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AGREEMENT AND PLAN OF MERGER
by and among
DESTEC ENERGY, INC.,
THE DOW CHEMICAL COMPANY,
NGC CORPORATION
and
NGC ACQUISITION CORPORATION II
dated as of
February 17, 1997
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 The Merger......................................... 1
Section 1.2 Closing............................................ 2
Section 1.3 Effective Time..................................... 2
Section 1.4 Certificate of Incorporation; By-Laws.............. 2
Section 1.5 Directors and Officers of the Surviving Corporation 3
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock........................ 3
Section 2.2 Exchange of Certificates........................... 4
Section 2.3 Company Equity-Based Awards........................ 7
Section 2.4 Dissenter's Rights................................. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization....................................... 9
Section 3.2 Capitalization..................................... 10
Section 3.3 Authorization; Validity of Agreement............... 11
Section 3.4 No Violations; Consents and Approvals.............. 12
Section 3.5 SEC Reports and Financial Statements............... 13
Section 3.6 Absence of Certain Changes......................... 14
Section 3.7 Absence of Undisclosed Liabilities................. 15
Section 3.8 Proxy Statement.................................... 15
Section 3.9 Employee Benefit Plans; ERISA...................... 16
Section 3.10 Litigation; Compliance with Law.................... 20
Section 3.11 Intellectual Property.............................. 21
Section 3.12 Significant Agreements............................. 21
Section 3.13 Taxes.............................................. 22
Section 3.14 Environmental Matters.............................. 23
Section 3.15 Required Vote by Company Stockholders.............. 25
Section 3.16 Brokers............................................ 25
Section 3.17 Public Utility Company; Public Utility
Regulatory Policies Act....................... 25
Section 3.18 Fairness Opinion................................... 27
Section 3.19 Excluded Subsidiaries.............................. 27
Section 3.20 No Other Representations or Warranties............. 27
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DOW
Section 4.1 Organization....................................... 27
Section 4.2 Authorization; Validity of Agreement............... 27
Section 4.3 No Violations; Consents and Approvals.............. 28
Section 4.4 Title to Shares.................................... 29
Section 4.5 Brokers............................................ 29
Section 4.6 No Other Representations or Warranties............. 29
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 5.1 Organization....................................... 29
Section 5.2 Authorization; Validity of Agreement............... 30
Section 5.3 No Violations; Consents and Approvals.............. 30
Section 5.4 Proxy Statement.................................... 32
Section 5.5 Interim Financial Condition........................ 32
Section 5.6 Financing.......................................... 32
Section 5.7 Surviving Corporation After the Merger............. 32
Section 5.8 Beneficial Ownership of Shares; Interested
Stockholder................................... 32
Section 5.9 Brokers............................................ 33
Section 5.10 Public Utility Company; Public Utility
Regulatory Policies Act....................... 33
Section 5.11 Absence of Litigation.............................. 33
Section 5.12 No Prior Activities................................ 34
Section 5.13 No Other Representations or Warranties............. 34
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Company.................. 34
Section 6.2 Acquisition Proposals.............................. 36
Section 6.3 Audited Financial Statements....................... 38
Section 6.4 Access to Information.............................. 38
Section 6.5 Further Action; Reasonable Best Efforts............ 39
Section 6.6 Employee Benefits.................................. 40
Section 6.7 Stockholders' Meeting; Proxy Statement............. 42
Section 6.8 Directors' and Officers' Insurance and
Indemnification............................... 43
Section 6.9 Publicity.......................................... 46
Section 6.10 No Solicitation.................................... 46
Section 6.11 Certain Arrangements............................... 46
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Section 6.12 Voting Agreement................................... 47
Section 6.13 Employee Benefits Indemnification.................. 47
Section 6.15 Acquisition Proposals.............................. 48
Section 6.16 Tax Matters........................................ 48
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation To
Effect the Merger............................. 53
Section 7.2 Conditions to Parent and Purchaser's Obligations to
Effect the Merger............................. 53
Section 7.3 Conditions to the Company's Obligation to
Effect the Merger............................. 54
ARTICLE VIII
TERMINATION
Section 8.1 Termination........................................ 55
Section 8.2 Effect of Termination.............................. 55
Section 8.3 Fee................................................ 56
ARTICLE IX
MISCELLANEOUS
Section 9.1 Fees and Expenses.................................. 56
Section 9.2 Specific Performance............................... 56
Section 9.3 Amendment; Waiver.................................. 56
Section 9.4 Survival........................................... 57
Section 9.5 Notices............................................ 57
Section 9.6 Interpretation..................................... 59
Section 9.7 Headings; Schedules................................ 59
Section 9.8 Counterparts....................................... 59
Section 9.9 Entire Agreement................................... 59
Section 9.10 Severability....................................... 60
Section 9.11 Governing Law...................................... 60
Section 9.12 Assignment......................................... 60
Section 9.13 Consent to Jurisdiction............................ 60
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LIST OF SCHEDULED DISCLOSURES
Disclosure Schedule
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List of Subsidiaries............................................... 3.1
Capital Stock Obligations.......................................... 3.2(a)
Certain Subsidiaries............................................... 3.2(b)
Certain Violations or Terminations................................. 3.4(a)
Certain Notices and Filings........................................ 3.4(b)
Certain Actions.................................................... 3.6
Certain Disclosed Liabilities...................................... 3.7
Employee Benefit Plans/ERISA Plans................................. 3.9(a)
Employee Benefit Plans Compliance.................................. 3.9(f)
Post-Retirement Plans.............................................. 3.9(h)
Severance Benefits................................................. 3.9(j)
Employee Information............................................... 3.9(k)
Pending Proceedings................................................ 3.10
Infringements on Intellectual Property............................. 3.11
Dow Agreements..................................................... 3.12(a)
Significant Agreements in Breach or Default........................ 3.12(b)
Required Consents.................................................. 3.12(c)
Pending Tax Proceedings............................................ 3.13
Certain Environmental Matters...................................... 3.14(a)
Environmental Claims............................................... 3.14(b)
QF Projects........................................................ 3.17(b)
EWG Projects....................................................... 3.17(c)
FUCO Projects...................................................... 3.17(d)
Certain Indebtedness............................................... 6.1(d)
Interim Benefits and Compensation Changes.......................... 6.1(e)
Termination of Certain Agreements.................................. 6.11(a)
Release of Dow as Obligor.......................................... 6.11(b)
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TABLE OF DEFINED TERMS
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Term Section
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Acquisition Proposal....................................... 6.2(d)
AES........................................................ 6.2(a)
affiliates................................................. 9.6
Allocation Schedule........................................ 6.16(a)
Antitrust Division......................................... 6.5(c)
associates................................................. 9.6
Assertion.................................................. 6.8(c)
Balance Sheet.............................................. 3.5
beneficial ownership....................................... 9.6
Board...................................................... 3.3(a)
Certificate of Merger...................................... 1.3
Certificates............................................... 2.2(b)
Change in Control.......................................... 6.6(a)
Closing.................................................... 1.2
Closing Date............................................... 1.2
Code............................................... ....... 3.9(b) (v), 6.16(a)
Company.................................................... Recitals
Company Common Stock....................................... Recitals
Company Employees.......................................... 6.6(c)
Company SEC Documents...................................... 3.5
Competition Laws........................................... 6.5(c)
Confidentiality Agreements................................. 6.4
Delaware Courts............................................ 9.13
DGCL....................................................... Recitals
Disclosure Schedule........................................ 3.1(b)
Dissenting Shares.......................................... 2.4
Dow........................................................ Recitals
Dow Agreements............................................. 3.12(a)
Dow Shares................................................. Recitals
Effective Time............................................. 1.3
Environmental Claim........................................ 3.14(e)(i)
Environmental Laws......................................... 3.14(e)(ii)
ERISA...................................................... 3.9(a)
ERISA Plans................................................ 3.9(a)
EWG Projects............................................... 3.17(c)
Exchange Act............................................... 3.4(b)
Exchange Fund.............................................. 2.2(a)
Excluded Subsidiaries...................................... 3.1(a)
FERC....................................................... 3.17(b)
Forms...................................................... 6.16(a)
FPA........................................................ 3.17(a)
FTC........................................................ 6.5(c)
FUCO Projects.............................................. 3.17(d)
GAAP....................................................... 3.5
Governmental Entity........................................ 3.4(b)
Hazardous Substances....................................... 3.14(c)(iii)
HSR Act.................................................... 6.5(c)
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Immaterial Subsidiaries...................................... 3.1(a)
include[s]/[ing]............................................. 9.6
Indemnified Liability........................................ 6.8(b)
Indemnified Parties.......................................... 6.8(b)
Indemnified Party............................................ 6.8(b)
Indemnitors.................................................. 6.8(c)
Intellectual Property........................................ 3.11
made available............................................... 9.6
Material Adverse Effect...................................... 3.1(a)
Merger....................................................... 1.1
Merger Consideration......................................... 2.1(a)
Parent....................................................... Recitals
Parent Plans................................................. 6.6(b)
Paying Agent................................................. 2.2(a)
Person....................................................... 3.1(a)
Plans........................................................ 3.9(a)
Preferred Stock.............................................. 3.2(a)
Proceeding................................................... 6.16(g)
Proxy Statement.............................................. 6.7(b)
PUHCA........................................................ 3.17(a)
Purchaser.................................................... Recitals
Purchaser Common Stock....................................... 2.1
QF Projects.................................................. 3.17(b)
Section 338(h)(10) Elections................................. 6.14(a)
Securities Act............................................... 3.5
SEC.......................................................... 3.5
Secretary of State........................................... 1.3
Shares....................................................... Recitals
Significant Agreements....................................... 3.12(a)
Special Meeting.............................................. 6.7(a)
Stock Plan................................................... 2.3(a)
Stock Purchase Agreement..................................... Recitals
Stock Purchase Plan.......................................... 2.3(c)
Subscriber................................................... 2.3(c)
Subsidiary................................................... 3.1(a)
Surviving Corporation........................................ 1.1
Taxes........................................................ 3.13
Tax Claim.................................................... 6.16(f)
Tax Return................................................... 3.13
Tax Sharing Agreement........................................ 6.16(b)
Transfer Taxes............................................... 6.16(c)(iii)
Variable Pay Plan............................................ 2.3(b)
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of February 17, 1997, by and
among Destec Energy, Inc., a Delaware corporation (the "Company"), The Dow
Chemical Company, a Delaware corporation ("Dow"), NGC Corporation, a Delaware
corporation ("Parent"), and NGC Acquisition Corporation II, a wholly owned
subsidiary of Parent and a Delaware corporation ("Purchaser").
WHEREAS, the Boards of Directors of Parent, Purchaser, Dow and the
Company have each approved, and the Boards of Directors of Parent, Purchaser and
the Company deem it advisable and in the best interests of their respective
stockholders to consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such acquisition, the Boards of Directors
of Parent, Purchaser and the Company have each approved this Agreement and the
merger of Purchaser with and into the Company in accordance with the terms of
this Agreement and the General Corporation Law of the State of Delaware (the
"DGCL"); and
WHEREAS, the number of shares of common stock, $.01 par value of the
Company (referred to herein as "Shares" or "Company Common Stock") owned by Dow
is set forth on Schedule A hereto (the "Dow Shares") and Dow has agreed to vote
all of the Dow Shares in favor of the approval of this Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to conditions of
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this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.3 hereof), Purchaser shall be merged (the "Merger") with
and into the Company and the separate corporate existence of Purchaser shall
cease. After the Merger,
the Company shall continue as the surviving corporation (sometimes hereinafter
referred to as the "Surviving Corporation"). The Merger shall have the effects
set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, upon the Merger, all the rights, privileges,
immunities, powers and franchises of the Company and Purchaser shall vest in the
Surviving Corporation and all obligations, duties, debts and liabilities of the
Company and Purchaser shall be the obligations, duties, debts and liabilities of
the Surviving Corporation.
Section 1.2 Closing. The closing of the Merger (the "Closing") will
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take place at 10:00 a.m., New York time, on the second business day after
satisfaction or waiver of all of the conditions set forth in Article hereof,
at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, unless an earlier date or place is agreed to in
writing by the parties hereto. The date on which the Closing occurs is referred
to herein as the "Closing Date."
Section 1.3 Effective Time. On or as promptly as practicable
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following the Closing Date, Purchaser and the Company will cause an appropriate
Certificate of Merger (the "Certificate of Merger") to be executed and filed
with the Secretary of State of the State of Delaware (the "Secretary of State")
in such form and executed as provided in the DGCL. The Merger shall become
effective on the date and time on which the Certificate of Merger has been duly
filed with the Secretary of State, or such later date and time as shall be
agreed upon by Purchaser, Dow and the Company and set forth therein, and such
time is hereinafter referred to as the "Effective Time."
Section 1.4 Certificate of Incorporation; By-Laws. Pursuant to the
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Merger, (x) the Amended and Restated Certificate of Incorporation of the
Company shall be amended in the form of the Certificate of Incorporation of
Purchaser, as in effect immediately prior to the Effective Time, and shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Amended and Restated Certificate of
Incorporation, and (y) the By-laws of Pur-
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chaser, as in effect immediately prior to the Effective Time, shall be the By-
laws of the Surviving Corporation until thereafter amended as provided by law,
the Amended and Restated Certificate of Incorporation and such By-laws.
