Securities and Exchange Commission
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 to 15(d) of the
Securities Exchange Act 1934
Date of Report: July 8, 1996
(Date of earliest event reported)
CalEnergy Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9874 94-2213782
(State of other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
302 South 36th Street, Suite 400, Omaha, NE 68131
(Address of principal executive offices) Zip Code
Registrant's Telephone Number, including area code:(402) 341-4500
Not Applicable
(Former name or former address, if changed from last report)
Item 5. Other Events
On July 8, 1996, CalEnergy Company, Inc. ("CalEnergy") and
Falcon Seaboard Resources, Inc. ("Falcon Seaboard") jointly
announced that CE/FS Holding Company, Inc., a wholly owned
subsidiary of CalEnergy ("Holding Company"), had entered into a
definitive agreement (the "Purchase Agreement") with the
stockholders of Falcon Seaboard for the purchase by Holding
Company of all of the issued and outstanding shares of capital
stock of Falcon Seaboard for a cash purchase price of
approximately $226,000,000. Falcon Seaboard has a significant
ownership interest in three operating gas-fired cogeneration
plants totalling 520MW in capacity and related natural-gas
pipelines. The acquisition is expected to be consummated in
early August 1996, subject to customary closing conditions, and
has been approved by the Federal Trade Commission and the
Department of Justice. Further information relating to this
transaction is contained in the Purchase Agreement and the
CalEnergy and Falcon Seaboard Joint Press Release of July 8,
1996, both of which are filed as exhibits to this Report and
incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of business being acquired: None.
(b) Pro Forma financial information: None.
(c) Exhibits:
99.1 Stock Purchase Agreement, dated as of
July 3, 1996, by and among CE/FS Holding Company,
Inc., David H. Dewhurst and all the remaining
owners of capital stock of Falcon Seaboard
Resources, Inc.
99.2 Joint Press Release of CalEnergy
Company, Inc. and Falcon Seaboard Resources, Inc.,
dated July 8, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CalEnergy Company, Inc.
By: \s\ Douglas L. Anderson
Douglas L. Anderson
Assistant Secretary and
Assistant General Counsel
(U.S. and Corporate)
Dated: July 11, 1996
Exhibit 99.1
STOCK PURCHASE AGREEMENT
regarding the purchase
of shares of
FALCON SEABOARD RESOURCES, INC.
by
CE/FS HOLDING COMPANY, INC.
___________________________________________
Dated as of July 3, 1996
Table of Contents
Page
ARTICLE I. DEFINITIONS 1
ARTICLE II. STOCK PURCHASE 19
Section 2.1. Shares. 19
Section 2.2. Purchase Price. 19
Section 2.3. Closing. 19
Section 2.4. Closing Obligations. 19
Section 2.5. Preparation of Balance Sheets. 21
Section 2.6. Purchase Price Adjustments. 25
Section 2.7. [Intentionally omitted] 28
Section 2.8. Adverse Contractual Development. 28
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS 28
Section 3.1. Organization and Good Standing. 29
Section 3.2. Authority; No Conflict. 29
Section 3.3. Capitalization of the Company; Title to
Shares. 32
Section 3.4. Subsidiaries. 32
Section 3.5. Financial Statements. 34
Section 3.6. Books and Records. 35
Section 3.7. Title to Operating Facility Properties
and Other Properties; Encumbrances. 35
Section 3.8. Condition and Sufficiency of Assets. 36
Section 3.9. Accounts Receivable. 36
Section 3.10. Certain Project Participants. 37
Section 3.11. No Undisclosed Liabilities. 37
Section 3.12. Taxes. 38
Section 3.13. No Material Adverse Change. 40
Section 3.14. Employee Benefits. 40
Section 3.15. Compliance With Legal Requirements;
Governmental Authorizations. 42
Section 3.16. Legal Proceedings; Orders. 46
Section 3.17. Absence of Certain Changes and Events. 47
Section 3.18. Contracts; No Defaults. 48
Section 3.19. Insurance. 51
Section 3.20. Environmental Matters. 51
Section 3.21. Employees. 54
Section 3.22. Labor Relations; Compliance. 54
Section 3.23. Intellectual Property. 55
Section 3.24. Disclosure. 56
Section 3.25. Relationships With Affiliates. 56
Section 3.26. Brokers or Finders. 56
Section 3.27. Acquired Assets. 56
Section 3.28. SECI Term Loan Agreement. 57
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER 57
Section 4.1. Organization and Good Standing. 57
Section 4.2. Authority; No Conflict. 57
Section 4.3. Investment Intent. 58
Section 4.4. Certain Proceedings. 58
Section 4.5. Brokers or Finders. 58
ARTICLE V. COVENANTS 59
Section 5.1. Access and Investigation. 59
Section 5.2. Operation of the Businesses of the
Acquired Entities. 60
Section 5.3. Announcements. 61
Section 5.4. Required Approvals; Further Assurances. 62
Section 5.5. HSR Act Approval. 63
Section 5.6. Notification; Supplement to Disclosure
Letter. 63
Section 5.7. Payment of Indebtedness by Affiliates. 63
Section 5.8. Exclusive Dealing. 64
Section 5.9. Reorganization with Respect to Excluded
Assets and Excluded Subsidiaries;
Transfer of Excluded Employees and
Company Plans. 64
Section 5.10. Warrants. 65
Section 5.11. Non-Compete; Non-Solicitation. 65
Section 5.12. Assumption of Houston Headquarters Lease;
Other Obligations. 66
Section 5.13. Use of Company Name and Logo. 67
Section 5.14. Transitional Use of Space and Access to
Personnel. 67
Section 5.15. Board Nomination. 67
ARTICLE VI. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO
CLOSE 69
Section 6.1. Accuracy of Representations. 69
Section 6.2. Sellers' Performance. 69
Section 6.3. Additional Documents. 70
Section 6.4. No Proceedings. 70
Section 6.5. Buyer's Due Diligence. 70
Section 6.6. No Injunction. 71
Section 6.7. Transaction Documents. 71
ARTICLE VII. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO
CLOSE 71
Section 7.1. Accuracy of Representations. 71
Section 7.2. Buyer's Performance. 71
Section 7.3. Additional Documents. 71
Section 7.4. No Injunction. 72
ARTICLE VIII. TERMINATION 73
Section 8.1. Termination Events. 73
Section 8.2. Effect of Termination. 73
Section 8.3. Alternative Transaction. 74
ARTICLE IX. INDEMNIFICATION; REMEDIES 75
Section 9.1. Survival; Right to Indemnification Not
Affected by Knowledge. 75
Section 9.2. Indemnification and Payment of Damages by
Sellers. 75
Section 9.3. Indemnification and Payment of Damages by
Sellers--Environmental Matters. 77
Section 9.4. Time Limitations. 78
Section 9.5. Limitations on Amount. 79
Section 9.6. Certain Claims Procedures. 80
Section 9.7. Right to Defend Third Party Claims. 80
Section 9.8. Equitable Remedies. 82
Section 9.9. Limitation on Rights and Remedies. 82
ARTICLE X. GENERAL PROVISIONS 83
Section 10.1. Transaction Costs. 83
Section 10.2. Confidentiality. 83
Section 10.3. Sellers' Agent; Notices. 84
Section 10.4. Entire Agreement. 85
Section 10.5. Amendment; Waiver. 86
Section 10.6. Assignments, Successors, and Parties in
Interest. 86
Section 10.7. Severability. 86
Section 10.8. Section Headings; Construction. 87
Section 10.9. Governing Law; Consent to Jurisdiction. 87
Section 10.10. Counterparts. 88
EXHIBITS
Exhibit A - CE Guaranty Agreement
Exhibit B - Consulting Agreement
Exhibit C - Disclosure Letter
Exhibit D - Escrow Agreement
Exhibit E - Individual Guarantor
Exhibit F - Individual Guaranty Agreement
Exhibit G - Stock Option Agreement
Exhibit H - Press Release
Exhibit I, J and K - June 30 Balance Sheets
Exhibit 6.3 - Opinion of Vinson & Elkins, et al
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made
as of July 3, 1996, by and among CE/FS Holding Company, Inc., a
Delaware corporation ("Buyer"), and David H. Dewhurst, an
individual resident of Texas ("Dewhurst"), and the other owners
of Shares listed on the signature page of this Agreement
(collectively, with Dewhurst, the "Sellers").
WHEREAS, the Sellers desire to sell, and the Buyer
desires to purchase, all of the issued and outstanding shares
(the "Shares") of capital stock of Falcon Seaboard Resources,
Inc., a Texas corporation (the "Company"), on the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, by virtue of the transfer of Shares
contemplated hereby, the parties intend that the Buyer shall
acquire the Acquired Entities and Acquired Assets and the Sellers
shall retain the Excluded Subsidiaries and Excluded Assets and
shall remain fully responsible for the Excluded Liabilities, all
as more fully described and subject to the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and of
the respective covenants and agreements contained herein, and
subject to the terms and conditions hereinafter set forth, the
parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE
DEFINITIONS
For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Article I:
"Accountants"--as defined in Section 2.6(b).
"Accounts Receivable"--as defined in Section 3.9.
"Acquired Assets"-- all assets (tangible or
intangible), including Equipment, other equipment, systems, data
and files of any kind whatsoever, used in the business of, or
owned or operated by, the Company or any of the Acquired Entities
on December 31, 1995 (subject to dispositions and retirements in
the Ordinary Course of Business) or June 30, 1996, including all
permits and contractual rights thereof relating to the Acquired
Entities, Operating Facilities, the Project Documents,
development opportunities relating directly or indirectly to the
Operating Facilities, and excluding only the Excluded Assets.
"Acquired Entities"-- the Company and each corporation,
partnership, joint venture, partnership interest and other entity
directly or indirectly owned, controlled or operated by the
Company at any time from and after January 1, 1996, including
without limitation those entities listed on Schedule 1.1 to the
Disclosure Letter or which have operating or ownership or other
contractual rights and interests in any of the Operating
Facilities or Oil and Gas Properties, and excluding only the
Excluded Subsidiaries.
"Adverse Contractual Development"--an Adverse
Contractual Development shall be deemed to exist if, within two
years of the Closing, due to the direct or indirect acts of Texas
Utilities Electric Company or the Texas Public Utility
Commission, a modification or interpretation of the Power
Purchase Agreement, dated July 30, 1986, as amended prior to the
date hereof, between PRI and the Texas Utilities Electric Company
or any other PRI project agreements or permits or approvals
occurs which shall result in an adverse impact on the PRI
economics with respect to CE.
"Affiliate"--used to indicate a relationship with any
Person means (i) any corporation, partnership, joint venture or
other entity of which such Person is an officer or general
partner or is, directly or indirectly, through one or more
intermediaries, the beneficial owner of 10% or more of (A) any
class or type of equity securities or other profits interest or
(B) the combined voting power of interests ordinarily entitled to
vote for management or otherwise to cause the direction of the
affairs of such entity and (ii) any trust or other estate in
which such Person has a substantial beneficial interest or as to
which such Person serves as a trustee or in a similar fiduciary
capacity. For purposes of this Agreement, an Affiliate of a
spouse or member of the immediate family of any individual Person
shall be deemed an Affiliate of such Person.
"Affiliated Transaction Entity"--as defined in Section
3.2(a).
"Agreement"--as defined in the first paragraph of this
Agreement.
"Alternative Transaction"--as defined in Section
8.3(a).
"Applicable Contract"--any Contract to which any
Acquired Entity is a party or by which any Acquired Entity or any
of the assets owned by it is bound, excluding only those
Contracts which constitute Excluded Assets.
"Balance Sheet"--as defined in Section 3.5.
"Breach"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any
instrument delivered pursuant to this Agreement will be deemed to
have occurred if there is or has been any inaccuracy in or breach
of, or any failure to perform or comply with, or any conflict or
inconsistency with, such representation, warranty, covenant,
obligation, or other provision.
"Buyer"--as defined in the first paragraph of this
Agreement.
"Buyer's Plan" - as defined in Section 5.16(a).
"CE"--CalEnergy Company, Inc.
"CE Guaranty Agreement" -- the guaranty agreement to be
executed in the form annexed hereto as Exhibit A on the Closing
Date by CE.
"CERCLA"--the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq.
"CERCLIS"--as defined in Section 3.20(c).
"Closing"--as defined in Section 2.3.
"Closing Date"--as defined in Section 2.3.
"Closing Date Balance Sheet Adjustments"--as defined in
Section 2.6.
"Closing Date Purchase Price"--as defined in Section
2.4(c).
"Company"--as defined in the Recitals of this
Agreement.
"Consent"--any approval, consent, ratification, waiver,
or other authorization (including any Governmental
Authorization).
"Company 401(k) Plan" - the Falcon Seaboard Resources,
Inc. 401(k) Profit Sharing Plan.
"Company Other Benefit Obligation" - each obligation,
agreement, or practice to provide benefits (other than salary) as
compensation for services rendered (including, without
limitation, consulting agreements under which the compensation
paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe
benefits within the meaning of IRC 132) that is sponsored,
maintained or contributed to by an Acquired Entity for the
benefit of current or former directors or employees of an
Acquired Entity, which obligation, agreement, or practice is not
a Company Plan.
"Company Plan" - each "employee benefit plan," as such
term is defined in Section 3(3) of the ERISA (including, but not
limited to, employee benefit plans, such as foreign plans, which
are not subject to the provisions of ERISA) that is or was
sponsored, maintained or contributed to by an Acquired Entity for
the benefit of any current or former employees of such Acquired
Entity.
"Consulting Agreement"--the consulting agreement to be
entered into on the Closing Date by and between David H. Dewhurst
and CE in the form attached hereto as Exhibit B.
"Contemplated Transactions"--all of the transactions
contemplated by this Agreement, including:
(a) the sale of the Shares by the Sellers to the Buyer;
(b) the execution, delivery, and performance of the Transaction
Documents;
(c) the performance by the Buyer and the Sellers of their
respective covenants and obligations under this Agreement;
(d) the Reorganization;
(e) the repurchase and cancellation of the FSOC Warrants; and
(f) the Buyer's acquisition of the Shares and the Acquired
Entities (including all Acquired Assets).
"Contract"--any agreement, contract, obligation, right,
promise, or undertaking (whether written or oral and whether
express or implied) that is legally binding.
"Costs"--all liabilities, losses, damages (including
all incidental and consequential damages incurred), claims,
costs, expenses (including costs of investigation and defense and
reasonable attorneys', experts' and consultants' fees), economic
losses, diminution in value, judgments, penalties, fines,
obligations, and disbursements of any kind or of any nature
whatsoever, whether accrued or contingent, including, without
limitation, natural resource damages, remedial, removal,
response, abatement, closure, post-closure, cleanup, legal,
investigative and monitoring costs and any related expenses or
disbursements; provided, in each case, that such Costs shall not
include any Costs to the extent they are attributable to (i) a
diminution or other decrease in the publicly-reported trading
price of CE's common stock or (ii) claims by Buyer or CE for
damages based upon any alleged other acquisition transaction or
lost opportunity in respect of use of funds that Buyer or CE
could have pursued instead of the subject transaction.
"Damages"--as defined in Section 9.2.
"Dewhurst"--as defined in the first paragraph of this
Agreement.
"Disclosure Letter"--the disclosure letter attached
hereto as Exhibit C.
"Encumbrance"--any charge, claim, community property
interest, condition, easement, equitable interest, lien,
mortgage, option, pledge, security interest, right of first
refusal, including any restriction on use, voting, transfer or
receipt of income.
"Environmental Laws"-- all applicable federal, state,
and local laws, ordinances, rules, regulations (including,
without limitation, CERCLA, the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. 1801 et seq., the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq., the Clean Air
Act, 42 U.S.C. 7401 et seq., the Clean Water Act, 33 U.S.C.
1251 et seq., the Occupational Safety and Health Act, 29 U.S.C.
651 et seq., the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. 11001 et seq., and the Endangered Species Act,
16 U.S.C. 1531 et seq., each as amended from time to time, and
all regulations and rules promulgated pursuant thereto, and all
analogous state and local laws, regulations and ordinances),
codes, duties under the common law or orders, including, without
limitation, any requirements imposed under any Governmental
Authorizations, judgments, Orders, decrees, agreements, or
recorded covenants, restrictions, easements or other Legal
Requirements relating to protection of the environment, natural
resources, human health, public safety or welfare, or which
pertain to Hazardous Materials.
"Environmental Permits"--all Governmental
Authorizations required under applicable Environmental Laws in
connection with the ownership, use and/or operation of the
Acquired Entities or the Property.
"EPA"--the United States Environmental Protection
Agency or any successor agency or department.
"Equipment"--any motor vehicles, tank cars, rolling
stock, cranes, forklifts, drilling equipment or, maintenance
equipment, operating equipment, tools, inventory and spare parts
either owned or used by the Acquired Entities or located at the
Operating Facilities.
"ERISA"--the Employee Retirement Income Security Act of
1974 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"Escrow Funds"--the amount to be paid by the Buyer
pursuant to Section 2.4(c)(ii) hereof, to be deposited with the
Escrow Agent into an escrow account pursuant to the terms of the
Escrow Agreement, together with all earnings thereon.
"Escrow Agent"--a financial institution chosen by CE
(and reasonably acceptable to the Sellers' Agent).
"Escrow Agreement"--as defined in Section 2.4(d).
"Excluded Assets"--(i) all proprietary interest in the
Falcon Seaboard name and logo, (ii) all assets (tangible or
intangible), equipment, systems, data, files and records of any
kind whatsoever directly used in the business of, or owned or
operated by, the Excluded Subsidiaries or Liquidated
Subsidiaries, (iii) the Whitehall Street Real Estate Limited
Partnership III and Meridian Advisors, Ltd. and the G.S. Capital
Partners II L.P. investment partnership interests, (iv) all
development opportunities owned or controlled by the Company
prior to the Closing Date except development opportunities which
relate directly or indirectly to the Operating Facilities, (v)
the Company's Houston Headquarters Lease and all office art,
furnishings and office equipment located at such offices (to the
extent such equipment is listed on Schedule 1.3 of the Disclosure
Letter and not primarily used or otherwise necessary in
conducting the businesses of the Operating Facilities or the
Acquired Entities), (vi) the other assets listed on Schedules 1.2
and 1.3 of the Disclosure Letter as of the date hereof, (vii)
Excluded Service Contracts and (viii) the Oil and Gas Properties;
and, in each case, all Costs and other obligations under
Contracts or otherwise relating thereto. For the avoidance of
doubt, the items footnoted on the attached Schedule 1.3
indicating proposed Excluded Assets will be included as Excluded
Assets to the extent mutually agreed by the Sellers and the Buyer
prior to Closing. The parties acknowledge that, subject to
abiding by the restrictions of the existing confidentiality
agreement between them and the restrictive covenant in Section
5.11 below, they are free to compete for any and all development
opportunities except for those conveyed to Buyer under clause
(iv) above.
"Excluded Service Contracts"--as defined in Section
5.12.
