-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BwpKih9X02fPNlmamYwa5GiBSBQ4uvHfsNGUh3qFoyDzzPP+mH27pKnmL/7ncgNi pCH6Sez23T5ybcoU9TjHDg== 0000950172-98-001256.txt : 19981130 0000950172-98-001256.hdr.sgml : 19981130 ACCESSION NUMBER: 0000950172-98-001256 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19981124 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981127 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORANGE & ROCKLAND UTILITIES INC CENTRAL INDEX KEY: 0000074778 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 131727729 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-04315 FILM NUMBER: 98760584 BUSINESS ADDRESS: STREET 1: ONE BLUE HILL PLZ CITY: PEARL RIVER STATE: NY ZIP: 10965 BUSINESS PHONE: 9143526000 MAIL ADDRESS: STREET 1: ONE BLUE HILL PLAZA CITY: PEARL RIVER STATE: NY ZIP: 10965 FORMER COMPANY: FORMER CONFORMED NAME: ROCKLAND LIGHT & POWER CO DATE OF NAME CHANGE: 19681202 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 November 24, 1998 ________________________________________________ Date of Report (Date of Earliest Event Reported) Orange and Rockland Utilities, Inc. ________________________________________________ (Exact Name of Registrant as Specified in Charter) New York 1-4315 13-1727729 __________________ ______________ _____________ (State or Other Jurisdiction (Commission File (IRS Employer of Incorporation) Number) Identification No.) One Blue Hill Plaza Pearl River, New York 10965 ___________________________________________________ (Address of Principal Executive Offices and Zip Code) (914) 352-6000 ___________________________________________________ (Registrant's Telephone Number, Including Area Code) N/A ________________________________________________________ (Former Name or Former Address, if Changed Since Last Report) ITEM 5. OTHER EVENTS. On November 24, 1998, Orange and Rockland Utilities, Inc. ("O&R") announced that it had signed definitive agreements with three subsidiaries of Southern Energy, Inc. ("SEI"), an affiliate of the Southern Company, to sell its generating assets for $476,290,000 in cash. SEI was the successful bidder in an auction process that was established pursuant to O&R's New York Electric Rate and Restructuring Plan, which was approved by the New York Public Service Commission (the "Commission") in December 1997, and the subsequent Divestiture Plan, which was approved by the Commission in May 1998. The sale is expected to close in April 1999. A copy of the press release relating to the agreements entered into with Southern Energy Bowline, L.L.C., Southern Energy Lovett, L.L.C. and Southern Energy NY-Gen, L.L.C. is filed herewith as Exhibit 99.16. Pursuant to the Bowline Point Generating Station Sales Agreement by and between O&R, Consolidated Edison Company of New York, Inc. ("Con Edison") and Southern Energy Bowline, L.L.C. ("Bowline LLC"), dated as of November 24, 1998 (the "Bowline ASA"), Bowline LLC agreed to acquire O&R's one-third interest and Con Edison's two-thirds interest in the Bowline Point Generating Station for $199,850,000 in cash. The Bowline ASA is filed herewith as Exhibit 10.58 and is incorporated herein by reference. Pursuant to the Lovett Generating Station Sales Agreement by and between O&R and Southern Energy Lovett, L.L.C. ("Lovett LLC"), dated as of November 24, 1998 (the "Lovett ASA"), Lovett LLC agreed to acquire the Lovett Generating Station for $243,500,000 in cash. The Lovett ASA is filed herewith as Exhibit 10.59 and is incorporated herein by reference. Pursuant to the Gas Turbine and Hydroelectric Generating Stations Sales Agreement by and between O&R and Southern Energy NY-Gen, L.L.C. ("NY- Gen LLC" and together with Bowline LLC and Lovett LLC, the "SEI Subs"), dated as of November 24, 1998 (the "NY-Gen ASA" and together with the Bowline ASA and the Lovett ASA, the "ASA's"), NY-Gen LLC agreed to acquire O&R's Gas Turbine and Hydroelectric Generating Stations for $20,440,000 in cash. The NY-Gen ASA is filed herewith as Exhibit 10.60 and is incorporated herein by reference. The principal terms of the ASA's include: (a) the SEI Subs will assume future environmental liabilities (other than off-site environmental liabilities incurred prior to the transfer of title) relating to any of the purchased assets; (b) the SEI Subs will assume existing collective bargaining agreements through their expiration covering employees that work at the purchased assets; and (c) the purchase price of each of the ASA's will be subject to a post-closing adjustment for fuel inventory present at the purchased assets. The sale of generating assets is subject to certain customary closing conditions, including, without limitation, the receipt of all necessary governmental approvals and the making of all necessary governmental filings, including the approval of state utility regulators in New York, New Jersey and Pennsylvania, the approval of the Federal Energy Regulatory Commission, the approval of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended, and the filing of the requisite notification with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the expiration of the applicable waiting period thereunder. Pursuant to the Bowline Adjacent Property Sales Agreement by and between O&R and Bowline LLC, dated as of November 24, 1998 (the "Adjacent Property ASA"), Bowline LLC agreed to acquire a parcel of land adjacent to the Bowline Point Generating Station for $12,500,000 in cash. The Adjacent Property ASA is filed herewith as Exhibit 10.61 and is incorporated herein by reference. In addition to the ASA's, O&R and one or more of the SEI Subs entered into a Transition Power Sales Agreement, two Load Pocket Call Option Agreements and three Continuing Site/Interconnection Agreements (the "Ancillary Agreements") in order to ensure reliable supply and distribution of electricity to O&R's customers in the transition period and into the future. The Transition Power Sales Agreement, the Eastern Load Pocket Call Option Agreement and the Western Load Pocket Call Option Agreement are filed herewith as Exhibits 10.62, 10.63 and 10.64, respectively, and are incorporated herein by reference. SEI executed two separate Guarantees (the "Bowline Guaranty" and the "Lovett, Gas Turbine and Hydroelectric Facilities Guaranty") whereby SEI guarantees the payment by and performance of Bowline LLC, Lovett LLC and NY-Gen LLC under the ASA's and the Ancillary Agreements. The Guarantees are filed herewith as Exhibits 10.65 and 10.66, respectively, and are incorporated herein by reference. The descriptions of the agreements entered into set forth herein do not purport to be complete and are qualified in their entirety by the provisions set forth in each of the agreements. ITEM 7. EXHIBITS. (c) Exhibits. 10.58 Bowline Point Generating Station Sales Agreement by and between Orange and Rockland Utilities, Inc., Consolidated Edison Company of New York, Inc. and Southern Energy Bowline, L.L.C., dated as of November 24, 1998. 10.59 Lovett Generating Station Sales Agreement between Orange and Rockland Utilities, Inc. and Southern Energy Lovett, L.L.C., dated as of November 24, 1998. 10.60 Gas Turbine and Hydroelectric Generating Stations Sales Agreement between Orange and Rockland Utilities, Inc. and Southern Energy NY-Gen, L.L.C., dated as of November 24, 1998 . 10.61 Bowline Adjacent Property Sales Agreement by and between Orange and Rockland Utilities, Inc. and Southern Energy Bowline, L.L.C., dated as of November 24, 1998. 10.62 Transition Power Sales Agreement by and between Orange and Rockland Utilities, Inc., Southern Energy Bowline, L.L.C., Southern Energy Lovett, L.L.C. and Southern Energy NY-Gen, L.L.C., dated as of November 24, 1998. 10.63 Eastern Load Pocket Call Option Agreement between Orange and Rockland Utilities, Inc. and Southern Energy Lovett, L.L.C., dated as of November 24, 1998. 10.64 Western Load Pocket Call option Agreement between Orange and Rockland Utilities, Inc. and Southern Energy NY-Gen, L.L.C., dated as of November 24, 1998. 10.65 Bowline Guaranty, dated as of November 24, 1998, given by Southern Energy, Inc. in favor of Orange and Rockland Utilities, Inc. and Consolidated Edison Company of New York, Inc. 10.66 Lovett, Gas Turbine and Hydroelectric Generating Facilities Guaranty, dated as of November 24, 1998, given by Southern Energy, Inc. in favor of Orange and Rockland Utilities, Inc. 99.16 Orange and Rockland Utilities, Inc. Press Release issued November 24, 1998. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: November 25, 1998 ORANGE AND ROCKLAND UTILITIES, INC. By: /s/ Robert J. McBennett _________________________________ Robert J. McBennett Treasurer Exhibit Index Exhibit Description 10.58 Bowline Point Generating Station Sales Agreement by and between Orange and Rockland Utilities, Inc., Consolidated Edison Company of New York, Inc. and Southern Energy Bowline, L.L.C., dated as of November 24, 1998. 10.59 Lovett Generating Station Sales Agreement between Orange and Rockland Utilities, Inc. and Southern Energy Lovett, L.L.C., dated as of November 24, 1998. 10.60 Gas Turbine and Hydroelectric Generating Stations Sales Agreement between Orange and Rockland Utilities, Inc. and Southern Energy NY-Gen, L.L.C., dated as of November 24, 1998 . 10.61 Bowline Adjacent Property Sales Agreement by and between Orange and Rockland Utilities, Inc. and Southern Energy Bowline, L.L.C., dated as of November 24, 1998. 10.62 Transition Power Sales Agreement by and between Orange and Rockland Utilities, Inc., Southern Energy Bowline, L.L.C., Southern Energy Lovett, L.L.C. and Southern Energy NY-Gen, L.L.C., dated as of November 24, 1998. 10.63 Eastern Load Pocket Call Option Agreement between Orange and Rockland Utilities, Inc. and Southern Energy Lovett, L.L.C., dated as of November 24, 1998. 10.64 Western Load Pocket Call option Agreement between Orange and Rockland Utilities, Inc. and Southern Energy NY-Gen, L.L.C., dated as of November 24, 1998. 10.65 Bowline Guaranty, dated as of November 24, 1998, given by Southern Energy, Inc. in favor of Orange and Rockland Utilities, Inc. and Consolidated Edison Company of New York, Inc. 10.66 Lovett, Gas Turbine and Hydroelectric Generating Facilities Guaranty, dated as of November 24, 1998, given by Southern Energy, Inc. in favor of Orange and Rockland Utilities, Inc. 99.16 Orange and Rockland Utilities, Inc. Press Release issued November 24, 1998. EX-10 2 EXHIBIT 10.58 - BOWLINE POINT GENERATING STATION SALES AGREEMENT Exhibit 10.58 ----------------------------------- BOWLINE POINT GENERATING STATION SALES AGREEMENT AMONG ORANGE AND ROCKLAND UTILITIES, INC., CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. AND SOUTHERN ENERGY BOWLINE, L.L.C. November 24, 1998 ----------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II SALE AND PURCHASE 2.1. The Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.2. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . 18 2.3. Assumed Liabilities . . . . . . . . . . . . . . . . . . . . 19 2.4. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . 24 ARTICLE III PURCHASE PRICE 3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . 28 3.2. Purchase Price Adjustment . . . . . . . . . . . . . . . . . 29 3.3. Allocation of Purchase Price . . . . . . . . . . . . . . . . 32 3.4. Proration . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE IV THE CLOSING 4.1. Time and Place of Closing . . . . . . . . . . . . . . . . . 34 4.2. Payment of Purchase Price . . . . . . . . . . . . . . . . . 34 4.3. Deliveries by the Sellers . . . . . . . . . . . . . . . . . 35 4.4. Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . 37 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS 5.1. Organization; Qualification . . . . . . . . . . . . . . . . 39 5.2. Authority Relative to this Agreement . . . . . . . . . . . . 39 5.3. Consents and Approvals; No Violation . . . . . . . . . . . . 40 5.4. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 43 5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . 43 5.6. Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 44 5.7. Absence of Certain Changes . . . . . . . . . . . . . . . . . 45 5.8. Title . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.9. Leasehold Interests . . . . . . . . . . . . . . . . . . . . 46 5.10. Improvements . . . . . . . . . . . . . . . . . . . . . . . 47 5.11. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 47 5.12. Environmental Matters . . . . . . . . . . . . . . . . . . . 48 5.13. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 50 5.14. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 5.15. Real Property Encumbrances . . . . . . . . . . . . . . . . 53 5.16. Condemnation . . . . . . . . . . . . . . . . . . . . . . . 53 5.17. Certain Contracts and Arrangements . . . . . . . . . . . . 53 5.18. Legal Proceedings, etc. . . . . . . . . . . . . . . . . . . 55 5.19. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . 55 5.20. Regulation as a Utility . . . . . . . . . . . . . . . . . . 56 5.21. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 5.22. Intellectual Property . . . . . . . . . . . . . . . . . . . 57 5.23. Year 2000 Readiness . . . . . . . . . . . . . . . . . . . . 57 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER 6.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . 58 6.2. Authority Relative to this Agreement . . . . . . . . . . . . 58 6.3. Consents and Approvals; No Violation . . . . . . . . . . . . 59 6.4. Operating Easements . . . . . . . . . . . . . . . . . . . . 60 6.5. Regulation as a Utility . . . . . . . . . . . . . . . . . . 60 6.6. Availability of Funds . . . . . . . . . . . . . . . . . . . 61 ARTICLE VII COVENANTS OF THE PARTIES 7.1. Conduct of Business Relating to the Purchased Assets . . . . 61 7.2. Access to Information . . . . . . . . . . . . . . . . . . . 66 7.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 69 7.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . 69 7.5. Public Statements . . . . . . . . . . . . . . . . . . . . . 70 7.6. Consents and Approvals . . . . . . . . . . . . . . . . . . . 71 7.7. Fees and Commissions . . . . . . . . . . . . . . . . . . . . 74 7.8. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 74 7.9. Supplements to Schedules . . . . . . . . . . . . . . . . . . 78 7.10. Employees . . . . . . . . . . . . . . . . . . . . . . . . . 79 7.11. Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . 84 7.12. Compliance with Cooling Water Usage Obligations . . . . . . 85 7.13. Real Estate Matters . . . . . . . . . . . . . . . . . . . . 87 7.14. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . 89 7.15. Scheduled Capital Expenditures and Scheduled Maintenance Expenditures . . . . . . . . . . . . . . . . . . . . . . 89 7.16. Expansion. . . . . . . . . . . . . . . . . . . . . . . . 90 7.17. Fuel Contract Renegotiation . . . . . . . . . . . . . . . . 90 7.18. Environmental Insurance . . . . . . . . . . . . . . . . . . 91 ARTICLE VIII CLOSING CONDITIONS 8.1. Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby. . . . . . . . . . . . . . . . . . . . 91 8.2. Conditions to Obligations of Buyer . . . . . . . . . . . . . 94 8.3. Conditions to Obligations of the Sellers . . . . . . . . . . 102 8.4. Extension of Closing Date . . . . . . . . . . . . . . . . . 104 ARTICLE IX INDEMNIFICATION 9.1. Indemnification . . . . . . . . . . . . . . . . . . . . . . 105 9.2. Defense of Claims . . . . . . . . . . . . . . . . . . . . . 109 ARTICLE X TERMINATION AND ABANDONMENT 10.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . 115 10.2. Procedure and Effect of Termination . . . . . . . . . . . . 117 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Amendment and Modification . . . . . . . . . . . . . . . . 118 11.2. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 118 11.3. Waiver of Compliance; Consents . . . . . . . . . . . . . . 120 11.4. No Survival . . . . . . . . . . . . . . . . . . . . . . . . 121 11.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 121 11.6. Assignment . . . . . . . . . . . . . . . . . . . . . . . . 124 11.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 125 11.8. Specific Performance . . . . . . . . . . . . . . . . . . . 125 11.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 126 11.10. Interpretation . . . . . . . . . . . . . . . . . . . . . . 126 11.11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . 126 11.12. Bulk Sales or Transfer Laws . . . . . . . . . . . . . . . 127 BOWLINE POINT GENERATING STATION SALES AGREEMENT BOWLINE POINT GENERATING STATION SALES AGREEMENT, dated as of November 24, 1998, among Orange and Rockland Utilities, Inc., a New York corporation ("O&R"), Consolidated Edison Company of New York, Inc., a New York corporation ("Con Edison") (each of O&R and Con Edison individually may be referred to as a "Seller" and collectively as the "Sellers" herein) and Southern Energy Bowline, L.L.C., a Delaware limited liability company ("Buyer"). WHEREAS, the Sellers own the Purchased Assets (as defined herein), and O&R operates under the terms of the Operating Agreement, dated October 10, 1969, a certain electric power generation station known as Bowline Point Generating Station that is part of the Purchased Assets; and WHEREAS, the Buyer desires to purchase and assume from the Sellers, and the Sellers desire to sell to Buyer, the Purchased Assets upon the terms and conditions hereinafter set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. (a) As used in this Agreement, the following terms have the meanings specified or referred to in this Section 1.1: (1) "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (2) "Agreement" means this Bowline Point Generating Station Sales Agreement together with the Schedules and Exhibits hereto. (3) "Ancillary Agreements" means (i) the Operating Easement, (ii) the Seller's Easements, (iii) the Continuing Site/Interconnection Agreement, and (iv) the Transition Agreement, (v) the Transition Capacity Sales Agreement, dated as of the date of this Agreement, between Con Edison and Buyer relating to the purchase from Buyer of installed electric capacity at Bowline. (4) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit A hereto. (5) "Bowline" means the Bowline Point Generating Station located in the Village of West Haverstraw, Rockland County, New York. (6) "Business Day" shall mean any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (7) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (8) "CERCLA" means the Federal Comprehensive Environmental Response, Compensation and Liability Act. (9) "Code" means the Internal Revenue Code of 1986, as amended. (10) "Confidentiality Agreement" means the Confidentiality Agreement, dated June 19, 1998, between O&R and Southern Energy, Inc. (11) "Continuing Site/Interconnection Agreement" means the Continuing Site/Interconnection Agreement, dated as of the date of this Agreement, between O&R and the Buyer. (12) "Emission Allowances" means the sulfur dioxide allowances already allocated by the United States Environmental Protection Agency to Bowline and the nitrogen oxide allowances to be allocated by the New York State Department of Environmental Conservation to Bowline, each as set forth in Schedule 1.1(a)(12). (13) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (14) "Environmental Laws" means all Federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances. (15) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (16) "Estimated Inventory Adjustment Amount" means the value of oil inventory and propane inventory used at or in connection with the Purchased Assets as of the date ten (10) days before the Closing Date, as determined by using the average price for residual 0.3% sulphur high pour New York cargo spot index for no. 6 oil - New York Harbor published in Bloomberg Energy during the consecutive ten (10) day period preceding the date which is ten (10) days before the Closing Date, and the average price for propane published in the Journal of Commerce for Propane-Mt. Belvieu during such consecutive ten (10) day period plus five cents ($0.05) per gallon, which valuations shall be provided to the Buyer by the Sellers no later than five (5) days before the Closing Date. (17) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (18) "Federal Power Act" means the Federal Power Act of 1935. (19) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (20) "Good Utility Practices" means any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry with respect to similar facilities during the relevant time period which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection, and expedition. Good Utility 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 such industry. (21) "Hazardous Substances" means (a) any petrochemical or petroleum products, oil, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. (22) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (23) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (24) "Income Tax" means any tax, charge, fee, levy, penalty, or other assessment imposed by any U.S. federal, state, local or foreign taxing authority (a) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains taxes and alternative minimum taxes but excluding sales, transfer and similar taxes) or (b) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such tax may be based, measured by or calculated with respect to, is described in clause (a), in each case together with any interest, penalties, or additions attributable thereto. (25) "Income Tax Return" means any return, report, information return or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Income Taxes. (26) "Independent Accounting Firm" means Arthur Andersen LLP or such other independent accounting firm of national reputation mutually appointed by the Sellers and the Buyer. (27) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit B hereto. (28) "Intellectual Property" means all patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, inventions, copyrights and copyright rights, know-how and all pending applications for and registrations of patents, trademarks, service marks and copyrights other than the names, trademarks, service marks or logos listed in Section 2.2(b) and (c) hereof. (29) "Internal Revenue Service" means the United States Internal Revenue Service, or any successor thereto. (30) "ISO" means the New York Independent System Operator, or its successor. (31) "Material Adverse Effect" means any change in or effect on the Purchased Assets after the date of this Agreement that is, individually or in the aggregate, materially adverse to the condition (financial or physical) of (as compared to the condition on the date of this Agreement), or the ability to own or operate (as compared to the ownership and operation thereof prior to the date of this Agreement), any material part of the Purchased Assets, other than (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change or effect resulting from any regulation, rule or order adopted or proposed by or with respect to the ISO and its responsibility for, authority over and operation of the wholesale and retail electric energy, capacity and ancillary services electric power markets and (v) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Sellers before the Termination Date. (32) "NJBPU" means the New Jersey Board of Public Utilities, or any successor thereto. (33) "NYPSC" means the New York Public Service Commission, or any successor thereto. (34) "Operating Easement" means the operating easement providing the right to continue operating and maintaining certain distribution facilities at the substations, which will be prepared as described in the Continuing Site/Interconnection Agreement. (35) "Other Sales Agreements" means the Lovett Generating Station Sales Agreement between O&R and Southern Energy Lovett, L.L.C.; the Gas Turbines and Hydroelectric Generating Station Sales Agreement between O&R and Southern Energy NY-Gen, L.L.C.; and the Bowline Adjacent Property Sales Agreement, between O&R and the Buyer, each dated as of the date of this Agreement. (36) "PAPUC" means the Pennsylvania Public Utility Commission, or any successor thereto. (37) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets contained in the documents listed on Schedules 5.8, 5.9(a), 5.9(b) and 5.15; (ii) any state of facts that a current survey of the Purchased Assets would disclose; (iii) mortgages, liens, pledges, charges, encumbrances and restrictions which are not in excess of $100,000 incurred in connection with the Sellers' purchase of properties and assets to be conveyed to Buyer as part of the Purchased Assets after the date of this Agreement securing all or a portion of the purchase price therefor incurred in the ordinary course of business; (iv) the Operating Easement; (v) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles, provided that the aggregate amount being so contested does not exceed $500,000; (vi) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to the Sellers' obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings, provided that the aggregate amount of such liens does not exceed $500,000; (vii) zoning, entitlement, conservation restrictions and other land use and environmental regulations by governmental authorities, provided that the foregoing do not materially interfere with the present use of the Purchased Assets; and (viii) such other liens, imperfections in or failure of title, charges, easements, restrictions and encumbrances which do not materially detract from the value of or materially interfere with the present use of the Purchased Assets and neither secure indebtedness, nor individually or in the aggregate have or would have a Material Adverse Effect or which will be discharged or released prior to or simultaneously with the Closing. (38) "Person" means an individual, a partnership, a joint venture, a corporation, a limited liability company, a limited liability partnership, a trust, an unincorporated organization or a governmental entity or any department or agency thereof. (39) "Purchased Assets" means the real and personal property, tangible or intangible, constituting or used principally for generation purposes at, or otherwise for the operation of, Bowline, including, but not limited to, the following assets: (a) the two 600 MW natural gas- or oil-fired steam electric generating units listed in Schedule 1.1(a)(39); (b) all of Sellers' right, title and interest in, to and under the Real Property (including all structures, buildings, facilities and other improvements thereon and all appurtenances thereto) as further described on Schedule 5.8; (c) all other machinery, equipment, furniture and other personal property owned by the Sellers located at Bowline on the Closing Date, including, without limitation, the items of personal property listed or referred to in Schedule 1.1(a)(39); (d) the underground portion of 345 kV transmission feeders that connect the electric generating units at Bowline to O&R's West Haverstraw 345 kV substation and approximately 7,400 feet of 16 inch gas main between Bowline and Garnerville, New York gas meter and regulator station subject to the terms of applicable easements which would not have a materially adverse effect thereon; (e) the Garnerville, New York gas meter and regulator station; (f) all inventories of fuels, supplies, spare parts and materials located at Bowline on the Closing Date; (g) all contracts, agreements and personal property leases principally relating to Bowline, as further listed on Schedules 5.17(a), (b), and (c) and 7.10(a), respectively; (h) the Environmental Permits and Permits listed on Schedules 5.12(a)(ii) and 5.19(a), respectively; (i) the Emission Allowances; (j) all books, operating records, reports, engineering or design plans, specifications, drawings, procedures, software or tools used to process and report environmental data, safety and maintenance manuals and similar items of the Sellers relating specifically to the aforementioned assets; (k) all of Sellers' right, title and interest in, to and under the Leases; (l) copies of all filings made with regulatory agencies, as updated, relating to O&R's Year 2000 programs as such filings apply to the Purchased Assets; (m) the existing cross-plant water outage credits points generated by Bowline under the Settlement Agreement or the Consent Order, if any exist on the Closing Date; (n) all unexpired, transferable warranties and guarantees from third parties with respect to any of the Purchased Assets, as of the Closing Date; (o) the Intellectual Property, if any, relating to the Purchased Assets (including Sellers' goodwill therein and the rights of Sellers in and to the name of Bowline) and all rights, privileges, claims, causes of action, indemnification rights and options pertaining solely to the Purchased Assets or the Assumed Liabilities, including, without limitation, those items listed on Schedule 1.1(a)(39)(o); (p) the assets acquired by Sellers pursuant to Section 7.4; and (q) $4.0 million in cash. (40) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (41) "Scheduled Capital Expenditures" means those capital expenditures listed on Schedule 1.1(a)(41). (42) "Scheduled Maintenance Expenditures" means those maintenance expenditures listed on Schedule 1.1(a)(42). (43) "SEC" means the Securities and Exchange Commission, or any successor thereto. (44) "Securities Act" means the Securities Act of 1933, as amended. (45) "Sellers Agreements" means those agreements listed on Schedule 5.17(a) and the Collective Bargaining Agreements. (46) "Separation Document" means the document, to be negotiated in good faith by the Buyer and O&R within three (3) months from the date of this Agreement, which will delineate the Purchased Assets from O&R's other assets, and which will be consistent with the separation document summary attached hereto as Exhibit C. (47) "Settlement Agreement" means that certain Settlement Agreement entered into on December 19, 1980, by the following entities to settle their disputes relating to the National Pollutant Discharge Elimination System permits issued to certain utilities in 1975: the Sellers; Central Hudson Gas & Electric Corporation; Niagara Mohawk Power Corporation; the Power Authority of the State of New York (currently the New York Power Authority); the New York State Department of Environmental Conservation; the Attorney General of the State of New York; the United States Environmental Protection Agency; Hudson River Fisherman's Association, Inc. (currently d/b/a the Hudson Riverkeeper Fund, Inc.); Scenic Hudson Preservation Conference (currently Scenic Hudson, Inc.); and the National Resources Defense Council, as amended. (48) "Subsidiary" when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (49) "Tax" means any tax, charge, fee, levy, penalty or other assessment imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any income, gross receipts, license, stamp, occupation, environmental, excise, property, sales, transfer, payroll, unemployment, withholding, social security or any other tax of any kind whatsoever, including any interest, penalties or additions attributable thereto. (50) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any schedule or other related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (51) "Transition Agreement" means the Transition Power Sales Agreement between the Buyer, Southern Energy Lovett, L.L.C. and Southern Energy NY-Gen, L.L.C. and O&R, dated as of the date of this Agreement. (52) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988. (b) Each of the following terms has the meaning specified in the Section set forth opposite such term: Term Section ---- ------- Adjustment Statement 3.2 Assumed Liabilities 2.3 Benefit Plans 5.14 Buyer Preamble Buyer Indemnitee 9.1 Buyer Required Regulatory Approvals 6.3 Buyer's Easements 4.3 CEI 11.6 Closing 4.1 Closing Date 4.1 Collective Bargaining Agreements 7.10 Con Edison Preamble Condition Fulfillment Date 8.4 Confidential Information 11.2 Consent Order 7.12 Defect of Title 7.13 Deferred Closing Date 8.4 Designated Representative 7.2 Direct Claim 9.2 Disclosing Party 11.2 DLJ 7.7 Environmental Insurance 7.18 Environmental Permits 5.12 ERISA Affiliate 2.4 ERISA Affiliate Plans 2.4 Estimated Purchase Price 4.2 Excluded Assets 2.2 Excluded Liabilities 2.4 Final Order 8.1 Hourly Employees 7.10 Indemnifiable Losses 9.1 Indemnification Floor 9.1 Indemnifying Party 9.1 Indemnitee 9.1 Intended Use 7.16 Inventory Adjustment Amount 3.2 ISO Approval 8.4 Leases 5.9 Leased Assets 7.4 Management Employees 7.10 Necessary Capital Expenditures 7.1 Necessary Maintenance Expenditures 7.1 O&R Preamble Participation Agreement 7.8 Pension Benefit Plans 5.14 Permits 5.19 Pollution Control Bond 2.4 Pollution Control Facilities 7.8 Property Interests 5.8 Purchase Price 3.1 Real Property 5.8 Recipient 11.2 Seller Preamble Seller Indemnitee 9.1 Sellers Preamble Sellers Balance Sheet 5.5 Sellers Required Regulatory Approvals 5.3 Seller's Easements 4.4 Termination Date 10.1 Third Party Claim 9.2 Title Commitment 7.13 Title Company 7.13 1986 Tax Act 7.8 ARTICLE II SALE AND PURCHASE 2.1. The Sale. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, at the Closing, the Sellers will sell, assign, convey, transfer and deliver to the Buyer, and the Buyer will purchase and acquire from the Sellers, free and clear of all Encumbrances (except for Permitted Encumbrances) all of the Sellers' right, title and interest in, to and under the real and personal property, tangible or intangible, owned by the Sellers and constituting the Purchased Assets. 2.2. Excluded Assets. Notwithstanding any provision herein to the contrary, the Purchased Assets shall not include the following (herein referred to as the "Excluded Assets"): (a) all cash, bank deposits, cash equivalents and accounts receivable (other than the cash specified in Section 1.1(a)(39)(q) of this Agreement); (b) the name "Orange and Rockland Utilities, Inc.", "Orange and Rockland", "O&R", "ORU" or any related or similar trade names, trademarks, service marks or logos; (c) the name "Con Ed", "Con Edison", "Consolidated Edison", "Consolidated Edison, Inc." "Consolidated Edison Company of New York, Inc.", "New York Edison," Brooklyn Edison," "States Island Edison," "Edison" or any related or similar names, trademarks, service marks or logos; (d) distribution, substation and communication facilities and related support equipment described in Schedule 2.2(d); (e) any refund, credit, penalty payment, adjustment or reconciliation (i) related to personal property or other Taxes (excluding Taxes relating to real property) paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under any of the Sellers Agreements and relating to a period before the Closing Date; (f) except to the extent specifically required by law, all personnel records relating to any employees of the Sellers; and (g) the rights and assets to be described in the Separation Document as not part of the Purchased Assets. 2.3. Assumed Liabilities. On the Closing Date, the Buyer shall deliver to the Sellers the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the following liabilities and obligations of the Sellers which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof: (a) all liabilities and obligations of the Sellers arising or accruing after the Closing Date under (i) the Sellers Agreements, the Environmental Permits, the Permits, real property leases, contracts and other agreements disclosed and assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Sellers with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement; except in each case, to the extent such liabilities and obligations, but for a breach or default by either Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default or any event which after the giving of notice would constitute a default by either Seller; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.8; (c) any liabilities and obligations for which the Buyer has indemnified the Sellers pursuant to Section 9.1; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.10, including the Collective Bargaining Agreements; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; and (iii) the investigation and/or remediation (whether or not such investigation or remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; provided, as to all of the above, that nothing set forth in this subsection 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at or adjacent to the Purchased Assets; and (vi) the investigation and/or remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any off-site location; provided, that nothing set forth in this subsection shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (g) all liabilities and obligations of the Sellers with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12(c); (h) all liabilities incurred by the Sellers with respect to maintenance and capital expenditures made with respect to the Purchased Assets by the Sellers which are requested by Buyer; (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations other than those liabilities and obligations noted in (a) through (i) above, exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place, the value of which liabilities and obligations, together with the liabilities and obligations relating to the "Purchased Asset" and the "Purchased Assets" as defined in each of the Other Sales Agreements, in the aggregate, shall not exceed $3 million. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Sellers and the Buyer. 2.4. Excluded Liabilities. The Buyer shall not assume or be obligated to pay, perform or otherwise discharge the following liabilities (the "Excluded Liabilities"): (a) any liabilities or obligations of either Seller in respect of any Excluded Assets or other assets of the Sellers which are not Purchased Assets; (b) any liabilities or obligations with respect to Taxes attributable to the Purchased Assets for taxable periods ending on or before the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.8(a); (c) any liabilities, obligations, or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances that were generated at the Purchased Assets, at any off-site location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at said off-site location occurred prior to the Closing Date, provided that for purposes of this Section, "off-site location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated, including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities arising after the Closing Date relating to: (i) the transmission lines delineated in the Operating Easements or (ii) O&R's operations on, or usage of, the Operating Easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (1) any violation or alleged violation of Environmental Law and (2) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by the Buyer; (e) any liabilities, obligations or responsibilities arising prior to or after the Closing Date relating to the easements provided O&R under the Operating Easement, including, without limitation: (i) the transmission lines or other facilities of O&R delineated in the Operating Easements or (ii) O&R's ownership rights, operations on, or usage of, the Operating Easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (1) any violation or alleged violation of Environmental Law or Release of Hazardous Substances and (2) loss of life, injury to persons or property or damage to natural resources, except in the case of (1) or (2) to the extent caused by the Buyer; (f) any liabilities or obligations required to be accrued by either Seller in accordance with generally accepted accounting principles and/or the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets, other than any liability assumed by Buyer under Section 2.3; (g) any liabilities or obligations with respect to liabilities relating to the Purchased Assets relating to any personal injury including bodily injury (including, but not limited to workers' compensation claims), discrimination, wrongful discharge, unfair labor practice or similar claim or cause of action with respect to any act or occurrence arising prior to or on the Closing Date, other than liabilities or obligations for injury to persons or loss of life assumed by the Buyer in Sections 2.3(e) and 2.3(f); (h) any fines or penalties imposed by a governmental agency or authority resulting from (A) an investigation or proceeding with respect to any act or occurrence arising prior to or on the Closing Date or (B) illegal acts, willful misconduct or gross negligence of either Seller prior to or on the Closing Date; (i) any payment obligations of either Seller for goods delivered or services rendered prior to the Closing; (j) any liabilities or obligations imposed upon, assumed or retained by O&R pursuant to the Continuing Site/Interconnection Agreement or any other Ancillary Agreement; (k) any liabilities, obligations or responsibilities relating to any deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all welfare, severance, stock-based, bonus and other employee benefit or fringe benefit plans, programs and arrangements, whether written or oral, maintained or with respect to which contributions have been in the last five (5) years or are made by O&R and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with O&R under Section 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") or to which O&R and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by O&R or any ERISA Affiliate; including, without limitation, any liability (A) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (B) with respect to non-compliance with the continuation requirements of COBRA; (C) with respect to any non-compliance with ERISA, the Code, or any other applicable laws; (D) with respect to any suit, proceeding or claim which is brought against either Seller, any ERISA Affiliate Plan, or any fiduciary or former fiduciary of any such ERISA Affiliate Plan; (E) relating to a multiemployer plan; or (F) for any claim or suit for benefits accrued under an ERISA Affiliate Plan prior to Closing; (l) any liabilities, obligations or responsibilities relating to the employment or termination of employment, by O&R of any individual (including, but not limited to, any employee of O&R) attributable to any actions or inactions by O&R prior to the Closing Date; and (m) any liabilities relating to the $55,000,000 New York State Energy Research and Development Authority Pollution Control Refunding Revenue Bonds (Orange and Rockland Utilities, Inc. Projects) 1994 Series A (the "Pollution Control Bond") and any agreements relating thereto. ARTICLE III PURCHASE PRICE 3.1. Purchase Price. The purchase price for the Purchased Assets shall be an amount equal to the sum of (i) $199,850,000, (ii) the Estimated Inventory Adjustment Amount, (iii) the Inventory Adjustment Amount and (iv) any amounts paid by the Sellers to acquire title to Leased Assets pursuant to Section 7.4(a) ( the "Purchase Price"). 3.2. Purchase Price Adjustment. (a) Within sixty (60) days after the Closing, the Sellers shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which sets forth an amount equal to (A) the value as of the Closing Date, of all oil inventory and propane inventory to be used at or in connection with the Purchased Assets determined by using (i) the average price for residual 0.3% surplus high pour New York cargo spot index for No. 6 oil - New York Harbor published in Bloomberg Energy for the consecutive ten (10) days prior to the Closing Date, the Closing Date and the nine (9) consecutive days following the Closing Date, and (ii) the average price for propane published in the Journal of Commerce for Propane Mt. Belvieu during such consecutive twenty (20) day period plus five cents ($0.05) per gallon minus (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"); The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as the Sellers have historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer and the Sellers agree to cooperate with the other in connection with the preparation of the Adjustment Statement and related information, and each shall provide to the other such books, records and information as may be reasonably requested from time to time. (b) The Buyer may dispute the Inventory Adjustment Amount; provided, however, that the Buyer shall notify the Sellers in writing of the disputed amount, and the basis of such dispute, within thirty (30) days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Buyer and the Sellers shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Sellers are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Sellers, the Buyer and the Sellers shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Sellers so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) If the Inventory Adjustment Amount is positive, within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay to the Sellers all undisputed portions of the Inventory Adjustment Amount. If the Inventory Adjustment Amount is negative, within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Sellers shall pay to the Buyer all undisputed portions of the Inventory Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay the Sellers an amount equal to the disputed portion of the Inventory Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if such amount shall be less than zero, the Sellers will pay to the Buyer the amount by which such amount is less than zero. All payments made pursuant to this Section 3.2(c) shall be paid together with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. For any payments made by the Buyer to the Sellers pursuant to this section, the Sellers shall provide the necessary information to the Buyer so that the Buyer may allocate payments due to Sellers between O&R and Con Edison. 3.3. Allocation of Purchase Price. The Buyer shall prepare an allocation of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one hundred eighty (180) days of the date of this Agreement but in no event less than forty-five (45) days prior to the Closing and submit it to the Sellers. The Sellers may dispute the allocation of the Purchase Price; provided, however, that the Sellers shall notify the Buyer in writing of the disputed amount, and the basis of such dispute, and follow the procedures relating to a dispute described in Section 3.2(b) above. The Buyer and the Sellers each agree to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns and Income Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Sellers shall report the transactions contemplated by the Agreement for federal Income Tax and all other Tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. The Buyer and the Sellers each agree to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Sellers shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4. Proration. (a) The Buyer and the Sellers agree that all of the items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets will be prorated as of the Closing Date, with the Sellers liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) personal property, real estate, occupancy and any other Taxes (excluding Income Taxes), assessments and other charges, if any, on or with respect to the ownership, use or business and operation of the Purchased Assets; (ii) rent, Taxes (excluding Income Taxes) and other items payable by or to the Sellers under any of the Sellers Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which such actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Sellers or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Sellers and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. ARTICLE IV THE CLOSING 4.1. Time and Place of Closing. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00 A.M. (local time) on April 30, 1999, or at such other place or later date and time as the parties may agree. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2. Payment of Purchase Price. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer will pay or cause to be paid to the Sellers at the Closing an amount (the "Estimated Purchase Price") in United States dollars, equal to the sum of (i) $199,850,000, (ii) the Estimated Inventory Adjustment Amount for the Closing, and (iii) any amounts paid to acquire title to Leased Assets pursuant to Section 7.4(a) hereof, by wire transfer of immediately available funds or by such other means as are agreed to by the Sellers and the Buyer. The Sellers shall provide the necessary information to the Buyer so that the Buyer may allocate the Estimated Purchase Price between O&R and Con Edison. 4.3. Deliveries by the Sellers. At the Closing, the Sellers will deliver the following to the Buyer: (a) The Bill of Sale, duly executed by the Sellers for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Sellers Agreements, the Environmental Permits and the Permits, to the extent specifically required hereunder. (c) Each Ancillary Agreement, required to be delivered under this Agreement, duly executed by O&R or Con Edison; (d) The certificates and the opinions of counsel contemplated by Sections 8.2(c), (e), (f), (g) and (i); (e) One or more bargain and sale deeds of conveyance in statutory form, with covenant against grantor's acts, transferring Sellers' interest in the Property Interests to the Buyer, duly executed and acknowledged by O&R and in recordable form substantially in the form of Exhibit D hereto; (f) One or more easements to the extent necessary to evidence the right of Buyer to use the real property of O&R (the "Buyer's Easements") that comprise part of the Excluded Assets, duly executed and acknowledged by O&R and in recordable form, each substantially in the form of Exhibit E hereto; (g) The Assignment of Leases in the form attached hereto as Exhibit F assigning to Buyer all of the Sellers' right, title and interest as lessor (or lessee as the case may be) under the leases; (h) Copies of the resolutions adopted by the Board of Directors or Board of Trustees, and/or a committee of the Board of Directors or Board of Trustees to whom the Board has delegated its authority, of each of the Sellers, certified by the Secretary of each Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by each Seller of this Agreement, the Bill of Sale and other closing documents described in this Agreement to which such Seller is a party, and the performance by such Seller of its respective obligations hereunder and thereunder; (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement and where necessary or desirable, in recordable form; (j) A certification of non-foreign status in a form which complies with Section 1445 of the Code and the regulations thereunder; provided, however, that if either Seller shall fail to deliver such certification, the Buyer shall withhold at the Closing and pay over to the appropriate taxing authority any amount equal to ten (10) percent of the portion to be allocated to such Seller of the total Amount Realized (as defined under Section 1445 of the Code); (k) Such other agreements, documents, instruments and writings as are required to be delivered by the Sellers at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith; and (1) $4.0 million by wire transfer of immediately available funds or by such other means as are agreed to by O&R and the Buyer. 4.4. Deliveries by Buyer. At the Closing, the Buyer will deliver the following to the Sellers: (a) The Estimated Purchase Price by wire transfer of immediately available funds or by such other means as are agreed to by the Sellers and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel contemplated by Sections 8.3(c) and (d); (d) The Instrument of Assumption, duly executed by the Buyer; (e) All such other instruments of assumption as shall, in the reasonable opinion of the Sellers and their counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (f) One or more easements to the extent necessary for O&R to continue and maintain their transmission and distribution business, in favor of the O&R (the "Seller's Easements") with respect to Real Property conveyed to Buyer, duly executed and acknowledged by Buyer, each substantially in the form of Exhibit E hereto, and Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.8; (g) Copies of the resolutions adopted by the Members or Managers, or similar governing body, of the Buyer, certified by the Member of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its respective obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS Each of O&R and Con Edison represents on behalf of itself only, and not on behalf of the other Seller, and warrants on behalf of itself only, and not on behalf of the other Seller, to the Buyer as follows: 5.1. Organization; Qualification. Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. Each Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each foreign jurisdiction in which it operates the Purchased Assets and such foreign jurisdiction requires it to be so qualified. Each Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and By-Laws as currently in effect. 5.2. Authority Relative to this Agreement. Each Seller has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors or Board of Trustees, or a committee of the Board of Directors or the Board of Trustees to whom the Board has designated its authority, of each Seller and no other corporate proceedings on the part of either Seller or its shareholders is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by such Seller, and assuming that this Agreement constitutes a valid and binding agreement of the Buyer, subject to the receipt of the Sellers Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitutes a valid and binding agreement of such Seller, enforceable against such Seller in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3. Consents and Approvals; No Violation. (a) Except as set forth in Schedule 5.3(a), and other than obtaining the Sellers Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement by such Seller nor the performance by such Seller of its respective obligations under this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-Laws of such Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or would not prohibit or restrain the execution, delivery or performance of this Agreement or the Ancillary Agreements, or the consummation of the transactions contemplated hereby or thereby in any material respect or (y) for those requirements which become applicable to such Seller as a result of the specific regulatory status of the Buyer (or any of its affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which such Seller, or any of its subsidiaries, is a party or by which such Seller, or any of its subsidiaries, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, individually or in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, law, decree, statute, rule or regulation applicable to such Seller, or any of its assets, which violation would, individually or in the aggregate, have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) as may be required by applicable law (A) notice by the Sellers to, and an order by, the NYPSC approving the transactions contemplated by this Agreement or the Ancillary Agreements, (B) notice by O&R to, and an order by, the NJBPU approving the transactions contemplated by this Agreement or the Ancillary Agreements and (C) notice by O&R to, and an order by, the PAPUC approving the transactions contemplated by this Agreement or the Ancillary Agreements, (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Sellers and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) are collectively referred to as the "Sellers Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by such Seller of the transactions contemplated hereby or by the Ancillary Agreements, other than such declarations, filings, registrations, notices, authorizations consents or approvals which, if not obtained or made, will not, in the aggregate, have a Material Adverse Effect and other than Permits and Environmental Permits. 5.4. Reports. Since January 1, 1996, O&R and Con Edison, pursuant to the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of O&R and Con Edison as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5. Financial Statements. The Sellers have previously furnished to the Buyer (i) audited statements of assets, liabilities and owners' interest of Bowline Point Tenants in Common relating to the Sellers' interest in Bowline as of December 31, 1997, and (ii) the related audited statements of operating expenses and changes in owners' interests relating to the Sellers' interest in Bowline for the fiscal year then ended, together with the respective reports thereon of Arthur Andersen LLP. The statements of assets, liabilities and owners' interest of Bowline Point Tenants in Common relating to the Sellers' interest in Bowline as of December 31, 1997 is referred to as the "Sellers Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly, in all material respects, the assets, liabilities, and owners' interests of Bowline Point Tenants in Common (Bowline Point Facility) as of December 31, 1997, and the operating expenses and changes in owners' interests for the year then ended, all in conformity with the General Agreement between O&R and Con Edison, dated October 10, 1969, as amended, and on the basis of accounting followed by the owners who are subject to regulation by the FERC and various state regulatory authorities with respect to their rates and accounting, except as otherwise noted therein. 5.6. Undisclosed Liabilities. Except as set forth in Schedule 5.6, to the Sellers' knowledge, the Sellers have no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Sellers Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, after the date of the Sellers Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7. Absence of Certain Changes. Except (i) as set forth in Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by such Seller with the SEC and (ii) as otherwise contemplated by this Agreement, to the Sellers' knowledge, since the date of the Sellers Balance Sheet there has not been: (a) any Material Adverse Effect; (b) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (c) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing or capital financing) by either Seller, which is material to the business or operations of the Purchased Assets, except agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (d) any change by either Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8. Title. Set forth in Schedule 5.8 is a true and complete list of all real property which is part of or material to the business or operations of the Purchased Assets (the "Real Property") and other real property interests which are a part of or material to the business or operations of the Purchased Assets (together with the Real Property, the "Property Interests"). One or both Sellers have leasehold or other contractual interests in all Purchased Assets identified in subsections (g), (k), (m), (n) and (p) of Section 1.1(a)(39) and, subject only to Permitted Encumbrances and the Leases: (i) good and marketable record title to the Real Property and the Buyer's Easements and (ii) good and valid title to all Purchased Assets identified in subsections (a), (c), (d), (e), (f), (h), (i), (j), (l) and (o) of Section 1.1(a)(39). At the Closing, O&R will have the cash available to pay the amount referred to in Section 1.1(a)(39)(q) of this Agreement. 5.9. Leasehold Interests. Schedule 5.9(a) lists all Real Property leases or subleases (the "Leases") relating to the Purchased Assets under which either or both of the Sellers are a lessee, sublessee, lessor, or sublessor and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9(b), the Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by the applicable Seller or Sellers thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. One or both Sellers have a valid and subsisting leasehold estate in and the right to quiet enjoyment of the Leases under which either Seller is a lessee or sublessee for the full term of such Leases, which leasehold interests are unencumbered other than by Permitted Encumbrances, and Sellers have delivered to Buyer true and complete copies of all Leases. 5.10. Improvements. Except as set forth in Schedule 5.10(a), O&R has not received, and to Con Edison's knowledge, Con Edison has not received, any notices from any governmental authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set for forth in Schedule 5.10(b), to the Sellers' knowledge, no notice has been received by either Seller from any governmental authority requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.11. Insurance. O&R represents and warrants that except as set forth in Schedule 5.11(a), all material policies of fire, liability, worker's compensation and other forms of insurance purchased or held by and insuring or related to the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11(b), neither Seller has been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last five (5) years nor have they received written notice from any insurer with respect to any Real Property or Lease of defects or inadequacies with respect thereto or the improvements located thereon that would materially adversely affect the insurability of same or cause the imposition of extraordinary premiums therefor. 5.12. Environmental Matters. (a) Except as disclosed in Schedule 5.12(a)(i), to the Sellers' knowledge, the Sellers hold, and are in compliance with, all permits, licenses, certificates and governmental authorizations ("Environmental Permits") required for either Seller to operate the Purchased Assets under applicable Environmental Laws, and the Sellers are otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Schedule 5.12(a) (ii) sets forth all Environmental Permits relating to the ownership or operation of the Purchased Assets. (b) Except as disclosed in Schedule 5.12(b), neither Seller has received any written request for information, or been notified that it is a potentially responsible party, under CERCLA or any similar State law with respect to any on-site location related to the Purchased Assets, and no investigation and/or remediation is being conducted or is pending at the Purchased Assets (other than investigations or remediation conducted by or on behalf of Seller or Buyer in connection with this transaction), except for such liability under such laws or investigations or remediation as would not be reasonably likely to have a Material Adverse Effect. (c) With respect to the Purchased Assets, no action, claim, investigation or other proceeding relating to any Environmental Law is pending, or to Seller's knowledge, threatened, and neither Seller has entered into or agreed to any consent decree or order, and are not subject to any judgment, decree, or administrative or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or administrative or judicial orders, actions, claims, investigations or proceedings that (i) would not be reasonably likely to have a Material Adverse Effect, (ii) appear on Schedule 5.12(c), or (iii) relate to off-site disposal locations. (d) All written reports of audits and studies performed by or on behalf of either Seller, and in the possession of either Seller, which concern Releases of Hazardous Substances at, on, in, or under the Purchased Assets or compliance of Purchased Assets with Environmental Laws, conducted within the last two (2) years, are listed in Schedule 5.12(d) and have been provided to Buyer. (e) The representations and warranties made in this Section 5.12 are the Sellers' exclusive representations and warranties relating to environmental matters. 5.13. Labor Matters. O&R represents and warrants that Schedule 7.10(a) lists, and O&R has previously delivered to the Buyer, true and correct copies of all labor union, Collective Bargaining Agreements and other labor agreements relating to the Purchased Assets to which O&R is a party or subject. Neither Con Edison nor any other party (except for the parties to the agreements listed in Schedule 7.10(a)) is a party to, or is subject to any labor union, collective bargaining agreement or other labor agreement which relates to the Purchased Assets. Con Ed has no employees employed at the Purchased Assets. With respect to the Purchased Assets, except to the extent set forth in Schedule 5.13 and except for such matters as will not have a Material Adverse Effect, to O&R's knowledge: (a) O&R is in compliance with all applicable laws respecting employment and employment practices, occupational health and safety, and wages and hours; (b) O&R has not received written notice of any unfair labor practice complaint against it pending before the National Labor Relations Board; (c) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting O&R; (d) O&R has not received notice that any representation petition respecting its employees has been filed with the National Labor Relations Board; (e) no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending against O&R; and (f) O&R has not experienced any primary work stoppage since at least December 31, 1994. 5.14. ERISA. (a) O&R represents and warrants that Schedule 5.14(a) lists all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all welfare, severance, stock-based, bonus and other employee benefit or fringe benefit plans, programs and arrangements, whether written or oral, maintained or with respect to which contributions have been in the last five (5) years or are made by O&R in respect of employees who are employed in connection with the Purchased Assets (such plans, programs and arrangements collectively, the "Benefit Plans"). To O&R's knowledge, each Benefit Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable laws. Accurate and complete copies of all such Benefit Plans and their summary descriptions, including multiemployer plans, have been made available to the Buyer. (b) Except as set forth in Schedule 5.14(b)(i), with respect to employees at the Purchased Assets, to O&R's knowledge, O&R and the ERISA Affiliates have fulfilled their respective obligations under the minimum funding requirements of Section 302 of ERISA, and Section 412 of the Code, with respect to each Benefit Plan that is a pension benefit plan as defined in Section 3(2) of ERISA (each, a "Pension Benefit Plan"). To the O&R's knowledge, neither O&R nor any ERISA Affiliate has incurred any liability to the Pension Benefit Guaranty Corporation in connection with any Pension Benefit Plan which is subject to Title IV of ERISA, including any withdrawal liability, nor is there any reportable event (as defined in Section 4043 of ERISA), except as set forth in Schedule 5.14(b)(ii). Except as set forth in Schedule 5.14(b)(iii), the Internal Revenue Service has issued a letter for each Pension Benefit Plan which is intended to be qualified under Section 401(a) of the Code, determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and to the O&R's knowledge, there has been no occurrence since the date of any such determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted and none is anticipated against O&R with respect to any Pension Benefit Plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (c) To the O&R's knowledge, neither O&R nor any ERISA Affiliate has engaged in any transaction within the meaning of Section 4069(b) or Section 4212(c) of ERISA. Except as set forth in Schedule 5.14(c), no Benefit Plan is a multi-employer plan. (d) To the extent O&R maintained or maintains a "group health plan" within the meaning of Section 5000(b)(1) of the Code, to the O&R's knowledge, O&R has materially complied with the notice and continuation requirements of Section 4980B of the Code, COBRA Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder. 5.15. Real Property Encumbrances. Schedule 5.15 lists all real property encumbrances affecting the Real Property including matters contained in deeds, easements and options. O&R represents and warrants that true and correct copies of all current surveys, abstracts, title opinions and policies of title insurance currently in force with respect to such Real Property have been delivered by O&R to the Buyer. None of the Permitted Encumbrances materially adversely affect the existing use of the Real Property. 5.16. Condemnation. Neither the whole nor any part of the Real Property or any other real property or rights leased, used or occupied by the Sellers in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the knowledge of the Sellers, no such condemnation or other taking is threatened or contemplated. 5.17. Certain Contracts and Arrangements. (a) Except (i) as listed in Schedule 5.17(a), (ii) for contracts, agreements, personal property leases, commitments, understandings or instruments which will expire prior to the Closing Date, (iii) for agreements with suppliers entered into in the ordinary course of business (including contracts entered into in connection with the Scheduled Capital Expenditures and the Scheduled Maintenance Expenditures), and (iv) for contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $200,000 or with annual or aggregate payments less than $200,000, neither Seller is a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.17(b), each Sellers Agreement listed on Schedule 5.17(a) constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and will continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of the Sellers Agreements listed on Schedule 5.17(a), any default or event which, with notice or lapse of time or both, would constitute a default on the part of any party thereto, except such events of default and other events as to which requisite waivers or consents have been obtained or which would not, individually or in the aggregate, have a Material Adverse Effect. 5.18. Legal Proceedings, etc. Except as set forth in Schedule 5.18 or in any filing made by either Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending or investigation pending or, to the Sellers' knowledge, threatened against either Seller relating to the Purchased Assets before any court, arbitrator, governmental or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect or would prohibit or restrain the execution, delivery or performance of this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby in any material respect. Except as set forth in Schedule 5.18, the Sellers are not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, governmental or regulatory authority relating to the Purchased Assets which would have a Material Adverse Effect. 5.19. Permits. Sellers have all material permits, licenses, franchises and other governmental authorizations, consents and approvals, other than with respect to Environmental Laws (collectively, "Permits") as set forth in Schedule 5.19(a), necessary to own or operate the Purchased Assets as presently owned or operated, except where the failure to have such Permits would not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the Purchased Assets, neither Seller has received any written notification that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any governmental or regulatory body or authority applicable to it, except for notifications of violations which would not, individually or in the aggregate, have a Material Adverse Effect. The Sellers are in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any governmental or regulatory body or authority applicable to Purchased Assets, except for violations which, in the aggregate, would not have a Material Adverse Effect. 5.20. Regulation as a Utility. O&R and certain of its subsidiaries are regulated as public utilities in the States of New York, New Jersey and Pennsylvania as set forth on Schedule 5.20(a)(i), and in no other State. Con Edison is regulated as a public utility in the State of New York as set forth on Schedule 5.20(a)(ii), and in no other state. Except as set forth on Schedule 5.20(b), the Sellers are not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21. Taxes. Except as set forth in Schedule 5.21: (a) no notice of deficiency or assessment has been received from any taxing authority with respect to liabilities for Taxes of Sellers in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in Schedule 5.21 is being contested in good faith through appropriate proceedings; (b) there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for Taxes associated with the Purchased Assets for any period; (c) there are no rulings or closing agreements executed with any taxing authority relating to the Purchased Assets that will be binding upon Buyer after the Closing; (d) none of the Purchased Assets is property that is required to be treated as being owned by any other person pursuant to the so-called safe harbor lease provisions of former Section 168(f)(8) of the Code or "tax-exempt use" property within the meaning of Section 168(h) of the Code; and (e) there are no powers of attorney in effect relating to Taxes relating to the Purchased Assets for any Post-Closing period. 5.22. Intellectual Property. Sellers have all right, title and interest in or valid and binding rights under contract to use the Intellectual Property relating to the Purchased Assets. Sellers have not received notice that it is infringing any Intellectual Property of any other Person in connection with the operation or business of the Purchased Assets, no claim is pending or has been made to such effect that has not been resolved and neither Seller is infringing any Intellectual Property of any other Person the effect of which, individually or in the aggregate, would have a Material Adverse Effect. 5.23. Year 2000 Readiness. O&R has have informed Buyer of its analysis of, the status of development of contingency plans for, and forecasted expenditures with respect to Year 2000 readiness of material computer software and computer firmware comprising the Purchased Assets, as such analysis, contingency plan development and forecast of expenditures exist on the date hereof. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER The Buyer represents and warrants to the Sellers as follows: 6.1. Organization. The Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Buyer has heretofore delivered to the Sellers complete and correct copies of its Certificate of Formation and Limited Liability Company Agreement (or other similar governing documents), as currently in effect. 6.2. Authority Relative to this Agreement. The Buyer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Managers or Members of the Buyer and the Board of Directors of both Southern Energy, Inc. and The Southern Company and no other company proceedings on the part of the Buyer or such Affiliates are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Buyer, and assuming that this Agreement constitutes a valid and binding agreement of the Sellers, subject to the receipt of the Buyer Required Regulatory Approvals and the Sellers Required Regulatory Approvals, constitutes a valid and binding agreement of the Buyer, enforceable against the Buyer in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3. Consents and Approvals; No Violation. (a) Except as set forth in Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Sellers Required Regulatory Approvals, neither the execution and delivery of this Agreement by the Buyer nor the purchase by the Buyer of the Purchased Assets pursuant to this Agreement will (i) conflict with or result in any breach of any provision of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(a) and except for the filings by the Buyer and the Sellers required by the HSR Act (the filings and approvals referred to in Schedule 6.3(a) and with respect to the HSR Act are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby. 6.4. Operating Easements. Buyer shall grant Operating Easements to O&R as agreed to pursuant to the procedures set forth in the Continuing Site/Interconnection Agreement. 6.5. Regulation as a Utility. On the Closing Date, the Buyer will be an exempt wholesale generator under the Holding Company Act, although it is a subsidiary of a registered public utility holding company under the Holding Company Act. On the Closing Date, the Buyer also will be a public utility under the Federal Power Act. Except as set forth in Schedule 6.5, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.6. Availability of Funds. The Buyer has sufficient funds available to it or will receive binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII COVENANTS OF THE PARTIES 7.1. Conduct of Business Relating to the Purchased Assets. Except as described in Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Sellers will operate and maintain the Purchased Assets according to their ordinary and usual course of business consistent with Good Utility Practice. Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Sellers will not with respect to the Purchased Assets: (a) make any material change in the operations of the Purchased Assets (including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by the Sellers other than consistent with past practice); (b) except for the Scheduled Capital Expenditures, make any capital expenditures with respect to the Purchased Assets or enter into any contract or commitment therefor, except that (i) the Sellers shall make any capital expenditures requested by the Buyer, provided that the Buyer will reimburse Sellers for such capital expenditures at least five (5) Business Days prior to the date payment for such expenditure is due, and (ii) the Sellers shall make any capital expenditures deemed necessary by the Sellers in accordance with Good Utility Practices ("Necessary Capital Expenditures"), at Sellers' cost and expense, provided, however, that if the Buyer requests that the Sellers make enhancements/upgrades with a cost in excess of the cost of any Necessary Capital Expenditures, the Buyer shall reimburse the Sellers for the cost of such enhancements/upgrades to the extent the cost of such enhancement/upgrade exceeds the cost of the Necessary Capital Expenditure at the time such enhancement/upgrade is performed; (c) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with Good Utility Practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances in the ordinary course of business; (d) except for the Scheduled Maintenance Expenditures, make any maintenance expenditures, except that (i) the Sellers shall make any maintenance expenditures requested by the Buyer provided that the Buyer will reimburse Sellers for such maintenance expenditures at least five (5) Business Days prior to the date payment for such expenditure is due, and (ii) the Sellers shall make any maintenance expenditures deemed necessary by the Sellers in accordance with Good Utility Practice ("Necessary Maintenance Expenditures") at Sellers' cost and expense, provided, however, that if the Buyer requests that the Sellers make enhancements / upgrades with a cost in excess of the cost of any Necessary Maintenance Expenditures, the Buyer shall reimburse the Sellers for the cost of such enhancements / upgrades to the extent the cost of such enhancement / upgrade exceeds the cost of the necessary maintenance expenditure at the time such enhancement/upgrade is performed; (e) amend or terminate prior to the expiration date, or waive any material term or give consent to any material request with respect to any of the Sellers Agreements, Permits or Environmental Permits, except to the extent that such amendment, termination, waiver or consent (i) will not have a material impact on operations of the Purchased Assets, including the cost of said operations or (ii) is required by Applicable Law, including Applicable Environmental Law; (f) enter into agreements for the purchase or sale of fuel (whether commodity or transportation): (i) that extend more than sixty (60) days beyond April 30, 1999 if, in the aggregate, such agreements have remaining payment obligations of more than $30 million after April 30, 1999; or (ii) that extend more than thirty (30) days beyond October 31, 1999 if, in the aggregate, such agreements have remaining payment obligations of more than $10 million after October 31, 1999; provided, however, that O&R shall consult with the Buyer regarding purchases or sales of fuel in excess of $15 million if such commitments to purchase or sell will extend beyond April 30, 1999. The parties further agree to adjust the dates in this Section 7.1(f) if the Closing is anticipated to occur after April 30, 1999. Such adjustment will reflect the amount of time beyond April 30, 1999 by which the Closing is expected to occur at the time such an agreement is entered; (g) enter into any power sales commitments: (i) having a term greater than six (6) months and that extends beyond April 30, 1999 if the aggregate energy under such commitment and all other then outstanding commitments not previously consented to by the Buyer would in Sellers' judgment reasonably be expected to exceed 150,000 MW hours delivered after April 30, 1999; or (ii) having a term greater than six (6) months and that extends beyond October 31, 1999 if the aggregate energy under such commitment and all other then outstanding commitments not previously consented to by the Buyer would in Sellers' judgment reasonably be expected to exceed 75,000 MW hours delivered after October 31, 1999; provided, however, Sellers shall consult with the Buyer regarding entering into any power sales commitments in excess of $5 million if such commitments will extend beyond April 30, 1999. The parties further agree to adjust the dates in this Section 7.1(g) if the Closing is anticipated to occur after April 30, 1999. Such adjustment will reflect the amount of time beyond April 30, 1999 by which the Closing is expected to occur at the time such an agreement is entered; (h) sell, lease or otherwise dispose of Emission Allowances except to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; (i) enter into any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (h); or (j) make any new, or change any current, election with respect to Taxes affecting the Purchased Assets. 7.2. Access to Information. (a) Between the date of this Agreement and the Closing Date, during ordinary business hours and upon reasonable notice (i) O&R will give the Buyer and the Buyer Representatives reasonable access to its managerial personnel who are employed in connection with the Purchased Assets and to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which the Buyer is permitted access by law, (ii) Sellers shall permit the Buyer to make such reasonable inspections thereof as the Buyer may reasonably request, including conducting environmental sampling at, on and underneath the Purchased Assets and performing compliance audits at the Purchased Assets, if Buyer reasonably deems such sampling necessary after reviewing further information which becomes available after the date hereof, so long as Sellers provide their consent to such sampling, which consent shall not be unreasonably withheld, (iii) O&R will cause its officers, engineers, operations and maintenance personnel and advisors to furnish the Buyer with such financial and operating data, Tax Returns (other than Income Tax Returns) and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request and assist Buyer in such inspections; (iv) Sellers cause its officers and advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by either Seller with or from the SEC, NYPSC, NJBPU, PAPUC, FERC, ISO or other governmental authority with respect to the Purchased Assets; provided, however, that (A) any such investigation shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) neither Seller shall be required to take any action which would constitute a waiver of the attorney-client privilege and (C) neither Seller need supply the Buyer with any information which it is under a legal obligation not to supply; provided, however, that Sellers shall have used commercially reasonable efforts to have such obligations waived. Notwithstanding anything in this Section 7.2 to the contrary, (i) O&R will only furnish or provide such access to employee medical records only as is permitted by law, and (ii) O&R will furnish or provide such access to personnel records only to the extent that the employee to which the personnel record relates has given its consent to the Sellers. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of Section 11.2 of this Agreement shall be treated as Confidential Information. (c) Commencing February 1, 1999, the Buyer shall have the right to physically locate one designated representative (the "Designated Representative") of the Buyer at an office or in workspace at O&R's corporate offices to observe the operations of Bowline, as well as the operations of the Lovett Generating Station, the hydroelectric generating stations and the gas turbine generating stations, pursuant to the Other Sales Agreements; provided, however, that the Buyer shall not unreasonably interfere with the Seller's use of the Purchased Assets. O&R shall coordinate site visits and provide the Designated Representative during such period prior to the Closing access to O&R's managerial personnel. The Designated Representative shall coordinate the Buyer's rights to access under Section 7.2(a) hereof during such period prior to the Closing. (d) For a period of seven (7) years after the Closing Date, Sellers and their representatives shall have reasonable access to (i) information on employees covered by the O&R Management Employee Transition Program and (ii) all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access (A) may reasonably be required by the Sellers in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date and (B) is not otherwise prohibited by law. Such access shall be afforded by the Buyer upon receipt of reasonable advance written notice and during normal business hours. The Sellers shall be responsible for any costs or expenses incurred by them pursuant to this Section 7.2(d). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such seven (7) year period, the Buyer shall, prior to such disposition, give the Sellers a reasonable opportunity at the Sellers' expense, to segregate and remove such books and records as the Sellers may select. Any information provided by Buyer to Sellers pursuant to this Section 7.2(d) shall be deemed Confidential Information.. 7.3. Expenses. Except to the extent specifically provided herein, whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. 7.4. Further Assurances. (a) Subject to the terms and conditions of this Agreement, each of the parties hereto will use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement, including without limitation, the use of the Sellers' and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. Neither of the Parties shall, without the prior written consent of the other Party, take or fail to take any action which might reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Agreement or the Ancillary Agreements. From time to time after the date hereof, without further consideration, the Sellers will, at their own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer will, at its own expense, execute and deliver such documents to the Sellers as the Sellers may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets ("Leased Assets") which are principally used by the Sellers for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Sellers will use their commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date unless Buyer directs Sellers in writing not to acquire any such Leased Asset. The Sellers' documented and reasonable costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of the Purchase Price. Schedule 7.4 lists all of the Leased Assets. (b) To the extent that any Sellers' rights under any guaranties, warranties and indemnification applicable to the Purchased Assets or the Assumed Liabilities are nontransferable or nonassignable, Sellers shall use its commercially reasonable efforts to provide to Buyer the benefits thereof in some other manner upon the request of Buyer. 7.5. Public Statements. The parties shall consult with each other prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and shall not issue any such public announcement, statement or other disclosure prior to such consultation, except as may be required by law or stock exchange rules or regulations and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent that such public announcements, statements or other disclosures do not violate Section 11.2 of this Agreement. 7.6. Consents and Approvals. (a) The Sellers and the Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. Buyer shall bear the cost of all filing fees under the HSR Act. (b) The Sellers and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Sellers Required Regulatory Approvals and the Buyer Required Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Sellers or the Buyer is a party or by which either of them is bound. The Sellers shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and each of the Sellers and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they will consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Sellers and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Sellers, on the one hand and the Buyer on the other hand, with all governmental bodies. To the extent that a consent to an assignment of any material Sellers Agreement cannot be obtained before the Closing Date, the Sellers will enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Sellers Agreements. