UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JULY 21, 2004
------------------------------
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1-31447 74-0694415
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1111 LOUISIANA
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 207-1111
------------------------------
TEXAS GENCO HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 1-31449 76-0695920
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1111 LOUISIANA
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 207-1111
------------------------------
ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE.
On July 21, 2004, CenterPoint Energy, Inc. ("CenterPoint Energy") and
its 81%-owned subsidiary, Texas Genco Holdings, Inc. ("Texas Genco"), announced
a definitive agreement for GC Power Acquisition LLC, a newly formed entity owned
in equal parts by affiliates of The Blackstone Group, Hellman & Friedman LLC,
Kohlberg Kravis Roberts & Co. L.P. and Texas Pacific Group, to acquire Texas
Genco for approximately $3.65 billion in cash.
The transaction will be accomplished in two steps. In the first step,
expected to be completed in the fourth quarter of 2004, Texas Genco will
purchase the approximately 19% of its shares owned by the public in a cash-out
merger at a price of $47 per share. Prior to its minority shareholder buy-out,
Texas Genco will file with the Securities and Exchange Commission a Rule 13e-3
transaction statement and a Schedule 14C information statement relating to
CenterPoint Energy's adoption of the transaction agreement and approval of the
transactions it contemplates. Following the cash-out merger of the publicly
owned shares, a Texas Genco subsidiary that will own Texas Genco's coal, lignite
and gas-fired generation plants will merge with a subsidiary of GC Power
Acquisition. The closing of the first step of the transaction is subject to
several conditions, including the mailing of the information statement described
above, the receipt of debt financing under the financing commitments described
below, the expiration or termination of any applicable waiting period under the
antitrust laws (including the Hart Scott Rodino Antitrust Improvement Act of
1976) and the Federal Energy Regulatory Commission's certification of the entity
that will own Texas Genco's coal, lignite and gas-fired generation plants as an
"exempt wholesale generator" under the Public Utility Holding Company Act of
1935.
In the second step of the transaction, expected to take place in the
first quarter of 2005 following receipt of approval by the Nuclear Regulatory
Commission, Texas Genco, the principal remaining asset of which, at that time,
will be Texas Genco's interest in the South Texas Project nuclear facility, will
merge with another subsidiary of GC Power Acquisition.
Cash proceeds to CenterPoint Energy will be approximately $2.2 billion
from the first step of the transaction and $700 million from the second step of
the transaction, for total cash proceeds of approximately $2.9 billion, or
$45.25 per share for CenterPoint Energy's 81% interest. CenterPoint Energy
intends to use the net after-tax proceeds it receives to pay down outstanding
debt, including senior debt under its bank credit facility that is secured in
part by CenterPoint Energy's 81% ownership interest in Texas Genco. As of June
30, 2004, $1.6 billion principal amount of borrowings was outstanding under this
credit facility.
GC Power Acquisition has entered into a commitment letter with
financing sources, including Goldman Sachs, providing for up to $2.5 billion in
the aggregate in debt financing for the transaction and a separate overnight
loan of $717 million to Texas Genco to fund its minority shareholder buy-out in
the first step of the transaction, each subject to customary closing conditions.
In addition, GC Power Acquisition's sponsor firms have committed upon closing of
the transaction to provide up to $1.08 billion in the aggregate in equity
funding for the transaction.
The transaction has been approved by the board of directors of
CenterPoint Energy and by the board of directors of Texas Genco acting upon the
unanimous recommendation of a special committee composed of independent members
of the Texas Genco board. CenterPoint Energy has signed a written consent that
satisfies all state law voting requirements applicable to the transaction.
In connection with the transaction, Texas Genco has entered into a
master power purchase and sale agreement with a member of the Goldman Sachs
group. Under that agreement, Texas Genco will sell forward a substantial
quantity of its available baseload capacity through 2008. Texas Genco's
obligations under the power purchase agreement will continue regardless of
whether the transaction described in this report is completed.
The foregoing description of the transaction is qualified in its
entirety by reference to the terms of the agreements, including the Transaction
Agreement that is filed as an exhibit to this report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following exhibit is filed herewith:
(c) Exhibits.
10.1 Transaction Agreement dated July 21, 2004 among CenterPoint
Energy, Inc., Utility Holding, LLC, NN Houston Sub, Inc.,
Texas Genco Holdings, Inc., HPC Merger Sub, Inc. and GC Power
Acquisition LLC (excluding exhibits and schedules thereto)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTERPOINT ENERGY, INC.
Date: July 22, 2004 By: /s/ James S. Brian
-----------------------------------
James S. Brian
Senior Vice President and
Chief Accounting Officer
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS GENCO HOLDINGS, INC.
Date: July 22, 2004 By: /s/ James S. Brian
-----------------------------------
James S. Brian
Senior Vice President and
Chief Accounting Officer
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- -------------------
10.1 Transaction Agreement dated July 21, 2004 among CenterPoint Energy,
Inc., Utility Holding, LLC, NN Houston Sub, Inc., Texas Genco
Holdings, Inc., HPC Merger Sub, Inc. and GC Power Acquisition LLC
(excluding exhibits and schedules thereto)
EXHIBIT 10.1
[EXECUTION COPY]
================================================================================
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
PAGE
ARTICLE I PUBLIC COMPANY MERGER..................................................... 3
Section 1.1 The Public Company Merger............................................ 3
Section 1.2 Time and Place of Public Company Merger Closing...................... 3
Section 1.3 Effective Time of the Public Company Merger.......................... 4
Section 1.4 Directors and Officers............................................... 4
Section 1.5 Articles of Incorporation and Bylaws................................. 4
Section 1.6 Effect of Public Company Merger on Capital Stock..................... 4
Section 1.7 Exchange of Certificates............................................. 5
ARTICLE II OTHER TRANSACTIONS....................................................... 7
Section 2.1 Genco LP Division.................................................... 7
Section 2.2 Merger Agreements.................................................... 8
Section 2.3 Non-STP Acquisition.................................................. 8
Section 2.4 Time and Place of Non-STP Acquisition Closing........................ 9
Section 2.5 STP Acquisition...................................................... 9
Section 2.6 Time and Place of STP Acquisition Closing............................ 10
Section 2.7 FIRPTA Certificate................................................... 11
Section 2.8 Director and Officer Resignations.................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CENTERPOINT........................... 11
Section 3.1 Organization; Etc.................................................... 11
Section 3.2 Authority Relative to this Agreement................................. 11
Section 3.3 Ownership of Shares.................................................. 12
Section 3.4 Consents and Approvals; No Violations................................ 12
Section 3.5 Affiliate Transactions............................................... 13
Section 3.6 Separation Transactions.............................................. 13
Section 3.7 Brokers; Finders and Fees............................................ 14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF GENCO HOLDINGS......................... 14
Section 4.1 Organization; Etc.................................................... 14
Section 4.2 Authority Relative to this Agreement................................. 15
Section 4.3 Capitalization....................................................... 16
Section 4.4 Ownership of Shares, Company Securities.............................. 17
Section 4.5 Consents and Approvals; No Violations................................ 17
Section 4.6 Reports and Financial Statements..................................... 18
Section 4.7 Absence of Undisclosed Liabilities................................... 20
Section 4.8 Absence of Certain Changes........................................... 20
Section 4.9 Litigation........................................................... 20
Section 4.10 Compliance with Law.................................................. 20
Section 4.11 Employee Benefit Plans............................................... 21
Section 4.12 Labor and Employment Matters......................................... 24
Section 4.13 Taxes................................................................ 24
Section 4.14 Title, Ownership and Related Matters................................. 26
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Section 4.15 Environmental........................................................ 27
Section 4.16 Brokers; Finders and Fees............................................ 29
Section 4.17 Texas Business Combination Law....................................... 30
Section 4.18 Intellectual Property................................................ 30
Section 4.19 Contracts............................................................ 30
Section 4.20 Insurance............................................................ 31
Section 4.21 Regulatory Matters................................................... 32
Section 4.22 Affiliate Transactions............................................... 35
Section 4.23 Derivative Products.................................................. 36
Section 4.24 Fairness Opinion..................................................... 36
Section 4.25 Board Recommendation................................................. 36
Section 4.26 Ownership of Assets.................................................. 37
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER................................... 37
Section 5.1 Organization; Etc.................................................... 37
Section 5.2 Authority Relative to this Agreement................................. 37
Section 5.3 Consents and Approvals; No Violations................................ 38
Section 5.4 Debt Financing....................................................... 38
Section 5.5 Litigation........................................................... 38
Section 5.6 Investigation by Buyer............................................... 38
Section 5.7 Brokers; Finders and Fees............................................ 40
Section 5.8 Buyer's ERCOT Generation............................................. 40
Section 5.9 Ownership of Genco Holding Stock..................................... 40
ARTICLE VI COVENANTS OF THE PARTIES................................................. 40
Section 6.1 Covenants of Genco Holdings.......................................... 40
Section 6.2 Access to Information................................................ 44
Section 6.3 Consents; Cooperation................................................ 45
Section 6.4 Commercially Reasonable Efforts...................................... 48
Section 6.5 Public Announcements................................................. 48
Section 6.6 Tax Matters.......................................................... 49
Section 6.7 Debt Financing....................................................... 55
Section 6.8 Employees; Employee Benefits......................................... 58
Section 6.9 Insurance............................................................ 66
Section 6.10 No Solicitation of Transactions...................................... 69
Section 6.11 Tax Exempt Financing................................................. 70
Section 6.12 NRC Approval......................................................... 75
Section 6.13 Preparation of Information Statement; SEC Filings.................... 76
Section 6.14 Directors' and Officers' Indemnification and Insurance............... 78
Section 6.15 Section 16 Matters................................................... 78
Section 6.16 Intercompany Accounts and Agreements................................. 78
Section 6.17 Transition Services and Other Intercompany Arrangements.............. 80
Section 6.18 Power Purchase Agreement............................................. 80
Section 6.19 Decommissioning Undertakings......................................... 80
Section 6.20 True-up Proceeds..................................................... 81
Section 6.21 Environmental Reporting Regarding NOx Emission Reductions............ 81
ii
Section 6.22 Leases............................................................... 82
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE PUBLIC COMPANY MERGER................. 82
Section 7.1 Conditions to Genco Holdings and Merger Sub's Obligations
to Consummate the Public Company Merger.............................. 82
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE NON-STP ACQUISITION.................. 83
Section 8.1 Conditions to Buyer, Genco Holdings and CenterPoint's
Obligations to Consummate the Non-STP Acquisition.................... 83
Section 8.2 Further Conditions to Genco Holdings and CenterPoint's Obligations... 83
Section 8.3 Further Conditions to Buyer's Obligations............................ 84
Section 8.4 Additional Conditions to Genco Holdings and CenterPoint's
Obligations.......................................................... 85
Section 8.5 Additional Conditions to Buyer's Obligations......................... 86
ARTICLE IX CONDITIONS TO CONSUMMATION OF THE STP ACQUISITION........................ 86
Section 9.1 Conditions to CenterPoint and Buyer's Obligations to
Consummate the STP Acquisition....................................... 86
Section 9.2 Further Conditions to Buyer's Obligations............................ 87
ARTICLE X TERMINATION AND ABANDONMENT............................................... 88
Section 10.1 Termination.......................................................... 88
Section 10.2 Procedure for and Effect of Termination.............................. 89
ARTICLE XI MISCELLANEOUS PROVISIONS................................................. 90
Section 11.1 Representations and Warranties....................................... 90
Section 11.2 Amendment and Modification........................................... 90
Section 11.3 Entire Agreement; Assignment......................................... 90
Section 11.4 Severability......................................................... 91
Section 11.5 Notices.............................................................. 91
Section 11.6 Governing Law........................................................ 93
Section 11.7 Descriptive Headings................................................. 93
Section 11.8 Counterparts......................................................... 93
Section 11.9 Fees and Expenses.................................................... 93
Section 11.10 Interpretation....................................................... 94
Section 11.11 Third-Party Beneficiaries............................................ 95
Section 11.12 No Waivers........................................................... 95
Section 11.13 Specific Performance................................................. 96
Section 11.14 Acknowledgments...................................................... 96
Section 11.15 Parent Undertaking................................................... 96
Section 11.16 Special Committee.................................................... 96
Exhibit A -- Form of Parent Written Consent
iii
Exhibit B -- Form of MergerAgreement for the Genco LP Division
Exhibit C -- Form of Merger Agreement for the Genco II LP Acquisition
Exhibit D -- Form of Merger Agreement for the Genco Services Acquisition
Exhibit E -- Form of Transition Services Agreement
Schedule 2.3 -- Non-STP Purchase Price Allocation
Schedule 6.17(b) -- Separation Amendments
Schedule 6.18 -- Power Purchase Arrangements
iv
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
2
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."
3
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.
4
(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
5
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,
6
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.
ARTICLE II
OTHER TRANSACTIONS
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
8
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.
9
(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. Section 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.
(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
31
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
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.
ARTICLE V
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, 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 5.3 Consents and Approvals; No Violations. Except for the
Required Approvals, none of the execution, delivery and performance of this
Agreement by Buyer, nor the consummation by Buyer 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
Buyer, (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 Buyer under, any Contract to
which Buyer is a party or by which any of its businesses, properties or assets
are bound, (c) violate any Law or Permit applicable to Buyer or its business,
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 5.3 for those which would not reasonably be expected to, individually or
in the aggregate, have a Buyer Material Adverse Effect.
Section 5.4 Debt Financing. As of the date hereof, Buyer has
delivered to Genco Holdings true and complete copies of (a) the Debt Financing
Letter on Section 5.4(a) of the disclosure letter delivered by Buyer to Parents
and Genco Holdings concurrently with the execution hereof (the "BUYER DISCLOSURE
LETTER") hereto, and (b) the equity letter on Section 5.4(b) of the Buyer
Disclosure Letter.
Section 5.5 Litigation. There is no Action pending or, to the
knowledge of Buyer, threatened against Buyer by or before any Governmental
Authority, nor are there any Orders that affect or bind any of them or any of
their respective businesses, properties or assets which would not reasonably be
expected to, individually or in the aggregate, have a Buyer Material Adverse
Effect.
