Exhibit 2.9
INVESTMENT AND PURCHASE AGREEMENT
by and between
▇▇▇▇▇▇▇▇▇ HOLDING CORPORATION
and
COVANTA ENERGY CORPORATION
Dated as of December 2, 2003
TABLE OF CONTENTS
1. Defined Terms............................................... 6
2. Actions Upon Signing; Deposit............................... 19
2.1. Approval Order..................................... 19
2.2. Payment of Deposit................................. 19
3. Closing; Closing Date; Expense Reimbursement................ 19
3.1. Issuance and Purchase of New Common Stock.......... 19
3.2. Funding............................................ 20
3.3. Payment of Expense Reimbursement................... 20
3.4. Company Deliverables............................... 20
3.5. Purchaser Deliverables............................. 20
4. Representations and Warranties of Company................... 21
4.1. Due Incorporation and Authority.................... 21
4.2. Subsidiaries and Investment Entities............... 21
4.3. Foreign Qualification.............................. 22
4.4. Outstanding Capital Stock.......................... 22
4.5. Options or Other Rights............................ 22
4.6. Authority Relative to this Agreement............... 22
4.7. Financial Statements............................... 23
4.8. No Material Adverse Change......................... 24
4.9. Compliance with Governmental Rules................. 25
4.10. Governmental Approvals............................. 25
4.11. No Breach.......................................... 25
4.12. Environmental Matters.............................. 26
4.13. Claims and Proceedings............................. 27
4.14. Contracts.......................................... 28
4.15. Tangible Property.................................. 29
4.16. Intellectual Property.............................. 29
4.17. Title to Properties................................ 29
4.18. Employee Benefit Plans............................. 30
4.19. Employee Matters................................... 31
4.20. Insurance.......................................... 32
4.21. No Brokers......................................... 32
4.22. SEC Documents and Other Documents.................. 32
4.23. Projects........................................... 33
4.24. Qualifying Facility Status; Nature of Business..... 33
4.25. Certain Regulatory Matters......................... 34
4.26. Agreements with Regulatory Agencies................ 34
4.27. Taxes.............................................. 34
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5. Representations and Warranties of Purchaser................. 36
5.1. Due Incorporation and Authority.................... 36
5.2. Authority to Execute and Perform Agreement......... 37
5.3. Purchase for Investment............................ 37
5.4. Plan Acknowledgment................................ 37
5.5. Financing.......................................... 37
5.6. Certain Tax Matters................................ 37
5.7. SEC Documents and Other Documents.................. 37
5.8. Insurance Matters.................................. 38
5.9. No Material Adverse Change......................... 39
5.10. Utility Regulatory Status.......................... 39
5.11. Marine Services Affiliates......................... 39
6. Covenants and Agreements.................................... 39
6.1. Conduct of Business................................ 39
6.2. Corporate Examinations and Investigations.......... 41
6.3. Publicity.......................................... 42
6.4. Efforts and Actions to Cause Closing to Occur...... 42
6.5. Governmental Approvals............................. 42
6.6. No Inconsistent Action............................. 43
6.7. Bankruptcy Covenants............................... 43
6.8. ISRA............................................... 44
6.9. Connecticut Property Transfer Act.................. 44
6.10. Exclusivity........................................ 45
6.11. Tax Matters........................................ 45
6.12. Pro Forma Taxes.................................... 46
6.13. D&O Insurance...................................... 46
6.14. Financial Statements............................... 46
6.15. Benefit Plans...................................... 46
7. Conditions Precedent to the Obligation of Purchaser......... 46
7.1. Representations and Covenants...................... 46
7.2. Required Consents and Required Governmental
Approvals.......................................... 47
7.3. No Claims.......................................... 47
7.4. Disclosure Statement Order......................... 47
7.5. Liquidation Plan................................... 47
7.6. Confirmation Orders................................ 47
7.7. Approval Orders.................................... 47
7.8. Exit Financing..................................... 47
7.9. International Reorganization and Arrangements...... 47
7.10. Tax Sharing Agreement.............................. 48
7.11. Cash Reserve....................................... 48
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7.12. ISRA............................................... 48
7.13. Qualifying Facility Recertifications............... 48
7.14. Tax Liability...................................... 48
7.15. Opinion............................................ 48
7.16. Geothermal Sale.................................... 48
7.17. Treatment of Certain Projects...................... 48
8. Conditions Precedent to the Obligation of Company........... 48
8.1. Representations and Covenants...................... 49
8.2. Required Consents and Required Governmental
Approvals.......................................... 49
8.3. Confirmation Orders................................ 49
8.4. Exit Financing..................................... 49
8.5. New Securities Issued.............................. 49
8.6. Execution of Tax Sharing Agreement................. 49
8.7. Geothermal Sale.................................... 49
8.8. Non-Operating Loss Carryforwards................... 49
9. Designation of Executory Contracts.......................... 49
10. Representations and Warranties of Company................... 50
11. Termination of Agreement.................................... 50
11.1. Termination........................................ 50
11.2. Survival After Termination; Termination Fee........ 51
12. Miscellaneous............................................... 53
12.1. Consent to Jurisdiction and Service of Process..... 53
12.2. Notices............................................ 53
12.3. Entire Agreement................................... 54
12.4. Waivers and Amendments; Non-Contractual Remedies;
Preservation of.................................... 54
12.5. Availability of Equitable Relief................... 54
12.6. Governing Law...................................... 54
12.7. Binding Effect; Assignment......................... 54
12.8. Usage.............................................. 55
12.9. Counterparts....................................... 55
12.10. Exhibits, Appendices and Disclosure Schedules;
Cross References................................... 55
12.11. Headings........................................... 55
12.12. Interpretation..................................... 55
12.13. Severability of Provisions......................... 55
12.14. Exclusivity of Representations..................... 55
12.15. Company's Knowledge................................ 55
12.16. No Third Party Beneficiaries....................... 55
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EXHIBITS, APPENDICES AND DISCLOSURE SCHEDULES
---------------------------------------------
Exhibit A: Debtors
Exhibit B: Form of Deposit Escrow Agreement
Exhibit C-1: Form of First Lien L/C Credit Facility Credit Agreement
Exhibit C-2: Form of Second Lien L/C Credit Facility Credit Agreement
Exhibit C-3: Form of International Term Loan Credit Facility Credit Agreement
Exhibit C-4: Form of International Revolver Credit Facility Credit Agreement
Exhibit C-5: Form of Domestic Intercreditor Agreement
Exhibit C-6: Form of International Intercreditor Agreement
Exhibit D: Form of Senior Secured Notes Indenture
Exhibit E-l: Plan
Exhibit E-2: Liquidation Plan
Exhibit F: Form of Tax Sharing Agreement
Exhibit G: Terms of International Reorganization and Arrangements
Exhibit H: Form of CPIH Management Services & Reimbursement Agreement
Appendix 1: Net Operating Loss Carryforwards
Appendix 2: Methodology for Pro Forma Tax
Company Disclosure Schedule
---------------------------
Section 4.2(i) Subsidiaries
Section 4.2(ii) Investment Entities
Section 4.2(iii) Organizational Chart
Section 4.4(i) Outstanding Capital Stock
Section 4.4(ii) Outstanding Liens on Capital Stock
Section 4.5 Options or Other Rights
Section 4.7 Financial Statements
Section 4.8 Material Adverse Change
Section 4.9 Compliance with Laws
Section 4.10 Required Governmental Approvals
Section 4.11(b) Required Consents
Section 4.11(c) Restrictions on Indebtedness
Section 4.12 Environmental Matters
Section 4.13 Claims and Proceedings
Section 4.14 Material Contracts
Section 4.16 Intellectual Property
Section 4.17(a) Real Property
Section 4.17(b) Real Property Agreement Defaults
Section 4.18 Employee Benefits
Section 4.19 Employee Matters
Section 4.20 Insurance
Section 4.22 SEC Documents and Other Documents
Section 4.23 Projects
Section 4.24(a) Qualifying Small Power Production Facilities and Qualifying
Cogeneration Facilities
Section 4.24(b) Non-Exempt Qualifying Facility Projects
Section 4.27 Taxes
Section 6.1 Conduct of Business
Section 6.11 Tax Matters
Section 7.17 Treatment of Certain Projects
Purchaser Disclosure Schedule
-----------------------------
Section 5.7(a) SEC Documents and Other Documents
Section 5.8(d) Insurance Laws
Page 5
THIS INVESTMENT AND PURCHASE AGREEMENT (this "Agreement"),
dated as of December 2, 2003, by and between ▇▇▇▇▇▇▇▇▇ HOLDING CORPORATION, a
Delaware corporation ("Purchaser"), and COVANTA ENERGY CORPORATION, a Delaware
corporation ("Company"), as debtor and debtor-in-possession under Chapter 11 of
the Bankruptcy Code.
WHEREAS, Company and certain of its Affiliates (as indicated
on Exhibit A hereto) are debtors and debtors-in-possession (collectively, the
"Debtors" and each, a "Debtor") in Chapter 11 case numbers 02-40826 through
02-40949, 02-16322 et al (the "Case") pending before the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court");
and
WHEREAS, subject to the terms and conditions set forth herein,
and pursuant to the Plan, Purchaser desires to purchase from Company, and
Company desires to sell to Purchaser, for $30,000,000, all shares of common
stock (the "New Common Stock") of Company as reorganized under the Plan (Company
as so reorganized, "Reorganized Covanta"), representing 100% of the equity of
Reorganized Covanta immediately following the Closing.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, agreements, representations and warranties of the parties
hereto as set forth herein, intending to be legally bound hereby the parties
hereby agree as follows:
1. Defined Terms.
Capitalized terms used herein but not otherwise defined herein shall
have the meaning assigned thereto in the Bankruptcy Code or in the Plan, as
applicable. In addition, as used in this Agreement, the following terms have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person
Controlling, Controlled by or under common Control with such Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section
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6.10(a).
"Approval Order" means an Order of the Bankruptcy Court approving
Sections 3.3, 6.10, 11.2(b) and 11.2(d) of this Agreement.
"Assumptions" shall have the meaning set forth in Section 4.18.
"Audited Financials" shall have the meaning set forth in Section
4.7(a).
"Balance Sheet" shall have the meaning set forth in Section 4.7(a).
"Balance Sheet Date" shall have the meaning set forth in Section
4.7(a).
"Bankruptcy Code" means title 11 of the United States Code, as amended
from time to time, as applicable to the Case.
"Bankruptcy Court" shall have the meaning set forth in the Recitals.
"Bankruptcy-Related Requirements" shall have the meaning set forth in
Section 6.10(b).
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as
amended, promulgated under section 2075 of title 28 of the United States Code,
as applicable to the Case.
"Benefit Plans" shall have the meaning set forth in Section 4.18.
"Business Day" means any day other than a Saturday, Sunday or "legal
holiday" as defined in Bankruptcy Rule 9006(a).
"Case" shall have the meaning set forth in the Recitals.
"Cash Tax Reserve" shall have the meaning set forth in Section 6.12(b).
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et seq.), or any
successor statute, and all implementing regulations promulgated thereunder.
"Claims" means any actions, causes of action, suits, claims,
complaints, demands, litigations or legal, administrative or arbitral
proceedings or investigations.
"Closing" shall have the meaning set forth in Section 3.
"Closing Cash Balance" means $40,000,000 plus the cumulative
Operational Cash Flow Adjustment for the period from January 3, 2004 through the
Closing Date.
"Closing Date" shall have the meaning set forth in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the Preamble.
"Company Disclosure Schedule" means the Company Disclosure Schedule
attached hereto.
"Company Failure" means a failure to consummate the closing of the
Second Lien L/C Credit Facility Credit Agreement or the International Revolver
Credit Facility Credit Agreement as a result of (a) Company or any of its
Affiliates failing to fulfill a condition precedent to such consummation that is
Page 7
solely within the control of Company or its Affiliates, (b) Company or any of
its Affiliates failing to execute and deliver either of such Credit Agreements
or any of the instruments contemplated by such Credit Agreements to be delivered
by Company or any of its Affiliates or (c) any other reason within the sole
control of Company or any of its Affiliates.
"Confidentiality Agreement" shall have the meaning set forth in Section
6.2.
"Confirmation Date" means the date that the Confirmation Orders are
entered by the Bankruptcy Court.
"Confirmation Hearing" means the hearing held by the Bankruptcy Court
pursuant to section 1128 of the Bankruptcy Code on confirmation of the Plan, as
such hearing may be adjourned or continued from time to time.
"Confirmation Orders" shall have the meaning set forth in Section 7.6.
"Consideration" shall have the meaning set forth in Section 3.1.
"Contemplated Transactions" means the transactions contemplated hereby,
including without limitation, the transactions contemplated under the Plan.
"Contingent Obligations" shall have the meaning set forth in the DIP
Agreement.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Copyrights" means any foreign or United States copyright registrations
and applications for registration thereof and any non-registered copyrights.
"CPIH" means Covanta Power International Holdings, Inc.
"CPIH Management Services & Reimbursement Agreement" means the
Management Services & Reimbursement Agreement to be entered into by Reorganized
Covanta, the other Company Entities party thereto and CPIH on the Closing Date,
substantially in the form attached as Exhibit H hereto.
"Covanta Tax Affiliate" shall mean any entity in respect of which
Covanta or any Subsidiary is or has been or will be liable for Taxes.
"Credit Agreements" means, collectively, the First Lien L/C Credit
Facility Credit Agreement, the Second Lien L/C Credit Facility Credit Agreement,
the International Term Loan Credit Facility Credit Agreement and the
International Revolver Credit Facility Credit Agreement.
"CTA" shall have the meaning set forth in Section 6.9.
"Debtor" and "Debtors" shall have the meanings set forth in the
Recitals.
"Definitive Documents" means the following agreements and documents:
this Agreement, the CPIH Management Services & Reimbursement Agreement, the
Disclosure Statement, the Domestic Intercreditor Agreement, the First Lien L/C
Credit Facility Credit Agreement, the International Intercreditor Agreement, the
International Revolver Credit Facility Credit Agreement, the International Term
Loan Credit Facility Credit Agreement, the Plan, the Liquidation Plan, the
Second Lien L/C Credit Facility Credit Agreement, the Senior Secured Notes
Indenture, the Tax Note, the Tax Sharing Agreement and the Unsecured Notes
Indenture.
Page 8
"Deposit" shall have the meaning set forth in Section 2.2.
"Deposit Escrow Agreement" shall have the meaning set forth in Section
2.2.
"Disclosure Schedules" means the Company Disclosure Schedule and the
Purchaser Disclosure Schedule.
"Disclosure Statement" means the disclosure statement, including all
exhibits, appendices and attachments thereto (each in form and substance
reasonably acceptable to Purchaser), filed in connection with the Plan approved
by Order of the Bankruptcy Court in accordance with section 1125 of the
Bankruptcy Code, as amended or supplemented.
"Disclosure Statement Order" shall have the meaning set forth in
Section 7.4.
"DIP Agreement" means the Debtor-In-Possession Credit Agreement, dated
as of April 1, 2002, among Company and each of its subsidiaries party thereto,
the financial institutions listed therein as lenders, Bank of America, N.A., as
Administrative Agent, and Deutsche Bank AG, New York Branch, as Documentation
Agent, as amended, supplemented or otherwise modified through the date hereof.
"Distributable Cash" shall have the meaning set forth in the Plan.
"Domestic Intercreditor Agreement" means the Intercreditor Agreement to
be entered into by Reorganized Covanta, each of its Subsidiaries party thereto
and each of the financial institutions listed therein as lenders, agents and/or
trustees on the Closing Date, substantially in the form attached as Exhibit C-5
hereto.
"Domestic Power Project" means a Project located in the United States
which generates electricity for sale.
"Domestic Project" shall have the meaning set forth in Section 4.23.
"D&O Insurance" means tail coverage for a period of three to six years
under Company's existing or other directors and officers insurance policy
covering Company's and its subsidiaries' current directors and officers.
"D&O Insurance Cost" means the cost of the D&O Insurance.
"Effective Date" means the date of effectiveness of the Plan specified
in Section 10.2 of the Plan (subject to the terms and conditions of this
Agreement), unless otherwise waived as provided in Section 10.3 of the Plan
(subject to the terms and conditions of this Agreement), or such other date
fixed by Company and Purchaser upon notice to the Bankruptcy Court.
"Employer" means any former or current employee of Company or any of
its subsidiaries.
"Environment" means navigable waters, waters of the contiguous zone,
ocean waters, natural resources, surface waters, ground water, drinking water
supply, land surface, subsurface strata, ambient air, both inside and outside of
buildings and structures, man-made buildings and structures, and plant and
animal life on earth.
"Environmental Claim" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any Governmental Authority or
any other Person, arising (a) pursuant to or in connection with any actual or
alleged violation of any Environmental Law or (b) in connection with any actual
Page 9
or alleged damage, injury, threat or harm to health, safety, natural resources
or the environment.
"Environmental Laws" means any and all current or future statutes,
ordinances, orders, rules, regulations, guidance documents, judgments,
Governmental Approvals, or any other requirements of any Governmental Authority
relating to (a) environmental matters, including those relating to any Hazardous
Materials Activity; (b) the generation, use, storage, transportation or disposal
of Hazardous Materials; or (c) occupational safety and health, industrial
hygiene, land use or the protection of human, plant or animal health or welfare,
in any manner applicable to Company, any of the Subsidiaries or any Facility.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"ERISA Affiliate" means, as applied to any Person, (i) any corporation
that is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Code of which that Person is a member; (ii) any trade or
business (whether or not incorporated) that is a member of a group of trades or
businesses under common control within the meaning of Section 414(c) of the Code
of which that Person is a member; and (iii) any member of an affiliated service
group within the meaning of Section 414(m) or (o) of the Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member.
"ERISA Event" means (a) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation) that would reasonably be expected to result
in a Material Adverse Effect on Company; (b) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the imposition of a Lien on the property of Company or
any of its Subsidiaries pursuant to Section 412(n) of the Internal Revenue Code,
except any such failure or imposition attributable to an error made in good
faith which results in the imposition of liability or a Lien on Company and its
Subsidiaries and their respective ERISA Affiliates of an immaterial amount, so
long as such error, failure and imposition are promptly corrected after
discovery of such error by Company or any of its Subsidiaries, or the failure to
make by its due date a required installment of a material amount under Section
412(m) of the Internal Revenue Code with respect to any Pension Plan or the
failure to make any required contribution of a material amount to a
Multiemployer Plan; (c) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (d) the
withdrawal by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in material current liability of
Company or any of its Subsidiaries pursuant to Section 4063 or 4064 of ERISA;
(e) the institution by the PBGC of proceedings to terminate any Pension Plan, or
the occurrence of any event or condition that would reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan; (f) the imposition of
material current liability on Company, any of its Subsidiaries or any of their
respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by
reason of the application of Section 4212(c) of ERISA where such reorganization,
insolvency or termination would reasonably be expected to result in a Material
Adverse Effect on Company; (g) the withdrawal of Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if it would reasonably be expected that Company or any of
its Subsidiaries will incur material liability therefor (in excess of the
contribution that would otherwise have been due absent such withdrawal), or the
Page 10
receipt by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Section 4041A or 4042 of ERISA; (h) the
assertion of a material claim (other than routine claims for benefits) against
any Benefit Plan other than a Multiemployer Plan or the assets thereof, or
against Company, any of its Subsidiaries or any of their respective ERISA
Affiliates in connection with any Benefit Plan, if such assertion or the
liability with respect thereto would reasonably be expected to result in a
Material Adverse Effect on Company; (i) receipt from the Internal Revenue
Service of notice of the failure of any Pension Plan (or any other Benefit Plan
intended to be qualified under Section 401(a) of the Internal Revenue Code) to
qualify under Section 401(a) of the Internal Revenue Code, or of the failure of
any trust forming part of any Pension Plan to qualify for exemption from
taxation under Section 501(a) of the Internal Revenue Code, in either case if
such failure would reasonably be expected to result in a Material Adverse Effect
on Company; or (j) the imposition of a Lien on the property of Company or any of
its Subsidiaries pursuant to Section 401(a)(29) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan.
