Document:

Exhibit 10(f)1

 

EXECUTION COPY

 

MULTI-YEAR CREDIT AGREEMENT

dated as of July 7, 2006

among

SOUTHERN POWER COMPANY,

as Borrower,

THE LENDERS IDENTIFIED HEREIN,

CITIBANK, N.A.,

as Administrative Agent,

and

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

as Initial Issuing Bank

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

as Syndication Agent,

BAYERISCHE LANDESBANK,

 

ING CAPITAL LLC,

 

KBC BANK, N.V.,

as Documentation Agents,

BARCLAYS BANK PLC,

 

HSBC BANK USA, NATIONAL ASSOCIATION,

 

JPMORGAN CHASE BANK, N.A.,

 

MIZUHO CORPORATE BANK, LTD.,

 

THE BANK OF NOVA SCOTIA,

 

WACHOVIA BANK, N.A.,

as Senior Managing Agents,

and

CITIGROUP GLOBAL MARKETS INC. 

 

and 

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

NEW YORK BRANCH,

as Joint Lead Arrangers and Joint Book Managers 

 

The Syndication Agent, the Documentation Agents, the Managing Agents, the Joint Lead Arrangers and the Joint Book Managers are for information purposes only and have no liability in such capacities in this Credit Agreement.

 

 

 

Table of Contents

	
            
 	
            Page
 

Section 1

DEFINITIONS AND ACCOUNTING TERMS

	
            1.1 Definitions
 	
            1
 
	
            1.2 Computation of Time Periods and Other Definitional Provisions
 	
            16
 
	
            1.3 Accounting Terms
 	
            16
 
			

Section 2

LOANS AND LETTERS OF CREDIT

	
            2.1 Commitment of the Lenders
 	
            16
 
	
            2.2 Extension of Maturity Date
 	
            19
 
	
            2.3 Method of Borrowing for Revolving Loans
 	
            20
 
	
            2.4 Funding of Revolving Loans
 	
            20
 
	
            2.5 Continuations and Conversions
 	
            21
 
	
            2.6 Minimum Amounts
 	
            21
 
	
            2.7 Reductions of Commitments
 	
            21
 
	
            2.8 Notes
 	
            22
 
	
            2.9 Increases in Revolving Loan Commitment
 	
            22
 
	
            2.10 Letters of Credit
 	
            23
 

Section 3

PAYMENTS

	
            3.1 Interest
 	
            26
 
	
            3.2 Prepayments.
 	
            26
 
	
            3.3 Payment in Full at Maturity
 	
            27
 
	
            3.4 Fees
 	
            27
 
	
            3.5 Place and Manner of Payments
 	
            28
 
	
            3.6 Pro Rata Treatment
 	
            29
 
	
            3.7 Computations of Interest and Fees
 	
            29
 
	
            3.8 Sharing of Payments
 	
            30
 

Section 4

ADDITIONAL PROVISIONS REGARDING LOANS

	
            4.1 Eurodollar Loans
 	
            30
 
	
            4.2 Capital Adequacy
 	
            32
 
	
            4.3 Compensation
 	
            32
 
	
            4.4 Taxes
 	
            33
 
	
            4.5 Mitigation; Mandatory Assignment
 	
            35
 

Section 5

CONDITIONS PRECEDENT

	
            5.1 Closing Conditions
 	
            35
 
	
            5.2 Conditions to Extensions of Credit
 	
            37
 

Section 6

REPRESENTATIONS AND WARRANTIES

	
            6.1 Organization and Good Standing
 	
            38
 
	
            6.2 Due Authorization
 	
            38
 
	
            6.3 No Conflicts
 	
            38
 

 

 

	
            i
 

 

 

 

 

	
            6.4 Consents
 	
            38
 
	
            6.5 Enforceable Obligations
 	
            38
 
	
            6.6 Financial Condition
 	
            38
 
	
            6.7 No Default
 	
            39
 
	
            6.8 Indebtedness and Off-Balance Sheet Indebtedness
 	
            39
 
	
            6.9 Litigation
 	
            39
 
	
            6.10 Material Agreements
 	
            39
 
	
            6.11 Taxes
 	
            39
 
	
            6.12 ERISA
 	
            39
 
	
            6.13 Compliance with Law
 	
            40
 
	
            6.14 Use of Proceeds; Margin Stock
 	
            40
 
	
            6.15 Government Regulation
 	
            40
 
	
            6.16 Solvency
 	
            40
 

Section 7

AFFIRMATIVE COVENANTS

	
            7.1 Information Covenants
 	
            40
 
	
            7.2 Preservation of Existence and Franchises
 	
            42
 
	
            7.3 Books and Records
 	
            42
 
	
            7.4 Compliance with Law
 	
            42
 
	
            7.5 Payment of Taxes
 	
            42
 
	
            7.6 Insurance
 	
            42
 
	
            7.7 Performance of Obligations
 	
            42
 
	
            7.8 ERISA
 	
            42
 
	
            7.9 Use of Proceeds
 	
            43
 
	
            7.10 Audits/Inspections
 	
            43
 
	
            7.11 Indebtedness to Capitalization
 	
            43
 

Section 8

NEGATIVE COVENANTS

	
            8.1 Nature of Business
 	
            43
 
	
            8.2 Consolidation and Merger
 	
            43
 
	
            8.3 Sale or Lease of Assets
 	
            44
 
	
            8.4 Transactions with Affiliates
 	
            44
 
	
            8.5 Fiscal Year
 	
            44
 
	
            8.6 Liens
 	
            44
 
	
            8.7 Minimum Contract Maintenance Covenant
 	
            45
 

Section 9

EVENTS OF DEFAULT

	
            9.1 Events of Default
 	
            46
 
	
            9.2 Acceleration; Remedies
 	
            48
 
	
            9.3 Allocation of Payments after Event of Default
 	
            49
 

Section 10

AGENCY PROVISIONS

	
            10.1 Appointment
 	
            50
 
	
            10.2 Delegation of Duties
 	
            50
 
	
            10.3 Exculpatory Provisions
 	
            50
 
	
            10.4 Reliance on Communications
 	
            51
 

 

 

	
            ii
 

 

 

 

 

	
            10.5 Notice of Default
 	
            51
 
	
            10.6 Non-Reliance on Agents and Other Lenders
 	
            51
 
	
            10.7 Indemnification
 	
            52
 
	
            10.8 Each Agent in Its Individual Capacity
 	
            52
 
	
            10.9 Successor Administrative Agent
 	
            53
 
	
            10.10 Administrative Agent May File Proof of Claims
 	
            53
 

Section 11

MISCELLANEOUS

	
            11.1 Notices and Other Communications; Facsimile Copies
 	
            54
 
	
            11.2 Right of Setoff
 	
            56
 
	
            11.3 Benefit of Agreement
 	
            56
 
	
            11.4 No Waiver; Remedies Cumulative
 	
            59
 
	
            11.5 Payment of Expenses, Etc
 	
            60
 
	
            11.6 Amendments, Waivers and Consents
 	
            60
 
	
            11.7 Counterparts
 	
            61
 
	
            11.8 Headings
 	
            61
 
	
            11.9 Defaulting Lender
 	
            61
 
	
            11.10 Survival of Indemnification and Representations and Warranties
 	
            62
 
	
            11.11 Governing Law
 	
            62
 
	
            11.12 Waiver of Jury Trial; Waiver of Consequential Damages
 	
            62
 
	
            11.13 Time
 	
            62
 
	
            11.14 Severability
 	
            62
 
	
            11.15 Entirety
 	
            62
 
	
            11.16 Confidentiality
 	
            62
 
	
            11.17 Binding Effect
 	
            63
 
	
            11.18 USA Patriot Act Notice
 	
            63
 
	
            11.19 Jurisdiction, Etc
 	
            64
 

 

	
            iii
 

 

 

 

 

SCHEDULES

 

	
            Schedule 1.1(a)
 	
            Account Designation Letter
 
	
            Schedule 1.1(b)
 	
            Commitment Percentages
 	
             

	
            Schedule 11.1
 	
            Notices
 	
             

				

 

EXHIBITS

 

	
            Exhibit 1.1
 	
            Terms of Subordination
 	
             

	
            Exhibit 2.1(b)
 	
            Form of Competitive Bid Request
 	
             

	
            Exhibit 2.3
 	
            Form of Notice of Borrowing
 	
             

	
            Exhibit 2.5
 	
            Form of Notice of Continuation/Conversion
 
	
            Exhibit 2.8(a)
 	
            Form of Revolving Loan Note
 	
             

	
            Exhibit 2.8(b)
 	
            Form of Competitive Bid Loan Note
 	
             

	
            Exhibit 2.10
 	
            Form of Letter of Credit Request
 	
             

	
            Exhibit 7.1(c)
 	
            Form of Compliance Certificate
 	
             

	
            Exhibit 11.3(b)
 	
            Form of Assignment and Assumption
 	
             

										

 

 

 

	
            iv
 

 

 

 

 

MULTI-YEAR CREDIT AGREEMENT

 

THIS MULTI-YEAR CREDIT AGREEMENT (this “Credit Agreement”), dated as of July 7, 2006, is entered into among SOUTHERN POWER COMPANY, a Delaware corporation (together with any other Person (as defined herein) as may be substituted therefor pursuant to Section 8.2(b)(ii), the “Borrower”), the Lenders (as defined herein), CITIBANK, N.A. (“Citibank”), as administrative agent (together with any successor administrative agent appointed pursuant to Section 10, the “Administrative Agent”), and THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH (“BTMU”), as Initial Issuing Bank (as defined herein). 

 

RECITALS

 

WHEREAS, the Borrower has requested that the Lenders provide a revolving credit facility, and the Lenders are willing to do so on the terms and conditions set forth herein.

 

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1

DEFINITIONS AND ACCOUNTING TERMS

1.1  Definitions.  As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires.  Defined terms herein shall include in the singular number the plural and in the plural the singular:

“Adjusted Eurodollar Rate” means, at any time, the Eurodollar Rate plus the Applicable Percentage for Eurodollar Loans, in each case as then in effect.

 

“Administrative Agent” has the meaning in the recital of parties to this Credit Agreement.  

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by or under direct or indirect common control with such Person.  A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 20% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise.

 

 

 

 

“Affiliate Subordinated Indebtedness” means any borrowings by the Borrower from The Southern Company or an Affiliate of The Southern Company; provided that such borrowings are subordinated on terms substantially similar to the terms of subordination set forth in Exhibit 1.1 hereto.

 

“Agent-Related Persons” means each of the Agents (including any successor agents), together with its Affiliates (including any Affiliate of such Agent acting as a Joint Lead Arranger) and the officers, directors, employees, representatives, agents, counsel and attorneys-in-fact of such Persons and Affiliates.

 

“Agents” means, collectively, the Issuing Banks, the Administrative Agent, the Syndication Agent, the Documentation Agents and the Managing Agents.

 

“Agent’s Account” means the account of the Administrative Agent maintained by the Administrative Agent at Citibank, N.A., with its office at 388 Greenwich Street, New York, New York 10013, Account No. 368522481, Attention: Bank Loan Syndications.

 

“Anniversary Date” has the meaning specified in Section 2.2(a).

 

“Applicable Percentage” means, at any time, and with respect to all Eurodollar Loans then outstanding, Unused Fees, and/or Utilization Fees, the applicable percentage corresponding to the Senior Debt Rating in effect from time to time as described below:

 

	
             

Senior

Debt Rating
 	
            Applicable Percentage
 for Eurodollar Loans 
 	
            Applicable Percentage for Unused Fees
 	
            Applicable Percentage for Utilization Fees 
 
	
             
 	
             
 	
             
 	
             
 
	
            I.              A+/A1/A+
 	
            .15%
 	
            .060%
 	
            .050%
 
	
             
 	
             
 	
             
 	
             
 
	
            II.            A/A2/A
 	
            .20%
 	
            .070%
 	
            .050%
 
	
             
 	
             
 	
             
 	
             
 
	
            III.           A-/A3/A-
 	
            .25%
 	
            .080%
 	
            .050%
 
	
             
 	
             
 	
             
 	
             
 
	
            IV.           BBB+/Baa1/BBB+
 	
            .35%
 	
            .10%
 	
            .050%
 
	
             
 	
             
 	
             
 	
             
 
	
            V.            BBB/Baa2/BBB
 	
            .45%
 	
            .125%
 	
            .10%
 
	
             
 	
             
 	
             
 	
             
 
	
            VI.           BBB-/Baa3/BBB- 
 	
            .55%
 	
            .15%
 	
            .15%
 
	
             
 	
             
 	
             
 	
             
 
	
            VII.          less than  BBB-/Baa3/BBB- or unrated  
 	
            .75%
 	
            .20%
 	
            .15%
 

 

Notwithstanding the above, if at any time there is a split in Senior Debt Ratings between S&P, Moody’s and Fitch and (a) any two such Senior Debt Ratings are equal and higher than the third such Senior Debt Rating, the two equal and higher Senior Debt Ratings (i.e., the lower pricing) will apply, (b) any two such Senior Debt Ratings are equal but lower than the third such Senior Debt Rating, the two equal and lower Senior Debt Ratings (i.e., the higher pricing) will apply or (c) none of the Senior Debt Ratings are equal, the intermediate Senior Debt Rating will apply.  If at any time the Borrower shall maintain Senior Debt Ratings from only two of S&P, Moody’s and Fitch and there is a split in such Senior Debt Ratings and (x) in the event of a single level split, the higher Senior Debt

 

_________________________

1Confirm account details.

 

2

 

 

Rating (i.e., the lower pricing) will apply and (y) in the event of a multiple level split, one level below the higher Senior Debt Rating will apply.

 

The Applicable Percentages for Eurodollar Loans, Unused Fees and Utilization Fees shall be determined and adjusted on the date (each, a “Calculation Date”) on which there is any change in the Senior Debt Rating of the Borrower.  Each Applicable Percentage shall be effective from one Calculation Date until the next Calculation Date.  Any adjustment in the Applicable Percentage shall be applicable to all existing Eurodollar Loans as well as any new Eurodollar Loans made.  The Borrower shall notify the Administrative Agent in writing immediately upon any change in any of its Senior Debt Ratings.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“Arranger” means each of Citigroup Global Markets Inc. and BTMU in its capacity as joint lead arranger.

 

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.3(b), and accepted by the Administrative Agent, in substantially the form of Exhibit 11.3(b) or any other form approved by the Administrative Agent).

 

“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit) under such Letter of Credit (assuming compliance at such time with all conditions to drawing).

 

“Bankruptcy Code” means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time.

 

“Base Rate” means, for any day, a simple rate per annum equal to the greater of (a) the Prime Rate for such day or (b) the sum of 1/2% plus the Federal Funds Rate for such day.

 

“Base Rate Loan” means a Revolving Loan which bears interest based on the Base Rate.

 

“Borrower” has the meaning specified in the recital of parties to this Credit Agreement.

 

“Borrower Obligations” means, without duplication, all of the obligations of the Borrower to the Lenders and the Agents, whenever arising, under this Credit Agreement, the Notes or any of the other Credit Documents.

 

3

 

 

 

“BTMU” has the meaning specified in the recital of parties to this Credit Agreement.

 

“Business Day” means any day other than a Saturday, a Sunday, a legal holiday or a day on which any Lender specifically or banking institutions generally are authorized or required by law or other governmental action to close in Atlanta, Georgia or New York, New York; provided that in the case of Eurodollar Loans, such day is also a day on which dealings between banks are carried on in Dollar deposits in the London interbank market.

 

“Calculation Date” has the meaning set forth in the definition of Applicable Percentage.

 

“Capitalization” means, with respect to the Borrower at any time, without duplication, the sum of (a) the aggregate of (i) the capital stock (but excluding treasury stock and capital stock subscribed and unissued), other equity accounts (including retained earnings and paid-in capital but excluding accumulated other comprehensive income and loss) of the Borrower as the same appears on its balance sheet prepared in accordance with GAAP as of the date of determination, (ii) Affiliate Subordinated Indebtedness and (iii) the principal amount of Trust Preferred Obligations and Junior Subordinated Deferred Interest Debt Obligations; provided that the maturity date of such Trust Preferred Obligations and Junior Subordinated Deferred Interest Debt Obligations is subsequent to
the latest Maturity Date applicable to any of the Commitments and Loans outstanding at such time and (b) the amount of all Indebtedness of the Borrower as of the same date; provided, that “Capitalization” shall not include any capital stock or other equity (including paid in capital and retained earnings, other than retained earnings which are permitted to be distributed by an Unrestricted Subsidiary to the Borrower) attributable, directly or indirectly, to an Unrestricted Subsidiary.

 

“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Issuing Banks and the Lenders, as collateral for the Letters of Credit Outstanding, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the Issuing Banks (which documents are hereby consented to by the Lenders).  Derivatives of such term have corresponding meanings.

 

“Change of Control” means the failure of The Southern Company, a Delaware corporation, to own more than 51% of the outstanding shares of the capital stock of the Borrower entitled to vote generally for the election of directors of the Borrower.

 

“Citibank” has the meaning specified in the recital of parties to this Credit Agreement.

 

“Closing Date” means the date hereof.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

4

 

 

 

“Commitment” means, with respect to each Lender, the obligation of such Lender to make Loans to the Borrower in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 1.1(b) under the caption “Commitment” or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Credit Agreement, and “Commitments” means, collectively, the sum of all Lenders’ Commitments, which shall be equal to $400,000,000 as such amount may be otherwise reduced in accordance with Section 2.7 or increased in accordance with Section 2.9.

 

“Commitment Percentage” means, for each Lender, the percentage identified as its Commitment Percentage opposite such Lender’s name on Schedule 1.1(b) attached hereto, as such percentage may be modified by assignment in accordance with Section 11.3 or by increases in the Commitments pursuant to Section 2.9.

 

“Communication” has the meaning set forth in Section 11.1(b).

 

“Competitive Bid” means an offer by a Lender to make a Competitive Bid Loan pursuant to the terms of Section 2.1(b).

 

“Competitive Bid Fee” means a fee of $1,000 payable by the Borrower to the Administrative Agent in connection with a Competitive Bid Request pursuant to Section 2.1(b).

 

“Competitive Bid Loan” means a loan made by a Lender in its discretion pursuant to the provisions of Section 2.1(b).

 

“Competitive Bid Maturity Date” means, with respect to any Competitive Bid Loan, the maturity date specified for such Competitive Bid Loan pursuant to Section 2.1(b)(ii).

 

“Competitive Bid Loan Notes” means the promissory notes of the Borrower in favor of each Lender evidencing the Competitive Bid Loans and substantially in the form of Exhibit 2.8(b), as such promissory notes may be amended, modified, supplemented or replaced from time to time.  

 

“Competitive Bid Rate” means, as to any Competitive Bid made by a Lender in accordance with the provisions of Section 2.1(b), the rate of interest offered by the Lender making the Competitive Bid.

 

“Competitive Bid Request” means a request by the Borrower for Competitive Bids in the form of Exhibit 2.1(b).

 

“Contracted Operating Cash Flows” means the projection done at the end of each fiscal quarter of the next four fiscal quarters of the Borrower’s and its Subsidiaries’ (other 

 

5

 

 

than Unrestricted Subsidiaries) total cash flow available for debt service from fixed-price capacity power contracts, each contract having a term from initial commencement to expiry of at least five years; provided, however, that up to 12.5% of the Contracted Operating Cash Flows may be derived from fixed-price capacity power contracts that have contract terms of at least two years but less than five years from initial commencement to expiry.  The projection shall be consistent with financial reporting procedures of the Borrower.  The term fixed-price capacity power contracts includes any power contract that states the base capacity price on a per unit basis (for example, in Dollars per megawatt) and which may allow for adjustments to that base price that are generally encompassed within the Borrower’s or the electric generation industry’s commercial expectations for a power
contract of a similar duration (including but not limited to adjustments to accommodate changed capacity purchase levels, variations in expected or actual construction costs or demonstrated capability levels, changes in equipment or law and force majeure); provided, however, that a power contract will not be considered to be a fixed-price capacity power contract if a material portion of the capacity price varies based upon a market index for electric capacity or energy, fuel, weather or other factor that is external to the generating facility and the transaction between the Borrower and its customer.  The method of calculating the energy price shall not be considered in assessing whether a power contract is a fixed-priced capacity power contract.

 

“Controlled Group” means (a) the controlled group of corporations as defined in Section 414(b) of the Code and the applicable regulations thereunder or (b) the group of trades or businesses under common control as defined in Section 414(c) of the Code and the applicable regulations thereunder, of which the Borrower is a part or may become a part.

 

“Credit Documents” means this Credit Agreement, the Notes, and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto.

 

“Credit Extensions” means as of any day, the sum of (a) the principle balance of all Loans then outstanding plus (b) the amount of Letters of Credit Outstanding as of such day.

 

“Debt Rating” means any credit rating of the Borrower by S&P, Moody’s or Fitch.

 

“Default” means any event, act or condition which, with notice or lapse of time, or both, would constitute an Event of Default.

 

“Defaulting Lender” means, at any time, any Lender that, at such time, (a) has failed to make a Loan required pursuant to the terms of this Credit Agreement, (b) has failed to pay to the Administrative Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official.

 

6

 

 

 

 “Documentation Agents” means each of Bayerische Landesbank, ING Capital         LLC and KBC Bank, N.V. in its capacity as Documentation Agent.

 

“Dollars” and “$” means dollars in lawful currency of the United States of America.

 

“Eligible Assignee” means any Person (other than a natural Person) that (a) has a combined capital and surplus of at least $500,000,000 and (b) is approved by (A) the Administrative Agent and (B) unless (i) a Default or Event of Default has occurred and is continuing or (ii) such Person is an Affiliate of or Approved Fund related to the assigning Lender, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

 

“Engagement Letter” means that certain letter agreement, dated as of May 30, 2006, among the Borrower and each of the Arrangers.

 

“Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of hazardous materials.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.

 

“ERISA Affiliate” means each person (as defined in Section 3(9) of ERISA) which together with the Borrower or any Subsidiary of the Borrower would be deemed to be a member of the same “controlled group” within the meaning of Section 414(b), (c), (m) and (o) of the Code.

 

“Eurodollar Loan” means a Revolving Loan bearing interest based on the Adjusted Eurodollar Rate.

 

“Eurodollar Rate” means, with respect to any Eurodollar Loan, for the Interest Period applicable thereto, a rate per annum determined pursuant to the following formula:

 

	
            “Eurodollar Rate”
 	
            =
 	
            Interbank Offered Rate  
 	
             

	
             
	
            1 - Eurodollar Reserve Percentage
 
					

 

“Eurodollar Reserve Percentage” means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, 

 

7

 

 

special, or marginal reserves) applicable with respect to “Eurocurrency liabilities” as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not any Lender has any Eurodollar liabilities subject to such reserve requirement at that time.  Eurodollar Loans shall be deemed to constitute Eurodollar liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender.  The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage.

 

“Event of Default” has the meaning specified in Section 9.1.

 

“Existing Credit Agreement” means that certain Amended and Restated Credit Agreement, dated as of June 10, 2005, among the Borrower, Citibank, as administrative agent, and certain lenders party thereto.

 

“Federal Funds Rate” means for any day the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent on such day on
such transactions as determined by the Administrative Agent.

 

“Fitch” means Fitch, Inc., or any successor or assignee of the business of such company in the business of rating securities.

 

“Fund” means any Person (other than a natural Person) that is, or will be, engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

 

“GAAP” means generally accepted accounting principles in the United States applied on a consistent basis and subject to Section 1.3.

 

“Governmental Authority” means any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.

 

“Guaranty Obligations” means, in respect of any Person, any legally enforceable obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of another Person.

 

“Indebtedness” means, as to any Person, without duplication:  (i) all obligations of such Person for borrowed money or evidenced by bonds, debentures, notes or similar 

 

8

 

 

instruments; (ii) all obligations of such Person for the deferred purchase price of property or services (except trade accounts payable arising in the ordinary course of business); (iii) all capital lease obligations of such Person; (iv) all Indebtedness of others secured by a Lien on any properties, assets or revenues of such Person (other than stock, partnership interests or other equity interests of such Person in entities other than the Borrower or any of its Subsidiaries) to the extent of the lesser of the value of the property subject to such Lien or the amount of such Indebtedness; (v) all Guaranty Obligations; and (vi) all non-contingent obligations of such Person under any letters of credit or bankers’ acceptances.  It is understood and agreed that Indebtedness (including Guaranty Obligations) shall not include (A) any Off Balance Sheet Indebtedness in existence as of the
Closing Date and additional Off Balance Sheet Indebtedness in an amount not to exceed $150,000,000 in the aggregate at any time, other than obligations of any partnership or joint venture that are recourse to the Borrower or any of its Subsidiaries, (B) any refinancing of Off Balance Sheet Indebtedness described in subsection (A) above in a principal amount not in excess of that outstanding as of the date of refinancing, (C) any project Indebtedness incurred by Subsidiaries of the Borrower to the extent such Indebtedness is non-recourse to the Borrower or (D) any Indebtedness with respect to Trust Preferred Obligations and any Junior Subordinated Deferred Interest Debt Obligations, as long as the maturity date of such Trust Preferred Obligations and Junior Subordinated Deferred Interest Debt Obligations is subsequent to the latest Maturity Date of any of the Commitments and Loans as of any date of determination; provided that the amount
of any mandatory principal amortization or defeasance of Trust Preferred Obligations or Junior Subordinated Deferred Interest Debt Obligations prior to the Maturity Date shall be included in this definition of Indebtedness.

 

“Initial Issuing Bank” means BTMU, in its capacity as issuer of Letters of Credit hereunder.

 

“Interbank Offered Rate” means, with respect to any Eurodollar Loan for the Interest Period applicable thereto:

 

(a)       the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Telerate screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

(b)       if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or

 

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(c)       if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Loan being made, continued or converted by the Administrative Agent and with a term equivalent to such Interest Period would be offered to leading banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) two Business Days prior to the first day of such Interest Period.

“Interest Payment Date” means (a) as to any Base Rate Loan, the last day of each fiscal quarter of the Borrower and the Maturity Date applicable to such Base Rate Loan, (b) as to any Eurodollar Loan, the last day of each applicable Interest Period and the Maturity Date applicable to such Eurodollar Loan and (c) as to any Competitive Bid Loan, the last day of the Interest Period for such Competitive Bid Loan and the Competitive Bid Maturity Date applicable to such Competitive Bid Loan.  In addition, where the applicable Interest Period for a Eurodollar Loan is greater than three months or the applicable Interest Period for a Competitive Bid Loan is greater than 90 days, then an Interest Payment Date shall also occur on the last day of each three-month period during such Interest Period.  If an Interest Payment Date
falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day.

 

“Interest Period” means (a) as to each Eurodollar Loan, a period of one, two, three, six, nine or 12 months’ duration, as the Borrower may elect and as may be available, with respect to durations of six months or less, and as consented to by all Lenders, with respect to durations of nine or 12 months, commencing, in each case, on the date of the borrowing (including continuations and conversions of Eurodollar Loans) and (b) with respect to each Competitive Bid Loan, each of the Interest Periods specified for such Competitive Bid Loan pursuant to Section 2.2(b)(ii), each of which Interest Periods shall not in any event be less than seven days’ duration; provided, however, (i) if any Interest Period would end on a
day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (ii) no Interest Period shall extend beyond the Competitive Bid Maturity Date or Maturity Date applicable to the relevant Loan and (iii) with respect to Eurodollar Loans, where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month.

 

“Issuing Bank” means the Initial Issuing Bank and any other Lender selected by the Borrower and agreed by such Lender with the Administrative Agent’s consent, such consent not to be unreasonably withheld, to which a Letter of Credit commitment hereunder has been assigned pursuant to Section 11.3 so long as such Lender expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its Letter of Credit Commitment (which information shall be 

 

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recorded by the Administrative Agent in the Register), for so long as such Initial Issuing Bank or Lender, as the case may be, shall have a Letter of Credit Commitment.  Any Issuing Bank may, in its reasonable discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.  Each Issuing Bank shall act commercially reasonably.

 

“Junior Subordinated Deferred Interest Debt Obligations” means deferrable interest debt obligations of the Borrower or one of its Subsidiaries that are subordinated with respect to right of payment on terms and conditions substantially similar to the Series F 7.125% Junior Subordinated Notes due June 30, 2042 issued by Southern Company Capital Funding, Inc.

 

“L/C Cash Deposit Account”  has the meaning specified in Section 2.10(i).

 

“L/C Disbursement” means a payment made by any Issuing Bank pursuant to a Letter of Credit issued by such Issuing Bank.

 

“Lenders” means those banks and other financial institutions identified as such on the signature pages hereto and such other institutions that may become Lenders pursuant to Section 11.3.

 

“Letter of Credit” means a letter of credit that is (a) issued by any Issuing Bank for the account of the Borrower and (b) in form and substance reasonably satisfactory to such Issuing Bank.

 

“Letter of Credit Commitment” means, with respect to any Issuing Bank at any time, the amount set forth opposite such Issuing Bank’s name on Schedule 1.1(b) hereto under the caption “Letter of Credit Commitment” or, if such Issuing Bank has entered into one or more Assignment and Acceptances, set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 11.03(c) as such Issuing Bank’s “Letter of Credit Commitment” as such amount may be reduced at or prior to such time pursuant to Section 2.7.

 

“Letter of Credit Fees” means the fees payable in respect of Letters of Credit pursuant to Section 3.4(c).

 

“Letters of Credit Outstanding” means, at any time, with respect to Letters of Credit outstanding at such time, the sum of (a) the Available Amount of such Letters of Credit at such time plus (b) all amounts theretofore drawn or paid under Letters of Credit for which any Issuing Bank has not then been reimbursed.

 

“Letter of Credit Request” means a request by the Borrower for the issuance of a Letter of Credit in the form of Exhibit 2.10.

 

 

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“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof).

 

“Loans” means the Revolving Loans and the Competitive Bid Loans.

 

“Managing Agents” means each of Barclays Bank PLC, HSBC Bank USA, National Association, JPMorgan Chase Bank, N.A., Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, Scotiabanc Inc. and Wachovia Bank, N.A. in its capacity as Senior Managing Agent..

 

“Material Adverse Effect” means a material adverse effect on (a) the operations, assets, financial condition or business of the Borrower, (b) the ability of the Borrower to perform its obligations under this Credit Agreement and the other Credit Documents or (c) the validity or enforceability of this Credit Agreement, any of the other Credit Documents, or the rights and remedies of the Lenders hereunder or thereunder; provided that neither a downgrade in any Debt Rating(s) nor the inability of the Borrower to place commercial paper shall, standing alone, constitute a Material Adverse Effect.

 

“Maturity Date” means the earlier of (a) July 7, 2011, subject to the extension thereof pursuant to Section 2.2, and (b) the date of termination in whole of the aggregate Commitments and Letter of Credit Commitments pursuant to Section 2.7 or 9.2; provided, however, that the Maturity Date of any Lender that is a Refusing Lender to any requested extension pursuant to Section 2.2 shall be the Maturity Date in effect immediately prior to the applicable Anniversary Date for all purposes of this Credit Agreement; provided further that if any Maturity Date as determined hereunder falls on a day that is not a Business Day, such
Maturity Date shall be deemed to fall on the next preceding Business Day.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities.

 

“Multiemployer Plan” means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the Controlled Group during such five-year period but only with respect to the period during which such Person was a member of the Controlled Group.

 

“Net Tangible Assets” means, as of any date, the total assets shown on the balance sheet of the Borrower and its Subsidiaries, determined on a consolidated basis in 

 

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accordance with GAAP less (a) all current liabilities and minority interests and (b) goodwill and other identifiable intangibles.

 

“Notes” means the Revolving Loan Notes and the Competitive Bid Loan Notes.

 

“Notice” has the meaning set forth in Section 11.1(b).

 

“Notice of Borrowing” means a request by the Borrower for a Revolving Loan (or any continuation or conversion thereof) in the form of Exhibit 2.3.

 

“Notice of Continuation/Conversion” means a request by the Borrower for the continuation or conversion of a Revolving Loan in the form of Exhibit 2.5.

 

“Off-Balance Sheet Indebtedness” means any obligation of a Person that would be considered indebtedness for tax purposes but is not set forth on the balance sheet of such Person, including, but not limited to, (a) any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product of such Person, (b) the aggregate amount of uncollected accounts receivables of such Person subject at such time to a sale of receivables (or similar transaction) and (c) obligations of any partnership or joint venture that is recourse to such Person.

 

“Other Taxes” has the meaning set forth in Section 4.4(b).

 

“Participation Purchaser” has the meaning assigned to such term in Section 11.3(d).

 

“PBGC” means the Pension Benefit Guaranty Corporation established under ERISA, and any successor thereto.

 

“Pension Plan” means any “pension plan” as defined in Section 3(2) of ERISA which is maintained for the employees of the Borrower or any Subsidiary of the Borrower.

 

“Person” means any individual, partnership (general or limited), limited liability company, joint venture, firm, corporation, association, trust or other enterprise (whether or not incorporated), or any government or political subdivision or any agency, department or instrumentality thereof.

 

“Plan” means any single-employer plan as defined in Section 4001 of ERISA and to which ERISA applies, which is maintained, or at any time during the five calendar years preceding the date of this Credit Agreement was maintained, for employees of the Borrower, any Subsidiary of the Borrower or an ERISA Affiliate.

 

“Platform” has the meaning set forth in Section 11.1(b).

 

 

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“Prime Rate” means the per annum rate of interest established from time to time by the Administrative Agent at its principal office in New York, New York as its “prime rate”.  Such rate is a rate set by the Administrative Agent based upon various factors including the Administrative Agent’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate.  Any change in the interest rate resulting from a change in the Prime Rate shall become effective as of the opening of business on the day on which such change in the Prime Rate is announced by the Administrative Agent.

 

“Refund” has the meaning specified in Section 4.4(c).

 

“Refusing Lenders” has the meaning specified in Section 2.2.

 

“Regulation D, U or X” means Regulation D, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof.

 

“Reportable Event” means a “reportable event” as defined in Section 4043 of ERISA with respect to which the notice requirements to the PBGC have not been waived.

 

“Required Lenders” means, at any time, Lenders whose aggregate Credit Exposure (as hereinafter defined) constitutes more than 50% of the aggregate Credit Exposure of all Lenders at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, then there shall be excluded from the determination of Required Lenders the aggregate principal amount of Credit Exposure of such Lender at such time.  For purposes of the preceding sentence, the term “Credit Exposure” as applied to each Lender means (a) at any time prior to the termination of the Commitments, an amount equal to the Commitment of such Lender and (b) at any time after the termination of the Commitments, the outstanding amount of
Revolving Loans owed to such Lender.

 

“Revolving Loan Notes” means the promissory notes of the Borrower in favor of each Lender evidencing the Revolving Loans and substantially in the form of Exhibit 2.8(a), as such promissory notes may be amended, modified, supplemented or replaced from time to time.

 

“Revolving Loans” means the revolving Loans made by the Lenders to the Borrower pursuant to Section 2.1(a).

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor or assignee of the business of such division in the business of rating securities.

 

“Senior Debt Rating” means the long-term senior unsecured, non-credit enhanced Debt Rating of the Borrower by each of S&P, Moody’s and Fitch.

 

 

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“Significant Subsidiary” means a Subsidiary of the Borrower which represents more than 10% of the Borrower’s assets on a consolidated basis.

 

“Subsidiary” means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, limited liability company, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries has more than 50% equity interest at any time.

 

“Syndication Agent” has the meaning specified in the recital of parties to this Credit Agreement.

 

“Taxes” has the meaning set forth in Section 4.4(a).

 

“Total Operating Cash Flows” means the projection done at the end of each fiscal quarter of the next four fiscal quarters of the Borrower’s and its Subsidiaries’ (other than Unrestricted Subsidiaries) total cash flow available for debt service, as projected consistent with the Borrower’s financial reporting procedures.

 

“Trust Indenture Act” has the meaning set forth in Section 10.8.

 

“Trust Preferred Obligations” means any securities issued by a trust or other special purpose entity in connection with the issuance of Junior Subordinated Deferred Interest Debt Obligations that are substantially similar to the 7.125% Trust Preferred Securities issued by Southern Company Capital Trust VI.

 

“Unrestricted Subsidiary” means any Subsidiary of the Borrower all the Indebtedness of which (a) is nonrecourse to the Borrower or any of its Subsidiaries (other than any other Unrestricted Subsidiary), other than with respect to stock or other ownership interest of the Borrower or any of its Subsidiaries in such Subsidiary, and (b) is not secured by any property of the Borrower or any of its Subsidiaries (other than the property of, or stock or other ownership interest in, an Unrestricted Subsidiary).

 

“Unused Fees” has the meaning set forth in Section 3.4(a).

 

“Unused Revolving Loan Commitment” means, for any period from the Closing Date to the final Maturity Date, the amount by which (a) the average aggregate amount of the Commitments for such period exceeds (b) the daily average sum for such period of the aggregate principal amount of all Revolving Loans outstanding.

 

“Utilization Fees” has the meaning set forth in Section 3.4(b).

 

 

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“Utilized Revolving Loan Commitment” means, for any period from the Closing Date to the final Maturity Date, the amount equal to the daily average sum for such period of the aggregate principal amount of all Loans outstanding.

 

1.2  Computation of Time Periods and Other Definitional Provisions.  For purposes of computation of periods of time hereunder, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.” References in this Credit Agreement to “Articles”, “Sections”, “Schedules” or “Exhibits” shall be to Articles, Sections, Schedules or Exhibits of or to this Credit Agreement unless otherwise specifically provided. 

