UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): March 31, 1998
CALPINE CORPORATION
(A Delaware Corporation)
Commission File Number: 033-73160
I.R.S. Employer Identification No. 77-0212977
50 West San Fernando Street
San Jose, California 95113
Telephone: (408) 995-5115
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 31, 1998, Calpine Corporation ("Calpine"), a Delaware corporation,
through a wholly-owned subsidiary, Calpine Finance Company, (collectively the
"Company") entered into a Stock Purchase and Redemption Agreement (the
"Agreement") with Dominion Cogen, Inc., a Virginia corporation ("Dominion"), and
Dominion Energy, Inc., a Virginia corporation ("DEI"). Under the terms of the
Agreement, the Company acquired the remaining 50 percent of the capital stock of
Texas Cogeneration Company ("TCC"). TCC is the owner of the 450 megawatt Texas
City and 377 megawatt Clear Lake Power Plants located in Texas City and
Pasadena, Texas. As consideration for the purchase of the stock, the Company
paid to Dominion $52.8 million in cash and has certain contingent purchase
payments beginning in the year 2000 that could approximate 2.9% of project
revenue. As part of the acquisition, the Company now also owns a 7.5 percent
interest in the Bayonne Power Plant, a 165 megawatt natural gas-fired
cogeneration power plant located in Bayonne, New Jersey.
Calpine Fuels Texas Corporation, a wholly-owned subsidiary of Calpine, now
purchases natural gas for the Texas power plants from Enron Capital & Trade Corp
("ECT"). In a related transaction, Calpine Fuels Texas paid approximately $105.3
million to ECT to restructure its existing gas contracts.
The Company funded the transactions with a portion of the net proceeds of
the March 31, 1998 offering of $300.0 million of 7-7/8% Senior Notes Due 2008.
On June 23, 1997, the Company had previously acquired a 50 percent interest
in TCC for a cash payment of $35.4 million. In addition, the Company purchased
from the existing lenders the $155.6 million of outstanding non-recourse project
financing of the two power plants, as previously reported in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
The Company now owns a 100 percent interest in the Texas City and Clear
Lake Power Plants. The Company has operated the plants since June 1997. The
Texas City and Clear Lake Power Plants are natural gas-fired, combined-cycle
cogeneration facilities. The plants provide electricity to Texas Utilities
Electric Company, Texas New Mexico Power Company and Houston Lighting & Power
Company. As cogenerators, they also provide electricity and steam to Union
Carbide Corporation's chemical facility and to Celanese Chemical Group, Inc.'s
organic chemicals plant.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
As of the date of filing this Current Report on Form 8-K, it is impracticable
for the Company to provide the financial statements required by this Item 7(a).
In accordance with Item 7(a)(4) of Form 8-K, such financial statements shall be
filed by amendment to this Form 8-K no later than 60 days after April 15, 1998.
(b) Pro Forma Financial Information
As of the date of filing this Current Report on Form 8-K, it is impracticable
for the Registrant to provide pro forma financial information required by this
Item 7(b). In accordance with Item 7(b) of Form 8-K, such financial statements
shall be filed by amendment to this Form 8-K no later than 60 days after April
15, 1998.
(c) Exhibits
The Exhibits to this Report are listed in the Exhibit Index set forth below.
EXHIBIT
NUMBER DESCRIPTION
- --------- ------------------------------------------------------
10.2.6 Purchase and Sale Agreement dated March 27, 1997
for the purchase and sale of shares of Enron/Dominion
Cogen Corp. Common Stock among Enron Power Corporation
and Calpine Finance Company
10.2.7 Stock Purchase and Redemption Agreement dated
March 31, 1998, among Dominion Cogen, Inc., Dominion
Energy, Inc., and Calpine Finance Company
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CALPINE CORPORATION
By: /s/ Peter Cartwright
-----------------------------------------
Peter Cartwright
President, Chief Executive Officer and
Chairman of the Board
April 14, 1998
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------- -------------
10.2.6 Purchase and Sale Agreement dated March 27, 6
1997 for the purchase and sale of shares of
Enron/Dominion Cogen Corp. Common Stock
among Enron Power Corporation and Calpine Finance
Company
10.2.7 Stock Purchase and Redemption Agreement 47
dated March 31, 1998, among Dominion
Cogen, Inc., Dominion Energy, Inc., and
Calpine Finance Company
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Exhibit 10.2.6
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1.1 Definitions 1
1.2 Terminology 6
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Class A Common Stock 7
2.2 Purchase Price 7
2.3 Determination of Purchase Price 7
ARTICLE III
CLOSING DATE
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Seller 9
4.1.1 Organization and Good Standing 9
4.1.2 Authority of Seller 9
4.1.3 No Violations With Respect to Seller 9
4.1.4 Approvals and Consents for Seller 10
4.1.5 Ownership 10
4.1.6 Company and Subsidiaries 11
4.1.7 No Violation With Respect to Company and Subsidiaries 11
4.1.8 No Default; Legal Requirements 12
4.1.9 Financial Statements 13
4.1.10 Leases; Contracts; Agreements and Commitments 13
4.1.11 Litigation 15
4.1.12 Government Permits 15
4.1.13 Employee Benefits 15
4.1.14 Tax Matters 15
4.1.15 Real Property 16
4.1.16 Environmental Matters 16
4.1.17 Regulatory Matters 16
4.1.18 Sole Purpose; Nature of Business 17
4.1.19 Brokerage or Finders Fees 17
4.1.20 Insurance 17
4.1.21 Material Assets and Properties 17
4.2 Representations and Warranties of Buyer 17
4.2.1 Organization and Good Standing 17
4.2.2 Authority of Buyer 17
4.2.3 No Violations 18
4.2.4 Approvals and Consents 18
4.2.5 Acquisition as Investment 18
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4.2.6 Brokerage or Finders Fees 18
4.2.7 No Electric Utility Ownership 18
4.2.8 Available Funds 19
4.2.9 Knowledgeable Buyer 19
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Covenants of Seller 19
5.1.1 Certain Changes 19
5.1.2 Operation of Business 21
5.1.3 Insurance 21
5.1.4 Access 21
5.1.5 Antitrust Notification and Other Governmental
Filings 21
5.1.6 Confidentiality 22
5.1.7 Public Announcements 22
5.1.8 Transaction Costs 22
5.1.9 Noncompetition 22
5.1.10 Satisfaction of Closing Conditions 22
5.2 Covenants of Buyer 22
5.2.1 Antitrust Notification and Other Governmental
Filings. 22
5.2.2 Public Announcements 23
5.2.3 Confidential Information 23
5.2.4 Transaction Costs 23
5.2.5 Satisfaction of Closing Conditions 23
5.2.6 Bank Account and Line of Credit 23
5.2.7 Certain FERC Matters 23
5.3 Mutual Covenants 24
5.3.1 Release 24
5.3.2 Tax Returns 24
5.3.4 Employment Matters 24
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Buyer's Obligation to Close 26
6.1.1 Compliance with Agreement 26
6.1.2 Representations and Warranties 26
6.1.3 Certificate 26
6.1.4 Filings 27
6.1.5 Litigation 27
6.1.6 Stock Certificates; Assignment Agreements 27
6.1.7 Opinion 27
6.1.8 Secretary's Certificate 27
6.1.9 Resignations 27
6.1.10 Scheduled Payments 27
6.1.11 Affidavits 27
6.1.12 Certain Other Agreements 27
6.2 Seller's Obligation to Close 27
6.2.1 Compliance with Agreement 27
6.2.2 Representations and Warranties 28
6.2.3 Certificate 28
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6.2.4 Opinion 28
6.2.5 Filings 28
6.2.6 Litigation 28
6.2.7 Assignment Agreements 28
6.2.8 Long Term Debt 28
6.2.9 Release 28
6.2.10 Certain Other Agreements 28
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of Buyer 29
7.2 Indemnification and Release of Seller 30
7.3 Applicability 31
7.4 Indemnification Procedures 31
7.5 Limitation on Liabilities 33
7.6 Notification by Seller of Certain Matters 34
ARTICLE VIII
TERMINATION RIGHTS
8.1 Termination 34
8.2 Limitation on Right to Terminate; Effect of Termination 35
ARTICLE IX
GENERAL
9.1 Exclusive Agreement; Schedules 35
9.2 Successors and Assigns 35
9.3 Amendments 36
9.4 Records and Access 36
9.5 Further Assurances 36
9.6 Notices 37
9.7 Governing Law 37
9.8 Severability 38
9.9 Counterparts 38
9.10 Expenses 38
9.11 Attorneys' Fees 38
</TABLE>
Exhibits to Purchase and Sale Agreement:
Exhibit A - Assignment and Assumption Agreements
Schedules to Purchase and Sale Agreement:
Schedule 1.1(A) - Knowledge
Schedule 4.1.3 - No Violations of Seller
Schedule 4.1.5(A) - Company's Capital Stock
Schedule 4.1.5(E) - Subsidiaries' Capital Stock Debt; Other Securities
Schedule 4.1.7 - No Violations of Company and Subsidiaries
Schedule 4.1.8 - No Default; Legal Requirements
Schedule 4.1.9(B)-1 - December 31 Balance Sheet
Schedule 4.1.9(B)-2 - Financial Statements
Schedule 4.1.9(C) - Balance Sheet Liabilities
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Schedule 4.1.10(A) - Contracts of Company and its Affiliates
Schedule 4.1.10(B) - Contracts of Seller and its Affiliates
Schedule 4.1.10(C) - Obligations of Seller and its Affiliates to
be Assumed by Buyer
Schedule 4.1.11 - Litigation
Schedule 4.1.14 - Tax Matters
Schedule 4.1.15 - Real Property
Schedule 4.1.16 - Environmental Matters
Schedule 4.1.20 - Insurance
Schedule 4.1.21 - Excluded Assets
Schedule 5.1.1 - Ordinary Course of Business
Schedule 5.3.4(A) - Employment Matters
Schedule 6.1.9 - Directors and Officers
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") for the purchase and sale of
all of the shares of Class A Common Stock of Enron/Dominion Cogen Corp., a
Delaware corporation (the "Company"), is made as of the 27th day of March, 1997,
by and between Enron Power Corp., a Delaware corporation ("Seller"), and Calpine
Finance Company, a Delaware corporation ("Buyer").
WHEREAS, Seller is the owner of 7,095 shares of Class A Common Stock of the
Company, which constitutes all of the issued and outstanding shares of Class A
Common Stock of the Company (the "Class A Common Stock"); and
WHEREAS, Seller wishes to sell all of the Class A Common Stock, and Buyer wishes
to purchase all of the Class A Common Stock, on the terms herein set forth; and
WHEREAS, concurrently with the purchase of the Class A Common Stock pursuant to
this Agreement, Buyer wishes to purchase the Long Term Debt (hereinafter
defined) at the Facilities (hereinafter defined) from the lenders thereof
pursuant to an Assignment Agreement to be entered into among Buyer and such
lenders (the "Assignment of Notes");
NOW, THEREFORE, in consideration of the mutual promises made herein, and subject
to the conditions hereinafter set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The terms set forth below shall have the meanings ascribed to
them in this Article I or in the part of this Agreement referred to below:
Administrative Services Agreement: means the Administrative Services Agreement
dated as of August 1, 1995, among ECT, the Company, EC5, Clear Lake and
Cogenron.
Affiliate: means with respect to an entity, any other entity controlling,
controlled by or under common control with such entity. As used in this
definition, the term "control," including the correlative term "controlling,"
"controlled by" and "under common control with" shall mean the possession,
direct or indirect, of the power to direct or cause the direction of the
management or policies of an entity, whether through ownership of voting
securities, by contract or otherwise. For the avoidance of doubt, neither the
Company nor any of the Subsidiaries is, nor shall be deemed to be, Affiliates of
Seller.
Agreement: as defined in the preamble.
Assignment Agreements: as defined in Section 2.2.
Assignment and Assumption Agreement: as defined in Section 2.2.
Assignment of Notes: as defined in the preamble.
Auditor: as defined in Section 2.3.
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Average Severance Cost: as defined in Section 5.3.4.
Base Purchase Price: as defined in Section 2.2
Best Efforts: means a party's best efforts in accordance with reasonable
commercial practice and without the incurrence of unreasonable expense.
Business Day: means any day other than a Saturday, a Sunday or a day on which
banks in Houston, Texas are authorized or required by law to be closed.
Buyer: as defined in the preamble.
Buyer Indemnified Loss: as defined in Section 7.1.
Buyer's Plans: as defined in Section 5.3.4.
Bylaws: as defined in Section 4.1.7.
Certificate of Incorporation: as defined in Section 4.1.7.
Claim Notice: as defined in Section 7.4.
Class A Common Stock: as defined in the preamble.
Class B Common Stock: as defined in Section 4.1.5.
Clear Lake: means Clear Lake Cogeneration Limited Partnership, a Texas limited
partnership.
Clear Lake Facility: the 377 megawatt gas-fired, combined-cycle power plant
located in Pasadena, Texas and owned by Clear Lake.
Clear Lake O & M Agreement: the Operations and Maintenance Agreement dated as of
August 1, 1995, among EOC, the Company and Clear Lake.
Closing: as defined in Article III.
Closing Date: as defined in Article III.
COBRA: as defined in Section 5.3.4. Code: means the Internal Revenue Code of
1986, as amended, or any amending or superseding tax laws of the United States
of America.
Cogenron: means Cogenron Inc., a Delaware corporation.
Cogen Venture: means Cogen Technologies NJ Venture, a New Jersey joint venture.
Company: as defined in the preamble.
Confidentiality Agreement: as defined in Section 5.2.3.
Credit Support Obligations: as defined in Section 5.3.1.
December 31 Balance Sheet: as defined in Section 4.1.9.
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Dominion: means Dominion Cogen, Inc., a Virginia corporation.
Dominion Energy: means Dominion Energy, Inc., a Virginia corporation.
Dominion Resources: means Dominion Resources, Inc. , a Virginia corporation.
EC1: means Enron Cogeneration One Company, a Delaware corporation.
EC3: means Enron Cogeneration Three Company, a Delaware corporation.
EC5: means Enron Cogeneration Five Company, a Delaware corporation.
ECT: means Enron Capital & Trade Resources Corp., a Delaware corporation.
Effective Date: as defined in Section 2.3.
Effective Date Balance Sheet: as defined in Section 2.3.
EIPI: as defined in Section 5.3.4.
Election Period: as defined in Section 7.4.
Employee Schedule: as defined in Section 5.3.4.
Environmental Legal Requirements: means any and all applicable Legal
Requirements and orders, restrictions and authorizations of a Governmental
Entity, including the Clean Air Act, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), the Federal Water Pollution
Control Act, the Occupational Safety and Health Act of 1970, the Resource
Conservation and Recovery Act of 1976 ("RCRA"), the Safe Drinking Water Act, the
Toxic Substances Control Act, the Hazardous & Solid Waste Amendments Act of
1984, the Superfund Amendments and Reauthorization Act of 1986, the Hazardous
Materials Transportation Act, and any similar law, regulation, or requirement of
any Governmental Entity; in each case as amended through and in effect on the
date hereof.
EOC: means Enron Operations Corp., a Delaware corporation.
ERISA: means the Employee Retirement Income Security Act of 1974, as amended.
Excluded Assets and Liabilities: as defined in Section 2.3.
Facilities: the Clear Lake Facility and the Texas City Facility.
Facilities Employees: as defined in Section 5.3.4.
FERC: means the Federal Energy Regulatory Commission.
Financial Statements: as defined in Section 4.1.9.
GAAP: as defined in Section 2.3.
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Governmental Entity: means any court, governmental department, commission,
council, board, agency or other instrumentality of the United States of America
or any state, county, municipality or local government.
Hazardous Substance: means any substance presently listed, defined, designated
or classified as "hazardous substances" under CERCLA, "hazardous wastes" under
RCRA, "hazardous materials" under the Hazardous Materials Transportation Act, or
"toxic substances" under the Toxic Substances Control Act.
HCC: Hoechst Celanese Chemical Corporation.
HSR Act: means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
Indemnity Notice: as defined in Section 7.4.
Indemnified Party: as defined in Section 7.4.
Indemnifying Party: as defined in Section 7.4.
Insurance: as defined in Section 4.1.20.
Knowledge, when used in the phrases "to Seller's knowledge," "to Buyer's
knowledge," or "to its [Seller's or Buyer's] knowledge" or "if Seller had
knowledge" means, and shall be limited to, the actual knowledge of the
appropriate individuals set forth for Seller or Buyer, respectively, on Schedule
1.1(A). Legal Requirement: means all applicable laws, rules, regulations, codes,
ordinances, permits, bylaws, variances, orders, conditions, and licenses of a
Governmental Entity.
Lien: means any lien, charge, mortgage, pledge, hypothecation, conditional sales
contract, or security interest (other than any of the foregoing listed on or
referenced in Schedule 4.1.10, governmental permits, licenses, consents and
approvals, encumbrances imposed by federal or state securities laws and
restrictions imposed by the Certificate of Incorporation, the Bylaws or the
Stockholders' Agreement).
Long Term Debt: as defined in Section 4.2.8.
Losses: as defined in Section 7.1.
Material Adverse Effect: means any adverse effect on the business, assets or
financial condition of the Company or any of the Subsidiaries that is material
in light of the business, assets or financial condition of the Company and the
Subsidiaries taken as a whole.
Notices: as defined in Section 9.6.
Partnership Agreement: as defined in Section 4.1.5.
Past Service: as defined in Section 5.3.4.
Plans: means "employee benefit plan," as such term is defined in Section 3(3) of
ERISA, including each "multiemployer plan," as such term is described
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4001(a)(3) and Section 3(37) of ERISA, and any terminated employee benefit plan.
Prime Rate: means a rate per annum equal to the lesser of (i) a varying rate per
annum that is equal to the interest rate publicly quoted by Citibank, N.A. from
time to time as its prime commercial or similar reference interest rate, with
adjustments in that varying rate to be made on the same date as any change in
that rate or (ii) the maximum rate permitted by applicable law.
Proposed Effective Date Balance Sheet: as defined in Section 2.3.
Purchase Price: as defined in Section 2.2.
PURPA: as defined in Section 4.1.17.
PURPA Regulations: as defined in Section 4.1.17.
PURPA Requirements: as defined in Section 4.1.17.
Self-Certification Notices: as defined in Section 4.2.7.
Seller: as defined in the preamble.
Seller Indemnified Loss: as defined in Section 7.2.
Seller's Interest: as defined in Section 2.3.
Severance Plan: as defined in Section 5.3.4.
Stockholders' Agreement: means that certain Stockholders' Agreement dated as of
June 27, 1988, among Seller (as successor to Enron Corp.), Dominion Resources
and Dominion.
Subsidiaries: EC1, EC3, Clear Lake and Cogenron.
Surety Agreement: means the Surety Agreement dated as of June 12, 1985, between
Enron Corp. (as successor to InterNorth Inc.) and Texas Utilities Electric
Company.
Tax Returns: as defined in Section 4.1.14.
Taxes: means all federal, state, local, Indian nation or foreign taxes,
assessments or other governmental charges, together with any interest or
penalties thereon.
Texas City Facility: means the 450 megawatt gas-fired combined-cycle power plant
located in Texas City, Texas and owned by Cogenron.
Texas Facilities: means, collectively, the Clear Lake Facility and the Texas
City Facility.
Texas City O & M Agreement: the Operations and Maintenance Agreement (Cogenron
Inc.) dated as of August 1, 1995, as amended, among EOC, the Company and
Cogenron.
Texas Plant Sites: means, collectively, the physical locations of the Texas
Facilities.
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Third Party Claim: as defined in Section 7.4.
UCC Guaranty Agreement: the Guaranty Agreement dated as of June 12, 1985, as
amended, between Cogenron and Union Carbide Corporation.
Unaudited Financial Statements: as defined in Section 4.1.9.
Working Capital: as defined in Section 2.3.
Year End Financials: as defined in Section 4.1.9.
1.2 Terminology. All article, section, subsection, schedule and exhibit
references used in this Agreement are to this Agreement unless otherwise
specified. All schedules and exhibits attached to this Agreement constitute a
part of this Agreement and are incorporated herein. Unless the context of this
Agreement clearly requires otherwise, (i) the singular shall include the plural
and the plural shall include the singular wherever and as often as may be
appropriate, (ii) the words "includes" or "including" shall mean "including
without limitation," and (iii) the words "hereof," "herein," "hereunder," and
similar terms in this Agreement shall refer to this Agreement as a whole and not
any particular section or article in which such words appear. Currency amounts
referenced herein are in United States Dollars. References to "generally
accepted accounting principles" herein shall refer to such principles in effect
in the United States of America as of the date of the statement to which such
phrase refers.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Class A Common Stock. Upon the terms and subject to the
conditions of this Agreement, at the Closing Seller will sell, assign, convey,
transfer and deliver to Buyer free and clear of Liens, and Buyer will purchase
and accept from Seller, the Class A Common Stock.
2.2 Purchase Price. (A) The purchase price (the "Purchase Price") to be paid by
Buyer for the Class A Common Stock shall be an amount equal to Thirty-Five
Million Four Hundred Twenty-Five Thousand Dollars ($35,425,000) (the "Base
Purchase Price"), as adjusted pursuant to Section 2.3 and as Buyer and Seller
may otherwise agree.
(B) Upon the terms and subject to the conditions of this Agreement, at
the Closing, (i) Seller will deliver to Buyer, and Buyer will accept, one or
more stock certificates representing all of the Class A Common Stock, against
payment therefor by Buyer to Seller of the Base Purchase Price, in immediately
available funds by wire transfer to one or more bank accounts designated by
Seller, and (ii) Buyer or Calpine Corporation will assume the rights and
obligations of Seller and its Affiliates under the agreements set forth on
Schedule 4.1.10(C) pursuant to the Omnibus Assignment and Assumption Consent,
Novation and Amendment Agreements in the form of Exhibit A hereto (the
"Assignment and Assumption Agreements"), and an agreement regarding the
Stockholders' Agreement in form and substance satisfactory to Buyer and Seller,
pursuant to which Enron Corp. or Seller will assign, and Calpine Corporation or
Buyer will assume, all of Enron Corp.'s rights and obligations under the
Stockholders' Agreement. In addition, but subject to Seller's
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rights under Section 8.1(v) and subject to obtaining consents to such
assignments from Clear Lake and Cogenron, respectively, and from the respective
holders of Long Term Debt secured by each of the Facilities, Seller shall cause
EOC to assign its rights and interests as operator under the Clear Lake O & M
Agreement and the Texas City O & M Agreement to Calpine Corporation or one of
its Affiliates designated by Buyer pursuant to assignment and assumption
agreements in form and substance satisfactory to Seller and Buyer. The
agreements described in this Section 2.2(B) pursuant to which rights and
obligations are to be assigned and assumed are collectively referred to as the
"Assignment Agreements."
2.3 Determination of Purchase Price. (A) As promptly as practicable following
the Closing Date, but in any event within 90 days after the Closing Date, Buyer
shall submit to Seller a proposed balance sheet prepared by the Company as of
the close of business on March 31, 1997 (the "Effective Date"), for the Company
and the Subsidiaries, excluding all items relating to EC5 or Cogen Venture
(including (i) all cash received by EC5 or from Cogen Venture in the three
months ending March 31, 1997, which is payable to Dominion pursuant to Section 2
of the Amendment to Reorganization Agreement dated as of June 30, 1991, and (ii)
any associated account payable to Dominion or its Affiliates related to cash
receipts by EC5 or from Cogen Venture which is then outstanding (the "Excluded
Assets and Liabilities")) (the "Proposed Effective Date Balance Sheet"),
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") and otherwise on a basis consistent with the
December 31 Balance Sheet (defined in Section 4.1.9(B)), together with
appropriate supporting calculations and documentation setting forth, in
reasonable detail, the preparation of the balance sheet. If Seller disputes the
correctness of the Proposed Effective Date Balance Sheet, Seller shall notify
Buyer of its objections in writing within 30 days after receipt of the Proposed
Effective Date Balance Sheet, which notice shall set forth in reasonable detail
the reasons for Seller's objections. If Seller fails to deliver such notice
within such 30-day period, Seller shall be deemed to have accepted the Proposed
Effective Date Balance Sheet (including Buyer's calculations therein). Buyer and
Seller shall endeavor in good faith to resolve any disputed items within 30 days
after Buyer's receipt of Seller's notice of objections. If they are unable to do
so, each party shall have the right to refer the dispute to Deloitte & Touche
(the "Auditor") for resolution and determination of the Proposed Effective Date
Balance Sheet to reflect what is required by this Section 2.3. Such
determination by the Auditor shall be conclusive and binding on the parties. The
fees of the Auditor incurred in resolving any such dispute shall be shared
equally by Seller and Buyer, unless the Auditor determines that, as a whole, the
positions taken by Buyer in the Proposed Effective Date Balance Sheet or by
Seller in its objections to the Proposed Effective Date Balance Sheet were
without merit, in which case the party making the unmeritorious assertion shall
pay the Auditor's entire fee. The balance sheet as of the Effective Date as
finally determined pursuant to this Section 2.3 (whether by failure of Seller to
deliver notice of objection, by agreement of the parties or by determination by
the Auditor) is referred to herein as the "Effective Date Balance Sheet".
