1
EXHIBIT 2(c)
PURCHASE AGREEMENT
dated as of February 19, 2000
Among
RELIANT ENERGY POWER GENERATION, INC.
as Buyer,
RELIANT ENERGY, INCORPORATED,
as Guarantor,
and
SITHE ENERGIES, INC.
and
Sithe Northeast Generating Company, Inc.,
as Sellers.
2
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. CERTAIN DEFINITIONS.............................................2
Section 1.1 Definitions..................................................2
Section 1.2 Certain Interpretive Matters................................25
ARTICLE 2. PURCHASE AND SALE OF INTERCOMPANY NOTES, MID-ATLANTIC
STOCK AND LLC INTERESTS........................................26
Section 2.1 Purchase and Sale of Intercompany Notes, Mid-Atlantic Stock
and LLC Interests...........................................26
Section 2.2 Determination of Adjustment Amount and Preclosing Seller
Breach Amount...............................................27
Section 2.3 Terminated Obligations......................................32
Section 2.4 Senior Credit Facility and BECO Facility....................33
Section 2.5 Allocation of Aggregate Purchase Price......................34
ARTICLE 3. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES.........35
Section 3.1 Organization, Qualification and Power.......................35
Section 3.2 Condemnation................................................36
Section 3.3 No Conflict.................................................36
Section 3.4 Equity Interests............................................37
Section 3.5 Financial Statements........................................39
Section 3.6 Litigation; Compliance with Law; Permits....................41
Section 3.7 Tax Matters.................................................42
Section 3.8 Material Contracts..........................................47
Section 3.9 Capital Expenditures........................................48
Section 3.10 Brokers ....................................................48
Section 3.11 Labor Matters...............................................48
Section 3.12 ERISA. .....................................................49
Section 3.13 Events Subsequent to November 24, 1999......................53
Section 3.14 Title to Properties.........................................55
Section 3.15 Insurance...................................................56
Section 3.16 Transactions with Certain Persons...........................56
Section 3.17 Compliance With Environmental Laws..........................57
Section 3.18 Certain Matters Relating to GPU Assets and Development
Assets......................................................58
Section 3.19 Consents and Approvals......................................59
Section 3.20 Utility Regulation..........................................60
Section 3.21 Intellectual Property.......................................60
ARTICLE 4. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS...........61
Section 4.1 Organization and Corporate Power............................61
i
3
Section 4.2 Authorization; Validity.....................................62
Section 4.3 No Conflict.................................................62
Section 4.4 Ownership of Genco, Mid-Atlantic Stock and LLC Interests....62
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER........................63
Section 5.1 Organization and Corporate Power............................63
Section 5.2 Authorization; Validity.....................................63
Section 5.3 No Conflict.................................................64
Section 5.4 Consents and Approvals......................................64
Section 5.5 Brokers ....................................................64
Section 5.6 Availability of Funds.......................................64
Section 5.7 No Knowledge of the Sellers' Breach.........................65
Section 5.8 Investment..................................................65
ARTICLE 6. ACCESS; ADDITIONAL AGREEMENTS..................................65
Section 6.1 Access to Information; Continuing Disclosure................65
Section 6.2 Regulatory Approvals........................................67
Section 6.3 Further Assurances..........................................68
Section 6.4 Certain Tax Matters.........................................69
Section 6.5 Ordinary Course of Business.................................78
Section 6.6 Notice of Changes...........................................86
Section 6.7 Collective Bargaining Agreements............................86
Section 6.8 Pollution Control Bonds.....................................87
Section 6.9 Certain Benefits Matters....................................88
Section 6.10 WARN Act....................................................90
Section 6.11 Sithe Release from GPU Liabilities..........................91
Section 6.12 Change of Entity Names......................................91
Section 6.13 Interim Services Agreement..................................91
Section 6.14 Environmental Matters/ISRA..................................92
Section 6.15 Certain Rights Under Amended and Restated Transition Power
Purchase Agreements.........................................93
Section 6.16 Release of Certain Agreements...............................94
Section 6.17 GPU Post Closing Amounts....................................94
Section 6.18 Trading Contracts...........................................94
Section 6.19 Matters Relating to Keystone and Conemaugh..................95
ARTICLE 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS....................95
Section 7.1 No Injunction...............................................96
Section 7.2 Representations and Warranties..............................96
Section 7.3 Performance.................................................97
Section 7.4 Approvals and Filings.......................................97
Section 7.5 Opinion of Counsel..........................................97
Section 7.6 No Material Adverse Effect..................................97
ii
4
Section 7.7 Buyer Permits...............................................98
Section 7.8 Resignations................................................98
ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH SELLER.........98
Section 8.1 No Injunction...............................................98
Section 8.2 Representations and Warranties..............................98
Section 8.3 Performance.................................................99
Section 8.4 Approvals and Filings.......................................99
Section 8.5 Opinion of Counsel.........................................100
ARTICLE 9. CLOSING.......................................................100
Section 9.1 Time and Place.............................................100
Section 9.2 Payments and Terminated Obligations........................100
Section 9.3 Deliveries.................................................101
ARTICLE 10. TERMINATION AND ABANDONMENT...................................102
Section 10.1 Methods of Termination....................................102
Section 10.2 Procedure Upon Termination and Consequences...............104
ARTICLE 11. SURVIVAL......................................................104
Section 11.1 Survival..................................................104
ARTICLE 12. ASSUMPTION OF GPU LIABILITIES; INDEMNIFICATION................105
Section 12.1 Assumption of GPU Liabilities; Indemnification............105
Section 12.2 Defense of Claims.........................................106
ARTICLE 13. OBLIGATIONS OF GUARANTOR......................................111
Section 13.1 Guarantee.................................................111
Section 13.2 Representations and Warranties Regarding Guarantor........112
Section 13.3 Covenants Relating to Buyer...............................113
ARTICLE 14. MISCELLANEOUS.................................................115
Section 14.1 Amendment and Modification................................115
Section 14.2 Waiver of Compliance......................................115
Section 14.3 Notices ..................................................115
Section 14.4 Binding Nature; Assignment................................117
Section 14.5 Entire Agreement..........................................118
Section 14.6 Expenses..................................................119
Section 14.7 Press Releases and Announcements; Disclosure..............119
Section 14.8 Acknowledgment............................................119
Section 14.9 Disclaimer Regarding Assets...............................121
Section 14.10 Governing Law.............................................122
Section 14.11 Nonforeign Affidavit......................................122
Section 14.12 Counterparts..............................................123
iii
5
Section 14.13 Interpretation............................................123
Section 14.14 Confidentiality...........................................123
Section 14.15 Limitation on Due Inquiry.................................124
iv
6
SCHEDULES
Schedule 1A - Development Assets
Schedule 1B - GPU Project Documents
Schedule 1C - General Description of Interim Services
Agreement
Schedule 1D - Executive Officers
Schedule 1E - Budgeted Development Costs
Schedule 2.3 - Terminated Obligations
Schedule 3.2 - Condemnation
Schedule 3.3 - Conflicts
Schedule 3.4 - Capital Stock
Schedule 3.5 - Financial Statements
Schedule 3.6 - Litigation; Compliance with Law; Permits
Schedule 3.7 - Tax Matters
Schedule 3.8 - Material Contracts
Schedule 3.9 - Capital Expenditures
Schedule 3.11 - Labor Matters
Schedule 3.12 - ERISA
Schedule 3.13 - Events Subsequent to November 24, 1999
Schedule 3.14 - Title to Properties
Schedule 3.16 - Transactions with Certain Persons
Schedule 3.17 - Environmental Matters
Schedule 3.18 - Certain GPU Matters
Schedule 3.19 - Seller Consents and Approvals
Schedule 3.21 - Intellectual Property
Schedule 4.3 - Sellers' Conflicts
Schedule 5.4 - Buyer Consents and Approvals
Schedule 6.5 - Exceptions to Ordinary Course of Business
v
7
Schedule 6.5.2 - Contracts Not to Be Amended
Schedule 6.5.2(f)(A) - Trading Contracts at Signing
Schedule 6.5.2(f)(B) - Trading Contracts Executed Between Signing
and Closing
Schedule 6.5.2(j) - Outages
Schedule 6.16 - Released Agreements
Schedule 7.4 - Approvals and Filings to be Obtained or
Made by Buyer Prior to Closing
Schedule 7.5 - Opinion of Sellers' Counsel
Schedule 8.4 - Approvals and Filings to be Obtained or
Made by Sellers Prior to Closing
Schedule 8.5 - Opinion of Buyer's Counsel
Schedule 9.3A - Form of Transfer Instrument for LLC
Interests
Schedule 9.3B - General Transfer and Conveyancing
Instrument
Schedule 12.1 - Form of Assumption Instrument
vi
8
PURCHASE AGREEMENT
This Purchase Agreement, dated as of February 19, 2000 (this
"Agreement") is among Reliant Energy Power Generation, Inc., a Delaware
corporation ("Buyer"), Reliant Energy, Incorporated, a Texas corporation
("Guarantor"), Sithe Energies, Inc., a Delaware corporation ("Sithe"), and Sithe
Northeast Generating Company, Inc., a Delaware corporation and an indirect
wholly-owned Subsidiary (as defined herein) of Sithe ("Genco" and, together with
Sithe, the "Sellers").
RECITALS
A. Sithe owns, through Genco, all of the issued and outstanding capital
stock of Sithe Mid-Atlantic Power Services, Inc., a Delaware corporation ("Sithe
Mid-Atlantic"), and all of the limited liability company interests in each of
Sithe Pennsylvania Holdings LLC, a Delaware limited liability company, Sithe
Maryland Holdings LLC, a Delaware limited liability company, and Sithe New
Jersey Holdings LLC, a Delaware limited liability company (Sithe Mid-Atlantic
and each of the limited liability companies referred to above, individually, a
"Company" and, collectively, the "Companies").
B. Sithe holds, through Genco, certain Intercompany Notes (as defined
herein) issued by the Companies.
C. The Companies collectively own, or will own at or prior to the
Closing (as defined herein) directly or indirectly through their wholly-owned
Subsidiaries, all of the GPU Assets (as defined herein), together with any
assets acquired after November 24, 1999 by Sithe or any of its Subsidiaries
relating primarily to the GPU Assets.
Purchase Agreement
9
D. The Companies collectively own, or will own at or prior to the
Closing, directly or indirectly through their wholly-owned Subsidiaries, certain
rights and assets relating to generation projects under development in the
geographic area covered by PJM (as defined herein) that were not part of the
assets acquired from GPU.
E. Buyer desires to purchase from Genco, and Genco desires to sell to
Buyer, subject to the terms and conditions of this Agreement, (a) all of the
issued and outstanding capital stock of Sithe Mid-Atlantic, (b) all of the
limited liability company interests in each of the other Companies and (c) all
of the Intercompany Notes held by Genco.
F. In order to induce the Sellers to enter into this Agreement,
Guarantor is willing to enter into this Agreement in order to guarantee Buyer's
obligation to pay, upon the terms and subject to the conditions set forth
herein, the Guaranteed Obligations and for the other purposes set forth in
Article 13.
G. The Board of Directors of each of the Sellers, Guarantor and Buyer
have determined that the consummation of the transactions contemplated by this
Agreement, upon the terms and conditions set forth in this Agreement, is in the
best interests of each of the Sellers, Guarantor and Buyer, respectively, and
their respective stockholders.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1. CERTAIN DEFINITIONS
Section 1.1 Definitions. For the purposes of this Agreement, the
following words and phrases shall have the following meanings:
2
10
"Acquired Assets" means collectively the GPU Assets and the Development
Assets.
"Adjusted Net Working Capital" means the result obtained by
subtracting the Base Net Working Capital from the Closing Net Working Capital.
"Adjustment Amount" means the difference between (i) the sum, without
duplication, of (a) Adjusted Net Working Capital, (b) Budgeted Capital
Expenditures and such additional amounts of Capital Expenditures as are allowed
under Section 6.5.2(i)(1) or (3), (c) Budgeted Development Costs (whether
expensed or capitalized) and such additional amounts of Development Costs as are
allowed under Section 6.5.2(i)(2), and (d) expenditures to which Buyer has
consented in writing, and (ii) the sum, without duplication, of (a) (1) any cash
proceeds from any dispositions of Acquired Assets (other than current assets)
that are obsolete, or (2) any salvage cash proceeds from the removal or
replacement of Acquired Assets that are capital assets that have not been
repaired or replaced or that have been repaired or replaced in accordance with
Section 6.5.2(b), (b) the Preclosing Seller Breach Amount, (c) insurance
proceeds received in connection with a casualty or property loss to the extent
Sellers have not previously repaired or replaced the covered property and (d)
the Mark to Market Adjustment Amount.
"Advisors" has the meaning as set forth in Section 14.8.2.
"Affiliate" means any Person that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common control
with, another Person. For purposes of the foregoing, "control", with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and
3
11
policies of such Person, whether through ownership of voting securities or by
contract or otherwise.
"Aggregate Purchase Price" has the meaning as set forth in Section
2.1.2.
"Agreement" has the meaning as set forth in the first paragraph of this
Agreement.
"Amended and Restated Transition Power Purchase Agreements" means (i)
the Amended and Restated Transition Power Purchase Agreement among Sithe,
Metropolitan Edison Company, Sithe Pennsylvania Holdings, LLC and Sithe Power
Marketing, dated as of November 24, 1999, (ii) the Amended and Restated
Transition Power Purchase Agreement among Sithe, Pennsylvania Electric Company,
Sithe Pennsylvania Holdings, LLC, Sithe Maryland Holdings, LLC and Sithe Power
Marketing, dated as of November 24, 1999, and (iii) the Amended and Restated
Transition Power Purchase Agreement among Sithe, Jersey Central Power and Light
Company, Sithe New Jersey Holdings, LLC and Sithe Power Marketing, dated as of
November 24, 1999.
"Assignment" means that certain Assignment and Transfer Agreement and
Bill of Sale, to be dated as of the Closing Date, substantially in the form of
Schedule 9.3B.
"Balance Sheets" means the Opening Balance Sheet, the December Balance
Sheet and the Closing Balance Sheet, all of which shall be prepared in
accordance with GAAP.
"Base Net Working Capital" means the Net Working Capital of the
Companies and their Subsidiaries on a combined basis as of November 24, 1999 as
determined from the Opening Balance Sheet.
4
12
"BECO Facility" means that certain Credit Agreement, dated as of May
15, 1998, among Sithe New England Holdings, LLC, Bank of Montreal, as agent, and
the financial institutions party thereto, as amended, modified and supplemented.
"Benefit Arrangement" means any executive incentive arrangement,
consisting of: (i) any employment or individual personal services agreement
involving an annual base salary of at least $250,000 (with respect to any such
agreement that is an employment agreement) or annual compensation of at least
$250,000 (with respect to any other such agreement), but excluding any agreement
of at-will employment, (ii) any equity compensation plan and (iii) any deferred
compensation plan.
"Benefit Plans" has the meaning as set forth in Section 3.12.1.
"Budgeted Capital Expenditures" means those expenditures incurred
between January 1, 2000 and the Closing Date in accordance with Schedule 3.9.
"Budgeted Development Costs" means those costs incurred between January
1, 2000 and the Closing Date in the development of the Development Projects that
are set forth on Schedule 1E.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banking institutions in New York, New York are authorized or
obligated by law or executive order to be closed.
"Buyer" has the meaning as set forth in the first paragraph of this
Agreement.
"Buyer Group" has the meaning as set forth in Section 6.1.1.
"Buyer's Representatives" has the meaning as set forth in Section
6.5.5(a).
"Buyer's Trading Representatives" has the meaning as set forth in
Section 6.5.5(b).
5
13
"Capital Expenditures" means expenditures that may be capitalized in
accordance with GAAP using the same accounting policies (which are in accordance
with GAAP) as were used by the Sellers in the preparation of the Opening Balance
Sheet or that Buyer agrees in writing should be treated as capitalized expenses
under this Agreement.
"Cash Equivalents" means (i) cash, (ii) debt securities issued,
guaranteed or insured by the United States government or any agency or
instrumentality thereof, (iii) certificates of deposit, eurodollar time
deposits, bankers' acceptances and bank deposits, (iv) repurchase obligations
for underlying securities of the types described in clauses (ii) and (iii)
above, and (v) commercial paper.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended (42 U.S.C.ss.ss.9601-9675).
"CFO Certificate" has the meaning as set forth in Section 13.3.1.
"Chief Financial Officer of Guarantor" has the meaning as set forth in
Section 13.3.1.
"Charter Documents" means, with respect to any Person, the certificate
of incorporation, by-laws, articles of organization, limited liability company
agreement, partnership agreement, formation agreement or other similar
organizational documents of such Person.
"Closing" has the meaning as set forth in Section 9.1.
"Closing Date" has the meaning as set forth in Section 9.1.
"Closing Balance Sheet" means an audited combining balance sheet at the
Closing Date of the Companies and their Subsidiaries, which balance sheet shall
not reflect any intercompany payables or receivables, to be prepared in
accordance with GAAP, using the same accounting
6
14
policies (which are in accordance with GAAP) as were used by the Sellers in the
preparation of the Opening Balance Sheet.
"Closing Net Working Capital" means the Net Working Capital of the
Companies and their Subsidiaries on a combined basis as of the Closing Date as
determined from the Closing Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as amended. All
citations to the Code or to the regulations promulgated thereunder shall include
any amendments or any substitute or successor provisions thereto.
"Collective Bargaining Agreements" has the meaning as set forth in
Section 3.11.
"Company" has the meaning as set forth in Recital A.
"Confidential Acquired Asset Information" has the meaning as set forth
in Section 14.14(b).
"Confidential Information" has the meaning as set forth in Section
14.14(a).
"Confidentiality Agreement" has the meaning as set forth in Section
6.1.1.
"Contract" means a contract, agreement, note, bond, mortgage,
indenture, easement, lease, license, instrument or other obligation.
"December Balance Sheet" has the meaning as set forth in Section 3.5.
"Development Assets" means all rights of the Sellers and their
Affiliates relating primarily to the Development Projects, including but not
limited to those arising pursuant to the Contracts, Permits and Environmental
Permits and other rights listed on Schedule 1A, and all books and records
(including but not limited to proposals, studies and applications) relating to
the Development Projects; provided, that the term "Development Assets" shall not
include any
7
15
GPU Assets and shall not include any assets of any Seller or any Affiliate of
any Seller that are not primarily related to the Development Projects.
"Development Costs" means costs incurred (whether capitalized or
expensed) in the development of the Development Projects including costs, fees
and expenses to be paid to third parties and costs chargeable by Sellers or
their Affiliates controlled by them to the Development Projects, in accordance
with Sithe's standard practices existing at the date hereof.
"Development Projects" means the Hunterstown, Erie West, Portland,
Atlantic, Seward and Gilbert generation projects under development by Sellers or
any of their Affiliates in the geographic area covered by PJM.
"Direct Claim" has the meaning as set forth in Section 12.2.3.
"DOJ" has the meaning as set forth in Section 6.2.1.
"Due Date" has the meaning as set forth in Section 6.4.12.
"Easement Agreements" means, collectively, those certain Easement
Agreements entered into pursuant to the Sithe/GPU Agreements with respect to
certain of the Real Property.
"Election" has the meaning as set forth in Section 6.4.1.1.
"Emission Allowance" means all present and future authorizations to
emit specified units of pollutants or Hazardous Substances, which units are
established by a Governmental Authority with jurisdiction over the generating
facilities included in the Acquired Assets and relating to such Acquired Assets
under (i) an air pollution control and emission reduction program designed to
mitigate global warming or interstate or intra-state transport of air pollutants
or Hazardous Substances; (ii) a program designed to mitigate impairment of
surface waters, watersheds or groundwater; or (iii) any pollution reduction
program with a similar purpose. Emission
8
16
Allowances include allowances, as described above, regardless as to whether the
Governmental Authority establishing such Emission Allowances designates such
allowances by a name other than "allowances."
"Emission Reduction Credits" means credits in units that are
established by a Governmental Authority with jurisdiction over the generating
facilities included in the Acquired Assets that have obtained the credits,
resulting from reductions in the emissions of air pollutants from an emitting
source or facility (including, without limitation, and to the extent allowable
under applicable law, reductions from shut-downs or control of emissions beyond
that required by applicable law) that: (i) have been identified by the
applicable state regulatory authorities as complying with applicable state laws
and regulations governing the establishment of such credits (including, without
limitation, that such emissions reductions are enforceable, permanent,
quantifiable and surplus); or (ii) have been certified by any other applicable
Governmental Authority as complying with the laws and regulations governing the
establishment of such credits (including, without limitation, that such
emissions reductions are enforceable, permanent, quantifiable and surplus). The
term includes Emission Reduction Credits that have been approved by any
applicable state regulatory agency and are awaiting United States Environmental
Protection Agency approval. The term also includes certified air emissions
reductions, as described above, regardless as to whether the Governmental
Authority certifying such reductions designates such certified air emissions
reductions by a name other than "emission reduction credits."
"Employee Benefit Plan" means any employee benefit plan, as defined in
Section 3(3) of ERISA.
9
17
"Environmental Claim" means administrative or judicial actions, suits,
orders, claims, liens, notices, notices of violations, investigations,
complaints, requests for information, proceedings, or other written
communication, whether criminal or civil, pursuant to or arising under any
applicable Environmental Law by any Person to the extent 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 the
presence, Release, or threatened Release into the environment of any Hazardous
Substances at any location related to the Acquired Assets, including, but not
limited to, any off-Site location to which Hazardous Substances, or materials
containing Hazardous Substances, were sent for handling, storage, treatment, or
disposal.
"Environmental Laws" means all applicable federal, state and local laws
and regulations, relating to pollution or protection of the environment, natural
resources or human health and safety, including laws and regulations relating to
Releases or threatened Releases of Hazardous Substances (including, without
limitation, Releases to ambient air, surface water, groundwater, land and
surface and subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, release, transport, disposal
or handling of Hazardous Substances.
"Environmental Permits" means permits, certificates, certifications,
licenses, franchises and other governmental filings, notices, authorizations,
consents and approvals under Environmental Laws.
10
18
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any Company and any Subsidiary of any
Company means any other Person that, together with the relevant Company
or Subsidiary, is or was required to be treated as a single employer under
Section 414 of the Code.
"Estimated Closing Statement" has the meaning as set forth in Section
2.2.1.
"Estimated Adjustment Amount" has the meaning as set forth in Section
2.2.1.
"Excluded Liabilities" means the sum of (a) affiliate notes payable,
(b) GPU Post Closing Amounts, (c) maintenance reserves and (d) deferred taxes,
all as determined from the Balance Sheets.
"FERC" has the meaning as set forth in Section 6.2.2.
"Financial Statements" has the meaning as set forth in Section 3.5.
"Financing Parties" has the meaning as set forth in Section 6.3.
"Fixed Purchase Price" has the meaning as set forth in Section 2.1.2.
"FTC" has the meaning as set forth in Section 6.2.1.
"Funded Debt" means indebtedness for borrowed money (other than under
the Intercompany Notes, and other than accounts payable and trade payables
incurred in the ordinary course of business).
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Genco" has the meaning set forth in the first paragraph of this
Agreement.
"Good Operating Practices" mean any of the practices, methods and acts
engaged in or approved by a significant portion of the electric generation
industry or any of the practices,
11
19
methods and acts engaged in or approved by a significant portion of the electric
generation industry or any of the practices, methods or acts which, in the
exercise of reasonable judgment in light of the facts known at the time the
decision was made, would have been expected to accomplish the desired result at
a reasonable cost consistent with good electric generation industry business
practices, reliability, safety and expedition during the relevant time period.