"Escrow Agent" shall have the meaning set forth in Section 2.2.
"EWG" means an exempt wholesale generator within the meaning of 15
U.S.C. Section 79z-5a of PUHCA.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exclusivity Provisions" shall have the meaning set forth in Section
6.10(a).
"Exit Costs" shall have the meaning set forth in the Plan.
"Exit Financing" means (a) the credit facilities for post-Effective
Date operations, substantially on the terms set forth in the Credit Agreements
and (b) the Senior Secured Notes issuance, substantially on the terms set forth
in the Senior Secured Notes Indenture.
"Expense Reimbursement" means the payments by Company to Purchaser and
Laminar, in accordance with the provisions of Section 3.3 and Section 11.2(d)
hereof, on account of Purchaser's and Laminar's actual, documented out-of-pocket
costs, fees and expenses (including, without limitation, the fees and expenses
of consultants, financial advisors, accountants and counsel and the costs, fees
and expenses relating to Purchaser's and Laminar's due diligence) incurred in
connection with the negotiation and documentation of this Agreement, the other
Definitive Documents, the consummation of the Contemplated Transactions, any of
the costs, fees and expenses associated with the financing sources of Purchaser
(other than any arrangement, transaction, commitment or other fees under the
Second Lien L/C Credit Facility Credit Agreement and the International Revolver
Credit Facility Credit Agreement) and any and all related matters.
"Facilities" means any and all real property (including all buildings,
fixtures or other improvements located thereon) now, hereafter or heretofore
owned, leased, operated or used by Company or any of the Subsidiaries or any of
their respective predecessors.
"FERC" means the Federal Energy Regulatory Commission or any successor
agency thereto.
"FIFRA" means the Federal Insecticide, Fungicide, and Rodenticide Act,
as amended (7 U.S.C. ss. 136 et seq.), or any successor statute, and all
implementing regulations promulgated thereunder.
"Final Deposit" shall have the meaning set forth in Section 2.2.
Page 11
"Final Order" means an Order of the Bankruptcy Court that has not been
reversed, stayed or modified and as to which the time to appeal or seek review,
rehearing, reargument or certiorari has expired and as to which no appeal or
petition for review, rehearing, reargument, stay or certiorari is pending, or as
to which any right to appeal or to seek certiorari, review, or rehearing has
been waived, or, if an appeal, reargument, petition for review, certiorari or
rehearing has been sought, the order or judgment of the Bankruptcy Court that
has been affirmed by the highest court to which the order was appealed or from
which the reargument, review or rehearing was sought, or certiorari has been
denied, and as to which the time to take any further appeal or seek further
reargument, review or rehearing has expired.
"First Lien Failure" means the failure of any of the following to be
true at the Closing: (a) each of the First Lien L/C Credit Facility Credit
Agreement and the International Term Loan Credit Facility Credit Agreement shall
be executed and delivered by the parties thereto and in effect, and (b) all
conditions precedent to consummation of the closings under such Credit
Agreements shall have been satisfied or waived, other than the closing of the
Second Lien L/C Credit Facility Credit Agreement, the International Revolver
Credit Facility Credit Agreement or the delivery of the Tax Sharing Agreement by
Purchaser.
"First Lien L/C Credit Facility Credit Agreement" means the Credit
Agreement to be entered into by Reorganized Covanta, each of its Subsidiaries
party thereto as borrowers, the financial institutions listed therein as
lenders, Deutsche Bank AG, New York Branch, as Documentation Agent, and Bank of
America, N.A., as Administrative Agent, on the Closing Date, substantially in
the form attached as Exhibit C-l hereto.
"Foreign Utility Company" means a foreign utility company within the
meaning of 15 U.S.C. Section 79z-5b(a)(3).
"FPA" means the Federal Power Act, as amended.
"FUCO" shall have the meaning set forth in Section 4.24(c).
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time.
"Geothermal Sale" shall have the meaning set forth in the Plan.
"Governmental Approval" means (a) any authorization, consent, approval,
license, lease, ruling, permit, tariff, rate, certification, waiver, exemption,
filing, variance, claim, Order of, by or with, (b) any required notice to, (c)
any declaration of or with or (d) any registration by or with any Governmental
Authority.
"Governmental Authority" means any foreign, United States federal,
state, municipal, local, territorial or other governmental department,
commission, board, bureau, agency, regulatory authority, instrumentality or
judicial or administrative body.
"Governmental Rule" means any statute, law, regulation, ordinance,
rule, Order, Governmental Approval, concession, grant, franchise, agreement,
directive, requirement of, or other governmental restriction or any similar
binding form of decision of or determination by, or any binding interpretation
or administration of any of the foregoing by, any Governmental Authority, now in
effect.
"Hazardous Materials" means (a) any chemical, material or substance at
any time defined as or included in the definition of (i) "hazardous wastes" or
"mixed wastes" as defined in RCRA or in any other Environmental Law; (ii)
Page 12
"hazardous substances", "pollutants" or "contaminants" as defined in CERCLA or
in any other Environmental Law; (iii) "chemical substances" or "mixtures" as
defined in TSCA or any other substance which is tested pursuant to TSCA or any
other Environmental Law, or the manufacture, processing, distribution, use or
disposal of which is regulated or prohibited pursuant to TSCA or any other
Environmental Law, including without limitation polychlorinated biphenyls and
electrical equipment which contains any oil or dielectric fluid containing
regulated concentrations of polychlorinated biphenyls; (iv) "insecticides",
"fungicides", "pesticides" or "rodenticides" as defined in FIFRA or any other
Environmental Law; or (v) "infectious waste" or "biohazardous waste" as defined
in any Environmental Law; (b) asbestos or any asbestos-containing materials; (c)
urea formaldehyde foam insulation; (d) any oil, petroleum, petroleum fraction or
petroleum derived substance; (e) any drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude oil,
natural gas or geothermal resources; (f) any flammable substances or explosives;
(g) any radioactive materials; and (h) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Governmental Authority or which may or could pose a hazard to the health and
safety of the owners, occupants or any Persons in the vicinity of any Facility
or to the indoor or outdoor environment.
"Hazardous Materials Activity" means any past, current, proposed or
threatened activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response action with respect to any of
the foregoing.
"Heber Reorganization Plan" shall have the meaning set forth in the
Plan.
"Indebtedness" shall mean (a) all indebtedness for borrowed money or
for the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable in
accordance with customary practices); (b) any other indebtedness that is
evidenced by a note, bond, debenture or similar instrument; (c) all obligations
under financing leases; (d) all obligations in respect of acceptances issued or
created; (e) all liabilities secured by any lien on any property; and (f) all
guarantee obligations.
"Intellectual Property" means all Patents, Trademarks, Copyrights,
Software and Trade Secrets used in or necessary for the conduct of the business
of Company and the Subsidiaries as currently conducted that are material to the
condition (financial or otherwise), business or operations of Company and the
Subsidiaries, taken as a whole.
"Initial Deposit" shall have the meaning set forth in Section 2.2.
"Insurance Regulator" means any Governmental Authority that regulates
the insurance operations and business of an Insurer or an insurance holding
company.
"Insurer" means each of the insurance subsidiaries or Affiliates of
Purchaser engaged in the business of insurance.
"Interim Financials" shall have the meaning set forth in Section
4.7(a).
"International Intercreditor Agreement" means the Intercreditor
Agreement to be entered into by Reorganized Covanta, each of its Subsidiaries
party thereto as borrowers and the financial institutions listed therein as
Page 13
lenders, agents and/or trustees on the Closing Date, substantially in the form
attached as Exhibit C-6 hereto.
"International Project" shall have the meaning set forth in Section
4.23.
"International Power Project" means a Project located outside of the
United States which generates electricity for sale.
"International Revolver Credit Facility Credit Agreement" means the
Credit Agreement to be entered into by reorganized CPIH, each of its
subsidiaries party thereto as borrowers and the financial institutions listed
therein or other financial institutions of sound reputation as lenders and/or
agents on the Closing Date, substantially in the form attached as Exhibit C-4
hereto.
"International Term Loan Credit Facility Credit Agreement" means the
Credit Agreement to be entered into by reorganized CPIH, each of its
subsidiaries party thereto as borrowers, the financial institutions listed
therein as lenders, Deutsche Bank AG, New York Branch, as Documentation Agent,
and Bank of America, N.A., as Administrative Agent, on the Closing Date,
substantially in the form attached as Exhibit C-3 hereto.
"Investment Entity" shall mean any corporation or other organization,
whether incorporated or unincorporated, of which on the Effective Date and after
giving effect to the Contemplated Transactions, Reorganized Covanta shall own
any equity interest, directly or indirectly, which is not a direct or indirect
Subsidiary, including but not limited to any foreign Investment Entity.
"Investment Motion" shall have the meaning set forth in Section 6.7(c).
"Investors" means SZ Investments, L.L.C., Laminar and Third Avenue
Trust, on behalf of the Third Avenue Value Fund Series.
"IRS" means the Internal Revenue Service.
"ISRA" shall have the meaning set forth in Section 6.8.
"Laminar" means ▇. ▇. ▇▇▇▇ Laminar Portfolios, L.L.C.
"Legal Proceeding" means any action, suit, proceeding, hearing or
investigation of, in or before any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or before any
arbitrator.
"Liabilities" shall have the meaning set forth in Section 4.7(a).
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, license, charge, option, right of first refusal,
easement, servitude, transfer restriction, encumbrance or any other restriction
or limitation whatsoever.
"Liquidation Plan" means the Amended Joint Plan of Liquidation in the
form attached as Exhibit E-2 hereto.
"Marine Services Affiliate" means each of the Affiliates of Purchaser
engaged in integrated marine transportation services or the vessel leasing
business.
"Material Adverse Effect on Company" means, in each case after giving
effect to the provisions of the Plan, (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of Reorganized Covanta and the Subsidiaries, considered as a whole, or (b) the
Page 14
effect of preventing or materially interfering with Company's or Reorganized
Covanta's ability to consummate the Contemplated Transactions; provided that no
effect resulting, individually or in the aggregate, from macro-economic events
or general market- related changes shall be a Material Adverse Effect on Company
unless Company is affected by such events or changes in a manner that is
substantially disproportionate when compared to competitor or peer businesses.
"Material Adverse Effect on Purchaser" means (a) a material adverse
effect upon the business, operations, properties, assets or condition (financial
or otherwise) of Purchaser and its subsidiaries, considered as a whole, or (b)
the effect of preventing or materially interfering with Purchaser's ability to
consummate the Contemplated Transactions; provided that no effect resulting,
individually or in the aggregate, from macro-economic events or general
market-related changes shall be a Material Adverse Effect on Purchaser unless
Purchaser is affected by such events or changes in a manner that is
substantially disproportionate when compared to competitor or peer businesses.
"Material Contract" means (a) the principal lease agreement, if any,
the principal service agreement, if any, and the principal operating agreement,
if any, with respect to each Project that will be part of Reorganized Covanta to
which Reorganized Covanta or any of the Subsidiaries will be a party on or after
the Effective Date (after giving effect to the provisions of the Plan), and (b)
any other material contract or other material arrangement with respect to each
Project that will be part of Reorganized Covanta to which Reorganized Covanta or
any Subsidiary will be a party on or after the Effective Date (after giving
effect to the provisions of the Plan).
"Monthly Management Reports" shall have the meaning set forth in
Section 6.14(a).
"Multiemployer Plan" means any Company Employee Benefit Plan that is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"New Common Stock" shall have the meaning set forth in the Recitals.
"NJDEP" shall have the meaning set forth in Section 6.8.
"Non-Exempt Qualifying Facility Project" shall have the meaning set
forth in Section 4.24(b).
"Operational Cash Flow Adjustment" means, for each completed calendar
week from January 3, 2004 through the Closing Date, the difference between (A)
operational cash flow for that week pertaining solely to the domestic
operational cash flow of businesses of the Company and its subsidiaries (other
than CPIH and its subsidiaries and the subsidiaries included in the Geothermal
Sale (the "Geothermal Operations")) and (B) $500,000, with excess operational
cash flows being reflected as a positive number and operational cash flow
shortfalls being reflected as a negative number; provided that, all overhead
expenditures of the Geothermal Operations shall be included in the determination
of domestic operational cash flow. For the avoidance of doubt, international
overhead incurred by the domestic operations, reorganization costs and other
non-operational expenses shall not be included in domestic operational cash
flow.
"Order" means an order, judgment, injunction, award, decree or writ.
"Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
Page 15
thereto.
"Pension Plan" means any Benefit Plan, other than a Multiemployer Plan,
which is subject to section 412 of the Internal Revenue Code or section 302 of
ERISA.
"Performance Guarantees" shall have the meaning set forth in the DIP
Agreement.
"Permitted Liens" means "Permitted Encumbrances" as defined in the DIP
Agreement.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Authority or other entity.
"Petition Date" means each of April 1, 2002 and June 6, 2003.
"Plan" means the Second Joint Plan of Reorganization (in form and
substance reasonably acceptable to Purchaser) for Company and certain of the
Debtors, and all exhibits and supplements thereto (each in form and substance
reasonably acceptable to Purchaser), as amended, modified or supplemented by
Company in accordance with the Bankruptcy Code, the Bankruptcy Rules and the
terms of this Agreement (all such amendments, modifications or supplements in
form and substance reasonably acceptable to Purchaser), pursuant to which the
Contemplated Transactions will be authorized and approved in accordance with the
terms of this Agreement, substantially in the form attached hereto as Exhibit
E-l.
"Pro Forma Income Tax Calculations" shall have the meaning set forth in
Section 6.12(a).
"Proceedings" shall have the meaning set forth in Section 4.13.
"Project" means each Domestic Project and International Project.
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
"Purchased Shares" shall have the meaning set forth in Section 3.1.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Disclosure Schedule" means the Purchaser Disclosure Schedule
attached hereto.
"PURPA" means the Public Utility Regulatory Policies Act of 1978, as
amended.
"Qualifying Cogeneration Facility" means a cogeneration facility that
satisfies the requirements of a "qualifying facility" set forth in 18 C.F.R.
ss.292.203(b), as amended from time to time.
"Qualifying Small Power Production Facility" means a small power
production facility that satisfies the requirements of a "qualifying facility"
set forth in 18 C.F.R. ss.292.203(a), as amended from time to time.
"Qualifying Facility" means either a Qualifying Small Power Production
Facility or a Qualifying Cogeneration Facility.
"Qualifying Facility Self Recertification" shall have the meaning set
forth in Section 7.13.
Page 16
"RCRA" means the Resource Conservation and Recovery Act, as amended (42
U.S.C. ss. 6901 et seq.), or any successor statute, and all implementing
regulations promulgated thereunder.
"Real Property" means all real property that is owned, leased or used
by Company, any Subsidiary or that is reflected as an asset of Company or any
Subsidiary on the Balance Sheet.
"Regulatory Agreement" shall have the meaning set forth in Section
4.26.
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing, depositing or migrating of Hazardous Materials into the indoor or
outdoor environment (including the abandonment, discarding or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), including the movement of any Hazardous Materials through the air,
soil, surface water or groundwater.
"Reorganized Covanta" shall have the meaning set forth in the Recitals.
"Required Consent" means a consent required so that the execution,
delivery or performance by Company of this Agreement, the consummation of the
Contemplated Transactions and the assumption or continued enforcement thereof by
Reorganized Covanta or any Subsidiary will not (a) result in any breach of or
constitute a default (or an event which with or without notice or lapse of time
or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, a Material Contract or
(b) result in the creation of any Lien, other than a Permitted Lien, on any
property or asset of Company, Reorganized Covanta or any Subsidiary, with an
individual value in excess of $1,000,000 or an aggregate value in excess of
$5,000,000.
"Required Governmental Approvals" shall have the meaning set forth in
Section 4.10(a).
"Restated Bylaws" means the bylaws of Reorganized Covanta, as amended
and restated in connection with the Plan.
"Restated Certificate of Incorporation" means the certificate of
incorporation of Reorganized Covanta, as amended and restated in connection with
the Plan.
"Retained Cash" means, if Additional Distributable Cash (as defined in
the Plan) is equal to $7.2 million, an amount of cash equal to twenty-five
percent (25%) of Post-Closing Cash (as defined in the Plan) in excess of the
total of Distributable Cash (as defined in the Plan) plus Additional
Distributable Cash.
"SEC" means the Securities and Exchange Commission or successor agency
thereto.
"SEC Documents" shall have the meaning set forth in Section 4.22.
"Second Lien L/C Credit Facility Credit Agreement" means the Credit
Agreement to be entered into by Reorganized Covanta, each of its Subsidiaries
party thereto as borrowers and the financial institutions listed therein as
lenders and/or agents on the Closing Date, substantially in the form attached as
Exhibit C-2 hereto; provided that there shall be an Issuing Lender (as defined
therein) capable of issuing the $50 million letter of credit required by
Company's ▇▇▇▇▇▇▇▇▇▇ Project, that has a credit rating of at least Aa from
▇▇▇▇▇'▇ or AA from Standard & Poor's, provided further that the Commitment
Letter and related term sheet of Bank One, NA dated December 2, 2003, shall not
Page 17
be considered in determining whether conditions or covenants hereunder
referencing the Second Lien L/C Credit Facility Credit Agreement are fulfilled
or performed.
"Senior Secured Notes" means, collectively, the notes to be issued on
the Effective Date by Reorganized Covanta pursuant to the Senior Secured Notes
Indenture in the face amount of $230 million and an initial accreted amount of
$205 million.
"Senior Secured Notes Indenture" means the Indenture to be entered into
by Reorganized Covanta and each of its Subsidiaries party thereto and the
trustee named therein, substantially in the form attached as Exhibit D hereto.
"Software" means any computer software programs, source code, object
code, data and documentation (other than commercially available "shrink wrap"
software).