(B) The Purchase Price shall be calculated as follows. To the extent
that Working Capital (defined below) on the Effective Date Balance Sheet exceeds
Working Capital on the December 31 Balance Sheet (the December 31 Balance Sheet
not being adjusted for the items described on Schedule 4.1.9(C)), or to the
extent that the Company or the Subsidiaries have made
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unscheduled principal payments (i.e., payments other than those required to be
made under the applicable amortization schedule) of Long Term Debt since
December 31, 1996, the Purchase Price shall be increased above the Base Purchase
Price to the extent of Seller's Interest (defined below) in the differences
thereof. To the extent that Working Capital on the Effective Date Balance Sheet
is less than Working Capital on the December 31 Balance Sheet (the December 31
Balance Sheet not being adjusted for the items described on Schedule 4.1.9(C)),
the Purchase Price shall be reduced below the Base Purchase Price to the extent
of Seller's Interest in the differences thereof. If the Purchase Price is
greater than the Base Purchase Price, Buyer shall pay Seller the difference
thereof. If the Purchase Price is less than the Base Purchase Price, Seller
shall pay Buyer the difference thereof. All amounts owed for Purchase Price
adjustments pursuant to this Section 2.3 shall be netted as appropriate so that
only one payment shall be made, all such amounts shall bear interest at the
Prime Rate from and including the Closing Date through and excluding the date of
payment, and all adjustments shall be made without duplication. Any payment
shall be made not later than two Business Days after final determination of the
Effective Date Balance Sheet pursuant to this Section 2.3 in immediately
available funds by wire transfer to a bank account designated by the party
entitled to receive the payment.
(C) For purposes of this Agreement, (i) "Working Capital" means current
assets (including without limitation cash and cash equivalents, accounts
receivable, materials and supplies, and prepaid expenses) minus current
liabilities (including without limitation accounts payable and other accrued
current liabilities, but excluding current maturities of long term debt),
excluding any items related to EC5 or Cogen Venture (including the Excluded
Assets and Liabilities) and determined in accordance with GAAP; and (ii)
"Seller's Interest" means, with respect to changes in Working Capital and
unscheduled principal payments of Long Term Debt, 50%.
ARTICLE III
CLOSING DATE04/09/98
The consummation of the purchase and sale of the Class A Common Stock shall be
held at a meeting (the "Closing") at the offices of Vinson & Elkins, L.L.P. at
10:00 A.M., Houston, Texas time, three Business Days after the date on which the
last condition contained in Article VI is satisfied or waived, or at such other
time, date and place as may be mutually agreed to in writing by the parties. The
date on which the Closing actually occurs is referred to herein as the "Closing
Date."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of. Seller hereby represents and
warrants to Buyer as follows:
4.1.1 Organization and Good Standing. Seller is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under the laws of the States of Delaware and Texas.
4.1.2 Authority of Seller. Seller has all requisite corporate power and
authority to enter into this Agreement, to consummate the transactions
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contemplated hereby and to perform all the terms and conditions hereof to be
performed by it. The execution, delivery and performance of this Agreement by
Seller and the transactions contemplated hereby to be consummated by Seller have
been duly authorized by all requisite corporate action by Seller. This Agreement
has been duly executed and delivered by Seller and constitutes a valid and
binding agreement of Seller enforceable against Seller in accordance with its
terms subject to applicable bankruptcy, insolvency and other similar laws
relating to or affecting the enforcement of creditors' rights generally and to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
4.1.3 No Violations With Respect to Seller. Except as set forth in
Schedule 4.1.3, the execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby to be consummated by Seller
or its Affiliates do not: (i) violate or conflict with any of the provisions of
the certificate of incorporation or bylaws of Seller; (ii) conflict with, result
in a breach of, or constitute a default under, or accelerate or permit the
acceleration of the performance required by, or require any consent,
authorization or approval under any material agreement or other instrument to
which Seller is a party or by which Seller or its properties are bound; (iii)
violate or conflict in any material respect with any Legal Requirements or any
foreign law, rule, regulation, code, ordinance, material permit or material
license; or (iv) constitute an event which, with notice, lapse of time or both
would result in any such material violation, conflict, breach or default.
4.1.4 Approvals and Consents for Seller. No filing, consent,
authorization or approval under any Legal Requirement binding upon Seller is
required to be made or obtained by Seller in order to execute or deliver this
Agreement or to consummate the transactions contemplated hereby by Seller,
except with respect to the filings required under the HSR Act and except for any
filings, consents, authorizations or approvals that, if not made or obtained, in
the aggregate would not have a Material Adverse Effect.
4.1.5 Ownership.
(A) Schedule 4.1.5 (A) sets forth all of the classes of capital stock
of the Company, the number of authorized shares of such classes, the number of
issued and outstanding shares of such classes and the par value thereof.
(B) Seller owns beneficially and of record 7,095 shares of the Class A
Common Stock. All of such shares of Class A Common Stock have been duly
authorized, validly issued and are fully paid and non-assessable. Upon delivery
of and payment for the Class A Common Stock as provided herein, at the Closing
Buyer will acquire good title to the Class A Common Stock free and clear of all
Liens other than Liens created by, through or under Buyer or its Affiliates.
(C) Except as provided in this Agreement, the Bylaws and the
Stockholders' Agreement, no subscription, option, warrant, conversion right,
call or other agreement or commitment of any character is outstanding obligating
Seller, the Company or (assuming that neither Buyer nor its Affiliates have
entered into any such agreement or commitment) any subsequent owner of the Class
A Common Stock to deliver or sell any Class A Common Stock or any securities,
options, rights or warrants exchangeable for or
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convertible into the Class A
Common Stock or any other class of capital stock of the Company. Except as
provided in the Stockholders' Agreement, there are no voting agreements with
respect to the Class A Common Stock or other agreements restricting the right of
the owner of the Class A Common Stock to sell, transfer, grant a Lien on, or
otherwise dispose of the Class A Common Stock, assuming that neither Buyer nor
its Affiliates have entered into any such agreement.
(D) Dominion owns of record 7,095 shares of Class B Common Stock of the
Company (the "Class B Common Stock"). The Class A Common Stock and the Class B
Common Stock together constitute all of the issued and outstanding capital stock
of the Company. To Seller's knowledge, except for the Stockholders' Agreement,
there are no voting agreements with respect to the Class B Common Stock.
(E) The Subsidiaries, EC5 and Cogen Venture constitute all of the
corporations, partnerships, joint ventures and other entities in which the
Company directly or indirectly owns an equity interest. The total number of
shares of authorized capital stock, and the classes and par values thereof, and
the number of issued and outstanding shares of each such class owned by the
Company, of each Subsidiary that is a corporation are set forth on Schedule
4.1.5 (E). Other than as provided in this Agreement, no subscription, option,
warrant, conversion right, call or other agreement or commitment of any
character is outstanding obligating the Company, any of the Subsidiaries that is
a corporation, or EC5 to deliver or sell any equity interest in any Subsidiary
that is a corporation or in EC5 or any securities, options, rights or warrants
exchangeable for or convertible into any such equity interest. Except as set
forth on Schedule 4.1.5 (E), neither the Company, the Subsidiaries nor EC5 has
any outstanding indebtedness for borrowed money or any other issued and
outstanding securities.
(F) The Company owns a 98% limited partner interest in Clear Lake and
EC3 owns a 2% general partner interest in Clear Lake. Other than as provided in
the Agreement of Limited Partnership dated January 29, 1988, between the Company
and EC3 (the "Partnership Agreement"), there are no outstanding subscriptions,
options, warrants or calls of any kind issued or granted by, or binding upon the
Company, EC3 or Clear Lake to purchase or otherwise acquire (whether directly or
through the purchase of any option or convertible security) any security of or
equity interest in Clear Lake.
4.1.6 Company and Subsidiaries:
(A) The Company and each of the Subsidiaries that is a corporation is
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is in good standing in the States of Delaware and Texas.
EC5 is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and is in good standing in the states of
Delaware and New Jersey. Neither the Company, any of the Subsidiaries nor EC5 is
qualified to do business as a foreign corporation in any other jurisdiction.
Neither the character of the properties now owned or leased by the Company, the
Subsidiaries or EC5 nor the nature of the business now conducted by any of them
require them to be so qualified, except where the failure to be so qualified
would not have a Material Adverse Effect.
(B) Clear Lake is a limited partnership duly formed and validly
existing under the laws of the State of Texas and is in good standing in the
State of Texas. Clear Lake is not qualified to do business as a foreign
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limited partnership in any other jurisdiction. Neither the character of the
properties now owned or leased by Clear Lake nor the nature of the business now
conducted by it requires it to be so qualified, except where the failure to be
so qualified would not have a Material Adverse Effect.
4.1.7 No Violation With Respect to Company and Subsidiaries. Seller has
previously furnished Buyer with correct and complete copies of the Certificate
of Incorporation of the Company (the "Certificate of Incorporation"), the Bylaws
of the Company (the "Bylaws"), the Stockholders' Agreement, certificates of
incorporation and bylaws of each Subsidiary that is a corporation, the
certificate of incorporation of EC5, the Partnership Agreement, the certificate
of limited partnership of Clear Lake and the Amended and Restated Joint Venture
Agreement of Cogen Venture. Except as set forth on Schedule 4.1.7 hereto, the
execution and delivery hereof by Seller does not, and the performance and
compliance with the terms and conditions hereof by it and the consummation of
the transactions contemplated hereby by Seller or its Affiliates will not:
(A) violate or conflict with any provision of the certificates of
incorporation or bylaws of the Company, the Subsidiaries, EC5, the Stockholders'
Agreement, or the Partnership Agreement;
(B) violate or conflict with any provision of or, except with respect
to the HSR Act, require any material filing, consent, authorization or approval
under any Legal Requirements binding upon the Company, the Subsidiaries or EC5;
(C) in any material respect, conflict with, result in a breach of,
constitute a default under (whether with notice or the lapse of time or both),
or accelerate or permit the acceleration of the performance required by, or
require any consent, authorization or approval or trigger any preferential right
of purchase under (i) any mortgage, indenture, loan or credit agreement or any
other material agreement or instrument evidencing indebtedness for money
borrowed, or any financing lease to which the Company, any Subsidiary or EC5 is
a party or by which any of them is bound or to which any of their respective
properties is subject or (ii) any other material lease, contract, agreement or
instrument to which any of them is a party or by which any of them is bound or
to which any of their respective properties is subject; or
(D) except as set forth in agreements entered into after the date
hereof that are approved by Buyer, result in the creation or imposition of any
Lien upon any material asset of the Company, the Subsidiaries or EC5;
in the case of clauses (B) through (D), except for any matters that in the
aggregate would not have a Material Adverse Effect.
4.1.8 No Default; Legal Requirements. Except as set forth in Schedule
4.1.8 hereto:
(A) Neither the Company, the Subsidiaries nor EC5 is in breach or
violation of, or in default under, and no condition exists that with notice or
lapse of time or both would constitute such a default under, (i) any mortgage,
indenture, loan or credit agreement, evidence of indebtedness or other material
instrument evidencing or securing borrowed money, or any financing lease to
which any of them is a party or by which any of their
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respective properties is bound, (ii) any judgment, order or injunction of any
court or governmental agency or (iii) any other agreement, contract, lease,
license or other instrument; except for breaches, violations, defaults and
conditions that individually or in the aggregate would not have a Material
Adverse Effect; and, to Seller's knowledge, no such breaches, violations or
defaults have been asserted in writing against the Company, the Subsidiaries or
EC5; and
(B) Neither the Company, the Subsidiaries nor EC5 is in violation of
any Legal Requirement, except for violations that individually or in the
aggregate would not have a Material Adverse Effect.
4.1.9 Financial Statements.
(A) Seller has delivered to Buyer the audited financial statements of
the Company as of December 31, 1993, December 31, 1994, and December 31, 1995
(the "Year End Financials") certified by the Auditor. The Year End Financials
were prepared in accordance with GAAP and present fairly in all material
respects, the financial position, results of operations and changes in cash
flows of the Company at the dates and for the periods therein indicated.
(B) Seller has also delivered to Buyer the unaudited financial
statements of the Company as of December 31, 1996, including a balance sheet as
of December 31, 1996, a copy of which is attached hereto as Schedule 4.1.9(B)-1,
(the "December 31 Balance Sheet") and income and cash flow statements as of such
date (the unaudited financial statements collectively are referred to as the
"Unaudited Financial Statements," and collectively with the Year End Financials,
the "Financial Statements"). The Unaudited Financial Statements were prepared
from the Company's and the Subsidiaries' books and records in accordance with
GAAP and, with respect to the December 31 Balance Sheet, as adjusted by the
numbers reflected on Schedule 4.1.9(C) hereby, present fairly in all material
respects the financial position, results of operations and changes in cash flow
of the Company and the Subsidiaries at the dates and for the period therein
indicated, except to the extent such statements would be affected by year end
and audit adjustments and except that such statements do not contain footnotes.
Except as set forth on Schedule 4.1.9(B)-2 hereto, the contingent liabilities
described in the footnotes to the audited financial statements of the Company as
of December 31, 1996 will not materially and adversely differ from the
contingent liabilities described in the Company's audited financial statements
as of December 31, 1995.
(C) Except as set forth on Schedule 4.1.9(C), the Company and the
Subsidiaries have no liabilities exceeding $100,000 in the aggregate that would
be required to be reflected on a balance sheet (not including the footnotes
thereto) prepared in accordance with GAAP applied on a basis consistent with the
Financial Statements, except for (i) liabilities reflected on the December 31
Balance Sheet, (ii) liabilities incurred since December 31, 1996 in the ordinary
course of business and (iii) liabilities with respect to which separate
agreements have been entered into between Seller or its Affiliates and Buyer or
its Affiliates concurrently with the execution of this Agreement.
(D) Since December 31, 1996, (i) the Company has neither declared,
provided for nor made any dividends or distributions to its shareholders, and
(ii) neither the Company nor the Subsidiaries has (a) made any material
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changes in its accounting methods, or (b) sold or otherwise disposed of any
material portion of its assets, except for sales or dispositions in the ordinary
course of business or pursuant to contracts listed on Schedule 4.1.10 (A).
4.1.10 Leases; Contracts; Agreements and Commitments. (A) Schedule
4.1.10(A) sets forth a list of the following written leases, contracts,
agreements, and contractual commitments to which the Company, any Subsidiary or
EC5 is a party or by which any of them or their respective assets are bound,
correct and complete copies of which have previously been made available to
Buyer:
(i) each lease, easement, right of way and license with respect to real
property that is necessary to conduct, in all material respects, their
respective businesses as they are currently being conducted and any other
material agreement with respect to real property;
(ii) each lease of personal property providing for rental payments in
excess of $50,000 per year;
(iii) each agreement involving $25,000 or more to contribute, lend or
advance funds to, or to purchase any additional equity interest in any other
person;
(iv) each agency agreement involving more than $50,000 in any one
year;
(v) each mortgage, indenture, note, loan agreement, pledge agreement,
security document, installment obligation, or other instrument, credit
agreement, or reimbursement agreement for or relating to any borrowing (other
than short-term borrowing in the ordinary course of business) in an amount in
excess of $50,000;
(vi) each collective bargaining agreement, employment agreement or
consulting agreement;
(vii) each guaranty, reimbursement agreement, bond, surety, or any
other direct or indirect agreement to pay or perform any obligation of any
person or entity given by the Company, any Subsidiary or EC5, excluding
endorsements in the ordinary course of business;
(viii) each agreement that expressly prohibits the Company, any
Subsidiary or EC5 from competing with the counterparty in such a manner as to
materially restrict the right of any of them to engage in any material business
in which any of them is now engaged;
(ix) each partnership, joint venture, shareholders or similar agreement;
(x) each agreement for a duration of greater than 30 days for the
purchase or sale of fuel, electric energy or capacity, or steam or the
transportation of fuel, wheeling of power or interconnection agreements that
would be in effect on the Closing Date;
(xi) each agreement providing for the purchase or option to purchase all
or substantially all of the assets of the Company, any Subsidiary or EC5;
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(xii) each material agreement between Seller, Dominion or their
respective Affiliates, on the one hand, and the Company, any Subsidiary, or EC5,
on the other hand, other than agreements that will be terminated on or before
the Closing Date and for which the Company will have no liability thereafter;
and
(xiii) all other agreements of a duration of greater than 90 days that
cannot be terminated without a penalty to the Company or any Subsidiary and that
have a total consideration of more than $50,000 during the primary contract term
that would be in effect on the Closing Date.
(B) Schedule 4.1.10(B) sets forth a list of each agreement to which
Seller or any of its Affiliates is a party that directly relates to the Company
and that, if the obligations thereunder are not performed, could have a Material
Adverse Effect.
(C) Schedule 4.1.10(C) sets forth a list of certain contracts,
agreements, or contractual commitments to which Seller or its Affiliates are a
party and the rights and obligations under which Buyer or Buyer's Affiliates
will assume pursuant to the Assignment Agreements. Except as disclosed on
Schedule 4.1.10(C), Seller and such Affiliates are not in default under any such
agreement or commitment, except where such defaults in the aggregate would not
have a Material Adverse Effect or, with respect to obligations of Seller or its
Affiliates under such contracts, agreements or commitments to be assumed by
Buyer or its Affiliates that provide equity support in respect of the Company or
the Subsidiaries, that would not have a material adverse effect on the
obligations of Buyer and its Affiliates as successors to Seller and its
Affiliates under such contracts, agreements or commitments. Except for
agreements to be assumed pursuant to the Assignment Agreements, Buyer will not
assume any liabilities or obligations of Seller or its Affiliates.
4.1.11 Litigation. Schedule 4.1.11 sets forth a list of all lawsuits
and administrative proceedings pending or, to the knowledge of Seller,
threatened against the Company, any Subsidiary or EC5. Schedule 4.1.11 also sets
forth a list of all lawsuits and administrative proceedings pending, or to the
knowledge of Seller, threatened against Seller or its Affiliates that directly
relate to the Company, any Subsidiary or EC5. To Seller's knowledge, there are
no material investigations by any Governmental Entity pending or threatened
against the Company, any Subsidiary or EC5.
4.1.12 Government Permits. Each of the Company and the Subsidiaries
have all permits, licenses, consents and approvals from Governmental Entities
required to be obtained by any of them that are necessary to conduct their
business in accordance with Legal Requirements as it is currently being
conducted, except where the failure to have same would not have a Material
Adverse Effect.
4.1.13 Employee Benefits. Each of the Company, the Subsidiaries and EC5
(i) is not, and has never been treated as being a "single employer" under
Section 414 of the Code with any other Person which has maintained or
contributed to or had any liability (contingent or otherwise) to, under or based
upon any Plan, (ii) does not have, and never has had, any "employees" as defined
in Section 3(6) of ERISA, and (iii) does not, and has never maintained,
contributed to or had any liability (contingent or otherwise) to, under or based
upon any Plan, including Plans maintained by any member of a
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"controlled group" (as defined in Section 414 of the Code) or any plan that is a
"multiemployer plan" (as defined in ERISA).
4.1.14 Tax Matters. Except as set forth in Schedule 4.1.14:
(i)(a) All returns and reports ("Tax Returns") of or with respect to
any and all Taxes which are required to be filed on or before the Closing Date
(taking into account any extensions permitted under Section 5.3.2) by the
Company and the Subsidiaries have been duly and timely filed (taking into
account any extensions permitted under Section 5.3.2);
(b) All Taxes which have become due by the Company or the Subsidiaries
(taking into account any extensions permitted under Section 5.3.2) with respect
to the period covered by each such Tax Return have been timely paid in full
(taking into account any extensions permitted under Section 5.3.2); and
(ii) There is no pending written claim against the Company or the
Subsidiaries for any Taxes that are due and payable, and no assessment,
deficiency or adjustment has been asserted or, to Seller's knowledge, proposed
with respect to any Tax Return of the Company or the Subsidiaries. There are no
audits or investigations pending or, to Seller's knowledge, threatened against
the Company or the Subsidiaries.
4.1.15 Real Property. Schedule 4.1.15 hereto sets forth legal
descriptions of the Facilities as they appear in the leases with respect
thereto. Neither the Company nor any Subsidiary owns fee simple title to any
real property. To Seller's knowledge, such legal descriptions accurately
describe, in all material respects, the real property on which the Clear Lake
Facility and the Texas City Facility are located.
4.1.16 Environmental Matters. Except as set forth on Schedule 4.1.16
hereto and except where any of the following would not have a Material Adverse
Effect, (i) neither the Company nor the Subsidiaries are in violation of any
Environmental Legal Requirement as a result of the operation of the business by
the Company or the Subsidiaries, (ii) no Hazardous Substances are present on, at
or under the Texas Plant Sites as a result of the operation of the business by
the Company or the Subsidiaries in quantities, concentrations, or locations that
require remedial action by any of them under Environmental Legal Requirements,
and, to Seller's knowledge, no such Hazardous Substances are present on, at or
under the Texas Plant Sites as a result of any other source or cause that would
require such remedial action, (iii) neither Seller nor the Company has received
any written notice, demand letter, or request for information from any
Governmental Entity or any third party indicating that Seller, the Company or
the Subsidiaries may be in violation of, or liable under, Environmental Legal
Requirements, which matter has not been finally resolved or settled, (iv) no
Hazardous Substance has been disposed of or transported from the business while
owned or operated by the Company or the Subsidiaries except as permitted under
applicable Environmental Legal Requirements or has been released on or from the
business by the Company or the Subsidiaries or the Texas Plant Sites while owned
or operated by the Company or the Subsidiaries which requires remediation under
applicable Environmental Legal Requirements, and (v) there has been no exposure
of any person or property to Hazardous Substances in connection with the
business by the Company or the Subsidiaries, which exposure has (i) resulted in
a material claim against the Company or the Subsidiaries or (ii)
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to Seller's knowledge, would be the basis for such a claim. This Section 4.1.16
is intended to, and shall be, the sole representation and warranty in this
Agreement with respect to environmental matters and no other representation and
warranty in this Agreement shall be construed as covering any environmental
matters.
4.1.17 Regulatory Matters.
(A) Neither Seller, the Company, nor any of the Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(B) Each of the Seller, the Company and the Subsidiaries is not subject
to, or is exempt from regulation as, an "electric utility company", a "holding
company," a "subsidiary company" of a "holding company," an "affiliate" of a
"holding company," or an "affiliate" of a "subsidiary company" of a "holding
company," in each case as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
(C) Each of the Facilities is a "qualifying cogeneration facility," as
such term is defined in the Federal Power Act, as amended by the Public Utility
Regulatory Policies Act of 1978 ("PURPA"), the regulations of FERC thereunder
("PURPA Regulations"), and the current interpretations of FERC and courts of
competent jurisdiction of PURPA and such regulations (collectively, PURPA, the
regulations and all such interpretations, the "PURPA Requirements").
4.1.18 Sole Purpose; Nature of Business. Neither the Company nor any
Subsidiary has conducted or is conducting any business other than business
relating to the development, financing, acquisition, construction, ownership,
operation and maintenance of the Facilities and the sale of energy produced from
the Facilities.
4.1.19 Brokerage or Finders Fees. All negotiations relating to this
Agreement and the transactions contemplated hereby have been conducted without
the intervention of any person or entity acting on behalf of Seller, its
Affiliates or the Company in such a manner as to give rise to a valid claim
against Buyer, the Company or any Subsidiary for any broker's or finder's
commission, fee or similar compensation.
4.1.20 Insurance. Set forth on Schedule 4.1.20 is a correct and
complete list of all operating insurance applicable to the Facilities and
maintained on behalf of the Company and the Subsidiaries (the "Insurance"),
listing the types of coverages, amounts of coverage and deductibles. Such
insurance is in full force and effect and complies in all materials respects
with all material requirements of all material agreements binding on the
Company, either Subsidiary or EOC, as operator under the Clear Lake O&M
Agreement and the Texas City O&M Agreement.