Good Operating Practices are not intended to be limited to the optimum
practices, methods or acts to the exclusion of all others, but rather to be
acceptable practices, methods or acts generally accepted in the industry.
"Governmental Authority" means any federal, state, local or other
governmental, regulatory or administrative agency, commission, department,
board, or other governmental subdivision, court, tribunal, arbitrating body or
other governmental authority.
"GPU" means GPU, Inc., a Pennsylvania corporation and a party to one or
more of the Sithe/GPU Agreements.
"GPU Assets" means all of the following:
(a) the "Purchased Assets" as defined in the Sithe/GPU Agreements
excluding assets identified or described in any Sithe/GPU Agreements as not
being included in the transactions contemplated in the Sithe/GPU Agreements, but
including any right that the Sellers and their Affiliates have to acquire the
stock or assets of York Haven Power Company and of Forked River station (but
excluding such stock or assets themselves);
(b) all rights of the Sellers and their Affiliates under the
GPU Project Documents and all rights, claims and causes of actions accrued
or accruing thereunder;
(c) all rights of the Sellers and their Affiliates under the
Sithe/GPU Agreements and all rights, claims and causes of action accrued or
accruing thereunder; and
12
20
(d) all of the assets and rights of the Sellers and their
Affiliates, acquired or created since November 24, 1999 and used in connection
with, and relating primarily to, the assets referred to in clause (a) of this
definition, including without limitation such assets consisting of Real
Property, Inventories, tangible personal property, Contract rights (including
any rights to sell power), Real Property leases, Permits, Environmental Permits,
books and records, Emission Reduction Credits and Emission Allowances, unexpired
and transferable warranties and guaranties from third parties with respect to
Real Property or personal property, year 2000 compliance information, names of
plants (excluding the right to use the name "Sithe") and intellectual property;
provided, that the GPU Assets shall not include (i) any Cash Equivalents, (ii)
the name "Sithe" or any right of use thereof, or (iii) any corporate-wide
information, technology, financial reporting or accounting systems, including
software relating thereto and hardware not located on the premises of any
facility included in the GPU Assets; provided however, that Buyer shall be
furnished with data related to the GPU Assets in a form agreeable to Buyer and
the Sellers.
"GPU Liabilities" means all of the obligations and liabilities (whether
accrued, absolute, contingent or otherwise) of Sithe or any of its Subsidiaries
(or any of their respective successors or assigns) under (i) the GPU Project
Documents, including, without limitation, obligations arising out of GPU Project
Documents that consist of assumed Contracts and Easement Agreements, and
Permitted Liens, (ii) the "Assumed Liabilities" as defined in the Sithe/GPU
Agreements, (iii) the Sithe/GPU Agreements (other than transaction expenses,
including transfer taxes, incurred pursuant to the Sithe/GPU Agreements) and
(iv) the Intercompany Notes.
13
21
"GPU Post Closing Amounts" means "Post-Closing Adjustments" as defined
in Section 3.3(c) of the Sithe/GPU Agreements.
"GPU Project Documents" means the agreements and documents listed on
Schedule 1B.
"GPU Sellers" has the meaning set forth in Section 6.8.
"Guaranteed Obligations" has the meaning as set forth in Section 13.1.
"Guarantor" has the meaning as set forth in the first paragraph
of this Agreement.
"Hazardous Substances" or "hazardous substances" means (a) any
petrochemical or petroleum products, coal ash, oil, radioactive materials,
radon gas, asbestos in any form that is friable, urea formaldehyde foam
insulation and transformers or other equipment that contain dielectric fluid
which contains levels of polychlorinated biphenyls in excess of 50 parts per
million, (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 is prohibited, limited or regulated by
any applicable Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnifiable Loss" has the meaning as set forth in Section 12.1.
"Indemnifying Party" has the meaning as set forth in Section 12.2.1.
"Indemnitee" has the meaning as set forth in Section 12.1.
14
22
"Independent Accounting Firm" means an independent accounting firm of
national reputation that is mutually appointed by Sithe and Buyer (other than
the regular outside accounting firm of any of Buyer, Guarantor or any Seller).
"Interim Services Agreement" shall mean that certain Interim Services
Agreement, to be entered into between Sithe and Buyer, a general description of
which is attached hereto as Schedule 1C.
"Inventories" means coal, fuel oil or alternative fuel inventories,
limestone, materials, spare parts, consumable supplies and chemical and gas
inventories relating to the operation of a generating facility included in
the Acquired Assets.
"Intercompany Notes" means (a) the promissory note, dated November 24,
1999, issued by Sithe Pennsylvania Holdings LLC to Genco in the principal amount
of $1,278,272,817.78, (b) the promissory note, dated November 24, 1999, issued
by Sithe New Jersey Holdings LLC to Genco in the principal amount of
$145,033,723.56, (c) the promissory note, dated November 24, 1999, issued by
Sithe Maryland Holdings LLC to Genco in the principal amount of $11,840,000.00,
(d) the promissory note, dated November 24, 1999, issued by Sithe Pennsylvania
Holdings LLC to Genco in the initial principal amount of $124,784,102.22, (e)
the promissory note, dated December 31, 1999, issued by Sithe Pennsylvania
Holdings LLC to Genco in the initial principal amount of $15,262,506.00, (f) the
promissory note, dated December 31, 1999, issued by Sithe New Jersey Holdings
LLC to Genco in the initial principal amount of $0.00, and (g) the promissory
note, dated December 31, 1999, issued by Sithe Maryland Holdings LLC to Genco in
the initial principal amount of $118,446.00 (as the principal balance
15
23
owing under the promissory notes referred to in clauses (e), (f) and (g) may
change from time to time prior to the Closing in accordance with this
Agreement).
"ISRA" has the meaning as set forth in Section 6.14.
"Keystone and Conemaugh Operating Agreements" means (i) the Conemaugh
Operating Agreement between Pennsylvania Electric Company and Conemaugh Station
Owners, dated as of December 1, 1967, as amended through the date hereof (the
last such amendment being dated November 24, 1999) and (ii) the Keystone
Operating Agreement between Pennsylvania Electric Company and Keystone Station
Owners, dated as of December 1, 1967 as amended through the date hereof (the
last such amendment being dated March 25, 1998).
"Keystone and Conemaugh Owners' Agreements" means (i) the Memorandum of
Owners' Agreement Conemaugh Steam Electric Station among Conemaugh Station
Owners, dated as of August 1, 1966; and (ii) the Memorandum of Owners' Agreement
Keystone Steam Electric Station among Keystone Station Owners, dated December 7,
1964.
"knowledge" or words to such effect means (a) with respect to any
Person that is an individual, the actual knowledge without independent
investigation of such Person and (b) (i) in the case of Sithe, the actual
knowledge of the executive officers listed on Schedule 1D after due inquiry by
one or more of such executive officers of (A) the plant managers of the
generating facilities included in the GPU Assets and (B) Martin Rosenberg,
pursuant to Section 6.5.4 and (ii) in the case of Buyer, the actual knowledge of
the executive officers listed on Schedule 1D.
"Liens" means liens, charges, restrictions, claims or encumbrances of
any nature.
"LLC Interests" has the meaning as set forth in Section 4.4.
16
24
"Mark to Market Adjustment Amount" means the amount (which may be
positive or negative) by which the market value (as defined by the mid-point of
the bid and ask price, as agreed by Buyer and Seller) of any outstanding Trading
Contracts, as of the Closing Date, listed in Schedule 6.5.2(f)(A) varies from
the recorded value of such Trading Contracts at the Closing Date.
"material" or "materially," when used with respect to any Company or
any Subsidiary of any Company or any of the Acquired Assets (except when used to
modify the term "Lien" or "Liens" in Section 3.14), means material to (i) the
Companies and their Subsidiaries, taken as a whole or (ii) any Specified Plant
(as defined below in the definition of "Material Adverse Effect").
"Material Adverse Effect" means an effect that is or reasonably could
be expected to be materially adverse to the business, assets, condition
(financial or otherwise), prospects, properties or results of operations of (a)
the Companies and their Subsidiaries, taken as a whole, or (b) a Specified Plant
(as defined below), excluding in any case, (i) any changes, circumstances or
effects resulting from or relating to changes or developments in the economy,
financial markets, commodity markets (including power markets), laws,
regulations or rules in the applicable electric power markets (including,
without limitation, changes in laws or regulations affecting owners or providers
of electric generation, transmission or distribution as a group and not the
Companies exclusively) or in the political climate generally or in any specific
region and (ii) any changes in conditions or developments generally applicable
to the industries in which any of the Companies or any of their Subsidiaries is
involved. As used herein, each of the following shall be a "Specified Plant":
(1) the Shawville Station and associated GPU Assets taken as a whole;
17
25
(2) the Portland Station and associated GPU Assets taken as a whole; and (3)
collectively, all GPU Assets taken as a whole that were conveyed to the Sellers
or their Affiliates under the Sithe/GPU Agreement identified in clause (d) of
the definition of Sithe/GPU Agreements.
"Material Contract" means each Contract to which any Company or any
Subsidiary of any Company is a party or by which any of them or any of their
respective property may be bound and which, in each case, is material to (a) the
Companies and their Subsidiaries taken as a whole or (b) any Specified Plant (as
defined above in the definition of "Material Adverse Effect"); provided,
however, that the term "Material Contract" shall not include the Project Office
Contracts.
"Mid-Atlantic Stock" has the meaning as set forth in Section 4.4.
"Multiemployer Plan" means a multiemployer plan, as defined in Sections
3(37) and 4001(a)(3) of ERISA.
"Net Working Capital" means the difference between (i) the sum of
(a) fuel inventory, including with respect to the Opening Balance Sheet, the
balance in any intercompany account with respect to fuel, (b) material and
supplies inventories, (c) other current assets, (d) other assets (excluding
land, property, plant & equipment, construction work in progress, project
development costs, goodwill, and long-term receivables from joint owners), and
(e) receivables from unaffiliated third parties (other than (1) insurance
receivables to the extent covered property is not being repaired or replaced and
(2) salvage receivables from the removal or replacement of Acquired Assets that
are capital assets that have not been repaired or replaced or that have been
repaired or replaced in accordance with Section 6.5.2(b)), and (ii) the sum of
(x) third party trade payables and (y) any other liabilities to unaffiliated
third parties other than (A) Excluded
18
26
Liabilities, (B) any liabilities related to the capacity payments payable under
the transportation contract between Pennsylvania Power & Light Company,
Interstate Energy Company and Jersey Central Power & Light Company, for the
Gilbert Station, dated as of August 12, 1977, and (C) Taxes for which either
Seller is liable pursuant to Section 6.4, all as determined from the Balance
Sheets.
"Net Worth" means, with respect to any Person, (a) the total assets of
such Person and its Subsidiaries on a consolidated basis, less (b) the total
liabilities of such Person and its Subsidiaries, on a consolidated basis, in
each case, determined in accordance with GAAP.
"NJDEP" has the meaning as set forth in Section 6.14.
"N.J.S.A." has the meaning as set forth in Section 3.20.
"Northeast Management" means Sithe Northeast Management Company, a
Pennsylvania corporation.
"Opening Balance Sheet" has the meaning as set forth in Section 3.5.
"Other Transfer Taxes" has the meaning as set forth in Section 6.4.3.2.
"Payor" has the meaning as set forth in Section 6.4.2.
"Permits" means permits, certificates, certifications, licenses,
franchises and other filings, notices, authorizations, consents and approvals of
any Governmental Authority (other than Environmental Permits).
"Permitted Liens" has the meaning as set forth in Section 3.14.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization or a Governmental Authority.
"PJM" means the Pennsylvania - New Jersey - Maryland power pool.
19
27
"Post-Closing Statement" has the meaning as set forth in Section 2.2.4.
"Preclosing Seller Breach Amount" shall mean the sum of the amount of
damages to Buyer, determined without regard to materiality or Material Adverse
Effect, resulting from a breach by the Sellers or any Company or any Subsidiary
of any Company of (i) the representations set forth in
(a) Sections 3.4.1 and 4.4 to the effect that the Sellers own 100% of
the equity interests in the Companies and each Subsidiary of the Companies free
and clear of any Liens, or
(b) Section 3.4.4 regarding the lack of business activities conducted
in the Companies and the Subsidiaries of the Companies other than in connection
with the acquisition, ownership, development and operation of the GPU Assets and
the absence of any Funded Debt (or any Liens related to any Funded Debt), or
(ii) the covenants set forth in paragraphs (b), (d), (f), (h) and (i)
of Section 6.5.2. For purposes of this definition, the damages to Buyer with
respect to a breach shall be deemed to be the monetary difference between (i)
the facts as represented as compared to the actual facts to which a specified
representation relates or (ii) the performance required by a specified covenant
as compared to actual performance. Such damages shall not include punitive,
incidental, special, exemplary or consequential damages, but only such actual
monetary differences as provided in the preceding sentence.
"Preclosing Seller Breach Amount Statement" has the meaning as set
forth in Section 2.2.1.
"Preparer" has the meaning as set forth in Section 6.4.2.
20
28
"Project Office Contracts" shall mean the Contracts which are entered
into or administered by the Keystone-Conemaugh Project Office on behalf of the
owners of the Keystone and Conemaugh generating stations.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
"Real Property" means those certain parcels of land (including all
buildings, facilities and other improvements thereon and all appurtenances
thereto and any and all easements and rights of ingress and egress) included in
the Acquired Assets, excluding the real property that are assets owned by the
York Haven Power Company and those related to the Forked River station (to which
the Company or any Subsidiary of the Company have rights pursuant to the
Sithe/GPU Agreements).
"reasonable efforts" means commercially reasonable efforts.
"Recipient" has the meaning as set forth in Section 6.4.6.1.
"Release" means release, spill, leak, discharge, dispose of, pump,
pour, emit, empty, inject, leach, dump or allow to escape into or through the
environment.
"Remediation" means action of any kind to address a Release or the
presence of Hazardous Substances at a Site or an off-Site location including,
without limitation, any or all of the following activities to the extent they
relate to or arise from the presence of a Hazardous Substance at a Site or an
off-Site location: (a) monitoring, investigation, assessment, treatment,
cleanup, containment, removal, mitigation, response or restoration work; (b)
obtaining any permits, consents, approvals or authorizations of any Governmental
Authority necessary to conduct any such activity; (c) preparing and implementing
any plans or studies for any such activity; (d) obtaining a written notice from
a Governmental Authority with jurisdiction over a
21
29
Site or an off-Site location under Environmental Laws that no material
additional work is required by such Governmental Authority; and (e) the use,
implementation, application, installation, operation or maintenance of removal
actions on a Site or an off-Site location, remedial technologies applied to the
surface or subsurface soils, excavation and off-Site treatment or disposal of
soils, systems for long term treatment of surface water or groundwater,
engineering controls or institutional controls, provided, that for purposes of
the foregoing, references to "off-Site" locations refer to such locations only
with respect to the period from November 24, 1999 to the Closing Date.
"Remediation Agreements" has the meaning as set forth in Section 6.14.
"RES" has the meaning as set forth in Section 6.18.
"Sellers" has the meaning as set forth in the first paragraph of this
Agreement.
"Sellers' Representatives" has the meaning as set forth in Section
6.5.5(a).
"Sellers' Trading Representatives" has the meaning as set forth in
Section 6.5.5(b).
"Senior Facility" means that certain Amended and Restated Senior
Secured Revolving Credit Agreement, dated as of December 19, 1997 and amended
and restated, among Sithe, certain Subsidiaries of Sithe, Bank of Montreal, as
agent, and the financial institutions party thereto, as amended, modified and
supplemented.
"Site" means, with respect to any generating facility included in the
Acquired Assets, the Real Property (including improvements) forming a part of,
or used or usable in connection with the operation of, such facility, including
any disposal sites included in the Real Property. Any reference to the Sites
shall include, by definition, the surface and subsurface elements, including
22
30
the soils and groundwater present at the Sites, and any reference to items "at
the Sites" shall include all items "at, on, in, upon, over, across, under and
within" the Site.
"Sithe" has the meaning set forth in the first paragraph of this
Agreement.
"Sithe/GPU Agreements" means, collectively (a) the Purchase and Sale
Agreement dated as of October 29, 1998, as amended by Amendments 1 through 9,
between Sithe and Jersey Central Power & Light Company, a New Jersey
corporation; (b) the Purchase and Sale Agreement dated as of October 29, 1998,
as amended by Amendments 1 through 9, between Sithe and Metropolitan Edison
Company, a Pennsylvania corporation; (c) the Purchase and Sale Agreement dated
as of October 29, 1998, as amended by Amendments 1 through 9, between Sithe and
Pennsylvania Electric Company, a Pennsylvania corporation; and (d) the Purchase
and Sale Agreement dated as of October 29, 1998, as amended by Amendments 1
through 9, among Jersey Central Power & Light Company, Metropolitan Edison
Company, GPU and Sithe; in each case together with the related documents,
instruments, agreements, including all closing statements, assignments, deeds,
Easement Agreements, assumptions, bills of sale and other transfer documents
executed or delivered in connection therewith.
"Sithe Mid-Atlantic" has the meaning as set forth in the Recitals.
"Sithe Power Marketing" shall mean Sithe Power Marketing, L.P.
"Subsidiary" of a Person means (i) any corporation, association or
other business entity of which 50% or more of the total voting power of shares
or other voting securities outstanding thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii) any partnership
or limited liability company (a) the sole general partner or the managing
general partner or managing
23
31
member of which is such Person or one or more of the other Subsidiaries of such
Person (or any combination thereof) or (b) the only general partners or members
of which are such Person or one or more of the other Subsidiaries of such Person
(or any combination thereof). For purposes of clarification, neither the
Keystone generation facility nor the Conemaugh generation facility shall be
deemed to be Subsidiaries of any Company.
"Target Date" means the 90th day after the date of this Agreement.
"Tax Audit" has the meaning as set forth in Section 6.4.6.1.
"Tax Item" has the meaning as set forth in Section 6.4.12.
"Taxes" mean all federal, state, local, foreign and other net income,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, lease, service, service use, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, windfall profits, fuel,
gas import, customs, duties or other taxes, fees, assessments or charges of any
kind whatsoever imposed by any governmental entity, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
and shall include all liability for the payment of any consolidated or combined
income taxes (including, without limitation, any United States federal
consolidated income tax liability) that is payable as a result of being a member
of, and which may be imposed upon, any affiliated group (as defined in Section
1504 (a) of the Code or other applicable law) of which any Taxpayer or Northeast
Management is a member, and the term "Tax" means any one of the foregoing Taxes.
"Taxpayer" means each Company and each Subsidiary of each Company other
than Northeast Management.
24
32
"Tax Returns" means all returns, declarations, reports, statements and
other documents required to be filed in respect of Taxes, and the term "Tax
Return" means any one of the foregoing Tax Returns.
"Terminated Obligations" means (i) all (a) existing letters of credit
set forth on Schedule 2.3 and any replacements thereof entered into in the
ordinary course of business or (b) letters of credit issued after the date of
this Agreement for the account of (1) any Company or any Subsidiary of any
Company and as to which Sithe or any of its Subsidiaries has any reimbursement
or other similar obligations or (2) Sithe or any of its Subsidiaries in
connection with the GPU Assets, Development Assets or Development Projects, in
case of clause (1) or (2), incurred in the ordinary course of business and
consistent with Good Operating Practices or with the consent of Buyer and (ii)
the bonds listed on Schedule 2.3 required by the State of Pennsylvania in
connection with permits or licenses issued for the generating facilities of any
Company and any Subsidiary of any Company in Pennsylvania.
"Third Party Claim" has the meaning as set forth in Section 12.2.1.
"Trading Contracts" has the meaning as set forth in Section 6.5.2(f).
"Unions" shall mean Local 459 of the International Brotherhood of
Electrical Workers, AFL-CIO ("IBEW"), Local 777 of the IBEW, and System Council
U-3 (consisting of Local Unions 327 and 1314) of the IBEW.
"WARN Act" has the meaning as set forth in Section 6.10.
Section 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
25
33
limitation." References to a Section, Article, Exhibit or Schedule shall mean a
Section, Article, Exhibit or Schedule of this Agreement, and reference to a
given agreement or instrument shall be a reference to that agreement or
instrument as modified, amended, supplemented and restated through the date as
of which such reference is made.
ARTICLE 2. PURCHASE AND SALE OF INTERCOMPANY NOTES, MID-
ATLANTIC STOCK AND LLC INTERESTS
Section 2.1 Purchase and Sale of Intercompany Notes, Mid-Atlantic Stock
and LLC Interests.
2.1.1 Transfer of Intercompany Notes, Mid-Atlantic Stock and LLC
Interests. Upon the terms and subject to the conditions set forth in Articles 7
and 8, on the Closing Date Genco shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase from Genco, the Intercompany Notes,
the Mid-Atlantic Stock and the LLC Interests.
2.1.2 Aggregate Purchase Price. The aggregate consideration
payable by Buyer to Genco for the transfer of the Intercompany Notes, the
Mid-Atlantic Stock and the LLC Interests pursuant to Section 2.1.1 shall be US$
2,100,000,000 (the "Fixed Purchase Price") plus the Adjustment Amount, which may
be a positive or negative number (the Adjustment Amount plus the Fixed Purchase
Price, the "Aggregate Purchase Price").
2.1.3 Allocation of Aggregate Purchase Price. Of the Aggregate
Purchase Price, an amount equal to the aggregate principal amount of, and
accrued and unpaid interest on, the Intercompany Notes shall be allocated to the
purchase of the Intercompany Notes; provided, that such amount shall in no event
exceed the Aggregate Purchase Price. The balance of the
26
34
Aggregate Purchase Price, if any, shall be allocated to the purchase of the
Mid-Atlantic Stock and the LLC Interests.
Section 2.2 Determination of Adjustment Amount and Preclosing Seller
Breach Amount.
2.2.1 At least 12 Business Days prior to the Closing Date, Buyer
shall prepare and deliver to the Sellers a statement (the "Preclosing Seller
Breach Amount Statement") which shall include an estimate of the Preclosing
Seller Breach Amount, if any, and a description in reasonable detail of (i) each
event or fact giving rise to the estimated damages included in such estimated
Preclosing Seller Breach Amount and (ii) Buyer's good faith calculation as to
the monetary value of the damages attributable to such event or fact, in
accordance with the definition of Preclosing Seller Breach Amount set forth in
this Agreement. At least ten (10) Business Days prior to the Closing Date, the
Sellers shall prepare and deliver to Buyer an estimated closing statement (the
"Estimated Closing Statement") that shall set forth the Sellers' best estimate
of the Adjustment Amount (the "Estimated Adjustment Amount"), if any, including
a calculation of such Estimated Adjustment Amount in reasonable detail, provided
that, solely for the purpose of establishing the Estimated Adjustment Amount,
the Preclosing Seller Breach Amount shall be deemed to be Buyer's estimate of
the Preclosing Seller Breach Amount included in the Preclosing Seller Breach
Amount Statement and any supplement thereto submitted by Buyer in accordance
with this Section 2.2 no later than three (3) Business Days prior to the Closing
Date. Solely for the purpose of establishing the amount of the Adjustment Amount
payable by Buyer to Genco at the Closing as part of the Aggregate Purchase
Price, the Estimated Adjustment Amount shall be deemed to be the Adjustment
Amount and Buyer shall
27
35
pay the Fixed Purchase Price plus the Estimated
Adjustment Amount to Genco at the Closing, subject to this Section 2.2.
