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Exhibit 2
Separation and Subscription Agreeement
between The Detroit Edison Company
and
International Transmission Company
(dated _____________, 2000)
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SEPARATION AND SUBSCRIPTION AGREEMENT
THIS SEPARATION AND SUBSCRIPTION AGREEMENT (the "Agreement") is made
and entered into as of the ____ day of _____________, 2000, by and between THE
DETROIT EDISON COMPANY, a Michigan corporation ("Detroit Edison"), and
INTERNATIONAL TRANSMISSION COMPANY, a Michigan corporation ("ITC").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Detroit Edison believes that it
would be in the company's best interests to completely separate the integrated
transmission facilities with voltage ratings 120 kV and above as well as all
related tariffs, contracts, books and records and those certain other facilities
used to serve certain wholesale customers more fully described on Exhibit A
attached hereto (collectively, the "Transmission Business") from Detroit Edison
(the "Separation");
WHEREAS, Detroit Edison has caused ITC to be incorporated in order to
effect such Separation;
WHEREAS, ITC currently conducts no business operations and has no
significant assets or liabilities; and
WHEREAS, the Boards of Directors of Detroit Edison and ITC have
determined that, in connection with the Separation, (i) Detroit Edison will
contribute and transfer to ITC, directly or indirectly, substantially all of the
assets and liabilities associated with the Transmission Business, and (ii) ITC
will issue to Detroit Edison __________ shares of the common stock of ITC (the
"Shares") in a tax-free exchange for the Transmission Business pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended;
NOW THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1.
SUBSCRIPTION AND CLOSING
1.1 Subscription. Detroit Edison hereby subscribes for the Shares,
which subscription shall be irrevocable for a period of twelve (12) months
following the date hereof (the "Subscription Period"). The Shares, when issued,
will constitute all of the issued and outstanding common stock of ITC, and ITC
will not as of the Separation Date (hereinafter
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defined) have obligated itself directly or indirectly to issue any further
shares of its common stock.
1.2 Separation Date. Unless otherwise provided in any document or
agreement executed by the parties in connection with this Agreement, and subject
to the fulfillment or waiver of the conditions precedent set forth in Article 4
hereof, the effective time and date of the Separation and the closing of the
other transactions contemplated by this Agreement shall be 12:01 a.m.,
prevailing Eastern Time on such date during the Subscription Period (the
"Separation Date") as may be fixed by the Boards of Directors of Detroit Edison
and ITC. The closing of the Separation shall take place at the offices of
Detroit Edison or at such other place as the parties may mutually agree.
1.3 Closing Deliveries. At the closing of the Separation, ITC shall
issue and deliver to Detroit Edison certificates representing the Shares in a
form reasonably acceptable to both parties, and each party shall deliver to the
other all Ancillary Agreements (as defined herein) to which it is a party and
all other documents, consents, approvals, instruments, certificates and other
items required to be delivered by such party pursuant to this Agreement or any
Ancillary Agreement. All deliveries and actions to be made or taken by the
parties at the closing of the Separation pursuant to this Agreement or the
Ancillary Agreements shall be deemed to occur simultaneously and constitute one
and the same transaction.
ARTICLE 2.
SEPARATION
2.1 Contribution and Transfer of Transmission Assets. At the closing of
the Separation and subject to the terms and conditions set forth herein, Detroit
Edison hereby agrees to contribute, transfer, assign and deliver to ITC,
directly or indirectly, all of Detroit Edison's right, title and interest in and
to the real and personal property and other assets set forth on Exhibit A
attached hereto (together with any additions to and/or substitutions for such
assets agreed to by ITC as may exist on the Separation Date, the "Transmission
Assets"), which Transmission Assets constitute as of the date hereof, and will
constitute on the Separation Date, substantially all of the assets constituting,
used in or associated with the Transmission Business. Detroit Edison will effect
such contribution and transfer by executing and delivering to ITC on the
Separation Date one or more Deeds and a Xxxx of Sale and Assignment, each in a
form mutually agreeable to both parties.
2.2 Assumption of Liabilities. At the closing of the Separation and
subject to the terms and conditions set forth herein, ITC hereby agrees to
assume and to pay, perform and discharge in accordance with their respective
terms, the liabilities and obligations of Detroit Edison associated with the
Transmission Business set forth on Exhibit B attached hereto (together with any
additions to and/or substitutions for such liabilities and obligations as may
exist on the Separation Date, the "Assumed Liabilities"). Prior to the
Separation Date, the parties agree to use their commercially reasonable efforts
to identify, agree upon and schedule any such Assumed Liabilities to be assumed
by ITC hereunder. ITC will effect such assumption of the
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Assumed Liabilities by executing and delivering to Detroit Edison an
Assignment and Assumption Agreement in a form mutually agreeable to both
parties.
