ASSET PURCHASE AGREEMENT

 

 

ASSET PURCHASE AGREEMENT

 

THIS AGREEMENT is made this 6^th day of January, 2006 between BRASCAN POWER INC., an Ontario corporation (“Buyer”), RUMFORD FALLS POWER COMPANY, a Maine corporation (“Seller”) and, solely for purposes of Section 5.06, Section 7.05 and Section 9.05 of this Agreement, RUMFORD PAPER COMPANY, a Delaware Corporation (“Mill Owner”), under the following circumstances:

 

A.  Seller owns and operates a project consisting of two hydroelectric generating plants and related facilities located on the Androscoggin River in Rumford, Oxford County, Maine comprised of approximately 40 megawatts in total (Federal Energy Regulatory Commission Project No. 2333) (collectively, the “Project”).

 

B.  Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Purchased Assets (as defined below) on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing, the representations, warranties and covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, and intending to be legally bound, the parties hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

1.01  Definitions.  For purposes of this Agreement, the terms set forth below shall be defined as follows:

 

“Affiliate” with respect to any party, means a party, person or entity that, directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such party.  For purposes of this definition, “control” means, when used with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

 

“Agreement” means this Asset Purchase Agreement.

 

“Ancillary Agreements” has the meaning set forth in Section 7.05 hereof.

 

“Assumed Agreements” has the meaning given that term in Section 2.01(d).

 

“Assumed Obligations” has the meaning given that term in Section 2.03(c).

 

1

 

“Attachments” has the meaning given that term in Section 5.01(a)(ix).

 

“Bank” has the meaning given that term in Section 10.08.

 

“Basket Amount” has the meaning given that term in Section 10.07(a).

 

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York City, New York, Dayton, Ohio, or Portland, Maine, are authorized or required by Law to be closed.

 

“Buyer” has the meaning given that term in the preamble to this Agreement.

 

“Buyer Group” has the meaning given that term in Section 10.02.

 

“Cash Purchase Price” has the meaning given that term in Section 2.04(a)(i).

 

“Change” means a material change in the use of the Project after the Closing Date, provided that a material change in use does not include a cessation in operations other than a voluntary decommissioning or demolition (or involuntary decommissioning or demolition that is not required by Environmental Law) of all or substantially all of the Project or the operations conducted thereon.

 

“Claim” has the meaning given that term in Section 10.04.

 

“Closing” has the meaning given that term in Section 7.01.

 

“Closing Date” has the meaning given that term in Section 7.01.

 

“CMP” means Central Maine Power Company.

 

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations adopted thereunder.

 

“Corrected Schedule” has the meaning given that term in Section 8.02(a).

 

“Damages” means all claims, liabilities, losses, damages, expenses, costs of settlement and demands of any character whatsoever (including, without limitation, the reasonable fees and expenses of counsel).

 

“Effective Time” has the meaning given that term in Section 7.02.

 

“Employee Agreements” has the meaning given that term in Section 3.10.

 

2

 

“Encumbrance” means any lien, mortgage, pledge, security interest, license, easement, quasi-easement, covenant, condition, declaration, imperfection of title, or other encumbrance or restriction.

 

“Environment” means any surface water, groundwater, drinking water supply, land surface, subsurface strata, river sediment, plant or animal life, natural resources, air, water vapor, surface soil, subsurface soil and any other natural resource.

 

“Environmental Claims” refers to any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, notice of violation, judicial or administrative proceeding, judgment, letter or other communication from any Governmental Entity, department, bureau, office or other authority, or any third party involving violations of Environmental Laws, Handling of Hazardous Materials or Releases of Hazardous Materials from, on or under (i) any assets or properties used by the Project; (ii) from any adjoining properties or businesses; or (iii) from or onto any facilities which received Hazardous Materials generated by the Purchased Assets.

 

“Environmental Conditions” means any condition, known or unknown, foreseen or unforeseen, arising out of:  (1) the Release, threat of Release, or exposure of Persons to Hazardous Materials; (2) any violation of any Environmental Law; (3) the Handling of Hazardous Materials or (4) any Environmental Claim.

 

“Environmental Damages” means all claims, judgments, causes of action, liabilities, obligations, damages, losses, deficiencies, costs, penalties, interest and expenses (including, without limitation, the reasonable fees and expenses of counsel).

 

“Environmental Laws” means any Law related to:  (i) the protection of the Environment and/or (ii) the Handling of Hazardous Materials.  “Environmental Laws” include, without limitation: the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C. §9601 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §6901 et seq.; the Clean Air Act, as amended, 42 U.S.C. §7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. §2601 et seq.; the Emergency Planning and Community Right to Know Act, as amended, 42 U.S.C. §11001 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. §300f et seq.; the Occupational Health and Safety Act, as amended, 29 U.S.C. §655 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §136 et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. §5101 et seq.; Oil Discharge Prevention and Pollution Control Law, 38 M.R.S.A. §541; Underground Oil Storage Facilities and Groundwater Protection Law, 38 M.R.S.A. § 561 et seq., and any other comparable foreign, federal, state, municipal or local Laws.

