EXHIBIT 2.1
TRANSACTION AGREEMENT
among
CENTERPOINT ENERGY, INC.,
UTILITY HOLDING, LLC,
NN HOUSTON SUB, INC.,
TEXAS GENCO HOLDINGS, INC.,
HPC MERGER SUB, INC.
and
GC POWER ACQUISITION LLC
Dated as of July 21, 2004
Table of Contents
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Exhibit B — Form of Merger
Agreement for the Genco LP Division
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Exhibit C — Form of Merger
Agreement for the Genco II LP Acquisition
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Exhibit D — Form of Merger
Agreement for the Genco Services Acquisition
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Exhibit E — Form of Transition
Services Agreement
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Schedule 2.3
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— Non-STP Purchase Price
Allocation
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Schedule 6.17(b) — Separation
Amendments
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Schedule 6.18 — Power Purchase
Arrangements
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TRANSACTION
AGREEMENT
TRANSACTION AGREEMENT, dated as of
July 21, 2004 (this “ Agreement ”), by and
among CenterPoint Energy, Inc., a Texas corporation (“
CenterPoint ”), Utility Holding, LLC, a Delaware
limited liability company and wholly-owned subsidiary of
CenterPoint (“ Utility Holding ” and, together
with CenterPoint, sometimes collectively referred to as “
Parents ” and, individually, a “ Parent
”), NN Houston Sub, Inc., a Texas corporation and a
direct wholly-owned subsidiary of Utility Holding (“
Merger Sub ”), Texas Genco Holdings, Inc., a
Texas corporation (“ Genco Holdings ”), GC Power
Acquisition LLC, a Delaware limited liability company (“
Buyer ”), and HPC Merger Sub, Inc., a Texas
corporation and a wholly-owned subsidiary of Buyer (“ STP
Merger Sub ”). Parents, Merger Sub, Genco Holdings,
Buyer and STP Merger Sub are hereinafter collectively referred to
as the “parties” and each individually as a
“party.”
WHEREAS, Utility Holding owns
64,764,240 shares (the “ Shares ”) of common
stock, par value $.001 per share (“ Common Stock
”), of Genco Holdings; and
WHEREAS, the Shares represent
approximately 80.96% of the total outstanding shares of Common
Stock of Genco Holdings; and
WHEREAS, Genco Holdings, through its
direct and indirect subsidiaries identified in
Section 4.3(a) of the Companies Disclosure Letter (as
defined below) (Genco Holdings and such direct and indirect
subsidiaries and any direct or indirect subsidiaries of Genco
Holdings formed after the date hereof are collectively referred to
herein as the “ Companies, ” and, individually,
each as a “ Company ”), (a) owns 11
electric power generation facilities, and a 30.8% (subject to
potential increase pursuant to the exercise of a right of first
refusal) interest in South Texas Project Nuclear Electric
Generating Station (the “ South Texas Project ”
or “ STP ”), all of which are located in Texas,
and (b) sells wholesale electric generation capacity, energy
and ancillary services in the Electric Reliability Council of
Texas, Inc. market (the “ ERCOT Market ”)
(such business referred to herein as the “ Genco
Business ”); and
WHEREAS, the respective Boards of
Directors of CenterPoint, Genco Holdings and Merger Sub, and the
sole manager of Utility Holding, have approved, and deem it
advisable to consummate, the merger of Merger Sub with and into
Genco Holdings (the “ Public Company Merger ”),
with Genco Holdings surviving as the Surviving Corporation (as
defined below), on terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, concurrently with the
execution and delivery of this Agreement and as a condition to
Buyer’s willingness to enter into this Agreement, Utility
Holding will deliver its written consent in the form attached
hereto as Exhibit A (the “ Parent Written Consent
”), pursuant to which Utility Holding will approve this
Agreement and the transactions contemplated hereby (including the
Public Company Merger); and
WHEREAS, concurrently with the
execution and delivery of this Agreement and as a condition to
Buyer’s willingness to enter into this Agreement, Texas
Genco, LP, a Texas limited partnership and an indirect wholly-owned
subsidiary of Genco Holdings (“ Genco LP ”), has
entered into a Master Power Purchase and Sale Agreement between
Genco LP and J. Aron & Company, dated the date hereof (the
“ Power Purchase Agreement ”); and
WHEREAS, concurrently with the
execution and delivery of this Agreement and as a condition to
Parents’ and Genco Holdings’ willingness to enter into
this Agreement, Buyer has entered into a commitment letter (the
“ Debt Financing Letter ”) with financing
sources with respect to the debt financing (the “ Debt
Financing ”) for the transactions contemplated hereby
other than the Public Company Merger, which financing will include
(a) a $775.0 million senior first prior secured term loan
facility, (b) a $475.0 million delayed draw term loan facility
(the “ Delayed Draw Term Facility ”), (c) a
$200.0 million senior first priority secured revolving credit
facility, (d) a $200.0 million senior first priority secured
letter of credit facility, (e) a $425.0 million senior first
priority secured letter of credit facility, and (f) the
issuance of $1,250.0 million of senior second priority secured
notes or, alternatively, $1,250.0 million under senior second
priority secured increasing rate bridge loans; and
WHEREAS, Annex E to the Debt
Financing Letter (the “ Public Company Merger Debt Term
Sheet ”) provides for debt financing to Genco Holdings
for the Public Company Merger, which financing will consist of a
$717.0 million overnight bridge loan (the “ Overnight
Bridge Loan ”); and
WHEREAS, prior to the Public Company
Merger Closing Date (as defined below), upon the terms and subject
to the conditions set forth in this Agreement, a Texas limited
partnership to be formed by Genco Holdings as a wholly-owned
indirect subsidiary of Genco Holdings (“ Genco II LP
”), will merge with Genco LP, and as a result of that merger
be allocated all of the Non-STP Assets and Liabilities (as defined
below) other than those held by Texas Genco Services, LP, a Texas
limited partnership wholly-owned by Genco Holdings (“
Genco Services ”) (such transaction, the “
Genco LP Division ”); and
WHEREAS, on the first business day
following consummation of the Public Company Merger or as soon as
possible thereafter, upon the terms and subject to the conditions
set forth in this Agreement, (1) a Texas limited partnership
to be formed by Buyer as a wholly-owned indirect subsidiary of
Buyer (“ Newco ”), will merge with and into
Genco II LP (such merger, the “ Genco II LP
Acquisition ”), with Genco II LP being the surviving
entity in the Genco II LP Acquisition as an indirect wholly-owned
subsidiary of Buyer, and (2) a Texas limited partnership to be
formed by Buyer as a wholly-owned indirect subsidiary of Buyer
(“ Newco2 ”) will merge with and into Genco
Services (such merger, the “ Genco Services
Acquisition ”), with Genco Services being the surviving
entity in the Genco Services Acquisition as an indirect
wholly-owned subsidiary of Buyer (the Genco II LP Acquisition and
the Genco Services Acquisition, collectively, the “
Non-STP Acquisition ”); and
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WHEREAS, following consummation of
the Public Company Merger and the Non-STP Acquisition, upon the
terms and subject to the conditions set forth in this Agreement,
STP Merger Sub will merge with and into Genco Holdings (the “
STP Acquisition ”), with Genco Holdings being the
surviving corporation in the STP Acquisition as a direct
wholly-owned subsidiary of Buyer; and
WHEREAS, Buyer is owned by
Blackstone Capital Partners IV L.P., Hellman & Friedman
Capital Partners IV, L.P., KKR Millennium Fund, L.P., TPG Partners
IV, L.P. and their respective affiliates (collectively, the “
Investors ”);
NOW, THEREFORE, in consideration of
the foregoing and the representations, warranties, covenants and
agreements contained in this Agreement, and intending to be legally
bound, the parties agree as follows:
ARTICLE I
PUBLIC COMPANY MERGER
Section 1.1
The Public Company Merger . On the terms and subject to the
conditions of this Agreement and in accordance with the Texas
Business Corporation Act (“ TBCA ”), at the
Public Company Merger Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into Genco
Holdings. As a result of the Public Company Merger, the
separate corporate existence of Merger Sub shall cease and Genco
Holdings shall survive the Public Company Merger (sometimes
hereinafter referred to as the “ Surviving Corporation
”). From and after the Public Company Merger Effective
Time, the Public Company Merger shall have the effects provided in
Article 5.06A of the TBCA. All rights, titles and
interests to all properties owned by Genco Holdings and Merger Sub
shall be allocated to and vested in the Surviving Corporation
without reversion or impairment, without further act or deed, and
without any transfer or assignment having occurred, but subject to
any existing Liens thereon. All liabilities and obligations
of Genco Holdings and Merger Sub shall become liabilities and
obligations of the Surviving Corporation.
Section 1.2
Time and Place of Public Company Merger Closing
. Unless this Agreement shall
have been terminated and the transactions herein contemplated shall
have been abandoned pursuant to Section 10.1 and subject to
the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Public Company Merger (the
“ Public Company Merger Closing ”) will
take place at the offices of Baker Botts L.L.P., One Shell Plaza,
910 Louisiana Street, Houston, Texas 77002-4995 at 9:00 a.m.
(local time) on the first business day (that is a day that is
followed by three consecutive days that are all business days)
following the date on which all of the conditions set forth in
Article VII (other than those that by their nature are
intended to be satisfied at the Public Company Merger Closing) have
been satisfied or waived, or at such other date, place or time as
the parties may agree. The date on which the Public Company
Merger Closing occurs and the transactions contemplated by the
Public Company Merger become effective is referred to as the
“ Public Company Merger Closing Date.
”
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Section 1.3
Effective Time of the Public Company Merger.
On the Public Company Merger
Closing Date, the parties shall cause the Public Company Merger to
be consummated by filing the articles of merger (the “
Articles of Merger ”) with the Secretary of State of
the State of Texas (the “ Texas Secretary of State
”) in such form as is required by, and executed in accordance
with, the relevant provisions of the TBCA and shall make any other
filings or recordings required under the TBCA (the date and time of
the issuance of a certificate of merger by the Texas Secretary of
State pursuant to Article 5.05 of the TBCA (or such later time
as is specified in the Articles of Merger) on the Public Company
Merger Closing Date, being the “ Public Company Merger
Effective Time ”).
Section 1.4
Directors and Officers . The directors of Merger Sub immediately
prior to the Public Company Merger Effective Time shall be the
initial directors of the Surviving Corporation following the Public
Company Merger, and the officers of Genco Holdings immediately
prior to the Public Company Merger Effective Time shall be the
initial officers of the Surviving Corporation following the Public
Company Merger, in each case until their respective successors are
duly elected or appointed or until their earlier death, resignation
or removal in accordance with the articles of incorporation and
bylaws of the Surviving Corporation.
Section 1.5
Articles of Incorporation and Bylaws. Following the Public Company Merger Effective
Time, the articles of incorporation of Genco Holdings shall be the
articles of incorporation of the Surviving Corporation until
thereafter changed or amended in accordance with the provisions
thereof and applicable Law. Following the Public Company
Merger Effective Time, the bylaws of Genco Holdings shall be the
bylaws of the Surviving Corporation until thereafter changed or
amended in accordance with the provisions thereof and applicable
Law.
Section 1.6
Effect of Public Company Merger on Capital Stock.
As of the Public Company
Merger Effective Time, by virtue of the Public Company Merger and
without any action on the part of Genco Holdings, Merger Sub or any
holder of any shares of capital stock of Genco Holdings or any
shares of capital stock of Merger Sub:
(a)
Common Stock of Merger Sub . Each share of common
stock of Merger Sub issued and outstanding immediately prior to the
Public Company Merger Effective Time shall be converted into one
validly issued, fully paid and non-assessable share of common
stock, par value $.001 per share, of the Surviving Corporation
(such shares, the “ Surviving Corporation Shares
”).
(b)
Cancellation of Certain Common Stock . Each share of
Common Stock that is owned by CenterPoint or any of its
subsidiaries (including Utility Holding, Genco Holdings or Merger
Sub), in each case immediately prior to the Public Company Merger
Effective Time shall automatically be cancelled and retired and
shall cease to exist, and no cash or other consideration shall be
delivered or deliverable in exchange therefor.
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(c)
Conversion of Common Stock . Subject to the provisions
of this Section 1.6, each share of Common Stock, other than
Dissent Shares and shares cancelled pursuant to
Section 1.6(b), issued and outstanding immediately prior to
the Public Company Merger Effective Time shall, by virtue of the
Public Company Merger and without any action on the part of the
holder thereof, be converted into the right to receive $47.00
in cash payable without interest (the “ Public Company Merger Consideration
”)
deliverable, in each case, to the holder of such share, upon
surrender, in the manner provided in Section 1.7, of a
certificate formerly evidencing such share (a “
Certificate ”).