"Excluded Employees"--all employees of the Acquired
Entities, the Excluded Subsidiaries, the Liquidated Companies,
their predecessors and any Persons previously owned or controlled
by any of them, excluding only those employees of the Acquired
Entities listed on Schedule 3.21 of the Disclosure Letter (other
than any plant managers deleted from such list pursuant the
request of CE made at any time more than two (2) days prior to
the Closing).
"Excluded Liabilities"--all Costs (i) that constitute
Transaction Costs to be paid by Seller pursuant to Section 10.1,
(ii) relating to all income taxes of the Sellers, all Taxes of or
attributable to any of the Acquired Entities (to the extent such
other Taxes are related to operations conducted on or prior to
June 30, 1996) or any of the Excluded Subsidiaries or the
Liquidated Companies and all Taxes, direct or indirect,
attributable to the transfer of the Shares pursuant to this
Agreement or the Contemplated Transactions, (iii) relating to
Excluded Assets, Excluded Subsidiaries or Liquidated Companies
(including, without limitation, any and all obligations,
liabilities and other Costs of or attributable to the past,
present or future operations of the Excluded Assets, Excluded
Subsidiaries or any Liquidated Companies), (iv) in respect of any
obligation to indemnify any Person by reason of the fact that
such Person was a director or officer of any of the Acquired
Entities, Excluded Subsidiaries or Liquidated Companies or was
serving as such at the request of any of the Sellers, any
Acquired Entity, Excluded Subsidiary or Liquidated Company, (v)
under any Tax sharing agreement to which the Sellers, any of the
Acquired Entities or the Excluded Subsidiaries are party, (vi)
incurred or arising in connection with the performance by the
Sellers of their obligations pursuant to Sections 5.9 and 5.12
hereof (including Taxes assessed against or payable by CE, Buyer
or any of the Acquired Entities as a result thereof) or (vii)
resulting from claims of the PBGC, or any other Costs or
obligations under or in connection with Company Plans or Company
Other Benefit Obligations, or otherwise incurred in connection
with any severance costs, benefits or other obligations, in each
case, to or in respect of any Excluded Employees.
"Excluded Subsidiaries"--Falcon Seaboard Diversified,
Inc., Falcon Seaboard Energy Services, Inc., Falcon Power II,
Inc., Falcon Seaboard India Private Limited, Falcon Seaboard
Argentina S.A., Falcon Seaboard Espana, S.A., Falcon Seaboard
Power Deutschland GmBH, Projecto Almeria Mediterraneo, S.A.,
Falcon Seaboard TEAG Energi VmbH, Falcon Seaboard TEAG Energi
GmbH and Co. K, Adirondack Power, Inc., Nassau Power Corporation,
and Falcon Power, Inc.
"Facilities"--any real property, leaseholds, easements,
rights of way or other interests currently or formerly owned or
operated by any Acquired Entity and any buildings, fixtures,
plants, structures, or equipment currently or formerly owned or
operated by the Acquired Entities, the Excluded Subsidiaries,
their predecessors or any Persons previously owned or controlled
by any of them.
"Falcon License"--as defined in Section 5.13.
"Final June 30 Balance Sheets" -as defined in Section
2.5.
"Final July 30 Balance Sheets"--as defined in Section
2.5.
"FSOC Warrants"--the outstanding warrants for the
purchase of 30% of the equity of Falcon Seaboard Oil Company
owned by certain third parties (and all rights of the holders of
such warrants in respect of compensation, consulting and other
fees, profit-sharing, bonuses, indemnities or other payments from
any of the Acquired Entities).
"FSOC Warrant Cancellation Agreements"--as defined in
Section 5.10.
"GAAP"--generally accepted United States accounting
principles, consistently applied, as in effect on the date on
which the document to which such term refers relates.
"Governmental Authorization"--any approval, consent,
license, permit, registration, waiver, exemption, variance,
franchise, right or other authorization issued, granted or given,
by or under the authority of any Governmental Body or pursuant to
any Legal Requirement.
"Governmental Body"--any nation or government and any
state or political subdivision thereof, any self-regulatory
organization acting under color of authority granted under any
Legal Requirement, and any court, tribunal, arbitrator,
authority, department, agency, commission, official or other
instrumentality of the United States, or any domestic, state,
county, city or other political subdivision thereof.
"Hazardous Material"--any product, substance, chemical,
material or waste whose presence, nature, quantity and/or
intensity of existence, use, manufacture, processing, treatment,
storage, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials is or has
been determined or asserted by a Governmental Body (through
regulation or otherwise) to be potentially injurious to public
health, safety, welfare, the environment or the Facilities, or
that is regulated, monitored or subject to reporting by any
Governmental Body or a basis for liability to any Governmental
Body or a third party under any applicable statute or common law
theory, including, without limitation, any material, waste or
substance which is or contains (i) petroleum, including crude oil
or any fraction thereof, natural gas, or synthetic gas usable for
fuel or any mixture thereof, (ii) asbestos, (iii) polychlorinated
biphenyls, (iv) flammable explosives, (v) radioactive materials,
(vi) radon in excess of EPA recommended exposure limits, (vii)
paint containing concentrations of lead equal to or in excess of
1.0 milligrams per square centimeter or 0.5 percent by weight or
mercury in excess of 200 parts per million, (viii) heavy metals
in concentrations or locations that could give rise to Remedial
Actions or (ix) any other hazardous substances as defined under
CERCLA.
"Houston Headquarters Lease"--the Lease Agreement
between Metropolitan Life Insurance Company and the Company dated
March 18, 1993, as amended.
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.
"Indemnified Persons"--as defined in Section 9.2.
"Individual Guarantor" -- with respect to the Shares
owned by any Seller which is not an individual, the individual
listed on Exhibit E attached hereto next to the name of such
Seller.
"Individual Guarantor Affiliate" -- any individual or
other Person which is a party to an Individual Guaranty.
"Individual Guaranty" -- the guaranty agreement to be
executed in the form annexed hereto as Exhibit F on the Closing
Date by each Individual Guarantor and Individual Guarantor
Affiliate in respect of all Shares listed next to his or its name
on Exhibit E or on the signature pages of this Agreement.
"Intellectual Property "--all (i) patents, letters
patent, design patents, patent applications, design patent
applications, inventions (whether or not patent applications have
been filed) or designs (whether or not patent applications have
been filed), (ii) trademarks, service marks, trade names, logos,
symbols or brands (whether registered or unregistered), (iii)
copyrights (whether registered or unregistered), (iv) fictitious-
name filings, rights of privacy or publicity, know-how, trade
secrets, formulae, research and development data, new product
research data and manufacturing processes, technology,
discoveries and unpatented inventions, and (v) source codes,
computer software or other intellectual property (whether
registered or unregistered) and any applications therefor either
owned by the Acquired Entities or used in the conduct of the
business of the Acquired Entities as presently conducted.
"Interim Balance Sheet"--as defined in Section 3.5.
"IRC"--the Internal Revenue Code of 1986 or any
successor law, and regulations issued by the IRS pursuant to the
Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United
States Department of the Treasury.
"Knowledge"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such
individual is actually aware of, or through the exercise of
reasonable diligence in the performance of his duties, or after
due inquiry of officers, plant managers and other responsible
corporate managers in connection with the Contemplated
Transactions, should have known, such fact or other matter.
A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any
individual who is serving on the date hereof as a director or
officer of such Person (or in any similar capacity) or any
Individual Guarantor has, or at any time had, Knowledge of such
fact or other matter.
"Legal Requirement"--any applicable federal, state,
local, municipal, foreign, international, multinational,
regulatory or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or
treaty.
"Liquidated Companies"--as defined in Section 3.4.
"Non-Utility Project Participant" -- as defined in
Section 3.10.
"NorCon Loan Agreement" -- the Loan Agreement dated as
of January 31, 1992, among Northern Consolidated Power, Inc.,
General Electric Capital Corporation and the other parties on the
signature pages thereto, together with the First Amendment
thereto dated as of September 18, 1992, the Second Amendment
thereto dated as of October 29, 1992, the Third Amendment thereto
dated as of December 31, 1992, the Fourth Amendment thereto dated
as of March 30 1993, the Fifth Amendment thereto dated as of May
24, 1993, the Sixth Amendment thereto dated as of July 23, 1993,
the Seventh Amendment thereto dated as of September 27, 1993, the
Eighth Amendment thereto dated as of November 30, 1993, the Ninth
Amendment thereto dated as of December 30, 1993, the Tenth
Amendment thereto dated as of May 1, 1994, the Eleventh Amendment
thereto dated as of May 31, 1994, and the Twelfth Amendment
thereto dated as of September 30, 1994.
"Oil and Gas Interest(s)" -- means direct and indirect
interests of the Company and the Acquired Entities (other than
the interests of FSOC and PRI and any other interests or
activities directly relating to the Operating Facilities) in and
rights with respect to oil, gas, mineral and related properties
and assets of any kind and nature, direct or indirect, including
working, mineral, royalty and overriding royalty interest,
production payments, operating rights, net profits interests,
other non-working interests and non-operating interests.
"Oil and Gas Properties"-- means (a) the Oil and Gas
Interests and (b) all of the Company's and Acquired Entities'
interests in and rights with respect to (i) hydrocarbons and
other minerals or revenues therefrom and contracts in connection
therewith and claims and rights thereto (including oil and gas
leases, operating agreements, unitization and pooling agreements
and orders, division orders, transfer orders, mineral deeds,
royalty deeds, oil and gas sales, exchange and processing
contracts and agreements and, in each case, interests
thereunder), surface interests, fee interests, reversionary
interests, reservations and concessions; (ii) easements, rights
of way, licenses, permits, leases, and other interests associated
with, appurtenant to, or necessary for the operation of the Oil
and Gas Interests; and (iii) wells, equipment and machinery
(including well equipment and machinery), oil and gas production,
gathering, transmission, compression, treating, processing and
storage facilities (including tanks, tank batteries, pipelines
and gathering systems), pumps, water plants, electric plants,
gasoline and gas processing plants, refineries and other tangible
personal property and fixtures associated with, appurtenant to,
or necessary for the operation of any of the Oil and Gas
Interests; but excluding in (i), (ii) and (iii) above, all
interests and rights directly relating to the Operating
Facilities.
"Operating Facilities"--(i) the 240 MW Saranac Power
Partners, L.P. cogeneration facility and all gas pipeline
facilities (including those operated by North Country Gas
Pipeline, Inc.), steamlines and interconnection facilities
related thereto, including the backup boiler ("Saranac"); (ii)
the 200 MW Power Resources, Inc. cogeneration facility and all
gas pipeline facilities (including those operated by Big Spring
Pipeline Company), steamline facilities and interconnection
facilities, related thereto ("PRI"); and (iii) the 80 MW NorCon
Power Partners, L.P. cogeneration facility and all gas pipeline
facilities, steamline facilities and interconnection facilities,
related thereto and the ARP facilities and related pipelines and
backup boiler ("NorCon"), in each case (other than with respect
to the Saranac backup boiler) to the extent that the Acquired
Entities and/or Operating Facilities own or operate or have the
exclusive right to use any such assets, (each of Saranac, PRI and
NorCon being referred to herein as an "Operating Facility" and
collectively as "Operating Facilities").
"Order"--any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or
rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a
Person will be deemed to have been taken in the "Ordinary Course
of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-
day operations of such Person in accordance with applicable Legal
Requirements and Governmental Authorizations and not in
connection with any extraordinary or unusual transaction
(including an acquisition or disposition of assets); and
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be
specifically authorized by the parent company (if any) of such
Person.
"Organizational Documents"--(a) the articles or
certificate of incorporation and the bylaws of a corporation;
(b) the partnership agreement and any statement of partnership of
a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership;
(d) the articles of limited liability and operating or limited
liability company agreement (if any) of a limited liability
company; (e) the trust agreement or trust instrument of a trust
any other related trust formation or governance documents; (f)
any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and
(g) any amendment to any of the foregoing.
"Partnership Interests"--each of the limited partner
and general partner interests in the Partnerships held indirectly
by the Company in the names and percentage amounts as set forth
on Schedule 1.5 to the Disclosure Letter.
"Partnerships"--Morgan Creek Partners, L.P., a Texas
limited partnership, Saranac Power Partners, L.P., a Delaware
limited partnership, and NorCon Power Partners, L.P., a Delaware
limited partnership.
"Person"--any individual, corporation (including any
non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"Post Closing Balance Sheet Adjustments"--as defined in Section 2.6.
"Post Closing Adjustment Date"--as defined in Section 2.5.
"Preliminary June 30 Balance Sheets"--as defined in Section 2.5.
"Preliminary July 31 Balance Sheets"--as defined in Section 2.5.
"PRI Loan Agreement"--the Amended and Restated Term
Loan Agreement, dated as of December 30, 1988, as amended by
Amendment No. 1, dated as of May 1, 1989, as further amended by
Amendment No. 2, dated as of April 28, 1989, as further amended
by Amendment No. 3, dated as of June 1, 1990, as further amended
by Amendment No. 4, dated as of April 15, 1991, and as further
amended by Amendment No. 5, dated as of June 29, 1995 (as so
amended, the "Amended Term Loan Agreement"), among Credit Suisse
and Merita Bank Ltd., Grand Cayman Branch (formerly Kansallis-
Osake-Pankki) as Term Lenders, the other Term Lenders named
therein, Power Resources, Inc., as Borrower, and Credit Suisse,
as Agent (collectively, the "PRI Lenders").
"Proceeding"--any action, arbitration, audit, hearing,
investigation, litigation, claim or suit (whether civil,
criminal, administrative, investigative, or informal) commenced,
brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Project Documents"--each (i) power purchase or sale
agreement, interconnection agreement, fuel purchase agreement
(gas, diesel, refinery off-gas, jet fuel, etc.) if such fuel
agreement is not terminable by the Acquired Entities without
penalty or Cost on 30 days' or less notice,, steam sale or
thermal host agreement, fuel transportation agreement, water
supply agreement or usage permit, sewer use agreement or permit,
waste disposal agreement and O&M agreement to which any of the
Acquired Entities are a party, and (ii) each Governmental
Authorization granted and available to an Acquired Entity in
respect of its operations or those of any Operating Facility.
"Property"--as defined in Section 9.3.
"Purchase Price"--as defined in Section 2.2.
"Release"--any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other
releasing into the environment, whether intentional or
unintentional.
"Remedial Action"--any action required to (i) clean up,
remove, remediate, permanently remedy or treat Hazardous
Materials, including, without limitation, actions defined under
Section 101 of CERCLA (ii) prevent a Release or Threat of Release
of any Hazardous Material, (iii) perform pre-remedial studies,
investigations or post-remedial monitoring and care, (iv) cure a
violation of Environmental Law or (v) take corrective action
under Sections 3004(u), 3004(v) or 3008(h) of the Resource
Conservation Recovery Act, 42 U.S.C. 6901 et seq. or analogous
state law.
"Representative"--with respect to a particular Person,
any director, officer, employee, agent, consultant, advisor, or
other representative of such Person, including legal counsel,
accountants, and financial advisors.
"Retained Employee" - each employee of an Acquired
Entity who is listed on Schedule 3.21 of the Disclosure Letter,
other than any plant manager deleted from such Schedule 3.21 at
the request of CE made at any time at least two (2) days prior to
the Closing Date, and who is employed by an Acquired Entity
immediately following the Closing.
"Saranac Loan Agreement"--the Amendment and Restatement
dated as of September 30, 1994 of the Loan Agreement dated as of
December 29, 1992 between Saranac Power Partners, L.P. in
conjunction with the County of Clinton Industrial Development
Agency (as Borrowers), North Pipeline Corporation, and Credit
Suisse as Agent for the Lenders, Credit Suisse, ABN-AMRO Bank,
N.V., National Westminster Bank PLC and the Fuji Bank, Limited,
New York branch, as Co-Agents, The Sumitomo Bank, Limited, as
Lead Manager, the Lenders party thereto and General Electric
Capital Corporation (collectively, the "Saranac Lenders").
"Securities Act"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"Sellers"--as defined in the first paragraph of this
Agreement.
"Sellers' Agent"--Dewhurst, in his capacity as attorney
and agent for the Sellers pursuant to Section 10.3 of this
Agreement.
"Senior Lenders"-the NorCon Lenders, the PRI Lenders
and the Saranac Lenders.
"Senior Loan Agreements"-- the NorCon Loan Agreement,
PRI Loan Agreement and Saranac Loan Agreement.
"Shares"--as defined in the Recitals of this Agreement.
"Reorganization"--as defined in Section 5.9 of this
Agreement.
"Stock Option Agreement"--the stock option agreement to
be entered into on the Closing Date by and between David H.
Dewhurst and CE regarding the grant of options to purchase
300,000 shares of common stock of CE in the form attached hereto
as Exhibit G.
"Subsidiaries"--all corporations, partnerships, joint
ventures and other entities with respect to which the Company,
directly or indirectly through one or more intermediaries, (i)
beneficially owns 10% or more of any class or type of equity
securities or other profits interest, (ii) controls the combined
voting power of interests ordinarily entitled to vote for or
otherwise direct the management or affairs or (iii) is the
general partner or managing member.
"Tax or Taxes " -- all taxes, charges, fees, levies or
other assessments, and all estimated payments thereof, including
but not limited to income, excise, property, sales, use, value
added, environmental, franchise, payroll, transfer, gross
receipts, withholding, social security and unemployment taxes
imposed by any Governmental Body, including any interest, penalty
and expense relating to such taxes, charges, fees, levies or
other assessments.
"Tax Return"--any return (including any information
return), report, statement, schedule, notice, form, or other
document or information filed with or submitted to, or required
to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection, or
payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"Threat of Release"--a substantial likelihood of a
Release that may require action in order to prevent or mitigate
damage to the human health, natural resources or environment that
may result from such Release.
"Threatened"--a claim, Proceeding, dispute, action, or
other matter will be deemed to have been "Threatened" if any
demand or statement has been made in writing or, to any of the
Sellers' Knowledge, orally or any notice has been given in
writing, or to any of the Sellers' Knowledge, orally, or if any
other event has occurred or any other circumstances exist, that
would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be
asserted, commenced, taken, or otherwise pursued in the future.
"Transaction Costs"--as defined in Section 10.1 of this
Agreement.
"Transaction Documents"--collectively, this Agreement,
the Escrow Agreement, the Consulting Agreement, the Stock Option
Agreement, the Houston Lease Assignment, the transfer and
assumption agreements relating to the Excluded Service Contracts,
the Reorganization documentation, the FSOC Warrant Cancellation
Agreements, all other Excluded Employee, Excluded Asset or
Excluded Subsidiary transfer and assumption documents (including,
without limitation, all benefit plan transfer documents), each of
which shall be on terms and conditions reasonably satisfactory to
the Buyer, the CE Guaranty, the Individual Guarantees and all
other documents, agreements and instruments contemplated thereby
or delivered in connection therewith, and such other documents,
agreements, and agreements as the Sellers and the Buyer may deem
necessary and advisable in connection with the Contemplated
Transactions.
"User"--any Person now or heretofore occupying, owning,
operating, managing, leasing, subleasing, possessing, using or
controlling the Facilities or any part or aspect of the
Facilities.
"Warrants"--the outstanding FSOC Warrants and any other
warrants for or rights or options to acquire shares of capital
stock, partnership interests or other equity securities.