 

“Environmental Liabilities” means any Environmental Damages, including without limitation, costs of investigation, Remedial Action or other response actions, known or unknown, foreseen or unforeseen, with regard to the Purchased Assets arising out of:  (i) Environmental Conditions, (ii) Historical Environmental Liabilities, or (iii) any violation of any Environmental

 

3

 

Permit.  For the avoidance of doubt, Environmental Liabilities shall not include Environmental Damages after the Closing Date resulting from increases in operating expenses of the Purchased Assets, including but not limited to, depreciation, wages, administration of environmental programs, chemicals, materials, sewer fees and permit fees.

 

“Environmental Permits” means any approvals, authorizations, certificates, consents, licenses, or permits required under any Environmental Law for operation of the Purchased Assets.

 

“Equipment” has the meaning given that term in Section 2.01(b).

 

“Exceptions” has the meaning given that term in Section 5.06(a).

 

“Excluded Assets” has the meaning given that term in Section 2.01.

 

“Excluded Obligations” has the meaning given that term in Section 2.03.

 

“Expiration Date” has the meaning given that term in Section 8.01(b).

 

“Federal Power Act” means the Federal Power Act, as amended, codified at 16 U.S.C. §§ 791 et seq. and the regulations adopted thereunder as of the effective date of this Agreement.

 

“FERC” means the Federal Energy Regulatory Commission.

 

“FERC Boundary” means the real property located within the Project boundary as depicted in the FERC License.

 

“FERC License” means the hydropower license issued pursuant to Part I of the Federal Power Act for FERC Project No. 2333, as amended from time to time, together with all regulations, orders, issuances, filings and correspondence applicable to the Project and arising under the Federal Power Act or regulations promulgated thereunder.

 

“Governmental Entity” means any nation, state, city, locality, municipality, or other political subdivision and any body or authority exercising judicial, legislative, regulatory or administrative functions for any of the foregoing (including, without limitation, any agency, department, board or commission), or any court or arbiter.

 

“Handling” means any manner of manufacturing, using, generating, accumulating, storing, treating, disposing of, recycling, processing, distributing, handling, labeling, producing, releasing, or transporting, as any such terms may be defined in any Environmental Law, of Hazardous Materials.

 

“Hazardous Materials” means any substance or material that has been defined or otherwise listed as a “hazardous material,” “hazardous waste” or “hazardous substance” or words of similar import under any Environmental Law or any other waste substance or material that is regulated under any

 

4

 

Environmental Law, including, without limitation, petroleum and petroleum products, polychlorinated biphenyls, and asbestos-containing materials.

 

“Historical Environmental Liabilities” means any Historical On-Site Environmental Liabilities or Historical Off-Site Environmental Liabilities.

 

“Historical Off-Site Environmental Liabilities” means any Environmental Liabilities (other than Historical On-Site Environmental Liabilities) that arise from operations, practices, Handling of Hazardous Materials, transfers, disposals or other activities (or omissions) of or on behalf of Seller prior to the Closing Date, including but not limited to Environmental Liabilities related to dioxin and furans, polychlorinated biphenyls and chlorinated solvents and contamination related to the pre-Closing removal of underground storage tanks.

 

“Historical On-Site Environmental Liabilities” means any Environmental Liabilities (other than Historical Off-Site Environmental Liabilities) arising from Environmental Conditions at, on, under or migrating from the Purchased Assets existing prior to the Closing Date, or that arise from operations, practices, Handling of Hazardous Materials, transfers, disposals or other activities (or omissions) of or on behalf of Seller at or on the Purchased Assets prior to the Closing Date, including but not limited to Environmental Liabilities related to dioxin and furans, polychlorinated biphenyls and chlorinated solvents, and contamination related to the pre-Closing removal of underground storage tanks; provided, however, that any Environmental Liabilities associated with subsurface groundwater contaminated with Hazardous Materials that flows beneath a Purchased Asset, where such Hazardous Materials were not Released, or alleged to be Released, from a Purchased Asset or the Mill, is not considered a Historical On-Site Environmental Liability; provided, further, notwithstanding anything to the contrary in this Agreement, Seller shall have no liability for historical on-site asbestos-containing materials (other than waste asbestos-containing material that is not in compliance with the Environmental Laws as of the Closing Date).

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“Indemnified Party” has the meaning given that term in Section 10.04.

 

“Indemnifying Party” has the meaning given that term in Section 10.04.

 

“Independent Consultant Award” has the meaning given that term in Section 10.08(iv).

 

“Knowledge of Seller” or “Seller’s Knowledge” means, and is limited to, the actual knowledge of John Fuller, General Manager (Pulp and Utilities); Larry Souther, former Operating Superintendent; Rick Delaney, Operating Superintendent; Scott Reed, Environmental Manager; Matt Jesch, Chief Financial Officer of New Page Corporation; and Ron Guay, Associate General Counsel of New Page Corporation, and each of their respective immediate subordinates.

