other than the Company)
36
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately before the enactment of the Tax
Reform Act of 1986, or (B) tax-exempt use property within the meaning of Section
168(h)(1) of the Code.
(e) The Company has not agreed to nor is it required to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
by reason of any change in any accounting method prior to the date hereof, and
there is no application pending with any taxing authority requesting permission
for any changes in any accounting method of the Company. To the knowledge of
PECO Energy, the Internal Revenue Service has not proposed in writing any such
adjustment or change in accounting method.
(f) Other than as disclosed in Schedule 3.20, the Company is not a party
to nor has any obligation under, any Tax sharing, allocation or similar
agreement.
(g) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to, income, gross receipts, ad valorem, excise, real property, personal
37
property, sales, use, transfer, franchise, employment, payroll, withholding,
social security, medicare or other taxes, including any interest, penalties or
additions attributable there to.
(h) For purposes of this Agreement, the term "Tax Return" shall mean 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.
3.21. Disclosure. Neither this Agreement, nor any Schedule, certificate,
----------
statement, writing, financial statement or document that is specifically
required by this Agreement to be furnished to the Buyer by or on behalf of PECO
Energy, as of the date thereof, will contain any untrue statement of a material
fact or omits or will fail to state a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
false or misleading.
38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer represents and warrants to PECO Energy as follows:
4.1. Organization. The Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and the
Commonwealth of Virginia and has all requisite corporate power to perform its
obligations under this Agreement. The Buyer has heretofore delivered to PECO
Energy complete and correct copies of its Certificate of Incorporation and By-
Laws (or other similar governing documents), as currently in effect.
4.2. Authority Relative to this Agreement. The Buyer has full corporate
------------------------------------
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Buyer and no other corporate
proceedings on the part of the Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Buyer, and assuming that this
Agreement
39
constitutes a valid and binding agreement of PECO Energy, subject to the receipt
of the Buyer Required Regulatory Approvals and the PECO Energy Required
Regulatory Approvals, constitutes a valid and binding agreement of the Buyer,
enforceable against the Buyer in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to enforcement of creditors, rights
generally or general principles of equity.
4.3. Consents and Approvals; No Violation. (a) Except as set forth in
------------------------------------
Schedule 4.3, and other than obtaining the Buyer Required Regulatory Approvals
and the PECO Energy Required Regulatory Approvals, neither the execution and
delivery of this Agreement by the Buyer nor the performance by the Buyer of its
obligations under this Agreement will (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation or By-Laws (or other
similar governing documents) of the Buyer, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (a) where the failure to obtain any such
consents, approvals, authorizations, or
40
permits, or to make such filings or notifications would not, in the aggregate,
have a material adverse effect on the ability of the Buyer to perform its
obligations under this Agreement or (b) for those requirements which become
applicable to the Buyer as a result of the specific regulatory status of the
Company, PECO Energy (or any of their respective affiliates) or as a result of
any other facts that specifically relate to the business or activities in which
the Company, PECO Energy (or any of their respective affiliates) is or proposes
to be engaged, (iii) to the best knowledge of the Buyer, 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,
deed of trust, franchise, permit, concession, contract, license agreement or
other instrument or obligation to which the Buyer is a party or by which any of
its assets may be bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or which, in the aggregate, would not have a material adverse
effect on the ability of the Buyer to perform its obligations under this
Agreement.
41
(b) Except as set forth in Schedule 4.3 and except for (i) any required
approvals under the Federal Power Act, (ii) (A) application by the Buyer to, and
an order by, the MPSC approving the transactions contemplated by the Agreement
and the related approvals applied for by the Buyer, (B) application by the
Buyer to and an order by the Delaware Public Service Commission and the Virginia
State Corporation Commission approving the transactions contemplated by this
Agreement and (C) approval, if required, of municipalities or other local
governmental bodies in the States of Delaware and Maryland and the Commonwealth
of Virginia, in the case of each of (A), (B) and (C), pursuant to the Delaware
Public Utility Act of 1974, the Maryland Public Service Commission Law and
Section 56-1 et seq. of the Virginia Code, (iii) the approval, if required, of
------
the SEC pursuant to the Holding Company Act, (iv) the filings by the Buyer and
PECO Energy required by Title II of the HSR Act and (v) all approvals of any
governmental authority, including the FERC with respect to the transactions
contemplated by the parties in connection with the Power Purchase Agreement
(the filings and approvals referred to in clauses (i) through (v) are
collectively referred to as the "Buyer Required Regulatory Approvals"), no
declaration, application,
42
filing or registration with, or notice to, or authorization, consent or approval
of any governmental or regulatory body or authority is necessary for the
consummation by the Buyer of the transactions contemplated hereby, other than
such declarations, applications, filings, registrations, authorizations,
consents or approvals which, if not obtained or made, will not, in the
aggregate, have a material adverse effect on the ability of the Buyer to perform
its obligations under this Agreement.
4.4. Regulation as a Utility. The Buyer is not a public utility holding
-----------------------
company under the Holding Company Act. Except in the States of Delaware and
Maryland and the Commonwealth of Virginia and by the FERC, the Buyer is not
subject to regulation as a public utility or public service company (or similar
designation) by the United States, any State or Commonwealth of the United
States, any foreign country or any municipality or any political subdivision of
the foregoing.
4.5. Acquisition of Stock for Investment. The Buyer is acquiring the
-----------------------------------
Company Common Stock for investment and not with a view toward, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling such Company Common Stock. The Buyer agrees that the
Company
43
Common Stock may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act, except pursuant to an exemption from such registration available under the
Securities Act.
4.6. Financing. The Buyer has sufficient funds available or has received
---------
written commitments from responsible financial institutions to provide
sufficient funds on the Closing Date to pay the Purchase Price.
ARTICLE V
COVENANTS OF THE PARTIES
------------------------
5.1. Conduct of Business of the Company. Except as described in Schedule
----------------------------------
5.1, during the period from the date of this Agreement to the Closing Date, PECO
Energy will cause the Company to conduct its business and operations and
maintain the assets of the Company in good repair and condition (subject to
ordinary wear and tear), all according to its ordinary and usual course of
business consistent with past practice. PECO Energy will use its reasonable
best efforts to preserve intact the business organization of the Company and its
goodwill, and keep available the services of its present
44
officers and key employees, and preserve intact the business relationships with
suppliers, customers and others having a business relationship with the Company,
and will also maintain its present relationship in all material respects with
the Company. Without limiting the generality of the foregoing, and, except as
contemplated in this Agreement or as described in Schedule 5.1, PECO Energy will
not prior to the Closing Date, without the prior written consent of the Buyer,
permit the Company to:
(a) (i) create, incur or assume any obligation or liability, whether
absolute, accrued, contingent or otherwise and whether due or to become due, in
excess of $250,000, other than in the ordinary course of business and consistent
with past practice, including obligations in respect of capital leases but
excluding purchase money mortgages granted in connection with the acquisition
of property in the ordinary course of business and consistent with past
practice; or (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except in the ordinary course of business and consistent with
past practice; provided, that the Company may
45
endorse negotiable instruments in the ordinary course of business and consistent
with past practice;
(b) declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of the
Company's capital stock (other than pursuant to Section 5.16), or redeem or
otherwise acquire any shares of the Company's capital stock;
(c) (i) increase the rate or terms of compensation or benefits payable or
to become payable by the Company to its directors, officers or employees, except
increases occurring in the ordinary course of business and consistent with past
practice (which shall include normal periodic performance reviews and related
compensation and benefit increases) and except pursuant to the VRIP or the VSIP
according to the terms of such programs on the date hereof; (ii) adopt, amend or
terminate any Company Plan, except any adoption, amendment or termination
occurring in the ordinary course of business and consistent with past practice
or to comply with any applicable law or regulation; or (iii) hire any new
employee, other than as necessary in order to conduct its business in its
ordinary course and consistent with past practice. Any such employee may only
be hired to replace a then current employee and
46
such newly hired employee shall not receive a salary or benefits in excess of
the departing employee;
(d) amend the Articles of Incorporation or Bylaws of the Company;
(e) issue any equity or debt security other than debt securities meeting
the requirements of clause (a) above;
(f) purchase, sell, lease, dispose of or otherwise transfer or subject to
any lien or encumbrance (other than liens and encumbrances set forth in Schedule
3.10, 5.16 and Permitted Exceptions), any assets of the Company, other than,
with respect to any individual item having a value of less than $100,000 and
with respect to all assets of the Company the aggregate value of which shall not
exceed $500,000 in the ordinary course of business and consistent with past
practice;
(g) change in any material respect or terminate any of the insurance
policies referred to in Section 3.12 in effect on the date hereof, unless
equivalent coverage at an equivalent or lesser price is obtained;
(h) perform any act or omit to perform any act which would cause a breach
or default under any contract, lease or agreement set forth on Schedule 3.11
47
or Schedule 3.16, except where any such breaches or defaults would not, in the
aggregate, have a Material Adverse Effect;
(i) enter into any new or terminate, renew, extend or renegotiate any
existing power purchase, exchange or transmission contract necessary to supply
power to the Company's service area;
(j) engage in any transaction or transactions with PECO Energy or any
affiliate of PECO Energy, except for transactions contemplated by this Agreement
or in the ordinary course of business and consistent with past practice or which
in the aggregate do not exceed $100,000;
(k) make any capital expenditure other than those which are set forth in
the Company's Capital Expenditure Forecast, a copy of which previously has been
provided to the Buyer in the management presentation, except that PECO Energy or
the Company shall not make any capital expenditure with respect to the new
Service/Headquarters Building that is currently being constructed at the
Peninsula Industrial Park, Lums Road Site, North East, Maryland (the "New
Service/HQ Building");
48
(l) other than pursuant to clause (k) above, make any capital expenditures
or capital expenditure commitments or enter into any lease, as lessee, of
capital equipment or other property, except with respect to any individual
capital expenditure or lease having a cost to the Company not in excess of
$100,000 and with respect to all capital expenditures and leases the aggregate
cost of which shall not exceed $500,000 incurred in the ordinary course of
business and consistent with past practice;
(m) make any changes in accounting principles, methods or practices or
financial policies and practices applicable to the Company, except as required
by generally accepted accounting principles;
(n) change the Company's taxable year;
(o) make, file, or enter into (whether before or after the Closing Date)
any election, consent, or agreement described in Section 3.20(d) or Section
3.20(e) hereof with respect to the Company or any of its assets;
(p) enter into, amend, terminate or waive any material provision of any
agreement, commitment or transaction not described in clauses (a) through (p)
above (including without limitation any borrowing, capital expenditure or
capital financing), material to
49
the business, operations or financial condition of the Company, except
agreements, commitments or transactions in the ordinary course of business and
consistent with past practice or as contemplated herein;
(q) commence actual construction of any new facilities, except for those
projects set forth on Schedule 5.1;
(r) engage in any activity which would cause a change in the status of the
Company, under any applicable regulatory body;
(s) except with respect to those matters set forth on Schedule 5.1, file
any applications, petitions, motions, orders, briefs, settlement agreements or
other papers in any proceeding before any governmental authority, or make any
appeals related thereto; or
(t) enter into any contract, agreement, commitment or arrangement, whether
written or oral, with respect to any of the transactions set forth in the
foregoing paragraphs (a) through (s).