ARTICLE
STOCK PURCHASE
Section Shares.
Subject to the terms and conditions of this Agreement,
at the Closing, each Seller shall sell, assign, transfer, convey
and deliver his Shares to the Buyer, and the Buyer shall purchase
and accept the Shares from the Sellers.
Section Purchase Price.
The aggregate purchase price (the "Purchase Price") for
the Shares will be $226,000,000 (i) minus the Closing Date
Balance Sheet Adjustments and Post-Closing Balance Sheet
Adjustments, if applicable, and (ii) subject to potential further
post-closing adjustments pursuant to Section 2.8.
Section Closing.
The closing of the sale and purchase of the Shares (the
"Closing") provided for in this Agreement will take place at
10:00 a.m., Houston time, on August 5, 1996, or at such other
time and date as the parties hereto shall agree in writing (the
"Closing Date") at the offices of Vinson & Elkins, 2300 First
City Tower, 1001 Fannin, Houston, Texas 77022 or at such other
place as the parties hereto shall agree in writing.
Section Closing Obligations.
In full consideration and exchange for the Shares on
the Closing Date, the Buyer shall thereupon pay to the Sellers
the Closing Date Purchase Price as defined in Section 2.4(c)
below by wire transfer of immediately available funds to an
account or accounts designated in writing by the Sellers at least
two business days prior to the Closing Date. The Closing Date
Purchase Price shall be subject to possible subsequent adjustment
to equal the Purchase Price, as provided in Sections 2.5, 2.6 and
2.8 below.
At the Closing:
Each Seller shall deliver to the Buyer or its
designees:
stock certificates representing his or its
Shares, duly endorsed in blank for transfer or
accompanied by appropriate stock powers duly executed
in blank.
a certificate executed by him or it to the
effect that each of the representations and warranties
made by him in this Agreement is accurate in all
material respects as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements
to the Disclosure Letter that were delivered by the
Sellers to the Buyer prior to the Closing Date in
accordance with Section 5.6); and
Dewhurst shall deliver to the Buyer or its designee
the Consulting Agreement and the Stock Option Agreement,
executed and/or acknowledged and accepted by Dewhurst.
In consideration and exchange for the Shares, the
Buyer shall thereupon deliver:
to the Sellers, the aggregate sum of $226,000,000
(x) minus the Closing Date Balance Sheet Adjustments,
if any, and (y) minus the amount paid to the Escrow
Agent pursuant to Section 2.4(c)(ii) (such sum, as so
adjusted, the "Closing Date Purchase Price") by wire
transfer of immediately available funds to an account
or accounts designated in writing by the Sellers prior
to the Closing Date, which aggregate sum shall be
allocated in the percentage proportions set forth
opposite each Seller's name on Schedule 2.4(c)(i) to
the Disclosure Letter;
to the Escrow Agent, the sum of $8,000,000 by
wire transfer of immediately available funds to be held
in the escrow account in accordance with the terms and
provisions of the Escrow Agreement;
to the Sellers' Agent, a certificate executed by
a duly authorized officer of the Buyer to the effect
that each of the representations and warranties made by
the Buyer in this Agreement is accurate in all material
respects as of the Closing Date as if made on the
Closing Date; and
to Dewhurst, the Consulting Agreement and the
Stock Option Agreement, executed by the Buyer.
The Buyer and the Sellers will enter into an escrow
agreement in the form of Exhibit D (the "Escrow Agreement")
with the Escrow Agent.
The Buyer and CE and the Sellers will also enter into
and deliver to the other all of the Transaction Documents to
which they are a party and such other documents as may be
required pursuant to Section 6 or 7, as applicable.
Section Preparation of Balance Sheets.
Sellers shall prepare the three proforma June 30
Balance Sheets referred to below and, with Buyer's written
consent, attach them as Exhibits hereto upon execution of
this Agreement (individually, the "Preliminary" draft of
each such balance sheet and collectively, the "Preliminary
June 30 Balance Sheets") and Sellers shall also prepare the
three final June 30 Balance Sheets referred to below and,
with Buyer's consent, attach them as Exhibits hereto at the
Closing Date (individually, the "Final" version of each such
balance sheet and collectively, the "Final June 30 Balance
Sheets") for purposes of determining the Closing Date
Balance Sheet Adjustments (as hereinafter defined), if
applicable.
In addition, Sellers shall prepare the three
proforma July 31 Balance Sheets referred to below and, with
Buyer's written consent, attach them as Exhibits hereto at
the Closing Date (individually, the "Preliminary" draft of
each such balance sheet and collectively, the "Preliminary
July 31 Balance Sheets") and Sellers shall also prepare
three final July 31 Balance Sheets referred to below within
30 days following the Closing and, with Buyer's written
consent, attach them as post-closing Exhibits hereto on the
45th day (the "Post Closing Adjustment Date") following the
Closing (individually, the "Final" version of each such
balance sheet and collectively, the "Final July 31 Balance
Sheets") for purposes of determining the Post Closing
Balance Sheet Adjustments (as hereinafter defined), if
applicable.
"Consolidated June 30 Balance Sheet" means the consolidated
balance sheet of the Company prepared by Sellers which reflects
all assets and liabilities in accordance with GAAP and prepared
on a basis consistent with past practice and consistent with the
Balance Sheet and, in addition, which provides footnote
disclosure or supporting schedules of any and all liabilities
(whether accrued, contingent or otherwise to the extent such
liabilities (i) constitute liabilities under the Statement of
Accounting Standards No. 5 or (ii) swaps and other financial
derivatives or instruments not identified on the balance sheet or
(iii) any other similar off-balance sheet obligations regardless
of whether there are offsetting assets) of which Sellers have
Knowledge and which is to be reviewed by Buyer and Deloitte and
Touche LLP ("DT") and shall only be accepted with the written
consent of Buyer. The approved proforma Preliminary Consolidated
June 30 Balance Sheet will be attached to this Agreement as
Exhibit I. Thereafter following the Company's accounting
department close for the month of June but in no event later than
July 15, 1996, Sellers shall prepare a Final Consolidated June 30
Balance Sheet which is prepared on a consistent basis with the
Preliminary version and which is to be reviewed by Buyer and DT
and shall only be accepted with the written consent of Buyer at
Closing. Sellers are obligated to disclose to Buyer in writing
all supplements or modifications to the Final Consolidated June
30 Balance Sheet of which Sellers have Knowledge prior to the
Closing Date and any such supplement or modification shall be
reviewed by Buyer and DT and shall only be accepted with the
written consent of Buyer.
"Holding Company June 30 Balance Sheet" means the holding
company balance sheet of the Company prepared by Sellers which
reflects all assets and liabilities of the Company (on a
consolidated basis but excluding its interests in the PRI
Operating Facility and Excluded Assets as of June 30, 1996) in
accordance with GAAP and, in addition, which provides footnote
disclosure or supporting schedules of any and all liabilities
(whether accrued, contingent or otherwise to the extent such
liabilities (i) constitute liabilities under the Statement of
Accounting Standards No. 5 or (ii) swaps and other financial
derivatives on instruments not identified on the balance sheet or
(iii) any other similar off-balance sheet obligations regardless
of whether there are offsetting assets) of which Sellers have
Knowledge and which is to be reviewed by Buyer and DT and shall
only be accepted with the written consent of Buyer. The approved
proforma Preliminary Holding Company June 30 Balance Sheet will
be attached to this Agreement as Exhibit J. Thereafter following
the accounting department close for the month of June but in no
event later than July 15, 1996, Sellers shall prepare a Final
Holding Company June 30 Balance Sheet which is prepared on a
consistent basis with the Preliminary version and which is to be
reviewed by Buyer and DT and accepted in writing by Buyer at
Closing. Sellers are obligated to disclose to Buyer in writing
all supplements or modifications to the Final Holding Company
June 30 Balance Sheet of which Sellers have Knowledge prior to
the Closing Date and any such supplement or modification shall be
reviewed by Buyer and DT and shall only be accepted with the
written consent of Buyer.
"As Adjusted June 30 Balance Sheet" means the consolidated
balance sheet of the Company prepared by Sellers which gives
effect on June 30, 1996 to the Reorganization of Excluded
Subsidiaries, Excluded Assets and Excluded Liabilities but which
otherwise reflects all assets and liabilities in accordance with
GAAP and, in addition, which provides footnote disclosure or
supporting schedules of any and all liabilities (whether accrued,
contingent or otherwise to the extent such liabilities constitute
(i) liabilities under the Statement of Accounting Standards No. 5
or (ii) swaps and other financial derivatives or instruments not
identified on the balance sheet or (iii) any other similar off-
balance sheet obligations regardless of whether there are
offsetting assets) of which Sellers have Knowledge and which is
to be reviewed by Buyer and DT and shall only be accepted with
the written consent of Buyer. The approved proforma Preliminary
As Adjusted June 30 Balance Sheet will be attached to this
Agreement as Exhibit K. Thereafter following the accounting
department close of the month of June but in no event later than
July 15, 1996, Sellers shall prepare a Final As Adjusted June 30
Balance Sheet which is prepared on a consistent basis with the
Preliminary version and which is to be reviewed by Buyer and DT
and shall only be accepted with the written consent by Buyer at
Closing. Sellers are obligated to disclose to Buyer in writing
all supplements or modifications to the Final As Adjusted June 30
Balance Sheet of which Sellers have Knowledge prior to the
Closing Date and any such supplement or modification shall be
reviewed by Buyer and DT and shall only be accepted with the
written consent of Buyer.
"Consolidated July 31 Balance Sheet" means the consolidated
balance sheet of the Company prepared by Sellers which reflects
all assets and liabilities in accordance with GAAP and prepared
on a basis consistent with past practice and consistent with the
Balance Sheet and, in addition, which provides footnote
disclosure or supporting schedules of any and all liabilities
(whether accrued, contingent or otherwise to the extent such
liabilities constitute (i) liabilities under the Statement of
Accounting Standards No. 5 or (ii) swaps and other financial
derivatives or instruments not identified on the balance sheet or
(iii) any other similar off-balance sheet obligations regardless
of whether there are offsetting assets) of which Sellers have
Knowledge and which is to be reviewed by Buyer and DT and shall
only be accepted with the written consent of Buyer. The approved
proforma Preliminary Consolidated July 31 Balance Sheet will be
attached to this Agreement as Exhibit L at Closing. Thereafter
following the accounting department close for the month of July,
Sellers shall prepare within 30 days of Closing a Final
Consolidated July 31 Balance Sheet which is prepared on a
consistent basis with the Preliminary version and which is to be
reviewed by Buyer and DT and shall only be accepted with the
written consent of Buyer at the Post Closing Adjustment Date.
Sellers are obligated to disclose to Buyer in writing all
supplements or modifications to the Final Consolidated July 31
Balance Sheet of which Sellers have Knowledge prior to the Post
Closing Adjustment Date and any such supplement or modification
shall be reviewed by Buyer and DT and shall only be accepted with
the written consent of Buyer.
"Holding Company July 31 Balance Sheet" means the holding
company balance sheet of the Company prepared by Sellers which
reflects all assets and liabilities of the Company (on a
consolidated basis but excluding its interests in the PRI
Operating Facility and Excluded Assets as of July 31, 1996) in
accordance with GAAP and, in addition, which provides footnote
disclosure or supporting schedules of any and all liabilities
(whether accrued, contingent or otherwise to the extent such
liabilities (i) constitute liabilities under the Statement of
Accounting Standards No. 5 or (ii) swaps and other financial
derivatives or instruments not identified on the balance sheet or
(iii) any other similar off-balance sheet obligations regardless
of whether there are offsetting assets) of which Sellers have
Knowledge and which is to be reviewed by Buyer and DT and shall
only be accepted with the written consent of Buyer. An approved
proforma Preliminary Holding Company July 31 Balance Sheet will
be attached to this Agreement as Exhibit M at Closing.
Thereafter following the accounting department close for the
month of July, Sellers shall prepare within 30 days of Closing a
Final Holding Company July 31 Balance Sheet which is prepared on
a consistent basis with the Preliminary version and which is to
be reviewed by Buyer and DT and accepted in writing by Buyer at
the Post Closing Adjustment Date. Sellers are obligated to
disclose to Buyer in writing all supplements or modifications to
the Final Holding Company July 31 Balance Sheet of which Sellers
have Knowledge prior to the Post Closing Adjustment Date and any
such supplement or modification shall be reviewed by Buyer and DT
and shall only be accepted with the written consent of Buyer.
"As Adjusted July 31 Balance Sheet" means the consolidated
balance sheet of the Company prepared by Sellers which gives
effect on July 31, 1996 to the Reorganization of the Excluded
Assets, Excluded Subsidiaries and Excluded Liabilities but which
otherwise reflects all assets and liabilities in accordance with
GAAP and, in addition, which provides footnote disclosure or
supporting schedules of any and all liabilities (whether accrued,
contingent or otherwise to the extent such liabilities (i)
constitute liabilities under the Statement of Accounting
Standards No. 5 or (ii) swaps and other financial derivatives or
instruments not identified on the balance sheet or (iii) any
other similar off-balance sheet obligations regardless of whether
there are offsetting assets) of which Sellers have Knowledge and
which is to be reviewed by Buyer and DT and shall only be
accepted with the written consent of Buyer. The approved
proforma Preliminary As Adjusted July 31 Balance Sheet will be
attached to this Agreement as Exhibit N at Closing. Thereafter
following the accounting department close for the month of July,
Sellers shall prepare within 30 days of Closing a Final As
Adjusted July 31 Balance Sheet which is prepared on a consistent
basis with the Preliminary version and which is to be reviewed by
Buyer and DT and accepted in writing by Buyer at the Post Closing
Adjustment Date. Sellers are obligated to disclose to Buyer in
writing all supplements or modifications to the Final As Adjusted
July 31 Balance Sheet of which Sellers have Knowledge prior to
the Post Closing Adjustment Date and any such supplement or
modification shall be reviewed by Buyer and DT and shall only be
accepted with the written consent of Buyer.
Section Purchase Price Adjustments.
(a) For purposes of all Purchase Price adjustments:
"June 30 Required Cash Amount" means $11 million at the
holding company, Falcon Seaboard Resources, Inc.
"Post June 30 Required Receipts" means all cash flows,
receivables and other receipts received or arising from the
ownership or operation of the Acquired Entities and Acquired
Assets from July 1, 1996 until the Closing Date.
To the extent that any of the following circumstances
exist (as reflected on the three Preliminary June 30 Balance
Sheets attached as Exhibits hereto, the three Final June 30
Balance Sheets attached as Exhibits hereto on the Closing Date,
the three Preliminary July 31 Balance Sheets attached as Exhibits
hereto on the Closing Date or the three Final July 31 Balance
Sheets attached as Exhibits hereto on the Post Closing Adjustment
Date), there will be a corresponding Purchase Price reduction or
reductions on the Closing Date (such reductions on the Closing
Date, the "Closing Date Balance Sheet Adjustments") and (without
duplication) on the Post Closing Adjustment Date (such reductions
on the Post Closing Adjustment Date, the "Post Closing Balance
Sheet Adjustments") to the extent indicated below:
(i) If, prior to July 1, 1996, any Transaction Costs of
the Sellers are paid for, incurred or committed to be
paid for by any of the Acquired Entities, a reduction
in the Purchase Price shall be made to the extent
such payment or commitment reduces either the June 30
Required Cash Amount or will reduce the Post June 30
Required Receipts;
(ii) If the Final Holding Company June 30 Balance Sheet
does not reflect (a) unrestricted and freely
distributable cash in an amount of at least the
Required June 30 Cash Amount; (b) trade payables and
accrued liabilities that are fully paid and properly
discharged or listed on the attached Schedule X; and
(c) a remaining working capital balance which is
comprised solely of the items listed on the attached
Schedule X, then, in each of (a), (b) and (c) above,
there shall be Purchase Price reductions
corresponding to the respective amounts of such
variances from the requirements of (a), (b) and (c),
if applicable;
(iii) If the assets and liabilities of the Company
reflected on the Final June 30 Balance Sheets as
compared to the Preliminary June 30 Balance Sheets,
or the Preliminary July 31 Balance Sheets as compared
with the Final June 30 Balance Sheets, or on the
Final July 31 Balance Sheets as compared with the
Preliminary July 31 Balance Sheets, shall have
decreased (in the case of assets) or increased (in
the case of liabilities) as a result, in whole or in
part, of Sellers' breach of the restrictions and
covenants herein, including without limitation
Section 5.2 of this Agreement, then there will in
each case be a Closing Date Balance Sheet Adjustment
or Post Closing Balance Sheet Adjustment, as
applicable, (without duplication) corresponding to
the extent such assets have been reduced or
liabilities have been increased from such breaches;
(b) If a dispute between the parties regarding the
application or implementation of the foregoing Purchase
Price adjustment procedures regarding the Closing Date
Balance Sheet Adjustments or the Post Closing Balance Sheet
Adjustments occurs (including disputes arising from the
failure of Buyer to deliver consent to any of the balance
sheets as described above), then the issues in dispute will
be submitted to a "big six" firm of independent certified
public accountants to be selected and agreed upon by Buyer
and Sellers' Agent (the "Accountants") for resolution. Upon
such submission to the Accountants, (i) each party will
furnish to the Accountants (within 15 days after such
initial submission or any subsequent documentation request
by the Accountants) such workpapers and other documents and
information relating to the disputed issues as the
Accountants may reasonably request and are available to that
party or its Subsidiaries (or its independent public
accountants), and will be afforded the opportunity to
present to the Accountants any material relating to the
determination and to discuss the determination with the
Accountants; (ii) the determination by the Accountants, as
set forth in a written notice delivered to both parties by
the Accountants (the "Accountants' Determination"), will be
binding and conclusive on the parties; and (iii) the Buyer
and the Sellers will each bear 50% of the fees of the
Accountants for such determination.
(c) On the tenth business day following the final
determination of the Post Closing Balance Sheet Adjustments,
the Sellers will pay the difference to the Buyer or, at the
Buyer's sole option, without waiver of any of its other
remedies against Sellers, the Buyer may set off the amount
of such difference against the Escrow Funds. All payments
will be made together with interest at 10% compounded daily
beginning on the Closing Date and ending on the date of
payment. Payments must be made in immediately available
funds. Payments to the Buyer shall be made by wire transfer
to such bank account as the Buyer will specify.
Section [Intentionally omitted]
Section Adverse Contractual Development.
If the Closing occurs and an Adverse Contractual
Development occurs, then Buyer shall promptly notify the Sellers
Agent and furnish the Sellers and the Escrow Agent a statement
specifying in reasonable detail the Costs incurred by PRI or CE
(which shall be quantified by CE, using a present value analysis,
to the extent they will be incurred over a period of time) as a
result of the Adverse Contractual Development. Payment for the
amount of any such claim by Buyer shall be made solely from the
Escrow Funds in accordance with the procedures set forth in the
Escrow Agreement.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller hereby severally and not jointly represents
and warrants to the Buyer as follows:
Section Organization and Good Standing.
