EXHIBIT 2.2
NUCLEAR GENERATION CONVEYANCE AGREEMENT
by and between
DUQUESNE LIGHT COMPANY, on the one hand, and
PENNSYLVANIA POWER COMPANY
and
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, on the other
Dated as of March 25, 1999
NUCLEAR GENERATION CONVEYANCE AGREEMENT
NUCLEAR GENERATION CONVEYANCE AGREEMENT, dated as of March 25, 1999
("Agreement"), by and between Duquesne Light Company ("DLC"), a Pennsylvania
corporation, on the one hand, and Pennsylvania Power Company ("Penn Power"), a
Pennsylvania corporation and The Cleveland Electric Illuminating Company
("CEIC"), an Ohio corporation, on the other. DLC, on the one hand, and Penn
Power and CEIC, on the other, are referred to individually as a "Party," and
collectively as the "Parties."
W I T N E S S E T H
WHEREAS, DLC and FE (as hereinafter defined), acting on behalf of the
FE Subsidiaries (as hereinafter defined) have entered into an agreement in
principle dated October 14, 1998 (the "Agreement in Principle"), regarding the
exchange of interests in certain electric generation facilities; and
WHEREAS, in order to implement the Agreement in Principle with respect
to DLC's nuclear generating assets which are subject to the jurisdiction of the
NRC (as hereinafter defined), the Parties desire to set forth in this Agreement
the definitive terms and conditions pursuant to which DLC agrees to transfer to
and convey, and Penn Power and CEIC agree to assume, all of DLC's right, title
and interest in and to certain plants (Beaver Valley Xxxx 0, Xxxxxx Xxxxxx Xxxx
0, SAPS and Perry Unit 1, as each is hereinafter defined), as well as DLC's
rights and obligations as operator of Beaver Valley Xxxx 0 xxx Xxxxxx Xxxxxx
Xxxx 0; and
WHEREAS, in order to implement the Agreement in Principle with respect
to certain fossil fueled power plants, simultaneously with the execution of this
Agreement, DLC and the FE Subsidiaries will enter into the Generation Exchange
Agreement (the "Exchange Agreement") dated as of the date hereof, in the form of
Exhibit A, pursuant to which DLC will exchange its undivided interests in
certain electric generation plants operated by the FE Subsidiaries (X.X. Xxxxxx
Unit No. 7, Xxxxx Xxxxxxxxx Units Nos. 1, 2 & 3, and Eastlake Unit No. 5) for
the interests of certain of the FE Subsidiaries in electric generation plants in
Xxxx Xxxx, Xxxx, Xxx Xxxxxx, Xxxxxxxxxxxx and Niles, Ohio; and
WHEREAS, simultaneously with the execution of this Agreement, DLC and
FE will enter into the FE Support Agreement, and DLC, FE and the FE Subsidiaries
will enter into the CAPCO Settlement Agreement and the Electric Facilities
Agreement (as each is hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms
have the meanings specified in this Section 1.1.
(1) "Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
(2) "Agreement" means this Nuclear Generation Conveyance
Agreement, together with the Schedules and Exhibits hereto, as the
same may be from time to time amended.
(3) "Agreement in Principle" has the meaning set forth in the
preamble to this Agreement.
(3A) "Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement"
means the Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement,
substantially in the form of Exhibit J hereto, to be entered into
between DLC and CEIC at the time this Agreement is executed.
(4) "Ancillary Agreements" means the CAPCO Settlement Agreement
and the Electric Facilities Agreement and, in respect of each Plant,
the Assignment and Assumption Agreement, the Xxxx of Sale, the FIRPTA
Affidavit, the Warranty Deed(s) with respect to such Plant and, in the
case of Beaver Valley, the Beaver Valley Omnibus Services Agreement,
in each case as the same may be from time to time amended.
(5) "ANI" means American Nuclear Insurance, or any successor
entity.
(6) "Assignment and Assumption Agreement" means an Assignment
and Assumption Agreement in respect of each Plant between DLC and the
applicable Specified FE Subsidiary, substantially in the form of
Exhibit B hereto, by which DLC shall, subject to the terms and
conditions hereof, assign the DLC Nuclear Agreements, certain
intangible assets and other DLC Nuclear Assets in respect of each
Plant to the applicable Specified FE Subsidiary, and whereby such
Specified FE Subsidiary shall assume the Assumed Liabilities in
respect of each Plant.
(7) "Assumed Decommissioning Liabilities" has the meaning set
forth in Section 2.3(f).
(8) "Assumed Environmental Liabilities" has the meaning set
forth in Section 2.3(c).
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(9) "Assumed Liabilities" has the meaning set forth in Section
2.3.
(10) "Assumed Nuclear Liabilities" has the meaning set forth in
Section 2.3(g).
(11) "Assumed Spent Fuel Liabilities" has the meaning set forth
in Section 2.3(h).
(12) "Atomic Energy Act" means the Atomic Energy Act of 1954, as
amended.
(13) "Beaver Valley" means, collectively, Beaver Valley Xxxx 0,
Xxxxxx Xxxxxx Xxxx 0 and SAPS.
(14) [Intentionally Omitted.]
(15) "Beaver Valley CAPCO Agreements" means all the contractual
arrangements associated with CAPCO relating to Beaver Valley,
including those contracts listed on Schedule 1.1 (15).
(16) "Beaver Valley Switchyard Assets" means the real and
personal assets described in Schedule 2.2(a).
(17) [Intentionally Omitted.]
(18) "Beaver Valley Omnibus Services Agreement" means the Beaver
Valley Omnibus Services Agreement substantially in the form of Exhibit
F hereto, to be entered into between Penn Power and DLC as of the DLC
Nuclear Closing Date.
(19) "Beaver Valley Unit 1" means the nuclear generating plant
known as Beaver Valley Power Station Unit No. l, including such
plant's fifty percent (50%) undivided interest in the Common Facility
Assets.
(20) "Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx Xxxxxx" has the
meaning set forth in Section 6.19.1 (a) (i).
(21) "Beaver Valley Unit 1 Decommissioning Shortfall" has the
meaning set forth in Section 6.19.1 (a) (i).
(22) "Beaver Valley Unit 1 Nonqualified Decommissioning Funds"
means one or more external trust funds that do not meet the
requirements of Code section 468A and Treasury Regulations section
1.468A-5, maintained by DLC with respect to Beaver Valley Unit 1 prior
to the DLC Nuclear Closing.
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(23) "Beaver Valley Unit 1 Qualified Decommissioning Fund" means
the external trust fund that meets the requirements of Code section
468A and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Beaver Valley Unit 1 prior to the DLC Nuclear Closing.
(24) "Beaver Valley Unit 2" means the nuclear generating plant
known as Beaver Valley Power Station Unit No. 2, including such
plant's fifty percent (50%) undivided interest in the Common Facility
Assets.
(25) "Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx Xxxxxx" has the
meaning set forth in Section 6.19.2 (a)(i).
(26) "Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx Xxxxxxxxx" has the
meaning set forth in Section 6.19.2 (a) (i).
(27) "Beaver Valley Unit 2 Facility Leases" means, collectively,
the seven (7) facility leases with respect to Beaver Valley Unit 2,
dated as of September 15, 1987, each by and between the Beaver Valley
Unit 2 Owner Trustee and DLC, as amended.
(28) "Beaver Valley Unit 2 Foreclosure" means any foreclosure,
forfeiture or similar proceeding the occurrence of which is pursuant
to the Beaver Valley Unit 2 Lease Indentures.
(29) "Beaver Valley Unit 2 Indentures Notes" has the meaning set
forth in Section 6.16(a).
(30) "Beaver Valley Unit 2 Indentures Support Agreement" means
the Beaver Valley Unit 2 Indentures Support Agreement substantially in
the form of Exhibit I.
(31) "Beaver Valley Xxxx 0 Xxxxxxxxxx Xxxxxxx" means Irving Trust
Company, as indenture trustee, under each of the Beaver Valley Unit 2
Lease Indentures, and any successor indenture trustee appointed in
accordance with the terms of the Beaver Valley Unit 2 Lease
Indentures.
(32) "Beaver Valley Unit 2 Lease Indentures" means, collectively,
the seven (7) trust indenture, mortgage, security agreements and
assignments of facility lease, dated as of September 15, 1987, between
State Street Bank and Trust Company (successor in interest to The
First National Bank of Boston), a national banking association, not in
its individual capacity, but solely as trustee under those certain
trust agreements dated as of September 15, 1987 with the owner
participants thereto as set forth therein, and The Bank of New York
(successor in interest to Irving Trust Company), a New York banking
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corporation, as the indenture trustee, as such may be amended,
modified, supplemented or restated from time to time.
(33) "Beaver Valley Unit 2 Lease Indentures Documents" means all
contractual arrangements implementing the sale-leaseback in respect of
Beaver Valley Unit 2, including those documents described in Schedule
1.1(33).
(34) "Beaver Valley Unit 2 Nonqualified Decommissioning Funds"
means the external trust funds that do not meet the requirements of
Code section 468A and Treasury Regulations section 1.468A-5,
maintained by DLC with respect to Beaver Valley Unit 2.
(35) "Beaver Valley Unit 2 Operating Agreement" means the
Operating Agreement -- Beaver Valley Xxxx 0 xxx Xxxxxx Xxxxxx Xxxx 0,
as amended and restated as of September 15, 1987, by and between CEIC,
DLC, Ohio Edison Company, an Ohio corporation, Penn Power, and The
Toledo Edison Company, an Ohio corporation, as such may be amended,
modified, supplemented or restated from time to time.
(36) "Beaver Valley Unit 2 Owner Trustee" means First National
Bank of Boston, as owner trustee under each of the Beaver Valley Unit
2 Facility Leases.
(37) "Beaver Valley Unit 2 Qualified Decommissioning Funds" means
the external trust funds that meet the requirements of Code section
468A and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Beaver Valley Unit 2.
(38) "Benefit Plans" means with respect to each Party, each
deferred compensation and each bonus or other incentive compensation,
stock purchase, stock option and other equity compensation plan,
program, agreement or arrangement; each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare"
plan, fund or program (within the meaning of Section 3(1) of ERISA)
each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each
employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in
each case, that is sponsored, maintained or contributed to or required
to be contributed to by such Party or by any ERISA Affiliate.
(39) "Xxxx of Sale" means a Xxxx of Sale, substantially in the
form of Exhibit C hereto, to be delivered by DLC to each of Penn Power
and CEIC at the DLC Nuclear Closing, with respect to Tangible Personal
Property included in the DLC Nuclear Assets transferred to such
Specified FE Subsidiary at the DLC Nuclear Closing.
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(40) "Bond Counsel" has the meaning assigned thereto in Section
6.17(b)(i).
(41) "Business Day" means any day other than Saturday, Sunday and
any day which is a day on which banking institutions in the
Commonwealth of Pennsylvania or the State of Ohio are authorized by
law or other governmental action to close.
(42) "Byproduct Material" means any radioactive material (except
Special Nuclear Material) yielded in, or made radioactive by, exposure
to radiation in the process of producing or utilizing Special Nuclear
Material.
(43) "CAPCO" means the Central Area Power Coordination Group.
(44) "CAPCO Agreements" means, collectively, the Beaver Valley
CAPCO Agreements and the Perry CAPCO Agreements.
(45) "CAPCO Settlement Agreement" means that certain CAPCO
Settlement Agreement executed by DLC and each applicable FE
Subsidiary, substantially in the form of Exhibit H hereto.
(46) "Capital Expenditures" means capital additions to or
replacements of property, plant and equipment included in the DLC
Nuclear Assets and other expenditures or repairs on property, plant
and equipment included in the DLC Nuclear Assets that would be
capitalized by a party in accordance with its normal accounting
policies.
(47) "CEIC" means The Cleveland Electric Illuminating Company, an
Ohio corporation.
(48) "CEIC Nonqualified Decommissioning Funds" means the external
trust funds that do not meet the requirements of Code section 468A and
Treasury Regulations section 1.468A-5, maintained by CEIC.
(49) "CEIC Qualified Decommissioning Funds" means the external
trust funds that meet the requirements of Code section 468A and
Treasury Regulations section 1.468A-5, maintained by CEIC with respect
to Perry Unit 1.
(50) "CERCLA" means the Federal Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et
seq., as amended.
(51) "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1984.
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(52) "COBRA Continuous Coverage" means the requirements of
Section 4980B(f) of the Code.
(53) "Code" means the Internal Revenue Code of 1986, as amended.
(54) "Collective Bargaining Agreement" has the meaning set forth
in Section 6.11(d).
(55) "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 under the circumstances in transactions of the kind and
nature contemplated by this Agreement in order for the performing
Party to satisfy its obligations hereunder.
(56) "Common CAPCO Agreements" means those CAPCO Agreements
relating to both any portion of the Exchange Assets and any portion of
the DLC Nuclear Assets, including those listed in Schedule 1.1(56).
(57) "Common Facility Assets" means those assets located at
Beaver Valley and used in common by Beaver Valley Xxxx 0 xxx Xxxxxx
Xxxxxx Xxxx 0 and listed in Schedule 1.1(57).
(58) "Computer Systems" means hardware, software, and firmware
product (including embedded microcontrollers in non-computer
equipment).
(59) "Continuation Period" has the meaning set forth in Section
6.11(e)(ii).
(60) "Decommissioning" means the complete retirement and removal
of a Plant from service and the restoration of the Real Property
relating to such Plant, as well as any planning and administrative
activities incidental thereto, including but not limited to (a) the
dismantlement, decontamination, storage, and/or entombment of the
Plant, in whole or in part, and any reduction or removal, whether
before or after termination of the NRC license for the Plant, of
radioactivity at the Real Property relating to such Plant, and (b) all
activities necessary for the retirement, dismantlement and
decontamination of the Plant to comply with all applicable laws,
including applicable Nuclear Laws and Environmental Laws, including
the applicable requirements of the Atomic Energy Act and the NRC's
rules, regulations, orders and pronouncements thereunder, the NRC
operating license for the Plant and any related decommissioning plan.
(61) "Decommissioning Costs" means the costs of Decommissioning
the DLC Nuclear Assets in accordance with all applicable laws,
including the applicable Nuclear Laws and Environmental Laws.
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(62) "Decommissioning Funds" means collectively, the Qualified
Decommissioning Funds and the Nonqualified Decommissioning Funds.
(63) "Department of Energy" means the United States Department of
Energy and any successor agency thereto.
(64) "Department of Energy Decommissioning and Decontamination
Fees" means all fees related to the Department of Energy's Special
Assessment of utilities for the Uranium Enrichment Decontamination and
Decommissioning Fund pursuant to Sections 1801, 1802 and 1803 of the
Atomic Energy Act, 42 U.S.C. 2297(g)-(g-2), and the Department of
Energy's implementing regulations at 10 CFR Part 766, or any similar
fees assessed under amended or superseding statutes or regulations
applicable to separative work units purchased from the Department of
Energy in order to decontaminate and decommission the Department of
Energy's gaseous diffusion enrichment facilities.
(65) "Department of Energy Standard Contract" means the Contracts
for Disposal of Spent Nuclear Fuel and/or High-Level Xxxxxxxxxxx
Xxxxx, Xx. XX- XX00-00XX00000, dated as of June 13, 1983 between the
United States of America, represented by the United States Department
of Energy, and DLC; and No. DE- CR01-84RW00004, dated as of June 26,
1984, between the Unites States of America, represented by the United
States Department of Energy, and DLC and OEC.
(66) "Direct Claim" means any claim by an Indemnitee on account
of an Indemnifiable Loss that does not result from a Third Party
Claim.
(67) "DLC" means Duquesne Light Company, a Pennsylvania
corporation.
(68) "DLC Beaver Valley Emergency Preparedness Agreements" means
those agreements listed in Schedule 1.1(68).
(69) "DLC Indemnifiable Loss" means an Indemnifiable Loss
asserted against or suffered by any DLC Indemnitee.
(70) "DLC Indemnitee" means DLC, its officers, directors,
employees, shareholders, Affiliates and agents.
(70A) "DLC Interim Fuel Requirements" has the meaning set forth
in Section 2.6(b)(i).
(71) "DLC Nonqualified Decommissioning Funds" means,
collectively, the Beaver Valley Unit 1 Nonqualified Decommissioning
Fund, the Beaver Valley Unit 2 Nonqualified Decommissioning Fund and
the Perry Unit 1 Nonqualified Decommissioning Fund.
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(72) "DLC Non-Union Employees" has the meaning set forth in
Section 6.11(c).
(73) "DLC Nuclear Agreements" means any contracts, agreements,
licenses and personal property leases entered into by DLC with respect
to the ownership, operation or maintenance of the DLC Nuclear Assets,
whether or not disclosed on Schedule 4.9(a)(i) and (ii) or Schedule
4.9(b)(i) and (ii), including the DLC Beaver Valley Emergency
Preparedness Agreements, but shall not include the Beaver Valley Unit
2 Lease Indentures Documents.
(74) "DLC Nuclear Assets" has the meaning set forth in Section
2.1, to the extent of DLC's undivided percentage interest in such
assets.
(75) "DLC Nuclear Closing" means the closing at which the
assignment, conveyance, transfer and delivery of some or all of the
DLC Nuclear Assets to Penn Power and CEIC, as contemplated by this
Agreement, shall take place.
(76) "DLC Nuclear Closing Date" has the meaning set forth in
Section 3.1.
(77) "DLC Nuclear Closing Payment" has the meaning set forth in
Section 3.2(a).
(78) "DLC Nuclear Insurance Policies" means any insurance
policies carried by or for the benefit of DLC with respect to the
ownership, operation or maintenance of the DLC Nuclear Assets,
including all ANI and XXXX nuclear liability, property damage or
business interruption policies in respect thereof.
(79) "DLC Qualified Decommissioning Funds" means, collectively,
the Beaver Valley Unit 1 Qualified Decommissioning Fund, the Beaver
Valley Unit 2 Qualified Decommissioning Fund and the Perry Xxxx 0
Qualified Decommissioning Fund.
(80) "DLC Representatives" means DLC's authorized
representatives, including its professional and financial advisors.
(81) "DLC Required Regulatory Approvals" means the Required
Regulatory Approvals referred to in Schedule 4.3(b).
(82) "DLC Savings Plans" has the meaning set forth in Section
6.11(e)(ii)(E).
(83) "DLC Transferred Non-Union Employees" has the meaning set
forth in Section 6.11(c).
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(84) "DLC Transferred Union Employee" has the meaning set forth
in Section 6.11(b).
(85) "DLC Transmission Assets" means DLC's seventy-six and
one-tenth percent (76.1%) undivided interest in the Beaver Valley
Switchyard Assets.
(86) "DLC Union Employees" has the meaning set forth in Section
6.11(b).
(87) "ECAR" means the East Central Area Reliability Council, a
regional reliability counsel established pursuant to the East Central
Area Reliability Coordination Agreement, and any successor entity
thereto.
(88) "Electric Facilities Agreement" has the meaning assigned
thereto in the Exchange Agreement.
(89) "Encumbrances" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and
use limitations, conservation easements, deed restrictions,
encumbrances and charges of any kind.
(90) "Environmental Claim" means any and all pending and/or
threatened administrative or judicial actions, suits, orders, claims,
liens, notices, notices of violations, investigations, complaints,
requests for information, proceedings, or other written
communications, whether criminal or civil (each, a "Claim"), pursuant
to or relating to any applicable Environmental Law or pursuant to a
common law theory, by any Person (including any Governmental
Authority, private person and citizens' group) based upon, alleging,
asserting, or claiming any actual or potential (a) violation of, or
liability under any Environmental Law, (b) violation of any
Environmental Permit, or (c) liability for investigatory costs,
cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or
penalties arising out of, based on, resulting from, or related to any
Environmental Condition or any Release or threatened Release into the
environment of any Regulated Substances at any location related to the
DLC Nuclear Assets, including, but not limited to, any Off-Site
Location to which Regulated Substances, or materials (other than
Nuclear Materials) containing Regulated Substances, were sent for
handling, storage, treatment, or disposal.
(91) "Environmental Condition" means the presence or Release of a
Regulated Substance (other than a naturally-occurring substance) on or
in environmental media, or structures on Real Property, at an Off-Site
Location or other property (including the presence in surface water,
groundwater, soils or subsurface strata, or air), including the
subsequent migration of any such Regulated Substance, regardless of
when such presence or Release occurred or is discovered.
(92) "Environmental Laws" means all Federal, state, local,
provincial, foreign and international civil and criminal laws,
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regulations, rules, ordinances, codes, decrees, judgments, directives,
or judicial or administrative orders relating to pollution or
protection of the environment, natural resources or human health and
safety, including laws relating to Releases or threatened Releases of
Regulated Substances (including Releases to ambient air, surface
water, groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, transport, disposal or handling of Regulated
Substances, but shall not include Nuclear Laws. "Environmental Laws"
include: (a) with respect to Federal law, CERCLA, the Hazardous
Materials Transportation Act (49 U.S.C. sections 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. sections 6901 et
seq.), the Federal Water Pollution Control Act (33 U.S.C. sections
1251 et seq.), the Clean Air Act (42 U.S.C. sections 7401 et seq.),
the Toxic Substances Control Act (15 U.S.C. sections 2601 et seq.),
Atomic Energy Act, 42 U.S.C. section 2011 et seq.; the Oil Pollution
Act (33 U.S.C. sections 2701 et seq.), the Emergency Planning and
Community Right-to-Know Act (42 U.S.C. sections 11001 et seq.), the
Occupational Safety and Health Act (29 U.S.C. sections 651 et
seq.),the Safe Drinking Water Act (42 U.S.C. section 300f et seq.),
the Surface Mine Conservation and Reclamation Act (30 U.S.C. sections
1251-1279), and regulations adopted pursuant thereto; and counterpart
state and local laws, and regulations adopted thereto; (b) with
respect to Pennsylvania law, the Pennsylvania Clean Streams Law (35
P.S. section 691.1 et seq.) the Pennsylvania Air Pollution Control Act
(35 P.S. section 4001 et seq.), the Pennsylvania Solid Waste
Management Act (35 P.S. section 6018.101 et seq.), the Pennsylvania
Storage Tank and Spill Prevention Act (35 P.S. section 6021.101 et
seq.), the Pennsylvania Safe Drinking Water Act (35 P.S. section 721.1
et seq.), the Pennsylvania Sewage Facilities Act (35 P.S. section
750.1 et seq.), the Pennsylvania Hazardous Sites Cleanup Act (35 P.S.
section 6020.101 et seq.), the Pennsylvania Land Recycling and
Environmental Remediation Standards Act (35 P.S. section 6026.101 et
seq.), the Pennsylvania Surface Mining Conservation and Reclamation
Act (52 P.S. section 1396.1 et seq.), the Coal Refuse Disposal Control
Act (52 P.S. section 30.51 et seq.), the Non-Coal Surface Mining and
Reclamation Act (52 P.S. section 3301 et seq.), the Pennsylvania
Worker and Community Right-to-Know Act (35 P.S. section 7301 et seq.),
the Pennsylvania Hazardous Material Emergency Planning and Response
Act (35 P.S. section 6022.101 et seq.), and regulations adopted
pursuant thereto; and (c) with respect to Ohio law, Ohio Rev. Code
Xxx. section 1501.30 et seq. (Diversion of Waters), Ohio Rev. Code
Xxx. section 1506.01 et seq. (Coastal Management), Ohio Rev. Code Xxx.
section 1509.01 et seq. (Oil and Gas), Ohio Rev. Code Xxx. section
1513.01 et seq. (Coal Surface Mining), Ohio Rev. Code Xxx. section
1520.01 et seq. (Canal Lands), Ohio Rev. Code Xxx. section 3704.01 et
seq. (Air Pollution Control), Ohio Rev. Code Xxx. section 3710.01 et
seq. (Asbestos Abatement), Ohio Rev. Code Xxx. section 3714.01 et seq.
(Construction and Demolition Debris), Ohio Rev. Code Xxx. section
3734.01 et seq. (Solid and Hazardous Wastes), Ohio Rev. Code Xxx.
section 3737.87 et seq. (Petroleum Underground Storage Tanks), Ohio
Rev. Code Xxx. section 3742.01 et seq. (Lead Abatement and Testing),
Ohio Rev. Code Xxx. section 3750.01 et seq. (Emergency Planning), Ohio
Rev. Code Xxx. section 3751.01 et seq. (Hazardous Substances), Ohio
Rev. Code Xxx. section 3752.01 et seq. (Cessation of Chemical Handling
Operations), Ohio Rev. Code Xxx. section 3767.01 et seq. (Nuisances),
Ohio Rev. Code Xxx. section 4913.01 et seq. (Public Utilities
Commission - Acid Rain Control), Ohio Rev. Code Xxx. section 6109.01
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et seq. (Safe Drinking Water), Ohio Rev. Code Xxx. section 6111.01 et
seq. (Water Pollution Control), and regulations adopted pursuant
thereto.
(93) "Environmental Permits" means any permits, registrations,
certificates, certifications, licenses and authorizations, consents
and approvals of Governmental Authorities required under Environmental
Laws with respect to the DLC Nuclear Assets.
(94) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(95) "ERISA Affiliate" means a trade or business, whether or not
incorporated, that together with a Party would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA.
(96) "Estimated DLC Nuclear Closing Payment" has the meaning set
forth in Section 3.2(b).
(97) "Estimated DLC Nuclear Closing Statement" has the meaning
set forth in Section 3.2(b).
(98) "Exchange Agreement" has the meaning set forth in the
preamble to this Agreement.
(99) "Exchange Assets" has the meaning assigned thereto in the
Exchange Agreement.
(100) "Exchange Closing" has the meaning assigned thereto in the
Exchange Agreement.
(101) "Exchange Date" has the meaning assigned thereto in the
Exchange Agreement.
(102) "Excluded Assets" has the meaning set forth in Section 2.2.
(103) "Excluded Liabilities" has the meaning set forth in Section
2.4.
(104) "Exempt Facilities" means those DLC facilities listed in
Schedule 1.1(104).
(105) "Facilities Act" has the meaning set forth in Section
10.12.
(106) "FE" means FirstEnergy Corp., an Ohio corporation and
parent company of the FE Subsidiaries.
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(107) "FE Subsidiaries" means, collectively, Ohio Edison Company,
Penn Power, CEIC and The Toledo Edison Company.
(108) "FE Support Agreement" means the FE Support Agreement
substantially in the form of Exhibit D hereto, to be entered into
between FE and DLC on the date hereof.
(109) "FENOC" means FirstEnergy Nuclear Operating Company, an
Ohio corporation.
(110) "FERC" means the Federal Energy Regulatory Commission or
any successor agency thereto.
(111) "Final Adjustment" has the meaning set forth in Section
3.2(d).
(112) "Final DLC Nuclear Closing Statement" has the meaning set
forth in Section 3.2(c).
(113) "Final Order" means an action by the relevant Governmental
Authority that has not been reversed, stayed, enjoined, set aside,
annulled or suspended or with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired.
(114) "FIRPTA Affidavit" means the Foreign Investment in Real
Property Tax Act Certification and Affidavit in respect of each Plant,
substantially in the form of Exhibit E hereto.
(115) "Fuel Supplies" means the supplies of nuclear fuel in
reactor core, natural uranium, converted uranium, enriched uranium
and/or any other form of nuclear fuel, under contract, or in
inventory, related to the operation of either Plant.
(116) "GE Settlement Agreement" means the Settlement Agreement
between Plaintiffs FE Subsidiaries and DLC and Defendant General
Electric Company, executed on January 20, 1994 in settlement of
litigation concerning Perry Unit 1.
(117) "Good Utility Practices" mean any of the applicable
practices, methods, standards, guides or acts:
(a) required by any Governmental Authority, regional or national
reliability council, or national trade organization, including NERC,
ECAR, Edison Electric Institute, or American Society of Mechanical
Engineers, or the successor of any of them, whether or not the Party
whose conduct is at issue is a member thereof;
13
(b) otherwise engaged in or approved by a significant portion of
the electric utility industry during the relevant time period which in
the exercise of reasonable judgment in light of the facts known or
that should have been known at the time a decision was made, could
have been expected to accomplish the desired result in a manner
consistent with law, regulation, good business practices, generation,
transmission, and distribution reliability, safety, environmental
protection, economy, and expediency. Good Utility Practices is
intended to be acceptable practices, methods, or acts generally
accepted in the region, and is not intended to be limited to the
optimum practices, methods, or acts to the exclusion of all others;
and
(c) such other acts or practices as are reasonably necessary to
maintain the reliability of the Plants.
(118) "Governmental Authority" means any foreign, Federal, state,
local or other governmental, regulatory or administrative agency,
court, commission, department, board, or other governmental
subdivision, legislature, rulemaking board, court, tribunal,
arbitrating body or other governmental authority.
(119) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
(120) "High Level Waste" means (1) irradiated nuclear reactor
fuel, (2) liquid wastes resulting from the operation of the first
cycle solvent extraction system, or its equivalent, and the
concentrated wastes from subsequent extraction cycles, or their
equivalent, in a facility for reprocessing irradiated reactor fuel,
and (3) solids into which such liquid wastes have been converted.