5.2. Access to Information.
---------------------
(a) Between the date of this Agreement and the Closing Date, PECO Energy
will cause the Company, during ordinary business hours and upon reasonable
notice, to (i) give the Buyer and its accountants, counsel,
50
environmental consultants, financial advisors and other authorized
representatives (the "Buyer Representatives") reasonable access to all books,
records, plants, offices and other facilities and properties of the Company to
which the Buyer is permitted access by law, (ii) permit the Buyer to make such
reasonable inspections thereof as the Buyer may reasonably request; (iii) cause
its officers and advisors to furnish the Buyer with annual and quarterly
financial statements of the Company for all periods between the date hereof and
the closing Date and such other financial and operating data and other
information with respect to the business and properties of the Company as the
Buyer may from time to time reasonably request; (iv) cause its officers and
advisors to furnish the Buyer a copy of each report, schedule or other document
filed or received by them with the SEC, MPSC or FERC with respect to the Company
provided, however, that (A) any such investigation shall be conducted in such a
- -------- -------
manner as not to interfere unreasonably with the operation of the business of
the Company, (E) the Company shall not be required to take any action which
would constitute a waiver of the attorney-client privilege and (C) the Company
need not
51
supply the Buyer with any information which the Company is under a legal
obligation not to supply.
(b) All information furnished to or obtained by the Buyer and the Buyer
Representatives pursuant to this Section 5.2 shall be subject to the provisions
of the Confidentiality Agreement, dated March 25, 1994 between PECO Energy and
the Buyer (the "Confidentiality Agreement") and shall be treated as
"Information" (as defined in the Confidentiality Agreement).
5.3. Expenses. Whether or not the transactions contemplated hereby are
--------
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by the party incurring
such costs and expenses.
5.4. Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, each of the parties hereto will use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
From time to time after the date hereof, without further consideration, PECO
Energy will, at its own expense, execute and deliver such documents to the Buyer
as the Buyer may reasonably request in order more effectively to vest in the
Buyer good title to the Company Common Stock. From time to time after the date
hereof, without further consideration, the Buyer will, at its own expense,
execute and deliver such documents to PECO Energy as PECO Energy may reasonably
request in order more effectively to
52
consummate the sale of the Company Common Stock pursuant to this Agreement.
5.5. Public Statements. The parties shall consult with each other prior
-----------------
to issuing any public announcement, statement or other disclosure with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such public announcement, statement or other disclosure prior to such
consultation, except as may be required by law and except that the parties may
make public announcements, statements or other disclosures with respect to this
Agreement and the transactions contemplated hereby to the extent and under the
circumstances in which the parties are expressly permitted by the
Confidentiality Agreement to make disclosures of "Information" (as defined in
the Confidentiality Agreement).
53
5.6. Consents and Approvals.
----------------------
(a) PECO Energy and the Buyer shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice any
notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. The parties shall consult with each other as to the appropriate time of
filing such notifications and shall use their best efforts to make such filings
at the agreed upon time, to respond promptly to any requests for additional
information made by either of such agencies, and to cause the waiting periods
under the HSR Act to terminate or expire at the earliest possible date after the
date of filing.
(b) PECO Energy and the Buyer shall cooperate with each other to (i)
promptly prepare and file all necessary documentation, (ii) effect all necessary
applications, notices, petitions and filings and execute all agreements and
documents, (iii) use all reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all governmental bodies and (iv) use
all reasonable efforts to obtain all necessary Permits, consents, approvals and
authorizations of all other parties, in the case of each
54
of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to
consummate the transactions contemplated by this Agreement (including, without
limitation, the PECO Energy Required Regulatory Approvals and the Buyer Required
Regulatory Approvals) or required by the terms of any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument to which the Company or the Buyer or any of its
subsidiaries is a party or by which any of them is bound. PECO Energy shall
have the right to review and approve in advance all characterizations of the
information relating to PECO Energy; the Buyer shall have the right to review
and approve in advance all characterizations of the information relating to the
Buyer; and each of PECO Energy and the Buyer shall have the right to review and
approve in advance all characterizations of the information relating to the
Company and the transactions contemplated by this Agreement which appear in any
filing made in connection with the transactions contemplated hereby. The
parties hereto agree that they will consult with each other with respect to the
obtaining of all such necessary Permits, consents, approvals and authorizations
of all third parties and governmental bodies. PECO Energy and the Buyer shall
55
designate separate counsel with respect to all applications, notices, petitions
and filings (joint or otherwise) relating to this Agreement and the transactions
contemplated hereby and in connection with the Power Purchase Agreement
(including but not limited to the PECO Energy Required Regulatory Approvals
and the Buyer Required Regulatory Approvals) on behalf of PECO Energy, the
Company and the Buyer with all governmental bodies.
(c) The parties hereto shall consult with each other prior to proposing or
entering into any stipulation or agreement with any Federal, State, Commonwealth
or local governmental authority or agency or any third party in connection with
any Federal, State, Commonwealth or local governmental consents and approvals
legally required for the consummation of the transactions contemplated hereby
and shall not propose or enter into any stipulation or agreement without the
other party's prior written consent, which consent shall not be unreasonably
withheld.
5.7. Fees and Commissions. PECO Energy and the Buyer each represent and
--------------------
warrant to the other that, except for Morgan Stanley & Co. Incorporated, which
is acting for and at the expense of PECO Energy, and Merrill Lynch, Pierce,
Fenner & Smith Incorporated,
56
which is acting for and at the expense of the Buyer, no broker, finder or other
person is entitled to any brokerage fees, commissions or finder's fees in
connection with the transaction contemplated hereby by reason of any action
taken by the party making such representation. PECO Energy and the Buyer will
pay to the other or otherwise discharge, and will indemnify and hold the other
harmless from and against, any and all claims or liabilities for all brokerage
fees, commissions and finder's fees (other than as described above) incurred by
reason of any action taken by such party.
5.8. Sales and Transfer Taxes. Notwithstanding anything in this Agreement
------------------------
to the contrary, all transfer taxes (including all stock transfer taxes, if any)
incurred in connection with this Agreement and the transactions contemplated
hereby shall be borne by the Buyer, and the Buyer will, at its own expense, file
all necessary Tax Returns and other documentation with respect to all such
transfer taxes, and, if required by applicable law, PECO Energy will join in the
execution of any such Tax Returns or other documentation.
5.9. Supplements to Schedules. From time to time prior to the Closing
------------------------
Date, PECO Energy shall supplement
57
or amend the Schedules required by Article III with respect to any matter
hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Schedules; provided, however, that any matters included therein, by so
supplementing or amending the Schedules, will not be deemed to cure any breach
of any representation or warranty made in this Agreement.
5.10. Employees. (a) Individuals who are employees of the Company as of
---------
the Closing Date shall not exceed 92 less any employees of the Company who prior
to the Closing Date participate in either the VRIP or the VSIP plus any person
who is hired by the Company pursuant to Section 5.1(c)(iii). Employees of the
Company as of the Closing Date ("Employees") will be employed immediately
following the Closing Date in such positions as the Buyer shall thereafter
determine, giving due consideration to the previous work history, job
experience, and qualifications of the Employees as well as the Buyer's needs.
(b) (i) For a period of three years following the Closing Date, Employees
not covered after the Closing Date by a collective bargaining agreement shall be
treated as any other similarly-situated employees of the Buyer in the event of
any reductions in the Buyer's
58
working force, without regard to whether their past employment was with the
Company or the Buyer.
(ii) Employees that are covered after the Closing Date by a collective
bargaining agreement shall be treated as provided in the then-effective
collective bargaining agreement between the Buyer and the collective bargaining
representative of the Employees in the event of any reductions in the Buyer's
working force; provided, that the Buyer shall negotiate in good faith with the
collective bargaining representative and thereby attempt to ensure that, for a
period of three years following the Closing Date, Employees who accept
positions with the Buyer that are covered by a collective bargaining agreement
shall be treated as any other similarly-situated employees of the Buyer in the
event of any reduction in the Buyer's working force, without regard to whether
their past employment was with the Company or the Buyer. Nothing in the
foregoing shall require, however, that the Buyer make any concession or other
commitment during such negotiations unless the Buyer determines, in its sole
and unreviewable discretion, that is appropriate to do so.
(c) Except as otherwise provided in paragraph (d) below, immediately
following the Closing Date, the
59
Employees shall be employed on substantially the same terms and conditions as,
and shall be covered by benefit plans or arrangements which, in the aggregate,
provide substantially equivalent benefits (at no additional cost) as were
provided to the Employees immediately prior to the Closing Date, except to the
extent otherwise required by the then-effective collective bargaining agreement
covering such Employees (as applicable). Such Employees shall receive credit
for past service with the Company, PECO Energy or its subsidiaries for purposes
of eligibility, participation, vesting, benefit accrual or entitlement under any
such benefit plans and arrangements, including, but not limited to, satisfaction
of any preexisting condition exclusion under any such plan providing health
care coverage.
(d) Effective as of the Closing Date, the Buyer will establish a pension
plan for the benefit of all Employees who continue in the employment of the
Buyer following the Closing Date ("Continuing Employees"). Such plan (the
"Buyer's Plan") shall provide accrued pension benefits for each Continuing
Employee in respect of service prior to the Closing Date in an amount at least
equal to the amount of such benefits accrued as of the Closing Date by such
Continuing
60
Employee (the "PECO Accrued Benefit") under the Service Annuity Plan of
Philadelphia Electric Company ("PECO Energy's Plan"). The Buyer represents and
warrants that the Buyer's Plan is or will become qualified under Section 401(a)
of the Code. Credit for prior service and earnings with PECO Energy or its
affiliates in respect of each Continuing Employee for purposes of eligibility
and vesting and for accrual of benefits shall be provided under the Buyer's
Plan. PECO Energy shall cause to be transferred to the Buyer's Plan, as soon as
practical following the Closing Date, but in no event before the 31st day after
the filing of all of the required Forms 5310-A, if any, in connection with such
transfer, and in no event later than 60 days following the Closing Date, an
amount equal to (i) plus (ii) less (iii):
(i) An amount equal to the aggregate actuarial present value (as
determined as set forth below) of the PECO Accrued Benefit for each Employee.
Such PECO Accrued Benefits shall include the value, based on benefits accrued
under PECO Energy's Plan as of the Closing Date, of early retirement benefits as
described in Section 4.3 and Section 4.6 of PECO Energy's Plan and the 50%
Contingent Annuitant Option as described in Section 5.3(b) of PECO Energy's Plan
for those
61
Continuing Employees who upon termination of employment with the Buyer meet the
requirements for early retirement as described in Section 4.3 of PECO Energy's
Plan. In addition, such PECO Accrued Benefit shall include the value of
preretirement death benefits as described in Section 5.3 and Section 5.4 of
PECO Energy's Plan.
