UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 33-53132
KENETECH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3009803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Sansome Street, Suite 300
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 398-3825
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
12 3/4% SENIOR SECURED NOTES DUE 2002
8 1/4% PREFERRED REDEEMABLE INCREASED DIVIDEND EQUITY SECURITIES
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[ ]
Based on the market price of the Common Stock at March 13, 1998
($0.055), the aggregate market value of the Common Stock of non-affiliates
of the Registrant was approximately $1.3 million. As of March 13, 1998,
there were 36,829,618 shares of Common Stock outstanding. The aggregate
market value of holdings of non-affiliates of the Registrant's 8.25%
Preferred Redeemable Increased Dividend Equity Securities (with the right
of 4/5 vote for each Depositary Share owned) based on the market price at
March 13, 1998 ($2.5625) was approximately $13.1 million. There were
5,124,600 Depositary Shares outstanding as of March 13, 1998.
Page 2
<PAGE>
PART I
Item 1. Business
- ----------------
KENETECH Corporation ("KENETECH"), a Delaware corporation, is a holding
company which participated through its subsidiaries in the electric utility
market in two principal ways. As used in this document "Company" refers to
KENETECH and its wholly-owned subsidiaries (including KENETECH Windpower,
Inc. (KWI) only through May 29, 1996).
Historically, the Company developed, constructed, financed, sold and
operated and managed independent power projects. A wholly-owned development
subsidiary is a joint venture partner with an affiliate of Enron
Corporation in a project under construction in Puerto Rico. In December
1997 the project obtained construction and term debt financing. The project
is a 507 MW (net) natural gas cogeneration facility and associated
liquified natural gas facility which will produce electricity to be sold to
Puerto Rico Electric Power Authority pursuant to a 22 year Power Purchase
Agreement dated March 10, 1995.
The power plant will be a combined cycle cogeneration facility consisting
of two combustion turbines capable of operating on LNG, LPG, or fuel oil to
generate electricity, and is expected to produce approximately 4 million
megawatt hours of electricity annually under baseload conditions. Steam
generated will also be used to convert sea water into fresh water in a
desalination plant, which is expected to produce approximately 4 million
gallons of potable water per day, of which approximately 1 million gallons
per day will be required by the project, with the remainder being available
for sale to local entities. This is the only project the Company (through
its wholly-owned development subsidiary) has in process. The Company's
wholly-owned development subsidiary intends to sell its interest in this
project in 1998.
One of the Company's subsidiaries is a general contractor which has
constructed independent power projects since 1988. This subsidiary competed
for contracts for engineering, procurement and construction (EPC) and for
construction only. Historically, the Company had constructed all of the
thermal energy power projects it developed and more recently had
constructed all of the Windplants it developed. Substantially all
construction work performed by the Company for third parties was
competitively bid and most was performed under turnkey contracts. The
chapter 11 filing of KWI discussed below has materially adversely affected
the Company's construction subsidiary and its ability to procure contracts.
This construction subsidiary had joint venture interests in the EPC
contracts for the Puerto Rico project described above which were sold in
December 1997. The Company is completing the projects in progress and
intends to dispose of its construction subsidiary in 1998.
KWI manufactured wind turbines and designed and operated utility-scale wind
powered electric powerplants which incorporated large arrays of such
turbines. On May 29, 1996, KWI filed for protection under chapter 11 of the
Federal Bankruptcy Code and reported an excess of liabilities over its
assets. Although the Company continues to own the common stock of KWI and
provides certain services under the jurisdiction of the Bankruptcy Court,
the Company believes it is probable that such ownership will not exist
after completion of the bankruptcy proceedings. Accordingly, as of May 29,
1996 KWI ceased to be accounted for as a consolidated subsidiary of the
Company. The Company's financial statements exclude all KWI activities
after that date.
EMPLOYEES: At March 10, 1998, the Company employed 53 persons (excluding
KWI).
Item 2. Property
- -----------------
The Company maintains its corporate headquarters in San Francisco,
California. The lease for approximately 7,404 square feet of corporate
office space expires in 1998. The annual lease payment is approximately
$119,000. The Company owns the Hartford Hospital cogeneration plant, a 17
MW combined cycle plant. The Company also has a 50% partnership interest in
a 17 MW wood-fired electric power plant it constructed in Chateaugay, New
York. In 1998 the Company's construction subsidiary sold its two buildings
consisting of 46,300 square feet of office space and 14,700 square feet of
industrial space which it owned in Meriden, Connecticut. Properties of KWI
are not included in this discussion.
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Item 3. Legal Proceedings
- -------------------------
LITIGATION
Shareholders' Litigation: On September 28, 1995, a class action complaint
was filed against the Company and certain of its officers and directors
(namely, Stanley Charren, Maurice E. Miller, Joel M. Canino and Gerald R.
Alderson), in the United States District Court for the Northern District of
California, alleging federal securities laws violations. On November 2,
1995, a First Amended Complaint was filed naming additional defendants,
including underwriters of the Company's securities and certain other
officers and directors of the Company (namely, Charles Christenson, Angus
M. Duthie, Steven N. Hutchinson, Howard W. Pifer III and Mervin E. Werth).
Subsequent to the Court's partial grant of the Company's and the
underwriter defendants' motions to dismiss, a Second Amended Complaint was
filed on March 29, 1996. The amended complaint alleges claims under
sections 11 and 15 of the Securities Act of 1933, and sections 10(b) and
20(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder,
based on alleged misrepresentations and omissions in the Company's public
statements, on behalf of a class consisting of persons who purchased the
Company's common stock during the period from September 21, 1993 (the date
of the Company's initial public offering) through August 8, 1995 and
persons who purchased the Company's preferred stock during the period from
April 28, 1994 (the public offering date of the preferred stock) through
August 8, 1995. The amended complaint alleges that the defendants
misrepresented the Company's progress on the development of its latest
generation of wind turbines and the Company's future prospects. The amended
complaint seeks unspecified damages and other relief.
In separate orders dated March 24, 1997 and April 16, 1997, the Court
granted plaintiffs' motion for certification of a plaintiff class
consisting of all persons or entities who purchased KENETECH common stock
between September 21, 1993 and August 8, 1995 or KENETECH depository shares
between April 28, 1994 and August 8, 1995, appointed representatives of the
certified plaintiff class, appointed counsel for the certified class and
denied without prejudice plaintiffs' motion for certification of an
underwriter defendant class. The plaintiffs then filed a Third Amended
Complaint adding additional plaintiffs alleged to have claims based on
section 11 of the Securities Act of 1933. On October 15, 1997, the Court
issued an order certifying a plaintiff and defendant underwriter class as
to the section 11 claim.
There have been two unsuccessful attempts at mediation to settle the action
and one unsuccessful settlement conference ordered by the federal judge
presiding over the action. Trial in this action is scheduled for the summer
of 1998. The Company intends to continue to contest the action vigorously.
Enercon Litigation: In 1996, Enercon GmbH ("Enercon") filed suit in Federal
Court against the Company, individual officers of the Company and/or
KENETECH Windpower, Inc. ("KWI"), and KWI's expert witness in proceedings
before the U.S. International Trade Commission (the "ITC"), for alleged
misconduct related to patent infringement proceedings instituted by KWI
against Enercon and The New World Power Corporation ("New World Power")
that resulted in issuance of an exclusion order by the ITC that barred
Enercon and New World Power from importing infringing wind turbines
products into the United States. In its suit, Enercon alleges malicious
prosecution, patent misuse and anti-trust violations. Enercon has appealed
the ITC's exclusion order to the Federal Circuit Court of Appeals in
addition to filing this suit. Upon motion of the defendants, this suit has
been stayed by the Federal District Court pending the outcome of the appeal
of the exclusion order.
Puerto Rico Litigation: In connection with the LNG-fired power plant being
constructed in Penuelas, Puerto Rico by EcoElectricia, L.P., a partnership
whose partners are subsidiaries of the Company and Enron Corporation,
certain environmental groups, citizens and the union which represents
electrical workers for the Puerto Rico Electric Power Authority ("PREPA")
brought a civil action challenging the procedure used by PREPA to select,
among others, EcoElectrica to design, finance, construct, own and operate
the Penuelas, Puerto Rico project, and requesting injunctive and
declaratory relief. On January 21, 1997, the Ponce Superior Division of the
Court of First Instance of Puerto Rico (the trial court) (No. JPE 96- 0345)
dismissed the complaint, holding that PREPA's selection of the independent
power producers need not have been done through public bidding pursuant to
section 205 of PREPA's Organic Act. On March 13, 1997, the plaintiffs,
Mision Industrial de Puerto Rico, Inc., the Union de Trabajadores de la
Page 4
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Industria Electrica y Riego (UTIER), Guayamenses Pro-Salud y Buen Ambiente,
Bartolome Diana, SURCCO, Inc. and Jose E. Olivieri Antonmarchi
(Appellants), filed an appeal before the Circuit Court of Appeal of Puerto
Rico (No. KLAN 97-00236), appealing the judgment entered against them.
EcoElectrica intervened in the action before the trial court and the appeal
is currently pending.
Westinghouse Litigation: C. N. Flagg Incorporated, a wholly-owned
subsidiary of CNF Industries, Inc., has instituted legal proceedings
against Westinghouse Electric Corporation ("Westinghouse") in the U.S.
Federal District Court in Minnesota to recover $6.0 million as compensation
for a termination of convenience of a project C. N. Flagg was building on
behalf of Westinghouse. Westinghouse has filed a counter-claim for $2.6
million alleging overpayment. C. N. Flagg filed a motion for summary
judgment which was denied.
Wrongful Termination Litigation: On December 31, 1987, a former employee of
CN Flagg Power, Inc. ("CN Power") (formerly, a wholly-owned subsidiary of
CNF Industries, Inc.) filed a complaint with the State of Connecticut
Commission of Human Rights and Opportunities (the "Commission") alleging
that he was wrongfully terminated from his position at Millstone Point, a
nuclear energy generation facility owned and operated by Northeast
Utilities ("Northeast"). CN Flagg's motion to dismiss the complaint has
been denied by the Commission; Northeast's motion to dismiss is pending.
Damages are alleged to be in the area of $300,000.
Eemsmond Litigation: Certain companies have threatened to bring suit
against CNF Constructors, Inc. ("CNF") (a wholly-owned subsidiary of CNF
Industries, Inc.) alleging CNF's failure to make payments on certain
equipment or civil construction services supplied in connection with the
construction of a windplant in The Netherlands. The amounts alleged to be
unpaid are in the area of $2,000,000.
General Motors Litigation: Plaintiffs CCF-1, Inc., Flagg Energy Development
Corporation (each a direct or indirect wholly-owned subsidiary of KENETECH
Energy Systems, Inc.) and Process Construction Supply, Inc. (a wholly-owned
subsidiary of CNF Industries, Inc.) brought suit against defendant General
Motors ("GM") in Connecticut State Court alleging breach of contract,
breach of express warranty, breach of implied warranty, breach of repair
warranty, misrepresentation and unfair trade practices involving gas
turbine engines installed at the Hartford Hospital co-generation plant
owned by CCF-1. The trial court either struck or granted summary judgment
in GM's favor on all causes of action, except the claim for breach of
repair warranty. A directed verdict was entered in favor of GM upon trial
of the one remaining cause of action. An appeal by the plaintiffs to the
Supreme Court of the State of Connecticut seeking reversal of the directed
verdict, the trial court's order to strike and the grant of summary
judgment and remand of the matter for trial on all causes of action is
pending.
Other: The Company is also a party to various other legal proceedings
normally incident to its business activities. The Company intends to defend
itself vigorously against these actions.
It is not feasible to predict or determine whether the ultimate outcome of
the above-described matters will have a material adverse effect on the
Company's financial position.
TERMINATED LITIGATION
Tennessee Pipeline Litigation: On January 6, 1996, a breach of contract
action was filed in the Superior Court for Middlesex County, Massachusetts,
by Tennessee Gas Pipeline Company ("Tennessee") against Pepperell Power
Associates Limited Partnership (the "Pepperell Partnership"), its general
partner, KES Pepperell, Inc. (each in whole or in part directly or
indirectly owned by KENETECH Energy Systems, Inc. ("KES"), a wholly-owned
subsidiary of the Company), and another non-affiliated general partner, in
connection with the termination of a natural gas transportation agreement.
Page 5
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The action sought to recover alleged unpaid charges of approximately
$1,800,000. KES Pepperell, Inc. filed a counterclaim in the action. On
December 2, 1996, Tennessee filed another action in the Superior Court for
Middlesex County, Massachusetts, against KES Pepperell, Inc. and KES, among
others, seeking to recover an $810,000 payment made to the Pepperell
Partnership plus treble damages and attorneys' fees. In June 1997, the
parties reached a tentative settlement which included resolution of claims
pending in a related regulatory proceeding before the Federal Energy
Regulatory Commission ("FERC") involving Flagg Energy Development
Corporation ("FEDCO"), a wholly-owned subsidiary of KES, which obtains gas
transportation services from Tennessee for the Hartford Hospital
co-generation plant. The settlement was to be finalized and executed by
July 15, 1997, but was not finalized or executed by such date due to
Tennessee's delay. On July 16, 1997 in the related regulatory proceeding,
FERC ordered Tennessee to refund in excess of $2,500,000 to FEDCO in
connection with the gas transportation services agreement for the Hartford
Hospital plant. After a request for a re-hearing by Tennessee, FERC ordered
payment of the refund by Tennessee within 30 days. Tennessee filed a motion
in the Superior Court seeking an emergency order to compel KES and its
subsidiaries to complete the tentative settlement as well as filing, on
September 30, 1997, a complaint in the district court of Harris County,
Texas, against KES and FEDCO alleging essentially the same causes of action
as in the Massachusetts actions.
On November 19, 1997, the parties entered into a Settlement and Release
Agreement whereby the Flagg gas transportation services agreement was
terminated and by netting amounts alleged to be owing thereunder to
Tennessee against refunds owed by Tennessee under the FERC order, Tennessee
was paid the sum of $1,000,000. Pursuant to such settlement, all of the
above-described actions have been dismissed with prejudice.
BANKRUPTCY OF KWI
On May 29, 1996, KWI filed a voluntary petition in the United States
Bankruptcy Court for the Northern District of California, Oakland,
California to reorganize under chapter 11 of the Bankruptcy Code. KWI's
management attributed its filing to continuing losses and lack of operating
capital. The Bankruptcy Petition filed by KWI stated that as of March 30,
1996 (the latest available information prior to the filing), KWI had
liabilities, as defined by bankruptcy filing procedures which include
certain commitments, claims and other liabilities not recognized under
generally accepted accounting principles, significantly in excess of
assets. Neither KWI nor the Company had been able to complete the sale of
certain assets or subsidiaries on a basis to provide additional capital for
KWI's ongoing operations and KWI believed that it would be unable to meet,
among other things, its existing maintenance and warranty obligations under
contracts undertaken in connection with the sale of its wind turbines.
The filing of the chapter 11 case by KWI resulted in an event of default
occurring under the Company's 12-3/4% Senior Secured Notes Due 2002 (the
"Notes") in the principal amount of $100 million. Furthermore, interest
under the Notes in the approximate amount of 6.4 million is due June 15 and
December 15 and the Company has not made an interest payment on the Notes
since December 15, 1995 and does not presently anticipate making its 1998
interest payments when due. The Notes are secured by all of the capital
stock of KWI, KENETECH Energy Systems, Inc. and KENETECH Facilities
Management, Inc. There have been continuing periodic discussions with
representatives of the holders of the Notes and the holders have not
commenced remedies or notified the Company of their intention to do so.
Since the filing of the chapter 11 case, KWI has sold certain development
assets, operating assets, technology rights and other assets under the
supervision of the Bankruptcy Court.
Representatives and members of the Official Unsecured Creditors' Committee,
have asserted their intention to commence litigation against the Company
and certain of its subsidiaries, as well as against officers and directors
thereof, with respect to facts which may constitute preferences under the
United States Bankruptcy Code and for other conduct engaged in assertedly
by the Company or its officers and directors which may give rise to direct
or indirect liability of the Company or its officers and directors to KWI
or to its creditors. Such proceedings could give rise to indemnification
claims against the Company by its officers and directors.
Page 6
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The bar date for filing claims in the chapter 11 case was January 31, 1997.
A claim against KWI was filed by the trustee of the holders of the Notes on
behalf of the Company in an amount in excess of $206.0 million. The Company
also filed a claim against KWI in an amount in excess of $8.0 million. In
addition, certain of the Company's direct and indirect subsidiaries and
affiliated, or formerly-affiliated, partnerships have filed claims against
KWI totaling in excess of $1.0 billion. Total claims filed against KWI are
in excess of $1.5 billion. It is unknown at present whether or not any
claims of the Company against KWI will be allowed in the chapter 11 case or
if allowed the extent of any distribution with respect thereto. The Company
believes that KWI may assert certain claims in bankruptcy against the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
None
Page 7
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- -----------------------------------------------------------------------------
Prior to September 21, 1993, the date the Company's Common Stock began
trading on The Nasdaq National Market under the symbol "KWND", there was no
public market for the Common Stock. The Company was advised by the National
Association of Securities Dealers, Inc. that the Company's Common Stock was
delisted from The Nasdaq National Market effective July 1, 1996. The
Company understands that bid and ask quotations continue to be entered by
market makers in the over-the-counter market for the Common Stock. The
Company has no current plans to cause the Common Stock to be listed with
The Nasdaq National Market or on any exchange. The following table sets
forth, for the periods indicated, the range of high and low bid and ask
quotations for the Common Stock as reported by a market maker in the stock.
Such over-the-counter market quotations do not include retail markups(1),
markdowns or commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
Year High Low
-------------- ------- -------
<S> <C> <C>
1996
----
First Quarter $ 1.875 $ 0.813
Second Quarter 1.937 0.172
Third Quarter 0.625 0.190
Fourth Quarter 0.300 0.040
1997
----
First Quarter $ 0.047 $ 0.000
Second Quarter 0.000 0.000
Third Quarter 0.125 0.000
Fourth Quarter 0.250 0.000
1998
----
First Quarter (to March 13, 1998) $ 0.125 $ 0.055
</TABLE>
(1) The market maker from which the Company obtained high and low bid and
ask quotations for 1997 and 1996 does not report quotations under $0.125.
The closing sale price of the Company's Common Stock as of a recent date is
set forth on the cover page hereof. There were approximately 586 holders of
record of the Common Stock as of March 1, 1998.
DIVIDEND POLICY
The Company has never paid a dividend on its Common Stock and does not
intend to pay Common Stock dividends in the foreseeable future. Also, the
Company's 12 3/4% Senior Secured Notes due 2002, and the provisions of the
Certificate of Incorporation under which the Company issued its 8 1/4%
Preferred Redeemable Increased Dividend Equity Securities restrict the
payment of Common Stock dividends except under specified circumstances. See
Item 7 and Item 8 of this Form 10-K for further restrictions on the
Company's ability to pay dividends on its Common Stock in the future.
Page 8
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Item 6. Selected Financial Data.
- --------------------------------
The following selected consolidated financial data is qualified in its
entirety by, and should be read in conjunction with, the Consolidated
Financial Statements of the Company and the Notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained elsewhere in this Form 10-K. The selected
consolidated financial data as of and for each of the five years in the
period ended December 31, 1997 have been derived from the audited
Consolidated Financial Statements of the Company. (Dollar amounts in
thousands, except per share amounts.)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (1):
Revenues........................................... $ 40,993 $ 91,890 $327,589 $338,211 $236,424
Total costs of revenues (2)........................ 45,000 83,705 504,696 278,778 188,208
Gross margin (excess of expenses over revenues).... (4,007) 8,185 (177,107) 59,433 48,216
Project development and marketing,
engineering, general and administrative expenses. 16,034 40,559 71,368 44,677 41,428
Income (loss) from operations...................... (20,041) (32,374) (248,475) 14,756 6,788
Income (loss) before taxes......................... (25,242) (60,850) (271,647) 1,426 (18,132)
Net income (loss).................................. (25,242) (84,241) (250,148) 4,348 (7,584)
Income (loss) per share:
Basic....................................... (0.92) (3) (2.52)(3) (7.12)(3) (0.03)(3) (0.27)(4)
Diluted..................................... (0.92) (3) (2.52)(3) (7.12)(3) (0.03)(3) (0.22)(5)
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................... $(148,781) $(141,621) $ (3,232) $140,766 $ 91,461
Property, plant and equipment, net................. 18,894 24,735 118,214 148,374 119,915
Total assets....................................... 90,586 123,311 401,249 517,168 417,332
Other long term debt (excludes current portion).... - - 152,048 158,522 166,276
Stockholders' equity (deficiency).................. (131,705) (97,900) (5,559) 248,718 147,790
(1) Excludes operations of KWI after bankruptcy filing (May 29, 1996).
(2) In 1995 includes special charges of $224,551. See discussion in Item 7.
(3) Includes effect of deducting dividends earned on convertible preferred stock
issued in 1994.
(4) Includes effect of deducting cash dividends earned on convertible preferred
stock issued in 1992 and the actual conversion of such preferred stock and
convertible notes to common stock.
(5) Includes the effect of reducing the net loss by the interest on the
convertible notes (net of the related tax effect), and the conversion of
such notes and convertible preferred stock to common stock as if such
conversion occurred at the beginning of 1993.
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
- ----------------------------------
OVERVIEW
KENETECH Corporation ("KENETECH"), a Delaware corporation, is a holding
company which participated through its subsidiaries in the electric utility
market. As used in this document "Company" refers to KENETECH and its
wholly-owned subsidiaries (including KENETECH Windpower, Inc. (KWI) only
through May 29, 1996).
Historically, the Company developed, constructed, financed, sold and
operated and managed independent power projects. A wholly-owned development
subsidiary is a joint venture partner with an affiliate of Enron
Corporation in a project under construction in Puerto Rico. In December
1997 the project obtained construction and term debt financing. The project
is a 507 MW (net) natural gas cogeneration facility and associated
liquified natural gas facility which will produce electricity to be sold to
Puerto Rico Electric Power Authority pursuant to a 22 year Power Purchase
Agreement dated March 10, 1995.
The power plant will be a combined cycle cogeneration facility consisting
of two combustion turbines capable of operating on LNG, LPG, or fuel oil to
generate electricity, and is expected to produce approximately 4 million
megawatt hours of electricity annually under baseload conditions. Steam
generated will also be used to convert sea water into fresh water in a
desalination plant, which is expected to produce approximately 4 million
gallons of potable water per day, of which approximately 1 million gallons
per day will be required by the project, with the remainder being available
for sale to local entities. This is the only project the Company (through
its wholly-owned development subsidiary) has in process. The Company's
wholly-owned development subsidiary intends to sell its interest in this
project in 1998.
One of the Company's subsidiaries is a general contractor which has
constructed independent power projects since 1988. This subsidiary competed
for contracts for engineering, procurement and construction (EPC) and for
construction only. Historically, the Company had constructed all of the
thermal energy power projects it developed and more recently had
constructed all of the Windplants it developed. Substantially all
construction work performed by the Company for third parties was
competitively bid and most was performed under turnkey contracts. The
chapter 11 filing of KWI discussed below has materially adversely affected
the Company's construction subsidiary and its ability to procure contracts.
This construction subsidiary had joint venture interests in the EPC
contracts for the Puerto Rico project described above which were sold in
December 1997. The Company is completing the projects in progress and
intends to dispose of its construction subsidiary in 1998.
KWI manufactured wind turbines and designed and operated utility-scale wind
powered electric powerplants which incorporated large arrays of such
turbines. On May 29, 1996, KWI filed for protection under chapter 11 of the
Federal Bankruptcy Code and reported an excess of liabilities over the fair
value of its assets. Although the Company continues to own the common stock
of KWI and provides certain services under the jurisdiction of the
Bankruptcy Court, the Company believes it is probable that such ownership
will not exist after completion of the bankruptcy proceedings. Accordingly,
as of May 29, 1996 KWI ceased to be accounted for as a consolidated
subsidiary of the Company. The Company's financial statements exclude all
KWI activities after that date.
CAUTIONARY STATEMENT
Certain information included in this report contains forward looking
statements within the meaning of the Securities Act of 1933, as amended,
and the Securities Act of 1934, as amended. Such forward looking
information is based on information available when such statements are made
and is subject to risks and uncertainties that could cause actual results
to differ materially from those expressed in the statements.
Page 10
<PAGE>
RESULTS OF OPERATIONS
The consolidated financial statements of KENETECH Corporation and certain
subsidiaries as of December 31, 1997 and 1996 and for the three years
ending December 31, 1997 have been prepared assuming the Company will
continue as a going concern (see Note 3). As mentioned previously, as of
May 29, 1996 KWI ceased to be accounted for as a consolidated subsidiary of
KENETECH and no activities of KWI have been reflected in the consolidated
financial statements of the Company since that date. The Company's
investment in KWI is recorded at zero in "Investments in Affiliates" in the
accompanying December 31, 1997 and 1996 consolidated balance sheets.
Revenues and expenses of KWI from January 1, 1996 through May 29, 1996 are
reflected in consolidated statements of operations and cash flows.
The Company incurred a net loss for 1997 of $25.2 million as compared to
net losses for 1996 of $84.2 million and for 1995 of $250.1 million. This
does not indicate an improvement in the Company's prospects. Instead this
decrease reflects the elimination of activities associated with divested
assets and subsidiaries, and the deconsolidation of KWI and downsizing. In
1998 the Company expects to generate operating losses before the sale of
assets described above in "Overview" due to administrative expenses and
interest expense on debt. The Company has few revenue generating activities
at December 31, 1997.
YEARS 1997 AND 1996
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
-------- --------
(in millions)
Gross Gross
Revenues Costs Margins Revenues Costs Margins
-------- ------- ------- -------- ------- -------
<S> ............................ <C> <C> <C> <C> <C> <C>
Construction services ........... $ 36.0 $ 36.1 $ (0.1) $ 51.0 $ 46.6 4.4
Energy sales (1) ................ 3.2 N/A N/A 14.4 N/A N/A
Maintenance, management
fees and other (1).............. 1.8 N/A N/A 16.3 N/A N/A
Energy plant operations (1)...... N/A 8.9 N/A N/A 31.9 N/A
-------- ------- ------- -------- ------- -------
Total energy plant operations 5.0 8.9 (3.9) 30.7 31.9 (1.2)
Windplant sales ................. -- -- -- 8.1 5.0 3.1
Interest on partnership notes
and funds in escrow ........... -- -- -- 1.1 N/A 1.1
Energy management services ...... -- -- -- 1.0 0.2 0.8
-------- ------- ------- -------- ------- -------
Total ............................ $ 41.0 $ 45.0 $ (4.0) $ 91.9 $ 83.7 $ 8.2
======== ======= ======= ======== ======= =======
(1) Maintenance, management fees and other revenues are earned by the Company for maintaining
and operating Windplants and thermal power plants owned by third parties and from the sale
of fuel to wood-fired electric power plants. Energy sales are the revenues generated by
Windplants and a thermal power plant owned by the Company. Energy plant operations expenses
are incurred to generate these revenues.
</TABLE>
Construction services revenues (recorded under the percentage-of-completion
method) decreased to $36.0 million for 1997 from $51.0 million for 1996 due
to the continued work-off of existing back-log. Construction services also
incurred an excess of expenses over revenues due to unrecoverable cost
overruns of approximately $2.3 million on one of the projects under
construction in 1997. The Company intends to dispose of its construction
subsidiary in 1998.
Energy plant operations experienced an excess of expenses over revenues of
$3.9 million for 1997 compared to a $1.2 million excess of expenses over
revenues in 1996 because in June and July of 1997 the Company's
cogeneration facility experienced, through force majeure events,
catastrophic failures of both its turbines. The cost of repairing the
individual units was prohibitive and there were no lease engines available
for short term installation. An expense of approximately $3.0 million was
recorded in energy plant operations to write-off these two turbines. The
Company assembled one turbine, which operates sporadically, from the
serviceable parts of the two failed turbines. In 1998 additional funding
Page 11
<PAGE>
was obtained from the lender to the facility to purchase one new turbine,
to replace the reassembled one, and procure a backup boiler. This new
turbine is scheduled to be installed in July 1998. The Company has reached
agreement with the purchasing utility to terminate the power purchase
agreement in exchange for a stream of payments through the year 2000. Under
this agreement the Company will continue to sell electricity and steam to
the site host using the new turbine. This agreement is currently in escrow
and is expected to close in the first week of April 1998 when the appeal
period for public utility commission approval of this arrangement expires.
Windplant sales, interest on partnership notes and funds in escrow and
engineering expenses were zero in 1997 because of the deconsolidation of
KWI.
Energy management services revenues decreased to zero for 1997 from $1.0
million for 1996. This operation was sold in the second quarter of 1996.
Project development and marketing expenses decreased to $2.2 million for
1997 from $7.1 million for 1996. Project development expenses declined
significantly because the only project the Company had in active
development in 1997 was the Puerto Rico project. The costs expensed in 1997
represent expenditures to market assets and/or to keep various assets
marketable.
General and administrative expenses decreased to $13.8 million for 1997
from $29.3 million for 1996 due to the deconsolidation of KWI and
downsizing of the Company.
Interest expense decreased to $16.3 million for 1997 from $19.6 million for
1996 due to the deconsolidation of KWI, the sale of subsidiaries and
increased capitalization of interest to the Puerto Rico project.
Sale of subsidiaries and fixed assets: During 1997 the Company sold fixed
assets, some projects in the initial stages of development and the
construction subsidiary's joint venture interests in the construction
contracts for the Puerto Rico project. On an aggregated basis, these
transactions generated cash of $20.9 million and a net gain of $10.0
million. During 1996 the Company sold its demand side management business,
its wood-fuel business, a manufacturing facility, several investments
accounted for on the equity basis, a subordinated note receivable, and
various fixed assets. On an aggregated basis these transactions generated
cash of $13.5 million and a net loss of $9.6 million.
Income taxes: The Company uses the asset and liability approach for
financial accounting and reporting for income taxes. The Company recorded
no tax benefit for 1997 because of the uncertainty about the Company's
ability to utilize such a benefit.
Page 12
<PAGE>
YEARS 1996 AND 1995
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
-------------------------- --------------------------
(in millions)
Gross Gross
Revenues Costs Margins Revenues Costs Margins
-------- ------- ------- -------- ------- -------
<S> ............................ <C> <C> <C> <C> <C> <C>
Construction services ........... $ 51.0 $ 46.6 $ 4.4 $ 63.2 $ 55.7 7.5
Energy sales (1) ................ 14.4 N/A N/A 38.0 N/A N/A
Maintenance, management
fees and other (1).............. 16.3 N/A N/A 41.4 N/A N/A
Energy plant operations (1)...... N/A 31.9 N/A N/A 62.6 N/A
-------- ------- ------- -------- ------- -------
Total energy plant operations 30.7 31.9 (1.2) 79.4 62.6 16.8
Windplant sales ................. 8.1 5.0 3.1 172.5 157.2 15.3
Interest on partnership notes
and funds in escrow ........... 1.1 -- 1.1 5.3 -- 5.3
Energy management services ...... 1.0 0.2 0.8 7.2 4.6 2.6
Special charges.................. -- -- -- -- 224.6 (224.6)
-------- ------- ------- -------- ------- -------
Total ............................ $ 91.9 $ 83.7 $ 8.2 $ 327.6 $ 504.7 $(177.1)
======== ======= ======= ======== ======= =======
(1) Maintenance, management fees and other revenues are earned by the Company for maintaining
and operating Windplants and thermal power plants owned by third parties and from the sale
of fuel to wood-fired electric power plants. Energy sales are the revenues generated by
Windplants and a thermal power plant owned by the Company. Energy plant operations expenses
are incurred to generate these revenues.
</TABLE>
Construction services revenues (recorded under the percentage-of-completion
method) decreased to $51.0 million for 1996 from $63.2 million for 1995 and
gross margin decreased to 9% for 1996 from 12% for 1995. The decrease in
revenue is attributable to a decrease in backlog of new projects. The
ability to secure new construction work has been impeded by the declaration
of bankruptcy by the Company's windpower subsidiary. The decrease in gross
margin is primarily due to a negative 1% gross margin on a cogeneration
plant construction job from which the Company was terminated for
convenience during 1996. This project accounted for 38% of the construction
revenues during 1996.
Energy plant operations, Windplant sales, Interest on partnership notes and
funds in escrow and Engineering expenses all declined significantly in 1996
because of the deconsolidation of KWI. As mentioned previously, on May 29,
1996 KWI filed for protection under chapter 11 of the Federal Bankruptcy
Code, reported an excess of liabilities over its assets, and ceased to be
accounted for as a consolidated subsidiary of the Company.
Energy management services revenues decreased to $1.0 million in 1996 from
$7.2 million in 1995. The Company sold this business in the second quarter
of 1996.
Special charges in 1995 relate to performance problems with the KVS-33 and
the domestic energy price environment as follows:
(i) Performance problems with the KVS-33. During 1995 mechanical problems
with the KVS-33 model wind turbines installed in 1994 and 1995 began
to appear, especially in the more severe weather environments. The
Company incurred substantial operating costs in 1995 as a result of
the problems with the KVS-33. As a result of these problems, the
Company wrote off all of its deferred engineering costs, reserved
certain inventory costs related to the KVS-33, reserved a significant
portion of the capitalized development costs for projects which were
going to be completed using the KVS-33 and accrued the estimated
retrofit costs attributable to the KVS-33. The aggregated amounts of
writedowns and asset reserves were $54.6 million and accruals of
liabilities of $86.8 million expected to be incurred over the next
several years were based on the best information available at December
31, 1995. It is possible that actual losses may be higher or lower
than the amount recognized.
Page 13
<PAGE>
(ii) Energy prices. During 1995, the energy prices utilities pay based upon
their "avoided costs" continued to decrease. These energy prices have
a significant effect on the Company's financial condition and
operations through two channels: (1) the Windplant assets owned by the
Company, and (2) the profitability of maintenance and management
contracts the Company has with third parties. Maintenance and
management fees generally are based on a percentage of the owners'
energy sales.
The Company used current energy prices based upon PG&E's "avoided costs"
prices (after fixed price contract periods expire in 1997-2004), increased
by modest inflation, to compute future cash flows for assessing the
impairment of Windplant assets and the profitability of the Company's
maintenance and management agreements with third party owners of
Windplants. The Company used modest inflation because most experts expect
PG&E's avoided cost to increase at or below the inflation rate. Based on
the calculations, using the principles of SFAS No. 121 and a present value
of future net cash flows discounted at 16% to approximate fair value,
certain Windplant assets and investments were written down by approximately
$50.3 million. In addition, projected negative cash flows on certain
maintenance and management contracts from 1996-2015 were discounted at 7%
to approximate a risk free rate and a loss accrual was recognized of $32.9
million. Based on the calculations, projected negative cash flows on
certain maintenance and management contracts commenced in 1996.
These writedowns and reserves were based on the best information available
as of December 31, 1995. It is possible that actual losses may be higher or
lower than the amounts recognized. The range of variance, if any, from such
amounts cannot be reasonably estimated.
Project development and marketing expenses decreased in 1996 to $7.1
million from $18.6 million in 1995. During 1996 the Company stopped
pursuing all new projects (except for the Puerto Rico project). The
expenses in 1996 represent costs to keep existing projects viable and
marketable and write-downs of the projects being marketed to the estimated
market value.
General and administrative expenses decreased to $29.3 million for 1996
from $40.4 million for 1995. Included in 1996's amount is $2.3 million
related to a writedown of buildings and land owned by the construction
subsidiary. The decrease is due to the termination of employees and the
deconsolidation of KWI.
Interest income decreased to $1.2 million in 1996 from $2.6 million in 1995
due to lower cash and investment balances.
Interest expense decreased to $19.6 million in 1996 from $23.4 million in
1995 due to the deconsolidation of KWI.
Equity income (loss) of unconsolidated affiliates. Equity investments in
affiliates resulted in a net loss of $409 thousand in 1996, compared to a
net loss of $2.4 million in 1995 due to the deconsolidation of KWI's
operations and the sale by the Company of several equity investments.
Loss on disposition of subsidiaries and assets. During 1996 the Company
sold its demand side management operations, its wood-fuel operations, a
manufacturing facility, several investments accounted for on the equity
basis, a subordinated note receivable, and various fixed assets. On an
aggregated basis these transactions generated cash of $13.5 million and a
net loss of $9.6 million. As mentioned previously, KWI filed for protection
on May 29, 1996 under chapter 11 of the Federal Bankruptcy Code and
reported an excess of liabilities over its assets. Although KENETECH
continues to own the common stock of KWI and provides certain services
under the jurisdiction of the Bankruptcy Court, KENETECH believes it is
probable that such ownership will not exist after completion of the
bankruptcy proceedings. Accordingly, as of May 29, 1996 KWI ceased to be
accounted for as a consolidated subsidiary of KENETECH.
Income taxes. The Company uses the asset and liability approach for
financial accounting and reporting for income taxes. The Company recorded a
tax provision of $23.4 million in 1996 attributable to the effect of
deconsolidating the net deferred tax assets relating to KWI as compared to
a benefit of $21.5 million in 1995. The remaining net deferred tax asset of
$17.9 million is expected to be realized by the generation of taxable
income from the sales of assets with appreciated values. The valuation
allowance was based on the best information available at December 31, 1996.
The actual tax assets realized may be higher or lower than the amount
recognized.
Page 14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
1997 Activities
---------------
Operating Activities
During 1997 operating activities used cash of $11.1 million because general
and administrative and interest expenses exceeded the Company's gross
margin.
Investing Activities
During 1997 investing activities provided cash of $10.0 million through the
sale by the Company's construction subsidiary of its joint venture
interests in the construction contracts for the Puerto Rico project and the
sale of various other fixed assets partially offset by funds invested in
the 507 MW (net) Puerto Rico project jointly developed with an affiliate of
Enron Corporation.
Financing Activities
During 1997 financing activities used $8.8 million of cash. Approximately
$10.0 million of the construction subsidiary's proceeds from the sale of
the aforementioned joint venture interests in the construction contracts
for the Puerto Rico project was used to pay off the construction
subsidiary's secured debt. In August 1996 a wholly-owned subsidiary of the
Company entered into a $30.0 million loan facility related to the
aforementioned Puerto Rico project. The interest rate on this loan
decreased because certain milestones were reached by the Puerto Rico
project. As a result additional funds became available under this facility
and the Company borrowed an additional $2.5 million in 1997. As of December
31, 1997, the outstanding balance of this loan was $24.2 million. No
further funds are available under this agreement because the remaining
funding capacity is structured to accommodate accrued and unpaid interest
for the remaining term of the loan.
Status
------
At December 31, 1997 the Company's working capital deficit was $148.8
million, which is $7.2 million greater than at December 31, 1996 because of
the decreases in cash and accounts receivable.
During 1996 the Company's liquidity became severely constrained as it
consumed its cash. On February 2, 1996 the Company announced that it would
not pay the dividend scheduled for February 15, 1996 on its preferred
stock. The Company paid no dividends on the preferred stock in 1997 and
1996 and does not expect to be able to for the foreseeable future. Under
the terms of the preferred stock, dividends accrue until paid. In December
1992 the Company sold $100.0 million of 12 3/4% Senior Secured Notes due
2002. Interest on these notes is due June 15 and December 15 of each year.
The Company did not make the 1997 and 1996 payments and is in default. The
Company does not expect to make the 1998 interest payments when due.
The Company has been able to continue its activities because:
i). It generated $13.5 million in 1996 by selling assets and drew $18.9
million from the $30.0 million Puerto Rico project loan obtained by a
wholly-owned subsidiary. This loan is collateralized by the stock of a
special purpose entity formed to hold, through affiliates, the
Company's interest in the Puerto Rico power project. No further funds
are available under this agreement because the remaining funding
capacity must accommodate accrued and unpaid interest for the
remaining term of the loan.
ii). In December 1997 the Company's construction subsidiary sold its joint
venture interests in construction contracts for the Puerto Rico
project for $18.7 million cash which was used to pay off the secured
loans of the construction subsidiary, fund the construction costs of
the remaining jobs the construction subsidiary is completing and other
operational expenses of the construction subsidiary. The ability of
the construction subsidiary to reestablish its backlog is hampered by
the Company's financial condition and KWI's bankruptcy filing. The
Company intends to dispose of its construction subsidiary in 1998.
There can be no assurance that the construction subsidiary will be
successful in disposing of its remaining assets.
Page 15
<PAGE>
Certain lenders and other creditors are seeking repayment and/or
restructuring of the amounts due them. The Company is unable to borrow
money and is delaying all payments except for essential services while it
attempts to raise cash through additional asset sales.
There can be no assurances that asset sales can be consummated or that
substantial proceeds can be received. If the Company is unable to sell
assets its liquidity will be further constrained. Management believes that
such sales, even if consummated, will not generate sufficient proceeds to
ultimately provide any return of invested capital to the holders of the
Company's common stock and that proceeds received from asset sales will be
used in operations or paid to creditors. Consequently, after, or as part of
a sale of the Company's subsidiaries' interests in the Puerto Rico project
(the only project in process), the Company believes that it is likely that
it, or certain of its subsidiaries, will seek protection under the Federal
Bankruptcy Code.
Risks and Uncertainties
-----------------------
The consolidated financial statements as of and for the year ended December
31, 1997 have been prepared assuming the Company will continue as a going
concern. The Company incurred significant losses in 1997, 1996 and 1995,
has negative working capital and its liquidity is severely constrained.
Certain lenders and creditors are seeking repayment and/or restructuring of
the amounts due them. In 1998 the Company expects to generate losses before
the sale of assets due to administrative expenses in excess of gross margin
and interest expense on debt. These factors raise substantial doubt about
the Company's ability to continue as a going concern in its current form.
