Exhibit 99.7
[Shoreham and Wading River]
EXECUTION COPY
SECOND OPTION AND PURCHASE AND SALE AGREEMENT
by and between
KEYSPAN GENERATION LLC, AS SELLER,
AND
LONG ISLAND LIGHTING COMPANY d/b/a LIPA, AS BUYER,
Dated as of March 22, 2007
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions..........................................................1
Section 1.2. Rules of Construction................................................8
ARTICLE II
PURCHASE OPTION
Section 2.1. Purchase Option......................................................9
Section 2.2. Excluded Assets......................................................9
Section 2.3. Exercisability.......................................................9
Section 2.4. Method of Exercise...................................................9
Section 2.5. Exercise Date.......................................................10
Section 2.6. Effect of Option Notice.............................................10
Section 2.7. Closing Date........................................................10
Section 2.8. Payment and Delivery of the Purchased Assets........................10
Section 2.9. Assignment and Assumption...........................................10
Section 2.10. Provision of Corporate Records......................................11
Section 2.11. Non-Recourse........................................................11
Section 2.12. Risk of Loss........................................................11
ARTICLE III
THE PURCHASE PRICE
Section 3.1. Net Book Value; Preliminary Purchase Price..........................12
Section 3.2. Post-Closing Purchase Price Adjustments.............................13
Section 3.3. Purchase Price Allocation...........................................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of Seller............................15
Section 4.2. Provision of Additional Schedules upon Exercise.....................18
Section 4.3. Representations and Warranties of Buyer.............................19
Section 4.4. Survival............................................................20
ARTICLE V
COVENANTS
Section 5.1. Covenants of Seller.................................................20
Section 5.2. Additional Agreements...............................................22
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ARTICLE VI
Section 6.1. Closing Conditions..................................................26
Section 6.2. Other Agreements....................................................29
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Notices.............................................................29
Section 7.2. Headings............................................................30
Section 7.3. Miscellaneous.......................................................30
Section 7.4. Governing Law.......................................................30
Section 7.5. Assignment..........................................................31
Section 7.6. Schedules...........................................................31
Section 7.7. Waiver; Amendment...................................................31
Section 7.8. Indemnification.....................................................31
Section 7.9. Issue Taxes.........................................................34
Section 7.10. Fees and Expenses...................................................34
Section 7.11. Effective Date......................................................34
Section 7.12. Termination.........................................................35
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SCHEDULES
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Schedule I Additional Assets
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Schedule II Excluded Assets
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Schedule III Description and Survey of Shoreham Plant
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Schedule IV Description and Survey of Wading River Plant
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Schedule V Disclosure Schedule
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EXHIBITS
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Exhibit A Form of Assignment and Assumption Agreement
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Exhibit B Form of Easement Agreement
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Exhibit C Form of Operation and Maintenance Agreement
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Exhibit D Form of Power Supply Agreement Amendment
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Exhibit E Form of Energy Management Agreement Amendment
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Exhibit F Form of Deed
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SECOND OPTION AND PURCHASE AND SALE AGREEMENT
This SECOND OPTION AND PURCHASE AND SALE AGREEMENT (this "Agreement") is
made and entered into as of March 22, 2007, by and between KEYSPAN GENERATION
LLC, a limited liability company organized and existing under the laws of the
State of New York ("Seller", and also referred to herein as "Genco"), and LONG
ISLAND LIGHTING COMPANY d/b/a LIPA, a wholly-owned subsidiary of Long Island
Power Authority, a corporate municipal instrumentality and political subdivision
of the State of New York ("Buyer", and also referred to herein as "LIPA").
RECITALS
WHEREAS, Seller is the owner of the Shoreham Plant (as defined herein) and
the Wading River Plant (as defined herein) (together, the "Generating
Facilities");
WHEREAS, Seller is willing to grant LIPA an option to purchase one or both
of the Generating Facilities, on the terms and subject to the conditions set
forth herein; and
WHEREAS, concurrently with the execution of this Agreement and as a
condition to the effectiveness of this Agreement, Seller and Buyer and, as
applicable, certain of their respective Affiliates, are entering into an
Amendment to the Amended and Restated Management Services Agreement, dated as of
the date hereof ( the "MSA Amendment"), an Agreement and Waiver, dated as of the
date hereof (the "Agreement and Waiver"), a First Amendment to Option and
Purchase and Sale Agreement, dated as of the date hereof (the "Option
Amendment") and certain other related agreements referred to therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. All capitalized terms used in this Agreement and
not otherwise defined shall have the meanings assigned to them in the Power
Supply Agreement. The following terms, as used herein, shall have the respective
meanings set forth in this Section 1.1:
"Actual Knowledge" means the actual knowledge of the corporate
officers or managerial representatives of the specified Person charged with
responsibility for the particular function as of the date of this
Agreement, or, with respect to any certificate delivered pursuant to this
Agreement, the date of delivery of the certificate after reasonable inquiry
by them of selected employees of such Person whom they believe, in good
faith, to be the persons responsible for the subject matter of the inquiry.
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"Additional Assets" means all assets used principally in connection
with the operation of the Generating Facilities, including, without
limitation, the assets set forth on Schedule I hereto, but excluding any
Excluded Assets.
"Adverse Consequences" means any and all claims, demands, suits,
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 reasonable
disbursements in connection therewith).
"Affiliate" means any Person, corporation or other entity directly or
indirectly controlling or controlled by another Person, corporation or
other entity or under direct or indirect common control with such Person,
corporation or other entity.
"Agreement" means this Second Option and Purchase and Sale Agreement
and all Exhibits and Schedules annexed hereto, as the same may be amended,
supplemented or otherwise modified from time to time.
"Agreement and Waiver" has the meaning assigned to it in the recitals
hereto.
"Amended and Restated Management Services Agreement" means the Amended
and Restated Management Services Agreement dated as of January 1, 2006,
between LIPA and KeySpan Electric Services LLC.
"Ancillary Agreements" means, collectively, the Assignment and
Assumption Agreement, the Deed, the Easement Agreement, the Operation and
Maintenance Agreement, the Power Supply Agreement Amendment and the Energy
Management Agreement Amendment.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement to be entered into between Seller and Buyer on the
Closing Date, substantially in the form attached hereto as Exhibit A.
"Assessments" has the meaning assigned to it in Section 5.2(e).
"Assumed Liabilities" has the meaning assigned to it in Section
2.9(a).
"Business" means, with respect to one or both of the Generating
Facilities that are part of the Purchased Assets, the business of operating
such Generating Facilities as they are operated on the date hereof.
"Business Day" means any day other than Saturday, Sunday and any day
on which banking institutions in the State of New York are authorized by
law or other governmental action to close.
"Buyer Indemnified Parties" has the meaning assigned to it in Section
7.8(a).
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"Buyer Required Governmental Approvals" means the approvals required
by Buyer from the New York State Comptroller, the New York Attorney General
(as to form) and the PACB to purchase the Purchased Assets.
"Cap" means 33% of the Purchase Price.
"Closing Date" has the meaning assigned to it in Section 2.7.
"Closing Date Net Book Value" has the meaning assigned to it in
Section 3.2(a).
"Closing Objection" has the meaning assigned to it in Section 3.1(b).
"Closing Payment Amount" means the amount payable by Buyer to Seller
on the Closing Date as an estimate of the Purchase Price, as determined
pursuant to Section 3.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercially Reasonable Efforts" means efforts which are reasonably
within the contemplation of the parties at the time of executing this
Agreement and which do not require the performing party to expend any funds
other than expenditures which are customary and reasonable in transactions
of the kind and nature contemplated by this Agreement in order for the
performing party to satisfy its obligations hereunder.
"Contract" means any contract, agreement, purchase order, lease,
indenture, mortgage, loan agreement, note, guarantee, commitment,
undertaking or arrangement of any kind.
"Deed" means the bargain and sale deed with covenant against grantor's
acts to be granted and delivered by Genco to LIPA on the Closing Date,
substantially in the form attached hereto as Exhibit F.
"Direct Claim" has the meaning assigned to it in Section 7.8(c)(iv).
"Disclosure Schedule" has the meaning assigned to it in Section 4.1.
"Easement Agreement" means the Easement Agreements to be entered into
between Genco and its Affiliates and LIPA on the Closing Date, each
substantially in the form attached hereto as Exhibit B.
"Effective Date" has the meaning assigned to it in Section 7.11.
"Emission Credits" means the allowances and credits issued or
certified pursuant to the Federal Clean Air Act or analogous provisions of
the Laws of the State of New York or other regional or local laws
authorizing the emission of fixed quantities of SO2, NOX or CO2 and other
emission compounds, to the extent attributable to the Purchased Assets as
of the Closing Date.
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"Energy Management Agreement" the Energy Management Agreement dated as
of June 26, 1997, between KETS and LIPA, as amended, supplemented or
otherwise modified from time to time.
"Energy Management Agreement Amendment" means an amendment to the
Energy Management Agreement to be entered into between KETS and LIPA within
five (5) days following the Exercise Date, substantially in the form
attached hereto as Exhibit E.
"Environmental Claim" has the meaning assigned to it in Section
4.1(g)(vii)(A).
"Environmental Laws" has the meaning assigned to it in Section
4.1(g)(vii)(B).
"Environmental Permits" has the meaning assigned to it in Section
4.1(g)(iii).
"Estimated Net Book Value" has the meaning assigned to it in Section
3.1(b).
"Excluded Assets" has the meaning assigned to it in Section 2.2.
"Excluded Liabilities" has the meaning assigned to it in Section
2.9(b).
"Exercise Date" has the meaning assigned to it in Section 2.5.
"Expiration Date" has the meaning assigned to it in Section 2.3.
"FERC" means the Federal Energy Regulatory Commission, and any
successor thereto and any analogous Governmental Authority.
"Final Closing Payment Amount" has the meaning assigned to it in
Section 3.2(d).
"Final Net Book Value" has the meaning assigned to it in Section
3.2(d).
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Generating Facilities" has the meaning assigned to it in the recitals
hereto.
"Good Utility Practices" mean any of the practices, methods and acts
engaged in or approved by a significant portion of the electric utility
industry during the relevant time period, or any of the practices, methods
or acts which, in the exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have been expected to
accomplish the desired result at a reasonable cost consistent with good
business practices, reliability, safety and expedition. Good Utility
Practices are not intended to be limited to the optimum or minimum
practices, methods or acts to the exclusion of all others, but rather to be
acceptable practices, methods or acts generally accepted in the industry.
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"Governmental Authority" means any federal, state, local or other
governmental, regulatory or administrative agency, commission, department,
board, or other governmental subdivision, court, tribunal, arbitrating body
or other governmental authority excluding, however, Buyer and the Long
Island Power Authority.
"Hazardous Materials" has the meaning assigned to it in Section
4.1(g)(vii)(C).
"HSR Act" means the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended, including the Premerger Notification Rules promulgated
thereunder.
"Indemnifiable Loss" has the meaning assigned to it in Section 7.8(a).
"Indemnifying Party" has the meaning assigned to it in Section
7.8(c)(i). "Indemnitee" has the meaning assigned to it in Section
7.8(c)(i).
"Independent Expert" has the meaning assigned to it in Section 3.2(c).
"Inspection" means all tests, reviews, examinations, inspections,
investigations, verifications, samplings and similar activities conducted
by Buyer or its representatives with respect to the Purchased Assets prior
to the Closing Date.
"Inventories" means fuel oil, materials, spare parts (stock and
non-stock), consumable supplies and chemical and gas inventories relating
to the operation of a Generating Facility located at, or in transit to, a
Generating Facility.
"KETS" means KeySpan Energy Trading Services LLC.
"Laws" means, with respect to any Person, any foreign, United States
federal, state or local laws, statutes, ordinances, rules or regulations
applicable to such Person.
"Liens" means, with respect to any asset, property or right of any
Person, any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset, property or right.
"Material Adverse Effect" means, with respect to a Generating Facility
or other asset or property, events or circumstances which, individually or
in the aggregate, have had or would reasonably be expected to have a
material adverse effect on the business, operations, properties, financial
condition or results of operations or the value of such Generating Facility
or other asset or property, except for any such event or circumstance
caused by or resulting from (i) an event, change, condition or circumstance
affecting the generating business in which Seller operates generally; (ii)
a change in economic (including financial, banking and/or securities
markets), regulatory or political conditions generally, including without
limitation changes in interest rates and changes in demand for electricity;
or (iii) the announcement or performance of the transactions contemplated
by this Agreement or the use of proceeds thereof.
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"Merger" means the business combination transaction provided for in
the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
June 26, 1997, among Buyer, affiliates of Seller and the other parties
named therein, as amended, supplemented or otherwise modified from time to
time.
"MSA Amendment" has the meaning assigned to it in the recitals hereto.
"National Grid Agreements" means the MSA Amendment, the Agreement and
Waiver, this Agreement and the Option Amendment.
"National Grid/KeySpan Closing Date" means the date on which the
Certificate of Merger is filed with the Secretary of State of the State of
New York in connection with the closing of the business combination
transaction provided for in the Agreement and Plan of Merger, dated as of
February 25, 2006, between National Grid plc, National Grid US8 Inc. and
KeySpan Corporation, pursuant to which National Grid US8 Inc., a
wholly-owned subsidiary of National Grid plc, will merge with and into
KeySpan Corporation, with KeySpan Corporation as the surviving entity.
"Net Book Value" means the net book value as reflected in Seller's
books, determined in accordance with GAAP and subject to the dispute
provisions of Section 3.2.
"Notice of Disagreement" has the meaning assigned to it in Section
3.2(b).
"Operation and Maintenance Agreement" means the Operation and
Maintenance Agreement to be entered into between Genco and LIPA within five
(5) days following the Exercise Date, substantially in the form attached
hereto as Exhibit C.
"Option" has the meaning assigned to it in Section 2.1.
"Option Notice" has the meaning assigned to it in Section 2.4.
"PACB" means the New York Public Authorities Control Board, and any
successor thereto and any analogous Governmental Authority.
"Permit" means any permit, license, approval, consent, order or
authorization of any Governmental Authority.
"Permitted Liens" means (i) statutory Liens for Taxes or other
governmental charges or assessments not yet due or delinquent or the
validity of which is being contested in good faith by appropriate
proceedings provided that the aggregate amount being so contested does not
exceed $50,000; (ii) mechanics', carriers', workers', repairers' and other
similar Liens arising or incurred in the ordinary course of business
relating to obligations as to which there is no default on the part of
Seller or the validity of which are being contested in good faith, and
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which do not, individually or in the aggregate, exceed $50,000; (iii)
zoning, entitlement, conservation restriction and other land use and
environmental regulations by any Governmental Authority; and (iv) such
other imperfections in or failure of title, charges, easements and
restrictions which do not materially, individually or in the aggregate,
detract from the value of the Purchased Assets as currently used or
materially interfere with the present use of the Purchased Assets and do
not secure indebtedness.
"Person" means, unless otherwise specified, a natural person,
corporation, society, limited liability company, partnership, joint
venture, unincorporated association or other entity, including a
Governmental Authority.
"PILOT Agreement" means an agreement entered into by Seller or an
Affiliate of Seller and a local municipality providing for payments in lieu
of real estate or similar Taxes.
"Power Supply Agreement" means the Power Supply Agreement, dated as of
June 26, 1997, between Genco and LIPA, as amended, supplemented or
otherwise modified from time to time.
"Power Supply Agreement Amendment" means an amendment to the Power
Supply Agreement to be entered into between Genco and LIPA within five (5)
days following the Exercise Date, substantially in the form attached hereto
as Exhibit D.
"Prime Rate" means the rate announced by Citibank, N.A. from time to
time at its principal office as its prime lending rate for domestic
commercial loans, such rate to change when and as such prime lending rate
changes.
"Proprietary Information" of a party means all information about the
party or its Affiliates, including their respective properties or
operations, furnished to the other party or its representatives by the
party or its representatives, after the date hereof, regardless of the
manner or medium in which it is furnished. Proprietary Information does not
include information that: (a) is or becomes generally available to the
public, other than as a result of a disclosure by the other party or its
representatives; (b) was known by or available to the other party on a
nonconfidential basis prior to its disclosure by the party or its
representatives; (c) becomes available to the other party on a
nonconfidential basis from a person, other than the party or its
representatives, who is not otherwise bound by a confidentiality agreement
with the party or its representatives, or is not otherwise under any
obligation to the party or any of its representatives not to transmit the
information to the other party or its representatives; or (d) is
independently developed by the other party.
"Purchase Price" has the meaning assigned to it in Section 3.1(b).
"Purchased Assets" means either or both of the Generating Facilities,
as specified in the Option Notice delivered by Buyer hereunder, together
with the Additional Assets and the Related Assets related to such specified
Generating Facilities.
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"Reference Net Book Value" has the meaning assigned to it in Section
3.1(a).
"Related Assets" means the construction work in progress balances
related to a Generating Facility together with the materials and supplies
related to such facility held by Seller.
"Release" has the meaning assigned to it in Section 4.1(g)(vii)(D).
"SEC" means the Securities and Exchange Commission, and any successor
thereto and any analogous Governmental Authority.
"Seller Indemnified Parties" has the meaning assigned to it in Section
7.8(b).
"Shoreham Plant" means the Shoreham combustion turbine Units Nos. 1
and 2, consisting of a 50 MW GE Frame 7 turbine and a 20 MW Pratt & Whitney
turbine, respectively, together with the related plant site, as delineated
on the survey attached hereto as Schedule III.
"Taxes" means all taxes, assessments and charges imposed by any United
States federal, state or local taxing authority or any foreign taxing
authority, including, without limitation, interest, penalties and additions
thereto.
"Third Party Claim" has the meaning assigned to it in Section
7.8(c)(i).
"Threshold" means (i) if both of the Generating Facilities are
purchased by Buyer, $500,000 or (ii) if only one of the Generating
Facilities is purchased by Buyer, $250,000.
"Treasury Regulations" means the regulations promulgated under the
Code from time to time, as amended.
"2006 Agreements" means the Amended and Restated Management Services
Agreement (as defined herein), the Settlement Agreement and Release, dated
as of January 1, 2006, among KeySpan Corporation, Genco, KeySpan Electric
Services LLC and KETS and LIPA and the Long Island Power Authority and the
Option and Purchase and Sale Agreement, dated as of January 1, 2006,
between Genco and LIPA.
"Wading River Plant" means the Wading River combustion turbine Units
Nos. 1, 2, and 3, each consisting of an 80 MW GE Frame 7EA turbine,
together with the related plant site, as delineated on the survey attached
hereto as Schedule IV.
Section 1.2. Rules of Construction. Unless the context otherwise requires:
(a) Words in the singular include the plural, and words in the plural
include the singular;
(b) Provisions apply to successive events and transactions;
8
(c) An accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(d) "Herein", "hereof" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision of this Agreement;
(e) Words in the masculine gender include the feminine gender and words in
feminine gender include the masculine gender; and
(f) The Article and Section headings used or contained in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.
ARTICLE II
PURCHASE OPTION
Section 2.1. Purchase Option. Subject to the terms and conditions of this
Agreement, Seller hereby grants to Buyer an irrevocable option to purchase the
Generating Facilities, or either of them, together with the related Additional
Assets and the Assumed Liabilities (the "Option").
Section 2.2. Excluded Assets. Notwithstanding anything to the contrary in
this Agreement, nothing in this Agreement will constitute or be construed as
conferring on Buyer, and Buyer is not being granted an option to acquire or is
not otherwise acquiring, any right, title or interest in or to any of the
specific assets, Contracts and real property described on Schedule II hereto
(the "Excluded Assets"), which are hereby excluded from the Purchased Assets.
Section 2.3. Exercisability. Subject to the further terms of this
Agreement, the Option shall become exercisable at any time after the National
Grid/KeySpan Closing Date. The Option shall expire and cease to be exercisable
at 3:00 p.m. on May 31, 2008 (the "Expiration Date").
Section 2.4. Method of Exercise. The Option may be exercised only by the
giving of a written notice by Buyer (the "Option Notice") to the Seller in such
form and in such manner as is prescribed in Section 7.1 herein, setting forth
which of the Generating Facilities, or both of them, Buyer has elected to
purchase. If Buyer delivers an Option Notice with respect to one of the
Generating Facilities prior to the Expiration Date, it may subsequently amend
the Option Notice to include the other Generating Facility by the delivery of a
notice to the Seller at any time prior to the Expiration Date; provided, that,
in such event, (i) the sale of both Generating Facilities and the other
Purchased Assets must occur simultaneously on a single Closing Date, (ii)
notwithstanding such amendment, the Exercise Date shall remain unchanged as the
date that the original Option Notice was delivered as provided in Section 2.5
and (iii) the parties shall prior to the Closing Date enter into a new Energy
Management Agreement Amendment (substantially in the form attached hereto as
Exhibit E) and a new Power Supply Agreement Amendment (substantially in the form
attached hereto as Exhibit D) to replace any already signed, in order to reflect
such amended Option Notice, and enter into an Operation and Maintenance
9
Agreement (substantially in the form attached hereto as Exhibit C) with respect
to such Generating Facility that is the subject of such amendment. The Option
Notice (and any amendment thereof referred to above) must be accompanied by a
certification by an authorized officer of LIPA that the exercise of the Option
has been affirmatively approved by the vote of the LIPA Board of Trustees.
Section 2.5. Exercise Date. The date of exercise of the Option shall be the
date on which the Option Notice is delivered to Seller at its address as
provided in Section 7.1 of this Agreement (the "Exercise Date").
Section 2.6. Effect of Option Notice. Upon receipt of the Option Notice by
Seller, Buyer and Seller shall be legally bound to consummate the transactions
contemplated hereby subject to (i) the satisfaction or waiver of each of the
conditions precedent set forth in Article VI hereof, including, without
limitation, receipt of all Buyer Required Governmental Approvals, and (ii) all
of the other terms and conditions hereof.
Section 2.7. Closing Date. The closing date of the sale, conveyance,
assignment and transfer by Seller, and the purchase by Buyer, of the Purchased
Assets pursuant to this Agreement and the other transactions contemplated hereby
will be a date, as mutually agreed by the parties, following satisfaction (or
waiver) of all conditions precedent to closing set forth in Article VI (the
"Closing Date"), which date shall not be later than one-hundred twenty (120)
days following such satisfaction (or waiver), at a location to be agreed upon by
the parties hereto following the Exercise Date. The Closing Date may be extended
by the written agreement of the parties hereto.
Section 2.8. Payment and Delivery of the Purchased Assets. On the Closing
Date, Seller shall deliver to Buyer the Assignment and Assumption Agreement, the
Deed and any other documents which, together, are sufficient to cause the entire
right, title and interest in the Purchased Assets to be transferred to Buyer,
beneficially and of record, and in consideration thereof (i) Buyer shall pay to
Seller an amount in cash equal to the Closing Payment Amount and (ii) Genco and
LIPA shall enter into the Ancillary Agreements. All such payments and deliveries
shall be deemed to occur simultaneously as a single transaction and no such
payment or delivery shall be effective unless all such payments and deliveries
have been made.
Section 2.9. Assignment and Assumption.
(a) Assumed Liabilities. Pursuant to the Assignment and Assumption
Agreement, Buyer shall assume all liabilities and obligations with respect
to the Purchased Assets arising on or after the Closing Date and those it
currently has under the Merger Agreement and the Power Supply Agreement
during its term, including, without limitation, asbestos and certain other
environmental liabilities (all such liabilities and obligations assumed by
Buyer being collectively, the "Assumed Liabilities").
(b) Excluded Liabilities. Pursuant to the Assignment and Assumption
Agreement, Seller shall retain (i) all liabilities and obligations related
to the Purchased Assets which relate to periods prior to the Closing Date,
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other than the Assumed Liabilities, [(ii) all liabilities and obligations,
including environmental liabilities, relating to the Excluded Assets], and
(iii) all liabilities and obligations it has assumed under the Merger
Agreement and the Power Supply Agreement with respect to the Purchased
Assets, including, without limitation, liabilities regarding manufactured
gas plant sites (all such liabilities and obligations retained by Seller
being collectively, the "Excluded Liabilities").
(c) Liabilities and Undertaking Agreement. The parties acknowledge and
agree that the Liabilities and Undertaking Agreement as clarified by letter
dated May 28, 1998 shall remain in effect and shall not be deemed to be
modified by anything to the contrary in Sections 2.9(a) and (b) above.
Section 2.10. Provision of Corporate Records. On the Closing Date, Seller
shall transfer to Buyer, at Seller's cost, the records in Seller's possession
relating to the Purchased Assets, including, without limitation, all Contracts,
litigation files and filings with any Governmental Authority relating to the
Purchased Assets, except to the extent such items are already in the possession
of Buyer, provided that, during normal business hours and on reasonable notice,
Buyer will provide Seller access to all such books and records that Seller
reasonably deems necessary to comply with Section 3.2.
Section 2.11. Non-Recourse. The sale and purchase of the Purchased Assets
shall be made on an "as-is" basis without recourse to Seller, and without
representation, covenant or warranty by Seller, express or implied, except in
each case as expressly set forth in this Agreement.
Section 2.12. Risk of Loss.
(a) Borne by Seller. Except to the extent set forth in the Power
Supply Agreement, from the date hereof through the Closing Date, all risk
of loss or damage to the property included in the Purchased Assets shall be
borne by Seller, other than loss or damage caused by the acts or negligence
of Buyer, which loss or damage shall be the responsibility of Buyer.
(b) Casualty; Condemnation. If before the Closing Date, all or any
portion of the Purchased Assets is (i) taken by eminent domain or is the
subject of a pending or (to the Actual Knowledge of Seller) contemplated
taking which has not been consummated, or (ii) damaged or destroyed by fire
or other casualty, Seller shall notify Buyer promptly in writing of such
fact, then if the parties consummate the transactions contemplated hereby
(including payment of the Purchase Price), (x) in the case of a
condemnation, Seller shall assign or pay, as the case may be, any proceeds
thereof to Buyer on the Closing Date (to the extent received prior to the
Closing Date or promptly upon receipt if received thereafter) and (y) in
the case of a casualty, Seller shall either restore the damage or assign
the insurance proceeds therefor (and pay the amount of any deductible
and/or self-insured amount in respect of such casualty) to Buyer on the
Closing Date (to the extent received prior to the Closing Date or promptly
upon receipt if received thereafter). Notwithstanding the above, if such
casualty or loss results in a Material Adverse Effect prior to the Closing
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Date and the parties elect to consummate the transactions contemplated
hereby, Buyer and Seller shall negotiate to settle the loss resulting from
such taking (and such negotiation shall include, without limitation, the
negotiation of a fair and equitable adjustment to the Closing Payment
Amount and Final Closing Payment Amount). If no such settlement is reached
within sixty (60) days after Seller has notified Buyer of such casualty or
loss, then Buyer or Seller may terminate this Agreement pursuant to Section
7.12(e). In the event of damage or destruction which Seller elects to
restore, Seller will have the right to postpone the Closing Date for up to
four (4) months. Buyer will have the right to inspect and observe all
repairs necessitated by any such damage or destruction.
ARTICLE III
THE PURCHASE PRICE
Section 3.1. Net Book Value; Preliminary Purchase Price.
(a) Not later than April 30, 2007, Seller shall provide Buyer with
Seller's determination of the Net Book Value of each Generating Facility,
the Related Assets and the Additional Assets as of December 31, 2006 based
on Seller's audited financial statements as of such date (the "Reference
Net Book Value"), together with the working papers of Seller and Seller's
independent public accountants relating to the Reference Net Book Value.
Seller will also make its representatives and independent public
accountants reasonably available from time to time during normal business
hours to address questions with respect thereto raised by Buyer and Buyer's
representatives.
(b) The purchase price for the Purchased Assets ("Purchase Price")
shall be 1.25 times the Net Book Value of the Purchased Assets (other than
the Related Assets for which the Purchase Price shall equal to the Net Book
Value of thereof) on the Closing Date. Not less than thirty (30) Business
Days prior to the Closing Date, Seller will cause to be delivered to Buyer
a good faith estimate of the Net Book Value of the Purchased Assets on the
Closing Date determined in accordance with GAAP and in a manner consistent
with the determination of the Reference Net Book Value (the "Estimated Net
Book Value") and a statement showing the determination thereof, together
with the working papers of Seller (and of Seller's independent accountants,
if any such accountants were engaged by Seller to assist in such
determination) relating to the Estimated Net Book Value. Not less than
fifteen (15) Business Days prior to the Closing Date, Buyer may notify
Seller in writing (the "Closing Objection") that it objects to Seller's
determination of the Estimated Net Book Value. Any Closing Objection shall
specify in reasonable detail the basis for Buyer's objections. If Buyer so
notifies Seller of a Closing Objection, Seller and Buyer shall, during the
fifteen (15) Business Day period following Seller's receipt of the Closing
Objection, attempt in good faith to resolve the items set forth in the
Closing Objection. If the parties resolve the items in the Closing
Objection, the Closing Payment Amount shall be 1.25 times such amount of
the Estimated Net Book Value agreed upon by the parties with respect to the
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Purchased Assets (other than with respect to the Related Assets for which
the Closing Payment Amount shall be equal to such amount). If the parties
are unable to resolve Buyer's objections, the Closing Payment Amount shall
be 1.20 times the Reference Net Book Value of all the Purchased Assets
(other than with respect to the Related Assets for which the Closing
Payment Amount shall be .95 times the Reference Net Book Value). If Seller
does not receive a Closing Objection within the applicable fifteen (15)
Business Day period, the Closing Payment Amount shall be 1.25 times the
Estimated Net Book Value with respect to the Purchased Assets (other than
with respect to the Related Assets for which the Closing Payment Amount
shall be the Estimated Net Book Value).
Section 3.2. Post-Closing Purchase Price Adjustments.
(a) On or before sixty (60) days following the Closing Date, Seller
shall prepare and deliver to Buyer an updated statement of the Net Book
Value of the Purchased Assets adjusted to the extent necessary to reflect
the Net Book Value of the Purchased Assets as of the Closing Date,
determined in accordance with GAAP and in a manner consistent with the
determination of the Reference Net Book Value (the "Closing Date Net Book
Value").
(b) Unless Buyer notifies Seller in writing within thirty (30) days
after Buyer's receipt of the Closing Date Net Book Value of any objection
to the determination of Net Book Value (the "Notice of Disagreement"), the
Closing Date Net Book Value shall become final and binding for purposes of
determining the Purchase Price. During the 30-day period following Buyer's
receipt of the Closing Date Net Book Value, Buyer and Buyer's
representatives will be permitted to review the working papers of Seller
and Seller's independent public accountants, if any such accountants were
engaged by Seller to assist in such determination, relating to the Closing
Date Net Book Value and any financial records relevant to the preparation
of the Closing Date Net Book Value, provided that such access shall be
during normal business hours. Seller and Seller's independent public
accountants will also be reasonably available from time to time during
normal business hours to address related questions raised by Buyer and
Buyer's representatives.
(c) Any Notice of Disagreement shall specify in reasonable detail the
basis for the objections set forth therein. The objections contained in the
Notice of Disagreement may relate to any aspect of the determination of the
Closing Date Net Book Value, including, without limitation, the proper or
consistent application of GAAP, capital additions, capital retirements,
cost of removal, annual depreciation allocations and arithmetic
calculations. Notwithstanding any Option exercise by Buyer, Buyer's
acquisition of the Purchased Assets based on the Reference Net Book Value
or the Estimated Net Book Value, or the net book value of the Purchased
Assets as may be reflected on Seller's books, the parties acknowledge and
agree that all rights Buyer has hereunder to raise objections in the Notice
of Disagreement shall not be prejudiced or waived and are expressly
reserved. If Buyer gives a Notice of Disagreement to Seller within such
30-day period, Seller and Buyer shall, during the 30-day period following
Seller's receipt of the Notice of Disagreement, attempt in good faith to
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resolve Buyer's objections. During such 30-day period, Seller and Seller's
representatives shall be permitted to review the working papers of Buyer
and Buyer's representatives relating to the Notice of Disagreement and the
basis therefor. Buyer and Buyer's representatives will also be reasonably
available from time to time during normal business hours to address related
questions raised by Seller and Seller's independent public accountants. If
Seller and Buyer are unable to resolve all such objections within such
30-day period, the matters remaining in dispute shall be submitted to the
New York, New York office of Grant Thornton LLP or such other accounting
firm as the parties may agree (the "Independent Expert"). Each of Buyer and
Seller represent and warrant that it neither has nor has had, and covenants
that it will not engage in, a relationship that could be reasonably
interpreted to compromise the Independent Expert's independence. The
parties shall instruct the Independent Expert to render a reasoned written
decision addressing the issues raised in the Notice of Disagreement and
determining whether the Closing Date Net Book Value was determined in
accordance with GAAP, consistently applied beginning from May 28, 1998, and
the provisions of this agreement, which decision shall be rendered as
promptly as practicable but in no event later than thirty (30) days after
its selection. If the Independent Expert determines that the Closing Date
Net Book Value as prepared by Seller and submitted to the Independent
Expert was not determined in accordance with GAAP and the provisions of
this Agreement, it shall determine the Closing Date Net Book Value. The
resolution of disputed items and determination by the Independent Expert
shall be final and binding. The fees and expenses of the Independent Expert
shall be shared equally by Seller and Buyer.