(ii) Interest on the amount determined under (i) from the Closing Date to
the date of transfer of such assets and liabilities (the "Transfer Date") at the
Pension Benefit Guaranty Corporation immediate interest rate in effect at the
Closing Date.
(iii) Any payment made to or in respect of a Continuing Employee who
retires or otherwise terminates employment after the Closing Date but before the
Transfer Date.
The actuarial present value of benefits shall be determined by the actuary
for PECO Energy's Plan as of the Closing Date and shall be calculated in
accordance with Section 414(1) of the Code on the basis of the following
assumptions:
(A) The interest rates, mortality assumption, and retirement age assumption as
used by the Pension Benefit Guaranty Corporation for terminating single employer
plans as of the Closing Date.
62
(B) The same percentage married and turnover assumptions as used by PECO
Energy's actuary in preparing the most recent actuarial valuation report for the
PECO Energy's Plan.
(e) PECO Energy shall pay all benefits accrued under PECO Energy's Plan
that become due and payable in respect of Continuing Employees prior to the
Transfer Date. As of the Transfer Date, the Buyer shall assume all of the
liabilities and obligations under PECO Energy's Plan with respect to the PECO
Accrued Benefits and each of PECO Energy and PECO Energy's Plan shall be
relieved of all such liabilities and obligations. Upon the transfer of assets
and liabilities in accordance with this Section, the Buyer agrees to indemnify
and hold harmless PECO Energy, its officers, directors, employees, agents and
affiliates, and the PECO Energy Plan and its fiduciaries, agents and delegatees,
from and against any and all costs, damages, losses, expenses or other
liabilities arising out of or related to the Buyer's Plan, including benefits
accrued by Continuing Employees prior to the Transfer Date which are provided
by the Buyer's Plan; provided, however, that the Buyer shall not indemnify or
-------- -------
hold harmless such parties with respect to those costs, damages, losses or other
liabilities that result from the acts or omissions of
63
such parties, which acts or omissions occurred or should have occurred prior to
the Transfer Date.
(f) PECO Energy shall cooperate with and supply sufficient information to
the actuary designated by the Buyer to enable such actuary to verify all
calculations required under this section.
(g) Except as specifically provided in paragraph (e) above, PECO Energy
and its affiliates (other than the Company) shall retain any and all liability
with respect to any Plan after the Closing Date with respect to any Employees
who are not Continuing Employees and with respect to any liabilities incurred
prior to the Closing Date with respect to Continuing Employees ("PECO Energy
Employee Liabilities"). PECO Energy agrees to indemnify and hold harmless the
Buyer and the Company, their officers, directors, employees, agents and
affiliates and the Buyer's Plan and its fiduciaries, agents and delegatees for
any and all Seller's Liabilities including, but not limited to, any and all
costs, damages, losses, expenses or other liabilities arising out of or related
to any PECO Energy Employee Liabilities; provided, however, PECO Energy shall
-------- -------
not hold harmless such parties with respect to those costs, damages, losses or
other liabilities with respect to
64
Continuing Employees that result from the acts or omissions of such parties that
occurred after the Closing Date.
(h) Effective as of the Closing Date, the Buyer will establish or
designate a profit sharing plan including a cash or deferred arrangement
("Buyer's Savings Plan") for the benefit of all Continuing Employees. The Buyer
represents and warrants that the Buyer's Savings Plan is or will become
qualified under sections 401(a) and 401(k) of the Code. PECO Energy shall cause
to be transferred to the Buyer's Savings Plan, as soon as practical following
the Closing Date, but in no event before the 31st day after the filing of all
Forms 5310-A, if required in connection with such transfer, assets representing
the account balances (in cash or cash equivalents) of all Continuing Employees
under the PECO Energy Employee Savings Plan. The PECO Energy Employee Savings
Plan shall pay all benefits accrued thereunder that become due and payable in
respect of Continuing Employees prior to the date of such transfer. As of the
date of such transfer, the Buyer shall assume all of the liabilities and
obligations under the PECO Energy Employee Savings Plan with respect to
Continuing Employees and each of PECO Energy and the PECO Energy Employee
Savings Plan shall
65
be relieved of all such liabilities and obligations. The parties hereto shall
cooperate to achieve such transfer in a manner intended to reduce any
administrative inconvenience. Upon the transfer of assets and liabilities in
accordance with this Section, the Buyer agrees to indemnify and hold harmless
PECO Energy, its officers, directors, employees, agents and affiliates, and the
PECO Energy Employee Savings Plan and its fiduciaries and agents, from and
against all costs, damages, losses, expenses or other liabilities arising out
of or related to the Buyer & Savings Plan, including benefits accrued by
Continuing Employees prior to the date of transfer of assets and liabilities
which are provided by the Buyer's Savings Plan; provided, however, that the
-------- -------
Buyer shall not indemnify or hold harmless such parties with respect to those
costs, damages, losses or other liabilities that result from the acts or
omissions of such parties, which acts or omissions occurred or should have
occurred prior to the date of transfer of assets and liabilities.
5.11. No Negotiations. To the extent not required by any governmental
---------------
authority or agency, PECO Energy shall and shall cause the Company and each
person acting for or on behalf of PECO Energy or the Company to
66
refrain from taking, directly or indirectly, any action (a) to seek or encourage
any offer or proposal from any person to acquire any assets (other than in the
ordinary course of business and consistent with past practice) or shares of
capital stock or other securities of the Company, (b) to merge, consolidate or
combine or permit any other person to merge, consolidate or combine with the
Company, (c) to negotiate or reach any agreement or understanding (whether or
not such agreement or understanding is absolute, revocable, contingent or
conditional) for, or otherwise to attempt to consummate any such acquisition,
transfer, merger, consolidation or combination or (d) to furnish or cause to be
furnished any information with respect to the Company to any person (other than
the Buyer or as otherwise required by law or any governmental authority). PECO
Energy will promptly advise the Buyer of receipt by PECO Energy, the Company or
any of their respective representatives of any offer, proposal or informational
request that is subject to this Section 5.11 from any person (other than the
Buyer).
5.12. Post-Closing Assistance. PECO Energy shall make its employees
-----------------------
available from time to time upon reasonable notice, so as not to interfere with
PECO Energy's business and operations, subsequent to the
67
Closing Date and shall provide such data and other information in such form as
may be reasonably requested by the Buyer to assist the Buyer at the Buyer's
reasonable cost and expense, in connection with the defense, prosecution or
investigation of any of the Buyer's obligations, rights and liabilities relating
to the Company.
5.13. Record Retention Procedures. Until the fifth anniversary of the
---------------------------
Closing Date, PECO Energy shall not dispose of any books, records, documents or
information relating to the Company prior to the Closing Date without first
giving notice to the Buyer and permitting the Buyer to retain or copy such books
and records as it may select, which selection must be made within a reasonable
time. During such period, PECO Energy shall permit the Buyer to make copies, at
the Buyer's expense, of such books, records, documents or information for any
reasonable purpose. In addition, PECO Energy shall make available to the Buyer
after Closing upon reasonable notice so as not to interfere with PECO Energy's
business and operations, those employees of PECO Energy with knowledge of or
relevant to the above-described matters for the purpose of consultation and/or
testimony in connection therewith,
68
such services to be performed at the Buyer's reasonable cost and expense.
5.14. Section 338(h)(10) Election. (a) With respect to the purchase by
---------------------------
the Buyer of the Company Common Stock (i) PECO Energy, the Company and the Buyer
shall jointly make a valid, timely and effective election as provided for in
Section 338(h)(10) of the Code and the Treasury Regulations provided thereunder
(the "Election") (and any comparable election under state or local tax law),
(ii) PECO Energy, the Company and the Buyer shall, as promptly as practicable
following the Closing Date, cooperate with each other to take all actions
necessary and appropriate (including filing such forms, returns, elections,
schedules and other documents as may be required) to effect and preserve a
timely Election in accordance with the provisions of Treasury Regulation (S)
1.338(h)(10)-i (or any comparable provision of state or local tax law) or any
successor provisions and (iii) PECO Energy and the Buyer shall report the
purchase by the Buyer of the Company Common Stock consistent with the Election
(and any comparable elections under state or local tax laws) and shall take no
position to the contrary thereto in any Tax Return, any proceeding before any
taxing authority, or otherwise.
69
(b) In connection with the Election, PECO Energy and the Buyer shall act
together in good faith to agree on the Aggregate Deemed Sales Price (as defined
under applicable Treasury Regulations) and the allocation of such Aggregate
Deemed Sales Price among the Company's assets. Such allocation of the Aggregate
Deemed Sales Price shall be made in accordance with Section 338(b) of the Code
and any applicable Treasury Regulations. If PECO Energy and the Buyer are
unable to agree on such allocation, such dispute shall be resolved by the
Settlement Auditor, whose fees and expenses shall be paid equally by both PECO
Energy and the Buyer. PECO Energy and the Buyer (i) shall be bound by such
allocation for purposes of determining any Taxes, (ii) shall prepare and file
all Tax Returns to be filed with any taxing authority in a manner consistent
with such allocation, and (iii) shall take no position inconsistent with such
allocation in any Tax Return, any proceeding before any taxing authority or
otherwise. In the event that such allocation is disputed by any taxing
authority, the party receiving notice of such dispute shall promptly notify and
consult with the other party concerning resolution of such dispute.
5.15. Other Tax Matters. PECO Energy will refrain from making an election
-----------------
to reattribute any losses of the
70
Company under Treasury Regulation Section 1.1502-20(g). PECO Energy shall cause
the Company to be included in its federal consolidated income Tax Return for its
taxable year ended December 31, 1993.
5.16. Transfer of Certain Assets, Properties and Other Items. (a) Prior
-------------------------------------- --------- -----
to the Closing, PECO Energy shall cause the Company to transfer to PECO Energy
(or any of its subsidiaries other than the Company) (i) title to the 500kV Peach
Bottom-Keeney transmission line and all real property relating thereto, except
that the Company will reserve the property rights set forth in Schedule 5.16(a),
(ii) title to the Company's service facility at the intersection of Bridge and
High Streets in Elkton, Maryland (the "Elkton Service Center"), and (iii) the
Company's employees, leased vehicles, equipment and parts in stock, and the
lease of the Building in Delta, Pennsylvania, which are used by the Company to
provide customer and maintenance services in the PECO Energy service territory
in York County, Pennsylvania (the "York Transfer"). A Schedule of the property
to be transferred in connection with the York Transfer shall be provided by PECO
Energy to the Buyer prior to the Closing and, immediately upon the consummation
of the York Transfer, the Company's
71
obligation to provide customer and maintenance services in York County,
Pennsylvania shall terminate.
(b) The distribution of properties and as sets by the Company to PECO
Energy contemplated by Section 5.16(a) shall be effected pursuant to a plan of
liquidation pursuant to Section 332 of the Code, which the company shall adopt
prior to the Closing Date.