Management's plan to address its liquidity involves the sale of its
interests in the Puerto Rico project for which it expects to receive
substantial cash proceeds. There can be no assurance that the Company will
be successful in implementing its plans and that the Company will continue
as a going concern. Management believes that such sales, even if
consummated, will not generate sufficient proceeds to ultimately provide
any return of invested capital to the holders of the Company's common
stock. In addition, the Company believes KWI may assert certain claims in
bankruptcy against the Company. Consequently, after, or as a part of a sale
of the Company's subsidiaries' interests in the Puerto Rico project (the
Company's only project in process), the Company believes that it is likely
that it, or certain of its subsidiaries, will seek protection under the
Federal Bankruptcy Code.
Year 2000 Problem
-----------------
The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. The
Company's management has made no evaluation regarding the anticipated
costs, problems and uncertainties associated with the Year 2000 issue.
New Accounting Standards
------------------------
In June 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" (SFAS No.
130) effective for the fiscal years ending after December 15, 1998. SFAS
No. 130, requires the presentation of comprehensive income in an entity's
financial statements. Comprehensive income represents all changes in equity
of an entity during the reporting period, including net income and charges
directly to equity which are excluded from the net income. This statement
is not anticipated to have any impact on the Company as the Company
currently does not enter into any transactions which result in charges (or
credits) directly to equity (such as additional minimum pension liability
changes, currency translation adjustments, unrealized gain or loss on
available for sale securities, etc.). SFAS No. 130 will be adopted by the
Company during 1998.
In June 1997, the Financial Accounting Standards Board also issued
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131) effective for the
fiscal years ending after December 15, 1998. SFAS No. 131, provides revised
disclosure guidelines for segments of an enterprise based on management
approach to defining operating segments. The management of the Company
believes that it currently operates in only one industry segment and
analyzes operations on a Company-wide basis, therefore the statement is not
expected to impact the Company.
Page 16
<PAGE>
Item 8. Financial Statements and Supplementary Data.
- ----------------------------------------------------
KENETECH Corporation Consolidated Financial Statements Page
----
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995 19
Consolidated Balance Sheets, December 31, 1997 and 1996 20
Consolidated Statements of Stockholders' Deficiency for the
years ended December 31, 1997, 1996 and 1995 21
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 22
Notes to Consolidated Financial Statements 23 - 39
Page 17
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of KENETECH Corporation:
We have audited the accompanying consolidated balance sheets of KENETECH
Corporation and subsidiaries (the "Company") as of December 31, 1997 and
1996 and the related consolidated statements of operations, stockholders'
deficiency, and cash flows for each of the years in the three-year period
ended December 31, 1997. Our audits also included the financial statement
schedules for 1997, 1996 and 1995 of KENETECH Corporation listed in the
Index at Item 14(a)(2). These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of KENETECH Corporation and
subsidiaries at December 31, 1997 and 1996 and the results of its
operations and its cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present in all material respects the
information set forth therein.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern (see Note 3). The
Company incurred significant losses in 1997, 1996 and 1995, has negative
working capital and its liquidity is severely constrained. Certain lenders
and creditors are seeking repayment and/or restructuring of the amounts due
them. In 1998, the Company expects to generate operating losses before the
sale of assets due to administrative expenses in excess of gross margin and
interest expense on debt. The Company has indicated that after or as part
of a sale of its subsidiaries' interests in the Puerto Rico project (the
only project in process) that it is likely that it, or certain of its
subsidiaries, will seek protection under the Federal Bankruptcy Code. In
addition, the Company believes KENETECH Windpower, Inc. (KWI), a
wholly-owned subsidiary which filed for Chapter 11 protection under the
Bankruptcy Code, will assert certain claims in bankruptcy against the
Company. These factors raise substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
KPMG Peat Marwick LLP
San Francisco, California
March 27, 1998
Page 18
<PAGE>
<TABLE>
KENETECH CORPORATION
--------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1997, 1996 and 1995
(in thousands, except per share amounts)
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Construction services................................$ 35,994 $ 50,958 $ 63,178
Energy sales......................................... 3,170 14,434 38,034
Maintenance, management fees and other............... 1,829 16,219 41,371
Windplant sales...................................... - 8,107 172,490
Interest on partnership notes and funds in escrow.... - 1,125 5,320
Energy management services........................... - 1,047 7,196
---------- ---------- ----------
Total revenues..................................... 40,993 91,890 327,589
Costs of revenues:
Construction services................................ 36,105 46,557 55,674
Energy plant operations.............................. 8,895 31,886 62,649
Windplant sales...................................... - 5,012 157,250
Energy management services........................... - 250 4,572
Special charges...................................... - - 224,551
---------- ---------- ----------
Total costs of revenues............................ 45,000 83,705 504,696
Gross margin (Excess of expenses over revenues)......... (4,007) 8,185 (177,107)
Project development and marketing expenses.............. 2,230 7,072 18,574
Engineering expenses.................................... - 4,206 12,401
General and administrative expenses..................... 13,804 29,281 40,393
---------- ---------- ----------
Loss from operations.................................... (20,041) (32,374) (248,475)
Interest income......................................... 988 1,176 2,575
Interest expense........................................ (16,291) (19,620) (23,387)
Equity (loss) income of unconsolidated affiliates....... 66 (409) (2,360)
Gain (loss) on disposition of subsidiaries and assets... 10,036 (9,623) -
---------- ---------- ----------
Loss before taxes....................................... (25,242) (60,850) (271,647)
Income tax (benefit) provision.......................... - 23,391 (21,499)
---------- ---------- ----------
Net loss.........................................$ (25,242) $ (84,241) $ (250,148)
========== ========== ==========
Net loss per common share:
Basic and Diluted............................ $ (0.92) $ (2.52) $ (7.12)
Weighted average number of common shares
used in computing per share amounts:
Basic and Diluted.......................... 36,830 36,781 36,341
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 19
<PAGE>
<TABLE>
KENETECH CORPORATION
--------------------
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(in thousands, except share amounts)
ASSETS
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................$ 7,294 $ 17,208
Funds in escrow, net....................................... 1,997 5,221
Accounts receivable........................................ 4,669 17,940
Inventories................................................ 135 135
Investment in power plant held for sale.................... 16,128 19,209
Investment in Puerto Rico project, net..................... 19,830 -
Deferred tax assets, net................................... 4,300 4,300
Other...................................................... 961 3,986
---------- ----------
Total current assets.................................... 55,314 67,999
Property, plant and equipment, net........................... 18,894 24,735
Investment in Puerto Rico project, net....................... - 11,507
Investments in affiliates.................................... - 32
Deferred tax assets, net..................................... 13,613 13,613
Other assets................................................. 2,765 5,425
---------- ----------
Total assets..........................................$ 90,586 $ 123,311
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable...........................................$ 12,579 $ 18,841
Bank loans payable......................................... 24,236 18,860
Accrued interest........................................... 26,103 13,462
Accrued liabilities........................................ 15,088 21,010
Debt associated with power plant held for sale............. 16,128 16,578
Other notes payable........................................ 8,878 20,165
Senior secured notes payable............................... 99,139 99,005
Accrued losses on contracts................................ 1,944 1,699
---------- ----------
Total current liabilities............................... 204,095 209,620
Accrued losses on contracts.................................. - 897
Estimated warranty costs and other long-term obligations..... - 1,061
Accrued dividends on preferred stock......................... 18,196 9,633
---------- ----------
Total liabilities....................................... 222,291 221,211
Stockholders' deficiency:
Convertible preferred stock - 10,000,000 shares
authorized, $.01 par value; issued and outstanding
102,492, $121,970 liquidation preference................... 99,561 99,561
Common stock - 110,000,000 shares authorized,
$.0001 par value; issued and outstanding
36,829,618 in 1997 and in 1996............................. 4 4
Additional paid-in capital................................... 127,658 136,221
Cumulative foreign exchange.................................. 35 35
Accumulated deficit.......................................... (358,963) (333,721)
---------- ----------
Total stockholders' deficiency.......................... (131,705) (97,900)
---------- ----------
Total liabilities and stockholders' deficiency........$ 90,586 $ 123,311
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
Page 20
<PAGE>
KENETECH CORPORATION
--------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
for the years ended December 31, 1997, 1996 and 1995
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Effect of Retained
Convertible Common Stock Additional Cumulative Earnings
Preferred Stock Series A Paid-in Unearned Foreign (Accumulated
Shares Amount Shares Amount Capital Compensation Exchange Deficit) Total
------- ------- ---------- ------ ---------- ------------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 102,492 $99,561 35,930,430 $ 4 $ 142,933 $ (870) $ - $ 7,090 $ 248,718
Exercise of stock options - - 316,805 - 469 - - - 469
Issuance of common stock - - 286,601 - 2,219 - - - 2,219
Recognition of unearned
compensation - - - - - 589 - - 589
Preferred stock dividends - - - - (1,070) - - (6,422) (7,492)
Foreign exchange - - - - - - 86 - 86
Net loss - - - - - - - (250,148) (250,148)
------- ------- ---------- ------ ---------- ------------- -------- ------------ ---------
Balance, December 31, 1995 102,492 99,561 36,533,836 4 144,551 (281) 86 (249,480) (5,559)
Issuance of common stock - - 295,782 - 233 - - - 233
Recognition of unearned
compensation - - - - - 281 - - 281
Preferred stock dividends - - - - (8,563) - - - (8,563)
Foreign exchange - - - - - - (51) - (51)
Net loss - - - - - - - (84,241) (84,241)
------- ------- ---------- ------ ---------- ------------- -------- ------------ ---------
Balance, December 31, 1996 102,492 99,561 36,829,618 4 136,221 - 35 (333,721) (97,900)
Preferred stock dividends - - - - (8,563) - - - (8,563)
Net loss - - - - - - - (25,242) (25,242)
------- ------- ---------- ------ ---------- ------------- -------- ------------ ---------
Balance, December 31, 1997 102,492 $99,561 36,829,618 $ 4 $ 127,658 $ - $ 35 $ (358,963) $(131,705)
======= ======= ========== ====== ========== ============= ======== ============ =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
Page 21
<PAGE>
<TABLE>
KENETECH CORPORATION
--------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997, 1996 and 1995
(in thousands)
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................$ (25,242) $ (84,241) $ (250,148)
Adjustments to reconcile net loss to net cash used
in operating activities:
(Gain) loss on disposition of subsidiaries and assets... (10,036) 9,623 -
Accrued and unpaid interest............................. 15,517 - -
Depreciation, amortization and other, net............... 8,406 3,117 1,672
Special charges......................................... - - 224,551
Deferred income taxes................................... - 23,391 (21,579)
Change in assets and liabilities
excluding special charges:
Funds in escrow, net................................... 3,224 2,382 (1,742)
Accounts receivable.................................... 9,171 16,688 31,237
Partnership notes and interest receivable, net......... - 290 (3,251)
Inventories............................................ - 2,468 (9,712)
Other assets........................................... 4,204 (56) (1,031)
Accrued warranties..................................... - (1,394) (262)
Accrued loss on contracts.............................. (652) (692) 5,872
Accounts payable and accrued liabilities............... (15,714) 3,701 (4,977)
---------- ---------- ----------
Net cash used in operating activities...................... (11,122) (24,723) (29,370)
Cash flows from investing activities:
Sales of marketable securities........................... - 3,536 19,949
Purchases of marketable securities....................... - (3,536) (481)
Additions to property, plant and equipment............... - (390) (11,489)
Proceeds from sale of subsidiaries and assets............ 20,877 13,471 3,021
Proceeds from sale of power plant, net................... - - 4,069
Expenditures on power plants under
development or construction............................. (10,896) (4,036) 3,643
Acquisition of Century Contractors West, Inc.,
net of cash received.................................... - - (1,360)
Investment in affiliates - Contributions................. - (1,814) (11,000)
Investment in affiliates - Distributions................. 14 605 723
---------- ---------- ----------
Net cash provided by investing activities................ 9,995 7,836 7,075
Cash flows from financing activities:
Proceeds from other notes payable........................ 503 7,780 16,359
Payments on other notes payable.......................... (11,790) (6,791) (27,248)
Proceeds from bank loan.................................. 2,500 21,030 90,500
Bank loan repayments, net................................ - (5,000) (77,300)
Proceeds from issuance of common stock, net.............. - 234 2,771
Payment of preferred stock dividends..................... - - (8,563)
---------- ---------- ----------
Net cash provided by (used in) financing activities........ (8,787) 17,253 (3,481)
---------- ---------- ----------
Increase (Decrease) in cash and cash equivalents........... (9,914) 366 (25,776)
Cash and cash equivalents at beginning of year........... 17,208 16,842 42,618
---------- ---------- ----------
Cash and cash equivalents at end of year.................$ 7,294 $ 17,208 $ 16,842
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
Page 22
<PAGE>
KENETECH CORPORATION
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
This requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The consolidated financial statements of KENETECH Corporation and certain
subsidiaries as of and for the periods ending December 31, 1997 and 1996
have been prepared assuming the Company will continue as a going concern.
On May 29, 1996, the Company's windpower subsidiary, KENETECH Windpower,
Inc. ("KWI"), filed for protection under chapter 11 of the Federal
Bankruptcy Code and reported an excess of liabilities over its assets.
Although the Company continues to own the common stock of KWI and provides
certain services under the jurisdiction of the Bankruptcy Court, the
Company believes it is probable that such ownership will not exist after
completion of the bankruptcy proceedings. Accordingly, as of May 29, 1996
KWI ceased to be accounted for as a consolidated subsidiary of the Company.
Intercompany balances and transactions for consolidated subsidiaries are
eliminated in consolidation. The Company's investment in KWI is recorded as
zero in "Investments in Affiliates" in the accompanying December 31, 1997
and 1996 consolidated balance sheets. Revenues and expenses of KWI from
January 1, 1996 through May 29, 1996 are reflected in consolidated
statements of operations and cash flows.
The Company's construction subsidiary, CNF, is completing its projects in
process and is in the process of disposing of its remaining assets and
liabilities. The Company's consolidated statement of operations for the
year ended December 31, 1997 and consolidated balance sheet as of December
31, 1997 include the following amounts relating to CNF:
Year ended December 31, 1997
(in thousands)
Revenues $35,994
Costs of revenues 36,105
-------
Gross margin (111)
General and administrative expenses 7,376
-------
Loss from operations (7,487)
Gain on disposition of subsidiaries and assets 15,110
Other (286)
-------
Income before income taxes $ 7,337
=======
As of
December 31, 1997
(in thousands)
Assets: Liabilities and owner's deficiency:
Current assets $ 6,935
Property plant and Current liabilities $ 13,621
equipment 2,820
Other long term assets 510 Owner's deficiency (3,356)
------- --------
Total assets $10,265 Total liabilities & deficiency $ 10,265
======= ========
Page 23
<PAGE>
KENETECH CORPORATION
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
2. SIGNIFICANT ACCOUNTING POLICIES
Export Sales: Windplant export sales were zero in 1997 and 1996, and 43% of
total revenues in 1995.
Unaffiliated Major Customers: The Company's energy sales to Pacific Gas and
Electric Company (PG&E) were zero in 1997, 6% of total revenues in 1996,
and 9% in 1995. Construction revenues from major customers were 82% of
total revenues in 1997, 21% in 1996, and 6% in 1995.
Revenues: Revenues from Windplant sales and construction services are
recognized on the percentage-of-completion, cost-to-cost method. Costs of
such revenues include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor,
supplies and tool costs that can be attributed to specific contracts.
Estimated future warranty costs are recognized as units are sold and
adjusted as circumstances require. Indirect costs not specifically
allocable to contracts and general and administrative expenses are charged
to operations as incurred. Revisions to contract revenue and cost estimates
are recognized in the accounting period in which they are determined.
Provision for estimated losses on uncompleted contracts is made in the
period in which such losses are determined.
Maintenance and management fees are recognized as earned under various
long-term agreements to operate and maintain the energy plants which the
Company has developed. Many of these fees are a percentage of owners'
energy sales which fluctuate based on production and price. Other revenues
include development fees earned under various independent power plant
development activities.
Energy sales revenue is recognized when electrical power or steam is
supplied to a purchaser, generally the local utility company or site host,
at the contract rate in place at the time of delivery. Certain contracts
have fixed prices for the first few years after which the prices are based
on the "avoided costs" price of utility purchasers.
Revenue from energy management services is recognized on certain long-term
contracts during the installation period of customer agreements structured
as sales-type leases using the percentage-of-completion, cost-to-cost
method and over the financing period of such leases using the
effective-interest method.
Depreciation: Depreciation is recorded on a straight-line basis over the
estimated useful lives as shown below:
Buildings and improvements 30 years
Cogeneration and substation facilities 30 years
Machinery and equipment 2 to 10 years
Furniture and fixtures 3 to 5 years
Leasehold improvements Shorter of estimated
life or term of lease
Research and Development: Expenditures for research and development are
recorded as engineering expense when incurred and totaled zero in 1997 and
1996 and $13,408,000 in 1995.
Interest Expense: Interest is capitalized on independent power plants under
construction and self-constructed assets and totaled $2,636,000 in 1997,
$587,000 in 1996 and $3,793,000 in 1995.
Income Taxes: The Company accounts for income taxes using the liability
method under which deferred income taxes arise from temporary differences
between the tax basis of assets and liabilities and their reported amounts
in the consolidated financial statements. Changes in deferred tax assets
and liabilities include the impact of any tax rate changes enacted during
the year and changes in the valuation allowance.
Accounts Receivable/Accrued Liabilities: Costs incurred and estimated
earnings in excess of billings on uncompleted contracts are included in
accounts receivable. Billings in excess of costs and estimated earnings on
uncompleted contracts are included in accrued liabilities.
Page 24
<PAGE>
KENETECH CORPORATION
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
Power Plant Held for Sale: Power plant held for sale represents the
Company's share of a completed power plant (see Note 12).
Investment in Puerto Rico Project: Investment in the Puerto Rico project
represents the Company's share of a project under construction in Puerto
Rico. (See Note 9).
Other Assets: Other assets include debt issuance costs of $2,252,000 and
$3,860,000 at December 31, 1997 and 1996 which are amortized on a
straight-line basis over the term of the related debt. Such amortization
expense was $1,582,000 in 1997, $1,176,000 in 1996 and $2,390,000 in 1995.
Cash Flow Information: Short-term investments purchased with original
maturities of three months or less are considered cash equivalents. In
1997, the Company capitalized $1,052,000 more in interest than was paid out
in cash. Cash paid for interest (net of amounts capitalized) was $4,683,000
in 1996 and $18,520,000 in 1995. In 1997, 1996 and 1995 the Company
received income tax refunds of $40,000, $1,343,000 and $1,393,000
respectively. Cash paid for income taxes was $146,000 in 1997 and zero in
1996 and 1995. The Company entered into capital leases for equipment of
$3,205,000 in 1995, which are included in other notes payable.
New Accounting Standards: In June 1997, the Financial Accounting Standards
Board issued Financial Accounting Standards No. 130 "Reporting
Comprehensive Income" (SFAS No. 130) effective for the fiscal years ending
after December 15, 1998. SFAS No. 130, requires the presentation of
comprehensive income in an entity's financial statements. Comprehensive
income represents all changes in equity of an entity during the reporting
period, including net income and charges directly to equity which are
excluded from the net income. This statement is not anticipated to have any
impact on the Company as the Company currently does not enter into any
transactions which result in charges (or credits) directly to equity (such
as additional minimum pension liability changes, currency translation
adjustments, unrealized gain or loss on available for sale securities,
etc.).
In June 1997, the Financial Accounting Standards Board also issued
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131) effective for the fiscal
years ending after December 15, 1998. SFAS No. 131, provides revised
disclosure guidelines for segments of an enterprise based on management
approach to defining operating segments. The management of the Company
believes that it currently operates in only one industry segment and
analyzes operations on a Company-wide basis, therefore the statement is not
expected to impact the Company.
3. LIQUIDITY AND GOING CONCERN
The consolidated financial statements as of and for the year ended December
31, 1997 have been prepared assuming the Company will continue as a going
concern. The Company incurred significant losses in 1997, 1996 and 1995,
has negative working capital and its liquidity is severely constrained.
Certain lenders and creditors are seeking repayment and/or restructuring of
the amounts due them. In 1998 the Company expects to generate losses before
the sale of assets due to administrative expenses in excess of gross margin
and interest expense on debt. These factors raise substantial doubt about
the Company's ability to continue as a going concern in its current form.
Management's plan to generate cash flow involves the sale of assets,
primarily its interests in the Puerto Rico project for which it expects to
receive substantial cash proceeds. There can be no assurance that the
Company will be successful in implementing its plans and that the Company
will continue as a going concern. Management believes that such sales, even
if consummated, will not generate sufficient proceeds to ultimately provide
any return of invested capital to the holders of the Company's common stock
and that any proceeds received from asset sales will be used in operations
or paid to creditors. In addition, the Company believes KWI may assert
certain claims in bankruptcy against the Company. Consequently, after, or
as a part of a sale of the Company's subsidiaries' interests in the Puerto
Rico project (the Company's only project in process), the Company believes
that it is likely that it, or certain of its subsidiaries, will seek
protection under the Federal Bankruptcy Code.
Page 25
<PAGE>
KENETECH CORPORATION
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
4. DECONSOLIDATION OF KWI
As mentioned previously, KWI filed for protection on May 29, 1996 under
chapter 11 of the Federal Bankruptcy Code and reported an excess of
liabilities over its assets. Although the Company continues to own the
common stock of KWI and provides certain services under the jurisdiction of
the Bankruptcy Court, the Company believes it is probable that such
ownership will not exist after completion of the bankruptcy proceedings.
Accordingly, as of May 29, 1996 KWI ceased to be accounted for as a
consolidated subsidiary of the Company. The condensed results of operations
for the year ending December 31, 1996 of the Company as if KWI had been
deconsolidated at the beginning of that period and without giving effect to
any other changes is as follows:
KENETECH CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1996
(unaudited, in thousands)
Revenues $ 72,608
Costs of revenues (68,556)
--------
Gross margin 4,052
Marketing & general & administrative expenses (28,115)
--------
Loss from operations (24,063)
Loss on sale of subsidiaries and assets (9,651)
Interest expense and other (15,816)
--------
Loss before income taxes (49,530)
Income tax provision 23,391
--------
Net loss $(72,921)
========
The above pro forma information is for illustrative purposes and does not
necessarily reflect what would have happened had KWI actually been
deconsolidated at the beginning of 1996.
Included in the consolidated statements of operations for the year ended
December 31, 1995 were revenues, excess of expenses over revenues and loss
before taxes of KWI of approximately $231,000,000, approximately
$188,000,000 and approximately $234,000,000 respectively.
KWI's 1996 operations through May 29, 1996 (a loss of approximately $14
million) are reflected in the accompanying consolidated financial
statements. The Company's investment in KWI is recorded as zero in
"Investments in Affiliates" in the accompanying December 31, 1996
consolidated balance sheet.
5. DISPOSITION OF SUBSIDIARIES AND ASSETS
In conjunction with management's plans to address its liquidity the
following transactions were entered into during 1997:
1) In December 1997 the Company's construction subsidiary sold its joint
venture interests in the EPC contracts for the Puerto Rico project for
$18,700,000 cash and incurred a net gain of $15,842,000 on this
transaction.
2) The Company sold various fixed assets for which it received cash of
$1,399,000 and incurred a net gain of $700,000.
3) In 1997 the Company sold a 1% general partner interest in a
cogeneration plant in Jamaica for $16,000 and incurred a loss of
$6,000 on this transaction.
4) Additionally the Company wrote various other assets held for
disposal down to management's estimate of fair market value.
Page 26
<PAGE>
KENETECH CORPORATION
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
6. LOSS PER SHARE
Loss per share amounts were calculated as follows for the years ended
December 31, 1997, 1996, and 1995 (in thousands, except for per share
amounts).
Basic and Diluted
---------------------------------
1997 1996 1995
--------- --------- ---------
Net loss $ (25,242) $ (84,241) $(250,148)
Less preferred stock dividends (8,563) (8,563) (8,563)
--------- --------- ---------
Net loss used in per
share calculations $ (33,805) $ (92,804) $(258,711)
========= ========= =========
Weighted average shares used
in per share calculations 36,830 36,781 36,341
========= ========= =========
Net loss per share $ (0.92) $ (2.52) $ (7.12)
========= ========= =========
Preferred stock dividends are added to the net loss. The Company incurred
net losses after preferred stock dividends for all periods presented,
therefore common stock equivalents are not included in weighted average
shares used in the loss per share calculation because they would be
anti-dilutive (reduce the loss per share).
During February 1997, The Financial Accounting Standards Board issued
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No.128)
and is effective for the fiscal years ending after December 15, 1997, and
accordingly the Company has adopted SFAS No. 128 in the accompanying
financial statements. SFAS No. 128 requires the presentation of basic and
diluted earnings per share in financial statements of public enterprises
rather than primary and fully diluted earnings as previously required.
7. SPECIAL CHARGES
The Company recorded a special charge of approximately $224,600,000 as of
December 31, 1995. Of this charge approximately $218,900,000 related to
KWI. The special charge is primarily related to two items:
(i) Performance problems with the KVS-33. During 1995 mechanical problems
with the KVS-33 model wind turbines installed in 1994 and 1995 began
to appear, especially in the more severe weather environments. The
Company incurred substantial operating costs in 1995 as a result of
the problems with the KVS-33. As a result of these problems, the
Company wrote off all of its deferred engineering costs, reserved
certain inventory costs related to the KVS-33, reserved a significant
portion of the capitalized development costs for projects which were
going to be completed using the KVS-33 and accrued the estimated
retrofit costs attributable to the KVS-33. The aggregated amounts of
writedowns and asset reserves were approximately $54,600,000 and
accruals of liabilities of approximately $86,800,000 expected to be
incurred over the next several years were based on the best
information available at December 31, 1995. It is possible that actual
losses may be higher or lower than the amount recognized.
(ii) Energy prices. During 1995, the energy prices utilities pay based upon
their "avoided costs" continued to decrease. These energy prices have
a significant effect on the Company's financial condition and
operations through two channels: (1) the Windplant assets owned by the
Company, and (2) the profitability of maintenance and management
contracts the Company has with third parties. Maintenance and
management fees generally are based on a percentage of the owners'
energy sales.
The Company used current energy prices at December 31, 1995 based upon
PG&E's "avoided costs" prices (after fixed price contract periods expire in
1997-2004), increased by modest inflation, to compute future cash flows for
assessing the impairment of Windplant assets and the profitability of the
Company's maintenance and management agreements with third party owners of
Windplants. The Company used modest inflation because most experts expect
Page 27
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
PG&E's avoided cost to increase at or below the inflation rate. Based on
the calculations, using the principles of SFAS No. 121 and a present value
of future net cash flows discounted at 16% to approximate fair value,
certain Windplant assets and investments were written down by approximately
$50,300,000. In addition, projected negative cash flows on certain
maintenance and management contracts from 1996-2015 were discounted at 7%
to approximate a risk free rate and a loss accrual was recognized of
$32,900,000. Based on the calculations, projected negative cash flows on
certain maintenance and management contracts commenced in 1996.
These writedowns and reserves were based on the best information available
as of December 31, 1995. It is possible that actual losses may be higher or
lower than the amounts recognized. The range of variance, if any, from such
amounts cannot be reasonably estimated.
8. RELATED PARTY TRANSACTIONS
The Company had transactions with related parties in the ordinary course of
business. Related parties consist primarily of energy plant investments in
which the Company owned partnership interests ranging from less than 1% to
50% with most such investments being 1% or less. The 1996 amounts include
KWI amounts through May 29, 1996 (see Note 4). Pursuant to contracts either
to provide Windplants, construction services or power plant management and
maintenance, the Company had the following revenues from related parties,
after elimination in consolidation of the Company's ownership interest:
1997 1996 1995
-------- -------- --------
` (in thousands)
Windplant sales $ - $ 5,324 $128,626
Maintenance, management fees
and other 167 8,939 19,209
Interest on partnership notes
and funds in escrow - 1,125 3,313
-------- -------- --------
$ 167 $ 15,388 $151,148
======== ======== ========
In addition, the Company has insignificant transactions with KWI relating
to shared services.
9. INVESTMENT IN PUERTO RICO PROJECT
A wholly-owned development subsidiary is a 50% joint venture partner with
an affiliate of Enron Corporation in a project under construction in Puerto
Rico. In December 1997 the project obtained construction and term debt
financing. The project is a 507 MW (net) natural gas cogeneration facility
and associated liquified natural gas facility which will produce
electricity to be sold to Puerto Rico Electric Power Authority pursuant to
a 22 year Power Purchase Agreement dated March 10, 1995.
The power plant will be a combined cycle cogeneration facility consisting
of two combustion turbines capable of operating on LNG, LPG, or fuel oil to
generate electricity, and is expected to produce approximately 4 million
megawatt hours of electricity annually under baseload conditions. Steam
generated will also be used to convert sea water into fresh water in a
desalination plant, which is expected to produce approximately 4 million
gallons of potable water per day, of which approximately 1 million gallons
per day will be required by the project, with the remainder being available
for sale to local entities. This is the only project the Company (through
its wholly-owned development subsidiary) has in process. The Company's
wholly-owned development subsidiary intends to sell its interest in this
project in 1998.
Investment in the Puerto Rico project includes project development costs
related to the Puerto Rico project, representing preconstruction costs
incurred to complete the design of cogeneration facilities, to secure the
necessary permits, to negotiate the contracts to construct and operate the
project, to obtain construction financing and for other development
services. Project development costs are capitalized once a project has
reached the design and permitting stage and the Company has obtained a
Page 28
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
power purchase agreement or other enforceable right to sell power. Also
included are the cash deposited into escrow for equity, a note receivable
from the project entity for the development fee, net of deferred revenue
related to the note and funds received from the first financial closing.
When it is probable that future projects will not be completed or costs may
not be recovered, such costs are written off or reserved for.
The balance sheet of the project entity (excluding escrowed cash provided
by the partners) as of December 31, 1997 was:
Balance Sheet
December 31, 1997
(unaudited, in thousands)
Cash and funds Accounts Payable $ 1,548
in escrow $ 1,690 Interest and notes payable
to affiliates 34,319
Construction Construction loan payable 115,954
in progress 150,131 Equity -
-------- --------
$151,821 $151,821
======== ========
10. FUNDS IN ESCROW
The Company has various long-term debt agreements which have escrow fund
requirements (see Note 15). The Company is required, under these
agreements, to establish escrow accounts. Debt service payments are made
from the escrow account. The escrow account balances at December 31, 1997
and 1996 were as follows:
1997 1996
------ -------
(in thousands)
Other notes payable $ 345 $ 1,581
Letters of credit collateral - 1,086
Project collateral 1,652 2,554
------ -------
$1,997 $ 5,221
====== =======
As of December 31, 1997, funds in escrow were invested in short-term cash
investments at rates ranging from zero to 5.1%. As previously discussed
KWI's funds in escrow are not reflected in the December 31, 1996 balance
sheet.
11. ACCOUNTS RECEIVABLE
Accounts Receivable: Accounts receivable at December 31, 1997 and 1996
consisted of: 1997 1996
-------- --------
(in thousands)
Contracts - Billed:
Completed contracts $ 1,342 $ 1,981
Contracts in progress 529 9,106
Retained 1,614 2,216
Contracts - Unbilled 2,175 2,782
Operations and other 554 1,855
Less: Allowance for
doubtful collections (1,546) -
-------- --------
$ 4,668 $ 17,940
======== ========
At December 31, 1997 and 1996 billed and unbilled receivables did not
include any amounts from related parties. Operations and other receivables
include zero and $33,000 respectively from related parties at December 31,
1997 and 1996.
Page 29
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
A summary of costs incurred and estimated earnings on uncompleted contracts
at December 31, 1997 and 1996 follows:
1997 1996
-------- --------
(in thousands)
Costs incurred and estimated earnings
on uncompleted contracts $ 66,444 $151,850
Billings to date 64,999 157,346
-------- --------
$ 1,445 $ (5,496)
======== ========
Such amounts were included in the consolidated balance sheets at December
31, 1997 and 1996 as follows:
1997 1996
-------- --------
(in thousands)
Costs incurred and estimated earnings
in excess of billings on uncompleted
contracts (accounts receivable) $ 2,175 $ 2,782
Billings in excess of costs and
estimated earnings on uncompleted
contracts (accrued liabilities) ( 730) (8,278)
-------- --------
$ 1,445 $ (5,496)
======== ========
12. INVESTMENT IN POWER PLANT HELD FOR SALE AND DEBT ASSOCIATED WITH POWER
PLANT HELD FOR SALE
Investment in power plant held for sale at December 31, 1997 and 1996
consisted of:
1997 1996
-------- --------
(in thousands)
Chateaugay power plant $ 16,128 $ 19,209
======== ========
The Company owns a 50% interest in a partnership which owns a 17.0 megawatt
wood-fired electric power plant it constructed in Chateaugay, New York in
September, 1993. Debt associated with this project held for sale at
December 31, 1997 and 1996 consisted primarily of tax-exempt bonds. In July
1991, the partnership entered into an agreement with the County of Franklin
(New York) Industrial Development Authority (the Authority) whereby the
Authority loaned the partnership the proceeds of the Authority's Series
1991A Bonds issued of $34,800,000 (supported by a letter of credit from the
partnership) to finance the construction of the Chateaugay project. The
bonds are due July 1, 2021. As the partnership makes debt payments, the
Company reduces its pro rata 50% share of the debt accordingly ($16,128,000
outstanding at December 31, 1997).
In 1997, the carrying value of this investment was written down to the
balance of the associated debt.
Page 30
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
13. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1997 and 1996 consisted of:
1997 1996
-------- --------
(in thousands)
Land $ 580 $ 580
Buildings and improvements 3,235 2,966
Cogeneration facility 22,282 26,467
Machinery, equipment and other 2,607 6,122
-------- --------
28,704 36,135
Less accumulated depreciation 9,810 11,400
-------- --------
$ 18,894 $ 24,735
======== ========
Depreciation expense was $1,481,000 in 1997, $6,814,000 in 1996, and
$14,527,000 in 1995. As previously discussed property, plant and equipment
of KWI are not reflected in the December 31, 1997 and 1996 balance sheets.
14. BANK LOAN PAYABLE
On August 30, 1996, the Company entered into a $30,000,000 loan agreement
to be used for the Puerto Rico project being jointly developed by the
Company. Throughout 1996 and most of 1997, amounts borrowed under this
agreement bore interest at the 90 day LIBOR plus 7.5%. This rate was
reduced to the 90 day LIBOR plus 5.9% upon the project receiving
construction financing in December 1997. The 90 day LIBOR rate was 5.8% at
December 31, 1997. The loan is collateralized by the stock of a special
purpose entity formed to hold through affiliates the Company's interest in
this thermal power plant. No further funds are available under this
agreement since the remaining funding capacity is structured to accommodate
accrued and unpaid interest for the remaining term of the loan. The
outstanding balance on this bank loan was $24,236,000 at December 31, 1997.
Page 31
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
15. OTHER NOTES PAYABLE
Other notes payable at December 31, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Note bearing interest at 11.3%, due in equal annual installments of principal and interest through
2002, collateralized by a cogeneration facility owned by the Company and requiring an escrow account. $ 7,689 $ 8,667
Borrowings under a $5,000,000 revolving credit agreement bearing interest at 1% above the bank's prime
rate through November 1997. (1) - 166
Borrowings under a $7,500,000 term loan agreement bearing interest at the bank's prime rate through
August 31, 1996 and at 1% above the bank's prime rate thereafter, due in quarterly installments of
$267,857 plus interest through December 31, 2000 and $2,142,860 due on March 31, 2001. (1) - 6,351
Borrowings under a $4,400,000 revolving loan agreement, interest rate selected by the Company from
specified alternatives (7.4% and 7.6% at December 31, 1997 and 1996, respectively), convertible to a
15-year term loan, payable semi-annually, collateralized by land, building and equipment. (1) - 3,645
Borrowings under a $1,200,000 loan agreement, due in 1999 bearing interest at prime plus 3% (11.25% at
December 31, 1997). 1,144 641
Notes bearing interest at 7.0% due through 1999.(2) 6 504
Other obligations bearing interest at 8.2% to 9.9% due through 1999, collateralized by equipment. 39 191
-------- --------
$ 8,878 $ 20,165
======== ========
(1) Facility was associated with the Company's construction subsidiary and was paid off and terminated in December 1997.
(2) The Company did not make the required principal and interest payment on December 1, 1996 and the holders of the
notes notified the Company of their collective intention to accelerate the obligation to pay the unpaid balance
of the notes plus accrued interest. In 1997, the Company paid $360,000 in full settlement of $540,000 of unpaid
principal and interest.
</TABLE>
Certain of the debt agreements provide events of default including
provisions which allow the lenders to accelerate repayment of the debt
should other debt of the Company experience an event of default which would
cause such other debt to be accelerated. Because of these provisions all
other notes payable are considered current.
The Company maintained a revolving credit agreement for working capital
purposes which was due to expire on May 30, 1996. This agreement required
the Company to meet certain financial ratios, net worth tests and
indebtedness tests. In April 1996 the Company renegotiated the revolving
credit agreement to provide for up to $5,000,000 for working capital
purposes for the Company's construction subsidiary (CNF) through April 30,
1997. The renegotiated agreement also provided a term loan of $7,500,000
which was used to pay the $5,000,000 outstanding at March 30, 1996 and to
provide cash collateral for up to $2,500,000 in outstanding letters of
credit. The loan would have become immediately payable upon the sale of
CNF. The agreement required CNF to meet certain net worth, financial ratio
and debt service coverage tests. At December 31, 1996 CNF was not in
compliance with these covenants. The bank issued a notice of default letter
which stated that due to KWI's bankruptcy filing and certain covenant
violations it would not make any further advances under the revolving
credit agreement. The balance due under this facility was paid off in
December 1997 and the facility was terminated.
Page 32
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
16. SENIOR SECURED NOTES PAYABLE
In December 1992 the Company sold $100,000,000 of 12-3/4% Senior Secured
Notes due 2002. The notes were sold at a discount of $1,389,000. Such
discount is being amortized on the effective yield method through 2002. The
unamortized discount was $861,000 at December 31, 1997. Interest on these
notes is due June 15 and December 15 of each year. The Notes are
redeemable, at the option of the Company, beginning December 15, 1997 at
106% of par, beginning December 15, 1998 at 103% of par, and beginning
December 15, 1999 at par.
Under the terms of the note indenture, the Company is restricted from
paying cash dividends on its common stock and must comply with certain
covenants, the most restrictive of which place limitations on payment of
such dividends, repurchasing common stock, incurring additional
indebtedness, pledging of assets and advances or loans to affiliates. The
indenture provides for an event of default (including the acceleration of
the repayment of the Notes) should other debt of the Company be accelerated
because the other debt was in default. The Company did not pay the interest
due June 15 and December 15, 1997 or June 15 and December 15, 1996 totaling
$12,750,000 for each year respectively, and is in default. At December 31,
1997 and 1996 the debt was classified as a current liability.
17. STOCKHOLDERS' DEFICIENCY
Convertible Preferred Stock: In May and June 1994, the Company sold 102,492
shares of 8 1/4% convertible preferred stock with a stated value of
$1,012.50 per share resulting in net proceeds of approximately $99,561,000
after underwriting discount and expenses. Dividends are cumulative from the
date of original issuance and are payable quarterly in arrears, when and as
declared by the Company's board of directors. The voluntary and involuntary
liquidation value of each preferred share is equal to the stated value plus
unpaid dividends. Preferred stockholders have the same voting rights as
common stockholders at the rate of 40 votes per preferred share.
The holders of the preferred stock may convert their shares into common
stock at any time at the rate of 41.665 common shares for each preferred
share. The preferred stock is not convertible by the Company prior to May
15, 1997. However, after that date and prior to May 15, 1998, the Company
may convert the preferred stock and should be expected to do so if the then
current market value exceeds the call price as defined. At such time the
preferred shareholder would receive the number of common shares equal to
the call price (initially $1,033.40, declining ratably to $1,012.50)
divided by the market price of the common stock, but in no event fewer than
41.665 common shares for each share of preferred stock. If not previously
converted, on May 14, 1998, each preferred share will mandatorily convert
into 50 shares of common stock and the right to receive cash equal to all
accrued and unpaid dividends. The Company has recorded a liability as of
December 31, 1997 and 1996 for unpaid dividends of $18,196,000 and
$9,633,000 respectively.
The preferred stock is held by a depositary and 5,124,600 depositary shares
have been issued. Each depositary share represents one-fiftieth of a
preferred share, with the holder entitled, proportionately, to all the
rights and preferences of the underlying preferred stock.
Stock Options: The Company currently has various stock option plans and
programs under which both qualified and non-qualified incentive stock
options have been granted. Options authorized and available for grant at
December 31, 1997 totaled approximately 4,097,000 shares in addition to
2,019,300 shares granted and outstanding at December 31, 1997.
Page 33
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
Stock option activity during 1997, 1996 and 1995 was as follows:
Exercise
Options Price
--------- ---------------
Outstanding December 31, 1995 2,135,000 1.25 - 23.25
Granted 1,750,000 0.81
Canceled (1,378,000) 1.25 - 23.25
---------
Outstanding December 31, 1996 2,507,000 0.81 - 19.75
Canceled (487,700) 0.81 - 19.75
---------
Outstanding December 31, 1997 2,019,300 0.81 - 19.75
=========
The weighted average exercise price of outstanding options at December 31,
1997 was $3.4825. Stock options vest as follows:
Exercise
Shares Price
--------- ----------------
Currently exercisable 425,000 $ 1.25 - $19.75
1998 44,100 12.81 - 16.50
1999 25,200 12.81 - 16.50
2000 25,000 16.50
2001 -
2002 1,500,000 0.81
---------
2,019,300
=========
The Financial Accounting Standards Board (FASB) has issued Statement No.