 

5

 

“Laws” means applicable laws, statutes, charters, ordinances, decisional law, common law, rules and regulations.

 

“Legal Proceeding” means any judicial, administrative or arbitral action, suit, proceeding (public or private) or governmental proceeding or investigation with regard to Environmental Law or Environmental Liabilities.

 

“Letter of Credit” has the meaning given that term in Section 10.08.

 

“Lowest-Cost Commercially Reasonable Manner” has the meaning given that term in Section 10A.04(e).

 

“Material Contract” has the meaning given that term in Section 3.08.

 

“MeadWestvaco” means MeadWestvaco Corporation, a Delaware corporation that is the seller in that certain Equity and Asset Purchase Agreement by and between Maple Acquisition LLC and MeadWestvaco Corporation dated January 14, 2005.

 

“Mill” means Rumford Paper Company’s pulp and paper mill operated on and about the Mill Real Property.

 

“Mill Owner” has the meaning given that term in the preamble to this Agreement.

 

“Mill Real Property” means the real property owned by Mill Owner as of the Closing Date.

 

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Entity.

 

“Permit” means any license, permit, approval or authorization of a Governmental Entity which relates to, or is necessary for, the ownership or the operation of the Project in substantially the same manner as it currently is being operated by Seller, but shall exclude any and all Environmental Permits.

 

“Permitted Encumbrances” means:  (i) liens for Taxes not yet delinquent or for Taxes that Seller is contesting in good faith through appropriate proceedings, provided in each case that adequate reserves have been established therefor, (ii) purchase money liens and liens securing rental payments under capital lease arrangements, (iii) liens of mechanics, materialmen, carriers, workers, repairers and other similar liens arising in the ordinary course of the operation of the Project, provided such liens can be and are insured against or bonded over, and (iv) other Encumbrances arising in the ordinary course of the operation of the Project which, in the aggregate, do not have a material adverse effect on the Purchased Assets (including, without limitation, the Real Property), taken as a whole.

 

6

 

“Person” means an individual, partnership, corporation, limited liability company, association, joint stock company, joint venture, trust, estate, unincorporated organization, labor union, Governmental Entity or any other entity.

 

“Project” has the meaning given that term in the recitals.

 

“Project Employees” has the meaning given that term in Section 3.10.

 

“Property Tax Year” has the meaning given that term in Section 2.05(b).

 

“Protocol Agreement” has the meaning set forth in Section 9.05 hereof.

 

“Purchase Price” has the meaning given that term in Section 2.04(a).

 

“Purchased Assets” has the meaning given that term in Section 2.01.

 

“Real Estate Documents” has the meaning given that term in Section 5.01(a)(ix).

 

“Real Estate Title Documents” has the meaning given that term in Section 5.06(a).

 

“Real Property Permitted Encumbrances” means: (a) the Permitted Encumbrances and (b) the following:

 

(i)  zoning, entitlement and other land use and building and fire Laws;

 

(ii)  Exceptions in the Title Insurance Commitment that are not Title Defects or Title Objections;

 

(iii)  the Encumbrances created by the Retained Real Property Instruments (to the extent agreed to pursuant to the provisions of Section 5.01(a)(ix) and 5.06);

 

(iv)  the cohabitation protocol and relocation rights, as set forth in Exhibit I to this Agreement, and the provisions of Section 9.04; and

 

(v)  those Title Defects and Title Objections accepted by Buyer in accordance with Section 5.06.

 

“Real Property to be Conveyed” has the meaning given that term in Section 2.01(a).

 

“Recipient” has the meaning given that term in Section 9.01.

 

“Records” has the meaning given that term in Section 2.01(f).

 

“Reduction Agreement” has the meaning given that term in Section 10.08(iii).

 

7

 

“Reduction Amount” has the meaning given that term in Section 10.08.

 

“Reduction Date” has the meaning given that term in Section 10.08.

 

“Reduction Dispute Notice” has the meaning given that term in Section 10.08(iii).

 

“Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration at, into or onto the Environment, including movement or migration through or in the air, soil, surface water or groundwater, whether sudden or non-sudden and whether accidental or non-accidental, or any release, emission or discharge as those terms are defined in any applicable Environmental Law.

 

“Remedial Action” means any response action, removal action, remedial action, corrective action, monitoring program, sampling program, investigation or other actions taken to (i) clean up, remove, remediate, treat, monitor, assess or evaluate Hazardous Materials in the environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger, public health or welfare or the environment; or (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities, or any other actions authorized by 42 U.S.C. § 9601 et seq. or 38 M.R.S.A. § 1361 et seq.

 

“Retained Real Property Instruments” means the instruments creating or otherwise evidencing the Real Property Rights to be Retained.

 

“Retained Real Property Rights” has the meaning given that term in Section 2.01(a).

 

“Schedule” means any of the disclosure schedules delivered by Seller to Buyer concurrently with the execution of this Agreement by the parties, subject to the provisions of Section 8.02 hereof.

 

“Seller” has the meaning given that term in the preamble to this Agreement.