(c) PECO Energy and the Buyer hereby agree that not later than 45 days
following the date of this Agreement, PECO Energy (or any subsidiary of PECO
Energy that is to acquire title to the Elkton Service Center pursuant to Section
5.16(a)) and the Buyer shall negotiate in good faith, and execute, a definitive
agreement relating to the lease of the Elkton Service Center by the Buyer, the
terms and conditions of which shall be reasonably satisfactory to the parties
hereto and include, without limitation, the terms and conditions set forth in
Annex 2 hereto.
5.17. Termination of Tax Sharing Agreements. PECO Energy agrees to
-------------------------------------
terminate on or prior to the Closing Date any Tax sharing agreement, arrangement
or similar contract between PECO Energy (or any affiliate thereof) and the
Company, and in no event shall the Company be required to make any payments
thereunder on
72
account of any transactions occurring prior to, on or after the Closing Date.
5.18. Power Purchase Arrangements. The Buyer and PECO Energy agree to
---------------------------
cause the termination of the Tri-Partite Agreement, dated May 1, 1972, among the
Company, PECO Energy and Susquehanna Electric Company, and the implementation of
the Power Purchase Agreement attached hereto as Annex 3 (the "Power Purchase
Agreement"), in each case effective as of February 1, 1996.
ARTICLE VI
CLOSING CONDITIONS
------------------
6.1. Conditions to Each Party's Obligations to Effect the Transactions
---------------------------------------------------- ------------
Contemplated Hereby. The respective obligations of each party to effect the
- -------------------
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions.
(a) The waiting period under the HSR Act applicable to the consummation of
the transactions contemplated hereby shall have expired or been terminated;
(b) No preliminary or permanent injunction or other order or decree by any
federal or state court which prevents the consummation of the transactions
73
contemplated hereby shall have been issued and remain in effect (each party
agreeing to use its reasonable best efforts to have any such injunction, order
or decree lifted) and no statute, rule or regulation shall have been enacted by
any State, Commonwealth or Federal government or governmental agency in the
United States which prohibits the consummation of the transactions contemplated
hereby;
(c) All Federal, State, Commonwealth and local government consents and
approvals required for the consummation of the transactions contemplated hereby
and in connection with the Power Purchase Agreement, including, without
limitation, the PECO Energy Required Regulatory Approvals and the Buyer Required
Regulatory Approvals, shall have been obtained and have become Final Orders and
shall contain no provisions or conditions which, directly or indirectly, would
have a material adverse effect on the business, operations, financial condition
or prospects of both (i) the net transmission and distribution assets of the
Company and (ii) the net transmission and distribution assets in Maryland of the
Buyer. A "Final Order", means a final order after all opportunities for
rehearing are exhausted (whether or not any appeal thereof is pending).
74
(d) All consents and approvals required under the terms of any note, bond,
mortgage, indenture, contract or other agreement to which PECO Energy, the
Company or the Buyer, or any of their respective subsidiaries, is a party for
the consummation of the transactions contemplated hereby shall have been
obtained, other than those which, if not obtained, would not, in the aggregate,
have a Material Adverse Effect or a material adverse effect on the ability of
PECO Energy or the Buyer to perform its obligations pursuant to this Agreement.
(e) The Power Purchase Agreement attached hereto as Annex 3 shall have
been executed and delivered by the parties thereto.
6.2. Conditions to Obligations of the Buyer. The obligation of the Buyer
--------------------------------------
to effect the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) There shall not have occurred and be continuing, a Material Adverse
Effect;
(b) PECO Energy shall have performed and complied with in all material
respects the covenants and agreements contained in this Agreement required to be
performed and complied with by it at or prior to the
75
Closing Date, and the representations and warranties of PECO Energy set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date as though made at and as of the
Closing Date; and
(c) The Buyer shall have received a certificate from an authorized officer
of PECO Energy, dated the Closing Date, to the effect that to the best of such
officer's knowledge, the conditions set forth in Section 6.2(a) and (b) have
been satisfied;
(d)(i) All indebtedness, whether secured or unsecured, of the Company
(other than trade payables incurred in the ordinary course of business and
consistent with past practice) shall have been offset or paid in full with no
adverse Tax consequences to the Company resulting from such offset or payment in
full; (ii) All indebtedness or other obligations of the Company to PECO Energy
or any affiliate of PECO Energy or of PECO Energy or any affiliate of PECO
Energy to the Company (including, but not limited to, those items shown on the
financial statements and books and records of the Company as power purchase
receivables or payables, federal Taxes receivable or payable and deferred
alternative minimum Tax receivable or payable) shall have been offset or paid in
full with no adverse
76
Tax consequences to the Company resulting from such offset or payment in full;
and (iii) the cash and cash equivalents held by the Company on Closing Date
shall not be less than $1,000,000.
(e) The Buyer shall have received an opinion from Skadden, Arps, Slate,
Meagher & Flom, special counsel to PECO Energy, dated the Closing Date and
satisfactory in form and substance to the Buyer and its counsel, substantially
to the effect that:
(i) PECO Energy is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania and has the
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby; and the execution and delivery
of this Agreement and the consummation of the transaction contemplated hereby
have been duly authorized by requisite corporate action taken on the part of
PECO Energy;
(ii) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland;
(iii) this Agreement has been executed and delivered by PECO Energy and
(assuming that the PECO Energy Required Regulatory Approvals and the Buyer
77
Required Regulatory Approvals are obtained) is a valid and binding obligation of
PECO Energy, enforceable against PECO Energy in accordance with its terms,
except (A) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights, (B) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought and (C) that such counsel expresses no
opinion with respect to the indemnification provisions contained in Article VIII
hereof;
(iv) the execution, delivery and performance of this Agreement by PECO
Energy will not constitute a violation of the Articles of Incorporation or
Bylaws in each case as currently in effect, of PECO Energy; and
(v) PECO Energy, by reason of delivery of certificates for the shares of
Company Common Stock in the name of the Buyer, will transfer to the Buyer good
title to such shares, free and clear of any liens, encumbrances, equities and
claims.
78
As to any matter contained in such opinion which involves the laws of any
jurisdiction other than the federal laws of the United States or the laws of the
State of New York, such counsel may rely upon opinions of counsel admitted in
such other jurisdictions. Any opinions relied upon by such counsel as aforesaid
shall be delivered together with the opinion of such counsel. Such opinion may
expressly rely as to matters of fact upon certificates furnished by PECO Energy
and appropriate officers and directors of the Company and by public officials.
6.3. Conditions to Obligations of PECO Energy. The obligation of PECO
----------------------------------------
Energy to effect the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
(a) The Buyer shall have performed in all material respects its covenants
and agreements contained in this Agreement required to be performed at or prior
to the Closing Date;
(b) The representations and warranties of the Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement
79
and as of the Closing Date as though made at and as of the Closing Date;
(c) PECO Energy shall have received a certificate from an authorized
officer of the Buyer, dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in Section 6.3(a) and (b)
have been satisfied; and
(d) PECO Energy shall have received an opinion from LeBoeuf, Lamb, Greene &
MacRae, counsel for the Buyer, dated the Closing Date and satisfactory in form
and substance to PECO Energy and its counsel, substantially to the effect that:
(i) the Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and the Commonwealth of
Virginia and has the corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; and the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by requisite
corporate action taken on the part of the Buyer;
(ii) this Agreement has been executed and delivered by the Buyer and
(assuming that the PECO
80
Energy Required Regulatory Approvals and the Buyer Required Regulatory Approvals
are obtained) is a valid and binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms, except (A) that such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights, (B) that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to certain equitable defenses and to the discretion of the
court before which any-proceeding therefore may be brought and (C) that such
counsel expresses no opinion with respect to the indemnification provisions
contained in Article VIII hereof; and
(iii) the execution, delivery and performance of this Agreement by the
Buyer will not constitute a violation of the Certificate of Incorporation or By-
Laws, as currently in effect, of the Buyer. As to any matter contained in such
opinion which involves the laws of any jurisdiction other than the federal laws
of the United States and the State of New York, such counsel may rely upon
opinions of counsel admitted to practice in such other jurisdictions. Any
opinions relied upon by such counsel as aforesaid shall be
81
delivered together with the opinion of such counsel. Such opinion may expressly
rely as to matters of facts upon certificates furnished by appropriate officers
and directors of the Buyer and its subsidiaries and by public officials.
ARTICLE VII
TERMINATION AND ABANDONMENT
---------------------------
7.1. Termination.
-----------
(a) This Agreement may be terminated at any time prior to the Closing
Date, by mutual written consent of the Buyer and PECO Energy.
(b) This Agreement may be terminated by PECO Energy or the Buyer if the
transactions contemplated hereby shall not have been consummated on or before 12
months from the date of this Agreement; provided that the right to terminate
--------
this Agreement under this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Closing Date to occur on or before such
date; and provided, further, that the termination date specified in this Section
-------- -------
7.1(b) shall automatically be extended to 18 months from the date of this
Agreement if after 12 months from the date of this Agreement, (i) the
82
condition set forth in Section 6.1(c) has not been satisfied or waived, (ii) all
other conditions set forth in Article VI have been or are then capable of being
satisfied and (iii) the approvals required by Section 6.1(c) which have at that
time not yet been obtained are being pursued with diligence.
(c) This Agreement may be terminated by either PECO Energy or the Buyer if
(i) any governmental or regulatory body, the consent of which is a condition to
the obligations of PECO Energy and the Buyer to consummate the transactions
contemplated hereby, shall have determined not to grant its consent and all
appeals of such determination shall have been taken and have been unsuccessful,
or (ii) any court of competent jurisdiction in the United States or any State or
Commonwealth shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such order, judgment or decree shall have become final and
nonappealable.
(d) This Agreement may be terminated by the Buyer, if there has been a
material violation or breach by PECO Energy of any agreement, representation or
warranty contained in this Agreement which has rendered the
83
satisfaction of any condition to the obligations of the Buyer impossible and
such violation or breach has not been waived by the Buyer.
(e) This Agreement may be terminated by PECO Energy, if there has been a
material violation or breach by the Buyer of any agreement, representation or
warranty contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of PECO Energy impossible and such violation or
breach has not been waived by PECO Energy.
7.2. Procedure and Effect of Termination. In the event of termination of
-----------------------------------
this Agreement and abandonment of the transactions contemplated hereby by either
or both of the parties pursuant to Section 7.1, written notice thereof shall
forthwith be given by the terminating party to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) said termination shall be the sole remedy of the parties hereto with
respect to breaches of any agreement, representation or warranty contained in
this Agreement and none of the parties hereto nor any of
84
their respective trustees, directors, officers or affiliates, as the case may
be, shall have any liability or further obligation to the other party or any of
their respective trustees, directors, officers or affiliates, as the case may
be, pursuant to this Agreement, except in each case as stated in this Section
7.2 and in Sections 5.2(b), 5.3 and 5.7; and
(b) all filings, applications and other submissions made pursuant to this
Agreement, to the extent practicable, shall be withdrawn from the agency or
other person to which they were made.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1. Indemnification. (a) PECO Energy will indemnify, defend and hold
---------------
harmless the Buyer from and against any and all claims, demands or suits (by any
person), losses, liabilities, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys' fees and disbursements in connection
therewith) to the extent the foregoing are not covered by insurance, and
excluding any amounts
85
indemnified by either PECO Energy or the Buyer pursuant to Section 8.3 hereof
(collectively, "Indemnifiable Losses"), asserted against or suffered by the
Buyer relating to, resulting from or arising out of (i) any breach by PECO
Energy of any of the representations and warranties of PECO Energy contained in
or made pursuant to this Agreement or (ii) any breach by PECO Energy of any
covenant or agreement of PECO Energy contained in this Agreement.