123. "Accounting for Stock-Based Compensation" which is effective for 1996
financial statements. SFAS No. 123 requires either recognition of
compensation expenses for stock options and other stock-based compensation
or supplemental disclosure of the impact such expense recognition would
have had on the Company's results of operations had the Company recognized
such expense. The Company has elected the supplemental disclosure option.
The Company believes that the effects on the reported net loss for 1997,
1996 and 1995 had stock-based compensation been recognized as expense under
the provisions of SFAS No. 123 would not be material.
18. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
1997 1996 1995
-------- -------- --------
(in thousands)
Current:
Federal $ - $ 54 $ (590)
State - 150 105
Foreign - 100 -
-------- -------- --------
- 304 (485)
-------- -------- --------
Deferred:
Federal - 20,201 (17,965)
State - 2,886 (3,049)
-------- -------- --------
- 23,087 (21,014)
-------- -------- --------
Total income tax provision (benefit) $ - $ 23,391 $(21,499)
======== ======== ========
Page 34
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
A reconciliation of the total income tax (benefit) to income taxes
calculated at the federal statutory tax rate of 35% is as follows:
1997 1996 1995
-------- -------- ---------
(in thousands)
(Loss) before income taxes $(25,242) $(61,568) $(271,647)
======== ========= =========
Statutory federal income tax
(benefit) provision $ (8,835) $(21,549) $ (95,076)
State income taxes, less
federal tax benefit (1,262) (2,928) (16,136)
Change in valuation allowance due to
current operations 10,097 24,627 89,705
Reduction of net deferred tax asset
attributable to deconsolidation of KWI - 23,087 -
Other - 154 8
-------- -------- ---------
Total income tax provision (benefit) $ - $ 23,391 $ (21,499)
======== ======== =========
As of December 31, 1997 and 1996, the deferred tax balances consisted of
the following:
1997 1996
-------- --------
(in thousands)
Current assets $ 4,340 $ 4,340
-------- --------
4,340 4,340
Current liabilities (40) (40)
-------- --------
Current deferred tax assets, net $ 4,300 $ 4,300
======== ========
Noncurrent assets:
Dealer installment sales $ - $ -
Federal and state net operating loss
and tax credit carryforwards 45,759 37,662
Gain on sale of fixed assets
and investment interests 3,461 3,061
Project development costs 5,855 4,655
Other 800 800
-------- --------
55,875 46,178
Valuation allowance (32,273) (22,176)
-------- --------
23,602 24,002
Noncurrent liabilities:
Depreciation and basis differences (4,742) (5,142)
Other (5,247) (5,247)
-------- --------
(9,989) (10,389)
-------- --------
Noncurrent deferred tax assets, net $ 13,613 $ 13,613
======== ========
Deferred income tax assets and liabilities reflect the tax effects of
temporary differences between the tax basis of assets and liabilities and
the reported amounts of these assets and liabilities for financial
reporting purposes. SFAS No. 109 requires that a valuation allowance be
recorded against tax assets which are more likely than not to not be
realized which resulted in $10,097,000 and $24,627,000 being recognized in
1997 and 1996. After the deconsolidation of KWI, the Company's recorded net
deferred tax asset is $17,913,000. This amount will be realized if taxable
net gains of approximately $50,000,000 are recognized, which management
believes is more likely than not to be realized from the sale of the
Company's interests in the Puerto Rico project. It is possible that the
actual deferred tax assets realized may be higher or lower than the amounts
currently recognized.
Page 35
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
The following table summarizes carryforwards (including KWI) available for
income tax purposes at December 31, 1997 (in thousands):
Expiration Dates
-----------------
Investment tax credits $ 1,706 2003 through 2005
Research and development tax credits,
federal and state 2,307 2003 and 2008
California solar tax credits 7,693 Indefinite
Alternative minimum tax credit 1,784 Indefinite
Net operating loss - federal 137,462 2007 through 2012
Net operating losses of acquired
subsidiaries subject to restrictions 2,202 2001 through 2005
Production Tax Credit 1,675 2009 through 2011
The Company's tax position could be adversely effected by changes in the
Company's ownership or the resolution of KWI's bankruptcy.
19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair values of the Company's financial
instruments at December 31, 1997 and 1996 were as follows:
1997 1996
------------------- -------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- ---------
(in thousands)
Assets:
Cash and cash equivalents $ 7,294 $ 7,294 $ 17,208 $ 17,208
Funds in escrow 1,997 1,997 5,221 5,221
Liabilities:
Power plant construction
financing 16,128 - 16,958 -
Senior secured notes payable 99,139 - 99,005 -
Other notes payable 8,878 - 20,165 -
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash and cash equivalents: The carrying amount is a reasonable estimate of
fair value.
Funds in escrow: Fair value represents market value as reported by the
financial institution holding the funds in escrow.
Power plant construction financing, Senior secured notes payable, and Other
notes payable: For 1997 and 1996, the fair value is undeterminable.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1997 and 1996.
Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since
those dates, and estimates of fair value subsequent to those dates may
differ significantly from the amounts presented herein.
Page 36
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
20. COMMITMENTS AND CONTINGENCIES
Leases: At December 31, 1997 the Company had various operating lease
agreements covering facilities and equipment. Substantially all leases
provide for renewal options which give the Company the right to extend the
leases at reduced rentals. Minimum rental commitments for future years are
as follows (in thousands):
1998 $ 527
1999 453
2000 316
2001 102
2002 86
Thereafter 1,634
Lease expense totaled $411,000 in 1997, $1,689,000 in 1996, and $8,699,000
in 1995.
Litigation: On September 28, 1995, a class action complaint was filed
against the Company and certain of its officers and directors (namely,
Stanley Charren, Maurice E. Miller, Joel M. Canino and Gerald R. Alderson),
in the United States District Court for the Northern District of
California, alleging federal securities laws violations. On November 2,
1995, a First Amended Complaint was filed naming additional defendants,
including underwriters of the Company's securities and certain other
officers and directors of the Company (namely, Charles Christenson, Angus
M. Duthie, Steven N. Hutchinson, Howard W. Pifer III and Mervin E. Werth).
Subsequent to the Court's partial grant of the Company's and the
underwriter defendants' motions to dismiss, a Second Amended Complaint was
filed on March 29, 1996. The amended complaint alleges claims under
sections 11 and 15 of the Securities Act of 1933, and sections 10(b) and
20(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder,
based on alleged misrepresentations and omissions in the Company's public
statements, on behalf of a class consisting of persons who purchased the
Company's common stock during the period from September 21, 1993 (the date
of the Company's initial public offering) through August 8, 1995 and
persons who purchased the Company's preferred stock during the period from
April 28, 1994 (the public offering date of the preferred stock) through
August 8, 1995. The amended complaint alleges that the defendants
misrepresented the Company's progress on the development of its latest
generation of wind turbines and the Company's future prospects. The amended
complaint seeks unspecified damages and other relief.
In separate orders dated March 24, 1997 and April 16, 1997, the Court
granted plaintiffs' motion for certification of a plaintiff class
consisting of all persons or entities who purchased KENETECH common stock
between September 21, 1993 and August 8, 1995 or KENETECH depository shares
between April 28, 1994 and August 8, 1995, appointed representatives of the
certified plaintiff class, appointed counsel for the certified class and
denied without prejudice plaintiffs' motion for certification of an
underwriter defendant class. The plaintiffs then filed a Third Amended
Complaint adding additional plaintiffs alleged to have claims based on
section 11 of the Securities Act of 1933. On October 15, 1997, the Court
issued an order certifying a plaintiff and defendant underwriter class as
to the section 11 claim.
There have been two unsuccessful attempts at mediation to settle the action
and one unsuccessful settlement conference ordered by the federal judge
presiding over the action. Trial in this action is scheduled for the summer
of 1998. The Company intends to continue to contest the action vigorously.
Enercon Litigation: In 1996, Enercon GmbH ("Enercon") filed suit in Federal
Court against the Company, individual officers of the Company and/or
KENETECH Windpower, Inc. ("KWI"), and KWI's expert witness in proceedings
before the U.S. International Trade Commission (the "ITC"), for alleged
misconduct related to patent infringement proceedings instituted by KWI
against Enercon and The New World Power Corporation ("New World Power")
that resulted in issuance of an exclusion order by the ITC that barred
Enercon and New World Power from importing infringing wind turbines
products into the United States. In its suit, Enercon alleges malicious
prosecution, patent misuse and anti-trust violations. Enercon has appealed
Page 37
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
the ITC's exclusion order to the Federal Circuit Court of Appeals in
addition to filing this suit. Upon motion of the defendants, this suit has
been stayed by the Federal District Court pending the outcome of the appeal
of the exclusion order.
Puerto Rico Litigation: In connection with the LNG-fired power plant being
developed in Penuelas, Puerto Rico by EcoElectricia, L.P., a partnership
whose partners are subsidiaries of the Company and Enron Corporation,
certain environmental groups, citizens and the union which represents
electrical workers for the Puerto Rico Electric Power Authority ("PREPA")
brought a civil action challenging the procedure used by PREPA to select,
among others, EcoElectrica to design, finance, construct, own and operate
the Penuelas, Puerto Rico project, and requesting injunctive and
declaratory relief. On January 21, 1997, the Ponce Superior Division of the
Court of First Instance of Puerto Rico (the trial court) (No. JPE 96- 0345)
dismissed the complaint, holding that PREPA's selection of the independent
power producers need not have been done through public bidding pursuant to
section 205 of PREPA's Organic Act. On March 13, 1997, the plaintiffs,
Mision Industrial de Puerto Rico, Inc., the Union de Trabajadores de la
Industria Electrica y Riego (UTIER), Guayamenses Pro-Salud y Buen Ambiente,
Bartolome Diana, SURCCO, Inc. and Jose E. Olivieri Antonmarchi
(Appellants), filed an appeal before the Circuit Court of Appeal of Puerto
Rico (No. KLAN 97-00236), appealing the judgment entered against them.
EcoElectrica intervened in the action before the trial court and the appeal
is currently pending.
Westinghouse Litigation: C. N. Flagg Incorporated, a wholly-owned
subsidiary of CNF Industries, Inc., has instituted legal proceedings
against Westinghouse Electric Corporation ("Westinghouse") in the U.S.
Federal District Court in Minnesota to recover $6.0 million as compensation
for a termination of convenience of a project C. N. Flagg was building on
behalf of Westinghouse. Westinghouse has filed a counter-claim for $2.6
million alleging overpayment. C. N. Flagg filed a motion for summary
judgment which was denied.
Wrongful Termination Litigation: On December 31, 1987, a former employee of
CN Flagg Power, Inc. ("CN Power") (formerly, a wholly-owned subsidiary of
CNF Industries, Inc.) filed a complaint with the State of Connecticut
Commission of Human Rights and Opportunities (the "Commission") alleging
that he was wrongfully terminated from his position at Millstone Point, a
nuclear energy generation facility owned and operated by Northeast
Utilities ("Northeast"). CN Flagg's motion to dismiss the complaint has
been denied by the Commission; Northeast's motion to dismiss is pending.
Damages are alleged to be in the area of $300,000.
Eemsmond Litigation: Certain companies have threatened to bring suit
against CNF Constructors, Inc. ("CNF") (a wholly-owned subsidiary of CNF
Industries, Inc.) alleging CNF's failure to make payments on certain
equipment or civil construction services supplied in connection with the
construction of a windplant in The Netherlands. The amounts alleged to be
unpaid are in the area of $2,000,000.
General Motors Litigation: Plaintiffs CCF-1, Inc., Flagg Energy Development
Corporation (each a direct or indirect wholly-owned subsidiary of KENETECH
Energy Systems, Inc.) and Process Construction Supply, Inc. (a wholly-owned
subsidiary of CNF Industries, Inc.) brought suit against defendant General
Motors ("GM") in Connecticut State Court alleging breach of contract,
breach of express warranty, breach of implied warranty, breach of repair
warranty, misrepresentation and unfair trade practices involving gas
turbine engines installed at the Hartford Hospital co-generation plant
owned by CCF-1. The trial court either struck or granted summary judgment
in GM's favor on all causes of action, except the claim for breach of
repair warranty. A directed verdict was entered in favor of GM upon trial
of the one remaining cause of action. An appeal by the plaintiffs to the
Supreme Court of the State of Connecticut seeking reversal of the directed
verdict, the trial court's order to strike and the grant of summary
judgment and remand of the matter for trial on all causes of action is
pending.
Page 38
<PAGE>
KENETECH CORPORATION
------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1997, 1996 and 1995
Other: The Company is also a party to various other legal proceedings
normally incident to its business activities. The Company intends to defend
itself vigorously against these actions.
It is not feasible to predict or determine whether the ultimate outcome of
the above-described matters will have a material adverse effect on the
Company's financial position.
The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. The
Company's management has made no evaluation regarding the anticipated
costs, problems and uncertainties associated with the Year 2000 issue.
Employment Contracts: Certain officers have employment contracts.
21. QUARTERLY INFORMATION (UNAUDITED)
Unaudited quarterly information for 1997 and 1996 was as follows (in
thousands, except per share amounts):
Year Ended December 31, 1997 - Quarters
First Second Third Fourth
------- -------- ------- --------
Total revenues $11,980 $ 12,918 $ 8,624 $ 7,471
Gross margin (Excess of
expenses over revenues) 295 (41) (3,954) (307)
Net income (loss) (9,906) (4,874) (10,250) (212)
Per common share:
Basic & Diluted
- net income (loss) $ (0.33) $ (0.19) $ (0.34) $ (0.06)
Year Ended December 31, 1996 - Quarters
First Second Third Fourth
------- -------- ------- --------
Total revenues $27,709 $ 29,491 $16,455 $ 18,235
Gross margin (Excess of
expenses over revenues) 397 8,163 242 (617)
Net loss (16,750) (32,435) (10,155) (24,901)
Per common share:
Basic & Diluted
- net loss $ (0.52) $ (0.94) $ (0.33) $ (0.73)
1997: In the fourth quarter the Company's construction subsidiary sold its
joint venture interests in the Puerto Rico EPC contracts for a net gain. In
the third quarter the Company wrote off the two turbines which failed at
its wholly-owned cogeneration plant causing the excess of expenses over
revenues to increase significantly.
1996: As mentioned previously, KWI filed for protection on May 29, 1996
under chapter 11 of the Federal Bankruptcy Code and reported an excess of
liabilities over its assets. Although KENETECH continues to own the common
stock of KWI and provides certain services under the jurisdiction of the
Bankruptcy Court, KENETECH believes it is probable that such ownership will
not exist after completion of the bankruptcy proceedings. Accordingly, as
of May 29, 1996 KWI ceased to be accounted for as a consolidated subsidiary
of KENETECH. The effect of the deconsolidation was the recognition of a
loss, a substantial portion of which primarily related to $23,087,000
million of net deferred tax assets relating to KWI.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
--------------------
Not applicable.
Page 39
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
- --------------------------------------------------------------
Directors and Executive Officers of the Company as of March 1, 1998, their
ages and their present titles:
Name Age Position
---- --- --------
Gerald R. Alderson 51 Director
Charles Christenson 67 Director
Angus M. Duthie 58 Chairman of the Board of Directors
Mark D. Lerdal 39 Director, Chief Executive Officer
and President
Michael U. Alvarez 41 Vice President
James J. Eisen 42 General Counsel, Vice President and
Assistant Secretary
Nicholas H. Politan 36 Chief Financial Officer, Vice
President and Assistant Secretary
Mervin E. Werth 51 Controller, Chief Accounting
Officer and Assistant Treasurer
BIOGRAPHICAL INFORMATION
KENETECH Corporation, a Delaware corporation, was formed in 1986 as a
holding company of KENETECH Windpower, Inc. (formerly, U.S. Windpower,
Inc.). References to KENETECH are, prior to 1986, references to KENETECH
Windpower, Inc.
GERALD R. ALDERSON is a Director and the President of National Kilowatt, an
unregulated electric retailer, and of Wattmonitor, an information services
company for the electric industry. Mr. Alderson has served as a Director of
KENETECH since September 1983 and served as Chairman of the Board from
March 1995 until March 1996. He served as KENETECH's President and Chief
Executive Officer from August 1981 until October 1995 and December 1995,
respectively. He received his B.A. from Occidental College and his M.B.A.
from the Harvard University Graduate School of Business Administration. He
is a Class I Director.
CHARLES CHRISTENSON is the Royal Little Professor of Business
Administration, Emeritus, at the Harvard University Graduate School of
Business Administration and has served as a Director of KENETECH since
January 1980. In the past, he was Deputy for Management Systems in the
Office of the Assistant Secretary of the Air Force, and held a variety of
teaching and administrative positions at the Harvard University Graduate
School of Business Administration. He received his B.S. from Cornell
University and his M.B.A. and D.B.A. from Harvard University. He is a Class
III Director.
ANGUS M. DUTHIE is a general partner of Prince Ventures and has served as a
Director of KENETECH since December 1980. He was elected as Chairman of the
Board of KENETECH in March 1996. Prince Ventures manages various capital
funds, in all of which F.H. Prince & Co., Inc. is a significant investor.
F.H. Prince & Co., Inc. is a privately held corporation with business
interests in real estate, as well as investments, both private and public.
Mr. Duthie is also a director of Occupational Health and Rehabilitation,
Inc., a publicly held company. Mr. Duthie holds a B.A. from Miami
University (Ohio). He is a Class III Director.
MARK D. LERDAL has served as a Director of KENETECH since March 1996 and as
Chief Executive Officer and President since April 1996. He served as Vice
President and General Counsel of KENETECH from April 1992 until March 1996.
From April 1990 to March 1992 he served as Vice President and Counsel of
KENETECH Energy Systems, Inc. He received his A.B. from Stanford University
and his J.D. from Northwestern University School of Law. He is a Class III
Director.
MICHAEL U. ALVAREZ has served as Vice President of KENETECH since July
1994. He has served as President of KENETECH Energy Systems, Inc. since
December 1993 and served as its Vice President from September 1991 until
his election as President. He received his B.A. and J.D. from the
University of Virginia.
JAMES J. EISEN has served as Vice President and General Counsel of KENETECH
and Vice President of KENETECH Windpower, Inc. since April 1996. He has
served as General Counsel of KENETECH Windpower, Inc. since April 1991 and
Page 40
<PAGE>
served as Counsel from 1986 to 1991. He received two Bachelor of Science
degrees from the Massachusetts Institute of Technology and his J.D. from
New York University School of Law.
NICHOLAS H. POLITAN has served as Vice President and Chief Financial
Officer of KENETECH since April 1996. He served as Vice President and Chief
Financial Officer of KENETECH Windpower, Inc. from August 1995 and April
1996, respectively, until June 1998. He has served as Vice President of
KENETECH Energy Systems, Inc. since March 1995, and served as Counsel from
September 1992 until March 1995. He received his B.A. from Duke University
and his J.D. from Stanford Law School.
MERVIN E. WERTH has served as Controller of KENETECH since August 1991.
Prior to that time, he was a Senior Manager for Deloitte & Touche LLP and
Treasurer of Friends of Photography. He received his B.S. from University
of California, Berkeley.
Each officer is generally elected to hold office until the next Annual
Meeting of the Company's Board of Directors. Directors are elected for a
three-year term.
Each of Gerald R. Alderson and Mark D. Lerdal were directors of and Gerald
R. Alderson, Mark D. Lerdal, Michael U. Alvarez, James J. Eisen and
Nicholas H. Politan were executive officers of KENETECH Windpower, Inc.
within the two-year period prior to KENETECH Windpower, Inc.'s chapter 11
filing in the United States Bankruptcy Court.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the
Securities and Exchange Commission thereunder require the Company's
executive officers and directors and persons who own more than ten percent
of the Company's stock, as well as certain affiliates of such persons, to
file initial reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Executive officers, directors
and persons owning more than ten percent of the Company's stock are
required by the SEC's regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of
Forms 3, 4 and 5 and amendments thereto received by the Company and written
representations that no other reports were required for those persons, the
Company believes that, during the fiscal year ended December 31, 1997, all
filing requirements applicable to its executive officers, directors and
owners of more than ten percent of the Company's stock were complied with,
except that Mervin E. Werth filed one late report covering one transaction.
Item 11. Executive Compensation
- ----------------------------------
Each Director of the Company receives a quarterly retainer of $5,000 plus a
$500 fee for each board meeting attended. In addition, each Director who
serves on either of the Audit Committee or the Compensation Committee
receives a meeting fee of $500 for attending any meeting of such Committees
not held in conjunction with a meeting of the Board of Directors (see also
footnote 1 to Summary Compensation Table). Directors were also eligible to
receive automatic stock option grants under the Automatic Option Grant
Program of the Company. The Automatic Option Grant Program has been
discontinued and the Directors have not received any automatic option
grants since 1995. See "Stock Plans" below.
The following table sets forth, for the fiscal years ended December 31,
1997, 1996 and 1995, all compensation, for services rendered in all
capacities to KENETECH and its consolidated subsidiaries (except as
otherwise noted), awarded to, earned by or paid to (i) all individuals
serving as Chief Executive Officer during 1997, (ii) the four most highly
compensated executive officers of the Company in addition to the Chief
Executive Officer who were serving as executive officers at the end of
1997, and (iii) a former executive officer of the Company for whom
disclosure would have been provided but for the fact that such individual
was not serving as an executive officer at the end of 1997. The table
excludes compensation paid by KENETECH Windpower, Inc. in 1996 and 1997
since it ceased to be accounted for as a consolidated subsidiary in 1996.
Page 41
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
================================================================================================================
Long-Term
Compensation All Other Compensation
Annual Compensation Awards ($)(3)
------------------------------------------- ------------ ----------------------
Securities
Other Annual Underlying
Name Compensation Options
Principal Position Year Salary Bonus ($)(1) (#)(2)
========================== ---- --------- --------- ------------ ------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
Mark D. Lerdal 1997 $ 401,295 $ 250,000 $ 21,500 - $ 1,165,071
Chief Executive Officer, 1996 $ 387,762 $ 300,000 $ 21,500 500,000 $ 1,152
President and Director 1995 $ 202,432 $ 20,000 - - -
========================== ---- --------- --------- ------------ ------------ ----------------------
Michael U. Alvarez 1997 $ 351,134 $ 364,920 - - $ 1,388
Vice President 1996 $ 380,152 $ 200,000 - 250,000 $ 1,388
1995 $ 225,729 $ 170,000 - - -
========================== ---- --------- --------- ------------ ------------ ----------------------
James J. Eisen 1997 $ 90,407 $ 59,880 - - $ 165,750
General Counsel, 1996 $ 144,395 $ 31,000 - 250,000 -
Vice President and 1995 $ 105,572 $ 20,772 - - -
Assistant Secretary (4)
========================== ---- --------- --------- ------------ ------------ ----------------------
Nicholas H. Politan 1997 $ 175,567(5)$ 540,440(5) - - $ 175,000
Chief Financial Officer, 1996 $ 178,261 $ 214,240 - 250,000 -
Vice President and 1995 $ 125,488 - - - -
Assistant Secretary
========================== ---- --------- --------- ------------ ------------ ----------------------
Mervin E. Werth 1997 $ 125,405 - - - -(6)
Controller, 1996 $ 125,405 $ 125,000 - - -(6)
Chief Accounting Officer 1995 $ 125,405 $ 9,375 - - -
and Assistant Treasurer
========================== ---- --------- --------- ------------ ------------ ----------------------
Michael A. Haas 1997 $ 40,857 $ 252,597 - - $ 95,700
(Vice President until 1996 $ 93,780 $ 59,100 - 250,000 -
4/11/97) (7) 1995 $ 95,419 $ 50,000 - - -
================================================================================================================
(1) Includes $21,500 in 1997 and 1996 for director's fees for Mark D. Lerdal.
(2) Shares of Common Stock subject to stock options granted during the fiscal year. No stock appreciation
rights were granted during 1997, 1996 or 1995.
(3) Includes $1,152 and $1,388 for 1997 and 1996 for insurance premiums paid by the
Company with respect to term life insurance for the benefit of Mark D. Lerdal and Michael U. Alvarez,
respectively, a pre-paid severance payment of $1,163,919 for Mark D. Lerdal, and severance payments of
$175,000 paid to Nicholas H. Politan, $165,750 paid to James J. Eisen and $95,700 paid to Michael Haas
upon termination of such individual's respective Employment Agreement with the Company.
(4) In addition, KENETECH Windpower, Inc. paid Mr. Eisen a bonus of $50,999 from gross proceeds of certain asset
sales occurring in 1996, $82,766 in salary, and $21,250 in bonus from gross proceeds of certain asset sales in 1997
and $183,582 in bonuses primarily earned in 1997 from proceeds of certain asset sales occurring in January 1998.
(5) Includes a bonus of $267,163 primarily earned in 1997 from proceeds of certain asset sales occurring in January
1998. Although all of Mr. Politan's compensation is paid by KENETECH Corporation, approximately $640,000 was
funded by KENETECH Windpower, Inc.
(6) All of the defendant officers and directors (including Mr. Werth) and KENETECH Corporation are jointly represented
by the same counsel in the securities class action described in Item 3 to this 10-K. A portion of such counsel's legal fees
has been paid by the Company, however, such fees have not been apportioned among the individual defendants.
(7) In addition, KENETECH Windpower, Inc. paid Mr. Haas $33,441 in salary and $406,823 in bonus from gross proceeds of
certain asset sales in 1996 and $15,480 in salary and $19,500 in bonus from gross proceeds of certain asset sales in 1997.
</TABLE>
No options or stock appreciation rights were awarded to the Chief Executive
Officer or the named executive officers of the Company during the fiscal
year ended December 31, 1997.
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ended December 31, 1997, with respect
to the Chief Executive Officer and the named executive officers of the
Company. No stock appreciation rights were outstanding during such fiscal
year.
Page 42
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
==================================================================================================================
Number of Securities Value of Unexercised
Shares Underlying Unexercised Options In-the-Money Options
Acquired on Value At Fiscal Year-End At Fiscal Year-End
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable (1)
=================== ------------ ------------ ------------------------------ -----------------------------
<S> <C> <C> <C> <C>
Mark D. Lerdal - - 31,000/535,000 -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Michael U. Alvarez - - 130,000/280,000 -/-
=================== ------------ ------------ ------------------------------ -----------------------------
James J. Eisen - - -/250,000 -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Nicholas H. Politan - - 2,400/250,600 -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Mervin E. Werth - - 20,000/2,500 -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Michael A. Haas - - 000,000/000,000 -/-
=================== ------------ ------------ ------------------------------ -----------------------------
(1) The exercise price of all options exceeds the market price of the underlying shares at December 31, 1997.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, Messrs. Christenson, Duthie and Pifer(1), served as members of
the Compensation Committee of the Company. None of the members of the
Compensation Committee have ever been officers or employees of the Company.
Mr. Lerdal may have attended meetings of the committee, but was not present
during deliberations or discussions regarding his own compensation.
(1) Howard W. Pifer III resigned effective February 21, 1997 from the Board
of Directors.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. Alvarez, Lerdal and Werth are the only executive officers of the
Company currently under an employment agreement. Messrs. Eisen, Haas and
Politan were under employment agreements during part of the fiscal year
ended December 31, 1997 and entered into the severance agreements described
below.
KENETECH Energy Systems, Inc. and certain direct or indirect wholly-owned
subsidiaries entered into an Employment Agreement with Mr. Alvarez that
became effective December 1, 1997 (such agreement superseded Mr. Alvarez's
prior employment agreement). The Employment Agreement provides that Mr.
Alvarez is to be employed (unless terminated for cause) at his annual base
salary of $350,000 until the later of i) December 31, 1998, (ii) 90 days
following the sale of the Company's interests in the Penuelas, Puerto Rico
project, or (iii) the date on which all payments under the Agreement have
been made. In the event of a change in control, Mr. Alvarez will receive a
lump sum payment equal to his annual base salary. Under the terms of the
Employment Agreement, Mr. Alvarez was paid a $350,000 bonus in 1997 upon
the closing of the construction financing for the Penuelas, Puerto Rico
project, and may earn a bonus of up to $1,920,000 from the proceeds of the
sale of the Company's interests in the Penuelas, Puerto Rico project, if
such proceeds exceed $100 million and up to $262,500 from the proceeds of
the sale of certain assets of KENETECH Energy Systems, Inc.
The Company entered into an Employment Agreement with Mr. Eisen on April
12, 1996 that provided that Mr. Eisen would be (i) employed by the Company
at annual base salary of $165,000, and (ii) entitled to receive a lump sum
severance payment equal to his base salary for one year and continue to be
covered by the Company health care and life insurance for one year. Upon a
Change in Control, Mr. Eisen would receive a lump sum payment equal to one
year's base salary. Pursuant to the terms of a Separation Agreement and
Mutual Release entered into by the Company and Mr. Eisen on June 30, 1997,
Mr. Eisen's Employment Agreement was terminated and he received a lump sum
payment of $165,750. Mr. Eisen continues to be employed as an at-will
employee of KENETECH Windpower, Inc.
Page 43
<PAGE>
The Company entered into an Employment Agreement with Mr. Lerdal on April
1, 1996. Mr. Lerdal's initial employment period runs for a period of three
years ending March 31, 1999 and is automatically renewable upon mutual
agreement for an unlimited series of one-year periods. Pursuant to the
terms and conditions of the Agreement, Mr. Lerdal (i) received a bonus of
$100,000 upon execution of the Agreement, (ii) will receive a minimum
annual base salary of $400,000 (subject to yearly adjustment), (iii) will
be eligible to receive an annual bonus of up to 25% of his base salary, and
(iv) will be eligible to earn additional bonuses of up to $450,000 upon the
occurrence of certain stated objectives. All of the objective payments have
been earned including the $250,000 paid as a bonus in 1997. In the event of
Mr. Lerdal's involuntary termination (other than for cause) including
non-renewal of the employment period, he will receive a severance payment
equal to two years base salary plus health care and life insurance coverage
for an additional two years. In the event of Mr. Lerdal's involuntary
termination or resignation within six months of a Change in Control, Mr.
Lerdal will receive a lump sum payment equal to one year's salary in
addition to the payments set forth in the immediately preceding sentence.
The severance provisions of such agreement were pre-funded in March 1997.
The Company entered into an Employment Agreement with Mr. Politan on April
12, 1996 that provided that Mr. Politan would be (i) employed by the
Company at an annual base salary of $175,000, (ii) entitled to receive a
lump sum severance payment equal to his base salary for one year and
continue to be covered by the Company health care and life insurance for
one year, (iii) entitled to receive a bonus in the amount of $75,000 on
December 31, 1996, and (iv) entitled to a bonus of $75,000 upon the
occurrence of certain stated objectives. Upon a Change in Control, Mr.
Politan would receive a lump sum payment equal to one year's base salary
plus all unpaid bonuses. Pursuant to the terms of a Separation Agreement
and Mutual Release entered into by the Company and Mr. Politan on August 1,
1997, Mr. Politan's Employment Agreement was terminated and he received a
lump sum payment of $175,000. Mr. Politan was re-hired as an at-will
employee of the Company.
The Company has agreed to enter into a Retention Incentive Agreement with
Mr. Werth which will provide that Mr. Werth will receive an incentive
payment of $25,000 for each calendar quarter that he remains employed by
the Company.
The Company entered into a Separation Agreement and Mutual Release with Mr.
Haas on March 12, 1997 that terminated Mr. Haas's Employment Agreement
effective April 11, 1997. Pursuant to the terms and conditions of the
Separation Agreement, Mr. Haas received a single lump sum payment of
$95,700.
STOCK PLANS
The 1993 Option Plan and the 1993 Stock Purchase Plan (the "Purchase Plan")
were implemented in September 1993. The Purchase Plan was discontinued
following the August 1996 semi-annual purchase date. No Options were
granted under the 1993 Option Plan during 1997.
The Company has registered shares of Common Stock reserved for issuance
under the 1993 Option Plan and the Purchase Plan thus permitting the resale
of such shares by non-affiliates in the public market without restriction
under the Securities Act of 1933.
The 1993 Option Plan
Under the 1993 Option Plan, key employees (including officers), consultants
to the Company and directors are provided an opportunity to acquire equity
interests in the Company. The 1993 Option Plan contains three separate
components: (i) a Discretionary Option Grant Program, under which key
employees (including officers) and consultants may be granted options to
purchase shares of Common Stock at an exercise price not less than 85% of
the fair market value of such shares on the grant date; (ii) an Automatic
Option Grant Program, under which option grants were automatically made at
periodic intervals to directors to purchase shares of Common Stock at an
exercise price equal to 100% of the fair market value of the option shares
on the grant date (this part of the plan has been discontinued); and (iii)
a Stock Issuance Program, under which eligible individuals may be issued
shares of Common Stock directly, either through the immediate purchase of
the shares (at fair market value or at discounts of up to 15%) or as a
bonus tied to the performance of services or the Company's attainment of
prescribed milestones.
Page 44
<PAGE>
The options granted under the Discretionary Option Grant Program may be
either incentive stock options designed to meet the requirements of Section
42 of the Internal Revenue Code of 1986, as amended (the "Code"), or
non-statutory options not intended to satisfy such requirements. All grants
under the Automatic Option Grant Program were non-statutory options.
Options may be granted or shares issued in the Discretionary Option Grant
and Stock Issuance Programs to eligible individuals in the employ or
service of the Company or any parent or subsidiary corporation now or
subsequently existing.
Under the Automatic Option Grant Program, each person who was a director at
the time of the Company's initial public offering, received at the
commencement of such offering, and each new director thereafter was, at the
time he or she became a director, to receive an automatic option grant for
5,000 shares of Common Stock. In addition, at each annual stockholders'
meeting, beginning with the 1994 annual meeting, each person who had been a
director for at least six months was to be granted an option to purchase
1,000 shares of Common Stock. If more than 50% of the outstanding Common
Stock were to be acquired in a hostile tender offer, each option granted
under the Automatic Option Grant Program that has been outstanding for at
least six months is to be automatically converted into the right to receive
from the Company the excess of the tender offer price over the option
price. No grants under the Automatic Option Grant Program have been made
since 1995.
A total of 6,688,020 shares of Common Stock were originally reserved for
issuance over the ten year term of the 1993 Option Plan.
Options will have maximum terms of ten years measured from the grant date.
Options will not be assignable or transferable other than by will or by the
laws of inheritance following the optionee's death, and the option may,
during the optionee's lifetime, be exercised only by the optionee. The
optionee will not have any stockholder rights with respect to the option
shares until the option is exercised and the option price is paid for the
purchased shares. Individuals holding shares under the Stock Issuance
Program will, however, have full stockholder rights with respect to those
shares, whether the shares are vested or unvested. The Plan Administrator
under the 1993 Option Plan has the authority to cancel outstanding options
under the Discretionary Option Grant Program (including options
incorporated from the Predecessor Plan) in return for the grant of new
options for the same or a different number of shares with an exercise price
based on the lower fair market value of the Common Stock on the new grant
date. The Board of Directors may terminate the 1993 Option Plan at any
time, and the 1993 Option Plan will in all events terminate on June 20,
2003.
All of the Company's employees are eligible to participate in the
Discretionary Grant Program. Non- employee directors are not eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs.
If the Company is acquired by merger, consolidation or asset sale, or there
is a hostile change in control of the Company, each option granted under
the Discretionary Option Grant Program will automatically accelerate in
full, and all unvested shares under the Stock Issuance Program will
immediately vest.
The Purchase Plan
The Purchase Plan was discontinued following the August 1996 semi-annual
purchase date. Prior to discontinuation of the Purchase Plan, each
full-time employee upon meeting certain conditions was eligible to
participate in the Purchase Plan for one or more offering periods. The
Purchase Plan was intended to be an "employee stock purchase plan" within
the meaning of Section 423 of the Code. The Purchase Plan was implemented
in a series of successive offering periods, each with a maximum duration of
twenty-four (24) months. The purchase price per share for any offering
period was 85% of the lower of (i) the fair market value of the Common
Stock on the start date of the offering period (or, if a participant joined
the Purchase Plan after the start date of an offering period, on the date
of the participant's entry into the Purchase Plan, provided that such
amount was not less than the fair market value of the Common Stock on the
start date of the offering period), and (ii) the fair market value on the
semi-annual purchase date.
Page 45
<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Restated Certificate of Incorporation limits, to the maximum
extent permitted by Delaware law, the personal liability of directors for
monetary damages for breach of their fiduciary duties as a director.
Delaware law does not permit a corporation to eliminate a director's duty
of care, nor does it permit elimination of liability for monetary damages
for breach of a director's duty of loyalty. Further, the provisions of the
Company's Restated Certificate of Incorporation have no effect on the
availability of equitable remedies such as injunction or recession or
monetary damages for a breach of a director's duty of care. Moreover,
non-monetary equitable remedies may not provide effective protection due to
factors such as procedural limitations on obtaining such relief and the
timeliness of any such sought relief. The Company's Restated Bylaws provide
that the Company shall indemnify its officers and directors and may
indemnify its employees and other agents to the fullest extent permitted by
law. Some current and former Directors and Officers of the Company have
entered into employment agreements or severance agreements that provide
that the indemnification provisions for directors and officers under the
Company's Restated Bylaws (to the maximum extent permitted by law) and/or
insurance coverage will be extended to such Director or Officer following
termination of his or her employment with respect to matters occurring
during his or her employment period.
In December 1995, the Company entered into indemnification agreements with
certain of its Directors and Officers whereby the Company agreed to
indemnify such Directors and Officers, subject to the exceptions set forth
therein, to the fullest extent permitted by the Delaware General
Corporation Law and the Restated Bylaws of the Company and against expenses
incurred by such Directors or Officers in connection with any liability
which he or she may incur in his or her capacity as such.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify a director, officer, employee or agent made a
party to an action by reason of the fact that he was director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred by him in
connection with such action, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action, had no reasonable
cause to believe was unlawful.
Insofar as the liability of directors for monetary damages for breach of
fiduciary duty of care under state law may be limited as aforesaid, such
limitations do not apply to liabilities of directors under federal
securities laws.
Insofar as the Company's Restated Certificate of Incorporation or Restated
Bylaws provide for indemnification of directors, officers and persons
controlling the Company against certain liabilities as aforesaid, it is the
opinion of the staff of the SEC that such indemnification is against public
policy as applied to liabilities under federal securities laws and is
therefore unenforceable. In accordance with such position of the staff, no
indemnification is available to directors, officers or controlling persons
for liabilities under federal securities laws.
The Company provides directors and officers liability insurance and
reimbursement insurance policies for its Officers and Directors.
See Item 3 of this 10-K regarding pending or threatened litigation
involving any director or officer of the Company where indemnification will
be required or permitted.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table sets forth certain information to the knowledge of the
Company regarding the beneficial ownership of the Company's Common Stock
and PRIDES as of March 1, 1998 for (i) each person known to the Company
beneficially to own 5% or more of the outstanding shares of its Common
Stock or PRIDES, (ii) each of the Company's directors, the Chief Executive
Officer and the named executive officers, and (iii) all directors and
executive officers as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock and PRIDES listed
below, based on information furnished by such owners, have sole investment
and voting power with respect to such shares, subject to community property
laws where applicable.
Page 46
<PAGE>
<TABLE>
<CAPTION>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
===================================================================================================================
Number of Shares Number of Shares
Of Common Stock of PRIDES Percentage of
Beneficial Owners (1) Beneficially Owned (2) Beneficially Owned Shares Outstanding
============================================== ---------------------- ------------------ ------------------
<S> <C> <C> <C>
Grace Brothers Ltd. 3,103,825(3) 5,000 8.4% Common
1560 Sherman Avenue 4.9% PRIDES
Suite 900
Evanston, IL 60201
============================================== ---------------------- ------------------ ------------------
Lawrence A. Heller 356,236(4) 8,550 0.96% Common
Quadrangle Offshore 8.34% PRIDES
(Cayman) LLC
31 West 52nd Street
New York, NY 10019
=============================================== ---------------------- ------------------ ------------------
Gerald R. Alderson 287,000 - *(5)
=============================================== ---------------------- ------------------ ------------------
Charles Christenson 67,000 - *
=============================================== ---------------------- ------------------ ------------------
Angus M. Duthie 59,720 - *
=============================================== ---------------------- ------------------ ------------------
Mark D. Lerdal 12,896,458 - 35% Common
=============================================== ---------------------- ------------------ ------------------
Michael U. Alvarez 131,441 - *
=============================================== ---------------------- ------------------ ------------------
James J. Eisen - - *
=============================================== ---------------------- ------------------ ------------------
Nicholas H. Politan 2,400 - *
=============================================== ---------------------- ------------------ ------------------
Mervin E. Werth 20,000 - *
=============================================== ---------------------- ------------------ ------------------
Michael A. Haas 6,462(6) 70(6) *
=============================================== ---------------------- ------------------ ------------------
All Directors and Executive Officers as a Group 13,464,019 - 36% Common
(the above-listed 8 persons, excluding
Michael A. Haas)
=============================================== ---------------------- ------------------ ------------------
(1) Information for beneficial owners of 5% or more of the Company's Common Stock or PRIDES is reported from and as
of the date of such owner's latest Schedule 13D or 13G (as amended) provided to the Company.
(2) Except as otherwise specifically noted, the number of shares stated as being beneficially owned includes
(a) all options under which officers or directors could acquire common stock currently and within 60 days following
March 1, 1998 (i.e., Gerald R. Alderson (287,000 shares), Charles Christenson (47,000 shares), Angus M. Duthie
(47,000 shares), Mark D. Lerdal (31,000 shares), Michael U. Alvarez (130,000 shares), Nicholas H. Politan (2,400
shares), Mervin E. Werth (20,000 shares) and all directors and officers as a group (564,400 shares)), and
(b) shares believed by the Company to be held beneficially by spouses.