2.2.2 At any time from the date on which Buyer shall have delivered the
Preclosing Seller Breach Amount Statement to the Sellers until the 30th day
after the Closing Date, the Sellers may object in writing to the estimated
Preclosing Seller Breach Amount or any other information included in the
Preclosing Seller Breach Amount Statement, which objection should include a
description, in reasonable detail, of the basis for such objection. If Sellers
so object, the parties shall attempt to resolve such dispute by negotiation. If
the parties are unable to resolve such dispute within ten (10) Business Days of
receipt by Buyer of any objection by the Sellers, such dispute shall be
submitted to final and binding arbitration before Jo Ao Mo S/ENDISPUTE, or its
successor, pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1 et
seq. Any party may commence the arbitration process called for in this Agreement
by filing a written demand for arbitration with Jo Ao Mo S/ENDISPUTE, with a
copy to the other parties. The arbitration will be conducted in accordance with
the provisions of Jo Ao Mo S/ENDISPUTE's Comprehensive Arbitration Rules and
Procedures in effect at the time of filing of the demand for arbitration. The
parties will cooperate with Jo Ao Mo S/ENDISPUTE and with one another in
selecting an arbitrator from Jo Ao Mo S/ENDISPUTE's panel of neutrals, and in
scheduling the arbitration proceedings. The arbitrator shall be instructed to
make a final determination with respect to the submitted dispute within sixty
(60) days of the date of the appointment. The arbitrator shall consider only the
alleged breaches described in the Preclosing Seller Breach Amount Statement and
in any supplement thereto submitted in writing by Buyer to the Sellers on or
prior to the Closing Date (which supplement, if any, shall contain the same type
28
36
of information required to be included in the Preclosing Seller Breach Amount
Statement with respect to any alleged breaches described in such supplement),
which breaches may only be with respect to the matters specified in the
definition of Preclosing Seller Breach Amount set forth in this Agreement. The
Sellers may object to any supplement provided by Buyer in writing prior to the
30th day after the Closing Date, which objection should include a description,
in reasonable detail, of the basis for any such objection. The arbitrator shall
determine the amount of damages, if any, that constitute the Preclosing Seller
Breach Amount in accordance with the definition of Preclosing Seller Breach
Amount set forth in this Agreement. In no event may the amount of the Preclosing
Seller Breach Amount exceed the estimate of the Preclosing Seller Breach Amount
included in the Preclosing Seller Breach Amount Statement and any supplement
thereto submitted by Buyer to the Sellers in accordance with this Section 2.2.2.
The final determination of the Preclosing Seller Breach Amount resulting from
such arbitration shall be final and binding on the parties hereto. The parties
covenant that they will participate in the arbitration in good faith. The
provisions of this Section 2.2.2 may be enforced by any court of competent
jurisdiction.
2.2.3 In the event that the Preclosing Seller Breach Amount as
determined pursuant to Section 2.2.2 (whether by arbitration or by settlement of
the parties after the Closing), if any, is less than the estimate of the
Preclosing Seller Breach Amount, if any, included in the Preclosing Seller
Breach Amount Statement and any supplement thereto submitted by Buyer to the
Sellers in accordance with Section 2.2.2, then Buyer shall pay to Genco, no
later than five (5) Business Days after such determination pursuant to Section
2.2.2, by wire transfer of immediately available funds to an account designated
by Genco, the amount
29
37
of such difference, plus interest on such amount from and
including the Closing Date to the date of payment at an annual rate of 18%. In
addition, in the event that the estimate of the Preclosing Seller Breach Amount,
if any, included in the Preclosing Seller Breach Amount Statement (and any
supplement thereto submitted by Buyer to the Sellers in accordance with Section
2.2.2) is more than 118% of the Preclosing Seller Breach Amount determined
pursuant to Section 2.2.2 (whether by arbitration or by settlement of the
parties after the Closing), then Buyer shall also include in such payment to
Genco the fees and expenses (including reasonable legal and accounting fees and
expenses) incurred by the Sellers in connection with the determination of the
Preclosing Seller Breach Amount pursuant to Section 2.2.2 (whether by
arbitration or by settlement of the parties after the Closing).
2.2.4 Within ninety (90) days following the Closing Date, the Sellers shall
prepare and deliver to Buyer a final closing statement (the "Post-Closing
Statement") that shall set forth the amount of the Adjustment Amount (other than
the Preclosing Seller Breach Amount). The Post-Closing Statement shall include
(i) the Opening Balance Sheet, expanded to include financial statement
footnotes, and (ii) the Closing Balance Sheet. The Sellers shall provide Buyer
and Buyer's independent auditors with copies of, or access to, records and other
information that Buyer may reasonably request with respect to the information
set forth on the Post-Closing Statement (other than the Preclosing Seller Breach
Amount). For purposes of the Post-Closing Statement, the values of fuel
inventories and materials and supplies inventories on the Closing Balance Sheet
will be determined after physical inventory observations, performed in
accordance with normal and customary industry practices, performed on or about
the Closing
30
38
Date, at Buyer's cost, utilizing inventory valuation methods consistent with
those used on the Opening Balance Sheet.
2.2.5. Within thirty (30) days following the delivery of the
Post-Closing Statement by the Sellers to Buyer, Buyer may object to the
Adjustment Amount (other than the Preclosing Seller Breach Amount) in writing.
If Buyer so objects to the Adjustment Amount, 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 Buyer, the parties shall
appoint the Independent Accounting Firm, and shall instruct such firm, at
Sithe's and Buyer's joint expense, to review the calculation of the Adjustment
Amount (other than the Preclosing Seller Breach Amount) and determine the
appropriate amount of the Adjustment Amount (other than the Preclosing Seller
Breach Amount), in accordance with this Agreement, 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 parties hereto.
2.2.6 Upon final determination of the Adjustment Amount (other than the
Preclosing Seller Breach Amount) pursuant to Section 2.2.5, whether by agreement
of the parties or as otherwise provided above, and regardless of whether the
Preclosing Seller Breach Amount has been finally determined, (a) if the
Adjustment Amount (assuming for this purpose that Preclosing Seller Breach
Amount is zero) is more than the Estimated Adjustment Amount (assuming for this
purpose that Preclosing Seller Breach Amount is zero), Buyer shall pay such
difference to Genco and (b) if the Adjustment Amount (assuming for this purpose
that Preclosing
31
39
Seller Breach Amount is zero) is less than the Estimated Adjustment Amount
(assuming for this purpose that Preclosing Seller Breach Amount is zero), Genco
shall pay such difference to Buyer, in either case, no later than five (5)
Business Days after such determination, by wire transfer of immediately
available funds to an account designated by the payee.
2.2.7 Notwithstanding anything else in this Agreement to the
contrary, (a) in no event shall the Closing Balance Sheet or the calculation of
Net Working Capital include any accrual, reserve or liability with respect to
any matter included in the Preclosing Seller Breach Amount in excess of the
accrual, reserve or liability with respect thereto included in the Opening
Balance Sheet, (b) in no event shall any accrual, reserve or liability be
included on the Closing Balance Sheet or in the calculation of Net Working
Capital with respect to any matter disclosed in Section 3.2, 3.3, 3.6, 3.7, 3.8,
3.11, 3.12, 3.13, 3.14, 3.15, 3.17, 3.18, 3.19, 3.20 or 3.21, including any
disclosure schedule relating to any of the foregoing Sections (except (i) to the
extent that an accrual, reserve or liability with respect to such matter was
included on the Opening Balance Sheet, in which case no adjustment shall be made
to such accrual, reserve or liability for purposes of the Closing Balance Sheet
and (ii) for accruals for third party trade payables and accrued expenses
incurred in the ordinary course of business through the Closing Date) and (c)
there shall be no accrual, reserve or liability on the Closing Balance Sheet or
in the calculation of Net Working Capital with respect to any event or matter
which gave rise to or was part of a Material Adverse Effect.
Section 2.3 Terminated Obligations.
On the Closing Date, in addition to paying the Fixed Purchase
Price and the Estimated Adjustment Amount to the Sellers, Buyer shall provide
evidence of the delivery of
32
40
substitute letters of credit or other security for each of the Terminated
Obligations in form and substance satisfactory to the beneficiary of each such
Terminated Obligation and use reasonable efforts to deliver to the Sellers
releases with respect to all Terminated Obligations as soon as reasonably
practicable. If Buyer is unable to effect any such substitution on or prior to
the Closing Date, Buyer will also indemnify and hold harmless each Seller from
and against any liabilities, claims, demands, judgments, losses, costs, damages
or expenses from and after the Closing Date that such Seller may sustain, suffer
or incur and that result from or arise out of or relate to that Terminated
Obligation until such time as substitutions of all such Terminated Obligations
are effected and releases thereto have been obtained; provided that Buyer shall
continue to use reasonable efforts to effect such substitution at all times
after the Closing Date with respect to the Terminated Obligations until such
time when the substitution of all Terminated Obligations has been effected. The
Sellers shall cooperate with and use reasonable efforts to assist Buyer in
obtaining any such releases; provided that none of the Companies, any Subsidiary
of any Company, any Seller or any Affiliate of any Seller shall be obligated to
seek any waiver or consent from any issuer of any Terminated Obligation; and
provided further, that the failure of either Seller to perform its obligations
in this Section shall not constitute an event that would, by itself, give rise
to any claim by Buyer or right of Buyer to terminate this Agreement.
Section 2.4 Senior Credit Facility and BECO
Facility. On or prior to the Closing Date, the Sellers shall, with respect to
each of the Senior Credit Facility and the BECO Facility, either (i) obtain
consent of the lenders under such facility to the consummation of the
transactions contemplated by this Agreement or (ii) discharge all outstanding
obligations of the
33
41
Sellers and their Affiliates under such facility. If the Sellers elect to follow
clause (ii), the Sellers and Buyer shall cooperate with one another to arrange
mutually satisfactory arrangements for the payment of the Aggregate Purchase
Price to assure that the outstanding obligations referred to in such clause (ii)
are discharged.
Section 2.5 Allocation of Aggregate Purchase Price. For United States
federal and applicable state income tax purposes, the Aggregate Purchase Price
and all other capitalized costs shall be allocated among the Mid-Atlantic Stock
and the assets of the other Companies and their Subsidiaries. In connection
therewith, Buyer shall prepare and submit to the Sellers a proposed allocation
of the Aggregate Purchase Price and all other capitalized costs among the
Mid-Atlantic Stock and the assets of the other Companies and their Subsidiaries
as soon as reasonably practicable after the Closing. Sellers shall approve and
agree to the proposed allocation unless Sellers reasonably determine that the
proposed allocation is improper. Each of Buyer and each of the Sellers agrees to
file Internal Revenue Service Form 8594, and all federal, state, local and
foreign tax returns, in a manner consistent with any such agreed upon
allocation. Each of Buyer and each of the Sellers agrees to provide the others
promptly with any information required to complete Form 8594. Buyer and the
Sellers shall notify and provide the others with reasonable assistance in the
event of an examination, audit or other proceeding regarding any allocation of
the Aggregate Purchase Price agreed to pursuant to this Section 2.5.
34
42
ARTICLE 3. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANIES
Except as otherwise disclosed in this Agreement, or in any Schedule,
Sithe hereby represents and warrants to Buyer, as of the date hereof (except
where such representation or warranty is expressly made as of another specific
date), as follows:
Section 3.1 Organization, Qualification and Power.
3.1.1 Sithe Mid-Atlantic is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and is duly licensed or qualified to transact business as a foreign corporation
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification, except where the failure to be so licensed or qualified would not
have, individually or in the aggregate, a Material Adverse Effect. Each Company
other than Sithe Mid-Atlantic is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly licensed or qualified to transact business as a foreign business
entity in each jurisdiction in which the nature of the business transacted by it
or the character of the properties owned or leased by it requires such licensing
or qualification, except where the failure to be so licensed or qualified would
not have, individually or in the aggregate, a Material Adverse Effect. Each
Company has full power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as now conducted.
3.1.2 Each Subsidiary of any Company that is a corporation is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and each Subsidiary of any Company that is a
partnership or limited liability company is duly
35
43
formed, validly existing and in good standing under the laws of the jurisdiction
of its organization. Each Subsidiary of any Company is duly licensed or
qualified to transact business as a foreign corporation, limited liability
company or partnership, as applicable, in each jurisdiction in which the nature
of the business transacted by it or the character of the properties owned or
leased by it requires such licensing or qualification, except where the failure
to be so licensed or qualified would not, individually or in the aggregate, have
a Material Adverse Effect. Each Subsidiary of any Company has the requisite
corporate or organizational power and authority to own, lease or otherwise hold
its properties and assets and to carry on its business as now conducted.
Section 3.2 Condemnation. Except as set forth in Schedule 3.2 and
except as would not, individually or in the aggregate, have a Material Adverse
Effect, none of the Companies and none of their Subsidiaries has received any
written notices of, and Sithe has no knowledge of, any pending or threatened
proceedings or governmental actions to condemn or take by power of eminent
domain all or any part of the Real Property and there have been no casualties or
condemnation proceedings relating to the Acquired Assets since November 24,
1999.
Section 3.3 No Conflict. Except as set forth in Schedule 3.3, the execution,
delivery and performance by the Sellers of this Agreement and the consummation
by the Sellers of the transactions contemplated hereby will not (i) violate,
conflict with or result in a breach of any provisions of the Charter Documents
of any Company or any Subsidiary of any Company, (ii) violate any law,
regulation, order, judgment or decree applicable to any Company or any
Subsidiary of any Company, or any order of any Governmental Authority having
jurisdiction over any Company or any Subsidiary of any Company, (iii) violate or
conflict with, or constitute
36
44
(with due notice or lapse of time or both) a default (or give rise to any right
of termination, consent, cancellation or acceleration) under (a) any Contract
(other than the Project Office Contracts) to which any Company or any Subsidiary
of any Company is a party or (b) any Contract (other than the Project Office
Contracts) to which Sithe or any Affiliate of Sithe is a party that constitutes
a part of the Acquired Assets or (iv) result in the creation or imposition of
any Lien on the Acquired Assets or, to Sithe's knowledge, violate or conflict
with, or constitute (with due notice or lapse of time or both) a default or give
rise to any right of termination, consent, cancellation or acceleration under
any Project Office Contract), except, in the case of clauses (ii), (iii) and
(iv), as would not, individually or in the aggregate, have a Material Adverse
Effect.
Section 3.4 Equity Interests.
3.4.1 Subsidiaries. The authorized, issued and outstanding
capital stock of Sithe Mid-Atlantic and each Subsidiary of each Company that is
a corporation are as set forth in Schedule 3.4. The limited liability company
interests, partnership interests or equity securities of each Company and each
Subsidiary of each Company that is not a corporation are as set forth in
Schedule 3.4. The stockholders of record of each Subsidiary of each Company that
is a corporation, and the owner or owners of each Subsidiary of each Company
that is not a corporation, are as set forth in Schedule 3.4. There is no
authorized or outstanding subscription, warrant, option, convertible security or
other right (contingent or otherwise) to purchase or otherwise acquire from any
Company or from any Subsidiary of any Company equity interests or partnership
interests of any Company or any Subsidiary of any Company. There is no
commitment on the part of any Company or any Subsidiary of any Company to issue
shares,
37
45
subscriptions, warrants, options, convertible securities, partnership interests
or other similar rights. No equity securities of any Company or any Subsidiary
of any Company are reserved for issuance for any such purpose. Neither any
Company nor any Subsidiary of any Company has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities. Except for this Agreement and except for the limited liability
company operating agreements of the Companies and their Subsidiaries (other than
Sithe Mid-Atlantic and Northeast Management), there is no voting trust or
agreement, stockholders agreement, pledge agreement, buy-sell agreement, right
of first refusal, preemptive right or proxy relating to any equity securities of
any Company or any equity securities or partnership interests of any Subsidiary
of any Company.
3.4.2 Duly Authorized Shares. All of the shares of Mid-Atlantic
Stock and all of the issued and outstanding shares of capital stock of Northeast
Management have been or at the Closing will be duly authorized, validly issued,
fully paid and non-assessable.
3.4.3 Other Equity Interests. Set forth on Schedule 3.4 is (i) a
list of each Person (other than any Company or any Subsidiary of any Company) in
which either any Company or any Subsidiary of any Company (A) has any direct or
indirect equity or other participation in, or (B) has any right (contingent or
otherwise) to acquire the same, and (ii) a description of the nature and amount
of each interest required to be set forth pursuant to clause (i). With respect
to such interests, either a Company or a Subsidiary of a Company owns, of record
and beneficially, the interests set forth opposite the name of the Company or
the Subsidiary, as the case may be, free and clear of any Liens. On the Closing
Date, upon consummation of the transactions contemplated hereby, either a
Company or a Subsidiary of a
38
46
Company will own such interests free and clear of any Liens, except for any
Liens created by or at the behest of Buyer.
3.4.4 Activities of the Companies. Each of the Companies was
formed for the purpose of acquiring, owning, developing and operating the
Acquired Assets, and no such Company is currently engaged or in the past has
engaged in any activity since the date of its formation other than in connection
with the ownership, operation and development of the Acquired Assets. No
Subsidiary of any Company which Subsidiary is a limited liability company has
conducted any material business activities since the date of its formation,
other than the ownership, operation and development of the Acquired Assets, and
Northeast Management has not conducted any material business activities since
November 24, 1999, other than the ownership, operation and development of the
Acquired Assets. None of the Companies and none of the Subsidiaries of the
Companies has any Funded Debt.
Section 3.5 Financial Statements. Attached as Schedule 3.5 are
(i) an unaudited combining balance sheet of the Companies and their Subsidiaries
at November 24, 1999 (the "Opening Balance Sheet") and (ii) an unaudited
combining balance sheet of the Companies and their Subsidiaries at December 31,
1999 (the "December Balance Sheet") and the related combining unaudited
statements of income and cash flows of the Companies and their Subsidiaries for
the period from November 24, 1999 to December 31, 1999 (such statements
specified in clause (i) and (ii) collectively, the "Financial Statements").
Within 45 days after the date hereof (or, if such 45th day is not a Business
Day, the next Business Day thereafter), the Sellers shall deliver to Buyer a
supplement to Schedule 3.5 which shall (i) include a balance sheet analysis with
respect to each of the Financial Statements and (ii) set forth the components
39
47
of each balance sheet line item (including the GPU Post Closing Amounts, the
liabilities related to the capacity payments payable under the transportation
contract between Pennsylvania Power & Light Company, Interstate Energy Company
and Jersey Central Power and Light Company for the Gilbert Station, long-term
receivables from joint owners, reserves for environmental obligations accrued,
the balance in any intercompany account with respect to fuel on the Opening
Balance Sheet only, and other reconciling items). Within 45 days after the date
hereof (or, if such 45th day is not a Business Day, the next Business Day
thereafter), the Sellers shall also provide Buyer with an analysis of the fuel
inventory at December 31, 1999, owned by Sithe Power Marketing with respect to
the Acquired Assets. The Financial Statements have been prepared in accordance
with GAAP and fairly present the financial condition, on a combined and
individual basis, of the Companies and their Subsidiaries as of the dates
thereof and the results of their operations, on a combined and individual basis,
for the period covered thereby, except as set forth on Schedule 3.5 and except
for the absence of financial statement footnotes and subject to normal recurring
period-end adjustments. Neither any Company nor any Subsidiary of any Company
has any liability or obligation (whether accrued, absolute, contingent or
otherwise), other than (i) liabilities reflected (but only to the extent so
reflected) or reserved against on the Opening Balance Sheet or the December
Balance Sheet, (ii) the GPU Liabilities, (iii) liabilities or obligations (other
than Funded Debt) that have arisen since November 24, 1999 (with respect to the
Opening Balance Sheet) or December 31, 1999 (with respect to the December
Balance Sheet) in the ordinary course of business, none of which, individually
or in the aggregate, would have a Material Adverse Effect, (iv) liabilities or
obligations explicitly disclosed herein or in any
40
48
Schedule, or (v) liabilities or obligations (other than Funded Debt) incurred in
accordance with the terms of this Agreement or any Contract listed on Schedule
3.8.
Section 3.6 Litigation; Compliance with Law; Permits.
3.6.1 Schedule 3.6 lists each action, suit, claim or proceeding
(including, but not limited to, any arbitration proceeding) pending or, to
Sithe's knowledge, threatened, and each investigation which, to Sithe's
knowledge, is pending or threatened, against any Company or any Subsidiary of
any Company or Sithe or any Affiliate of Sithe, at law or in equity, or before
or by any Governmental Authority that relates to (a) any Company or any
Subsidiary of any Company or (b) any Acquired Assets, which (in the case of (a)
or (b) above), if determined adversely to any Company or any Subsidiary of any
Company or Sithe or any Affiliate of Sithe, would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. For purposes
of the preceding sentence, no representation is made with respect to (i) any
proceeding before any Governmental Authority initiated by any Company or any
Subsidiary of any Company in which any Company or any such Subsidiary of any
Company is an applicant for any Permit or Environmental Permit, to the extent
the matters considered in such proceeding are limited to the approval or
authority requested in such application, or (ii) proceedings initiated by a
third party in which any Company or any Subsidiary of any Company is an
intervener, and the subject matter of such intervention is of general
applicability to similarly-situated parties. Neither any Company nor any
Subsidiary of any Company is in default with respect to any order, writ,
injunction or decree known to or served upon such entity of any Governmental
Authority except for defaults which would not have, individually or in the
aggregate, a Material Adverse Effect.
41
49
3.6.2 Except as set forth on Schedule 3.6, the Sellers and their
Affiliates controlled by them, including each Company and each Subsidiary of
each Company, are in compliance with all laws, rules, regulations and orders
applicable to the business and operations of the Acquired Assets and the
business of the Companies and their Subsidiaries (other than labor laws, which
are addressed in Section 3.11, and other than Environmental Laws, which are
addressed in Section 3.17), except where the failure to so comply would not
have, individually or in the aggregate, a Material Adverse Effect.
3.6.3 Except as set forth on Schedule 3.6, each Company and each
Subsidiary of each Company has all Permits and Environmental Permits necessary
to own, lease or otherwise hold its properties and assets and to conduct its
business as currently conducted, except where the failure to obtain the same
would not have, individually or in the aggregate, a Material Adverse Effect.
Except as disclosed on Schedule 3.6, neither any Company nor any Subsidiary of
any Company has received any notification that it is in violation of any such
Permits and Environmental Permits except notifications of violations which would
not have, individually or in the aggregate, a Material Adverse Effect. Each
Company and each Subsidiary of each Company is in compliance with all such
Permits and Environmental Permits except where non-compliance would not have,
individually or in the aggregate, a Material Adverse Effect.
Section 3.7 Tax Matters.
3.7.1 There have been properly completed and filed on a timely
basis and in correct form all Tax Returns required to be filed (i) on or prior
to the date hereof by any Taxpayer and (ii) after November 24, 1999 and on or
prior to the date hereof (and, to Sithe's knowledge on or prior to November 24,
1999), by Northeast Management. As of the time of
42
50
filing, the foregoing Tax Returns of any Taxpayer and, to Sithe's knowledge, of
Northeast Management, were true and complete in all material respects.
3.7.2 Except as would not, individually or in the aggregate, have
a Material Adverse Effect, with respect to all amounts in respect of Taxes (i)
imposed on any Taxpayer with respect to all taxable periods or portions of
periods ending on or before the Closing Date and (ii) imposed on Northeast
Management with respect to all taxable periods or portions of periods beginning
after November 24, 1999 and ending on or before the Closing Date (and, to
Sithe's knowledge, with respect to all taxable periods or portions of periods
beginning on or before November 24, 1999 and ending on or before November 24,
1999), (a) all applicable Tax laws and regulations have been complied with in
all respects and (b) all such amounts required to be paid to taxing authorities
or others on or before the date hereof have been paid, except such Taxes, if
any, as are set forth in Schedule 3.7 that are being contested in good faith.
3.7.3 Except as set forth in Schedule 3.7 , no adjustments to the
Tax liability of any Taxpayer have been proposed in writing (and are currently
pending) by any taxing authority in connection with any Tax Return of any
Taxpayer, except for adjustments that would not have a Material Adverse Effect.