1.3  Accounting Terms.  Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis.  All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1 (or, prior to the delivery of the first financial statements pursuant to Section 7.1, consistent with the financial statements described in Section 5.1(e)); provided, however, if (a) the Borrower shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Administrative Agent or the Required Lenders shall so object in writing within 30 days after delivery of such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Borrower to the Lenders as to which no such objection shall have been made.

 

SECTION 2

LOANS AND LETTERS OF CREDIT

2.1  Commitment of the Lenders.  (a)  Extensions of Credit.  Subject to the terms and conditions set forth herein, each Lender severally agrees to extend credit to the Borrower, on a revolving basis, in the form of revolving loans to the Borrower (each, a “Revolving Loan” and collectively, the “Revolving Loans”) and Letters of Credit, each in Dollars, at any time and from time to time, during the period from the Closing Date until the Maturity Date applicable to the Commitment and Loans of such Lender; provided, however, that (i) the aggregate amount of the Credit Extensions (after giving effect to such extension of credit) outstanding shall
not exceed the aggregate amount of the Commitments of the Lenders then in effect; (ii) Letters of Credit shall be available from the Issuing Banks, subject to the ratable participation of all Lenders, as set forth in Section 2.10; (iii) the aggregate amount of Letters of Credit Outstanding shall not at any time exceed the aggregate amount of the Commitments of the Lenders then in effect; and (iv) with respect to each individual Lender, the Lender’s pro rata share of outstanding Credit Extensions shall not exceed such Lender’s Commitment Percentage of the aggregate amount of 

 

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Commitments then in effect.  Within the limits of each Lender’s Commitment, the Borrower may borrow, repay and reborrow pursuant to the terms of this Credit Agreement.

	
            (b)
 	
            Competitive Bid Loans Subfacility.  
 

(i)        Competitive Bid Loans.  Subject to the terms and conditions set forth herein, the Borrower may, from time to time, during the period from the Closing Date to the relevant Maturity Date, request, in Dollars, and each Lender may, in its sole discretion, agree to make Competitive Bid Loans to the Borrower; provided, however, that (A) the sum of the aggregate amount of Credit Extensions outstanding shall not exceed the aggregate amount of the Commitments then in effect and (B) if a Lender does make a Competitive Bid Loan it shall not reduce such Lender’s obligation to make its pro rata share of any Revolving Loan or fund participations in L/C Disbursements.

(ii)       Competitive Bid Requests.  The Borrower may solicit Competitive Bids by delivery of a Competitive Bid Request to the Administrative Agent by 10:00 a.m. on a Business Day not less than one nor more than five Business Days prior to the date of the requested Competitive Bid Loan.  A Competitive Bid Request must be substantially in the form of Exhibit 2.1(b) and shall specify (A) the date of the requested Competitive Bid Loan (which shall be a Business Day), (B) the aggregate amount of the requested Competitive Bid Loan, (C) the applicable Interest Period or Interest Periods requested, (D) the maturity date (the “Competitive Bid Maturity Date”) for repayment of
the requested Competitive Bid Loan (which Competitive Bid Maturity Date may not be earlier than the date occurring seven days after the date on which such requested Competitive Bid Loan is to be made and no later than 180 days after the date on which such requested Competitive Bid Loan is to be made; provided, however, that such Competitive Bid Maturity Date shall be no later than the Maturity Date) and (E) other terms (if any) and must be accompanied by the Competitive Bid Fee.  The Administrative Agent shall notify the Lenders of its receipt of a Competitive Bid Request and the contents thereof and invite the Lenders to submit Competitive Bids in response thereto.  The Borrower may not request a Competitive Bid for more than three different Interest Periods per Competitive Bid Request and Competitive Bid Requests may be made no more frequently than four times every calendar
month.

(iii)       Competitive Bid Procedure.  Each Lender may, in its sole discretion, make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request.  Each Competitive Bid must be received by the Administrative Agent not later than 10:00 a.m. on the proposed date of the requested Competitive Bid Loan; provided, however, that should the Administrative Agent, in its capacity as a Lender, desire to submit a Competitive Bid it shall notify the Borrower of its Competitive Bid and the terms thereof not later than 15 minutes prior to the time the other Lenders are required to submit their Competitive Bid.  A Lender may offer to make all or part of the requested Competitive Bid
Loan and may submit multiple Competitive Bids in response to a Competitive Bid Request.  Any Competitive Bid must specify (A) the particular Competitive Bid Request as to which the Competitive Bid is submitted, (B) the minimum (which shall be not less than $5,000,000 and integral multiples of $1,000,000 in excess thereof) and maximum principal amounts of the requested Competitive Bid Loan or 

 

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Loans that the Lender is willing to make and (C) the applicable interest rate or rates and Interest Period or Interest Periods therefor.  A Competitive Bid submitted by a Lender in accordance with the provisions hereof shall be irrevocable.  The Administrative Agent shall promptly notify the Borrower of all Competitive Bids made and the terms thereof.  The Administrative Agent shall send a copy of each of the Competitive Bids to the Borrower and each of the Lenders for its records as soon as practicable.

(iv)      Acceptance of Competitive Bids.  The Borrower may, in its sole discretion, subject only to the provisions of this subsection (iv), accept or refuse any Competitive Bid offered to it.  To accept a Competitive Bid, the Borrower shall give oral notification of its acceptance of any or all such Competitive Bids (which shall be promptly confirmed in writing) to the Administrative Agent by 11:00 a.m. on the proposed date of the Competitive Bid Loan; provided, however, (A) the failure by the Borrower to give timely notice of its acceptance of a Competitive Bid shall be deemed to be a refusal thereof, (B) to the extent Competitive Bids are for comparable Interest Periods, the Borrower may
accept Competitive Bids only in ascending order of rates, (C) the aggregate amount of Competitive Bids accepted by the Borrower shall not exceed the principal amount specified in the Competitive Bid Request, (D) if the Borrower shall accept a bid or bids made at a particular Competitive Bid Rate, but the amount of such bid or bids shall cause the total amount of bids to be accepted by the Borrower to be in excess of the amount specified in the Competitive Bid Request, then the Borrower shall accept a portion of such bid or bids in an amount equal to the amount specified in the Competitive Bid Request less the amount of all other Competitive Bids accepted with respect to such Competitive Bid Request, which acceptance in the case of multiple bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such bid at such Competitive Bid Rate and (E) no bid shall be accepted for a Competitive Bid Loan unless
such Competitive Bid Loan is in a minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof, except that where a portion of a Competitive Bid is accepted in accordance with the provisions of clause (D) of this subsection (iv), then in a minimum principal amount of $500,000 and integral multiples of $100,000 in excess thereof (but not in any event less than the minimum amount specified in the Competitive Bid), and in calculating the pro rata allocation of acceptances of portions of multiple bids at a particular Competitive Bid Rate pursuant to clause (D) of this subsection (iv), the amounts shall be rounded to integral multiples of $100,000 in a manner which shall be in the discretion of the Borrower.  A notice of acceptance of a Competitive Bid given by the Borrower in accordance with the provisions hereof shall be irrevocable.  The Administrative Agent shall, not later than noon on the proposed date of such Competitive Bid Loan, notify each
bidding Lender whether or not its Competitive Bid has been accepted (and, if so, in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Bid Loan in respect of which its bid has been accepted.

(v)       Funding of Competitive Bid Loans.  Each Lender which is to make a Competitive Bid Loan shall make its Competitive Bid Loan available to the Administrative Agent by 2:00 p.m. on the date specified in the Competitive Bid Request by deposit of immediately available funds to the Administrative Agent at the Agent’s 

 

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Account.  The Administrative Agent will, upon receipt, make the proceeds of such Competitive Bid Loans available to the Borrower.

(vi)      Maturity of Competitive Bid Loans.  Each Competitive Bid Loan shall mature and be due and payable in full on the Competitive Bid Maturity Date applicable thereto.  Unless the Borrower shall give notice to the Administrative Agent otherwise (or repays such Competitive Bid Loan), or a Default or Event of Default exists and is continuing, the Borrower shall be deemed to have requested Revolving Loans from all of the Lenders (in the amount of the maturing Competitive Bid Loan and accruing interest at the Base Rate), the proceeds of which will be used to repay such Competitive Bid Loan.

2.2  Extension of Maturity Date.  (a)  Not more than 75 days and not less than 20 days prior to each anniversary of the Closing Date (the “Anniversary Date”), the Borrower may request in writing that the Lenders extend each Maturity Date for an additional year (and the Administrative Agent shall promptly give the Lenders notice of any such request).  Each Lender shall provide the Administrative Agent, not less than 15 days prior to the then current Anniversary Date, with written notice regarding whether it agrees to extend the Maturity Date of its Commitment.  Each decision by a Lender shall be in its sole discretion and failure by a Lender to give timely written notice hereunder shall be deemed a decision by such Lender not to extend the Maturity Date of its Commitment and Loans.  If each
of the Lenders timely agrees in writing to extend the Maturity Date, then the Maturity Date shall be extended for an additional year pursuant to a duly written amendment of this Credit Agreement executed by the Administrative Agent, on behalf of the Lenders, and the Borrower.

(b)       If Lenders holding more than 50% of the Commitments but less than all of the Commitments timely agree in writing to extend the Maturity Date of their respective Commitments, then the Borrower may either:

(i)        notify the Administrative Agent in writing that it wishes to (and all Lenders that are not Refusing Lenders (as defined below) shall agree to) extend the Maturity Date applicable to the Commitments and Loans of those Lenders that are not Refusing Lenders; provided that the Maturity Date shall not be extended as to any Refusing Lender; or

	
            (ii)
 	
            acknowledge in writing that the Maturity Date will not be extended.
 

(c)       In the event that the Borrower elects to extend the Maturity Date pursuant to Section 2.2(b)(i), then the Borrower may, on or before the then current Anniversary Date, request, at its own discretion and its own expense, that any of the Lenders that fail to agree to extend the Maturity Dates of their respective Commitments (each, a “Refusing Lender”) (and each Refusing Lender shall be required to transfer and assign upon such request) transfer and assign in whole (but not in part), without recourse (in accordance with and subject to the terms of Section 11.3(b)), all of its interests, rights and obligations under this Credit Agreement to an Eligible Assignee or Eligible Assignees (which may be one or more existing Lenders if any existing Lender accepts such assignment);
provided that (A) such assignment or assignments shall not conflict with any law, rule, regulation or order of any court or other Governmental Authority, (B) the Borrower or such Eligible Assignee or Eligible Assignees shall pay to the 

 

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Refusing Lenders in immediately available funds the principal of and interest accrued to the date of such payment on the portion of the Loans hereunder held by such Refusing Lenders and all other amounts owed to such Refusing Lenders hereunder, as well as any transfer fee owing to the Administrative Agent under Section 11.3(b) and (C) such transfer and assignment must occur on or prior to the then current Anniversary Date.

(d)       If the Maturity Date is extended in accordance with clause (a) or (b)(i) of this Section 2.2, then the Borrower shall pay to the Administrative Agent, for the pro rata benefit of the Lenders (other than the Refusing Lenders), a Maturity Date extension fee.

2.3  Method of Borrowing for Revolving Loans.  By no later than 11:00 a.m. (a) on the date of the requested borrowing of Revolving Loans that will be Base Rate Loans or (b) three Business Days prior to the date of the requested borrowing of Revolving Loans that will be Eurodollar Loans, the Borrower shall submit a written Notice of Borrowing in the form of Exhibit 2.3 to the Administrative Agent setting forth (i) the amount requested, (ii) whether such Revolving Loans shall accrue interest at the Base Rate or the Adjusted Eurodollar Rate, (iii) with respect to Revolving Loans that will be Eurodollar Loans, the Interest Period applicable thereto and (iv) certification that the Borrower has complied in all respects with Section 5.2.

2.4  Funding of Revolving Loans.  Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly inform the Lenders as to the terms thereof.  Each such Lender shall make its Commitment Percentage of the requested Revolving Loans available to the Administrative Agent by 1:00 p.m. on the date specified in the Notice of Borrowing by deposit in Dollars of immediately available funds to the Administrative Agent at the Agent’s Account.  The amount of the requested Revolving Loans will then be made available to the Borrower by the Administrative Agent by crediting the account of the Borrower on the books of such office of the Administrative Agent, to the extent the amount of such Revolving Loans are made available to the Administrative Agent.

No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make Revolving Loans hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder.  Unless the Administrative Agent shall have been notified by any Lender prior to the date of any such Revolving Loan that such Lender does not intend to make available to the Administrative Agent its portion of the Revolving Loans to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on the date of such Revolving Loans, and the Administrative Agent in reliance upon such assumption, may (in its sole discretion but without any obligation to do
so) make available to the Borrower a corresponding amount.  If such corresponding amount is not in fact made available to the Administrative Agent, the Administrative Agent shall be able to recover such corresponding amount from such Lender.  If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent will promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent.  The Administrative Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding 

 

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amount is recovered by the Administrative Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for such Revolving Loan pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal Funds Rate.

 

2.5  Continuations and Conversions.  The Borrower shall have the option, on any Business Day, to continue existing Eurodollar Loans for a subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or to convert Eurodollar Loans in Dollars into Base Rate Loans; provided, however, that (a) each such continuation or conversion must be requested by the Borrower pursuant to a written Notice of Continuation/Conversion, in the form of Exhibit 2.5, in compliance with the terms set forth below, (b) except as provided in Section 4.1, Eurodollar Loans may only be continued or converted into Base Rate Loans on the last day of the Interest Period applicable hereto, (c) upon the occurrence of an Event of Default, any Eurodollar Loan then outstanding
shall automatically be converted into a Base Rate Loan at the end of the Interest Period then in effect for such Eurodollar Loan, (d) Base Rate Loans may not be converted into Eurodollar Loans during the existence and continuation of a Default or Event of Default and (e) any request to extend a Eurodollar Loan that fails to comply with the terms hereof or any failure to request an extension of a Eurodollar Loan at the end of an Interest Period shall constitute a conversion, in each case, to a Base Rate Loan on the last day of the applicable Interest Period.  Each continuation or conversion must be requested by the Borrower no later than 11:00 a.m. (i) on the date for a requested conversion of a Eurodollar Loan to a Base Rate Loan or (ii) three Business Days prior to the date for a requested continuation of a Eurodollar Loan or conversion of a Base Rate Loan to a Eurodollar Loan, in each case pursuant to a written Notice of Continuation/Conversion submitted to the Administrative Agent
which shall set forth (A) whether the Borrower wishes to continue or convert such Loans and (B) if the request is to continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan, the Interest Period applicable thereto.

2.6  Minimum Amounts.  Each request for a Revolving Loan or a conversion or continuation hereunder shall be subject to the following requirements:  (a) each Revolving Loan shall be in a minimum of $5,000,000, and (b) no more than ten Eurodollar Loans shall be outstanding hereunder at any one time.  For the purposes of this Section 2.6, all Eurodollar Loans with the same Interest Periods shall be considered as one Eurodollar Loan, but Eurodollar Loans with different Interest Periods, even if they begin on the same date, shall be considered separate Eurodollar Loans.  Any Revolving Loan requested shall be in an integral multiple of $1,000,000, unless the request is for all of the remaining amount of the Commitments available to be borrowed.

2.7  Reductions of Commitments.

(a)       Commitments.  Upon at least three Business Days’ prior written notice to the Administrative Agent (which notice shall be promptly transmitted by the Administrative Agent to each Lender), the Borrower shall have the right to permanently terminate or reduce the aggregate unused amount of the Commitments, at any time or from time to time; provided that (a) each partial reduction shall be in an aggregate amount at least equal to $10,000,000 and in integral multiples of $1,000,000 above such amount, and (b) no reduction shall be made which would reduce the aggregate amount of the Commitments to an amount less than the then 

 

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outstanding Credit Extensions.  Any reduction in (or termination of) the Commitments shall be permanent and may not be reinstated except as permitted by Section 2.9.

(b)       The Letter of Credit Commitments of each Issuing Bank shall be permanently reduced on a pro rata basis from time to time on the date of each reduction in the Commitments by the amount of each such reduction in the Commitments.

2.8  Notes.  (a)  Revolving Loan Notes.  Any Lender may request that the Revolving Loans made by it to the Borrower be evidenced by a promissory note of the Borrower payable to each Lender in substantially the form of Exhibit 2.8(a) (the “Revolving Loan Notes”).  In such event, the Borrower shall prepare, execute and deliver to such Lender a Revolving Loan Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns).  Thereafter, the Revolving Loans evidenced by such Revolving Loan Notes and interest thereon shall at all times (including after assignment pursuant to Section 11.3) be represented by one or more Revolving Loan Notes in such form payable to the order of the payee named
therein (or, if such Revolving Loan Note is a registered note, to such payee and its registered assigns). 

(b)       Competitive Bid Loan Notes.  Any Lender may request that the Competitive Bid Loans made by it to the Borrower be evidenced by a promissory note of the Borrower payable to each Lender in substantially the form of Exhibit 2.8(b) (the “Competitive Bid Loan Notes”).  In such event, the Borrower shall prepare, execute and deliver to such Lender a Competitive Bid Loan Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns).  Thereafter, the Competitive Bid Loans evidenced by such Competitive Bid Loan Notes and interest thereon shall at all times (including after assignment pursuant to Section 11.3) be represented by one or more Competitive
Bid Loan Notes in such form payable to the order of the payee named therein (or, if such Competitive Bid Loan Note is a registered note, to such payee and its registered assigns).  

The date, amount, type, interest rate and duration of Interest Period (if applicable) of each Loan made by each Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by such Lender on its books; provided that the failure of such Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a payment when due of any amount owing hereunder or under any Note in respect of the Loans to be evidenced by such Note, and each such recordation or endorsement shall be conclusive and binding absent manifest error.

 

2.9  Increases in Revolving Loan Commitment.  From time to time prior to the latest applicable Maturity Date and, in each case, upon at least 45 days’ prior written notice to the Administrative Agent (which notice shall be promptly transmitted by the Administrative Agent to each Lender), the Borrower shall have the right, subject to the terms and conditions set forth below, to increase the aggregate amount of the Commitments; provided that (a) no Default or Event of Default shall exist at the time of a request or a proposed increase in the Commitments, (b) such increase must be in a minimum amount of $25,000,000 and in integral multiples of $1,000,000 above such amount, (c) the Commitments shall not be increased by an amount greater than $100,000,000 without the prior written consent of the Required Lenders, (d) no individual Lender’s
Commitment may be increased without such Lender’s written consent, 

 

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(e) Schedule 1.1(b) shall be amended to reflect the revised Commitments and revised Commitment Percentages of the Lenders and (f) if any Revolving Loans are outstanding at the time of an increase in the Commitments, the Borrower will prepay (provided that any such prepayment shall be subject to Section 4.3) one or more existing Revolving Loans in an amount necessary such that after giving effect to the increase in the Commitments each Lender will hold its pro rata share (based on its share of the revised Commitments) of outstanding Revolving Loans.

Any such increase in the aggregate amount of the Commitments shall apply to (x) the Commitment of one or more existing Lenders requested by the Borrower to participate in such increase that accepts such request in the Lender’s sole discretion; provided that if more than one Lender wishes to participate, then such increase shall be allocated pro rata among such Lenders and any Eligible Assignee referred to in (y) below (based on the amount that each such Lender was willing to increase its Commitment) and/or (y) the creation of a new Commitment by one or more institutions that is not an existing Lender; provided that any such institution (A) must be an Eligible Assignee, (B) must be acceptable to the Administrative Agent, (C) must have a Commitment of at least $10,000,000 and
(D) must become a Lender under this Credit Agreement by execution and delivery of an appropriate joinder agreement or of counterparts to this Credit Agreement in a manner acceptable to the Borrower and the Administrative Agent.

2.10  Letters of Credit.  (a)  Upon the terms and subject to the conditions herein set forth, the Borrower may request, in the form of a Letter of Credit Request, any Issuing Bank, at any time and from time to time after the date hereof, to issue, and such Issuing Bank shall issue, for the account of the Borrower one or more Letters of Credit; provided that no Letter of Credit shall be issued if after giving effect to such issuance (i) the aggregate Letters of Credit Outstanding shall exceed the aggregate amount of the Commitments of the Lenders then in effect, (ii) the aggregate Credit Extensions (after giving effect to the issuance of such Letter of Credit) would exceed the aggregate amount of Commitments then in effect or (iii) the Letters of Credit Outstanding for all Letters of Credit Issued by such Issuing Bank would exceed such Issuing
Bank’s Letter of Credit Commitment at such time; and provided further that no Letter of Credit shall be issued if the applicable Issuing Bank shall have received notice from the Administrative Agent or the Required Lenders that the conditions to such issuance have not been met.

(b)       Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the latest applicable Maturity Date.

(c)       Each Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit issued by such Issuing Bank.  Each Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank will make payment thereunder (which payment shall not be made until at least two Business Days after such notice from such Issuing Bank to the Borrower); provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any such payment.

 

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(d)       Any L/C Disbursement shall be reimbursed by the Borrower in Dollars on the next Business Day of any such payment thereof by any Issuing Bank by paying to the Administrative Agent an amount equal to such drawing not later than 3:00 p.m., New York time, on such date; provided that the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.3 that such payment be financed with a Revolving Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Revolving Loan; provided that if the Borrower fails to reimburse such Issuing Bank when due pursuant to this paragraph (d), then
(i) Section 2.10(f) shall apply and (ii) interest shall accrue on the unpaid amount of the L/C Disbursement, from the date of such disbursement to but excluding the date the Borrower reimburses the relevant Issuing Bank, at the rate per annum then applicable to Base Rate Loans, and such interest accrued shall be for the account of such Issuing Bank; provided further that interest accrued on and after the date of payment by any Lender pursuant to paragraph (g) of this Section to reimburse the relevant Issuing Bank shall be for the account of such Lender to the extent of such payment.

(e)       Immediately upon the issuance of any Letter of Credit by any Issuing Bank (or the amendment of a Letter of Credit increasing the amount thereof), and without any further action on the part of such Issuing Bank, such Issuing Bank shall be deemed to have sold to each Lender, and each such Lender shall be deemed unconditionally and irrevocably to have purchased from such Issuing Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Lender’s Commitment Percentage, in such Letter of Credit, each drawing thereunder and the obligations of the Borrower under this Credit Agreement and the other Credit Documents with respect thereto. Upon any change in the Commitments pursuant to Sections 2.2, 2.7, 2.9 or 11.3 or any termination of the Commitment of any Refusing Lender on any Maturity Date occurring
prior to the latest Maturity Date applicable to the Loans pursuant to Section 2.2, it is hereby agreed that with respect to all Letters of Credit Outstanding, there shall be an automatic adjustment to the participations hereby created to reflect the new Commitment of the assigning and assignee Lenders or the termination of the Commitment of any Refusing Lender on the Maturity Date applicable to such Refusing Lender.  Any action taken or omitted by any Issuing Bank under or in connection with a Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Issuing Bank any resulting liability to any Lender.

(f)        In the event that any Issuing Bank makes any L/C Disbursement and the Borrower shall not have reimbursed such amount in full to such Issuing Bank pursuant to Section 2.10(d), such Issuing Bank shall promptly notify the Administrative Agent, which shall promptly notify each Lender of such failure, and each Lender shall promptly and unconditionally pay to the Administrative Agent for the account of such Issuing Bank the amount of such Lender’s Commitment Percentage of such unreimbursed payment in Dollars and in same day funds.  If such Issuing Bank so notifies the Administrative Agent, and the Administrative Agent so notifies the Lenders prior to 11:00 a.m., New York time, on any Business Day, each such Lender shall make available to such Issuing Bank such Lender’s Commitment Percentage of the amount of such payment on such
Business Day in same day funds.  If and to the extent such Lender shall not have so made its Commitment Percentage of the amount of such payment available to the applicable Issuing Bank, such Lender agrees to pay to the applicable Issuing Bank, forthwith on demand such amount, together with interest thereon, for each day from such 

 

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date until the date such amount is paid to the Administrative Agent for the account of the applicable Issuing Bank at the Federal Funds Rate.  Each Lender agrees to fund its Commitment Percentage of such unreimbursed payment notwithstanding a failure to satisfy any applicable lending conditions or the provisions of Section 2.1 or Section 2.6, or the occurrence of the applicable Maturity Date.  The failure of any Lender to make available to any Issuing Bank its Commitment Percentage of any payment under any Letter of Credit issued by such Issuing Bank shall neither relieve any Lender of its obligation hereunder to make available to such Issuing Bank its Commitment Percentage of any payment under any Letter of Credit on the date required, as specified above, nor increase the obligation of such other Lender.  Whenever any Lender has made payments to any Issuing Bank in respect of any reimbursement
obligation for any Letter of Credit issued by such Issuing Bank, such Lender shall be entitled to share ratably, based on its Commitment Percentage, in all payments and collections thereafter received on account of such reimbursement obligation. 

(g)       Whenever the Borrower desires that an Issuing Bank issue a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall give to such Issuing Bank and the Administrative Agent at least two Business Days’ prior written (including telegraphic, telex, facsimile or cable communication) notice (or such shorter period as may be agreed upon in writing by such Issuing Bank and the Borrower) specifying the date on which the proposed Letter of Credit is to be issued, amended, renewed or extended (which shall be a Business Day), the stated amount of the Letter of Credit so requested, the expiration date of such Letter of Credit, the name and address of the beneficiary thereof, and the provisions thereof. 

(h)       The obligations of the Borrower to reimburse any Issuing Bank for any L/C Disbursement made by such Issuing Bank shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Credit Agreement under all circumstances, including, without limitation:  (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other right which the Borrower may have at any time against a beneficiary of any Letter of Credit or against any of the Lenders, whether in connection with this Credit Agreement, the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; (iv) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder; or (v) the fact that any Event of Default shall have occurred and be continuing. 

(i)        If any Letters of Credit shall remain outstanding and partially or wholly undrawn on any Maturity Date applicable to the Commitments and Loans of any Refusing Lender, the Borrower shall immediately Cash Collateralize an amount equal to such Refusing Lender’s Commitment Percentage of the amount of Letters of Credit Outstanding on such Maturity Date.  The Borrower hereby grants to the Administrative Agent, for the benefit of each Issuing Bank and the Lenders, a security interest in all cash, deposit accounts and all balances therein and all proceeds of the foregoing which form part of the Cash Collateral.  Cash Collateral shall be maintained in a blocked, non-interest bearing deposit account of the Administrative 

 

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Agent (the “L/C Cash Deposit Account”).  Amounts deposited into the L/C Cash Deposit Account pursuant to this Section 2.10(i) shall be made available to the Issuing Banks to the extent such Refusing Lender would have been required to make such amount available to the Issuing Banks in accordance with Section 2.10(f) if the Commitments of such Refusing Lender had not terminated on the relevant Maturity Date.  After all relevant Letters of Credit shall have expired or been fully drawn upon and all other obligations of the Borrower thereunder shall have been paid in full, the balance, if any, in such L/C Cash Deposit Account shall be promptly returned to the Borrower.

SECTION 3

PAYMENTS

3.1  Interest.  

	
            (a)
 	
            Interest Rate.
 

(i)        Each Base Rate Loan shall accrue interest at the Base Rate applicable to such Base Rate Loan.

(ii)       Each Eurodollar Loan shall accrue interest at the Adjusted Eurodollar Rate applicable to such Eurodollar Loan.

(iii)       Each Competitive Bid Loan shall accrue interest at the applicable Competitive Bid Rate with respect to such Competitive Bid Loan.

(b)       Default Rate of Interest.  Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate equal to 2% plus the rate which would otherwise be applicable (or if no rate is applicable, then a rate per annum equal to the rate for Revolving Loans that are Base Rate Loans plus 2% per annum).

(c)       Interest Payments.  Interest on Loans shall be due and payable in arrears on each applicable Interest Payment Date.

3.2  Prepayments.

(a)       Voluntary Prepayments.  The Borrower shall have the right to prepay Loans in whole or in part from time to time without premium or penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on two Business Days’ prior written notice to the Administrative Agent and any prepayment of Eurodollar Loans will be subject to Section 4.3; (ii) each such partial prepayment of Loans shall be in the minimum principal amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof; and (iii) Competitive Bid Loans may not be prepaid unless a breakage fee equal to the actual amount of damages suffered by the Lender whose Competitive Bid Loan is prepaid is paid to such
Lender.  Amounts prepaid hereunder shall be applied as the Borrower may elect; provided that if the Borrower fails to 

 

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specify the application of a voluntary prepayment, then such prepayment shall be applied first to Base Rate Loans, then to Eurodollar Loans in direct order of Interest Period maturities, and then to Competitive Bid Loans pro rata among all Lenders holding same.

	
            (b)
 	
            Mandatory Prepayments.  
 

(i)        If at any time the amount of Revolving Loans outstanding plus the aggregate amount of Competitive Bid Loans outstanding plus the aggregate amount of Letters of Credit Outstanding exceeds the aggregate amount of the Commitments of the Lenders then in effect, the Borrower shall immediately make a principal payment to the Administrative Agent in the manner and in an amount such that the sum of the aggregate amount of Revolving Loans outstanding plus Competitive Bid Loans outstanding plus the aggregate amount of Letters of Credit Outstanding is less than or equal to the aggregate amount of the
Commitments of the Lenders then in effect.

(ii)       Any prepayments made under this Section 3.2(b) shall be subject to Section 4.3 and shall be applied first to Base Rate Loans, then to Eurodollar Loans in direct order of Interest Period maturities, and then to Competitive Bid Loans pro rata among all Lenders holding same.

3.3  Payment in Full at Maturity.

On each Maturity Date, the entire outstanding principal amount owing under the Credit Documents, together with accrued but unpaid interest and all other sums owing under the Credit Documents, shall be due and payable in full to the relevant Lenders, unless accelerated sooner pursuant to Section 9.2.

 

3.4  Fees.

	
            (a)
 	
            Unused Fees.
 

(i)        In consideration of the Commitment being made available by each Lender hereunder, the Borrower agrees to pay to the Administrative Agent, for the pro rata benefit of each Lender, a per annum fee equal to the Applicable Percentage for Unused Fees multiplied by the Unused Revolving Loan Commitment (the “Unused Fees”).

(ii)       The accrued Unused Fees shall be due and payable in arrears fifteen days after the end of each fiscal quarter of the Borrower for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date, as well as on each Maturity Date.

	
            (b)
 	
            Utilization Fees.
 

(i)        If on any day the aggregate outstanding principal amount of all Revolving Loans and Competitive Bid Loans plus the amount of Letters of Credit Outstanding on such day exceeds the product of (A) 50% times (B) the aggregate amount of Commitments then in effect, the Borrower agrees to pay to the Administrative Agent, for the pro rata benefit of each Lender, a per annum fee equal to the Applicable Percentage 

 

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for Utilization Fees multiplied by the Utilized Revolving Loan Commitment (the “Utilization Fees”).

(ii)       The accrued Utilization Fees shall be due and payable in arrears 15 days after the end of each fiscal quarter of the Borrower for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date, as well as on each Maturity Date.

	
            (c)
 	
            Letter of Credit Fees.
 

(i)        The Borrower shall pay to the Administrative Agent, for the pro rata benefit of each Lender, in arrears 15 days after the end of each fiscal quarter and on each Maturity Date, a fee (each, a “Letter of Credit Fee”) equal to the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding during such quarter at the Applicable Percentage for Eurodollar Loans during such quarter.  Upon the occurrence and during the continuance of an Event of Default, the amount of any Letter of Credit Fees payable by the Borrower pursuant to this Section 3.4(c)(i) shall be increased by 2% per annum.

(ii)       The Borrower shall pay to each Issuing Bank, for its own account, and in addition to all Letter of Credit Fees otherwise provided for hereunder, (A) a fee in an amount equal to (1) if the applicable Issuing Bank is the Initial Issuing Bank, 0.125% per annum of the average face amount of any Letters of Credit outstanding and issued by the Initial Issuing Bank during each fiscal quarter, and (2) if the applicable Issuing Bank is any other Issuing Bank, such other rate as agreed to between such Issuing Bank and the Borrower, in each case which shall be due and payable in arrears 15 days after the end of such quarter and on each Maturity Date, and (B) such fees and charges in connection with the issuance, negotiation, settlement, amendment and
processing of each Letter of Credit issued by such Issuing Bank as are agreed upon between the Borrower and such Issuing Bank.

(d)       Administrative Fees.  The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative fee as agreed to between the Borrower and the Administrative Agent in the Engagement Letter.

3.5  Place and Manner of Payments.  All payments of principal, interest, fees, expenses and other amounts to be made by the Borrower under this Credit Agreement shall be made unconditionally and without deduction for any counterclaim, defense, recoupment or setoff.  All such payments shall be received not later than 2:00 p.m. on the date when due in Dollars and in immediately available funds by the Administrative Agent at its offices in New York, New York.  The Administrative Agent will distribute such payments made to the Lenders on the date of receipt if such payment is received prior to 2:00 p.m.; otherwise, the Administrative Agent will distribute such payments to the Lenders, and such payment will be credited to the Borrower, on the next succeeding Business Day.  The Borrower shall, at the time it makes any payment under this
Credit Agreement, specify to the Administrative Agent the Loans, fees or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails to specify, or if such application would be inconsistent with the terms 

 

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hereof, the Administrative Agent shall distribute such payment to the Lenders in such manner as it reasonably determines in its sole discretion).  Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and fees for the period of such extension), except that, in the case of Eurodollar Loans (or interest payable with respect thereto), if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day.

3.6  Pro Rata Treatment.  Except to the extent otherwise provided herein, all Revolving Loans, each payment or prepayment of principal of any Revolving Loan, each payment of interest on the Revolving Loans, each payment with respect to a Letter of Credit, each payment of Unused Fees, each payment of Utilization Fees, each payment of Letters of Credit Fees, each reduction of the Commitments, and each conversion or continuation of any Revolving Loans, shall be allocated pro rata among the Lenders in accordance with the respective Commitment Percentages; provided that if any Lender shall have failed to pay its applicable pro rata share of any Revolving Loan or L/C Disbursement and such amount was made available to the Borrower pursuant to Section 2.4 or 2.10, as applicable, then any amount to which such Lender would otherwise be entitled
pursuant to this Section 3.6 shall instead be payable to the Administrative Agent until the share of such Revolving Loan not funded by such Lender has been repaid; provided further that, in the event that any amount paid to any Lender pursuant to this Section 3.6 is rescinded or must otherwise be returned by the Administrative Agent, each Lender shall, upon the request of the Administrative Agent, repay to the Administrative Agent the amount so paid to such Lender, with interest for the period commencing on the date such payment is returned by the Administrative Agent until the date the Administrative Agent receives such payment at a rate per annum equal to the Federal Funds Rate. 

3.7  Computations of Interest and Fees.  (a)  Except for Base Rate Loans, on which interest shall be computed on the basis of a 365- or 366-day year, as the case may be, all computations of interest and fees hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days.

(b)       It is the intent of the Lenders and the Borrower to conform to and contract in strict compliance with applicable usury law from time to time in effect.  All agreements between the Lenders and the Borrower are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral.  In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law.  If, from any possible construction of any of the Credit Documents or any other document, interest would otherwise be payable in
excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and such documents shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document.  If any Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the maximum lawful amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the 

 

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reduction of the principal amount owing on the Loans and not to the payment of interest, or refunded to the Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal amount of the Loans.  The right to demand payment of the Loans or any other indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders do not intend to charge or receive any unearned interest in the event of such demand.  All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such indebtedness does not exceed
the maximum nonusurious amount permitted by applicable law.

3.8  Sharing of Payments.  Each Lender agrees that, in the event that any Lender shall obtain payment in respect of any Loan or L/C Disbursement owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker’s lien, counterclaim or otherwise (including, but not limited to, pursuant to the Bankruptcy Code) in excess of its pro rata share as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans or L/C Disbursements, in such amounts and with such other adjustments from time to time, as shall be equitable in order that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement.  Each Lender further agrees that if a payment to a Lender (which is obtained by such Lender through the exercise of a right of setoff,
banker’s lien, counterclaim or otherwise) shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit to each Lender whose payment shall have been rescinded or otherwise restored, together with its pro rata share of any interest required to be paid by the Lender whose payment shall have been rescinded or otherwise restored.  The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker’s lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation.  Except as otherwise expressly provided in this Credit Agreement, if any Lender shall fail to remit to the Administrative Agent or any other Lender an amount payable by such
Lender to the Administrative Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall accrue interest thereon, for each day from the date such amount is due until the day such amount is paid to the Administrative Agent or such other Lender, at a rate per annum equal to the Federal Funds Rate.

SECTION 4

ADDITIONAL PROVISIONS REGARDING LOANS

4.1  Eurodollar Loans.  (a)  Unavailability.  In the event that the Administrative Agent shall have determined in good faith (i) that Dollar deposits in the principal amounts requested with respect to a Eurodollar Loan are not generally available in the London interbank Eurodollar market or (ii) that reasonable means do not exist for ascertaining the Eurodollar Rate, the Administrative Agent shall, as soon as practicable thereafter, give written notice of such 

 

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determination to the Borrower and the Lenders.  In the event of any such determination under clauses (i) or (ii) above, until the Administrative Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (A) any request by the Borrower for Eurodollar Loans shall be deemed to be a request for Base Rate Loans and (B) any request by the Borrower for conversion into or continuation of Eurodollar Loans shall be deemed to be a request for conversion into or continuation of Base Rate Loans.