(121) "High Level Waste Repository" means a facility which is
designed, constructed and operated by or on behalf of the Department
of Energy for the storage and disposal of Spent Nuclear Fuel and other
High Level Waste in accordance with the requirements set forth in the
Nuclear Waste Policy Act.
(122) "IBEW" has the meaning set forth in Section 6.11(b).
(123) "IBEW CBA" has the meaning set forth in Section 6.11(b).
(124) "Income Tax" means any Federal, state, local or foreign Tax
(a) based upon, measured by or calculated with respect to net income,
profits or receipts (including capital gains Taxes and minimum Taxes)
or (b) based upon, measured by or calculated with respect to multiple
bases (including corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with
respect to, is described in clause (a), in each case together with any
interest, penalties, or additions to such Tax.
14
(125) "Indemnifiable Loss" means any claim, demand, suit, loss,
liability, damage, obligation, payment, cost or expense (including the
cost and expense of any action, suit, proceeding, assessment,
judgment, settlement or compromise relating thereto and reasonable
attorneys' fees and reasonable disbursements in connection therewith).
(126) "Indemnifying Party" means a Party obligated to provide
indemnification under this Agreement.
(127) "Indemnitee" means a Person entitled to receive
indemnification under this Agreement.
(128) "Independent Accounting Firm" means such independent
accounting firm of national reputation as is mutually appointed by DLC
and Specified FE Subsidiaries.
(128A) "Interim Period" has the meaning set forth in Section
6.1.1(a).
(129) "Inspection" means all tests, reviews, examinations,
inspections, investigations, verifications, samplings and similar
activities conducted by Specified FE Subsidiaries (or either one of
them) or their agents or Representatives with respect to the DLC
Nuclear Assets prior to the DLC Nuclear Closing.
(130) "Intellectual Property" means patents and patent rights,
trademarks and trademark rights, inventions, copyrights and copyright
rights and all pending applications for registrations of patents,
trademarks, and copyrights.
(131) "Inventories" means materials, spare parts, capital spare
parts, consumable supplies and chemical inventories relating to the
operation of any Plant, provided, that "Inventories" shall not include
Fuel Supplies, and provided further, that reference to "Inventories"
shall be limited to the extent of DLC's proportionate interest
therein.
(132) "IRS" means the Internal Revenue Service and any successor
agency thereto.
(133) "J&L Specialty Steel Transformer" means the 345/138 Kv auto
transformer located at the site on which the Beaver Valley Switchyard
Assets are located and owned by J&L Specialty Steel Company.
(134) "Knowledge" means the actual knowledge of the corporate
officers and/or Plant managers of the specified Person charged with
responsibility for the particular function as of the date of this
Agreement, or, with respect to any certificate delivered pursuant to
this Agreement, the date of delivery of the certificate.
15
(135) "Low Level Waste" means waste material which contains
radioactive nuclides emitting primarily beta or gamma radiation, or
both, in concentrations or quantities which exceed applicable Federal
or state standards for unrestricted release. Low Level Waste does not
include waste containing more than ten (10) nanocuries of transuranic
contaminants per gram of material, nor Spent Nuclear Fuel, nor
material classified as either high-level waste or waste which is
unsuited for disposal by near-surface burial under any applicable
Federal regulations.
(136) "Material Adverse Effect" means any change in, or effect on
DLC's proportionate interest in any Plant, from or after the date
hereof that is materially adverse to the operations or condition
(financial or otherwise) of DLC's proportionate interest in such
Plant, other than: (a) any change affecting the international,
national, regional or local electric or nuclear industry as a whole
and not specific and exclusive to DLC's proportionate interest in such
Plant; (b) any change or effect resulting from changes in the
international, national, regional or local wholesale or retail markets
for electric or nuclear power; (c) any change or effect resulting from
changes in the international, national, regional or local markets for
any fuel used in connection with DLC's proportionate interest in such
Plant; (d) any change or effect resulting from changes in the North
American, national, regional or local electric transmission systems or
operations thereof; (e) any materially adverse change in or effect on
DLC's proportionate interest in such Plant which is cured (including
by the payment of money) before the Termination Date; and (f) any
order of any court or Governmental Authority applicable to the
providers of generation, transmission or distribution of electricity
generally that imposes restrictions, regulations or other requirements
thereon, including any order with respect to an independent system
operator or retail access in Pennsylvania or Ohio.
(137) "Microwave Tower" shall mean the microwave tower at Beaver
Valley reserved by DLC pursuant to the Electric Facilities Agreement.
(138) "XXXX" means Nuclear Electric Insurance Limited, or any
successor entity.
(139) "NERC" means North American Electric Reliability Council,
and any successor entity thereto.
(140) "Nonqualified Funds" mean any funds not eligible for
contribution to an external trust meeting the requirements of Code
section 468A and Treasury Regulations section 1.468A-5.
(141) "Non-Qualifying Offer" means an offer to a DLC Transferred
NonUnion Employee that is either less than 100% of such employee's
current total annual cash compensation at the time the offer was made
(consisting of base salary and target incentive bonus) or requires, as
a condition of acceptance, a relocation of residence as described in
Section 6.11(g).
16
(142) "NRC" means the United States Nuclear Regulatory Commission
and any successor agency thereto.
(143) "NRC Approvals" means the consent of the NRC pursuant to
Section 184 of the Atomic Energy Act and 10 C.F.R. section 50.80 to
the transfer of DLC's undivided ownership interests in Beaver Valley
Xxxx 0 xxx Xxxxxx Xxxxxx Xxxx 0 to Penn Power, DLC's undivided
ownership interest in Perry to CEIC, and DLC's operating
responsibility for Beaver Valley to FENOC, NRC approval of all
conforming administrative license amendments associated with such
transfers, NRC consent to the transfer of, and approval of any related
amendments to, any nuclear materials licenses associated with such
transfers and any other NRC reviews or approvals required in
connection with the consummation of the transactions contemplated by
this Agreement.
(144) "Nuclear Laws" means all Federal, state, local, provincial,
foreign and international civil and criminal laws, regulations, rules,
ordinances, codes, decrees, judgements, directives, or judicial or
administrative orders relating to the regulation of nuclear power
plants, nuclear source, byproduct and Special Nuclear Materials; the
regulation of Low Level Waste and High Level Wastes; the
transportation and storage of nuclear materials; the regulation of
Safeguards Information; the regulation of nuclear fuel; the enrichment
of uranium; the disposal and storage of high-level radioactive waste,
and spent nuclear fuel; contracts for and payments into the Nuclear
Waste Fund; and as applicable, the Antitrust Laws and Section 5 of the
Federal Trade Commission Act to specified activities or proposed
activities of certain licensees of commercial nuclear reactors, but
shall not include Environmental Laws. "Nuclear Laws" include the
Atomic Energy Act of 1954, as amended (42 U.S.C. section 2011 et
seq.), the Xxxxx-Xxxxxxxx Act (section 170 of the Atomic Energy Act of
1954, as amended); the Energy Reorganization Act of 1974 (42 U.S.C.
section 5801 et seq.); Convention on the Physical Protection of
Nuclear Material Implementation Act of 1982 (Public Law 97 - 351; 96
STAT. 1663); the Foreign Assistance Act of 1961 (22 U.S.C. section
2429 et seq.); the Nuclear Non-Proliferation Act of 1978 (22 U.S.C.
section 3201); the Low-Level Radioactive Waste Policy Act (42 U.S.C.
section 2021b et seq.); the Nuclear Waste Policy Act, (42 U.S.C.
section 10101 et seq.); the Low-Level Radioactive Waste Policy
Amendments Act of 1985 (42 U.S.C. section 2021d, 471); the Energy
Policy Act of 1992 (4 U.S.C. section 13201 et seq.); the Pennsylvania
Radiation Protection Act, 35 P.S. 7110.101 et seq.; the Appalachian
States Low-Level Radioactive Waste Compact, 35 P.S. section 7125.1 et
seq.; the Pennsylvania Low-Level Radioactive Waste Disposal Act., 35
P.S. section 7130.101 et seq.; the Pennsylvania Radiation Protection
Act, 35 P.S.7110.101 et seq.; the Pennsylvania Low-Level Radioactive
Waste Disposal Act, 35 P.S. section 7130.101 et seq.; the Ohio
Low-Level Radioactive Waste Act, ORC Chapter 3747; Ohio Radiation
Control Law, ORC Chapter 3748.
17
(145) "Nuclear Material" means Source Material, Special Nuclear
Material, Low Level Waste, Byproduct Material and Spent Nuclear Fuel.
(146) "Nuclear Waste Fund" means the fund established by the
Department of Energy under the Nuclear Waste Policy Act in which the
Spent Nuclear Fuel Fees to be used for the design, construction and
operation of a High Level Waste Repository and other activities
related to the storage and disposal of Spent Nuclear Fuel and/or High
Level Waste are deposited.
(147) "Nuclear Waste Policy Act" means the Nuclear Waste Policy
Act of 1982, as amended.
(148) "Off-Site Location" means any real property other than the
Real Property.
(149) "PaDEP" means the Pennsylvania Department of Environmental
Protection and any successor agency thereto.
(150) "PaPUC" means the Pennsylvania Public Utility Commission
and any successor agency thereto.
(151) "Party" has the meaning set forth in the preamble to this
Agreement.
(151 A) "Penn Fuel Lease Arrangements" means the Second Amended
and Restated Fuel Lease, dated December 1, 1981, with Amendment No. 1
dated January 22, 1992 between Penn Fuel Corporation, as lessor, and
DLC, as lessee, and certain financing arrangements in connection with
such Second Amended and Restated Fuel Lease.
(152) "Penn Power" means Pennsylvania Power Company, a
Pennsylvania corporation.
(153) "Penn Power Nonqualified Decommissioning Funds" means the
external trust funds that do not meet the requirements of Code section
468A and Treasury Regulations section 1.468-5 maintained by Penn
Power.
(154) "Penn Power Qualified Decommissioning Funds" means the
external trust funds that meet the requirements of Code section 468A
and Treasury Regulations section 1.468-5, maintained by Penn Power
with respect to Beaver Valley.
(155) "Permits" mean, with respect to the DLC Nuclear Assets, any
permits, licenses (including the NRC 10 C.F.R. Part 50 Nuclear
Licenses), registrations, franchises and other authorizations,
consents and approvals of Governmental Authorities (but in each case
excluding Environmental Permits).
18
(156) "Permitted Encumbrances" means the permitted liens and
encumbrances as set forth in Schedule 1.1 (156).
(157) "Perry CAPCO Agreements" means all the contractual
arrangements associated with CAPCO relating to Perry Xxxx 0, including
those contracts listed in Schedule 1.1(157).
(158) "Perry Unit 1" means the nuclear generation plant known as
Perry Unit No. 1.
(159) "Perry Xxxx 0 Xxxxxxxxxxxxxxx Xxxxxx" has the meaning set
forth in Section 6.19.3 (a) (i).
(160) "Perry Xxxx 0 Xxxxxxxxxxxxxxx Xxxxxxxxx" has the meaning
set forth in Section 6.19.3 (a) (i).
(161) "Perry Unit 1 Nonqualified Decommissioning Funds" means the
external trust funds that do not meet the requirements of Code section
468A and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Perry Xxxx 0.
(162) "Perry Unit 1 Qualified Decommissioning Funds" means the
external trust funds that meet the requirements of Code section 468A
and Treasury Regulations section 1.468A-5, maintained by DLC with
respect to Perry Unit 1.
(163) "Person" means any individual, partnership, limited
liability company, joint venture, corporation, trust, unincorporated
organization, or Governmental Authority.
(164) "Plant" means Beaver Valley or Perry Unit 1.
(165) "Plants" mean, collectively, Beaver Valley and Perry Unit
1.
(166) "Proposed Final Adjustment" has the meaning set forth in
Section 3.2(c).
(167) "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, in connection
with this Agreement, whether before or after the date hereof,
regardless of the manner or medium in which it is furnished and all
analyses, reports, tests or other information created or prepared by,
or on behalf of, a Party during the performance of "Phase I" or "Phase
II" environmental site assessments. Proprietary Information does not
include information that: (a) is or becomes generally available to the
public, other than as a result of a disclosure by the other Party or
19
its Representatives; (b) was available to the other Party on a
nonconfidential basis prior to its disclosure by the Party or its
Representatives; (c) becomes available to the other Party on a
nonconfidential basis from a Person, other than the Party or its
Representatives, who is not otherwise bound by a confidentiality
agreement with the Party or its Representatives, or is not otherwise
under any obligation to the Party or any of its Representatives not to
transmit the information to the other Party or its Representatives; or
(d) is independently developed by the other Party.
(168) "PUCO" means the Public Utilities Commission of the State
of Ohio and any successor agency thereto.
(169) "Qualified Funds" mean any funds eligible for contribution
to an external trust meeting the requirements of Code section 468A and
Treasury Regulations section 1.468A-5.
(170) "Qualifying Offer" means an offer to a DLC Transferred
Non-Union Employee of the same or similar job that is at least 100% of
such employee's current total annual cash compensation at the time the
offer was made (consisting of base salary and target incentive bonus).
(171) "Real Property" has the meaning set forth in Section
2.1(a). Any reference to the Real Property includes, by definition,
the surface and subsurface elements, including the soils and
groundwater present at the Real Property, and any reference to items
"at the Real Property" shall include all items "at, on, in, upon,
over, across, under and within" the Real Property.
(172) "Real Property Leases" means all real property leases
listed in Schedule 4.5 under which DLC is a lessee or lessor and which
relate to the DLC Nuclear Assets.
(173) "Regulated Substances" means (a) any petrochemical or
petroleum products, oil or coal ash, radioactive materials, radon gas,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and dielectric fluid containing
polychlorinated biphenyls; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "hazardous constituents,"
"restricted hazardous materials," "extremely hazardous substances,"
"toxic substances," "contaminants," "pollutants," "toxic pollutants"
or words of similar meaning and regulatory effect under any applicable
Environmental Law; and (c) any other chemical, material or substance,
exposure to which or whose discharge, emission, disposal or Release is
prohibited, limited or regulated by any applicable Environmental Law,
but in all events shall exclude any Nuclear Material.
(174) "Regulatory Approvals" means any consent or approval of,
filing with, or notice to, any Governmental Authority that is
necessary for the execution and delivery of this Agreement by the
20
referenced Party or the consummation thereby of the transactions
contemplated hereby, other than such consents, approvals, filings or
notices which, if not obtained or made, will not prevent such Party
from performing its material obligations hereunder.
(175) "Regulatory Material Adverse Effect" shall occur where a
Final Order with respect to Required Regulatory Approvals contains
terms and conditions that are materially adverse to the financial
condition, prospects, properties, operations or results of operations
of the affected Party, taken as a whole including all Subsidiaries and
Affiliates, to which the terms and conditions of such Final Order
apply, provided that, in addition to the foregoing, a Final Order with
respect to Required Regulatory Approvals shall be deemed to constitute
a Regulatory Material Adverse Effect (i) as to FE Subsidiaries or
their Affiliates, if it prohibits such FE Subsidiaries or Affiliates
from transferring their transmission assets to American Transmission
Systems, Inc. (or its successor and assigns), is inconsistent with the
FERC's determination in Ohio Edison Co. et al., 81 FERC P. 61,110
(1997) that "we expect FirstEnergy to participate in the Midwest ISO
or another appropriate ISO," or requires the FE Subsidiaries or their
Affiliates to divest generating plants other than Avon Lake, Newcastle
or Niles, and (ii) as to DLC, if it disallows from recovery in rates a
material portion of the expenses related to the Generation Exchange
(as such term is defined in the Exchange Agreement).
(176) "Release" means release, spill, leak, discharge, dispose
of, pump, pour, emit, empty, inject, xxxxx, dump or allow to escape
into or through the environment.
(177) "Remediation" means any action taken in the investigation,
removal, confinement, cleanup, treatment, or monitoring of an
Environmental Condition on Real Property or Off-Site Location,
including, (i) obtaining any Permits or Environmental Permits required
for such remedial activities, and (ii) implementation of any
engineering controls and institutional controls. The term
"remediation" includes (1) any action which constitutes "removal"
action or "remedial action" as defined by Section 101 of CERCLA, 42
U.S.C. section 6901(23) and (24); (2) any action which constitutes a
"response" as defined by Section 102 of the Pennsylvania Hazardous
Sites Cleanup Act, 35 P.S. section 6020.103 or (3) any action which
constitutes a "remedy" or "remedial activities" as defined by Ohio
Rev. Code Xxx. section 3746.01(N).
(178) "Representatives" means the DLC Representatives and the
Specified FE Subsidiaries' Representatives, as applicable.
(179) "Required Regulatory Approvals" means with respect to a
Party, any consent or approval of, filing with, or notice to, any
Governmental Authority that is necessary for the execution and
delivery of this Agreement by such Party or the consummation by such
Party of the transactions contemplated hereby and thereby, other than
such consents, approvals, filings or notices which are not required in
21
the ordinary course to be obtained prior to the DLC Nuclear Closing
and transfer of the DLC Nuclear Assets or which, if not obtained or
made, will not prevent such Party from performing its material
obligations hereunder.
(180) "Revenue Bonds" has the meaning assigned thereto in Section
6.17(a)(i).
(181) "Safeguards Information" means information not otherwise
classified as National Security Information or Restricted Data under
NRC's regulations which specifically identifies an NRC licensee's
detailed (1) security measures for the physical protection of Special
Nuclear Material, or (2) security measures for the physical protection
and location of certain plant equipment vital to the safety of
production or utilization facilities.
(182) "SAPS" means the real and personal property comprising the
decommissioned Shippingport Atomic Power Station described in Schedule
1.1(182).
(183) "SEC" means the Securities and Exchange Commission and any
successor agency thereto.
(184) "Shippingport Contract" means Xxxxxxxx XX-XX00-00XX00000,
as redesignated (36-1)-292, or No. 76-C-11-0292 between DLC and the
United States Energy Research and Development Administration, and its
successor the Department of Energy.
(185) "Shippingport Site Buildings" means those buildings
described in Schedule 1.1(185).
(186) "Source Material" means: (1) uranium or thorium; or any
combination thereof, in any physical or chemical form, or (2) ores
which contain by weight one-twentieth of one percent (0.05%) or more
of: (i) uranium, (ii) thorium, or (iii) any combination thereof.
Source Material does not include Special Nuclear Material.
(187) "Special Nuclear Material" means plutonium, uranium-233,
uranium enriched in the isotope-233 or in the isotope-235, and any
other material that the NRC determines to be "Special Nuclear
Material." Special Nuclear Material also refers to any material
artificially enriched by any of the above-listed materials or
isotopes.
(188) "Specified FE Subsidiaries" means, collectively, Penn Power
and CEIC, and "Specified FE Subsidiary" means either one of them.
(189) "Specified FE Subsidiaries' Indemnifiable Losses" has the
meaning set forth in Section 8.3.
22
(190) "Specified FE Subsidiaries' Indemnitee" means each
Specified FE Subsidiary, its officers, directors, employees,
shareholders, Affiliates and agents.
(191) [Intentionally omitted.]
(192) "Specified FE Subsidiaries' Representatives" means the
authorized representatives of each Specified FE Subsidiary, including
its professional and financial advisors.
(193) "Specified FE Subsidiaries' Required Regulatory Approvals"
means, the Required Regulatory Approvals referred to in Schedule
5.3(b).
(194) "Spent Nuclear Fuel" means fuel that has been withdrawn
from a nuclear reactor following irradiation and has not been
chemically separated into its constituent elements by reprocessing.
Spent Nuclear Fuel includes the Special Nuclear Material, Byproduct
Material, source material, and other radioactive materials associated
with nuclear fuel assemblies.
(195) "Spent Nuclear Fuel Fees" means these fees assessed on
electricity generated at the Plants and sold pursuant to the
Department of Energy Standard Contract for Disposal of Spent Nuclear
Fuel and/or High Level Waste, as provided in Section 302 of the
Nuclear Waste Policy Act and 10 C.F.R. Part 961, as the same may be
amended from time to time.
(196) "Subsidiary" when used in reference to any Person means any
entity of which outstanding securities, having ordinary voting power
to elect a majority of the Board of Directors or other Persons
performing similar functions of such entity are owned directly or
indirectly by such Person.
(197) "Tangible Personal Property" has the meaning set forth in
Section 2.1(c).
(198) "Taxes" means all taxes, charges, fees, levies, penalties
or other assessments imposed by any Federal, state, local or foreign
taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, withholding, social
security, gross receipts, license, stamp, occupation, employment or
other taxes, including any interest, penalties or additions
attributable thereto.
(199) "Tax Return" means any return, report, information return,
declaration, claim for refund or other document (including any
schedule or related or supporting information) required to be supplied
to any taxing authority with respect to Taxes including amendments
thereto.
23
(200) "Termination Date" has the meaning set forth in section
9.1(b).
(201) "Third Party Claim" means any claim, action, or proceeding
made or brought by any Person who is not (i) a Party to this
Agreement, or (ii) an Affiliate of a Party to this Agreement.
(202) "Transferable Permits" means those Permits and
Environmental Permits which may be transferred by DLC to Specified FE
Subsidiaries without a filing with, notice to, consent of or approval
of any Governmental Authority, as set forth in Schedule 1.1(202).
(203) "Transfer Taxes" means any real property transfer or gains
tax, sales tax, conveyance fee, use tax, stamp tax, stock transfer tax
or other similar tax, including any related penalties, interest and
additions to tax.
(203A) "Transition Committee" has the meaning set forth in
Section 6.1.1(b)(i).
(203B) "Transition Plan" has the meaning set forth in Section
6.1.1(b)(i).
(203C) "Transition Team" has the meaning set forth in Section
6.1.1(b)(i).
(204) "USEPA" means the United States Environmental Protection
Agency and any successor agency thereto.
(205) "WARN Act" means the Federal Worker Adjustment Retraining
and Notification Act of 1988, as amended.
(206) "Warranty Deed" means a special warranty deed, in the Form
of Exhibit G hereto.
(207) "Year 2000 Compliant" means, with respect to any Party,
that the Computer Systems of such Party will correctly differentiate
between years, in different centuries, that end in the same two
digits, and will accurately process date/time data (including, but not
limited to, calculating, comparing, and sequencing) from, into, and
between the twentieth and twenty-first centuries, including leap year
calculations. "Year 2000 Compliance" has a meaning correlative to the
foregoing.
1.2 Certain Interpretive Matters. In this Agreement, unless the
context otherwise requires, the singular shall include the plural, the masculine
shall include the feminine and neuter, and vice versa. The term "includes" or
"including" shall mean "including without limitation." In addition, (i)
references to a Section, Article, Exhibit or Schedule shall mean a Section,
Article, Exhibit or Schedule of this Agreement; (ii) reference to a given
agreement or instrument shall be a reference to that agreement or instrument as
modified, amended, supplemented or restated through the date as of which such
reference is made; (iii) references to any Person shall include its permitted
successors and assigns and, in the case of any Governmental Authority, any
Person succeeding to its functions and capacities; and (iv) references to laws,
24
rules and regulations shall include such laws, rules and regulations as they may
from time to time be amended, modified or supplemented.
1.3 CAPCO Agreements to Govern. The Parties agree that, unless this
Agreement expressly provides otherwise, the Parties' ownership, operation and
maintenance of each Plant shall be governed by the CAPCO Agreements up to the
DLC Nuclear Closing Date in respect of such Plant. Unless otherwise restricted
under this Agreement, the CAPCO Agreements will govern and control the Parties'
ownership, operation and maintenance of each Plant prior to the DLC Nuclear
Closing Date in respect of such Plant.
1.4 DLC's Interest in Assets. The Parties acknowledge that DLC has a
forty-seven and one-half percent (47.5%) undivided interest in Beaver Valley
Unit 1 and the DLC Nuclear Assets relating thereto, a thirteen and seventy-four
hundredths percent (13.74%) undivided interest in Beaver Valley Unit 2 and the
DLC Nuclear Assets relating thereto and a thirteen and seventy-four hundredths
percent (13.74%) undivided interest in Perry Unit 1 and the DLC Nuclear Assets
relating thereto. All references in this Agreement to DLC's right, title and
interest in such Plants and assets, and rights, liabilities and obligations in
connection therewith, shall be construed in this context.
ARTICLE II
CONVEYANCE OF DLC NUCLEAR ASSETS
2.1 Transfer of DLC Nuclear Assets. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, at the DLC Nuclear
Closing DLC will assign, convey, transfer and deliver to Penn Power, in respect
of Beaver Valley, and CEIC, in respect of Perry Unit 1, and Penn Power, in
respect of Beaver Valley, and CEIC, in respect of Perry Xxxx 0, will assume and
acquire from DLC, free and clear of all Encumbrances (except for Permitted
Encumbrances), all right, title and interest of DLC in and to all of the assets
(except for Excluded Assets) constituting the Plants, or used in and necessary
to generate electricity from the Plants and DLC's undivided percentage ownership
interest in those assets described below, each as in existence on the DLC
Nuclear Closing Date (collectively, "DLC Nuclear Assets"):
(a) Those certain parcels of real property owned by DLC
relating to the Plants, together with all building, facilities and other
improvements thereon and all appurtenances thereto, as described in Schedule
2.1(a) (the "Real Property");
(b) All Inventories related exclusively to the Plants;
(c) All machinery ( mobile or otherwise), equipment (including
communications equipment), vehicles, tools, furniture and furnishings and other
personal property included in the DLC Nuclear Assets that are owned by DLC and
located on the Real Property on the DLC Nuclear Closing Date, including the
items of personal property jointly owned by DLC and FE Subsidiaries and used
principally in the operation of the Plants that are in the possession of DLC and
listed in Schedule 2.1(c), other than property used or primarily usable as part
25
of the DLC Transmission Assets or otherwise constituting part of the Excluded
Assets (collectively, "Tangible Personal Property");
(d) Subject to the provisions of Section 6.6(c), all DLC Nuclear
Agreements, provided, however, in the event the Exchange Closing and the DLC
Nuclear Closing do not occur on the same day, for the Common CAPCO Agreements
which shall not be assigned and assumed as otherwise contemplated hereunder but
shall be so assigned and assumed at the later of such Exchange Closing or DLC
Nuclear Closing and then pursuant to a separate Assignment and Assumption
Agreement, and, provided further, however, that DLC shall not assign its
interest as operator under the Beaver Valley Unit 2 Operating Agreement to Penn
Power on the DLC Nuclear Closing Date but DLC shall make arrangements to provide
that Penn Power (or its designee) will be responsible for operation and
maintenance of Beaver Valley after the DLC Nuclear Closing, and DLC shall
terminate all involvement under the Beaver Valley Unit 2 Operating Agreement on
the date on which the Beaver Valley Unit 2 Lease Indentures are terminated;
(e) Subject to the provisions of Section 6.6(c), all Real
Property Leases;
(f) All Transferable Permits;
(g) All books, operating records, operating, safety and
maintenance manuals, engineering design plans, documents, blueprints and
as-built plans, specifications, procedures and similar items of DLC relating
specifically to the design, construction, licensing, regulation, operation or
Decommissioning of the DLC Nuclear Assets and necessary for the licensing,
operation and Decommissioning of the Plants in the possession of DLC other than
such items which are proprietary to third parties and accounting records;
(h) Fuel Supplies and Spent Nuclear Fuel;
(i) All unexpired, transferable warranties and guarantees from
third parties with respect to any DLC Nuclear Asset and listed in Schedule
2.1(i);
(j) The names of the Plants. It is expressly understood that DLC
is not assigning or transferring to Specified FE Subsidiaries any right to use
the name "Duquesne," "Duquesne Light Company," "DQE", "DQE, Inc.", or other
trade names, trademarks, service marks, corporate names and logos or any part,
derivative or combination thereof;
(k) All drafts, memoranda, reports, information, technology, and
specifications relating to DLC's plans for Year 2000 Compliance with respect to
the Plants;
(l) The Intellectual Property described on Schedule 2.1(l);
(m) The DLC Qualified Decommissioning Funds and the DLC
Nonqualified Decommissioning Funds;
(n) The GE Settlement Agreement;
26
(o) The DLC Nuclear Insurance Policies and DLC's member account
balance in respect of all ANI and XXXX nuclear liabilities, property damage or
business interruption policies; and
(p) All right, title and interest of DLC in and to the 10 C.F.R.
Part 50 Nuclear Licenses.