The inclusion of shares herein, however, does not constitute an admission that the persons named as stockholders are
direct or indirect beneficial owners of such shares.
(3) According to a Statement on Schedule 13G/A filed with the Commission on January 27, 1998, includes 208,325 shares
obtainable upon conversion of 5,000 shares of the Company's 8-1/4% Preferred Redeemable Increased Dividend Equity
Securities (250,000 depositary shares) at the conversion rate of 41.665 shares of Common Stock per share. According
to such Statement on Schedule 13G/A, Grace Brothers Ltd. is an Illinois limited partnership that is a Broker or Dealer
registered under Section 15 of the Securities Exchange Act of 1934.
(4) According to a Statement on Schedule 13D/A filed with the Commission on November 17, 1997, includes 356,236 shares
obtainable upon conversion of 8,550 shares of the Company's 8-1/4% Preferred Redeemable Increased Dividend Equity
Securities (427,500 depositary shares) at the conversion rate of 41.665 shares of Common Stock per share.
(5) Does not exceed one percent of the class so owned.
(6) Based on the latest information provided to the Company by Mr. Haas.
</TABLE>
REGISTRATION RIGHTS
The beneficial holders (or their transferees) of approximately 14,000,000
shares of Common Stock, are entitled to certain rights with respect to the
registration of such shares under the Securities Act of 1933 (the
"Securities Act"). Under the terms of the Registration Rights Agreements
dated as of June 28, 1985 (the "Registration Rights Agreement"), between
the Company and such holders, if the Company proposes to register any of
its securities under the Securities Act, either for its own account or the
account of other security holders exercising registration rights, such
holders are entitled to notice of such registration and are entitled to
include shares of such Common Stock therein; provided, among other
Page 47
<PAGE>
conditions, that the underwriters of any offering have the right to limit
the number of shares included in such registration. In addition, for a
period of eight years after September 21, 1993, the date of the Company's
initial public offering of its Common Stock, a holder or holders of an
aggregate of 40% or more of the shares subject to such registration rights
may require the Company on not more than six occasions to file a
registration statement under the Securities Act with respect to their
shares of Common Stock.
Additionally, parties to the Stock Purchase Agreement dated as of June 30,
1992, and the Note Purchase Agreement dated as of June 25, 1992 (the
"Notes"), are entitled to notice of any registration of Common Stock
proposed by the Company, either for its own account or the account of other
security holders exercising registration rights, and, are entitled to
include shares of the Common Stock which they own by virtue of the
conversion of the preferred stock and/or Notes obtained pursuant to such
agreements, subject to (i) the underwriters' limitations, and (ii) in the
case of a secondary offering on behalf of holders of registration rights
pursuant to the Registration Rights Agreement, the consent of the holders
of such rights. The parties to such agreements are also given the right to
require the Company to register their shares of Common Stock, but may
exercise such right not more than once every two years.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
KWI entered into certain Asset Sale Compensation Agreements with each of
James J. Eisen, and Nicholas H. Politan and KWI and KENETECH International
Ltd. ("KIL") entered into a certain Asset Sale Compensation Agreement with
Michael A. Haas pursuant to which such executive officers of the Company
have received or will receive a percentage ranging from 0.5% to 3% of the
gross proceeds derived from the disposition of certain specified assets of
KWI or KIL (see footnotes to the Summary Compensation Table for amounts
earned in 1996 and 1997).
All of the defendant officers and directors and KENETECH Corporation are
jointly represented by the same counsel in the securities class action
described in Item 3 to this 10-K. A portion of such counsel's legal fees
has been paid by the Company, however, such fees have not been apportioned
among the individual defendants.
Page 48
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) (1)FINANCIAL STATEMENTS
KENETECH Corporation:
The consolidated financial statements of KENETECH Corporation are
included in Part II, Item 8 as follows:
KENETECH Corporation Consolidated Financial Statements Page
------------------------------------------------------ ------
Independent Auditors' Reports 18
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996, and 1995 19
Consolidated Balance Sheets, December 31, 1997 and 1996 20
Consolidated Statements of Stockholders' Equity (Deficiency)
for the years ended December 31, 1997, 1996 and 1995 21
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 22
Notes to Consolidated Financial Statements 23 - 39
(a) (2)KENETECH Corporation Financial Statement Schedules
--------------------------------------------------
I. Condensed Financial Information of Registrant for the
years ended December 31, 1997, 1996 and 1995 54
II. Valuation and Qualifying Accounts for the years ended
December 31, 1997, 1996 and 1995 55
Financial statements and supplemental schedules not included have been
omitted because of the absence of conditions under which they are
required or because the information is included elsewhere in this report.
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<PAGE>
(a)(3) EXHIBITS - All of the Exhibits (except 10.51 - 10.56 and 21.1) listed
below were previously filed with Registration Statements or Reports on Form
10-K of KENETECH Corporation as specified below.
Number Description
3 ARTICLES OF INCORPORATION AND BYLAWS
3.1(3) Restated Certificate of Incorporation of KENETECH Corporation
("KENETECH").
3.2(10) Restated Bylaws of KENETECH, as amended November 16, 1995 and February
27, 1997.
10 MATERIAL CONTRACTS
FINANCING AGREEMENTS AND RELATED DOCUMENTS
10.1(4) Third Amended and Restated Line of Credit and Security Agreement dated
as of March 31, 1994, among KENETECH, CNF Industries, Inc., Process
Construction Supply, Inc., CNF Construction, Inc., KENETECH Windpower, Inc.
and Shawmut Bank Connecticut, N.A.
10.2(5) Indenture dated as of December 28, 1992, between Meridian Trust Company
of California, as Trustee, and KENETECH Corporation.
10.3(7) Indenture of Trust and Security Agreement dated as of February 13, 1992,
between Meridian Trust Company of California, as Trustee, and KENETECH
Windpower, Inc. ("Windpower") (formerly U.S. Windpower, Inc.).
10.4(4) First Supplemental Indenture of Trust and Security Agreement dated as of
June 15, 1993, between Meridian Trust Company of California, as Trustee,
and KENETECH Windpower, Inc.
10.5(7) Term Loan Agreement dated as of October 31, 1991, among KEM Partners
1991, L.P., Banque Paribas, as a bank and agent, and certain other banks
named therein.
10.6(4) Amended and Restated Term Loan Agreement dated June 7, 1993, between KC
One Company and U.S. West Financial Services, Inc. (which restates the Term
Loan Agreement dated as of November 20, 1992).
POWER SALES AGREEMENTS
10.7(7) Pacific Gas & Electric Co. ("PG&E") Standard Offer #4 Power Purchase
Agreement (PG&E Log No. 01W004) dated March 5, 1984, between PG&E and
KENETECH Windpower, Inc. relating to a 110,0000 KW facility, filed as an
exemplar pursuant to Instruction 2 to Item 601 of Regulation S-K.
10.8(7) Electricity Purchase Agreement dated as of April 10, 1987, between
CCF-1, Inc. and The Connecticut Light and Power Company, amended and
restated as of March 3, 1987.
10.9(7) Power Sale Agreement dated April 13, 1987, between Commonwealth Electric
Company and Pepperell Power Associates Limited Partnership.
10.10(7) Agreement (Power Purchase) dated September 30, 1988, between New York
State Electric & Gas Corporation and Northern Energy Group, Inc. ("NEG"),
as amended by Amendment No. 1 and Amendment No. 2, each dated September 30,
1988, and Amendment No. 3 approved July 27, 1989, as assigned by NEG and
Chateaugay Energy Limited Partnership to KES Chateaugay, L.P., pursuant to
an Assignment and Assumption of Power Purchase Agreement dated as of July
1, 1991.
10.11(7) Power Purchase Agreement dated as of April 29, 1992, between KENETECH
Windpower, Inc. and NV Energiebedrjf voor Groningen en Drenthe.
10.12(5) Power Purchase Agreement dated as of June 23, 1993, among The
Narragansett Electric Company, Massachusetts Electric Company and Granite
State Electric Company (all of which are wholly-owned subsidiaries of New
England Electric System).
10.13(3) Power Purchase Agreement dated November 18, 1993, between Lower
Colorado River Authority and KENETECH Windpower, Inc.
10.14(3) Power Purchase Agreement dated as of April 2, 1993, between KENETECH
Windpower, Inc. and TransAlta Utilities Corporation.
10.15(7) Power Savings Agreement dated as of September 28, 1990, between
KENETECH Energy Management, Inc. ("KEM") (previously Econoler/USA, Inc.)
and Orange and Rockland Utilities, Inc., filed as an exemplar pursuant to
Item 2 of Section 601 of Regulation S-K.
10.16(3) Electricity Purchase Agreement dated December 13, 1993, between
KENETECH Ltd. and Hydro-Quebec (Site No. 1).
10.17(7) Form of Energy Service Agreement between KEM and the Host Customer.
10.18(3) Restatement of the Project Agreement dated January 29, 1993, between
USW and the Sacramento Municipal Utility District.
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DEVELOPMENT AGREEMENTS
10.19(6) Mutual Services and Financing Agreement dated April 28, 1989, between
PG&E, Electric Power Research Institute, Inc. and KENETECH Windpower, Inc.
and Sponsor Accession Agreement dated April 28, 1989, among PG&E, EPRI,
KENETECH Windpower, Inc. and Niagara Mohawk Power Corporation.
10.20(7) Demonstration Agreement dated as of October 1, 1991, between Her
Majesty the Queen in Right of Alberta and KENETECH Windpower, Inc.
10.21(6) Wind Energy Facility Sales Agreement made as of June 29, 1992, among
Krimenergo, Ukrenerguresuorsy, PHB Ukraine Ltd. and KENETECH Windpower,
Inc.
10.22(3) Development Agreement dated as of February 7, 1994, between KENETECH
Windpower, Inc. and Sacramento Municipal Utility District.
10.23(3) Development Agreement dated as of February 14, 1994, among Puget Sound
Power & Light Company, PacifiCorp, Portland General Electric Company and
KENETECH Windpower, Inc.
10.24(3) Joint Development Agreement dated as of June 21, 1993, among Central
Power Limited, The Wing-Merrill Group, Ltd., and KENETECH Windpower, Inc.
10.25(2) Development Agreement dated as of March 7, 1994, between PacifiCorp and
KENETECH Windpower, Inc.
OTHER AGREEMENTS
10.26(7) Seaboard Surety Company Contractor's General Agreement of Indemnity
dated November 15, 1989, among KENETECH, CNF Constructors, and C.N. Flagg &
Co., Incorporated.
10.27(4) Stock Purchase Agreement dated as of June 30, 1993, among KENETECH,
Weiss, Peck & Greer ("WP&G") and certain affiliates of WP&G.
10.28(1) $75,000,000 Credit Agreement among KENETECH Windpower, Inc.,
(Borrower), Morgan Guaranty Trust Company of New York (Administrative
Agent, Issuing Bank and Lender, ABN AMRO Bank N.V. San Francisco
International Branch (Collateral Agent and Lender) and The Bank of Nova
Scotia, Sanwa Bank California, Shawmut Bank Connecticut, N.A., Banque
Nationale de Paris, Banco Central Hispanoamericano, S.A., and San Francisco
Agency (Lenders) dated as of September 30, 1994.
10.29(8) Wind Operated Electricity Generator Purchase Order - Order No: 1
between KENETECH Windpower, Inc. and ABAN Loyd Chiles Offshore Ltd. dated
November 11, 1994.
10.30(8) Wind Operated Electricity Generator Purchase Order - Order No: 2
between KENETECH Windpower, Inc. and ABAN Loyd Chiles Offshore Ltd. dated
December 22, 1994.
10.31(8) Amendment to Purchase Order dated December 15, 1994 between KENETECH
Windpower, Inc. and ABAN Loyd Chiles Offshore Ltd.
10.32(8) Amendment No. 1 to Purchase Documents between KENETECH Windpower, Inc.
and ABAN Loyd Chiles Offshore Ltd. dated December 22, 1994.
EMPLOYMENT AND SEVERANCE AGREEMENTS
10.33(8) Employment Agreement dated as of March 1, 1995 between KENETECH and
Gerald R. Alderson.
10.34(8) Employment Agreement dated as of December 1, 1994 between KENETECH and
Joel M. Canino.
10.35(8) Severance Agreement and Offer Letters both dated January 23, 1995
between KENETECH and Ralph B. Muse.
10.36(9) Employment Agreement dated as of December 31, 1995 between KENETECH
and Mark D. Lerdal.
10.37(9) Employment Agreement, dated as of January 1, 1996, between KENETECH
Energy Systems, Inc. and Michael U. Alvarez.
10.38(9) Agreement, dated November 1, 1995, between KENETECH and GGG Inc.
10.39(9) Agreement, dated April 2, 1996, between KENETECH and GGG Inc.
10.40(9) Separation Agreement and Mutual Release, dated as of October 12, 1995,
between KENETECH and Jean-Yves Dexmier.
10.41(10) Employment Agreement Amendment, dated as of December 11, 1996, between
KENETECH Energy Systems, Inc. and Michael U. Alvarez.
10.42(10) Employment Agreement, dated as of April 12, 1996, between KENETECH
Corporation and James J. Eisen.
10.43(10) Employment Agreement, dated as of April 12, 1996, between KENETECH
Corporation and Michael A. Haas.
10.44(10) Employment Agreement, dated as of April 1, 1996, between KENETECH
Corporation and Mark D. Lerdal.
10.45(10) Employment Agreement, dated as of April 12, 1996, between KENETECH
Corporation and Nicholas H. Politan.
10.46(10) Separation Agreement and Mutual Release, dated as of April 9, 1996,
between KENETECH Corporation and Gerald R. Alderson.
10.47(10) Separation Agreement and Release, dated October 7, 1996, among
KENETECH Corporation, CNF Industries, Inc. and Joel M. Canino.
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<PAGE>
10.48(10) First Amendment to Separation Agreement and Release, dated October 28,
1996, among KENETECH Corporation, CNF Industries, Inc. and Joel M. Canino.
10.49(10) Retention Agreement, dated February 2, 1996, by and between KENETECH
Corporation and Mervin E. Werth.
10.50(10) Employment Agreement, dated as of April 12, 1996, between KENETECH
Windpower, Inc. and Steven A. Kern.
10.51 Employment Agreement, effective December 1, 1997, among KENETECH
Corporation, KENETECH Energy Systems, Inc., certain direct and in-direct
subsidiaries of KENETECH Energy Systems and Michael U. Alvarez.
10.52 Separation Agreement and Mutual Release, dated as of June 30, 1997,
between KENETECH Corporation and James J. Eisen.
10.53 Separation Agreement and Mutual Release, dated as of August 1, 1997,
between KENETECH Corporation and Nicholas H. Politan.
10.54 Separation Agreement and Mutual Release, dated as of March 12, 1997,
between KENETECH Corporation and Michael A. Haas.
ASSET SALE AGREEMENTS
10.55 Master Agreement of Dissolution, Distribution and Assignment, dated as
of August 27, 1997, between Enron Power I (Puerto Rico), Inc. and CNF
Penuelas, Inc.
10.56 Master Agreement of Dissolution, Distribution and Assignment, dated as
of August 27, 1997, between Enron Equipment Procurement Company and CNF
Equipment, Inc.
16 LETTER RE: CHANGE IN CERTIFYING ACCOUNTANT
16.1 (9) Letter from Deloitte & Touche, LLP dated May 11, 1995.
16.2 (9) Letter from Deloitte & Touche, LLP dated May 17, 1995.
21 SUBSIDIARIES OF THE REGISTRANT
21.1 Subsidiaries
(1) Incorporated by reference to Form 10-Q filed with the Securities and
Exchange Commission & by Registrant on November 16, 1994.
(2) Incorporated by reference to Amendment No. 3 to Form S-1, File No. 33-76590
filed April 27, 1994.
(3) Incorporated by reference to Form S-1, File No. 33-76590 filed with the
Securities and Exchange Commission by the Registrant on March 18, 1994.
(4) Incorporated by reference to Amendment No. 1 to Form S-1, File No.
33-65902, filed with the Securities and Exchange Commission by the
Registrant on August 19, 1993.
(5) Incorporated by reference to Form S-1, File No. 33-65902, filed with the
Securities and Exchange Commission by Registrant on July 7, 1993.
(6) Incorporated by reference to Amendment No. 2 to Form S-1, file No.
33-53132, filed with the Securities and Exchange Commission by the
Registrant on December 19, 1992.
(7) Incorporated by reference to Form S-1, File No. 33-53132, filed with the
Securities and Exchange Commission by the Registrant on October 9, 1992.
(8) Incorporated by reference to Form 10-K, File No. 33-53132, filed with the
Securities and Exchange Commission by the Registrant on April 5, 1995.
(9) Incorporated by reference to Form 10-K, File No. 33-53132, filed with the
Securities and Exchange Commission by the Registrant on April 15, 1996.
(10) Incorporated by reference to Form 10-K, File No. 33-53132, filed with the
Securities and Exchange Commission by the Registrant on April 1, 1997.
(b) Reports on Form 8-K:
The Registrant filed a Report on Form 8-K, dated December 17, 1997,
annexing a press release issued on December 15, 1997 announcing the closing
of the construction financing for the Penuelas, Puerto Rico project.
(c) Exhibits:
Other than items 10.51 - 10.56 and 21.1, the documents and agreements
listed in Item 14(a)3 have been previously filed with the Securities and
Exchange Commission and are hereby incorporated by reference.
(d) Financial Statement Schedules:
The financial statements and financial statement schedules listed in item
14(a)(1) and (2) are filed as part of this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, therewith duly authorized.
KENETECH Corporation
By: /s/ Mark D. Lerdal
Mark D. Lerdal
President, Chief Executive Officer, and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the date indicated:
Signature Title Date
/s/ Mark D. Lerdal President, Chief Executive March 30, 1998
Officer, and Director
Mark D. Lerdal
/s/ Nicholas H. Politan Chief Financial Officer, March 30, 1998
Vice President and
Assistant Secretary
Nicholas H. Politan
/s/ Mervin E. Werth Corporate Controller, March 30, 1998
Chief Accounting Officer
and Assistant Treasurer
Mervin E. Werth
/s/ Gerald R. Alderson Director March 30, 1998
Gerald R. Alderson
/s/ Charles Christenson Director March 30, 1998
Charles Christenson
/s/ Angus M. Duthie Chairman of the Board March 30, 1998
of Directors
Angus M. Duthie
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<PAGE>
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(in thousands)
CONDENSED STATEMENTS OF OPERATIONS
for the years ended December 31, 1997, 1996 and 1995
1997 1996 1995
--------- --------- ---------
Equity in earnings of consolidated
subsidiaries $(16,676) $ (28,597) $(257,313)
General and administrative (expenses) (4,624) (12,619) (6,513)
reimbursement
Interest income 118 4,061 7,210
Interest expense (14,096) (14,072) (15,031)
Gain (loss) on sales of
subsidiaries and assets 10,036 (9,623) -
-------- --------- ---------
Income (Loss) before taxes (25,242) (60,850) (271,647)
Income tax expense (benefit) - 23,391 (21,499)
-------- --------- ---------
Net income (loss) $(25,242) $ (84,241) $(250,148)
======== ========= =========
CONDENSED BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
Current assets: 1997 1996
-------- --------
Cash and cash equivalents $ 2,383 $ 2,865
Other 72 3,076
-------- --------
Total current assets 2,455 5,941
Investments in subsidiaries (22,346) (14,427)
Due from affiliates 30,342 27,673
Other assets 16,171 15,700
-------- -------
Total assets $ 26,622 $ 34,887
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 340 $ 814
Accrued liabilities 35,462 17,760
Senior secured notes payable 99,139 99,005
Other 5,190 5,575
-------- --------
Total current liabilities 140,131 123,154
Accrued dividends on preferred stock 19,196 9,633
-------- --------
Total liabilities 158,327 132,787
Stockholders' deficiency:
Preferred Convertible Stock 99,561 99,561
Common stock 4 4
Other stockholders' deficiency (231,270) (197,465)
-------- --------
Total stockholders' deficiency (131,705) (97,900)
-------- --------
Total liabilities and stockholders' deficiency $ 26,622 $ 34,887
======== ========
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SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(in thousands)
CONDENSED STATEMENTS OF CASH FLOWS for the
years ended December 31, 1997, 1996 and 1995
1997 1996 1995
-------- -------- --------
Net cash used in operating activities $ (972) $ (7,122) $(40,346)
Net cash provided by investing activities 1,140 11,205 16,299
Net cash provided by (used in)
financing activities (650) (5,089) 949
-------- -------- --------
Increase (Decrease) in cash and
cash equivalents (482) (1,006) (23,098)
Cash and cash equivalents at
beginning of year 2,865 3,871 26,969
-------- -------- --------
Cash and cash equivalents at end of year $ 2,383 $ 2,865 $ 3,871
======== ======== ========
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance Charged to Balance
Beginning Costs & Deductions at End
Description of Period Expenses (1) of Period
- ----------- --------- ---------- ---------- ---------
Warranty reserves:
Year ended December 31, 1995 $ 2,157 $ 73,586 $ 9,831 $ 65,912
Year ended December 31, 1996 65,912 - 65,912 -
Year ended December 31, 1997 - - - -
Project development allowance (2):
Year ended December 31, 1995 $ - $ 24,805 $ 3,279 $ 21,526
Year ended December 31, 1996 21,526 1,557 21,526 1,557
Year ended December 31, 1997 1,557 1,943 - 3,500
Allowance for doubtful accounts:
Year ended December 31, 1997 $ - $ 1,546 $ - $ 1,546
- ---------------
(1) 1996 deductions result from the deconsolidaiton of KWI and the
write-off of wood project in Illinois.
(2) Deducted from power plants under development.
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into and effective as of this 1st day of
December 1997, by and between KENETECH Energy Systems, Inc. a Delaware
corporation (the "Company"), KENETECH Corporation (the "Parent"), KES Penuelas
Holdings, Inc., KES LNG, Ltd.; KES Penuelas Ltd., KES Puerto Rico, L.P., KES
Bermuda, Inc. (collectively referred to as the "Subsidiaries"), and Michael U.
Alvarez, an individual currently employed by the Company (the "Executive").
RECITALS:
A. The Executive presently is employed as an Executive Officer by the Company
and has valuable experience and knowledge with respect to the business and
affairs of the Company, the Parent and its Subsidiaries;
B. The Parent, the Company and its Subsidiaries (each jointly and severally an
"Employer" and, collectively, the "Employers") desire to continue the
services of the Executive for the purposes of disposing of the Company's
interests (the "EcoElectrica Interest") in EcoElectrica, L.P.
("EcoElectrica"), and are willing to offer the Executive the incentive to
do so in the form of a written Employment Agreement which supersedes all
prior Employment Agreements executed by the parties hereto, and the
Executive desires to enter into a new Employment Agreement;
C. Representatives of the holders of not less than $34 million principal
amount of the Parent's 12 3/4% Secured Notes (the "Secured Notes") have
participated in the negotiation of this Employment Agreement and have
represented that such holders, and perhaps others, are prepared to give
written assurances to the Executive substantially to the effect that such
holders (and their assignees and transferees) will not object to and will
support the terms of this Employment Agreement before any tribunal with
appropriate jurisdiction (the "Assurances") and each Employer has agreed to
use its best efforts to obtain Assurances from the holders of not less than
$51 million principal amount of Secured Notes which, when received, shall
be filed by the Secretary of each Employer with minutes of meetings of the
Board of Directors of such Employer. The Executive has specifically relied
on the expectation of receiving the Assurances prior to the filing by any
Employer of any bankruptcy petition under the Federal Bankruptcy Code as an
inducement to enter into this Employment Agreement and cancel the existing
employment agreement.
D. This Employment Agreement has been approved by the Board of Directors of
the Parent and is to be approved by the Board of Directors of each of the
Company and the Subsidiaries. The execution of this Employment Agreement
conclusively evidences that such approvals have been duly authorized by the
respective Boards of Directors certifying that each of the obligations
owing to the Executive hereunder are joint and several obligations of each
of the Employers. Copies of the Resolutions of the respective Boards of
Directors are attached hereto.
NOW, THEREFORE, in consideration of the above recitals; the continued employment
of the Executive by the Employers, the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed as follows:
AGREEMENT
1. EMPLOYMENT
1.1 Duties. The Employers will continue to employ the Executive in his current
position for the Employment Period. The Executive agrees to continue in
such employment for the duration of the Employment Period and to perform in
good faith and to the best of the Executive's ability all services which
may be required of the Executive's position and to be available to render
such services at all reasonable times and places in accordance with
reasonable directives and assignments issued by the President of the
Company and the Company's Board of Directors. During the Executive's
Employment Period, he will devote such time and effort as may be necessary
to implement the business and affairs of the Employers within the scope of
the executive office. The Executive's principal employment location shall
be San Francisco, California and the Executive shall have no obligation to
relocate at the request of the Company. Except to the extent allowed by the
Board of Directors of the Company, the Executive will not, whether for the
Executive's own account or as an employee, consultant or advisor, provide
services to any business enterprise which is in direct competition with the
Employers, provided, however, that the Executive will have the right to
consult with and provide services to any other business enterprise, and to
perform such incidental services as are necessary in connection with (a)
<PAGE>
the Executive's private passive investments, (b) the Executive's charitable
or community activities, and (c) the Executive's participation in trade or
professional organizations, but only to the extent in each case that such
services do not interfere with the performance of the Executive's services
hereunder.
1.2 Term of Employment. Unless sooner terminated in connection with a
termination for cause (pursuant to paragraph 1.5 hereof), the Executive is
and will continue to be employed by the Employers for a period (the
"Employment Period") until the later to occur of: (a) December 31, 1998;
(b) 90 days following the closing of the sale of the EcoElectrica Interest;
and (c) the date on which all payments due hereunder are fully and finally
paid; at the Executive's current annual base salary ("Base Salary") and
with the same employee benefits applicable as of January 1, 1997.
1.3 Death of Executive. The employment relationship established by this
Employment Agreement shall be terminated automatically upon the death of
the Executive; provided, however, that if any of the Special Bonus Payments
(as defined in paragraph 2 hereof) would otherwise have been earned or
would have been payable within one year of the date of the Executive's
death, the Employers will pay the Executive's estate such Special Bonus
Payments.
1.4 Disability of Executive. This Employment Agreement shall be terminated
automatically upon the permanent disability of the Executive. For purposes
of this Employment Agreement, a permanent disability shall be deemed to
have occurred if (a) the Executive is unable to perform his material duties
hereunder for a period of ninety (90) consecutive days, or one hundred
eighty (180) days in any one (1) year period, on account of any physical or
mental disability, or (b) a licensed physician selected by the Company and
approved by the Executive (or his closest relative if the Executive is
unable to act), which approval shall not be unreasonably withheld, makes a
medical determination of physical or mental disability or incapacity of the
Executive, provided, however, that if any of the Special Bonus Payments
would otherwise have been earned or would have been payable within one year
of the date of the Executive's permanent disability, the Employers will pay
the Executive such Special Bonus Payments.
1.5 Termination for Cause. This Employment Agreement may be terminated
voluntarily by the Employers at any time during its term upon (a) any
finding of felonious conduct or material fraud by the Executive or (b)
embezzlement or misappropriation of funds or property of the Employers by
the Executive, in each case upon written notice to the Executive specifying
the cause for termination. This Employment Agreement may be terminated by
the Employers at any time during its term upon (A) any material breach by
the Executive of his duties under this Employment Agreement, (B) gross
negligence by the Executive, (C) any conduct or act of moral turpitude, or
any conduct or act done or committed by the Executive that will, in the
minds of reasonable people, reflect negatively on the Employers, or that
brings the Employers into public hatred, contempt or ridicule or that tends
to shock or offend the community in which the Executive represents the
Employers, in each case in a material or significant way, (D) the
Executive's consistent refusal to perform his material duties and
obligations, or (E) the Executive's willful and intentional misconduct in
the performance of his material duties and obligations, in each case after
written notice to the Executive specifying the cause for termination, and,
in the case of the causes described in subparagraph (A) and (D) above, the
passage of not less than thirty (30) days after receipt of such notice,
during which time the Executive shall have the right to respond to the
Employers' notice and cure the breach or other event giving rise to the
termination.
1.6 Change in Control. Upon a Change in Control, the Employers will pay the
Executive a lump sum amount equal to one year's Base Salary. For purposes
of this Employment Agreement, "Change in Control" means:
(a) a merger or acquisition in which the Parent is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State of the Parent's incorporation;
(b) the sale, transfer or other disposition of all or substantially all of
the assets of the Parent in liquidation or dissolution of the Parent;
(c) any reverse merger in which the Parent is the surviving entity, but in
which fifty percent (50%) or more of the Parent's outstanding voting
stock is transferred to holders different from those who held the
stock immediately prior to such merger; or
<PAGE>
(d) the acquisition of more than fifty percent (50%) of the Parent's
outstanding voting stock pursuant to a tender or exchange offer made
by a person or related group of persons (other than the Parent or a
person that directly or indirectly controls, is controlled by or is
under common control with the Parent).
1.7 Withholding. The Employers will deduct and withhold, from the compensation
payable to the Executive under this Employment Agreement, any and all
Federal, State and local income and employment withholding taxes and any
other amounts required to be deducted or withheld by the Employers under
the applicable statute or regulation.
2. SPECIAL BONUS PAYMENTS
The Employers shall pay the Executive certain bonuses (collectively referred to
as "Special Bonus Payments") as set forth below.
2.1 Financial Closing Bonus. On the date EcoElectrica closes the funding of a
nonrecourse construction loan pursuant to a Credit Agreement, dated as of
October 31, 1997, among EcoElectrica, Banque Paribas and ABN AMRO Bank (the
"Financial Closing"), the Employers will pay to the Executive a Financial
Closing bonus in the amount of $350,000.
2.2 ECOELECTRICA BONUS. An EcoElectrica bonus (the "EcoElectrica Incentive")
shall be paid to the Executive as follows. The EcoElectrica Incentive shall
be determined with reference to Distributable Cash (as defined below)
resulting from the transactions in which the Employers directly or
indirectly sell, transfer or otherwise dispose of all or substantially all
of the EcoElectrica Interest and shall not exceed six million dollars
($6,000,000) in an aggregate amount to be shared by the Executive, Aaron T.
Samson and Scott J. Taylor. "Distributable Cash" means cash and or cash
equivalents distributable or available for distribution by the Company and
the Subsidiaries, to the Parent (including all cash paid, advanced, or
distributed to the Parent and its affiliates after the date hereof) net of
(a) amounts due under the Loan Agreement, dated as of August 30, 1996, by
and between Lyon Credit Corporation and KES Penuelas Holdings, Inc., (b)
liabilities known to the Company and those actually known by the Executive
(other than nonrecourse debt or obligations) arising from the Company's
ownership of Hartford Hospital, Chateaugay, Pepperell and other Company
assets (other than the EcoElectrica Interest), (c) direct and approved
costs of sale of EcoElectrica Interest, (d) up to $10 million in the
aggregate in respect of the provision or payment of taxes payable by the
Parent (on a consolidated basis) arising from the sale of the EcoElectrica
Interest and/or amounts, if any, paid or provided by the Parent to reduce
or settle intercompany claims or debts within the Parent's family as
certified by the Chief Financial Officer, or other authorized officer of
the Parent as of the date of such distribution (including crossclaims
involving KENETECH Windpower, Inc. ("KWI")) and (e) Gross Sales Proceeds
(as defined below) with respect to which Other Asset Incentive (as defined
below) is paid. Distributable Cash is not reduced by (a) payments with
respect to the EcoElectrica Incentive and the Other Asset Incentive or (b)
costs or fees associated with bankruptcy filings, if any, by the Parent
and/or affiliates. The Executive shall be entitled to receive a forty
percent (40%) share (the "Share") of the EcoElectrica Incentive. The Share
shall be paid to the Executive (the "Share Payments") as and when payments
are made to the holders of the Secured Notes (the "Note Payments") in the
same proportion each Note Payments bear to the lesser of (x) amounts of
principal and interest remaining due on the Secured Notes on the date of
such Note Payment or (y) the amount the holders of the Secured Notes have
agreed to accept in full satisfaction of the Secured Notes; provided,
however, that to the extent a Note Payment has been reduced, in effect, by
an offset against Distributable Cash not described above, such Note Payment
shall be deemed not to have been so reduced for purposes of the
corresponding Share Payment; and, provided further, that in no event shall
the entire Share be paid to the Executive later than the earlier of the
first anniversary of the date of the sale of the EcoElectrica Interest or
the date that the obligations under the Secured Notes have been cancelled.
In his sole discretion, the Executive may direct the Company to allocate a
portion of his share of the EcoElectrica Incentive (and the Other Asset
Incentive) to other employees as additional compensation to them. If, due
to reasons reasonably beyond the control of the Employers, the liabilities
described in clause (d) have not been paid or provided for as of the time
of distribution, then the Executive shall be entitled to distribution of
100% of his share of the EcoElectrica Incentive calculated to be due,
assuming the total of such liabilities is $10 million less the amount that
such liabilities as have been paid or provided for prior to the date of
distribution; provided, however, that the balance due to the Executive
<PAGE>
shall from time to time be distributed immediately upon the provision or
payment of any such liability (up to $10 million in the aggregate) or upon
any determination that no further liabilities described in clause (d)
exist, whichever first occurs. In the event the Parent determines not to
sell the EcoElectrica Interest by December 31, 1998, and instead determines
to refinance or otherwise provide for the payment or satisfaction of the
Secured Notes or determines to recapitalize the Parent, Distributable Cash
shall be determined at that time, with reference to the implied value of
the EcoElectrica Interest and/or the Employers' then going concern value
and shall make the Share Payments as and when the Note Payments are made as
above provided, but in no event shall the entire Share be paid to the
Executive later than the earlier of the first anniversary of the date of
such refinancing or recapitalization or the date the Secured Notes have
been cancelled.
Distributable Cash EcoElectrica Incentive (Expressed as
Incremental % of Distributable Cash)
$100 million to $110 million 5
$110 million to $120 million 6
$120 million to $130 million 7.5
$130 million to $140 million 9
more than $140 million 10
2.3 Other Asset Bonuses. Fifteen percent (15%) (but not to exceed $750,000 in
the aggregate for the Executive, Aaron T. Samson and Scott J. Taylor) of
the Gross Sales Proceeds resulting from the disposition of all
miscellaneous assets of the Company (other than EcoElectrica) or settlement
of any claims by or against the Company, including, but not limited to
Hartford Hospital, KES Chateaugay, L.P. and Pepperell, shall be set aside
at the time of each closing thereof for a fund to make bonus payments to
the Executive, Aaron T. Samson and Scott J. Taylor (the "Other Asset
Incentive"). The Executive shall be entitled to a forty percent (40%) share
of the Other Asset Incentive funds received from the disposition of such
assets or settlement of such claims within five (5) days of receipt by the
Employers thereof.
"Gross Sales Proceeds" means the amount of cash proceeds realized or to be
realized by the Company and affiliates, without regard to actual or
proposed timing of receipt, from a purchaser or through escrow releases
(e.g., cash releases securing equity funding or indemnity deposits) and, in
any case, without deduction for legal expenses, taxes, other fees, loan
repayments, compensation payments or amounts paid to the KWI estate to
settle creditors' claims.
3. CONFIDENTIALITY. The Executive hereby acknowledges that the Employers may,
from time to time during the Employment Period, disclose to the Executive
confidential information pertaining to the Employers' business and affairs
and client base, including (without limitation) customer lists and
accounts, other similar items indicating the source of the Employers'
income, and information pertaining to the salaries and performance levels
of the Employers' employees. The Executive will not, at any time during or
after such Employment Period, disclose to any third party or directly or
indirectly make use of any such confidential information, including
(without limitation) the names, addresses and telephone numbers of the
Employers' customers, other than in connection with, and in furtherance of,
the Employers' business and affairs. All documents and data (whether
written, printed or otherwise reproduced or recorded) containing or
relating to any such proprietary information of the Employers which come
into the Executive's possession during the Employment Period will be
returned by the Executive to the Employers immediately upon the termination
of the Employment Period or upon any earlier request by the Employers, and
the Executive will not retain any copies, notes or excerpts thereof. The
Executive's obligations under this Section 3 will continue in effect after
termination of the Executive's employment with the Employers, whatever the
reason or reasons for such termination, and the Employers will have the
right to communicate with any of the Executive's future or prospective
employers concerning the Executive's continuing obligations under this
Section 3.
4. INDEMNIFICATION. The indemnification provisions for Officers and Directors
under the Employers' Bylaws will (to the maximum extent permitted by law)
be extended to the Executive, and during the period following the
Executive's termination irrespective of a Change in Control, with respect
to any and all matters, events or transactions occurring or effected during
the Executive's Employment Period.
<PAGE>
5. GOVERNING LAW. This Employment Agreement shall be governed, construed and
interpreted under, and in accordance with, the laws of the State of
California.
6. ENTIRE EMPLOYMENT AGREEMENT. This Employment Agreement constitutes the
entire Employment Agreement (and supersedes and replaces in their entirety
any prior Employment Agreements, arrangements and understandings) between
the Executive, the Parent, the Company or the Subsidiaries with respect to
the subject matter hereof, and no amendment hereof shall be deemed valid
unless in writing and signed by the parties hereto.
7. INTERPRETATION AND CONSTRUCTION. The headings and sections of this
Employment Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Employment Agreement. It is the intention
of the parties hereto that the provisions contained herein be enforceable
to the fullest extent permitted by applicable law. In the event that any
provision of this Employment Agreement shall be finally determined to be
unenforceable, such provision shall not be entirely void, but rather shall
be limited or revised by a court of competent jurisdiction only to the
extent necessary to make it enforceable, but every other provision of this
Employment Agreement shall remain in full force and effect. In the event
that this Employment Agreement is rejected as an executory contract or
otherwise by any one, or more of the obligors hereunder, such rejection
shall have no effect upon the liability of the remaining obligors.
8. BINDING EFFECT NONASSIGNABILITY; WAIVER. The rights and obligations of the
Company, the Parent and the Subsidiaries under this Employment Agreement
shall inure to the benefit of, and shall be binding upon, the Parent, the
Company and its Subsidiaries and their successors and assigns. The rights
and obligations of the Executive under this Employment Agreement are
personal to the Executive and may not be assigned, transferred or delegated
by the Executive to any other person or entity except as provided for
herein. The waiver of any of the parties of any breach of any provision
hereof shall not be effective unless in writing and shall not constitute a
waiver by such party of any other succeeding breach of any provision
hereof.
9. ACKNOWLEDGMENT. The Executive acknowledges that he has carefully read all
of the provisions of this Employment Agreement, and has given careful
consideration to the restrictions imposed upon him hereby, and he agrees
that the same are necessary for the proper protection of the Employer's
business and that the Employers have agreed to enter into this Employment
Agreement in partial consideration of the representation of the Executive
that he will abide by and be bound by such provisions. He further confirms
that he considers each of said provisions to be reasonable with respect to
the subject matter thereof.
10. DISPUTES. Any dispute or controversy arising among the parties to this
Employment Agreement relating to the validity, enforceability, enforcement,
performance, construction, and interpretation of this Employment Agreement,
including a dispute pertaining to the validity or enforceability of this
provision shall be enforceable in law and in equity and the expenses and
attorneys' fees incurred by the Executive in seeking relief, in addition to
such other relief as may be granted, shall be paid by the Employers. Any
proceeding for injunctive relief (including temporary restraining orders,
preliminary injunctions and permanent injunctions) may be brought in any
court of competent jurisdiction.
11. COUNTERPARTS. This Employment Agreement may be executed in two or more
counterparts, all of which, when taken together, shall constitute one and
the same Employment Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the day and year first above written.
Dated: February 20, 1998
______________________________ KES PENUELAS, LTD.
Michael U. Alvarez a BVI Company
KENETECH ENERGY SYSTEMS, INC. By:
a Delaware corporation Mark D. Lerdal, Vice President
By: KES PUERTO RICO, L.P.
Mark D. Lerdal, Vice President a Bermuda Exempted Limited Partnership
KENETECH CORPORATION, By:
Delaware corporation Mark D. Lerdal, Vice President
KES LNG, Ltd., General Partner
By: KES BERMUDA, INC.
Mark D. Lerdal, CEO & President a Delaware corporation
KES PENUELAS HOLDINGS, INC. By:
a Delaware corporation Mark D. Lerdal, Vice President
By:
Mark D. Lerdal, Vice President
KES LNG, LTD.
a BVI Company
By:
Mark D. Lerdal, Vice President
<PAGE>
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (the Agreement) is made and entered into as of June
30, 1997, by and between KENETECH CORPORATION (the Company), a Delaware
corporation, and JAMES J. EISEN (the Employee), who has been employed by the
Company.
RECITALS
The Company and the Employee are parties to an Employment Agreement dated April
12, 1996 (the Employment Agreement). The Company is terminating the Employee's
employment on or about June 30, 1997. The Employee will continue to act as the
Company's Vice President and General Counsel.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, and for other good and valuable consideration, the Company and
the Employee agree as follows:
1. Separation Date. The Company and the Employee agree that the Employee's
employment by the Company shall terminate effective June 30, 1997 (the
Separation Date).
2. Terms of Separation. In consideration of the agreements by the Employee
provided herein, the Company agrees as follows:
(a) In full satisfaction of any claims by the Employee in connection with
his employment by the Company or the termination of his employment by
the Company, including any claims for compensation (but subject to
Section 6(d) and (e) below), severance payments or benefits, and the
like, the Company shall pay to the Employee a lump sum amount equal to
$165,750, less all applicable deductions, within five (5) business
days following the Separation Date.