Section 5.6 Investigation by Buyer. Buyer has conducted its own
independent review and analysis of the business, operations, assets,
liabilities, results of operations, financial condition, technology and
prospects of the Genco Business and acknowledges that Buyer has been provided
access to personnel, properties, premises and records of the Genco Business for
such purpose. In entering into this Agreement, Buyer has relied upon, among
other things, its due diligence investigation and analysis of the Companies and
the Genco Business, and Buyer:
38
(a) acknowledges and agrees that it has not been induced by and has
not relied upon any representations or warranties, whether express or implied,
made by Parents or any of their respective directors, officers, shareholders,
employees, affiliates, controlling persons, agents, advisors or representatives
(in each case other than Genco Holdings) that are not expressly set forth in
Article III of this Agreement, whether or not any such representations,
warranties or statements were made in writing or orally, and acknowledges and
agrees that all representations and warranties made in Article III are made by
CenterPoint and not Genco Holdings;
(b) acknowledges and agrees that it has not been induced by and has
not relied upon any representations or warranties, whether express or implied,
made by the Companies or any of their respective directors, officers,
shareholders, employees, affiliates, controlling persons, agents, advisors or
representatives (in each case other than Parents) that are not expressly set
forth in Article IV of this Agreement, whether or not any such representations,
warranties or statements were made in writing or orally, and acknowledges and
agrees that all representations and warranties made in Article IV are made by
Genco Holdings and not CenterPoint;
(c) acknowledges and agrees that none of Parents and the Companies
or any of their respective directors, officers, shareholders, employees,
affiliates, controlling persons, agents, advisors or representatives makes or
has made any representation or warranty, either express or implied, as to the
accuracy or completeness of any of the information provided or made available to
Buyer or its directors, officers, employees, affiliates, controlling persons,
agents or representatives, including without limitation, any information
included in the Confidential Information Memorandum dated February 2004, as
supplemented to the date of this Agreement, and any information, document, or
material provided or made available, or statements made, to Buyer (including its
directors, officers, employees, affiliates, controlling persons, advisors,
agents or representatives) during site or office visits, in any "data rooms,"
management presentations or supplemental due diligence information provided to
Buyer (including its directors, officers, employees, affiliates, controlling
persons, advisors, agents or representatives) in connection with discussions or
access to management of the Genco Business or in any other form in expectation
of the transactions contemplated by this Agreement, in each case except, with
respect to Parents and Genco Holdings, as applicable, to the extent reflected in
the respective representations and warranties of CenterPoint in Article III or
Genco Holdings in Article IV (collectively, "DUE DILIGENCE INFORMATION");
(d) acknowledges and agrees that (i) the Due Diligence Information
includes certain projections, estimates and other forecasts, and certain
business plan information, (ii) there are uncertainties inherent in attempting
to make such projections, estimates and other forecasts and plans and Buyer is
familiar with such uncertainties, and (iii) Buyer is taking full responsibility
for making its own evaluation of the adequacy and accuracy of all projections,
estimates and other forecasts and plans so furnished to it and any use of or
reliance by Buyer on such projections, estimates and other forecasts and plans
shall be at its sole risk; and
39
(e) agrees, to the fullest extent permitted by Law, that none of
Parents, the Companies or any of their respective directors, officers,
shareholders, employees, affiliates, controlling persons, agents, advisors or
representatives shall have any liability or responsibility whatsoever to Buyer
or its directors, officers, shareholders, employees, affiliates, controlling
persons, agents, advisors or representatives on any basis (including, without
limitation, in contract or tort, under federal or state securities laws or
otherwise) resulting from the furnishing to Buyer, or Buyer's use of, any Due
Diligence Information, except for fraud or intentional misrepresentation.
Section 5.7 Brokers; Finders and Fees. No broker, finder, investment
banker or other person whose fees or expenses would be payable by the Parents
or, prior to the STP Acquisition Closing, the Companies may be entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer.
Section 5.8 Buyer's ERCOT Generation. Buyer and its affiliates do
not directly or indirectly own, control or have under construction any
generating assets located in or capable of delivering electricity to the ERCOT
Market. Neither Buyer nor its controlled affiliates have a present intention to
acquire or construct any generating assets located in or capable of delivering
electricity to the ERCOT Market except through the Companies.
Section 5.9 Ownership of Genco Holding Stock. Except as set forth in
Section 5.9 of Buyer Disclosure Letter, as of the date of this Agreement,
neither Buyer nor any of its "affiliates" or "associates" (as those terms are
defined under Rule 12b-2 under the Exchange Act) beneficially owns any shares of
Common Stock or any other security of Genco Holdings.
ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.1 Covenants of Genco Holdings. During the period from the
date of this Agreement to the STP Acquisition Closing, unless otherwise
expressly contemplated by this Agreement, as set forth in Section 6.1 of the
Companies Disclosure Letter or required by applicable Law or unless Buyer gives
its prior written consent, which consent shall not be unreasonably withheld or
delayed, Genco Holdings shall, and shall cause each other Company to, (1)
conduct its businesses only in, and not to take any action except in, the
ordinary course of business, in a manner consistent with past practice, in
compliance with applicable Laws and in accordance with good utility practices
and (2) preserve substantially intact its business organization, to preserve its
assets and properties in good repair and condition and to preserve its present
relationships with Governmental Authorities, customers, suppliers and other
persons with which it has business relations. By way of amplification and not
limitation, during the period from the date of this Agreement to the STP
Acquisition Closing, Genco Holdings agrees that no Company shall directly or
indirectly do, or propose, authorize or commit to do, any of the following, in
each case unless otherwise expressly contemplated by this Agreement, as
40
set forth in Section 6.1 of the Companies Disclosure Letter or without the prior
written consent of Buyer, which consent shall not be unreasonably withheld or
delayed:
(a) amend or otherwise change any Company's articles of
incorporation or bylaws (or similar organizational documents);
(b) except as required under a Contract in force as of the date of
this Agreement, issue, deliver, sell, lease, sell and leaseback, pledge,
license, transfer, mortgage, encumber, dispose of or otherwise subject to any
Lien (i) any Company Securities or (ii) any property or assets, whether tangible
or intangible, of any Company, other than assets sold, leased, pledged,
licensed, transferred, disposed of or encumbered in the ordinary course of
business and in a manner consistent with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock or other equity interests, property or
otherwise, with respect to any of Company Securities other than (i) dividends by
a direct or indirect wholly-owned subsidiary of Genco Holdings to its parent to
the extent required to fund the dividends referred to in clause (ii) or (iii)
below, (ii) prior to the Public Company Merger Closing Date, regular quarterly
cash dividends with respect to the Common Stock, not in excess of $0.25 per
share per quarter, in each case with usual declaration, record and payment dates
and otherwise in accordance with Genco Holdings' past dividend policy and (iii)
following the Non-STP Acquisition Closing and the repayment of all principal and
interest under the Overnight Bridge Loan, if any, distribution by Genco Holdings
of up to $2,231 million in the aggregate of Non-STP Consideration or other cash;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of the Company Securities;
(e) repurchase, repay or incur any Indebtedness or issue any
securities in respect of Indebtedness or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations or
Indebtedness of any person, other than repayments in the ordinary course of
business and in a manner consistent with past practice under the revolving
credit line under the Credit Agreement dated as of December 23, 2003 among Genco
Holdings, Texas Genco GP, LLC, Texas Genco LP, LLC, Genco Services, Genco LP,
various lenders and Deutsche Bank AG New York Branch, as Administrative and
Collateral Agent (as amended, modified or supplemented prior to the date of this
Agreement or as contemplated by Section 6.7(d), which amendments, modifications
and supplements have been furnished to Buyer, the "CREDIT AGREEMENT") and other
than borrowings under the Overnight Bridge Loan, if any;
(f) (i) make aggregate payments pursuant to the Company Affiliate
Contracts set forth in Section 4.22 of the Companies Disclosure Letter, other
than any such payments prior to the Non-STP Acquisition Closing Date, not in
excess of $3,000,000 per month, (ii) forgive any liabilities, debts or
obligations under any Company Affiliate Contract set forth in Section 4.22 of
the Companies Disclosure Letter; (iii) take any action outside the ordinary
course of business consistent with past practice pursuant to any Company
Affiliate Contracts set forth in Section 4.22 of the Companies
41
Disclosure Letter; or (iv) engage in or enter into any Company Affiliate
Contract which would be required to be set forth in Section 4.22 of the
Companies Disclosure Letter if in effect on the date of this Agreement;
(g) (i) amend in any material respect, terminate, cancel or renew
any Company Contract or enter into any Contract that would be a Company Contract
if in effect on the date of this Agreement, provided that, for the avoidance of
doubt, to the extent any such Contract is entered into after the date of this
Agreement in accordance with this Agreement, such Contract shall be deemed to be
a Company Contract for purposes of this Agreement, (ii) acquire (including by
merger, consolidation or acquisition of stock or assets) any assets (other than
in the ordinary course of business), business or any corporation, partnership,
limited liability company, association or business organization or division
thereof (other than acquisitions prior to the Non-STP Acquisition Closing having
an aggregate consideration of not more than $5,000,000) other than fuel,
supplies, maintenance materials and other inventory items in the ordinary course
of business consistent with past practice, or (iii) except as set forth in
Section 6.1(g) of the Companies Disclosure Letter, authorize or make any capital
expenditures, except such expenditures made prior to the Non-STP Acquisition
Closing Date in an amount not in excess of $5,000,000 individually or
$25,000,000 in the aggregate;
(h) amend, terminate, cancel or renew the Power Purchase Agreement
or the agreements referred to in Section 6.18;
(i) except as required by applicable Law (including, for the
avoidance of doubt, ERCOT Market regulation), reactivate or enter into any
"reliability must run" Contract with respect to any generating plant that, as of
the date of this Agreement, is shutdown or "mothballed";
(j) except to the extent required under applicable Law or the terms
of any Company Plan existing as of the date of this Agreement, (i) increase or
otherwise amend the compensation or fringe benefits of any present or former
director, officer or employee of any Company (except for increases in salary or
hourly wage rates, in the ordinary course of business consistent with past
practice), (ii) grant any retention, severance or termination pay to, or enter
into, or amend, any employment, consulting or severance Contract with any
present or former director, officer or employee of any Company, (iii) loan or
advance any money or other property to any present or former director, officer
or employee of any Company; (iv) establish, enter into, adopt, amend or
terminate any Company Plan, any collective bargaining agreements identified on
Section 4.12 of the Companies Disclosure Letter or any plan, agreement, program,
policy, trust, fund or other arrangement that would be a Company Plan if it were
in existence as of the date of this Agreement; or (v) hire any new employees;
(k) fail to maintain its books and records in accordance with GAAP
in any material respect or, except as may be required as a result of a change in
Law or in GAAP, and subject to the establishment of the TGN Retirement Plan
pursuant to Section 6.8(e) of this Agreement, change material Tax, pension,
regulatory or financial accounting policies, procedures, practices or principles
used by it;
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(l) make, change or rescind any material Tax election; fail to duly
and timely file all material Tax Returns and other documents required to be
filed with any Governmental Authority, subject to timely extensions permitted by
applicable Law; extend the statute of limitations with respect to any Tax; or,
except in the ordinary course of business, settle or compromise any material
federal, state, local or foreign Tax liability;
(m) waive, release, assign, settle or compromise any pending or
threatened Action which is material, which relates to the transactions
contemplated hereby or which is brought by any current, former or purported
holder of any Company Securities in such capacity;
(n) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of any Company;
(o) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction when due or
otherwise in the ordinary course of business and consistent with past practice
of liabilities reflected or reserved against in the balance sheet or incurred in
the ordinary course of business after March 31, 2004 and consistent with past
practice;
(p) make any loans, advances or capital contributions (including any
"keep well" or other Contract to maintain any financial statement condition of
another person) to, or investments in, any other person, except for loans,
advances and capital contributions to Companies that are wholly-owned by Genco
Holdings and are in existence on the date of this Agreement (other than any loan
by Genco LP or Genco Services);
(q) other than in the ordinary course of business and in a manner
consistent with past practice or as required by applicable Law, (i) modify in
any material respect the Trading Policies or any similar policy, other than
modifications which are more restrictive to any Company, or (ii) enter into any
Contract or transaction related to any Derivative Product or any similar
transaction (other than as permitted by the Trading Policies);
(r) enter into, amend, terminate, cancel or renew any Contract or
other transaction other than in the ordinary course of business and in a manner
consistent with past practice, as required by applicable Law, or otherwise that,
individually or in the aggregate with all other Contracts or transactions, would
conflict with, violate or otherwise would not be permitted under the Trading
Policies or any similar purchasing policy;
(s) fail to maintain in full force and effect insurance policies
covering the Companies and their respective properties, assets and businesses in
a form and amount consistent with good utility practice, including the Company
Insurance Policies
43
(except in the ordinary course of business to the extent any such policies
expire in accordance with their term and they are replaced with policies
consistent with good utility practice) and to promptly and diligently prosecute
claims under such policies;
(t) except to the extent required by applicable Law, take any action
that would reasonably be expected to result in (i) any representation and
warranty of the Companies set forth in this Agreement (A) that is qualified as
to materiality or Companies Material Adverse Effect becoming untrue or (B) that
is not so qualified becoming untrue in any material respect or (ii) any
condition to the Public Company Merger set forth in Article VII not being
satisfied;
(u) fail to take any action that would reasonably be expected to,
directly or indirectly, prevent or materially impair or delay the consummation
of the transactions contemplated hereby (except to the extent specifically
permitted by Section 10.1); or
(v) take, offer, propose to take or enter into or amend any Contract
to take, offer or propose any of the actions described above in Sections 6.1(a)
through 6.1(u).
Section 6.2 Access to Information.