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, nothing in this Agreement will constitute a transfer to Penn Power,
in respect of Beaver Valley, and CEIC, in respect of Perry Xxxx 0 of, or be
construed as conferring on Penn Power, in respect of Beaver Valley, and CEIC, in
respect of Perry Unit 1, and Penn Power, in respect of Beaver Valley, and CEIC,
in respect of Perry Unit 1 is not acquiring, any right, title or interest in or
to the following specific assets which are associated with the DLC Nuclear
Assets, but which are hereby specifically excluded from the transfer to Penn
Power, in respect of Beaver Valley, and CEIC, in respect of Perry Xxxx 0 and the
definition of DLC Nuclear Assets herein (the "Excluded Assets"):
(a) The DLC Transmission Assets and the assets being transferred
by DLC pursuant to the Electric Facilities Agreement (including those certain
assets, facilities, agreements, and other property used or primarily usable as
part of the DLC Transmission Assets);
(b) Certain switches and meters in the Plants, gas facilities,
revenue meters and remote testing units, drainage pipes and systems and certain
transmission towers and poles, as identified as being retained by DLC in the
Electric Facilities Agreement;
(c) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
(d) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), and any income, sales, payroll or other
tax receivables;
(e) The rights of DLC and its Affiliates to the names
"Duquesne," "Duquesne Light Company," "DQE", "DQE, Inc.", or other trade names,
trademarks, service marks, corporate names or logos, or any part, derivative or
combination thereof;
(f) All tariffs, agreements and arrangements to which DLC is a
party for the purchase or sale of electric capacity and/or energy or for the
purchase of transmission or ancillary services;
(g) Except as provided in Section 2.11, or in the case of causes
of action against third parties (including indemnification and contribution)
relating to an Environmental Condition or Regulated Substance or arising under
Environmental Laws, the rights of DLC in and to any causes of action against
third parties (including indemnification and contribution) relating to any Real
Property or Tangible Personal Property, Permits, Environmental Permits, Taxes,
Real Property Leases or DLC Nuclear Agreements, if any, and not relating to the
27
Assumed Liabilities including any claims for refunds, prepayments, offsets,
recoupment, insurance proceeds, condemnation awards, judgments and the like,
whether received as payment or credit against future liabilities, relating
specifically to the Plants or the Real Property and relating to any period prior
to the applicable DLC Nuclear Closing Date;
(h) Any and all of DLC's rights and interests in any contract
that is not a DLC Nuclear Agreement or that is an intercompany transaction
between DLC and an Affiliate of DLC, whether or not such intercompany
transaction relates to the provision of goods and services, payment
arrangements, intercompany charges or balances, or the like;
(i) DLC's accrued interest in refunds of reserve premiums and/or
dividends and/or distributions of earnings based on membership account
balance(s) and insurance premiums in respect of all ANI and XXXX nuclear
liabilities, property damage or business interruption policies in respect of the
Plants up to and including the DLC Nuclear Closing Date, irrespective of when
such refunds and/or dividends are actually paid;
(j) The J&L Specialty Steel Transformer;
(k) The Beaver Valley Unit 2 Lease Indentures Documents;
(l) The telecommunication equipment listed in Schedule 2.2(l);
and
(m) The Microwave Tower.
2.3 Assumed Liabilities. On the DLC Nuclear Closing Date with respect
to the Plants, each Specified FE Subsidiary shall deliver to DLC an Assignment
and Assumption Agreement pursuant to which each Specified FE Subsidiary (Penn
Power, in respect of Beaver Valley, and CEIC, in respect of Perry Unit 1) shall
assume and agree to discharge when due, without recourse to DLC, and shall
release DLC from all of the following liabilities and obligations of DLC, direct
or indirect, known or unknown, absolute or contingent, which relate to, or arise
by virtue of DLC's ownership of the DLC Nuclear Assets (other than Excluded
Liabilities) with respect to the Plants (Penn Power, in respect of Beaver
Valley, and CEIC, in respect of Perry Unit 1), in accordance with the respective
terms and subject to the respective conditions thereof (collectively, "Assumed
Liabilities"):
(a) All liabilities and obligations of DLC arising on or after
the DLC Nuclear Closing Date under the DLC Nuclear Agreements (except, in the
event the Exchange Closing and the DLC Nuclear Closing do not occur on the same
day, for the Common CAPCO Agreements which shall not be assigned and assumed as
otherwise contemplated hereunder but shall be so assigned and assumed at the
later of such Exchange Closing or such DLC Nuclear Closing and then pursuant to
a separate Assignment and Assumption Agreement), the Real Property Leases and
the Transferable Permits in accordance with the terms thereof, including the DLC
Nuclear Agreements entered into by DLC (i) prior to the date hereof and (ii)
after the date hereof consistent with the terms of this Agreement, except in
each case to the extent such liabilities and obligations, but for a breach or
default by DLC, would have been paid, performed or otherwise discharged on or
28
prior to such DLC Nuclear Closing Date or to the extent the same arise out of
any such breach or default or out of any event which after the giving of notice
or passage of time would constitute a default by DLC;
(b) All liabilities and obligations associated with the DLC
Nuclear Assets in respect of Taxes for which Specified FE Subsidiaries are
liable pursuant to Sections 3.4 or 6.9(a) hereof;
(c) All liabilities, responsibilities and obligations arising
under Environmental Laws or relating to Environmental Conditions or Regulated
Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation is known or unknown, contingent or accrued, as of the applicable DLC
Nuclear Closing Date, including: (i) costs of compliance (including capital,
operating and other costs) relating to any violation or alleged violation of
Environmental Laws occurring prior to, on or after such DLC Nuclear Closing
Date, with respect to the ownership or operation of the applicable DLC Nuclear
Assets; (ii) property damage or natural resource damage (whether such damages
were manifested before or after the applicable DLC Nuclear Closing Date) arising
from Environmental Conditions or Releases of Regulated Substances at, on, in,
under, adjacent to, or migrating from any DLC Nuclear Assets prior to, on, or
after the applicable DLC Nuclear Closing Date; (iii) any Remediation (whether or
not such Remediation commenced before the applicable DLC Nuclear Closing Date or
commences after the applicable DLC Nuclear Closing Date) of Environmental
Conditions or Regulated Substances that are present or have been Released prior
to, on or after such DLC Nuclear Closing Date, at, on, in, adjacent to or
migrating from the DLC Nuclear Assets; (iv) any violations or alleged violations
of Environmental Laws occurring on or after the applicable DLC Nuclear Closing
Date with respect to the ownership or operation of any DLC Nuclear Assets; (v)
any bodily injury or loss of life arising from Environmental Conditions or
Releases of Regulated Substances at, on, in, under, adjacent to or migrating
from any DLC Nuclear Assets on or after the applicable DLC Nuclear Closing Date;
(vi) any bodily injury, loss of life, property damage, or natural resource
damage arising from the storage, transportation, treatment, disposal, discharge,
recycling or Release, at any Off-Site Location, or arising from the arrangement
for such activities, on or after the applicable DLC Nuclear Closing Date, of
Regulated Substances generated in connection with the ownership or operation of
the DLC Nuclear Assets; and (vii) any Remediation of any Environmental Condition
or Release of Regulated Substances arising from the storage, transportation,
treatment, disposal, discharge, recycling or Release, at any Off-Site Location,
or arising from the arrangement for such activities, on or after the applicable
DLC Nuclear Closing Date, of Regulated Substances generated in connection with
the ownership or operation of the DLC Nuclear Assets (collectively, "Assumed
Environmental Liabilities");
(d) All liabilities and obligations of DLC with respect to the
DLC Nuclear Assets under the agreements or consent orders with Governmental
Authorities set forth on Schedule 2.3(d) after the applicable DLC Nuclear
Closing;
(e) Any Tax that may be imposed by any Federal, state or local
government on the ownership, sale (except with respect to Transfer Taxes as
provided in Section 6.9(a)), operation or use of the applicable DLC Nuclear
29
Assets on or after the DLC Nuclear Closing Date, except for any Income Taxes
attributable to income received by DLC;
(f) All liabilities and obligations of DLC in respect of
Decommissioning the DLC Nuclear Assets, and the Decommissioning Costs relating
thereto whether arising prior to, on or after the applicable DLC Nuclear Closing
Date (collectively, "Assumed Decommissioning Liabilities");
(g) All liabilities, responsibilities and obligations arising
under or relating to Nuclear Laws or relating to any claim in respect of Nuclear
Materials based on common law or Environmental Laws, whether such liability,
responsibility or obligation is known or unknown, contingent or accrued and
whether arising or occurring prior to, on or after the DLC Nuclear Closing Date,
including any and all asserted or unasserted liabilities or obligations to third
parties (including employees) for personal injury or tort, or similar causes of
action arising out of the ownership or operation of the DLC Nuclear Assets prior
to, on or after the DLC Nuclear Closing Date, including liabilities,
responsibilities and obligations arising out of or resulting from the
transportation, treatment, storage or disposal of Low Level Waste or other
Nuclear Materials, including liabilities, responsibilities and obligations
arising out of or resulting from a "nuclear incident" or "precautionary
evacuation" (as such terms are defined in the Atomic Energy Act) at the Plants,
or any other licensed nuclear reactor site in the United States, or in the
course of the transportation of Nuclear Materials to or from the Plants or any
other site prior to, on or after the DLC Nuclear Closing Date, including
liability for any deferred premiums assessed in connection with such a nuclear
incident or precautionary evacuation under any applicable NRC or industry
retrospective rating plan or insurance policy, including any mutual insurance
pools established in compliance with the requirements imposed under Section 170
of the Atomic Energy Act and 10 C.F.R. Part 140 or 10 C.F.R. section 50.54(w),
provided, however, that in respect of liabilities, responsibilities and
obligations under Section 211 of the Energy Reorganization Act and 10 C.F.R.
50.7 in respect of Beaver Valley, Penn Power as transferee hereunder shall only
be responsible for liabilities, responsibilities or obligations arising or
occurring on or after the DLC Nuclear Closing (collectively, "Assumed Nuclear
Liabilities");
(h) All liabilities, responsibilities and obligations in respect
of Spent Nuclear Fuel, whether such liability, responsibility or obligation is
known or unknown, contingent or accrued and whether arising or occurring prior
to, on or after the DLC Nuclear Closing Date except as specified in the first
sentence of Section 2.9 (collectively, "Assumed Spent Fuel Liabilities"); and
(i) All of DLC's rights (except as provided under the CAPCO
Settlement Agreement) and obligations under all CAPCO Agreements, except to the
extent otherwise specifically provided in the applicable DLC Assignment and
Assumption Agreement and except, in the event the Exchange Closing and the DLC
Nuclear Closing do not occur on the same day, for the Common CAPCO Agreements
which shall not be assigned and assumed as otherwise contemplated hereunder but
shall be so assigned and assumed at the later of such Exchange Closing or such
DLC Nuclear Closing and then pursuant to a separate Assignment and Assumption
Agreement.
30
2.4 Excluded Liabilities. Notwithstanding anything to the contrary in
this Agreement, no Specified FE Subsidiary shall assume or be obligated to pay,
perform or otherwise discharge the following specified liabilities or
obligations of DLC, (provided, however, that DLC retains such liabilities and
obligations only to the extent these liabilities and obligations currently are
imposed on DLC under the CAPCO Agreements and provided, further, that nothing in
this Section 2.4 shall be construed to impose any continuing liability or
obligation on DLC in respect of Assumed Decommissioning Liabilities, Assumed
Environmental Liabilities (except as expressly provided in Sections 2.4(e), (g)
and (h)), Assumed Nuclear Liabilities and Assumed Spent Fuel Liabilities) (the
"Excluded Liabilities"):
(a) Any liabilities or obligations of DLC in respect of any
Excluded Assets or other assets of DLC that are not DLC Nuclear Assets;
(b) Any liabilities or obligations of DLC with respect to Taxes
attributable to DLC's ownership, operation or use of DLC Nuclear Assets for
taxable periods, or portions thereof, ending before the DLC Nuclear Closing
Date, except for Taxes for which Specified FE Subsidiaries are liable pursuant
to Section 3.4 hereof and except for liabilities described in Section 2.3 that
may be characterized as "Taxes";
(c) Any liabilities or obligations of DLC accruing under any of
the DLC Nuclear Agreements prior to the DLC Nuclear Closing Date;
(d) Any and all asserted or unasserted liabilities or
obligations to third parties (including employees) for personal injury or tort,
or similar causes of action arising during or attributable to the period prior
to the DLC Nuclear Closing Date, to the extent these liabilities or obligations
are not assumed by Specified FE Subsidiaries by operation of law;
(e) Any fines, penalties and associated costs for defending
related enforcement actions, resulting from any violation or alleged violation
of Environmental Laws or Nuclear Laws with respect to the ownership or operation
of the DLC Nuclear Assets occurring prior to the DLC Nuclear Closing Date;
(f) Any payment obligations of DLC pursuant to DLC Nuclear
Agreements for goods delivered or services rendered prior to the DLC Nuclear
Closing Date, including, but not limited to, rental payments pursuant to the
Real Property Leases;
(g) Any liabilities, responsibilities and obligations of DLC
arising under Environmental Laws or relating to Environmental Conditions or
Regulated Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability, responsibility or
obligation was known or unknown, contingent or accrued, which relates to (i) any
bodily injury, loss of life, property damage or natural resource damage arising
from the storage, transportation, treatment, disposal, discharge, recycling or
Release, at any Off-Site Location, or arising from the arrangement for such
activities, prior to the DLC Nuclear Closing Date, of Regulated Substances
generated in connection with the ownership or operation of the DLC Nuclear
Assets; or (ii) any Remediation of any Environmental Condition or Regulated
Substance at any Off-Site Location, arising from the storage, transportation,
treatment, disposal, discharge, recycling or Release, at such Off-Site Location,
or arising from the arrangement for such activities, prior to the DLC Nuclear
31
Closing Date, of Regulated Substances generated in connection with, in each
case, the ownership or operation of the DLC Nuclear Assets; provided, that for
purposes of this paragraph, "Off-Site Location" does not include any location to
which Regulated Substances disposed of or Released at the DLC Nuclear Assets
have migrated;
(h) Any liability to third parties (including employees) for
bodily injury or loss of life (whether or not such injury or loss arose or was
made manifest on or after the DLC Nuclear Closing Date), to the extent caused
(or allegedly caused) by Environmental Conditions or the Release of Regulated
Substances at, on, in, under, or adjacent to, or migrating from, the DLC Nuclear
Assets prior to the DLC Nuclear Closing Date;
(i) Any liability of DLC arising out of a breach by DLC or any
Affiliates of DLC of any of their respective obligations under this Agreement or
the Ancillary Agreements;
(j) Any liability of DLC in respect of Department of Energy
Decontamination and Decommissioning fees due up to the time of the DLC Nuclear
Closing as described in (and limited by) Section 2.10;
(k) Any liability in respect of Spent Nuclear Fuel specified as
belonging to DLC in the first sentence of Section 2.9; and
(l) Any liability specified as belonging to DLC pursuant to
Section 6.11(o).
2.5 Control of Litigation. The Parties agree and acknowledge that DLC
shall be entitled exclusively to control, defend and settle any litigation,
administrative or regulatory proceeding, and any investigation or Remediation
activity (including without limitation any environmental mitigation or
Remediation activities), (i) arising out of or related to any Excluded
Liabilities or (ii) in respect of Beaver Valley, where DLC, as operator of the
Plant, would have been entitled to control such litigation under the CAPCO
Agreements as in effect as of the DLC Nuclear Closing Date in respect of Beaver
Valley, and in each case Specified FE Subsidiaries shall agree to cooperate
fully in connection therewith, provided, however, that, in respect of any such
activity described in clause (ii), DLC shall give the applicable Specified FE
Subsidiary reasonable advance notice and opportunity to comment upon any
settlement, which comments shall be fully considered.
2.6 Fuel Supplies. (a) At the DLC Nuclear Closing, DLC will sell,
assign, convey, transfer and deliver to each Specified FE Subsidiary its rights,
title and interest in and to the Fuel Supplies related to the operation of the
applicable DLC Nuclear Assets (Beaver Valley in respect of Penn Power, and Perry
Unit 1, in respect of CEIC) and the applicable Specified FE Subsidiary shall pay
DLC an amount equal to the actual cost of such Fuel Supplies on DLC's books and
records, as established by invoices (and reasonable supporting materials
establishing the actual cost of such Fuel Supplies) with such invoices and
supporting materials to be delivered to the Specified FE Subsidiaries not later
than three (3) Business Days prior to the scheduled date of the DLC Nuclear
Closing.
32
(b)(i) The Parties acknowledge that, absent exercise by the
Specified FE Subsidiaries of the option provided in clause (ii) below, DLC shall
not be obligated to renew the Penn Fuel Lease Arrangements which are due to
expire on September 29, 1999, but DLC may, at its option, elect to renew such
arrangements to provide for DLC's requirements for Fuel Supplies from such
expiration date through the DLC Nuclear Closing Date (the "DLC Interim Fuel
Requirements").
(ii) DLC agrees that if the Specified FE Subsidiaries
request, in writing, prior to July 10, 1999 that DLC renew the Penn Fuel Lease
Arrangements for a period after the DLC Nuclear Closing Date, and agree in
writing to pay any incremental costs associated with the renewal by DLC and
obtaining all consents in respect of such arrangements, DLC will use
Commercially Reasonable Efforts to effect such renewal and to obtain any
consents required in connection therewith.
(iii) In connection with the DLC Interim Fuel Requirements,
the Parties agree to discuss whether it would be mutually economically
advantageous for DLC to obtain such requirements from Specified FE Subsidiaries
(or an Affiliate of either of them), provided, however, that this clause shall
neither require DLC to obtain such requirements from Specified FE Subsidiaries
(or an Affiliate of either of them) nor obligate Specified FE Subsidiaries (or
an Affiliate of either of them) to supply such requirements to DLC.
2.7 Inventories. Schedule 2.7 lists the Inventories that exist as of
the date of this Agreement, together with the net book values of such
Inventories. At the DLC Nuclear Closing, as part of the DLC Nuclear Assets in
respect of the applicable Plant, DLC will transfer to each Specified FE
Subsidiary (Penn Power in respect of Beaver Valley and CEIC in respect of Perry
Unit 1) DLC's interest in Inventories at such Plant.
2.8 [Intentionally Omitted.]
2.9 Spent Nuclear Fuel Fees and Ownership Between the date hereof and
the DLC Nuclear Closing Date for the Plants, DLC will pay all Spent Nuclear Fuel
Fees and any other fees associated with its share of electricity generated at
such Plant and sold prior to such closing date, and Specified FE Subsidiaries
shall have no liability or responsibility in respect thereof. Specified FE
Subsidiaries shall pay and discharge all fees and expenses associated with their
share of the nuclear fuel consumed in the Plants and sold from and after such
closing date, and DLC shall have no liability or responsibility in respect
thereof. Specified FE Subsidiaries shall assume title to, and responsibility for
the storage and disposal of Spent Nuclear Fuel presently stored at each Plant
(including any such fuel which may have been used in connection with generating
DLC's share of electricity at such Plant) as of the DLC Nuclear Closing Date for
such Plant. DLC shall assign to each Specified FE Subsidiary the applicable
Department of Energy's Standard Spent Fuel Disposal Contract for each Plant and
shall provide the required notice to the Department of Energy within 90 days of
transfer of title to Spent Nuclear Fuel.
2.10 Department of Energy Decontamination and Decommissioning Fees.
DLC will continue to pay all Department of Energy Decontamination and
Decommissioning Fees relating to its share of the nuclear fuel purchased and
consumed at each Plant prior to the DLC Nuclear Closing Date for such Plant,
including all annual Special Assessment invoices to be issued after such closing
33
date by the Department of Energy, as contemplated by its regulations at 10
C.F.R. Part 766 implementing Sections 1801, 1802, and 1803 of the Atomic Energy
Act, but DLC shall have no liability in respect of any such fees thereafter,
whether such fees are assessed with respect to the period prior to, on or after
the DLC Nuclear Closing Date.
2.11 Property Tax Litigation. Notwithstanding the provisions of the
Perry CAPCO Agreements, CEIC will receive the full benefits, including any
refunds, and shall bear the full costs incurred after October 14, 1998, related
to pending litigation and appeals regarding the real and personal property taxes
for Perry Unit 1 as identified on Schedule 2.11. DLC will continue to take all
actions necessary in such proceedings, in cooperation with CEIC until the DLC
Nuclear Closing, subject to reimbursement at the DLC Nuclear Closing by CEIC of
all expenses incurred by DLC for such proceedings after October 14, 1998. DLC
will promptly pay to CEIC all amounts received by DLC as a result of such
pending litigation and appeals. If the conveyance as to Perry Unit 1 is not
consummated for any reason, the Parties shall negotiate arrangements that place
them in the same position as to such Plant, with respect to any such costs or
benefits, as if neither the Agreement in Principle nor this Agreement had been
executed.
ARTICLE III
THE DLC NUCLEAR CLOSING
3.1 DLC Nuclear Closing. Upon the terms and subject to the
satisfaction of the conditions in Article VII of this Agreement, the conveyance,
assignment, transfer and delivery of the DLC Nuclear Assets to Penn Power, in
respect of Beaver Valley, and CEIC, in respect of Perry Xxxx 0, and the
assumption of the Assumed Liabilities by Penn Power, in respect of Beaver
Valley, and CEIC, in respect of Perry Unit 1, in respect of such DLC Nuclear
Assets, as contemplated by this Agreement shall take place at a closing (the
"DLC Nuclear Closing"), to be held at the offices of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, 0000 Xxx Xxxx Xxxxxx, XX, Xxxxxxxxxx, X.X. at 10:00 a.m.
local time, on the day following the date the conditions precedent to the DLC
Nuclear Closing set forth in ArticleVII of this Agreement in respect of the
Plants have been either satisfied or waived by the Party for whose benefit such
conditions precedent exist, or at such other time and date as the Parties may
mutually agree. The date of the DLC Nuclear Closing in respect of the Plants is
hereinafter called the "DLC Nuclear Closing Date".
3.2 Calculation of DLC Nuclear Closing Payments.
(a) The "DLC Nuclear Closing Payment" means the total of
payments due under the Beaver Valley CAPCO Agreements and the Perry CAPCO
Agreements, the amounts due to DLC from the Specified FE Subsidiaries in respect
of Fuel Supplies pursuant to Section 2.6 and the amounts due pursuant to Section
3.4.
(b) At least ten (10) Business Days prior to the DLC Nuclear
Closing Date, DLC shall prepare and deliver to Penn Power, in respect of Beaver
Valley, and CEIC, in respect of Perry Unit 1, an estimated closing statement
34
(each, an "Estimated DLC Nuclear Closing Statement") that shall set forth DLC's
best estimate of all estimated DLC Nuclear Closing Payments due from Penn Power,
in respect of Beaver Valley, and CEIC, in respect of Perry Xxxx 0, to DLC (the
"Estimated DLC Nuclear Closing Payment") in respect of the DLC Nuclear Closing.
Within five (5) Business Days following the delivery of the Estimated DLC
Nuclear Closing Statement to Specified FE Subsidiaries, either Specified FE
Subsidiary may object in good faith to the Estimated DLC Nuclear Closing Payment
in writing. If either Specified FE Subsidiary objects to the Estimated DLC
Nuclear Closing Payment, the Parties shall attempt to resolve their differences
by negotiation. If the Parties are unable to do so before three (3) Business
Days prior to the DLC Nuclear Closing Date, the amounts of the Estimated DLC
Nuclear Closing Payment not in dispute shall be paid at the DLC Nuclear Closing.
The disputed portion shall be paid as a Final Adjustment to the extent required
by Section 3.2(c).
(c) Within sixty (60) days following the DLC Nuclear Closing
Date, DLC shall prepare and deliver to Penn Power, in respect of Beaver Valley,
and CEIC, in respect of Perry Xxxx 0, a final closing statement including
adjustments to the proration amounts specified by Section 3.4 and any disputed
portion of the DLC Nuclear Closing Payment described in clause (a) above (the
"Final DLC Nuclear Closing Statement") setting forth the final DLC Nuclear
Closing Payment in respect of the DLC Nuclear Closing and identifying the amount
of any adjustment necessary to conform such Final DLC Nuclear Closing Statement
with payments made at the DLC Nuclear Closing ("Proposed Final Adjustment"). All
calculations of any DLC Nuclear Closing Payments shall be prepared using the
same accounting principles, policies and methods as DLC has historically used in
connection with the calculation of the items reflected on such Final DLC Nuclear
Closing Statement.
(d) Within thirty (30) days following the delivery of a Final
DLC Nuclear Closing Statement, Penn Power, in respect of Beaver Valley, and
CEIC, in respect of Perry Xxxx 0, may object to such Proposed Final Adjustment
in writing. DLC agrees to cooperate to provide the applicable Specified FE
Subsidiary and its Representatives information used to prepare any Final DLC
Nuclear Closing Statement and information relating thereto. If either Specified
FE Subsidiary objects to the Proposed Final Adjustment in respect of its Plant,
the Parties shall attempt to resolve such dispute by negotiation. If the Parties
are unable to resolve such dispute within thirty (30) days of any objection by
the applicable Specified FE Subsidiary, such Specified FE Subsidiary and DLC
shall appoint the Independent Accounting Firm, which shall, at their joint
expense, review the Proposed Final Adjustment and determine the appropriate
adjustment to the applicable DLC Nuclear Closing Payment, if any, within thirty
(30 days) of such appointment. The Parties agree to cooperate with the
Independent Accounting Firm and provide it with such information as it
reasonably requests to enable it to make such determination. The finding of such
Independent Accounting Firm shall be binding on the applicable Specified FE
Subsidiary and DLC. Upon determination of the appropriate adjustment (the "Final
Adjustment") by agreement of the Parties or by binding determination of the
Independent Accounting Firm, if the Final Adjustment results in a change to any
DLC Nuclear Closing Payment, the Party owing the difference shall deliver such
difference to the other Party no later than two (2) Business Days after such
determination, in immediately available funds or in any other manner as
reasonably requested by the payee.
35
3.3 Payment of DLC Nuclear Closing Payment. If any DLC Nuclear
Closing Payment is a positive amount, such amount shall be payable by the
applicable Specified FE Subsidiary to DLC. If any DLC Nuclear Closing Payment is
a negative amount, such amount shall be payable by DLC to the applicable
Specified FE Subsidiary. In connection with the DLC Nuclear Closing, subject to
Section 3.2(b), the Party owing the DLC Nuclear Closing Payment shall pay such
amount to the other Party by wire transfer of immediately available funds
denominated in U.S. dollars or by such other means as are agreed upon by the
Parties. In addition to DLC Nuclear Closing Payments, the Parties recognize that
monies will be owed under the terms of the CAPCO Agreements related to the DLC
Nuclear Assets for obligations through the DLC Nuclear Closing Date.
Notwithstanding any contrary provisions herein, the Parties will follow existing
CAPCO billing procedures and the applicable Party will take all actions
necessary to cause final bills to be rendered within ninety (90) days after the
DLC Nuclear Closing Date.
3.4 Prorations. Notwithstanding anything to the contrary in any CAPCO
Agreement:
(a) The Parties agree that all of the items normally prorated,
including those listed below (but not including Income Taxes), relating to the
business and operation of the DLC Nuclear Assets shall be prorated as of the DLC
Nuclear Closing Date, with DLC liable to the extent such items relate to any
time period prior to the DLC Nuclear Closing Date, and the applicable Specified
FE Subsidiary liable to the extent such items relate to periods commencing with
the DLC Nuclear Closing Date (measured in the same units used to compute the
item in question, otherwise measured by calendar days):
(i) Personal property, real estate and occupancy
Taxes, assessments and other charges, if any, on or with respect to the business
and operation of the DLC Nuclear Assets;
(ii) Rent, Taxes and all other items (including prepaid
services or goods not included in Inventory) payable by or to a DLC under any of
the DLC Nuclear Agreements;
(iii) Any permit, license, registration, compliance
assurance fees or other fees with respect to any Transferable Permit;
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities with respect to the DLC Nuclear Assets;
(v) Rent and Taxes payable by DLC under the Real
Property Leases assigned to the applicable Specified FE Subsidiary; and
(vi) ANI and XXXX insurance premiums for the current
year or other applicable policy period;
(vii) Impositions and fees payable to the Department of
Energy and the NRC; and
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(viii) Membership fees in respect of the Institute for
Nuclear Power Operator, the Nuclear Energy Institute and similar organizations
involved solely in nuclear matters.
(b) In connection with the prorations referred to in Section 3.4
(a) above, in the event that actual figures are not available at the DLC Nuclear
Closing Date, the proration shall be based upon the actual Taxes or other
amounts accrued through the DLC Nuclear Closing Date or paid for the most recent
year (or other appropriate period) for which actual Taxes or other amounts paid
are available. Such prorated Taxes or other amounts shall be re-prorated and
paid to the appropriate Party within sixty (60) days of the date that the
previously unavailable actual figures become available. The prorations shall be
based on the number of days in a year or other appropriate period (i) before the
DLC Nuclear Closing Date and (ii) including and after the DLC Nuclear Closing
Date. The Parties agree to furnish each other with such documents and other
records as may be reasonably requested in order to confirm all adjustment and
proration calculations made pursuant to this Section 3.4.
3.5 Audit Cooperation. Each of Specified FE Subsidiaries and DLC
shall notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding any fair market value of the
DLC Nuclear Assets and the Assumed Liabilities.