(b)       Change in Legality.  Notwithstanding any other provision herein, if any change in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Administrative Agent, such Lender may:

(A)       declare that Eurodollar Loans, and conversions to or continuations of Eurodollar Loans, will not thereafter be made by such Lender hereunder, whereupon any request by the Borrower for, or for conversion into or continuation of, Eurodollar Loans shall, as to such Lender only, be deemed a request for, or for conversion into or continuation of, Base Rate Loans, unless such declaration shall be subsequently withdrawn; and

(B)       require that all outstanding Eurodollar Loans made by it be converted to Base Rate Loans in which event all such Eurodollar Loans shall be automatically converted to Base Rate Loans.

In the event any Lender shall exercise its rights under clause (A) or (B) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the Base Rate Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.

 

(c)       Increased Costs.  If at any time a Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to the making, the commitment to make or the maintaining of any Eurodollar Loan because of any change since the date of this Credit Agreement in any applicable law, governmental rule, regulation, guideline or order (or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline or such order) including, without limitation, the imposition, modification or deemed applicability of any reserves, deposits or similar requirements (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the
extent included in the computation of the Adjusted Eurodollar Rate), then the Borrower shall pay to such Lender within 15 days after demand, which demand shall contain the basis and calculations supporting such demand, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender may determine in its sole discretion) as may be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder.

 

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Each determination and calculation made by a Lender under this Section 4.1 shall, absent manifest error, be binding and conclusive on the parties hereto.

 

4.2  Capital Adequacy.  If, after the date hereof, any Lender has determined that the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s (or parent corporation’s) capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender, or its parent corporation, could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Lender’s (or parent corporation’s) policies with respect to capital adequacy), then the Borrower shall pay to such Lender within 15 days after demand, which demand shall contain the basis and calculations supporting such demand, such additional amount or amounts as will compensate such Lender for such reduction.  Each determination by any such Lender of amounts owing under this Section 4.2 shall, absent manifest error, be conclusive and binding on the parties hereto.

4.3  Compensation.  The Borrower shall compensate each Lender, within 15 days after demand, which demand shall contain the basis and calculations supporting such demand, for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by the Lender to fund its Eurodollar Loans) which such Lender may sustain:

(a)       if for any reason (other than a default by such Lender or the Administrative Agent) a borrowing, continuation or conversion of any Eurodollar Loan or Competitive Bid Loan does not occur on a date specified therefor in a Notice of Borrowing, Competitive Bid Request or Notice of Continuation/Conversion, as the case may be;

(b)       if any prepayment, repayment, continuation or conversion of any Eurodollar Loan or Competitive Bid Loan occurs on a date which is not the last day of an Interest Period applicable thereto, including, without limitation, in connection with any demand, acceleration, mandatory prepayment or otherwise (including any demand under this Section 4);

(c)       if the Borrower fails to repay any Eurodollar Loan or Competitive Bid Loans when required by the terms of this Credit Agreement; or

(d)       if the Borrower elects to cause a mandatory assignment of such Lender’s Commitment pursuant to Section 4.5.

Calculation of all amounts payable to a Lender under this Section 4.3 shall be made as though the Lender has actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Adjusted Eurodollar Rate (or at the margin set forth in the applicable Competitive Bid) in an amount equal to the amount of that Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit 

 

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from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 4.3.  Each determination and calculation hereunder shall be in good faith and shall be conclusive absent manifest error.

 

4.4  Taxes.  (a)  Tax Liabilities Imposed on a Lender.  Any and all payments by the Borrower hereunder or under any of the Credit Documents shall be made, in accordance with the terms hereof and thereof, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes measured by net income and franchise taxes imposed on any Lender by the jurisdiction under the laws of which such Lender is organized or transacting business or any political subdivision thereof (all such non-excluded taxes, being hereinafter referred to as “Taxes”).  If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender,
(i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.4) such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law, and (iv) the Borrower shall deliver to such Lender evidence of such payment to the relevant Governmental Authority.

(b)       Other Taxes.  In addition, the Borrower agrees to pay, upon written notice from a Lender and prior to the date when penalties attach thereto, all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Credit Agreement (collectively, the “Other Taxes”).

(c)       Refunds.  If a Lender or the Administrative Agent (as the case may be) shall become aware that it is entitled to claim a refund (or a refund in the form of a credit) (each, a “Refund”) from a Governmental Authority (as a result of any error in the amount of Taxes or Other Taxes paid to such Governmental Authority or otherwise) of Taxes or Other Taxes which the Borrower has paid, or with respect to which the Borrower has paid additional amounts, pursuant to this Section 4.4, it shall promptly notify the Borrower in writing of the availability of such Refund and shall, within 30 days after receipt of written notice by the Borrower make a claim to such Governmental Authority for such Refund at the Borrower’s expense if, in the judgment of such
Lender or the Administrative Agent (as the case may be), the making of such claim will not be otherwise disadvantageous to it; provided that nothing in this subsection (c) shall be construed to require any Lender or the Administrative Agent to institute any administrative proceeding (other than the filing of a claim for any such Refund) or judicial proceeding to obtain such Refund.

If a Lender or the Administrative Agent (as the case may be) receives a Refund from a Governmental Authority (as a result of any error in the amount of Taxes or Other Taxes paid to such Governmental Authority or otherwise) of any Taxes or Other Taxes which have been paid by the Borrower, or with respect to which the Borrower has paid additional amounts 

 

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pursuant to this Section 4.4, it shall promptly pay to the Borrower the amount so received (but only to the extent of payments made, or additional amounts paid, by the Borrower under this Section 4.4 with respect to Taxes or Other Taxes giving rise to such Refund), net of all reasonable out-of-pocket expenses (including the net amount of taxes, if any, imposed on such Lender or the Administrative Agent with respect to such Refund) of such Lender or Administrative Agent, and without interest (other than interest paid by the relevant Governmental Authority with respect to such Refund); provided, however, that the Borrower, upon the request of such Lender or the Administrative Agent, agrees to repay the amount paid over to the Borrower (plus penalties, interest or other charges) to such Lender or the
Administrative Agent in the event such Lender or the Administrative Agent is required to repay such Refund to such Governmental Authority.  Nothing contained in this Section 4.4(c) shall require any Lender or the Administrative Agent to make available any of its tax returns (or any other information that it deems to be confidential or proprietary) or to alter its tax accounting practices.

(d)       Foreign Lender.  Each Lender (which, for purposes of this Section 4.4, shall include any Affiliate of a Lender that makes any Eurodollar Loan pursuant to the terms of this Credit Agreement) that is not a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) shall submit to the Borrower and the Administrative Agent on or before the Closing Date (or, in the case of a Person that becomes a Lender after the Closing Date by assignment, promptly upon such assignment), two duly completed and signed copies of (A) either (1) Form W-8BEN of the United States Internal Revenue Service, or a successor applicable form, entitling such Lender to a complete exemption from withholding on all amounts to be received by such Lender pursuant to this Credit Agreement and/or
the Notes or (2) Form W-8ECI of the United States Internal Revenue Service, or an applicable successor form, relating to all amounts to be received by such Lender pursuant to this Credit Agreement and/or the Notes and, if applicable, (B) an Internal Revenue Service Form W-8 or W-9 entitling such Lender to receive a complete exemption from United States backup withholding tax.  Each such Lender shall, from time to time after submitting either such form, submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of such forms (or such successor forms or other documents as shall be adopted from time to time by the relevant United States taxing authorities) as may be (1) reasonably requested in writing by the Borrower or the Administrative Agent and (2) appropriate under then current United States laws or regulations.  Upon the reasonable request of the Borrower or the Administrative Agent, each Lender that has not provided the forms or other
documents as provided above, on the basis of being a United States person, shall submit to the Borrower and the Administrative Agent a certificate to the effect that it is such a “United States person.”  If and for any period during which the provisions of this Section 4.4(d) are not satisfied by or with respect to any such Lender, no provision of this Credit Agreement shall require the Borrower to indemnify with respect to any resulting withholding of United States taxes imposed on or with respect to such Lender as a result of such noncompliance for the periods to which such noncompliance relates, unless such noncompliance is directly attributable to a change in a law, rule or regulation issued by a Governmental Authority which results in the inability of such Lender to provide such form.  Each such Lender shall indemnify and hold harmless (on an after-tax basis) the Borrower against any claim for United States withholding taxes which the Borrower fails to withhold on
payments to such Lender as a direct result of the invalidity of any form provided to the Borrower by such Lender pursuant to this Section 4.4(d).

 

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4.5  Mitigation; Mandatory Assignment.  The Administrative Agent and each Lender shall use reasonable efforts to avoid or mitigate any increased cost or suspension of the availability of an interest rate under Sections 4.1 through 4.4 above to the greatest extent practicable (including transferring the Loans to another lending office or Affiliate of a Lender) unless, in the opinion of the Administrative Agent or such Lender, such efforts would be likely to have an adverse effect upon it.  In the event that (a) a Lender makes a request to the Borrower for additional payments in accordance with Section 4.1, 4.2 or 4.4 or (b) a Lender is a Defaulting Lender, then, provided that no Default or Event of Default has occurred and is continuing at such time, the Borrower may, at its own expense (such expense to include any transfer fee payable to the
Administrative Agent under Section 11.3(b) and any expense pursuant to this Section 4.5) and in its sole discretion, require such Lender to transfer and assign in whole (but not in part), without recourse (in accordance with and subject to the terms and conditions of Section 11.3(b)), all of its interests, rights and obligations under this Credit Agreement to an Eligible Assignee which shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (a) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority and (b) the Borrower or such assignee shall have paid to the assigning Lender in immediately available funds the principal of and interest accrued to the date of such payment on the portion of the Loans hereunder held by such assigning Lender and all other amounts owed to such assigning Lender hereunder,
including amounts owed pursuant to Sections 4.1 through 4.4.  In the event that, after ten Business Days of receiving written notice from the Borrower requiring any Lender to make such an assignment pursuant to this Section 4.5, such Lender fails to execute the agreements required under Section 11.3(b) in connection with such an assignment, then upon one Business Day’s prior written notice from the Borrower to such Lender (with a copy furnished to the Administrative Agent), such agreements shall be deemed to have been executed by such Lender.

 

SECTION 5

CONDITIONS PRECEDENT

5.1  Closing Conditions.  The obligation of each Lender to enter into this Credit Agreement is subject to satisfaction of the following conditions on or prior to the Closing Date (in form and substance acceptable to the Lenders):

(a)       Executed Credit Documents.  Receipt by the Administrative Agent of duly executed copies of (i) this Credit Agreement and (ii) the Revolving Loan Notes.

(b)       Officer’s Certificate.  Receipt by the Administrative Agent of a certificate of an officer of the Borrower stating that, as of the Closing Date, (i) there exists no Default or Event of Default, (ii) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects and (iii) the Borrower is in compliance with the financial covenant set forth in Section 7.11, as demonstrated by the covenant calculations on a schedule attached thereto.

 

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(c)       Opinions of Counsel.  Receipt by the Administrative Agent of the following:

(i)        an opinion, or opinions, satisfactory to the Administrative Agent, addressed to the Administrative Agent and each of the Lenders from legal counsel to the Borrower; and

(ii)       an opinion of Shearman & Sterling LLP, counsel to the Administrative Agent, in form and substance satisfactory to the Administrative Agent.

(d)       Corporate Documents.  Receipt by the Administrative Agent of the following:

(i)        Charter Documents.  A certificate of an officer of the Borrower that there have been no amendments or documents granted by the office of the Secretary of State of the State of Delaware affecting the Certificate of Incorporation of the Borrower issued by the Secretary of State of the State of Delaware on January 8, 2001.

(ii)       Bylaws.  A copy of the bylaws of the Borrower certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date.

(iii)       Resolutions.  Copies of resolutions of the Board of Directors of the Borrower approving and adopting the Credit Documents to which it is a party and the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of the Borrower to be true and correct and in force and effect as of the Closing Date.

(iv)      Good Standing.  Copies of (A) certificates of good standing, existence or its equivalent with respect to the Borrower certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing would have a Material Adverse Effect and (B) to the extent available, a certificate indicating payment of all corporate franchise taxes certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of its incorporation and each other jurisdiction in which the failure to pay such franchise taxes would have a Material Adverse Effect.

(v)       Incumbency.  An incumbency certificate of the Borrower, certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date.

(e)       Financial Statements.  Receipt by the Lenders of the consolidated audited financial statements of the Borrower dated as of December 31, 2005, including balance sheets and income and cash flow statements, in each case audited by independent public accountants of recognized standing and prepared in accordance with GAAP.

(f)        Fees and Expenses.  Payment by the Borrower of all fees and expenses owed by it to the Lenders, the Arrangers and the Administrative Agent, including, without 

 

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limitation, payment to the Administrative Agent of the fees agreed to between the Borrower and the Administrative Agent set forth in the Engagement Letter and payment to each of the Arrangers of the fees agreed to between the Borrower and each Arranger set forth in the respective fee letter between such Arranger and the Borrower.

(g)       Material Adverse Effect.  No event or condition shall have occurred since the date of the financial statements delivered pursuant to Section 5.1(e) above that has had or would be likely to have a Material Adverse Effect. 

(h)       Existing Credit Agreement.  Receipt by the Administrative Agent of evidence that all obligations under the Existing Credit Agreement have been paid in full and all commitments thereunder terminated.

(i)        Account Designation Letter.  The Administrative Agent shall have received the executed Account Designation Letter in the form of Schedule 1.1(a).

(j)        Other.  Receipt by the Lenders of such other documents, instruments, agreements or information as reasonably requested by any Lender.

5.2  Conditions to Extensions of Credit.  In addition to the conditions precedent stated elsewhere herein, the Lenders shall not be obligated to make any Loans, issue any Letters of Credit or extend any Maturity Date hereunder unless:

(a)       Request.  The Borrower shall have timely delivered a duly executed and completed Notice of Borrowing, Letter of Credit Request, Competitive Bid Request or written request to extend any Maturity Date, as applicable, in conformance with all the terms and conditions of this Credit Agreement;

(b)       Representations and Warranties.  The representations and warranties made by the Borrower in the Credit Documents are true and correct in all material respects at and as if made as of the date of the funding of each Loan, issuance of each Letter of Credit or each extension of any Maturity Date, and after giving effect to such Loan, Letter of Credit or extension, as applicable, and, with respect to each Loan, to the application of the proceeds therefrom; provided that the representations made pursuant to Sections 6.6, 6.8 and 6.9 shall only be made on the Closing Date and on the date of any extension of any Maturity Date; and

(c)       No Default.  On the date of the funding of each Loan, issuance of each Letter of Credit or each extension of any Maturity Date, as applicable, no Default or Event of Default has occurred and is continuing or would be caused by making the requested Loans, including, without limitation, with respect to each Loan, the restrictions on (i) the amount of Credit Extensions that may be outstanding as set forth in Sections 2.1(a) and 2.1(b) and (ii) the use of proceeds set forth in Section 7.9.

The delivery of each Notice of Borrowing, Letter of Credit Request or Competitive Bid Request, as applicable, shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b) and (c) above.

 

 

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SECTION 6

REPRESENTATIONS AND WARRANTIES

The Borrower hereby represents and warrants to each Lender that:

 

6.1  Organization and Good Standing.  Each of the Borrower and each Significant Subsidiary (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (b) is duly qualified and in good standing as a foreign corporation authorized to do business in every jurisdiction where the failure to so qualify would have a Material Adverse Effect and (c) has the requisite corporate power and authority to own its properties and to carry on its business as now conducted and as proposed to be conducted.

6.2  Due Authorization.  The Borrower (a) has the requisite corporate power and authority to execute, deliver and perform this Credit Agreement and the other Credit Documents and to incur the obligations herein and therein provided for and (b) is duly authorized to, and has been authorized by all necessary corporate action to, execute, deliver and perform this Credit Agreement and the other Credit Documents.

6.3  No Conflicts.  Neither the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof by the Borrower will (a) violate or conflict with any provision of its certificate or articles of incorporation or bylaws, (b) violate, contravene or materially conflict with any law, regulation (including without limitation, Regulation D, U or X), order, writ, judgment, injunction, decree or permit applicable to it, (c) violate, contravene or materially conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, the violation of which could have a Material Adverse Effect or (d) result in or require the creation
of any Lien upon or with respect to its properties.

6.4  Consents.  No consent, approval, authorization or order of, or filing, registration or qualification with, any court or Governmental Authority or third party is required in connection with the execution, delivery or performance of this Credit Agreement or any of the other Credit Documents that has not been obtained.

6.5  Enforceable Obligations.  This Credit Agreement and the other Credit Documents have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by bankruptcy or insolvency laws or similar laws affecting creditors’ rights generally or by general equitable principles.

6.6  Financial Condition.  The financial statements provided to the Lenders as described in Section 5.1(e):  (a) fairly present the financial condition and operations of the Borrower as of the date thereof and (b) were prepared in accordance with GAAP.  Since the date 

 

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of such financial statements, there has been no change that has, or would be reasonably likely to have, a Material Adverse Effect.

6.7  No Default.  No Default or Event of Default presently exists.

6.8  Indebtedness and Off-Balance Sheet Indebtedness.  As of the Closing Date, the Borrower and its Subsidiaries have no Indebtedness except as disclosed in the financial statements referenced in Section 5.1(e) and as otherwise incurred in the ordinary course.  Set forth on the Borrower’s Annual Report on Form 10-K for the year ended December 31, 2005 and the Borrower’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 is a specific description of all material Off-Balance Sheet Indebtedness of the Borrower and its Subsidiaries as of the periods covered thereby.

6.9  Litigation.  Except as disclosed in the Borrower’s Annual Report on Form 10-K for the year ended December 31, 2005, in the Borrower’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 and in any Current Report on Form 8-K filed by the Borrower between December 31, 2005 and the Closing Date, there are no actions, suits or legal, equitable, arbitration or administrative proceedings, pending or, to the knowledge of the Borrower, threatened against the Borrower or a Significant Subsidiary, in which there is a reasonable possibility of an adverse decision which has had or would be reasonably expected to have a Material Adverse Effect.

6.10  Material Agreements.  The Borrower is not in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound, which default has had or would be reasonably expected to have a Material Adverse Effect.

6.11  Taxes.  The Borrower has filed, or caused to be filed, all material tax returns (federal, state, local and foreign) required to be filed and paid all amounts of taxes shown thereon to be due (including interest and penalties) and has paid all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes (a) which are not yet delinquent or (b) that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP.  The Borrower is not aware of any proposed material tax assessments against it.

6.12  ERISA.  (a)  No Reportable Event has occurred and is continuing with respect to any Plan; (b) no Plan has an accumulated funding deficiency determined under Section 412 of the Code; (c) no proceedings have been instituted, or, to the knowledge of the Borrower, planned to terminate any Plan; (d) neither the Borrower, nor any member of a Controlled Group, nor any duly appointed administrator of a Plan has instituted or intends to institute proceedings to withdraw from any Multiemployer Pension Plan (as defined in Section 3(37) of ERISA); and (e) each Plan has been maintained and funded in all material respects with its terms and with the provisions of ERISA applicable thereto.

 

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6.13  Compliance with Law.  The Borrower is in compliance with all laws, rules, regulations, orders and decrees applicable to it, or to its properties, unless such failure to comply would not have a Material Adverse Effect.

6.14  Use of Proceeds; Margin Stock.  The proceeds of the Loans hereunder (a) will be used solely for the purposes specified in Section 7.9 and (b) will not be used in a manner that would cause a violation of Regulation U or Regulation X.

6.15  Government Regulation.  Any issuance of the Notes by the Borrower hereunder, the incurrence of the indebtedness contemplated by this Credit Agreement and the borrowing, repayment and reborrowing of Loans hereunder requires no authorization or approval of any Governmental Authority other than such authorizations and approvals that already have been obtained.  The Borrower is not an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, or controlled by such a company.

6.16  Solvency.  The Borrower is solvent.  For purposes of the preceding sentence, “solvent” means (a) the fair saleable value (on a going concern basis) of the Borrower’s assets exceed its liabilities, contingent or otherwise, fairly valued, (b) the Borrower will be able to pay its debts as they become due and (c) upon paying its debts as they become due, the Borrower will be left with reasonably sufficient capital to satisfy all of its current and reasonably anticipated obligations. 

SECTION 7

AFFIRMATIVE COVENANTS

The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans and L/C Disbursements, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments hereunder shall have terminated:

 

7.1  Information Covenants.  The Borrower will furnish, or cause to be furnished, to the Administrative Agent:

(a)       Annual Financial Statements.  As soon as available, and in any event within 120 days after the close of each fiscal year of the Borrower, a consolidated balance sheet and income statement of the Borrower and its Subsidiaries as of the end of such fiscal year, together with related statements of operations and retained earnings and of cash flows for such fiscal year, setting forth in comparative form figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such
accountants concur) and shall not be limited as to the scope of the audit or qualified as to going concern. 

 

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(b)       Quarterly Financial Statements.  As soon as available, and in any event within 55 days after the close of each fiscal quarter of the Borrower (other than the fourth fiscal quarter), a consolidated balance sheet and income statement of the Borrower and its Subsidiaries as of the end of such fiscal quarter, together with related statements of operations and retained earnings and of cash flows for such fiscal quarter in each case setting forth in comparative form figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Administrative Agent, and accompanied by a certificate of the chief financial officer of the Borrower to the effect that such quarterly financial statements fairly
present in all material respects the financial condition of the Borrower and its Subsidiaries and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments. 

(c)       Officer’s Certificate.  At the time of delivery of the financial statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of the chief financial officer of the Borrower, substantially in the form of Exhibit 7.1(c), (i) demonstrating compliance with the financial covenant contained in Section 7.11 by calculation thereof as of the end of each such fiscal period, (ii) providing Contracted Operating Cash Flows and Total Operating Cash Flows, each as of the end of such fiscal quarter, and (iii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Borrower proposes to take with respect thereto. 

(d)       Reports.  Promptly upon transmission or receipt thereof, copies of any filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy statements, notices and reports as the Borrower shall send to its shareholders.

(e)       Notices.  Upon the Borrower obtaining knowledge thereof, the Borrower will give written notice to the Administrative Agent immediately of (i) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Borrower proposes to take with respect thereto, and (ii) the occurrence of any of the following with respect to the Borrower:  (A) the pendency or commencement of any litigation, arbitral or governmental proceeding against the Borrower which, if adversely determined, is likely to have a Material Adverse Effect, (B) the institution of any proceedings against the Borrower with respect to, or the receipt of notice by the Borrower of potential liability or responsibility for, violation or alleged violation of any
federal, state or local law, rule or regulation, the violation of which would likely have a Material Adverse Effect, or (C) any notice or determination concerning the imposition of any withdrawal liability by a Multiemployer Plan against the Borrower or any of its ERISA Affiliates, the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA or the termination of any Plan.

(f)        Other Information.  With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of the Borrower as the Administrative Agent or any Lender may reasonably request.

 

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7.2  Preservation of Existence and Franchises.  The Borrower will, except as permitted by Section 8.2, do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority.

7.3  Books and Records.  The Borrower will keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves).

7.4  Compliance with Law.  The Borrower will comply with all laws, rules, regulations and orders, and all restrictions imposed by all Governmental Authorities, applicable to it and its property if noncompliance with any such law, rule, regulation, order or restriction would be reasonably expected to have a Material Adverse Effect, such compliance to include, without limitation, ERISA and Environmental Laws.

7.5  Payment of Taxes.  The Borrower will pay and discharge all taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent; provided, however, that the Borrower shall not be required to pay any such tax, assessment, charge, levy, or claim which is being contested in good faith by appropriate proceedings and as to which adequate reserves therefor have been established in accordance with GAAP.

7.6  Insurance.  The Borrower will at all times maintain in full force and effect insurance (including worker’s compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice.

7.7  Performance of Obligations.  The Borrower will perform in all material respects all of its obligations under the terms of all material agreements, indentures, mortgages, security agreements or other material debt instruments to which it is a party or by which it is bound.

7.8  ERISA.  The Borrower and each ERISA Affiliate will (a) at all times make prompt payment of all contributions (i) required under all Pension Plans and (ii) required to meet the minimum funding standard set forth in ERISA with respect to each Plan; (b) promptly upon request, furnish the Administrative Agent and the Lenders copies of each annual report/return (Form 5500 Series), as well as all schedules and attachments required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA, and the regulations promulgated thereunder, in connection with each of its Pension Plans for each Plan Year (as defined in ERISA); (c) notify the Administrative Agent immediately of any fact, including, but not limited to, any Reportable Event arising in connection with any of its Plans, which might constitute grounds for termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to administer such Plan, together with a statement, if requested by the Administrative Agent, as to the reason therefor and the action, if any, proposed to be taken in respect thereof; and (d) furnish to the Administrative Agent, upon its request, such additional information concerning any of its Plans as may be reasonably requested.  The Borrower will not nor will it permit any ERISA Affiliate to (A) terminate a Plan if any such termination would have a Material Adverse Effect or (B) cause or permit to exist any 

 

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Reportable Event under ERISA or other event or condition which presents a material risk of termination at the request of the PBGC if such termination would have a Material Adverse Effect.

7.9  Use of Proceeds.  The proceeds of the Loans may be used solely (a) to provide credit support for the Borrower’s commercial paper program or tax-exempt financings, (b) for working capital for the Borrower and (c) for other general corporate purposes, including, without limitation, acquisitions.

7.10  Audits/Inspections.  Upon reasonable notice and during normal business hours, the Borrower will permit representatives appointed by the Administrative Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers, to visit and inspect the Borrower’s property, including its books and records, its accounts receivable and inventory, the Borrower’s facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representatives obtain and shall permit the Administrative Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of the Borrower. 

7.11  Indebtedness to Capitalization.  The ratio of (a) Indebtedness of the Borrower to (b) Capitalization shall at all times be less than or equal to .65 to 1.0. 

SECTION 8

NEGATIVE COVENANTS

The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans and L/C Disbursements, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments hereunder shall have terminated:

 

8.1  Nature of Business.  The Borrower will not alter the character of its business from that conducted as of the Closing Date.

8.2  Consolidation and Merger.  The Borrower will not enter into any transaction of merger or consolidation or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that notwithstanding the foregoing provisions of this Section 8.2, the following actions may be taken if after giving effect thereto no Default or Event of Default exists:

(a)       a Subsidiary of the Borrower may be merged or consolidated with or into the Borrower; provided that the Borrower shall be the continuing or surviving corporation; and

(b)       the Borrower may merge or consolidate with any other Person (other than one of its Subsidiaries) if either (i) the Borrower shall be the continuing or surviving corporation or (ii) the Borrower shall not be the continuing or surviving corporation and the corporation so continuing or surviving (A) is a corporation organized and duly existing under the law of any 

 

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state of the United States, (B) has (1) a long-term, senior, unsecured, non-credit enhanced debt rating of BBB- or better from S&P and Baa3 or better from Moody’s or (2) a commercial paper rating of A-2 or better from S&P and P-2 or better from Moody’s and (C) executes and delivers to the Administrative Agent and the Lenders an instrument in form satisfactory to the Required Lenders pursuant to which it expressly assumes the Loans and all of the other obligations of the Borrower under the Credit Documents and procures for the Administrative Agent and each Lender an opinion in form satisfactory to the Required Lenders and from counsel satisfactory to the Required Lenders in respect of the due authorization, execution, delivery and enforceability of such instrument and covering such other matters as the Required Lenders may reasonably request; provided that prior to any such merger or consolidation, the Borrower shall have delivered to the Administrative Agent a certificate demonstrating that, upon giving effect to such merger or consolidation on a pro forma basis, the Borrower will be in compliance with Section 7.11.

8.3  Sale or Lease of Assets.  The Borrower will not convey, sell, lease, transfer or otherwise dispose of in one transaction or a series of transactions, all or substantially all of its business or assets whether now owned or hereafter acquired, except as permitted pursuant to Section 8.2.

8.4  Transactions with Affiliates.  Except as otherwise required by law, the Borrower will not enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any of its Affiliates other than on terms and conditions substantially as favorable as would be obtainable in a comparable arm’s-length transaction with a Person other than an Affiliate.

8.5  Fiscal Year.  The Borrower will not change its fiscal year (a) without prior written notification to the Lenders and (b) if such change would materially affect the Lenders’ ability to read and interpret the financial statements delivered pursuant to Section 7.1 or calculate the financial covenant in Section 7.11.

8.6  Liens.  The Borrower will not contract, create, incur, assume or permit to exist any Lien with respect to any of its property or assets of any kind (whether real or personal, tangible or intangible), whether now owned or hereafter acquired, securing any Indebtedness unless the Loans hereunder are equally and ratably secured with such other Indebtedness other than the following: (a) Liens securing Borrower Obligations, (b) Liens for taxes not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof), (c) Liens in respect of property imposed by law arising in the ordinary course of business such as materialmen’s, mechanics’, warehousemen’s,
carrier’s, landlords’ and other nonconsensual statutory Liens which are not yet due and payable, which have been in existence less than 90 days or which are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof), (d) pledges or deposits made in the ordinary course of business to secure payment of worker’s compensation insurance, unemployment insurance, pensions or social security programs, (e) Liens arising from good faith deposits in connection with or to secure 

 

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performance of tenders, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (other than obligations in respect of the payment of borrowed money), (f) Liens arising from good faith deposits in connection with or to secure performance of statutory obligations and surety and appeal bonds (unless such Lien is in connection with a judgment that has caused an Event of Default pursuant to Section 9.1(g)), (g) easements, rights-of-way, restrictions (including zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered property for its intended purposes, (h) judgment Liens that would not constitute an Event of Default, (i) Liens arising by virtue of any statutory or common law provision relating to banker’s
liens, rights of setoff or similar rights as to deposit accounts or other funds maintained with a creditor depository institution, (j) any Lien created or arising over any property which is acquired, constructed or created by the Borrower, but only if (i) such Lien secures only principal amounts (not exceeding the cost of such acquisition, construction or creation) raised for the purposes of such acquisition, construction or creation, together with any costs, expenses, interest and fees incurred in relation thereto or a guarantee given in respect thereof, (ii) such Lien is created or arises on or before 180 days after the completion of such acquisition, construction or creation and (iii) such Lien is confined solely to the property so acquired, constructed or created and any improvements thereto, (k) any Lien on any property or assets acquired from a corporation or other entity which is merged with or into the Borrower in accordance with Section 8.2, and is not created in
anticipation of any such transaction (unless such Lien is created to secure or provide for the payment of any part of the purchase price of such corporation or other entity), (l) any Lien on any property or assets existing at the time of acquisition of such property or assets by the Borrower and which is not created in anticipation of such acquisition (unless such Lien was created to secure or provide for the payment of any part of the purchase price of such property or assets), (m) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Liens referred to in the foregoing clauses (a) through (l), for amounts not exceeding the principal amount of the Indebtedness secured by the Lien so extended, renewed or replaced, provided that such extension, renewal or replacement Lien is limited to all or a part of the same property or assets that were covered by the Lien extended,
renewed or replaced (plus improvements on such property or assets) and (n) Liens on property, in addition to those otherwise permitted by clauses (a) through (m) above, securing, directly or indirectly, Indebtedness which does not exceed, in the aggregate at any one time outstanding, ten percent (10%) of Net Tangible Assets.

8.7  Minimum Contract Maintenance Covenant.  The Borrower will not declare or pay any dividends or make any other distributions (except dividends payable or distributions made in shares of its common stock and dividends payable in cash in cases where, concurrently with the payment of the dividend, an amount in cash equal to the dividend is received by the Borrower as a capital contribution or as the proceeds of the issue and sale of shares of its common stock) on its common stock, or purchase or permit any of its Subsidiaries to purchase any shares of its common stock or make any payment on Affiliate Subordinated Indebtedness, unless (i) the percentage derived from dividing Contracted Operating Cash Flows by Total Operating Cash Flows is at least 80%, or
(ii) the ratio of Indebtedness of the Borrower and its Subsidiaries (other than Unrestricted Subsidiaries) to Capitalization of the Borrower and its Subsidiaries (other than Unrestricted Subsidiaries) is no more than .60 to 1.0.

 

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SECTION 9

EVENTS OF DEFAULT

9.1  Events of Default.  An Event of Default shall exist upon the occurrence of any of the following specified events (each, an “Event of Default”):

	
            (a)
 	
            Payment.  The Borrower shall:
 	
             

	
            (i)
 	
            default in the payment when due of any principal of any of the Loans; or
 

(ii)       default, and such default shall continue for five or more Business Days, in the payment when due of any interest on the Loans or of any fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith.

(b)       Representations.  Any representation, warranty or statement made or deemed to be made by the Borrower herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was made or deemed to have been made.

	
            (c)
 	
            Covenants.  The Borrower shall:
 

(i)        default in the due performance or observance of any term, covenant or agreement contained in Sections 7.2, 7.3, 7.4, 7.9, 7.11 or 8.1 through 8.7, inclusive; or

(ii)       default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.1(a), (b), (c) or (e) and such default shall continue unremedied for a period of ten Business Days after the earlier of an officer of the Borrower becoming aware of such default or written notice thereof given by the Administrative Agent; or

 

(iii)       default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained in this Credit Agreement or any other Credit Document and such default shall continue unremedied for a period of at least 30 days after the earlier of an officer of the Borrower becoming aware of such default and written notice thereof given by the Administrative Agent.

(d)       Credit Documents.  Any Credit Document shall fail to be in full force and effect or to give the Administrative Agent and/or the Lenders the rights, powers and privileges purported to be created thereby.

(e)       Bankruptcy, Etc.  The occurrence of any of the following with respect to the Borrower or a Significant Subsidiary:  (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of the Borrower or a Significant 

 

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Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Borrower or a Significant Subsidiary or for any substantial part of its property or ordering the winding up or liquidation of its affairs; or (ii) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect is commenced against the Borrower or a Significant Subsidiary and such petition remains unstayed and in effect for a period of 60 consecutive days; or (iii) the Borrower or a Significant Subsidiary shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the
appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person or any substantial part of its property or make any general assignment for the benefit of creditors; or (iv) the Borrower or a Significant Subsidiary shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by such Person in furtherance of any of the aforesaid purposes.

(f)        Defaults under Other Agreements.  With respect to any Indebtedness (other than the Indebtedness under this Credit Agreement) of the Borrower or a Significant Subsidiary in an aggregate principal amount in excess of $100,000,000, (i) the Borrower or such Significant Subsidiary shall (A) default in any payment (interest or principal) (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (B) default (after giving effect to any applicable grace period) in the observance or performance of any covenant or agreement relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is
to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause any such Indebtedness to become due prior to its stated maturity; or (ii) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or (iii) any such Indebtedness matures and remains unpaid.

(g)       Judgments.  One or more judgments, orders, or decrees shall be entered against the Borrower or a Significant Subsidiary involving any liabilities of $100,000,000 or more, in the aggregate (to the extent not paid or covered by insurance provided by a carrier that has acknowledged coverage), and such judgments, orders or decrees shall continue unsatisfied, undischarged and unstayed for a period ending on the first to occur of (i) the last day on which such judgment, order or decree becomes final and unappealable and, where applicable, with the status of a judicial lien or (ii) 30 days.

(h)       ERISA.  (i) The Borrower, or any member of the Controlled Group, shall fail to pay when due an amount or amounts aggregating in excess of $100,000,000 which it shall have become liable to pay under Title IV of ERISA; or (ii) notice of intent to terminate a Plan or Plans which in the aggregate have unfunded liabilities in excess of $100,000,000 (individually and collectively, a “Material Plan”) shall be filed under Title IV of ERISA by the Borrower or any member of the Controlled Group, any plan administrator or any combination of the foregoing; or (iii) the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to 

 

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cause a trustee to be appointed to administer any Material Plan; or (iv) a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or (v) there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the Controlled Group to incur a current payment obligation in excess of $100,000,000.

	
            (i)
 	
            Change of Control.  The occurrence of any Change of Control.
 

9.2  Acceleration; Remedies.  Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by the Required Lenders (or the Lenders, if required by Section 11.6) or cured to the satisfaction of the Required Lenders (or the Lenders, if required by Section 11.6), the Administrative Agent may, with the consent of the Required Lenders or, in the case of clause (ii) or (iv), the Required Lenders or the relevant Issuing Bank, and shall, upon the request and direction of the Required Lenders or, in the case of clause (ii) or (iv), the Required Lenders or the relevant Issuing Bank, by written notice to the Borrower take any of the following actions without prejudice to the rights of the Administrative Agent or any Lender to enforce its claims against the Borrower, except as otherwise specifically provided for herein:

(i)        Termination of Commitments.  Declare the Commitments terminated whereupon the Commitments shall be immediately terminated.

(ii)       Letters of Credit.  Declare the obligation of any Issuing Banks to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate.

(iii)       Acceleration of Loans.  Declare the unpaid principal of and any accrued interest in respect of all Loans and any and all other indebtedness or obligations of any and every kind owing by the Borrower to any of the Lenders or the Administrative Agent hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

(iv)      Cash Collateral.  Require that the Borrower Cash Collateralize the Letters of Credit in an amount equal to the Letters of Credit Outstanding.

(v)       Enforcement of Rights.  Enforce any and all rights and interests created and existing under the Credit Documents, including, without limitation, all rights of setoff.

Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(e) shall occur, then the Commitments and the obligation of each Issuing Bank to issue Letters of Credit shall automatically terminate, and all Loans, all accrued interest in respect thereof, all accrued and unpaid fees and other indebtedness or obligations owing to the Lenders and the Administrative Agent hereunder shall immediately become due and payable, in each case, without the giving of any notice or other action by the Administrative Agent, the Issuing Banks or the Lenders, and the obligation of the Borrower to Cash Collateralize the Letters of Credit pursuant to Section 9.2(iv) shall automatically become effective.

 

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Notwithstanding the fact that enforcement powers reside primarily with the Administrative Agent, each Issuing Bank and each Lender have, to the extent permitted by law, a separate right of payment and shall be considered a separate “creditor” holding a separate “claim” within the meaning of Section 101(5) of the Bankruptcy Code or any other insolvency statute.

 

9.3  Allocation of Payments after Event of Default.  Notwithstanding any other provisions of this Credit Agreement, after the exercise of any remedies by the Administrative Agent or the Lenders pursuant to Section 9.2 (or after the Commitments shall automatically terminate, the Loans (with accrued interest thereon) and all other amounts under the Credit Documents shall automatically become due and payable in accordance with the terms of such Section and the Letters of Credit Outstanding shall automatically be required to be Cash Collateralized as set forth in Section 9.2), all amounts collected or received by the Administrative Agent, any Issuing Bank or any Lender on account of amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows:

FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys’ fees) of the Administrative Agent, any Issuing Bank or any of the Lenders in connection with enforcing the rights of the Administrative Agent, the Issuing Banks and the Lenders under the Credit Documents and any protective advances made by the Administrative Agent, any of the Issuing Banks or any of the Lenders, pro rata as set forth below;

 

SECOND, to payment of any fees owed to the Administrative Agent, any Issuing Bank or any Lender, pro rata as set forth below;

 

THIRD, to the payment of all accrued interest payable to the Lenders hereunder, pro rata as set forth below;

 

FOURTH, to the payment of the outstanding principal amount of the Loans and all other obligations which shall have become due and payable under the Credit Documents; 

 

FIFTH, to the Administrative Agent for the account of each of the Issuing Banks, to Cash Collateralize the Letters of Credit Outstanding comprised of the aggregate undrawn amount of all outstanding Letters of Credit issued by such Issuing Banks; and

 

SIXTH, the payment of the surplus, if any, after all of the Borrower Obligations have been indefeasibly paid in full to whomever may be lawfully entitled to receive such surplus.

 

Subject to Section 2.10(i), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied in accordance with clause Sixth above.

 

 

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In carrying out the foregoing, (a) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category and (b) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans held by such Lender bears to the aggregate then outstanding Loans) of amounts available to be applied.

 

SECTION 10

AGENCY PROVISIONS

10.1  Appointment.  Each Lender hereby designates and appoints Citibank as Administrative Agent and BTMU as Initial Issuing Bank to act as specified herein and in the other Credit Documents, and each such Lender hereby authorizes the Agents, as an agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Agents shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Agents.  The provisions of this Section 10.1 are solely for the benefit of the Agents and the Lenders, and the Borrower shall not have any rights as a third-party beneficiary of the provisions hereof.  In performing its functions and duties under this Credit Agreement and the other Credit Documents, each Agent shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower.  Notwithstanding anything herein or in any of the Credit Documents to the contrary, no Lender that is listed as a “Co-Documentation Agent”, a “Co-Managing Agent” or a “Co-Agent” (if any) herein shall have any functions, duties, obligations, responsibilities or liabilities, or serve in
any capacity, hereunder or under any of the Credit Documents except as a Lender in accordance with the terms of the Credit Documents.  The Administrative Agent shall, upon receipt thereof from the Borrower, promptly deliver to the Lenders copies of the financial statements received pursuant to Section 7.1.

10.2  Delegation of Duties.  An Agent may execute any of its duties hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  An Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

10.3  Exculpatory Provisions.  No Agent-Related Person shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person’s own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower contained herein or in any of the other Credit Documents or in any certificate, report, statement or other document 

 

50

 

 

referred to or provided for in, or received by an Agent-Related Person under or in connection herewith, or in connection with, the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of the Borrower to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be responsible to any Lender for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Credit Agreement or any of the other Credit Documents or for any representations, warranties, recitals or statements made herein or therein or made by the Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by an Agent-Related Person to the Lenders or by or on behalf of the Borrower to an
Agent-Related Person or any Lender or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Borrower.  The Agents are not trustees for the Lenders and owe no fiduciary duty to the Lenders.

10.4  Reliance on Communications.  An Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without  limitation, counsel to the Borrower, independent accountants and other experts selected by such Agent with reasonable care).  An Agent may deem and treat the Lenders as the owner of its interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent in accordance with Section 11.3(b).  The Agents shall be fully
justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  The Agents shall in all cases be fully protected in acting, or in refraining from acting, hereunder or under any of the other Credit Documents, in accordance with a request of the Required Lenders (or, to the extent specifically provided in Section 11.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns).

10.5  Notice of Default.  The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless it has received notice from a Lender or the Borrower referring to the Credit Document, describing such Default or Event of Default and stating that such notice is a “notice of default.”  In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Lenders.  The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be directed by the Required Lenders.

10.6  Non-Reliance on Agents and Other Lenders.  Each Lender expressly acknowledges that no Agent-Related Person has made any representations or warranties to it and that no act by any Agent-Related Person hereinafter taken, including any review of the affairs of 

 

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the Borrower, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender.  Each Lender represents to the Agents that it has, independently and without reliance upon the Agents, any other Agent-Related Person or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Credit Agreement.  Each Lender also represents that it will, independently and without reliance upon the Agents, any other Agent-Related Person or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking
or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower.  Except for (i) delivery of the Credit Documents, (ii) delivery of all financial statements received by the Administrative Agent pursuant to Section 7.1(a) and 7.1(b), (iii) delivery of all notices received by the Administrative Agent pursuant to Sections 7.1(e) and 7.8 and (iv) delivery of notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, no Agent-Related Person shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower which may come into the possession of an Agent-Related Person.

10.7  Indemnification.  Each Lender agrees to indemnify each Agent-Related Person (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to such Lender’s Commitment in effect on the date on which indemnification is sought under this section (or if indemnification is sought after the date on which the Commitments shall have terminated and the Loans shall have been paid in full, according to such Lender’s Commitment in effect immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment of the Borrower Obligations) be imposed on, incurred by or asserted against such Agent-Related Person in any
way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent-Related Person under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of such Agent-Related Person.  If any indemnity furnished to an Agent-Related Person for any purpose shall, in the opinion of such Agent-Related Person, be insufficient or become impaired, such Agent-Related Person may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.  The agreements in this
Section 10.7 shall survive the payment of the Borrower Obligations and all other amounts payable hereunder and under the other Credit Documents.

10.8  Each Agent in Its Individual Capacity.  Each Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the 

 

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Borrower as though such Agent were not an Agent hereunder.  With respect to the Loans made and all Borrower Obligations owing to it, each Agent shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though it were not an Agent, and the terms “Lender” and “Lenders” shall include each Agent in its individual capacity.  No Agent shall have any duty to disclose any information obtained or received by it or any of its Affiliates relating to the Borrower or any of its Affiliates to the extent such information was obtained or received in any capacity other than as such Agent.  In the event that Citibank or any of its Affiliates shall be or become an indenture trustee under the Trust Indenture Act of 1939 (as amended, the "Trust Indenture Act") in respect of any securities issued or guaranteed by
the Borrower, the parties hereto acknowledge and agree that any payment or property received in satisfaction of or in respect of any obligation of the Borrower hereunder or under any other Credit Document by or on behalf of Citibank in its capacity as the Administrative Agent for the benefit of any Lender (other than Citibank or an Affiliate of Citibank) under this Credit Agreement or any Note  and which is applied in accordance with this Credit Agreement shall be deemed to be exempt from the requirements of Section 311 of the Trust Indenture Act pursuant to Section 311(b)(3) of the Trust Indenture Act.

10.9  Successor Administrative Agent.  The Administrative Agent may, at any time, resign upon 30 days’ written notice to the Borrower and the Lenders.  Upon any such resignation, the Required Lenders, with the written consent of the Borrower, shall have the right to appoint a successor to the resigning Administrative Agent.  If no successor Administrative Agent shall have been so duly appointed, and/or such successor agent shall not have accepted such appointment, within 30 days after the notice of resignation, then the retiring Administrative Agent shall select a successor Administrative Agent, with the written consent of the Borrower, provided such successor is a Lender hereunder or a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at
least $500,000,000.  If no successor Administrative Agent shall have been appointed within the time frame set forth above, then the Lenders shall perform all the obligations of the resigning Administrative Agent until the time a successor has been appointed by the Required Lenders, with the written consent of the Borrower, as set forth above and has accepted such appointment.  Upon the acceptance of the appointment as Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent under this Credit Agreement and the other Credit Documents, and the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Credit Agreement.

10.10  Administrative Agent May File Proof of Claims.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Borrower, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

 

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(a)       to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Borrower Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 3.4 and 11.5 allowed in such judicial proceeding); and

(b)       to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 3.4 and 11.5.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Borrower Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

 

SECTION 11

MISCELLANEOUS

11.1  Notices and Other Communications; Facsimile Copies.  (a)  General.  Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including by facsimile transmission).  All written notices and all other communications expressly permitted hereunder to be given by telephone shall be made to the applicable address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 11.1 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties.  All such notices and other communications shall be deemed to be given or made upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii)
(A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of subsection (c) below), when delivered; provided, however, that notices and other communications to the Administrative Agent or the Lenders pursuant to Section 2 shall not be effective until actually received by the Administrative Agent or the Lenders, as the case may be.  In no event shall a voicemail message be effective as a notice, communication or confirmation hereunder.

 

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(b)       Platform.  So long as Citibank or any of its Affiliates is the Administrative Agent, materials required to be delivered pursuant to Sections 7.1(a), (b) and (d) may be delivered to the Administrative Agent in an electronic medium in a format acceptable to the Administrative Agent and the Lenders by e-mail at [?].  The Borrower agrees that the Administrative Agent may make such materials, as well as any other written information, documents, instruments and other material relating to the Borrower, any of its Subsidiaries or any other materials or matters relating to this Credit Agreement, any Notes or any of the transactions contemplated hereby (collectively, the "Communications"), available to the Lenders by posting such notices on Intralinks (the
"Platform").  The Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided "as is" and "as available" and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform.  No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform.  Each Lender agrees that notice to it (as provided in the next sentence) (a
"Notice") specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender for purposes of this Credit Agreement; provided that, if requested by any Lender, the Administrative Agent shall deliver a copy of the Communications to such Lender by e-mail or telecopier.  Each Lender agrees (i) to notify the Administrative Agent in writing of such Lender's e-mail address or addresses to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address(es) for such Lender) and (ii) that any Notice may be sent to such e-mail address or addresses.  In the event that a Lender notifies the
Administrative Agent of a change in the e-mail address or addresses previously designated by such Lender for the purpose of receiving Notices, the Administrative Agent shall promptly confirm with such Lender the requested change.

(c)       Effectiveness of Facsimile Documents and Signatures.  Credit Documents may be transmitted and/or signed by facsimile.  The effectiveness of any such documents and signatures shall have the same force and effect as manually signed originals and shall be binding on the Borrower, the Administrative Agent and the Lenders.  The Administrative Agent may also require that any such documents and signatures be confirmed by a manually signed original thereof; provided, however, that the failure to request or deliver the same shall not limit the effectiveness of any facsimile document or signature.

(d)       Limited Use of Electronic Mail.  Electronic mail and Internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 7.1, and to distribute Credit Documents for execution by the parties thereto, and may not be used for any other purpose except as deemed reasonable and appropriate by the Administrative Agent.

 

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(e)       Reliance by Administrative Agent and Lenders.  The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices given by the Borrower even if such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein.  All telephonic notices to and other communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

11.2  Right of Setoff.  In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default and the commencement of remedies described in Section 9.2, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of the Borrower to the Lenders hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether
the Administrative Agent or the Lenders shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such setoff shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of such Lender subsequent thereto.  The Borrower hereby agrees that any Participation Purchaser may exercise all rights of setoff with respect to its participation interest as fully as if such Person were a Lender hereunder.

11.3  Benefit of Agreement.  (a)  The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Credit
Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and Participation Purchasers to the extent provided in subsection (d) of this Section) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement.

(b)       Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or, in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is
specified in the Assignment and 

 

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Assumption, as of the Trade Date, shall not be less than $5,000,000 and in integral multiples of $1,000,000 in excess thereof, unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing or such Person is not an Affiliate of or Approved Fund related to the assigning Lender, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Credit Agreement with respect to the Loans or the Commitment assigned; (iii) any assignment of a Commitment must be approved by the Administrative Agent (which approval shall not be unreasonably withheld) unless the Person that is the proposed
assignee is itself a Lender or an Affiliate of a Lender (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); (iv) any assignment of a Commitment must be approved by each Issuing Bank (which approval shall not be unreasonably withheld); and (v) except as provided in Section 4.5 solely with respect to an assigning Lender, the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500.  Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Credit Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Credit Agreement, and the assigning Lender thereunder
shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Credit Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 4.1 through 4.4 and 11.5 with respect to facts and circumstances occurring prior to the effective date of such assignment).  Upon request, the Borrower (at its expense) shall execute and deliver a Revolving Loan Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Credit Agreement that does not comply with this subsection shall be treated for purposes of this Credit Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.

(c)       The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in the United States a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower and any
Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d)       Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participation Purchaser”) in all or a portion of such Lender’s rights and/or obligations under this Credit Agreement (including all or a portion of its Commitment and/or the Loans owing to it); 

 

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provided that (i) such Lender’s obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Credit Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification or waiver of any provision of this Credit Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participation Purchaser,
agree to any amendment, waiver or other modification described in clauses (a) through (g) of Section 11.6 that directly affects such Participation Purchaser.  Subject to subsection (e) of this Section, the Borrower agrees that each Participation Purchaser shall be entitled to the benefits of Sections 4.1 through 4.4 and 11.5 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section.  To the extent permitted by law, each Participation Purchaser also shall be entitled to the benefits of Section 11.2 as though it were a Lender, provided such Participation Purchaser agrees to be subject to Section 3.8 as though it were a Lender.

(e)       A Participation Purchaser shall not be entitled to receive any greater payment under Section 4.2 or 4.4 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participation Purchaser, unless the sale of the participation to such Participation Purchaser is made with the Borrower’s prior written consent.  A Participation Purchaser that would be a “foreign corporation, partnership or trust” within the meaning of the Code if it were a Lender shall not be entitled to the benefits of Section 4.4 unless the Borrower is notified of the participation sold to such Participation Purchaser and such Participation Purchaser agrees, for the benefit of the Borrower, to comply with Section 4.4(d) as though it were a Lender.

(f)        Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Credit Agreement (including under its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(g)       Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose-funding vehicle managed or sponsored by the Granting Lender or an Affiliate thereof (an “SPC”) the option to fund all or any part of any Loan that such Granting Lender would otherwise be obligated to fund pursuant to this Credit Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to fund all or any part of such Loan, the Granting Lender shall be obligated to fund such Loan pursuant to the terms hereof, (iii) no SPC shall have any voting
rights pursuant to Section 11.6, (iv) with respect to notices, payments and other matters hereunder, the Borrower, the Administrative Agent and the Lenders shall not be obligated to deal with an SPC, but may limit their communications and other dealings relevant to such SPC to the applicable Granting Lender and (v) each Granting Lender’s obligations under this Credit Agreement shall remain unchanged.  Each party hereto 

 

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agrees that no SPC will be entitled to any rights or benefits except as expressly set forth in this subsection (g).  The funding of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent that, and as if, such Loan were funded by such Granting Lender.  Each party hereto hereby agrees that no SPC shall be liable for any indemnity or payment under this Credit Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Granting Lender provides such indemnity or makes such payment.  Notwithstanding anything to the contrary contained in this Credit Agreement, any SPC may disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or guarantee to such SPC.  This subsection (g) may not be amended without the prior written consent of each
Granting Lender, all or any part of whose Loan is being funded by an SPC at the time of such amendment.

(h)       Notwithstanding anything to the contrary contained herein, any Lender that is a Fund may create a security interest in all or any portion of the Loans owing to it and the Notes, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities, provided that, unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 11.3, (i) no such pledge shall release the pledging Lender from any of its obligations under the Credit Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Credit Documents even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

(i)        Each Issuing Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank’s rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 and shall be in an integral multiple of $1,500,000 in excess thereof, (ii) each such
assignment shall be to an Eligible Assignee and (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500.

11.4  No Waiver; Remedies Cumulative.  No failure or delay on the part of an Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower and an Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.  The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which an Agent or any Lender would otherwise have.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative
Agent or the Lenders to any other or further action in any circumstances without notice or demand.

 

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11.5  Payment of Expenses, Etc.  The Borrower agrees to:  (i) pay all reasonable out-of-pocket costs and expenses of (A) each Agent-Related Person in connection with the administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, the reasonable fees and expenses of Shearman & Sterling LLP, special counsel to the Administrative Agent) and any amendment, waiver, consent or assignment relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement and (B) the Administrative Agent and the Lenders in connection with enforcement of the Credit Documents and the documents and instruments referred to therein (including,
without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel for the Administrative Agent and each of the Lenders); and (ii) indemnify each Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents, representatives and attorneys-in-fact from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceeding; provided that the Borrower shall not be responsible for any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified; and provided further that in no event shall the Borrower have any liability with respect to the settlement or compromise of any claim or proceeding effected without its prior written consent.  The agreements in this Section 11.5 shall survive the repayment of the Borrower Obligations and the termination of the Commitments.

11.6  Amendments, Waivers and Consents.  Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing and signed by the Required Lenders and the Borrower; provided that no such amendment, change, waiver, discharge or termination shall without the consent of each Lender affected thereby, 

	
            (a)
 	
            extend any Maturity Date;
 

(b)       reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) on any Loan or reduce the amount or extend the time of payment of fees owing hereunder;

(c)       reduce or waive or extend the time of payment of the principal amount of any Loan;

(d)       increase the Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default or a mandatory 

 

60

 

 

reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender);

(e)       release the Borrower from its obligations under the Credit Documents or consent to the transfer or assignment of such obligations; 

(f)        amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.8, 5.2, 9.1(a), 11.2, 11.3 or 11.5; or

(g)       reduce any percentage specified in, or otherwise modify, the definition of Required Lenders.

Notwithstanding the above, no provision of Section 10 may be amended or modified without the written consent of the Administrative Agent.

 

Notwithstanding the above, in the case of a non-consenting Lender, the Borrower may, at its own discretion and its own expense, require that any such Lender transfer and assign in whole (but not in part), without recourse (in accordance with and subject to the terms of Section 11.3(b)), all of its interests, rights and obligations under this Credit Agreement to an Eligible Assignee or Eligible Assignees (which may be one or more existing Lenders if any existing Lender accepts such assignment); provided that (A) such assignment or assignments shall not conflict with any law, rule, regulation or order of any court or other Governmental Authority and (B) the Borrower or such Eligible Assignee or Eligible Assignees shall pay to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the
portion of the Loans hereunder held by such Lender and all other amounts owed to such Lender hereunder, as well as any transfer fee owing to the Administrative Agent under Section 11.3(b).

 

Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, each Lender is entitled to vote as such Lender sees fit on any reorganization plan that affects the Loans and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersede the unanimous consent provisions set forth herein.

 

11.7  Counterparts.  This Credit Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.  It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart.

11.8  Headings.  The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement.

11.9  Defaulting Lender.  Each Lender understands and agrees that if such Lender is a Defaulting Lender then it shall not be entitled to vote on any matter requiring the consent of the Required Lenders or to object to any matter requiring the consent of all the Lenders; provided, however, that (a) any Defaulting Lender shall be entitled to vote on any matters set 

 

61

 

 

forth in clause (d) of Section 11.6 (or the amendment of such clause) or any amendment or modification to this Section 11.9 and (b) all other benefits and obligations under the Credit Documents shall apply to such Defaulting Lender.

11.10  Survival of Indemnification and Representations and Warranties.  All indemnities set forth herein and all representations and warranties made herein shall survive the execution and delivery of this Credit Agreement, the making of the Loans, and the repayment of the Loans and other obligations and the termination of the Commitments hereunder.

11.11  GOVERNING LAW.  THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE PARTIES HERETO CONSENT TO SUCH GOVERNANCE, CONSTRUCTION AND INTERPRETATION UNDER THE LAWS OF THE STATE OF NEW YORK.

11.12  WAIVER OF JURY TRIAL; WAIVER OF CONSEQUENTIAL DAMAGES.  (a)  EACH OF THE PARTIES TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.  

 (b)  The Borrower agrees that the Administrative Agent, any Lender, any of their Affiliates and their respective officers, directors, employees, representatives, agents and attorneys-in-fact (each, an “Indemnified Party”) shall not have any liability for any indirect or consequential damages arising out of, related to or in connection with the Credit Documents except to the extent such damages were caused by reason of gross negligence or willful misconduct on the part of such Indemnified Party.

11.13  Time.  All references to time herein shall be references to Eastern Standard Time or Eastern Daylight time, as the case may be, unless specified otherwise.

11.14  Severability.  If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.

11.15  Entirety.  This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein.

11.16  Confidentiality.  Each Lender agrees that it will use its reasonable best efforts to keep confidential and to cause any representative designated under Section 7.10 to keep confidential any non-public information from time to time supplied to it under or in connection with any Credit Document including, without limitation, any such information 

 

62

 

 

furnished to a Lender prior to or in connection with its entry into any Credit Document (the “Information”); provided, however, that nothing herein shall affect the disclosure of any such Information to (a) the extent such Lender in good faith believes such disclosure is required by statute, rule, regulation or judicial process, (b) the extent requested by any regulatory authority having jurisdiction over such Lender (including any self-regulatory authority, such as the National Association of Insurance Commissioners) which has been  notified of the confidential nature of such Information, (c) counsel for such Lender or to its accountants, (d) bank examiners or auditors or comparable Persons, (e) any Affiliate of such Lender, (f) (i) any other Lender,
(ii) any assignee, transferee or participant or (iii) any potential assignee, transferee or participant of all or any portion of any Lender’s rights under this Credit Agreement, in each case, who is notified of the confidential nature of the Information and agrees to be bound by this provision or provisions reasonably comparable hereto or (g) any other Person in connection with any litigation to which any one or more of the Lenders is a party; and provided further that no Lender shall have any obligation under this Section 11.16 to the extent any such Information becomes available on a non-confidential basis from a source other than the Borrower or its Subsidiaries or that any Information becomes publicly available other than by a breach of this Section 11.16.  Each Lender agrees it will use all confidential Information exclusively for the purpose of evaluating, monitoring, selling,
protecting or enforcing its Loans and other rights under the Credit Documents.

11.17  Binding Effect.  (a)  This Credit Agreement shall become effective when it shall have been executed by the Borrower, each Lender and the Agents, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, each Lender and the Agents, together with their respective successors and assigns.  Nothing in this Credit Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the indemnified parties hereunder) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement.  

(b)       This Credit Agreement shall be a continuing agreement and shall remain in full force and effect until all Loans, interest, fees and other Borrower Obligations have been paid in full and all Commitments have been terminated.  Upon termination, the Borrower shall have no further obligations (other than the indemnification provisions that survive) under the Credit Documents; provided that, should any payment, in whole or in part, of the Borrower Obligations be rescinded or otherwise required to be restored or returned by the Administrative Agent or any Lender, whether as a result of any proceedings in bankruptcy or pursuant to court order, then the Credit Documents shall automatically be reinstated and all amounts required to be restored or returned, and all costs and expenses incurred by the
Administrative Agent or any Lender in connection therewith shall be deemed included as part of the Borrower Obligations.

11.18  USA Patriot Act Notice.  Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that, pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

 

63

 

 

 

11.19  Jurisdiction, Etc.  (a)  Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Credit Agreement or any of the other Credit Documents to which it is a party, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the fullest extent permitted by law, in such federal court.  Each of the parties hereto 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.  Nothing in this Credit Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Credit Agreement or any of the other Credit Documents in the courts of any jurisdiction.

(b)       Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Credit Agreement or any of the other Credit Documents to which it is a party in any New York State or federal court.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

[Signature pages follow.]

 

 

64

 

 

 

Each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written.

 

 

	
            SOUTHERN POWER COMPANY,
 

as Borrower

 

By: /s/Michael W. Southern

Name: Michael W. Southern

Title: Senior Vice President and Chief Financial Officer

 

 

 

 

 

	
            CITIBANK, N.A.,
 

as Administrative Agent

 

By: /s/Maureen Maroney

Name: Maureen Maroney

Title: Director

 

 

 

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

as Initial Issuing Bank

 

By: /s/Linda Tam

Name: Linda Tam

Title: Authorized Signatory

 

 

 

 

	
            CITIBANK, N.A.,
 

as Lender

 

By: /s/Maureen Maroney

Name: Maureen Maroney

Title: Director

 

 

 

 

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH,

as Lender

 

By: /s/Linda Tam

Name: Linda Tam

Title: Authorized Signatory

 

 

 

 

BAYERISCHE LANDESBANK, Cayman Islands Branch, as Lender

 

By: /s/Michael Jakob

Name: Michael Jakob

Title: First Vice President

 

By: /s/Norman McClave

Name: Norman McClave

Title: First Vice President

 

 

 

 

ING CAPITAL, LLC,

as Lender

 

By: /s/Ann E. Sutton

Name: Ann E. Sutton

Title: Associate

 

By: /s/Erwin Thomet

Name: Erwin Thomet

Title: Managing Director

 

 

 

 

KBC BANK, N.V.,

as Lender

 

By: /s/Rik Scheerlinck

Name: Rik Scheerlinck

Title: Sr. Vice President & General Manager

 

By: /s/Eric Raskin

Name: Eric Raskin

Title: Vice President

 

 

 

 

JPMORGAN CHASE BANK, N.A.,

as Lender

 

By: /s/Michael DeForge

Name: Michael DeForge

Title: Vice President

 

 

 

 

BARCLAYS BANK PLC,

as Lender

 

By: /s/Gary B. Wenslow

Name: Gary B. Wenslow

Title: Associate Director

 

 

 

 

HSBC BANK USA, NATIONAL ASSOCIATION, as Lender

 

By: /s/Jennifer Diedzic

Name: Jennifer Diedzic

Title: Assistant Vice President

 

 

 

 

MIZUHO CORPORATE BANK, LTD.,

as Lender

 

By: /s/Raymond Ventura

Name: Raymond Ventura

Title: Deputy General Manager

 

 

 

 

THE BANK OF NOVA SCOTIA,

as Lender

 

By: /s/Thane A. Rattew

Name: Thane A. Rattew

Title: Managing Director

 

 

 

 

WACHOVIA BANK, N.A.,

as Lender

 

By: /s/Lawrence P. Sullivan

Name: Lawrence P. Sullivan

Title: Director

 

 

 

 

BANK OF AMERICA, N.A.,

as Lender

 

By: /s/Gabriela Millhorn

Name: Gabriela Millhorn

Title: Senior Vice President

 

 

 

 

SANPAOLO IMI, S.P.A.,

as Lender

 

By: /s/Renato Carducci

Name: Renato Carducci

Title: General Manager

 

By: /s/K. Douglas Knapp

Name: K. Douglas Knapp

Title: First Vice PresidentExhibit 10(f)4

 

Southern Power has requested confidential treatment for certain portions of this document pursuant to an application for confidential treatment sent to the Securities and Exchange Commission. Southern Power has omitted such portions from this filing and filed them separately with the Securities and Exchange Commission. Such omissions are designated as "[**]."

 

EXECUTION VERSION

 

 

PURCHASE AND SALE AGREEMENT

by and between

PROGRESS GENCO VENTURES, LLC

as the Seller

and

SOUTHERN POWER COMPANY – ROWAN LLC

as the Purchaser

 

Dated as of May 8, 2006

 

 

 

 

 

 

TABLE OF CONTENTS

	
            
 	
            Page

 
	
            ARTICLE I DEFINITIONS
 	
              1
 
	
             
	
            1.1
 	
            Certain Definitions
 	
              1
 
	
             
	
            1.2
 	
            Other Terms
 	
            13
 
	
             
	
            1.3
 	
            Rules as to Usage
 	
            13
 
	
             
	
            1.4
 	
            Schedules and Exhibits
 	
            14
 
	
            ARTICLE II PURCHASE AND SALE OF MEMBERSHIP INTEREST
 	
            14
 
	
             
	
            2.1
 	
            Sale and Transfer of the Membership Interest
 	
            14
 
	
             
	
            2.2
 	
            Purchase Price
 	
            14
 
	
             
	
            2.3
 	
            Payment of Purchase Price
 	
            14
 
	
             
	
            2.4
 	
            Allocation of Purchase Price; Tax Filings
 	
            14
 
	
             
	
            2.5
 	
            Closing Purchase Price Adjustments
 	
            15
 
	
             
	
            2.6
 	
            Post-Closing Purchase Price Adjustment
 	
            16
 
	
            ARTICLE III CLOSING
 	
            17
 
	
             
	
            3.1
 	
            Time and Place of Closing
 	
            17
 
	
             
	
            3.2
 	
            Deliveries by the Seller
 	
            17
 
	
             
	
            3.3
 	
            Deliveries by the Purchaser
 	
            19
 
	
            ARTICLE IV TERMINATION
 	
            20
 
	
             
	
            4.1
 	
            Termination of Agreement
 	
            20
 
	
             
	
            4.2
 	
            Effect of Termination
 	
            21
 
	
            ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLER
 	
            21
 
	
             
	
            5.1
 	
            Organization and Good Standing
 	
            21
 
	
             
	
            5.2
 	
            Authorization; Enforceability
 	
            22
 
	
             
	
            5.3
 	
            No Violation; Consents
 	
            22
 
	
             
	
            5.4
 	
            Litigation
 	
            23
 
	
             
	
            5.5
 	
            Compliance with Law
 	
            23
 
	
             
	
            5.6
 	
            Environmental Matters
 	
            24
 
	
             
	
            5.7
 	
            Ownership
 	
            25
 
	
             
	
            5.8
 	
            Title to Assets
 	
            25
 
	
             
	
            5.9
 	
            Description of Real Property
 	
            25
 
	
             
	
            5.10
 	
            Condition of Facilities
 	
            26
 
	
             
	
            5.11
 	
            Financial Advisors
 	
            26
 
	
             
	
            5.12
 	
            Employees; Employee Benefits
 	
            27
 
	
             
	
            5.13
 	
            Labor Matters
 	
            27
 
	
             
	
            5.14
 	
            Financial Statements
 	
            28
 
	
             
	
            5.15
 	
            Events Subsequent to Most Recent Fiscal Year End
 	
            28
 
	
             
	
            5.16
 	
            Minute Books
 	
            28
 
	
             
	
            5.17
 	
            Emissions Allowances
 	
            28
 
	
             
	
            5.18
 	
            Undisclosed Liabilities
 	
            28
 
	
             
	
            5.19
 	
            Taxes
 	
            28
 
	
             
	
            5.20
 	
            Intellectual Property
 	
            30
 
	
             
	
            5.21
 	
            Insurance
 	
            30
 
	
             
	
            5.22
 	
            Contracts
 	
            31
 
	
             
	
            5.23
 	
            Guaranties
 	
            32
 
					

 

 

	
            i
 

 

 

 

 

	
             
	
            5.24
 	
            Bank Accounts
 	
            32
 
	
             
	
            5.25
 	
            Business
 	
            32
 
	
             
	
            5.26
 	
            Accounts Receivable
 	
            32
 
	
             
	
            5.27
 	
            Solvency
 	
            32
 
	
            ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER
 	
            32
 
	
             
	
            6.1
 	
            Organization and Good Standing
 	
            32
 
	
             
	
            6.2
 	
            Authorization; Enforceability
 	
            32
 
	
             
	
            6.3
 	
            No Violation; Consents
 	
            33
 
	
             
	
            6.4
 	
            Litigation
 	
            33
 
	
             
	
            6.5
 	
            Investment Intent
 	
            34
 
	
             
	
            6.6
 	
            Financial Capability
 	
            34
 
	
             
	
            6.7
 	
            Financial Advisors
 	
            34
 
	
             
	
            6.8
 	
            Solvency
 	
            34
 
	
            ARTICLE VII COVENANTS
 	
            34
 
	
             
	
            7.1
 	
            Access to Information
 	
            34
 
	
             
	
            7.2
 	
            Conduct of the Business Pending the Closing
 	
            35
 
	
             
	
            7.3
 	
            Appropriate Action; Consents; Filings
 	
            36
 
	
             
	
            7.4
 	
            Preservation of Records; Cooperation
 	
            36
 
	
             
	
            7.5
 	
            Confidentiality
 	
            37
 
	
             
	
            7.6
 	
            Public Announcements
 	
            37
 
	
             
	
            7.7
 	
            Use of Name
 	
            38
 
	
             
	
            7.8
 	
            Certain Dividends, Assignments and Releases
 	
            38
 
	
             
	
            7.9
 	
            Further Assurances
 	
            38
 
	
             
	
            7.10
 	
            Supplements to Schedules
 	
            38
 
	
             
	
            7.11
 	
            Environmental Due Diligence
 	
            39
 
	
             
	
            7.12
 	
            Title Insurance and Surveys
 	
            41
 
	
             
	
            7.13
 	
            Transition Plan
 	
            42
 
	
             
	
            7.14
 	
            Replacement of Credit Support
 	
            43
 
	
             
	
            7.15
 	
            Performance Testing
 	
            43
 
	
             
	
            7.16
 	
            No Solicitation
 	
            44
 
	
             
	
            7.17
 	
            Removing Excluded Assets
 	
            44
 
	
             
	
            7.18
 	
            Credit Support
 	
            44
 
	
             
	
            7.19
 	
            Insurance
 	
            45
 
	
             
	
            7.20
 	
            Emission Credits
 	
            46
 
	
            ARTICLE VIII CONDITIONS TO CLOSING
 	
            47
 
	
             
	
            8.1
 	
            Conditions Precedent to Obligations of Each Party
 	
            47
 
	
             
	
            8.2
 	
            Conditions Precedent to Obligations of the Purchaser
 	
            48
 
	
             
	
            8.3
 	
            Conditions Precedent to Obligations of the Seller
 	
            48
 
	
            ARTICLE IX TAXES
 	
            49
 
	
             
	
            9.1
 	
            Sales and Transfer Taxes
 	
            49
 
	
             
	
            9.2
 	
            Property Taxes
 	
            49
 
	
            ARTICLE X CERTAIN REMEDIES AND LIMITATIONS
 	
            50
 
	
             
	
            10.1
 	
            Review
 	
            50
 
	
             
	
            10.2
 	
            Limitation of Representations and Warranties
 	
            50
 
	
             
	
            10.3
 	
            No Consequential or Punitive Damages
 	
            51
 
	
             
	
            10.4
 	
            No Recourse
 	
            51
 
				

 

 

ii

 

 

 

	
             
	
            10.5
 	
            Expiration of Representations, Warranties and Covenants
 	
            51
 
	
             
	
            10.6
 	
            Indemnification
 	
            52
 
	
             
	
            10.7
 	
            No Set-Off
 	
            55
 
	
             
	
            10.8
 	
            Effect of Investigation
 	
            55
 
	
             
	
            10.9
 	
            Procedure for Environmental Indemnification
 	
            56
 
	
             
	
            10.10
 	
            Specific Performance
 	
            57
 
	
            ARTICLE XI MISCELLANEOUS
 	
            57
 
	
             
	
            11.1
 	
            Employees and Employee Benefits
 	
            57
 
	
             
	
            11.2
 	
            Expenses
 	
            59
 
	
             
	
            11.3
 	
            Incorporation of Exhibits and Schedules
 	
            59
 
	
             
	
            11.4
 	
            Submission to Jurisdiction
 	
            59
 
	
             
	
            11.5
 	
            Waiver of Jury Trial
 	
            59
 
	
             
	
            11.6
 	
            No Right of Set-Off
 	
            60
 
	
             
	
            11.7
 	
            Entire Agreement; Amendments and Waivers
 	
            60
 
	
             
	
            11.8
 	
            Governing Law
 	
            60
 
	
             
	
            11.9
 	
            Table of Contents and Headings
 	
            60
 
	
             
	
            11.10
 	
            Notices
 	
            60
 
	
             
	
            11.11
 	
            Severability
 	
            62
 
	
             
	
            11.12
 	
            Binding Effect; Assignment
 	
            62
 
	
             
	
            11.13
 	
            Counterparts
 	
            62
 
				

 

 

List of Exhibits

 

	
            Exhibit A
 	
            Form of Conveyancing Instrument
 	
             

	
            Exhibit B
 	
            Form of Seller Officer’s Certificate
 	
             

	
            Exhibit C
 	
            Form of Seller Secretary’s Certificate
 	
             

	
            Exhibit D
 	
            Form of Progress Energy Secretary’s Certificate
 	
             

	
            Exhibit E
 	
            Form of Release of the Project Company from Liability
 	
             

	
            Exhibit F
 	
            Form of Assignment and Assumption Agreement for Agreements
 	
             

	
            Exhibit G
 	
            Form of Assignment and Assumption Agreement for Excluded Assets
 	
             

	
            Exhibit H
 	
            Form of Seller Officer’s Certificate of Facility Performance
 	
             

	
            Exhibit I
 	
            Form of Purchaser Officer’s Certificate
 	
             

	
            Exhibit J
 	
            Form of Purchaser Secretary’s Certificate
 	
             

	
            Exhibit K
 	
            Form of Southern Power Secretary’s Certificate
 	
             

	
            Exhibit L-1
 	
            Form of PGN Guaranty Termination and Release Agreement for Duke Power
 
													

	
            Exhibit L-2
 	
             Form of PGN Guaranty Termination and Release Agreement for Duke Electric Transmission
 

	
            Exhibit L-3
 	
            Form of PGN Guaranty Termination and Release Agreement for NCMPA
 
	
            Exhibit M
 	
            Form of PGN Parent Guaranty
 	
             

	
            Exhibit N
 	
            Form of Southern Power Parent Guaranty
 	
             

	
            Exhibit O
 	
            List of Individuals with Knowledge
 	
             

	
            Exhibit P
 	
            Capacity Test Procedures
 	
             

						

 

 

iii

 

 

 

List of Schedules

 

Seller’s Disclosure Schedule

	
            Section 1.1(A):
 	
            Permitted Encumbrances
 	
             

	
            Section 1.1(B):
 	
            Information Technology Excluded Assets
 	
             

	
            Section 1.1(C):
 	
            Permitted Real Property Encumbrances
 	
             

	
            Section 3.2(g):
 	
            Agreements Assigned to and Assumed by the Project Company
 
	
            Section 3.2(h):
 	
            Agreements To Be Terminated or Amended and Restated
 	
             

	
            Section 5.3(a):
 	
            Violations
 	
             

	
            Section 5.3(b):
 	
            Seller Approvals
 	
             

	
            Section 5.4(a):  
 	
            Actions and Orders
 	
             

										

	
            Section 5.4(b):  
 	
            Outstanding Orders and Pending and Threatened Litigation Known by the Seller
 

	
            Section 5.5(a):  
 	
            Notices of Violations
 	
             

	
            Section 5.5(b)(i):  
 	
            Necessary Approvals
 	
             

	
            Section 5.5(b)(ii):  
 	
            Expired or Challenged Necessary Approvals
 
				

	
            Section 5.5(b)(iii):
 	
            Necessary Approvals Invalidated by Transfer of Membership Interest
 

	
            Section 5.6:
 	
            Environmental Violations
 	
             

	
            Section 5.6(b):  
 	
            The Project Company’s Material Environmental Approvals
 	
             

	
            Section 5.8:  
 	
            Recently-Acquired Assets
 	
             

	
            Section 5.9:  
 	
            Description of Real Property
 	
             

	
            Section 5.10(b):  
 	
            Pending Claims for Defective Work, Equipment or Materials
 	
            
 	
             

	
            Section 5.12(c):
 	
            Employee Agreements
 	
             

	
            Section 5.12(f):
 	
            Non-Compliance with Laws Relating to Employees
 	
             

	
            Section 5.14:
 	
            Annual Unaudited Balance Sheets and Statements of Income
 	
             

	
            Section 5.15:
 	
            Events Subsequent to Most Recent Fiscal Year End
 	
             

	
            Section 5.16:
 	
            Undisclosed Minute Books
 	
             

	
            Section 5.17:
 	
            Emissions Allowances
 	
             

	
            Section 5.18:  
 	
            Disclosed Liabilities
 	
             

	
            Section 5.19(a):
 	
            Untimely Tax Returns; Unpaid Taxes; Other Tax Jurisdictions
 
	
            Section 5.19(b):
 	
            Waivers and Extensions of Statutes of Limitations
 	
             

															

	
            Section 5.19(c):
 	
            Taxes Not Withheld; Untimely Tax Returns Related to Withholding
 

	
            Section 5.19(f):
 	
            Special Property Tax Treatment
 	
             

	
            Section 5.20:  
 	
            Intellectual Property
 	
             

	
            Section 5.21:  
 	
            Insurance Policies
 	
             

	
            Section 5.22:  
 	
            Material Agreements
 	
             

	
            Section 7.17:  
 	
            Third Party Assets in Excess of $100,000
 
						

 

Purchaser’s Disclosure Schedule

	
            Section 6.3(a):
 	
            Violations
 	
             

	
            Section 6.3(b):
 	
            Purchaser Approvals
 

 

	
            Schedule 1.1(A)
 	
            Capital Spare Parts
 

 

 

iv

 

 

 

	
            Schedule 1.1(B)
 	
            Title Insurance Policy
 

 

	
            Schedule 7.8(b)
 	
            Intercompany Accounts and Obligations Not Assigned
 

 

	
            Schedule 7.8(c)  
 	
            Liabilities Not Released
 

 

	
            Schedule 7.12(c)
 	
            Survey
 

 

	
            Schedule 7.19(b)
 	
            Progress Insurance Policies
 

 

 

 

v

 

 

 

PURCHASE AND SALE AGREEMENT

 

This PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of May 8, 2006 (the “Effective Date”), is made and entered into by and between Progress Genco Ventures, LLC, a North Carolina limited liability company (the “Seller”), and Southern Power Company – Rowan LLC, a Delaware limited liability company (the “Purchaser”).  Certain capitalized terms used in this Agreement have the meanings assigned to them in Article I. 