 

“Seller Group” has the meaning given that term in Section 10.03.

 

“Seller Reduction Notice” has the meaning given that term in Section 10.08(i).

 

“Seller Title Notice” has the meaning given that term in Section 5.06(c).

 

“Services Agreement” has the meaning given that term in Section 5.01(a)(ix).

 

“Specified Consents” has the meaning given that term in Section 6.01(d).

 

“Survey” has the meaning given that term in Section 5.06(a).

 

8

 

“Tax” or “Taxes” means any foreign, federal, state or local income, gross receipts, occupation, environmental (including taxes under Section 59A of the Code), customs, duties, registration, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, franchise, real property, personal property, business and occupation, capital stock,  stamp or documentary, transfer, workman’s compensation or other tax, governmental fee or imposition of any kind whatsoever, including any interest, penalties, additions, assessments or deferred liability with respect thereto, whether disputed or not.

 

“Tax Return” means any return, report, declaration, true and perfect list under 36 M.R.S.A. § 706, claim for refund or reimbursement, estimate, election, or information statement or bill relating to any Tax, including any schedule or attachment thereto and any amendment thereto.

 

“Third Party Claim” has the meaning given that term in Section 10.04.

 

“Title Defects” has the meaning given that term in Section 5.06(b).

 

“Title Insurance Commitment” has the meaning given that term in Section 5.06(a).

 

“Title Notice” has the meaning given that term in Section 5.06(b).

 

“Title Objections” has the meaning given that term in Section 5.06(b).

 

“Transfer Taxes” has the meaning given that term in Section 2.05(d).

 

“Undivided Interest Agreement” has the meaning given that term in Section 7.05.

 

“Water Rights Agreement” has the meaning given that term in Section 7.05.

 

1.02  United States Dollars. All references to money and dollar amounts in this Agreement shall mean dollars and currency of the United States of America.

 

ARTICLE 2

 

PURCHASE AND SALE OF ASSETS

 

2.01  Purchase and Sale of Assets.  Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell to Buyer, and Buyer shall purchase from Seller, the following assets (collectively, the “Purchased Assets”), as the same shall exist on the Closing Date free and clear of all Encumbrances other than Permitted Encumbrances (and, in the case of Real Property, the Real Property Permitted Encumbrances):

 

(a)  without limitation, Seller’s real property located within the FERC Boundary, the other real property described in Schedule 2.01(a)(A), and, as and to the extent agreed by Buyer, Seller and

 

9

 

Mill Owner in accordance with Section 5.06 hereof, (i) sufficient real property easement rights in Mill Owner’s real property located within the FERC Boundary that are necessary to operate the Project, (ii) such other real estate rights necessary for Buyer to construct the third penstock in the vicinity of the two existing penstocks near the Lower Station (as depicted in the FERC License), and (iii) such easements or other rights necessary for the delivery by Buyer of electrical energy and ancillary products from the Project to the ISO-NE for sale into NEPOOL in accordance with good operating practices, in compliance with Laws and Seller’s Permits (except as otherwise contemplated by this Agreement) and Environmental Permits, as more particularly described in Schedule 2.01(a) (collectively, the “Real Property to be Conveyed”),  but excluding therefrom, without limitation, the real property and related rights set forth under the heading of “Retained Real Property Rights” on Schedule 2.01(a)(B) and other real property and related rights agreed to by the parties in accordance with Section 5.06 or not expressly agreed to be sold or conveyed to Buyer (collectively, the “Retained Real Property Rights”);

 

(b)  the machinery, equipment, tools, furniture, furnishings and other fixed assets listed on Schedule 2.01(b) (collectively, the “Equipment”);

 

(c)  the inventory of supplies, stores, parts and materials used in the operation of the Project and located on the Real Property on the Closing Date;

 

(d)  all of Seller’s rights under the contracts, agreements, purchase orders, understandings, and arrangements set forth on Schedule 2.01(d) (collectively, the “Assumed Agreements”);

 

(e)  all of Seller’s rights in, to and under the Permits and Environmental Permits that are listed on Schedule 2.01(e), in each case to the extent assignable; and

 

(f)  all of Seller’s documents and records with respect to the ownership and operation of the Project (including, without limitation, (i) with respect to the Real Property, the Equipment, the Assumed Agreements, the Permits and the Environmental Permits; (ii) as required by and pertaining to the FERC License; and (iii) cost reports including property tax assessments for the last three years) (collectively, the “Records”), subject to Seller’s right to retain copies of any such Records;

 

provided, however, that notwithstanding anything to the contrary contained in this Agreement, the term “Purchased Assets” shall not include any of the following assets of Seller or any assets not described above (which shall be retained by Seller and hereinafter are referred to as the “Excluded Assets”):

 

(i)  cash and cash equivalents and bank accounts;

 

(ii)  any real property of Seller not described on Schedule 2.01(a) as “Real Property to be Conveyed”, the Retained Real Property Rights and any personal property of Seller not listed on Schedule 2.01(b);

 

10

 