(d)
Dissenters’ Rights . Notwithstanding anything in
this Agreement to the contrary, shares of Common Stock that are
issued and outstanding immediately prior to the Public Company
Merger Effective Time and that are held by any person who is
entitled to dissent from and properly dissents from this Agreement
pursuant to, and who complies in all respects with, Articles 5.11,
5.12 and 5.13 of the TBCA (the “ Dissenters’ Statute ”), in each case to the
extent applicable (“ Dissent Shares ”), shall not be
converted into a right to receive the Public Company Merger
Consideration as provided in Section 1.6(c), but rather the
holders of Dissent Shares shall be entitled to the right to receive
payment of the fair value of such Dissent Shares in accordance with
the Dissenters’ Statute upon surrender of the certificate or
certificates duly endorsed representing such Dissent Shares;
provided, however, that if any such holder shall fail to perfect or
otherwise shall effectively waive, withdraw or lose the right to
receive payment of the fair value under the Dissenters’
Statute, then the right of such holder to be paid the fair value of
such holder’s Dissent Shares shall cease and such Dissent
Shares shall be deemed to have been converted as of the Public
Company Merger Effective Time into the right to receive the Public
Company Merger Consideration as provided in
Section 1.6(c). Genco Holdings shall give prompt notice
to Buyer (and, until the STP Acquisition Closing (as defined in
Section 2.6), CenterPoint) of any objections or demands
received by Genco Holdings for payment of the fair value of Common
Stock pursuant to the Dissenters’ Statute, and Buyer (and,
until the STP Acquisition Closing, CenterPoint) shall have the
right to direct all negotiations and proceedings with respect to
such objections or demands. Genco Holdings shall not, without
the prior written consent of Buyer (and until the STP Acquisition
Closing, CenterPoint), make any payment with respect to, or settle
or offer to settle, any such objections or demands, or agree to do
any of the foregoing.
Section 1.7
Exchange of Certificates.
(a)
Deposit with Payment Agent . Prior to the Public
Company Merger Effective Time, CenterPoint shall appoint a bank or
trust company reasonably acceptable to Buyer and Genco Holdings to
act as agent (the “ Paying Agent ”) for the delivery of
the Public Company Merger Consideration upon surrender of the
Certificates in accordance with this Article I. At or
promptly after the Public Company Merger Effective Time, the
Surviving Corporation shall deposit with the Paying Agent an amount
of cash required for the payment of the Public Company Merger
Consideration upon surrender of Certificates in accordance with
this Article I. Such funds shall be invested by the
Paying Agent as directed by the Surviving Corporation, provided
that such investments shall be in obligations of or guaranteed by
the United States of America or any agency or
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instrumentality thereof, in
commercial paper obligations rated A-1 or P-1 or better by
Moody’s Investors Services, Inc. or Standard &
Poor’s Corporation, respectively, or in certificates of
deposit, bank repurchase agreements or banker’s acceptances
of commercial banks with capital exceeding $500,000,000. Any
net profit resulting from, or interest or income produced by, such
investments will be payable to the Surviving
Corporation.
(b)
Exchange and Payment Procedures . As soon as
reasonably practicable after the Public Company Merger Effective
Time, the Paying Agent shall mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title
to the Certificates held by such person shall pass, only upon
proper delivery of the Certificates to the Paying Agent and shall
be in customary form and have such other provisions as the parties
may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the
Public Company 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 Surviving Corporation,
together with such letter of transmittal, duly completed and
validly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall
be entitled to receive in exchange therefor the Public Company
Merger Consideration in respect of the shares formerly represented
by such Certificate pursuant to Section 1.6(c), and the
Certificate so surrendered shall forthwith be cancelled. In
the event of a transfer of ownership of Common Stock that is not
registered in the share transfer books of Genco Holdings, the
Public Company Merger Consideration may be paid and delivered in
exchange therefor to a person other than the person in whose name
the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such Public Company Merger
Consideration shall pay any transfer or other Taxes required by
reason of the payment to a person other than the registered holder
of such Certificate or establish to the reasonable satisfaction of
the Surviving Corporation that such Tax has been paid or is not
applicable. No interest shall be paid or shall accrue on the
Public Company Merger Consideration payable upon surrender of any
Certificate.
(c)
No Further Ownership Rights in Common Stock . Until
surrendered as contemplated by Section 1.7(b), each
Certificate shall be deemed at any time after the Public Company
Merger Effective Time to represent only the right to receive upon
such surrender the Public Company Merger Consideration as
contemplated by this Article I. The Public Company
Merger Consideration delivered upon the surrender of a Certificate
in accordance with the terms of this Article I shall be deemed
to have been delivered at the Public Company Merger Effective Time
in full satisfaction of all rights pertaining to the shares of
Common Stock formerly represented by such Certificate. At the
close of business on the date on which the Public Company Merger
Effective Time occurs, the share transfer books of Genco Holdings
shall be closed, and there shall be no further registration of
transfers on the share transfer books of the Surviving Corporation
of the shares of Common Stock that were outstanding immediately
prior to the Public Company Merger Effective Time. If, after
the close of business on the date on which the Public Company
Merger Effective Time occurs,
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Certificates are presented
to the Surviving Corporation or the Paying Agent for transfer or
any other reason, they shall be cancelled and exchanged as provided
in this Article I.
(d)
No Liability . None of the parties to this Agreement,
the Surviving Corporation and the Paying Agent shall be liable to
any person in respect of any cash or property delivered to a public
official pursuant to any applicable abandoned property, escheat or
similar Law. Any portion of the Public Company Merger
Consideration deposited with the Paying Agent pursuant to this
Article I which remains undistributed to the holders of the
Certificates for twelve months after the Public Company Merger
Effective Time (or immediately prior to such earlier date on which
any cash or property in respect of such Certificate would otherwise
escheat to or become the property of any Governmental Authority)
shall be delivered to the Surviving Corporation, upon demand.
Any holders of Certificates who have not theretofore complied with
this Article I shall thereafter look only to the Surviving
Corporation and only as general creditors thereof for payment of
their claim, if any, to which such holders may be
entitled.
(e)
Lost Certificates . If any Certificate shall have been
lost, stolen, defaced or destroyed, upon the making of an affidavit
of that fact by the person claiming such Certificate to be lost,
stolen, defaced or destroyed and, if required by the Surviving
Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with
respect to such Certificate, the Paying Agent shall pay in respect
of such lost, stolen, defaced or destroyed Certificate the Public
Company Merger Consideration.
(f)
Withholding Rights . The Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold any
applicable Taxes from the consideration otherwise payable pursuant
to this Agreement to any holder of shares of Common
Stock.
Section 2.1
Genco LP Division .
Prior to the Public Company Merger Closing Date, CenterPoint and
Genco Holdings shall cause the Genco LP Division to be consummated,
as follows: Genco LP and Genco II LP shall execute and
deliver a merger agreement substantially in the form attached
hereto as Exhibit B and consummate the Genco LP
Division on the terms and conditions set forth therein pursuant to
a multiple survivor merger of Genco LP and Genco II LP pursuant to
which (i) except for the STP Assets and Liabilities (as
defined below), all of Genco LP’s right, title and interest
in and to any and all properties, assets, rights, claims, Contracts
and Permits and all debts, liabilities and obligations shall be
allocated to Genco II LP (the “ Genco LP Non-STP Assets
and Liabilities ”), (ii) all of the properties,
assets, rights, claims, Contracts and Permits set forth in
Section 2.1(a) of the Companies Disclosure Letter (as
defined herein) shall be allocated to Genco LP (the “ STP
Assets ”) and (iii) all of the debts, liabilities
and obligations set forth in Section 2.1(b) of the
Companies Disclosure Letter shall be allocated to Genco LP (the
“STP Liabilities ” and collectively with the STP
Assets, the
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“ STP Assets and Liabilities
”). CenterPoint and Genco Holdings agree that after the
date of this Agreement Buyer shall have the right to review the
items set forth on Sections 2.1(a) and 2.1(b) of the
Companies Disclosure Letter and the parties agree that to the
extent the parties in good faith determine that any such items are
more properly characterized as Non-STP Assets and Liabilities, as
applicable, such items shall be removed from such Sections.
The Genco LP Non-STP Assets and Liabilities together with the
assets, rights, claims, Contracts, Permits, debts, liabilities and
obligations of Genco Services immediately prior to the effective
time of the Genco Services Acquisition are referred to collectively
as the “ Non-STP Assets and Liabilities
”.
Section 2.2
Merger Agreements .
(a)
On or prior to the Public Company Merger Date, Genco II LP and
Newco shall execute and deliver a merger agreement substantially in
the form of Exhibit C (the “ Genco II Merger Agreement ”).
(b)
On or prior to the Public Company Merger Date, Genco Services and
Newco2 shall execute and deliver a merger agreement substantially
in the form of Exhibit D (the “
Genco Services Merger
Agreement ”).
Section 2.3
Non-STP Acquisition . On the first business day after the
Public Company Merger Closing Date or as soon as possible
thereafter (the “ Non-STP Acquisition Closing Date
”), on the terms and subject to the conditions set forth in
Article VIII, at the Non-STP Acquisition Closing (as defined
below), Buyer shall cause Newco and Newco2, and CenterPoint and
Genco Holdings shall cause Genco II LP and Genco Services, as
applicable, to consummate the Non-STP Acquisition, as
follows:
(a)
Genco II LP and Newco shall consummate the Genco II LP Acquisition
on the terms and conditions set forth in the Genco II Merger
Agreement, with Genco II LP being the surviving entity in the Genco
II LP Acquisition as an indirectly wholly owned subsidiary of
Buyer.
(b)
Genco Services and Newco2 shall consummate the Genco Services
Acquisition on the terms and conditions set forth in the Genco
Services Merger Agreement, with Genco Services being the surviving
entity in the Genco Services Acquisition as an indirectly wholly
owned subsidiary of Buyer.
(c)
In the Non-STP Acquisition, (i) Buyer shall cause to be paid
in the Genco II LP Acquisition to the partners of Genco II LP total
consideration of $2,789 million in cash without interest (the
“ Genco II LP
Consideration ”) by wire transfer of
immediately available funds and (ii) Buyer shall cause to be
paid in the Genco Services Acquisition to the partners of Genco
Services total consideration of $24 million in cash without
interest (together with the Genco II LP Consideration, the
“ Non-STP
Consideration ”), in each case to
the accounts specified by Genco Holdings to Buyer in writing at
least two business days prior to the Non-STP Acquisition Closing
Date. To the extent Genco Holdings has received proceeds
under the Overnight Bridge Loan prior to the Non-STP Acquisition
Closing, a portion of the Non-STP Consideration shall be
paid
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directly by Buyer to the
lenders thereof to repay such borrowings and interest thereon in
full.
(d)
The parties have agreed in Schedule 2.3 hereto to the
proposed allocation of the Non-STP Consideration among the Non-STP
Assets and Liabilities as of the date hereof in accordance with
section 1060 of the Code and the regulations promulgated
thereunder (the “ 1060
Allocation ”). Such 1060
Allocation shall be amended by agreement of the parties on the
Non-STP Acquisition Closing Date to reflect any changes required by
Section 1060 of the Code and the regulations promulgated
thereunder (such 1060 Allocation as amended, the “
Final 1060 Allocation
”).
The Final 1060 Allocation shall be used by CenterPoint and Buyer in
preparing Internal Revenue Service Form 8594, Asset
Acquisition Statement (which Form 8594 shall be completed,
executed and delivered by such parties as soon as practicable after
the Non-STP Acquisition Closing Date but in no event later than 15
days prior to the date such form is required to be filed).
CenterPoint and Buyer each shall file, or cause to be filed,
Form 8594 prepared in accordance with this
Section 2.3(d) with the U.S. federal income Tax Returns
for the taxable period which includes the Non-STP Acquisition
Closing Date. The Final 1060 Allocation shall be binding upon
the parties hereto and upon each of their successors and assigns,
and the parties hereto shall report for tax purposes the
transactions contemplated by this Agreement in accordance with such
allocations.
Section 2.4
Time and Place of Non-STP Acquisition Closing
. Unless this Agreement shall
have been terminated and the transactions herein contemplated shall
have been abandoned pursuant to Section 10.1 and subject to
the satisfaction or waiver of the conditions set forth in
Article VIII, the closing of the Non-STP Acquisition (the
“ Non-STP Acquisition Closing ”) will take place
at the offices of Baker Botts L.L.P., One Shell Plaza, 910
Louisiana Street, Houston, Texas 77002-4995 at 9:00 a.m.
(local time) on the Non-STP Acquisition Closing Date, or at such
other date, place or time as CenterPoint and the Buyer may
agree.