(d) The Purchase Price shall be an amount equal to the Closing Date
Net Book Value determined pursuant to this Section 3.2 (the "Final Net Book
Value") multiplied by 1.25 for the Purchased Assets (other than the Related
Assets for which the Purchase Price shall be an amount equal to the Final
Net Book Value) (the "Final Closing Payment Amount"). If the Final Closing
Payment Amount is less than the Closing Payment Amount, Seller shall pay or
cause to be paid to Buyer, an amount equal to the amount by which the Final
Closing Payment Amount is less than the Closing Payment Amount (together
with interest thereon from the Closing Date to the date paid at the Prime
Rate). If the Final Closing Payment Amount is greater than the Closing
Payment Amount, Buyer shall pay or cause to be paid to Seller, an amount
equal to the amount by which Final Closing Payment Amount exceeds the
Closing Payment Amount (together with interest thereon from the Closing
Date to the date paid at the Prime Rate). All payments pursuant to this
Section 3.2(d), if any, shall be made by wire transfer of immediately
available funds within three (3) Business Days after final determination of
the amounts to be so paid.
Section 3.3. Purchase Price Allocation. The parties agree that the Purchase
Price shall be allocated in accordance with the rules under Section 1060 of the
Code and the Treasury Regulations promulgated thereunder. Seller shall prepare
such allocation subject to review by the Buyer. The Parties agree to act in
accordance with the computations and allocations as determined pursuant to this
Section 3.3 in any relevant Tax returns or filings, including any forms or
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reports required to be filed pursuant to Section 1060 of the Code, the Treasury
Regulations promulgated thereunder or any provisions of local, state and foreign
law, and to cooperate in the preparation of any such forms and to file such
forms in the manner required by applicable law. Any issues with respect to the
allocation which have not been finally resolved within sixty (60) days following
the closing of the transactions contemplated hereby shall be referred to the
Independent Expert whose determination shall be final and binding upon the
parties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of Seller. Seller represents
and warrants to Buyer on the date hereof and on the Closing Date that, except as
set forth on Schedule V and as provided in Section 4.2 (the "Disclosure
Schedule"):
(a) Ownership of Purchased Assets. On the Closing Date, Seller will
own and hold, beneficially and of record, the entire right, title and
interest in and to all of the Purchased Assets free and clear of all Liens,
other than Permitted Liens.
(b) Execution and Enforceability. Seller has all requisite power and
authority to execute and deliver this Agreement and the Ancillary
Agreements and to perform each of its obligations hereunder and thereunder.
Seller has duly authorized the execution, delivery and performance of this
Agreement and, as appropriate, the Ancillary Agreements. This Agreement is,
upon receipt of Buyer Required Governmental Approvals, and, when executed
and delivered, the Ancillary Agreements will be, the legal, valid and
binding obligations of Seller, and (assuming the due authorization,
execution and delivery by Buyer) is and will be, enforceable against Seller
in accordance with their respective terms.
(c) Organization and Qualification of Seller. Seller is a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of New York and has all requisite power and
authority to conduct its business as then conducted and to own and lease
its properties and assets. Seller is qualified to do business and in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business then requires such qualification.
(d) No Violations or Conflicts. Neither the execution and delivery of
this Agreement by Seller nor the consummation by Seller of the transactions
contemplated by this Agreement on the Closing Date (i) violates the
articles of organization, the operating agreement or other constituent
instruments of Seller, (ii) results in a violation or breach of, or
constitutes a default or an event of default under, any bond or other
material Contract, Permit, instrument or other obligation to which Seller
is a party, or (iii) violates any Laws, writ, judgment, injunction or court
decree.
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(e) Consents and Approvals. Except for the approval of the FERC
pursuant to Section 203 of the Federal Power Act of the transfer of the
Purchased Assets on the Closing Date or as otherwise provided in this
Agreement or as set forth on the Disclosure Schedule, no consent, approval
or authorization of, or declaration, filing or registration with, any
Governmental Authority is required to be made or obtained by Seller in
connection with the execution, delivery and performance of this Agreement
by Seller. Except as set forth on the Disclosure Schedule, no consent,
approval or authorization by, or notice to, any other Person is required to
be made or obtained by Seller in connection with the execution, delivery
and performance of this Agreement by Seller. On the Closing Date, all
notices or other actions required to be made or taken, if any, pursuant to
any applicable Laws to permit the closing of the transactions contemplated
by this Agreement will have been made and taken.
(f) Compliance with Laws; Permits. The Business is in compliance in
all material respects with all Laws and Seller has not received any written
notice to the contrary from any Governmental Authority. Seller has all
material Permits required for it to conduct the Business and no material
violations have been recorded in respect of any Permits and no proceeding
is pending or, to the Actual Knowledge of Seller, threatened with respect
to the limitation or revocation of any Permit.
(g) Environmental Protection. Except as set forth in the Disclosure
Schedule, or except as would not reasonably be expected to result in a
Material Adverse Effect on the Purchased Assets, to the Actual Knowledge of
the Seller:
(i) Compliance. Seller is in material compliance with all
Environmental Laws (as defined below in this Section 4.1(g))
applicable to the Generating Facilities; and Seller has not received
any communication (written or oral) from any Person (including any
Governmental Authority) that alleges that Seller is not in such
compliance with applicable Environmental Laws.
(ii) Environmental Claims. Seller has no notice of any material
Environmental Claim (as defined below in this Section 4.1(g)) pending
against Seller with respect to the Generating Facilities.
(iii) Environmental Permits. Seller has obtained or has applied
for all material environmental health and safety permits and all other
governmental licenses, permits and authorizations (collectively, the
"Environmental Permits") necessary for the construction of the
facilities constituting part of the Generating Facilities or the
ownership or operation of such facilities or the Generating
Facilities, and all such Environmental Permits are in good standing
or, where applicable, a renewal application has been timely filed and
is pending agency approval, and Seller is in material compliance with
all terms and conditions of the Environmental Permits.
(iv) Releases. There has been no Release (as defined below in
this Section 4.1.(g)) of any Hazardous Material (as defined below in
this Section 4.1(g)) at either of the Generating Facilities that would
be reasonably likely to form the basis of any material Environmental
Claim against Seller.
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(v) Predecessors. Seller has no knowledge, with respect to any
predecessor of Seller, of any material Environmental Claim with
respect to the Generating Facilities pending or threatened, or of any
Release of Hazardous Materials that would be reasonably likely to form
the basis of any material Environmental Claim.
(vi) Disclosure. Seller has disclosed to Buyer all material facts
which it reasonably believes, based on applicable Law as in effect on
the date hereof and on the Closing Date, form the basis of a material
Environmental Claim arising from (A) the cost of pollution control
equipment currently required or known to be required in the future
with respect to the Generating Facilities; (B) current remediation
costs or remediation and site monitoring costs known to be required in
the future with respect to the Generating Facilities; or (C) any other
environmental matter affecting the Generating Facilities.
(vii) As used in this Agreement:
(A) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices
of noncompliance or violation (written or oral) by any Person
(including any Governmental Authority) alleging potential
liability (including, without limitation, potential
responsibility for or liability for enforcement, investigatory
costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or
resulting from (a) the presence, or Release or threatened Release
into the environment, of any Hazardous Materials at any location
constituting a portion of the Generating Facilities; or (b)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law with respect to the
Generating Facilities; or (c) any and all claims by any third
party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the
presence or Release of any Hazardous Materials with respect to
the Generating Facilities.
(B) "Environmental Laws" means all federal, state, local
Laws, ordinances, rules and regulations relating to health and
safety, pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or protection of human health as it relates
to the environment including, without limitation, laws and
regulations relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
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(C) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam
insulation, and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls; and (B)
any chemicals, materials or substances which are now defined as
or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", or words of similar import, under any
Environmental Law; and (C) any other chemical, material,
substance or waste, exposure to which is now prohibited, limited
or regulated under any Environmental Law in a jurisdiction in
which the Generating Facilities are operated.
(D) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, surface or subsurface soil,
surface water, saltwater shoreline or floor bottom, groundwater
or property from or affecting either of the Generating
Facilities.
(h) Litigation. There is no claim, suit, litigation, investigation or
proceeding pending, or to the Actual Knowledge of Seller threatened,
against Seller in any court, by any Governmental Authority or before any
arbitrator or other tribunal relating to this Agreement or the transactions
contemplated hereby that would reasonably be expected to have a Material
Adverse Effect on Seller's ability to perform its obligations hereunder.
Seller is not subject to any outstanding action, order, writ, judgment,
injunction or decree of any court or Governmental Authority relating to
this Agreement or the transactions contemplated hereby that would
reasonably be expected to have a Material Adverse Effect on Seller's
ability to perform its obligations hereunder.
Section 4.2. Provision of Additional Schedules upon Exercise. The
Disclosure Schedule provided on the date hereof pursuant to Section 4.1 is valid
as of the date hereof. Seller may at any time up to twenty (20) days prior to
the Closing Date provide Buyer with an updated Disclosure Schedule, the last of
which will be valid as of the Closing Date. Unless Buyer has the right to
terminate this Agreement pursuant to Section 7.12(d) by reason of the
developments reflected on one or more updated Disclosure Schedules (considered
individually or in the aggregate with any such prior developments) and exercises
the right within ten (10) days after such right accrues, but in any event prior
to the Closing Date, the provision of the updated Disclosure Schedule pursuant
to this Section 4.2 will be deemed to have amended this Agreement, including the
Disclosure Schedule, to have qualified the representations and warranties
contained in Section 4.1, and to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of the
developments.
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Section 4.3. Representations and Warranties of Buyer. Except as otherwise
disclosed to Seller in writing, Buyer represents and warrants to Seller on the
date hereof and on the Closing Date as follows:
(a) Power and Authority. Buyer has all requisite power and authority
to execute and deliver this Agreement and the Ancillary Agreements and,
upon receipt of Buyer Required Governmental Approvals, to perform each of
its obligations hereunder and thereunder. Buyer has duly authorized the
execution, delivery and performance of this Agreement and, as appropriate,
the Ancillary Agreements. This Agreement is, upon receipt of Buyer Required
Governmental Approvals, and, when executed and delivered, the Ancillary
Agreements will be, the legal, valid and binding obligation of Buyer and
(assuming the due authorization, execution and delivery by Seller) is and,
in the case of the Ancillary Agreements, will be, enforceable against Buyer
in accordance with their respective terms.
(b) Applicability of HSR Act. Buyer is an agency of the State of New
York and is not a "corporation engaged in commerce" within the meaning of
the HSR Act as of either the date hereof, the Exercise Date or the Closing
Date.
(c) No Violations or Conflicts. Neither the execution and delivery of
this Agreement by Buyer nor the consummation of the transactions
contemplated by this Agreement on the Closing Date (i) violates the
articles of incorporation or by-laws of Buyer, (ii) results in a violation
or breach of, or constitutes a default or an event of default under, any
bond or other material Contract, Permit, instrument or other obligation to
which Buyer is a party, or (iii) violates any Laws, writ, judgment,
injunction or court decree.
(d) Consents and Approvals. Except as otherwise provided in this
Agreement, upon receipt of Buyer Required Governmental Approvals, no
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Authority is required to be made or
obtained by Buyer in connection with the execution, delivery and
performance of this Agreement by Buyer. No consent, approval or
authorization by, or notice to, any other Person is required to be made or
obtained by Buyer in connection with the execution, delivery and
performance of this Agreement by Buyer. On the Closing Date, all notices or
other actions required to be made or taken, if any, pursuant to any
applicable Laws to permit the closing of the transactions contemplated by
this Agreement will have been made and taken.
(e) Litigation. There is no claim, suit, litigation, investigation or
proceeding pending, or to the Actual Knowledge of Buyer threatened, against
Buyer in any court, by any Governmental Authority or before any arbitrator
or other tribunal relating to this Agreement or the transactions
contemplated hereby that would reasonably be expected to have a Material
Adverse Effect on Buyer's ability to perform its obligations hereunder.
Buyer is not subject to any outstanding action, order, writ, judgment,
injunction or decree of any court or Governmental Authority relating to
this Agreement or the transactions contemplated hereby that would
reasonably be expected to have a Material Adverse Effect on Buyer's ability
to perform its obligations hereunder.
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Section 4.4. Survival. The representations and warranties of Seller and
Buyer set forth in this Article IV shall survive for a period of eighteen (18)
months following the Closing Date except for the representations and warranties
of the Seller set forth in Section 4.1(g), which shall survive for a period of
nine (9) months following the Closing Date.
ARTICLE V
COVENANTS
Section 5.1. Covenants of Seller. After the date hereof and prior to the
Closing Date or earlier termination of this Agreement, Seller agrees as follows,
except as expressly contemplated or permitted in this Agreement or to the extent
Buyer shall otherwise consent in writing:
(a) Conduct of Business Relating to the Purchased Assets. Seller (1)
shall operate the Purchased Assets in the ordinary course of business
consistent with the past practices of Seller and consistent with Good
Utility Practices, (2) shall use all Commercially Reasonable Efforts to
preserve intact such Purchased Assets, and use Commercially Reasonable
Efforts to preserve the goodwill and relationships with its customers,
suppliers and others having business dealings with it with respect to the
Purchased Assets, (3) shall maintain the insurance coverage described in
Article 17 of the Power Supply Agreement, consistent with past practices of
Seller and with Good Utility Practices, (4) shall maintain all books,
records, files, working papers, correspondence, memoranda and other
documentation relating to the Purchased Assets consistent with past
practices of Seller and with Good Utility Practices, and (5) shall comply
with all applicable Laws relating to the Purchased Assets, including,
without limitation, all Environmental Laws, except where the failure to so
comply would not be reasonably expected to result in a Material Adverse
Effect with respect to the Purchased Assets. Without limiting the
generality of the foregoing, and, except as (x) contemplated in this
Agreement, or (y) required under applicable Law or by any Governmental
Authority, prior to the Closing Date, without the prior written consent of
Buyer, Seller shall not with respect to the Purchased Assets:
(i) Make any material change in the levels of Inventories
customarily maintained by Seller with respect to the Purchased Assets,
other than changes which are consistent with Good Utility Practices;
(ii) Sell, lease (as lessor), encumber, pledge, transfer or
otherwise dispose of, any material Purchased Assets individually or in
the aggregate (except for Purchased Assets used, consumed or replaced
in the ordinary course of business consistent with past practices of
Seller or with Good Utility Practices) other than to encumber
Purchased Assets with Permitted Liens;
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(iii) Modify, amend or voluntarily terminate prior to the
expiration date any Contracts or Permits associated with such
Purchased Assets in any material respect, other than (x) in the
ordinary course of business, to the extent consistent with the past
practices of Seller and with Good Utility Practices, (y) with cause,
to the extent consistent with past practices of Seller or its
Affiliates and with Good Utility Practices, or (z) as may be required
in connection with transferring Seller's rights or obligations
thereunder to Buyer pursuant to this Agreement;
(iv) Except as otherwise provided herein, enter into any Contract
relating to the Purchased Assets that requires annual payments by
Seller that exceed $1,000,000 individually or $3,000,000 in the
aggregate unless it is terminable by Seller (or, after the Closing
Date, by Buyer) without penalty or premium upon no more than sixty
(60) days notice;
(v) Operate and maintain the Purchased Assets otherwise than in
accordance with the terms and conditions of the Power Supply
Agreement, the Amended and Restated Management Services Agreement, as
amended by the MSA Amendment, and the Energy Management Agreement; and
(vi) Except as otherwise provided herein, enter into any written
or oral Contract with respect to any of the proscribed transactions
set forth in the foregoing paragraphs (i) through (v).
(b) Access to Information. Seller will, at reasonable times and upon
reasonable notice: (i) give Buyer and its representatives reasonable
access, during normal business hours and upon reasonable notice, to
Seller's managerial personnel and to all books, records, plans, equipment,
offices and other facilities and properties constituting the assets subject
to the Option in order to permit Buyer to make such reasonable Inspections
thereof as Buyer may request; (ii) furnish Buyer with such financial and
operating data and other information with respect to the assets subject to
the Option as Buyer may from time to time reasonably request, and permit
Buyer to make such reasonable Inspections thereof as Buyer may request;
(iii) furnish Buyer a copy of each material report, schedule or other
document filed by Seller or any of its Affiliates with respect to the
assets subject to the Option, this Agreement and the transactions
contemplated hereby with any state or federal court, administrative agency,
commission or other Governmental Authority, including, without limitation,
the SEC, FERC, New York Public Service Commission or New York Independent
System Operator; and (iv) furnish Buyer with all such other information as
shall be reasonably necessary to enable Buyer to verify the accuracy of the
representations and warranties of Seller contained in this Agreement;
provided, however, that (x) any such Inspections and investigations shall
be conducted in such a manner consistent with Seller's safety requirements
and so as not to interfere unreasonably with the operation of the subject
assets, (y) Seller shall not be required to take any action which would
constitute a waiver of the attorney-client privilege, and (z) Seller need
not supply Buyer with any information which Seller is under a legal or
contractual obligation not to supply.
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(c) Cooperation; Notification. Seller shall: (i) confer on a regular
and frequent basis with one or more representatives of Buyer to discuss,
subject to applicable law, material operational matters and the general
status of its ongoing operations relating to the assets subject to the
Option; (ii) promptly notify Buyer of any significant changes in its
business, properties, assets, condition (financial or other), results of
operations or prospects relating to the assets subject to the Option; and
(iii) advise Buyer of any change or event which, individually or in the
aggregate, has had or, insofar as reasonably can be foreseen, is reasonably
likely to result in a Material Adverse Effect on the assets subject to the
Option.
Section 5.2. Additional Agreements
(a) Notification of Certain Matters. Each party hereto shall give
prompt notice to the other party of (i) the occurrence or failure to occur
of any event, which occurrence or failure would be reasonably likely to
cause any representation or warranty of such party contained herein to be
untrue or inaccurate in any material respect at any time, (ii) any material
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, and (iii) any
newly discovered fact or circumstance that might reasonably be expected to
have a material effect on the accuracy of any representation or warranty of
such party contained herein.
(b) Easements. On the Closing Date, pursuant to one or more Easement
Agreements, as appropriate, Buyer shall grant to Seller and its Affiliates
irrevocable and perpetual easements on each of the sites and related
parcels of each Generating Facility within the Purchased Assets to the
extent necessary for the continued operation and maintenance of, and access
to, the extent necessary, the Excluded Assets.
(c) Subdivision.
(i) The parties shall jointly cooperate and use Commercially
Reasonable Efforts to obtain the requisite subdivision of the parcels
of land on which the Purchased Assets are located to subdivide the
property to enable the Seller to own the real property on which any
Excluded Asset is located.
(ii) If notwithstanding the parties' Commercially Reasonable
Efforts they are unable to obtain required subdivision approval as
contemplated above on or prior to the Closing Date, the parties agree
that: (a) Seller shall transfer to Buyer the real estate underlying
the Excluded Assets, to the extent such real estate is not among the
real estate parcels included within the Purchased Assets, at no cost
to Buyer, and (b) the parties shall negotiate in good faith and enter
into with each other appropriate lease, easement and/or license
agreements in order to provide each other with adequate and necessary
rights (including rights of ingress and egress) to own, operate and
maintain the Purchased Assets and the Excluded Assets, as the case may
be, such agreements to contain customary terms and conditions for
agreements of this type including, without limitation, indemnification
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for acts and omissions and environmental claims and liabilities, but
not to require any rental or similar payments to be made by either
party, except for real estate taxes, insurance and other similar
charges and assessments, and nominal payments, if any, attributable to
such real estate.
(d) Emission Credits.
(i) To the extent Emission Credits are not required to satisfy
the compliance obligations of the Purchased Assets, such Emissions
Credits shall be pooled with those attributable to Seller's remaining
generating stations under the Power Supply Agreement (for the term of
the Power Supply Agreement) and such pooled credits shall be applied
pro rata to all such generating stations to meet their compliance
obligations under applicable Law, provided that if Buyer exercises the
Option with respect to both of the Generating Facilities, excess
Emission Credits from one of the Generating Facilities shall first be
applied to the other Generating Facility to the extent necessary to
meet its compliance obligations under applicable Law. If any Emissions
Credits attributable to the Purchased Assets are sold after the
Closing Date, Buyer shall be entitled to 100% of the net sale proceeds
therefrom.
(ii) In the event Buyer sells or transfers either or both of the
Generating Facilities that constitute Purchased Assets, the Emission
Credits related to such Generating Facilities shall remain subject to
the provisions of this Agreement with respect to the use of such
Emission Credits for Seller's remaining generating stations, and Buyer
hereby covenants to provide therefor in any agreement for any such
sale or transfer to the satisfaction of Seller.
(e) Assessments. Real estate Taxes/PILOT Agreements, sewer rents,
water charges, and other similar assessments ("Assessments") associated
with the sites of the Generating Facilities that constitute Purchased
Assets or Assumed Liabilities and assessed during the fiscal period in
which the Closing Date occurs shall be treated in accordance with terms of
the Power Supply Agreement.
(f) Proprietary Information. Between the date of this Agreement and
the Closing Date, each party shall, and shall use its best efforts to cause
its representatives to, (i) keep all Proprietary Information of the other
party confidential and not to disclose or reveal any such Proprietary
Information to any person other than such party's representatives and (ii)
not use such Proprietary Information other than in connection with the
consummation of the transactions contemplated hereby. The obligations of
the parties under this Section 5.2(f) shall be in full force and effect
(and shall survive the termination of this Agreement) until the later of
three (3) years from the date hereof, the discharge of all other
obligations owed by the parties to each other and the closing of the
transactions contemplated by this Agreement.
(g) Post-Closing Access. For a period of seven (7) years after the
Closing Date (or such longer period as may be required by applicable Law or
Section 5.2(h)), each party and its representatives shall have reasonable
23
access to all of the books and records relating to the Purchased Assets to
the extent that such access may reasonably be required by such party in
connection with the Assumed Liabilities[ or the Excluded Liabilities], or
other matters relating to or affected by the operation of the Purchased
Assets or the Excluded Assets. Such access shall be afforded by the party
in possession of any such books and records upon reasonable notice and
during normal business hours. The party exercising this right of access
shall be solely responsible for any costs or expenses incurred by it or the
other party with respect to such access pursuant to this Section 5.2(g). If
the party in possession of such books and records shall desire to dispose
of any books and records upon or prior to the expiration of such seven-year
period (or any such longer period), such party shall, prior to such
disposition, give the other party a reasonable opportunity at such other
party's reasonable expense, to segregate and remove such books and records
as such other party may select.
(h) Permitted Disclosure of Proprietary Information. Upon the other
party's prior written approval (which will not be unreasonably withheld or
delayed), either party may provide Proprietary Information of the other
party to any Governmental Authority with jurisdiction or any stock
exchange, as may be necessary to obtain requisite Governmental Authority
consents or to comply generally with any relevant law or regulation. The
disclosing party will seek confidential treatment for the Proprietary
Information provided to any Governmental Authority and the disclosing party
will notify the other party as far in advance as is practicable of its
intention to release to any Governmental Authority any Proprietary
Information.
(i) Further Assurances.
(i) Subject to the terms and conditions of this Agreement, each
of the parties hereto shall use its Commercially Reasonably Efforts to
take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the purchase and sale
of the Purchased Assets pursuant to this Agreement and the assumption
of the Assumed Liabilities, including, without limitation, using its
Commercially Reasonably Efforts to ensure satisfaction of the
conditions precedent to each party's obligations hereunder, including
obtaining all necessary consents, approvals and authorizations of
third parties and Governmental Authorities required to be obtained in
order to consummate the transactions contemplated in this Agreement
(including FERC approval). Neither of the parties hereto shall,
without prior written consent of the other party, take or fail to take
any action, which might reasonably be expected to prevent or
materially impede, interfere with or delay the transactions
contemplated by this Agreement. From time to time after the Closing
Date, without further consideration, Seller will, at Buyer's expense,
execute and deliver such documents to Buyer as Buyer may reasonably
request in order to more effectively vest in Buyer Seller's title to
the Purchased Assets subject to Permitted Liens.
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(ii) In the event that any Purchased Asset shall not have been
conveyed to Buyer on the Closing Date, Seller shall, subject to
Section 5.2(i)(iii), use Commercially Reasonable Efforts to convey
such asset to Buyer as promptly as is practicable after the Closing
Date.
(iii) To the extent that Seller's rights under any Contract
relating to the Purchased Assets may not be assigned without the
consent of another Person which consent has not been obtained by the
Closing Date, this Agreement shall not constitute an agreement to
assign or deliver the same, if an attempted assignment or delivery
would constitute a breach thereof or be unlawful. Seller and Buyer
agree that if any consent to an assignment or delivery of any material
such Contract shall not be obtained or if any attempted assignment
would be ineffective or would impair Buyer's rights and obligations
under the material Contract in question, so that Buyer would not in
effect acquire the benefit of all such rights and obligations, Seller,
at Buyer's option and to the maximum extent permitted by law and such
material Contract, shall, after the Closing Date, appoint Buyer to be
Seller's agent with respect to such material Contract, or, to the
maximum extent permitted by law and such material Contract, enter into
such reasonable arrangements with Buyer or take such other actions as
are necessary to provide Buyer with the same or substantially similar
rights and obligations of such material Contract as Buyer may
reasonably request; provided that Buyer shall assume all of Seller's
obligations under such Contract and indemnify Seller against any
claims with respect to such Contract and such arrangement arising
after the Closing Date. Seller and Buyer shall cooperate and shall
each use Commercially Reasonable Efforts prior to and after the
Closing Date to obtain an assignment of such material Contract to
Buyer.
(iv) To the extent that Seller's rights under any warranty or
guaranty constituting part of the Purchased Assets may not be assigned
without the consent of another Person, which consent has not been
obtained by the Closing Date, this Agreement shall not constitute an
agreement to assign same, if an attempted assignment would constitute
a breach thereof, or be unlawful. Seller and Buyer agree that if any
consent to an assignment of any such warranty or guaranty shall not be
obtained, or if any attempted assignment would be ineffective or would
impair Buyer's rights and obligations under the warranty or guaranty
in question, so that Buyer would not in effect acquire the benefit of
all such rights and obligations, Seller, at Buyer's expense, shall use
Commercially Reasonable Efforts, to the extent permitted by law and
such warranty or guaranty, to enforce such warranty or guaranty for
the benefit of Buyer so as to provide Buyer to the maximum extent
possible with the benefits and obligations of such warranty or
guaranty.
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ARTICLE VI
CLOSING CONDITIONS
Section 6.1. Closing Conditions. The obligations of the parties to
consummate the sale and purchase of the Purchased Assets is subject to the
satisfaction of the following conditions, provided, however, that the party or
parties to whose benefit a condition runs may waive compliance with such
condition:
(a) No Injunctions, etc. No preliminary or permanent injunction or
other order or decree by any federal or state court or Governmental
Authority which prevents the consummation of the sale and purchase of the
Purchased Assets contemplated herein shall have been issued and remain in
effect (each party agreeing to use its Commercially Reasonable Efforts to
have any such injunction, order or decree lifted) and no statute, rule or
regulation shall have been enacted by any state or federal government or
Governmental Authority which prohibits the consummation of the sale and
purchase of the Purchased Assets.
(b) Consents. All Governmental Authority consents and approvals and
Permits required to consummate the sale and purchase of the Purchased
Assets shall have been obtained (and copies of which shall have been
provided to the other party) and be in full force and effect, including,
without limitation, the approval of the PACB and FERC and subdivision
approvals under Section 5.2(c), reasonably satisfactory to Seller and
Buyer. All consents and approvals of third persons shall have been obtained
(and copies of which shall have been provided to the other party) and shall
be in full force and effect, except to the extent that the failure to
obtain such a consent or approval would not be reasonably expected to have
a Material Adverse Effect with respect to the Purchased Assets.
(c) Representations and Warranties. Each of the representations and
warranties set forth in Article IV that is qualified as to materiality
shall be true and correct, and each of such representations and warranties
that is not so qualified shall be true and correct in all material
respects, on and as of the Closing Date except to the extent such
representations and warranties are stated to be effective only as of an
earlier date, in which case such representations and warranties shall be
true and correct or true and correct in all material respects, as
applicable, as of such earlier date.
(d) Compliance with Agreements. The parties shall have complied with
or performed in all material respects all of their respective agreements
and covenants in this Agreement to be complied with or performed by them at
or prior to the Closing Date.
(e) Ancillary Agreements. Each of the Ancillary Agreements shall have
been executed and be in full force and effect.
(f) No Material Adverse Effect. There shall be no Material Adverse
Effect with respect to the Purchased Assets since the Exercise Date.
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(g) Contracts. To the extent available, originals of all Contracts
relating to the Purchased Assets and, if not available, true and correct
copies thereof, shall have been provided to Buyer.
(h) Seller Opinion of Counsel. Buyer shall have received an opinion
from Seller's counsel (who may be in-house counsel to Seller) reasonably
acceptable to Buyer, dated the Closing Date and reasonably satisfactory in
form and substance to Buyer and its counsel, substantially to the effect
that:
(i) Seller is a limited liability company duly formed, validly
existing and in good standing under the laws of State of New York and
has the power and authority to own, lease and operate its material
assets and properties and to carry on its Business as is now
conducted, and to execute and deliver this Agreement and each
Ancillary Agreement and to consummate the transactions contemplated by
it hereby and thereby; and the execution and delivery of this
Agreement and the Ancillary Agreements by Seller and the consummation
of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary action required on the part of
Seller;
(ii) This Agreement and each Ancillary Agreement have been duly
and validly executed and delivered by Seller and constitute legal,
valid and binding agreements of Seller enforceable against Seller in
accordance with their respective terms, except that such
enforceability may be limited, by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity);
(iii) The execution, delivery and performance of this Agreement
and each Ancillary Agreement by Seller do not (A) conflict with the
articles of organization, operating agreement or other constituent
instruments of Seller or (B) to the knowledge of such counsel,
constitute a violation of or default under those agreements or
instruments which are material to the business or financial condition
of Seller of which such counsel is aware; and
(iv) No consent or approval of, filing with, or notice to, any
Governmental Authority is necessary for the execution and delivery of
this Agreement and the Ancillary Agreements by Seller or the
consummation by Seller of the transactions contemplated hereby and
thereby, other than such consents, approvals filings or notices which,
if not obtained or made, will not prevent Seller from performing its
material obligations hereunder and thereunder.
(i) Buyer Opinion of Counsel. Seller shall have received an opinion
from Buyer's counsel (who may be in-house counsel to Buyer) reasonably
acceptable to Seller, dated the Closing Date and reasonably satisfactory in
form and substance to Seller and its counsel, substantially to the effect
that:
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(i) Buyer is a corporation, duly organized, validly existing and
in good standing under the laws of the State of New York and has the
corporate power and authority to own, lease and operate its material
assets and properties and to carry on its business as is now
conducted, and to execute and deliver this Agreement and each
Ancillary Agreement and to consummate the transactions contemplated by
it hereby and thereby; and the execution and delivery of this
Agreement and the Ancillary Agreements by Buyer and the consummation
of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action required on the part of
Buyer;
(ii) This Agreement and the Ancillary Agreements have been duly
and validly executed and delivered by Buyer, as applicable, and
constitute legal, valid and binding agreements of Buyer, enforceable
against Buyer in accordance with their respective terms, except that
such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity);
(iii) The execution, delivery and performance of this Agreement
and each Ancillary Agreement by Buyer do not (A) conflict with the
articles of incorporation or by-laws of Buyer or (B) to the knowledge
of such counsel, constitute a violation of or default under those
agreements or instruments which are material to the business or
financial condition of Buyer of which such counsel is aware; and
(iv) No consent or approval of, filing with, or notice to, any
Governmental Authority is necessary for the execution and delivery of
this Agreement and the Ancillary Agreements by Buyer or the
consummation by Buyer of the transactions contemplated hereby and
thereby, other than such consents, approvals, filings or notices
which, if not obtained or made, will not prevent Buyer from performing
its material obligations hereunder or thereunder.
(j) Officers' Certificates. Each party shall have delivered to the
other party (i) a certificate, executed by an executive officer of such
party, dated the Closing Date, to the effect that the conditions set forth
in Sections 6.1(c) and (d) have been satisfied with respect to such party,
and (ii) a certificate, executed by an executive officer of such party,
dated the Closing Date, certifying the incumbency of each officer of such
party executing instruments, agreements and certificates required to be
delivered to the other party hereunder.
(k) Good Standing Certificates. Each party shall have delivered to the
other party a copy of the articles of organization or other organizational
documents of such party certified by the Secretary of State of New York, in
each case, dated within ten days of the Closing Date.
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(l) Transfer Tax Returns. The parties shall have executed all New York
State real property transfer tax returns required by law.