(iii)  subject to Section 2.01(d) and Section 2.05, any receivables or other rights to receive payments (with the exception of insurance proceeds resulting from the destruction of any Purchased Asset required to be conveyed under Section 2.01 which Purchased Asset is not replaced prior to the Closing, which proceeds shall be paid to Buyer at or after the Closing, as the case may be);

 

(iv)  all financial statements, tax returns and official corporate records, including the corporate minute books and stock ledgers;

 

(v)  all (A) “employee benefit plans” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended), (B) employment, consulting, non-competition, non-solicitation or other compensation agreements, and all collective bargaining agreements, and (C) bonus or other incentive compensation, equity or equity based compensation, stock purchase, deferred compensation, change in control, severance, leave of absence, vacation, salary continuation, medical, life insurance, section 125 cafeteria, dependant care, pension or welfare benefit plans, policies, agreements or arrangements, in each case as to which the Seller has any liability, contingent or otherwise, thereunder for current or former employees, directors or individual consultants of Seller;

 

(vi)  Seller’s shares in Androscoggin Reservoir Company, a Maine corporation; and

 

(vii)  the other assets, if any, listed on Schedule 2.01(vii).

 

2.02  Conditional Assignment of Assumed Agreements, Permits and Environmental Permits.  To the extent that the assignment of any of the Assumed Agreements, the Permits, or the Environmental Permits by Seller to Buyer is not permitted without the consent or approval of any other party or parties thereto, this Agreement shall not be deemed to constitute an undertaking to assign the same if such consent or approval is not given; provided, however, that Buyer and Seller each shall use commercially reasonable efforts to secure any such consent or approval.  If a consent or approval to the assignment of an Assumed Agreement is required and is not obtained prior to Closing, Seller shall cooperate with Buyer following the Closing in any commercially reasonable arrangement designed to provide Buyer with the benefits under the Assumed Agreements to the extent not assigned.

 

2.03.  Assumption of Obligations.  At the Closing, Buyer shall assume and agree to perform and pay on a timely basis, in accordance with the applicable terms and conditions,  the following liabilities and obligations of Seller relating to the Project and the Purchased Assets:

 

(a)  all liabilities or obligations of Seller that (i) accrue, are assessed or are required to be performed under the terms of the Assumed Agreements after the Closing, or (ii) are assessed prior to the Closing but are due and payable after the Closing, or (iii) are assessed after the Closing but relate to a period prior to the Closing, and in the cases of clauses (ii) and (iii), only to the extent disclosed to Buyer on Schedule 2.03(a);

 

11

 

(b)  all liabilities or obligations of Seller that accrue and are required to be performed under the terms of the Permits and Environmental Permits, to the extent assigned to Buyer, excluding, however, any fines, penalties or administrative charges imposed by a Governmental Entity relating to the period prior to the Closing; and

 

(c)  all liabilities or obligations of Seller that accrue and are required to be performed by Seller under the terms of the Real Property Permitted Encumbrances ((a) through (c), collectively, the “Assumed Obligations”);

 

provided, however, that notwithstanding anything to the contrary contained in this Agreement, the term “Assumed Obligations” shall not include any other liabilities or obligations of Seller including, without limitation, the following liabilities and obligations of Seller (all of which other liabilities and obligations shall be retained by Seller and hereinafter are referred to as the “Excluded Obligations”):

 

(i)  all liabilities and obligations not relating to the Project;

 

(ii)  all liabilities and obligations (including, without limitation, Historical Environmental Liabilities and obligations unless and only to the extent Buyer breaches any covenants under Sections 5.02(d) or 9.04) relating to or arising out of the operation of the Project prior to the Closing Date;

 

(iii)  all liabilities and obligations for Taxes (x) of Seller or (y) subject to the provisions of Section 2.05(b) or (d) hereof, relating to or arising out of the Purchased Assets or the operation of the Project prior to the Closing Date; and

 

(iv)  all liabilities and obligations relating to or arising out of (A) the employment by Seller, or (B) the termination of employment by Seller, of any employees of Seller or Mill Owner at the Project arising at any time.

 

2.04  Purchase Price.  (a) The consideration to be given by Buyer to Seller for the purchase and sale of the Purchased Assets (the “Purchase Price”) shall consist of:

 

(i)  One Hundred Forty-Four Million Dollars ($144,000,000) (the “Cash Purchase Price”), and

 

(ii)  the assumption by Buyer of the Assumed Obligations as provided in Section 2.03.

 

(b)  The Cash Purchase Price shall be paid by Buyer at the Closing by wire transfer of immediately available funds to the account or accounts specified by Seller in writing to Buyer.

 

12

 

2.05  Prorations and Expenses; Certain Tax Matters.

 

(a)  Except as otherwise specifically provided in this Agreement, all income, expenses and costs pertaining to the conduct and operation of the Project and the ownership of the Purchased Assets, other than real and personal property taxes, which are addressed in Sections 2.05(b) and (c) hereof, and obligations under Assumed Agreements, which are addressed in Section 2.03(a) hereof, shall be prorated as of the Closing Date, so that as between Seller and Buyer, Seller shall receive all revenues and shall be responsible for all expenses, costs and liabilities allocable to the period prior to the Closing Date, and Buyer shall receive all revenues and shall be responsible for all expenses, costs and liabilities allocable to the Closing Date and the period thereafter.