"Subsidiary" means, any corporation or other organization, whether
incorporated or unincorporated, of which, as of the Effective Date and after
giving effect to the Contemplated Transactions, (a) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization will be held
directly or indirectly, owned or controlled by Reorganized Covanta or (b)
Reorganized Covanta or any Subsidiary will be a general partner or managing
member, including but not limited to any foreign Subsidiaries.
"Superior Proposal" shall have the meaning set forth in Section
6.10(b).
"Tangible Property" shall have the meaning set forth in Section 4.15.
"Tax Note" means the note(s) to be issued on the Effective Date by
Reorganized Covanta in respect of certain tax claims pursuant to Section 2.4 of
the Plan, which shall be in form and substance reasonably acceptable to
Purchaser and Company.
"Tax Sharing Agreement" means that certain Tax Sharing Agreement to be
entered into among Purchaser, Company and CPIH on the Closing Date,
substantially in the form attached as Exhibit F hereto.
"Taxes" means all taxes, however denominated, including any interest or
penalties that may become payable in respect thereof, imposed by any federal,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income taxes (including, but not limited to, United States
federal income taxes and state income Taxes), payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, environmental, franchise taxes, gross receipts taxes, occupation taxes,
real and personal property taxes, stamp taxes, transfer taxes, withholding
taxes, workers' compensation, and other obligations of the same or of a similar
nature, whether arising before, on or after the Closing Date.
"Termination Fee" shall have the meaning set forth in the Section
11.2(b).
"Trade Secrets" means any trade secrets, research records, processes,
procedures, manufacturing formulae, technical know-how, technology, blue prints,
designs, plans, inventions (whether patentable and whether reduced to practice),
invention disclosures and improvements thereto.
"Trademarks" means any foreign or United States trademarks, service
marks, trade dress, trade names, brand names, designs and logos, corporate
Page 18
names, product or service identifiers, whether registered or unregistered, and
all registrations and applications for registration thereof.
"TSCA" means the Toxic Substances Control Act of 1976, as amended (15
U.S.C. ss. 2601 et seq.), or any successor statute, and all implementing
regulations promulgated thereunder.
"Unpaid Pro Forma Tax Liability" shall have the meaning set forth in
Section 6.12(b).
"Unsecured Notes" means the notes to be issued on or after the
Effective Date pursuant to the Unsecured Notes Indenture by Reorganized Covanta
in the amount of the Allowed Class 4 Claims (as defined in the Plan) plus $4
million.
"Unsecured Notes Indenture" means the indenture to be entered into by
Reorganized Covanta and the trustee named therein on the Closing Date in
accordance with the Plan, which shall be in form and substance reasonably
acceptable to Purchaser and Company.
2. Actions Upon Signing; Deposit.
2.1. Approval Order. Promptly following the execution and
delivery of this Agreement, and in accordance with the provisions of Section
6.7, Company shall use commercially reasonable efforts to obtain the Approval
Order.
2.2. Payment of Deposit. Concurrent with the execution and
delivery of this Agreement, Purchaser shall pay or cause to be paid by wire
transfer of immediately available funds, $15,000,000 (the "Initial Deposit"), to
a bank selected by Company and reasonably acceptable to Purchaser (the "Escrow
Agent") to be held pursuant to an escrow agreement substantially in the form of
Exhibit B hereto (the "Deposit Escrow Agreement"). Within two (2) Business Days
following the entry of the Approval Order, Purchaser shall pay or cause to be
paid by wire transfer of immediately available funds, $15,000,000 (the "Final
Deposit" and, together with the Initial Deposit, the "Deposit"), to the Escrow
Agent to be held pursuant to the Deposit Escrow Agreement. Upon receipt of each
of the Initial Deposit and the Final Deposit, the Escrow Agent shall immediately
deposit such Deposit into an interest-bearing account. The Escrow Agent shall
hold the Deposit until the earlier of (a) the Closing Date, at which time the
Deposit shall be applied to the payment of the Consideration in accordance with
Section 3.2 and (b) the termination of this Agreement, at which time the Deposit
shall be applied in accordance with Section 11.2(c). The Escrow Agent's escrow
fees and charges shall be paid one-half by Company and one-half by Purchaser.
Purchaser and Company agree to provide written instructions to the Escrow Agent
providing for the release of the Deposit in accordance with the terms of this
Section 2.2.
3. Closing; Closing Date; Expense Reimbursement. The closing of the
issuance and purchase of the Purchased Shares contemplated hereby (the
"Closing") shall take place, on the terms and subject to the conditions set
forth herein, at the offices of Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or such other place as Purchaser and Company
may agree), at 9:30 a.m., New York City time, on the Effective Date, provided
that all of the conditions to the Closing set forth in Sections 7 and 8 shall
have been satisfied or waived by the party entitled to waive the same. The time
and date upon which the Closing occurs is herein called the "Closing Date."
3.1. Issuance and Purchase of New Common Stock. At the
Closing, upon the terms and subject to the conditions of this Agreement and in
reliance upon the representations, warranties and agreements contained herein,
Reorganized Covanta shall issue, sell, convey, assign, transfer and deliver to
Purchaser, and Purchaser shall purchase and acquire from Reorganized Covanta,
Page 19
all the shares of New Common Stock (the "Purchased Shares"), representing 100%
of the equity of Reorganized Covanta immediately following the Closing, for an
aggregate purchase price of $30,000,000 (the "Consideration"), free and clear of
any and all Liens.
3.2. Funding. At the Closing, the Escrow Agent shall release
the Deposit to Company in accordance with the written instructions of Purchaser
and Company pursuant to Section 2.2, and Company shall apply the Deposit to the
Consideration. At the Closing, the Escrow Agent shall release the interest
earned on the Deposit to Purchaser.
3.3. Payment of Expense Reimbursement. (a) As soon as
commercially practicable (but in no event later than two (2) Business Days
following the entry of the Approval Order), Company shall pay or cause to be
paid to Purchaser up to a maximum of $3,000,000 of actual, documented costs,
fees and expenses incurred by Purchaser and covered by the Approval Order, by
wire transfer of immediately available funds to an account designated in writing
by Purchaser.
(b) From and after the entry of the Approval Order, Laminar
may send periodic invoices to Company for out-of-pocket fees and expenses
incurred by Laminar that are covered by the Approval Order, and Company shall
promptly reimburse Laminar (by payment in such manner as Laminar may reasonably
direct) for such expenses, up to a maximum of $350,000. The $350,000 of Laminar
Expense Reimbursement shall be incremental to any expense reimbursements to
which Laminar may otherwise be contractually or otherwise entitled pursuant to
an order of the Bankruptcy Court, except that Laminar shall not be entitled to
any duplicative recovery of fees and expenses. Laminar shall be a third party
beneficiary of this Section 3.3 with the full right to enforce it.
(c) At Closing (or termination of this Agreement, if
applicable, and so long as Company shall not have terminated, or shall not have
the right to terminate, this Agreement pursuant to (i) Section 11.1(b) (solely
in connection with a failure of the condition set forth in Section 8.1(a) or 8.4
(if such failure is not the result of a Company Failure and there has not been a
First Lien Failure) or (ii) Section 11.1(d)), Company shall pay or cause to be
paid to Purchaser by wire transfer of immediately available funds to an account
designated in writing by Purchaser an amount equal to the actual, documented
costs, fees and expenses incurred by Purchaser and covered by the Approval Order
outstanding on the Closing Date or the date of such termination, in each case as
set forth in an invoice from Purchaser, such amount not to exceed $1 million (in
addition to any other amounts payable pursuant to this Agreement).
3.4. Company Deliverables. (a) At the Closing, upon delivery
of the Consideration, Company agrees to deliver to Purchaser and/or its
designees and assigns stock certificates representing the Purchased Shares, each
such certificate to be duly and validly endorsed in favor of Purchaser and/or
its designees and assigns sufficient to vest in Purchaser and/or its designees
and assigns good and valid title to such Purchased Shares, free and clear of any
and all Liens.
(b) At the Closing, Company agrees to, and agrees to cause
the Subsidiaries to, deliver to Purchaser (i) the certificate referred to in
Section 7.1(c), (ii) evidence of the Required Consents and Required Governmental
Approvals referred to in Section 7.2, (iii) the Qualifying Facility Self
Recertifications referred to in Section 7.13, (iv) all other previously
undelivered documents required to be delivered by Company (including Reorganized
Covanta) or any Subsidiary to Purchaser at or prior to the Closing pursuant to
the terms hereof, (v) executed copies of the forms referred to in Section 7.17
and (vi) any and all other documents reasonably requested by Purchaser.
3.5. Purchaser Deliverables. (a) At the Closing, upon delivery
of the Purchased Shares, Purchaser agrees to pay, or cause to be paid pursuant
Page 20
to Section 3.2 of this Agreement, the Consideration to Company.
(b) At the Closing, Purchaser agrees to (i) deliver to
Company the certificate referred to in Section 8.1(c), (ii) (A) subject only to
the conditions to Purchaser's obligations set forth in Section 7 of this
Agreement, arrange for execution and delivery of (x) the Second Lien L/C Credit
Facility Credit Agreement and the International Revolver Credit Facility Credit
Agreement by the lenders and/or agents thereunder and (y) the Tax Sharing
Agreement by Purchaser and (B) if there has been no Company Failure and there
has not been a First Lien Failure, cause the Second Lien L/C Credit Facility
Credit Agreement and the International Revolver Credit Facility Credit Agreement
to be available at the Closing for issuance of letters of credit and loans,
(iii) deliver to Company all other previously undelivered documents required to
be delivered by Purchaser to Company at or prior to the Closing pursuant to the
terms hereof and (iv) deliver to Company any and all other documents reasonably
requested by Company.
4. Representations and Warranties of Company. In the event of any
inconsistency between statements in the body of this Agreement and statements in
the Company Disclosure Schedule (excluding exceptions expressly set forth in the
Company Disclosure Schedule), the statements in the body of this Agreement shall
control. Matters disclosed in one section of the Company Disclosure Schedule
shall be deemed disclosed for purposes of other representations and warranties
(including, without limitation, the representations and warranties set forth in
Section 4.8) of Company (and Reorganized Covanta) to the extent the
applicability of such disclosure to such other representations and warranties is
reasonably apparent. Company (including Reorganized Covanta) hereby represents
and warrants, on behalf of itself and its Subsidiaries as follows:
4.1. Due Incorporation and Authority. Company is on the date
hereof, and Reorganized Covanta will be on the Effective Date, a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Company has on the date hereof, and Reorganized Covanta will
have on the Effective Date, all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as currently
conducted by Company.
4.2. Subsidiaries and Investment Entities. Section 4.2(i) of
the Company Disclosure Schedule is a true and complete list of all Subsidiaries
and Section 4.2(ii) of the Company Disclosure Schedule is a true and complete
list of all Investment Entities (noting, (a) the jurisdiction of organization of
each such Subsidiary and Investment Entity, (b) all domestic and foreign
jurisdictions in which Reorganized Covanta, such Subsidiaries and, to the
knowledge of Company, such Investment Entities are qualified to transact
business, (c) the ownership interest therein of Reorganized Covanta, each
Subsidiary and each Investment Entity, in each case as of the Effective Date and
after giving effect to the Contemplated Transactions, (d) if not to be
wholly-owned by Reorganized Covanta or the Subsidiaries, to the knowledge of
Company, the identity and ownership interest of each of the other owners of such
Subsidiary and each Investment Entity, and (e) the federal tax status of
Reorganized Covanta, each Subsidiary and, to the knowledge of Company, each
Investment Entity as a corporation, partnership or disregarded entity). Section
4.2(iii) of the Company Disclosure Schedule contains a complete and accurate
organizational chart, as of the Effective Date and after giving effect to the
Contemplated Transactions, of Reorganized Covanta, the Subsidiaries and the
Investment Entities. Each of the Subsidiaries and, to the knowledge of Company,
each of the Investment Entities is an entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization and has
all requisite corporate or equivalent power and authority to own, lease and
operate its properties and carry on its business as currently conducted, except
where failure to be in good standing, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect on Company.
Page 21
4.3. Foreign Qualification. Company and each of the
Subsidiaries is, Reorganized Covanta will be and, to the knowledge of Company,
each of the Investment Entities is, duly qualified or otherwise authorized as a
foreign entity to transact business and is in good standing in each jurisdiction
in which such qualification or authorization is required by Governmental Rule,
except where failure to be so qualified, authorized or in good standing,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on Company.
4.4. Outstanding Capital Stock. The authorized and issued
shares of capital stock or other ownership interests of Reorganized Covanta and
each Subsidiary and, to the knowledge of Company, each Investment Entity are set
forth in Section 4.4(i) of the Company Disclosure Schedule. Except as set forth
in Section 4.4(ii) of the Company Disclosure Schedule, as of the Effective Date
and after giving effect to the Contemplated Transactions, Reorganized Covanta's
or any of the Subsidiaries' equity interest in any Subsidiary or, to the
knowledge of Company, any Investment Entity will be owned by Reorganized Covanta
or such Subsidiary free and clear of any Liens, other than Liens under the Exit
Financing and Liens set forth in Section 4.4(ii) of the Company Disclosure
Schedule. At the Closing, after giving effect to the Contemplated Transactions,
all of the outstanding shares of capital stock of Reorganized Covanta and the
Subsidiaries will be, and Reorganized Covanta's or any of the Subsidiaries'
equity interests in any Investment Entity will be, duly authorized and validly
issued, fully paid and nonassessable. Except as set forth in Section 4.4(i) of
the Company Disclosure Schedule, at the Closing, no other shares of capital
stock or other ownership interests of Reorganized Covanta or any of the
Subsidiaries will be authorized or outstanding. On the Closing Date, Reorganized
Covanta will have full power and authority to issue and deliver free and clear
of any Lien, the Purchased Shares, and, upon delivery of and payment for the
Purchased Shares at the Closing as herein provided, Reorganized Covanta will
convey to Purchaser good and valid title thereto, free and clear of any Liens.
4.5. Options or Other Rights. Except as set forth in Section
4.5 of the Company Disclosure Schedule, as of the Effective Date and after
giving effect to the provisions of the Plan, there will be no outstanding right,
subscription, warrant, call, preemptive right, option or other agreement of any
kind to purchase or otherwise receive from Reorganized Covanta or any Subsidiary
any of the outstanding, authorized but unissued, unauthorized or treasury shares
of the capital stock or any other ownership interest of Reorganized Covanta or
any Subsidiary, and there will be no outstanding security of any kind of
Reorganized Covanta or any Subsidiary convertible into any such capital stock or
other ownership interest.
4.6. Authority Relative to this Agreement. Except for any
required approvals of the Bankruptcy Court, Company has all necessary corporate
power and authority to execute and deliver this Agreement and, upon receipt of
any required approval of the Bankruptcy Court, to perform its obligations
hereunder. The execution and delivery of this Agreement by Company, the
performance by Company (including Reorganized Covanta) of its obligations
hereunder and the consummation by Company (including Reorganized Covanta) of the
Contemplated Transactions have been duly authorized by all requisite corporate
action on the part of Company. This Agreement has been duly and validly executed
and delivered by Company and (assuming due authorization, execution and delivery
hereof by Purchaser and upon receipt of any required approval of the Bankruptcy
Court) will constitute the legal, valid and binding obligation of Company
(including Reorganized Covanta) enforceable against Company (including
Reorganized Covanta) in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or similar laws affecting creditors' rights generally and subject, as
to enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Page 22
4.7. Financial Statements. (a) The consolidated balance sheets
of Company as of December 31, 2000, 2001 and 2002 and the related consolidated
statements of income, shareholders' equity and changes in financial position for
the years then ended, including the notes thereto, audited by Deloitte & Touche
LLP, independent certified public accountants, which have been delivered to
Purchaser, set forth the consolidated financial position of Company and its
consolidated subsidiaries as at such dates and the consolidated results of
operations of Company and such subsidiaries for such periods, in each case in
accordance with GAAP consistently applied for the periods covered thereby. The
foregoing consolidated financial statements of Company as of December 31, 2000,
2001 and 2002 and for the years then ended are sometimes herein called the
"Audited Financials." The unaudited consolidated balance sheet of Company as of
September 30, 2003, and the related consolidated statements of income,
shareholders' equity and changes in financial position for the quarter than
ended, including the notes thereto, which have been delivered to Purchaser, set
forth the consolidated financial position of Company and its consolidated
subsidiaries as at such dates and the consolidated results of operations of
Company and such subsidiaries for the quarter ended September 30, 2003, in each
case in accordance with GAAP applied on a basis consistent with that of the
Audited Financials (subject to normal year-end adjustments consistent with past
practice). The foregoing unaudited consolidated financial statements of Company
and its consolidated subsidiaries as of and for the quarter ended September 30,
2003 are sometimes herein called the "Interim Financials," the consolidated
balance sheet included in the Interim Financials is sometimes herein called the
"Balance Sheet," and September 30, 2003 is sometimes herein called the "Balance
Sheet Date." Each of the financial statements referenced above have been
prepared from, are in accordance with and accurately reflect the books and
records of Company and its consolidated subsidiaries, comply in all material
respects with applicable accounting requirements (including GAAP and fairly
present the consolidated financial position and the consolidated results of
operations and cash flows (and changes in financial position, if any) of Company
and its consolidated subsidiaries as of the times and for the periods referred
to therein (subject, in the case of unaudited statements, to normally recurring
year-end audit adjustments which are not material either individually or in the
aggregate, consistent with past practice and in accordance with GAAP). Except as
reflected in the Interim Financials or as set forth in Section 4.7 of the
Company Disclosure Schedule, neither Company nor any consolidated subsidiary has
any direct or indirect indebtedness, liability, Claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise ("Liabilities")
except for (i) Liabilities that will be fully discharged in the Case at the
Effective Date, (ii) Liabilities that have arisen since the Balance Sheet Date
in the ordinary course of business of Company and its consolidated subsidiaries,
(iii) Contingent Obligations and Performance Guarantees that are permitted under
the DIP Agreement and (iv) unclaimed contingent liabilities that exist under the
primary operating agreements with respect to Projects or insurance policies of
Company.
(b) The Monthly Management Reports which are to be
delivered to Purchaser pursuant to Section 6.14(a), will (i) be prepared in good
faith from and consistent with the books and records of Company and its
subsidiaries and (ii) fairly present the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of Company and its consolidated subsidiaries as of the times
and for the periods referred to therein (subject to normally recurring year end
adjustments which are not material either individually or in the aggregate,
consistent with past practice).
(c) All accounts receivable of Company and each Subsidiary,
whether reflected in the Balance Sheet or otherwise, represent sales actually
made in the ordinary course of business and are valid and collectible net of any
reserves shown on the Balance Sheet.
Page 23
4.8. No Material Adverse Change. (a) Except as set forth in
Section 4.8 of the Company Disclosure Schedule, as disclosed in Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 or as
disclosed in materials filed with the Bankruptcy Court, since December 31, 2002,
there has been no change, event or occurrence which, individually or in the
aggregate, has had or would reasonably be expected to result in a Material
Adverse Effect on Company, and none of Company or any of the Subsidiaries knows
of any such change, event or occurrence which is threatened, nor has there been
any damage, destruction or loss which, individually or in the aggregate, has had
or would reasonably be expected to result in a Material Adverse Effect on
Company, whether or not covered by insurance.