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any Federal, State or local governmental authority or agency or any third party in connection with any Federal, State or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. (d) Buyer shall assume primary responsibility for securing the transfer or reissuance of the Permits effective as of the Closing Date. Sellers shall cooperate with Buyer's efforts in this regard and shall use their best efforts to assist in the transfer or reissuance when so requested by Buyer. In the event that Buyer is unable, despite commercially reasonable efforts, to obtain a transfer or reissuance of one or more Permits as of the Closing Date, Buyer may use the Permits issued to Sellers to the extent permissible under applicable laws and regulations provided (i) Buyer notified Sellers prior to Closing, (ii) Buyer continues to make commercially reasonable efforts to obtain a transfer or reissuance of such Permits after the Closing, and (iii) Buyer indemnifies Sellers for any losses, claims or penalties suffered by Sellers in connection with the Permit that is not transferred or reissued as of the Closing Date resulting from Buyer's operation of the Purchased Assets following the Closing Date. In no event shall Buyer use or otherwise rely on a Permit issued to Sellers beyond one year after Closing unless Buyer has, after exercising its commercially reasonable efforts, been unable to obtain same and such reliance is not prohibited by law. 7.7. Fees and Commissions. The Sellers and the Buyer each represent and warrant to the other that, except for Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), which is acting for and at the expense of the Sellers, and Credit Suisse First Boston Corporation, which is acting for and at the expense of the Buyer, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Sellers and the Buyer will pay to the other or otherwise discharge, and will indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8. Tax Matters. (a) Notwithstanding any other provision of this Agreement, all transfer, sales and similar Taxes incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer, and the Buyer will, at its own expense, file, to the extent required by law, all necessary Tax Returns with respect to all such Taxes, and, if required by applicable law, the Sellers will join in the execution of any such Tax Returns. (b) With respect to Taxes to be prorated in accordance with Section 3.4 of this Agreement only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Sellers' approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Sellers' review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Sellers shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with the Section 3.4 of this Agreement. (c) On and after the Closing Date until the maturity or redemption date of the Pollution Control Bonds which were issued to finance or refinance all or a portion of the cost of the Pollution Control Facilities (as defined hereinafter): (i) Except as otherwise permitted in clause (ii) below, Buyer will not change or permit to be changed the character or nature of the use of those facilities listed in Schedule 7.8(c) hereto (the "Pollution Control Facilities") from the manner Seller has used said facilities prior to the sale of the Purchased Assets, unless such changed use would constitute a use or purpose of the Pollution Control Facilities for which tax-exempt bonds could be issued pursuant to section 1313 of the Tax Reform Act of 1986, P.L. 99-514 (the "1986 Tax Act"), to refund bonds described in section 1312(a) of the 1986 Tax Act which, for purposes hereof, are assumed to have been issued to finance facilities of the same character and use or purpose as the Pollution Control Facilities; (ii) Buyer and any transferee which becomes subject to the provisions of the foregoing clause (i) by reason of this clause (ii) will not sell or otherwise transfer any portion of the Pollution Control Facilities unless (A) the transferee covenants to satisfy the conditions of the foregoing clause (i) with respect to its ownership and use of the Pollution Control Facilities or (B) the transfer relates to personal property and is exclusively for cash the proceeds of which will be expended within six (6) months of the date of receipt on facilities for which tax-exempt bonds could be issued pursuant to section 1313 of the 1986 Tax Act, to refund bonds described in section 1312(a) of said act which, for purposes hereof, are assumed to have been issued to finance facilities of the same character and use or purpose as said facilities; (iii) Buyer will cooperate with O&R and use commercially reasonable efforts to permit O&R to have access to the Pollution Control Facilities at reasonable times to examine them; and (iv) The foregoing clause (i) shall not be construed to prevent Buyer (or any transferee) from ceasing to operate, maintain or repair any element or item of the Pollution Control Facilities, the operation, maintenance or repair of which becomes uneconomic to Buyer because of damage or destruction or obsolescence (including physical, functional or economic obsolescence), or because of any change in government standards and regulations or the termination of the operation of the Purchased Assets to which the element or item is an adjunct. O&R shall notify Buyer when the Pollution Control Bonds have matured or been redeemed. (d) Each of the Buyer and the Sellers shall provide the other with such assistance (including access to the Purchased Assets) as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each will retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.8 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. (e) O&R will consult with and allow Buyer to participate in all outstanding real property tax disputes concerning the Purchased Assets and shall take such positions as Buyer may request consistent with the positions previously communicated to Sellers by Buyer with respect to such tax disputes, to assist Buyer in obtaining a tax agreement with respect to such tax disputes for periods subsequent to the Closing Date. O&R will use its commercially reasonable efforts to assist Buyer in obtaining an agreement with the taxing authorities pursuant to which the assessed value for real estate tax purposes of the Purchased Assets will be the lowest value achievable. O&R shall not enter into any agreement with the taxing authorities with respect to such real property tax disputes relating to periods prior to the Closing Date without the written consent of Buyer which Buyer shall not unreasonably withhold as long as O&R has complied with this Section 7.8(e). 7.9. Supplements to Schedules. Prior to the Closing Date, the parties shall supplement or amend the Schedules required by Articles V and VI with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.10. Employees. (a) Schedule 7.10(a) sets forth all collective bargaining agreements to which O&R is a party in connection with the Purchased Assets and all other labor agreements and amendments thereto, that are or may be associated with the Purchased Assets (the "Collective Bargaining Agreements"). Buyer shall offer employment to begin as of the Closing Date to the O&R's employees who work in connection with the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"), and the Buyer will assume the Collective Bargaining Agreements and all of O&R's obligations thereunder, including, without limitation, the terms and conditions of the employee benefit plans covering such hourly employees. (b) Continued Employment; Service Credit. The Buyer shall, as of the Closing Date, offer employment to the employees of O&R (who will be listed on Schedule 7.10(b) by the Buyer), who worked at or directly serviced the Purchased Assets, who were employees immediately prior to the Closing Date, who were not Hourly Employees and who are approved by Buyer (the "Management Employees"). The Buyer shall provide Schedule 7.10(b) to O&R at least ninety (90) days prior to the date which the Closing is anticipated to occur (but in no event later than February 1, 1999, or such other date to which the Buyer and O&R mutually agree). The Management Employees hired by the Buyer shall be given credit for all service with O&R or its subsidiaries (and service credited by O&R or such subsidiary), to the same extent as such service was credited for such purpose by O&R or such subsidiary, under all employee benefit plans, programs and policies, and fringe benefits of the Buyer in which they become participants for purposes of eligibility, vesting and determination of level of benefits (but not for purposes of benefit accrual). To the extent permissible under the terms thereof and required by applicable law, the Buyer shall (i) waive all limitations as to preexisting conditions exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date, and (ii) provide each Management Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Closing Date. (c) Subject to applicable law, the Buyer shall maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits as will, in the aggregate, provide benefits to the Management Employees that are no less favorable than those provided pursuant to such employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Sellers and their subsidiaries, as in effect on the Closing Date. During the period between the date hereof and the Closing Date, O&R shall use its best efforts to keep available all current Management Employees for employment by the Buyer (except those employees which the Buyer identifies in writing as Management Employees which the Buyer does not intend to employ). (d) Notwithstanding the Buyer's assumption of the Collective Bargaining Agreement, the Buyer shall not assume sponsorship or any other obligation under any Benefit Plan of O&R or any ERISA Affiliate of the Sellers in connection with the assumption of such agreements or in connection with hiring any of the Hourly Employees. All benefits accrued under such Benefits Plans and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of O&R and any individual covered under any such Benefit Plan that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing pursuant to the provisions of COBRA. (e) O&R agrees to perform timely and discharge all requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of their employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. The Buyer will cooperate with O&R to provide O&R with such information as may be needed from the Buyer for inclusion in such notices, including providing O&R at least ninety (90) days prior to the date on which the Closing is anticipated to occur (but in no event, later than February 1, 1999 or such other date to which the Buyer and O&R mutually agree) with a list of all of O&R's employees to whom the Buyer will make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. (f) O&R shall be responsible for any payments required under its severance plan, including severance payment and other benefit enhancements, offered in connection with the transfer of the Purchased Assets. Within thirty (30) days following the last day that any employee may elect to participate in such plan, O&R shall provide Buyer with a list of all electing employees. In any event, Buyer is not required to establish this or any other severance or benefit plan. (g) O&R shall comply with all of the requirements of COBRA arising from this Agreement with respect to all employees of O&R employed at the Purchased Assets who are not employed by Buyer. (h) O&R shall pay, when due, to all Hourly Employees and Management Employees hired by the Buyer pursuant to Section 7.10 hereof, all compensation, bonus, severance, vacation and holiday compensation, workers' compensation or other employment benefits which have accrued to such Hourly Employees and Management Employees through and including the Closing Date. (i) Following the execution of this Agreement, O&R will use its commercially reasonable best efforts to arrange meetings and interviews with such employees of O&R as Buyer shall reasonably request. (j) O&R shall not, prior to the Closing Date, with respect to the Purchased Assets, (i) hire new employees or transfer current employees prior to the Closing to work at the Purchased Assets, other than to fill vacancies in existing positions in the reasonable discretion of Sellers, (ii) take any action prior to the Closing to affect a material change in the Collective Bargaining Agreement, or (iii) take any action prior to the Closing to increase the aggregate benefits payable to the employees employed in connection with the Purchased Assets, except (A) as otherwise required by the terms of the Collective Bargaining Agreement obligations to effects bargain, (B) as O&R shall reasonably deem appropriate in order to comply with its obligations under the second sentence of Section 7.10(c) above, (C) for retention bonuses payable to Management Employees on or before the Closing Date and (D) increases in salary and benefits in the ordinary course of business, consistent with past practice. 7.11. Risk of Loss. (a) From the date hereof through the Closing Date, all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Sellers. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the knowledge of the Sellers after reasonable inquiry and investigation) contemplated taking which has not been consummated, the Sellers shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Sellers shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Sellers has notified the Buyer of such taking, then the Buyer or the Sellers may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f). (c) If, before the Closing Date all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Sellers shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Sellers have not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Sellers shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price and assigning any insurance proceeds to Buyer at the Closing) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Sellers have notified the Buyer of such casualty, then the Buyer may terminate this Agreement pursuant to Section 10.1(f). 7.12. Compliance with Cooling Water Usage Obligations. (a) The Buyer shall assume and agree to perform any environmental cooling water usage obligations that are imposed on Bowline under the Fourth Amended Stipulation of Settlement and Judicial Consent Order in NRDC v. NYSDEC among the New York State Department of Environmental Conservation, O&R, Con Edison, Central Hudson Gas and Electric Corporation, New York Power Authority, Natural Resources Defense Council, Scenic Hudson, Inc., and the Hudson Riverkeeper Fund, Inc., executed by the Honorable Justice Joseph C. Teresi on October 23, 1997 (the "Consent Order") in a manner consistent with the cross-plant outage credit chart set forth in Attachment E to the Consent Order. (b) Notwithstanding the expiration of the Consent Order, for so long as the July outage requirement at Bowline, as specified in paragraph 3 of the Consent Order, may be met by drawing 2.8 unit-days of outage from Indian Point Unit No. 2's existing balance of unit-days of outage that were accrued in excess of those required under the Settlement Agreement, as provided for under paragraph 3 of the Consent Order, Con Edison shall provide Buyer with such 2.8 unit-days of outage for use at Bowline at no additional cost to either party. (c) In subsequent permits, permit applications, and regulatory and judicial proceedings pertaining to cooling water usage obligations at Bowline which mandate outages at Bowline, including without limitation obligations imposed pursuant to the Clean Water Act section402, New York State Environmental Conservation Law Title 8, the Consent Order, or any successor order or permits, the parties shall take all commercially reasonable efforts to support, effect and implement arrangements for allocating cross-plant outage credits among the facilities subject to the Consent Order. Neither party shall be required to pay the other party for such credits (or comparable rights) other than the actual incremental costs, if any, incurred by one party to create and transfer such credits (or comparable rights) to the other party. (d) The parties shall take such actions as may be necessary to (i) include Buyer in the working group composed of the electric generation companies who are parties to the Consent Order, and (ii) impose the conditions and provisions of this Section 7.12 upon all of its successors and assigns. 7.13. Real Estate Matters. (a) Buyer shall obtain an American Land Title Association ("ALTA") or New York Board of Title Underwriters ("NYBTU") owners standard form title policy commitment with respect to the Real Property (the "Title Commitment") from a title company of Buyer's choice (the "Title Company") covering title to the Real Property, together with an ALTA 3.1 zoning endorsement, if available, including parking and access, and such other endorsements as Buyer may reasonably request. Sellers shall provide the Title Company and Buyer such information as the Title Company or Buyer may reasonably request to assist the Title Company in connection with the Title Commitment. Without limiting the foregoing, Sellers shall provide the Title Company and Buyer a copy of the most recent surveys in their possession regarding the Real Property. Promptly after receiving the Title Commitment, Buyer shall notify Sellers in writing of any defects in title which are not Permitted Encumbrances and would cause title to the Real Property to be uninsurable (any of which is called herein a "Defect of Title"). Buyer shall be deemed to have waived any objection to any Defect of Title that was disclosed by the Title Commitment if Buyer fails to notify Sellers of such Defect of Title within thirty (30) days after receipt of such Title Commitment. With respect to the existence of any Defect of Title that is not disclosed by the Title Commitment, but which arises prior to Closing, Buyer shall immediately notify the Sellers in writing of any such Defect of Title. (b) O&R agrees that upon the written request of Buyer it will consent and cause its affiliates to consent to the relocation of the Operating Easements and Seller's Easements so long as (i) Buyer pays the cost of such relocation, (ii) such relocation will be to space within Buyer's ownership and will not materially adversely affect the operation of O&R's or its respective affiliates' transmission and distribution business except for the minimum downtime associated with the cut over for such relocation process in accordance with Good Utility Practice, and (iii) the Buyer's requested relocation is consistent with Good Utility Practices. O&R further agrees to condition any grant or assignment by O&R of the Operating Easements or Seller's Easements on the express agreement of its transferee to be bound by the terms and conditions of this Section 7.13(b). (c) As to any Operating Easement or Sellers' Easement not currently of record or reserved or granted back to O&R at Closing, all of which are to be granted by Buyer at Closing concurrently with the transfer of title to Buyer and prior to any mortgage or other encumbrance, such Operating Easements and Seller's Easements shall include standard cross- indemnity provisions relating to personal injury, death or property damage occurring as a result of gross negligence or willful misconduct in the use of such Easements, whereby each party agrees to indemnify the other for the consequences of the gross negligence or willful misconduct of those for whom the indemnifying party is legally responsible. 7.14. Year 2000. O&R shall (a) use its best efforts to cooperate with Buyer in formulating a plan to prepare the Purchased Assets to be ready for Year 2000 computer-related issues with a target completion date of October 1, 1999 and (b) perform until the Closing Date (or later, at O&R's election, pursuant to the second sentence of Section 7.15 of this Agreement) the tasks identified in such plan, consistent with Good Utility Practices and the expenditures contemplated in O&R's Year 2000 plans referred to in Section 5.23 hereof. 7.15. Scheduled Capital Expenditures and Scheduled Maintenance Expenditures. The Sellers shall perform, or caused to be performed, the Scheduled Capital Expenditures and the Scheduled Maintenance Expenditures, at Sellers' cost, prior to the Closing Date. To the extent that Scheduled Capital Expenditures and Scheduled Maintenance Expenditures are not completed by the Closing Date, the Sellers either (i) shall cause the Scheduled Capital Expenditures or Scheduled Maintenance Expenditures to be completed within a reasonable period of time following the Closing Date or (ii) shall pay Buyer its reasonable costs to complete such unfinished Scheduled Capital Expenditures or Scheduled Maintenance Expenditures within thirty (30) days of Sellers' receipt from Buyer of a reasonably detailed invoice for such cost. 7.16. Expansion. The parties recognize that the Buyer may wish to add additional generating capacity at Bowline site ("Intended Use") and the value to Buyer for such Intended Use is included in the Purchase Price. Accordingly, to the extent such action or inaction does not interfere with or adversely affect O&R transmission and distribution business, O&R's agrees that, at Buyer's cost, it: (a) will use commercially reasonable efforts to cooperate with Buyer's reasonable request to remove or modify any (i) Permitted Encumbrances which materially adversely affect Buyer's Intended Use, or (ii) conditions (either physical or otherwise) which exist at Bowline or at any of the Purchased Assets which would prevent, hinder, or otherwise interfere with the Buyer's Intended Use, and (b) shall not, and shall ensure that their respective affiliates shall not, oppose, hinder, or interfere with Buyer's efforts to add such additional capacity and shall cooperate with Buyer's other reasonable requests with respect thereto. 7.17. Fuel Contract Renegotiation. At Buyers' request, O&R shall exercise commercially reasonable efforts to cooperate with Buyer in Buyer's efforts to renegotiate the Service Agreement for Service under OPT Rate schedule, between Columbia Gas Contract Transmission Corp. and O&R, dated July 1, 1991. 7.18. Environmental Insurance. If Buyer elects to purchase insurance coverage to cover liabilities arising from Hazardous Substances present or Released at, on, in or under the (i) Purchased Assets and (ii) the "Purchased Asset" or "Purchased Assets," as defined in each of the Other Sales Agreements, on or prior to the Closing Date ("Environmental Insurance"), Sellers shall share equally with Buyer the cost of premiums for such Environmental Insurance, up to a maximum payment by Sellers of $200,000 in the aggregate for such insurance relating to (A) the Purchased Assets and (B) the "Purchased Asset" and "Purchased Assets" as defined in each of the Other Sales Agreements. If Buyer purchases such Environmental Insurance, Buyer shall add each Seller as an additional insured. ARTICLE VIII CLOSING CONDITIONS 8.1. Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated with no order, decree, judgment or injunction enjoining or prohibiting the consummation of the transactions contemplated hereby having been issued; (b) No preliminary or permanent injunction or other order or decree by any federal or state court or governmental authority which prevents or is reasonably likely to prevent the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall be pending or shall have been issued and remain in effect (each party agreeing to use its reasonable efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental authority in the United States which prohibits the consummation of the transactions contemplated hereby; (c) All Federal, State and local government orders, consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Sellers Required Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have become Final Orders (a "Final Order" means action by the relevant regulatory authority which has not been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired, and as to which all conditions to the consummation of such transaction prescribed by law, regulation or order have been satisfied), and such Final Order is in form and substance reasonably acceptable to the party that sought the consent or approval granted by such Final Order (for purposes of this clause (i), a Final Order shall be deemed to be reasonably acceptable to such party if it complies in all material respects with the terms and conditions of such party's application therefor and contains no additional terms or conditions which would have a Material Adverse Effect on such party or the operation of the Purchased Assets); provided, however, that if at the time such order, consent, or approval would otherwise be deemed to be a Final Order, there shall be pending or threatened any appeal or challenge thereto, which, if adversely determined, would cause such order, consent or approval to not be reasonably acceptable to the party that sought such order, consent or approval, then if such party who would be adversely affected notifies the other parties that such a pending or threatened appeal or challenge exists (such notification to be made as soon as reasonably practicable following knowledge of such pending or threatened appeal or challenge, but in no event later than fifteen (15) days from date on which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired and all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied), then such order, consent or approval shall be deemed to be a Final Order only after all opportunities for rehearing or judicial review are exhausted and provided, further, that if the designation of an order, consent or approval as a Final Order shall be deferred pursuant to the foregoing provision, the Termination Date shall be automatically extended for a period of time equal to the period of time for which the designation as a Final Order has been deferred; and (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Sellers or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in the last sentence of Section 7.6(b) has been entered into. 8.2. Conditions to Obligations of Buyer. The obligation of the Buyer to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect, including, without limitation, any Material Adverse Effect regarding water usage at Bowline; (b) The Sellers shall have performed and complied with the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Sellers set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of each Seller; (c) The Buyer shall have received a certificate from an authorized officer of each Seller, dated the Closing Date, to the effect that to the best of such officers' knowledge, after reasonable inquiry and investigation, the conditions relating to such Seller and set forth in Sections 8.2(a) and (b) have been satisfied; (d) The "Closing" as defined in the Lovett Generating Station Sales Agreement between O&R and Southern Energy Lovett, L.L.C., dated as of the date hereof, shall have occurred or shall occur concurrently with the Closing hereunder; (e) The Buyer shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) O&R is a corporation organized, existing and in good standing under the laws of the State of New York and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action taken on the part of O&R. (2) this Agreement and the Ancillary Agreements have been executed and delivered by O&R and (assuming that the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of O&R, enforceable against O&R in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by O&R will not (A) constitute a violation of the Certificate of Incorporation or By-Laws of O&R, or (B) to counsel's knowledge constitute a violation or default under those agreements or instruments set forth on a schedule to this opinion; (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal or New York governmental authority is necessary for the consummation by O&R of the Closing other than (i) the Sellers Required Regulatory Approvals, which are addressed below, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate have a Material Adverse Effect or prevent O&R from performing its obligations hereunder; and (5) The Bill of Sale, the Instrument of Assumption and the other agreements described in Section 4.3 are in proper form to transfer to Buyer such title to the Purchase Assets as was held by O&R. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer and admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by O&R and appropriate officers and directors of O&R and by public officials. (f) The Buyer shall have received an opinion from Riker, Danzig, Scherer, Hyland & Perretti, LLP (New Jersey Counsel), Nixon, Hargrave, Devans & Doyle, LLP (New York Counsel) and Morgan, Lewis & Bockius, LLP (Pennsylvania Counsel), or other local regulatory counsel for O&R reasonably acceptable by Buyer, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal governmental authority or any governmental authority in the States of New York, New Jersey and Pennsylvania is necessary for the consummation by O&R of the Closing other than (i) the Sellers Required Regulatory Approvals, which have been obtained and are in full force and effect with such terms and conditions as were imposed by the applicable governmental authorities, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate, have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer and admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by O&R and appropriate officers and directors of O&R and by public officials. (g) The Buyer shall have received an opinion from the General Counsel of Con Edison, which shall be reasonably acceptable to Buyer, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) Con Edison is a corporation organized, existing and in good standing under the laws of the State of New York and has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by requisite corporate action taken on the part of Con Edison; (2) this Agreement has been executed and delivered by Con Edison and (assuming that the Sellers Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) is a valid and binding obligation of Con Edison, enforceable against Con Edison in accordance with its terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (3) the execution, delivery and performance of this Agreement by Con Edison will not constitute a violation of the Certificate of Incorporation or By-Laws of Con Edison; (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal governmental authority is necessary for the consummation by Con Edison of the Closing other than (i) the Sellers Required Regulatory Approvals, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. (5) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal governmental authority or any governmental authority in the State of New York is necessary for the consummation by Con Edison of the Closing other than (i) the Sellers Required Regulatory Approvals, which have been obtained and are in full force and effect with such terms and conditions as were imposed by the applicable governmental authorities, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by Con Edison and appropriate officers and directors of Con Edison and by public officials. (h) Buyer shall have received the Title Commitment showing the Real Property to be insured as subject only to Permitted Encumbrances, and the effective date of the Title Commitment shall have been updated to the Closing Date and marked to show the satisfaction of all conditions to the issuance of the title policy other than conditions within the control of the Buyer; and (i) Buyer shall have obtained a certificate of the Secretary of each Seller identifying by name and title and bearing the signature of the officer of such Seller authorized to execute and deliver this Agreement and the other agreements and instruments contemplated hereby. 8.3. Conditions to Obligations of the Sellers. The obligation of the Sellers to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Sellers shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officers' knowledge, the conditions set forth in Sections 8.3(a) and (b) have been satisfied; and (d) The Sellers shall have received an opinion from Troutman Sanders LLP, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Sellers and their counsel, substantially to the effect that: (1) The Buyer is a limited liability company organized, existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action taken on the part of the Buyer; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Sellers Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except (A) that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer will not constitute a violation of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents), as currently in effect, of the Buyer; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental authority is necessary for the consummation by the Buyer of the Closing other than (i) the Buyer Required Regulatory Approvals, all of which have been obtained and are in full force and effect with such terms and conditions as shall have been imposed by any applicable governmental authority, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States and the State of New York, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate Members and Managers of the Buyer and its subsidiaries and by public officials. 8.4. Extension of Closing Date. If the approval by the FERC of the establishment of the ISO (the "ISO Approval") shall not have been obtained on or prior to the Condition Fulfillment Date, the parties agree to defer the Closing Date until the date (the "Deferred Closing Date") which is the earlier of (a) the last day in the month in which the ISO Approval is deemed final under applicable law, provided that if there are less than five (5) Business Days in the month in which the ISO Approval is deemed final, then the last day in the month which follows the month in which the ISO Approval is deemed final, and (b) August 31, 1999; provid however, that all conditions set forth in Section 8.2(a) and all conditi set forth in Section 8.2(b) regarding the representations and warran of Seller shall be deemed to be fulfilled on the Deferred Closing D unless the nonfulfillment of such conditions primarily results from the acts or omissions of Sellers or from the occurrence of facts or circumstances primarily relate to the Sellers' ownership and/or operation, or the physical condition, of the Purchased Assets. For purposes of this Agreement, the "Condition Fulfillment Date" shall mean the date on which all conditions set forth in Sections 8.1 and 8.2 shall have been fulfilled but not earlier than the later of (i) the date on which all conditions set forth in Section 8.3 have been fulfilled or waived and (ii) April 30, 1999. ARTICLE IX INDEMNIFICATION 9.1. Indemnification. The Sellers shall share all indemnification obligations and benefits arising under this Article 9 in proportion to their ownership of the Purchased Assets; two-thirds (66.667%) of all such benefits and obligations shall be allocated to Con Edison and one-third (33.333%) of all such benefits and obligations shall be allocated to O&R. In each instance the term "Sellers" is used in this Article 9, such term shall mean each Seller in proportion to the allocation described in the previous sentence. (a) The Sellers generally, and not joint and severally will indemnify, defend and hold harmless the Buyer, Buyer's affiliates, and their respective Members, Managers, employees and agents (each a "Buyer Indemnitee") from and against any and all causes of action, claims, demands or suits (by any Person), losses, liabilities, damages (excluding consequential and special damages), obligations, payments, costs, Taxes 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) to the extent the foregoing are not covered by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by the Sellers of any covenant or agreement of the Sellers contained in this Agreement; (ii) the Excluded Liabilities; (iii) the Excluded Assets; (iv) any breach of any representation in Sections 5.1, 5.2 and 5.3 hereof; (v) Sellers' non-compliance with any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement; or (vi) the gross negligence or willful misconduct of Sellers, or their affiliates or their best respective contractors while on Buyer's property (including, without limitation, any easement provided the Sellers with respect to such property) after the Closing to the extent such Indemnifiable Loss is not caused by the negligence or willful misconduct of any Buyer Indemnitee. (b) The Buyer will indemnify, defend and hold harmless the Sellers, Sellers' Affiliates, and their respective directors, officers, employees and agents (each, a "Seller Indemnitee") from and against any and all Indemnifiable Losses asserted against or suffered by the Sellers relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement or (ii) the Assumed Liabilities; (iii) the operation of the Purchased Assets after the Closing Date, (iv) any breach of any representation in Article VI or (v) the gross negligence or willful misconduct of Buyer, its affiliates or their respective contractors while on Seller's property after the Closing, to the extent such Indemnifiable Loss is not caused by the negligence or willful misconduct of any Seller Indemnitee. (c) Either the party required to provide indemnification under this Agreement (the "Indemnifying Party") or the entity or person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement. (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The Sellers and the Buyer shall have indemnification obligations with respect to Indemnifiable Losses asserted against or suffered by the Sellers or the Buyer, as the case may be, to the extent that the aggregate of all such Indemnifiable Losses exceed the Indemnification Floor. It is agreed and understood that neither the Sellers nor the Buyer, as the case may be, shall have any liability at any time for Indemnifiable Losses asserted against or suffered by the other party until the aggregate amount of Indemnifiable Losses asserted or suffered by such other party under this Section 9.1 shall exceed the Indemnification Floor, and then only to the extent that the aggregate amount of Indemnifiable Losses exceeds the Indemnification Floor. The term "Indemnification Floor" shall mean an amount equal to $200,000. (g) The rights and remedies of the Sellers and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Sellers and the Buyer may have under this Agreement for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement; (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be; or (iii) any other liabilities described in Section 9.1(a) or 9.1(b). Rights and remedies under the Ancillary Agreements are as set forth therein. 9.2. Defense of Claims. (a) If any Indemnitee receives written notice of the assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) 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 will indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. (b) The party defending the Third Party Claim shall (i) consult with the other throughout the pendency of the Third Party Claim regarding the investigation, defense, settlement, compromise, trial, appeal or other resolution thereof; and (ii) afford the other party the opportunity, by notice, to participate and be associated in the defense of any Third Party Claim through counsel chosen by such other party, at its own expense, in the defense of any Third Party Claim as to which a party has elected to conduct and control the defense thereof. The parties shall cooperate in the defense of any Third Party Claim. The Indemnitee shall make available to the Indemnifying Party or its representatives all records and other materials reasonably required for use in contesting any Third Party Claim (subject to such confidentiality provisions as the Indemnitee may reasonably require) and shall furnish such testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnifying Party in connection therewith. If requested by the Indemnifying Party, the Indemnitee shall cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest or, if appropriate, in making any counterclaim against the Person asserting the claim or demand, or any cross-complaint against any Person. The Indemnifying Party shall reimburse the Indemnitee for any expenses incurred by Indemnitee in cooperating with or acting at the request of the Indemnifying Party. (c) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days (unless waiting twenty (20) calendar days would prejudice the Indemnitee's rights) after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of (a) any Third Party Claim with respect to Income Taxes or (b) any other Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer (other than with respect to Income Taxes) within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, compromise, or settle any Third Party Claim (other than with respect to Income Taxes) at any time, provided that in such event the Indemnitee shall waive any right to indemnity hereunder unless the Indemnitee shall have first sought the consent of the Indemnifying Party in writing to such payment, settlement or compromise and such consent was unreasonably withheld or delayed, in which event no claim for indemnity therefor hereunder shall be waived. (d) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than thirty (30) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will have a period of thirty (30) calendar days (unless waiting thirty (30) days would prejudice the Indemnitee's rights, in which case such period as would likely not prejudice the Indemnitee's rights, but in no event less than ten (10) days) within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party will be deemed to have accepted such Direct Claim. If the Indemnifying Party rejects such Direct Claim, the Indemnitee will be free to seek enforcement of its rights to indemnification under this Agreement. (e) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of the Chase Manhattan Bank), will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. Nothing in this Section 9.2(e) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (f) A failure to give timely notice as provided in this Section 9.2 will not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. ARTICLE X TERMINATION AND ABANDONMENT 10.1. Termination. (a) This Agreement may be terminated at any time prior to Closing Date, by mutual written consent of the Buyer and the Sellers. (b) This Agreement may be terminated by the Sellers jointly or Buyer if (i) the Closing shall not have been consummated on or before September 30, 1999 (the "Termination Date"); provided that the right to terminate this Agreement under this Section 10.1(b) shall not be available to either Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; and provided, further, that if on September 30, 1999 the conditions to the Closing set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the day which is eighteen (18) months from the date of this Agreement. (c) This Agreement may be terminated by either the Sellers jointly or the Buyer if (i) any governmental or regulatory body, the consent of which is a condition to the obligations of the Sellers and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent, or shall condition such consent upon any material change to the terms of this Agreement or the Ancillary Agreements or upon any other condition that materially and adversely affects the value of the transactions contemplated herein or therein for either party, and all appeals of such determination shall have been taken and have been unsuccessful; (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby or in the Ancillary Agreements and such order, judgment or decree shall have become final and nonappealable; or (iii) any statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental agency in the United States which prohibits the transactions contemplated herein or in the Ancillary Agreements. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Sellers of any agreement, representation or warranty contained in this Agreement which (i) has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer or cured by Sellers within fifteen (15) days after receipt by Buyer of notice specifying same or (ii) causes a Material Adverse Effect, of which Buyer has notified Sellers, and which Sellers have not promptly exercised commercially reasonable efforts to cure but in no event later than twenty (20) days following such notification by Buyer. (e) This Agreement may be terminated by the Sellers jointly, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Sellers impossible and such violation or breach has not been waived by the Sellers or cured by Buyer within fifteen (15) days after receipt by Buyer of notice specifying same. (f) This Agreement may be terminated by either the Sellers jointly or the Buyer in accordance with the provisions of Section 7.11(b) or (c). 10.2. Procedure and Effect of Termination. In the event of termination of this Agreement by either or both of the parties pursuant to Section 10.1, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein, such termination shall be without any further liability of either party or parties to the other party or parties except as follows: (a) in the event of termination of this Agreement by Sellers pursuant to Section 10.1(e), Sellers shall have the right to pursue all remedies available to them in equity or at law in connection with the violation or breach of this Agreement by Buyer; (b) in the event of termination of this Agreement by Buyer pursuant to Section 10.1(d), Buyer shall have the right to pursue all remedies available to it in equity or at law in connection with the violation or breach of this Agreement by Sellers; and (c) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of the Sellers and the Buyer. 11.2. Confidentiality. (a) All information regarding a party (the "Disclosing Party") that is furnished directly or indirectly to the other party (the "Recipient") pursuant to this Agreement and marked "Confidential" shall be deemed "Confidential Information." Notwithstanding the foregoing, Confidential Information does not include information that (i) is rightfully received from Recipient from a third party having an obligation of confidence to the Disclosing Party, (ii) is or becomes in the public domain, through no action on Recipient's part in violation of this Agreement, (iii) is already known by Recipient as of the date hereof, or (iv) is developed by Recipient independently of any Confidential Information of the Disclosing Party. Information that is specific as to certain data shall not be deemed to be in the public domain merely because such information is embraced by more general disclosure in the public domain. (b) Recipient shall keep the Confidential Information strictly confidential and not disclose any Confidential Information to any third party for a period of two (2) years from the date the Confidential Information was received by Recipient, except as otherwise provided herein. (c) Recipient may disclose the Confidential Information to its and its affiliates' respective directors, officers, employees, consultants, advisors and agents who need to know the Confidential Information for the purpose of assisting Recipient with respect to its obligations under this Agreement. Recipient shall inform all such parties, in advance, of the confidential nature of the Confidential Information. Recipient shall cause such parties to comply with the requirements of this Agreement and shall be responsible for the actions, uses, and disclosures of all such parties. (d) If Recipient becomes legally compelled or required to disclose any of the Confidential Information (including, without limitation, pursuant to the rules or regulations of the NYPP, ISO or FERC), Recipient will provide the Disclosing Party with prompt written notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy. Recipient will furnish only that portion of the Confidential Information which its counsel considers legally required, and Recipient will cooperate, at the Disclosing Party's expense, with the Disclosing Party's counsel to enable the Disclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. It is further agreed that, in the event that a protective order or other remedy is not obtained, the Recipient will furnish only that portion of the Confidential Information which, in the written opinion of the Recipient's counsel, is legally required to be disclosed and, upon the Disclosing Party's request, use commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to such information. (e) Recipient shall promptly return to the Disclosing Party all items containing or constituting Confidential Information, together with all copies, extracts, or summaries thereof, upon the earlier of (i) the Disclosing Party's request, or (ii) the termination or expiration of this Agreement. 11.3. Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.4. No Survival. Subject to the provisions of Article X, each and every representation, warranty and covenant contained in this Agreement (other than (a) the covenants contained in Sections 3.2, 3.3, 3.4, 7.2(b), 7.2(c), 7.2(d), 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10, 7.12, 7.13, 7.15, 7.16, 7.18, 9.1 and 9.2 and in Article XI (which covenants shall survive in accordance with their terms), (b) the representations and warranties contained in Sections 5.1, 5.2, 5.3, 6.1, 6.2 and 6.3 (which representations and warranties shall survive for twelve (12) months from the Closing) and (c) the representation and warranty in Section 5.21 (which representation and warranty shall survive for the applicable statute of limitations) shall expire with, and be terminated and extinguished by the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and such representations, warranties and covenants shall not survive the Closing Date; and none of the Sellers, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation, warranty or covenant. 11.5. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon receipt on a Business Day if during the normal business hours of the recipient, or if not, on the next Business Day, if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) If to O&R, to: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 Attention: Legal Department with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attention: Sheldon S. Adler, Esq. (b) If to Con Edison, to: Consolidated Edison Company of New York, Inc. 4 Irving Place New York, NY 10003 Attention: Senior Vice President and General Counsel with copies to: Cravath, Swaine & Moore 825 Eighth Avenue New York, NY 10019 Attention: George W. Bilicic, Jr., Esq. (c) If to Buyer, to: Southern Energy Bowline LLC c/o Southern Energy, Inc. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 Attention: Randy Harrison, Vice-President with copies to: Troutman Sanders LLP Nationsbank Plaza Suite 5200 Atlanta, GA 30308 Attention: Robert C. Marshall, Esq. and Southern Company Services 270 Peachtree Street Bin 918 Atlanta, Georgia 30303 Attention: Vice President and Associate General Counsel 11.6. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. The Buyer acknowledges that O&R has entered into an Agreement and Plan of Merger whereby O&R will become a wholly-owned subsidiary of Consolidated Edison, Inc. ("CEI"). Notwithstanding any other provision of this Article 11.6, the Buyer agrees that this Agreement may be assigned to CEI, or a wholly-owned affiliate of CEI without the Buyer's consent. Notwithstanding the foregoing, (a) Buyer may assign all of its rights and obligations hereunder to any wholly owned subsidiary (direct or indirect) of Buyer or Buyer's parent and upon Sellers' receipt of notice from Buyer of any such assignment, such assignee will be deemed to have assumed, ratified, agreed to be bound by and perform all such obligations, and all references herein to "Buyer" shall thereafter be deemed to be references to such assignee, in each case without the necessity for further act or evidence by the parties hereto or such assignee; and (b) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee or lending institutions for the purposes of financing or refinancing the Purchased Assets, including upon or pursuant to the exercise of remedies with respect to such financing or refinancing, or by way of assignments, transfers, pledges, or other dispositions in lieu thereof; provided, however, that no such assignment or other disposition shall relieve or in any way discharge Buyer or such assignee from the performance of Buyer's obligations under this Agreement. Sellers agree, at Buyer's expense, to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer pledge or other disposition of rights and interests hereunder so long as Sellers' rights under this Agreement are not thereby altered, amended, diminished or otherwise impaired. 11.7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies, and the Sellers and the Buyer hereby agree to irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. If requested by Sellers, Buyer will consent to appointing an agent for service of process in New York City. 11.8. Specific Performance. Sellers and Buyer agree that a material breach of this Agreement will cause the non-breaching party immediate and irreparable harm that monetary damages cannot adequately remedy, and therefore, in addition to all other remedies hereunder, the parties agree that, upon any actual or impending material breach of this Agreement, the non-breaching party shall be entitled to equitable relief, including injunctive relief and specific performance, without bond or proof of damages, and in addition to any other remedies that the non-breaching party may have under applicable law. 11.9. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.10. Interpretation. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.11. Entire Agreement. This Agreement, the Ancillary Agreements, the Confidentiality Agreement, including the Exhibits and Schedules referred to herein or therein, and the Guaranty given to Sellers by Southern Energy, Inc. embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of the Sellers contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Information Memorandum, dated May 1998, previously made available to the Buyer by the Sellers and DLJ). This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement. 11.12. Bulk Sales or Transfer Laws. The Buyer acknowledges that the Sellers will not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Sellers with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. IN WITNESS WHEREOF, the Sellers and the Buyer have caused this agreement to be signed by their respective duly authorized officers as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By /s/ D. Louis Peoples ------------------------------------------- Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. By /s/ J. Michael Evans ------------------------------------------- Name: J. Michael Evans Title: President and Chief Operating Offider SOUTHERN ENERGY BOWLINE, L.L.C. By /s/ Randy Harrison ------------------------------------------- Name: Randy Harrison Title: Vice President EX-10 3 EXHIBIT 10.59 - LOVETT GENERATING STATION SALES AGREEMENT Exhibit 10.59 LOVETT GENERATING STATION SALES AGREEMENT BETWEEN ORANGE AND ROCKLAND UTILITIES, INC. AND SOUTHERN ENERGY LOVETT, L.L.C. November 24, 1998 TABLE OF CONTENTS ARTICLE I DEFINITIONS 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II SALE AND PURCHASE 2.1 The Sale . . . . . . . . . . . . . . . . . . . . . 18 2.2 Excluded Assets . . . . . . . . . . . . . . . . . . 18 2.3 Assumed Liabilities . . . . . . . . . . . . . . . . 19 2.4 Excluded Liabilities . . . . . . . . . . . . . . . 24 ARTICLE III PURCHASE PRICE 3.1 Purchase Price . . . . . . . . . . . . . . . . . . 29 3.2 Purchase Price Adjustment . . . . . . . . . . . . . 29 3.3 Allocation of Purchase Price . . . . . . . . . . . 32 3.4 Proration . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE IV THE CLOSING 4.1 Time and Place of Closing . . . . . . . . . . . . . 34 4.2 Payment of Purchase Price . . . . . . . . . . . . 35 4.3 Deliveries by Seller . . . . . . . . . . . . . . . 35 4.4 Deliveries by Buyer . . . . . . . . . . . . . . . . 37 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER 5.1 Organization; Qualification . . . . . . . . . . . . 39 5.2 Authority Relative to this Agreement . . . . . . . 40 5.3 Consents and Approvals; No Violation . . . . . . . 40 5.4 Reports . . . . . . . . . . . . . . . . . . . . . . 42 5.5 Financial Statements . . . . . . . . . . . . . . . 43 5.6 Undisclosed Liabilities . . . . . . . . . . . . . . 44 5.7 Absence of Certain Changes or Events . . . . . . . 44 5.8 Title . . . . . . . . . . . . . . . . . . . . . . . 45 5.9 Leasehold Interests . . . . . . . . . . . . . . . . 45 5.10 Improvements . . . . . . . . . . . . . . . . . . . 46 5.11 Insurance . . . . . . . . . . . . . . . . . . . . . 46 5.12 Environmental Matters . . . . . . . . . . . . . . . 47 5.13 Labor Matters . . . . . . . . . . . . . . . . . . . 49 5.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . 50 5.15 Real Property Encumbrances . . . . . . . . . . . . 51 5.16 Condemnation . . . . . . . . . . . . . . . . . . . 52 5.17 Certain Contracts and Arrangements . . . . . . . . 52 5.18 Legal Proceedings, etc. . . . . . . . . . . . . . . 53 5.19 Permits . . . . . . . . . . . . . . . . . . . . . . 54 5.20 Regulation as a Utility . . . . . . . . . . . . . . 55 5.21 Taxes . . . . . . . . . . . . . . . . . . . . . . . 55 5.22 Intellectual Property . . . . . . . . . . . . . . . 56 5.23 Year 2000 Readiness . . . . . . . . . . . . . . . . 56 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER 6.1 Organization . . . . . . . . . . . . . . . . . . . 56 6.2 Authority Relative to this Agreement . . . . . . . 57 6.3 Consents and Approvals; No Violation . . . . . . . 57 6.4 Operating Easements . . . . . . . . . . . . . . . . 59 6.5 Regulation as a Utility . . . . . . . . . . . . . . 59 6.6 Availability of Funds . . . . . . . . . . . . . . . 59 ARTICLE VII COVENANTS OF THE PARTIES 7.1 Conduct of Business Relating to the Purchased Assets. . . . . . . . . . . . . . . . . . . . . . . 59 7.2 Access to Information . . . . . . . . . . . . . . . 64 7.3 Expenses . . . . . . . . . . . . . . . . . . . . . 67 7.4 Further Assurances . . . . . . . . . . . . . . . . 68 7.5 Public Statements . . . . . . . . . . . . . . . . . 69 7.6 Consents and Approvals . . . . . . . . . . . . . . 70 7.7 Fees and Commissions . . . . . . . . . . . . . . . 73 7.8 Tax Matters . . . . . . . . . . . . . . . . . . . . 73 7.9 Supplements to Schedules . . . . . . . . . . . . . 77 7.10 Employees . . . . . . . . . . . . . . . . . . . . . 77 7.11 Risk of Loss . . . . . . . . . . . . . . . . . . . 82 7.12 Real Estate Matters . . . . . . . . . . . . . . . . 84 7.13 Year 2000 . . . . . . . . . . . . . . . . . . . . . 86 7.14 Scheduled Capital Expenditures and Scheduled Maintenance Expenditures . . . . . . . . . . . . . 86 7.15 Expansion. . . . . . . . . . . . . . . . . . . . 86 7.16 Fuel Contract Renegotiation . . . . . . . . . . . . 87 7.17 Environmental Insurance . . . . . . . . . . . . . . 87 ARTICLE VIII CLOSING CONDITIONS 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby . . . . . . . . . 88 8.2 Conditions to Obligations of Buyer . . . . . . . . 91 8.3 Conditions to Obligations of Seller . . . . . . . . 96 8.4 Extension of Closing Date . . . . . . . . . . . . . 100 ARTICLE IX INDEMNIFICATION 9.1 Indemnification . . . . . . . . . . . . . . . . . . 101 9.2 Defense of Claims . . . . . . . . . . . . . . . . . 104 ARTICLE X TERMINATION AND ABANDONMENT 10.1 Termination . . . . . . . . . . . . . . . . . . . . 109 10.2 Procedure and Effect of Termination . . . . . . . . 112 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1 Amendment and Modification . . . . . . . . . . . . 113 11.2 Confidentiality . . . . . . . . . . . . . . . . . . 113 11.3 Waiver of Compliance; Consents . . . . . . . . . . 115 11.4 No Survival . . . . . . . . . . . . . . . . . . . . 115 11.5 Notices . . . . . . . . . . . . . . . . . . . . . . 116 11.6 Assignment . . . . . . . . . . . . . . . . . . . . 118 11.7 Governing Law . . . . . . . . . . . . . . . . . . . 119 11.8 Specific Performance . . . . . . . . . . . . . . . 119 11.9 Counterparts . . . . . . . . . . . . . . . . . . . 120 11.10 Interpretation. . . . . . . . . . . . . . . . . . 120 11.11 Entire Agreement. . . . . . . . . . . . . . . . . 120 11.12 Bulk Sales or Transfer Laws . . . . . . . . . . . 121 LOVETT GENERATING STATION SALES AGREEMENT LOVETT GENERATING STATION SALES AGREEMENT, dated as of November 24, 1998, between Orange and Rockland Utilities, Inc., a New York corporation ("Seller" or "O&R"), and Southern Energy Lovett, L.L.C., a Delaware limited liability company ("Buyer"). WHEREAS, the Seller owns and operates the Purchased Assets (as defined herein); and WHEREAS, the Buyer desires to purchase and assume from the Seller, and the Seller desires to sell to Buyer, the Purchased Assets upon the terms and conditions hereinafter set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 Definitions. (a) As used in this Agreement, the following terms have the meanings specified or referred to in this Section 1.1: (1) "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (2) "Agreement" means this Lovett Generating Station Sales Agreement together with the Schedules and Exhibits hereto. (3) "Ancillary Agreements" means the Operating Easement, the Load Pocket Agreement, the Continuing Site/Interconnection Agreement and the Transition Agreement. (4) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit A hereto. (5) "Business Day" shall mean any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (6) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (7) "CERCLA" means the Federal Comprehensive Environmental Response, Compensation and Liability Act. (8) "Code" means the Internal Revenue Code of 1986, as amended. (9) "Confidentiality Agreement" means the Confidentiality Agreement, dated June 19, 1998, between the Seller and Southern Energy, Inc. (10) "Continuing Site/Interconnection Agreement" means the Continuing Site/Interconnection Agreement, dated as of the date of this Agreement, between the Seller and the Buyer. (11) "Emission Allowances" means the sulfur dioxide allowances already allocated by the United States Environmental Protection Agency to Lovett and the nitrogen oxide allowances to be allocated by the New York State Department of Environmental Conservation to Lovett, all as set forth in Schedule 1.1(a)(11). (12) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (13) "Environmental Laws" means all Federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances or coal ash (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances or coal ash. (14) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (15) "Estimated Inventory Adjustment Amount" means the lesser of the Seller's book value of its coal inventory, or $48.50 per ton multiplied by the number of tons of coal in the coal inventory, used at or in connection with the Purchased Assets as of the date ten (10) days before the Closing Date, which valuation shall be provided to the Buyer by the Seller no later than five (5) days before the Closing Date. For the purposes of calculating the Estimated Inventory Adjustment Amount, the coal inventory shall include all coal whether above or below grade, except that any below grade coal, determined through a survey to be conducted by Seller prior to the Closing, whose use would be non-compliant with air emission regulations regarding SO2 emissions, shall be excluded from such inventory. (16) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (17) "Federal Power Act" means the Federal Power Act of 1935. (18) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (19) "Good Utility Practices" means any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry with respect to similar facilities during the relevant time period which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection, and expedition. Good Utility 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 such industry. (20) "Hazardous Substances" means (a) any petrochemical or petroleum products, oil, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. (21) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (22) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (23) "Income Tax" means any tax, charge, fee, levy, penalty, or other assessment imposed by any U.S. federal, state, local or foreign taxing authority (a) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains taxes and alternative minimum taxes but excluding sales, transfer and similar taxes) or (b) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such tax may be based, measured by or calculated with respect to, is described in clause (a), in each case together with any interest, penalties, or additions attributable thereto. (24) "Income Tax Return" means any return, report, information return or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Income Taxes. (25) "Independent Accounting Firm" means Arthur Andersen LLP or such other independent accounting firm of national reputation mutually appointed by the Seller and the Buyer. (26) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit B hereto. (27) "Intellectual Property" means all patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, inventions, copyrights and copyright rights, know-how and all pending applications for and registrations of patents, trademarks, service marks and copyrights other than the names, trademarks, service marks or logos listed in Section 2.2(b) hereof. (28) "Internal Revenue Service" means the United States Internal Revenue Service, or any successor thereto. (29) "ISO" means the New York Independent System Operator, or its successor. (30) "Load Pocket Agreement" means the Load Pocket Call Option Agreement, dated as of the date of this Agreement, between the Buyer and Seller. (31) "Lovett" means the Lovett Generating Station located in Tomkins Cove, Rockland County, New York. (32) "Material Adverse Effect" means any change in or effect on the Purchased Assets after the date of this Agreement that is, individually or in the aggregate, materially adverse to the condition (financial or physical) of (as compared to the condition on the date of this Agreement), or the ability to own or operate (as compared to the ownership and operation thereof prior to the date of this Agreement), any material part of the Purchased Assets, other than (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change or effect resulting from any regulation, rule or order adopted or proposed by or with respect to the ISO and its responsibility for, authority over and operation of the wholesale and retail electric energy, capacity and ancillary services electric power markets and (v) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by the Seller before the Termination Date. (33) "NJBPU" means the New Jersey Board of Public Utilities, or any successor thereto. (34) "NYPSC" means the New York Public Service Commission or any successor thereto. (35) "Operating Easement" means the operating easement providing the right to continue operating and maintaining certain distribution facilities at the substations, which will be prepared as described in the Continuing Site/Interconnection Agreement. (36) "Other Sales Agreements" means the Bowline Generating Station Sales Agreement between the Seller and Southern Energy Bowline, L.L.C.; the Gas Turbines and Hydroelectric Generating Station Sales Agreement between the Seller and Southern Energy NY-Gen, L.L.C.; and the Bowline Adjacent Property Sales Agreement between the Seller and Southern Energy Bowline, L.L.C., each dated as of the date of this Agreement. (37) "PAPUC" means the Pennsylvania Public Utility Commission or any successor thereto. (38) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets contained in the documents listed on Schedules 5.8, 5.9(a), 5.9(b) and 5.15; (ii) any state of facts that a current survey of the Purchased Assets would disclose; (iii) mortgages, liens, pledges, charges, encumbrances and restrictions which are not in excess of $100,000 incurred in connection with the Sellers' purchase of properties and assets to be conveyed to Buyer as part of the Purchased Assets after the date of this Agreement securing all or a portion of the purchase price therefor incurred in the ordinary course of business; (iv) the Operating Easement; (v) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles, provided that the aggregate amount being so contested does not exceed $500,000; (vi) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to the Sellers' obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings, provided that the aggregate amount of such liens does not exceed $500,000; (vii) zoning, entitlement, conservation restrictions and other land use and environmental regulations by governmental authorities, provided that the foregoing do not materially interfere with the present use of the Purchased Assets; and (viii) such other liens, imperfections in or failure of title, charges, easements, restrictions and encumbrances which do not materially detract from the value of or materially interfere with the present use of the Purchased Assets and neither secure indebtedness, nor individually or in the aggregate have or would have a Material Adverse Effect or which will be discharged or released prior to or simultaneously with the Closing. (39) "Person" means an individual, a partnership, a joint venture, a corporation, a limited liability company, a limited liability partnership, a trust, an unincorporated organization or a governmental entity or any department or agency thereof. (40) "Purchased Assets" means the real and personal property, tangible or intangible, constituting or used principally for generation purposes at, or otherwise for, the operation of Lovett, including, but not limited to, the following assets: (a) two active steam electric generating units (Units 4 and 5) fired by coal, natural gas or heavy oil, one active steam electric generating unit fired by natural gas or oil (Unit 3) and two retired units formerly capable of being fired by natural gas or oil (Units 1 and 2) as listed or referred to in Schedule 1.1(a)(40); (b) all of the Seller's right, title and interest in, to and under the Real Property (including all structures, buildings, facilities and other improvements thereon and all appurtenances thereto) as further described on Schedule 5.8; (c) all other machinery, equipment, furniture and other personal property owned by the Seller on the Closing Date and located at Lovett and listed or referred to in Schedule 1.1(a)(40); (d) all inventories of fuels, supplies, spare parts and materials located at Lovett; (e) the 69 kV and 138 kV transmission connections, described as being sold to Buyer in the separation document summary in Exhibit C; (f) all contracts, agreements and personal property leases principally relating to Lovett, as further listed on Schedules 5.17(a), (b), and (c) and 7.10(a), respectively, as being associated with the Lovett Generating Station; (g) all Environmental Permits and Permits listed on Schedules 5.12(a)(ii) and 5.19(a), respectively, as being associated with the Lovett Generating Station; (h) the Emission allowances; (i) the coal ash management facility ("CAMF") located adjacent to the Lovett, which consists of a clay-lined partially covered twelve (12) acre coal ash disposal area, leachate pump station and detention pond, the coal ash and all equipment located at such facility and used in connection with the CAMF; (j) the gas regulator station, station bypass piping and the 24 inch steel main downstream at the outlet of the regulator station; (k) all books, operating records, reports, engineering or design plans, specifications, drawings, procedures, software or tools used to process and report environmental data, safety and maintenance manuals and similar items of the Seller relating specifically to the aforementioned assets; (l) all of the Seller's right, title and interest in, to and under the Leases; (m) copies of all filings made with regulatory agencies, as updated, relating to Seller's Year 2000 programs as such filings apply to the Purchased Assets; (n) all unexpired, transferable warranties and guarantees from third parties with respect to any of the Purchased Assets, as of the Closing Date; (o) the Intellectual Property, if any, relating to the Purchased Assets (including Seller's goodwill therein and the rights of Seller in and to the name of Lovett) and all the rights, privileges, claims, causes of action, indemnification rights and options pertaining solely to the Purchased Assets or the Assumed Liabilities, including without limitation, those items listed on Schedule 1.1(a)(40)(o); (p) the assets acquired by Seller pursuant to Section 7.4; (q) the six inch and eight inch water mains extending from Lovett to connections with United Water Company Facilities located at (i) Park Road in Stony Point, New York and (ii) the intersection of Elm Avenue and Route 9W in Stony Point, New York, respectively subject to the terms of applicable easements which would not have a materially adverse effect thereon; and (r) $5.4 million in cash. (41) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (42) "Scheduled Capital Expenditures" means those capital expenditures listed on Schedule 1.1(a)(42). (43) "Scheduled Maintenance Expenditures" means those maintenance expenditures listed on Schedule 1.1(a)(43). (44) "SEC" means the Securities and Exchange Commission or any successor thereto. (45) "Securities Act" means the Securities Act of 1933, as amended. (46) "Seller Agreements" means those agreements listed on Schedule 5.17(a) and the Collective Bargaining Agreements. (47) "Separation Document" means the document, to be negotiated in good faith by the Seller and the Buyer within three (3) months from the date of this Agreement, which will delineate the Purchased Assets from the Seller's other assets and which will be consistent with the separation document summary attached hereto as Exhibit C. (48) "Subsidiary" when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (49) "Tax" means any tax, charge, fee, levy, penalty or other assessment imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any income, gross receipts, license, stamp, occupation, environmental, excise, property, sales, transfer, payroll, unemployment, withholding, social security or any other tax of any kind whatsoever, including any interest, penalties or additions attributable thereto. (50) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any schedule or other related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (51) "Transition Agreement" means the Transition Power Sales Agreement between the Buyer, Southern Energy Bowline, L.L.C., Southern Energy NY-Gen, L.L.C. and the Seller, dated as of the date of this Agreement. (52) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988. (b) Each of the following terms has the meaning specified in the Section set forth opposite such term: Term Section ---- ------- Adjustment Statement 3.2 ALTA 7.12 Assumed Liabilities 2.3 Benefit Plans 5.14 Buyer Preamble Buyer Required Regulatory Approvals 6.3 Buyer's Easements 4.3 Buyer's Indemnitee 9.1 CEI 11.5 Closing 4.1 Closing Date 4.1 Collective Bargaining Agreements 7.10 Defect of Title 7.12 Direct Claim 9.2 Disclosing Party 11.2 DLJ 7.7 Environmental Permits 5.12 ERISA Affiliate 2.4 ERISA Affiliate Plans 2.4 Estimated Purchase Price 4.2 Excluded Assets 2.2 Excluded Liabilities 2.4 Final Order 8.1 Hourly Employees 7.10 Indemnifiable Losses 9.1 Indemnification Floor 9.1 Indemnifying Party 9.1 Indemnitee 9.1 Inventory Adjustment Amount 3.2 Leases 5.9 Leased Assets 7.4 Management Employees 7.10 Maintenance and Capital Expenditures Adjustment Amount 3.2 Massey 7.1 Materials and Supplies Adjustment Amount 3.2 Necessary Capital Expenditures 7.1(b) Necessary Maintenance Expenditures 7.1(d) NYBTU 7.12 Pension Benefit Plans 2.4 Permits 5.19 Pollution Control Bonds 2.4 Pollution Control Facilities 7.8 Purchase Price 3.1 Purchased Assets Preamble Real Property 5.8 Recipient 11.2 Seller Preamble Seller Balance Sheet 5.5 Seller Required Regulatory Approvals 5.3 Seller's Easements 4.3 Termination Date 10.1 Third Party Claim 9.2 Title Commitment 7.12 Title Company 7.12 1986 Tax Act 7.8 ARTICLE II SALE AND PURCHASE 2.1 The Sale. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, at the Closing, the Seller will sell, assign, convey, transfer and deliver to the Buyer, and the Buyer will purchase and acquire from the Seller, free and clear of all Encumbrances (except for Permitted Encumbrances) all of the Seller's right, title and interest in, to and under the real and personal property, tangible or intangible, owned by the Seller and constituting the Purchased Assets. 2.2 Excluded Assets. Notwithstanding any provision herein to the contrary, the Purchased Assets shall not include the following (herein referred to as the "Excluded Assets"): (a) all cash, bank deposits, cash equivalents and accounts receivable (other than the cash specified in Section 1.1(a)(40)(r) of the Agreement); (b) the name "Orange and Rockland Utilities, Inc.", "Orange and Rockland", "O&R", "ORU" or any related or similar trade names, trademarks, service marks or logos; (c) distribution, substation and communication facilities and related support equipment described in Schedule 2.2(c); (d) any refund, credit, penalty payment, adjustment or reconciliation (i) related to personal property or other Taxes (excluding Taxes relating to Real Property) paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under any of the Seller Agreements and relating to a period before the Closing Date; (e) except to the extent specifically required by law, all personnel records relating to any employees of the Seller; and (f) the rights and assets to be described in the Separation Document as not part of the Purchased Assets. 2.3 Assumed Liabilities. On the Closing Date, the Buyer shall deliver to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the following liabilities and obligations of the Seller which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof: (a) all liabilities and obligations of the Seller arising or accruing after the Closing Date under (i) the Seller Agreements, the Environmental Permits, the Permits, real property leases, contracts and other agreements disclosed and assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by the Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement; except in each case, to the extent such liabilities and obligations, but for a breach or default by the Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default or any event which after the giving of notice would constitute a default by Seller; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.8; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.10, including the Collective Bargaining Agreements; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances or coal ash at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, but not limited to, Hazardous Substances or coal ash contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; and (iii) the investigation and/or remediation (whether or not such investigation or remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances or coal ash that is present or has been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, but not limited to, Hazardous Substances or coal ash contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; provided, as to all of the above, that nothing set forth in this subsection 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances or coal ash at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, but not limited to, Hazardous Substances or coal ash contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances or coal ash, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or remediation of Hazardous Substances or coal ash that is present or has been released on or after the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, but not limited to, Hazardous Substances or coal ash contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at or adjacent to the Purchased Assets; and (vi) the investigation and/or remediation of Hazardous Substances or coal ash that is disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any off-site location; provided, that nothing set forth in this subsection shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (g) all liabilities and obligations of the Seller with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12(c); (h) all liabilities incurred by the Seller with respect to maintenance and capital expenditures made with respect to the Purchased Assets by the Seller which are requested by Buyer; (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations other than those liabilities and obligations noted in (a) through (i) above, exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place, the value of which liabilities and obligations, together with the liabilities and obligations relating to the "Purchased Asset" and the "Purchased Assets" as defined in the Other Sales Agreements, in the aggregate, shall not exceed $3 million. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. 2.4 Excluded Liabilities. The Buyer shall not assume or be obligated to pay, perform or otherwise discharge the following liabilities (the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller in respect of any Excluded Assets or other assets of the Seller which are not Purchased Assets; (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Assets for taxable periods ending on or before the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.8(a); (c) any liabilities, obligations, or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities of Hazardous Substances or coal ash that was generated at the Purchased Assets, at any off-site location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at said off-site location occurred prior to the Closing Date, provided that for purposes of this Section, "off-site location" does not include any location to which Hazardous Substances or coal ash disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated, including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities arising after the Closing Date relating to (i) the transmission lines delineated in the Operating Easements or (ii) any Seller's operations on, or usage of, the Operating Easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (1) any violation or alleged violation of Environmental Law and (2) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by Buyer; (e) any liabilities, obligations or responsibilities arising prior to or after the Closing Date relating to the easements provided O&R under the Operating Easement, including, without limitation: (i) the transmission lines or other facilities of O&R delineated in the Operating Easements or (ii) O&R ownership rights, operations on, or usage of, the Operating Easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (1) any violation or alleged violation of Environmental Law or Release of Hazardous Substances or coal ash and (2) loss of life, injury to persons or property or damage to natural resources, except in the case of (1) or (2), to the extent caused by the Buyer. (f) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and/or the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets other than any liability assumed by Buyer under any provision of this Agreement, including without limitation, Section 2.3; (g) any liabilities or obligations with respect to liabilities relating to the Purchased Assets relating to any personal injury including bodily injury (including, but not limited to workers' compensation claims), discrimination, wrongful discharge, or unfair labor practice or similar claim or cause of action with respect to any act or occurrence arising prior to or on the Closing Date, other than liabilities or obligations for injury to persons or loss of life assumed by the Buyer in Sections 2.3(e) and 2.3(f); (h) any fines or penalties imposed by a governmental agency or authority resulting from (A) an investigation or proceeding with respect to any act or occurrence arising prior to or on the Closing Date or (B) illegal acts, willful misconduct or gross negligence of the Seller prior to or on the Closing Date; (i) any payment obligations of the Seller for goods delivered or services rendered prior to the Closing; (j) any liabilities or obligations imposed upon, assumed or retained by O&R pursuant to the Continuing Site/Interconnection Agreement or any other Ancillary Agreement; (k) any liabilities, obligations or responsibilities relating to any deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all welfare, severance, stock-based, bonus and other employee benefit or fringe benefit plans, programs and arrangements, whether written or oral, maintained or with respect to which contributions have been in the last five (5) years or are made by O&R and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with the Seller under Section 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") or to which the Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by the Seller or any ERISA Affiliate; including without limitation, any liability (A) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (B) with respect to non- compliance with the continuation requirements of COBRA; (C) with respect to any non-compliance with ERISA, the Code or any other applicable laws; (D) with respect to any suit, proceeding or claim which is brought against any ERISA Affiliate Plan, or any fiduciary or former fiduciary of any such or ERISA Affiliate Plan; (E) relating to a multiemployer plan; or (F) for any claim or suit for benefits accrued under an ERISA Affiliate Plan prior to Closing; (l) any liabilities, obligations or responsibilities relating to the employment or termination of employment, by the Seller of any individual (including, but not limited to, any employee of the Seller) attributable to any actions or inactions by the Seller prior to the Closing Date; and (m) any liabilities relating to the $55,000,000 New York State Energy Research and Development Authority Pollution Control Refunding Revenue Bonds (Orange and Rockland Utilities, Inc. Project) 1994 Series A and the $44,000,000 New York Energy Research and Development Authority Pollution Control Refunding Revenue Bonds (Orange and Rockland Utilities, Inc. Projects) 1995 Series A (the "Pollution Control Bonds") and any agreements relating thereto. ARTICLE III PURCHASE PRICE 3.1 Purchase Price. The purchase price for the Purchased Assets shall be an amount equal to the sum of (i) $243,500,000, (ii) the Estimated Inventory Adjustment Amount, (iii) the Inventory Adjustment Amount and (iv) any amounts paid by the Seller to acquire title to Leased Assets pursuant to Section 7.4 (the "Purchase Price"). 3.2 Purchase Price Adjustment. (a) Within sixty (60) days after the Closing, the Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which sets forth an amount equal to (i) the lesser of (A) the Seller's book value, as of the Closing Date, of its coal inventory or (B) $48.50 per ton multiplied by the number of tons of coal in the coal inventory, used at or in connection with the Purchased Assets minus (ii) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"). For the purposes of calculating the Estimated Inventory Adjustment Amount, the coal inventory shall include all coal whether above or below grade except that any below grade coal, determined through a survey to be conducted by Seller prior to the Closing, whose use would be non-compliant with air emission regulations regarding SO(2) emissions, shall be excluded from such inventory. The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as the Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement, except that the price utilized for determining the unit price of coal in this Section 3.2(a) shall be the lower of the price determined in accordance with such historic method or $48.50 per ton. The Buyer and the Seller agree to cooperate with the other in connection with the preparation of the Adjustment Statement and related information, and each shall provide to the other such books, records and information as may be reasonably requested from time to time. (b) The Buyer may dispute the Inventory Adjustment Amount, provided, however, that the Buyer shall notify the Seller in writing of the disputed amount, and the basis of such dispute, within thirty (30) days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Buyer and the Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and the Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to the Seller, the Buyer and the Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and the Seller so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) If the Inventory Adjustment Amount is positive, within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay the Seller all undisputed portions of the Inventory Adjustment Amount. If the Inventory Adjustment Amount is negative, within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Seller shall pay the Buyer all undisputed portions of the Inventory Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay the Seller an amount equal to the disputed portion of the Inventory Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if such amount shall be less than zero, the Seller will pay to the Buyer the amount by which such amount is less than zero. All payments made pursuant to this Section 3.2(c) shall be paid together with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. 3.3 Allocation of Purchase Price. The Buyer shall prepare an allocation of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one hundred eighty (180) days of the date of this Agreement but in no event less than forty-five (45) days prior to the Closing and submit it to Seller. The Seller may dispute the allocation of the Purchase Price; provided, however, that the Seller shall notify the Buyer in writing of the disputed amount, and the basis of such dispute, and follow the procedures relating to a dispute described in Section 3.2(b) above. The Buyer and the Seller each agrees to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns and Income Tax Returns, in accordance with such agreed allocation. Each of the Buyer and the Seller shall report the transactions contemplated by the Agreement for federal Income Tax and all other Tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. The Buyer and the Seller each agrees to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and the Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4 Proration. (a) The Buyer and the Seller agree that all of the items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets will be prorated as of the Closing Date, with the Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) personal property, real estate, occupancy and any other Taxes (excluding Income Taxes), assessments and other charges, if any, on or with respect to the ownership, use or business and operation of the Purchased Assets; (ii) rent, Taxes (excluding Income Taxes) and other items payable by or to the Seller under any of the Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which such actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. ARTICLE IV THE CLOSING 4.1 Time and Place of Closing. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00 A.M. (local time) on April 30, 1999, or at such other place or later date and time as the parties may agree. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2 Payment of Purchase Price. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer will pay or cause to be paid to the Seller at the Closing an amount (the "Estimated Purchase Price") in United States dollars, equal to the sum of (i) $243,500,000, (ii) the Estimated Inventory Adjustment Amount for the Closing, and (iii) any amounts paid to acquire title to Leased Assets pursuant to Section 7.4 hereof, by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.3 Deliveries by Seller. At the Closing, the Seller will deliver the following to the Buyer: (a) The Bill of Sale, duly executed by the Seller for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent specifically required hereunder; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by O&R; (d) The certificates and the opinions of counsel contemplated by Sections 8.2(c), (e), (f) and (h); (e) One or more bargain and sale deeds of conveyance in statutory form, with covenant against grantor's acts, transferring Seller's interest in the Property Interests to the Buyer, duly executed and acknowledged by O&R and in recordable form substantially in the form of Exhibit D hereto; (f) One or more easements to the extent necessary to evidence the right of Buyer to use the real property of O&R (the "Buyer's Easements") that comprise the Excluded Assets, duly executed and acknowledged by O&R and in recordable form, each substantially in the form of Exhibit E hereto; (g) The Assignment of Leases in the form attached hereto as Exhibit F assigning to Buyer all of Seller's right, title and interest as lessor (or lessee as the case may be) under the leases; (h) Copies of the resolutions adopted by the board of directors of the Seller, certified by the Secretary of the Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement, the Bill of Sale and other closing documents described in this Agreement to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder; (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement and where necessary or desirable, in recordable form; (j) A certification of non-foreign status in a form which complies with Section 1445 of the Code and the regulations thereunder; provided, however, that if the Seller shall fail to deliver such certification, the Buyer shall withhold at the Closing and pay over to the appropriate taxing authority any amount equal to 10% of the total Amount Realized (as defined under Section 1445 of the Code); (k) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith; and (l) $5.4 million by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.4 Deliveries by Buyer. At the Closing, the Buyer will deliver the following to the Seller: (a) The Estimated Purchase Price by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel contemplated by Sections 8.3(c) and (d); (d) The Instrument of Assumption, duly executed by the Buyer; (e) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (f) One or more easements to the extent necessary for Seller to continue and maintain its transmission and distribution business, in favor of the Seller (the "Seller's Easements") with respect to real property conveyed to Buyer, duly executed and acknowledged by Buyer, each substantially in the form of Exhibit E hereto, and Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.8; (g) Copies of the resolutions adopted by the Members or Managers or similar governing body of the Buyer, certified by the Member of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER The Seller represents and warrants to the Buyer as follows: 5.1 Organization; Qualification. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which it operates the Purchased Assets and such jurisdiction requires it to be so qualified. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and By-Laws as currently in effect. 5.2 Authority Relative to this Agreement. The Seller has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Seller and no other corporate proceedings on the part of the Seller or its shareholders are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Seller, and assuming that this Agreement constitutes a valid and binding agreement of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitutes a valid and binding agreement of the Seller, enforceable against the Seller in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3 Consents and Approvals; No Violation. (a) Except as set forth in Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement by the Seller nor the performance by the Seller of its obligations under this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-Laws of the Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or would not prohibit or restrain the execution, delivery or performance of this Agreement or the Ancillary Agreements, or the consummation of the transactions contemplated hereby or thereby in any material respect or (y) for those requirements which become applicable to the Seller as a result of the specific regulatory status of the Buyer (or any of its affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller, or any of its subsidiaries, is a party or by which the Seller, or any of its subsidiaries, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, individually or in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, law, decree, statute, rule or regulation applicable to the Seller, or any of its assets, which violation would, individually or in the aggregate, have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) (A) notice by the Seller to, and an order by, the NYPSC approving the transactions contemplated by this Agreement or the Ancillary Agreements, (B) notice by the Seller to, and an order by, the NJBPU approving the transactions contemplated by this Agreement or the Ancillary Agreements and (C) notice by the Seller to, and an order by, the PAPUC approving the transactions contemplated by this Agreement or the Ancillary Agreements, (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by the Seller of the transactions contemplated hereby or by the Ancillary Agreements, other than such declarations, filings, registrations, notices, authorizations consents or approvals which, if not obtained or made, will not, in the aggregate, have a Material Adverse Effect and other than Permits and Environmental Permits. 5.4 Reports. Since January 1, 1996, O&R, pursuant to the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of O&R as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5 Financial Statements. The Seller has previously furnished to the Buyer (i) audited consolidated balance sheets of the Seller as of December 31, 1997, and (ii) the related audited consolidated statements of income and retained earnings and changes in financial position of the Seller for the fiscal year then ended, together with the respective reports thereon of Arthur Andersen LLP. The consolidated balance sheet of the Seller as of December 31, 1997 is referred to as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of the Seller as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial position for the periods then ended, all in conformity with generally accepted accounting principles as applicable to a regulated utility applied on a consistent basis, except as otherwise noted therein. 5.6 Undisclosed Liabilities. Except as set forth in Schedule 5.6, to the Seller's knowledge, the Seller has no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7 Absence of Certain Changes or Events. Except (i) as set forth in Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC and (ii) as otherwise contemplated by this Agreement, to the Seller's knowledge, since the date of the Seller Balance Sheet there has not been: (a) any Material Adverse Effect; (b) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (c) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing or capital financing) by the Seller, which is material to the business or operations of the Purchased Assets, except agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (d) any change by the Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8 Title. Set forth in Schedule 5.8 is a true and complete list of all real property which is part of or material to the business or operations of the Purchased Assets (the "Real Property") and other real property interests which are a part of or material to the business or operations of the Purchased Assets (together with the Real Property, the "Property Interests"). The Seller has leasehold or other contractual interests in all Purchased Assets identified in subsections (f), (l), (n) and (p) of Section 1.1(a)(40) and subject only to Permitted Encumbrances and the Leases, (i) good and marketable title to the Real Property and (ii) good and valid title to all Purchased Assets identified in subsections (a), (c), (d), (e), (g), (h), (i), (j), (k), (m), (o) and (q) of Section 1.1(a)(40). At the Closing, the Seller will have the cash available to pay the amount referred to in Section 1.1(a)(40)(r) of this Agreement. 5.9 Leasehold Interests. Schedule 5.9(a) lists all Real Property leases or subleases (the "Leases") relating to the Purchased Assets under which the Seller is a lessee, sublessee, lessor or sublessor and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9(b), the Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by the Seller thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. Seller has a valid and subsisting leasehold estate in and the right to quiet enjoyment of the Leases under which either Seller is a lessee or sublessee for the full term of such Leases, which leasehold interests are unencumbered other than by Permitted Encumbrances, and Seller has delivered to Buyer true and complete copies of all Leases. 5.10 Improvements. Except as set for forth in Schedule 5.10(a), the Seller has not received any written notices from any governmental authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set for forth in Schedule 5.10(b), no notice has been received by the Seller from any governmental authority requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.11 Insurance. Except as set forth in Schedule 5.11(a), all material policies of fire, liability, worker's compensation and other forms of insurance purchased or held by and insuring or related to the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11(b), the Seller has not been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last five (5) years nor have they received written notice from any insurer with respect to any Real Property or Lease of defects or inadequacies with respect thereto or the improvements located thereon that would materially adversely affect the insurability of same or cause the imposition of extraordinary premiums therefor. 5.12 Environmental Matters. (a) Except as disclosed in Schedule 5.12(a)(i), to the Seller's knowledge, the Seller holds, and is in compliance with, all permits, licenses, certificates and governmental authorizations ("Environmental Permits") required for the Seller to operate the Purchased Assets under applicable Environmental Laws, and the Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Schedule 5.12(a)(ii) sets forth all Environmental Permits relating to the ownership or operation of the Purchased Assets. (b) Except as disclosed in Schedule 5.12(b), Seller has not received any written request for information, or been notified that it is a potentially responsible party, under CERCLA or any similar State law with respect to any on-site location related to the Purchased Assets, and no investigation and/or remediation is being conducted or is pending at the Purchased Assets (other than investigations or remediation conducted by or on behalf of Seller or Buyer in connection with this transaction) except for such liability under such laws or investigations or remediation as would not be reasonably likely to have a Material Adverse Effect. (c) With respect to the Purchased Assets, no action, claim, investigation or other proceeding relating to any Environmental Law is pending, or to Seller's knowledge, threatened, and Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree, or administrative or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances or coal ash under any Environmental Law, except such consent decrees or orders, judgments, decrees or administrative or judicial orders, actions, claims, investigations or proceedings that (i) would not be reasonably likely to have a Material Adverse Effect or (ii) appear on Schedule 5.12(c), or (iii) relate to off-site disposal locations. (d) All written reports of audits and studies performed by or on behalf of Seller, and in the possession of Seller, which concern Releases of Hazardous Substances or coal ash at, on, in, or under the Purchased Assets or compliance of Purchased Assets with Environmental Laws conducted within the last two (2) years are listed in Schedule 5.12(d) and have been provided to Buyer. (e) The representations and warranties made in this Section 5.12 are the Seller's exclusive representations and warranties to environmental matters. 5.13 Labor Matters. Schedule 7.10(a) lists and Seller has previously delivered to the Buyer true and correct copies of all labor union, Collective Bargaining Agreements and other labor agreements relating to the Purchased Assets to which Seller is a party or is subject. With respect to the Purchased Assets, except to the extent set forth in Schedule 5.13 and except for such matters as will not have a Material Adverse Effect, to the Seller's knowledge: (a) Seller is in compliance with all applicable laws respecting employment and employment practices, occupational health and safety, and wages and hours; (b) Seller has not received written notice of any unfair labor practice complaint against it pending before the National Labor Relations Board; (c) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting the Seller; (d) Seller has not received notice that any representation petition respecting its employees has been filed with the National Labor Relations Board; (e) no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending against the Seller; and (f) Seller has not experienced any primary work stoppage since at least December 31, 1994. 5.14 ERISA. (a) Schedule 5.14(a) lists all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all welfare, severance, stock-based, bonus and other employee benefit or fringe benefit plans, programs and arrangements, whether written or oral, maintained or with respect to which contributions have been in the last five (5) years or are made by O&R in respect of employees who are employed in connection with the Purchased Assets (such plans, programs and arrangements collectively, the "Benefit Plans"). To the Seller's knowledge, each Benefit Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable laws. Accurate and complete copies of all such Benefit Plans and their summary descriptions, including multiemployer plans, have been made available to the Buyer. (b) Except as set forth in Schedule 5.14(b)(i), with respect to employees at the Purchased Assets, to the Seller's knowledge, O&R and the ERISA Affiliates have fulfilled their respective obligations under the minimum funding requirements of Section 302 of ERISA, and Section 412 of the Code, with respect to each Benefit Plan that is a pension benefit plan as defined in Section 3(2) of ERISA (each, a "Pension Benefit Plan"). To the Seller's knowledge, neither O&R nor any ERISA Affiliate has incurred any liability to the Pension Benefit Guaranty Corporation in connection with any Pension Benefit Plan which is subject to Title IV of ERISA, including any withdrawal liability, nor is there any reportable event (as defined in Section 4043 of ERISA), except as set forth in Schedule 5.14(b)(ii). Except as set forth in Schedule 5.14(b)(iii), the Internal Revenue Service has issued a letter for each Pension Benefit Plan which is intended to be qualified under Section 401(a) of the Code, determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and to the Seller's knowledge there has been no occurrence since the date of any such determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted and none is anticipated against O&R with respect to any Pension Benefit Plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (c) To the Seller's knowledge, neither Seller nor any ERISA Affiliate has engaged in any transaction within the meaning of Section 4069(b) or Section 4212(c) of ERISA. Except as set forth in Schedule 5.14(c), no Benefit Plan is a multi-employer plan. (d) To the extent O&R maintained or maintains a "group health plan" within the meaning of Section 5000(b)(1) of the Code, to the Seller's knowledge, O&R has materially complied with the notice and continuation requirements of Section 4980B of the Code, COBRA Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder. 5.15 Real Property Encumbrances. Schedule 5.15 lists all real property encumbrances affecting the Real Property including matters contained in deeds, easements and options. True and correct copies of all current surveys, abstracts, title opinions and policies of title insurance currently in force with respect to such Real Property have been delivered by the Seller to the Buyer. None of the Permitted Encumbrances materially adversely affect the existing use of the Real Property. 5.16 Condemnation. Neither the whole nor any part of the Real Property or any other real property or rights leased, used or occupied by the Seller in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 5.17 Certain Contracts and Arrangements. (a) Except (i) as listed in Schedule 5.17(a), (ii) for contracts, agreements, personal property leases, commitments, understandings or instruments which will expire prior to the Closing Date, (iii) for agreements with suppliers entered into in the ordinary course of business (including contracts entered into in connection with the Scheduled Capital Expenditures and the Scheduled Maintenance Expenditures), and (iv) for contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $200,000 or with annual or aggregate payments less than $200,000, the Seller is not a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.17(b), each Seller Agreement listed on Schedule 5.17(a) constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and will continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of the Seller Agreements listed on Schedule 5.17(a), any default or event which, with notice or lapse of time or both, would constitute a default on the part of any party thereto, except such events of default and other events as to which requisite waivers or consents have been obtained or which would not, individually or in the aggregate, have a Material Adverse Effect. 5.18 Legal Proceedings, etc. Except as set forth in Schedule 5.18 or in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending or investigation pending or, to the Seller's knowledge, threatened against the Seller relating to the Purchased Assets before any court, arbitrator, governmental or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect or would prohibit or restrain the execution, delivery or performance of this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby in any material respect. Except as set forth in Schedule 5.18, the Seller is not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, governmental or regulatory authority relating to the Purchased Assets which would have a Material Adverse Effect. 5.19 Permits. The Seller has all material permits, licenses, franchises and other governmental authorizations, consents and approvals, other than with respect to Environmental Laws (collectively, "Permits") as set forth in Schedule 5.19(a), necessary to own or operate the Purchased Assets as presently owned or operated, except where the failure to have such Permits would not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the Purchased Assets, the Seller has not received any written notification that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any governmental or regulatory body or authority applicable to it, except for notifications of violations which would not, individually or in the aggregate, have a Material Adverse Effect. The Seller is in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any governmental or regulatory body or authority applicable to Purchased Assets, except for violations which, in the aggregate, would not have a Material Adverse Effect. 5.20 Regulation as a Utility. O&R and certain of its subsidiaries are regulated as public utilities in the States of New York, New Jersey and Pennsylvania as set forth on Schedule 5.20(a), and in no other state. Except as set forth on Schedule 5.20(b), the Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21 Taxes. Except as set forth in Schedule 5.21: (a) no notice of deficiency or assessment has been received from any taxing authority with respect to liabilities for Taxes of Seller in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in Schedule 5.21 is being contested in good faith through appropriate proceedings; (b) there are no outstanding agreements or waivers extending the applicable statutory periods of limitation for Taxes associated with the Purchased Assets for any period; (c) there are no rulings or closing agreements executed with any taxing authority relating to the Purchased Assets that will be binding upon Buyer after the Closing; (d) none of the Purchased Assets is property that is required to be treated as being owned by any other person pursuant to the so-called safe harbor lease provisions of former Section 168(f)(8) of the Code or "tax-exempt use" property within the meaning of Section 168(h) of the Code; and (e) there are no powers of attorney in effect relating to Taxes relating to the Purchased Assets for any Post-Closing period. 5.22 Intellectual Property. Seller has all right, title and interest in or valid and binding rights under contract to use the Intellectual Property relating to the Purchased Assets. Seller has not received notice that it is infringing any Intellectual Property of any other Person in connection with the operation or business of the Purchased Assets, no claim is pending or has been made to such effect that has not been resolved and Seller is not infringing any Intellectual Property of any other Person the effect of which, individually or in the aggregate, would have a Material Adverse Effect. 5.23 Year 2000 Readiness. Seller has informed Buyer of its analysis of, the status of development of contingency plans for, and forecasted expenditures with respect to Year 2000 readiness of material computer software and computer firmware comprising the Purchased Assets, as such analysis, contingency plan development and forecast of expenditures exist on the date hereof. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER The Buyer represents and warrants to the Seller as follows: 6.1 Organization. The Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Buyer has heretofore delivered to the Seller complete and correct copies of its Certificate of Formation and Limited Liability Company Agreement (or other similar governing documents), as currently in effect. 6.2 Authority Relative to this Agreement. The Buyer has full power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Managers or Members of the Buyer and the Board of Directors of both Southern Energy, Inc. and The Southern Company and no other company proceedings on the part of the Buyer or such Affiliates of the Buyer are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Buyer, and assuming that this Agreement constitutes a valid and binding agreement of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitutes a valid and binding agreement of the Buyer, enforceable against the Buyer in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3 Consents and Approvals; No Violation. (a) Except as set forth in Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement by the Buyer nor the purchase by the Buyer of the Purchased Assets pursuant to this Agreement will (i) conflict with or result in any breach of any provision of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(a) and except for the filings by the Buyer and the Seller required by the HSR Act (the filings and approvals referred to in Schedule 6.3(a) and with respect to the HSR Act are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby. 6.4 Operating Easements. Buyer will grant Operating Easements to Seller as agreed to pursuant to the procedures set forth in the Continuing Site/Interconnection Agreement. 6.5 Regulation as a Utility. On the Closing Date, the Buyer will be an exempt wholesale generator under the Holding Company Act, although it is a subsidiary of a registered public utility holding company under the Holding Company Act. On the Closing Date, the Buyer also will be a public utility under the Federal Power Act. Except as set forth in Schedule 6.5, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.6 Availability of Funds. The Buyer has sufficient funds available to it or will receive binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII COVENANTS OF THE PARTIES 7.1 Conduct of Business Relating to the Purchased Assets. Except as described in Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller will operate and maintain the Purchased Assets according to its ordinary and usual course of business consistent with Good Utility Practice. Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Seller will not with respect to the Purchased Assets: (a) make any material change in the operations of the Purchased Assets (including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by the Seller other than consistent with past practice); (b) except for Scheduled Capital Expenditures, make any capital expenditures with respect to the Purchased Assets or enter into any contract or commitment therefor, except that (i) the Seller shall make any capital expenditures requested by the Buyer, provided that the Buyer will reimburse Seller for such capital expenditures at least five (5) Business Days prior to the date payment for such expenditure is due, and (ii) the Seller shall make any capital expenditures deemed necessary by the Seller in accordance with Good Utility Practices ("Necessary Capital Expenditures") at Seller's cost and expense, provided, however, that if the Buyer requests that the Seller make enhancements/upgrades with a cost in excess of the cost of any Necessary Capital Expenditures, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the cost of such an enhancement/upgrade exceeds the cost of the Necessary Capital Expenditure at the time such enhancement/upgrade is performed; (c) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with Good Utility Practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances in the ordinary course of business; (d) except for Scheduled Maintenance Expenditures, make any maintenance expenditures, except that (i) the Seller shall make any maintenance expenditures requested by the Buyer provided that the Buyer will reimburse Seller for such maintenance expenditures at least five (5) Business Days prior to the date payment for such expenditure is due, and (ii) the Seller shall make any maintenance expenditures deemed necessary by the Seller in accordance with Good Utility Practices ("Necessary Maintenance Expenditures") at Seller's cost and expense, provided, however, that if the Buyer requests that the Seller make enhancements/upgrades with a cost in excess of the cost of any Necessary Maintenance Expenditures, the Buyer shall reimburse the Seller for the cost of such enhancements/upgrades to the extent the cost of such enhancement/upgrade exceeds the cost of the Necessary Maintenance Expenditure at the time such enhancement/upgrade is performed; (e) amend or terminate prior to the expiration date, or waive any material term or give consent to any material request with respect to any of the Seller's Agreements, Permits or Environmental Permits except to the extent that such amendment, termination, waiver or consent (i) will not have a material impact on operations of the Purchased Assets, including the cost of said operations or (ii) is required by applicable law, including applicable Environmental Law; (f) enter into any agreements for the purchase or sale of fuel (whether commodity or transportation): (i) that extend more than sixty (60) days beyond April 30, 1999 if, in the aggregate such agreements have remaining payment obligations of more than $20 million after April 30, 1999 in each case, other than any agreements that are entered into pursuant to (A) the Letter of Intent for transportation of coal between Seller and CSX dated as of October 20, 1998 and (B) the letter between Seller and Massey Coal Sales Company, Inc. ("Massey") which memorializes the price reopener agreement in connection with the Coal Purchase and Sales Agreement between Massey and Seller dated March 9, 1984, as amended. (ii) that extend more than thirty (30) days beyond October 31, 1999 if, in the aggregate, such agreements have remaining payment obligations of more than $10 million after October 31, 1999 provided, however, that O&R shall consult with the Buyer regarding purchases or sales of fuel in excess of $10 million if such commitments to purchase or sell will extend beyond April 30, 1999. The parties further agree to adjust the dates in this Section 7.1(f) if the Closing is anticipated to occur after April 30, 1999. Such adjustment will reflect the amount of time beyond April 30, 1999 by which the Closing is expected to occur at the time such an agreement is entered; (g) enter into any power sales commitments: (i) having a term greater than six (6) months and that extends beyond April 30, 1999 if the aggregate energy under such commitment and all other then outstanding commitments not previously consented to by the Buyer would in Seller's judgment reasonably be expected to exceed 100,000 MW hours delivered after April 30, 1999; or (ii) having a term greater than six (6) months and that extends beyond October 31, 1999 if the aggregate energy under such commitment and all other then outstanding commitments not previously consented to by the Buyer would in Seller's judgment reasonably be expected to exceed 45,000 MW hours delivered after October 31, 1999; provided, however, Seller shall consult with the Buyer regarding entering into any power sales commitments in excess of $3 million if such commitments will extend beyond April 30, 1999. The parties further agree to adjust the dates in this Section 7.1(g) if the Closing is anticipated to occur after April 30, 1999. Such adjustment will reflect the amount of time beyond April 30, 1999 by which the Closing is expected to occur at the time such an agreement is entered; (h) sell, lease or otherwise dispose of Emission Allowances except to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; (i) enter into any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (h); or (j) make any new, or change any current, election with respect to Taxes affecting the Purchased Assets. 7.2 Access to Information. (a) Between the date of this Agreement and the Closing Date, the Seller will, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to its managerial personnel and to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which the Buyer is permitted access by law, (ii) permit the Buyer to make such reasonable inspections thereof as the Buyer may reasonably request, including conducting environmental sampling at, on and underneath the Purchased Assets and performing compliance audits at the Purchased Assets, if Buyer reasonably deems such sampling necessary after reviewing further information which becomes available after the date hereof, so long as Seller provides its consent to such sampling, which consent shall not be unreasonably withheld, (iii) cause its officers, engineers, operations and maintenance personnel and advisors to furnish the Buyer with such financial and operating data, Tax Returns (other than Income Tax Returns) and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request and assist Buyer in such inspections, (iv) cause its officers and advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by them with the SEC, NYPSC, NJBPU, PAPUC, FERC, ISO, or other governmental authority with respect to the Purchased Assets; provided, however, that (A) any such investigation shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) the Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) the Seller need not supply the Buyer with any information which the Seller is under a legal obligation not to supply, provided, however, that Seller shall have used commercially reasonable efforts to have such obligations waived. Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller will furnish or provide such access to medical records only as is permitted by law, and (ii) the Seller will furnish or provide such access to personnel records only to the extent that the employee to which the personnel record relates has given his/her consent to the Seller. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of Section 11.2 hereof and shall be treated as Confidential Information. (c) Commencing February 1, 1999, the Buyer shall have the right to physically locate one designated representative (the "Designated Representative") of the Buyer at an office or in workspace at Seller's corporate offices to observe the operations of Lovett, as well as the operations of the Bowline Point Generating Station, the hydroelectric generating stations and the gas turbine generating stations, pursuant to the Other Sales Agreements; provided, however, that the Buyer shall not unreasonably interfere with the Seller's use of the Purchased Assets. The Seller shall coordinate site visits and provide the Designated Representative during such period prior to the Closing access to Seller's managerial personnel. The Designated Representative shall coordinate the Buyer's rights to access under Section 7.2(a) hereof during the period prior to the Closing. (d) For a period of seven (7) years after the Closing Date, the Seller and its representatives shall have reasonable access to (i) information on employees covered by the Seller's Management Employee Transition Program and (ii) all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access (A) may reasonably be required by the Seller in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date and (B) is not otherwise prohibited by law. Such access shall be afforded by the Buyer upon receipt of reasonable advance written notice and during normal business hours. The Seller shall be responsible for any costs or expenses incurred by it pursuant to this Section 7.2(d). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such seven (7) year period, the Buyer shall, prior to such disposition, give the Seller a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. Any information provided by Buyer to Seller pursuant to this Section 7.2(d) shall be deemed Confidential Information. 7.3 Expenses. Except to the extent specifically provided herein, whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. 7.4 Further Assurances. (a) Subject to the terms and conditions of this Agreement, each of the parties hereto will use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement, including without limitation, the use of the Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. Neither of the Parties shall, without the prior written consent of the other Party, take or fail to take any action which might reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Agreement or the Ancillary Agreements. From time to time after the date hereof, without further consideration, the Seller will, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer will, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets ("Leased Assets") which are principally used by the Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, the Seller will use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date unless Buyer directs Seller in writing not to acquire any such Leased Asset. The Seller's documented and reasonable costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of the Purchase Price. Schedule 7.4 lists all of the Leased Assets. (b) To the extent that any Seller's rights under any guaranties, warranties and indemnification applicable to the Purchased Assets or the Assumed Liabilities are nontransferable or nonassignable, Seller shall use its commercially reasonable efforts to provide to Buyer the benefits thereof in some other manner upon the request of Buyer. 7.5 Public Statements. The parties shall consult with each other prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and shall not issue any such public announcement, statement or other disclosure prior to such consultation, except as may be required by law or stock exchange rules or regulations and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent that such public announcements, statements or other disclosures do not violate Section 11.2 of this Agreement. 7.6 Consents and Approvals. (a) The Seller and the Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. Buyer shall bear the cost of all filing fees under the HSR Act. (b) The Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller or the Buyer is a party or by which either of them is bound. The Seller shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they will consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, the Seller will enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any Federal, State or local governmental authority or agency or any third party in connection with any Federal, State or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. (d) Buyer shall assume primary responsibility for securing the transfer or reissuance of the Permits effective as of the Closing Date. Seller shall cooperate with Buyer's efforts in this regard and shall use its best efforts to assist in the transfer or reissuance when so requested by Buyer. In the event that Buyer is unable, despite commercially reasonable efforts, to obtain a transfer or reissuance of one or more Permits as of the Closing Date, Buyer may use the Permits issued to Seller to the extent permissible under applicable laws and regulations provided (i) Buyer notified Seller prior to Closing, (ii) Buyer continues to make commercially reasonable efforts to obtain a transfer or reissuance of such Permits after the Closing, and (iii) Buyer indemnifies Seller for any losses, claims or penalties suffered by Seller in connection with the Permit that is not transferred or reissued as of the Closing Date resulting from Buyer's operation of the Purchased Assets following the Closing Date. In no event shall Buyer use or otherwise rely on a Permit issued to Seller beyond one year after Closing unless Buyer has, after exercising its commercially reasonable efforts, been unable to obtain same and such reliance is not prohibited by law. 7.7 Fees and Commissions. The Seller and the Buyer each represent and warrant to the other that, except for Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), which is acting for and at the expense of the Seller, and Credit Suisse First Boston Corporation, which is acting for and at the expense of the Buyer, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer will pay to the other or otherwise discharge, and will indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8 Tax Matters. (a) Notwithstanding any other provision of this Agreement, all transfer, sales and similar Taxes incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer, and the Buyer will, at its own expense, file, to the extent required by law, all necessary Tax Returns with respect to all such Taxes, and, if required by applicable law, the Seller will join in the execution of any such Tax Returns. (b) With respect to Taxes to be prorated in accordance with Section 3.4 of this Agreement only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with the Section 3.4 of this Agreement. (c) On and after the Closing Date until the maturity or redemption date of the Pollution Control Bonds which were issued to finance or refinance all or a portion of the cost of the Pollution Control Facilities (as defined hereinafter): (i) Except as otherwise permitted in clause (ii) below, Buyer will not change or permit to be changed the character or nature of the use of those facilities listed in Schedule 7.8(c) hereto (the "Pollution Control Facilities") from the manner Seller has used said facilities prior to the sale of the Purchased Assets, unless such changed use would constitute a use or purpose of the Pollution Control Facilities for which tax-exempt bonds could be issued pursuant to section 1313 of the Tax Reform Act of 1986, P.L. 99-514, or (the "1986 Tax Act"), to refund bonds described in section 1312(a) of the 1986 Tax Act which, for purposes hereof, are assumed to have been issued to finance facilities of the same character and use or purpose as the Pollution Control Facilities; (ii) Buyer and any transferee which becomes subject to the provisions of the foregoing clause (i) by reason of this clause (ii) will not sell or otherwise transfer any portion of the Pollution Control Facilities unless (A) the transferee covenants to satisfy the conditions of the foregoing clause (i) with respect to its ownership and use of the Pollution Control Facilities or (B) the transfer relates to personal property and is exclusively for cash the proceeds of which will be expended within six (6) months of the date of receipt on facilities for which tax-exempt bonds could be issued pursuant to section 1313 of the 1986 Tax Act, to refund bonds described in section 1312(a) of said act which, for purposes hereof, are assumed to have been issued to finance facilities of the same character and use or purpose as said facilities; (iii) Buyer will cooperate with Seller and use commercially reasonable efforts to permit Seller to have access to the Pollution Control Facilities at reasonable times to examine them; and (iv) The foregoing clause shall not be construed to prevent Buyer (or any transferee) from ceasing to operate, maintain or repair any element or item of the Pollution Control Facilities, the operation, maintenance or repair of which becomes uneconomic to Buyer because of damage or destruction or obsolescence (including physical, functional or economic obsolescence), or because of any change in government standards and regulations or the termination of the operation of the Purchased Assets to which the element or item is an adjunct. Seller shall notify Buyer when the Pollution Control Bonds have matured or been redeemed. (d) Each of the Buyer and the Seller shall provide the other with such assistance (including access to the Purchased Assets) as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each will retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.8 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. (e) Seller will consult with and allow Buyer to participate in all outstanding real property tax disputes concerning the Purchased Assets and shall take such positions as Buyer may request consistent with the positions previously communicated to Seller by Buyer with respect to such tax disputes, to assist Buyer in obtaining a tax agreement with respect to such tax disputes for periods subsequent to the Closing Date. Seller will use its commercially reasonable efforts to assist Buyer in obtaining an agreement with the taxing authorities pursuant to which the assessed value for real estate tax purposes of the Purchased Assets will be the lowest value achievable. Seller shall not enter into any agreement with the taxing authorities with respect to such real property tax disputes relating to periods prior to the Closing Date without the written consent of Buyer which Buyer shall not unreasonably withhold as long as Seller has complied with this Section 7.8(e). 7.9 Supplements to Schedules. Prior to the Closing Date, the parties shall supplement or amend the Schedules required by Article V and VI with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.10 Employees. (a) Schedule 7.10(a) sets forth all collective bargaining agreements to which O&R is a party in connection with the Purchased Assets and all other labor agreements and amendments thereto, that are or may be associated with the Purchased Assets (the "Collective Bargaining Agreements"). Buyer shall offer employment to begin as of the Closing Date to the Seller's employees who work in connection with the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"), and the Buyer will assume the Collective Bargaining Agreements and all of the Seller's obligations thereunder, including, without limitation, the terms and conditions of the employee benefit plans covering such hourly employees. (b) Continued Employment; Service Credit. The Buyer shall, as of the Closing Date, offer employment to the employees of the Seller (who will be listed on Schedule 7.10(b) by the Buyer), who worked at or directly serviced the Purchased Assets, who were employees immediately prior to the Closing Date and who were not Hourly Employees and who are approved by Buyer (the "Management Employees"). The Buyer shall provide Schedule 7.10(b) at least ninety (90) days prior to the date on which the Closing is anticipated to occur (but in no event later than February 1, 1999, or such other date to which the Buyer and O&R mutually agree). The Management Employees hired by the Buyer shall be given credit for all service with Seller or its subsidiaries (and service credited by Seller or such subsidiary), to the same extent as such service was credited for such purpose by Seller or such subsidiary, under all employee benefit plans, programs and policies, and fringe benefits of the Buyer in which they become participants for purposes of eligibility, vesting and determination of level of benefits (but not for purposes of benefit accrual). To the extent permissible under the terms thereof and required by applicable law, the Buyer shall (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date, and (ii) provide each Management Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Closing Date. (c) Subject to applicable law, the Buyer shall maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits as will, in the aggregate, provide benefits to the Management Employees that are no less favorable than those provided pursuant to such employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller and its subsidiaries, as in effect on the Closing Date. During the period between the date hereof and the Closing Date, the Seller shall use its best efforts to keep available all current Management Employees for employment by the Buyer (except those employees which the Buyer identifies in writing as Management Employees which the Buyer does not intend to employ). (d) Notwithstanding the Buyer's assumption of the Collective Bargaining Agreement, the Buyer shall not assume sponsorship or any other obligation under any Benefit Plan of O&R or any ERISA Affiliate of the Seller in connection with the assumption of such agreements or in connection with hiring any of the Hourly Employees. All benefits accrued under such Benefits Plans and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of O&R and any individual covered under any such Benefit Plan that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(l) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing, pursuant to the provisions of COBRA. (e) The Seller agrees to perform timely and discharge all requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. The Buyer will cooperate with Seller to provide Seller with such information as may be needed from the Buyer for inclusion in such notices, including providing Seller at least ninety (90) days prior to the date on which the Closing is anticipated to occur (but in no event, later than February 1, 1999 or such other date to which the Buyer and O&R mutually agree) with a list of all of Seller's employees to whom the Buyer will make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. (f) O&R shall be responsible for any payments required under its severance plan, including severance payment and other benefit enhancements, offered in connection with the transfer of the Purchased Assets. Within thirty (30) days following the last day that any employee may elect to participate in such plan, O&R shall provide Buyer with a list of all electing employees. In any event, Buyer is not required to establish this or any other severance or benefit plan. (g) O&R shall comply with all of the requirements of COBRA arising from this Agreement with respect to all employees of O&R employed at the Purchased Assets who are not employed by Buyer. (h) O&R shall pay, when due, to all Hourly Employees and Management Employees hired by the Buyer pursuant to Section 7.10 hereof, all compensation, bonus, severance, vacation and holiday compensation, workers' compensation or other employment benefits which have accrued to such Hourly Employees and Management Employees through and including the Closing Date. (i) Following the execution of this Agreement, O&R will use its commercially reasonable best efforts to arrange meetings and interviews with such employees of O&R as Buyer shall reasonably request. (j) O&R shall not, prior to the Closing Date, with respect to the Purchased Assets, (i) hire new employees or transfer current employees prior to the Closing to work at the Purchased Assets, other than to fill vacancies in existing positions in the reasonable discretion of Seller, (ii) take any action prior to the Closing to affect a material change in the Collective Bargaining Agreement, or (iii) take any action prior to the Closing to increase the aggregate benefits payable to the employees employed in connection with the Purchased Assets, except (A) as otherwise required by the terms of the Collective Bargaining Agreement obligations to effects bargain, (B) as O&R shall reasonably deem appropriate in order to comply with its obligations under the second sentence of Section 7.10(c) above, (C) for retention bonuses payable to Management Employees on or before the Closing Date and (D) increases in salary and benefits in the ordinary course of business, consistent with past practice. 7.11 Risk of Loss. (a) From the date hereof through the Closing Date, all risk of loss or damage to the property included in the Purchased Assets shall be borne by the Seller. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the knowledge of the Seller after reasonable inquiry and investigation) contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer or the Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f). (c) If, before the Closing Date, all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and assigning any insurance proceeds to Buyer at the Closing and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such casualty, then the Buyer may terminate this Agreement pursuant to Section 10.1(f). 7.12 Real Estate Matters. (a) Buyer shall obtain an American Land Title Association ("ALTA") or New York Board of Title Underwriters ("NYBTU") owners standard form title policy commitment with respect to the Real Property (the "Title Commitment") from a title company of Buyer's choice (the "Title Company") covering title to the Real Property, together with an ALTA 3.1 zoning endorsement, if available, including parking and access, and such other endorsements as Buyer may reasonably request. Seller shall provide the Title Company and Buyer such information as the Title Company or Buyer may reasonably request to assist the Title Company in connection with the Title Commitment. Without limiting the foregoing, Seller shall provide the Title Company and Buyer a copy of the most recent surveys in their possession regarding the Real Property. Promptly after receiving the Title Commitment, Buyer shall notify Seller in writing of any defects in title which are not Permitted Encumbrances and would cause title to the Real Property to be uninsurable (any of which is called herein a "Defect of Title"). Buyer shall be deemed to have waived any objection to any Defect of Title that was disclosed by the Title Commitment if Buyer fails to notify Seller of such Defect of Title within thirty (30) days after receipt of such Title Commitment. With respect to the existence of any Defect of Title that is not disclosed by the Title Commitment, but which arises prior to Closing, Buyer shall immediately notify the Seller in writing of any such Defect of Title. (b) O&R agrees that upon the written request of Buyer it will consent and cause its affiliates to consent to the relocation of the Operating Easements and Seller's Easements so long as (i) Buyer pays the cost of such relocation, (ii) such relocation will be to space within Buyer's ownership and will not materially adversely affect the operation of Seller's or its respective affiliates' transmission and distribution business, except for the minimum downtime associated with the cut over for such relocation process in accordance with Good Utility Practices and (iii) the Buyer's requested relocation is consistent with Good Utility Practices. Seller further agrees to condition any grant or assignment by it of the Operating Easements or Seller's Easements on the express agreement of its transferee to be bound by the terms and conditions of this Section 7.12(b). (c) As to any Operating Easement or Seller's Easement not currently of record or reserved or granted back to O&R at Closing, all of which are to be granted by Buyer at Closing concurrently with the transfer of title to Buyer and prior to any mortgage or other encumbrance, such Operating Easements and Seller's Easements shall include standard cross- indemnity provisions relating to personal injury, death or property damage occurring as a result of gross negligence or willful misconduct in the use of such Easements, whereby each party agrees to indemnify the other for the consequences of the gross negligence or willful misconduct of those for whom the indemnifying party is legally responsible. 7.13 Year 2000. O&R shall (a) use its best efforts to cooperate with Buyer in formulating a plan to prepare the Purchased Assets to be ready for Year 2000 computer-related issues with a target completion date of October 1, 1999 and (b) perform until the Closing Date (or later, at Seller's election, pursuant to the second sentence of Section 7.14 of this Agreement) the tasks identified in such plan, consistent with Good Utility Practices and the expenditures contemplated in itsYear 2000 plans referred to in Section 5.23 hereof. 7.14 Scheduled Capital Expenditures and Scheduled Maintenance Expenditures. The Seller shall perform, or caused to be performed, the Scheduled Capital Expenditures and the Scheduled Maintenance Expenditures, at Seller's cost, prior to the Closing Date. To the extent that Scheduled Capital Expenditures and Scheduled Maintenance Expenditures are not completed by the Closing Date, the Seller either (i) shall cause the Scheduled Capital Expenditures or Scheduled Maintenance Expenditures to be completed within a reasonable time following the Closing Date, or (ii) shall pay Buyer its reasonable costs to complete such unfinished Scheduled Capital Expenditures or Scheduled Maintenance Expenditures within thirty (30) days of Seller's receipt from Buyer of a reasonably detailed invoice for such cost. 7.15 Expansion. The parties recognize that the Buyer may wish to add additional generating capacity at the Lovett site ("Intended Use") and the value to Buyer for such Intended Use is included in the Purchase Price. Accordingly, to the extent such action or inaction does not interfere with or adversely affect the Seller's transmission and distribution business, Seller agrees that, at Buyer's cost, they: (a) will use commercially reasonable efforts to cooperate with Buyer's reasonable request to remove or modify any (i) Permitted Encumbrances which materially adversely affect Buyer's Intended Use, or (ii) conditions (either physical or otherwise) which exist at Bowline or at any of the Purchased Assets which would prevent, hinder, or otherwise interfere with the Buyer's Intended Use, and (b) shall not, and shall ensure that their respective affiliates shall not, oppose, hinder, or interfere with Buyer's efforts to add such additional capacity and shall cooperate with Buyer's other reasonable requests with respect thereto. 7.16 Fuel Contract Renegotiation. At Buyers' request, Seller shall exercise commercially reasonable efforts to cooperate with Buyer in Buyer's efforts to renegotiate (i) the Service Agreement for Service under OPT Rate schedule, between Columbia Gas Contract Transmission Corp. and O&R, dated July 1, 1991 and (ii) Coal Purchase and Sales Agreement between Massey and Seller dated March 9, 1984, as amended. 7.17 Environmental Insurance. If Buyer elects to purchase insurance coverage to cover liabilities arising from Hazardous Substances present or Released at, on, in or under (i) the Purchased Assets and (ii) the "Purchased Asset" and "Purchased Assets," as defined in each of the Other Sales Agreements on or prior to the Closing Date ("Environmental Insurance"), Seller shall share equally with Buyer the cost of premiums for such Environmental Insurance, up to a maximum payment by Seller of $200,000 in the aggregate for such insurance relating to (A) the Purchased Assets and (B) the "Purchased Asset" and "Purchased Assets" as defined in each of the Other Sales Agreements. If Buyer purchases such Environmental Insurance, Buyer shall add Seller as an additional insured. ARTICLE VIII CLOSING CONDITIONS 8.1 Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to fulfillment at or prior to the Closing Date of the following condition (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated with no order, decree, judgment or injunction enjoining or prohibiting the consummation of the transactions contemplated hereby having been issued; (b) No preliminary or permanent injunction or other order or decree by any federal or state court or governmental authority which prevents or is reasonably likely to prevent the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall be pending or shall have been issued and remain in effect (each party agreeing to use its reasonable efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental authority in the United States which prohibits the consummation of the transactions contemplated hereby; (c) All Federal, State and local government, orders, consents and approvals required for the consummation of the transactions contemplated hereby or by the Ancillary Agreements, including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have become Final Orders (a "Final Order" means action by the relevant regulatory authority which has not been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired, and as to which all conditions to the consummation of such transaction prescribed by law, regulation or order have been satisfied), and such Final Order is in form and substance reasonably acceptable to the party that sought the consent or approval granted by such Final Order (for purposes of this clause (i), a Final Order shall be deemed to be reasonably acceptable to such party if it complies in all material respects with the terms and conditions of such party's application therefor and contains no additional terms or conditions which would have a Material Adverse Effect on such party or the operation of the Purchased Assets) provided, however, that if at the time such order, consent, or approval would otherwise be deemed to be a Final Order, there shall be pending or threatened any appeal or challenge thereto, which, if adversely determined, would cause such order, consent or approval to not be reasonably acceptable to the party that sought such order, consent or approval, then if such party who would be adversely affected notifies the other party that such a pending or threatened appeal or challenge exists (such notification to be made as soon as reasonably practicable following knowledge of such pending or threatened appeal or challenge, but in no event later than fifteen (15) days from date on which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired and all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied), then such order, consent or approval shall be deemed to be a Final Order only after all opportunities for rehearing or judicial review are exhausted and provided, further, that if the designation of an order, consent or approval as a Final Order shall be deferred pursuant to the foregoing proviso, the Termination Date shall be automatically extended for a period of time equal to the period of time for which the designation as a Final Order has been deferred; and (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in the last sentence of Section 7.6(b) has been entered into. 8.2 Conditions to Obligations of Buyer. The obligation of the Buyer to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officer's knowledge, after reasonable inquiry and investigation, the conditions set forth in Sections 8.2(a) and (b) have been satisfied; (d) The "Closing" as defined in the Bowline Point Generating Station Sales Agreement between the Seller, Consolidated Edison Company of New York, Inc. and the Buyer, dated as of the date hereof, shall have occurred or shall occur concurrently with the Closing hereunder; (e) The Buyer shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) the Seller is a corporation organized, existing and in good standing under the laws of the State of New York and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by requisite corporate action taken on the part of the Seller. (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Seller and (assuming that the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Seller, enforceable against the Seller in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Seller will not (A) constitute a violation of the Certificate of Incorporation or By- Laws of the Seller or (B) to counsel's knowledge constitute a violation or default under those agreements or instruments set forth on a schedule to this opinion; (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal or New York governmental authority is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals which are addressed below, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate have a Material Adverse Effect or prevent Seller from performing its obligations hereunder; and (5) the Bill of Sale, the Instrument of Assumption and the other agreements described in Section 4.3 are in proper form to transfer to Buyer such title to the Purchase Assets as was held by Seller. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials. (f) The Buyer shall have received an opinion from Riker, Danzig, Scherer, Hyland & Perretti, LLP (New Jersey Counsel), Nixon, Hargrave, Devans & Doyle, LLP (New York Counsel) and Morgan, Lewis & Bockius, LLP (Pennsylvania Counsel), or other local regulatory counsel for O&R reasonably acceptable by Buyer, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal governmental authority or any governmental authority in the States of New York, New Jersey and Pennsylvania is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, which have been obtained and are in full force and effect with such terms and conditions as were imposed by the applicable governmental authorities, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer and admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials. (g) Buyer shall have received the Title Commitment showing the Real Property to be insured as subject only to Permitted Encumbrances, and the effective date of the Title Commitment shall have been updated to the Closing Date and marked to show the satisfaction of all conditions to the issuance of the title policy other than conditions within the control of the Buyer; and (h) Buyer shall have obtained a certificate of the Secretary of Seller identifying by name and title and bearing the signature of the officer of Seller authorized to execute and deliver this Agreement and the other agreements and instruments contemplated hereby. 8.3 Conditions to Obligations of Seller. The obligation of the Seller to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) have been satisfied; and (d) The Seller shall have received an opinion from Troutman Sanders LLP, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: (1) The Buyer is a limited liability company organized, existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action taken on the part of the Buyer; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except (A) that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer will not constitute a violation of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents), as currently in effect, of the Buyer; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental authority is necessary for the consummation by the Buyer of the Closing other than (i) the Buyer Required Regulatory Approvals, all of which have been obtained and are in full force and effect with such terms and conditions as shall have been imposed by any applicable governmental authority, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States and the State of New York, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate Members and Managers of the Buyer and its subsidiaries and by public officials. 8.4 Extension of Closing Date. If the approval by the FERC of the establishment of the ISO (the "ISO Approval") shall not have been obtained on or prior to the Condition Fulfillment Date, the parties agree to defer the Closing Date until the date (the "Deferred Closing Date") which is the earlier of (a) the last day in the month in which the ISO Approval is deemed final under applicable law, provided that if there are less than five (5) Business Days in the month in which the ISO Approval is deemed final, then the last day in the month which follows the month in which the ISO Approval is deemed final, or (b) August 31, 1999; provided, however, that all conditions set forth in Section 8.2(a) and all conditions set forth in Section 8.2(b) regarding the representations and warranties of Seller shall be deemed to be fulfilled on the Deferred Closing Date unless the nonfulfillment of such conditions primarily results from the acts or omissions of Seller or from the occurrence of facts or circumstances that primarily relate to the Seller's ownership and/or operation, or the physical condition, of the Purchased Assets. For purposes of this Agreement, the "Condition Fulfillment Date" shall mean the date on which all conditions set forth in Sections 8.1 and 8.2 shall have been fulfilled but not earlier than the later of (i) the date on which all conditions set forth in Section 8.3 have been fulfilled or waived and (ii) April 30, 1999. ARTICLE IX INDEMNIFICATION 9.1 Indemnification. (a) The Seller will indemnify, defend and hold harmless the Buyer, Buyer's affiliates, and their respective Members, Managers, employees and agents (each. a "Buyer's Indemnitee") from and against any and all causes of action, claims, demands or suits (by any Person), losses, liabilities, damages (excluding consequential and special damages), obligations, payments, costs, Taxes 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) to the extent the foregoing are not covered by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by the Seller of any covenant or agreement of the Seller contained in this Agreement, (ii) the Excluded Liabilities, (iii) the Excluded Assets, (iv) any breach of any representation in Sections 5.1, 5.2 and 5.3 hereof, (v) Seller's non-compliance with any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement, or (vi) the gross negligence or willful misconduct of Seller, or its affiliates or their best respective contractors while on Buyer's property (including, without limitation, any easement provided the Seller with respect to such property) after the Closing to the extent such Indemnifiable Loss is not caused by the negligence or willful misconduct of any Buyer Indemnitee. (b) The Buyer will indemnify, defend and hold harmless the Seller, Seller's Affiliates, and their respective directors, officers, employees and agents (each, a "Seller Indemnitee") from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement, (ii) the Assumed Liabilities, (iii) the operation of the Purchased Assets after the Closing Date, (iv) any breach of any representation in Article VI, or (v) the gross negligence or willful misconduct of Buyer, its affiliates or their respective contractors while on Seller's property after the Closing, to the extent such Indemnifiable Loss is not caused by the negligence or willful misconduct of any Seller Indemnitee. (c) Either the party required to provide indemnification under this Agreement (the "Indemnifying Party") or the entity or person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement. (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The Seller and the Buyer shall have indemnification obligations with respect to Indemnifiable Losses asserted against or suffered by the Seller or the Buyer, as the case may be, to the extent that the aggregate of all such Indemnifiable Losses exceed the Indemnification Floor. It is agreed and understood that neither the Seller nor the Buyer, as the case may be, shall have any liability at any time for Indemnifiable Losses asserted against or suffered by the other party until the aggregate amount of Indemnifiable Losses asserted or suffered by such other party under this Section 9.1 shall exceed the Indemnification Floor, and then only to the extent that the aggregate amount of Indemnifiable Losses exceeds the Indemnification Floor. The term "Indemnification Floor" shall mean an amount equal to $200,000. (g) The rights and remedies of the Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement, or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be or (iii) any other liabilities described in Section 9.1(a) or 9.1(b). Rights and remedies under the Ancillary Agreements are as set forth therein. 9.2 Defense of Claims. (a) If any Indemnitee receives written notice of the assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) 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 will indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. (b) The party defending the Third Party Claim shall (i) consult with the other throughout the pendency of the Third Party Claim regarding the investigation, defense, settlement, compromise, trial, appeal or other resolution thereof; and (ii) afford the other party the opportunity, by notice, to participate and be associated in the defense of any Third Party Claim through counsel chosen by such other party, at its own expense, in the defense of any Third Party Claim as to which party has elected to conduct and control the defense thereof. The parties shall cooperate in the defense of the Third Party Claim. The Indemnitee shall make available to the Indemnifying Party or its representatives all records and other materials reasonably required for use in contesting any Third Party Claim (subject to such confidentiality provisions as the Indemnitee may reasonably require) and shall furnish such testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnifying Party in connection therewith. If requested by the Indemnifying Party, the Indemnitee shall cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest or, if appropriate, in making any counterclaim against the Person asserting the claim or demand, or any cross-complaint against any Person. The Indemnifying Party shall reimburse the Indemnitee for any expenses incurred by Indemnitee in cooperating with or acting at the request of the Indemnifying Party. (c) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days (unless waiting twenty (20) calendar days would prejudice the Indemnitee's rights) after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of (i) any Third Party Claim with respect to Income Taxes or (ii) any other Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer (other than with respect to Income Taxes) within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, compromise, or settle any Third Party Claim (other than with respect to Income Taxes) at any time, provided that in such event the Indemnitee shall waive any right to indemnity hereunder unless the Indemnitee shall have first sought the consent of the Indemnifying Party in writing to such payment, settlement or compromise and such consent was unreasonably withheld or delayed, in which event no claim for indemnity therefor hereunder shall be waived. (d) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than thirty (30) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will have a period of thirty (30) calendar days (unless waiting thirty (30) days would prejudice the Indemnitee's rights, in which case such period as would likely not prejudice the Indemnitee's rights, but in no event less than ten (10) days) within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party will be deemed to have accepted such Direct Claim. If the Indemnifying Party rejects such Direct Claim, the Indemnitee will be free to seek enforcement of its rights to indemnification under this Agreement. (e) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of the Chase Manhattan Bank), will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. Nothing in this Section 9.2(e) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (f) A failure to give timely notice as provided in this Section 9.2 will not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. ARTICLE X TERMINATION AND ABANDONMENT 10.1 Termination. (a) This Agreement may be terminated at any time prior to Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or Buyer if (i) the Closing shall not have been consummated on or before September 30, 1999 (the "Termination Date"); provided that the right to terminate this Agreement under this Section 10.1(b) shall not be available to Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; and provided, further, that if on September 30, 1999 the conditions to the Closing set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the day which is eighteen (18) months from the date of this Agreement. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any governmental or regulatory body, the consent of which is a condition to the obligations of the Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent or shall condition such consent upon any material change to the terms of this Agreement or the Ancillary Agreements or upon any other condition that materially and adversely affects the value of the transactions contemplated herein or therein for either party, and all appeals of such determination shall have been taken and have been unsuccessful, (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby or the Ancillary Agreements and such order, judgment or decree shall have become final and nonappealable, or (iii) any statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental agency in the United States which prohibits the transactions contemplated herein or in the Ancillary Agreements. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which (i) has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer or cured by Seller within fifteen (15) days after receipt by Buyer of notice specifying same or (ii) causes a Material Adverse Effect, of which Buyer has notified Seller, and which Seller has not promptly exercised commercially reasonable efforts to cure but in no event later than twenty (20) days following such notification by Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller or cured by Seller within fifteen (15) days after receipt by Buyer of notice specifying same. (f) This Agreement may be terminated by either the Seller or the Buyer in accordance with the provisions of Section 7.11(b) or (c). 10.2 Procedure and Effect of Termination. In the event of termination of this Agreement by either or both of the parties pursuant to Section 10.1, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein, such termination shall be without any further liability of either party or parties except as follows: (a) in the event of termination of this Agreement by Seller pursuant to Section 10.1(e), Seller shall have the right to pursue all remedies available to it in equity or at law in connection with the violation or breach of this Agreement by Buyer; (b) in the event of termination of this Agreement by Buyer pursuant to Section 10.1(d), Buyer shall have the right to pursue all remedies available to it in equity or at law in connection with the violation or breach of this Agreement by Seller; and (c) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI MISCELLANEOUS PROVISIONS 11.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2 Confidentiality. (a) All information regarding a party (the "Disclosing Party") that is furnished directly or indirectly to the other party (the "Recipient") pursuant to this Agreement and marked "Confidential" shall be deemed "Confidential Information." Notwithstanding the foregoing, Confidential Information does not include information that (i) is rightfully received from Recipient from a third party having an obligation of confidence to the Disclosing Party, (ii) is or becomes in the public domain, through no action on Recipient's part in violation of this Agreement, (iii) is already known by Recipient as of the date hereof, or (iv) is developed by Recipient independently of any Confidential Information of the Disclosing Party. Information that is specific as to certain data shall not be deemed to be in the public domain merely because such information is embraced by more general disclosure in the public domain. (b) Recipient shall keep the Confidential Information strictly confidential and not disclose any Confidential Information to any third party for a period of two years (2) from the date the Confidential Information was received by Recipient, except as otherwise provided herein. (c) Recipient may disclose the Confidential Information to its and its affiliates' respective directors, officers, employees, consultants, advisors and agents who need to know the Confidential Information for the purpose of assisting Recipient with respect to its obligations under this Agreement. Recipient shall inform all such parties, in advance, of the confidential nature of the Confidential Information. Recipient shall cause such parties to comply with the requirements of this Agreement and shall be responsible for the actions, uses, and disclosures of all such parties. (d) If Recipient becomes legally compelled or required to disclose any of the Confidential Information (including, without limitation, pursuant to the rules or regulations of the NYPP, ISO or FERC), Recipient will provide the Disclosing Party with prompt written notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy. Recipient will furnish only that portion of the Confidential Information which its counsel considers legally required, and Recipient will cooperate, at the Disclosing Party's expense, with the Disclosing Party's counsel to enable the Disclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. It is further agreed that in the event that a protective order or other remedy is not obtained, the Recipient will furnish only that portion of the Confidential Information which, in the written opinion of the Recipient's counsel, is legally required to be disclosed and, upon the Disclosing Party's request, use commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to such information. (e) Recipient shall promptly return to the Disclosing Party all items containing or constituting Confidential Information, together with all copies, extracts, or summaries thereof, upon the earlier of (i) the Disclosing Party's request, or (ii) the termination or expiration of this Agreement. 11.3 Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.4 No Survival. Subject to the provisions of Article X, each and every representation, warranty and covenant contained in this Agreement (other than (a) the covenants contained in Sections 3.2, 3.3, 3.4, 7.2(b), 7.2(c), 7.2(d), 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10, 7.12, 7.14, 7.15, 7.16, 7.17, 9.1 and 9.2 and in Article XI (which covenants shall survive in accordance with their terms), (b) the representations and warranties contained in Sections 5.1, 5.2, 5.3, 6.1, 6.2 and 6.3 (which representations and warranties shall survive for twelve (12) months from the Closing) and (c) the representation and warranty in Section 5.21 (which representation and warranty shall survive for the applicable statute of limitations) shall expire with, and be terminated and extinguished by the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and such representations, warranties and covenants shall not survive the Closing Date; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation, warranty or covenant. 11.5 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon receipt on a Business Day if during the normal business hours of the recipient, or if not, on the next Business Day, if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice: (a) If to the Seller, to: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 Attention: Legal Department with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attention: Sheldon S. Adler, Esq. (b) if to the Buyer, to: Southern Energy Lovett, L.L.C. c/o Southern Energy, Inc. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 Attention: Randy Harrison, Vice-President with copies to: Troutman Sanders LLP Nationsbank Plaza Suite 5200 Atlanta, GA 30308 Attention: Robert C. Marshall, Esq. and Southern Company Services 270 Peachtree Street Bin 918 Atlanta, Georgia 30303 Attention: Vice President and Associate General Counsel 11.6 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. The Buyer acknowledges that O&R has entered into an Agreement and Plan of Merger whereby O&R will become a wholly-owned subsidiary of Consolidated Edison, Inc. ("CEI"). Notwithstanding any other provision of this Article 11.6, the Buyer agrees that this Agreement may be assigned to CEI, or a wholly-owned affiliate of CEI without the Buyer's consent. Notwithstanding the foregoing, (a) Buyer may assign all of its rights and obligations hereunder to any wholly owned subsidiary (direct or indirect) of Buyer or Buyer's parent and upon Seller's receipt of notice from Buyer of any such assignment, such assignee will be deemed to have assumed, ratified, agreed to be bound by and perform all such obligations, and all references herein to "Buyer" shall thereafter be deemed to be references to such assignee, in each case without the necessity for further act or evidence by the parties hereto or such assignee; and (b) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee or lending institutions for the purposes of financing or refinancing the Purchased Assets, including upon or pursuant to the exercise of remedies with respect to such financing or refinancing, or by way of assignments, transfers, pledges, or other dispositions in lieu thereof; provided, however, that no such assignment or other disposition shall relieve or in any way discharge Buyer or such assignee from the performance of Buyer's obligations under this Agreement. Seller agrees, at Buyer's expense, to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer pledge or other disposition of rights and interests hereunder so long as Seller's rights under this Agreement are not thereby altered, amended, diminished or otherwise impaired. 11.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies, and the Seller and the Buyer hereby agree to irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. If requested by Seller, Buyer will consent to appointing an agent for service of process in New York City. 11.8 Specific Performance. Sellers and Buyer agree that a material breach of this Agreement will cause the non-breaching party immediate and irreparable harm that monetary damages cannot adequately remedy, and therefore, in addition to all other remedies hereunder, the parties agree that, upon any actual or impending material breach of this Agreement, the non-breaching party shall be entitled to equitable relief, including injunctive relief and specific performance, without bond or proof of damages, and in addition to any other remedies that the non-breaching party may have under applicable law. 11.9 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.10 Interpretation. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.11 Entire Agreement. This Agreement, the Ancillary Agreements, the Confidentiality Agreement, including the Exhibits and Schedules referred to herein or therein, and the Guaranty given to Seller by Southern Energy, Inc. embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Information Memorandum, dated May 1998, previously made available to the Buyer by the Seller and DLJ). This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement. 11.12 Bulk Sales or Transfer Laws. The Buyer acknowledges that the Seller will not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. IN WITNESS WHEREOF, the Seller and the Buyer have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By: /s/ D. Louis Peoples _____________________________ Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer SOUTHERN ENERGY LOVETT, L.L.C. By: /s/ Randy Harrison __________________________ Name: Randy Harrison Title: Vice President EX-10 4 EXHIBIT 10.60 - GAS TURBINE AND HYDROELECTRIC GENERATING STATIONS SALES AGREEMENT Exhibit 10.60 GAS TURBINE AND HYDROELECTRIC GENERATING STATIONS SALES AGREEMENT BETWEEN ORANGE AND ROCKLAND UTILITIES, INC. AND SOUTHERN ENERGY NY-GEN, L.L.C. November 24, 1998 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II PURCHASE AND SALE 2.1. The Sale . . . . . . . . . . . . . . . . . . . . . 25 2.2. Excluded Assets . . . . . . . . . . . . . . . . . . 25 2.3. Assumed Liabilities . . . . . . . . . . . . . . . . 26 2.4. Excluded Liabilities . . . . . . . . . . . . . . . 31 ARTICLE III PURCHASE PRICE 3.1. Purchase Price . . . . . . . . . . . . . . . . . . 35 3.2. Purchase Price Adjustment . . . . . . . . . . . . . 36 3.3. Allocation of Purchase Price . . . . . . . . . . . 38 3.4. Proration . . . . . . . . . . . . . . . . . . . . . 39 ARTICLE IV THE CLOSING 4.1. Time and Place of Closing . . . . . . . . . . . . . 40 4.2. Payment of Purchase Price . . . . . . . . . . . . . 41 4.3. Deliveries by Seller . . . . . . . . . . . . . . . 41 4.4. Deliveries by Buyer . . . . . . . . . . . . . . . . 43 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER 5.1. Organization; Qualification . . . . . . . . . . . . 45 5.2. Authority Relative to this Agreement . . . . . . . 46 5.3. Consents and Approvals; No Violation . . . . . . . 46 5.4. Reports . . . . . . . . . . . . . . . . . . . . . . 48 5.5. Financial Statements . . . . . . . . . . . . . . . 49 5.6. Undisclosed Liabilities . . . . . . . . . . . . . . 50 5.7. Absence of Certain Changes or Events . . . . . . . 50 5.8. Title . . . . . . . . . . . . . . . . . . . . . . . 51 5.9. Leasehold Interests . . . . . . . . . . . . . . . . 52 5.10. Improvements . . . . . . . . . . . . . . . . . 52 5.11. Insurance . . . . . . . . . . . . . . . . . . 53 5.12. Environmental Matters . . . . . . . . . . . . 53 5.13. Labor Matters . . . . . . . . . . . . . . . . . . 55 5.14. ERISA . . . . . . . . . . . . . . . . . . . . . . 56 5.15. Real Property Encumbrances . . . . . . . . . . . . 58 5.16. Condemnation . . . . . . . . . . . . . . . . . . . 58 5.17. Certain Contracts and Arrangements . . . . . . . . 58 5.18. Legal Proceedings, etc. . . . . . . . . . . . . . 60 5.19. Permits . . . . . . . . . . . . . . . . . . . . . 60 5.20. Regulation as a Utility . . . . . . . . . . . . . 61 5.21. Taxes . . . . . . . . . . . . . . . . . . . . . . 61 5.22. Intellectual Property . . . . . . . . . . . . . . 62 5.23. Year 2000 Readiness . . . . . . . . . . . . . . . 62 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER 6.1. Organization . . . . . . . . . . . . . . . . . . . 63 6.2. Authority Relative to this Agreement . . . . . . . 63 6.3. Consents and Approvals; No Violation . . . . . . . 64 6.4. Operating Easements . . . . . . . . . . . . . . . . 65 6.5. Regulation as a Utility . . . . . . . . . . . . . . 65 6.6. Availability of Funds . . . . . . . . . . . . . . . 65 ARTICLE VII COVENANTS OF THE PARTIES 7.1. Conduct of Business Relating to the Purchased Assets 66 7.2. Access to Information . . . . . . . . . . . . . . . 69 7.3. Expenses . . . . . . . . . . . . . . . . . . . . . 72 7.4. Further Assurances . . . . . . . . . . . . . . . . 72 7.5. Public Statements . . . . . . . . . . . . . . . . . 74 7.6. Consents and Approvals . . . . . . . . . . . . . . 74 7.7. Fees and Commissions . . . . . . . . . . . . . . . 77 7.8. Tax Matters . . . . . . . . . . . . . . . . . . . . 78 7.9. Supplements to Schedules . . . . . . . . . . . . . 80 7.10. Employees . . . . . . . . . . . . . . . . . . 80 7.11. Risk of Loss . . . . . . . . . . . . . . . . . 85 7.12. Real Estate Matters . . . . . . . . . . . . . 86 7.16. Environmental Remediation . . . . . . . . . . 90 7.17. Buyout of Leases . . . . . . . . . . . . . . . 92 ARTICLE VIII CLOSING CONDITIONS 8.1. Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby. . . . . . . . . . 93 8.2. Conditions to Obligations of Buyer . . . . . . . . 96 8.3. Conditions to Obligations of Seller . . . . . . . . 101 8.4. Extension of Closing Date. . . . . . . . . . . . . 104 ARTICLE IX INDEMNIFICATION 9.1 Indemnification . . . . . . . . . . . . . . . . . . 105 9.2. Defense of Claims . . . . . . . . . . . . . . . . 108 ARTICLE X TERMINATION AND ABANDONMENT 10.1. Termination . . . . . . . . . . . . . . . . . 113 10.2. Procedure and Effect of Termination . . . . . 115 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Amendment and Modification . . . . . . . . . 116 11.2. Confidentiality . . . . . . . . . . . . . . . 117 11.3. Waiver of Compliance; Consents . . . . . . . . 119 11.4. No Survival. . . . . . . . . . . . . . . . . 119 11.5. Notices . . . . . . . . . . . . . . . . . . . 120 11.6. Assignment . . . . . . . . . . . . . . . . . . 121 11.7. Governing Law . . . . . . . . . . . . . . . . 123 11.8. Specific Performance . . . . . . . . . . . . . 123 11.9. Counterparts . . . . . . . . . . . . . . . . . 124 11.10. Interpretation . . . . . . . . . . . . . . . . 124 11.11. Entire Agreement . . . . . . . . . . . . . . . 124 11.12. Bulk Sales or Transfer Laws . . . . . . . . . 