(b) The Buyer will indemnify, defend and hold harmless PECO Energy from
and against any and all Indemnifiable Losses asserted against or suffered by
PECO Energy relating to, resulting from or arising out of (i) any breach by the
Buyer of any of the representations and warranties of the Buyer contained in or
made pursuant to this Agreement or (ii) any breach by the Buyer of any covenant
or agreement of the Buyer contained in this Agreement.
(c) Either the person required to provide indemnification under this
Agreement (the "Indemnifying Party") or the person entitled to receive
indemnification under this Agreement (the "Indemnitee") may assert any offset or
similar right in respect of its obligations under this Section 8.1 based upon
any actual
86
or alleged breach of any representation, warranty, covenant or agreement
contained in this Agreement.
(d) Any Indemnitee having a claim under these indemnification provisions
shall make a good faith effort to recover all losses, damages, costs and
expenses from insurers of such Indemnitee under applicable insurance policies so
as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any
Indemnifiable Loss shall be reduced (i) to the extent the Indemnitee receives
any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take
into account any net Tax benefit recognized by the Indemnitee arising from the
recognition of the Indemnifiable Loss and any payment actually received with
respect to an Indemnifiable Loss.
(e) The expiration, termination or extinguishment of any covenant,
agreement, representation or warranty pursuant to Section 9.3 shall not affect
the parties' obligations under this Section 8.1 if the Indemnitee provided the
Indemnifying Party with proper notice of the claim or event for which
indemnification is sought prior to such expiration, termination or
extinguishment.
(f) PECO Energy and the Buyer shall have indemnification obligations with
respect to
87
Indemnifiable Losses asserted against or suffered by PECO Energy or the Buyer,
as the case may be, to the extent that the aggregate of all such Indemnifiable
Losses exceed the Indemnification Basket (as hereinafter defined), but not in
excess of $10,000,000, it being agreed and understood that neither PECO Energy
nor the Buyer, as the case may be, shall have any liability at any time for
Indemnifiable Losses asserted against or suffered by PECO Energy or the Buyer in
an amount that is less than or equal to the then current Indemnification Basket.
The term "Indemnification Basket" shall mean an amount equal to no more than
$500,000.
8.2. Defense of Claims. (a) If any Indemnitee receives notice of the
-----------------
assertion of any claim or of the commencement of any claim, action, or
proceeding made or brought by any person who is not a party to this Agreement or
an affiliate of a party to this Agreement ("Third Party Claim") with respect to
which indemnification is to be sought from an Indemnifying Party, the Indemnitee
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than ten (10) calendar days after the Indemnitee's
receipt of notice of such Third Party Claim. Such notice shall describe the
nature of the
88
Third Party Claim in reasonable detail and will indicate the estimated amount,
if practicable, of the Indemnifiable Loss that has been or may be sustained by
the Indemnitee. The Indemnifying Party will have the right to participate in
or, by giving written notice to the Indemnitee, to elect to assume the defense
of any Third Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, and the Indemnitee will cooperate in good
faith in such defense at such Indemnitee's own expense.
(b) If within ten (10) calendar days after an Indemnitee provides written
notice to the Indemnifying Party of any Third Party Claim the Indemnitee
receives written notice from the Indemnifying Party that such Indemnifying Party
has elected to assume the defense of such Third Party Claim as provided in the
last sentence of Section 8.2(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party fails to
-------- -------
take reasonable steps necessary to defend diligently such Third Party Claim
within twenty (20) calendar days after receiving notice from the Indemnitee that
the Indemnitee believes the Indemnifying Party has failed to take such steps,
the Indemnitee may assume its own
89
defense, and the Indemnifying Party will be liable for all reasonable expenses
thereof. Without the prior written consent of the Indemnitee, the Indemnifying
Party will not enter into any settlement of any Third Party Claim which would
lead to liability or create any financial or other obligation on the part of the
Indemnitee for which the Indemnitee is not entitled to indemnification
hereunder. If a firm offer is made to settle a Third Party Claim without
leading to liability or the creation of a financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the Indemnitee
to that effect. If the Indemnitee fails to consent to such firm offer within
ten (10) calendar days after its receipt of such notice, the Indemnitee may
continue to contest or defend such Third Party Claim and, in such event, the
maximum liability of the Indemnifying Party as to such Third Party Claim will be
the amount of such settlement offer, plus reasonable costs and expenses paid or
incurred by the Indemnitee up to the date of such notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss which
does not result from a Third
90
Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party
reasonably prompt written notice thereof, stating the nature of such claim in
reasonable detail and indicating the estimated amount, if practicable, but in
any event not later than ten (10) calendar days after the Indemnitee becomes
aware of such Direct Claim, and the Indemnifying Party will have a period of
thirty (30) calendar days within which to respond to such Direct Claim. If the
Indemnifying Party does not respond within such thirty (30) calendar day period,
the Indemnifying Party will be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its rights to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time subsequent to the
making of an indemnity payment in respect thereof, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement or payment by 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), will promptly be repaid by the Indemnitee to the Indemnifying Party.
91
Upon making any indemnity payment, the Indemnifying Party will, to the extent of
such indemnity payment, be subrogated to all rights of the Indemnitee against
any Third Party in respect of the indemnifiable Loss to which the indemnity
payment relates; provided, however, that (i) the Indemnifying Party will then be
-------- -------
in compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all claims of the Indemnifying Party against any
such third party on account of said indemnity payment is hereby made expressly
subordinated and subjected in right of payment to the Indemnitee's rights
against such third party. Without limiting the generality or effect of any
other provision hereof, each such Indemnitee and Indemnifying Party will duly
execute upon request all instruments reasonably necessary to evidence and
perfect the above-described subrogation and subordination rights.
(e) A failure to give timely notice as provided in this Section 8.2 will
not affect the rights or obligations of any party hereunder except if, and only
to the extent that, as a result of such failure, the party which was entitled to
receive such notice was actually prejudiced as a result of such failure.
92
8.3. Tax Indemnification. (a) PECO Energy will be responsible for, will
-------------------
pay or cause to be paid, and will indemnify and hold harmless the Buyer from and
against each and all of the following:
(i) any and all Taxes resulting from (A) the Election made pursuant to
Section 5.14 hereof; and (B) the transfers of the 5OOkV Peach Bottom-Keeney
transmission line, the Elkton Service Center and certain other properties of the
Company as described in Section 5.16 hereof;
(ii) any and all Taxes with respect to any taxable period of the Company
ending on or before the Closing Date, other than those Taxes listed in clause
(i) above;
(iii) any and all Taxes resulting from the Company having been (or ceasing
to be) included in any affiliated, consolidated, combined, or unitary Tax Return
that PECO Energy included the Company for any taxable period (or portion
thereof) ending on or prior to the Closing Date (including without limitation
(A) any liability for Taxes resulting from a "deferred
93
intercompany transaction," within the meaning of Treasury Regulation Section
1.1502-13(a)(2) (or any analogous or similar provision under state, local or
foreign law), that occurred on or prior to the Closing Date) and (B) any
liability of the Company pursuant to Treasury Regulation Section 1.1502-6(a) or
any analogous or similar state, local or foreign law;
(iv) any breach by PECO Energy of any representation, warranty, agreement
or covenant contained in Sections 3.20, 5.1(n), 5.13, 5.14, 5.15 and 5.16 hereof
or this Section 8.3; and
(v) any and all Taxes allocated to PECO Energy pursuant to Section 8.3(c)
hereof.
Notwithstanding the foregoing, PECO Energy shall indemnify the Buyer for
the Taxes described in clauses (ii) through (v) only to the extent that the sum
of such Taxes described in clauses (ii) through (v) exceeds the amount reserved
therefor on the Closing Balance Sheet of the Company.
(b) The Buyer shall indemnify PECO Energy and its affiliates and hold them
harmless from and against any
94
and all liability for Taxes of the Company for any taxable period ending after
the Closing Date (except to the extent such taxable period began before the
Closing Date, in which case the Buyer's indemnity cover only that portion of any
such Taxes that are not for the Pre-Closing Tax Period (as hereinafter defined).
(c) Taxes attributable to the taxable period of the Company beginning
before the Closing Date and ending after the Closing Date (the "Overlap Period")
shall be apportioned between the portion of such Overlap Period ending on the
Closing Date (the "Pre-Closing Tax Period") and the portion of such period
ending after the Closing Date on the basis of an interim closing of the books.
With respect to any Tax Return required to be filed by the Buyer for the Overlap
Period, the Buyer shall provide PECO Energy with a statement calculating in
reasonable detail the amount of Tax that is allocable to PECO Energy pursuant to
this Section 8.3(c) (a "Statement") and copies of all relevant Tax Returns at
least twenty business days prior to the due date for filing of such Tax Return
(including extensions). Not later than five business days before the due date
for payment of Taxes with respect to such Tax Return, PECO
95
Energy shall pay to the Buyer an amount equal to the Taxes shown on the
Statement that are allocable to PECO Energy pursuant to this Section 8.3(c);
provided, however, that if PECO Energy and the Buyer are unable to agree on the
- -------- -------
amount of PECO Energy's indemnification obligation hereunder, such dispute will
be settled by the Settlement Auditor whose fees and expenses shall be paid by
the Buyer and PECO Energy in proportion to each party's respective liability for
Taxes as determined by the Settlement Auditor, and PECO Energy shall pay the
amount determined by the Settlement Auditor within five days of such
determination. Any payment by PECO Energy as determined by the Settlement
Auditor shall bear interest from the date such Taxes were due to be paid at a
rate calculated based on a per annum rate computed on the basis of a 365 day
year and equal to the average of the high and low bid rates for federal funds on
such due date as such bid rates were published in The Wall Street Journal
-----------------------
(Eastern Edition). No payment pursuant to this Section 8.3(c) shall excuse PECO
Energy from its indemnification obligations pursuant to Section 8.3(a) hereof
should the amount of Taxes as ultimately determined (on audit or otherwise), for
the periods covered by such Tax Returns and which are the
96
responsibility of PECO Energy, exceed the amount of PECO Energy's payment under
this Section 8.3(c).