Section 1.5 Directors and Officers of the Surviving Corporation.
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(a) The directors of Purchaser immediately prior to the Effective
Time shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors shall have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-laws.
(b) The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Capital Stock. As of the Effective Time,
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by virtue of the Merger and without any action on the part of the Company,
Parent, Purchaser or the holders of any shares of Company Common Stock or the
common stock, par value $.01 per share, of Purchaser (the "Purchaser Common
Stock"):
(a) Each issued and outstanding share of Company Common Stock (other
than Shares to be cancelled in accordance with Section 2.1 (c) and other than
Dissenting Shares (as defined herein) covered by Section 2.4) shall be
converted into the right to receive $21.65 per share in cash, payable to the
holder thereof, without interest (the "Merger Consideration"), upon surrender of
the certificate formerly representing such share of Company Common Stock in the
manner provided in Section 2.2. All such shares of Company Common Stock, when
so
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converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.2. Any payment made
pursuant to this Section 2.1(a) shall be made net of applicable withholding
taxes to the extent such withholding is required by law.
(b) Each issued and outstanding share of Purchaser Common Stock shall
be converted into and become one fully paid and nonassessable share of common
stock of the Surviving Corporation.
(c) Each share of Company Common Stock that is held by the Company as
treasury stock and each share of Company Common Stock owned by Parent, Purchaser
or any other Subsidiary of Parent shall be cancelled and retired and shall cease
to exist and no payment of any consideration shall be made with respect thereto.
Section 2.2 Exchange of Certificates.
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(a) Prior to the Effective Time, Parent shall designate the Company's
registrar and transfer agent, or such other bank or trust company as agreed in
writing by the parties, to act as paying agent for the holders of Shares in
connection with the Merger, pursuant to an agreement providing for the matters
set forth in this Section 2.2 and such other matters as may be appropriate and
the terms of which shall be reasonably satisfactory to the Company (the "Paying
Agent"), to receive the funds to which holders of Shares shall become entitled
pursuant to Sections 2.1(a) and 2.3. Prior to the Effective Time, Parent will
deposit or cause to be deposited in trust with the Paying Agent for the benefit
of holders of Company Common Stock the funds necessary to complete the payments
contemplated by Section 2.1(a) (the "Exchange Fund") on a timely basis;
provided, that no such deposit shall relieve Parent of its obligation to pay the
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Merger Consideration pursuant to Section 2.1(a). Notwithstanding anything to
the contrary in this Section 2.2, Parent and the Company will make arrangements
with the Paying Agent to the reasonable satisfaction of Dow such that
4
Dow, and any other stockholder of the Company that is present at the office of
the Paying Agent in person or through a personal representative (it being
understood that Dow need not be present at the office of the Paying Agent
because it will be present at the Closing) and gives the Company at least two
days prior written notice that it will be present at that office, will receive,
as soon as possible after the Effective Time (but in any event on the same date
as the Effective Time) in same day funds by wire transfer to such accounts as
Dow or such stockholders shall specify with at least two days prior written
notice, the Merger Consideration (in the case of Dow without any deduction or
offset whatsoever for any purpose, including deductions for withholding taxes so
long as Dow has complied with applicable tax law in completing and delivering
any required forms) for each of its or their shares of Company Common Stock
(provided that Dow and any such stockholders have surrendered the Certificates
(as defined below) for their shares of Company Common Stock to the Paying Agent
and, with respect to stockholders other than Dow, complied with the terms and
conditions of Section 2.2(b) hereof).
(b) At the Effective Time, Parent will instruct the Paying Agent to
promptly, and in any event not later than five business days following the
Effective Time, mail to each holder of record of a certificate or certificates
(other than holders who are paid on the Closing Date pursuant to the last
sentence of Section 2.2(a)), which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"),
whose Shares were converted pursuant to Section 2.1(a) into the right to
receive the Merger Consideration (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by the Company,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange
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therefor the Merger Consideration for each share of Company Common Stock
formerly represented by such Certificate, to be mailed (or made available for
collection by hand if so elected by the surrendering holder) within three
business days of receipt thereof, and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration is to be made to
a person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Paying Agent
that such tax either has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.2, each Certificate (other than Certificates
representing Company Common Stock held by Parent or Purchaser, or any Subsidiary
of Parent or Purchaser, or Dissenting Shares (as defined in Section 2.4)) shall
be deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
Any portion of the Exchange Fund which remains unclaimed by the former holders
of Shares for twelve months after the Effective Time shall be delivered to the
Surviving Corporation, upon demand, and any former holders of Shares shall
thereafter look only to the Surviving Corporation for any cash to which they are
entitled as a result of the Merger. The Surviving Corporation shall be entitled
to deduct and withhold from the consideration otherwise payable to any former
holder of Shares pursuant to this Agreement such amounts as the Surviving
Corporation is required to deduct and withhold with respect to making such
payment under the Code (as hereinafter defined), or any provision of state,
local or foreign tax law. To the extent that such amounts are withheld by or on
behalf of the Surviving Corporation, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the former holder of
Shares in respect of which such deduction and withholding was made by the
Surviving Corporation.
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(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, the Paying Agent will issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof as determined in accordance with
this Article II; provided that the Person to whom the Merger Consideration is
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paid shall, as a condition precedent to the payment thereof, give the Surviving
Corporation a bond in such sum as it may direct or otherwise indemnify the
Surviving Corporation in a manner satisfactory to it against any claim that may
be made against the Surviving Corporation with respect to the Certificate
claimed to have been lost, stolen or destroyed.
(d) After the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no transfers on the stock transfer books of
the Surviving Corporation of Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Article II.
Section 2.3 Company Equity-Based Awards.
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(a) Immediately prior to the Effective Time, each option granted by
the Company pursuant to the Destec Energy, Inc. 1990 Award and Option Plan, as
amended on February 14, 1997 (the "Stock Plan") to purchase shares of Company
Common Stock, whether or not exercisable, which is outstanding and unexercised
at such time, shall be cancelled to the Company and each grantee thereof shall
be entitled to receive immediately prior to the Effective Time, in lieu of the
shares of Company Common Stock that would otherwise have been issuable upon
exercise, an amount in cash computed by multiplying (i) the excess, if any, of
(x) the Merger Consideration over (y) the per share exercise price applicable to
such option by (ii) the number of such shares of Company Common Stock then
subject to such option. Prior to the Closing, the Company will use its
reasonable best efforts to obtain a written acknowledgement by any holder of an
option whose per share exercise price is greater than the Merger
7
Consideration that the payment made pursuant to this section 2.3(a) is being
made in consideration of the cancellation of such recipient's award and other
rights under the Stock Plan.
(b) Immediately prior to the Effective Time, each share of Deferred
Stock and Restricted Stock awarded under the Stock Plan or awarded or subject to
award under the Destec Energy, Inc. 1995 Variable Pay Plan, as amended through
February 14, 1997 (the "Variable Pay Plan"), shall become fully vested and
nonforfeitable, and shall be cancelled to the Company and each grantee thereof
shall be entitled to receive immediately prior to the Effective Time, in lieu of
the shares of Company Common Stock that would otherwise have been deliverable,
an amount in cash computed by multiplying (i) the Merger Consideration and (ii)
the number of such shares of Deferred Stock or Restricted Stock.
(c) In accordance with the terms of the Destec Energy, Inc.
Employees' Stock Purchase Plan, as amended on February 14, 1997 (the "Stock
Purchase Plan"), immediately prior to the Effective Time, (i) each participant
(a "Subscriber") in the Stock Purchase Plan shall be entitled to receive a cash
lump sum in an amount equal to the cash amounts previously deducted from such
Subscriber in respect of the current Plan Year (as defined in the Stock Purchase
Plan) and (ii) each Subscriber who is a Subscriber as of the Change in Control
Date (as defined in the Stock Purchase Plan) shall be entitled to receive an
amount in cash equal to the product of (x) the number of shares subscribed for
by such Subscriber in respect of the Plan Year (as defined in the Stock Purchase
Plan) and (y) the excess, if any, of the Merger Consideration over the lower of
the Plan Price or the Market Price for such Plan Year (as such terms are defined
in the Stock Purchase Plan).
(d) All payments made pursuant to this Section 2.3 shall be subject
to applicable withholding taxes.
Section 2.4 Dissenter's Rights. Notwithstanding anything in this
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Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has delivered a
8
written demand for appraisal of such shares in accordance with Section 262 of
the DGCL, if such Section 262 provides for appraisal rights for such Shares in
the Merger ("Dissenting Shares"), shall not be converted into the right to
receive the Merger Consideration, as provided in Section 2.1 (a) hereof, unless
and until such holder fails to perfect or effectively withdraws or otherwise
loses his right to appraisal and payment under the DGCL. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or loses his
right to appraisal, such Dissenting Shares shall thereupon be treated as if they
had been converted as of the Effective Time into the right to receive the Merger
Consideration to which such holder is entitled, without interest or dividends
thereon. Dow hereby waives any and all rights under the DGCL to make a demand
for appraisal in connection with the Merger and covenants and agrees with Parent
and Purchaser not to take any action under Section 262 of the DGCL or otherwise
that would be inconsistent with Section 6.12 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser that:
Section 3.1 Organization. (a) The Company and each of its
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Subsidiaries (as hereinafter defined) is a corporation or other entity duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or organization, has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted, and is qualified or licensed to do
business as a foreign corporation or Person (as hereinafter defined) and is in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so organized, existing and in good standing or to have such power and
authority, or to be so qualified or licensed would not have a Material Adverse
Effect. As used in this Agreement, the term "Material Adverse Effect" shall mean
a material adverse
9
effect on the business or financial condition of the Company and its
Subsidiaries taken as a whole, but excluding any such effect resulting from
general economic conditions and any occurrence or condition affecting generally
the independent power industry. The Company has previously delivered to Parent
a complete and correct copy of each of its Amended and Restated Certificate of
Incorporation and By-Laws, as currently in effect. "Subsidiary" shall mean with
respect to any Person, any corporation or other entity of which 50% or more 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 entity is directly or indirectly owned by such
Person, other than immaterial or inactive corporations or other entities
(together, the "Immaterial Subsidiaries") and, with respect to the Company,
other than Xxxxxxxx Energy Limited Partnership, Commonwealth Atlantic Limited
Partnership and Nevada Cogeneration Associates No. 2 (collectively, the
"Excluded Subsidiaries"). "Person" shall mean an individual, partnership, joint
venture, trust, corporation, limited liability company or other legal entity or
Governmental Entity.
(b) Schedule 3.1 of the disclosure schedule delivered by the Company
to Parent prior to the date hereof (the "Disclosure Schedule") lists each of the
Company's Subsidiaries, together with the jurisdiction of incorporation or
organization of each such Subsidiary.
(c) None of the Immaterial Subsidiaries have liabilities or
obligations that would result in a Material Adverse Effect.
Section 3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
150,000,000 shares of Company Common Stock and 50,000,000 preferred shares, par
value $1.00 per share (the "Preferred Stock"). As of December 31, 1996, (i)
56,079,260 shares of Company Common Stock were issued and outstanding, (ii)
6,170,740 shares of Company Common Stock were issued and held in the treasury of
the Company and (iii) there were no shares of Preferred Stock issued and
outstanding. Since December 31, 1996, the Company has not issued any shares of
capital stock of any class
10
of the Company other than issuances of shares of Company Common Stock pursuant
to awards under the Stock Plan, the Variable Pay Plan or the Stock Purchase Plan
outstanding as of such date. All the outstanding shares of the Company's capital
stock are duly authorized, validly is sued, fully paid and non-assessable.
Except as set forth in Schedule 3.2(a) of the Disclosure Schedule, as of the
date hereof, there are no existing (i) options, warrants, calls, preemptive
rights, subscriptions or other rights, convertible securities, agreements or
commitments of any character obligating the Company or any of its Subsidiaries
to issue, transfer or sell any shares of capital stock or other equity interest
in, the Company or any of its Subsidiaries or securities convertible into or ex
changeable for such shares or equity interests, (ii) contractual obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any capital stock of the Company or any Subsidiary of the Company or
(iii) voting trusts or voting or similar agreements to which the Company is a
party with respect to the voting of the capital stock of the Company. As of the
date hereof, there are no existing awards of stock appreciation rights under the
Stock Plan or the Variable Pay Plan.
(b) Except as set forth in Schedule 3.2(b) of the Disclosure Schedule
and except for directors qualifying shares or shares issued under similar
arrangements, all of the outstanding shares of capital stock (or equivalent
equity interests of entities other than corporations) of each of the Company's
Subsidiaries are beneficially owned, directly or indirectly, by the Company.
(c) Australian Power Partners B.V. owns a 20% partnership interest in
the Xxxxxxxxx Power Partnership and Destec Australia Energy Finance Pty. Ltd.
owns a 12.55% limited partnership interest in Xxxxxxxxx Finance Limited
Partnership.