(a) From the date of this Agreement to the STP Acquisition Closing,
Genco Holdings will, and will cause each other Company and its and their
respective officers, directors, employees, accountants, auditors, counsel,
financial advisors and other agents and representatives (collectively,
"REPRESENTATIVES") to (i) give Buyer and its Representatives and potential
financing sources for the transactions contemplated by this Agreement reasonable
access during normal business hours to the officers, employees, agents,
properties (including the South Texas Project), offices, plants and other
facilities and to the books, personnel, Contracts and records of Genco Holdings
or any Company, (ii) permit Buyer to make such copies and inspections thereof as
Buyer may reasonably request, and (iii) furnish Buyer with such financial,
trading, marketing and operating data and other information concerning the
business, properties (including the South Texas Project), Contracts, assets,
liabilities, personnel and other aspects of any Company, as Buyer and its
Representatives and potential financing sources may from time to time reasonably
request, provided, however, that any access to properties of the Companies shall
be conducted at Buyer's expense, at a reasonable time, under the reasonable
supervision of the Companies' personnel and in such a manner as to not interfere
unreasonably with the operation of the businesses of Genco Holdings or the
Companies; provided, further, that Genco Holdings shall not be required to
provide access to any information (i) that is subject to attorney-client
privilege to the extent doing so would reasonably be expected to cause such
privilege to be waived or (ii) that is subject to contractual prohibition
against disclosure to the extent doing so would violate such prohibition, it
being agreed that Genco Holdings shall use its commercially reasonable efforts
to seek to furnish any such information in a manner that does not result in any
such waiver or violation, including entering into joint defense agreements and
obtaining requisite consents.
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(b) All such information and access shall be subject to the terms
and conditions of the letter agreements (collectively, the "CONFIDENTIALITY
AGREEMENT") between the Investors and CenterPoint, until the STP Acquisition
Closing Date, with respect to the STP Assets and Liabilities, and until the
Non-STP Acquisition Closing Date with respect to the Non-STP Assets and
Liabilities. Notwithstanding anything to the contrary contained in this
Agreement, none of Parents, the Companies or any of their affiliates will have
any obligation to make available or provide to Buyer or its representatives a
copy of any consolidated, combined or unitary Tax Return filed by Genco
Holdings, or any of their affiliates, or any related material other than any
portions of such Tax Returns that relate to the Companies.
Section 6.3 Consents; Cooperation.
(a) Each of Parents and Buyer shall cooperate, and use commercially
reasonable efforts, to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other party in doing, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby as promptly as practicable, including, but not
limited to making all filings and obtaining all Approvals and third party
consents necessary to consummate the transactions contemplated by this
Agreement, provided, however, that, with respect to the foregoing, (i) such
efforts shall not require Parents, Merger Sub, the Companies, Buyer or any of
their respective subsidiaries to make any payment to obtain any such Approval or
third-party consent, other than nominal transfer fees or filing fees and/or the
costs and expenses of third parties pursuant to the terms of any Contract, (ii)
Parents, Merger Sub and the Companies shall not be permitted to consent to any
action or to make or offer to make any substantive commitment or undertaking or
incur any liability or obligation with respect to the Companies without the
consent of Buyer, which shall not be unreasonably withheld and (iii) that,
notwithstanding the foregoing, the actions of Parents, Merger Sub, the Companies
and Buyer with respect to filings, approvals and other matters (A) pursuant to
the HSR Act and any local, state, federal (other than the HSR Act) or foreign
antitrust statute, antitrust law, antitrust regulation or antitrust rule
applicable to Parents, the Companies or Buyer ("OTHER ANTITRUST REGULATIONS")
shall be governed by subsections (b), (c), (d) and (e) of this Section 6.3 and
(B) related to the NRC Approval shall be governed by Section 6.12 hereof.
(b) CenterPoint and Buyer shall file with (i) the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ"), the notification and report form required for the transactions
contemplated by this Agreement and any supplemental information requested in
connection with such notification and report form pursuant to the HSR Act, and
(ii) any other applicable Governmental Authority, all filings, reports,
information and documentation required for the consummation of the transactions
contemplated by this Agreement pursuant to the Other Antitrust Regulations. Each
of CenterPoint and Buyer shall furnish to each other's counsel such necessary
information and reasonable assistance as the other party may reasonably request
in connection with its preparation of any filing or submission that is necessary
under the HSR Act and Other Antitrust Regulations. Each of CenterPoint and Buyer
shall consult with each other as to the appropriate time of making such filings
and
45
submissions and shall use commercially reasonable efforts to make such filings
and submissions at the agreed upon time.
(c) Each of Parents, the Companies and Buyer shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, the FTC and the DOJ and other governmental or
regulatory entities and shall comply promptly by responding to any such inquiry
or request.
(d) Each of Parents, the Companies and Buyer shall use commercially
reasonable efforts to vigorously defend, lift, mitigate and rescind the effect
of any Action materially and adversely affecting this Agreement or the ability
of the parties to consummate the transactions contemplated by this Agreement,
including promptly appealing any adverse Order.
(e) Prior to the date specified in Section 10.1(b) (as it may be
extended pursuant thereto), each of Genco Holdings and Buyer shall take any and
all steps necessary to avoid or eliminate each and every impediment under the
HSR Act and any Other Antitrust Regulations that may be asserted by any
Governmental Authority with respect to the transactions contemplated by this
Agreement so as to enable the Public Company Merger Closing, the Non-STP
Acquisition Closing and the STP Acquisition Closing to occur as soon as
reasonably possible, including proposing, negotiating, committing to and
effecting, by consent decree, hold separate order or otherwise, the sale,
divestiture or disposition of such assets or businesses of Buyer or any of its
subsidiaries or otherwise take or commit to take any action that limits its
freedom of action with respect to, or its ability to retain, any of the
businesses, product lines or assets of Buyer or its subsidiaries, as may be
required in order to avoid the entry of, or to the effect the dissolution of,
any injunction, temporary restraining order or other order in any suit or
proceeding, which would otherwise have the effect of preventing or delaying the
Public Company Merger Closing, the Non-STP Acquisition Closing or the STP
Acquisition Closing. At the request of CenterPoint, Buyer shall agree to divest,
hold separate or otherwise take or commit to take any action that limits its
freedom of action with respect to, or its ability to retain, any of the
businesses or assets of Buyer or any of its subsidiaries, provided that (i) any
such action may be conditioned upon the consummation of the transactions
contemplated by this Agreement and (ii) any such actions do not and would not
reasonably be expected to have, individually or in the aggregate, a Companies
Material Adverse Effect.
(f) With respect to any agreements for which any required Approval
or third-party consent is not obtained prior to the Public Company Merger
Closing Date, the Non-STP Acquisition Closing or the STP Acquisition Closing
Date, as applicable, Parents, the Companies and Buyer will each use commercially
reasonable efforts to obtain any such consent or approval after such date until
such consent or approval has been obtained and Parents will provide Buyer or,
after the STP Acquisition Closing Date, any Company, with the same benefits
arising under such agreements, including performance by either Parent as agent,
if legally and commercially feasible, provided that Buyer will provide Parents
with such access to the premises, books and records and personnel as is
necessary to enable Parents to perform their obligations under such
46
agreements and Buyer shall pay or satisfy the corresponding liabilities for the
enjoyment of such benefits to the extent Buyer would have been responsible
therefor if such consent or approval had been obtained.
(g) Parents and Genco Holdings shall keep Buyer reasonably apprised
of the status of matters relating to the completion of the transactions
contemplated hereby and shall promptly furnish Buyer with copies of all notices
or other communications received by Parents or by any Company or its or their
Representatives from any third party and/or any Governmental Authorities with
respect to the transactions contemplated hereby. Parents and Genco Holdings
shall promptly furnish to Buyer such necessary information and reasonable
assistance as Buyer may request in connection with the foregoing and shall
promptly provide counsel for Buyer with copies of all filings made by Parents or
the Companies, and all correspondence between Parents or the Companies (and
their respective Representatives) with any Governmental Authority and any other
information supplied by Parents and any Company (and their respective
Representatives) to a Governmental Authority in connection herewith and the
transactions contemplated hereby. Parents and Genco Holdings shall, subject to
applicable Law, permit counsel for Buyer reasonable opportunity to review in
advance, and consider in good faith the views of Buyer in connection with, any
proposed written communication by Parents or the Companies to any Governmental
Authority. Parents, Merger Sub and Genco Holdings agree not to participate, or
to permit any Company to participate, in any substantive meeting or discussion,
either in person or by telephone, with any Governmental Authority in connection
herewith and the transactions contemplated hereby unless it consults with Buyer
in advance and, to the extent not prohibited by such Governmental Authority,
gives Buyer and its counsel the opportunity to attend and participate.
(h) Buyer shall keep CenterPoint and Genco Holdings reasonably
apprised of the status of matters relating to the completion of the transactions
contemplated hereby and shall promptly furnish CenterPoint and Genco Holdings
with copies of all notices or other communications received by Buyer or its
Representatives from any third party and/or any Governmental Authorities with
respect to the transactions contemplated hereby, other than with respect to the
Debt Financing for which Buyer's obligations shall be governed by Section
6.7(a). Buyer shall promptly furnish to CenterPoint and Genco Holdings such
necessary information and reasonable assistance as CenterPoint and Genco
Holdings may request in connection with the foregoing and shall promptly provide
counsel for CenterPoint and Genco Holdings with copies of all filings made by
Buyer, and all correspondence between Buyer (and its Representatives) with any
Governmental Authority and any other information supplied by Buyer (and its
Representatives) to a Governmental Authority in connection herewith and the
transactions contemplated hereby. Buyer shall, subject to applicable Law, permit
counsel for CenterPoint and Genco Holdings reasonable opportunity to review in
advance, and consider in good faith the views of CenterPoint and Genco Holdings
in connection with, any proposed written communication by Buyer to any
Governmental Authority. Buyer agrees not to participate in any substantive
meeting or discussion, either in person or by telephone, with any Governmental
Authority in connection herewith and the transactions contemplated hereby unless
it consults with CenterPoint and Genco Holdings in advance
47
and, to the extent not prohibited by such Governmental Authority, gives
CenterPoint and Genco Holdings and its respective counsel the opportunity to
attend and participate.
(i) In the event and for so long as Buyer actively is prosecuting,
contesting or defending any Action against a third party in connection with (i)
any transactions contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction involving the Companies arising
out of or related to facts or events, existing prior to the STP Acquisition
Closing, the Parents shall, and shall cause their respective affiliates to,
cooperate with Buyer and, after the STP Acquisition Closing, the Companies and
their counsel in the prosecution, contest or defense, make available its
personnel, and provide such testimony and access to its books and records and
facilities as shall be reasonably necessary in connection with the prosecution,
contest or defense, all at the sole control, cost and expense of the Companies.
(j) Genco Holdings shall use its reasonable best efforts to obtain
from the IRS prior to the STP Acquisition Closing (i) a ruling that the indirect
transfer of the assets of the Qualified Decommissioning Fund pursuant to this
Agreement is not a taxable event and (ii) a ruling that Genco Holdings will
continue to be entitled to make tax-deductible contributions to the Qualified
Decommissioning Fund after the STP Acquisition Closing. Parent and Genco
Holdings shall keep Buyer apprised of the status of any communications with, and
any inquiries or requests for additional information from, the IRS with respect
to such rulings and shall promptly respond to any such inquiry or request.
Section 6.4 Commercially Reasonable Efforts. Each of Parents, Genco
Holdings and Buyer shall cooperate, and use commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate the
transactions contemplated by this Agreement. Without limiting the foregoing,
after the Non-STP Acquisition Closing, each of the parties at the reasonable
request of the other shall execute and deliver, or cause to be executed and
delivered, such assignments, deeds, bills of sale and other instruments of
transfer as any party reasonably may request as necessary, proper or advisable
in order to effect or further evidence the Non-STP Acquisition and the other
transactions contemplated thereby. In addition, at the STP Acquisition Closing,
Parents shall deliver, or cause to be delivered, to Buyer all minute books,
stock record books (or similar registries) and corporate (or similar) records
and seals of the Companies held by Parents or their respective affiliates (other
than the Companies) or otherwise not in the possession of the Companies, other
than such items delivered in connection with the Non-STP Acquisition.
Section 6.5 Public Announcements. Prior to the STP Acquisition
Closing, except as otherwise agreed to by the parties, the parties shall not
issue any report, statement or press release or otherwise make any public
statements with respect to this Agreement and the transactions contemplated by
this Agreement, except as described in the following sentence and in the
reasonable judgment of the party may be required by Law (including in connection
with regulatory proceedings) or in connection with its
48
obligations as a publicly-held, exchange-listed or Nasdaq-quoted company, in
which case the parties will use their commercially reasonable efforts to reach
mutual agreement as to the language of any such report, statement or press
release. Upon the execution of this Agreement and upon each of the Public
Company Merger Closing, the Non-STP Acquisition Closing and the STP Acquisition
Closing, the parties will consult with each other with respect to the issuance
of a joint report, statement or press release with respect to this Agreement and
the transactions contemplated by this Agreement.
Section 6.6 Tax Matters.
(a) No Election Under Section 338(h)(10). CenterPoint and Buyer
agree that they will not make a joint election under Section 338(h)(10) of the
Code or under any comparable provision of state or local Law (an "ELECTION")
with respect to the STP Acquisition.
(b) Indemnification.
(i) Parents' Indemnification of Buyer. Notwithstanding
anything in the Spin-off Separation Agreement to the contrary, Parents
shall indemnify Buyer and the Companies from, against and in respect of
any (A) Taxes (as defined in Section 6.6(n) of this Agreement) with
respect to the Non-STP Assets and Liabilities for any Taxable period
ending on or prior to the Non-STP Acquisition Closing Date and the portion
of any Straddle Period ending on the Non-STP Acquisition Closing Date
(determined in accordance with the provisions of paragraph (c) below), (B)
Taxes imposed on any Company (including, without limitation, any Taxes
attributable to the Non-STP Acquisition or the Genco LP Division) for any
Taxable period ending on or prior to the STP Acquisition Closing Date and
the portion of any Straddle Period ending on the STP Acquisition Closing
Date (determined in accordance with the provisions of paragraph (c)
below), (C) Taxes for which any Company may be liable under Treasury
Regulation Section 1.1502-6 (or any corresponding provision of state,
local or foreign Law), as a member of an affiliated, consolidated or
combined group, (D) Taxes of any other person for which any Company may be
liable as a transferee or successor, by contract or otherwise, (E) Taxes
resulting from any obligation under, any Tax sharing, Tax indemnity or
similar contract and (F) any Transfer Taxes (as defined below) for which
either Parent is liable under Section 6.6(f) of this Agreement.