125 GAS TURBINE AND HYDROELECTRIC GENERATING STATIONS SALES AGREEMENT GAS TURBINE AND HYDROELECTRIC GENERATING STATIONS SALES AGREEMENT, dated as of November 24, 1998, between Orange and Rockland Utilities, Inc., a New York corporation ("Seller" or "O&R"), and Southern Energy NY-Gen, L.L.C., a Delaware limited liability company ("Buyer"). WHEREAS, Seller owns and operates the Gas Turbines (as defined herein) and the Hydroelectric Assets (as defined herein) (collectively, the "Purchased Assets"); and WHEREAS, the Buyer desires to purchase, and Seller desires to sell, the Purchased Assets upon the terms and conditions hereinafter set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. (a) As used in this Agreement, the following terms have the meanings specified or referred to in this Section 1.1: (1) "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (2) "Agreement" means this Gas Turbine and Hydroelectric Generating Stations Sales Agreement together with the Schedules and Exhibits hereto. (3) "Ancillary Agreements" means the Operating Easement, the Seller's Easements, the Load Pocket Agreement, the Continuing Site/Interconnection Agreement and the Transition Agreement. (4) "Bill of Sale" means the Bill of Sale to be delivered at the Closing with respect to the Purchased Assets which constitute personal property and which are to be transferred at the Closing, substantially in the form of Exhibit A hereto. (5) "Business Day" shall mean any day other than Saturday, Sunday and any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (6) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (7) "CERCLA" means the Federal Comprehensive Environmental Response, Compensation and Liability Act. (8) "Code" means the Internal Revenue Code of 1986, as amended. (9) "Confidentiality Agreement" means the Confidentiality Agreement, dated June 19, 1998, between Seller and Southern Energy, Inc. (10) "Continuing Site/Interconnection Agreement" means the Continuing Site/Interconnection Agreement, dated as of the date of this Agreement, between Seller and the Buyer. (11) "Emission Allowances" means the nitrogen oxide allowances to be allocated by the New York State Department of Environmental Conservation to the Gas Turbines, as set forth in Schedule 1.1(a)(11). (12) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation, easements, deed restrictions, encumbrances and charges of any kind. (13) "Environmental Laws" means all Federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances. (14) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (15) "Estimated Inventory Adjustment Amount" means the value of the JP4 fuel inventory used at or in connection with the Gas Turbines, as published in the Journal of Commerce, on the date ten (10) days before the Closing Date, or the most recently published date prior to such date (ten days before the Closing) which valuation shall be provided to the Buyer by Seller no later than five (5) days before the Closing Date. (16) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (17) "Federal Power Act" means the Federal Power Act of 1935. (18) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (19) "Gas Turbines" means the Hillburn Gas Turbine and the Shoemaker Gas Turbine. (20) "Good Utility Practices" means any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry with respect to similar facilities during the relevant time period which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection, and expedition. Good Utility 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 such industry. (21) "Hazardous Substances" means (a) any petrochemical or petroleum products, oil, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. (22) "Hillburn Gas Turbine" means the gas turbine generating station which includes the real and personal property, tangible or intangible, constituting and used principally for generation purposes at or otherwise for the operation of the Hillburn Gas Turbine Generating Station located in the Village of Hillburn, Town of Ramapo, Rockland County, New York, including, but not limited to, the following assets: (a) all of the Seller's right, title and interest in, to and under the Real Property (including all structures, buildings, facilities and other improvements thereon and all appurtenances thereto) as further described on Schedule 5.8 as associated with the Hillburn Gas Turbine Generating Station; (b) all of the Seller's right, title and interest in, to and under the Leases described on Schedule 5.9(a) as associated with the Hillburn Gas Turbine Generating Station; (c) all inventories of fuels, supplies, spare parts and materials located at the Hillburn Gas Turbine Generating Station on the Closing Date; (d) the machinery, equipment, furniture and other personal property owned by Seller and located at the Hillburn Gas Turbine Generating Station on the Closing Date, including, without limitation, the items of personal property included on Schedule 1.1(a)(22); (e) the turbines currently leased by Seller and located at the Hillburn Gas Turbine Generating Station (the contract relating to this lease is listed on Schedule 5.17(a)); (f) the 69 kv transmission connections, described as being sold to the Buyer in the separation document summary in Exhibit C, between the Hillburn Gas Turbine Generating Station and Seller's transmission system; (g) all contracts, agreements and personal property leases principally relating to the Hillburn Gas Turbine Generating Station as further listed on Schedules 5.17(a) and 7.10(a), respectively, associated with Hillburn Gas Turbine Generating Station; (h) the Environmental Permits and Permits listed on Schedules 5.12(a)(ii) and 5.19(a), respectively, as being associated with the Hillburn Gas Turbine Generating Station; (i) the Emission Allowances relating to the Hillburn Gas Turbine Generating Station; (j) all books, operating records, reports engineering or design plans, specifications, drawings, procedures, softwares or tools used to process and report environmental data safety and maintenance manuals and similar items of Seller relating specifically to the aforementioned assets; (k) copies of filings made with regulatory agencies, as updated, relating to Seller's Year 2000 programs as such filings apply to the Hillburn Gas Turbine Generating Station; (l) all unexpired, transferable warranties and guarantees from third parties with respect to the Hillburn Gas Turbine Generating Station, as of the Closing Date; (m) the Intellectual Property relating to the Hillburn Gas Turbine Generating Station (including Seller's goodwill therein and the rights of Seller in and to the name of Hillburn Gas Turbine) and all rights, privileges, claims, causes of action, indemnification rights and options pertaining solely to the Hillburn Gas Turbine or the Assumed Liabilities, relating to the Hillburn Gas Turbine, including, without limitation, those items listed on Schedule 1.1(a)(22)(m); (n) all assets acquired by Seller pursuant to Section 7.4; and (o) $200,000 in cash. (23) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (24) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (25) "Hydroelectric Assets" means the Mongaup Hydroelectric Station (Units 1, 2, 3 and 4) ("Mongaup"), the Swinging Bridge Hydroelectric Station (Units 1 and 2) ("Swinging Bridge"), the Rio Hydroelectric Station (Units 1 and 2) ("Rio") and an interest (the assignment of which interest is subject to the approval of New York City pursuant to Article XIII of an agreement between The City of New York and The Rockland Light and Power Company, a predecessor company to the Seller, dated February 2, 1951) in the Grahamsville Hydroelectric Station ("Grahamsville", and with Mongaup, Swinging Bridge and Rio, the "Hydroelectric Generating Stations") including the real and personal property, tangible or intangible, owned by the Seller and located at and used principally for generation purposes in connection with such stations, including, but not limited to, the following assets: (a) all of the Seller's right, title and interest in, to and under the Real Property (including all structures, buildings, facilities and other improvements thereon and all appurtenances thereto) described on Schedule 5.8; (b) the machinery, equipment, furniture and other personal property owned by the Seller and located in or on the Hydroelectric Generating Stations on the Closing Date, including, without limitation, the items of personal property listed or referred to in Schedule 1.1(a)(25); (c) all inventories of fuels, supplies, spare parts and materials relating to the Hydroelectric Generating Stations and located at, or in transit to, the Hydroelectric Generating Stations on the Closing Date; (d) the 69 kv transmission connections, described as being sold to the Buyer in the separation document summary in Exhibit C between the Hydroelectric Generating Stations and the Seller's transmission system. (e) all contracts, agreements and personal property leases principally relating to the Hydroelectric Generating Stations, as further listed on Schedules 5.17(a) and 7.10(a), respectively, as being associated with the Hydroelectric Generating Stations; (f) all Environmental Permits and Permits listed on Schedules 5.12(a)(ii) and 5.19(a), respectively, as being associated with the Hydroelectric Generating Stations; (g) all books, operating records, reports, engineering or design plans, specifications, drawings, procedures, software or tools used to process and report environmental data, safety and maintenance manuals and similar items of the Seller relating specifically to the aforementioned assets. (h) all of the Seller's right, title and interest in, to and under the Leases described on Schedule 5.9(a) as associated with the Hydroelectric Assets; (i) copies of all filings made with regulatory agencies, as updated, relating to Seller's Year 2000 programs as such filings apply to the Hydroelectric Generating Station; (j) all unexpired, transferable warranties and guarantees from third parties with respect to the Hydroelectric Generating Station, as of the Closing Date; (k) the Intellectual Property relating to the Hydroelectric Generating Station (including Seller's goodwill therein and the rights of Seller in and to the name of the Hydroelectric Generating Stations) and all rights, privileges, claims, causes of action, indemnification rights and options pertaining solely to the Hydroelectric Assets or the Assumed Liabilities relating to the Hydroelectric Assets, including, without limitation, those items as listed on Schedule 1.1(a)(25)(k); (l) all assets acquired by Seller pursuant to Section 7.4; and (m) $200,000 in cash. (26) "Income Tax" means any tax, charge, fee, levy, penalty, or other assessment imposed by any U.S. federal, state, local or foreign taxing authority (a) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains taxes and alternative minimum taxes but excluding sales, transfer and similar taxes) or (b) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such tax may be based, measured by or calculated with respect to, is described in clause (a), in each case with any interest, penalties, or additions attributable thereto. (27) "Income Tax Return" means any return, report, information return or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Income Taxes. (28) "Independent Accounting Firm" means Arthur Andersen LLP or such other independent accounting firm of national reputation mutually appointed by Seller and the Buyer. (29) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit B hereto. (30) "Intellectual Property" means all patents and patent rights, trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, brand names, inventions, copyrights and copyright rights, know-how and all pending applications for and registrations of patents, trademarks, service marks and copyrights other than the names, trademarks, service marks or logos listed in Section 2.2(b) hereof. (31) "Internal Revenue Service" means the United States Internal Revenue Service or any successor thereto. (32) "ISO" means the New York Independent System Operator, or its successor. (33) "Load Pocket Agreement" means the Load Pocket Call Option Agreement, dated as of the date of this Agreement, between the Buyer and Seller. (34) "Material Adverse Effect" means any change in or effect on the Purchased Assets after the date of this Agreement that is, individually or in the aggregate, materially adverse to the condition (financial or physical) of (as compared to the condition on the date of this Agreement), or the ability to own or operate (as compared to the ownership and operation thereof prior to the date of this Agreement), any material part of the Purchased Assets, other than (i) any change or effect resulting from changes in the international, national, regional or local wholesale or retail markets for electric power, (ii) any change or effect resulting from changes in the international, national, regional or local markets for any fuel used at the Purchased Assets, (iii) any change or effect resulting from changes in the North American, national, regional or local electric transmission systems, (iv) any change or effect resulting from any regulation, rule or order adopted or proposed by or with respect to the ISO and its responsibility for, authority over and operation of the wholesale and retail electric energy, capacity and ancillary services electric power markets and (v) any materially adverse change in or effect on the Purchased Assets which is cured (including by the payment of money) by Seller before the Termination Date. (35) "NJBPU" means the New Jersey Board of Public Utilities or any successor thereto. (36) "NYPSC" means the New York Public Service Commission or any successor thereto. (37) "Operating Easement" means the operating easement providing the right to continue operating and maintaining certain distribution facilities at the substations, which will be prepared as described in the Continuing Site/Interconnection Agreement. (38) "Other Sales Agreements" means the Bowline Point Generating Station Sales Agreement between the Seller, Consolidated Edison Company of New York, Inc. and Southern Energy Bowline, L.L.C.; the Bowline Adjacent Property Sales Agreement between the Seller and Southern Energy Bowline, L.L.C.; and the Lovett Generating Station Sales Agreement between the Seller and Southern Energy Lovett, L.L.C., each dated as of the date of this Agreement. (39) "PAPUC" means the Pennsylvania Public Utility Commission or any successor thereto. (40) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Assets contained in the documents listed on Schedules 5.8, 5.9(a), 5.9(b) and 5.15; (ii) all exceptions, restrictions, easements, covenants, charges, rights of way and monetary and non-monetary encumbrances of record or that are set forth in an applicable FERC project license, except for such encumbrances which secure indebtedness; (iii) the Operating Easements; (iv) any state of facts that a current survey of the Purchased Assets would disclose; (vi) mortgages, liens, pledges, charges, encumbrances and restrictions which are not in excess of $50,000 incurred in connection with the Seller's purchase of properties and assets to be conveyed to Buyer as part of the Purchased Assets after the date of this Agreement securing all or a portion of the purchase price therefor incurred in the ordinary course of business; (vii) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles, provided that the aggregate amount being so contested does not exceed $50,000; (viii) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to Seller's obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings, provided that the aggregate amount of such liens does not exceed $500,000; (ix) zoning, entitlement, conservation restrictions and other land use and environmental regulations by governmental authorities, provided that the foregoing do not materially interfere with the present use of the Purchased Assets; and (x) such other liens, imperfections in or failure of title, charges, easements, restrictions and encumbrances which do not materially detract from the value of or materially interfere with the present use of the Purchased Assets and, neither secure indebtedness, nor individually or in the aggregate have or would have a Material Adverse Effect or which will be discharged or released prior to or simultaneously with the Closing. (41) "Person" means an individual, a partnership, a joint venture, a corporation, a limited liability company, a limited liability partnership, a trust, an unincorporated organization or a governmental entity or any department or agency thereof. (42) "Real Property" means each parcel of real property owned in fee or by easement by Seller (or in which Seller holds an interest), including, buildings, structures and improvements located thereon, fixtures contained therein and appurtenances thereto and easements and other rights relating thereto and as more fully described on Schedule 5.8. (43) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (44) "Scheduled Capital Expenditures" means those capital expenditures listed on Schedule 1.1(a)(44). (45) "Scheduled Maintenance Expenditures" means those maintenance expenditures listed on Schedule 1.1(a)(45). (46) "SEC" means the Securities and Exchange Commission, or any successor thereto. (47) "Securities Act" means the Securities Act of 1933, as amended. (48) "Seller Agreements" means those agreements listed on Schedule 5.17(a) and the Collective Bargaining Agreements. (49) "Separation Document" means the document, to be negotiated in good faith by the Buyer and Seller within three (3) months from the date of this Agreement, which will delineate the Purchased Assets from Seller's other assets and which will be consistent with the separation document summary attached hereto as Exhibit C. (50) "Shoemaker Gas Turbine" means the gas turbine generating station which includes the personal property, tangible or intangible, constituting or used principally for generation purposes at, or otherwise for the operation of the Shoemaker Gas Turbine Generating Station, located in the Towns of Wawayanda and Wallkill, City of Middletown, Orange County, New York, including, but not limited to, the following assets: (a) all of the Seller's right, title and interest in, to and under the Leases described on Schedule 5.9(a) as associated with the Shoemaker Gas Turbine Generating Station; (b) all inventories of fuels, supplies spare parts and materials located at the Shoemaker Gas Turbine Generating Station on the Closing Date; (c) the machinery, equipment, vehicles, furniture and other personal property owned by Seller and located at the Shoemaker Gas Turbine Generating Station on the Closing Date, including, without limitation, the items of personal property included on Schedule 1.1(a)(50); (d) the turbines currently leased by Seller and located at the Shoemaker Gas Turbine Generating Station (the contract relating to this lease is listed on Schedule 5.17(a)); (e) the 69 kv transmission connections, described as being sold to the Buyer in the separation document summary in Exhibit C, between the Shoemaker Gas Turbine Generating Station and Seller's transmission system; (f) all contracts, agreements and personal property leases listed on Schedules 5.17(a) and 7.10(a), respectively, as being associated with Shoemaker Gas Turbine Generating Station; (g) the Environmental Permits and Permits listed on Schedules 5.12(a)(ii) and 5.19(a), respectively, as being associated with the Shoemaker Gas Turbine Generating Station; (h) the Emission Allowances relating to the Shoemaker Gas Turbine Generating Station; (i) all books, operating records, reports, engineering or design plans, specifications, drawings, procedures, software or tools used to process and report environmental data, safety and maintenance manuals and similar items of Seller relating specifically to the aforementioned assets. (j) copies of all filings made with regulatory agencies as, updated, relating to Seller's Year 2000 programs as such filings apply to the Shoemaker Gas Turbine Generating Station; (k) all unexpired, transferable warranties and guarantees from third parties with respect to the Shoemaker Gas Turbine Generating Station, as of the Closing Date; (l) the Intellectual Property relating to the Shoemaker Gas Turbine Generating Station (including Seller's goodwill therein and the rights of Seller in and to the name of Shoemaker Gas Turbine) and all rights, privileges, claims, causes of action, indemnification rights and options pertaining solely to the Shoemaker Gas Turbine or the Assumed Liabilities relating to the Shoemaker Gas Turbine, including, without limitation, those items listed on Schedule 1.1(a)(50)(l); (m) all assets acquired by Seller pursuant to Section 7.4; and (n) $200,000 in cash. (51) "Subsidiary" when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (52) "Tax" means any tax, charge, fee, levy, penalty or other assessment imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any income, gross receipts, license, stamp, occupation, environmental, excise, property, sales, transfer, payroll, unemployment, withholding, social security or any other tax of any kind whatsoever, including any interest, penalties or additions attributable thereto. (53) "Tax Return" means any return, report, information return declaration, claim for refund or other document (including any schedule or other related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (54) "Transition Agreement" means the Transition Power Sales Agreement between the Buyer, Southern Energy Bowline, L.L.C., Southern Energy Lovett, L.L.C. and Seller, dated as of the date of this Agreement. (55) "WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988. (b) Each of the following terms has the meaning specified in the Section set forth opposite such term: Term Section ---- ------- Adjustment Statement 3.2 ALTA 7.12 Assumed Liabilities 2.3 Benefit Plans 5.14 Buyer Preamble Buyer Indemnitee 9.1 Buyer Required Regulatory Approvals 6.3 Buyer's Easements 4.3 CEI 11.6 Closing 4.1 Closing Date 4.1 Collective Bargaining Agreements 7.10 Condition Fulfillment Date 8.4 Confidential Information 11.2 Defect of Title 7.12 Deferred Closing Date 8.4 Designated Representative 7.2 Direct Claim 9.2 Disclosing Party 11.2 DLJ 7.7 Environmental Insurance 7.15 Environmental Permits 5.12 EPA 7.16 ERISA Affiliate 2.4 ERISA Affiliate Plans 2.4 Estimated Purchase Price 4.2 Excluded Assets 2.2 Excluded Liabilities 2.4 Final Order 8.1 Hourly Employees 7.10 Indemnifiable Losses 9.1 Indemnification Floor 9.1 Indemnifying Party 9.1 Indemnitee 9.1 Inventory Adjustment Amount 3.2 ISO Approval 8.4 Leases 5.9 Leased Assets 7.4 Management Employees 7.10 Necessary Capital Expenditures 7.1 Necessary Maintenance Expenditures 7.1 NYSDEC 7.16 PAHs 7.16 Pension Benefit Plans 5.14 Permits 5.19 Property Interests 5.8 Purchase Price 3.1 Purchased Assets Preamble Recipient 11.2 Seller Preamble Seller Balance Sheet 5.5 Seller Indemnitee 9.1 Seller Required Regulatory Approvals 5.3 Seller's Easements 4.3 Termination Date 10.1 Third Party Claim 9.2 Title Company 7.13 ARTICLE II PURCHASE AND SALE 2.1. The Sale. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, at the Closing, Seller will sell, assign, convey, transfer and deliver to the Buyer, and the Buyer will purchase and acquire from Seller, free and clear of all Encumbrances (except for Permitted Encumbrances) all of Seller's right, title and interest in, to and under the real and personal property, tangible or intangible, owned by Seller and constituting the Purchased Assets. 2.2. Excluded Assets. Notwithstanding any provision herein to the contrary, the Purchased Assets shall not include the following (herein referred to as the "Excluded Assets"): (a) all cash, bank deposits, cash equivalents and accounts receivable (except for the cash specified in Section 1.1(a) (22) (o), 1.1(a) (25) (m) and 1.1(a) (50) (n) of this Agreement); (b) the name "Orange and Rockland Utilities, Inc.", "Orange and Rockland", "O&R", "ORU" or any related or similar trade names, trademarks, service marks or logos; (c) distribution, substation and communication facilities and related support equipment described in Schedule 2.2(c); (d) any refund, credit, penalty payment, adjustment or reconciliation (i) related to personal property or other Taxes (excluding Taxes relating to real property) paid prior to the Closing Date in respect of the Purchased Assets, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable, or (ii) arising under any of Seller Agreements and relating to a period before the Closing Date; (e) except to the extent specifically required by law, all personnel records relating to any employees of Seller; and (f) the rights and assets to be described in the Separation Document as not part of the Purchased Assets. 2.3. Assumed Liabilities. On the Closing Date, the Buyer shall deliver to Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the following liabilities and obligations of Seller, which relate to the Purchased Assets, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof; (a) all liabilities and obligations of Seller arising or accruing after the Closing Date under (i) Seller Agreements, the Environmental Permits, the Permits, real property leases, contracts and other agreements disclosed and assigned to the Buyer pursuant to this Agreement in accordance with the terms thereof, and (ii) the leases, contracts and other agreements entered into by Seller with respect to the Purchased Assets after the date hereof consistent with the terms of this Agreement; except in each case, to the extent such liabilities and obligations, but for a breach or default by Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default or in any event which after the giving of notice would constitute a default by Seller; (b) all liabilities and obligations associated with the Purchased Assets in respect of Taxes for which the Buyer is liable pursuant to Section 7.8; (c) any liabilities and obligations for which the Buyer has indemnified Seller pursuant to Section 9.1; (d) all liabilities to employees for which the Buyer is liable pursuant to Section 7.10, including the Collective Bargaining Agreements; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets prior to the Closing Date, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; and (iii) the investigation and/or remediation (whether or not such investigation or remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; provided, as to all of the above, that nothing set forth in this subsection 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (f) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or operation of the Purchased Assets; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or operation of the Purchased Assets; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets on or after the Closing Date, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Assets; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets; (v) the investigation and/or remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Assets, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Assets or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at or adjacent to the Purchased Assets; and (vi) the investigation and/or remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or operation of the Purchased Assets, at any off-site location; provided, that nothing set forth in this subsection shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (g) all liabilities and obligations of Seller with respect to the Purchased Assets under the agreements or consent orders set forth on Schedule 5.12(c); (h) all liabilities incurred by Seller with respect to maintenance and capital expenditures made with respect to the Purchased Assets by Seller which are requested by Buyer; (i) all liabilities or obligations relating to leases for the Purchased Assets; and (j) all other liabilities or obligations other than those liabilities and obligations noted in (a) through (i) above, exclusively relating to the Purchased Assets no matter when the events or occurrences giving rise to such liabilities or obligations took place, the value of which liabilities and obligations together with the liabilities and obligations relating to the "Purchased Asset" and "Purchased Assets" as defined in the Other Sales Agreements, in the aggregate, shall not exceed $3 million. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between Seller and the Buyer. 2.4. Excluded Liabilities. The Buyer shall not assume or be obligated to pay, perform or otherwise discharge the following liabilities (the "Excluded Liabilities"): (a) any liabilities or obligations of Seller in respect of any Excluded Assets or other assets of Seller which are not Purchased Assets; (b) any liabilities or obligations with respect to Taxes attributable to the Purchased Assets for taxable periods ending on or before the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.8(a); (c) any liabilities, obligations, or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances that were generated at the Purchased Assets, at any off- site location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at said off- site location occurred prior to the Closing Date, provided that for purposes of this Section, "off-site location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Assets have migrated, including, but not limited to, surface waters that have received waste water discharges from the Purchased Assets; (d) any liabilities, obligations or responsibilities arising after the Closing Date relating to (i) the transmission lines delineated in the Operating Easements or (ii) any Seller's operations on, or usage of, the Operating Easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (1) any violation or alleged violation of Environmental Law and (2) loss of life, injury to persons or property or damage to natural resources, except to the extent caused by Buyer; (e) any liabilities, obligations or responsibilities arising prior to or after the Closing Date relating to the easements provided Seller under the Operating Easement, including, without limitation: (i) the transmission lines or other facilities of Seller delineated in the Operating Easements or (ii) Seller's ownership rights, operations on, or usage of, the Operating Easements, including, without limitation, liabilities, obligations or responsibilities arising as a result of or in connection with (1) any violation or alleged violation of Environmental Law or Release of Hazardous Substances and (2) loss of life, injury to persons or property or damage to natural resources, except in the case of (1) or (2) to the extent caused by the Buyer; (f) any liabilities or obligations required to be accrued by Seller in accordance with generally accepted accounting principles and/or the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Assets other than any liability assumed by Buyer under Section 2.3 of this Agreement; (g) any liabilities or obligations with respect to liabilities relating to the Purchased Assets relating to any personal injury including bodily injury (including, but not limited to workers' compensation claims), discrimination, wrongful discharge, or unfair labor practice or similar claim or cause of action with respect to any act or occurrence arising prior to or on the Closing Date other than liabilities or obligations for injury to persons or loss of life assumed by the Buyer in Sections 2.3(e) and 2.3(f); (h) any fines or penalties imposed by a governmental agency or authority resulting from (A) an investigation or proceeding with respect to any act or occurrence arising prior to or on the Closing Date or (B) illegal acts, willful misconduct or negligence of Seller prior to or on the Closing Date; (i) any payment obligations of Seller for goods delivered or services rendered prior to the Closing; (j) any liabilities or obligations imposed upon, assumed or retained by Seller pursuant to the Continuing Site/Interconnection Agreement or any other Ancillary Agreement; (k) any liabilities, obligations or responsibilities relating to any deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all welfare, severance, stock-based, bonus and other employee benefit or fringe benefit plans, programs and arrangements, whether written or oral, maintained or with respect to which contributions have been in the last five (5) years or are made by Seller and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with Seller under Section 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") or to which Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by Seller or any ERISA Affiliate, including without limitation, any liability (A) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (B) with respect to non- compliance with the continuation requirements of COBRA; (C) with respect to any non-compliance with ERISA, the Code, or any other applicable laws; (D) with respect to any suit, proceeding or claim which is brought against Seller, any ERISA Affiliate Plan, or any fiduciary or former fiduciary of any such ERISA Affiliate Plan; (E) relating to a multiemployer plan; or (F) for any claim or suit for benefits accrued under an ERISA Affiliate Plan prior to Closing; and (l) any liabilities, obligations or responsibilities relating to the employment or termination of employment, by Seller of any individual (including, but not limited to, any employee of Seller) attributable to any actions or inactions by Seller prior to the Closing Date. ARTICLE III PURCHASE PRICE 3.1. Purchase Price. The purchase price for the Purchased Assets shall be an amount equal to the sum of (i) $20,440,000, (ii) the Estimated Inventory Adjustment Amount, (iii) the Inventory Adjustment Amount and (iv) any amounts paid by Seller to acquire title to Leased Assets pursuant to Section 7.4 (the "Purchase Price"). 3.2. Purchase Price Adjustment. (a) Within sixty (60) days after the Closing, Seller shall prepare and deliver to the Buyer a statement (the "Adjustment Statement") which sets forth: an amount equal to (A) the weighted average value for the twenty (20) consecutive days prior to the Closing Date of all JP4 fuel inventory to be used at or in connection with the Purchased Assets as determined by using the price of fuel in the Journal of Commerce as of the Closing Date, or if no price is available for such date, as of the most recent date such price is available prior to the Closing Date, minus (B) the Estimated Inventory Adjustment Amount (such difference is referred to as the "Inventory Adjustment Amount"). The Adjustment Statement shall be prepared using the same generally accepted accounting principles, policies and methods as Seller has historically used in connection with the calculation of the items reflected on the Adjustment Statement. The Buyer and Seller agree to cooperate with Seller in connection with the preparation of the Adjustment Statement and related information, and each shall provide to the other such books, records and information as may be reasonably requested from time to time. (b) The Buyer may dispute the Inventory Adjustment Amount; provided, however, that the Buyer shall notify Seller in writing of the disputed amount, and the basis of such dispute, within thirty (30) days of the Buyer's receipt of the Adjustment Statement. In the event of a dispute with respect to the Inventory Adjustment Amount, the Buyer and Seller shall attempt to reconcile their differences and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties. If the Buyer and Seller are unable to reach a resolution of such differences within thirty (30) days of receipt of the Buyer's written notice of dispute to Seller, the Buyer and Seller shall submit the amounts remaining in dispute for determination and resolution to the Independent Accounting Firm, which shall be instructed to determine and report to the parties, within thirty (30) days after such submission, upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the parties hereto with respect to the amounts disputed. The fees and disbursements of the Independent Accounting Firm shall be allocated between the Buyer and Seller so that the Buyer's share of such fees and disbursements shall be in the same proportion that the aggregate amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully disputed by the Buyer (as finally determined by the Independent Accounting Firm) bears to the total amount of such remaining disputed amounts so submitted by the Buyer to the Independent Accounting Firm. (c) If the Inventory Adjustment Amount is positive, within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, the Buyer shall pay Seller all undisputed portions of the Inventory Adjustment Amount. If the Inventory Adjustment Amount is negative, within ten (10) Business Days after the Buyer's receipt of the Adjustment Statement, Seller shall pay the Buyer all undisputed portions of the Inventory Adjustment Amount. If there is a dispute with respect to any amount on the Adjustment Statement, within five (5) Business Days after the final determination of such disputed amounts on the Adjustment Statement, the Buyer shall pay Seller an amount equal to the disputed portion of the Inventory Adjustment Amount as finally determined to be payable with respect to the Adjustment Statement; provided, however, that if such amount shall be less than zero, Seller will pay to the Buyer the amount by which such amount is less than zero. All payments made pursuant to this Section 3.2(c) shall be paid together with interest thereon for the period commencing on the Closing Date through the date of payment, calculated at the prime rate of The Chase Manhattan Bank in effect on the Closing Date, in cash by federal or other wire transfer of immediately available funds. 3.3. Allocation of Purchase Price. The Buyer shall prepare an allocation of the Purchase Price consistent with Section 1060 of the Code and the Treasury Regulations thereunder within one hundred eighty (180) days of the date of this Agreement but in no event less than forty-five (45) days prior to the Closing and submit it to Seller. Seller may dispute the allocation of the Purchase Price; provided, however, that Seller shall notify the Buyer in writing of the disputed amount, and the basis of such dispute, and follow the procedures relating to a dispute described in Section 3.2(b) above. The Buyer and Seller agree to file Internal Revenue Service Form 8594, and all federal, state, local and foreign Tax Returns and Income Tax Returns, in accordance with such agreed allocation. Each of the Buyer and Seller shall report the transactions contemplated by the Agreement for federal Income Tax and all other Tax purposes in a manner consistent with the allocation determined pursuant to this Section 3.3. The Buyer and Seller agree to provide the other promptly with any other information required to complete Form 8594. Each of the Buyer and Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price. 3.4. Proration. (a) The Buyer and Seller agree that all of the items normally prorated, including those listed below, relating to the business and operation of the Purchased Assets will be prorated as of the Closing Date, with Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) personal property, real estate, occupancy and any other Taxes (excluding Income Taxes), assessments and other charges, if any, on or with respect to the ownership, use or business and operation of the Purchased Assets; (ii) rent, Taxes (excluding Income Taxes) and other items payable by or to Seller under any of Seller Agreements to be assigned to and assumed by the Buyer hereunder; (iii) any permit, license or registration fees with respect to any Environmental Permit or other Permit; and (iv) sewer rents and charges for water, telephone, electricity and other utilities. (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which such actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 3.4. ARTICLE IV THE CLOSING 4.1. Time and Place of Closing. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00 A.M. (local time) on April 30, 1999; or at such other place or later date and time as the parties may agree. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2. Payment of Purchase Price. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Assets, the Buyer will pay or cause to be paid to Seller at the Closing an amount (the "Estimated Purchase Price") in United States dollars, equal to the sum of (i) $20,440,000, (ii) the Estimated Inventory Adjustment Amount for the Closing, and (iii) any amounts paid to acquire title to Leased Assets pursuant to Section 7.4 hereof, by wire transfer of immediately available funds or by such other means as are agreed to by Seller and the Buyer. 4.3. Deliveries by Seller. At the Closing, Seller will deliver the following to the Buyer: (a) The Bill of Sale, duly executed by Seller for the personal property included in the Purchased Assets; (b) The executed consents to transfer the Seller Agreements, the Environmental Permits and the Permits, to the extent specifically required hereunder; (c) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Seller; (d) The certificates and the opinions of counsel contemplated by Sections 8.2(c), (e), (f) and (h); (e) One or more bargain and sale deeds of conveyance in statutory form, with covenant against grantor's acts, transferring Seller's interest in the Property Interests to the Buyer, duly executed and acknowledged by Seller and in recordable form substantially in the form of Exhibit D hereto; (f) One or more easements to the extent necessary to evidence the right of Buyer to use the real property of Seller (the "Buyer's Easements") that comprise part of the Excluded Assets, duly executed and acknowledged by Seller and in recordable form, each substantially in the form of Exhibit E hereto; (g) The Assignment of Leases in the form attached hereto as Exhibit F assigning to Buyer all of Seller's right, title and interest as lessor (or lessee as the case may be) under the leases; (h) Copies of the resolutions adopted by the board of directors of Seller, certified by the Secretary of Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement, the Bill of Sale and other closing documents described in this Agreement to which Seller is a party, and the performance by Seller of its obligations hereunder and thereunder; (i) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Assets in accordance with this Agreement and where necessary or desirable, in recordable form; (j) A certification of non-foreign status in a form which complies with Section 1445 of the Code and the regulations thereunder; provided, however, that if Seller shall fail to deliver such certification, the Buyer shall withhold at the Closing and pay over to the appropriate taxing authority any amount equal to ten (10) percent of the total Amount Realized (as defined under Section 1445 of the Code); (k) $600,000 by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; and (l) Such other agreements, documents, instruments and writings as are required to be delivered by Seller at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith. 4.4. Deliveries by Buyer. At the Closing, the Buyer will deliver the following to Seller: (a) The Estimated Purchase Price by wire transfer of immediately available funds or by such other means as are agreed to by Seller and the Buyer; (b) Each Ancillary Agreement required to be delivered under this Agreement, duly executed by the Buyer; (c) The certificate and opinion of counsel contemplated by Sections 8.3(c) and (d); (d) The Instrument of Assumption, duly executed by the Buyer; (e) All such other instruments of assumption as shall, in the reasonable opinion of Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (f) One or more easements to the extent necessary for Seller to continue and maintain their transmission and distribution business, in favor of the Seller (the "Seller's Easements") with respect to Real Property conveyed to Buyer, duly executed and acknowledged by Buyer, each substantially in the form of Exhibit E hereto, and Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.8; (g) Copies of the resolutions adopted by the Members or Managers or similar governing body of the Buyer, certified by a Member of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its respective obligations hereunder and thereunder; and (h) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to the Buyer as follows: 5.1. Organization; Qualification. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. Seller is duly qualified to do business as a foreign corporation and is in good standing under the laws of each foreign jurisdiction in which it operates the Purchased Assets and such foreign jurisdiction requires it to be so qualified. Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and By-Laws as currently in effect. 5.2. Authority Relative to this Agreement. Seller has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Seller and no other corporate proceedings on the part of Seller or its shareholders are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Seller, and assuming that this Agreement constitutes a valid and binding agreement of the Buyer, subject to the receipt of Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitutes a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3. Consents and Approvals; No Violation. (a) Except as set forth in Schedule 5.3(a), and other than obtaining Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement by Seller nor performance by Seller of its obligations under this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-Laws of Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or would not prohibit or restrain the execution, delivery or performance of this Agreement or the Ancillary Agreements, or the consummation of the transactions contemplated hereby or thereby in any material respect or (y) for those requirements which become applicable to Seller as a result of the specific regulatory status of the Buyer (or any of its affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which Seller, or any of its subsidiaries, is a party or by which Seller or any of its subsidiaries, or any of the Purchased Assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, individually or in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, law, decree, statute, rule or regulation applicable to Seller, or any of its assets, which violation would, individually or in the aggregate, have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) (A) notice by Seller to, and an order by, the NYPSC approving the transactions contemplated by this Agreement or the Ancillary Agreements, (B) notice by Seller to, and an order by, the NJBPU approving the transactions contemplated by this Agreement or the Ancillary Agreements and (C) notice by Seller to, and an order by, the PAPUC approving the transactions contemplated by this Agreement or the Ancillary Agreements, (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) are collectively referred to as "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by Seller of the transactions contemplated hereby or by the Ancillary Agreements, other than such declarations, filings, registrations, notices, authorizations consents or approvals which, if not obtained or made, will not, in the aggregate, have a Material Adverse Effect and other than Permits and Environmental Permits. 5.4. Reports. Since January 1, 1996, Seller pursuant to the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act, has filed or caused to be filed with the SEC, the applicable state or local utility commissions or regulatory bodies, or the FERC, as the case may be, all material forms, statements, reports and documents (including all exhibits, amendments and supplements thereto) required to be filed by them with respect to the business and operations of Seller as it relates to the Purchased Assets under each of the Securities Act, the Exchange Act, the applicable State public utility laws, the Federal Power Act and the Holding Company Act and the respective rules and regulations thereunder, all of which complied in all material respects with all applicable requirements of the appropriate act and the rules and regulations thereunder in effect on the date each such report was filed. 5.5. Financial Statements. Seller has previously furnished to the Buyer (i) audited consolidated balance sheets of Seller as of December 31, 1997, and (ii) the related audited consolidated statements of income and retained earnings and changes in financial position of Seller for the fiscal year then ended, together with the respective reports thereon of Arthur Andersen LLP. The consolidated balance sheet of Seller as of December 31, 1997 is referred to as the "Seller Balance Sheet." Each of the balance sheets included in the financial statements referred to in this Section 5.5 (including the related notes thereto) presents fairly the financial position of Seller as of their respective dates, and the other related statements included therein (including the related notes thereto) present fairly the results of operations and changes in financial position for the periods then ended, all in conformity with generally accepted accounting principles as applicable to a regulated utility applied on a consistent basis, except as otherwise noted therein. 5.6. Undisclosed Liabilities. Except as set forth in Schedule 5.6, to the Seller's knowledge, the Seller has no liability or obligation relating to the business or operations of the Purchased Assets, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, after the date of Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Assets. 5.7. Absence of Certain Changes or Events. Except (i) as set forth in Schedule 5.7, or in the reports, schedules, registration statements and definitive proxy statements filed by Seller with the SEC and (ii) as otherwise contemplated by this Agreement, to the Seller's knowledge, since the date of Seller Balance Sheet there has not been: (a) any Material Adverse Effect; (b) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (c) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing or capital financing) by Seller, which is material to the business or operations of the Purchased Assets, except agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (d) any change by Seller, with respect to the Purchased Assets, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.8. Title. Set forth in Schedule 5.8 is a true and complete list of all real property which is part of or material to the business or operations of the Purchased Assets (the "Real Property") and other real property interests which are a part of or material to the business or operations of the Purchased Assets (together with the Real Property, the "Property Interests"). The Seller has leasehold or other contractual interests in all Purchased Assets identified in subsections (b), (g), (l) and (n) of Section 1.1(a)(22) and, as of the date of this Agreement, the Purchased Asset identified in subsection (e) of Section 1.1(a)(22); subsections (e), (h), (j) and (l) of Section 1.1(a)(25) and subsections (a), (f), (k) and (m) of Section 1.1(a)(50) and, as of the date of this Agreement, the Purchased Asset identified in subsection (d) of Section 1.1(a) (50); and subject only to Permitted Encumbrances and the Leases: (i) good and marketable record title to the real property and the Buyer's Easements and (ii) good and valid title to all Purchased Assets identified in subsections (c), (d), (f), (h), (i), (j), (k) and (m) of Section 1.1(a)(22); subsections (b), (c), (d), (f), (g), (i) and (k) of Section 1.1(a)(25) and subsections (b), (c), (e), (g), (h), (i), (j) and (l) of Section 1.1(a)(50). As of the Closing Date, the Seller will have good and valid title to the Purchased Assets identified in subsection (e) of Section 1.1(a)(22) and subsection (d) of Section 1.1(a)(50). At Closing, Seller will have the cash available to the amounts referred to in Sections 1.1(a) (22) (o), 1.1(a) (25) (m) and 1.1(a) (50) (n) of this Agreement. 5.9. Leasehold Interests. Schedule 5.9(a) lists, all Real Property leases or subleases (the "Leases") relating to the Purchased Assets under which Seller is a lessee, sublessee, lessor or sublessor and which are to be assigned to, and assumed by, the Buyer on the Closing Date. Except as set forth in Schedule 5.9(b), the Leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing material defaults by Seller thereunder; and no event has occurred which (whether with or without notice, lapse of time or both) would constitute a material default thereunder. Seller has a valid and subsisting leasehold estate in and the right to quiet enjoyment of the Leases under which Seller is a lessee or sublessee for the full term of such Leases which leasehold interests are unencumbered other than by Permitted Encumbrances, and Seller has delivered to Buyer true and complete copies of all Leases. 5.10. Improvements. Except as set for forth in Schedule 5.10(a), Seller has not received any written notices from any governmental authority stating or alleging that any improvements with respect to the Purchased Assets have not been constructed in compliance with applicable law. Except as set for forth in Schedule 5.10(b), no written notice has been received by Seller from any governmental authority requiring or advising as to the need for any repair, alteration, restoration or improvement in connection with the Purchased Assets. 5.11. Insurance. Except as set forth in Schedule 5.11(a), all material policies of fire, liability, worker's compensation and other forms of insurance purchased or held by and insuring or relating to the Purchased Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.11(b), Seller has not been refused any insurance with respect to the Purchased Assets nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last five (5) years nor has Seller received written notice from any insurer with respect to any Real Property or Lease of defects or inadequacies with respect thereto or the improvements located thereon that would materially adversely affect the insurability of same or cause the imposition of extraordinary premiums therefor. 5.12. Environmental Matters. (a) Except as disclosed in Schedule 5.12(a)(i), to the Seller's knowledge, Seller holds, and is in compliance with, all permits, licenses, certificates and governmental authorizations ("Environmental Permits") required for the Seller to operate the Purchased Assets under applicable Environmental Laws, and Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Assets except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Schedule 5.12(a)(ii) sets forth all Environmental Permits relating to the ownership or operation of the Purchased Assets. (b) Except as disclosed in Schedule 5.12(b), Seller has not received any written request for information, or been notified that it is a potentially responsible party, under CERCLA or any similar State law with respect to any on-site location related to the Purchased Assets, and no investigation and/or remediation is being conducted or is pending at the Purchased Assets (other than investigations or remediation conducted by or on behalf of Seller or Buyer in connection with this transaction), except for such liability under such laws or investigations or remediation as would not be reasonably likely to have a Material Adverse Effect. (c) With respect to the Purchased Assets, no action, claim, investigation or other proceeding relating to any Environmental Law is pending or to Seller's knowledge, threatened, and the Seller has not entered into or agreed to any consent decree or order, and is not subject to any judgment, decree, or administrative or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or administrative or judicial orders, actions, claims, investigations or proceedings that (i) would not be reasonably likely to have a Material Adverse Effect, (ii) appear on Schedule 5.12(c), or (iii) relate to off-site disposal locations. (d) All written reports of audits and studies performed by or on behalf of Seller, and in the possession of the Seller, which concern Releases of Hazardous Substances at, on, in, or under the Purchased Assets or compliance of Purchased Assets with Environmental Laws, conducted within the last two (2) years, are listed in Schedule 5.12(d) and have been provided to Buyer. (e) The representations and warranties made in this Section 5.12 are Seller's exclusive representations and warranties relating to environmental matters. 5.13. Labor Matters. Schedule 7.10(a) lists and Seller has previously delivered to the Buyer true and correct copies of all labor union, Collective Bargaining Agreements and other labor agreements relating to the Purchased Assets to which Seller is a party or subject. With respect to the Purchased Assets, except to the extent set forth in Schedule 5.13 and except for such matters as will not have a Material Adverse Effect, to the Seller's knowledge: (a) the Seller is in compliance with all applicable laws respecting employment and employment practices, occupational health and safety, and wages and hours; (b) Seller has not received written notice of any unfair labor practice complaint against it pending before the National Labor Relations Board; (c) there is no labor strike, slowdown or stoppage actually pending or threatened against or affecting Seller; (d) Seller has not received notice that any representation petition respecting its employees has been filed with the National Labor Relations Board; (e) no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending against Seller; and (f) Seller has not experienced any primary work stoppage since at least December 31, 1994. 5.14. ERISA. (a) Schedule 5.14(a) lists all deferred compensation, pension, profit-sharing and retirement plans, including multiemployer plans, and all welfare, severance, stock-based, bonus and other employee benefit or fringe benefit plans, programs and arrangements, whether written or oral, maintained or with respect to which contributions have been in the last five (5) years or are made by the Seller in respect of employees who are employed in connection with the Purchased Assets (such plans, programs and arrangements, collectively, the "Benefit Plans"). To the Seller's knowledge, each Benefit Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable laws. Accurate and complete copies of all such Benefit Plans and their summary descriptions, including multiemployer plans, have been made available to the Buyer. (b) Except as set forth in Schedule 5.14(b)(i), with respect to employees at the Purchased Assets, to the Seller's knowledge, the Seller and the ERISA Affiliates have fulfilled their respective obligations under the minimum funding requirements of Section 302 of ERISA, and Section 412 of the Code, with respect to each Benefit Plan that is a pension benefit plan as defined in Section 3(2) of ERISA (each, a "Pension Benefit Plan"). To the Seller's knowledge, neither the Seller nor any ERISA Affiliate has incurred any liability to the Pension Benefit Guaranty Corporation in connection with any Pension Benefit Plan which is subject to Title IV of ERISA, including any withdrawal liability, nor is there any reportable event (as defined in Section 4043 of ERISA), except as set forth in Schedule 5.14(b)(ii). Except as set forth in Schedule 5.14(b)(iii), the Internal Revenue Service has issued a letter for each Pension Benefit Plan which is intended to be qualified under Section 401(a) of the Code, determining that such plan is exempt from United States Federal Income Tax under Sections 401(a) and 501(a) of the Code, and to the Sellers's knowledge, there has been no occurrence since the date of any such determination letter which has adversely affected such qualification, and no withdrawal liability has been incurred by or asserted and none is anticipated against Seller with respect to any Pension Benefit Plan which is a "multiemployer plan" (as defined in Section 3(37) of ERISA). (c) To the Seller's knowledge, neither the Seller nor any ERISA Affiliate has engaged in any transaction within the meaning of Section 4069(b) or Section 4212(c) of ERISA. Except as set forth in Schedule 5.14(c), no Benefit Plan is a multi-employer plan. (d) To the extent the Seller maintained or maintains a "group health plan" within the meaning of Section 5000(b)(1) of the Code, to the Seller's knowledge, the Seller has materially complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder. 5.15. Real Property Encumbrances. Schedule 5.15 lists all real property encumbrances affecting Seller's Real Property including matters contained in deeds, easements and options. True and correct copies of all current surveys, abstracts, title opinions and policies of title insurance currently in force with respect to such Real Property have been delivered by Seller to the Buyer. None of the Permitted Encumbrances materially adversely affect the existing use of the Real Property. 5.16. Condemnation. Neither the whole nor any part of the Real Property or any other real property or rights leased, used or occupied by Seller in connection with the ownership or operation of the Purchased Assets is subject to any pending suit for condemnation or other taking by any public authority, and, to the knowledge of Seller, no such condemnation or other taking is threatened or contemplated. 5.17. Certain Contracts and Arrangements. (a) Except (i) as listed in Schedule 5.17(a), (ii) for contracts, agreements, personal property leases, commitments, understandings or instruments which will expire prior to the Closing Date, (iii) for agreements with suppliers entered into in the ordinary course of business (including contracts entered into in connection with the Scheduled Capital Expenditures and the Scheduled Maintenance Expenditures), and (iv) for contracts, agreements, personal property leases, commitments, understandings or instruments with a value less than $200,000 or with annual or aggregate payments less than $200,000, Seller is not a party to any written contract, agreement, personal property lease, commitment, understanding or instrument which is material to the business or operations of the Purchased Assets. (b) Except as disclosed in Schedule 5.17(b), each Seller Agreement listed on Schedule 5.17(a) constitutes a valid and binding obligation of the parties thereto and is in full force and effect and may be transferred to the Buyer pursuant to this Agreement and will continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder. (c) Except as set forth in Schedule 5.17(c), there is not, under any of Seller Agreements listed on Schedule 5.17(a), any default or event which, with notice or lapse of time or both, would constitute a default on the part of any party thereto, except such events of default and other events as to which requisite waivers or consents have been obtained or which would not, individually or in the aggregate, have a Material Adverse Effect. 5.18. Legal Proceedings, etc. Except as set forth in Schedule 5.18 or in any filing made by Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending or investigations pending, or to Seller's knowledge, threatened against Seller relating to the Purchased Assets before any court, arbitrator, governmental or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect or would prohibit or restrain the execution, delivery or performance of this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby in any material respect. Except as set forth in Schedule 5.18, Seller is not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, governmental or regulatory authority relating to the Purchased Assets which would have a Material Adverse Effect. 5.19. Permits. Seller has all material permits, licenses, franchises and other governmental authorizations, consents and approvals, other than with respect to Environmental Laws (collectively, "Permits") as set forth in Schedule 5.19(a), necessary to own or operate the Purchased Assets as presently owned or operated, except where the failure to have such Permits would not have a Material Adverse Effect. Except as set forth in Schedule 5.19(b), with respect to the Purchased Assets, Seller has not received any written notification that it is in violation of any of such Permits, or any law, statute, order, rule, regulation, ordinance or judgment of any governmental or regulatory body or authority applicable to it, except for notifications of violations which would not, individually or in the aggregate, have a Material Adverse Effect. Seller is in compliance with all Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of any governmental or regulatory body or authority applicable to Purchased Assets, except for violations which, in the aggregate, would not have a Material Adverse Effect. 5.20. Regulation as a Utility. The Seller and certain of its subsidiaries are regulated as public utilities in the States of New York, New Jersey and Pennsylvania as set forth on Schedule 5.20(a), and in no other state. Except as set forth on Schedule 5.20(b), Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 5.21. Taxes. Except as set forth in Schedule 5.21, (a) no notice of deficiency or assessment has been received from any taxing authority with respect to Seller's liabilities for Taxes in respect of the Purchased Assets, which have not been fully paid or finally settled, and any such deficiency shown in Schedule 5.21 is being contested in good faith through appropriate proceedings; (b) there are no outstanding agreements or waivers extending the applicable statutory periods of limitations for Taxes associated with the Purchased Assets for any period; (c) there are no rulings or closing agreements executed with any taxing authority relating to the Purchased Assets that will be binding upon Buyer after the Closing; (d) none of the Purchased Assets is property that is required to be treated as being owned by any other person pursuant to the so-called safe harbor lease provisions of former Section 168(f)(8) of the Code, or "tax-exempt use" property within the meaning of Section 168(h) of the Code; and (e) there are no powers of attorney in effect relating to Taxes relating to the Purchased Assets for any Post-Closing period. 5.22. Intellectual Property. The Seller has all right, title and interest in or valid and binding rights under contract to use the Intellectual Property relating to the Purchased Assets. Seller has not received notice that it is infringing any Intellectual Property of any other Person in connection with the operation or business of the Purchased Assets, no claim is pending or has been made to such effect that has not been resolved and Seller is not infringing any Intellectual Property of any other Person the effect of which, individually or in the aggregate, would have Material Adverse Effect. 5.23. Year 2000 Readiness. Seller has informed Buyer of its analysis of, the status of development of contingency plans for, and forecasted expenditures with respect to Year 2000 readiness of material computer software and computer firmware comprising the Purchased Assets, as such analysis, contingency plan development and forecast of expenditures exist on the date hereof. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER The Buyer represents and warrants to Seller as follows: 6.1. Organization. The Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Buyer has heretofore delivered to Seller complete and correct copies of its Certificate of Formation and Limited Liability Company Agreement (or other similar governing documents), as currently in effect. 6.2. Authority Relative to this Agreement. The Buyer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Managers or Members of the Buyer and the Board of Directors of both Southern Energy, Inc. and The Southern Company and no other company proceedings on the part of the Buyer or such Affiliates are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Buyer, and assuming that this Agreement constitutes a valid and binding agreement of Seller, subject to the receipt of the Buyer Required Regulatory Approvals and Seller Required Regulatory Approvals, constitutes a valid and binding agreement of the Buyer, enforceable against the Buyer in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3. Consents and Approvals; No Violation. (a) Except as set forth in Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement by the Buyer nor the purchase by the Buyer of the Purchased Assets pursuant to this Agreement will (i) conflict with or result in any breach of any provision of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(a) and except for the filings by the Buyer and Seller required by the HSR Act (the filings and approvals referred to in Schedule 6.3(a) and with respect to the HSR Act are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby. 6.4. Operating Easements. Buyer shall grant Operating Easements to Seller as agreed to pursuant to the procedures set forth in the Continuing Site/Interconnection Agreement. 6.5. Regulation as a Utility. On the Closing Date, the Buyer will be an exempt wholesale generator under the Holding Company Act, although it is a subsidiary of a registered public utility holding company under the Holding Company Act. On the Closing Date, the Buyer also will be a public utility under the Federal Power Act. Except as set forth in Schedule 6.5, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.6. Availability of Funds. The Buyer has sufficient funds available to it or will receive binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII COVENANTS OF THE PARTIES 7.1. Conduct of Business Relating to the Purchased Assets. Except as described in Schedule 7.1, during the period from the date of this Agreement to the Closing Date, Seller will operate and maintain the Purchased Assets according to its ordinary and usual course of business consistent with Good Utility Practice. Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), Seller will not with respect to the Purchased Assets: (a) make any material change in the operations of the Purchased Assets (including, without limitation, the levels of fuel inventory and materials and supplies customarily maintained by Seller other than consistent with past practice); (b) except for Scheduled Capital Expenditures, make any capital expenditures with respect to the Purchased Assets or enter into any contract or commitment therefor, except that (i) Seller shall make any capital expenditures requested by the Buyer, provided that the Buyer will reimburse Seller for such capital expenditures at least five (5) Business Days prior to the date payment for such expenditure is due, and (ii) Seller shall make any capital expenditures deemed necessary by Seller in accordance with Good Utility Practices ("Necessary Capital Expenditures") at Seller's cost and expense, provided, however, that if the Buyer requests that Seller make enhancements/upgrades with a cost in excess of the cost of any Necessary Capital Expenditures, the Buyer shall reimburse Seller for the cost of such enhancements/upgrades to the extent the cost of such enhancement/upgrade exceeds the cost of the Necessary Capital Expenditure at the time such enhancement/upgrade is performed. (c) sell, lease (as lessor), transfer or otherwise dispose of, any of the Purchased Assets, other than assets used, consumed or replaced in the ordinary course of business consistent with Good Utility Practice and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Assets other than Permitted Encumbrances in the ordinary course of business; (d) except for Scheduled Maintenance Expenditures, make any maintenance expenditures, except that (i) Seller shall make any maintenance expenditures requested by the Buyer, provided that the Buyer will reimburse Seller for such maintenance expenditures at least five (5) Business Days prior to the date payment for such expenditure is due, and (ii) Seller shall make any maintenance expenditures deemed necessary by Seller in accordance with Good Utility Practice ("Necessary Maintenance Expenditures") at Seller's cost and expense, provided, however, that if the Buyer requests that Seller make enhancements/upgrades with a cost in excess of the cost of any Necessary Maintenance Expenditures, the Buyer shall reimburse Seller for the cost of such enhancements/ upgrades to the extent the cost of such enhancement/upgrade exceeds the cost of the Necessary Maintenance Expenditure at the time such enhancement/upgrade is performed; (e) amend or terminate prior to the expiration date, or waive any material term or give consent to any material request with respect to any of Seller's Agreements, Permits or Environmental Permits, except to the extent that such amendment, termination, waiver or consent (i) will not have a material impact on operations of the Purchased Assets, including the cost of said operations or (ii) is required by applicable law, including applicable Environmental Law; (f) enter into agreements for the purchase or sale of fuel (whether commodity or transportation) other than agreements entered into in the ordinary course of business, for which commitments to purchase or sell under such agreement would not exceed a one week time period; (g) enter into any power sales commitments, other than short term contracts under which power sales commitment(s) would not exceed a two week time period; (h) sell, lease or otherwise dispose of Emission Allowances except to the extent necessary to operate the Purchased Assets in accordance with this Section 7.1; (i) enter into any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (h); or (j) make any new, or change any current, election with respect to Taxes affecting the Purchased Assets. 7.2. Access to Information. (a) Between the date of this Agreement and the Closing Date, Seller will, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to its managerial personnel and to all books, records, plants, offices and other facilities and properties constituting the Purchased Assets to which the Buyer is permitted access by law, (ii) permit the Buyer to make such reasonable inspections thereof as the Buyer may reasonably request, including conducting environmental sampling at, on and underneath the Purchased Assets and performing compliance audits at the Purchased Assets, if Buyer reasonably deems such sampling necessary after reviewing further information which becomes available after the date hereof, so long as Seller provides its consent to such sampling, which consent shall not be unreasonably withheld, (iii) cause its officers, engineers, operations and maintenance personnel and advisors to furnish the Buyer with such financial and operating data, Tax Returns (other than Income Tax Returns) and other information with respect to the Purchased Assets as the Buyer may from time to time reasonably request and assist Buyer in such inspections, (iv) cause its officers and advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by it with or from the SEC, NYPSC, NJBPU, PAPUC, FERC, ISO or other governmental authority with respect to the Purchased Assets; provided, however, that (A) any such investigation shall be conducted in such a manner as not to interfere unreasonably with the operation of the Purchased Assets, (B) Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) Seller need not supply the Buyer with any information which Seller is under a legal obligation not to supply, provided, however, that Seller shall have used commercially reasonable efforts to have such obligations waived. Notwithstanding anything in this Section 7.2 to the contrary, (i) Seller will furnish or provide such access to medical records only as is permitted by law, and (ii) Seller will furnish or provide such access to personnel records only to the extent that the employee to which the personnel record relates has given his/her consent to the Seller. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of Section 11.2 of this Agreement shall be treated as Confidential Information. (c) Commencing February 1, 1999, the Buyer shall have the right to physically locate one designated representative (the "Designated Representative") of the Buyer at an office or in workspace at the Seller's corporate offices to observe the operations of the Gas Turbines and the Hydroelectric Assets, as well as the operations of the Lovett Generating Station, and the Bowline Generating Stations, pursuant to the Lovett Generating Sales Agreement and the Bowline Generating Stations Sales Agreement entered into the date hereof between the Seller and the Buyer and the Seller, Consolidated Edison Company of New York, Inc. and the Buyer, respectively, provided, however, that the Buyer shall not unreasonably interfere with the Seller's use of the Purchased Assets. The Seller shall coordinate site visits and provide the Designated Representative during such period prior to the Closing access to Seller's managerial personnel. The Designated Representative shall coordinate the Buyer's rights to access under Section 7.2(a) hereof during such period prior to the Closing. (d) For a period of seven (7) years after the Closing Date, Seller and its representatives shall have reasonable access to (i) information on employees covered by Seller's Management Employee Transition Program and (ii) all of the books and records of the Purchased Assets, as the case may be, transferred to the Buyer hereunder to the extent that such access (A) may reasonably be required by Seller in connection with matters relating to or affected by the operation of the Purchased Assets prior to the Closing Date and (B) is not otherwise prohibited by law. Such access shall be afforded by the Buyer upon receipt of reasonable advance written notice and during normal business hours. Seller shall be responsible for any costs or expenses incurred by them pursuant to this Section 7.2(d). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such seven (7) year period, the Buyer shall, prior to such disposition, give Seller a reasonable opportunity at Seller's expense, to segregate and remove such books and records as Seller may select. Any information provided by Buyer to Seller pursuant to this Section 7.2(d) shall be deemed Confidential Information. 7.3. Expenses. Except to the extent specifically provided herein, whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. 7.4. Further Assurances. (a) Subject to the terms and conditions of this Agreement, each of the parties hereto will use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Assets pursuant to this Agreement, including without limitation, the use of Seller's and the Buyer's commercially reasonable efforts to obtain all Permits and Environmental Permits necessary for the Buyer to operate the Purchased Assets. Neither of the Parties shall, without the prior written consent of the other Party, take or fail to take any action which might reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Agreement or the Ancillary Agreements. From time to time after the date hereof, without further consideration, Seller will, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Assets. From time to time after the date hereof, the Buyer will, at its own expense, execute and deliver such documents to Seller as Seller may reasonably request in order to more effectively consummate the sale of the Purchased Assets pursuant to this Agreement. To the extent that any personal property lease, relating to any assets ("Leased Assets") which are principally used by Seller for generation purposes at the Purchased Assets, cannot be assigned to the Buyer, Seller will use its commercially reasonable efforts to acquire title to such Leased Assets and to include them in the Purchased Assets before the Closing Date unless Buyer directs Seller in writing not to acquire any such Leased Asset. Seller's documented and reasonable costs associated with acquiring title to such Leased Assets shall be paid by the Buyer as part of the Purchase Price, except for any and all costs of acquiring the title to the leased Gas Turbines as described in Section 7.17. Schedule 7.4 lists all of the Leased Assets. (b) To the extent that any Seller's rights under any guaranties, warranties and indemnification applicable to the Purchased Assets or the Assumed Liabilities are nontransferable or nonassignable, Seller shall use its commercially reasonable efforts to provide to Buyer the benefits thereof in some other manner upon the request of Buyer. 7.5. Public Statements. The parties shall consult with each other prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and shall not issue any such public announcement, statement or other disclosure prior to such consultation, except as may be required by law or stock exchange rules or regulations and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent that such public announcements, statements or other disclosures do not violate Section 11.2 of this Agreement. 7.6. Consents and Approvals. (a) Seller and the Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. Buyer shall bear the cost of all filing fees under the HSR Act. (b) Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all reasonable efforts to obtain the transfer or reissuance to the Buyer of all necessary Environmental Permits, Permits, consents, approvals and authorizations of all governmental bodies and (iv) use all reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which Seller or the Buyer is a party or by which either of them is bound. Seller shall have the right to review and approve in advance all characterizations of the information relating to Purchased Assets; and each of Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they will consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such necessary Environmental Permits, Permits, consents, approvals and authorizations of all third parties and governmental bodies. Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. To the extent that a consent to an assignment of any material Seller Agreement cannot be obtained before the Closing Date, Seller will enter into all such agreements with the Buyer as are necessary to give the Buyer the rights, obligations and burdens of such Seller Agreements. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any Federal, State or local governmental authority or agency or any third party in connection with any Federal, State or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. (d) Buyer shall assume primary responsibility for securing the transfer or reissuance of the Permits effective as of the Closing Date. Seller shall cooperate with Buyer's efforts in this regard and shall use its best efforts to assist in the transfer or reissuance when so requested by Buyer. In the event that Buyer is unable, despite commercially reasonable efforts, to obtain a transfer or reissuance of one or more Permits as of the Closing Date, Buyer may use the Permits issued to Seller to the extent permissible under applicable laws and regulations provided (i) buyer notified Seller prior to Closing, (ii) Buyer continues to make commercially reasonable efforts to obtain a transfer or reissuance of such Permits after the Closing, and (iii) Buyer indemnifies Seller for any losses, claims or penalties suffered by Seller in connection with the Permit that is not transferred or reissued as of the Closing Date resulting from Buyer's operation of the Purchased Assets following the Closing Date. In no event shall Buyer use or otherwise rely on a Permit issued to Seller beyond one year after Closing unless Buyer has, after exercising its commercially reasonable efforts, been unable to obtain same and such reliance is not prohibited by law. 7.7. Fees and Commissions. Seller and the Buyer each represent and warrant to the other that, except for Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), which is acting for and at the expense of Seller, and Credit Suisse First Boston Corporation, which is acting for and at the expense of the Buyer, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. Seller and the Buyer will pay to the other or otherwise discharge, and will indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8. Tax Matters. (a) Notwithstanding any other provision of this Agreement, all transfer, sales and similar Taxes incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer, and the Buyer will, at its own expense, file, to the extent required by law, all necessary Tax Returns with respect to all such Taxes, and, if required by applicable law, the Seller will join in the execution of any such Tax Returns. (b) With respect to Taxes to be prorated in accordance with Section 3.4 of this Agreement only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Assets, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with the Section 3.4 of this Agreement. (c) Each of the Buyer and Seller shall provide the other with such assistance (including access to the Purchased Assets) as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each will retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.8 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. (d) Seller will consult with and allow Buyer to participate in all outstanding real property tax disputes concerning the Purchased Assets and shall take such positions as Buyer may request consistent with the positions previously communicated to Seller by Buyer with respect to such tax disputes, to assist Buyer in obtaining a tax agreement with respect to such tax disputes for periods subsequent to the Closing Date. Seller will use its commercially reasonable efforts to assist Buyer in obtaining an agreement with the taxing authorities pursuant to which the assessed value for real estate tax purposes of the Purchased Assets will be the lowest value achievable. Seller shall not enter into any agreement with the taxing authorities with respect to such real property tax disputes relating to periods prior to the Closing Date without the written consent of Buyer which Buyer shall not unreasonably withhold as long as Seller has complied with this Section 7.8(d). 7.9. Supplements to Schedules. Prior to the Closing Date, parties shall supplement or amend the Schedules required by Articles V and VI with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.10. Employees. (a) Schedule 7.10(a) sets forth all collective bargaining agreements to which Seller is a party in connection with the Purchased Assets and all other labor agreements and amendments thereto, that are or may be associated with the Purchased Assets (the "Collective Bargaining Agreements"). Buyer shall offer employment to begin as of the Closing Date to Seller's employees who work in connection with the Purchased Assets and who are included in the bargaining units covered by the Collective Bargaining Agreements ("Hourly Employees"), and the Buyer will assume the Collective Bargaining Agreements and all of Seller's obligations thereunder, including, without limitation, the terms and conditions of the employee benefit plans covering such hourly employees. (b) Continued Employment; Service Credit. The Buyer shall, as of the Closing Date, offer employment to the employees of Seller (who will be listed on Schedule 7.10(b) by the Buyer) who worked at or directly serviced the Purchased Assets, who were employees immediately prior to the Closing Date, who were not Hourly Employees and who are approved by Buyer (the "Management Employees"). The Buyer shall provide Schedule 7.10(b) to Seller at least ninety (90) days prior to the date on which the Closing is anticipated to occur (but in no event later than February 1, 1999, or such other date to which the Buyer and Seller mutually agree). The Management Employees hired by the Buyer shall be given credit for all service with Seller or its subsidiaries (and service credited by Seller or such subsidiary), to the same extent as such service was credited for such purpose by Seller or such subsidiary, under all employee benefit plans, programs and policies, and fringe benefits of the Buyer in which they become participants for purposes of eligibility, vesting and determination of level of benefits (but not for purposes of benefit accrual). To the extent permissible under the terms thereof and required by applicable law, the Buyer shall (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Management Employees under any welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare benefit plan maintained for the Management Employees immediately prior to the Closing Date, and (ii) provide each Management Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Closing Date. (c) Subject to applicable law, the Buyer shall maintain for a period of at least one year after the Closing Date, without interruption, such employee compensation, welfare and benefit plans, programs, policies and fringe benefits as will, in the aggregate, provide benefits to the Management Employees that are no less favorable than those provided pursuant to such employee compensation, welfare and benefit plans, programs, policies and fringe benefits of the Seller and its subsidiaries, as in effect on the Closing Date. During the period between the date hereof and the Closing Date, Seller shall use its best efforts to keep available all current Management Employees for employment by the Buyer (except those employees which the Buyer identifies in writing as Management Employees which the Buyer does not intend to employ). (d) Notwithstanding the Buyer's assumption of the Collective Bargaining Agreement, the Buyer shall not assume sponsorship or any other obligation under any Benefit Plan of the Seller or any ERISA Affiliate of the Seller in connection with the assumption of such agreements or in connection with hiring any of the Hourly Employees. All benefits accrued under such Benefits Plans and all benefits currently payable as of the Closing Date shall be and shall remain the obligation of Seller and any individual covered under any such Benefit Plan that is a Group Health Plan (as defined in Section 4980B(g)(2) of the Code and Section 607(1) of ERISA) and who is eligible for continued coverage under such Group Health Plan as of the Closing Date, shall continue to be covered under such Group Health Plan after Closing pursuant to the provisions of COBRA. (e) Seller agrees to perform timely and discharge all requirements, if any, under the WARN Act and under applicable state and local laws and regulations for the notification of its employees arising from the sale of the Purchased Assets to the Buyer up to and including the Closing Date. The Buyer will cooperate with Seller to provide Seller with such information as may be needed from the Buyer for inclusion in such notices, including providing Seller at least ninety (90) days prior to the date on which the Closing is anticipated to occur (but in no event, later than February 1, 1999 or such other date to which the Buyer and Seller mutually agree) with a list of all of Seller's employees to whom the Buyer will make offers of employment. After the Closing Date, the Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees with respect to the Purchased Assets. (f) Seller shall be responsible for any payments required under its severance plan, including severance payments and other benefit enhancements, offered in connection with the transfer of the Purchased Assets. Within thirty (30) days following the last day that any employee may elect to participate in such plan, Seller shall provide Buyer with a list of all electing employees. In any event, Buyer is not required to establish this or any other severance or benefit plan. (g) Seller shall comply with all of the requirements of COBRA arising from this Agreement with respect to all employees of Seller employed at the Purchased Assets who are not employed by Buyer. (h) Seller shall pay, when due, to all Hourly Employees and Management Employees hired by the Buyer pursuant to Section 7.10 hereof, all compensation, bonus, severance, vacation and holiday compensation, workers' compensation or other employment benefits which have accrued to such Hourly Employees and Management Employees through and including the Closing Date. (i) Following the execution of this Agreement Seller will use its commercially reasonable best efforts to arrange meetings and interviews with such employees of Seller as Buyer shall reasonably request. (j) Seller shall not, prior to the Closing Date, with respect to the Purchased Assets, (i) hire new employees or transfer current employees prior to the Closing to work at the Purchased Assets, other than to fill vacancies in existing positions in the reasonable discretion of Seller, (ii) take any action prior to the Closing to affect a material change in the Collective Bargaining Agreement, or (iii) take any action prior to the Closing to increase the aggregate benefits payable to the employees employed in connection with the Purchased Assets, except (A) as otherwise required by the terms of the Collective Bargaining Agreement obligations to effects bargain, (B) as Seller shall reasonably deem appropriate in order to comply with its obligations under the second sentence of Section 7.10(c) above, (C) for retention bonuses payable to Management Employees on or before the Closing Date and (D) increases in salary and benefits in the ordinary course of business, consistent with past practice. 