Schedule 3.1 of the Disclosure Letter contains a
complete and accurate list for each Acquired Entity of its
name, its jurisdiction of incorporation , formation or other
organization, other jurisdictions in which it is authorized
to do business, and its capitalization (including the
identity of each stockholder or partner and the number (and
percentage) of shares or partnership interests held directly
or indirectly by the Company and by third Persons in each
such Acquired Entity). Each Acquired Entity is a
corporation or partnership duly organized, validly existing,
and (if applicable) in good standing under the laws of its
jurisdiction of incorporation or formation and has all
requisite corporate (or other analogous) power and authority
to conduct its business as it is now being conducted, to own
or use the properties and assets that it purports to own or
use, and to perform all its obligations under Applicable
Contracts. Each Acquired Entity which is a corporation is
duly qualified to do business as a foreign corporation and
is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
The Sellers have made available to the Buyer copies
of the Organizational Documents of each Acquired Entity, as
currently in effect, and such copies are accurate and
complete as of the date hereof and will be as of the
Closing.
Section Authority; No Conflict.
This Agreement constitutes the legal, valid, and
binding obligation of each Seller, enforceable against him
in accordance with its terms. Upon the execution and
delivery by the Sellers, the Acquired Entities, the
Individual Guarantors, the Individual Guarantor Affiliates
and the other parties to any of the Transaction Documents
which are Affiliates of Dewhurst or the Company, including
without limitation any Excluded Subsidiaries (collectively,
the "Affiliated Transaction Entities"), of the Transaction
Documents to which they are signatories, whether in an
individual or other capacity, the Transaction Documents will
constitute legal, valid and binding obligations of the
Sellers and/or Acquired Entities and/or Individual
Guarantors and/or the Individual Guarantor Affiliates and/or
Affiliated Transaction Entities party thereto, enforceable
against such Sellers, the Acquired Entities, Individual
Guarantors, the Individual Guarantor Affiliates and
Affiliated Transaction Entities in accordance with their
respective terms. Subject to compliance with the HSR Act in
respect of the sale of the Shares pursuant to this
Agreement, such Seller, the Acquired Entities, the
Individual Guarantors, the Individual Guarantor Affiliates
and Affiliated Transaction Entities have the absolute and
unrestricted right, power, authority, and capacity to
execute and deliver this Agreement and the Transaction
Documents to which they are parties and to perform their
respective obligations hereunder and thereunder. Each
Transaction Document (including, without limitation, this
Agreement) that is to be executed and delivered in the name
and on behalf of a corporation (other than CE or the Buyer),
general or limited partnership, limited liability company or
trust will have been executed and delivered by a duly
empowered, acting and qualified officer, general partner,
partner, managing member, member or trustee, as applicable,
of such entity , and the execution and delivery of the same
by such person on behalf of such entity will have been duly
authorized (or are otherwise permitted) by appropriate
corporate proceedings, necessary consents of partners or
members and in accordance with the Organizational Documents
of such entity.
Neither the execution and delivery by the Sellers of
this Agreement or by any of the Sellers, Acquired Entities,
Individual Guarantors, the Individual Guarantor Affiliates
or Affiliated Transaction Entities of any of the Transaction
Documents nor the consummation or performance by such
parties of any of the Contemplated Transactions to be
consummated or performed by them will, directly or
indirectly (with or without notice or lapse of time):
contravene, conflict with, or result in a
violation of (A)any provision of the Organizational
Documents of any of the Sellers, the Acquired Entities,
Individual Guarantors, the Individual Guarantor
Affiliates or Affiliated Transaction Entities, or
(B) any resolution adopted by the board of directors or
the stockholders or by the management committee or
partners of any of the Sellers, any Acquired Entity or
Individual Guarantor Affiliate or Affiliated
Transaction Entity;
contravene, conflict with, or result in a
violation of, or give any Governmental Body or other
Person the right to challenge any of the Contemplated
Transactions or to exercise any right or obtain any
relief under, any Legal Requirement or any Order to
which any Acquired Entity, Affiliated Transaction
Entity, Individual Guarantor, Individual Guarantor
Affiliate or Seller, or any of the assets owned or used
by any Acquired Entity, is subject;
contravene, conflict with, or result in a
violation of any of the terms or requirements of, or
give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Acquired
Entity or Affiliated Transaction Entity, Individual
Guarantor Affiliate or that otherwise relates to the
business of, or any of the assets owned or used by, any
Acquired Entity;
contravene, conflict with, or result in a
violation or breach of any provision of, or give any
Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Applicable Contract; or
result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets
owned or used by any Acquired Entity.
Subject to compliance with the HSR Act in respect of
the sale of the Shares pursuant to this Agreement, no Seller,
Acquired Entity, Individual Guarantor, Individual Guarantor
Affiliate or Affiliated Transaction Entity is or will be required
to give any notice to or obtain any Consent from any Person
(including, without limitation, any Governmental Authority) in
connection with the execution and delivery of this Agreement or
the consummation or performance by the Sellers or any Acquired
Entity, Individual Guarantor, Individual Guarantor Affiliate or
Affiliated Transaction Entity of any of the Contemplated
Transactions to be consummated or performed by the Sellers or any
Acquired Entity, Individual Guarantor, Individual Guarantor
Affiliate or Affiliated Transaction Entity hereunder or
thereunder.
Section Capitalization of the Company; Title to
Shares.
The authorized capital stock of the Company
consists of 1,000,000 shares of common stock, par value $.01
per share, of which 1,189.18 shares are issued, outstanding
and owned by the Sellers and constitute the Shares. All of
the Shares have been duly authorized and are validly issued,
fully paid and nonassessable. Each Seller has, and will
have at the Closing, valid and marketable title to the
number of Shares set forth beside such Seller's name on the
signature page to this Agreement, free and clear of all
Encumbrances.
There are no Contracts or other arrangements
obligating the Company to issue, sell, pledge, dispose of or
encumber (i) shares of any class of capital stock of the
Company, (ii) any options, warrants or rights of any kind to
acquire any class of capital stock of the Company or (iii)
any securities that are convertible into or exercisable or
exchangeable for any shares of any class of capital stock of
the Company.
There are no Contracts or other arrangements
obligating the Company to redeem, purchase or acquire or
offer to acquire (i) any shares of any class of capital
stock of the Company, (ii) any outstanding options, warrants
or rights to acquire any shares of any class of capital
stock of the Company or (iii) any securities that are
convertible into or exercisable or exchangeable for any
shares of any class of capital stock of the Company.
There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar
rights affecting the capital stock of the Company.
Section Subsidiaries.
Except for those entities listed on Schedule
3.4(a) of the Disclosure Schedule (collectively, the
"Liquidated Companies"), the Acquired Entities (excluding
the Company) and the Excluded Subsidiaries constitute all of
the Subsidiaries which are presently, or at any time within
the past two years have been, directly or indirectly owned
by the Company.
All of the shares of stock of the Acquired
Entities that are corporations have been duly authorized and
are validly issued, fully paid and nonassessable. All of
the general and limited partnership interests (whether
certificated or uncertificated) of Acquired Entities which
are partnerships are validly authorized, issued and
outstanding in accordance with the Organizational Documents
of such partnerships, and no liability for additional
capital contributions under claim of right by any person or
otherwise under the terms of such Organizational Documents
attaches thereto. The Company (directly or indirectly
through one or more Subsidiaries) has, and will have at the
Closing, valid and marketable title to the shares of stock,
general or limited partnership interests, other equity
interests, or any securities that are convertible into or
exercisable or exchangeable for equity interests of the
Acquired Entities owned by it, free and clear of
Encumbrances.
Other than the FSOC Warrants, there are no
Contracts or other arrangements obligating any Acquired
Entity to issue, sell, pledge, dispose of or encumber (i)
shares of stock, general or limited partnership interests or
other equity interests of such Acquired Entity or rights to
acquire the assets thereof, (ii) any options, warrants or
rights of any kind to acquire shares of stock, general or
limited partnership interests or other equity interests of
such Acquired Entity or (iii) any securities that are
convertible into or exercisable or exchangeable for any
shares of stock, general or limited partnership interests or
other equity interests of such Acquired Entity.
Except as set forth in Schedule 3.4(d) of the
Disclosure Letter, there are no Contracts or other
arrangements obligating any Acquired Entity to redeem,
purchase or acquire or offer to acquire (i) shares of stock,
general or limited partnership interests or other equity
interests of such Acquired Entity, (ii) any outstanding
options, warrants or rights of any kind to acquire shares of
stock, general or limited partnership interests or other
equity interests of such Acquired Entity or (iii) any
securities that are convertible into or exercisable or
exchangeable for any shares of stock, general or limited
partnership interests or other equity interests of such
Acquired Entity or the assets thereof.
Except as disclosed in Schedule 3.4(e) of the
Disclosure Letter, there are no outstanding or authorized
stock appreciation, phantom stock, profit participation or
similar rights affecting the stock, general or limited
partnership interests or other equity interests of any
Acquired Entity.
Section Financial Statements.
The Sellers have heretofore furnished to the Buyer:
(a) audited consolidated balance sheets of the Company (excluding
the Excluded Subsidiaries) as at December 31st in each of the
years 1993 through 1994, and the related audited consolidated
statements of income, changes in stockholders' equity, and cash
flow for each of the fiscal years then ended, together with the
report thereon of DT, independent certified public accountants,
(b) an audited consolidated balance sheet of the Company
(excluding the Excluded Subsidiaries) as at December 31, 1995
(including the notes thereto, the "Balance Sheet"), and the
related consolidated statements of income, changes in
stockholders' equity, and cash flow for the fiscal year then
ended, together with the report thereon of DT, independent
certified public accountants, and (c) the three Preliminary June
30 Balance Sheets and the related unaudited consolidated
statements of income, changes in stockholders' equity, and cash
flow for the five months then ended, including in each case the
notes thereto. Such financial statements and notes fairly
present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Acquired
Entities as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with
GAAP and the other requirements of Section 2.6; the financial
statements referred to in this Section 3.4 reflect the consistent
application of such accounting principles throughout the periods
involved, except as disclosed in the notes to such financial
statements. No financial statements of any Person other than the
Acquired Entities and the Excluded Subsidiaries are required by
GAAP to be included in the consolidated financial statements of
the Company.
Section Books and Records.
(a) The minute books and stock record books, and other
similar records of the Acquired Entities, all of which have
been made available to the Buyer, are complete and correct
in all material respects and reflect all significant actions
authorized or taken by such entities. At the Closing, all
such books and records will be in the possession of the
Acquired Entities.
(b) The documentation provided to lenders under the
Senior Loan Agreements of the Operating Facilities regarding
project finance monthly loan draws since the Balance Sheet
date are complete and correct in all material respects and
accurately reflect the expenditure and disbursement
transactions described therein and the basis therefor
pursuant to the requirements of the loans made thereunder.
Section Title to Operating Facility Properties and
Other Properties; Encumbrances.
(a) Each of the Partnerships and/or Operating
Facilities, alone or together with other Acquired Entities,
owns or holds, as applicable, all interests in real property
(fee simple, lease, easements or other interests, as
applicable) necessary or desirable for the conduct of its
business and the continued operation of the Operating
Facilities in accordance with the Project Documents and
consistent with past practice.
(b) The Acquired Entities and/or Operating Facilities
own (with good and marketable fee simple title in the case
of owned real property, easements or rights of way and good
and valid leasehold title, easements or rights of way in the
case of leased real property, easements or rights of way
subject only to the matters permitted by the following
sentence) or otherwise have the valid and enforceable right
to use all the properties, interests and assets (whether
real, personal, or mixed and whether tangible or intangible)
that they regularly use in the conduct of their businesses
or purport to own, including, without limitation, all of the
properties, leaseholds, other interests and assets reflected
in the Balance Sheet and the Preliminary June 30 Balance
Sheets (except for (i) personal property sold since the date
of the Balance Sheet and the Preliminary June 30 Balance
Sheets, as the case may be, in the Ordinary Course of
Business and (ii) the Excluded Assets and (iii) other assets
held by the Excluded Subsidiaries. All material properties,
interests and assets reflected in the Balance Sheet and the
June Balance Sheet are free and clear of all Encumbrances
(and are not, in the case of real property, subject to any
rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature
except, with respect to all such properties and assets,
liens for current taxes not yet due, minor imperfections of
title, if any, and similar minor Encumbrances), except for
any such Encumbrances or rights of way, building use
restrictions, exceptions, variances, reservations or
limitations, as applicable, that (i) apply only to Excluded
Assets or (ii) that do not impair the present or anticipated
use of the property subject thereto or the operations of any
Acquired Entity in each case in a manner consistent with
past practices.
Section Condition and Sufficiency of Assets.
The buildings, plants, structures, and Equipment owned,
leased or used by the Acquired Entities have been the subject of
maintenance practices which are consistent with good industry
practice and manufacturers' specifications and are adequate for
the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. To the Sellers' Knowledge,
the building, plants, structures, and Equipment of the Acquired
Entities are structurally sound, in good operating condition and
repair and sufficient for the continued conduct of the Acquired
Entities' businesses immediately after the Closing in
substantially the same manner as conducted in the twelve month
period ending on the Closing Date.
Section Accounts Receivable.
Except as disclosed in Schedule 3.9 of the Disclosure
Letter, all accounts receivable of the Acquired Entities that are
reflected on the Balance Sheet or the Preliminary June 30 Balance
Sheets or on the Final June 30 Balance Sheets or the accounting
records of the Acquired Entities as of the Closing Date
(collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or
services actually performed in the Ordinary Course of Business.
Unless paid prior to the Closing Date, the Accounts Receivable
are or will be as of the Closing Date current and collectible net
of the respective reserves shown on the Balance Sheet or the
Preliminary June 30 Balance Sheets or on the Final June 30
Balance Sheets or the accounting records of the Acquired Entities
as of the Closing Date (which reserves are adequate and
calculated consistent with past practice and, in the case of the
reserve as of the Closing Date, will not represent a greater
percentage of the Accounts Receivable as of the Closing Date than
the reserves reflected in the Preliminary June 30 Balance Sheets
and the Final June 30 Balance Sheets represented of the Accounts
Receivable reflected therein and will not represent a material
adverse change in the composition of such Accounts Receivable in
terms of aging). Except as disclosed in Schedule 3.9 of the
Disclosure Letter, and subject to such reserves, each of the
Accounts Receivable either has been or will be collected in full,
without any set-off, within ninety days after the day on which it
first becomes due and payable. Except as disclosed in Schedule
3.9 of the Disclosure Letter, there is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of
Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts
Receivable. Schedule 3.9 of the Disclosure Letter contains a
complete and accurate list of all Accounts Receivable as of the
date of the Preliminary June 30 Balance Sheets, which list sets
forth the aging of such Accounts Receivable.
Section Certain Project Participants.
Except as disclosed in Schedule 3.10 of the Disclosure
Letter, to the Knowledge of the Sellers, no steamhost, fuel
supplier, fuel transporter, pipeline provider or partner ("Non-
Utility Project Participant") is the subject of any pending or
Threatened Proceeding or other event or circumstance which would,
individually or in the aggregate, cause such Non-Utility Project
Participant to be unwilling or unable to perform any of its
material obligations under the Project Documents to which it is a
party.
Section No Undisclosed Liabilities.
Except as set forth in the Disclosure Letter, the
Acquired Entities have no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Balance Sheet or the
Preliminary June 30 Balance Sheets and current liabilities
incurred in the Ordinary Course of Business since the respective
dates thereof.
Section Taxes.
Except as set forth in Section 3.12 of the Disclosure
Letter:
The Acquired Entities have filed or caused to be
filed all Tax Returns that are or were required to be filed
by or with respect to any of them, either separately or as a
member of a group of corporations, pursuant to applicable
Legal Requirements. The Sellers have delivered to the Buyer
copies of, and Schedule 3.12 of the Disclosure Letter
contains a complete and accurate list of, all such Tax
Returns relating to income or franchise taxes filed since
December 31, 1994. The Acquired Entities have paid, or made
provision for the payment of, all Taxes that have or, to
Sellers' Knowledge, may become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received
by the Sellers or any Acquired Entity, except such Taxes, if
any, as are listed in Schedule 3.12 of the Disclosure Letter
and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have
been provided in the Balance Sheet and the Interim Balance
Sheet.
The United States federal and state income Tax
Returns of each Acquired Entity subject to such Taxes have
been audited by the IRS or relevant state tax authorities
for all taxable years listed on Schedule 3.12(b) of the
Disclosure Letter. Schedule 3.12 of the Disclosure Letter
contains a complete and accurate list of all audits of all
such Tax Returns, including a reasonably detailed
description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been
paid, reserved against, settled, or, as described in
Schedule 3.12 of the Disclosure Letter, are being contested
in good faith by appropriate proceedings. Schedule 3.12 of
the Disclosure Letter describes all adjustments to the
United States federal income Tax Returns filed by any
Acquired Entity or any group of corporations including any
Acquired Entity for all taxable years since those listed on
Schedule 3.12(b) of the Disclosure Letter, and the resulting
deficiencies proposed by the IRS. Except as described in
Schedule 3.12 of the Disclosure Letter, no Seller or
Acquired Entity has given or been requested to give waivers
or extensions (or is or would be subject to a waiver or
extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of any Acquired
Entity or for which any Acquired Entity may be liable.
Except as disclosed in Schedule 3.12 of the
Disclosure Letter, the charges, accruals, and reserves with
respect to Taxes on the respective books of each Acquired
Entity are adequate (determined in accordance with GAAP)
and, to the Sellers' Knowledge, are at least equal to that
Acquired Entity's liability for Taxes. There exists no
proposed tax assessment against any Acquired Entity except
as disclosed in the Balance Sheet or in Schedule 3.12 of the
Disclosure Letter. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to
any property or assets held, acquired, or to be acquired by
any Acquired Entity. All Taxes that any Acquired Entity is
or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body or
other Person.
All Tax Returns filed by (or that include on a
consolidated basis) any Acquired Entity are true, correct,
and complete in all material requests. There is no tax
sharing agreement that will require any payment by any
Acquired Entity after the date of this Agreement.
The consummation of the Contemplated Transactions
will not cause CE or any Acquired Entity to become subject
to, or to become liable for the payment of, any Tax
(excluding any Tax which is an Excluded Liability) or, to
the Knowledge of the Sellers, cause any of the assets owned
by any Acquired Entity to be reassessed or revalued by any
taxing authority or other Governmental Body.
Section No Material Adverse Change.
Except as specifically disclosed on Schedule 3.13 of
the Disclosure Letter, since the date of the Balance Sheet, there
has not been any material adverse change in the business,
operations, properties, prospects, assets, or condition of any
Acquired Entity and no event has occurred or circumstance exists
that could reasonably be expected to result in such a material
adverse change.
Section Employee Benefits.
(a) Schedule 3.14(a) of the Disclosure Letter contains
a complete and accurate list of all Company Plans and Company
Other Benefit Obligations. True, correct and complete copies of
each of the Company Plans, and related trusts, if applicable,
including all amendments thereto, have been delivered to the
Buyer. There has also been delivered to the Buyer, with respect
to each Company Plan required to file such report and
description, the most recent report on Form 5500 and the summary
plan description. True, correct and complete copies or
descriptions of all Company Other Benefit Obligations have also
been delivered to the Buyer.