2.3 Further Agreements and Actions.
(a) Subject to the terms and conditions set forth in this
Agreement, each of the parties hereto will use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions
contemplated hereby, including, without limitation, using best efforts
to satisfy the conditions precedent set forth in Article 4.
(b) Without limiting the generality of the foregoing, Detroit
Edison and ITC shall cooperate with each other and (i) promptly make
all filings, applications and notices with or to any international,
federal, state or local governmental or regulatory authorities, (ii)
use best efforts to obtain the transfer or reissuance to ITC of all
necessary permits, consents, approvals and authorizations of all
governmental or regulatory authorities, and (iii) use best efforts to
obtain all necessary lien releases, consents, approvals and
authorizations of all other third parties, in each case as are
necessary or advisable to consummate the transactions contemplated by
this Agreement or required by the terms of any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument to which Detroit Edison, ITC or any
of their affiliates is a party or by which any of them (or their
assets) is bound. Each of Detroit Edison and ITC shall have the right
to review in advance all characterizations of the information relating
to the transactions contemplated by this Agreement which appear in any
filing made in connection herewith by the other party.
(c) In addition to the delivery of the Shares, the transfer of
the Purchased Assets and the assumption of the Assumed Liabilities, the
parties agree that they will negotiate, enter into and deliver between
themselves or with third parties such further agreements,
understandings, opinions, consents and indemnifications (collectively,
the "Ancillary Agreements") as are legally required or advisable to
implement, give full effect to or otherwise consummate the Separation
and the other transactions contemplated hereby on the Separation Date.
Without limiting the generality of the foregoing, such Ancillary
Agreements may include tax sharing agreements, facilities agreements,
maintenance and other services agreements, license agreements, leases,
management and employee services agreements, allocation agreements,
indemnification agreements and agreements with respect to employee
matters.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
3.1 Authority. Each party hereby represents and warrants to the other
party that (a) it has all necessary corporate power and authority to execute,
deliver and perform this Agreement, (b) the execution, delivery and performance
of this Agreement have been duly authorized by all
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necessary corporate action of such party, (c) it has duly and validly executed
and delivered this Agreement, and (d) this Agreement is a legal, valid and
binding obligation of such party.
3.2 Title to Assets. Detroit Edison hereby covenants to ITC, its
successors and assigns that, except as set forth on Exhibit C attached hereto,
(a) Detroit Edison is now (or will be on the Separation Date) the owner of
marketable title to the Transmission Assets; (b) Detroit Edison has or will have
on the Separation Date the lawful right to sell and transfer the Transmission
Assets to ITC; and (c) ITC shall receive on the Separation Date such title and
claim to the Transmission Assets as is at least as good, valid and marketable as
both that Detroit Edison initially received and as currently owned by Detroit
Edison, free and clear however of all liens, claims, encumbrances and rights of
others. Detroit Edison further covenants and agrees with ITC, its successors and
assigns, that it will defend such title forever against all claims and demands
whatsoever.
3.3 Securities Matters. Detroit Edison acknowledges that the Shares
subscribed for hereunder have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or the Michigan Uniform Securities Act
(the "Michigan Securities Act") in reliance on exemptions from registration,
that the Shares may not be further transferred, assigned, sold or conveyed
except upon registration under the Securities Act and the Michigan Securities
Act or pursuant to exemptions therefrom, and that any certificates representing
the Shares will bear legends substantially to that effect.
ARTICLE 4.
CONDITIONS PRECEDENT
4.1 Conditions To Separation. The obligations of Detroit Edison and ITC
to consummate the Separation and the other transactions contemplated hereby are
subject to the fulfillment on or prior to the Separation Date of the following
conditions:
(a) Government Approvals. Any material governmental or regulatory
approvals necessary or appropriate to consummate the Separation shall
have been obtained and be in full force and effect;
(b) No Legal Restraints. No order, injunction or decree issued by
any court or agency of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the Separation shall be
in effect and no other event outside the control of the parties shall
have occurred or failed to occur that prevents the consummation of the
Separation;
(c) No Material Adverse Effect. No other events or developments
shall have occurred subsequent to the date hereof that, in the
judgment of the Boards of Directors of the parties, would result in
the Separation having a material adverse effect on the parties or on
the stockholders of Detroit Edison; and
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(d) Ancillary Agreements. The parties shall have agreed upon and
executed all Ancillary Agreements necessary or desirable in connection
with the transactions contemplated hereby.
ARTICLE 5.