All deficiencies asserted or assessments made as a result of any examinations
have been fully paid, or are fully reflected as a liability in the financial
statements of the applicable Taxpayer, or are being contested in good faith and
are described in Schedule 3.7 except for deficiencies or assessments that would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
set forth on Schedule 3.7, with respect to all taxable periods or portions of
periods beginning after November 24, 1999 (and, to Sithe's knowledge, with
respect to all taxable periods or portions of periods beginning before November
24, 1999 and
43
51
ending on or before November 24, 1999) no adjustments to the Tax liability of
Northeast Management have been proposed in writing (and are currently pending)
by any taxing authority in connection with any Tax Return of Northeast
Management, except for adjustments that would not have a Material Adverse
Effect. To Sithe's knowledge, all material deficiencies asserted or assessments
made as a result of any examination have been fully paid or are fully reflected
as a liability in the financial statements of Northeast Management, or are being
contested in good faith and are described in Schedule 3.7.
3.7.4 Except as set forth on Schedule 3.7, there are no liens for
Taxes (other than for current Taxes not yet due and payable) on any of the
assets of any Company or any Subsidiary of any Company.
3.7.5 Each of the Companies (other than Sithe Mid-Atlantic) and
each Subsidiary of each Company (other than Northeast Management) is properly
treated as a disregarded entity for federal income tax purposes.
3.7.6 No property owned by any Company or any Subsidiary of any
Company (i) is property required to be treated as being owned by another Person
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of
1954, as amended and in effect immediately prior to the enactment of the Tax
Reform Act of 1986, (ii) constitutes "tax-exempt use property" within the
meaning of Section 168(h)(1) of the Code or (iii) except for pollution control
facilities financed with the proceeds of Pollution Control Revenue Bonds (as
described in Section 6.8 of this Agreement), is "tax-exempt bond financed
property" within the meaning of Section 168(g) of the Code.
44
52
3.7.7 Genco is not a foreign person within the meaning of Section
1445 of the Code.
3.7.8 Genco and each of Sithe Mid-Atlantic and Northeast
Management are members of a "selling consolidated group" as such term is defined
in Treasury Regulation Section 1.338(h)(10)-1(c).
3.7.9 Except as set forth on Schedule 3.7 and other than the
Sithe/GPU Agreements and except as would not, individually or in the aggregate,
have a Material Adverse Effect, (i) no Company and no Subsidiary of any Company
other than Northeast Management is a party to, is bound by or has any
obligations under any Tax sharing agreement, any Tax indemnification agreement
or similar contract or arrangement and (ii) to Sithe's knowledge, Northeast
Management is not a party to, is not bound by and has no obligation under any
Tax sharing agreement, any Tax indemnification agreement or similar contract or
arrangement.
3.7.10 Except as set forth on Schedule 3.7, no tax audits or
other administrative proceedings or court proceedings are presently pending with
regard to any Taxes for which any Company or any Subsidiary of any Company would
be liable except for audits or proceedings which would not have a Material
Adverse Effect.
3.7.11 Except as would not have, individually or in the
aggregate, a Material Adverse Effect, no Company and no Subsidiary of any
Company has executed or entered into (or prior to the close of business on the
Closing Date will execute or enter into) with any taxing authority (i) any
agreement, waiver or other document extending or having the effect of extending
or waiving the period for assessments or collection of any Taxes for which any
Company or any Subsidiary of any Company would or could be liable or (ii) any
closing
45
53
agreement pursuant to Section 7121 of the Code, or any predecessor provision
thereof or any similar provision of state, local or foreign tax law that relates
to the assets or operations of any Company or any Subsidiary of any Company.
3.7.12 Except as would not have, individually or in the
aggregate, a Material Adverse Effect, no Company and no Subsidiary of any
Company has made any payments, is obligated to make any payments, or is a party
to any agreement or other arrangement that could obligate it to make any
payments that would not be deductible under Section 280G of the Code.
3.7.13 Except as would not have, individually or in the
aggregate, a Material Adverse Effect, each Company and each Subsidiary of each
Company has collected and withheld all Taxes that it has been required to
collect or withhold and has timely submitted all such collected and withheld
Taxes to the appropriate authorities. Each Company and each Subsidiary of each
Company has complied and is in compliance with all applicable laws, rules and
regulations relating to the payment, withholding and information reporting
requirements relating to any Taxes required to be collected or withheld.
3.7.14 Neither Sithe Mid-Atlantic nor Northeast Management has
made an election or filed a consent under Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by
such entity.
3.7.15 No claim has ever been made by an authority in a
jurisdiction where any Company or any Subsidiary of any Company does not or has
not filed tax returns that such Company or such Subsidiary of any Company is or
may be subject to taxation by that jurisdiction.
46
54
Section 3.8 Material Contracts. The Contracts listed in Schedule
3.8 include all of the Material Contracts and certain other Contracts that are
listed for the information of Buyer; provided, however, that no Contract shall
be deemed a Material Contract solely by reason of the fact that it is listed on
Schedule 3.8. Except as otherwise set forth in Schedule 3.8: (i) each Contract
listed on Schedule 3.8 and, to Sithe's knowledge, each Project Office Contract,
is valid, binding and in full force and effect, and is enforceable by a Company
or a Subsidiary of a Company, as applicable, in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
relating to creditors' rights generally, and general equitable principles
(whether considered in a proceeding in equity or at law), except those Contracts
which have expired or been terminated in the ordinary course of business or in
accordance with Good Operating Practices, and except as would not, individually
or in the aggregate, have a Material Adverse Effect, (ii) each Company and each
Subsidiary of a Company that is a party to a Contract listed in Schedule 3.8 has
performed in all material respects the obligations required to be performed by
it to date under such Contract, except for such failure or failures to perform
which would not, individually or in the aggregate, have a Material Adverse
Effect and, to Sithe's knowledge, each Company and each Subsidiary of a Company
that is a party to a Project Office Contract has performed in all respects the
obligations required to be performed by it to date under such Project Office
Contract, except for such failure or failures to perform which would not
individually or in the aggregate, have a Material Adverse Effect, (iii) there is
not, under any Contract listed on Schedule 3.8, or, to Sithe's knowledge, under
any Project Office Contract any default or event which, with notice or lapse of
time or both, would constitute a default on the part of any
47
55
Company or any Subsidiary of any Company and neither any Company nor any
Subsidiary of any Company has received any notice of default, notice of force
majeure or notice of other suspension of performance or notice exercising a
right of renegotiation under any such Contract to which it is a party, except as
would not have, individually or in the aggregate, a Material Adverse Effect; and
(iv) none of the Companies or their Subsidiaries is seeking the renegotiation or
substitute performance of any Contract listed Schedule 3.8, or to Sithe's
knowledge, any Project Office Contract, except as would not have, individually
or in the aggregate, a Material Adverse Effect. For purposes of this Section
3.8, the term "Contract listed on Schedule 3.8" shall not include any Project
Office Contract.
Section 3.9 Capital Expenditures. Except as set forth in Schedule 3.9,
as of the date of this Agreement, there are no capital expenditures that are
planned by any Company or any Subsidiaries of any Company through December 31,
2000.
Section 3.10 Brokers. None of the Sellers, any Company or any
Subsidiary or Affiliate of any Company has any contract, arrangement or
understanding with any investment banking firm, broker or finder with respect to
the transactions contemplated by this Agreement, except for Goldman, Sachs &
Co., whose fees shall be borne by the Sellers.
Section 3.11 Labor Matters. The Sellers have delivered to Buyer true
and correct copies of the agreements listed on Schedule 3.11 (the "Collective
Bargaining Agreements"). The Collective Bargaining Agreements constitute all
collective bargaining agreements to which any Seller, any Company or any
Subsidiary of any Company is a party or is subject and that relate to the
business and operations of any Company or any Subsidiary of any Company. Other
than as set forth in Schedule 3.11, the applicable Company or the applicable
Subsidiary of any Company
48
56
(a) is in compliance with all applicable laws and regulations regarding
employment and employment practices, terms and conditions of employment, and
wages and hours; (b) has not received written notice of any. unfair labor
practice complaint against it pending before the National Labor Relations Board;
(c) has no arbitration proceeding pending against it that arises out of or under
any collective bargaining agreement that relates to the business or operations
of any Company or any Subsidiary of any Company, and (d) is not currently
experiencing, and has received no current threat of, any work stoppage, in each
case, except as would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 3.12 ERISA.
3.12.1 Schedule 3.12 lists all Employee Benefit Plans and
Benefit Arrangements that are sponsored or contributed to by Sithe, any Company
or any Subsidiary of any Company covering the employees or former employees of
any Company or any Subsidiary of any Company ("Benefit Plans"). With respect to
each Benefit Plan, each Company and each Subsidiary of each Company has made
available to Buyer a true and correct copy of each of the following, as
applicable:
3.12.1.1 the current plan document (including all
amendments adopted since the most recent restatement) and its most recently
prepared summary plan description and all summaries of material modifications
prepared since the most recent summary plan description, and all material
employee communications relating to such plan;
3.12.1.2 a written description of any Benefit Plan for
which no plan document exists;
49
57
3.12.1.3 annual reports or Code Section 6039D
information returns (IRS Form 5500 Series), including financial statements, if
applicable, for the last three years;
3.12.1.4 all contracts relating to any Benefit Plan with
respect to which any Company or any Subsidiary of any Company has any liability,
without limitation, each related trust agreement, insurance contract, service
provider contract, subscription or participation agreement, or investment
management agreement (including all amendments to each such document);
3.12.1.5 the most recent IRS determination letter or
other opinion letter with respect to the qualified status under Code Section
401(a) of any Benefit Plan intended to satisfy the qualification requirements of
Code Section 401(a); and
3.12.1.6 actuarial reports or valuations for the last
three years.
3.12.2 To Sithe's knowledge, except as set forth in Schedule
3.12 and except as would not have, individually or in the aggregate, a Material
Adverse Effect, all Benefit Plans subject to ERISA and the Code covering
employees or former employees of any Company or any Subsidiary of any Company
comply with ERISA and the Code.
3.12.3 Except as set forth in Schedule 3.12, all Employee
Benefit Plans intended to be qualified under Code Section 401 maintained by any
Company or any Subsidiary of any Company have received favorable determinations
with respect to such qualified status from the Internal Revenue Service or will
be amended as requested by the Internal Revenue Service within the remedial
amendment period prescribed under Section 401(b) of the Code so as to
50
58
obtain such favorable determination. Except as set forth in Schedule 3.12, to
Sithe's knowledge, nothing has occurred in the operation of any such plan that
would adversely affect its qualification under Section 401(a) of the Code.
3.12.4 None of the Companies, any Subsidiaries of any Company
or their respective ERISA Affiliates currently sponsors, contributes to or has
any obligation to contribute to any voluntary employees' beneficiary
association, as defined in Section 501(c)(9) of the Code.
3.12.5 No Employee Benefit Plan that is subject to Title IV of
ERISA and is sponsored by any Company or any Subsidiary of any Company or their
respective ERISA Affiliates has (i) incurred an accumulated funding deficiency,
whether or nor waived, within the meaning of Section 412 of the Code or Section
302 of ERISA, or (ii) been a plan with respect to which a reportable event, as
defined in Section 4043 of ERISA, to the extent that the reporting of such event
to the Pension Benefit Guaranty Corporation has not been waived, has occurred
and is continuing, or will occur as a result of the consummation of the
transactions contemplated by this Agreement. Except as set forth in Schedule
3.12, neither any Company nor any Subsidiary of any Company, nor any of their
respective ERISA Affiliates, has incurred any liability under Section 4062(b) of
ERISA or to the Pension Benefit Guaranty Corporation in connection with any
Benefit Plan which is subject to Title IV of ERISA or any withdrawal liability
with respect to any Benefit Plan, within the meaning of Section 4201 of ERISA.
3.12.6 Neither any Company nor any Subsidiary of any Company or
their respective ERISA Affiliates sponsors or has previously sponsored,
maintained, contributed to or incurred an obligation to contribute to any
Multiemployer Plan.
51
59
3.12.7 Except as set forth in Schedule 3.12, to Sithe's
knowledge, no Person has engaged in or been a party to a transaction that is
prohibited under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA, respectively, in
relation to any of the Employee Benefit Plans covering employees or former
employees of any Company or any Subsidiary of any Company.
3.12.8 Except as set forth in Schedule 3.12 or as specifically
provided in Sithe/GPU Agreements or the Collective Bargaining Agreements, as of
the date hereof, no employee or former employee of any Company or any Subsidiary
of any Company shall accrue or receive additional benefits, service or
accelerated rights to payment of benefits under any Benefit Plan or become
entitled to severance, termination allowance or similar payments as a result of
the transactions contemplated by this Agreement.
3.12.9 Except as set forth in Schedule 3.12 and other than
claims for benefits in the ordinary course, there is no material claim pending,
or, to Sithe's knowledge, threatened, involving any Benefit Plan by any Person
against such Benefit Plan. No Benefit Plan is subject to ongoing audit or other
administrative proceeding of the IRS, the Department of Labor or any other
governmental agency, and no Benefit Plan is the subject of any pending
application for administrative relief under any voluntary compliance program of
the IRS, the Department of Labor or any other governmental entity.
3.12.10 Except as set forth in Schedule 3.12, each Company and
each Subsidiary of each Company has made full and timely payment of all amounts
required to be contributed under the terms of each Benefit Plan.
52
60
3.12.11 Except as set forth in Schedule 3.12, no Benefit Plan
provides for the continuation of medical or health benefits or death benefits
after an employee's termination of employment (including retirement) except for
continuation coverage required pursuant to Section 4980B of the Code and Part 6
of Title I of ERISA and the regulations thereunder.
3.12.12 Except as set forth in Schedule 3.12, or as
specifically provided in the Sithe/GPU Agreements or a Collective Bargaining
Agreement, neither any Company nor any Subsidiary of any Company is subject to
any legal obligation to enter into any new form of compensation or employment
agreement or to establish any new Employee Benefit Plan or benefit program of
any nature, including (without limitation) any stock option, stock or cash
award, non-qualified deferred compensation or executive compensation plan or
policy or to modify or change any existing Benefit Plan. Except as set forth in
Schedule 3.12, or as specifically provided in the Sithe/GPU Agreements or a
Collective Bargaining Agreement, each Company and/or each Subsidiary of each
Company has the right to, in any manner, and without the consent of any
employee, beneficiary or dependent, employees' organization or other person,
terminate, modify or amend any Employee Benefit Plan (or their participation in
any such new Employee Benefit Plan) at any time sponsored, maintained or
contributed to by any Company or any Subsidiary of any Company, effective as of
any date before, on or after the Closing Date except to the extent that any
retroactive amendment would be prohibited by Section 204(g) of ERISA or would
adversely affect a vested accrued benefit or a previously granted award under
any such plan not subject to Section 204(g) of ERISA.
Section 3.13 Events Subsequent to November 24, 1999. Except (a) as set
forth in Schedule 3.13, (b) as specifically provided for by this Agreement or
consented to or approved in
53
61
writing by Buyer or (c) for transactions between or among any Company and any
other Company and/or one or more of the Subsidiaries of any Company or between
or among Subsidiaries of any Company, since November 24, 1999 neither any
Company nor any Subsidiary of any Company, has:
3.13.1 incurred or guaranteed any Funded Debt;
3.13.2 acquired or disposed of, in either case in any manner,
any Acquired Assets or properties, other than (i) acquisitions and dispositions
in the ordinary course of business consistent with Good Operating Practices,
(ii) dispositions of obsolete assets, (iii) acquisitions and dispositions in
connection with property losses fully covered by insurance, (iv) acquisitions
and dispositions in the ordinary course of business in accordance with any
Contract listed on Schedule 3.8 or (v) distributions or other payments of Cash
Equivalents to any Seller or any Affiliate of any Seller;
3.13.3 amended its Charter Documents other than amendments to
remove the name "Sithe" from the name of any Company or Subsidiary of any
Company;
3.13.4 failed to pay and discharge on a timely basis any
liabilities which constitute current liabilities under GAAP, except for (i)
liabilities not yet due, (ii) liabilities which are subject to good faith
contest for which appropriate reserves have been established or (iii)
liabilities for which the failure to pay would not, individually or in the
aggregate, have a Material Adverse Effect;
3.13.5 cancelled any indebtedness owed to any Company or any
Subsidiary of any Company or waived any rights of substantial value to any
Company or any Subsidiary of any
54
62
Company, except for any such cancellations or waivers of intercompany
indebtedness or which, individually or in the aggregate, do not have a Material
Adverse Effect; or
3.13.6 entered into any agreement or commitment to take any of
the actions described in Sections 3.13.1 to 3.13.5.
Section 3.14 Title to Properties. Except as set forth on Schedule 3.14,
the Companies and their Subsidiaries (a) have, or on the Closing Date will have,
good and valid title to, or a valid leasehold interest in, the Acquired Assets
that consist of Real Property or tangible personal property and (b) own, lease
or have rights to use, or have rights with respect to, or on the Closing Date
will own, lease or have rights to use or have rights with respect, as
applicable, to all other material Acquired Assets (other than, in the case of
(a) or (b) above, material GPU Assets and the material Development Assets
disposed of in the ordinary course of business and consistent with Good
Operating Practices and dispositions that would not result in a breach of the
representations set forth in Section 3.13), free and clear of any material
Liens, except for: (i) Liens set forth in Schedule 3.14 or Liens incurred in the
ordinary course of business in connection with the performance of the terms of
any Contract listed on Schedule 3.8; (ii) Liens for current taxes not yet due
and payable or being contested in good faith through appropriate proceedings,
Liens to lenders incurred on deposits made in the ordinary course of business in
connection with maintaining bank accounts, Liens in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, governmental permits, licenses and approvals, performance and
return-of-money bonds and other similar obligations incurred in the ordinary
course of business, (iii)
55
63
materialmen's, warehousemen's and mechanics' Liens and other Liens arising by
operation of law in the ordinary course of business for sums not yet due, and
(iv) zoning, entitlement, conservation restriction and other land use and
environmental regulations by Governmental Authorities, provided, in the case of
clauses (ii) and (iii) above, that none of the foregoing would have,
individually or in the aggregate, a Material Adverse Effect. The Liens described
in the foregoing clauses (i), (ii), (iii) and (iv) are collectively referred to
as "Permitted Liens."
Section 3.15 Insurance. Each Company and the Subsidiaries of each
Company hold or are covered by valid policies of insurance of the types and in
such amounts as is customary for companies similarly situated. Prior to the
Closing Date, the Sellers shall provide a copy of each such policy, or if such
policy is not available, a broker's confirmation of coverage or binder, to
Buyer. Each Company and each Subsidiary of each Company is a named insured under
these policies or covered pursuant to a broad form named insured wording. The
Sellers shall use their reasonable efforts to have such policies endorsed to
provide that effective at and from the Closing Date, Buyer and its Affiliates
will be additional insureds, but only in respect of occurrences prior to the
Closing Date. The Sellers shall use reasonable efforts to assist Buyer in filing
any claims under such policies. In the event any such policies are
"claims-made", prior to the Closing Date the Sellers shall, in consultation with
Buyer, obtain terms to extend coverage thereunder for claims reported after the
Closing Date. Buyer may, at its option, accept or decline such terms and if
accepted, shall pay any premiums and related fees for the coverage extension.
Section 3.16 Transactions with Certain Persons. Except for liabilities
and obligations arising out of their employment relationship with any Company or
any Affiliate of any
56
64
Company, and except as set forth in Schedule 3.8, 3.12 or 3.16, neither any
Company nor any Subsidiary of any Company has any outstanding liabilities or
obligations owing to or from any officer, director or employee of any Seller or
any of Sellers' Affiliates (other than the Companies and their Subsidiaries) nor
any member of any such person's immediate family.
Section 3.17 Compliance With Environmental Laws. (a) Except as set
forth in Schedule 3.17, the Companies and their Subsidiaries are in compliance
with the applicable Environmental Laws, except where any such instance of
non-compliance would not have, individually or in the aggregate, a Material
Adverse Effect. Except as set forth in Schedule 3.17, (i) no written notice of
any violation of the applicable Environmental Laws relating to the operations or
properties of any Company or any Subsidiary of any Company has been received by,
and is pending against, any Company or any Subsidiary of any Company, except
where any such instance of non-compliance would not have, individually or in the
aggregate, a Material Adverse Effect and (ii) there are no writs, injunctions,
consents, decrees, orders or judgments outstanding, or any pending actions,
suits, claims, or proceedings relating to compliance by any Company or any
Subsidiary of any Company with or liability of any of them under the applicable
Environmental Laws, including any Remediation of Hazardous Substances, except
where any such instance of non-compliance or liability would not have,
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 3.17, there are no pending or, to Sithe's knowledge, threatened
investigations, actions, suits, claims, or proceedings relating to compliance by
any Company or any Subsidiary of any Company with or liability of any of them
under the applicable Environmental Laws except where any such instance of
non-compliance or liability would not have, individually or in the aggregate, a
Material Adverse
57
65
Effect. Schedule 3.17 lists all Emission Allowances and Emission Reduction
Credits included in the Acquired Assets.
(b) Except as disclosed on Schedule 3.17, (i) none of the Sellers, the
Companies or their Subsidiaries has received any written request for
information, or been notified in writing that it is a potentially responsible
party, under CERCLA or any similar state law with respect to the Real Property
or any other Acquired Asset and (ii) to Sithe's knowledge, since November 24,
1999, no Releases of Hazardous Substances have initiated at, from, in, on, or
under any Site, and no Hazardous Substances are present in, on, about or
migrating from any such Site that could reasonably be expected to give rise to
an Environmental Claim related to the Acquired Assets for which Remediation
reasonably could be required, except in any such case to the extent that any
such Releases would not, individually or in the aggregate, create a Material
Adverse Effect.
Section 3.18 Certain Matters Relating to GPU Assets and Development
Assets.
Except as set forth in Schedule 3.18:
3.18.1 All conditions precedent to closing set forth in the
Sithe/GPU Agreements or in any of the agreements that GPU or any of its
Affiliates entered into in connection with the closing of the transactions
contemplated by the Sithe/GPU Agreements (including, but not limited to,
continuing services agreements, interconnection agreements, transition power
purchase agreements and various easement, license, sublease and other
agreements) were satisfied or waived and all post-closing obligations thereunder
to be performed prior to the date hereof have been satisfied or waived.
3.18.2 All interconnection agreements contemplated by the
Sithe/GPU Agreements, including the interconnection agreements with respect to
the Keystone and
58
66
Conemaugh facilities, have (a) been fully executed and delivered by the intended
parties thereto, and (b) been filed with FERC. The filing party has requested
that all such interconnection agreements become fully effective as of November
24, 1999.
3.18.3 No assets provided by the Sithe/GPU Agreements to have
been purchased by any Company or any of its Subsidiaries were excluded from
purchase under Section 7.3 of such agreements for failure to meet the conditions
therein.
3.18.4 Each of the Keystone and Conemaugh Operating Agreements
and the Keystone and Conemaugh Owners' Agreements are in full force and effect
and neither Sithe nor any of its Affiliates (including the Companies) has
received any notice of or has knowledge of any termination thereunder.
3.18.5 None of the Sellers or any Affiliates controlled by them
has any generation projects under development in the geographic area covered by
the PJM other than the Development Projects.
3.18.6 Except as set forth in the disclosure schedules hereto,
or otherwise provided in the Sithe/GPU Agreements, the Acquired Assets include
all of the assets and rights material to the operation of the generation
facilities included in the GPU Assets in accordance with Good Operating
Practices.