(b) The Employee shall cease participation in all employee benefit plans
of the Company effective as of the Separation Date, and the Company
shall not be liable for any payments to or on behalf of the Employee
in respect of any fringe benefits incurred after the Separation Date.
The foregoing shall not be in lieu of any continued health care
coverage to which the Employee or his dependents would otherwise, at
the Employee's expense, be entitled in accordance with the
requirements of Code Section 4980B by reason of termination of his
employment.
(c) The Company will deduct and withhold, from the compensation payable to
the Employee under this Agreement, any and all Federal, State and
local income and employment withholding taxes and any other amounts
required to be deducted or withheld by the Company under the
applicable statute or regulation.
3. Indemnification and Insurance. To the extent permitted by applicable law,
the Company agrees that all rights to indemnification from the Company
existing under the law and under the Company's certificate of incorporation
and by-laws as of the Separation Date, in favor of the Employee as an
officer, employee, or agent of the Company shall survive this Agreement and
shall continue in full force and effect with respect to any liability for
any acts or omissions by the Employee prior to or after the Separation
Date. The Company further agrees that, for so long as it maintains
directors' and officers' liability insurance that covers any active or
former officers or employees of KENETECH Corporation, it shall include the
Employee among the insured officers or employees.
4. Confidentiality Agreement. The Employee acknowledges that any
confidentiality, proprietary or ownership rights or nondisclosure
agreement(s) in favor of the Company which he may have entered into in
connection with his employment (the Confidentiality Agreement(s)) by the
Company, are understood to survive, and do survive, the termination of his
employment and this Agreement for a period of six (6) months, and
accordingly nothing in this Agreement shall be construed as terminating,
limiting or otherwise affecting any such Confidentiality Agreement(s) or
the Employee's obligations thereunder for such period.
5. Notices. Any notice given to either party to this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below or to such
changed address as such party may subsequently give such notice of.
<PAGE>
If to the Company: KENETECH Corporation
500 Sansome Street, Suite 300
San Francisco, CA 94111
Attn: Chief Executive Officer
If to the Employee: James J. Eisen
6001 Harbord Drive
Oakland, CA 94611
6. General Provisions.
(a) The effect, intent and construction of this Agreement shall be
governed by the laws of the State of California, without giving effect
to the conflict of laws rules thereof.
(b) The Company and the Employee mutually agree that neither may assign
this Agreement, or any rights or obligations under this Agreement, to
any person or entity without the express prior written approval of the
other.
(c) Except as set forth in subparagraphs (d) and (e) below, this Agreement
sets forth the entire agreement between the Company and the Employee
and supersedes any and all prior agreements or understandings between
the Company and the Employee pertaining to the subject matter hereof,
including the Employment Agreement and any other agreements relating
to the Employee's employment by the Company. Except as specifically
set forth in Paragraph 4 hereof, the Employment Agreement shall be
null and void as of the Separation Date. This Agreement shall inure to
the benefit of and be binding upon the successors in interest and
assigns of each party except as otherwise provided herein.
(d) With respect to the Asset Sale Compensation Agreement between the
Employee and KENETECH Windpower, Inc. (KWI), now debtor in
possession, dated as of May 17, 1996, as amended by Addendum dated
August 26, 1996 and as it may be further amended from time to time,
the parties hereto agree that nothing herein shall be deemed to alter
or amend such agreement insofar as KWI's obligations to the Employee
are concerned.
(e) Nothing herein shall amend or alter the Incentive Stock Option
Agreements between the Employee and KENETECH Corporation entered into
in 1986 and 1989 or the Grant of Stock Option between the Employee and
KENETECH Corporation dated as of April 12, 1996, or any grant of stock
options or issuance of stock thereunder, or rights related thereto.
(f) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
IN WITNESS WHEREOF, the Company and the Employee have duly executed this
Agreement as of the date first set forth above.
KENETECH CORPORATION
By_________________________ ___________________________
Name: Mark D. Lerdal JAMES J. EISEN
Title: Chief Executive Officer
<PAGE>
SETTELEMENT AGREEMENT AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (this "Agreement") is made and
entered into as of August 1, 1997, by and between KENETECH CORPORATION (the
"Company"), a Delaware corporation, and NICHOLAS H. POLITAN (the "Employee"), an
individual employed by the Company.
RECITALS
A. The Company and the Employee are parties to an Employment Agreement dated
April 12, 1996 (the "Employment Agreement").
B. The Employee and the Company have certain disputes concerning the
Employment Agreement.
C. The Employee and the Company desire to terminate the Employment Agreement
and to compromise, settle and release fully and finally all outstanding
matters relating to the Employment Agreement.
D. Subject to the terms and conditions of this Agreement, upon such
termination of the Employment Agreement, the Employee shall be employed by
the Company as an at-will employee.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, and for other good and valuable consideration, the Company and
the Employee agree as follows:
1. Terms of Settlement.
(a) In consideration of the agreements by the Employee provided herein,
including, without limitation, the releases by the Employee in Section
2 below, the Company agrees as follows:
(i) In full satisfaction of any claims by the Employee in connection
with his employment or the termination of the Employment
Agreement (but subject to Sections 6(e), (f) and (g) below),
including, but not limited to, any claims for compensation,
bonuses, severance payments or benefits, change in control
benefits, out-placement services or any other payments under the
Employment Agreement, the Company shall pay to the Employee a
lump sum amount equal to $175,000.00, less all applicable
deductions, within five (5) business days following the execution
of this Agreement.
(ii) Upon termination of the Employment Agreement, the Employee shall
be employed as an at-will employee of the Company as its Chief
Financial Officer and a Vice President on the same terms and
conditions as other at-will employees of the Company, including
the right to participate in all employee benefit plans of the
Company available to other at-will employees of the Company.
(iii)The Company shall deduct and withhold, from the compensation
payable to the Employee under this Agreement, any and all
Federal, State and local income and employment withholding taxes
and any other amounts required to be deducted or withheld by the
Company under any applicable statute or regulation.
(b) The Employee agrees that nothing in this Agreement shall confer upon
the Employee any right to continue as an employee of the Company for
any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any direct or
indirect subsidiary employing the Employee), which rights are
expressly reserved by the Company, to terminate the Employee's
employment at any time for any reason whatsoever, with or without
cause.
2. Mutual Releases.
(a) Release By The Employee. Except as to any claims arising out of rights
provided under this Agreement, in consideration of the agreements set
forth herein and upon indefeasible payment in full of all amounts
payable to Employee under Section 1 of this Agreement, the Employee
hereby irrevocably and unconditionally releases, acquits and forever
discharges for himself and his heirs, executors, administrators,
agents, successors and assigns, the Company and any related entity and
their stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys, divisions,
and subsidiaries, and all persons acting by, through, under or in
concert with any of them (collectively, the "Company Releasees"), or
<PAGE>
any of them, from any and all charges, complaints, claims, assertions
of claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorneys' fees
and costs actually incurred) of any nature whatsoever, whether known
or unknown, suspected or unsuspected, arising directly or indirectly
out of the Employment Agreement, which the Employee or his heirs,
executors, administrators, agents, successors or assigns, now has, or
ever claimed to have, or could claim against each or any of the
Company Releasees, including, without limitation, any of the
following: claims in equity or law for wrongful discharge, and
personal injury claims, claims under federal, state or local laws
prohibiting discrimination on account of age, national origin, race,
sex, disability, religion and other protected classifications, or
claims under the Civil Rights Acts of 1866 and 1871, as amended, Title
VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act
of 1991, the Age Discrimination in Employment Act of 1967, as amended,
the Employee Retirement Income Security Act of 1974, as amended, the
Americans with Disabilities Act of 1990, the Family Medical and Leave
Act, the California Fair Employment and Housing Act or any comparable
law of any other State.
(b) Release By The Company. Except as to any claims arising out of rights
provided under this Agreement, in consideration for the agreements set
forth herein, the Company hereby irrevocably and unconditionally
releases, acquits and forever discharges for itself and its agents,
successors and assigns, the Employee and his successors and assigns
(collectively, the "Employee Releasees"), or any of them, from any and
all charges, complaints, claims, assertions of claims, liabilities,
obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and
expenses (including attorneys' fees and costs actually incurred) of
any nature whatsoever, known or unknown, suspected or unsuspected,
arising directly or indirectly out of any interactions between the
Company and the Employee Releasees, arising out of the Employment
Agreement, which the Company now has, or ever claimed to have, or
could claim against each or any of the Employee Releasees.
3. Waiver of Unknown Claims. The Employee acknowledges that he is aware that
he may hereafter discover claims or facts different from or in addition to
those he now knows or believes to be true with respect to the matters
herein released, and except as to any claims arising out of the rights
provided under this Agreement, he agrees that the releases set forth above
shall be and remain in effect in all respects a complete general release as
to the matters released and all claims relative thereto which may exist or
may heretofore have existed, notwithstanding any such different or
additional facts. The Employee acknowledges that he has considered the
possibility that he may not fully know the number or magnitude of all of
the claims which he has or may have against the Company and the Company
Releasees and, except as set forth in this Agreement, intends to assume the
risk that he is releasing unknown claims. The Employee acknowledges that he
has been informed of Section 1542 of the Civil Code of the State of
California and, except as set forth in this Agreement, he does hereby
expressly waive and relinquish all rights and benefits which he has or may
have under such Section, which reads as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
The Employee understands and acknowledges the significance and consequences
of such specific waiver of Section 1542 and hereby assumes full
responsibility for any injuries, damages or losses that he may incur as the
result of such waiver.
4. Indemnification and Insurance. To the extent permitted by applicable law,
the Company agrees that all rights to indemnification from the Company
existing under the law and under the Company's certificate of incorporation
and by-laws as of the date hereof, in favor of the Employee as an officer,
employee, or agent of the Company shall survive this Agreement and shall
continue in full force and effect with respect to any liability for any
acts or omissions by the Employee during the period of his employment by
the Company. The Company further agrees that, for so long as it maintains
directors' and officers' liability insurance that covers any employees of
the Company, it shall include the Employee among the insured employees;
provided, however, that this Agreement shall not be construed or implied as
an obligation to continue to maintain directors' and officers' liability
insurance for active or former employees for any period of time.
<PAGE>
5. Non-disclosure Agreements. The Employee acknowledges that any
confidentiality, proprietary or ownership rights or nondisclosure
agreement(s) in favor of the Company or the Company Releasees which he may
have entered into in connection with his employment (the "Nondisclosure
Agreement(s)") by the Company, are understood to survive, and do survive,
the termination of his Employment Agreement, and accordingly nothing in
this Agreement shall be construed as terminating, limiting or otherwise
affecting any such Nondisclosure Agreement(s) or the Employee's obligations
thereunder.
6. General Provisions.
(a) The Employee represents and acknowledges that in executing this
Agreement, he does not rely and has not relied upon any
representation, inducement agreement or statement not set forth herein
made by any of the Company Releasees or by any of the Company
Releasees' agents, representatives or attorneys with regard to the
subject matter of this Agreement.
(b) The provisions of this Agreement are severable, and if any part of it
is found to be unenforceable, the other provisions shall remain fully
valid and enforceable. This Agreement shall survive the termination of
any arrangements contained herein.
(c) The Company and the Employee mutually agree that neither may assign
this Agreement, or any rights or obligations under this Agreement, to
any person or entity without the express prior written approval of the
other.
(d) This Agreement sets forth the entire agreement between the Company and
the Employee and supersedes any and all prior agreements or
understandings between the Company and the Employee pertaining to the
subject matter hereof. The Employment Agreement shall be null and void
upon execution of this Agreement. This Agreement shall inure to the
benefit of and be binding upon the successors in interest and assigns
of each party except as otherwise provided herein.
(e) With respect to the Asset Sale Compensation Agreement between the
Employee and KENETECH Windpower, Inc. ("KWI"), now debtor in
possession, dated as of May 20, 1996, as it may be amended from time
to time, the parties hereto agree that nothing herein shall be deemed
to alter or amend such agreement insofar as KWI's obligations to the
Employee are concerned.
(f) Nothing herein shall amend or alter any Incentive Stock Option
Agreement between the Employee and the Company or the Grant of Stock
Option between the Employee and the Company dated as of April 12,
1996, or any grant of stock options thereunder.
(g) Notwithstanding anything to the contrary in this Agreement, the
Employment Agreement and all payments due thereunder shall be
reinstated, and the release by the Employee hereunder shall be null
and void, if at any time payment, or any part thereof, of any amount
under this Agreement is rescinded or must otherwise be restored or
returned by the Employee upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for the Company, all as though such payment
hereunder had not been made.
(h) The effect, intent and construction of this Agreement shall be
governed by the laws of the State of California, without giving effect
to the conflict of laws rules thereof.
(i) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original.
IN WITNESS WHEREOF, the Company and the Employee have duly executed this
Agreement as of the date first set forth above.
KENETECH CORPORATION
By_________________________ ___________________________
Name: Mark D. Lerdal NICHOLAS H. POLITAN
Title: President and Chief Executive Officer
<PAGE>
SEPARATION AGREEMENT AND MUTUAL RELEASE
THIS SEPARATION AGREEMENT AND MUTUAL RELEASE (the "Agreement") is made and
entered into as of March 12, 1997, by and between KENETECH CORPORATION (the
"Company"), a Delaware corporation, and MICHAEL A. HAAS (the "Employee"), who
has been employed by the Company.
RECITALS
A. The Company and the Employee are parties to an Employment Agreement dated
April 12, 1996 (the "Employment Agreement") pursuant to which the Employee
has acted as a Vice President of the Company. The Company is terminating
the Employee's employment on or about April 11, 1997.
B. The Employee acknowledges that he has received full salary, vacation pay
and benefits payments from the Company in accordance with the Company's
regular payroll practices to date.
C. The Employee and the Company desire to compromise, settle and release fully
and finally all outstanding matters between the Employee and the Company,
including all matters relating to the Employment Agreement, the Employee's
employment, his separation from the Company and the termination of his
employment.
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein, and for other good and valuable consideration, the Company and
the Employee agree as follows:
1. Separation Date. The Company and the Employee agree that the Employee's
employment by the Company shall terminate effective April 11, 1997 (the
"Separation Date"). The Employee understands and agrees that, effective as
of the Separation Date, he is no longer authorized to incur any expenses,
obligations or liabilities on behalf of the Company. He acknowledges that
he has been reimbursed for all expenses incurred by him to date.
2. Termination. The execution of this Agreement shall confirm the Employee's
termination as an officer and employee of the Company effective as of the
Separation Date.
3. Terms of Separation. In consideration of the agreements by the Employee
provided herein, including, without limitation, the releases by the
Employee in Paragraph 4 below, the Company agrees as follows:
(a) In full satisfaction of any claims by the Employee in connection with
his employment or the termination of his employment, including, but
not limited to, any claims for compensation (but subject to Section
12(e) below), severance payments or benefits, change in control
benefits, and outplacement services, the Company shall pay to the
Employee a lump sum amount equal to $95,700.00 less all applicable
deductions within five (5) business days following the Separation
Date.
(b) The Employee has ceased participation in all employee benefit plans of
the Company effective as of the Separation Date, and the Company shall
not be liable for any payments to or on behalf of the Employee in
respect of any fringe benefits. The foregoing shall not be in lieu of
any continued health care coverage to which the Employee or his
dependents would otherwise, at the Employee's expense, be entitled in
accordance with the requirements of Code Section 4980B by reason of
termination of his employment.
(c) The Employee's employment will be deemed terminated effective on the
Separation Date.
(d) The Company will deduct and withhold, from the compensation payable to
the Employee under this Agreement, any and all Federal, State and
local income and employment withholding taxes and any other amounts
required to be deducted or withheld by the Company under the
applicable statute or regulation.
4. Mutual Releases.
(a) Release By The Employee. Except as to any claims arising out of rights
provided under this Agreement, in consideration for the agreements set
forth herein, the Employee hereby irrevocably and unconditionally
releases, acquits and forever discharges for himself and his heirs,
executors, administrators, agents, successors and assigns, KENETECH
Corporation and any related entity (other than KENETECH Windpower,
Inc. and its subsidiaries) and their stockholders, predecessors,
successors, assigns, agents, directors, officers, employees,
<PAGE>
representatives, attorneys, divisions, and subsidiaries, and all
persons acting by, through, under or in concert with any of them
(collectively, the "Company Releasees"), or any of them, from any and
all charges, complaints, claims, assertions of claims, liabilities,
obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and
expenses (including attorneys' fees and costs actually incurred) of
any nature whatsoever, known or unknown, suspected or unsuspected,
arising directly or indirectly out of any interactions between the
Employee or his heirs, executors, administrators, agents, successors
or assigns, and the Company Releasees from the beginning of time to
the present, including but not limited to any matter arising out of
the Employment Agreement, the Employee's employment by the Company,
his separation from employment with the Company, or the termination of
the Employee's employment, which the Employee or his heirs, executors,
administrators, agents, successors or assigns, now has, or ever
claimed to have, or could claim against each or any of the Company
Releasees, including, without limitation, any of the following: claims
in equity or law for wrongful discharge, and personal injury claims,
claims under federal, state or local laws prohibiting discrimination
on account of age, national origin, race, sex, disability, religion
and other protected classifications, or claims under the Civil Rights
Acts of 1866 and 1871, as amended, Title VII of the Civil Rights Act
of 1964, as amended, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, as amended, the Employee
Retirement Income Security Act of 1974, as amended, the Americans with
Disabilities Act of 1990, the Family Medical and Leave Act, the
California Fair Employment and Housing Act or any comparable law of
any other State (collectively, the "Employee Claims"). The Employee
hereby agrees to forego any right to file any charges or complaints
with any governmental agencies or any legal action against the Company
Releasees under any of the laws referenced in this paragraph or with
respect to any of the Employee Claims. Notwithstanding the foregoing,
the release by the Employee in this paragraph shall not limit the
right of the Employee to seek to enforce the provisions of this
Agreement, including without limitation the provisions of Paragraph 8
below.
(b) Release By The Company. Except as to any claims arising out of rights
provided under this Agreement, in consideration for the agreements set
forth herein, the Company hereby irrevocably and unconditionally
releases, acquits and forever discharges for itself and its agents,
successors and assigns, the Employee and his successors and assigns
(collectively, the "Employee Releasees"), or any of them, from any and
all charges, complaints, claims, assertions of claims, liabilities,
obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and
expenses (including attorneys' fees and costs actually incurred) of
any nature whatsoever, known or unknown, suspected or unsuspected,
arising directly or indirectly out of any interactions between the
Company and the Employee Releasees from the beginning of time to the
present, arising out of the Employment Agreement, the Employee's
employment by the Company, his separation from employment with the
Company, or the termination of the Employee's employment, which the
Company now has, or ever claimed to have, or could claim against each
or any of the Employee Releasees (collectively, the "Company Claims").
The Company hereby agrees to forego any right to file any charges or
complaints with any governmental agencies or any legal action against
the Employee Releasees with respect to any of the Company Claims.
Notwithstanding the foregoing, the release by the Company in this
paragraph shall not limit the right of the Company to seek to enforce
the provisions of this Agreement, including without limitation the
provisions of Paragraph 8 below.
(d) Indemnification and Insurance. To the extent permitted by applicable
law, the Company agrees that all rights to indemnification from the
Company existing under the law and under the Company's certificate of
incorporation and by-laws as of the Separation Date, in favor of the
Employee as an officer, employee, or agent of the Company shall
survive this Agreement and shall continue in full force and effect
with respect to any liability for any acts or omissions by the
Employee during the period of his employment by the Company. The
Company further agrees that, for so long as it maintains directors'
and officers' liability insurance that covers any former employees of
KENETECH Corporation whose employment terminated in April 1997 or
earlier, it shall include the Employee among the insured former
employees; provided, however, that this Agreement shall not be
construed or implied as an obligation to continue to maintain
directors' and officers' liability insurance for active or former
<PAGE>
employees for any period of time. The Employee shall hold the Company
harmless from any liability arising out of his tax situation and any
taxes, penalties, or other assessments that may hereafter be asserted
on account of any payments or other compensation hereunder, over and
above taxes withheld and paid in a timely manner by the Company.
5. Waiver of Unknown Claims. The Employee acknowledges that he is aware that
he may hereafter discover claims or facts different from or in addition to
those he now knows or believes to be true with respect to the matters
herein released, and except as to any claims arising out of the rights
provided under this Agreement, he agrees that the releases set forth above
shall be and remain in effect in all respects a complete general release as
to the matters released and all claims relative thereto which may exist or
may heretofore have existed, notwithstanding any such different or
additional facts. The Employee acknowledges that he has considered the
possibility that he may not fully know the number or magnitude of all of
the claims which he has or may have against the Company and the Company
Releasees and, except as set forth in this Agreement and Paragraph 8 below,
intends to assume the risk that he is releasing unknown claims. The
Employee acknowledges that he has been informed of Section 1542 of the
Civil Code of the State of California and, except as set forth in this
Agreement and Paragraph 8 below, he does hereby expressly waive and
relinquish all rights and benefits which he has or may have under such
Section, which reads as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
The Employee understands and acknowledges the significance and consequences
of such specific waiver of Section 1542 and, except as set forth in this
Agreement and Paragraph 8 below, hereby assumes full responsibility for any
injuries, damages or losses that he may incur as the result of such waiver.
6. Confidentiality and Non-disclosure Agreements.
(a) The Employee acknowledges that any confidentiality, proprietary or
ownership rights or nondisclosure agreement(s) in favor of the Company
or the Company Releasees which he may have entered into in connection
with his employment (the "Nondisclosure Agreement(s)") by the Company,
are understood to survive, and do survive, the termination of his
employment and this Agreement, and accordingly nothing in this
Agreement shall be construed as terminating, limiting or otherwise
affecting any such Nondisclosure Agreement(s) or the Employee's
obligations thereunder.
(b) The Employee agrees that, except to the extent compelled by law or
legal process or except to the extent he is required to disclose to
governmental authorities in connection with any inquiry, audit or
assessment relating to the taxation of any payments provided for
herein or except in any litigation or arbitration proceeding between
the Company and the Employee as provided herein (in which case the
Employee will use his best efforts to ensure that such information is
maintained as confidential by the persons to whom he is compelled or
required to disclose such information), the Employee will not: (i)
disclose or communicate confidential information of the Company to any
third party (including governmental agencies and employees and former
employees of the Company); (ii) make use of confidential information
of the Company for his own behalf, or on behalf of any third party;
and (iii) facilitate, assist, persuade or attempt to facilitate,
assist or persuade any third party to commence or prosecute any legal
proceedings against the Company or any Company Releasees. If the
Employee receives, is notified of, or is served with a subpoena,
summons, complaint, order, notice, notice of deposition or any other
legal process or request for information (collectively, "Legal
Process") in connection with any legal or quasi-legal proceeding,
including, but not limited to, any action at law or equity,
arbitration, administrative proceeding or governmental,
self-regulating organization or stock exchange investigation
(collectively, "Litigation"), relating to the performance of his
services as an employee, officer or as a director of the Company, or
which, if complied with by the Employee, might compel or lead to the
disclosure by the Employee of confidential information of the Company,
the Employee shall immediately notify the Company and provide the
Company with a copy of the same.
<PAGE>
7. Company Property and Information. The Company and the Employee agree that
the Employee shall, as of the Separation Date, return to the Company all
Company Information (defined below) and files containing Company
Information; credit cards; cardkey passes; door and file keys; computers,
computer access codes, computer discs, and magnetic media; software; and
all other physical property which the Employee received in connection with
his employment. The term "Company Information" as used in this Agreement
means confidential or proprietary business or financial information of the
Company. The Employee further represents and warrants that he has not,
except in the ordinary course of business and in accordance with Company
policies and procedures, destroyed or discarded any documents or
information.
8. Confidentiality of This Agreement.
(a) The Employee and the Company mutually represent and agree that, except
to the extent required by law, they will keep the terms, and the fact,
of this Agreement completely confidential and they will not hereafter
disclose any information concerning this Agreement to any person;
provided, however, that the Employee may disclose the terms, and the
fact, of this Agreement to his immediate family and either party may
disclose the terms hereof to his or its legal and tax advisors if such
persons agree to keep such information confidential and not disclose
it to others, except as provided in Paragraph 6(b) above; provided,
however, that either party may make any disclosures that may be
required or appropriate under applicable laws or regulations.
(b) The provisions set forth in subparagraph (a) above are material terms
of this Agreement, and a breach of any of those provisions shall
constitute a material breach of this Agreement.
9. Consideration. The Company and the Employee mutually acknowledge that
neither is required to enter into this Agreement, and the Employee
acknowledges that the consideration to be received by him under this
Agreement is adequate and that the promises and agreements made by the
Company in this Agreement are in consideration of the Employee's agreement
to provide the releases set forth in Paragraph 4 above.
10. Voluntary Agreement. The Employee represents and agrees that he has been
advised by the Company of his right to discuss all aspects of this
Agreement with his attorneys, that he has voluntarily chosen whether to
avail himself of this right, that he has carefully read and fully
understands all of the provisions of this Agreement, and that he is
voluntarily entering into this Agreement.
11. Notices. Any notice given to either party to this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
sent by certified mail, postage prepaid, return receipt requested, duly
addressed to the party concerned at the address indicated below or to such
changed address as such party may subsequently give such notice of.
If to the Company: KENETECH Corporation
500 Sansome Street, Suite 300
San Francisco, CA 94111
Attn: General Counsel
If to the Employee: Michael A. Haas
1737 University Avenue
Palo Alto, CA 94301
12. General Provisions.
(a) The Employee represents and acknowledges that in executing this
Agreement, he does not rely and has not relied upon any
representation, inducement agreement or statement not set forth herein
made by any of the Company Releasees or by any of the Company
Releasees' agents, representatives or attorneys with regard to the
subject matter of this Agreement or otherwise.
(b) The provisions of this Agreement are severable, and if any part of it
is found to be unenforceable, the other provisions shall remain fully
valid and enforceable. This Agreement shall survive the termination of
any arrangements contained herein.
(c) The Company and the Employee mutually agree that neither may assign
this Agreement, or any rights or obligations under this Agreement, to
any person or entity without the express prior written approval of the
other.
<PAGE>
(d) Except as set forth in subparagraphs (e) and (f) below, this Agreement
sets forth the entire agreement between the Company and the Employee
and supersedes any and all prior agreements or understandings between
the Company and the Employee pertaining to the subject matter hereof,
including the Employment Agreement and any other agreements relating
to the Employee's employment. Except as specifically set forth in
Paragraph 6 hereof, the Employment Agreement shall be null and void as
of the Separation Date. This Agreement shall inure to the benefit of
and be binding upon the successors in interest and assigns of each
party except as otherwise provided herein.
(e) With respect to the Asset Sale Compensation Agreement between the
Employee, KENETECH International Ltd. ("KIL"), a subsidiary of the
Company, and KENETECH Windpower, Inc. ("KWI"), now debtor in
possession, dated as of May 17, 1996, as amended by Addendum dated
August 26, 1996 and as it may be further amended from time to time,
the parties hereto agree as follows:
(i) Nothing herein shall be deemed to alter or amend such agreement
insofar as KWI's obligations to the Employee are concerned; and
(ii) The parties acknowledge that KIL shall have no further
obligations to the Employee under such agreement except with
respect to sale of the asset identified as "Gaspe" on Table 2b
thereto.
(f) Nothing herein shall amend or alter the Incentive Stock Option
Agreement between the Employee and KENETECH Corporation dated as of
March 25, 1993 or the Grant of Stock Option between the Employee and
KENETECH Corporation dated as of April 12, 1996, or any grant of stock
options thereunder.
(g) The effect, intent and construction of this Agreement shall be
governed by the laws of the State of California, without giving effect
to the conflict of laws rules thereof.
(h) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original.
IN WITNESS WHEREOF, the Company and the Employee have duly executed this
Agreement as of the date first set forth above.
KENETECH CORPORATION
By_________________________ ___________________________
Name: Mark D. Lerdal MICHAEL A. HAAS
Title: Chief Executive Officer Date Signed: March __, 1997
Date Signed: March __, 1997
<PAGE>
MASTER AGREEMENT OF DISSOLUTION, DISTRIBUTION AND ASSIGNMENT
This Master Agreement of Dissolution, Distribution and Assignment (this
"Agreement"), dated as of August 27, 1997 (the "Execution Date"), is entered
into by and between Enron Power I (Puerto Rico), Inc., a Delaware corporation
("Enron Power"), and CNF Penuelas, Inc., a Delaware corporation ("CNF"):
WHEREAS, pursuant to the Partnership Agreement of Enron Power Construction
Partnership dated as of October 16, 1995 (the "Original Joint Venture
Agreement"), Enron Power and Enron Power II (Puerto Rico), Inc. ("ENRON II")
formed Enron Power Construction Partnership (the "Joint Venture");
WHEREAS, pursuant to the Assignment dated as of November 1, 1995, ENRON II
assigned its 50% interest in the Joint Venture to CNF;
WHEREAS, pursuant to the Amended and Restated Joint Venture Agreement of
Enron/CNF Power Construction Partnership dated as of November 1, 1995 (the
"Amended Joint Venture Agreement"), Enron Power and CNF (hereinafter
individually called the "Partner" and collectively called the "Partners")
amended and restated the Original Joint Venture Agreement, and renamed the Joint
Venture as Enron/CNF Power Construction Partnership (the "General Partnership");
WHEREAS, pursuant to the Limited Partnership Agreement of Enron/CNF Power
Construction, L.P. dated as of December 13, 1996 (the "Partnership Agreement")
and a certificate of limited partnership filed December 17, 1996 with the
Delaware Secretary of State, the Partners formed Enron/CNF Power Construction,
L.P., a Delaware limited partnership (the "Partnership"), with each Partner
owning a 49% general partner interest and a 1% limited partner interest in the
Partnership;
WHEREAS, pursuant to the Assignment and Assumption Agreement dated as of
December 18, 1996 the Partners transferred and assigned all of their interests
in the General Partnership to the Partnership, and continued the business of the
Joint Venture under the Partnership;
WHEREAS, except for certain site preparation activities, the Partnership has not
commenced construction under that certain Onshore Construction Contract dated as
of November 1, 1995 (the "Construction Contract"), originally between
EcoElectrica, L.P. and the Joint Venture, and substantially all of the costs and
expenses of the Joint Venture to date have been covered by Enron Engineering &
Construction Company, a Delaware corporation ("EE&CC"), CNF Constructors, Inc.,
a Tennessee corporation, and their respective affiliates;
WHEREAS, subject to the terms and conditions of this Agreement, the Partners
desire (i) to dissolve the Partnership and cause any and all right, title and
interest in and to the assets and property of the Partnership (the "Partnership
Property"), including, but not limited to, the Partners' interests in the
Construction Contract, to be distributed to the Partners as agreed to herein;
(ii) CNF to assign and transfer to Enron Power all of CNF's interests in and to
the Partnership Property to be distributed to CNF pursuant to the dissolution of
the Partnership (the "CNF Interest"); and (iii) Enron Power to thereafter
perform under the Construction Contract in lieu of the Partnership.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to set forth the terms and conditions of the dissolution of the
Partnership, the distribution of Partnership Property and the assignment and
transfer to Enron Power of the CNF Interest, the parties hereto hereby agree as
follows:
ARTICLE I
Dissolution, Distribution and Assignment; Closing
Section 1.1 Dissolution. Subject to the terms and conditions of this Agreement,
and in accordance with Section 22.3(a) of the Partnership Agreement, the
Partners agree to dissolve the Partnership and to wind up expeditiously the
Partnership's affairs and business. In accordance with Section 22.4 of the
Partnership Agreement, Enron Power and CNF will act as the liquidators of the
Partnership.
Section 1.2 Distribution and Termination. Subject to the terms and conditions of
this Agreement, on the Effective Date (as hereinafter defined), all of the
Partnership Property shall be distributed to the Partners in accordance with the
Distribution and Assignment Agreement referred to in Section 1.6(ii) of this
Agreement. Upon such distribution, the Partnership's affairs shall be terminated
and the liquidators shall promptly cause to be filed all certificates and
instruments required to effect the termination of the Partnership, including a
Certificate of Cancellation in substantially the form attached hereto as Exhibit
1.2 to be filed with the Secretary of State of the State of Delaware.
Section 1.3 Assignment of CNF Interest. Immediately following the distribution
of the Partnership Property to the Partners on the Effective Date, (i) CNF shall
assign and transfer to Enron Power the CNF Interest, including, but not limited
to, all of CNF's interest in the Construction Contract, and (ii) Enron Power
shall accept the CNF Interest, and will thereby assume and agree to perform all
the duties and obligations of CNF under the Construction Contract. Each of the
Partners acknowledges that upon the assignment of the CNF Interest to Enron
Power, Enron Power shall possess all of the rights, title and interest which had
been held by the Partnership in and to the Construction Contract.
Section 1.4 Time and Place of Closing on the Effective Date. Unless the Partners
agree otherwise in writing, and subject to the terms and conditions of this
Agreement, (i) the winding up of the Partnership's business and affairs, (ii)
the distribution to the Partners of all of their respective rights, title and
interest in and to the Partnership Property, and (iii) the assignment and
transfer of the CNF Interest shall each be consummated (the "Closing") at the
offices of Enron Power, 333 Clay, Suite 400, Houston, Texas 77002, or at such
other place as the Partners may agree in writing. The date when the Closing
actually occurs is referred to in this Agreement as the "Effective Date."
Section 1.5 Conditions Precedent to Closing. The Closing shall be held on a
mutually acceptable date within three (3) business days after the satisfaction
or mutual waiver of the following ("Conditions Precedent"):
(a) the mutually satisfactory execution and delivery of all Related Agreements
(as defined below);
(b) Enron Power receiving a Notice to Proceed (as defined in the Construction
Contract); and
(c) the satisfaction or waiver of all conditions precedent to the Notice to
Proceed Date (as defined in the Construction Contract).
Section 1.6 Related Agreements. Subject to the terms and conditions stated in
this Agreement along with the right for CNF and Enron Power to mutually agree in
writing to waive any requirement under this Section 1.6, at or prior to the
Effective Date the appropriate parties shall execute and deliver the following
agreements (the agreements listed in this Section 1.6 are collectively referred
to in this Agreement as the "Related Agreements") and where applicable CNF and
Enron Power shall cause their affiliates to deliver:
(i) The Distribution and Assignment Agreement, in the form attached hereto
as Exhibit 1.6(i), providing for the distribution of the Partnership
Property to each of the Partners (the "Distribution and Assignment
Agreement");
(ii) The Assignment and Assumption Agreement, in the form attached hereto
as Exhibit 1.6(ii), providing for the assignment and transfer by CNF
of the CNF Interest to Enron Power, and the acceptance and assumption
of the CNF Interest by Enron Power (the "CNF Assignment Agreement");
(iii)The acknowledgment and consent of EcoElectrica, L.P. of the
transactions contemplated by this Agreement in substantially the form
attached to the Distribution and Assignment Agreement and the CNF
Assignment Agreement (the "Consents"), provided, however, that in the
event CNF's affiliated partner in EcoElectrica has executed both
Consents, but Enron Power's affiliated partner in EcoElectrica has not
executed both Consents within three (3) business days after the Notice
to Proceed Date, then Enron Power will be deemed to have waived the
requirement under Section 1.6 (iii);
(iv) The letter agreement (the "Enron Development/KESI Cancellation
Letter") between Enron Development Corp. ("Enron Development") and
Kenetech Energy Systems, Inc. ("KESI"), in substantially the form
attached hereto as Exhibit 1.6(iv), cancelling the Side Letter
Agreement dated November 1, 1995 between Enron Development and KESI
pursuant to which each has the right to cancel the Construction
Contract and that certain Offshore Supply Contract dated as of
November 1, 1995, originally between EcoElectrica, L.P. and Enron
Equipment Procurement Company (the "Offshore Supply Contract");
(v) Except to the extent waived in accordance with the terms thereof, all
documents required to be delivered at or prior to the closing
contemplated by the Master Agreement of Dissolution, Distribution and
Assignment (the "Equipment L.P. Dissolution Agreement") entered into
on the date of this Agreement between Enron Equipment Procurement
Company ("Enron Procurement") and CNF Equipment, Inc. ("CNF
Equipment") relating to the dissolution of Enron/CNF Equipment, L.P.,
a Delaware limited partnership (the "Equipment L.P.") and the
distribution and assignment of its property (collectively, the
"Equipment L.P. Agreements");
(vi) The guaranty of Kenetech Corporation, a Delaware corporation
("Kenetech"), in the form attached hereto as Exhibit 1.6(vi), pursuant
to which Kenetech unconditionally guarantees any and all obligations
of CNF under Section 3.1, Section 3.2, Section 3.3, Section 5.1 and
Section 5.2 of this Agreement (the "Kenetech Guaranty");
(vii)The guaranty of Enron Power Corp., a Delaware corporation, in the
form attached hereto as Exhibit 1.6(vii), pursuant to which Enron
Power Corp. unconditionally guarantees any and all obligations of
Enron Power under Section 3.1, Section 5.1 and Section 5.2;
(viii) The Global Change Order, in substantially the form attached hereto
as Exhibit 1.6(viii), relating to the consent and amendment required
by the lenders to the project;
(ix) The Change Order, in substantially the form attached hereto as Exhibit
1.6(ix), relating to the LPG storage facility (the "LPG Change
Order"), provided, however, that in the event the LPG Change Order has
not been executed within three (3) business days after the Notice to
Proceed Date, then Enron Power will be deemed to have waived the
requirement under Section 1.6 (ix);
(x) The letter agreement between CNF Industries, Inc. and Enron Power I,
in the form attached hereto as Exhibit 1.6(x), releasing the guaranty
of CNF Industries, Inc. granted pursuant to Section 11.3 of the
Partnership Agreement; and
(xi) The letter agreement between Enron Power Corp. and CNF, in the form
attached hereto as Exhibit 1.6(xi), releasing the guaranty of Enron
Power Corp. granted pursuant to Section 11.3 of the Partnership
Agreement.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of CNF. CNF represents and warrants
to Enron Power that:
(a) Organization of CNF. CNF is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease, operate and
otherwise hold all of its properties and assets and to carry on its
business as presently conducted and is duly qualified to do business in
each jurisdiction in which the nature of its business as now conducted or
its assets makes such qualification necessary, except where the failure to
be so qualified would not have a material adverse effect on it.
(b) Authorization and Validity of Agreement. CNF has all necessary corporate
power and authority to enter into this Agreement and each of the Related
Agreements to which it is a party and to perform its obligations hereunder
and thereunder, and the execution, delivery and performance by CNF of this
Agreement and each of the Related Agreements to which it is a party has
been duly and validly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by CNF and at or prior to
the Effective Date each of the Related Agreements to which CNF is a party
will have been duly executed and delivered by CNF, and, assuming this
Agreement and each of the Related Agreements to which CNF is a party
constitute legal, valid and binding obligations of the other parties
thereto, when executed and delivered will constitute legal, valid and
binding obligations of CNF, enforceable against it in accordance with their
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Consent and Approval; No Conflict. Neither the execution and delivery of
this Agreement or the Related Agreements to which CNF is a party nor the
consummation of the transactions and performance of the terms and
conditions contemplated hereby or thereby will (i) conflict with or result
in any breach of any provision of the certificate of incorporation or
bylaws of CNF; (ii) except as otherwise provided in this Agreement, require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (A) any
regulatory approvals or routine governmental consents normally acquired
after the consummation of transactions such as transactions of the nature
contemplated by this Agreement or (B) where it is reasonably expected that
the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not prevent or delay in any
material respect the consummation of the transactions contemplated hereby
or thereby; (iii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any agreement, instrument or obligation to
which CNF is a party or by which CNF may be bound and to which any of the
Partnership Property is subject, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or will be obtained prior to the Closing; (iv)
violate any order, writ, injunction, decree, statute, rule or regulation to
which CNF is subject and which relate to any of its assets; or (v) result
in the imposition or creation of any lien, charge or encumbrance upon any
Partnership Property under any agreement by which Partnership Property is
bound.
(d) Ownership of Partnership Interests; Title. As of the date of this Agreement
and immediately prior to the Closing, CNF is and will be the owner of
record and beneficially of a 49% general partner interest and a 1% limited
partner interest in the Partnership, and it has not received any notice of
adverse claim to the ownership of such interests and does not have any
reason to know of any such adverse claim.
(e) No Liens. CNF shall transfer and assign the CNF Interest to Enron Power
pursuant to the CNF Assignment Agreement free and clear of all liens,
encumbrances or similar rights.
(f) Solvency. As of the date hereof CNF is Solvent, and following the transfer
of the CNF Interest to Enron Power pursuant to the CNF Assignment Agreement
and the receipt by CNF of the payment contemplated by Section 3.1(a) and
Section 3.1(b) (i) and (ii) of this Agreement, CNF shall be Solvent. For
purposes of this Section 2.1(f) the term "Solvent" shall mean: (i) the
assets of CNF, at a fair valuation, exceed CNF's total liabilities
(including contingent, subordinated, unmatured and unliquidated
liabilities); (ii) based on current projections, which are based on
underlying assumptions which provide a reasonable basis for the projections
and which reflect CNF's judgment based on present circumstances of the most
likely set of conditions and CNF's most likely course of action for the
period projected (including any payments that may be received by CNF under
Section 3.1), CNF has sufficient cash flow to enable it to pay its debts as
they mature; and (iii) CNF does not have unreasonably small capital with
which to engage in its anticipated business. For purposes of this
Section 2.1(f), the "fair valuation" of the assets of CNF means a valuation
on the basis of the amount which may be realized within a reasonable time,
either through collection or sale of such assets at the regular market
value, conceiving the latter as the amount which could be obtained for the
property in question within such period by a capable and diligent
businessman from an interested buyer who is willing to purchase under
ordinary selling conditions, including obtaining necessary consents.