7.11. Risk of Loss. (a) From the date hereof through the Closing Date, all risk of loss or damage to the property included in the Purchased Assets shall be borne by Seller. (b) If, before the Closing Date all or any portion of the Purchased Assets are taken by eminent domain, or is the subject of a pending or (to the knowledge of Seller), after reasonable inquiry and investigation contemplated taking which has not been consummated, Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, the Buyer and Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after Seller has notified the Buyer of such taking, then the Buyer or Seller may, if such taking relates to the Purchased Assets, terminate this Agreement pursuant to Section 10.1(f). (c) If, before the Closing Date, all or any material portion of the Purchased Assets are damaged or destroyed by fire or other casualty, Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and assigning any insurance proceeds to Buyer at the Closing and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after Seller has notified the Buyer of such casualty, then the Buyer may terminate this Agreement pursuant to Section 10.1(f). 7.12. Real Estate Matters. (a) Buyer shall obtain an American Land Title Association ("ALTA") or New York Board of Title Underwriters ("NYBTU") owners standard form title policy commitment with respect to the Real Property (the "Title Commitment") from a title company of Buyer's choice (the "Title Company") covering title to the Real Property together with an ALTA 3.1 zoning endorsement, if available, including parking and access, and such other endorsements as Buyer may reasonably request. Seller shall provide the Title Company and Buyer such information as the Title Company or Buyer may reasonably request to assist the Title Company in connection with the Title Commitment. Without limiting the foregoing, Seller shall provide the Title Company and Buyer a copy of the most recent surveys in their possession regarding the Real Property. Promptly after receiving the Title Commitment, Buyer shall notify Seller in writing of any defects in title which are not Permitted Encumbrances and would cause title to the Real Property to be uninsurable (any of which is called herein a "Defect of Title"). Buyer shall be deemed to have waived any objection to any Defect of Title that was disclosed by the Title Commitment if Buyer fails to notify Seller of such Defect of Title within thirty (30) days after receipt of such Title Commitment. With respect to the existence of any Defect of Title that is not disclosed by the Title Commitment, but which arises prior to Closing, Buyer shall immediately notify Seller in writing of any such Defect of Title. (b) Seller agrees that upon the written request of Buyer it will consent and cause its affiliates to consent to the relocation of the Operating Easements and Seller's Easements so long as (i) Buyer pays the cost of such relocation, (ii) such relocation will be to space within Buyer's ownership and will not materially adversely affect the operation of Seller's or its affiliates' transmission and distribution business, except for the minimum downtime associated with the cut over for such relocation process in accordance with Good Utility Practices, and (iii) the Buyer's requested relocation is consistent with Good Utility Practices. Seller further agrees to condition any grant or assignment by it of the Operating Easements or Sellers Easements on the express agreement of its transferee to be bound by the terms and conditions of this Section 7.12(b). (c) As to any Operating Easement or Sellers Easement not currently of record or reserved or granted back to Seller at Closing, all of which are to be granted by Buyer at Closing concurrently with the transfer of title to Buyer and prior to any mortgage or other encumbrance, such Operating Easements and Sellers Easements shall include standard cross-indemnity provisions relating to personal injury, death or property damage occurring as a result of gross negligence or willful misconduct in the use of such Easements, whereby each party agrees to indemnify the other for the consequences of the gross negligence or willful misconduct of those for whom the indemnifying party is legally responsible. 7.13. Year 2000. Seller shall (a) use its best efforts to cooperate with Buyer in formulating a plan to prepare the Purchased Assets to be ready for Year 2000 computer-related issues with a target completion date of October 1, 1999 and (b) perform until the Closing Date (or later, at Seller's election pursuant to the second sentence of Section 7.14 of this Agreement) the tasks identified in such plan, consistent with Good Utility Practices and the expenditures contemplated in its Year 2000 plans referred to in Section 5.23 hereof. 7.14. Scheduled Capital Expenditures and Scheduled Maintenance Expenditures. The Seller shall perform, or caused to be performed, the Scheduled Capital Expenditures and the Scheduled Maintenance Expenditures, at Seller's cost, prior to the Closing Date. To the extent that Scheduled Capital Expenditures and Scheduled Maintenance Expenditures are not completed by the Closing Date, the Seller either (i) shall cause the Scheduled Capital Expenditures or Scheduled Maintenance Expenditures to be completed within a reasonable period of time following the Closing Date or (ii) shall pay Buyer its reasonable costs to complete such unfinished Scheduled Capital Expenditures or Scheduled Maintenance Expenditures within thirty (30) days of Seller's receipt from Buyer of a reasonably detailed invoice for such cost. 7.15. Environmental Insurance. If Buyer elects to purchase insurance coverage to cover liabilities arising from Hazardous Substances present or Released at, on, in or under (i) the Purchased Assets and (ii) the "Purchased Asset" and "Purchased Assets" as defined in each of the Other Sales Agreements on or prior to the Closing Date ("Environmental Insurance"), Seller shall share equally with Buyer the cost of premiums for such Environmental Insurance, up to a maximum payment by Seller of $200,000 in the aggregate for such insurance relating to (A) the Purchased Assets and (B) the "Purchased Asset" and "Purchased Assets" as defined in each of the Other Sales Agreements. If Buyer purchases such Environmental Insurance, Buyer shall add Seller as an additional insured. 7.16. Environmental Remediation. (a) Seller will, at its own expense, be responsible for remediating, in accordance with applicable Environmental Laws, the following areas located at the Hillburn Gas Turbine Generating Station identified on page 6-2 of the Report, Additional Phase II Environmental Site Investigations Orange and Rockland prepared by URS Greiner Woodward Clyde, dated November 1998: (i) PCB-contaminated soils in two areas at the 34.5 kv Substation; (ii) PCB-contaminated soils in the Gas Turbine Switching Transformer Substation; (iii) stained soils and associated contamination in the 69 kv Substation containing polyaromatic hydrocarbons ("PAHs"); and (iv) stained soils and associated contamination in the Equipment Storage Area containing PAHs. Seller's obligation to remediate these conditions is limited to remediation of affected soils in the areas identified above. Seller shall remediate such soils to meet the least stringent New York cleanup standards applicable to the Hillburn Gas Turbine Generating Station as it is currently used; provided however, that the cleanup standards which govern the remedial work under this subparagraph (a) shall be at least as stringent as the New York State Department of Environmental Conservation ("NYSDEC") soil cleanup standards to protect groundwater. To the extent that the NYSDEC or the United States Environmental Protection Agency ("EPA") is involved in the oversight of any of the remediation described above, Seller shall remediate such soils to the extent required by the NYSDEC or the EPA, as the case may be. Seller shall prepare a work plan for the remedial work required by this subparagraph (a) and shall submit the work plan for Buyer's review and comment. Seller shall conduct confirmation sampling which demonstrates the completion of the remedial work required by this subparagraph (a) and shall prepare a report discussing the work. Except as otherwise required by applicable Environmental Law, neither party shall notify NYSDEC or EPA concerning the remedial work without the prior consent of the other party. Seller shall be responsible for all negotiations with the NYSDEC or the EPA with respect to such remedial work and, provided Seller is in substantial compliance with this Section 7.16, Buyer shall not engage in any discussions with NYSDEC or the EPA with respect to the remedial work, except to the extent authorized by Seller. (b) Seller shall exercise reasonable efforts to complete the remedial work described in subparagraph (a) prior to the Closing. If Seller has not completed the remedial work described in subparagraph (a) as of the Closing, Seller will continue to be responsible for completing said remediation as soon as reasonably possible after the Closing. In undertaking said remedial work, Seller shall (i) comply in all material respects with applicable Environmental Laws; (ii) provide Buyer with copies of all final and complete data, documents, correspondence and reports related to the remedial work; (iii) provide Buyer with at least five (5) Business Days' advance notice prior to undertaking any field work at the Hillburn Gas Turbine Generating Station; (iv) take all reasonable precautions to ensure that performance of the remedial work does not unreasonably interfere with operations at the Hillburn Gas Turbine Generating Station; and (v) repair and restore, to the extent practicable, any areas of the Hillburn Gas Turbine Generating Station adversely impacted by the remedial work. (c) If Seller is required to complete the remedial work described in subparagraph (a) after the Closing, Buyer shall undertake reasonable efforts to enable Seller, Seller's agents and representatives to undertake the remedial work. To this end, Buyer shall afford Seller and its agents and representatives, including, but not limited to, environmental contractors and consultants, with reasonable cooperation, including, but not limited to, reasonable access to any of the real property upon which remedial work is to be conducted, relevant records and utility services (including, but not limited to water and electricity); obtaining additional environmental permits (at Seller's expense) in order to undertake the required remediation; and filing any necessary reports (at Seller's expense) with relevant governmental authorities. 7.17. Buyout of Leases. The Seller shall exercise its purchase option, at Seller's cost, under the Amendment to Lease Agreement, effective as of August 1, 1996, between Seller and Fleet Capital Corporation, which amends the Lease Agreement, dated as of February 1, 1991, between United States Trust Company of New York, as Trustee, Lessor and Seller, Lessee. ARTICLE VIII CLOSING CONDITIONS 8.1. Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment at or prior to the Closing Date of the following conditions: (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated with no order, decree, judgment or injunction enjoining or prohibiting the consummation of the transactions contemplated hereby having been issued; (b) No preliminary or permanent injunction or other order or decree by any federal or state court or governmental authority which prevents or is reasonably likely to prevent the consummation of the transactions contemplated hereby or by the Ancillary Agreements shall be pending or shall have been issued and remain in effect (each party agreeing to use its reasonable efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental authority in the United States which prohibits the consummation of the transactions contemplated hereby; (c) All Federal, State and local government orders, consents and approvals required for the consummation of the transactions contemplated hereby, or by the Ancillary Agreements, including, without limitation, Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have become Final Orders (a "Final Order" means action by the relevant regulatory authority which has not been reversed, stayed, enjoined, set aside, annulled or suspended, with respect to which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired, and as to which all conditions to the consummation of such transaction prescribed by law, regulation or order have been satisfied) and such Final Order is in form and substance reasonably acceptable to the party that sought the consent or approval granted by such Final Order (for purposes of this clause (i), a Final Order shall be deemed to be reasonably acceptable to such party if it complies in all material respects with the terms and conditions of such party's application therefor and contains no additional terms or conditions which would have a Material Adverse Effect on such party or the operation of the Purchased Assets); provided, however, that if at the time such order, consent, or approval would otherwise be deemed to be a Final Order, there shall be pending or threatened any appeal or challenge thereto, which, if adversely determined, would cause such order, consent or approval to not be reasonably acceptable to the party that sought such order, consent or approval, then if such party who would be adversely affected notifies the other party that such a pending or threatened appeal or challenge exists (such notification to be made as soon as reasonably practicable following knowledge of such pending or threatened appeal or challenge, but in no event later than fifteen (15) days from date on which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired and all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied), then such order, consent or approval shall be deemed to be a Final Order only after all opportunities for rehearing or judicial review are exhausted and provided, further, that if the designation of an order, consent or approval as a Final Order shall be deferred pursuant to the foregoing proviso, the Termination Date shall be automatically extended for a period of time equal to the period of time for which the designation as a Final Order has been deferred; (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which Seller or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, other than those (i) which if not obtained, would not, in the aggregate, have a Material Adverse Effect, or (ii) for which an agreement which is described in the last sentence of Section 7.6(b) has been entered into. 8.2. Conditions to Obligations of Buyer. The obligation of the Buyer to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) Seller shall have performed and complied with the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of Seller set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of Seller; (c) The Buyer shall have received a certificate from an authorized officer of Seller, dated the Closing Date, to the effect that to the best of such officers' knowledge, after reasonable inquiry and investigation, the conditions set forth in Sections 8.2(a) and (b) have been satisfied; (d) The "Closing" as defined in each of the Lovett Generating Station Sales Agreement between the Seller and Southern Energy Lovett, L.L.C. and the Bowline Point Generating Station Sales Agreement among Seller, Consolidated Edison Company of New York, Inc. and Southern Energy Bowline, L.L.C., each dated as of the date hereof, shall have occurred or shall occur concurrently with the Closing hereunder. (e) The Buyer shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) Seller is a corporation organized, existing and in good standing under the laws of the State of New York and has the corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action taken on the part of Seller. (2) this Agreement and the Ancillary Agreements have been executed and delivered by Seller and (assuming that Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by Seller will not (A) constitute a violation of the Certificate of Incorporation or By- Laws of Seller, or (B) to counsel's knowledge constitute a violation or default under those agreements or instruments set forth on a schedule to this opinion; (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal or New York governmental authority is necessary for the consummation by Seller of the Closing other than (i) Seller Required Regulatory Approvals which are addressed below, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate have a Material Adverse Effect or prevent Seller from performing its obligations hereunder; and (5) The Bill of Sale, the Instrument of Assumption and the other agreements described in Section 4.3 are in proper form to transfer to Buyer such title to the Purchase Assets as was held by Seller. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer and admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by Seller and appropriate officers and directors of Seller and by public officials. (f) The Buyer shall have received an opinion from Riker, Danzig, Scherer, Hyland & Perretti, LLP (New Jersey Counsel), Nixon, Hargrave, Devans & Doyle, LLP (New York Counsel) and Morgan, Lewis & Bockius, LLP (Pennsylvania Counsel), or other local regulatory counsel for O&R reasonably acceptable by Buyer, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that no declaration, filing or registration with, or notice to, or authorization, consent or approval of any federal governmental authority or any governmental authority in the States of New York, New Jersey and Pennsylvania is necessary for the consummation by Seller of the Closing other than (i) Seller Required Regulatory Approvals, which have been obtained and are in full force and effect with such terms and conditions as were imposed by the applicable governmental authorities, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer and admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by Seller and appropriate officers and directors of Seller and by public officials. (g) Buyer shall have received the Title Commitment showing the Real Property to be insured as subject only to Permitted Encumbrances, and the effective date of the Title Commitment shall have been updated to the Closing Date and marked to show the satisfaction of all conditions to the issuance of the title policy other than conditions within the control of the Buyer. (h) Buyer shall have obtained a certificate of the Secretary of Seller identifying by name and title and bearing the signature of the officer of Seller authorized to execute and deliver this Agreement and the other agreements and instruments contemplated hereby. 8.3. Conditions to Obligations of Seller. The obligation of Seller to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officers' knowledge, the conditions set forth in Sections 8.3(a) and (b) have been satisfied; and (d) Seller shall have received an opinion from Troutman Sanders LLP, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to Seller and its counsel, substantially to the effect that: (1) The Buyer is a limited liability company organized, existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby; and the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action taken on the part of the Buyer; (2) this Agreement and the Ancillary Agreements have been executed and delivered by the Buyer and (assuming that Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) are valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with their terms, except (A) that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (3) the execution, delivery and performance of this Agreement and the Ancillary Agreements by the Buyer will not constitute a violation of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents), as currently in effect, of the Buyer. (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental authority is necessary for the consummation by the Buyer of the Closing other than (i) the Buyer Required Regulatory Approvals, all of which have been obtained and are in full force and effect with such terms and conditions as shall have been imposed by any applicable governmental authority, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the federal laws of the United States and the State of New York, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate Members and Managers of the Buyer and its subsidiaries and by public officials. 8.4. Extension of Closing Date. If the approval by the FERC of the establishment of the ISO (the "ISO Approval") shall not have been obtained on or prior to the Condition Fulfillment Date, the parties agree to defer the Closing Date until the date (the "Deferred Closing Date") which is the earlier of (a) the last day in the month in which the ISO Approval is deemed final under applicable law, provided that if there are less than five (5) Business Days in the month in which the ISO Approval is deemed final, then the last day in the month which follows the month in which the ISO Approval is deemed final, or (b) August 31, 1999; provided, however, that all conditions set forth in Section 8.2(a) and all conditions set forth in Section 8.2(b) regarding the representations and warranties of Seller shall be deemed to be fulfilled on the Deferred Closing Date unless the nonfulfillment of such conditions primarily results from the acts or omissions of Seller or from the occurrence of facts or circumstances that primarily relate to the Seller's ownership and/or operation, or the physical condition of the Purchased Assets. For purposes of this Agreement, the "Condition Fulfillment Date" shall mean the date on which all conditions set forth in Sections 8.1 and 8.2 shall have been fulfilled but not earlier than the later of (i) the date on which all conditions set forth in Section 8.3 have been fulfilled or waived and (ii) April 30, 1999. ARTICLE IX INDEMNIFICATION 9.1. Indemnification. (a) Seller will indemnify, defend and hold harmless the Buyer, Buyer's affiliates, and their respective Managers, Members, employees and agents (each a "Buyer Indemnitee") from and against any and all claims, causes of action, demands or suits (by any Person), losses, liabilities, damages (excluding consequential and special damages), obligations, payments, costs, Taxes 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) to the extent the foregoing are not covered by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by Seller of any covenant or agreement of Seller contained in this Agreement, (ii) the Excluded Liabilities; (iii) the Excluded Assets; (iv) any breach of any representation in Sections 5.1, 5.2 and 5.3 hereof; (v) Seller's non-compliance with any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement, or (vi) the gross negligence or willful misconduct of the Seller, or its affiliates or its contractors while on Buyer's property (including without limitation, any easement provided Seller with respect to such property) after the Closing to the extent such Indemnifiable Loss is not caused by a the negligence or willful misconduct of any Buyer Indemnitee. (b) The Buyer will indemnify, defend and hold harmless Seller, Seller's Affiliates, and their respective directors, officers, employees and agents (each, a "Seller Indemnitee") from and against any and all Indemnifiable Losses asserted against or suffered by Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement, (ii) the Assumed Liabilities; (iii) the operation of the Purchased Assets after the Closing Date, (iv) any breach of any representation in Article VI, or (v) the gross negligence or willful misconduct of Buyer, its affiliates or their respective contractors while on Seller's property after the Closing, to the extent such Indemnifiable Loss is not caused by the negligence or willful misconduct of any Seller Indemnitee. (c) Either the party required to provide indemnification under this Agreement (the "Indemnifying Party") or the entity or person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement. (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) Seller and the Buyer shall have indemnification obligations with respect to Indemnifiable Losses asserted against or suffered by Seller or the Buyer, as the case may be, to the extent that the aggregate of all such Indemnifiable Losses exceed the Indemnification Floor. It is agreed and understood that neither Seller nor the Buyer, as the case may be, shall have any liability at any time for Indemnifiable Losses asserted against or suffered by the other party until the aggregate amount of Indemnifiable Losses asserted or suffered by such other party under this Section 9.1 shall exceed the Indemnification Floor, and then only to the extent that the aggregate amount of Indemnifiable Losses exceeds the Indemnification Floor. The term "Indemnification Floor" shall mean an amount equal to $200,000. (g) The rights and remedies of Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which Seller and the Buyer may have under this Agreement for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be; or (iii) any other liabilities described in Section 9.1(a) or 9.1(b). Rights and remedies under the Ancillary Agreements are as set forth therein. 9.2. Defense of Claims. (a) If any Indemnitee receives written notice of the assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) 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 will indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. (b) The party defending the Third Party Claim shall (a) consult with the other throughout the pendency of the Third Party Claim regarding the investigation, defense, settlement, compromise, trial, appeal or other resolution thereof; and (b) afford the other party the opportunity, by notice, to participate and be associated in the defense of any Third Party Claim through counsel chosen by such other party, at its own expense, in the defense of any Third Party Claim as to which a party has elected to conduct and control the defense thereof. The parties shall cooperate in the defense of any Third Party Claim. The Indemnitee shall make available to the Indemnifying Party or its representatives all records and other materials reasonably required for use in contesting any Third Party Claim (subject to such confidentiality provisions as the Indemnitee may reasonably require) and shall furnish such testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnifying Party in connection therewith. If requested by the Indemnifying Party, the Indemnitee shall cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest or, if appropriate, in making any counterclaim against the Person asserting the claim or demand, or any cross-complaint against any Person. The Indemnifying Party shall reimburse the Indemnitee for any expenses incurred by Indemnitee in cooperating with or acting at the request of the Indemnifying Party. (c) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days (unless waiting twenty (20) calendar days would prejudice the Indemnitee's rights) after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of (a) any Third Party Claim with respect to Income Taxes or (b) any other Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer (other than with respect to Income Taxes) within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, compromise, or settle any Third Party Claim (other than with respect to Income Taxes) at any time, provided that in such event the Indemnitee shall waive any right to indemnity hereunder unless the Indemnitee shall have first sought the consent of the Indemnifying Party in writing to such payment, settlement or compromise and such consent was unreasonably withheld or delayed, in which event no claim for indemnity therefor hereunder shall be waived. (d) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than thirty (30) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will have a period of thirty (30) calendar days (unless waiting thirty (30) days would prejudice the Indemnitee's rights, in which case such period as would likely not prejudice the Indemnitee's rights, but in no event less than ten (10) days) within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party will be deemed to have accepted such Direct Claim. If the Indemnifying Party rejects such Direct Claim, the Indemnitee will be free to seek enforcement of its rights to indemnification under this Agreement. (e) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of the Chase Manhattan Bank), will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. Nothing in this Section 9.2(e) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (f) A failure to give timely notice as provided in this Section 9.2 will not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. ARTICLE X TERMINATION AND ABANDONMENT 10.1. Termination. (a) This Agreement may be terminated at any time prior to Closing Date, by mutual written consent of the Buyer and Seller. (b) This Agreement may be terminated by Seller or Buyer if (i) the Closing shall not have been consummated on or before September 30, 1999 (the "Termination Date"); provided that the right to terminate this Agreement under this Section 10.1(b) shall not be available to Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing Date to occur on or before such date; and provided, further, that if on September 30, 1999, the conditions to the Closing set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the day which is eighteen (18) months from the date of this Agreement. (c) This Agreement may be terminated by either Seller or the Buyer if (i) any governmental or regulatory body, the consent of which is a condition to the obligations of Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent or shall condition such consent upon any material change to the terms of this Agreement or the Ancillary Agreements or upon any other condition that materially and adversely affects the value of the transactions contemplated herein or therein for either party and all appeals of such determination shall have been taken and have been unsuccessful; (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby or in the Ancillary Agreements and such order, judgment or decree shall have become final and nonappealable; or (iii) any statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental agency in the United States which prohibits the transactions contemplated herein or in the Ancillary Agreements. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by Seller of any agreement, representation or warranty contained in this Agreement which (i) has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer or cured by the Seller within fifteen (15) days after receipt by Buyer of notice specifying same or (ii) causes a Material Adverse Effect, of which Buyer has notified Seller, and which Seller has not promptly exercised commercially reasonable efforts to cure but in no event later than twenty (20) days following such notification by Buyer. (e) This Agreement may be terminated by Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of Seller impossible and such violation or breach has not been waived by Seller or cured by Buyer within fifteen (15) days after receipt by Buyer of notice specifying same. (f) This agreement may be terminated by either Seller or the Buyer in accordance with the provisions of Section 7.11(b) or (c). 10.2. Procedure and Effect of Termination. In the event of termination of this Agreement by either or both of the parties pursuant to Section 10.1, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein said termination shall be without any further liability of either party or parties except as follows: (a) in the event of termination of this Agreement by Seller pursuant to Section 10.1(e), Seller shall have the right to pursue all remedies available to it in equity or at law in connection with the violation or breach of this Agreement by Buyer; (b) in the event of termination of this Agreement by Buyer pursuant to Section 10.1(d), Buyer shall have the right to pursue all remedies available to it in equity or at law in connection with the violation or breach of this Agreement by Seller; and (c) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Seller and the Buyer. 11.2. Confidentiality. (a) All information regarding a party (the "Disclosing Party") that is furnished directly or indirectly to the other party (the "Recipient") pursuant to this Agreement and marked "Confidential" shall be deemed "Confidential Information." Notwithstanding the foregoing, Confidential Information does not include information that (i) is rightfully received from Recipient from a third party having an obligation of confidence to the Disclosing Party, (ii) is or becomes in the public domain, through no action on Recipient's part in violation of this Agreement, (iii) is already known by Recipient as of the date hereof, or (iv) is developed by Recipient independently of any Confidential Information of the Disclosing Party. Information that is specific as to certain data shall not be deemed to be in the public domain merely because such information is embraced by more general disclosure in the public domain. (b) Recipient shall keep the Confidential Information strictly confidential and not disclose any Confidential Information to any third party for a period of two (2) years from the date the Confidential Information was received by Recipient, except as otherwise provided herein. (c) Recipient may disclose the Confidential Information to its and its affiliates' respective directors, officers, employees, consultants, advisors and agents who need to know the Confidential Information for the purpose of assisting Recipient with respect to its obligations under this Agreement. Recipient shall inform all such parties, in advance, of the confidential nature of the Confidential Information. Recipient shall cause such parties to comply with the requirements of this Agreement and shall be responsible for the actions, uses, and disclosures of all such parties. (d) If Recipient becomes legally compelled or required to disclose any of the Confidential Information (including, without limitation, pursuant to the rules or regulations of the NYPP, ISO or FERC), Recipient will provide the Disclosing Party with prompt written notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy. Recipient will furnish only that portion of the Confidential Information which its counsel considers legally required, and Recipient will cooperate, at the Disclosing Party's expense, with the Disclosing Party's counsel to enable the Disclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. It is further agreed that in the event that a protective order or other remedy is not obtained, the Recipient will furnish only that portion of the Confidential Information which, in the written opinion of the Recipient's counsel, is legally required to be disclosed and, upon the Disclosing Party's request, use commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to such information. (e) Recipient shall promptly return to the Disclosing Party all items containing or constituting Confidential Information, together with all copies, extracts, or summaries thereof, upon the earlier of (i) the Disclosing Party's request, or (ii) the termination or expiration of this Agreement. 11.3. Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.4. No Survival. Subject to the provisions of Article X, each and every representation, warranty and covenant contained in this Agreement other than (a) the covenants contained in Sections 3.2, 3.3, 3.4, 7.2(b), 7.2(c), 7.2(d), 7.3, 7.5, 7.6, 7.7, 7.8, 7.10, 7.14, 9.1 and 9.2 and in Article XI (which covenants shall survive in accordance with their terms); (b) the representations and warranties contained in Sections 5.1, 5.2, 5.3, 6.1, 6.2, and 6.3 (which representations and warranties shall survive for twelve (12) months from the Closing) and (c) the representation and warranty in Section 5.21 (which representation and warranty shall survive for the applicable statute of limitations) shall expire with, and be terminated and extinguished by the consummation of the sale of the Purchased Assets and the transfer of the Assumed Liabilities pursuant to this Agreement and such representations, warranties and covenants shall not survive the Closing Date; and none of Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation, warranty or covenant. 11.5. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon receipt on a Business Day if during the normal business hours of the recipient, or if not, on the next Business Day if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) If to Seller, to: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 Attention: Legal Department with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attention: Sheldon S. Adler, Esq. (b) if to the Buyer, to: Southern Energy NY-Gen, L.L.C., c/o Southern Energy, Inc. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 Attention: Randy Harrison, Vice-President with copies to: Troutman Sanders LLP Nationsbank Plaza Suite 5200 Atlanta, GA 30308 Attention: Robert C. Marshall, Esq. and Southern Company Services 270 Peachtree Street Box 918 Atlanta, Georgia 30303 Attention: Vice President and Associate General Counsel 11.6. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. The Buyer acknowledges that Seller has entered into an Agreement and Plan of Merger whereby Seller will become a wholly-owned subsidiary of Consolidated Edison, Inc. ("CEI"). Notwithstanding any other provision of this Article 11.6, the Buyer agrees that this Agreement may be assigned to CEI, or a wholly-owned affiliate of CEI without the Buyer's consent. Notwithstanding the foregoing, (a) Buyer may assign all of its rights and obligations hereunder to any wholly-owned subsidiary (direct or indirect) of Buyer or Buyer's parent and upon Seller's receipt of notice from Buyer of any such assignment, such assignee will be deemed to have assumed, ratified, agreed to be bound by and perform all such obligations, and all references herein to "Buyer" shall thereafter be deemed to be references to such assignee, in each case without the necessity for further act or evidence by the parties hereto or such assignee; and (b) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee or lending institutions for the purposes of financing or refinancing the Purchased Assets, including upon or pursuant to the exercise of remedies with respect to such financing or refinancing, or by way of assignments, transfers, pledges, or other dispositions in lieu thereof; provided however, that no such assignment or other disposition shall relieve or in any way discharge Buyer or such assignee from the performance of Buyer's obligations under this Agreement. Seller agrees, at Buyer's expense, to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, pledge or other disposition of rights and interests hereunder so long as Seller's rights under this Agreement are not thereby altered, amended, diminished or otherwise impaired. 11.7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies, and Seller and the Buyer hereby agree to irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. If requested by Seller, Buyer will consent to appointing an agent for service of process in New York City. 11.8. Specific Performance. Seller and Buyer agree that a material breach of this Agreement will cause the non-breaching party immediate and irreparable harm that monetary damages cannot adequately remedy, and therefore, in addition to all other remedies hereunder, the parties agree that, upon any actual or impending material breach of this Agreement, the non-breaching party shall be entitled to equitable relief, including injunctive relief and specific performance, without bond or proof of damages, and in addition to any other remedies that the non-breaching party may have under applicable law. 11.9. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.10. Interpretation. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.11. Entire Agreement. This Agreement, the Ancillary Agreements, the Confidentiality Agreement, including the Exhibits and Schedules referred to herein or therein, and the Guaranty given to the Seller by Southern Energy, Inc. embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Information Memorandum, dated May 1998 (previously made available to the Buyer by Seller and DLJ). This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement. 11.12. Bulk Sales or Transfer Laws. The Buyer acknowledges that Seller will not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. IN WITNESS WHEREOF, Seller and the Buyer have caused this agreement to be signed by their respective duly authorized officers as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By /s/ D. Louis Peoples ___________________________ Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer SOUTHERN ENERGY NY-GEN, L.L.C. By /s/ Randy Harrison ______________________________ Name: Randy Harrison Title: Vice President EX-10 5 EXHIBIT 10.61 - BOWLINE ADJACENT PROPERTY SALES AGREEMENT Exhibit 10.61 ------------------------------- BOWLINE ADJACENT PROPERTY SALES AGREEMENT BETWEEN ORANGE AND ROCKLAND UTILITIES, INC. AND SOUTHERN ENERGY BOWLINE, L.L.C. November 24, 1998 ------------------------------- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II PURCHASE AND SALE 2.1. The Sale . . . . . . . . . . . . . . . . . . . . . . . 10 2.2. Excluded Assets . . . . . . . . . . . . . . . . . . . 10 2.3. Assumed Liabilities . . . . . . . . . . . . . . . . . 11 2.4. Excluded Liabilities . . . . . . . . . . . . . . . . . 15 ARTICLE III PURCHASE PRICE 3.1. Purchase Price . . . . . . . . . . . . . . . . . . . . 17 3.2. Proration. . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE IV THE CLOSING 4.1. Time and Place of Closing . . . . . . . . . . . . . . 18 4.2. Payment of Purchase Price . . . . . . . . . . . . . . 19 4.3. Deliveries by Seller . . . . . . . . . . . . . . . . . 19 4.4. Deliveries by Buyer . . . . . . . . . . . . . . . . . 20 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER 5.1. Organization; Qualification . . . . . . . . . . . . . 22 5.2. Authority Relative to this Agreement . . . . . . . . . 22 5.3. Consents and Approvals; No Violation . . . . . . . . . 23 5.4. Undisclosed Liabilities . . . . . . . . . . . . . . . 25 5.5. Absence of Certain Changes or Events . . . . . . . . . 25 5.6. Title . . . . . . . . . . . . . . . . . . . . . . . . 26 5.7. Insurance . . . . . . . . . . . . . . . . . . . . . . 26 5.8. Environmental Matters . . . . . . . . . . . . . . . . 27 5.9. Real Property Encumbrances . . . . . . . . . . . . . . 29 5.10. Condemnation . . . . . . . . . . . . . . . . . . . . 29 5.11. Certain Contracts and Arrangements . . . . . . . . . 29 5.12. Legal Proceedings, etc. . . . . . . . . . . . . . . . 29 5.13. Regulation as a Utility . . . . . . . . . . . . . . . 30 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER 6.1. Organization . . . . . . . . . . . . . . . . . . . . . 30 6.2. Authority Relative to this Agreement . . . . . . . . . 31 6.3. Consents and Approvals; No Violation . . . . . . . . . 31 6.4. Regulation as a Utility . . . . . . . . . . . . . . . 33 6.5. Availability of Funds . . . . . . . . . . . . . . . . 33 ARTICLE VII COVENANTS OF THE PARTIES 7.1. Conduct of Business Relating to the Purchased Asset . 33 7.2. Access to Information . . . . . . . . . . . . . . . . 35 7.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . 36 7.4. Further Assurances . . . . . . . . . . . . . . . . . . 37 7.5. Public Statements . . . . . . . . . . . . . . . . . . 38 7.6. Consents and Approvals . . . . . . . . . . . . . . . . 38 7.7. Fees and Commissions . . . . . . . . . . . . . . . . . 41 7.8. Tax Matters . . . . . . . . . . . . . . . . . . . . . 41 7.9. Supplements to Schedules . . . . . . . . . . . . . . . 43 7.10. Risk of Loss . . . . . . . . . . . . . . . . . . . . 44 7.11. Real Estate Matters . . . . . . . . . . . . . . . . . 45 7.12. Condemnation . . . . . . . . . . . . . . . . . . . . 47 7.13. Environmental Insurance. . . . . . . . . . . . . . 47 ARTICLE VIII CLOSING CONDITIONS 8.1. Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby. . . . . . . . . . . 48 8.2. Conditions to Obligations of Buyer . . . . . . . . . . 51 8.3. Conditions to Obligations of Seller . . . . . . . . . 56 ARTICLE IX INDEMNIFICATION 9.1. Indemnification . . . . . . . . . . . . . . . . . . . 58 9.2. Defense of Claims . . . . . . . . . . . . . . . . . . 61 ARTICLE X TERMINATION AND ABANDONMENT 10.1. . . . . . . . . . . . . . . . . . . . . . . . . . . 67 10.2. Procedure and Effect of Termination . . . . . . . . . 69 ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Amendment and Modification . . . . . . . . . . . . . 70 11.2. Confidentiality . . . . . . . . . . . . . . . . . . . 70 11.3. Waiver of Compliance; Consents . . . . . . . . . . . 72 11.4. No Survival . . . . . . . . . . . . . . . . . . . . . 72 11.5. Notices . . . . . . . . . . . . . . . . . . . . . . . 73 11.6. Assignment . . . . . . . . . . . . . . . . . . . . . 74 11.7. Governing Law . . . . . . . . . . . . . . . . . . . . 76 11.8. Specific Performance . . . . . . . . . . . . . . . . 76 11.9. Counterparts . . . . . . . . . . . . . . . . . . . . 77 11.10. Interpretation . . . . . . . . . . . . . . . . . . 77 11.11. Entire Agreement . . . . . . . . . . . . . . . . . 77 11.12. Bulk Sales or Transfer Laws . . . . . . . . . . . . 78 BOWLINE ADJACENT PROPERTY SALES AGREEMENT BOWLINE ADJACENT PROPERTY SALES AGREEMENT, dated as of November 24, 1998, between Orange and Rockland Utilities, Inc., a New York corporation ("Seller"), and Southern Energy Bowline, L.L.C., a Delaware limited liability company ("Buyer"). WHEREAS, the Seller owns certain real property, which includes the Purchased Asset (as defined herein); and WHEREAS, the Buyer desires to purchase, and the Seller desires to sell, the Purchased Asset upon the terms and conditions hereinafter set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. (a) As used in this Agreement, the following terms have the meanings specified or referred to in this Section 1.1: (1) "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. (2) "Agreement" means this Bowline Adjacent Property Sales Agreement. (3) "Business Day" shall mean any day other than Saturday, Sunday or any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (4) "Buyer Representatives" means the Buyer's accountants, counsel, environmental consultants, financial advisors and other authorized representatives. (5) "CERCLA" means the Federal Comprehensive Environmental Response, Compensation and Liability Act. (6) "Code" means the Internal Revenue Code of 1986, as amended. (7) "Confidentiality Agreement" means the Confidentiality Agreement, dated June 19, 1998, between the Seller and Southern Energy, Inc. (8) "Encumbrances" means any mortgages, pledges, liens, security interests, conditional and installment sale agreements, activity and use limitations, conservation easements, deed restrictions, encumbrances and charges of any kind. (9) "Environmental Laws" means all Federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders relating to pollution or protection of the environment, natural resources or human health and safety, including, without limitation, laws relating to Releases or threatened Releases of Hazardous Substances (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Substances. (10) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (11) "Federal Power Act" means the Federal Power Act of 1935. (12) "FERC" means the Federal Energy Regulatory Commission or any successor thereto. (13) "Good Utility Practices" mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry with respect to similar facilities during the relevant time period which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection, and expedition. Good Utility 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 such industry. (14) "Hazardous Substances" means (a) any petrochemical or petroleum products, oil, radioactive materials, radon gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation and transformers or other equipment that contain dielectric fluid which may contain levels of polychlorinated biphenyls; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous substances," "toxic substances," "contaminants" or "pollutants" or words of similar meaning and regulatory effect; or (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law. (15) "Holding Company Act" means the Public Utility Holding Company Act of 1935, as amended. (16) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. (17) "Income Tax" means any tax, charge, fee, levy, penalty, or other assessment imposed by any U.S. federal, state, local or foreign taxing authority (a) based upon, measured by or calculated with respect to net income, profits or receipts (including, without limitation, capital gains taxes and alternative minimum taxes but excluding sales, transfer and similar taxes) or (b) based upon, measured by or calculated with respect to multiple bases (including, without limitation, corporate franchise taxes) if one or more of the bases on which such tax may be based, measured by or calculated with respect to, is described in clause (a), in each case together with any interest, penalties, or additions attributable thereto. (18) "Income Tax Return" means any return, report, information return or other document (including any related or supporting information) supplied or required to be supplied to any authority with respect to Income Taxes. (19) "Instrument of Assumption" means the Instrument of Assumption in the form of Exhibit A hereto. (20) "Internal Revenue Service" means the United States Internal Revenue Service, or any successor thereto. (21) "Material Adverse Effect" means any change in or effect on the Purchased Asset after the date of this Agreement that is, individually or in the aggregate, materially adverse to the condition (financial or physical, as compared to the condition on the date of this Agreement) of the Purchased Asset other than any materially adverse change in or effect on the Purchased Asset which is cured (including by the payment of money) by the Seller before the Termination Date. (22) "NJBPU" means the New Jersey Board of Public Utilities or any successor thereto. (23) "NYPSC" means the New York Public Service Commission or any successor thereto. (24) "Other Sales Agreements" means the Bowline Generating Station Sales Agreement between the Seller, Consolidated Edison Company of New York and the Buyer; the Lovett Generating Station Sales Agreement between the Seller and Southern Energy Lovett, L.L.C.; and the Gas Turbines and Hydroelectric Generating Station Sales Agreement between the Seller and Southern Energy NY-Gen, L.L.C., each dated as of the date of this Agreement. (25) "PAPUC" means the Pennsylvania Public Utility Commission or any successor thereto. (26) "Permitted Encumbrances" means (i) those exceptions to title to the Purchased Asset contained in the documents listed on Schedules 5.6 and 5.9, (ii) any state of facts that a current survey of the Purchased Asset would disclose; (iii) statutory liens for current Taxes, assessments or other governmental charges not yet due or delinquent or the validity of which is being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles, provided that the aggregate amount being so contested does not exceed $50,000; (iv) mechanics', carriers', workers', repairers' and other similar liens arising or incurred in the ordinary course of business relating to the Seller's obligations which are not yet due and payable or the validity of which are being contested in good faith by appropriate proceedings, provided that the aggregate amount of such liens does not exceed $50,000; (v) zoning, entitlement, conservation restrictions and other land use and environmental regulations by governmental authorities; provided that the foregoing do not materially interfere with the present use of the Purchased Asset; and (vi) such other liens, imperfections in or failure of title, charges, easements, restrictions and encumbrances which do not materially detract from the value of or materially interfere with the present use of the Purchased Asset and neither secure indebtedness nor individually or in the aggregate have or would have a Material Adverse Effect or which will be discharged or released prior to or simultaneously with the Closing. (27) "Person" means an individual, a partnership, a joint venture, a corporation, a limited liability company, a limited liability partnership, a trust, an unincorporated organization or a governmental entity or any department or agency thereof. (28) "Purchased Asset" means all of Seller's right, title and interest in, to and under the property adjacent to the Bowline Point Generating Station, located in the Town of Haverstraw, Rockland County, New York and identified as Section 21.17, Block 1, Lots 2 through 5 and Section 27.05, Block 1, Lots 1 and 3 in the records of the Town of Haverstraw, consisting of a total of approximately 98 acres along the Hudson River, including some 68 acres of upland area and 23 acres under the waters of the Hudson River, all as described in Schedule 5.6. (29) "Release" means release, spill, leak, discharge, dispose of, pump, pour, emit, empty, inject, leach, dump or allow to escape into or through the environment. (30) "SEC" means the Securities and Exchange Commission or any successor thereto. (31) "Securities Act" means the Securities Act of 1933, as amended. (32) "Subsidiary" when used in reference to any other person means any corporation of which outstanding securities having ordinary voting power to elect a majority of the Board of Directors of such corporation are owned directly or indirectly by such other person. (33) "Tax" means any tax, charge, fee, levy, penalty or other assessment imposed by any U.S. federal, state, local or foreign taxing authority, including, but not limited to, any income, gross receipts, license, stamp, occupation, environmental, excise, property, sales, transfer, payroll, withholding, social security or any other tax of any kind whatsoever, including any interest, penalties or additions attributable thereto. (34) "Tax Return" means any return, report, information return, declaration, claim for refund or other document (including any schedule or other related or supporting information) supplied or required to be supplied to any authority with respect to Taxes and including any supplement or amendment thereof. (b) Each of the following terms has the meaning specified in the Section set forth opposite such term: Term Section ---- ------- ALTA 7.11 Assumed Liabilities 2.3 Buyer Preamble Buyer Indemnitee 9.1 Buyer Required Regulatory Approvals 6.3 CEI 11.6 Closing 4.1 Closing Date 4.1 Confidential Information 11.2 Defect of Title 7.11 Direct Claim 9.2 Disclosing Party 11.2 DLJ 7.7 Environmental Insurance 7.13 Environmental Permits 5.8 Excluded Assets 2.2 Excluded Liabilities 2.4 Final Order 8.1 Indemnifiable Losses 9.1 Indemnification Floor 9.1 Indemnifying Party 9.1 Indemnitee 9.1 NYBTU 7.11 Permits 3.2 Purchase Price 3.1 Purchased Asset Preamble Recipiant 11.2 Rockland County 7.12 Seller Preamble Seller Balance Sheet 5.4 Seller Indemnitee 9.1 Seller Required Regulatory Approvals 5.3 Seller's Easements 4.4 Termination Date 10.1 Third Party Claim 9.2 Title Commitment 7.11 ARTICLE II PURCHASE AND SALE 2.1. The Sale. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, at the Closing, the Seller will sell, assign, convey, transfer and deliver to the Buyer, and the Buyer will purchase and acquire from the Seller, free and clear of all Encumbrances (except for Permitted Encumbrances) all of the Seller's right, title and interest in, to and under the real and personal property, tangible or intangible, owned by the Seller and constituting the Purchased Asset. 2.2. Excluded Assets. Notwithstanding any provision herein to the contrary, the Purchased Asset shall not include the following (herein referred to as the "Excluded Assets"): (a) all cash, bank deposits, cash equivalents and accounts receivable; (b) the name "Orange and Rockland Utilities, Inc.", "Orange and Rockland", "O&R", "ORU" or any related or similar trade names, trademarks, service marks or logos; and (c) any refund, credit, penalty payment, adjustment or reconciliation related to Taxes (excluding Taxes relating to real property) paid prior to the Closing Date in respect of the Purchased Asset, whether such refund, adjustment or reconciliation is received as a payment or as a credit against future Taxes payable. 2.3. Assumed Liabilities. On the Closing Date, the Buyer shall deliver to the Seller the Instrument of Assumption pursuant to which the Buyer shall assume and agree to discharge to the maximum extent permitted by law, all of the following liabilities and obligations of the Seller, which relate to the Purchased Asset, other than Excluded Liabilities, in accordance with the respective terms and subject to the respective conditions thereof: (a) all liabilities and obligations of the Seller arising or accruing after the Closing Date under the contracts and other agreements disclosed and entered into by the Seller with respect to the Purchased Asset after the date hereof consistent with the terms of this Agreement; except in each case, to the extent such liabilities and obligations, but for a breach or default by the Seller, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent the same arise out of any such breach or default or any event which after the giving of notice would constitute a default by Seller; (b) all liabilities and obligations associated with the Purchased Asset in respect of Taxes for which the Buyer is liable pursuant to Section 7.8; (c) any liabilities and obligations for which the Buyer has indemnified the Seller pursuant to Section 9.1; (d) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to the Closing Date, with respect to the ownership or operation of the Purchased Asset; (ii) loss of life, injury to persons or property or damage to natural resources (whether or not such loss, injury or damage arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date), caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Asset prior to the Closing Date, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Asset or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Asset; and (iii) the investigation and/or remediation (whether or not such investigation or remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Asset, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Asset or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Asset; provided, as to all of the above, that nothing set forth in this subsection 2.3(d) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (e) any liability, obligation or responsibility under or related to former, current or future Environmental Laws or the common law, whether such liability or obligation or responsibility is known or unknown, contingent or accrued, arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, on or after the Closing Date, with respect to the ownership or use of the Purchased Asset; (ii) compliance with applicable Environmental Laws on or after the Closing Date with respect to the ownership or use of the Purchased Asset; (iii) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Asset on or after the Closing Date, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Asset or in the soil, surface water, sediments, groundwater, landfill cells, or in other environmental media at or adjacent to the Purchased Asset; (iv) loss of life, injury to persons or property or damage to natural resources caused (or allegedly caused) by the off-site disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership or operation of the Purchased Asset; (v) the investigation and/or remediation of Hazardous Substances that are present or have been released on or after the Closing Date at, on, in, under, adjacent to, discharged from, emitted from or migrating from the Purchased Asset, including, but not limited to, Hazardous Substances contained in building materials at the Purchased Asset or in the soil, surface water, sediments, groundwater, landfill cells or in other environmental media at or adjacent to the Purchased Asset; and (vi) the investigation and/or remediation of Hazardous Substances that are disposed, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership or use of the Purchased Asset, at any off-site location; provided, that nothing set forth in this subsection 2.3(e) shall require the Buyer to assume any liabilities that are expressly excluded in Section 2.4; (f) all liabilities and obligations of the Seller with respect to the Purchased Asset under the agreements or consent orders set forth on Schedule 5.8(c); and (g) all other liabilities or obligations other than those liabilities and obligations noted in (a) through (f) above, exclusively relating to the Purchased Asset no matter when the events or occurrences giving rise to such liabilities or obligations took place, the value of which liabilities and obligations, together with the liabilities and obligations relating to the "Purchased Assets" as defined in each of the Other Sales Agreements in the aggregate, shall not exceed $3 million. All of the foregoing liabilities and obligations to be assumed by the Buyer hereunder (excluding any Excluded Liabilities) are referred to herein as the "Assumed Liabilities." It is understood and agreed that nothing in this Section 2.3 shall constitute a waiver or release of any claims arising out of the contractual relationships between the Seller and the Buyer. 2.4. Excluded Liabilities. The Buyer shall not assume or be obligated to pay, perform or otherwise discharge the following liabilities (the "Excluded Liabilities"): (a) any liabilities or obligations of the Seller in respect of any Excluded Assets or other assets of the Seller which are not part of the Purchased Asset; (b) any liabilities or obligations in respect of Taxes attributable to the Purchased Asset for taxable periods ending on or before the Closing Date, except for Taxes for which the Buyer is liable pursuant to Section 7.8(a); (c) any liabilities, obligations, or responsibilities relating to the disposal, storage, transportation, discharge, Release, recycling, or the arrangement for such activities, of Hazardous Substances that were generated at the Purchased Asset, at any off-site location, where the disposal, storage, transportation, discharge, Release, recycling or the arrangement for such activities at said off-site location occurred prior to the Closing Date, provided that for purposes of this Section, "off-site location" does not include any location to which Hazardous Substances disposed of, discharged from, emitted from or Released at the Purchased Asset have migrated, including, but not limited to, surface waters that have received waste water discharges from the Purchased Asset; (d) any liabilities or obligations required to be accrued by the Seller in accordance with generally accepted accounting principles and/or the FERC Uniform System of Accounts on or before the Closing Date with respect to liabilities related to the Purchased Asset other than any liability assumed by Buyer under any provision of this Agreement, including without limitation, Section 2.3; (e) any liabilities or obligations with respect to liabilities relating to the Purchased Asset relating to any personal injury, including bodily injury, (including, but not limited to workers' compensation claims), discrimination, wrongful discharge, unfair labor practice or similar claim or cause of action with respect to any act or occurrence arising prior to or on the Closing Date other than liabilities or obligations for injury to persons or loss of life assumed by the Buyer in Sections 2.3(d) and 2.3(e); (f) any fines or penalties imposed by a governmental agency or authority resulting from (A) an investigation or proceeding with respect to any act or occurrence arising prior to or on the Closing Date or (B) illegal acts, willful misconduct or gross negligence of the Seller prior to or on the Closing Date. ARTICLE III PURCHASE PRICE 3.1. Purchase Price. The purchase price for the Purchased Asset shall be an amount equal to the sum of $12,500,000 (the "Purchase Price"). 3.2. Proration. (a) The Buyer and the Seller agree that all of the items normally prorated, including those listed below, relating to the Purchased Asset will be prorated as of the Closing Date, with the Seller liable to the extent such items relate to any time period through the Closing Date, and the Buyer liable to the extent such items relate to periods subsequent to the Closing Date: (i) real estate, occupancy and any other Taxes (excluding Income Taxes), assessments and other charges, if any, on or with respect to the ownership or use of the Purchased Asset; (ii) rent, Taxes (excluding Income Taxes) and other items payable by or to the Seller; and (iii) any permit, license or registration fees with respect to any Environmental Permit or other permit relating to the ownership or use of the Purchased Asset ("Permit"). (b) In connection with such proration, in the event that actual figures are not available at the Closing Date, the proration shall be based upon the actual amount of such Taxes or fees for the preceding year (or appropriate period) for which such actual Taxes or fees are available and such Taxes or fees shall be reprorated upon request of either the Seller or the Buyer made within sixty (60) days of the date that the actual amounts become available. The Seller and the Buyer agree to furnish each other with such documents and other records as may be reasonably requested in order to confirm all proration calculations made pursuant to this Section 3.2. ARTICLE IV THE CLOSING 4.1. Time and Place of Closing. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") will take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00 A.M. (local time) on April 30, 1999; or at such other place or later date and time as the parties may agree. The date and time at which the Closing actually occurs is hereinafter referred to as the "Closing Date." 4.2. Payment of Purchase Price. Upon the terms and subject to the satisfaction of the conditions contained in this Agreement, in consideration of the aforesaid sale, assignment, conveyance, transfer and delivery of the Purchased Asset, the Buyer will pay or cause to be paid to the Seller at the Closing in United States dollars by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer. 4.3. Deliveries by Seller. At the Closing, the Seller will deliver the following to the Buyer: (a) The certificates and the opinions of counsel contemplated by Sections 8.2(c), (e), and (f); (b) One or more bargain and sale deeds of conveyance in statutory form, with covenant against grantor's acts, transferring Seller's interest in the Purchased Asset to the Buyer, duly executed and acknowledged by the Seller and in recordable form substantially in the form of Exhibit B hereto; (c) Copies of the resolutions adopted by the board of directors of the Seller, certified by the Secretary of the Seller, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Seller of this Agreement and other closing documents described in this Agreement to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder; (d) All such other instruments of assignment or conveyance as shall, in the reasonable opinion of the Buyer and its counsel, be necessary to transfer to the Buyer the Purchased Asset in accordance with this Agreement and where necessary or desirable, in recordable form; (e) A certification of non-foreign status in a form which complies with Section 1445 of the Code and the regulations thereunder; provided, however, that if the Seller shall fail to deliver such certification, the Buyer shall withhold at the Closing and pay over to the appropriate taxing authority any amount equal to ten (10) percent of the total Amount Realized (as defined under Section 1445 of the Code); and (f) Such other agreements, documents, instruments and writings as are required to be delivered by the Seller at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith. 4.4. Deliveries by Buyer. At the Closing, the Buyer will deliver the following to the Seller: (a) The Purchase Price by wire transfer of immediately available funds or by such other means as are agreed to by the Seller and the Buyer; (b) The certificate and opinion of counsel contemplated by Sections 8.3(c) and (d); (c) The Instrument of Assumption, duly executed by the Buyer; (d) All such other instruments of assumption as shall, in the reasonable opinion of the Seller and its counsel, be necessary for the Buyer to assume the Assumed Liabilities in accordance with this Agreement; (e) Copies of the resolutions adopted by the Members or Managers or other similar governing body of the Buyer, certified by the Member of the Buyer, as having been duly and validly adopted and as being in full force and effect, authorizing the execution and delivery by the Buyer of this Agreement and other closing documents described in this Agreement to which the Buyer is a party, and the performance by the Buyer of its obligations hereunder and thereunder; (f) Such other agreements, documents, instruments and writings as are required to be delivered by the Buyer at or prior to the Closing Date pursuant to this Agreement or otherwise required in connection herewith; and (g) One or more easements to the extent necessary for Seller to continue and maintain their transmission and distribution business, in favor of the Seller (the "Seller's Easements") with respect to the Purchased Asset conveyed to Buyer, duly executed and acknowledged by Buyer, each substantially in the form of Exhibit C hereto, and Buyer shall bear any transfer or similar tax incurred in connection herewith as set forth in Section 7.8. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER The Seller represents and warrants to the Buyer as follows: 5.1. Organization; Qualification. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and has all requisite corporate power and authority to own, lease, and operate its properties and to carry on its business as is now being conducted. The Seller has heretofore delivered to the Buyer complete and correct copies of its Certificate of Incorporation and By-Laws as currently in effect. 5.2. Authority Relative to this Agreement. The Seller has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Seller and no other corporate proceedings on the part of the Seller are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Seller, and assuming that this Agreement constitutes a valid and binding agreement of the Buyer, subject to the receipt of the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, constitutes a valid and binding agreement of the Seller, enforceable against the Seller in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 5.3. Consents and Approvals; No Violation. (a) Except as set forth in Schedule 5.3(a), and other than obtaining the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, neither the execution and delivery of this Agreement by the Seller nor the performance by Seller of its obligations under this Agreement or the consummation of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-Laws of the Seller, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, except (x) where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect or would not prohibit or restrain the execution, delivery or performance of this Agreement, or the consummation of the transactions contemplated hereby in any material respect or (y) for those requirements which become applicable to the Seller as a result of the specific regulatory status of the Buyer (or any of its Affiliates) or as a result of any other facts that specifically relate to the business or activities in which the Buyer (or any of its Affiliates) is or proposes to be engaged; (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which the Seller, or any of its subsidiaries, is a party or by which the Seller, or any of its subsidiaries or any of the Purchased Asset may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, individually or in the aggregate, would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, law, decree, statute, rule or regulation applicable to the Seller, or any of its assets, which violation would, individually or in the aggregate, have a Material Adverse Effect. (b) Except as set forth in Schedule 5.3(b) and except for (i) any required approvals under the Federal Power Act, (ii) (A) notice by the Seller to, and an order by, the NYPSC approving the transactions contemplated by this Agreement, (B) notice by the Seller to, and an order by, the NJBPU approving the transactions contemplated by this Agreement and (C) notice by the Seller to, and an order by, the PAPUC approving the transactions contemplated by this Agreement, (iii) the approval, if required, of the SEC pursuant to the Holding Company Act, and (iv) the filings by the Seller and the Buyer required by the HSR Act and the expiration or earlier termination of all waiting periods under the HSR Act (the filings and approvals referred to in clauses (i) through (iv) are collectively referred to as the "Seller Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by the Seller of the transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations consents or approvals which, if not obtained or made, will not, in the aggregate, have a Material Adverse Effect. 5.4. Undisclosed Liabilities. The balance sheet of the Seller as of December 31, 1997 is referred to herein as the "Seller Balance Sheet." Except as set forth in Schedule 5.4, to the Seller's knowledge, the Seller has no liability or obligation relating to the Purchased Asset, secured or unsecured (whether absolute, accrued, contingent or otherwise, and whether due or to become due), of a nature required by generally accepted accounting principles to be reflected in a corporate balance sheet or disclosed in the notes thereto, which are not accrued or reserved against in the Seller Balance Sheet or disclosed in the notes thereto in accordance with generally accepted accounting principles, except those which either were incurred in the ordinary course of business, after the date of the Seller Balance Sheet, or those which in the aggregate are not material to the Purchased Asset. 5.5. Absence of Certain Changes or Events. Except (i) as set forth in Schedule 5.5, or in the reports, schedules, registration statements and definitive proxy statements filed by the Seller with the SEC and (ii) as otherwise contemplated by this Agreement, to the Seller's knowledge, since the date of the Seller Balance Sheet there has not been: (a) any Material Adverse Effect; (b) any damage, destruction or casualty loss, whether covered by insurance or not, which had a Material Adverse Effect; (c) any entry into any agreement, commitment or transaction (including, without limitation, any borrowing or capital financing) by the Seller, which is material to the Purchased Asset, except agreements, commitments or transactions in the ordinary course of business or as contemplated herein; or (d) any change by the Seller, with respect to the Purchased Asset, in accounting methods, principles or practices except as required or permitted by generally accepted accounting principles. 5.6. Title. Set forth in Schedule 5.6 is a true and complete list of all real property which is part of the Purchased Asset. The Seller has good and marketable record title to the Purchased Asset, subject only to Permitted Encumbrances. 5.7. Insurance. Except as set forth in Schedule 5.7(a), all material policies of fire, liability, and other forms of insurance purchased or held by and insuring or related to the Purchased Asset are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid, and no notice of cancellation or termination has been received with respect to any such policy which was not replaced on substantially similar terms prior to the date of such cancellation. Except as described in Schedule 5.7(b), the Seller has not been refused any insurance with respect to the Purchased Asset nor has its coverage been limited by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last five (5) years nor has it received written notice from any insurer with respect to the Purchased Asset of defects or inadequacies with respect thereto or the improvements located thereon that would materially adversely affect the insurability of the same or cause the imposition of extraordinary premiums therefor. 5.8. Environmental Matters. (a) Except as disclosed in Schedule 5.8(a)(i), to the Seller's knowledge, the Seller holds, and is in compliance with, all permits, licenses, certificates and governmental authorizations ("Environmental Permits") required for Seller to own or use the Purchased Asset under applicable Environmental Laws, and the Seller is otherwise in compliance with applicable Environmental Laws with respect to the Purchased Asset except for such failures to hold or comply with required Environmental Permits, or such failures to be in compliance with applicable Environmental Laws, which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect. Schedule 5.8(a)(ii) sets forth all Environmental Permits relating to the ownership or use of the Purchased Asset. (b) The Seller has not received any written request for information, or been notified that it is a potentially responsible party, under CERCLA or any similar State law with respect to any on-site or off- site location related to the Purchased Asset, and no investigation and/or remediation is being conducted or is pending at the Purchased Asset (other than investigations or remediation conducted by or on behalf of Seller or Buyer in connection with this transaction), except for such liability under such laws or investigation or remediation as would not be reasonably likely to have a Material Adverse Effect. (c) With respect to the Purchased Asset, no action, claim investigation or other proceeding relating to any Environmental Law is pending or, to the Seller's knowledge, threatened, and Seller has not entered into or agreed to any consent decree or order, and are not subject to any judgment, decree, or administrative or judicial order relating to compliance with any Environmental Law or to investigation or cleanup of Hazardous Substances under any Environmental Law, except such consent decrees or orders, judgments, decrees or administrative or judicial orders, actions, claims, investigations or proceedings that (i) would not be reasonably likely to have a Material Adverse Effect, (ii) appear on Schedule 5.8(c) or (iii) relate to off-site disposal locations. (d) All written reports of audits and studies performed by or on behalf of Seller, and in the possession of Seller, which concern Releases of Hazardous Substances at, on, in, or under the Purchased Asset or compliance of Purchased Asset with Environmental Laws, conducted within the last two (2) years, are listed in Schedule 5.8(d) and have been provided to Buyer. (e) The representations and warranties made in this Section 5.8 are the Seller's exclusive representations and warranties relating to environmental matters. 5.9. Real Property Encumbrances. Schedule 5.9 lists real property encumbrances affecting the Purchased Asset including matters contained in deeds, easements and options. True and correct copies of all current surveys, abstracts, title opinions and policies of title insurance currently in force with respect to the Purchased Asset have been delivered by the Seller to the Buyer. None of the Permitted Encumbrances materially adversely affect the existing use of the Purchased Asset. 5.10. Condemnation. Except as set forth on Schedule 5.10, neither the whole nor any part of the Purchased Asset or any other real property or rights leased, used or occupied by the Seller in connection with the ownership of the Purchased Asset is subject to any pending suit for condemnation or other taking by any public authority, and, to the knowledge of the Seller, no such condemnation or other taking is threatened or contemplated. 5.11. Certain Contracts and Arrangements. Except as listed in Schedule 5.11(a), the Seller is not a party to any written contract, agreement, commitment, understanding or instrument which is material to the Purchased Asset. 5.12. Legal Proceedings, etc. Except as set forth in Schedule 5.12 or in any filing made by the Seller pursuant to the Securities Act or the Exchange Act, there are no claims, actions, or proceedings pending or investigation pending or, to the Seller's knowledge, threatened against the Seller relating to the Purchased Asset before any court, arbitrator, governmental or regulatory authority or body acting in an adjudicative capacity, which, if adversely determined, would have a Material Adverse Effect or would prohibit or restrain the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. Except as set forth in Schedule 5.12, the Seller is not subject to any outstanding judgment, rule, order, writ, injunction or decree of any court, governmental or regulatory authority relating to the Purchased Asset which has a Material Adverse Effect. 5.13. Regulation as a Utility. The Seller and certain of its subsidiaries are regulated as public utilities in the States of New York, New Jersey and Pennsylvania, as set forth on Schedule 5.13(a). Except as set forth on Schedule 5.13(b), the Seller is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER The Buyer represents and warrants to the Seller as follows: 6.1. Organization. The Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Buyer has heretofore delivered to the Seller complete and correct copies of its Certificate of Formation and Limited Liability Company Agreement (or other similar governing documents), as currently in effect. 6.2. Authority Relative to this Agreement. The Buyer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Manager or Members of the Buyer and the Board of Directors of both Southern Energy, Inc. and The Southern Company and no other company proceedings on the part of the Buyer or such Affiliates are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by the Buyer, and assuming that this Agreement constitutes a valid and binding agreement of the Seller, subject to the receipt of the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, constitutes a valid and binding agreement of the Buyer, enforceable against the Buyer in accordance with its terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally or general principles of equity. 6.3. Consents and Approvals; No Violation. (a) Except as set forth in Schedule 6.3(a), and other than obtaining the Buyer Required Regulatory Approvals and the Seller Required Regulatory Approvals, neither the execution and delivery of this Agreement by the Buyer nor the purchase by the Buyer of the Purchased Asset pursuant to this Agreement will (i) conflict with or result in any breach of any provision of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents) of the Buyer, (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, (iii) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, agreement, lease or other instrument or obligation to which the Buyer or any of its subsidiaries is a party or by which any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained. (b) Except as set forth in Schedule 6.3(a) , the filings by the Buyer and the Seller required by the HSR Act (the filings and approvals referred to in Schedule 6.3(a) and with respect to the HSR Act are collectively referred to as the "Buyer Required Regulatory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental or regulatory body or authority is necessary for the consummation by the Buyer of the transactions contemplated hereby. 6.4. Regulation as a Utility. On the Closing Date, the Buyer will be an exempt wholesale generator under the Holding Company Act, although it is a subsidiary of a registered public utility holding company under the Holding Company Act. On the Closing Date, the Buyer also will be a public utility under the Federal Power Act. Except as set forth in Schedule 6.4, the Buyer is not subject to regulation as a public utility or public service company (or similar designation) by the United States, any State of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 6.5. Availability of Funds. The Buyer has sufficient funds available to it or will receive binding written commitments from responsible financial institutions to provide sufficient funds on the Closing Date to pay the Purchase Price. ARTICLE VII COVENANTS OF THE PARTIES 7.1. Conduct of Business Relating to the Purchased Asset. Except as described in Schedule 7.1, during the period from the date of this Agreement to the Closing Date, the Seller will maintain the Purchased Asset according to its ordinary and usual course of business consistent with Good Utility Practices. Without limiting the generality of the foregoing, and, except as contemplated in this Agreement or as described in Schedule 7.1, prior to the Closing Date, without the prior written consent of the Buyer (unless such consent would be prohibited by law), the Seller will not with respect to the Purchased Asset: (a) make any material change in the maintenance of the Purchased Asset; (b) make any capital expenditures with respect to the Purchased Asset or enter into any contract or commitment therefor; (c) sell, lease (as lessor), transfer or otherwise dispose of, any part of the Purchased Asset, other than assets used, consumed or replaced in the ordinary course of business consistent with Good Utility Practices and not mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Purchased Asset; (d) amend or terminate prior to the expiration date, or waive any material term or give consent to any material request with respect to any of the Permits or Environmental Permits, except to the extent that such amendment, termination, waiver or consent (i) will not have a material impact on operations of the Purchased Asset, including the cost of said operations or (ii) is required by applicable law, including applicable Environmental Law; and (e) enter into any contract, agreement, commitment or arrangement, whether written or oral, with respect to any of the transactions set forth in the foregoing paragraphs (a) through (d). 7.2. Access to Information. (a) Between the date of this Agreement and the Closing Date, the Seller will, during ordinary business hours and upon reasonable notice (i) give the Buyer and the Buyer Representatives reasonable access to its managerial personnel and all books, records, and property constituting the Purchased Asset to which the Buyer is permitted access by law, (ii) permit the Buyer to make such reasonable inspections thereof as the Buyer may reasonably request, including conducting environmental sampling at, on and underneath the Purchased Asset and performing compliance audits at the Purchased Asset, if Buyer reasonably deems such sampling necessary after reviewing further information which becomes available after the date hereof, so long as Seller provides its consent to such sampling, which consent shall not be unreasonably withheld; (iii) cause its officers and advisors to furnish the Buyer with such information with respect to the Purchased Asset as the Buyer may from time to time reasonably request and assist Buyer in such inspections; (iv) cause its officers and advisors to furnish the Buyer a copy of each report, schedule or other document filed or received by them with or from the SEC, NYPSC, NJBPU, PAPUC, FERC, New York Independent System Operator or other governmental authority with respect to the Purchased Asset; provided, however, that (A) any such investigation shall be conducted in such a manner as not to interfere unreasonably with the Purchased Asset, (B) the Seller shall not be required to take any action which would constitute a waiver of the attorney-client privilege and (C) the Seller need not supply the Buyer with any information which the Seller is under a legal obligation not to supply; provided, however, that Seller shall have used commercially reasonable efforts to have such obligations waived. (b) All information furnished to or obtained by the Buyer and the Buyer Representatives pursuant to this Section 7.2 shall be subject to the provisions of the Section 11.2 hereof and shall be treated as Confidential Information. (c) For a period of seven (7) years after the Closing Date, the Seller and its representatives shall have reasonable access to (i) all of the books and records of the Purchased Asset, as the case may be, transferred to the Buyer hereunder to the extent that such access (A) may reasonably be required by the Seller in connection with matters relating to the Purchased Asset prior to the Closing Date and (B) is not otherwise prohibited by law. Such access shall be afforded by the Buyer upon receipt of reasonable advance written notice and during normal business hours. The Seller shall be responsible for any costs or expenses incurred by them pursuant to this Section 7.2(c). If the Buyer shall desire to dispose of any such books and records prior to the expiration of such seven (7) year period, the Buyer shall, prior to such disposition, give the Seller a reasonable opportunity at the Seller's expense, to segregate and remove such books and records as the Seller may select. Any information provided by Buyer to Seller pursuant to this Section 7.2(c) shall be deemed Confidential Information. 7.3. Expenses. Except to the extent specifically provided herein, whether or not the transactions contemplated hereby are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such costs and expenses. 7.4. Further Assurances. (a) Subject to the terms and conditions of this Agreement, each of the parties hereto will use all commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the sale of the Purchased Asset pursuant to this Agreement. From time to time after the date hereof, without further consideration, the Seller will, at its own expense, execute and deliver such documents to the Buyer as the Buyer may reasonably request in order more effectively to vest in the Buyer good title to the Purchased Asset. Neither party shall, without the prior written consent of the other party, take or fail to take any action which might reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Agreement. From time to time after the date hereof, the Buyer will, at its own expense, execute and deliver such documents to the Seller as the Seller may reasonably request in order to more effectively consummate the sale of the Purchased Asset pursuant to this Agreement. (b) To the extent that any Seller's rights under any guaranties, warranties and indemnification applicable to the Purchased Asset or the Assumed Liabilities are nontransferable or nonassignable, Seller shall use its commercially reasonable efforts to provide to Buyer the benefits thereof in some other manner upon the request of Buyer. 7.5. Public Statements. The parties shall consult with each other prior to issuing any public announcement, statement or other disclosure with respect to this Agreement or the transactions contemplated hereby and shall not issue any such public announcement, statement or other disclosure prior to such consultation, except as may be required by law or stock exchange rules or regulations and except that the parties may make public announcements, statements or other disclosures with respect to this Agreement and the transactions contemplated hereby to the extent that such public announcements, statements or other disclosures do not violate Section 11.2 of this Agreement. 