4.1.21 Material Assets and Properties. Except for assets and properties
listed on Schedule 4.1.21 hereto, and except for assets and properties provided
pursuant to the Administrative Services Agreement, each of the Subsidiaries owns
or otherwise has the right to use the assets and properties reasonably necessary
to conduct their respective businesses as they are now conducted; except where
the failure to have same would not have
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a Material Adverse Effect.
4.2 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller as follows:
4.2.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
4.2.2 Authority of Buyer. Buyer has all requisite corporate power and
authority to enter into this Agreement, to consummate the transactions
contemplated hereby and to perform all the terms and conditions hereof to be
performed by it. The execution, delivery and performance of this Agreement by
Buyer and the transactions contemplated hereby to be consummated by Buyer have
been duly authorized by all requisite corporate action by Buyer. This Agreement
has been duly executed and delivered by Buyer and constitutes a valid and
binding agreement of Buyer enforceable against Buyer in accordance with its
terms subject to applicable bankruptcy, insolvency and other similar laws
relating to or affecting the enforcement of creditors' rights generally and to
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
4.2.3 No Violations. The execution and delivery of this Agreement by
Buyer and the consummation of the transactions contemplated hereby to be
consummated by Buyer do not and will not: (i) violate or conflict with any of
the provisions of the certificate of incorporation or bylaws of Buyer; (ii) in
any material respect conflict with, result in a breach of, or constitute a
default under, or accelerate or permit the acceleration of the performance
required by, or require any consent, authorization or approval under any
material agreement or other instrument to which Buyer is a party or by which
Buyer or its properties are bound; (iii) violate or conflict in any material
respect with any Legal Requirements or any foreign law, rule, regulation, code,
ordinance, material permit or material license; or (iv) constitute an event
which, with notice, lapse of time or both would result in any such material
violation, conflict, breach or default.
4.2.4 Approvals and Consents. No material filing, consent,
authorization or approval under any Legal Requirement binding upon Buyer is
required to be made or obtained by Buyer in order to execute or deliver this
Agreement or to consummate the transactions contemplated by hereby by Buyer,
except with respect to the filings required under the HSR Act.
4.2.5 Acquisition as Investment. Buyer is acquiring the Class A Common
Stock for its own account as an investment without the present intent to sell,
transfer or otherwise distribute the Class A Common Stock to any other person or
entity.
4.2.6 Brokerage or Finders Fees. All negotiations relating to this
Agreement and the transactions contemplated hereby have been conducted without
the intervention of any person or entity acting on behalf of Buyer or its
Affiliates in such a manner as to give rise to a valid claim against Seller, the
Company or any Subsidiary for any broker's or finder's commission, fee or
similar compensation.
4.2.7 No Electric Utility Ownership. Assuming Seller's representation
in Section 4.1.17(C) is accurate, Buyer is not (i) an "electric utility" or an
"electric utility holding company" or a wholly or partially owned subsidiary of
either, within the meaning of Part 292 of the PURPA
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Regulations (18 C.F.R. Part 292) and FERC's decisions thereunder or (ii)
otherwise engaged in the generation or sale of electric power (other than
electric power solely from "cogeneration facilities" or "small power production
facilities" (both within the meaning of Part 292 of the PURPA Regulations or the
current interpretations of FERC and the courts of competent jurisdiction of such
regulation)). At or before the Closing, Buyer will have ratified all written
agreements between Clear Lake or Cogenron, on the one hand, and Buyer, Seller,
DRI or their respective Affiliates, on the other. Within 30 days after the
Closing Date, Buyer will have caused each of Clear Lake and Cogenron to file a
notice of self-certification ("collectively, the "Self-Certification Notices"),
the purpose of which is to reflect the change in ownership of the Company, which
notices shall describe the non-utility status of Calpine.
4.2.8 Available Funds. Buyer has, and at the Closing will have,
sufficient funds available to it to purchase the Class A Common Stock pursuant
to this Agreement and to purchase the existing long-term project debt on the
Facilities (the "Long Term Debt") pursuant to the Assignment of Notes for a cash
purchase price equal to the outstanding principal balance, plus accrued
interest, as of the Closing Date, which principal and interest, as of the date
hereof, is expected to total approximately $157,000,000.
4.2.9 Knowledgeable Buyer. Buyer (i) is represented by competent legal,
tax and financial counsel in connection with the negotiation, execution, and
delivery of this Agreement, (ii) together with its Affiliates, has sufficient
knowledge and experience in owning, managing, and operating power generating
facilities to enable it to evaluate the Facilities, the Company, each
Subsidiary, EC5 and Cogen Venture, and the businesses of each of them, and the
technical, commercial, financial, legal, regulatory, and other risks associated
with owning the Class A Common Stock, (iii) acknowledges that pursuant to this
Agreement it will have, prior to the Closing Date, performed all due diligence
that it desires to perform to enable it to evaluate the risks and merits of
consummating the transactions contemplated hereby, and that in making the
decision to enter into this Agreement and the Assignment of Notes and to
consummate the transactions contemplated hereby and thereby, it has relied
solely on the basis of its own independent investigation, analysis and
evaluation of the Company and the Subsidiaries and their properties, assets,
business, financial condition and prospects and upon the express
representations, warranties and covenants in this Agreement and in any
certificate delivered at the Closing, and (iv) together with its Affiliates, is
financially capable of owning the Class A Common Stock and the Long Term Debt
and performing its obligations under this Agreement, the Assignment of Notes and
the Assignment Agreements. Nothing discovered (or which should have been
discovered) by Buyer in the course of due diligence will be considered a waiver
of or will reduce Seller's rights under Article VII; provided that, prior to the
Closing, Buyer has disclosed to Seller any inaccuracy in Seller's
representations and warranties or any errors in or omissions from the schedules
to this Agreement of which Buyer has knowledge, and further provided that the
foregoing does not extend the time period in which a claim may be made under
Article VII or affect Seller's rights under Section 7.6. Buyer acknowledges that
neither Seller, its Affiliates nor any other person or entity has made any
representation or warranty, express or implied, as to the Company or the
Subsidiaries except for those expressly set forth in Section 4.1 or in any
certificate by Seller or its Affiliates delivered at the Closing.
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ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Covenants of Seller. Seller covenants and agrees with Buyer as follows:
5.1.1 Certain Changes. Except as may be permitted hereunder or as
otherwise contemplated in this Agreement and except as set forth on Schedule
5.1.1, from the date hereof through the Closing Date, without first obtaining
the written consent of Buyer, which consent shall not be unreasonably withheld,
Seller shall, to the extent within its reasonable control, cause the Company and
the Subsidiaries not to:
(i) make any material change in the conduct of its business or
operations or make any change in its financial or tax accounting principles or
practices;
(ii) merge into or with or consolidate with any other entity or acquire
all or substantially all of the business or assets of any corporation, person or
entity;
(iii) make any change in their respective organizational documents;
(iv) purchase any securities of any corporation, person or entity
except for investments of cash and other funds in the ordinary course
of business or issue any debt or equity securities;
(v) mortgage, pledge or subject to any new Lien any of their respective
material assets, tangible or intangible, except pursuant to any
agreement disclosed on Schedule 4.1.10; or sell, transfer or dispose of
all or any material portion of their assets, except for sales,
transfers or dispositions in the ordinary course of business or other
dispositions of equipment or inventory items that are obsolete or not
of material value;
(vi) take any action or enter into any commitment with respect to or in
contemplation of any liquidation, dissolution, recapitalization,
reorganization or other winding up of its business or operation;
(vii) enter into any settlement of or commence any material pending or
threatened litigation;
(viii) consent to the entry of any decree or order by a Governmental
Entity;
(ix) set aside, declare or pay any dividends;
(x) incur or guarantee any indebtedness for borrowed money in excess of
$50,000 or forgive any indebtedness for borrowed money or make any advances or
loans to third parties;
(xi) form any new subsidiaries or engage in any new businesses;
(xii) enter into any new material agreement or amend or terminate any
material agreement; or
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(xiii) provide any new (meaning not pursuant to an existing agreement
disclosed on Schedule 4.1.10(A)) severance or other employee
benefits to any employee of or consultant to the Company or
any Subsidiary, except for extensions of existing consulting
agreements on substantially the same terms.
From the date hereof through the Closing Date, except as permitted hereunder or
contemplated hereby or as consented to in writing by Buyer, Seller will not
enter into any guarantees or other support agreements in respect of the Company
or the Subsidiaries. With respect to those matters set forth on Schedule 5.1.1,
Seller shall consult, and shall use its Best Efforts to cause the Company and
the Subsidiaries to consult, with Buyer with respect to any negotiations with
third parties and any new agreements or amendments or modifications to
agreements contemplated by the matters listed on Schedule 5.1.1, and shall use
its good faith efforts to incorporate any revisions to agreements requested by
Buyer in such negotiations, agreements, amendments and modifications.
5.1.2 Operation of Business. From the date hereof until the Closing
Date, except as permitted hereunder or contemplated hereby or as consented to in
writing by Buyer, Seller shall use its Best Efforts to cause the Company and the
Subsidiaries to carry on their respective businesses in the usual and ordinary
course except where the failure to do so would not have a Material Adverse
Effect, including the purchase of spare parts for the Facilities and the
performance of maintenance, repairs and similar activities in accordance with
the normal current schedule therefor, and the payment of amounts due under the
Long Term Debt as and when due under the applicable amortization schedule.
Seller shall not cause EOC or ECT to change the performance of their obligations
under the Clear Lake O & M Agreement, the Texas City O & M Agreement or the
Administrative Services Agreement.
5.1.3 Insurance. From the date hereof until the Closing Date, Seller
will use its Best Efforts to cause the Company to maintain the Insurance for
itself and the Subsidiaries. Buyer recognizes and acknowledges that the
Insurance will terminate upon the Closing and that the Company and the
Subsidiaries will need to obtain new insurance. All insured claims or losses
arising or occurring on or before the Closing with respect to the Company or the
Subsidiaries shall be for the account of the Company or the Subsidiaries under
the insurance policies maintained pursuant to the applicable operating and
maintenance agreements or credit facilities relating to the Long Term Debt,
regardless of when such claims or losses are reported to the applicable
insurance carrier; provided that with respect to Insurance constituting
liability insurance,. all such claims and losses shall be reported no later than
the first anniversary of the Closing Date.
5.1.4 Access. Seller will afford to Buyer and its authorized
representatives, at Buyer's sole expense, risk and cost, reasonable access from
the date hereof through the Closing Date, during normal business hours, to its
and the Company's personnel, properties, books and records relating to the
Facilities, the Company, the Subsidiaries and EC5 and will furnish to Buyer such
additional financial and operating data and other information relating to any of
them as Buyer may reasonably request, to the extent that such access and
disclosure would not violate the terms of any agreement to which Seller, the
Company, any Subsidiary or EC5 is bound or any Legal Requirement; provided,
however, that the confidentiality of any data or information so acquired shall
be maintained by Buyer and its Affiliates and
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their representatives in accordance with Section 5.2.3; and further provided
that all requests for access shall be directed to Brad Petzold (713) 853-1611,
or such other persons as Seller may designate from time to time. During said
period, Seller will also allow Buyer such access to the documents within its
possession or to which it has reasonable access relating directly to Cogen JV.
5.1.5 Antitrust Notification and Other Governmental Filings. Seller or
its Affiliate will, as promptly as practicable (and, in any event, within 10
days after the execution hereof) file with the Federal Trade Commission and the
Department of Justice the notification and report form required to be filed by
it for the transactions contemplated hereby (and shall request early termination
of the waiting period) and any supplemental information which may be reasonably
requested in connection therewith pursuant to the HSR Act.
5.1.6 Confidentiality. After the Closing Date, Seller shall not,
directly or indirectly, use, disclose or provide to any other person or entity
any information of a confidential or proprietary nature concerning the business
or assets of the Company, the Subsidiaries or EC5 except (i) as is required in
governmental filings or judicial, administrative or arbitration proceedings or
by Legal Requirements, (ii) information that was or becomes in the public domain
without breach of any obligation of confidentiality by Seller or its Affiliates,
or (iii) as is reasonably necessary to enforce its rights or defend its
obligations in connection with the Facilities.
5.1.7 Public Announcements. Subject to applicable securities law or
stock exchange requirements, at all times until the Closing Date, Seller shall
promptly advise, and obtain the approval (which may not be withheld
unreasonably) of, Buyer before issuing, or permitting any of its directors,
officers, employees, agents or investment bankers, or any of its Affiliates to
issue, any press release or other announcement with respect to this Agreement or
the transactions contemplated hereby; provided that no further approval shall be
required for press releases or other announcements which are substantially
similar to previously approved releases or announcements provided a copy of such
release or announcement is furnished promptly to Buyer.
5.1.8 Transaction Costs. Seller shall bear and pay all of the costs,
fees and expenses incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement.
5.1.9 Noncompetition. For a period of one year after the Closing Date,
neither Seller nor any of its Affiliates shall sell or enter into any contract
to sell and, upon request by Buyer, shall immediately cease any activities or
attempts to sell or enter into any contract to sell, steam to Union Carbide
Corporation for use at its facility adjacent to the Texas City Facility or to
Hoechst Celanese Corporation for use at its facility adjacent to the Clear Lake
Facility.
5.1.10 Satisfaction of Closing Conditions. Seller shall use its Best
Efforts to cause satisfaction of the conditions precedent to Closing set forth
in Sections 6.1.3, 6.1.7 through 6.1.10, and, subject to Section 8.1(v),
Sections 6.1.6 and 6.2.7 through 6.2.9.
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5.2 Covenants of Buyer. Buyer covenants and agrees with Seller as follows:
5.2.1 Antitrust Notification and Other Governmental Filings. Buyer or
its Affiliate will as promptly as practicable (and, in any event, within 10 days
after the execution hereof) file with the Federal Trade Commission and the
Department of Justice the notification and report form required for the
transactions contemplated hereby (and shall request early termination of the
waiting period) and any supplemental information which may be reasonably
requested in connection therewith pursuant to the HSR Act.
5.2.2 Public Announcements. Subject to applicable securities law or
stock exchange requirements, at all times until the Closing Date, Buyer shall
promptly advise, and obtain the approval (which may not be withheld
unreasonably) of, Seller before issuing, or permitting any of Buyer's directors,
officers, employees, agents or investment bankers, or any of Buyer's Affiliates
to issue, any press release or other announcement with respect to this Agreement
or the transactions contemplated hereby; provided that no further approval shall
be required for press releases or other announcements which are substantially
similar to previously approved releases or announcements provided a copy of such
release or announcement is furnished promptly to Seller.
5.2.3 Confidential Information. In the event that this Agreement is
terminated or, if not terminated, until the Closing Date, the confidentiality of
any data or information received by Buyer regarding the business and assets of
the Company, Seller and their respective Affiliates shall be maintained by Buyer
and its representatives in accordance with the Confidentiality Agreement dated
March 10, 1997 executed by Calpine Corporation and Seller (the "Confidentiality
Agreement").
5.2.4 Transaction Costs. Buyer shall bear and pay all of the costs,
fees and expenses incurred by it or on its behalf in connection with the
transactions contemplated by this Agreement, including the filing fees under the
HSR Act.
5.2.5 Satisfaction of Closing Conditions. Buyer shall use its Best
Efforts to cause satisfaction of the conditions precedent to Closing set forth
in Sections 6.2.3, 6.2.4, and 6.2.7 through 6.2.9.
5.2.6 Bank Account and Line of Credit. Buyer has heretofore delivered
to Seller a letter from Bank of Nova Scotia (the "Bank") stating that Buyer (i)
has deposited sufficient funds in a deposit account maintained by it at the Bank
and (ii) has sufficient funds available to be drawn under the line of credit
provided by the Bank, to complete the purchase of the Class A Common Stock and
Long Term Debt as contemplated hereby. Buyer hereby agrees that prior to the
termination of this Agreement as permitted hereunder, it shall not (a) withdraw
or use funds from such account or (b) draw down on or use funds from such line
of credit except to purchase the Class A Common Stock and the Long Term Debt,
which withdrawal or use in the aggregate would reduce the total amount available
in such account and under such line of credit to less than the sum of the Base
Purchase Price and the amount of the principal and interest outstanding under
the Long Term Debt. From the date hereof through the Closing, Buyer shall not,
and shall cause its Affiliates not to, take any action that would cause the
terms and conditions to utilizing funds under such line of credit not to be
satisfied. Nothing in
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this Section 5.2.6 is intended to, nor shall it, modify Section 4.2.8 or imply
that Buyer's obligations under this Agreement are subject to financing.
5.2.7 Certain FERC Matters. At or before the Closing, Buyer shall
ratify all written agreements between Clear Lake and Cogenron, on the one hand,
and Buyer, Seller, DRI or their respective Affiliates, on the other, and shall
furnish Seller with a valid resolution of Buyer evidencing such ratification.
Within 30 days after the Closing Date, Buyer shall cause Clear Lake and Cogenron
to file the Self-Certification Notices with FERC.
5.3 Mutual Covenants. Buyer and Seller covenant and agree as follows:
5.3.1 Release. Prior to the Closing, without limiting Seller's rights
under Sections 6.2.7 through 6.2.9, and 8.1(v), Buyer and Seller shall use their
Best Efforts to have Seller and their Affiliates released from all obligations
under the agreements listed on Schedule 4.1.10(C) (including the agreements
listed as Credit Support Obligations therein (the "Credit Support
Obligations")). In addition, Buyer shall provide financial information and offer
to furnish substantially equivalent credit support obligations to the obligees
under the Credit Support Obligations to effect such release pursuant to
agreements that are mutually satisfactory to Buyer and Seller. To the extent
that Seller and its Affiliates are not released from all of the Credit Support
Obligations pursuant to agreements reasonably satisfactory to Seller in form and
substance, Buyer shall indemnify Seller and its Affiliates pursuant to Section
7.2(B) with respect thereto.
5.3.2 Tax Returns. Seller, in cooperation with the Company, shall cause
to be prepared and timely filed (taking into account any extensions permitted
hereunder) each income Tax Return of the Company that includes a taxable period
ending on or before the Closing Date which is required to be filed after the
Closing Date, and pursuant to Section 9.4(B), Buyer shall provide records and
assistance to enable Seller to make such filings. Seller shall not cause or
permit the Company to extend the filing date for such Tax Returns without
Buyer's prior written consent.
5.3.3 Administrative Services Agreement. Seller shall cause ECT to
agree (i) to offer to the Company to amend the Administrative Services Agreement
to provide that it will terminate on a date designated by the Company which is
not more than 90 days after the Closing Date, (ii) to continue to perform ECT's
duties and obligations under the Administrative Services Agreement through and
including such designated termination date and (ii) upon such termination date,
to deliver and turn over to the Company non-proprietary software, electronic
data and books and records relating primarily to the Company or the Subsidiaries
and any other items as are mutually agreed upon by ECT and the Company.
5.3.4 Employment Matters.
(A) Facilities Employees. Schedule 5.3.4(A) (the "Employee Schedule")
to be attached to this Agreement will contain the names of employees of Enron
International Payroll, Inc. ("EIPI") who are engaged in the operation and
maintenance of the Facilities (the "Facilities Employees"), their current
salaries and work location. Seller shall deliver the Employee Schedule of
Facilities Employees on a confidential basis to the Manager, Human Resources of
Buyer, no more than five business days after this Agreement is executed. The
Employee Schedule shall set forth substantially
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the same number of employees, types and numbers of jobs at each Facility and at
the Company, current salary amounts and years of past service credit as the
information previously provided to Buyer by Seller or its Affiliates. The
Employee Schedule shall show the name, job position, work location, current
salary and years of past service credit for each of the Facilities Employees. In
addition, Seller will provide Buyer on a confidential basis relevant written
information in Seller's possession regarding each individual's work
qualifications, training history, and prior jobs held while employed by any
affiliate of Seller. The average severance cost for these Facilities Employees
is $25,272 (the "Average Severance Cost"). Buyer, in its sole discretion, may
make offers of employment to any of the Facilities Employees. Buyer understands
that offers of employment which are not at least at the current salary and at
the same location of any Facilities Employee may be declined by such employee
and such employee, if terminated by EIPI, would be entitled to a severance
benefit under the Enron Corp. Severance Pay Plan (the "Severance Plan"), a copy
of which Seller has provided to Buyer. With respect to Facilities Employees who
become entitled to a severance benefit under the Severance Plan as a result of
Buyer's not having made offers of employment to such employees at their current
salaries and at the same location, Seller shall be financially responsible for
the first nine Facilities Employees who are paid a severance benefit under the
Severance Plan, and Buyer shall promptly, without delay, upon receipt of written
notification by Seller, pay to Seller an amount equal to the number of such
Facilities Employees in excess of nine, who within 90 days after the Closing,
are paid a severance benefit under the Severance Plan multiplied by the Average
Severance Cost. If any such Facilities Employee is terminated by Seller and
receives severance under the Severance Plan, and within 12 months after the
termination of the Facilities Employee by Seller, Buyer employs such Facilities
Employee, then Buyer shall promptly pay to Seller an amount equal to all or a
portion of the severance benefit, if any, paid to such Facilities Employee by
either Seller or EIPI in connection with such employee's termination of
employment with either Seller or EIPI, determined by multiplying the amount of
such severance benefit by a fraction, the numerator of which is the number 12
reduced by the number of full months that have passed from the Closing Date to
the employment date, and the denominator of which is the number 12.
(B) COBRA Continuation Coverage. Seller shall be responsible for the
health care claims of any Facilities Employees that are not employed by Buyer as
of the Closing Date who receive continuation of health care coverage, as
required by the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
under medical plans by which they are covered. Buyer shall be responsible for
providing health care continuation coverage, if any, as required by COBRA to any
of the Facilities Employees who are employed by Buyer as of or subsequent to the
Closing Date and who cease employment with Buyer for any reason thereafter.
(C) Participation In Buyer's Plans. Subsequent to the Closing, upon
employment with Buyer, the Facilities Employees employed by Buyer shall be
eligible for participation in all employee benefit plans (within the meaning of
Section 3(3) of ERISA) for which similarly situated employees of Buyer are
eligible ("Buyer's Plans"). Under Buyer's Plans, the Facilities Employees
employed by Buyer will be given credit for Past Service (defined below) for
purposes of determining (i) eligibility for participation in the retirement,
short or long term disability, severance and vacation plans (including, without
limitation, eligibility for early retirement), and (ii) the duration
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and amount, if any, of short or long term disability and severance benefits.
"Past Service" means (i) service as an employee of EIPI or any of its affiliates
and (ii) service as an employee of any other entity, but only to the extent that
such service is recognized under the applicable and similar plan of EIPI or its
Affiliates, and is continuous through the Closing Date.
(D) No Medical Preexisting Condition. No preexisting condition
limitations shall be applicable to Facilities Employees employed by Buyer under
any employee benefit plan of Buyer provided that, with respect to each
Facilities Employee and his or her other covered dependents, such Facilities
Employee and each covered dependent enrolls in such plan within 30 days of the
Facilities Employee commencing employment with Buyer; and further provided that
such person has been covered under a medical plan for the six-month period
preceding the Closing. Additionally, any Facilities Employee or covered
dependent expenses applied toward deductibles in the year in which the Closing
occurs and any out-of-pocket limitations under EIPI's medical and dental plans
in the year in which the Closing occurs shall be recognized under Buyer's
medical and dental plans and applied respectively toward any deductibles or
out-of-pocket limits thereunder in such year.
(E) Responsibility for Claims. Employee benefit claims for expenses
incurred by, or for services provided to, Facilities Employees or their
dependents which occur prior to the date of the Closing shall be the financial
obligation of Seller. Employee benefit claims for expenses incurred by, or for
services provided to, Facilities Employees employed by Buyer or their covered
dependents which occur on or after the Closing Date shall be covered under
Buyer's Plans. The amount and type of benefits payable in any case shall be
determined in accordance with the terms of the applicable employee benefit plan.