(b) Except as set forth in Section 4.8 of the Company
Disclosure Schedule, as disclosed in Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2003, as disclosed in materials filed with the
Bankruptcy Court or as specifically contemplated herein or in the Plan, (x)
since December 31, 2002, Company and each Subsidiary has conducted its
respective business only in the ordinary and usual course consistent with past
practice, and (y) neither Company nor any Subsidiary has:
(i) paid, discharged or satisfied any Claim,
liability or obligation (whether absolute, accrued, contingent or
otherwise) with a value in excess of $1,000,000 in the aggregate, other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of Claims, liabilities and
obligations reflected or reserved against in the Balance Sheet or
incurred in the ordinary course of business and consistent with past
practice since the Balance Sheet Date;
(ii) permitted or allowed any of its property or
assets (real, personal or mixed, tangible or intangible) to be
subjected to any Lien (other than Permitted Liens);
(iii) cancelled any debts or waived any claims or
rights with a value in excess of $1,000,000 in the aggregate;
(iv) sold, transferred or otherwise disposed of any
of its properties or assets (real, personal or mixed, tangible or
intangible) with a value in excess of $1,000,000 in the aggregate,
except in the ordinary course of business and consistent with past
practice;
(v) disposed of or permitted to lapse any rights to
the use of any material Intellectual Property, or, to the knowledge of
Company, disclosed to any Person other than representatives of
Purchaser any trade secret, formula, process, know-how or other
Intellectual Property material to its business not theretofore a matter
of public knowledge;
(vi) made any capital expenditure or commitment that
was not permitted under the DIP Agreement;
(vii) except as required by FASB 143, made any change
in any method of accounting or accounting practice;
(viii) paid, loaned or advanced any amount to, or
sold, transferred or leased any individual property or asset (real,
personal or mixed, tangible or intangible) with an aggregate value in
excess of $1,000,000 to, or entered into any agreement or arrangement
with, any of its officers or directors or any Affiliate or associate of
any of its officers or directors; or
(ix) agreed, whether in writing or otherwise, to take
any action described in this section.
Page 24
4.9. Compliance with Governmental Rules. Except as set forth
in Section 4.9 of the Company Disclosure Schedule, none of Company, any
Subsidiary, nor, to the knowledge of Company, any Investment Entity, is in
material violation of any material applicable Governmental Rule (other than
Governmental Rules relating to the environment, which are addressed in Section
4.12, Governmental Rules relating to Taxes, which are addressed in Section 4.27,
and Governmental Rules relating to Benefit Plans, which are addressed in Section
4.18) and none of Company, any Subsidiary, and to the knowledge of Company, any
Investment Entity, has received notice that any such violation is being or may
be alleged.
4.10. Governmental Approvals. (a) Except for Governmental
Approvals set forth in Section 4.10 of the Company Disclosure Schedule (the
"Required Governmental Approvals"), (i) no action by Company, Reorganized
Covanta, any Subsidiary or, to the knowledge of Company, any Investment Entity,
is required under any Governmental Rule for the execution, delivery or
performance of this Agreement by Company, Reorganized Covanta, any Subsidiary or
any Investment Entity and consummation of the Contemplated Transactions and (ii)
no action by Company, Reorganized Covanta, any Subsidiary or, to the knowledge
of Company, any Investment Entity, or Purchaser is required in order that all
Governmental Approvals will remain in full force and effect following the
consummation of the Contemplated Transactions.
(b) All Governmental Approvals that are required for the
conduct of the business of, or the use of any property of, Company (including
Reorganized Covanta), any of the Subsidiaries or, to the knowledge of Company,
any Investment Entity (i) have been duly obtained, (ii) are in full force and
effect, (iii) are not subject to appeal or all applicable appeal periods have
expired (except Governmental Approvals that do not have limits on appeal periods
under Governmental Rules), (iv) have not been suspended or cancelled and, to the
knowledge of Company, no suspension or cancellation has been threatened, (v) are
held in the name of Company (including Reorganized Covanta) or any of the
Subsidiaries or, to the knowledge of Company, any of the Investment Entities, as
applicable, and (vi) are free from conditions or requirements that would
materially limit the conduct of the business of, or the use, consistent with
past practice, of any property of, Company (including Reorganized Covanta) or
any of the Subsidiaries or, to the knowledge of Company, any of the Investment
Entities except for such matters that, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect on Company.
(c) Company and each of the Subsidiaries are in compliance
in all material respects with, all applicable material Governmental Approvals.
4.11. No Breach. (a) The execution and delivery of this
Agreement by Company does not, and, assuming approval of this Agreement and
confirmation of the Plan by the Bankruptcy Court, the performance of this
Agreement by Company (including Reorganized Covanta) and the consummation of the
Contemplated Transactions will not:
(i) conflict with or violate any provision of any
certificate of incorporation or by-laws of Company or Reorganized
Covanta (to the extent that such document is then governing such
entity) or any equivalent organizational documents of any Subsidiary
or, to the knowledge of Company, Investment Entity;
(ii) conflict with or violate any material
Governmental Rule or Governmental Approval applicable to Company,
Reorganized Covanta, any Subsidiary or, to the knowledge of Company,
any Investment Entity, or by which any property or asset of Company,
Reorganized Covanta, any Subsidiary with an aggregate value in excess
of $1,000,000 is or may be bound or affected; or
Page 25
(iii) assuming that all Required Consents have been
obtained or deemed by operation of the Plan or the Confirmation Orders
to be given, result in any breach of or constitute a default (or an
event which with or without notice or lapse of time or both would
become a default) under, result in the acceleration of, or give to
others any right of termination, amendment, modification, acceleration
or cancellation of, or result in the creation of an Lien, other than
Liens under the Credit Agreements and Senior Secured Notes Indenture
and any Liens permitted under the Credit Agreements, or require any
notice, consent or waiver under any Material Contract.
(b) Section 4.11(b) of the Company Disclosure Schedule
identifies each Material Contract in respect of which a Required Consent must be
obtained.
(c) Except as noted in Section 4.11(c) of the Company
Disclosure Schedule, no Material Contract contains any restriction upon (i) the
prepayment of any Exit Financing, (ii) the incurrence of Indebtedness by Company
or any Subsidiary or (iii) the ability of Company or any Subsidiary to grant any
Lien on the properties or assets of Company or any Subsidiary. Section 4.11(c)
of the Company Disclosure Schedule sets forth the amount of principal and unpaid
interest outstanding under each instrument evidencing Indebtedness of Company
and any Subsidiary, if any, that will accelerate or become due or result in a
right on the part of the holder of such Indebtedness (with or without due notice
or lapse of time) to require prepayment, redemption or repurchase as a result of
the execution of this Agreement or the consummation of any of the Contemplated
Transactions.
4.12. Environmental Matters. (a) Except as set forth in
Section 4.12 of the Company Disclosure Schedule and except as would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Company, Company, the Subsidiaries and, to the knowledge of
Company, the Investment Entities have obtained all Governmental Approvals which
are required under the Environmental Laws for the operation of their respective
businesses and the ownership, use and operation of each of their current
Facilities, all such Governmental Approvals are in effect, no appeal nor any
other action is pending to revoke any such Governmental Authorization; and
Company, the Subsidiaries and, to the knowledge of Company, the Investment
Entities are in full compliance with all terms and conditions of all such
Governmental Approvals. Except as set forth in Section 4.12 of the Company
Disclosure Schedule and except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Company, to the
extent required by applicable Environmental Laws, Company, the Subsidiaries and,
to the knowledge of Company, the Investment Entities have filed (or will have
filed by the Closing Date) all applications necessary to renew or obtain any
necessary Governmental Approvals in a timely fashion so as to allow Company, the
Subsidiaries and the Investment Entities to continue to operate their businesses
in compliance with applicable Environmental Laws, and Company, the Subsidiaries
and, to the knowledge of Company, the Investment Entities know of no reason to
expect that any such new, transferred or renewed Governmental Approval (i) will
not be obtained or approved in a timely fashion, and (ii) will include any terms
or conditions that would reasonably be expected to result in a Material Adverse
Effect on Company.
(b) Except as set forth in Section 4.12 of the Company
Disclosure Schedule and except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Company,
Company, the Subsidiaries and, to the knowledge of Company, the Investment
Entities have been and are in compliance with all applicable Environmental Laws.
(c) Except as set forth in Section 4.12 of the Company
Disclosure Schedule, neither Company, any of the Subsidiaries nor, to the
knowledge of Company, any of the Investment Entities nor any of their respective
Page 26
Facilities or operations are subject to any outstanding written order, consent
decree or settlement agreement with any Person relating to (a) any Environmental
Law, (b) any Environmental Claim or (c) any Hazardous Materials Activity, in the
case of each of the foregoing, that, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect on Company or
impose liability on Purchaser;
(d) Except as set forth in Section 4.12 of the Company
Disclosure Schedule, neither Company, any of the Subsidiaries nor, to the
knowledge of Company, any of the Investment Entities has received any letter or
request for information under Section 104 of CERCLA or any comparable state law
regarding any condition, occurrence or activity that could reasonably be
expected to form the basis of an Environmental Claim against Company, any of the
Subsidiaries or, to the knowledge of Company, any of the Investment Entities
that, individually or in the aggregate, would reasonably be expected to result
in a Material Adverse Effect on Company or impose material liability on
Purchaser;
(e) Except as set forth in Section 4.12 of the Company
Disclosure Schedule, there are and, to Company's knowledge, have been no
conditions, occurrences, or Hazardous Materials Activities that could reasonably
be expected to form the basis of an Environmental Claim against Company or any
of the Subsidiaries or, to the knowledge of Company, any of the Investment
Entities that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect on Company or impose liability on Purchaser;
(f) Except as set forth in Section 4.12 of the Company
Disclosure Schedule, (i) neither Company, any of its Subsidiaries nor, to the
knowledge of Company, any of the Investment Entities nor, to the knowledge of
Company, any predecessor of Company, any of the Subsidiaries or any of the
Investment Entities has filed any notice under any Environmental Law indicating
past or present treatment of Hazardous Materials at any Facility, (ii) none of
Company's or any of its Subsidiaries' Facilities constitute facilities for the
treatment, storage or disposal of Hazardous Materials under RCRA or any state
equivalent, and (iii) none of Company's or any of its Subsidiaries' operations
involves the generation, transportation, treatment, storage or disposal of
hazardous waste in violation of RCRA or any state equivalent that, individually
or in the aggregate, would reasonably be expected to result in a Material
Adverse Effect on Company or impose liability on Purchaser; and
(g) Compliance with all current requirements pursuant to or
under Environmental Laws would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect on Company or impose
liability on Purchaser.
4.13. Claims and Proceedings. Except as set forth in Section
4.13 of the Company Disclosure Schedule and except as to claims arising prior to
the Petition Date that are within the jurisdiction of the Bankruptcy Court and
are to be resolved in the Case or by force of the discharge granted to Company
in connection with the Case, there are no actions, suits, proceedings (whether
administrative, judicial or otherwise), governmental investigations or
arbitrations ("Proceedings") (whether or not purportedly on behalf of Company,
any of the Subsidiaries or, to the knowledge of Company, any of the Investment
Entities) at law or in equity, or before or by any court or other Government
Authority (including any Environmental Claims) that are pending or, to the
knowledge of Company, threatened against or affecting Company, any of the
Subsidiaries or, to the knowledge of Company, any of the investment Entities or
any property of Company, any of the Subsidiaries or, to the knowledge of
Company, any of the investment Entities and that, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse Effect
on Company. Neither Company, any of the Subsidiaries nor, to the knowledge of
Company, any of the Investment Entities is subject to or in default with respect
to any final judgments, writs, injunctions, decrees, rules or regulations of any
Page 27
court or other Government Authority that, individually or in the aggregate,
would reasonably be expected to result in a Material Adverse Effect on Company.
4.14. Contracts. (a) Section 4.14(a) of the Company Disclosure
Schedule sets forth all of the Material Contracts as of the date hereof.
(b) All of the Material Contracts (i) to which Company or
any Subsidiary which is a Debtor is a party, upon the assumption thereof by
Company or such Subsidiary pursuant to section 365 of the Bankruptcy Code, will
be valid and binding upon Company or such Subsidiary and, to the knowledge of
Company, the other party or parties thereto in accordance with their terms and
(ii) to which any other Subsidiary is a party are valid and binding upon such
Subsidiary and, to the knowledge of Company, the other party or parties thereto
in accordance with their terms. Except as set forth in Section 4.14(b) of the
Company Disclosure Schedule, neither Company nor any of the Subsidiaries is in
default in any material respect under any of such Material Contracts, nor does
any condition exist that with notice or lapse of time or both would constitute
such a default thereunder. Except as set forth in Section 4.14(b) of the Company
Disclosure Schedule, to the knowledge of Company, no other party to any such
Material Contract is in default thereunder in any material respect nor does any
condition exist that with notice or lapse of time or both would constitute such
a default thereunder. To the knowledge of Company, no event of force majeure or
other event or condition exists that permits or requires any party to a Material
Contract to cancel, suspend or terminate its performance under any Material
Contract to which it is a party in accordance with the terms thereof or that
would excuse any such party from liability for non-performance thereunder.
(c) Except as set forth in Section 4.14(c) of the Company
Disclosure Schedule, Company (including Reorganized Covanta), the Subsidiaries
and, to the knowledge of Company, the Investment Entities, previously have
assumed in the Case or will assume on or prior to the Effective Date or pursuant
to the Plan all Material Contracts necessary to continue to operate their
respective businesses subsequent to the Closing as such businesses were operated
on the date hereof.
(d) Except as set forth in Section 4.14(d) of the Company
Disclosure Schedule, there are no purchase contracts or commitments of more than
twelve (12) months of Company, any Subsidiary or, to the knowledge of Company,
any Investment Entity, that are not terminable by Company or such Subsidiary or,
to the knowledge of Company, such Investment Entity on notice of 90 days or
less, other than purchase contracts or commitments entered in the ordinary
course of business that require payments by Company of less than $1,000,000
individually or in respect of substantially similar contracts with the same
vendor, $1,000,000 in the aggregate.
(e) Except as set forth in Section 4.14(e) of the Company
Disclosure Schedule, neither Company, any Subsidiary nor, to the knowledge of
Company, any Investment Entity, has any outstanding contracts with directors,
officers or employees that are not cancelable by it on notice of not longer than
thirty (30) days and without liability, penalty or premium or any agreement or
arrangement providing for the payment of any bonus or commission based on sales
or earnings.
(f) Except as set forth in Section 4.14(f) of the Company
Disclosure Schedule and except for employment or similar agreements, neither
Company, any Subsidiary nor to the knowledge of Company, any Investment Entity,
is restricted by agreement in any material respect from carrying on, anywhere in
the world, the businesses of the development and/or operation of waste to energy
projects, independent power projects or water projects.
(g) Except as set forth in Section 4.14(g) of the Company
Disclosure Schedule, neither Company, any Subsidiary nor, to the knowledge of
Company, any Investment Entity, has outstanding any agreement to acquire any
Page 28
debt obligations of others in an amount in excess of $100,000 in the aggregate.
(h) Except as indicated in Section 4.14(h) of the Company
Disclosure Schedule, neither Company nor any Subsidiary has any outstanding loan
to any Person for an amount in excess of $1,000,000 in the aggregate.
(i) Except as indicated in Section 4.14(i) of the Company
Disclosure Schedule, neither Company, any Subsidiary nor, to the knowledge of
Company, any Investment Entity, has any commitment or obligation to continue to
utilize the services of, or otherwise do business with, any licensor, agent,
consultant, advisor, vendor, supplier or licensee of Company, any Subsidiary or
any Investment Entity that is not terminable on notice of 90 days or less,
except for such services having an aggregate value less than $1,000,000.
(j) All material instruments, records, agreements and other
documents (including but not limited to all Material Contracts) relating to
Company, any Subsidiary and, to the knowledge of Company and to the extent
available to Company, any Investment Entity, have been made available to
Purchaser in the data rooms in New York, New York, Fairfax, Virginia and
Fairfield, New Jersey. Further, all minute books and records of Company and its
Subsidiaries relating to proceedings of their respective shareholders, boards of
directors and committees of their respective boards of directors other than
those specific portions concerning any Alternative Transaction proposed prior to
the date hereof have been made available to Purchaser, and are their original
minute books and records or are true, correct and complete copies thereof
(excluding those portions concerning any such Alternative Transaction), through
the date hereof. In the event that definitive minutes have not been prepared
with respect to any such proceedings of such shareholders, boards of directors
or committees, Company and the Subsidiaries have made available to Purchaser
with originals or true, correct and complete copies of draft minutes, to the
extent they exist, or written agendas relating thereto, which drafts and
agendas, if any, reflect all events that occurred in connection with such
proceedings (excluding those portions concerning any such Alternative
Transactions).
4.15. Tangible Property. The facilities, machinery, equipment,
furniture, buildings and other improvements, fixtures, vehicles, structures, any
related capitalized items and other tangible property material to the business
of Company, its Subsidiaries and, to the knowledge of Company, the Investment
Entities, taken as a whole, whether owned, leased, managed, developed or
operated by Company, any Subsidiaries or any Investment Entities (the "Tangible
Property") are in good operating condition and repair, subject to ordinary wear
and tear and continued repair and replacement in accordance with accepted good
practices for the particular industry, and are suitable for theft intended use.
4.16. Intellectual Property. As of the date hereof, Section
4.16 of the Company Disclosure Schedule contains a true, accurate and complete
list of all material Intellectual Property other than Trade Secrets and, in the
case of foreign Intellectual Property, as determined solely on the basis of
searches of publicly available computer databases. Each of Company and the
Subsidiaries owns or has the right to use all material Intellectual Property
used in the conduct of its business, and none of such Intellectual Property
conflicts with a right of any other Person to the extent such conflict would not
reasonably be expected to result in a Material Adverse Effect on Company.
4.17. Title to Properties. (a) Company (including Reorganized
Covanta), the Subsidiaries and, to the knowledge of Company, the Investment
Entities and Projects have (i) good, sufficient and legal title to (in the case
of fee interests in real property), (ii) valid leasehold interests in (in the
case of leasehold interests in real or personal property), or (iii) good title
to (in the case of all other personal property), all of their respective
material properties and assets reflected in the most recent financial statements
referred to in Section 4.7 or in the Monthly Management Reports and financial
Page 29
statements delivered pursuant to Section 6.14, in each case except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under Section 6.1. Except as set forth in
Section 4.17 of the Company Disclosure Schedule, all such properties and assets
are free and clear of Liens.
