Exhibit 2.3
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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
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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 - DESTEC
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
Section 6.12 Voting Agreement.........................................47
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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
---------- --------
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
Term Section
---- -------
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)
Immaterial Subsidiaries...............................................3.1(a)
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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
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 this Agreement and in accordance with the DGCL, at the
Effective Time (as defined in Section 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 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, ▇▇▇▇▇▇▇
& ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, 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
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 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 Purchaser, as in effect immediately prior to the Effective
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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.
(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, 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 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 converted, shall no
longer be outstanding and shall automatically be cancelled and retired
and shall cease to
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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.
(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 Merger Consideration pursuant to Section 2.1(a). Notwithstand-
ing 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 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
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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
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
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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.
(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 deliver-
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able in respect thereof as determined in accordance with this Article II;
provided that the Person to whom the Merger Consideration is 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 .
Section 2.3 Company Equity-Based Awards.
(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 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
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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 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 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,
8
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
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 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
9
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 ▇▇▇▇▇▇▇▇ 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 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 issued, 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
10
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
exchangeable 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 ▇▇▇▇▇▇▇▇▇ Power Partnership and Destec Australia Energy
Finance Pty. Ltd. owns a 12.55% limited partnership interest in ▇▇▇▇▇▇▇▇▇
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 transactions 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 66 2/3% 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 exe-
11
cuted 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, 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
12
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, 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
13
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 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,
construc-
14
tion 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 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,
15
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 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 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").
16
(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
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
17
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 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).
18
(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 agreements listed in Schedule 3.9(j)(iii) of
the Disclosure Schedule) which, in the aggregate, would result in impo-
sition 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
19
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 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
20
or other valid rights to use, all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, service marks, service ▇▇▇▇
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.
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
21
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.
(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
22
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" 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.
23
(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.
(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;
24
(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.
Section 3.16 Brokers. Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & 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 de-
25
fined 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. ss. 292.601(c) or 18 C.F.R. ss. 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. ss. 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. ss. 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 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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated to the effect that, as of
the date hereof, the consideration to be received by the stockholders of
the
26
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:
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.
27
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 indebt-
edness, 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
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
28
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
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated is acting as investment banker for the
Company and is entitled to a 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
29
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 Purchaser
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
30
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.
(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 ss. 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.
31
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.
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
contem-
32
plated by this Agreement based upon arrangements made by or on behalf of Parent
and Purchaser. Parent and Purchaser are solely responsible for the fees and
expenses of Chase Securities Inc.
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 contem-
plated 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 Govern-
mental 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 arrang-
33
ing any financing required to consummate the transactions contemplated hereby.
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
34
hereof and disclosed to Purchaser in writing (including as disclosed in
the Company SEC Documents); or (ii) redeem, 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);
35
(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 or another
Acquisition Proposal, or amend or with-
36
draw 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.
Section 6.3 Audited Financial Statements. The Company will
deliver to Parent a copy of audited ▇▇▇▇▇-
37
cial 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.
38
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 Subsid-
iaries.
(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 the consummation of the transactions
contemplated by this Agreement.
39
(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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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 "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
40
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
(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
41
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 stockholders. 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.
42
(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 in respect of actions or
omissions occurring at or prior
43
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 thereof) 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 in whole or in part on, or arising in
whole or in part out of, any matter, including the transactions
contem-
44
plated 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 against whom such Assertion was made, or (ii) obtaining an
unconditional general release from the party making
45
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 hand, and the Company and
its Subsidiaries, on the other hand, shall settle and repay all
outstanding intercompany
46
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 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
47
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 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
48
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 amounts Dow is required to pay to the
Company under the Tax Sharing Agreement.
49
(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 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
50
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 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
51
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 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.
52
(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 66 2/3% 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.
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
53
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
(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.
54
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 provision 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
55
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 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
56
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 addresses (or at such other address
for a party as shall be specified by like notice):
57
(a) if to the Company, to:
Destec Energy, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to Dow, to:
The Dow Chemical Company
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
and :
(c) if to Parent or Purchaser, to:
NGC Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
58
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
2300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: T. ▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
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 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.
59
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 "Dela-
ware 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.
60
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/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice
President, Chief Financial
Officer and Treasurer
THE DOW CHEMICAL COMPANY
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇▇
Title: Corporate Director, M&A
NGC CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
and General Counsel
NGC ACQUISITION CORPORATION II
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
61
SCHEDULE A
Number of Shares
----------------
The Dow Chemical Company 45,000,000
A-1