(F) Severance Benefits. Buyer shall cause the Facilities Employees
employed by Buyer to be eligible for severance benefits, to be paid to such a
Facilities Employee if within one year after the Closing the Facilities Employee
either has a reduction in base pay and elects within 30 days thereof to
terminate employment or is terminated by Buyer for a reason other than
termination for cause, in the sum of (i) two weeks of base pay for each year of
Past Service and additional service, or portion thereof, credited with Buyer,
and (ii) two weeks of base pay for each Ten Thousand Dollars, or portion
thereof, of annualized base pay, up to a maximum total severance payment equal
to 52 weeks of base pay. "Termination for cause" as used in this paragraph shall
mean termination for such reasons as Buyer may reasonably determine constitutes
cause which is serious enough to result in a legitimate business need for
termination of employment instead of warning, probation or counseling. Failure
to meet established performance expectations shall not be such a cause for
termination unless the Facilities Employee has been counseled about the
unacceptable performance and has had an opportunity to improve performance for
at least 30 days.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Buyer's Obligation to Close. Buyer's obligation to close under this
Agreement is subject to the fulfillment, on the Closing Date, of each of the
following conditions (except to the extent that Buyer shall have hereafter
agreed in writing to waive one or more of such conditions):
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6.1.1 Compliance with Agreement. Seller shall have performed and
complied in all material respects with all covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing.
6.1.2 Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at and as of the Closing.
6.1.3 Certificate. Seller shall have delivered to Buyer (i) a
certificate, dated the Closing Date, executed on its behalf by its president or
a vice president, certifying true and correct copies of each contract,
agreement, commitment, instrument or other document described on Schedules
4.1.10(A), 4.1.10(B), and 4.1.10(C), and (ii) a certificate, dated the Closing
Date, executed on its behalf by its president or a vice president, to the effect
that the conditions in Sections 6.1.1 and 6.1.2 are satisfied, except for any
exceptions noted in such certificate. If any of Buyer's conditions to Closing
have not been satisfied, but Buyer nonetheless waives the satisfaction of such
condition, Buyer shall not be entitled to any decrease in the Purchase Price or
any recourse, including indemnification under Section 7.1, against Seller or its
Affiliates with respect to the matter so waived.
6.1.4 Filings. Any applicable waiting period under the HSR Act shall
have expired.
6.1.5 Litigation. (i) There shall not be pending any litigation or
proceeding (filed by a person or entity other than Buyer or its Affiliates) to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain material damages or other material relief in connection with the
consummation of such transactions.
6.1.6 Stock Certificates; Assignment Agreements. Seller shall have
delivered to Buyer (i) one or more stock certificates evidencing the Class A
Common Stock, with stock powers duly executed in blank, and (ii) the Assignment
Agreements, duly executed by Seller and its Affiliates (to the extent they are
parties thereto) and all necessary consents thereto shall have been obtained.
6.1.7 Opinion. Seller shall have delivered to Buyer one or more
opinions of internal counsel of Seller or its Affiliates (i) covering due
authorization, execution and delivery by Seller and its Affiliates, as
applicable, of this Agreement, any separate agreements executed
contemporaneously herewith between Seller or its Affiliates and Buyer or its
Affiliates (including the Guaranty by Enron Corp. of Seller's obligations
hereunder in favor of Buyer) and the Assignment Agreements and (ii) to the
effect that this Agreement and such other agreements are valid and binding on
Seller or its Affiliates, as applicable (but expressing no opinion as to
enforceability).
6.1.8 Secretary's Certificate. Seller shall have delivered to Buyer a
certificate dated the Closing Date executed by the secretary or an assistant
secretary of Seller, certifying that the resolutions of Seller authorizing
entering into this Agreement and in full force and effect.
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6.1.9 Resignations. Seller shall have delivered to Buyer the duly
executed resignations of all Class A directors and the officers listed on
Schedule 6.1.9.
6.1.10 Scheduled Payments. All scheduled payments on Long Term Debt due
on or before the Effective Date pursuant to the applicable amortization schedule
therefor shall have been paid.
6.2 Seller's Obligation to Close. The obligation of Seller to close under this
Agreement is subject to the fulfillment, on the Closing Date, of each of the
following conditions (except to the extent that Seller shall have hereafter
agreed in writing to waive one or more of such conditions):
6.2.1 Compliance with Agreement. Buyer shall have performed and
complied in all material respects with all covenants to be performed or complied
with by Buyer on or prior to the Closing.
6.2.2 Representations and Warranties. The representations and warranties
of Buyer contained in this Agreement shall be true and correct in all material
respects at and as of the Closing
6.2.3 Certificate. Buyer shall have delivered to Seller a certificate,
dated the Closing Date, executed on its behalf by its president or a vice
president, to the effect that the conditions in Sections 6.2.1 and 6.2.2 have
been satisfied, except for any exceptions noted in such certificate. If any of
Seller's conditions to Closing have not been satisfied, but Seller nonetheless
waives the satisfaction of such condition, Seller shall not be entitled to any
increase in the Purchase Price or any recourse, including indemnification under
Section 7.2, against Buyer with respect to the matters so waived.
6.2.4 Opinion. Buyer shall have delivered to Seller an opinion of
internal counsel (i) covering due authorization, execution and delivery by Buyer
and its Affiliates, as applicable, of this Agreement, any separate agreements
executed contemporaneously herewith between Seller or its Affiliates and Buyer
or its Affiliates (including the Guaranty by Calpine Corporation of Buyer's
obligations hereunder in favor of Seller), and the Assignment Agreements and
(ii) to the effect that this Agreement and such other agreements are valid and
binding on Buyer or its Affiliates, as applicable (but expressing no opinion as
to enforceability).
6.2.5 Filings. Any applicable waiting period under the HSR Act shall
have expired.
6.2.6 Litigation. There shall not be pending any litigation or
proceeding (filed by a person or entity other than Seller or its Affiliates) to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain material damages or other material relief in connection with the
consummation of such transactions.
6.2.7 Assignment Agreements. Buyer shall have executed and delivered to
Seller the Assignment Agreements, duly executed by Buyer and its Affiliates (to
the extent they are parties thereto) and all necessary consents thereto shall
have been obtained.
6.2.8 Long Term Debt. Buyer shall have purchased the Long Term Debt,
including the outstanding principal and interest thereunder, pursuant to the
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Assignment of Notes and shall have otherwise obtained the release of Seller and
its Affiliates from liability under the Credit Support Obligations (other than
the Surety Agreement) pursuant to documents and agreements in form and substance
reasonably acceptable to Seller or, with respect to Credit Support Obligations
other than the UCC Guaranty Agreement, Buyer shall indemnify Seller and its
Affiliates with respect thereto pursuant to Section 7.2(B).
6.2.9 Release. Seller and its Affiliates shall have obtained releases,
in form and substance satisfactory to Seller, of all of its and its Affiliates'
obligations under the Credit Support Obligations, other than the Surety
Agreement.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification of Buyer. (A) After the Closing, subject to Sections 7.1(B),
7.5 and 7.6, Seller shall indemnify Buyer against, and hold Buyer harmless from,
any loss, damage, cost, liability or expense (including reasonable costs of
defense and investigations, settlements, and reasonable attorneys' fees) or
penalties or fines (collectively "Losses") Buyer incurs or becomes subject to,
to the extent arising out of or resulting from any inaccuracy in or breach of
any of the (i) representations and warranties or (ii) covenants made by Seller
herein (any such Loss being referred to herein as "Buyer Indemnified Loss");
provided that Seller shall have no liability under Section 7.1(A) unless the
aggregate of all Buyer Indemnified Losses for which Seller would, but for this
proviso, be liable exceeds on a cumulative basis $1,000,000, and then only to
the extent of any such excess; and further provided that Seller shall not have
any liability under Section 7.1(A) for any individual item where the Loss
relating to such item is less than $25,000; and further provided that, in the
case of Section 4.1.16, in no event shall the aggregate liability of Seller
exceed $4,000,000; and further provided that the aggregate liability of Seller
under this Section 7.1(A) for Buyer Indemnified Losses (excluding Buyer
Indemnified Losses resulting from a breach of Sections 4.1.2 or 4.1.5(B) and
excluding purchase price adjustments and matters covered by separate agreement
executed concurrently herewith which state that they are not subject to such
limitations) shall in no event exceed $10,000,000; and further provided that
Seller's liability with respect to a breach of the representations in Section
4.1.2 and 4.1.5(B) shall not exceed the Purchase Price; and further provided
that the aggregate liability of Seller under this Agreement (including Buyer
Indemnified Losses resulting from breach of Section 4.1.2 or 4.1.5(B)) and under
any certificate to be delivered by Seller or its Affiliates at the Closing and
under any agreement delivered in connection herewith shall in no event exceed
the Purchase Price; and further provided that in no event shall Seller have any
obligation to indemnify Buyer with respect to any Losses arising out of default
by the Company or the Subsidiaries under the credit agreements or security
agreements with respect to the Long Term Debt (x) unless such default is a
default with respect to (i) the payment of principal, interest, fees or other
expenses required to be paid under such credit agreements or security
agreements, (ii) any requirements of such credit agreements or security
agreements to deposit, maintain, return or restore funds in or to project
accounts or reserve accounts, or (iii) the use, application or distribution of
funds, including payments to Seller, Dominion and their respective Affiliates,
or (y) unless Seller had knowledge of such default at or prior to the Closing.
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(B) The representations and warranties in this Agreement and in any
other document or certificate to be delivered at the Closing pursuant hereto
shall survive the Closing solely for purposes of this Article VII and shall
terminate 540 days after the Closing Date, except for (i) Sections 4.1.2,
4.1.5(B), and 4.2.2, which, solely for purposes of this Article VII, shall
survive indefinitely, (ii) Section 4.1.14, which shall terminate upon the
expiration of the statute of limitations applicable to tax matters, and (iii)
Section 4.1.16, which shall terminate 1,095 days after the Closing Date. No
action can be brought with respect to any breach of any representation and
warranty under this Agreement or any other document or certificate to be
delivered at the Closing pursuant hereto unless a Claim Notice or Indemnity
Notice specifying the breach of the representation or warranty forming the basis
of such claim has been delivered to the party alleged to have breached such
representation or warranty prior to the termination date of such representation
or warranty as described in this Section 7.1(B). Any claim for indemnity for
breach of covenant herein that pursuant to its terms is to be performed prior to
the Closing shall be effective only as to matters with respect to which a Claim
Notice has been delivered pursuant hereto within 180 days after the Closing
Date. The limited rights provided to Buyer and Seller pursuant to this Article
VII and Article VIII shall be the sole remedy for any inaccuracy in or breach of
any representations, warranties or covenants contained in this Agreement or in
any document or certificate to be delivered at the Closing. Except to the extent
expressly set forth in Section 4.1 or in any agreement or certificate delivered
by Seller or its Affiliates at the Closing, neither Seller, Company, any
Subsidiary nor any of their respective Affiliates makes any representations or
warranties whatsoever and Seller hereby disclaims all liability and
responsibility for any other representation, warranty, statement or information
made or communicated (orally or in writing) to Buyer (including, but not limited
to, any information contained in the data room maintained by or on behalf of
Seller or any opinions, information or advice which may have been provided to
Buyer by any officer, stockholder, director, employee, agent, consultant or
representative of Seller, Company, any Subsidiary or any of their respective
Affiliates). Without limiting the generality of the foregoing, except as
expressly set forth in Section 4.1 or any certificates delivered by Seller or
its Affiliates at the Closing, neither Seller, Company, any Subsidiary nor any
of their respective Affiliates makes any representation or warranty as to (i)
title to any of the properties or assets of Company or any Subsidiary, (ii) the
Facilities, or (iii) the prospects of the business of the Company and the
Subsidiaries. SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, OR FITNESS FOR PARTICULAR PURPOSE, AND OF
CONFORMITY TO SAMPLES AND MODELS. To the fullest extent permitted by Legal
Requirements, Buyer and Seller hereby waive any and all rights they may have at
law or in equity except as set forth in this Article VII with respect to any
inaccuracy in or breach of any representation or warranty and covenant in this
Agreement or in any certificates to be delivered by Seller or its Affiliates at
the Closing.
7.2 Indemnification and Release of Seller. (A) After the Closing, subject to
Section 7.5, Buyer shall indemnify Seller against, and hold Seller harmless
from, any Losses Seller incurs or becomes subject to, to the extent arising out
of or resulting from any inaccuracy in or breach of any of the (i)
representations and warranties or (ii) covenants made by Buyer herein (any such
Loss being referred to herein as a "Seller Indemnified Loss"); provided that
Buyer shall have no liability under Section 7.2(A) unless the
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aggregate of all Seller Indemnified Losses (excluding Seller Indemnified Losses
resulting from a breach of Section 4.2.2, 4.2.8 or 5.2.6) for which Buyer would,
but for this proviso, be liable exceeds on a cumulative basis $1,000,000, and
then only to the extent of any such excess; and further provided that Buyer
shall not have any liability under Section 7.2(A) for any individual item where
the Loss relating to such item is less than $25,000; and further provided that
the aggregate liability of Seller under this Section 7.2(A) for Seller
Indemnified Losses (excluding Seller Indemnified Losses resulting from a breach
of Section 4.2.2, 4.2.8 or 5.2.6) shall in no event exceed $10,000,000; and
further provided that the aggregate liability of Buyer under this Agreement
(including Seller Indemnified Losses resulting from breach of Section 4.2.2) or
in any certificate delivered by Buyer or its Affiliates at the Closing) shall in
no event exceed the sum of the Purchase Price and the total outstanding
principal and interest under the Long Term Debt.
(B) After the Closing, Buyer shall indemnify and hold harmless Seller
and its Affiliates from any Losses arising out of obligations to be paid or
performed from and after the Closing under the Credit Support Obligations,
except for Credit Support Obligations with respect to which Seller has advised
Buyer in writing at or before the Closing that any release received with respect
thereto is satisfactory in form and substance to Seller.
(C) Except as expressly set forth in Section 4.2 or in any certificate
to be delivered by Buyer or its Affiliates at the Closing, neither Buyer nor any
of its Affiliates makes any representations or warranties whatsoever, and Buyer
hereby disclaims all liability and responsibility for any other representation,
warranty, statement or information made or communicated (orally or in writing)
to Seller and its Affiliates. To the fullest extent permitted by Legal
Requirements, Seller and its Affiliates hereby waive any and all rights they may
have at law or in equity except as set forth in this Article VII with respect to
any inaccuracy in or breach of any representation, warranty or covenant in this
Agreement or in any certificate to be delivered by Buyer or its Affiliates at
the Closing.
7.3 Applicability. SUBJECT TO SECTIONS 7.5 AND 7.6, THE PROVISIONS OF THIS
ARTICLE VII SHALL APPLY NOTWITHSTANDING THE SOLE, JOINT OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE INDEMNIFIED PARTY. IF BOTH
THE INDEMNIFIED PARTY AND THE INDEMNIFYING PARTY ARE ADJUDICATED NEGLIGENT OR
OTHERWISE AT FAULT OR STRICTLY LIABLE WITHOUT FAULT, THE CONTRACTUAL OBLIGATIONS
OF INDEMNIFICATION UNDER THIS ARTICLE VII SHALL, SUBJECT TO SECTION 7.5 AND 7.6,
CONTINUE, BUT THE INDEMNIFYING PARTY SHALL INDEMNIFY THE INDEMNIFIED PARTY ONLY
FOR THE PERCENTAGE OF RESPONSIBILITY FOR THE DAMAGE OR INJURIES ADJUDICATED TO
BE ATTRIBUTABLE TO THE INDEMNIFYING PARTY.
7.4 Indemnification Procedures. All claims for indemnification under
this Agreement shall be asserted and resolved as follows:
(A) A party claiming indemnification under this Agreement (an
"Indemnified Party") with respect to any third-party claim or claims asserted
against the Indemnified Party ("Third Party Claim") that could give rise to a
right of indemnification under this Agreement shall promptly (i) notify the
party from whom indemnification is sought (the "Indemnifying Party") of the
Third Party Claim and (ii) transmit to the Indemnifying Party a written notice
("Claim Notice") describing in reasonable detail the nature of the
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Third Party Claim, a copy of all papers served with respect to such claim (if
any), the Indemnified Party's best estimate of the amount of damages
attributable to the Third Party Claim and the basis of the Indemnified Party's
request for indemnification under this Agreement. Subject to Section 7.1(B),
failure to provide such Claim Notice shall not affect the right of the
Indemnified Party's indemnification hereunder except to the extent the
Indemnifying Party is prejudiced thereby. Within 30 days after receipt of any
Claim Notice (the "Election Period"), the Indemnifying Party shall notify the
Indemnified Party (x) whether the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Article VII with respect to such
Third Party Claim and (y) whether the Indemnifying Party desires to defend the
Indemnified Party against such Third Party Claim; provided that if the
Indemnifying Party fails to so notify the Indemnified Party during the Election
Period, the Indemnifying Party shall be deemed to have elected to dispute such
liability.
(B) If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party does not dispute its potential
liability to the Indemnified Party under this Article VII and that the
Indemnifying Party elects to assume the defense of the Third Party Claim, then
the Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the Indemnifying Party to a final
conclusion or settled at the discretion of the Indemnifying Party in accordance
with this Section 7.4(B). The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided that counsel selected by the Indemnifying Party to defend such
proceedings shall be reasonably acceptable to the Indemnified Party; and further
provided that the Indemnifying Party shall not enter into any settlement
agreement providing for (i) a finding of responsibility or liability on the part
of the Indemnified Party, (ii) any material sanction or material restriction
upon the conduct of any business, (iii) an affirmative obligation on the part of
the Indemnified Party, other than an obligation to pay money which will be
discharged in full by the Indemnifying Party, or (iv) any amendment to any
contract, agreement, instrument or other document binding on Buyer, the Company,
either Subsidiary, EC5, or their respective Affiliates; in each case, without
the Indemnified Party's consent, which consent shall not be unreasonably
withheld. The Indemnified Party is hereby authorized, at the sole cost and
expense of the Indemnifying Party (but only if pursuant to Section 7.4(D) the
Indemnified Party is actually entitled to indemnification hereunder), to file,
during the Election Period, any motion, answer or other pleadings which the
Indemnified Party shall deem necessary or appropriate to protect its interests
or those of the Indemnifying Party and not prejudicial to the Indemnifying Party
(it being understood and agreed that if an Indemnified Party takes any such
action, the Indemnifying Party shall be relieved of its obligations hereunder
with respect to such Third Party Claim to the extent that such action prejudiced
the Indemnifying Party). If requested by the Indemnifying Party, the Indemnified
Party agrees, at the sole cost and expense of the Indemnifying Party, to
cooperate with the Indemnifying Party and its counsel in contesting any Third
Party Claim which the Indemnifying Party elects to contest, including the making
of any related counterclaim against the person or entity asserting the Third
Party Claim or any cross-complaint against any person or entity. The Indemnified
Party may participate in, but not control, any defense or settlement or any
Third Party Claim controlled by the Indemnifying Party
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pursuant to this Section 7.4, and the Indemnified Party shall bear its own costs
and expenses with respect to such participation.
(C) If the Indemnifying Party fails to notify the Indemnified Party
within the Election Period that the Indemnifying Party elects to defend the
Indemnified Party pursuant to Section 7.4(B), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 7.4(B) but fails to
diligently prosecute or settle the Third Party Claim, then the Indemnified Party
shall have the right to defend, at the sole cost and expense of the Indemnifying
Party (but only if pursuant to Section 7.4(D) the Indemnified Party is actually
entitled to indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings; provided, however, that
the Indemnified Party may not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this Section 7.4(C), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
(D) If the Indemnifying Party elects not to (or is deemed to have
elected not to) assume the defense of a Third Party Claim, or elects to assume
the defense of a Third Party Claim, but reserves the right to dispute whether
such claim is an indemnifiable loss under this Article VII, the determination of
whether the Indemnified Party is entitled to indemnification hereunder shall be
resolved by litigation in an appropriate court of competent jurisdiction.
(E) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder which does not involve a Third Party Claim, the
Indemnified Party shall promptly transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, the Indemnified Party's best estimate of the amount of damages
attributable to such claim and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party within 30 days from its receipt of the Indemnity Notice
that the Indemnifying Party disputes such claim, the Indemnifying Party shall be
deemed to have disputed such claim. If the Indemnifying Party has disputed (or
is deemed to have disputed) such claim, such dispute shall be resolved by
litigation in an appropriate court of competent jurisdiction.
(F) Payments of all amounts owing by the Indemnifying Party with
respect to a Third Party Claim shall be made within 30 days after the latest of
(i) the settlement of the Third Party Claim, (ii) the expiration of the period
for appeal of a final adjudication of such Third Party Claim and (iii) the
expiration of the period for appeal of a final adjudication of the Indemnifying
Party's liability to the Indemnified Party under this Agreement. Payments of all
amounts owing by the Indemnifying Party as described in Section 7.3(E) shall be
made within 30 days after the earlier of the expiration of the period for appeal
of a final adjudication or agreement between the Indemnifying Party and the
Indemnified Party as to the Indemnifying Party's liability to the Indemnified
Party under this Agreement.
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7.5 Limitation on Liabilities. (A) IN NO EVENT SHALL THE INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT (INCLUDING UNDER ARTICLE VII AND ARTICLE VIII)
OR THE TERM "LOSSES" COVER OR INCLUDE CONSEQUENTIAL, INCIDENTAL, SPECIAL,
INDIRECT, OR PUNITIVE DAMAGES OR LOST PROFITS SUFFERED BY THE COMPANY, BUYER,
SELLER OR SELLER'S AFFILIATES, WHETHER BASED ON STATUTE, CONTRACT, TORT OR
OTHERWISE, AND WHETHER OR NOT ARISING FROM THE INDEMNIFYING PARTY'S SOLE, JOINT
OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT.
(B) Notwithstanding anything to the contrary contained in this
Agreement, (i) no amounts of indemnity shall be payable as a result of any claim
in respect of a Loss under Articles VII or VIII to the extent that (1) the
Indemnified Party failed to promptly notify the Indemnifying Party of such claim
and the Indemnifying Party's liability with respect to such claim was adversely
affected by such failure, or (2) the Indemnified Party had a reasonable
opportunity, but failed, in good faith to mitigate the Loss, including the
failure to use Best Efforts to recover under a policy of insurance or under a
contractual right of set-off or indemnity, (ii) all indemnifiable Losses under
Articles VII or VIII shall be net of insurance proceeds recovered or recoverable
by the Indemnified Party and net of tax benefits to the Indemnified Party and
its Affiliates, (iii) in no event shall Seller be responsible for more than 50%
of the amount of Loss suffered or incurred in whole or in part by the Company or
the Subsidiaries (as opposed to a Loss suffered or incurred solely by Buyer; for
example, a breach of Section 4.1.5(B), and (iv) the amounts of indemnity and
Losses described in this Section 7.5 shall in all cases be subject to the
restrictions in Section 7.1, and the provisions of this Section 7.5 shall in no
event expand the liability of Seller under Section 7.1. The Indemnified Party
hereby waives (or will cause to be waived) any subrogation rights that its
insurers may have with respect to any indemnifiable Losses.
7.6 Notification by Seller of Certain Matters. Seller may, at the Closing,
notify Buyer in one or more of the certificates to be delivered pursuant to
Section 6.1.3, in reasonable detail of any representation or warranty of Seller
that was not true and correct as of the date of this Agreement or as of the
Closing or of any covenant of Seller that has not been performed and complied
with and, if Buyer shall nevertheless close under this Agreement, none of the
matters set forth in such certificate shall be deemed to be an inaccuracy in or
breach of any of the representations and warranties or covenants of Seller
herein for purposes of, and Buyer shall not be entitled to be indemnified as to
any of such matters pursuant to, this Article VII.
ARTICLE VIII
TERMINATION RIGHTS
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date as follows, and in no other manner:
(i) by mutual consent of Buyer and Seller;
(ii) by notice from Seller to Buyer, if the Closing Date shall not have
occurred on or before May 15, 1997;
(iii) by notice from Buyer to Seller, if the Closing Date shall not
have occurred on or before May 15, 1997;
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(iv) by either party by notice to the other, if (a) a final
non-appealable judgment has been entered against such party or
any of its Affiliates restraining, prohibiting or declaring
illegal the transactions contemplated hereby or (b) the
Company or any of the Subsidiaries shall have declared
bankruptcy or been involuntarily put into bankruptcy or
receivership; or
(v) notwithstanding Section 5.1.10 or any other provision of this
Agreement, by notice from Seller to Buyer, if at any time prior to the Closing
Seller reasonably believes, in its sole discretion, that the approvals required
(in Seller's judgment) to enter into this Agreement or the Assignment of Notes
or to consummate the transactions contemplated hereby or thereby in a manner
that releases Seller and its Affiliates from liability under the Credit Support
Obligations (including any approvals from Dominion or its Affiliates, the
lenders under the Long Term Debt, and Union Carbide Corporation under the
Guaranty Agreement, but excluding any consent of Texas Utilities Electric
Company under the Surety Agreement) will not be obtained in a time period
satisfactory to Seller in its sole discretion.