(d) If a claim, audit, adjustment, examination or other claim or adjustment
shall be made by any taxing authority concerning Taxes covered in Section 8.3(a)
hereof, the party seeking indemnification the ("Tax Indemnified Party") shall
promptly notify the other party (the "Tax Indemnifying Party") in writing of
such claim (the "Tax Claim"). If a notice of a Tax Claim (the "Tax Notice") is
not given to the Tax Indemnifying Party within a reasonably sufficient time to
allow the Tax Indemnifying Party effectively to contest such Tax Claim, or in
reasonable detail to apprise the Tax Indemnifying Party of the nature of the Tax
Claim, taking into account the facts and circumstances with respect to such Tax
Claim, the Tax Indemnifying Party shall not be liable to the Tax Indemnified
Party or any of its affiliates to the extent (but only to such extent) that the
Tax Indemnifying Party's position is actually prejudiced as a result thereof.
With respect to any Tax Claim which might result in an indemnity payment to
the Buyer pursuant to Section 8.3(a), PECO Energy shall, to the extent permitted
by law, control all proceedings taken in connection with
97
such Tax Claim (including, without limitation, selection of counsel) and,
without limiting the foregoing, may in its sole discretion at its sole expense
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with any taxing authority with respect thereto, and may, in its sole
discretion, either pay the Tax claimed and sue for a refund where applicable law
permits such refund suits or contest such Tax Claim in any permissible manner.
In no case shall the Buyer settle or compromise any Tax Claim referred to in the
proceeding sentence without PECO Energy's prior written consent; provided,
--------
however, that the Buyer shall be entitled to settle or compromise such Tax Claim
- -------
in the event it waives its rights to any indemnity payment with respect thereto
and; provided, further, that such settlement or compromise will not, in PECO
-------- -------
Energy's sole discretion, increase PECO Energy's obligation under Section
8.3(a). The Buyer shall cooperate with PECO Energy in contesting such Tax
Claim, which cooperation shall include, without limitation, the reasonable
retention and (upon PECO Energy's request) the provision to PECO Energy of
records and information which are reasonably relevant to such Tax Claim, and
making employees available to provide additional information or
98
explanation of any material provided hereunder or to testify at proceedings
relating to such Tax Claim, all at PECO Energy's expense.
(e) PECO Energy shall include, or cause to be included, the Company in (i)
the United States consolidated federal income Tax Return of PECO Energy for the
taxable periods of the Company ending on December 31 of the calendar year
immediately preceding the calendar year in which the Closing Date occurs and the
taxable period of the Company ending on the Closing Date, and (ii) all other
consolidated and all affiliated, combined, or unitary Tax Returns of PECO Energy
or its affiliates for the taxable period of the Company ending on December 31 of
the calendar year immediately preceding the calendar year in which the Closing
Date occurs and the taxable period ending on the Closing Date to the extent
permitted or required by applicable law. Such Tax Returns referred to in
clauses (i) and (ii) above are referred to as "PECO Energy Consolidated or
Combined Returns." PECO Energy shall prepare, or cause to be prepared, and
timely file, or cause to be timely filed, all PECO Energy Consolidated or
Combined Returns which include the Company or its assets or operations for all
taxable periods of the Company ending on or prior to the Closing Date (which
99
Tax Returns shall include the Company and the reportable items from the assets
or operations of the Company through and including the Closing Date). PECO
Energy also shall prepare, or cause to be prepared, and timely file, or cause to
be timely filed, all other Tax Returns of or which include the Company or its
assets or operations with respect to any taxable period ending on or prior to
the Closing Date. PECO Energy shall pay all Taxes shown to be due on such Tax
Returns. The Buyer shall prepare, or cause to be prepared, and file, or cause
to be filed, all Tax Returns of the Company which PECO Energy is not required to
file pursuant to this Section 8.3(e). PECO Energy and the Buyer shall
cooperate fully with each other, and make available to each other in a timely
fashion, such Tax data and other information as may be reasonably required by
PECO Energy or the Buyer, in connection with the preparation or filing of any
Tax Returns described in Section 8.3. Any Tax Returns required to be filed by
PECO Energy pursuant to this Section 8.3(e) shall be reviewed by an accounting
firm of national standing prior to their submission to the Buyer.
(f) PECO Energy and the Buyer will provide to each other, and the Buyer
will cause the Company to
100
provide to PECO Energy, full access, at any reasonable time and from time to
time after the Closing Date, at the business location at which the books and
records of the Company are maintained, to such Tax data relating solely to the
Company as PECO Energy or the Buyer, as the case may be, may from time to time
reasonably request and will furnish, and request the independent accountants and
legal counsel of PECO Energy, the Buyer or the Company to furnish to PECO Energy
or the Buyer, as the case may be, such additional Tax and other information and
documents relating solely to the Company in the possession of such persons as
PECO Energy or the Buyer may from time to time reasonably request. In
particular, PECO Energy will provide to the Buyer, to the extent requested by
the Buyer, true and complete copies of all separate Tax Returns (and related
workpapers) of the Company and such portions of the affiliated, consolidated,
combined or unitary Tax Returns of affiliated groups of which the Company was a
member (and related workpapers), in each case to the extent such returns or such
portions related exclusively to the Company.
(g) PECO Energy shall be responsible for, shall pay or cause to be paid,
and shall indemnify and hold harmless the Buyer or the Company from and against
any
101
liability of the Company arising under any Tax sharing, Tax indemnity, Tax
allocation or similar contracts (whether or not written) to which the Company is
a party or is obligated thereunder on or prior to the Closing Date.
(h) Any refunds, carrybacks or credits of Taxes of the Company for any
taxable period ending on or before the Closing Date shall be for the account of
PECO Energy and shall be paid by the Buyer to PECO Energy within ten days after
the Buyer receives such refund. Any refunds or credits of Taxes of the Company
for any taxable period beginning after the Closing Date shall be for the account
of the Buyer and shall be paid by PECO Energy to the Buyer within ten days after
PECO Energy receives such refund. Any refunds or credits of Taxes of the
Company for any Overlap Period shall be allocated between PECO Energy and the
Buyer on the basis of an interim closing of the books.
8.4. Tax Exclusivity. This Article VIII shall be the exclusive remedy for
---------------
all Tax matters.
102
ARTICLE IX
MISCELLANEOUS PROVISIONS
------------------------
9.1. Amendment and Modification. Subject to applicable law, this Agreement
--------------------------
may be amended, modified or supplemented only by written agreement of PECO
Energy and the Buyer.
9.2. Waiver of Compliance; Consents. Except as otherwise provided in this
------------------------------
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
9.3. Survival of Representations and warranties. Subject to the provisions
------------------------------------------
of Section 7.2, the representations and warranties contained in this Agreement
and the Schedules will survive the Closing and will remain in full force and
effect thereafter (a) until the expiration of the applicable statute of
limitation in the case of the representations and
103
warranties of PECO Energy set forth in Section 3.20, (b) until the third
anniversary of the Closing Date in the case of the representations and
warranties set forth in Section 3.13 and (c) until the first anniversary of the
Closing Date in the case of all other representations and warranties set forth
in Articles III and IV hereof. Subject to the provisions of Section 7.2, the
covenants and agreements contained in this Agreement shall expire on the Closing
Date (other than the covenants and agreements contained in Sections 5.2(b), 5.3,
5.4, 5.7, 5.8, 5.10, 5.12, 5.13, 5.14, 5.15, 5.16(b), 5.18 and Article VIII,
which shall survive the Closing Date in accordance with their respective terms).
9.4. Indemnification and Adjustment Payments. Unless otherwise required
---------------------------------------
by law, PECO Energy and the Buyer agree that any payment made by PECO Energy to
the Buyer or by the Buyer to PECO Energy under Section 1.4 or ARTICLE VIII
hereof will be treated by the parties on their Tax Returns as an adjustment to
the consideration paid by the Buyer for the Company and shall take no position
to the contrary in any audit, examination or administrative proceeding.
9.5. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by facsimile
104
transmission, telexed or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided
--------
that notices of a change of address shall be effective only upon receipt
thereof):
(a) If to PECO Energy, to:
PECO Energy Company
2301 Market, Box 8699
Philadelphia, Pennsylvania
Attention: Gregory A. Cucchi
Vice President-Planning and Performance
with copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Sheldon S. Adler, Esq.
(b) if to the Buyer, to:
Delmarva Power & Light Company
800 King Street
Wilmington, Delaware 19899
Attention: Thomas S. Shaw
with copies to:
LeBoeuf, Lamb, Greene & MacRae
125 West 55th Street
New York, New York 10019
Attention: Douglas W. Hawes, Esq.
105
9.6. Assignment. This Agreement and all of the provisions hereof shall be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights or interests hereunder shall be assigned or obligations delegated by any
party hereto, including by operation of law without the prior written consent
of the other party.
9.7. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York (without regard to any New
York law or rule requiring the application of the laws of any other
jurisdiction) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
9.8. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.9. Interpretation. The article and section headings contained in this
--------------
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this
106
Agreement, the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a governmental entity or any department or agency thereof. As
used in this Agreement, the term "Permitted Exceptions" shall mean and include
(i) those exceptions to title to the properties and assets of the Company listed
in Schedule 3.10; (ii) all exceptions, restrictions, easements, rights of way
and encumbrances set forth in title reports or title insurance binders which
have been made available to the Buyer prior to the date of this Agreement; (iii)
mortgages, liens, pledges, charges, encumbrances and restrictions which secure
debt that is reflected as a liability on the Company Balance Sheet or which are
otherwise reflected in the Company Balance Sheet or disclosed in the notes
thereto; (iv) mortgages, liens, pledges, charges, encumbrances and restrictions
incurred in connection with the Company's purchase of properties and assets in
the ordinary course of business after the date of the Company Balance Sheet
securing all or a portion of the purchase price therefor; (v) statutory liens
for current taxes or assessments not yet due or delinquent or the validity of
which is being contested in good faith by appropriate proceedings; (vi)
mechanics', carriers', workers',
107
repairers', and other similar liens arising or incurred in the ordinary course
of business relating to obligations as to which there is no default on the part
of the Company; (vii) zoning, entitlement and other land use and environmental
regulations by governmental authorities that are not material to the business
and operations of the Company and (viii) such other liens, imperfections in
title, charges, easements, restrictions and encumbrances which do not materially
detract from the value of or materially interfere with the present use of any
property subject thereto or affected thereby that is material to the business,
operations or financial condition of the Company or which relate to properties
that are not material to the Company and do not, in the aggregate have a
Material Adverse Effect. As used in this Agreement, the term "subsidiary" when
used in reference to any other person shall mean any corporation of which
outstanding securities having ordinary voting power to elect a majority of the
Board of Directors of such corporation are owned directly or indirectly by such
other person. As used in this Agreement, the terms "affiliate" and "parent"
shall have the meanings set forth in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act. Any statement in this Agreement made to PECO
Energy's
108
knowledge shall be deemed to include the knowledge of the Company.
9.10. Entire Agreement. This Agreement, including the documents,
----------------
schedules, certificates and instruments referred to herein, and the
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the transactions contemplated by this Agreement.
There are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein or
therein. This Agreement supersedes all prior agreements and understandings
between the Parties with respect to such transactions other than the
Confidentiality Agreement.