(ii) Buyer's Indemnification of Parents. Buyer shall indemnify
Parents from, against and in respect of any liability of Parents or their
subsidiaries for any (A) Taxes with respect to the Non-STP Assets and
Liabilities for any Taxable period beginning after the Non-STP Acquisition
Closing Date and the portion of any Straddle Period beginning after the
Non-STP Acquisition Closing Date (determined in accordance with the
provisions of paragraph (c) below), (B) Taxes imposed on any Company for
any Taxable period beginning after the STP Acquisition Closing Date and
the portion of any Straddle Period beginning after the STP Acquisition
Closing Date (determined in accordance with the provisions
49
of paragraph (c) below); and (C) Transfer Taxes for which Buyer is liable
under Section 6.6(f) of this Agreement.
(c) Computation of Tax Liabilities; Proration of Taxes and Earnings
and Profits. To the extent permitted by applicable Law or administrative
practice, the taxable years of the Companies shall end on and include the
Non-STP Acquisition Closing Date with respect to any Company acquired (directly
or indirectly) by Buyer on such date or STP Acquisition Closing Date with
respect to any Company acquired (directly or indirectly) by Buyer on such date.
Whenever it is necessary to determine the liability for Taxes, or the earnings
and profits, for a portion of a taxable year or period that begins before and
ends after, as applicable, the Non-STP Acquisition Closing Date or the STP
Acquisition Closing Date (the "APPLICABLE CLOSING DATE") (a "STRADDLE PERIOD"),
the determination of the Taxes or the earnings and profits for the portion of
the year or period ending on, and the portion of the year or period beginning
after, the Applicable Closing Date shall be determined by assuming that the
taxable year or period ended on and included the Applicable Closing Date, except
that exemptions, allowances or deductions that are calculated on an annual basis
and annual property taxes shall be prorated on the basis of the number of days
in the annual period elapsed through the Applicable Closing Date as compared to
the number of days in the annual period elapsing after the Applicable Closing
Date. Notwithstanding anything to the contrary herein, any franchise Tax paid or
payable with respect to any Company shall be allocated to the taxable period
during which the income, operations, assets or capital comprising the base of
such Tax is measured, regardless of whether the right to do business for another
taxable period is obtained by the payment of such franchise Tax.
(d) Tax Returns.
(i) Parents shall prepare, or cause to be prepared, in
accordance with past practice unless otherwise required by applicable Law,
and file or cause to be filed when due Tax Returns with respect to the
Companies for any taxable period, or portion thereof, ending on or before
the STP Acquisition Closing Date which are required or permitted by
applicable Law or administrative practice to be filed with respect to a
taxable period, or portion thereof, ending on or before the STP
Acquisition Closing Date.
(ii) Buyer shall prepare, or cause to be prepared, and file or
cause to be filed when due all other Tax Returns with respect to the
Companies required to be filed with respect to a taxable period, or
portion thereof, ending after the STP Acquisition Closing Date.
(iii) If either Buyer or Parents may be liable for any
material portion of the Tax payable in connection with any Tax Return to
be filed by the other (or any item reported on such Tax Return is likely
to affect the Tax liability of such party), the party responsible under
this Agreement for filing such return (the "PREPARER") shall prepare and
deliver to the other party (the "PAYOR") a copy of such return and any
schedules, work papers and other documentation then available that are
relevant to the preparation of the portion of such return for
50
which the Payor is or may be liable under this Agreement not later than 45
days before the Due Date (as defined in Section 6.6(n) of this Agreement).
The Preparer shall not file such return until the earlier of either the
receipt of written notice from the Payor indicating the Payor's consent
thereto, or the Due Date.
The Payor shall have the option of providing to the Preparer, at any
time at least 15 days prior to the Due Date, written instructions as to how the
Payor wants any, or all, of the items for which it may be liable (or any item
that is likely to affect the Tax liability of such party) reflected on such Tax
Return. The Preparer shall, in preparing such return, cause the items for which
the Payor is liable under this Agreement to be reflected in accordance with the
Payor's instructions (unless, in the opinion of a partner of a nationally
recognized law firm retained by the Preparer, complying with the Payor's
instructions would likely subject the Preparer to any criminal penalty or to
civil penalties under sections 6662 through 6664 of the Code or similar
provisions of applicable state, local or foreign Law) and, in the absence of
having received such instructions, in accordance with past practice.
If the Preparer fails to satisfy its obligations under this Section
6.6(d), the Payor shall have no obligation to indemnify the Preparer for any
Taxes which are reflected on any such return or any related loss, and shall
retain any and all remedies it may otherwise have which arise out of such
failure.
(e) Contest Provisions.
(i) Notification of Contests. Each of Buyer, on the one
hand, and Parents, on the other hand (the "RECIPIENT"), shall notify the
chief tax officer (or other appropriate person) of Parents or Buyer, as
the case may be, in writing within 15 days of receipt by the Recipient of
written notice of any pending or threatened audits, adjustments or
assessments (a "TAX AUDIT") which are likely to affect the liability for
Taxes of such other party. If the Recipient fails to give such prompt
notice to the other party, it shall not be entitled to indemnification for
any Taxes arising in connection with such Tax Audit to the extent that
such failure to give notice adversely affects the other party's right to
participate in the Tax Audit.
(ii) Which Party Controls.
(a) Parents' Items. If such Tax Audit relates to any
taxable period, or portion thereof, ending on or before the
Applicable Closing Date or for any Taxes for which Parents are
liable in full under this Agreement, Parents shall, at their
expense, control the defense and settlement of such Tax Audit.
(b) Buyer's Items. If such Tax Audit relates to any
taxable period, or portion thereof, beginning on or after the
Applicable Closing Date or for any Taxes for which Buyer is liable
in full under this Agreement, Buyer shall, at its expense, control
the defense and settlement of such Tax Audit.
51
(c) Combined and Mixed Items. If such Tax Audit
relates to Taxes for which both Parents and Buyer are liable under
this Agreement, to the extent practicable such Tax Items (as defined
in Section 6.6(n) of this Agreement) will be distinguished and each
party will control the defense and settlement of those Taxes for
which it is so liable. If such Tax Audit relates to a taxable
period, or portion thereof, beginning before and ending after the
Applicable Closing Date and any Tax Item cannot be identified as
being a liability of only one party or cannot be separated from a
Tax Item for which the other party is liable, Parents, at their
expense, shall control the defense and settlement of the Tax Audit,
provided that such party defends the items as reported on the
relevant Tax Return and provided further that no such matter shall
be settled without the written consent of both parties, not to be
unreasonably withheld.
(d) Participation Rights. Any party whose liability
for Taxes may be affected by a Tax Audit shall be entitled to
participate at its expense in such defense and to employ counsel of
its choice at its expense and shall have the right to consent to any
settlement of such Tax Audit, (such consent not to be unreasonably
withheld) to the extent that such settlement would have an adverse
effect for a period for which that party is liable for Taxes, under
this Agreement or otherwise.
(f) Transfer Taxes. All excise, sales, use, transfer (including
real property transfer or gains), stamp, documentary, filing, recordation and
other similar taxes, together with any interest, additions or penalties with
respect thereto and any interest in respect of such additions or penalties,
resulting directly from the Non-STP Acquisition or the STP Acquisition (the
"TRANSFER TAXES"), shall be shared equally by Parents and Buyer. Notwithstanding
Section 6.6(d) of this Agreement, which shall not apply to Tax Returns relating
to Transfer Taxes, any Tax Returns that must be filed in connection with
Transfer Taxes shall be prepared and filed when due by the party primarily or
customarily responsible under the applicable local Law for filing such Tax
Returns, and such party will use its commercially reasonable efforts to provide
such Tax Returns to the other party at least 10 days prior to the Due Date for
such Tax Returns.
(g) Buyer's Claiming, Receiving or Using of Refunds and
Overpayments. If, after the STP Acquisition Closing Date, Buyer or any Company
(i) receives any refund or (ii) actually utilizes the benefit of any overpayment
of Taxes which, in each case (i) and (ii), (A) relates to Taxes paid by Parents
or any Company with respect to a taxable period, or portion thereof, ending on
or before the STP Acquisition Closing Date, or (B) is the subject of
indemnification by Parents under this Agreement, Buyer shall promptly transfer,
or cause to be transferred, to Parents the entire amount of the refund or
overpayment (including interest, if any, received from the Taxing Authority with
respect to such refund) received or actually utilized by Buyer or any Company
(net of any tax thereon), provided, however, that any refund or tax benefit
related to the carryback of any Tax Item of any Company from a taxable period
beginning after the STP Acquisition Closing Date to a taxable period ending on
or before the STP Acquisition Closing Date to the extent permitted by Section
6.6(h) shall be for the
52
account of Buyer. Buyer agrees to notify Parents within 15 days following the
receipt of any such refund or actual utilization of any such overpayment.
(h) Buyer shall make, and shall cause the Companies to make,
elections under Section 172(b)(3) and any other applicable provision of the Code
and the Treasury Regulations promulgated thereunder, and under any comparable
provision of any state, local or foreign tax law in any state, locality or
foreign jurisdiction in which any Company files a combined, consolidated or
unitary return with Parents, to relinquish the entire carryback period with
respect to any Tax Item of any Company arising in any taxable period beginning
after the STP Acquisition Closing Date that could be carried back to a taxable
year of such Company ending on or before the STP Acquisition Closing Date;
provided, however, that with respect to any such item for which an election
cannot be made under applicable Law, Parents shall be required to pay to Buyer
or the applicable Company thereof any Tax refund received or credit utilized
that results solely from such carryback net of any costs of Seller in procuring
such Tax refund or credit. To the extent permitted by this Section 6.6(h),
Parents shall permit Buyer or any Company to (or, with respect to consolidated,
combined or unitary income taxes, Parents shall at Buyer's request) amend and
file any Tax Return filed by or including any Company in order to carryback any
Tax Item of any Company from a taxable period beginning after the STP
Acquisition Closing Date to a taxable period ending on or before the STP
Acquisition Closing Date.
(i) Resolution of All Tax-Related Disputes. In the event that
Parents and Buyer cannot agree on the calculation of any amount relating to
Taxes or the interpretation or application of any provision of this Agreement
relating to Taxes, such dispute shall be resolved by a partner at a nationally
recognized law firm or nationally recognized accounting firm mutually acceptable
to Parents and Buyer, whose decision shall be final and binding upon all persons
involved and whose expenses shall be shared equally by Parents and Buyer.
(j) Post-Closing Actions Which Affect Liability for Taxes.
(a) Buyer shall not permit any Company to take any
action on or after the Applicable Closing Date which could
materially increase Parents' liability for Taxes (including any
liability of Parents to indemnify Buyer and the Companies for Taxes
under this Agreement). Parents shall not take any action on or after
the Applicable Closing Date which could materially increase Buyer's
or any Company's liability for Taxes (including any liability of
Buyer or any Company to indemnify Parents for Taxes under this
Agreement).
(b) Except to the extent required by applicable Law,
or as provided in Sections 6.6(g) and (h), neither Buyer, Parents,
any Company nor any affiliate of any of them shall, without the
prior written consent of the other party, amend any Tax Return (with
respect to any Tax Item of any Company) filed by, or with respect
to, any Company or any of
53
their subsidiaries for any taxable period, or portion thereof,
beginning before the Applicable Closing Date.
(k) Assistance and Cooperation. The parties agree that, after the
Applicable Closing Date:
(i) Each party shall assist (and cause their respective
affiliates to assist) the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing;
(ii) The parties shall cooperate fully in preparing for any
Tax Audits, or disputes with taxing authorities, relating to any Tax
Returns or Taxes of any Company, including providing access to relevant
books and records relating to Taxes at issue;
(iii) The parties shall make available to each other and to
any taxing authority as reasonably requested all relevant books and
records relating to Taxes;
(iv) Each party shall promptly furnish the other party with
copies of all relevant correspondence received from any taxing authority
in connection with any Tax Audit or information request relating to Taxes
for which such other party may have an indemnification obligation under
this Agreement; and
(v) Except as otherwise provided in this Agreement, the
party requesting assistance or cooperation shall bear the other party's
out-of-pocket expenses in complying with such request to the extent that
those expenses are attributable to fees and other costs of unaffiliated
third-party service providers.
(l) This Section 6.6 alone shall govern the procedure for all Tax
indemnification claims.
(m) The Tax Allocation Agreement by and among CenterPoint Energy,
Inc. and its Affiliated Companies and Texas Genco Holdings, Inc. and its
Affiliated Companies dated as of August 31, 2002 (the "Tax Allocation
Agreement"), shall remain in effect until (i) the Non-STP Acquisition Closing
Date, with respect to any Company acquired (directly or indirectly) by Buyer on
such date or (ii) the STP Acquisition Closing Date, with respect to any Company
acquired (directly or indirectly) by Buyer on such date, at which time such
agreement, and any other Tax sharing agreement or arrangements, written or
unwritten, binding any Company shall terminate. Notwithstanding the foregoing,
unless the transactions contemplated by this Agreement are terminated, no
payments shall be made by Genco Holdings or any other Company under the Tax
Allocation Agreement or any Tax sharing agreements or arrangements, other than
payments with respect to current Taxes payable imposed in the ordinary course of
business for the current taxable period (the "Permitted Payments")(for the
avoidance of doubt, such Permitted Payments shall exclude (A) any Taxes relating
to the Non-STP Acquisition or the Genco LP Division and (B) any adjustments
which would otherwise be
54
made to Taxes paid under such Tax Allocation Agreement by Genco Holdings or any
other Company for prior periods), and provided, however that any Permitted
Payments that would not have been due under the terms of the Tax Allocation
Agreement until after the Non-STP Acquisition Closing Date or STP Acquisition
Closing Date, as applicable, shall be paid on the date set forth in such Tax
Allocation Agreement (notwithstanding the fact that such Tax Allocation
Agreement may have been previously terminated pursuant to this Section 6.6(m)).