(m) FIRPTA. Seller shall have delivered an appropriate certification
and affidavit with respect to the Foreign Investment in Real Property Tax
Act.
(n) Other Instruments of Transfer. Buyer shall have received all such
other instruments of assignment, transfer or conveyance as shall, in the
reasonable opinion of Buyer and its counsel, be necessary to transfer to
Buyer the Purchased Assets in accordance with this Agreement and where
necessary in recordable form.
(o) Other Instruments. Each party shall have received such other
agreements, documents, instruments and writings as are required to be
delivered by the other party at or prior to the Closing Date pursuant to
this Agreement or otherwise reasonably required in connection herewith.
Section 6.2. Other Agreements. The parties agree that the Operation and
Maintenance Agreement, the Power Supply Agreement Amendment and the Energy
Management Agreement Amendment shall be executed by the parties within five (5)
days following the Exercise Date; provided that such agreement and amendments
shall not become effective until, among other things as set forth in such
agreement and amendments, (i) all required Permits are obtained (and the parties
hereby agree to begin the process of seeking such Permits within ten (10) days
after the Effective Date) and (ii) the conditions set forth above in this
Article VI have been satisfied. The parties acknowledge and agree that the Power
Supply Agreement and the Energy Management Agreement shall remain in full force
and effect with respect to the Generating Facilities until the Closing Date and
otherwise in accordance with their respective terms if Buyer does not exercise
the Option.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made if (i) sent by registered or certified mail, return receipt
requested, or (ii) hand delivered, or (iii) sent by prepaid overnight carrier,
with a record of receipt, to the parties at the following addresses (or at such
other addresses as shall be specified by the parties by like notice):
(a) if to Buyer: Long Island Power Authority
333 Earle Ovington Blvd, Suite 403
Uniondale, NY 11553
Attn: General Counsel
and to: Thelen, Reid Brown Raysman & Steiner LLP
875 Third Avenue
New York, NY 10022
Attn: Douglas E. Davidson
29
(b) if to Seller: KeySpan
Generation LLC c/o
KeySpan Corporation One
Metrotech Center
Brooklyn, New York 11201
Attn: John J. Bishar, Jr.
with copies to: National Grid
25 Research Drive
Westborough, MA 01582
Attn: Lawrence J. Reilly
Each notice or communication shall be deemed to have been given on the date
received.
Section 7.2. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 7.3. Miscellaneous. This Agreement, together with the Exhibits and
Schedules annexed hereto: (i) constitute the entire agreement and supersede all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof and thereof;
(ii) shall be binding upon and inure to the benefit of the parties hereto and
thereto and their respective successors and permitted assigns and are not
intended to confer upon any other Person, any rights or remedies hereunder or
thereunder; and (iii) may be executed in two or more counterparts which together
shall constitute a single agreement.
Section 7.4. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York (without giving
effect to conflict of law principles) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
THE PARTIES HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS AND PROCEEDINGS
RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE STATE COURTS IN
AND FOR NASSAU COUNTY, NEW YORK OR THE FEDERAL COURTS IN AND FOR THE EASTERN
DISTRICT OF NEW YORK, WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION FOR SUCH
PURPOSE, AND THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION
OF SUCH COURTS AND IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. SERVICE OF PROCESS MAY BE MADE IN
ANY MANNER RECOGNIZED BY SUCH COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT
OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
30
Section 7.5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party. No party shall be
relieved of any liability arising hereunder in respect of any assignment
pursuant to this Section, unless such assignor has received a written release
expressly excepting such assignor from any liability that may arise hereunder.
Section 7.6. Schedules. Any information set forth on any Schedules annexed
hereto shall, to the extent applicable, be deemed to be included on each other
appropriate Schedule annexed to this Agreement.
Section 7.7. Waiver; Amendment. No waiver by any party hereto of any term,
condition or obligation of this Agreement shall be valid unless in writing and
signed by the waiving party. No failure or delay by either party hereto at any
time to require the other party hereto to perform strictly in accordance with
the terms hereof shall preclude such party from requiring performance by such
other party hereto at any later time. No waiver of any one or several of the
terms, conditions or obligations of this Agreement, and no partial waiver
thereof, shall be construed as a waiver of any of the other terms, conditions or
obligations of this Agreement. This Agreement may not be amended, changed or
modified in any fashion except by written instrument signed by each of the
parties hereto.
Section 7.8. Indemnification.
(a) Indemnification Provisions for Buyer's Benefit. Seller shall
indemnify Buyer, its Affiliates and their respective trustees, directors,
officers and employees ("Buyer Indemnified Parties") from and against any
and all Adverse Consequences that Buyer Indemnified Parties may incur or
suffer (each, an "Indemnifiable Loss") as a result of (i) any inaccuracy or
breach of a representation or warranty made by Seller in this Agreement,
provided that Buyer makes a written claim for indemnification against
Seller pursuant to Section 7.1 within the survival period set forth in
Section 4.4; (ii) the breach of, or default in the performance by Seller
of, any covenant, agreement or obligation to be performed by Seller
pursuant to this Agreement; and (iii) the Excluded Liabilities provided,
however that (a) Seller shall have no obligation to indemnify Buyer
Indemnified Parties from and against any Indemnifiable Losses until Buyer
Indemnified Parties have suffered Indemnifiable Losses in excess of the
Threshold (in which event Buyer Indemnified Parties may recover all
Indemnifiable Losses in excess of the Threshold), and (b) the maximum
liability of Seller for Indemnifiable Losses under this Section 7.8(a)
shall not exceed the Cap. The limitations on Seller's obligations to
indemnify set forth in this Section 7.8(a) shall not apply to (x) any
willful breach of any covenant which survives the Closing Date under this
Agreement, (y) any Indemnifiable Losses arising from Seller's fraud or (z)
the Excluded Liabilities.
(b) Indemnification Provisions for Seller's Benefit. Buyer shall
indemnify Seller, its Affiliates and their respective directors, officers
and employees ("Seller Indemnified Parties") from and against any and all
Indemnifiable Losses that Seller Indemnified Parties may incur or suffer as
a result of (i) any inaccuracy or breach of a representation or warranty
31
made by Buyer in this Agreement, provided that Seller makes a written claim
for indemnification against Buyer pursuant to Section 7.1 within the
survival period set forth in Section 4.4; (ii) the breach of, or default in
the performance by Buyer of, any covenant, agreement or obligation to be
performed by the Buyer pursuant to this Agreement; and (iii) the Assumed
Liabilities; provided, however that (a) Buyer shall have no obligation to
indemnify Seller Indemnified Parties from and against any Indemnifiable
Losses until Seller Indemnified Parties have suffered Indemnifiable Losses
in excess of the Threshold (in which event Seller Indemnified Parties may
recover all Indemnifiable Losses in excess of the Threshold), and (b) the
maximum liability of Buyer for Indemnifiable Losses under this Section
7.8(b) shall not exceed the Cap. The limitations on Buyer's obligations to
indemnify set forth in this Section 7.8(b) shall not apply to (x) any
willful breach of any covenant which survives the Closing Date under this
Agreement, (y) any Indemnifiable Losses arising from Buyer's fraud or (z)
the Assumed Liabilities.
(c) Defense of Claims.
(i) If any Person entitled to receive indemnification under this
Agreement (an "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 (a "Third Party Claim") with respect to which
indemnification is to be sought from a Person required to provide
indemnification under this Agreement (an "Indemnifying Party"), the
Indemnitee shall give such Indemnifying Party reasonably prompt written
notice thereof, but in any event such notice shall not be given later than
ten (10) days after the Indemnitee's receipt of notice of such Third Party
Claim. Such notice shall describe the nature of the Third Party Claim in
reasonable detail and shall indicate the estimated amount, if practicable,
of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have the right to participate in
or, by giving written notice to the Indemnitee, to elect to assume the
defense of any Third Party Claim at such Indemnifying Party's expense and
by such Indemnifying Party's own counsel, provided that the counsel for the
Indemnifying Party who shall conduct the defense of such Third Party Claim
shall be reasonably satisfactory to the Indemnitee. The Indemnitee shall
cooperate in good faith in such defense. If an Indemnifying Party elects
not to assume the defense of any Third Party Claim, the Indemnitee may not
compromise or settle such Third Party Claim without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(ii) If, within ten (10) 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 Section 7.8(c)(i), the Indemnifying Party will not be liable
32
for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the
Indemnifying Party shall fail to take reasonable steps necessary to defend
or settle diligently such Third Party Claim within twenty (20) days after
receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume
its own defense and the Indemnifying Party shall be liable for all
reasonable expenses thereof for which the Indemnifying Party is liable
pursuant to Section 7.8(a) or (b), as applicable.
(iii) Without the prior written consent of the Indemnitee, the
Indemnifying Party shall not enter into any settlement of any Third Party
Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder. If a firm offer is made to settle a
Third Party Claim without leading to liability or the creation of a
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the
Indemnifying Party shall give written notice to the Indemnitee to that
effect. If the Indemnitee fails to consent to such firm offer within ten
(10) days after its receipt of such notice, the Indemnifying Party shall be
relieved of its obligations to defend such Third Party Claim and the
Indemnitee may contest or defend such Third Party Claim. In such event, the
maximum liability of the Indemnifying Party as to such Third Party Claim
will be the amount of such settlement offer plus reasonable costs and
expenses paid or incurred by Indemnitee up to the date of said notice. The
Indemnitee will have the right to reject any settlement approved by the
Indemnifying Party if the Indemnitee is not fully and unconditionally
released from any liability resulting from that claim or is required to pay
any costs, expenses or damages to any person as a result of the claim that
are not covered by the indemnity provided herein.
(iv) Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and
indicating the estimated amount, if practicable, but in any event such
notice shall not be given later than ten (10) days after the Indemnitee
becomes aware of such Direct Claim, and the Indemnifying Party shall have a
period of thirty (30) days within which to respond to such Direct Claim. If
the Indemnifying Party does not respond within such 30-day period, the
Indemnifying Party shall be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its right to indemnification under this Agreement (if any).
33
(v) If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an indemnity payment in respect thereof, is reduced by
recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by,
from or against any other entity, the amount of such reduction, less any
costs, expenses or premiums incurred in connection therewith (together with
interest thereon from the date of payment thereof at the Prime Rate) shall
promptly be repaid by the Indemnitee to the Indemnifying Party.
(vi) A failure to give timely notice as provided in this Section
7.8(c) shall not affect the rights or obligations of any party hereunder
except if, and only to the extent that, as a result of such failure, the
party which was entitled to receive such notice was actually prejudiced as
a result of such failure.
(d) The parties agree that any indemnification payment made pursuant
to this Agreement shall be treated for Tax purposes as an adjustment to the
Purchase Price, unless otherwise required by applicable law.
(e) Notwithstanding anything to the contrary contained herein, the
indemnification provided for herein shall not cover, and in no event shall
any party hereto be liable for, any indirect, consequential, incidental,
exemplary, special damages or punitive damages or damages for lost profits
(except, in each case, to the extent necessary to reimburse an Indemnitee
for judgments actually awarded to third parties in respect of such types of
damages).
(f) After the Closing Date, other than as provided in Section 3.2,
this Section 7.8 will constitute the parties exclusive remedy for any of
the matters addressed herein or other claim arising out of or relating to
this Agreement.
Section 7.9. Issue Taxes. Buyer alone shall bear all documentary, stamp,
transfer, and similar taxes levied under the laws of the United States of
America or any State or local taxing authority thereof or therein in connection
with the sale of the Purchased Assets.
Section 7.10. Fees and Expenses. Except as expressly set forth herein, each
party shall bear its own costs and expenses (including those of such party's
legal, financial and other advisors) incurred in connection with the
transactions contemplated by this Agreement.
Section 7.11. Effective Date. This Agreement shall become legally binding
and effective only upon satisfaction of each of the following conditions
precedent (the date upon which all such conditions are satisfied, the "Effective
Date"):
(a) Approvals reasonably satisfactory to Buyer and Seller from the New
York State Comptroller and the New York State Attorney General (as to form)
of this Agreement and each of the other National Grid Agreements shall have
been obtained and be in full force and effect;
(b) Each of the 2006 Agreements shall have become effective pursuant
to their respective terms and be in full force and effect; and
34
(c) The Merger shall have been consummated.
Section 7.12. Termination. This Agreement may be terminated as provided
below:
(a) by mutual consent;
(b) by either party, by not less than three (3) Business Days' notice
to the other party, if (i) any federal or state court of competent
jurisdiction shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the closing, and such
order, judgment or decree shall have become final and nonappeallable; or
(ii) any statute, rule, order or regulation shall have been enacted or
issued by any Governmental Authority which, directly or indirectly,
prohibits the consummation of the closing;
(c) by either party, by not less than three (3) Business Days' notice
to the other party, if any required third-party or Governmental Authority
consents, approvals and Permits, the receipt of which is a condition to the
obligation to consummate the sale and purchase of the Purchased Assets
under Article VI, shall have been denied or shall have been granted but
contains terms or conditions which are not reasonably satisfactory to the
designated party or parties under Article VI; provided that the terminating
party has used Commercially Reasonable Efforts to obtain such consents,
approvals and Permits;
(d) by the non-breaching party, by not less than three (3) Business
Days' notice to the other party, in the event of the other party's breach
or default in the performance by the other party of any representation,
warranty, covenant or agreement of such other party hereunder, which breach
or default (i) would, individually or in the aggregate with all other
uncured breaches and defaults of such other party, constitute grounds for
the conditions set forth in Article VI not to be satisfied at the Closing
Date and (ii) has not been, or cannot be, cured within thirty (30) days
after written notice, describing such breach or default in reasonable
detail, is given by the terminating party to the breaching or defaulting
party;
(e) by either party in accordance with the provisions of Section
2.12(b); or
(f) by either party, in the event of a failure of the Closing Date to
occur on or prior to the date that is nine (9) months after the Exercise
Date, provided, that if the sole closing condition that has not been met at
the expiration of such nine-month period is the failure to have obtained
any one or more third-party or Governmental Authority approval(s) despite
such party's Commercially Reasonable Efforts, then such nine-month period
shall be extended for up to an additional three months to obtain such
third-party or Governmental Authority approval(s), so long as such party
shall continue to diligently pursue obtaining such approval(s) during such
extended period.
35
IN WITNESS WHEREOF, each party hereto has duly executed this Agreement
as of the date first above written.
KEYSPAN GENERATION LLC,
as Seller
By: /s/John J. Bishar Jr.
---------------------
Name: John J. Bishar Jr.
Title: Executive Vice President
36
LONG ISLAND LIGHTING COMPANY d/b/a LIPA,
as Buyer
By: /s/Richard M. Kessel
--------------------
Name: Richard M. Kessel
Title: CEO & President
37
Schedule I
----------
Additional Assets
-----------------
1. All furniture, office supplies, tools and other equipment located at the
Generating Facilities, other than facilities, tools and equipment
identified as Excluded Assets.
2. All telecommunications facilities located at the Generating Facilities
relating primarily to the operation of the Generating Facilities.
3. All agreements and purchase orders relating to the Related Assets held by
Seller as of the Closing Date.
4. All motor vehicles owned, purchased or leased by Seller that are used
primarily in connection with the Generating Facilities.
5. All franchises, permits and other governmental authorizations relating
primarily to the Generating Facilities.
6. The Wading River Plant spare parts.
I-1
Schedule II
-----------
Excluded Assets
---------------
1. For the Wading River Plant, the C3 Warehouse (as depicted on the survey
attached as Schedule IV).
2. All materials, inventory, tools, supplies, property rights, agreements and
purchase orders, at the Generating Facilities that are not held primarily
in connection with the Generating Facilities, excluding all such items
owned by the Buyer as of the Closing Date.
3. All motor vehicles owned, purchased or leased by Seller that are not used
primarily in connection with the Generating Facilities.
4. All patents, copyrights, trade secrets, proprietary information, licensed
software, manuals and other intellectual property that are not held
primarily in connection with the Generating Facilities, excluding all
intellectual property owned by Buyer as of the Closing Date.
5. All franchises, permits and other governmental authorizations relating
primarily to any Excluded Asset.
II-1
Schedule III
------------
Description and Survey of Shoreham Plant
----------------------------------------
III-1
Schedule IV
-----------
Description and Survey of Wading River Plant
--------------------------------------------
IV-1
Schedule V
----------
Disclosure Schedule
-------------------
A. Consents and Approvals
----------------------
Both Shoreham Plant and Wading River Plant
1. Approval of the FERC pursuant to Section 203 of the Federal Power Act for
the transfer of the Purchased Assets.
2. Subdivision approvals as contemplated under Section 5.2(c).
3. Consents from third-parties as may be required for the transfer of leases,
easements and other Contracts that are part of the Purchased Assets.
4. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the transfer of the New York State Title IV Acid Rain and
Title V Air permits and the designation thereunder of Buyer as the owner of
the Generating Facilities.
5. Filings with and consents, approvals and other actions of NYSDEC as may be
required for the transfer of the Memorandum of Understanding Regarding
Voluntarily Restricting SO2 Allowance Sales to Certain Upwind States and
the designation thereunder of Buyer as the owner of the Generating
Facilities.
6. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the issuance by the NYSDEC of New York Chemical Bulk
Storage permits in the name of Buyer.
7. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the transfer of the State Pollutant Discharge Elimination
System ("SPDES") permits and the designation thereunder of Buyer as the
owner of the Generating Facilities.
8. Filings with and consents, approvals and other actions by the NYSDEC as may
be required for the issuance by the NYSDEC of Major Petroleum Facility
licenses in the name of Buyer.
9. Filings with and consents, approvals and other actions as may be required
for the transfer of the Suffolk County Article XII Fuel Storage permits and
the designation thereunder of Buyer as the owner of the Generating
Facilities.
V-1
B. Environmental
-------------
Shoreham Plant
1. The Shoreham Plant is not capable of meeting existing required daily NOx
Reasonably Achievable Control Technology ("RACT") emission limitations on
an individual unit basis. Compliance currently relies on a daily
system-wide NOx averaging program in which compliance shortfall at such
units is compensated for by an excess margin of compliance at other Genco
units as provided for in the Seller's NYSDEC approved NOx RACT compliance
plan. Consequently, future compliant operation of the Shoreham Plant under
ownership by Buyer or subsequent acquirer under existing NOx RACT emissions
limits is subject to approval by the NYSDEC (and possibly the U.S.
Environmental Protection Agency ("USEPA")) to continued inclusion of the
Purchased Assets within the Seller's NOx RACT system-wide averaging
compliance plan or, alternatively, the implementation of other NOx
reduction measures on the Purchased Assets.
2. Spill of 550 gallons of No. 2 fuel oil during replacement of a 550 gallon
underground storage tank. A corrective action plan is being implemented
under a Stipulation Agreement between the NYSDEC and Seller. A soil vapor
extraction system was installed in July 2005 and is currently operating
(NYSDEC Spill 03-06681).
3. Underground pipe failed resulting in the release of 5 gallons of product to
surrounding soil (NYSDEC Spill 02-06045).
Wading River Plant
None.
Both Shoreham Plant and Wading River Plant
1. The Shoreham Plant and Wading River Plant contain thermal system components
and other systems that utilize insulation or other materials containing
asbestos fibers (including, but not limited to, boiler insulation, pipe
insulation and coverings, duct insulation and coverings and other thermal
system insulations), and such circumstances could form the basis of an
Environmental Claim. The extent of this asbestos and the components and
other systems affected, and the amount of the remediation costs, if
required, with respect thereto, are unknown.
2. The Shoreham Plant and Wading River Plant contain facility components and
other systems covered with paint or other coating that contain lead, and
such circumstances could form the basis of an Environmental Claim. The
V-2
38
extent of this lead and the components and other systems affected, and the
amount of the remediation costs, if required, with respect thereto, are
unknown.
3. The Shoreham Plant and Wading River Plant may contain deposits which could
form the basis of an Environmental Claim. The extent of deposited material
and the amount of the remediation costs, if required, are unknown.
4. Throughout the life of each of the Shoreham Plant and Wading River Plant,
various routine and other repairs and maintenance tasks have been
performed, including various component replacements. The US EPA and other
parties have made claims against a number of operators and owners of
electric power plants that routine and other maintenance tasks cause a
plant to be "modified" for purposes of the Clean Air Act and subject to
"New Source Review" requirements, resulting in violations of the Clean Air
Act. While there have been no New Source Review claims made against the
Shoreham Plant and Wading River Plant as of the date of the Agreement,
future claims could be made by the US EPA or other parties alleging that
previous repairs and maintenance tasks have resulted in Clean Air Act
violations. The effect of such a claim, if successfully made, is not known,
including, but not limited to, the type and cost of the pollution control
equipment that would to required to meet "New Source Review" requirements.
5. From time to time, the Shoreham Plant and Wading River Plant exceed opacity
limits specified in their New York State Title V air permits. All
exceedences are reported to the NYSDEC in accordance with the applicable NY
DEC consent order.
6. From time to time, the Shoreham Plant and Wading River Plant exceed limits
specified in their SPDES permits. All exceedences are reported to the
NYSDEC in accordance with the applicable SPDES permits.
V-3
Exhibit A
---------
Form of Assignment and Assumption Agreement
-------------------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT, dated as of ______ __, 200_, between KEYSPAN GENERATION LLC, a
limited liability company organized and existing under the laws of the State of
New York ("Seller"), and LONG ISLAND LIGHTING COMPANY d/b/a LIPA, a wholly-owned
subsidiary of Long Island Power Authority, a corporate municipal instrumentality
and political subdivision of the State of New York ("Buyer").
WITNESSETH:
WHEREAS, Seller and Buyer are parties to that certain Option and Purchase and
Sale Agreement, dated as of ______ __, 200_ (the "Purchase and Sale Agreement");
and
WHEREAS, pursuant to the Purchase and Sale Agreement, Seller has agreed to sell
all of its right, title and interest in and to the Purchased Assets other than
the Excluded Assets to Buyer, and Buyer has agreed to purchase such right, title
and interest in and to the Purchased Assets other than the Excluded Assets and
to assume the Assumed Liabilities other than the Excluded Liabilities;
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth, subject to the terms and
conditions of the Purchase and Sale Agreement, Seller and Buyer agree as
follows:
1. Assignment of Assets. Effective as of the date hereof, Seller does
hereby sell, convey and assign to Buyer, free and clear of all Liens, except
Permitted Liens, all of its right, title and interest in and to the Purchased
Assets other than the Excluded Assets and Buyer hereby accepts the foregoing
assignment of the Purchased Assets other than the Excluded Assets, upon the
terms and conditions set forth in the Purchase and Sale Agreement.
2. Assumption of Liabilities. Effective as of the date hereof, Buyer does
hereby assume the Assumed Liabilities other than the Excluded Liabilities, upon
the terms and conditions set forth in the Purchase and Sale Agreement.
3. No Third Party Beneficiaries. Subject to the terms and conditions of the
Purchase and Sale Agreement, this Agreement shall be binding upon and inure
solely to the benefit of Seller and Buyer and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person, any legal or equitable right, benefit or remedy of any nature
whatsoever, under or by reason of this Agreement.
4. Further Assurances. Each party hereto agrees to execute and deliver such
further documents and instruments as may be necessary or reasonably requested by
either party to further confirm and perfect the assignment and transfer to Buyer
of the rights and obligations under the Purchase and Sale Agreement with respect
to the Purchased Assets.
A-1
5. Conflict. In the event that any provision of this Agreement is construed
to conflict with a provision of the Purchase and Sale Agreement, the provision
in the Purchase and Sale Agreement shall be deemed controlling.
6. Binding Nature. This Agreement shall bind and shall inure to the benefit
of the parties and their respective assigns, transferees and successors.
7. Amendments and Waivers. This Agreement may be amended, and any provision
hereof waived, but only in writing signed by the party against whom such
amendment or waiver is sought to be enforced.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of New York (without giving effect to
conflict of law principles) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies.
9. Counterparts. This Agreement may be executed in counterparts, which may
be delivered by facsimile transmission. Each counterpart shall be deemed an
original, and all counterparts taken together shall constitute one and the same
instrument.
10. Defined Terms. Capitalized terms used herein but not defined shall have
the meanings set forth in the Purchase and Sale Agreement.
[Remainder of Page Intentionally Left Blank]
A-2
IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the
parties hereto as of the day and year first above written.
KEYSPAN GENERATION LLC,
as Seller
By: _______________________________
Name:
Title:
LONG ISLAND LIGHTING COMPANY d/b/a LIPA,
as Buyer
By: _________________________________
Name:
Title:
A-3
Exhibit B
---------
Form of Easement Agreement
--------------------------
EASEMENT AGREEMENT
This EASEMENT AGREEMENT ("Agreement") made as of this ___ day of _______,
2006 between LONG ISLAND LIGHTING COMPANY d/b/a/ LIPA, a New York corporation,
having its principal office at 333 Earle Ovington Boulevard, Uniondale, New York
11553 (the "Grantor") and [KEYSPAN CORPORATION SUBSIDIARY], a ________________,
having its principal office at _________________________ ("Grantee"; Grantor and
Grantee are sometimes individually referred to herein as the "Party" and
collectively referred to herein as the "Parties");
WITNESSETH:
WHEREAS, Grantor and [Grantee] [KeySpan Generation LLC, an affiliate of Grantee
("Genco")] are parties to that certain Second Option and Purchase and Sale
Agreement, dated as of [ ] (the "Second Purchase and Sale Agreement";
capitalized terms used herein (including on the exhibits hereto) not defined
herein shall have the meanings given thereto in the Second Purchase and Sale
Agreement); and
WHEREAS, pursuant to the terms of the Second Purchase and Sale Agreement,
[Grantee] [Genco] has agreed to sell all of its right, title and interest in and
to the Purchased Assets other than the Excluded Assets to Grantor, and Grantor
has agreed to purchase such right, title and interest in and to the Purchased
Assets other than the Excluded Assets and to assume the Assumed Liabilities
other than the Excluded Liabilities;
WHEREAS, pursuant to the terms of the Second Purchase and Sale Agreement,
certain premises were conveyed by [Grantee] [Genco] to Grantor, which premises
are located in [Suffolk] County, New York and are more particularly described in
Exhibit "A" attached hereto (the "Grantor Premises");
WHEREAS, Grantee owns and operates certain facilities which constitute Excluded
Assets which are located on the Grantor Premises, and Grantee desires that
Grantor grant to Grantee the easements described herein in order to give Grantee
the right to continue to operate, maintain, repair, construct, and replace such
Excluded Assets.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth, Grantor and Grantee agree
as follows:
WITNESSETH, that in consideration of the sum of one dollar ($1.00) and other
good and valuable consideration, the receipt of which is hereby acknowledged,
Grantor does hereby grant and convey to Grantee and its successors and assigns
forever, a permanent and perpetual non exclusive easement on, over, under and
above that portion of the Grantor Premises, more particularly described in
Exhibit "B" attached hereto (the "Easement Area") for the purpose of the
B-1
operation, maintenance, repair, construction and replacement of certain
facilities, pipes, pipelines and other facilities described on Exhibit "C"
attached hereto (collectively the "Facilities"). The contractors and invitees of
the Grantee and its successors and assigns shall have the right to enter upon
and use the Easement Area for the foregoing purpose.
Grantee, its successors, assigns, contractors and agents are also granted the
right of reasonable access to and from the Easement Area over the driveways and
roadways located on Grantor's Premises by their vehicles and equipment for
purposes of accessing the Facilities and for purposes of the operation,
maintenance, repair, construction and replacement of the Facilities.
The easement rights and privileges herein granted and conveyed (collectively,
the "Easement Rights"), shall at all times be a continuing covenant running with
the land, and shall be binding upon, and inure to the benefit of, the Parties
and their respective successors and assigns.
TO HAVE AND TO HOLD the Easement Rights, and the rights and privileges herein
described and granted and conveyed, unto Grantee and its successors and assigns
forever.
This Agreement is made and accepted upon the following terms and conditions:
1. Grantee agrees that the exercise of its Easement Rights on, in, under or
above the Easement Area and the adjoining Grantor's Premises and the
operation, maintenance, repair, installation, construction and replacement
of any structures or facilities in, on, over or under said Easement Area
shall be performed in such manner, location and condition as to avoid
damage to, or material interference with, Grantor's overhead or underground
electric generation or other fixtures, lines, conduits, pipes, pipe lines,
equipment and facilities now or hereafter located on, in, under or above
Grantor's Premises.
2. Grantor, including its agents, contractors and subcontractors, reserves and
retains the right and privilege to utilize the Easement Area for the
conduct of Grantor's business and any purpose related thereto or to the
ownership, operation, maintenance, repair, replacement, installation or
construction of any facilities, lines, pipes, pipelines, conduits, fixtures
or equipment now or hereafter located in, on, under or above such Easement
Area provided the exercise of such rights by Grantor shall not unreasonably
interfere with Grantee's Easement Rights hereunder.
3. Subject to Grantee's obligations under Section 6 below and Grantor's rights
under Section 23 below, Grantor agrees to maintain the Easement Area in
substantially the same condition as exists on the date hereof (exclusive of
the Facilities or any additions thereto or substitutions thereof). Subject
to Grantor's rights under Section 23 below, no above ground permanent
building, structure or physical obstruction, including trees and shrubbery,
shall be installed after the date hereof by Grantor on the Easement Area to
the extent that such building, structure or physical obstruction
unreasonably interferes with Grantee's rights to enter upon, occupy and
utilize the Easement Area as set forth in this Agreement. Grantee shall
have the right, in connection with the exercise of its Easement Rights, at
B-2
Grantee's sole cost and expense, to remove any roots, trees, brush or
similar nature-related obstructions which necessarily must be removed from
the Easement Area in connection with Grantee's exercise of its Easement
Rights; provided, however, Grantee shall be responsible for restoring the
balance of the Easement Area to substantially the same condition which
existed immediately prior to Grantee's exercise of its Easement Rights.
4. The Facilities shall at all times be and remain the property of Grantee,
its successors and assigns.
5. Subject to the conditions set forth in Section 3 above, Grantee agrees
that, in connection with any installation, repair, replacement,
construction, maintenance or other work performed by or on behalf of
Grantee in the Easement Area, Grantee shall at its sole cost and expense
promptly repair and restore the Easement Area to substantially the
condition which existed immediately prior to such installation, repair,
replacement, construction, maintenance or other work, any portions of the
Grantor's Premises which are damaged or disturbed by such installation or
work, except for trees, roots, brush or similar nature-related obstructions
required to be removed from the Easement Area.
6. Each Party (the "Indemnifying Party") shall indemnify and hold harmless the
other (the "Indemnified Party"), the Indemnified Party's respective
directors, trustees, officers, employees, parents, affiliates,
subsidiaries, agents, assigns, successors, representatives and contractors
from and against all liabilities, penalties, losses, costs, damages,
claims, proceedings, suits, judgments, liens, encumbrances, or expenses of
whatever form or nature, including reasonable attorneys' fees and other
costs of legal defense and of investigating any proceeding commenced or
threatened, whether direct or indirect, as a result of, arising out of or
in any way connected with the Indemnifying Party's use and occupation of or
activities upon the Easement Area or the exercise of such Indemnifying
Party's rights and breach of such Party's obligations under this Agreement,
whenever made or incurred. The Indemnified Party shall have the right to
demand that the Indemnifying Party undertake to defend any and all suits
and to investigate and defend any and all claims, against the Indemnified
Party or the Indemnified Party's respective directors, trustees, officers,
employees, parents, affiliates, subsidiaries, agents, assigns, successors,
representatives or contractors related to or arising out of such
Indemnifying Party's use or occupation of or activities upon the Easement
Area or the Indemnifying Party's exercise of its rights and obligations
hereunder. Notwithstanding the foregoing, Grantor shall have no obligation
to indemnify or defend against any loss, judgment, claim or suit to the
extent such loss, judgment, claim or suit which relates to any liabilities
(i) which were expressly assumed by Grantor under the Second Purchase and
Sale Agreement, or (ii) which are otherwise included within the Assumed
Liabilities.
B-3
7. The Parties and their respective successors and assigns agree to procure
and keep in force during the term of this Agreement the following minimum
insurance coverages (which may be through self-insurance), and each of the
Parties and their respective mortgagees and ground lessees, if any, must be
added to and named as additional insureds on the other Party's insurance
policies:
(i) New York State Worker's Compensation Insurance and Employer's
Liability Insurance;
(ii) Commercial General Liability Insurance including Personal Injury,
Death, Contractual, Contingent, Products/Completed Operations, Independent
Contractors, Broad Form Property Damage, and coverage for damage caused by
explosion, collapse or structural injury or damage to underground
utilities, and such policy must not contain any "x, c and u" exclusions;
(iii) Commercial Automobile Liability Insurance covering all
automobile, trucks and other vehicles utilized at the Site, including,
without limitation, all hired and non-owned vehicles;
Each of (ii) and (iii) above shall afford protection in an amount of not
less than Two Million Dollars ($2,000,000) combined single limit coverage
arising out of any one occurrence and Ten Million Dollars ($10,000,000) in
the aggregate; and
(iv) Pollution or Environmental Legal Liability in the amount of Ten
Million Dollars ($10,000,000) per occurrence and Ten Million Dollars
($10,000,000) in the aggregate as an extension of (ii) above or in a
separate policy providing at the minimum sudden and accidental pollution
liability.