Section 2.5
STP Acquisition .
On the terms and subject to the conditions set forth in
Article IX, and in accordance with the TBCA, at the STP
Acquisition Closing (as defined below), the parties hereto shall
cause the STP Acquisition to be consummated as follows:
(a)
STP Merger Sub shall be merged with and into Genco Holdings.
As a result of the STP Acquisition, the separate corporate
existence of STP Merger Sub shall cease and Genco Holdings shall
survive the merger (sometimes hereinafter referred to as the
“ STP Survivor
”).
From and after the STP Acquisition Effective Time (as defined
below), the STP Acquisition shall have the effects provided in
Article 5.06A of the TBCA. All rights, titles and
interests to all properties owned by Genco Holdings and STP Merger
Sub shall be allocated to and vested in STP Survivor without
reversion or impairment, without further act or deed, and without
any transfer or assignment having occurred, but subject to any
existing Liens thereon. All liabilities and obligations of
Genco Holdings and STP Merger Sub shall become liabilities and
obligations of STP Survivor.
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(b)
As soon as practicable after the STP Acquisition Closing, the
parties shall cause the STP Acquisition to be consummated by filing
articles of merger (the “ STP Articles of Merger ”) with the Texas
Secretary of State in such form as is required by, and executed in
accordance with, the relevant provisions of the TBCA and shall make
all other filings or recordings required under the TBCA (the date
and time of the issuance of a certificate of merger by the Texas
Secretary of State pursuant to Article 5.05 of the TBCA (or
such later time as is specified in the STP Articles of Merger) on
the STP Acquisition Closing Date, being the “
STP Acquisition Effective
Time ”).
(c)
Following the STP Acquisition Effective Time, the articles of
incorporation of Genco Holdings shall be the articles of
incorporation of the STP Survivor until thereafter changed or
amended in accordance with the provisions thereof and applicable
Law. Following the STP Acquisition Effective Time, the bylaws
of Genco Holdings shall be the bylaws of the STP Survivor until
thereafter changed or amended in accordance with the provisions
thereof and applicable Law.
(d)
As of the STP Acquisition Effective Time, by virtue of the STP
Acquisition and without any action on the part of Genco Holdings,
STP Merger Sub or any holder of any shares of capital stock of
Genco Holdings or any shares of capital stock of STP Merger
Sub:
(i)
Each share of common stock of STP Merger Sub issued and outstanding
immediately prior to the STP Acquisition Effective Time shall be
converted into one validly issued, fully paid and non-assessable
share of common stock, par value $.001 per share, of the STP
Survivor.
(ii)
The shares of capital stock in Genco Holdings issued and
outstanding immediately prior to the STP Acquisition Effective Time
shall, by virtue of the STP Acquisition and without any action on
the part of the holder thereof, be converted into the right to
receive total aggregate merger consideration of $700 million in
cash without interest (the “ STP Consideration
”) by wire transfer of
immediately available funds to an account specified by Utility
Holding to Buyer in writing at least two business days prior to the
STP Acquisition Closing Date.
Section 2.6
Time and Place of STP Acquisition Closing . Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been
abandoned pursuant to Section 10.1 and subject to the
satisfaction or waiver of the conditions set forth in
Article IX, the closing of the STP Acquisition (the “
STP Acquisition Closing ”) will take place at
the offices of Baker Botts L.L.P., One Shell Plaza, 910 Louisiana
Street, Houston, Texas 77002-4995 at 9:00 a.m. (local time) on
the fifth business day following the date on which all of the
conditions to each party’s obligations set forth in
Article IX (other than those that by their nature are intended
to be satisfied at the STP Acquisition Closing) have been satisfied
or waived, or at such other date, place or time as CenterPoint and
Buyer may agree. The date on which the STP Acquisition
Closing occurs, which shall be the date of the STP Acquisition
Effective Time, is referred to as the “ STP
Acquisition Closing Date. ”
10
Section 2.7
FIRPTA Certificate . At each of the STP Acquisition Closing
and the Non-STP Acquisition Closing, Parents shall deliver (or in
the case of the Non-STP Acquisition, shall cause Genco Holdings to
deliver) a duly executed and acknowledged certificate, in form and
substance reasonably acceptable to Buyer and in accordance with the
Code and Treasury Regulations, certifying Parents’
non-foreign status as provided under Treasury regulation
Section 1.1445-2(b)(2).
Section 2.8
Director and Officer Resignations . At or prior to the STP Acquisition
Closing, all the directors of Genco Holdings and its subsidiaries
shall deliver to Genco Holdings written resignations and all of the
officers of Genco Holdings and its subsidiaries shall deliver to
Genco Holdings written resignation, or CenterPoint shall cause such
officers to be removed, in each case, from their positions as
directors or officers of Genco Holdings and its subsidiaries,
effective as of the STP Acquisition Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CENTERPOINT
CenterPoint represents and warrants
to Buyer as follows:
Section 3.1
Organization; Etc.
Each of the Parents and Merger Sub (a) is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization, (b) has all requisite corporate
or limited liability company power and authority, as applicable, to
execute and deliver this Agreement and all other agreements and
instruments executed in connection herewith or delivered pursuant
hereto (including the Parent Written Consent), to perform its
obligations hereunder and to consummate the transactions
contemplated by this Agreement and (c) is duly qualified or
licensed to do business, and is in good standing in each
jurisdiction in which the nature of its business or the ownership,
operation or leasing of its properties makes such qualification or
licensing necessary, except where the failure to be so qualified or
licensed would not reasonably be expected to, individually or in
the aggregate, have a Companies Material Adverse Effect.
Section 3.2
Authority Relative to this Agreement . The execution, delivery and performance
of this Agreement and all other agreements and instruments executed
in connection herewith or delivered pursuant hereto (including the
Parent Written Consent) by the Parents and Merger Sub and the
consummation of the transactions contemplated by this Agreement and
all other agreements and instruments executed in connection
herewith or delivered pursuant hereto have been duly and validly
authorized by all requisite corporate or limited liability company
action, as applicable, on the part of each of the Parents and
Merger Sub and no other corporate or similar actions or proceedings
on the part of either Parent is necessary to authorize the
execution, delivery and performance of this Agreement and all other
agreements and instruments executed in connection herewith or
delivered pursuant hereto by each of the Parents and Merger Sub or
for the Parents or Merger Sub to consummate the transactions so
contemplated. This Agreement and all other agreements and
instruments executed in
11
connection herewith or delivered pursuant hereto
(including the Parent Written Consent) have been, or will be, duly
and validly executed and delivered by each of the Parents and
Merger Sub and, with respect to this Agreement and any other such
agreement, assuming it has been duly authorized, executed and
delivered by any other party (other than Parents, Merger Sub and
any of their affiliates other than Genco Holdings and its
controlled affiliates), constitutes, or will constitute when
executed, a valid and binding agreement of such Parent and Merger
Sub, enforceable against such Parent and Merger Sub in accordance
with its terms, except that (a) enforcement may be subject to
any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws, now or hereafter in effect, relating to or
limiting creditors’ rights generally, and
(b) enforcement of this Agreement, including, among other
things, the remedy of specific performance and injunctive and other
forms of equitable relief, may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor
may be brought. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has not
engaged in any business or conducted any operations other than in
connection with the transaction contemplated hereby.
Section 3.3
Ownership of Shares
(a)
Except as set forth in Section 3.3(a) of the disclosure
letter delivered by Parents to Buyer concurrently with the
execution hereof (the “ Parents Disclosure Letter ”), (i) all the
Shares are owned beneficially and of record by Utility Holding free
and clear of all Liens and (ii) all of the membership
interests of Utility Holding are owned beneficially and of record
by CenterPoint free and clear of all Liens. The Shares
represent approximately 80.96% of the issued and outstanding Common
Stock on a primary and fully diluted basis.
(b)
Except as set forth in Section 3.3(b) of the Parents
Disclosure Letter, after giving effect to the Public Company
Merger, Utility Holding will own 100% of the outstanding capital
stock of the Surviving Corporation, free and clear of all
Liens. After giving effect to the merger contemplated by the
STP Acquisition in Section 2.5(a), Buyer will own 100%
of the outstanding capital stock of the STP Survivor, free and
clear of all Liens, other than Liens granted by Buyer. After
giving effect to the merger contemplated by the Non-STP Acquisition
in Section 2.3, Buyer will own 100% of the interests in Genco
II LP and 100% of the interests in Genco Services, in each case,
free and clear of all Liens, other than Liens granted by
Buyer.
Section 3.4
Consents and Approvals; No Violations . Except for the Required Approvals (as
defined in Section 4.5) or as set forth in Section 3.4 of
the Parents Disclosure Letter, none of the execution, delivery and
performance of this Agreement and any other agreements and
instruments executed in connection herewith or delivered pursuant
hereto (including the Parent Written Consent) by Parents, nor the
consummation by Parents of the transactions contemplated by this
Agreement, will (a) conflict with, violate or result in any
breach of any provision of the certificate of formation, articles
of incorporation, regulations, bylaws or similar documents, as
applicable, of Parents, (b) 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,
12
amendment, cancellation or acceleration or any
right or obligation to purchase or sell securities or assets)
under, or require any consent or result in a material loss of a
material benefit to Parents under, any contract (written or oral),
obligation, plan, undertaking, arrangement, commitment, note, bond,
mortgage, indenture, agreement, lease, other instrument or Approval
(as defined below) (collectively, “ Contracts ”
and individually, a “ Contract ”) to which
either Parent is a party or by which any of them or any of their
respective businesses, properties or assets are bound,
(c) violate any Permit that is currently in effect applicable
to either Parent or its business, properties or assets, or
(d) require any permit, license, authorization, certification,
tariff, consent, approval, concession or franchise from, action by,
filing with or notification to (collectively, “
Approvals ” and, individually, an “
Approval ”), any foreign, Federal, state, or local
government or regulator or any court, arbitrator, administrative
agency, regional transmission organization, the ERCOT Market
independent system operator, or commission or other governmental,
quasi-governmental, taxing or regulatory (including a stock
exchange or other self-regulatory body) authority, official or
agency (including a public utility commission, public services
commission or similar regulatory body), domestic, foreign or
supranational (a “ Governmental Authority ”),
except in the case of clauses (b), (c) and (d) of this
Section 3.4, those which would not reasonably be expected to,
individually or in the aggregate, have a Companies Material Adverse
Effect, or which become applicable solely as a result of the
business or activities in which Buyer is engaged.
Section 3.5
Affiliate Transactions . Except as set forth in Section 3.5
of the Parents Disclosure Letter or as disclosed in Genco
Holding’s proxy statement relating to the election of
directors dated April 23, 2004, there are no Contracts or
transactions between any Company, on the one hand, and any
(A) Parent or its controlled affiliates (other than the
Companies), on the other hand, other than any Contract or
transaction entered into in the ordinary course of business and on
terms no less favorable than would have been reached on an
arm’s-length basis that is not material to the Company, or
(B) (i) officer or director of any Parent or its
affiliates or (ii) affiliate of any such officer or director,
on the other hand, in each case in this clause (B) other
than any Contract or transaction entered into in the ordinary
course of business and on terms no less favorable than would have
been reached on an arm’s-length basis or that is not material
to the Company (all Contracts and transactions, whether entered
into before or after the date hereof, referred to in clauses
(A) or (B), “ Parent Affiliate Contracts
”). True and complete copies of the Parent Affiliate
Contracts have been made available to Buyer.
Section 3.6
Separation Transactions
(a)
The transactions contemplated by the Separation Agreement (the
“ Spin-off Separation
Agreement ”) between CenterPoint
and Genco Holdings dated August 31, 2002, including the
contribution and transfer by Parents and their respective
affiliates to the Companies of substantially all of the assets and
related liabilities associated with the Genco Business on such date
(the “ Separation
Transactions ”) have been
consummated in all material respects as described in the Spin-off
Separation Agreement. Parents have made available to Buyer a
true and complete copy of the Spin-off Separation Agreement and all
other Contracts among Parents or their affiliates or
any
13
of their respective
predecessors (other than any Company) and any Company in connection
with the transactions contemplated by the Spin-off Separation
Agreement (collectively, the “ Separation Documents ”). Parents have
made available to Buyer a true and complete copy of the Master
Separation Agreement (the “ Master Separation Agreement ”) between Reliant
Energy, Incorporated and Reliant Resources, Inc.
(“ RRI
”) dated
December 31, 2000.