 

(b)  Real and personal property Taxes with respect to the Property Tax Year in which the Closing occurs that are attributable to the Purchased Assets shall be apportioned between Seller and Buyer in the following manner and shall be an adjustment to the Purchase Price.  Seller’s proportionate share of such Taxes shall be based on the number of days in the Property Tax Year that Seller owned the real and personal property at issue up through and including the day before the date of the Closing.  Buyer’s proportionate share of such Taxes with respect to such property shall be based on the proportionate number of days in the Property Tax Year on and after the date of the Closing.  For purposes of this Section 2.05, the term “Property Tax Year” means the fiscal year of the taxing jurisdiction imposing the real or personal property tax. If the Closing occurs before the Tax rates or values for the real or personal property Taxes are fixed for the Property Tax Year, the apportionment of such Taxes shall be based upon the Tax rates for the immediately preceding Property Tax Year applied to the most recent assessed valuation of the Purchased Assets. Seller’s proportionate share of such Taxes shall be reduced by the amount of any real and personal property Taxes paid prior to the Closing in respect of the current Property Tax Year.

 

(c)  Any refunds or credits of real property Taxes or personal property Taxes relating to the Purchased Assets with respect to: (i) any Property Tax Years occurring prior to the Property Tax Year in which the Closing occurs shall be for the account of Seller, and if received or utilized by the Buyer, shall be paid to Seller within five Business Days after Buyer receives such refund or utilizes such credit, and Buyer shall notify Seller of such receipt or utilization within such time period, and (ii) the Property Tax Year that includes the Closing Date shall be apportioned between Seller and Buyer, pro rata in the same manner as such Taxes originally were allocated pursuant to Section 2.05(b), based on the portion of the Property Tax Year in which such Purchased Assets were owned by Seller and Buyer, respectively.

 

(d)  Notwithstanding any other provision of this Agreement to the contrary, any and all sales, use, transfer, stamp, duties, recording and similar Taxes (“Transfer Taxes”) incurred in connection with the transactions contemplated by this Agreement shall be borne by Buyer.  The party charged by Law with the duty of making the necessary filing and Tax Returns with respect to such Transfer Taxes shall do so in accordance with applicable Law and make the required Transfer Tax payment.  If Seller has such duty to file and pay any Transfer Tax, Buyer shall reimburse Seller within five Business Days following receipt of notice of the amount thereof.

 

13

 

2.06  Purchase Price Allocation.  For purposes of Section 1060 of the Code, the Purchase Price shall be allocated among the Purchased Assets in the manner set forth on Schedule 2.06.  Buyer and Seller shall: (i) be bound by such allocation for purposes of determining any Taxes, (ii) prepare and file their Tax Returns on a basis consistent with such allocation, and (iii) take no position inconsistent with such allocation on any Tax Return or in any proceeding before any taxing authority.  The obligations of Buyer and Seller under this Section 2.06 shall survive the Closing.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Except as expressly set forth in Section 3.05, Seller represents and warrants to Buyer as of the date hereof as follows:

 

3.01  Corporate Organization and Authority of Seller.  Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of Maine with full power and authority to own and operate the Project and the Purchased Assets and carry on its business as now being conducted.  Seller has all requisite corporate power and authority to execute, deliver and perform this Agreement.  Seller is duly qualified or authorized to do business as a foreign corporation and is in good standing under the Laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not reasonably be expected to have a material adverse effect on the Purchased Assets or Seller’s ability to consummate the transactions contemplated hereby.  Seller’s execution and delivery of this Agreement and any other agreements to be executed and delivered by Seller at the Closing and the performance by Seller of the transactions contemplated by this Agreement and any such other agreements has been duly authorized by all necessary corporate action on the part of Seller.

 

3.02  Enforceability.  This Agreement is, and each other Ancillary Agreement to be executed and delivered by Seller at the Closing will be, duly and validly executed and delivered by Seller, and this Agreement is, and each other Ancillary Agreement to be executed and delivered by Seller will be, a valid and legally binding obligation of Seller, enforceable against Seller in accordance with their respective terms.  Neither the execution and delivery of this Agreement or any such other agreement nor the performance by Seller of the terms and provisions hereof or thereof will:  (i) violate the Articles of Incorporation or Bylaws of Seller, (ii) violate any Law or Order by which Seller, the Project or any of the Purchased Assets are bound, or (iii) except as set forth on Schedule 3.02, result in a breach or violation of any term or provision of, constitute a default under, or give rise to any right of termination or cancellation under, or result in or permit an acceleration of, any indenture, mortgage, lease or other agreement or instrument to which Seller is a party or by which Seller or any of the Purchased Assets is bound, other than as would not reasonably be expected to have a material adverse effect on Seller’s ability to perform its obligations hereunder, or the Project or the Purchased Assets.