9.11. No Third Party Beneficiary Rights. This Agreement is not intended
---------------------------------
to and shall not be construed to give any person or entity other than the
parties signatory hereto (or any duly authorized successor thereto) any interest
or rights with respect to or in connection with any agreement or provision
contained herein or contemplated hereby
109
IN WITNESS WHEREOF, PECO Energy and the Buyer have caused this agreement to
be signed by their respective duly authorized officers as of the date first
above written.
PECO ENERGY COMPANY
By /s/ Gregory A. Cucchi
---------------------
Title Vice President
----------------
DELMARVA POWER & LIGHT COMPANY
By /s/ T. S. Shaw
--------------
Title Sr. Vice President
------------------
Annex 1
-------
Calculation of Adjustment Amount/1/
Net Working Capital (as defined below)
- - $2,500,000 (required working capital)
+ or - Deferred Fuel Adjustment
+ The greater of (i) 0 and (ii) Cumulative Capital
Expenditures actually made from the date of the
Stock Purchase Agreement until the Closing Date
minus Cumulative Net Earnings from the date of the
-----
Stock Purchase Agreement until the Closing Date
= Adjustment Amount
Net Working Capital
+ Cash and Temporary Cash Investments
+ Accounts Receivable (Trade)/2/
- - Allowance
+ Materials and Supplies
+ Prepayments
+ Accrued Unbilled Revenue/3/
- - Accounts Payable
- - Customer Deposits
- - Accrued State and Local Taxes/4/
- - Tax Collections Payable/5/
- - Accrued Vacation and Sicktime
- - Customer Advances
= Net Working Capital
- --------------------
/1/ Determined in accordance with the information set forth in the Closing
Balance Sheet (as defined in Section 1.3 of the Stock Purchase).
/2/ Accounts Receivable (Trade) shall include only those accounts receivable
actually collected within the 90 day period following the Closing Date.
/3/ Calculation method to be based upon the output method in a manner applied
consistently with PECO Energy's past practice.
/4/ Excluding Taxes resulting from (i) the joint election pursuant to Section
338(h)(10) of the Code provided for in Section 5.14 of the Stock Purchase
Agreement and (ii) the transfers of the 500kV Peach Bottom-Keeney
transmission line, the Elkton Service Center and certain other properties
of the Company pursuant to Section 5.16 of the Stock Purchase Agreement,
which shall be the sole obligation of PECO Energy as provided in the
Stock Purchase Agreement.
/5/ Excluding Taxes resulting from (i) the joint election pursuant to Section
338(h)(10) of the Code provided for in Section 5.14 of the Stock Purchase
Agreement and (ii) the transfers of the 500kV Peach Bottom-Keeney
transmission line, the Elkton Service Center and certain other properties
of the Company pursuant to Section 5.16 of the Stock Purchase Agreement,
which shall be the sole obligation of PECO Energy as provided in the
Stock Purchase Agreement.
Annex 2
-------
Terms and Conditions of Service Center Lease
PECO Energy and Buyer shall on the Closing Date enter into the Service
Center Lease (as hereinafter defined) for the Elkton Service Center, between
PECO Energy, as landlord, and Buyer, as tenant. PECO Energy shall deliver a
proposed form of lease for the Elkton Service Center (the "Service Center
--------------
Lease") to Buyer on or prior to June 30, 1994, which lease shall be between PECO
Energy, as landlord, and Buyer, as tenant, and shall contain provisions
consistent with the following terms (the "Required Terms"):
--------------
(a) the Service Center Lease shall be a net lease, with Buyer obligated to
(i) maintain, repair and operate the Elkton Service Center at Buyer's
sole cost and expense throughout the term of the Service Center Lease
and deliver the same at the end of the term in the same condition that
existed upon lease commencement, except for ordinary wear and tear, and
(ii) pay all real estate taxes and assessments attributable to the
premises.
(b) the Service Center Lease will commence on the Closing Date and will be
for a term of the earlier of three years from the Closing Date or the
end 30 days after the New Service/HQ Building is substantially
completed (the "Initial Term").
(c) the rent payable under the Service Center Lease shall be $1 per year
for each year of the Initial Term. For any extension of the Initial
Term, the rent shall be a commercially reasonable amount, to be agreed
upon by the parties hereto.
(d) the Elkton Service Center will be delivered by PECO Energy, and
accepted by Buyer, in its "as is" condition.
(e) neither PECO Energy nor any of its subsidiaries shall be required to
provide any services or utilities to the premises, all of which will
be provided and obtained, as the case may be, by Buyer, at Buyer's sole
cost and expense.
(f) Buyer shall be required to maintain such insurance as is reasonably
required by PECO Energy.
(g) Buyer shall operate the Elkton Service Center in full compliance with
Environmental Law, and Buyer's operation of the Elkton Service Center
shall not cause PECO Energy to be out of compliance with Environmental
Law.
(h) Buyer shall, as necessary, clean up and take all other action necessary
to assure that PECO Energy does not at any time suffer or have
asserted against it, either directly or indirectly, any claim, loss or
liability relating to the presence, release or threatened release of
Hazardous Materials in or on the Elkton Service Center relating to the
operations, actions or omission to act of Buyer.
(i) Buyer shall not, without the permission of PECO Energy, which shall not
be unreasonably withheld, use or allow Hazardous Materials at the
Elkton Service Center in materially greater amounts, or of different
kinds (other than de minimis use), as compared to prior to the Closing
Date.
(j) Buyer shall promptly report to PECO Energy any disposal or release of
Hazardous Materials during Buyer's leasehold in, on or from the Elkton
Service Center other than de minimis releases relating to ordinary
operations which are promptly cleaned up and releases made in
compliance with Environmental Law.
(k) Buyer shall permit PECO Energy and any environmental consultants of
PECO Energy at all reasonable times to inspect the Elkton Service
Center and Buyer's operations thereat.
(l) Buyer shall not, except to the extent required by law, disclose to a
third party any facts or information relating to environmental
conditions at the Elkton Service Center which are the responsibility of
PECO Energy, or otherwise instigate any claim, demand or requirement by
any third party with respect to such environmental conditions.
2
(m) Buyer shall not have the right to perform alterations within the
premises, assign the lease, or sublet all or any portion of the
premises, without PECO Energy's prior written consent, which consent
may be withheld in PECO Energy's sole discretion.
(n) the lease shall contain a general indemnity, pursuant to which Buyer
shall indemnify and hold PECO Energy, its subsidiaries and affiliates
(the "PECO Group") harmless from and against any and all liability,
cost, expense and damage suffered by the PECO Group which relates to,
results from or arises out of any breach by the Buyer of any term or
condition of the lease.
The Service Center Lease shall also contain such other customary commercial
lease provisions for similar leases reasonably required by PECO Energy and the
Buyer, provided that the same shall not be inconsistent with the Required Terms.
3
Schedule 3.1 Organization; Qualification.
-----------------------------------------
Commonwealth of Pennsylvania
Schedule 3.5 Consents and Approvals; No Violation.
---------------------------------------------------
None
2
Schedule 3.8 Undisclosed Liabilities
------------------------------------
None
3
Schedule 3.9 Absence of Certain Changes or Events.
--------------------------------------------------
(d) Proposed Health Plan Amendment requiring retiree contribution for
medical coverage.
4
Schedule 3.10 Title and Related Matters
---------------------------------------
FEE PROPERTY OWNED BY
CONOWINGO POWER COMPANY
File No. Acreage Use
1897 0.057 Northeast Substation
1939 0.280 Chesapeake City Substation
3145 0.172 Kilby Substation
3637 0.689 Liberty Grove Substation
3668 0.737 Oldfield 33-4 KV Substation
3701 0.389 Perryville Storage Bldg.
3705 0.075 Rising Sun substation
3711 2.4 Elkton Service Bldg.
3712 0.247 Elkton Service Bldg.
3713 41.880 Cecil Substation
3714 9.930 Cecil Substation
3715 8.354 Cecil Substation
3716 0.743 Glen Substation
3720 0.689 Cathers Substation
3721 0.680 Andora Substation
3725 0.779 Normina 33-4 KV Substation
3727 0.670 Irishtown 33-4 KV Substation
3736 0.745 Mechanics 33-4 KV Substation
3749 0.642 Harris Substation
3751 0.689 Charles Substation
3752 0.792 Appleton Substation
3753 0.780 Macton Substation
3754 0.978 Gilpins Substation
3755 0.688 Prince Substation
3756 1.0 Bohemia 33-4 KV Substation
3757 0.681 Middle 33-4 Substation
3758 0.775 Perch Substation
3759 0.680 Elkneck 33-4 KV Substation
3771 0.531 Harford 33-4 KV Substation
3773 0.459 Gallion Substation
3784 4.419 Elkton Pole Storage
3793 0.559 Leslie 33-4 Substation
3794 0.643 Calvert 33-4 KV Substation
3796 0.158 Elkton Service Building
3807 0.671 Greenbank 33-4 KV Substation
3811 0.497 Cayots 33-4 KV Substation
3812 0.476 Cayots 33-4 KV Substation
5
Schedule 3.10 Title and Related matters.
----------------------------------------
FEE PROPERTY OWNED BY
CONOWINGO POWER COMPANY
(Continued)
File No. Acreage Use
3813 0.612 Triumph Substation
4073 0.325 Theodore 33-4 KV Substation
4078 13.15 New Service Building Site
6138 16.079 Colora 220-33 KV Substation
6101 3.8 Peach Bottom/Keeney Corridor
6118 26.306 Peach Bottom/Keeney Corridor
6119 21.589 Peach Bottom/Keeney Corridor
6120 15.44 Peach Bottom/Keeney Corridor
6121 6.304 Peach Bottom/Keeney Corridor
6123 7.355 Peach Bottom/Keeney Corridor
6124 25.984 Peach Bottom/Keeney Corridor
6125 4.356 Peach Bottom/Keeney Corridor
6126 19.452 Peach Bottom/Keeney Corridor
6127 1.930 Peach Bottom/Keeney Corridor
6128 4.069 Peach Bottom/Keeney Corridor
6129 26.345 Peach Bottom/Keeney Corridor
6130 11.827 Peach Bottom/Keeney Corridor
6131 26.929 Peach Bottom/Keeney Corridor
6132 9.107 Peach Bottom/Keeney Corridor
6133 42.555 Peach Bottom/Keeney Corridor
6134 11.327 Peach Bottom/Keeney Corridor
6135 14.342 Peach Bottom/Keeney Corridor
6136 3.654 Peach Bottom/Keeney Corridor
6137 8.858 Peach Bottom/Keeney Corridor
6138 16.079 Colora Substation
6138 67.826 Peach Bottom/Keeney Corridor
6139 20.707 Peach Bottom/Keeney Corridor
6140 17.879 Peach Bottom/Keeney Corridor
6141 5.841 Peach Bottom/Keeney Corridor
6142 62.64 Peach Bottom/Keeney Corridor
6143 15.639 Peach Bottom/Keeney Corridor
6145 10.424 Peach Bottom/Keeney Corridor
6146 34.75 Peach Bottom/Keeney Corridor
6147 9.074 Peach Bottom/Keeney Corridor
6148 14.952 Peach Bottom/Keeney Corridor
6149 15.786 Peach Bottom/Keeney Corridor
6150 16.921 Peach Bottom/Keeney Corridor
6
Schedule 3.10 Title and Related Matters.