In addition, prior to performing any work in the Easement Area, Grantee
shall cause its contractors to carry a policy of commercial general
liability insurance, naming the Grantor and its mortgagee and ground
lessee, if any, as additional insureds in the amounts set forth in clauses
(ii) and (iii) above, and cause its contractors to carry a policy of New
York State Workers Compensation Insurance.
The Parties shall provide each other with Certificates of Insurance
indicating the coverages noted above. Such policies shall contain a
provision whereby either Party shall receive at least thirty (30) days
written notice prior to the cancellation or material modification of such
policies. In the event that such insurance is available only on a
claims-made basis, then the dates of coverage, including the retroactive
date and the time period within which any claim can be filed, shall be
stated in the Certificate of Insurance, and the insuring Party shall be
obligated to ensure that no gaps in coverage occur.
B-4
Such insurance shall not relieve or release the Parties from, or limit
their respective liability as to, any and all obligations arising under
this Agreement.
Each of the Parties may provide any insurance required hereunder under a
blanket policy or policies.
8. Each Party shall provide the other with at least 5 days prior notice of any
intended construction activity within the Easement Area.
9. This Agreement shall commence and become effective upon the execution
thereof by both of the Parties, and shall continue thereafter in
perpetuity.
10. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the respective Parties hereto.
11. Grantee agrees, in exercising its Easement Rights, that it will comply with
all laws, orders, ordinances, rules, regulations and requirements of all
governmental authorities having jurisdiction.
12. There shall be no liability on the Grantor and persons occupying or
lawfully present on the ground surface of the Easement Area for damage, if
any, which may be caused to any facilities located beneath the surface of
such Easement Area by normal and reasonable use of, or vehicular or
pedestrian traffic over such Easement Area (including, without limitation,
landscaping), except to the extent caused by Grantor's gross negligence or
willful misconduct.
13. The Grantee shall take any easement as to which it is the grantee hereunder
without warranty of title and subject and subordinate to all valid
easements, encumbrances, covenants and restrictions affecting the Grantor's
Premises as of the date hereof, and in its then "as is" condition and
without any representation or warranty whatsoever.
14. In the event of any actual or threatened violation hereof by either Party,
damages will not afford an adequate remedy hereunder to the other Party,
and the other Party shall be deemed to suffer irreparable harm and shall be
entitled to injunctive relief and specific performance from a court of
competent jurisdiction.
15. If the Grantor or the Grantee (in any case a "Defaulting Owner") violates
any covenant, condition or restriction, if any, contained in this
Agreement, then in addition to any other remedy provided for in this
Agreement, the Grantor or the Grantee (the "Creditor Owner") may demand by
written notice (the "Default Notice") that the violation be cured. If the
Defaulting Owner does not cure the violation within twenty (20) days after
receipt of the Default Notice, or if such default is of a kind which cannot
reasonably be cured within twenty (20) days, and the Defaulting Owner does
not within such twenty (20) day period commence to cure such default and
diligently thereafter prosecute such cure to completion, then the Creditor
Owner (and its agents, contractors and employees) shall have the right to
(i) enter upon the property of the Defaulting Owner and summarily abate,
remove or otherwise remedy any improvement, thing or condition which
violates the terms of this Agreement, and (ii) enter upon the property of
B-5
the Defaulting Owner and perform any obligation of the Defaulting Owner to
be performed thereon. Notwithstanding anything to the contrary set forth
above, in the event such violation relates to an emergency condition which
presents an immediate danger to life or property, within two (2) business
days after receipt of a Default Notice (or such shorter period as may be
reasonably practicable under the circumstances), the Creditor Owner shall
have the right to exercise the remedies set forth in the preceding
sentence. The Defaulting Owner shall, within ten (10) days of written
demand by the Creditor Owner, accompanied by reasonable supporting
documentation, reimburse the Creditor Owner for all costs and expenses
reasonably incurred by the Creditor Owner in undertaking any of the actions
permitted by clauses (i) and (ii) of this paragraph, including, without
limitation, wages, benefits and overhead allocable to the time expended by
any employee of the Creditor Owner in taking such actions, together with
interest thereon at the Prime Rate, from the date such costs and expenses
were advanced or incurred by the Creditor Owner until the date such costs
and expenses were paid by the Defaulting Owner.
16. No breach of this Agreement or default by either Party shall entitle the
other Party to terminate or cancel this Agreement.
17. All rights, privileges and remedies afforded to the Parties by this
Agreement shall be deemed to be cumulative, and the exercise of any one of
such remedies shall not be deemed to be a waiver of any other right, remedy
or privilege provided for herein.
18. Nothing contained in this Agreement shall be construed to make the Parties
hereto partners or joint venturers, or to render either of said Parties
liable for the debts or obligations of the other Party.
19. Whenever it is provided in this Agreement that a notice, demand, request,
consent, approval or other communication shall or may be given to or served
upon either of the Parties by the other, and whenever either of the Parties
shall desire to give or serve upon the other any notice, demand, request,
consent, approval or other communication with respect hereto or to the
subject matter hereof, each such notice, demand, request, consent, approval
or other communication shall be in writing and, any law or statute to the
contrary notwithstanding, shall be effective for any purpose if given or
served as follows:
(a) Notice to Grantor. By hand or reputable overnight
courier delivery, against a receipt, or by mailing the same
by registered or certified mail, postage prepaid, return
receipt requested, addressed to:
B-6
with a copy simultaneously to:
and to such other address(es) as the Grantor may from time
to time designate by notice given to the other parties as
aforesaid.
(b) Notice to Grantee. By hand or reputable overnight
courier delivery, against a receipt, or by mailing the same
by registered or certified mail, postage prepaid, return
receipt requested, addressed to:
with a copy simultaneously to:
and to such other address(es) as the Grantee may from time
to time designate by notice given to the other parties as
aforesaid.
20. Every notice, demand, request, consent, approval, or other communication
hereunder shall be deemed to have been given or served upon the earlier to
occur of receipt or refusal to receipt.
21. All construction, repairs, maintenance, installations, replacements and
additions being performed on the Easement Area by the Grantee or its
contractors, agents, employees, laborers and materialmen shall be performed
in such a manner so as to minimize interference and avoid any conflict with
other contractors, mechanics, laborers or materialmen performing
construction, repairs, maintenance, installations, replacements or
additions on Grantor's Premises. All construction, repairs, maintenance,
installations, replacements and additions being performed on the Grantor
Premises by the Grantor or its contractors, agents, employees, laborers and
materialmen shall be performed in such a manner so as to minimize
B-7
interference and avoid any conflict with other contractors, mechanics,
laborers or materialmen performing construction, repairs, maintenance,
installations, replacements or additions for Grantee in the Easement Area.
22. The Grantor and the Grantee shall each, within fifteen (15) days of the
written request of the other, issue to the requesting party or to any
mortgagee, purchaser or ground lessee of the Grantor's Premises or any
portion thereof, an estoppel certificate stating (i) whether the party to
whom the request has been directed knows of any default under the Agreement
and if there are known defaults specifying the nature thereof or whether
any events have occurred which but for the giving of notice or the passage
of time, or both, would constitute such a default; (ii) whether this
Agreement has been assigned, modified or amended in any way by such party
(and if it has, then stating the nature thereof); (iii) whether this
Agreement as of that date is in full force and effect; and (iv) that the
estoppel certificate may be relied upon by the requesting party or such
mortgagee, ground lessee, or purchaser, as the case may be.
23. Grantor shall have the right to direct Grantee to relocate the Facilities
or any portion thereof to another location on the Grantor's Premises when
necessary for the conduct of Grantor's business on the Grantor's Premises.
In the event that Grantor shall have given such a direction, Grantor and
Grantee shall meet and cooperate in good faith and use all commercially
reasonable efforts to agree upon a new location on the Grantor's Premises
to which such Facilities can be relocated and the relocation process
therefor (including the timing of the relocation). Any such new location
and relocation process (including the timing thereof) shall be subject to
the mutual agreement of Grantor and Grantee and shall be determined and
agreed upon so that the relocation will not result in any material
interference with the operation of any of the Facilities. In the event the
parties are unable to agree upon a new location and process therefor within
90 days of Grantee's receipt of Grantor's direction, the parties shall
refer the matter to arbitration for binding resolution under the expedited
dispute resolution provisions of Section 7.8 of the Amended and Restated
MSA, dated as of January 1, 2006, as amended, between Grantor and KeySpan
Electric Services, LLC. The Grantor and the Grantee shall, in connection
with any relocation pursuant to this Section 23, cooperate with each other
to execute and deliver, and record with the appropriate recording offices,
such amendments to this agreement and other instruments as may be required
to grant to Grantee an easement for such Facilities in the relocation area
and otherwise to reflect such relocation, including, without limitation,
amending the legal description of the Easement Area to reflect the
relocation area. All costs, fees and expenses incurred by Grantee to
relocate any Facilities pursuant to this Section 23 shall be borne by the
Grantor (except if such costs, fees and expenses are obligations of any
third party other than an affiliate of the Grantee, in which case such
costs, fees and expenses shall be borne by such third party).
(Signatures appear on following page)
B-8
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day
and year first above written.
LONG ISLAND LIGHTING COMPANY d/b/a/
LIPA
By:
-------------------------------
Name:
Title:
[KEYSPAN CORPORATION SUBSIDIARY]
By:
-------------------------------
Name:
Title:
B-9
Exhibit C
---------
Form of Operation and Maintenance Agreement
-------------------------------------------
C-1
Exhibit C to Second Option and Purchase and Sale Agreement
FINAL COPY
OPERATION AND MAINTENANCE AGREEMENT
between
LONG ISLAND LIGHTING COMPANY (d/b/a LIPA)
and
[KEYSPAN CORPORATION SUBSIDIARY]
Dated as of [_____________]
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 DEFINITIONS.............................................................................................1
ARTICLE 2 OPERATOR'S SERVICES.....................................................................................7
2.1. Scope of Services...............................................................................7
2.1.1. Services to be Provided by Operator....................................................7
2.1.2. General Service Requirements...........................................................8
2.2. Minimum Loadings Ramp Rate, Start-Up Times and Minimum Scheduled Shut Down......................9
2.3. Plant Document Preparation......................................................................9
2.3.1. O&M Procedures.........................................................................9
2.3.2. Preventive Maintenance Program.........................................................9
2.3.3. Administrative Procedures Manual.......................................................9
2.4. Plant Staffing..................................................................................9
ARTICLE 3 OWNER RESPONSIBILITIES.................................................................................10
3.1. General........................................................................................10
3.2. Information....................................................................................10
3.3. Site Access and Facilities.....................................................................10
3.4. Permits........................................................................................10
3.5. Other Services.................................................................................10
ARTICLE 4 BUDGET PREPARATION, REVIEW AND ADOPTION................................................................10
4.1. Annual Capital Budget Preparation..............................................................10
4.2. Annual Capital Budget Review...................................................................10
ARTICLE 5 BILLING DATA AND OTHER OPERATING REPORTS...............................................................11
5.1. Reports........................................................................................11
5.1.1. Monthly Reports.......................................................................11
5.1.2. Quarterly Reports.....................................................................11
5.2. Notice from Judicial/Governmental Authorities..................................................11
5.3. Government Reports.............................................................................11
5.4. Other Information..............................................................................12
ARTICLE 6 DISPUTE RESOLUTION.....................................................................................12
6.1. General........................................................................................12
6.2. Negotiation....................................................................................12
6.3. Dispute Resolution Following Negotiation.......................................................12
6.4. Mediation......................................................................................12
6.5. Arbitration....................................................................................13
i
6.6. Provisional Relief.............................................................................13
6.7. Information Exchange...........................................................................13
6.8. Site of Arbitration............................................................................13
6.9. Awards.........................................................................................14
6.10. Grounds for Judicial Review....................................................................14
6.11. No Interruption................................................................................14
ARTICLE 7 COMPENSATION AND PAYMENT...............................................................................14
7.1. Monthly Invoices...............................................................................14
7.2. Fuel Management Fee............................................................................14
7.3. Audit..........................................................................................14
7.4. Maximum Variable Charge Payment................................................................15
ARTICLE 8 TERM AND TERMINATION...................................................................................15
8.1. Effective Date.................................................................................15
8.2. Term...........................................................................................15
8.3. Termination by Operator........................................................................16
8.3.1. Termination Rights....................................................................16
8.3.2. Payment...............................................................................16
8.4. Termination by Owner...........................................................................16
8.4.1. Termination for Cause.................................................................16
8.4.2. Termination for Convenience...........................................................17
8.5. Plant Condition at End of Term.................................................................17
ARTICLE 9 INSURANCE..............................................................................................18
9.1. Operator Insurance Coverage....................................................................18
9.1.1. Plant Liability Insurance.............................................................18
9.1.2. Workers Compensation and Employers Liability Insurance................................19
9.1.3. General Insurance Provisions..........................................................19
9.1.4. Operator Disclosure and Cooperation...................................................20
9.2. Owner Insurance Coverage.......................................................................20
9.3. Self-Insurance, etc............................................................................20
ARTICLE 10 INDEMNIFICATION.......................................................................................21
10.1. Indemnification of Owner.......................................................................21
10.2. Indemnification of Operator....................................................................22
10.3. Notice.........................................................................................23
10.4. Deferral of Dispute Resolution.................................................................23
ARTICLE 11 GENERAL LIMITATIONS OF LIABILITY......................................................................23
11.1. Total Liability................................................................................23
11.2. Consequential Damages..........................................................................24
11.3. Owner Actions..................................................................................24
ii
11.4. Survival and Application.......................................................................24
ARTICLE 12 ENVIRONMENTAL MATTERS.................................................................................24
12.1. Site Conditions................................................................................24
12.1.1. Disclosure............................................................................24
12.2. Insurance/Indemnification......................................................................24
12.3. Compliance.....................................................................................25
12.4. New Source Review Requirements.................................................................25
ARTICLE 13 NONDISCLOSURE.........................................................................................25
13.1. General........................................................................................25
13.2. Exceptions.....................................................................................25
13.3. Required Disclosure............................................................................26
ARTICLE 14 DOCUMENTS AND MATERIALS...............................................................................26
14.1. Documents and Materials........................................................................26
14.2. Review by Owner................................................................................26
ARTICLE 15 MISCELLANEOUS PROVISIONS..............................................................................26
15.1. Agreement......................................................................................26
15.2. Relationship of the Parties....................................................................26
15.3. KeySpan Guaranty...............................................................................26
15.4. Assignment.....................................................................................27
15.5. Access.........................................................................................27
15.5.1. Owner.................................................................................27
15.5.2. Cooperation...........................................................................27
15.6. Not for Benefit of Third Parties...............................................................27
15.7. Force Majeure..................................................................................27
15.7.1. Events Constituting Force Majeure.....................................................27
15.7.2. Event of Force Majeure................................................................28
15.7.3. Scope.................................................................................28
15.8. Strikes........................................................................................28
15.9. Amendments.....................................................................................29
15.10. Survival.......................................................................................29
15.11. No Waiver......................................................................................29
15.12. Notices........................................................................................29
15.13. Representations and Warranties.................................................................29
15.13.1. Owner Representations and Warranties..................................................30
15.13.2. Operator Representations and Warranties...............................................30
15.14. Counterparts...................................................................................31
15.15. Governing Law..................................................................................31
15.16. Captions; Appendices...........................................................................31
15.17. Non-Recourse...................................................................................31
15.18. Severability...................................................................................31
iii
15.19. Rules of Interpretation........................................................................31
15.20. Private Use Rules..............................................................................32
15.21. State Law Requirements.........................................................................32
APPENDICES
----------
Appendix A - Excluded Services
Appendix B - Allocated Fixed O&M Cost Payment
Appendix C - KeySpan Guaranty
Appendix D - Fuel Management Services
Appendix E - Provisions Required by State Law
iv
OPERATION AND MAINTENANCE AGREEMENT
-----------------------------------
This OPERATION AND MAINTENANCE AGREEMENT (the "Agreement") is entered into
as of [___________], by and between LONG ISLAND LIGHTING COMPANY d/b/a LIPA
("Owner", and also referred to herein as "LIPA"), a wholly-owned subsidiary of
the Long Island Power Authority, a corporate municipal instrumentality and
political subdivision of the State of New York, and [KEYSPAN CORPORATION
SUBSIDIARY] ("Operator"), a corporation organized and existing under the laws of
the State of New York.
RECITALS
WHEREAS, LIPA and an affiliate of Operator, KeySpan Generation, LLC, are
parties to a Second Option and Purchase and Sale Agreement dated as of March 22,
2007 ( the "Second Option Agreement") pursuant to which, subject to the terms
and conditions thereof, LIPA has exercised an option to purchase the Plant (as
defined below); and
WHEREAS, Owner and Operator are entering into this Agreement pursuant to
Section 6.1 of the Second Option Agreement, in order for the Owner to retain
Operator to operate and maintain the Plant upon the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise required by the context in which any defined term appears,
the following capitalized terms have the meanings specified in this Article 1:
"Administrative Procedures Manual" has the meaning ascribed to that
term in Section 2.3.3.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common
control with such Person. For purposes of the foregoing definition,
"control" means (i) the direct or indirect ownership of fifty percent (50%)
or more of the outstanding capital stock or other securities or equity
interests having ordinary voting power to elect the board of directors,
managing general partner or similar managing authority or (ii) the power to
direct the management of such Person.
"Agreement" means this Operation and Maintenance Agreement, including
all Appendices annexed hereto and any terms specifically incorporated by
reference, and any amendments hereto agreed in writing by the parties
hereto.
"Allocated Fixed O&M Cost Payment" means a monthly payment made by
Owner to Operator determined in accordance with Appendix B.
"Annual Capital Budget" has the meaning set forth in Section 4.2.
"Applicable Law" means any Permit or any law, statute, act,
regulation, code, ordinance, rule, judgment, order, decree, directive,
requirement, guideline or any similar decision or determination, or any
Governmental Authority's official interpretation or administration of any
of the foregoing, which governs or affects the Plant, as now or hereinafter
in effect.
"Arbitrators" has the meaning set forth in Section 6.5.
"Availability" means the availability of the Plant as measured by the
North American Electric Reliability Council (NERC) - Generating
Availability Data System (GADS) Availability Factor Formula, as set forth
in Section II of Appendix F to the Power Supply Agreement.
"Bankrupt" means with respect to a party, such party (a) files a
petition or otherwise commences a proceeding under any bankruptcy,
insolvency, reorganization or similar law, or has any such petition filed
or commenced against it, (b) makes an assignment or any general arrangement
(other than an assignment undertaken in connection with a financing) for
the benefit of creditors, (c) otherwise becomes bankrupt or insolvent
(however evidenced), (d) has a liquidator, administrator, receiver,
bankruptcy trustee, conservator or similar official appointed with respect
to it or any substantial portion of its property or assets, provided that
if such action is taken without such party's consent, such party shall be
allowed 60 days to dismiss such appointment, or (e) is generally unable to
pay its debts as they come due.
"Business Day" means any day other than a Saturday, Sunday or legal
holiday. Legal holidays are those holidays set forth in Operator's
collective bargaining agreements.
"Calendar Year" means (i) initially, the period from the Effective
Date to the last day of next succeeding December and (ii) thereafter, each
12-month period beginning on the first day of each January.
"Chair" has the meaning set forth in Section 6.5.
"Computerized Maintenance Management System" means a computer system
to manage maintenance activities, such as work order creation and tracking,
maintenance scheduling, equipment history, parts information, inventory
tracking, manhours required for maintenance, and the Preventive Maintenance
Program.
"Confidential Information" has the meaning ascribed to that term in
Section 13.1.
"City Gate" means a receipt point of natural gas at any point located
at the New York Facilities at which KeySpan may now have rights to receive
natural gas.
"CPR" means the International Institute for Conflict Prevention &
Resolution.
2
"CPR Mediation Procedures" mean the procedures published from time to
time by the CPR for the conduct of mediations.
"CPR Rules" has the meaning set forth in Section 6.5.
"Default Interest Rate" means the rate established from time to time
as the "overpayment rate" pursuant to Subsection (e) of Section 1096 of the
New York State Tax Law by the New York State Commission of Taxation and
Finance, as applicable to Owner under Section 2880(7)(c) of the New York
State Public Authorities Law.
"Dispute" means any dispute arising out of or relating to the
Agreement.
"Effective Date" has the meaning ascribed to that term in Section 8.1.
"Emergency" means an event occurring at the Plant which poses actual
or imminent risk of serious personal injury, physical damage or
environmental contamination requiring immediate preventative or remedial
action by Operator.
"Energy Management Agreement" means the Energy Management Agreement,
by and between LIPA and KETS, dated as of June 26, 1997, as amended by the
first amendment thereto, dated March 29, 2002, the second amendment
thereto, dated December 30, 2005, the third amendment thereto, dated
_______, and the fourth amendment thereto, dated __________..
"Environmental Claim" means any and all administrative, regulatory or
judicial actions, suits, or proceedings alleging potential liability
arising out of (a) the Release into the environment of any Hazardous
Materials at the Plant; or (b) any violation of any Environmental Law with
respect to the Plant.
"Environmental Law" means all applicable federal, state, and local
statutes, ordinances, and regulations relating to pollution and the
protection of the environment.
"Excluded Services" means those services set forth in Appendix A
annexed hereto.
"FAA" has the meaning set forth in Section 6.9.
"Fees-And-Costs" means reasonable fees and expenses of employees,
attorneys, architects, engineers, accountants, expert witnesses,
contractors, consultants and other persons, and costs of transcripts,
printing of briefs and records on appeal, copying and other reimbursed
expenses, and expenses of any Legal Proceeding.
"FERC" means the Federal Energy Regulatory Commission.
"Firm Gas Supply" means a type of natural gas supply delivered or
transported to a City Gate that may not be interrupted except for Force
Majeure events. Such gas may be interrupted on the gas distribution system
serving KeySpan's existing gas service area whenever its continued delivery
would adversely affect the reliability of the gas distribution system
serving KeySpan's existing gas service area.
3
"Force Majeure" has the meaning ascribed to that term in Section
15.7.1.
"Fuel" means natural gas, oil, kerosene or other fossil fuel used for
operating the Plant.
"Fuel Management Fee" has the meaning ascribed to that term in Section
7.2.
"Gas Balancing" means the type of service currently provided by
KeySpan whenever the aggregate daily gas taken for use by the Plant varies
from the daily nominated quantity. When this occurs, Operator will cause
certain assets currently owned or contracted for by KeySpan to be used to
either provide additional quantities of gas required by the Plant or take
back any excess quantities not required by the Plant.
"Guarantor" means KeySpan.
"Governmental Authority" means any Federal, state, local or other
governmental, regulatory or administrative agency, commission, department,
board, or other governmental subdivision, court, tribunal, arbitral body of
other governmental authority, but excluding any owner of the Plant (if
otherwise a Governmental Authority under this definition) when acting in
its ownership capacity.
"Hazardous Materials" means (A) any petroleum, asbestos in any form
that is friable, and polychlorinated biphenyls; and (B) any chemicals,
materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," or "toxic pollutants" under any Environmental Law.
"Indemnified Party" has the meaning ascribed to that term in Section
10.3.
"Indemnifying Party" has the meaning ascribed to that term in Section
10.3.
"Interruptible Gas Supplies" means natural gas supplies that will be
interrupted whenever the supplier recalls supplies pursuant to a negotiated
supply contract and/or the interstate pipeline interrupts the
transportation of such gas supply pursuant to its FERC approved tariff.
Such gas supplies may also be interrupted for force majeure events.
"KETS" means KeySpan Energy Trading Services LLC.
"KeySpan" means KeySpan Corporation, a New York corporation.
"KeySpan Guaranty" has the meaning ascribed to that term in Section
15.3.
4
"Loss-and-Expense" means any and all losses, liabilities, obligations,
damages, delays, fines, penalties, judgments, deposits, costs, claims,
demands, charges, assessments, taxes, or expenses, including all
Fees-And-Costs.
"New York Facilities" or "NYF" means the system of gas mains severally
owned and operated by KeySpan, The Brooklyn Union Gas Company and
Consolidated Edison Co. of New York, Inc. pursuant to the NYF Agreement.
"NYF Agreement" means the New York Facilities Agreement entered into
as of January 1, 1994, by an between The Brooklyn Union Gas Company,
Consolidated Edison Co. of New York, Inc., and KeySpan, as successor to
Long Island Lighting Company, as the same may be amended in accordance with
its terms.
"O&M Manual" means all equipment manuals, system descriptions, system
operating instructions, equipment maintenance instructions and pertinent
design documentation (including vendor and manufacturer manuals, as-built
drawings and all final specifications) for the Plant provided by Owner,
Operator, manufacturers, suppliers or vendors.
"O&M Procedures" means the procedures developed by Operator as defined
in Section 2.3.1.
"Operator Indemnified Parties" has the meaning ascribed to that term
in Section 10.2.
"Owner Indemnified Parties" has the meaning ascribed to that term in
Section 10.1.
"Party Appointed Arbitrators" has the meaning ascribed to that term in
Section 6.5.
"Permits" means collectively all authorizations, approvals, licenses,
rulings, permits, waivers, certifications, exemptions, variances, filings
or registrations by or with any Governmental Authority required for the
operation, maintenance, repair, subsequent improvement, modification,
replacement and ownership of the Plant.
"Person" means, unless otherwise specified, a natural person,
corporation, limited liability company, partnership, joint venture,
unincorporated association, society or other entity, including a
Governmental Authority.
"Plant" means the [insert definition from Option Agreement of either
Shoreham Plant or Wading River Plant].
"Plant Documents" means the O&M Manual, the O&M Procedures, the
Administrative Procedures Manual, the Annual Capital Budget, administrative
and general procedures, Emergency response procedures and other manuals and
procedures for the Plant developed by Operator from time to time.
5
"Plant Liability Insurance" has the meaning ascribed to that term in
Section 9.1.1.
"Power Supply Agreement" means the Power Supply Agreement, by and
between LIPA and GENCO, dated as of June 26, 1997, as amended by the
amendments thereto, dated [___________].
"Preventive Maintenance Program" has the meaning ascribed to that term
in Section 2.3.2.
"Prudent Electric Production Practices" means any of the practices,
methods and acts, as revised from time to time, that are then generally
accepted by the electric generation industry and commonly used in prudent
electric generation engineering and operations to operate and maintain
equipment lawfully, safely, dependably and economically, and as would have
been expected, in the exercise of reasonable judgment in light of the facts
and characteristics of the Plant known, or should have been known, at the
time the decision is made, to accomplish the desired result at the lowest
reasonable cost in a manner consistent with Applicable Laws, applicable
Permits, reliability, safety, environmental protection, economy and
expediency, including, without limitation, those established by the North
American Electric Reliability Council, as applicable to units of the size
and type of the Plant. Prudent Electric Production Practices are not
intended to be limited to the optimum practices, methods or acts to the
exclusion of others, but rather to the spectrum of possible practices,
methods and acts generally accepted by a significant portion of the
electric generation industry in the relevant region, during the relevant
time period, as described in the preceding sentence.
"Quarterly Report" means the report prepared on a monthly basis by
Operator as further described in Section 5.1.2.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal,
leaching, or migration into the indoor or outdoor environment (including,
without limitation, the abandonment or disposal of any barrels, containers
or other closed receptacles containing any hazardous materials), as well as
the movement of any hazardous material through the air, soil, surface
water, groundwater or property.
"Second Option Agreement" has the meaning ascribed to in the recitals.
"Services" has the meaning ascribed to that term in Section 2.1.
"System Interruptible Gas Supply" means a type of natural gas supply
that will be interrupted whenever its continued delivery would adversely
impact the delivery of gas to the gas customers served by the KeySpan's gas
transmission or distribution system; furthermore, if Operator is using non-
KeySpan assets to provide natural gas to the Plant, such gas will only be
interrupted on KeySpan's gas distribution system whenever its continued
delivery would adversely impact the reliability of such gas distribution
system. If the Plant is using gas provided from KeySpan assets, the Plant
will be interrupted before KeySpan's interruptible gas customers consistent
with current practices. Such gas supplies may also be interrupted for force
majeure events.
6
"Term" has the meaning ascribed to that term in Section 8.2.
"Termination for Convenience" has the meaning ascribed to that term in
Section 8.4.2.
"Transitional Labor Costs" mean the annualized labor costs, based upon
actual head count (and including, without limitation, all salaries,
pensions and welfare benefits and all other direct labor costs), of
personnel assigned full time to the Plant on the date of a Termination for
Convenience pursuant to Section 8.4.2, who are no longer required for the
operation and maintenance of the Plant due to a termination of this
Agreement, either with respect to the Plant or a discrete generating unit,
under Section 8.4.2.
"Transitional Labor Cost Payments" has the meaning ascribed to that
term in Section 8.4.2.
"Utility Services" means electric, telephone, potable water, municipal
water, sewage and other utility services required by Operator for the
provision of Services.
"Variable Charge" means (i) for the period from the Effective Date
through December 31, 2008, 90(cent) per net MWh produced by the Plant, and
(ii) for any period beginning after December 31, 2008, an amount per MWh to
be agreed by the parties based upon Operator's variable costs to provide
the Services. If the parties do not agree on a new Variable Charge for the
periods after December 31, 2008, then such dispute shall be resolved in
accordance with Article 6.
"Variable Charge Cap" has the meaning ascribed to that term in Section
7.4.
"Variable Charge Excess" has the meaning ascribed to that term in
Section 7.4.
"Variable Charge Payment " means an amount equal to the Variable
Charge multiplied by the net MWh produced by the Plant.
ARTICLE 2
OPERATOR'S SERVICES
2.1. Scope of Services. Except as provided in Article 3, Operator shall
provide, or cause to be provided, all services necessary to operate and maintain
the Plant in accordance with the services described in this Article 2 and the
other requirements set forth in this Agreement (the "Services"). Without
limiting the generality of the foregoing, and subject to the requirements set
forth in Section 2.1.2, Operator shall perform, or cause to be performed, the
following Services for the Owner:
2.1.1. Services to be Provided by Operator. During the Term, Operator
shall have the responsibility to:
7
(a) provide Fuel management services as set forth in Appendix D;
(b) develop, implement and update as necessary site specific
Operations and Maintenance Procedures and a Preventive
Maintenance Program;
(c) implement a Computerized Maintenance Management System;
(d) perform routine repairs on any failed or malfunctioning equipment
comprising part of the Plant;
(e) schedule, procure and manage major maintenance services for the
Plant;
(f) identify the need for goods and services providers (which may be
affiliates of the Operator) with respect to the operation and
maintenance of the Plant and schedule, arrange for, procure, and
coordinate the receipt of such goods and services;
(g) purchase, receive and expedite, as necessary, chemicals,
lubricants, consumables, operating and maintenance supplies,
vehicles, spare parts, safety supplies, tools and equipment
required to operate and maintain the Plant;
(h) maintain an inventory of spare parts, materials, supplies and
tools necessary to operate and maintain the Plant, and purchase
replacement inventory as required;
(i) provide periodic technical, administrative and financial reports
to Owner as required with respect to the Plant, including such
reports as required by regulatory agencies;
(j) maintain required technical and administrative records with
respect to the Plant;
(k) establish and maintain a technical library with respect to the
Plant;
(l) make recommendations to Owner for capital improvements and
changes to the Plant as part of the Annual Capital Budget as
provided in Article 4 (it being acknowledged and agreed, for the
avoidance of doubt, that the Services shall not include the
making of any capital improvements or changes to the Plant,
except as Owner and Operator may mutually agree from time to
time); and
(m) provide assistance to Owner in the preparation of insurance and
warranty claims, preparation of reports required to comply with
Environmental Laws, regulations or Permits, and such other
matters relating to the operation and maintenance of the Plant as
Owner may reasonably require.
2.1.2. General Service Requirements. In providing the Services,
Operator shall:
8
(a) comply with, to the extent applicable and necessary to provide
the Services, (i) all Applicable Laws, (ii) Prudent Electric
Production Practices, (iii) all insurance requirements applicable
to the Plant, (iv) any warranty obligations applicable to the
Plant, (v) vendor manuals and manufacturer's guidelines
applicable to the Plant or, in Operator's opinion and to the
extent they comply with Prudent Electric Production Practices,
Operator's current practice, (vi) O&M Manuals approved by Owner,
and (vii) NYISO dispatch directions; provided, however that
Operator shall be excused from such compliance with the previous
clauses (i) through (vii) if the reason for non-compliance arises
from (A) any act or omission by Operator to the extent necessary
to respond to any Emergency; or (B) any budgetary limitations
imposed by Owner pursuant to Article 4; or (C) as otherwise
expressly set forth in this Agreement.