 

14

 

3.03  Subsidiaries; Mill Owner.  Except as otherwise set forth on Schedule 3.03, Seller does not own, directly or indirectly, any capital stock, membership interest or other equity interest in any Person.  All of the outstanding capital stock of Seller is owned by Mill Owner.

 

3.04  Third Party Consents.  Except as otherwise set forth on Schedule 3.04, no material authorization, consent, waiver or approval of, or filing with, or notification to, any third party (including, without limitation, any Governmental Entity) is required to be obtained by Seller in connection with its sale and transfer of the Purchased Assets to Buyer on the terms and conditions set forth in this Agreement, and to permit Seller to perform its other obligations hereunder.

 

3.05  Title to Purchased Assets; Sufficiency.  Except as otherwise set forth on Schedule 3.05, Seller has:  (i) good and defensible title to all of the tangible and intangible personal property constituting part of the Purchased Assets, free and clear of all Encumbrances other than the Permitted Encumbrances, and (ii) good and marketable fee simple title to the Real Property to be Conveyed, free and clear of all Encumbrances, other than the Real Property Permitted Encumbrances.  Except for the Excluded Assets and except as set forth in Schedule 3.05 hereof, the Purchased Assets constitute all of the properties and assets used in or held for use in the operation of the Project as currently operated by Seller, and are sufficient for Buyer to operate the Project as the Project is currently operated by Seller.  Notwithstanding anything to the contrary in this Section 3.05, Seller makes no representation and warranty whatsoever with respect to the Real Property to be Conveyed as of the date of this Agreement, which representation and warranty in this Section 3.05 as it relates to the Real Property to be Conveyed shall be made only as of the Closing Date.

 

3.06  Environmental.  Except as described on Schedule 3.06:  (i) to the Knowledge of Seller, the Real Property is in compliance with all applicable Environmental Laws, except where the failure to be in compliance would not have a material adverse effect on the Purchased Assets, taken as a whole; (ii) Seller has not received written notification within the three-year period preceding the date of this Agreement from any Governmental Entity with respect to any current material violations of or liability under any Environmental Laws concerning the Purchased Assets; (iii) to the Knowledge of Seller, there are no claims, actions, suits or Legal Proceedings pending or threatened, at law or equity, relating to violation of or liability under any Environmental Law concerning the Purchased Assets; (iv) to the Knowledge of Seller, there has been no Release or threatened Release at, on, under or from the Purchased Assets of any Hazardous Materials except such matters as would not reasonably be expected to have a material adverse effect on the Purchased Assets, taken as a whole; (v) to the Knowledge of Seller, there are no facts or circumstances that could reasonably be expected to result in the imposition of liability pursuant to Environmental Law upon Buyer with respect to the Purchased Assets, except such matters as would not reasonably be expected to have a material adverse effect on the Purchased Assets, taken as a whole;  (vi) Seller has provided to Buyer copies of the reports and investigations within its possession or control regarding the environmental condition of the Purchased Assets that are listed on Schedule 3.06(vi); (vii) Schedule 3.06(vii) contains a true, correct and complete list of all material Environmental Permits pertaining to the Project; (viii) Seller currently has all material Environmental Permits that are required for the operation of the

 

15

 

Project as presently operated, all of which are in full force and effect; and (ix) to the Knowledge of Seller (a) Seller is not in violation of any terms or conditions of any such Environmental Permit, other than any such violation, breach or default that would not reasonably be expected to have a material adverse effect on Seller, the Project or the Purchased Assets, (b) no written notice of a pending violation of any material Environmental Permit has been received by Seller, and (c) no proceeding is pending or threatened to revoke, prevent the renewal of, or limit any such material Environmental Permit.  The representations and warranties contained in this Section 3.06 are the exclusive representation and warranties by Seller related to Environmental Laws, Environmental Conditions and Environmental Permits.

 

3.07  Equipment.  Except as otherwise described on Schedule 3.07, the Equipment constitutes all material machinery, equipment, tools, furniture and furnishings required for the operation of the Project in substantially the same manner as it was being operated by Seller immediately prior to the date of this Agreement.  Except as otherwise described on Schedule 3.07, all of the Equipment is located on the Real Property.

 

3.08  Contracts.  Schedule 3.08 contains a list of all contracts, leases, commitments and agreements to which Seller is a party as of the date of this Agreement which relate to the Project and either:  (i) require the payment or receipt by Seller of more than Fifty Thousand Dollars ($50,000) during the term of such contract or agreement and which are not terminable by Seller on ninety (90) or fewer days notice without penalty, or (ii) which are described in Subsections 3.08(i) through (vii) below (collectively, the “Material Contracts”).  Except as set forth on Schedule 3.08, Seller has made true and complete copies of the Material Contracts available to Buyer.  To the Knowledge of Seller, each of the Material Contracts is in full force and effect and is the legal, valid, binding and enforceable obligation of Seller; no material default exists thereunder.   Material Contracts shall include:

 

(i)  contracts and agreements for the future purchase, exchange or sale of electric power or ancillary services that extend beyond the Closing Date;

 

(ii)  contracts and agreements for the future transmission of electric power;

 

(iii) interconnection contracts and agreements;

 

(iv) contracts and agreements related to reservoir, water management and river operations;

 

(v)  contracts and agreements for the sale of any Purchased Asset or that grant a right or option to purchase any Purchased Asset;

 

(vi)  contracts and agreements under which Seller has imposed a security interest on any of the Purchased Assets; and

 

(vii)  contracts and agreements that purport to limit the Project’s freedom to compete in any line of business or in any geographic area.