(b)
The execution, delivery and performance of the Separation Documents
by any of Parents and their respective affiliates (including the
Companies) party thereto, and the consummation of the transactions
contemplated thereby, were duly and validly authorized by all
requisite action. Each of the Separation Documents was duly
and validly executed and delivered by Parents and their respective
affiliates (including the Companies) party thereto and constitutes
a valid and binding agreement of such parties, enforceable against
such persons in accordance with its terms, except that
(a) enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors’
rights generally, and (b) enforcement, including, among other
things, the remedy of specific performance and injunctive and other
forms of equitable relief, may be subject to equitable defenses and
to the discretion of the court before which any proceeding therefor
may be brought.
Section 3.7
Brokers; Finders and Fees . Except for Citigroup Global Markets
Inc., whose fees will be paid by CenterPoint, neither of the
Parents or their respective affiliates (other than the Companies)
has employed, engaged or entered into a Contract with any
investment banker, broker, finder, other intermediary or any other
person or incurred any liability for any investment banking,
financial advisory or brokerage fees, commissions, finders’
fees or any other fee in connection with this Agreement or the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GENCO HOLDINGS
Genco Holdings represents and
warrants to Buyer as follows.
Section 4.1
Organization; Etc .
Each Company (a) is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization,
(b) has all requisite corporate, partnership or limited
liability company power and authority, as applicable, to own, lease
and operate all of its properties and assets and to carry on its
business substantially as it is now being conducted, and
(c) is duly qualified or licensed to do business, and is in
good standing in each jurisdiction in which the nature of its
business or the ownership, operation or leasing of its properties
makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not reasonably be
expected to, individually or in the aggregate, have a Companies
Material Adverse Effect. As used in this Agreement, the term
“ Companies Material Adverse Effect ” means any
state of facts, change, development, event, effect, condition or
occurrence materially adverse to the business, assets, properties,
liabilities,
14
condition (financial or otherwise) or results of
operations of the Companies taken as a whole or that, directly or
indirectly, prevents or materially impairs or delays the ability of
any of the Parents or Genco Holdings to perform its obligations
hereunder; provided, however, that (a) any adoption,
implementation, promulgation, repeal, modification,
reinterpretation or proposal of any rule, regulation, ordinance,
order, protocol or any other Law of or by any national, state or
regional Governmental Authority (including, for the avoidance of
doubt, the ERCOT Market), (b) changes or developments in
national, regional or state wholesale or retail markets for fuel,
including, without limitation, changes in commodity prices, or
related products, (c) changes or developments in national,
regional or state wholesale or retail electric power prices,
(d) system-wide changes or developments in national, regional
or state electric transmission or distribution systems, other than
changes or developments involving physical damage or destruction
thereto, and (e) changes or developments in financial or
securities markets or the economy in general shall, in each case,
be excluded from such determination to the extent any such Laws,
changes and developments do not have a disproportionate effect on
the Companies as compared to other entities engaged in the power
generation business in any of the relevant geographic areas with
respect to such Laws, changes or developments, as applicable.
In interpreting the definition of “Companies Material Adverse
Effect” with respect to plant outages, the parties agree that
the effect of the unplanned plant outages at the Companies from
August 31, 2002 to March 31, 2004 did not in and of
themselves have a Companies Material Adverse Effect after taking
into account all relevant facts and circumstances. Genco
Holdings has made available to Buyer a true and complete copy of
the certificates of incorporation and the bylaws (or similar
organizational documents) of each of the Companies, in each case as
currently in effect. Genco Holdings has made available to
Buyer true and complete copies of the minutes of all meetings or
written consents of the shareholders (or other equityholders) and
the boards of directors (or similar body) and any committee thereof
of each of the Companies (and, to the extent applicable to the
Genco Business, any affiliate of Parent engaged in the Genco
Business that transferred, directly or indirectly, assets or
liabilities to any Company in the Separation Transactions), in each
case, since January 1, 2001.
Section 4.2
Authority Relative to this Agreement . The execution, delivery and performance
of this Agreement and all other agreements and instruments executed
in connection herewith or delivered pursuant hereto, by the
Companies and the consummation of the transactions contemplated by
this Agreement and all other agreements and instruments executed in
connection herewith or delivered pursuant hereto have been duly and
validly authorized by all requisite corporate, partnership or
limited liability company action, as applicable, on the part of the
applicable Company and no other actions or proceedings on the part
of any Company is necessary to authorize the execution, delivery
and performance of this Agreement and all other agreements and
instruments executed in connection herewith or delivered pursuant
hereto by any Company or, upon delivery of the Parent Written
Consent, to consummate the transactions so
contemplated. With the receipt of the Parent Written
Consent, no vote of the holders of any class or series of the
capital stock of Genco Holdings is necessary to approve this
Agreement or to consummate the transactions contemplated hereby
(including the Public Company Merger). This Agreement and all
other agreements and instruments executed in connection herewith or
delivered pursuant hereto have been, or
15
will be, duly and validly executed and delivered
by the applicable Company and, with respect to this Agreement and
any other such agreement, assuming it has been duly authorized,
executed and delivered by any other party (other than an affiliate
of Genco Holdings other than Parents), constitutes, or will
constitute when executed, a valid and binding agreement of such
Company, enforceable against such Company in accordance with its
terms, except that a enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting
creditors’ rights generally, and (b) enforcement of this
Agreement, including, among other things, the remedy of specific
performance and injunctive and other forms of equitable relief, may
be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 4.3
Capitalization.
(a)
The authorized capital stock of Genco Holdings consists of
160,000,000 shares of Common Stock and no preferred stock.
Section 4.3(a) of the disclosure letter delivered by
Genco Holdings to Buyer concurrently with the execution hereof
( the “Companies
Disclosure Letter ”) sets forth the name,
jurisdiction of incorporation or organization and capitalization of
each Company. As of the date hereof, Genco Holdings has
(i) 80,000,000 shares of Common Stock issued and outstanding
and no other issued or outstanding shares of capital stock and
(ii) no shares of Common Stock are held in the treasury of
Genco Holdings. All outstanding shares of capital stock of or
interests in each Company are validly issued, fully paid and
nonassessable, and owned by a Company (except in the case of shares
of Genco Holdings) free of preemptive (or similar) rights and free
and clear of any security interests, liens, claims, pledges,
Contracts, limitations in voting, dividend or transfer rights,
charges or other encumbrances of any nature whatsoever
(“ Liens
”), except
as set forth in Section 4.3(a) of the Companies
Disclosure Letter. As of the date hereof, except as set forth
in Section 4.3(a) of the Companies Disclosure Letter,
there are not (A) any capital stock or other equity interests
or voting securities, in any Company issued or outstanding,
(B) any securities convertible into or exchangeable or
exercisable for shares of any capital stock or equity interests or
voting securities in any Company, (C) any subscriptions,
options, warrants, calls, rights, convertible securities or other
Contracts or commitments of any character obligating any Company to
issue, transfer or sell any of its capital stock or other equity
interests or voting securities, or (D) equity equivalents,
interests in the ownership or earnings or similar rights, or any
agreements, arrangements or understandings granting any person any
rights in any Company similar to capital stock or other equity
interests or voting securities (the items in clauses (A), (B),
(C) or (D), collectively, “ Company Securities ”). Except as
set forth in Section 4.3(a) of the Companies Disclosure
Letter, none of the Parents and their respective affiliates (other
than the Companies) owns any Company Securities. There are no
(1) outstanding obligations of any Company to repurchase,
redeem or otherwise acquire any Company Securities, (2) voting
trusts, proxies, registration rights agreements or other agreements
or understandings with respect to the voting, disposition,
dividends or otherwise or concerning any Company Securities to
which the Companies or Parents are a party or (3) outstanding
obligations of any Company to provide funds to or make any
investment (in the form of a loan, capital contribution or
otherwise) in any other Company or any other person, including as
a
16
result of the transactions
contemplated by this Agreement. All dividends on the Common
Stock that have been declared or have accrued prior to the date of
this Agreement have been paid in full, and, as of the date of this
Agreement, no dividends have been declared since May 13,
2004.
(b)
No Company has any direct or indirect equity interest in any
person, other than another Company. None of the Companies own
any capital stock of Genco Holdings.
(c)
Section 4.3(c) of the Companies Disclosure Letter sets
forth a true and complete list of each Contract in effect on the
date of this Agreement pursuant to which any Indebtedness (as
defined below) of any Company in excess of $1,000,000 is
outstanding or may be incurred, together with the amount
outstanding thereunder as of the date of this Agreement. No
Contract pursuant to which any Indebtedness of any Company is
outstanding or may be incurred provides for the right to vote (or
is convertible into, or exchangeable for, securities having the
right to vote) on any matters on which the shareholders of any
Company may vote. “ Indebtedness ” means
(A) indebtedness for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable
in accordance with customary practices), including indebtedness
evidenced by a note, bond, debenture or similar instrument,
(B) obligations required to be classified and accounted for as
capital leases on a balance sheet under GAAP, (C) obligations
in respect of outstanding letters of credit, acceptances and
similar obligations created for the account of such person,
(D) obligations under interest rate cap agreements, interest
rate swap agreements, foreign currency exchange agreements and
other hedging or similar agreements, (E) to the extent not
otherwise included in the foregoing, any financing of accounts
receivable or inventory and (F) guarantees of any of the
foregoing of another person. No event has occurred which
either entitles, or could entitle (with or without notice or lapse
of time or both) the holder of any Indebtedness described in
Section 4.3(c) of the Companies Disclosure Letter to
accelerate, or which does accelerate, the maturity of any such
Indebtedness.
(d)
No Company has in effect any stockholder rights plan or similar
device or arrangement, commonly or colloquially known as a
“poison pill” or “anti-takeover” plan, or
any similar plan, device or arrangement (a “
Rights Plan ”), and the board of
directors of Genco Holdings has not adopted or authorized the
adoption of such a plan, device or arrangement.
Section 4.4
Ownership of Shares, Company Securities.
Except as set forth in
Section 4.4 of the Companies Disclosure Letter, all the Shares
are owned beneficially and of record by Utility Holding and
beneficially by CenterPoint free and clear of all Liens. The
Shares represent approximately 80.96% of the issued and outstanding
Common Stock on a primary and fully diluted basis.
Section 4.5
Consents and Approvals; No Violations . Except for applicable requirements of
the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended
(the “ HSR Act ”), the filing with the SEC of
the Information Statement and a
17
Rule 13e-3 Transaction Statement pursuant
to the applicable requirements of the Exchange Act and the filing
of applications for de-listing of the Common Stock with the New
York Stock Exchange (the “ NYSE ”), approval
from the Nuclear Regulatory Commission (the “ NRC
”) of any indirect license transfer deemed to be created by
the STP Acquisition (the “ NRC Approval ”),
certification that Genco II LP is an “exempt wholesale
generator” (“ EWG ”) as defined in
Section 32 of the Public Utility Holding Company Act of 1935
(“ PUHCA ”) by the Federal Energy Regulatory
Commission (“ FERC ”), the filing of articles or
certificates of merger, as applicable, with the Secretary of State
of the State of Texas with respect to the Genco LP Division, the
Genco II LP Acquisition, the Genco Services Acquisition and the STP
Acquisition or as set forth in Section 4.5 of the Companies
Disclosure Letter (collectively, the “ Required
Approvals ”), none of the execution, delivery and
performance of this Agreement by Genco Holdings, nor the
consummation by Genco Holdings of the transactions contemplated by
this Agreement, will (a) conflict with, violate or result in
any breach of any provision of the certificate of formation,
articles of incorporation, regulations, bylaws or similar
documents, as applicable, of any Company, (b) 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 or any right
or obligation to purchase or sell securities or assets) under, or
require any consent or result in a material loss of a material
benefit to the Companies under, any Contract to which any Company
is a party or by which any Company or its businesses, properties or
assets are bound, (c) violate any Order, writ, injunction,
decree, statute, rule or regulation (collectively, “
Laws ,” and individually, a “ Law
”) or Permit applicable to any Company or any of its
businesses properties or assets, or (d) require any Approval
from, by or to any Governmental Authority, except in the case of
clauses (b), (c) and (d) of this Section 4.5 for
those which would not reasonably be expected to, individually or in
the aggregate, have a Companies Material Adverse Effect, or which
become applicable solely as a result of the business or activities
in which Buyer is engaged.
Section 4.6
Reports and Financial Statements.