(b) administer all matters pertaining to labor relations, salaries,
wages, working conditions, hours of work, termination of
employment, employee benefits, safety, and all other personnel
matters; and
(c) provide accounting, bookkeeping, and administrative services in
connection with costs under the Annual Capital Budget;
2.2. Minimum Loadings Ramp Rate, Start-Up Times and Minimum Scheduled Shut
Down. In providing the Services, the Operator shall not be required to operate
the Plant outside of the specifications for the Plant set forth in Appendix E of
the Power Supply Agreement (which Appendix is hereby incorporated by reference
herein) with respect to Minimum Loadings, Ramp Rate, Start-Up Times and Minimum
Scheduled Shut Down.
2.3. Plant Document Preparation.
2.3.1. O&M Procedures. Operator shall develop, implement and update as
necessary Plant-specific procedures as Operator deems to be necessary or
appropriate for the safe and efficient operation of the Plant during the
Term (the "O&M Procedures"), which O&M Procedures shall be subject to
Owner's review and approval, which approval shall not be unreasonably
withheld or delayed.
2.3.2. Preventive Maintenance Program. Operator shall develop,
implement and update as necessary a Plant-specific program for preventative
maintenance (the "Preventive Maintenance Program"), which program shall be
subject to Owner's review and approval, which approval shall not be
unreasonably withheld or delayed.
2.3.3. Administrative Procedures Manual. Operator shall develop,
implement and update as necessary a manual for administrative procedures
with respect to the Plant's operation (the "Administrative Procedures
Manual"), which Administrative Procedures Manual shall be subject to
Owner's review and approval, which approval shall not be unreasonably
withheld or delayed.
2.4. Plant Staffing. Operator shall provide adequate numbers of properly
qualified, trained and, where required, licensed personnel for the performance
of the Services.
9
ARTICLE 3
OWNER RESPONSIBILITIES
3.1. General. At Owner's sole cost and expense, Owner shall furnish to
Operator the information, data, reports, services, materials and other items as
provided in this Article 3. Owner shall make such items available at such times
and in such a manner as may be reasonably required by Operator.
3.2. Information. Owner shall provide to Operator copies of all agreements
related to the Plant and any amendments thereto or replacements thereof, as well
as technical, operational and other information, all as reasonably available to
Owner or in Owner's possession and necessary for the performance of the
Services. Subject to the standards of performance set forth in Section 2.1.2,
and unless Owner obtained such documents and information from Operator or an
Affiliate of Operator, Operator shall be entitled to rely upon such information
in its performance of the Services.
3.3. Site Access and Facilities. Owner shall arrange for Operator to have:
(i) continuous road access to the Plant, (ii) adequate parking facilities for
all Operator personnel, including its contractors and subcontractors; (iii)
access to the Plant and all systems, interconnections, equipment and
appurtenances of the Plant; and (iv) suitable office, warehouse and laboratory
space, and maintenance shop facilities. Operator hereby acknowledges that the
facilities at the Plant site as of the Effective Date satisfy the requirements
of the preceding sentence.
3.4. Permits. Except for Permits that must be obtained by Operator under
Applicable Law, Operator on behalf of Owner shall obtain or cause to be obtained
all Permits, including the renewal, revision or modification of such Permits, as
may be necessary to authorize Operator to engage in the business of operating
and maintaining electric generation facilities. Operator shall comply with all
terms and conditions of such Permits.
3.5. Other Services. Owner shall be responsible for the Excluded Services
as set forth in Appendix A.
ARTICLE 4
BUDGET PREPARATION, REVIEW AND ADOPTION
4.1. Annual Capital Budget Preparation. No later than September 1 of each
Calendar Year, Operator will submit for Owner's approval a written proposed
budget for capital expenditures with respect to the Plant for the next Calendar
Year and each of the four (4) succeeding Calendar Years.
4.2. Annual Capital Budget Review. Within 30 days of receipt of Operator's
proposed capital expenditure budget, Owner shall review the proposed budget and
return it to Operator with such changes, additions, deletions or revisions as
Owner shall require. The budget as returned to Operator by Owner shall be the
"Annual Capital Budget" for the applicable Calendar Years.
10
ARTICLE 5
BILLING DATA AND OTHER OPERATING REPORTS
5.1. Reports.
5.1.1. Monthly Reports. On the 15th Business Day of each calendar
month following the Effective Date, Operator shall submit to Owner a report
summarizing, for the prior calendar month, the electric generation,
availability, heat rate and Fuel consumption (each on a monthly and
year-to-date basis), major equipment trips or failures, procurement,
capital improvements, labor relations, training activities, safety issues,
significant interactions with governmental authorities, significant
environmental and permit issues including any notices of violation,
significant operating problems along with remedial actions planned, a brief
summary of major activities planned for the next two reporting periods and
other material data in connection with the Plant operation for the prior
calendar month. Such reports shall be in a format reasonably acceptable to
Owner.
5.1.2. Quarterly Reports. On the 20th Business Day following each
quarter following the Effective Date, Operator shall submit to Owner a
report summarizing for such prior quarter (i) Annual Capital Budget
performance, and various explanations thereof, and other material Annual
Capital Budget data in connection with the Plant and (ii) the progress with
respect to scheduled maintenance under the Preventive Maintenance Program
(the "Quarterly Report").
5.2. Notice from Judicial/Governmental Authorities. Promptly upon obtaining
knowledge thereof, each party shall submit to the other party written notice of
and copies of any relevant documents in the submitting party's possession
relating to: (i) any litigation, claims, disputes or actions actually filed, or
any material litigation, claims, disputes or actions which are threatened,
concerning in each case Owner, Operator, the Plant, or the Services; (ii) any
actual refusal to grant, renew or extend, or any action pending or any action
filed with respect to, the granting, renewal or extension of any Permit or any
material threatened action regarding the same; (iii) any dispute with any
Governmental Authority which may have a material adverse effect on the business
or affairs of Owner or Operator, or Plant operation or maintenance; and (iv)
without regard to their materiality, all penalties or notices of violation
issued by any Governmental Authority.
5.3. Government Reports. Any material reports relating to the Plant that
are prepared by Operator for submittal to any Governmental Authority shall first
be furnished to Owner for Owner's review and approval within a reasonable period
of time prior to such submission; provided, that if necessary to comply with a
prompt filing deadline, Operator shall give Owner only such notice and
opportunity to review as is reasonably practicable under the circumstances. Any
Owner approval shall not be unreasonably withheld or delayed. Operator shall
provide to Owner a copy of all reports relating to the Plant prepared by it for
submittal to any Governmental Authority concurrently with such submittal.
11
5.4. Other Information. Upon Owner's reasonable (as to time and format)
request, Operator shall submit to Owner any other material information
reasonably available to Operator concerning the Plant or the Services performed
by Operator.
ARTICLE 6
DISPUTE RESOLUTION
6.1. General. Any Dispute shall be resolved in accordance with the
procedures specified below, which shall constitute the sole and exclusive
procedures for the resolution of any Disputes.
6.2. Negotiation. The parties may attempt to resolve any Dispute promptly
by appointing a senior executive of each party to attempt to mutually agree upon
a resolution. Any party may give the other party written notice of any Dispute
not resolved in the normal course of business. Within 5 days after delivery of
the notice, the receiving party shall submit to the other a written response.
The notice and response shall include (a) a statement of that party's position
and a summary of arguments supporting that position, and (b) the name and title
of the executive who will represent that party and of any other person who will
accompany the executive. Within 10 days after delivery of the initial notice,
the persons representing the parties shall meet at a mutually acceptable time
and place, and thereafter as often as they reasonably deem necessary, to attempt
to resolve the Dispute. The parties shall endeavor to complete the negotiation
process within 20 days after the delivery of the negotiation notice. All
negotiations pursuant to this clause shall be confidential and shall be treated
as compromise settlement negotiations which shall not be used by either party as
evidence in any mediation, arbitration or court proceeding. The parties are not
required to undertake negotiation of any Dispute prior to commencing mediation
or arbitration pursuant to Section 6.4 or Section 6.5 respectively and may
commence mediation or arbitration at any time during the course of negotiation.
If a party commences mediation or arbitration pursuant to Section 6.4 or Section
6.5 respectively, any previously commenced negotiation shall be immediately
terminated, without any penalty or prejudice to the party commencing
negotiation.
6.3. Dispute Resolution Following Negotiation. If the Dispute has not been
resolved by negotiation as provided herein, either party may commence mediation
or arbitration pursuant to Sections 6.4 or Section 6.5 respectively. The parties
are not required to undertake mediation of any Dispute prior to commencing
arbitration pursuant to Section 6.5 and a party may commence arbitration at any
time during the course of mediation. If a party commences arbitration pursuant
to Section 6.5, any previously commenced mediation shall be immediately
terminated, without any penalty or prejudice to the party commencing
arbitration.
6.4. Mediation. Either party may refer for mediation, by written notice to
mediate, any Dispute not resolved by the negotiations provided for in Section
6.2. The mediation shall be conducted in accordance with the CPR Mediation
Procedures then currently in effect, to the extent such procedures are
consistent with the Agreement. The parties shall mutually agree on the selection
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of a mediator, who may, but is not required to, be on a list of neutral
mediators published by the CPR. If the parties are unable to reach agreement on
the selection of a mediator within 5 days after delivery of the notice to
mediate, the parties shall follow the CPR procedures for selecting a mediator.
The parties shall endeavor to complete the mediation process within 20 days
after the delivery of the mediation notice.
6.5. Arbitration. Any Dispute which has not been resolved by negotiation as
provided in Section 6.2 or by mediation as provided in Section 6.4 shall be
settled by binding arbitration in accordance with the CPR Rules for
Non-Administered Arbitrations ("CPR Rules") then currently in effect, except to
the extent such rules are inconsistent with any provision of the Agreement, in
which case the provisions of the Agreement shall be followed. An arbitration
shall be commenced by written notice to the other party containing information
regarding the Dispute as set forth in Section 6.2. The arbitration shall be
conducted by three arbitrators (the "Arbitrators"). The Owner designates [name]
as its arbitrator or, in the event [name] is unavailable, [name] as its
alternate arbitrator. The Operator designates [name] as its arbitrator or, in
the event [name] is unavailable, [name] as its alternate arbitrator. In the
event that a party's designee is no longer able or is unwilling to serve as an
arbitrator for a Dispute, a party may appoint a substitute or replacement
arbitrator and shall promptly notify the other party thereof. The parties'
designated arbitrators are hereinafter referred to as the "Party Appointed
Arbitrators." The Party Appointed Arbitrators, within two business days of
receiving a notice of arbitration will select a third arbitrator (the "Chair"),
who will be one of the following individuals: [names]. The Chair shall be the
chairperson of the panel. In the event that any one of these individuals is no
longer able or is unwilling to continue to serve as the Chair, the Party
Appointed Arbitrators will confer and agree on a replacement arbitrator within
three Business Days. In the event no such agreement can be reached, the CPR
procedures shall govern the appointment of the Chair.
6.6. Provisional Relief. Either party may, without prejudice to any
negotiation, mediation, or arbitration procedures, proceed in the New York State
Supreme Court, Nassau County, to obtain provisional judicial relief if, in the
such party's sole discretion, such action is necessary to avoid imminent
irreparable harm, to provide uninterrupted electrical and other services, or to
preserve the status quo pending the conclusion of the Dispute procedures
specified herein. For purposes of the foregoing, Owner and Operator each hereby
agrees to submit to the jurisdiction of such court and, to the maximum extent
permitted by law, waives any right to object to the bringing of an action in
such court on ground of lack of venue or that such court is an inconvenient
forum.
6.7. Information Exchange. The Arbitrators shall have the discretion to
order a prehearing exchange of information by the parties, including, without
limitation, production of requested documents, the exchange of witness
statements of proposed witnesses, and the examination by deposition of parties.
The parties hereby agree timely to produce all such information as ordered by
the Arbitrators.
6.8. Site of Arbitration. The site of any Arbitration brought pursuant to
the Agreement shall be either Mineola, New York or Hauppauge, New York, or such
other site as the parties may agree.
13
6.9. Awards. The Arbitrators shall have no authority to award punitive
damages or any other damages aside from the prevailing party's direct damages
plus interest at the Default Interest Rate from the date such damages were
incurred. The Arbitrators may award reasonable attorneys' fees and costs of the
arbitration. The arbitration shall be governed by the Federal Arbitration Act, 9
U.S.C. ss.ss.1-16 (the "FAA"), and judgment upon the award rendered by the
Arbitrators may be entered by any court having jurisdiction thereof.
6.10. Grounds for Judicial Review. Any award made by the Arbitrators with
respect to any Dispute pursuant to these dispute resolution procedures may be
vacated, modified or corrected by a court only on the grounds permitted under
the provisions of Sections 10 and 11 of the FAA.
6.11. No Interruption. The pendency of these Dispute resolution procedures
shall not in and of itself relieve either party from its duty to perform under
this Agreement or serve to delay or suspend the operation of the Project or the
performance of the Services hereunder.
ARTICLE 7
COMPENSATION AND PAYMENT
Owner shall pay Operator for the Services in the manner and at the times
specified in this Article 7.
7.1. Monthly Invoices. Operator shall prepare and submit monthly invoices
to Owner no later than fifteen (15) days following the end of each calendar
month for payments due hereunder, which will include charges for (i) the monthly
Allocated Fixed O&M Cost Payment (ii) subject to Section 7.4, the monthly
Variable Charge Payment, and (iii) the monthly portion of the Fuel Management
Fee for such month as described in Section 7.2. Operator shall supply any
supporting documentation for the invoice as Owner may reasonably request.
Subject to Owner's right to conduct an audit pursuant to Section 7.3, Owner
shall pay such invoices within ten (10) days following the receipt of Operator's
invoice. Any amounts due but unpaid by Owner to Operator hereunder shall accrue
interest at the Default Interest Rate from the date due until paid. Payment
shall be made of all amounts owed by Owner to Operator hereunder by wire
transfer, or by other mutually agreeable method(s) to an account designated by
Operator.
7.2. Fuel Management Fee. The Owner shall pay Operator a management fee
(the "Fuel Management Fee") commencing in the first month of the Effective Date.
The Fuel Management Fee will be $25,000 per year, payable in monthly
installments of $2,083. [The Fuel Management Fee shall be $25,000 per year
prorated based upon the fuel BTU's purchased in the year prior to the exercise
of the Second Option Agreement with respect to the Plant.] In addition, Owner
shall pay Operator for the cost of Fuel and fuel related taxes, as well as third
party fuel related fees and costs prudently incurred consistent with existing
practice under the Energy Management Agreement and Appendix D to this Agreement.
7.3. Audit. Notwithstanding the payment of any amount under this Agreement,
Owner shall remain entitled to conduct a subsequent audit and review of all
costs incurred and paid by Owner pursuant to this Agreement, together with any
supporting documentation requested by Owner, for a period of seven (7) years
14
from and after the date of such payment. If, pursuant to such audit and review,
it is determined that any amount previously paid by Owner did not constitute a
due and payable item pursuant to this Agreement, Owner may recover such amount
from Operator or deduct or cause to be deducted such amount from any payment
that may be due to Operator.
7.4. Maximum Variable Charge Payment. Notwithstanding anything to the
contrary, the maximum aggregate Variable Charge Payments payable to Operator for
any Calendar Year shall not exceed an amount (the "Variable Charge Cap") equal
to twenty percent (20%) of the sum of the Allocated Fixed O&M Cost Payments,
Variable Charge Payments, and Fuel Management Fee paid to Operator for such
Calendar Year. If the payment of the Variable Charge Payment for any month would
cause the sum of all Variable Charge Payments for the applicable Calendar Year
to exceed the Variable Charge Cap, then the amount (the "Variable Charge
Excess") by which such sum exceeds the Variable Charge Cap shall not be payable
to Operator. Thereafter, if the sum of all Variable Charge Payments for the
applicable Calendar Year actually paid to Operator is less than the Variable
Charge Cap, then there shall be paid to Operator with the next monthly payment
pursuant to Section 7.1, an amount equal to the lesser of (i) the difference
between the sum of all Variable Charge Payments for the applicable Calendar Year
actually paid to Operator (taking into consideration such month's payments) and
the Variable Charge Cap and (ii) the aggregate Variable Charge Excesses not paid
to Operator for such Calendar Year and any previous Calendar Years (plus a
carrying charge accruing at the Default Rate until such Variable Charge Excesses
are paid).
ARTICLE 8
TERM AND TERMINATION
8.1. Effective Date. This Agreement shall become legally binding and
effective only upon satisfaction of the following conditions precedent (the date
upon which all such conditions are satisfied, the "Effective Date"):
(a) Approvals of this Agreement (reasonably satisfactory to Owner and
Operator) from the Public Authorities Control Board, New York
State Comptroller, and the New York Attorney General (as to form)
shall have been obtained and be in full force and effect;
(b) The closing of the purchase of the Plant under the Second Option
Agreement shall have occurred; and
(c) Each of the Power Supply Agreement Amendment and the Energy
Management Agreement Amendment (each as defined in the Second
Option Agreement) shall have become effective in accordance with
their respective terms.
8.2. Term. The term of this Agreement shall commence on the Effective Date
and expire May 28, 2013 unless earlier terminated.
15
8.3. Termination by Operator.
8.3.1. Termination Rights. Operator has the right to terminate this
Agreement without liability if:
(a) Owner fails to pay any undisputed sum due under this Agreement
within 30 days after Owner has received notice of such default
from Operator;
(b) Owner fails to perform any of its other obligations under this
Agreement in any material respect and such failure continues
after notice is provided by Operator to Owner, provided that
Owner shall have up to 60 Business Days to cure or make
substantial progress towards curing such default;
(c) any Governmental Authority suspends or revokes any approvals
issued by such Governmental Authority to permit Operator to
perform its obligations under this Agreement, or otherwise
prohibits Operator from performing its obligations under this
Agreement, provided that such suspension, revocation or
prohibition, as the case may be, was not the result of Operator's
negligence or failure to comply with the requirements of any
Applicable Law, Permit or approval; or
(d) Owner is Bankrupt;
8.3.2. Payment. In the event of a termination by Operator under this
Section 8.3, Owner shall pay Operator for all amounts due for the period
prior to such termination.
8.4. Termination by Owner.
8.4.1. Termination for Cause. Owner has the right to terminate this
Agreement for cause without liability if:
(a) Operator fails to perform any of its obligations under this
Agreement in any material respect and such failure continues
after notice is provided by Owner to Operator, provided that
Operator shall have up to 60 Business Days to cure or make
substantial progress towards curing such default;
(b) Operator is Bankrupt;
(c) Operator's total liability under this Agreement during two
consecutive Calendar Years shall have exceeded its maximum
liability hereunder for each such Calendar Year pursuant to
Section 11.1;
(d) the KeySpan Guaranty shall be held to be unenforceable or the
Guarantor shall disavow, or default in the performance of, its
obligations under the KeySpan Guaranty; or
16
(e) The Availability of the Plant in any two consecutive full
Calendar Years is less than ____ percent (___%) other than as a
result of (i) any one or more events of Force Majeure, (ii)
Owner's acting unreasonably with respect to the approval of any
Annual Capital Budget, (iii) the failure of Owner to pay for
expenses included in any Annual Capital Budget or otherwise to
cause or permit to be made any capital improvement or change to
the Plant included in any Annual Capital Budget on the schedule
provided therein or (iv) any negligent act or omission of Owner
or any of Owner's contractors, subcontractors, agents or invitees
(other than Operator and any of its contractors, subcontractors,
agents and invitees). [Specify 85% for Shoreham Plant; 85% for
Wading River Plant]
8.4.2. Termination for Convenience. Owner has the right, by not less
than 30 days prior written notice to Operator, to terminate this Agreement
with respect to the Plant (or with respect to a discrete generating unit
thereof) for convenience (a "Termination for Convenience") in the event of:
(a) The Plant's or such unit's, as the case may be, retirement; or
(b) The Plant's or such unit's, as the case may be, shutdown in
connection with a repowering.
In the event of a termination pursuant to this Section 8.4.2,
Operator shall be entitled, in addition to all other amounts due
to it hereunder as of the date of termination, monthly payments
(the "Transitional Labor Cost Payments") equal to the product of
(i) one twelfth (1/12) of the Transitional Labor Costs times (ii)
the applicable percentage set forth in table below. Beginning
with the next succeeding month following a termination under
Section 8.4.2, Owner shall make Transitional Labor Cost Payments
to Operator on the fifteenth (15th) of each month until the
earlier to occur of (a) Owner's having made forty eight (48)
Transitional Labor Cost Payments or (b) May 28, 2013.
Transitional Labor Cost Percentage
Payment
(Month)
1 to 12 100%
13 to 24 75%
25 to 36 50%
37 to 48 25%
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8.5. Plant Condition at End of Term. Upon the expiration or earlier
termination of this Agreement, Operator shall remove its personnel and equipment
from the Plant in an orderly fashion. All special tools, improvements, inventory
of supplies, spare parts, safety equipment, O&M Manuals, documentation, whether
or not marked as confidential or proprietary in accordance with Article 13
hereof (in each case as provided to, obtained by or provided by, and as modified
by Operator pursuant to this Agreement during the Term) and any other items
furnished by or on behalf of Operator and paid for by Owner will remain at the
Plant and will remain or become the property of Owner without any additional
charge. Owner shall also have the right, in its sole discretion, to directly
assume any contracts entered into by or obligations of Operator solely in
connection with the Services, provided Owner also assumes sole liability under
such contracts. Operator shall execute all documents and take all other
reasonable steps requested by Owner that are required to assign to and vest in
Owner all rights, benefits, interests and title in connection with such
contracts or obligations and release Operator from same; provided, however, that
Owner shall indemnify and hold harmless Operator from and against any and all
liabilities arising thereunder after the date of any such assumption and
release. Prior to the effective date of such expiration or earlier termination,
Operator shall reasonably cooperate with Owner regarding the transition to a new
operator. If Owner requests Operator to continue to provide such transition
cooperation after the effective date of such expiration or earlier termination,
Operator shall provide such transition cooperation for a reasonable period of
time and Owner shall reimburse Operator for all costs incurred during such
transition period.
ARTICLE 9
INSURANCE
9.1. Operator Insurance Coverage. Throughout the Term, except as otherwise
required herein, Operator shall at its own cost, procure and maintain, with
insurers having an A.M. Best policyholders' rating of "A" or better, or
self-insure in accordance with the requirements made herein the following kinds
and amounts of insurance:
9.1.1. Plant Liability Insurance. (A) Such insurance as will protect
Operator from claims which may arise out of or result from services of
Operator as more fully described in this Agreement, whether such services
be by the Operator or by a contractor or by anyone directly or indirectly
employed by any of them, or by anyone for whose acts any of them may be
liable, claims for bodily injury and property damage of the kind usually
and customarily insured in a policy of: (i) commercial general liability
insurance, including at a minimum, coverage for contractual liability,
products and completed operations liability, and (ii) pollution or
environmental legal liability insurance as an extension of (i) above or in
a separate policy providing at the minimum sudden and accidental pollution
liability, and (iii) automobile liability insurance covering all vehicles
owned, operated, used, or the responsibility of Operator and (B) All Risk
Property Insurance for the full replacement value of the Plant, with Owner
named as the named insured. Operator shall cause Owner and its Affiliates
with the employees, agents, officers, directors, trustees, and
representatives of each to be named as additional insureds on the policies
described in (i), (ii) and (iii) of clause (A) above, with each policy
having a combined single limit of not less than $25,000,000.00 for each
occurrence (all insurance set forth in (i), (ii) and (iii) of clause (A)
above are collectively referred to as "Plant Liability Insurance").
Notwithstanding anything to the contrary in this Section 9.1 or any other
provision hereof, Owner shall pay or reimburse Operator for Owner's
18
proportionate share of all incremental costs incurred by Operator with
respect to the Plant Liability Insurance, or the All Risk Property
Insurance referred to above, as a result of the transfer to Owner of the
Plant and its ownership thereof.
9.1.2. Workers Compensation and Employers Liability Insurance. Such
insurance as will protect Operator from claims by employees for bodily
injury and occupational disease: (i) as required by the state of New York
and any other applicable state or governmental authority and (ii) employers
liability of not less than $25,000,000.00.
9.1.3. General Insurance Provisions. The insurance requirements set
forth herein are to fully protect Owner and its Affiliates from any and all
claims by third-parties, including employees of Operator or its agents,
subcontractors or employees and shall provide the following:
(a) Operator Insurance is Primary. The Plant Liability Insurance
shall apply as primary insurance with respect to any and all
other insurance or self-insurance programs carried by or
maintained by Owner or its Affiliates.
(b) Evidence of Coverage. Operator shall, prior to the Effective Date
of this Agreement, and within five (5) days after each request by
Owner, provide certificates of insurance to Owner's insurance
consultant evidencing all insurance policies, and if requested by
Owner or Owner's insurance consultant, a true, correct and
complete copy of all such insurance policies, required pursuant
to this Section 9.1. If the Plant Liability Insurance is
available only on a claims-made basis, then the dates of coverage
(including the retroactive date) will be so stated on the
certificate of insurance.
(c) Waiver of Subrogation. Owner and any other party reasonably
requested by Owner shall be granted waivers of subrogation by all
insurers providing coverage to Operator whether or not such
insurance policies are maintained pursuant to the requirements of
this Section 9.1 of the Agreement, including any amendments
thereto, or otherwise.
(d) Severability of Insureds. All policies required in this Section
9.1 shall provide that (i) inclusion of more that one person or
organization as insured hereunder shall not in any way affect the
rights of any such person or organization as respects any claim,
demand, suit or judgment made, brought or recovered, by or in
favor of any other insured, or by or in favor of any employee of
such other insured, and (ii) each person or organization is
protected thereby in the same manner as though a separate policy
had been issued to each, but nothing therein shall operate to
increase the insurance company's liability as set forth elsewhere
in the policy beyond the amount for which the insurance company
would have been liable if only one person or interest had been
named as insured.
19
(e) Notice of Cancellation. All policies required in this Section 9.1
may not be cancelled or materially altered without giving at
least thirty (30) days (or ten (10) days if such cancellation is
due to a failure to pay premiums) prior written notice of
cancellation to Owner.
(f) Deductibles. Any and all deductible or retention amounts under
policies provided by Operator pursuant to this Section 9.1 shall
be assumed by, for the account of, and at the sole risk of
Operator.
(g) Claims Made Policies. When the insurance policies required herein
are issued on a "claims made" or "claims first made" form, the
retroactive date shall be on or before the Effective Date of this
Agreement and such policies must be maintained for a period of at
least five (5) years after Termination of this Agreement or shall
be specifically endorsed to provide that claims made for at least
five (5) years after the event or occurrence giving rise to the
claim will be covered.
9.1.4. Operator Disclosure and Cooperation. Where Operator is
providing insurance coverage for benefit of Owner, procuring insurance at
request of Owner, and/or securing coverage at the expense of Owner,
Operator shall make complete and timely disclosure of all information as
may be requested from time to time by Owner and provide full cooperation in
securing such coverages as may be requested by Owner. Such disclosure and
cooperation shall include, without limit, an exact copy of the applicable
insurance policy wording, premium calculation, rating structure, disclosure
of No Claims Bonuses and/or profit sharing, information regarding cargo
shipments and related surveys, fees or commissions paid to brokers or
consultants, and/or other fees or expenses which may be incurred by Owner
in conjunction with the procurement of said insurance. In the event that
any Plant Liability Insurance policy or the coverage extended thereunder to
Owner or Owner's Affiliates is not renewed or is canceled and is not
replaced by Operator or its Affiliates with insurance policies providing
comparable coverage thereto, or if the Plant Liability Insurance policies,
in Owner's or Owner's Affiliates' reasonable judgment, undergo any material
change such that the coverage afforded thereunder is not commercially
reasonable, Owner and its Affiliates may secure separate general liability
insurance policies and/or pollution legal liability policies and/or
automobile liability policies to provide comparable commercially reasonable
insurance coverage and Operator shall reimburse Owner and its Affiliates,
as the case may be, for the Operator's proportionate share of the premiums
paid by Owner and its Affiliates, as the case may be, for such insurance.
9.2. Owner Insurance Coverage. Throughout the Term, Owner shall, at its
cost, maintain third party liability insurance similar to that required of
Operator and workers compensation insurance for its employees.
9.3. Self-Insurance, etc. Operator and Owner may carry such self insured
retentions, deductibles, or may self-insure any of the above Plant Liability
Insurance, All Risk Property Insurance, and Worker's Compensation insurance to
the extent that it is doing so on the Effective Date or to such greater extent
as may be approved in writing by Owner. Nothing in this Article 9 is intended to
nor shall it relieve Owner or Operator of any of their respective obligations
and liabilities under this Agreement including, but not limited to, the
indemnification obligations set forth in Article 10 below.
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ARTICLE 10
INDEMNIFICATION
10.1. Indemnification of Owner. Operator agrees that to the extent
permitted by law it will protect, indemnify and hold harmless Owner and its
Affiliates and their respective representatives, trustees, directors, officers,
employees and subcontractors (as applicable in the circumstances), (the "Owner
Indemnified Parties") from and against (and pay the full amount of) any
Loss-and-Expense and will defend the Owner Indemnified Parties in any suit,
including appeals, for personal injury to, or death of, any person, or loss or
damage to property arising out of: (a) the gross negligence or willful
misconduct of Operator; (b) a violation of law by Operator which materially and
adversely affects (i) the condition or operations of the Plant, (ii) the
financial condition of Owner, (iii) the performance or ability of Operator to
perform its obligations under this Agreement or (iv) the cost of providing
electric service to the customers of the Plant (in each case other than for any
violation of environmental Law for which Owner or Operator may be strictly
liable provided Operator acted in a manner consistent with Prudent Electric
Production Practices), or (c) a criminal violation of Law by Operator. Operator
shall not, however, be required to reimburse or indemnify any Owner Indemnified
Party for any Loss-and-Expense to the extent any such Loss-and-Expense is due to
(a) any matter for which Owner is responsible under Article 3 hereof, (b) the
negligence or other wrongful conduct of any Owner Indemnified Party, (c) any
event of Force Majeure, (d) any act or omission of any Owner Indemnified Party
judicially determined to be responsible for or contributing to the
Loss-and-Expense, or (e) any matter for which the risk has been specifically
allocated to the Owner hereunder. An Owner Indemnified Party shall promptly
notify Operator of the assertion of any claim against it for which it is
entitled to be indemnified hereunder, shall give Operator the opportunity to
defend such claim, and shall not settle the claim without the approval of
Operator. Operator shall be entitled to control the handling of any such claim
and to defend or settle any such claim, in its sole discretion, with counsel of
its own choosing that is reasonably acceptable to the Owner Indemnified Parties;
provided, however, that, in the case of any such settlement, Operator shall
obtain written release of all liability of the Owner Indemnified Parties, in
form and substance reasonably acceptable to the Owner Indemnified Parties.
Notwithstanding the foregoing, each Owner Indemnified Party shall have the right
to employ its own separate counsel in connection with, and to participate in
(but, except as provided below, not control) the defense of, such claim, but the
fees and expenses of such counsel incurred after notice to Operator of its
assumption of the defense thereof shall be at the expense of such Owner
Indemnified Party unless:
(i) the employment of counsel by such Owner Indemnified Party has
been authorized by the Operator;
(ii) counsel to such Owner Indemnified Party shall have reasonably
concluded that there may be a conflict on any significant issue
between Operator and such Owner Indemnified Party in the conduct
of the defense of such claim; or
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(iii) Operator shall not in fact have employed counsel reasonably
acceptable to the Owner Indemnified Party to assume the defense
of such claim within twenty (20) days following the receipt by
Operator of the notice from the Owner Indemnified Party regarding
the assertion of the applicable claim,
in each of which cases the fees and expenses of counsel for such Owner
Indemnified Party shall be at the expense of Operator; provided, however, that,
with respect to clauses (ii) and (iii) of this sentence, Operator shall not be
obligated to pay the fees and expenses of more than one law firm, plus local
counsel if necessary in each relevant jurisdiction, for all such Owner
Indemnified Parties with respect to any claims arising out of the same events or
facts or the same series of events or facts. The Operator shall not be entitled,
without the consent of such Owner Indemnified Party, to assume or control the
defense of any claim as to which counsel to such Owner Indemnified Party shall
have reasonably made the conclusion that there may be a conflict on any
significant issue between Operator and such Owner Indemnified Party in the
conduct of the defense of such claim as set forth in clause (ii) above, provided
that the foregoing limitation shall apply only with respect to those issues for
which there may be such a conflict. These indemnification provisions are for the
protection of the Owner Indemnified Parties only and shall not establish, of
themselves, any liability to third parties. The provisions of this Section 10.1
shall survive termination of this Agreement.
10.2. Indemnification of Operator. Owner agrees that to the extent
permitted by law, it will protect, indemnify and hold harmless Operator and its
Affiliates and their respective officers, directors, subcontractors (as
applicable in the circumstances) and employees (the "Operator Indemnified
Parties") from and against (and pay the full amount of) any Loss-and-Expense,
and will defend the Operator Indemnified Parties in any suit, including appeals,
for personal injury to, or death of, any person, or loss or damage to property
arising out of any matter for which Owner is responsible under Article 3 hereof.