Section 3.19 Consents and Approvals. Except as set forth in Schedule
3.19, no registration or filing with, or consent or approval of or other action
by, any Governmental Authority or any other Person is or will be necessary for
the valid execution, delivery and performance by the Sellers of this Agreement
and the consummation of the transactions contemplated hereby, other than filings
required pursuant to the HSR Act.
59
67
Section 3.20 Utility Regulation. Neither any Company nor any Subsidiary
of any Company is a "public utility company", a "holding company" or a
"subsidiary company" of a "holding company", each term as defined in PUHCA. Each
of the Generator Equity Interests constitutes an "exempt wholesale generator" as
such term is defined in PUHCA. As used in this Agreement, "Generator Equity
Interest" means any corporation, association, partnership or other business
entity owning any electric generating facilities and included in the Acquired
Assets. None of the Companies is (i) a "public utility" as that term is defined
in Section 102 of the Public Utility Code, 66 Pa. C.S. 102, an "electric
distribution company", or "electric generation supplier" as those terms are
defined in Section 2803 of the Public Utility Code, 66 Pa.C.S. 2803, (ii) an
"electric company" or a "public service company" as defined in Section 1-101 of
the Public Utility Companies Article of the Annotated Code of Maryland, (iii) an
"electric public utility" as defined in New Jersey Statutes Annotated
("N.J.S.A.") 48:3-51 or a "public utility" as defined in N.J.S.A. 48:2-13, (iv)
"engaged in the business of an electricity supplier" in the state of Maryland
within the meaning of Section 7-507 of the Public Utility Companies Article of
the Annotated Code of Maryland or (v) otherwise subject to regulation as to
rates or the provision of service by the Pennsylvania Public Utility Commission,
the Maryland Public Service Commission or the New Jersey Board of Public
Utilities. Sithe New Jersey Holdings LLC is an "electric power generator" as
that term is defined in N.J.S.A. 48:3-51.
Section 3.21 Intellectual Property. Except as disclosed in Schedule
3.21 (i) none of the Companies or their Subsidiaries is, 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 Intellectual Property, and
(ii) to Sithe's knowledge, such Intellectual Property is not being
60
68
infringed by any other Person. The Sellers have not received notice that they or
any of the Companies or the Subsidiaries of the Companies are infringing any
Intellectual Property of any other Person in connection with the operation or
business of the Acquired Assets, and, to the knowledge of Sellers, none of the
Sellers, the Companies or the Subsidiaries of the Companies are infringing any
Intellectual Property of any other Person the effect of which, individually or
in the aggregate, would have a Material Adverse Effect. "Intellectual Property"
means all patents and patent rights, trademarks and trademark rights, copyrights
and copyright rights owned by the Companies and their Subsidiaries and necessary
for the operation and maintenance of the Acquired Assets, and all pending
applications for registrations of patents, trademarks, and copyrights, as set
forth as part of Schedule 3.21.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES REGARDING THE SELLERS
Except as otherwise disclosed in this Agreement or in any Schedule,
Sithe represents and warrants to Buyer, as of the date hereof (except where such
representation or warranty is expressly made as of another specific date), as
follows:
Section 4.1 Organization and Corporate Power. Each Seller is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. Genco has full corporate power and authority to own the
Intercompany Notes, the Mid-Atlantic Stock and the LLC Interests and to transfer
the Intercompany Notes, the Mid-Atlantic Stock and the LLC Interests as provided
in this Agreement, and such transfer has been authorized by all requisite action
on the part of the Sellers. Sellers have full corporate power and authority to
execute, deliver and perform this Agreement.
61
69
Section 4.2 Authorization; Validity. The execution, delivery and
performance of this Agreement by each Seller have been duly authorized by all
requisite action on the part of such Seller. This Agreement has been duly
executed and delivered by each Seller and constitutes the valid and binding
obligation of such Seller, enforceable against such Seller in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereinafter in effect
relating to creditors' rights generally, and general equitable principles
(whether considered in a proceeding in equity or at law).
Section 4.3 No Conflict. Except as set forth in Schedule 4.3, the
execution, delivery and performance by each Seller of this Agreement and the
consummation by each Seller of the transactions contemplated hereby will not (i)
violate the Certificate of Incorporation and By-laws of such Seller, (ii)
violate any law or regulation applicable to such Seller, or (iii) violate or
conflict with, or constitute (with due notice or lapse of time or both) a
default under, any Contract by which such Seller or any of its assets is bound
except, in the case of clauses (ii) and (iii) above, as would not materially
adversely affect the Sellers' ability to consummate the transactions
contemplated hereby.
Section 4.4 Ownership of Genco, Mid-Atlantic Stock and LLC Interests.
Sithe owns, indirectly, all of the issued and outstanding capital stock of
Genco. Genco owns all of the issued and outstanding capital stock of Sithe
Mid-Atlantic (the "Mid-Atlantic Stock"), free and clear of any Liens. Genco owns
all of the limited liability company interests, as defined in Section 18-101 of
the Delaware Limited Liability Company Act, of each of the Companies other than
Sithe Mid-Atlantic, and all voting and other rights appurtenant to the ownership
of such interests (such
62
70
interests and rights, collectively, the "LLC Interests"), free and clear of any
Liens. Except for this Agreement and except for the limited liability company
agreements of the Companies and their Subsidiaries (other than Sithe
Mid-Atlantic and Sithe Northeast Management), there is no voting trust or
agreement, stockholders agreement, pledge agreement, buy-sell agreement, right
of first refusal, preemptive right, proxy or agreement or commitment to sell
relating to the Mid-Atlantic Stock and the LLC Interests or the capital stock or
other equity interests of any Subsidiary of any Company. On the Closing Date,
upon the consummation of the transactions contemplated by this Agreement, Buyer
will own the Mid-Atlantic Stock and the LLC Interests free and clear of any
Liens, except for any Liens created by or at the behest of Buyer.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Sellers that, as of the date
hereof (except where such representation or warranty is expressly made only as
of a specific date) as follows:
Section 5.1 Organization and Corporate Power. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Buyer has full corporate power and authority to execute, deliver and
perform this Agreement.
Section 5.2 Authorization; Validity. The execution, delivery and
performance by Buyer of this Agreement have been duly authorized by all
requisite corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes the valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium
63
71
or other similar laws now or hereafter in effect relating to creditors' rights
generally, and general equitable principles (whether considered in a proceeding
in equity or at law).
Section 5.3 No Conflict. The execution, delivery and performance by
Buyer of this Agreement and the consummation of the transactions contemplated
hereby will not (i) violate the Certificate of Incorporation or By-Laws of
Buyer; (ii) violate any law or regulation applicable to Buyer, or any order of
any court or governmental agency or authority having jurisdiction over Buyer, or
(iii) violate or conflict with, or constitute (with due notice or lapse of time
or both) a default under, any Contract by which Buyer or any of its assets is
bound.
Section 5.4 Consents and Approvals. Except as set forth in Schedule
5.4, no registration or filing with, or consent or approval of or other action
by, any Governmental Authority or any other Person is or will be necessary for
the valid execution, delivery and performance by Buyer of this Agreement and the
consummation of the transactions contemplated hereby, other than filings
required pursuant to the HSR Act.
Section 5.5 Brokers. Neither Buyer nor any Subsidiary or Affiliate of
Buyer has any contract, arrangement or understanding with any investment banking
firm, broker, finder or similar agent with respect to the transactions
contemplated by this Agreement, except for Chase Securities Inc. whose fees
shall be borne by Buyer.
Section 5.6 Availability of Funds. At the Closing, Buyer will have
sufficient funds to pay the Aggregate Purchase Price and the Estimated
Adjustment Amount and to consummate the transactions contemplated hereby.
64
72
Section 5.7 No Knowledge of the Sellers' Breach. Buyer has no knowledge
of any breach by any Seller of any representation or warranty of such Seller or
of any condition or circumstance that would excuse Buyer from its timely
performance of its obligations hereunder.
Section 5.8 Investment. Buyer is not acquiring the Mid-Atlantic Stock
or the LLC Interests with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act of 1933, as
amended.
ARTICLE 6. ACCESS; ADDITIONAL AGREEMENTS
Section 6.1 Access to Information; Continuing Disclosure
6.1.1 Access. The Sellers agree that from the date hereof until
the Closing Date, subject to the terms of the Confidentiality Agreement (as
defined below) and for purposes of transition, upon reasonable notice from
Buyer, (i) the Sellers shall, and shall cause each Affiliate controlled by Sithe
to, provide to Buyer and its representatives (collectively, the "Buyer Group")
reasonable access, at reasonable times during normal business hours, to the
employees, auditors, counsel and consultants of the Sellers and the Affiliates
controlled by Sithe relating to, and to the properties, books and records of the
Sellers and the Affiliates controlled by Sithe relating to, the Acquired Assets
and the GPU Liabilities and shall promptly furnish to the Buyer Group
information as the Buyer Group may reasonably request; provided, that such
access shall be afforded to the Buyer Group as soon as practicable but in no
event more than two Business Days after receipt of notice, and only in such
manner so as not to unreasonably disturb or interfere with the normal operations
of the Companies or their Subsidiaries; and provided further, that neither
Seller nor any of their respective Affiliates shall be required to take any
action that would
65
73
constitute a waiver of the attorney-client privilege or to supply to the Buyer
Group any information that any Company or any such Subsidiary of any Company is
under a legal obligation not to supply, and (ii) as soon as practicable after
request by Buyer or its representatives but in no event more than two Business
Days after receipt of notice, each Seller shall have, or cause the appropriate
Affiliate of Sithe to have, meetings or discussions with the Buyer Group
regarding the conduct of the business of each Company and its Subsidiaries, the
Acquired Assets, the GPU Liabilities and the effect thereon of the transactions
contemplated by this Agreement. All information furnished by or on behalf of any
Company or any Subsidiary of any Company hereunder to a member of the Buyer
Group shall be subject to the terms of the Confidentiality Agreement dated as of
November 16, 1999 between Sithe and Buyer (the "Confidentiality Agreement").
Buyer shall not have the right to perform or conduct any environmental sampling
or testing at, in, on or underneath the Acquired Assets.
6.1.2 Transition. In furtherance of the foregoing Section 6.1.1
and to further transition planning activities, from the date hereof, the Sellers
shall permit designated representatives of Buyer and its Affiliates to use
office space at the offices of the Companies in Johnstown, Pennsylvania in order
to participate in transition planning. The Sellers will also designate certain
representatives located in Johnstown to work on a daily basis with Buyer's
designated representatives as a "transition team." The Companies shall keep
Buyer's designated representatives reasonably informed on a timely basis about
significant issues relating to the business of the Companies and their
Subsidiaries and the ownership, operation and development of the Acquired
Assets. Within 15 days of the date hereof, Buyer and the Sellers shall also
establish a transition planning committee, which shall meet (whether in person
or telephonically)
66
74
not less than weekly and more frequently as appropriate to discuss matters
relating to Closing and the transition to ownership of the Companies and the
ownership, operation and development of the Acquired Assets by Buyer.
Section 6.2 Regulatory Approvals.
6.2.1 Antitrust Notification. Buyer and Sithe will as promptly
as practicable, but in no event later than fifteen (15) days following the
execution and delivery of this Agreement, each file with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ") the Notification and Report Form under the HSR Act, if any, required
in connection with the transactions contemplated hereby and as promptly as
practicable supply additional information, if any, requested in connection
herewith pursuant to the HSR Act. Such Notification and Report Form and
additional information, if any, submitted to the FTC or the DOJ shall be in
substantial compliance with the requirements of the HSR Act. Each of Buyer and
Sithe shall furnish to the other such information and assistance as the other
may reasonably request in connection with its preparation of any filing or
submission which is necessary under the HSR Act. Each of Buyer and Sithe shall
keep the other apprised in a prompt manner of the status and substance of any
communications with, and inquiries or requests for additional information from,
the FTC and the DOJ and shall comply promptly with any such inquiry or request.
Each of Buyer and Sithe will use its reasonable efforts to obtain the
termination or expiration of any applicable waiting period required under the
HSR Act for the consummation of the transactions contemplated hereby.
6.2.2 Regulatory Approval Process. Buyer and the Sellers shall,
as promptly as practical, but in no event later than thirty days following the
execution and delivery of this
67
75
Agreement, submit or cause the submission, to the appropriate agency/ies or
third party/ies all declarations, filings and registrations listed on Schedules
7.4 and 8.4 required to be submitted by such Person or its Subsidiaries. The
parties agree to make a joint filing for any approval required under Section 203
of the Federal Power Act. With respect to any filings that will be submitted to
the Federal Energy Regulatory Commission ("FERC"), Buyer and the Sellers shall
cooperate to share and develop information necessary for such filing(s) and
prepare drafts of such filing(s) within fifteen days following execution and
delivery of this Agreement and shall give each other reasonable opportunity to
comment on and to revise such draft filings(s) before such filing(s) are
submitted to FERC.
Section 6.3 Further Assurances. From time to time from the date hereof
until the Closing Date, as and when requested by any party hereto, the requested
party shall use reasonable efforts to execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary to consummate the transactions contemplated by this
Agreement, including, without limitation, such actions as are necessary in
connection with obtaining any third party consent or any regulatory filings
(including filings with FERC) identified on Schedule 7.4 or 8.4. Without
limiting the generality of the foregoing, the Sellers shall: (i) use reasonable
efforts to facilitate communication between Buyer and any Person having the
right to consent to the termination or substitution of any Terminated
Obligation, or to consent to the release of any obligation set forth on Schedule
6.16; and (ii) cooperate, and cause the Companies and their Subsidiaries to
cooperate, with Buyer in connection with any financing transactions, which
cooperation shall consist of making
68
76
management of the Sellers, the Companies and the Subsidiaries of the Companies
available to potential financing sources and other Persons who may be involved
in potential financings (the "Financing Parties") (including any rating
agencies, attorneys, consultants, potential investors, lenders, placement agents
and underwriters) at management's offices on not less than two Business Days'
notice and only in such a manner so as not to unreasonably disturb or interfere
with the normal operations of Sithe and its Affiliates, and allowing the
Financing Parties and their representatives to conduct customary due diligence,
in each case, during normal business hours upon reasonable notice and subject to
the execution by such Financing Parties and each such representative of a
confidentiality agreement with the Sellers in form and substance consistent with
the Confidentiality Agreement; provided, however, the failure of either Seller
to perform its obligations in this sentence shall not constitute a breach of
this Agreement by either Seller or otherwise constitute an event that would, by
itself, give rise to any claim by Buyer or right of Buyer to terminate this
Agreement. In the event that any Acquired Asset shall not have been effectively
assigned, transferred or conveyed to the Companies or the Subsidiaries of the
Companies at the Closing, the Sellers shall convey such asset to Buyer as
promptly as is practicable after the Closing in the manner set forth in, and
subject to the limitations set forth in, the Assignment.
Section 6.4 Certain Tax Matters.
6.4.1 Election Under Section 338(h)(10).
6.4.1.1 The Sellers and Buyer shall make a joint
election for each of Sithe Mid-Atlantic and Northeast Management under Section
338(h)(10) of the Code and under any comparable provisions of state or local law
(an "Election") with
69
77
respect to the purchase of the Mid-Atlantic Stock and the deemed purchase of all
outstanding capital stock of Northeast Management. The Sellers and Buyer shall
mutually execute and complete copies of IRS Form 8023 and any similar state or
local forms no later than 60 days prior to the due date (including extensions)
for filing such forms or the Tax Returns to which such forms must be attached.
If any changes are required in these forms as a result of information that is
first available after such forms are prepared, the parties will promptly agree
on such changes.
6.4.1.2 Buyer shall prepare and submit to the Sellers a
proposed allocation of the Modified Adjusted Deemed Sales Price (as defined in
Treasury Regulation Section 1.338(h)(10)-1(f)) for each of Sithe Mid-Atlantic
and Northeast Management among the assets of each such corporation as soon as
practicable after the Closing Date. Sellers shall approve and agree to the
proposed allocation unless Sellers reasonably determine that the proposed
allocation is improper. Neither Buyer nor the Sellers shall take any action
inconsistent with, or fail to take any action necessary for, the validity of the
Election, and, if an allocation schedule is agreed to among Buyer and the
Sellers, Buyer and the Sellers shall adopt and utilize the asset values as
determined on the allocation schedule for the purpose of all Tax Returns filed
by them unless otherwise required by applicable law.
6.4.2 Tax Returns. The Sellers shall cause the Companies and
their Subsidiaries to prepare and file at the Sellers' expense (i) all Tax
Returns of the Companies and their Subsidiaries which are required to be filed
(taking into account extensions of time to file) on or before the Closing Date
and (ii) all federal and state income and franchise Tax Returns of the
70
78
Companies and their Subsidiaries for all periods ending on or prior to the
Closing Date. Buyer shall prepare and file (or cause to be prepared and filed)
at its own expense all other Tax Returns of the Companies and their
Subsidiaries. If either Buyer, on the one hand, or either Seller, on the other
hand, may be liable for any material portion of the Tax payable in connection
with any Tax Return to be filed by the other, the party responsible under this
Section 6.4.2 for filing such return (the "Preparer") shall prepare and deliver
to the other party (the "Payor") a copy of such return and any schedules, work
papers and other documentation then available that are relevant to the
preparation of the portion of such return for which the Payor is or may be
liable hereunder not later than 30 days before the Due Date (as defined in
Section 6.4.12 of this Agreement). The Preparer shall not file such return until
the earlier of either the receipt of written notice from the Payor indicating
the Payor's consent thereto, or the Due Date. The Payor shall have the option of
providing to the Preparer, at any time at least 15 days prior to the Due Date,
written instructions as to how the Payor wants any, or all, of the items for
which it may be liable reflected on such Tax Return. The Preparer shall, in
preparing such return, cause the items for which the Payor is liable hereunder
to be reflected in accordance with the Payor's instructions (unless, in the
opinion of nationally recognized tax counsel to the Preparer, complying with the
Payor's instructions would likely subject the Preparer to any criminal penalty
or to civil penalties) and, in the absence of having received such instructions,
in accordance with past practice.
If the Preparer fails to satisfy its obligations pursuant to this
Section 6.4.2, the Payor shall have no obligation to indemnify the Preparer for
any Taxes which are reflected on any such Tax
71
79
Return if and to the extent the Payor was actually prejudiced by such failure,
and shall retain any and all remedies it may otherwise have which arise out of
such failure.
6.4.3 Transfer Taxes.
6.4.3.1 Sales and Real Property Taxes. All sales and use
and real property transfer taxes incurred in connection with this Agreement and
the transactions contemplated hereby shall be borne by Buyer, and Buyer at its
own expense shall file, to the extent required by applicable laws and
regulations, all necessary Tax Returns and other documentation with respect to
all such transfer or sales and use taxes, and, if required by applicable law,
Buyer shall cause the Companies and their Subsidiaries to join the execution of
any such Tax Returns or other documentation.
6.4.3.2 Other Transfer Taxes. All excise, transfer
(excluding real property transfer or gains taxes and excluding sales and use
taxes), stamp, documentary, filing, recordation and other similar taxes
(excluding real property transfer or gains taxes and excluding sales and use
taxes), together with any interest, additions or penalties with respect thereto
and any interest in respect of such additions or penalties, resulting directly
from the sale and transfer by the Sellers to Buyer of the Mid-Atlantic Stock and
the LLC Interests (the "Other Transfer Taxes"), shall be borne by Buyer.
Notwithstanding Section 6.4.2 of this Agreement, which shall not apply to Tax
Returns relating to Transfer Taxes, any Tax Returns that must be filed in
connection with Transfer Taxes shall be prepared and filed when due by Buyer,
and Buyer will use its reasonable efforts to provide such Tax Returns to the
Sellers at least 10 days prior to the Due Date for such Tax Returns.
72
80
6.4.4 Indemnification.
6.4.4.1 Sellers' Indemnification of Buyer. The Sellers
shall indemnify Buyer from, against and in respect of any Taxes imposed on any
Company or any Subsidiary of a Company with respect to any taxable period, or
portion thereof, ending on or before the Closing Date; provided, however, that
with respect to Northeast Management, the Sellers shall have no obligation to
indemnify Buyer for taxes with respect to any taxable period or portion thereof
ending on or before November 24, 1999.
6.4.4.2 Buyer's Indemnification of the Sellers. The
Buyer shall indemnify the Sellers from, against and in respect of any liability
of the Sellers or their Subsidiaries for (A) any Taxes imposed on any Company or
any Subsidiary of a Company with respect to any taxable period, or portion
thereof, beginning on or after the Closing Date; and (B) any Transfer Taxes for
which Buyer is liable pursuant to Section 6.4.3 hereof.
6.4.5 Computation of Tax Liabilities.
6.4.5.1 Proration of Taxes and Earnings and Profits. To
the extent permitted by law or administrative practice, the taxable years of
each Company and each Subsidiary of each Company shall end on and include the
Closing Date. Whenever it is necessary to determine the liability for Taxes, or
the earnings and profits, of any Company or any Subsidiary of a Company for a
portion of a taxable year or period that begins before and ends after the
Closing Date, the determination of the Taxes or the earnings and profits for the
portion of the year or period ending on, and the portion of the year or period
beginning after, the Closing Date shall be determined by assuming that the
73
81
taxable year or period ended on and included the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis and
annual property taxes shall be prorated on the basis of the number of days in
the annual period elapsed through the Closing Date as compared to the number of
days in the annual period elapsing after the Closing Date.
6.4.5.2 Standalone Basis. Whenever it is necessary to determine
the liability of any Company or any Subsidiary of a Company for Taxes, such
liability shall be computed as if such Company or such Subsidiary of a Company
was not a member of Sithe's or Genco's consolidated, affiliated, combined or
unitary group for Tax purposes.
6.4.6 Contest Provisions.
6.4.6.1 Notification of Contests. Each of Buyer, on the one
hand, and the Sellers, on the other hand (the "Recipient"), shall notify the
Vice President - Taxes or chief tax officer of the other party in writing within
45 days of receipt by the Recipient of written notice of any pending or
threatened audits, adjustments or assessments (a "Tax Audit") which are likely
to affect the liability for Taxes of such other party. If the Recipient fails to
give such prompt notice to the other party, it shall not be entitled to
indemnification for any Taxes arising in connection with such Tax Audit if and
to the extent that such other party is actually prejudiced by such failure to
give notice.
6.4.6.2 Which Party Controls.
6.4.6.2.1 Sellers' Items. If such Tax Audit relates to any
taxable period, or portion thereof, ending on or before the Closing Date or for
any Taxes for
74
82
which the Sellers are liable in full hereunder, the Sellers shall at their
expense control the defense and settlement of such Tax Audit.
6.4.6.2.2. Buyer's Items. If such Tax Audit relates to
any taxable period, or portion thereof, beginning on or after the Closing Date
or for any Taxes for which Buyer is liable in full hereunder, Buyer shall at its
expense control the defense and settlement of such Tax Audit.
6.4.6.2.3 Combined and Mixed Items. If such Tax Audit
relates to Taxes for which both the Sellers and Buyer are liable hereunder, to
the extent practicable such Tax Items (as defined in Section 6.4.12 of this
Agreement) will be distinguished and each party will control the defense and
settlement of those Taxes for which it is so liable. If such Tax Audit relates
to a taxable period, or portion thereof, beginning before and ending after the
Closing Date and any Tax Item cannot be identified as being a liability of only
one party or cannot be separated from a Tax Item for which the other party is
liable, the party which has the greater potential liability for those Tax Items
that cannot be so attributed or separated (or both) shall control the defense of
the Tax Audit, provided that such party defends the items as reported on the
relevant Tax Return and provided further that no such matter shall be settled
without the written consent of both parties, not to be unreasonably withheld.