8.2 Limitation on Right to Terminate; Effect of Termination. (A) A party shall
not be allowed to exercise any right of termination pursuant to Section 8.1 if
the event giving rise to the termination right shall be due to the willful
failure of such party to perform or observe in any material respect any of the
covenants set forth herein to be performed or observed by such party.
(B) If this Agreement is terminated as permitted under Section 8.1,
such termination shall be without liability of or to any party to this Agreement
or any Affiliate, shareholder, director, officer, employee, agent or
representative of such party; provided that Sections 4.1.19, 4.2.6, 5.1.6,
5.1.7, 5.1.8, 5.2.2, 5.2.3, 5.2.4, 8.2, 9.10 and 9.11 shall survive any such
termination; and further provided that if any such termination under Section 8.1
(excluding Section 8.1(v)) shall result from the willful failure of any party or
its Affiliate to perform a covenant of this Agreement or from a willful breach
of this Agreement by any party or its Affiliate, or a breach, whether or not
willful, of Section 4.2.8 or 5.2.6 by Buyer, then, subject to Article VII, such
party shall be liable for Losses sustained or incurred by the other parties as a
result of such failure or breach.
ARTICLE IX
GENERAL
9.1 Exclusive Agreement; Schedules. This Agreement and the attached schedules
and exhibits, the agreements and documents to be executed pursuant hereto or
which are executed concurrently herewith and the Confidentiality Agreement set
forth the entire agreement and understanding of the parties in respect of the
transactions contemplated hereby and supersede all prior agreements,
arrangements and undertakings (oral or written) relating to the subject matter
hereof. The disclosures in the schedules hereto are to be taken as relating to
the representations and warranties of Seller as a whole. The inclusion of
information in the schedules hereto shall not be construed as an admission that
such information is material. In addition, matters reflected in the schedules
are not necessarily limited to matters required by
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this Agreement to be reflected on such schedules. Such additional matters are
set forth for information purposes only and do not necessarily include other
matters of a similar nature. No representation, promise, inducement or statement
of intention has been made by any party which is not embodied in or superseded
by this Agreement or the Confidentiality Agreement or in the agreements and
documents to be executed pursuant hereto, and no party shall be bound by or
liable for any alleged representation, promise, inducement or statement of
intention not so set forth.
9.2 Successors and Assigns. All of the terms, covenants, representations,
warranties and conditions of this Agreement shall be binding upon, and inure to
the benefit of, and be enforceable by, the parties hereto and their respective
permitted successors and assigns (and in the case of indemnities to the benefit
of all persons indemnified). This Agreement and the rights and obligations
hereunder shall not be assigned by any party hereto (by operation of law or
otherwise) without the prior written consent of the other party, except that any
party may assign an interest in all of its rights hereunder to any Affiliate;
provided that no assignment shall relieve the assigning party of any of its
representations, warranties, or obligations contained herein, and except that
after the Closing Buyer may collaterally assign its rights hereunder to the
lenders of the Company, the Subsidiaries, Buyer or its Affiliates, to secure the
Long Term Debt or any extensions or replacements thereof or any other financing
or refinancing of the Facilities.
9.3 Amendments. This Agreement may be amended, modified, superseded or canceled,
and any of the terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed by the parties
hereto, or, in the case of a waiver, by or on behalf of the party waiving
compliance. The failure of any party at any time or times to require performance
of any provisions hereof shall in no manner affect the right at a later time to
enforce the same. No waiver by any party of any condition, or of any breach of
any term, covenant, representation or warranty contained in this Agreement, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of any breach of any other term, covenant, representation or
warranty.
9.4 Records and Access. (A) After the Closing, Seller shall deliver to Buyer all
files and records in its possession that are normally maintained by Seller or
its Affiliates in respect of the Company (including all documents and
information contained in the data room maintained by or on behalf of Seller) as
soon as practicable; provided that Seller may make and keep copies of such files
and records.
(B) From and after the Closing, Buyer shall maintain copies of all
books, records and other information (including books, records and information
relating to financial information, taxes and litigation) relating to the
Facilities and the Company and shall not destroy any of same without first
allowing Seller, at Seller's expense, the opportunity to make copies of same for
a period of not less than five years (or if longer, the applicable statute of
limitations period). During such period, Buyer shall give Seller and their
representatives reasonable cooperation, access and staff assistance, during
normal business hours and upon reasonable notice, with respect to such books,
records and information as may be necessary for general business purposes,
including for the preparation of tax returns and financial statements and the
management and handling of tax audits and
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litigation; provided that such requested cooperation, access and assistance
shall not unreasonably interfere with the normal operations of Buyer. 9.5
Further Assurances. Each party agrees to execute such further instruments or
documents as the other party may from time to time reasonably request in order
to confirm or carry out the transactions contemplated in this Agreement;
provided that no such instrument or document shall expand a party's obligations
or liabilities beyond that contemplated in this Agreement.
9.6 Notices. All notices, requests, demands and other communications
(collectively, "Notices") required or permitted to be given hereunder shall be
in writing and delivered personally, or by facsimile transmission or mailed
first class, postage prepaid, registered or certified mail, as follows:
If to Buyer, to:
Calpine Finance Company
50 West San Fernando
San Jose, California 95113
Attention: Ron Walter and Joseph E. Ronan
Facsimile Number: (405) 995-0505
with a copy to:
Washburn, Briscoe & McCarthy
A Professional Corporation
55 Francisco Street, Suite 600
San Francisco, California 94133
Attention: David C. Spielberg
Facsimile Number: (415) 421-5044
If to Seller, to:
Enron Power Corp.
Enron Building
1400 Smith
Houston, Texas 77002
Attention: General Counsel
Facsimile Number: (713) 646-3491
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Marcia E. Backus
Facsimile Number: (713) 615-5606
All Notices shall be effective upon receipt. Any party may change its Notice
address by giving written Notice to the other in the manner specified above.
9.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
CONFLICT OF LAW PRINCIPLES.
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9.8 Severability. In the event any of the provisions hereof are held to be
invalid or unenforceable under any Legal Requirement, the remaining provisions
hereof shall not be affected thereby. In such event, the parties hereto agree
and consent that such provisions and this Agreement shall be modified and
reformed so as to effect the original intent of the parties as closely as
possible with respect to those provisions which were held to be invalid or
unenforceable.
9.9 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute but one agreement.
9.10 Expenses. Except as expressly provided in this Agreement, whether or not
the transactions contemplated hereby are consummated, each party shall pay its
own expenses incident to the preparation of this Agreement and for consummating
the transaction.
9.11 Attorneys' Fees. If any party institutes legal action against the other to
enforce this Agreement, the party prevailing pursuant to any final judgment
shall be entitled to recover its reasonable attorneys' fees and expenses from
the other party that are attributable solely to such enforcement (subject to the
caps and other limits set forth in Article VII).
IN WITNESS WHEREOF, the parties have duly executed this instrument the day and
year first above written.
Seller:
ENRON POWER CORP.
By:
Name:
Title:
Buyer:
CALPINE FINANCE COMPANY
By:
Name:
Title:
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Exhibit 10.2.7
STOCK PURCHASE AND REDEMPTION AGREEMENT
This Stock Purchase and Redemption Agreement ("Agreement"),
dated as of March 31, 1998, is made and entered into by and among Dominion
Cogen, Inc., a Virginia corporation ("Seller"), Dominion Energy, Inc., a
Virginia corporation ("DEI"), Texas Cogeneration Company, a Delaware corporation
(the "Company"), and Calpine Finance Company, a Delaware corporation
("Purchaser").
RECITALS
A. Seller is the owner of 7,095 shares of the Class B Common
Stock of the Company, which constitutes all of the issued and outstanding shares
of Class B Common Stock of the Company (the "Class B Common Stock").
B. Purchaser is the owner of 7,095 shares of the Class A
Common Stock of the Company, which constitutes all of the issued and outstanding
shares of Class A common Stock of the Company (the "Class A Common Stock").
C. DEI is the owner of all of the issued and outstanding stock of DEI
Texas, Inc., a Virginia corporation ("DEI Texas").
D. Purchaser wishes to purchase 3,418 shares of the Class B
Common Stock and all of the DEI Texas Stock, Seller wishes to sell 3,418 shares
of the Class B Common Stock to Purchaser, DEI wishes to sell the DEI Texas Stock
to Purchaser, and the Company wishes to redeem 3,677 shares of the Class B
Common Stock from Seller, all on the terms and conditions set forth below.
E. Seller has certain rights and obligations under the
Reorganization Agreement with respect to Bayonne. Seller wishes to relinquish
those rights and be relieved of such obligations, and Seller and Purchaser wish
to terminate the Reorganization Agreement in each case, effective from and after
the Closing Date.
NOW, THEREFORE, for good and valuable consideration, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms have the
meanings set forth in this Section 1.1:
"Arbitration" has the meaning defined in Section 2.3.
"Arbitrator" has the meaning defined in Section 2.3.
"Actual Book Earnings" has the meaning defined in Section 2.3.
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"Additional Dividend" has the meaning defined in Section 2.3.
"Administrative Services Agreement" means that certain
Administrative Services Agreement dated June 23, 1997 by and between the
Company and DEI.
"Administrator" means DEI in its capacity as the contracting
party under the Administrative Services Agreement.
"Affiliate" means, with respect to any Person, any other
Person who directly or indirectly controls, is controlled by or is under common
control with such Person (excluding any trustee or fiduciary under or committee
in charge of administering any ERISA Plan). A Person is deemed to be "controlled
by" another Person if such other Person possesses, directly or indirectly, power
(i) to vote more than 50% of the securities having ordinary voting power to
elect a majority of the board of directors, the managing general partner or
similar managing authority or (ii) to direct the management of such Person.
"Agreement Regarding Stockholders Agreement" means that certain
Agreement Regarding Stockholders Agreement dated as of June 23, 1997 by and
among Seller, DEI, DRI, Calpine, Purchaser, Enron and EPC.
"Available" means, with respect to either Project, that such
Project is capable of generating electric energy and transmitting such energy to
the Project's customers at such Project's nominal capacity as described in the
definition of each Project.
"Bankruptcy Event" means, with respect to any Person, (i) the
institution by such Person of a voluntary case seeking liquidation or
reorganization under the Bankruptcy Law, (ii) the consent by such Person to the
institution against it of an involuntary case seeking liquidation or
reorganization under the Bankruptcy Law, (iii) the application by such Person
for, or the consent of such Person to, the appointment of a receiver,
liquidator, sequestrator, trustee or other officer with similar powers for such
Person, or (iv) the institution against such Person of an involuntary case for
liquidation or reorganization under the Bankruptcy Law if such involuntary case
is not dismissed within sixty (60) days after its filing.
"Bankruptcy Law" means Title 11 of the United States Code.
"Bayonne" means Cogen Technologies NJ Venture, a New Jersey
general partnership.
"Bayonne Financial Statements" has the meaning defined in
Section 4.7.
"Bayonne Interest" has the meaning defined in Section 4.5.
"Bayonne Partnership Agreement" has the meaning defined in
Section 4.1.
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"Bayonne Project" means the approximately 165 MW natural gas
fired cogeneration facility in Bayonne, New Jersey.
"Btu" means British Thermal Unit.
"Business Day" means a day other than a Saturday, a Sunday or
a day on which banks in San Jose, California, Richmond, Virginia or New York,
New York are authorized or required by law to be closed.
"Calpine" means Calpine Corporation, a Delaware corporation.
"Calpine Entities" means Purchaser and Calpine.
"Calpine Guaranty" has the meaning defined in Section 3.7.
"Capitalized Lease" means any lease or similar arrangement
which, in accordance with GAAP, would be classified as a capitalized lease.
"Charter Documents" means, with respect to any Person, such
Person's articles or certificate of incorporation, partnership agreement or
similar organizational document, its bylaws and all shareholders agreements,
voting trusts and similar arrangements applicable to any of its shares of
capital stock or other ownership interests.
"Claim" means any claim, demand, cause of action, judgment,
liability, activity or use limitation, easement, deed restriction or other
similar charge or encumbrance.
"Class A Common Stock" has the meaning defined in Recital B.
"Class B Common Stock" has the meaning defined in Recital A.
"Clear Lake" means Clear Lake Cogeneration Limited
Partnership, a Texas limited partnership.
"Clear Lake Gross Revenues" means the actual gross revenues
from the sale of electric energy and capacity and steam from the Clear Lake
Project up to a total capacity (including equivalent capacity for the production
of steam included in the calculation of gross revenues) of 377 MW (as such
capacity may be reduced by 15 MW after installation of dry low NO-x equipment
after the date hereof), calculated in accordance with GAAP on an accrual basis.
"Clear Lake Gross Revenues" shall not include any revenues from the sale of
electric energy or capacity or steam in excess of a capacity of 377 MW
(including equivalent capacity for the production of steam), as such capacity
may be reduced by 15 MW after installation of dry low NOx equipment after the
date hereof, whether resulting from improvements or capacity additions to the
Clear Lake Project after the Closing Date or otherwise. In the event that
electric energy or capacity is sold by Clear Lake from the Clear Lake Project to
an Affiliate of Clear Lake, for purposes of calculating Clear Lake Gross
Revenues, the sale price of such electric energy
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or capacity shall be deemed to be equal to the Weighted Average Market
Electricity Price.
"Clear Lake Project" means the approximately 377 MW (as such
capacity may be reduced by 15 MW after installation of dry low NO-x equipment
after the date hereof) gas fired, combined cycle power plant located in
Pasadena, Texas owned by Clear Lake.
"Closing" has the meaning defined in Section 2.5.
"Closing Date" has the meaning defined in Section 2.5.
"COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985.
"Code" means the Internal Revenue Code of 1986 and the rules
and regulations promulgated thereunder.
"Cogenron" means Cogenron, Inc., a Delaware corporation.
"Contract" has the meaning defined in Section 4.10.
"CPI" means the Consumer Price Index (All Urban Consumers) for
Houston, Texas, published from time to time by the United States Department of
Labor, adjusted as appropriate to account for any changes in the computation of
such index, or, if such index is discontinued, the successor index published by
the Department of Labor or other agency of the United States.
"DEI" has the meaning given in the first paragraph of this
Agreement.
"DEI Texas" has the meaning defined in Recital C.
"DEI Texas Financial Statements" has the meaning defined in
Section 4.7.
"DEI Texas Stock" means all of the issued and outstanding
stock, common and preferred, voting and nonvoting, of DEI Texas.
"Dominion Entities" means Seller and DEI, collectively.
"DRI" means Dominion Resources, Inc., a Virginia corporation.
"EC1" means Enron Cogeneration One Company, a Delaware
corporation.
"EC3" means Enron Cogeneration Three Company, a Delaware
corporation.
"EC5" means Enron Cogeneration Five Company, a Delaware
corporation.
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"Enron" means Enron Corp., a Delaware corporation.
"EPC" means Enron Power Corp., a Delaware corporation.
"Equity Support Agreements" means those agreements listed on
Schedule 1.1.
"ERISA" means the Employee Retirement Income Security Act of
1974 and the rules and regulations promulgated thereunder.
"ERISA Affiliate" has the meaning defined in Section 2.4.
"ERISA Plan" has the meaning defined in Section 2.4.
"Event of Default" means the occurrence of any "default,"
"event of default" or similar term under any Indebtedness or Related
Indebtedness and the expiration of all applicable notice and grace periods and
opportunities to cure.
"Excluded Liabilities" has the meaning defined in Section 2.4.
"Force Majeure" means any act, event or circumstance beyond
the reasonable control of, and not due to the negligence or greater fault of,
the affected Person, including (i) acts of God or the elements, fires,
lightning, floods, landslides, earthquakes, hurricanes, tornadoes or unusually
severe weather conditions, (ii) riots or other civil disturbance, accidents,
sabotage, explosions or theft, (iii) injunctions, embargoes, actions by
Governmental Entities or inability to obtain or delay in obtaining permits or
other approvals, (iv) shortages or unavailability of equipment, material or
labor, or unavailability of gas transportation or electric transmission
capacity, (v) interruptions of gas supply or transportation or interruptions of
electric supply or transmission, and (vi) strikes, lockouts, slowdowns and other
labor disturbances.
"GAAP" means generally accepted accounting principles and
practices as in effect in the United States from time to time, applied on a
consistent basis.
"Generation Shortfall Amount" means the amount by which the
Minimum Generation Level for a calendar year during the Redemption Term exceeds
the actual amount of electric energy produced by the Projects during such
calendar year.
"Governmental Entity" means any federal, state, local or
foreign government, agency, commission, council, governmental department, board,
bureau, court, tribunal or instrumentality.
"Gross Revenues" means the Clear Lake Gross Revenues and the
Texas City Gross Revenues.
"Hazardous Materials" means any substances, materials or
wastes listed, defined, designated or classified as "hazardous" or "toxic" under
any
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Legal Requirements relating to pollution, protection of the environment, or
occupational or environmental health and safety.
"Heat Rate" means, with respect to the Clear Lake Project,
7390 Btu per kWh, and, with respect to the Texas City Project, 8300 Btu per kWh.
"HL&P" means Houston Lighting and Power Company, a Texas
corporation.
"Indebtedness" means indebtedness for borrowed money,
reimbursement obligations with respect to letters of credit, rent obligations
under Capitalized Leases and guarantees of any of the foregoing.
"Indemnified Party" has the meaning defined in Section 8.2.
"Indemnifying Party" has the meaning defined in Section 8.2.
"Index Fuel Price" means, with respect to a Project, for any
given day, the "Daily Midpoint" price of natural gas for
"East-Houston-Katy-Houston Ship Channel" published in Gas Daily for such day,
expressed in $/MMBtu.
"kWh" means kilowatt-hour.
"Legal Requirements" means any law, statute, code, ordinance,
rule, regulation, order, judgment, permit or license requirement or condition,
or guideline or directive of any Governmental Entity.
"Lien" means a lien, security interest, charge, mortgage,
pledge, conditional or installment sale agreement, title retention or holding
agreement or other encumbrance of any kind.
"Market Electricity Price" means, for any given hour, (i) the
applicable price for electric energy under HL&P's Rate Schedule for Firm Energy
Purchases from Qualifying Facilities - FEP, as published from time to time, for
all "On-Peak Hours" (as defined in such tariff), and HL&P's Rate Nonfirm Energy
Purchases from Qualifying Facilities - NEP, as published from time to time, for
all "Off-Peak Hours" (as defined in such tariff), or (ii) after the
implementation of full retail deregulation in Texas, such other published index
price for electric energy as the Dominion Entities and Purchaser may mutually
agree.
"Material Adverse Effect" means any material adverse effect on
the business, assets or financial condition of the Company, any of its
Subsidiaries or DEI Texas, as the case may be.
"Minimum Generation Level" means 5,795,616 MWh per calendar
year minus the sum of (a) the number of hours in such year that the Clear Lake
Project was not Available due to Force Majeure times 377 MW (as such capacity
may be reduced by 15 MW after installation of dry low NO-x equipment after the
date hereof) plus (b) the number of hours in such year that the Texas City
Project was not Available due to Force Majeure times 450 MW, (c) the number of
hours in such year that the Variable Cost of Production of the Clear Lake
Project was greater than the Market Electricity Price available to the Clear
Lake Project for such hours times 377 MW (as such capacity may be reduced by 15
MW after installation of dry low NO-x equipment after the date hereof), plus (d)
the number of hours in such year that the Variable Cost of Production of the
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Texas City Project was greater than the Market Electricity Price available to
the Texas City Project for such hours times 450 MW.
"MMBtu" means million British Thermal Units.
"MW" means megawatt.
"MWh" means megawatt-hour.
"Net Present Value" means the net present value as of the
Closing Date of the payments in question, based on the actual amounts paid and
the actual dates of payment, calculated using a discount rate of 8% per annum.
"Override and Standstill Agreements" means (i) that certain
Override and Standstill Agreement dated as of June 23, 1997 by and among
Cogenron, EC1, the Company, DEI Texas, Seller, DEI, DRI, Purchaser and Calpine,
as amended by that certain Amendment No. 1 to Override and Standstill Agreement
dated as of August 22, 1997 by and among Cogenron, EC1, the Company, DEI Texas,
Seller, DEI, DRI, Purchaser and Calpine, and (ii) that certain Override and
Standstill Agreement dated as of June 23, 1997 by and among Clear Lake, EC3, the
Company, DEI Texas, Seller, DEI, DRI, Purchaser and Calpine.
"Partnerships" means Clear Lake and Texas City.
"Person" means any natural person, corporation, partnership,
limited liability company, firm, association, trust or other entity.
"Projected Book Earnings" has the meaning defined in Section
2.3.
"Projects" means the Clear Lake Project and the Texas City
Project.
"Purchase Price" has the meaning defined in Section 2.2.
"Purchased Assets" has the meaning defined in Section 2.1.
"Purchased TCC Stock" has the meaning defined in Section 2.1.
"Purchaser" has the meaning given in the first paragraph of
this Agreement.
"Redeemed TCC Stock" has the meaning defined in Section 3.1.
"Redemption Payment" has the meaning defined in Section 3.2.
"Redemption Percentage" means, during calendar years 2000 and
2001, 2.2% and, during each other year of the Redemption Term, 2.9% (expressed
as a decimal where appropriate).
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"Redemption Term" means the period from January 1, 2000
through December 31, 2012, unless terminated earlier pursuant to Section 3.3(a)
or extended pursuant to Section 3.3(b).
"Related Indebtedness" means Indebtedness of Calpine or its
Affiliates pursuant to which, after the occurrence of an Event of Default
thereunder, the holder of such Indebtedness has the right to accelerate any
material (as described in Section 3.5) Indebtedness of the Company or its
Subsidiaries or to exercise any lien on or security interest in either or both
Projects or any material part thereof.
"Reorganization Agreement" means that certain Reorganization
Agreement dated as of April 14, 1989 by and among DRI, Seller, Enron and the
Company, as amended by that certain Amendment of Reorganization Agreement dated
as of June 30, 1991, by and among DRI, Seller, Enron and the Company, and as
further amended by the Agreement Regarding Stockholders Agreement.
"Seller" has the meaning given in the first paragraph of this
Agreement.
"Stockholders Agreement" means that certain Stockholders
Agreement dated June 27, 1988 by and among Enron, Seller and DRI, as amended by
the Agreement Regarding Stockholders Agreement.
"Straddle Period" has the meaning defined in Section 6.6(a).
"Subsidiary" means, with respect to any Person, any
corporation, partnership or other Person of which more than 50% of the
outstanding capital stock or other comparable ownership interest having ordinary
voting power to elect a majority of the board of directors, the managing general
partner or similar managing authority is owned directly or indirectly by such
Person, by such Person and one or more wholly owned Subsidiaries of such Person
or by one or more other wholly owned Subsidiaries of such Person.
"Substitute Redemption Payment" has the meaning defined in
Section 3.4.
"Tax Contest" has the meaning defined in Section 6.6(d).
"Taxes" means all taxes, charges, fees, levies, penalties or
other assessments imposed by any United States federal, state or local or
foreign taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, withholding, social security or
other taxes, including any interest, penalties or additions attributable
thereto.
"Tax Return" means any return, report, information return or
other document (including any related or supporting information) required to be
supplied to any authority with respect to Taxes.
"Texas City" means Texas City Cogeneration, L.P., a Delaware
limited partnership.
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"Texas City Gross Revenues" means the actual gross revenues
from the sale of electric energy and capacity and steam from the Texas City
Project up to a total capacity (including equivalent capacity for the production
of steam included in the calculation of gross revenues) of 450 MW, calculated in
accordance with GAAP on an accrual basis. "Texas City Gross Revenues" shall not
include any revenues from the sale of electric energy or capacity or steam in
excess of a capacity of 450 MW (including equivalent capacity for the production
of steam), whether resulting from improvements or capacity additions to the
Texas City Project after the Closing Date or otherwise. In the event that
electric energy or capacity is sold by Texas City from the Texas City Project to
an Affiliate of Texas City, for purposes of calculating Texas City Gross
Revenues, the sale price of such electric energy or capacity shall be deemed to
be equal to the Weighted Average Market Electricity Price.
"Texas City Project" means the approximately 450 MW gas fired,
combined cycle power plant located in Texas City, Texas owned by Texas City.
"Third Party Rights" means all options, warrants, rights of
first offer or first refusal, preemptive rights to purchase and other rights to
acquire ownership of or an interest in a particular asset or security.
"TNP" means Texas-New Mexico Power Company.