(n) For purposes of this Agreement, "TAX" or "TAXES" shall mean
taxes (other than the Transfer Taxes) of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including income taxes,
gross receipts, ad valorem, value added, excise, real or personal property,
asset, sales, use, license, payroll, transaction, capital, net worth, franchise,
withholding, estimated, social security, utility, workers' compensation,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes, unclaimed property and escheat obligations,
franchise fees, street rentals, right-of-way fees and any other fees or
impositions related to the use or occupancy of public rights of way or other
governmental taxes imposed by or payable to the United States, or any state,
county, local or foreign government or subdivision or agency thereof, together
with any interest, penalties or additions with respect thereto and any interest
in respect of such additions or penalties; "DUE DATE" shall mean, with respect
to any Tax Return, the date such return is due to be filed (taking into account
any valid extensions); "TAX ITEM" shall mean, with respect to Taxes, any item of
income, gain, deduction, loss or credit or other tax attribute "TAX RETURN"
shall mean any return, declaration, report, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
Section 6.7 Debt Financing.
(a) Parents and Genco Holdings agree to provide, and shall cause
each Company and their respective Representatives to provide, all cooperation
reasonably requested by Buyer and necessary in connection with the arrangement
of the Debt Financing, including (i) participation in meetings, drafting
sessions, due diligence sessions, management presentation sessions, "road shows"
and sessions with rating agencies, (ii) preparation by Genco Holdings of
business projections, financial statements, offering memoranda, private
placement memoranda, prospectuses and similar documents and (iii) execution and
delivery by the Companies of any underwriting or placement agreements, pledge
and security documents, other definitive financing documents, including any
indemnity agreements, or other requested certificates or documents, including a
certificate of the chief financial officers of any Company with respect to
solvency matters, comfort letters of accountants, consents of accountants for
use of their reports in any materials relating to the financing to be used in
connection with the transactions contemplated by this Agreement, legal opinions,
engineering reports, environmental reports, surveys and title insurance as may
be reasonably requested by Buyer, provided, however, that no such agreements or
documents shall impose any monetary obligation or liability (i) on the Companies
(excluding, for the avoidance of doubt, the Non-STP Assets and Liabilities in
any Company acquired in the Non-STP
55
Acquisition) prior to the STP Acquisition Closing other than payment obligations
under the Overnight Bridge Loan, or (ii) on CenterPoint or any of its affiliates
other than the Companies. Parents and Genco Holdings shall use commercially
reasonable efforts to cause Deloitte & Touche LLP, the independent auditors of
the Companies, to provide any unqualified opinions, consents or customary
comfort letters with respect to the financial statements needed in connection
with the Debt Financing. Genco Holdings agrees to allow Buyer's accounting
representatives the opportunity to review the financial statements in draft form
and to allow such representatives access to each Company and supporting
documentation with respect to the preparation of such financial statements and
to use commercially reasonable efforts to cause its independent auditors to
provide reasonable access to their working papers relating to procedures
performed with respect to such financial statements. Buyer shall keep
CenterPoint reasonably apprised of the status of all material matters relating
to the arrangement of the Debt Financing and shall give CenterPoint and Genco
Holdings prompt written notice of (i) any material breach by any party of the
Debt Financing Letter (or any definitive agreements entered into pursuant
thereto) or (ii) any termination of the Debt Financing Letter.
(b) Without limiting the generality of the provisions of Section
6.7(a), to the extent reasonably required in connection with the Debt Financing,
Genco Holdings shall use commercially reasonable efforts to provide, or cause
each of the Company and their respective Representatives to provide, the
following:
(i) (1) for each tract of Real Property constituting a power
generating site and the power generating assets located thereon owned by
one of the Companies ("Plant Real Property"), and for the Energy
Development Center, Texas standard form owner's (with respect to the
portion thereof constituting Owned Real Property) and leasehold (with
respect to the portion thereof constituting Leased Real Property) title
insurance policies and, if applicable, a Texas standard form mortgagee's
policy of title insurance reasonably satisfactory to Buyer's sources of
Debt Financing ("BUYER'S LENDER") from one or more nationally recognized
title companies satisfactory to Buyer, Genco Holdings and CenterPoint (the
"TITLE COMPANY"), with each such policy (A) dated as of the Public Company
Merger Closing Date, (B) in an amount reasonably acceptable to Buyer, (C)
accompanied by copies of all documents referenced as exceptions to title,
(D) insuring good, valid and indefeasible fee simple title to the Owned
Real Property and good, valid and indefeasible leasehold interest in the
Leased Real Property in one of the Companies subject only to the Permitted
Liens and such matters as may be reasonably requested by Buyer, (E) naming
such Company as "insured" and (F) containing such other available
endorsements (including, without limitation, non-imputation endorsements)
and affirmative coverages as Buyer may reasonably request, and (2) duly
executed affidavits and other documents executed by the Companies,
consistent with local practice, as are necessary to induce the Title
Company to issue the policies, endorsements and affirmative coverages
described in the manner set forth above in subclause (1);
(ii) a new or recertified survey for each Plant Real Property
and the Energy Development Center (a "SURVEY") of the type and with such
detail as a
56
reasonably prudent financial institution making a project financing loan
for existing electric power generating plants would require (the "SURVEY
STANDARD"), prepared or recertified on or after the date of this Agreement
by land surveyors licensed in the states in which the Owned Real Property
is located, which Surveys have been certified or recertified by said
surveyors to each Company, Buyer, Buyer's Lender and, to the extent
necessary to satisfy the Survey Standard set forth above, show the
following items: (A) no material violation of any setback or building line
requirement (whether such requirements are imposed by Law or deed or
plat), unless the Title Company is willing and able to insure over such
violation; (B) no material encroachment by improvements located on
adjoining properties onto any material portion of any Plant Real Property
or the Energy Development Center, or by improvements located on any
material portion of Plant Real Property or the Energy Development Center,
onto adjoining properties, easements, utilities or rights of way, unless
the Title Company is willing and able to insure over such encroachment;
(C) adequate means of ingress and egress to and from each Plant Real
Property or the Energy Development Center; and (D) the CEHE Land (if any)
adjacent to each tract of Owned Real Property constituting Plant Real
Property;
(iii) a current estoppel certificate, in form reasonably
satisfactory to Buyer, for each Lease, from each lessor thereunder; and
(iv) for all Real Property other than Plant Real Property and
the Energy Development Center, such evidence of title as a reasonably
prudent financial institution making a project financing loan for an
existing portfolio of electric power generating assets would require.
(c) Buyer shall use commercially reasonable efforts to arrange the
Debt Financing on the terms and conditions described in the Debt Financing
Letter, including using commercially reasonable efforts (i) to negotiate
definitive agreements with respect thereto on the terms and conditions contained
therein and (ii) to satisfy all conditions applicable to Buyer in such
definitive agreements that are within its control. In the event any portion of
the Debt Financing becomes unavailable in the manner or from the sources
contemplated in the Debt Financing Letter, Buyer shall use commercially
reasonable efforts to arrange any such portion from alternative sources on terms
and conditions which are, in the reasonable judgment of Buyer, comparable or
more favorable (to Buyer) in the aggregate thereto, and to the extent that any
terms and conditions are not set forth in the Debt Financing Letter, on terms
and conditions reasonably satisfactory to Buyer.
(d) CenterPoint and Genco Holdings shall use commercially
reasonable efforts to obtain any waivers, amendments, modifications or
supplements necessary in connection with the transactions contemplated by this
Agreement to the Credit Agreement or the Credit Agreement, dated October 7,
2003, among CenterPoint, as Borrower, and JPMorgan Chase Bank, as Administrative
Agent.
57
(e) All documented out-of-pocket costs and expenses reasonably
incurred by Parents or the Companies in complying with Sections 6.7(a), (b) or
(c) shall be paid by Buyer, unless this Agreement is terminated prior to the
Public Company Merger Effective Time (i) under circumstances in which Buyer
would have the right to terminate this Agreement under Section 10.1(c) or (ii)
as a result of the failure of the conditions set forth in Section 8.3(a) or
8.3(b) to be satisfied. All documented out-of-pocket costs and expenses incurred
reasonably by Genco Holdings in complying with Section 6.7(d) shall be paid by
CenterPoint.
Section 6.8 Employees; Employee Benefits.
(a) On or as soon as reasonably practicable following the
execution of this Agreement, Genco Holdings shall provide Buyer with a true and
complete list (which shall be confirmed and adjusted as necessary five (5) days
prior to the Non-STP Acquisition Closing Date or, in the case of the employees
listed on Section 6.8(a) of the Companies Disclosure Letter (the "SCHEDULED
EMPLOYEES"), the STP Acquisition Closing Date) of (i) all individuals who are
employed by the Companies on a full-time, permanent or part-time basis
principally at or with respect to the business of the Companies immediately
prior to the Non-STP Acquisition Closing Date or, in the case of the Scheduled
Employees, the STP Acquisition Closing Date (such individuals hereinafter
referred to as the "ACTIVE COMPANY EMPLOYEES"), which list shall include each
Active Company Employee's name, position, hourly wage rate or salary, total
compensation (including incentive and similar compensation), the Company by
which such Active Company Employee is employed, and the vacation time to which
each employee is entitled (for purposes of Section 6.8(b)), and (ii) all
individuals who are employees of the Companies on a full-time, permanent or
part-time basis and are on a leave of absence (due to sickness, disability or
any other reason) immediately prior to the Non-STP Acquisition Closing Date or,
in the case of the Scheduled Employees, the STP Acquisition Closing Date (such
individuals hereinafter referred to as the "EMPLOYEES ON LEAVE"), which list
shall include the same information provided in clause (i) for Active Company
Employees. The parties agree that an Employee on Leave who returns to active
employment with the Companies at his or her former work location not later than
twelve (12) weeks from the Non-STP Acquisition Closing Date or, in the case of
the Scheduled Employees, the STP Acquisition Closing Date (or such later date as
required by Law) shall be considered an Active Company Employee as of the date
such individual returns to active employment with a Company at his or her former
work location. None of the Companies, Buyer or Buyer's affiliates shall have any
obligation under this Agreement to continue the employment of any Active Company
Employee or Employee on Leave following the Non-STP Acquisition Closing Date or,
in the case of the Scheduled Employees, the STP Acquisition Closing Date.
Parents shall retain all responsibility and liability for any wages,
compensation or benefits for any individual employee while such individual is an
Employee on Leave until (and if) such individual becomes an Active Company
Employee.
(b) From and after the Non-STP Acquisition Closing Date or, in the
case of the Scheduled Employees, the STP Acquisition Closing Date, Buyer and its
affiliates will honor in accordance with their terms and this Agreement the
executive,
58
employment and other agreements and arrangements set forth in Section 6.8(b) of
the Companies Disclosure Letter, as of the date of this Agreement, between a
Company and certain employees and former employees thereof, and all of the
Plans; provided, however, that nothing herein shall preclude any change in any
Plan, including termination of any Plan, effective on a prospective basis, and
consistent with applicable Law. Beginning immediately after the Non-STP
Acquisition Closing Date or, in the case of the Scheduled Employees, the STP
Acquisition Closing Date, any Employee Welfare Benefit Plan or material fringe
benefit including vacation pay or paid sick leave, that Buyer maintains,
contributes to or participates in (collectively, "BUYER EMPLOYEE BENEFIT PLANS")
shall be made available to each Active Company Employee when, and on the same
terms and conditions, such Buyer Employee Benefit Plan would be made available
to a new employee of Buyer or its controlled affiliates who is similarly
situated to the Active Company Employee; provided, however, that, during the
one-year period commencing on the Non-STP Acquisition Closing Date, and subject
to Section 6.8(h) of this Agreement, health and welfare benefits provided under
the Employee Welfare Benefit Plans of the Companies and Buyer or its affiliates
for the Active Company Employees shall be substantially similar in the aggregate
to such benefits provided to Active Company Employees immediately prior to the
execution of this Agreement by the Companies and Parents, with such changes to
such Plans, but only to the extent permitted under section 6.1(j) of this
Agreement; and provided, further, that nothing in this Section 6.8(b) shall
result in Buyer providing a duplication of benefits to any Company Employees or
Active Company Employees. Buyer and Buyer Employee Benefit Plans shall recognize
(i) all of each Active Company Employee's time of employment and service with
Parents, their affiliates and the Companies, as applicable, from such Active
Company Employee's initial date of hire through the Non-STP Acquisition Closing
Date or, in the case of the Scheduled Employees, the STP Acquisition Closing
Date for the purpose of determining vesting and eligibility (but not for
purposes of benefit accruals) under Buyer Employee Benefit Plans, (ii) the
amount of annual vacation time under Buyer's vacation policy to which an Active
Company Employee shall be entitled, and (iii) all other purposes for which such
service is either taken into account or recognized; provided, however, that such
service need not be credited to the extent it would result in a duplication of
benefits. On and after the Non-STP Acquisition Closing Date until (i) December
31, 2004, if the Non-STP Acquisition Closing occurs in 2004, or (ii) June 30,
2005, if the Non-STP Acquisition Closing occurs in 2005 (such period the
"TRANSITION PERIOD"), each Active Company Employee shall continue to be covered
under the Company vacation policy and sick leave policy in which such Active
Company Employee participated immediately prior to the Non-STP Acquisition
Closing or, in the case of the Scheduled Employees, the STP Acquisition Closing
Date. During the year in which the Non-STP Acquisition Closing or, in the case
of the Scheduled Employees, the STP Acquisition Closing Date occurs, in addition
to vacation time earned or accrued with any Company, Buyer or its affiliate
after the Non-STP Acquisition Closing or, in the case of the Scheduled
Employees, the STP Acquisition Closing Date, each Active Company Employee shall
be entitled to receive any unused earned or accrued vacation time with the
Company, Buyer or its affiliates that he or she may have accrued or earned
immediately prior to the Non-STP Acquisition Closing Date or, in the case of the
Scheduled Employees, the STP Acquisition Closing Date, subject to management
59
approval for the specific days of vacation required by the Active Company
Employee; provided, however, that, if Buyer deems it necessary to disallow such
Active Company Employee from taking such earned or accrued vacation and such
vacation cannot be rescheduled, Buyer shall be liable for and pay in cash to
each such Active Company Employee an amount equal to the vacation time not taken
as provided under the terms of the vacation policy. Any Active Company Employee
whose employment is voluntarily or involuntarily terminated by Buyer during the
Transition Period shall receive pay for earned or accrued and unused vacation
time in accordance with such Company's vacation policy as in effect immediately
prior to the Non-STP Acquisition Closing or, in the case of the Scheduled
Employees, the STP Acquisition Closing Date.