(b) No Company Plan is or was subject to Title IV of
ERISA, and no Company Plan is or was a multiemployer plan within
the meaning of 3 (37) of ERISA. No Acquired Entity has any
outstanding unpaid liability to, or with respect to, any employee
benefit plan that is subject to Title IV of ERISA, including,
without limitation, a multiemployer plan within the meaning of 3
(37) of ERISA. No Acquired Entity has incurred, nor does any
Acquired Entity have any reason to expect to incur, any liability
to the PBGC, a trustee appointed under Section 4042 of ERISA, or
any multiemployer plan.
(c) Except as disclosed on Section 3.14(a) of the
Disclosure Letter:
(i) Each Acquired Entity has performed all
material obligations, whether arising by operation of law or
by contract, required to be performed by it in connection
with the Company Plans and the Company Other Benefit
Obligations;
(ii) Each Company Plan and Company Other Benefit
Obligation has been administered, maintained and operated in
accordance with the terms thereof and in compliance with
applicable law (including, where applicable, ERISA and the
IRC);
(iii) There are no actions, suits or claims
pending (other than routine claims for benefits) or, to the
Knowledge of the Sellers, threatened against, or with
respect to, any of the Company Plans or Company Other
Benefit Obligations or their assets; and
(iv) No act, omission or transaction has occurred
which would result in imposition on an Acquired Entity of
(A) liability or damages for breach of fiduciary duty under
409 of ERISA, (B) a civil penalty assessed pursuant to
subsections (c), (i) or (1) of 502 of ERISA, or (C) a tax
imposed pursuant to Chapter 43 of Subtitle D of the IRC.
(v) Except to the extent required under ERISA
601 et seq. and IRC 4980B, no Acquired Entity provides
health or welfare benefits for any retired or former
employee or is obligated to provide health or welfare
benefits to any active employee following such employee's
retirement or other termination of service.
(vi) The Sellers and all Acquired Entities have
complied with the provisions of ERISA 601 et seq. and IRC
4980B.
(vii) No payment that is owed or may become
due to any director, officer, employee, or agent of any
Acquired Entity will be non-deductible to the Acquired
Entities under IRC 280G or subject to tax under IRC 4999;
nor will any Acquired Entity be required to "gross up" or
otherwise compensate any such person because of the
imposition of any excise tax on a payment to such person.
(viii) The consummation of the Contemplated
Transactions will not result in the payment, vesting or
acceleration of any benefit (except for Excluded
Liabilities).
(ix) No Acquired Entity is a party to any
employment or similar agreement with any Retained Employee
that is not an Excluded Liability.
(d) With respect to any employee benefit plan, within
the meaning of 3(3) of ERISA, which is not listed in Schedule
3.14(a) of the Disclosure Letter but which is sponsored,
maintained or contributed to, or has been sponsored, maintained
or contributed to within six years prior to the Closing Date, by
any corporation, trade, business or entity under common control
with an Acquired Entity, within the meaning of 414(b), (c) or
(m) of the IRC or 4001 of ERISA ("Commonly Controlled Entity"),
(i) no withdrawal liability, within the meaning of 4201 of
ERISA, has been incurred, which withdrawal liability has not been
satisfied, (ii) no liability to the PBGC, or a trustee appointed
under Section 4042 of ERISA, has been incurred by any Commonly
Controlled Entity, which liability has not been satisfied, (iii)
no accumulated funding deficiency, whether or not waived, within
the meaning of 302 of ERISA or 412 of the IRC have been timely
made.
(e) The Company 401(k) Plan is the only Company Plan
that is intended or required to be qualified under 401(a) of the
IRC. The Company 401(k) Plan (i) is the subject of a favorable
determination letter from the IRS regarding such qualified status
and covering amendments required under the Unemployment
Compensation Amendments of 1992, the Omnibus Reconciliation Act
of 1993, and the final nondiscrimination regulations under
Section 401(a) (4) of the IRC (or the Company has timely filed
the Company 401(k) Plan with the IRS for such a determination
letter) and (ii) has not been amended or operated in a way which
would adversely affect such qualified status.
Section Compliance With Legal Requirements;
Governmental Authorizations.
Except as set forth in Schedule 3.15 of the
Disclosure Letter:
each Acquired Entity is, and at all times since
December 31, 1993 has been, in full compliance with
each material Legal Requirement that is or was
applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets;
no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may
constitute or result in a violation by any Acquired
Entity of, or a failure on the part of any Acquired
Entity to comply with, any material Legal Requirement,
or (B) may give rise to any obligation on the part of
any Acquired Entity to undertake, or to bear all or any
portion of the cost of, any remedial action of any
nature having a Cost in excess of $50,000; and
no Acquired Entity has received, at any time
since December 31, 1993, any notice or other
communication (whether written or, to Sellers'
Knowledge, oral) from any Governmental Body or any
other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to
comply with, any material Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on
the part of any Acquired Entity to undertake, or to
bear all or any portion of the cost of, any remedial
action having a Cost in excess of $50,000 of any
nature.
The Company has all Governmental Authorizations
necessary or desirable to permit the Acquired Entities to
lawfully conduct and operate their businesses in the manner
they currently conduct and operate or propose to conduct and
operate such businesses and to permit the Acquired Entities
to own and use their assets (including all Acquired Assets)
in the manner in which they currently own and use such
assets. Without limiting the foregoing, North Country Gas
Pipeline Corporation ("North Country") has obtained all
Governmental Approvals for construction and operation of its
pipeline and related facilities and the conduct of its
business as presently conducted including, if applicable,
all necessary approvals of each contract for the sale of gas
and each contract with any Affiliate. All of such approvals
are valid and in full force and effect and none of such
Governmental Authorizations will be terminated, restricted
or otherwise reduced in value as a result of consummation of
the Contemplated Transactions; and neither, to Sellers'
Knowledge, the Company nor any Acquired Entity or Operating
Facility has been informed of any contest or challenge to
such Governmental Authorizations or of any violation of the
terms thereof, or is aware of any basis for any such
challenge or contest or a finding of any such violation.
Except as disclosed in Schedule 3.15 of the Disclosure
Letter:
each Acquired Entity is, and at all times since
December 31, 1993 has been, in full compliance with all
of the terms and requirements of each material
Governmental Authorization;
no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a
violation of or a failure to comply with any term or
requirement of any material Governmental Authorization
listed or required to be listed in Schedule 3.15 of the
Disclosure Letter, or (B) result directly or indirectly
in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification
to, any such Governmental Authorization;
no Acquired Entity has received, at any time
since December 31, 1993, any notice or other
communication (whether written or, to the Knowledge of
Sellers, oral) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any
term or requirement of any Governmental Authorization,
or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental
Authorization; and
all applications required to have been filed for
the renewal of all Governmental Authorizations
possessed by the Acquired Entities at any time within
the past five years have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all
other filings required to have been made with respect
to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental
Bodies.
(i) At all applicable times since the date delivery of
electric energy commenced, whether for testing or otherwise
("Start Date"), each of the Operating Facilities:
(A) has met the standards for qualifying as a
"qualifying cogeneration facility," as such term is (or
was, at the time) defined in the Public Utilities
Regulatory Policy Act, as amended ("PURPA"), the
regulations of FERC thereunder ("PURPA Regulations"),
and the current interpretations of FERC and courts of
competent jurisdiction of PURPA and such regulations
(collectively, PURPA, the regulations and all such
interpretations, the "PURPA Requirements"); and
(B) has met the operating standard and the
efficiency standard of the PURPA Requirements without
the need for any waiver in each calendar year.
(ii) Each of the Partnerships and/or Operating
Facilities has in effect a contract with an entity under
which such entity (the "Thermal Host") has agreed to
purchase steam from such Operating Facility and use such
steam for an industrial or commercial process or for heating
or cooling, or has agreed to obtain cooling or chilling
service from such Partnership and/or Operating Facility, or
both, in aggregate amounts which equal or exceed the
projected amount of "useful thermal output" required for
continued qualification of the facility as a qualifying
cogeneration facility under the PURPA Requirements, and each
such contract runs for a period of at least as long as the
power purchase agreement of such Operating Facility, subject
only to the specific termination provisions therein. None
of the Partnerships or Operating Facilities has materially
breached any agreement with a Thermal Host, or, except as
specifically disclosed on Schedule 3.15(c)(ii) of the
Disclosure Letter, has been informed of any alleged material
breach by the Partnerships or Operating Facility owner of an
agreement with a Thermal Host, or, to Sellers' Knowledge has
learned of any material breach or threatened breach by a
Thermal Host of any agreement with such Partnerships or
Operating Facility owner.
Section Legal Proceedings; Orders.
Except as set forth in Schedule 3.16 of the
Disclosure Letter, there is no pending Proceeding:
that has been commenced by or against any
Acquired Entity or, to the Knowledge of the Sellers,
any Non-Utility Project Participant that could
reasonably be expected to adversely affect the business
of, or any of the material assets owned or used by, any
Acquired Entity; or
that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise
interfering with, the performance or consummation by
any of the parties (other than CE and Buyer) of any of
the Contemplated Transactions.
To the Knowledge of Sellers, (1) no such Proceeding has
been Threatened and (2) no event has occurred or circumstance
exists that may give rise to or serve as a basis for the
commencement of any such Proceeding. The Sellers have delivered
to the Buyer copies of all material pleadings relating to each
Proceeding listed in Schedule 3.16 of the Disclosure Letter.
Except as set forth in Schedule 3.16 of the
Disclosure Letter:
each Acquired Entity is in full compliance with
all of the terms and requirements of each material
Order to which it, or any of the assets owned or used
by it, is subject;
no event has occurred or circumstance exists
that may constitute or result in (with or without
notice or lapse of time) a violation of or failure to
comply with any term or requirement of any such Order
to which any Acquired Entity, or any of the assets
owned or used by any Acquired Entity, is subject; and
no Acquired Entity has received, at any time
since December, 1993, any notice or other communication
(whether written or, to Sellers' Knowledge, oral) from
any Governmental Body or any other Person regarding any
actual, alleged, possible, or potential violation of,
or failure to comply with, any term or requirement of
any such Order to which any Acquired Entity, or any of
the assets owned or used by any Acquired Entity, is or
has been subject.
Section Absence of Certain Changes and Events.
Except as set forth in Schedule 3.17 of the Disclosure
Letter, since the date of the Balance Sheet, the Acquired
Entities have conducted their businesses only in the Ordinary
Course of Business and there has not been any:
change in any Acquired Entity's authorized or issued
capital stock or partnership interests; grant of any stock
option or right to purchase shares of capital stock or
partnership interests of any Acquired Entity; issuance of
any security convertible into such capital stock or
partnership interests; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by
any Acquired Entity of any shares of any such capital stock
or partnership interests; or declaration or payment of any
dividend or other distribution or payment in respect of
shares of capital stock or partnership interests;
amendment to the Organizational Documents of any
Acquired Entity;
payment or increase by any Acquired Entity of any
bonuses, salaries, or other compensation to any stockholder,
director, officer, or (except in the Ordinary Course of
Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or
other employee benefit plan for or with any employees of any
Acquired Entity;
damage to or destruction or loss of any asset or
property of any Acquired Entity, whether or not covered by
insurance, adversely affecting the properties, assets,
business, financial condition or prospects of the Acquired
Entities in an aggregate amount exceeding $250,000;
except in the Ordinary Course of Business, entry
into, termination of, or receipt of notice of termination of
(i) any license, joint venture, credit, or similar
agreement, or (ii) any Contract or transaction involving a
total remaining commitment by or to any Acquired Entity of
at least $250,000;
sale (other than sales of inventory in the Ordinary
Course of Business), lease, transfer or other disposition of
any asset or property (including, without limitation, any
Contract rights) of any Acquired Entity or mortgage, pledge,
or imposition of any lien or other encumbrance on any
material asset or property of any Acquired Entity, including
the sale, lease, or other disposition of any of the
Intellectual Property Assets;
cancellation or waiver of any claims or rights with
an aggregate value to any Acquired Entity in excess of
$250,000;
material change in the accounting methods used by any
Acquired Entity; or
agreement, whether oral or written, by any Acquired
Entity to do any of the foregoing.
Section Contracts; No Defaults.
The Sellers have delivered or made available to the
Buyer true and complete copies, of:
each Project Document;
each Applicable Contract involving the creation,
incurrence, assumption or guaranty of any indebtedness
for borrowed money, or any capitalized lease
obligation, in excess of $250,000;
each Applicable Contract that was not entered
into in the Ordinary Course of Business and that
involves expenditures or receipts of one or more
Acquired Entities in excess of $250,000;
each other lease, rental or occupancy agreement,
license, installment and conditional sale agreement and
other Applicable Contract affecting the ownership of,
leasing of, title to, use of, or any fee, leasehold or
other interest in, any real or personal property
(except any such Contract having a value per item or
aggregate payments of less than $250,000);
each licensing agreement or other Applicable
Contract with respect to patents, trademarks,
copyrights, or other intellectual property, including
agreements with current or former employees,
consultants, or contractors regarding the appropriation
or the non-disclosure of any of the Intellectual
Property;
each profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation,
severance, or other material plan or arrangement for
the benefit of the employees of any Acquired Entity;
each nonterminable Applicable Contract for the
employment of any individual or any Applicable Contract
providing for termination or severance benefits;
each joint venture, partnership or limited
liability company Contract and other Applicable
Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by any Acquired
Entity with any other Person;
each Applicable Contract containing covenants
that limits the freedom of any Acquired Entity to
engage in any line of business or to compete with any
Person;
each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or
provides for an express undertaking by any Acquired
Entity to be responsible for consequential damages
exceeding $250,000;
each written warranty, guaranty, and or other
similar undertaking with respect to contractual
performance extended by any Acquired Entity other than
in the Ordinary Course of Business exceeding $250,000;
any other Applicable Contract that
unconditionally commits any Acquired Entity to
expenditure in excess of $100,000;
any Contract of the Acquired Entities, the
Excluded Subsidiaries, their predecessors, or any
companies previously owned by them for significant
acquisitions or dispositions of stock or assets or
other business combinations entered into since
January 1, 1991, for which any Acquired Entity will
have any liability after the Closing;
the bank accounts or other accounts with financial
institutions of the Acquired Entities in existence at
any time on or after December 31, 1995, and the names
of all authorized signatories or other account
personnel with respect to such accounts, each as listed
on Schedule 3.18(a)(xiv); and
each amendment, supplement, and modification
(whether oral or written) in respect of any of the
foregoing.
Except as set forth in Schedule 3.18(b) of the
Disclosure Letter:
each Acquired Entity is in full compliance with
all applicable terms and requirements of each material
Applicable Contract under which such Acquired Entity
has or had any obligation or liability or by which such
Acquired Entity or any of the assets owned or used by
such Acquired Entity is or was bound;
to such Seller's Knowledge, each other Person
that has any obligation or liability under any Contract
under which an Acquired Entity has any rights is in
compliance in all material respects with all applicable
terms and requirements of such Contract; and
no event has occurred or circumstance exists
that (with or without notice or lapse of time) may
contravene, conflict with, or result in a violation or
breach of, or give any Acquired Entity or, to the
Knowledge of the Seller, any other Person the right to
declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to
cancel, terminate, or modify, any Project Document.
Except as specifically set forth in Schedule 3.18(c)
of the Disclosure Letter, there are no renegotiations of,
attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to any
Acquired Entity under current or completed Contracts with
any Person and, to the Knowledge of the Sellers and the
Acquired Entities, no such Person has made written demand
for such renegotiation.
Section Insurance.
The Sellers have delivered or made available to the
Buyer true and complete copies of all policies of insurance
to which any Acquired Entity is a party or under which any
Acquired Entity or Operating Facility is or has been covered
at any time within the three years preceding the date of
this Agreement (including title insurance policies issued in
favor of lenders).
The Acquired Entities have paid all premiums due, and
have otherwise performed all of their respective
obligations, under each policy to which any Acquired Entity
is a party or that provides coverage to any Acquired Entity
or director thereof.
The Acquired Entities have given notice to the
insurer of all claims that may be insured thereby.
Section Environmental Matters.
In addition to and without limiting any of the
foregoing:
Except as set forth on Schedule 3.20(a) to the
Disclosure Letter, (i) the Acquired Entities, the Excluded
Subsidiaries, the Facilities and the operations conducted
thereon are in compliance in all material respects with all
Environmental Laws, (ii) the Acquired Entities and the
Excluded Subsidiaries have obtained all material
Environmental Permits required for the conduct of their
businesses as presently conducted or proposed to be
conducted, (iii) such Environmental Permits are in full
force and effect and (iv) the Acquired Entities and the
Excluded Subsidiaries are in full compliance with all
material terms and conditions of such Environmental Permits.
The Acquired Entities and the Excluded Subsidiaries
have not violated, done or suffered any act which could give
rise to any material liability or liabilities aggregating
more than $50,000 under, and are not otherwise exposed to
any material liability or liabilities aggregating more than
$50,000 under, any Environmental Law. No event has occurred
with respect to the Facilities, the operations conducted
thereon or the Acquired Entities or the Excluded
Subsidiaries which, upon the passage of time, the giving of
notice, or failure to act would reasonably be expected to
give rise to material liability under any Environmental Law.
Except as set forth on Schedule 3.20(c) to the
Disclosure Letter and where such have been and are
maintained in compliance with applicable Environmental Laws,
(i) neither the Facilities or any portion thereof, nor to
the Knowledge of the Sellers, the Acquired Entities, or the
Excluded Subsidiaries, any property adjacent to the
Facilities is being used or has been used for the treatment,
generation, transportation, processing, handling, production
or disposal of any Hazardous Materials or as a landfill or
other waste disposal site; (ii) none of the Facilities or
portion thereof has been subject to investigation by any
Governmental Body evaluating the need to investigate or
undertake Remedial Action at the Facilities; and (iii) none
of the Facilities is identified on the current or proposed
(x) National Priorities List under 40 C.F.R. 300 Appendix B,
or (y) Comprehensive Environmental Response, Compensation
and Liability Inventory System ("CERCLIS") list, or any
analogous state list.
Except as set forth on Schedule 3.20(d) to the
Disclosure Letter, there have been and are no: (i)
aboveground or underground storage tanks, (ii) injection
wells or surface impoundments for Hazardous Materials or
(iii) wetlands as defined under applicable Environmental
Law, located within any portion of the Facilities.
Except as set forth on Schedule 3.20(e) to the
Disclosure Letter where such have been and are maintained in
compliance with applicable Environmental Laws, there is no
(i) asbestos or asbestos containing material, (ii) urea
formaldehyde insulation, (iii) PCBs or PCB-containing
equipment, including transformers, (iv) radon in excess of
EPA recommended exposure limits, or (v) paint containing
concentrations of lead equal to or in excess of 1.0
milligram per square centimeter or 0.5 percent by weight or
mercury in excess of 200 parts per million, located within
any portion of the Facilities for which Remedial Action is
presently required or expected to be required under
applicable Environmental Laws or exposure to which could
reasonably be expected to give rise to liability under
Environmental Laws.