6.4.6.2.4 Participation Rights. Any party whose
liability for Taxes may be affected by a Tax Audit shall be entitled to
participate at its expense in such defense and to employ counsel of its choice
at its expense.
75
83
6.4.7 Buyer's Claiming, Receiving or Using of Refunds and
Overpayments. If after the Closing, Buyer, any Company, or any Subsidiary of a
Company (A) receives any refund or (B) utilizes the benefit of any overpayment
of Taxes which, in each case (A) and (B), (x) relates to Taxes paid by the
Sellers or any Company, or any Subsidiary of a Company with respect to a taxable
period, or portion thereof, ending on or before the Closing Date, or (y) is the
subject of indemnification by the Sellers pursuant to this Agreement, Buyer
shall promptly transfer, or cause to be transferred, to the Sellers the entire
amount of the refund or overpayment (including interest) resolved or utilized by
Buyer, any Company, or any Subsidiary of a Company. The Buyer agrees to notify
the Sellers within 15 days following the discovery of a right to claim any such
refund or overpayment and the receipt of any such refund or utilization of any
such overpayment. The Buyer agrees to claim any such refund or to utilize any
such overpayment as soon as possible and to furnish to the Sellers all
information, records and assistance necessary to verify the amount of the refund
or overpayment.
6.4.8 Resolution of All Tax-Related Disputes. In the event that
the Sellers and Buyer cannot agree on the calculation of any amount relating to
Taxes or the interpretation or application of any provision of this Agreement
relating to Taxes, such dispute shall be resolved by a nationally recognized
accounting firm mutually acceptable to each of the Sellers and Buyer, whose
decision shall be final and binding upon all Persons involved and whose expenses
shall be shared equally by the Sellers, on the one hand, and Buyer on the other
hand.
6.4.9 Termination of Existing Tax Sharing Agreements. Any and
all existing Tax sharing agreements or arrangements, written or unwritten,
binding any Company or any Subsidiary of a Company, shall be terminated as of
the Closing.
76
84
6.4.10 Assistance and Cooperation. The parties agree that,
after the Closing Date:
6.4.10.1 Buyer, on the one hand, and the Sellers, on the
other hand, shall each assist the other (and cause its respective Affiliates to
assist) the other party in preparing any Tax Returns which such other party is
responsible for preparing and filing;
6.4.10.2 Buyer, on the one hand, and the Sellers, on the
other hand, shall cooperate fully in preparing for any Tax audits, or disputes
with taxing authorities, relating to any Tax Returns or Taxes of any Company or
any Subsidiary of a Company;
6.4.10.3 Buyer, on the one hand, and the Sellers, on the
other hand, shall make available to each other upon written request and to any
taxing authority as reasonably requested in writing all relevant books and
records relating to Taxes but only to the minimum extent necessary to enable the
other party to prepare Tax Returns or resolve disputes with taxing authorities
relating to Tax Returns or Taxes of a Company or a Subsidiary of a Company. Any
such information shall be kept strictly confidential;
6.4.10.4 Buyer, on the one hand, and the Sellers, on the
other hand, shall promptly furnish the other party with copies of all relevant
correspondence received from any taxing authority in connection with any Tax
Audit or information request relating to Taxes for which such other party may
have an indemnification obligation under this Agreement; and
77
85
6.4.10.5 Except as otherwise provided herein, the party
requesting assistance or cooperation shall bear the other party's out-of-pocket
expenses in complying with such request to the extent that those expenses are
attributable to fees and other costs of unaffiliated third-party service
providers.
6.4.11 This Section 6.4 alone shall govern the procedure for
all Tax indemnification claims, notwithstanding any provision of Article 12.
6.4.12 For purposes of this Agreement, "Due Date" shall mean,
with respect to any Tax Return, the date such return is due to be filed (taking
into account any valid extensions); and "Tax Item" shall mean, with respect to
Taxes, any item of income, gain, deduction, loss or credit or other tax
attribute.
Section 6.5 Ordinary Course of Business.
6.5.1 Prior to the Closing, except (i) as set forth on Schedule
3.13 or 6.5 or actions taken in the ordinary course of business pursuant to or
in connection with Contracts listed on Schedule 3.8, (ii) as specifically
provided for by this Agreement or consented to or approved in writing by Buyer
or (iii) for transactions between or among any Company and any other Company
and/or one or more of the Subsidiaries of any Company or between or among
Subsidiaries of any Company, the Sellers shall cause each Company and each
Subsidiary of each Company to:
(a) conduct its business in the ordinary course of business,
consistent with Good Operating Practices;
(b) maintain the insurance coverage described in Section 3.15,
including the filing and prosecution of any claims related to the Acquired
Assets; and
78
86
(c) comply with all applicable laws and regulations relating to the Acquired
Assets, including without limitation, all Environmental Laws, except where the
failure to so comply would not result, individually or in the aggregate, in a
Material Adverse Effect.
6.5.2 Without limiting the generality of the foregoing, and,
except as (i) contemplated in this Agreement, (ii) described in Schedule 6.5 or
(iii) required under applicable laws and regulations or by any Governmental
Authority, prior to the Closing, without the prior written consent of Buyer, the
Sellers shall not, directly or indirectly through their Subsidiaries, with
respect to the Acquired Assets:
(a) make any material change in the levels of Inventories
customarily maintained with respect to the GPU Assets and the Development
Assets, other than changes in the ordinary course of business consistent with
Good Operating Practices or that would not have, individually or in the
aggregate, a Material Adverse Effect;
(b) sell, lease (as lessor), encumber, pledge, transfer or
otherwise dispose of any of the Acquired Assets (except for (i) Acquired Assets,
used, consumed or replaced in the ordinary course of business consistent with
Good Operating Practices, (ii) dispositions of obsolete assets in the ordinary
course of business consistent with Good Operating Practices, (iii) property
losses, (iv) dispositions in the ordinary course of business in accordance with
any Contract listed on Schedule 3.8 and (v) dispositions of Acquired Assets not
to exceed $10.0 million in the aggregate, except that no such disposition shall
be of any Acquired Assets necessary for the operation of a generating facility
included in the Acquired Assets), other than to encumber Acquired Assets with
Permitted Liens;
79
87
(c) modify, amend, voluntarily terminate, waive or permit to
expire prior to the scheduled expiration date any Contracts listed on Schedule
3.8, Real Property leases or any of the Permits or Environmental Permits
associated with such Acquired Assets other than (i) in the ordinary course of
business, to the extent consistent with Good Operating Practices, (ii) as may be
required in connection with the transactions contemplated by this Agreement or
the Sithe/GPU Agreements or (iii) as may be required by applicable law, rule or
regulation;
(d) (i) enter into any commitment for the purchase, sale, or
transportation of fuel unless (A) such commitment is terminable on or before the
Closing Date either (1) automatically or (2) by option of any Company or any
Subsidiary of any Company (or after the Closing, by Buyer) without penalty or
premium in its sole discretion, (B) such commitment will by its terms be fully
performed on or before the Closing Date, (C) such commitment is for an amount of
fuel necessary to produce electricity sufficient to satisfy the obligations of
the Sellers or their Subsidiaries pursuant to any Contract entered into pursuant
to Section 6.5.2 (d)(ii)(C) or (D) the aggregate payment under such commitment
for fuel and all other outstanding commitments for fuel not previously approved
by Buyer would not exceed $5.0 million, or (ii) enter into any commitment for
the purchase or sale of electricity, capacity or related products unless (A)
such commitment is terminable on or before the Closing Date either (1)
automatically or (2) by option of any Company or any Subsidiary of any Company
(or after the Closing, by Buyer) without penalty or premium in its sole
discretion, (B) such commitment will by its terms be fully performed on or
before the Closing Date, (C) such commitment is for the sale of electricity into
the PJM Energy Interchange Market, or a similar daily spot market, (1) for an
amount of electricity not to exceed, with respect to any generating facility
included in the GPU
80
88
Assets, the maximum capacity for such generating facility at the time such
commitment is made and (2) for a term not to extend beyond the next Business Day
following such commitment or (D) the aggregate payment under such commitment for
electricity, capacity or related products and all other outstanding commitments
for electricity, capacity or related products not previously approved by Buyer
would not exceed $5.0 million;
(e) sell, lease or otherwise dispose of Emission Allowances, or
Emission Reduction Credits identified in Schedule 3.17, except to the extent
necessary to operate any of the Acquired Assets in accordance with this Section
6.5 or in accordance with Good Operating Practices;
(f) enter into any Contract relating to the Acquired Assets
(other than any such Contract described in Section 6.5.2(d)) unless (i) such
Contract is terminable on or before the Closing Date either (A) automatically or
(B) by option of any Company or any Subsidiary of any Company (or, after the
Closing, by Buyer) without penalty or premium in its sole discretion, (ii) such
Contract will by its terms be fully performed on or before the Closing Date,
(iii) the aggregate payments under any such Contract entered into after the date
hereof and not previously approved by Buyer would not exceed $500,000
individually or together with all other such Contracts, $5,000,000 in the
aggregate, (iv) such Contract relates to any outage and is entered into in
accordance with Good Operating Practices or (v) such Contract is (A) listed on
Schedule 6.5.2(f)(A) or (B) entered into by Sithe Power Marketing with the
consent of Buyer and set forth on Schedule 6.5.2(f)(B), as such schedule may be
amended from time to time in accordance with Section 6.5.5(b) (any Contract
referred to in this clause (v), a "Trading Contract", and all such Contracts
collectively, the "Trading Contracts"); provided that notwithstanding anything
else
81
89
herein to the contrary, any Seller or any Subsidiary of any Seller may at any
time prior to the Closing Date amend, modify, supplement or terminate any
Contract set forth on Schedule 6.5.2(f)(A), or remove any such Contract from
Schedule 6.5.2(f)(A), with or without the consent of Buyer.
(g) except as otherwise required by the terms of the Collective
Bargaining Agreements or the Sithe/GPU Agreements or, with the prior written
consent of Buyer not to be unreasonably withheld, as Sithe believes is necessary
for the operation of the business of the Companies and their Subsidiaries in
accordance with Good Operating Practices: (i) hire any new employees prior to
the Closing on terms that provide for an annual salary of more than $100,000;
(ii) increase salaries or wages of employees prior to the Closing other than in
the ordinary course of business and in accordance with the past practices of
Sithe or any Affiliate of Sithe; (iii) take any action prior to the Closing to
effect a change in a Collective Bargaining Agreement; (iv) take any action prior
to the Closing to increase the aggregate benefits payable to its employees other
than increases for non-union employees in the ordinary course of business and in
accordance with past practices of Sithe or any Affiliate of Sithe; or (v) enter
into any employment contracts or any collective bargaining agreements with labor
organizations representing such employees;
(h) modify, amend, voluntarily terminate, waive or permit to
expire prior to the scheduled expiration date any rights under or agree to any
termination of any of the Contracts listed on Schedule 6.5.2, to the extent that
any such amendment, modification, waiver or termination could reasonably be
expected to affect the rights of the Companies and their Subsidiaries after the
Closing Date without the prior consent of Buyer not to be unreasonably withheld,
other than such amendments, modifications or alterations as (i) have already
been
82
90
agreed upon, in substance (as disclosed on Schedule 6.5) or (ii) reasonably
incidental to the operation of the Acquired Assets in the ordinary course of
business;
(i) make any Capital Expenditures or incur any Development
Costs except for (1) Budgeted Capital Expenditures plus additional Capital
Expenditures in an amount of up to 10% of the amount of Budgeted Capital
Expenditures, (2) Budgeted Development Costs plus additional Development Costs
in an amount of up to 10% of the amount of Budgeted Development Costs, (3)
Capital Expenditures necessary in order to comply with (A) applicable law or the
rules and regulations of any Governmental Authority or other entity having the
legal authority to regulate the activities of the Companies, the Subsidiaries of
the Companies or the Acquired Assets (including, without limitation, rules and
regulations relating to PJM) and (B) to comply with the decisions of the owners
of the Keystone and/or Conemaugh generating facilities with respect to the
operation of such facilities, and (4) Capital Expenditures for the account of
Sithe and its Subsidiaries, other than the Companies and their Subsidiaries; and
(j) make any changes in scheduled outages for the generating
facilities included in the Acquired Assets, which scheduled outages are set
forth on Schedule 6.5.2(j), except in accordance with Good Operating Practices;
and
(k) 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 (a) through
(j).
6.5.3 Notwithstanding Section 6.5.1 or 6.5.2, (a) any Company
and any Subsidiary of any Company shall be permitted to distribute or otherwise
pay Cash Equivalents to any other Company or Subsidiary of any Company or any
Seller or any Affiliate of any Seller
83
91
(other than Cash Equivalents constituting proceeds from a disposition of assets
made by a Company or a Subsidiary of a Company in breach of this Agreement
without regard to materiality), (b) Sithe Northeast Management may enter into
Contracts on behalf of the station owners under the Keystone and Conemaugh
Operating Agreements, (c) Sithe Pennsylvania Holdings, LLC may enter into
Contracts and otherwise perform its obligations as an owner in the Keystone and
Conemaugh stations that are contemplated under the Keystone or Conemaugh annual
station plan, under the Keystone coal supply plan or under the Conemaugh coal,
natural gas and limestone supply plan and (d) Sithe and its Subsidiaries (other
than the Companies and their Subsidiaries) may enter into letters of credit that
satisfy the requirements of clause (b) of the definition of "Terminated
Obligations".
6.5.4 The Sellers shall cause one or more of their executive
officers set forth on Schedule 1D to make due inquiry of (a) each plant manager
of the generating facilities included in the Acquired Assets and (b) Martin
Rosenberg, as to the accuracy of the representations and warranties contained in
Sections 3.2, 3.3, 3.6.1, 3.8 and the third sentence of Section 3.17 as of the
date hereof and the Closing Date (except that, with respect to the plant
managers, due inquiry regarding the representations and warranties contained in
Section 3.3 and Section 3.8 shall be as of the Closing Date only), to the extent
that any such representation or warranty is qualified as to Sithe's knowledge.
6.5.5 (a) Buyer hereby designates the two representatives of
Buyer or its Affiliates listed on Schedule 6.5 under the heading "Buyer's
Representatives" or such other representatives as Buyer may designate upon
written notice to the Sellers (the "Buyer's Representatives"), to be responsible
for determining whether consent to any action prohibited by
84
92
this Section 6.5 (other than any action described in clause (b) below) shall be
given by Buyer. The Sellers hereby designate the two representatives of the
Sellers listed on Schedule 6.5 under the heading "Sellers' Representatives" or
such other representatives as the Sellers may designate upon written notice to
Buyer (the "Sellers' Representatives"), to contact Buyer's Representatives with
requests for consent to any action prohibited by this Section 6.5 (other than
any action described in clause (b) below). Buyer's Representatives shall respond
promptly (in writing) to any request for consent (which must be written, except
as set forth below) to the taking of any action under this Section 6.5 and Buyer
shall not unreasonably withhold (taking into account Buyer's interests) the
requested consent. If Buyer's Representatives do not respond to any request
within three (3) Business Days of its receipt, such consent will be deemed to
have been given. The Sellers' Representatives may rely on any consent given by
either of Buyer's Representatives. The time periods within which Buyer's
Representatives must respond shall commence on the date on which either of
Buyer's Representatives receives a written request for consent.
(b) Buyer hereby designates the two representatives of Buyer
listed on Schedule 6.5 under the heading "Buyer's Trading Representatives" or
such other representatives as Buyer may designate upon written notice to the
Sellers (the "Buyer's Trading Representatives"), to be responsible for
determining whether any consent to any action that relates to a commitment
referenced in Section 6.5.2(d) and that is to be entered into on the Business
Day of the request shall be given by Buyer. The Sellers hereby designate the two
representatives of the Sellers listed on Schedule 6.5 under the heading
"Sellers' Trading Representatives" or such other representatives as the Sellers
may designate upon written notice (the "Sellers' Trading
85
93
Representatives") to contact Buyer's Trading Representatives with respect to any
such commitment. Such request may be made orally and such consent (x) shall not
be unreasonably withheld (taking into account Buyer's interests), (y) shall be
given as soon as practicable and (z) shall be deemed to have been given if
Buyers Trading Representatives do not respond within 2 hours of receipt of such
request. The Sellers' Trading Representatives may rely on any consent given by
either of Buyer's Trading Representatives. The time periods within which Buyer's
Trading Representatives must respond shall commence on the date and time on
which either of Buyer's Trading Representatives receives a request for consent.
Section 6.6 Notice of Changes. Prior to the Closing, each party will
promptly advise the other in writing with respect to any matter arising after
execution of this Agreement of which that party obtains knowledge (including,
without limitation, knowledge that if in existence on the date of this Agreement
and not disclosed by Buyer would have resulted in the breach of Section 5.7) 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.
Section 6.7 Collective Bargaining Agreements. Effective as of the
Closing, Buyer shall cause each Company and each Subsidiary of each Company to
perform its respective obligations under any Collective Bargaining Agreement
that covers the employees of any such entity for the duration of the term of any
such Collective Bargaining Agreement. Effective as of the Closing, Buyer shall
assume the Collective Bargaining Agreements in place of Sithe and shall
thereafter recognize the Unions in place of Sithe and comply with all applicable
obligations in place of Sithe under the Collective Bargaining Agreements. If,
after the Closing, Buyer sells, transfers, or otherwise conveys any of the
Acquired Assets covered by one or more of the
86
94
Collective Bargaining Agreements, whether by transfer, lease, assignment,
corporate reorganization or otherwise, Buyer shall require, as an absolute
precondition of such sale, transfer, or conveyance, that the purchaser,
transferee, lessee or assignee of such assets assume the applicable Collective
Bargaining Agreement(s) and agree to be bound by the terms, conditions and
obligations thereof.
Section 6.8 Pollution Control Bonds. Notwithstanding any other
provision hereof, Buyer covenants and agrees that, after the Closing Date, Buyer
will not make any modifications to the "Purchased Assets" as defined under the
Sithe/GPU Agreements or take any action which, in and of itself, results in a
loss of the exclusion of interest on the "Pollution Control Revenue Bonds" as
defined under the Sithe/GPU Agreements issued on behalf of Jersey Central Power
& Light Company, Metropolitan Edison Company and Pennsylvania Electric Company
(the "GPU Sellers") in connection with such Purchased Assets from gross income
for federal income tax purposes under Section 103 of the Code. Actions with
respect to Purchased Assets shall not constitute a breach by Buyer of this
Section 6.8 in the following circumstances: (i) Buyer ceases to use or
decommissions any of the Purchased Assets or subsequently repowers such
Purchased Assets that are no longer used or decommissioned (but does not hold
such Purchased Assets for sale); (ii) Buyer acts with respect to Purchased
Assets in order to comply with requirements under applicable federal, state or
local environmental or other laws or regulations; or (iii) Buyer acts in a
manner the GPU Seller (i.e., a reasonable private provider of electricity of
similar stature as the GPU Seller) would have acted during the term of the
Pollution Control Revenue Bonds (including, but not limited to, applying new
technology). In the event Buyer acts or anticipates acting in a manner that will
cause a loss of the exclusion of interest on the Pollution
87
95
Control Revenue Bonds from gross income for federal income tax purposes, Buyer
shall give prompt written notice to such effect. Buyer further covenants and
agrees that, in the event that Buyer transfers any of the "Purchased Assets" (as
described above), Buyer shall obtain from its transferee a covenant and
agreement that is analogous to Buyer's covenant and agreement pursuant to this
Section 6.8, including this sentence. In addition, Buyer shall not, without at
least 60 days' advance written notice to the GPU Seller, take any action which
would result in (x) a change in the use of the assets financed with the
Pollution Revenue Control Bonds from the use in which such assets were
originally intended, or (y) a sale of such assets separate from the generating
assets to which they relate; provided that no notice is required of the events
set forth in clause (i), (ii), or (iii) above. This covenant shall survive the
Closing and shall continue in effect so long as the Pollution Control Revenue
Bonds remain outstanding.
Section 6.9 Certain Benefits Matters.
6.9.1 Following the Closing, Buyer agrees to cause each Company
and each Subsidiary of each Company to honor and perform the obligations of such
Company and such Subsidiary under each Benefit Plan in accordance with the terms
of any such Benefit Plan and in accordance with the obligations imposed under
the Sithe/GPU Agreements and the Collective Bargaining Agreements; provided,
however, that Buyer, any Company and any Subsidiary of any Company may make any
lawful changes to any such Benefit Plan, or terminate any Benefit Plan, to the
extent permitted under the terms of such Benefit Plan, the Sithe/GPU Agreements,
the Collective Bargaining Agreements and applicable law. Effective as of the
Closing, Buyer shall assume in place of Sithe all the obligations of Sithe under
the Sithe/GPU Agreements that pertain to the Benefit Plans and shall cause Sithe
to be released from all such obligations. In the event
88
96
that any employees of a Company or Subsidiary of a Company are covered under a
Benefit Plan sponsored by Sithe that is required to be maintained on behalf of
such employees pursuant to the Sithe/GPU Agreements or a Collective Bargaining
Agreement, Buyer shall, or shall cause the Company or the Subsidiary of any
Company that employs such employees either to assume the sponsorship of such
Benefit Plan, accept a spin-off of the portion of such Benefit Plan covering
such employees, adopt a new Employee Benefit Plan or amend an existing Employee
Benefit Plan to provide the required benefits, as Buyer may determine, provided
that Buyer shall notify Sithe of the manner in which it will meet the obligation
described in this sentence at least thirty (30) days before the Closing and
cause Sithe to be released from its obligations under the Sithe/GPU Agreements
effective upon the Closing. Nothing in this Agreement shall preclude a
subsequent agreement by Buyer to assume the obligation to provide benefits under
any Employee Benefit Plan to any group of employees under one or more of the
Collective Bargaining Agreements with respect to service earned with a Company
or a Subsidiary of any Company for the period commencing November 24, 1999 and
ending on the Closing Date, subject to reimbursement of Buyer by Sithe for the
cost of any such benefits, calculated as Buyer and Sithe may agree, and subject
to the agreement of the Union that represents the affected employees.
6.9.2 Following the Closing, Buyer shall cause each Company and
each Subsidiary of each Company to (A) waive all pre-existing conditions,
exclusions, and waiting periods with respect to participation and coverage
requirements applicable to the employees of such Company and each such
Subsidiary and their covered dependents under any group health plan, within the
meaning of Section 5000(b)(1) of the Code, in which such employees may be
89
97
eligible to participate after the Closing Date except to the extent that such
pre-existing conditions, exclusions and waiting periods were in effect in the
Benefit Plans that covered such employees prior to the Closing; (B) provide each
employee of such Company and each such Subsidiary with credit for payments made
by such employee or his covered dependents prior to the Closing Date for
purposes of satisfying any applicable deductible or out-of-pocket requirements
under any such group health plan, and (C) give credit, to employees of such
Company and each such Subsidiary, for purposes of satisfying any eligibility or
vesting requirements of (but not for purposes of benefit accrual under) any
Employee Benefit Plan, or other benefit program or arrangement in which
employees of such Company and each such Subsidiary may be eligible to
participate after the Closing Date, for services rendered by such employees
prior to the Closing Date to such Company and each such Subsidiary or, to the
extent recognized by the Benefit Plans, for services rendered to any other
Person; provided, that the foregoing shall not apply to the extent it would
result in duplication of benefits.
Section 6.10 WARN Act. Sellers and the Companies will provide Buyer on
or prior to the Closing Date with a written list of all employees of the
Companies or their Subsidiaries whose employment has been terminated and whose
work hours have been reduced within 90 calendar days preceding the Closing Date.