(g) Fair Consideration. The consideration payable to CNF pursuant to Article
III of this Agreement equals or exceeds the reasonable equivalent value of
the CNF Interest to be transferred to Enron Power pursuant to the CNF
Assignment Agreement.
(h) Delivery of CNF Work Product. CNF and affiliated parties have delivered to
Enron Power all work, of any kind or nature, related to the Project (as
defined in the Construction Contract) in the possession or under the
control of such person, including but not limited to: drawings,
specifications, calculations, purchase orders, quotations, estimates,
budgets, cost reports, cost forecasts, labor or manpower projections or
forecasts, cash flow projections, schedules, work plans, transportation
studies, installation plans or procedures, arrangements with subcontractors
or subsuppliers, monthly reports, daily logs, engineering studies,
correspondence with or between any party related to the Project and
including that with any possible subcontractors, monthly reports, daily
logs, engineering studies, and related data.
(i) No Agreements, Claims, Actions or Proceedings. Except for this Agreement,
the Related Agreements, and any agreement entered into jointly by CNF and
Enron Power, CNF is not a party to any contract, agreement or arrangement
relating to the Partnership Property or the Construction Contract which
binds or purports to bind the Partnership or its assets. Except as
disclosed on Schedule 2.1(i), as of the Execution Date and, except as may
be provided on an amended Schedule 2.1(i) delivered by CNF at or prior to
the Effective Date, as of the Effective Date there are no claims, actions
or proceedings pending that arise from activities conducted by CNF, its
affiliates or their representatives that relate to the Partnership,
Partnership Property or the Construction Contract and, to the knowledge of
CNF, no such claims, actions or proceedings are threatened.
Section 2.2 Representations and Warranties of Enron Power. Enron Power hereby
represents and warrants to CNF that:
(a) Organization of Enron Power. Enron Power is a corporation duly organized,
validly existing and in good standing under the laws of the state of
Delaware and has all requisite corporate power and authority to own, lease,
operate and otherwise hold all of its properties and assets and to carry on
its business as presently conducted and is duly qualified to do business in
each jurisdiction in which the nature of its business as now conducted or
its assets makes such qualification necessary, except where the failure to
be so qualified would not have a material adverse effect on it.
(b) Authorization and Validity of Agreement. Enron Power has all necessary
corporate power and authority to enter into this Agreement and each of the
Related Agreements to which it is a party and to perform its obligations
hereunder and thereunder, and the execution, delivery and performance by
Enron Power of this Agreement and each of the Related Agreements to which
it is a party has been duly and validly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by
Enron Power and at or prior to the Effective Date each of the Related
Agreements to which Enron Power is a party will have been duly executed and
delivered by Enron Power, and, assuming this Agreement and each of the
Related Agreements to which Enron Power is a party constitute legal, valid
and binding obligations of the other parties thereto, when executed and
delivered will constitute legal, valid and binding obligations of Enron
Power, enforceable against it in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) Consent and Approval; No Conflict. Neither the execution and delivery of
this Agreement or the Related Agreements to which Enron Power is a party
nor the consummation of the transactions and performance of the terms and
conditions contemplated hereby or thereby will (i) conflict with or result
in any breach of any provision of the certificate of incorporation or
bylaws of Enron Power; (ii) except as otherwise provided in this Agreement,
require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, except (A)
any regulatory approvals or routine governmental consents normally acquired
after the consummation of transactions such as transactions of the nature
contemplated by this Agreement or (B) where it is reasonably expected that
the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not prevent or delay in any
material respect the consummation of the transactions contemplated hereby
or thereby; (iii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any agreement, instrument or obligation to
which Enron Power is a party or by which Enron Power may be bound and to
which any of the Partnership Property is subject, except for such defaults
(or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or will be obtained prior
to the Closing; (iv) violate any order, writ, injunction, decree, statute,
rule or regulation to which Enron Power is subject and which relate to any
of its assets; or (v) result in the imposition or creation of any lien,
charge or encumbrance upon any Partnership Property under any agreement by
which the Partnership Property is bound.
(d) Ownership of Partnership Interests; Title. As of the date of this Agreement
and immediately prior to the Closing, Enron Power is and will be the owner
of record and beneficially of a 49% general partner interest and a 1%
limited partner interest in the Partnership, and it has not received any
notice of adverse claim to the ownership of such interests and does not
have any reason to know of any such adverse claim.
(e) No Claims. As of the date of this Agreement and, except as may be set forth
on an amended Schedule 2.1(i) delivered by CNF pursuant to Section 2.1(i),
immediately prior to the Closing, there are no claims, actions or
proceedings pending that arise from the gross negligence or willful
misconduct of CNF, its affiliates or their representatives that relate to
the Partnership, Partnership Property or the Construction Contract and, to
the knowledge of Enron Power, no such claims, actions or proceedings are
threatened.
ARTICLE III
Additional Covenants and Agreements
Section 3.1 Certain Payments to CNF.
(a) Payment on the Execution Date. Subject to the terms and conditions of this
Agreement, Enron Power shall pay to CNF on the Execution Date, by wire
transfer or certified bank check, an aggregate of $300,000 in partial
consideration for the transactions contemplated in this Agreement.
(b) Payments Following the Effective Date. Subject to, and conditioned upon the
satisfaction or valid waiver of the Conditions Precedent, Enron Power shall
pay to CNF, by wire transfer or a certified bank check, the following
amounts:
(i) Four Hundred Eighty Eight Thousand One Hundred and Seven Dollars
($488,107) on the Effective Date to CNF or its designee for the
out-of-pocket costs incurred and paid by CNF and its affiliates on
behalf of the Partnership and constituting Contract Costs (as defined
in the Partnership Agreement) through April 30, 1997 for which CNF and
its affiliates had not been reimbursed as of April 30, 1997; and
(ii) Four Million One Hundred Thousand Dollars ($4,100,000) on the
Effective Date.
(c) Cancellation Option. In the event a Notice to Proceed under the
Construction Contract is not issued by EcoElectrica, L.P. to Enron Power by
December 15, 1997, Enron Power shall have the right, but not the
obligation, to terminate this Agreement by giving written notice of such
election to CNF on or prior to December 19, 1997 (the "Revocation Option").
Should Enron Power elect to exercise the Revocation Option, CNF shall be
obligated to promptly repay to Enron Power (and in any event no later than
December 31, 1997) any and all amounts paid to CNF pursuant to this Section
3.1 of this Agreement. In the event that Enron Power elects to exercise the
Revocation Option, and subject to the repayment by CNF to Enron Power of
any and all amounts owed by CNF hereunder, then this Agreement shall be
considered terminated effective upon delivery by Enron Power of notice of
the Revocation Option, and thereafter Enron Power shall have no further
payment obligations under the Agreement and CNF and Enron Power shall
continue as partners.
(d) Cancellation of Project. In the event the Project is terminated or
cancelled prior to the receipt of a Notice to Proceed (including, without
limitation, because of the denial of a permit or license necessary to the
Project or the termination or cancellation of the Power Purchase Agreement
(as defined in the Construction Contract)), CNF shall be obligated to
promptly repay Enron Power (in any event no later than thirty (30) days
after notice of such termination or cancellation is given by Enron Power to
CNF) any and all amounts paid to CNF pursuant to this Section 3.1 of the
Agreement. In the event that the Project is terminated or cancelled, and
subject to the repayment by CNF to Enron Power of any and all amounts owed
by CNF hereunder, then this Agreement shall be considered terminated
effective upon delivery by Enron Power of notice of the Project
cancellation, and thereafter Enron Power shall have no further payment
obligations under the Agreement and CNF and Enron Power shall continue as
partners.
Section 3.2 Alteration of Construction Contract and Offshore Supply Contract.
Prior to the Effective Date, CNF agrees to assist Enron Power in the
negotiations with EcoElectrica L.P. pertaining to the Global Change Order and
the LPG Change Order in order to minimize modifications or alterations to the
Construction Contract and the Offshore Supply Contract that result in a negative
impact on, or decrease the profit accruing under, the Construction Contract and
the Offshore Supply Contract.
Section 3.3 Continued Existence. CNF shall maintain its corporate existence as a
Delaware corporation in good standing under the laws thereunder for a period
equal to the earlier of (x) one year following the date of this Agreement or (y)
the Notice to Proceed Date.
Section 3.4 Certain Other Obligations. In addition, Enron Power acknowledges
that between the Effective Date and the earlier of the Effective Date or the
termination of this Agreement CNF will not be performing any obligations under
the Partnership Agreement relating to the performance of the Construction
Contract, including the obligation under Article 11 with respect to obtaining a
payment and performance bond.
ARTICLE IV
Arbitration
Section 4.1 Management Resolution of Disputes. In the event of any claim,
dispute, disagreement or controversy arising out of or relating to this
Agreement or the transactions contemplated herein or the breach or termination
of this Agreement or any Related Agreement (each, hereinafter referred to as a
"Dispute"), which the parties to this Agreement have been unable to settle or
agree upon within a period of fifteen (15) days after such Dispute arises, each
party shall nominate a senior officer of its management to meet at a mutually
agreed time and place not later than thirty (30) days after the Dispute has
arisen to attempt to resolve such Dispute. Should a resolution of such Dispute
not be obtained within ten (10) days after the meeting of senior officers for
such purpose, or such longer period as the parties may mutually agree upon, then
either party may by notice to the other submit the Dispute to arbitration in
accordance with the provisions of Section 4.2 of this Agreement.
Section 4.2 Binding Arbitration of Disputes. Any Dispute which is not settled in
accordance with the provisions of Section 4.1 of this Agreement shall be
submitted to binding arbitration to be conducted in accordance with the
following procedure:
(a) The party seeking arbitration hereunder may request such arbitration in
writing, which writing shall include a clear statement of the matter(s) in
dispute and shall name one arbitrator appointed by such party. Within
twenty (20) business days after receipt of such request, the other party
shall appoint one arbitrator, or in default thereof, such arbitrator shall
be named as soon as practicable by the Arbitration Committee of the
American Arbitration Association, and the two arbitrators so appointed
shall name a third arbitrator within ten (10) business days, or failing
such agreement on a third arbitrator by the two arbitrators so appointed, a
third arbitrator shall be appointed by the Arbitration Committee of the
American Arbitration Association.
(b) The arbitration hearing shall be held in New York, New York, on at least
twenty (20) business days' prior written notice to the parties. Except as
otherwise provided herein, the proceedings shall be conducted in accordance
with the Commercial Arbitration Rules and procedures of the American
Arbitration Association. Any decision of the arbitrators shall be joined in
by at least two of the arbitrators and shall be set forth in a written
award which shall state the basis of the award and shall include both
findings of fact and conclusions of law. Notwithstanding the foregoing, in
the case of any monetary dispute or claim for damages, the amount of which
is contested, each party shall submit in writing a proposed arbitration
award at the commencement of the arbitration hearing, and the arbitrators
shall be required to adopt in full the proposed arbitration award of one of
the parties with respect to such monetary amount or damages. Any award
rendered pursuant to the foregoing, which may include an award or decree of
specific performance hereunder, shall be final and binding on the parties
and not subject to review or appeal, and judgment thereon may be entered or
enforcement thereof sought by either party in a court of competent
jurisdiction.
(c) Notwithstanding the foregoing, nothing contained herein shall be deemed to
give the arbitrators appointed pursuant to the foregoing any authority,
power or right to alter, change, amend, modify, waive, add to or delete
from any of the provisions of this Agreement or the Related Agreements.
(d) The losing party shall bear all costs of the arbitration including costs of
all arbitrators, both parties' attorneys' fees and disbursements and expert
fees. In the event that the arbitrators allocate liability among the
parties, then the costs of the arbitration shall be shared pro rata by the
parties.
(e) Each of the parties to this Agreement agree that compliance by a party with
the provisions of subparagraphs (a) through (e) of this Section 4.2 shall
be a complete defense to any suit, action or proceeding instituted in any
federal or state court, or before any administrative tribunal by another
party with respect to any controversy or dispute arising under or pursuant
to this Agreement and which is subject to arbitration as set forth herein,
other than a suit or action alleging non-compliance with a final and
binding arbitration award rendered hereunder.
Section 4.3 Enforceability in Federal and State Court. The agreement to
arbitrate set forth in Section 4.2 shall be enforceable in either federal or
state court. The enforcement of such agreement and all procedural aspects
thereof, including the construction and interpretation of this agreement to
arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or
defenses as to arbitrability, and the rules (except as otherwise expressly
provided herein) governing the conduct of the arbitration, shall be governed by
and construed pursuant to the United States Arbitration Act, 9 U.S.C. 1-16. In
deciding the substance of any such claim, dispute or disagreement, the
arbitrators shall apply the substantive laws of the State of Delaware; provided,
however, that the arbitrators shall have no authority to award punitive damages
under any circumstances (whether it be exemplary damages, treble damages, or any
other penalty or punitive type of damages) regardless of whether such damages
may be available under Delaware law, the parties to this Agreement hereby
waiving their right, if any, to recover punitive damages in connection with any
such claims, disputes or disagreements.
ARTICLE V
Indemnification
Section 5.1 Mutual Indemnification. Each of Enron Power and CNF (each an
"Indemnifying Party") hereby agrees to indemnify, defend and hold harmless the
other, its directors, officers, and employees, its controlled and controlling
persons and persons under common control, and their respective directors,
officers and employees (collectively "related persons"), from and against all
Claims (as hereinafter defined) asserted against, resulting to, imposed upon or
incurred by such party or such party's related persons (an "Indemnified
Person"), directly or indirectly, by reason of, arising out of, or resulting
from (a) the inaccuracy or breach of any representation or warranty of the
Indemnifying Party contained in this Agreement and (b) the breach of any
covenant or agreement of the Indemnifying Party contained in this Agreement.
"Claim" shall include (i) all debts, liabilities and obligations; (ii) losses,
damages, costs and expenses including, without limitation, interest (including
prejudgment interest in any litigated matter), penalties, court costs and
reasonable attorneys' fees and expenses; and (iii) all demands, claims, actions,
costs of investigation, causes of action, proceedings, arbitrations, judgments,
settlements and assessments, whether or not ultimately determined to be valid ;
provided, however, that "Claims" shall not include any of the foregoing to the
extent covered by insurance maintained by or for the benefit of the applicable
Indemnified Person; however the Indemnifying Party shall be liable for the
deductible and any uninsured portion of the applicable Claim.
Section 5.2 Additional Indemnification. In addition to its obligations under
Section 5.1, Enron Power hereby agrees to indemnify, defend and hold harmless
CNF and its related persons from and against (a) all Claims asserted against,
imposed upon or incurred by CNF or any of its related persons by reason of,
arising out of, or resulting from the performance of the Construction Contract
before or after the Closing (including any Claim arising from activities
conducted jointly by Enron Power and CNF, their affiliates and representatives)
and (b) all Claims asserted against, imposed upon or incurred by CNF or any of
its related persons by reason of, arising out of, or resulting from the
performance of the Construction Contract after the Effective Date but prior to
the termination of this Agreement under either Section 3.1(c) or Section 3.1(d),
except for Claims under Section 5.1 and Claims that shall have been determined
by the arbitrators under Article IV to have resulted from (i) the sole
negligence of CNF or its related persons, or (ii) the willful misconduct of CNF
or its related persons (such excluded Claims under (i) and (ii) referred to as a
"CNF Obligation"). CNF shall indemnify, defend and hold harmless Enron Power and
its related persons from and against all Claims arising out of CNF Obligations,
but only if the aggregate Claims incurred by Enron Power and its related persons
arising from CNF Obligations exceeds $625,000, and then only with respect to the
amount in excess of $625,000.
ARTICLE VI
Notices
Section 6.1 Notices. Any notice or other written instrument required or
permitted to be given pursuant to this Agreement shall be in writing signed by
the party giving such notice and shall, to the extent reasonably practicable, be
sent by telefax, and if not reasonably practicable to send by telefax, then by
hand delivery, overnight courier, telegram or registered mail, to the other
party at such address as set forth below:
If delivered to CNF:
CNF Constructors, Inc.
900 Rockmead Drive
4 Kingwood Place, Suite 200
Kingwood, TX 77339
Attention: Douglas L. Kieta
Telefax No.: (713) 356-3845
with a copy to:
Kenetech Corporation
500 Sansome Street
San Francisco, CA 94111
Attention: President
Telefax No.: (415) 984-8111
If delivered to Enron Power:
Enron Power I (Puerto Rico), Inc.
333 Clay Street, Suite 400
Houston, Texas 77002
Attention: Legal Department
Telefax No.: (713) 646-6280
with a copy to:
Enron Engineering & Construction Company
333 Clay Street, Suite 400
Houston, Texas 77002
Attention: Legal Department
Telefax No.: (713) 646-6280
Each party shall have the right to change the place to which notice shall be
sent or delivered or to specify one additional address to which copies of
notices may be sent, in either case by similar notice sent or deliveries in like
manner to the other parties. Without limiting any other means by which a party
to this Agreement maybe able to prove that a notice has been received by another
party, a notice shall be deemed to be duly received: (a) if delivered by hand,
overnight courier or telegram, the date when left at the address of the
recipient; (b) if sent by registered mail, the date of the return receipt; or
(c) if sent by telefax, upon receipt by the sender of an acknowledgment or
transmission report generated by the machine from which the telefax was sent
indicating that the telefax was sent in its entirety to the recipient's telefax
number.
ARTICLE VII
Miscellaneous
Section 7.1 Confidentiality. Each Partner acknowledges that Article 14 of the
Partnership Agreement shall survive the dissolution and termination of the
Partnership, and that no Partner shall disclose any Confidential Information (as
defined in the Partnership Agreement) to any third party except as provided
therein. Furthermore, the terms and conditions of this Agreement and the
transactions contemplated hereby shall remain subject to the terms and
conditions of that certain Confidentiality Agreement dated as of March 4, 1997
among EE&CC, CNFC Industries Inc. and Kenetech.
Section 7.2 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
Section 7.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to the
choice of law principles thereof.
Section 7.4 Entire Agreement. This Agreement (including the Related Agreements
and other agreements incorporated herein) and the exhibits hereto contain the
entire agreement between the parties with respect to the subject matter hereof
and there are no agreements, understandings, representations or warranties
between the parties other than those set forth or referred to herein.
Section 7.5 Expenses. Whether the transactions contemplated hereby are or are
not consummated, all legal and other costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses.
Section 7.6 Headings; Definitions. The section and article headings contained in
this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
Section 7.7 Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive compliance by the
other parties hereto with any term or provision of this Agreement on the part of
such other party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
Section 7.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 7.9 Additional Documents. In connection with this Agreement and the
transactions contemplated hereby, each party hereto agrees to execute and
deliver, or cause the execution and delivery of, such additional documents and
instruments, and to perform such additional acts, as may be necessary as
appropriate to effectuate, carry out and perform all of the terms, provisions
and conditions of this Agreement and the transactions contemplated hereby.
Section 7.10 Survival. The provisions of Article IV and V shall survive the
termination of this Agreement for a period of five (5) years from the Execution
Date.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties as of the day first above written.
Enron Power I (Puerto Rico), Inc.
By: _____________________________
Name:
Title:
CNF Penuelas, Inc.
By: _____________________________
Name:
Title:
<PAGE>
ONSHORE CERTIFICATE
EXHIBIT 1.2
CERTIFICATE OF CANCELLATION OF
CERTIFICATE OF LIMITED PARTNERSHIP OF
ENRON/CNF POWER CONSTRUCTION, L.P.
This Certificate of Cancellation, dated as of [_____], 1997, is being filed by
the undersigned in the Office of the Secretary of State of the State of Delaware
(the "Secretary of State") in accordance with the provisions of 6 Del.C. 17-203
to cancel the Certificate of Limited Partnership of Enron/CNF Power
Construction, L.P. (the "Partnership").
1. The name of the limited partnership is Enron/CNF Power Construction, L.P.
2. The Partnership filed in the Office of the Secretary of State a Certificate
of Limited Partnership on December 17, 1996.
3. The reason for the filing of this Certificate of Cancellation is that the
Partnership has been dissolved and the winding up of the Partnership has
been completed.
4. This Certificate of Cancellation shall be effective immediately upon
filing.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Cancellation as of the date first-above written.
GENERAL PARTNERS:
Enron Power I (Puerto Rico), Inc., a Delaware corporation
By: _________________________________
Name:
Title:
CNF Penuelas, Inc., a Delaware corporation
By: _________________________________
Name:
Title:
<PAGE>
ONSHORE
EXHIBIT 1.6(i)
DISTRIBUTION AND ASSIGNMENT AGREEMENT
This Distribution and Assignment Agreement (this "Agreement"), dated as of
[______], 1997, is entered into by and among Enron/CNF Power Construction, L.P.,
a Delaware limited partnership (the "Partnership"), Enron Power I (Puerto Rico),
Inc. a Delaware corporation ("Enron Power"), and CNF Penuelas, Inc., a Delaware
corporation ("CNF").
WHEREAS, pursuant to the Limited Partnership Agreement of Enron/CNF Power
Construction, L.P. dated as of December 13, 1996 (the "Partnership Agreement")
and a certificate of limited partnership filed December 16, 1996 with the
Delaware Secretary of State, Enron Power and CNF (hereinafter individually
called a "Partner" and collectively called the "Partners") formed the
Partnership, with each Partner owning a 49% general partner interest and a 1%
limited partner interest in the Partnership;
WHEREAS, the Partners are the sole limited partners and general partners of the
Partnership;
WHEREAS, pursuant to that certain Master Agreement of Dissolution, Distribution
and Assignment, dated [______], 1997 (the "Master Agreement"), the Partners
agreed, among other things, to dissolve the Partnership in accordance with
Section 22.3(a) of the Partnership Agreement;
WHEREAS, as contemplated by the Master Agreement, the Partners have paid all
debts and liabilities of the Partnership (including, without limitation, all
expenses incurred in liquidation) or have otherwise made adequate provisions for
such debt and liabilities;
WHEREAS, the Partners, as liquidators of the Partnership, have completed, or
have otherwise made adequate provisions for, all actions necessary to wind up
the affairs of the Partnership in accordance with the Partnership Agreement and
Section 17-803 of the Delaware Revised Uniform Limited Partnership Act, as
amended (the "Act");
WHEREAS, pursuant to this Agreement, the Partners wish to distribute to each
Partner a 50% undivided interest in the right, title and interest in and to all
of the assets owned, leased or held by the Partnership as of the date hereof,
whether tangible or intangible (the "Partnership Property," including, without
limitation, all of the assets and property described in Exhibit A hereto);
NOW THEREFORE, in consideration of the mutual covenants set forth below and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby acknowledge and ratify their agreement as
follows:
Distribution and Assignment. The Partners, as liquidators of the Partnership,
hereby distribute, assign, convey and deliver (i) to Enron Power and its
successors and assigns a 50% undivided interest in and to the Partnership
Property, and (ii) to CNF and its successors and assigns a 50% undivided
interest in and to the Partnership Property.
Acceptance of Assignment. Each of the Partners hereby accepts the assignment of
its 50% undivided interest in the Partnership Property and acknowledges that
such assignment constitutes a complete return of its capital contribution and a
complete distribution of its interest in the Partnership and all of the
Partnership's property and assets.
Acknowledgment and Consent to Release of Partnership. Each Partner acknowledges,
consents to and agrees to be bound by, the terms and conditions set forth in the
attached Acknowledgment, Consent and Release.
Effective Date. This Agreement is effective as of the date first above written.
Certificate of Cancellation. Upon the distribution and assignment of the
Partnership Property pursuant to this Agreement, the Partners agree to file a
Certificate of Cancellation with the Secretary of State of the State of Delaware
in order to cancel the Certificate of Limited Partnership of the Partnership in
accordance with Section 17-203 of the Act.
Further Assurances. The parties shall take all acts and execute all documents as
any other party may reasonably request to fully carry out and effectuate the
transactions contemplated by this Agreement.
Miscellaneous. This Agreement (including the Acknowledgment, Consent and Release
attached hereto): (i) shall be governed by and construed in accordance with the
laws of the State of Delaware; (ii) shall not be amended or modified except by
an instrument in writing executed by all parties; (iii) shall be binding upon
the successors and assigns of the respective parties; and (iv) may be executed
in several counterparts, all of which together shall constitute one agreement
binding on all parties hereto notwithstanding that all parties have not signed
the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first above written.
THE PARTNERSHIP:
ENRON/CNF POWER CONSTRUCTION, L.P.
a Delaware limited partnership
By: ENRON POWER I (PUERTO RICO), INC.
as a General and Limited Partner
By: ___________________________
Name:
Title:
By: CNF PENUELAS, INC.
as a General and Limited Partner
By: ___________________________
Name:
Title:
THE PARTNERS:
ENRON POWER I (PUERTO RICO), INC.
a Delaware corporation
By: __________________________
Name:
Title:
CNF PENUELAS, INC.
a Delaware corporation
By: __________________________
Name:
Title:
ACKNOWLEDGMENT CONSENT AND RELEASE
THE UNDERSIGNED, EcoElectrica, L.P., hereby acknowledges and agrees that it has
been informed of and consents to the distribution and assignment of the
Partnership Property pursuant to the terms and conditions of the Distribution
and Assignment Agreement (the "Agreement") to which this Acknowledgment, Consent
and Release is attached. Each capitalized term used herein and not otherwise
defined herein shall have the definition assigned thereto in the Agreement.
EcoElectrica, L.P. hereby further agrees that, subject to the execution and
delivery of the Assignment and Assumption Agreement whereby CNF assigns its
interest in the Partnership Property to Enron Power, all references to
"Supplier" and "Contractor" in that certain Offshore Construction Contract dated
as of November 1, 1995 (the "Construction Contract"), originally between
EcoElectrica, L.P. and Enron Power, shall refer to Enron Power. Finally,
EcoElectrica, L.P. hereby releases the Partnership, and each of the Partners
solely in their capacities as general partners and limited partners in the
Partnership (the "Released Parties"), from all duties and obligations under the
Construction Contract and agrees to accept performance of all such duties and
obligations from Enron Power in place of the Partnership and the Released
Parties.
ECOELECTRICA, L.P.,
a Bermuda exempted limited partnership
By: KES Bermuda, Inc.
a Delaware corporation, its general partner
By: ______________________________
Name:
Title:
By: Buenergia, B.V.
a Dutch limited liability company,
its general partner
By: ______________________________
Name:
Title:
<PAGE>
ONSHORE ASSIGNMENT
EXHIBIT 1.6 (ii)
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this "Agreement"), dated as of
[_____], 1997, is entered into by and between Enron Power I (Puerto Rico), Inc.,
a Delaware corporation ("Enron Power") and CNF Penuelas, Inc., a Delaware
corporation ("CNF").
WHEREAS, pursuant to the Limited Partnership Agreement of Enron/CNF, L.P. dated
as of December 13, 1996 (the "Partnership Agreement") and a certificate of
limited partnership filed December 16, 1996 with the Delaware Secretary of
State, Enron Power and CNF (hereinafter individually called a "Partner" and
collectively called the "Partners") formed the Partnership, with each Partner
owning a 49% general partner interest and a 1% limited partner interest in the
Partnership;
WHEREAS, pursuant to that certain Master Agreement of Dissolution, Distribution
and Assignment, dated [_______], 1997 (the "Master Agreement"), the Partners
agreed, among other things, to dissolve the Partnership in accordance with
Section 22.3(a) of the Partnership Agreement;
WHEREAS, pursuant to that certain Distribution and Assignment Agreement, dated
as of the date hereof (the "Distribution and Assignment Agreement"), the
Partners distributed, assigned, conveyed, and delivered to each Partner a 50%
undivided interest in the right, title and interest in and to all of the assets
owned, leased or held by the Partnership as of the date hereof, whether tangible
or intangible (the "Partnership Property," including, without limitation, all of
the assets and property described in Exhibit A hereto);
WHEREAS, pursuant to the Master Agreement, CNF desires to assign and transfer to
Enron Power all of CNF's interest in and to the Partnership Property distributed
and assigned to CNF under the Distribution and Assignment Agreement (the "CNF
Interest");
NOW THEREFORE, in consideration of the promises, covenants and agreements set
forth herein and in the Master Agreement and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
acknowledge and ratify their agreement as follows:
Assignment. CNF hereby assigns, conveys, transfers and delivers to Enron Power
all of CNF's right title and interest in and to the CNF Interest in exchange for
the consideration specified in the Master Agreement.
Acceptance of Assignment. Enron Power hereby accepts the assignment of the CNF
Interest and hereby assumes and agrees to perform or to satisfy and discharge
any and all duties and obligations relating to and arising out of the
Construction Contract.
Acknowledgment and Consent to Release of Partnership. Each Partner acknowledges,
consents to and agrees to be bound by, the terms and conditions set forth in the
attached Acknowledgment, Consent and Release.
Effective Date. This Agreement is effective as of the date first above written.
Further Assurances. The parties shall take all acts and execute all documents as
any other party may reasonably request to fully carry out and effectuate the
transactions contemplated by this Agreement.
Miscellaneous. This Agreement (including the Acknowledgment, Consent and Release
attached hereto): (i) shall be governed by and construed in accordance with the
laws of the State of Delaware; (ii) shall not be amended or modified except by
an instrument in writing executed by all parties; (iii) shall be binding upon
the successors and assigns of the respective parties; and (iv) may be executed
in several counterparts, all of which together shall constitute one agreement
binding on all parties hereto notwithstanding that all parties have not signed
the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first above written.
CNF PENUELAS, INC.
Delaware corporation, as assignor
By: ______________________________
Name:
Title:
ENRON POWER I (PUERTO RICO), INC.
a Delaware corporation, as assignee
By: ______________________________
Name:
Title:
ACKNOWLEDGMENT CONSENT AND RELEASE
THE UNDERSIGNED, EcoElectrica, L.P., hereby acknowledges and agrees that it has
been informed of and consents to the assignment and conveyance of the CNF
Interest pursuant to the terms and conditions of the Assignment and Assumption
Agreement (the "Agreement") to which this Acknowledgment, Consent and Release is
attached. Each capitalized term used herein and not otherwise defined herein
shall have the definition assigned thereto in the Agreement. EcoElectrica, L.P.
hereby further agrees that all references to "Supplier" and "Contractor" in that
certain Onshore Construction Contract dated as of November 1, 1995 (the
"Construction Contract"), originally between EcoElectrica, L.P. and Enron Power
Construction Partnership, shall refer to Enron Power. Finally, EcoElectrica,
L.P. hereby releases the Partnership, and each of the Partners solely in their
capacities as general partners and limited partners in the Partnership (the
"Released Parties"), from all duties and obligations under the Construction
Contract and agrees to accept performance of all such duties and obligations
from Enron Power in place of the Partnership and the Released Parties.
ECOELECTRICA, L.P.,
a Bermuda exempted limited partnership
By: KES Bermuda, Inc.
a Delaware corporation, its general partner
By: ________________________
Name:
Title:
By: Buenergia, B.V.
a Dutch limited liability company, its general
partner
By: ________________________
Name:
Title:
<PAGE>
ONSHORE LETTER AGREEMENT
Exhibit 1.6(iv)
Enron Development Corp.
333 Clay Street, Suite 1700
Houston, Texas 77002
[___________], 1997
Kenetech Energy Systems, Inc.
500 Sansome Street
Suite 300
San Francisco, CA 94111
Re: Cancellation of Side Letter Agreement
Gentlemen:
I refer to that certain Side Letter Agreement dated November 1, 1995 (the "Side
Letter Agreement") between Enron Development Corp. and Kenetech Energy Systems,
Inc., pursuant to which each has the right to cancel (i) the Onshore
Construction Contract dated as of November 1, 1995, originally between
EcoElectrica, L.P. and Enron Power Construction Partnership and (ii) the
Offshore Supply Contract dated as of November 1, 1995, originally between
EcoElectrica, L.P. and Enron Equipment Procurement Company ("Enron
Procurement").
In accordance with (i) the Master Agreement of Dissolution, Distribution and
Assignment dated the date hereof, by and between Enron Power I (Puerto Rico),
Inc. and CNF Penuelas, Inc., and (ii) the Master Agreement of Dissolution
Distribution and Assignment dated the date hereof, by and between Enron
Procurement, and CNF Equipment Inc., please evidence your agreement to cancel
the terms and conditions of the Side Letter Agreement by signing and returning
this letter agreement to the undersigned.
Very truly yours,
[Authorized Signatory]
AGREED AND ACCEPTED:
KENETECH ENERGY SYSTEMS, INC.
By: __________________________ Date: __________________________
Name:
Title:
<PAGE>
ONSHORE KENETECH GUARANTY
GUARANTY
This Guaranty, dated as of [_______], 1997 (this "Guaranty"), is by Kenetech
Corporation, a Delaware corporation (the "Guarantor"), in favor of Enron Power I
(Puerto Rico), Inc., a Delaware corporation (the "Beneficiary"):
WHEREAS, the Beneficiary and CNF Penuelas, Inc., a Delaware corporation and an
indirect wholly-owned subsidiary of the Guarantor ("CNF"), are the sole general
partners and limited partners of Enron/CNF Power Construction, L.P., a Delaware
limited partnership (the "Partnership");
WHEREAS, the Beneficiary and CNF entered into that certain Master Dissolution,
Distribution and Assignment Agreement, dated as of [_______], 1997, (the "Master
Agreement"), whereby the parties agreed, among other things, (i) to dissolve the
Partnership and cause any and all right, title and interest in and to the assets
and property of the Partnership (the "Partnership Property"), including, but not
limited to, that certain Onshore Construction Contract dated as of November 1,
1995 (the "Construction Contract"), originally between EcoElectrica, L.P. and
Enron Power Construction Partnership, to be distributed to the Beneficiary and
CNF; (ii) that CNF assign and transfer to the Beneficiary all of CNF's interests
in and to the Partnership Property to be distributed to CNF pursuant to the
dissolution of the Partnership (the "CNF Interest"); and (iii) that the
Beneficiary thereafter perform under the Construction Contract in lieu of the
Partnership;
WHEREAS, it is a condition to the Beneficiary consummating the transactions
under the Master Agreement that the Guarantor enter into this Guaranty;
WHEREAS, Guarantor acknowledges that it will benefit if CNF consummates the
transactions under the Master Agreement;
NOW, THEREFORE, in consideration of the premises set forth above and other good
and valuable consideration, receipt of which is hereby acknowledged, and as an
inducement to the Beneficiary to enter into the Master Agreement, the Guarantor
hereby agrees as follows:
1. Guaranty. In consideration of the Beneficiary entering into the Master
Agreement, the Guarantor absolutely, unconditionally and irrevocably
guarantees to Beneficiary, its successors and assigns, the prompt payment
when due, of all obligations and liabilities of CNF to Beneficiary arising
from Section 3.1, Section 3.2, Section 3.3, Section 5.1 and Section 5.2 of
the Master Agreement (the "Obligations") for so long as any Obligation may
arise under the Master Agreement. If for any reason CNF shall fail fully
and punctually to pay and perform any Obligation, the Guarantor shall pay
such sum to the Beneficiary, plus interest thereon calculated at the thirty
day LIBOR rate from the date CNF became obligated to make such payment
under the Master Agreement through the date payment is made by the
Guarantor. This Guaranty is an absolute, unconditional guaranty of payment
and performance and not of collectability, and is in no way conditioned or
contingent upon any attempt to collect from CNF, enforce performance by CNF
or on any other condition or contingency.
2. Nature of Guaranty. The Guarantor's obligations hereunder shall not be
affected by the validity or enforceability of CNF's obligations under the
Master Agreement or any other agreement relating thereto or by any other
event, occurrence or circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor or surety. In the event
that any payment of CNF in respect of any Obligations is rescinded or must
otherwise be returned for any reason whatsoever, the Guarantor shall remain
liable hereunder in respect to such Obligations as if such payment had not
been made. However, notwithstanding anything herein to the contrary,
nothing herein is intended to deny to the Guarantor, and it is expressly
agreed that the Guarantor shall have and may assert, any and all of the
defenses, set-offs, counterclaims and other rights with regard to any
Obligations that CNF may possess, including without limitation, any defense
based upon the payment or satisfaction by CNF of such Obligations (or the
performance or observance of any terms or provisions of the Master
Agreement out of which such Obligations are alleged to arise), except any
defense that CNF may possess relating to (i) lack of validity or
enforceability of the Master Agreement against CNF arising from the
defective incorporation of CNF; (ii) lack of qualification by CNF to do
business in any applicable jurisdiction; (iii) defective corporate
authority by CNF to enter into or perform the Master Agreement; or (iv) the
insolvency, bankruptcy, or other reorganization of CNF.
The Beneficiary shall not be obligated to file any claim relating to the
Obligations in the event that CNF becomes subject to a bankruptcy,
reorganization or similar proceeding, and the failure of Beneficiary to
file shall not affect the Guarantor's obligations hereunder.
3. Modification and Amendments. The Guarantor agrees that Beneficiary may at
any time and from time to time, without notice to or further consent of the
Guarantor, make any agreement with CNF or with any other party to or person
liable on any of the Obligations, or interested therein, for the payment,
compromise, discharge or release thereof, in whole or in part, or for any
modification of the terms thereof or of any agreement between Beneficiary
and CNF or any such other party or person, without in any way impairing or
affecting this Guaranty. Except the modifications allowed pursuant to this
Section 3, this Guaranty may be amended only with the written consent of
the Beneficiary and the Guarantor.
4. Expenses. The Guarantor agrees to pay on demand all out-of-pocket expenses
(including the reasonable fees and expenses of Beneficiary's counsel) in
any way relating to the enforcement or protection of the rights of
Beneficiary hereunder.
5. Subrogation. The Guarantor will not exercise any rights which it may
acquire by way of subrogation until all the Obligations to Beneficiary
shall have been paid in full. Subject to the foregoing, upon payment of all
the Obligations, the Guarantor shall be subrogated to the rights of
Beneficiary against CNF.
6. No Waiver; Cumulative Rights. No failure on the part of Beneficiary to
exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
by Beneficiary of any right, remedy or power hereunder preclude any other
or future exercise of any right, remedy or power. Each and every right,
remedy and power hereby granted to Beneficiary or allowed it by law or
other agreement shall be cumulative and not exclusive of any other, and may
be exercised by Beneficiary from time to time.
7. Waiver of Notice. The Guarantor waives notice of the acceptance of this
Guaranty, presentment, demand, notice of dishonor, protest and all other
notices whatsoever.
8. Representations and Warranties.
(a) The Guarantor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has full
corporate power to execute, deliver and perform this Guaranty.
(b) The execution, delivery and performance of this Guaranty have been and
remain duly authorized by all necessary corporate action and do not
contravene any provision of law or of the Guarantor's constitutional
documents or any contractual restriction binding on the Guarantor or
its assets.
(c) All consents, authorizations and approvals of, and registrations and
declarations with, any governmental authority necessary for the due
execution, delivery and performance of this Guaranty have been
obtained and remain in full force and effect and all conditions
thereof have been duly complied with, and no other action by, and no
notice to or filing with, any governmental authority is required in
connection with the execution, delivery or performance of this
Guaranty.
(d) This Guaranty constitutes the legal, valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors rights and to general equity principles.
(e) (i) The Guarantor is not, and will not as a result of the execution
and delivery of this Guaranty, be rendered insolvent, (ii) the
Guarantor does not intend to incur, or believe it is incurring,
obligations beyond its ability to pay, and (iii) the Guarantor's
property remaining after the delivery and performance of this Guaranty
will not constitute unreasonably small capital.
9. Assignment. This Guaranty is binding upon Guarantor and its successors and
permitted assigns. Neither the Guarantor nor the Beneficiary may assign its
rights, interest or obligations hereunder to any other person without the
prior written consent of the other party.
10. Notices. All notices or other communications in connection with this
guaranty shall be given in the same manner and with the same effect as set
forth in Section 6.1 of the Master Agreement. The Guarantor's address for
notices is as follows: Kenetech Corporation 500 Sansome Street San
Francisco, California 94111 Attention: President Telefax No. (415) 984-8111
or such other address as the Guarantor shall from time to time specify to
Beneficiary.
11. Governing Law. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
choice of law doctrine.
12. Severability. The invalidity of one or more phrases, sentences, clauses or
Sections contained in this Guaranty shall not affect the validity of the
remaining portions of this Guaranty so long as the material purposes of
this Guaranty can be determined and effectuated.
IN WITNESS WHEREOF, the Guarantor has caused its duly authorized officer to
execute and deliver this Guaranty as of the date first above written.