Section 3.3 Authorization; Validity of Agreement.
------------------------------------
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and, subject to approval of its stockholders
as contemplated by Section 6.7 hereof, to consummate the transac-
11
tions contemplated hereby. The execution and delivery by the Company of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company (the "Board") and,
other than approval and adoption of this Agreement by the holders of at least
662/3% of the outstanding shares of Company Common Stock, no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement by the Company and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, assuming due authorization, execution and delivery
of this Agreement by Parent, Dow and Purchaser, is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
(b) The Board has duly approved the transactions contemplated by
this Agreement for the purposes of Section 203 of the DGCL such that the
provisions of Section 203 of the DGCL will not apply to the transactions
contemplated by this Agreement.
Section 3.4 No Violations; Consents and Approvals.
-------------------------------------
(a) Except as set forth in Schedule 3.4(a) of the Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby will
(i) assuming stockholder approval as contemplated by Section 6.7 hereof has been
obtained, violate any provision of the Amended and Restated Certificate of
Incorporation or By-Laws of the Company or the equivalent organizational
documents of its Subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, amendment, cancellation or acceleration)
under, the provisions of any note, mortgage, indenture, guarantee, lease,
license, contract, agreement or other instrument to which the Company or any of
its Subsidiaries is a party or by which any of them or any of their assets may
be bound or (iii) assuming that all consents, authorizations and approvals
contemplated by Section 3.4(b) have been obtained and all filings contemplated
thereby have been made, violate any order,
12
writ, injunction, decree, statute, rule or regulation applicable to the Company,
any of its Subsidiaries or any of their assets; in each case, except for such
violations, breaches, defaults, terminations, amendments, cancellations or
accelerations which (x) would not prevent the Merger, (y) would not result in a
Material Adverse Effect or (z) result from the regulatory status of Parent or
Purchaser.
(b) Except as disclosed in Schedule 3.4(b) of the Disclosure
Schedule, no filing or registration with, notification to, or authorization,
consent or approval of, any U.S., state, local or foreign court, legislative,
executive or regulatory authority or agency (a "Governmental Entity") is
required in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby, except (i) applicable requirements under Competition Laws (as defined in
Section 6.5(b)), (ii) applicable requirements under the Securities Exchange Act
of 1934, as amended and the regulations thereunder (the "Exchange Act"), (iii)
the filing of the Certificate of Merger with the Secretary of State, (iv)
applicable requirements under state securities or "blue sky" laws of various
states or non-United States change-in-control or investment laws or regulations,
and (v) such other consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings (x) the failure of which to be obtained
or made would not prevent the Merger or result in a Material Adverse Effect or
(y) required as a result of the regulatory status of Parent or Purchaser.
Section 3.5 SEC Reports and Financial Statements. The Company has
------------------------------------
filed with the Securities and Exchange Commission (the "SEC") all reports, forms
and documents required to be filed by it since January 1, 1994 under the
Exchange Act and has heretofore made available to Parent (i) its Annual Reports
on Form 10-K for the fiscal years ended December 31, 1994 and December 31, 1995,
respectively, and its Amendment to its Annual Report on Form 10-K/A for the year
ended December 31, 1995, (ii) its Quarterly Reports on Form 10-Q for the periods
ended March 31, June 30 and September 30, 1996, respectively, (iii) all proxy
statements relating to meetings of stockholders of the Company since January 1,
13
1994 (in the form mailed to stockholders), (iv) all other forms, reports and
registration statements filed by the Company with the SEC since January 1, 1994
(other than registration statements on Form S-8 or Form 8-A, filings on Form T-1
or preliminary materials and registration statements in forms not declared
effective) and (v) the unaudited consolidated balance sheet as of December 31,
1996 (the "Balance Sheet"). The documents described in clauses (i)-(iv) above
are referred to in this Agreement collectively as the "Company SEC Documents".
As of their respective dates, the Company SEC Documents (a) did not contain any
untrue statement of a material fact 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 and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act of 1933 (the "Securities Act"), as the case may be, and
the applicable rules and regulations of the SEC thereunder. The consolidated
financial statements included in the Company SEC Documents and the Balance
Sheet have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as otherwise noted therein and except that the interim
financial statements and the Balance Sheet are subject to year end adjustment
and do not contain all footnote disclosures required by GAAP) and fairly
present in all material respects the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein. No variation in the balance sheet included in the audited financial
statements for the year ended December 31, 1996 delivered to Parent pursuant to
Section 6.3 hereof from the Balance Sheet will result in a Material Adverse
Effect.
Section 3.6 Absence of Certain Changes. Except as disclosed in the
--------------------------
Company SEC Documents or as disclosed in Schedule 3.6 to the Disclosure
Schedule, from December 31, 1996 until the date of this Agreement, (i) there has
not been a Material Adverse Effect and (ii)(a) the Company has not declared, set
aside or paid any dividend or other distribution with respect to its capital
stock, (b) neither the Company nor any of its
14
Subsidiaries has issued or disposed of any additional shares of, or securities
convertible into or exchangeable for, or options, warrants, or rights of any
kind to acquire, any shares of its capital stock of any class or any other
ownership interest, other than issuances of shares of the Company in respect of
the exercise of options, warrants or rights outstanding as of such date and
other than the issuance of shares or ownership interests in the Company or any
wholly owned Subsidiary, (c) the Company and its Subsidiaries have not incurred
any material indebtedness for borrowed money other than short term indebtedness
incurred in the ordinary course of business and indebtedness of Subsidiaries
incurred in connection with the acquisition, development, construction or
operation of power generation or energy producing facilities, which indebtedness
is without recourse to the Company or its assets (other than the assets or
earnings of such Subsidiary or such facility), and (d) the Company has not
changed any of the accounting principles or practices used by the Company or its
Subsidiaries, except as required as a result of a change in law, SEC guidelines
or GAAP (or, if applicable with respect to Subsidiaries, applicable foreign
generally accepted accounting principles).
Section 3.7 Absence of Undisclosed Liabilities. Except as and to
----------------------------------
the extent disclosed in the Company SEC Documents or as disclosed in Schedule
3.7 to the Disclosure Schedule, since the date of the Balance Sheet, the Company
and its Subsidiaries have not incurred any liabilities that would be required to
be reflected or reserved against in a consolidated balance sheet of the Company
and its Subsidiaries prepared in accordance with GAAP, except for such
liabilities as would not result in a Material Adverse Effect and except for
liabilities and obligations resulting from the execution and delivery of this
Agreement or relating to the transactions contemplated hereby.
Section 3.8 Proxy Statement. The Proxy Statement (as defined in
---------------
Section 6.7(b)) (and any amendment thereof or supplement thereto) at the date
mailed to Company stockholders and at the time of the Special Meeting (as
defined in Section 6.7(a)), (i) will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or
15
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading and (ii) will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder; except that no representation is made by the Company
with respect to statements made in the Proxy Statement based on information
supplied by Parent or Purchaser for inclusion in the Proxy Statement.
Section 3.9 Employee Benefit Plans; ERISA.
-----------------------------
(a) Schedule 3.9(a) of the Disclosure Schedule contains a true and
complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, restricted stock, deferred stock, stock
appreciation right, vacation policy, superannuation, severance or termination
pay, hospitalization or other medical, life or other insurance, flexible
benefit, cafeteria plan, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement, and each other
employee benefit plan, program, agreement or arrangement, sponsored, maintained
or contributed to by the Company or its Subsidiaries, for the benefit of any
employee or former employee of the Company or any of its Subsidiaries employed
in the United States (the "Plans"). Schedule 3.9(a) identifies each of the Plans
(collectively, the "ERISA Plans") that is an "employee benefit plan," as defined
in section 3(3) of the Employee Retirement Security Income Plan of 1974, as
amended ("ERISA").
(b) With respect to each Plan, the Company has heretofore delivered
or made available to Purchaser a true and complete copy of each of the following
documents:
(i) the Plan (including all amendments thereto);
(ii) the most recent annual report and actuarial report
with respect to each such Plan, if required under ERISA;
(iii) the most recent report on Form 5500 and Summary Plan
Description, together
16
with each Summary of Material Modifications required under ERISA with
respect thereto;
(iv) if the Plan is funded through a trust or any third
party funding vehicle, the trust or other funding agreement (including
all amendments thereto) and the latest financial statements thereof;
and
(v) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to qualify
under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) Neither the Company nor any of its Subsidiaries sponsors,
maintains, contributes to or has any obligation with respect to a Plan which is
either a defined benefit plan or a money purchase plan or which is subject to
Title IV of ERISA.
(d) No direct or indirect liability under Title IV of ERISA has been
incurred by the Company or any of its Subsidiaries with respect to any Plan and
the Company does not reasonably expect that it or any of its Subsidiaries will
incur liabilities under such Title, other than liabilities that would not have a
Material Adverse Effect.
(e) No ERISA Plan is a "multiemployer pension plan," as defined in
section 3(37) of ERISA, nor is any ERISA Plan a plan described in section
4063(a) of ERISA.
(f) No ERISA Plan or any trust established thereunder has incurred
any "accumulated funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, as of the last day of the most
recent fiscal year of each ERISA Plan ended prior to the Closing Date. Each
ERISA Plan intended to be "qualified" within the meaning of section 401(a) of
the Code has been determined by the Internal Revenue Service to be so qualified
(or timely application has been made therefor); to the knowledge of the Company,
no event has occurred since the date of such determination that would adversely
affect such qualification; and each trust maintained thereunder has been
determined by the
17
Internal Revenue Service to be exempt from taxation under section 501(a) of the
Code. Except as disclosed in Schedule 3.9(f) of the Disclosure Schedule, each
Plan has been operated and administered in all material respects in accordance
with its terms and applicable law, including but not limited to ERISA and the
Code, the Company and its Subsidiaries have substantially performed all
obligations, whether arising by operation of law or by contract, required to be
performed by them in connection with the Plans, each employee benefit plan,
policy and arrangement applicable to employees of the Company and its
Subsidiaries who are employed outside of the United States has been operated and
administered in all material respects in accordance with its terms and
applicable law and the Company and its Subsidiaries have substantially performed
all obligations, whether arising by operation of law or by contract, required to
be performed by them in connection with each such plan, policy and arrangement,
except where a failure to so operate or administer or to perform such
obligations would not result in a Material Adverse Effect. There are no pending,
or to the actual knowledge of the Company, threatened, material claims by or on
behalf of any Plan, by any employee or beneficiary covered under any such Plan,
or otherwise involving any such Plan (other than routine claims for benefits).
Except as disclosed in Schedule 3.9(f) of the Disclosure Schedule, as of the
date hereof, there is no matter pending (other than routine qualification
determination filings) with respect to any of the Plans before any Governmental
Entity, other than matters that could not reasonably be expected to have a
Material Adverse Effect.
(g) Neither the Company nor any of its Subsidiaries, nor any of the
ERISA Plans, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in a transaction in connection with which the Company or any
of its Subsidiaries, any of the ERISA Plans, any such trust, or any trustee or
administrator thereof, or any party dealing with the ERISA Plans or any such
trust could be subject to either (i) breach of fiduciary duty liability damages
under section 409 of ERISA, (ii) a civil penalty assessed pursuant to section
502(c), (i) or (l) of ERISA or (iii) a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code, except where
18
such damages, penalty or tax would not reasonably be expected to have a Material
Adverse Effect.
(h) Except as set forth in Schedule 3.9(h) to the Disclosure
Schedule, no Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company or its Subsidiaries beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension benefit plan,"
as that term is defined in section 3(2) of ERISA, (iii) deferred compensation
benefits accrued as liabilities on the books of the Company or (iv) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary).
(i) Each trust funding a Plan, which trust is intended to be exempt
from federal income taxation pursuant to section 501(c)(9) of the Code,
satisfies the requirements of such section and has received a favorable
determination letter from the Internal Revenue Service regarding such exempt
status.
(j) Except as disclosed in Schedule 3.9(j)(i) of the Disclosure
Schedule, the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not (1) require the Company or any of
its Subsidiaries to make a larger contribution to, or pay greater benefits
under, any Plan or (2) create or give rise to any additional vested rights or
service credits under any Plan. Except as disclosed in Schedule 3.9(j)(ii) of
the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a
party to any agreement, nor has the Company or any of its Subsidiaries
established any policy or practice, requiring any such entity to make a payment
or provide any other form of compensation or benefit to any person performing
services for the Company or any of its Subsidiaries upon termination of such
services which would not be payable or provided in the absence of the
consummation of the transactions contemplated by this Agreement. In connection
with the consummation of the transactions contemplated by this Agreement, no
payments have or will be made hereunder, under the Plans, or under any other
agreement (including, without limitation, the employment and severance agree-
19
ments listed in Schedule 3.9(j)(iii) of the Disclosure Schedule) which, in the
aggregate, would result in imposition of the sanctions imposed under sections
280G and 4999 of the Code.