Such list will indicate the employee's site of employment, position or job
title, name, starting and ending dates of employment and date of employment
loss, termination, layoff and, if applicable, the amount of hour reduction. If a
plant closing or a mass layoff occurs or is deemed to occur with respect to any
Company or any Subsidiary of any Company or any of their respective facilities
in connection with the transactions contemplated in this Agreement or at any
time after the Closing, Buyer shall be
90
98
solely responsible for providing all notices required under the Work Adjustment
and Retraining Notification Act, 29 U.S.C. Section 2109 et seq. or the
regulations promulgated thereunder (the "WARN Act") and for taking all remedial
measures, including, without limitation, the payment of all amounts, penalties,
liabilities, costs and expenses if such notices are not provided.
Section 6.11 Sithe Release from GPU Liabilities. If requested by Sithe,
Buyer shall use reasonable efforts to cause all third parties to release Sithe
and its Affiliates and their successors and assigns (other than the Companies
and their Subsidiaries) from all GPU Liabilities and to obtain the
acknowledgment or consent of any third party of or to the assumption by Buyer of
the GPU liabilities as provided in Article 12; provided that the failure to
cause such release or obtain such acknowledgement or consent shall not affect
Buyer's obligations under Article 12.
Section 6.12 Change of Entity Names. Buyer acknowledges and agrees that
the trade name "Sithe" shall not be deemed an Acquired Asset and that the
Sellers shall be permitted (but shall not be required), on or prior to the
Closing, to cause each Company and each Subsidiary of each Company to change its
name such that the name "Sithe" is not used in any such entity's name. Following
the Closing Date, Buyer shall, upon the request of any Seller, cause any Company
or any Subsidiary of any Company the name of which includes the name "Sithe" to
change its name within 90 days of such request to exclude the name "Sithe."
Section 6.13 Interim Services Agreement. As promptly as practicable but
in any event within 30 days of the date of this Agreement, Buyer and Sithe shall
negotiate in good faith and use reasonable efforts to enter into an Interim
Services Agreement with respect to the services and on the terms and conditions
described in Schedule 1C; provided that the execution and
91
99
delivery of the Interim Services Agreement shall not be a condition to the
performance by any party of any of such party's obligations under this
Agreement.
Section 6.14 Environmental Matters/ISRA. Buyer acknowledges that Sithe
New Jersey Holdings, LLC has entered into agreements with the New Jersey
Department of Environmental Protection ("NJDEP") pursuant to the New Jersey
Industrial Site Recovery Act ("ISRA"), N.J.S.A. ss.ss. 13:1K-6 et seq.,
("Remediation Agreements") which obligate Sithe New Jersey Holdings, LLC to
conduct a Remediation of the Glen Gardner, Sayreville, Werner and Gilbert
generating facilities in conformance with applicable State standards. The
Sellers shall cause Sithe New Jersey Holdings, LLC to take such actions as are
necessary to obtain such authorizations as are required to consummate the
transactions contemplated by this Agreement in compliance with ISRA, including
the filings of any General Information Notices and any other required ISRA
documents and applications. Buyer agrees to cooperate with the Sellers and Sithe
New Jersey Holdings, LLC in these efforts, which cooperation shall include, but
shall not be limited to, execution of, or consenting to, ISRA related
applications, submissions or remediation agreements with NJDEP and the
establishment of remediation funding sources satisfactory to NJDEP. Buyer agrees
that the Sellers and their Affiliates shall have no responsibility for
compliance with ISRA after Closing. Pursuant to Section 12.1 of this Agreement,
at Closing, Buyer shall assume all of the Sellers' ISRA obligations and
liabilities related to the GPU Assets and shall indemnify and hold harmless the
Sellers, their Affiliates (other than the Companies and their Subsidiaries) and
their shareholders for any costs or liabilities associated with the remediation
of the GPU Assets, including those obligations and liabilities addressed in the
existing Remediation Agreements between Sithe New Jersey Holdings, LLC and NJDEP
and any
92
100
further ISRA obligations or liabilities arising as a result of this Agreement,
provided, that Buyer's obligation to indemnify and hold harmless the Sellers,
their Affiliates (other than the Companies and their Subsidiaries) and their
shareholders shall not apply to any fines or penalties imposed by NJDEP arising
out of Sellers' decision to close the transactions provided for in this
Agreement without obtaining NJDEP's authorizations pursuant to ISRA.
Section 6.15 Certain Rights Under Amended and Restated Transition Power
Purchase Agreements.
Buyer shall promptly (but in no event later than 5:00 p.m., Eastern
time, on February 23, 2000 provide the Sellers with written instructions setting
forth the amount, if any, of capacity with respect to which the applicable
Affiliates of the Sellers should exercise the put options. The Sellers shall
cause the applicable Affiliates to exercise the put options or refrain from such
exercise, in accordance with such instructions; provided, that Buyer shall have
consulted with the Sellers regarding the benefits to the Companies and their
Subsidiaries of complying with such instructions, and such instructions shall
not be inconsistent with the operation of the Companies and their Subsidiaries
in accordance with Good Operating Practices; and provided further, that in the
absence of any such written instructions from Buyer at or prior to 5:00 p.m.,
Eastern time, on February 23, 2000, Buyer shall be deemed to have consented to
either the exercise of such options (in whole or in part) or to a determination
not to exercise such options, in either case, as determined by either Seller (or
the applicable Affiliates) in the sole discretion of any such Person; and
provided, further, that neither the Sellers nor Buyer (nor their respective
Affiliates) shall be liable for any losses or damages alleged to have occurred
as a result of or arising out of any action or inaction consistent with any
instructions from Buyer given pursuant to this Section
93
101
6.15 or, failing delivery of such instruction from Buyer at or prior to 5:00
p.m., Eastern time, on February 23, 2000, any discretionary action or inaction
by either Seller (or any of their Affiliates) with respect to Section 3.06 of
any of the Amended and Restated Transition Power Purchase Agreements. The
Sellers shall provide to Buyer copies of any and all correspondence from GPU or
any of its Affiliates regarding the "put option" or the "call option" under any
of the Amended and Restated Transition Power Purchase Agreements immediately
after receipt thereof.
Section 6.16 Release of Certain Agreements. Buyer and Sellers shall use
reasonable efforts to obtain for the benefit of each Seller and its Affiliates
(other than the Companies and their Subsidiaries) a release from any and all
obligations and liabilities of such Seller and such Affiliates arising under, or
in connection with, each of the Contracts listed on Schedule 6.16.
Section 6.17 GPU Post Closing Amounts. The Sellers shall indemnify and
hold harmless Buyer from and against any liabilities, claims, demands,
judgments, losses, costs, damages or expenses from and after the Closing Date
that Buyer may sustain, suffer or incur and that result from or arise out of or
relate to the GPU Post Closing Amounts.
Section 6.18 Trading Contracts. On or prior to the Closing Date, the
Sellers shall cause Sithe Power Marketing, and Guarantor shall cause Reliant
Energy Services, Inc. ("RES") to enter into "back-to-back" Contracts pursuant to
which Sithe Power Marketing shall purchase from (or sell to) RES any fuel,
electricity, capacity or related products required to be sold by (or purchased
by) Sithe Power Marketing, as the case may be, pursuant to each Trading Contract
on substantially the same terms and conditions as are applicable to Sithe Power
Marketing under such Trading Contract. The Sellers shall use reasonable efforts
to cause Sithe Power Marketing to enter into the Trading Contracts described in
Section 6.5.2(f)(v)(B) using the form of enabling
94
102
agreement provided to the Sellers by Buyer with such changes thereto as shall be
mutually acceptable to RES and Sithe Power Marketing.
Section 6.19 Matters Relating to Keystone and Conemaugh. From the date
hereof until the Closing Date, the Sellers shall, and shall cause Sithe
Pennsylvania Holdings LLC to, promptly notify Buyer of, and consult with Buyer
with respect to, any proposed vote of the owners under the Keystone and
Conemaugh Owners' Agreements. Buyer shall direct the vote of Sithe Pennsylvania
Holdings LLC or any other Subsidiary of Sellers entitled to vote under such
agreements with respect to any such matter, provided that Buyer agrees to
execute such vote in a manner consistent with Good Operating Practices.
Notwithstanding the foregoing, in the event that Buyer does not provide written
direction to Sithe reasonably in advance of such proposed vote, but in any event
no later than one Business Day preceding the date of such proposed vote, Buyer
shall be deemed to have granted to Sithe Pennsylvania Holdings LLC the right to
exercise discretion with respect to the matter subject to such vote. Neither the
Sellers nor their Affiliates shall be liable for any losses or damages alleged
to have occurred as a result of or arising out of any vote by Sithe Pennsylvania
Holdings LLC under the Keystone and Conemaugh Owners' Agreements made in
accordance with this Section 6.19.
ARTICLE 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer under this Agreement shall be subject to the
satisfaction (or waiver by Buyer in its sole discretion), at or before the
Closing, of each of the following conditions, and the Sellers shall use
reasonable efforts to cause each of such conditions to be satisfied on or before
the Target Date and, in any event, as promptly as practicable:
95
103
Section 7.1 No Injunction. No Governmental Authority shall have issued
any injunction or other order (whether temporary, preliminary or permanent) or
enacted any statute, rule or regulation that prohibits the consummation of the
transactions contemplated hereby; provided, that the parties shall use their
reasonable efforts to litigate against, and obtain the lifting of, any such
injunction or order.
Section 7.2 Representations and Warranties. The representations and
warranties of each Seller contained in Articles 3 and 4 shall be true and
correct in all material respects as of the Closing Date (in each case except (a)
where such representation or warranty is expressly made only as of a date other
than the date hereof, in which case such representation or warranty shall be
true and correct in all material respects as of such date, and (b) where such
representation or warranty is qualified by reference to materiality or a
Material Adverse Effect, in which case such representation or warranty shall be
true in all respects) as though such representations and warranties were made at
and as of the Closing Date, except as otherwise contemplated by this Agreement
or as may be specified in amendments to any of the Schedules provided at the
Closing (none of which amendments may disclose the occurrence of any event or
development which, individually or in the aggregate, would have a Material
Adverse Effect); and Buyer shall have received at the Closing (i) a certificate
of each Seller dated the Closing Date and signed on behalf of such Seller by an
executive officer of such Seller to such effect, but only insofar as it is
applicable to the representations and warranties set forth in Article 3, which
certificate shall include a representation that one or more of the executive
officers listed on Schedule 1D have made due inquiry of (A) the plant managers
and (B) Martin Rosenberg not earlier than three (3) Business Days prior to the
Closing Date for purposes of affirming those representations and
96
104
warranties referred to in Section 6.5.4 that are qualified as to Sithe's
knowledge, and (ii) a certificate of each Seller dated the Closing Date and
signed by an executive officer of such Seller, to such effect, but only insofar
as it is applicable to the representations and warranties set forth in Article
4.
Section 7.3 Performance. Each Seller shall have performed and complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by such Seller at or prior to the
Closing (except where a covenant or agreement is qualified by reference to
materiality or Material Adverse Effect, in which case such covenant or agreement
shall be performed in all respects); and Buyer shall have received at the
Closing a certificate of each Seller dated the Closing Date and signed on behalf
of such Seller by an executive officer of such Seller to such effect.
Section 7.4 Approvals and Filings. All Permits, Environmental Permits,
consents, authorizations and approvals from, and all declarations, filings and
registrations with, Governmental Authorities or third parties that are listed on
Schedule 7.4 shall have been obtained or made without any conditions or terms
that, individually or in the aggregate, have or would have a Material Adverse
Effect. All waiting periods under the HSR Act shall have expired or been
properly terminated.
Section 7.5 Opinion of Counsel. Buyer shall have received an opinion or
opinions dated the Closing Date of counsel to the Sellers, covering the matters
set forth on Schedule 7.5.
Section 7.6 No Material Adverse Effect. Since the date of this
Agreement, no events that have or would have, individually or in the aggregate,
a Material Adverse Effect shall have occurred and be continuing.
97
105
Section 7.7 Buyer Permits. Buyer shall have obtained all Permits and
Environmental Permits listed on Schedule 7.4, to the extent necessary, to own
and operate the generating facilities included in the Acquired Assets in
accordance with past emissions and operating practices, except for those Permits
and Environmental Permits the absence of which would not individually or in the
aggregate have a Material Adverse Effect.
Section 7.8 Resignations. Buyer shall have received the written
resignations of the directors, limited liability company managers and officers
of each of the Companies and their Subsidiaries, effective as of the Closing
Date.
ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH SELLER
The obligations of Sellers under this Agreement shall be subject to the
satisfaction (or waiver by the Sellers in their sole discretion) at or before
the Closing, of each of the following conditions, and Buyer shall use reasonable
efforts to cause each of such conditions to be satisfied on or before the Target
Date and, in any event, as promptly as practicable:
Section 8.1 No Injunction. No Governmental Authority shall have issued
any injunction or other order (whether temporary, preliminary or permanent) or
enacted any statute, rule or regulation that prohibits the consummation of the
transactions contemplated hereby; provided, that the parties shall use their
reasonable efforts to litigate against, and obtain the lifting of, any such
injunction or order.
Section 8.2 Representations and Warranties. The representations and
warranties of Buyer and Guarantor contained in Articles 5 and 13, respectively,
shall be true and correct in all material respects as of the Closing Date (in
each case except (a) where such representation or warranty is expressly made
only as of a date other than the date hereof, in which case such representation
or
98
106
warranty shall be true and correct in all material respects as of such date) as
though such representations and warranties were made at and as of the Closing
Date, except as otherwise contemplated by this Agreement; and the Sellers shall
have received at the Closing (i) a certificate, dated the Closing Date, signed
on behalf of Buyer by an executive officer of Buyer to such effect, but only
insofar as it is applicable to the representations and warranties set forth in
Article 5, and (ii) a certificate, dated the Closing Date, signed on behalf of
Guarantor by an executive officer of Guarantor to such effect, but only insofar
as it is applicable to the representations and warranties set forth in Article
13.
Section 8.3 Performance. Buyer shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it at or prior to the Closing (except where
a covenant or agreement is qualified by reference to materiality or Material
Adverse Effect, in which case such covenant or agreement shall be performed in
all respects); and the Sellers shall have received at the Closing a certificate,
dated the Closing Date, signed on behalf of Buyer by an executive officer of
Buyer to such effect.
Section 8.4 Approvals and Filings. All Permits, Environmental Permits,
consents, authorizations and approvals from, and all declarations, filings and
registrations with, Governmental Authorities or third parties that are listed on
Schedule 8.4 shall have been obtained or made. All waiting periods under the HSR
Act shall have expired or been properly terminated.
99
107
Section 8.5 Opinion of Counsel. The Sellers shall have received an
opinion or opinions dated the Closing Date of counsel to Buyer and Guarantor,
covering the matters set forth in Schedule 8.5.
ARTICLE 9. CLOSING
Section 9.1 Time and Place. Subject to the provisions of Articles 7 and
8, the closing of the sale by the Sellers and the purchase by Buyer of the
Intercompany Notes, the Mid-Atlantic Stock and the LLC Interests and the
consummation of the transactions contemplated by Article 2 (the "Closing") shall
take place at the offices of Latham & Watkins, 885 Third Avenue, New York, New
York 10022 on the Target Date; provided, however, that, if all of the conditions
in Articles 7 and 8 are not satisfied by the Target Date, then, subject to
Article 10, the Closing shall take place on the fifth Business Day after the
date on which such conditions are satisfied (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions); and provided, further that, notwithstanding the
foregoing, the Closing may take place at such other place, at such other time,
or on such other date as the parties hereto may mutually agree (the date on
which the Closing occurs being herein referred to as the "Closing Date").
Section 9.2 Payments and Terminated Obligations.
9.2.1 Payment for Intercompany Notes, Mid-Atlantic Stock and
LLC Interests. At the Closing, upon the terms and subject to the conditions set
forth herein, Buyer shall pay to Genco, by wire transfer of immediately
available funds to an account designated by the Sellers,
100
108
the Fixed Purchase Price, as adjusted by the Estimated Adjustment Amount, in
United States dollars.
9.2.2 Terminated Obligations; Releases. At the Closing, upon
the terms and subject to the conditions set forth herein, (a) Buyer shall
deliver to the applicable Company or Subsidiary of a Company (i) any letters of
credit in substitution for the Terminated Obligations that are required to be
delivered pursuant to Section 2.3 or (ii) evidence of other arrangements made in
satisfaction of Section 2.3 and (b) each Seller shall receive the releases
obtained pursuant to Sections 6.11 and 6.16.
Section 9.3 Deliveries.
9.3.1 Transfer Instruments. Genco shall deliver to Buyer (a)
the Intercompany Notes, duly endorsed in blank for transfer, (b) certificate(s)
evidencing the Mid-Atlantic Stock, duly endorsed in blank for transfer or
accompanied by a stock power duly executed in blank, (c) instruments of transfer
in substantially the form attached hereto as Schedule 9.3A, in order to
effectuate the transfer of the LLC Interests and (d) a general transfer and
conveyancing instrument with respect to the Acquired Assets in substantially the
form attached hereto as Schedule 9.3B duly executed by the Sellers.
9.3.2 Certificates; Opinions. Buyer and the Sellers shall
deliver to each other the certificates, opinions of counsel and other items
described in Articles 7 and 8.
9.3.3 Other Closing Transactions. Each of the parties shall
take such other actions required hereby to be performed by it prior to or on the
Closing Date, including, without limitation, satisfying the conditions set forth
in Articles 7 and 8, and providing evidence of such satisfaction consisting of
(i) the certificates required by Sections 7.2, 7.3, 8.2 and 8.3; (ii) copies
101
109
of the consents, authorizations, approvals, declarations, filings and
registrations listed on Schedules 7.4 and 8.4, and (iii) copies of the opinions
of counsel required by Sections 7.5 and 8.5.
9.3.4 Senior Credit Facility and BECO Facility. The Sellers
shall deliver to Buyer, with respect to each of the Senior Credit Facility and
the BECO Facility, either (i) evidence of consent of the lenders under such
facility to the consummation of the transactions contemplated by this Agreement
or (ii) a payoff letter evidencing the discharge of all outstanding obligations
of the Sellers and their Affiliates under such facility.
9.3.5 Additional Documents. Each party shall execute and
deliver to the other parties all documents which the other reasonably determines
are necessary to consummate the transactions contemplated hereby or to
demonstrate or evidence compliance with the terms or the accuracy of any
representation and warranty set forth herein. At the Closing, the Sellers shall
deliver to Buyer the stock certificates, certificates of organization, limited
liability company agreements and/or other instruments evidencing the Companies'
ownership of their respective Subsidiaries.
ARTICLE 10. TERMINATION AND ABANDONMENT
Section 10.1 Methods of Termination. This Agreement may be terminated
and the transactions herein contemplated may be abandoned at any time prior to
the Closing Date:
10.1.1 by mutual consent of Sithe and Buyer; or
10.1.2 by Buyer at any time after September 30, 2000 if any of
the conditions provided for in Article 7 of this Agreement shall not have been
satisfied or waived in writing by
102
110
Buyer in its sole discretion prior to such date; provided, that if any condition
in Article 7 has not been so satisfied or waived and diligent efforts are being
undertaken to satisfy such condition, including, but not limited to, efforts to
cure any breach of any representation or warranty, then the references to
September 30, 2000 in this Section 10.1.2 shall be extended for up to 90 days so
long as such diligent efforts continue; or
10.1.3 by Sithe at any time after September 30, 2000 if any of
the conditions provided for in Article 8 of this Agreement shall not have been
satisfied or waived in writing by Sithe in its sole discretion prior to such
date; provided, that if any condition in Article 8 has not been so satisfied or
waived and diligent efforts are being undertaken to satisfy such condition,
including, but not limited to, efforts to cure any breach of any representation
or warranty, then the references to September 30, 2000 in this Section 10.1.3
shall be extended for up to 90 days so long as such diligent efforts continue;
or
10.1.4 (a) by Buyer, upon not less than 30 days' prior written
notice, there has been a violation or breach by any Seller of any agreement,
representation or warranty contained in this Agreement which, individually or in
the aggregate, has or would have a Material Adverse Effect and which is not
susceptible to cure (or if so susceptible is not the subject of diligent efforts
on the part of the breaching party to cure; provided that no such efforts shall
affect the time periods set forth in Section 10.1.2); provided, that Buyer is
not in material violation or breach of its agreements, representations or
warranties contained in this Agreement, or (b) by Sithe upon not less than 30
days, prior written notice, if there has been a material violation or breach by
Buyer of any agreement, representation or warranty contained in this Agreement;
103
111
provided, that the Sellers are not in material violation or breach of their
agreements, representations or warranties contained in this Agreement.
Section 10.2 Procedure Upon Termination and Consequences. Buyer or
Sithe, as the case may be, may terminate this Agreement when permitted pursuant
to Section 10.1 by delivering written notice of such termination, and such
termination shall be effective upon delivery of such notice in accordance with
Section 14.3. If this Agreement is terminated as provided herein:
10.2.1 Buyer will deliver all documents, work papers and other
materials relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof, to the Sellers; and
10.2.2 no party hereto shall have any liability or further
obligation to any other party to this Agreement (i) except with respect to the
Confidentiality Agreement, which shall survive the termination of this
Agreement, including with respect to information that is subject to the
Confidentiality Agreement pursuant to Section 6.1, and the confidentiality
agreement dated February 8, 2000 between Buyer and Sithe which shall survive the
termination of this Agreement, (ii) except for such legal and equitable rights
and remedies which any party may have by reason of any breach or violation of
this Agreement by any other party prior to such termination and (iii) except
pursuant to Section 14.6.
ARTICLE 11. SURVIVAL
Section 11.1 Survival. The several representations and
warranties of each Seller contained in Article 4 (and in the certificate
delivered pursuant to Section 7.2(ii)), the
104
112
representations and warranties of Buyer contained in Sections 5.1, 5.2 and 5.3
(and the certificate delivered pursuant to Section 8.2(i) (only insofar as
applicable to Sections 5.1, 5.2 and 5.3), the representations and warranties of
Guarantor contained in Sections 13.2.1, 13.2.2. and 13.2.3 (and the certificate
delivered pursuant to Section 8.2(ii) (only insofar as applicable to Sections
13.1, 13.2 and 13.3), the covenants and agreements of the Sellers contained in
Sections 2.2, 2.3, 2.4, 2.5, the last sentence of Section 6.3, 6.4, 6.16, 6.17,
10.2.1, Articles 11, 12 and 14, the covenants and agreements of Buyer contained
in Sections 2.2, 2.3, 2.4, 2.5, 6.4, 6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.14,
6.16, Articles 11, 12 and 14, and the covenants and agreements of Guarantor
contained in Articles 11 and 13, shall survive the Closing. Except as provided
in the preceding sentence, the representations, warranties, covenants and
agreements contained in this Agreement and in any certificate delivered pursuant
to this Agreement shall not survive the Closing and shall terminate
simultaneously therewith, and from and after the Closing no party shall have any
liability with respect to any such terminated representation, warranty, covenant
or agreement.
ARTICLE 12. ASSUMPTION OF GPU LIABILITIES; INDEMNIFICATION
Section 12.1 Assumption of GPU Liabilities; Indemnification. At the
Closing, Buyer shall assume, pursuant to an instrument substantially in the form
attached hereto as Schedule 12.1, all obligations and liabilities of any kind,
whether fixed, contingent, accrued or otherwise, that any Seller or any
Affiliate of any Seller (other than any Company or any Subsidiary of any
Company) or any of their respective successors or assigns may have under, with
respect to or in connection with the GPU Liabilities. Buyer shall indemnify,
defend and hold harmless each Seller, their Affiliates (other than the Companies
and their Subsidiaries) and their respective
105
113
officers, directors, employees, shareholders, Affiliates and agents (each, an
"Indemnitee") from and against any and all claims, demands, suits, losses,
liabilities, damages, obligations, payments, costs and expenses (including,
without limitation, the costs and expenses of any and all actions, suits,
proceedings, assessments, judgments, settlements and compromises relating
thereto and reasonable attorneys' fees and reasonable disbursements in
connection therewith) (each, an "Indemnifiable Loss"), asserted against or
suffered by any Indemnitee relating to, resulting from or arising out of (i) the
GPU Liabilities or (ii) any Third Party Claims against any Indemnitee arising
out of or in connection with the Acquired Assets, including the acquisition,
ownership or operation thereof.