(b) As of the date hereof, Section 4.17(a) of the Company
Disclosure Schedule contains a true, accurate and complete list of (i) all fee
interests in any Real Property and (ii) all leases, subleases or assignments of
leases (together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting each Real Property, regardless of whether
Company, one of the Subsidiaries or, to the knowledge of Company, one of the
Investment Entities is the landlord or tenant (whether directly or as an
assignee or successor in interest) under such lease, sublease or assignment.
Except as specified in Section 4.17(b) of the Company Disclosure Schedule, each
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and Company has no knowledge of any material default that has
occurred and is continuing thereunder, and each such agreement constitutes the
legally valid and binding obligation of Company, such Subsidiary or, to the
knowledge of Company, such Investment Entity, enforceable against Company, such
Subsidiary or, to the knowledge of Company, such Investment Entity in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles.
4.18. Employee Benefit Plans. (a) Company, each of the
Subsidiaries, to the knowledge of Company, each of the Investment Entities and,
with respect to Pension Plans and Multiemployer Plans, each of their ERISA
Affiliates, are in material compliance with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each "employee benefit plan" as defined in Section
3(3) of ERISA which is maintained or contributed to by Company, any of the
Subsidiaries or any of their respective ERISA Affiliates (the "Benefit Plans"),
and have performed all of their material obligations under each Benefit Plan.
Each Benefit Plan that is intended to qualify under Section 401(a) of the
Internal Revenue Code has received, or has timely taken all action necessary to
receive, a favorable determination letter from the Internal Revenue Service to
such effect and no event has occurred (other than the enactment of legislation
for which the remedial amendment period has not expired) that would reasonably
be expected to affect adversely such Benefit Plan's qualification.
(b) No ERISA Event has occurred or is reasonably expected
to occur.
(c) Except to the extent required under Section 4980B of
the Internal Revenue Code or except as set forth in Section 4.18 of the Company
Disclosure Schedule, no Benefit Plan provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employee of Company, any of the Subsidiaries or, to the knowledge of Company,
any of the Investment Entities.
(d) As of the most recent January 1 (based on, with respect
to each Pension Plan, the actuarial valuation of such January 1, or if no such
valuation was performed as of such January 1 but was performed within the
preceding 12 months, the date as which the valuation was so performed), the
amount of unfounded benefit liabilities (as defined in Section 4001(a)(l8) of
ERISA, but determined on the basis of the actuarial assumptions used for funding
purposes with respect to a Pension Plan (as set forth in Section 412 of the
Code, including, where applicable, the interest rate assumptions set forth in
Section 412(j) of the Code), in the aggregate for all Pension Plans (excluding
for purposes of such computation any Pension Plans with respect to which assets
exceed benefit liabilities), does not exceed (i) $20,000,000 in the event the
applicable law (including statutorily prescribed actuarial assumptions) used in
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determining such unfounded benefit liabilities (the "Assumptions") is generally
as favorable as the Assumptions used in the 2003 plan year valuations with
respect to such Pension Plans, or (ii) $26,000,000, in the event the Assumptions
are generally less favorable than the Assumptions used in the 2003 plan year
valuations with respect to such Pension Plans.
(e) To the knowledge of Company, as of the most recent
valuation date for each Multiemployer Plan for which the actuarial report (or an
estimate provided pursuant to Section 4221(e) of ERISA) is reasonably available
to Company, the potential withdrawal liability of Company, the Subsidiaries and
their respective ERISA Affiliates for a complete withdrawal from such
Multiemployer Plan (within the meaning of Section 4203 of ER1SA), when
aggregated with the potential liability for a complete withdrawal from all other
Multiemployer Plans for which such actuarial report (or an estimate provided
pursuant to Section 4221(e) of ERISA) is reasonably available to Company, based
on the information contained in such reports or estimates, would not reasonably
be expected to exceed $7,500,000.
(f) Neither Company nor any Subsidiary has incurred or is
reasonably expected to incur any material liability pursuant to Title IV of
ERISA with respect to any employee benefit plan of an entity that was formerly
an ERISA Affiliate of Company or any of the Subsidiaries or with respect to any
employee benefit plan that was previously maintained by Company, any of the
Subsidiaries or, to the knowledge of Company, any of the Investment Entities.
4.19. Employee Matters. Except as set forth in Section 4.19 of
the Company Disclosure Schedule:
(a) Neither Company nor any of the Subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of Company or any of the
Subsidiaries.
(b) None of the employees of Company or any of the
Subsidiaries is represented by any labor organization and Company has no
knowledge of any current union organizing activities among the employees of
Company or any of the Subsidiaries, nor, to the knowledge of Company, does any
dispute concerning representation exist concerning such employees.
(c) There are no material labor strikes, labor disputes,
work stoppages, lockouts or material grievances pending or, to the knowledge of
Company, threatened involving the employees of Company or any of the
Subsidiaries, and during the past five (5) years there has not been any such
actions with respect to Reorganized Covanta or its Subsidiaries.
(d) There are no complaints, charges or claims against
Company or any of the Subsidiaries pending or, to the knowledge of Company,
threatened to be brought or filed with any Governmental Authority in connection
with the employment by Company or any of the Subsidiaries of any individual,
including, without limitation, any claim relating to employment discrimination,
equal pay, sexual harassment, employee safety and health, wages and hours or
workers' compensation which, individually or in the aggregate, would reasonably
be expected to result in a Material Adverse Effect on Company.
(e) Neither Company nor any of the Subsidiaries has
received notice of the intent of any Governmental Authority responsible for the
enforcement of labor or employment laws to conduct an investigation with respect
to or relating to Company or any of the Subsidiaries and no such investigation
is in progress where such investigation, individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect on Company.
Page 31
(f) To the knowledge of Company, neither Company nor any of
the Subsidiaries has incurred any material liability as the result of failure to
comply with the Worker Adjustment and Retraining Notification Act.
(g) None of the employees of Company or any of the
Subsidiaries has suffered an "employment loss" (as defined in the WARN Act)
during the 90 day period prior to the date of this Agreement. The listing on
Schedule 4.19(g) shall be updated at the Closing for employment losses occurring
during the 90 day period prior to the Closing.
4.20. Insurance. Section 4.20 of the Company Disclosure
Schedule sets forth a true and complete list of (a) all insurance policies
currently held by Company and the Subsidiaries, and in force as of the date
hereof with respect to the assets, properties, business, employees, officers,
representatives and directors of Company and the Subsidiaries, setting forth as
to each policy a general description of type of coverage, carrier, policy
number, coverage limit and expiration date and (b) the total amount of annual
premiums for Company and the Subsidiaries for all policies referred to in this
Section 4.20. Such policies of Company and the Subsidiaries are in full force
and effect as of the date hereof, except in each case, where the failure of such
policies to be in full force and effect would not reasonably be expected to
result in a Material Adverse Effect on Company; and, except as set forth in
Section 4.20 of the Company Disclosure Schedule, such policies of Company and
the Subsidiaries and, to the knowledge of Company, such policies of any of the
Investment Entities will remain in effect following the Closing or be replaced
by at least substantially comparable policies, except where the failure of such
policies to so remain or be so replaced would not reasonably be expected to
result in a Material Adverse Effect on Company. The holders of those policies of
Company and the Subsidiaries listed on Section 4.20 of the Company Disclosure
Schedule are in compliance with the terms and conditions thereof in all material
respects. All premiums on such policies of Company and the Subsidiaries have
been paid when due except where the failure to pay such premiums when due would
not reasonably be expected to result in a Material Adverse Effect on Company.
4.21. No Brokers. Except for Chilmark Partners, no broker,
finder, financial advisor, agent or similar intermediary has acted on behalf of
Company, any Subsidiary or, to the knowledge of Company, any Investment Entity,
in connection with this Agreement or the Contemplated Transactions, and, except
for fees to Chilmark Partners and Houlihan, Lokey, ▇▇▇▇▇▇ & ▇▇▇▇▇ payable
pursuant to a Final Order of the Bankruptcy Court and except for fees payable in
connection with the Exit Financing there are no brokerage commissions, finder's
fees or similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with Company or any Subsidiary or, to
the knowledge of Company, any Investment Entity, or any action taken by Company
or any Subsidiary or, to the knowledge of Company, any Investment Entity.
4.22. SEC Documents and Other Documents. (a) Except as set
forth in Section 4.22 of the Company Disclosure Schedule, since January 1, 2000,
Company has filed with the SEC all reports, schedules, forms, statements and
other documents (including exhibits and all other information incorporated
therein) required to be filed with the SEC pursuant to the Exchange Act, and the
rules and regulations of the SEC thereunder (the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents when filed contained any untrue statement of a material fact or
omitted or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) No representation or warranty by Company contained in
this Agreement and no statement contained in any document (including financial
statements and the Company Disclosure Schedule), certificate, or other writing
furnished or to be furnished by Company (including Reorganized Covanta) or any
Page 32
Subsidiary to Purchaser or any of its representatives pursuant to the provisions
hereof or in connection with the Contemplated Transactions, contains or will
contain any untrue statement of material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was made,
in order to make the statements herein or therein not misleading that has not
been corrected.
4.23. Projects. Section 4.23 of the Company Disclosure
Schedule is a true and complete list of all projects to be owned, leased,
managed or operated by Reorganized Covanta, any Subsidiary or, to the knowledge
of Company, any Investment Entity (noting, (a) the state or country in which it
is located, (b) the type of fuel, (c) the type of project (i.e., power Project,
water Project or steam Project), (d) the nature of the interest, (e) the
regulatory status of power Projects located in the United States (i.e., as a
Qualifying Small Power Production Facility or a Qualifying Cogeneration
Facility), and (f) the regulatory status of power Projects located outside the
United States (i.e., "exempt wholesale generators" pursuant to Section 32 of
PUHCA and the FERC regulations implemented thereunder or a foreign utility
company pursuant to Section 33 of PUHCA). Any domestic project is referred to
herein as a "Domestic Protect" and any international project is referred to
herein as an "International Project."
4.24. Qualifying Facility Status; Nature of Business. (a) All
Domestic Power Projects owned, leased or operated by Reorganized Covanta, any
Subsidiary or, to the knowledge of Company, any Investment Entity are listed in
Section 4.24(a) of the Company Disclosure Schedule and each Domestic Power
Project identified in Section 4.24(a) of the Company Disclosure Schedule and
each Domestic Power Project identified in Section 4.24(a) of the Company
Disclosure Schedule is a Qualifying Small Power Production Facility or a
Qualifying Cogeneration Facility. Each Domestic Power Project has since the
first generation or sale of electricity met all requirements for, and except for
the Domestic Power Project operated by Covanta Mid-Conn, Inc., has been either,
(i) certified by FERC or (ii) self certified by the Domestic Project in
accordance with PURPA and the FERC regulations issued thereunder, in each case
as either a Qualifying Small Power Production Facility or Qualifying
Cogeneration Facility, as applicable, the FERC regulations implemented
thereunder and all administrative and judicial precedents relating thereto. Each
such certification is in full force and effect. Each Domestic Power Project
meets all ownership requirements for a Qualifying Facility under PURPA (and such
regulations and precedents).
(b) Each Domestic Power Project identified on Section
4.24(b) of the Company Disclosure Schedule is a Qualifying Small Power
Production Facility that is not exempt from the FPA pursuant to 18 C.F.R. ss.
292.601 (each a "Non-Exempt Qualifying Facility Project"). Each Non-Exempt
Qualifying Facility Project has received all Governmental Approvals necessary
under the FPA for the operation and ownership of such Non-Exempt Qualifying
Facility Project, including, without limitation (i) blanket authorization for
the issuance of securities and assumptions of liabilities under Section 204 of
the FPA, (ii) for the sale of power at wholesale under Section 205 of the FPA,
as applicable, and (iii) any and all authorizations required under Section 203
of the FPA or Section 8 of the FPA, in each case that are necessary to the
conduct of its business and the fulfillment of its obligation under applicable
Material Contracts and Governmental Rules.
(c) The Subsidiaries owning or operating each Domestic
Power Project that is a Qualifying Facility and the Subsidiaries that are EWGs
or Foreign Utility Companies ("FUCO") do not conduct any business or own any
interest in another entity that would cause such projects that are Qualifying
Facilities and such Subsidiaries that are EWGs or FUCOs to fail to satisfy the
legal requirements that must be met to obtain and retain status as a Qualifying
Facility, an EWG or a FUCO, respectively.
Page 33
4.25. Certain Regulatory Matters. (a) All utility services
necessary for the development, ownership, operation, and financing of each
Project, including, as necessary, fuel supply, water supply, storm and sanitary
sewer, gas, electric and telephone services and facilities, are available to the
Project on commercially reasonable terms.
(b) None of Company (including Reorganized Covanta), any of
the Subsidiaries or, to the knowledge of Company, any of the Investment Entities
is now and will not be after giving effect to the Contemplated Transactions and
Purchaser will not, solely as a consequence of the Contemplated Transactions,
be: (i) a "public utility company," a "holding company" or either a "subsidiary
company" or an "affiliate" of either a "holding company" or an "public utility
company," as such terms are defined in PUHCA; (ii) subject to regulation under
PUHCA, except pursuant to Sections 9(a)(2), 32 and 33 thereof; (iii) except for
Non-Exempt Qualifying Facility Projects, an "electric utility" as such term is
used in 18 C.F.R. ss. 292.206, or subject to regulation as a "public utility"
under the FPA, provided that, Qualifying Facilities are not exempt from
regulation under Sections 1-18, 21-30, 202(c), 210, 211, 212, 213, 214 and
305(c) of the EPA and any Governmental Rules promulgated with respect thereto,
including, without limitation, any enforcement provisions applicable thereto;
(iv) subject to regulation under the applicable Governmental Rules of any state
respecting the rates of electric utilities, or subject to material financial and
organizational regulation of electric utilities under such Governmental Rules;
or (v) subject to regulation under the applicable Governmental Rules of any
state as a gas utility.
(c) No Subsidiary is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940 or an "investment advisor" within the meaning of the
Investment Company Act of 1940.
(d) All International Power Projects owned, leased or
operated by Reorganized Covanta, any Subsidiary or, to the knowledge of Company,
any Investment Entity are listed in Section 4.23(d) of the Company Disclosure
Schedule. Each of the International Power Projects has obtained from FERC exempt
wholesale generator status under Section 32 of PUHCA and FERC's applicable
regulations relating thereto or foreign utility company status under Section 33
of PUHCA and regulations applicable thereto. Each of the International Power
Projects is (i) located outside the United States, (ii) not a public utility
holding company within the meaning of PUHCA and (iii) not subject to regulation
under PUHCA.
4.26. Agreements with Regulatory Agencies. Neither Company,
the Subsidiaries nor, to the knowledge of Company, the Investment Entities is
subject to any cease-and-desist or other order issued by, or is a party to any
currently effective written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of (each a "Regulatory Agreement") any Governmental Authority
that restricts the conduct of its business or that in any manner relates to its
capital adequacy, its management or its business, and that, with respect to all
others mentioned above, relates to the Projects, nor has Company, any Subsidiary
or, to the knowledge of Company, any Investment Entity been advised in writing
by any Governmental Authority that it is considering issuing or requesting any
Regulatory Agreement, excluding in all such cases orders that are applicable to
the power generation industry in general.
4.27. Taxes. Except as indicated in Section 4.27 of the
Company Disclosure Schedule:
(a) Company and each of the Covanta Tax Affiliates have
filed (or there have been filed on such Persons' behalf) all federal and all
Page 34
foreign, state and local tax returns required to be filed by each of them under
applicable Governmental Rule. All such tax returns were and are true, complete
and correct in all material respects and filed on a timely basis (after giving
effect to any filing extension properly granted by a Governmental Authority
having the authority to do so).
(b) Company and each of the Covanta Tax Affiliates have
paid all Taxes (other than Taxes to be discharged pursuant to the Plan or
included in the Tax Note) that are currently due and payable for all periods
through and including the Closing Date within the time and in the manner
prescribed by applicable Governmental Rules.
(c) Company and the Covanta Tax Affiliates have established
on their books and records reserves adequate to pay all Taxes and reserves for
deferred income Taxes in accordance with GAAP.
(d) There are no Tax liens upon the assets of Company or
any of the Covanta Tax Affiliates, except liens for Taxes not yet due.
(e) Company and each of the Covanta Tax Affiliates have
complied with the provisions of the Code relating to the withholding of Taxes
(including, without limitation, pursuant to Sections 1441 and 1442 of the Code
and withholding from employee wages), as well as similar provisions under any
other applicable Governmental Rules, and have withheld and paid over to the
proper Governmental Authorities all amounts required within the time and in the
manner prescribed by applicable Governmental Authority.
(f) Neither Company nor any Covanta Tax Affiliate has
requested any extension of time within which to file any tax return, which tax
return has not since been filed.
(g) Company has filed, as a common parent corporation of an
"affiliated group" (within the meaning of Section 1504(a) of the Code), a
consolidated return for federal income tax purposes on behalf of itself and all
of those Covanta Tax Affiliates which are "includible corporations" (within the
meaning of Section 1504(b) of the Code).
(h) Prior to the Closing (assuming the Tax Note will be
paid according to its terms), (i) the statute of limitations for the assessment
of federal income taxes will have expired for all consolidated federal income
tax returns of Company (and any members of its group) or such returns shall have
been examined and resolved by the IRS for all periods through 2001; (ii) except
for Taxes relating to taxable periods that close after April 1, 2002 and Taxes
relating to Covanta Tax Affiliates that have not filed for voluntary relief
under Chapter 11 of the Bankruptcy Code, the statute of limitations for the
assessment of state, local and foreign income taxes has expired for all
applicable returns of Company and the Covanta Tax Affiliates or those returns
have been examined and resolved by the appropriate taxing authorities for all
periods; and (iii) no deficiency for any Taxes (other than as reflected in the
Tax Note) has been proposed, asserted or assessed against Company or the Covanta
Tax Affiliates which has not been resolved and paid in full.
(i) No material audits or other administrative or court
proceedings are presently pending with regard to any Taxes or Tax Returns of
Company or any of the Covanta Tax Affiliates and no power of attorney or similar
document which is currently in force has been granted by Company or any Covanta
Tax Affiliate with respect to any matter relating to Taxes.
(j) Neither Company nor any of the Covanta Tax Affiliates
has applied for, received, or has pending a Tax Ruling or commenced negotiations
or entered into a Closing Agreement with any taxing authority.
(k) Neither Company nor any Covanta Tax Affiliate is a
Page 35
party to any agreement relating to indemnifying for, allocating or sharing
Taxes.
(l) Neither Company nor any Covanta Tax Affiliate has
participated in or cooperated with an international boycott within the meaning
of Section 999 of the Code.
(m) Neither Company nor any of the Covanta Tax Affiliates
has any liability for Taxes of any Person other than Company and the Covanta Tax
Affiliates (i) under Treasury Reg. Section 1.1502-6 (or any similar provision of
state, local or foreign law), (ii) by Contract, or (iii) otherwise.