(k) Schedule 3.9(k)(i) of the Disclosure Schedule contains a true and
complete list of each employment or severance agreement and, to the actual
knowledge of the Management Committee and the General Counsel, each consulting
agreement with an individual providing for payment obligations in excess of
$350,000, pertaining to any employee of the Company or any of its Subsidiaries.
The Company has heretofore delivered or made available to Purchaser a true and
complete copy of each such employment and severance agreement. Schedule
3.9(k)(ii) of the Disclosure Schedule sets forth by number and employment
classification the approximate numbers of employees employed by the Company and
its Subsidiaries as of the date of this Agreement. None of said employees are
subject to union or collective bargaining agreements with the Company or any of
its Subsidiaries.
Section 3.10 Litigation; Compliance with Law.
-------------------------------
(a) Except as set forth in Schedule 3.10 of the Disclosure Schedule
or as disclosed in the Company SEC Documents and except for claims under
Environmental Laws (which are the subject of Section 3.14), there is no (i)
suit, claim, action, proceeding or investigation (A) pending or, to the actual
knowledge of the Company, threatened, against the Company or any of its
Subsidiaries which if determined adversely to the Company or such Subsidiaries
would have a Material Adverse Effect or (B) as of the date hereof, pending or,
to the actual knowledge of the Company, threatened, against the Company or any
of its Subsidiaries which if determined adversely to the Company or such
---------
Subsidiaries would prevent the Merger or (ii) judgment, decree, injunction, rule
or order of a Governmental Entity or arbitrator outstanding against the Company
or any of its Subsidiaries (x) which would have a Material Adverse Effect or (y)
in effect as of the date hereof which would prevent the Merger.
(b) Except as disclosed in the Company SEC Documents and except for
Environmental Laws (which are the subject of Section 3.14), the operations of
the
20
Company and its Subsidiaries are not being conducted in violation of any law,
statute, regulation, and judgment, decree, order or injunction of any
Governmental Entity, except where such violations would not have a Material
Adverse Effect.
(c) The Company and its Subsidiaries hold all licenses, permits,
variances and approvals of Governmental Entities necessary for the lawful
conduct of their respective businesses as currently conducted except for
licenses, permits, variances or approvals under Environmental Laws (which are
the subject of Section 3.14) and except where the failure to hold such licenses,
permits, variances or approvals would not have a Material Adverse Effect.
Section 3.11 Intellectual Property. Except as set forth on Schedule
---------------------
3.11 of the Disclosure Schedule, the Company and its Subsidiaries own, or
possess licenses or other valid rights to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks, service xxxx rights, trade secrets, applications to register, and
registrations for, the foregoing trademarks, service marks, know-how and other
proprietary rights and information (collectively, "Intellectual Property")
necessary in connection with the business of the Company and its Subsidiaries as
currently conducted, except where the failure to possess such rights or licenses
or valid rights to use would not have a Material Adverse Effect. To the actual
knowledge of the Company, except as disclosed in Schedule 3.11 of the Disclosure
Schedule, (i) the conduct of the business of the Company and its Subsidiaries as
currently conducted does not infringe upon any Intellectual Property of any
third party except where such infringement would not result in a Material
Adverse Effect and (ii) no Person is infringing upon any Intellectual Property
of the Company or its Subsidiaries except where such infringement would not
result in a Material Adverse Effect. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the loss of, or any encumbrance on, the rights of the Company or any
Subsidiary with respect to the Intellectual Property owned or used by them,
except where such loss or encumbrance would not have a Material Adverse Effect.
21
Section 3.12 Significant Agreements.
----------------------
(a) Schedule 3.12(a) of the Disclosure Schedule lists all contracts,
agreements and commitments between the Company or any of its Subsidiaries, on
the one hand, and on the other hand Dow or any of its affiliates (other than
the Company and its Subsidiaries) that will survive the consummation of the
Merger, excluding contracts, agreements and commitments which collectively are
immaterial to the Company and except for this Agreement and the other
agreements entered into in connection with this Agreement (the "Dow
Agreements"). The Company has heretofore made available to Parent complete and
correct copies of the Dow Agreements and the contracts or agreements of the
Company included as exhibits to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, as amended by the Company's Form 10-K/A
(the Dow Agreements and such other agreements and contracts being referred to
herein as the "Significant Agreements").
(b) Except as set forth in Schedule 3.12(b) of the Disclosure
Schedule, to the knowledge of the Company each of the Significant Agreements is
in full force and effect and enforceable in accordance with its terms; neither
the Company nor any of its Subsidiaries has received written notice of
cancellation or termination of any Significant Agreement; and there exists no
event of default or occurrence, condition or act on the part of the Company or
any of its Subsidiaries or, to the knowledge of the Company, on the part of the
other parties to the Significant Agreements which constitutes or would
constitute (with notice or lapse of time or both) a breach of or default under
any of the Significant Agreements; except where the failure to be in full force
and effect would not have, and such breaches and defaults as would not result
in, a Material Adverse Effect.
(c) Except as disclosed on Schedules 3.4(a) and Schedule 3.12(c) of
the Disclosure Schedule, no consents from any third parties under any
Significant Agreements are required in connection with the consummation of the
Merger, except for such consents, which if not received, would not result in a
Material Adverse Effect or prevent the consummation of the Merger.
22
(d) Other than the Significant Agreements, and any contract,
agreement or commitment previously provided or made available to Parent or
Purchaser, there are no contracts or agreements, the performance of which would
result in a Material Adverse Effect.
Section 3.13 Taxes. (a) The Company and its Subsidiaries have (i)
-----
filed (or there have been filed on their behalf) with the appropriate
governmental authorities all material Tax Returns (as hereinafter defined)
required to be filed by them and such Tax Returns are true, correct and
complete, and (ii) paid or withheld or made provision in accordance with GAAP
(or there has been paid or provision has been made on their behalf) for the
payment of all material Taxes (as hereinafter defined) that are due and payable
or required to be withheld for all taxable periods and portions thereof through
the date hereof; (b) except as set forth on Schedule 3.13 of the Disclosure
Schedule, no federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any
material Taxes of the Company or its Subsidiaries, and no assessment,
deficiency or adjustment has been asserted with regard to any such Taxes that
the Company and its Subsidiaries have not paid or have not made provision for
in accordance with GAAP or are contesting in good faith; (c) there are no
material liens for Taxes upon any property or assets of the Company or any
Subsidiary thereof, except for liens for Taxes not yet due and payable and liens
for Taxes that are being contested in good faith; and (d) except as set forth on
Schedule 3.13 of the Disclosure Schedule there is not in force any extension of
time for the assessment or payment of any Tax with respect to the Company or
any Subsidiary of the Company.
For purposes of this Agreement, "Taxes" shall mean any and all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, excise, stamp, real or personal
property, ad valorem, withholding, estimated, social security, unemployment,
occupation, use, service, service use, license, net worth, payroll, franchise,
severance, transfer, recording or other taxes, assessments or charges imposed
by any Governmental Entity and any interest, penalties, or additions to tax
attributable thereto. For purposes of this Agreement, "Tax Return"
23
shall mean any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 3.14 Environmental Matters.
---------------------
(a) Except as disclosed in the Company SEC Documents or as disclosed
in Schedule 3.14(a) of the Disclosure Schedule, the Company and its
Subsidiaries are in compliance with all applicable Environmental Laws (as
hereinafter defined), which compliance includes the possession of permits and
governmental authorizations required under applicable Environmental Laws and
compliance with the terms and conditions thereof, except where such non-
compliance would not result in a Material Adverse Effect.
(b) Except as disclosed in the Company SEC Documents or as disclosed
in Schedule 3.14(b) of the Disclosure Schedule, there are no Environmental
Claims (as hereinafter defined) pending or, to the actual knowledge of the
Company, threatened, against the Company or its Subsidiaries that would result
in a Material Adverse Effect.
(c) As of the date hereof, to the actual knowledge of the Management
Committee and the General Counsel of the Company, except as previously disclosed
or contained in materials previously provided or made available to Parent or
Purchaser, the Company and its Subsidiaries are not subject to any remedial
obligations required under Environmental Laws that would result in a Material
Adverse Effect.
(d) Parent and Purchaser acknowledge that the representations and
warranties contained in this Section 3.14 are the only representations and
warranties being made by the Company with respect to compliance with, or
liability or claims under, Environmental Laws or with respect to permits issued
or required under Environmental Laws, that no other representation by the
Company contained in this Agreement shall apply to any such matters and that no
other representation or warranty, express or implied, is being made with respect
thereto.
24
(e) As used in this Agreement:
(i) the term "Environmental Claim" means any claim, action,
investigation or written notice to the Company or its Subsidiaries by any
person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, personal injuries,
or penalties) arising out of, based on, or resulting from (a) the presence,
or release into the environment, of any Hazardous Substance (as
hereinafter defined) at any location, whether or not owned or operated by
the Company or its Subsidiaries or (b) circumstances forming the basis of
any violation, or alleged violation of any applicable Environmental Law;
(ii) the term "Environmental Laws" means all federal, state,
local and foreign laws and regulations, decrees and legal requirements
including judicial and administrative decrees, as in effect and as
interpreted as of the date hereof, relating to pollution or protection of
the environment, including without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of
Hazardous Substances, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances; and
(iii) the term "Hazardous Substance" means chemicals, pollutants,
contaminants, solid and hazardous wastes, hazardous and toxic substances,
and oil and petroleum products.
Section 3.15 Required Vote by Company Stockholders. The affirmative
-------------------------------------
vote of the holders of at least 66 2/3% of the outstanding Shares entitled to
vote hereon is the only vote of any class of capital stock of the Company
required by the DGCL, the Amended and Restated Certificate of Incorporation or
the By-Laws of the Company to adopt this Agreement and approve the transactions
contemplated hereby.
25
Section 3.16 Brokers. Except for Xxxxxx Xxxxxxx & Co. Incorporated,
-------
no broker, finder or investment banker is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
The Company is solely responsible for the fees and expenses of Xxxxxx Xxxxxxx &
Co. Incorporated, the amount of which has been previously disclosed to Parent.
Section 3.17 Public Utility Company; Public Utility Regulatory
-------------------------------------------------
Policies Act.
------------
(a) Neither the Company nor any of its Subsidiaries is (i) subject
to regulation as a "holding company" or a "subsidiary company" of a holding
company or a "public utility company" under Section 2(a) of the Public Utility
Holding Company Act of 1935 ("PUHCA"), (ii) except with respect to the Company's
Subsidiaries that are "exempt wholesale generators" (as such term is defined in
Section 32 of PUHCA) or engaged in power marketing activities, subject to
regulation under the Federal Power Act, as amended ("FPA"), other than as
contemplated by 18 C.F.R. (S) 292.601(c) or 18 C.F.R. (S) 35.12 or (iii) except
with respect to the Company's Subsidiaries that are "exempt wholesale
generators" (as such term is defined in Section 32 of PUHCA) or engaged in
power marketing activities, subject to any state law or regulation with respect
to rates or the financial or organizational regulation of electric utilities,
other than as contemplated by 18 C.F.R. (S) 292.602(c).
(b) Each of the power generation projects in which the Company or its
Subsidiaries has an interest which is subject to the requirements under the
Public Utility Regulatory Policies Act of 1978, as amended (16 U.S.C. (S) 796,
et seq.), and the regulations of the Federal Energy Regulatory Commission
("FERC") promulgated thereunder, as amended from time to time, necessary to be a
"qualifying cogeneration facility" and/or a "qualifying small power production
facility" (the "QF Projects") meets such requirements. Schedule 3.17(b) sets
forth a complete list of the QF Projects.
(c) Each of the power generation projects in which the Company or its
Subsidiaries has an interest
26
which is subject to regulation as an "exempt wholesale generator" (as such term
is defined in Section 32 of PUHCA) ("EWG Projects") as of the date hereof meets
the requirements to maintain "exempt wholesale generator" status. A complete
list of the Company's EWG Projects is disclosed in Schedule 3.17(c) of the
Disclosure Schedule.
(d) Each of the power generation projects in which the Company or its
Subsidiaries has an interest which is subject to regulation as a "foreign
utility company" (as such term is defined in Section 33 of PUHCA) ("FUCO
Projects") as of the date hereof meets the requirements to maintain "foreign
utility company" status. A complete list of the Company's FUCO Projects is
disclosed in Schedule 3.17(d) of the Disclosure Schedule.
Section 3.18 Fairness Opinion. The Company has received the opinion
----------------
of Xxxxxx Xxxxxxx & Co. Incorporated to the effect that, as of the date hereof,
the consideration to be received by the stockholders of the Company in the
Merger is fair to such stockholders from a financial point of view.
Section 3.19 Excluded Subsidiaries. To the actual knowledge of the
---------------------
Management Committee and the General Counsel of the Company, there is no event
or condition with respect to any Excluded Subsidiary that, if the Excluded
Subsidiaries were included in the definition of Subsidiaries, would result in a
breach of any representation or warranty set forth in this Article III.
Section 3.20 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article III, neither the
Company nor any other Person makes any other express or implied representation
or warranty on behalf of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DOW
Dow represents and warrants to Parent and Purchaser as follows:
27
Section 4.1 Organization. Dow is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware.
