EXHIBIT
2.3
SETTLEMENT AGREEMENT AND
RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE
(“Agreement”) is made this 31st day of January, 2006,
by and among UNITED BRIDGEPORT ENERGY, INC. (“United”),
DUKE BRIDGEPORT ENERGY, LLC (“Duke Bridgeport” and
together with United, the “Parties”), UIL HOLDINGS
CORPORATION (“UIL”), DUKE CAPITAL LLC (“Duke
Capital”), BRIDGEPORT ENERGY, LLC (“Bridgeport
Energy”) and NC DEVELOPMENT AND DESIGN COMPANY, LLC
(“NC Design”).
WHEREAS the Parties are members of Bridgeport
Energy, a Delaware limited liability company, and their
relationship as members thereof is governed by the Amended and
Restated Limited Liability Company Agreement of Bridgeport Energy,
LLC dated September 17, 1997 (as amended, the “Bridgeport LLC
Agreement”);
WHEREAS Bridgeport Energy owns and operates a
combined-cycle, electric generating facility (the “Bridgeport
Facility”) in Bridgeport, Connecticut, known as
“Bridgeport Energy”;
WHEREAS the Parties are members of NC Design, a
Delaware limited liability company, and their relationship as
members thereof is governed by the Limited Liability Company
Agreement of NC Development & Design Company, LLC dated as of
September 17, 1997 (as amended, the “NC Design LLC
Agreement”);
WHEREAS on May 12, 2005, Judge William Dreier
issued an Opinion in In the Matter of the Arbitration between
Duke Bridgeport Energy, LLC and United Bridgeport Energy, Inc.
, American Arbitration Association Case No. 11 198 Y 00487 05,
holding that on February 9, 2005, United validly exercised its
right under the Bridgeport LLC Agreement to require Duke Bridgeport
to purchase its Membership Interest in Bridgeport Energy (the
“Bridgeport Membership Interest”) at Fair Market Value,
as those terms are defined in the Bridgeport LLC
Agreement;
WHEREAS the Parties have been unable to
determine the Fair Market Value of the Bridgeport Membership
Interest and have not completed the purchase and sale
thereof;
WHEREAS Bridgeport Energy is currently engaged
in a dispute resolution proceeding against Duke Energy Trading and
Marketing LLC (“DETM”), which proceeding has been filed
with the American Arbitration Association, Case No. 11 174 02327 05
(the “DETM Proceeding”);
WHEREAS United commenced an arbitration on
December 16, 2005, identified as American Arbitration Association,
Case No. 11 198 Y 2729 05, concerning determination of the Fair
Market Value of the Bridgeport Membership Interest (the
“Appraisal Proceeding”);
WHEREAS NC Design owns certain drawings, plans,
specifications, and other assets related to the Bridgeport Facility
and NC Design provides services to Bridgeport Energy pursuant to an
Administrative Services Agreement dated as of September 17,
1997;
WHEREAS Section 11.4 of the NC Design LLC
Agreement provides that it is the intention of Duke Bridgeport and
United that the ownership percentages of the members of
NC
Design be in the same ratio as the ownership
percentages of the members of Bridgeport Energy and provides for
the automatic adjustment of such ownership percentages of NC Design
upon a change of ownership percentages of Bridgeport Energy to
ensure that such ownership percentages correspond;
WHEREAS the Parties wish to resolve all disputes
between them and to effect the purchase by Duke Bridgeport from
United of the Bridgeport Membership Interest and of United’s
one-third membership interest in NC Design (the “NC Design
Membership Interest” and, together with the Bridgeport
Membership Interest, the “Membership Interests”), and
therefore have chosen to enter into this Agreement; and
WHEREAS the Parties acknowledge that the sale by
United to Duke Bridgeport of the Bridgeport Membership Interest is
subject to approval by the Federal Energy Regulatory Commission
(“FERC”).
NOW, THEREFORE, in consideration of the mutual
covenants and promises hereinafter set forth, the Parties, UIL,
Duke Capital, Bridgeport Energy, and NC Design agree as
follows:
1.
Payment . Duke Bridgeport will pay to United the sum of
$71 million (the “Payment”) via electronic funds
transfer on the third business day immediately after receipt of the
Required Consents (as defined in paragraph 9(b) below) (such date,
the “Closing Date”). The consummation of the
transactions contemplated by this Agreement, including the delivery
of the Payment by Duke Bridgeport and the execution and delivery of
the Assignment by the Parties, is referred to herein as the
“Closing”.
2.
Assignment and
Assumption .
Contemporaneously with receipt of the Payment: (a) United will
execute and convey to Duke Bridgeport an assignment of the
Membership Interests in consideration of the Payment; and (b) Duke
Bridgeport will execute and convey to United an assumption of
United’s obligations and liabilities under the Bridgeport LLC
Agreement and the NC Design LLC Agreement, in consideration of
United’s assignment of the Membership Interests. The
assignment and assumption described in the foregoing sentence shall
be in the form of Exhibit A , with such amendments or
modifications thereof to which the Parties agree (the
“Assignment”). Duke Bridgeport may assign its right to
acquire the Membership Interests to an Affiliate (as defined in
paragraph 6 below) of Duke Bridgeport; provided, however, that Duke
Bridgeport shall remain liable for the Payment and all of its other
obligations and liabilities under this Agreement.