7.6. Consents and Approvals. (a) The Seller and the Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the HSR Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby. The parties shall consult with each other as to the appropriate time of filing such notifications and shall use their best efforts to make such filings at the agreed upon time, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date after the date of filing. Buyer shall bear the cost of all filing fees under the HSR Act. (b) The Seller and the Buyer shall cooperate with each other and (i) promptly prepare and file all necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) use all reasonable efforts to obtain the transfer or reissuance to the Buyer of all consents, approvals and authorizations of all governmental bodies and (iv) use all reasonable efforts to obtain all necessary consents, approvals and authorizations of all other parties, in the case of each of the foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to consummate the transactions contemplated by this Agreement (including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which the Seller or the Buyer is a party or by which either of them is bound. The Seller shall have the right to review and approve in advance all characterizations of the information relating to Purchased Asset; and each of the Seller and the Buyer shall have the right to review and approve in advance all characterizations of the information relating to the transactions contemplated by this Agreement which appear in any filing made in connection with the transactions contemplated hereby. The parties hereto agree that they will consult with each other with respect to the transferring to the Buyer or the obtaining by the Buyer of all such consents, approvals and authorizations of all third parties and governmental bodies. The Seller and the Buyer shall designate separate counsel with respect to all applications, notices, petitions and filings (joint or otherwise) relating to this Agreement and the transactions contemplated hereby on behalf of the Seller, on the one hand and the Buyer on the other hand, with all governmental bodies. (c) The parties hereto shall consult with each other prior to proposing or entering into any stipulation or agreement with any Federal, State or local governmental authority or agency or any third party in connection with any Federal, State or local governmental consents and approvals legally required for the consummation of the transactions contemplated hereby and shall not propose or enter into any such stipulation or agreement without the other party's prior written consent, which consent shall not be unreasonably withheld. (d) Buyer shall assume primary responsibility for securing the transfer or reissuance of the Permits effective as of the Closing Date. Seller shall cooperate with Buyer's efforts in this regard and shall use its best efforts to assist in the transfer or reissuance when so requested by Buyer. In the event that Buyer is unable, despite commercially reasonable efforts, to obtain a transfer or reissuance of one or more Permits as of the Closing Date, Buyer may use the Permits issued to Seller to the extent permissible under applicable laws and regulations provided (i) Buyer notified Seller prior to Closing, (ii) Buyer continues to make commercially reasonable efforts to obtain a transfer or reissuance of such Permits after the Closing, and (iii) Buyer indemnifies Seller for any losses, claims or penalties suffered by Seller in connection with the Permit that is not transferred or reissued as of the Closing Date resulting from Buyer's ownership or use of the Purchased Asset following the Closing Date. In no event shall Buyer use or otherwise rely on a Permit issued to Seller beyond one (1) year after Closing unless Buyer has, after exercising its commercially reasonable efforts, been unable to obtain same and such reliance is not prohibited by law. 7.7. Fees and Commissions. The Seller and the Buyer each represent and warrant to the other that, except for Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), which is acting for and at the expense of the Seller, and Credit Suisse First Boston Corporation, which is acting for and at the expense of the Buyer, no broker, finder or other Person is entitled to any brokerage fees, commissions or finder's fees in connection with the transaction contemplated hereby by reason of any action taken by the party making such representation. The Seller and the Buyer will pay to the other or otherwise discharge, and will indemnify and hold the other harmless from and against, any and all claims or liabilities for all brokerage fees, commissions and finder's fees (other than as described above) incurred by reason of any action taken by such party. 7.8. Tax Matters. (a) Notwithstanding any other provision of this Agreement, all transfer, sales and similar Taxes incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Buyer, and the Buyer will, at its own expense, file, to the extent required by law, all necessary Tax Returns with respect to all such Taxes, and, if required by applicable law, the Seller will join in the execution of any such Tax Returns. (b) With respect to Taxes to be prorated in accordance with Section 3.2 of this Agreement only, the Buyer shall prepare and timely file all Tax Returns required to be filed with respect to the Purchased Asset, if any, and shall duly and timely pay all such Taxes shown to be due on such Tax Returns. The Buyer's preparation of any such Tax Returns shall be subject to the Seller's approval, which approval shall not be unreasonably withheld. The Buyer shall make such Tax Returns available for the Seller's review and approval no later than twenty (20) days prior to the due date for filing such Tax Return. Within ten (10) days after receipt of such Tax Return, the Seller shall pay to the Buyer its proportionate share of the amount shown as due on such Tax Return determined in accordance with the Section 3.2 of this Agreement. (c) Each of the Buyer and the Seller shall provide the other with such assistance (including access to the Purchased Asset) as may reasonably be requested by the other party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each will retain and provide the requesting party with any records or information which may be relevant to such return, audit or examination, proceedings or determination. Any information obtained pursuant to this Section 7.8 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be kept confidential by the parties hereto. (d) The Seller will consult with and allow Buyer to participate in all outstanding real property tax disputes concerning the Purchased Asset and shall take such positions as Buyer may request consistent with the positions previously communicated to Seller by Buyer with respect to such tax disputes, to assist Buyer in obtaining a tax agreement for periods subsequent to the Closing Date. The Seller will use its commercially reasonable efforts to assist Buyer in obtaining an agreement with the taxing authorities pursuant to which the assessed value of the Purchased Asset will be the lowest value achievable. The Seller shall not enter into any agreement with the taxing authorities with respect to such tax disputes relating to periods prior to the Closing Date without the written consent of Buyer which Buyer shall not unreasonably withhold as long as the Seller has complied with this Section 7.8(d). 7.9. Supplements to Schedules. Prior to the Closing Date, the Parties shall supplement or amend the Schedules required by Articles V and VI with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Schedules. No supplement or amendment of any Schedule made pursuant to this Section shall be deemed to cure any breach of any representation or warranty made in this Agreement unless the parties agree thereto in writing. 7.10. Risk of Loss. (a) From the date hereof through the Closing Date, all risk of loss or damage to the property included in the Purchased Asset shall be borne by the Seller. (b) If, before the Closing Date all or any portion of the Purchased Asset are taken by eminent domain, or is the subject of a pending or (to the knowledge of the Seller after reasonable inquiry and investigation) contemplated taking which has not been consummated, the Seller shall notify the Buyer promptly in writing of such fact. If such taking would have a Material Adverse Effect, subject to Section 7.12 of this Agreement, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such taking (including, without limitation, by making a fair and equitable adjustment to the Purchase Price) and, upon such settlement, consummate the transaction contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such taking, then the Buyer may, if such taking relates to the Purchased Asset, terminate this Agreement pursuant to Section 10.1(f). (c) If, before the Closing Date all or any material portion of the Purchased Asset are damaged or destroyed by fire or other casualty, the Seller shall notify the Buyer promptly in writing of such fact. If such damage or destruction would have a Material Adverse Effect and the Seller has not notified the Buyer of its intention to cure such damage or destruction within fifteen (15) days after its occurrence, the Buyer and the Seller shall negotiate in good faith to settle the loss resulting from such casualty (including, without limitation, by making a fair and equitable adjustment to the Purchase Price and assigning any insurance proceeds to Buyer at the Closing) and, upon such settlement, consummate the transactions contemplated by this Agreement pursuant to the terms of this Agreement. If no such settlement is reached within sixty (60) days after the Seller has notified the Buyer of such casualty, then the Buyer may terminate this Agreement pursuant to Section 10.1(f). 7.11. Real Estate Matters. (a) Buyer shall obtain an American Land Title Association ("ALTA") or New York Board of Title Underwriters ("NYBTU") owners standard form title policy commitment with respect to the Purchased Asset (the "Title Commitment") from a title company of Buyer's choice (the "Title Company") covering title to the Purchased Asset, together with an ALTA 3.1 zoning endorsement, if available, including parking and access, and such other endorsements as Buyer may reasonably request. Seller shall provide the Title Company and Buyer such information as the Title Company or Buyer may reasonably request to assist the Title Company in connection with the Title Commitment. Without limiting the foregoing, Seller shall provide the Title Company and Buyer a copy of the most recent surveys in their possession regarding the Purchased Asset. Promptly after receiving the Title Commitment, Buyer shall notify Seller in writing of any defects in title which are not Permitted Encumbrances that would cause title to the Purchased Asset to be uninsurable (any of which is called herein a "Defect of Title"). Buyer shall be deemed to have waived any objection to any Defect of Title that was disclosed by the Title Commitment if Buyer fails to notify Seller of such Defect of Title within thirty (30) days after receipt of such Title Commitment. With respect to the existence of any Defect of Title that is not disclosed by the Title Commitment, but which arises prior to Closing, Buyer shall immediately notify the Seller in writing of any such Defect of Title. (b) Seller agrees that upon the written request of Buyer it will consent and cause its Affiliates to consent to the relocation of the Seller's Easements so long as (i) Buyer pays the cost of such relocation, (ii) such relocation will be to space within Buyer's ownership and will not materially adversely affect the operation of Seller's or its Affiliates' transmission and distribution business (except for the minimum amount of downtime associated with the cut over for such relocation process in accordance with Good Utility Practices), and (iii) the Buyer's requested relocation is consistent with Good Utility Practices. Seller further agrees to condition any grant or assignment by it of the Seller's Easements on the express agreement of its transferee to be bound by the terms and conditions of this Section 7.11(b). (c) As to any Seller's Easement which is to be granted by Buyer at Closing concurrently with the transfer of title to Buyer and prior to any mortgage or other encumbrance, such Seller's Easements shall include standard cross-indemnity provisions relating to personal injury, death or property damage occurring as a result of gross negligence or willful misconduct in the use of such Easements, whereby each party agrees to indemnify the other for the consequences of the gross negligence or wilful misconduct of those for whom the indemnifying party is legally responsible. 7.12. Condemnation. The Seller shall consult with and allow Buyer to participate in all negotiations with the County of Rockland, New York ("Rockland County") concerning Rockland County's threat to condemn a portion of the Purchased Asset. Seller shall use commercially reasonable efforts to assist Buyer in preventing Rockland County from condemning such portion of the Purchased Asset. The Seller shall not enter into any agreement with Rockland County regarding the threatened condemnation without the prior consent of Buyer, which consent Buyer shall not unreasonably withhold. 7.13. Environmental Insurance. If Buyer elects to purchase insurance coverage to cover liabilities arising from Hazardous Substances present or Released at, on, in or under (i) the Purchased Asset and (ii) the "Purchased Asset" and "Purchased Asset," as defined in each of the Other Sales Agreements on or prior to the Closing Date ("Environmental Insurance"), Seller shall share equally with Buyer the cost of premiums for such Environmental Insurance, up to a maximum payment by Seller of $200,000 in the aggregate for such insurance relating to (A) the Purchased Asset and (B) the "Purchased Assets" as defined in each of the Other Sales Agreements. If Buyer purchases such Environmental Insurance, Buyer shall add Seller as an additional insured. 7.14. Expansion. The parties recognize that the Buyer may wish to add additional generating capacity at Bowline Generating Station ("Intended Use") and the value to Buyer for such Intended Use is included in the Purchase Price. Accordingly, to the extent such action or inaction does not interfere with or adversely affect the Seller's transmission and distribution business, Seller agrees that, at Buyer's cost, they: (a) will use commercially reasonable efforts to cooperate with Buyer's reasonable request to remove or modify any (i) Permitted Encumbrances which materially adversely affect Buyer's Intended Use, or (ii) conditions (either physical or otherwise) which exist at the Purchased Asset which would prevent, hinder, or otherwise interfere with the Buyer's Intended Use, and (b) shall not, and shall ensure that their respective affiliates shall not, oppose, hinder, or interfere with Buyer's efforts to add such additional capacity and shall cooperate with Buyer's other reasonable requests with respect thereto. ARTICLE VIII CLOSING CONDITIONS 8.1. Conditions to Each Party's Obligations to Effect the Transactions Contemplated Hereby. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to t fulfillment at or prior to the Closing Date of the following condition (a) The waiting period under the HSR Act applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated with no order, decree, judgment or injunction enjoining or prohibiting the consummation of the transactions contemplated hereby having been issued; (b) No preliminary or permanent injunction or other order or decree by any Federal or State court or governmental authority which prevents or is reasonably likely to prevent the consummation of the transactions contemplated hereby shall be pending or shall have been issued and remain in effect (each party agreeing to use its reasonable efforts to have any such injunction, order or decree lifted) and no statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental authority in the United States which prohibits the consummation of the transactions contemplated hereby; (c) All Federal, State and local government orders, consents and approvals required for the consummation of the transactions contemplated hereby including, without limitation, the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals, shall have become Final Orders (a "Final Order" means action by the relevant regulatory authority which has not been reversed, stayed, enjoined, set aside, annulled or suspended with respect to which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired, and as to which all conditions to the consummation of such transaction prescribed by law, regulation or order have been satisfied), and such Final Order is in form and substance reasonably acceptable to the party that sought the consent or approval granted by such Final Order (for purposes of this clause (i), a Final Order shall be deemed to be reasonably acceptable to such party if it complies in all material respects with the terms and conditions of such party's application therefor and contains no additional terms or conditions which would have a Material Adverse Effect on such party or the ownership or use of the Purchased Asset); provided, however, that if at the time such order, consent, or approval would otherwise be deemed to be a Final Order, there shall be pending or threatened any appeal or challenge thereto, which, if adversely determined, would cause such order, consent or approval to not be reasonably acceptable to the party that sought such order, consent or approval, then if such party who would be adversely affected notifies the other party that such a pending or threatened appeal or challenge exists (such notification to be made as soon as reasonably practicable following knowledge of such pending or threatened appeal or challenge, but in no event later than fifteen (15) days from date on which any waiting period prescribed by law before the transactions contemplated hereby may be consummated has expired and all conditions to the consummation of such transactions prescribed by law, regulation or order have been satisfied), then such order, consent or approval shall be deemed to be a Final Order only after all opportunities for rehearing or judicial review are exhausted and provided, further, that if the designation of an order, consent or approval as a Final Order shall be deferred pursuant to the foregoing proviso, the Termination Date shall be automatically extended for a period of time equal to the period of time for which the designation as a Final Order has been deferred; and (d) All consents and approvals required under the terms of any note, bond, mortgage, indenture, contract or other agreement to which the Seller or the Buyer, or any of their subsidiaries, is a party for the consummation of the transactions contemplated hereby shall have been obtained, other than those which if not obtained, would not, in the aggregate, have a Material Adverse Effect. 8.2. Conditions to Obligations of Buyer. The obligation of the Buyer to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) There shall not have occurred and be continuing, a Material Adverse Effect; (b) The Seller shall have performed and complied with in all respects the covenants and agreements contained in this Agreement required to be performed and complied with by it on or prior to the Closing Date, and the representations and warranties of the Seller set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date, and the Buyer shall have received a certificate to that effect signed by an authorized officer of the Seller; (c) The Buyer shall have received a certificate from an authorized officer of the Seller, dated the Closing Date, to the effect that to the best of such officers' knowledge, after reasonable inquiry and investigation, the conditions set forth in Sections 8.2(a) and (b) have been satisfied; (d) The "Closing" as defined in the Bowline Generating Station Sales Agreement among the Seller, Consolidated Edison Company of New York and the Buyer, dated as of the date hereof as such Closing Date may be extended pursuant to Section 8.4 of the Bowline Generating Station Sales Agreement, shall have occurred or shall occur concurrently with the Closing hereunder; and (e) The Buyer shall have received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) The Seller is a corporation organized, existing and in good standing under the laws of the State of New York and has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all requisite corporate action taken on the part of the Seller. (2) this Agreement has been executed and delivered by the Seller and (assuming that the Buyer Required Regulatory Approvals are obtained) is a valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except that such enforcement thereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (3) the execution, delivery and performance of this Agreement by the Seller will not (A) constitute a violation of the Certificate of Incorporation or By-Laws of the Seller, or (B) to counsel's knowledge constitute a violation or default under those agreements or instruments set forth on a schedule to this opinion; and (4) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Federal or New York governmental authority is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, which are addressed below, (ii) declarations, filings or registrations with, or notices to, or authorizations, consents or approvals relating to Permits and Environmental Permits and (iii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate have a Material Adverse Effect or prevent Seller from performing its obligations hereunder. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer and admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials. (f) The Buyer shall have received an opinion from Riker, Danzig, Scherer, Hyland & Perretti, LLP (New Jersey Counsel), Nixon, Hargrave, Devans & Doyle, LLP (New York Counsel) and Morgan, Lewis & Bockius, LLP (Pennsylvania Counsel), or other local regulatory counsel for Seller reasonably acceptable by Buyer, dated the Closing Date and satisfactory in form and substance to the Buyer and its counsel, substantially to the effect that: (1) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any Federal governmental authority or any governmental authority in the States of New York, New Jersey and Pennsylvania is necessary for the consummation by the Seller of the Closing other than (i) the Seller Required Regulatory Approvals, which have been obtained and are in full force and effect with such terms and conditions as were imposed by the applicable governmental authorities and (ii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, individually or in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States or the laws of the State of New York, such counsel may rely upon opinions of counsel which are reasonably acceptable to Buyer and admitted in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of fact upon certificates furnished by the Seller and appropriate officers and directors of the Seller and by public officials. (g) Buyer shall have received a Title Commitment showing the Real Property to be insured as subject only to Permitted Encumbrances, and the effective date of the Title Commitment shall have been updated to the Closing Date and marked to show the satisfaction of all conditions to the issuance of the title policy other than conditions within the control of the Buyer. 8.3. Conditions to Obligations of Seller. The obligation of the Seller to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following additional conditions: (a) The Buyer shall have performed its covenants and agreements contained in this Agreement required to be performed on or prior to the Closing Date; (b) The representations and warranties of the Buyer set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made at and as of the Closing Date; (c) The Seller shall have received a certificate from an authorized officer of the Buyer, dated the Closing Date, to the effect that, to the best of such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b) have been satisfied; and (d) The Seller shall have received an opinion from Troutman Sanders LLP, counsel for the Buyer, dated the Closing Date and satisfactory in form and substance to the Seller and its counsel, substantially to the effect that: (i) The Buyer is a limited liability company organized, existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized by all requisite corporate action taken on the part of the Buyer; (ii) this Agreement has been executed and delivered by the Buyer and (assuming that the Seller Required Regulatory Approvals and the Buyer Required Regulatory Approvals are obtained) is a valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except (A) that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and (B) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to certain equitable defenses and to the discretion of the court before which any proceeding therefore may be brought; (iii) the execution, delivery and performance of this Agreement by the Buyer will not constitute a violation of the Certificate of Formation or Limited Liability Company Agreement (or other similar governing documents), as currently in effect, of the Buyer; and (iv) no declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental authority is necessary for the consummation by the Buyer of the Closing other than (i) the Buyer Required Regulatory Approvals, all of which have been obtained and are in full force and effect with such terms and conditions as shall have been imposed by any applicable governmental authority; and (ii) such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made, would not, in the aggregate have a Material Adverse Effect. As to any matter contained in such opinion which involves the laws of any jurisdiction other than the Federal laws of the United States and the State of New York, such counsel may rely upon opinions of counsel admitted to practices in such other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall be delivered together with the opinion of such counsel. Such opinion may expressly rely as to matters of facts upon certificates furnished by appropriate Members and Managers of the Buyer and its subsidiaries and by public officials. ARTICLE IX INDEMNIFICATION 9.1. Indemnification. (a) The Seller will indemnify, defend and hold harmless the Buyer, Buyer's Affiliates, and their respective Members, Managers, employees and agents (each a "Buyer Indemnitee") from and against any and all causes of action, claims, demands or suits (by any Person), losses, liabilities, damages (excluding consequential and special damages), obligations, payments, costs, Taxes 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) to the extent the foregoing are not covered by insurance, (collectively, "Indemnifiable Losses"), asserted against or suffered by the Buyer Indemnitee relating to, resulting from or arising out of (i) any breach by the Seller of any covenant or agreement of the Seller contained in this Agreement; (ii) the Excluded Liabilities; (iii) the Excluded Assets; (iv) any breach of the representation in Sections 5.1, 5.2 and 5.3 hereof or (v) the gross negligence or willful misconduct of Seller, its Affiliates or its contractors while on Buyer's property (including, without limitation, any easement provided the Seller with respect to such property) after the Closing to the extent such Indemnifiable Loss is not caused by the negligence or willful misconduct of any Buyer Indemnitee. (b) The Buyer will indemnify, defend and hold harmless the Seller, Seller's Affiliates, and their respective directors, officers, employees and agents (each a "Seller Indemnitee") from and against any and all Indemnifiable Losses asserted against or suffered by the Seller relating to, resulting from or arising out of (i) any breach by the Buyer of any covenant or agreement of the Buyer contained in this Agreement, (ii) the Assumed Liabilities, (iii) its use of the Purchased Asset after the Closing Date, (iv) any breach of any representation in Article VI or (v) the gross negligence or willful misconduct of Buyer, its Affiliates or their respective contractors while on Seller's property after the Closing, to the extent such Indemnifiable Loss is not caused by the negligence or willful misconduct of any Seller Indemnitee. (c) Either the party required to provide indemnification under this Agreement (the "Indemnifying Party") or the entity or person entitled to receive indemnification under this Agreement (the "Indemnitee") may assert any offset or similar right in respect of its obligations under this Section 9.1 based upon any actual or alleged breach of any covenant or agreement contained in this Agreement. (d) Any Indemnitee having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any Indemnifiable Loss hereunder. The amount of any Indemnifiable Loss shall be reduced (i) to the extent that Indemnitee receives any insurance proceeds with respect to an Indemnifiable Loss and (ii) to take into account any Tax or Income Tax benefit recognized by the Indemnitee arising from the recognition of the Indemnifiable Loss, net of any Tax or Income Tax detriment, and any payment actually received with respect to an Indemnifiable Loss. (e) The expiration, termination or extinguishment of any covenant, agreement, representation or warranty shall not affect the parties' obligations under this Section 9.1 if the Indemnitee provided the Indemnifying Party with proper notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (f) The Seller and the Buyer shall have indemnification obligations with respect to Indemnifiable Losses asserted against or suffered by the Seller or the Buyer, as the case may be, to the extent that the aggregate of all such Indemnifiable Losses exceed the Indemnification Floor. It is agreed and understood that neither the Seller nor the Buyer, as the case may be, shall have any liability at any time for Indemnifiable Losses asserted against or suffered by the other party until the aggregate amount of Indemnifiable Losses asserted or suffered by such other party under this Section 9.1 shall exceed the Indemnification Floor, and then only to the extent that the aggregate amount of Indemnifiable Losses exceeds the Indemnification Floor. The term "Indemnification Floor" shall mean an amount equal to $200,000. (g) The rights and remedies of the Seller and the Buyer under this Article IX are exclusive and in lieu of any and all other rights and remedies which the Seller and the Buyer may have under this Agreement for monetary relief with respect to (i) any breach or failure to perform any covenant or agreement set forth in this Agreement; (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be; or (iii) any other liabilities described in Section 9.1(a) or 9.1(b). 9.2. Defense of Claims. (a) If any Indemnitee receives written notice of the assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a party to this Agreement or any affiliate of a party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party, the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) 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 will indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. (b) The party defending the Third Party Claim shall (a) consult with the other throughout the pendency of the Third Party Claim regarding the investigation, defense, settlement, compromise, trial, appeal or other resolution thereof; and (b) afford the other party the opportunity, by notice, to participate and be associated in the defense of any Third Party Claim through counsel chosen by such other party, at its own expense, in the defense of any Third Party Claim as to which a party has elected to conduct and control the defense thereof. The parties shall cooperate in the defense of the Third Party Claim. The Indemnitee shall make available to the Indemnifying Party or its representatives all records and other materials reasonably required for use in contesting any Third Party Claim (subject to such confidentiality provisions as the Indemnitee may reasonably require) and shall furnish such testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnifying Party in connection therewith. If requested by the Indemnifying Party, the Indemnitee shall cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest or, if appropriate, in making any counterclaim against the Person asserting the claim or demand, or any cross-complaint against any Person. The Indemnifying Party shall reimburse the Indemnitee for any expenses incurred by Indemnitee in cooperating with or acting at the request of the Indemnifying Party. (c) If within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 9.2(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within twenty (20) calendar days (unless waiting twenty (20) calendar days would prejudice the Indemnitee's rights) after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of (a) any Third Party Claim with respect to Income Taxes or (b) any other Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer (other than with respect to Income Taxes) within ten (10) calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, compromise, or settle any Third Party Claim (other than with respect to Income Taxes) at any time, provided that in such event the Indemnitee shall waive any right to indemnity hereunder unless the Indemnitee shall have first sought the consent of the Indemnifying Party in writing to such payment, settlement, compromise and such consent was unreasonably withheld or delayed, in which event no claim for indemnity therefor hereunder shall be waived. (d) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than thirty (30) calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will have a period of thirty (30) calendar days (unless waiting thirty (30) days would prejudice the Indemnitee's rights, in which case such period as would likely not prejudice the Indemnitee's rights, but in no event less than ten (10) days) within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty calendar day period, the Indemnifying Party will be deemed to have accepted such Direct Claim. If the Indemnifying Party rejects such Direct Claim, the Indemnitee will be free to seek enforcement of its rights to indemnification under this Agreement. (e) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of the Chase Manhattan Bank), will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. Nothing in this Section 9.2(e) shall be construed to require any party hereto to obtain or maintain any insurance coverage. (f) A failure to give timely notice as provided in this Section 9.2 will not affect the rights or obligations of any party hereunder except if, and only to the extent that, as a result of such failure, the party which was entitled to receive such notice was actually prejudiced as a result of such failure. ARTICLE X TERMINATION AND ABANDONMENT 10.1. (a) This Agreement may be terminated at any time prior to Closing Date, by mutual written consent of the Buyer and the Seller. (b) This Agreement may be terminated by the Seller or Buyer if (i) the Closing shall not have been consummated on or before September 30, 1999 (the "Termination Date"); provided that the right to terminate this Agreement under this Section 10.1(b) shall not be available to Seller or Buyer if its failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; and provided, further, that if on September 30, 1999 the conditions to the Closing set forth in Section 8.1(c) shall not have been fulfilled but all other conditions to the Closing shall be fulfilled or shall be capable of being fulfilled, then the Termination Date shall be the day which is eighteen (18) months from the date of this Agreement. (c) This Agreement may be terminated by either the Seller or the Buyer if (i) any governmental or regulatory body, the consent of which is a condition to the obligations of the Seller and the Buyer to consummate the transactions contemplated hereby, shall have determined not to grant its consent, or shall condition such consent upon any material change to the terms of this Agreement or upon any other condition that materially and adversely affects the value of the transactions contemplated herein or therein for either party, and all appeals of such determination shall have been taken and have been unsuccessful; (ii) any court of competent jurisdiction in the United States or any State shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, judgment or decree shall have become final and nonappealable; or (iii) any statute, rule or regulation shall have been enacted or interpreted by any State or Federal government or governmental agency in the United States which prohibits the transactions contemplated herein. (d) This Agreement may be terminated by the Buyer, if there has been a material violation or breach by the Seller of any agreement, representation or warranty contained in this Agreement which (i) has rendered the satisfaction of any condition to the obligations of the Buyer impossible and such violation or breach has not been waived by the Buyer or (ii) causes a Material Adverse Effect, of which Buyer has notified Seller, and which Seller has not promptly exercised commercially reasonable efforts to cure but in no event later than twenty (20) days following such notification by Buyer. (e) This Agreement may be terminated by the Seller, if there has been a material violation or breach by the Buyer of any agreement, representation or warranty contained in this Agreement which has rendered the satisfaction of any condition to the obligations of the Seller impossible and such violation or breach has not been waived by the Seller or cured by Buyer within fifteen (15) days after receipt by Buyer of notice specifying same. (f) This Agreement may be terminated by either the Seller or the Buyer in accordance with the provisions of Section 7.10(b) or (c) hereof. 10.2. Procedure and Effect of Termination. In the event of termination of this Agreement by either or both of the parties pursuant to Section 10.1, written notice thereof shall forthwith be given by the terminating party to the other party and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated as provided herein, such termination shall be without any further liability of either party or parties to the other party or parties except as follows: (a) in the event of termination of this Agreement by Seller pursuant to Section 10.1(e), Seller shall have the right to pursue all remedies available to it in equity or at law in connection with the violation or breach of this Agreement by Buyer; (b) in the event of termination of this Agreement by Buyer pursuant to Section 10.1(d), Buyer shall have the right to pursue all remedies available to it in equity or at law in connection with the violation or breach of this Agreement by Seller; and (c) all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made. ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of the Seller and the Buyer. 11.2. Confidentiality. (a) All information regarding a party (the "Disclosing Party") that is furnished directly or indirectly to the other party (the "Recipient") pursuant to this Agreement and marked "Confidential" shall be deemed "Confidential Information." Notwithstanding the foregoing, Confidential Information does not include information that (i) is rightfully received from Recipient from a third party having an obligation of confidence to the Disclosing Party, (ii) is or becomes in the public domain, through no action on Recipient's part in violation of this Agreement, (iii) is already known by Recipient as of the date hereof, or (iv) is developed by Recipient independently of any Confidential Information of the Disclosing Party. Information that is specific as to certain data shall not be deemed to be in the public domain merely because such information is embraced by more general disclosure in the public domain. (b) Recipient shall keep the Confidential Information strictly confidential and not disclose any Confidential Information to any third party for a period of two (2) years from the date the Confidential Information was received by Recipient, except as otherwise provided herein. (c) Recipient may disclose the Confidential Information to its and its Affiliates' respective directors, officers, employees, consultants, advisors and agents who need to know the Confidential Information for the purpose of assisting Recipient with respect to its obligations under this Agreement. Recipient shall inform all such parties, in advance, of the confidential nature of the Confidential Information. Recipient shall cause such parties to comply with the requirements of this Agreement and shall be responsible for the actions, uses, and disclosures of all such parties. (d) If Recipient becomes legally compelled or required to disclose any of the Confidential Information (including, without limitation, pursuant to the rules or regulations of the NYPP, ISO or FERC), Recipient will provide the Disclosing Party with prompt written notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy. Recipient will furnish only that portion of the Confidential Information which its counsel considers legally required, and Recipient will cooperate, at the Disclosing Party's expense, with the Disclosing Party's counsel to enable the Disclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. It is further agreed that in the event that a protective order or other remedy is not obtained, the Recipient will furnish only that portion of the Confidential Information which, in the written opinion of the Recipient's counsel, is legally required to be disclosed and, upon the Disclosing Party's request, use commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to such information. (e) Recipient shall promptly return to the Disclosing Party all items containing or constituting Confidential Information, together with all copies, extracts, or summaries thereof, upon the earlier of (i) the Disclosing Party's request, or (ii) the termination or expiration of this Agreement. 11.3. Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 11.4. No Survival. Subject to the provisions of Article X, each and every representation, warranty and covenant contained in this Agreement (other than the covenants contained in Sections 3.2, 7.2(b), 7.2(c), 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 9.1 and 9.2) and in Article XI (which covenants shall survive in accordance with their terms) and other than the representations and warranties contained in Sections 5.1, 5.2, 5.3, 6.1, 6.2 and 6.3 (which representations and warranties shall survive for twelve (12) months from the Closing) shall expire with, and be terminated and extinguished by the consummation of the sale of the Purchased Asset and the transfer of the Assumed Liabilities pursuant to this Agreement and such representations, warranties and covenants shall not survive the Closing Date; and none of the Seller, the Buyer or any officer, director, trustee or Affiliate of either of them shall be under any liability whatsoever with respect to any such representation, warranty or covenant. 11.5. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon receipt on a Business Day if during the normal business hours of the recipient, or if not, on the next Business Day, if delivered personally or by facsimile transmission, telexed or mailed by overnight courier or registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) If to the Seller, to: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 Attention: Legal Department with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attention: Sheldon S. Adler, Esq. (b) If to Buyer, to: Southern Energy Bowline LLC c/o Southern Energy, Inc. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 Attention: Randy Harrison, Vice-President with copies to: Troutman Sanders LLP Nationsbank Plaza Suite 5200 Atlanta, GA 30308 Attention: Robert C. Marshall, Esq. and Southern Company Services 270 Peachtree Street Bin 918 Atlanta, GA 30303 Attention: Vice President and Associate General Counsel 11.6. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto, including by operation of law without the prior written consent of the other party, nor is this Agreement intended to confer upon any other Person except the parties hereto any rights or remedies hereunder. The Buyer acknowledges that Seller has entered into an Agreement and Plan of Merger whereby Seller will become a wholly-owned subsidiary of Consolidated Edison, Inc. ("CEI"). Notwithstanding any other provision of this Section 11.6, the Buyer agrees that this Agreement may be assigned to CEI, or a wholly-owned affiliate of CEI without the Buyer's consent. Notwithstanding the foregoing, (a) Buyer may assign all of its rights and obligations hereunder to any wholly-owned subsidiary (direct or indirect) of Buyer or Buyer's parent and upon Seller's receipt of notice from Buyer of any such assignment, such assignee will be deemed to have assumed, ratified, agreed to be bound by and perform all such obligations, and all references herein to "Buyer" shall thereafter be deemed to be references to such assignee, in each case without the necessity for further act or evidence by the parties hereto or such assignee; and (b) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee or lending institutions for the purposes of financing or refinancing the Purchased Asset, including upon or pursuant to the exercise of remedies with respect to such financing or refinancing, or by way of assignments, transfers, pledges, or other dispositions in lieu thereof; provided, however, that no such assignment or other disposition shall relieve or in any way discharge Buyer or such assignee from the performance of Buyer's obligations under this Agreement. Seller agrees, at Buyer's expense, to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, pledge or other disposition of rights and interests hereunder so long as Seller's rights under this Agreement are not thereby altered, amended, diminished or otherwise impaired. 11.7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies, and the Seller and the Buyer hereby agree to irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. If requested by Seller, Buyer will consent to appointing an agent for service of process in New York City. 11.8. Specific Performance. Seller and Buyer agree that a material breach of this Agreement will cause the non-breaching party immediate and irreparable harm that monetary damages cannot adequately remedy, and therefore, in addition to all other remedies hereunder, the parties agree that, upon any actual or impending material breach of this Agreement, the non-breaching party shall be entitled to equitable relief, including injunctive relief and specific performance, without bond or proof of damages, and in addition to any other remedies that the non-breaching party may have under applicable law. 11.9. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 11.10. Interpretation. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 11.11. Entire Agreement. This Agreement including the Exhibits and Schedules referred to herein, the Confidentiality Agreement and the Guaranty given to Seller by Southern Energy, Inc. embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. It is expressly acknowledged and agreed that there are no restrictions, promises, representations, warranties, covenants or undertakings of Seller contained in any material made available to the Buyer pursuant to the terms of the Confidentiality Agreement (including the Information Memorandum, dated May 1998, previously made available to the Buyer by the Seller and DLJ). This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions other than the Confidentiality Agreement. 11.12. Bulk Sales or Transfer Laws. The Buyer acknowledges that the Seller will not comply with the provision of any bulk sales or transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement. The Buyer hereby waives compliance by the Seller with the provisions of the bulk sales or transfer laws of all applicable jurisdictions. IN WITNESS WHEREOF, the Seller and the Buyer have caused this agreement to be signed by their respective duly authorized officers as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By /s/ D. Louis Peoples --------------------------------- Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer SOUTHERN ENERGY BOWLINE, L.L.C. By /s/ Randy Harrison --------------------------------- Name: Randy Harrison Title: Vice President EX-10 6 EXHIBIT 10.62 - TRANSITION POWER SALES AGREEMENT Exhibit 10.62 TRANSITION POWER SALES AGREEMENT BETWEEN SOUTHERN ENERGY BOWLINE, L.L.C., SOUTHERN ENERGY LOVETT, L.L.C., SOUTHERN ENERGY NY-GEN, L.L.C., AND ORANGE AND ROCKLAND UTILITIES, INC. Dated as of November 24, 1998 TABLE OF CONTENTS Page 1. DEFINITIONS......................................................3 2. TERM AND TERMINATION.............................................6 3. INSTALLED CAPACITY REQUIREMENTS, QUANTITY AND PRICE..............7 4. ENERGY REQUIREMENTS, QUANTITY AND PRICE..........................9 5. SCHEDULING......................................................10 6. BILLING AND PAYMENT PROCEDURES..................................12 7. INDEMNIFICATION.................................................14 8. LIMITATION OF LIABILITY.........................................18 9. FORCE MAJEURE...................................................19 10. DEFAULT AND TERMINATION.........................................20 11. ADDITIONAL REMEDIES.............................................20 12. DISPUTES........................................................21 13. REPRESENTATIONS.................................................21 14. ASSIGNMENT OR OTHER CHANGE IN CORPORATE IDENTITY................23 15. WAIVER..........................................................24 16. COUNTERPARTS....................................................24 17. GOVERNING LAW...................................................25 18. SEVERABILITY....................................................25 19. AMENDMENT.......................................................25 20. ENTIRE AGREEMENT................................................26 21. FURTHER ASSURANCES..............................................26 22. NO THIRD PARTY BENEFICIARIES....................................26 23. CONFIDENTIALITY.................................................26 24. NOTICES.........................................................27 TRANSITION POWER SALES AGREEMENT BETWEEN BOWLINE LLC, LOVETT LLC, NY-GEN LLC AND ORANGE AND ROCKLAND UTILITIES, INC. This Agreement is made and entered into as of this 24th day of November, 1998, by and between Southern Energy Bowline, L.L.C. ("Bowline LLC"), Southern Energy Lovett, L.L.C. ("Lovett LLC"), and Southern Energy NY-Gen, L.L.C. ("NY-Gen LLC"), each a Delaware limited liability company and having their principal place of business at 900 Ashwood Parkway, Suite 500, Atlanta, Georgia 30338 (individually a "Generator" and collectively, the "Generators"), and Orange and Rockland Utilities, Inc. ("O&R"), a New York corporation having a principal place of business at One Blue Hill Plaza, Pearl River, New York 10965. The Generators and O&R shall each be referred to as a "Party", and shall be referred to collectively as the "Parties." WHEREAS, as a consequence of the comprehensive restructuring of the electric power industry in New York State, O&R has offered all its electric generating assets located in New York for sale by auction; WHEREAS, O&R, ConEdison and Bowline LLC have entered into the Bowline Point Generating Station Sales Agreement dated as of the date hereof, O&R and Lovett LLC have entered into the Lovett Generating Station Sales Agreement dated as of the date hereof and O&R and NY-Gen LLC have entered into the Gas Turbine and Hydroelectric Generation Station Sales Agreement dated as of the date hereof (the "ASA's") pursuant to which the respective Generators shall purchase such electric generating assets; WHEREAS, the rights and obligations of buyers and generators of electric generating capacity, energy, transmission and ancillary services may be modified by a proposal (the "Proposal") currently pending before the Federal Energy Regulatory Commission ("FERC") to restructure the New York Power Pool, which contemplates the formation of the New York Independent System Operator ("ISO") and the implementation of the ISO Tariff filed on December 19, 1997, as approved by FERC in FERC Docket Nos. ER97-1523-000, OA97-470-000 and ER97-4234-000, as such tariff may be amended from time-to-time; WHEREAS, FERC may approve, accept, modify, or reject the Proposal, and its actions may affect the rights and obligations under this Agreement; and WHEREAS, in consideration of the sale of the Purchased Assets to the Generators, and in recognition of O&R's installed capacity requirements for its remaining native load customers, the Generators and O&R agree to enter into this Transition Power Sales Agreement, whereby O&R will purchase from the Generators, and the Generators will sell to O&R, various amounts of MW of Installed Capacity and Energy (as defined herein) for the term of this Agreement. NOW THEREFORE, in consideration of the mutual agreements and commitments contained herein, the Generators and O&R hereby agree as follows: 1. DEFINITIONS (a) The following terms shall have the meanings set forth below. Any term used in this Agreement that is not defined herein shall have the meaning customarily attributed to such term by the electric utility industry in New York. "Agreement" shall mean this Transition Power Sales Agreement Between the Generators and O&R, dated as of November 24, 1998, as it may be amended from time to time. "Ancillary Agreements" shall mean (i) the Eastern Load Pocket Call Option Agreement by and between O&R and Lovett LLC, (ii) the Western Load Pocket Call Option Agreement by and between O&R and NY-Gen LLC, (iii) the Continuing Site/Interconnection Agreement by and between O&R and Bowline LLC, (iv) the Continuing Site/Interconnection Agreement by and between O&R and Lovett LLC and (v) the Continuing Site/Interconnection Agreement by and between O&R and NY-Gen LLC, each dated as of the date hereof. "Auction" shall mean the sale of O&R's electric generating units described in the "Confidential Information Memorandum" issued by O&R for the sale of all of O&R's electric generating units, dated May 1998. "Business Day" shall mean any day other than Saturday, Sunday or any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. "Closing Date" shall mean the date and time at which the closing of the transactions contemplated by the ASA's actually occurs. "ConEdison" shall mean Consolidated Edison Company of New York, Inc. "Delivery Point" means the physical point where Energy will be delivered and measured for purposes of this Agreement. With respect to power generated from any of the Purchased Assets, the Delivery Point shall mean the generator terminals at the applicable Purchased Asset. With respect to power generated from non-Purchased Assets, the Delivery Point shall mean the O&R Load Zone. "Energy" shall mean the amount of energy in GWH that the Generators are required to deliver to O&R pursuant to Schedule A. "FERC" shall mean the Federal Energy Regulatory Commission or its successor. "Good Utility Practices" mean any of the practices, methods or acts engaged in or approved by a significant portion of the electric utility industry with respect to similar facilities during the relevant time period which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection, and expedition. Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to delineate the acceptable practices, methods or acts generally accepted in such industry. "Installed Capacity" shall mean electric generating capacity that satisfies all of the applicable Installed Capacity requirements established by the NYPP or ISO, as they apply to O&R. "ISO" shall mean the New York Independent System Operator, as described in the Supplemental Filing, or its successors. "ISO Tariff" shall mean the tariff described in the Supplemental Filing, as it may be amended from time to time. "NERC" shall mean the North American Electric Reliability Council or its successors. "NYPP" shall mean the New York Power Pool or its successors. "O&R" shall mean Orange and Rockland Utilities, Inc. or its successor. "O&R Load Zone" shall mean the load zone as designated by the ISO which encompasses the O&R service territory. "Off-Peak" shall mean all hours not classified as On-Peak hours. "On-Peak" shall mean those hours Monday through Friday, from hour beginning 7:00 AM through hour beginning 10:00 PM excluding NERC holidays. "Purchased Assets" shall mean the Bowline, Lovett, Gas Turbines and Hydroelectric Assets as described in the respective ASA's. "Replacement Capacity" shall mean Installed Capacity under this Agreement from a source different from the source identified by the Generators or O&R and subsequently identified to the NYPP or ISO in O&R's periodic reports required under applicable procedures to the extent such Installed Capacity satisfies NYPP or ISO Installed Capacity requirements applicable to O&R including any applicable delivery requirements. "Replacement Capacity Costs" shall mean the incremental cost of Replacement Capacity to the extent it exceeds the cost of ICAP calculated in accordance with Section 3.2. "Summer Capability Period" shall have the meaning provided by the NYPP, the ISO or their successor(s), as may be modified from time to time. Summer Capability Period is currently each May 1 through October 31 of each year. "Supplemental Filing" shall mean the December 19, 1997 Supplemental Filing to the Comprehensive Proposal to Restructure the New York Wholesale Electric Market in FERC Docket Nos. ER97-1523-000, OA97-470-000, and ER97-4234-000. "Winter Capability Period" shall have the meaning provided by the NYPP, the ISO or their successor(s), as may be modified from time to time. Winter Capability Period is currently each November 1 through April 30 of the following calendar year. (b) Each of the following terms has the meaning specified in the Section set forth opposite such term: Term Section - ---- ------- ASA's Recitals Capacity Payment 3.2 Confidential Information 23(a) CEI 14(b) Direct Claim 7.4 Disclosing Party 23(a) Deficiency Capacity Payment 3.4 Deficiency Energy Payment 4.4 Energy Payment 4.2 Event of Default 10.1 Force Majeure Event 9.1 Generators Indemnifiable Losses 7.2 ICAP 3.2 Indemnifiable Loss 7.3 Indemnifying Party 7.4 Indemnitee 7.3 Net Worth 14(a) O&R Indemnifiable Losses 7.1 Recipient 23(a) Third Party Claim 7.4 2. TERM AND TERMINATION 2.1 Subject to all necessary regulatory authorizations, this Agreement shall become effective when signed by the Parties. O&R's right and obligation to purchase Installed Capacity and Energy and the Generators' obligation to provide and sell Installed Capacity and Energy shall begin on the Closing Date. This Agreement shall terminate on October 31, 2000. 2.2 This Agreement is subject to all necessary regulatory authorizations without any material modifications or conditions. If any regulatory agency having jurisdiction over this Agreement requires any modification to, or imposes any condition of acceptance or approval of, this Agreement, then the Parties shall engage in good faith negotiations for a period of 30 days following the issuance of that modified or conditional acceptance or approval in order to agree to revisions to this Agreement to satisfy, or otherwise address, such modification or condition. If the Parties fail to agree mutually to such changes, then the Generators may make a unilateral filing to satisfy the modification or condition, which filing shall attempt to satisfy the intent of the Parties under this Agreement; provided, however, that O&R shall have the right to protest the manner in which the Generators have attempted to satisfy such modification or condition. 3. INSTALLED CAPACITY REQUIREMENTS, QUANTITY AND PRICE 3.1 Unless excused by the provisions of Article 9, O&R shall purchase from the Generators and the Generators shall provide to O&R Installed Capacity in the amounts specified in Schedule A for the term of this Agreement. Subject to the provisions of this Article 3, O&R shall compensate the Generators for Installed Capacity at a price of $130/MW-Day for the term of this Agreement. 3.2 Subject to the crediting mechanism of Section 3.4, O&R shall pay the Capacity Payment to the Generators monthly as follows: "Capacity Payment" = ICAP multiplied by $130/MW-Day multiplied by number of days in month (or part of month, if applicable during any month of this Agreement) Where: "ICAP" is the amount of Installed Capacity in MW, including Replacement Capacity, not to exceed the amounts in Schedule A, for the term of this Agreement, that is actually provided by the Generators to O&R. 3.3 Except as otherwise provided in this Article 3, O&R shall make no other payment to the Generators for Installed Capacity actually provided under this Agreement. 3.4 Capacity Requirement (a) Whenever ICAP delivered by the Generators to O&R is less than the amount of Installed Capacity that the Generators are required to supply under Section 3.1, the Generators shall pay O&R for reasonable and documented costs incurred by O&R as a direct result of the Generators' failure to supply all or part of the Installed Capacity requirement, calculated as follows: The sum of (i) all installed capacity deficiency charges imposed by the NYPP or ISO on O&R, to the extent they exceed charges that would have been due under Sections 3.1 and 3.2 had the Generators performed with respect to the amount of Installed Capacity by which the Generators were deficient and on which O&R incurred such NYPP or ISO installed capacity deficiency charges; (ii) if the Generators fail to provide Replacement Capacity, and O&R obtains Replacement Capacity from a source other than the Generators in accordance with Good Utility Practices, then O&R's Replacement Capacity Costs that are reasonably incurred, to the extent not included in (i); and (iii) all directly related transaction costs, to the extent not included in (i) and (ii), that are reasonably incurred as a direct result of the Generators' failure to provide O&R with the required amount of Installed Capacity. Such sum shall be referred to as the "Deficiency Capacity Payment." (b) If O&R purchases more Replacement Capacity than the amount by which the Generators are deficient, then O&R shall be solely responsible for the cost of the purchased Replacement Capacity that is more than the amount by which the Generators are deficient. (c) If O&R incurs any reasonable and documented costs described in Section 3.4(a) over a period greater than one calendar month as a direct result of the Generators' deficiencies described in Section 3.4(a), subject to the Generators' approval, which shall not be unreasonably withheld, O&R shall allocate those costs on a monthly basis. 3.5 O&R shall pay all taxes, surcharges, adjustments or other assessments imposed by law, rule or regulation which are of general applicability and imposed on the sales of Installed Capacity hereunder unless O&R can demonstrate, based on a ruling from the New York Public Service Commission, that it cannot collect such taxes, surcharges, adjustments or other assessments from its customers. 3.6 Billing and payments of the Capacity Payment and the Deficiency Capacity Payment shall be made in accordance with Article 6. 3.7 Subject to the terms and conditions set forth herein, the Generators shall satisfy all requirements applicable to suppliers of Installed Capacity established by the NYPP or the ISO (including any applicable locational requirements and compliance with and satisfaction of all applicable tariffs, rules and practices) so that O&R will receive the levels of Installed Capacity specified in Schedule A for the term of this Agreement; and 3.8 Subject to the terms and conditions set forth herein, each Party shall reasonably cooperate with the other Party at the other Party's request in arranging any necessary interfaces or protocols to satisfy NYPP or ISO requirements associated with any services provided under this Agreement. 3.9 Subject to the terms and conditions set forth herein, O&R shall satisfy all requirements applicable to purchasers of Installed Capacity established by the NYPP or the ISO. 4. ENERGY REQUIREMENTS, QUANTITY AND PRICE 4.1 Unless excused by the provisions of Article 9, O&R shall take and purchase from the Generators and the Generators shall deliver and sell to O&R at the Delivery Point, the full amount of Energy specified in Schedule A for the term of this Agreement. The Energy to be delivered by the Generators to O&R may be generated at the Purchased Assets or any other generating facility, whether owned by third parties or the Generators. Title to the Energy shall pass to O&R at the Delivery Point and the Generators shall incur no expense or risk beyond the Delivery Point. Subject to the provisions of this Article 4, O&R shall compensate the Generators at the price levels specified in Schedule A. 4.2 Subject to the crediting mechanism of 4.4, O&R shall pay the Energy Payment to the Generators monthly as follows: "Energy Payment" = ER multiplied by EP Where: "ER" is the amount of Energy in MWH that must be taken by O&R from the Generators for any given month during the capability period and on-peak or off-peak period specified in Schedule A; and "EP" is the Energy price for the capability period and On-Peak or Off-Peak period specified in Schedule A. 4.3 Except as otherwise provided in this Article 4, O&R shall make no other payment to the Generators for Energy actually provided under this Agreement. 4.4 Energy Requirements and Replacement Costs Whenever the amount of Energy delivered to O&R by the Generators during any month is less than the amount of Energy that the Generators are required to supply under Schedule A for that month, the Generators shall pay O&R monthly for reasonable and documented costs incurred by O&R in accordance with Good Utility Practices as a direct result of the Generators' failure to supply all or part of the Energy requirement, calculated as follows. The sum of (i) all reasonable and documented costs incurred by O&R for third-party energy purchases in lieu of Energy amounts that the Generators should have supplied had the Generators performed with respect to the Energy specified in Schedule A and; (ii) All directly related transaction costs not included in Section 4.4 (i) above that are reasonably incurred by O&R as direct result of the Generators' failure to provide the Energy specified in Schedule A. Such sum is referred to as the "Deficiency Energy Payment." 4.5 If the Closing Date occurs after May 1, 1999, the Energy specified in Schedule A for the Summer 1999 Capability Period shall be prorated on a daily basis for the month that the Closing occurs. If the Closing Date occurs after November 1, 1999, the Energy specified in Schedule A for the Winter 1999 Capability Period shall be prorated on a daily basis for the month that the Closing occurs. 4.6 Billing and payment of the Energy Payment and the Deficiency Energy Payment shall be made in accordance with Article 6. O&R shall pay all taxes, surcharges, adjustments or other assessments imposed by law, rule or regulation which are of general applicability and imposed on the sales of Energy hereunder unless O&R can demonstrate, based on a ruling from the New York Public Service Commission, that it cannot collect such taxes, surcharges, adjustments or other assessments from its customers. 5. SCHEDULING 5.1 Schedule Dates for Installed Capacity Subject to Section 5.3, O&R and the Generators shall comply with the following scheduling procedures with respect to Installed Capacity: (a) The Generators shall notify O&R in writing 30 days prior to the anticipated Closing Date of the location and name of each generating unit at the Purchased Assets that the Generators intend to use to supply the Installed Capacity required pursuant to this Agreement and the estimated amount of Installed Capacity the Generators expect to supply from each unit for the period from the Closing Date to and including October 31, 2000; (b) By September 1, 1999, and March 1, 2000, the Generators shall notify O&R in writing of the location and name of each generating unit at the Purchased Assets that the Generators intend to use to supply the Installed Capacity required pursuant to this Agreement and the estimated amount of Installed Capacity the Generators expect to supply from each unit for the periods from November 1, 1999 through April 30, 2000, and from May 1, 2000 through October 31, 2000, respectively; and (c) To the extent permitted by ISO or NYPP procedures and consistent with the Generators' obligations under Section 3.1 and 3.6, the Generators shall notify O&R of any changes in the name and location of, and the amount of Installed Capacity from, any generating unit to be used by the Generators to supply the Installed Capacity required pursuant to this Agreement at least 30 days before the date O&R is required to report such change to the NYPP or ISO. 5.2 Scheduling Energy The Generators and O&R shall comply in all material respects with applicable energy scheduling requirements under NYPP or ISO rules and regulations. 5.3 Notification Changes If the NYPP or ISO modifies the notification schedules or the definition of Summer Capability Period or Winter Capability Period such that the schedule dates contained in this Section 5 are inconsistent with the modified schedule or definition, then O&R shall provide reasonable notice thereof to the Generators and the Parties shall revise the dates in this Section 5 to be consistent with said modification. 6. BILLING AND PAYMENT PROCEDURES 6.1 Billing and Payments (a) Beginning in the calendar month following the Closing Date, the Generators shall render a bill for the Capacity Payment and the Energy Payment to O&R for the previous calendar month in accordance with Sections 3.2 and 4.2 on or before the 20th day of each month. The Capacity Payment and the Energy Payment owed, unless otherwise agreed, shall be due and payable on or before the later of (i) the last day of the month, or (ii) 10 days after O&R receives a bill. (b) After the Closing Date, O&R shall render bills to the Generators for any Deficiency Capacity Payment or Deficiency Energy Payment owed by the Generators to O&R calculated in accordance with Sections 3.4 and 4.4 on or before the 20th day of each month. All Deficiency Capacity Payments or Deficiency Energy Payments owed, unless otherwise agreed, shall be due and payable on or before the later of (i) the last day of the month, or (ii) 10 days after the Generators receives a bill. (c) Each Party may set off any undisputed amount owed to the other Party against any undisputed amount owed pursuant to this Agreement or other arrangement(s) agreed to between the Parties including, without limitation, amounts owed under Sections 3.4 and 4.4. (d) If any payment under Sections 6.1(a) or (b) falls due on a day that is not a Business Day, then the payment shall be made on the next Business Day. (e) Interest on unpaid amounts or payments received after the due date shall accrue at a rate equal to the lesser of (i) two percent per annum over the prime commercial lending rate established from time to time by Chase Manhattan Bank, N.A., New York, New York, or its successor, or (ii) the highest rate per annum permitted by law, from the due date until the date upon which payment is made. (f) All billings to O&R shall be sent to: Orange and Rockland Utilities, Inc. 390 West Route 59 Spring Valley, New York 10977 Attn: Manager - Energy Resources (g) All billings to the Generators shall be sent to: Southern Energy Bowline, L.L.C. Southern Energy Lovett, L.L.C. Southern Energy NY-Gen, L.L.C. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 Attention: Steve Gillis Finance Director North American Operations (h) Any payments owed directly by the Generators to the ISO or the NYPP shall be made pursuant to the procedures established in the ISO Tariff, by the ISO or in the NYPP procedures. The Generators shall be solely responsible for making all such payments to the ISO or the NYPP. (i) The Parties shall maintain records, accounts and other documents sufficient to reflect accurately all transactions hereunder for a period of four years from the time of the transactions. Each Party shall, at its own expense, have the right to audit such records, accounts and other documents of the other Party during such four-year period upon reasonable prior notice to the other Party. 6.2 Billing Disputes If a Party contests the amount billed in accordance with Section 6.1(a) or (b) before the bill is due, the contesting Party shall pay the undisputed billed amount when due and promptly provide written notice to the other Party of the relevant bill identifying the reason for the dispute. If neither Party disputes a bill within six months after the due date of such bill, such bill shall be deemed correct. The Parties shall engage in good faith negotiations to resolve any disputed amounts within 30 days. If the Parties are unable to resolve a dispute within such period, disputed amounts shall be paid into an escrow account pending resolution of the dispute. Thereafter, either Party may exercise such remedies as may be available under this Agreement, at law or in equity. In addition to any other remedies available to the Generators in the event O&R fails to pay a disputed bill into such escrow account within 30 days after its due date, the Generators may withhold Installed Capacity and Energy until such bill is paid. Interest at the rate specified in Section 6.1(e) shall accrue on the portion, if any, that is refunded or credited to the contesting Party or that is released from escrow to the non-contesting Party, when the contested amount is resolved. 6.3 Survival The provisions of Sections 3 and 4 and this Section 6 shall survive termination, expiration, cancellation, suspension, or completion of this Agreement to the extent necessary to allow for final billing and payment. 7. INDEMNIFICATION 7.1 Generators' Indemnification The Generators shall indemnify, hold harmless and defend O&R, its parent, affiliates, and successors, and their officers, directors, employees, agents, subcontractors, and successors, from and against any and all claims, demands, liabilities, costs, losses, judgments, damages and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by O&R in any actions or proceedings between O&R and a third party, the Generators, or any other party) to the extent the foregoing are not covered by insurance ("O&R Indemnifiable Losses") asserted against or suffered by O&R for (i) damage to property, or (ii) injury to or death of any person, including O&R employees, the Generators' employees and their affiliates' employees, or any third parties, in such case to the extent caused by the gross negligence or willful misconduct of the Generators and/or their respective officers, directors, employees, agents, and subcontractors and arising out of this Agreement and not caused by the negligence or willful misconduct of any such Indemnitee. 7.2 O&R's Indemnification O&R shall indemnify, hold harmless and defend the Generators, their parent, affiliates, and successors, and their officers, directors, employees, agents, subcontractors, and successors, from and against any and all claims, demands, liabilities, costs, losses, judgments, damages and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by the Generators in any actions or proceedings between the Generators and a third party, O&R, or any other party) to the extent the foregoing are not covered by insurance ("Generators Indemnifiable Losses") asserted against or suffered by the Generators for (i) damage to property, or (ii) injury to or death of any person, including the Generators employees, O&R's employees and their affiliates' employees, or any third parties, in each case to the extent caused by the gross negligence or willful misconduct of O&R and/or its officers, directors, employees, agents, and subcontractors and arising out of or connected with this Agreement and not caused by the negligence or willful misconduct of any such Indemnitee. 7.3 Indemnification Procedures Any Party entitled to receive indemnification under this agreement (an "Indemnitee") having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any O&R Indemnifiable Loss or Generators Indemnifiable Loss, as appropriate, hereunder. The amount of any O&R Indemnifiable Loss or Generators Indemnifiable Loss, as appropriate, shall be reduced to the extent that Indemnitee receives any insurance proceeds with respect to an O&R Indemnifiable Loss or Generators Indemnifiable Loss, as appropriate (either may be referred to as an "Indemnifiable Loss"). 7.4 Defense of Claims. (a) If any Indemnitee receives written notice of the assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a Party to this Agreement or any affiliate of a Party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from a person required to provide indemnification under this Agreement (an "Indemnifying Party"), the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 days after the Indemnitee's receipt of written notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and will indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee will cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 7.4(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within 20 calendar days (unless waiting 20 calendar days would prejudice the Indemnitee's rights) after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten business days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, compromise or settle any Third Party Claim at any time, provided that in such event the Indemnitee shall waive any right to indemnity hereunder unless the Indemnitee shall have first sought the consent of the Indemnifying Party in writing to such payment, settlement or compromise and such consent was unreasonably withheld or delayed, in which event no claim for indemnity therefor hereunder shall be waived. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than thirty calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will have a period of 30 calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such 30 calendar day period, the Indemnifying Party will be deemed to have accepted such Direct Claim. If the Indemnifying Party rejects such Direct Claim, the Indemnitee will be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of the Chase Manhattan Bank, N.A.), will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. Nothing in this Section 7.4(d) shall be construed to require any Party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 7.4 will not affect the rights or obligations of any Party hereunder except if, and only to the extent that, as a result of such failure, the Party which was entitled to receive such notice was actually prejudiced as a result of such failure. 7.5 Survival The indemnification obligations of each Party under this Article 7 shall become effective upon the occurrence of the Closing Date, and, for acts and occurrences prior to expiration, termination, completion, suspension or cancellation of this Agreement shall continue in full force and effect regardless of whether this Agreement expires, terminates, or is suspended, completed or canceled. Such obligations shall not be limited in any way by any limitation on insurance, by the amount or types of damages (except as otherwise limited under Section 8.1), or by any compensation or benefits payable by the Parties under workers' compensation acts, disability benefit acts or other employee acts, or otherwise. 8. LIMITATION OF LIABILITY 8.1 Limitation on Damages Neither O&R nor the Generators, nor their respective officers, directors, agents, employees, successors, assigns, or subcontractors nor their respective officers, directors, agents, employees, successors, assigns, or subcontractors shall be liable to the other Party or its parent, subsidiaries, affiliates, officers, directors, agents, employees, successors, assigns, or subcontractors for claims, suits, actions, causes of action or otherwise for incidental, punitive, special, indirect, multiple or consequential damages (including attorneys' fees or litigation costs) connected with, or resulting from, performance or non-performance of this Agreement, or any actions undertaken in connection with, or related to this Agreement, including, without limitation, any such damages which are based upon causes of action for breach of contract, statutory (including negligence and misrepresentation), breach of warranty or strict liability. 8.2 Subject to indemnity obligations set forth in Article 7, upon an Event of Default by O&R under this Agreement, which Event of Default is not excusable due to a Force Majeure Event or due to an Event of Default by the Generators under this Agreement, O&R's liability to the Generators shall be limited to the Generators' direct damages incurred by the Generators as a result of such Event of Default by O&R. 8.3 Subject to indemnity obligations set forth in Article 7, upon an Event of Default by the Generators under this Agreement, which Event of Default is not excusable due to a Force Majeure Event or due to an Event of Default by O&R under this Agreement, the Generators' liability to O&R shall be limited to O&R's direct damages incurred by O&R as a result of such Event of Default by the Generators. 8.4 The provisions of this Article 8 shall survive termination, cancellation, suspension, completion, or expiration of this Agreement. 9. FORCE MAJEURE 9.1 Force Majeure Event A Party shall not be considered to be in default or breach of this Agreement, and shall be excused from performance, or liability for damages to the other Party, to the extent it shall be delayed in or prevented from performing or carrying out any of the obligations or responsibilities of this Agreement because of Force Majeure Event. "Force Majeure Event" means any occurrence beyond the reasonable control of a Party which causes such Party to be delayed in or prevented from performing or carrying out any of its obligations under this Agreement and which by the exercise of due diligence in accordance with Good Utility Practices, that Party is unable to prevent, avoid, mitigate, or overcome, including any of the following: any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm or flood, ice, explosion, breakage or accident to machinery or equipment, order, regulation or restriction imposed by governmental military or lawfully established civilian authorities provided that a Force Majeure Event shall not include lack of finances or change in market conditions, and provided further that any failure by the Generators to obtain fuel or services for the Facility due to the failure of any supplier or subcontractor of the Generators to perform any obligation to the Generators will not constitute a Force Majeure Event hereunder unless such subcontractor or supplier is unable to perform for reasons that would constitute a "Force Majeure Event" hereunder. 9.2 Obligations to Make Payment Nothing contained in this Article 9 shall relieve any Party of the obligation to make payments when due pursuant to this Agreement, provided that O&R shall not be required to pay Installed Capacity Payments or Energy Payments due under Sections 3 and 4 to the extent that (i) with respect to Installed Capacity Payments, the Generators are unable to provide ICAP because of a Force Majeure Event experienced by the Generators and O&R is unable to receive Installed Capacity credit as a result thereof and (ii) with respect to Energy Payments, the Generators are unable to deliver Energy because of a Force Majeure Event experienced by the Generators. 9.3 Notice and Due Diligence Any Party claiming that a Force Majeure Event has occurred shall (i) provide prompt written notice of such Force Majeure Event to the other Party giving a detailed written explanation of the event and estimate of its expected duration and probable effect on the performance of that Party's obligations hereunder; and (ii) use commercially reasonable efforts in accordance with Good Utility Practices to mitigate the effect of the Force Majeure Event on the other Party, including the provision of Replacement Capacity, if available; except that settlement of any labor dispute shall be in the sole judgment of the affected Party. 9.4 Survival The provisions in this Article 9 shall survive termination, cancellation, suspension, completion or expiration of this Agreement. 10. DEFAULT AND TERMINATION 10.1 Event of Default Defined Unless excused by a Force Majeure Event, or the other Party's Event of Default, each of the following events shall be deemed to be an "Event of Default" hereunder: failure of either Party, in a material respect, to comply with, observe, or perform any covenant, warranty or obligation under this Agreement, without limitation, including the obligation to pay amounts due under Article 3 and 4 in accordance with Article 6, and such failure is not cured or rectified within 30 days after receipt of written notice of such failure from the other Party or such longer period as may be reasonably required, provided that the defaulting Party diligently attempts to cure the Event of Default; provided, however, that in any event, O&R shall have no more than five Business Days to pay any past due bill. 10.2 This Agreement shall terminate if the ASA's are terminated. 10.3 The provisions of this Section 10 are subject to the occurrence of the Closing Date and shall survive termination, cancellation, suspension, completion or expiration of this Agreement. 11. ADDITIONAL REMEDIES Subject to Section 8.1, and to the extent permitted by law, the Parties shall be entitled to injunctive relief to prevent breaches by a Party, and specific performance to enforce the terms of this Agreement, in addition to any other remedy to which a Party is entitled under this Agreement, at law, or in equity. In addition, the non-defaulting Party may pursue any remedies and may begin proceedings at the FERC to terminate this Agreement by giving at least ten days advance written notice to the defaulting Party, such termination to be effective as of the date specified in such notice, subject to the approval of the FERC, in accordance with FERC regulations. 12. DISPUTES Any disagreement between O&R and the Generators as to their rights and obligations under this Agreement shall first be addressed by the Parties. If representatives of the Parties are unable in good faith to satisfactorily resolve their disagreement, the Parties shall refer to the matter to their respective senior management. If after using their best efforts to try to resolve the dispute, senior management cannot resolve the dispute in 30 days, either Party may exercise any right or remedy available pursuant to this Agreement. 13. REPRESENTATIONS 13.1 Representations of O&R O&R represents and warrants to Generators as follows: (a) Organization. O&R is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and O&R has the requisite corporate power and authority to carry on its business as now being conducted; (b) Authority Relative to this Agreement. O&R has the requisite power and authority to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the actions it contemplates have been duly and validly authorized by all required corporate action. The Agreement has been duly and validly executed and delivered by O&R and constitutes a valid and binding Agreement of O&R; (c) Regulatory Approval. O&R has obtained or will obtain by the Closing Date any and all approvals of, and given any notice to, any public authority that are required for O&R to execute and deliver this Agreement; and (d) Compliance With Law. (i) O&R represents and warrants that it is not in violation of any applicable law, statute, order, rule, or regulation promulgated or judgment entered by any Federal, state, or local governmental authority, which violation would affect O&R's performance of its obligations under this Agreement. (ii) O&R represents and warrants that it will comply in all material respects with all applicable laws, rules, regulations, codes and standards of all Federal, state, and local governmental agencies having jurisdiction over this Agreement and all applicable rules, requirements and procedures of the ISO and NYPP, except to the extent that a failure to so comply would not have a material adverse effect on O&R's obligations hereunder. 13.2 Representations of Generators Each Generator represents and warrants to O&R as follows: (a) Organization. Each Generator is a limited liability company, validly existing and in good standing under the laws of the State of Delaware and each Generator has the requisite power and authority to carry on its business as now being conducted; (b) Authority Relative to this Agreement. Each Generator has the requisite power and authority to execute and deliver this Agreement and, subject to the procurement of applicable regulatory approvals, to carry out the actions required of it by this Agreement. The execution and delivery of this Agreement and the actions it contemplates have been duly and validly authorized by the Managers or Members of each Generator and no other company proceedings on the part of the Generators are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. The Agreement has been duly and validly executed and delivered by each Generator and constitutes a valid and binding Agreement of each Generator; (c) Regulatory Approval. Each Generator has obtained or will obtain by the Closing Date any and all approvals of, and given any notice to, any public authority that are required for it to execute and deliver this Agreement; and (d) Compliance With Law. (i) Each Generator represents and warrants that it is not in violation of any applicable law, statute, order, rule, or regulation promulgated or judgment entered by any Federal, state, or local governmental authority, which violation would affect its performance of its obligations under this Agreement. (ii) Each Generator represents and warrants that it will comply in all material respects with all applicable laws, rules, regulations, codes and standards of all Federal, state, and local governmental agencies having jurisdiction over this Agreement and all applicable rules, requirements and procedures of the ISO and NYPP, except to the extent that a failure to so comply would not have a material adverse effect on its obligations hereunder. 13.3 The representations and warranties in Sections 13.1 and 13.2 shall continue in full force and effect for the term of this Agreement. 