Section 4.2 Authorization; Validity of Agreement. Dow has the
------------------------------------
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby (which, for purposes of
this Agreement shall include all of Dow's obligations under Section 6.12
hereof). The execution and delivery by Dow of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the board of directors of Dow and no other corporate proceedings on the part
of Dow are necessary to authorize the execution and delivery of this Agreement
by Dow and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Dow and, assuming due
authorization, execution and delivery of this Agreement by the Company, Parent
and Purchaser, is a valid and binding obligation of Dow enforceable against Dow
in accordance with its terms.
Section 4.3 No Violations; Consents and Approvals.
-------------------------------------
(a) Neither the execution and delivery of this Agreement by Dow nor
the consummation by Dow of the transactions contemplated hereby will (i) violate
any provision of the Certificate of Incorporation or By-Laws of Dow; (ii) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination, amendment,
cancellation, or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, lease, license, contract, agreement or other instrument or
obligation to which Dow is a party or by which its assets may be bound; or (iii)
assuming that all consents, authorizations and approvals contemplated by Section
4.3(b) below have been obtained and all filings contemplated thereby have been
made, violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Dow or any of its properties or assets; in each case, except for
any such violations, breaches, defaults, terminations, amendments, cancellations
or
28
accelerations which would not individually or in the aggregate be reasonably
expected to prevent the consummation by Dow of the transactions contemplated by
this Agreement.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is required in
connection with the execution and delivery of this Agreement by Dow or the
consummation by Dow of the transactions contemplated hereby, except (i)
applicable requirements under Competition Laws; (ii) applicable requirements
under the Exchange Act; (iii) applicable requirements under state securities and
Blue Sky laws; (iv) applicable requirements pursuant to (S) 203 of the FPA; and
(v) such other consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings, the failure of which to be obtained or
made would not prevent the consummation by Dow of the transactions contemplated
by this Agreement.
(c) As of the date hereof, neither Dow, nor any of its properties or
assets is subject to any order, writ, judgment, injunction, decree,
determination or award which would prevent the consummation by Dow of the
transactions contemplated hereby.
Section 4.4 Title to Shares.
---------------
(a) The Dow Shares described in Schedule A represent all of the
Shares beneficially owned by Dow. Dow is the sole record and beneficial owner of
the Dow Shares.
(b) There are no options or rights to acquire, or any agreements to
which Dow is a party relating to, the Dow Shares, other than this Agreement.
Section 4.5 Brokers. No broker, finder or investment banker is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Dow (it being understood that Xxxxxx Xxxxxxx & Co.
Incorporated is acting as investment banker for the Company and is entitled to a
29
fee from the Company in connection with the transactions contemplated by this
Agreement).
Section 4.6 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article IV, neither Dow nor any
other Person makes any other express or implied representation or warranty on
behalf of Dow.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
Section 5.1 Organization. Parent is a corporation duly organized,
------------
validly existing and in good standing under the laws of Delaware and Purchaser
is a corporation duly organized, validly existing and in good standing under the
laws of Delaware. Each of Parent and Purchaser has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so organized, existing and in good
standing or to have such power and authority, or to be so qualified or licensed
would not have a material adverse effect on the business or financial condition
of Parent and its Subsidiaries, taken as a whole, or materially impair or delay
the consummation of the transactions contemplated by this Agreement. Parent has
previously delivered to the Company complete and correct copies of its
certificate of incorporation and by-laws and the certificate of incorporation
and by-laws of Purchaser, in each case as currently in effect.
Section 5.2 Authorization; Validity of Agreement. Each of Parent
------------------------------------
and Purchaser has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by Parent and Pur-
30
chaser of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the respective Boards of Directors of
Parent and Purchaser and no other corporate proceedings on the part of Parent or
Purchaser are necessary to authorize the execution and delivery of this
Agreement by Parent and Purchaser and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and Purchaser and, assuming due authorization, execution and delivery of
this Agreement by the Company and Dow, is a valid and binding obligation of each
of Parent and Purchaser enforceable against each of them in accordance with its
terms.
Section 5.3 No Violations; Consents and Approvals.
-------------------------------------
(a) Neither the execution and delivery of this Agreement by Parent
and Purchaser nor the consummation by Parent and Purchaser of the transactions
contemplated hereby will (i) violate any provision of the respective certificate
of incorporation or by-laws of Parent or Purchaser, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any material
note, bond, mortgage, indenture, guarantee, other evidence of indebtedness,
license, lease, contract, agreement or other instrument or obligation to which
Parent or any of its Subsidiaries is a party or by which any of them or any of
their assets may be bound or (iii) assuming that all consents, authorizations
and approvals contemplated by Section 5.3(b) have been obtained and all filings
contemplated thereby have been made, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, any of its
Subsidiaries or any of their properties or assets; except for such violations,
breaches, defaults, terminations, amendments, cancellations or accelerations
which would not materially impair or delay the consummation of the transactions
contemplated by this Agreement.
31
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is required in
connection with the execution and delivery of this Agreement by Parent and
Purchaser or the consummation by Parent and Purchaser of the transactions
contemplated hereby, except (i) applicable requirements under Competition Laws,
(ii) applicable requirements under the Exchange Act, (iii) the filing of the
Certificate of Merger with the Secretary of State, (iv) applicable requirements
under state securities or "blue sky" laws of various states or non-United States
change-in-control laws or regulations, (v) applicable requirements pursuant to
(S) 203 of the FPA and (vi) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings the
failure of which to be obtained or made would not materially impair or delay the
consummation of the transactions contemplated by this Agreement.
Section 5.4 Proxy Statement. None of the information supplied by
---------------
Parent or Purchaser for inclusion in the Proxy Statement (including any
amendments or supplements thereto) will, at the date mailed to stockholders and
at the time of the Special Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 5.5 Interim Financial Condition. The unaudited balance sheet
---------------------------
of Parent for the interim period ending September 30, 1996 has been prepared in
accordance with GAAP (except as otherwise noted therein and except that the
unaudited balance sheet is subject to year-end adjustment and does not contain
all footnote disclosures required by GAAP) and fairly presents in all material
respects the financial position of Parent as of the date thereof. Since such
date, there has not been an adverse effect in Parent's financial condition that
would materially adversely affect the ability of Parent or Purchaser to
consummate the Merger.
32
Section 5.6 Financing. Parent and Purchaser will have sufficient
---------
funds available (through existing credit arrangements or otherwise) at the
Closing to pay the Merger Consideration and to perform their obligations
hereunder and the obligations of the Surviving Corporation and its Subsidiaries
following the Effective Time.
Section 5.7 Surviving Corporation After the Merger. At and
--------------------------------------
immediately after the Effective Time, and after giving effect to the Merger and
the other transactions contemplated in connection therewith (and any changes in
the Surviving Corporation's assets and liabilities as a result thereof), the
Surviving Corporation will not (i) be insolvent (either because its financial
condition is such that the sum of its debts is greater than the fair value of
its assets or because the present fair saleable value of its assets will be less
than the amount required to pay its probable liabilities on its debts as they
mature), (ii) have unreasonably small capital with which to engage in its
business or (iii) have incurred or plan to incur indebtedness beyond its ability
to pay such debts as they mature.
Section 5.8 Beneficial Ownership of Shares; Interested Stockholder.
------------------------------------------------------
None of Parent, Purchaser or any of their respective affiliates or associates
beneficially owns more than 5% of the outstanding shares of Company Common Stock
or any securities convertible into or exchangeable for Company Common Stock.
Section 5.9 Brokers. Except for Chase Securities Inc., no broker,
-------
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent and Purchaser. Parent and
Pur chaser are solely responsible for the fees and expenses of Chase Securities
Inc.
33
Section 5.10 Public Utility Company; Public Utility Regulatory
-------------------------------------------------
Policies Act.
------------
(a) Neither Parent, Purchaser nor any of their respective
Subsidiaries is (i) subject to regulation as a "holding company" or a
"subsidiary company" of a holding company or a "public utility company" under
Section 2(a) of the PUHCA, (ii) except with respect to their power marketing
activities, subject to regulation under the FPA, other than as contemplated by
18 C.F.R. (S) 292.601(c) or (iii) subject to any state law or regulation with
respect to rates or the financial or organizational regulation of electric
utilities, other than as contemplated by 18 C.F.R. (S) 292.602(c).
(b) Neither Parent, Purchaser nor any of their respective
Subsidiaries is engaged in any activities that would require any filing with, or
receipt of regulatory approvals from, the Federal Energy Regulatory Commission
under (S)(S) 203 (except with respect to their power marketing activities), 204
or 205 of the FPA in connection with the consummation of the transactions
contemplated by this Agreement.
Section 5.11 Absence of Litigation. As of the date hereof, there is
---------------------
no suit, claim, action, proceeding or investigation pending against, or to the
actual knowledge of Parent and Purchaser, threatened against, Parent or
Purchaser or any of their respective properties before any Governmental Entity
or arbitrator which challenges or seeks to prevent, enjoin, alter or delay the
Merger or any of the other transactions contemplated by this Agreement. As of
the date hereof, neither Parent nor Purchaser nor any of their respective
properties is subject to any judgment, decree, order or injunction of any
Governmental Entity or arbitrator which would prevent or delay the consummation
of the transactions contemplated hereby.
Section 5.12 No Prior Activities. Since the date of its
-------------------
incorporation, Purchaser has not engaged in any activities other than in
connection with or as contemplated by this Agreement or in connection with
arranging any financing required to consummate the transactions contemplated
hereby.
34
Section 5.13 No Other Representations or Warranties. Except for the
--------------------------------------
representations and warranties contained in this Article V, neither Parent,
Purchaser nor any other Person makes any other express or implied representation
or warranty on behalf of Parent or Purchaser.
ARTICLE VI
COVENANTS
Section 6.1 Interim Operations of the Company. The Company covenants
---------------------------------
and agrees that after the date hereof and prior to the Effective Time, except as
(i) contemplated by this Agreement, (ii) required by applicable law, by any
Significant Agreement or by any Plan disclosed on Schedule 3.9(a) of the
Disclosure Schedule or (iii) agreed to in writing by Parent:
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary course and, to the extent consistent therewith,
the Company shall use its reasonable best efforts to preserve its business
organization and the business organization of its Subsidiaries intact and
maintain existing relations with customers, suppliers and employees;
(b) the Company shall not amend its Amended and Restated Certificate
of Incorporation or By-Laws and shall not authorize or vote in favor of,
directly or indirectly, any amendment by its Subsidiaries of their respective
organizational documents;
(c) the Company shall not declare, set aside or pay any dividend or
other distribution with respect to its capital stock; and neither the Company
nor its Subsidiaries shall (i) issue or dispose of any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, or rights
to acquire, any shares of capital stock of any class of the Company or its
Subsidiaries other than issuances of shares of Company Common Stock pursuant to
securities, options, warrants, calls, commitments or rights existing at the
date hereof and disclosed to Purchaser in writing (including as disclosed in the
Company SEC Documents); or (ii) re-
35
deem, purchase or otherwise acquire directly or indirectly any of its capital
stock;
(d) Neither the Company nor its Subsidiaries shall incur any
indebtedness for borrowed money other than (i) short term indebtedness incurred
in the ordinary course of business (ii) indebtedness of Subsidiaries incurred in
connection with the acquisition, development, construction or operation of power
generation or energy producing facilities, which indebtedness is without
recourse to the Company or its assets (other than the assets or earnings of such
Subsidiary or such facility), and (iii) other indebtedness not in excess of $15
million in the aggregate;
(e) except as set forth in Schedule 6.1(e) of the Disclosure
Schedule, neither the Company nor its Subsidiaries shall (i) except for
increases in the ordinary course of business consistent with past practice or to
reflect promotions, grant any material increase in the compensation payable or
to become payable by the Company or any of its Subsidiaries to any employee;
(ii) adopt or otherwise materially increase, or accelerate the payment or
vesting of the amounts payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock appreciation right, restricted stock purchase, insurance, pension,
retirement or other employee benefit plan agreement or arrangement; or (iii)
enter into or amend in any material respect any existing employment or severance
agreement or consulting agreement with any individual consultant (which
consulting agreement provides for payments in excess of $350,000) or, except in
accordance with the existing written policies of the Company, existing
contracts or agreements or in the ordinary course of business consistent with
past practice, grant any severance or termination pay to any officer, director,
employee or individual consultant of the Company or any of its Subsidiaries;
(f) neither the Company nor its Subsidiaries shall change the
accounting principles used by it unless required by law, SEC guidelines or GAAP
(or, if applicable with respect to Subsidiaries, applicable foreign generally
accepted accounting principles);
36
(g) The Company shall not, and shall not permit any of its
Subsidiaries to, acquire or agree to acquire any material assets except in the
ordinary course of business or incur or commit to incur, or consent to the
incurrence by any of the Excluded Subsidiaries, of any capital expenditures (as
such term is defined under GAAP) not included in the 1997 project financial
models previously provided to Parent except for such capital expenditures not in
excess of $1 million per project or more than $15 million in the aggregate; and
(h) The Company shall not permit any individual to subscribe for any
additional shares of Company Common Stock under the Stock Purchase Plan.