3.
Arbitration
Proceedings. United
further agrees that it will withdraw and dismiss the Appraisal
Proceeding with prejudice within five days of the Closing. During
the period between the date hereof and the date on which the
Appraisal Proceeding is withdrawn and terminated in accordance with
the immediately preceding sentence, United shall not take any
actions to advance its claims in the Appraisal Proceeding and the
Parties shall take all actions as may be necessary to cause the
Appraisal Proceeding to be held in abeyance during that period;
provided, however, that in the event FERC issues a Final Order
denying approval for the transactions contemplated hereby, United
may, as of the date of such Final Order, resume actions to advance
its claims in the Appraisal Proceeding. During the period between
the date hereof and the date of the Closing, United shall not take,
and shall not cause or seek to cause Bridgeport
Energy to take,
any actions to advance Bridgeport Energy’s claims in the DETM
Proceeding and the Parties and Bridgeport Energy shall take all
actions as may be necessary to cause the DETM Proceeding to be held
in abeyance during that period; provided, however, that in the
event FERC issues a Final Order denying approval for the
transactions contemplated hereby, United may cause Bridgeport
Energy, as of the date of such Final Order, to resume actions to
advance its claims in the DETM Proceeding and Bridgeport Energy
may, as of the date of such Final Order, resume actions to advance
its claims in the DETM Proceeding.
4.
Interim Operations of Bridgeport
Energy .During the period
between the date hereof and the Closing: (a) United shall not be
required to make any capital contribution or loan of funds to
Bridgeport Energy or NC Design; (b) United shall not be entitled to
receive or demand any distribution from Bridgeport Energy or NC
Design; (c) Duke Bridgeport shall assume performance of all of the
terms, covenants, conditions and obligations of United under the
Bridgeport LLC Agreement and the NC Design LLC Agreement; and (d)
Duke Bridgeport shall have all rights and responsibilities with
respect to management and operation of Bridgeport Energy and NC
Design, including with respect to any action or matter that would
require approval of the Management Committee or any Member of
either Bridgeport Energy or NC Design; provided ,
however , that, notwithstanding the foregoing, (x) without
the consent of both Parties, Bridgeport Energy will not take any
action to resolve or otherwise affect in any material respect the
DETM Proceeding, and (y) in the event FERC issues a Final Order
denying approval for the transactions contemplated hereby, (1) the
foregoing assumptions, consents and agreements shall terminate and
be of no further effect and neither of the Parties shall be deemed
to have released or waived any right or claim for damages, with
respect to itself or to Bridgeport Energy or NC Design, that it
has, shall have or may have had with respect to any action taken
during such period between the date hereof and the Closing, (2) if
Duke Bridgeport has made any capital contribution or loan of funds
to Bridgeport Energy or NC Design between the date hereof and the
Closing, United shall promptly make any capital contribution or
loan of funds that would have been required of it in the absence of
this Settlement Agreement and Bridgeport Energy or NC Design, as
the case may be, shall return to Duke Bridgeport the portion of the
capital contribution or loan of funds made by Duke Bridgeport in
place of United as a result of the provisions of this Settlement
Agreement, and (3) if Bridgeport Energy or NC Design makes any
distribution between the date hereof and the Closing, United shall
be entitled to receive the portion thereof to which it would have
been entitled in the absence of this Settlement Agreement, and Duke
Bridgeport shall promptly return to Bridgeport Energy or NC Design,
as the case may be, the portion of any distribution received by it
in place of United as a result of the provisions of this Settlement
Agreement.
5.
Costs . The Parties agree that each of them will bear
its respective costs associated with the Appraisal Proceeding, and
the negotiation and performance of this Agreement and the
Assignment.
6.
Release of Duke Bridgeport,
Bridgeport Energy, and NC Design . Except as set forth in the last sentence of
this paragraph and as set forth in paragraph 15 below with respect
to Continuing Contracts, effective as of the Closing, United
releases and forever discharges Duke Bridgeport, Bridgeport Energy,
NC Design, each of their Affiliates (including without limitation
DETM, which United acknowledges is an Affiliate of Duke Bridgeport
for all purposes under this Agreement, and Duke Capital and any
Affiliate of Duke Capital), and each of their
respective
predecessors, successors, assigns, principals, agents, officers,
directors, employees, members and parent corporations
(collectively, the “Duke Released Parties”) from, and
covenants not to sue or commence any arbitration or similar
proceeding against any of the Duke Released Parties with respect
to, any and all past, present, and future claims, demands, rights,
causes of action, judgments, executions, damages, liabilities, and
costs or expenses (including attorney’s fees and court costs)
relating to or arising out of any claim made, or which could be
made, against any Duke Released Party arising out of or related to
the Bridgeport LLC Agreement or the NC Design LLC Agreement, or
arising from or relating to any aspect of the business, actions,
activities or management of Bridgeport Energy, the Parties’
membership interests therein or the Bridgeport Facility, including,
but not limited to, (i) any claim for any distribution from
Bridgeport Energy or NC Design, including any claim for
distributions in respect of prior capital contributions,
reliability-must-run payments or any proceeds related to a sales
and use tax settlement to