Section 12.2 Defense of Claims.
12.2.1 If any Indemnitee receives notice of the assertion of
any claim or of the commencement of any claims, action, or proceeding made or
brought by any Person (including Guarantor, Buyer, their respective Affiliates,
officers, directors and shareholders, and the successors and assigns of any such
Person) (a "Third Party Claim") with respect to which indemnification is to be
sought from a Person that is required to indemnify such Indemnitee (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. In addition, the Indemnitee shall transmit to the Indemnifying
Party a copy of all papers served with respect to such claim (if any). The
Indemnitee shall cooperate in good faith
106
114
in such defense at the Indemnifying Party's expense. If the Indemnifying Party
shall acknowledge in writing to the Indemnitee that the Indemnifying Party shall
be obligated to indemnify the Indemnitee under the terms of its indemnity
hereunder in connection with such Third Party Claim, then 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 employing 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. 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.
12.2.2 (i) If, within ten (10) calendar days after an
Indemnitee provides written notice to the Indemnifying Party of any Third Party
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 12.2.1, 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, 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
107
115
any Third Party Claim which would lead to liability or create any financial or
other obligation or restriction 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.
12.2.3 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, and the Indemnifying Party
shall have a period of thirty (30) calendar days after the Indemnifying Party's
receipt of such notice 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.
12.2.4 Notwithstanding anything to the contrary contained
herein:
108
116
12.2.4.1 Any Indemnitee shall use 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 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, provided that
the Indemnitee shall only be required to make expenditures if and to the extent
that the Indemnifying Party shall have advanced funds to the Indemnitee for such
expenditures after notice from the Indemnitee to the Indemnifying Party that
such an expenditure would be required.
12.2.4.2 Any Indemnifiable Loss shall be net of the
dollar amount of any insurance or other proceeds actually received by the
Indemnitee with respect to the Indemnifiable Loss, but shall not take into
account any income tax benefits to the Indemnitee, or any income taxes
attributable to the receipt of any indemnification payments hereunder. Any party
seeking indemnity hereunder shall use reasonable efforts to seek coverage
(including both costs of defense and indemnity) under applicable insurance
policies with respect to any such Indemnifiable Loss; provided, that the failure
to seek or obtain such coverage shall not affect such party's rights pursuant to
this Article 12, and provided, further, that no such party seeking
indemnification shall be required to enter into or maintain any insurance policy
or incur additional insurance premiums pursuant to this Section 12.2.4.2.
109
117
The expiration or termination of any covenant or agreement
shall not affect the parties' obligations under this Section if the Indemnitee
provides the Indemnifying Party with proper notice of the claim or event for
which indemnification is sought prior to such expiration, termination or
extinguishment.
Notwithstanding anything to the contrary 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. Buyer and the Sellers 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 last paragraph of Section 12.2.4.2. shall not preclude recovery of an
Indemnifiable Loss by an Indemnitee to the extent such Indemnifiable Loss is
payable to a third party in connection with a Third Party Claim.
12.2.5 A failure to give timely notice as provided in this
Section 12.2 shall not affect the rights or obligations of any party hereunder
except if, and only to the extent that, as a result of such failure, the party
which was entitled to receive such notice was actually prejudiced as a result of
such failure.
12.2.6 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
110
118
any costs or expenses incurred in connection therewith shall promptly be repaid
by the Indemnitee to the Indemnifying Party.
ARTICLE 13. OBLIGATIONS OF GUARANTOR
Section 13.1 Guarantee. In order to induce the Sellers to enter into
this Agreement and to consummate the transactions contemplated hereby, and for
other good and valuable consideration received, Guarantor irrevocably and
unconditionally guarantees Buyer's obligation to pay promptly when due the
Aggregate Purchase Price in accordance with the terms of this Agreement (the
"Guaranteed Obligations"). No invalidity, irregularity or unenforceability of
all or any part of the Guaranteed Obligations, or of any security therefor,
shall affect, impair or be a defense to the foregoing guarantee nor shall any
other circumstances which may otherwise constitute a defense available to, or
legal or equitable discharge of, Guarantor in respect of the Guaranteed
Obligations, or of any security therefor, or in respect of the foregoing
guarantee affect, impair or be a defense to the foregoing guarantee. The
liability of Guarantor hereunder is absolute, primary and unconditional and
shall not be subject to any offset, defense or counterclaim of Guarantor.
Guarantor also agrees that no Seller need attempt to collect any part of the
Guaranteed Obligations from Guarantor or others, but may require Guarantor to
make immediate payment of the Guaranteed Obligations when due or at any time
thereafter. To the fullest extent permitted by law, Guarantor hereby waives all
defenses, counterclaims and all suretyship defenses.
111
119
Section 13.2 Representations and Warranties Regarding Guarantor.
Guarantor represents and warrants to the Sellers that, as of the date hereof
(except where such representation or warranty is expressly made only as of a
specific date) as follows:
13.2.1 Organization and Corporate Power. Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. Guarantor has full corporate power and authority to
execute, deliver and perform this Agreement.
13.2.2 Authorization; Validity. The execution, delivery and
performance by Guarantor of this Agreement have been duly authorized by all
requisite corporate action on the part of Guarantor. This Agreement has been
duly executed and delivered by Guarantor and constitutes the valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and general equitable principles
(whether considered in a proceeding in equity or at law).
13.2.3 No Conflict. The execution, delivery and performance by
Guarantor of this Agreement and the consummation of the transactions
contemplated hereby will not (i) violate the articles of incorporation or
by-laws of Guarantor; (ii) violate any law or regulation applicable to
Guarantor, or any order of any Governmental Authority having jurisdiction over
Guarantor, or (iii) violate or conflict with, or constitute (with due notice or
lapse of time or both) a default under, any Contract by which Guarantor or any
of its assets is bound.
13.2.4 Consents and Approvals. No registration or filing with,
or consent or approval of or other action by, any Governmental Authority or any
other Person is or will be
112
120
necessary for the valid execution, delivery and performance by Guarantor of its
obligations under this Agreement.
Section 13.3 Covenants Relating to Buyer.
13.3.1 Guarantor hereby covenants and agrees that, for a period
commencing on the Closing Date and terminating on the second anniversary of the
Closing Date, Guarantor shall cause Buyer at all times to maintain (i) a Net
Worth equal to the greater of (a) $611 million or (b) an amount that is not
significantly less than the Net Worth of Buyer immediately after the Closing,
and (ii) sufficient net assets to discharge and perform its obligations pursuant
to this Agreement. Not later than forty five (45) days after the Closing Date,
Guarantor shall deliver to the Sellers a certificate of the Chief Financial
Officer of Guarantor (or an officer of Guarantor serving in a similar capacity)
(the "Chief Financial Officer of Guarantor") setting forth the Net Worth of
Buyer and its Subsidiaries as of the end of the calendar month immediately
preceding the month in which the Closing occurs, on a pro forma basis to give
effect to the purchase of the Intercompany Notes, the LLC Interests and the
Sithe Mid Atlantic Stock (the "CFO Certificate") and certifying that the amount
set forth in the CFO Certificate has been derived from a historical balance
sheet prepared in accordance with GAAP and that the adjustments thereto are
based upon reasonable assumptions. Not later than (y) the 45th day after the
last day of each of the first, second and third fiscal quarters of Buyer and (z)
the 100th day after the last day of each fiscal year of Buyer, Guarantor shall
provide Sithe with a certificate of the Chief Financial Officer of Guarantor to
the effect that Guarantor was in compliance with the provisions of this Section
13.3.1 during the preceding fiscal quarter (or fiscal year, in the case of any
such certificate delivered with respect to a fiscal year-end balance sheet).
113
121
13.3.2 Upon the reasonable request of Sithe in connection with
a possible acquisition, merger, consolidation, financing or other similar
transaction, Buyer shall provide to Sithe, upon not less than 10 Business Days'
prior notice, the most recent year-end audited consolidated balance sheet of
Buyer and its Subsidiaries (and, if such request is made later than the 135th
day following the last day of Buyer's fiscal year, the most recent unaudited
consolidated balance sheet of Buyer and its Subsidiaries) together with a
certificate of the Chief Financial Officer of Buyer that such balance sheet or
balance sheets have been prepared in accordance with GAAP; provided that in no
event shall Buyer be required to deliver the foregoing balance sheets pursuant
to this Section 13.3.2: (a) more frequently than twice in any 365-day period;
and (b) unless Buyer and Sithe (and any third party to which Sithe proposes to
provide copies of such balance sheets) shall have executed a confidentiality
agreement reasonably satisfactory to Buyer and Sithe. In addition, if there is a
claim or threatened claim against Sithe or any of its Affiliates with respect to
any matter as to which Buyer is obligated to provide indemnification pursuant to
Article 12 and, based on the advice of Sithe's independent auditors, in the
absence of evidence of Buyers ability to satisfy such obligation, such claim or
threatened claim will be required to be disclosed, in footnotes or otherwise, in
Sithe's consolidated financial statements, then upon the reasonable request of
Sithe, Buyer shall provide to Sithe, upon not less than 10 Business Days' prior
notice, the financial statements referred to the preceding sentence, but without
regard to the number of other requests that Sithe may have delivered during the
preceding 365-day period.
13.3.3 Notwithstanding Section 13.3.1, Guarantor may elect, at
any time on or prior to the second anniversary of the Closing Date, to terminate
Section 13.3.1 by delivering to the Sellers a guarantee of all of Buyer's
obligations hereunder in form and substance satisfactory
114
122
to the Sellers in their sole discretion by either (a) Guarantor or (b) another
Person, provided that such other Person has (i) a Net Worth greater than or
equal to the Net Worth of Guarantor immediately prior to the date of such
assumption and (ii) either (A) securities listed on a national securities
exchange in the United States, Britain, Japan, France, Germany, the Netherlands
or Belgium, (B) an investment grade credit rating for long term unsecured
indebtedness from either Standard and Poors Rating Group, a division of the
McGraw-Hill Industries, Inc., or Moody's Investors Services, Inc. or (C) a
financial condition reasonably acceptable to Sithe, as determined based upon
financial statements that are mutually acceptable to Guarantor and Sithe. Any
such guarantee shall terminate on the second anniversary of the Closing Date.
ARTICLE 14. MISCELLANEOUS
Section 14.1 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by written agreement of Buyer and Sithe.
Section 14.2 Waiver of Compliance. Any failure of Buyer, on the one
hand, or any Seller, on the other hand, to comply with any obligation, covenant,
agreement or condition contained herein may be expressly waived in writing by
Sithe, in the event of any such failure by Buyer, or by Buyer, in the event of
any such failure by any Seller, but such waiver or failure to insist upon strict
compliance shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
Section 14.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery, (b) facsimile transmission,
115
123
(c) registered or certified mail, postage prepaid, return receipt requested, or
(d) overnight courier service. Notices shall be sent to the appropriate party at
its address or facsimile number given below (or at such other address or
facsimile number for such party as shall be specified by notice given
hereunder).
If to either Seller, to:
Sithe Energies, Inc.
335 Madison Avenue, 28th Floor
New York, New York 10017
Attn: Chief Executive Officer
Telecopy: (212) 351-0015
General Counsel
Telecopy: (212) 351-0019
with copies to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Attn: Roger H. Kimmel, Esq.
Samuel A. Fishman, Esq.
Telecopy: (212) 751-4864
or to such other Person or address as Sithe shall designate by notice
to Buyer.
If to Buyer to:
Reliant Energy Power Generation, Inc.
1111 Louisiana
Houston, Texas 77002
Telecopy No.: 713-207-9605
Attn: J. Douglas Divine
Senior Vice President
Generation Development, Wholesale Group
116
124
with a copy to:
Reliant Energy, Incorporated
1111 Louisiana
Houston, Texas 77002
Telecopy: 713-207-0116
Attn: Michael L. Jines
Vice President and General Counsel, Wholesale
Group
or to such other Person or address as Buyer shall designate by notice
to Sithe.
All such notices, requests, demands, waivers and communications shall
be deemed received upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate address or (iii) in the case of a facsimile
transmission, transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above by first
class mail or by an overnight courier service, postage prepaid. However, such
mailing shall in no way alter the time at which the facsimile notice is deemed
received.
Section 14.4 Binding Nature; Assignment. This Agreement 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 of the
parties hereto without prior written consent of (i) in the case of an assignment
by Buyer or Guarantor, Sithe or (ii) in the case of an assignment by any Seller,
Buyer; provided, that Buyer may assign and delegate its rights, interests and
obligations hereunder to one or more wholly-owned direct or indirect
Subsidiaries of Buyer or of Guarantor, upon written notice to
117
125
Sithe (which shall contain a representation that the assignee is a wholly-owned
Subsidiary of Buyer or Guarantor) at or before the Closing Date, in which event
Buyer shall remain liable for all of its obligations under this Agreement and
such Subsidiary or Subsidiaries shall, together with Buyer, be jointly and
severally liable for such obligations. Nothing contained herein, express or
implied, is intended to confer on any Person other than the parties hereto or
their successors and assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement. Notwithstanding the proviso contained in
the immediately preceding sentence, Buyer may not assign its rights, interests
and obligations hereunder if such assignment could reasonably be expected to
result in a delay or impediment to consummating those transactions hereunder
which by their terms are to be performed on the Closing Date, including, without
limitation, due to the need to obtain the consent of any third party, including
any Governmental Authority, not required for Buyer to consummate the
transactions contemplated hereby.
Section 14.5 Entire Agreement. This Agreement, including the Schedules
and the Confidentiality Agreement, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement, including the Schedules, the Confidentiality Agreement
and the confidentiality agreement, dated February 8, 2000 between Buyer and
Sithe, supersede all prior drafts, agreements and understandings between or
among any or all of the parties with respect to such subject matter and
supersede any letters, memoranda or other documents or communications, whether
oral, written or electronic, submitted or made by (i) Buyer or its agents or
representatives to either Seller, Goldman, Sachs & Co. or any of their
respective Affiliates, agents or representatives, or (ii) either Seller,
Goldman, Sachs & Co. or their respective agents or representatives to Buyer or
any of its agents
118
126
or representatives, in connection with the bidding process which occurred prior
to the execution of this Agreement or otherwise in connection with the
negotiation and execution of this Agreement. No communications by or on behalf
of any Seller, including responses to any questions or inquiries, whether
orally, in writing or electronically, and no information provided in any data
room or any copies of any information from any data room provided to Buyer or
any other information shall be deemed to (i) constitute a representation,
warranty or an agreement of such Seller, or (ii) be part of this Agreement.
Section 14.6 Expenses. Except as otherwise expressly provided in
Section 2.2.3, each party to this Agreement will pay its own expenses in
connection with the negotiation of this Agreement, the performance of its
obligations hereunder, and the consummation of the transactions contemplated
herein.
Section 14.7 Press Releases and Announcements; Disclosure. Prior to the
Closing Date, no press release or other public announcement or disclosure
related to this Agreement or the transactions contemplated herein (including but
not limited to the terms and conditions of this Agreement) shall be issued or
made without the prior approval of Buyer and Sithe. The foregoing shall not
prohibit any disclosure required by law, provided such disclosure is made
pursuant to the Confidentiality Agreement and that the disclosing party shall
consult with the other parties in advance of such disclosure.
Section 14.8 Acknowledgment.
14.8.1 Buyer acknowledges that neither any Seller, any Company,
any Subsidiary of any Company nor any other Person has made any representation
or warranty, expressed or implied, as to the accuracy or completeness of any
information regarding any Seller, any
119
127
Company or any Subsidiary of any Company not included in this Agreement and
the Schedules. Without limiting the generality of the foregoing, no
representation or warranty is made with respect to any information in the
Confidential Offering Memorandum dated November 1999 or any supplement or
amendment thereto provided in connection with the solicitation of proposals to
enter into the transactions contemplated by this Agreement, such information
having been provided for the convenience of Buyer in order to assist Buyer in
framing its due diligence efforts.
14.8.2 Buyer further acknowledges that (i) Buyer, either alone
or together with any Persons Buyer has retained to advise it with respect to the
transactions contemplated hereby ("Advisors"), has knowledge and experience in
transactions of this type and in the business of the Companies and their
Subsidiaries and is therefore capable of evaluating the risks and merits of
acquiring the Intercompany Notes, the Mid-Atlantic Stock and the LLC Interests
and the consummation of the transactions contemplated hereby, (ii) it has relied
on its own independent investigation, and has not relied on any information or
representations furnished by any Seller, any Company, any Subsidiary of any
Company or any representative or agent of any thereof or any other Person
(except as specifically set forth herein), in determining to enter into this
Agreement, (iii) neither any Seller, any Company, any Subsidiary of any Company
nor any representative or agent of any thereof or any other Person has given any
investment, legal or other advice or rendered any opinion as to whether the
purchase of the Intercompany Notes, the Mid-Atlantic Stock and the LLC Interests
or the consummation of the transactions contemplated hereby is prudent, and
Buyer is not relying on any representation or warranty by any Seller, any
Company, any Subsidiary of any Company or any representative or agent of any
thereof or any
120
128
other Person except as set forth in this Agreement, (iv) Buyer has conducted
extensive due diligence, including a review of the documents contained in a data
room prepared by or on behalf of the Sellers, the Companies and the Subsidiaries
of the Companies; and (v) the Sellers made available to Buyer all documents,
records and books pertaining to the Companies and the Subsidiaries of the
Companies that Buyer's attorneys, accountants, Advisors, if any, and Buyer have
requested, and Buyer and its Advisors, if any, have had the opportunity to visit
the Companies and the Subsidiaries of the Companies, their facilities, plants,
development sites, offices and other properties, and ask questions and receive
answers concerning the Companies, the Subsidiaries of the Companies and the
terms and conditions of this Agreement.
Section 14.9 Disclaimer Regarding Assets. Except as otherwise expressly
provided herein, each Seller expressly disclaims any representations or
warranties of any kind or nature, express or implied, as to the condition, value
or quality of the assets or operations of the Companies or the Subsidiaries of
the Companies or the prospects (financial and otherwise), risks and other
incidents of the Companies or the Subsidiaries of the Companies and each Seller
specifically disclaims any representation or warranty of merchantability, usage,
suitability or fitness for any particular purpose with respect to such 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 as to the condition of, or the rights of any Company or any
Subsidiary of any Company, or their title to, any of their assets, or any part
thereof, or whether any Company or any Subsidiary of any Company possesses
sufficient Real Property or personal property interests to own or operate such
assets. Except as expressly provided herein, no Schedule or exhibit to this
Agreement, nor any other material or information
121
129
provided by or communications made by any Seller, any Company, any Subsidiary of
any Company, or any of their respective representatives will cause or create any
warranty, express or implied, as to the condition, value or quality of such
assets. Without limiting the generality of the foregoing, no representation or
warranty is made with respect to the accuracy of any information provided in any
site tours or on any web site, or in any meetings with management or other
personnel of any Seller, any Company, any Subsidiary of any Company or their
respective representatives, except as expressly set forth herein.
Section 14.10 Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York without giving
effect to the choice of law principles thereof which would require the
application of the laws of a jurisdiction other than New York. Each party
consents to personal jurisdiction in any action arising out of or relating to
this Agreement brought in the U.S. District Court for the Southern District of
New York, or any New York court within the County and State of New York having
subject matter jurisdiction as to a matter arising out of or relating to this
Agreement (and the appropriate appellate courts), and each of the parties hereto
agrees that (except as provided in Sections 2.2.2 and 2.2.3) any action
instituted by either of them against the other arising out of or relating to
this Agreement will be instituted exclusively in one of the above specified
courts.
Section 14.11 Nonforeign Affidavit. At or prior to the Closing, Genco
shall furnish Buyer an affidavit, stating, under penalty of perjury, that the
indicated number is the transferor's United States taxpayer identification
number and that the transferor is not a foreign person, pursuant to Section
1445(b)(2) of the Code. In the event that Genco fails to furnish such affidavit
to Buyer, Buyer shall be entitled to deduct and withhold from the Aggregate
Purchase
122
130
Price federal income taxes to the extent required to be withheld pursuant to
Section 1445(a) of the Code.
Section 14.12 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. Delivery of an executed
counterpart of a signature page of this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart of this
Agreement.
Section 14.13 Interpretation. The article and section headings
contained in this Agreement are inserted for convenience only and shall not
constitute a part hereof.
Section 14.14 Confidentiality. (a) (i) The terms and conditions of the
Confidentiality Agreement are hereby incorporated by reference into this
Agreement as of the Closing Date, as though fully set forth herein, except for
the following amendments: (A) the provisions thereof shall terminate five years
from the Closing Date; (B) the term "Confidential Information" as used therein
shall mean all information, whether written, oral or otherwise and on whatever
medium that is furnished to the Recipient (as defined in the Confidentiality
Agreement) and its Representatives (each as defined in the Confidentiality
Agreement) by Sithe which concerns Sithe, its affiliates, properties or assets
or the properties or assets of GPU, and all analyses, compilations, forecasts,
studies or other documents prepared by Recipient (as defined in the
Confidentiality Agreement) or its Representatives which contain such
information; and (C) the provisions of the Confidentiality Agreement shall not
apply to any Confidential Information relating to the Acquired Assets (the
"Confidential Acquired Asset Information"). From and after
123
131
the Closing Date, the term "Confidentiality Agreement" shall mean the
Confidentiality Agreement as so incorporated by reference herein and as so
modified.
(b) From and after the Closing Date, Sithe agrees to maintain
in confidence any Confidential Acquired Asset Information Sithe or any of its
Subsidiaries have (with the exception of any publicly available information) for
a period of five (5) years from the Closing Date to the same extent and subject
to the same terms, conditions and exceptions as apply to the Recipient pursuant
to Section 14.14(a) with respect to Confidential Information (including, without
limitation, those terms, conditions and exceptions that were incorporated by
reference therein), mutatis mutandis as though such terms, conditions and
exceptions were set forth in this Section 14.14(b).
Section 14.15 Limitation on Due Inquiry. To the extent due inquiry is
required to be made of Martin Rosenberg with respect to any representation or
warranty made under this Agreement as of any date after Martin Rosenberg ceases
to be an employee of Sithe or of an Affiliate of Sithe, such requirement shall
be deemed to have been satisfied if such due inquiry is made within fourteen
(14) days prior to or 14 days after the date on which Mr. Rosenberg ceases to be
an employee of Sithe or an Affiliate of Sithe.
124
132
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
SITHE ENERGIES, INC.
By: /s/ WILLIAM V. KRIEGEL
--------------------------------
Name: William V. Kriegel
Title: Chief Executive Officer and President
SITHE NORTHEAST GENERATING COMPANY, INC.
By: /s/ WILLIAM V. KRIEGEL
--------------------------------
Name: William V. Kriegel
Title: Chief Executive Officer and President
RELIANT ENERGY POWER GENERATION, INC.
By: /s/ J. DOUGLAS DIVINE
--------------------------------
Name: J. Douglas Divine
Title: Senior Vice President,
Generation Development
Reliant Energy, Incorporated, is executing
this Agreement solely for the purposes
specified in Article 13.
RELIANT ENERGY, INCORPORATED,
as Guarantor
By: /s/ J. DOUGLAS DIVINE
--------------------------------
Name: J. Douglas Divine
Title: Senior Vice President,
Generation Development
Purchase Agreement