(i) neither the Company nor its Subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing.
Section 6.2 Acquisition Proposals.
---------------------
(a) The Company and its Subsidiaries will not, directly or indirectly
through their respective officers, directors, employees, representatives and
agents, (i) initiate, facilitate, encourage or solicit the making of any
Acquisition Proposal (as hereinafter defined) or (ii) except as permitted below,
engage in negotiations or discussions with, or furnish any non-public
information to, any third party relating to an Acquisition Proposal.
Notwithstanding anything to the contrary contained in this Agreement, at any
time prior to the approval of the Merger by the Company's stockholders the
Company and the Board (i) may participate in negotiations or discussions
(including, as a part thereof, making any counterproposal) with or furnish
information to any third party that delivers a written Acquisition Proposal to
the Company which was not solicited or encouraged after the date hereof if the
Board determines in good faith, after consultation with its outside counsel,
that the failure to participate in such discussions or negotiations or to
furnish such information could reasonably be expected to constitute a breach of
the Board's fiduciary duties under applicable law and (ii) without qualifying
the obligations of the Company pursuant to Section 6.7(a) hereof, shall be
permitted to (x) take and disclose to the Company's stockholders a position
with respect to the Merger
37
or another Acquisition Proposal, or amend or withdraw such position, pursuant to
Rules 14d-9 and 14e-2 under the Exchange Act or (y) make disclosure to the
Company's stockholders, in each case if the Board determines in good faith,
after consultation with its outside counsel, that the failure to take such
action could reasonably be expected to constitute a breach of the Board's
fiduciary duties under, or otherwise violate, applicable law. The Company, Dow
and their respective Subsidiaries, officers, directors, employees,
representatives and agents shall immediately cease all existing activities,
discussions and negotiations with any parties other than Parent and The AES
Corporation ("AES") conducted heretofore with respect to an Acquisition
Proposal.
(b) The Company shall promptly advise Parent in writing of any
inquiries or proposals relating to an Acquisition Proposal and any actions taken
pursuant to Section 6.2(a) (including the material terms thereof and the
identity of the other parties involved).
(c) Any action by the Board pursuant to the second sentence of
Section 6.2(a) shall not change the approval of the Board with respect to this
Agreement for purposes of Section 203 of the DGCL.
(d) For purposes of this Agreement, "Acquisition Proposal" shall
mean any proposal made by a third party relating to (i) a merger,
recapitalization, share exchange, consolidation, business combination, sale of
shares of capital stock or securities convertible into or exercisable or
exchangeable for capital stock, tender offer or exchange offer or similar
transaction involving the Company including, without limitation, any single or
multi-step transaction or series of related transactions or, (ii) the
acquisition of any material portion of the business or assets of the Company and
its Subsidiaries or (iii) any public announcement of a proposal, plan or
intention to do any of the foregoing, in each case other than the transactions
contemplated by this Agreement and other than the transactions related to the
Company's disposition of its interest in the Tiger Bay project partnership to
Florida Power Corporation or its affiliates.
38
Section 6.3 Audited Financial Statements. The Company will deliver
----------------------------
to Parent a copy of audited financial statements for the year ended December
31, 1996 (and any consolidating financial statements used in the preparation
thereof) promptly after such audited financial statements have been made
publicly available.
Section 6.4 Access to Information. From the date of this Agreement
---------------------
until the Effective Time, the Company shall afford to Parent and its authorized
representatives and, solely with respect to the international operations of the
Company and its Subsidiaries, to AES and its authorized representatives,
reasonable access during normal business hours upon reasonable prior notice to
all of its books and records and, during such period, the Company shall furnish
promptly to Parent or AES, as applicable, such financial data and other
information concerning its business, properties and personnel as Parent or AES
may reasonably request. Parent or AES and their respective authorized
representatives will conduct all such inspections in a manner which will
minimize any disruptions of the business and operations of the Company and its
Subsidiaries. Until the Effective Time, Parent and Purchaser and AES will hold
any such information in accordance with the provisions of the confidentiality
agreement between the Company and Parent, dated as of November 6, 1996, or
between the Company and AES, dated as of October 24, 1996, (as the case may be
"Confidentiality Agreements"), and will cause such information to be so held by
their Representatives (as defined in the Confidentiality Agreement). Upon a
termination of this Agreement pursuant to Section 8.1, Parent, Purchaser, AES
and their respective Representatives shall return (and hold confidential) all
information provided pursuant to this Section 6.4 and all other Information (as
defined in the Confidentiality Agreements) pursuant to the procedures set forth
in the Confidentiality Agreements. The foregoing shall not require the Company
to permit any inspection or to disclose any information which in the reasonable
judgment of the Company would result in the disclosure of any trade secrets of
third parties or violate any obligation of the Company with respect to
confidentiality if the Company shall have used its reasonable best efforts to
obtain the consent of such third party to such inspection or disclosure.
39
Section 6.5 Further Action; Reasonable Best Efforts.
---------------------------------------
(a) Upon the terms and subject to the conditions herein provided,
each of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using reasonable best efforts to obtain all necessary authorizations,
consents and approvals, and to effect all necessary registrations and filings.
Each of the parties hereto will furnish to the other parties such necessary
information and reasonable assistance as such other parties may reasonably
request in connection with the foregoing and will provide the other parties with
copies of all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in connection
with this Agreement, and the transactions contemplated hereby. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and/or directors
of the Surviving Corporation shall take or cause to be taken all such necessary
action. In addition, the Company agrees to use its reasonable best efforts to
assist AES in obtaining any necessary authorization, consent and approval with
respect to a sale after the Effective Time by Parent or Purchaser to AES of any
assets relating to the international operations of the Company and its
Subsidiaries.
(b) Parent, Purchaser, Dow and the Company shall use their respective
reasonable best efforts to resolve such objections, if any, as may be asserted
with respect to the transactions contemplated hereby under the laws, rules,
guidelines or regulations of any Governmental Entity. Without limiting the
foregoing, each of the parties shall cooperate in good faith and consult with
each other with respect to filings, communications, agreements, arrangements or
consents, written or oral, formal or informal, with the FERC and shall further
use their reasonable best effort to obtain any approvals required to be received
from the FERC in connection with
40
the consummation of the transactions contemplated by this Agreement.
(c) Without limiting Section 6.5(b), Dow and Parent shall, as soon as
practicable, file Notification and Report Forms under the HSR Act (as defined
below) with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division") and shall use reasonable
best efforts to respond as promptly as practicable to all inquiries received
from the FTC or the Antitrust Division for additional information or
documentation; and Parent and Purchaser shall use their reasonable best efforts
to take or cause to be taken all actions necessary, proper or advisable to
obtain any consent, waiver, approval or authorization relating to any
Competition Law that is required for the consummation of the transactions
contemplated by this Agreement, provided, however, that the foregoing shall not
obligate Parent or Purchaser to take any action which would have a material
adverse effect on the combined businesses of the Company and its Subsidiaries,
and Parent and its affiliates, taken as a whole. "Competition Laws" means
federal, state, local or foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization, lessening of competition or restraint of trade and includes
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act").
Section 6.6 Employee Benefits.
-----------------
(a) Parent and Purchaser hereby agree to honor without modification
or contest, and agree to cause the Surviving Corporation to honor without
modification or contest, and to make required payments when due under, all Plans
and other agreements listed on Schedule 3.9(k) of the Disclosure Schedule in
existence as of the date hereof (or as modified to the extent permitted by
Section 6.1); provided, however, that nothing herein shall be construed as
-------- -------
preventing Parent from amending or terminating any Plan, to the extent
permitted under the terms of such Plan. Purchaser and Parent hereby acknowledge
that, notwithstanding the terms of any Plan or award or agreement entered into
thereunder, the Merger constitutes a
41
"Change in Control" for purposes of such Plans, awards and agreements and agree
to abide by the provisions of any Plan which relate to a Change in Control,
including the accelerated vesting and/or payment of equity-based awards under
the Stock Plan, Variable Pay Plan and the Stock Purchase Plan.
(b) Parent and Purchaser hereby agree that, for a period of one year
immediately following the Effective Time, they shall, or shall cause the
Surviving Corporation to either (i) continue to maintain the employee benefit
plans, policies and arrangements established, maintained or contributed to by
the Company or its Subsidiaries for the benefit of the employees and former
employees of the Company and its Subsidiaries (whether employed in the U.S. or
outside the U.S.) on terms no less favorable in the aggregate than those
provided on the date hereof to such employees and former employees of the
Company and its Subsidiaries or (ii) provide that such employees and former
employees of the Company and its Subsidiaries may participate in analogous plans
of Parent which provide benefits which in the aggregate are substantially
similar to those provided to them under such plans on the date hereof (such
analogous plans being referred to herein as the "Parent Plans").
(c) Parent and Purchaser agree that for purposes of all plans
referred to in Section 6.6(b) and Parent Plans (including all policies and
employee fringe benefit programs, including vacations, of the Surviving
Corporation) under which an employee's benefit depends, in whole or in part, on
length of service, credit will be given to individuals employed by the Company
and its Subsidiaries as of the Effective Time ("Company Employees") for service
previously credited with the Company or its Subsidiaries prior to the Effective
Time, provided, that such crediting of service does not result in duplication
--------
of benefits, and provided that such crediting of service shall not be given for
--------
benefit accrual purposes under any defined benefit plan. Company Employees
shall also be given credit for any deductible or co-payment amounts paid in
respect of the Plan year in which the Effective Time occurs, to the extent that,
following the Effective Time, they participate in any Parent Plan for which
deductibles or co-payments are required. Parent and Purchaser shall also cause
each Parent Plan to waive
42
(i) any preexisting condition restriction which was waived under the terms of
any analogous Plan immediately prior to the Effective Time or (ii) waiting
period limitation which would otherwise be applicable to a Company Employee on
or after the Effective Time to the extent such Company Employee had satisfied
any similar waiting period limitation under an analogous Plan prior to the
Effective Time.
Section 6.7 Stockholders' Meeting; Proxy Statement.
--------------------------------------
(a) The Company shall, in accordance with applicable federal
securities laws, the DGCL, the Amended and Restated Certificate of Incorporation
and the By-laws of the Company, duly call, give notice of, convene and hold a
special meeting of its stockholders (the "Special Meeting") as promptly as
practicable after the date hereof for the purpose of considering and taking
action upon this Agreement and such other matters as may be appropriate at the
Special Meeting. Notwithstanding anything in this Agreement to the contrary,
the Company shall not take any action which interferes with the convening of the
Special Meeting or the taking of a stockholders' vote at that meeting.
(b) The Company shall prepare and file with the SEC, and Parent, Dow
and Purchaser shall cooperate with the Company in such preparation and filing, a
preliminary proxy statement or information statement relating to this
Agreement and the transactions contemplated hereby and use its reasonable best
efforts to furnish the information required to be included by the SEC in the
Proxy Statement (as hereinafter defined) and, after consultation with Parent,
to respond promptly to any comments made by the SEC with respect to the
preliminary proxy statement and, promptly after the completion of any SEC review
or notification from the SEC that the preliminary proxy materials will not be
subject to comment, cause a definitive proxy statement or information statement
(the "Proxy Statement") to be mailed to its stock holders. Subject to the
fiduciary obligations of the Board under applicable law, the Company shall
include in the Proxy Statement the recommendation of the Board that stockholders
of the Company approve and adopt this Agreement and the transactions
contemplated hereby.
43
(c) Parent agrees that (i) it will provide the Company with all
information concerning Parent or Purchaser necessary or appropriate to be
included in the Proxy Statement and (ii) at the Special Meeting or any
postponement or adjournment thereof (or at any other meeting at which the Merger
or this Agreement are considered by stockholders), it will vote, or cause to be
voted, all of the Shares then owned by, or with respect to which proxies are
held by it, Purchaser or any of its other Subsidiaries and affiliates, if any,
in favor of the approval and adoption of this Agreement.
(d) The Company, Parent and Purchaser shall cooperate with one
another in the preparation and filing of the Proxy Statement and shall use their
reasonable best efforts to promptly obtain and furnish the information required
to be included in the Proxy Statement and to respond promptly to any comments or
requests made by the SEC with respect to the Proxy Statement. Each party hereto
shall promptly notify the other parties of the receipt of comments of, or any
requests by, the SEC with respect to the Proxy Statement, and shall promptly
supply the other parties with copies of all correspondence between such party
(or its representatives) and the SEC (or its staff) relating thereto. The
Company, Parent and Purchaser each agree to correct any information provided by
it for use in the Proxy Statement which shall have become, or is, false or
misleading.
Section 6.8 Directors' and Officers' Insurance and Indemnification.
------------------------------------------------------
(a) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain provisions with respect to indemnification set forth
in Article VI of the Company's Amended and Restated Certificate of
Incorporation and Article VII of the Company's By-laws on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of six years after the Effective Time (or, in the case of matters
occurring prior to the Effective Time which have not been resolved prior to the
sixth anniversary of the Effective Time, until such matters are finally
resolved), in any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors or
officers of the Company
44
in respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement).