(c) If the Non-STP Acquisition Closing occurs during 2004, then
Buyer shall cause each Company (or its affiliates) to, or, Buyer shall, continue
and maintain in effect and operation the Texas Genco Holdings, Inc. Short-Term
Incentive Plan ("TGN STI PLAN"), as in effect on the date of this Agreement,
subject to such changes as permitted in Section 6.8(c) of the Companies
Disclosure Letter, with the same performance goals and objectives as established
for 2004, for the remainder of 2004, and, provided and to the extent such 2004
performance goals are met, bonuses earned for 2004 shall be paid under the TGN
STI Plan to the Active Company Employees covered by such plan in 2005 in
accordance with the terms of the TGN STI Plan. If the Non-STP Acquisition
Closing occurs after June 30, 2005, then Buyer shall cause each Company (or its
affiliates) or, Buyer shall, continue and maintain in effect and operation the
TGN STI Plan, as in effect on the date of this Agreement, subject to such
changes as are permitted in Section 6.8(c) of the Companies Disclosure Letter,
with the same performance goals and objectives as established for 2005, and,
provided and to the extent such 2005 performance goals are met, bonuses earned
for 2005 shall be paid under the TGN STI Plan to the Active Company Employees
covered by such plan in 2006 in accordance with the terms of the TGN STI Plan.
From the date of this Agreement until the Non-STP Acquisition Closing Date,
Parents shall, or shall cause the Companies to, accrue the target amounts
payable under the TGN STI Plan in respect of the period prior to the Non-STP
Acquisition Closing Date.
(d) Notwithstanding anything to the contrary in this Section 6.8,
Parents shall be liable for any amounts to which any Company Employee becomes
entitled under any benefit, retention or severance policy, plan, agreement
arrangement or program which exists or arises or may be deemed to exist or
arise, under any applicable Law or otherwise, as a result of, or in connection
with, the transactions contemplated by this Agreement other than an Active
Company Employee whose employment is terminated (following the Non-STP
Acquisition Closing) on or after the Non-STP Acquisition Closing Date or, in the
case of the Scheduled Employees, the STP Acquisition Closing Date. In the event
that an Active Company Employee's employment is terminated, other than for cause
(as defined in Section 6.8(f)), by Buyer, its affiliates or any Company
(following the Non-STP Acquisition Closing) on or after the Non-STP Acquisition
Closing Date or, in the case of the Scheduled Employees, the STP Acquisition
Closing Date, then Buyer shall be responsible for severance costs for such
Active Company Employee, including any severance benefits due under Section
6.8(f) below. Buyer shall be responsible and assume all liability for all
notices or payments due
60
to any Active Company Employees, and all notices, payments, fines or assessments
due to any governmental authority, under any applicable foreign, federal, state
or local Law with respect to the employment, discharge or layoff of employees by
any Company after the Non-STP Acquisition Closing Date or, in the case of the
Scheduled Employees, the STP Acquisition Closing Date, including, but not
limited to, the Worker Adjustment and Retraining Notification Act and any rules
or regulations as have been issued in connection with the foregoing. On or
promptly after the Non-STP Acquisition Closing or, in the case of the Scheduled
Employees, the STP Acquisition Closing Date, Parents (to the extent Parents have
such information and the Companies do not have such information) and the
Companies shall provide to Buyer a list of all Company Employees whose
employment was terminated within 90 days prior to the Non-STP Acquisition
Closing or, in the case of the Scheduled Employees, the STP Acquisition Closing
Date and the date that each such Company Employee was terminated.
(e) Buyer and Parents agree that prior to the Non-STP Acquisition
Closing Date Genco LP (or such other appropriate Company) may establish the
Texas Genco Retirement Plan, and related trust ("TGN RETIREMENT PLAN"), Texas
Genco Savings Plan, and related trust ("TGN SAVINGS PLAN"), and Texas Genco
Benefit Restoration Plan ("TGN BRP") to provide benefits for eligible Company
Employees; provided, however, that prior to the STP Acquisition Closing Date,
the Scheduled Employees shall not be eligible to participate in any such plans.
The TGN Retirement Plan shall be a pension plan, intended to be qualified under
Section 401(a) of the Code, established to provide benefits for Company
Employees that are substantially similar to the benefits provided for such
employees under the CenterPoint Energy, Inc. Retirement Plan (the "CNP
RETIREMENT PLAN"), as in effect as of the date of this Agreement.
Notwithstanding the foregoing, if Genco LP (or such other appropriate Company)
establishes the TGN Retirement Plan prior to the Non-STP Acquisition Closing
Date, such Company and CenterPoint agree to (i) provide for the transfer of
assets to the TGN Retirement Plan from the CNP Retirement Plan on terms that are
consistent with applicable Law, and (ii) provide Buyer with a reasonable
opportunity prior to such transfer to review the proposed transfer and, with
respect to the Scheduled Employees, CenterPoint agrees to transfer the accrued
benefits of the Scheduled Employees from the CNP Retirement Plan to the TGN
Retirement Plan effective as of the STP Acquisition Closing Date, subject to
clause (i) above; provided, however, that CenterPoint shall only have such
obligation if the TGN Retirement Plan has not been terminated and no action has
been taken by Buyer or the plan sponsor to terminate such plan as of such date.
The TGN Savings Plan shall be a savings plan, intended to be qualified under
Section 401(a) of the Code, established to provide benefits for Company
Employees that are substantially similar to the benefits provided for such
employees under the CenterPoint Energy, Inc. Savings Plan ("CNP SAVINGS PLAN"),
as in effect as of the date of this Agreement, which shall include an employee
stock ownership plan within the meaning of Section 4975 of the Code ("ESOP");
provided, however, that except as required by applicable Law, Buyer shall not be
required to continue the ESOP on or after the Non-STP Acquisition Closing Date
and, to the extent required by applicable federal securities law, Parents shall
prepare and file a registration statement on Form S-8, along with a related
prospectus, with respect to the ESOP securities on or before the effective date
of such plan, and maintain the effectiveness of such registration statement
through the Non-
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STP Acquisition Closing Date to the extent required by applicable Law.
CenterPoint agrees to take such action to cause any plan-to-plan transfer of the
Scheduled Employees' account balances under the CNP Savings Plan to the TGN
Savings Plan as of, or as soon as administratively practicable after, the STP
Acquisition Closing Date; provided, however, that CenterPoint shall only have
such obligation if such plan has not been terminated and no action has been
taken by Buyer or the plan sponsor to terminate such plan as of such date. The
TGN BRP shall be an excess benefits plan related to the TGN Retirement Plan
established to provide benefits for Company Employees that are substantially
similar to the excess benefits provided for such employees under the CenterPoint
Energy, Inc. Benefit Restoration Plan, as in effect as of the date of this
Agreement.
(f) Buyer and Parents agree that, prior to the Non-STP Acquisition
Closing Date, Genco Holdings (or Genco II LP) may enter into a severance
agreement with each of the Active Company Employees listed in Section 6.8(f) of
the Companies Disclosure Letter (individually, "TGN SEVERANCE AGREEMENT" and
collectively, "TGN SEVERANCE AGREEMENTS") to provide the severance benefits
described in Section 6.8(f) of the Companies Disclosure Letter to such Active
Company Employees in the event of an eligible termination of employment during
the two-year period commencing on the Non-STP Acquisition Closing Date, and
Buyer and its affiliates will cause Genco Holdings and its successors to honor
such agreements in accordance with their terms and this Agreement. Buyer and
Parents agree that, prior to the STP Acquisition Date, Genco Holding (or Genco
II LP) may establish the Texas Genco Severance Benefits Plan #2060 ("TGN
SEVERANCE PLAN #2060"), which shall provide (i) benefits that are identical to
those provided under the Texas Genco Holdings, Inc. Severance Benefits Plan
#2050 ("TGN SEVERANCE PLAN #2050"), for the Scheduled Employees who were listed
as "Employees" under the TGN Severance Plan #2050 as of such plan's effective
date, and (ii) such Scheduled Employees severance benefits in the event of an
eligible termination of employment during the two-year period commencing on the
STP Acquisition Closing Date. With respect to an Active Company Employee (1) who
is not eligible for benefits under the TGN Severance Plan #2050, the TGN
Severance Plan #2060 or a TGN Severance Agreement and (2) whose employment is
terminated, other than for Cause, by Buyer, its affiliates or any Company within
one year after the Non-STP Acquisition Closing Date, or, in the case of a
Scheduled Employee, the STP Acquisition Closing Date (each a "COVERED
EMPLOYEE"), Buyer shall provide or cause the applicable Company to provide each
such terminated Covered Employee with severance benefits which shall be no less
favorable than the following benefits:
(i) a lump-sum cash severance payment in an amount equal to
three weeks of the Covered Employee's base salary or annualized base rate
of pay ("severance pay") multiplied by the number of full years of Service
credited to the Covered Employee, with a minimum of 12 weeks and a maximum
of 52 weeks of severance pay to be awarded to a Covered Employee;
(ii) an additional lump-sum cash severance payment in an
amount equal to the Covered Employee's target award under the TGN STI
Plan, if any, based upon the Covered Employee's actual eligible earnings
for the period
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commencing on January 1st of the year during which his or her termination
occurs and ending on the Covered Employee's termination date;
(iii) for the applicable period required by COBRA for benefits
provided to the Covered Employee under a group health plan, as defined in
Section 5000(b)(1) of the Code, of the Buyer or its affiliates ("BUYER
MEDICAL PLAN"), the Covered Employee shall pay the active employee rate
with respect to coverage during the period of time commencing as of his or
her termination date equal to the total number of weeks used to calculate
his or her severance benefit in clause (i) above, and thereafter the full
COBRA rate (which is equal to 102% of the full group rate, which includes
the employee's and employer's share of the group coverage cost and a 2%
administrative fee) with respect to such coverage for the remainder of the
continuation coverage period required by COBRA, with such benefits
governed by and subject to (a) the terms and conditions of the plan
documents providing such benefits, including the reservation of the right
to amend or terminate such benefits under those plan documents at any
time, and (b) the provisions of COBRA, and such Covered Employee who, as
of his or her termination date, has (1) attained age 50, but not age 55,
and (B) completed at least 20 years of Service shall have the same access
to the Company's or Buyer's retiree medical plan (if any) as such Covered
Employee would have been eligible to access had the Covered Employee
terminated his or her employment immediately after attaining age 55;
provided, however, that such access shall not commence prior to the date
the Covered Employee actually attains age 55;
(iv) in addition to any benefit the Covered Employee is
otherwise entitled to under the TGN Retirement Plan, if the Covered
Employee as of his or her termination date has (a) attained age 50, but
not yet 55, and (b) completed at least 20 years of Service, then he or she
shall be deemed eligible to receive a benefit equal to the early
retirement benefit (payable in a form other than a lump-sum) under the TGN
Retirement Plan that the Covered Employee would have been eligible to
receive thereunder had he or she terminated his or her employment
immediately after attaining age 55; provided, however, that such benefit
shall not commence prior to the date the Covered Employee actually attains
age 55 and, for benefit accrual purposes, that the Covered Employee's
benefit under the TGN Retirement Plan shall be based on his actual Service
as of his or her termination date; and
(v) the Covered Employee shall be offered outplacement
services appropriate to his or her employment position on his or her
termination date as provided in Section 6.8(f)(v) of the Companies
Disclosure Letter.
For purpose of the severance benefits payable under Section 6.8(f)(i) above, (1)
the term "CAUSE" shall mean termination from employment due to (i) gross
negligence in the performance of duties; (ii) intentional and continued failure
to perform duties; (iii) intentional engagement in conduct which is materially
injurious to Genco Holdings or its affiliates, successors, employees or property
(monetarily or otherwise) or Buyer; an intentional act of fraud, embezzlement or
theft; an intentional wrongful disclosure of
63
confidential or proprietary information of the Company or an affiliate; or (iv)
conviction of a felony or a misdemeanor involving moral turpitude; provided,
however, that for this purpose, an act or failure to act on the part of an
Active Company Employee will be deemed "intentional" only if done or omitted to
be done by the Active Company Employee not in good faith and without reasonable
belief that his or her action or omission was in the best interest of the
Company, and no act or failure to act on the part of the Active Company Employee
will be deemed "intentional" if it was due primarily to an error in judgment or
negligence; and (2) the term "SERVICE" shall be defined as in the TGN Retirement
Plan, as in effect on the Non-STP Acquisition Closing Date or, in the case of a
Scheduled Employee, the STP Acquisition Closing Date; provided, however, that
(i) less than six months of Service shall not constitute a year of Service, and
six months or more of Service shall constitute a full year of Service (except in
the event a Covered Employee has a total of less than six months of Service, in
which case the employee shall be deemed to have one year of Service); and (ii)
to the extent not credited as Service under the TGN Retirement Plan, Service
shall include the employee's employment with Genco Holdings or its affiliates
during the period commencing on the Non-STP Acquisition Closing Date or, in the
case of a Scheduled Employee, the STP Acquisition Closing Date and ending on the
employee's termination date. The parties to this Agreement agree that any
severance benefits payable pursuant to this Section 6.8(f) (including benefits
payable under the TGN Severance Plan #2050 and TGN Severance Agreements) shall
be in exchange for, subject to, and conditioned upon, a Covered Employee's
execution of a valid and enforceable waiver and release that shall release
Parents, Parents' affiliates, the Companies, the affiliates of the Companies,
Buyer, Buyer's affiliates, Genco Holdings, Genco Holdings' affiliates and each
of their directors, officers, employees and agents, employee benefit plans, and
the fiduciaries and agents of said plans from liability and damages in any way
related to the Covered Employee's employment with or separation from employment
with Buyer, Parents, the Companies or any of their affiliates.
(g) Buyer agrees that upon the Non-STP Acquisition Closing Date,
or, in the case of the Scheduled Employees, the STP Acquisition Closing Date,
each Active Company Employee shall be immediately eligible to participate,
without any waiting time, in a group health plan, as defined in Section
5000(b)(1) of the Code of Buyer or its affiliates ("BUYER MEDICAL PLAN"). Buyer
agrees that Buyer Medical Plan shall credit each Active Company Employee towards
the deductibles, coinsurance and maximum out-of-pocket provisions imposed under
such group health plan, for the calendar year during which the Non-STP
Acquisition Closing Date occurs, with any applicable expenses already incurred
during the portion of the year preceding the Non-STP Acquisition Closing Date
or, in the case of the Scheduled Employees, the STP Acquisition Closing Date,
under the applicable group health plans of Parents.