(a)
Since the date Genco Holdings’ registration statement on
Form 10 was declared effective by the Securities and Exchange
Commission (the “ SEC ”) (December 11,
2002), Genco Holdings and, to the extent applicable, each of the
other Companies, has timely filed (i) with the SEC all forms,
reports, schedules, statements, registration statements and
definitive proxy statements (all such filings, including such
registration statement on Form 10, the “
Genco SEC Reports
”)
required to be filed by the Companies under each of the Securities
Act of 1933, as amended, and the respective rules and
regulations thereunder (the “ Securities Act ”) and the Securities
Exchange Act of 1934, as amended, and the respective rules and
regulations thereunder (the “ Exchange Act ”), and (ii) with
the SEC, the NRC, the Public Utility Commission of Texas (the
“ PUC
”) and any
other Governmental Authority with jurisdiction all material forms,
reports, schedules, registrations, declarations and other filings
required to be filed by it under all applicable Laws, including
PUHCA, the Atomic Energy Act of 1954 (“ AEA ”) and the Texas
Public Utility Regulatory Act, and the respective rules and
regulations thereunder (“ PURA ”), all of which, as
amended if applicable, complied in all material respects with all
applicable requirements of the appropriate act and the
rules and
18
regulations promulgated
thereunder. As of their respective dates the Genco SEC
Reports (including exhibits and all other information incorporated
by reference thereto) did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated or incorporated by reference therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading. Each of the audited and
unaudited consolidated financial statements (including any related
notes) of Genco Holdings included in the Genco SEC Reports
(including exhibits and all other information incorporated by
reference thereto), including its Annual Report on Form 10-K
for the year ended December 31, 2003 (the “
Genco Holdings 10-K
”) when
filed, complied in all material respects with all applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto, was prepared from, and
is in accordance with, the books and records of the Companies,
which books and records have been maintained, and which financial
statements were prepared, in accordance with United States
generally accepted accounting principles (“
GAAP ”) (except, in the case
of unaudited quarterly statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis throughout the periods
involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the
financial position of Genco Holdings and its subsidiaries as of the
dates thereof and the results of their operations, cash flows and
changes in financial position for the periods reported (subject, in
the case of unaudited quarterly statements, to normal year-end
audit adjustments that are immaterial to the Companies as a
whole). All of the Companies are consolidated for accounting
purposes.
(b)
Section 4.6(b) of the Companies Disclosure Letter
contains true and complete copies of the audited balance sheet for
South Texas Project, as of December 31, 2003,
December 31, 2002 and December 31, 2001, and the audited
statement of income of South Texas Project for the fiscal years
ended December 31, 2003, December 31, 2002 and
December 31, 2001 (collectively, the “
STP Financial Statements
”).
Each of the STP Financial Statements was prepared from, and is in
accordance with, the books and records of South Texas Project,
which books and records have been maintained, and which financial
statements were prepared, in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be
indicated therein or in the notes thereto) and, as of their
respective dates, fairly presented in all material respects the
financial position of South Texas Project as of the dates thereof
and the results of their operations, cash flows and changes in
financial position for the periods reported.
(c)
The management of Genco Holdings has (i) implemented
disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act) intended to ensure
that material information relating to the Companies is timely made
known to the management of Genco Holdings by others within those
entities, and (ii) has disclosed, based on its most recent
evaluation, to Genco Holdings’ outside auditors and the audit
committee of board of directors of Genco Holdings (A) all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting (as defined
in Rule 13a-15(f) of the Exchange Act) which could
adversely affect Genco Holdings’ ability to record, process,
summarize and report financial information on a timely basis and
(B) any fraud, whether or not material, that
19
involves management or other
employees who have a significant role in Genco Holdings’
internal control over financial reporting. A summary of any
such disclosure made by management to Genco Holdings’
auditors and audit committee has been made available to
Buyer.
Section 4.7
Absence of Undisclosed Liabilities . Except (a) for liabilities and
obligations incurred in the ordinary course of business and
consistent with past practice since March 31, 2004, or
(b) as otherwise disclosed in the audited financial statements
included in the Genco Holdings 10-K or reflected in the notes
thereto, in the unaudited interim financial statements included in
Genco Holding’s Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2004 or reflected in the
notes thereto, or in Section 4.7 of the Companies Disclosure
Letter, no Company has incurred any liabilities, debts or
obligations of any nature (whether direct, indirect, accrued,
asserted, unasserted, contingent, known or unknown, determined or
determinable, matured or unmatured or otherwise) in excess of
$10,000,000, individually or in the aggregate, that would be
required to be reflected or reserved against in the consolidated
balance sheet of Genco Holdings, or in the notes thereto, prepared
in accordance with GAAP as used in preparing the December 31,
2003 balance sheet included in the audited financial statements in
the Genco Holdings 10-K.
Section 4.8
Absence of Certain Changes . Except as set forth in Section 4.8
of the Companies Disclosure Letter or disclosed in the Genco SEC
Reports filed and publicly available prior to the date of this
Agreement, since December 31, 2003 and until the date of this
Agreement, the Companies have conducted their businesses only in
the ordinary course and in a manner consistent with past practice,
and since such date there has not been any state of facts, change,
development, event, effect, condition or occurrence that has or
would reasonably be expected to, individually or in the aggregate,
have a Companies Material Adverse Effect. Since
December 31, 2003, except as (i) specifically
contemplated by this Agreement, (ii) disclosed in the Genco
SEC Reports filed and publicly available prior to the date of this
Agreement or (iii) set forth in Section 4.8 of the
Companies Disclosure Letter, there has not occurred any action,
development, event or occurrence or failure to act that, if it had
occurred after the date of this Agreement, would have required the
consent of Buyer under Section 6.1.
Section 4.9
Litigation . Except as set forth in Section 4.9
of the Companies Disclosure Letter, there is no litigation, suit,
claim, action, administrative, arbitral or other proceeding,
inquiry, audit, hearing petition, grievance, complaint or
governmental or regulatory investigation (each an “
Action ”) pending or, to the knowledge of the
Companies, threatened against any Company, nor are there any
outstanding Orders that affect or bind any Company or its
businesses, properties or assets that would reasonably be expected
to, individually or in the aggregate, have a Companies Material
Adverse Effect.
Section 4.10
Compliance with Law.
(a)
Each Company is, and since December 31, 2001, each Company
(and to the extent related to the Genco Business, any affiliate of
a Parent previously
20
engaged in the Genco
Business that transferred directly or indirectly, assets or
liabilities to any Company in the Separation Transaction) has been
in compliance with all applicable Law and none of the Companies has
received any notice (including through any Action), and there has
been no Action filed, commenced or, to the knowledge of the
Companies, threatened against any Company, alleging any violation
of Law, except for any noncompliance or violation that would not
reasonably be expected to, individually or in the aggregate, have a
Companies Material Adverse Effect.
(b)
Except as would not reasonably be expected to, individually or in
the aggregate, have a Companies Material Adverse Effect,
(1) the Companies hold all Approvals, authorizations,
certificates, licenses, consents and permits of Governmental
Authorities (“ Permits ”) necessary for the
Companies to own, lease and operate their respective properties and
assets and to carry on their respective businesses as currently
conducted, and (2) all such Permits are in full force and
effect. Except as would not reasonably be expected to,
individually or in the aggregate, have a Companies Material Adverse
Effect, (1) there has occurred no breach of or default under
(with or without notice or lapse of time or both) any such Permit,
and none of the Companies has received any notice (including
through any Action), and (2) to the knowledge of any Company,
there has been no Action filed, commenced or threatened against it,
alleging any such breach or default or otherwise seeking to revoke,
terminate, suspend or modify any Permit or impose any fine, penalty
or other sanctions for violation of any Laws relating to any
Permit.
Section 4.11
Employee Benefit Plans
(a)
Section 4.11(a)(i) of the Companies Disclosure Letter
sets forth, a true and complete list of all “employee benefit
plans” (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
(“ ERISA
”),
including multi-employer plans within the meaning of
Section 3(37) of ERISA, and all stock purchase, stock option,
employment, change-in-control, collective bargaining, incentive,
employee loan, deferred compensation, pension, profit-sharing,
retirement, bonus, retention bonus, severance and other employee
benefit or fringe benefit plans, agreements, programs, policies or
other arrangements, whether or not subject to ERISA (including any
funding mechanism therefor now in effect or required in the future
as a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written, legally
binding or not, under which (i) any current or former
employee, director or consultant of any Company (the “
Company Employees
”) has any
present or future right to benefits and which are maintained or
sponsored by or with respect to which contributions are made by any
Company, Parent or any subsidiary of a Parent, in any such case,
for the benefit of Company Employees, or (ii) any Company has
had or has any present or future liability (collectively, the
“ Plans
” and
individually, the “ Plan ”).
Section 4.11(a)(ii) of the Companies Disclosure Letter
identifies each Plan that is sponsored, established, maintained or
contributed to solely by any Company, or to which solely the
Companies are required to contribute or under which any of the
Companies has any liability (collectively, the “
Company Plans ” and individually,
the “ Company
Plan ”). With respect to
each Plan, Genco Holdings has made available to Buyer true and
complete copies of (i) the most recent Plan documents and
any
21
amendments thereto,
(ii) the most recent summary plan description and all related
summaries of material modifications, and (iii) for any Plan
intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the “
Code ”), other than the TGN
Retirement Plan and the TGN Savings Plan, as defined in
Section 6.8(e) of this Agreement, a copy of the most
recent favorable determination letter received from the Internal
Revenue Service (the “ IRS ”), and (iv) for
the three most recent years (A) the annual report on
Form 5500 filed with the IRS, (B) audited financial
statements, and (C) actuarial valuation reports (and, with
respect to any Plan other than a Company Plan, such actuarial
valuation separately indicates the valuation of the Plan
liabilities to the Company Employees and a current statement of
assets underlying such liabilities).
(b)
All Plans and their related trusts have been and are, in all
material respects, maintained in accordance with each such
Plan’s terms and in operation in compliance with applicable
requirements of ERISA, the Code, and all other applicable
Law. Each Plan intended to be “qualified” within
the meaning of Section 401(a) of the Code is so qualified
and, other than the TGN Retirement Plan and the TGN Savings Plan,
as defined in Section 6.8(e) of this Agreement, has been
determined to be so qualified by the IRS and, to the knowledge of
the Companies, there are no facts which would adversely affect the
qualified status of any such Plan. Except as would not
reasonably be expected, individually or in the aggregate, to have a
Companies Material Adverse Effect, no event has occurred and no
condition exists that would subject any of the Companies, the
Parents or Buyer, either directly or by reason of the
Companies’ or the Parents’ affiliation with any ERISA
Affiliate (as defined below), to any tax, fine, Lien, penalty or
other liability imposed by ERISA, the Code or other applicable
Law. For each Plan with respect to which a Form 5500 has
been filed, no material change has occurred with respect to the
matters covered by the most recent Form since the date
thereof. Except as otherwise contemplated by this Agreement,
there is no present intention that any Plan be materially amended,
suspended or terminated, or otherwise modified to adversely change
benefits (or the levels thereof) under any Plan at any time within
the 12 months immediately following the date of this
Agreement.
(c)
No Plan or employee pension plan within the meaning of
Section 3(2) of ERISA (“ Employee Pension Benefit Plan
”)
maintained by any of the Companies, Parents, or any entity that is
required to be treated as a single employer together with the
Companies or Parents under Section 414 of the Code
(“ ERISA
Affiliate ”) that is subject to
Section 412 of the Code has had an “accumulated funding
deficiency” (as such term is defined in Section 412 of
the Code and in Section 303 of ERISA), that remains
unsatisfied, whether or not waived, and no unsatisfied liability to
the Pension Benefit Guaranty Corporation (“
PBGC ”) has been incurred
with respect to any such plan by any Company.
(d)
None of the Companies, Parents or any ERISA Affiliate contributes
to, has at any time within the last ten years had an obligation to
contribute to, or has or had any liability (including withdrawal
liability as defined in Section 4201 of ERISA) under, or with
respect to, any multiemployer plan within the meaning of
Section 3(37) of ERISA that remains unsatisfied.
22
(e)
The requirements of Part 6 of Subtitle B of Title I of ERISA
and Code Section 4980B (“ COBRA ”) have been complied
with in all material respects by each such Plan that is an employee
welfare benefit plan, within the meaning set forth in
Section 3(1) of ERISA (“ Employee Welfare Benefit Plan
”), subject
to COBRA. Except as set forth in Section 4.11(e) of
the Companies Disclosure Letter, none of the Companies or Parents
has incurred any current or projected liability in respect of
post-employment or post-retirement health, medical or life
insurance benefits for current, former or retired employees of any
of the Companies, except as required to avoid an excise tax under
Section 4980B of the Code or otherwise except as may be
required pursuant to any other applicable Law.
(f)
Except as set forth in Section 4.11(f) of the Companies
Disclosure Letter, (i) no such Plan that is an Employee
Pension Benefit Plan has been completely or partially terminated or
been the subject of a Reportable Event within the meaning of
Section 4043 of ERISA during the six years preceding the
Non-STP Acquisition Closing Date, and (ii) no proceeding by
the PBGC to terminate any such Employee Pension Benefit Plan has
been instituted or threatened and (iii) no administrative
investigation, audit or other administrative proceeding by the
Department of Labor, the PBGC, the IRS or other governmental
agencies are pending, threatened or in progress (including any
routine requests for information from the PBGC).