 

16

 

3.09  Permits.  Schedule 3.09 contains a true, correct and complete list of all material Permits pertaining to the Project.  Except as set forth on Schedule 3.09, Seller currently has all material Permits that are required for the operation of the Project as presently operated, all of which are in full force and effect.  Except as set forth on Schedule 3.09, to Seller’s Knowledge (a) Seller is not in violation of any terms or conditions of any such Permit, other than any such violation, breach or default that would not reasonably be expected to have a material adverse effect on Seller, the Project or the Purchased Assets, (b) no written notice of a pending violation of any material Permit has been received by Seller, and (c) no proceeding is pending or threatened to revoke, prevent the renewal of, or limit any such material Permit.

 

3.10  Employees.  Schedule 3.10 contains a list of the names of each employee of Mill Owner who, as of the date of this Agreement, directly and primarily performs services for the Project (the “Project Employees”) and a list of any collective bargaining agreement or employment agreement currently in effect covering any such Project Employee (collectively, the “Employee Agreements”).  Copies of the Employee Agreements have been made available to Buyer.  Except as otherwise set forth on Schedule 3.10: (i) to the Knowledge of Seller, there is no labor strike, dispute or work stoppage or lockout involving any of the Project Employees actually pending or threatened, and (ii) Mill Owner is in compliance in all material respects with all applicable Laws respecting employment and employment practices with respect to the Project Employees.

 

3.11  Compliance with Law.  Except as otherwise set forth on Schedule 3.11 and excluding any representation or warranty regarding Environmental Laws, which is governed exclusively by Section 3.06, (i) to the Knowledge of Seller, the Project is being operated in compliance with all applicable Laws except for non-compliance which would not reasonably be expected to have a material adverse effect on Seller, the Project or the Purchased Assets; (ii) Seller has not been given written notice of any violation of any Law with respect to the ownership or operation of the Purchased Assets; and (iii) to the Knowledge of Seller, no investigation or review relating to Seller with respect to the ownership or operation of the Purchased Assets by any Governmental Entity is pending or threatened.

 

3.12  Litigation.  Except as described on Schedule 3.12, to the Knowledge of Seller, there are no claims, actions, suits or proceedings pending or threatened against Seller or the Purchased Assets, at law or in equity, before or by any Governmental Entity nor is Seller subject to any Order: (i) relating to the ownership or operation of the Project or the Purchased Assets, (ii) which could materially impair the ability of Seller to perform its obligations under this Agreement or any other agreement to be entered into by Seller at the Closing, or (iii) which questions the validity or propriety of this Agreement or any such other agreement or of any action to be taken hereunder or thereunder.

 

3.13  Changes in the Project.  Since December 31, 2004, except as otherwise set forth in Schedule 3.13:  (i) there has not occurred any development or event that has caused or would reasonably be expected to cause a material adverse change in the physical condition or operating capability of the Purchased Assets, taken as a whole; (ii) there has been no sale, lease, transfer,

 

17

 

Encumbrance or disposition of assets used in the operation of the Project with an aggregate book value of more than $50,000, other than the use of supplies in the ordinary course of business and other than the distribution of cash to Mill Owner; (iii) there has been no capital expenditures or commitments in respect thereto in excess of $50,000; and (iv) Seller has not entered into any agreement with respect to any of the foregoing.

 

3.14  Taxes.  Seller has filed in a timely manner all requisite Tax Returns required to be filed by it, all such Tax Returns are true, correct and complete in all material respects, and all material amounts of Taxes required to be paid by Seller have been paid in a timely manner for all periods ending prior to the Closing Date. There is no material dispute or pending or threatened claim, or any audit, investigation, protest or similar proceeding concerning any Tax with respect to the Purchased Assets.  None of the Purchased Assets is (i) property required to be treated as being owned by another Person pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax Reform Act of 1986, (ii) “tax-exempt use property” within the meaning of Section 168(h)(1) of the Code, (iii) “tax-exempt bond financed property” within the meaning of Section 168(g) of the Code, (iv) “limited use property” within the meaning of Rev. Proc. 2001-28, (v) subject to Section 168(g)(1)(A) of the Code, or (vi) subject to any provision of state, local or foreign Law comparable to any of the provisions listed above.  None of the Purchased Assets are subject to any Encumbrances for unpaid Taxes.  Seller is not a foreign person wi