No Encumbrances which could have an adverse effect
exceeding $50,000 in aggregate have been placed upon any
Facilities in connection with any actual or alleged
liability under any Environmental Law.
Except as set forth on Schedule 3.20(g) to the
Disclosure Letter, (i) there is no pending or, to the
Knowledge of the Sellers, the Acquired Entities and the
Excluded Subsidiaries, Threatened, Proceeding which could
have an adverse effect exceeding $50,000 in aggregate
against the Sellers, the Acquired Entities or the Excluded
Subsidiaries arising under any Environmental Law; (ii) there
are no ongoing negotiations with or agreements with any
Governmental Body relating to any Remedial Action or other
environmentally-related claim; (iii) none of the Sellers,
the Acquired Entities or the Excluded Subsidiaries has
submitted notice pursuant to Section 103 of CERCLA or
analogous statute or notice under any applicable
Environmental Law reporting a release of a Hazardous
Material into the environment; and (iv) none of the Sellers,
the Acquired Entities or the Excluded Subsidiaries has
received any notice, claim, demand, suit or request for
information from any Person with respect to any liability or
alleged liability or liabilities aggregating in excess of
$50,000 under any Environmental Law, nor, to the Knowledge
of the Sellers, the Acquired Entities and the Excluded
Subsidiaries, has any other entity whose liability therefor,
in whole or in part, may be attributed to the Sellers, the
Acquired Entities or the Excluded Subsidiaries, received
such notice, claim, demand, suit or request for information.
Neither the Sellers, the Acquired Entities or the Excluded
Subsidiaries have, nor to the Knowledge of any of them, any
prior owner or operator of the Facilities has, generated,
disposed of, or arranged for the disposal of any Hazardous
Material except in compliance with Environmental Law and
where such would not reasonably be expected to give rise to
liability under Environmental Laws.
There are no environmental conditions or
operations at any of the Facilities which would reasonably
be expected to impair the ability to develop or carry on the
business of the Acquired Entities or the Facilities or which
would reasonably be expected to require material capital
expenditures to comply with Environmental Laws.
Section Employees.
Schedule 3.21 of the Disclosure Letter contains a
complete and accurate list of the following information for
each Retained Employee, including each Retained Employee on
leave of absence or layoff status: employer; name; job
title; current compensation paid or payable; vacation
accrued; and service credited for purposes of vesting and
eligibility to participate under any Acquired Entity's
pension, retirement, profit-sharing, thrift-savings,
deferred compensation, stock bonus, stock option, cash
bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance,
medical, welfare, or vacation plan, or any other employee
benefit plan.
No Retained Employee is a party to, or is otherwise
bound by, any agreement or arrangement, including any
confidentiality, noncompetition, or proprietary rights
agreement, between such employee and any other Person
("Proprietary Rights Agreement") that in any way adversely
affects or will affect (i) the performance of his duties as
an employee of the Acquired Entities, or (ii) the ability of
any Acquired Entity to conduct its business, including any
Proprietary Rights Agreement with the Sellers or the
Acquired Entities by any such employee. Except as set forth
on Schedule 3.21 to the Disclosure Letter, to the Sellers'
Knowledge, no plant manager or other responsible manager of
any Acquired Entity intends to terminate his employment with
any Acquired Entity.
Section Labor Relations; Compliance.
Except as set forth on Schedule 3.22 to the Disclosure
Letter, no Acquired Entity has been or is a party to any
collective bargaining or other labor Contract. Since December
31, 1993 there has not been, there is not presently pending or
existing, and to the Sellers' Knowledge there is not Threatened,
(a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any Proceeding against any Acquired Entity
relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including
any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or
affecting any of the Acquired Entities or their premises, or (c)
any application for certification of a collective bargaining
agent. There is no lockout of any employees by any Acquired
Entity, and no such action is contemplated by any Acquired
Entity. Each Acquired Entity has complied in all material
respects with all Legal Requirements relating to employment,
equal employment opportunity, nondiscrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and
health, and plant closing. No Acquired Entity is liable for the
payment of any compensation, damages, taxes, fines, penalties, or
other amounts, however designated, for failure to comply with any
of the foregoing Legal Requirements.
Section Intellectual Property.
With respect to Intellectual Property owned or used
by one or more Acquired Entities, such Acquired Entities own
or have the right to use such Intellectual Property as is
necessary to operate their respective businesses as they are
currently operated.
With respect to Intellectual Property that is not
owned by one or more Acquired Entities, such Acquired
Entities will, at Closing, enjoy the right to use the same
on terms at least as favorable as currently enjoyed by such
Acquired Entities.
The ownership and/or use of the Intellectual
Property does not infringe or otherwise violate any
intellectual property right owned or claimed by another.
None of the Sellers or any of the Acquired Entities has
received any written adverse notice or claim by any Person
with respect to the ownership, registrability,
patentability, validity, enforceability or use of any
Intellectual Property.
Section Disclosure.
To the Knowledge of Sellers, no representation or
warranty of the Sellers in this Agreement and no statement
in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light
of the circumstances in which they were made, not
misleading; provided that nothing contained in this
representation is intended to, or shall in any way, modify
(by Knowledge or otherwise) or otherwise limit in any
respect any of the other representations of Sellers
contained in this Agreement.
To the Knowledge of Sellers, no notice given pursuant
to Section 5.6 will contain any untrue statement or omit to
state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances
in which they were made, not misleading; provided that
nothing contained in this representation is intended to, or
shall in any way, modify (by Knowledge or otherwise) or
otherwise limit in any respect any of the other
representations of Sellers contained in this Agreement.
Section Relationships With Affiliates.
Except as set forth in Schedule 3.25 of the Disclosure
Letter, no Seller or any Affiliate of the Sellers or of any
Acquired Entity is a party to any Contract with, or has any claim
or right (other than Excluded Liabilities) against, the Company
or any Acquired Entity.
Section Brokers or Finders.
Except for obligations to Goldman Sachs & Company, the
Sellers and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in
connection with this Agreement.
Section Acquired Assets.
The Acquired Assets and Project Documents
constitute all of the assets, other property (tangible or
intangible), Contracts, other rights and Government
Authorizations which are necessary or desirable in order to
permit the Acquired Entities and Operating Facilities to continue
to conduct their businesses as presently conducted and
anticipated to be conducted in each case after the Closing
consistent with past practice and in compliance with all
applicable Contractual requirements, Legal Requirements and
Government Authorizations.
Section SECI Term Loan Agreement.
Except only for the satisfaction of the additional
conditions precedent referenced in the July 10, 1995 letter from
GECC to the Company, to the Knowledge of the Sellers, the
Borrower has no reason to believe that it currently, and
immediately following the Closing, would not be in compliance
with the other conditions precedent and entitled to borrow up to
$55 million pursuant to the SECI Term Loan Agreement.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers as
follows:
Section Organization and Good Standing.
The Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware.
Section Authority; No Conflict.
This Agreement constitutes the legal, valid, and
binding obligation of the Buyer, enforceable against the
Buyer in accordance with its terms. Upon the execution and
delivery by the Buyer of the Transaction Documents to which
it is a party, such Transaction Documents will constitute
the legal, valid, and binding obligations of the Buyer,
enforceable against the Buyer in accordance with their
respective terms. Subject to compliance with the HSR Act in
respect of the purchase of the Shares pursuant to this
Agreement, the Buyer has the absolute and unrestricted
right, power, and authority to execute and deliver this
Agreement and the Transaction Documents to which it is a
party and to perform its obligations hereunder and
thereunder.
Neither the execution and delivery of this Agreement
by the Buyer nor the consummation or performance of any of
the Contemplated Transactions by the Buyer will give any
Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to:
any provision of the Buyer's Organizational
Documents;
any resolution adopted by the board of directors
or the stockholders of the Buyer;
any Legal Requirement or Order to which the
Buyer may be subject; or
any Contract to which the Buyer is a party or by
which the Buyer may be bound.
Subject to compliance with the HSR Act in respect of
the purchase of the Shares pursuant to this Agreement, the Buyer
is not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Contemplated Transactions.
Section Investment Intent.
The Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
Section Certain Proceedings.
There is no pending Proceeding that has been commenced
against the Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions. To the Buyer's
Knowledge, no such Proceeding has been Threatened.
Section Brokers or Finders.
Except for obligations to CS First Boston, the Buyer
and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold the
Sellers harmless from any such payment alleged to be due by or
through the Buyer as a result of the action of the Buyer or its
officers or agents.
Section 4.6. Buyer's Plan.
The Buyer's Plan (i) is the subject of a favorable
determination letter from the IRS regarding the qualified status
of such plan under 401 (a) of the IRC and covering amendments
required under the Unemployment Compensation Amendments of 1992,
the Omnibus Reconciliation Act of 1993, and the final
nondiscrimination regulations under Section 401 (a) (4) of the
IRC (or the Buyer has timely filed, or will timely file, the
Buyer's Plan with the IRS for such a determination letter), and
(ii) has not been amended or operated in a way which would
materially adversely affect such qualified status.
ARTICLE
COVENANTS
Section Access and Investigation.
Between the date of this Agreement and the Closing
Date, each Seller will, and, to the extent within Sellers'
reasonable control, will cause each Acquired Entity and its
Representatives to, (a) afford the Buyer and its Representatives
full and free access to each Acquired Entity's personnel,
properties (including the operations conducted thereon),
contracts, books and records, and other documents and data, (b)
arrange interviews with each Acquired Entity's customers,
vendors, suppliers, lenders, key employees and partners, (c)
furnish the Buyer and its Representatives with copies of all such
contracts, books and records, and other existing documents and
data as the Buyer may reasonably request, (d) furnish the Buyer
and its Representatives with such additional financial,
operating, and other data and information as the Buyer or its
Representatives may reasonably request, and (e) shall deliver to
the Buyer all environmental reports, investigations, audits,
studies, tests, reviews, assessments or other analyses of the
Acquired Entities or the Facilities. Upon advance written notice
from the Buyer to the Sellers, the Buyer's investigation may
include, without limitation, such testing of the soil,
groundwater, building components, tanks, containers and equipment
at the Facilities as the Buyer or its Representatives shall deem
necessary or appropriate to evaluate the conditions at or of the
Facilities and the compliance of the operations conducted thereon
with all applicable Legal Requirements and Contracts; provided,
however, that any such environmental assessment conducted by the
Buyer shall not unreasonably interfere with the operation of the
Facilities and shall be subject to any reasonable restrictions
imposed by the Sellers.
Section Operation of the Businesses of the Acquired
Entities.
Between the date of this Agreement and the Closing,
except as may be consented to in writing by the Buyer or as
otherwise expressly provided for in this Agreement, the Sellers
shall, and shall cause each Acquired Entity to, conduct the
business of the Acquired Entities only in the Ordinary Course of
Business and use its reasonable best efforts to preserve the
business organization of the business conducted by the Acquired
Entities intact and preserve the good will of the suppliers,
customers, employees, creditors, contract and award parties and
others with whom business relationships exist in respect of the
business conducted by the Acquired Entities. Without limiting
the generality of the foregoing, without the prior written
consent of the Buyer (which shall not be unreasonably withheld)
or as otherwise expressly provided for in this Agreement, the
Sellers will not, and will cause the Acquired Entities not to:
pay or declare any dividends on or make any other
distribution in respect of the Shares;
acquire or dispose of, or enter into any
commitment with respect to the acquisition or disposition
of, any assets, securities or other interest in an amount
valued at greater than $1,000,000, in the aggregate;
take any action other than in the Ordinary Course of
Business and in a manner consistent with past practice with
respect to accounting policies or procedures;
enter into any agreement or transaction with any
Affiliate upon terms or conditions less favorable than could
be obtained on an arms' length basis or any transaction with
a value in excess of $1,000,000;
settle or take any material action with respect to
any material Proceeding that is pending or Threatened
against, file or amend any Tax Returns on behalf of, or take
any actions involving any material regulatory filings or
material Governmental Authorizations made or held by or on
behalf of, any of the Acquired Entities;
dispose of at, on, under, or about the Facilities,
or, except to the extent necessary in the Ordinary Course of
Business and in compliance with all applicable Environmental
Laws, use, generate or store any Hazardous Materials at the
Facilities or transport any Hazardous Materials from the
Facilities;
enter into, amend or otherwise modify the terms of
any new or existing Project Documents, or any financing or
security documents relating thereto, or any awards or
similar commitments for the purchase or sale of electrical
power, steam sales, O&M services, natural gas or other
fuels, or any related project, financing or security
documents;
change the historical operating and maintenance
practices of or otherwise defer any required maintenance or
capital expenditures with respect to the Facilities or
business of the Acquired Entities; or
take any affirmative action, or fail to take any
reasonable action within their control, as a result of which
any of the changes or events listed in Section 3.17 is
likely to occur.
Section Announcements.
Prior to the Closing, except as set forth in the joint
press release annexed hereto as Exhibit 5.3, the Buyer will not
and the Sellers will not (and will cause the Acquired Entities
and the Excluded Subsidiaries not to) issue any press release or
otherwise directly or indirectly make any public statement or
furnish any statement or make any announcement to its customers,
suppliers or employees with respect to the Contemplated
Transactions without the prior consent of the Buyer (in the case
of a statement by any Seller, Acquired Entity or Excluded
Subsidiary) or the Sellers' Agent (in the case of a statement by
the Buyer) except as may be required by the rules of any stock
exchange on which the Buyer's securities are listed, by any other
Legal Requirement, or to the extent necessary to obtain any
consents and approvals of any Governmental Body or Person to the
consummation of the Contemplated Transactions. The Sellers and
the Buyer will consult with each other concerning the means by
which the Acquired Entities' employees (excluding corporate
employees), customers, and suppliers and others having dealings
with the Acquired Entities will be informed of the Contemplated
Transactions.
Section Required Approvals; Further Assurances.
Subject to the terms and conditions of this Agreement,
the Buyer and the Sellers will, and the Sellers will cause the
Acquired Entities and Affiliated Transaction Entities to, use
their reasonable best efforts:
to obtain prior to the earlier of the date required
(if so required) or the Closing Date, all authorizations,
consents, orders, permits or approvals of, or notices to, or
filings, registrations or qualifications with, all
Governmental Bodies or any other Persons that are required
on their respective parts, for the consummation of the sale
of the Shares pursuant to this Agreement;
to defend, consistent with applicable principles and
requirements of law, any Proceeding challenging this
Agreement or the sale of the Shares pursuant thereto;
to furnish to each other such information and
assistance as may reasonably be requested in connection with
the foregoing; and
to (i) take, or cause to be taken, all action, to do,
or cause to be done, all things, and to execute and deliver
to each other all documents, agreements and instruments as
are necessary, proper or advisable to consummate and make
effective the Contemplated Transactions, including, without
limitation, to effect the transfer to the Buyer of all
applicable Governmental Authorizations, and (ii) refrain
from taking any action which reasonably could be expected to
render any representation or warranty or covenant contained
in this Agreement untrue or incorrect in any respect as of
the Closing Date.
Section HSR Act Approval.
The Sellers and the Buyer will in good faith promptly
furnish all materials reasonably requested by the Federal Trade
Commission, the United States Department of Justice or any of the
regulatory agencies having oversight of all prior filings made by
them under the HSR Act with respect to the Contemplated
Transactions.
Section Notification; Supplement to Disclosure
Letter.
Between the date of this Agreement and the Closing
Date, each Seller will promptly notify the Buyer in writing if
such Seller becomes aware of any fact or condition that causes or
constitutes a Breach of any of such Seller's representations and
warranties herein as of the date of this Agreement, or if such
Seller becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence
or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the
Disclosure Letter were dated the date of the occurrence or
discovery of any such fact or condition, the Sellers will
promptly deliver to the Buyer a supplement to the Disclosure
Letter specifying such change. During the same period, each
Seller will promptly notify the Buyer of the occurrence of any
Breach of any covenant of such Seller in this Section 5 or of the
occurrence of any event that may make the satisfaction of the
conditions in Section 6 impossible or unlikely.
Section Payment of Indebtedness by Affiliates.
The Sellers will cause (i) all indebtedness owed to an
Acquired Entity by any Seller, Excluded Subsidiary, Individual
Guarantor, Affiliated Transaction Entity or any other Affiliate
of any Seller or Individual Guarantor (excluding other Acquired
Entities) to be paid in full or contributed as capital to such
Acquired Entity prior to Closing without any penalty or other
Cost to any Acquired Entity and (ii) all Contracts (other than
Excluded Contracts) between any Acquired Entity and any Seller,
Excluded Subsidiary, Individual Guarantor, Affiliated Transaction
Entity or other Affiliate of any Seller or Individual Guarantor
(excluding other Acquired Entities) to be canceled without Cost
or other penalty to any Acquired Entity on or prior to the
Closing.
Section Exclusive Dealing.
Until such time, if any, as this Agreement is
terminated pursuant to Section 8, the Sellers will not, and will
cause each Acquired Entity and each of their Representatives not
to, directly or indirectly solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any
inquiries or proposals from, any Person (other than the Buyer)
relating to any transaction involving the sale of the business or
assets (other than in the Ordinary Course of Business) of any
Acquired Entity, or any of the capital stock of any Acquired
Entity, or any merger, consolidation, business combination, or
similar transaction involving any Acquired Entity or any other
transaction which would conflict with this Agreement.
Section Reorganization with Respect to Excluded
Assets and Excluded Subsidiaries; Transfer of Excluded Employees
and Company Plans.
(a) At or prior to the Closing, the Sellers shall, or
shall cause the Acquired Entities to, at their sole expense and
with no adverse Tax consequences (other than Excluded
Liabilities) or other Costs to the Acquired Entities or the
Buyer, sell, distribute, assign, transfer, convey and deliver to
the Sellers or their designees (other than the Acquired Entities)
the Excluded Assets (including all liabilities associated
therewith) and all of the shares of capital stock, partnership
interests and other equity or ownership interests of the Excluded
Subsidiaries held directly or indirectly by the Company and
(collectively, the "Reorganization") enter into and deliver such
instruments of assignment and assumption, bills of sale and other
transfer documents (in form and substance reasonably satisfactory
to counsel for the Buyer) as the Buyer reasonably deems necessary
or advisable to sell, distribute, assign, transfer, convey and
deliver fully and effectively ownership and assumption of all
liabilities in respect of the foregoing from the Acquired
Entities to the Sellers or their designees.
(b) At or prior to the Closing Date, but effective as
of the Closing Date, the Sellers shall, at their sole expense and
with no adverse Tax or other consequences to the Acquired
Entities or the Buyer, (i) transfer, or cause the Acquired
Entities to transfer, the employment of all Excluded Employees
who are employed by an Acquired Entity to the Sellers or their
designees (other than the Acquired Entities), (ii) cause the
Acquired Entities to cease to be adopting employers under all
Company Plans and Company Other Benefit Obligations, and (iii)
except as provided in Section 5.16, cause one or more designees
of the Sellers (other than the Acquired Entities) to assume all
past, present and future obligations and liabilities of the
Acquired Entities with respect to the Company Plans, Company
Other Benefit Obligations and Excluded Employees.
Section Warrants.