W I T N E S S E T H:

 

WHEREAS, the Seller is a direct wholly-owned subsidiary of Progress Ventures, Inc., a North Carolina corporation (d/b/a Progress Energy Ventures, Inc.) (“Progress Ventures”), and Progress Ventures is an indirect wholly-owned subsidiary of Progress Energy, Inc., a North Carolina corporation (“Progress Energy”);

WHEREAS, the Purchaser is a wholly-owned subsidiary of Southern Power Company, a Delaware corporation (“Southern Power”);

WHEREAS, the Seller owns a 100% limited liability company membership interest (the “Membership Interest”) in Rowan County Power, LLC, a North Carolina limited liability company (the “Project Company”);

WHEREAS, the Project Company is engaged in the generation of electric power utilizing three GE 7FA gas and oil fired combustion turbines and one 2x1 combined cycle unit (each a “Unit” and collectively the “Units”); and

WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser desires to purchase from the Seller, the Membership Interest pursuant to the terms of this Agreement.

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

 

DEFINITIONS

1.1     Certain Definitions.  For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:

“Action” means any action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority of any nature, civil, criminal, regulatory or otherwise, at law or in equity.

 

 

	
            1
 

 

 

 

 

“Affiliate” (and, with a correlative meaning “Affiliated”) means, with respect to any Person, any direct or indirect subsidiary of such Person, and any other Person that directly, or through one or more intermediaries, controls or is controlled by or is under common control with such first Person.  As used in this definition, “control” (including with correlative meanings, “controlled by” and “under common control with”) means possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests,
by contract or otherwise).

“Affiliated Contracts” means the agreements between the Project Company and its Affiliates identified as such in Section 5.22 of the Seller’s Disclosure Schedule.

“Agreement” shall have the meaning set forth in the preamble hereof.

“Applicable Law” means, with respect to any Person, any Law applicable to such Person or its business, properties or assets.

“Approvals” means the approvals, authorizations, grants of authority, consents, Orders, qualifications, permits, licenses, variances, exemptions, franchises, concessions, certificates, filings, or registrations or any waivers of any of the foregoing, and the notices, statements or other communications required to be filed with, delivered to or obtained from any Governmental Authority or other Person.

“Assets” means the Project, the Intellectual Property Assets and any other tangible or intangible personal property (including books, records, files and reports, without eliminating the Seller’s right to retain originals pursuant to Section 3.2(e)) owned or leased by the Project Company that is used to own, operate or maintain the Project or otherwise conduct the business of the Project Company, but excluding any Excluded Assets.  

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in Alabama, Georgia, North Carolina or New York City are authorized or required by Law to close.  Any event the scheduled occurrence of which would fall on a day that is not a Business Day shall be deferred until the next succeeding Business Day.

“Capital Spare Parts” means the spare parts listed on Schedule 1.1(A) attached hereto.

“Casualty Insurance Claims” shall have the meaning set forth in Section 7.19(b).

“Closing” shall have the meaning set forth in Section 3.1.

“Closing Date” means the date on which the Closing occurs.

“Closing Fuel Oil Statement” has the meaning set forth in Section 2.6(a).

 

 

	
            2
 

 

 

 

 

“Code” means the Internal Revenue Code of 1986, as amended.

“Confidentiality Agreement” shall have the meaning set forth in Section 7.5.

“Consents” means any consent or waiver required from, or any notification that must be granted to, a third party other than a Governmental Authority.

“Contract” means any written contract, indenture, note, bond, loan, instrument, lease, commitment or other agreement.

“Copyrights” means all U.S. and foreign copyrights, and applications and registrations for the foregoing.

“CP&L” means Carolina Power & Light Company, a North Carolina corporation d/b/a Progress Energy Carolinas, Inc.

“DeSoto Agreement” means that certain Purchase and Sale Agreement, dated as of the date hereof made by and between the Seller and Southern Power Company – DeSoto LLC, a Delaware limited liability company, relating to the purchase and sale of the Seller’s 100% limited liability company membership interest in DeSoto County Generating Company, LLC, a Delaware limited liability company.

“Duke Electric Transmission” means Duke Electric Transmission, a division of Duke Energy Corporation, a Delaware corporation.

“Duke Power” means Duke Power Company, a North Carolina corporation.

“Duke Power Contracts” means each of (i) the Power Sales Agreement, dated as of January 19, 2001, between CP&L and Duke Power with respect to Unit 1, as assigned by CP&L to the Project Company pursuant to the Assignment and Assumption Agreement, dated as of February 1, 2002, between CP&L and the Project Company, (ii) the Power Sales Agreement, dated as of December 22, 2003, between Progress Ventures and Duke Power with respect to Unit 1, (iii) the Power Sales Agreement, dated as of December 22, 2003, between Progress Ventures and Duke Power with respect to Unit 2, (iv) the Power Sales Agreement, dated as of September 18, 2002, between the Project Company and Duke Power with respect to Unit 3 and (v) the Power Sales Agreement, dated as of December 22, 2003, between Progress Ventures and Duke Power with respect to Unit 3.

“Effective Date” has the meaning set forth in the preamble.

“Emissions Allowances” means any and all “Allowances” as that term is defined in the Clean Air Act, 42 U.S.C. § 7401 et seq., as amended from time to time, and any regulations and requirements promulgated thereunder, including but not limited to the definition of “Allowance” as set forth in Title IV of the Clean Air Act or any other cap-and-trade program or any other program requiring Allowances or credits under the 

 

	
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Clean Air Act, as amended from time to time, and any regulations and requirements thereunder.

“Employee” means an employee of the Seller or an Affiliate of the Seller who is performing services primarily in respect of the Facility.

“Employee Plans” means all “employee benefit plans” as defined by Section 3(3) of ERISA, all specified fringe benefit plans as defined in Section 6039D of the Code, and all other bonus, incentive compensation, deferred compensation, profit-sharing, stock-option, stock-appreciation right, stock-bonus, stock-purchase, employee-stock-ownership, savings, severance, change in control, supplemental unemployment, layoff, salary-continuation, retirement, pension, health, life-insurance, disability, accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit, or welfare plan, and any other employee compensation or benefit plan, agreement, policy, practice, commitment, contract or understanding (whether qualified or non-qualified, currently effective or terminated, written or unwritten) and any trust, escrow or other
agreement related thereto.

“Encumbrances” means any and all liens, charges, security interests, options, claims, mortgages, deeds of trust, leases, rights of first refusal, easements, servitudes, pledges, proxies, voting trusts or agreements, obligations, understandings or arrangements or other restrictions on title or transfer of any nature whatsoever.

“Environmental Claim” means any claim, action, cause of action, investigation or notice by any person or entity alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (i) the presence, or release into the environment, of any Material of Environmental Concern at the Project or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental, Health and Safety Law by the Project Company.

“Environmental, Health and Safety Laws” means all Applicable Laws in effect on the date hereof relating to the protection of health, worker safety with respect to exposure, the environment, natural resources or the protection thereof including laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern.

“Environmental Professional” shall have the meaning set forth in Section 7.11(e).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

 

	
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“ERISA Affiliate” means any entity controlled by, controlling or under common control with the Project Company within the meaning of Section 414 of the Code or Section 4001(a)(14) or Section 4001(b) of ERISA.

“Excluded Assets” means all Capital Spare Parts, all Wilson-Bohannon padlocks and keys; income Tax Returns and work papers relating to such Tax Returns; Tax Assets; prepaid insurance; cash and cash equivalents; accounts receivable (including Intercompany Receivables), except for accounts receivable accruing after the Closing Date; operational, compliance and governance procedures (contained in written manuals or otherwise) that pertain, in addition to the Facility, to one or more other electric generation facilities owned or operated by Progress Energy; and all information technology items listed on Section 1.1(B) of the Seller’s Disclosure Schedule.  

“Facility” means that certain power generation facility known as the “Rowan County Plant," which is located at the Real Property, including the Units and all Tangible Personal Property.

“Financial Statements” shall have the meaning set forth in Section 5.14.

“Good Utility Practices” means the generally accepted and sound industry practices, methods and acts from time to time applicable to the operation of similar power facilities situated in the United States in a manner consistent with Applicable Law and Approvals, safety and reliability.  Good Utility Practices are not intended to be limited to any particular set of optimum practices, methods, or acts to the exclusion of all others, but rather are intended to include a range of possible practices, methods or acts consistent with the above stated criteria.

“Governing Documents” means with respect to any particular entity, (i) if a corporation, the articles or certificate of incorporation and the bylaws; (ii) if a limited liability company, the articles of organization and operating agreement; (iii) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or organization of the Person; (iv) all equityholders’ agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the organization, management or operation of any Person or relating to the rights, duties and obligations of the equityholders of any Person; and (v) any amendment or supplement to any of the foregoing.

“Governmental Authority” means any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any governmental authority, agency, department, board, commission or instrumentality of the United States of America or any state or political subdivision thereof, and any tribunal, court or arbitrator(s) of competent jurisdiction.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and any rules or regulations promulgated pursuant to such Act.

 

 

	
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“Improvements” means all buildings, structures, fixtures and improvements located on the Real Property, including the Facility.

“Indemnitee” shall have the meaning set forth in Section 10.6(e).

“Indemnitor” shall have the meaning set forth in Section 10.6(e).

“Independent Accounting Firm” shall have the meaning set forth in Section 2.4.

“Intellectual Property” means Trademarks, Patents, Copyrights and Trade Secrets.

“Intellectual Property Assets” has the meaning set forth in Section 5.20.

“Intercompany Payables” has the meaning set forth in Section 3.2(f).

“Intercompany Receivables” has the meaning set forth in Section 7.8(a).

“Knowledge” means, with respect to a party, the actual knowledge of the individuals listed in Exhibit O under the name of such party. 

“Law” means any federal, state or local law, statute, code, ordinance, rule, regulation, Order or other requirement enacted, promulgated, issued or entered by a Governmental Authority.

“Liabilities” means any and all debts, losses, liabilities, accounts payable, claims, damages, expenses, fines, costs, royalties, proceedings, deficiencies or obligations (including those arising out of any Action, such as any settlement or compromise thereof or judgment or award therein), of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due, and whether or not resulting from third party claims, and any reasonable out-of-pocket costs and expenses (including reasonable legal counsels’, accountants’, or other fees and expenses incurred in defending any Action or in investigating any of the same or in asserting any rights hereunder).

“Listed Employees” shall have the meaning set forth in Section 11.1(a).

“Loss” shall have the meaning set forth in Section 10.6(a).  

“Material Agreements” shall have the meaning set forth in Section 5.22.

“Materials of Environmental Concern” means chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, radioactive materials, asbestos, petroleum and petroleum products and any other materials or substances regulated under any Environmental, Health and Safety Laws.

“Membership Interest” shall have the meaning set forth in the recitals.

 

 

	
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“Most Recent Fiscal Year End” shall have the meaning set forth in Section 5.14.  

“NCMPA” means North Carolina Municipal Power Agency No. 1.

“NCMPA Contracts” means each of (i) the Master Power Purchase and Sales Agreement Confirmation Letter, dated as of January 12, 2004, between Progress Ventures and NCMPA, as such Confirmation Letter is governed by the EEI Master Power Purchase and Sale Agreement, dated as of March 5, 2003, between Progress Ventures and NCMPA and (ii) the Master Power Purchase and Sales Agreement Confirmation Letter, dated as of January 24, 2006, between Progress Ventures and NCMPA, as such Confirmation Letter is governed by the EEI Master Power Purchase and Sale Agreement, dated as of March 5, 2003, between Progress Ventures and NCMPA.

“Necessary Approvals” shall have the meaning set forth in Section 5.5(b)(i).

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award issued by a Governmental Authority.

“Ordinary Course of Business” shall refer to the ordinary course of business of the Project Company consistent with Good Utility Practice, where applicable, and past practice with reference to the two-year period immediately preceding the date hereof.

“Ozone Season” shall have the meaning set forth in Section 7.20.

“Outside Date” shall have the meaning set forth in Section 4.1(b)(i).

“Patents” means all U.S. and foreign patents, patent applications, patent disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions, and extensions thereof, and applications and registrations for the foregoing.

“Permitted Encumbrances” means:

 (a)    requirements under Applicable Law or restrictions necessitating any Consent to the transfer of the Membership Interest;

	
            (b)
 	
            Encumbrances created by this Agreement;
 

(c)    Encumbrances identified in Section 1.1(A) of the Seller’s Disclosure Schedule, or reflected or referred to in the Financial Statements (including the notes thereto); 

 (d)    liens for Taxes and other governmental levies not yet due and payable or, if due, being contested in good faith by appropriate proceedings in 

 

	
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accordance with Applicable Law and for which reserves are set aside in the Ordinary Course of Business; 

 (e)     mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other liens, including all statutory liens, arising or incurred in the Ordinary Course of Business up to fifty thousand U.S. dollars ($50,000) in the aggregate; 

 (f)     conditional sales contracts and equipment leases with third parties entered into in the Ordinary Course of Business; or

	
            (g)
 	
            Permitted Real Property Encumbrances.
 

“Permitted Real Property Encumbrances” means (i) zoning, planning and building codes and other Applicable Laws regulating the use, development and occupancy of the Project and permits, consents and rules under such laws; (ii) matters shown on the title insurance policy identified in Schedule 1.1(B) (other than a mortgage or other lien securing indebtedness of the Seller, the Project Company or any of their Affiliates); and (iii) matters identified in Section 1.1(C) of the Seller’s Disclosure Schedule.  

“Person” means and includes natural persons, corporations, limited partnerships, limited liability companies, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and all Governmental Authorities.

“PGN Guaranties” means each of (i) the Guaranty Agreement, dated as of September 18, 2002, by Progress Energy in favor of Duke Power, (ii) the Guaranty Agreement, dated as of December 22, 2003, by Progress Energy in favor of Duke Power, (iii) the Guaranty Agreement, dated as of April 15, 2003, by Progress Energy in favor of Duke Electric Transmission, (iv) the Guaranty Agreement, dated as of February 1, 2006, by Progress Energy in favor of NCMPA and (v) the Guaranty Agreement, dated as of April 7, 2003, by Progress Energy in favor of NCMPA.

“PGN Guaranty Termination and Release Agreements” means each of (i) the PGN Guaranty Termination and Release Agreements by and between Progress Energy and Duke Power, substantially in the form of Exhibit L-1, which terminate the PGN Guaranties by Progress Energy in favor of Duke Power, (ii) the PGN Guaranty Termination and Release Agreement by and between Progress Energy and Duke Electric Transmission, substantially in the form of Exhibit L-2, which terminates the PGN Guaranty by Progress Energy in favor of Duke Electric Transmission and (iii) the PGN Guaranty Termination and Release Agreements by and between Progress Energy and NCMPA, substantially in the form of Exhibit L-3, which terminate the PGN Guaranties by Progress Energy in favor of NCMPA.

“PGN Parent Guaranty” shall have the meaning set forth in Section 7.18. 

 

 

	
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“Pre-Closing Accounts Payable” shall have the meaning set forth in Section 10.6(c).

“Pre-Closing Fuel Oil Statement” shall have the meaning set forth in Section 2.5(a).

“Pre-Closing Period” shall have the meaning set forth in Section 9.2.

“Proceedings” means all proceedings, actions, claims, suits, investigations and inquiries by or before any arbitrator or Governmental Authority.

“Progress Energy” shall have the meaning set forth in the recitals.

“Progress Insurance Policies” shall have the meaning set forth in Section 7.19(b).

“Project” means the Improvements and the Real Property.

“Project Company” shall have the meaning set forth in the recitals.

“Project Company Material Adverse Effect” means any change, circumstance or event that would have a materially adverse effect on the Assets or liabilities of the Project Company, taken as a whole, excluding any such change, circumstance or event to the extent resulting from (i) the economy or securities markets in general, or any outbreak of hostility, terrorist activities or war, (ii) the announcement, pendency or consummation of the sale of the Membership Interest or any other action by the Seller or its Affiliates contemplated by or required by this Agreement, or (iii) any changes in general economic (including changes in commodity prices or foreign exchange rates), political or regulatory conditions in the electricity generation industry.  Without limiting the generality of the foregoing, such definition of Project Company
Material Adverse Effect shall specifically include adverse consequences reasonably likely to result in Liabilities and lost revenues on a net present value basis calculated using an 8% discount rate, to the Project Company of twelve million U.S. dollars ($12,000,000) or more, subject to the exclusions set forth in clauses (i), (ii) and (iii) above.

“Property Taxes” shall have the meaning set forth in Section 9.2.

“Property Tax Rebate” shall have the meaning set forth in Section 9.2.

“Purchase Price” shall have the meaning set forth in Section 2.2.

“Purchaser” shall have the meaning set forth in the preamble hereof.

“Purchaser Approvals” means the Approvals and Consents necessary for the authorization, execution, delivery and performance of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated by this Agreement.

 

 

	
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“Purchaser Indemnitees” shall have the meaning set forth in Section 10.6(c).

“Purchaser Indemnitees’ Threshold” shall have the meaning set forth in Section 10.6(d).

 “Purchaser Material Adverse Effect” means any change, circumstance or event that would materially hinder the Purchaser’s ability to consummate the transactions contemplated by this Agreement, excluding any such change, circumstance or event to the extent resulting from (i) the economy or securities markets in general, or any outbreak of hostility, terrorist activities or war, (ii) the announcement, pendency or consummation of the sale of the Membership Interest or any other action by the Purchaser or its Affiliates contemplated by or required by this Agreement, or (iii) any changes in general economic (including changes in commodity or energy prices), political or regulatory conditions in the electricity generation industry.

“Purchaser’s Disclosure Schedule” means the schedule attached to this Agreement and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included by the Purchaser pursuant to this Agreement.

“Real Property” means the land described in Section 5.9 of the Seller’s Disclosure Schedule.

“Retention Period” has the meaning set forth in Section 7.4.

“Rowan Oil Inventory Price” means the sum of (a) the product of (i) one and eleven thousandths (1.011) multiplied by (ii) the OPIS daily average Charlotte rack price per gallon for low sulfur No. 2 dyed oil, measured at the close of business two (2) Business Days prior to the Closing Date, and (b) two and five tenths cents ($0.025) per gallon.

“Securities Act” means the Securities Act of 1933, as amended.

“Seller” shall have the meaning set forth in the preamble hereof.

“Seller Approvals” means the Approvals and Consents necessary for the authorization, execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated by this Agreement.

“Seller Indemnitees” shall have the meaning set forth in Section 10.6(a).

“Seller Indemnitees’ Threshold” shall have the meaning set forth in Section 10.6(b).

“Seller Material Adverse Effect” means any change, circumstance or event that would materially hinder the Seller’s ability to consummate the transactions contemplated by this Agreement, excluding any such change, circumstance or event to 

 

	
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the extent resulting from (i) the economy or securities markets in general, or any outbreak of hostility, terrorist activities or war, (ii) the announcement, pendency or consummation of the sale of the Member Interest or any other action by the Seller or its Affiliates contemplated by or required by this Agreement, or (iii) any changes in general economic (including changes in commodity or energy prices), political or regulatory conditions in the electricity generation industry.

“Seller’s Closing Fuel Oil Statement” has the meaning set forth in Section 2.6(a).

“Seller’s Disclosure Schedule” means the schedule attached to this Agreement and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included by the Seller pursuant to this Agreement.

“Southern Power Parent Guaranty” has the meaning set forth in Section 7.18.

“Subsidiary” or “subsidiary” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (i) the total combined voting power of all classes of voting securities of such entity, (ii) the total combined equity interest, or (iii) the capital or profit interests, in the case of a partnership; or (b) otherwise has the power to vote or to direct the voting of sufficient securities to elect a majority of the board of directors or similar governing body.

“Survey Objections” shall have the meaning set forth in Section 7.12(c).

“Tangible Personal Property” means all machinery, equipment, parts, spare parts, tools, furniture, office equipment, computer hardware, computer software and licenses, electronic files, printed reference and procedures documents, supplies, materials, inventory, vehicles and other items of tangible personal property of every kind owned or leased by the Project Company, together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof, without in the case of books, records, files and reports eliminating the Seller’s right to retain originals pursuant to Section 3.2(e). 

“Tax” means all federal, state, provincial, territorial, municipal, local or foreign income, profits, franchise, gross receipts, environmental, customs, duties, net worth, sales, use, goods and services, withholding, value added, ad valorem, employment, social security, disability, occupation, pension, real property, personal property (tangible and intangible), stamp, transfer, conveyance, severance, production, excise and other taxes, withholdings, duties, levies, imposts and other similar charges and assessments (including any and all fines, penalties and additions attributable to or otherwise imposed on or with respect to any such taxes, charges, fees, levies or other assessments, and interest thereon) imposed by or on behalf of any Taxing Authority.

 

 

	
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“Tax Asset” means any item of income, gain, loss, deduction or credit, or other attribute arising from or attributable to a Pre-Closing Period, or with respect to any taxable year or period that includes the Closing Date, the portion of such taxable year or period through and including the Closing Date, that may have the effect of increasing or decreasing any Tax that has accrued for Tax purposes, but has not been used during a taxable period, and that could reduce a Tax in another taxable period, including a net operating loss, prepaid Tax, anticipated refunds of Taxes, net capital loss, investment tax credit, foreign tax credit, research and experimentation credit, charitable deduction or credit related to alternative minimum tax or any other Tax credit.

“Tax Benefit” means the amount of any refund, credit or reduction in otherwise required Tax payments, including interest payable thereon, actually received or recognized.

“Tax Returns” means any report, return, declaration, claim for refund, information report or return or statement required to be supplied to a Taxing Authority in connection with Taxes, including any schedule or attachment thereto or amendment thereof.

“Taxing Authority” means any Governmental Authority exercising any authority to impose, regulate, levy, assess or administer the imposition of any Tax. 

“Third-Party Assets” shall have the meaning set forth in Section 7.17.

“Title Objections” shall have the meaning set forth in Section 7.12(b).

“Total 2006 Ozone Emission Allowances” shall have the meaning set forth in Section 7.20.

“Trade Secrets” means trade secrets, proprietary processes and methodologies.

“Trademarks” means all U.S. and foreign trademarks, service marks, corporate and trade names, Internet domain names, logos, slogans, trade dress, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, and applications and registrations for the foregoing.

“Transaction Documents” means this Agreement, and any other agreement or instrument executed in connection therewith or pursuant thereto.

“Transfer Taxes” shall have the meaning set forth in Section 9.1.

“Transition Committee” shall have the meaning set forth in Section 7.13(e).

“Units” shall have the meaning set forth in the Recitals.

 

 

	
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1.2     Other Terms.  Other terms may be defined elsewhere in this Agreement and, unless otherwise indicated, shall have such meaning throughout this Agreement.

1.3     Rules as to Usage.  Except as otherwise expressly provided herein, the following rules shall apply to the usage of terms in this Agreement:

(a)     The terms defined above have the meanings set forth above for all purposes, and such meanings are equally applicable to both the singular and plural forms of the terms defined.  If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  

(b)     “Include,” “includes” and “including” shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import.

(c)     “Writing,” “written” and comparable terms refer to printing, typing, and other means of reproducing in a visible form.

(d)     Any Law defined or referred to herein means such Law as from time to time amended, modified or supplemented, including by succession of comparable successor Law and any rules and regulations promulgated thereunder.

(e)     References to a Person are also to its permitted successors and assigns.

(f)     Any term defined above by reference to any agreement, instrument or Law has such meaning whether or not such agreement, instrument or Law is in effect.

(g)     “Hereof,” “herein,” “hereunder” and comparable terms refer, unless otherwise expressly indicated, to the entire agreement or instrument in which such terms are used and not to any particular article, section or other subdivision thereof or exhibit or schedule or other attachment thereto.  References in an instrument to “Article,” “Section,” or another subdivision or to an exhibit or schedule or other attachment are, unless the context otherwise requires, to an article, section, subsection or subdivision of or an exhibit or schedule or other attachment to such agreement or instrument.

(h)     Pronouns, whenever used in any agreement or instrument that is governed by this Agreement and of whatever gender, shall include all Persons.  References to any gender include, unless the context otherwise requires, references to all genders.

	
            (i)
 	
            “Shall” and “will” have equal force and effect.
 

(j)      Whenever the consent or approval of any party is required pursuant to this Agreement, unless expressly stated that such consent or approval is to be given in the sole discretion of such party, such consent or approval shall not be unreasonably withheld, conditioned or delayed.

 

 

	
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(k)     Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. Whenever any action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.

(l)      All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP.

1.4     Schedules and Exhibits.  This Agreement consists of the Articles contained herein and the Schedules and Exhibits attached hereto, all of which comprise part of one and the same agreement with equal force and effect.

ARTICLE II

 

PURCHASE AND SALE OF MEMBERSHIP INTEREST

2.1     Sale and Transfer of the Membership Interest.  Upon the terms and subject to the conditions contained herein, on the Closing Date, the Seller shall sell, assign, transfer, convey and deliver to the Purchaser, and the Purchaser shall purchase from the Seller, the Membership Interest, free and clear of all Encumbrances, except for any Encumbrances imposed pursuant to Applicable Law or this Agreement.

2.2     Purchase Price.  The aggregate purchase price for the Membership Interest shall be an amount equal to three hundred twenty-five million U.S. dollars ($325,000,000.00) (the “Purchase Price”) as the same may be adjusted if and as required pursuant to the provisions of Sections 2.5 and 2.6.

2.3     Payment of Purchase Price.  The Purchaser shall transfer the Purchase Price if and as adjusted pursuant to Section 2.5 to the Seller at the Closing.  Adjustments, if any, pursuant to Sections 2.5 and 2.6 shall be paid in accordance with the provisions of such applicable Section.

2.4     Allocation of Purchase Price; Tax Filings.  For federal Tax purposes and relevant state income Tax purposes, the Project Company is classified as a disregarded entity.  Consequently, the sale and purchase of the Membership Interest hereunder is to be treated as a sale and purchase of the Assets for all such purposes.  The Purchase Price, plus the amount of the Project Company’s Liabilities that constitute part of the amount realized for federal income Tax purposes, shall be allocated among the Assets, which allocation shall be arrived at by an independent appraisal, conducted at the Purchaser’s sole expense by Navigant Consulting or another  nationally recognized appraiser mutually agreeable to the Purchaser and the Seller, in compliance with Section 1060 of the Code and the
regulations promulgated thereunder.  The Purchaser shall provide the allocation arrived at by such independent appraisal to the Seller by July 15, 2006.  In the event that the Seller disagrees with the allocation arrived at by such independent appraisal, the Purchaser and the Seller shall jointly appoint PricewaterhouseCoopers or another independent accounting firm of international reputation mutually acceptable to the Seller and the Purchaser (the “Independent  

 

	
            14
 

 

 

 

Accounting Firm”), which shall, at the Purchaser’s and the Seller’s equal expense, within fifteen (15) days (or such other period mutually agreed upon by the Purchaser and the Seller) determine the appropriate allocation with respect to the issues in dispute.  The finding of such Independent Accounting Firm shall be binding on the Purchaser and the Seller.  Promptly after the determination of the post-Closing Purchase Price adjustment pursuant to Section 2.6, the parties shall mutually revise the allocation to the extent necessary to reflect the Purchase Price adjustments made pursuant to Sections 2.5 and 2.6, and references to “such allocation” in this Section 2.4 shall
refer to the allocation after such revision.  Each of the Purchaser and the Seller shall (i) timely file all forms (including Internal Revenue Service Form 8594) and Tax Returns required to be filed in connection with such allocation, (ii) be bound by such allocation for purposes of determining Taxes, (iii) prepare and file, and cause its Affiliates to prepare and file, its Tax Returns on a basis consistent with such allocation and (iv) take no position, and cause its Affiliates to take no position, inconsistent with such allocation on any applicable Tax Return, in any audit or proceeding before any Taxing Authority, in any report made for Tax, financial accounting or any other purposes, or otherwise.  Notwithstanding the foregoing, the parties agree that it will not be inconsistent with such allocation for (a) the Purchaser’s cost for the Assets to differ from the total amount allocated hereunder to reflect capitalized acquisition costs not included in the total amount allocated
pursuant to this Section 2.4 and (b) the amount realized by the Seller to differ from the total amount allocated pursuant to this Section 2.4 to reflect transaction costs that reduce the amount realized for federal income Tax purposes.  In the event that the allocation pursuant to this Section 2.4 is disputed by any Taxing Authority, the party receiving notice of such dispute shall promptly notify the other party hereto concerning the existence and resolution of such dispute.

	
            2.5
 	
            Closing Purchase Price Adjustments.
 

(a)     Fuel Oil.  Not less than ten (10) Business Days prior to the Closing Date, the Seller shall deliver to the Purchaser a statement of the amount of fuel oil owned by the Project Company or any Affiliate of the Project Company and held for use by the Project Company at the Facility as of a date within twenty (20) Business Days prior to the Closing Date that is certified by an authorized officer of the Seller as having been prepared in good faith (the “Pre-Closing Fuel Oil Statement”); provided, that for the avoidance of doubt, the Pre-Closing Fuel Oil Statement shall not include any fuel oil owned by Duke Power pursuant to the Duke Power Contracts or otherwise or any fuel oil purchased by Duke Power pursuant to the
Duke Power Contracts prior to the Closing Date.  The Pre-Closing Fuel Oil Statement shall be accompanied by such backup information and schedules as are reasonably required in order for the Purchaser to understand and verify the accuracy of the computation of the amount of fuel oil reflected on the Pre-Closing Fuel Oil Statement.

(b)     Adjustments.  The Purchase Price shall be adjusted upward by the product of the Rowan Oil Inventory Price multiplied by the amount of fuel oil reflected on the Pre-Closing Fuel Oil Statement.    

 

 

	
            15
 

 

 

 

 

2.6     Post-Closing Purchase Price Adjustment.  The Purchase Price shall be subject to adjustment after the Closing as specified in this Section 2.6.

(a)     Closing Fuel Oil Statement.  As promptly as practicable, but in no event later than forty-five (45) days following the Closing Date, the Seller shall deliver to the Purchaser a statement of the amount of fuel oil owned by the Project Company at the Facility as of the Closing Date that is certified by an authorized officer of the Seller as having been prepared in good faith (the “Seller’s Closing Fuel Oil Statement”); provided, that for the avoidance of doubt, the Seller’s Closing Fuel Oil Statement shall not include any fuel oil owned by Duke Power pursuant to the Duke Power Contracts or otherwise or any fuel oil purchased by Duke Power pursuant to the Duke Power Contracts prior to the Closing
Date.  The Seller’s Closing Fuel Oil Statement shall be accompanied by such backup information and schedules as are reasonably required in order for the Purchaser to understand and verify the accuracy of the computation of the amount of fuel oil reflected on the Seller’s Closing Fuel Oil Statement.  The Seller’s Closing Fuel Oil Statement shall be deemed final for the purposes of this Section 2.6(a) (and as and when deemed final shall be referred to as the “Closing Fuel Oil Statement”) upon the earlier of (A) the failure of the Purchaser to notify the Seller of a dispute within twenty (20) Business Days after the delivery of the Seller’s Closing Fuel Oil Statement to the Purchaser, (B) the resolution of all disputes, pursuant to Section 2.6(b)(i), by the Seller’s
accountants and the Purchaser’s accountants, and (C) the resolution of all disputes, pursuant to Section 2.6(b)(ii), by the Independent Accounting Firm. 

	
            (b)
 	
            Fuel Oil Statement Issue Resolution Process.
 

(i) The Seller may in good faith dispute any amounts reflected on the Seller’s Closing Fuel Oil Statement delivered pursuant to Section 2.6(a), to the extent that the net effect of such disputed amounts would affect the adjustment pursuant to Section 2.6(c), but only on the basis that the amounts reflected on such statements are incorrect or were not arrived at in accordance with GAAP in a manner consistent with the Financial Statements.  The Purchaser shall deliver notice of such a dispute to the Seller setting forth in reasonable detail the items or amounts disputed and the Purchaser’s proposed corrections.  In the event of such a dispute, the Seller’s and the Purchaser’s respective accountants 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 hereto.  If the Seller’s and the Purchaser’s respective accountants are unable to reach a resolution within sixty (60) days of the delivery of the Seller’s Closing Fuel Oil Statement, the items remaining in dispute shall be submitted for resolution to the Independent Accounting Firm.