3.6 Deliveries by Specified FE Subsidiaries. At the DLC Nuclear
Closing, each Specified FE Subsidiary will deliver, or cause to be delivered,
the following to DLC:
(a) With respect to the transfer of the applicable DLC Nuclear
Assets:
(i) The Assignment and Assumption Agreement in respect
of such assets, duly executed by each Specified FE Subsidiary (Penn Power in
respect of Beaver Valley and CEIC in respect of Perry Unit 1);
(ii) All such other instruments of assumption as shall,
in the reasonable opinion of DLC and its counsel, be necessary for Penn Power to
assume the Assumed Liabilities in respect of Beaver Valley and CEIC to assume
the Assumed Liabilities in respect of Perry Unit 1, in each case in accordance
with this Agreement; and
(iii) Certificates of insurance relating to the insurance
policies required pursuant to Section 6.16 of this Agreement and
pursuant to 10 C.F.R. Parts 50 and 140.
(b) With respect to this Agreement:
(i) The documents to be delivered by Specified FE
Subsidiaries under Section 7.2;
(ii) Copies, certified by the Secretary or Assistant
Secretary of each Specified FE Subsidiary, of corporate resolutions authorizing
the execution and delivery of this Agreement and all of the agreements and
instruments to be executed and delivered by such Specified FE Subsidiary in
37
connection herewith, and the consummation of the transactions contemplated
hereby;
(iii) Certificates of the Secretary or Assistant
Secretary of each Specified FE Subsidiary identifying the name and title and
bearing the signatures of the officers of such Specified FE Subsidiary
authorized to execute and deliver this Agreement and the other agreements and
instruments contemplated hereby;
(iv) Certificates of good standing with respect to each
Specified FE Subsidiary, issued by the jurisdiction of incorporation of such
Specified FE Subsidiary; and
(v) Such other agreements, documents, instruments and
writings as are required to be delivered by such Specified FE Subsidiary at or
prior to the applicable DLC Nuclear Closing Date pursuant to this Agreement or
otherwise reasonably required in connection herewith.
(vi) Certificates dated the DLC Nuclear Closing Date
executed by the duly authorized officers of each Specified FE Subsidiary to the
effect that, to such officers' Knowledge, the conditions set forth in Section
7.3 have been satisfied by each Specified FE Subsidiary and that each of the
representations and warranties of each Specified FE Subsidiary made in this
Agreement are true and correct in all material respects as though made at and as
of the DLC Nuclear Closing Date.
3.7 Deliveries by DLC. At the DLC Nuclear Closing, DLC will deliver,
or cause to be delivered, the following to the applicable Specified FE
Subsidiary (Penn Power in respect of Beaver Valley and CEIC in respect of Perry
Unit 1):
(a) With respect to the transfer of the applicable DLC
Nuclear Assets :
(i) The Assignment and Assumption Agreement in respect
of such assets, duly executed by DLC;
(ii) The duly executed Xxxx of Sale with respect to the
applicable DLC Nuclear Assets;
(iii) Copies of any and all governmental and other third
party consents, waivers or approvals obtained or required to be obtained by DLC
with respect to the transfer of the applicable DLC Nuclear Assets or the
consummation of the transactions contemplated by this Agreement;
(iv) One or more Warranty Deeds conveying the Real
Property, duly executed and acknowledged by DLC and in recordable form;
(v) FIRPTA Affidavits, duly executed by DLC;
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(vi) To the extent available, originals of all DLC
Nuclear Agreements, Real Property Leases and Transferable Permits and, if not
available, true and correct copies thereof which agreements, leases and permits
shall be located at the applicable Plant, with a list thereof being provided at
the applicable DLC Nuclear Closing;
(vii) All such other instruments of assignment, transfer
or conveyance as shall, in the reasonable opinion of the applicable Specified FE
Subsidiary and its counsel, be necessary or desirable to transfer the applicable
DLC Nuclear Assets to the applicable Specified FE Subsidiary, in accordance with
this Agreement and where necessary or desirable in recordable form; and
(viii) The DLC Nuclear Insurance Policies.
(b) With respect to this Agreement:
(i) The documents to be delivered by DLC under Section
7.3;
(ii) Copies, certified by the Secretary or Assistant
Secretary of DLC, of corporate resolutions authorizing the execution and
delivery of this Agreement and all of the agreements and instruments to be
executed and delivered by DLC in connection herewith, and the consummation of
the transactions contemplated hereby;
(iii) A certificate of the Secretary or Assistant
Secretary of DLC identifying the name and title and bearing the signatures of
the officers of DLC authorized to execute and deliver this Agreement and the
other agreements and instruments contemplated hereby;
(iv) A certificate of good standing with respect to
DLC, issued by the Secretary of State of the Commonwealth of Pennsylvania and
the State of Ohio; and
(v) Such other agreements, documents, instruments and
writings as are required to be delivered by DLC at or prior to the applicable
DLC Nuclear Closing Date pursuant to this Agreement or otherwise reasonably
required in connection herewith.
(vi) Certificate dated the DLC Nuclear Closing Date
executed by the duly authorized officers of DLC to the effect that, to such
officers' Knowledge, the conditions set forth in Section 7.2 have been satisfied
by DLC and that each of the representations and warranties of DLC made in this
Agreement are true and correct in all material respects as though made at and as
of the DLC Nuclear Closing Date.
3.8 Work in Progress. The Parties agree to work together before and
after the DLC Nuclear Closing Date to effect an orderly transition with respect
to work in progress.
3.9 Ancillary Agreements. The Parties acknowledge that the Ancillary
Agreements (except for the Electric Facilities Agreement and the CAPCO
Settlement Agreement) shall be executed on the DLC Nuclear Closing Date and each
39
Party agrees to execute, in connection with the DLC Nuclear Closing, each such
Ancillary Agreement to which it is to be a party, substantially in the form of
such Ancillary Agreements attached hereto. Each Party further (i) acknowledges
that it has executed the CAPCO Settlement Agreement and the Electric Facilities
Agreement on the date hereof and (ii) agrees that the Parties hereto shall make,
pursuant to Section 6.7 hereof, all filings necessary or advisable to obtain any
Required Regulatory approvals in respect of the CAPCO Settlement Agreement and
the Electric Facilities Agreement and the transactions contemplated thereby.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC
DLC represents and warrants to Penn Power, in respect of Beaver Valley, and
to CEIC, in respect of Perry Xxxx 0 as follows:
4.1 Incorporation; Qualification. DLC is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to own, lease and operate its material assets and properties and to carry on its
business as is now being conducted. DLC is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each jurisdiction
in which its business, as now being conducted, shall require it to be so
qualified, except where the failure to be so qualified would not have a Material
Adverse Effect. DLC has heretofore delivered to Specified FE Subsidiaries true,
complete and correct copies of its Articles of Incorporation and Bylaws as
currently in effect.
4.2 Authority. DLC has full corporate power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements to which DLC is
a signatory and to consummate the transactions contemplated hereby or thereby.
The execution and delivery of this Agreement and each of the Ancillary
Agreements to which DLC is a signatory by DLC and the consummation of the
transactions contemplated hereby and thereby by DLC have been duly and validly
authorized by all necessary corporate action required on the part of DLC and
this Agreement and each of the Ancillary Agreements to which it is a signatory
have been duly and validly executed and delivered by DLC. Subject to the receipt
of the DLC Required Regulatory Approvals, each of this Agreement and each of the
Ancillary Agreements to which DLC is a signatory constitutes the legal, valid
and binding agreement of DLC, enforceable against DLC in accordance with its
terms, except 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).
4.3 Consents and Approvals; No Violation. (a) Except as set forth in
Schedule 4.3(a), and subject to obtaining any DLC Required Regulatory Approvals,
neither the execution, delivery and performance of this Agreement by DLC nor the
execution, delivery and performance by DLC of the Ancillary Agreements will (i)
conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws of DLC, (ii) result in a default (or give rise to any
40
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which DLC is a party or by which
it, or any of the DLC Nuclear Assets may be bound, except for such defaults (or
rights of termination, cancellation or acceleration) as to which requisite
waivers or consents have been obtained or that would not, individually or in the
aggregate, create a Material Adverse Effect; or (iii) constitute violations of
any law, regulation, order, judgment or decree applicable to DLC, which
violations, individually or in the aggregate, would create a Material Adverse
Effect.
(b) Other than the Required Regulatory Approvals set forth in
Schedule 4.3(b) (the "DLC Required Regulatory Approvals"), no consent or
approval of, filing with, or notice to, any Governmental Authority is necessary
for the execution and delivery of this Agreement, or the consummation by DLC of
the transactions contemplated thereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent DLC from
performing its material obligations hereunder and (ii) such consents, approvals,
filings or notices which become applicable to DLC or the DLC Nuclear Assets as a
result of the specific regulatory status of Specified FE Subsidiaries (or any of
their Affiliates) or as a result of any other facts that specifically relate to
the business or activities in which Specified FE Subsidiaries (or any of their
Affiliates) is or proposes to be engaged.
4.4 Insurance. (a) DLC has obtained and is maintaining policies of
liability and other forms of insurance as required by the applicable CAPCO
Agreements.
(b) DLC has obtained and is maintaining the policies of
liability and other forms of insurance in respect of SAPS as described in
Schedule 4.4(b).
4.5 DLC Real Property Leases. Schedule 4.5 lists, as of the date of
the Agreement, all Real Property Leases. Except as set forth in Schedule 4.5,
the Real Property Leases are valid, binding and enforceable against DLC in
accordance with their terms; there are no existing material defaults by DLC or,
to DLC's Knowledge, any other party thereunder; and no event has occurred which
(whether with or without notice, lapse of time or both) would constitute a
material default by DLC or, to DLC's Knowledge, any other party thereunder. DLC
has delivered to each Specified FE Subsidiary true, correct and complete copies
of each of the Real Property Leases applicable to the Plant it is to acquire.
4.6 Environmental Matters. (a) DLC is an owner but not an operator of
Perry Unit 1 which is operated by an FE Subsidiary. For this reason, both DLC's
environmental responsibilities and its Knowledge of environmental issues and
concerns at Perry Unit 1 and the related DLC Nuclear Assets are limited and its
representations are accordingly limited or excluded as set forth in this Section
4.6(a). Subject to this fact and except as disclosed in Schedule 4.6(a):
(i) DLC holds, and is in substantial compliance with,
all Environmental Permits that are required for DLC to own its undivided
interest in Perry Unit 1, and DLC is otherwise in compliance with applicable
Environmental Laws with respect to its ownership of Perry Unit 1 except for such
failures to hold or comply with required Environmental Permits, or such
41
failures to be in compliance with applicable Environmental Laws, as would not,
individually or in the aggregate, create a Material Adverse Effect;
(ii) DLC has not received any written request for
information, or been notified that it is a potentially responsible party, under
CERCLA or any similar state law with respect to Perry Unit 1; and
(iii) DLC has not entered into or agreed to any consent
decree or order relating to Perry Xxxx 0, and is not subject to any outstanding
judgment, decree, or judicial order relating to compliance with any
Environmental Law or to Remediation of Regulated Substances under any
Environmental Law relating to Perry Unit 1.
(b) Except as disclosed in Schedule 4.6(b):
(i) DLC holds, and is in substantial compliance with,
all Environmental Permits that are required for DLC to own its undivided
interest in Beaver Valley and to conduct the business and operations of the DLC
Nuclear Assets in respect of Beaver Valley, and is otherwise in compliance with
applicable Environmental Laws with respect to the business and operations of the
DLC Nuclear Assets in respect of Beaver Valley, except for such failures to hold
or comply with required Environmental Permits, or such failures to be in
compliance with applicable Environmental Laws, as would not, individually or in
aggregate, create a Material Adverse Effect;
(ii) DLC has not received any written request for
information, or been notified that it is a potentially responsible party, under
CERCLA or any similar state law with respect to the Real Property in respect of
Beaver Valley;
(iii) DLC has not entered into or agreed to any consent
decree or order relating to the Real Property in respect of Beaver Valley, nor
is it subject to any outstanding judgment, decree, or judicial order relating to
compliance with any Environmental Law or to Remediation of Regulated Substances
under any Environmental Law relating to Beaver Valley.
(iv) To DLC's Knowledge, no Release of Regulated
Substances has occurred at the Real Property in respect of Beaver Valley and no
Regulated Substances are present in, on, about or migrating from the Real
Property in respect of Beaver Valley that could (absent a Release of such
substances) give rise to an Environmental Claim related to the DLC Nuclear
Assets in respect of Beaver Valley for which Remediation reasonably could be
required, except in any such case to the extent that any such Release or
Environmental Claim would not, individually or in aggregate, create a Material
Adverse Effect.
(c) The representations and warranties made in this Section 4.6
are DLC's exclusive representations and warranties relating to environmental
matters.
4.7 Real Property. Schedule 4.7 contains a description of the Real
Property included in the DLC Nuclear Assets . True and correct copies of any
current surveys, abstracts, title commitments or title opinions in DLC's
possession and all policies of title insurance currently in force and in the
42
possession of DLC with respect to the Real Property have heretofore been made
available to Specified FE Subsidiaries.
4.8 Condemnation. Except as set forth in Schedule 4.8, DLC has not
received any written notices of and otherwise has no Knowledge of any pending or
threatened proceedings or actions by any Governmental Authority to condemn or
take by power of eminent domain all or any part of the DLC Nuclear Assets.
4.9 Contracts and Leases. (a) With respect to Perry Unit 1:
(i) Schedule 4.9(a)(i) lists each written contract,
license, agreement, or personal property lease which is material to DLC's
ownership interest in the DLC Nuclear Assets relating to Perry Unit 1, other
than (A) those listed or described on another Schedule, (B) that are expected to
expire or terminate prior to the DLC Nuclear Closing Date, (C) that provide for
annual payments by DLC after the date hereof of less than $500,000, or (iv) to
which FE or a FE Subsidiary is a signatory.
(ii) Except as disclosed in Schedule 4.9(a)(ii), each
DLC Nuclear Agreement listed in Schedule 4.9(a)(i) (A) constitutes a legal,
valid and binding obligation of DLC and, to DLC's Knowledge, constitutes a valid
and binding obligation of the other parties thereto, and (B) may be transferred
to CEIC pursuant to this Agreement without the consent of the other parties
thereto and will continue in full force and effect thereafter, unless in any
such case the impact of such lack of legality, validity or binding nature, or
inability to transfer, would not, individually or in the aggregate, create a
Material Adverse Effect.
(iii) Except as set forth in Schedule 4.9(a)(iii), there
is not, under any of the DLC Nuclear Agreements listed in Schedule 4.9(a)(i),
any default or event which, with notice or lapse of time or both, would
constitute a default on the part of DLC or, to DLC's Knowledge, any of the other
parties thereto, except such events of default and other events which would not,
individually or in the aggregate, create a Material Adverse Effect.
(b) With respect to Beaver Valley:
(i) Schedule 4.9(b)(i) lists each DLC Nuclear
Agreement in respect of Beaver Valley which is material to the business or
operations of the DLC Nuclear Assets in respect of Beaver Valley, other than
those (A) that are listed or described on another Schedule, (B) that are
expected to expire or terminate prior to the DLC Nuclear Closing Date, or (C)
that provide for annual payments by DLC after the date hereof of less than
$500,000.
(ii) Except as disclosed in Schedule 4.9(b)(ii), each
DLC Nuclear Agreement in respect of Beaver Valley (A) constitutes a legal, valid
and binding obligation of DLC and, to DLC's Knowledge, constitutes a valid and
binding obligation of the other parties thereto, and (B) may be transferred to
Penn Power pursuant to this Agreement without the consent of the other parties
thereto and will continue in full force and effect thereafter, unless in any
such case the impact of such lack of legality, validity or binding nature, or
inability to transfer, would not, individually or in the aggregate, create a
43
Material Adverse Effect, with the understanding that the DLC Nuclear Assets
associated with Beaver Valley Unit 2 will be subject to the Encumbrances
associated with the Beaver Valley Unit 2 Lease Indentures.
(iii) Except as set forth in Schedule 4.9(b)(iii), there
is not, under the DLC Nuclear Agreements in respect of Beaver Valley, any
default or event which, with notice or lapse of time or both, would constitute a
default on the part of DLC or to DLC's Knowledge, any of the other parties
thereto, except such events of default and other events which would not,
individually or in the aggregate, create a Material Adverse Effect.
4.10 Legal Proceedings. Except as set forth in Schedule 4.10, there is
no action or proceeding pending or, to DLC's Knowledge, threatened against DLC
before any court, arbitrator or Governmental Authority, which could,
individually or in the aggregate, reasonably be expected to create a Material
Adverse Effect. Except as set forth in Schedule 4.10, DLC is not subject to any
outstanding judgments, rules, orders, writs, injunctions or decrees of any
court, arbitrator or Governmental Authority that would, individually or in the
aggregate, create a Material Adverse Effect.
4.11 Permits. (a) With respect to Perry Unit 1:
(i) DLC has all Permits necessary to own the DLC
Nuclear Assets relating to Perry Unit 1 except where the failure to have such
Permits would not, individually or in the aggregate, create a Material Adverse
Effect. Except as disclosed on Schedule 4.11(a)(i), DLC has not received any
notification that DLC is in violation of any such Permits, except notifications
of violations which would not, individually or in the aggregate, create a
Material Adverse Effect. DLC is in compliance with all such Permits except where
non-compliance would not, individually or in the aggregate, create a Material
Adverse Effect.
(ii) Schedule 4.11(a)(ii) sets forth all material
Permits, other than Transferable Permits related to the DLC Nuclear Assets
relating to Perry Unit 1 held by DLC.
(b) With respect to Beaver Valley:
(i) DLC has all Permits (other than Environmental
Permits, which are addressed in Section 4.6 hereof) necessary to own and operate
the DLC Nuclear Assets relating to Beaver Valley except where the failure to
have such Permits would not, individually or in the aggregate, create a Material
Adverse Effect. Except as disclosed on Schedule 4.11(b)(i), DLC has not received
any notification that DLC is in violation of any such Permits, except
notifications of violations which would not, individually or in the aggregate,
create a Material Adverse Effect. DLC is in compliance with all such Permits
except where non-compliance would not, individually or in the aggregate, create
a Material Adverse Effect.
(ii) Schedule 4.11(b)(ii) sets forth all material
Permits, other than Transferable Permits related to the DLC Nuclear Assets
relating to Beaver Valley.
44
4.12 Taxes. DLC has filed or caused to be filed all Tax Returns that
are required to be filed by it with respect to any Tax relating to the DLC
Nuclear Assets, and paid or caused to be paid all Taxes that have become due as
indicated thereon, except where such Tax is being contested in good faith by
appropriate proceedings, or where the failure to so file or pay would not create
a Material Adverse Effect. All Tax Returns relating to the DLC Nuclear Assets
are true, correct and complete in all material respects. There are no liens for
Taxes upon the DLC Nuclear Assets except for liens for Taxes not yet due and
Permitted Encumbrances. Except as set forth in Schedule 4.12, no notice of
deficiency or assessment has been received from any taxing authority with
respect to liabilities for Taxes of DLC in respect of the DLC Nuclear Assets,
which have not been fully paid or finally settled, and any such deficiency shown
in Schedule 4.12 is being contested in good faith through appropriate
proceedings. Except as set forth in Schedule 4.12, there are no outstanding
agreements or waivers extending the applicable statutory periods of limitation
for Taxes associated with the DLC Nuclear Assets that will be binding upon the
applicable Specified FE Subsidiary after the DLC Nuclear Closing. Except as set
forth in Schedule 4.12, none of the DLC Nuclear Assets is property that is
required to be treated as being owned by any other person pursuant to the
so-called safe harbor lease provisions of former Section 168(f) of the Code, and
none of the DLC Nuclear Assets is "tax-exempt use" property within the meaning
of Section 168(h) of the Code. Schedule 4.12 sets forth the taxing jurisdictions
in which DLC owns assets or conducts business that require a notification to a
taxing authority of the transactions contemplated by this Agreement, if the
failure to make such notification, or obtain Tax clearance certificates in
connection therewith, would either require either Specified FE Subsidiary to
withhold any portion of the consideration or subject either Specified FE
Subsidiary to any liability for any Taxes of DLC.
4.13 Intellectual Property. Schedule 4.13 sets forth all Intellectual
Property used in and, individually or in the aggregate with other Intellectual
Property, material to the operation or business of the DLC Nuclear Assets, each
of which DLC either has all right, title and interest in or valid and binding
rights under contract to use. Except as disclosed in Schedule 4.13, (i) DLC is
not, nor has it received any notice that it is, in default (or with the giving
of notice or lapse of time or both, would be in default), under any contract to
use such Intellectual Property, and (ii) to DLC's Knowledge, such Intellectual
Property is not being infringed by any other Person. DLC has not received notice
that it is infringing any Intellectual Property of any other Person in
connection with the operation or business of DLC Nuclear Assets, and DLC, to its
Knowledge, is not infringing any Intellectual Property of any other Person
which, individually or in the aggregate, would have a Material Adverse Effect.
4.14 Compliance With Laws. DLC is in compliance with all applicable
laws, rules and regulations with respect to its ownership or, in the case of
Beaver Valley, operation of DLC Nuclear Assets except where the failure to be in
compliance would not, individually or in the aggregate, create a Material
Adverse Effect.
4.15 DISCLAIMERS REGARDING DLC NUCLEAR ASSETS. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, THE DLC NUCLEAR
ASSETS ARE TRANSFERRED "AS IS, WHERE IS", AND DLC EXPRESSLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO
LIABILITIES, OPERATIONS OF THE PLANTS, THE TITLE, CONDITION, VALUE OR QUALITY OF
45
THE DLC NUCLEAR ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND
OTHER INCIDENTS OF THE DLC NUCLEAR ASSETS AND DLC SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE WITH RESPECT TO THE DLC NUCLEAR ASSETS, OR ANY PART
THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS
THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL REQUIREMENTS, INCLUDING
BUT NOT LIMITED TO ANY ENVIRONMENTAL LAWS, OR WHETHER DLC POSSESSES SUFFICIENT
REAL PROPERTY OR PERSONAL PROPERTY TO OPERATE THE DLC NUCLEAR ASSETS. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC FURTHER SPECIFICALLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF REGULATED SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO THE DLC NUCLEAR ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, DLC EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF THE DLC
NUCLEAR ASSETS OR THE SUITABILITY OF THE DLC NUCLEAR ASSETS FOR OPERATION AS A
POWER PLANT AND NO SCHEDULE OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL
OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY DLC OR DLC REPRESENTATIVES,
OR BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR CREATE ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE DLC
NUCLEAR ASSETS.
4.16 Year 2000 Compliance. DLC, with respect to the Computer Systems
at Beaver Valley that may be included in the DLC Nuclear Assets, has plans to
achieve Year 2000 Compliance, and is using Commercially Reasonable Efforts to
execute and carry out such plans.
4.17 [Intentionally Omitted.]
4.18 Capital Expenditures. The only capital expenditures associated
with the DLC Nuclear Assets relating to Beaver Valley that are planned by DLC
are those capital expenditures approved in accordance with the Beaver Valley
CAPCO Agreements.
4.19 Labor Matters. DLC has previously delivered to Penn Power or its
Representatives true and correct copies of all collective bargaining agreements
to which DLC is a party or is subject and which relate to the business and
operations of the DLC Nuclear Assets relating to Beaver Valley. With respect to
the business or operations of the DLC Assets relating to Beaver Valley, except
to the extent set forth in Schedule 4.19 and except for such matters as will
not, individually or in aggregate, create a Material Adverse Effect, (a) DLC is
in compliance with all applicable laws respecting employment and employment
practices, occupational safety and health, plant closing, mass layoffs, terms
and conditions of employment and wages and hours; (b) DLC has not received any
written notice of any unfair labor practice complaint against DLC pending before
the National Labor Relations Board; (c) no arbitration proceeding arising out of
46
or under any collective bargaining agreement is pending against DLC; and (d) DLC
has not experienced any work stoppage within the three-year period prior to the
date hereof and to DLC's Knowledge none is currently threatened.
4.20 Benefit Plans; ERISA. (a) Schedule 4.20 lists all DLC Benefit
Plans maintained for, or in which the employees of DLC connected with the DLC
Nuclear Assets relating to Beaver Valley participate. True and complete copies
of all such DLC Benefit Plans have been made available to Penn Power or its
Representatives.
(b) No liability under Title IV or Section 302 of ERISA has been
incurred by DLC or any ERISA Affiliate of DLC that has not been satisfied in
full, and no condition exists that presents a material risk to DLC or any ERISA
Affiliate of DLC of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation (which premiums have been
paid when due). Insofar as the representation made in this Section 4.20(b)
applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with
respect to any employee benefit plan, program, agreement or arrangement subject
to Title IV of ERISA to which DLC or any ERISA Affiliate of DLC made, or was
required to make, contributions during the five (5)-year period ending on the
last day of the most recent plan year ended prior to the DLC Nuclear Closing
Date.
(c) The consummation of the transactions contemplated by this
Agreement will not, either alone or in combination with another event through
the DLC Nuclear Closing Date, (i) entitle any current or former employee or
officer of DLC or any ERISA Affiliate of DLC to severance pay, unemployment
compensation or any other payment that is not the responsibility of DLC pursuant
to Section 6.11(o), or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer that is not
the responsibility of DLC pursuant to Section 6.11(o).
(d) There has been no material failure of a DLC Benefit Plan
that is a group health plan (as defined in Section 5000(b)(1) of the Code) to
meet the requirements of Section 4980B(f) of the Code with respect to a
qualified beneficiary (as defined in Section 4980B(g) of the Code). Neither DLC
nor any ERISA Affiliate of DLC has contributed to a nonconforming group health
plan (as defined in Section 5000(c) of the Code) and no ERISA Affiliate of DLC
has incurred a tax under Section 5000(e) of the Code that is or could become a
liability of Specified FE Subsidiaries.
(e) There are no pending, or to DLC's Knowledge, threatened or
anticipated claims by or on behalf of any DLC Benefit Plans, by any employee or
beneficiary covered under any such DLC Benefit Plans, or otherwise involving any
such DLC Benefit Plans (other than routine claims for benefits).
4.21 DLC Qualified Decommissioning Funds.
(a) Each DLC Qualified Decommissioning Fund is a trust, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
with all requisite authority to conduct its affairs as it now does. Each DLC
Qualified Decommissioning Fund satisfies the requirements necessary for such
47
fund to be treated as a "Nuclear Decommissioning Reserve Fund" within the
meaning of Code section 468A(a) and as a "nuclear decommissioning fund" and a
"qualified nuclear decommissioning fund" within the meaning of Treas. Reg.
section 1.468A-1(b)(3). Each such fund is in compliance in all material respects
with all applicable rules and regulations of the NRC, the PaPUC, and the IRS. No
DLC Qualified Decommissioning Fund has engaged in any acts of "self-dealing" as
defined in Treas. Reg. section 1.468A-5(b)(2). No "excess contribution," as
defined in Treas. Reg. section 1.468A-5(c)(2)(ii), has been made to any DLC
Qualified Decommissioning Fund which has not been withdrawn within the period
provided under Treas. Reg. section 1.468A-5(c)(1). DLC has made timely and valid
elections to make annual contributions to the DLC Qualified Decommissioning
Funds for each year in which such Funds have been in existence. DLC has
heretofore delivered copies of such elections to Specified FE Subsidiaries.
(b) Subject only to DLC's Required Regulatory Approvals, DLC has
all requisite authority to cause the assets of the DLC Qualified Decommissioning
Funds to be transferred to the applicable Specified FE Subsidiaries in
accordance with the provisions of this Agreement.
(c) DLC and/or the trustee of each of the DLC Qualified
Decommissioning Funds have filed or caused to be filed with the NRC, the IRS and
any state or local authority all material forms, statements, reports, documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them. DLC has delivered to Specified FE Subsidiaries a copy
of the schedule of ruling amounts most recently issued by the IRS for each of
the DLC Qualified Decommissioning Funds, a copy of the request that was filed to
obtain such schedule of ruling amounts and a copy of any pending requests for
revised ruling amounts, in each case together with all exhibits, amendments and
supplements thereto. As of the DLC Nuclear Closing, DLC will have timely filed
all requests for revised schedules of ruling amounts for the DLC Qualified
Decommissioning Funds in accordance with Treas. Reg. section 1.468A-3(i). DLC
shall furnish Specified FE Subsidiaries with copies of such requests for revised
schedules of ruling amounts, together with all exhibits, amendments and
supplementals thereto, promptly after they have been filed with the IRS. Any
amounts contributed to the DLC Qualified Decommissioning Funds while such
requests are pending before the IRS and which turn out to be in excess of the
applicable amounts provided in the schedule of ruling amounts issued by the IRS
will be withdrawn from the DLC Qualified Decommissioning Funds within the period
provided under Treas. Reg. section 1.468A-5(c)(2) for withdrawals of excess
contributions to be made without resulting in a disqualification of the Funds
under Treas. Reg. section 1.468A-5(c)(1). Except as provided in Section 6.19 of
this Agreement, there are no interim rate orders that may be retroactively
adjusted or retroactive adjustments to interim rate orders that may affect
amounts that Specified FE Subsidiaries may contribute to the DLC Qualified
Decommissioning Funds or may require distributions to be made from the DLC
Qualified Decommissioning Funds.