At or prior to the Closing, the Sellers (i) shall cause
the cancellation of all outstanding FSOC Warrants and all other
Warrants in respect of any stock or partnership interests
included in the Acquired Entities, and the termination of all
agreements relating to any such Warrants at no expense or other
Cost (including Taxes) to CE, the Buyer or the Acquired Entities
(collectively, the "Warrant Cancellations"), (ii) shall deliver
such executed releases and other documentation relating to the
FSOC Warrant Cancellation as the Seller shall enter into with
Buyer's consent and otherwise as the Buyer may reasonably request
(collectively, the "FSOC Warrant Cancellation Agreements") and
(iii) shall deliver other documentation reasonably satisfactory
to Buyer in respect of all other Warrant Cancellations (if any).
Section Non-Compete; Non-Solicitation.
During the term of the existing power purchase
agreements at the Operating Facilities, each Seller
severally agrees that he shall not, directly or indirectly
(whether through the Excluded Subsidiaries or otherwise),
without the prior written consent of the Buyer, develop,
own, operate, manage or invest (exclusive of investments in
less than 5% of the publicly traded securities of another
entity) in any power-related projects that could reasonably
be expected to harm the competitive position of the
Operating Facilities or the ability of Buyer to expand or
add to the same; provided that Dewhurst and Buyer's CEO
shall use their reasonable best efforts to make such
determination of potential harm jointly and Buyer shall not
unreasonably withhold its consent in connection therewith.
For a period of one year after the Closing, each
Seller severally agrees that he shall not directly or
indirectly (whether through the Excluded Subsidiaries or
otherwise) hire or take away any employee of any Acquired
Entity who remains employed by such Acquired Entity
subsequent to the Closing Date without the prior written
consent of Buyer.
Section Assumption of Houston Headquarters Lease;
Other Obligations.
The Sellers shall use all reasonable commercial
efforts (including, if required, a personal guaranty in
favor of the lessor by Dewhurst) to cause the Houston
Headquarters Lease to be assigned to the Sellers or an
Affiliate of the Sellers as soon as practicable after the
Closing pursuant to a lease assignment and assumption
agreement (the "Houston Lease Assignment") satisfactory to
Buyer providing for the release of the Company and all
Acquired Entities from all liabilities, obligations and
other Costs relating to the Houston Headquarters Lease.
Until the Houston Lease Assignment is executed, the Sellers
will make all payments and perform all obligations relating
to the Houston Headquarters Lease. Prior to and subsequent
to the execution of the Houston Lease Assignment, the
Sellers will indemnify and hold the Buyer harmless from any
and all obligations, liabilities and other Costs relating to
the Houston Headquarters Lease.
At the election of the Buyer, exercised by a
written notice delivered to Sellers at any time prior to the
close of business on July 25, 1996, all of the obligations
and other Costs relating to any consulting, employment,
geologic or other similar service contracts of the Acquired
Entities (collectively, to the extent so designated by
Buyer, "Excluded Service Contracts") shall be similarly
transferred or assigned to, and be fully assumed by, and
become the sole responsibility of, the Sellers as of the
Closing Date.
Section Use of Company Name and Logo.
The Sellers shall retain all rights to use the "Falcon
Seaboard" name and logo; provided, however, that the Sellers do
hereby grant unto the Buyer as of the Closing a non-exclusive
right to use such name and logo (the "Falcon License") to the
extent reasonably required by Buyer for legal or regulatory
purposes relating to the Operating Facilities and development
opportunities relating to such Operating Facilities that
constitute expansions or additions to such Operating Facilities;
provided, further, that the Buyer shall use its commercially
reasonable efforts to minimize or eliminate such usage as
expeditiously as possible (by changes of name or logo or
otherwise) to the extent reasonably practicable.
Section Transitional Use of Space and Access to
Personnel.
The Buyer and the Acquired Entities shall be entitled
to the continued use and occupancy of up to approximately six
offices and one conference room at the premises covered by the
Houston Headquarters Lease (including the use and operation of
office furnishings, fixtures, equipment and other systems
thereat) at no cost or expense to the Buyer or the Acquired
Entities for a period of six months from and after the Closing.
The Sellers shall use their reasonable best efforts to make
themselves and other employees continuing in an employment
relationship with the Sellers or the Excluded Subsidiaries
available to the Buyer and the Acquired Entities for assistance
for a period of 90 days from and after the Closing.
Section Board Nomination.
During the term of the Consulting Agreement, CE shall
use its reasonable best efforts to nominate Dewhurst to the Board
of Directors of CE, subject to Dewhurst agreeing to and complying
with appropriate arrangements intended to avoid conflicts of
interest with respect to the business, prospects and best
interests of CE and its subsidiaries and shareholders.
Section 5.16. Employee Benefit Matters.
(a) As soon as practicable (but in no event later than
180 days) following the Closing Date, the Sellers shall cause to
be transferred from the trustees of the Company 401(k) Plan to
the trustees of a defined contribution plan qualified under 401
(a) of the IRC and designated by the Buyer (the "Buyer's Plan")
an amount in cash equal to the aggregate account balances of the
Retained Employees under the Company 401(k) Plan determined as of
the transfer date (which shall be a valuation date) in accordance
with the methods of valuation set forth in the Company 401(k)
Plan and in accordance with Section 414(1) of the IRC; provided,
however, that to the extent any Retained Employee owes any amount
to the Company 401(k) Plan pursuant to the terms of a loan from
such plan to such Retained Employee, an in-kind transfer of such
loan shall be made in lieu of the transfer of cash. From and
after the date of such transfer, the Buyer shall cause the
Buyer's Plan to assume the obligations of the Company 401(k) Plan
with respect to benefits accrued by the Retained Employees under
the Company 401(k) Plan and the Company 401 (k) Plan shall cease
to be responsible therefor. The Buyer and the Sellers shall
cooperate in making all appropriate arrangements and filings, if
any, in connection with the transfer described above. Further,
the Buyer and the Sellers shall cooperate and take such actions
as are necessary to permit the continuation of loan repayments by
Retained Employees to the Company 401(k) Plan by payroll
deductions during the period beginning on the Closing Date and
ending on the earlier of (i) the date of the transfer described
in this subsection or (ii) the date that is 180 days after the
Closing Date.
(b) The Buyer shall assume the accrued and unused
vacation and sick leave of the Retained Employees for 1996 from
January 1, 1996 through the Closing Date for the hours set forth
on Exhibit A to Schedule 1.4 of the Disclosure Letter, which
amount Sellers hereby represent and warrant as being the only
such amounts due to the Retained Employees for all prior periods.
(c) The Company Plans shall be responsible for all
claims for health or medical benefits which are incurred on or
prior to June 30, 1996 by Retained Employees (and their eligible
dependents) that are payable under the terms and conditions of
the Company Plans. The Buyer's group health plan covering
Retained Employees as of the Closing Date shall be responsible
for all claims for health or medical benefits which are incurred
from and after the June 30, 1996 by Retained Employees (and their
eligible dependents) that are payable under the terms and
conditions of Buyer's plan. For purposes of this Section
5.16(c), a claim for benefits shall be deemed to be incurred when
the expense giving rise to the claim is incurred.
ARTICLE
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The Buyer's obligation to purchase the Shares and to
take the other actions required to be taken by the Buyer at the
Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be
waived by the Buyer, in whole or in part):
Section Accuracy of Representations.
All of the Sellers' representations and warranties in
this Agreement (considered individually) must have been
accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date (other
than in respect of inaccuracies in respect of the number of
Shares owned (but not percentage ownership of) the Sellers
necessitated by the Reorganization to the extent covered as
Excluded Liabilities or otherwise caused by any additional
aspects of the Reorganization to the extent disclosed to,
and consented to in writing by, the Buyers), without giving
effect to any supplement to the Disclosure Letter.
Each of the Sellers' representations and warranties
in Sections 3.3, 3.5, 3.11, 3.13 and 3.25 must have been
accurate in all respects as of the date of this Agreement,
and must be accurate in all respects as of the Closing Date
as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
Each of the Sellers and the other officers and
directors of the Acquired Entities shall have delivered to
the Buyer their respective resignations as officers and
directors of all of the Acquired Entities, effective as of
the Closing.
Section Sellers' Performance.
(a) All of the covenants and obligations that the
Sellers are required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered
individually) must have been duly performed and complied with in
all material respects.
(b) Each document required to be delivered by the
Sellers pursuant to Section 2.4 must have been delivered.
Section Additional Documents.
Each of the following documents shall have been duly
executed and delivered to the Buyer:
an opinion or opinions of Vinson & Elkins LLP,
Chadbourne & Parke LLP, Akin Gump and other firms acceptable
to Buyer, dated the Closing Date, substantially in the form
of Exhibit 6.3;
such other documents as the Buyer may reasonably
request for the purpose of (i) evidencing the accuracy of
any of the Sellers' representations and warranties,
(ii) evidencing the performance by the Sellers of, or the
compliance by the Sellers with, any covenant or obligation
required to be performed or complied with by such Seller,
(iii) evidencing the satisfaction of any condition referred
to in this Section 6, or (iv) otherwise facilitating the
consummation or performance of any of the Contemplated
Transactions by the parties thereto (other than CE and
Buyer).
Section No Proceedings.
Since the date of this Agreement, there must not have
been commenced or Threatened against the Buyer, or against any
Person affiliated with the Buyer, any Proceeding (a) involving
any challenge to, or seeking substantial damages or other relief
in connection with, any of the Contemplated Transactions, or
(b) that may have the effect of preventing, delaying or making
illegal any of the Contemplated Transactions.
Section Buyer's Due Diligence.
The Buyer, in its sole discretion, must be satisfied
with the results of its due diligence investigation with respect
to the Acquired Entities.
Section No Injunction.
There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the
Shares by the Sellers to the Buyer.
Section Transaction Documents.
Each of the Transaction Documents shall have been duly
executed and delivered by all parties thereto and all
transactions contemplated thereunder to occur on or prior to the
Closing shall have occurred.
ARTICLE
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
The Sellers' obligation to sell the Shares and to take
the other actions required to be taken by the Sellers at the
Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be
waived by the Sellers, in whole or in part):
Section Accuracy of Representations.
All of the Buyer's representations and warranties in
this Agreement (considered individually) must have been accurate
in all material respects as of the date of this Agreement and
must be accurate in all material respects as of the Closing Date
as if made on the Closing Date.
Section Buyer's Performance.
All of the covenants and obligations that CE or the
Buyer is required to perform or to comply with pursuant to
this Agreement at or prior to the Closing (considered
individually) must have been performed and complied with in
all material respects.
(b) The Buyer must have delivered each of the
documents required to be delivered by CE and the Buyer
pursuant to Section 2.4.
Section Additional Documents.
The Buyer must have caused the following documents to
be delivered to the Sellers:
such documents as the Sellers may reasonably request
for the purpose of (i) enabling their counsel to provide the
opinion referred to in Section 6.3(a), (ii) evidencing the
accuracy of any representation or warranty of the Buyer,
(iii) evidencing the performance by the Buyer of, or the
compliance by the Buyer with, any covenant or obligation
required to be performed or complied with by the Buyer,
(iv) evidencing the satisfaction of any condition referred
to in this Section 7, or (v) otherwise facilitating the
consummation of any of the Contemplated Transactions by CE
or Buyer.
Section No Injunction.
There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits the sale of the
Shares by the Sellers to the Buyer.
Section 7.6. CE Guaranty.
CE shall have executed and delivered to Sellers' Agent
the CE Guaranty Agreement.
Section 7.7. Disclosure Letter Updates.
The additional disclosures, if any, contained in
Sellers' supplement or supplements to the Disclosure Letter
delivered to Buyer after the date hereof in respect of matters
discovered by Sellers after the date hereof (which could not have
come to Sellers' Knowledge prior to the date hereof) or events
occurring subsequent to the date hereof shall not, in Sellers'
reasonable judgment (after consulting with outside counsel and,
if possible, providing the Buyer with at least two (2) days prior
written notice thereof and with reasonable details concerning
such breaches), represent breaches of the representations and
warranties made by Sellers on the date hereof which exceed
$10,000,000 in the aggregate.
ARTICLE
TERMINATION
Section Termination Events.
This Agreement may, by notice given prior to or at the
Closing, be terminated:
by either the Buyer or the Sellers if a material
Breach of any provision of this Agreement has been committed
by the other party and such Breach has not been waived;
(i) by the Buyer if any of the conditions in Section
6 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible
(other than through the failure of the Buyer to comply with
its obligations under this Agreement) and the Buyer has not
waived such condition on or before the Closing Date; or (ii)
by the Sellers, if any of the conditions in Section 7 has
not been satisfied as of the Closing Date or if satisfaction
of such a condition is or becomes impossible (other than
through the failure of the Sellers to comply with their
obligations under this Agreement) and the Sellers have not
waived such condition on or before the Closing Date;
by mutual consent of the Buyer and the Sellers; or
by either the Buyer or the Sellers if the Closing has
not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before August 31,
1996, or such later date as the parties may agree upon.
Section Effect of Termination.
Buyer's right of termination under Section 8.1 is in
addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated
pursuant to Section 8.1, all further obligations of the parties
under this Agreement (other than obligations which have
previously been breached) will terminate, except that the rights
and obligations in this Section 8.2 and in Sections 8.3, 10.1,
10.2 and 10.3 will survive; provided, however, that if (x) Buyer
elects to terminate this Agreement for any reason other than the
failure of the condition precedent set forth in Section 6.5 due
to issues identified by Buyer which adversely affect the
valuation of the Acquired Entities by an amount of $2,000,000 or
more, or inaccuracies in the representations and warranties of
Sellers made on the date hereof which exceed $2,000,000 in the
aggregate, or (y) on August 31, 1996, the only condition to
Buyer's obligations to close hereunder not then satisfied is the
condition precedent set forth in Section 6.5, and if, at the time
of such termination or on August 31, 1996, all of the other
conditions precedent to Buyer's obligation to close set forth in
Article 6 have been satisfied, then (in lieu of any other Damages
or remedies for Sellers under this Agreement or otherwise) Buyer
shall promptly pay to Sellers liquidated damages in the aggregate
amount of $250,000 by wire transfer to the accounts and in the
proportions set forth in Section 2.4(c)(i). If Buyer elects to
terminate this Agreement because of the failure of the condition
precedent set forth in Section 6.5 due to issues identified by
Buyer which adversely affect the valuation of the Acquired
Entities by $2,000,000 or more or inaccuracies in the
representations and warranties of Sellers made on the date hereof
which exceed $2,000,000 or more, Buyer shall have no obligations
to Sellers in respect of the Termination of this Agreement,
failure to consummate the Contemplated Transactions or otherwise.
Section Alternative Transaction.
If this Agreement is terminated for any reason (other
than pursuant to Section 8.1(a) solely as a result of the Breach
by Buyer of any applicable provisions hereof), the Sellers agree
to pay to the Buyer a non-refundable fee of $10,000,000 by wire
transfer of immediately available funds to an account designated
by the Buyer promptly upon the occurrence, at any time prior to
February 5, 1997, of any of the following events:
the consummation of any transaction by the Company or
any of its Subsidiaries or Affiliates or the Sellers or any
Affiliates involving the sale of a material equity interest
in the Company or any Subsidiaries or Affiliates or the sale
or other disposition, by way of merger, sale of stock or
assets, joint venture or otherwise, of a material portion of
the business of the Company or any of its Subsidiaries or
Affiliates (an "Alternative Transaction");
the entry into a definitive agreement which
contemplates any Alternative Transaction by the Company or
any of its Subsidiaries or Affiliates or the Sellers or any
Affiliates; or
a public announcement by or with respect to the
Company or any of its Subsidiaries or Affiliates or the
Sellers or any Affiliates with respect to a plan or
intention of any of them to effect an Alternative
Transaction which plan or intention thereafter results in an
Alternative Transaction (in which case any amounts due to
the Buyer under this Section 8.3 shall become payable upon
the earlier of (i) the execution of a definitive agreement
for an Alternative Transaction or (ii) the consummation of
an Alternative Transaction).
ARTICLE
INDEMNIFICATION; REMEDIES
Section Survival; Right to Indemnification Not
Affected by Knowledge.
All representations, warranties, covenants, and
obligations in this Agreement, the Disclosure Letter, the
supplements to the Disclosure Letter, the certificates delivered
pursuant to Section 2.4(a)(ii), and any other certificate or
document delivered pursuant to this Agreement will, subject to
the applicable time limits, if any, set forth in Section 9.4,
survive the Closing.
Section Indemnification and Payment of Damages by
Sellers.
After the Closing, each Seller, severally and not
jointly (in proportion to each Seller's percentage ownership of
the Shares), will indemnify, hold harmless and defend the Buyer,
the Acquired Entities, and their respective Representatives,
stockholders, controlling persons, and affiliates (collectively,
the "Indemnified Persons") for, and will pay to the Indemnified
Persons the amount of, any Costs, whether or not involving a
third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
subject to the applicable provisions of Section 9.4,
9.5 and 9.9(a), any Breach of any representation or warranty
(without regard to (i) any "materiality" qualification,
dollar limit or other similar qualification set forth
therein, and other than any such dollar limits to the extent
that such dollar limits restrict the Sellers' obligations to
list documents provided that all documents exceeding such
dollars limits are correctly listed in accordance with the
provisions thereof and (ii) without regard to any supplement
to the Disclosure Letter) made by such Seller in this
Agreement (excluding those made in Sections 3.3, 3.4, 3.12
and 3.20); provided, that any such breach of a
representation or warranty in respect of Legal Requirements
in so far as such representation or warranty relates to
matters covered by the indemnity contained in Section 9.3
(or which would be covered by Section 9.3 if it applied to
Environmental Laws enacted after the Closing Date) shall not
be deemed breached if the applicable Legal Requirement
referenced therein is not an existing or prior Legal
Requirement;
subject to the applicable provisions of Section 9.4,
9.5 and 9.9(a), any Breach by such Seller of any covenant or
obligation to be performed by the Sellers in this Agreement
(excluding the covenants contained in Sections 5.2(e),
5.2(f), 5.7, 5.9, 5.10, 5.11, 5.12;
subject to the applicable provisions of Section
9.4, 9.5 and 9.9(a), any Breach by the Sellers of any
representation or warranty (without regard to any
"materiality" qualification, dollar limit or other similar
qualification set forth therein and without regard to any
supplement to the Disclosure Letter) made in Section 3.12 or
any covenant or obligation to be performed by the Sellers
under Section 5.2(e) or 5.10 (except Tax claims covered by
Section 9.2(d) below);
any Breach by the Sellers of any representation or
warranty contained in Sections 3.3 and 3.4 (without regard
to any supplement to the Disclosure Letter), 5.7, 5.9, 5.11
and 5.12 or any other Cost incurred by the Buyer or any of
the Acquired Entities in connection with the FSOC Warrant
Cancellation or the Houston Lease Assignment; or
any Excluded Liability.
Section Indemnification and Payment of Damages by
Sellers--Environmental Matters.