"Variable Cost of Production" means, for either Project, the
quotient of (a) the sum of (i) the product of the Heat Rate for such Project
times the Index Fuel Price for the hour in question, plus (ii) the Variable O&M
Cost for such Project, divided by (b) 1 minus the then applicable Redemption
Percentage.
"Variable O&M Cost" means (i) with respect to the Clear Lake
Project, $1.00 per MWh, and, with respect to the Texas City Project, $ 1.60 per
MWh, times (ii) a fraction, the numerator of which is the CPI most recently
published prior to the date for which the Variable O&M Cost is to be determined
and the denominator of which is the CPI most recently published prior to the
Closing Date.
"Weighted Average Market Electricity Price" means, for any
period, (i) the weighted average Market Electricity Price for all hours in such
period during which the Market Energy Price was greater than the Variable Cost
of Production, or (ii) such other index or published market price as the
Dominion Entities and Purchaser may mutually agree, in either case expressed in
$/MWh.
1.2 Construction. All references in this Agreement to
articles, sections, subsections, schedules and exhibits are to articles,
sections, subsections, schedules and exhibits in or to this Agreement unless
otherwise indicated. All schedules and exhibits attached to this Agreement are a
part of this Agreement and are incorporated herein. References in this Agreement
to agreements, instruments or other documents shall mean such agreements,
instruments or other documents as amended, modified or supplemented from time to
time. Unless expressly indicated or clearly
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required by the context, (a) references in this Agreement to the singular
include the plural and references to the plural include the singular, (b) the
words "include" and "including" are not exclusive or limiting and mean "include
without limitation" or "including without limitation," and (c) the words
"hereof," "herein," "hereunder" and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular section or article in which
such words appear. References in this Agreement to "days" means calendar days
unless Business Days are specified. References in this Agreement to a Person
include such Persons permitted successors and assigns. Currency amounts referred
to in this Agreement are in United States Dollars. References in this Agreement
to "generally accepted accounting principles" or "GAAP" shall mean such
principles as in effect in the United States at the time of the statement or
calculation to which such phrase refers. Whenever a representation or warranty
is made or qualified as being to a party's "knowledge" or "actual knowledge," it
is understood to indicate that the party making such representation or warranty
does not have any current knowledge or actual knowledge, as applicable, that
such representation or warranty is inaccurate.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale of Stock. Subject to the terms,
covenants and conditions set forth herein, on the Closing Date, Seller shall
sell, assign, transfer and deliver to Purchaser, and Purchaser shall purchase
and accept from Seller, 3,418 shares of the Class B Common Stock (the "Purchased
TCC Stock"). Subject to the terms, covenants and conditions set forth herein, on
the Closing Date, DEI shall sell, assign, transfer and convey to Purchaser, and
Purchaser shall purchase and accept from DEI, all of the DEI Texas Stock and all
of DEI's right, title and interest under the Administrative Services Agreement.
(The Purchased TCC Stock, the DEI Texas Stock and DEI's right, title and
interest under the Administrative Services Agreement are referred to
collectively herein as the "Purchased Assets.")
2.2 Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be cash in the amount of Fifty-Two Million Seven
Hundred Fifty Thousand Dollars ($52,750,000), payable by wire transfer in
immediately available funds, to the bank account of Seller designated by Seller
in writing not later than two (2) Business Days prior to the Closing Date.
2.3 Additional Dividend.
(a) (i) Seller and Purchaser agree that if the Company's
actual book net income (excluding income of or distributions from EC5 or
Bayonne), as calculated in accordance with GAAP (except that in calculating such
net income, no adjustments will be made to the actual book net income for the
Company for the period beginning January 1, 1998 and ending March 31, 1998 to
reflect changes in prior period accruals of receivables and liabilities existing
as of December 31, 1997 which directly relate to matters in dispute in the
Company's current litigation with TNP from the balances reported for such
receivables and liabilities in the unaudited financial statements of the Company
as of December 31, 1997, a copy of which is
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attached hereto as Schedule 2.3A, other than billing, invoicing and other
administrative adjustments made in the ordinary course of the Company's business
with TNP) (the "Actual Book Earnings") for the period from January 1, 1998
through the Closing Date is greater than the projected amount of the Company's
book net income as shown on the Company's 1998 budget attached hereto as
Schedule 2.3B (the "Projected Book Earnings") for such period, Seller and
Purchaser shall take all actions necessary to cause the Company to declare as of
the Closing Date and pay to each of Seller and Purchaser a cash dividend (the
"Additional Dividend") to each of Seller and Purchaser equal to 50% of the
amount by which the Actual Book Earnings for such period exceed the Projected
Book Earnings for such period.
(ii) The Additional Dividends will be calculated and
paid as follows.
(A) On or before April 13, 1998, Purchaser
shall deliver to Seller
Purchaser's best estimate of the Company's Actual Book Earnings for the period
from January 1, 1998 through the Closing Date, and the Additional Dividends, if
any, shall initially be calculated on the basis of such estimate. The estimated
Additional Dividends shall be paid to each of Purchaser and Seller on or before
April 20, 1998.
(B) On or before July 1, 1998, Purchaser
shall deliver to Seller Purchaser's
final calculation of the Company's Actual Book Earnings for the period from
January 1, 1998 through the Closing Date. If Seller disputes such calculation,
Seller shall, within seven (7) days after its receipt of such calculation,
deliver to Purchaser a notice of such dispute and a description of the reasons
therefor. If Seller fails to deliver such notice of dispute within such seven
(7) day period, Seller shall be deemed to have consented to Purchaser's
calculation, and the final Additional Dividend shall be computed on that basis.
If the final aggregate amount of the Additional Dividends computed in accordance
with the clause (B) (subject to resolution of any disputes) is greater than the
aggregate amount of the estimated Additional Dividends paid to Purchaser and
Seller pursuant to clause (A) above, an amount equal to fifty percent (50%) of
such excess shall be paid to each of Purchaser and Seller on or before July 10,
1998 (or, if the calculation of the Additional Dividends is disputed, within ten
(10) days after the resolution of such dispute). If the final aggregate amount
of the Additional Dividends computed in accordance with the clause (B) (subject
to resolution of any disputes pursuant to Section 2.3(b) below) is less than the
aggregate amount of the estimated Additional Dividends paid to Purchaser and
Seller pursuant to clause (A) above, Purchaser and Seller shall each repay to
the Company an amount equal to fifty percent (50%) of such deficiency on or
before July 10, 1998 (or, if the calculation of the Additional Dividends is
disputed, within ten (10) days after the resolution of such dispute).
(b) If Purchaser and Seller are unable to agree upon the
amount of the Company's Actual Book Earnings for the period from January 1, 1998
to the Closing Date by July 10, 1998, then, at any time after July 10, 1998,
either Seller or Purchaser may request, by notice to the other party, that the
determination of Actual Book Earnings for such period be submitted to
arbitration (the "Arbitration") before a mutually agreeable and qualified
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partner of KPMG Peat Marwick LLC, or another national certified public
accounting firm mutually acceptable to Purchaser and Seller (the "Arbitrator").
The Arbitration shall be decided in accordance with this Agreement, GAAP and the
accounting practices of the Company. The Arbitration shall be completed by July
31, 1998 (or the earliest later date reasonably practicable) and shall be the
sole and binding method of resolving disputes between Purchaser and Seller
concerning the calculation of Actual Book Earnings. Purchaser and Seller shall
each bear their own costs and expenses in connection with the Arbitration and
shall share the fees and costs of the Arbitrator equally; provided, however, the
Arbitrator shall have the authority to award costs and expenses to either party
and/or to require either party to pay a greater proportion of the Arbitrator's
fees and expenses if the Arbitrator determines that the either party pursued the
Arbitration or resisted settlement of the dispute frivolously or arbitrarily.
2.4 Excluded Liabilities. None of Purchaser, the Company and
its Subsidiaries, or DEI Texas shall, as a result of Purchaser's purchase of the
Purchased Assets, assume or be obligated to pay, perform or otherwise discharge
the following liabilities or obligations (collectively, the "Excluded
Liabilities"):
(a) any liabilities or obligations of Seller, DEI or DRI for
capital contributions to the Company, any Subsidiaries of the Company or DEI
Texas relating to the period up to and ending on the Closing Date; provided,
however, that if either Dominion Entity or DRI is required, after the Closing
Date, to make any equity contributions to the Company or its Subsidiaries
pursuant to the Equity Support Agreements in respect of pre-Closing obligations
thereunder, the Purchase Price and the aggregate amount of the Redemption
Payments shall each be increased by an amount equal to fifty percent (50%) of
the amount of any such equity contribution.
(b) any liabilities for loans or other Indebtedness of the
Company, its Subsidiaries or DEI Texas to any of the Dominion Entities or their
Affiliates, other than amounts due to DEI under the Administrative Services
Agreement for services performed by DEI prior to the Closing Date, amounts due
to DEI Texas under the DEI Texas Gas Supply Agreements for gas supplied
thereunder by DEI Texas prior to the Closing Date, and liabilities described in
items 1 and 2 on Schedule 4.7;
(c) except for item 1 on Schedule 4.15B, any liabilities or
obligations with respect to EC5 or Bayonne arising on or before the Closing Date
that are subject to any indemnity or similar obligations by either of the
Dominion Entities or their Affiliates under the Reorganization Agreement or the
Agreement Regarding Stockholders Agreement;
(d) any liabilities or obligations in respect of Taxes which
are the Dominion Entities' responsibility under Section 6.5 or which may be
payable by either of the Dominion Entities or their Affiliates with respect to
dividends or distributions to such Persons from the Company or DEI Texas;
(e) any liabilities, obligations or responsibilities relating
to any "employee benefit plan" or any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) maintained by any of the Dominion Entities,
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or by any trade or business (whether or not incorporated) which is or has ever
been under common control, or which is or has ever been treated as a single
employer, with any of the Dominion Entities under Section 414(b), (c), (m) or
(o) of the Code ("ERISA Affiliate") or to which any of the Dominion Entities and
any ERISA Affiliate contributed ("ERISA Plans"), including any multiemployer
plan, maintained by, contributed to, or obligated to contribute to, at any time,
by any of the Dominion Entities or any ERISA Affiliate, including any liability
(A) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (B)
relating to a multiemployer plan; (C) with respect to non-compliance with the
notice and benefit continuation requirements of COBRA; (D) with respect to any
non-compliance with ERISA or any other applicable laws; or (E) with respect to
any suit, proceeding or claim which is brought against Purchaser, the Company or
its Subsidiaries, Calpine, any such ERISA Plan, or any fiduciary or former
fiduciary of any such ERISA Plan;
(f) any liabilities or obligations, including accounts
payable, under or in connection with the Administrative Services Agreement or
the performance of DEI thereunder, arising or relating to acts or omissions
occurring on or before the Closing Date, other than accounts payable (not to
exceed $75,000 in the aggregate) owed to DEI arising out of DEI's performance
under the Administrative Services Agreement prior to the Closing Date which have
not been paid or reimbursed to DEI as of the Closing Date; and
(g) any liabilities, obligations or responsibilities of any of
the Dominion Entities not related to or arising from the Company or its
Subsidiaries, the Bayonne Interest, DEI Texas or the Projects.
2.5 Closing. The closing ("Closing") for the consummation of
the transactions contemplated by this Agreement, including the purchase and sale
of the Purchased Assets and the Stock Redemption shall take place at the offices
of Washburn, Briscoe & McCarthy, A Professional Corporation, 55 Francisco
Street, suite 600, San Francisco, California 94133, or such other place as the
parties may agree, at 10:00 a.m. (San Francisco time) on the later of March 31,
1998 or two (2) Business Days after the date on which all conditions set forth
in Article VII shall have been satisfied or waived, or such other date and time
as the parties may agree (the "Closing Date").
2.6 Deliveries by Dominion Entities. At the Closing, the Dominion
Entities will deliver to Purchaser and/or the Company, as applicable, the items
described in Sections 7.1(e) through 7.1(o).
2.7 Deliveries by Purchaser. At the Closing, Purchaser will deliver to
the Dominion Entities the items described in Sections 7.2(d) through 7.2(j).
ARTICLE III
REDEMPTION OF STOCK
3.1 Stock Redemption. Subject to the terms, covenants and
conditions set forth herein, on the Closing Date, the Company shall redeem and
accept from Seller, and Seller shall tender and deliver to the Company, 3,677
shares of the Class B common Stock (the "Redeemed TCC Stock"). Upon
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such redemption, the Redeemed TCC Stock shall, at the Company's option, be held
by the Company as treasury stock or retired.
3.2 Redemption Payment. In consideration of the redemption of
the Redeemed TCC Stock by the Company, and subject to the terms, covenants and
conditions set forth herein, the Company shall make a monthly payment (the
"Redemption Payment") to Seller at the end of each calendar month during the
Redemption Term equal to the product of (a) the applicable Redemption Percentage
for such month and (b) the Gross Revenues for such month; provided, however, no
Redemption Payment shall be due (x) in any month in which the Gross Revenues for
the calendar year to date through the end of such month are not greater than the
product of (i) $30,000,000 times (ii) the number of months elapsed to date in
such calendar year through the month in question divided by 12, (y) after the
expiration or termination of the Redemption Term, and (z) if Seller breaches its
covenant set forth in Section 6.1 below; provided, further, that if no
Redemption Payment is due in any given month as a result of the foregoing clause
(x) and in a subsequent month in such calendar year a Redemption Payment is due,
the Company shall make an additional Redemption Payment to Seller in such
subsequent month sufficient to cause the sum of all Redemption Payments made in
such calendar year to date to equal the total amount of Redemption Payments that
would have been paid in such calendar year had clause (x) not been applicable;
provided, further, that if the Gross Revenues in any calendar year during the
Redemption Term are less than $30,000,000, the Company shall be entitled to a
credit against Redemption Payments otherwise required to be paid in the next
subsequent year in which Redemption Payments are payable equal to the total
amount of Redemption Payments made in the calendar year in which Gross Revenues
were less than $30,000,000.
3.3 Redemption Term.
(a) Notwithstanding anything herein to the contrary, the
Redemption Term shall terminate, and no further Redemption Payments shall be due
or payable, on the last day of the calendar month in which the Net Present Value
of all Redemption Payments and all Substitute Redemption Payments made to Seller
through the end of such month, together with any payments of liquidated damages
under Section 3.5, equals or exceeds $56,750,000.
(b) Notwithstanding anything herein to the contrary, if at the
end of the then current Redemption Term, the Net Present Value of all Redemption
Payments and all Substitute Redemption Payments made to Seller through the end
of the last month of such Redemption Term is less than $56,750,000, the
Redemption Term shall be automatically extended for an additional five (5) year
period, subject to termination at such time as the requirements of Section
3.3(a) are satisfied; provided, however, that the Redemption Term shall in no
event be extended beyond December 31, 2032.
3.4 Substitute Redemption Payment. In the event that, at the
end of any calendar year during the Redemption Term, except the calendar year in
which the Redemption Term terminates pursuant to Section 3.3(a), the total
amount of electric energy actually produced by the Projects in the aggregate is
less than the Minimum Generation Level, the Company shall make an
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additional payment (the "Substitute Redemption Payment") to Seller equal to the
product of (i) the Generation Shortfall Amount, times (ii) the applicable
Redemption Percentage for such calendar year, times (iii) the Weighted Average
Market Electricity Price for such calendar year. A simplified example of the
calculation of the Substitute Redemption Payment is attached as Schedule 3.4 for
purposes of illustration only. In practice, actual calculations will be done for
each Project on an hourly basis.
3.5 Liquidated Damages. In the event of (i) the occurrence of
a Bankruptcy Event with respect to the Company, (ii) a failure by the Company
and Calpine to pay the Substitute Redemption Payment to Seller within twenty
(20) days after such amount was finally determined to be due, (iii) a sale by
the Company (or an Affiliate of the Company to whom the Company's interest in
the Projects may have been transferred) of either of the Projects except a sale
or transfer of either Project to Calpine or one of its Affiliates or a sale or
transfer of either Project in connection with the financing of such Project(s)
through a Capitalized Lease, so long as after such sale or transfer, Calpine or
its Affiliate continues to operate, maintain and control the operation of such
Project(s), (iv) the sale by Purchaser (or any Affiliate of Purchaser to whom
Purchaser's ownership of the Company may have been transferred) of more than
fifty percent (50%), individually or in the aggregate, of its ownership interest
in the Company to any Person other than Calpine or an Affiliate of Calpine, (v)
the sale by Purchaser (or any Affiliate of Purchaser to whom Purchaser's
ownership of the Company may have been transferred) of fifty percent (50%) or
less of its ownership interest in the Company to any Person other than Calpine
or an Affiliate of Calpine in connection with which Calpine or one of its
Affiliates ceases to operate, maintain and control the operation of the
Projects, or (vi) the occurrence of an Event of Default under any material
Indebtedness of the Company or its Affiliates or any Related Indebtedness of
Calpine or its Affiliates which would entitle, in either such case, the holder
of such Indebtedness or Related Indebtedness to accelerate any material
Indebtedness of the Company or the Partnerships or secured by either or both
Projects or to enforce a lien on or security interest in either or both
Projects, Seller shall be entitled to recover, as liquidated damages and not as
a penalty, an amount equal to the lesser of (a) an amount which, as of the date
such liquidated damages are paid, would have a Net Present Value of $56,750,000
and (b) the amount which, together with all previous Redemption Payments and
Substitute Redemption Payments, would be sufficient to cause a termination of
the Redemption Term pursuant to Section 3.3(a). For purposes of this Section
3.5, "material" Indebtedness means Indebtedness having an outstanding principal
amount of $1,000,000 or more or which would entitle the holder of such
Indebtedness to exercise a lien on or a security interest in either Project or
any material part thereof.
3.6 Reporting and Payment.
(a) Within thirty (30) days after the end of each calendar
month during the Redemption Term, the Company shall deliver to Seller a report
showing the amount of electric energy generated by the Projects during such
month, the amount of Gross Revenues for such month and the amount of any
Redemption Payment due with respect to such month. Within thirty (30) days after
the end of each calendar year during the Redemption Term except the
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calendar year in which the Redemption Term terminates pursuant to Section
3.3(a), in addition to the report required for the last month of such year
pursuant to the preceding sentence, the Company shall deliver to Seller a report
showing the amount of electric energy generated by the Projects during such
calendar year, the Minimum Generation Level for such calendar year, and the
amount of any Substitute Redemption Payment due with respect to such calendar
year. All such reports shall be accompanied by sufficient backup information and
worksheets to provide Seller a reasonable basis for understanding and verifying
them, including, if requested by Seller, copies of the invoices sent by Clear
Lake and Texas City to their respective power purchasers (redacted to exclude
any proprietary or confidential information, but showing at least the amount
billed by Clear Lake or Texas City to such power purchasers) and copies of the
receipts log or similar records for Clear Lake and Texas City showing the amount
received from such power purchasers.
(b) Seller shall have the right, during normal business hours
and upon reasonable advance notice to Purchaser and at its own expense, to audit
the invoices, receipts logs and operational logs (showing hours of operation) of
Clear Lake and Texas City to verify the amount of Redemption Payments due
hereunder. In connection therewith, the Company, Clear Lake and Texas City shall
make such records available to Seller and its employees, representatives and
agents engaged to perform such audit; provided, however, that any information
reviewed by or disclosed to Seller and its employees, representatives and agents
in connection with such audit shall be held in strictest confidence, shall not
be disclosed to any other Person except as required by law or court order, and
shall not under any circumstances be used by Seller or any of its Affiliates for
any other purposes whatsoever, including businesses of Seller or its Affiliates
which are competitive with Clear Lake, Texas City or any of their Affiliates.
(c) Any dispute between Seller and the Company concerning the
calculation of the amount of Redemption Payments under Sections 3.2 or 3.4 shall
be settled by Arbitration before the Arbitrator. Such Arbitration shall be the
sole and binding method of resolving disputes between Purchaser and Seller
concerning the calculation of the mount of Redemption Payments due Seller.
Purchaser and Seller shall each bear their own costs and expenses in connection
with the Arbitration and shall share the fees and costs of the Arbitrator
equally; provided, however, the Arbitrator shall have the authority to award
costs and expenses to either party and/or to require either party to pay a
greater proportion of the Arbitrator's fees and expenses if the Arbitrator
determines that the either party pursued the Arbitration or resisted settlement
of the dispute frivolously or arbitrarily.
(d) All payments of Redemption Payments and Substitute
Redemption Payments shall be due within thirty (30) days after the end of the
calendar month or calendar year, as applicable, to which such Redemption
Payments or Substitute Redemption Payments relate. Payments not made when due
shall accrue interest at an annual rate equal to the "prime rate" published in
the Wall Street Journal from time to time plus two percent (2%).
3.7 Calpine Guaranty. Calpine shall guarantee the due and
punctual payment by the Company of the Redemption Payments, the Substitute
Redemption Payments and the liquidated damages set forth in Section 3.5
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pursuant to a guaranty (the "Calpine Guaranty") in the form of Exhibit A
attached hereto.
3.8 Contract Parties. In furtherance of the obligation of the
Company to make the Redemption Payments, Purchaser and the Company agree that,
during the Redemption Term, any and all contracts providing for the provision of
electric energy or capacity or steam by either Project shall be entered into by
Clear Lake or Texas City, as the case may be, and shall not be contractual
obligations of the Company, Purchaser or any of their respective shareholders or
Affiliates. If any contracts providing for the provision of electric energy or
capacity or steam by either Project are entered into by the Company, Purchaser
or any of their respective shareholders or Affiliates in violation of the
foregoing covenant, rather than by Clear Lake or Texas City, as the case may be,
the gross revenues received pursuant to such contracts shall be included in the
Gross Revenues for purposes of calculating Redemption Payments hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DOMINION ENTITIES
Subject to the qualifications and exceptions set forth below,
the Dominion Entities jointly and severally represent and warrant to the Calpine
Entities that, as of the date hereof and as of the Closing Date:
4.1 Organization and Standing
(a) Each of the Dominion Entities and DEI Texas is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia. Each of the Dominion Entities and DEI Texas is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is necessary
because of the property owned, leased or operated by it or because of the nature
of its business as now being conducted, except in those jurisdictions where the
failure to be so qualified or licensed would not create a Material Adverse
Effect or have a material adverse effect on Seller's or DEI's ability to perform
its obligations hereunder. DEI Texas does not have any Subsidiaries.
(b) To the Dominion Entities' actual knowledge, Bayonne is a
general partnership duly organized, validly existing and in good standing under
the laws of the State of New Jersey. Seller has previously delivered to
Purchaser such copies of the joint venture agreement of Bayonne and all
amendments, attachments, exhibits and schedules thereto (the "Bayonne
Partnership Agreement") as Seller has in its possession.
4.2 Authority; Binding Agreement. Each of the Dominion
Entities has full corporate power and authority to execute and deliver this
Agreement, and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by each of the Dominion
Entities. This Agreement has been duly and validly executed and delivered by
each of the Dominion Entities and constitutes the valid and binding obligation
of each Dominion Entity, enforceable against such Dominion Entity in accordance
with its terms, subject to bankruptcy, insolvency,
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fraudulent transfer, moratorium and other laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
4.3 Conflicts; Consents. Except as set forth on Schedule 4.3,
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by each of the Dominion
Entities with all of the provisions hereof will (i) conflict with or result in a
breach of or require any consent or approval under the Charter Documents of any
Dominion Entity, DEI Texas or EC5, (ii) conflict with or result in a default or
require any consent or approval under any of the provisions of any contract,
agreement or other instrument to which any Dominion Entity, DEI Texas or, to the
Dominion Entities' actual knowledge, EC5 is a party or by which it is bound,
(iii) violate any Legal Requirement applicable to any Dominion Entity, DEI Texas
or, to the Dominion Entities' actual knowledge, EC5 or their respective
properties or assets, or (iv) result in the creation or imposition of any Lien
or Claim on the any of the Purchased Assets or the Redeemed TCC Stock or on the
properties or assets of the Company or any of its Subsidiaries, DEI Texas or, to
the Dominion Entities' actual knowledge, EC5 under any agreements, obligations
or undertakings entered into by either of the Dominion Entities or DEI Texas.
Except as otherwise set forth on Schedule 4.3, no consent or approval from any
Governmental Entity or other Person, nor any notification of or filing with any
Governmental Entity or other Person, is required in connection with the
execution, delivery and performance by the Dominion Entities of this Agreement
or the consummation of the transactions contemplated hereby.