(d) DLC has made available to Specified FE Subsidiaries the
balance sheets for each of the DLC Qualified Decommissioning Funds as of
December 31, 1998 and as of the last Business Day before the DLC Nuclear Closing
Date, and they present fairly as of December 31, 1998 and as of the last
Business Day before closing, the financial position of each of the DLC Qualified
Decommissioning Funds in conformity with generally accepted accounting
principles applied on a consistent basis, except as otherwise noted there. DLC
48
has made available to Specified FE Subsidiaries information from which Specified
FE Subsidiaries can determine the Tax Basis of all assets in the DLC Qualified
Decommissioning Funds as of the last Business Day before the DLC Nuclear Closing
Date. There are no liabilities (whether absolute, accrued, contingent or
otherwise and whether due or to become due), including, but not limited to, any
acts of "self-dealing" as defined in Treas. Reg. section 1.468A-5(b)(2) or
agency or other legal proceedings that may materially affect the financial
position of each of the DLC Qualified Decommissioning Funds other than those, if
any, that are disclosed on Schedule 4.21.
(e) DLC has made available to Specified FE Subsidiaries all
contracts and agreements to which the Trustee of each of the DLC Qualified
Decommissioning Funds, in its capacity as such, is a party.
(f) Each of the DLC Qualified Decommissioning Funds has filed
all Tax Returns required to be filed and all material Taxes shown to be due on
such Tax Returns have been paid in full except where such Tax is being contested
in good faith by appropriate proceedings or where the failure to so file or pay
would not create a Material Adverse Effect. Except as shown in Schedule 4.21, no
notice of deficiency or assessment has been received from any taxing authority
with respect to liability for Taxes of each of the DLC Qualified Decommissioning
Funds which have not been fully paid or finally settled, and any such deficiency
shown in such Schedule 4.21 is being contested in good faith through appropriate
proceedings. Except as set forth in Schedule 4.21, there are no outstanding
agreements or waivers extending the applicable statutory periods of limitations
for Taxes associated with each of the DLC Qualified Decommissioning Funds that
will be binding on Specified FE Subsidiaries after the DLC Nuclear Closing Date.
(g) To the extent DLC have pooled the assets of the DLC
Qualified Decommissioning Funds for investment purposes in periods prior to the
DLC Nuclear Closing, such pooling arrangement is a partnership for federal
income tax purposes and DLC has filed all Tax Returns required to be filed with
respect to such pooling arrangement for such periods.
4.22 DLC Nonqualified Decommissioning Funds.
(a) Each DLC Nonqualified Decommissioning Fund is a trust
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania with all requisite authority to conduct its affairs as it now does.
Each of DLC Nonqualified Decommissioning Fund is in full compliance with all
applicable rules and regulations of the NRC, and the PaPUC.
(b) Subject only to DLC's Required Regulatory Approvals, DLC has
all requisite authority to cause the assets of the DLC Nonqualified
Decommissioning Funds to be transferred to the applicable Specified FE
Subsidiaries in accordance with the provisions of this Agreement.
(c) DLC and/or the Trustee of the DLC Nonqualified
Decommissioning Funds have filed or caused to be filed with the NRC and any
state or local authority all material forms, statements, reports, documents
(including all exhibits, amendments and supplements thereto) required to be
filed by either of them.
49
(d) DLC has made available to Specified FE Subsidiaries the
balance sheets for the DLC Nonqualified Decommissioning Funds as of December 31,
1998 and as of the last Business Day before the DLC Nuclear Closing Date, and
they present fairly as of December 31, 1998 and as of the last Business Day
before closing, the financial position of the DLC Nonqualified Decommissioning
Funds in conformity with generally accepted accounting principles applied on a
consistent basis, except as otherwise noted therein. DLC has made available to
Specified FE Subsidiaries information from which Specified FE Subsidiaries can
determine the Tax Basis as of the last Business Day before closing of all assets
(other than cash) of the DLC Nonqualified Decommissioning Funds transferred to
Specified FE Subsidiaries pursuant to Section 6.19. There are no liabilities
(whether absolute, accrued, contingent or otherwise and whether due or to become
due) including, but not limited, agency or other legal proceedings, that may
materially affect the financial position of the DLC Nonqualified Decommissioning
Funds other than those, if any, that are disclosed on Schedule 4.22.
(e) DLC has made available to Specified FE Subsidiaries all
contracts and agreements to which the trustee of the Nonqualified
Decommissioning Funds, in its capacity as such, is a party.
4.23 DLC Nuclear Law Matters.
(a) DLC is a licensed co-owner, but not an operator of Perry
Unit 1, which is operated by an Affiliate of Specified FE Subsidiaries. Subject
to this fact, and except as disclosed in Schedule 4.23(a):
(i) DLC holds, and is in substantial compliance with
all Permits in respect of Nuclear Laws that are required for DLC to own Perry
Unit 1 and DLC is otherwise in compliance with all Nuclear Laws with respect to
its ownership of Perry Unit 1 except for such failures to hold or comply with
regard to Permits in respect of Nuclear Laws, or such failures to be in
compliance with applicable Nuclear Laws, as would not, individually or in the
aggregate, create a Material Adverse Effect; and
(ii) DLC has not entered into or agreed to any consent
decree or order relating to Perry Xxxx 0, and is not subject to any outstanding
judgment, decree or judicial order relating to any Nuclear Law relating to Perry
Unit 1.
(b) Except as disclosed in Schedule 4.23(b):
(i) DLC holds, and is in substantial compliance with,
all Permits in respect of Nuclear Laws that are required for DLC to conduct the
business of and operate the DLC Nuclear Assets in respect of Beaver Valley, and
is otherwise in substantial compliance with applicable Nuclear Laws with respect
to the business and operations of the DLC Nuclear Assets in respect of Beaver
Valley except for such failures to hold or comply with required Permits in
respect of Nuclear Laws, or such failures to be in compliance with applicable
Nuclear Laws, as would not, individually or in aggregate, create a Material
Adverse Effect; and
50
(ii) DLC is not subject to any outstanding judgment,
decree, or judicial order relating to compliance with any Nuclear Law relating
to Beaver Valley.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SPECIFIED FE
SUBSIDIARIES
Each Specified FE Subsidiary hereby, for itself, represents and warrants to
DLC as follows:
5.1 Incorporation; Qualification. Such Specified FE Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite corporate power
and authority to own, lease and operate its material assets and properties and
to carry on its business as is now being conducted. Such Specified FE Subsidiary
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which its business as now being
conducted shall require it to be so qualified, except where the failure to be so
qualified would not have an Material Adverse Effect. Such Specified FE
Subsidiary has heretofore delivered to DLC true, complete and correct copies of
its Articles of Incorporation and Bylaws as currently in effect.
5.2 Authority. Such Specified FE Subsidiary has full corporate power
and authority to execute and deliver this Agreement and each of the Ancillary
Agreements to which it is a signatory and to consummate the transactions
contemplated hereby or thereby. The execution and delivery of this Agreement and
each of the Ancillary Agreements to which it is a signatory by such Specified FE
Subsidiary and the consummation of the transactions contemplated hereby and
thereby by such Specified FE Subsidiary have been duly and validly authorized by
all necessary corporate action required on the part of such Specified FE
Subsidiary and this Agreement and each of the Ancillary Agreements to which it
is a signatory has been duly and validly executed and delivered by such
Specified FE Subsidiary. Subject to the receipt of the applicable Specified FE
Subsidiaries' Required Regulatory Approvals, each of this Agreement and each of
the Ancillary Agreements to which it is a signatory constitutes the legal, valid
and binding agreement of such Specified FE Subsidiary, enforceable against such
Specified FE Subsidiary in accordance with its 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).
5.3 Consents and Approvals; No Violation.
(a) Except as set forth in Schedule 5.3(a), and subject to
obtaining any applicable Specified FE Subsidiaries' Required Regulatory
Approvals, neither the execution and delivery of this Agreement nor the
execution and delivery of the Ancillary Agreements to which it is a signatory
will (i) conflict with or result in any breach of any provision of the Articles
of Incorporation or Bylaws of such Specified FE Subsidiary, (ii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, material agreement or other instrument or obligation to which such
51
Specified FE Subsidiary is a party or by which it, or any of the DLC Nuclear
Assets may be bound, except for such defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained or that would not, individually or in the aggregate, create a
Material Adverse Effect; or (iii) constitute violations of any law, regulation,
order, judgment or decree applicable to such Specified FE Subsidiary, which
violations, individually or in the aggregate, would create a Material Adverse
Effect.
(b) Other than the Required Regulatory Approvals set forth in
Schedule 5.3(b) in respect of such Specified FE Subsidiary (collectively, the
"Specified FE Subsidiaries' Required Regulatory Approvals"), no consent or
approval of, filing with, or notice to, any Governmental Authority is necessary
for the execution and delivery of this Agreement by such Specified FE
Subsidiary, or the consummation by such Specified FE Subsidiary of the
transactions contemplated hereby, other than (i) such consents, approvals,
filings or notices which, if not obtained or made, will not prevent such
Specified FE Subsidiary from performing its material obligations hereunder and
(ii) such consents, approvals, filings or notices which become applicable to
such Specified FE Subsidiary or the DLC Nuclear Assets as a result of the
specific regulatory status of DLC (or any of its Affiliates) or as a result of
any other facts that specifically relate to the business or activities in which
DLC (or any of its Affiliates) is or proposes to be engaged.
5.4 Legal Proceedings. Except as set forth in Schedule 5.4, there is
no action or proceeding pending or, to the knowledge of such Specified FE
Subsidiary, threatened, against such Specified FE Subsidiary before any court,
arbitrator or Governmental Authority, which could, individually or in the
aggregate, reasonably be expected to create an Material Adverse Effect. Except
as set forth in Schedule 5.4, such Specified FE Subsidiary is not subject to any
outstanding judgments, rules, orders, writs, injunctions or decrees of any
court, arbitrator or Governmental Authority that would, individually or in the
aggregate, create an Material Adverse Effect.
5.5 [Intentionally Omitted].
5.6 WARN Act. Specified FE Subsidiaries do not intend to engage in a
"Plant Closing" or "Mass Layoff" as such terms are defined in the WARN Act with
respect to any Plant within sixty days of the DLC Nuclear Closing Date in
respect of the Plants.
5.7 Regulatory Status of Specified FE Subsidiaries. Each Specified FE
Subsidiary is an "electric utility" within the meaning of 10 C.F.R. section 50.2
and an "eligible taxpayer" under Code Section 468A).
5.8 Specified FE Subsidiaries' Nuclear Law Matters.
(a) Penn Power is a licensed co-owner, but not an operator, of
Beaver Valley, which is operated by DLC. Subject to this fact, and except as
disclosed in Schedule 5.8(a):
(i) Penn Power holds, and is in substantial compliance
with all Permits in respect of Nuclear Laws that are required for Penn Power to
own Beaver Valley and Penn Power is otherwise in compliance with all Nuclear
52
Laws with respect to its ownership of Beaver Valley except for such failures to
hold or comply with regard to Permits in respect of Nuclear Laws, or such
failures to be in compliance with applicable Nuclear Laws, as would not,
individually or in the aggregate, create a Material Adverse Effect; and
(ii) Penn Power has not entered into or agreed to any
consent decree or order relating to Beaver Valley, and is not subject to any
outstanding judgment, decree or judicial order relating to any Nuclear Law
relating to Beaver Valley.
(b) Except as disclosed in Schedule 5.8(b):
(i) CEIC holds, and is in substantial compliance with,
all Permits in respect of Nuclear Laws that are required for CEIC to conduct the
business of and operate the CEIC Nuclear Assets in respect of Perry Xxxx 0, and
is otherwise in substantial compliance with applicable Nuclear Laws with respect
to the business and operations of the CEIC Nuclear Assets in respect of Perry
Unit 1 except for such failures to hold or comply with required Permits in
respect of Nuclear Laws, or such failures to be in compliance with applicable
Nuclear Laws, as would not, individually or in aggregate, create a Material
Adverse Effect; and
(ii) CEIC is not subject to any outstanding judgment,
decree, or judicial order relating to compliance with any Nuclear Law relating
to Perry Unit 1.
ARTICLE VI
COVENANTS OF THE PARTIES
6.1.1 Interim Operation of Beaver Valley. (a) The Parties understand
and agree that the CAPCO Agreements remain in full force and effect from the
date of this Agreement through the DLC Nuclear Closing Date (the "Interim
Period"), and, except as modified by this Section 6.1, the ownership and
operating responsibility for Beaver Valley shall be as provided in the CAPCO
Agreements.
(b) During the Interim Period, in the interest of facilitating
an orderly transition and permitting informed action by FENOC in furtherance of
the action contemplated by Section 6.15 hereof, the Parties agree as follows:
(i) A transition team led by one individual designated
by DLC and one individual designated by FENOC (the "Transition Team")
will be established as soon after execution of this Agreement as
practicable to examine all aspects of the operation of Beaver Valley,
including but not limited to operations and maintenance, engineering,
regulatory, procedural, staffing, support services, fuel purchasing
and business issues affecting Beaver Valley. The Transition Team shall
appoint individuals from each Party's organization representing the
key nuclear functional areas as such areas are mutually defined by the
Transition Team. The appointed individuals and the Transition Team
shall comprise the Beaver Valley Transition Committee (the "Transition
53
Committee") which shall meet, during the Interim Period, on a regular
basis to create a definitive transition plan which will enable the
Parties to effect an orderly transition in furtherance of the action
contemplated by Section 6.15 hereof (the "Transition Plan").
(ii) From time to time, but at least once every two
weeks, the Transition Committee shall report its progress on the
Transition Plan to the senior management of both DLC and FENOC. The
Transition Committee shall be provided access to such information and
site facilities as may be necessary to enable it to perform its
responsibilities hereunder. The Transition Committee shall have no
authority to bind or make agreements on behalf of any of DLC, FENOC or
Penn Power, or to issue instructions to or direct or exercise
authority over their respective officers, employees, advisors or
agents.
(iii) Nothing in this Section 6.1.1(b) is intended to
modify DLC's ownership or operating responsibility or authority with
respect to Beaver Valley as provided for in the CAPCO Agreements or in
any way affect DLC's authority to conduct its business at Beaver
Valley in accordance with its own judgement and discretion in
accordance with the CAPCO Agreements.
(c) Notwithstanding Section 6.1(a) above, unless Penn Power
otherwise consents in writing, during the period from the date of this Agreement
to the DLC Nuclear Closing Date, DLC shall not:
(i) except as otherwise provided herein (including as provided in
Section 6.1(d) below), enter into any commitment for the purchase, sale, or
transportation of fuel for Beaver Valley having a term greater than six months
and not terminable on or before the DLC Nuclear Closing Date either (i)
automatically, or (ii) by option of Penn Power in its sole discretion, if the
aggregate payment under such commitment for fuel and all other outstanding
commitments for fuel for Beaver Valley not previously approved by Penn Power
would exceed $3,000,000;
(ii) except as otherwise provided herein, enter into
any contract, agreement, commitment or arrangement relating to Beaver Valley
that individually exceeds $1,000,000 unless it is terminable by DLC without
penalty or premium upon no more than sixty (60) days notice;
(iii) except as otherwise required by the terms of any
collective bargaining agreement or as otherwise provided in Section 6.11 hereof
or as currently contemplated by the plans and budgets in place under the CAPCO
Agreements, (i) hire at, or transfer to Beaver Valley, any new employees prior
to the DLC Nuclear Closing, other than to fill vacancies in existing positions
in the reasonable discretion of DLC, (ii) materially increase salaries or wages
of employees employed in connection with Beaver Valley prior to the DLC Nuclear
Closing, (iii) take any action prior to the DLC Nuclear Closing to affect a
material change in any collective bargaining agreement, or (iv) take any action
prior to the DLC Nuclear Closing to materially increase the aggregate benefits
payable to the employees employed in connection with Beaver Valley; or
54
(iv) except as otherwise provided herein, enter into
any written or oral contract, agreement, commitment or arrangement with respect
to any of the proscribed transactions set forth in the foregoing paragraphs
(i)-(iii).
(d) Notwithstanding Section 6.1(c) above, DLC is permitted to
enter into commitments with respect to uranium enrichment services in respect to
the Plants satisfactory to it in its sole discretion from the date of this
Agreement through the DLC Nuclear Closing Date in respect of each Plant;
provided, however, that if DLC expects to include such commitments in the DLC
Nuclear Agreements, it shall obtain the written consent of Specified FE
Subsidiaries prior to entering into such commitments.
6.1.2 Interim Operation of Perry Unit 1. The Parties understand and
agree that the Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement
executed in accordance with Section 6.15(b) hereof shall remain in full force
and effect during the Interim Period, and, except as modified by this Agreement,
the ownership, operation and maintenance of Perry shall be as provided in the
amended CAPCO Perry Unit 1 Operating Agreement.
6.2 Access to Information.
(a) For a period of seven (7) years after the DLC Nuclear
Closing Date (or such longer period as may be required by applicable law), each
Party and their Representatives shall have reasonable access to all of the books
and records of the DLC Nuclear Assets, including all Transferred Employee
Records in the possession of any Party to the extent that such access may
reasonably be required in connection with the Assumed Liabilities or the
Excluded Liabilities, or other matters relating to or affected by the operation
of the DLC Nuclear Assets . Such access shall be afforded by the Party in
possession of any such books and records upon receipt of reasonable advance
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 holder of the information with respect to such access pursuant to this
Section 6.2(a). 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 the latter's
expense, to segregate and remove such books and records as it may select.
(b) Penn Power agrees that, prior to the DLC Nuclear Closing
Date, it will not contact any vendors, suppliers, employees, or other
contracting parties of DLC or its Affiliates with respect to any aspect of the
DLC Nuclear Assets relating to Beaver Valley or the transactions contemplated
hereby, without the prior written consent of DLC, which consent shall not be
unreasonably withheld.
6.3 Confidentiality. (a) Each Party shall, and shall use its best
efforts to cause its Representatives to, (i) keep all Proprietary Information of
the other Party confidential and not to disclose or reveal any such Proprietary
Information to any Person other than such Party's Representatives and (ii) not
use such Proprietary Information other than in connection with the consummation
55
of the transactions contemplated hereby. After the DLC Nuclear Closing Date, any
Proprietary Information to the extent related to the DLC Nuclear Assets acquired
by Specified FE Subsidiaries shall no longer be subject to the restrictions set
forth herein. The obligations of the Parties under this Section 6.3(a) shall be
in full force and effect for three (3) years from the date hereof and will
survive the termination of this Agreement, the discharge of all other
obligations owed by the Parties to each other and the DLC Nuclear Closing Date.
(b) Upon the other Party's prior written approval (which shall
not be unreasonably withheld), either Party may provide Proprietary Information
of the other Party to the PUCO, the PaPUC, the SEC, the FERC, the NRC or any
other Governmental Authority with jurisdiction or any stock exchange, as may be
necessary to obtain Regulatory Approvals required by a Party, 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.
6.4 Public Statements. Subject to the requirements imposed by law,
any Governmental Authority or stock exchange, prior to the DLC Nuclear Closing
Date, no press release or other public announcement or public statement or
comment in response to any inquiry relating to the transactions contemplated by
this Agreement shall be issued or made by any Party without the prior approval
of the other Party (which approval shall not be unreasonably withheld). The
Parties agree to cooperate in preparing such announcements.
6.5 Expenses. Except to the extent specifically provided herein,
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses, including the costs of any state or local Transfer Taxes associated
with its transfer of the Real Property. Notwithstanding anything to the contrary
herein, Specified FE Subsidiaries will be responsible for (a) all costs and
expenses associated with the obtaining of any title insurance policy and all
endorsements thereto that such Party elects to obtain and (b) all filing fees
under the HSR Act relating to the DLC Nuclear Assets it would acquire hereunder.
6.6 Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each
Party hereto shall use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and achieve the
DLC Nuclear Closing in respect of all the Plants pursuant to this Agreement and
the assumption of the Assumed Liabilities, including using its best 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 hereunder, and to effectuate a
transfer of the Transferable Permits to Specified FE Subsidiaries. Specified FE
Subsidiaries agree to perform promptly all conditions required of Specified FE
Subsidiaries in connection with DLC's Required Regulatory Approvals. None of the
Parties hereto shall, without prior written consent of the other Parties, take
56
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.
(b) In the event that any DLC Nuclear Asset shall not have been
conveyed to the applicable Specified FE Subsidiary at the DLC Nuclear Closing,
DLC shall, subject to Section 6.6(c), use Commercially Reasonable Efforts to
convey such asset to the applicable Specified FE Subsidiary as promptly as is
practicable after the DLC Nuclear Closing.
(c) (i) To the extent that DLC's rights under any material DLC
Nuclear Agreement or Real Property Lease may not be assigned without the consent
of another Person which consent has not been obtained by the DLC Nuclear Closing
Date, this Agreement shall not constitute an agreement to assign the same, if an
attempted assignment would constitute a breach thereof or be unlawful.
(ii) If any consent to an assignment of any material DLC Nuclear
Agreement or Real Property Lease shall not be obtained or if any attempted
assignment would be ineffective or would impair either Specified FE
Subsidiaries' rights and obligations under the material DLC Nuclear Agreement or
Real Property Lease in question, so that such Specified FE Subsidiary would not
in effect acquire the benefit of all such rights and obligations, DLC, at the
option of such Specified FE Subsidiary and to the maximum extent permitted by
law and such material DLC Nuclear Agreement or Real Property Lease shall, after
the DLC Nuclear Closing Date, appoint such Specified FE Subsidiary to be DLC's
agent with respect to such material DLC Nuclear Agreement or Real Property
Lease, or, to the maximum extent permitted by law and such material DLC Nuclear
Agreement or Real Property Lease, enter into such reasonable arrangements with
such Specified FE Subsidiary or take such other actions as are necessary to
provide such Specified FE Subsidiary with the same or substantially similar
rights and obligations of such material DLC Nuclear Agreement or Real Property
Lease as such Specified FE Subsidiary may reasonably request. The Parties shall
cooperate and shall each use Commercially Reasonable Efforts prior to and after
the DLC Nuclear Closing Date to obtain an assignment of such material DLC
Nuclear Agreement or Real Property Lease to such Specified FE Subsidiary. For
purposes of this Section 6.6(c), without limitation, all DLC Nuclear Agreements
listed on Schedules 4.5 and 4.9(a)(i) and 4.9(b)(i) are deemed to be "material."
(d) To the extent that DLC's rights under any warranty or
guaranty described in Section 2.1(i) may not be assigned without the consent of
another Person, which consent has not been obtained by the DLC Nuclear Closing
Date, this Agreement shall not constitute an agreement to assign the same, if an
attempted assignment would constitute a breach thereof, or be unlawful. If any
consent to an assignment of any such warranty or guaranty shall not be obtained,
or if any attempted assignment would be ineffective or would impair the rights
and obligations of the applicable Specified FE Subsidiary under the warranty or
guaranty in question, so that such Specified FE Subsidiary would not in effect
acquire the benefit of all such rights and obligations, DLC, at the expense of
such Specified FE Subsidiary, 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 such Specified FE Subsidiary so as to provide
such Specified FE Subsidiary to the maximum extent possible with the benefits
and obligations of such warranty or guaranty.
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6.7 Consents and Approvals.
(a) As promptly as advisable after the date of this Agreement,
DLC and Specified FE Subsidiaries shall each file or cause to be filed with the
Federal Trade Commission and the United States Department of Justice any
notifications required to be filed under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. The Parties shall use their respective best efforts to respond promptly
to any requests for additional information made by either of such agencies, and
to cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date after the date of filing. Specified FE Subsidiaries will
pay all filing fees under the HSR Act relating to the DLC Nuclear Assets to be
acquired thereby, but each Party will bear its own costs of the preparation of
any filing.
(b) As promptly as advisable after the date hereof, Specified FE
Subsidiaries shall make any filings required by the Federal Power Act. Prior
filings with the FERC, Specified FE Subsidiaries shall submit such application
to DLC for review and comment and shall incorporate into the application any
revisions reasonably requested. Specified FE Subsidiaries shall be solely
responsible for the cost of preparing and filing the application, any
petition(s) for rehearing, or any reapplication. If the filing is rejected by
the FERC, Specified FE Subsidiaries agrees to petition the FERC for rehearing
and/or to re-submit an application with the FERC, provided that in either case
this action does not create a Material Adverse Effect on Specified FE
Subsidiaries and that it has been approved by DLC.
(c) As promptly as advisable, and in any case within sixty (60)
days after the date of this Agreement, DLC and Specified FE Subsidiaries, as
applicable, shall make any filings required by the PUCO, the PaPUC and any other
Governmental Authority, and make or cause to be made any other filings required
to be made with respect to the transactions contemplated hereby. The Parties
shall respond promptly to any requests for additional information made by such
agencies, and use their respective Commercially Reasonable Efforts to cause
regulatory approval to be obtained at the earliest possible date after the date
of filing. Each Party will bear its own costs of the preparation of any such
filing.
(d) The Parties shall cooperate with each other and promptly
prepare and file notifications with, and request Tax clearances from, state and
local taxing authorities in jurisdictions in which a portion of the
consideration may be required to be withheld or in which Specified FE
Subsidiaries would otherwise be liable for any Tax liabilities of DLC pursuant
to such state and local Tax law.
(e) Specified FE Subsidiaries shall have the primary
responsibility for securing the transfer, reissuance or procurement of the
Permits and Environmental Permits (other than Transferable Permits) effective as
of the DLC Nuclear Closing Date. DLC shall cooperate with Specified FE
Subsidiaries' efforts in this regard and assist in any transfer or reissuance of
a Permit or Environmental Permit held by DLC or the procurement of any other
Permit or Environmental Permit when so requested by Specified FE Subsidiaries,
to the extent such cooperation does not entail payment of money by DLC.
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(f) As promptly as possible after the date hereof, DLC and
Specified FE Subsidiaries shall file with the NRC joint applications requesting
the NRC Approvals. The Parties shall respond promptly to any requests for
additional information made by the NRC, cooperate in connection with any
presentation or proceeding associated with the NRC application and use their
respective best efforts to cause such NRC Approvals to be obtained at the
earliest possible date after the date of filing. Each Party will bear its own
costs of the preparation of any such filing and the NRC filing and processing
fees in respect of such filing shall be paid fifty percent (50%) by DLC and
fifty percent (50%) by the Specified FE Subsidiaries.
6.8 Fees and Commissions. Each Party represents and warrants to the
other Party that, no broker, finder or other Person is entitled to any brokerage
fees, commissions or finder's fees in connection with the transaction
contemplated hereby by reason of any action taken by the Party making such
representation. DLC and Specified FE Subsidiaries will pay to the other or
otherwise discharge, and will indemnify and hold the other harmless from and
against, any and all claims or liabilities for all brokerage fees, commissions
and finder's fees (other than the fees, commissions and finder's fees payable to
the parties listed above) incurred by reason of any action taken by the
indemnifying party.
6.9 Tax Matters.
(a) All Transfer Taxes incurred in connection with this
Agreement and the transactions contemplated hereby, including, (i) Pennsylvania
or Ohio sales tax; (ii) the Pennsylvania or Ohio transfer tax, conveyance fees
or conveyances of interests in real and/or personal property; and (iii)
Pennsylvania or Ohio sales tax and transfer tax on deeds shall be borne by DLC.
DLC shall file, to the extent required by, or permissible under, applicable law,
all necessary Tax Returns and other documentation with respect to all such
Transfer Taxes, and, if required by applicable law, Specified FE Subsidiaries
shall join in the execution of any such Tax Returns and other documentation.
Prior to the applicable DLC Nuclear Closing Date, to the extent applicable,
Specified FE Subsidiaries shall provide to DLC appropriate certificates of Tax
exemption from each applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.4 of this Agreement, Specified FE Subsidiaries shall prepare and
timely file all Tax Returns required to be filed after the DLC Nuclear Closing
Date with respect to the DLC Nuclear Assets, if any, and shall duly and timely
pay all such Taxes shown to be due on such Tax Returns. Specified FE
Subsidiaries agrees that preparation of any such Tax Returns shall be subject to
DLC's approval, which approval shall not be unreasonably withheld. Specified FE
Subsidiaries shall make such Tax Returns available for DLC's review and approval
no later than fifteen (15) Business Days prior to the due date for filing each
such Tax Return.
(c) Specified FE Subsidiaries and DLC shall provide each other
with such assistance as may reasonably be requested by the other Party in
connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each shall retain and provide
the requesting party with any records or information which may be relevant to
such return, audit, examination or proceedings. Any information obtained
59
pursuant to this Section 6.9(c) or pursuant to any other Section hereof
providing for the sharing of information or review of any Tax Return or other
instrument relating to Taxes shall be kept confidential by the Parties.