KENETECH CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
ONSHORE ENRON GUARANTY
Exhibit 1.6(vii)
GUARANTY
This Guaranty, dated as of [______], 1997 (this "Guaranty"), is by Enron Power
Corp., a Delaware corporation (the "Guarantor"), in favor of CNF Penuelas, Inc,
a Delaware corporation (the "Beneficiary"):
WHEREAS, the Beneficiary and Enron Power I (Puerto Rico), Inc. a Delaware
corporation and an affiliate of the Guarantor ("EPI"), are the sole general
partners and limited partners of Enron/CNF Power Construction, L.P., a Delaware
limited partnership (the "Partnership");
WHEREAS, the Beneficiary and CNF entered into that certain Master Dissolution,
Distribution and Assignment Agreement, dated as of [_____], 1997, (the "Master
Agreement"), whereby the parties agreed, among other things, (i) to dissolve the
Partnership and cause any and all right, title and interest in and to the assets
and property of the Partnership (the "Partnership Property"), including, but not
limited to, that certain Onshore Construction Contract dated as of November 1,
1995 (the "Construction Contract"), originally between EcoElectrica, L.P. and
Enron Power Construction Partnership, to be distributed to the Beneficiary and
EPI; (ii) that the Beneficiary assign and transfer to EPI all of the
Beneficiary's interests in and to the Partnership Property to be distributed to
the Beneficiary pursuant to the dissolution of the Partnership (the "CNF
Interest"); and (iii) that EPI thereafter perform under the Construction
Contract in lieu of the Partnership;
WHEREAS, it is a condition to the Beneficiary consummating the transactions
under the Master Agreement that the Guarantor enter into this Guaranty;
WHEREAS, Guarantor acknowledges that it will benefit if the Beneficiary
consummates the transactions under the Master Agreement;
NOW, THEREFORE, in consideration of the premises set forth above and other good
and valuable consideration, receipt of which is hereby acknowledged, and as an
inducement to CNF to enter into the Master Agreement, the Guarantor hereby
agrees as follows:
1. Guaranty. In consideration of the Beneficiary entering into the Master
Agreement, the Guarantor absolutely, unconditionally and irrevocably
guarantees to Beneficiary, its successors and assigns, the prompt payment
when due, of all obligations and liabilities of EPI to Beneficiary arising
from Section 3.1, Section 5.1, and Section 5.2 of the Master Agreement (the
"Obligations") for so long as any Obligation may arise under the Master
Agreement. If for any reason EPI shall fail fully and punctually to pay and
perform any Obligation, the Guarantor shall pay such sum to the
Beneficiary, plus interest thereon calculated at the thirty day LIBOR rate
from the date EPI became obligated to make such payment under the Master
Agreement through the date payment is made by the Guarantor. This Guaranty
is an absolute, unconditional guaranty of payment and performance and not
of collectability, and is in no way conditioned or contingent upon any
attempt to collect from EPI, enforce performance by EPI or on any other
condition or contingency.
2. Nature of Guaranty. The Guarantor's obligations hereunder shall not be
affected by the validity or enforceability of EPI's obligations under the
Master Agreement or any other agreement relating thereto or by any other
event, occurrence or circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor or surety. In the event
that any payment of EPI in respect of any Obligations is rescinded or must
otherwise be returned for any reason whatsoever, the Guarantor shall remain
liable hereunder in respect to such Obligations as if such payment had not
been made. However, notwithstanding anything herein to the contrary,
nothing herein is intended to deny to the Guarantor, and it is expressly
agreed that the Guarantor shall have and may assert, any and all of the
defenses, set-offs, counterclaims and other rights with regard to any
Obligations that EPI may possess, including without limitation, any defense
based upon the payment or satisfaction by EPI of such Obligations (or the
performance or observance of any terms or provisions of the Master
Agreement out of which such Obligations are alleged to arise), except any
defense that EPI may possess relating to (i) lack of validity or
enforceability of the Master Agreement against EPI arising from the
defective incorporation of EPI; (ii) lack of qualification by EPI to do
business in any applicable jurisdiction; (iii) defective corporate
authority by EPI to enter into or perform the Master Agreement; or (iv) the
insolvency, bankruptcy, or other reorganization of EPI.
The Beneficiary shall not be obligated to file any claim relating to the
Obligations in the event that EPI becomes subject to a bankruptcy,
reorganization or similar proceeding, and the failure of Beneficiary to
file shall not affect the Guarantor's obligations hereunder.
3. Modification and Amendments. The Guarantor agrees that Beneficiary may at
any time and from time to time, without notice to or further consent of the
Guarantor, make any agreement with EPI or with any other party to or person
liable on any of the Obligations, or interested therein, for the payment,
compromise, discharge or release thereof, in whole or in part, or for any
modification of the terms thereof or of any agreement between Beneficiary
and EPI or any such other party or person, without in any way impairing or
affecting this Guaranty. Except the modifications allowed pursuant to this
Section 3, this Guaranty may be amended only with the written consent of
the Beneficiary and the Guarantor.
4. Expenses. The Guarantor agrees to pay on demand all out-of-pocket expenses
(including the reasonable fees and expenses of Beneficiary's counsel) in
any way relating to the enforcement or protection of the rights of
Beneficiary hereunder.
5. Subrogation. The Guarantor will not exercise any rights which it may
acquire by way of subrogation until all the Obligations to Beneficiary
shall have been paid in full. Subject to the foregoing, upon payment of all
the Obligations, the Guarantor shall be subrogated to the rights of
Beneficiary against EPI.
6. No Waiver; Cumulative Rights. No failure on the part of Beneficiary to
exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
by Beneficiary of any right, remedy or power hereunder preclude any other
or future exercise of any right, remedy or power. Each and every right,
remedy and power hereby granted to Beneficiary or allowed it by law or
other agreement shall be cumulative and not exclusive of any other, and may
be exercised by Beneficiary from time to time.
7. Waiver of Notice. The Guarantor waives notice of the acceptance of this
Guaranty, presentment, demand, notice of dishonor, protest and all other
notices whatsoever.
8. Representations and Warranties.
(a) The Guarantor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has full
corporate power to execute, deliver and perform this Guaranty.
(b) The execution, delivery and performance of this Guaranty have been and
remain duly authorized by all necessary corporate action and do not
contravene any provision of law or of the Guarantor's constitutional
documents or any contractual restriction binding on the Guarantor or
its assets.
(c) All consents, authorizations and approvals of, and registrations and
declarations with, any governmental authority necessary for the due
execution, delivery and performance of this Guaranty have been
obtained and remain in full force and effect and all conditions
thereof have been duly complied with, and no other action by, and no
notice to or filing with, any governmental authority is required in
connection with the execution, delivery or performance of this
Guaranty.
(d) This Guaranty constitutes the legal, valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors rights and to general equity principles.
(e) (i) The Guarantor is not, and will not as a result of the execution
and delivery of this Guaranty, be rendered insolvent, (ii) the
Guarantor does not intend to incur, or believe it is incurring,
obligations beyond its ability to pay, and (iii) the Guarantor's
property remaining after the delivery and performance of this Guaranty
will not constitute unreasonably small capital.
9. Assignment. This Guaranty is binding upon Guarantor and its successors and
permitted assigns. Neither the Guarantor nor the Beneficiary may assign its
rights, interest or obligations hereunder to any other person without the
prior written consent of the other party.
10. Notices. All notices or other communications in connection with this
guaranty shall be given in the same manner and with the same effect as set
forth in Section 6.1 of the Master Agreement. The Guarantor's address for
notices is as follows: Kenetech Corporation 500 Sansome Street San
Francisco, California 94111 Attention: President Telefax No. (415) 984-8111
or such other address as the Guarantor shall from time to time specify to
Beneficiary.
11. Governing Law. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
choice of law doctrine.
12. Severability. The invalidity of one or more phrases, sentences, clauses or
Sections contained in this Guaranty shall not affect the validity of the
remaining portions of this Guaranty so long as the material purposes of
this Guaranty can be determined and effectuated.
IN WITNESS WHEREOF, the Guarantor has caused its duly authorized officer to
execute and deliver this Guaranty as of the date first above written.
ENRON POWER CORP.
By: ______________________________
Name:
Title:
<PAGE>
ONSHORE RELEASE OF CNF
Exhibit 1.6(x)
CNF Industries, Inc.
355 Research Parkway
Meriden, Connecticut 06450
[______], 1997
Enron Power I (Puerto Rico), Inc.
333 Clay Street, Suite 400
Houston, Texas 77002
Attn: Legal Department
Re: Release of CNF Industries, Inc. Guaranty
Gentlemen:
I refer to that certain Guaranty dated as of December 18, 1996 (the "CNF Onshore
Guaranty") by CNF Industries, Inc., a Delaware corporation (the "Guarantor"),
for the benefit of Enron Power I (Puerto Rico), Inc., a Delaware corporation
("Enron Power I"), entered into pursuant to Section 11.3 of the Limited
Partnership Agreement of Enron/CNF Power Construction, L.P., a Delaware limited
partnership.
In accordance with (i) the Master Agreement of Dissolution, Distribution and
Assignment dated [________], 1997, by and between Enron Power I and CNF
Penuelas, Inc., and (ii) Section 16 of the CNF Onshore Guaranty, please evidence
your agreement to terminate the CNF Onshore Guaranty and release the Guarantor
from any and all obligations thereunder by signing and returning this letter
agreement to the undersigned.
Very truly yours,
[Authorized Signatory]
AGREED AND ACCEPTED:
ENRON POWER I (PUERTO RICO), INC.
By: __________________________ Date: July __, 1997
Name:
Title:
<PAGE>
ONSHORE RELEASE OF ENRON
Exhibit 1.6(xi)
Enron Power Corp.
P.O. Box 1188
Houston, Texas 77251-1188
[______], 1997
CNF Penuelas, Inc.
355 Research Parkway
Meriden, Connecticut 06450
Attn:___________________
Re: Release of Enron Power Corp. Guaranty
Gentlemen:
I refer to that certain Guaranty dated as of December 18, 1996 (the "EPC Onshore
Guaranty") by Enron Power Corp., a Delaware corporation (the "Guarantor"), for
the benefit of CNF Penuelas, Inc., a Delaware corporation ("CNF"), entered into
pursuant to Section 11.3 of the Limited Partnership Agreement of Enron/CNF Power
Construction, L.P., a Delaware limited partnership.
In accordance with (i) the Master Agreement of Dissolution, Distribution and
Assignment dated [_____], 1997, by and between Enron Power I (Puerto Rico) I,
Inc. and CNF, and (ii) Section 16 of the EPC Onshore Guaranty, please evidence
your agreement to terminate the EPC Onshore Guaranty and release the Guarantor
from any and all obligations thereunder by signing and returning this letter
agreement to the undersigned.
Very truly yours,
[Authorized Signatory]
AGREED AND ACCEPTED:
CNF PENUELAS, INC.
By: __________________________ Date: July __, 1997
Name:
Title:
<PAGE>
OFFSHORE MASTER AGREEMENT
MASTER AGREEMENT OF DISSOLUTION, DISTRIBUTION AND ASSIGNMENT
This Master Agreement of Dissolution, Distribution and Assignment (this
"Agreement"), dated as of August 27, 1997, is entered into by and between Enron
Equipment Procurement Company, a Delaware corporation ("Enron Procurement"), and
CNF Equipment, Inc., a Delaware corporation ("CNF Equipment"):
WHEREAS, Enron Procurement, acting on its own behalf, entered into that certain
Offshore Supply Contract dated November 1, 1995 (the "Supply Contract") with
EcoElectrica, L.P., a limited partnership formed under the laws of Bermuda
("EcoElectrica");
WHEREAS, in order to participate jointly in the performance of the Supply
Contract, Enron Procurement and CNF Equipment (hereinafter individually called a
"Partner" and collectively called the "Partners") associated themselves in the
form of a joint venture (the "Joint Venture") by entering into that certain
Joint Venture Agreement dated as of November 1, 1995;
WHEREAS, pursuant to the Limited Partnership Agreement of Enron/CNF Power
Equipment, L.P. dated as of December 13, 1996 (the "Partnership Agreement") and
a certificate of limited partnership filed December 17, 1996 with the Delaware
Secretary of State, the Partners formed Enron/CNF Equipment, L.P., a Delaware
limited partnership (the "Partnership"), with each Partner owning a 49% general
partner interest and a 1% limited partner interest in the Partnership;
WHEREAS, pursuant to the Assignment and Assumption Agreement dated as of
December 18, 1996 the Partners transferred and assigned all of their interests
in the Joint Venture to the Partnership, and continued the business of the Joint
Venture under the Partnership;
WHEREAS, the Partnership has not commenced supply under the Supply Contract and
substantially all of the costs and expenses of the Joint Venture to date have
been covered by Enron Engineering & Construction Company, a Delaware corporation
("EE&CC"), CNF Constructors, Inc., a Tenessee corporation, and their respective
affiliates;
WHEREAS, subject to the terms and conditions of this Agreement, the Partners
desire (i) to dissolve the Partnership and cause any and all right, title and
interest in and to the assets and property of the Partnership (the "Partnership
Property"), including, but not limited to, the Partners' interests in the Supply
Contract, to be distributed to the Partners as agreed to herein; (ii) CNF
Equipment to assign and transfer to Enron Procurement all of CNF Equipment's
interests in and to the Partnership Property to be distributed to CNF Equipment
pursuant to the dissolution of the Partnership (the "CNF Equipment Interest");
and (iii) Enron Procurement to thereafter perform under the Supply Contract in
lieu of the Partnership.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants, agreements and conditions contained herein, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to set forth the terms and conditions of the dissolution of the
Partnership, the distribution of Partnership Property and the assignment and
transfer to Enron Procurement of the CNF Equipment Interest, the parties hereto
hereby agree as follows:
ARTICLE I
Dissolution, Distribution and Assignment; Closing
Section 1.1 Dissolution. Subject to the terms and conditions of this Agreement,
and in accordance with Section 22.3(a) of the Partnership Agreement, the
Partners agree to dissolve the Partnership and to wind up expeditiously the
Partnership's affairs and business. In accordance with Section 22.4 of the
Partnership Agreement, Enron Procurement and CNF Equipment will act as the
liquidators of the Partnership.
Section 1.2 Distribution and Termination. Subject to the terms and conditions of
this Agreement, on the Effective Date (as hereinafter defined), all of the
Partnership Property shall be distributed to the Partners in accordance with the
Distribution and Assignment Agreement referred to in Section 1.6(ii) of this
Agreement. Upon such distribution, the Partnership's affairs shall be terminated
and the liquidators shall promptly cause to be filed all certificates and
instruments required to effect the termination of the Partnership, including a
Certificate of Cancellation in substantially the form attached hereto as Exhibit
1.2 to be filed with the Secretary of State of the State of Delaware.
Section 1.3 Assignment of CNF Equipment Interest. Immediately following the
distribution of the Partnership Property to the Partners on the Effective Date,
(i) CNF Equipment shall assign and transfer to Enron Procurement the CNF
Equipment Interest, including, but not limited to, all of CNF Equipment's
interest in the Supply Contract, and (ii) Enron Procurement shall accept the CNF
Equipment Interest, and will thereby assume and agree to perform all the duties
and obligations of CNF Equipment under the Supply Contract. Each of the Partners
acknowledges that upon the assignment of the CNF Equipment Interest to Enron
Procurement, Enron Procurement shall possess all of the rights, title and
interest which had been held by the Partnership in and to the Supply Contract.
Section 1.4 Time and Place of Closing on the Effective Date. Unless the Partners
agree otherwise in writing, and subject to the terms and conditions of this
Agreement, (i) the winding up of the Partnership's business and affairs, (ii)
the distribution to the Partners of all of their respective rights, title and
interest in and to the Partnership Property, and (iii) the assignment and
transfer of the CNF Equipment Interest shall each be consummated (the "Closing")
at the offices of Enron Procurement, 333 Clay, Suite 400, Houston, Texas 77002,
or at such other place as the Partners may agree in writing. The date when the
Closing actually occurs is referred to in this Agreement as the "Effective
Date."
Section 1.5 Conditions Precedent to Closing. The Closing shall be held on a
mutually acceptable date within three (3) business days after the satisfaction
or mutual waiver of the following ("Conditions Precedent"):
(a) the mutually satisfactory execution and delivery of all Related Agreements
(as defined below);
(b) Enron Procurement receiving a Notice to Proceed (as defined in the Supply
Contract); and
(c) the satisfaction or waiver of all conditions precedent to the Notice to
Proceed Date (as defined in the Supply Contract).
Section 1.6 Related Agreements. Subject to the terms and conditions stated in
this Agreement along with the right for CNF Equipment and Enron Procurement to
mutually agree in writing to waive any requirement under this Section 1.6, at or
prior to the Effective Date the appropriate parties shall execute and deliver
the following agreements (the agreements listed in this Section 1.6 are
collectively referred to in this Agreement as the "Related Agreements") and
where applicable CNF Equipment and Enron Procurement shall cause their
affiliates to deliver:
(i) The Distribution and Assignment Agreement, in the form attached hereto
as Exhibit 1.6(i), providing for the distribution of the Partnership
Property to each of the Partners (the "Distribution and Assignment
Agreement");
(ii) The Assignment and Assumption Agreement, in the form attached hereto
as Exhibit 1.6(ii), providing for the assignment and transfer by CNF
Equipment of the CNF Equipment Interest to Enron Procurement, and the
acceptance and assumption of the CNF Equipment Interest by Enron
Procurement (the "CNF Equipment Assignment Agreement");
(iii)The acknowledgment and consent of EcoElectrica, L.P. of the
transactions contemplated by this Agreement in substantially the form
attached to the Distribution and Assignment Agreement and the CNF
Equipment Assignment Agreement (the "Consents"), provided, however,
that in the event CNF Equipment's affiliated partner in EcoElectrica
has executed both Consents, but Enron Procurement's affiliated partner
in EcoElectrica has not executed both Consents within three (3)
business days after the Notice to Proceed Date, then Enron Procurement
will be deemed to have waived the requirement under Section 1.6 (iii);
(iv) The letter agreement (the "Enron Development/KESI Cancellation
Letter") between Enron Development Corp. ("Enron Development") and
Kenetech Energy Systems, Inc. ("KESI"), in substantially the form
attached hereto as Exhibit 1.6(iv), cancelling the Side Letter
Agreement dated November 1, 1995 between Enron Development and KESI
pursuant to which each has the right to cancel the Supply Contract and
that certain Offshore Supply Contract dated as of November 1, 1995,
originally between EcoElectrica, L.P. and Enron Equipment Procurement
Company (the "Offshore Supply Contract");
(v) Except to the extent waived in accordance with the terms thereof, all
documents required to be delivered at or prior to the closing
contemplated by the Master Agreement of Dissolution, Distribution and
Assignment (the "Construction L.P. Dissolution Agreement") entered
into on the date of this Agreement between Enron Power I (Puerto Rico)
("Enron Power") and CNF Penuelas, Inc. ("CNF Penuelas") relating to
the dissolution of Enron Power/CNF Penuelas, L.P., a Delaware limited
partnership (the "Construction L.P.") and the distribution and
assignment of its property (collectively, the "Construction L.P.
Agreements");
(vi) The guaranty of Kenetech Corporation, a Delaware corporation
("Kenetech"), in the form attached hereto as Exhibit 1.6(vi), pursuant
to which Kenetech unconditionally guarantees any and all obligations
of CNF Equipment under Section 3.1, Section 3.2, Section 3.3, Section
5.1 and Section 5.2 of this Agreement (the "Kenetech Guaranty");
(vii)The guaranty of Enron Power Corp., a Delaware corporation, in the
form attached hereto as Exhibit 1.6(vii), pursuant to which Enron
Power Corp. unconditionally guarantees any and all obligations of
Enron Procurement under Section 3.1, Section 5.1 and Section 5.2;
(viii) The Global Change Order, in substantially the form attached hereto
as Exhibit 1.6(viii), relating to the consent and amendment required
by the lenders to the project;
(ix) The Change Order, in substantially the form attached hereto as Exhibit
1.6(ix), relating to the LPG storage facility (the "LPG Change
Order"), provided, however, that in the event the LPG Change Order has
not been executed within three (3) business days after the Notice to
Proceed Date, then Enron Procurement will be deemed to have waived the
requirement under Section 1.6 (ix);
(x) The letter agreement between CNF Industries, Inc. and Enron Power I,
in the form attached hereto as Exhibit 1.6(x), releasing the guaranty
of CNF Industries, Inc. granted pursuant to Section 11.3 of the
Partnership Agreement; and
(xi) The letter agreement between Enron Power Corp. and CNF Equipment, in
the form attached hereto as Exhibit 1.6(xi), releasing the guaranty of
Enron Power Corp. granted pursuant to Section 11.3 of the Partnership
Agreement.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of CNF Equipment. CNF Equipment
represents and warrants to Enron Procurement that:
(a) Organization of CNF Equipment. CNF Equipment is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to
own, lease, operate and otherwise hold all of its properties and assets and
to carry on its business as presently conducted and is duly qualified to do
business in each jurisdiction in which the nature of its business as now
conducted or its assets makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on
it.
(b) Authorization and Validity of Agreement. CNF Equipment has all necessary
corporate power and authority to enter into this Agreement and each of the
Related Agreements to which it is a party and to perform its obligations
hereunder and thereunder, and the execution, delivery and performance by
CNF Equipment of this Agreement and each of the Related Agreements to which
it is a party has been duly and validly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by
CNF Equipment and at or prior to the Effective Date each of the Related
Agreements to which CNF Equipment is a party will have been duly executed
and delivered by CNF Equipment, and, assuming this Agreement and each of
the Related Agreements to which CNF Equipment is a party constitute legal,
valid and binding obligations of the other parties thereto, when executed
and delivered will constitute legal, valid and binding obligations of CNF
Equipment, enforceable against it in accordance with their terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) Consent and Approval; No Conflict. Neither the execution and delivery of
this Agreement or the Related Agreements to which CNF Equipment is a party
nor the consummation of the transactions and performance of the terms and
conditions contemplated hereby or thereby will (i) conflict with or result
in any breach of any provision of the certificate of incorporation or
bylaws of CNF Equipment; (ii) except as otherwise provided in this
Agreement, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
except (A) any regulatory approvals or routine governmental consents
normally acquired after the consummation of transactions such as
transactions of the nature contemplated by this Agreement or (B) where it
is reasonably expected that the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not
prevent or delay in any material respect the consummation of the
transactions contemplated hereby or thereby; (iii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any agreement, instrument or
obligation to which CNF Equipment is a party or by which CNF Equipment may
be bound and to which any of the Partnership Property is subject, except
for such defaults (or rights of termination, cancellation or acceleration)
as to which requisite waivers or consents have been obtained or will be
obtained prior to the Closing; (iv) violate any order, writ, injunction,
decree, statute, rule or regulation to which CNF Equipment is subject and
which relate to any of its assets; or (v) result in the imposition or
creation of any lien, charge or encumbrance upon any Partnership Property
under any agreement by which Partnership Property is bound.
(d) Ownership of Partnership Interests; Title. As of the date of this Agreement
and immediately prior to the Closing, CNF Equipment is and will be the
owner of record and beneficially of a 49% general partner interest and a 1%
limited partner interest in the Partnership, and it has not received any
notice of adverse claim to the ownership of such interests and does not
have any reason to know of any such adverse claim.
(e) No Liens. CNF Equipment shall transfer and assign the CNF Equipment
Interest to Enron Procurement pursuant to the CNF Equipment Assignment
Agreement free and clear of all liens, encumbrances or similar rights.
(f) Solvency. As of the date hereof CNF Equipment is Solvent, and following the
transfer of the CNF Equipment Interest to Enron Procurement pursuant to the
CNF Equipment Assignment Agreement and the receipt by CNF Equipment of the
payment contemplated by Section 3.1(a) and Section 3.1(b) (i) and (ii) of
this Agreement, CNF Equipment shall be Solvent. For purposes of this
Section 2.1(f) the term "Solvent" shall mean: (i) the assets of CNF
Equipment, at a fair valuation, exceed CNF Equipment's total liabilities
(including contingent, subordinated, unmatured and unliquidated
liabilities); (ii) based on current projections, which are based on
underlying assumptions which provide a reasonable basis for the projections
and which reflect CNF Equipment 's judgment based on present circumstances
of the most likely set of conditions and CNF Equipment's most likely course
of action for the period projected (including any payments that may be
received by CNF Equipment under Section 3.1), CNF Equipment has sufficient
cash flow to enable it to pay its debts as they mature; and (iii) CNF
Equipment does not have unreasonably small capital with which to engage in
its anticipated business. For purposes of this Section 2.1(f), the "fair
valuation" of the assets of CNF Equipment means a valuation on the basis of
the amount which may be realized within a reasonable time, either through
collection or sale of such assets at the regular market value, conceiving
the latter as the amount which could be obtained for the property in
question within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling
conditions, including obtaining necessary consents.
(g) Fair Consideration. The consideration payable to CNF Equipment pursuant to
Article III of this Agreement equals or exceeds the reasonable equivalent
value of the CNF Equipment Interest to be transferred to Enron Procurement
pursuant to the CNF Equipment Assignment Agreement.
(h) Delivery of CNF Equipment Work Product. CNF Equipment and affiliated
parties have delivered to Enron Procurement all work, of any kind or
nature, related to the Project (as defined in the Supply Contract) in the
possession or under the control of such person, including but not limited
to: drawings, specifications, calculations, purchase orders, quotations,
estimates, budgets, cost reports, cost forecasts, labor or manpower
projections or forecasts, cash flow projections, schedules, work plans,
transportation studies, installation plans or procedures, arrangements with
subcontractors or subsuppliers, monthly reports, daily logs, engineering
studies, correspondence with or between any party related to the Project
and including that with any possible subcontractors, monthly reports, daily
logs, engineering studies, and related data.
(i) No Agreements, Claims, Actions or Proceedings. Except for this
Agreement, the Related Agreements, and any agreement entered into
jointly by CNF Equipment and Enron Procurement, CNF Equipment is not a
party to any contract, agreement or arrangement relating to the
Partnership Property or the Supply Contract which binds or purports to
bind the Partnership or its assets. Except as disclosed on Schedule
2.1(i), as of the Execution Date and, except as may be provided on an
amended Schedule 2.1(i) delivered by CNF Equipment at or prior to the
Effective Date, as of the Effective Date there are no claims, actions
or proceedings pending that arise from activities conducted by CNF
Equipment, its affiliates or their representatives that relate to the
Partnership, Partnership Property or the Supply Contract and, to the
knowledge of CNF Equipment, no such claims, actions or proceedings are
threatened.
Section 2.2 Representations and Warranties of Enron Procurement. Enron
Procurement hereby represents and warrants to CNF Equipment that:
(a) Organization of Enron Procurement. Enron Procurement is a corporation duly
organized, validly existing and in good standing under the laws of the
state of Delaware and has all requisite corporate power and authority to
own, lease, operate and otherwise hold all of its properties and assets and
to carry on its business as presently conducted and is duly qualified to do
business in each jurisdiction in which the nature of its business as now
conducted or its assets makes such qualification necessary, except where
the failure to be so qualified would not have a material adverse effect on
it.
(b) Authorization and Validity of Agreement. Enron Procurement has all
necessary corporate power and authority to enter into this Agreement and
each of the Related Agreements to which it is a party and to perform its
obligations hereunder and thereunder, and the execution, delivery and
performance by Enron Procurement of this Agreement and each of the Related
Agreements to which it is a party has been duly and validly authorized by
all necessary corporate action. This Agreement has been duly executed and
delivered by Enron Procurement and at or prior to the Effective Date each
of the Related Agreements to which Enron Procurement is a party will have
been duly executed and delivered by Enron Procurement, and, assuming this
Agreement and each of the Related Agreements to which Enron Procurement is
a party constitute legal, valid and binding obligations of the other
parties thereto, when executed and delivered will constitute legal, valid
and binding obligations of Enron Procurement, enforceable against it in
accordance with their terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or
at law).
(c) Consent and Approval; No Conflict. Neither the execution and delivery of
this Agreement or the Related Agreements to which Enron Procurement is a
party nor the consummation of the transactions and performance of the terms
and conditions contemplated hereby or thereby will (i) conflict with or
result in any breach of any provision of the certificate of incorporation
or bylaws of Enron Procurement; (ii) except as otherwise provided in this
Agreement, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
except (A) any regulatory approvals or routine governmental consents
normally acquired after the consummation of transactions such as
transactions of the nature contemplated by this Agreement or (B) where it
is reasonably expected that the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not
prevent or delay in any material respect the consummation of the
transactions contemplated hereby or thereby; (iii) result in a default (or
give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any agreement, instrument or
obligation to which Enron Procurement is a party or by which Enron
Procurement may be bound and to which any of the Partnership Property is
subject, except for such defaults (or rights of termination, cancellation
or acceleration) as to which requisite waivers or consents have been
obtained or will be obtained prior to the Closing; (iv) violate any order,
writ, injunction, decree, statute, rule or regulation to which Enron
Procurement is subject and which relate to any of its assets; or (v) result
in the imposition or creation of any lien, charge or encumbrance upon any
Partnership Property under any agreement by which the Partnership Property
is bound.
(d) Ownership of Partnership Interests; Title. As of the date of this Agreement
and immediately prior to the Closing, Enron Procurement is and will be the
owner of record and beneficially of a 49% general partner interest and a 1%
limited partner interest in the Partnership, and it has not received any
notice of adverse claim to the ownership of such interests and does not
have any reason to know of any such adverse claim.
(e) No Claims. As of the date of this Agreement and, except as may be set forth
on an amended Schedule 2.1(i) delivered by CNF Equipment pursuant to
Section 2.1(i), immediately prior to the Closing, there are no claims,
actions or proceedings pending that arise from the gross negligence or
willful misconduct of CNF Equipment, its affiliates or their
representatives that relate to the Partnership, Partnership Property or the
Supply Contract and, to the knowledge of Enron Procurement, no such claims,
actions or proceedings are threatened.
ARTICLE III
Additional Covenants and Agreements
Section 3.1 Certain Payments to CNF Equipment.
(a) Payment on the Execution Date. Subject to the terms and conditions of this
Agreement, Enron Procurement shall pay to CNF Equipment on the Execution
Date, by wire transfer or certified bank check, an aggregate of Seven
Hundred Thousand ($700,000) in partial consideration for the transactions
contemplated in this Agreement.
(b) Payments Following the Effective Date. Subject to, and conditioned upon the
satisfaction or valid waiver of the Conditions Precedent, Enron Procurement
shall pay to CNF Equipment, by wire transfer or a certified bank check, the
following amounts:
(i) Two Million Four Hundred Thousand Dollars ($2,400,000 on the Effective
Date to CNF Equipment or its designee for the out-of-pocket costs
incurred and paid by CNF Equipment and its affiliates on behalf of the
Partnership and constituting Contract Costs (as defined in the
Partnership Agreement) through April 30, 1997 for which CNF Equipment
and its affiliates had not been reimbursed as of April 30, 1997; and
(ii) Nine Million Nine Hundred Thousand Dollars ($9,900,000) on the
Effective Date.
(c) Cancellation Option. In the event a Notice to Proceed under the Supply
Contract is not issued by EcoElectrica, L.P. to Enron Procurement by
December 15, 1997, Enron Procurement shall have the right, but not the
obligation, to terminate this Agreement by giving written notice of such
election to CNF Equipment on or prior to December 19, 1997 (the "Revocation
Option"). Should Enron Procurement elect to exercise the Revocation Option,
CNF Equipment shall be obligated to promptly repay to Enron Procurement
(and in any event no later than December 31, 1997) any and all amounts paid
to CNF Equipment pursuant to this Section 3.1 of this Agreement. In the
event that Enron Procurement elects to exercise the Revocation Option, and
subject to the repayment by CNF Equipment to Enron Procurement of any and
all amounts owed by CNF Equipment hereunder, then this Agreement shall be
considered terminated effective upon delivery by Enron Procurement of
notice of the Revocation Option, and thereafter Enron Procurement shall
have no further payment obligations under the Agreement and CNF Equipment
and Enron Procurement shall continue as partners.
(d) Cancellation of Project. In the event the Project is terminated or
cancelled prior to the receipt of a Notice to Proceed (including, without
limitation, because of the denial of a permit or license necessary to the
Project or the termination or cancellation of the Power Purchase Agreement
(as defined in the Supply Contract)), CNF Equipment shall be obligated to
promptly repay Enron Procurement (in any event no later than thirty (30)
days after notice of such termination or cancellation is given by Enron
Procurement to CNF Equipment) any and all amounts paid to CNF Equipment
pursuant to this Section 3.1 of the Agreement. In the event that the
Project is terminated or cancelled, and subject to the repayment by CNF
Equipment to Enron Procurement of any and all amounts owed by CNF Equipment
hereunder, then this Agreement shall be considered terminated effective
upon delivery by Enron Procurement of notice of the Project cancellation,
and thereafter Enron Procurement shall have no further payment obligations
under the Agreement and CNF Equipment and Enron Procurement shall continue
as partners.
Section 3.2 Alteration of Supply Contract and Onshore Construction Contract.
Prior to the Effective Date, CNF Equipment agrees to assist Enron Procurement in
the negotiations with EcoElectrica L.P. pertaining to the Global Change Order
and the LPG Change Order in order to minimize modifications or alterations to
the Supply Contract and the Onshore Construction Contract that result in a
negative impact on, or decrease the profit accruing under, the Supply Contract
and the Onshore Construction Contract.
Section 3.3 Continued Existence. CNF Equipment shall maintain its corporate
existence as a Delaware corporation in good standing under the laws thereunder
for a period equal to the earlier of (x) one year following the date of this
Agreement or (y) the Notice to Proceed Date.
Section 3.4 Certain Other Obligations. Enron Procurement acknowledges that in
the event that the Closing occurs, CNF Equipment will not be obligated to pay
the "Base Rate Fee" or "Additional Risk Fee" referred to in Section 2.1 of the
Partnership Agreement. In addition, Enron Procurement acknowledges that between
the Effective Date and the earlier of the Effective Date or the termination of
this Agreement CNF Equipment will not be performing any obligations under the
Partnership Agreement relating to the performance of the Supply Contract,
including the obligation under Article 11 with respect to obtaining a payment
and performance bond.
ARTICLE IV
Arbitration
Section 4.1 Management Resolution of Disputes. In the event of any claim,
dispute, disagreement or controversy arising out of or relating to this
Agreement or the transactions contemplated herein or the breach or termination
of this Agreement or any Related Agreement (each, hereinafter referred to as a
"Dispute"), which the parties to this Agreement have been unable to settle or
agree upon within a period of fifteen (15) days after such Dispute arises, each
party shall nominate a senior officer of its management to meet at a mutually
agreed time and place not later than thirty (30) days after the Dispute has
arisen to attempt to resolve such Dispute. Should a resolution of such Dispute
not be obtained within ten (10) days after the meeting of senior officers for
such purpose, or such longer period as the parties may mutually agree upon, then
either party may by notice to the other submit the Dispute to arbitration in
accordance with the provisions of Section 4.2 of this Agreement.
Section 4.2 Binding Arbitration of Disputes. Any Dispute which is not settled in
accordance with the provisions of Section 4.1 of this Agreement shall be
submitted to binding arbitration to be conducted in accordance with the
following procedure:
(a) The party seeking arbitration hereunder may request such arbitration in
writing, which writing shall include a clear statement of the matter(s) in
dispute and shall name one arbitrator appointed by such party. Within
twenty (20) business days after receipt of such request, the other party
shall appoint one arbitrator, or in default thereof, such arbitrator shall
be named as soon as practicable by the Arbitration Committee of the
American Arbitration Association, and the two arbitrators so appointed
shall name a third arbitrator within ten (10) business days, or failing
such agreement on a third arbitrator by the two arbitrators so appointed, a
third arbitrator shall be appointed by the Arbitration Committee of the
American Arbitration Association.
(b) The arbitration hearing shall be held in New York, New York, on at least
twenty (20) business days' prior written notice to the parties. Except as
otherwise provided herein, the proceedings shall be conducted in accordance
with the Commercial Arbitration Rules and procedures of the American
Arbitration Association. Any decision of the arbitrators shall be joined in
by at least two of the arbitrators and shall be set forth in a written
award which shall state the basis of the award and shall include both
findings of fact and conclusions of law. Notwithstanding the foregoing, in
the case of any monetary dispute or claim for damages, the amount of which
is contested, each party shall submit in writing a proposed arbitration
award at the commencement of the arbitration hearing, and the arbitrators
shall be required to adopt in full the proposed arbitration award of one of
the parties with respect to such monetary amount or damages. Any award
rendered pursuant to the foregoing, which may include an award or decree of
specific performance hereunder, shall be final and binding on the parties
and not subject to review or appeal, and judgment thereon may be entered or
enforcement thereof sought by either party in a court of competent
jurisdiction.
(c) Notwithstanding the foregoing, nothing contained herein shall be deemed to
give the arbitrators appointed pursuant to the foregoing any authority,
power or right to alter, change, amend, modify, waive, add to or delete
from any of the provisions of this Agreement or the Related Agreements.
(d) The losing party shall bear all costs of the arbitration including costs of
all arbitrators, both parties' attorneys' fees and disbursements and expert
fees. In the event that the arbitrators allocate liability among the
parties, then the costs of the arbitration shall be shared pro rata by the
parties.
(e) Each of the parties to this Agreement agree that compliance by a party with
the provisions of subparagraphs (a) through (e) of this Section 4.2 shall
be a complete defense to any suit, action or proceeding instituted in any
federal or state court, or before any administrative tribunal by another
party with respect to any controversy or dispute arising under or pursuant
to this Agreement and which is subject to arbitration as set forth herein,
other than a suit or action alleging non-compliance with a final and
binding arbitration award rendered hereunder.
Section 4.3 Enforceability in Federal and State Court. The agreement to
arbitrate set forth in Section 4.2 shall be enforceable in either federal or
state court. The enforcement of such agreement and all procedural aspects
thereof, including the construction and interpretation of this agreement to
arbitrate, the scope of the arbitrable issues, allegations of waiver, delay or
defenses as to arbitrability, and the rules (except as otherwise expressly
provided herein) governing the conduct of the arbitration, shall be governed by
and construed pursuant to the United States Arbitration Act, 9 U.S.C. 1-16. In
deciding the substance of any such claim, dispute or disagreement, the
arbitrators shall apply the substantive laws of the State of Delaware; provided,
however, that the arbitrators shall have no authority to award punitive damages
under any circumstances (whether it be exemplary damages, treble damages, or any
other penalty or punitive type of damages) regardless of whether such damages
may be available under Delaware law, the parties to this Agreement hereby
waiving their right, if any, to recover punitive damages in connection with any
such claims, disputes or disagreements.
ARTICLE V
Indemnification
Section 5.1 Mutual Indemnification. Each of Enron Procurement and CNF Equipment
(each an "Indemnifying Party") hereby agrees to indemnify, defend and hold
harmless the other, its directors, officers, and employees, its controlled and
controlling persons and persons under common control, and their respective
directors, officers and employees (collectively "related persons"), from and
against all Claims (as hereinafter defined) asserted against, resulting to,
imposed upon or incurred by such party or such party's related persons (an
"Indemnified Person"), directly or indirectly, by reason of, arising out of, or
resulting from (a) the inaccuracy or breach of any representation or warranty of
the Indemnifying Party contained in this Agreement and (b) the breach of any
covenant or agreement of the Indemnifying Party contained in this Agreement.
"Claim" shall include (i) all debts, liabilities and obligations; (ii) losses,
damages, costs and expenses including, without limitation, interest (including
prejudgment interest in any litigated matter), penalties, court costs and
reasonable attorneys' fees and expenses; and (iii) all demands, claims, actions,
costs of investigation, causes of action, proceedings, arbitrations, judgments,
settlements and assessments, whether or not ultimately determined to be valid ;
provided, however, that "Claims" shall not include any of the foregoing to the
extent covered by insurance maintained by or for the benefit of the applicable
Indemnified Person; however the Indemnifying Party shall be liable for the
deductible and any uninsured portion of the applicable Claim.
Section 5.2 Additional Indemnification. In addition to its obligations under
Section 5.1, Enron Procurement hereby agrees to indemnify, defend and hold
harmless CNF Equipment and its related persons from and against (a) all Claims
asserted against, imposed upon or incurred by CNF Equipment or any of its
related persons by reason of, arising out of, or resulting from the performance
of the Supply Contract before or after the Closing (including any Claim arising
from activities conducted jointly by Enron Procurement and CNF Equipment, their
affiliates and representatives) and (b) all Claims asserted against, imposed
upon or incurred by CNF or any of its related persons by reason of, arising out
of, or resulting from the performance of the Supply Contract after the Effective
Date but prior to the termination of this Agreement under either Section 3.1(c)
or Section 3.1(d), except for Claims under Section 5.1 and Claims that shall
have been determined by the arbitrators under Article IV to have resulted from
(i) the sole negligence of CNF Equipment or its related persons, or (ii) the
willful misconduct of CNF Equipment or its related persons (such excluded Claims
under (i) and (ii) referred to as a "CNF Equipment Obligation"). CNF Equipment
shall indemnify, defend and hold harmless Enron Procurement and its related
persons from and against all Claims arising out of CNF Equipment Obligations,
but only if the aggregate Claims incurred by Enron Procurement and its related
persons arising from CNF Equipment Obligations exceeds $625,000, and then only
with respect to the amount in excess of $625,000.
ARTICLE VI
Notices
Section 6.1 Notices. Any notice or other written instrument required or
permitted to be given pursuant to this Agreement shall be in writing signed by
the party giving such notice and shall, to the extent reasonably practicable, be
sent by telefax, and if not reasonably practicable to send by telefax, then by
hand delivery, overnight courier, telegram or registered mail, to the other
party at such address as set forth below:
If delivered to CNF Equipment:
CNF Constructors, Inc.
900 Rockmead Drive
4 Kingwood Place, Suite 200
Kingwood, TX 77339
Attention: Douglas L. Kieta
Telefax No.: (713) 356-3845
with a copy to:
Kenetech Corporation
500 Sansome Street
San Francisco, CA 94111
Attention: President
Telefax No.: (415) 984-8111
If delivered to Enron Procurement:
Enron Equipment Procurement Company
333 Clay Street, Suite 400
Houston, Texas 77002
Attention: Legal Department
Telefax No.: (713) 646-6280
with a copy to:
Enron Engineering & Construction Company
333 Clay Street, Suite 400
Houston, Texas 77002
Attention: Legal Department
Telefax No.: (713) 646-6280
Each party shall have the right to change the place to which notice shall be
sent or delivered or to specify one additional address to which copies of
notices may be sent, in either case by similar notice sent or deliveries in like
manner to the other parties. Without limiting any other means by which a party
to this Agreement maybe able to prove that a notice has been received by another
party, a notice shall be deemed to be duly received: (a) if delivered by hand,
overnight courier or telegram, the date when left at the address of the
recipient; (b) if sent by registered mail, the date of the return receipt; or
(c) if sent by telefax, upon receipt by the sender of an acknowledgment or
transmission report generated by the machine from which the telefax was sent
indicating that the telefax was sent in its entirety to the recipient's telefax
number.