(b) Parent agrees that at all times after the Merger it shall
indemnify, or shall cause the Surviving Corporation and its Subsidiaries to
indemnify, each person who is now, or has been at any time prior to the date
hereof, an employee, director or officer of the Company or of any of the
Company's Subsidiaries (individually an "Indemnified Party" and collectively
the "Indemnified Parties"), to the full extent permitted by applicable law, with
respect to any claim, liability loss, damage, cost or expense, whenever asserted
or claimed ("Indemnified Liability"), based in whole or in part on, or arising
in whole or in part out of, any matter existing or occurring at or prior to the
Effective Time; provided, however, that such indemnity for any such employee
-------- -------
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such employee shall be required only if such proceeding (or part
there of) was authorized by Parent, the Surviving Corporation or a Subsidiary
thereof employing such employee; and provided, further, that notwithstanding
--------- -------
the immediately preceding clause if a written claim received from or on behalf
of an indemnified party is not paid in full within ninety days after such
receipt, the claimant may at any time thereafter bring suit against the
Surviving Corporation or Parent to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. Parent shall, and shall cause the
Surviving Corporation to, maintain in effect for not less than six years after
the Effective Time policies of directors' and officers' liability insurance with
a coverage amount of $75 million and equivalent in all other material respects
to those maintained by or on behalf of the Company and its Subsidiaries on the
date hereof (and containing terms and conditions which are no less advantageous
to the persons currently covered by such policies as insured) with respect to
matters existing or occurring at or prior to the Effective Time.
(c) Without limiting the foregoing, in the event any Indemnified
Party becomes involved in any capacity in any action, proceeding or
investigation based
45
in whole or in part on, or arising in whole or in part out of, any matter,
including the transactions contemplated hereby, existing or occurring at or
prior to the Effective Time, then to the extent permitted by law Parent shall,
or shall cause the Surviving Corporation to, periodically advance to such
Indemnified Party its legal and other expenses (including the cost of any
investigation and preparation incurred in connection therewith), subject to the
provision by such Indemnified Party of an undertaking to reimburse the amounts
so advanced in the event of a final determination by a court of competent
jurisdiction that such Indemnified Party is not entitled thereto. Promptly after
receipt by an Indemnified Party of notice of the assertion (an "Assertion")") of
any claim or the commencement of any action against him in respect to which
indemnity or reimbursement may be sought against Parent, the Company, the
Surviving Corporation or a Subsidiary of the Company or the Surviving
Corporation ("Indemnitors") hereunder, such Indemnified Party shall notify any
Indemnitor in writing of the Assertion, but the failure to so notify any
Indemnitor shall not relieve any Indemnitor of any liability it may have to such
Indemnified Party hereunder except to the extent that such failure shall have
materially and irreversibly prejudiced Indemnitor in defending against such
Assertion. Indemnitors shall be entitled to participate in and, to the extent
Indemnitors elect by written notice to such Indemnified Party within 30 days
after receipt by any Indemnitor of notice of such Assertion, to assume the
defense of such Assertion, at their own expense, with counsel chosen by
Indemnitors and reasonably satisfactory to such Indemnified Party.
Notwithstanding that Indemnitors shall have elected by such written notice to
assume the defense of any Assertion, such Indemnified Party shall have the right
to participate in the investigation and defense thereof, with separate counsel
chosen by such Indemnified Party, but in such event the fees and expenses of
such counsel shall be paid by such Indemnified Party unless such separate
counsel is required due to a conflict of interest, in which case the Indemnitors
shall be responsible for the fees and expenses of separate counsel. No
Indemnified Party shall settle any Assertion without the prior written consent
of Parent, which shall not be unreasonably withheld, nor shall any Indemnitors
settle any Assertion without either (i) the written consent of all Indemnified
Parties
46
against whom such Assertion was made, or (ii) obtaining an unconditional general
release from the party making the Assertion for all Indemnified Parties as a
condition of such settlement.
(d) The provisions of this Section 6.8 are intended for the benefit
of, and shall be enforceable by, the respective Indemnified Parties.
Section 6.9 Publicity. None of the Company, Parent, Dow, Purchaser
---------
nor any of their respective affiliates shall issue or cause the publication of
any press release or other announcement with respect to this Agreement, the
Merger or the other transactions contemplated hereby or thereby without prior
consultation with the other parties, except as may be required by law or by any
listing agreement with a national securities exchange after prior notice has
been given to, and all reasonable efforts have been made to consult with the
other parties.
Section 6.10 No Solicitation. Dow agrees that, for a period
---------------
commencing on the date hereof and ending on the first anniversary of the Closing
Date, it will not to the knowledge of the elected officers of Dow, directly or
indirectly, solicit for employment any employee of the Company or any of its
Subsidiaries.
Section 6.11 Certain Arrangements. (a) Upon the Effective Time, the
--------------------
Company and Dow shall cause to be terminated the agreements set forth in
Schedule 6.11(a) of the Disclosure Schedule. Except as provided in the
immediately preceding sentence or if terminated pursuant to their respective
terms, the Dow Agreements in effect immediately prior to the consummation of the
Merger shall continue in full force and effect following the Effective Time, in
accordance with their terms.
(b) Upon the Effective Time, Parent and Purchaser shall cause Dow to
be released as an obligor under the arrangements set forth in Schedule 6.11(b)
of the Disclosure Schedule including agreeing that Parent shall become liable
for or cause another to become liable for such obligation.
(c) Effective as of the purchase by Purchaser of the Dow Shares, Dow
and its Subsidiaries, on the one
47
hand, and the Company and its Subsidiaries, on the other hand, shall settle and
repay all outstanding intercompany obligations between them for borrowed money,
in accordance with the terms of such obligations.
Section 6.12 Voting Agreement.
----------------
(a) For so long as this Agreement is in effect, Dow shall vote, or
cause to be voted, all of the Dow Shares in favor of the approval and adoption
of this Agreement and the transactions contemplated thereby.
(b) For so long as this Agreement is in effect, in any meeting of
the stockholders of the Company, however called, and in any action by consent of
the stockholders of the Company, Dow shall vote or cause to be voted all of
Dow's Shares against: (i) any Acquisition Proposal; (ii) any other proposed
corporate action of the Company requiring stockholder approval that would
prevent or materially delay the consummation of the transactions contemplated by
this Agreement; or (iii) any action or agreement that would result in a breach
in any respect of any covenant, representation or warranty or any other
obligation of the Company or Dow under this Agreement.
Section 6.13 Employee Benefits Indemnification. With respect to
---------------------------------
claims made within three years after the Effective Time, from and after the
Effective Time, Dow shall be liable for, and shall indemnify the Company and its
Subsidiaries for and hold such entities harmless against any obligations arising
out of any employee benefit plans (within the meaning of section 3(3) of ERISA)
established, maintained or contributed to by Dow or any corporation (other than
the Company or any of its Subsidiaries), trade, business, or entity under common
control with Dow, within the meaning of Section 414(b), (c), (m) or (o) of the
Code or section 4001 of ERISA.
Section 6.14 The Dow Shares. Dow agrees not to (either directly or
--------------
indirectly): (i) sell, transfer, pledge, assign, hypothecate or otherwise
dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, assignment,
hypothecation or other disposition of the Dow
48
Shares (including, without limitation, through the disposition or transfer of
control of another person); (ii) grant any proxies with respect to the Dow
Shares, deposit the Dow Shares into a voting trust or enter into a voting
agreement with respect to any of the Dow Shares; or (iii) take any action which
would be reasonably expected to make any representation or warranty of Dow
herein untrue or incorrect in any material respect.
Section 6.15 Acquisition Proposals.
---------------------
(a) Dow will not, directly or indirectly through any officer,
director, employee, representative, or agent (i) initiate, facilitate, encourage
or solicit the making of any Acquisition Proposal, (ii) engage in negotiations
or discussions with, or furnish any non-public information to, any third party
relating to an Acquisition Proposal, or (iii) agree to or approve any
Acquisition Proposal; provided, that Dow shall not be deemed to have breached
--------
its obligations contained in this Section 6.15 by reason of any action taken by
the Company or its Board permitted by the second sentence of Section 6.2(a) of
this Agreement.
(b) Dow shall immediately advise Parent in writing of the receipt by
Dow of any inquiries or proposals relating to an Acquisition Proposal.
Section 6.16 Tax Matters.
-----------
(a) Dow and Parent shall make a joint election for the Company (and
all U.S. corporations that are Subsidiaries of the Company) under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code") and
under any applicable similar provisions of state or local law with respect to
the purchase of the Dow Shares or any deemed purchase of such Subsidiaries
(collectively, the "Section 338(h)(10) Elections"). On the Closing Date, Dow
and Parent shall exchange completed and executed copies of Internal Revenue
Service Form 8023-A and any similar state or local forms (collectively, the
"Forms"). If any changes are required in the Forms as a result of information
which is first available after such Forms are prepared, the parties will
promptly agree on such changes. After all required schedules to support the
Forms are completed, Dow and Parent shall
49
file the Forms, which filing shall be made within the time period specified
under applicable law. Dow, Parent, and the Company shall make all required
filings relating to the Section 338(h)(10) Elections in connection with their
federal and applicable state and local income tax returns, and shall cooperate
fully with each other with respect to such filings.
Within 180 days following the Closing Date, Parent shall (i) draft a
schedule (the "Allocation Schedule") allocating the Modified Adjusted Deemed
Sales Price (as defined in Section 1.338(h)(10)-1(f) of the Treasury
regulations) and the Adjusted Deemed Sales Price (as defined in Section 1.338-
3(d) of the Treasury regulations) for the Company and each Subsidiary for which
Section 338(h)(10) Elections or elections under Section 338(g) of the Code will
be made, among the assets of the Company and each such Subsidiary and (ii)
deliver such Allocation Schedule to Dow. The Allocation Schedule shall be
reasonable and shall be prepared in accordance with Section 338(h)(10) of the
Code and the Treasury regulations thereunder. Each of Parent, on the one hand,
and Dow (upon its consent to the Allocation Schedule, which consent shall not be
unreasonably withheld) on the other hand, shall report the transactions
contemplated hereby, and file all Tax Returns, in each case, for federal, state,
local and foreign Tax purposes in accordance with the Allocation Schedule.
(b) Nothing contained herein shall be construed as altering the
rights, obligations and duties of Dow, the Company and any Subsidiaries of the
Company to each other pursuant to the Tax Sharing Agreement between Dow and the
Company and its Subsidiaries dated May 15, 1996 (the "Tax Sharing Agreement")
previously disclosed to Parent and Purchaser. The Tax Sharing Agreement shall
continue to govern the rights and obligations of the Company and Dow with
respect to the taxable periods for which it is effective. The Tax Sharing
Agreement shall be amended effective as of the Closing Date in the form of the
First Amendment to the Tax Sharing Agreement which has been previously
distributed to Parent.
Parent shall pay or cause the Company to pay to Dow all amounts
required to be paid to Dow under the Tax Sharing Agreement. Dow shall pay to
the Company all
50
amounts Dow is required to pay to the Company under the Tax Sharing Agreement.
(c) (i) Dow shall be liable for, and shall indemnify Parent and
Purchaser for and hold Parent and Purchaser harmless against (A) all income
Taxes imposed for any taxable year on Dow's "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) or any other combined or unitary group for state,
local or foreign tax purposes that includes Dow and (B) any incremental amount
of state and local income Taxes (not including the use of any losses or other
Tax attributes) imposed on the Company and its Subsidiaries (other than any
amount of state or local Taxes imposed on a combined or unitary group that
includes Dow) for the taxable year that includes the Closing Date, to the extent
that such amount is incurred as a result of the Section 338(h)(10) Elections or
any election under Section 338(g) of the Code. Dow shall be entitled to any
refund of (or credit for) Taxes allocable or attributable to Taxes for which Dow
is liable to Purchaser pursuant to this paragraph (c)(i) of this Section 6.16.
(ii) Parent and Purchaser shall be liable for, and shall
indemnify Dow for and hold Dow harmless against, all Taxes of or imposed on the
Company or any Subsidiary of the Company for any taxable period other than those
Taxes referred to in paragraph (c)(i) of this Section 6.16. Parent shall be
entitled to any refund of (or credit for) Taxes allocable or attributable to
Taxes for which Parent is liable to Dow pursuant to this paragraph (c)(ii) of
Section 6.16.
(iii) Notwithstanding anything to the contrary contained
herein, Parent shall assume and pay all sales, use, privilege, transfer, stock
transfer, real property transfer, documentary, gains, stamp, duties, recording
and similar Taxes and fees (including any penalties, interest or additions)
imposed upon any party incurred in connection with any of the transactions
contemplated by this Agreement (collectively, "Transfer Taxes") except for such
Transfer Taxes imposed on Dow with respect to the sale of the Dow Shares, and
Parent shall, at its own expense, accurately file all necessary Tax Returns and
other documentation with respect to any
51
Transfer Tax other than Tax Returns which Dow is responsible for filing under
applicable law. Parent and Dow agree to timely sign and deliver such
certificates or forms as may be necessary or appropriate to establish an
exemption from (or otherwise reduce), or file Tax Returns with respect to, such
Transfer Taxes.