 (ii) The Independent Accounting Firm shall, within thirty (30) days after the items remaining in dispute are submitted to the Independent Accounting Firm, or such longer period of time as the Independent Accounting Firm determines is necessary, deliver its written determination to the Seller and the Purchaser upon such items.  The Independent Accounting Firm’s determination shall be final, binding and conclusive on the Seller and the Purchaser.  The fees and disbursements of the Independent Accounting Firm shall be allocated between the Seller and the Purchaser in 

 

	
            16
 

 

 

 

the same proportion that the aggregate amount of such remaining disputed items so submitted to the Independent Accounting Firm that is unsuccessfully disputed by each such party as finally determined by the Independent Accounting Firm bears to the total amount of such remaining disputed items.  The Purchaser and the Seller shall make readily available to the Independent Accounting Firm all relevant information, books and records and any work papers relating to the dispute and all other items reasonably requested by the Independent Accounting Firm.  In no event may the Independent Accounting Firm’s resolution of any difference be for an amount which is outside the range of the Purchaser’s and the Seller’s disagreement.

 (c)  Adjustment.  The post-Closing Purchase Price adjustment shall be an amount equal to the product of the Rowan Oil Inventory Price multiplied by the amount (positive or negative) equal to the amount of fuel oil reflected on the Closing Fuel Oil Statement minus the amount of fuel oil reflected on the Pre-Closing Fuel Oil Statement.  If the result is a positive number, then the Purchase Price shall be adjusted upward in an amount equal to the result obtained under this Section 2.6(c), and within three (3) Business Days after the finalization of the Closing Fuel Oil Statement pursuant to Section 2.6(a), such amount shall be paid by the Purchaser to the Seller by wire transfer in immediately available funds.  If the result obtained in this
Section 2.6(c) is a negative number, then the Purchase Price shall be adjusted downward in an amount equal to such result, and within three (3) Business Days after the finalization of the Closing Fuel Oil Statement pursuant to Section 2.6(a), such amount shall be paid by the Seller to the Purchaser by wire transfer in immediately available funds.  

ARTICLE III

 

CLOSING

3.1     Time and Place of Closing.  The closing of the purchase and sale of the Membership Interest (the “Closing”) shall take place at the offices of Troutman Sanders LLP in Atlanta, Georgia, within three (3) Business Days after the conditions to Closing set forth in Article VIII (excluding conditions that, by their terms, cannot be satisfied until the Closing) have been satisfied (or waived by the party entitled to waive such condition), but no earlier than August 31, 2006, or at such other place, date and time as the parties may agree.  The Closing shall be deemed effective as of 11:59 P.M. Atlanta, Georgia time on the Closing Date.

3.2     Deliveries by the Seller.  At the Closing, the Seller shall deliver, or cause to be delivered, to the Purchaser:

(a)     an executed counterparty of the instrument conveying title to the Membership Interest substantially in the form of Exhibit A;

(b)     executed copies of the Seller Approvals;

            

(c)     an executed officer’s certificate of the Seller in the form attached hereto as Exhibit B; 

 

 

	
            17
 

 

 

 

 

(d)     executed secretary’s certificates of the Seller and Progress Energy in the forms attached as Exhibit C and Exhibit D, respectively;

(e)     except as set forth in Section 5.16 of the Seller’s Disclosure Schedule, the books, records and files of the Project Company related to the Project and to the operation and maintenance of the Project and copies of any records of Progress Ventures related to any Employee (as permitted by Applicable Law) to whom the Purchaser or one of its Affiliates has extended an offer of employment which has been accepted on or prior to the Closing Date (in lieu of any originals of any such books, records and files, the Seller may provide copies thereof provided that it identifies them as such and such books, records and files do not relate solely to the business of the Project Company); 

(f)     a release of the Project Company from all Liabilities incurred by the Project Company prior to the Closing and owing to the Seller or any of its Affiliates as of the Closing (“Intercompany Payables”), other than those Liabilities set forth on Schedule 7.8(c), in the form attached as Exhibit E;

(g)     assignment and assumption agreements substantially in the form of Exhibit F, properly executed by the Seller or its Affiliates and (i) the Project Company or (ii) the Purchaser or its Affiliates, pursuant to which all rights and obligations of the Seller or its Affiliates (A) to the fuel oil held for use by Seller or an Affiliate of Seller (other than the Project Company) for use at the Facility but not owned by the Project Company, and (B) under the agreements set forth in Section 3.2(g) of the Seller’s Disclosure Schedule were assigned to, and assumed by, the Project Company, the Purchaser or an Affiliate of the Purchaser at or prior to the Closing;

(h)     proof of the termination of, or removal of the Project Company as a party to, the agreements with the Seller or its Affiliates and other intercompany arrangements set forth in Section 3.2(h) of the Seller’s Disclosure Schedule, in a form reasonably acceptable to the Purchaser;

(i)      an assignment and assumption agreement in the form attached as Exhibit G, properly executed by the Seller, pursuant to which all Excluded Assets owned by the Project Company and all Pre-Closing Accounts Payable of the Project Company are assigned by the Project Company to, and assumed by, the Seller or an Affiliate of the Seller other than the Project Company at or prior to the Closing; 

(j)      a receipt for the payment of the Purchase Price;

            

(k)     an executed certificate from an officer of the Seller in the form attached as Exhibit H, dated as of the Closing Date, that:

(i)      each Unit is operational, dispatchable and capable of meeting the scheduling requirements of Duke Power and NCMPA in accordance with the Duke Power Contracts and the NCMPA Contracts, respectively;

 

 

	
            18
 

 

 

 

 

(ii)     each Unit is in compliance with all noise and emissions limitations and other material Applicable Laws and Approvals; and

(iii)     the combined cycle Unit is capable of delivering net electrical output of no less than ninety-six percent (96%) of 468 MW, and the simple cycle Units 1, 2 and 3 are collectively capable of simultaneously delivering net electrical output of no less than ninety-six percent (96%) of 453 MW; provided, that such certification shall not constitute a representation or warranty by the Seller to such net electrical output under such conditions;  

	
            
 	
            
 

(l)     resignations from all officers of the Project Company; and

(m)    any other documents or instruments or copies thereof as may be reasonably necessary to effect or facilitate the transactions contemplated hereunder to the extent reasonably requested by the Purchaser not less than five (5) Business Days prior to the Closing.

3.3       Deliveries by the Purchaser.  At the Closing, the Purchaser shall deliver, or cause to be delivered, to the Seller:

(a)     an executed counterparty of the instrument conveying title to the Membership Interest substantially in the form attached hereto as Exhibit A;

(b)     the Purchase Price (less any net amounts, if any, for which Seller is liable, or plus any net amounts, if any, for which Purchaser is liable, pursuant to Section 9.2) to an account designated by the Seller in writing by wire transfer in immediately available funds;

(c)     executed copies of the Purchaser Approvals;

            

(d)     an executed officer’s certificate of the Purchaser in the form attached hereto as Exhibit I; 

(e)     executed secretary’s certificates of the Purchaser and Southern Power in the forms attached hereto as Exhibit J and Exhibit K, respectively; and

(f)     any other documents or instruments or copies thereof as may be reasonably necessary to effect or facilitate the transactions contemplated hereunder to the extent reasonably requested by the Seller not less than five (5) Business Days prior to the Closing.

 

 

	
            19
 

 

 

 

 

ARTICLE IV

 

TERMINATION

4.1     Termination of Agreement.  Subject to the limitations set forth in Section 4.2, this Agreement may be terminated prior to the Closing Date as follows:

(a)     At any time prior to the Closing Date by the written consent of the Seller and the Purchaser;

	
            (b)
 	
            By either the Seller or the Purchaser if:
 

(i)      the Closing has not occurred on or before November 1, 2006 (as may be extended pursuant to a written agreement of the parties, the “Outside Date”); provided, however, that the terminating party is not in default of its obligations hereunder; provided further, that if following November 1, 2006 the only condition set forth in Article VIII that remains unsatisfied is a Purchaser Approval or Seller Approval required from the Federal Energy Regulatory Commission, then the Outside Date shall automatically be extended to December 1, 2006, or

(ii)     there shall be any Applicable Law that makes consummation of the transactions contemplated hereby illegal or otherwise prohibited (and such Law is not overturned or otherwise made inapplicable to the transactions contemplated hereby within a period of ninety (90) days) or if any Order is entered by a Governmental Authority of competent jurisdiction having valid enforcement authority permanently restraining, prohibiting or enjoining the Seller or the Purchaser from consummating the transactions contemplated hereby and such Order shall become final and non-appealable.

(c)     By the Seller if the Purchaser has breached any of its representations, warranties, covenants or other agreements contained in this Agreement; provided, however, that such breach (i) cannot be or has not been cured within thirty (30) days of the Seller’s written notice of such breach, and (ii) would cause the failure of any condition set forth in Article VIII.

	
            (d)
 	
            By the Purchaser:
 

(i)      if the Seller has breached any of its representations, warranties, covenants or other agreements contained in this Agreement; provided, however, that such breach (A) cannot be or has not been cured within thirty (30) days of the Purchaser’s written notice of such breach, and (B) would cause the failure of any condition set forth in Article VIII; 

(ii)     if a supplement or amendment to the Schedules is made pursuant to Section 7.10 to cure a materially inaccurate or incomplete representation and warranty and the Purchaser has made a valid and timely written objection thereto in accordance with Section 7.10; 

 

 

	
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            (iii)
 	
            at any time prior to June 15, 2006;
 	
             

	
            (iv)
 	
            if permitted pursuant to Section 7.11; or
 

(v)          if (x) the combined cycle Unit or the simple cycle Units collectively are unable to complete the performance tests contemplated by Section 7.15 such that the Seller is not able to provide the certification required under Section 3.2(k), and (y) the Seller fails to retest the combined cycle Unit or the simple cycle Units, as the case may be, which failed to meet the required performance criteria within thirty (30) days of the failed performance test or any such retest, as provided for in Section 7.15, fails to meet the required performance criteria. 

4.2     Effect of Termination.  No termination of this Agreement pursuant to Section 4.1 shall be effective until written notice thereof is given in accordance with Section 11.10 to the non-terminating party specifying the provision hereof pursuant to which such termination is made.  If validly terminated pursuant to Section 4.1, this Agreement shall become wholly void and of no further force and effect without liability to the Purchaser, the Seller, the Project Company or any of its or their respective Subsidiaries, Affiliates, officers, directors, employees, agents, advisors or other representatives, and each shall be fully released and discharged from any
liability or obligation under or resulting from this Agreement, and neither the Seller nor the Purchaser shall have any other remedy or cause of action under or relating to this Agreement or any Applicable Law, including, without limitation, for reimbursement of expenses, except that the obligations of the Seller and the Purchaser under the Confidentiality Agreement and the obligations of the parties under this Section 4.2 and Sections 7.5, 7.6 and 7.18 and Articles X and XI of this Agreement shall remain in full force and effect; provided, however, that nothing in this Section
4.2 shall be deemed to release any party from liability for any fraud or willful breach of its obligations under this Agreement in any material respect.

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE SELLER

As of the Effective Date and again on the Closing Date, the Seller hereby represents and warrants to the Purchaser as follows:

	
            5.1
 	
            Organization and Good Standing.
 

(a)     The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is formed and has the requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.

(b)     The Project Company is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is formed and has the requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.  The Project 

 

	
            21
 

 

 

 

Company has no subsidiaries and does not own any shares of capital stock or other securities of another Person.

(c)     The Seller has delivered to the Purchaser complete and accurate copies of the Governing Documents of the Project Company.

5.2     Authorization; Enforceability.  The Seller has the requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement by the Seller and the consummation by the Seller of the transactions contemplated by this Agreement have been duly authorized by all necessary action on the part of the Seller and its Affiliates.  This Agreement has been duly executed and delivered by the Seller and, assuming the due execution and delivery by the Purchaser, constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms.

	
            5.3
 	
            No Violation; Consents.
 

(a)     Except as set forth on Section 5.3(a) of the Seller’s Disclosure Schedule, and subject to obtaining the Seller Approvals set forth on Section 5.3(b) of the Seller’s Disclosure Schedule, the execution and delivery by the Seller of this Agreement and the consummation by the Seller of the transactions contemplated hereby do not and will not:

(i)      violate, contravene, conflict with or result in the breach of any provision of the Governing Documents of, or resolutions of the boards of directors of, the Seller or the Project Company,

(ii)     violate, contravene, conflict with, result in the breach of or give rise to any right to revoke, withdraw, suspend, modify or terminate any Approval or Consent to which the Seller or the Project Company or any Asset is bound or subject,

(iii)     violate, contravene, conflict with or result in the breach of any Applicable Law,

(iv)    except for Permitted Encumbrances, result in the imposition or creation of any Encumbrance upon the Membership Interest or

(v)     permit any Person the right to declare a default or exercise any remedy under, to accelerate the maturity, performance or payment of or to cancel, terminate or modify any note, bond, mortgage, indenture, license or agreement.

Clauses (ii), (iii), (iv) and (v) shall not apply to any conflict, violation, breach, default, requirement for Consents, rights of acceleration, cancellation, termination or Encumbrance that would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect or a Project Company Material Adverse Effect.

 

 

	
            22
 

 

 

 

 

(b)     Except for such Seller Approvals set forth on Section 5.3(b) of the Seller’s Disclosure Schedule, no Approval or Consent issued by, or declaration or filing with, or notification to, or waiver from any Person, is required on the part of the Seller in connection with the execution and delivery of this Agreement, or the performance by the Seller of any provision contained in this Agreement, except for any such requirements the failure of which to obtain or make would not reasonably be expected to have, individually or in the aggregate, a Seller Material Adverse Effect or a Project Company Material Adverse Effect.

	
            5.4
 	
            Litigation.
 

(a)     Except as set forth in Section 5.4(a) of the Seller’s Disclosure Schedule, no Action or Order is pending or, to the Seller’s Knowledge, threatened against the Seller, the Project Company or its business, any Asset or any of the Seller’s Affiliates that seeks to restrain or prohibit or otherwise challenge the consummation, legality or validity of this Agreement or the transactions contemplated hereby.

(b)     Except as set forth in Section 5.4(b) of the Seller’s Disclosure Schedule, none of the Seller, the Project Company or its business or any Asset (i) is subject to any outstanding Order or (ii) is a party or, to the Seller’s Knowledge, is contemplated or threatened to be made a party to any action, suit, proceeding, hearing or investigation of, in, or before any court or quasi judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator that would reasonably be expected to have, individually or in the aggregate a Seller Material Adverse Effect or Project Company Material Adverse Effect.

	
            5.5
 	
            Compliance with Law.
 

(a)     Applicable Law.  The Seller and the Project Company have complied in all material respects with all Necessary Approvals and all Applicable Laws other than Environmental, Health and Safety Laws, which are the subject of Section 5.6.  Except as set forth in Section 5.5(a) of the Seller’s Disclosure Schedule, the Seller has not received notification that it has violated any Necessary Approval or any Applicable Law other than Environmental, Health and Safety Laws, which are the subject of Section 5.6.

	
            (b)
 	
            Necessary Approvals.
 

(i)      Except as set forth on Part A of Section 5.5(b)(i) of the Seller’s Disclosure Schedule, the Project Company holds all Approvals, including occupancy permits, that are required to be obtained from a Governmental Authority under Applicable Laws other than Environmental, Health and Safety Laws, which are the subject of Section 5.6, in connection with the use, operation or ownership of the Project and the conduct of the Project Company’s business as currently conducted (“Necessary Approvals”).  All Necessary Approvals are listed in Part B of Section 5.5(b)(i) of the Seller’s Disclosure Schedule.  Any application for the renewal of any such Necessary 

 

	
            23
 

 

 

 

Approval due prior to the Closing Date has been, or will be, timely filed prior to the Closing Date.

(ii)     Except as set forth in Section 5.5(b)(ii) of the Seller’s Disclosure Schedule, all Necessary Approvals are in full force and effect, and no proceeding to modify, suspend, revoke, withdraw, terminate or otherwise limit any Necessary Approval is pending or, to the Knowledge of the Seller, threatened.  No administrative or governmental action has been taken or, to the Knowledge of the Seller, threatened in connection with the expiration, continuance or renewal of any Necessary Approval.

(iii)     Except as noted in Section 5.5(b)(iii) of the Seller’s Disclosure Schedule, the sale of the Membership Interest contemplated herein will not cause any Necessary Approval material to the continuing operation of the Project to become invalid or subject to reissuance or modification.

5.6   Environmental Matters.  Except as set forth in Section 5.6 of the Seller’s Disclosure Schedule:

(a)     the Project Company is and has been at all times and in all material respects in compliance with all applicable Environmental, Health and Safety Laws, which compliance includes, but is not limited to, the possession of all Approvals required under applicable Environmental, Health and Safety Laws to own and operate the Project, and compliance with the terms and conditions thereof;

(b)     all material Approvals currently held by the Project Company pursuant to the Environmental, Health and Safety Laws are identified in Section 5.6(b) of the Seller’s Disclosure Schedule;

(c)     the Project Company has not received any communication that alleges that the Project Company is not in compliance with all applicable Environmental, Health and Safety Laws;

(d)     no Environmental Claim is pending or, to the Seller’s Knowledge, threatened against the Project Company; 

(e)     to the Knowledge of the Seller, there are no past or present actions, activities, circumstances, conditions, events or incidents, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern that could reasonably be expected to form the basis of any material Environmental Claim against the Project Company; 

(f)     neither the Seller nor the Project Company has entered into, and the Facility is not subject to, any Action, Order, judgment, suit, proceeding, decree, agreement, injunction or, to the Knowledge of the Seller, any material investigation or inquiry, of any Governmental Authority relating to Liabilities under any Environmental, Health and Safety Laws, other than matters that have been resolved in a final and binding 

 

	
            24
 

 

 

 

proceeding and for which neither the Project Company nor the Facility has any further Liability; and

(g)     to Seller’s Knowledge neither Seller nor the Project Company has received from any Governmental Authority, notification of a material requirement to take action to comply with any applicable Environmental, Health and Safety Laws (including Approvals required thereunder) with respect to the Project, and which action has not yet been completed.

5.7     Ownership.  The Seller is, and on the Closing Date will be, the sole record and beneficial owner of the Membership Interest, free and clear of all Encumbrances other than those created by this Agreement and requirements under Applicable Law.  The Seller does not own any securities issued by, or other obligations of, the Project Company other than the Membership Interest, and other than by virtue of its sole ownership of the Membership Interest, the Seller does not own any of the Assets.  Such Membership Interest has been duly authorized and validly issued, is fully paid and, except as may be expressly set forth in the Governing Documents, has no requirements for the owner thereof to make additional contributions to, or be liable for, the obligations of the Project Company.  Other than pursuant
to this Agreement there are not, and at the Closing there will not be, any existing options, warrants, calls, rights of preemption, subscriptions or other rights or other agreements or commitments of any character to acquire any membership interests of the Project Company, or securities convertible into or exchangeable for or which otherwise confer on the holder thereof any right to acquire any interest in the Project Company, nor is the Project Company committed to issue, sell or otherwise cause to become outstanding any such option, warrant, right or security.

5.8     Title to Assets.  The Project Company has good, valid and marketable title to all the Assets that it purports to own free and clear of all Encumbrances (except for Permitted Encumbrances and except for properties and assets disposed of in the Ordinary Course of Business since the date of the Financial Statements) including all the Assets reflected in the Financial Statements and all Assets purchased by the Project Company since the Most Recent Fiscal Year End, which subsequently acquired personal properties and assets (other than inventory and short term investments) are listed in Section 5.8 of the Seller’s Disclosure Schedule; provided that the Project shall only be subject to Permitted Real
Estate Encumbrances.

5.9     Description of Real Property.  Section 5.9 of the Seller’s Disclosure Schedule contains a correct legal description of the Real Property.  The Project constitutes all real property currently owned by the Project Company.  Ownership of the Project is sufficient for the Project Company to conduct its business in the Ordinary Course of Business.  Neither the Seller nor the Project Company has received notice of the institution or proposed institution of any condemnation proceedings in respect of any of the Real Property.  Except as set forth in Section 1.1(C) of the Seller’s Disclosure Schedule and in
the last sentence of this Section 5.9, the Project Company is not a party to any lease, sublease, license or occupancy agreement of or with respect to the Project or any other real property, nor is the Project subject to any lease, sublease, license or occupancy agreement.  A true and complete copy of each of the following 

 

	
            25
 

 

 

 

documents have either been delivered or made available to the Purchaser(all recording references are to the Register of Deeds of Rowan County, North Carolina):  (a) North Carolina Special Warranty Deed (Book 931, Page 740 and Book 955, Page 825); (b) North Carolina Non-Warranty Deed (Book 931, Page 741); (c) Easement (Book 868, Page 340); (d) Assignment and Assumption of Easement, dated as of May 22, 2000, between CP&L and Duke Energy Corporation (Recording information unknown); (e) Right of Way Agreement (Book 377, Page 535); (f) General Permit (Book 380, Page 3); (g) Easement (Book 889, Page 282): (h) Easement (Book 404, Page 237); (i) Right of Way Agreement (Book 890, Page 257); (j) Easement, dated April 30, 2001, from CP&L in favor of BellSouth Telecommunications, Inc. (Recording information unknown); (k) Right of Way Agreement  (Book 935, Page 737); (l) Agricultural Lease, dated October 26, 1999,
between CP&L and Bobby K. Waller (unrecorded); and (m) Lease, dated August 28, 2000, between CP&L and Duke Energy Corporation (unrecorded).

	
            5.10
 	
            Condition of Facilities.
 

(a)     Other than as part of routine or planned maintenance in the Ordinary Course of Business, no material item of Tangible Personal Property or any portion of the Improvements is in need of major repair or replacement.

(b)     Except as set forth in Section 5.10(b) of the Seller’s Disclosure Schedule, there are no pending material claims for defective work, equipment or materials relating to the Facility made by the Project Company or the Seller against any Person.

(c)     To Seller’s Knowledge, (i) use of the Real Property for the various purposes for which it is presently being used is permitted as of right under all applicable zoning Laws, and (ii) all Improvements are in compliance with all Applicable Laws, including those pertaining to zoning, building and the disabled.  The Seller has not received notice, written or otherwise, to the effect that there is an existing or proposed plan to modify or realign any street or highway or any existing or proposed eminent domain proceeding that would result in the taking of all or any part of the Facility or that would prevent or hinder the continued use of the Facility as heretofore used in the conduct of the business of the Project Company.

(d)     The Seller has delivered to the Purchaser the most current “as-built” drawings of the Facility in the possession or control of the Project Company or the Seller.

5.11    Financial Advisors.  The Purchaser is not and will not become obligated to pay any fee or commission or like payment to any broker, finder or financial advisor as a result of the consummation of the transactions contemplated by this Agreement based upon any arrangement made by or on behalf of the Project Company, the Seller or any Affiliates of the Seller.

 

 

	
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            5.12
 	
            Employees; Employee Benefits.
 

(a)     The Project Company does not have, and on the Closing Date will not have, any employees.  The Project Company has no liabilities or obligations with respect to any Employees or any other individuals (including, but not limited to, contract workers, lease employees or temporary employees) that have performed work at or in connection with the Facility or in connection with the business of the Project Company.

(b)     The Project Company does not sponsor and has not in the past sponsored any Employee Plans.  The Project Company has no liability or obligation with respect to any Employee Plans of any ERISA Affiliate.

(c)     Except as set forth on Section 5.12(c) of the Seller’s Disclosure Schedule, no Employee is covered by an employment agreement or any other contractual obligation to continue employment with either the Seller or any Affiliate of the Seller.

(d)     None of the Project Company, the Seller or any Affiliate of the Seller has made any commitments or representations to any Person regarding (i) employment by the Purchaser at the Facility after the Closing Date, (ii) any benefits to be provided by the Purchaser or Affiliates of the Purchaser after the Closing Date, or (iii) any other terms and conditions of employment by the Purchaser following the Closing Date.

(e)     With respect to the Employees, the Project Company, the Seller and all Affiliates of the Seller are in compliance with the Worker Adjustment and Retraining Notification Act (the “WARN Act”), if applicable, and the Project Company, the Seller or Affiliates of the Seller have provided all affected Employees with all notices, if any, required under the WARN Act within the time periods required by the WARN Act.

(f)     Except as set forth in Section 5.12(f) of the Seller’s Disclosure Schedule, the Project Company, the Seller and all Affiliates of the Seller have complied in all material respects with all Applicable Laws relating to the employment of the Employees, including terms and conditions of employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits and other employment practices, the payment of social security and similar Taxes and occupational safety and health.

5.13    Labor Matters.  None of the Seller, the Project Company or any of their Affiliates is a party to or bound by any collective bargaining or similar agreement with any labor organization relating to the Employees, all of whom are employees of Progress Ventures and not of the Project Company, and the Seller has no Knowledge of (a) any current or planned employee union or organizing activities relating to the Employees, (b) any union claiming to represent any of the Employees, and (c) any current or threatened strike, dispute, slowdown, stoppage or lockout actually pending relating to the Employees.

 

 

	
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5.14    Financial Statements.  Provided as Section 5.14 of the Seller’s Disclosure Schedule are annual unaudited balance sheets and statements of income as of and for the periods ended December 31, 2003, December 31, 2004 and December 31, 2005 (with the period ended December 31, 2005 being, the “Most Recent Fiscal Year End”) for the Project Company (with respect to the Most Recent Fiscal Year End, the “Financial Statements”).  Except with respect to the operations, assets and liabilities reflected in the agreements to be assigned and assumed pursuant to Sections 3.2(g)
and 3.2(i), the Financial Statements (including the notes thereto) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Project Company as of such dates and the results of operations (and changes in financial position, if any) of the Project Company for such periods, are correct and complete, and are consistent with the books and records of the Project Company.

5.15    Events Subsequent to Most Recent Fiscal Year End.  Except with respect to the operations, assets and liabilities reflected in the agreements to be assigned and assumed pursuant to Sections 3.2(g), and 3.2(i), since the Most Recent Fiscal Year End, no event, condition or circumstance has arisen that has caused or is reasonably expected to cause a Project Company Material Adverse Effect. 

5.16    Minute Books.  The minute books of the Project Company are complete and correct in all material respects and have been maintained in accordance with sound business practices.  The minute books of the Project Company contain accurate and complete records of all meetings of, and corporate action taken by, the Seller in its capacity as sole owner of the Membership Interest in the Project Company, and no meeting of the Seller acting in such capacity has been held for which minutes have not been prepared and are not contained in such minute books.  Except as set forth in Section 5.16 of the Seller’s Disclosure Schedule, the Seller has heretofore delivered to the Purchaser true and complete copies of all
minute books of the Project Company.  

5.17    Emissions Allowances.  The Project Company owns all right, title and interest in and to all Emissions Allowances as they relate to the Facility, which such Emissions Allowances are set forth in Section 5.17 to the Seller’s Disclosure Schedule.

5.18    Undisclosed Liabilities.  Except (a) as set forth in Section 5.18 of the Seller’s Disclosure Schedule and the other exhibits and schedules hereto, (b) as disclosed in the Financial Statements or in any notes thereto, (c) for liabilities and obligations incurred in the Ordinary Course of Business and (d) with respect to the operations, assets and liabilities reflected in the agreements to be assigned and assumed pursuant to Sections 3.2(g) and 3.2(i), to the Knowledge of the Seller, the Project Company does not have any other material Liabilities.  Other than as set forth in the Financial Statements or as to
which the Project Company in good faith has disputed or determined to dispute or not pay, no unpaid invoices, bills representing amounts alleged to be owed by the Project Company or other alleged obligations of the Project Company exist which are material to the business or operations of the Project Company.

	
            5.19
 	
            Taxes.
 

 

 

	
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(a)     Except as set forth in Section 5.19(a) of the Seller’s Disclosure Schedule, the Seller, with respect to the Project Company, and the Project Company have filed or caused to be filed on a timely basis all Tax Returns with respect to Taxes that are or were required to be filed pursuant to Applicable Laws.  All such Tax Returns filed by the Seller, with respect to the Project Company, and the Project Company are true, correct and complete in all material respects.  The Seller, with respect to the Project Company, and the Project Company have paid, or made provision for the payment of, all Taxes that have or may have become due for all periods covered by such Tax Returns, or pursuant to any assessment received by the Seller, with respect to the Project Company, or
the Project Company, except such Taxes, if any, as are not yet delinquent or are listed in Section 5.19(a) of the Seller’s Disclosure Schedule and are being contested in good faith.  Except as set forth in Section 5.19(a) of the Seller’s Disclosure Schedule, no claim has ever been made or, to the Knowledge of the Seller, proposed or threatened by any Taxing Authority in a jurisdiction where the Seller, with respect to the Project Company, or the Project Company does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.  There are no Encumbrances for Taxes on any Assets, except to the extent of statutory Encumbrances for Taxes accruing but not yet due and payable or which are being contested in good faith by appropriate proceedings.

(b)     There is no dispute or claim concerning any Taxes of the Seller, with respect to the Project Company, or the Project Company claimed or raised by any Governmental Authority in writing or, to the Knowledge of the Seller, proposed or threatened.  Except as described in Section 5.19(b) of the Seller’s Disclosure Schedule to this Agreement, the Seller, with respect to the Project Company, and the Project Company have not given or been requested to give waivers or extensions of any statute of limitations relating to the payment of Taxes of the Seller, with respect to the Project Company, or the Project Company for any open taxable years or periods.

(c)     Except as set forth in Section 5.19(c) of the Seller’s Disclosure Schedule, all Taxes that the Seller, with respect to the Project Company, or the Project Company is or was required by Applicable Law to withhold, deduct or collect have been duly withheld, deducted and collected and, to the extent required, have been paid to the proper Governmental Authority or other Person, and all Tax Returns, including but not limited to Forms W-2 and 1099 (and any similar forms, reports or statements required under state, local or foreign law), required with respect thereto have been properly completed and timely filed. 

(d)     The Project Company is classified as a “disregarded entity” within the meaning of Treasury Regulation Section 301.7701-2(a), and has not made an election to be treated as an association within the meaning of Treasury Regulation Section 301.7701-3. 

(e)     None of Progress Energy or the Seller, with respect to the Project Company, or the Project Company has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate the Project Company to make any payments that are not deductible under Code Section 280G subsequent to the Closing Date. 

 

 

	
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(f)     Except as set forth in Section 5.19(f) of the Seller’s Disclosure Schedule, the Assets have not been classified by any Taxing Authority under the designation authorized by Law to obtain a special low Property Tax rate or to receive a reduction, abatement or deferment of Property Taxes.

5.20  Intellectual Property.  Except as set forth in Section 5.20 of the Seller’s Disclosure Schedule, the Project Company does not own, or directly license from a third party, any Intellectual Property.  The Project Company either owns free and clear of all Encumbrances, or possesses sufficient rights to use, all Intellectual Property listed in Section 5.20 of the Seller’s Disclosure Schedule (the “Intellectual Property Assets”). 

	
            5.21
 	
            Insurance.
 

(a)     Section 5.21 of the Seller’s Disclosure Schedule to this Agreement sets forth a list of (1) all insurance policies (A) to which the Seller, with respect to the Project Company, or the Project Company is a party, named insured or otherwise the beneficiary and (B) which are currently in force or under which the Seller, with respect to the Project Company, or the Project Company could potentially still submit claims for losses with respect to the Project, and (2) all pending applications therefor as are applicable to cover the Assets.  The Seller has delivered to the Purchaser:

(i)      accurate and complete copies of all policies of insurance (and material correspondence relating to coverage thereunder) listed in Section 5.21 of the Seller’s Disclosure Schedule to this Agreement; and

(ii)     accurate and complete copies of all pending applications by the Project Company for policies of insurance as listed in Section 5.21 of the Seller’s Disclosure Schedule.

(b)     All policies of insurance described in Section 5.21 of the Seller’s Disclosure Schedule to this Agreement: (A) are valid and enforceable; (B) are sufficient for compliance with all Applicable Laws and Material Agreements; and (C) do not provide for any retrospective premium adjustment or other experienced-based liability on the part of the Project Company.

(c)     As regards the policies described in Section 5.21 of the Seller’s Disclosure Schedule to this Agreement, the Project Company has not received (i) any refusal of coverage or any notice that a defense will be afforded with reservation of rights or (ii) any notice of cancellation or any other indication that any such policy of insurance is no longer in full force or effect or that the issuer of any such policy of insurance is not willing or able to perform its obligations thereunder.

(d)     As regards the policies described in Section 5.21 of the Seller’s Disclosure Schedule to this Agreement, the Project Company has paid all premiums due, and has otherwise performed all of its material obligations under each such policy of insurance.  

 

 

	
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5.22    Contracts.  Section 5.22 of the Seller’s Disclosure Schedule lists the following types of contracts and other agreements, as they may have been amended, (“Material Agreements”) to which the Project Company is a party:

(a)     any agreement that involves delivery of power, including the Duke Power Contracts and the NCMPA Contracts, performance of services or procurement or delivery of equipment, materials or supplies, or the conveyance of rights (e.g., transmission rights), to the Project Company of an amount or value in excess of one hundred thousand U.S. dollars ($100,000);

(b)     any agreement affecting the ownership of, leasing of, title to, use of or any leasehold or other interest in any real or personal property that, in the case of personal property, is of an amount or value in excess of one hundred thousand U.S. dollars ($100,000);

(c)     any agreement (however named) involving a sharing of profits, losses, costs or liabilities by the Project Company with any other Person;

(d)     any agreement containing covenants that in any material way purport to restrict the Project Company’s business activity or limit the freedom of the Project Company to engage in business or to compete with any Person;

(e)     any power of attorney of the Project Company that is currently effective and outstanding;

(f)     any material written warranty, guaranty or other similar undertaking with respect to contractual performance, which was extended (i) by or on behalf of the Project Company or (ii) to the Project Company; 

(g)     each Affiliated Contract or other intercompany arrangement between the Project Company and its Affiliates, exclusive of any agreement set forth on Section 3.2(h) of the Seller’s Disclosure Schedule; and 

(h)     any amendment, supplement and modification (whether oral or written) in respect of any of the foregoing.

With respect to each Material Agreement of the Project Company:  (A) a true and complete copy of such Material Agreement was made available to the Purchaser in connection with its due diligence; (B) such Material Agreement will in all material respects continue to be legal, valid, binding and enforceable against the Project Company, without amendment, except as permitted in Section 7.2(b), and, to the Seller’s Knowledge, enforceable against the other party thereto, following the consummation of the transactions contemplated hereby except for Affiliated Contracts; (C) the Project Company is not in material breach or default and has not given or received any notice regarding any alleged material violation or breach of, or material default under, any Material Agreement being transferred to the Purchaser, and, to the Seller’s Knowledge, no other party
is in material breach or default, and no event or circumstance has occurred which with provision of notice or expiration of any applicable cure period would 

 

	
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constitute a material breach or default, or permit termination, modification, or acceleration, under the Material Agreement; (D) no party has repudiated any material provision of any Material Agreement; and (E) there are no negotiations or attempts to renegotiate any material amounts paid or payable to the Project Company under the Material Agreements with any Person having the right to demand or require such renegotiation and no written notice of such demand has been received by the Project Company. 

5.23  Guaranties.  The Project Company is not a guarantor or otherwise liable for any liability or obligation (including indebtedness) of any other Person, and no other Person is a guarantor or otherwise liable for any liability or obligation of the Project Company except with respect to the PGN Guaranties.

5.24    Bank Accounts.  The Project Company does not maintain any accounts or safety deposit boxes of any nature with any bank, trust company, savings and loan association, brokerage house or other financial institution.  

5.25    Business.  The only business engaged in by the Project Company is the construction, ownership, operation and maintenance of the Project, the generation and wholesale sale of electric energy and capacity from the Facility and any and all other activities related or incidental to the foregoing.

5.26    Accounts Receivable.  The Seller and the Project Company have provided to the Purchaser a true and correct aging report for all material accounts receivable of the Project Company, and neither the Seller nor the Project Company has received any notice of any contest claim or request of setoff from any obligor of any such accounts receivable relating to the amount or validity of such accounts receivable. 

5.27    Solvency.  The Seller is not insolvent and will not be rendered insolvent by any of the transactions contemplated hereunder.  As used in this Section 5.27, “insolvent” means the inability of a Person to pay his debts when they become due.

ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

As of the Effective Date and again on the Closing Date, the Purchaser hereby represents and warrants to the Seller as follows:  

6.1     Organization and Good Standing.  The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is formed and has the requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.

6.2     Authorization; Enforceability.  The Purchaser has the requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement by the Purchaser and the consummation by the Purchaser of the transactions contemplated 

 

	
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hereby have been duly authorized by all necessary action on the part of the Purchaser and its Affiliates.  This Agreement has been duly executed and delivered by the Purchaser and, assuming the due execution and delivery by the Seller, constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms.

	
            6.3
 	
            No Violation; Consents.
 

(a)     Except as set forth on Section 6.3(a) of the Purchaser’s Disclosure Schedule, and subject to obtaining the Purchaser Approvals set forth on Section 6.3(b) of the Purchaser’s Disclosure Schedule, the execution and delivery by the Purchaser of this Agreement and the consummation by the Purchaser of the transactions contemplated hereby do not and will not:

(i)      violate, contravene, conflict with or result in the breach of any provision of the Governing Documents of, or resolutions of the board of directors of, the Purchaser, 

(ii)     violate, contravene, conflict with, result in the breach of or give rise to any right to revoke, withdraw, suspend, modify or terminate any Approval or Consent to which the Purchaser is bound or subject, 

(iii)     violate, contravene, conflict with or result in the breach of any Applicable Law or

(iv)    permit any Person the right to declare a default or exercise any remedy under, to accelerate the maturity, performance or payment of or to cancel, terminate or modify any note, bond, mortgage, indenture, license or agreement.