(g)
With respect to each Plan (i) there has been no prohibited
transaction within the meaning of Section 406 of ERISA and
Section 4975 of the Code, and no fiduciary within the meaning
of Section 3(21) of ERISA has any material liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of
any such Plan, and (ii) except as set forth in
Section 4.11(g) of the Companies Disclosure Letter, no
Action involving any Plan (other than routine claims for benefits)
is pending or threatened, and, to the knowledge of the Companies or
employees of the Companies with responsibility for employee
benefits matters, there is no basis for any such
Action.
(h)
Except as set forth in Section 4.11(h) of the Companies
Disclosure Letter, no Plan is a split-dollar life insurance program
or provides for loans to executive officers of the Companies
(within the meaning of the Sarbanes-Oxley Act of 2002).
(i)
Except as set forth in Section 4.11(i) of the Companies
Disclosure Letter, no Plan exists that, as a result of the
execution of this Agreement, shareholder approval of this Agreement
or the transactions contemplated by this Agreement (whether alone
or in connection with any subsequent event(s)), could
(i) entitle any Company Employee to severance pay or any
increase in severance pay upon any termination of employment after
the date of this Agreement, (ii) accelerate the time of
payment or vesting or result in any payment or funding (through a
grantor trust or otherwise) of compensation or benefits under,
increase the amount payable or result in any other material
obligation pursuant to, any of the Plans, (iii) limit or
restrict the right of any Company to merge, amend or terminate any
of the Plans, (iv) cause any Company to record additional
compensation expense on its income statement with respect to
any
23
outstanding stock option or
other equity-based award, or (v) result in payments under any
of the Plans which would not be deductible under Section 280G
of the Code.
Section 4.12
Labor and Employment Matters . Except as set forth in Section 4.12
of the Companies Disclosure Letter, as of the date of this
Agreement there are no collective bargaining agreements or other
labor Contracts relating to any Company or covering any Company
Employee to which any Company is a party or by which it is bound,
and, except as would not reasonably be expected, individually or in
the aggregate, to have a Companies Material Adverse Effect, there
are no (a) Actions or Orders pending or, to the knowledge of
any Company, threatened, in each case relating to Company Employees
or employment practices or asserting that any Company has committed
an unfair labor practice or is seeking to compel any Company to
bargain with any labor union or labor organization,
(b) pending or, to the knowledge of any Company, threatened
labor strikes or other labor troubles affecting any Company,
(c) labor strikes, disputes, walk-outs, work stoppages,
slow-downs, lockouts, arbitrations or grievances involving any
Company (and there has been none with respect to any Company or the
Genco Business in the last five years), (d) representation
questions respecting any of the Company Employees (and there has
been none with respect to any Company or the Genco Business in the
last five years), (e) to the knowledge of any Company,
campaigns conducted to solicit cards from Company Employees to
authorize representation by a labor organization or (f) unfair
labor practices committed by the Companies or their
employees. Except as would not reasonably be expected,
individually or in the aggregate, to have a Companies Material
Adverse Effect, each Company is in compliance in all respects with
all collective bargaining agreements and all applicable Laws
regarding employment and employment practices, terms and conditions
of employment, wages and hours and occupational safety and
health.
Section 4.13
Taxes . Except as set forth in Section 4.13 of
the Companies Disclosure Letter:
(a)
With respect to each Company, (i) all material Tax Returns
required to be filed have been or will be timely filed in
accordance with any applicable Laws and all such Tax Returns are or
will be true and complete in all material respects, and
(ii) all Taxes due have been or will be paid (whether or not
such Taxes are shown as being due on any Tax Returns).
(b)
With respect to each Company, (i) there is no material action,
suit, proceeding, audit, written claim or assessment pending or
proposed with respect to Taxes or with respect to any Tax Return,
(ii) there are no waivers or extensions of any applicable
statute of limitations for the assessment or collection of Taxes
with respect to any Tax Return which remain in effect, and
(iii) there are no material Liens for Taxes upon the assets of
any Company, except for Liens for Taxes not yet due and payable or
Liens for Taxes being contested in good faith through appropriate
proceedings and for which adequate reserves have been maintained in
accordance with GAAP.
(c)
Genco Holdings is and will be a member of an affiliated group
filing a consolidated federal income tax return of which
CenterPoint is the common
24
parent. None of the
Companies (i) is currently or has ever been a member of an
affiliated group (other than a group the common parent of which is
CenterPoint or any Company) filing a consolidated federal income
Tax Return or (ii) has any liability for the Taxes of any
person (other than the affiliated group of which CenterPoint is the
common parent) under Treasury Regulations Section 1.1502-6 (or
any similar provision of state, local or foreign Laws), or as a
transferee or successor, by contract or otherwise.
(d)
None of the Companies is a party to, bound by or has any obligation
under, any Tax sharing, Tax indemnity or similar contract with a
party that is not a member of the affiliated group of which
CenterPoint is the common parent.
(e)
Each Company has withheld and paid over all Taxes required to have
been withheld and paid over, and complied in all respects with all
information reporting requirements, in connection with amounts paid
or owing to any employee, creditor, independent contractor or other
third party.
(f)
No property of any Company is property that any Company or any
party to this transaction is or will be required to treat as being
owned by another person pursuant to the provisions of Code
Section 168(f)(8) (as in effect prior to its amendment by
the Tax Reform Act of 1986) or is “tax exempt use
property” within the meaning of Code
Section 168(h).
(g)
None of the Companies has been a party to any distribution
occurring during the last two years in which the parties to such
distribution treated the distribution as one to which
Section 355 of the Code is applicable.
(h)
No actions have been taken by Parents or any of their affiliates
that would reasonably be expected to, individually or in the
aggregate, have jeopardized the qualification of the interest as
tax-exempt on any tax-exempt bonds that relate to any assets of the
Companies.
(i)
None of the Companies is required to include amounts in income, or
exclude items of deduction, in a taxable period beginning after the
STP Acquisition Closing Date (a “ Post-Closing Tax Period ”) as a result of
(i) a change in method of accounting, (ii) a closing
agreement as described in section 7121 of the Code (or
corresponding or similar provision of state, local or foreign Tax
Laws), (iii) an installment sale or open transaction arising
in a taxable period ending on or before the STP Acquisition Closing
Date (a “ Pre-Closing
Tax Period ”), (iv) a
prepaid amount received, or paid, in a Pre-Closing Tax Period or
(v) deferred gains that could be recognized in a Post-Closing
Tax Period.
(j)
None of the Companies has engaged in any “reportable
transactions” within the meaning of Treas. Reg.
§ 1.6011-4(b).
(k)
All assets that are owned by each Company and required to be listed
on the property tax rolls have been properly listed and described
on the property tax rolls for 2004 and all Pre-Closing Tax Periods
and no portion of each Company’s assets constitutes omitted
property for property tax purposes.
25
(l)
Genco Holdings does not hold an interest in any entity treated as a
corporation or partnership for federal income tax purposes and all
of the Companies (other than Genco Holdings) are treated as
disregarded entities for federal income tax purposes.
Section 4.14
Title, Ownership and Related Matters . Each Company has good title to, or
rights by license, lease or other agreement to use, all properties
and assets (or rights thereto) (other than cash, cash equivalents
and securities and except as contemplated in this Agreement)
necessary to permit each Company to conduct its business as
currently conducted, except as set forth in Section 4.14 of
the Companies Disclosure Letter or otherwise where the failure to
have such title or rights would not reasonably be expected to,
individually or in the aggregate, have a Companies Material Adverse
Effect. Without limiting the generality of the
foregoing:
(a)
Section 4.14(a)(i) of the Companies Disclosure Letter
lists and identifies the owner of all material real property and
material interests in real property owned by each Company (such
real property and interests in real property, together with
(A) all the buildings, improvements, structures and fixtures
now or subsequently located on the fee property owned by each
Company (excluding those structures and fixtures for which title
was retained by RRI in the vesting deeds (“
RRI Retained Structures
”), and
(B) such buildings, improvements, structures and fixtures now
or subsequently located on the property a non-fee interest in which
is owned by each Company that were either (i) conveyed to such
Company by RRI in the vesting deed or easement or (ii) built
by or for such Company or its predecessors (excluding RRI Retained
Structures) (collectively, the “ Owned Real Property ”). For purposes
of this Section 4.14(a) only, each Company’s
“predecessors” shall include Genco Holdings,
CenterPoint, Reliant Energy, Incorporated, Houston
Lighting & Power Company and all other predecessors in
title of each such entity with respect to the Real Property.
The “ Energy
Development Center ” means the tract of
land identified in paragraph (Q) of Section 4.14(a)(i) of
the Companies Disclosure Letter and all the buildings,
improvements, structures and fixtures now or subsequently located
thereon. Section 4.14(a)(ii) of the Companies
Disclosure Letter lists all agreements other than easements or
rights of way (together with any amendments, modifications or
supplements thereto, the “ Leases ”) pursuant to which
any Company leases, subleases, licenses or otherwise occupies
(whether as landlord, tenant, subtenant or other occupancy
arrangement) any real property or interest in real property that is
material to the Genco Business taken as a whole (collectively, the
“ Leased Real
Property ”, together with the
Owned Real Property, the “ Real Property ”) and identifies the
Company party thereto. With respect to each of the Real
Property and except as would not reasonably be expected to,
individually or in the aggregate, have a Companies Material Adverse
Effect:
(i)
the identified owner of each parcel of Owned Real Property has
good, valid and indefeasible fee simple title to the Owned Real
Property that consists of fee property as contrasted with some
lesser estate therein, and the identified owner of each parcel of
Owned Real Property that does not consist of fee property has good
title to such Owned Real Property, free and clear of all Liens
other than (A) Liens for current taxes and assessments not yet
due and
26
payable, (B) inchoate
mechanics’ and materialmen’s Liens for construction in
progress, (C) workmen’s, repairmen’s,
warehousemen’s and carriers’ Liens arising in the
ordinary course of business of the Companies consistent with past
practice, and (D) all Liens and other imperfections of title
and encumbrances which would not reasonably be expected to
materially interfere with the conduct of the Genco Business, taken
as a whole (collectively, “ Permitted Liens
”);
(ii)
each Leased Real Property is held subject to a Lease that is a
valid and subsisting agreement in full force and effect and
constitutes a valid and binding obligation of, and is legally
enforceable against, the respective parties thereto and each
Company, as applicable, has good and valid title to the leasehold
estate in the Leased Real Property, free and clear of any Liens
other than Permitted Liens;
(iii)
there are no pending or, to the knowledge of the Companies,
threatened condemnation, expropriation or taking proceedings
against the Real Property; and
(iv)
there are no outstanding options or rights of first refusal to
purchase or lease the Real Property, or any portion thereof or
interest therein.
(b)
Section 4.14(b) of the Companies Disclosure Letter sets
forth a true and complete list of all material real property or
material interests in real property sold, leased, transferred or
disposed of since August 31, 2002.
(c)
Except as would not reasonably be expected to, individually or in
the aggregate, have a Companies Material Adverse Effect,
(1) all of the Companies’ properties, rights and assets
are in good operating condition and repair, subject to continued
repair and replacement consistent with past practice, and
(2) there are no structural defects in any such properties,
rights and assets.
Section 4.15
Environmental .
Except as set forth in Section 4.15 of the Companies
Disclosure Letter, or as would not reasonably be expected to,
individually or in the aggregate, have a Companies Material Adverse
Effect:
(a)
The Companies are in compliance with all applicable Environmental
Laws, and no Company or Parent has received any written
communication from any Governmental Authority that alleges that any
of the Companies (or, to the extent applicable to the Genco
Business, any affiliate of Parents previously engaged in the Genco
Business that transferred, directly or indirectly, assets or
liabilities to any Company in the Separation Transactions) is not
in compliance with applicable Environmental Laws;
(b)
Each Company has obtained and possesses all environmental, health
and safety Permits, including all air emissions allowances and
water rights (collectively, the “ Environmental Permits ”) necessary for the
construction and operation of its facilities or the conduct of its
business, and all such Environmental Permits are in good standing
or, where applicable, a renewal application has been
timely
27
filed and is pending
approval by any Governmental Authority, and the Companies are in
compliance with all terms and conditions of the Environmental
Permits.
(c)
There is no Environmental Claim (as defined below) (i) pending
or, to the knowledge of the Companies, threatened against any
Company or (ii) to the knowledge of the Companies, pending or
threatened against any real or personal property or operations that
any Company owns, leases or uses, in whole or in part, including
any off-site facility used by any Company for the treatment,
storage and disposal of any Hazardous Substance.