Owner shall not, however, be required to reimburse or indemnify any Operator
Indemnified Party for any Loss-and-Expense to the extent any such
Loss-and-Expense is due to (a) any matter for which Operator is responsible
under Article 2 hereof or for which Operator is required to indemnify Owner
under Section 10.1, (b) the negligence or other wrongful conduct of any Operator
Indemnified Party, (c) any event of Force Majeure, (d) any act or omission of
any Operator Indemnified Party judicially determined to be responsible for or
contributing to the Loss-and-Expense, or (e) any matter for which the risk has
been specifically allocated to Operator hereunder. An Operator Indemnified Party
shall promptly notify Owner of the assertion of any claim against it for which
it is entitled to be indemnified hereunder, shall give Owner the opportunity to
defend such claim, and shall not settle the claim without the approval of Owner.
Owner shall be entitled to control the handling of any such claim and to defend
or settle any such claim, in its sole discretion, with counsel of its own
choosing that is reasonably acceptable to the Operator Indemnified Party;
provided, however, that, in the case of any such settlement, Owner shall obtain
written release of all liability of the Operator Indemnified Party, in form and
substance reasonably acceptable to the Operator Indemnified Party.
Notwithstanding the foregoing, each Operator Indemnified Party shall have the
right to employ its own separate counsel in connection with, and to participate
in (but, except as provided below, not control) the defense of, such claim, but
the fees and expenses of such counsel incurred after notice to Owner of its
assumption of the defense thereof shall be at the expense of such Operator
Indemnified Party unless:
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(i) the employment of counsel by such Operator Indemnified Party has
been authorized by Owner;
(ii) counsel to such Operator Indemnified Party shall have reasonably
concluded that there may be a conflict on any significant issue
between Owner and such Operator Indemnified Party in the conduct
of the defense of such claim; or
(iii) Owner shall not in fact have employed counsel reasonably
acceptable to the Owner Indemnified Party to assume the defense
of such claim within twenty (20) days following the receipt by
Owner of the notice from the Operator Indemnified Party regarding
the assertion of the applicable claim,
in each of which cases the fees and expenses of counsel for such Operator
Indemnified Party shall be at the expense of Owner; provided, however, that,
with respect to clause (ii) and clause (iii) of this sentence, Owner shall not
be obligated to pay the fees and expenses of more than one law firm, plus local
counsel if necessary in each relevant jurisdiction, for all such Operator
Indemnified Parties with respect to any claims arising out of the same events or
facts or the same series of events or facts. Owner shall not be entitled,
without the consent of such Operator Indemnified Party, to assume or control the
defense of any claim as to which counsel to such Operator Indemnified Party
shall have reasonably made the conclusion that there may be a conflict on any
significant issue between Owner and such Operator Indemnified Party in the
conduct of the defense of such claim as set forth in clause (ii) above, provided
that the foregoing limitation shall apply only with respect to those issues for
which there may be such a conflict. These indemnification provisions are for the
protection of the Operator Indemnified Parties only and shall not establish, of
themselves, any liability to third parties. The provisions of this Section 10.2
shall survive termination of this Agreement.
10.3. Notice. In the event that a party (the "Indemnified Party") becomes
aware of any event or circumstance which might entitle it to indemnification
under this Article 10, it shall provide the other party (the "Indemnifying
Party") with written notification within the earlier of thirty (30) days after
discovery of such event or circumstance or ten (10) Business Days prior to the
time any response is required by law regarding such event or circumstance.
10.4. Deferral of Dispute Resolution. In the event that a party makes claim
for indemnification under this Article 10 and such claim is the subject of
Dispute Resolution under Article 6 of this Agreement, then, upon mutual
agreement of the parties, such Dispute Resolution may be suspended pending the
resolution of the indemnification claim.
ARTICLE 11
GENERAL LIMITATIONS OF LIABILITY
11.1. Total Liability. Operator's total liability to Owner during any
Calendar Year during the Term for all claims of any kind, whether based upon
contract obligation, tort liability (including negligence) or otherwise, for any
loss or damage arising out of, connected with or resulting from this Agreement
during such each Calendar Year, or from the performance or breach thereof, shall
in no case exceed the Fuel Management Fee for such Calendar Year; provided,
23
however, that the foregoing limitation of liability shall not apply to damages
resulting from Operator's gross negligence or willful misconduct or to
Operator's obligation to indemnify Owner against third party claims pursuant to
Article 10.
11.2. Consequential Damages. Notwithstanding any provision in this
Agreement to the contrary, neither party nor any of its respective Affiliates,
shareholders, principals, directors, trustees, officers, employees, agents,
subcontractors or vendors shall be liable for consequential or indirect losses
or damages, including loss of profit, cost of replacement for electricity, cost
of capital, loss of goodwill, increased operating costs or any other special or
incidental damages or losses, damages or liabilities under any agreements to
which Owner may be a party irrespective of whether such claims are based upon
warranty, negligence, strict liability, contract, operation of law or otherwise.
11.3. Owner Actions. Operator shall not be liable for any claims, losses,
damages, costs, expenses, fines, penalties and liabilities, including but not
limited to Environmental Claims, arising out of (i) Owner's inability or refusal
to allocate monies for capital expenditures with respect to the Plant after
Operator's specific, detailed, request for funds for specified projects pursuant
to Section 4.1; (ii) failure of Plant equipment that is not the result of
Operator's or its agent's gross negligence or willful misconduct in the
operation and maintenance of the Plant; or (iii) Operator's or its agent's
compliance with any instructions or directives provided by Owner.
11.4. Survival and Application. The waivers and disclaimers of liability,
indemnities, releases from liability, and limitations on liability expressed in
this Agreement shall survive the expiration or earlier termination of this
Agreement and shall apply at all times, whether in contract, equity, tort or
otherwise, regardless of the fault, negligence (in whole or in part), strict
liability, breach of contract or breach of warranty of the party indemnified,
released or whose liabilities are limited, and shall extend to the Affiliates,
shareholders, principals, directors, officers and employees, agents and related
or affiliated entities of such party, and their Affiliates, principals,
officers, directors and employees.
ARTICLE 12
ENVIRONMENTAL MATTERS
12.1. Site Conditions.
12.1.1. Disclosure. Owner agrees that it will fully disclose to
Operator all information, both written and oral, that becomes known to or
comes into the possession of Owner after the Effective Date from time to
time regarding the environmental conditions at the Plant, including any and
all reports, audits or other correspondence from environmental consultants
and/or Governmental Authorities.
12.2. Insurance/Indemnification. Owner shall cause Operator and its
Affiliates to be designated as a named insured on any insurance policy covering
Environmental Claims carried by Owner and its Affiliates.
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12.3. Compliance. Without limiting the generality of Section 2.1.2 above,
Operator shall comply with all requirements of Environmental Laws, including the
terms and conditions of all Permits issued or obtained under Environmental Laws,
in connection with Operator's provision of the Services. Operator shall be
responsible for complying with all reporting obligations that arise under
Environmental Laws in connection with any Emergency or other event or condition
related to the Plant, including the reporting of any release of any Hazardous
Materials. Owner shall indemnify, defend and hold harmless Operator, its
shareholders, Affiliates, officers, directors, employees, agents and
representatives from and against any and all Environmental Claims directly or
indirectly related to or arising out of the actual or alleged existence,
generation, use, collection, treatment, storage, transportation, recovery,
removal, discharge or disposal of Hazardous Materials at the Plant and/or
adjacent areas to the Plant, except for Environmental Claims arising directly
out of the gross negligence or willful misconduct of the Operator or any
"Environmental Loss" for which Operator is liable under Section D5, Fuel
Indemnification Provisions, of Appendix D (as such term is defined in such
appendix).
12.4. New Source Review Requirements. Notwithstanding anything to the
contrary in this Agreement, Owner shall bear all responsibility and liability
for compliance with all requirements with respect to New Source Review under the
Clean Air Act and any similar provisions of any other Applicable Law, including,
without limitation (i) all responsibility and liability with respect to
decisions made by the Owner (and the consequences thereof) about potential
regulatory implications of routine repairs, upgrades, maintenance and
modifications of the Plant and (ii) all responsibility and liability for all
costs, penalties and other Losses and Expenses associated with New Source Review
relating to the Plant (whether from third-party claims or otherwise) as a
consequence of such decisions (or the consequences thereof).
ARTICLE 13
NONDISCLOSURE
13.1. General. Each party agrees, to the extent permitted by Applicable
Law, to hold in confidence any confidential information supplied to that party
and designated in writing as confidential by the supplier thereof ("Confidential
Information"). Each party further agrees, to the extent requested by the
supplier of such information, to require its subcontractors, vendors, suppliers
and employees to enter into appropriate nondisclosure agreements relative to
such Confidential Information, prior to the receipt thereof. The nondisclosure
obligations set forth in this Article 13 shall survive for a period of five (5)
years following the expiration or earlier termination of this Agreement.
13.2. Exceptions. The provisions of this Article 13 shall not apply to
information covered by any one of the following exceptions or any combination
thereof: (i) information that was in the public domain prior to the receiving
party's receipt or that subsequently becomes part of the public domain by
publication or otherwise, except by the receiving party's wrongful act; (ii)
information that the receiving party can demonstrate was in its possession prior
to receipt thereof from the disclosing party; (iii) information received by a
party from a third party having no obligation of confidentiality with respect
thereof; and (iv) information which was developed independently by the receiving
party without access to the disclosing party's Confidential Information.
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13.3. Required Disclosure. Notwithstanding anything in this Article 13 to
the contrary, if any party is required by Applicable Laws, or in the course of
administrative or judicial proceedings, to disclose Confidential Information,
such party may make such disclosure of such Confidential Information; provided,
however, that the party making such disclosure shall immediately notify the
other party of the requirement prior to disclosing the Confidential Information
so that the disclosing party may attempt to cause such third-party to treat the
Confidential Information in a confidential manner and to prevent such
Confidential Information from becoming part of the public domain.
ARTICLE 14
DOCUMENTS AND MATERIALS
14.1. Documents and Materials. Operator shall maintain at the Plant current
as-built drawings, plans, specifications, descriptions, O&M Manuals, and related
materials regarding the Plant, in each case to the extent such documents and
materials were furnished to or prepared by Operator during the Term. All such
materials and documents, together with any materials and documents furnished to
Operator by Owner in connection with the Plant, shall be delivered to Owner upon
the expiration of the Term or earlier termination of this Agreement; provided,
however, that Operator may retain and use copies of all such documents and
materials in the course of its current and future business activities.
14.2. Review by Owner. All materials and documents referenced in Section
14.1 shall be available for review by Owner at all reasonable times and upon
reasonable notice during development and promptly upon completion thereof.
ARTICLE 15
MISCELLANEOUS PROVISIONS
15.1. Agreement. This Agreement consists of the terms and conditions set
forth in the body hereof and the Appendices and other attachments hereto. In the
event of a conflict, variation or inconsistency between or among the Appendices,
other attachments and the terms and conditions set forth in the body hereof, the
terms contained in the body hereof shall govern. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof.
15.2. Relationship of the Parties. Operator is deemed to be an independent
contractor hereunder and shall not be deemed to be (i) a partner, joint venturer
or affiliate of Owner, (ii) an owner, lessee, or sublessee of the Plant, or
(iii) an assignee or obligor under any agreements with respect to the Plant to
which it is not a party.
26
15.3. KeySpan Guaranty. Operator shall provide to Owner upon the execution
and delivery of this Agreement a guaranty from KeySpan Corporation, Operator's
parent, of Operator's obligations hereunder in the form of an amendment to the
Guaranty Agreement dated May 28, 1998, from KeySpan Corporation to the Long
Island Power Authority, which amendment shall be substantially in the form set
forth in Appendix C (the "KeySpan Guaranty").
15.4. Assignment. This Agreement shall not be assigned by either party
without the prior written consent of the other party hereto, which consent shall
not be unreasonably withheld, delayed or conditioned. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their successors
and permitted assigns.
15.5. Access.
15.5.1. Owner. During the Term, Owner and its authorized agents and
representatives shall have continuous access at all times to the Plant.
Owner shall comply with all Operator access and safety requirements while
at the Plant. Upon the request of Owner, or its authorized agents and
representatives, Operator shall provide such Persons with access to any
Plant operating data and logs.
15.5.2. Cooperation. During any such inspection or review of the Plant
undertaken during the Term, Owner and its authorized agents and
representatives must strictly comply with all of Operator's safety and
security procedures, and Owner and its authorized agents and
representatives must conduct such inspection and reviews in such a manner
as to not unreasonably interfere with Operator's activities. Operator also
shall reasonably cooperate with Owner in allowing other visitors access to
the Plant under conditions mutually agreeable to the parties.
15.6. Not for Benefit of Third Parties. Except as otherwise expressly
provided herein, this Agreement and each and every provision hereof is for the
exclusive benefit of the parties hereto and is not for the benefit of any third
party.
15.7. Force Majeure.
15.7.1. Events Constituting Force Majeure. As used in this Agreement,
"Force Majeure" means any act, event, or condition that causes delay in or
failure of performance of obligations under this Agreement, or otherwise
materially and adversely affects a party's ability to perform, if such act,
event or condition (i) is beyond the reasonable control of the party
relying thereon, (ii) is not the result of the willful misconduct or
negligent act or omission of such party, and (iii) is not an act, event or
condition, the risk or consequence of which such party expressly assumed
under this Agreement, and then only to the extent that such Force Majeure
event cannot be cured, remedied, avoided, offset, or otherwise overcome by
the prompt exercise of reasonable due diligence of the party relying
thereon including, but not limited to:
(a) acts of God, accident, flood, sabotage, fire, explosion,
vehicular accident, epidemic, earthquake, lighting, drought, or
similar occurrence, acts of utilities, transmission outages or
sudden or disruptive electrical events or disturbance on the
transmission or distribution system, disruption of Fuel or
materials supply, acts of public or foreign enemy, war and other
27
hostilities, invasion, blockade, insurrection, rebellion, riot
and disorder, strikes or labor disturbances, general arrest or
restraint of government and people, civil disturbance or similar
occurrence;
(b) entry of an injunctive or restraining order or judgment of any
Governmental Authority, if such order or judgment is not the
result of the act, or failure to act, of a party or its
subcontractors or suppliers; or
(c) suspension, termination, interruption of, or failure to obtain
any Permit required or necessary for the construction, operation
or maintenance of the Plant, provided such suspension,
termination, interruption or failure is not the result of the
action or inaction of a party relying thereon or its
subcontractors or suppliers.
Notwithstanding the foregoing, events of Force Majeure excusing
Operator's obligations to operate and maintain the Plant shall not include
(i) a strike or labor action by Operator's employees at the Plant; (ii) the
failure of any subcontractor, supplier or vendor of Operator to perform its
obligations under any agreement or undertaking with Operator unless the
failure of such subcontractor, supplier or vendor to perform is caused by
an event or condition that would qualify as an event of Force Majeure for
Operator; or (iii) any change in general economic conditions or costs of
materials, supplies and labor.
15.7.2. Event of Force Majeure. Except for the obligations of either
party to make payments of amounts due to the other party, the party
claiming Force Majeure shall be excused from performance and shall not be
considered to be in default in respect of any obligation under this
Agreement to the extent that a failure of performance of such obligation
shall be due to Force Majeure. If either party's ability to perform its
obligations under this Agreement is affected by Force Majeure, the party
claiming such inability shall: (i) promptly notify the other party of such
Force Majeure and its cause and confirm the same in writing within five (5)
Business Days of discovery of the event or circumstances constituting such
Force Majeure; (ii) immediately supply such available information about the
event or circumstances constituting the Force Majeure and the cause thereof
as is reasonably requested by the other party; and (iii) immediately
initiate removal of the cause of the Force Majeure or, if immediate removal
is not possible, to mitigate the effect thereof.
15.7.3. Scope. The suspension of performance due to Force Majeure
shall be of no greater scope and no longer duration than that which is
necessary. The excused party shall use its reasonable best efforts to
remedy its inability to perform.
15.8. Strikes. In the event that the Plant is unable to supply capacity,
energy or ancillary services to Owner due to a strike or other form of labor
action by Operator's employees, or the employees of its contractors or
subcontractors, Owner shall have the right to operate the Plant and to retain
such other personnel or agents as Owner in its sole discretion and at its sole
cost and expense deems necessary or advisable for such purposes. For so long as
Owner operates the Plant and/or retains such other personnel, the Allocated
Fixed O&M Costs Payment, Variable Charge Payment and the Fuel Management Fee, as
28
applicable, payable under this Agreement shall be reduced (but not less than to
zero) by an amount equal to Owner's costs to operate and maintain the Plant;
provided, however that Operator shall resume operation of the Plant, upon
termination of such strike.
15.9. Amendments. No amendments or modifications of this Agreement shall be
valid unless evidenced in writing and signed by duly authorized representatives
of both parties.
15.10. Survival. Notwithstanding any provisions herein to the contrary, the
provisions set forth in Articles 6, 10, 11,12 and 13, and Sections 5.3, 7.3,
8.5, 15.1, 15.2, 15.6, 15.7, 15.10, 15.12, 15.15, 15.16, 15.17, 15.18, and 15.19
shall survive in full force the expiration or earlier termination of this
Agreement. In addition, any and all rights and obligations accruing under this
Agreement prior to the termination date or expiration date shall survive such
termination or expiration.
15.11. No Waiver. It is understood and agreed that any delay, waiver or
omission by Owner or Operator to exercise any right arising from any breach or
default by Owner or Operator with respect to any of the terms, provisions, or
covenants of this Agreement shall not be construed to be a waiver by Owner or
Operator, as the case may be, of any subsequent breach or default of the same or
other terms, provisions or covenants on the part of the other party.
15.12. Notices. Any written notice required or permitted under this
Agreement shall be deemed to have been duly given on the date of receipt, and
shall be either delivered personally to the party to whom notice is given, or
mailed to the party to whom notice is to be given, by facsimile or first class
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the addressee at the most recent address specified by written
notice given to the other party in the manner provided in this Article 15.12.
The parties' addresses for such notices are as follows:
To Operator:
[KeySpan Corporation Subsidiary]
c/o KeySpan Corporation
175 E. Old Country Road
Hicksville, NY 11801
Attention: James Brennan
FAX No.: [____________]
To Owner:
Long Island Lighting Company (d/b/a LIPA)
333 Earle Ovington Blvd, Suite 403
Uniondale, New York 11553
Attention: Chief Operating Officer
w/copy to:General Counsel
FAX No.: [____________]
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15.13. Representations and Warranties.
15.13.1. Owner Representations and Warranties. Owner, as of the date
of this Agreement, makes the following representations and warranties as
the basis for its undertakings contained herein:
(a) Owner has all requisite power and authority to execute and
deliver this Agreement and to perform each of its obligations
hereunder. Owner has duly authorized the execution, delivery and
performance of this Agreement. This Agreement is the legal, valid
and binding obligation of Owner and (assuming that this Agreement
has been duly authorized, executed and delivered by Operator) is
enforceable against Owner in accordance with its terms.
(b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated herein and the fulfillment of and
compliance with the provisions of this Agreement do not
materially conflict with or constitute a material breach of or a
material default under any of the terms, conditions or provisions
of any law, any order of any court or other agency of government,
the organizational documents of Owner or any contractual
limitation, restriction or outstanding trust indenture, deed of
trust, mortgage, loan agreement, other evidence of indebtedness
or any other agreement or instrument to which Owner is a party or
by which it or any of its property is bound or result in a
material breach of or a material default under any of the
foregoing.
(c) All organizational consents and authorizations, and all other
actions required for Owner to execute and deliver this Agreement
have been obtained or completed.
(d) Owner has obtained, or will obtain as of the Effective Date, all
Permits required to be obtained by Owner for the ownership,
operation, maintenance, and repair of the Plant.
15.13.2. Operator Representations and Warranties. Operator, as of the
date of this Agreement, makes the following representations and warranties
as the basis for its undertakings contained herein:
(a) Operator has all requisite power and authority to execute and
deliver this Agreement and to perform each of its obligations
hereunder. Operator has duly authorized the execution, delivery
and performance of this Agreement. This Agreement is the legal,
valid and binding obligation of Operator and (assuming that this
Agreement has been duly authorized, executed and delivered by
Owner) is enforceable against Operator in accordance with its
terms.
(b) The execution and delivery of this Agreement, the consummation of
the transactions contemplated herein and the fulfillment of and
compliance with the provisions of this Agreement do not
materially conflict with or constitute a material breach of or a
material default under, any of the terms, conditions or
provisions of any law, any order of any court or other agency of
government, the Operator's organizational documents or any
contractual limitation, corporate or partnership restriction or
30
outstanding trust indenture, deed of trust, mortgage, loan
agreement, other evidence of indebtedness or any other agreement
or instrument to which Operator is a party or by which it or any
of its property is bound or result in a material breach of or a
material default under any of the foregoing.
(c) All organizational consents and authorizations, and all other
actions required for Operator to execute and deliver this
Agreement have been obtained or completed.
(d) Operator has either obtained or will obtain all licenses or
certificates that it or its employees are required to secure
under Applicable Law to perform the Services.
15.14. Counterparts. The parties may execute this Agreement in
counterparts, which shall, in the aggregate, when signed by both parties
constitute one and the same instrument; and, thereafter, each counterpart shall
be deemed an original instrument.
15.15. Governing Law. This Agreement shall be interpreted, governed and
construed in accordance with the laws of the State of New York. Any action
arising out of or relating to this Agreement shall be brought in New York
Supreme Court, Nassau County, or United States District Court for the Eastern
District of New York.
15.16. Captions; Appendices. Titles or captions of the articles contained
in this Agreement and the Appendices annexed hereto are inserted only as a
matter of convenience and for reference, and in no way define, limit, extend,
describe or otherwise affect the scope or meaning of this Agreement or the
intent of any provision hereof.
15.17. Non-Recourse. Except for Owner's rights under the KeySpan Guaranty,
neither party shall have any recourse against any of the other party's
Affiliates and each party expressly waives its rights of recourse against, and
releases from liability, the other party's Affiliates. Each party shall look
solely to the other party, and the assets thereof, to effect recovery of such
party's claims against the other party.
15.18. Severability. The invalidity or unenforceability of any provision of
this Agreement shall be determined only by a court of competent jurisdiction,
and the parties hereby agree to negotiate an equitable adjustment to the invalid
or unenforceable provisions with a view toward effecting the purposes of this
Agreement; the validity or enforceability of the remaining provisions or
portions or applications thereof, shall not be affected thereby.
15.19. Rules of Interpretation. The terms and provisions of this Agreement
shall be interpreted and construed as follows: (a) words of the masculine gender
shall include corresponding words of the feminine or neuter genders and vice
versa; (b) the plural shall include the singular and vice versa; (c) unless the
context indicates otherwise, all references herein to Articles, Sections,
paragraphs, appendices, schedules, and Appendices shall refer, respectively, to
the Articles, Sections, paragraphs, appendices, schedules and Appendices of this
Agreement; (d) the words "includes" or "including" mean "including, but not
limited to" and are not limiting; (e) any reference to an agreement, a contract
31
or any other document means the same as it may be amended, modified,
supplemented or replaced from time to time, unless otherwise noted; (f) any
reference to a Person includes such Person's successors and assigns; and (g)
"ensure", shall not be construed as a guarantee, but shall imply only a duty to
use reasonable effort and care, consistent with Prudent Electric Production
Practices.
15.20. Private Use Rules. In the event that it is determined that the
compensation provisions contained in this Agreement do not comply with the
applicable Internal Revenue Service "private use" rules, the parties shall
cooperate with each other and negotiate in good faith to amend or modify such
compensation provisions so that they do so comply while retaining the relative
economic benefits of the parties under this Agreement.
15.21. State Law Requirements. All contracts entered into by Owner are
required under New York State law to contain certain terms and conditions, as
set forth in Appendix E hereto and the provisions of such Appendix E are hereby
deemed incorporated in this Agreement at this place. To the extent of any
conflict between any other provision of this Agreement and Appendix E, Appendix
E shall control. The Operator shall comply with such terms and conditions during
the Term of this Agreement.
32
IN WITNESS WHEREOF, the parties have executed this Agreement through their
duly authorized officers as of the date set forth in the preamble to this
Agreement.
LONG ISLAND LIGHTING COMPANY [KEYSPAN CORPORATION
(d/b/a LIPA) SUBSIDIARY]
By: ________________________ By: __________________________
Name: _______________________ Name: ________________________
Title: _______________________ Title: _______________________
33
APPENDIX "A"
------------
EXCLUDED SERVICES
-----------------
The following costs and other obligations are Owner's responsibility:
1. Property Taxes
2. Inventory Taxes
3. Emission credits and allowances
4. Costs imposed by the New York Independent System Operator (or other
regional transmission or electrical pool operator) rules or
procedures, including any costs associated with the sale or other
marketing of any energy produced by the Plant.
5. Costs relating to unforeseen, sudden major equipment or component
failures not covered under equipment warranty, including major
component failures.
6. Initial inventory of spare parts, consumables and tools, and storage
of spare parts.
7. Costs to replace Plant equipment to the extent that such costs are
capital expenditures and all other capital improvements.
8. Cost of any capital expenditures for alterations, modifications,
improvements or additions to the Plant which are required by any
Governmental Authority or otherwise required to comply with Applicable
Laws.
9. Costs subject to Owner's indemnification obligations under this
Agreement.
10. Costs to remedy any notice of violation or non-compliance issued by
any Governmental Authority with regard to air emissions, water
discharges, noise emissions, hazardous discharges or any other
environmental, health or safety problems affecting the Plant.
A-1
APPENDIX "B"
------------
ALLOCATED FIXED O&M COST PAYMENT
--------------------------------
On the Effective Date and for the first Calendar Year, the Allocated
Fixed O&M Cost Payment shall be an amount determined as follows:
AFOMCP = (CC + $7,120,000 - PT - DEP- RORB - TAXES - CARC - ASC)*(PE/TE)/12
Where:
AFOMCP = Allocated Fixed O&M Charge Payment
CC = The Capacity Charge in effect under the PSA.
PT = The component for property taxes included in the Capacity Charge.
DEP = The component for depreciation included in the Capacity Charge.
RORB = The component for return on rate base included in the Capacity
Charge.
TAXES = The component for state and federal income taxes included in the
Capacity Charge.
CARC = The component for common assets recovery charge included in the
Capacity Charge.
ASC = The component for the amortization of security costs included in the
Capacity Charge.
PE = The total number of operator's full time equivalent employees
working at the Plant as of the date immediately preceding the
Effective Date, excluding, however, any MSD workers. In no event shall
PE exceed the average number of such employees for the two (2)
Calendar Years immediately preceding the Effective Date.
TE = The total number of full time equivalent employees working as of the
day immediately preceding the Effective Date for Operator or its
affiliates at all generating facilities covered under the PSA as of
such date.
On January 1 of each Calendar Year during the Term through December 31,
2008, the Allocated Fixed O&M Charge shall be equal to the Allocated Fixed O&M
Charge for the previous year plus the Labor Cost Index Adjustment plus the
Benefit Cost Index Adjustment, where:
"Labor Cost Index Adjustment (Production)" means the sum of (1) the
average monthly labor costs for the Plant contained in the Allocated
Fixed O&M Charge Payments for the prior Calendar Year and (2) the
product of (a) the Defined Labor Index times (b) average monthly base
labor costs contained in the Allocated Fixed O&M Charge Payments for
the prior Calendar Year.
"Defined Labor Index" means the percentage change for the twelve month
period ending on the preceding September 30 for the Employment Cost
Index for Wages and Salaries Only, Private Industry Workers,
Northeast, Not Seasonally Adjusted, as published by the United States
Bureau of Labor Statistics.
B-1
"Benefit Cost Index Adjustment" means the sum of (1) the
average monthly benefit costs contained in the Allocated Fixed
O&M Charge Payments for the Plant in the prior Calendar Year
and (2) the product of (a) the Defined Labor index times (b)
average monthly base benefit costs contained in the Allocated
Fixed O&M Charge Payments for the prior Calendar Year.
For each Calendar Year during the term after December 31, 2008, the
Allocated Fixed O&M Charge shall be an amount to be agreed upon by the parties
based upon a cost of service analysis. If the parties do not agree on a new
Allocated Fixed O&M Charge for the Calendar Years after December 31, 2008, then
such dispute shall be resolved in accordance with Article 6.
B-2
APPENDIX "C"
------------
FORM OF KEYSPAN GUARANTY AMENDMENT
----------------------------------
AMENDMENT TO GUARANTY AGREEMENT
THIS AMENDMENT TO THE GUARANTY AGREEMENT is made and dated as of
[_________________] (this "Amendment") to the Guaranty Agreement, dated as of
May 28, 1998 (the "Guaranty"), from KEYSPAN CORPORATION (f/k/a Marketspan
Corporation), a corporation organized and existing under the laws of the State
of New York (together with any permitted successors and assigns hereunder, the
"Guarantor"), to LONG ISLAND POWER AUTHORITY (together with its subsidiaries and
other permitted assignees of the Agreements, the "Authority").
RECITALS
WHEREAS, Long Island Lighting Company d/b/a LIPA (the "Owner"), a
wholly-owned subsidiary of the Authority, and [KeySpan Corporation Subsidiary]
(the "Operator"), a subsidiary of the Guarantor are parties to an Operation and
Maintenance Agreement, dated as of the date hereof (the "O&M Agreement"),
whereby the Operator has agreed to operate and maintain the Plant (as defined in
the O&M Agreement) upon the terms and conditions set forth in the O&M Agreement;
and
WHEREAS, pursuant to Section 15.3 of the O&M Agreement, the Guarantor is
entering into this Amendment to guarantee the obligations of the Operator under
the O&M Agreement on the terms and subject to the conditions of the Guaranty.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1 Definitions. All capitalized terms used in this Amendment and not
otherwise defined shall have the meanings assigned to them in the Guaranty.
Section 2. Amendment to the Guaranty Agreement. The parties hereby agree
that (i) the term "Agreements" as used in the Guaranty shall be deemed to
include the O&M Agreement for all purposes of the Guaranty and (ii) the term
"Subsidiaries" as used in the Guaranty shall be deemed to include the Operator
for all purposes of the Guaranty.
Section 3. Miscellaneous
(a) Incorporation by Reference. Sections 1.2(A), (B), (C) and (D) of
the Guaranty shall be incorporated by reference herein as if fully set
forth herein.
(b) Entire Agreement; Authority. The Guaranty, as amended by this
Amendment, together with the Agreement and the Transaction Agreements,
constitute the entire agreement between the parties hereto with respect to
C-1
the transactions contemplated by the Guaranty. Nothing in this Amendment is
intended to confer on any person other than the Guarantor, the Authority
and their successors and assigns as permitted hereunder any rights or
remedies under or by reason of this Amendment.
(c) Counterparts. This Amendment may be executed in any number of
original counterparts. All such counterparts shall constitute but one and
the same Amendment.
(d) Applicable Law. This Amendment shall be governed by and construed
in accordance with the applicable laws of the State of New York.
(e) Full Force and Effect of Guaranty. Notwithstanding the amendment
and extension of the Management Services Agreement, or the amendments to
the Power Supply Agreement and the Energy Management Agreement, the
Guaranty, as modified by this Amendment, and as this Amendment is made a
part thereof, shall remain in full force and effect.
C-2
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their duly authorized officers or representatives
as of the date first above written.
LONG ISLAND POWER AUTHORITY
By _______________________
Name:
Title:
KEYSPAN CORPORATION
By _______________________
Name:
Title:
C-3
APPENDIX "D"
------------
FUEL MANAGEMENT SERVICES
------------------------
D1. General. Operator shall manage all aspects of the fuel supply for the
Plant including determinations regarding the type of fuel used for operating the
Plant and the source of such fuel supply taking into account the purchase of
alternate sources of electricity in lieu of electricity from the Plant when
economic. Owner will compensate Operator for such fuel management services in
accordance with the terms of this Agreement. In this respect, Operator shall,
among other things:
(a) Acquire required gas supplies which includes a mix of
Interruptible and Firm Gas Supplies as deemed appropriate;
(b) Acquire required fuel oil supplies in accordance with generating
unit specific requirements as determined by Operator;
(c) Negotiate, execute and administer fuel supply contracts with one
or more entities;
(d) Obtain and schedule transportation for all fuel deliveries,
including daily nomination and dispatch;
(e) Arrange for the displacement of gas across KeySpan's gas
distribution system and the New York Facilities to facilitate deliveries to
the Plant; and
(f) Arrange-for the delivery, receipt, fuel analysis, handling,
storage, local and on site transportation and use of Fuel.
Unless otherwise arranged and agreed to between Owner and Operator, all gas
supplies to be used at the Plant will be Interruptible Gas Supplies or short
term Firm Gas Supplies with contracts extending no longer than one month from
the date entered into, all of which are System Interruptible Gas Supplies.