4.4 Title to Purchased Assets and Redeemed TCC Stock.
(a) Seller is the lawful owner, of record and beneficially, of
all of the Class B Common Stock. All shares of the Class B Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
Seller has good and marketable title to the Class B Common Stock, free and clear
of all Liens, Claims and Third Party Rights, and with no restriction on or
agreement relating to the voting rights and the other incidents of record and
beneficial ownership of such Class B Common Stock except as provided in the
Stockholders Agreement. At the Closing, Seller will transfer such good and
marketable title to the Purchased TCC Stock to Purchaser and will tender the
Redeemed TCC Stock to the Company, in each case free and clear of all Liens,
Claims and Third Party Rights and with no restriction on or agreement relating
to the voting rights and the other incidents of record and beneficial ownership
except the Stockholders Agreement.
(b) The DEI Texas Stock consists of ten (10) shares of common
stock. There are no other classes of DEI Texas Stock issued or outstanding. DEI
is the lawful owner, of record and beneficially, of all of the DEI Texas Stock
and of the Administrator's interest under the Administrative Services Agreement.
All shares of the DEI Texas Stock have been duly authorized and validly issued
and are fully paid and nonassessable. DEI has good and marketable title to the
DEI Texas Stock and the Administrator's interest under the Administrative
Services Agreement, free and clear of all Liens, Claims and Third Party Rights,
and, with respect to the DEI Texas Stock, with no restriction on or agreement
relating to the voting rights and the other incidents of record and beneficial
ownership of such DEI Texas. At the
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Closing, Seller will transfer such good and marketable title to the DEI Texas
Stock and to the Administrator's interest under the Administrative Services
Agreement to Purchaser, in each case free and clear of all Liens, Claims and
Third Party Rights, except that the transfer of the Administrator's interest
under the Administrative Services Agreement requires the consent of the Company
thereto, and, with respect to the DEI Texas Stock, with no restriction on or
agreement relating to the voting rights and the other incidents of record and
beneficial ownership.
4.5 Bayonne Partnership Interest. EC5 owns a 7.06% general
partnership interest in Bayonne (the "Bayonne Interest"). To the Dominion
Entities' actual knowledge, the Bayonne Partnership Agreement is in full force
and effect. All capital contributions, loans and other advances that EC5, the
Dominion Entities or their Affiliates have been notified by Bayonne (or the
managing general partner thereof) are required to be made have been made by EC5
or one of the Dominion Entities to Bayonne on or before the Closing Date. No
Dominion Entity has granted to any other Person, and to the Dominion Entities'
actual knowledge no Person holds, any outstanding rights to acquire or options,
warrants, call agreements, convertible securities or other Third Party Rights to
acquire, directly or indirectly, the Bayonne Interest. No Dominion Entity has
entered into any, and to the Dominion Entities' actual knowledge there are no,
voting agreements or other restrictions with respect to voting rights and the
other incidents of ownership of the Bayonne Interest except as set forth in the
Bayonne Partnership Agreement. To the Dominion Entities' actual knowledge,
Bayonne has not sold or refinanced, or agreed to sell or refinance, the Bayonne
Project.
4.6 Brokers. No agent, broker, investment banker or any other
Person acting on behalf of any of the Dominion Entities or under their authority
is or will be entitled to any broker's or finder's fee or any other commission
or similar fee directly or indirectly from any of the parties hereto in
connection with any of the transactions contemplated hereby.
4.7 Financial Information. Seller has delivered to Purchaser
the balance sheets and income statements of DEI Texas as of December 31, 1997,
certified as true and correct by the chief financial officer of DEI Texas (the
"DEI Texas Financial Statements") and such copies of the audited balance sheets
and income statements of Bayonne as of December 31, 1996 as Seller has in its
possession (the "Bayonne Financial Statements"). The DEI Texas Financial
Statements present fairly, as of December 31, 1997, the financial position of
DEI Texas in conformity with GAAP. To the Dominion Entities' actual knowledge,
the Bayonne Financial Statements are the most recent statements of the financial
condition and results of operations of Bayonne that EC5, the Dominion Entities
or their Affiliates have in their possession. Except as set forth on Schedule
4.7, DEI Texas does not have any liabilities in excess of $25,000 which are not
reflected on the DEI Texas Financial Statements. Except for any unpaid amounts
due to DEI for services performed by DEI under the Administrative Services
Agreement prior to the Closing Date (which do not exceed $75,000) and amounts
due to DEI Texas under the DEI Texas Gas Supply Agreements for gas supplied
thereunder by DEI Texas prior to the Closing Date (which do not exceed
$20,000,000), none of the
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Company, the Company's Subsidiaries or DEI Texas have any obligations or
liabilities, including any Indebtedness, to any of the Dominion Entities or any
of their Affiliates which will survive the Closing Date.
4.8 Absence of Changes. Except as set forth on Schedule 4.8,
since December 31, 1997, DEI Texas has been operated in the ordinary course of
business and there has not been:
(a) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by DEI Texas
other than current obligations and liabilities incurred in the ordinary course
of business not exceeding $25,000 in the aggregate;
(b) except for dividends referred to in Section 6.11, any
declaration, setting aside or payment of any dividend or other distribution with
respect to the DEI Texas Stock, any direct or indirect redemption, purchase or
other acquisition of any of the DEI Texas Stock or any split, subdivision or
reclassification of the DEI Texas Stock;
(c) any sale, assignment pledge, encumbrance, transfer or other
disposition of any material asset of DEI Texas;
(d) any material damage, destruction or loss (whether or not covered by
insurance) affecting any material asset or property of DEI Texas;
(e) any change in the independent accountants of DEI Texas or
in the accounting methods or practices followed by DEI Texas, or any change in
depreciation or amortization policies or rates followed by DEI Texas;
(f) any liquidation, winding up, merger or consolidation involving DEI
Texas or, to the Dominion Entities' actual knowledge, Bayonne;
(g) any incurrence of new or additional indebtedness on the part of DEI
Texas; or
(h) any agreement, whether in writing or otherwise to take any of the
actions specified in the foregoing items (a) through (g).
4.9 Tax Matters. All federal, state, local and foreign tax
returns required to be filed by or on behalf of DEI Texas have been filed with
the appropriate governmental authorities or bodies in all jurisdictions in which
such returns or pro forma returns are required to be filed. Seller has delivered
to Purchaser true and complete copies of such returns in respect of the three
most recent tax years of DEI Texas. All federal, state, local and foreign
income, profits, franchise, sales, use, occupation, property, excise and other
taxes (including interest and penalties and withholdings of tax) due from or
payable by DEI Texas have been paid on a timely basis or are adequately provided
for on the DEI Texas Financial Statements. No issues have been raised by the
Internal Revenue Service upon audit with respect to DEI Texas, no state, local
or foreign audits or other administrative proceedings or court proceedings exist
or have been initiated with regarding to any taxes or tax returns of DEI Texas,
and none of the Dominion Entities or DEI Texas has received any written notice
that such an
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audit is pending or threatened. The books and records maintained by DEI Texas
and the DEI Texas Financial Statements, as of the date thereof and subject to
adjustments consistent with GAAP, accrue liabilities for all taxes which are not
yet due and payable, except where the failure to do so would not have a Material
Adverse Effect.
4.10 Agreements, Etc.
(a) Schedule 4.10A contains a true and complete list of all
written contracts, agreements, leases, loan agreements, pledge or security
agreements, mortgages, deeds of trust, collective bargaining agreements,
employment agreements, partnership or joint venture agreements, shareholders
agreements, options, restrictive covenants and other contractual agreements and
instruments (each a "Contract" and collectively, "Contracts") to which DEI Texas
or any of the Dominion Entities (insofar as they relate to DEI Texas) is a party
or by which any of them are bound. None of the Dominion Entities, DEI Texas and,
to the best of the Dominion Entities' knowledge, any other party is in default
under any such Contract nor, to the best of the Dominion Entities' knowledge, is
any party to any such Contract currently threatening or proposing a termination
thereof. Seller has delivered to Purchaser true and correct copies of each such
Contract. Each such Contract is in full force and effect and is the valid and
binding obligation of DEI Texas or the applicable Dominion Entity, as the case
may be, enforceable against such party or parties in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Schedule 4.10B contains a true and correct list of all
Contracts relating to or affecting the Projects to which any Dominion Entity or
any Affiliate of any Dominion Entity (other than the Company and its
Subsidiaries or DEI Texas) is a party or by which any of them or their
respective properties are bound. Each such Contract is in full force and effect
and is the valid and binding obligation of DEI Texas or the applicable Dominion
Entity, as the case may be, enforceable against such party or parties in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
None of the Dominion Entities, DEI Texas and, to the best of the Dominion
Entities' knowledge, any other party is in default under any such Contract nor,
to the best of the Dominion Entities' knowledge, is any party to any such
Contract currently threatening or proposing a termination thereof. Without
limiting the generality of the foregoing, to the best of the Dominion Entities
knowledge, DEI has performed all of its obligations under the Administrative
Services Agreement in all material respects and is not in default thereunder.
(c) The copies of the Contracts relating to Bayonne which
Seller or DEI has delivered to Purchaser are complete copies of the copies of
such Contracts which are Seller's, DEI's or their Affiliates' possession.
4.11 Assets, Property and Related Matters.
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(a) Items 2 and 12 on Schedule 4.10A are all material assets,
including all real and personal property, owned or leased by DEI Texas. Except
as set forth in Schedule 4.10A, DEI Texas has good and valid title to such
assets, free and clear of all Liens, Claims and Third Party Rights.
(b) The sole asset owned by EC5 is the Bayonne Interest.
4.12 Nature of Business. DEI Texas is not and has not engaged
in any business or activity other than the purchase and sale of natural gas
supplied to the Projects and activities incidental thereto.
4.13 Compliance With Laws. Except as set forth in Schedule
4.13A, DEI Texas and the Dominion Entities (insofar as it relates to or affects
DEI Texas or the DEI Texas Stock) are each in compliance with all Legal
Requirements applicable to DEI Texas and the Dominion Entities (insofar as it
relates to or affects DEI Texas or the DEI Texas Stock), including Legal
Requirements relating to pollution, protection of the environment or Hazardous
Materials, and none of them has received any written notice of violation of any
such Legal Requirement. DEI Texas and the Dominion Entities (insofar as it
relates to or affects DEI Texas or the DEI Texas Stock) each have all federal,
state, local and foreign governmental licenses and permits necessary to conduct
their respective businesses as presently being conducted, and DEI Texas and the
Dominion Entities (insofar as it relates to or affects DEI Texas or the DEI
Texas Stock) are each in compliance therewith in all material respects except
where the failure to have such permits would not reasonably be expected to have
a Material Adverse Effect. All such licenses and permits held by DEI Texas and
the Dominion Entities (insofar as it relates to or affects DEI Texas or the DEI
Texas Stock) are listed on Schedule 4.13A and are in full force and effect. DEI
Texas and the Dominion Entities (insofar as it relates to or affects DEI Texas
or the DEI Texas Stock) have received, handled, used, stored, treated, shipped
and disposed of all Hazardous Materials in compliance in all material respects
with all applicable Legal Requirements. There have been no unremedied releases
of Hazardous Materials by DEI Texas or the Dominion Entities (insofar as it
relates to or affects DEI Texas or the DEI Texas Stock) except such as would not
reasonably be expected to have a Material Adverse Effect.
4.14 Employees; Employee Plans. DEI Texas does not currently
have, nor has it ever had, any employees. DEI Texas does not currently have and
has never established or maintained any ERISA Plan, any other pension,
retirement, savings, deferred compensation or profit-sharing plan, any stock
option, stock appreciation, performance share, bonus or other incentive plan,
any severance plan, any health, group insurance or other welfare plan, or any
other similar plan. All persons performing services for Seller, DEI or DEI Texas
in connection with the Company, its Subsidiaries or the Projects, including
services under the Administrative Services Agreement, are employees of DEI, DRI
or a subsidiary of DRI, except that Earl Gore and Alan Hodges are not employees
of DEI, DRI or a subsidiary of DRI, but have consulting agreements directly with
the Company
4.15 Litigation.
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(a) Except as set forth in Schedule 4.15A, there are no
pending lawsuits, actions, claims, investigations or legal, administrative or
arbitration proceedings by, against or in respect of DEI Texas or the Dominion
Entities (insofar as it relates to or affects DEI Texas or the DEI Texas Stock),
and, to the best of the Dominion Entities' knowledge, no such lawsuits, actions,
claims, investigations or legal, administrative or arbitration proceedings are
threatened. To the best of the Dominion Entities' knowledge, no material
investigations relating to DEI Texas or the Dominion Entities (insofar as it
relates to or affects DEI Texas or the DEI Texas Stock) are pending or have been
threatened by or before any Governmental Entity. Except as set forth in Schedule
4.15A, there are no existing judgments, decrees, injunctions or orders of any
court, arbitrator or other Governmental Entity against DEI Texas or the Dominion
Entities (insofar as relates to or affects DEI Texas or the DEI Texas Stock).
(b) Except as set forth in Schedule 4.15B, there are no
pending lawsuits, actions, claims, investigations or legal, administrative or
arbitration proceedings by, against or in respect of the Dominion Entities
(insofar as it relates to or affects EC5, Bayonne or the Bayonne Interest) or,
to the Dominion Entities' actual knowledge, EC5, and, to the best of the
Dominion Entities' knowledge with respect to the Dominion Entities and to the
Dominion Entities' actual knowledge with respect to EC5, no such lawsuits,
actions, claims, investigations or legal, administrative or arbitration
proceedings are threatened. To the best of the Dominion Entities' knowledge with
respect to the Dominion Entities and the Dominion Entities' actual knowledge
with respect to EC5, no material investigations relating to EC5 or the Dominion
Entities (insofar as it relates to or affects EC5, Bayonne or the Bayonne
Interest) are pending or have been threatened by or before any Governmental
Entity. Except as set forth in Schedule 4.15B, there are no existing judgments,
decrees, injunctions or orders of any court, arbitrator or other Governmental
Entity against the Dominion Entities (insofar as it relates to or affects EC5,
Bayonne or the Bayonne Interest) or, to the Dominion Entities' actual knowledge,
EC5.
4.16 Utility Regulation. DEI Texas is not and has never been engaged in
the generation, transmission, distribution or sale of electric power.
4.17 Investment Company. None of the Dominion Entities or DEI Texas is
an "investment company" or a company "controlled" by an investment company
within the meaning of the Investment Company Act of 1940.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Subject to the qualifications and exceptions set forth below,
the Purchaser represents and warrants to the Dominion Entities that, as of the
date hereof and as of the Closing Date:
5.1 Organization and Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which
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such qualification is necessary because of the property owned, leased or
operated by it or because of the nature of its business as now being conducted,
except in those jurisdictions where the failure to be so qualified or licensed
would not create a Material Adverse Effect or have a material adverse effect on
Purchaser's ability to perform its obligations hereunder.
5.2 Authority; Binding Agreement. Purchaser has full corporate
power and authority to execute and deliver this Agreement, and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
have been duly authorized by Purchaser. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, moratorium and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
5.3 Conflicts; Consents. Except as set forth on Schedule 5.3,
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by Purchaser with all of
the provisions hereof will (i) conflict with or result in a breach of or require
any consent or approval under the Charter Documents of Purchaser, (ii) conflict
with or result in a default or require any consent or approval under any of the
provisions of any contract, agreement or other instrument to which Purchaser is
a party or by which it is bound, or (iii) violate any Legal Requirement
applicable to Purchaser or their respective properties or assets. Except as
otherwise set forth on Schedule 5.3, no consent or approval from any
Governmental Entity or other Person, nor any notification of or filing with any
Governmental Entity or other Person, is required in connection with the
execution, delivery and performance by Purchaser of this Agreement or the
consummation of the transactions contemplated hereby.
5.4 Acquisition As Investment. Purchaser is acquiring the
Purchased TCC Stock and the DEI Texas Stock for its own account as an investment
without the present intent to sell, transfer or distribute the Purchased TCC
Stock or DEI Texas Stock to any other Person other than the possible transfer of
such stock to one or more wholly owned Subsidiaries of Calpine.
5.5 Brokers. No agent, broker, investment banker or any other
Person acting on behalf of Purchaser or under its authority is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from any of the parties hereto in connection with any of
the transactions contemplated hereby.
ARTICLE VI
ADDITIONAL AGREEMENTS AND COVENANTS
6.1 Covenant Not To Compete. Seller agrees that, for a period
of twenty-five (25) years from and after the Closing Date, it will not sell,
agree to sell or attempt to sell steam to any Persons who are purchasing steam
from either Project to supply such Person's needs in Texas. Seller acknowledges
and agrees that the foregoing covenant is a material part of the
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consideration for the payment of the Redemption Payments as described in Article
III above.
6.2 Further Assurances. The Dominion Entities and Purchaser
shall cooperate with each other and (i) promptly prepare and file all necessary
documentation, (ii) effect all necessary applications, notices, petitions and
filings and execute all agreements and documents, and (iii) use all commercially
reasonable efforts to obtain all necessary consents, approvals and
authorizations of all other parties necessary or advisable to consummate the
transactions contemplated by this Agreement or required by the terms of any
Contract to which any of the Dominion Entities, the Calpine Entities, the
Company and its Subsidiaries, DEI Texas or Bayonne is a party or by which any of
them or their respective properties is bound. Each of the Dominion Entities and
Purchaser agrees to execute, and to cause its Subsidiaries and Affiliates to
execute, such additional documents or instruments as any other party hereto may
from time to time reasonably request in order to confirm or carry out the
transactions contemplated by this Agreement; provided, however, that no such
document or instrument shall expand a party's liabilities or obligations beyond
that contemplated in this Agreement.
6.3 Books and Records. On the Closing Date, or as soon
thereafter as reasonably possible, the Dominion Entities will deliver to
Purchaser all of the books and records of DEI Texas and all books and records
maintained by or in the possession of the Dominion Entities or their Affiliates
(including DEI in its capacity as Administrator under the Administrative
Services Agreement) relating to the Company and its Subsidiaries (including
EC5).
6.4 [intentionally omitted]
6.5 Taxes.
(a) The Dominion Entities shall be responsible for 100% of all
Taxes related or attributable to DEI Texas for all periods up to and including
the Closing Date. Purchaser shall be responsible for 100% of all Taxes related
or attributable to the Company and its Subsidiaries (including EC5) and DEI
Texas for all periods after the Closing Date. For purposes of this Agreement,
(i) the amount of any taxable income or Taxes attributable to the pre-Closing
portion of any taxable period beginning before and ending after the Closing Date
(the "Straddle Period") shall be determined by reference to the relative amounts
of the Company's or DEI Texas', as the case may be, pre-tax net book income
(determined in accordance with GAAP) in the pre-Closing and post-Closing
portions of such Straddle Period; provided, however, that any extraordinary
transaction shall be allocated to the portion of such Straddle Period in which
it occurred.
(b) DEI shall prepare and timely file all Tax Returns of DEI
Texas for all tax periods ending before the Closing Date and shall cooperate
with and, if requested, assist Purchaser in preparing and filing all Tax Returns
of DEI Texas for all tax periods ending on or after the Closing Date, including
any Straddle Period. The Dominion Entities shall also cooperate with and, if
requested, assist Purchaser and the Company in preparing and
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filing all Tax Returns of the Company and its Subsidiaries for all tax periods
ending on or before December 31, 1998 which have not been filed as of the
Closing Date.
(c) The Tax Returns referred to in Section 6.5(b) shall be
prepared in a manner consistent with past practice, unless a contrary treatment
is required by an intervening change in the applicable law. DEI shall cause to
be made available to Purchaser a copy of any Tax Return that is DEI's
responsibility under Section 6.5(b), and Purchaser shall cause to be made
available to the Dominion Entities a copy of any Tax Return relating to any tax
period ending before the Closing Date and any Straddle Period that is
Purchaser's responsibility under Section 6.5(b), in each case together with all
relevant work papers and other information. Each such Tax Return shall be made
available for review no later than twenty (20) Business Days prior to the due
date (including all extensions) for the filing of such Tax Return. A copy of any
such Tax Return shall be provided to the Dominion Entities or Purchaser, as
applicable, no later than ten (10) Business Days after such Tax Return is filed.
(d) DEI and Purchaser shall each notify the other party in
writing within 30 days of receipt of written notice of any pending or threatened
Tax examination, audit or other administrative or judicial proceeding (a "Tax
Contest") that could reasonably be expected to affect the Taxes for which the
other party is responsible under Section 6.5(a). If the recipient of such notice
of a Tax Contest fails to provide such notice to the other party, the other
party shall not be responsible for any Taxes, including interest and penalties,
to the extent they would have been avoided or which would not have been payable
had such party received timely notice of the Tax Contest.
(e) Except as provided in the last sentence of this Section
6.5(e), if a Tax Contest relates to any Taxes for which any of the Dominion
Entities is responsible in full hereunder, the Dominion Entities shall at their
expense control the defense and settlement of such Tax Contest. Except as
provided in the last sentence of this Section 6.5(e), if such Tax Contest
relates to any period beginning after the Closing Date or to any Taxes for which
Purchaser is responsible in full hereunder, Purchaser shall at its own expense
control the defense and settlement of such Tax Contest. The party not in control
of the defense shall have the right to observe the conduct of any Tax Contest at
its expense, including through its own counsel and other professional experts.
The Dominion Entities and Purchaser shall jointly control the defense and
settlement of any Tax Contest relating to a Straddle Period, and the fees and
expenses related thereto shall be paid 50% by the Dominion Entities and 50% by
Purchaser.
(f) Notwithstanding anything to the contrary in Section
6.5(e), to the extent that an issue raised in any Tax Contest controlled by one
party or jointly controlled could materially affect the liability for Taxes of
the other party, the controlling party shall not, and neither party in the case
of joint control shall, enter into a final settlement without the consent of the
other party, which consent shall not be unreasonably withheld. Where a party
withholds its consent to any final settlement, that party may continue or
initiate further proceeding, at its own expense, and the liability of the
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party that wished to settle (as between the consenting and the non-consenting
party) shall not exceed the liability that would have resulted from the proposed
final settlement (including interest, additions to Tax, and penalties that have
accrued at that time), and the non-consenting party shall indemnify the
consenting party for such Taxes.
6.6 Confidentiality. After the Closing Date, the Dominion
Entities shall not use, disclose or provide, and shall cause their Affiliates
not to use, disclose or provide, directly or indirectly, to any other Person any
confidential or proprietary information relating to the Company, its
Subsidiaries, DEI Texas or Bayonne except (i) as is required pursuant to any
applicable Legal Requirement, (ii) information that was or becomes available in
the public domain without any breach of any confidentiality obligation by the
Dominion Entities or their Affiliates, or (iii) in accordance with and to the
extent provided in Section 3.6(b).
6.7 Employment Matters. The Dominion Entities consent to
Purchaser or its Affiliates entering into direct discussions with their or their
Affiliates' employees who are currently performing services for the Company or
its Subsidiaries regarding possible future employment by Purchaser or its
Affiliates; provided, however, Purchaser and its Affiliates shall not be
obligated to offer employment to any such employees. Purchaser and its
Affiliates shall not incur any liability as a result of such discussions. The
Dominion Entities shall remain liable for all salary, benefits, severance
payments, bonus payments and other payments of any kind due or payable to such
employees (to and including the date of their employment by Purchaser or its
Affiliates in the case of employees who are hired by Purchaser or its
Affiliates), except that the foregoing shall not affect DEI's rights to recover
any such amounts as Administrator under the Administrative Services Agreement.
6.8 Certain Organizational Matters.
(a) Seller and Purchaser each agree to vote their respective
shares of stock in the Company, and to cause the respective directors of the
Company appointed by them to vote, in favor of, and for the adoption of all
necessary resolutions and the taking of all necessary actions for, (i) the
payment of any Additional Dividend which may be payable as provided in Section
2.3 above and (ii) the redemption by the Company of the Redeemed TCC Stock and
the payment of the Redemption Payments to Seller as provided in Article III
above.
(b) Subject to the satisfaction of the conditions precedent to
their respective obligations hereunder, the Dominion Entities and Purchaser
hereby agree to terminate, and Purchaser shall cause Calpine to terminate, as of
the Closing Date, (i) the Stockholders Agreement, (ii) the Reorganization
Agreement, (iii) the Agreement Regarding Stockholders Agreement, (iv) the
Override and Standstill Agreements, and (v) the Equity Support Agreements;
provided, however, that the termination of such agreements shall not terminate
(x) any releases of liabilities given or contained in any such agreements or (y)
any obligations of the parties thereto, including payment and indemnity
obligations, arising out of or relating to the period prior to the Closing Date
or events or transactions occurring prior to the Closing
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Date, including the indemnity obligations under Section 3 of Amendment of
Reorganization Agreement dated as of June 30, 1991, except that all indemnity
and other obligations of either Dominion Entity or DRI under the Reorganization
Agreement, to the extent (but only to the extent) that such obligations cover
the matters disclosed in item 1 of Schedule 4.15B, shall terminate as of the
Closing Date; provided, further, that upon the termination of such agreements,
each of the parties thereto shall release the other parties from, and shall be
released by the other parties from, any further obligations or liabilities under
such agreements arising out of or relating to events or transactions occurring
after the Closing Date. The Dominion Entities and Purchaser agree to execute and
deliver, and to cause their respective Affiliates to execute and deliver, at
Closing such agreements and instruments as may be necessary to effectuate or
evidence such termination and any continuing obligations or releases.