----------------------------------------
FEE PROPERTY OWNED BY
CONOWINGO POWER COMPANY
(Continued)
File No. Acreage Use
6151 24.218 Peach Bottom/Keeney Corridor
6152 6.576 Peach Bottom/Keeney Corridor
6153 27.395 Peach Bottom/Keeney Corridor
6154 23.34 Peach Bottom/Keeney Corridor
6155 2.994 Peach Bottom/Keeney Corridor
6156 23.375 Peach Bottom/Keeney Corridor
6157 10.663 Peach Bottom/Keeney Corridor
6158 11.157 Peach Bottom/Keeney Corridor
6159 7.428 Peach Bottom/Keeney Corridor
6160 18.515 Peach Bottom/Keeney Corridor
6161 1.916 Peach Bottom/Keeney Corridor
6162 1.248 Peach Bottom/Keeney Corridor
6163 29.843 Peach Bottom/Keeney Corridor
6164 12.998 Peach Bottom/Keeney Corridor
6166 2.711 Peach Bottom/Keeney Corridor
6167 3.757 Peach Bottom/Keeney Corridor
6168 54.509 Peach Bottom/Keeney Corridor
6169 6.111 Peach Bottom/Keeney Corridor
6172 63.974 Peach Bottom/Keeney Corridor
6173 11.078 Peach Bottom/Keeney Corridor
6174 6.311 Peach Bottom/Keeney Corridor
6175 5.605 Peach Bottom/Keeney Corridor
6176 10.208 Peach Bottom/Keeney Corridor
6177 36.0 Peach Bottom/Keeney Corridor
6178 9.469 Peach Bottom/Keeney Corridor
6179 10.086 Peach Bottom/Keeney Corridor
6180 0.461 Peach Bottom/Keeney Corridor
6181 44.715 Peach Bottom/Keeney Corridor
6182 0.550 Peach Bottom/Keeney Corridor
6184 15.456 Peach Bottom/Keeney Corridor
6185 44.705 Peach Bottom/Keeney Corridor
6187 21.515 Peach Bottom/Keeney Corridor
6188 21.232 Peach Bottom/Keeney Corridor
6189 18.655 Peach Bottom/Keeney Corridor
6191 4.916 Peach Bottom/Keeney Corridor
6192 5.294 Peach Bottom/Keeney Corridor
6193 3.621 Peach Bottom/Keeney Corridor
7
Schedule 3.10
-------------
FEE PROPERTY OWNED BY
CONOWINGO POWER COMPANY
(Continued)
File No. Acreage Use
6195 11.426 Peach Bottom/Keeney Corridor
6196 13.124 Peach Bottom/Keeney Corridor
6197 1.052 Peach Bottom/Keeney Corridor
6198 9.813 Peach Bottom/Keeney Corridor
6199 3.522 Peach Bottom/Keeney Corridor
6200 12.925 Peach Bottom/Keeney Corridor
6204 9.164 Peach Bottom/Keeney Corridor
6206 0.115 Peach Bottom/Keeney Corridor
6209 0.372 Peach Bottom/Keeney Corridor
6211 10.360 Peach Bottom/Keeney Corridor
9995 0.169 Elkton Service Building
8
Schedule 3.11 Leases.
----------------------
None
9
Schedule 3.12 Insurance.
------------------------
None
10
Schedule 3.13 Environmental Matters.
------------------------------------
(iii) U.S. Environmental Protection Agency letter dated August 23, 1988;
U.S. Environmental Protection Agency letter dated September 3, 1985;
U.S. Environmental Protection Agency letter dated April 17, 1987;
U.S. Environmental Protection Agency letter dated July, 1991.
(iv) Underground Storage Tanks
-------------------------
1000 gallon underground waste oil storage tank
10,000 gallon underground gasoline tank
400 gallon underground diesel fuel tank
2000 gallon underground heating oil tank
All of the above items are located at Elkton Service Center.
11
Schedule 3.14 Labor Matters.
----------------------------
1. OFCPP Consolidation Agreement as fully described in the PECO Energy June
30, 1992 Quarterly Report to the SEC on Form IO-Q (page 26).
2. Two Company employees are part of the class of plaintiffs in the
Fisher/Kurz class action lawsuits, described in PECO Energy's Annual Report
to the SEC on Form 10-K (Page 27)
3. Election Bar Period for PECO Energy Company, with respect to a
representation petition filing, expires on June 22, 1994, after which a
union may file a representation petition. Currently there is no unfair
labor practice charge against the Company pending before the National Labor
Relations Board; however, it is common in a representation petition filing
to file unfair labor practice charges.
12
Schedule 3.15 ERISA; Benefit Plans.
----------------------------------
1. PECO Energy Severance Benefit Plan
2. 1994 Voluntary Separation Incentive Program
3. 1994 Voluntary Retirement Incentive Plan
4. PECO Energy Medical Benefits Plan
5. PECO Energy Dental Benefits Plan
6. PECO Energy Group Life Insurance
7. PECO Energy Employee Savings Plan
8. PECO Energy Service Annuity Plan
9. PECO Energy Dependent Life Insurance Plan
10. PECO Energy Accidental Death and Dismemberment Plan
11. PECO Energy Short-Term Disability Plan
12. PECO Energy Long-Term Disability Plan
13. PECO Energy Beneficial Association Special Benefit Plan
14. PECO Energy Beneficial Association (Employee Association and Athletic
Association)
15. PECO Energy Health Care Flexible Spending Account
16. PECO Energy Dependent Care Assistance Flexible Spending Account
17. PECO Energy SILO Merchandise Plan
18. PECO Energy Employee Assistance Plan
19. PECO Energy Occupational Hazard Plan
20. PECO Energy Travel Accident Plan
21. PECO Energy Disability Payroll Plan
22. PECO Energy Tuition Refund Plan
23. PECO Energy Deferred Compensation and Supplemental Retirement Benefit Plan
24. PECO Energy Management Group Deferred Compensation
and Retirement Benefit Plan
25. PECO Energy 1989 Long-Term Incentive Plan
26. PECO Energy Incentive Compensation Plan
27. PECO Energy Management Incentive Compensation Plan
28. PECO Energy Quarter Century Club (one free dinner)
13
Schedule 3.16 Certain Contracts and Arrangements.
-------------------------------------------------
Master Leasing Agreement, dated as of June 1, 1986, between BLC Corporation and
Conowingo Power Company.
14
Schedule 3.17 Legal Proceedings; etc.
-------------------------------------
None
15
Schedule 3.18 Permits.
-----------------------
None
16
Schedule 3.19 Recalculation as a Utility.
------------------------------------------
3.19(a)
- -------
State of Maryland
3.19(b)
- -------
Commonwealth of Pennsylvania
17
Schedule 3.20 Taxes
--------------------
3.20(a)
- -------
Agreement by PECO Energy extending the statutory period of limitation to 1995
for federal income taxes for the years 1987-90.
3.20(b)
- -------
IRS Power of Attorney (IRS Form 4828) granted by PECO Energy Company to Louis W.
Ricker, Esq. and Steven G. Lioce, Esq. with respect to federal income tax
matters (Form 1120) for the years 1987-90.
18
Schedule 4.3 Consents and Approvals; No Violation
--------------------------------------------------
None
19
Schedule 5.1 Conduct of the Company.
-------------------------------------
5.1(c)
- ------
Proposed Retiree Health Plan amendment requiring retiree contribution for
medical coverage.
5.1(s) Regulatory Filings
- --------------------------
MPSC
- ----
o ECR (rate filing and semi-annual status reports)
o DSM Rider (rate filing and semi-annual interim DSM updates)
o Environmental surcharge
o COPCO 10-year plan
o Section 69(b) filing (due January 1995)
o Monthly earnings reports
o MPSC Assessment filing
o NARUC Rate Report
o E2R2 Report
FERC
- ----
o monthly Fuel Adjustment
20
Schedule 5.16(a)
----------------
Company will retain ownership of all facilities associated with the transmission
and distribution lines addressed by the following perpetual easements and rights
of way to be retained by Company.
1. A perpetual easement to a strip of ground approximately 170 feet wide
located on the south side of the Peach Bottom-Keeney transmission corridor from
the Colora Substation to the point where the Cecil/Colora Transmission Line
crosses Interstate Highway 95. The easement will provide Company the rights
required to operate, maintain, repair and replace existing transmission and
distribution facilities within the easement area and to install, operate,
maintain, repair, and replace additional transmission or distribution facilities
within the easement area together with the necessary rights for access across
PECO Energy property or easements and vegetation trimming rights.
2. A perpetual easement to a strip of ground approximately 125 feet wide
located on the south side of the Peach Bottom-Keeney transmission corridor from
the Delaware State Line to a point where the existing 138 KV transmission line
enters the existing AMTRAK corridor. The easement will provide Company the
rights required to operate, maintain, repair and replace existing transmission
and distribute facilities within the easement area and to install, operate,
maintain, repair, and replace additional transmission or distribution facilities
within the easement area together with the necessary rights for access across
PECO Energy property or easements and vegetation trimming rights.
3. A perpetual easement to a strip of ground approximately 170 feet wide
located on the north side of the Peach Bottom-Keeney transmission corridor from
the Colora Substation to the point where the line connects with the transmission
line owned by Susquehanna Power Company. The easement will provide Company the
rights required to operate, maintain, repair and replace existing transmission
and distribution facilities within the easement area and to install, operate,
maintain, repair, and replace additional transmission or distribution
facilities within the easement area together with the necessary rights for
21
access across PECO Energy property or easements and vegetation trimming rights.
4. A perpetual easement to a strip of ground approximately 170 feet wide
located in the center of the Peach Bottom-Keeney transmission corridor from the
Colora Substation to the point where the line connects with the transmission
line owned by Susquehanna Power Company. The easement will provide Company the
rights required to operate, maintain, repair and replace existing transmission
and distribution facilities within the easement area and to install, operate,
maintain, repair, and replace additional transmission or distribution facilities
within the easement area together with the necessary rights for access across
PECO Energy property or easements and vegetation trimming rights. This easement
will be subject to a requirement that the Company or Buyer, at PECO Energy's
request and expense, will relocate the existing transmission line or any
additional facilities added after Closing to a new easement provided for by PECO
Energy and further subject to the requirement that PECO Energy shall coordinate
any required relocation with Buyer to minimize disruption of service by Buyer.
5. In addition to the above described perpetual easements, Company will retain
the necessary rights of way to operate, maintain, renew, repair, and replace the
distribution facilities crossing or longitudinally located on the Peach Bottom-
Keeney transmission corridor. These rights of way will be subject to a
requirement that the Company or Buyer, at PECO Energy's request and expense,
will relocate the distribution facilities to a new easement provided for by
PECO Energy and further subject to the requirement that PECO Energy shall
coordinate any required relocation with Buyer to minimize disruption of service
by Buyer.
22