(h) Following the Non-STP Acquisition Closing Date, to the extent
applicable, Parents shall retain all liabilities, obligations and
responsibilities to provide post-retirement medical, health and life insurance
benefits ("RETIREE MEDICAL BENEFITS") to any Company Employee or Active Company
Employee who (A) retired on or prior to the Non-STP Acquisition Closing Date or,
in the case of the Scheduled Employees, the STP Acquisition Closing Date, or (B)
would have, had such Company Employee or
64
Active Company Employee retired prior to the Non-STP Acquisition Closing Date
or, in the case of the Scheduled Employees, the STP Acquisition Closing Date,
been entitled to Retiree Medical Benefits pursuant to the terms of any Plan;
provided, that such Company Employee or Active Company Employee shall be
entitled to elect to receive such benefits upon their termination with Buyer.
Notwithstanding anything to the contrary in this Agreement, including, without
limitation, the provisions of Section 6.8(b) of this Agreement, Buyer shall have
no obligation to continue, establish or maintain any Plan or Employee Welfare
Benefit Plan that provides for Retiree Medical Benefits (except to the extent
required by applicable Law).
(i) Except as otherwise provided in this Section 6.8 or under the
Transition Services Agreement referenced in Section 8.3(f) of this Agreement,
Buyer acknowledges that, on and after the Non-STP Acquisition Closing Date with
respect to the Companies other than Genco Holdings and Genco LP, and on and
after the STP Acquisition Closing Date with respect to Genco Holdings and Genco
LP, the participation by the Companies in all Plans not sponsored or maintained
solely by any of the Companies shall terminate as of the applicable date, and
Buyer shall be solely responsible for providing any successor or alternate
plans; provided, however, that nothing in this Section 6.8 shall require Buyer
to provide such plans for the benefit of the Scheduled Employees on or prior to
the STP Acquisition Closing Date.
(j) Buyer shall comply with any obligations under any collective
bargaining agreements identified on Section 4.12 of the Companies Disclosure
Letter, to the extent required by applicable Law.
(k) After the Non-STP Acquisition Closing Date or, in the case of
the Scheduled Employees, the STP Acquisition Closing Date, Buyer shall be
responsible for, and shall indemnify and hold harmless, Parents, the Companies
and their respective officers, directors, employees, affiliates and agents and
the fiduciaries (including plan administrators) of the Plans, from and against,
any and all claims, losses, damages, costs and expenses (including attorneys'
fees and expenses) and other liabilities and obligations relating to or arising
out of (i) all salaries, commissions and vacation entitlements accrued but
unpaid as of the Non-STP Acquisition Closing or, in the case of the Scheduled
Employees, the STP Acquisition Closing Date and post-closing bonuses (with
respect to the Non-STP Acquisition Closing Date or the STP Acquisition Closing
Date, as applicable), due to any Active Company Employee, (ii) the liabilities
assumed by Buyer under this Section 6.8 or any failure by Buyer to comply with
the provisions of this Section 6.8, and (iii) any claims of, or damages or
penalties sought by, any Active Company Employee, or any governmental entity on
behalf of or concerning any Active Company Employee, with respect to any act or
failure to act by Buyer to the extent arising from the employment, discharge,
layoff or termination of any Active Company Employee who becomes an employee of
Buyer or any Company after the Non-STP Acquisition Closing Date or, in the case
of the Scheduled Employees, the STP Acquisition Closing Date.
(l) Parents shall retain responsibility for and continue to pay
all medical, life insurance, disability and other welfare plan expenses and
benefits for each
65
Company Employee with respect to claims incurred by such Company Employees or
their covered dependents prior to the Non-STP Acquisition Closing or, in the
case of the Scheduled Employees, the STP Acquisition Closing Date and with
respect to any Company Employee who retired or was terminated prior to the
Non-STP Acquisition Closing Date or, in the case of the Scheduled Employees, the
STP Acquisition Closing Date. Such expenses and benefits with respect to claims
incurred by Company Employees or their covered dependents on or after the
Non-STP Acquisition Closing shall be the responsibility of Buyer. For purposes
of this paragraph, a claim is deemed incurred when the services that are the
subject of the claim are performed; in the case of life insurance, when the
death occurs; and in the case of long-term disability benefits, when the
disability occurs. In addition, after the Non-STP Acquisition Closing Date,
Parents shall be responsible for, and shall indemnify and hold harmless, Buyer
and its officers, directors, employees, affiliates and agents and the
fiduciaries (including plan administrators) of the CenterPoint Energy, Inc.
Savings Plan and the CenterPoint Energy, Inc. Retirement Plan, from and against
any and all claims, losses, damages, costs and expenses (including attorneys'
fees and expenses) and other liabilities and obligations relating to or arising
out of any litigation, arbitration and administrative or other proceeding with
respect to the CenterPoint Energy, Inc. Savings Plan or the CenterPoint Energy
Inc. Retirement Plan.
(m) Nothing herein expressed or implied shall confer upon any of
the employees of the Parents, the Companies or any of their affiliates, any
rights or remedies, including any right to employment, or continued employment
for any specified period, of any nature or kind whatsoever under or by reason of
the Agreement.
Section 6.9 Insurance.
(a) From and after the date of this Agreement (including after the
Non-STP Acquisition Closing Date and after the STP Acquisition Closing Date),
CenterPoint shall not take or fail to take, and shall cause each of its
subsidiaries not to take or fail to take, any action (including any termination,
alteration or amendment) if such action or inaction, as the case may be, would
adversely affect the applicability of, or limit or restrict the coverage
available under: (i) any insurance policies (including, without limitation, the
Company Insurance Policies) held by CenterPoint or any of its subsidiaries or
predecessors that cover all or any part of the Genco Business, the Companies or
any liabilities or obligations that were initially assumed or are of the type
initially assumed by Genco Holdings in the Spin-off Separation Agreement
("APPLICABLE INSURANCE POLICIES"); or (ii) any cost sharing, coverage-in-place,
or similar arrangement or agreement related to and/or replacing the Applicable
Insurance Policies ("APPLICABLE INSURANCE AGREEMENTS", and together with the
Applicable Insurance Policies, the "APPLICABLE INSURANCE"). CenterPoint agrees
that from and after August 31, 2002, all Applicable Insurance (including the
proceeds therefrom) directly or indirectly applicable to such assets or
liabilities shall be for the benefit of the Companies. CenterPoint and its
affiliates and, prior to the STP Acquisition Closing Date, Genco Holdings, shall
not agree to any buy out of coverage with respect to liability exposures under
any Applicable Insurance Policies without Buyer's prior written consent (not to
be unreasonably withheld). In connection with any such buy out approved by Genco
Holdings, Genco
66
Holdings shall receive a share of any such buyout proceeds as agreed to by
CenterPoint and the Buyer.
(b) Any Company shall be entitled to assert any rights such
Company has under any Applicable Insurance. To the extent necessary to satisfy
Section 6.9(a) and permissible under Applicable Insurance Policies without
causing cancellation or loss of rights under Applicable Insurance, CenterPoint
agrees to transfer or assign to the Companies or otherwise cause to be vested in
the Companies the Applicable Insurance with respect to the Non-STP Assets and
Liabilities at or prior to the Non-STP Acquisition Closing Date and at or prior
to the STP Acquisition Closing Date with respect to the STP Assets and
Liabilities. The parties agree that, in the event and to the extent that
CenterPoint is not able to cause all Applicable Insurance to be modified,
amended and/or assigned so that Buyer and its subsidiaries (including, for
clarification, the applicable Companies that become subsidiaries of Buyer as of
such time as those Companies become subsidiaries) are the direct beneficiaries
of, and additional insureds under such Applicable Insurance, with all rights to
directly enforce, obtain the benefit of and take all other action in respect of
such Applicable Insurance, prior to the Non-STP Acquisition Closing Date, the
following provisions shall apply:
(i) The Separation Amendment shall amend the Spin-Off
Separation Agreement and related agreements and instruments to clarify
that CenterPoint shall retain all liabilities included in the Non-STP
Assets and Liabilities, and the STP Assets and Liabilities, to the extent
and only to the extent that such liabilities are covered under the
Applicable Insurance (the "INSURED RETAINED LIABILITIES").
(ii) CenterPoint agrees, after receipt of a claim, to use
commercially reasonable efforts to obtain the maximum available actual
recovery for any Insured Retained Liabilities under the Applicable
Insurance, provided that CenterPoint shall have no liability or obligation
to Buyer or any Company (other than its obligation to comply herewith) for
any amounts or costs in excess of amounts actually recovered under the
Applicable Insurance. Buyer agrees to reasonably cooperate in defending
claims relating to the Insured Retained Liabilities, including, without
limitation, at CenterPoint's request, providing information, direction and
guidance to CenterPoint. Buyer further agrees to reimburse CenterPoint
and/or its counsel for documented out-of-pocket expenses reasonably
incurred subsequent to the Non-STP Acquisition Closing Date with respect
to the Non-STP Assets and Liabilities and subsequent to the STP
Acquisition Closing Date with respect to the STP Assets and Liabilities in
defending such claims, but only to the extent that such documented
out-of-pocket expense are not paid under any Applicable Insurance.
(iii) To the extent any Insured Retained Liability is
partially, but not fully, covered by the Applicable Insurance: (a) Buyer
and its subsidiaries and Representatives shall be entitled to participate
in all aspects of the defense, litigation, settlement and any other
proceedings and negotiations regarding such Insured Retained Liability;
and (b) neither CenterPoint nor any of its affiliates or
67
Representatives shall enter into any settlement of such Insured Retained
Liability without Buyer's prior written consent.
(iv) CenterPoint shall promptly notify Buyer in writing of
any Insured Retained Liability for which: (a) coverage is denied or
threatened to be denied in part or in full under the Applicable Insurance
and/or (b) CenterPoint believes that no coverage is available under the
Applicable Insurance. CenterPoint shall provide together with such notice
sufficient documentation to demonstrate the basis for any asserted lack of
coverage for such Insured Retained Liability. To the extent Buyer is
satisfied that there is no coverage for such Insured Retained Liability,
such Insured Retained Liability shall cease to qualify as an Insured
Retained Liability and to such extent shall be deemed a Genco Liability
(as defined in the Spin-Off Separation Agreement). During the resolution
of any disputes with respect to the matters set forth in this clause (iv),
CenterPoint agrees that Buyer and its subsidiaries and Representatives
shall be entitled to participate in all aspects of the defense,
litigation, settlement and any other proceedings and negotiations
regarding the disputed Insured Retained Liability (hereinafter, "DISPUTED
INSURED RETAINED LIABILITY") except to the extent that such participation
would jeopardize maintenance of the Applicable Insurance in effect;
provided that in such event participation shall be allowed to the greatest
extent that would not jeopardize maintenance of the Applicable Insurance
in effect.
(v) Notwithstanding the provisions of subsection (iv) above,
CenterPoint, at Buyer's expense: (a) shall contest any denial or reduction
of coverage for any Insured Retained Liability; and (b) shall not settle
any claim related to any Disputed Insured Retained Liability without
Buyer's prior written consent.
(vi) In no event shall CenterPoint or any of its affiliates
enter into any cost sharing, coverage-in-place or similar agreement or
arrangement or any other compromise or settlement relating to any
Applicable Insurance or Insured Retained Liability without the prior
written approval of Buyer.
(vii) Nothing in this Section 6.9 shall constitute a
representation or warranty by CenterPoint that coverage is available to
Buyer and its subsidiaries under the Applicable Insurance for any specific
claim. Neither this Section 6.9 nor any provision hereof shall be read in
a manner that violates or conflicts with any provision of any of the
Applicable Insurance. Nothing in this Section 6.9 shall be deemed (A) to
constitute an assignment of any Applicable Insurance Policy or any
interest therein to the Buyer or (B) to provide CenterPoint or any of its
affiliates with rights to coverage other than as already set forth in the
Applicable Insurance. To the extent that this Section 6.9 or any provision
hereof violates or conflicts with any provision of any Applicable
Insurance Policy or would cause a cancellation or loss of rights under any
Applicable Insurance Policy, the parties agree that this Section 6.9 shall
be amended or construed with respect only to such Applicable Insurance
Policy and to the minimum extent
68
necessary to cure or avoid such conflict, inconsistency, violation,
cancellation or loss of rights, provided, however, that this provision
shall not constitute a representation or warranty that any such conflict,
purported assignment, inconsistency or violation may be avoided or cured.
(viii) CenterPoint agrees promptly to provide Buyer with
copies of correspondence with insurers and other counterparties under the
Applicable Insurance in respect of any Insured Retained Liability.
(c) Parents and Genco Holdings agree that Buyer and its
subsidiaries may use, following the Non-STP Acquisition Closing Date, the third
party providers, including legal counsel, currently used by Parents and the
Companies to defend and manage the defense of asbestos-related claims involving
the Companies.
Section 6.10 No Solicitation of Transactions.
(a) Each of Parents and Genco Holdings agrees that neither it nor
any other Company shall, and that it shall cause its Representatives and the
Representatives of any Company not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate (including by way of furnishing
non-public information) any inquiries or the making or implementation of any
proposal or offer (including any proposal from or offer to its shareholders)
with respect to (i) a merger, reorganization, share exchange, tender offer,
exchange offer, consolidation, business combination, recapitalization,
liquidation, dissolution, joint venture or similar transaction involving any
Company or (ii) any purchase or sale of more than 10% of the assets of the
Companies, taken as a whole, or any Company Securities (any such proposal or
offer being hereinafter referred to as an "ALTERNATIVE PROPOSAL"). Each of
Parents and Genco Holdings further agrees that neither it nor any Company shall,
and that it shall cause its Representative and the Representative of any Company
not to, directly or indirectly, have any discussion with or provide any
confidential information or data to any person relating to an Alternative
Proposal, or engage in any negotiations concerning an Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal or accept an Alternative Proposal.