(n) Neither Company nor any of the Covanta Tax Affiliates
has, with regard to any assets or property held or acquired by any of them,
filed a consent to the application of Section 341(f)(2) of the Code, or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a "subsection
(f) asset" (as such term is defined in Section 341(f)(4) of the Code) owned by
Company or any of the Covanta Tax Affiliates.
(o) No deficiencies for any Taxes have been proposed,
asserted or assessed against Company, or any Covanta Tax Affiliate, and there is
no outstanding waiver of the statute of limitations with respect to any Taxes or
Tax Returns of Company or any Covanta Tax Affiliate.
(p) Neither Company nor any of the Covanta Tax Affiliates
is required to include in income any adjustment pursuant to Section 481(a) of
the Code by reason of a voluntary change in accounting method or has knowledge
that the Internal Revenue Service has proposed any such adjustment or change in
accounting method.
(q) Neither Company nor any Covanta Tax Affiliate is a
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code and the acquisition of the stock of Company
will not be a factor causing any payments to be made by Company or any Covanta
Tax Affiliate which payments are not deductible (in whole or in part) pursuant
to Section 280G of the Code.
(r) None of the Covanta Tax Affiliates have an "investment
in United States property" within the meaning of Section 956 of the Code.
(s) None of the Covanta Tax Affiliates have income which is
includible in computing the taxable income of a United States person (as
determined under Section 7701 of the Code) under Section 951 of the Code.
(t) To the knowledge of Company, all transactions which
could give rise to an understatement of federal income tax (within the meaning
of Section 6662 of the Code) were adequately disclosed on the returns as
required in accordance with Section 6662(d)(2)(B) of the Code.
(u) Neither Company nor any Covanta Tax Affiliate has
entered into any transactions or other arrangements which could give rise to a
material accrual of taxable income subsequent to the Closing without a
contemporaneous receipt of cash.
5. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Company as follows:
5.1. Due Incorporation and Authority. Purchaser is duly
organized, validly existing and in good standing under the Governmental Rules of
the jurisdiction under which it was organized and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being and as heretofore conducted.
Page 36
5.2. Authority to Execute and Perform Agreement. Purchaser has
the full legal right and power and all authority and approvals required to enter
into, execute and deliver this Agreement and each and every agreement and
instrument contemplated hereby to which Purchaser is or will be a party or by
which Purchaser will be bound and to perform fully its obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by Purchaser,
and on the Closing Date each and every agreement and instrument contemplated.
hereby to which Purchaser is a party will be duly executed and delivered by
Purchaser and (assuming due execution and delivery hereof and thereof by the
other parties hereto and thereto) this Agreement and each such other agreement
and instrument will be valid and binding obligations of Purchaser enforceable
against Purchaser in accordance with their respective terms. The execution and
delivery by Purchaser of this Agreement and each and every other agreement and
instrument contemplated hereby to which Purchaser is a party, the consummation
of the transactions contemplated hereby and thereby and the performance by
Purchaser of this Agreement and each such other agreement and instrument in
accordance with their respective terms and conditions will not (a) violate any
provision of Purchaser's governing or organizational documents; (b) require
Purchaser to obtain any consent, approval, authorization or action of, or make
any filing with or give any notice to, any Governmental Authority or any other
Person; (c) violate, conflict with or result in the breach of any of the terms
and conditions of, result in a material modification of the effect of, otherwise
cause the termination of or give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both constitute) a
default under, any contract to which Purchaser is a party or by or to which
Purchaser or any of its properties is or may be bound or subject; or (d) violate
any Governmental Rule applicable to Purchaser.
5.3. Purchase for Investment. Purchaser is purchasing the
Purchased Shares for its own account for investment and not with a view to
public resale or distribution thereof.
5.4. Plan Acknowledgment. The Plan substantially in the form
attached hereto as Exhibit E-l is satisfactory to Purchaser in all material
respects.
5.5. Financing. At the Closing, Purchaser will have the
financial ability to purchase the Purchased Shares for the Consideration
pursuant to Section 3.1.
5.6. Certain Tax Matters. (a) As of December 31, 2002,
Purchaser had net operating loss carryforwards and other tax attributes in the
amount set forth in Appendix 1 hereto, which, as adjusted for current year
results, as of the Closing Date, are not subject to limitations under Section
382 or other provisions of the Code.
(b) For U.S. federal income tax purposes, as of the date
hereof, Purchaser projects that it will have a net operating loss for its
consolidated group for its 2003 taxable year.
5.7. SEC Documents and Other Documents. (a) Except as set
forth in Section 5.7(a) of Purchaser Disclosure Schedule, since January 1, 2000,
Purchaser has filed all SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents when filed
contained any untrue statement of a material fact or omitted or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) No representation or warranty by Purchaser contained in
Page 37
this Agreement and no statement contained in any document (including the
Purchaser Disclosure Schedule), certificate or other writing furnished or to be
furnished by Purchaser to Company or any of its representatives pursuant to the
provisions hereof or in connection with the Contemplated Transactions, contains
or will contain any untrue statement of material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make the statements herein or therein not misleading.
5.8. Insurance Matters. (a) Unless exempted by applicable law,
neither Purchaser nor any Insurer has transacted any insurance business in any
jurisdiction requiring an insurance license in which it did not possess such an
insurance license and each of Purchaser and the Insurers are in compliance in
all material respects with all applicable insurance statutes, laws, regulations,
rules, injunctions, decrees, permits, orders and licenses (including, without
limitation, laws relating to insurance holding companies), except where such
failure, individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect on Purchaser, and neither Purchaser nor any
Insurer has received notice of any alleged violation of any such law, statute,
rule, regulation, injunction, decree, permit, order or license except for
notices of alleged violations which, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect on Purchaser.
(b) Each of the Insurers and Purchaser has timely filed all
reports, data, registrations, filings, other information and applications
required to be filed with any Insurance Regulator, except where such failure,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on Purchaser. True and genuine copies of all material
filings for the past two years have been made available to Company or its
representatives.
(c) There are no intercompany agreements or understandings
(written or oral) between Purchaser or any subsidiary of Purchaser, on the one
hand, and any of the Insurers on the other hand (or between Purchaser or an
Insurer on the one hand and a third party on the other hand) relating to loans
or investments of any sort (including without limitation, surplus notes,
guarantees, keep-well arrangements that could affect the solvency of an
Insurer), or that could otherwise be reasonably be expected to result in the
imposition of any material liability on either Purchaser or any Insurer (such
agreements or understandings being referred to herein collectively as
"Inter-Purchaser Agreements") currently in effect. Except as disclosed in
statutory financial statements, or in Purchaser's SEC Documents, Schedule 5.8(c)
sets forth a list of all Inter-Purchaser Agreements that were in effect at any
time within the last six (6) years. All existing Inter-Purchaser Agreements have
been disclosed, to the extent required by law, to the appropriate Insurance
Regulator on the appropriate form, and all required consents of the appropriate
Insurance Regulator relating thereto have been obtained.
(d) Except as set forth in Section 5.8(d) of the Purchaser
Disclosure Schedule, the execution, delivery and performance of this Agreement
by the Purchaser does not and will not: (i) conflict with or violate any
insurance law, statute, rule, regulation or policy of any jurisdiction
applicable to Purchaser or any Insurer; or (ii) require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
Insurance Regulator, except where such failure, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect on Purchaser.
(e) There are no Proceedings, at law or in equity, or
before or by any court or other Government Authority that are pending or, to the
knowledge of Purchaser, threatened against or affecting Purchaser, any of the
Insurers or their subsidiaries, which have been, are or will be initiated by an
Insurance Regulator or other Governmental Authority that, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse Effect
Page 38
on Purchaser.
5.9. No Material Adverse Change. Except as disclosed in the
Purchaser's Quarterly Report on Form 10-Q for the quarter ended September 30,
2003, since December 31, 2002, there has been no change, event or occurrence
which, individually or in the aggregate, has had or would reasonably be expected
to result in a Material Adverse Effect on Purchaser, and Purchaser does not know
of any such change, event or occurrence which is threatened, nor has there been
any damage, destruction or loss which, individually or in the aggregate, has had
or would reasonably be expected to result in a Material Adverse Effect on
Purchaser, whether or not covered by insurance.
5.10. Utility Regulatory Status. None of Purchaser nor any of
its subsidiaries is: a "public utility company," a "holding company" or either a
"subsidiary company" or an "affiliate" of either a "holding company" or a
"public utility company," as such terms are defined in PUHCA; (b) subject to
regulation under PUHCA except pursuant to Section 9(a)(2) thereof; (c) an
"electric utility" or "public utility" as such terms are defined under the FPA,
or subject to regulation under the FPA; or (d) an "electric utility" or
"electric utility holding company" as such terms are defined in PURPA and the
FERC regulations issued thereunder.
5.11. Marine Services Affiliates. There are no intercompany
agreements or understandings (written or oral) between Purchaser or any
subsidiary of Purchaser other than the Marine Services Affiliates, on the one
hand, and any of the Marine Services Affiliates, on the other hand, relating to
loans or investments of any sort, including without limitation guarantees or
keep-well arrangements, or that could otherwise reasonably be expected to result
in the imposition of any material liability on Purchaser with respect to the
liabilities of the Marine Services Affiliates. There are no Proceedings, at law
or in equity, or before or by any court or other Governmental Authority that are
pending or, to the knowledge of Purchaser, threatened against or affecting
Purchaser (or any of the Affiliates of Purchaser other than the Marine Services
Affiliates), that purport to establish liability of Purchaser for the
liabilities of the Marine Services Affiliates which Proceedings, individually or
in the aggregate, would reasonably be expected to result in a Material Adverse
Effect on Purchaser.
6. Covenants and Agreements.
6.1. Conduct of Business. From the date hereof through the
Closing Date, except as (w) set forth in Section 6.1 of the Company Disclosure
Schedule, (x) contemplated by the Plan, (y) authorized by the Bankruptcy Court
or (z) required under the DIP Agreement, Company agrees that (i) it shall (and
shall cause the Subsidiaries to) use commercially reasonable efforts to preserve
intact its business relationships with third parties; (ii) it shall use
commercially reasonable efforts to conduct its (and shall cause the Subsidiaries
to use commercially reasonable efforts to conduct their) businesses and maintain
its (and shall cause the Subsidiaries to maintain their) assets in a manner
consistent with good industry practice and such that the representations and
warranties contained in Section 4 shall continue to be true and correct on and
as of the Closing Date as if made on and as of the Closing Date; (iii) it shall
give Purchaser prompt written notice of any event, condition or circumstance
occurring that would constitute a violation or breach of (x) any representation
or warranty, whether made as of the date hereof or as of the Closing Date, or
(y) any covenant or agreement of Company contained in this Agreement; and (iv)
without limiting the generality of the foregoing, without the prior written
consent of Purchaser:
(a) neither Company nor any Subsidiary shall: (i) amend its
certificate of incorporation or by-laws or similar organizational documents,
(ii) issue, sell, transfer, pledge, dispose of or encumber any shares of any
class or series of its capital stock or Indebtedness, or securities convertible
Page 39
into or exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of any class or series of its capital stock or
any Indebtedness, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to any shares of
any class or series of its capital stock; (iv) split, combine or reclassify any
shares of any class or series of its stock; or (v) redeem, purchase or otherwise
acquire directly or indirectly any shares of any class or series of its capital
stock, or any instrument or security which consists of or includes a right to
acquire such shares;
(b) neither Company nor any Subsidiary shall organize any
new Subsidiary or acquire any capital stock or other equity securities, or
equity or ownership interest in the business, of any other Person;
(c) except as set forth in Section 6.1(c) of the Company
Disclosure Schedule, neither Company nor any Subsidiary shall make any material
change in the operations of the Projects;
(d) except as set forth in Section 6.1(d) of the Company
Disclosure Schedule, neither Company nor any Subsidiary shall modify, amend or
terminate any of its Material Contracts or waive, release or assign any material
rights or claims, except in the ordinary course of business and consistent with
past practice;
(e) except as set forth in Section 6.1(e) of the Company
Disclosure Schedule and except for loans or payments pursuant to the DIP
Agreement, neither Company nor any Subsidiary shall: (i) incur or assume any
Indebtedness, except in the ordinary course of business in an amount not to
exceed $100,000 in the aggregate, from the date hereof until the Closing; (ii)
pay, repay, discharge, purchase, repurchase or satisfy any Indebtedness issued
or guaranteed by Company or any Subsidiary except for any Project limited
recourse debt; (iii) modify the terms of any Indebtedness or other liability
except for any Project limited recourse debt; (iv) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other Person, except as described in the
Company Disclosure Schedule as being in the ordinary course of business and
consistent with past practice; (v) make any loans, advances or capital
contributions to, or investments in, any other Person; (vi) enter into any
material commitment or transaction (including any capital expenditure or
purchase, sale or lease of assets or real estate), except in the ordinary course
of business; or (vii) dispose of or permit to lapse any rights to any
Intellectual Property;
(f) neither Company nor any Subsidiary shall lease,
license, mortgage, pledge or encumber any assets other than in the ordinary and
usual course of business and consistent with the past practice as described in
Section 6.1(f) of the Company Disclosure Schedule or transfer, sell or dispose
of any assets other than in the ordinary and usual course of business and
consistent with past practice described in Section 6.1(f) of the Company
Disclosure Schedule or dispose of or permit to lapse any rights to any
Intellectual Property;
(g) neither Company nor any Subsidiary shall increase any
compensation payable or to become payable to any of its officers, directors or
employees (other than normal recurring increases in the ordinary course of
business of compensation payable to employees who are not contemplated to
participate in any broad based management incentive plan of Company and other
than increases made pursuant to the terms of any Benefit Plan), or enter into or
amend any employment, severance, consulting, termination agreement with, or
employee benefit plan for, or make any loan or advance to, any of its officers,
directors or employees or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such Persons pursuant to an employee
benefit plan or otherwise;
Page 40
(h) neither Company nor any Subsidiary shall (i) adopt or
pay, grant, issue, accelerate or accrue payments or benefits pursuant to any
pension, profit-sharing, extra compensation, incentive, deferred compensation,
stock purchase, stock option, stock appreciation right, group insurance,
severance pay, retirement or other employee benefit plan, agreement or
arrangement, with or for the benefit of any director, officer or employee,
whether past or present, except as described in Section 6.1(h) of the Company
Disclosure Schedule or in accordance with the terms of any plan, agreement or
arrangement as in effect on the date hereof or (ii) amend any of the foregoing
in any material respect or enter into any material consulting agreement with any
former employee;
(i) neither Company nor any Subsidiary shall enter into any
contract or transaction relating to the purchase of assets other than in the
ordinary and usual course of business consistent with past practices;
(j) neither Company nor any Subsidiary shall pay,
repurchase, discharge or satisfy any of its claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice;
(k) other than as contemplated by the Plan or herein,
neither Company nor any Subsidiary shall adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of Company or any Subsidiary;
(l) neither Company nor any Subsidiary shall (i) change any
of the accounting methods used by it unless required by GAAP or (ii) make any
election relating to Taxes, change any election relating to Taxes already made,
adopt any accounting method relating to Taxes or change any accounting method
relating to Taxes;
(m) neither Company nor any Subsidiary shall take, or agree
to or commit to take, any action that would or would be reasonably likely to
result in any of the conditions to the Closing set forth in Section 8 not being
satisfied or that would materially impair the ability of Company to consummate
the Closing in accordance with the terms hereof or materially delay such
consummation;
(n) neither Company nor any of Subsidiary shall enter into
any agreement, contract, commitment or arrangement to do any of the foregoing or
authorize, recommend, propose or announce an intention to do any of the
foregoing; and
(o) neither Company nor any Subsidiary shall take, or
commit to take, any action outside the ordinary course of business that would or
would reasonably be likely to result in a material increase in current
liabilities or a material decrease in current assets.
6.2. Corporate Examinations and Investigations. Prior to the
Closing Date, Company shall, and shall cause each of the Subsidiaries to, permit
any authorized representatives of Purchaser to visit and inspect any of the
properties of Company or of any of the Subsidiaries, to inspect, copy and take
extracts from its and their financial, accounting and tax records (excluding
information relating to any Alternative Transaction), and to discuss its and
their affairs, finances and accounts with its and their officers and independent
public accountants (provided that Company may, if it so chooses, be present at
or participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may reasonably be
requested. Without limiting the foregoing, Purchaser and its representatives
shall be allowed to conduct an environmental investigation of the Facilities
Page 41
owned or operated by Company or any Subsidiary, including, at the reasonable
discretion of Purchaser, the undertaking of environmental testing at the
Facilities, subject to consultation with Company and subject to customary
indemnification arrangements. Both parties agree and acknowledge that they will
continue to be bound by the terms of the confidentiality agreement, dated
January 21, 2003, (the "Confidentiality Agreement") between Purchaser and
Company.
6.3. Publicity. The parties agree that no publicity release or
public statement or public communication concerning this Agreement or the
Contemplated Transactions shall be made without written advance approval thereof
by Company and Purchaser; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may, upon the advice of counsel, be required by applicable
Governmental Rule or any listing agreement with any national securities
exchange. Notwithstanding anything herein to the contrary, except as reasonably
necessary to comply with applicable securities laws, each party to this
Agreement (and each employee, representative or other agent of such party) may
(a) consult any tax advisor regarding the U.S. federal income tax treatment or
tax structure of the transaction, and (b) disclose to any and all persons,
without limitation of any kind, the U.S. federal income tax treatment and tax
structure of the transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to the taxpayer relating to such tax
treatment and tax structure; provided that clause (b) shall not apply until the
earliest of (i) the date of the public announcement of discussions relating to
the transaction, (ii) the date of the public announcement of the transaction or
(iii) the date of the execution of an agreement, with or without conditions, to
enter into the transaction. For this purpose, "tax structure" is limited to any
facts relevant to the U.S. federal income tax treatment of the transaction and
does not include information relating to the identity of the parties.
6.4. Efforts and Actions to Cause Closing to Occur. Prior to
the Closing, upon the terms and subject to the conditions of this Agreement,
each of Company and Purchaser shall, and Company shall cause the Subsidiaries
to, use their commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done and cooperate with each other in order
to do, all things necessary (subject to applicable laws) to satisfy the
conditions to Closing set forth in Sections 7 and 8 and consummate the Closing
and the Contemplated Transactions, including, but not limited to (a) the
preparation and filing of all forms, registrations and notices required to be
filed to consummate the Closing and the Contemplated Transactions, and the
taking of such actions as are necessary to obtain any requisite approvals,
authorizations, consents, orders, licenses, permits, qualifications, exemptions
or waivers by any third ▇▇▇▇▇, including the Required Consents, and (b) the
preparation of any disclosure documents requested by Purchaser in order to
facilitate the financing of any of the Contemplated Transactions.
6.5. Governmental Approvals. (a) Each of the parties shall
take all actions necessary to file as soon as practicable all notifications,
filings and other documents required to obtain all Governmental Approvals
including, without limitation, under the FPA, and to respond as promptly as
practicable to any inquiries and requests received from the Federal Trade
Commission, the Antitrust Division of the Department of Justice, FERC and any
other Governmental Authority for additional information or documentation in
connection therewith.