Clauses (ii), (iii) and (iv) shall not apply to any conflict, violation, breach, default, requirement for Consents, rights of acceleration, cancellation, termination or Encumbrance that would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

(b)     Except for such Purchaser Approvals set forth on Section 6.3(b) of the Purchaser’s Disclosure Schedule, no Approval or Consent issued by, or declaration or filing with, or notification to, or waiver from any Person, exclusive of internal and corporate authorizations that have been obtained, is required on the part of the Purchaser in connection with the execution and delivery of this Agreement, or the performance by the Purchaser of any provision contained in this Agreement, except for any such requirements the failure of which to obtain or make would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

6.4     Litigation.  There is no Action or Order pending or, to the Knowledge of the Purchaser, threatened against the Purchaser or any of its Affiliates or Subsidiaries that seeks to restrain or prohibit or otherwise challenge the consummation, legality or validity of the transactions contemplated hereby.

 

 

	
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6.5     Investment Intent.  The Purchaser is buying the Membership Interest for investment purposes and not with a view toward, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the Membership Interest.

6.6     Financial Capability.  The Purchaser will have on the Closing Date sufficient cash to purchase the Membership Interest and to consummate the transactions contemplated by this Agreement, including, without limitation, payments of fees and expenses contemplated hereunder.

6.7     Financial Advisors.  None of the Seller or any of its Affiliates is or will become obligated to pay any fee or like payment to any broker, finder or financial advisor as a result of the consummation of the transactions contemplated by this Agreement based upon any arrangement made by or on behalf of the Purchaser. 

6.8     Solvency.  The Purchaser is not insolvent and will not be rendered insolvent by any of the transactions contemplated hereunder.  As used in this Section 6.8, “insolvent” means the inability of a Person to pay his debts when they become due.

ARTICLE VII

 

COVENANTS

7.1     Access to Information.  Prior to the date hereof, the Purchaser has conducted due diligence on the Project Company and has had access to or received the properties, books, records and personnel of the Project Company.  Between the date hereof and the Closing, the Seller shall, and shall cause the Project Company to, in response to reasonable requests of the Purchaser and its representatives (including its legal advisors and accountants) therefor, provide additional access, during normal business hours and upon reasonable advance notice, to the properties, books, records and personnel of the Project Company and the Facility and Real Property; provided, that in no event shall the Seller or the Project Company be obligated to provide (i) any access to
information that is repetitive or duplicative of access previously provided, (ii) access or information in violation of Applicable Law, (iii) bids, letters of intent, expressions of interest, or other proposals received from others in respect of the Project Company or in connection with the transactions contemplated by this Agreement or otherwise, and information and analyses relating to such communications, or (iv) any information, the disclosure of which would jeopardize any privilege available to the Seller, the Project Company or any of their respective Affiliates relating to such information or would cause the Seller, the Project Company or any of their respective Affiliates to breach a confidentiality obligation to which it is bound.  In connection with such access, the Purchaser’s representatives shall cooperate with the Seller’s and the Project Company’s representatives and shall use their reasonable best efforts to minimize any disruption of the business of the
Seller and the Project Company.  The Purchaser agrees to abide by the terms of the Confidentiality Agreement and any safety rules or rules of conduct reasonably imposed by the Seller, the Project Company or their respective Affiliates or the operator of any such entity, as the case may be, with respect to such access and any 

 

	
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information furnished to them or their representatives pursuant to this Section 7.1.  Without regard to Section 10.6(b), the Purchaser shall indemnify, defend and hold harmless the Seller, the Project Company, their Affiliates and their respective officers, directors, employees and agents from and against any and all Liabilities asserted against or suffered by them relating to, resulting from, or arising out of, the examinations or inspections made by the Purchaser or its representatives pursuant to this Section 7.1.

	
            7.2
 	
            Conduct of the Business Pending the Closing.
 

(a)     Except as otherwise expressly contemplated by this Agreement and the schedules attached hereto or with the prior written consent of the Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned), during the period from the date hereof to and through the Closing Date, the Seller shall preserve in all material respects its business operations, organization and goodwill and shall use commercially reasonable efforts, subject to compliance with any contractual obligations, to cause the Project Company to:  (i) conduct its business in the Ordinary Course of Business and in material compliance with all Applicable Laws, Approvals and contractual obligations; (ii) operate and maintain the Facility in accordance with Good Utility Practices; (iii) pay all Liabilities as and when due; (iv) continue in full force and effect the insurance
coverage under the policies set forth in Section 5.21 of the Seller’s Disclosure Schedule; and (v) use commercially reasonable efforts to maintain the existing Employees.  Further, the Seller will reasonably inform and involve, to the extent practicable provided no privilege is waived, the Purchaser in any defense of the Seller or the Project Company against any audit or investigation by the Federal Energy Regulatory Commission or any other Governmental Authority (except for any audit or investigation during the period prior to the Closing Date relating to U.S. federal income Taxes) that specifically relates in any way to the Assets prior to the Closing Date.

(b)     Except as otherwise expressly contemplated by this Agreement and the schedules attached hereto or with the prior written consent of the Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned), during the period from the date hereof to and through the Closing Date, the Seller shall not and shall cause the Project Company not to (i) make any material modification, amendment or extension to any existing Contract or enter into any additional Contract with a payment commitment by the Project Company in excess of one hundred thousand U.S. dollars ($100,000); (ii) enter into any compromise or settlement of litigation, proceeding or investigation by a Governmental Authority relating to the Assets, other than in the Ordinary Course of Business; (iii) allow the Membership Interest or the Assets to become subject to any Encumbrance other than
a Permitted Encumbrance; (iv) issue any additional Membership Interests; (v) merge or consolidate the Project Company with any other Person or allow the Project Company to acquire any assets outside of the Ordinary Course of Business; (vi) sell, lease or otherwise dispose of any Assets other than in the Ordinary Course of Business; (vii) waive any claims or rights of the Project Company in excess of fifty thousand U.S. dollars ($50,000) other than in the Ordinary Course of Business; (viii) incur any indebtedness for borrowed money; (ix) take any affirmative action or fail to take any reasonable action within its control that could result in a Project Company Material Adverse Effect or Seller Material Adverse Effect; (x) make any 

 

	
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material changes in the levels of inventory of parts or other supplies or materials included in the Tangible Personal Property; (xi) enter into any Affiliated Contracts or other arrangement with its Affiliates; (xii) make any change in management personnel located at the Facility; (xiii) grant any Employee an increase in compensation or benefits other than in the Ordinary Course of Business if any such increase would be applicable for any period after the Closing Date; (xiv) make any Tax election, or enter into any agreement concerning Taxes, with respect to the Assets, if such election or agreement would apply to the Project Company or the Assets for any period after the Closing Date; (xv) sell, lease or otherwise dispose of any Emission Allowance except to the extent necessary to operate the Facility within the Ordinary Course of Business; or (xvi) agree or commit to do any of the foregoing.  

(c)     For the avoidance of doubt, the foregoing shall not require the Seller, the Project Company or any of their Affiliates or representatives to make any payments, incur any costs, or enter into or amend any contractual arrangements, agreements or understandings, unless such payment, incurrence or other action is required by any Applicable Law or Approval by any Governmental Entity or by contractual obligation.

7.3     Appropriate Action; Consents; Filings.  Through the Closing Date, the Seller and the Purchaser shall cooperate with each other and use (and will cause their respective Affiliates and Subsidiaries to use) commercially reasonable efforts (i) to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary, proper or advisable on their part under this Agreement, Applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement, (ii) as soon as practicable after execution of this Agreement, to obtain promptly all Purchaser Approvals and Seller Approvals and (iii) to provide prompt notification to the other parties hereto of any actions pursuant to clauses (i) through (ii) of this Section 7.3.  The Purchaser agrees and acknowledges that it must obtain all Necessary Approvals the issuance or renewal of which is required after the Closing Date.  For the avoidance of doubt, the Seller shall not be obligated to pay any consideration or incur any additional costs to obtain any Consents from third parties that may be necessary, proper or advisable to consummate the transactions contemplated by this Agreement if such Consents would cost individually, or in the aggregate, more than fifty thousand U.S. dollars ($50,000).  No party shall have any Liability to the other in the event it is unable to obtain any of the Seller Approvals or the Purchaser Approvals, as the case may be.  Except with respect to a party’s failure to cooperate and take actions contemplated by this Section 7.3, any failure to obtain any Seller Approval or Purchaser Approval hereunder shall not constitute a breach of
any representations, warranties or covenants of a party.  

7.4     Preservation of Records; Cooperation.  Each of the Seller and the Purchaser shall, and on and following the Closing the Purchaser shall cause the Project Company to, preserve and keep in its possession all records held by the Seller or delivered to the Purchaser, as applicable, (including any Tax Returns of the Project Company) on and after the date hereof relating to the business of the Project Company, for a period of the longer of (i) three (3) years following the Closing Date or (ii) the 

 

	
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expiration of the applicable statute of limitations (including extension or waivers thereof) (the applicable period, the “Retention Period”); and shall make such records and personnel available to the other party as may reasonably be required by such party in connection with, among other things, any insurance claims involving, legal proceedings involving, or governmental investigations of the Seller or the Purchaser, as applicable, or any of their respective Affiliates; provided, however, that in no event shall the Seller or the Purchaser be obligated to provide any information the disclosure of which would jeopardize any privilege available to the Seller, the Purchaser, the Project Company or their respective Affiliates relating to such information or which
would cause any of the Seller, the Purchaser, the Project Company or their respective Affiliates to breach a confidentiality obligation to which it is bound.  In addition, for the applicable Retention Period, the Purchaser shall, and shall cause its Affiliates to, use commercially reasonable efforts to make available to the Seller and its Affiliates all records held by any third party operator of the Project Company as may reasonably be required by the Seller or any of its Affiliates in connection with, among other things, any insurance claims involving, legal proceedings involving, or governmental investigations of, the Seller or any of its Affiliates; provided, however, that in no event shall the Seller or the Purchaser be obligated to provide any information the disclosure of which would jeopardize any privilege available to the Seller, the Purchaser, or their respective Affiliates
relating to such information or which would cause any of the Seller, the Purchaser, or their respective Affiliates to breach a confidentiality obligation to which it is bound.  Within thirty (30) days of the expiration of any applicable Retention Period, each party shall have the opportunity (but not the obligation), at its sole cost and expense and upon written notice to the other party, to remove and retain all or any part of the records preserved by the other party as the first party may in its sole discretion select.  

7.5     Confidentiality.  The parties acknowledge that the Purchaser or its Affiliate and the Seller or its Affiliate previously executed a Confidentiality Agreement, dated June 4, 2004 (the “Confidentiality Agreement”), between Progress Ventures, Inc. and Southern Company Services Inc., which Confidentiality Agreement shall continue in full force and effect in accordance with its terms.  In addition, the parties agree that the terms and conditions of the transactions contemplated hereby and any access or information provided to the Seller, the Purchaser, or their respective representatives hereunder in connection with the execution hereof shall be subject to the same standards and obligations of confidentiality as set forth in the
Confidentiality Agreement.  

7.6     Public Announcements.  Prior to the Closing Date, none of the Seller, the Purchaser, or any of their Affiliates, or any of their agents or representatives, shall issue any press release or public statement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other parties hereto, unless such disclosure is required by Applicable Law, Order or obligations pursuant to any agreement with any national securities exchange or national securities association; provided, that the party intending to make such release shall give the other parties prior notice and shall use its commercially reasonable efforts consistent with such Applicable Law, Order or obligation to consult with the other
parties with respect to the text thereof.

 

 

	
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7.7     Use of Name.  Following the Closing Date, neither the Purchaser nor any of its Affiliates shall have any right, title or interest in the name “Progress” or “Progress Energy” (or any variation thereof) or any trademarks, trade names, logos or symbols related thereto. As soon as reasonably practicable following the Closing (and in any event, within sixty (60) days thereafter), the Purchaser shall cause the removal of all trademarks, trade names, logos and symbols related to the name “Progress” or “Progress Energy” from any Assets (including all signs) that are visible to, or obtainable by, members of the public.

	
            7.8
 	
            Certain Dividends, Assignments and Releases.
 

(a)     Subject to Section 7.2, prior to or at the Closing, the Seller shall be permitted to cause the Project Company to make dividends, distributions or assignments for nominal consideration of all (i) cash, (ii) cash equivalents and (iii) all intercompany accounts and obligations of the Seller or any of its Affiliates in favor of the Project Company, including without limitation each contract that the Project Company has, as of the date hereof, with the Seller or any of its Affiliates (such accounts and obligations, the “Intercompany Receivables”) until the Seller or any of its Affiliates (other than the Project Company) is the owner and beneficiary of such cash, cash equivalents and Intercompany Receivables and the parties hereto expressly agree that such cash,
cash equivalents and Intercompany Receivables or any value related thereto shall not be part of the Membership Interest or any of the value transferred pursuant to this Agreement.

(b)     Prior to or at the Closing, except as set forth on Schedule 7.8(b) the Seller shall cause all Affiliated Contracts, intercompany accounts and obligations that are obligations of the Project Company to the Seller or any of its Affiliates (other than the Project Company), including without limitation each contract that the Project Company has, as of the date hereof, with the Seller or any Affiliate of the Seller, to be assigned to, and assumed by, an entity other than the Project Company, repaid, terminated or otherwise satisfied, without Liability to the Project Company.  

(c)     Prior to or at the Closing, the Seller and any Affiliates of the Seller to which the Project Company has any Liabilities shall have released the Project Company from all Intercompany Payables, other than those Liabilities set forth on Schedule 7.8(c).

7.9     Further Assurances.  The Seller and the Purchaser agree that from and after the Effective Date, each of them will, and will cause their respective Affiliates to, execute and deliver such further instruments of conveyance and transfer and take such other action as may reasonably be requested by any party hereto to carry out the purposes and intent hereof.

7.10    Supplements to Schedules.  The Seller may from time to time prior to ten (10) Business Days preceding any anticipated Closing Date by notice in accordance with this Agreement supplement or amend the Schedules to correct any matter that would otherwise constitute a breach of any representation or warranty contained herein; provided, that if the Purchaser identifies and notifies the Seller of any 

 

	
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matter that would otherwise constitute a breach of any representation or warranty to the Seller, the Seller shall be required to supplement or amend the Schedules to correct such matter.  If any supplement or amendment materially adversely affects the benefits to be obtained by the Purchaser under this Agreement and the Purchaser objects in writing, within the earlier of (i) ten (10) Business Days of receiving notice of any such supplement or amendment or (ii) the anticipated Closing Date, to any purported breach sought to be so cured, then the Purchaser shall have the right to terminate this Agreement.  If any such amendment or supplement is necessitated by events (or items that have come to the Seller’s Knowledge where such representation is qualified by the Seller’s Knowledge) subsequent to the Effective Date, then, without prejudice to the Purchaser’s rights related to Casualty Insurance
Claims as provided in Section 7.19, the Purchaser’s right of termination shall be the Purchaser’s sole remedy relating to the matters set forth in amendments or supplements to the applicable Schedules.  If any amendment or supplement is needed to cure any breach of the Seller’s representations and warranties that were inaccurate or incomplete on the Effective Date, then in addition to any right of termination, the Purchaser shall be entitled to close notwithstanding Knowledge of such breach, the Schedules will not be deemed amended and supplemented for the purposes of the indemnification provisions of Article X and the Purchaser shall not be prohibited pursuant to Section 10.8 from seeking indemnification pursuant to Article X.  In all other cases, to the extent the Agreement is not
terminated, the Schedules and representations and warranties shall be deemed for all purposes to include and reflect such supplements and amendments as of the date hereof and at all times thereafter, including the Closing Date.   

	
            7.11
 	
            Environmental Due Diligence.  
 

(a)     Subject to Section 7.1, the Seller and the Project Company shall permit the Purchaser to have reasonable access to the Project during normal business hours, in such a manner as will not unreasonably interfere with operations at the Project, to perform, at the Purchaser’s sole expense, a Phase I environmental assessment of the Project pursuant to ASTM Standard E 1527-05 conducted by a nationally recognized environmental consultant approved by the Seller (whose approval shall not be unreasonably withheld), and, if determined necessary by the Purchaser, a Phase II environmental site assessment conducted by a nationally recognized environmental consultant approved by the Seller.  The Purchaser or its representative shall provide notice of the date of the site visit to the designated Project manager at least three
(3) Business Days in advance of the commencement of such visit.  The Purchaser shall disclose to the Seller and the Project Company all of the results of any such Phase I or II environmental investigation, including providing copies of all reports generated in or as a result of such investigation (excluding any draft reports prepared at the direction of counsel or reports prepared by such counsel for the Purchaser) within three (3) Business Days of the Purchaser’s receipt thereof.

(b)     The scope of work for such Phase II assessments or sampling shall be approved by the Seller prior to the commencement of any such assessment or sampling.  The Purchaser shall provide the Seller the opportunity to take, at Seller’s expense, split sampling during any sampling event.  The Purchaser shall provide to Seller 

 

	
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the complete results of any such assessment or sampling, including all laboratory analyses, field notes, boring logs, and the like, including the interpretation of the results by the Purchaser’s environmental consultant (and in the event the Seller elects to take split sampling, the Seller shall provide such results to the Purchaser).  Except as provided in this Section 7.11, Purchaser shall not disclose the proposed Phase II assessments or sampling or the results thereof to any Person.  The Purchaser shall be solely responsible for the disposal of all sampling material and media.  

(c)     In the event that the results of Phase II assessments or sampling indicate a condition for which Environmental, Health and Safety Laws require further investigation, remediation, or other similar response, the Seller shall be entitled to exercise, at its sole discretion, one of the following options: within five (5) Business Days of receiving such assessment (including all of the information required by this Section 7.11 to be disclosed to Seller), notifying the Purchaser in writing of the Seller’s intention to either (A) further investigate, remediate or otherwise respond to any such condition indicated by the Phase II assessments or sampling, at Seller’s sole expense, prior to the Closing or within a reasonable time thereafter or (B) not further investigate, remediate or otherwise respond to any such
condition, in which event, the Purchaser may either (1) remediate or otherwise respond to such condition at the Purchaser’s sole expense subsequent to the Closing or (2) terminate this Agreement; provided, that if the condition indicated by the Phase II assessments or sampling is reasonably likely to result in a Project Company Material Adverse Effect, then the Seller shall have the right to terminate this Agreement.

(d)     In the event that Seller and Purchaser fail to agree, after exercising good faith efforts to agree, on any of the following issues, the Seller or the Purchaser may initiate arbitration of such dispute as provided in this Section 7.11.  The issues for which such arbitration shall be available include: (i) whether the results of Purchaser’s Phase II investigation, taking into account any results of such Phase II investigation conducted by Seller, constitute a condition for which Environmental, Health and Safety Laws require further investigation, remediation or further similar response; (ii) if Seller exercises the option set forth in Subsection 7.11(c)(A) hereof, whether Seller has performed or completed such further investigation, remediation or further similar
response required by  Environmental, Health and Safety Laws (including whether Seller has so performed or completed within a reasonable time after the Closing); or (iii) whether the results of Purchaser’s Phase II investigation, taking into account any results of such Phase II investigation conducted by Seller, constitute a condition that is reasonably likely to result in a Project Company Material Adverse Effect.

(e)     In the event either the Seller or the Purchaser elects to initiate arbitration pursuant to Subsection 7.11(d) hereof by written notice to the other, such dispute shall be resolved by the decision of a panel of Environmental Professionals, one each chosen by the Seller and the Purchaser, and the third (to act as chairman) chosen by the other two arbiters (the “Arbitration Panel”); provided, that if the chairman of the Arbitration Panel is not appointed within five (5) days of the notice of a dispute, then the parties may apply to the American Arbitration Association for the purpose of appointing such chairman, who shall have the qualifications set forth herein..  

 

	
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“Environmental Professional” means a qualified professional who is either an attorney or an environmental or professional engineer, or similar expert, and in any case experienced in matters arising under Environmental, Health and Safety Laws and who is professionally so licensed by the State of North Carolina; and in the case of the chairman of the Arbitration Panel, who is not and has not been employed or retained by either Seller or Purchaser or any Affiliate thereof.  Within thirty (30) days after the naming of the Arbitration Panel, the Arbitration Panel shall issue a report resolving the dispute.  The Arbitration Panel may at its sole discretion retain the services of a environmental or professional engineer, or similar expert (acceptable to and approved by both Purchaser and Seller) to assist in the Arbitration Panel’s resolution of the
dispute.  The Arbitration Panel shall resolve the dispute based on a review of the Purchaser’s Phase I or Phase II environmental assessments, the Seller’s split sampling (if any) and written submissions by the Purchaser and Seller setting forth their positions and the reasons in support thereof, after meeting with the parties. The decision of the Arbitration Panel shall be binding upon the Seller and the Purchaser with respect to the dispute so resolved, shall be final, and shall not be subject to judicial review. Each party shall bear its own attorney’s and expert’s costs and fees, and the costs and fees of the chairman of the Arbitration Panel or expert retained by the Arbitration Panel in accordance with this Section 7.11 shall be borne equally by the Purchaser and the Seller.

	
            7.12
 	
            Title Insurance and Surveys.
 

(a)     Title Insurance.  In the event the Purchaser elects to purchase a title insurance policy with regard to the Project, such policy shall be purchased from First American Title Insurance Company, Fidelity National Title Insurance Company or Land America.  The commitment, any policy of title insurance, and other title costs or charges, including search and exam fees, shall be at the Purchaser’s sole cost and expense.

(b)     Certain Exceptions to Title.  The Purchaser shall have the right to object in writing to any title matters that are not Permitted Real Property Encumbrances that are disclosed in any title commitment (or any update thereof) within ten (10) Business Days after receipt thereof by delivering written notice to the Seller.  Unless the Purchaser shall timely object to any such title matters, all such title matters shall be deemed to constitute additional Permitted Real Property Encumbrances.  Any such title matters which are not Permitted Real Property Encumbrances and which are timely objected to by the Purchaser shall be herein collectively called the “Title Objections.”  The Seller may elect (but shall not be obligated) to remove or cause to be removed any
Title Objections, which removal will be effected by the issuance of title insurance omitting the Title Objections as exceptions to coverage; provided, that the Seller must so remove and satisfy of record any mortgage, lien, judgment or other Title Objection which may be so removed and satisfied by the payment of a liquidated sum of money.  In the event that the Purchaser elects to purchase an owner’s title insurance policy, such policy shall be an ALTA 1992 form owner’s title insurance policy with respect to the Real Property and the Improvements, insuring the Project Company as the fee simple owner in the amount of that portion of the Purchase Price allocated to the Real Property and Improvements, deleting all requirements listed in ALTA Schedule B-1, subject only to the Permitted Real Property Encumbrances, and providing for endorsements requested by 

 

	
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the Purchaser which may be issued by title insurance companies in the State of North Carolina, including, without limitation, ALTA 9 (comprehensive endorsement), same-as-survey, access, tax lot, contiguity, subdivision and non-imputation endorsements.  The Seller hereby agrees to execute and deliver any affidavit, indemnification or other information reasonably required by the title insurer in connection with the issuance of a non-imputation endorsement (or any other endorsement) or otherwise in connection with the issuance of such title insurance policy.

(c)     Survey.  The Purchaser hereby accepts the state of facts shown on the survey identified in Schedule 7.12(c).  The Purchaser, at its sole cost and expense, may have the aforementioned survey updated.  The Purchaser shall have the right to object in writing to any new state of facts not shown on the aforementioned survey that are not Permitted Real Property Encumbrances within ten (10) days after receipt of the updated survey by delivering written notice to the Seller.  Any such new state of facts which are timely objected to by the Purchaser shall be herein collectively called the “Survey Objections.”  The Seller may elect (but shall not be obligated) to remove or cause to be removed or insured over any Survey
Objections, which removal will be deemed effected by the issuance of title insurance eliminating the Survey Objections.

	
            7.13
 	
            Transition Plan.  
 

(a)     The parties acknowledge and agree that in order to ensure that upon Closing the transition of the ownership and operation of the Facility is as smooth and orderly as is reasonably practicable, representatives of the Purchaser shall be entitled to become familiar with the Facility and other Assets, and be introduced to, and have the opportunity to meet with, suppliers, other vendors and customers of the Project Company, and to conduct other activities as set forth on the transition plan as determined by the Transition Committee.  In connection with such transition, the Purchaser will have reasonable access to the Facility including the communications room, control room and equipment rooms.  After the Closing Date, the Seller and Purchaser shall reasonably cooperate to effect the termination of any agreement that is related to the Project and to which the Seller
or one of its Affiliates is a party.  

(b)     Promptly after the Effective Date, the Seller will inform the Purchaser regarding the planned operation schedule of each Unit for the next six (6) months.  The Purchaser shall be allowed to send observers to the Facility to observe the operation of each of the Units.  Such observers may return to the Facility on multiple occasions, including such occasions as may be necessary for the observers to observe each Unit’s operations immediately after the Effective Date and to observe their operations immediately prior to the scheduled Closing Date.  The observers shall be allowed to monitor and record performance of each Unit and shall be allowed access to historical performance data following operation and shutdown of each of the Units; provided, that the Seller or its Affiliates shall not be required to incur any
expenses for such monitoring or access other than expenses the Seller or its Affiliates would incur in the absence of such monitoring or access unless the Purchaser agrees to pay for such incremental expenses.  Items that may be monitored will include, without limitation: (i) individual CT gross power output (at the generator terminals); (ii) individual CT fuel 

 

	
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consumption; (iii) ambient temperature; (iv) ambient pressure; (v) ambient relative humidity; (vi) average exhaust temperature; (vii) exhaust temperature profile; (viii) compressor discharge pressure; (ix) compressor discharge temperature; (x) IGV angle; (xi) water injection flow rate (if applicable for oil firing); (xii) NOx emissions; and (xiii) CO2 emissions.  

(c)     In order to provide a space for the Purchaser to conduct its business in furtherance of the transition procedures contained in this Section 7.13, the Seller shall, and shall cause the Project Company to, allow the Purchaser to bring onto and maintain on the Real Property a mobile office unit (e.g., a trailer) immediately following the Effective Date.  The exact location for the mobile office unit will be agreed to by the Transition Committee and will allow for reasonable access to the Facility.  The Seller shall provide a method and labor to connect the mobile office electrical service to the Facility’s station service.  Furthermore, the Purchaser shall be permitted to use a third-party contractor to come onto the Real Property and provide services for temporary voice and data connectivity and to stage
materials for permanent installation during the transition and post-Closing.

(d)     Except as provided in the foregoing clauses of this Section 7.13, any access to the Project, and any activities undertaken at the Project, by the Purchaser or its Affiliates, any representative of the Purchaser or its Affiliates, or any third party acting on behalf of the Purchaser or its Affiliates must receive the prior express consent of the Seller, its Affiliates or a representative of the Seller or its Affiliates. 

(e)     As soon as possible after the date of this Agreement, the Seller and the Purchaser shall create a special transition committee (the “Transition Committee”) that shall be composed of two representatives of the Seller and two representatives of the Purchaser.  After the date of this Agreement and prior to the Closing, subject to Applicable Law, the Transition Committee shall exchange information and examine various alternatives regarding the manner in which to best transition management of the Project Company and the Facility to the Purchaser effective as of the Closing Date.  The Transition Committee shall hold periodic meetings, which meetings may be held telephonically or in person, and shall act by majority vote.

7.14    Replacement of Credit Support.  The parties shall cooperate and use commercially reasonable efforts in order that, effective as of the Closing Date, (a) the PGN Guaranties may be terminated and the credit support procured by Progress Energy or its Affiliates on behalf of the Project Company in connection with the PGN Guaranties, the Duke Contracts or the NCMPA Contracts may be returned and (b) substitute credit support arrangements, if required, of the Purchaser or an Affiliate of the Purchaser shall be in effect.

7.15    Performance Testing.  Upon written request and at the direction of the Purchaser, the Seller shall cause the Project Company to conduct performance tests of the Facility in accordance with the testing procedures contained in the Duke Power Contracts, which may be reviewed by the Purchaser, and in accordance with any additional procedures set out in Exhibit P; provided, that the Purchaser shall have the 

 

	
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option of monitoring and recording the results of such tests or requiring the Project Company to monitor and record such tests; provided, further, that the costs of any such tests shall be paid by the Purchaser.  Any such performance tests shall be coordinated to the maximum extent possible to mitigate the costs of such performance tests, including the purchase of fuel for such performance tests.  If any such performance test of the combined cycle Unit or the collective combustion turbine Units does not meet the requirements such that the certificate set forth in Section 3.2(k) may be provided, then Seller, at its sole expense shall be permitted to retest such combined cycle Unit or collective combustion turbine Units in order to achieve such requirements;
provided that Seller shall only be permitted to perform one such retest with thirty (30) days from the date of the failed test and at least five (5) days prior to Closing.

7.16    No Solicitation.  Until such time as this Agreement shall be terminated neither the Seller nor any of its Affiliates shall directly or indirectly solicit, initiate, encourage, discuss or negotiate with or provide any nonpublic information to any Person (other than the Purchaser) relating to any business combination transaction involving the Project Company, including the sale by the Seller of any of the Project Company’s Membership Interest, the merger or consolidation of the Project Company or the sale of the Project Company’s business or any of the Assets.

7.17  Removing Excluded Assets.  On or before the Closing Date, the Seller shall remove from the Facility and the Real Property all Excluded Assets as well as any assets and equipment that, as of the Effective Date, are located at the Project and are owned or leased by an Affiliate of the Project Company or some other third party (“Third-Party Assets”).  All Third Party Assets valued in excess of one hundred thousand U.S. dollars ($100,000) are set forth in Section 7.17 of the Seller’s Disclosure Schedule.  Such removal shall be undertaken in such manner as to avoid any damage to the Facility and other Assets and any disruption of the business operations of the
Project Company after the Closing.  The cost of any damage to the Facility or any other Assets resulting from such removal shall be paid by the Seller at the Closing.  Should the Seller fail to remove the Excluded Assets and Third-Party Assets as required by this Section 7.17, the Purchaser shall have the right, but not the obligation, (a) to remove the Excluded Assets and Third-Party Assets at the Seller’s sole cost and expense; (b) to store the Excluded Assets and Third-Party Assets as unclaimed and to charge the Seller all storage costs associated therewith; (c) thirty (30) days after the Closing Date, to treat the Excluded Assets and Third-Party Assets, except for those Third-Party Assets owned by third parties that are not Affiliates of the Project Company, as unclaimed and to proceed to dispose of the same under the laws governing unclaimed property; or (d) to exercise any other right or remedy conferred by this Agreement or
otherwise available at law or in equity.  The Seller shall promptly reimburse the Purchaser for all costs and expenses incurred by the Purchaser in connection with any Excluded Assets and Third-Party Assets not removed by the Seller on or before the Closing Date.

	
            7.18
 	
            Credit Support.  
 

 

 

	
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(a)     On or before the Effective Date, the Seller will cause Progress Energy to issue a payment and performance guaranty in favor of the Purchaser in the form attached to this Agreement as Exhibit M (the “PGN Parent Guaranty”).

(b)     On or before the Effective Date, the Purchaser will cause Southern Power Company to issue a payment and performance guaranty in favor of the Seller in the form attached to this Agreement as Exhibit N (the “Southern Power Parent Guaranty”).

	
            7.19
 	
            Insurance.  
 

(a)     The parties acknowledge and agree that effective upon the Closing, the Seller’s insurance policies shall be terminated or modified to exclude coverage of the Facility by the Seller.  Consequently, the Purchaser will at or before the Closing obtain at its sole cost and expense replacement insurance policies providing coverage for claims made and arising after the Closing Date.

(b)     The Seller and the Purchaser agree that Casualty Insurance Claims relating to the Assets or the business of the Project Company (including those already reported and those relating to events that have occurred prior to the Closing but have not yet been reported) shall remain with the Project Company following the Closing.  For purposes hereof, “Casualty Insurance Claims” shall mean any claims in respect of events that occurred prior to the Closing under any of the casualty insurance policies relating to business interruption or property or physical damage maintained by the Seller or its Affiliates prior to the Closing with respect to the Assets or business of the Project Company and listed on Schedule 7.19(b) (the “Progress
Insurance Policies”).  The Seller will, and will cause its Affiliates to, maintain all Progress Insurance Policies in full force and effect at all times prior to the Closing.  The parties acknowledge that the Casualty Insurance Claims shall be subject to the terms and conditions of the Progress Insurance Policies.  With respect to the Casualty Insurance Claims, the following procedures shall apply: (i) an authorized officer of the Purchaser or the Project Company shall deliver written notice to the Seller of any Casualty Insurance Claim of which it becomes aware following the Closing and which such authorized officer believes in good faith may be covered by any of the Progress Insurance Policies, and (ii) the Seller and its Affiliates shall, in good faith and in cooperation and consultation with the Purchaser, promptly and with due expediency submit, administer, investigate, evaluate and dispose of all Casualty Insurance Claims with the appropriate insurer
and the insurance claims service company on behalf of the Purchaser or the Project Company, such that any and all proceeds from such Casualty Insurance Claim will be paid by the Seller or its Affiliates over to the Project Company; provided, however, that from and after the Closing, in no event shall the Seller or any of its Affiliates be required to file any Action or initiate any other proceeding against any underwriter of any Progress Insurance Policy in respect of any Casualty Insurance Claim.  For the avoidance of doubt, the Purchaser shall have the right to seek indemnification pursuant to Section 10.6 from the Seller for breaches of the Seller’s obligations pursuant to this Section 7.19(b), but shall not have the right to seek indemnification pursuant to Section
10.6 for any insurer’s failure to pay with respect to any Casualty Insurance Claim.  

 

 

	
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(c)     The Purchaser shall pay to the Seller, its Affiliate or any authorized insurance claims service provider the amount of any invoice received from the Seller, its Affiliates or any authorized insurance claims service provider for any reasonable and demonstrable costs and expenses incurred by any such Person in connection with the administration, investigation, evaluation or disposal of any Casualty Insurance Claims on behalf of the Project Company pursuant to Section 7.19(b) within twenty (20) Business Days of receipt of any such invoice; provided that, the Seller shall pay the cost of any premiums and deductibles due and owing under the respective Progress Insurance Policy relating to any such Casualty Insurance Claims.

(d)     Nothing in this Agreement is intended to provide or shall be construed as providing a benefit or release to any insurer or claims service organization of any obligation under any Progress Insurance Policy.  The Seller and the Purchaser confirm that the sole intention of Sections 7.19(b) and (c) is to divide and allocate the benefits and obligations under the Progress Insurance Policies between them as of the Closing Date and not to alter in any manner the rights and obligations of any insurer or contract claims service company thereunder or the rights and obligations of the Seller or the Project Company thereunder.  Nothing herein shall be construed as creating or permitting any insurer or contract claims service company the right of subrogation against the Seller or
the Purchaser or any of their respective Affiliates in respect of payments made by one to the other under any Progress Insurance Policy.

	
            7.20
 	
            Emission Credits.  
 

 

 (a)    If the Closing occurs, the actual total emissions generated by the Facility on or after January 1, 2006, until the Closing Date for which sulfur dioxide Emissions Allowances (“SO2 Emissions Allowances”) are required shall be determined by the parties as soon as practicable after the Closing Date and the Seller shall at its option promptly after such determination either (a) transfer, or cause another Person to transfer, to the Purchaser SO2 Emissions Allowances in the amount required for such emissions or (b) reimburse the Purchaser in an amount equal to the cost of such SO2 Emissions Allowances at the price per such Emission Allowance as published in the Cantor Environmental Brokerage Monthly Market Price Indices (or its successor index) as of the Closing Date.

 

 (b)    If the Closing occurs, Seller and Purchaser agree that the cost of purchasing Emission Allowances required for emissions of oxides of nitrogen generated by operation of the plant (the “NOX Emissions Allowances”) from May 1, 2006 through September 30, 2006 (“Ozone Season”) shall be allocated by determining, as soon as practicable after the end of the Ozone Season, the actual total of such emissions by the Facility for which such Emission Allowances are required from May 1, 2006 through the Closing Date, the actual total of such emissions by the Facility for which such NOX Emission Allowances are required from May 1, 2006 through September 30, 2006, and the difference between such totals.  The total NOX Emission Allowances required for operation of
the Facility during the entire 2006 Ozone Season shall also be determined and shall be referred to in herein as “Total 2006 Ozone Emission Allowances”.  In the event that the Total 2006 Ozone Emission Allowances is 136 or lower, Purchaser shall 

 

	
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reimburse Seller for 11 NOX Emission Allowances in an amount equal to the cost of such NOX Emission Allowances as of the Closing Date.  In the event that the Total 2006 Ozone Emission Allowance is greater than 136 but less than 148, Purchaser shall reimburse Seller in an amount equal to the proportion of the amount of emissions of oxides of nitrogen which were generated by the Facility from the Closing Date through September 30, 2006 compared to the total of such emissions generated by the Facility during the Ozone Season multiplied by the cost of 11 NOX Emission Allowances required for such emissions based on the cost of such NOX Emission Allowances in the open market as of the Closing Date. In the event that the Total 2006 Ozone Emission Allowance is greater than 147, Seller shall reimburse Purchaser in an amount equal to the proportion of the amount of emissions of oxides of nitrogen which were generated by
the Facility from May 1, 2006 through the Closing Date compared to the total of such emissions generated by the Facility during the Ozone Season multiplied by the difference between 147 and the Total 2006 Ozone Emission Allowances multiplied by the cost of one such Emission Allowance on the open market as of the Closing Date.  Determination of the cost of a NOX Emission Allowance shall be governed by the price of the applicable NOX Emission Allowance as published in the Cantor Environmental Brokerage Monthly Market Price Indices (or its successor index).  Seller and Purchaser shall have the option of transferring NOX Emission Allowances to the other in lieu of reimbursing the other for the cost of such NOX Emission Allowances.  