6.9 Certain Consents and Releases. The Dominion Entities and
Purchaser shall each use all commercially reasonable efforts to obtain all
consents and releases of liability listed on Schedule 6.9; provided, however,
that "commercially reasonable efforts" shall not be deemed to require any of the
Dominion Entities or Purchaser to make any payments to any of the Persons listed
on Schedule 6.9 in order to obtain such consents and approvals.
6.10 Transaction Costs. Each of the Dominion Entities and Purchaser
shall bear and pay all of the costs, fees and expenses incurred by it or on its
behalf in connection with the transactions contemplated by this Agreement.
6.11 DEI Texas Dividend, Receivables and Payables. The
Dominion Entities may, at their option, cause DEI Texas to declare and pay a
dividend to DEI, as its sole shareholder at that time, a dividend equal to the
sum of (i) all cash held by DEI Texas on the Closing Date and (ii) all rights to
receive payment of accounts receivable of DEI Texas existing as of the Closing
Date; provided, however, that the foregoing dividend shall be net of and shall
be reduced by the amount of all outstanding liabilities of DEI Texas (including
accounts payable to DEI and its Affiliates) as of the Closing Date, other than
the liabilities described in items 1 and 2 on Schedule 4.7. Purchaser shall
cause DEI Texas to use commercially reasonable efforts to collect such accounts
receivable and shall remit to DEI the amounts collected, net of liabilities
payable by DEI or reimbursable to Purchaser or DEI Texas, during the previous
calendar month (and not previously paid to or for the benefit of DEI) on or
before the twentieth (20th) day of the next following calendar month, commencing
with the calendar month following the one in which the Closing Date occurs,
until all such receivables and liabilities have been collected or paid in full.
Regardless of whether or not such a dividend is declared, DEI shall be entitled
to receive all amounts collected with respect to accounts receivable of DEI
Texas existing as of, or relating to any period prior to, the Closing Date and
shall be responsible for and shall pay, or shall reimburse Purchaser and DEI
Texas for the payment of, all accounts payable of DEI Texas existing as of, or
relating to any period prior to, the Closing Date, other than the liabilities
described in items 1 and 2 on Schedule 4.7.
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6.12 Amounts Payable With Respect to Bayonne Interest or Due
Under Reorganization Agreement. Seller shall be entitled to receive and retain
all payments or distributions on account of the Bayonne Interest for the period
prior to the Closing Date and shall continue to be responsible for all cash
calls, claims, losses, damages, expenses or liabilities relating to the Bayonne
Interest as provided under the Reorganization Agreement for the period prior to
the Closing Date, except that all indemnity and other obligations of either
Dominion Entity or DRI under the Reorganization Agreement, to the extent (but
only to the extent) that such obligations cover the matters disclosed in item 1
of Schedule 4.15B, shall terminate as of the Closing Date. Without limiting the
parties' rights and obligations under Section 6.8(b), on or before the Closing
Date, Purchaser and its Affiliates shall pay all amounts due under the
Reorganization Agreement for all periods ending on the Closing Date.
6.13 Change of Name. Promptly following the Closing, Purchaser
shall take all steps necessary to amend the articles of incorporation of DEI
Texas to change the name of DEI Texas to a name which does not include "DEI" or
"Dominion" or other similar names or references to DEI or its Affiliates. After
completing such name change, neither Purchaser nor DEI Texas shall use the names
"DEI" or "Dominion" in any fashion in connection with their respective
businesses.
6.14 Intercompany Accounts. Without limiting the parties'
rights and obligations under Section 6.11, on the Closing Date, DEI Texas and
the Company shall pay all amounts owed, as of the Closing Date, to Seller, DEI
and their Affiliates and to Purchaser and its Affiliates.
6.15 Termination of Insurance Policies. DEI shall take such
actions as are necessary to terminate, effective as of the Closing Date, the
existing insurance policies which DEI maintains in favor of the Company pursuant
to the Administrative Services Agreement. DEI may retain one half of any premium
refunds and other amounts received in connection with the termination of such
insurance policies and shall pay or cause to be paid to Purchaser (or, at
Purchaser's election, the Company) the other one half of all such premium
refunds and other amounts.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions To Purchaser's Obligations. Purchaser's obligations under
this Agreement are subject to the satisfaction, at or prior to the Closing, of
the following conditions, unless waived by the Calpine Entities in writing:
(a) The representations and warranties of the Dominion
Entities contained herein shall be true and correct in all material respects as
of the date hereof and as of the Closing Date as if made on and as of the
Closing Date.
(b) The Dominion Entities shall have performed and complied
with all of, and shall not as of the Closing Date be in default under any of,
the covenants, agreements and obligations contained in this Agreement which
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are required to be performed or complied with by any of the Dominion Entities on
or prior to the Closing Date.
(c) No Material Adverse Effect shall have occurred and be continuing on
the Closing Date.
(d) This Agreement and the transactions contemplated hereby
shall have been approved by the Boards of Directors of each of the Calpine
Entities.
(e) Purchaser shall have received (i) from Seller one or more
stock certificates evidencing the Purchased TCC Stock being purchased by
Purchaser, (ii) from DEI one or more stock certificates evidencing the DEI Texas
Stock, and (iii) from DEI an assignment agreement reasonably satisfactory in
form and substance to Purchaser pursuant to which DEI's interest under the
Administrative Services Agreement is assigned to Purchaser or one of its
Affiliates.
(f) Seller shall have tendered to the Company, and the Company
shall have accepted and redeemed, the Redeemed TCC Stock as provided in Article
III hereof.
(g) Purchaser shall have received certificates of the
President or any Vice President of each Dominion Entity confirming the matters
set forth in Section 7.1(a) and (b) as of the Closing Date, in form and
substance reasonably satisfactory to Purchaser.
(h) Purchaser shall have received copies of all duly executed
and delivered waivers and consents listed on Schedule 4.3 and Schedule 6.9, each
in form and substance reasonably satisfactory to Purchaser.
(i) Purchaser shall have received copies of each of the
Contracts listed on Schedules 4.10A and Schedule 4.10B, certified as of the
Closing Date as true, correct and complete by the President or any Vice
President of DEI.
(j) Purchaser shall have received all of the books and records
of DEI Texas and true and correct copies of all records in the possession of the
Dominion Entities relating to the Company and its Subsidiaries.
(k) The Dominion Entities, the Calpine Entities and any other
necessary Persons shall have executed and delivered all agreements and
instruments necessary to effectuate the covenants set forth in Section 6.8(b).
(l) Purchaser shall have received the unconditional
resignations of (i) all officers and directors of the Company and its
Subsidiaries appointed by any of the Dominion Entities and (ii) all officers and
directors of DEI Texas, in each case effective as of the Closing Date.
(m) Purchaser shall have received certificates from the
Secretary or an Assistant Secretary of each Dominion Entity, dated as of the
Closing Date, certifying the Charter Documents of each Dominion Entity and
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DEI Texas, the resolutions of the Board of Directors of each Dominion Entity and
the incumbency and specimen signatures of each person executing this Agreement
and any agreements, instruments, certificates or other documents delivered
pursuant hereto by or on behalf of the Dominion Entities or DEI Texas.
(n) Purchaser shall have received the opinion, dated the
Closing Date, of McGuire, Woods, Battle & Boothe LLP, counsel to the Dominion
Entities, as to the matters set forth in Sections 4.1, 4.2 and 4.3 in form and
substance reasonably satisfactory to Purchaser.
(o) Purchaser shall have received (i) good standing
certificates (A) of the Dominion Entities and DEI Texas in their respective
jurisdictions of organization and (B) of DEI and DEI Texas in the State of
Texas, and (ii) a certificate of existence of Bayonne in the State of New
Jersey, in each case as of a date not less than ten (10) days prior to the
Closing Date.
(p) No injunction or order issued by a court of competent
jurisdiction that prohibits the consummation of the transactions contemplated
herein shall be in effect.
7.2 Conditions To Dominion Entities' Obligations. The obligations of the
Dominion Entities under this Agreement are subject to the satisfaction, at or
prior to the Closing, of the following conditions, unless waived by the Dominion
Entities in writing:
(a) The representations and warranties of Purchaser contained
herein shall be true and correct in all material respects as of the date hereof
and as of the Closing Date as if made on and as of the Closing Date.
(b) Purchaser shall have performed and complied with all of,
and shall not as of the Closing Date be in default under any of, the covenants,
agreements and obligations contained in this Agreement which are required to be
performed or complied with by Purchaser on or prior to the Closing Date.
(c) This Agreement and the transactions contemplated hereby
shall have been approved by the Boards of Directors of each of the Dominion
Entities.
(d) Purchaser shall have paid the Purchase Price to Seller as provided
in Section 2.2.
(e) Seller shall have tendered to the Company, and the Company
shall have accepted and redeemed, the Redeemed TCC Stock as provided in Article
III hereof, and Calpine shall have delivered to Seller the duly executed Calpine
Guaranty.
(f) The Dominion Entities shall have received certificates of
the President or any Vice President of Purchaser confirming the matters set
forth in Section 7.2(a) and (b) as of the Closing Date, in form and substance
reasonably satisfactory to the Dominion Entities.
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(g) The Dominion Entities shall have received copies of all
duly executed and delivered waivers and consents listed on Schedule 5.3 and
Schedule 6.9, each in form and substance reasonably satisfactory to the Dominion
Entities.
(h) The Dominion Entities, the Calpine Entities and any other
necessary Persons shall have executed and delivered all agreements and
instruments necessary to effectuate the covenants set forth in Section 6.8(b).
(i) The Dominion Entities shall have received certificates
from the Secretary or an Assistant Secretary of Purchaser, dated as of the
Closing Date, certifying the Charter Documents of Purchaser, the resolutions of
the Board of Directors of Purchaser and the incumbency and specimen signatures
of each person executing this Agreement and any agreements, instruments,
certificates or other documents delivered pursuant hereto by or on behalf of
Purchaser.
(j) The Dominion Entities shall have received the opinion,
dated the Closing Date, of Washburn, Briscoe & McCarthy, A Professional
Corporation counsel to Purchaser, as to the matters set forth in Sections 5.1,
5.2 and 5.3 in form and substance reasonably satisfactory to the Dominion
Entities.
(k) No injunction or order issued by a court of competent
jurisdiction that prohibits the consummation of the transactions contemplated
herein shall be in effect.
(l) Seller shall have received, from a third party mutually
acceptable to Seller and Purchaser, a valuation report concluding that the Net
Present Value of the Redemption Payments equals or exceeds $56,750,000.
(m) The letter of credit provided by DEI to HL&P on behalf of
Clear Lake pursuant to the power purchase agreement between Clear Lake and HL&P
shall have been terminated or returned to DEI, or Purchaser shall have made
arrangements with HL&P satisfactory to DEI to terminate such letter of credit or
to have it returned to DEI.
7.3 Inaccuracy of Representations. If Purchaser, Seller or DEI
has knowledge of any material inaccuracy in the representations and warranties
of the Dominion Entities or Purchaser hereunder as of the Closing Date or of any
facts, circumstances or occurrences that would result in any such material
inaccuracy, it shall promptly inform the other parties of such material
inaccuracy or such facts, circumstances or occurrences. Such disclosure shall
not affect the rights or liabilities of any party with respect to a breach of a
representation or warranty hereunder, except that, if such disclosure is made,
or such material inaccuracy otherwise becomes known to the party or parties to
whom such representation or warranty is to be made, prior to the Closing Date
and the party to whom such representation or warranty was made elects to close
the transactions contemplated by this Agreement notwithstanding such breach,
such party will be deemed to have waived such breach of representation or
warranty.
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ARTICLE VIII
INDEMNIFICATION
8.1 Indemnity.
(a) The Dominion Entities hereby jointly and severally
indemnify and hold harmless the Calpine Entities, the Company and each of its
Subsidiaries, and DEI Texas, and their respective Affiliates, directors,
officers, employees, agents, successors and assigns, from and against any and
all liabilities, judgments, claims, settlements, losses, damages, fees, liens,
taxes, penalties, obligations and expenses (including reasonable attorney's fees
and expenses) incurred or suffered by any such Person directly or indirectly
arising or resulting from any Excluded Liability or breach of any
representation, warranty, covenant or obligation of any of the Dominion Entities
in this Agreement or any agreement, instrument, certificate or other document
delivered pursuant to this Agreement by or on behalf of any Dominion Entity;
provided that the aggregate liability of the Dominion Entities under this
Section 8.1 shall not exceed the Purchase Price.
(b) Purchaser hereby indemnifies and holds harmless the
Dominion Entities and their respective Affiliates, directors, officers,
employees, agents, successors and assigns from and against any and all
liabilities, judgments, claims, settlements, losses, damages, fees, liens,
taxes, penalties, obligations and expenses (including reasonable attorney's fees
and expenses) incurred or suffered by any such Person directly or indirectly
arising or resulting from any breach of any representation, warranty, covenant
or obligation of Purchaser in this Agreement or any agreement, instrument,
certificate or other document delivered pursuant to this Agreement by or on
behalf of Purchaser.
(c) The Indemnifying Party shall have the right, at its option
and at its own expense, to be represented by counsel of its choice and to
participate in, or to take exclusive control of, the defense, negotiation and/or
settlement of any proceeding, claim or demand which relates to any amounts
indemnifiable or potentially indemnifiable under this Article VIII; provided,
however, that the Indemnified Party may participate in any such proceeding with
counsel of its choice, which shall be at its own expense, unless the
Indemnifying Party does not pursue with reasonable diligence such defense,
negotiation or settlement. The Indemnified Party shall have a right to notice of
any settlement, and the Indemnifying Party shall not execute or otherwise agree
to any settlement agreement or consent decree which provides for other than
monetary payment (including, but not limited to any with admission of liability,
restrictions of business activities or criminal, civil or administrative
penalties) without the Indemnified Party's prior written consent, which consent
will not be unreasonably withheld. Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay or settle any such claim, provided
that in such event it shall waive any right to indemnity therefor by the
Indemnifying Party, unless such payment or settlement follows the failure of the
Indemnifying Party to assume the defense of such claim, in which case such
payment or settlement will not result in any waiver of any right of indemnity
with respect thereto. If the Indemnifying Party elects not to defend or settle
such proceeding, claim or
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demand and the Indemnified Party defends, settles or otherwise deals with any
such proceeding, claim or demand, which settlement may be without the consent of
the Indemnifying Party, the Indemnified Party shall provide ten (10) days'
advance written notice of any settlement to the Indemnifying Party and will act
reasonably and in accordance with its good faith business judgment, but such
settlement by the Indemnified Party shall not relieve the Indemnifying Party of
any of its obligations or liabilities hereunder, including its obligation to
indemnify the Indemnified Party for the costs of such defense and settlement.
The parties shall cooperate fully with each other in connection with the
defense, negotiation or settlement of any such legal proceeding, claim or
demand.
(d) After final judgment or award shall have been rendered by
a court, arbitration board or administrative agency of competent jurisdiction
and the expiration of the time in which to appeal therefrom, or a settlement
shall have been consummated, or the Indemnifying Party and the Indemnified Party
shall have arrived at a mutually binding agreement with respect to each separate
matter indemnified by the Indemnifying Party, the Indemnified Party shall
forward to the Indemnifying Party notice of any sums due and owing by the
Indemnifying Party with respect to such matter and the Indemnifying Party shall
pay all of the sums so owing to the Indemnified Party within ten (10) days after
the date of such notice.
8.2 Notices. In case any claim or litigation which might give
rise to any obligation of a party under this Article VIII (each an "Indemnifying
Party") shall come to the attention of the party seeking indemnification
hereunder (the "Indemnified Party"), the Indemnified Party shall promptly notify
the Indemnifying Party in writing of the existence and amount thereof. The
Indemnifying Party shall promptly notify the Indemnified Party in writing if it
accepts such claim or litigation as being within its indemnification obligations
under this Article VIII. Such response shall be delivered no later than thirty
(30) days after the initial notification from the Indemnified Party; provided,
however, that if the Indemnifying Party reasonably cannot respond to such notice
within thirty (30) days, the Indemnifying Party shall respond to the Indemnified
Party as soon thereafter as reasonably possible. A failure to give timely notice
as provided in this Section 8.2 will not affect the rights or obligations of any
party hereunder except if, and only to the extent that, as a result of such
failure, the party which was entitled to receive such notice was actually
prejudiced as a result of such failure.
8.3 Insurance and Tax Benefits. The amount of any claim by an
Indemnified Party for indemnification pursuant to this Article VIII shall be
computed net of insurance proceeds and tax benefits received or receivable (and
likely to be received) by such Indemnified Party on account of such claim.
8.4 Applicability. Subject to Section 8.5 below, the
provisions of this Article VIII shall apply notwithstanding the sole, joint or
concurrent negligence, strict liability or other fault of the Indemnified Party.
If both the Indemnified Party and the Indemnifying Party are adjudicated
negligent or otherwise at fault or strictly liable without fault, the
contractual indemnification obligations under this Article VIII shall,
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subject to Section 8.5, continue, but the Indemnifying Party shall only
indemnify the Indemnified Party for the percentage of responsibility for the
damage or injuries adjudicated to be attributable to the Indemnifying Party.
8.5 Limitation on Damages. In no event shall the
indemnification obligations under this Article VIII or any other losses,
expenses or damages recoverable by any party hereunder cover or include
consequential, incidental, special, indirect or punitive damages or lost profits
suffered by any party hereto, whether based on statute, contract, tort or
otherwise, and whether or not arising from the Indemnifying Party's sole, joint
or concurrent negligence, strict liability or other fault.
ARTICLE IX
TERMINATION RIGHTS
[intentionally omitted]
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Entire Agreement. This Agreement, the schedules and
exhibits attached hereto and the agreements, instruments, certificates and other
documents delivered in connection with this Agreement contain the entire
agreement among the parties with respect to the transactions contemplated by
this Agreement and supersede all prior agreements or understandings among the
parties.
10.2 Descriptive Headings. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
10.3 Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed sufficiently
given if delivered personally or by recognized private delivery service (such as
Federal Express or DHL), sent by telecopy (with confirmation of receipt), or
sent by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Purchaser, to:
Calpine Finance Corporation
50 West San Fernando Street
San Jose, California 95113
Attn: Ron A. Walter
Telephone: (408) 995-5115
Telecopier: (408) 995-0505
With a copy to:
Washburn, Briscoe & McCarthy,
A Professional Corporation
55 Francisco Street, Suite 600
San Francisco, California 94133
Attn: David C. Spielberg
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Telephone: (415) 421-3200
Telecopier: (415) 421-5044
If to the Dominion Entities, to:
Dominion Energy, Inc.
Dominion Cogen, Inc.
901 East Byrd Street
Richmond, Virginia 23219
Attn: Christine M. Schwab
Telephone: (804) 775-5868
Telecopier: (804) 698-2783
with a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
901 East Cary Street
Richmond, Virginia 23219
Attn: R. Marshall Merriman, Jr.
Telephone: (804) 775-4380
Telecopier: (804) 698-2120
or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other parties in writing in accordance herewith.
Each such notice, request or communication shall be effective when received or,
if given by mail, when delivered at the address specified in this Section 10.3
or on the fifth business day following the date on which such communication is
posted, whichever occurs first.
10.4 Counterparts. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be decried to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
10.5 Survival. All representations, warranties and covenants
of Seller and Purchaser hereunder shall survive the Closing and expire on the
date that is two (2) years after the Closing Date, except with respect to (i)
Sections 4.1(a), 4.2, 4.4, 4.6, 5.1, 5.2, 5.5 and 6.10 which shall survive
indefinitely, (ii) Sections 3.2 through 3.8, inclusive, which shall terminate
upon the termination of the Redemption Term, (iii) Section 6.1, which shall
terminate twenty-five (25) years after the Closing Date, and (iv) Sections 4.9
and 6.5 which shall terminate upon the expiration of the statutes of limitations
for matters described therein. Further, the indemnification and reimbursement
obligations under Article VIII shall survive (x) indefinitely with respect to
any indemnity claim based on fraud or intentional misrepresentation, (y) for the
applicable survival period described in the preceding sentence with respect to
the representations, warranties and covenants described therein, and (z) until
any claims for, or any claims that may result in, any liability, judgment,
claim, settlement, loss, damage, fee, lien, tax, penalty, obligation or expense
for which indemnity may be sought hereunder have been resolved with respect to
claims of which the Indemnifying Party has received written notice from the
Indemnified Party on or before the last of the survival periods for such claims
provided in this Section 10.5.
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10.6 Benefits of Agreement. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. This Agreement is for the
sole benefit of the parties hereto and not for the benefit of any third party.
10.7 Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure from this Agreement, shall be effective unless it is in
writing and signed by the parties hereto. Such modification, amendment, waiver
or consent shall be effective only in the specific instance and for the purpose
for which given.
10.8 Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by either party hereto without
the prior written consent of the other parties hereto. Notwithstanding the
foregoing, (i) Purchaser may assign any or all of its rights and obligations
hereunder to any wholly owned direct or indirect Subsidiary of Calpine, and upon
Seller's receipt of notice from Purchaser of any such assignment, Purchaser will
be released from all liabilities and obligations hereunder, accrued and
unaccrued, such assignee will be deemed to have assumed, ratified, agreed to be
bound by and perform all such liabilities and obligations, and all references
herein to "Purchaser" shall thereafter be deemed references to such assignee, in
each case without the necessity for further act or evidence by the parties
hereto or such assignee; (ii) Purchaser and its permitted successors and assigns
may assign, transfer, pledge or otherwise dispose of their rights and interests
hereunder to a trustee or lending institution(s) for the purposes of financing;
provided, however, that no such assignment or disposition shall relive or in any
way discharge Purchaser or its permitted successors and assigns from the
performance of their duties and obligations under this Agreement; and (iii)
Seller may assign any or all of its rights to receive payment of any portion of
the Redemption Payments (but not any other rights, including rights of audit or
inspection associated therewith) to any Person or Persons, and the Company
agrees, upon direction from Seller, to pay such assigned Redemption payments
directly to such assignee(s); provided, however, that payment by the Company
pursuant to any such notice of assignment from Seller shall constitute full
performance by the Company with respect to any obligations to make such
Redemption Payments to Seller hereunder; provided, further, that all
arrangements necessary to effect such assignments shall be at Seller's sole cost
and expense. The Dominion Entities agree to execute and deliver such documents
as may be reasonably necessary to accomplish any such assignment, transfer,
conveyance, pledge or disposition of rights hereunder so long as the Dominion
Entities' rights under this Agreement are not thereby altered, amended,
diminished or otherwise impaired.
10.9 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict of
laws principles.
10.10 Consent to Jurisdiction. Each of the Dominion Entities
and Purchaser hereby submits to the nonexclusive jurisdiction of the United
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States District Court for the Southern District of New York and of any state
court sitting in the Borough of Manhattan, New York, New York for purposes of
all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each of the Dominion Entities and Purchaser
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum. Any and all service of process
and any other notice in any such proceeding shall be effective against any of
the Dominion Entities and Purchaser if given personally or by registered or
certified mail, return receipt requested, or by any other means of mail that
requires a signed receipt, postage prepaid, mailed to such Dominion Entity or
Purchaser.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed and delivered as of the day and year first above written.
DOMINION COGEN, INC. CALPINE FINANCE COMPANY
By: /s/ E. Wayne Harrell By: /s/ Scott R. Healy
----------------------------- -----------------------------
Name: E. Wayne Harrell Name: Scott R. Healy
--------------------------- ---------------------------
Title: Senior Vice President Title:
-------------------------- --------------------------
DOMINION ENERGY, INC. TEXAS COGENERATION COMPANY
By: /s/ E. Wayne Harrell By: /s/ Scott R. Healy
----------------------------- -----------------------------
Name: E. Wayne Harrell Name: Scott R. Healy
--------------------------- ---------------------------
Title: Senior Vice President Title:
-------------------------- --------------------------
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