¢A
(d)
To the knowledge of the Companies, there has been no Release (as
defined below) of any Hazardous Substance (as defined below) that
has formed or would reasonably be expected to form the basis of
(i) any Environmental Claim against any Company or against any
person (including any predecessor of the Companies) whose liability
for such claim the Companies has or may have retained or assumed,
either by operation of Law or by Contract, or (ii) any
requirement on the part of any Company to undertake Remedial
Action.
(e)
To the knowledge of the Companies, each Company has disclosed to
Buyer all facts which such Company reasonably believes forms the
basis of (i) any Environmental Claim against any such Company
or (ii) any obligation of any such Company currently required,
or known to be required in the future, to incur costs for pollution
control equipment or environmental remediation under, or otherwise
to comply with, applicable Environmental Laws.
For purposes of this
Agreement:
“ Environmental Claim
” means any and all Actions,
demands, demand letters, directives, Liens or notices of
noncompliance or violation by any person (including any
Governmental Authority) alleging potential liability (including
potential responsibility for or liability for enforcement costs,
investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural-resources damages, property
damages, personal injuries, fines or penalties) arising out of,
based on or resulting from (A) the presence, or Release or
threatened Release into the environment, of any Hazardous
Substances at any location, whether or not owned, operated, leased
or managed by the Companies or joint ventures;
(B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or (C) any and
all Actions by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous
Substances;
“ Environmental Law
” means all Laws relating to
pollution, the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of
human health and safety as it relates to the environment, including
Laws relating to Releases or threatened Releases of any Hazardous
Substance, or otherwise relating to the manufacture,
processing,
28
distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Substance
including the Comprehensive Environmental Response, Compensation,
and Liability Act (“ CERCLA ”) (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801 et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33
U.S.C. Section 1251 et seq.), the Clean Air Act (33 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.),
and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.) (“ OSHA ”) and the regulations promulgated
pursuant thereto, and any such applicable state or local statutes,
and the regulations promulgated pursuant thereto, as such Laws have
been and may be amended or supplemented to the date of this
Agreement;
“ Hazardous Substance
” means any substance
listed, defined or classified as hazardous, toxic or radioactive
pursuant to any applicable Environmental Law, including petroleum
and any derivative or by-product thereof, and any other substance
regulated pursuant to, or the presence or exposure to which may
form the basis for liability under, any applicable Environmental
Law;
“ Release
” means any spilling,
emitting, leaking, pumping, pouring, emptying, injecting, escaping,
dumping, disposing, discharging, or leaching into the environment,
or into or out of any property owned, operated or leased by the
applicable party; and
“ Remedial Action
” means all actions,
including any capital expenditures, required by a governmental
entity or required under any Environmental Law, or voluntarily
undertaken to (a) clean up, remove, treat, or in any other way
ameliorate or address any Hazardous Substance in the environment;
(b) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Substance so it does not endanger
or threaten to endanger the public health or welfare of the indoor
or outdoor environment; (c) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (d) bring the applicable party into
compliance with any Environmental Law.
Section 4.16
Brokers; Finders and Fees
(a)
Except for RBC Capital Markets Corporation, whose fees will be paid
by Genco Holdings, none of the Companies and their respective
controlled affiliates has employed, engaged or entered into a
Contract with any investment banker, broker, finder, other
intermediary or any other person or incurred any liability for any
investment banking, financial advisory or brokerage fees,
commissions, finders’ fees or any other fee in connection
with this Agreement or the transactions contemplated by this
Agreement.
(b)
Set forth in Section 4.16(b) of the Companies Disclosure
Letter is the Genco Holdings’ reasonable estimate of the fees
and expenses incurred or payable, or
29
to be incurred or payable,
by any Company in connection with this Agreement and the
consummation of the transactions contemplated hereby.
Section 4.17
Texas Business Combination Law . Genco Holdings validly elected in its
original bylaws not to be governed by Part Thirteen of the
TBCA such that Part Thirteen of the TBCA would not apply to
the Public Company Merger and the other transactions contemplated
hereby.
Section 4.18
Intellectual Property . Except as set forth in Section 4.18
of the Companies Disclosure Letter, or as would not reasonably be
expected to, individually or in the aggregate, have a Companies
Material Adverse Effect: (i) the Companies own or have the
valid right to use all the Intellectual Property necessary or
desirable to conduct their businesses as currently conducted and
consistent with past practice free and clear of all Liens;
(ii) the Company IP is valid, enforceable and unexpired, has
not been abandoned, and does not infringe, impair, misappropriate,
dilute, make unauthorized use of, or otherwise violate (“
Infringe ”) the Intellectual Property of any third
party and is not being Infringed by any third party; (iii) no
Action or Order is outstanding or pending, or to the knowledge of
the Companies, threatened that seeks to cancel, limit or challenge
the ownership, use, value, validity or enforceability of any
Company IP, and to the knowledge of the Companies, there is no
valid basis for same; (iv) each Company has taken all
necessary steps (including executing non-disclosure and
intellectual property assignment agreements and filing for
statutory protections) to protect, preserve, police, maintain and
safeguard the value, validity and their ownership of its Company
IP, including any confidential Company IP; and (v) each
Company has executed all appropriate agreements with current and
past employees, contractors and agents to assign to the Companies
all of their right, title and interest in any Company
IP.
Section 4.19
Contracts . Section 4.19 of the Companies
Disclosure Letter contains a true and complete list of the
following Contracts to which any Company is a party or by which any
Company properties are bound or affected as of the date of this
Agreement:
(a)
Contracts containing covenants restricting the payment of dividends
or limiting the freedom in any material respect of any Company or
any of their respective affiliates to engage in any line of
business or compete with any person or operate at any
location;
(b)
Joint venture agreements, limited liability company agreements,
partnership agreements or similar agreements;
(c)
the Transition Services Agreement, dated as of August 31,
2002, between CenterPoint and Genco Holdings (the
“Current Transition Services
Agreement” ), the Technical Services
Agreement (the “ Technical Services Agreement ”) between Genco
Holdings and RRI dated as of December 31, 2000, and the
Contract (the “ Pipeline Services Agreement ”), effective
April 1, 2002 between Genco Holdings and CenterPoint Energy
Pipeline Services;
30
(d)
Contracts (other than employment agreements) involving expenditures
which are reasonably expected to be in excess of $1,000,000 per
annum pursuant to which any person is engaged to perform services
replacing, or similar in nature to, any services provided since
July 1, 2003 by any of Parent, RRI and their respective
affiliates in connection with any of the Current Transition
Services Agreement, the Technical Services Agreement and the
Pipeline Services Agreement;
(e)
Contracts involving expenditures (capital or otherwise),
liabilities or revenues to the Companies which are reasonably
expected to be in excess of $5,000,000 per annum or $25,000,000 in
the aggregate;
(f)
Contracts with terms of one year or longer, unless expenditures,
liabilities or revenues thereunder are not reasonably expected to
be in excess of $1,000,000 per annum;
(g)
Each lease of personal property (i) requiring lease payments
equal to or exceeding $250,000 per annum or (ii) the loss of
which would reasonably be expected to, individually or in the
aggregate with other such losses, have a Companies Material Adverse
Effect;
(h)
The Second Amended and Restated Decommissioning Master Trust
Agreement for the South Texas Project (the “Decommissioning
Trust Agreement”) made August 31, 2002, by and between
Genco Holdings and Mellon Bank, N.A. and all Contracts related
thereto; and
(i)
Contracts otherwise material to the Companies.
True and complete copies of the written
Contracts required to be identified in Sections 4.3(c), 4.11(a),
4.12, 4.19, 4.20, 4.22 and 4.23 of the Companies Disclosure Letter
(all such Contracts, whether now or hereafter existing,
collectively, the “ Company Contracts ”) (and
true and complete written summaries of any such oral Contracts)
have been made available to Buyer, except as set forth in
Section 4.19 of the Companies Disclosure Letter.
Except as would not reasonably be expected,
individually or in the aggregate, to have a Companies Material
Adverse Effect, no Company is and, to the knowledge of the
Companies, no other party is in default under, or in breach or
violation of, any Company Contract and, to the knowledge of the
Companies, no event has occurred which would result in any breach
or violation of, constitute a default, require consent or result in
the loss of a material benefit under, give rise to a right to
permit or require the purchase or sale of assets or securities
under, give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a
Lien on any of the properties or assets of any Company (in each
case, with or without notice or lapse of time or both) a connection
with to, any Company Contract, and each Company Contract is valid,
binding and enforceable in accordance with its terms and is in full
force and effect.
Section 4.20
Insurance . Section 4.20 of the Companies
Disclosure Letter contains a true and complete list of the
insurance policies and fidelity bonds of or
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for the benefit of any Company or its assets,
businesses, operations, employees, officers or directors (the
“ Company Insurance Policies ”). Each of
the Company Insurance Policies is valid, enforceable, existing and
binding, and the premiums due thereon have been timely paid.
There are no outstanding unpaid claims under any of the Company
Insurance Policies with respect to any Company, except in the
ordinary course of business consistent with past practice. No
Company has received notice of cancellation, termination or
non-renewal of any Company Insurance Policy or has been denied
insurance coverage. The Company Insurance Policies are
sufficient for compliance with applicable Law and all Contracts to
which any of the Companies is a party or by which it or any of its
assets are bound, and are in such amounts, against such risks and
losses, and on such terms and conditions as are consistent with
industry practice in the business of each Company.
Section 4.21
Regulatory Matters
(a)
PUHCA and Utility Regulation . Each of the Companies
is subject to regulation under PUHCA as a “subsidiary”
of CenterPoint, which is a “registered holding company”
(as such terms are defined under PUHCA). Genco LP is subject
to regulation (i) under the AEA as a licensee or the owner of
licensee, (ii) under Texas utility Law as a “power
generation company” (as such term is defined under PURA), and
(iii) under the ERCOT protocols as a “resource
entity” (as such term is defined in the ERCOT
protocols). Except as set forth in the immediately preceding
sentences, the Companies are not subject to regulation as a public
utility, public utility holding company or public service company
(or similar designation) by any Governmental Authority.
(b)
STP Compliance . Except as set forth in
Section 4.21(b) of the Companies Disclosure Letter, the
operation of the South Texas Project is and has since
January 1, 1999 been conducted in compliance in all material
respects with applicable health, safety, regulatory and other legal
requirements. Such legal requirements include, but are not
limited to, the NRC Facility Operating Licenses for the South Texas
Project issued pursuant to 10 C.F.R. Chapter I, and all
regulations, requirements and orders related in any way thereto;
and all obligations of the owners of South Texas Project pursuant
to contracts with the United States Department of Energy for the
disposal of spent nuclear fuel and high-level radioactive waste,
and any Laws of the State of Texas or any agency thereof. The
operations of the South Texas Project are not the subject of any
outstanding notice of violation or material request for information
from the NRC or any other agency with jurisdiction over such
facility. The South Texas Project maintains, and is in
compliance in all material respects with, emergency plans designed
to protect the health and safety of the public in the event of an
unplanned release of radioactive materials, and the NRC has
determined that such plans are in compliance with its
requirements.
(c)
Exempt Wholesale Generator Status . Genco LP is, and
has been determined by order of the FERC to be, an EWG, and neither
such order nor Genco LP’s status as an EWG under PUHCA is the
subject of any pending or, to the knowledge of the Companies,
threatened judicial or administrative proceeding to revoke or
modify such
32
status. To the
knowledge of the Companies, there are no facts that are reasonably
likely to cause Genco LP to lose its status as an EWG under
PUHCA.
(d)
Qualified Decommissioning Fund . Except as set forth
in Section 4.21(d) of the Companies Disclosure
Letter:
(i)
With respect to all periods prior to the STP Acquisition Closing
Date: (i) Genco Holding’s Qualified Decommissioning Fund
consists of one or more trusts that are validly existing and in
good standing under the laws of its jurisdiction of formation with
all requisite authority to conduct its affairs as it now does;
(ii) Genco Holding’s Qualified Decommissioning Fund
satisfies the requirements necessary for such fund to be treated as
a “Nuclear Decommissioning Reserve Fund” within the
meaning of Code Section 468A(a) and as a “Nuclear
Decommissioning Fund” and a “Qualified Nuclear
Decommissioning Fund” within the meaning of Treas. Reg.
Section l.468A-l(b)(3); (iii) Genco Holdings’
Qualified Decommissioning Fund is in compliance in all material
respects with all applicable rules and regulations of any
Governmental Authority having jurisdiction, including the NRC, the
PUC and the IRS, (iv) Genco Holdings’ Qualified
Decommissioning Fund has not engaged in any acts of
“self-dealing” as defined in Treas. Reg.