Operator will arrange for the most cost-effective fuel for use at the Plant,
subject to the existing obligations of KeySpan Energy Delivery-Long Island with
respect to the delivery of gas to its customers. Operator will arrange for Gas
Balancing services to be provided associated with use of gas at the Plant.
Operator will provide these services from existing assets of Operator or its
affiliates. Operator will not contract for additional firm assets (including
storage, pipeline capacity or swing gas supply) specifically for use in the
Plant unless Owner and Operator agree to the contract. Such Interruptible Gas
Supplies will be provided only as long as it is available for use, in the Plant.
D2. Fuel Measurement. To the extent not already in place, installation,
maintenance and operation of all fuel metering and telemetering equipment shall
be undertaken by Operator in accordance with applicable requirements. Operator
shall cooperate with Owner in Owner's verification of the accuracy of all
measurements of fuel made by Operator and Owner shall have access to all records
of Operator necessary for such purpose.
D-1
D3. General Fuel Service Requirements.
D3.1 Minimization of Costs. In providing the fuel, Operator shall use best
efforts to minimize fuel costs for the Plant, such efforts being consistent with
(i) all applicable insurance policies, (ii) all applicable prudent industry
practices and standards, including Prudent Electric Production Practices, (iii)
all applicable operating and contract constraints for fuel delivery, (iv)
Operator's collective bargaining agreements and (v) applicable Laws.
D3.2 Accounting Controls. Operator, on a monthly basis, shall provide,
or cause to be provided, all accounting, bookkeeping, and administrative
services in connection with the fuel costs, such accounting to be consistent
with the FERC Uniform System of Accounts and generally accepted accounting
principles consistently applied. In areas of conflict, FERC accounting
principles shall control. All records relating to such services shall be subject
to review and audit in accordance with Section 7.3.
D4. Ownership of Fuel.
D4.1 Ownership of the Fuel. In order to eliminate any ambiguity in this
Agreement with respect to the ownership of the Fuel purchased by Operator or any
Affiliate of Operator on behalf of Owner pursuant to this Agreement, Owner and
Operator agree as follows: (i) Owner acknowledges that it is the owner of the
Fuel; and (ii) Operator acknowledges and confirms that it is obligated to, and
agrees that it will, indemnify the Owner Indemnified Parties in the manner set
forth in this Appendix D for any Loss, as defined in this Appendix D.
D4.2 Owner's Agreements. Owner hereby acknowledges ownership of the Fuel
throughout the effective term of this Agreement and agrees that from the date of
this Agreement it will:
(i) take no position inconsistent with its ownership of the Fuel in any
filing with a governmental agency or department (including any tax
return) or in any judicial or administrative proceeding (other than a
judicial proceeding in which the provisions of this Agreement may be
at issue);
(ii) account for the Fuel as an asset of Owner and cause the Fuel to be
reflected as such in its financial statements; and
(iii) provide from time to time such further assurances and written
confirmation of its ownership of the Fuel as shall reasonably be
requested by Operator.
D5. Fuel Indemnification Provisions
D5.1 General Indemnity. Operator acknowledges and confirms that during the
Term it is obligated to, and agrees that it will, indemnify, defend and hold
harmless the Owner Indemnified Parties against any and all Losses (as defined in
Section D5.2, below), other than any Losses caused by the negligence, willful
misconduct or breach of statutory or regulatory duty of one or more Owner
Indemnified Parties; provided, however that no Loss shall be deemed to have been
caused by the negligence, willful misconduct or breach of statutory or
regulatory duty of any Owner Indemnified Party if any action or failure to act
D-2
giving rise to such Loss is that of Operator or any Affiliate of Operator acting
on behalf of any Owner Indemnified Party pursuant to one of this Agreement, the
Energy Management Agreement or the Power Supply Agreement. In no event shall the
term "Loss" and "Losses" mean Economic Loss, as that term is defined in Section
D5.2 below.
D5.2 Certain Definitions. As used in this Appendix D, the term "Loss" and
"Losses" mean any loss, claim, damage, liability, demand, action, suit,
judgment, assessment, penalty, award, cost and/or expense suffered by or
asserted against any Owner Indemnified Party or to which any Owner Indemnified
Party may become subject insofar as any such loss, claim, damage, liability,
demand, action, suit, judgment, assessment, penalty, award, cost and/or expense
arises out of, or is based upon, Owner's ownership of the Fuel, including,
without limitation, any Environmental Loss, Fuel Loss, General Claim and/or
Collection Expense, each as defined below. For the purpose of defining "Loss"
and exclusions thereto and as otherwise used in this Appendix D, in addition to
the definitions set forth in Article 1 of this Agreement, the following terms
are used with the meanings set forth below:
"Attorneys' Fees" means and includes all reasonable costs, fees and charges
(including, without limitation, charges for disbursements) of any attorney,
legal assistant and paralegal, and shall include both outside counsel retained
by any Owner Indemnified Party and in-house counsel for any Owner Indemnified
Party and shall also include, without limitation, expert witness payments
(whether consulting or testifying) and other court costs whether or not incurred
in a judicial or administrative proceeding.
"Collection Expense" means any expense (including, without limitation,
Attorneys' Fees) incurred by an Owner Indemnified Party in order to obtain
payment from Operator or an insurer in respect of a Loss or otherwise to enforce
the terms of this Appendix D.
"Economic Loss" shall mean any loss in economic value of the Fuel resulting
from, but not limited to, such factors as: changes in the unit price of the Fuel
in the open market, changes in the cost of transporting the Fuel to the point of
consumption, changes in the cost of storing the Fuel prior to consumption, and
changes in the cost of injecting or withdrawing the Fuel. "Economic Loss" shall
also mean any loss resulting from trading in financial derivatives in the
commodities markets that are designed to hedge price risk associated with the
Fuel, but in no event will any loss that falls within the definition of "Fuel
Loss" (as that term is defined in this Appendix D) also be considered to be
"Economic Loss."
"Fuel Environmental Law" means and includes any present and/or future
federal, state or local law, ordinance, code, rule, regulation or order
regulating, relating to, or imposing liability or standards of conduct
concerning environmental matters, permits, pollution, waste disposal, industrial
hygiene, land use or the protection of human or animal health or welfare,
including, without limitation, those related to any Release or threatened
Release of hazardous materials and to the ownership, transportation, storage,
use or disposition of hazardous materials, in any manner applicable to the Fuel
and other requirements of governmental authorities relating to the environment
or to any hazardous material or Fuel-Related Activity (including, without
limitation, the U. S. Comprehensive Environmental Response, Compensation and
Liability Act, the U. S. Superfund Amendment and Reauthorization Act, the U. S.
Toxic Substances Control Act, the U. S. Resources Conservation and Recovery Act,
D-3
the U. S. Hazardous Material Transportation Act, the U. S. Clean Air Act, the U.
S. Water Pollution Control Act, the U. S. River and Harbors Act of 1899, the Oil
Pollution Act of 1990, the New York Environmental Conservation Law and all rules
arid regulations of the United States Environmental Protection Agency, the New
York Department of Environmental Conservation, or any other agency or
governmental board or entity having jurisdiction over the Fuel or the ownership,
transportation, storage, use or disposition thereof, as any of the foregoing
have been or are hereafter amended).
"Environmental Loss" means a Loss suffered or incurred by an Owner
Indemnified Party arising out of or as a result of: (i) any violation of any
applicable Fuel Environmental Law relating to the Fuel or to the ownership,
transportation, storage, use or disposition thereof; (ii) any investigation,
inquiry, order, hearing, action, or other proceeding by or before any
governmental agency addressing the violation of any applicable Fuel
Environmental Law in connection with any Fuel-Related Activity; (iii) any claim,
demand or cause of action, or any action or other proceeding, whether
meritorious or not, brought or asserted against any Owner Indemnified Party
which directly or indirectly relates to, arises from or is based on any of the
matters described in clauses (i) or (ii), or any allegation of any such matters;
or (iv) any cost of reclamation or remediation with respect to any property,
whether then owned by such Owner Indemnified Party or by another person and
whether legally imposed under a Fuel Environmental Law or as a result of a Legal
Proceeding or necessary to restore an Owner Indemnified Party's property to the
condition it was in and/or the value it held prior to any damage suffered as a
result of any Fuel-Related Activity.
"Fuel Loss" means any actual loss or deprivation of Fuel to Owner so that
such Fuel is not available for its intended use under this Agreement through
either a loss, damage, theft, seizure or destruction of such Fuel or a
diminution of the value of Fuel through the attachment of liens or other
encumbrances or claims to title for which Owner is not responsible; provided,
however, that, at the sole option of Owner, the amount of any Fuel Loss for
purposes of this Appendix D may be measured by the expense, as reasonably
determined by Owner, of acquiring power in substitution for that which would
have been generated with the Fuel to which such Fuel Loss relates; provided,
further that under no circumstances shall Operator be liable hereunder for any
amount in excess of the amount of the replacement value of the Fuel which is the
subject of the Fuel Loss at the time it is replaced.
"Fuel-Related Activity" means any storage, holding, release, emission,
discharge, processing, abatement, removal, disposition, handling or
transportation of Fuel.
"General Claim" means a claim for damages; other than a claim brought under
a Fuel Environmental Law, asserted against an Owner Indemnified Party because of
Owner's ownership of the Fuel, including and expressly limited to, a claim
asserted by: (i) a party claiming bodily injury or property damage caused by the
Fuel or by the transportation, storage, use or disposition thereof; (ii) an
employee or former employee of Operator or KeySpan Corporation or its various
subsidiaries seeking worker's compensation, pension or other benefits of
employment or alleging violations of the Occupational Safety and Health Act, or
other statutes or governmental regulations governing safety in the workplace,
labor relations or other aspects of the employer/employee relationship as a
result of a Fuel-Related Activity.; (iii) a government or agency or department
thereof seeking the assessment of fines or penalties in connection with the
transportation of the Fuel or any other aspect of the ownership, storage, use or
D-4
disposition of the Fuel; or (iv) any other party seeking to hold such Owner
Indemnified Party legally responsible for damage caused by the Fuel or for the
acts or omissions of Operator or KeySpan Corporation or its various subsidiaries
managing the Fuel.
"Legal Proceeding" means an action, suit, investigation, administrative
proceeding or formal proceeding of an adversarial nature before a court or other
governmental tribunal with jurisdiction over the parties and authority to assess
fines or penalties and/or to award damages or issue an order binding on a party
thereto.
D5.3 Fuel Indemnification Procedure.
(a) Losses Not Asserted or Incurred in a Legal Proceeding. If, other than
in the course of a Legal Proceeding, an Owner Indemnified Party shall incur a
Loss or receive a demand or claim for payment by it which, if paid, would
constitute a Loss, such Owner Indemnified Party shall deliver to Operator (in
the case of any such demand or claim, promptly, but in any case .within twenty
days after receipt thereof), a written request for indemnification (a
"Request"), setting forth in reasonable detail the nature of such Loss, demand
or claim, the amount thereof (or if the precise amount of such Loss, demand or
claim is not yet known or determinable, the estimated amount or magnitude
thereof or a statement to the effect that such. amount is not yet known or
determinable) and the basis on which such Owner Indemnified Party believes that
it is entitled to be indemnified pursuant to this Appendix D, accompanied by any
appropriate supporting documentation. If
(i) the amount of the Loss, demand or claim is set forth in the Request,
the Operator shall pay the requested amount within thirty (30)
Business Days (as used in this Appendix D, the term "Business Day"
means any day on which commercial banks are not authorized or required
to be closed in Nassau County, New York); provided, however, that, if
Operator believes that the information provided in such Request is
incomplete or insufficient to support a claim for indemnification in
the amount stated or that the Request does not state a valid claim for
indemnification pursuant to this Appendix D, it shall, not more than
ten (10) Business Days after receipt of the Request, deliver written
notice to such Owner Indemnified Party that it (i) requires further
information in order to evaluate the claim for indemnification,
stating the nature of the required information, or (ii) acknowledges
that such Owner Indemnified Party is entitled to indemnification but
disagrees with the amount requested, stating the basis for its
disagreement and. the amount it believes to be appropriate, or (iii)
disclaims liability under this Appendix D with respect to the Loss,
demand or claim described in the Request, stating the basis for its
denial of liability; or
(ii) the precise amount of the Loss, demand or claim is not set forth in
the Request, Operator shall, within ten (10) Business Days, deliver
written notice to such Owner Indemnified Party either (a)
acknowledging the Loss as covered by this Appendix D, subject to the
ultimate determination of the amount thereof; or (b) if Operator
believes that the information provided in such Request is incomplete
or insufficient to support a claim for indemnification or that the
Request does not state a valid claim for indemnification pursuant to
D-5
this Appendix D, notifying such Owner Indemnified Party that Operator
(x) requires further information in order to evaluate the claim for
indemnification, stating the nature of the required information, or
(y) disclaims liability under this Appendix D with respect to the
Loss, demand or claim described in the Request, stating the basis for
its denial of liability.
If Operator has made a request for further information, such Owner Indemnified
Party shall, within ten (10) Business Days, either provide the requested
information or notify Operator in writing that it does not believe any further
information is necessary. If the Owner Indemnified Party fails to respond within
ten (10) Business Days or fails to satisfy Operator's request for further
information, Operator shall deliver written notice to such Owner Indemnified
Party that it disclaims liability under this Appendix D with respect to the
Loss, demand or claim described in the Request, stating the basis for its denial
of liability. If the Owner Indemnified Party provides further information
satisfying Operator's request, Operator shall, within ten (10) Business Days,
either (a) if the Request stated a specific amount of the Loss, pay the
requested amount; (b) if the Request did not state a specific amount of Loss,
deliver written notice to such Owner Indemnified Party that it acknowledges the
Loss, demand or claim as covered by this Appendix D, subject to the ultimate
determination of the amount thereof; or (c) deliver written notice to such Owner
Indemnified Party that it disclaims liability under this Appendix D with respect
to the Loss, demand or claim described in the Request, stating the basis for its
denial of liability. If the Request does not state a precise amount of Loss,
demand or claim, within five (5) Business Days after it becomes aware of or is
able to determine the amount of the Loss, demand or claim, such Owner
Indemnified Party shall deliver to Operator, a written supplement to the
Request, setting forth in reasonable detail the amount of such Loss, demand or
claim and the manner in which it was determined, accompanied by any appropriate
supporting documentation. Operator shall respond to any such supplement to a
Request in the manner contemplated by clause (i), above. Any dispute as to the
amount or appropriateness of any indemnification requested hereunder shall be
resolved in the manner provided in Article 6 of this Agreement.
(b) Indemnification in Connection with Losses Incurred or Asserted in Legal
Proceedings. Promptly after receipt by an Owner Indemnified Party of notice of
the commencement of any Legal Proceeding which may result in a Loss to such
Owner Indemnified Party, but in any case within ten (10) Business Days thereof,
such Owner Indemnified Party will, if a claim in respect thereof is to be made
against Operator under this Appendix D, notify Operator in writing of the
commencement thereof. In case any such action is brought against any Owner
Indemnified Party, and it notifies Operator of the commencement thereof,
Operator will be entitled to participate therein, and, to the extent that it may
wish to assume the defense thereof, with counsel reasonably satisfactory to such
Owner Indemnified Party, it may elect by written notice delivered to the Owner
Indemnified Party promptly after receiving the aforesaid notice from such Owner
Indemnified Party, to assume the defense thereof, with counsel reasonably
satisfactory. to such Owner Indemnified Party; provided, however, that if the
defendants (including impleaded parties) in any such action include both such
Owner Indemnified Party and Operator and such Owner Indemnified Party shall have
reasonably concluded that- there may be legal defenses available to it and/or
other Owner Indemnified Parties which are different from or additional to' those
available to Operator, such Owner Indemnified Party or Owner Indemnified Parties
shall have the right to select separate counsel to assert such legal defenses
and to otherwise participate in the defense of such action on behalf of such
D-6
Owner Indemnified Party or Owner Indemnified Parties. Upon receipt of notice
from Operator to such Owner Indemnified Party of its election so to assume the
defense of such action and approval by the Owner Indemnified Party of counsel,
Operator will not be liable to such Owner Indemnified Party under this Appendix
D for any legal or other expenses subsequently incurred by such Owner
Indemnified Party in connection with the defense thereof unless (i) such Owner
Indemnified Party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that Operator shall not be liable for
the expenses of more than one separate counsel representing the Owner
Indemnified Parties who are parties to such action); (ii) Operator shall not
have employed counsel satisfactory to such Owner Indemnified Party to represent
such Owner Indemnified Party within a reasonable time after notice of
commencement of the action; or (iii) Operator has authorized the employment of
counsel for such Owner Indemnified Party at the expense of Operator; and except
that if clause (i) or (iii) is applicable, such liability shall be only in
respect of the counsel referred to in such clause (i) or (iii).
(c) Contribution. In order to provide for just and equitable contribution
in connection with any Legal Proceeding under circumstances in which the
indemnification provided for in this Appendix D is due in accordance with the
terms hereof but is for any reason held by a court to be unavailable from
Operator, on the grounds of policy or otherwise, Operator and the affected Owner
Indemnified Parties shall contribute to the aggregate Losses (including any
legal and other expenses reasonably incurred in connection with investigating or
defending any portions of the complaint to which Operator and one or more Owner
Indemnified Parties may be subject) in such proportion as the court or other
tribunal shall find equitable in light of the relative fault or responsibility
of Operator and the Owner Indemnified Parties. Any Owner Indemnified Party
entitled to contribution shall, promptly after receipt of notice of commencement
of a Legal Proceeding against such Owner Indemnified Party in respect of which a
claim for contribution may be made against Operator under this paragraph (c),
but in any case within ten (10) Business Days thereof, whether or not a request
for indemnification is to be made in respect of such Legal Proceeding, notify
Operator in writing of the commencement thereof. Each Owner Indemnified Party's
obligation to contribute pursuant to this paragraph (c) shall be several and not
joint.
(d) Progress Payments. Notwithstanding any other provision of this Section
D5.3, if an Owner Indemnified Party has delivered a Request with respect to a
Loss, claim or demand pursuant to Section D5.3(a) hereof or a notice with
respect to a Legal Proceeding pursuant to Section D5.3(b) hereof, Operator shall
pay promptly, but in any case within thirty (30) Business Days of the receipt of
a written request therefor, such amounts disbursed by such Owner Indemnified
Party in connection with such Loss, claim or demand or such Legal Proceeding as
are set forth in such written request; provided, however, that all amounts paid
by Operator pursuant to this Section D5.3(d) shall be credited against the full
amount of the Loss suffered by such Owner Indemnified Party as finally
determined pursuant hereto; provided, further, that if the aggregate amount paid
to any Owner Indemnified Party pursuant to this Section D5.3(d) shall ultimately
be determined to have been paid in respect of a claim for which such Owner
Indemnified Party was not legally entitled to be indemnified pursuant to this
Appendix D or in an amount which exceeded the full amount of the Loss ultimately
determined to be subject to this Appendix D, such Owner Indemnified Party shall,
promptly after receipt of a written request therefor from Operator, but in any
case within five (5) Business Days thereafter, repay to Operator such aggregate
amount or the portion thereof which exceeded the amount of the Loss, as the case
may be.
D-7
(e) Effect of Insurance Coverage, Claims and Payments. Notwithstanding any
other provision of this Appendix D, no payment required to be made to an Owner
Indemnified Party in respect of a Loss pursuant to this Section D5.3 shall be
delayed, reduced, offset or affected in any way by (i) the existence of any
insurance policy or policies which may cover or result in the payment of
insurance proceeds with respect to such Loss; (ii) the pendency of any claim
filed under any such insurance policy or asserted against any third party which
may result in the payment of insurance proceeds or other amounts in respect of
such Loss; or (iii) any other possibility or potential for payment in respect of
such Loss by any person other than Operator; provided, however; that (x) if any
amount is received by an Owner Indemnified Party in the form of payment of a
type contemplated by clause (i), (ii) or (iii) of this Section D5.3(e) prior to
the time that Operator is required to pay such amount pursuant to this Section
D5.3, the amount required to be paid pursuant to this Section D5.3 shall be
reduced to the extent of such amount theretofore actually received by such Owner
Indemnified Party and (y) if any amount is received by an Owner Indemnified
Party in the form of payment of -a type contemplated by clause (i), (ii) or
(iii) of this Section D5.3(e) subsequent to the time that a portion or the full
amount of a Loss has been paid to such Owner Indemnified Party by Operator with
the result that such Owner Indemnified Party has actually received an aggregate
amount in excess of the full amount of such Loss, such Owner Indemnified Party
shall, promptly after receipt of a written request therefor from Operator, but
in any case within five (5) Business Days thereafter, repay to Operator such
amount or the portion thereof which resulted in such Owner Indemnified Party
receiving an amount in excess of the full amount of such Loss, as the case may
he.
(f) Failure of an Owner Indemnified Party to Comply with the
Indemnification Procedures. Notwithstanding any other provision of this Appendix
D, failure of an Owner Indemnified Party to comply with the foregoing
indemnification procedures, including but not limited to the time periods set
forth for compliance herein, shall relieve Operator of its obligations to make
any payment until such failure to comply by an Owner Indemnified Party has been
remedied to the reasonable satisfaction of Operator; provided, however, that the
failure by an Owner Indemnified Party to take an action within a specified time
period shall only toll Operator's obligation to make payments hereunder during
such failure to comply and shall not prevent such Owner Indemnified Party from
perfecting a valid and enforceable claim to indemnification once such action has
been taken.
D6. Insurance in Respect of Fuel
D6.1 Operator to Maintain Insurance Coverage.
(a) Operator will, for the mutual benefit of Operator and the Owner
Indemnified Parties, obtain and maintain during the entire Term:
(i) Policies of insurance, with respect to the Fuel, insuring the
Fuel against loss or damage by fire, lightning and such other
perils as are included in a standard "all-risk" policy,
including, without limitation, flood and earth movement, extra
expense, riot and civil commotion, vandalism, malicious mischief,
D-8
burglary and theft. Such insurance shall be in an amount equal to
the full replacement cost of the Fuel. The Owner Indemnified
Parties shall be included as additional insureds and shall, where
applicable, be included as loss payees;
(ii) Comprehensive or Commercial General Liability insurance,
including broad form property damage, blanket contractual, acts
of contractors/subcontractors, sudden and accidental pollution
and personal injury coverages and containing minimum limits per
occurrence of $100,000,000 and $200,000,000 in the aggregate for
any policy year;
(iii) Insurance covering the replacement cost of any Fuel which may be
the subject of a Fuel Loss or the cost of purchasing power in
substitution for the power which would have been generated
through the use of such Fuel, whichever is greater;
(iv) Worker's compensation insurance with respect to any employees of
Operator, as required by any governmental authority or legal
requirement and employer's liability coverage with limits of
$100,000,000;
(v) To the extent that such coverage is not otherwise provided by
insurance maintained by Operator, during any period of repair or
restoration of the Plant or any other location at which the Fuel
is regularly stored or used, builder's "all risk" insurance in an
amount equal to not less than the full insurable value of the
Fuel insuring against such risks (including, without limitation,
fire and extended coverage) as Owner may request, in form and
substance acceptable to Owner, and, in addition, provision shall
be made by Operator to require any contractor performing such
repair or restoration to maintain comparable coverage;
(vi) If it is determined by an environmental state and/or federal
agency that a site must be cleaned up Operator and/or any Owner
Indemnified Party with an estimated aggregate cost in excess of
$10,000,000, Clean-up Cost Cap (CCC) coverage providing
catastrophic protection for cost overruns on clean-up cost
estimates associated with any Fuel-Related Activity and resulting
known liabilities in any determined Area of Concern as well as
new found conditions within the Areas of Concern with a
deductible not in excess of 10% of such cost estimates;
(vii) Pollution Legal Liability (PLL), if available from companies
with a claims paying ability rating of "A" or better by Best's
Rating Guide, covering bodily injury, property damage and
clean-up costs arising from new conditions arising from future
spills/releases from any Fuel-Related Activity; and
(viii) Such other insurance as may from time to time be reasonably
required by Owner in order to protect the interests of the Owner
Indemnified Parties.
(b) Self-Insurance, Etc. -Notwithstanding the requirements of Section
D6.1(a) hereof, it is agreed that (i) Operator may self-insure any of the
above coverages to the extent that it is doing so on the Effective Date or
to such greater extent as may be approved in writing by Owner and, with
such terms and in such amounts, as a prudent company with the same debt
D-9
rating as KeySpan Corporation would maintain with respect to similar
properties and a similar business, and, in any event, will maintain
insurance on all its property of a character usually insured by a company
engaged in the same or a similar business similarly situated against loss
or damage of the kinds and in the amounts customarily insured against by
such companies, and carry or cause to be carried, with such insurers in
customary amounts, such other insurance, including public liability
insurance as is usually carried by companies engaged in the same or a
similar business similarly situated; provided, however, that if at any time
KeySpan Corporation's debt ratings fall below minimum investment grade as
rated by both Standard and Poors and by Moody's, Operator shall not be
permitted to self-insure pursuant to this Section D6.1(b) and shall fully
comply with the requirements of Section D6.1(a) hereof within ninety (90)
days, except to the extent that Owner has otherwise agreed in writing.
D6.2 Requirements for All Policies. All policies of insurance (the
"Policies") required pursuant to this Section D6: (i) if they cover property
damage to any Fuel, shall contain a "Replacement Cost Endorsement" and shall
have a deductible no greater than $3,000,000 or twenty percent (20%) of such
replacement cost, whichever is less unless otherwise agreed by Owner; (ii) shall
be issued by companies with a claims paying ability rating of "A" or better by
Best's Rating Guide; (iii) to the extent that it covers loss of, or damage to,
Fuel, shall name Owner, as its interest may appear, as a loss payee or the
equivalent, naming Owner as the person to which (or at the direction of which)
all payments made by such insurance company shall be paid; (iv) shall contain a
waiver of subrogation against Owner; (vi) shall be maintained throughout the
Term without additional cost to Owner; (vii) shall contain such provisions as
Owner deems reasonably necessary to protect the interests of the Owner
Indemnified Parties, including, without limitation, endorsements providing that
neither Operator, any Owner Indemnified Party nor any other party shall be a
co-insurer under said Policies, and that the Owner Indemnified Parties shall
receive at least thirty (30) days prior written notice of any modification,
reduction or cancellation; and (viii) shall he reasonably satisfactory in form
and substance to Owner and shall be approved by Owner as to, amounts, form, risk
coverage, deductibles, loss payees and insureds.
D6.3 Payment of Insurance Premiums. To the extent that Operator does not
self-insure pursuant to Section D6.1(b) hereof, Operator shall pay the premiums
for such Policies (the "Insurance Premiums") as the same become due and payable
and shall furnish to Owner evidence of the renewal of each of the Policies with
receipts for the payment of the Insurance Premiums or other evidence of such
payment reasonably satisfactory to Owner. If Operator does not furnish such
evidence and receipts at least thirty (30) days subsequent to the expiration of
any expiring Policy, then Owner may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums therefor, and Operator
agrees to reimburse Owner for the cost of such Insurance Premiums promptly on
demand. Within thirty (30) days after request by Owner, Operator shall obtain
such increases in the amounts of coverage required hereunder as may be
reasonably requested by Owner, taking into consideration changes in the value of
money over time, changes in liability laws, changes in prudent customs and
practices. The payment by Operator of Insurance Premiums pursuant to this
Section D6.3 shall not in any way reduce or offset the amount of any payment
which Operator is required to make in respect of any Loss pursuant to Section D5
hereof.
D-10
APPENDIX "E"
------------
PROVISIONS REQUIRED BY STATE LAW
--------------------------------
NON-ASSIGNMENT CLAUSE. In accordance with Section 138 of the State Finance Law,
this Agreement may not be assigned by the Operator or its right, title or
interest therein assigned, transferred, conveyed, sublet or otherwise disposed
of without the previous consent, in writing, of Owner and any attempts to assign
this Agreement without the Owner's written consent are null and void. The
Operator may, however, assign its right to receive payment without Owner's prior
written consent unless this Agreement concerns Certificates of Participation
pursuant to Article 5-A of the State Finance Law.
COMPTROLLER'S APPROVAL. In accordance with Section 112 of the New York State
Finance Law (the "State Finance Law"), this Agreement shall not be valid,
effective or binding upon Owner until it has been approved by the State
Comptroller and filed in his office.
WORKER'S COMPENSATION BENEFITS. In accordance with Section 142 of the State
Finance Law, this Agreement shall be void and of no force and effect unless the
Operator provides and maintains coverage during the life of this Agreement for
the benefit of such employees as are required to be covered by the provisions of
the Workers' Compensation Law.
NON-DISCRIMINATION REQUIREMENTS. In accordance with Article 15 of the Executive
Law (also known as the Human Rights Law) and all other New York State and
Federal statutory and constitutional non-discrimination provisions, the Operator
shall not discriminate against any employee or applicant for employment because
of race, creed, color, sex, national origin, age, disability, marital status,
sexual orientation, genetic predisposition or carrier status. Furthermore, in
accordance with Article 220-e of the New York Labor Law, and to the extent that
this Agreement shall be performed within the State of New York, the Operator
agrees that neither it nor its subcontractors shall, by reason of race, creed,
color, disability, sex, national origin, sexual orientation, genetic
predisposition or carrier status; (a) discriminate in hiring against any New
York State citizen who is qualified and available to perform the work; or (b)
discriminate against or intimidate any employee for the performance of work
under this Agreement.
WAGE AND HOURS PROVISIONS. If this Agreement is a public work contract covered
by Article 8 of the Labor Law or a building service contract covered by Article
9 thereof, neither the Operator's employees nor the employees of its
subcontractors may be required or permitted to work more than the number of
hours or days stated in said statutes, except as otherwise provided in the Labor
Law and as set forth in prevailing wage and supplement schedules issued by the
State Labor Department. Furthermore, the Operator and its subcontractors must
pay at least the prevailing wage rate and pay or provide the prevailing
supplements, including the premium rates for overtime pay, as determined by the
State Labor Department in accordance with the Labor Law.
E-1
NON-COLLUSIVE BIDDING CERTIFICATION. In accordance with Section 2878 of the
Public Authorities Law, if this Agreement was awarded based upon the submission
of bids, the Operator warrants, under penalty of perjury, that its bid was
arrived at independently and without collusion aimed at restricting competition.
The Operator further warrants that, at the time the Operator submitted its bid,
an authorized and responsible person executed and delivered to the Owner a
non-collusive bidding certification on the the Manager's behalf.
INTERNATIONAL BOYCOTT PROHIBITION. In accordance with Section 220-f of the Labor
Law and Section 139-h of the State Finance Law, if this Agreement exceeds
$5,000, the Operator agrees, as a material condition of this Agreement, that
neither the Operator nor any substantially owned or affiliated person, firm,
partnership or corporation has participated, is participating, or shall
participate in an international boycott in violation of the federal Export
Administration Act of 1979 (50 USC app. Sections 2401 et seq.) or regulations
thereunder. If the Manager, or any of the aforesaid affiliates of the Manager,
is convicted or is otherwise found to have violated said laws or regulations
upon the final determination of the United States Commerce Department or any
other appropriate agency of the United States subsequent to this Agreement's
execution, such contract, amendment or modification thereto shall be rendered
forfeit and void. The Operator shall so notify the State Comptroller within five
(5) business days of such conviction, determination or disposition of appeal
(2NYCRR 105.4).
SET-OFF RIGHTS. Owner shall have all of its common law, equitable and statutory
rights of set-off. These rights shall include, but not be limited to, Owner's
option to withhold for the purposes of set-off any moneys due to the Operator
under this Agreement up to any amounts due and owing to Owner with regard to
this Agreement, any other contract with Owner, including any contract for a term
commencing prior to the term of this Agreement, plus any amounts due and owing
to Owner for any other reason including, without limitation, tax delinquencies,
fee delinquencies or monetary penalties relative thereto. Owner shall exercise
its set-off rights in accordance with normal State practices including, in cases
of set-off pursuant to an audit, the finalization of such audit by Owner, its
representatives, or the State Comptroller.
RECORDS. The Operator shall establish and maintain complete and accurate books,
records, documents, accounts and other evidence directly pertinent to
performance under this Agreement (hereinafter, collectively, "the Records"). The
Records must be kept for the balance of the calendar year in which they were
made and for six (6) additional years thereafter. The State Comptroller, the
Attorney General and any other person or entity authorized to conduct an
examination, as well as the agency or agencies involved in this Agreement, shall
have access to the Records during normal business hours at an office of the
Operator within the State of New York or, if no such office is available, at a
mutually agreeable and reasonable venue within the State, for the term specified
above for the purposes of inspection, auditing and copying. Owner shall take
reasonable steps to protect from public disclosure any of the Records which are
exempt from disclosure under Section 87 of the Public Officers Law (the
"Statute") provided that: (i) the Operator shall timely inform the Owner in
writing, that said records should not be disclosed; and (ii) said records shall
be sufficiently identified; and (iii) designation of said records as exempt
under the Statute is reasonable. Nothing contained herein shall diminish, or in
any way adversely affect, the State's right to discovery in any pending or
future litigation.