(d) In the event that a dispute arises between DLC and either
Specified FE Subsidiary regarding Taxes, or any amount due under this Section
6.9, the Parties shall attempt in good faith to resolve such dispute and any
agreed upon amount shall be paid to the appropriate Party. If such dispute is
not resolved within 30 days, the Parties shall submit the dispute to the
Independent Accounting Firm for resolution, which resolution shall be final,
conclusive and binding on the Parties. Notwithstanding anything in this
Agreement to the contrary, the fees and expenses of the Independent Accounting
Firm in resolving the dispute shall be borne 50% by DLC and 50% by the
applicable Specified FE Subsidiary. Any payment required to be made as a result
of the resolution of the dispute by the Independent Accounting Firm shall be
made within ten days after such resolution, together with any interest
determined by the Independent Accounting Firm to be appropriate.
6.10 Advice of Changes. Prior to the DLC Nuclear Closing, each Party
will advise the other in writing with respect to any matter arising after
execution of this Agreement of which that Party obtains Knowledge and which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth in this Agreement, including any of the Schedules hereto. DLC may
at any time notify Specified FE Subsidiaries of any development causing a breach
of any of its representations and warranties in Article IV, and Specified FE
Subsidiaries may at any time notify DLC of any development causing a breach of
any of its representations and warranties in Article V. Unless DLC or the
Specified FE Subsidiaries have the right to terminate this Agreement pursuant to
Section 9.1(f) or (g) below (after the expiration of the applicable cure period
provided therein) by reason of the developments and exercises that right within
the period of fifteen (15) days after such right accrues, the written notice
pursuant to this Section 6.10 will be deemed to have amended this Agreement,
including the appropriate Schedule, to have qualified the representations and
warranties contained in Articles IV and V above, as applicable and to have cured
any misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the development.
6.11 DLC Employees.
(a) DLC shall identify the employees at the Plants on Schedule
6.11(a), which schedule shall also set forth such employees level of seniority,
classification and Plant location. DLC may submit an offer of continuing
employment with DLC or a DLC Subsidiary or an Affiliate thereof to those
employees identified on Schedule 6.11(a), provided that such offer shall not be
contingent on any such employee waiving his or her rights to consider a
competing offer of employment from either Specified FE Subsidiary. Upon the
acceptance by any such employee of DLC's offer of continuing employment, DLC
shall provide written notice thereof to Specified FE Subsidiaries and shall
modify Schedule 6.11(a) to reflect the same.
(b) At least 120 days prior to the DLC Nuclear Closing Date,
each Specified FE Subsidiary shall provide DLC with notice of its respective
staffing level requirements, listed by classification and operation, and shall
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be required to offer employment only to that number of employees of DLC who are
covered by the International Brotherhood of Electrical Workers ("IBEW"), Local
Unions 140, 142, 144, 147, 148, 149 collective bargaining agreement with DLC
("IBEW CBA") and are either (i) employed in positions relating to the Plants or
(ii) if employed at another location, perform substantially all their work in
support of the Plants, and in each case, who are necessary to satisfy such
Specified FE Subsidiary's staffing level requirements (collectively, "DLC Union
Employees"). In each classification, DLC Union Employees shall be so offered
employment in order of their seniority as provided for in the IBEW CBA. Each
person who becomes employed by such Specified FE Subsidiary pursuant to this
section shall be referred herein as a "DLC Transferred Union Employee."
(c) At least 120 days prior to the DLC Nuclear Closing Date,
each Specified FE Subsidiary shall provide DLC with notice of its respective
staffing level requirements, listed by classification and operation, and shall
be required to make either a Non-Qualifying or a Qualifying Offer of employment
only to that number of salaried employees of DLC who are employed in connection
with the DLC Nuclear Assets and who are listed in, or are in a function or whose
employment responsibilities are listed in, Schedule 6.11(c) (collectively, "DLC
Non-Union Employees"), which schedule shall also set forth such employees'
salary and responsibilities and who are necessary to satisfy the staffing level
requirements of a Specified FE Subsidiary or Affiliate. Each employee employed
by a Specified FE Subsidiary or Affiliate pursuant to this section shall be
referred herein as a "DLC Transferred Non-Union Employee." To the extent that a
Specified FE Subsidiary takes an employee from Beaver Valley and relocates the
employee to another plant owned by any Specified FE Subsidiary or any Affiliate
of any of them, such employee shall receive the same relocation allowance as if
he or she had been an FE employee.
(d) All offers of employment made by a Specified FE Subsidiary
pursuant to Sections 6.11 (b) and (c) shall be made in accordance with all
applicable laws and regulations (including the joint application to be made by
DLC and Penn Power to the NRC in respect of Beaver Valley), and for DLC Union
Employees, in accordance with the IBEW CBA and shall remain open for a period of
ten (10) working days. Any such offer which is accepted within such ten (10)
working day period shall thereafter be irrevocable until the earlier of the DLC
Nuclear Closing Date or the termination of this Agreement pursuant to its terms.
Following acceptance of such offers, such Specified FE Subsidiary shall provide
written notice thereof to DLC, and DLC shall provide such Specified FE
Subsidiary with access to the files and records of employees accepting such
offers, to the extent permitted by contract, the IBEW CBA and/or applicable law.
Schedule 6.11(d) sets forth the collective bargaining agreements, and amendments
thereto, to which DLC is a party in connection with the DLC Nuclear Assets.
(e) With respect to DLC Transferred Union Employees and DLC
Transferred Non-Union Employees, the following shall be applicable:
(i) For such DLC Transferred Union Employees, a
Specified FE Subsidiary shall recognize IBEW Local Unions 140, 142, 144, 147,
148, 149 as the exclusive collective bargaining representative and shall assume
the terms and conditions of the IBEW CBA until the expiration of said agreement,
and will further comply with all applicable legal obligations with respect to
collective bargaining under federal labor law thereafter.
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(ii) A Specified FE Subsidiary or Affiliate will
establish and maintain benefit plans (including a severance plan) for
Transferred DLC Non-Union Employees and DLC Transferred Union Employees under
either the IBEW CBA or any similar DLC document which are comparable to the DLC
Plant Benefit Plans in effect for such employees immediately prior to the DLC
Nuclear Closing Date and provide at least the same level of benefits or coverage
as the DLC Plant Benefit Plans in accordance with and for the duration of the
IBEW CBA, in the case of DLC Transferred Union Employees, or until December 31,
2001, in the case of DLC Transferred NonUnion Employees (such period being
hereinafter referred to as the "Continuation Period"). Subject to applicable law
and the IBEW CBA, nothing in the foregoing shall prevent a Specified FE
Subsidiary or FE Affiliate from using different benefit providers or from
establishing new benefit plans or using its existing benefit plans as the means
of meeting its obligation hereunder. The commitments under this paragraph shall,
however, require the following during the Continuation Period:
(A) With respect to health care plans, any Specified FE
Subsidiary agrees to waive or to cause the waiver of all limitations
as to pre-existing conditions and actively-at-work exclusions and
waiting periods for such employees, except that a Specified FE
Subsidiary may require the employee or his/her dependents who, on the
DLC Nuclear Closing Date, is then in the process of satisfying any
similar exclusion or waiting period under the DLC health care plans to
satisfy fully the balance of the applicable time period for such
exclusion or waiting period under the applicable FE plan. With respect
to the calendar year in which the DLC Nuclear Closing Date occurs, all
health care expenses incurred by any such employees and/or any
eligible dependent thereof in the portion of the calendar year
preceding the DLC Nuclear Closing Date that were qualified to be taken
into account for purposes of satisfying any deductible or
out-of-pocket limit under any DLC health care plans shall be taken
into account for purposes of satisfying any deductible or
out-of-pocket limit under the health care plan of a Specified FE
Subsidiary or Affiliate of FE for such calendar year.
(B) With respect to service and seniority, a Specified FE
Subsidiary shall recognize each such employee's service and seniority
with DLC for all non-pension purposes, including the determination of
eligibility and extent of service or seniority-related welfare
benefits such as vacation and sick pay benefits and to agree to give
each such employee full credit for all vacation benefits banked,
accrued, and unused, as of the DLC Nuclear Closing Date.
(C) With respect to pension benefits, a Specified FE Subsidiary
or Affiliate of FE shall provide each employee with a pension benefit
that, when combined with the benefit accrued by such employee under
the DLC pension plan as it exists on the DLC Nuclear Closing Date, is
at least equal in value to the pension benefit such employee would
have accrued if such employee had remained employed with DLC and
continued to be covered by such DLC pension plan (as it exists on the
DLC Nuclear Closing Date) during the Continuation Period. In providing
such benefits, a Specified FE Subsidiary or Affiliate of FE shall
recognize each such employee's combined service and earnings with DLC
and a Specified FE Subsidiary or Affiliate of FE. The determination of
the benefit required by this Section 6.11(e)(ii)(C) shall be made in
good faith by the accounting firm then acting as the independent
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auditor of the Specified FE Subsidiary or Affiliate of FE, which
determination shall be final and binding on the parties hereto and
each affected employee.
(D) With respect to post-retirement medical and life insurance
programs, a Specified FE Subsidiary shall provide to any such employee
who retires from a Specified FE Subsidiary's employment prior to the
expiration of the IBEW CBA with respect to DLC Transferred Union
Employees, and December 31, 2001 with respect to DLC Transferred
Non-Union Employees, and is at least age 55 and has ten or more years
of combined service with DLC and a Specified FE Subsidiary or
Affiliate of FE, benefits, to the extent possible, that are
substantially equivalent to the DLC post-retirement medical and life
insurance programs that such employee would have received, if such
employee had continued to be covered by the DLC programs as they
existed on the DLC Nuclear Closing Date.
(E) With respect to the DLC 401(k) Retirement Savings Plan for
Management or the DLC 401(k) Retirement Savings Plan for the IBEW
(collectively, the "DLC Savings Plan"), a Specified FE Subsidiary
shall take any and all necessary action to cause the trustee of any
defined contribution plan of a Specified FE Subsidiary in which any
such employee becomes a participant by virtue of this section, to
accept a direct "rollover" of all or a portion of said employee's
"eligible rollover distribution" within the meaning of Section 402 of
the Code from the DLC Savings Plan, if requested to do so by such
employee, or to accept a direct plan-to-plan transfer from the DLC
Savings Plan of the account balances of any such employee and the
assets of such plans related thereto, if requested to do so by DLC or
by any such employee. Each Specified FE Subsidiary agrees that the
property so rolled over and the assets so transferred may include (i)
promissory notes evidencing loans from the DLC Savings Plan to such
employees that are outstanding as of the DLC Nuclear Closing Date, and
(ii) shares of DLC common stock in which the account balances of such
employees are invested as of the DLC Nuclear Closing Date. However,
any defined contribution plan of FE or its Subsidiaries or Affiliates
accepting such a rollover or transfer shall not be required to (i)
make any further loans to any such employee after the DLC Nuclear
Closing Date or (ii) permit any additional investment to be made in
DLC common stock on behalf of any such employee after the DLC Nuclear
Closing Date. DLC hereby represents to each FE Subsidiary that the DLC
Savings Plan is intended to be qualified within the meaning of Section
402 of the Code.
(f) With respect to severance benefits, each Specified FE
Subsidiary, as applicable, is required to provide for any DLC Transferred
Non-Union Employee who is terminated as a result of an overall reduction in work
force due to decreased employment need of such Specified FE Subsidiary prior to
the date which is one year following the DLC Nuclear Closing Date severance
benefits at the level for such employees in effect as of the date hereof. DLC
Transferred Non-Union Employees shall also be entitled to severance benefits if,
prior to the date which is one year following the DLC Nuclear Closing Date, the
applicable Specified FE Subsidiary reduces the pay rate for such employee and
such employee within seven days thereafter terminates employment. Any employee
provided severance benefits under this section may be required to execute a
release of claims against DLC and such Specified FE Subsidiary, in such form as
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each Specified FE Subsidiary shall prescribe, as a condition for the receipt of
such benefits.
(g) Each DLC Transferred Non-Union Employee who is initially
assigned, or assigned within 12 months of the DLC Nuclear Closing Date, by each
Specified FE Subsidiary, to a principal place of work that requires such
employee to relocate his residence will be reimbursed by the applicable
Specified FE Subsidiary for all relocation expenses in accordance with the DLC
relocation plans in effect as of the date hereof. For purposes of the foregoing
a required relocation of residence shall include a change in the principal place
of work that is more than 30 miles farther from such employee's principal place
of work immediately prior to the DLC Nuclear Closing Date and requires a commute
from his current residence of at least one hour in each direction.
(h) DLC shall be responsible, with respect to the DLC Nuclear
Assets, for performing and discharging all requirements under the WARN Act and
under applicable state and local laws and regulations for the notification of
its employees of any "employment loss" within the meaning of the WARN Act which
occurs prior to the DLC Nuclear Closing Date.
(i) Neither Specified FE Subsidiary shall be responsible for
extending COBRA Continuous Coverage to any employees and former employees of
DLC, or to any qualified beneficiaries of such employees and former employees,
who become or became entitled to COBRA Continuous Coverage on or before the DLC
Nuclear Closing Date, including those for whom the DLC Nuclear Closing Date
occurs during their COBRA election period.
(j) DLC or its Affiliates shall pay to all DLC Transferred Union
and DLC Transferred Non-Union Employees, all compensation, bonus, vacation and
holiday compensation, workers' compensation or other employment benefits to
which they are entitled under the terms of the applicable compensation or DLC
benefit plans or programs. The Specified FE Subsidiaries shall pay to each
employee offered employment pursuant to this Section 6.11, all unpaid salary,
bonus, vacation and holiday compensation, workers' compensation or other
compensation or employment benefits that are payable in cash which have accrued
to such employees following the DLC Nuclear Closing Date, at such times as
provided under the terms of the applicable compensation or benefit programs.
(k) Individuals who are otherwise DLC Union Employees or DLC
Non-Union Employees, but who on any date are not actively at work due to a leave
of absence covered by the Family and Medical Leave Act (FMLA), or due to any
other authorized leave of absence, shall nevertheless be treated as "Union
Employees" or as "Non-Union Employees", as the case may be, on such date if they
are able (i) to return to work within the protected period under the FMLA or
such other leave (which in any event shall not extend more than twelve (12)
weeks after the DLC Nuclear Closing Date), whichever is applicable, and (ii) to
perform the essential functions of their job, with or without a reasonable
accommodation.
(l) The Specified FE Subsidiaries shall be responsible, with
respect to the Exchange Assets, for performing and discharging all requirements
under the WARN Act and under applicable state and local laws and regulations for
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the notification of its employees of any "employment loss" within the meaning of
the WARN Act which occurs following the DLC Nuclear Closing Date.
(m) The Specified FE Subsidiaries are responsible for extending
and continuing to extend COBRA Continuation Coverage to all DLC Transferred
Union and DLC Transferred NonUnion Employees, and qualified beneficiaries of
such employees who become entitled to such COBRA Continuation Coverage following
the DLC Nuclear Closing Date.
(n) The provisions of this Section 6.11 shall not be construed
as being for the benefit for any person other than the Parties hereto, and shall
not be enforceable by persons other than such Parties (including, without
limitations, the DLC Transferred Union Employees and DLC Transferred Non-Union
Employees.)
(o) Notwithstanding any provision of the Beaver Valley CAPCO
Agreements, with respect to any DLC Union Employees who do not receive an offer
of employment from a Specified FE Subsidiary pursuant to subsection (b) hereof
and with respect to any DLC Non-Union Employees who decline a Non-Qualifying
Offer pursuant to subsection (c) hereof, and are thereafter terminated, DLC will
be responsible for paying for the aggregate cost incurred in providing the
severance, pension and banked, accrued and unused vacation benefits due to such
employees.
6.12 Risk of Loss.
From the date hereof through the DLC Nuclear Closing Date, all
risk of loss or damage to the property included in the DLC Nuclear Assets shall
be governed by the Perry CAPCO Agreements or Beaver Valley CAPCO Agreements, as
applicable.
6.13 CAPCO Agreements. Administration of the CAPCO Agreements shall be
conducted in accordance with the terms of such CAPCO Agreements and the CAPCO
Settlement Agreement.
6.14 Refund of Accrued Interest in Insurance Premiums. At the request
of DLC, each Specified FE Subsidiary shall enter into and/or cause other
appropriate FE Subsidiaries to enter into any agreement with ANI and/or XXXX and
DLC reasonably requested by DLC to assure that the refunds in respect of ANI and
XXXX reserve premiums and/or dividends and/or distributions of earnings based on
membership account balance(s) and insurance premiums described in Section 2.2(i)
are paid directly by ANI and/or XXXX to DLC.
6.15 Operating Control. (a) Subject to the terms and conditions hereof
and receipt of the applicable DLC Required Regulatory Approvals, at the DLC
Nuclear Closing DLC shall transfer to FENOC, and FENOC shall assume from DLC,
responsibility for the operation and maintenance of Beaver Valley and FENOC
shall become the operator, all as described in Section 2.1(d).
(b) As of the date of this Agreement, DLC has provided written
notification to FE that it supports the pending NRC application by FENOC to
assume responsibility for the operation and maintenance of Perry Unit 1.
Promptly upon the execution of this Agreement, DLC shall (i) provide its
consent, pursuant to the operating agreement in respect of Perry Xxxx 0, to the
assignment of operating responsibility to FENOC and (ii) the parties to
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Amendment 2 to the CAPCO Perry Unit 1 Operating Agreement shall execute and
deliver that amendment.
6.16 Beaver Valley Unit 2 Facility Leases.
(a) Prior to the DLC Nuclear Closing Date, DLC will terminate
the Beaver Valley Unit 2 Facility Leases and will be responsible for all
payments and expenses associated with such termination. In addition, pursuant to
Section 3.9(b) of the Beaver Valley Unit 2 Lease Indentures, DLC will assume all
of the obligations of the Beaver Valley Unit 2 Owner Trustees under those
indenture and the notes issued and outstanding thereunder (the "Beaver Valley
Unit 2 Indentures Notes") and shall make all payments required thereby. DLC
further agrees that it will redeem the Beaver Valley Unit 2 Indentures Notes in
full no later than December 1, 2002. In connection with such termination and
assumption, Penn Power agrees to cooperate and/or to cause other appropriate FE
Subsidiaries to cooperate to the extent reasonably necessary or appropriate to
effect such termination and assumption by DLC, including taking those actions
described in Schedule 6.16(a) and taking actions reasonably acceptable to it
that may be required by third parties in connection with such termination and
assumption.
(b) Until the Beaver Valley Unit 2 Indentures Notes have been
paid in full, Penn Power agrees that it:
(i) will not terminate the Beaver Valley Unit 2
Operating Agreement, and will not sell, transfer, assign or dispose of
(collectively, "transfer") all or any material portion of its rights or interest
in and to Beaver Valley Unit 2 and the Beaver Valley Unit 2 Operating Agreement,
unless such transfer is made subject to the Encumbrance of the Beaver Valley
Unit 2 Lease Indentures, as provided in this Agreement, and the transferee
assumes all obligations in connection with accepting the transfer subject to
such Encumbrance as provided in this Agreement;
(ii) will keep Beaver Valley Unit 2 and the Beaver
Valley Unit 2 Operating Agreement free and clear of any Encumbrances that would
be superior to the Encumbrance of the Beaver Valley Unit 2 Lease Indentures;
(iii) cause Beaver Valley Unit 2 to be used and operated
under and in compliance with all applicable laws, rules regulations and orders
of any applicable Governmental Authority, Good Utility Practices and the Beaver
Valley Unit 2 Operating Agreement, except where failure to do so would not
result in a Material Adverse Effect; and
(iv) maintain insurance policies in respect of Beaver
Valley Unit 2 comparable to those maintained in respect thereof by DLC as of the
DLC Nuclear Closing Date in respect of Beaver Valley, cause DLC to be a named
insured in respect of such liability insurance policies maintained in respect of
Beaver Valley, cause the Beaver Valley Unit 2 Lease Indentures Trustee to be a
named insured on such insurance policies and the loss payee in respect of
thirteen and seventy-four one hundredths percent (13.74%) of the "all risk"
property insurance portion of such insurance policies, and provide a copy of a
certificate evidencing such insurance coverage to DLC on or before September 1
of each year.
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6.17 Tax Exempt Financing.
(a) Specified FE Subsidiaries understand and agree that:
(i) the Exempt Facilities have been financed, and
refinanced, in whole or in part, with the proceeds of the issuance and sale by
various governmental authorities of industrial development revenue bonds or
private activity bonds (collectively, the "Revenue Bonds") the interest on
which, with certain exceptions, is excluded from gross income for purposes of
federal income taxation; and DLC is the economic obligor in respect of such
bonds;
(ii) the basis for such exclusion is the use of the
Exempt Facilities for the purpose of (A) the abatement or control of atmospheric
pollution or contamination (B) the abatement or control of water pollution or
contamination, (C) sewage disposal and/or (D) the disposal of solid waste, such
qualifying purposes being discussed in more detail in (b) below;
(iii) the use of the Exempt Facilities for a purpose
other than the qualifying purpose indicated in subsection (ii) above could
impair (a) such exclusion from gross income of the interest on such bonds,
possibly with retroactive affect, unless appropriate remedial action were taken
(which could include prompt defeasance and /or redemption of such bonds) and/or
(b) the deductibility of DLC's payment of interest based on the restrictions in
Section 150(b) of the Code; and
(iv) any breach by Specified FE Subsidiaries of their
obligations under this Article could result in the incurrence by DLC of
additional costs and expenses, including without limitation, increased interest
costs, loss of the interest deduction for tax purposes and transaction costs
relating to any refinancing redemption and/or defeasance of all or part of the
Revenue Bonds, and Specified FE Subsidiaries will be liable to DLC for such
additional costs and expenses.
(b) (i) Specified FE Subsidiaries shall not use, or permit
the use of, the Exempt Facilities for any purpose other than:(A) abating or
controlling atmospheric or water pollution or contamination by removing,
altering, disposing of or storing pollutants, contaminants, waste or heat, all
as contemplated in U.S. Treasury Regulations Section 1.103-8(g); (B) the
collection, storage, treatment, utilization, processing or final disposal of
solid waste, all as contemplated in U.S. Treasury Regulations Section
1.103-8(f); or (C) the collection, storage, treatment, utilization, processing
or final disposal of sewage, all as contemplated in U.S. Treasury Regulations
Section 1.103-8(f); unless Specified FE Subsidiaries have obtained at their own
expense an opinion addressed to DLC of nationally recognized bond counsel
reasonably acceptable to DLC ("Bond Counsel") that such use will not impair (x)
the exclusion from gross income of the interest on any issue of Revenue Bonds
for Federal income tax purposes or (y) the deductibility of DLC's payments of
interest based on the restrictions in Section 150(b) of the Code.
(ii) Specified FE Subsidiaries reasonably expect, as of
the date of this Agreement, that the Exempt Facilities will continue to be used
for the qualifying purposes set forth in subsection (i) above, and for no other
purpose, for the remainder of their useful lives.
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(c) It is expressly understood and agreed the provisions of
clause (b) above shall not prohibit Specified FE Subsidiaries from suspending
the operation of the Exempt Facilities on a temporary basis, or from terminating
the operation of the Exempt Facilities on a permanent basis and shutting down,
retiring, abandoning and/or decommissioning the Exempt Facilities; provided,
however, that if the Exempt Facilities, in whole or in part, are dismantled and
sold, including any sale for scrap, and if the operation of the Plant served by
such Exempt Facilities shall not theretofore have been, and is not then being,
terminated on a permanent basis, then the proceeds of such sale of the Exempt
Facilities shall within six months from the date of sale be expended to acquire
replacement property to be used for the same qualifying purpose as the Exempt
Facilities so sold, unless Specified FE Subsidiaries have obtained at their own
expense an opinion addressed to DLC Bond Counsel that no taking this action will
not impair (x) the exclusion from gross income of the interest on any issue of
Revenue Bonds for Federal income tax purposes or (y) the deductibility of DLC's
payments of interest based on the restrictions in Section 150(b) of the Code.
(d) Specified FE Subsidiaries shall not issue, or have issued on
their behalf, any tax-exempt bonds to finance or refinance its acquisition of
the Exempt Facilities; provided that it is expressly understood and agreed that
this clause (d) shall not prohibit the use of tax-exempt bonds to finance or
refinance any improvement to the Exempt Facilities made after the date of
acquisition or any assets other than the Exempt Facilities.
(e) Specified FE Subsidiaries shall give DLC at least 180 days'
prior written notice of any suspension or termination of the operation of the
Exempt Facilities, or any part thereof, and of any sale, exchange, transfer or
other disposition of the Exempt Facilities, or any part thereof, including, but
not limited to, a sale for scrap.
(f) If DLC shall desire to refund any Revenue Bonds, Specified
FE Subsidiaries shall cooperate with DLC and with Bond Counsel with respect to
the refunding bonds and shall provide upon request any representations,
agreements or covenants that are reasonably requested concerning its compliance
to such date and/or in the future with the representations, agreements and
covenants made herein.
(g) If Specified FE Subsidiaries shall sell, exchange, transfer
or otherwise dispose of the Exempt Facilities to a third party, Specified FE
Subsidiaries shall cause to be included in the documentation relating to such
transaction covenants and agreements on the part of such third party
substantially identical to those on the part of Specified FE Subsidiaries
contained in this Section 6.17.
(h) The covenants and agreements on the part of Specified FE
Subsidiaries contained in this Section 6.17 shall continue in effect so long as
any Revenue Bonds, including any refunding bonds issued hereafter to refund any
Revenue Bonds, shall remain outstanding. DLC shall notify Specified FE
Subsidiaries promptly when there shall be no Revenue bonds outstanding.
6.18 Removal at Shippingport Site Buildings. Prior to the DLC Nuclear
Closing in respect of Beaver Valley, DLC will remove all Regulated Substances
and Nuclear Material from the Shippingport Site Buildings to the reasonable
satisfaction of Penn Power. In addition, DLC agrees to use Commercially
68
Reasonable Efforts to assign its rights under the Shippingport Contract to Penn
Power and take appropriate steps to delete the SAPS site from the definition of
the Beaver Valley site boundaries set forth in the Updated Safety Analysis
Reports for Beaver Valley Xxxx 0 xxx Xxxxxx Xxxxxx Xxxx 0 and other related
licensing documentation on or prior to the DLC Nuclear Closing.
6.19 Decommissioning Funds.
6.19.1 Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx Xxxxx
(x) Xxxxxx Xxxxxx Xxxx 0 Qualified Funds.
(i) As soon as practicable after execution of this Agreement,
DLC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS substantially to the
effect that DLC be permitted to make an additional single
contribution in the same calendar year as the DLC Nuclear
Closing Date to the Beaver Valley Unit 1 Qualified
Decommissioning Fund in an amount equal to the Beaver Valley
Unit 1 Decommissioning Shortfall. As used herein, the
"Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx Xxxxxxxxx" shall mean
$25.5 million (the "Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx
Xxxxxx") less the amount of any additional qualifying fund
deposits made by DLC to the Beaver Valley Unit 1 Qualified
Decommissioning Fund between January 1, 1999 and the DLC
Nuclear Closing Date. If necessary to obtain such IRS
ruling, DLC will request from the PaPUC an appropriate order
with respect to the rate treatment of such contribution.
(ii) If DLC is informed by the IRS that the IRS will not issue a
favorable ruling or DLC determines that it is otherwise
unable to obtain the private letter ruling described in
paragraph (i) above prior to the DLC Nuclear Closing Date,
DLC may notify Penn Power, in writing, that DLC is unable to
obtain the IRS ruling. Upon receiving such notification,
Penn Power shall use Commercially Reasonable Efforts to
obtain a private letter ruling from the IRS prior to the DLC
Nuclear Closing Date substantially to the effect that Penn
Power be permitted to make an additional single contribution
to the Penn Power Qualified Decommissioning Funds for Beaver
Valley Unit 1 in the same calendar year as the DLC Nuclear
Closing Date in an amount equal to the Beaver Valley Unit 1
Decommissioning Shortfall and, if necessary to obtain such
ruling, Penn Power shall also request from the PaPUC an
appropriate order with respect to the rate treatment of such
contribution. To the extent that Penn Power obtains the
private letter ruling referenced in this paragraph (ii), DLC
shall agree to pay in cash to Penn Power an amount equal to
the Beaver Valley Unit 1 Decommissioning Shortfall.
(iii) If DLC determines that the private letter rulings described
in paragraphs (i)-(ii) will not be obtained, Penn Power
69
shall, at the request of DLC, cooperate with DLC in
requesting such private letter rulings from the IRS or
authorizations from any other Governmental Authority prior
to the DLC Nuclear Closing Date that would permit DLC to
transfer to Penn Power or permit DLC or Penn Power, as
applicable, to make one or more contributions, as soon as
possible after January 1, 1999, to the Beaver Valley Unit 1
Qualified Decommissioning Funds or the Penn Power Qualified
Decommissioning Funds, as applicable, in such amounts that
would provide to Penn Power in Qualified Funds, the
equivalent, on an after-tax present value basis, of the
Beaver Valley Unit 1 Decommissioning Amount as determined in
paragraphs (i) and (ii) above. In the event that the rulings
or authorizations in this paragraph (iii) are not able to be
obtained or DLC otherwise determines not to pursue the
provisions of this paragraph (iii), DLC shall transfer to
Penn Power such amounts as provided pursuant to the
provisions of paragraphs (v)(A) and (B) below.