14. ASSIGNMENT OR OTHER CHANGE IN CORPORATE IDENTITY (a) This Agreement and all of the provisions hereof shall be binding upon, and inure to the benefit of the Parties and their respective successors and permitted assigns, but assignment of any right, interest or obligation under this Agreement may not be made without the other Party's written consent, which may not be unreasonably withheld. Assignments that are not consented to may be voided by the non-assigning Party. This Agreement shall be binding upon and inure to the benefit of O&R, the Generators and their respective successors and assigns. Notwithstanding the foregoing, (a) O&R may assign this Agreement to an affiliate of O&R that has a contractual or statutory obligation to supply Installed Capacity and Energy to O&R's retail customers, provided, however, that no such assignment, transfer, pledge, conveyance, or disposition shall relieve or in any way discharge O&R from the performance of its duties and obligations under this Agreement; and (b) the Generators may assign, transfer, pledge or otherwise dispose of their respective rights and interests hereunder to (i) a trustee or lending institution(s) for the purposes of financing or refinancing the acquisition of the Purchased Assets, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, pledges, conveyances, or dispositions in lieu thereof; provided, however, that no such assignment, transfer, pledge, conveyance, or disposition shall relieve or in any way discharge the Generators from the performance of their respective duties and obligations under this Agreement; or (ii) an affiliate of the Generators or (iii) a purchaser, transferee or lessor of all or substantially all of a Generator's right, title and interest in and to the Purchased Assets, provided such purchaser, transferee or lessor (A) (1) has a "net worth", or "consolidated net worth", if applicable, as determined in accordance with U.S. generally accepted accounting principles and reflected in an audited balance sheet (or consolidated balance sheet, if applicable) ("Net Worth") at least equal to an amount equal to (x) with regard to Bowline LLC, one-third of the Purchase Price (as described in Section 3.1 of the Bowline Point Generating Station Sales Agreement), (y) with regard to Lovett LLC, one-third of the Purchase Price (as described in Section 3.1 of the Lovett Generating Station Sales Agreement) and (z) with regard to NY-Gen LLC, one-third of the Purchase Price (as described in Section 3.1 of the Gas Turbine and Hydroelectric Generating Station Sales Agreement), or (2) provides a guaranty from an affiliate which has a Net Worth at least equal to the amount specified in (A)(1) above and (B) demonstrates its ability to operate the Purchased Assets to O&R's reasonable satisfaction in accordance with Good Utility Practices. (b) The Generators acknowledge that O&R has entered into an Agreement and Plan of Merger whereby O&R will become a wholly-owned subsidiary of Consolidated Edison, Inc. ("CEI"). Notwithstanding any other provision of this Article 14, the Generators agree that this Agreement may be assigned to CEI, or a wholly-owned affiliate of CEI without the Generators' consent provided, however, that no such assignment, transfer, pledge, conveyance, or disposition shall relieve or in any way discharge O&R from the performance of its duties and obligations under this Agreement. 15. WAIVER Except as otherwise provided in this Agreement, any failure of a Party to comply with any obligation, covenant, agreement, or condition herein may be waived by the Party entitled to the benefit thereof only by a written instrument signed by the Party granting such waiver, but such waiver shall not operate as a waiver of, or estoppel with respect to any subsequent failure of the first Party to comply with such obligation, covenant, agreement, or condition. 16. COUNTERPARTS This Agreement may be executed in two or more counterparts, all of which will be considered one and the same Agreement and each of which will be deemed an original. 17. GOVERNING LAW This Agreement and all rights, obligations, and performances of the Parties hereunder, are subject to all applicable Federal and state laws, and to all duly-promulgated orders and other duly-authorized action of governmental authorities having jurisdiction. When not in conflict with or preempted by Federal law, this Agreement will be governed by and construed in accordance with the law of the State of New York, without giving effect to the conflict of law principles thereof. Except for those matters covered in this Agreement that are jurisdictional to the FERC and the federal appellate courts to the extent of any appeals from FERC proceedings, any action arising out of or concerning this Agreement must be brought in the federal and state courts of the State of New York. Both Parties hereby consent to the exclusive jurisdiction of the courts of the State of New York for the purpose of hearing and determining any action not preempted by Federal law or not within the jurisdiction of the FERC. If requested by O&R, each Generator will consent to appointing an agent for service of process in New York City. 18. SEVERABILITY If any of the provisions of this Agreement are held to be unenforceable or invalid by any court or regulatory authority of competent jurisdiction, the Parties shall, to the extent possible, negotiate an equitable adjustment to the provisions of this Agreement with a view toward effecting the purpose of this Agreement, and the validity and enforcability of the remaining provisions hereof shall not be affected thereby. 19. AMENDMENT If the applicable provisions of the ISO Tariff, or any other ISO or NYPP rules relating to Installed Capacity and Energy or the implementation of this Agreement are changed materially from the ISO Tariff filed with FERC by the Member Systems of NYPP on December 19, 1997, the Parties shall endeavor in good faith to make conforming changes to this Agreement with the intent to fulfill the purposes of this Agreement, provided, however, that in no event shall such change excuse O&R from paying the Capacity Payment in accordance with Section 3.2. Any such conforming change to this Agreement shall be subject to filing with FERC. Except as provided above in this Section 19 and subject to Section 2.2, the rates, terms and conditions contained in this Agreement are not subject to change under Sections 205 or 206 of the Federal Power Act, as either section may be amended or superseded, absent the mutual written agreement of the Partes. It is the intent of this Section 19 that, except as provided above in this Section 19 and subject to Section 2.2, to the maximum extent permitted by law, the rates, terms and conditions in this Agreement shall not be subject to change, regardless of whether such change is sought (a) by the FERC acting sua sponte on behalf of a Party or third party, (b) by a Party, (c) by a third party, or (d) in any other manner and that this Agreement may be amended, modified, or supplemented only by written agreement of both O&R and the Generators. 20. ENTIRE AGREEMENT This Agreement, the ASA's and the Ancillary Agreements constitute the entire understanding between the Parties, and supersedes any and all previous understandings, oral or written, which pertain to the subject matter contained herein or therein. 21. FURTHER ASSURANCES The Parties hereto agree to promptly execute and deliver, at the expense of the Party requesting such action, any and all other and further instruments and documents which may be reasonably requested in order to effectuate the transactions contemplated hereby. 22. NO THIRD PARTY BENEFICIARIES Nothing in this Agreement, express or implied, is intended to confer on any person, other than the Parties, any rights or remedies under or by reason of this Agreement. 23. CONFIDENTIALITY (a) All information regarding a Party (the "Disclosing Party") that is furnished directly or indirectly to the other Party (the "Recipient") pursuant to this Agreement and marked "Confidential" shall be deemed "Confidential Information". Notwithstanding the foregoing, Confidential Information does not include information that (i) is rightfully received from Recipient from a third party having an obligation of confidence to the Disclosing Party, (ii) is or becomes in the public domain through no action on Recipient's part in violation of this Agreement, (iii) is already known by Recipient as of the date hereof, or (iv) is developed by Recipient independently of any Confidential Information of the Disclosing Party. Information that is specific as to certain data shall not be deemed to be in the public domain merely because such information is embraced by more general disclosure in the public domain. (b) Recipient shall keep the Confidential Information strictly confidential and not disclose any Confidential Information to any third party for a period of two years from the date the Confidential Information was received by Recipient, except as otherwise provided herein. (c) Recipient may disclose the Confidential Information to its and its affiliates' respective directors, officers, employees, consultants, advisors and agents who need to know the Confidential Information for the purpose of assisting Recipient with respect to its obligations under this Agreement. Recipient shall inform all such parties, in advance, of the confidential nature of the Confidential Information. Recipient shall cause such parties to comply with the requirements of this Agreement and shall be responsible for the actions, uses, and disclosures of all such parties. (d) If Recipient becomes legally compelled or required to disclose any of the Confidential Information (including, without limitation, pursuant to the rules or regulations of the NYPP, ISO or FERC), Recipient will provide the Disclosing Party with prompt written notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy. Recipient will furnish only that portion of the Confidential Information which its counsel considers legally required, and Recipient will cooperate, at the Disclosing Party's expense, with the Disclosing Party's counsel to enable the Disclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. It is further agreed that, if in the absence of a protective order, Recipient is nonetheless required to disclose any Confidential Information, Recipient will furnish only that portion of the Confidential Information which its counsel considers is legally required. (e) Recipient shall promptly return to the Disclosing Party all items containing or constituting Confidential Information, together with all copies, extracts, or summaries thereof, upon the earlier of (i) the Disclosing Party's request, or (ii) the termination or expiration of this Agreement. 24. NOTICES All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed effective upon receipt when delivered either by hand delivery, cable, telecopy (confirmed in writing) or telex, or by mail (registered or certified, postage prepaid) to the respective Parties as follows: If to O&R, to: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: Legal Department Fax: (914) 577-2959 with copies to: Skadden, Arps, Slate, Meagher & Flom LLP 919 Third Avenue New York, NY 10022 Attention: Sheldon S. Adler, Esq. If to the Generators to: Southern Energy Bowline, L.L.C. Southern Energy Lovett, L.L.C. Southern Energy NY-Gen, L.L.C. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 Attention: Randy Harrison, Vice President Southern Company Services 276 Peachtree Street Bin 918 Atlanta, Georgia 30303 Attention: Vice President and Associate General Counsel and Troutman Sanders LLP Nationsbank Plaza Suite 5200 Atlanta, Georgia 30308 Attention: Robert C. Marshall, Esq. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed as of the date and year first above written. SOUTHERN ENERGY BOWLINE, L.L.C. By: /s/ Randy Harrison _____________________________ Name: Randy Harrison Title: Vice President SOUTHERN ENERGY LOVETT, L.L.C. By: /s/ Randy Harrison ____________________________ Name: Randy Harrison Title: Vice President SOUTHERN ENERGY NY-GEN, L.L.C. By: /s/ Randy Harrison _____________________________ Name: Randy Harrison Title: Vice President ORANGE AND ROCKLAND UTILITIES, INC. By: /s/ D. Louis Peoples ______________________________ Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer EX-10 7 EXHIBIT 10.63 - EASTERN LOAD POCKET CALL OPTION AGREEMENT Exhibit 10.63 ------------------------------------ EASTERN LOAD POCKET CALL OPTION AGREEMENT BETWEEN ORANGE AND ROCKLAND UTILITIES, INC. AND SOUTHERN ENERGY LOVETT, L.L.C. November 24, 1998 ------------------------------------ TABLE OF CONTENTS Article I. Definitions and Interpretation..............................2 Article II. Representations, Warranties and Covenants..................13 Article III. Term.......................................................16 Article IV. O&R's Right to Dispatch the Facility.......................17 Article V. Delivery by Lovett LLC.....................................21 Article VI. Price......................................................21 Article VII. Payment Terms..............................................23 Article VIII. Testing and Capacity Ratings...............................25 Article IX. Generation Commitments.....................................26 Article X. Start-up Lead Times and Other Operating Constraints........26 Article XI. Metering...................................................26 Article XII. Coordination of Facility and System Maintenance............27 Article XIII. Modifications..............................................28 Article XIV. Termination................................................28 Article XV. Indemnification............................................31 Article XVI. Limitation of Liability....................................37 Article XVII. Insurance..................................................38 Article XVII. Force Majeure..............................................41 Article XIX. Contract Documents.........................................43 Article XX. Dispute Resolution.........................................44 Article XXI. Taxes......................................................44 Article XXII. Assignment or Transfer.....................................45 Article XXII. Regulatory Approval; Effective Date........................46 Article XXI. Confidentiality............................................46 Article XXV. Amendments.................................................49 Article XXVI. Books and Records: Audit Rights...........................49 Article XXVII. Miscellaneous Provisions...................................50 THIS LOAD POCKET CALL OPTION AGREEMENT ("Agreement"), dated as of the 24th day of November 1998, between ORANGE AND ROCKLAND UTILITIES, INC., a New York corporation ("O&R") with an office at One Blue Hill Plaza, Pearl River, New York 10965 and SOUTHERN ENERGY LOVETT, L.L.C. a Delaware limited liability company ("Lovett LLC") with offices at 900 Ashwood Parkway, Suite 500, Atlanta, Georgia 30338. W I T N E S S E T H : WHEREAS, O&R is authorized by its certificate of incorporation and by the State of New York to engage in the production, transmission, sale and distribution of electricity for heat, light and power to the public; WHEREAS, pursuant to an Electric Rate and Restructuring Plan dated November 6, 1997 O&R has agreed to divest by auction all its electric generating facilities; WHEREAS, pursuant to this auction process, O&R has agreed to sell the Facility (as defined below) to Lovett LLC; WHEREAS, O&R desires to have the ability to call on and dispatch the Facility under the terms of this Agreement in those hours when the operation of the Facility is required by O&R to ensure the reliability of the Load Pocket (as hereinafter defined) ("Load Pocket Hours"); WHEREAS, Lovett LLC agrees to dispatch the Facility during Load Pocket Hours on the terms and conditions set forth herein and therefore is willing to enter into this Agreement with O&R; and WHEREAS, O&R agrees to pay Lovett LLC to dispatch the Facility during Load Pocket Hours on the terms and conditions set forth herein and therefore is willing to enter into this Agreement with Lovett LLC. NOW, THEREFORE, in consideration of the premises and other valuable consideration given the one to the other, the sufficiency of which each Party acknowledges, O&R and Lovett LLC agree as follows: Article I. Definitions and Interpretation 1.1 The following terms when used herein (and in the schedules attached hereto) with initial capitalization, shall have the meaning specified in this Article. The singular shall include the plural and the masculine shall include the feminine and neuter, and vice versa. "Includes" or "including" shall mean "including without limitation". References to a section, article or schedule shall mean a section, article or schedule of this Agreement, as the case may be, unless the context requires otherwise, and reference to a given Agreement or instrument shall be a reference to that Agreement or instrument as modified, amended, supplemented or restated through the date as of which such reference is made. Unless the context otherwise requires, references to any Law shall be deemed references to such Law as it may be amended, replaced or restated from time to time. Unless the context otherwise requires, any reference to a "person" includes any individual, partnership, firm, company, corporation, joint venture, trust, association, organization or other entity, in each case whether or not having separate legal personality. 1.2 The following terms shall have the meanings set forth below: (a) ASA: The Lovett Generating Station Sales Agreement dated as of November 24, 1998 by and between Lovett LLC and O&R. (b) Available: That the Facility is capable, in real time (subject to Start-up Lead Times), of producing Energy which can be Delivered up to the Availability Limit. (c) Availability: The capability of the Facility at any given time to produce Energy measured in MW. (d) Availability Limit: For any hour the maximum number of MW which Lovett LLC is obligated to make Available from the Facility pursuant to this Agreement, as identified in Schedule A. (e) Business Day: Any day other than Saturday, Sunday or any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (f) Capacity: The capability to generate or transmit electrical power measured in megawatts ("MW"). (g) Capital Improvement: A material addition or modification to, change in, or replacement or renewal of plant or equipment which comprises a Facility or any other plant, equipment or facilities used by Lovett LLC for the production of Energy at the Facility. (h) Closing DateThe date and time at which the closing of the transactions contemplated by the ASA actually occurs. (i) Commission: The New York State Public Service Commission. (j) Contract Year: Each 12-month period commencing on the Effective Date or on any anniversary of the Effective Date occurring during the term of this Agreement. (k) Daily Dispatch Notice: A notice requesting dispatch of the Facility to provide Energy delivered by O&R to Lovett LLC's Scheduling Coordinator on the day before a Requested Operation Period pursuant to this Agreement, in a form which complies with the requirements of Section 4.2. (l) Deliver: To deliver Energy to the Delivery Point in compliance with the requirements described in Section 5.1 and the term "Delivered" shall be construed accordingly. (m) Delivered MW or Delivered MWhs: The MW or MWhs of Energy, as the case may be, Delivered by Lovett LLC pursuant to O&R's request. (n) Delivery Point: The generator terminals at the Facility, which are the physical points where Energy will be delivered and measured for purposes of this Agreement. (o) Dispatch Notice: A Daily Dispatch Notice, an Hourly Dispatch Notice and/or a Dispatch Notice given by O&R in real time to Lovett LLC's Scheduling Coordinator. (p) DMNC: Dependable Maximum Net Capability. (q) Due Date: The date which is 30 days after the date on which a Party submits an invoice to the other Party. (r) Effective Date: The same date as the Closing Date. (s) Emergency: A condition or situation which is likely to result in degradation or disruption of service to O&R's customers, or is likely to endanger life or property. (t) Emission Costs: Lovett LLC's emissions' related costs as calculated pursuant to Schedule E. (u) Energy: Electrical energy. (v) Energy Costs: Lovett LLC's costs for Delivered MWhs which are Delivered pursuant to a Dispatch Notice as calculated pursuant to Section 6.2 and Schedule C. (w) Facility: The electrical generating facilities more particularly described in Schedule A. (x) FERC: Federal Energy Regulatory Commission. (y) Forced Outage: Any outage of the Facility other than (i) a Planned Outage, (ii) a Planned Overhaul, (iii) an outage caused by a Force Majeure Event, (iv) an outage caused by an act or omission of O&R, including any O&R Event of Default, (v) an outage caused by an ISO order or request to take a unit off line as a result of an emergency or as a result of any abnormal transmission condition on O&R's System, or (vi) any outage required to comply with any environmental restrictions, that fully or partially curtails its ability to produce Energy when dispatched by O&R in accordance with the terms of this Agreement. (z) Good Utility Practices: Any of the practices, methods or acts engaged in or approved by a significant portion of the electric utility industry with respect to similar facilities during the relevant time period, which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection and expedition. Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to delineate the acceptable practices, methods, or acts generally accepted in such industry. (aa) Governmental Authority: Any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to a government. (bb) Hourly Dispatch Notice: A notice, delivered by O&R to Lovett LLC's Scheduling Coordinator, requesting dispatch of the Facility to provide Energy pursuant to this Agreement, other than a Daily Dispatch Notice, in such form as may be adopted by the Parties, provided that such form complies with the requirements of Section 4.2 of this Agreement. (cc) Interest Rate: The rate of interest at the prime rate of The Chase Manhattan Bank in effect on the applicable date. (dd) ISO: The New York Independent System Operator. (ee) ISO Protocols: The rules, protocols, procedures and standards promulgated by the ISO (as amended from time to time) to be complied with by the ISO and all market participants in relation to participation in the market for Energy in accordance with the ISO Operating Agreement and Tariff. (ff) ISO Tariff: The open access transmission operating agreement and tariff approved by the FERC, in FERC Docket Nos. ER97-1523-000, OA97-470-000, and ER97-4234-000, as it may be modified and in effect from time to time. (gg) Law: Any law, treaty, code, rule, regulation, or order or determination of an arbitrator, court or other Governmental Authority, or any franchise, license, lease, permit, certificate, authorization, qualification, right or approval issued or granted by a Governmental Authority and binding on a Party or any of its property. (hh) Load Pocket: The electric load required by O&R's customers in the area of O&R's service territory outlined on the attached diagram on Schedule H, provided, however, that, (i) because of transmission constraints on O&R's transmission and distribution system as of the date hereof, such area requires generating resources internal to such area to ensure reliable service to such electric load and (ii) the Facility is a generating resource internal to such area that is necessary to ensure such reliable service. (ii) Lovett LLC's Scheduling Coordinator: The Scheduling Coordinator identified by Lovett LLC. (jj) Market Transaction: A delivery of Energy and/or capacity from the Facility, other than pursuant to this Agreement. (kk) Maximum Requested MW: The highest MW output of the Facility which O&R can request Lovett LLC to dispatch, as shown on Schedule A. (ll) Minimum Requested MW: The lowest MW output needed to maintain stable continuous operation of the Facility, as shown on Schedule A. (mm) NERC: North American Electric Reliability Council or its successors. (nn) Nonmarket Transaction: A delivery of Energy from the Facility pursuant to a Dispatch Notice under this Agreement. (oo) NYPP: The New York Power Pool or its successors. (pp) NYPP Procedures: The most current methods and procedures of the NYPP, including those for determining DMNC, as amended. (qq) Off-Peak: All hours not classified as On-Peak hours. (rr) On-Peak: The hours in Monday through Friday from hour beginning 7:00 a.m. through hour beginning 10:00 p.m. excluding NERC holidays. (ss) O&R Load Zone: The load zone as designated by the ISO which encompasses the O&R service territory. (tt) O&R's System: O&R's electric transmission and distribution system. (uu) Party: Either O&R or Lovett LLC and Parties means O&R and Lovett LLC. (vv) Planned Outage: A planned interruption in the electrical output of the Facility or a planned transmission interruption of the O&R System, as the case may be, to perform routine maintenance pursuant to the Planned Outage schedule provided under Section 12.3. (ww) Planned Overhaul: A planned interruption in the electrical output of the Facility or a planned transmission interruption of the O&R System, as the case may be, to perform a major equipment overhaul and inspections or major transmission facilities maintenance and inspection at the dates and times provided under Section 12.3. (xx) Requested MW : The MW of generation capability which O&R requests be made available from the Facility pursuant to a Dispatch Notice. (yy) Requested Operation Period: The hours during which O&R requests that the Facility be dispatched pursuant to a Dispatch Notice. (zz) Shutdown: The condition of the Facility where the generator rotor is at rest. (aaa) Start-up: The action of bringing the Facility from Shutdown to Synchronous Speed, to its Minimum Requested MW and having it unconditionally released for ramping to full load if required, and "Started-up" and "Starting-up" shall be construed accordingly. (bbb) Start-up Lead Time: The amount of time required to Start-up the Facility, as shown on Schedule A. (ccc) Start-up Costs: Lovett LLC's costs for Starting-up the Facility in response to a Dispatch Notice, as described in Section 6.2 and Schedule D. (ddd) Summer Capability Period: The meaning provided by the NYPP, the ISO or their successor(s), as may be modified from time to time. Summer Capability Period is currently each May 1 through October 31 of each year. (eee) Synchronized: The condition where the Facility is connected to the Transmission Grid. (fff) Synchronous Speed: That speed required by the Facility to enable it to be Synchronized to the Transmission Grid. (ggg) Transmission Grid: The electric transmission system (as it may be modified or expanded from time to time) under control of the NYPP or the ISO. (hhh) Winter Capability Period: The meaning provided by the NYPP, the ISO or their successor(s), as may be modified from time to time. Winter Capability Period is currently each November 1 through April 30 of the following calendar year. 1.3 Each of the following terms has the meaning specified in the Section set forth opposite such term: Term Section - ---- ------- Adjustment Invoice 7.4 Agreement Preamble Annual Forecast 4.1 Availability Payment 6.1 Direct Claim 15.4 Disclosing Party 24.1 Estimated Invoice 7.1 Event of Default 14.1 Force Majeure Event 18.1 Forecast 4.1 Generation Costs 6.2 Indemnifiable Loss 15.3 Indemnifying Party 15.3 Indemnitee 15.3 Load Pocket Dispatch Log Schedule J Load Pocket Hours Recitals Lovett LLC Indemnifiable Loss 15.2 Lovett LLC Preamble Net Worth 22.1 O&R Preamble O&R Indemnifiable Loss 15.1 Occurrence Schedule G Recipient 24.1 Shed Load Schedule G Taxes 21.1 Third Party Claim 15.4 Article II. Representations, Warranties and Covenants 2.1 Lovett LLC makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement. (a) Lovett LLC represents that it is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. (b) Lovett LLC represents and warrants that (i) it is duly authorized to enter into this Agreement and discharge and perform all covenants and obligations on its part to be performed under and pursuant to this Agreement, (ii) the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any law, any order of any court or other agency of government, or any contractual limitation, deed of trust, mortgage, partnership agreement, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Lovett LLC is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing, except for such conflicts, breaches or defaults, as to which requisite waivers have been obtained or which would not have a material adverse effect on Lovett LLC's ability to perform its obligations under this Agreement, and (iii) this Agreement is the legal, valid and binding obligation of Lovett LLC enforceable in accordance with its terms, except that such enforceability may be limited by applicable laws affecting or relating to enforcement of creditors' rights and general principles of equity. (c) Lovett LLC represents and warrants that all consents and authorizations required for Lovett LLC to execute and deliver this Agreement have been obtained, except for such consents and authorizations which, if not obtained, would not be reasonably likely to have a material adverse affect on Lovett LLC's ability to perform its obligations under this Agreement. 2.2 O&R makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement. (a) O&R represents and warrants that it is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. (b) O&R represents and warrants that it is duly authorized to enter into this Agreement and discharge and perform all covenants and obligations on its part to be performed under and pursuant to this Agreement and that the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement will not conflict with or constitute a breach of or a default under, any of the terms, conditions, or provisions of any law, any order of any court or other agency of government, the certificate of incorporation or by-laws of O&R, or any contractual limitation, corporate restriction or outstanding trust indenture, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which O&R is a party or by which it or any of its property is bound, or result in a breach of or default under any of the foregoing except for such conflicts, breaches or defaults, as to which requisite waivers have been obtained or which would not have a material adverse effect on O&R's ability to perform its obligations under this Agreement, and (iii), and this Agreement is the legal, valid and binding obligation of O&R enforceable in accordance with its terms except that such enforceability may be limited by applicable laws affecting or relating to enforcement of creditors' rights and general principles of equity. (c) O&R represents and warrants that all consents and authorizations required to execute this Agreement have been obtained except for such consents and authorizations which, if not obtained, would not be reasonably likely to have a material adverse affect on O&R's ability to perform its obligations under this Agreement. (d) O&R represents and warrants that as of the Closing Date the Facilities are capable of meeting the operating requirements specified herein in accordance with Good Utility Practices, including the Maximum Requested MW, the Minimum Requested MW, the Requested MW, the heat rates set forth in Schedule A, the Start-up Lead Time, the Synchronous Speed and the requirements to be set forth in a Dispatch Notice, and O&R has no knowledge of any conditions at the Facilities that could cause such Facilities to be unable to satisfy such requirements during the term of this Agreement. Article III.Term 3.1 This Agreement shall remain in full force and effect for a period of one year from the Closing Date. O&R may, in its sole discretion, extend the term of this Agreement for a maximum of four additional consecutive one year terms. In order for O&R to exercise its option to extend the term of this Agreement, O&R must provide Lovett LLC with written notice, at least 120 days prior to the termination of this Agreement, of its intention to extend the term of this Agreement for another year. Applicable provisions of this Agreement shall continue in effect after termination to the extent necessary to provide for final billings and adjustments. Upon each one year extension of this Agreement, the Availability Payments in Schedule B shall be increased in accordance with the Consumer Price Index for all Urban consumers, U.S. City Average, all times, unadjusted (base date January 1998) released by the U.S. Government Department of Labor, Bureau of Labor Statistics or its successor, or should such price index be discontinued, or the bases of its calculation be substantially modified, such other price index as is mutually agreed upon by O&R and Lovett LLC. Article IV. O&R's Right to Dispatch the Facility 4.1 On the Effective Date and, if the term of this Agreement has been extended pursuant to Section 3.1, on the anniversary of the Effective Date, O&R will provide Lovett LLC with a non-binding forecast ("Annual Forecast") representing O&R's then current best estimate of the Capacity that O&R will require the Facility to provide during the next 12 months for the Load Pocket. Not less than 30 days prior to the beginning of every calendar month during the term of this Agreement, O&R shall provide Lovett LLC with a non-binding forecast ("Forecast") representing O&R's then current best estimate of the Capacity that O&R will require the Facility to provide from the beginning of that calendar month through the end of the following two calendar months (a three month period) for the Load Pocket. The Forecast and Annual Forecast will take into account the Planned Outages and Planned Overhauls. O&R shall use its best efforts to prepare its estimate but shall have no liability to Lovett LLC for the accuracy or completeness of the Forecast or the Annual Forecast. 4.2 Subject to the terms and conditions described in this Agreement, O&R shall have the right to direct that the Facility be available to Deliver Energy during Load Pocket Hours for the Load Pocket. O&R shall direct the dispatch of the Facility by delivering, in accordance with the communication protocols from time to time established by the Parties, a Daily Dispatch Notice to Lovett LLC's Scheduling Coordinator not later than 10:00 a.m. of the day before the commencement of the Requested Operation Period specified in such notice and/or delivering an Hourly Dispatch Notice to Lovett LLC's Scheduling Coordinator at least one half hour prior to the commencement of the Requested Operation Period specified in such notice and/or delivering a Dispatch Notice in real time. Each Dispatch Notice shall comply with the Start-up Lead Times and the other operational limitations described in Schedule A, and, Lovett LLC shall have no liability, nor shall Lovett LLC suffer any reductions in payments, for failure to comply with a Dispatch Notice which is not in compliance with such limitations. Each Daily Dispatch Notice or Hourly Dispatch Notice may be modified by a subsequent Daily Dispatch Notice or a subsequent Hourly Dispatch Notice, subject to the restrictions of this subsection. O&R may, subject to the restrictions of this subsection, issue a Dispatch Notice directing dispatch of the Facility in real time for the Load Pocket. 4.3 Each Dispatch Notice shall specify the time of commencement and termination of the Requested Operation Period and, for each hour of the Requested Operation Period, the Minimum Requested MW which O&R requests to be dispatched and the Maximum Requested MW O&R requests to be available for the Load Pocket. All hours of operation in each Dispatch Notice shall be consecutive Load Pocket Hours, unless otherwise agreed to in writing by Lovett LLC. O&R may not direct Lovett LLC to conduct more than one dispatchable start-up per calendar day per generating unit. Each Party shall record the applicable information from the Dispatch Notices in the Load Pocket Dispatch Log, a form of which is attached hereto in the Form of Schedule J. 4.4 If Lovett LLC considers that a Dispatch Notice does not comply with the limitations set forth in Schedule A or that Lovett LLC is otherwise not required to dispatch the Facility in accordance with a Dispatch Notice, it shall forthwith give written notice to O&R to that effect. This notice shall specify in detail why Lovett LLC believes the Dispatch Notice does not comply or Lovett LLC is not otherwise required to dispatch the Facility, as the case may be, and shall include, without limitation, the following bases for the notice as applicable: (i) any amount of Capacity requested by O&R that Lovett LLC is not obligated to provide pursuant to Section 9.1; (ii) whether the Start-up Lead Time or any other operating constraint as described in Schedule A is inconsistent with Delivery of the Requested MW in accordance with the Dispatch Notice; (iii) any operation of the Facility necessary to comply with the Dispatch Notice which would be in breach of any applicable Law or would conflict with Good Utility Practices. 4.5 Upon receipt of Lovett LLC's notice issued pursuant to Section 4.4, O&R may, by delivering a notice to Lovett LLC's Scheduling Coordinator promptly thereafter, but in no event later than half an hour prior to commencement of the Requested Operation Period, modify the Dispatch Notice in accordance with Lovett LLC's notice. 4.6 At or about 9:00 a.m. each day, Lovett LLC shall provide O&R with a daily status report regarding the operating characteristics and current status of the Facility, substantially in the form attached hereto as Schedule L. This report will include information that pertains to the reliable performance of the Facility such as response rate, start up time, minimum run time, minimum down time, minimum loading point, full load point and available choice of fuels. The report also will describe the Facility's current availability, deratings and planned operations for the next 24 hours. Lovett LLC shall notify O&R immediately of any actual or planned change to this data. Article V. Delivery by Lovett LLC 5.1 Lovett LLC shall, in response to a Dispatch Notice from O&R, dispatch the Facility at the Minimum Requested MW and make available the Maximum Requested MW in accordance with the Dispatch Notice, subject to the limits described in this Agreement. 5.2 Lovett LLC shall, in response to a Dispatch Notice from O&R, provide reactive supply and voltage control for the Load Pocket by making available the minimum MVARs at full MW load as set forth in Schedule A. Article VI. Price 6.1 Following the Effective Date, O&R shall make Availability payments as described in Schedule B ("Availability Payments") to Lovett LLC in accordance with Section 7.1. 6.2 When Lovett LLC dispatches a Facility into the ISO during Load Pocket Hours pursuant to a Dispatch Notice, O&R shall pay Lovett LLC its Generation Costs as set forth below ("Generation Costs"), to the extent that the revenue received by such Facility from the ISO is less than the Generation Costs during such time period. For purposes of determining such payment described in the preceding sentence, (i) the revenue received by the Facility shall include all revenue received from all energy and ancillary services markets, during the period the Facility operates as recorded in the Load Pocket Dispatch Log, but shall exclude any capacity payments and (ii) such revenue shall not be reduced by any penalties assessed by the ISO for non-performance. Generation Costs shall be the sum of all applicable Energy Costs for both minimum generation and above minimum generation (as calculated pursuant to Schedule C), Start-up Costs (as calculated pursuant to Schedule D) and Emissions Costs (as calculated pursuant to Schedule E). Schedule F illustrates how payment will be calculated when a Facility is operating pursuant to Market and Nonmarket Transactions. In addition, to the extent that O&R issues a notice modifying the Dispatch Notice pursuant to Section 4.2 or 4.5, O&R shall compensate Lovett LLC for any incremental costs including, but not limited to, imbalance or scheduling charges and/or penalties imposed on or incurred by Lovett LLC as a result of the modification. 6.3 If Lovett LLC fails to be available to provide Energy during Load Pocket Hours, Lovett LLC shall be assessed the penalties as calculated in accordance with Schedule G to this Agreement. Such penalties shall be O&R's sole and exclusive remedy with respect to any failure to be available or to provide Energy during Load Pocket Hours. 6.4 Nothing in this Agreement shall restrict Lovett LLC from entering into Market Transactions either inside or outside of a Requested Operation Period. 6.5 O&R is not purchasing from and accordingly makes no payment to Lovett LLC for either capacity or ancillary services pursuant to this Agreement. If the Parties wish to engage in the purchase or sale of capacity and/or ancillary services, they will do so pursuant to a separate agreement(s). Article VII.Payment Terms 7.1 Within 14 days after the end of each calendar month during the term of this Agreement (and, if termination of this Agreement does not occur at the end of a month, within 14 days after the end of the month in which termination occurs), Lovett LLC shall submit an estimated invoice ("Estimated Invoice") to O&R for all charges properly due under this Agreement for that month using reasonable estimates of actual data. Such invoice shall set out or be supported by detailed calculations and breakdowns of the estimated amounts due. The Estimated Invoice shall be paid by O&R no later than the Due Date. 7.2 All payments shall be made by wire transfer in accordance with instructions from the Party making payment or by memorandum accounts. Each Party may set off any undisputed amount owed to the other Party against any undisputed amount owed pursuant to this Agreement or other arrangement(s) agreed to between the Parties. 7.3 If any sum or part of a sum shown on an invoice is disputed by either Party, payment of the undisputed sums on that invoice shall not be withheld. Interest on any unpaid amounts shall be charged at the Interest Rate plus 2 percent per annum calculated from the Due Date of the invoice to the date of payment. 7.4 Lovett LLC shall submit to O&R an adjusted or supplemental invoice ("Adjustment Invoice") within 60 days after the date of the Estimated Invoice which Adjustment Invoice should reflect the actual amounts due from O&R to Lovett LLC for the months covered by the appropriate Estimated Invoice. If the Adjustment Invoice reflects an amount that is less than the amount charged to O&R under the Estimated Invoice, Lovett LLC shall pay the difference between the amount in the Adjustment Invoice and the amount in the Estimated Invoice to O&R together with interest at the Interest Rate from the Due Date of the Estimated Invoice to the effective date of repayment by Lovett LLC no later than the Due Date and the provisions of Section 7.2 shall apply to any such payment. If the Adjustment Invoice reflects an amount that is greater than the amount charged to O&R under the Estimated Invoice, O&R shall pay the difference between the amount in the Adjustment Invoice and the amount in the Estimated Invoice to Lovett LLC together, with interest from the Due Date of the Estimated Invoice to the date of payment by O&R. 7.5 If the Due Date is not a Business Day, then the next following Business Day will be the Due Date. 7.6 If O&R does not dispute the amount in an Estimated Invoice or an Adjustment Invoice in a writing provided to Lovett LLC identifying in reasonable detail the reasons therefor within six months after receipt of such invoice, such invoice shall be deemed correct. Each Party shall at its own cost provide the other Party with such information and assistance as the other Party reasonably requests to resolve the dispute, subject to the confidentiality provisions herein. If O&R has disputed the amount prior to its due date in a writing provided to Lovett LLC identifying in reasonable detail the reasons thereof, O&R shall not be obligated to pay the disputed amount until such dispute is resolved. The Parties shall engage in good faith negotiations to resolve any disputed amounts within 30 days. If the Parties are unable to resolve the dispute within such 30-day period, either Party may exercise such rights and remedies available to it under law or at equity. If the dispute is finally settled or determined in favor of Lovett LLC, Lovett LLC shall include the amount settled or determined in an invoice under Section 7.1 or 7.4 plus interest. If the settlement or determination of the dispute results in an amount being due to O&R, Lovett LLC shall pay O&R or credit the rebate to O&R at the time the next invoice is issued to O&R plus interest. Interest on disputed amounts will be calculated in accordance with Section 7.3. Article VIII. Testing and Capacity Ratings 8.1 During the term of this Agreement, Lovett LLC shall provide O&R with the results of the DMNC test which Lovett LLC performs for each capability period (as defined by the NYPP or the ISO or their successors) in accordance with NYPP Procedures or any similar test established by the ISO Protocols. Article IX. Generation Commitments 9.1 O&R shall not have the right under this Agreement to dispatch the Facility (i) in excess of the Maximum Requested MW, (ii) less than the Minimum Requested MW, (iii) to provide Energy to customers outside of the Load Pocket or to support O&R's System outside of the Load Pocket, or (iv) during any outage that is included as an exception to the definition of "Forced Outage". Article X. Start-up Lead Times and Other Operating Constraints 10.1 Lovett LLC shall not be obligated under this Agreement to Start-up the Facility unless the amount of time between the delivery of the Dispatch Notice requesting such Start-up and the commencement of the applicable Requested Operation Period shall at least equal the Start-up Lead Time. 10.2 Lovett LLC shall not be obligated to operate the Facility pursuant to this Agreement in excess of the other operational limits as set forth in Schedule A or in a manner inconsistent with Good Utility Practices or Law. Article XI. Metering 11.1 Metering services shall be performed as provided for in the Continuing Site/Interconnection Agreement, by and between O&R and Lovett LLC, dated November 24, 1998. Article XII.Coordination of Facility and System Maintenance 12.1 Lovett LLC shall use its commercially reasonable efforts to fuel, operate and maintain the Facility, or cause the Facility to be fueled, operated and maintained, in accordance with all material Laws and Good Utility Practices so that Lovett LLC is able to perform its obligations under this Agreement. Lovett LLC shall also notify O&R of any derating greater than 5% of the Facility's nominal ratings, as set forth in Schedule A, that will cause Lovett LLC to be unable to perform its obligations during a Load Pocket Hour. 12.2 Other than unscheduled maintenance, each Party shall use reasonable efforts to coordinate with the other Party the maintenance of the Facility and the O&R System, as the case may be, as well as any electric transmission lines, required in order to ensure the sound operation of the Facility and O&R's System. Except in cases of Emergency and Good Utility Practices, neither Planned Outages, including planned partial outages, and Planned Overhauls shall be scheduled or performed at the Facility or the O&R System, as the case may be, during the On-Peak hours in the months of June through September, inclusive, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. 12.3 Within 60 days after the Effective Date, each Party shall provide the other Party, a non-binding schedule of Planned Outages and Planned Overhauls (including expected commencement date and duration) for the following calendar year. In addition, each Party shall provide a non-binding two-year forecast of Planned Overhauls in accordance with ISO procedures. Each Party may make such changes to such schedules and forecasts as it considers appropriate, at its sole discretion, subject to the restrictions set forth herein. Article XIII. Modifications 13.1 In the event of any material loss or damage to the Facility that would substantially impair the capability of the Facility to Deliver Energy during a Load Pocket Hour, Lovett LLC shall at its own expense make such repairs or replacements as it considers necessary in accordance with Good Utility Practices in order to perform its obligations hereunder. Article XIV. Termination 14.1 Unless otherwise caused by a Force Majeure Event or an act or omission of the non-defaulting Party, any one or more of the following events shall constitute an Event of Default under this Agreement, and the terms "Event of Default" or "Events of Default" shall mean, whenever they are used in this Agreement, any one or more of the following events: (a) Failure by either Party to pay any material amount due and payable by it pursuant to this Agreement after the same shall have become due and payable; (b) A material breach by either Party of any covenant, condition or obligation on its part to be performed (other than as referred to in paragraph (a) above) and such failure shall materially and adversely affect such Party's performance under this Agreement and such breach is not cured within 30 days after the breaching Party receives written notice thereof from the non-breaching Party, or within such longer cure period as may reasonably be required if such breach cannot be reasonably cured within such 30-day period and the defaulting Party has instituted corrective action and diligently attempts to cure such default and continues such action until the cure is complete; (c) The dissolution or liquidation of either Party, or the admission in writing by either Party of its inability to pay its debts as they become due, or the failure by either Party to lift any execution, garnishment or attachment of such consequences as will impair such Party's ability to perform substantially its obligations pursuant to this Agreement, or the commission by either Party of any act of bankruptcy, or the adjudication of either Party as a bankrupt, or the making of any assignment by either Party for the benefit of its creditors or the entry by either Party into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to either Party in any proceeding for the reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar proceeding instituted under the provisions of any bankruptcy act or under any similar act in any domestic or foreign jurisdiction which may now be in effect or hereafter enacted, or within 60 days after the commencement of any such proceeding against either Party such proceeding shall have been dismissed, or the filing of an answer admitting or not contesting the material allegations of a petition against it in such proceeding, or the appointment without the consent or acquiescence of either Party, of any trustee, receiver or liquidator of either Party or of any material part of its properties, if within 60 days thereafter such appointment shall not have been vacated, or if either Party shall seek or consent or acquiesce in the appointment of any trustee, receiver or liquidator of itself or of any material part of its properties; (d) If any material representation or warranty made by or on behalf of either Party shall prove to have been false or incorrect in any material respect on the date as of which made. 14.2 Whenever any Event of Default shall have occurred and be continuing, the non-defaulting Party, to the extent permitted by law, may, upon written notice to the defaulting Party, terminate this Agreement and thereupon this Agreement shall cease and terminate. 14.3 In addition to the foregoing remedies, whenever any Event of Default, which materially affects the defaulting Party's performance under this Agreement, shall have occurred and be continuing, the non-defaulting Party, to the extent permitted by law, shall be entitled to suspend immediately its performance under this Agreement, until such Event of Default is corrected. If the Event of Default does not cease or is not corrected, the non-defaulting Party may proceed to terminate this Agreement in accordance with the provisions of this Agreement. 14.4 No termination of this Agreement shall relieve the defaulting Party of its liability and obligations hereunder accruing or arising prior to such termination, and the non-defaulting Party may take wherever action at law or in equity as may appear necessary or desirable to enforce performance and observance of any obligations, agreements, or covenants under this Agreement, and the rights given hereunder shall be in addition to all other remedies available to the Parties, either in law, at equity or otherwise, for the breach of this Agreement. Article XV. Indemnification 15.1 Lovett LLC's Indemnification Lovett LLC shall indemnify, hold harmless and defend O&R, its parent, affiliates, and successors, and their officers, directors, employees, agents, subcontractors, and successors, from and against any and all claims, demands, liabilities, costs, losses, judgments, damages and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by O&R in any actions or proceedings between O&R and a third party, Lovett LLC, or any other party) to the extent the foregoing are not covered by insurance ("O&R Indemnifiable Losses") asserted against or suffered by O&R for (i) damage to property, or (ii) injury to or death of any person, including O&R employees, Lovett LLC's employees and their affiliates' employees, or any third parties, in such case to the extent caused by the gross negligence or willful misconduct of Lovett LLC and/or its officers, directors, employees, agents, and subcontractors and arising out of this Agreement and not caused by the negligence or willful misconduct of any such Indemnitee. 15.2 O&R's Indemnification O&R shall indemnify, hold harmless and defend Lovett LLC, its parent, affiliates, and successors, and their officers, directors, employees, agents, subcontractors, and successors, from and against any and all claims, demands, liabilities, costs, losses, judgments, damages and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by Lovett LLC in any actions or proceedings between Lovett LLC and a third party, O&R, or any other party) to the extent the foregoing are not covered by insurance ("Lovett LLC Indemnifiable Losses") asserted against or suffered by Lovett LLC for (i) damage to property, or (ii) injury to or death of any person, including Lovett LLC employees, O&R's employees and their affiliates' employees, or any third parties, in each case to the extent caused by the gross negligence or willful misconduct of O&R and/or its officers, directors, employees, agents, and subcontractors and arising out of this Agreement and not caused by the negligence or willful misconduct of any such Indemnitee. 15.3 Indemnification Procedures Either Party entitled to receive indemnification under this agreement (an "Indemnitee") having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any O&R Indemnifiable Loss or Lovett LLC Indemnifiable Loss, as appropriate, hereunder. The amount of any O&R Indemnifiable Loss or Lovett LLC Indemnifiable Loss, as appropriate, shall be reduced to the extent that Indemnitee receives any insurance proceeds with respect to an O&R Indemnifiable Loss or Lovett LLC Indemnifiable Loss, as appropriate (either may be referred to as an "Indemnifiable Loss"). 15.4 Defense of Claims. (a) If any Indemnitee receives written notice of the assertion of any claim or of the commencement of any claim, action, or proceeding made or brought by any Person who is not a Party to this Agreement or any affiliate of a Party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from a person required to provide indemnification under this Agreement (an "Indemnifying Party"), the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 days after the Indemnitee's receipt of written notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and will indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee will cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 15.4(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within 20 calendar days (unless waiting 20 calendar days would prejudice the Indemnitee's rights) after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten business days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, compromise, or settle any Third Party Claim at any time, provided that in such event the Indemnitee shall waive any right to indemnity hereunder unless the Indemnitee shall have first sought the consent of the Indemnifying Party in writing to such payment, settlement, or compromise and such consent was unreasonably withheld or delayed, in which event no claim for indemnity therefor hereunder shall be waived. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than 30 calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will have a period of 30 calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such 30 calendar day period, the Indemnifying Party will be deemed to have accepted such Direct Claim. If the Indemnifying Party rejects such Direct Claim, the Indemnitee will be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of the Chase Manhattan Bank, N.A.), will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. Nothing in this Section 15.4(d) shall be construed to require any Party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 15.4 will not affect the rights or obligations of any Party hereunder except if, and only to the extent that, as a result of such failure, the Party which was entitled to receive such notice was actually prejudiced as a result of such failure. 15.5 Each Party shall be responsible for protecting its facilities from possible damage by reason of electrical disturbances or faults caused by the operation, faulty operation, or non-operation of the other Party's facilities, and such other Party shall not be liable for any such damages so caused. Article XVI. Limitation of Liability 16.1 Neither Party shall be liable to the other Party or its affiliates for any consequential, incidental, punitive, special or indirect damages arising out of or relating to the performance or breach of this Agreement including, without limitation, replacement power costs, loss of revenue, loss of anticipated profits or loss of use of the Facility, the O&R System or other property, whether or not such damages are based upon causes of action for breach of contract, statutory (including negligence and misrepresentation), breach of warranty, or strict liability. 16.2 The benefits of this Article shall also extend to each Party's affiliates and their respective officers, directors, employees, and agents and, to the extent they are acting on behalf of such Party, such Party's contractors, subcontractors, suppliers and vendors of every tier, and shall survive termination or suspension of this Agreement, as well as the fulfillment of the obligations of the Parties hereunder. Article XVII. Insurance 17.1 Lovett LLC or its affiliate, at its cost and expense, shall maintain and keep in full force and effect during the term of this Agreement the following insurance in connection with the Facility: (a) Workers' Compensation Insurance for statutory obligations imposed by Workers' Compensation or Occupational Disease Laws, and Employer's Liability Insurance with a minimum limit of $1,000,000. When applicable, coverage shall include the United States Longshoreman's and Harbor Workers' Compensation Act and the Jones Act. (b) General Liability Insurance including Personal Injury, Broad Form Property Damage, Products/Completed Operations, Explosion, Collapse and Underground (XCU) Liability, Contractual Liability and Contractors Protective Liability Insurance with minimum limits of liability of $2,000,000 per occurrence. (c) Automobile Liability Insurance, including coverage for all owned, non-owned and hired automotive equipment used by Lovett LLC with minimum limits of liability of $5,000,000 per occurrence. (d) All risk property damage insurance, including boiler and machinery coverage, with minimum limits of $275,000,000. (e) Business interruption and extra expense insurance covering expenses and losses due to business interruption, resulting from damage to the Facility, in amounts to be determined by Lovett LLC. 17.2 In the event the Facility is substantially damaged or destroyed, O&R shall have the right to cause the proceeds of insurance policies required under Section 17.1(d) to be used to repair or rebuild the Facility; provided, however, that Lovett LLC may control the disbursement of such insurance proceeds for such purpose. 17.3 For all insurance required under Section 17.1, except Workers' Compensation and Employers Liability, O&R, its directors, officers and employees shall be named as additional insureds, as their interest may appear. 17.4 Consistent with the terms of the indemnities provided for hereunder, all of the insurance required under Section 17.1 shall be primary to any or all other insurance coverage and shall not contribute with similar insurance in effect for O&R. 17.5 All insurance required under Section 17.1 shall contain provisions wherein all rights of subrogation or recovery of any kind against O&R, its agents, employees, officers, successors and assigns are specifically waived by Lovett LLC and the insuring entity. 17.6 The General Liability insurance specified in Section 17.1(b) shall contain a cross liability provision. All insurance required hereunder shall provide insurance for occurrences during the performance of services by Lovett LLC and all subcontractors pursuant to this Agreement and for a period of two years after termination of this Agreement. In the event that any insurance as required herein is available only on a "claims-made" basis, such insurance shall provide for a retroactive date not later than the date of this Agreement and such insurance shall be maintained by Lovett LLC, with a retroactive date not later than the retroactive date required above, for a minimum period of five years after the termination of this Agreement. 17.7 All insurance required herein shall be issued by an insurer admitted to do business in the State of New York and shall have a Best's Rating of not less than "A" and a net surplus of not less than $25,000,000. 17.8 Lovett LLC's insurance carrier shall notify O&R of any material change in, or cancellation of, the insurance required hereunder at least 30 days prior to the effective date of any such change or cancellation. 17.9 Self-insurance may be utilized by Lovett LLC. 17.10 Prior to the Closing Date, Lovett LLC shall provide, for O&R's review and approval, a Certificate of Insurance verifying the existence of insurance coverages in compliance with the requirements of this Agreement. The Certificate of Insurance should be mailed to: Risk Management Department Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Article XVIII. Force Majeure 18.1 "Force Majeure Event" means any occurrence beyond the reasonable control of a Party which causes such Party to be delayed in or prevented from performing or carrying out any of its obligations under this Agreement and which by the exercise of due diligence in accordance with Good Utility Practices, that Party is unable to prevent, avoid, mitigate, or overcome, including the following: any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm or flood, ice, explosion, breakage or accident to machinery or equipment, order, regulation or restriction imposed by governmental, military or lawfully established civilian authorities, provided that a Force Majeure Event shall not include lack of finances, or change in market conditions, and provided further that any failure of Lovett LLC to obtain fuel or services for the Facility due to the failure of any supplier or subcontractor of Lovett LLC to perform any obligation to Lovett LLC will not constitute a Force Majeure Event hereunder unless such subcontractor or supplier is unable to perform for reasons that would constitute a "Force Majeure Event" hereunder. 18.2 If either Party because of a Force Majeure Event is rendered wholly or partly unable to perform its obligations under this Agreement, that Party shall be excused from whatever performance is affected by the Force Majeure Event to the extent so affected, and shall not be liable for damages caused by such non-performance provided that: (a) The non-performing Party, within seven days after it becomes aware or should have become aware that it would be unable to perform, gives the other Party written notice of the occurrence of the Force Majeure Event, including an estimation of its expected duration and probable impact on the performance of its obligations hereunder and submitting satisfactory evidence of the existence of the Force Majeure Event; (b) The suspension of performance is of no greater scope and of no longer duration than is required by the Force Majeure Event; (c) No obligations of either Party which arose before the occurrence causing the suspension of performance are excused as a result of the occurrence; and (d) The non-performing Party uses its commercially reasonable efforts to remedy expeditiously its inability to perform. This subparagraph shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest. It is understood and agreed that the settlement of strikes, walkouts, lockouts or other labor disputes shall be entirely within the discretion of the Party involved in the strike, walkout, lockout or other labor dispute. (e) When the non-performing Party is able to resume performance of its obligations under this Agreement, that Party shall give the other Party written notice to that effect. (f) The Force Majeure Event was not caused by any negligent acts, or omissions, or failure to comply with any Law or for any breach or default of this Agreement. Article XIX. Contract Documents 19.1 The contract documents which comprise the contract between the Parties are referenced hereto and made a part hereof and consist of the following: (a) This Agreement; and (b) Schedules to this Agreement as follows: (i) Schedule A: Description of Units and Performance Requirements; (ii) Schedule B: Availability Payment ; (iii) Schedule C: Energy Costs; (iv) Schedule D: Start-up Costs; (v) Schedule E: Emissions Costs; (vi) Schedule F: Payment Examples; (vii) Schedule G: Penalties; (viii) Schedule H: Load Pocket Diagram; (ix) Schedule I: Dispute Resolution Procedures; (x) Schedule J: Load Pocket Dispatch Log; (xi) Schedule K: Operating Instructions; and (xii) Schedule L: Daily Status Report. Article XX. Dispute Resolution 20.1 The Parties shall make reasonable efforts to settle all disputes arising out of or in connection with this Agreement. In the event any dispute is not settled, the Parties shall follow the alternative dispute resolution procedures set forth in Schedule I. Article XXI. Taxes 21.1 O&R shall pay all taxes, surcharges, adjustments or other assessments imposed by law, rule or regulation which are of general applicability and imposed on sales of Energy from Lovett LLC to O&R pursuant to this Agreement, unless O&R can demonstrate, based on a ruling from the Commission, that it cannot collect such taxes, surcharges, adjustments or other assessments from its customers ("Taxes"). Article XXII. Assignment or Transfer 22.1 The Parties acknowledge that any assignment of this Agreement is subject to approval by the FERC and the NYPSC. Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, (a) O&R may assign this Agreement to an affiliate of O&R that has a contractual or statutory obligation to supply Energy to O&R's retail customers in the Load Pocket, provided, however, that no such assignment, transfer, pledge, conveyance, or disposition shall relive or in any way discharge O&R from the performance of its duties and obligations under this Agreement; and (b) Lovett LLC may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to (i) a trustee or lending institution(s) for the purposes of financing or refinancing the acquisition of the Purchased Assets, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, pledges, conveyances, or dispositions in lieu thereof; provided, however, that no such assignment, transfer, pledge, conveyance, or disposition shall relieve or in any way discharge Lovett LLC from the performance of its duties and obligations under this Agreement; or (ii) an affiliate of Lovett LLC or (iii) a purchaser, transferee or lessor of all or substantially all of Lovett LLC's right, title and interest in and to the Purchased Assets, provided such purchaser, transferee or lessor (A)(1) has a "net worth", or "consolidated net worth", if applicable, as determined in accordance with U.S. generally accepted accounting principles and reflected in an audited balance sheet (or consolidated balance sheet, if applicable) ("Net Worth") at least equal to an amount equal to one-third of the Purchase Price (as described in Section 3.1 of the ASA) or (2) provides a guaranty from an affiliate which has a Net Worth at least equal to the amount specified in (A)(1) above and (B) demonstrates its ability to operate the Purchased Assets to O&R's reasonable satisfaction in accordance with Good Utility Practices. Article XXIII. Regulatory Approval; Effective Date 23.1 This Agreement shall not become effective and binding upon the Parties until it has been: (i) signed by each of the Parties hereto, and (ii) the FERC and the NYPSC have entered a final order in form and substance satisfactory to O&R and to Lovett LLC approving this Agreement and the recovery by O&R from its customers of all payments made to Lovett LLC pursuant to the terms of this Agreement. O&R and Lovett LLC agree to use their commercially reasonable efforts to obtain such regulatory approval as promptly as practicable following execution of this Agreement. Article XXIV. Confidentiality 24.1 All information regarding a Party (the "Disclosing Party") that is furnished directly or indirectly to the other Party (the "Recipient") pursuant to this Agreement and marked "Confidential" shall be deemed "Confidential Information." Notwithstanding the foregoing, Confidential Information does not include information that (i) is rightfully received from Recipient from a third party having no obligation of confidence to the Disclosing Party, (ii) is or becomes in the public domain, through no action on Recipient's part in violation of this Agreement, (iii) is already known by Recipient as of the date hereof, or (iv) is developed by Recipient independently of any Confidential Information of the Disclosing Party. Information that is specific as to certain data shall not be deemed to be in the public domain merely because such information is embraced by more general disclosure in the public domain. 24.2 Recipient shall keep the Confidential Information strictly confidential and not disclose any Confidential Information to any third party for a period of two years from the date the Confidential Information to any third party for a period of two years from the date the Confidential Information was received by Recipient, except as otherwise provided herein. 24.3 Recipient may disclose the Confidential Information to its and its affiliates' respective directors, officers, employees, consultants, advisors and agents who need to know the Confidential Information for the purpose of assisting Recipient with respect to its obligations under this Agreement. Recipient shall inform all such parties, in advance, of the confidential nature of the Confidential Information. Recipient shall cause such parties to comply with the requirements of this Agreement and shall be responsible for the actions, uses, and disclosures of all such parties. 24.4 If Recipient becomes legally compelled or required to disclose any of the Confidential Information (including, without limitation, pursuant to the rules or regulations of the NYPP, ISO or FERC), Recipient will provide the Disclosing Party with prompt written notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy. Recipient will furnish only that portion of the Confidential Information which its counsel considers legally required, and Recipient will cooperate, at the Disclosing Party's expense, with the Disclosing Party's counsel to enable the Disclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. It is further agreed that, if in the absence of a protective order, Recipient is nonetheless required to disclose any Confidential Information, Recipient will furnish only that portion of the Confidential Information which its counsel considers is legally required. 24.5 Recipient shall promptly return to the Disclosing Party all items containing or constituting Confidential Information, together with all copies, extracts, or summaries thereof, upon the earlier of (i) the Disclosing party's request, or (ii) the termination or expiration of this Agreement. Article XXV. Amendments 25.1 This Agreement shall not be amended unless such amendment shall be in writing and signed by a duly authorized representative of each of the Parties. Such amendments or modifications shall become effective only after the Parties have received any authorizations required from the FERC or the NYPSC. Nothing contained in this Agreement shall be construed as affecting in any way the right of either of the Parties furnishing or receiving service under this Agreement to unilaterally make application to the FERC for a change in rates under Sections 205 or 206 of the Federal Power Act and pursuant to the FERC rules and regulations promulgated thereunder. Article XXVI. Books and Records: Audit Rights 26.1 Lovett LLC shall maintain for four years the information utilized to determine the payments pursuant to Schedules C, D, and E. Such records shall be available at all reasonable times for inspection and audit by O&R. O&R shall have the right to inspect and audit such records and supporting documents for any calendar year at any time within the 24 month period following the end of such year, provided that with respect to invoices, O&R disputes the amounts of such invoices in the time period provided in Section 7.6. No adjustments to payments shall be required as a result of such audit unless and to the extent that O&R makes a claim upon Lovett LLC for any discrepancies disclosed by such audit within two months following expiration of such 24 month period. The expense of any such audit shall be borne solely by O&R. Article XXVII. Miscellaneous Provisions 27.1 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective successors and assigns. 27.2 Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 27.3 Notices. Where written notice is required by this Agreement, all notices, certificates or other communications hereunder shall be in writing and shall be deemed delivered (i) when personally delivered (by courier or otherwise) to the recipient and receipt is confirmed in writing, (ii) three days after being mailed by United Sates registered or certified mail, postage prepaid, return receipt requested, or (iii) when faxed to recipient during the normal business hours of the recipient on a Business Day (or if not faxed at such time, during the next Business Day) and receipt is confirmed on the sender's fax machine, addressed or faxed and a copy is mailed to the other Party on the same Business Day, as follows: (a) To Lovett LLC: Southern Energy Lovett, L.L.C. 900 Ashwood Parkway, Suite 500 Atlanta, Georgia 30338 Attention: Steve Gillis Finance Director, North American Operations Fax: (770) 379-7272 (b) To O&R: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: Legal Department Fax: (914) 577-2959 or to such other and different address as may be designated by the Parties. 27.4 Prior Agreements Superseded. This Agreement shall completely and fully supersede all other prior understandings or agreements, both written and oral, between the Parties relating to the subject matter hereto. 27.5 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies, and the Seller and the Buyer hereby agree to irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. If requested by O&R, Lovett LLC will consent to appointing an agent for service of process in New York City. 27.6 Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation, covenant, agreement or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 27.7 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement. 27.8 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement. 27.9 No Survival of Reps and Warranties. Each and every representation and warranty contained in this Agreement and each and every covenant contained in this Agreement shall expire with, and be terminated and extinguished by, (i) the expiration of the term of this Agreement pursuant to Article III, or (ii) the termination of this Agreement pursuant to Article XIV or otherwise; and neither the Seller, the Buyer nor any officer, director, trustee or affiliate of either the Seller or the Buyer shall have any liability whatsoever with respect to any such representation, warranty or covenant. 27.10 Agency. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties or to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party. IN WITNESS WHEREOF, Lovett LLC and O&R have caused this Agreement to be executed as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By: /s/ D. Louis Peoples _________________________________ Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer SOUTHERN ENERGY LOVETT, L.L.C. By: /s/ Randy Harrison ________________________________ Name: Randy Harrison Title: Vice President EX-10 8 EXHIBIT 10.64 - WESTERN LOAD POCKET CALL OPTION AGREEMENT Exhibit 10.64 WESTERN LOAD POCKET CALL OPTION AGREEMENT BETWEEN ORANGE AND ROCKLAND UTILITIES, INC. AND SOUTHERN ENERGY NY-GEN, L.L.C. November 24, 1998 TABLE OF CONTENTS Article I. Definitions and Interpretation............................2 Article II. Representations, Warranties and Covenants................13 Article III. Term.....................................................16 Article IV. O&R's Right to Dispatch the Facility.....................17 Article V. Delivery by NY-Gen LLC...................................21 Article VI. Price....................................................21 Article VII. Payment Terms............................................23 Article VIII. Testing and Capacity Ratings.............................26 Article IX. Generation Commitments...................................26 Article X. Start-up Lead Times and Other Operating Constraints......26 Article XI. Metering.................................................27 Article XII. Coordination of Facility and System Maintenance..........27 Article XIII. Modifications............................................28 Article XIV. Termination..............................................28 Article XV. Indemnification..........................................31 Article XVI. Limitation of Liability..................................38 Article XVII. Insurance................................................39 Article XVIII. Force Majeure............................................42 Article XIX. Contract Documents.......................................44 Article XX. Dispute Resolution.......................................45 Article XXI. Taxes....................................................45 Article XXII. Assignment or Transfer...................................45 Article XXIII. Regulatory Approval; Effective Date......................47 Article XXIV. Confidentiality..........................................47 Article XXV. Amendments...............................................49 Article XXVI. Books and Records: Audit Rights.........................50 Article XXVII. Miscellaneous Provisions.................................50 THIS LOAD POCKET CALL OPTION AGREEMENT ("Agreement"), dated as of the 24th day of November 1998 , between ORANGE AND ROCKLAND UTILITIES, INC., a New York corporation ("O&R") with an office at One Blue Hill Plaza, Pearl River, New York 10965 and SOUTHERN ENERGY NY-GEN, L.L.C. a Delaware limited liability company ("NY-Gen LLC") with offices at 900 Ashwood Parkway, Suite 500 Atlanta, Georgia 30338. W I T N E S S E T H : WHEREAS, O&R is authorized by its certificate of incorporation and by the State of New York to engage in the production, transmission, sale and distribution of electricity for heat, light and power to the public; WHEREAS, pursuant to an Electric Rate and Restructuring Plan dated November 6, 1997 O&R has agreed to divest by auction all its electric generating facilities; WHEREAS, pursuant to this auction process, O&R has agreed to sell the Facility (as defined below) to NY-Gen LLC; WHEREAS, O&R desires to have the ability to call on and dispatch the Facility under the terms of this Agreement in those hours when the operation of the Facility is required by O&R to ensure the reliability of the Load Pocket (as hereinaf ter defined) ("Load Pocket Hours"); WHEREAS, NY-Gen LLC agrees to dispatch the Facility during Load Pocket Hours on the terms and conditions set forth herein and therefore is willing to enter into this Agreement with O&R; and WHEREAS, O&R agrees to pay NY-Gen LLC to dispatch the Facility during Load Pocket Hours on the terms and conditions set forth herein and therefore is willing to enter into this Agreement with NY-Gen LLC. NOW, THEREFORE, in consideration of the premises and other valuable consideration given the one to the other, the sufficiency of which each Party ac knowledges, O&R and NY-Gen LLC agree as follows: Article I. Definitions and Interpretation 1.1 The following terms when used herein (and in the schedules attached hereto) with initial capitalization, shall have the meaning specified in this Article. The singular shall include the plural and the masculine shall include the feminine and neuter, and vice versa. "Includes" or "including" shall mean "including without limitation". References to a section, article or schedule shall mean a section, article or schedule of this Agreement, as the case may be, unless the context requires otherwise, and reference to a given Agreement or instrument shall be a reference to that Agreement or instrument as modified, amended, supplemented or restated through the date as of which such reference is made. Unless the context otherwise requires, references to any Law shall be deemed references to such Law as it may be amended, replaced or restated from time to time. Unless the context otherwise requires, any reference to a "person" includes any individual, partnership, firm, company, corporation, joint venture, trust, association, organization or other entity, in each case whether or not having separate legal personality. 1.2 The following terms shall have the meanings set forth below: (a) ASA: The Gas Turbine and Hydroelectric Generating Stations Sales Agreement dated as of November 24, 1998 by and between NY-Gen LLC and O&R. (b) Available: That the Facility is capable, in real time (subject to Start-up Lead Times), of producing Energy which can be Delivered up to the Availability Limit. (c) Availability: The capability of the Facility at any given time to produce Energy measured in MW. (d) Availability Limit: For any hour the maximum number of MW which NY-Gen LLC is obligated to make Available from the Facility pursuant to this Agreement, as identified in Schedule A. (e) Business Day: Any day other than Saturday, Sunday or any day which is a legal holiday or a day on which banking institutions in the State of New York are authorized by law or other governmental action to close. (f) Capacity: The capability to generate or transmit electrical power measured in megawatts ("MW"). (g) Capital Improvement: A material addition or modification to, change in, or replacement or renewal of plant or equipment which comprises a Facility or any other plant, equipment or facilities used by NY-Gen LLC for the production of Energy at the Facility. (h) Closing Date: The date and time at which the closing of the transactions contemplated by the ASA actually occurs. (i) Commission: The New York State Public Service Commission. (j) Contract Year: Each 12-month period commencing on the Effective Date or on any anniversary of the Effective Date occurring during the term of this Agreement. (k) Daily Dispatch Notice: A notice requesting dispatch of the Facility to provide Energy delivered by O&R to NY-Gen LLC's Scheduling Coordi nator on the day before a Requested Operation Period pursuant to this Agreement, in a form which complies with the requirements of Section 4.2. (l) Deliver: To deliver Energy to the Delivery Point in compli ance with the requirements described in Section 5.1 and the term "Delivered" shall be construed accordingly. (m) Delivered MW or Delivered MWhs: The MW or MWhs of Energy, as the case may be, Delivered by NY-Gen LLC pursuant to O&R's request. (n) Delivery Point: The generator terminals at the Facility, which are the physical points where Energy will be delivered and measured for purposes of this Agreement. (o) Dispatch Notice: A Daily Dispatch Notice, an Hourly Dispatch Notice and/or a Dispatch Notice given by O&R in real time to NY-Gen LLC's Scheduling Coordinator. (p) DMNC: Dependable Maximum Net Capability. (q) Due Date: The date which is 30 days after the date on which a Party submits an invoice to the other Party. (r) Effective Date: The same date as the Closing Date. (s) Emergency: A condition or situation which is likely to result in degradation or disruption of service to O&R's customers, or is likely to endanger life or property. (t) Emission Costs: NY-Gen LLC's emissions' related costs as calculated pursuant to Schedule E. (u) Energy: Electrical energy. (v) Energy Costs: NY-Gen LLC's costs for Delivered MWhs which are Delivered pursuant to a Dispatch Notice as calculated pursuant to Section 6.2 and Schedule C. (w) Facility: The electrical generating facilities more particularly described in Schedule A, individually or collectively as the case may be. (x) FERC: Federal Energy Regulatory Commission. (y) Forced Outage: Any outage of the Facility other than (i) a Planned Outage, (ii) a Planned Overhaul, (iii) an outage caused by a Force Majeure Event, (iv) an outage caused by an act or omission of O&R, including any O&R Event of Default, (v) an outage caused by an ISO order or request to take a unit off line as a result of an emergency or as a result of any abnormal transmission condition on O&R's System, or (vi) any outage required to comply with any environmental restrictions, that fully or partially curtails its ability to produce Energy when dis patched by O&R in accordance with the terms of this Agreement. (z) Good Utility Practices: Any of the practices, methods or acts engaged in or approved by a significant portion of the electric utility industry with respect to similar facilities during the relevant time period, which in each case, in the exercise of reasonable judgment in light of the facts known or that should have been known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety, law, regulation, environmental protection and expedition. Good Utility Practices are not intended to be limited to the optimum practices, methods or acts to the exclusion of all others, but rather to delineate the acceptable practices, methods, or acts generally accepted in such industry. (aa) Governmental Authority: Any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to a government. (bb) Hourly Dispatch Notice: A notice, delivered by O&R to NY-Gen LLC's Scheduling Coordinator, requesting dispatch of the Facility to provide Energy pursuant to this Agreement, other than a Daily Dispatch Notice, in such form as may be adopted by the Parties, provided that such form complies with the require ments of Section 4.2 of this Agreement. (cc) Interest Rate: The rate of interest at the prime rate of The Chase Manhattan Bank in effect on the applicable date. (dd) ISO: The New York Independent System Operator. (ee) ISO Protocols: The rules, protocols, procedures and standards promulgated by the ISO (as amended from time to time) to be complied with by the ISO and all market participants in relation to participation in the market for Energy in accordance with the ISO Operating Agreement and Tariff. (ff) ISO Tariff: The open access transmission operating agree ment and tariff approved by the FERC, in FERC Docket Nos. ER97-1523-000, OA97-470-000, and ER97-4234-000, as it may be modified and in effect from time to time. (gg) Law: Any law, treaty, code, rule, regulation, or order or determination of an arbitrator, court or other Governmental Authority, or any franchise, license, lease, permit, certificate, authorization, qualification, right or approval issued or granted by a Governmental Authority and binding on a Party or any of its property. (hh) Load Pocket: The electric load required by O&R's customers in the area of O&R's service territory outlined on the attached diagram on Schedule H, provided, however, that, (i) because of transmission constraints on O&R's transmission and distribution system as of the date hereof, such area requires generating resources internal to such area to ensure reliable service to such electric load and (ii) the Facility is a generating resource internal to such area that is neces sary to ensure such reliable service. (ii) Market Transaction: A delivery of Energy and/or capacity from the Facility, other than pursuant to this Agreement. (jj) Maximum Requested MW: The highest MW output of the Facility which O&R can request NY-Gen LLC to dispatch, as shown on Schedule A. (kk) Minimum Requested MW: The lowest MW output needed to maintain stable continuous operation of the Facility, as shown on Schedule A. (ll) NERC: North American Electric Reliability Council or its successors. (mm) Nonmarket Transaction: A delivery of Energy from the Facility pursuant to a Dispatch Notice under this Agreement. (nn) NY-Gen LLC's Scheduling Coordinator: The Scheduling Coordinator identified by NY-Gen LLC. (oo) NYPP: The New York Power Pool or its successors. (pp) NYPP Procedures: The most current methods and procedures of the NYPP, including those for determining DMNC, as amended. (qq) Off-Peak: All hours not classified as On-Peak hours. (rr) On-Peak: The hours in Monday through Friday from hour beginning 7:00 a.m. through hour beginning 10:00 p.m. excluding NERC holidays. (ss) O&R Load Zone: The load zone as designated by the ISO which encompasses the O&R service territory. (tt) O&R's System: O&R's electric transmission and distribution system. (uu) Party: Either O&R or NY-Gen LLC and Parties means O&R and NY-Gen LLC. (vv) Planned Outage: A planned interruption in the electrical output of the Facility or a planned transmission interruption of the O&R System, as the case may be, to perform routine maintenance pursuant to the Planned Outage schedule provided under Section 12.3. (ww) Planned Overhaul: A planned interruption in the electrical output of the Facility or a planned transmission interruption of the O&R System, as the case may be, to perform a major equipment overhaul and inspections or major transmission facilities maintenance and inspection at the dates and times provided under Section 12.3. (xx) Requested MW : The MW of generation capability which O&R requests be made available from the Facility pursuant to a Dispatch Notice. (yy) Requested Operation Period: The hours during which O&R requests that the Facility be dispatched pursuant to a Dispatch Notice. (zz) Shutdown: The condition of the Facility where the generator rotor is at rest. (aaa) Start-up: The action of bringing the Facility from Shutdown to Synchronous Speed, to its Minimum Requested MW and having it unconditionally released for ramping to full load if required, and "Started-up" and "Starting-up" shall be construed accordingly. (bbb) Start-up Lead Time: The amount of time required to Start-up the Facility, as shown on Schedule A. (ccc) Start-up Costs: NY-Gen LLC's costs for Starting-up the Facility in response to a Dispatch Notice, as described in Section 6.2 and Schedule D. (ddd) Summer Capability Period: The meaning provided by the NYPP, the ISO or their successor(s), as may be modified from time to time. Summer Capability Period is currently each May 1 through October 31 of each year. (eee) Synchronized: The condition where the Facility is connected to the Transmission Grid. (fff) Synchronous Speed: That speed required by the Facility to enable it to be Synchronized to the Transmission Grid. (ggg) Transmission Grid: The electric transmission system (as it may be modified or expanded from time to time) under control of the NYPP or the ISO. (hhh) Winter Capability Period: The meaning provided by the NYPP, the ISO or their successor(s), as may be modified from time to time. Winter Capability Period is currently each November 1 through April 30 of the following calendar year. 1.3 Each of the following terms has the meaning specified in the Section set forth opposite such term: Term Section - ---- ------- Adjustment Invoice 7.4 Agreement Preamble Annual Forecast 4.1 Availability Payment 6.1 Direct Claim 15.4 Disclosing Party 24.1 Estimated Invoice 7.1 Event of Default 14.1 Force Majeure Event 18.1 Forecast 4.1 Generation Costs 6.2 Indemnifiable Loss 15.3 Indemnifying Party 15.3 Indemnitee 15.3 Load Pocket Dispatch Log Schedule J Load Pocket Hours Recitals Net Worth 22.1 NY-Gen LLC Indemnifiable Loss 15.2 NY-Gen LLC Preamble O&R Preamble O&R Indemnifiable Loss 15.1 Occurrence Schedule G Recipient 24.1 Shed Load Schedule G Taxes 21.1 Third Party Claim 15.4 Article II. Representations, Warranties and Covenants 2.1 NY-Gen LLC makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement. (a) NY-Gen LLC represents that it is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. (b) NY-Gen LLC represents and warrants that (i) it is duly authorized to enter into this Agreement and discharge and perform all covenants and obligations on its part to be performed under and pursuant to this Agreement, (ii) the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any law, any order of any court or other agency of government, or any contractual limitation, deed of trust, mortgage, partnership agreement, loan agreement, other evidence of indebtedness or any other agreement or instrument to which NY-Gen LLC is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing, except for such conflicts, breaches or defaults, as to which requisite waivers have been obtained or which would not have a material adverse effect on NY-Gen LLC's ability to perform its obligations under this Agreement, and (iii) this Agreement is the legal, valid and binding obligation of NY-Gen LLC enforceable in accordance with its terms, except that such enforceability may be limited by applicable laws affecting or relating to enforcement of creditors' rights and general principles of equity. (c) NY-Gen LLC represents and warrants that all consents and authorizations required for NY-Gen LLC to execute and deliver this Agreement have been obtained, except for such consents and authorizations which, if not obtained, would not be reasonably likely to have a material adverse affect on NY-Gen LLC's ability to perform its obligations under this Agreement. 