(b) Company shall use best efforts, at and as of the
Closing, at its sole expense, to cause the transfer, reissuance or modification
of any Governmental Approvals to the extent that such is required to cause the
Governmental Approvals to remain in full force and effect in the possession of
Reorganized Covanta or any of the Subsidiaries, as the case may be, after the
Closing.
Page 42
6.6. No Inconsistent Action. Neither party shall take any
action that is materially inconsistent with its obligations under this
Agreement, except for (and as follows from) the Approval Order and except as
required by the Bankruptcy Court.
6.7. Bankruptcy Covenants. (a) As soon as practicable
following the execution of this Agreement (and in no event later than December
5, 2003), Company shall, and shall cause each of the other Debtors to, file the
Plan. As soon as practicable thereafter (and in no event later than December 18,
2003), Company shall, and shall cause each of the other Debtors to, file a
Disclosure Statement with respect to the Plan. Thereafter, without the prior
written consent of Purchaser, Company shall not, and shall cause each of the
other Debtors not to, amend or modify any material provision of the Plan or the
Disclosure Statement with respect to the business, operations, assets, condition
(financial or otherwise) or prospects of Reorganized Covanta and its
Subsidiaries or withdraw the Plan or file any other plan of reorganization of
the Debtors. Company shall, and shall cause each of the other Debtors to,
promptly provide Purchaser with (i) proposed final drafts of all documents,
motions, orders, filings, pleadings, supplements or amendments that Company or
any other Debtor proposes to file with the Bankruptcy Court which relate to the
consummation or approval of the Plan, this Agreement or any provision therein or
herein, and will provide Purchaser with reasonable opportunity to review and
comment upon such filings and (ii) any objections to the Plan or Disclosure
Statement. Company shall, and shall cause each of the other Debtors to, consult
and cooperate with Purchaser, and consider in good faith the views of Purchaser,
as contemplated by the Plan, with respect to all such filings and the acceptance
or rejection prior to Closing of any unexpired lease or other executory
contract. Company shall, and shall cause each of the other Debtors to, promptly
(and, in any event, within two (2) Business Days after receipt of such pleadings
by the Debtors) provide Purchaser with copies of all pleadings (other than
proofs of claim below $10,000 in amount) received by or served by or upon any of
the Debtors in connection with the Case after the date hereof.
(b) In the event an appeal is taken, or a stay pending
appeal is requested or reconsideration is sought, from either the Confirmation
Orders or the Disclosure Statement Order, Company shall promptly after becoming
aware thereof notify Purchaser of such notice of appeal, request for a stay
pending appeal or motion for reconsideration. Company shall also provide
Purchaser with written notice (and copies) of any other or further notice of
appeal, motion or application filed in connection with any appeal from or
application for reconsideration of, either of such orders and any related
briefs.
(c) Promptly after the execution of this Agreement (and in
no event later than two (2) Business Days following the execution of this
Agreement), Company shall, and shall cause each of the other Debtors to, file a
motion (the "Investment Motion") for expedited determination of the approval of
the Exclusivity Provisions (as defined in Section 6.10(a)), the Termination Fee
and the Expense Reimbursement provided for in this Agreement in form and
substance reasonably acceptable to Purchaser. Company shall, and shall cause
each of the other Debtors to, use commercially reasonable efforts to obtain the
Approval Order by December 18, 2003, which order shall be in form and substance
reasonably acceptable to Purchaser and Company, with only such changes as shall
be agreed to by Purchaser and Company in writing.
(d) Promptly after the execution of this Agreement (and in
no event later than five (5) Business Days following execution of this
Agreement), Company shall file a motion to seek authorization to pay, with
respect to the Second Lien L/C Credit Facility Credit Agreement, a commitment
fee of up to $125,000, and cost reimbursement of up to $75,000. Company shall
use commercially reasonable efforts to obtain an order granting such
authorization as soon as practicable.
Page 43
6.8. ISRA. Company shall seek a determination from the New
Jersey Department of Environmental Protection ("NJDEP") that the Industrial Site
Recovery Act, N.J.S.A. 13:1K-6, et seq. ("ISRA"), is not applicable to the
transactions contemplated by this Agreement. Company shall allow Purchaser and
its representatives to review and comment on any filings made in connection with
this request. If the NJDEP determines that ISRA is applicable to this
transaction, Company shall ensure that it obtains any approval necessary in
order to comply with the requirements of ISRA in connection with the closing of
the transaction.
6.9. Connecticut Property Transfer Act. Company and Purchaser
shall make an evaluation to determine whether the Connecticut Transfer Act,
Conn. Gen. Stat. ss. 22a-134, et seq. ("CTA"), applies to the Contemplated
Transactions. If Company and Purchaser determine that CTA applies to the
Contemplated Transactions, Company shall undertake all actions required to (a)
determine which form(s) must be prepared pursuant to the CTA and delivered to
Purchaser prior to Closing and (b) ensure that such form(s) are prepared
correctly and delivered to Purchaser prior to Closing.
6.10. Exclusivity.
(a) From and after the date of this Agreement, Company
shall not, and shall cause each Subsidiary and each of their respective
directors, officers, employees, financial advisors, representatives and agents
not to, directly or indirectly, (i) solicit, initiate, engage or participate in
or encourage discussion or negotiations with any Person or entity (other than
Purchaser) concerning any merger, consolidation, sale of material assets, tender
offer for, recapitalization of or accumulation or acquisition of securities
issued by Company or any Subsidiary, proxy solicitation, other business
combination involving Company or any Subsidiary or any other plan of
reorganization of Company or any Subsidiary (including, without limitation, any
Employee Stock Ownership Plan structure) (collectively, "Alterative
Transaction"), or (ii) provide any non-public information concerning the
business, properties or assets of Company or any Subsidiary to any Person or
entity (other than to Purchaser). Company shall, and shall cause each of its
Subsidiaries to, immediately cease any and all existing activities, discussions
and negotiations with any Person other than Purchaser with respect to any
Alternative Transaction and the Company shall, and shall cause its Subsidiaries
to, continue indefinitely the confirmation hearing for their pending
reorganization and liquidation plans involving an Employee Stock Ownership Plan.
Company shall immediately notify Purchaser of, and shall disclose to Purchaser
all details of, any inquiries, discussions or negotiations described in the
first sentence of this Section 6.10. The provisions of this Section 6.10 are
referred to in this Agreement as the "Exclusivity Provisions."
(b) Notwithstanding the provisions of subsection (a) above,
prior to entry of the Confirmation Orders, the Debtors may, to the extent
required by the Bankruptcy Code, the Bankruptcy Rules, the operation and
information requirements of the Office of the United States Trustee, or any
orders entered or approvals or authorizations granted by the Bankruptcy Court in
the Case during the period prior to Closing (collectively, the "Bankruptcy
Related Requirements"), or to the extent that the board of directors of Company
determines, in good faith after consultation with outside legal counsel, that
such board's fiduciary duties under applicable Governmental Rule require it to
do so, participate in discussions or negotiations with, and, subject to the
requirements of subsection (c) below, furnish information to any Person, entity
or group after such Person, entity or group has delivered to the Debtors, in
writing, an unsolicited bona fide offer to effect an Alternative Transaction
that the board of directors of Company in its good faith judgment determines,
after consultation with its independent financial advisors, would result in a
transaction more favorable to the stakeholders of the Debtors from a financial
point of view than the transactions contemplated hereby and for which financing,
to the extent required, is then committed (or which, in the good faith judgment
Page 44
of the board of directors, is reasonably capable of being obtained) and which
(in the good faith judgment of the board of directors) is likely to be
consummated (a "Superior Proposal"). In the event the Debtors receive a Superior
Proposal, nothing contained in this Agreement (but subject to the terms hereof)
will prevent the board of directors of Company from approving such Superior
Proposal or requesting authorization of such Superior Proposal from the
Bankruptcy Court, if such board determines, in good faith, after consultation
with outside legal counsel, that such action is required by its fiduciary duties
under applicable Governmental Rule; and in such case, the board of directors of
Company may terminate this Agreement pursuant to Section 11.1(f) hereof;
provided, however, that Company shall not terminate this Agreement until at
least five (5) Business Days after Purchaser's receipt of a copy of such
Superior Proposal.
(c) Debtors shall, within one (1) Business Day of the
occurrence thereof, notify Purchaser orally and in writing of the receipt of a
Superior Proposal. Such notice to Purchaser shall indicate in reasonable detail
the identity of the potential acquirer and the material terms and conditions of
such Superior Proposal, to the extent known.
(d) Notwithstanding anything to the contrary in this
Section 6.10, Company shall not, and shall cause each of its Subsidiaries not
to, provide any non-public information to a third party unless: (i) Company and
its Subsidiaries provide such non-public information pursuant to a
non-disclosure agreement entered into subsequent to the date hereof with terms
regarding the protection of confidential information at least as restrictive as
such terms in the Confidentiality Agreement or pursuant to confidentiality
agreements existing on the date hereof; and (ii) such non-public information has
been delivered previously or made available to Purchaser.
(e) Notwithstanding anything to the contrary in this
Section 6.10, Company shall be permitted to continue the solicitation of
expressions of interest in its international operations.
6.11. Tax Matters. (a) Except as disclosed in Section 6.11 of
the Company Disclosure Schedule and except to the extent reflected on Appendix 2
hereto, Company shall not, nor shall Company permit any Covanta Tax Affiliate
to, without the written consent of Purchaser, (i) make or rescind any election
relating to Taxes if such action would materially adversely affect Company's tax
position, (ii) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, (iii) materially change any of its methods of reporting
income or deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
December 31, 2001 or (iv) undertake any transactions or enter into any
arrangements that could (A) result in the receipt of cash or other consideration
prior to the Closing Date but an accrual of taxable income subsequent to the
Closing Date, (B) otherwise defer the recognition of income or gain to a period
subsequent to the Closing Date or (C) accelerate a loss or deduction to a period
prior to the Closing Date. Notwithstanding any other provision of this
Agreement, and except as disclosed in Section 6.11 of the Company Disclosure
Schedule and except to the extent reflected on Appendix 2 hereto, in the event
that, after the date hereof, Company or any Covanta Tax Affiliate seeks a
"Closing Agreement" from the IRS or a definitive settlement agreement from the
IRS or any state, local or foreign taxing authority on a matter that is subject
to a representation, warranty or covenant set forth in this Agreement (including
with respect to the Tax Note), then: (A) Company shall, or shall cause such
Covanta Tax Affiliate to, keep Purchaser informed as to the status of such
agreement and any discussions, negotiations or arrangements related thereto, and
(B) Company shall not, and shall cause any such Covanta Tax Affiliate not to,
file or submit any document to any taxing authority in connection with any such
agreement without first providing Purchase with (1) copies of any such document
and (2) an opportunity to review and comment on any such document prior to such
Page 45
filing or submission.
(b) From the date hereof through the Closing Date,
Purchaser shall not undertake any action that would cause the net operating loss
carryforwards and other tax attributes in the amount set forth in Appendix 1
hereto, as adjusted for current year results and anticipated ordinary course
results up and until the Closing Date, not to be available for the use by
Company and its Subsidiaries.
6.12. Pro Forma Taxes.
(a) Company shall prepare pro forma U.S. federal, state and
local income tax calculations (including for any taxes determined by reference
to gross or net income or revenue) for all relevant jurisdictions reflecting the
liabilities of Company and the Covanta Tax Affiliates for all taxable periods
(including 2003 and 2004 through the Closing Date) for which the Taxes have not
been paid or discharged pursuant to the Plan (other than payment of the Tax
Note) taking into account the consummation of all transactions included in the
Plan, any prior transactions and the transactions required by Section 7.17 of
this Agreement (the "Pro Forma Income Tax Calculations"). Such Pro Forma Income
Tax Calculations shall be delivered to Purchaser at least twenty (20) Business
Days prior to Closing for review and approval.
(b) Prior to Closing, Company shall have established a cash
reserve (the "Cash Tax Reserve") for the unpaid aggregate tax liability
reflected on the Pro Forma income Tax Calculations (the "Unpaid Pro Forma Tax
Liability").
6.13. D&O Insurance. The D&O Insurance Cost shall have been
paid by Company on or prior to the Closing Date, and the D&O Insurance shall be
in full force and effect.
6.14. Financial Statements. (a) As promptly as practicable,
and in any event no later than thirty (30) days after the end of each monthly
period ending after the date hereof and before the Closing Date, Company shall
deliver to Purchaser true and complete copies of(in the case of any such monthly
period) the unaudited consolidated statements of income and cash flows of
Company and its Subsidiaries as of and for each such monthly period and the
portion of the fiscal year then ended (each set, the "Monthly Management
Reports").
(b) Company shall, and shall cause its Subsidiaries and
certified public accountants to, cooperate with Purchaser in connection with the
preparation of the financial statements required by Rule 3-05 of Regulation S-X
and the financial statements and other information required by Article 11 of
Regulation S-X with respect to Reorganized Covanta and its Subsidiaries.
6.15. Benefit Plans. Purchaser generally intends to maintain
the existing Benefit Plans, subject to Purchaser's right to amend, terminate or
modify the Benefit Plans as permitted by such Benefit Plans or applicable law.
7. Conditions Precedent to the Obligation of Purchaser. The obligation
of Purchaser to purchase the Purchased Shares from Company is subject, at the
option of Purchaser acting in accordance with the provisions of Section 11 with
respect to termination of this Agreement, to the fulfillment on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
by Purchaser (unless the non-fulfillment of any condition is the result of the
action or inaction of Purchaser):
7.1. Representations and Covenants. (a) The representations
and warranties of Company contained in (i) this Agreement shall be true and
correct (without giving effect to any limitation as to "materiality" or
"Material Adverse Effect on Company" qualifiers set forth therein) on and as of
Page 46
the Closing Date with the same force and effect as though made on and as of the
Closing Date, except in any case for such failures to be true and correct which
would not reasonably be expected to result in a Material Adverse Effect on
Company and (ii) Section 4.8(a) shall be true and correct on and as of the
Closing Date.
(b) Company shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by Company on or prior to the Closing Date.
(c) Company shall have delivered to Purchaser a
certificate, dated as of the Closing Date and signed by the Chief Executive
Officer and Chief Financial Officer of Company, certifying as to (a) and (b)
above.
7.2. Required Consents and Required Governmental Approvals.
All Required Consents and Required Governmental Approvals shall have been
obtained or deemed by operation of the Plan or the Confirmation Order to be
given and be in full force and effect, and Purchaser shall have been furnished
with evidence reasonably satisfactory to it that such Required Consents and
Required Governmental Approvals have been granted and obtained.
7.3. No Claims. No Claims shall be pending or, to the
knowledge of Purchaser or Company, threatened, before any Governmental Authority
(including investigations instituted by the United States Department of Justice
or the Federal Trade Commission in connection with antitrust regulations) to
restrain or prohibit, or to obtain damages in respect of, this Agreement or the
consummation of the Contemplated Transactions or which, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse Effect
on Company.
7.4. Disclosure Statement Order. The Bankruptcy Court shall
have entered an order in form and substance satisfactory to Purchaser (the
"Disclosure Statement Order") approving the Disclosure Statement for the Plan.
7.5. Liquidation Plan. The final Liquidation Plan shall be in
form and substance satisfactory to Purchaser except for modifications that would
not have an adverse effect upon the business, operations, properties, assets,
condition (financial or otherwise) or prospects of Reorganized Covanta and the
Subsidiaries.
7.6. Confirmation Orders. The Bankruptcy Court shall have
entered orders in form and substance reasonably satisfactory to Purchaser (the
"Confirmation Orders") confirming the Plan and the Liquidation Plan pursuant to
Section 1129 of the Bankruptcy Code and the Confirmation Orders shall have
become Final Orders.
7.7. Approval Orders. The Bankruptcy Court shall have entered
the Approval Order and the Approval Order shall be in full force and effect, and
shall not have been stayed, vacated, modified or supplemented without
Purchaser's prior written consent.
7.8. Exit Financing. All conditions precedent to the closing
of the Exit Financing shall have been satisfied or waived and the Exit Financing
shall have been consummated in accordance with the material terms contained in
the Credit Agreements and the Senior Secured Notes Indenture; provided that
failure of this condition precedent shall not affect the obligations of the
Purchaser under, or the terms of, Section 3.5(b)(ii) or Section 11.2(c).
7.9. International Reorganization and Arrangements. (a) The
reorganization of the International Projects and the international operations
and entities of Company and Subsidiaries shall have been consummated on the
terms and conditions set forth in Exhibit G and otherwise on terms and
Page 47
conditions satisfactory to Purchaser.
(b) The CPIH Management Services & Reimbursement Agreement
shall have been authorized, executed and delivered by each of the parties
thereto on terms substantially as set forth in Exhibit H and otherwise on terms
and conditions satisfactory to Purchaser and shall be in full force and effect.
7.10. Tax Sharing Agreement. The Tax Sharing Agreement shall
have been authorized, executed and delivered by Company on terms as set forth in
Exhibit F and shall be in full force and effect.
7.11. Cash Reserve. On the Effective Date, Company shall, (i)
have established a fully funded cash reserve for Exit Costs and (ii) in
addition, have a cash balance, after giving effect to payment of the
Consideration, in an amount equal to the Closing Cash Balance plus Retained
Cash.
7.12. ISRA. For any Facility subject or potentially subject to
ISRA, (a) Company shall have obtained a letter of non-applicability from the
NJDEP or (b) if ISRA is applicable to one or more of such Facilities, with
respect to each such Facility, Company shall have obtained an approval of a
Remedial Action Workplan (as such term is defined by ISRA) from the NJDEP,
entered into a Remediation Agreement (as such term is defined by ISRA) with the
NJDEP or obtained such other approval as authorized by ISRA to allow for the
closing of this transaction.
7.13. Qualifying Facility Recertifications. Company shall
cause each of its Subsidiaries directly owning a Qualifying Facility to have
prepared and filed at FERC a self-recertification using FERC Form 556 updating
the prior certification or self certification, as applicable, to include any
changes that have occurred prior to Closing and the change in upstream ownership
effected by the Contemplated Transactions at Closing (each a "Qualifying
Facility Self Recertification"). Each such Qualifying Facility Self
Recertification shall fully comply with all applicable FERC rules and
regulations, including but not limited to, fully updating all changes that have
occurred to the relevant Project since the last certification for which FERC's
rules and regulations require a recertification or self-recertification,
including, without limitation, its ownership, technical characteristics, fuel
use, size and ability to meet applicable operating and efficiency requirements.
7.14. Tax Liability. Company shall have established the Cash
Tax Reserve for the Unpaid Pro Forma Tax Liability.
7.15. Opinion. Company shall have delivered an opinion of
regulatory counsel in a form reasonably satisfactory to Purchaser and its
counsel.
7.16. Geothermal Sale. The closing of the Geothermal Sale
shall have occurred on substantially the same terms as set forth in the Heber
Reorganization Plan.