ARTICLE VII
Miscellaneous
Section 7.1 Confidentiality. Each Partner acknowledges that Article 14 of the
Partnership Agreement shall survive the dissolution and termination of the
Partnership, and that no Partner shall disclose any Confidential Information (as
defined in the Partnership Agreement) to any third party except as provided
therein. Furthermore, the terms and conditions of this Agreement and the
transactions contemplated hereby shall remain subject to the terms and
conditions of that certain Confidentiality Agreement dated as of March 4, 1997
among EE&CC, CNFC Industries Inc. and Kenetech.
Section 7.2 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
Section 7.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to the
choice of law principles thereof.
Section 7.4 Entire Agreement. This Agreement (including the Related Agreements
and other agreements incorporated herein) and the exhibits hereto contain the
entire agreement between the parties with respect to the subject matter hereof
and there are no agreements, understandings, representations or warranties
between the parties other than those set forth or referred to herein.
Section 7.5 Expenses. Whether the transactions contemplated hereby are or are
not consummated, all legal and other costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses.
Section 7.6 Headings; Definitions. The section and article headings contained in
this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
Section 7.7 Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Any
party hereto may, only by an instrument in writing, waive compliance by the
other parties hereto with any term or provision of this Agreement on the part of
such other party hereto to be performed or complied with. The waiver by any
party hereto of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
Section 7.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 7.9 Additional Documents. In connection with this Agreement and the
transactions contemplated hereby, each party hereto agrees to execute and
deliver, or cause the execution and delivery of, such additional documents and
instruments, and to perform such additional acts, as may be necessary as
appropriate to effectuate, carry out and perform all of the terms, provisions
and conditions of this Agreement and the transactions contemplated hereby.
Section 7.10 Survival. The provisions of Article IV and V shall survive the
termination of this Agreement for a period of five (5) years from the Execution
Date.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties as of the day first above written.
ENRON EQUIPMENT PROCUREMENT COMPANY
By: _____________________________
Name:
Title:
CNF Penuelas, Inc.
By: _____________________________
Name:
Title:
OFFSHORE CERTIFICATE
Exhibit 1.2
CERTIFICATE OF CANCELLATION
OF
CERTIFICATE OF LIMITED PARTNERSHIP
OF
ENRON/CNF EQUIPMENT, L.P.
This Certificate of Cancellation, dated as of [_____], 1997, is being filed by
the undersigned in the Office of the Secretary of State of the State of Delaware
(the "Secretary of State") in accordance with the provisions of 6 Del.C. 17-203
to cancel the Certificate of Limited Partnership of Enron/CNF Power Equipment,
L.P. (the "Partnership").
1. The name of the limited partnership is Enron/CNF Equipment, L.P.
2. The Partnership filed in the Office of the Secretary of State a Certificate
of Limited Partnership on December 17, 1996.
3. The reason for the filing of this Certificate of Cancellation is that the
Partnership has been dissolved and the winding up of the Partnership has
been completed.
4. This Certificate of Cancellation shall be effective immediately upon
filing.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Cancellation as of the date first-above written.
GENERAL PARTNERS:
Enron Equipment Procurement Company, a Delaware corporation
By: _________________________________
Name:
Title:
CNF Equipment, Inc., a Delaware corporation
By: _________________________________
Name:
Title:
OFFSHORE
Exhibit 1.6(i)
DISTRIBUTION AND ASSIGNMENT AGREEMENT
This Distribution and Assignment Agreement (this "Agreement"), dated as of
[______], 1997, is entered into by and among Enron/CNF Equipment, L.P., a
Delaware limited partnership (the "Partnership"), Enron Equipment Procurement
Company, a Delaware corporation ("Enron Procurement"), and CNF Equipment, Inc.,
a Delaware corporation ("CNF Equipment").
WHEREAS, pursuant to the Limited Partnership Agreement of Enron/CNF Equipment,
L.P. dated as of December 13, 1996 (the "Partnership Agreement") and a
certificate of limited partnership filed December 16, 1996 with the Delaware
Secretary of State, Enron Procurement and CNF Equipment (hereinafter
individually called a "Partner" and collectively called the "Partners") formed
the Partnership, with each Partner owning a 49% general partner interest and a
1% limited partner interest in the Partnership;
WHEREAS, the Partners are the sole limited partners and general partners of the
Partnership;
WHEREAS, pursuant to that certain Master Agreement of Dissolution, Distribution
and Assignment, dated [_________], 1997 (the "Master Agreement"), the Partners
agreed, among other things, to dissolve the Partnership in accordance with
Section 22.3(a) of the Partnership Agreement;
WHEREAS, as contemplated by the Master Agreement, the Partners have paid all
debts and liabilities of the Partnership (including, without limitation, all
expenses incurred in liquidation) or have otherwise made adequate provisions for
such debt and liabilities;
WHEREAS, the Partners, as liquidators of the Partnership, have completed, or
have otherwise made adequate provisions for, all actions necessary to wind up
the affairs of the Partnership in accordance with the Partnership Agreement and
Section 17-803 of the Delaware Revised Uniform Limited Partnership Act, as
amended (the "Act");
WHEREAS, pursuant to this Agreement, the Partners wish to distribute to each
Partner a 50% undivided interest in the right, title and interest in and to all
of the assets owned, leased or held by the Partnership as of the date hereof,
whether tangible or intangible (the "Partnership Property," including, without
limitation, all of the assets and property described in Exhibit A hereto);
NOW THEREFORE, in consideration of the mutual covenants set forth below and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby acknowledge and ratify their agreement as
follows:
Distribution and Assignment. The Partners, as liquidators of the Partnership,
hereby distribute, assign, convey and deliver (i) to Enron Procurement and its
successors and assigns a 50% undivided interest in and to the Partnership
Property, and (ii) to CNF Equipment and its successors and assigns a 50%
undivided interest in and to the Partnership Property.
Acceptance of Assignment. Each of the Partners hereby accepts the assignment of
its 50% undivided interest in the Partnership Property and acknowledges that
such assignment constitutes a complete return of its capital contribution and a
complete distribution of its interest in the Partnership and all of the
Partnership's property and assets.
Acknowledgment and Consent to Release of Partnership. Each Partner acknowledges,
consents to and agrees to be bound by, the terms and conditions set forth in the
attached Acknowledgment, Consent and Release.
Effective Date. This Agreement is effective as of the date first above written.
Certificate of Cancellation. Upon the distribution and assignment of the
Partnership Property pursuant to this Agreement, the Partners agree to file a
Certificate of Cancellation with the Secretary of State of the State of Delaware
in order to cancel the Certificate of Limited Partnership of the Partnership in
accordance with Section 17-203 of the Act.
Further Assurances. The parties shall take all acts and execute all documents as
any other party may reasonably request to fully carry out and effectuate the
transactions contemplated by this Agreement.
Miscellaneous. This Agreement (including the Acknowledgment, Consent and Release
attached hereto): (i) shall be governed by and construed in accordance with the
laws of the State of Delaware; (ii) shall not be amended or modified except by
an instrument in writing executed by all parties; (iii) shall be binding upon
the successors and assigns of the respective parties; and (iv) may be executed
in several counterparts, all of which together shall constitute one agreement
binding on all parties hereto notwithstanding that all parties have not signed
the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first above written.
THE PARTNERSHIP:
ENRON/CNF EQUIPMENT, L.P.
a Delaware limited partnership
By: ENRON EQUIPMENT PROCUREMENT COMPANY
as a General and Limited Partner
By: ______________________________
Name:
Title:
By: CNF EQUIPMENT, INC.
as a General and Limited Partner
By: ______________________________
Name:
Title:
THE PARTNERS:
ENRON EQUIPMENT PROCUREMENT COMPANY
a Delaware corporation
By: ______________________________
Name:
Title:
CNF EQUIPMENT, INC.
a Delaware corporation
By: ______________________________
Name:
Title:
ACKNOWLEDGMENT CONSENT AND RELEASE
THE UNDERSIGNED, EcoElectrica, L.P., hereby acknowledges and agrees that it has
been informed of and consents to the distribution and assignment of the
Partnership Property pursuant to the terms and conditions of the Distribution
and Assignment Agreement (the "Agreement") to which this Acknowledgment, Consent
and Release is attached. Each capitalized term used herein and not otherwise
defined herein shall have the definition assigned thereto in the Agreement.
EcoElectrica, L.P. hereby further agrees that, subject to the execution and
delivery of the Assignment and Assumption Agreement whereby CNF Equipment
assigns its interest in the Partnership Property to Enron Procurement, all
references to "Supplier" and "Contractor" in that certain Offshore Supply
Contract dated as of November 1, 1995 (the "Supply Contract"), originally
between EcoElectrica, L.P. and Enron Procurement, shall refer to Enron
Procurement. Finally, EcoElectrica, L.P. hereby releases the Partnership, and
each of the Partners solely in their capacities as general partners and limited
partners in the Partnership (the "Released Parties"), from all duties and
obligations under the Supply Contract and agrees to accept performance of all
such duties and obligations from Enron Procurement in place of the Partnership
and the Released Parties.
ECOELECTRICA, L.P.,
a Bermuda exempted limited partnership
By: KES Bermuda, Inc.
a Delaware corporation, its general partner
By: ______________________________
Name:
Title:
By: Buenergia, B.V.
a Dutch limited liability company, its general
partner
By: ______________________________
Name:
Title:
<PAGE>
OFFSHORE ASSIGNMENT
Exhibit 1.6(ii)
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (this "Agreement"), dated as of
[______], 1997, is entered into by and between Enron Equipment Procurement
Company, a Delaware corporation ("Enron Procurement") and CNF Equipment, Inc., a
Delaware corporation ("CNF Equipment").
WHEREAS, pursuant to the Limited Partnership Agreement of Enron/CNF Equipment,
L.P. dated as of December 13, 1996 (the "Partnership Agreement") and a
certificate of limited partnership filed December 16, 1996 with the Delaware
Secretary of State, Enron Procurement and CNF Equipment (hereinafter
individually called a "Partner" and collectively called the "Partners") formed
the Partnership, with each Partner owning a 49% general partner interest and a
1% limited partner interest in the Partnership;
WHEREAS, pursuant to that certain Master Agreement of Dissolution, Distribution
and Assignment, dated [________], 1997 (the "Master Agreement"), the Partners
agreed, among other things, to dissolve the Partnership in accordance with
Section 22.3(a) of the Partnership Agreement;
WHEREAS, pursuant to that certain Distribution and Assignment Agreement, dated
as of the date hereof (the "Distribution and Assignment Agreement"), the
Partners distributed, assigned, conveyed, and delivered to each Partner a 50%
undivided interest in the right, title and interest in and to all of the assets
owned, leased or held by the Partnership as of the date hereof, whether tangible
or intangible (the "Partnership Property," including, without limitation, all of
the assets and property described in Exhibit A hereto);
WHEREAS, pursuant to the Master Agreement, CNF Equipment desires to assign and
transfer to Enron Procurement all of CNF Equipment's interest in and to the
Partnership Property distributed and assigned to CNF Equipment under the
Distribution and Assignment Agreement (the "CNF Interest");
NOW THEREFORE, in consideration of the promises, covenants and agreements set
forth herein and in the Master Agreement and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
acknowledge and ratify their agreement as follows:
Assignment. CNF Equipment hereby assigns, conveys, transfers and delivers to
Enron Procurement all of CNF Equipment's right title and interest in and to the
CNF Interest in exchange for the consideration specified in the Master
Agreement.
Acceptance of Assignment. Enron Procurement hereby accepts the assignment of the
CNF Interest and hereby assumes and agrees to perform or to satisfy and
discharge any and all duties and obligations relating to and arising out of the
Supply Contract.
Acknowledgment and Consent to Release of Partnership. Each Partner acknowledges,
consents to and agrees to be bound by, the terms and conditions set forth in the
attached Acknowledgment, Consent and Release.
Effective Date. This Agreement is effective as of the date first above written.
Further Assurances. The parties shall take all acts and execute all documents as
any other party may reasonably request to fully carry out and effectuate the
transactions contemplated by this Agreement.
Miscellaneous. This Agreement (including the Acknowledgment, Consent and Release
attached hereto): (i) shall be governed by and construed in accordance with the
laws of the State of Delaware; (ii) shall not be amended or modified except by
an instrument in writing executed by all parties; (iii) shall be binding upon
the successors and assigns of the respective parties; and (iv) may be executed
in several counterparts, all of which together shall constitute one agreement
binding on all parties hereto notwithstanding that all parties have not signed
the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first above written.
CNF EQUIPMENT, INC.
a Delaware corporation, as assignor
By: ______________________________
Name:
Title:
ENRON EQUIPMENT PROCUREMENT COMPANY
a Delaware corporation, as assignee
By: ______________________________
Name:
Title:
ACKNOWLEDGMENT CONSENT AND RELEASE
THE UNDERSIGNED, EcoElectrica, L.P., hereby acknowledges and agrees that it has
been informed of and consents to the assignment and conveyance of the CNF
Interest pursuant to the terms and conditions of the Assignment and Assumption
Agreement (the "Agreement") to which this Acknowledgment, Consent and Release is
attached. Each capitalized term used herein and not otherwise defined herein
shall have the definition assigned thereto in the Agreement. EcoElectrica, L.P.
hereby further agrees that all references to "Supplier" and "Contractor" in that
certain Offshore Supply Contract dated as of November 1, 1995 (the "Supply
Contract"), originally between EcoElectrica, L.P. and Enron Procurement, shall
refer to Enron Procurement. Finally, EcoElectrica, L.P. hereby releases the
Partnership, and each of the Partners solely in their capacities as general
partners and limited partners in the Partnership (the "Released Parties"), from
all duties and obligations under the Supply Contract and agrees to accept
performance of all such duties and obligations from Enron Procurement in place
of the Partnership and the Released Parties.
ECOELECTRICA, L.P.,
a Bermuda exempted limited partnership
By: KES Bermuda, Inc.
a Delaware corporation, its general partner
By: ________________________
Name:
Title:
By: Buenergia, B.V.
a Dutch limited liability company, its general
partner
By: ________________________
Name:
Title:
<PAGE>
OFFSHORE LETTER AGREEMENT
Exhibit 1.6(iv)
Enron Development Corp.
333 Clay Street, Suite 1700
Houston, Texas 77002
[________________], 1997
Kenetech Energy Systems, Inc.
500 Sansome Street
Suite 300
San Francisco, CA 94111
Re: Cancellation of Side Letter Agreement
Gentlemen:
I refer to that certain Side Letter Agreement dated November 1, 1995 (the "Side
Letter Agreement") between Enron Development Corp. and Kenetech Energy Systems,
Inc., pursuant to which each has the right to cancel (i) the Onshore
Construction Contract dated as of November 1, 1995, originally between
EcoElectrica, L.P. and Enron Power Construction Partnership and (ii) the
Offshore Supply Contract dated as of November 1, 1995, originally between
EcoElectrica, L.P. and Enron Equipment Procurement Company ("Enron
Procurement").
In accordance with (i) the Master Agreement of Dissolution, Distribution and
Assignment dated the date hereof, by and between Enron Power I (Puerto Rico),
Inc. and CNF Penuelas, Inc., and (ii) the Master Agreement of Dissolution
Distribution and Assignment dated the date hereof, by and between Enron
Procurement, and CNF Equipment Inc., please evidence your agreement to cancel
the terms and conditions of the Side Letter Agreement by signing and returning
this letter agreement to the undersigned.
Very truly yours,
[Authorized Signatory]
AGREED AND ACCEPTED:
KENETECH ENERGY SYSTEMS, INC.
By: __________________________
Date: __________________________
Name:
Title:
<PAGE>
OFFSHORE KENETECH GUARANTY
Exhibit 1.6(vi)
GUARANTY
This Guaranty, dated as of [________________], 1997 (this "Guaranty"), is by
Kenetech Corporation, a Delaware corporation (the "Guarantor"), in favor of
Enron Equipment Procurement Company, a Delaware corporation (the "Beneficiary"):
WHEREAS, the Beneficiary and CNF Equipment, Inc., a Delaware corporation and an
indirect wholly-owned subsidiary of the Guarantor ("CNF Equipment"), are the
sole general partners and limited partners of Enron/CNF Equipment, L.P., a
Delaware limited partnership (the "Partnership");
WHEREAS, the Beneficiary and CNF Equipment entered into that certain Master
Agreement of Dissolution, Distribution and Assignment, dated as of
[_____________], 1997, (the "Master Agreement"), whereby the parties agreed,
among other things, (i) to dissolve the Partnership and cause any and all right,
title and interest in and to the assets and property of the Partnership (the
"Partnership Property"), including, but not limited to, that certain Offshore
Supply Contract dated as of November 1, 1995 (the "Supply Contract"), originally
between EcoElectrica, L.P. and Enron Procurement, to be distributed to the
Beneficiary and CNF Equipment; (ii) that CNF Equipment assign and transfer to
the Beneficiary all of CNF Equipment's interests in and to the Partnership
Property to be distributed to CNF Equipment pursuant to the dissolution of the
Partnership (the "CNF Interest"); and (iii) that the Beneficiary thereafter
perform under the Supply Contract in lieu of the Partnership;
WHEREAS, it is a condition to the Beneficiary entering into the Master Agreement
that the Guarantor enter into this Guaranty;
WHEREAS, Guarantor acknowledges that it will benefit if CNF Equipment enters
into the Master Agreement;
NOW, THEREFORE, in consideration of the premises set forth above and other good
and valuable consideration, receipt of which is hereby acknowledged, and as an
inducement to the Beneficiary to enter into the Master Agreement, the Guarantor
hereby agrees as follows:
1. Guaranty. In consideration of the Beneficiary entering into the Master
Agreement, the Guarantor absolutely, unconditionally and irrevocably
guarantees to Beneficiary, its successors and assigns, the prompt payment
when due, of all obligations and liabilities of CNF Equipment to
Beneficiary arising from Section 3.1, Section 3.2, Section 3.4 and Section
5.1 of the Master Agreement (the "Obligations") for so long as any
Obligation may arise under the Master Agreement. If for any reason CNF
Equipment shall fail fully and punctually to pay and perform any
Obligation, the Guarantor shall pay such sum to the Beneficiary, plus
interest thereon calculated at the thirty day LIBOR rate from the date CNF
Equipment became obligated to make such payment under the Master Agreement
through the date payment is made by the Guarantor. This Guaranty is an
absolute, unconditional guaranty of payment and performance and not of
collectability, and is in no way conditioned or contingent upon any attempt
to collect from CNF Equipment, enforce performance by CNF Equipment or on
any other condition or contingency.
2. Nature of Guaranty. The Guarantor's obligations hereunder shall not be
affected by the validity or enforceability of CNF Equipment's obligations
under the Master Agreement or any other agreement relating thereto or by
any other event, occurrence or circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor or
surety. In the event that any payment of CNF Equipment in respect of any
Obligations is rescinded or must otherwise be returned for any reason
whatsoever, the Guarantor shall remain liable hereunder in respect to such
Obligations as if such payment had not been made. However, notwithstanding
anything herein to the contrary, nothing herein is intended to deny to the
Guarantor, and it is expressly agreed that the Guarantor shall have and may
assert, any and all of the defenses, set-offs, counterclaims and other
rights with regard to any Obligations that CNF Equipment may possess,
including without limitation, any defense based upon the payment or
satisfaction by CNF Equipment of such Obligations (or the performance or
observance of any terms or provisions of the Master Agreement out of which
such Obligations are alleged to arise), except any defense that CNF
Equipment may possess relating to (i) lack of validity or enforceability of
the Master Agreement against CNF Equipment arising from the defective
incorporation of CNF Equipment; (ii) lack of qualification by CNF Equipment
to do business in any applicable jurisdiction; (iii) defective corporate
authority by CNF Equipment to enter into or perform the Master Agreement;
or (iv) the insolvency, bankruptcy, or other reorganization of CNF
Equipment.
The Beneficiary shall not be obligated to file any claim relating to the
Obligations in the event that CNF Equipment becomes subject to a
bankruptcy, reorganization or similar proceeding, and the failure of
Beneficiary to file shall not affect the Guarantor's obligations hereunder.
3. Modification and Amendments. The Guarantor agrees that Beneficiary may at
any time and from time to time, without notice to or further consent of the
Guarantor, make any agreement with CNF Equipment or with any other party to
or person liable on any of the Obligations, or interested therein, for the
payment, compromise, discharge or release thereof, in whole or in part, or
for any modification of the terms thereof or of any agreement between
Beneficiary and CNF Equipment or any such other party or person, without in
any way impairing or affecting this Guaranty. Except the modifications
allowed pursuant to this Section 3, this Guaranty may be amended only with
the written consent of the Beneficiary and the Guarantor.
4. Expenses. The Guarantor agrees to pay on demand all out-of-pocket expenses
(including the reasonable fees and expenses of Beneficiary's counsel) in
any way relating to the enforcement or protection of the rights of
Beneficiary hereunder.
5. Subrogation. The Guarantor will not exercise any rights which it may
acquire by way of subrogation until all the Obligations to Beneficiary
shall have been paid in full. Subject to the foregoing, upon payment of all
the Obligations, the Guarantor shall be subrogated to the rights of
Beneficiary against CNF Equipment.
6. No Waiver; Cumulative Rights. No failure on the part of Beneficiary to
exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
by Beneficiary of any right, remedy or power hereunder preclude any other
or future exercise of any right, remedy or power. Each and every right,
remedy and power hereby granted to Beneficiary or allowed it by law or
other agreement shall be cumulative and not exclusive of any other, and may
be exercised by Beneficiary from time to time.
7. Waiver of Notice. The Guarantor waives notice of the acceptance of this
Guaranty, presentment, demand, notice of dishonor, protest and all other
notices whatsoever.
8. Representations and Warranties.
(a) The Guarantor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has full
corporate power to execute, deliver and perform this Guaranty.
(b) The execution, delivery and performance of this Guaranty have been and
remain duly authorized by all necessary corporate action and do not
contravene any provision of law or of the Guarantor's constitutional
documents or any contractual restriction binding on the Guarantor or
its assets.
(c) All consents, authorizations and approvals of, and registrations and
declarations with, any governmental authority necessary for the due
execution, delivery and performance of this Guaranty have been
obtained and remain in full force and effect and all conditions
thereof have been duly complied with, and no other action by, and no
notice to or filing with, any governmental authority is required in
connection with the execution, delivery or performance of this
Guaranty.
(d) This Guaranty constitutes the legal, valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors rights and to general equity principles.
(e) (i) The Guarantor is not, and will not as a result of the execution
and delivery of this Guaranty, be rendered insolvent, (ii) the
Guarantor does not intend to incur, or believe it is incurring,
obligations beyond its ability to pay, and (iii) the Guarantor's
property remaining after the delivery and performance of this Guaranty
will not constitute unreasonably small capital.
9. Assignment. This Guaranty is binding upon Guarantor and its successors and
permitted assigns. Neither the Guarantor nor the Beneficiary may assign its
rights, interest or obligations hereunder to any other person without the
prior written consent of the other party.
10. Notices. All notices or other communications in connection with this
guaranty shall be given in the same manner and with the same effect as set
forth in Section 6.1 of the Master Agreement. The Guarantor's address for
notices is as follows:
Kenetech Corporation
500 Sansome Street
San Francisco, California 94111
Attention: President
Telefax No. (415) 984-8111
or such other address as the Guarantor shall from time to time specify to
Beneficiary.
11. Governing Law. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
choice of law doctrine.
12. Severability. The invalidity of one or more phrases, sentences, clauses or
Sections contained in this Guaranty shall not affect the validity of the
remaining portions of this Guaranty so long as the material purposes of
this Guaranty can be determined and effectuated.
IN WITNESS WHEREOF, the Guarantor has caused its duly authorized officer to
execute and deliver this Guaranty as of the date first above written.
KENETECH CORPORATION
By: ______________________________
Name:
Title:
<PAGE>
OFFSHORE ENRON GUARANTY
Exhibit 1.6 (vii)
GUARANTY
This Guaranty, dated as of [_____________], 1997 (this "Guaranty"), is by Enron
Power Corp., a Delaware corporation (the "Guarantor"), in favor of CNF
Equipment, Inc., a Delaware corporation (the "Beneficiary"):
WHEREAS, the Beneficiary and Enron Equipment Procurement Company, a Delaware
corporation and an indirect [wholly-owned] subsidiary of the Guarantor ("Enron
Procurement"), are the sole general partners and limited partners of Enron/CNF
Equipment, L.P., a Delaware limited partnership (the "Partnership");
WHEREAS, the Beneficiary and Enron Procurement entered into that certain Master
Agreement of Dissolution, Distribution and Assignment, dated as of
[___________], 1997, (the "Master Agreement"), whereby the parties agreed, among
other things, (i) to dissolve the Partnership and cause any and all right, title
and interest in and to the assets and property of the Partnership (the
"Partnership Property"), including, but not limited to, that certain Offshore
Supply Contract dated as of November 1, 1995 (the "Supply Contract"), originally
between EcoElectrica, L.P. and Enron Procurement, to be distributed to the
Beneficiary and Enron Procurement; (ii) that the Beneficiary assign and transfer
to the Enron Procurement all of the Beneficiary's interests in and to the
Partnership Property to be distributed to the Beneficiary pursuant to the
dissolution of the Partnership (the "CNF Interest"); and (iii) that the Enron
Procurement thereafter perform under the Supply Contract in lieu of the
Partnership;
WHEREAS, it is a condition to the Beneficiary consummating the transactions
under the Master Agreement that the Guarantor enter into this Guaranty;
WHEREAS, Guarantor acknowledges that it will benefit if Enron Procurement
consummates the transactions under the Master Agreement;
NOW, THEREFORE, in consideration of the premises set forth above and other good
and valuable consideration, receipt of which is hereby acknowledged, and as an
inducement to the Beneficiary to enter into the Master Agreement, the Guarantor
hereby agrees as follows:
1. Guaranty. In consideration of the Beneficiary entering into the Master
Agreement, the Guarantor absolutely, unconditionally and irrevocably
guarantees to Beneficiary, its successors and assigns, the prompt payment
when due, of all obligations and liabilities of Enron Procurement to
Beneficiary arising from Section 3.1, Section 5.1 and Section 5.2 of the
Master Agreement (the "Obligations") for so long as any Obligation may
arise under the Master Agreement. If for any reason Enron Procurement shall
fail fully and punctually to pay and perform any Obligation, the Guarantor
shall pay such sum to the Beneficiary, plus interest thereon calculated at
the thirty day LIBOR rate from the date Enron Procurement became obligated
to make such payment under the Master Agreement through the date payment is
made by the Guarantor. This Guaranty is an absolute, unconditional guaranty
of payment and performance and not of collectability, and is in no way
conditioned or contingent upon any attempt to collect from Enron
Procurement, enforce performance by Enron Procurement or on any other
condition or contingency.
2. Nature of Guaranty. The Guarantor's obligations hereunder shall not be
affected by the validity or enforceability of Enron Procurement's
obligations under the Master Agreement or any other agreement relating
thereto or by any other event, occurrence or circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor or surety. In the event that any payment of Enron Procurement in
respect of any Obligations is rescinded or must otherwise be returned for
any reason whatsoever, the Guarantor shall remain liable hereunder in
respect to such Obligations as if such payment had not been made. However,
notwithstanding anything herein to the contrary, nothing herein is intended
to deny to the Guarantor, and it is expressly agreed that the Guarantor
shall have and may assert, any and all of the defenses, set-offs,
counterclaims and other rights with regard to any Obligations that Enron
Procurement may possess, including without limitation, any defense based
upon the payment or satisfaction by Enron Procurement of such Obligations
(or the performance or observance of any terms or provisions of the Master
Agreement out of which such Obligations are alleged to arise), except any
defense that Enron Procurement may possess relating to (i) lack of validity
or enforceability of the Master Agreement against Enron Procurement arising
from the defective incorporation of Enron Procurement; (ii) lack of
qualification by Enron Procurement to do business in any applicable
jurisdiction; (iii) defective corporate authority by Enron Procurement to
enter into or perform the Master Agreement; or (iv) the insolvency,
bankruptcy, or other reorganization of Enron Procurement.
The Beneficiary shall not be obligated to file any claim relating to the
Obligations in the event that Enron Procurement becomes subject to a
bankruptcy, reorganization or similar proceeding, and the failure of
Beneficiary to file shall not affect the Guarantor's obligations hereunder.
3. Modification and Amendments. The Guarantor agrees that Beneficiary may at
any time and from time to time, without notice to or further consent of the
Guarantor, make any agreement with Enron Procurement or with any other
party to or person liable on any of the Obligations, or interested therein,
for the payment, compromise, discharge or release thereof, in whole or in
part, or for any modification of the terms thereof or of any agreement
between Beneficiary and Enron Procurement or any such other party or
person, without in any way impairing or affecting this Guaranty. Except the
modifications allowed pursuant to this Section 3, this Guaranty may be
amended only with the written consent of the Beneficiary and the Guarantor.
4. Expenses. The Guarantor agrees to pay on demand all out-of-pocket expenses
(including the reasonable fees and expenses of Beneficiary's counsel) in
any way relating to the enforcement or protection of the rights of
Beneficiary hereunder.
5. Subrogation. The Guarantor will not exercise any rights which it may
acquire by way of subrogation until all the Obligations to Beneficiary
shall have been paid in full. Subject to the foregoing, upon payment of all
the Obligations, the Guarantor shall be subrogated to the rights of
Beneficiary against Enron Procurement.
6. No Waiver; Cumulative Rights. No failure on the part of Beneficiary to
exercise, and no delay in exercising, any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
by Beneficiary of any right, remedy or power hereunder preclude any other
or future exercise of any right, remedy or power. Each and every right,
remedy and power hereby granted to Beneficiary or allowed it by law or
other agreement shall be cumulative and not exclusive of any other, and may
be exercised by Beneficiary from time to time.
7. Waiver of Notice. The Guarantor waives notice of the acceptance of this
Guaranty, presentment, demand, notice of dishonor, protest and all other
notices whatsoever.
8. Representations and Warranties.
(a) The Guarantor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has full
corporate power to execute, deliver and perform this Guaranty.
(b) The execution, delivery and performance of this Guaranty have been and
remain duly authorized by all necessary corporate action and do not
contravene any provision of law or of the Guarantor's constitutional
documents or any contractual restriction binding on the Guarantor or
its assets.
(c) All consents, authorizations and approvals of, and registrations and
declarations with, any governmental authority necessary for the due
execution, delivery and performance of this Guaranty have been
obtained and remain in full force and effect and all conditions
thereof have been duly complied with, and no other action by, and no
notice to or filing with, any governmental authority is required in
connection with the execution, delivery or performance of this
Guaranty.
(d) This Guaranty constitutes the legal, valid and binding obligation of
the Guarantor enforceable against the Guarantor in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors rights and to general equity principles.
(e) (i) The Guarantor is not, and will not as a result of the execution
and delivery of this Guaranty, be rendered insolvent, (ii) the
Guarantor does not intend to incur, or believe it is incurring,
obligations beyond its ability to pay, and (iii) the Guarantor's
property remaining after the delivery and performance of this Guaranty
will not constitute unreasonably small capital.
9. Assignment. This Guaranty is binding upon Guarantor and its successors and
permitted assigns. Neither the Guarantor nor the Beneficiary may assign its
rights, interest or obligations hereunder to any other person without the
prior written consent of the other party.
10. Notices. All notices or other communications in connection with this
guaranty shall be given in the same manner and with the same effect as set
forth in Section 6.1 of the Master Agreement. The Guarantor's address for
notices is as follows:
Enron Power Corp.
P.O. Box 1188
Houston, TX 77251-1188
Attn: Legal Department
Telefax No.
or such other address as the Guarantor shall from time to time specify to
Beneficiary.
11. Governing Law. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Delaware without reference to
choice of law doctrine.
12. Severability. The invalidity of one or more phrases, sentences, clauses or
Sections contained in this Guaranty shall not affect the validity of the
remaining portions of this Guaranty so long as the material purposes of
this Guaranty can be determined and effectuated.
IN WITNESS WHEREOF, the Guarantor has caused its duly authorized officer to
execute and deliver this Guaranty as of the date first above written.
ENRON POWER CORP.
By: ________________________________
Name:
Title:
<PAGE>
OFFSHORE RELEASE OF CNF
Exhibit 1.6(x)
CNF Industries, Inc.
355 Research Parkway
Meriden, Connecticut 06450
[_______], 1997
Enron Equipment Procurement Company
333 Clay Street, Suite 400
Houston, Texas 77002
Attn: Legal Department
Re: Release of CNF Industries, Inc. Guaranty
Gentlemen:
I refer to that certain Guaranty dated as of December 18, 1996 (the "CNF
Offshore Guaranty") by CNF Industries, Inc., a Delaware corporation (the
"Guarantor"), for the benefit of Enron Equipment Procurement Company, a Delaware
corporation ("Enron Procurement"), entered into pursuant to Section 11.3 of the
Limited Partnership Agreement of Enron/CNF Equipment, L.P., a Delaware limited
partnership.
In accordance with (i) the Master Agreement of Dissolution, Distribution and
Assignment dated [________], 1997, by and between Enron Procurement and CNF
Equipment, Inc., and (ii) Section 16 of the CNF Offshore Guaranty, please
evidence your agreement to terminate the CNF Offshore Guaranty and release the
Guarantor from any and all obligations thereunder by signing and returning this
letter agreement to the undersigned.
Very truly yours,
[Authorized Signatory]
AGREED AND ACCEPTED:
ENRON EQUIPMENT PROCUREMENT COMPANY
By: __________________________ Date: July __, 1997
Name:
Title:
OFFSHORE RELEASE OF ENRON
Exhibit 1.6(xi)
Enron Power Corp.
P.O. Box 1188
Houston, Texas 77251-1188
[_______], 1997
CNF Equipment, Inc.
355 Research Parkway
Meriden, Connecticut 06450
Attn:__________________
Re: Release of Enron Power Corp. Guaranty
Gentlemen:
I refer to that certain Guaranty dated as of December 18, 1996 (the "EPC
Offshore Guaranty") by Enron Power Corp., a Delaware corporation (the
"Guarantor"), for the benefit of CNF Equipment, Inc., a Delaware corporation
("CNF Equipment"), entered into pursuant to Section 11.3 of the Limited
Partnership Agreement of Enron/CNF Equipment, L.P., a Delaware limited
partnership.
In accordance with (i) the Master Agreement of Dissolution, Distribution and
Assignment dated [______], 1997, by and between Enron Equipment Procurement
Company and CNF Equipment, and (ii) Section 16 of the EPC Offshore Guaranty,
please evidence your agreement to terminate the EPC Offshore Guaranty and
release the Guarantor from any and all obligations thereunder by signing and
returning this letter agreement to the undersigned.
Very truly yours,
[Authorized Signatory]
AGREED AND ACCEPTED:
CNF EQUIPMENT, INC.
By: __________________________ Date: July __, 1997
Name:
Title:
<PAGE>
Subsidiaries of KENETECH Corporation as of 03/01/98:
CNF Industries, Inc.
(Delaware)
C.N. Flagg & Co., Incorporated
(Connecticut)
CNF Century Acquisition, Inc.
(Delaware)
Century Contractors West, Inc.
(Texas)
CNF Constructors, Inc.
(Tennessee)
CNF Equipment, Inc.
(Delaware)
CNF Penuelas, Inc.
(Delaware)
KENETECH - CNF Texas, Inc.
(Delaware)
CNF Power, Inc.
(Connecticut)
Process Construction Supply, Inc.
(Delaware)
KENETECH Energy Systems, Inc.
(Delaware)
Flagg Energy Development Corporation
(Delaware)
CCF-1, Inc.
(Connecticut)
KEM, Inc.
(Delaware)
KES Bloom, Inc.
(Delaware)
KES Chateaugay, Inc.
(Delaware)
KES Chicago Heights, Inc.
(Delaware)
KES Kingsburg, Inc.
(Delaware)
KES Kingston, Inc.
(Delaware)
KES LNG, Inc.
(Delaware)
KES Penuelas Holdings, Inc.
(Delaware)
KES Bermuda, Inc.
(Delaware)
KES Bermuda, Ltd.
(British Virgin Islands)
KES LNG, Ltd.
(British Virgin Islands)
KES Penuelas, Ltd.
(British Virgin Islands)
KES Pepperell, Inc.
(Delaware)
<PAGE>
KES Renville, Inc.
(Delaware)
Mill Street GP, Inc.
(Delaware)
Mill Street LP, Inc.
(Delaware)
KENETECH Facilities Management, Inc.
(Delaware)
KFM Pepperell, Inc.
(Delaware)
KENETECH International Ltd.
(Delaware)
Energia Eolica de Galicia, S.A.
(Spain)
Energie Eolienne KENETECH, Inc./KENETECH Windpower, Inc.
(Quebec)
KW Groningen B.V.
(Netherlands)
KW Eemsmond B.V.
(Netherlands)
KENETECH Merger Company
(Delaware)
KENETECH Windpower India Company Limited
(Mauritius)
KENETECH India Private Limited
(India)
KENETECH Windpower, Inc.
(Delaware)
AWP Plantas Eolicas, S.A.
(Spain)
East Wind Limited
(Channel Islands)
Windergo Ltd.
Fiberblade Corporation
(Delaware)
GP WPP93 LP, Inc.
(Delaware)
KC One Company
(Delaware)
KENETECH Assembly and Test, Inc.
(Delaware)
KENETECH Canadian Operations, Inc.
(Alberta)
KENETECH Finance Company
(Delaware)
KENETECH Project Company
(Delaware)
USW Altamont Corporation
(Delaware)
KENETECH Leasing Company
USW Delta Company
<PAGE>
KENETECH FSC, Inc.
(Barbados)
KENETECH Solar Energy Ventures, Inc.
(Delaware)
KW Altamont I, Inc.
(Delaware)
KW Altamont II, Inc.
(Delaware)
KW Altamont SCE, Inc.
(Delaware)
KW Boulevard I, Inc.
(Delaware)
KW Boulevard II, Inc.
(Delaware)
KW Cottonwood I, Inc.
(Delaware)
KW Cottonwood II, Inc.
(Delaware)
KW Eemsmond GP, Inc.
(Delaware)
KW Eemsmond LP, Inc.
(Delaware)
KW Europe Project Development Limited Liability Company
KW Greenville Company
(Delaware)
KW Hayward, Inc.
(Delaware)
KW India, Inc.
(Delaware)
KW Jackson, Inc.
(Delaware)
KW Kelso I, Inc.
(Delaware)
KW Kelso II, Inc.
(Delaware)
KW Kelso III, Inc.
(Delaware)
KW Kelso IV, Inc.
(Delaware)
KW Kramer I, Inc.
(Delaware)
KW Kramer II, Inc.
(Delaware)
KW Kramer PV, Inc.
(Delaware)
KW La Rumorosa I, Inc.
(Delaware)
KW La Rumorosa II, Inc.
(Delaware)
KW La Rumorosa III, Inc.
(Delaware)
<PAGE>
KW Llyn Alaw LP, Inc.
(Delaware)
KW San Diego, Inc.
(Delaware)
KW SCE, Inc.
(Delaware)
KW SDG&E, Inc.
(Delaware)
KW Sidewinder, Inc.
(Delaware)
KW Solano I, Inc.
(Delaware)
KW Solano II, Inc.
(Delaware)
KW Tehachapi II, Inc.
(Delaware)
KW Tehachapi III, Inc.
(Delaware)
KW Tejona, S.A.
(Costa Rica)
KW Texas Manufacturing, Inc.
(Delaware)
KW Texas, Inc.
(Delaware)
KW Vansycle I, Inc.
(Delaware)
KW Vansycle II, Inc.
(Delaware)
KW WPP94, Inc.
(Delaware)
Northeast Windpower Systems, Inc.
(Delaware)
U.S. Windpower 1983-1, Inc.
(California)
U.S. Windpower 1984, Inc.
(California)
US WEG, Inc.
(Delaware)
USW Concord Company
(Delaware)
USW Fremont Company
(Delaware)
USW Midwest Windpower Land Company
(Delaware)
USW WindRiver Company
(Delaware)
USW WPP93 GP, Inc.
(Delaware)
Wind Generator Parks, Inc.
(California)
Windplant Operations B.V.
(Netherlands)
<PAGE>
Windpower Management Associates 1985-3, Inc.
(California)
Windpower Partners 1993 (SCE), Inc.
(Delaware)
WPP94 GP, Inc.
(Delaware)
KW Transmission, Inc.
KENETECH Wood Fuels, Inc.
(Delaware)
KWF Chateaugay, Inc.
(Delaware)
NOTE: * designates entities with multiple parents.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE KENETECH
CORP 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENT.
</LEGEND>
<CIK> 0000807708
<NAME> KENETECH CORPORATION
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 7,294
<SECURITIES> 0
<RECEIVABLES> 4,669
<ALLOWANCES> 0
<INVENTORY> 135
<CURRENT-ASSETS> 55,314
<PP&E> 28,704
<DEPRECIATION> 9,810
<TOTAL-ASSETS> 90,586
<CURRENT-LIABILITIES> 204,095
<BONDS> 0
18,196
0
<COMMON> 4
<OTHER-SE> (131,705)
<TOTAL-LIABILITY-AND-EQUITY> 90,586
<SALES> 3,170
<TOTAL-REVENUES> 40,993
<CGS> 8,895
<TOTAL-COSTS> 45,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (16,291)
<INCOME-PRETAX> (25,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,242)
<EPS-PRIMARY> (0.92)
<EPS-DILUTED> (0.92)
</TABLE>