 

ARTICLE VIII

 

CONDITIONS TO CLOSING

8.1     Conditions Precedent to Obligations of Each Party.  The respective obligations of the Seller and the Purchaser to consummate the transactions contemplated by this Agreement are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions:

(a)     No Order issued by any Governmental Authority of competent jurisdiction preventing the consummation of the transactions contemplated hereby shall be in effect, nor shall any material proceeding initiated by any Governmental Authority of competent jurisdiction having valid enforcement authority seeking such an Order be pending, nor shall there be any action taken, nor any Law or Order enacted, entered or enforced that has not been subsequently overturned or otherwise made inapplicable to this Agreement, that makes the consummation or performance of any of the transactions contemplated hereby illegal;

(b)     Any waiting period (including any extension thereof) applicable to the purchase and sale of the Membership Interest to the Purchaser under the HSR Act shall have been terminated or expired; and

(c)     The Seller Approvals and the Purchaser Approvals shall have been obtained and do not contain or result in any condition, requirement or other term that (i) requires the divestiture or transfer of control of any assets by Purchaser or any of its 

 

	
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Affiliates or (ii) would result in a Seller Material Adverse Effect, Purchaser Material Adverse Effect or Project Company Material Adverse Effect. 

8.2     Conditions Precedent to Obligations of the Purchaser.  The obligations of the Purchaser to consummate the transactions contemplated by this Agreement are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by the Purchaser, in whole or in part, subject to Applicable Law):

(a)     The representations and warranties of the Seller contained herein that are qualified as to materiality shall be true and complete in all respects and each such representation or warranty that is not so qualified shall be true and complete in all material respects, in each case as of the date hereof and at and as of the Closing Date, except to the extent that any of such representations or warranties refers specifically to a date other than to the date hereof or the Closing Date, in which case as of such other date;

(b)     The Seller shall have performed and complied with its obligations and covenants required by this Agreement to be performed or complied with by the Seller on or prior to the Closing Date, in all material respects; and

(c)     The Seller shall have delivered to the Purchaser the deliveries contemplated by Section 3.2.

8.3     Conditions Precedent to Obligations of the Seller.  The obligations of the Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived by the Seller, in whole or in part, subject to Applicable Law): 

(a)     The representations and warranties of the Purchaser contained herein that are qualified as to materiality shall be true and complete in all respects and each such representation or warranty that is not so qualified shall be true and complete in all material respects, in each case as of the date hereof and at and as of the Closing Date, except to the extent that any of such representations or warranties refers specifically to a date other than to the date hereof or the Closing Date, in which case as of such other date;

(b)     The Purchaser shall have performed and complied with all obligations and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date, in all material respects; 

(c)     Progress Energy and Duke Power or NCMPA, as applicable, shall have executed the PGN Guaranty Termination and Release Agreements and any credit support provided under the PGN Guaranties, the Duke Contracts or the NCMPA Contracts returned or terminated; 

(d)     The transactions contemplated in the DeSoto Agreement shall have closed, unless any failure to close such transactions was due solely to the Seller’s material breach of the DeSoto Agreement; and

 

 

	
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(e)     The Purchaser shall have delivered to the Seller the deliveries contemplated by Section 3.3.

ARTICLE IX

 

TAXES

9.1     Sales and Transfer Taxes.  All transfer, documentary, recording, notarial, sales, use, registration, stamp, real or personal property (except for Property Taxes described in Section 9.2) and other similar Taxes, fees and expenses (including, but not limited to, all applicable stock transfer or real estate transfer Taxes and including any penalties, interest and additions to such Tax) (“Transfer Taxes”) incurred in connection with this Agreement and the transactions contemplated thereby shall be borne one-half by the Purchaser and one-half by the Seller, regardless of whether any Taxing Authority seeks to collect such Taxes from the Purchaser or the Seller.   If required by Applicable Law, the
Seller shall duly and timely file all Tax Returns in connection with such Transfer Taxes after consultation with the Purchaser.  The Purchase Price does not include any Transfer Taxes imposed in connection with the sale of the Membership Interest.  The parties shall cooperate to comply with all requirements relating to Tax Returns for such Transfer Taxes and shall provide each other with such documentation and take such other actions as may be reasonably necessary to minimize the amount of any such Transfer Taxes.  

9.2     Property Taxes.  Real and personal property ad valorem taxes with respect to the Project (“Property Taxes”), and any rebates relating to such Property Taxes provided for in the Location Assistance Agreement between Rowan County, North Carolina and Carolina Power & Light Company, an Affiliate of the Project Company (“Property Tax Rebate”), for the taxable period that includes the Closing Date shall be prorated on a daily basis through the Closing Date.  The Seller shall be liable only for the portion of such Property Taxes attributable to the portion of such taxable period ending on the Closing Date (the “Pre-Closing Period”), and shall be entitled to the portion of any Property Tax Rebate attributable to such Pre-Closing Period.  In the event that such Property Tax Rebate is received by either party after the Closing Date, such party shall promptly pay over to the other party the prorated portion of such refund such other party is entitled to under this Section 9.2.  If a tax bill in respect of the Property Taxes for the taxable period during which the Closing Date occurs has not been received by the Seller, the pro-ration shall be based upon the actual amount of Property Taxes for the preceding taxable period, and such Property Taxes shall be reprorated promptly following the date that the actual amount of Property Taxes becomes available.  Notwithstanding any other provision of this Agreement, (i) if the Seller pays any such Property Tax not attributable to a Pre-Closing Period, the Purchaser
will reimburse the Seller upon demand for the amount of such Property Tax paid, and (ii) if the Purchaser pays any such Property Tax attributable to a Pre-Closing Period, the Seller will reimburse the Purchaser upon demand for the amount of such Property Tax paid.

 

 

	
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ARTICLE X

 

CERTAIN REMEDIES AND LIMITATIONS 

	
            10.1
 	
            Review.
 

(a)     No Reliance.  The Purchaser has reviewed and has had access to certain documents, records and information and has had the opportunity to ask questions in connection with its decision to enter into this Agreement and to consummate the transactions contemplated hereby.  In connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, the Purchaser has not relied upon, and the Purchaser expressly waives and releases the Seller from any liability for any claims (including claims based upon fraudulent inducement) relating to or arising from, any representation, warranty, statement, advice, document, projection, or other information of any type provided by the Seller or any of its Affiliates or any of its representatives, except for those representations and
warranties expressly set forth in Article V.  In deciding to enter into this Agreement, and to consummate the transactions contemplated hereby, the Purchaser has relied solely upon its own knowledge, investigation, and analysis (and that of its attorneys, accountants, consultants and representatives) and not on any disclosure or representation made by, or any duty to disclose on the part of, the Seller or its Affiliates or any of its representatives, other than the express representations and warranties of the Seller set forth in Article V.

(b)     Limited Duties.  Any and all duties and obligations which any party hereto may have to any other party hereto with respect to or in connection with the Membership Interest, the Intercompany Receivables, the Project Company, this Agreement or the transactions contemplated hereby are limited to those specifically set forth in this Agreement.  Neither the duties nor obligations of any party hereto, nor the rights of any party hereto, shall be expanded beyond the terms of this Agreement on the basis of any legal or equitable principle or on any other basis whatsoever.  Neither any equitable nor legal principle nor any implied obligation of good faith or fair dealing nor any other matter requires any party hereto to incur, suffer or perform any act, condition or obligation contrary to the terms of this Agreement,
whether or not existing and whether foreseeable or unforeseeable.  Each of the parties hereto acknowledges that it would be unfair, and that it does not intend, to increase any of the obligations of any other party under this Agreement on the basis of any implied obligation or otherwise.

10.2    Limitation of Representations and Warranties.  Except for the representations and warranties set forth in Article V, the Seller is not making any other representations or warranties, written or oral, statutory, express or implied, concerning the Membership Interest, or the business, Assets or Liabilities of the Seller or the Project Company.  The Purchaser acknowledges that, except as expressly provided in this Agreement, the Seller has not made, and that the Seller hereby expressly disclaims and negates, and the Purchaser hereby expressly waives, any representation or warranty, express, implied, at common law, by statute or otherwise relating to, and the Purchaser hereby expressly waives and relinquishes any and all rights, claims and causes of action
against the Seller and any of its Affiliates and representatives in connection with the 

 

	
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accuracy, completeness or materiality of any information, data or other materials (written or oral) heretofore furnished to the Purchaser and its Affiliates or representatives by or on behalf of the Seller or any of its Affiliates or its representatives in connection therewith.  Without limiting the foregoing, the Seller is not making any representation or warranty to the Purchaser with respect to any financial projection or forecast relating to the business, Assets or Liabilities of the Seller or of the Project Company.  With respect to any projection or forecast delivered on behalf of the Seller to the Purchaser or its Affiliates or representatives, the Purchaser acknowledges that (i) there are uncertainties inherent in attempting to make such projections and forecasts, (ii) the Purchaser is familiar with such uncertainties, (iii) the Purchaser is taking full responsibility for making its own evaluation of
the adequacy and accuracy of all such projections and forecasts furnished to it, and (iv) the Purchaser shall have no claim against the Seller or any of its Affiliates or representatives with respect thereto.

10.3    No Consequential or Punitive Damages.  Except with respect to matters involving Losses brought or asserted by third parties obligating either party to indemnify the other pursuant to Section 10.6, no party hereto (or its Affiliates) shall, under any circumstance, be liable to the other party hereto (or its Affiliates) for any consequential, exemplary, special, incidental or punitive damages claimed by such other party under the terms of or due to any breach of this Agreement, including, but not limited to, loss of revenue or income, cost of capital, or loss of business reputation or opportunity.  

10.4    No Recourse.  No past, present or future director, officer, employee, member, shareholder, incorporator, partner or Affiliate of either party or its Affiliates shall have any Liability for any obligations of such party under this Agreement or for any claim based on, in respect of or by reason of such obligations or their creation, except, with respect to Affiliates, as provided under the terms of the PGN Parent Guaranty and the Southern Power Parent Guaranty.

	
            10.5
 	
            Expiration of Representations, Warranties and Covenants.
 

All of the representations and warranties of the Seller set forth in this Agreement and the other Transaction Documents shall terminate and expire, and shall cease to be of any force or effect, at 5:00 P.M. (Eastern U.S. time) on the date that is two (2) years after the Closing Date (except with respect to the representations and warranties contained in Section 5.19, which shall survive until the applicable statute of limitations expires), and all liability with respect to such representations and warranties shall thereupon be extinguished, except to the extent that notice of an alleged breach of such representations or warranties has been provided to the Seller by the Purchaser before such date; provided, that claims by the Purchaser Indemnitees for indemnification pursuant to Section 10.6(c)(i) due to the breach or inaccuracy of any representation and warranty as of the Effective Date or the Closing Date by the Seller in Sections 5.1, 5.2 and 5.3(a) shall not be subject to any such limitation.  All of the representations and warranties of the Purchaser set forth in this Agreement and the other Transaction Documents shall terminate and expire, and shall cease to be of any force or effect, at 5:00 P.M. (Eastern U.S. time) on the date that is two (2) years after the Closing Date, and all liability with respect to such 

 

	
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representations and warranties shall thereupon be extinguished, except to the extent that notice of an alleged breach of such representations or warranties has been provided to the Purchaser by the Seller before such date; provided, that claims by the Seller Indemnitees for indemnification pursuant to Section 10.6(a)(i) due to the breach or inaccuracy of any representation and warranty as of the Effective Date or the Closing Date by the Purchaser in Sections 6.1, 6.2 and 6.3(a) shall not be subject to any such limitation.  No claim or cause of action arising out of the inaccuracy or breach of any representation or warranty may be made following the termination of the applicable
survival period referred to in this Section 10.5.  

	
            10.6
 	
            Indemnification.
 

(a)     By the Purchaser.  Subject to the provisions of this Article X relating to the survival of representations and warranties and the other limitations contained herein, from and after the Closing, the Purchaser agrees to indemnify, defend and hold harmless the Seller and its Affiliates, and their officers, directors, partners, employees, agents, representatives, successors and assigns (“Seller Indemnitees”) against all claims, losses, liabilities, damages, deficiencies, costs and expenses, including, without limitation, losses resulting from the defense, settlement or compromise of a claim or demand or assessment, reasonable attorneys’, accountants’ and expert witnesses’ fees, costs and expenses of
investigation, and the costs and expenses of enforcing the indemnification provided hereunder (hereafter individually a “Loss” and collectively “Losses”) incurred by any of the Seller Indemnitees (after deduction of the amount of any insurance proceeds recoverable and any net Tax Benefit) and arising out of or relating to:  (i) any breach of any representation or warranty made by the Purchaser in this Agreement or any other Transaction Document, (ii) any breach of any covenant, agreement or other obligation of the Purchaser contained in this Agreement or any other Transaction Document, (iii) any claim for Taxes attributable to the Project Company for periods ending after the Closing Date, (iv) the Purchaser’s share of any Transfer Taxes and Property Taxes determined under Article IX of this Agreement, (v) any
Liability of Progress Energy under the PGN Guaranties arising from and after the Closing, and (vi) any Liability of the Project Company from and after the Closing other than those liabilities for which the Seller has agreed to indemnify the Purchaser pursuant to Section 10.6(c) of this Agreement.  

(b)     Limitations on Rights of the Seller Indemnitees.  Except as set forth below, the Purchaser shall not be required to indemnify the Seller Indemnitees with respect to any claim for indemnification resulting from or arising out of matters described in Section 10.6(a)(i) except to the extent that (i) any such claim is in an amount in excess of [**], and (ii) the aggregate amount of all such claims by the Seller Indemnitees in excess of [**] per claim exceeds [**] (the “Seller Indemnitees’ Threshold”), and then the Seller Indemnitees will be entitled to recover Losses in excess of the Seller Indemnitees’ Threshold; provided, however, that the Purchaser’s maximum combined liability under Section 10.6(a)(i) of this Agreement and Section 10.6(a)(i) of the DeSoto Agreement shall not exceed [**]; provided, however, that claims by the Seller Indemnitees for indemnification pursuant to Section 10.6(a)(i) due to the breach or inaccuracy of any representation and warranty as of the Effective Date or Closing Date by the Purchaser in 

 

	
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Sections 6.1, 6.2 or 6.3(a) shall not be subject to any such limitations and shall not count toward any such limitations.

(c)     By the Seller.  Subject to the provisions of this Article X, from and after the Closing, the Seller agrees to indemnify, defend and hold harmless the Purchaser and its Affiliates, officers, directors, employees, agents and stockholders (collectively, the “Purchaser Indemnitees”) against all Losses incurred by any of the Purchaser Indemnitees (after deduction of the amount of any insurance proceeds recoverable and any net Tax Benefit) and arising out of or relating to: (i) any breach of any representation or warranty made by the Seller in this Agreement or any other Transaction Document, (ii) any breach of any covenant, agreement or other obligation of the Seller contained in this Agreement or any other
Transaction Document, (iii) any claim for Taxes attributable to the Project Company for periods ending on or prior to the Closing Date, (iv) any Liability arising from any Affiliated Contract, any Intercompany Payable or any intercompany arrangement referenced in Sections 7.8(b) or 7.8(c) prior to the Closing Date, (v) any Liability with respect to any Excluded Asset, (vi) the Seller’s share of any Transfer Taxes and Property Taxes determined under Article IX of this Agreement, (vii) any Liability of Progress Energy under the PGN Guaranties arising prior to the Closing and (viii) any Liability with respect to any accounts payable (as such term is used and defined under generally accepted accounting practices) by the Project Company, or by the Seller or its Affiliates in connection with the business of the Project Company, accrued prior to
the Closing Date (the “Pre-Closing Accounts Payable”).  

(d)     Limitations on Rights of the Purchaser Indemnitees.  Except as set forth below, the Seller shall not be required to indemnify the Purchaser Indemnitees with respect to any claim for indemnification resulting from or arising out of matters described in Section 10.6(c)(i) except to the extent that (i) any such claim is in an amount in excess of [**] and (ii) the aggregate amount of all such claims by the Purchaser Indemnitees in excess of [**] per claim exceeds [**] (the “Purchaser Indemnitees’ Threshold”), and then the Purchaser Indemnitees will be entitled to recover Losses in excess of the Purchaser Indemnitees’ Threshold; provided, however, that the Seller’s maximum combined liability under Section 10.6(c)(i) of this Agreement and Section 10.6(c)(i) of the DeSoto Agreement shall not exceed [**]; provided, however, that claims by the Purchaser Indemnitees for indemnification pursuant to Section 10.6(c)(i) due to the breach or inaccuracy of any representation and warranty as of the Effective Date or Closing Date by the Seller in Sections 5.1, 5.2, 5.3(a) or 5.19 shall not be subject to any such limitations and shall not count toward any such limitations. 

	
            (e)
 	
            Procedure.
 

(i)     Third-Party Actions.  Any Purchaser Indemnitee or Seller Indemnitee (the “Indemnitee”) shall give the other parties hereto prompt notice of any third-party claim or portion thereof that may give rise to any indemnification obligation under this Article X, together with the estimated amount of such claim and a summary of the material facts known by the Indemnitee regarding the claim, and the indemnitor with respect to such claim (the “Indemnitor”) shall have the right to assume the defense (at the Indemnitor’s expense) of any such claim through counsel of the Indemnitor’s choosing 

 

	
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by so notifying the Indemnitee within thirty (30) days of the first receipt by the Indemnitor of notice of such claim from the Indemnitee; provided, however, that any such counsel shall be reasonably satisfactory to the Indemnitee.  Failure to give such notice shall not affect the indemnification obligations hereunder in the absence of actual and material prejudice.  If, under applicable standards of professional conduct, a conflict with respect to any significant issue between any Indemnitee and any Indemnitor exists in respect of such third-party claim, the Indemnitor shall pay the reasonable fees and expenses of such additional counsel as may be required to be retained in order to resolve such conflict.  The Indemnitor shall be liable for the fees and expenses of counsel employed by the Indemnitee for any period
during which the Indemnitor has not assumed the defense of or is not diligently pursuing the defense of any such third-party claim (other than during any period in which the Indemnitee will have failed to give notice of the third-party claim as provided above).  If the Indemnitor assumes such defense, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnitor, it being understood that the Indemnitor controls such defense.  If the Indemnitor chooses to defend or prosecute a third-party claim, the Indemnitee shall, at the Indemnitor’s expense, cooperate in the defense or prosecution thereof, which cooperation shall include, to the extent reasonably requested by the Indemnitor, the retention, and the provision to the Indemnitor, of records and information reasonably necessary to the defense of such third-party claim, and making employees of the Indemnitee and its Affiliates
available on a mutually convenient basis to provide additional information and explanation of any materials provided hereunder; provided, that the parties shall enter into a reasonable joint defense agreement if necessary to protect any privilege available to the Indemnitee or its Affiliates.  If the Indemnitor chooses to defend or prosecute any third-party claim, the Indemnitee shall agree to any settlement, compromise or discharge of such third-party claim that the Indemnitor may recommend and that, by its terms, discharges the Indemnitee and its Affiliates from the full amount of liability in connection with such third-party claim; provided, however, that, without the consent of the Indemnitee, the Indemnitor shall not consent to, and the Indemnitee shall not be required to agree to, the entry of any judgment or enter into any settlement that
(A) provides for injunctive or other non-monetary relief affecting the Indemnitee or any of its Affiliates, including a finding or admission of any violation of any Law or Approval of a Government Authority or a violation of the rights of any Person, and (B) does not include as an unconditional term thereof the giving of a release from all liability with respect to such claim by each claimant or plaintiff to each indemnified Person that is the subject of such third-party claim.  Notwithstanding the foregoing, if an Indemnitee determines in good faith that there is a reasonable probability that a third-party claim may adversely affect it or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under the Agreement (determined without regard to the Threshold), the Indemnitee may, by notice to the Indemnitor, assume the exclusive right to defend, compromise or settle such third-party claim (except for any third-party claim
relating to U.S. federal income Taxes), but the Indemnitor will not be bound by any determination of any third-party claim so defended for the purposes of this Agreement or any compromise or settlement effected without its consent. 

 

 

	
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 (ii)    Other Claims.  Any claims for indemnification other than as provided in Section 10.6(a) and 10.6(c) may be asserted by notice from the Indemnitee to the Indemnitor.

(f)     Exclusivity.  Except for the right to specific performance provided in Section 10.10 with respect to covenants, the right of each party hereto to refuse to close as and if applicable pursuant to Sections 8.2(a) or 8.3(a) or to terminate the Agreement as and if applicable pursuant to Section 4.1 or following Closing to assert indemnification claims and receive indemnification payments pursuant to this Section 10.6 shall be the sole and exclusive right and remedy exercisable by such party with respect to any breach by the other party hereto of any representation, warranty or covenant
in this Agreement or any other Transaction Document.  

(g)     Subrogation.  To the extent that the Indemnitor makes or is required to make any indemnification payment to the Indemnitee, the Indemnitor shall be entitled to exercise, and shall be subrogated to, any rights and remedies (including rights of indemnity, rights of contribution and other rights of recovery) that the Indemnitee or any of the Indemnitee’s Affiliates may have against any other Person with respect to any Losses, circumstances or matter to which such indemnification payment is directly or indirectly related. The Indemnitee shall permit the Indemnitor to use the name of the Indemnitee and the names of the Indemnitee’s Affiliates in any transaction or in any proceeding or other matter involving any of such rights or remedies; and the Indemnitee shall take such actions as the Indemnitor may
reasonably request for the purpose of enabling the Indemnitee to perfect or exercise the Indemnitor’s right of subrogation hereunder.  This Section 10.6(g) shall not grant the Indemnitor any rights to sue or otherwise seek recovery from the Indemnitee or any of its Affiliates; provided, that the Indemnitor shall not be limited hereby in raising any action or inaction on the part of the Indemnitee or any of its Affiliates as a defense to any such indemnification.

(h)     Effect of Indemnity Payments.  The Purchaser and the Seller hereby agree that any and all indemnity payments made pursuant to this Agreement shall, to the maximum extent permitted by Applicable Law, be treated for all Tax purposes as an adjustment to the Purchase Price.

10.7  No Set-Off.  Neither the Purchaser nor the Seller shall have any right to set-off any indemnification obligations that either may have under Section 10.6 against any other obligations or amounts due to the Purchaser or the Seller, as applicable, including, without limitation, under any other provisions of this Agreement or under any other Transaction Document.

10.8    Effect of Investigation.  For purposes of this Article X, the Seller shall not be deemed to have breached any representation or warranty if (i) the Purchaser, prior to the Closing Date, had Knowledge of the breach, or facts and circumstances constituting or resulting in a breach, of such representation or warranty, (ii) the breach could have been cured by, or at the direction of, the Seller if the Seller had known of the breach, (iii) the Purchaser did not notify the Seller of the breach pursuant to Section 7.10 and consummated the transactions contemplated hereby notwithstanding such Knowledge 

 

	
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of the breach and (iv) for the avoidance of doubt, the Purchaser did not acquire its Knowledge of the breach from an amendment or supplement to the Schedules or Exhibits pursuant to Section 7.10 that cured a breach of the Seller’s representations and warranties that were inaccurate or incomplete on the Effective Date.

	
            10.9
 	
            Procedure for Environmental Indemnification.  
 

(a)     In the event that the Purchaser tenders notice of a claim for indemnification for a matter or circumstances which is or could become the subject of an Environmental Claim, the Seller shall have the right but not the obligation to undertake defense of any such claim made by third parties, pursuant to Section 10.6(e) hereof, or to otherwise resolve such claim by conducting an investigation or remediation (if appropriate) thereof, at the Seller’s expense.  The Seller shall notify the Purchaser of the Seller’s intent to exercise such right promptly after receiving the Purchaser’s notice of claim for indemnification for such matter, circumstances, or Environmental Claim.  In the event that the Purchaser provides such notice to the Seller and undertakes to resolve such claim, both the Purchaser and the
Seller shall have all the respective rights provided in Section 10.6(e) hereof with respect to such claim and, in addition, the Purchaser shall make the Project available to the Seller to reasonably investigate or remediate or otherwise resolve such claim, provided that, (i) the Seller’s activities do not unreasonably interfere with the operation of the Project, (ii) the Purchaser shall have the right, but not the obligation, at the Purchaser’s sole expense, to take split samples, and (iii) the Seller shall share with the Purchaser the results of the Seller’s investigation including sampling results.     

(b)     Except to the extent required to satisfy or otherwise resolve a claim for injury or damages by a third party pursuant to any Environmental, Health and Safety Laws and for which indemnification is provided in this Agreement, the Seller and the Purchaser agree that with respect to any investigation, remediation, or correction of noncompliance, or other action to be undertaken by the Seller or the Purchaser that is the subject of an indemnification claim by the Purchaser Indemnitees pursuant to this Agreement, the Seller’s obligation pursuant to Section 10.6(c) shall be limited to conducting or reimbursing the Purchaser for (as the case may be and, in the case of reimbursing the Purchaser, subject to the limitations provided in Section 10.6(d)) (i) the most
commercially reasonable method under the circumstances and based upon the understanding that the Project is and will continue to be used for the purposes to which it was put as of the Closing Date (including the potential expansion of the Facility to include an additional combustion turbine unit; provided, that the Seller’s indemnification obligations remain subject to the provisions of Section 10.5), and (ii) which method shall not exceed the least stringent requirements of any applicable Environmental, Health and Safety Law or any clean-up standards set forth, established, published, proposed or promulgated under, pursuant to or by an Environmental, Health and Safety Law or Governmental Authority having jurisdiction over such remedial action, correction of noncompliance, or action, in each case as in effect on the Closing Date or any requirement or order of any Governmental Authority
specifically with respect to such investigation, remediation, or correction of noncompliance, or action.  To the extent necessary to achieve the purposes set forth in the preceding sentence, the Purchaser shall 

 

	
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agree to a deed restriction or other institutional controls on the Project provided that such deed restriction or other institutional controls shall not restrict or limit the use to which the Project was put as of the Closing Date (including the potential expansion of the Facility to include an additional combustion turbine unit; provided, that the Seller’s indemnification obligations remain subject to the provisions of Section 10.5).  The Purchaser agrees that it shall, in good faith, seek to enter, when necessary, into an agreement with the Governmental Authority having jurisdiction over the investigation, remediation, or correction of noncompliance or other action, to allow the Purchaser to use the most commercially reasonable method and least stringent standard in connection with investigation, remediation,
correction of noncompliance, or other action under such circumstances and use.

(c)     If the Closing occurs, with respect to any Environmental Claim, the Purchaser’s rights to indemnification set forth in this Agreement shall constitute a Purchaser Indemnitee’s exclusive remedy for such claim, and the Purchaser expressly waives and relinquishes, on behalf of itself, its successors and any assigns, any and all rights, claims, or remedies such person may have against any and all of the Seller Indemnitees under any Environmental, Health and Safety Laws, as presently in force or hereafter enacted, promulgated, or amended (including, without limitation, under the Comprehensive Environmental Response Compensation and Liability Act, or any similar state or local law) or at common law.

10.10  Specific Performance.  The Purchaser and the Seller acknowledge that the transactions contemplated hereunder are unique and that the parties will be irreparably injured should such transactions not be consummated in accordance with the terms and conditions of this Agreement.  Consequently, the Purchaser will not have an adequate remedy at law if the Seller shall fail to consummate the transactions hereunder, and the Seller will not have an adequate remedy at law if the Purchaser shall fail to consummate the transactions hereunder.  The Purchaser or the Seller, as applicable, shall have the right, in addition to any other remedy available under this Agreement, to specific performance of the other party’s obligations hereunder subject to its having performed its obligations hereunder, and both parties agree
not to take a position in any proceeding to the effect that the other party has an adequate remedy at law.

ARTICLE XI

 

MISCELLANEOUS

	
            11.1
 	
            Employees and Employee Benefits.
 

(a)     Neither the Purchaser nor any Affiliate of the Purchaser shall have any obligation to hire or make offers of employment to any Employee or to assume any liabilities or obligations related to any Employee Plans.  However, the Seller agrees that the Purchaser or an Affiliate of the Purchaser may offer employment to any Employee on such terms and conditions as determined by the Purchaser or an Affiliate of the Purchaser with such employment commencing immediately following the Closing Date. To that end, within ten (10) days after execution of this Agreement, the Seller shall provide the 

 

	
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Purchaser with a list of all Employees and their job titles, compensation and benefits; provided, that the Purchaser shall not disclose such information to any third party other than an Affiliate of the Purchaser or a third party engaged by the Purchaser or an Affiliate of the Purchaser to assist in employment or employee benefit matters.  The Purchaser or an Affiliate of the Purchaser shall have reasonable access to the Facility, and all Employees shall be made available to the Purchaser or an Affiliate of the Purchaser for the purpose of conducting employment interviews with Employees.  The Purchaser or an Affiliate of the Purchaser shall conduct the interviews as expeditiously as possible prior to the Closing Date.  Access and availability shall be provided by the Seller and the Project Company upon reasonable prior notice by the Purchaser during normal
business hours.  At least fifteen (15) days prior to the scheduled Closing Date, the Purchaser shall provide the Seller with a list of Employees (the “Listed Employees”) to whom the Purchaser or an Affiliate of the Purchaser intends to make offers of employment with such offers to be contingent on (i) the Closing, and (ii) the standard hiring requirements or conditions of the Purchaser or an Affiliate of Purchaser, including completion of background checks and drug tests.  Nothing herein shall be deemed to require the Purchaser or any Affiliate of the Purchaser to hire any Employee or to continue the employment of or provide any particular level of compensation or benefits to any Listed Employee actually hired by the Purchaser or any Affiliate of the Purchaser.  The Purchaser and its Affiliates shall indemnify and hold harmless the Seller and its Affiliates and their officers, directors, employees and shareholders in connection
with any Liability or Loss arising from the decision of the Purchaser or any of its Affiliates to hire or not to hire any Employee without regard to the limitations in Article X.  The Seller and its Affiliates shall indemnify and hold harmless the Purchaser and its Affiliates and their officers, directors, employees and shareholders in connection with any Liability or Loss arising from the Seller’s or its Affiliate’s breach of the representation in Section 5.12(d) or from employment practices related to the termination of any Employee on or before the Closing Date without regard to the limitations in Article X.

(b)     Subject to the Seller’s obligations under Section 7.2, nothing in this Agreement shall be deemed to require the Seller to continue the employment of, or provide any particular level of compensation or benefits to, any Employee, including any Listed Employee, prior to the Closing Date; provided, however, that the Seller or an Affiliate of the Seller shall be responsible for (i) the payment of all wages and other remuneration due to Employees or former Employees with respect to their services as employees of the Seller or an Affiliate of the Seller through the close of business on the Closing Date, including all bonuses and vacation pay earned on or prior to the Closing Date, (ii) the payment of any termination or
severance payments and the provision of health plan continuation coverage in accordance with the requirements of COBRA, (iii) any claims made or incurred by Employees, former Employees and their beneficiaries under the Employee Plans and (iv) compliance with the requirements, if any, of the WARN Act.

 

 

	
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11.2    Expenses.  Except as otherwise set forth in this Agreement, each of the Seller and the Purchaser shall bear its own expenses (including, without limitation, attorney’s fees) incurred in connection with the preparation, negotiation, execution and performance of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby; provided, that the Seller and the Purchaser shall equally share the expenses incurred in obtaining clearance under the HSR Act.

11.3    Incorporation of Exhibits and Schedules.  The exhibits and schedules identified in this Agreement are incorporated herein by reference and made a part hereof.  

	
            11.4
 	
            Submission to Jurisdiction.
 

(a)     Each of the parties hereto (i) consents to submit itself to the exclusive personal jurisdiction of any federal court located in the State of New York or any New York state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a federal court located in the State of New York or a New York state court.

(b)     The parties hereby unconditionally and irrevocably waive, to the fullest extent permitted by Applicable Law, any objection which they may now or hereafter have to the laying of venue of any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby brought in any court specified in paragraph (a) above, or any defense of inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(c)     Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by the mailing of a copy thereof in accordance with the provisions of Section 11.10.

11.5    Waiver of Jury Trial.  The parties hereby irrevocably and unconditionally waive, to the fullest extent permitted by Applicable Law, any right that they may have to trial by jury of any claim or cause of action, or in any legal proceeding, directly or indirectly based upon or arising out of this Agreement or the transactions contemplated by this Agreement.  Each party (a) certifies that no representative, agent, or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 11.5.

 

 

	
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11.6    No Right of Set-Off.  The Purchaser for itself and for its Affiliates, successors and assigns hereby unconditionally and irrevocably waives any rights of set-off, netting, offset, recoupment, or similar rights that the Purchaser or any of its respective Affiliates, successors and assigns has or may have with respect to the payment of the Purchase Price or any other payments to be made by the Purchaser pursuant to this Agreement or any other document or instrument delivered by the Purchaser in connection herewith. The Seller for itself and for its Affiliates, successors and assigns hereby unconditionally and irrevocably waives any rights of set-off, netting, offset, recoupment or similar rights that the Seller or any of its respective Affiliates, successors or assigns has or may have with respect to any document or
instrument delivered by the Seller or its Affiliates in connection herewith.  

11.7    Entire Agreement; Amendments and Waivers.  This Agreement (including the schedules and exhibits hereto), together with the other Transaction Documents and the Confidentiality Agreement represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and can be amended, supplemented or changed, and any provision hereof or thereof can be waived, only by written instrument making specific reference to this Agreement, the other Transaction Documents or the Confidentiality Agreement, as applicable, signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought.  No action taken pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.  The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach and shall apply only to the specific instance for which it is given.  No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

11.8    Governing Law.  This Agreement, the rights and obligations of the parties under this Agreement, and any claim or controversy arising out of this Agreement or the transactions contemplated by this Agreement (whether based on contract, tort, or any other theory), including all matters of construction, validity and performance, shall in all respects be governed by and interpreted, construed, and determined in accordance with, the internal Laws of the State of New York (without regard to any conflict of laws provision that would require the application of the Law of any other jurisdiction).

11.9    Table of Contents and Headings.  The table of contents and section headings of this Agreement are for reference purposes only and are to be given no effect in the construction or interpretation of this Agreement.

11.10  Notices.  All notices and other communications under this Agreement shall be in writing and shall be deemed duly given (a) when delivered personally or by prepaid overnight courier, with a record of receipt, (b) the fourth day 

 

	
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after mailing if mailed by certified mail, return receipt requested, or (c) the day of transmission, if sent by facsimile, telecopy or e-mail during regular business hours, or the day after transmission, if sent after regular business hours (with a copy promptly sent by prepaid overnight courier with record of receipt or by certified mail, return receipt requested), to the parties at the following addresses or telecopy numbers (or to such other address or telecopy number as a party may have specified by notice given to the other party pursuant to this provision):

If to the Seller:

c/o Progress Energy Services Company

410 South Wilmington Street

P.O. Box 1551

Raleigh, NC 27601

Telephone:  (919) 546-7504

e-mail:  mark.mcquade@pgnmail.com

Fax:  (919) 546-2920

	
            Attention:
 	
            David Fountain, Esq.
 	
             

	
             
	
            Mark McQuade, Esq.
 

 

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

1440 New York Avenue, N.W.

Washington, DC 20005

Telephone:  (202) 371-7000

Fax:  (202) 393-5760

e-mail:  jmatte@skadden.com

	
            Attention:
 	
            Jeanine Matte, Esq.
 

 

If to the Purchaser:

Southern Power Company – Rowan LLC

600 North 18th Street

Birmingham, AL  35291

Attention:  President and CEO

 

 

	
            61
 

 

 

 

 

With a copy to:

Troutman Sanders LLP

Bank of America Plaza, Suite 5200

600 Peachtree Street, N.W.

Atlanta, Georgia  30308

Telephone:  (404) 885-3360

Fax:  (404) 962-6610

e-mail:  john.lamberski@troutmansanders.com

	
            Attention:  
 	
            John Lamberski, Esq.
 	
             

	
             
	
            Richard E. Thompson II, Esq.
 

11.11  Severability.  Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

11.12  Binding Effect; Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.  Except as set forth in Sections 7.1, 10.6, and 11.1, nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any Person not a party to this Agreement.  No assignment of this Agreement or of any rights or obligations hereunder may be made by the Seller or the Purchaser (by operation of law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment without the required consents shall be void; provided, that prior to Closing the Purchaser may assign this Agreement to Southern Power without the consent of Seller, in which case the Purchaser and Southern Power shall enter into an assignment and assumption agreement in a form reasonably acceptable to the Seller pursuant to which Southern Power shall assume all of the obligations of the Purchaser hereunder, following execution and delivery of a copy of such executed assignment and assumption agreement to the Seller, the Seller shall promptly return the Southern Power Parent Guaranty, marked “canceled”, to Southern Power and Section 7.16(b) shall be void and of no further force or effect.

11.13  Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

 

[The Remainder of this Page Is Intentionally Left Blank.]

 

 

 

 

 

	
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above.

 

PROGRESS GENCO VENTURES, LLC

 

	
            By:
 	
            /s/Mark F. Mulhern
 

Name: Mark F. Mulhern

Title: President

 

SOUTHERN POWER COMPANY – ROWAN LLC

 

	
            By:
 	
            /s/Ronnie L. Bates
 

Name: Ronnie L. Bates

Title: President and Chief Executive Officer

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