Section 1.468A-5(b)(2); (v) no “excess
contribution,” as defined in Treas. Reg.
Section 1.468A-5(c)(2)(ii), has been made to Genco
Holdings’ Qualified Decommissioning Fund which has not been
withdrawn within the period provided under Treas. Reg.
Section 1.468A-5(c)(2)(i); and (vi) except as set forth
in Section 4.21(d) of the Companies Disclosure Letter,
Genco Holdings has made timely and valid elections to make annual
contributions to Genco Holding’s Qualified Decommissioning
Fund since its inception and Genco Holdings has heretofore
delivered copies of such elections to Buyer. As used in this
Agreement, the term “ Qualified Decommissioning Fund
” means all amounts
contributed to qualified funds for administrative costs and costs
incurred in connection with the entombment, dismantlement, removal
and disposal of the structures, systems and components of a unit of
common facilities, including all costs incurred in connection with
the preparation for decommissioning, such as engineering and other
planning expenses incurred with respect to the unit of common
facilities after actual decommissioning occurs, such as physical
security and radiation monitoring expenses, as part of Genco
LP’s cost of service required by PURA or as approved by the
PUC.
(ii)
Genco Holdings has heretofore delivered to Buyer a copy of Genco
Holdings’ Decommissioning Trust Agreement as in effect on the
date of this Agreement.
(iii)
With respect to all periods prior to the STP Acquisition Closing
Date, (i) Genco Holdings and/or Mellon Bank, N.A. (the
“ Trustee ”) of
Genco Holdings’ Qualified Decommissioning Fund has/have filed
or caused to be filed with the NRC, the IRS and any other
Governmental Authority all material forms, statements, reports,
documents (including all exhibits, amendments and
Â!
33
supplements thereto) required to
be filed by Genco Holdings and/or the Trustee of Genco
Holdings’ Qualified Decommissioning Fund; and (ii) there
are no interim rate orders that may be retroactively adjusted or
retroactive adjustments to interim rate orders that may affect
amounts that Buyer may contribute to Genco Holdings’
Qualified Decommissioning Fund or may require distributions to be
made from Genco Holdings’ Qualified Decommissioning
Fund. Genco Holdings has delivered to Buyer a copy of the
schedule of ruling amounts most recently issued by the IRS for
Genco Holdings’ Qualified Decommissioning Fund and a complete
copy of the request that was filed with the IRS to obtain such
schedule of ruling amounts and a copy of any pending request
for revised ruling amounts, in each case together with all
exhibits, amendments and supplements thereto. Any amounts
contributed to Genco Holdings’ Qualified Decommissioning Fund
while such request is pending before the IRS and which turn out to
exceed the applicable amounts provided in the schedule of
ruling amounts issued by the IRS will be withdrawn from Genco
Holdings’ Qualified Decommissioning Fund within the period
provided under Treas. Reg.
Section 1.468A-5(c)(2)(i).
(iv)
Genco Holdings has made available to Buyer a statement of assets
and liabilities prepared by the Trustee for Genco Holdings’
Qualified Decommissioning Funds as of December 31, 2003 and as
of June 30, 2004 and will make such a statement available as
of the most recently available month end preceding the STP
Acquisition Closing, and they fairly presented and will fairly
present as of such dates the financial position of each of Genco
Holdings’ Qualified Decommissioning Funds. Genco Holdings has
made available to Buyer information from which Buyer can determine
the Tax Basis of all assets in Genco Holdings’ Qualified
Decommissioning Fund and will make such a statement available as of
the most recently available month end preceding the STP Acquisition
Closing.
(v)
Genco Holdings has made available to Buyer all material contracts
and agreements to which the Trustee of Genco Holdings’
Qualified Decommissioning Fund, in its capacity as such, is a
party.
(vi)
With respect to all taxable periods prior to the STP Acquisition
Closing Date, Genco Holdings’ Qualified Decommissioning Fund
has filed all material Tax Returns required to be filed, including
but not limited to returns for estimated Income Taxes, such Tax
Returns are true and complete in all material respects, and all
Taxes have been paid in full. No notice of deficiency or
assessment has been received from any taxing authority with respect
to any liability for Taxes of Genco Holdings’ Qualified
Decommissioning Fund which have not been fully paid or finally
settled. There are no outstanding agreements or waivers
extending the applicable statutory periods of limitations for any
Taxes associated with Genco Holdings’ Qualified
Decommissioning Fund for any period.
(e)
Nonqualified Decommissioning Funds . Except as set
forth in Section 4.21(e) of the Companies Disclosure
Letter:
34
(i)
With respect to all periods prior to the STP Acquisition Closing
Date, Genco Holdings’ Nonqualified Decommissioning Funds is a
trust validly existing and in good standing under the laws of its
jurisdiction of formation with all requisite authority to conduct
its affairs as it now does. Genco Holdings’
Nonqualified Decommissioning Funds are in full compliance in all
material respects with all applicable rules and regulations of
any Governmental Authority, including the NRC and the PUC.
Company’s Nonqualified Decommissioning Funds are, and since
their inception have been, classified as a grantor trust owned by
the Parents under Section 671 to 677 of the Code. As
used in this Agreement, the term “ Nonqualified
Decommissioning Funds ”
means the nonqualified funds, as determined by the Trustee and
Texas Genco, LP, established and maintained under the
Decommissioning Trust Agreement for decommissioning South Texas
Project Unit No. 1, South Texas Project Unit No. 2 and
the common facilities to which monies are contributed, which
nonqualified funds are not subject to the conditions and
limitations of Section 468A of the Code.
(ii)
With respect to all periods prior to the STP Acquisition Closing
Date, Genco Holdings and the Trustee of Genco Holdings’
Nonqualified Decommissioning Funds have filed or caused to be filed
with the NRC and any other Governmental Authority all material
forms, statements, reports, documents (including all exhibits,
amendments and supplements thereto) required to be filed by either
of them.
(iii)
Genco Holdings has made available to Buyer a statement of assets
and liabilities prepared by the Trustee for Genco Holdings’
Nonqualified Decommissioning Funds as of December 31, 2003 and
as of June 30, 2004 and will make such a statement available
as of the end of the most recently available month end preceding
the STP Acquisition Closing, and they fairly presented and will
fairly present as of such dates the financial position of each of
Genco Holdings’ Nonqualified Decommissioning Funds.
Genco Holdings has made available to Buyer all contracts and
agreements to which the Trustee of Genco Holdings’
Nonqualified Decommissioning Funds, in its capacity as such, is a
party.
(iv)
Genco Holdings has made available to Buyer all material contracts
and agreements to which the Trustee of Genco Holdings’
Nonqualified Decommissioning Funds, in its capacity as such, is a
party.
Section 4.22
Affiliate Transactions . Except as set forth in Section 4.22
of the Companies Disclosure Letter or as disclosed in Genco
Holding’s proxy statement relating to the election of
directors dated April 23, 2004, there are no Contracts or
transactions between any Company, on the one hand, and any
(A) Parent or its affiliates (other than the Companies), on
the other hand, other than any Contract or transaction entered into
in the ordinary course of business and on terms no less favorable
than would have been reached on an arms-length basis that is not
material to the Company, or (B) (i) officer or director
of any Company or Parent or its affiliates, or (ii) affiliate
of any such
35
officer or director, on the other hand, in each
case in this clause (B) except those of a type available
to Company Employees generally and other than any Contract or
transaction entered into in the ordinary course of business and on
terms no less favorable than would have been reached on an
arm’s-length basis or that is not material to the Company
(all Contracts and transactions referred to in
clauses (A) or (B), whether entered into before or after
the date hereof, “ Company Affiliate Contracts
”).
Section 4.23
Derivative Products.
(a)
All Derivative Products entered into for the account of any Company
were entered into in accordance with (i) established risk
parameters, limits and guidelines and in compliance with the risk
management policies approved by the board of directors of Genco
Holdings (the “ Trading
Policies ”), in each case both
as in effect at the time such Derivative Products were entered into
and as in effect on the date of this Agreement, to restrict the
level of risk that any Company is authorized to take, individually
and in the aggregate, with respect to Derivative Products and
monitor compliance with such risk parameters and
(ii) applicable Law and policies of any Governmental
Authority.
(b)
Genco Holdings has made available Buyer a true and complete copy of
the Trading Policies, and the Trading Policies contain a true and
complete description of the practice of the Companies with respect
to Derivative Products, as of the date of this
Agreement.
(c)
At no time has any Company engaged in any “round trip,”
“sale/buyback” or “wash” trading or any
similar transaction.
(d)
For purposes of this Agreement, “ Derivative Product” means (i) any swap, cap,
floor, collar, futures contract, forward contract, option and any
other derivative financial instrument or Contract, based on any
commodity, security, instrument, asset, rate or index of any kind
or nature whatsoever, whether tangible or intangible, including
electricity, natural gas, crude oil and other commodities,
emissions allowances, currencies, interest rates and indices and
(ii) forward contracts for physical delivery, physical output
of assets, and physical load obligations.
Section 4.24
Fairness Opinion . Genco Holdings has received the
written opinion of RBC Capital Markets Corporation to the effect
that, as of the date of this Agreement, the consideration to be
received in the Public Company Merger by Genco Holdings’
shareholders (other than CenterPoint) is fair to such shareholders
from a financial point of view. An executed copy of such
opinion has been delivered to Buyer.
Section 4.25
Board Recommendation . The board of directors of Genco
Holdings, upon the unanimous recommendation of a special committee
thereof, has unanimously (i) adopted resolutions approving
this Agreement and the transactions contemplated hereby, including
the Public Company Merger, in accordance with the TBCA,
(ii) determined that this Agreement and the transactions
contemplated hereby, including the Public Company Merger, are
advisable and fair to and in the best interests
36
of the shareholders of Genco Holdings,
(iii) resolved to recommend approval of this Agreement and the
transactions contemplated hereby, including the Public Company
Merger, to the shareholders of Genco Holdings and
(iv) directed that approval of this Agreement be submitted to
Genco Holdings’ shareholders.
Section 4.26
Ownership of Assets . Except as set forth in
Section 4.26 of the Companies Disclosure Letter, none of Genco
Holdings or any of its subsidiaries (other than Genco LP, Genco
Services and, after the Genco LP Division, Genco II LP)
(i) owns, leases or has any other right, title or interest in
any assets or properties, (ii) is a party to, or is otherwise
bound by or subject to, any Contract, (iii) owns or holds any
Permits, or (iv) has any Company Employees.
REPRESENTATIONS AND
WARRANTIES OF BUYER
Buyer hereby represents and warrants
to Parents and Genco Holdings as follows:
Section 5.1
Organization; Etc . Buyer (a) is duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization, (b) has all requisite limited
liability company power and authority to execute and deliver this
Agreement and all other agreements and instruments executed in
connection herewith or delivered pursuant hereto, to perform its
obligations hereunder and to consummate the transactions
contemplated by this Agreement and (c) is duly qualified or
licensed to do business, and is in good standing in each
jurisdiction in which the nature of its business or the ownership,
operation or leasing of its properties makes such qualification or
licensing necessary, except where the failure to be so qualified or
licensed would not reasonably be expected to, individually or in
the aggregate, have a Buyer Material Adverse Effect. As used
in this Agreement, the term “ Buyer Material Adverse
Effect ” means an event, change or circumstance which
would materially adversely affect the ability of Buyer to
consummate the transactions contemplated by this Agreement or
directly or indirectly prevent or materially impair or delay the
ability of Buyer to perform its obligations hereunder.
Section 5.2
Authority Relative to this Agreement . The execution,
delivery and performance of this Agreement and all other agreements
and instruments executed in connection herewith or delivered
pursuant hereto, by Buyer and the consummation of the transactions
contemplated by this Agreement and all other agreements and
instruments executed in connection herewith or delivered pursuant
hereto have been duly and validly authorized by all requisite
corporate or limited liability company action, as applicable, on
the part of Buyer and no other corporate actions or proceedings on
the part of Buyer is necessary to authorize the execution, delivery
and performance of this Agreement and all other agreements and
instruments executed in connection herewith or delivered pursuant
hereto by Buyer or to consummate the transactions so
contemplated. This Agreement and all other agreements and
instruments executed in connection herewith or delivered pursuant
hereto have been, or will be, duly
37
and validly executed and delivered by Buyer and,
with respect to this Agreement and any other such agreement,
assuming it has been duly authorized, executed and delivered by any
other party (other than an affiliate of Buyer), constitutes, or
will constitute when executed, a valid and binding agreement of
Buyer, enforceable against Buyer in accordance with its terms,
except that (a) enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting
creditors’ rights generally, and (b) enforcement of this
Agreement, includ
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