(iv) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 1 Qualified Decommissioning
Funds to be transferred to Penn Power (or, if directed in
writing to do so by Penn Power, to the trustee of any trust
specified in such written direction), provided that (A) Penn
Power shall contribute all amounts received from the Beaver
Valley Unit 1 Qualified Decommissioning Funds into the Penn
Power Qualified Decommissioning Funds, and (B) each of DLC
and Penn Power shall have received private letter rulings
from the IRS, or opinions of counsel satisfactory to each of
DLC and Penn Power, substantially to the effect that,
pursuant to Treas. Reg. section 1.468A-6, neither DLC nor
Penn Power nor any of the applicable DLC Qualified
Decommissioning Funds or Penn Power Qualified
Decommissioning Funds shall recognize any gain or otherwise
take into account any income for federal income tax purposes
by reason of the transfer of the assets of the Beaver Valley
Unit 1 Qualified Decommissioning Funds.
(v) At the DLC Nuclear Closing Date, DLC shall, in respect of
any amounts for which an IRS private letter ruling pursuant
to paragraphs (i), (ii) or (iii) has not been received,
transfer an additional decommissioning payment to Penn Power
as follows:
(A) If receipt of the additional decommissioning
payment by Penn Power from DLC is not included in income for
federal income tax purposes or Penn Power receives a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPNet") shall be ($25.5 million - AQF) (1.436).
As used in this paragraph (A) and paragraph (B) below, AQF
shall mean the additional qualifying fund deposits
authorized by any IRS ruling, including any qualified fund
deposits made between January 1, 1999 and the DLC Nuclear
Closing Date; provided, however, that ADPNet shall not be
less than zero.
70
(B) If receipt of the additional decommissioning
payment by Penn Power is included in income for federal
income tax purposes and Penn Power does not receive a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPGross") shall be ($25.5 million - AQF) (1.436)
divided by 0.65; provided, however, that ADPGross shall not
be less than zero.
Any additional decommissioning payment shall be payable in
cash or in additional Nonqualified Funds, and at the request
of DLC, Penn Power shall contribute all payments received
from DLC into the Penn Power Nonqualified Decommissioning
Funds or the Penn Power Qualified Decommissioning Funds.
(b) Beaver Valley Unit 1 Nonqualified Funds.
(i) DLC and Penn Power shall use Commercially Reasonable Efforts
to obtain a private letter ruling from the IRS prior to the
DLC Nuclear Closing Date substantially to the effect that
Penn Power shall not recognize any gain or otherwise take
into account any income for federal income tax purposes by
reason of the transfer of the assets of the Beaver Valley
Unit 1 Nonqualified Decommissioning Funds.
(ii) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 1 Nonqualified
Decommissioning Funds to be transferred to Penn Power (or,
if directed in writing to do so by Penn Power, to the
trustee of any trust specified in such written direction),
provided that, to the extent required by any IRS private
letter ruling received pursuant to paragraph (i), Penn Power
shall contribute all amounts received from the Beaver Valley
Unit 1 Nonqualified Decommissioning Funds into the Penn
Power Nonqualified or Qualified Decommissioning Funds, as
applicable.
(iii) If the receipt by Penn Power of the Beaver Valley Unit 1
Nonqualified Decommissioning Funds is included in income for
federal income tax purposes and Penn Power does not receive
a deduction for federal income tax purposes for the same
year in which it has such income, DLC shall transfer to Penn
Power an amount equal to the assets of the Beaver Valley
Unit 1 Nonqualified Decommissioning Funds as of the DLC
Nuclear Closing Date divided by 0.65.
(c) Reporting
Commencing on the date of this Agreement until the DLC
Nuclear Closing Date, DLC shall provide (or cause the
investment manager to provide) to Penn Power quarterly
unaudited statements of earnings, contributions, market
71
values, investment allocations and performance reports and
such other information for the Beaver Valley Unit 1
Qualified and Nonqualified Decommissioning Funds as
reasonably requested by Penn Power.
6.19.2 Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx Xxxxx
(x) Xxxxxx Xxxxxx Xxxx 0 Qualified Funds.
(i) As soon as practicable after execution of this Agreement,
DLC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS substantially to the
effect that DLC be permitted to make an additional single
contribution in the same calendar year as the DLC Nuclear
Closing Date to the Beaver Valley Unit 2 Qualified
Decommissioning Fund in an amount equal to the Beaver Valley
Unit 2 Decommissioning Shortfall. As used herein, the
"Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx Xxxxxxxxx" shall mean
$10.3 million (the "Beaver Valley Xxxx 0 Xxxxxxxxxxxxxxx
Xxxxxx") less the amount of any additional qualifying fund
deposits made by DLC to the Beaver Valley Unit 2 Qualified
Decommissioning Fund between January 1, 1999 and the DLC
Nuclear Closing Date. If necessary to obtain such IRS
ruling, DLC will request from the PaPUC an appropriate order
with respect to the rate treatment of such contribution.
(ii) If DLC is informed by the IRS that the IRS will not issue a
favorable ruling or DLC determines that it is otherwise
unable to obtain the private letter ruling described in
paragraph (i) above prior to the DLC Nuclear Closing Date,
DLC may notify Penn Power, in writing, that DLC is unable to
obtain the IRS ruling. Upon receiving such notification,
Penn Power shall use Commercially Reasonable Efforts to
obtain a private letter ruling from the IRS prior to the DLC
Nuclear Closing Date substantially to the effect that Penn
Power be permitted to make an additional single contribution
to the Penn Power Qualified Decommissioning Funds for Beaver
Valley Unit 2 in the same calendar year as the DLC Nuclear
Closing Date in an amount equal to the Beaver Valley Unit 2
Decommissioning Shortfall and, if necessary to obtain such
ruling, Penn Power shall also request from the PaPUC an
appropriate order with respect to the rate treatment of such
contribution. To the extent that Penn Power obtains the
private letter ruling referenced in this paragraph (ii), DLC
shall agree to pay in cash to Penn Power an amount equal to
the Beaver Valley Unit 2 Decommissioning Shortfall.
(iii) If DLC determines that the private letter rulings described
in paragraphs (i)-(ii) will not be obtained, Penn Power
shall, at the request of DLC, cooperate with DLC in
requesting such private letter rulings from the IRS or
authorizations from any other Governmental Authority prior
to the DLC Nuclear Closing Date that would permit DLC to
transfer to Penn Power or permit DLC or Penn Power, as
applicable, to make one or more contributions, as soon as
possible after January 1, 1999, to the Beaver Valley Unit 2
Qualified Decommissioning Funds or the Penn Power Qualified
72
Decommissioning Funds, as applicable, in such amounts that
would provide to Penn Power in Qualified Funds, the
equivalent, on an after-tax present value basis, of the
Beaver Valley Unit 2 Decommissioning Amount as determined in
paragraphs (i) and (ii) above. In the event that the rulings
or authorizations in this paragraph (iii) are not able to be
obtained or DLC otherwise determines not to pursue the
provisions of this paragraph (iii), DLC shall transfer to
Penn Power such amounts as provided pursuant to the
provisions of paragraphs (v)(A) and (B) below.
(iv) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 2 Qualified Decommissioning
Funds to be transferred to Penn Power (or, if directed in
writing to do so by Penn Power, to the trustee of any trust
specified in such written direction), provided that (A) Penn
Power shall contribute all amounts received from the Beaver
Valley Unit 2 Qualified Decommissioning Funds into the Penn
Power Qualified Decommissioning Funds, and (B) each of DLC
and Penn Power shall have received private letter rulings
from the IRS, or opinions of counsel satisfactory to each of
DLC and Penn Power, substantially to the effect that,
pursuant to Treas. Reg. section 1.468A-6, neither DLC nor
Penn Power nor any of the applicable DLC Qualified
Decommissioning Funds or Penn Power Qualified
Decommissioning Funds shall recognize any gain or otherwise
take into account any income for federal income tax purposes
by reason of the transfer of the assets of the Beaver Valley
Unit 2 Qualified Decommissioning Funds.
(v) At the DLC Nuclear Closing Date, DLC shall, in respect of
any amounts for which an IRS private letter ruling pursuant
to paragraphs (i), (ii) or (iii) has not been received,
transfer an additional decommissioning payment to Penn Power
as follows:
(A) If receipt of the additional decommissioning
payment by Penn Power from DLC is not included in income for
federal income tax purposes or Penn Power receives a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPNet") shall be ($10.3 million - AQF) (1.436).
As used in this paragraph (A) and paragraph (B) below, AQF
shall mean the additional qualifying fund deposits
authorized by any IRS ruling, including any qualified fund
deposits made between January 1, 1999 and the DLC Nuclear
Closing Date; provided, however, that ADPNet shall not be
less than zero.
(B) If receipt of the additional decommissioning
payment by Penn Power is included in income for federal
income tax purposes and Penn Power does not receive a
deduction for federal income tax purposes for the same year
in which it has such income, the additional decommissioning
payment ("ADPGross") shall be ($10.3 million - AQF) (1.436)
73
divided by 0.65; provided, however, that ADPGross shall not
be less than zero.
Any additional decommissioning payment shall be payable in
cash, or in additional Nonqualified Funds, and at the
request of DLC, Penn Power shall contribute all payments
received from DLC into the Penn Power Nonqualified
Decommissioning Funds or the Penn Power Qualified
Decommissioning Funds.
(b) Beaver Valley Unit 2 Nonqualified Funds.
(i) DLC and Penn Power shall use Commercially Reasonable Efforts
to obtain a private letter ruling from the IRS prior to the
DLC Nuclear Closing Date substantially to the effect that
Penn Power shall not recognize any gain or otherwise take
into account any income for federal income tax purposes by
reason of the transfer of the assets of the Beaver Valley
Unit 2 Nonqualified Decommissioning Funds.
(ii) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Beaver Valley Unit 2 Nonqualified
Decommissioning Funds to be transferred to Penn Power (or,
if directed in writing to do so by Penn Power, to the
trustee of any trust specified in such written direction),
provided that, to the extent required by any IRS private
letter ruling received pursuant to paragraph (i), Penn Power
shall contribute all amounts received from the Beaver Valley
Unit 2 Nonqualified Decommissioning Funds into the Penn
Power Nonqualified or Qualified Decommissioning Funds, as
applicable.
(iii) If the receipt by Penn Power of the Beaver Valley Unit 2
Nonqualified Decommissioning Funds is included in income for
federal income tax purposes and Penn Power does not receive
a deduction for federal income tax purposes for the same
year in which it has such income, DLC shall transfer to Penn
Power an amount equal to the assets of the Beaver Valley
Unit 2 Nonqualified Decommissioning Funds as of the DLC
Nuclear Closing Date divided by 0.65.
(c) Reporting
Commencing on the date of this Agreement until the DLC
Nuclear Closing Date, DLC shall provide (or cause the
investment manager to provide) to Penn Power quarterly
unaudited statements of earnings, contributions, market
values, investment allocations and performance reports and
such other information for the Beaver Valley Unit 2
Qualified and Nonqualified Decommissioning Funds as
reasonably requested by Penn Power.
6.19.3 Perry Xxxx 0 Xxxxxxxxxxxxxxx Xxxxx
00
(x) Xxxxx Xxxx 0 Qualified Funds.
(i) As soon as practicable after execution of this Agreement,
DLC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS substantially to the
effect that DLC be permitted to make an additional single
contribution in the same calendar year as the DLC Nuclear
Closing Date to the Perry Unit 1 Qualified Decommissioning
Fund in an amount equal to the Perry Xxxx 0 Xxxxxxxxxxxxxxx
Xxxxxxxxx. As used herein, the "Perry Xxxx 0 Xxxxxxxxxxxxxxx
Xxxxxxxxx" shall mean $21.6 million (the "Perry Xxxx 0
Xxxxxxxxxxxxxxx Xxxxxx") less the amount of any additional
qualifying fund deposits made by DLC to the Perry Xxxx 0
Qualified Decommissioning Fund between January 1, 1999 and
the DLC Nuclear Closing Date. If necessary to obtain such
IRS ruling, DLC will request from the PaPUC an appropriate
order with respect to the rate treatment of such
contribution.
(ii) If DLC is informed by the IRS that the IRS will not issue a
favorable ruling or DLC determines that it is otherwise
unable to obtain the private letter ruling described in
paragraph (i) above prior to the DLC Nuclear Closing Date,
DLC may notify CEIC, in writing, that DLC is unable to
obtain the IRS ruling. Upon receiving such notification,
CEIC shall use Commercially Reasonable Efforts to obtain a
private letter ruling from the IRS prior to the DLC Nuclear
Closing Date substantially to the effect that CEIC be
permitted to make an additional single contribution to the
CEIC Qualified Decommissioning Funds for Perry Unit 1 in the
same calendar year as the DLC Nuclear Closing Date in an
amount equal to the Perry Unit 1 Decommissioning Shortfall
and, if necessary to obtain such ruling, CEIC shall also
request from the PUCO an appropriate order with respect to
the rate treatment of such contribution. To the extent that
CEIC obtains the private letter ruling referenced in this
paragraph (ii), DLC shall agree to pay in cash to CEIC an
amount equal to the Perry Unit 1 Decommissioning Shortfall.
(iii) If DLC determines that the private letter rulings described
in paragraphs (i)- (ii) will not be obtained, CEIC shall, at
the request of DLC, cooperate with DLC in requesting such
private letter rulings from the IRS or authorizations from
any other Governmental Authority prior to the DLC Nuclear
Closing Date that would permit DLC to transfer to CEIC or
permit DLC or CEIC, as applicable, to make one or more
contributions, as soon as possible after January 1, 1999, to
the Perry Xxxx 0 Qualified Decommissioning Funds or the CEIC
Qualified Decommissioning Funds, as applicable, in such
amounts that would provide to CEIC in Qualified Funds, the
equivalent, on an after-tax present value basis, of the
Perry Unit 1 Decommissioning Amount as determined in
paragraphs (i) and (ii) above. In the event that the rulings
or authorizations in this paragraph (iii) are not able to be
obtained or DLC otherwise determines not to pursue the
provisions of this paragraph (iii), DLC shall transfer to
75
CEIC such amounts as provided pursuant to the provisions of
paragraphs (v)(A) and (B) below.
(iv) At the DLC Nuclear Closing, DLC shall cause all of the
assets of the Perry Unit 1 Qualified Decommissioning Funds
to be transferred to CEIC (or, if directed in writing to do
so by CEIC, to the trustee of any trust specified in such
written direction), provided that (A) CEIC shall contribute
all amounts received from the Perry Unit 1 Qualified
Decommissioning Funds into the CEIC Qualified
Decommissioning Funds, and (B) each of DLC and CEIC shall
have received private letter rulings from the IRS, or
opinions of counsel satisfactory to each of DLC and CEIC,
substantially to the effect that, pursuant to Treas. Reg.
section 1.468A-6, neither DLC nor CEIC nor any of the
applicable DLC Qualified Decommissioning Funds or CEIC
Qualified Decommissioning Funds shall recognize any gain or
otherwise take into account any income for federal income
tax purposes by reason of the transfer of the assets of the
Perry Unit 1 Qualified Decommissioning Funds.
(v) At the DLC Nuclear Closing Date, DLC shall, in respect of
any amounts for which an IRS private letter ruling pursuant
to paragraphs (i), (ii) or (iii) has not been received,
transfer an additional decommissioning payment to CEIC as
follows:
(A) If receipt of the additional decommissioning
payment by CEIC from DLC is not included in income for
federal income tax purposes or CEIC receives a deduction for
federal income tax purposes for the same year in which it
has such income, the additional decommissioning payment
("ADPNet") shall be ($21.6 million - AQF) (1.436). As used
in this paragraph (A) and paragraph (B)below, AQF shall mean
the additional qualifying fund deposits authorized by any
IRS ruling, including any qualified fund deposits made
between January 1, 1999 and the DLC Nuclear Closing Date;
provided, however, that ADPNet shall not be less than zero.
(B) If receipt of the additional decommissioning
payment by CEIC is included in income for federal income tax
purposes and CEIC does not receive a deduction for federal
income tax purposes for the same year in which it has such
income, the additional decommissioning payment ("ADPGross")
shall be ($21.6 million - AQF) (1.436) divided by 0.65;
provided, however, that ADPGross shall not be less than
zero.
Any additional decommissioning payment shall be payable in
cash or in additional Nonqualified Funds, and at the request
of DLC, CEIC shall contribute all payments received from DLC
into the CEIC Nonqualified Decommissioning Funds or the CEIC
Qualified Decommissioning Funds.
(b) Reporting
76
Commencing on the date of this Agreement until the DLC
Nuclear Closing Date, DLC shall provide (or cause the
investment manager to provide) to CEIC quarterly unaudited
statements of earnings, contributions, market values,
investment allocations and performance reports and such
other information for the Perry Unit 1 Qualified
Decommissioning Funds as reasonably requested by CEIC.
6.20 Employee Morale. The Parties agree to work together in good faith
to preserve the morale of the employees at Beaver Valley prior to the DLC
Nuclear Closing Date in respect of Beaver Valley.
6.21 Beaver Valley Omnibus Services Agreement and Related Easements.
The Parties agree that they will work together in good faith during the Interim
Period to finalize the Beaver Valley Omnibus Services Agreement (including
Exhibit A thereto), and that the form thereof attached hereto may need to be
modified in order to take into account the reasonable operating needs of Beaver
Valley following the DLC Nuclear Closing Date. The Parties further agree that
they will work together to agree on an easement and access agreement,
substantially in the form of Exhibit K, to be executed at the time the Beaver
Valley Omnibus Services Agreement is executed, to provide DLC with the access
rights reasonably necessary to enable it to perform its obligations under the
Beaver Valley Omnibus Services Agreement.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of the Parties. The obligation of the
Parties to effect the transfer of the DLC Nuclear Assets in respect of each
Plant and the other transactions contemplated by this Agreement shall be subject
to the fulfillment or waiver by each of Specified FE Subsidiaries and DLC at or
prior to the DLC Nuclear Closing Date, of the following conditions in respect of
each Plant:
(a) The waiting period under the HSR Act applicable to the
consummation of the transfer of the DLC Nuclear Assets contemplated hereby shall
have expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any Governmental Authority which prevents the consummation of the
transfer of the applicable DLC Nuclear Assets contemplated herein shall have
been issued and remain in effect (each Party agreeing to use its reasonable best
efforts to have any such injunction, order or decree lifted) and no statute,
rule or regulation shall have been enacted by any state or federal government or
Governmental Authority prohibiting the consummation of the transfer of the DLC
Nuclear Assets;
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(c) In respect of the DLC Nuclear Closing in respect of Beaver
Valley, DLC shall have terminated the Beaver Valley Facilities Leases and
assumed the Beaver Valley Unit 2 Indentures Notes issued pursuant to the Beaver
Valley Unit 2 Lease Indentures;
(d) The Applicable NRC Approval(s) shall have been obtained in
respect of the transfer of such Plant;
(e) The CAPCO Settlement Agreement shall have been executed by
DLC, the FE Subsidiaries and TEC;
(f) The Support Agreement shall have been executed by FE and
DLC;
(g) All consents or approvals, filings with, or notices to any
Governmental Authority that are necessary for the consummation of the
transactions contemplated by each of the CAPCO Settlement Agreement and the
Electric Facilities Agreement shall have been obtained or made, other than such
consents, approvals, filings or notices which are not required in the ordinary
course to be obtained or made prior to the consummation of the transactions
thereunder or which, if not obtained or made, will not prevent the parties
thereto from performing their material obligations thereunder; and
(h) There shall be no court order requiring DQE to consummate
the transactions contemplated under the Agreement and Plan of Merger between DQE
and Allegheny Energy, Inc.
7.2 Conditions to Obligations of DLC. The obligation of DLC to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment of the following conditions or the waiver thereof by DLC at or
prior to the DLC Nuclear Closing Date of the following conditions:
(a) DLC shall have received all Required Regulatory Approvals
applicable to DLC, in form and substance reasonably satisfactory to it and on
terms and conditions that do not create a Regulatory Material Adverse Effect for
DLC;
(b) All consents and approvals for the consummation of the
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the transfer of the applicable DLC Nuclear Assets contemplated
hereby required under the terms of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which Specified FE Subsidiaries
is a party or by which Specified FE Subsidiaries, or any of the applicable DLC
Nuclear Assets, may be bound, shall have been obtained, other than those which
if not obtained, would not, individually or in the aggregate, create a Material
Adverse Effect;
(c) Specified FE Subsidiaries shall have in all material
respects performed and complied with the covenants and agreements contained in
this Agreement which are required to be performed and complied with by Specified
FE Subsidiaries on or prior to the DLC Nuclear Closing Date;
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(d) The representations and warranties of Specified FE
Subsidiaries set forth in this Agreement shall be true and correct in all
material respects as of the DLC Nuclear Closing Date as though made at and as of
the DLC Nuclear Closing Date;
(e) DLC shall have received a certificate from authorized
officers of Specified FE Subsidiaries, dated the DLC Nuclear Closing Date, to
the effect that, to such officers' Knowledge, the conditions set forth in
Sections 7.2(c) and (d) have been satisfied by Specified FE Subsidiaries;
(f) DLC shall have received an opinion from counsel to each
Specified FE Subsidiary, dated the DLC Nuclear Closing Date and reasonably
satisfactory in form and substance to DLC and its counsel, substantially to the
effect that:
(i) Such Specified FE Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization and is qualified to do business in the Commonwealth of Pennsylvania
or State of Ohio, as the case may be, and has the full corporate power and
authority to own, lease and operate its material assets and properties and to
carry on its business as is now conducted, and to execute and deliver the
Agreement and each of the Ancillary Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby; and the execution
and delivery of the Agreement and the Ancillary Agreements to which it is a
party by such Specified FE Subsidiary, and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action required on the part of such Specified FE Subsidiary;
(ii) The Agreement and each of the Ancillary Agreements
to which it is a party have been duly and validly executed and delivered by such
Specified FE Subsidiary and constitute legal, valid and binding agreements of
such Specified FE Subsidiary, enforceable against such Specified FE Subsidiary
in accordance with their 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 the
Agreement and each of the Ancillary Agreements to which it is a party by the
applicable Specified FE Subsidiary does not (A) conflict with the Articles of
Incorporation or Bylaws, as currently in effect, of such Specified FE Subsidiary
or (B) to the knowledge of such counsel, constitute a violation of or default
under those agreements or instruments set forth on a Schedule attached to the
opinion and which have been identified to such counsel as all the agreements and
instruments which are material to the business or financial condition of such
Specified FE Subsidiary;
(iv) The Assignment and Assumption Agreement and other
transfer documents described in Section 3.6 are in proper form for each
Specified FE Subsidiary to assume its respective Assumed Liabilities; and
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(v) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and delivery of
this Agreement and each of the Ancillary Agreements by Specified FE Subsidiaries
or the consummation by Specified FE Subsidiaries of the transactions
contemplated hereby and thereby, other than (i) such consents, approvals,
filings or notices set forth in Schedules 4.3(a) or 4.3(b) or which, if not
obtained or made, will not prevent Specified FE Subsidiaries from performing
their material obligations under this Agreement and each of the Ancillary
Agreements to which it is a party and (ii) such consents, approvals, filings or
notices which become applicable to each Specified FE Subsidiary or the
applicable DLC Nuclear Assets as a result of the specific regulatory status of
DLC (or any of its Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which DLC (or any of its
Affiliates) is or proposes to be engaged.
In rendering the foregoing opinion, counsel to each Specified FE
Subsidiary may rely on opinions of local law reasonably acceptable to DLC.
(g) Specified FE Subsidiaries shall have delivered, or caused to
be delivered, to DLC at the DLC Nuclear Closing, Specified FE Subsidiaries
closing deliveries described in Section 3.6.
7.3 Conditions to Obligations of Specified FE Subsidiaries. The
obligation of Specified FE Subsidiaries to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or waiver by
Specified FE Subsidiaries at or prior to the DLC Nuclear Closing Date of the
following conditions:
(a) Specified FE Subsidiaries shall have received all Required
Regulatory Approvals applicable to Specified FE Subsidiaries on terms and
conditions that do not create a Regulatory Material Adverse Effect for Specified
FE Subsidiaries;
(b) All consents and approvals for the execution, delivery, and
performance of this Agreement and the Ancillary Agreements, and for the
consummation of the transfer of the applicable DLC Nuclear Assets contemplated
hereby required under the terms of any note, bond, mortgage, indenture, material
agreement or other instrument or obligation to which DLC is a party or by which
DLC, or any of the DLC Nuclear Assets, may be bound, shall have been obtained,
other than those which if not obtained, would not, individually or in the
aggregate, create a Material Adverse Effect;
(c) DLC shall have in all material respects performed and
complied with the covenants and agreements contained in this Agreement which are
required to be performed and complied with by DLC on or prior to the DLC Nuclear
Closing Date (including its covenant under Section 6.16(a) to terminate the
Beaver Valley Unit 2 Facility Leases and assume the obligations in respect of
the Beaver Valley Unit 2 Indentures Notes);
(d) The representations and warranties of DLC set forth in this
Agreement shall be true and correct in all material respects as of the DLC
Nuclear Closing Date as though made at and as of the DLC Nuclear Closing Date;
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(e) Specified FE Subsidiaries shall have received a certificate
from an authorized officer of DLC, dated the DLC Nuclear Closing Date, to the
effect that, to such officer's Knowledge, the conditions set forth in Sections
7.3(c) and (d) have been satisfied by DLC;
(f) Specified FE Subsidiaries shall have received an opinion
from DLC's counsel, dated the DLC Nuclear Closing Date and reasonably
satisfactory in form and substance to Specified FE Subsidiaries and its counsel,
substantially to the effect that:
(i) DLC is a corporation duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has the full corporate power and authority to own, lease and operate its
material assets and properties and to carry on its business as is now conducted,
and to execute and deliver the Agreement and each of the Ancillary Agreements
and to consummate the transactions contemplated hereby and thereby; and the
execution and delivery of the Agreement and the Ancillary Agreements by DLC, and
the consummation of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action required on the
part of DLC;
(ii) The Agreement and each of the Ancillary Agreements
have been duly and validly executed and delivered by DLC and constitute legal,
valid and binding agreements of DLC, enforceable against DLC in accordance with
their terms, except 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 the
Agreement and each of the Ancillary Agreements by DLC does not conflict with the
Articles of Incorporation or Bylaws, as currently in effect, of DLC;
(iv) The Assignment and Assumption Agreement, the Xxxx
of Sale, the Warranty Deeds, and other transfer documents described in Section
3.7 are in proper form to transfer to Specified FE Subsidiaries such title as
was held by DLC to the applicable DLC Nuclear Assets; and
(v) No consent or approval of, filing with, or notice
to, any Governmental Authority is necessary for the execution and delivery of
this Agreement and each of the Ancillary Agreements by DLC, or the consummation
by DLC of the transactions contemplated hereby and thereby, other than (i) such
consents, approvals, filings or notices set forth in Schedules 4.3(a) or 4.3(b)
or which, if not obtained or made, will not prevent DLC from performing its
material obligations under this Agreement and each of the Ancillary Agreements
and (ii) such consents, approvals, filings or notices which become applicable to
DLC or the DLC Nuclear Assets as a result of the specific regulatory status of
Specified FE Subsidiaries (or any of their Affiliates) or as a result of any
other facts that specifically relate to the business or activities in which
Specified FE Subsidiaries (or any of their Affiliates) is or proposes to be
engaged.
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In rendering the foregoing opinion, DLC's counsel may rely on opinions
of local law reasonably acceptable to Specified FE Subsidiaries.
(g) DLC shall have delivered, or caused to be delivered, to
Specified FE Subsidiaries at the applicable DLC Nuclear Closing, DLC's closing
deliveries described in Section 3.7.
(h) With respect to Beaver Valley only, Penn Power shall have
received from a title insurance company ALTA title owner's insurance policies on
the Real Property, subject only to Permitted Encumbrances, standard printed
exceptions and such other Encumbrances as are reasonably acceptable to Penn
Power. Any Permitted Encumbrance not removed prior to the DLC Nuclear Closing
shall be deemed reasonably acceptable to Specified FE Subsidiaries as aforesaid
unless such Permitted Encumbrance would have a Material Adverse Effect. DLC
shall provide Specified FE Subsidiaries with a copy of a preliminary title
report and survey for the Real Property as soon as they are available.
ARTICLE VIII
INDEMNIFICATION
8.1 General Indemnification Obligations. Up to the DLC Nuclear
Closing Date, the indemnification provisions of the CAPCO Agreements shall be
applicable.