2.2 O&R makes the following representations, warranties and covenants as the basis for the benefits and obligations contained in this Agreement. (a) O&R represents and warrants that it is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and the transac tions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement. (b) O&R represents and warrants that it is duly authorized to enter into this Agreement and discharge and perform all covenants and obligations on its part to be performed under and pursuant to this Agreement and that the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement will not conflict with or constitute a breach of or a default under, any of the terms, conditions, or provisions of any law, any order of any court or other agency of government, the certificate of incorporation or by-laws of O&R, or any contractual limitation, corporate restriction or outstanding trust indenture, deed of trust, mort gage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which O&R is a party or by which it or any of its property is bound, or result in a breach of or default under any of the foregoing except for such conflicts, breaches or defaults, as to which requisite waivers have been obtained or which would not have a material adverse effect on O&R's ability to perform its obligations under this Agreement, and (iii), and this Agreement is the legal, valid and binding obligation of O&R enforceable in accordance with its terms except that such enforceability may be limited by applicable laws affecting or relating to enforcement of creditors' rights and general principles of equity. (c) O&R represents and warrants that all consents and authoriza tions required to execute this Agreement have been obtained except for such consents and authorizations which, if not obtained, would not be reasonably likely to have a material adverse affect on O&R's ability to perform its obligations under this Agreement. (d) O&R represents and warrants that as of the Closing Date the Facilities are capable of meeting the operating requirements specified herein in accordance with Good Utility Practices, including the Maximum Requested MW, the Minimum Requested MW, the Requested MW, the heat rates set forth in Schedule A, the Start-up Lead Time, the Synchronous Speed and the requirements to be set forth in a Dispatch Notice, and O&R has no knowledge of any conditions at the Facilities that could cause such Facilities to be unable to satisfy such requirements during the term of this Agreement. Article III. Term 3.1 This Agreement shall remain in full force and effect for a period of one year from the Closing Date. O&R may, in its sole discretion, extend the term of this Agreement for a maximum of four additional consecutive one year terms. In order for O&R to exercise its option to extend the term of this Agreement, O&R must provide NY-Gen LLC with written notice, at least 120 days prior to the termination of this Agreement, of its intention to extend the term of this Agreement for another year. Applicable provisions of this Agreement shall continue in effect after termination to the extent necessary to provide for final billings and adjustments. Upon each one year extension of this Agreement, the Availability Payments in Schedule B shall be increased in accordance with the Consumer Price Index for all Urban consumers, U.S. City Average, all times, unadjusted (base date January 1998) released by the U.S. Government Department of Labor, Bureau of Labor Statistics or its successor, or should such price index be discontinued, or the bases of its calcula tion be substantially modified, such other price index as is mutually agreed upon by O&R and NY-Gen LLC. Article IV. O&R's Right to Dispatch the Facility 4.1 On the Effective Date and, if the term of this Agreement has been extended pursuant to Section 3.1, on the anniversary of the Effective Date, O&R will provide NY-Gen LLC with a non-binding forecast ("Annual Forecast") representing O&R's then current best estimate of the Capacity that O&R will require the Facility to provide during the next 12 months for the Load Pocket. Not less than 30 days prior to the beginning of every calendar month during the term of this Agreement, O&R shall provide NY-Gen LLC with a non-binding forecast ("Forecast") represent ing O&R's then current best estimate of the Capacity that O&R will require the Facility to provide from the beginning of that calendar month through the end of the following two calendar months (a three month period) for the Load Pocket. The Forecast and Annual Forecast will take into account the Planned Outages and Planned Overhauls. O&R shall use its best efforts to prepare its estimate but shall have no liability to NY-Gen LLC for the accuracy or completeness of the Forecast or the Annual Forecast. 4.2 Subject to the terms and conditions described in this Agreement, O&R shall have the right to direct that the Facility be available to Deliver Energy during Load Pocket Hours for the Load Pocket. O&R shall direct the dispatch of the Facility by delivering, in accordance with the communication protocols from time to time established by the Parties, a Daily Dispatch Notice to NY-Gen LLC's Schedul ing Coordinator not later than 10:00 a.m. of the day before the commencement of the Requested Operation Period specified in such notice and/or delivering an Hourly Dispatch Notice to NY-Gen LLC's Scheduling Coordinator at least one half hour prior to the commencement of the Requested Operation Period specified in such notice and/or delivering a Dispatch Notice in real time. Each Dispatch Notice shall comply with the Start-up Lead Times and the other operational limitations described in Schedule A, and, NY-Gen LLC shall have no liability, nor shall NY-Gen LLC suffer any reductions in payments, for failure to comply with a Dispatch Notice which is not in compliance with such limitations. Each Daily Dispatch Notice or Hourly Dispatch Notice may be modified by a subsequent Daily Dispatch Notice or a subsequent Hourly Dispatch Notice, subject to the restrictions of this subsection. O&R may, subject to the restrictions of this subsection, issue a Dispatch Notice directing dispatch of the Facility in real time for the Load Pocket. 4.3 Each Dispatch Notice shall specify the time of commencement and termination of the Requested Operation Period and, for each hour of the Requested Operation Period, the Minimum Requested MW which O&R requests to be dis patched and the Maximum Requested MW O&R requests to be available for the Load Pocket. All hours of operation in each Dispatch Notice shall be consecutive Load Pocket Hours, unless otherwise agreed to in writing by NY-Gen LLC. O&R may not direct NY-Gen LLC to conduct more than one dispatchable start-up per calendar day per generating unit. Each Party shall record the applicable information from the Dispatch Notices in the Load Pocket Dispatch Log, a form of which is attached hereto in the Form of Schedule J. 4.4 If NY-Gen LLC considers that a Dispatch Notice does not comply with the limitations set forth in Schedule A or that NY-Gen LLC is otherwise not required to dispatch the Facility in accordance with a Dispatch Notice, it shall forthwith give written notice to O&R to that effect. This notice shall specify in detail why NY-Gen LLC believes the Dispatch Notice does not comply or NY-Gen LLC is not otherwise required to dispatch the Facility, as the case may be, and shall include, without limitation, the following bases for the notice as applicable: (i) any amount of Capacity requested by O&R that NY-Gen LLC is not obligated to provide pursuant to Sec tion 9.1; (ii) whether the Start-up Lead Time or any other operating constraint as described in Schedule A is inconsistent with Delivery of the Requested MW in accordance with the Dispatch Notice; (iii) any operation of the Facility necessary to comply with the Dispatch Notice which would be in breach of any applicable Law or would conflict with Good Utility Practices. 4.5 Upon receipt of NY-Gen LLC's notice issued pursuant to Section 4.4, O&R may, by delivering a notice to NY-Gen LLC's Scheduling Coordinator promptly thereafter, but in no event later than half an hour prior to commencement of the Requested Operation Period, modify the Dispatch Notice in accordance with NY-Gen LLC's notice. 4.6 At or about 9:00 a.m. each day, NY-Gen LLC shall provide O&R with a daily status report regarding the operating characteristics and current status of the Facility, substantially in the form attached hereto as Schedule L. This report will include information that pertains to the reliable performance of the Facility such as response rate, start up time, minimum run time, minimum down time, minimum loading point, full load point and available choice of fuels. The report also will describe the Facility's current availability, deratings and planned operations for the next 24 hours. NY-Gen LLC shall notify O&R immediately of any actual or planned change to this data. Article V. Delivery by NY-Gen LLC 5.1 NY-Gen LLC shall, in response to a Dispatch Notice from O&R, dispatch the Facility at the Minimum Requested MW and make available the Maximum Requested MW in accordance with the Dispatch Notice, subject to the limits described in this Agreement. 5.2 NY-Gen LLC shall, in response to a Dispatch Notice from O&R, provide reactive supply and voltage control for the Load Pocket by making available the minimum MVARs at full MW load as set forth in Schedule A. Article VI. Price 6.1 Following the Effective Date, O&R shall make Availability payments as described in Schedule B ("Availability Payments") to NY-Gen LLC in accordance with Section 7.1. 6.2 When NY-Gen LLC dispatches a Facility into the ISO during Load Pocket Hours pursuant to a Dispatch Notice, O&R shall pay NY-Gen LLC its Generation Costs as set forth below ("Generation Costs"), to the extent that the revenue received by such Facility from the ISO is less than the Generation Costs during such time period. For purposes of determining such payment described in the preceding sentence, (i) the revenue received by the Facility shall include all revenue received from all energy and ancillary services markets, during the period the Facility operates as recorded in the Load Pocket Dispatch Log, but shall exclude any capacity payments and (ii) such revenue shall not be reduced by any penalties assessed by the ISO for non-performance. Generation Costs shall be the sum of all applicable Energy Costs for both minimum generation and above minimum genera tion (as calculated pursuant to Schedule C), Start-up Costs (as calculated pursuant to Schedule D) and Emissions Costs (as calculated pursuant to Schedule E). Schedule F illustrates how payment will be calculated when a Facility is operating pursuant to Market and Nonmarket Transactions. In addition, to the extent that O&R issues a notice modifying the Dispatch Notice pursuant to Section 4.2 or 4.5, O&R shall compensate NY-Gen LLC for any incremental costs including, but not limited to, imbalance or scheduling charges and/or penalties imposed on or incurred by NY-Gen LLC as a result of the modification. 6.3 If NY-Gen LLC fails to be available to provide Energy during Load Pocket Hours, NY-Gen LLC shall be assessed the penalties as calculated in accor dance with Schedule G to this Agreement. Such penalties shall be O&R's sole and exclusive remedy with respect to any failure to be available or to provide Energy during Load Pocket Hours. 6.4 Nothing in this Agreement shall restrict NY-Gen LLC from entering into Market Transactions either inside or outside of a Requested Operation Period. 6.5 O&R is not purchasing from and accordingly makes no payment to NY-Gen LLC for either capacity or ancillary services pursuant to this Agreement. If the Parties wish to engage in the purchase or sale of capacity and/or ancillary services, they will do so pursuant to a separate agreement(s). Article VII. Payment Terms 7.1 Within 14 days after the end of each calendar month during the term of this Agreement (and, if termination of this Agreement does not occur at the end of a month, within 14 days after the end of the month in which termination occurs), NY-Gen LLC shall submit an estimated invoice ("Estimated Invoice") to O&R for all charges properly due under this Agreement for that month using reasonable estimates of actual data. Such invoice shall set out or be supported by detailed calculations and breakdowns of the estimated amounts due. The Estimated Invoice shall be paid by O&R no later than the Due Date. 7.2 All payments shall be made by wire transfer in accordance with instructions from the Party making payment or by memorandum accounts. Each Party may set off any undisputed amount owed to the other Party against any undisputed amount owed pursuant to this Agreement or other arrangement(s) agreed to between the Parties. 7.3 If any sum or part of a sum shown on an invoice is disputed by either Party, payment of the undisputed sums on that invoice shall not be withheld. Interest on any unpaid amounts shall be charged at the Interest Rate plus 2 percent per annum calculated from the Due Date of the invoice to the date of payment. 7.4 NY-Gen LLC shall submit to O&R an adjusted or supplemental invoice ("Adjustment Invoice") within 60 days after the date of the Estimated Invoice which Adjustment Invoice should reflect the actual amounts due from O&R to NY-Gen LLC for the months covered by the appropriate Estimated Invoice. If the Adjustment Invoice reflects an amount that is less than the amount charged to O&R under the Estimated Invoice, NY-Gen LLC shall pay the difference between the amount in the Adjustment Invoice and the amount in the Estimated Invoice to O&R together with interest at the Interest Rate from the Due Date of the Estimated Invoice to the effective date of repayment by NY-Gen LLC no later than the Due Date and the provisions of Section 7.2 shall apply to any such payment. If the Adjustment Invoice reflects an amount that is greater than the amount charged to O&R under the Estimated Invoice, O&R shall pay the difference between the amount in the Adjustment Invoice and the amount in the Estimated Invoice to NY-Gen LLC together, with interest from the Due Date of the Estimated Invoice to the date of payment by O&R. 7.5 If the Due Date is not a Business Day, then the next following Business Day will be the Due Date. 7.6 If O&R does not dispute the amount in an Estimated Invoice or an Adjustment Invoice in a writing provided to NY-Gen LLC identifying in reasonable detail the reasons therefor within six months after receipt of such invoice, such invoice shall be deemed correct. Each Party shall at its own cost provide the other Party with such information and assistance as the other Party reasonably requests to resolve the dispute, subject to the confidentiality provisions herein. If O&R has disputed the amount prior to its due date in a writing provided to NY-Gen LLC identifying in reasonable detail the reasons thereof, O&R shall not be obligated to pay the disputed amount until such dispute is resolved. The Parties shall engage in good faith negotiations to resolve any disputed amounts within 30 days. If the Parties are unable to resolve the dispute within such 30-day period, either Party may exercise such rights and remedies available to it under law or at equity. If the dispute is finally settled or determined in favor of NY-Gen LLC, NY-Gen LLC shall include the amount settled or determined in an invoice under Section 7.1 or 7.4 plus interest. If the settlement or determination of the dispute results in an amount being due to O&R, NY-Gen LLC shall pay O&R or credit the rebate to O&R at the time the next invoice is issued to O&R plus interest. Interest on disputed amounts will be calcu lated in accordance with Section 7.3. Article VIII. Testing and Capacity Ratings 8.1 During the term of this Agreement, NY-Gen LLC shall provide O&R with the results of the DMNC test which NY-Gen LLC performs for each capability period (as defined by the NYPP or the ISO or their successors) in accordance with NYPP Procedures or any similar test established by the ISO Protocols. Article IX. Generation Commitments 9.1 O&R shall not have the right under this Agreement to dispatch the Facility (i) in excess of the Maximum Requested MW, (ii) less than the Minimum Requested MW, (iii) to provide Energy to customers outside of the Load Pocket or to support O&R's System outside of the Load Pocket, or (iv) during any outage that is included as an exception to the definition of "Forced Outage". Article X. Start-up Lead Times and Other Operating Constraints 10.1 NY-Gen LLC shall not be obligated under this Agreement to Start-up the Facility unless the amount of time between the delivery of the Dispatch Notice requesting such Start-up and the commencement of the applicable Requested Operation Period shall at least equal the Start-up Lead Time. 10.2 NY-Gen LLC shall not be obligated to operate the Facility pursuant to this Agreement in excess of the other operational limits as set forth in Schedule A or in a manner inconsistent with Good Utility Practices or Law. Article XI. Metering 11.1 Metering services shall be performed as provided for in the Continuing Site/Interconnection Agreement, by and between O&R and NY-Gen LLC, dated November 24, 1998. Article XII. Coordination of Facility and System Maintenance 12.1 NY-Gen LLC shall use its commercially reasonable efforts to fuel, operate and maintain the Facility, or cause the Facility to be fueled, operated and maintained, in accordance with all material Laws and Good Utility Practices so that NY-Gen LLC is able to perform its obligations under this Agreement. NY-Gen LLC shall also notify O&R of any derating greater than 5% of the Facility's nominal ratings, as set forth in Schedule A, that will cause NY-Gen LLC to be unable to perform its obligations during a Load Pocket Hour. 12.2 Other than unscheduled maintenance, each Party shall use reasonable efforts to coordinate with the other Party the maintenance of the Facility and the O&R System, as the case may be, as well as any electric transmission lines, required in order to ensure the sound operation of the Facility and O&R's System. Except in cases of Emergency and Good Utility Practices, neither Planned Outages, including planned partial outages, and Planned Overhauls shall be scheduled or performed at the Facility or the O&R System, as the case may be, during the On-Peak hours in the months of June through September, inclusive, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. 12.3 Within 60 days after the Effective Date, each Party shall provide the other Party, a non-binding schedule of Planned Outages and Planned Overhauls (including expected commencement date and duration) for the following calendar year. In addition, each Party shall provide a non-binding two-year forecast of Planned Overhauls in accordance with ISO procedures. Each Party may make such changes to such schedules and forecasts as it considers appropriate, at its sole discretion, subject to the restrictions set forth herein. Article XIII. Modifications 13.1 In the event of any material loss or damage to the Facility that would substantially impair the capability of the Facility to Deliver Energy during a Load Pocket Hour, NY-Gen LLC shall at its own expense make such repairs or replace ments as it considers necessary in accordance with Good Utility Practices in order to perform its obligations hereunder. Article XIV. Termination 14.1 Unless otherwise caused by a Force Majeure Event or an act or omission of the non-defaulting Party, any one or more of the following events shall constitute an Event of Default under this Agreement, and the terms "Event of Default" or "Events of Default" shall mean, whenever they are used in this Agree ment, any one or more of the following events: (a) Failure by either Party to pay any material amount due and payable by it pursuant to this Agreement after the same shall have become due and payable; (b) A material breach by either Party of any covenant, condition or obligation on its part to be performed (other than as referred to in paragraph (a) above) and such failure shall materially and adversely affect such Party's perfor mance under this Agreement and such breach is not cured within 30 days after the breaching Party receives written notice thereof from the non-breaching Party, or within such longer cure period as may reasonably be required if such breach cannot be reasonably cured within such 30-day period and the defaulting Party has instituted corrective action and diligently attempts to cure such default and continues such action until the cure is complete; (c) The dissolution or liquidation of either Party, or the admission in writing by either Party of its inability to pay its debts as they become due, or the failure by either Party to lift any execution, garnishment or attachment of such consequences as will impair such Party's ability to perform substantially its obliga tions pursuant to this Agreement, or the commission by either Party of any act of bankruptcy, or the adjudication of either Party as a bankrupt, or the making of any assignment by either Party for the benefit of its creditors or the entry by either Party into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to either Party in any proceeding for the reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar proceeding instituted under the provisions of any bankruptcy act or under any similar act in any domestic or foreign jurisdiction which may now be in effect or hereafter enacted, or within 60 days after the commencement of any such proceeding against either Party such proceeding shall have been dismissed, or the filing of an answer admitting or not contesting the material allegations of a petition against it in such proceeding, or the appointment without the consent or acquiescence of either Party, of any trustee, receiver or liquidator of either Party or of any material part of its properties, if within 60 days thereafter such appointment shall not have been vacated, or if either Party shall seek or consent or acquiesce in the appointment of any trustee, receiver or liquidator of itself or of any material part of its properties; (d) If any material representation or warranty made by or on behalf of either Party shall prove to have been false or incorrect in any material respect on the date as of which made. 14.2 Whenever any Event of Default shall have occurred and be continu ing, the non-defaulting Party, to the extent permitted by law, may, upon written notice to the defaulting Party, terminate this Agreement and thereupon this Agree ment shall cease and terminate. 14.3 In addition to the foregoing remedies, whenever any Event of Default, which materially affects the defaulting Party's performance under this Agreement, shall have occurred and be continuing, the non-defaulting Party, to the extent permitted by law, shall be entitled to suspend immediately its performance under this Agreement, until such Event of Default is corrected. If the Event of Default does not cease or is not corrected, the non-defaulting Party may proceed to terminate this Agreement in accordance with the provisions of this Agreement. 14.4 No termination of this Agreement shall relieve the defaulting Party of its liability and obligations hereunder accruing or arising prior to such termination, and the non-defaulting Party may take wherever action at law or in equity as may appear necessary or desirable to enforce performance and observance of any obliga tions, agreements, or covenants under this Agreement, and the rights given hereunder shall be in addition to all other remedies available to the Parties, either in law, at equity or otherwise, for the breach of this Agreement. Article XV. Indemnification 15.1 NY-Gen LLC's Indemnification NY-Gen LLC shall indemnify, hold harmless and defend O&R, its parent, affiliates, and successors, and their officers, directors, employees, agents, subcontractors, and successors, from and against any and all claims, demands, liabilities, costs, losses, judgments, damages and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by O&R in any actions or proceedings between O&R and a third party, NY-Gen LLC, or any other party) to the extent the foregoing are not covered by insurance ("O&R Indemnifiable Losses") asserted against or suffered by O&R for (i) damage to property, or (ii) injury to or death of any person, including O&R employees, NY-Gen LLC's employees and their affiliates' employees, or any third parties, in such case to the extent caused by the gross negligence or willful misconduct of NY-Gen LLC and/or its officers, directors, employees, agents, and subcontractors and arising out of this Agreement and not caused by the negligence or willful misconduct of any such Indemnitee. 15.2 O&R's Indemnification O&R shall indemnify, hold harmless and defend NY-Gen LLC, its parent, affiliates, and successors, and their officers, directors, employees, agents, subcontractors, and successors, from and against any and all claims, demands, liabilities, costs, losses, judgments, damages and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by NY-Gen LLC in any actions or proceedings between NY-Gen LLC and a third party, O&R, or any other party) to the extent the foregoing are not covered by insurance ("NY-Gen LLC Indemnifiable Losses") asserted against or suffered by NY-Gen LLC for (i) damage to property, or (ii) injury to or death of any person, including NY-Gen LLC employees, O&R's employees and their affiliates' employees, or any third parties, in each case to the extent caused by the gross negligence or willful miscon duct of O&R and/or its officers, directors, employees, agents, and subcontractors and arising out of this Agreement and not caused by the negligence or willful misconduct of any such Indemnitee. 15.3 Indemnification Procedures Either Party entitled to receive indemnification under this agreement (an "Indemnitee") having a claim under these indemnification provisions shall make a good faith effort to recover all losses, damages, costs and expenses from insurers of such Indemnitee under applicable insurance policies so as to reduce the amount of any O&R Indemnifiable Loss or NY-Gen LLC Indemnifiable Loss, as appropriate, hereunder. The amount of any O&R Indemnifiable Loss or NY-Gen LLC Indemnifiable Loss, as appropriate, shall be reduced to the extent that Indemnitee receives any insurance proceeds with respect to an O&R Indemnifiable Loss or NY-Gen LLC Indemnifiable Loss, as appropriate (either may be referred to as an "Indemnifiable Loss"). 15.4 Defense of Claims. (a) If any Indemnitee receives written notice of the assertion of any claim or of the commencement of any claim, action, or proceed ing made or brought by any Person who is not a Party to this Agreement or any affiliate of a Party to this Agreement (a "Third Party Claim") with respect to which indemnification is to be sought from a person required to provide indemnification under this Agreement (an "Indemnifying Party"), the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 days after the Indemnitee's receipt of written notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and will indicate the estimated amount, if practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's own expense and by such Indemnifying Party's own counsel, and the Indemnitee will cooperate in good faith in such defense at such Indemnitee's own expense. (b) If within ten calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claim the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 15.4(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within 20 calendar days (unless waiting 20 calendar days would prejudice the Indemnitee's rights) after receiving notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable expenses thereof. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder. If a firm offer is made to settle a Third Party claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten business days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnify ing Party as to such Third Party Claim will be the amount of such settlement offer, plus reasonable costs and expenses paid or incurred by the Indemnitee up to the date of such notice. Notwithstanding the foregoing, the Indemnitee shall have the right to pay, compromise, or settle any Third Party Claim at any time, provided that in such event the Indemnitee shall waive any right to indemnity hereunder unless the Indemnitee shall have first sought the consent of the Indemnifying Party in writing to such payment, settlement, or compromise and such consent was unreasonably withheld or delayed, in which event no claim for indemnity therefor hereunder shall be waived. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event not later than 30 calendar days after the Indemnitee becomes aware of such Direct Claim, and the Indemnifying Party will have a period of 30 calendar days within which to respond to such Direct Claim. If the Indemnify ing Party does not respond within such 30 calendar day period, the Indemnifying Party will be deemed to have accepted such Direct Claim. If the Indemnifying Party rejects such Direct Claim, the Indemnitee will be free to seek enforcement of its rights to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the prime rate then in effect of the Chase Manhattan Bank, N.A.), will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any indemnity payment, the Indemnifying Party will, to the extent of such indemnity payment, be subrogated to all rights of the Indemnitee against any third party in respect of the Indemnifiable Loss to which the indemnity payment relates; provided, however, that (i) the Indemnifying Party will then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnify ing Party against any such third party on account of said indemnity payment is hereby made expressly subordinated and subjected in right of payment to the Indemnitee's rights against such third party. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. Nothing in this Section 15.4(d) shall be construed to require any Party hereto to obtain or maintain any insurance coverage. (e) A failure to give timely notice as provided in this Section 15.4 will not affect the rights or obligations of any Party hereunder except if, and only to the extent that, as a result of such failure, the Party which was entitled to receive such notice was actually prejudiced as a result of such failure. 15.5 Each Party shall be responsible for protecting its facilities from possible damage by reason of electrical disturbances or faults caused by the opera tion, faulty operation, or non-operation of the other Party's facilities, and such other Party shall not be liable for any such damages so caused. Article XVI. Limitation of Liability 16.1 Neither Party shall be liable to the other Party or its affiliates for any consequential, incidental, punitive, special or indirect damages arising out of or relating to the performance or breach of this Agreement including, without limita tion, replacement power costs, loss of revenue, loss of anticipated profits or loss of use of the Facility, the O&R System or other property, whether or not such damages are based upon causes of action for breach of contract, statutory (including negli gence and misrepresentation), breach of warranty, or strict liability. 16.2 The benefits of this Article shall also extend to each Party's affiliates and their respective officers, directors, employees, and agents and, to the extent they are acting on behalf of such Party, such Party's contractors, subcontractors, suppliers and vendors of every tier, and shall survive termination or suspension of this Agree ment, as well as the fulfillment of the obligations of the Parties hereunder. Article XVII. Insurance 17.1 NY-Gen LLC or its affiliate, at its cost and expense, shall maintain and keep in full force and effect during the term of this Agreement the following insurance in connection with the Facility: (a) Workers' Compensation Insurance for statutory obligations imposed by Workers' Compensation or Occupational Disease Laws, and Employer's Liability Insurance with a minimum limit of $1,000,000. When applicable, coverage shall include the United States Longshoreman's and Harbor Workers' Compensation Act and the Jones Act. (b) General Liability Insurance including Personal Injury, Broad Form Property Damage, Products/Completed Operations, Explosion, Collapse and Underground (XCU) Liability, Contractual Liability and Contractors Protective Liability Insurance with minimum limits of liability of $2,000,000 per occurrence. (c) Automobile Liability Insurance, including coverage for all owned, non-owned and hired automotive equipment used by NY-Gen LLC with minimum limits of liability of $5,000,000 per occurrence. (d) All risk property damage insurance, including boiler and machinery coverage, with minimum limits of $125,000,000. (e) Business interruption and extra expense insurance covering expenses and losses due to business interruption, resulting from damage to the Facility, in amounts to be determined by NY-Gen LLC. 17.2 In the event the Facility is substantially damaged or destroyed, O&R shall have the right to cause the proceeds of insurance policies required under Section 17.1(d) to be used to repair or rebuild the Facility; provided, however, that NY-Gen LLC may control the disbursement of such insurance proceeds for such purpose. 17.3 For all insurance required under Section 17.1, except Workers' Compensation and Employers Liability, O&R, its directors, officers and employees shall be named as additional insureds, as their interest may appear. 17.4 Consistent with the terms of the indemnities provided for hereunder, all of the insurance required under Section 17.1 shall be primary to any or all other insurance coverage and shall not contribute with similar insurance in effect for O&R. 17.5 All insurance required under Section 17.1 shall contain provisions wherein all rights of subrogation or recovery of any kind against O&R, its agents, employees, officers, successors and assigns are specifically waived by NY-Gen LLC and the insuring entity. 17.6 The General Liability insurance specified in Section 17.1(b) shall contain a cross liability provision. All insurance required hereunder shall provide insurance for occurrences during the performance of services by NY-Gen LLC and all subcontractors pursuant to this Agreement and for a period of two years after termination of this Agreement. In the event that any insurance as required herein is available only on a "claims-made" basis, such insurance shall provide for a retroac tive date not later than the date of this Agreement and such insurance shall be maintained by NY-Gen LLC, with a retroactive date not later than the retroactive date required above, for a minimum period of five years after the termination of this Agreement. 17.7 All insurance required herein shall be issued by an insurer admitted to do business in the State of New York and shall have a Best's Rating of not less than "A" and a net surplus of not less than $25,000,000. 17.8 NY-Gen LLC's insurance carrier shall notify O&R of any material change in, or cancellation of, the insurance required hereunder at least 30 days prior to the effective date of any such change or cancellation. 17.9 Self-insurance may be utilized by NY-Gen LLC. 17.10 Prior to the Closing Date, NY-Gen LLC shall provide, for O&R's review and approval, a Certificate of Insurance verifying the existence of insurance coverages in compliance with the requirements of this Agreement. The Certificate of Insurance should be mailed to: Risk Management Department Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Article XVIII. Force Majeure 18.1 "Force Majeure Event" means any occurrence beyond the reasonable control of a Party which causes such Party to be delayed in or prevented from performing or carrying out any of its obligations under this Agreement and which by the exercise of due diligence in accordance with Good Utility Practices, that Party is unable to prevent, avoid, mitigate, or overcome, including the following: any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm or flood, ice, explosion, breakage or accident to machinery or equipment, order, regulation or restriction imposed by governmental, military or lawfully established civilian authorities, provided that a Force Majeure Event shall not include lack of finances, or change in market conditions, and provided further that any failure of NY-Gen LLC to obtain fuel or services for the Facility due to the failure of any supplier or subcontractor of NY-Gen LLC to perform any obligation to NY-Gen LLC will not constitute a Force Majeure Event hereunder unless such subcontractor or supplier is unable to perform for reasons that would constitute a "Force Majeure Event" hereunder. 18.2 If either Party because of a Force Majeure Event is rendered wholly or partly unable to perform its obligations under this Agreement, that Party shall be excused from whatever performance is affected by the Force Majeure Event to the extent so affected, and shall not be liable for damages caused by such non-performance provided that: (a) The non-performing Party, within seven days after it becomes aware or should have become aware that it would be unable to perform, gives the other Party written notice of the occurrence of the Force Majeure Event, including an estimation of its expected duration and probable impact on the performance of its obligations hereunder and submitting satisfactory evidence of the existence of the Force Majeure Event; (b) The suspension of performance is of no greater scope and of no longer duration than is required by the Force Majeure Event; (c) No obligations of either Party which arose before the occur rence causing the suspension of performance are excused as a result of the occur rence; and (d) The non-performing Party uses its commercially reasonable efforts to remedy expeditiously its inability to perform. This subparagraph shall not require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the sole judgment of the Party involved in the dispute, are contrary to its interest. It is understood and agreed that the settlement of strikes, walkouts, lockouts or other labor disputes shall be entirely within the discretion of the Party involved in the strike, walkout, lockout or other labor dispute. (e) When the non-performing Party is able to resume performance of its obligations under this Agreement, that Party shall give the other Party written notice to that effect. (f) The Force Majeure Event was not caused by any negligent acts, or omissions, or failure to comply with any Law or for any breach or default of this Agreement. Article XIX. Contract Documents 19.1 The contract documents which comprise the contract between the Parties are referenced hereto and made a part hereof and consist of the following: (a) This Agreement; and (b) Schedules to this Agreement as follows: (i) Schedule A: Description of Units and Performance Requirements; (ii) Schedule B: Availability Payment ; (iii) Schedule C: Energy Costs; (iv) Schedule D: Start-up Costs; (v) Schedule E: Emissions Costs; (vi) Schedule F: Payment Examples; (vii) Schedule G: Penalties; (viii) Schedule H: Load Pocket Diagram; (ix) Schedule I: Dispute Resolution Procedures; (x) Schedule J: Load Pocket Dispatch Log; (xi) Schedule K: Operating Instructions; and (xii) Schedule L: Daily Status Report. Article XX. Dispute Resolution 20.1 The Parties shall make reasonable efforts to settle all disputes arising out of or in connection with this Agreement. In the event any dispute is not settled, the Parties shall follow the alternative dispute resolution procedures set forth in Schedule I. Article XXI. Taxes 21.1 O&R shall pay all taxes, surcharges, adjustments or other assessments imposed by law, rule or regulation which are of general applicability and imposed on sales of Energy from NY-Gen LLC to O&R pursuant to this Agreement, unless O&R can demonstrate, based on a ruling from the Commission, that it cannot collect such taxes, surcharges, adjustments or other assessments from its customers ("Taxes"). Article XXII. Assignment or Transfer 22.1 The Parties acknowledge that any assignment of this Agreement is subject to approval by the FERC and the NYPSC. Neither Party shall assign this Agreement or any portion thereof without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. Notwithstand ing the foregoing, (a) O&R may assign this Agreement to an affiliate of O&R that has a contractual or statutory obligation to supply Energy to O&R's retail customers in the Load Pocket, provided, however, that no such assignment, transfer, pledge, conveyance, or disposition shall relive or in any way discharge O&R from the performance of its duties and obligations under this Agreement; and (b) NY-Gen LLC may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to (i) a trustee or lending institution(s) for the purposes of financing or refinancing the acquisition of the Purchased Assets, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assign ments, transfers, pledges, conveyances, or dispositions in lieu thereof; provided, however, that no such assignment, transfer, pledge, conveyance, or disposition shall relieve or in any way discharge NY-Gen LLC from the performance of its duties and obligations under this Agreement; or (ii) an affiliate of NY-Gen LLC or (iii) a purchaser, transferee or lessor of all or substantially all of NY-Gen LLC's right, title and interest in and to the Purchased Assets, provided such purchaser, transferee or lessor (A)(1) has a "net worth", or "consolidated net worth", if applicable, as deter mined in accordance with U.S. generally accepted accounting principles and re flected in an audited balance sheet (or consolidated balance sheet, if applicable) ("Net Worth") at least equal to an amount equal to one-third of the Purchase Price (as described in Section 3.1 of the ASA) or (2) provides a guaranty from an affiliate which has a Net Worth at least equal to the amount specified in (A)(1) above and (B) demonstrates its ability to operate the Purchased Assets to O&R's reasonable satisfaction in accordance with Good Utility Practices. Article XXIII. Regulatory Approval; Effective Date 23.1 This Agreement shall not become effective and binding upon the Parties until it has been: (i) signed by each of the Parties hereto, and (ii) the FERC and the NYPSC have entered a final order in form and substance satisfactory to O&R and to NY-Gen LLC approving this Agreement and the recovery by O&R from its customers of all payments made to NY-Gen LLC pursuant to the terms of this Agreement. O&R and NY-Gen LLC agree to use their commercially reasonable efforts to obtain such regulatory approval as promptly as practicable following execution of this Agreement. Article XXIV. Confidentiality 24.1 All information regarding a Party (the "Disclosing Party") that is furnished directly or indirectly to the other Party (the "Recipient") pursuant to this Agreement and marked "Confidential" shall be deemed "Confidential Information." Notwithstanding the foregoing, Confidential Information does not include informa tion that (i) is rightfully received from Recipient from a third party having no obligation of confidence to the Disclosing Party, (ii) is or becomes in the public domain, through no action on Recipient's part in violation of this Agreement, (iii) is already known by Recipient as of the date hereof, or (iv) is developed by Recipient independently of any Confidential Information of the Disclosing Party. Information that is specific as to certain data shall not be deemed to be in the public domain merely because such information is embraced by more general disclosure in the public domain. 24.2 Recipient shall keep the Confidential Information strictly confidential and not disclose any Confidential Information to any third party for a period of two years from the date the Confidential Information to any third party for a period of two years from the date the Confidential Information was received by Recipient, except as otherwise provided herein. 24.3 Recipient may disclose the Confidential Information to its and its affiliates' respective directors, officers, employees, consultants, advisors and agents who need to know the Confidential Information for the purpose of assisting Recipi ent with respect to its obligations under this Agreement. Recipient shall inform all such parties, in advance, of the confidential nature of the Confidential Information. Recipient shall cause such parties to comply with the requirements of this Agreement and shall be responsible for the actions, uses, and disclosures of all such parties. 24.4 If Recipient becomes legally compelled or required to disclose any of the Confidential Information (including, without limitation, pursuant to the rules or regulations of the NYPP, ISO or FERC), Recipient will provide the Disclosing Party with prompt written notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy. Recipient will furnish only that portion of the Confidential Information which its counsel considers legally required, and Recipient will cooperate, at the Disclosing Party's expense, with the Disclosing Party's counsel to enable the Disclosing Party to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. It is further agreed that, if in the absence of a protective order, Recipient is nonetheless required to disclose any Confidential Information, Recipient will furnish only that portion of the Confidential Information which its counsel considers is legally required. 24.5 Recipient shall promptly return to the Disclosing Party all items containing or constituting Confidential Information, together with all copies, extracts, or summaries thereof, upon the earlier of (i) the Disclosing party's request, or (ii) the termination or expiration of this Agreement. Article XXV. Amendments 25.1 This Agreement shall not be amended unless such amendment shall be in writing and signed by a duly authorized representative of each of the Parties. Such amendments or modifications shall become effective only after the Parties have received any authorizations required from the FERC or the NYPSC. Nothing contained in this Agreement shall be construed as affecting in any way the right of either of the Parties furnishing or receiving service under this Agreement to unilater ally make application to the FERC for a change in rates under Sections 205 or 206 of the Federal Power Act and pursuant to the FERC rules and regulations promulgated thereunder. Article XXVI. Books and Records: Audit Rights 26.1 NY-Gen LLC shall maintain for four years the information utilized to determine the payments pursuant to Schedules C, D, and E. Such records shall be available at all reasonable times for inspection and audit by O&R. O&R shall have the right to inspect and audit such records and supporting documents for any calendar year at any time within the 24 month period following the end of such year, provided that with respect to invoices, O&R disputes the amounts of such invoices in the time period provided in Section 7.6. No adjustments to payments shall be required as a result of such audit unless and to the extent that O&R makes a claim upon NY-Gen LLC for any discrepancies disclosed by such audit within two months following expiration of such 24 month period. The expense of any such audit shall be borne solely by O&R. Article XXVII. Miscellaneous Provisions 27.1 Binding Effect. This Agreement and any extension shall inure to the benefit of and shall be binding upon the Parties and their respective successors and assigns. 27.2 Counterparts. This Agreement may be executed in several counter parts, each of which shall be an original and all of which shall constitute but one and the same instrument. 27.3 Notices. Where written notice is required by this Agreement, all notices, certificates or other communications hereunder shall be in writing and shall be deemed delivered (i) when personally delivered (by courier or otherwise) to the recipient and receipt is confirmed in writing, (ii) three days after being mailed by United Sates registered or certified mail, postage prepaid, return receipt requested, or (iii) when faxed to recipient during the normal business hours of the recipient on a Business Day (or if not faxed at such time, during the next Business Day) and receipt is confirmed on the sender's fax machine, addressed or faxed and a copy is mailed to the other Party on the same Business Day, as follows: (a) To NY-Gen LLC: Southern Energy NY-Gen LLC 900 Ashwood Parkway, Suite 500 Atlanta, Georgia 30338 Attention: Steve Gillis Finance Director, North American Operations Fax: (770) 379-7272 (b) To O&R: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: Legal Department Fax: (914) 577-2959 or to such other and different address as may be designated by the Parties. 27.4 Prior Agreements Superseded. This Agreement shall completely and fully supersede all other prior understandings or agreements, both written and oral, between the Parties relating to the subject matter hereto. 27.5 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies, and the Seller and the Buyer hereby agree to irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in New York City over any suit, action or proceeding arising out of or relating to this Agreement. If requested by O&R, NY-Gen LLC will consent to appointing an agent for service of process in New York City. 27.6 Waiver of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation, covenant, agreement or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver or failure to insist upon strict compliance with such obliga tion, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 27.7 Headings. The headings contained in this Agreement are used solely for convenience and do not constitute a part of the agreement between the Parties hereto, nor should they be used to aid in any manner in the construction of this Agreement. 27.8 Third Parties. This Agreement is intended solely for the benefit of the Parties hereto. Nothing in this Agreement shall be construed to create any duty to, or standard of care with reference to, or any liability to, any person not a Party to this Agreement. 27.9 No Survival of Reps and Warranties. Each and every representation and warranty contained in this Agreement and each and every covenant contained in this Agreement shall expire with, and be terminated and extinguished by, (i) the expiration of the term of this Agreement pursuant to Article III, or (ii) the termina tion of this Agreement pursuant to Article XIV or otherwise; and neither the Seller, the Buyer nor any officer, director, trustee or affiliate of either the Seller or the Buyer shall have any liability whatsoever with respect to any such representation, warranty or covenant. 27.10 Agency. This Agreement shall not be interpreted or construed to create an association, joint venture, or partnership between the Parties or to impose any partnership obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, the other Party. IN WITNESS WHEREOF, NY-Gen LLC and O&R have caused this Agreement to be executed as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By: /s/ D. Louis Peoples ________________________________ Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer SOUTHERN ENERGY NY-GEN, L.L.C. By: /s/ Randy Harrison ________________________________ Name: Randy Harrison Title: Vice President EX-10 9 EXHIBIT 10.65 - BOWLINE GUARANTY Exhibit 10.65 BOWLINE GUARANTY This Guaranty (this "Guaranty"), dated as of November 24, 1998, is given by Southern Energy, Inc., a Delaware corporation (the "Guarantor"), in favor of Orange and Rockland Utilities, Inc., a New York corporation ("O&R") and Consolidated Edison Company of New York, Inc., a New York corporation ("Con Edison"). RECITALS WHEREAS, Southern Energy Bowline, L.L.C., a Delaware limited liability company and a direct or indirect wholly-owned subsidiary of the Guarantor (the "Buyer"), has entered into the Bowline Point Generating Station Sales Agreement (the "Asset Sales Agreement"), dated as of the date hereof with O&R and Con Edison, pursuant to which the Buyer has agreed to purchase and O&R and Con Edison have agreed to sell certain electric generating assets, as more particularly set forth therein; and WHEREAS, the Buyer has entered into the Bowline Adjacent Property Sales Agreement (the "Property Sales Agreement"), dated as of the date hereof with O&R, pursuant to which the Buyer has agreed to purchase and O&R has agreed to sell certain property, as more particularly set forth therein; and WHEREAS, Guarantor has agreed to guarantee the payment and performance obligations of the Buyer under the Asset Sales Agreement and the Property Sales Agreement. NOW, THEREFORE, the Guarantor agrees as follows: Section 1. Definitions. (a) Capitalized terms used herein shall have the meanings assigned to them herein or, if not defined herein, then such terms shall have the meanings assigned to them in the Asset Sales Agreement. Section 2. Guaranty. (a) Guarantor hereby absolutely and irrevocably guarantees to O&R and Con Edison and their successors and permitted assigns, as primary obligor and not merely as a surety, that the Buyer shall: (i) be bound by and perform, (A) the provisions of Sections 3.1 (Purchase Price), 3.2 (Purchase Price Adjustment), Section 3.4 (Proration) and Section 4.2 (Payment of Purchase Price) of the Asset Sales Agreement; (ii) pay (A) the amounts required to be paid by the Buyer pursuant to Article IX (Indemnification) of the Asset Sales Agreement and the Indemnification provisions of each of the Ancillary Agreements, where applicable and (B) all other amounts required to be paid by the Buyer under the Ancillary Agreements and any other agreement or instrument relating thereto not described in (ii)(A) above; and (iii) promptly perform, observe and comply with all other obligations, covenants, and undertakings and representations and warranties of the Buyer contained in the Asset Sales Agreement, the Ancillary Agreement and any other agreement or instrument relating thereto (all of such obligations collectively, the "Guaranteed Obligations"). Guarantor agrees that such Guaranteed Obligations shall forthwith become due and payable by Guarantor or be required to be performed by the Guarantor for the purposes of this Guaranty upon the occurrence of any event or condition giving rise to the obligation of the Buyer so to pay or be performed under the Asset Sales Agreement, Ancillary Agreements or any other agreement or instrument relating thereto. (b) Guarantor hereby absolutely and irrevocably guarantees to O&R and its successors and permitted assigns, as primary obligor and not merely as a surety, that the Buyer shall: (i) be bound by and perform, (A) the provisions of Sections 3.1 (Purchase Price), Section 3.2 (Proration) and Section 4.2 (Payment of Purchase Price) of the Property Sales Agreement; (ii) pay (A) the amounts required to be paid by the Buyer pursuant to Article IX (Indemnification) of the Property Sales Agreement and (iii) promptly perform, observe and comply with all other obligations, covenants, and undertakings and representations and warranties of the Buyer contained in the Property Sales Agreement or any other agreement or instrument relating thereto (the "Guaranteed Property Obligations"). Guarantor agrees that such Guaranteed Property Obligations shall forthwith become due and payable by Guarantor or be required to be performed by the Guarantor for the purposes of this Guaranty upon the occurrence of any event or condition giving rise to the obligation of the Buyer so to pay or be performed under the Property Sales Agreement or any other agreement or instrument relating thereto. (c) In the event that the Buyer shall fail to perform such Guaranteed Obligations or Guaranteed Property Obligations at the times and in the manner provided in the Asset Sales Agreement, the Property Sales Agreement, the Ancillary Agreements and any other agreement or instrument relating thereto, the Guarantor, within thirty (30) days of receipt of written notice from O&R and/or Con Edison, as applicable, of the Buyer's failure to perform, shall duly perform or cause to be performed the same. (d) Subject to the foregoing provisions, this Guaranty shall be an absolute, unconditional, present and continuing guaranty of payment and performance (not merely of collection or collectability) which shall remain in full force and effect until the first to occur of (i) the date that each and all of the Guaranteed Obligations and Guaranteed Property Obligations shall have been fully and satisfactorily discharged in accordance with the terms and provisions of the Asset Sales Agreement, the Property Sales Agreement, the Ancillary Agreements and any other agreement or instrument relating thereto or (ii) such date (the "Attainment Date") on or after the second anniversary of the Closing Date (as defined in the Asset Sales Agreement) that the Buyer shall have attained for at least four (4) consecutive fiscal quarters (A) "net worth", as determined in accordance with U.S. generally accepted accounting principles and reflected in a balance sheet certified by an independent certified public accounting firm of national reputation, at least equal to an amount equal to one-third of the sum of the Purchase Price (as described in Section 3.1 of the Asset Sales Agreement) and the Purchase Price (as described in Section 3.1 of the Property Sales Agreement). Section 3. Guaranty Absolute. The liability of Guarantor under this Guaranty shall be unaffected by: (a) any lack of validity of the Asset Sales Agreement or the Property Sales Agreement which is caused by an act or failure to act of Buyer or the Guarantor; (b) the occurrence or continuance of any event of bankruptcy, reorganization or insolvency with respect to Buyer or any other Person (for purposes hereof, "Person" shall include any natural person, corporation, partnership, firm, association, governmental authority or any other entity whether acting in an individual, fiduciary or other capacity), or the dissolution, liquidation or winding up of Buyer or any other Person; (c) any amendment, supplement, reformation or other modification of the Asset Sales Agreement or the Property Sales Agreement; (d) the exercise, non-exercise or delay in exercising, by O&R or Con Edison, as applicable, or any other Person of any of their rights and remedies under this Guaranty, the Asset Sales Agreement or the Property Sales Agreement; (e) any permitted assignment or other transfer of this Guaranty by O&R or Con Edison, as applicable, or any permitted assignment or other transfer of the Asset Sales Agreement or the Property Sales Agreement in whole or in part; (f) any change in control of the Buyer; (g) any sale, transfer or other disposition by Guarantor of any direct or indirect interest it may have in Buyer; or (h) the absence of any notice to, or knowledge by, Guarantor of the existence or occurrence of any of the matters or events set forth in the foregoing clauses. Section 4. Waiver. In addition to waiving any defenses to which clauses (a) through (h) of Section 3 may refer: (a) Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by Guarantor of its obligations under, or the enforcement by O&R or Con Edison, as applicable, of, this Guaranty. (b) Guarantor waives all notices, diligence, presentment and demand (whether for nonpayment or protest or of acceptance, maturity, extension of time, change in nature or form of the Guaranteed Obligations or the Guaranteed Property Obligations, acceptance of security, release of security, composition or agreement arrive at as to the amount of, or the terms of, the Guaranteed Obligations or the Guaranteed Property Obligations, notice of adverse change in Buyer's financial condition, or any other fact which might materially increase the risk to Guarantor hereunder) with respect to the Guaranteed Obligations or the Guaranteed Property Obligations which are not specifically provided for in the Asset Sales Agreement or the Property Sales Agreement, and any other demands whatsoever which are not specifically provided for in the Asset Sales Agreement or the Property Sales Agreement, and waives the benefit of all provisions of law which are in conflict with the terms of this Guaranty. (c) Until payment and satisfaction in full of all Guaranteed Obligations and the Guaranteed Property Obligations, Guarantor irrevocably waives any right it may have to bring a case or proceeding against Buyer by reason of their performance under this Guaranty or with respect to any other obligation of Buyer to Guarantor, under any state or federal bankruptcy, insolvency, reorganization, moratorium or similar laws for the relief of debtors. Section 5. Representations and Warranties. Guarantor represents and warrants as follows: (a) Due Organization. Guarantor is a corporation duly organized and validly existing under the laws of Delaware. (b) Power and Authority. Guarantor has full corporate power, authority and legal right to enter into this Guaranty and to perform its obligations hereunder. (c) Due Authorization. This Guaranty has been duly authorized, executed and delivered by Guarantor. (d) Enforceability. This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting creditors' rights generally. (e) No Conflicts. The execution and delivery by Guarantor of this Guaranty and the performance by Guarantor of its obligations hereunder will not (i) violate the provisions of Guarantor's certificate of incorporation or bylaws; (ii) violate the provisions of any law applicable to Guarantor or the transactions contemplated hereby; or (iii) result in a breach of or constitute a default under any agreement to which Guarantor is a party or by which it or its assets or property are bound which breach or default would have a material adverse effect on Guarantor's ability to perform its obligations hereunder. (f) No Proceedings. There is no action, suit or proceeding at law or in equity or by or before any governmental authority or arbitral tribunal now pending or, to the best knowledge of Guarantor, threatened against Guarantor which reasonably could be expected to have a material adverse effect on Guarantor's ability to perform its obligations under this Guaranty. (g) No Claims. Guarantor's obligations under this Guaranty are not subject to any offsets or claims of any kind against Buyer, O&R or Con Edison, as applicable, or any other Person. Section 6. Repayment and Reinstatement. If any claim is ever made upon O&R or Con Edison, as applicable, or any Person claiming through O&R or Con Edison, as applicable, for repayment or disgorgement of any amount or amounts received by O&R or Con Edison, as applicable, from the Buyer in payment of the Guaranteed Obligations or the Guaranteed Property Obligations and O&R or Con Edison, as applicable, or such Person, as the case may be, repays or disgorges all or any part of said amount, then, notwithstanding any revocation or termination of this Guaranty, Guarantor shall be and remain liable to O&R or Con Edison, as applicable, or such Person, as the case may be, under the terms of this Guaranty for the amount so repaid, to the same extent as if such amount had never originally been received by O&R or Con Edison, as applicable, or such Person, as the case may be. Section 7. Amendments; Waivers; Etc. Neither this instrument nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by O&R or Con Edison, as applicable, and Guarantor, as the case may be. No delay or failure by O&R or Con Edison, as applicable, to exercise any remedy against Buyer or Guarantor will be construed as a waiver of that right or remedy. No failure on the part of O&R or Con Edison, as applicable, to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by any applicable law. Section 8. Severability. In the event that the provisions of this Guaranty are claimed or held to be inconsistent with any other instrument evidencing or securing O&R or the Guaranteed Obligations, the terms of this Guaranty shall remain fully valid and effective. If any one or more of the provisions of this Guaranty should be determined to be illegal or unenforceable, all other provisions shall remain effective. Section 9. Assignment. (a) Assignability. Guarantor shall not have the right to assign any of Guarantor's rights or obligations under this Guaranty. O&R or Con Edison, as applicable, may, at any time and from time to time, assign, in whole or in part, their respective rights hereunder to any Person to whom O&R or Con Edison, as applicable, has the right to assign their rights or obligations under and, pursuant to the terms of the Asset Sales Agreement or the Property Sales Agreement, whereupon such assignee shall succeed to all rights of O&R or Con Edison, as applicable, hereunder, as the case may be. (b) Successors and Assigns. Subject to Section 9(a) hereof, all of the terms of this instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 10. Addresses for Notices. All notices and other communications provided for hereunder shall be given in accordance with the notice requirements of the Asset Sales Agreement and if to Guarantor, at the address specified below the space for its execution of this Guaranty. Section 11. Jurisdiction. (a) To the extent permitted by applicable law, Guarantor hereby irrevocably submits to the jurisdiction of any state or federal court sitting in New York City in any action or proceeding arising out of or relating to this Guaranty, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such a court. Guarantor, O&R and Con Edison hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. To the extent permitted by applicable law, Guarantor irrevocably consents to the service of any and all process in any such action or proceedings by the mailing of copies of such process to Guarantor at its address specified below the space for its execution of this Guaranty. Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process otherwise consented to in paragraph (a) of this section (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, to the extent permitted by law, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty. Section 12. Governing Law. This Guaranty shall be governed by, and construed in accordance with, the laws of the state of New York except the choice of law rules. Section 13. Entire Agreement. This Guaranty contains the complete agreement of Guarantor with respect to the matters contained herein and supersedes all other negotiations or agreements, whether written or oral, with respect to the subject matter hereof. IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal effective as of the date first above written. SOUTHERN ENERGY, INC. By: /s/ Randy Harrison __________________________ Name: Randy Harrison Title: Vice President - Project Development Address: 900 Ashwood Parkway Suite 500 Atlanta, GA 30308 ACCEPTED AND AGREED: ORANGE AND ROCKLAND UTILITIES, INC. By: /s/ D. Louis Peoples __________________________________ Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer Address: One Blue Hill Plaza Pearl River, New York 10965 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. By: /s/ J. Michael Evans _________________________________ Name: J. Michael Evans Title: President and Chief Operating Officer Address: 4 Irving Place New York, New York 10003 EX-10 10 EXHIBIT 10.66 - LOVETT, GAS TURBINE AND HYDROELECTRIC GENERATING FACILITIES GUARANTY Exhibit 10.66 LOVETT, GAS TURBINE AND HYDROELECTRIC GENERATING FACILITIES GUARANTY This Guaranty (this "Guaranty"), dated as of November 24, 1998, is given by Southern Energy, Inc., a Delaware corporation (the "Guarantor"), in favor of Orange and Rockland Utilities, Inc., a New York corporation ("O&R"). RECITALS WHEREAS, Southern Energy Lovett, L.L.C., a Delaware limited liability company and a direct or indirect wholly-owned subsidiary of the Guarantor ("SEL"), has entered into the Lovett Generating Station Sales Agreement (the "Lovett Sales Agreement"), dated as of the date hereof with O&R pursuant to which SEL has agreed to purchase and O&R has agreed to sell certain electric generating assets, as more particularly set forth therein; and WHEREAS, Southern Energy NY-Gen, L.L.C. ("NY-Gen" and together with SEL, the "Buyers" and each individually, a "Buyer") entered into the Gas Turbine and Hydroelectric Generating Station Sales Agreement (the "Gas and Hydro Sales Agreement," together with the Lovett Sales Agreement, the "Asset Sales Agreements"), dated as of the date hereof with O&R, pursuant to which NY-Gen has agreed to purchase and O&R has agreed to sell certain property, as more particularly set forth therein; and WHEREAS, Guarantor has agreed to guarantee the payment and performance obligations of (i) SEL under the Lovett Sales Agreements and (ii) NY-Gen under the Gas and Hydro Sales Agreement. NOW, THEREFORE, the Guarantor agrees as follows: Section 1. Definitions. (a) Capitalized terms used herein shall have the meanings assigned to them herein or, if not defined herein, then such terms shall have the meanings assigned to them in the Lovett Sales Agreement and/or the Gas and Hydro Sales Agreement, as applicable. Section 2. Guaranty. (a) Guarantor hereby absolutely and irrevocably guarantees to O&R and its successors and permitted assigns, as primary obligor and not merely as a surety, that SEL shall: (i) be bound by and perform (A) the provisions of Sections 3.1 (Purchase Price), 3.2 (Purchase Price Adjustment), Section 3.4 (Proration) and Section 4.2 (Payment of Purchase Price) of the Lovett Sales Agreement; (ii) pay (A) the amounts required to be paid by SEL pursuant to Article IX (Indemnification) of the Lovett Sales Agreement and the Indemnification provisions of each of the Ancillary Agreements, where applicable and (B) all other amounts required to be paid by SEL under the Ancillary Agreements and any other agreement or instrument relating thereto not described in (ii)(A) above; and (iii) promptly perform, observe and comply with all other obligations, covenants, and undertakings and representations and warranties of SEL contained in the Lovett Sales Agreement, the Ancillary Agreement and any other agreement or instrument relating thereto (all of such obligations collectively, the "Guaranteed Lovett Obligations"). Guarantor agrees that such Guaranteed Lovett Obligations shall forthwith become due and payable by Guarantor or be required to be performed by the Guarantor for the purposes of this Guaranty upon the occurrence of any event or condition giving rise to the obligation of SEL so to pay or be performed under the Lovett Sales Agreement, the Ancillary Agreements or any other agreement or instrument relating thereto. (b) Guarantor hereby absolutely and irrevocably guarantees to O&R and its successors and permitted assigns, as primary obligor and not merely as a surety, that NY-Gen shall: (i) be bound by and perform, (A) the provisions of Sections 3.1 (Purchase Price), Section 3.2 (Purchase Price Adjustment), Section 3.4 (Proration) and Section 4.2 (Payment of Purchase Price) of the Gas and Hydro Sales Agreement; (ii) pay (A) the amounts required to be paid by NY-Gen pursuant to Article IX (Indemnification) of the Gas and Hydro Sales Agreement and the indemnification provisions of each of the Ancillary Agreements, where applicable and (B) all other amounts required to be paid by NY-Gen under the Ancillary Agreements and any other agreement or instrument relating thereto not described in (ii)(A) above; and (iii) promptly perform, observe and comply with all other obligations, covenants, and undertakings and representations and warranties of NY-Gen contained in the Gas and Hydro Sales Agreement or any other agreement or instrument relating thereto (the "Guaranteed Gas and Hydro Obligations"). Guarantor agrees that such Guaranteed Gas and Hydro Obligations shall forthwith become due and payable by Guarantor or be required to be performed by the Guarantor for the purposes of this Guaranty upon the occurrence of any event or condition giving rise to the obligation of the Buyer so to pay or be performed under the Gas and Hydro Sales Agreement or any other agreement or instrument relating thereto. (c) In the event that the Buyers shall fail to perform any such Guaranteed Lovett Obligations or Guaranteed Gas and Hydro Obligations at the times and in the manner provided in the Lovett Sales Agreement, the Gas and Hydro Sales Agreement, the Ancillary Agreements and any other agreement or instrument relating thereto, as applicable, the Guarantor, within thirty (30) days of receipt of written notice from O&R of a Buyer's failure to perform, shall duly perform or cause to be performed the same. (d) Subject to the foregoing provisions, this Guaranty shall be an absolute, unconditional, present and continuing guaranty of payment and performance (not merely of collection or collectability) which shall remain in full force and effect until the first to occur of (i) the date that each and all of the Guaranteed Lovett Obligations and Guaranteed Gas and Hydro Obligations shall have been fully and satisfactorily discharged in accordance with the terms and provisions of the Lovett Sales Agreement, the Gas and Hydro Sales Agreement, the Ancillary Agreements and any other agreement or instrument relating thereto or (ii) such date (the "Attainment Date") on or after the second anniversary of the Closing Date (which shall mean the later of the "Closing Date," as defined in the Lovett Sales Agreement and the "Closing Date" as defined in the Gas and Hydro Sales Agreement) that the Buyers together shall have attained for at least four (4) consecutive fiscal quarters (A) a "net worth", as determined in accordance with U.S. generally accepted accounting principles and reflected in a balance sheet certified by an independent certified public accounting firm of national reputation, at least equal to an amount equal to one-third of the sum of the Purchase Price (as described in Section 3.1 of the Lovett Sales Agreement) and the Purchase Price (as described in Section 3.1 of the Gas and Hydro Sales Agreement). Section 3. Guaranty Absolute. The liability of Guarantor under this Guaranty shall be unaffected by: (a) any lack of validity of the Lovett Sales Agreement or the Gas and Hydro Sales Agreement which is caused by an act or failure to act of either Buyer or the Guarantor; (b) the occurrence or continuance of any event of bankruptcy, reorganization or insolvency with respect to either Buyer or any other Person (for purposes hereof, "Person" shall include any natural person, corporation, partnership, firm, association, governmental authority or any other entity whether acting in an individual, fiduciary or other capacity), or the dissolution, liquidation or winding up of either Buyer or any other Person; (c) any amendment, supplement, reformation or other modification of the Lovett Sales Agreement or the Gas and Hydro Sales Agreement; (d) the exercise, non-exercise or delay in exercising, by O&R or any other Person of any of their rights and remedies under this Guaranty, the Lovett Sales Agreement or the Gas and Hydro Sales Agreement; (e) any permitted assignment or other transfer of this Guaranty by O&R or any permitted assignment or other transfer of the Lovett Sales Agreement or the Gas and Hydro Sales Agreement in whole or in part; (f) any change in control of either Buyer; (g) any sale, transfer or other disposition by Guarantor of any direct or indirect interest it may have in Buyer; or (h) the absence of any notice to, or knowledge by, Guarantor of the existence or occurrence of any of the matters or events set forth in the foregoing clauses. Section 4. Waiver. In addition to waiving any defenses to which clauses (a) through (h) of Section 3 may refer: (a) Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by Guarantor of its obligations under, or the enforcement by O&R of, this Guaranty. (b) Guarantor waives all notices, diligence, presentment and demand (whether for nonpayment or protest or of acceptance, maturity, extension of time, change in nature or form of the Guaranteed Lovett Obligations or the Guaranteed Gas and Hydro Obligations, acceptance of security, release of security, composition or agreement arrive at as to the amount of, or the terms of, the Guaranteed Lovett Obligations or the Guaranteed Gas and Hydro Obligations, notice of adverse change in either Buyer's financial condition, or any other fact which might materially increase the risk to Guarantor hereunder) with respect to the Guaranteed Lovett Obligations or the Guaranteed Gas and Hydro Obligations which are not specifically provided for in the Lovett Sales Agreement or the Gas and Hydro Sales Agreement, and any other demands whatsoever which are not specifically provided for in the Lovett Sales Agreement or the Gas and Hydro Sales Agreement, and waives the benefit of all provisions of law which are in conflict with the terms of this Guaranty. (c) Until payment and satisfaction in full of all Guaranteed Lovett Obligations and the Guaranteed Gas and Hydro Obligations, Guarantor irrevocably waives any right it may have to bring a case or proceeding against either Buyer by reason of their performance under this Guaranty or with respect to any other obligation of either Buyer to Guarantor, under any state or federal bankruptcy, insolvency, reorganization, moratorium or similar laws for the relief of debtors. Section 5. Representations and Warranties. Guarantor represents and warrants as follows: (a) Due Organization. Guarantor is a corporation duly organized and validly existing under the laws of Delaware. (b) Power and Authority. Guarantor has full corporate power, authority and legal right to enter into this Guaranty and to perform its obligations hereunder. (c) Due Authorization. This Guaranty has been duly authorized, executed and delivered by Guarantor. (d) Enforceability. This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws affecting creditors' rights generally. (e) No Conflicts. The execution and delivery by Guarantor of this Guaranty and the performance by Guarantor of its obligations hereunder will not (i) violate the provisions of Guarantor's certificate of incorporation or bylaws; (ii) violate the provisions of any law applicable to Guarantor or the transactions contemplated hereby; or (iii) result in a breach of or constitute a default under any agreement to which Guarantor is a party or by which it or its assets or property are bound which breach or default would have a material adverse effect on Guarantor's ability to perform its obligations hereunder. (f) No Proceedings. There is no action, suit or proceeding at law or in equity or by or before any governmental authority or arbitral tribunal now pending or, to the best knowledge of Guarantor, threatened against Guarantor which reasonably could be expected to have a material adverse effect on Guarantor's ability to perform its obligations under this Guaranty. (g) No Claims. Guarantor's obligations under this Guaranty are not subject to any offsets or claims of any kind against either Buyer, O&R or any other Person. Section 6. Repayment and Reinstatement. If any claim is ever made upon O&R or any Person claiming through O&R for repayment or disgorgement of any amount or amounts received by O&R from SEL or NY-Gen, as applicable in payment of the Guaranteed Lovett Obligations or the Guaranteed Gas and Hydro Obligations and O&R or such Person, as the case may be, repays or disgorges all or any part of said amount, then, notwithstanding any revocation or termination of this Guaranty, Guarantor shall be and remain liable to O&R or such Person, as the case may be, under the terms of this Guaranty for the amount so repaid, to the same extent as if such amount had never originally been received by O&R or such Person, as the case may be. Section 7. Amendments; Waivers; Etc. Neither this instrument nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by O&R and Guarantor, as the case may be. No delay or failure by O&R to exercise any remedy against either Buyer or Guarantor will be construed as a waiver of that right or remedy. No failure on the part of O&R to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by any applicable law. Section 8. Severability. In the event that the provisions of this Guaranty are claimed or held to be inconsistent with any other instrument evidencing or securing O&R or the Guaranteed Lovett Obligations, the Guaranteed Gas and Hydro Obligations, the terms of this Guaranty shall remain fully valid and effective. If any one or more of the provisions of this Guaranty should be determined to be illegal or unenforceable, all other provisions shall remain effective. Section 9. Assignment. (a) Assignability. Guarantor shall not have the right to assign any of Guarantor's rights or obligations under this Guaranty. O&R may, at any time and from time to time, assign, in whole or in part, their respective rights hereunder to any Person to whom O&R has the right to assign their rights or obligations under and, pursuant to the terms of the Lovett Sales Agreement or the Gas and Hydro Sales Agreement, whereupon such assignee shall succeed to all rights of O&R hereunder, as the case may be. (b) Successors and Assigns. Subject to Section 9(a) hereof, all of the terms of this instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Section 10. Addresses for Notices. All notices and other communications provided for hereunder shall be given in accordance with the notice requirements of the Lovett Sales Agreement, the Gas and Hydro Sales Agreement, and if to Guarantor, at the address specified below the space for its execution of this Guaranty. Section 11. Jurisdiction. (a) To the extent permitted by applicable law, Guarantor hereby irrevocably submits to the jurisdiction of any state or federal court sitting in New York City in any action or proceeding arising out of or relating to this Guaranty, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such a court. Guarantor and O&R hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. To the extent permitted by applicable law, Guarantor irrevocably consents to the service of any and all process in any such action or proceedings by the mailing of copies of such process to Guarantor at its address specified below the space for its execution of this Guaranty. Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process otherwise consented to in paragraph (a) of this section (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, to the extent permitted by law, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty. Section 12. Governing Law. This Guaranty shall be governed by, and construed in accordance with, the laws of the state of New York except the choice of law rules. Section 13. Entire Agreement. This Guaranty contains the complete agreement of Guarantor with respect to the matters contained herein and supersedes all other negotiations or agreements, whether written or oral, with respect to the subject matter hereof. IN WITNESS WHEREOF, Guarantor has signed this Guaranty under seal effective as of the date first above written. SOUTHERN ENERGY, INC. By: /s/ Randy Harrison _____________________________ Name: Randy Harrison Title: Vice President - Project Development Address: 900 Ashwood Parkway Suite 500 Atlanta, GA 30308 ACCEPTED AND AGREED: ORANGE AND ROCKLAND UTILITIES, INC. By: /s/ D. Louis Peoples ______________________________ Name: D. Louis Peoples Title: Vice Chairman and Chief Executive Officer Address: One Blue Hill Plaza Pearl River, New York 10965 EX-99 11 EXHIBIT 99.16 - PRESS RELEASE Exhibit 99.16 914-577-2430 Contact: Michael Donovan SOUTHERN ENERGY TO PURCHASE ORANGE AND ROCKLAND GENERATING FACILITIES FOR $480 MILLION Pearl River, NY, November 24, 1998 - Orange and Rockland Utilities, Inc. today announced that the Company has signed a definitive agreement to sell all its electric generating facilities, including the Bowline Point Generating Plant owned jointly with Consolidated Edison of New York, Inc., to Southern Energy, Inc., a subsidiary of Southern Company. The sales price for all generating facilities is approximately $480 million, including plant equipment and spare parts inventory. Orange and Rockland's portion of the sales price is approximately $345 million. Southern Energy has announced plans to spend an additional $390 million to upgrade the plants and build up to 710 megawatts of new natural gas-fired generation. Total generation for the assets sold is 1,776 megawatts, with Orange and Rockland's portion being 962 MW. Southern Energy, one of the nation's top energy production firms, was the successful bidder in a process for the auction of the plants established under Orange and Rockland's New York Electric Rate and Restructuring Plan, approved by the New York Public Service Commission in December 1997, and the subsequent Divestiture Plan approved by the Commission in May 1998. The transaction has been approved by the Boards of Orange and Rockland and Southern Company. Consolidated Edison Company of New York, Inc., which has a two-thirds interest in the Bowline Point Generating Plant in West Haverstraw, NY, also approved the sale of that facility. The sale of the generating plants is subject to federal and state regulatory review, and is expected to be completed by April 30, 1999. The Divestiture Plan provides that any gain in excess of Orange and Rockland's portion of the plants' net book value, applicable sales expenses and taxes will be shared among Orange and Rockland customers and shareholders. Orange and Rockland's portion of the net book value, applicable sales expenses and taxes totaled approximately $330 million. Under the Sales Agreement, Southern Energy subsidiaries agreed to honor the current union contract between Orange and Rockland and IBEW Local 503. For Orange and Rockland employees hired by Southern Energy subsidiaries, their years of Orange and Rockland service will be utilized to determine the level of benefits to which they may be entitled under any Southern Energy employee benefit plan - including pension plans in which such hired employees participate. Orange and Rockland Electric Production Division management employees who may suffer a loss of employment as a result of the divestiture are covered under the terms of Orange and Rockland's Management Employee Transition Program outlined to employees in December 1997. Originating as a utility in Alabama, Georgia, Florida and Mississippi, Southern Company currently serves over 12 million customers in ten countries on four continents. It has vast experience in providing competitive energy and energy services, and it has earned an outstanding reputation for its environmental commitment and shareholder value. Although it has facilities worldwide, Southern Company strongly endorses local community involvement. Since 1927, the company's motto of "A Citizen Wherever We Serve" has been a guiding principle. According to Tom Boren, President of Southern Energy, the new owners of the generating facilities will work closely with community leaders and others to sustain high levels of corporate and charitable involvement. Today's announcement represents a historic milestone in New York's deregulation of the State's electric utility industry and in O&R's transition from being a regulated generation, transmission and distribution company to one that focuses on transmission and distribution. Orange and Rockland Utilities, Inc., and its subsidiaries, Rockland Electric Company and Pike County Light & Power Company, serve approximately 269,600 electric customers in a 1,350-square-mile region with a population of more than 675,000 in southeastern New York State, northern New Jersey and northeastern Pennsylvania. O&R and PCL&P also distribute natural gas to approximately 114,500 customers in New York and Pennsylvania. -----END PRIVACY-ENHANCED MESSAGE-----