In addition to, and without limiting the generality of,
the provisions of Section 9.2, the Sellers, severally and not
jointly (in proportion to each Seller's percentage ownership of
the Shares), will indemnify, hold harmless and defend the Buyer,
the Acquired Entities, and the other Indemnified Persons from and
against, and will pay to Buyer, the Acquired Entities, and the
other Indemnified Persons the amount of, all Damages that arise
directly or indirectly from or in connection with any existing or
prior Environmental Law that is or was or allegedly is or was
applicable to the Facilities or to the properties of the Excluded
Subsidiaries (collectively, the "Property"), the operations
conducted thereon, or the Acquired Entities or the Excluded
Subsidiaries and which relate to any operations or environmental
conditions, violations or occurrences existing, initially arising
or alleged to have arisen on or before the Closing Date,
regardless of Sellers' Knowledge thereof, including, without
limitation, all Damages arising out of or in any way relating to:
any violation or alleged violation of any such
Environmental Law applicable to the Property or the
operations of any User or any Environmental Permit with
respect to the Property;
any generation, transport, treatment, recycling,
processing, storage, disposal or arrangement therefor of
Hazardous Materials whether (i) on any Property, (ii)
originating from the Property, or (iii) otherwise connected
to the operations of any User, the Acquired Entities or the
Excluded Subsidiaries;
any Release or Threat of Release of any Hazardous
Material at, to or from the Property;
any Remedial Action arising out of, relating to,
or in connection with the Property or the operations of any
User in connection with any of the Property;
any asbestos-containing material or other
Hazardous Material on, in, under or at the Property;
failure to comply with any covenants, terms or
conditions relating to environmental matters;
Breach of any representation or warranty made in
Section 3.20 by the Sellers or covenant or obligation to be
performed by the Sellers under Section 5.2(f) of this
Agreement;
exposure to any electro-magnetic fields, products,
raw materials or Hazardous Materials manufactured,
generated, transported, handled, recycled, processed,
stored, installed or used at or from the Property, by the
Acquired Entities or by the Excluded Subsidiaries or as part
of the operations of any User in connection with the
Property that causes or contributes to any property damage
or disease, injury or illness to any person; and
any environmental, health or safety investigation
or review conducted in connection with the Property or the
operations of the Acquired Entities or the Excluded
Subsidiaries.
The Buyer will be entitled to control any Remedial
Action, any related Proceeding and any other Proceeding with
respect to which indemnity may be sought under this Section 9.3,
provided that Buyer exercises good faith and utilizes a
commercially reasonable approach in connection therewith, after
giving due consideration to all relevant capital costs and
operating costs, technical feasibility and other relevant Costs
over the life of the affected properties and equipment (including
the residual periods following expiration of the existing power
purchase agreements) and the Costs of the Remedial Action. The
procedure described in Section 9.6(b) will apply to any claim
solely for monetary damages relating to a matter covered by this
Section 9.3.
Section Time Limitations.
The Sellers will have no liability for
indemnification of any Indemnified Person pursuant to
Sections 9.2(a) or (in respect of covenants or obligations
of Seller to be performed at or prior to Closing) 9.2(b)
unless on or before the date that is two years from and
after the date that the Closing occurs the Buyer notifies
the Sellers of a claim thereunder specifying the factual
basis of that claim in reasonable detail to the extent then
known by the Buyer.
The Sellers will have no liability for
indemnification of any Indemnified Person pursuant to
Section 9.3 unless on or before the date that is four years
from and after the date that the Closing occurs the Buyer
notifies the Sellers of a claim specifying the factual basis
of that claim in reasonable detail to the extent then known
by the Buyer.
The Sellers will have no liability for
indemnification of any Indemnified Person pursuant to
Section 9.2(c) unless on or before the date that is six
years from and after the date that the Closing occurs the
Buyer notifies the Sellers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then
known by the Buyer.
The Sellers' liability to indemnify the Buyer
under Sections 9.2(d) and 9.2(e) shall continue
indefinitely; provided that any Excluded Liability claims
relating to Taxes shall continue for the six year period
(and pursuant to the procedures) contained in Section 9.2(c)
above, unless such Tax claims relate to the Reorganization
or the Warrant Cancellations or the Warrant Cancellation
Agreements, in which case such Tax claims and related
indemnity obligations shall continue indefinitely.
Section Limitations on Amount.
(a) The aggregate liability of the Sellers pursuant to
their indemnification obligations under Sections 9.2(a) and
9.2(b) shall be limited to the Escrow Funds.
(b) The aggregate liability of the Sellers pursuant to
their indemnification obligations under Sections 9.2(c) and
9.3, respectively, shall be limited, in each case, to the
sum of $22,600,000; provided, that the cost of defense by
Buyer (including all attorneys' fees) incurred in connection
with matters covered thereby shall be unlimited if Buyer is
not determined by a final judgment to be primarily liable
for the tax or environmental Damages at issue.
(c) No single or aggregate limit on the liability of
the Sellers for Damages or other claims made by the Buyer
under Sections 9.2(d) or 9.2(e) shall apply to any such
claims, except that any such claim related to a breach of
the Sellers' representations made in Sections 3.3 or 3.4
shall be limited, in the aggregate, to an amount equal to
the Purchase Price.
(d) Sellers shall have no obligation to make any
payments under Article IX (excluding Sections 9.2(d) and
(e)) until the aggregate amount of all claims of the Buyers
pursuant to its indemnification rights thereunder exceeds
$250,000, it being understood that once such amount is
exceeded, the aggregate amount of all such claims shall be
and become payable on demand.
Section Certain Claims Procedures.
Subject to the applicable provisions of Section
9.4, 9.5 and 9.9(a), Claims for Damages under Sections
9.2(a) or 9.2(b) shall be made by written notice to the
Escrow Agent setting forth the amount of such claim and
specifying in reasonable detail the basis therefor, all as
more fully described in the Escrow Agreement.
Subject to the applicable provisions of Section
9.4, 9.5 and 9.9(a), Claims for Damages under Sections
9.2(c) or 9.3, and any Claims for Damages under Sections
9.2(d) or 9.2(e), may be made, at the option of the
Indemnified Person, by written notice to the Escrow Agent or
by written notice to the Sellers or the Sellers' Agent
setting forth the amount of such claim and specifying in
reasonable detail the basis therefor.
Neither the giving of nor the failure to give a
notice of claim hereunder (except to the extent such notice
is required to be given to the Escrow Agent pursuant to
Section 9.6(a)) will limit the Buyer in any manner in the
enforcement of any other remedies that may be available to
it under Article 8 or 9 hereof.
Section Right to Defend Third Party Claims.
Promptly after receipt by an indemnified party of
notice of the commencement of any Proceeding against it,
such indemnified party will, if a claim is to be made
against an indemnifying party under this Article 9, give
notice to the indemnifying party of the commencement of such
claim, but, subject to the applicable time limits, if any,
set forth in Section 9.4, the failure to notify the
indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party is
prejudiced by the indemnifying party's failure to give such
notice.
If any Proceeding referred to in Section 9.7(a) is
brought against an indemnified party and it gives notice to
the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and
the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the
indemnifying party fails to provide reasonable assurance to
the indemnified party of its financial capacity to defend
such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding
with counsel satisfactory to the indemnified party and,
after notice from the indemnifying party to the indemnified
party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the
indemnified party under this Article 9 for any fees of other
counsel or any other expenses with respect to the defense of
such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation.
If the indemnifying party assumes the defense of a
Proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such
claims may be effected by the indemnifying party without
the indemnified party's consent unless (A) there is no
finding or admission of any violation of Legal Requirements
or any violation of the rights of any Person and no effect
on any other claims that may be made against the indemnified
party, and (B) the sole relief provided is monetary damages
that are paid in full by the indemnifying party; and (iii)
the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without
its consent.
Notwithstanding the foregoing, at the election of an
indemnified party, the indemnified party may, by notice to
the indemnifying party, assume the exclusive right to
defend, compromise, or settle such Proceeding, but the
indemnifying party will not be bound by any determination of
a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably
withheld).
The Sellers hereby consent to the non-exclusive
jurisdiction of any court in which a Proceeding is brought
against any Indemnified Person for purposes of any claim
that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on the Sellers
with respect to such a claim anywhere in the world.
The parties hereto shall cooperate with and assist
the other parties in connection with any such defense to the
extent reasonably possible.
Section Equitable Remedies.
The Sellers agree that a monetary remedy for a breach
of the provisions set forth in Sections 5.11(a) of this Agreement
or of Sellers' obligations to be performed at or prior Closing
under this Agreement would be inadequate and impracticable and
further agree that such a breach would cause the Buyer
irreparable harm. It is accordingly agreed that the Buyer shall
be entitled to injunctive relief to prevent breaches of this
agreement and to specifically enforce the provisions contained in
Section 5.11 hereof and the other obligations of Sellers' to be
performed at or prior to Closing, in addition to any other remedy
to which the Buyer may be entitled under this Agreement, the
Transaction Documents or otherwise at law or in equity.
Section Limitation on Rights and Remedies.
(a) The rights and remedies provided in Articles 8 and
9 will be exclusive of any other rights or remedies that may be
available to the Buyer or any other Indemnified Persons at law or
in equity, in connection with this Agreement, the certificates to
be delivered pursuant to Section 2.4(a)(ii), and the Contemplated
Transactions, and Buyer hereby waives and releases, on behalf of
itself and the other Indemnified Persons, any and all such other
rights and remedies in respect thereof.
(b) The payment rights and remedies provided in
Section 8.2 will be exclusive of any other rights and remedies
that may be available to Sellers at law or in equity for
termination of this Agreement, and the Sellers hereby waive and
release any and all such other rights and remedies in respect of
such termination.
ARTICLE
GENERAL PROVISIONS
Section Transaction Costs.
Except as otherwise provided expressly in this
Agreement, the fees, expenses and disbursements (including the
fees, expenses and disbursements of any lawyers, accountants,
investment bankers or other representatives engaged in connection
with the Contemplated Transactions) incurred in connection with
the Transaction Documents and the Contemplated Transactions
(whether or not the same are consummated) ("Transaction Costs")
shall be paid by the Buyer with respect to the Buyer and will be
paid by the Sellers with respect to the Sellers and the Acquired
Entities; provided that costs with respect to the Escrow
Agreement shall be paid as provided in the Escrow Agreement and
provided, further, that Buyer will pay the HSR Act filing fee.
Seller shall pay all sales, recording, transfer, transfer gains
or other similar taxes and all filing and recording fees incurred
in connection with the Transaction Documents and the Contemplated
Transactions. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject
to any rights of such party arising from a breach of this
Agreement by another party.
Section Confidentiality.
Between the date of this Agreement and the Closing
Date, the Buyer and the Sellers will maintain in confidence, and
will cause the directors, officers, employees, agents, and
advisors of the Buyer and the Acquired Entities to maintain in
confidence, and not use to the detriment of another party or an
Acquired Entity any written, oral, or other information obtained
in confidence from another party hereto or an Acquired Entity in
connection with this Agreement or the Contemplated Transactions,
unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b)
the use of such information is necessary or appropriate in making
any filing or obtaining any consent or approval required for the
consummation of the Contemplated Transactions or in connection
with the financing, if any, of the Purchase Price by the Buyer,
or (c) the furnishing or use of such information is required for
due diligence in connection with the Contemplated Transactions or
by any Governmental Body, applicable stock exchange rule or
regulation, Proceeding or Legal Requirement. If the Contemplated
Transactions are not consummated, each party will return or
destroy as much of such written information as the other party
may reasonably request.
Section Sellers' Agent; Notices.
Except to the extent specifically provided herein, each
Seller does hereby irrevocably constitute and appoint Dewhurst
(the "Sellers' Agent") as such Seller's attorney and agent to
take all actions and do all things necessary on behalf of such
Seller in connection with the Contemplated Transactions with full
power of substitution in the premises.
All notices, consents, waivers, and other
communications under this Agreement must be in writing and will
be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may
designate by notice to the other parties):
Sellers:
David H. Dewhurst
Chairman and Chief Executive Officer
Falcon Seaboard Resources, Inc.
Five Post Oak Park, Suite 1400
Houston, Texas 77027
Facsimile No.: (713) 622-0045
with a copy to:
Vinson & Elkins LLP
1001 Fannin Street
Suite 2300
Houston, Texas 77002-6760
Attention: Marcia E. Backus
Facsimile No.: (713) 615-5606
Buyer:
CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attention: General Counsel
Facsimile No.: (402) 231-1658
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter J. Hanlon
Facsimile No.: (212) 821-8111
Section Entire Agreement.
This Agreement shall be of no force or effect until
executed and delivered by each of the parties hereto. This
Agreement embodies the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and
supersedes all prior written or oral commitments, arrangements,
letters of intent (including the letter of intent dated June 12,
1996 between CE, Dewhurst and the Company) or understandings with
respect thereto. There is no restriction, agreement, promise,
warranty, covenant or undertaking with respect to the
transactions contemplated hereby other than those expressly set
forth herein.
Section Amendment; Waiver.
This Agreement may only be amended or modified by means
of a written statement signed by the party against whom
enforcement of any such amendment or modification is sought. Any
party hereto may, by an instrument in writing, waive compliance
with any term or provision of this Agreement on the part of such
other party hereto. The waiver by any party hereto of a breach
of any term or provision of this Agreement will not be construed
as a waiver of any subsequent breach. Neither the failure nor
any delay by any party in exercising any right, power, or
privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of
such right, power or privilege or the exercise of any other
right, power or privilege.
Section Assignments, Successors, and Parties in
Interest.
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties, except
that the Buyer may assign any of its rights or obligations under
this Agreement to any wholly-owned Subsidiary of the Buyer,
provided, that the Buyer remains liable (either primarily or as a
guarantor or otherwise) for the performance of its obligations
hereunder. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties.
Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or
with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
Section Severability.
If any one or more of the provisions of this Agreement
is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this
Agreement will not be affected thereby, and the Sellers and the
Buyer will use their commercially reasonable efforts to
substitute one or more valid, legal and enforceable provisions
which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
Section Section Headings; Construction.
The headings of Sections in this Agreement are provided
for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement and
all references to "hereof" refer to the entire Agreement. All
words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the
preceding words or terms.
Section Governing Law; Consent to Jurisdiction.
This Agreement (including all Exhibits and Schedules
attached hereto) will be governed by the laws of the State of New
York and the laws of the United States applicable therein
(regardless of the laws that might be applicable under principles
of conflicts of law) as to all matters, including but not limited
to matters of validity, construction, effect and performance.
The Buyer and each Seller hereby submit to the exclusive
jurisdiction of the courts of the State of New York solely in
respect of the interpretation and enforcement of the provisions
of this Agreement and any related agreement and hereby waive, and
agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement of this
Agreement and any related agreement, that they are not subject
thereto or that such action, suit or proceeding may not be
brought or is not maintainable in such courts or that this
Agreement may not be enforced in or by such courts or that their
property is exempt or immune from execution, that the suit,
action or proceeding is brought in an inconvenient forum, or that
the venue of the suit, action or proceeding is improper. Service
of process with respect thereto may be made upon the Buyer or the
Sellers' Agent, as applicable, by mailing a copy thereof by
registered or certified mail, postage prepaid, to such party at
its address as provided in Section 10.3 hereof.
Section Counterparts.
This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
[Signature page follows.]
DO NOT DELETE HARD PAGE BREAK -
KEEP SIGNATURE PAGE ON ITS OWN PAGE
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
Buyer: CE/FS HOLDING COMPANY, INC.
By: _/s/ Steven A. McArthur
Name: Steven A. McArthur
Title: Senior V.P.
Sellers: Share
Percentage
Shareholder Ownership
The David Henry Dewhurst III
Management Trust U/A DHD
By: /s/ David H. Dewhurst
Title: Trustee
David Dewhurst Investment
Partnership, Ltd.
By: /s/ David H. Dewhurst
Title Genral Partner
James R. Douglass
By: /s/ J. R. Douglas
MWD Investments
By: /s/ J.R. Douglas
Title General Partner
Martin H. Young, Jr.
By: /s/ Martin H. Young, Jr.
MHY Investments, Ltd.
By: /s/Martin H. Young, Jr.
Title General Partner
Eugene H. Dewhurst
By: /s/ Eugene H. Dewhurst
Gene and Linda Investments, Ltd.
By: /s/ Eugene H. Dewhurst
Title General Partner
Georg F. Mikulcik
By: /s/ Georg F. Mikulcik
GFM Investments, Ltd.
By: /s/ George F. Mikulcik
Title General Partner
Harold Don Teague
By: /s/ Don Teague
HDT Investment
Partnership, Ltd.
By: /s/Don Teague
Title General Partner
Exhibit 99.2
JOINT PRESS RELEASE
of
CalEnergy Company, Inc. Falcon Seaboard
Resources, Inc.
FOR IMMEDIATE RELEASE
CalEnergy Company, Inc.
David L. Sokol - Chairman and Chief Executive Officer402-341-4500
John G. Sylvia - Senior Vice President, Chief Financial Officer
402-341-4500
Falcon Seaboard Resources, Inc.
David H. Dewhurst - Chairman and Chief Executive Officer713-622-
0055
CalEnergy Signs Definitive Agreement to Acquire the Ownership
Interest in
Falcon Seaboard's Three Operating Gas-Fired Cogeneration Plants
having 520 MW of Capacity
OMAHA, NEBRASKA and HOUSTON, TEXAS, July 8, 1996 --- CalEnergy
Company, Inc. ("CalEnergy") (NYSE, PSE and LSE symbol: CE) and
Falcon Seaboard Resources, Inc. ("Falcon Seaboard"), a privately
held oil and gas, pipeline and independent power producer,
announced today that they have executed a definitive agreement
for the purchase by CalEnergy of Falcon Seaboard's significant
ownership interest in three operating gas-fired cogeneration
plants and related natural-gas pipelines, for a cash price of
$226,000,000. The plants are located in Texas, Pennsylvania and
New York and total 520 MW in capacity. Oil and gas properties,
domestic and international power projects under development, as
well as a growing energy services business will be retained by
the shareholders of Falcon Seaboard. The transaction has
received Hart-Scott-Rodino clearance by the Federal Trade
Commission and Department of Justice. Closing is anticipated in
early August 1996.
"The acquisition of the Falcon Seaboard facilities continues our
fuel diversification efforts and brings to us additional low-cost
and well-positioned assets for competition in the deregulated
domestic electric industry of the future," said David L. Sokol,
Chairman and Chief Executive Officer of CalEnergy Company, Inc.
"We are also pleased to have Mr. Dewhurst join our Board of
Directors and to begin working with him on certain international
joint development efforts."
"CalEnergy's acquisition of these facilities is a win for both
companies. CalEnergy will be able to maximize the asset value of
these facilities as it integrates them into their strategic plan
and the new Falcon Seaboard will be able to redeploy the proceeds
into our oil and gas and energy services businesses, as well as
the development of certain domestic and international projects
with CalEnergy," said David H. Dewhurst, Chairman and Chief
Executive Officer of Falcon Seaboard. "In our international
power development we have been looking for the right strategic
fit and we are excited to be involved with CalEnergy."
CalEnergy Company, Inc., a leading independent power producer, is
an international developer, owner and operator of environmentally
responsible power generation facilities.