COVENANTS AND OTHER MATTERS
5.1 Agreement For Exchange of Information.
(a) Exchange. Each of Detroit Edison and ITC agrees to provide,
or cause to be provided, to the other, at any time before or after the
Separation Date, as soon as reasonably practicable after written
request therefor, any Information (as defined herein) insofar as it
relates to the conduct of the businesses of the parties prior to the
Separation Date in the possession or under the control of the other
party that the requesting party reasonably needs (i) to comply with
reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities laws) by a
governmental authority having jurisdiction over the requesting party,
(ii) for use in any other judicial, regulatory, administrative or
other proceeding or in order to satisfy audit, accounting, claims,
regulatory, litigation or other similar requirements, (iii) to comply
with its obligations under this Agreement or any Ancillary Agreement,
or (iv) in connection with the ongoing businesses of Detroit Edison or
ITC; provided, however, that in the event any party determines that
provision of Information could be commercially detrimental, violate
any law or agreement, or waive any attorney-client privilege, the
parties shall take all reasonable measures to permit compliance with
such obligation in a manner that avoids any such harm or consequence.
Any information exchanged by the parties pursuant to this Section
5.1(a) shall be subject to the applicable rules and regulations
promulgated by the Federal Energy Regulatory Commission 18 C.F.R.
Section 37.4 (1999), as amended from time to time, governing the
transfer of information and communications between public utilities'
wholesale merchant and transmission system operation functions, and
that of their affiliates. For purposes of this Agreement,
"Information" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports,
records, books, contracts, instruments, surveys, discoveries, ideas,
concepts, know-how, techniques, designs, specifications, drawings,
blueprints, diagrams, models, prototypes, samples, flow charts, data,
computer data, disks, diskettes, tapes, computer programs or other
software, marketing plans, customer names, communications by or to
attorneys (including attorney-client privileged communications), memos
and other materials prepared by attorneys or under their direction
(including attorney work product), and other technical, financial,
employee or business information or data.
(b) Limitation of Liability. No party shall have any liability to
any other party in the event that any Information exchanged or
provided pursuant to this Section 5.1 is found to be inaccurate, in
the absence of willful misconduct by the party providing such
Information.
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(c) Other Agreements Providing For Exchange of Information. The
rights and obligations granted under this Section 5.1 are subject to
any specific limitations, qualifications or additional provisions on
the sharing, exchange or confidential treatment of Information set
forth in any Ancillary Agreement.
5.2 Payment of Expenses. Except as otherwise provided in the Ancillary
Agreements or the Exhibits hereto, all out-of-pocket costs and expenses of the
parties hereto in connection with the preparation of this Agreement, the
Ancillary Agreements and the Separation (and the transactions contemplated
thereby) shall be paid by Detroit Edison.
ARTICLE 6.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, the Ancillary Agreements and the
Exhibits and Schedules referenced or attached hereto and thereto, constitute (or
in the case of the Ancillary Agreement will, when executed, constitute) the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous agreements and understandings
(whether oral or written) with respect to the subject matter hereof.
6.2 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Michigan as to all
matters regardless of its conflicts of law principles.
6.3 Termination. This Agreement and all Ancillary Agreements may be
terminated and the Separation abandoned at any time prior to the Separation Date
by mutual consent of Detroit Edison and ITC. In the event of termination
pursuant to this section, no party shall have any liability of any kind to the
other party.
6.4 Notices. Any notice, demand, offer, request or other communication
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be in writing and shall be deemed effectively given the earlier
of (i) when received, (ii) when delivered personally, (iii) one (1) business day
after being delivered by facsimile (with receipt of appropriate confirmation),
(iv) one (1) business day after being deposited with an overnight courier
service or (v) four (4) days after being deposited in the United States mail,
First Class with postage prepaid, and addressed to the attention of the party's
General Counsel at the address of its principal executive office or such other
address as a party may request by notifying the other in writing.
6.5 Counterparts. This Agreement, including the Exhibits hereto and the
other documents referred to herein, may be executed in counterparts, each of
which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
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6.6 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. Neither party hereto may assign
its rights or obligations under this Agreement, in whole or in part, without the
prior written consent of the other party, and any attempted assignment not in
accordance herewith shall be null and void and of no force and effect.
6.7 Amendment. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
6.8 Interpretation. The headings contained in this Agreement in any
Exhibit hereto are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Any capitalized term used in
any Exhibit but not otherwise defined therein, shall have the meaning assigned
to such term in this Agreement. When a reference is made in this Agreement to an
Article or a Section, or an Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated.
6.9 Conflicting Agreements. In the event of conflict between this
Agreement and any Ancillary Agreement or other agreement executed in connection
herewith, the provisions of such Ancillary Agreement or other agreement, as the
case may be, shall prevail.
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IN WITNESS WHEREOF, the undersigned have caused their respective duly
authorized representatives to execute this Agreement under seal as of the day
and year first written above.
THE DETROIT EDISON COMPANY
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
INTERNATIONAL TRANSMISSION COMPANY
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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