E-2
EQUAL EMPLOYMENT FOR MINORITIES AND WOMEN. In accordance with Section 312 of the
New York Executive Law: (i) the Operator shall not discriminate against
employees or applicants for employment because of race, creed, color, national
origin, sex, age, disability, marital status, sexual orientation, genetic
predisposition or carrier status and shall undertake or continue existing
programs of affirmative action to ensure that minority group members and women
are afforded equal employment opportunities without discrimination ("affirmative
action" shall mean recruitment, employment, job assignment, promotion,
upgradings, demotion, transfer, layoff, or termination and rates of pay or other
forms of compensation); (ii) at the request of the Owner, the Operator shall
request each employment agency, labor union, or authorized representative of
workers with which it has a collective bargaining or other agreement or
understanding, to furnish a written statement that such employment agency, labor
union or representative will not discriminate on the basis of race, creed,
color, national origin, sex, age, disability, marital status, sexual
orientation, genetic predisposition or carrier status and that such union or
representative will affirmatively cooperate in the implementation of the
Manager's obligations herein; and (iii) the Operator shall state, in all
solicitations or advertisements for employees, that, in the performance of this
Agreement, all qualified applicants will be afforded equal employment
opportunities without discrimination because of race, creed, color, national
origin, sex, age, disability, marital status, sexual orientation, genetic
predisposition or carrier status. The Operator shall include the provisions of
(i), (ii) and (iii) above, in every subcontract over twenty-five thousand
dollars ($25,000.00) for the construction, demolition, replacement, major
repair, renovation, planning or design of real property and improvements thereon
(the "Work") except where the Work is for the beneficial use of the Manager.
CONFLICTING TERMS. In the event of a conflict between the terms of this
Agreement (including any and all attachments thereto and amendments thereof) and
the terms of this Appendix E, the terms of this Appendix E shall control.
GOVERNING LAW. This Agreement shall be governed by the laws of the State of New
York except where the Federal supremacy clause requires otherwise.
LATE PAYMENT. Timeliness of payment and any interest to be paid to the Operator
for late payment shall be governed by Section 2880 of the Public Authorities Law
and the guidelines adopted by Owner thereto.
PROHIBITION ON PURCHASE OF TROPICAL HARDWOODS. The Operator certifies and
warrants that all wood products to be used under this contract award will be in
accordance with, but not limited to, the specifications and provisions of State
Finance Law ss.165 (Use of Tropical Hardwoods) which prohibits purchase and use
of tropical hardwoods, unless specifically exempted, by the State or any
governmental agency or political subdivision or public benefit corporation.
Qualification for an exemption under this law will be the responsibility of the
Operator to establish to meet with the approval of the State.
In addition, when any portion of this Agreement involving the use of woods,
whether supply or installation, is to be performed by any subcontractor, the
Operator will indicate and certify in the submitted bid proposal that the
subcontractor has been informed and is in compliance with specifications and
provisions regarding use of tropical hardwoods as detailed in ss.165 State
E-3
Finance Law. Any such use must meet with the approval of the State; otherwise,
the bid may not be considered responsive. Under bidder certifications, proof of
qualification for exemption will be the responsibility of the Operator to meet
with the approval of the State.
MACBRIDE FAIR EMPLOYMENT PRINCIPLES. In accordance with the MacBride Fair
Employment Principles (Chapter 807 of the New York Laws of 1992), the Operator
hereby stipulates that the Operator either (i) has no business operations in
Northern Ireland, or (ii) shall take lawful steps in good faith to conduct any
business operations in Northern Ireland in accordance with the MacBride Fair
Employment Principles (as described in Article 165 of, the New York State
Finance Law), and shall permit independent monitoring of compliance with such
principles.
OMNIBUS PROCUREMENT ACT OF 1992. It is the policy of New York State to maximize
opportunities for the participation of New York State business enterprises,
including minority and women-owned business enterprises as bidders,
subcontractors and suppliers on its procurement contracts. Information on the
availability of New York State subcontractors and suppliers is available from:
NYS Department of Economic Development
Division for Small Business
One Commerce Plaza
Albany, New York 12245.
A directory of certified minority and women-owned business enterprises
is available from:
NYS Department of Economic Development
Minority and Women's Business Development Division
One Commerce Plaza
Albany, New York 12245
The Omnibus Procurement Act of 1992 requires that by signing this Agreement, the
Operator certifies that:
(a) The Operator has made commercially reasonable efforts to encourage the
participation of New York State Business Enterprises as suppliers and
subcontractors, including certified minority and woman-owned business
enterprises, on this project, and has retained the documentation of these
efforts to be provided upon request to the State;
(b) The Operator has complied with the Federal Equal Opportunity Act of 1972
(P.L. 92-261), as amended; and
(c) The Operator agrees to make commercially reasonable efforts to provide
notification to New York State residents of employment opportunities on
this Project through listing any such positions with the Job Service
Division of the New York State Department of Labor, or providing such
E-4
notification in such manner as is consistent with existing collective
bargaining contracts or agreements. The Operator agrees to document these
efforts and to provide said documentation to the State upon request.
(d) The Operator acknowledges that the State may seek to obtain offset credits
from foreign countries as a result of this Agreement and agrees to
cooperate with the State in these efforts.
RECIPROCITY AND SANCTIONS PROVISIONS. The Operator is hereby notified that if
its principal place of business is located in a state that penalizes New York
State vendors, and if the goods or services it offers are substantially produced
or performed outside New York State, the Omnibus Procurement Act 1994 amendments
(Chapter 684, Laws of 1994) require that the Operator be denied contracts which
it would otherwise obtain.
PURCHASES OF APPAREL. In accordance with State Finance Law 162 (4-a), Owner
shall not purchase any apparel from any contractor unable or unwilling to
certify that: (i) such apparel was manufactured in compliance with all
applicable labor and occupational safety laws, including, but not limited to,
child labor laws, wage and hours laws and workplace safety laws, and (ii) the
Operator will supply, prior to or on the Contract Date, the names and addresses
of each subcontractor and a list of all manufacturing plants to be utilized by
the Manager.
CERTIFICATION OF COMPLIANCE WITH EXECUTIVE ORDER 127. The Operator certifies
that all information provided to Owner with respect to Executive Order Number
127 is complete, true, and accurate.
OPTIONAL TERMINATION BY THE AUTHORITY. Owner reserves the right to terminate
this Agreement in the event it is found that the certification filed by the
Operator in accordance with New York State Executive Order Number 127, signed by
Governor Pataki on June 16, 2003, was intentionally false or intentionally
incomplete. Upon such finding, Owner may exercise its termination right by
providing written notification to the Operator in accordance with the written
notification terms of this Agreement.
CONTINGENT FEES. The Operator hereby certifies and agrees that (a) the Operator
has not employed or retained and will not employ or retain any individual or
entity for the purpose of soliciting or securing any Owner contract or any
amendment or modification thereto pursuant to any agreement or understanding for
receipt of any form of compensation which in whole or in part is contingent or
dependent upon the award of any such contract or any amendment or modification
thereto; and (b) the Operator will not seek or be paid an additional fee that is
contingent or dependent upon the completion of a transaction by Owner.
E-5
Exhibit D
---------
Form of Power Supply Agreement Amendment
----------------------------------------
D-1
FINAL COPY
Exhibit D to Second Option and Purchase and Sale Agreement
[THIRD]
AMENDMENT
Dated as of [_________]
to
POWER SUPPLY AGREEMENT
between
LONG ISLAND LIGHTING COMPANY
and
KEYSPAN GENERATION LLC
Dated as of
June 26, 1997
This [THIRD] AMENDMENT (the "Amendment") is made and entered into as of
[___________], by and between LONG ISLAND LIGHTING COMPANY d/b/a LIPA, a New
York corporation ("LIPA"), and KEYSPAN GENERATION LLC, a New York limited
liability company ("GENCO"), to the Power Supply Agreement, by and between LIPA
and GENCO, dated as of June 26, 1997 (as amended, supplemented or otherwise
modified from time to time, the "PSA").
RECITALS
WHEREAS, LIPA and GENCO are parties to Second Option and Purchase and Sale
Agreement, dated as of March 22, 2007 (the "Second Option Agreement"), pursuant
to which LIPA was granted an option to purchase the Shoreham generating facility
and certain related assets (the "Shoreham Plant") and/or the Wading River
generating facility and certain related assets (the "Wading River Plant") on the
terms and subject to the conditions set forth therein;
WHEREAS, LIPA and GENCO are also parties to an Option and Purchase and Sale
Agreement, dated as of January 1, 2006 (the "First Option Agreement"), pursuant
to which LIPA was granted an option to purchase the Far Rockaway generating
facility and certain related assets (the "Far Rockaway Plant") and/or the E.F.
Barrett generating facility and certain related assets (the "E.F. Barrett
Plant") on the terms and conditions set forth therein; and
WHEREAS, LIPA has exercised its option under the Second Option Agreement to
purchase [the Shoreham Plant] [and] [the Wading River Plant]; and
WHEREAS, as a condition to the purchase of the Purchased Assets under the
Second Option Agreement, LIPA and GENCO are entering into this Amendment to the
PSA to reflect the purchase of the Purchased Assets.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used in this Amendment and
not otherwise defined shall have the meanings assigned to them in the PSA.
ARTICLE 2
AMENDMENTS TO PSA
Section 2.1. Amendment to Article 1 of the PSA. (a) Article 1.1 of the PSA
is hereby amended by inserting the following new definitions in the appropriate
alphabetical order:
1
"Second Option Agreement" means the Second Option and Purchase and Sale
Agreement, dated as of March 22, 2007 between LIPA and GENCO, as amended,
supplemented or otherwise modified from time to time.
"Shoreham Plant" means the Shoreham combustion turbine Units Nos. 1 and 2,
consisting of a 50 MW GE Frame 7 turbine and a 20 MW Pratt & Whitney
turbine, respectively, together with the related plant site and certain
adjacent real estate parcels, as more fully described in the Option
Agreement.
"[Third] Amendment" means the Amendment to this Agreement, dated as of
[________].
"Wading River Plant" means the Wading River gas turbine Units Nos. 1, 2 and
3, each consisting of an 80 MW GE Frame 7EA turbine, together with the
related plant site and certain adjacent real estate parcels, as more fully
described in the Second Option Agreement.
(b) If definitions have previously been added to Article 1 of the PSA for
"LIPA Generating Facilities" and "Step-Up Percentage," such definitions are
amended to read as set forth below. If such definitions have not previously been
added to the PSA, Article 1.1 of the PSA is amended by inserting the following
new definitions in the appropriate alphabetical order:
"LIPA Generating Facilities" means the electric generating facilities and
appurtenant facilities purchased by LIPA from GENCO, which as of the
effective date of the [Third] Amendment [is/are] [the E.F. Barrett Plant]
[,] [the ICUs] (,) [the Far Rockaway Plant] [,] [the Shoreham Plant] [,
and] [the Wading River Plant].
"Step-Up Percentage" means the step-up in the tax basis of each Generating
Facility's tax basis expressed as a percentage of the total step-up in the
tax bases of Generating Facilities that were recorded as a result of the
sale of the Genco assets to KeySpan. For the [E.F. Barrett Plant the
percentage shall be 10.87%;] [for the Far Rockaway Plant, the percentage
shall be 4.05%;] [for the ICUs the percentage shall be 2.43%;][for the
Shoreham Plant, the percentage shall be 1.19%,] [and for the Wading River
Plant, the percentage shall be 16.60%.]"
(c) The definitions of "Generating Facilities" and "Generating Facility
Sites" in Article 1 of the PSA are hereby amended by deleting such definitions
in their entirety and inserting in lieu thereof the following new definitions:
"Generating Facilities" means the electric generating facilities owned by
GENCO as of March 19, 1997 (but excluding the LIPA Generating Facilities),
including, but not limited to: (a) all systems, structures, equipment and
appurtenances associated with each Generating Facility's operation and
forming a part thereof; (b) permanent administrative offices and building
structures housing Generating Facility equipment; site improvements such as
roads, drainage, fencing and landscaping; and (c) structures, pipelines and
2
equipment for: (i) the delivery of Fuel; (ii) the transport of water, waste
water and other waste disposal; and (iii) other materials, supplies and
commodities required for the Services. A list of GENCO's generating units
as of the effective date of the [Third] Amendment is contained in Appendix
C.
"Generating Facility Sites" means each parcel of land upon which each
existing Generating Facility is situated, as well as the land contiguous
thereto, owned by Genco as of March 19, 1997 (but excluding the LIPA
Generating Facilities owned by LIPA as of the effective date of the [Third]
Amendment).
Section 2.2. Amendment to Section 2.6 of the PSA. Section 2.6 of the PSA is
hereby amended by deleting the first sentence thereof and substituting in lieu
thereof the following:
"GENCO will use reasonable efforts, in accordance with Prudent Utility
Practice to maintain a DMNC level for the Generating Facilities of [3973 MW
minus the following amounts for each generating facility which is a LIPA
Generating Facility as of the Closing date specified in the Second Option
Agreement: Far Rockaway Plant--110 MW; E.F. Barrett Plant--386 MW;
ICUs--281MW; Shoreham Plant--67 MW; and Wading River Plant--242 MW].
Section 2.3 Amendment to Section 3.1.1 of the PSA. Unless previously
amended to reflect a transfer of Generating Facilities to LIPA under the First
Option Agreement, Section 3.1.1 of the PSA is hereby amended as follows:
(a) by deleting the second sentence thereof and substituting in lieu thereof
the following:
"This analysis would evaluate all available resource options, including the
LIPA Generating Facilities, to meet the electric energy requirements of
LIPA's Electricity Customers."
(b) by deleting the fourth sentence thereof and substituting in lieu thereof
the following:
"The IERP analysis is intended to be performed to determine the optimum mix
of the LIPA Generating Facilities, the Generating Facilities, and purchased
power from other sources in an effort to provide the least cost mix of
electricity resources including demand side management (DSM) options for
LIPA's Electricity Customers while observing established reliability
criteria."
Section 2.4. Amendment to Section 9.1.1 of the PSA. Unless previously
amended to reflect a transfer of Generating Facilities to LIPA under the First
Option Agreement, Section 9.1.1 of the PSA is hereby amended by adding the
following new sentence at the end thereof. If such sentence has previously been
added to the PSA, it shall be amended to read as follows:
3
"In addition to the foregoing, on or before [_________], GENCO shall
prepare and submit to LIPA for review and approval a revised Five Year
Budget Plan, which shall contain fixed and variable costs developed by
GENCO in calendar year 2008 to account for the fact that the LIPA
Generating Facilities owned by LIPA as of the effective date of the [Third]
Amendment are no longer Generating Facilities."
Section 2.5. Amendment to Section 9.1.2 of the PSA. Unless previously
amended to reflect a transfer of Generating Facilities to LIPA under the First
Option Agreement, Section 9.1.2 of the PSA is hereby amended by adding the
following new sentence after the first sentence thereof. If such sentence has
previously been added to the PSA, it shall be amended to read as follows:
"On or before __________, GENCO shall prepare and submit to LIPA a revised
rolling Five Year Capital Improvement Budget showing incremental capital
expenditures and associated rate adjustments for the Generating Facilities
excluding the LIPA Generating Facilities as of the effective date of the
[Third] Amendment for LIPA's review and approval."
Section 2.6. Amendment to Section 9.2 of the PSA. Unless previously amended
to reflect a transfer of Generating Facilities to LIPA under the First Option
Agreement, Section 9.2 of the PSA is hereby amended by adding the following new
sentence at the end thereof:
"The parties shall establish mutually agreed upon timelines following
LIPA's receipt of the revised rolling Five Year Capital Improvement Budget
for review and revision of the revised Five Year Capital Improvement Budget
pursuant to the procedures set forth above."
Section 2.7. Amendment to Article 11.1 of the PSA. Section 11.1 of the PSA
is hereby amended by deleting the LIPA Generating Facilities and associated
capacity values from the Capacity Ramp Down schedule and by amending the first
sentence of the second paragraph thereof to read as follows:
"The Ramp Down will be an aggregate potential reduction amount
of no greater than 1500 MW, less the amount of generating
capacity in the LIPA Generating Facilities."
Section 2.8. Amendment to Appendix A of the PSA.
(a) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA under the First Option Agreement, Appendix A to the PSA is
hereby amended by inserting the following new paragraph (H) in Section I
thereof:
"Notwithstanding the foregoing Section I, on and after the effective date
of the [Third] Amendment, the Capacity Charge for the Generating Facilities
(excluding the LIPA Generating Facilities) shall be re-determined by
removing the costs being recovered through the Capacity Charge in effect
for that Contract Year for the LIPA Generating Facilities. The costs to be
removed will include the: return on rate base calculated at the rate of
7.17% for each of the LIPA Generating Facilities individually less its
share of the $7.120 million revenue credit; depreciation charges; property
4
taxes specifically identified as attributable to the appropriate LIPA
Generating Facilities; state and federal income taxes (including the effect
of the costs of removal); and an allocable share of operations and
maintenance expenses (net of contractual synergy savings). The allocable
share of operations and maintenance expenses to be attributable to each of
the LIPA Generating Facility shall be determined by multiplying the Total
Fixed O&M Cost Component by the total number of full time equivalent
employees dedicated to the LIPA Generating Facility divided by the total
number of full time equivalent employees working at each of the GENCO
Generating Facilities covered under the PSA ("Allocated Fixed O&M Cost").
The Total Fixed O&M Cost Component shall be determined by subtracting from
the sum of the Capacity Charge and the $7.120 million revenue credit, the
following components: property taxes, depreciation, return on rate base,
state and federal income taxes (including the effects of cost of removal),
common assets recovery charge and the amortization of security costs.
The share of the revenue credit assignable to each of the LIPA Generating
Facilities shall be determined by multiplying $7.120 million by the amount
of the Step-Up Percentage for the Generating Facility."
(b) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA under the First Option Agreement, Appendix A to the PSA is
hereby amended by inserting the following new paragraph in Section III(B)
thereof relating to the Tax True-Up. If such paragraph has previously been added
to the PSA, it is hereby amended to read as follows:
"Notwithstanding the foregoing, on and after the effective date of the
[Third] Amendment, the base amount of property taxes shall be revised by
removing the base amount of property taxes attributed to the LIPA
Generating Facilities that is included in the base amount of property taxes
at the time of Closing (as defined in the Second Option Agreement)."
(c) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA under the First Option Agreement, Appendix A to the PSA is
hereby amended by inserting the following new paragraph in Section III(C) of the
PSA relating to the Tax True-Up. If such paragraph has previously been added to
the PSA, it is hereby amended to read as follows:
"(4) On and after the effective date of the [Third] Amendment, the Budgeted
Incremental Depreciation Expense and the Budgeted Incremental Net Utility
Plant shall be revised by removing the Budgeted Incremental Depreciation
Expenses and Budgeted Incremental Net Utility Plant attributed to the LIPA
Generating Facilities."
(d) Unless previously amended to reflect a transfer of Generating
Facilities to LIPA under the First Option Agreement, Appendix A to the PSA is
hereby amended by deleting Section IV thereof relating to Reopeners.
5
(e) Section V of Appendix A to the PSA is hereby amended as of the
effective date of the [Third] Amendment by restatement of (i) the amount of the
Incremental Synergy Savings as set forth in Section V.J.; (ii) the base year
labor costs (production) and base year benefit costs (production) as set forth
in the Labor Cost Index Adjustment (Production) and Benefit Cost Index
Adjustment (Production) as set forth in Section V.K., and (iii) base year labor
costs (support) and base year benefit costs (support) as set forth in the Labor
Cost Index Adjustment (Support) and Benefit Cost Index Adjustment (Support) in
Section V.L., to reflect removal of the LIPA Generating Facilities.
Section 2.9. Amendment to Appendix B of the PSA. Appendix B of the PSA is
hereby amended as of the effective date of the [Third] Amendment by deleting
from Table 1 thereof each of the LIPA Generating Facilities and the amounts
associated with each of the LIPA Generating Facilities.
Section 2.10. Amendment to Appendix C of the PSA. Appendix C of the PSA is
hereby amended as of the effective date of the [Third] Amendment by deleting the
LIPA Generating Facilities and their associated name plate ratings from the list
of Generating Units.
Section 2.11. Amendment to Appendix E of the PSA. Appendix E of the PSA is
hereby amended as of the effective date of the [Third] Amendment by deleting the
LIPA Generating Facilities from the tables.
Section 2.12. Amendment to Appendix F of the PSA. Schedule F to the PSA is
hereby amended by inserting the following new paragraph (VI). If such paragraph
has previously been added to the PSA, it is hereby amended to read as follows:
"Upon the effective date of the [Third] Amendment, the original targets for
(i) the DMNC Incentive/Disincentive and (ii) the Availability
Incentive/Disincentive, shall be adjusted to reflect the targets for Genco
Generating Facilities as shown in the graph below. The incentive maximums
shall be reduced by __% [insert: 1.7% if only Shoreham Plant purchased;
6.1% if only Wading River Plant purchased; 7.8% if both Shoreham Plant and
Wading River Plant are purchased]"
- ------------------------ -------------------------------------- -------------------------------------- ----------------------
[If only Shoreham [If only Wading River [If both Shoreham
Plant purchased] Plant purchased] Plant and Wading
River Plant
purchased]
- ------------------------ -------------------------------------- -------------------------------------- ----------------------
Availability 94.1% 93.9% 93.9%
- ------------------------ -------------------------------------- -------------------------------------- ----------------------
DMNC 3906 MW 3731 MW 3664 MW
- ------------------------ -------------------------------------- -------------------------------------- ----------------------
6
ARTICLE 3
MISCELLANEOUS
Section 3.1. Effective Date. This Amendment shall be effective upon
satisfaction of each of the following conditions (the date upon which all such
conditions are satisfied, the "Effective Date"): (i) the consummation of the
sale and purchase of the Purchased Assets pursuant to the Second Option
Agreement; (ii) approval of this Amendment from the New York State Attorney
General (as to form); (iii) approval (satisfactory to LIPA and Genco) of this
Amendment from the New York State Comptroller; and (iv) the Federal Energy
Regulatory Commission shall have permitted the Amendment to become effective.
The conditions set forth in items (ii), (iii) and (iv) above are hereinafter
referred to as the "Approvals." Upon receipt of all the Approvals, LIPA shall
provide Genco with a copy of each such Approval.
Section 3.2. Affirmation of Representations. The representations and
warranties of GENCO set forth in Section 21.9.1 of the PSA shall be true and
correct in all material respects as of the Effective Date. The representations
and warranties of LIPA set forth in Section 21.9.2 of the PSA shall be true and
correct in all material respects as of the Effective Date.
Section 3.3. Miscellaneous.
(a) This Amendment provides for certain values used to calculate the rates
and charges payable by LIPA to be determined by removing from the values in the
PSA in effect prior to the Effective Date of this Amendment certain amounts
associated with the LIPA Generating Facilities. The exact value to be used is
subject to (i) a final determination of whether the Shoreham Plant, the Wading
River Plant, or both, have become LIPA Generating Facilities, and (ii)
identification of values properly attributable to the LIPA Generating
Facilities. The final values to be used in calculating such rates and charges
after the Effective Date shall be determined by mutual agreement of the parties
no later than 30 days after the Effective Date.
(b) Except as amended hereby, the PSA shall remain in full force and
effect. The parties shall cooperate in preparation of an amended and restated
PSA which incorporates the provisions of the original PSA and all amendments
thereto, including this Amendment to be effective as of the Effective Date.
(c) This Amendment shall be governed, including, without limitation, as to
validity, interpretation and effect, by the Laws of the State of New York.
(d) This Amendment may be executed in two or more counterparts which
together shall constitute a single agreement.
7
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officers or representatives as of the
date first above written.
LONG ISLAND LIGHTING COMPANY
d/b/a LIPA
By /s/ ____________________
Name: [_________________]
Title: [_________________]
KEYSPAN GENERATION LLC
By /s/ ____________________
Name: [_________________]
Title: [_________________]
8
Exhibit E
---------
Form of Energy Management Agreement Amendment
---------------------------------------------
E-1
FINAL COPY
Exhibit E to Second Option and Purchase and Sale Agreement
FOURTH AMENDMENT
Dated as of [_______________________]
to
ENERGY MANAGEMENT AGREEMENT
between
LONG ISLAND LIGHTING COMPANY
and
KEYSPAN ENERGY TRADING SERVICES LLC
Dated as of
June 26, 1997
This FOURTH AMENDMENT (the "Amendment") is made and entered into as of
[___________], by and between LONG ISLAND LIGHTING COMPANY d/b/a LIPA, a New
York corporation ("LIPA"), and KEYSPAN ENERGY TRADING SERVICES LLC, a New York
limited liability company formerly known as MarketSpan Trading Services LLC (the
"Energy Manager"), to the Energy Management Agreement, by and between LIPA and
the Energy Manager, dated as of June 26, 1997, as previously amended as of March
29, 2002 and as of December [__], 2005 (the "EMA").
RECITALS
WHEREAS, Energy Manager is responsible under the EMA, inter alia, for fuel
procurement, delivery, storage, and management ("Fuel Management Services") for
the GENCO Generating Facilities to meet the energy generation requirements of
the Electricity Customers;
WHEREAS, LIPA and KeySpan Generation LLC are parties to a Second Option and
Purchase and Sale Agreement, dated as of March 22, 2007 (the "Second Option
Agreement"), pursuant to which LIPA was granted an option to purchase the
Shoreham Plant (as defined in the Second Option Agreement) and/or the Wading
River Plant (as defined in the Second Option Agreement) and certain related
assets on the terms and subject to the conditions set forth therein;
WHEREAS, on [_____] LIPA exercised its option under the Second Option
Agreement to purchase [the Shoreham Plant] [and] [the Wading River Plant] as
specified in the Option Notice (as defined in the Second Option Agreement)
delivered by LIPA under the Second Option Agreement (the "Purchased Assets");
WHEREAS, LIPA and [KEYSPAN CORPORATION SUBSIDIARY] ("Operator") are
contemporaneously entering into an Operation and Maintenance Agreement (the "O&M
Agreement") pursuant to which LIPA will retain Operator to, among other things,
perform Fuel Management Services for the Purchased Assets upon the terms and
conditions set forth therein; and
WHEREAS, as a condition to the consummation of the purchase and sale of the
Purchased Assets under the Second Option Agreement, LIPA and the Energy Manager
are entering into this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
2
ARTICLE 1
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used in this Amendment and
not otherwise defined shall have the meanings assigned to them in the EMA.
ARTICLE 2
AMENDMENTS TO EMA
Section 2.1. Amendment to Section 3.2.1 of the EMA. Section 3.2.1 of the
EMA is hereby amended by deleting "$750,000" in the 4th line thereof and
inserting in lieu thereof "$725,000". [If LIPA purchases only one of the Plants,
then the $25,000 fee reduction will be pro rated based upon the fuel BTU's
purchased in the year prior to the exercise of the Second Option Agreement.]
ARTICLE 3
MISCELLANEOUS
Section 3.1. Effective Date. This Amendment shall be effective upon
satisfaction of the following conditions (the date upon which all such
conditions are satisfied, the "Effective Date"): (i) the consummation of the
sale and purchase of the Purchased Assets pursuant to the Second Option
Agreement, (ii) approval of this Amendment (satisfactory to Energy Manager and
LIPA) from the New York State Comptroller, (iii) approval (as to form) of this
Amendment from the New York Attorney General, and (iv) if required in LIPA's
sole judgment, receipt of a private letter ruling from the Internal Revenue
Service that this Amendment constitutes a "qualified management services
agreement" under the Internal Revenue Code of 1986, as amended, and the
regulations thereunder. The conditions set forth in items (ii), (iii) and (iv)
above are hereinafter referred to as the "Approvals".
Section 3.2. Affirmation of Representations. The representations and
warranties of the Energy Manager set forth in Section 13.11.1 of the EMA shall
be true and correct in all material respects as of the Effective Date. The
representations and warranties of LIPA set forth in Section 13.11.2 of the EMA
shall be true and correct in all material respects as of the Effective Date.
Section 3.4. Miscellaneous. Except as amended hereby, the EMA shall remain
in full force and effect. This Amendment shall be governed, including, without
limitation, as to validity, interpretation and effect, by the Laws of the State
of New York. This Amendment may be executed in two or more counterparts which
together shall constitute a single agreement.
3
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their duly authorized officers or representatives as of the
date first above written.
LONG ISLAND LIGHTING COMPANY
d/b/a LIPA
By ________________________
Name:
Title:
KEYSPAN ENERGY TRADING SERVICES LLC
By ________________________
Name:
Title:
4
Exhibit F
---------
Form of Deed
------------
THIS INDENTURE, made the _____ day of _____________, in the year 200_
BETWEEN
KEYSPAN GENERATION LLC, a limited liability company organized and existing under
the laws of the State of New York, c/o KeySpan Corporation, One Metrotech
Center, Brooklyn, New York 11201
party of the first part, and
LONG ISLAND LIGHTING COMPANY d/b/a LIPA, a corporation organized and existing
under the laws of the State of New York and a wholly-owned subsidiary of Long
Island Power Authority, a corporate municipal instrumentality and political
subdivision of the State of New York, 333 Earle Ovington Blvd, Suite 403
Uniondale, NY 11553
party of the second part,
WITNESSETH, that for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, in consideration of the foregoing
and the mutual covenants and agreements hereinafter set forth, the party of the
first part does hereby grant and release unto the party of the second part, the
heirs or successors and assigns of the party of the second part forever,
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being described as follows:
SEE SCHEDULE A ATTACHED HERETO AND MADE A PART HEREOF.
TOGETHER with all right, title and interest, if any, of the party of the first
part in and to any streets and roads abutting the above described premises to
the center lines thereof; TOGETHER with the appurtenances and all the estate and
rights of the party of the first part in and to said premises; TO HAVE AND TO
HOLD the premises herein granted unto the party of the second part, the heirs or
successors and assigns of the party of the second part forever.
AND the party of the first part covenants that the party of the first part has
not done or suffered anything whereby the said premises have been encumbered in
any way whatever, except as set forth on Schedule B attached hereto and made a
part hereof.
AND the party of the first part, in compliance with Section 13 of the Lien Law,
covenants that the party of the first part will receive the consideration for
this conveyance and will hold the right to receive such consideration as a trust
fund to be applied first for the purpose of paying the cost of the improvement
and will apply the same first to the payment of the cost of the improvement
before using any part of the total of the same for any other purpose. The word
"party" shall be construed as if it read "parties" whenever the sense of this
indenture so requires.
IN WITNESS WHEREOF, the party of the first part has duly executed this deed the
day and year first above written.
IN PRESENCE OF:
-----------------------------------
- --------------------------
WITNESS -----------------------------------
F-1
ACKNOWLEDGEMENT TAKEN IN NEW YORK STATE
State of New York, County , ss:
On the day of in the year ,
before me, the undersigned, personally appeared
, personally known to me or proved to me on the basis of ,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to satisfactory evidence
to be the individual(s) whose name(s) is (are) subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the
his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which the
individual(s) instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument. acted, executed the
instrument.
- -------------------------------------------------------------------------------
ACKNOWLEDGEMENT BY SUBSCRIBING WITNESS
TAKEN IN NEW YORK STATE
State of New York, County of , ss:
On the day of in the year ,
before me, the undersigned, a Notary Public in and for said
State, personally appeared
, the
subscribing witness to the foregoing instrument, with whom I am personally
acquainted, who, being by me duly sworn, did depose and say that he/she/they
reside(s) in
(if the place of residence is in a city, include the street and street number if
any, thereof); that he/she/they know(s)
to be the individual described in and who executed the foregoing instrument;
that said subscribing witness was present and saw said
execute the same; and that said witness at the same time subscribed
his/her/their name(s) as a witness thereto
F-2
ACKNOWLEDGEMENT TAKEN IN NEW YORK STATE
State of New York, County , ss:
On the day of in the year ,
before me, the undersigned, personally appeared
, personally known to me or proved to me on the basis of ,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to satisfactory evidence
to be the individual(s) whose name(s) is (are) subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their capacity(ies), and that by his/her/their signature(s) on the
his/her/their capacity(ies), and that by his/her/their signature(s) on the
instrument, the individual(s), or the person upon behalf of which the
individual(s) instrument, the individual(s), or the person upon behalf of which
the individual(s) acted, executed the instrument. acted, executed the
instrument.
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENT TAKEN OUTSIDE NEW YORK STATE
*State of ,County of ,ss:
*(Or insert District of Columbia, Territory, Possession or
Foreign County)
On the day of in the year ,
, before me the undersigned personally appeared
Personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), that by his/her/their signature(s) on the instrument, the
individual(s) or the person upon behalf of which the individual(s) acted,
executed the instrument, and that such individual make such appearance before
the undersigned in the
(add the city or political subdivision and the state or country or other place
the acknowledgement was taken).
SCHEDULE A
[insert legal description]
F-3
SCHEDULE B
[insert title exceptions]
F-4