7.17. Treatment of Certain Projects. Prior to Closing, Company
and Purchaser shall have mutually agreed upon the treatment under the Plan of,
and all arrangements with respect to, the waste-to-energy-Projects in Haverhill,
Massachusetts, Lake County, Florida, ▇▇▇▇▇▇ County, New Jersey, the Town of
Babylon, New York, and the water Project in Tampa, Florida. Company and
Purchaser agree that various mutually agreed arrangements for each of such
Projects as described in Section 7.17 of the Company Disclosure Schedule shall
be acceptable arrangements, which if consummated by the Company, subject to the
reasonable approval of Purchaser, shall satisfy this condition precedent.
8. Conditions Precedent to the Obligation of Company. The obligation of
Company to issue and sell the Purchased Shares is subject, at the option of
Page 48
Company acting in accordance with the provisions of Section 11 with respect to
termination of this Agreement, to the fulfillment on or prior to the Closing
Date of the following conditions, any one or more of which may be waived by
Company (unless the non-fulfillment of any condition is a result of the action
or inaction of Company, the Subsidiaries or their Affiliates):
8.1. Representations and Covenants. (a) The representations
and warranties of Purchaser contained in (i) this Agreement shall be true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" qualifiers set forth therein) on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date, except in any case for such failures to be true and correct which would
not reasonably be expected to result in a Material Adverse Effect on Purchaser
and (ii) Section 5.9 shall be true and correct on and as of the Closing Date.
(b) Purchaser shall have performed and complied in all
material respects with all covenants and agreements required by this Agreement
to be performed or complied with by it on or prior to the Closing Date.
(c) Purchaser shall have delivered to Company a
certificate, dated the date of the Closing and signed by an officer of
Purchaser, certifying as to (a) and (b) above and satisfaction of the condition
set forth in Section 8.8.
8.2. Required Consents and Required Governmental Approvals.
All Required Consents and Required Governmental Approvals shall have been
obtained or deemed by operation of the Plan or the Confirmation Orders to have
been given and shall be in full force and effect.
8.3. Confirmation Orders. The Confirmation Orders shall have
been entered by the Bankruptcy Court and shall not be stayed, reversed, amended,
ordered to be reconsidered, or modified in a manner not approved by Company.
8.4. Exit Financing. All conditions precedent to closing the
Exit Financing (other than any failure of a condition precedent due to the
breach, action or inaction of Company) shall have been satisfied or waived and
the Exit Financing shall have been consummated in accordance with the material
terms contained in the Credit Agreements and the Senior Secured Notes Indenture;
provided that the failure to consummate is not the result of the breach, action
or inaction of Company.
8.5. New Securities Issued. All conditions precedent to the
issuance of each of the Unsecured Notes and the Tax Note (other than the Closing
hereunder) shall have been satisfied.
8.6. Execution of Tax Sharing Agreement. The Tax Sharing
Agreement shall have been authorized, executed and delivered by Purchaser on
terms as set forth in Exhibit F and shall be in full force and effect.
8.7. Geothermal Sale. The Closing of the Geothermal Sale shall
have occurred on substantially the same terms as set forth in the Heber
Reorganization Plan.
8.8. Non-Operating Loss Carryforwards. Purchaser's good faith
estimate of the amount of net operating loss carryforwards projected to be
available to Company and its Subsidiaries at Closing shall not be less than $325
million.
9. Designation of Executory Contracts. Company and Purchaser shall
determine in good faith the executory contracts and Leases that Company will
assume or reject. At least thirty (30) days before the Confirmation Hearing,
Company shall provide to Purchaser a schedule identifying the executory
contracts and Leases that it proposes to assume or reject for Purchaser's
Page 49
approval.
10. Representations and Warranties of Company. Notwithstanding any
right of Purchaser to investigate fully the affairs of Company and the
Subsidiaries and notwithstanding any knowledge of facts determined or
determinable by Purchaser pursuant to such investigation or right of
investigation, prior to the Closing, Purchaser has the right to rely fully upon
the representations and warranties of Company contained in Section 4 of this
Agreement.
11. Termination of Agreement.
11.1. Termination. This Agreement may be terminated prior to
the Closing as follows:
(a) at the election of Purchaser, if any one or more of the
conditions to the obligation of Purchaser to close set forth in Section 7 has
not been fulfilled as of June 15, 2004;
(b) at the election of Company, if any one or more of the
conditions to the obligation of Company to close set forth in Section 8 has not
been fulfilled as of June 15, 2004;
(c) at the election of either party, if there is any Order
of any nature of any Governmental Authority of competent jurisdiction that is in
effect that restrains, enjoins or otherwise prohibits the consummation of the
Contemplated Transactions;
(d) at the election of Company, if Purchaser has materially
breached any material covenant or agreement contained in this Agreement, which
breach cannot be or is not cured prior to June 15, 2004, provided that Company
is not then in material breach of any material covenant or agreement contained
in this Agreement;
(e) at the election of Purchaser, if Company has materially
breached any material covenant or agreement contained in this Agreement, which
breach cannot be or is not cured prior to June 15, 2004, provided that Purchaser
is not then in material breach of any material covenant or agreement contained
in this Agreement;
(f) at the election of Company, if (i) Company accepts a
Superior Proposal or (ii) the Bankruptcy Court approves an Alternative
Transaction, provided that Company has complied with its obligations under
Section 6.10 and provided further that Company shall not terminate this
Agreement pursuant to this paragraph (f) until the expiration of five (5)
Business Days following Purchaser's receipt of written notice advising Purchaser
that Company has received an offer for an Alternative Transaction specifying the
material terms and conditions of such an Alternative Transaction (and including
a copy thereof with all accompanying documentation), identifying the Person
making such an offer for an Alternative Transaction and stating whether Company
intends to enter into a definitive agreement with respect thereto. After
providing the notice referred to in the preceding sentence, Company shall
provide a reasonable opportunity to Purchaser during such five (5) Business Day
period to make any adjustments in the terms and conditions of this Agreement as
are necessary to cause the Contemplated Transactions to proceed on terms and
conditions equivalent to or better than such Alternative Transaction;
(g) at the election of Purchaser, if (i) Company enters
into an agreement with respect to an Alternative Transaction or (ii) the
Bankruptcy Court approves an Alternative Transaction;
(h) at any time after December 18, 2003, at the election of
Purchaser, if by such date the Approval Order has not been entered or if such
Page 50
order has been vacated, reversed or materially modified or amended or stayed; or
(i) at any time on or prior to the Closing Date, by mutual
written consent of Company and Purchaser.
11.2. Survival After Termination; Termination Fee. (a) If this
Agreement terminates pursuant to Section 11.1 and the Contemplated Transactions
are not consummated, this Agreement shall become null and void and have no
further force or effect, except that (i) any such termination shall be without
prejudice to the rights of(A) Purchaser and Laminar, as applicable, to receive
the damages and payments described in Section 3.3, Section 11.2(b), Section
11.2(c) and Section 11.2(d) and (B) if applicable, Company to receive the
payment set forth in Section 11.2(c) and (ii) the provisions of Section 11.2(g)
shall survive. Notwithstanding anything in this Agreement to the contrary, the
provisions of Section 6.2 relating to the Confidentiality Agreement shall remain
in full force and effect.
(b) The parties agree that if (i) this Agreement is
terminated under Section 11.1 for any reason by a party which has the right to
terminate this Agreement (other than by Company pursuant to (A) Section 11.1(b)
(x) solely in connection with a failure of the condition set forth in Section
81(a) or 8.2 to be satisfied other than as a result of any breach, action or
inaction of Company or (y) solely in connection with a failure of the condition
set forth in Section 8.4 if such failure is not the result of a Company Failure
and a First Lien Failure has not occurred or (B) Section 11.1(d)) and (ii)
Company closes an Alternative Transaction within 6 months of such termination,
or contracts to close an Alternative Transaction within 6 months of such
termination and subsequently closes such an Alternative Transaction, Purchaser
shall be entitled to payment of $12,000,000 as a termination fee (the
"Termination Fee"), which Company shall pay or cause to be paid to Purchaser by
wire transfer of immediately available funds within two (2) Business Days of the
closing of such an Alternative Transaction to an account designated in writing
by Purchaser; provided that if Purchaser terminates pursuant to Section 7.6
solely because an appeal is pending against the Confirmation Order, and there is
no stay of the Confirmation Order, no Termination Fee shall be payable under
this Section 11.2(b).
(c) The parties agree that if this Agreement is terminated
pursuant to Section 11.1 for any reason, the parties will instruct the Escrow
Agent to return the Deposit to Purchaser with interest within two (2) Business
Days of termination by wire transfer of immediately available funds to an
account designated in writing by Purchaser, provided that, notwithstanding the
foregoing, if (i) Company terminates this Agreement pursuant to (A) Section
11.1(b) in connection with a failure of the condition set forth in (x) Section
8.1(a) solely as a result of a knowing breach of the representations and
warranties set forth in Section 5 by Purchaser or (y) Section 8.4 if such
failure is not the result of a Company Failure and a First Lien Failure has not
occurred or (B) Section 11.1(d) and (ii) Purchaser has not terminated, or has no
right to terminate, this Agreement pursuant to any clause of Section 11.1 (other
than pursuant to Section 11.1(a) solely in connection with a failure of the
condition precedent set forth in (x) Section 7.2 that is the result of any
intentional breach, action or inaction of Purchaser or (y) Section 7.8 solely in
connection with the failure of Purchaser to perform its obligation under Section
3.5(b)(ii)), the parties shall instruct the Escrow Agent to transfer the Deposit
to Company with interest within two (2) Business Days of termination by wire
transfer of immediately available funds to an account designated in writing by
Company.
(d) In the event that this Agreement is terminated because
of a failure of Company to consummate the Geothermal Sale, Purchaser may submit
invoices to Company for reimbursement of out-of-pocket fees and expenses
incurred by Purchaser, and Company shall pay or cause to be paid by wire
transfer of immediately available funds to an account designated in writing by
Page 51
Purchaser up to an additional $1 million over the amounts payable by Company in
respect of Purchaser Expense Reimbursement under Section 3.3; provided that
Company has not terminated, and has no right to terminate, this Agreement
pursuant to (i) Section 11.1(b) (solely in connection with a failure of the
condition in Section 8.1(a) or 8.2 to be satisfied other than as a result of any
breach, action or inaction of Company) or (ii) Section 11.1(d).
(e) If Purchaser receives payment of the Termination Fee
under Section 11.2(b), such payment, together with the Expense Reimbursement,
shall (i) be full consideration for Purchaser's efforts and expenses in
connection with this Agreement and the Contemplated Transactions, including the
substantial due diligence efforts of Purchaser and its professionals and
advisors and (ii) constitute liquidated and agreed damages to Purchaser in
respect of this Agreement and the Contemplated Transactions, and Company and
Reorganized Covanta shall have no further obligations under this Agreement or
further liability to Purchaser. Purchaser and Company believe that it is
impossible to determine accurately the amount of all damages that Purchaser
would incur by virtue of the failure to proceed with the Contemplated
Transactions, and Purchaser's sole and exclusive remedy for any such failure
shall be to receive payment of the Expense Reimbursement and payment of the
Termination Fee. Except as provided in this Section, Purchaser shall have no
right or remedy against Company, at law or in equity, by reason of a breach by
Company of its obligation to proceed with the Contemplated Transactions.
(f) The parties agree that if the Deposit is paid to
Company pursuant to Section 11.2(c), such payment shall (i) be full
consideration for Company's efforts and expenses in connection with this
Agreement and the Contemplated Transactions, and (ii) constitute liquidated and
agreed damages to Company in respect of this Agreement and the Contemplated
Transactions, including failure to close the Second Lien L/C Credit Facility
Credit Agreement or the International Revolver Credit Facility Credit Agreement,
and Purchaser shall have no further obligation under this Agreement or further
liability to Company. Company and Purchaser believe that it is impossible to
determine accurately the amount of all damages that Company would incur by
virtue of a breach by Purchaser of their obligations to proceed with the
Contemplated Transactions, including failure to close the Second Lien L/C Credit
Facility Credit Agreement or the International Revolver Credit Facility Credit
Agreement, and Company's sole and exclusive remedy for any such breach shall be
to retain the Deposit, if applicable, pursuant to the provisions of this Section
11.2. Except as provided in this Section 11.2, Company shall have no right or
remedy against Purchaser, at law or in equity, by reason of a breach by
Purchaser of its obligation to proceed with the Contemplated Transactions,
including failure to arrange for or close the Second Lien L/C Credit Facility
Credit Agreement or the International Revolver Credit Facility Credit Agreement.
For the avoidance of doubt, notwithstanding anything in this Agreement to the
contrary, the parties to this Agreement hereby agree that a breach by Purchaser
of its obligations under Section 3.5(b)(ii) or a failure of the condition
precedent in Sections 7.8 or 8.4 with respect to the Second Lien L/C Credit
Facility Credit Agreement and the International Revolver Credit Facility Credit
Agreement will not result in any liability to Purchaser in an amount greater
than the amount of the Deposit (in accordance with, and to the extent provided
in, Section 11.2(c) above).
(g) Notwithstanding any provision of this Agreement or any
other agreement, instrument or document executed in connection with the
Contemplated Transactions or otherwise, Company acknowledges and hereby
covenants with the Investors that each such Investor, the lenders under the
First Lien L/C Credit Facility Credit Agreement, International Revolver Credit
Facility Credit Agreement and Second Lien L/C Credit Facility Credit Agreement
and any indemnitee of each Investor shall have no responsibility, obligation or
liability under or in connection with this Agreement and the Contemplated
Transactions, whether in contract, under tort law or otherwise. The parties
agree that each of the Investors severally shall be a third party beneficiary of
Page 52
this Section 11.2(g) with the full right to enforce it.
(h) The parties hereby agree that there shall be no
liability for lost profits (save for forfeiture of the Deposit under this
Agreement, if applicable) or punitive, incidental or consequential damages under
this Agreement.
(i) The Expense Reimbursement and Termination Fee shall
constitute administrative expenses of Company under section 364(c)(i) of the
Bankruptcy Code with priority over any and all administrative expenses of the
kind specified in section 503(b) or 507(b) of the Bankruptcy Code.
(j) Company acknowledges that Purchaser would not have
invested efforts in negotiating and documenting the Contemplated Transactions
and incurring duties to pay its legal and financial representatives if Purchaser
were not entitled to the Termination Fee plus Expense Reimbursement, as provided
for herein.
12. Miscellaneous.
12.1. Consent to Jurisdiction and Service of Process. All
disputes arising out of or related to this Agreement, including, without
limitation, any dispute relating to the interpretation, meaning or effect of any
provision hereof, will be resolved in the Bankruptcy Court and the parties
hereto each submit to the exclusive jurisdiction of the Bankruptcy Court for the
purpose of adjudicating any such dispute.
12.2. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, or sent by facsimile transmission or, if mailed, five days after the
date of deposit in the United States mails, as follows:
(a) if to Purchaser, to:
▇▇▇▇▇▇▇▇▇ Holding Corporation
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois)
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Company, to:
Covanta Energy Corporation
▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Page 53
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
12.3. Entire Agreement. This Agreement and any other
collateral agreements executed in connection with the consummation of the
Contemplated Transactions contain the entire agreement among the parties with
respect to the purchase of the Purchased Shares and supersede all prior
agreements, written or oral, with respect thereto.
12.4. Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by Purchaser and Company or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any such right, power or privilege, nor
any single or partial exercise of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right, power or
privilege.
12.5. Availability of Equitable Relief. The parties
acknowledge that damages following termination may not be an adequate remedy and
accordingly agree that prior to the Closing a party shall be entitled to
equitable relief for any breach (or anticipatory breach) of this Agreement by
any other party. The parties further agree that equitable relief shall be the
only relief available prior to delivery of a notice of termination of this
Agreement by any party in accordance with Section 11.
12.6. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York.
12.7. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. Purchaser may not assign its rights or
delegate its obligations hereunder without the prior written consent of Company,
which may be withheld in Company's sole discretion. Any purported assignment by
Purchaser without prior written consent of Company shall be deemed void.
12.8. Usage. All pronouns and any variations thereof refer to
the masculine, feminine or neuter, singular or plural, as the context may
require. All terms defined in this Agreement in their singular or plural forms
have correlative meanings when used herein in their plural or singular forms,
respectively. Unless otherwise expressly provided, the words "include,"
"includes" and "including" do not limit the preceding words or terms and shall
be deemed to be followed by the words "without limitation."
Page 54
12.9. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
12.10. Exhibits, Appendices and Disclosure Schedules; Cross
References. The Exhibits, Appendices and the Disclosure Schedules are a part of
this Agreement as if fully set forth herein and all references to this Agreement
shall be deemed to include the Exhibits, Appendices and the Disclosure
Schedules. All references herein to Sections, Exhibits, Appendices and the
Disclosure Schedules shall be deemed references to such parts of this Agreement,
unless the context shall otherwise require.
12.11. Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
12.12. Interpretation. The parties acknowledge and agree that
(a) each party and its counsel reviewed and negotiated the terms and provisions
of this Agreement and have contributed to its revision; (b) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (c) the terms and provisions of this Agreement shall be construed fairly as
to all parties hereto, regardless of which party was generally responsible for
the preparation of this Agreement.
12.13. Severability of Provisions. (a) If any provision or any
portion of any provision of this Agreement shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement shall not be affected thereby.
(b) If the application of any provision or any portion of
any provision of this Agreement to any person or circumstance shall be held
invalid or unenforceable, the application of such provision or portion of such
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby.
12.14. Exclusivity of Representations. Except for the
representations and warranties contained in Sections 4 and 5, (a) neither
Company, Reorganized Covanta, Purchaser nor any other Person has made any
representation or warranty (whether express or implied) on behalf of Company,
Reorganized Covanta, Purchaser, any of their respective Affiliates or any of
their respective employees, agents or representatives regarding Company or any
of its Affiliates, Reorganized Covanta, the Subsidiaries, Purchaser or any of
its Affiliates, the New Common Stock (or the value thereof) or the Contemplated
Transactions and (b) Company and Purchaser hereby disclaim any such
representation or warranty, notwithstanding the delivery or disclosure to the
other party or its employees, agents or representatives of any information,
documents or other material, including without limitation any projections,
estimates or budgets.
12.15. Company's Knowledge. For purposes of any representation
or warranty of Company set forth in this Agreement, the words "to Company's
knowledge" or "to the knowledge of Company" shall mean the actual knowledge
without due inquiry as of the date of such representation or warranty of any of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
12.16. No Third Party Beneficiaries. Except as set forth in
Section 11.2(g) and Section 3.3, nothing in this Agreement, express or implied,
shall be construed to confer upon any Person (other than the parties hereto and
theft respective successors and assigns permitted hereby) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
Page 55
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
PURCHASER:
▇▇▇▇▇▇▇▇▇ HOLDING CORPORATION
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CFO
COMPANY:
COVANTA ENERGY CORPORATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇
Title: President
Page 56