8.2 Indemnification and Release of DLC by Specified FE Subsidiaries.
(a) Each Specified FE Subsidiary severally with respect to
itself under this Agreement shall indemnify, defend and hold harmless DLC, its
officers, directors, employees, shareholders, Affiliates and agents (each, a
"DLC Indemnitee") from and against any and all Indemnifiable Losses asserted
against or suffered by any DLC Indemnitee (each, a "DLC Indemnifiable Loss") in
any way relating to, resulting from or arising out of (i) any breach by such
Specified FE Subsidiary of any covenant or agreement of such Specified FE
Subsidiary contained in this Agreement or the representations and warranties
contained in Sections 5.1, 5.2 and 5.3, (ii) the Assumed Liabilities, or (iii)
any Third Party Claims against a DLC Indemnitee arising out of or in connection
with such Specified FE Subsidiary's ownership or operation of the Plants and
other DLC Nuclear Assets on or after the DLC Nuclear Closing Date.
(b) Each Specified FE Subsidiary severally with respect to
itself under this Agreement, on behalf of its Representatives and Affiliates,
does hereby release, hold harmless and forever discharge DLC, DLC
Representatives and Affiliates of DLC, from any and all Specified FE
Subsidiaries Indemnifiable Losses resulting from, arising out of or relating to
Assumed Liabilities. Each Specified FE Subsidiary hereby waives for itself any
and all rights and benefits with respect to such Specified FE Subsidiaries'
Indemnifiable Losses that it now has, or in the future may have conferred upon
it by virtue of any statute or common law principle which provides that a
general release does not extend to claims which a Party does not know or suspect
to exist in its favor at the time of executing the release, if Knowledge of such
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claims would have materially affected such Party's settlement with the obligor.
In this connection, each Specified FE Subsidiary hereby acknowledges that it is
aware that factual matters now unknown to it may have given or may hereafter
give rise to Specified FE Subsidiaries' Indemnifiable Losses that are presently
unknown, unanticipated and unsuspected, and it further agrees that this release
has been negotiated and agreed upon in light of that awareness and nevertheless
hereby intends to release DLC, DLC Representatives and DLC Affiliates from the
Specified FE Subsidiaries' Indemnifiable Losses described in the first sentence
of this paragraph.
8.3 Indemnification of Specified FE Subsidiaries by DLC.
DLC shall indemnify, defend and hold harmless Specified FE
Subsidiaries, their officers, directors, employees, shareholders, Affiliates and
agents (each, a "Specified FE Subsidiaries' Indemnitee") from and against any
and all Indemnifiable Losses asserted against or suffered by any Specified FE
Subsidiaries' Indemnitee (each, a "Specified FE Subsidiaries' Indemnifiable
Loss") in any way relating to, resulting from or arising out of (i) any breach
by DLC of any covenant or agreement of DLC contained in this Agreement or the
representations and warranties contained in Sections 4.1, 4.2 and 4.3, (ii) the
Excluded Liabilities, (iii) noncompliance by DLC with any bulk sales or transfer
laws as provided in Section 10.13, and (iv) claims and liabilities associated
with the termination of the Beaver Valley Unit 2 Facility Leases as contemplated
by Section 6.16.
8.4 Certain Limitations on Indemnification.
(a) Notwithstanding anything to the contrary contained herein:
(i) Any Indemnitee shall use Commercially Reasonable
Efforts to mitigate all losses, damages and the like relating to a claim under
these indemnification provisions, including availing itself of any defenses,
limitations, rights of contribution, claims against third Persons and other
rights at law or equity. The Indemnitee's Commercially Reasonable Efforts shall
include the reasonable expenditure of money to mitigate or otherwise reduce or
eliminate any loss or expenses for which indemnification would otherwise be due,
and the Indemnifying Party shall reimburse the Indemnitee for the Indemnitee's
reasonable expenditures in undertaking the mitigation.
(ii) Any Indemnifiable Loss shall be net of (i) the
dollar amount of any insurance or other proceeds actually receivable by the
Indemnitee or any of its Affiliates with respect to the Indemnifiable Loss, and
(ii) income tax benefits to the Indemnitee, to the extent realized by the
Indemnitee. Any Party seeking indemnity hereunder shall use Commercially
Reasonable Efforts to seek coverage (including both costs of defense and
indemnity) under applicable insurance policies with respect to any such
Indemnifiable Loss.
(b) The expiration, termination or extinguishment of any
covenant or agreement shall not affect the Parties' obligations under Sections
8.2 and 8.3 hereof if the Indemnitee provided the Indemnifying Party with proper
notice of the claim or event for which indemnification is sought prior to such
expiration, termination or extinguishment.
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(c) Except to the extent otherwise provided in Article VII, the
rights and remedies of DLC and each DLC Indemnitee and each of the Specified FE
Subsidiaries and each Specified FE Subsidiaries' Indemnitee under this Article
VIII are exclusive and in lieu of any and all other rights and remedies which
DLC and Specified FE Subsidiaries may have under this Agreement or otherwise for
monetary relief, with respect to (i) any breach of or failure to perform any
covenant, agreement, or representation or warranty set forth in this Agreement,
after the occurrence of the DLC Nuclear Closing, or (ii) the Assumed Liabilities
or the Excluded Liabilities, as the case may be. The indemnification obligations
of the Parties set forth in this Article VIII apply only to matters arising out
of this Agreement, but do not extend to matters arising out of the Ancillary
Agreements. Any Indemnifiable Loss arising under or pursuant to an Ancillary
Agreement shall be governed by the indemnification obligations, if any,
contained in the Ancillary Agreement under which the Indemnifiable Loss arises.
(d) Notwithstanding anything to the contrary contained herein,
no Party (including an Indemnitee) shall be entitled to recover from any other
Party (including an Indemnifying Party) for any liabilities, damages,
obligations, payments, losses, costs, or expenses under this Agreement any
amount in excess of the actual compensatory damages, court costs and reasonable
attorney's and other advisor fees suffered by such Party. DLC and Specified FE
Subsidiaries waive any right to recover punitive, incidental, special, exemplary
and consequential damages arising in connection with or with respect to this
Agreement. The provisions of this Section 8.4(d) shall not apply to
indemnification for a Third Party Claim.
8.5 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion or
commencement of any Third Party Claim made or brought by any Person who is not a
Party to this Agreement or any Affiliate of a Party to this Agreement with
respect to which indemnification is to be sought from an Indemnifying Party, the
Indemnitee shall give such Indemnifying Party reasonably prompt written notice
thereof, but in any event such notice shall not be given later than ten (10)
calendar days after the Indemnitee's receipt of notice of such Third Party
Claim. Such notice shall describe the nature of the Third Party Claim in
reasonable detail and shall indicate the estimated amount, if practicable, of
the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The
Indemnifying Party will have the right to participate in or, by giving written
notice to the Indemnitee, to elect to assume the defense of any Third Party
Claim at such Indemnifying Party's expense and by such Indemnifying Party's own
counsel, provided that the counsel for the Indemnifying Party who shall conduct
the defense of such Third Party Claim shall be reasonably satisfactory to the
Indemnitee. The Indemnitee shall cooperate in good faith in such defense at such
Indemnitee's own expense. If an Indemnifying Party elects not to assume the
defense of any Third Party Claim, the Indemnitee may compromise or settle such
Third Party Claim over the objection of the Indemnifying Party, which settlement
or compromise shall conclusively establish the Indemnifying Party's liability
pursuant to this Agreement.
(b) (i) If, within ten (10) calendar days after an
Indemnitee provides written notice to the Indemnifying Party of any Third Party
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Claims, the Indemnitee receives written notice from the Indemnifying Party that
such Indemnifying Party has elected to assume the defense of such Third Party
Claim as provided in Section 8.5(a), the Indemnifying Party will not be liable
for any legal expenses subsequently incurred by the Indemnitee in connection
with the defense thereof; provided, however, that if the Indemnifying Party
shall fail to take reasonable steps necessary to defend diligently such Third
Party Claim within twenty (20) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense and the Indemnifying
Party shall be liable for all reasonable expenses thereof.
(ii) Without the prior written consent of the
Indemnitee, the Indemnifying Party shall not enter into any settlement of any
Third Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder. If a firm offer is made to settle a Third
Party Claim without leading to liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party shall give written notice
to the Indemnitee to that effect. If the Indemnitee fails to consent to such
firm offer within ten (10) calendar days after its receipt of such notice, the
Indemnifying Party shall be relieved of its obligations to defend such Third
Party Claim and the Indemnitee may contest or defend such Third Party Claim. In
such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will be the amount of such settlement offer plus reasonable costs
and expenses paid or incurred by Indemnitee up to the date of said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") shall be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event such notice shall not be
given later than ten (10) calendar days after the Indemnitee becomes aware of
such Direct Claim, and the Indemnifying Party shall have a period of thirty (30)
calendar days within which to respond to such Direct Claim. If the Indemnifying
Party does not respond within such thirty (30) calendar day period, the
Indemnifying Party shall be deemed to have accepted such claim. If the
Indemnifying Party rejects such claim, the Indemnitee will be free to seek
enforcement of its right to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by, from or
against any other entity, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith (together with interest thereon
from the date of payment thereof at the publicly announced prime rate then in
effect of The Chase Manhattan Bank) shall promptly be repaid by the Indemnitee
to the Indemnifying Party.
(e) A failure to give timely notice as provided in this Section
8.5 shall not affect the rights or obligations of any Party hereunder except if,
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and only to the extent that, as a result of such failure, the Party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.
ARTICLE IX
TERMINATION
9.1 Termination. (a) This Agreement may be terminated at any time
prior to the DLC Nuclear Closing Date by mutual written consent of DLC and the
Specified FE Subsidiaries.
(b) This Agreement may be terminated by either Party if (i) any
Federal or state court of competent jurisdiction shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the DLC Nuclear Closing, and such order, judgment or decree shall have become
final and nonappeallable; (ii) any statute, rule, order or regulation shall have
been enacted or issued by any Governmental Authority which prohibits the
consummation of the DLC Nuclear Closing; or (iii) the DLC Nuclear Closing
contemplated hereby shall have not occurred on or before the day which is 12
months from the date of this Agreement (the "Termination Date"); provided that
the right to terminate this Agreement under this Section 9.1(b) (iii) shall not
be available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the DLC Nuclear
Closing to occur on or before such date; and provided, further, that if on the
Termination Date the conditions to the DLC Nuclear Closing set forth in Section
7.1(b) or 7.2(a) or 7.3(a), shall not have been fulfilled but all other
conditions to the DLC Nuclear Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be the day which is 18 months
from the date of this Agreement.
(c) This Agreement may be terminated by DLC if it shall have
received a Final Order that has caused the conditions set forth in Section
7.2(a) not to be satisfied.
(d) This Agreement may be terminated by Specified FE
Subsidiaries if they (or either one of them) shall have received a Final Order
that has caused the conditions set forth in Section 7.3(a) not to be satisfied.
(e) This Agreement may be terminated by either Party if, before
the DLC Nuclear Closing Date, all or any portion of the DLC Nuclear Assets are
(i) taken by eminent domain or are the subject of a pending or (to the Knowledge
of DLC with respect such DLC Nuclear Assets) contemplated taking which has not
been consummated or (ii) damaged or destroyed by fire or other casualty, DLC
shall (x) notify the applicable Specified FE Subsidiary promptly in writing of
such fact, (y) assign or pay, as the case may be, any proceeds thereof to the
applicable Specified FE Subsidiary at the DLC Nuclear Closing, and (z) either
restore the damage or assign the insurance proceeds therefor (and pay the amount
of any deductible and/or self-insured amount in respect of such casualty) to the
applicable Specified FE Subsidiary at the DLC Nuclear Closing. Notwithstanding
the above, if such casualty or loss results in a Material Adverse Effect to DLC
with respect to the DLC Nuclear Assets being conveyed by DLC, the Parties shall
negotiate to settle the loss resulting from such taking (and such negotiation
shall include, without limitation, the negotiation of a fair and equitable
payment to the applicable Specified FE Subsidiary to offset such casualty or
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loss). If no such settlement is reached within sixty (60) days after DLC has
notified the applicable Specified FE Subsidiary of such casualty or loss, then
DLC may terminate this Agreement. In the event of damage or destruction which
DLC elects to restore, DLC will have the right (with respect to the DLC Nuclear
Assets being conveyed by DLC) to postpone the DLC Nuclear Closing for up to six
(6) months, and the applicable Specified FE Subsidiary will have the right to
inspect and observe, or have its Representatives inspect or observe, all repairs
necessitated by any such damage or destruction.
(f) This Agreement may be terminated by DLC if there has been a
violation or breach by a Specified FE Subsidiary of any covenant, representation
or warranty contained in this Agreement which has resulted in a Material Adverse
Effect and such violation or breach is not cured (and the applicable Material
Adverse Effect remedied) by the earlier of the DLC Nuclear Closing Date or the
date which is thirty (30) days after receipt by Specified FE Subsidiaries of
notice specifying particularly such violation or breach, and such violation or
breach has not been waived by DLC.
(g) This Agreement may be terminated by Specified FE
Subsidiaries if there has been a violation or breach by DLC of any covenant,
representation or warranty contained in this Agreement which has resulted in a
Material Adverse Effect and such violation or breach is not cured (and the
applicable Material Adverse Effect remedied) by the earlier of the DLC Nuclear
Closing Date or the date which is thirty (30) days after receipt by DLC of
notice specifying particularly such violation or breach, and such violation or
breach has not been waived by Specified FE Subsidiaries provided, however, that
in no event shall DLC's entry into a commitment described in Section 6.1(d)
constitute a basis for termination under this clause (g).
9.2 Procedure and Effect of No-Default Termination. In the event of
termination of this Agreement by either or both of the Parties pursuant to any
of Section 9.1(a) through (e), written notice thereof shall forthwith be given
by the terminating party to the other party, whereupon the liabilities of the
Parties hereunder will terminate, except as otherwise expressly provided in this
Agreement, and thereafter neither Party shall have any recourse against the
other by reason of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of DLC and Specified FE
Subsidiaries.
10.2 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the Party entitled to
the benefits thereof only by a written instrument signed by the Party granting
such waiver, but such waiver of such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
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10.3 No Survival. (a) Except as provided in Section 10.3(b) and
10.3(c), each and every representation, warranty and covenant contained in this
Agreement shall expire with, and be terminated and extinguished by the
consummation of the sale of the DLC Nuclear Assets and shall merge into the
deed(s) pursuant hereto and the transfer of the Assumed Liabilities pursuant to
this Agreement and such representations, warranties and covenants shall not
survive the DLC Nuclear Closing Date; and none of DLC, either Specified FE
Subsidiary or any officer, director, trustee or Affiliate of any of them shall
be under any liability whatsoever with respect to any such representation,
warranty or covenant.
(b) The covenants contained in Sections 3.2(c), 3.2(d), 3.4,
3.5, 6.2(a), 6.3(a), 6.5, 6.6, 6.7(e), 6.7(f), 6.8, 6.9, 6.11, 6.14, 6.16, 6.17,
9.2, and in Articles VIII and IX shall survive the delivery of the deed(s) and
the DLC Nuclear Closing in accordance with their terms.
(c) The representations, warranties and disclaimers contained in
Sections 4.1, 4.2, 4.3, 5.1, 5.2, 5.3, and claims arising under 6.7(e) shall
survive the DLC Nuclear Closing for eighteen (18) months from the DLC Nuclear
Closing Date.
10.4 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
specified by like notice; provided however, that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to DLC, to:
Duquesne Light Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X'Xxxxx
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxx
88
(b) if to either Specified FE Subsidiary, to:
FirstEnergy Corp.
00 Xxxxx Xxxx Xxxxxx
Xxxxx, XX 00000
Telephone:
Fax:
Attention: Xxxxxxx X. Xxxxxxxxx
with a copy to:
Winthrop, Stimpson, Xxxxxx & Xxxxxxx
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
10.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any Party
hereto, including by operation of law, without the prior written consent of each
other Party, nor is this Agreement intended to confer upon any other Person
except the Parties hereto any rights, interests, obligations or remedies
hereunder. Except as expressly provided herein, no provision of this Agreement
shall create any third party beneficiary rights in any employee or former
employee of DLC (including any beneficiary or dependent thereof) in respect of
continued employment or resumed employment, and no provision of this Agreement
shall create any rights in any such Persons in respect of any benefits that may
be provided, directly or indirectly, under any employee benefit plan or
arrangement except as expressly provided for thereunder. DLC agrees, at the
expense of Specified FE Subsidiaries, to execute and deliver such documents as
may be reasonably necessary to accomplish any such assignment, transfer, pledge
or other disposition of rights and interests hereunder so long as the DLC's
rights under this Agreement are not thereby altered, amended, diminished or
otherwise impaired.
10.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the Commonwealth of Pennsylvania (without giving
effect to conflict of law principles) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies
(except to such matters of real estate law that must be governed by the laws of
the State of Ohio). THE PARTIES HERETO AGREE THAT VENUE IN ANY AND ALL ACTIONS
AND PROCEEDINGS RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE IN THE
STATE AND FEDERAL COURTS IN AND FOR PITTSBURGH, PENNSYLVANIA, WHICH COURTS SHALL
HAVE EXCLUSIVE JURISDICTION FOR SUCH PURPOSE, AND THE PARTIES HERETO IRREVOCABLY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS AND IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
89
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.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Interpretation. The articles, section and schedule headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.
10.9 Schedules and Exhibits. Except as otherwise provided in this
Agreement, all Exhibits and Schedules referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
10.10 Entire Agreement. This Agreement and the Ancillary Agreements,
including the Exhibits, Schedules, documents, certificates and instruments
referred to herein or therein, embody the entire agreement and understanding of
the Parties hereto in respect of the transactions contemplated by this
Agreement. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred to
herein or therein. This Agreement and the Ancillary Agreements supersede all
prior agreements and understandings between the Parties with respect to such
transactions (including the Agreement in Principle).
10.11 U.S. Dollars. Unless otherwise stated, all dollar amounts set
forth herein are United States (U.S.) dollars.
10.12 Sewage Facilities. Pursuant to the provisions of the Pennsylvania
Sewage Facilities Act, 35 P.S. section 750.7a, Penn Power is notified that a
"community sewage system" (as defined in Section 2 of the Sewage Facilities Act,
35 P.S. section 750.2) is not available on one or more lots comprising part of
the Real Property at the facilities list in Schedule 10.12. Prior to
construction of any buildings on such lots, a permit to connect to a community
sewage system or a permit for installation of an individual sewage system must
be obtained pursuant to Section 7 of the Sewage Facilities Act, 35 P.S. section
750.7. Before signing this Agreement, Penn Power should contact the local agency
charged with administering the Sewage Facilities Act in the area of each such
facility and lot(s) to determine the procedure and requirements for obtaining a
permit for an individual or community sewage system to service such lot(s), if
required for the intended uses and purposes of such lot(s).
10.13 Bulk Sales Laws. Each Specified FE Subsidiary acknowledges that,
notwithstanding anything in this Agreement to the contrary, DLC will not comply
with the provision of the bulk sales laws of any jurisdiction in connection with
the transactions contemplated by this Agreement. Each Specified FE Subsidiary
hereby waives compliance by DLC with the provisions of the bulk sales laws of
all applicable jurisdictions.
90
IN WITNESS WHEREOF, DLC and Specified FE Subsidiaries have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
DUQUESNE LIGHT COMPANY
By: /s/ Xxxxxx X. X'Xxxxx
-----------------------------------
Name: Xxxxxx X. X'Xxxxx
Title: Vice President, Finance
PENNSYLVANIA POWER COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Executive Vice President
and General Counsel
THE CLEVELAND ELECTRIC
ILLUMINATING COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Executive Vice President
and General Counsel
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Exchange Agreement
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of Xxxx of Sale
Exhibit D Form of FE Support Agreement
Exhibit E Form of FIRPTA Affidavit
Exhibit F Form of Beaver Valley Omnibus Services Agreement
Exhibit G Form of Special Warranty Deed
Exhibit H Form of CAPCO Settlement Agreement
Exhibit I Form of Beaver Valley Unit 2 Indentures Support
Agreement
Exhibit J Form of Amendment 2 to the CAPCO Perry Unit 1 Operating
Agreement
Exhibit K Form of Easement Agreement
SCHEDULES
1.1(15) Beaver Valley CAPCO Agreements
1.1(33) Beaver Valley Unit 2 Lease Indentures Documents
1.1(56) Common CAPCO Agreements
1.1(57) Common Facility Assets
1.1(68) DLC Beaver Valley Emergency Preparedness Agreements
1.1(104) Exempt Facilities
1.1(156) Permitted Encumbrances
1.1(157) Perry CAPCO Agreements
1.1(182) Real and Personal Property Comprising the Decommissioned
Shippingport Atomic Power Station
1.1(202) Transferable Permits (both environmental and non-environmental)
2.1(a) DLC Real Property
2.1(c) Tangible Personal Property
2.1(i) Unexpired, Transferrable Warranties and Guarantees from Third
Parties
2.1(l) Intellectual Property
2.2(a) Beaver Valley Switchyard Assets
2.2(l) Excepted Beaver Valley Telecommunications Equipment
2.3(d) Agreements or Consent Orders
2.7 Inventories to be Transferred and Total Net Book Value
2.11 Perry Unit 1 Property Tax Litigation
4.3(a) DLC Conflicts/Defaults/Violations
4.3(b) DLC Required Regulatory Approvals
4.4(b) Shippingport Atomic Power Station Insurance Coverage
4.5 Real Property Leases
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4.6(a) Perry Unit 1 Environmental Matters
4.6(b) Beaver Valley Environmental Matters
4.7 Description of Real Property
4.8 Notices of Condemnation
4.9(a)(i) Perry Unit 1 List of Contracts
4.9(a)(ii) Material Exceptions and Required Consents to Perry Unit 1
Contracts
4.9(a)(iii) Material Defaults under Perry Unit 1 Contracts
4.9(b)(i) Beaver Valley List of Contracts
4.9(b)(ii) Material Exceptions and Required Consents to Beaver Valley
Contracts
4.9(b)(iii) Material Defaults under Beaver Valley Contracts
4.10 Legal Proceedings
4.11(a)(i) Perry Unit 1 Permit Violations
4.11(a)(ii) Perry Unit 1 Material Permits
4.11(b)(i) Beaver Valley Permit Violations
4.11(b)(ii) Beaver Valley Material Permits
4.12 Tax Matters
4.13 Intellectual Property
4.19 Beaver Valley Labor Matters
4.20 Beaver Valley Benefit Plans
4.21 Matters Relating to Qualified Decommissioning Funds
4.22 Matters Relating to Nonqualified Decommissioning Funds
4.23(a) DLC Nuclear Law Matters Relating to Perry Unit 1
4.23(b) DLC Nuclear Law Matters Relating to Beaver Valley
5.3(a) Specified FE Subsidiaries' Conflicts/Defaults/Violations
5.3(b) Specified FE Subsidiaries' Required Regulatory Approvals
5.4 List of Specified FE Subsidiaries' Litigation
5.8(a) Specified FE Subsidiaries' Nuclear Law Matters Relating to Beaver
Valley
5.8(b) Specified FE Subsidiaries' Nuclear Law Matters Relating to Perry
Xxxx 0
6.11(a) Specified Individual Employees
6.11(c) DLC Non-Union Employees
6.11(d) DLC Collective Bargaining Agreements for DLC Nuclear Assets
6.16(a) Penn Power Actions in Respect of Beaver Valley Unit 2 Lease
Indentures
10.12 Sewage Facilities
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS............................................................ 2
1.1 Definitions............................................. 2
1.2 Certain Interpretive Matters............................ 24
1.3 CAPCO Agreements to Govern.............................. 24
1.4 DLC's Interest in Assets................................ 24
ARTICLE II
CONVEYANCE OF DLC NUCLEAR ASSETS....................................... 25
2.1 Transfer of DLC Nuclear Assets.......................... 25
2.2 Excluded Assets......................................... 26
2.3 Assumed Liabilities..................................... 28
2.4 Excluded Liabilities.................................... 30
2.5 Control of Litigation................................... 31
2.6 Fuel Supplies........................................... 32
2.7 Inventories............................................. 32
2.8 [Intentionally Omitted.]................................ 32
2.9 Spent Nuclear Fuel Fees and Ownership .................. 32
2.10 Department of Energy Decontamination and
Decommissioning Fees.................................... 33
2.11 Property Tax Litigation................................. 33
ARTICLE III
THE DLC NUCLEAR CLOSING................................................ 33
3.1 DLC Nuclear Closing..................................... 33
3.2 Calculation of DLC Nuclear Closing Payments............. 34
3.3 Payment of DLC Nuclear Closing Payment.................. 35
3.4 Prorations.............................................. 35
3.5 Audit Cooperation....................................... 36
3.6 Deliveries by Specified FE Subsidiaries................. 36
3.7 Deliveries by DLC....................................... 37
3.8 Work in Progress........................................ 39
3.9 Ancillary Agreements.................................... 39
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF DLC..................... 39
4.1 Incorporation; Qualification............................ 39
4.2 Authority............................................... 39
4.3 Consents and Approvals; No Violation.................... 40
4.4 Insurance............................................... 40
4.5 DLC Real Property Leases................................ 40
4.6 Environmental Matters................................... 40
4.7 Real Property........................................... 42
4.8 Condemnation............................................ 42
4.9 Contracts and Leases.................................... 42
4.10 Legal Proceedings....................................... 43
4.11 Permits................................................. 43
4.12 Taxes................................................... 44
4.13 Intellectual Property................................... 44
4.14 Compliance With Laws.................................... 44
4.15 DISCLAIMERS REGARDING DLC NUCLEAR ASSETS................ 44
4.16 Year 2000 Compliance.................................... 45
4.17 [Intentionally Omitted.]................................ 45
4.18 Capital Expenditures.................................... 45
4.19 Labor Matters........................................... 45
4.20 Benefit Plans; ERISA.................................... 46
4.21 DLC Qualified Decommissioning Funds..................... 46
4.22 DLC Nonqualified Decommissioning Funds.................. 48
4.23 DLC Nuclear Law Matters................................. 49
ARTICLE V
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SPECIFIED FE
SUBSIDIARIES........................................................... 50
5.1 Incorporation; Qualification............................ 50
5.2 Authority............................................... 50
5.3 Consents and Approvals; No Violation.................... 50
5.4 Legal Proceedings....................................... 51
5.5 [Intentionally Omitted]................................. 51
5.6 WARN Act................................................ 51
5.7 Regulatory Status of Specified FE Subsidiaries.......... 51
5.8 Specified FE Subsidiaries' Nuclear Law Matters.......... 51
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ARTICLE VI
COVENANTS OF THE PARTIES............................................... 52
6.1.1 Interim Operation of Beaver Valley...................... 52
6.1.2 Interim Operation of Perry Unit 1....................... 54
6.2 Access to Information................................... 54
6.3 Confidentiality......................................... 54
6.4 Public Statements....................................... 55
6.5 Expenses................................................ 55
6.6 Further Assurances...................................... 55
6.7 Consents and Approvals.................................. 56
6.8 Fees and Commissions.................................... 58
6.9 Tax Matters............................................. 58
6.10 Advice of Changes....................................... 59
6.11 DLC Employees........................................... 59
6.12 Risk of Loss............................................ 64
6.13 CAPCO Agreements........................................ 64
6.14 Refund of Accrued Interest in Insurance Premiums........ 64
6.15 Operating Control....................................... 64
6.16 Beaver Valley Unit 2 Facility Leases.................... 64
6.17 Tax Exempt Financing.................................... 65
6.18 Removal at Shippingport Site Buildings.................. 67
6.19 Decommissioning Funds................................... 67
6.19.1 Beaver Valley Unit 1 Decommissiong Funds................ 67
6.19.2 Beaver Valley Unit 2 Decommissiong Funds................ 70
6.19.3 Perry Xxxx 0 Decommissioning Funds...................... 73
6.20 Employee Morale......................................... 75
6.21 Beaver Valley Omnibus Services Agrement and Related
Easements............................................... 75
ARTICLE VII
CONDITIONS............................................................. 76
7.1 Conditions to Obligations of the Parties................ 76
7.2 Conditions to Obligations of DLC........................ 76
7.3 Conditions to Obligations of Specified FE Subsidiaries.. 78
ARTICLE VIII
INDEMNIFICATION........................................................ 80
8.1 General Indemnification Obligations..................... 80
8.2 Indemnification and Release of DLC by Specified FE
Subsidiaries............................................ 80
8.3 Indemnification of Specified FE Subsidiaries by DLC..... 81
iii
8.4 Certain Limitations on Indemnification.................. 81
8.5 Defense of Claims....................................... 82
ARTICLE IX
TERMINATION............................................................ 84
9.1 Termination............................................. 84
9.2 Procedure and Effect of No-Default Termination.......... 85
ARTICLE X
MISCELLANEOUS PROVISIONS............................................... 86
10.1 Amendment and Modification.............................. 86
10.2 Waiver of Compliance; Consents.......................... 86
10.3 No Survival............................................. 86
10.4 Notices................................................. 86
10.5 Assignment.............................................. 87
10.6 Governing Law........................................... 87
10.7 Counterparts............................................ 88
10.8 Interpretation.......................................... 88
10.9 Schedules and Exhibits.................................. 88
10.10 Entire Agreement........................................ 88
10.11 U.S. Dollars............................................ 88
10.12 Sewage Facilities....................................... 88
10.13 Bulk Sales Laws. ...................................... 89
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