(d) (i) Dow shall file or cause to be filed when due all Tax Returns
Dow has elected to file pursuant to the Tax Sharing Agreement and Dow shall
remit or cause to be remitted any Taxes due in respect of such Tax Returns, and
Parent shall file or cause to be filed when due all Tax Returns other than those
Tax Returns Dow has elected to file pursuant to the Tax Sharing Agreement that
are required to be filed by or with respect to the Company and each of its
Subsidiaries and Parent shall remit or cause to be remitted any Taxes due in
respect of such Tax Returns.
(ii) None of Parent or any affiliate of Parent shall (or
shall cause or permit the Company or any of its Subsidiaries to) amend, refile
or otherwise modify any Tax Return relating in whole or in part to the Company
or any of its Subsidiaries with respect to any taxable year or period ending on
or before the Closing Date without the prior written consent of Dow.
(iii) Parent shall promptly cause the Company and each
Subsidiary to prepare and provide to Dow all Tax information materials,
including, without limitation, schedules and work papers which the Company is
required to provide Dow pursuant to the Tax Sharing Agreement. Each of Dow and
Parent shall (and shall cause their respective affiliates to): (A) assist the
other party in preparing any Tax Returns which such other party is responsible
for preparing and filing in accordance with clause (i) of this Section 6.16(d),
(B) cooperate fully in preparing for any audits of, or disputes with taxing
authorities regarding, any Tax Returns of the Company and each Subsidiary of the
Company, and (C) make available to the other party and to any taxing authority
as reasonably requested all information, records, and documents relating to
Taxes of the Company and each Subsidiary of the Company, provided, Dow or
--------
Parent (or respective affiliates) has access to information, records
52
or personnel concerning such Tax Returns that is not available to the other
party.
(e) Dow or Parent shall pay the other party for the Taxes for which
Dow or Parent, respectively, is liable pursuant to paragraph (c) of Section 6.16
upon the written request of the party entitled to the payment, setting forth in
detail the nature and the amount of the Taxes to which the payment relates.
(f) Each of Dow and Parent shall (and shall cause their respective
affiliates to): (A) provide timely notice to the other in writing of any notice
of deficiency, proposed adjustment, adjustment, assessment, audit, examination,
suit, dispute or other claim ("Tax Claim") delivered, sent, commenced or
initiated to or against the Company or any Subsidiary of the Company by any
Taxing authority with respect to taxable periods for which the other may have a
liability under this Section 6.16, and (B) furnish the other with copies of all
correspondence received from any taxing authority in connection with any Tax
audit or information request with respect to any such taxable period.
(g) Dow shall have the sole right to represent the Company's and each
of its Subsidiaries' interests in any Tax Claim, Tax audit or administrative or
court proceeding ("Proceeding") relating to any Taxes (A) imposed for any
taxable year on Dow's "affiliated group" (as defined in Section 1504(a) of the
Code without regard to the limitations contained in Section 1504(b) of the Code)
or any other combined or unitary group of Dow, (B) imposed on the Company or
any Subsidiary of the Company as a result of the Section 338(h)(10) Elections or
elections under Section 338(g) of the Code (or similar provision under state,
local or foreign law) pursuant to paragraph (a) of Section 6.16. None of
Parent, any of its affiliates, the Company or any Subsidiaries of the Company
may settle any Proceeding for any taxable year which may be the subject of
indemnification by Dow under paragraph (c) of Section 6.16 without the prior
written consent of Dow, which consent may not be unreasonably withheld. Parent
shall have the sole right to represent the Company's and each of its
Subsidiaries' interests in any Proceeding relating to any Taxes for which Parent
could be liable to Dow pursuant to Section 6.16(c) of this Agreement. If
53
the resolution of any Proceeding could adversely affect a party other than the
party with the sole right to represent the Company's or any Subsidiary's
interest in any Tax Claim then such other party shall have the right to
participate in such Proceeding at its own cost and expense.
(h) Any payment by Parent, Purchaser or Dow pursuant to this Section
6.16 shall be an adjustment to the Merger Consideration.
(i) The obligations set forth in this Section 6.16 shall be
unconditional and absolute and shall remain in effect without limitation as to
time.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation To Effect the
----------------------------------------------------
Merger. The respective obligation of each party to effect the Merger shall be
------
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) Any approval required under the FPA to consummate the Merger
shall have been obtained;
(b) Any waiting period applicable to the Merger under the HSR Act and
under any other Competition Law that requires a filing prior to the Effective
Time shall have terminated or expired;
(c) This Agreement shall have been approved and adopted by the
affirmative vote of the holders of at least 662/3% of the outstanding shares of
Company Common Stock; and
(d) No statute, rule, injunction, order, decree or regulation shall
have been enacted or promulgated by any Governmental Entity of competent
jurisdiction which prohibits the consummation of the Merger or makes the Merger
illegal.
54
Section 7.2 Conditions to Parent and Purchaser's Obligation to Effect
---------------------------------------------------------
the Merger. The obligation of Parent and Purchaser to effect the Merger shall
----------
be subject to the satisfaction or waiver at or prior to the Closing Date of each
of the following conditions:
(a) The Company and Dow shall have performed in all material respects
all of their respective covenants and agreements under this Agreement required
to be performed at or prior to the Closing provided, that with respect to such
--------
covenants and agreements of the Company, the foregoing condition shall be deemed
satisfied so long as no failure to perform any such covenant or agreement shall
have had or would have a Material Adverse Effect.
(b) The representations and warranties of Dow set forth in this
Agreement shall be true and correct in all material respects (except in the case
of any representation and warranty made as of a specified date, which need only
be true as of such date) as of the date of the Closing as if such
representations and warranties were made on such date; and
(c) The representations and warranties of the Company set forth in
this Agreement shall be true and correct (except in the case of any
representation and warranty made as of a specified date, which need only be true
as of such date) as of the date of the Closing as if such representations and
warranties were made on such date; provided, that the foregoing condition shall
--------
be deemed satisfied so long as no failure to be so true and correct shall have
had or would have a Material Adverse Effect.
Section 7.3 Conditions to the Company's Obligation to Effect the
----------------------------------------------------
Merger. The obligation of the Company to effect the Merger shall be subject to
------
the satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) Parent and Purchaser shall have performed in all material
respects all of their covenants and agreements under this Agreement required to
be performed at or prior to the Closing; and
55
(b) The representations and warranties of Parent and Purchaser set
forth in this Agreement shall be true and correct in all material respects
(except in the case of any representation and warranty made as of a specified
date, which need only be true as of such date) as of the date of the Closing as
if such representations and warranties were made on such date.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. Notwithstanding anything herein to the
-----------
contrary, this Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether before or after stockholder
approval thereof:
(a) By the mutual consent of Parent, Dow and the Company; or
(b) By the Company, Dow or Parent, if: (i) the Merger has not been
consummated on or prior to December 31, 1997, or such other date, if any, as
Parent, Dow and the Company shall agree upon; provided that the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be available to
a party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Effective Time to occur on or
before such date; (ii) if the stockholders of the Company fail to approve and
adopt this Agreement at the Special Meeting (including any postponement or
adjournment thereof) or (iii) any Governmental Entity shall have issued a
statute, order, decree or regulation or taken any other action (which statute,
order, decree, regulation or other action the parties hereto shall use their
reasonable best efforts to lift) in each case permanently restraining, enjoining
or otherwise prohibiting the Merger or making the Merger illegal and such
statute, order, decree, regulation or other action shall have become final and
non-appealable.
Section 8.2 Effect of Termination. In the event of the termination
---------------------
of this Agreement as provided in Section 8.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provi-
56
sion hereof pursuant to which such termination is made, and this Agreement shall
forthwith become null and void, and there shall be no liability on the part of
Parent, Purchaser, Dow or the Company except as set forth in Section 9.1 hereof
and Section 8.3 hereof and except with respect to the requirement to comply with
the Confidentiality Agreements and return and hold confidential Information
pursuant to the procedures set forth in Section 6.4. The termination of this
Agreement shall not relieve any party from liability for breach of this
Agreement except as provided in the second sentence of Section 8.3 hereof.
Section 8.3 Fee. The Company shall promptly pay to Parent a fee of
---
$65,000,000 in the event that this Agreement is terminated pursuant to Section
8.1(b)(ii). If this Agreement is terminated pursuant to Section 8.1(b)(ii)
hereof, the payment of such fee shall be the sole and exclusive remedy against
the Company, Dow and their respective Affiliates, officers, directors and
representatives in connection with this Agreement and the transactions
contemplated hereby.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Fees and Expenses. Except as contemplated by this
-----------------
Agreement, all costs and expenses incurred in connection with this Agreement
and the consummation of the transactions contemplated hereby shall be paid by
the party incurring such expenses.
Section 9.2 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 9.3 Amendment; Waiver.
-----------------
(a) This Agreement may be amended by the parties hereto, by action
taken or authorized by their
57
respective Boards of Directors, at any time before or after approval by the
stockholders of the Company of the matters presented in connection with the
Merger, but after any such approval no amendment shall be made without the
approval of such stockholders if such amendment changes the Merger Consideration
or alters or changes any of the other terms or conditions of this Agreement if
such alteration or change would materially adversely affect the rights of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
(b) At any time prior to the Effective Time, the parties may (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties of the other parties contained herein or in any document,
certificate or writing delivered pursuant hereto or (iii) waive compliance with
any of the agreements or conditions of the other parties hereto contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
Section 9.4 Survival. The respective representations and warranties
--------
of Parent, Purchaser, Dow and the Company contained herein or in any
certificates or other documents delivered prior to or as of the Effective Time
shall not survive beyond the Effective Time, provided however that the
representations and warranties of Dow in Section 4.4 of this Agreement shall
survive indefinitely following the Effective Time. The covenants and
agreements of the parties hereto (including the Surviving Corporation after the
Merger) shall survive the Effective Time without limitation (except for those
which, by their terms, contemplate a shorter survival period).
Section 9.5 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery
by a standard overnight carrier or when delivered by hand or (c) the expiration
of five business days after the day when mailed in the United States by
certified or registered mail, postage prepaid, addressed at the following
58
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to:
Destec Energy, Inc.
0000 XxxxXxxx Xxxx.
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
(b) If to Dow, to:
The Dow Chemical Company
0000 Xxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
and :
(c) if to Parent or Purchaser, to:
NGC Corporation
00000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
00
Xxxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
2300 First City Tower
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: T. Xxxx Xxxxx and
Xxxxx X. Xxxxxxxxxxxx
Section 9.6 Interpretation. When a reference is made in this
--------------
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrase "made available" when used in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
words "affiliates" and "associates" when used in this Agreement shall have the
respective meanings ascribed to them in Rule 12b-2 under the Exchange Act. The
phrase "beneficial ownership" and words of similar import when used in this
Agreement shall have the meaning ascribed to it in Rule 13d-3 under the Exchange
Act.
Section 9.7 Headings; Schedules. The headings contained in this
-------------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Any matter disclosed pursuant to
any Schedule to the Disclosure Schedule shall be deemed to be disclosed for all
purposes under this Agreement but such disclosure shall not be deemed to be an
admission or representation as to the materiality of the item so disclosed.
Section 9.8 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original but all of which
shall be considered one and the same agreement.
Section 9.9 Entire Agreement. This Agreement and the Confidentiality
----------------
Agreement, and certain other
60
agreements executed by the parties hereto as of the date of this Agreement,
constitute the entire agreement, and supersedes all prior agreements and
understandings (written and oral), among the parties with respect to the
subject matter hereof.
Section 9.10 Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 9.11 Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 9.12 Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by,
the parties and their respective successors and assigns, and except to the
extent necessary to enforce the provisions of Sections 2.1, 2.3, and 6.8, the
provisions of this Agreement are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
Section 9.13 Consent to Jurisdiction. Each of the parties hereto
-----------------------
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States of
America located in the State of Delaware (the "Delaware Courts") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating thereto
except in such Delaware Courts), waives any objection to the laying of venue of
any such litigation in the Delaware Courts and agrees not to plead or claim in
any Delaware Court that such litigation brought therein has been brought in an
inconvenient forum.
61
IN WITNESS WHEREOF, Parent, Purchaser, Dow and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
DESTEC ENERGY, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
__________________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President, Chief
Financial Officer and Treasurer
THE DOW CHEMICAL COMPANY
By: /s/ X. X. Xxxxxxxxx
__________________________________________
Name: X. X. Xxxxxxxxx
Title: Corporate Director, Mergers and
Acquisitions
NGC CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
__________________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President and General
Counsel
NGC ACQUISITION CORPORATION II
By: /s/ Xxxxxxx X. Xxxxxxxx
__________________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title:
62
SCHEDULE A
Number of Shares
----------------
The Dow Chemical Company 45,000,000
A-1