(b) CenterPoint shall not, directly or indirectly, sell, transfer,
pledge, hypothecate, encumber, assign or dispose of any membership interests in
Utility Holding (or any beneficial ownership thereof) or its beneficial
ownership interest in the Shares or offer to make such a sale, transfer or other
disposition (collectively, "TRANSFER") to any person, and Utility Holding shall
not Transfer the Shares (or any beneficial ownership thereof).
(c) Each of Parents and Genco Holdings (as applicable) shall
notify Buyer promptly (and in any event by 5:00 p.m. New York City time, on the
next business day) of the receipt of any inquiries, proposals or offers relating
to an Alternative Proposal received by any Parent or Company or its
Representatives, indicating, in connection with such notice, the name of such
person and the material terms of any inquiries, proposals or offers. Each of
Parents and Genco Holdings shall keep Buyer reasonably informed of the
69
status of any inquiries, proposals or offers and any modifications thereto. Each
of Parents and Genco Holdings further agrees that neither of the Parents nor any
Company shall enter into any agreement with any person subsequent to the date of
this Agreement with respect to an Alternative Proposal or that prohibits Genco
Holdings from providing such information to Buyer. Genco Holdings agrees that no
Company shall terminate, waive, amend or modify any provision of any standstill
or confidentiality agreement to which it is a party and that each Company shall
use commercially reasonable efforts to enforce the provisions of any such
agreement.
(d) Effective as of the date of this Agreement, each of Parents
and Genco Holdings agrees that each Company shall, and each of Parents and Genco
Holdings shall cause any Representative of a Parent or Company to, terminate any
existing activities, discussions or negotiations with any third parties that may
be ongoing with respect to any Alternative Proposal. Genco Holdings shall use
commercially reasonable efforts to inform the Representatives of a Parent or a
Company of the obligations undertaken in this Section 6.10 and shall request
that all confidential information previously furnished to any such third parties
be returned promptly.
(e) The board of directors of Genco Holdings (or any committee
thereof) shall not approve or recommend an Alternative Proposal.
(f) Genco Holdings and the board of directors of Genco Holdings
may take and disclose to Genco Holdings' shareholders a position in accordance
with Rule 14e-2 under the Exchange Act with respect to an Alternative Proposal;
provided that the foregoing will in no way (i) permit any action that would
otherwise have been prohibited under this Agreement (including Section 6.10(e)),
(ii) limit the obligation of Genco Holdings to comply with its obligations under
this Agreement or (iii) eliminate or modify the effect that any action taken or
disclosure made in accordance with such Rule would have under this Agreement.
(g) Genco Holdings shall not, and shall not permit any Company to,
adopt, authorize or enter into any Rights Plan.
Section 6.11 Tax Exempt Financing. (a) Buyer and CenterPoint
understand and agree that:
(i) the pollution control facilities identified in Section
6.11(a)(1) of the Parents Disclosure Letter (each a "POLLUTION CONTROL
FACILITY" and collectively the "POLLUTION CONTROL FACILITIES") have been
financed or refinanced, in whole or in part, with the proceeds of the
issuance and sale by various governmental authorities of the industrial
development revenue bonds or private activity bonds listed in such Section
6.11(a)(2) (collectively, the "REVENUE BONDS"), the interest on which is
excludable from gross income for purposes of federal income taxation;
CenterPoint, or CenterPoint Energy Houston Electric, LLC, a Texas limited
liability company and indirect wholly-owned subsidiary of CenterPoint
("CEHE" and, collectively with CenterPoint, the "CENTERPOINT OBLIGORS"),
is the entity obligated to make payments to the issuer
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and any credit or liquidity provider in connection with each issue of
Revenue Bonds; the Revenue Bonds listed in Section 6.11(a)(2) of the
Parents Disclosure Letter are the only outstanding bonds or similar
obligations the interest on which is excludable from gross income for
purposes of federal income taxation relating the Genco Business; and
Section 6.11(a)(1) of the Parents Disclosure Letter accurately reflects
the generation facilities where the Pollution Control Facilities financed
by such Revenue Bonds are located;
(ii) the basis for such exclusion is the use of the Pollution
Control Facilities for one or more of the following purposes: (a) the
abatement or control of atmospheric pollution or contamination, (b) the
abatement or control of water pollution or contamination, (c) sewage
disposal, or (d) the disposal of solid waste, such purposes ("QUALIFYING
USES") being discussed in more detail in Section 6.11(b) below;
(iii) the use of a Pollution Control Facility for a purpose
other than its current Qualifying Uses indicated in subsection (ii) above
could impair (a) such excludability from gross income of the interest on
the issue of Revenue Bonds which were issued to finance or refinance the
acquisition or construction of that Pollution Control Facility, possibly
with retroactive effect, unless appropriate remedial action (which could
include prompt redemption or defeasance of such issue of Revenue Bonds, in
whole or in part) were taken, or (b) the deductibility of the CenterPoint
Obligors' payment of interest on such issue of Revenue Bonds;
(iv) any breach by Buyer of its covenants under Section 6.11
could result in the incurrence by the CenterPoint Obligors of increased
interest costs on the Revenue Bonds or loss of the interest deduction for
tax purposes, or transaction costs relating to any refinancing, redemption
or defeasance of the issue of Revenue Bonds which were issued to finance
or refinance the acquisition or construction of any particular facilities,
and, subject to Section 6.11(i), Buyer shall be liable to the CenterPoint
Obligors to the extent such additional costs and expenses result from a
breach by Buyer of its covenants under Section 6.11; provided, however,
that Buyer shall only be liable after a final determination of taxability
by the IRS to the CenterPoint Obligors for (i) actual costs incurred as a
result of a final declaration of the IRS declaring any series of Revenue
Bonds taxable, and, without duplication, (ii) actual costs accruing to the
CenterPoint Obligors resulting from a loss of the deductibility of
interest paid on such Revenue Bonds; provided, further, that the
CenterPoint Obligors will promptly notify Buyer in writing of any audit by
the IRS which could result in additional costs and expenses for which
Buyer could be responsible hereunder and allow representatives of Buyer to
participate in all proceedings and will not agree to any settlement
without the prior written consent of Buyer (which consent shall not be
unreasonably withheld); and
(v) notwithstanding the other provisions of this Section
6.11, neither Buyer nor the Companies will have any liability under this
Agreement or otherwise to the CenterPoint Obligors arising with respect to
the Revenue Bonds
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and relating to the use of the Pollution Control Facilities for a purpose
other than a Qualifying Use prior to the Non-STP Acquisition Closing, and
the CenterPoint Obligors agree to fully release Buyer and the Companies in
respect of any such liability effective as of the Non-STP Acquisition
Closing.
(b) Subject to Section 6.11(c), Buyer covenants not to use (and to
cause its subsidiaries not to use) the Pollution Control Facilities for any
purpose other than each such Pollution Control Facility's current Qualifying
Uses, which in each case may include:
(i) abating or controlling atmospheric or water pollution or
contamination by removing, altering, disposing of or storing pollutants,
contaminants, waste or heat, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(g);
(ii) the collection, storage, treatment, utilization,
processing or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or
(iii) the collection, storage, treatment, utilization,
processing or final disposal of sewage, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f);
unless, in each such case, (i) Buyer has obtained and delivered to the
CenterPoint Obligors, at Buyer's expense, an opinion addressed to the
CenterPoint Obligors of nationally recognized bond counsel reasonably acceptable
to the CenterPoint Obligors ("BOND COUNSEL" and such opinion being an "OPINION
OF BOND COUNSEL") that such a change in use will not impair the excludability
from gross income for federal income tax purposes of the interest on any issue
of Revenue Bonds or that such change in use will not affect the CenterPoint
Obligors' eligibility to deduct interest payments made with respect to such
bonds, or (ii) there are no longer any Revenue Bonds or, to the extent permitted
by this Agreement, tax-exempt bonds issued to refinance Revenue Bonds
outstanding with respect to such Pollution Control Facility. Except with respect
to the Gas Plant Pollution Control Facilities (as defined below), Buyer
reasonably expects that each of the Pollution Control Facilities will continue
to be used for its current Qualifying Uses set forth in subsection (a)(ii)
above, and for no other purpose, for the remainder of the Pollution Control
Facilities' useful lives. Subject to the representations in Section 6.11(i),
Buyer covenants to refrain (and to cause its subsidiaries to refrain) from
making any use of the Pollution Control Facilities, other than each such
Pollution Control Facility's current Qualifying Uses, that would (i) impair the
excludability from gross income for federal income tax purposes of the interest
on any issue of Revenue Bonds, or (ii) impair the deductibility of the
CenterPoint Obligors' payments of interest on such issue of Revenue Bonds.
(c) It is expressly understood and agreed that the provisions of
Section 6.11(b) above shall not prohibit Buyer or any of Buyer's subsidiaries
from (i) causing or otherwise permitting the operation of the Pollution Control
Facilities to be
72
suspended on a temporary basis; (ii) causing or otherwise permitting the
termination of the operation of any Pollution Control Facilities on a permanent
basis and the shutting down, retiring, abandoning and/or decommissioning of any
of the Pollution Control Facilities; or (iii) subject to Section 6.11(f),
selling, exchanging or transferring any of the Pollution Control Facilities to a
third party. Notwithstanding the foregoing, except in the case of any of the
Pollution Control Facilities financed or refinanced with the Revenue Bonds
identified on Section 6.11(c) of the Parents Disclosure Letter (such facilities,
the "Gas Plant Pollution Control Facilities"), neither Buyer nor Buyer's
subsidiaries shall cause or otherwise permit the dismantlement of all or any
portion of a Pollution Control Facility unless (i) such dismantlement occurs
subsequent to the end of the expected economic useful life of the Pollution
Control Facility (as determined on the date of issue of the most recent issue of
Revenue Bonds that financed or refinanced prior to the date of this Agreement
such Pollution Control Facility and as set forth in the documentation and tax
information filings with respect to such Revenue Bonds), (ii) in the event such
dismantlement involves the sale (for scrap or otherwise) of all or any portion
of such Pollution Control Facility, the amount received in consideration for
such sale is used by Buyer or such subsidiary, within 90 days of such
dismantlement, to acquire or construct property that is used for the same
Qualifying Use for which such Pollution Control Facility had been used prior to
its dismantlement, (iii) Buyer or such subsidiary first obtains and delivers to
the CenterPoint Obligors at Buyer's or its subsidiary's expense an Opinion of
Bond Counsel addressed to the CenterPoint Obligors that such action will not (x)
impair the exclusion from gross income of the interest on any issue of Revenue
Bonds for federal income tax purposes or (y) affect the CenterPoint Obligors'
eligibility to deduct interest payments made with respect to such bonds, or (iv)
there are no longer any Revenue Bonds or, to the extent permitted by this
Agreement, tax-exempt bonds issued to refinance Revenue Bonds outstanding with
respect to such Pollution Control Facility. In addition, Buyer shall give the
CenterPoint Obligors 120 days advance written notice before Buyer or any
subsidiary of Buyer shall cause or otherwise permit the dismantlement of all or
any portion of any of the Gas Plant Pollution Control Facilities.
(d) If Buyer, its successors or assigns desires to finance or
refinance any improvement or addition to any of the Pollution Control
Facilities, the CenterPoint Obligors agree to cooperate, at Buyer's expense,
with all reasonable requests by Buyer in supplying any information, records or
reports necessary or desirable to effect such financing.
(e) If the CenterPoint Obligors desire to refund any Revenue
Bonds, Buyer, at the expense of the CenterPoint Obligors, shall cooperate with
all reasonable requests of the CenterPoint Obligors and with Bond Counsel with
respect to the issuance of the refunding bonds and shall provide upon request
any representations, agreements or covenants that are reasonably requested
concerning Buyer's compliance to such date and/or in the future; provided that
Buyer shall not be required to make any covenants, representations or agreements
which will adversely impact Buyer or Buyer's operation of the Genco Business or
Buyer's intended use of the Pollution Control Facilities, including the sale or
discontinuance of use of any Pollution Control Facilities; provided further that
the CenterPoint Obligors agree that they will not undertake any refunding of
Revenue Bonds with tax-exempt bonds that have a maturity that is later than the
latest maturity of
73
any other outstanding series of Revenue Bonds previously issued to finance or
refinance all or a portion of Pollution Control Facilities located at the same
generation facility as the Pollution Control Facilities that were financed or
refinanced (in whole or in part) with the series of Revenue Bonds to be
refunded. If Buyer shall desire to cause an Opinion of Bond Counsel to be
delivered to the CenterPoint Obligors pursuant to Section 6.11(b) or the second
sentence of Section 6.11(c), the CenterPoint Obligors shall cooperate with Buyer
and with Bond Counsel and shall provide upon request copies of documents
relating to the Revenue Bonds and any representations relating to the Revenue
Bonds and the CenterPoint Obligors or any affiliate or predecessor entity's
prior use of the Pollution Control Facilities and compliance with the terms of
the trust indentures, installment payment and bond agreements, tax certificates
and agreements and any other agreements underlying or relating to the Revenue
Bonds or any similar documents relating to any tax-exempt bonds refunded by the
Revenue Bonds that are reasonably requested. Buyer shall cooperate with the
CenterPoint Obligors and with Bond Counsel, and shall provide upon request such
representations as the CenterPoint Obligors may reasonably request in connection
with efforts by the CenterPoint Obligors to obtain any opinions of Bond Counsel
contemplated under the terms of the bond documents relating to the Revenue Bonds
in connection with the transactions contemplated by this Agreement; provided,
that, Buyer shall not be required to provide any representations that would
adversely impact Buyer or Buyer's operation of the Genco Business or Buyer's
intended use of the Pollution Control Facilities, including the sale or
discontinuance of use of any Pollution Control Facilities, and the parties
hereto agree that obtainment of any such opinions of Bond Counsel shall not
constitute a condition to any party's obligation to close any of the
transactions contemplated by this Agreement.
(f) If Buyer or any of Buyer's subsidiaries shall sell, exchange,
transfer or otherwise dispose of any of the Pollution Control Facilities or any
subsidiary that owns any of the Pollution Control Facilities to a third party,
Buyer shall cause to be included in the documentation relating to such
transaction covenants and agreements on the part of such third party for the
benefit of the CenterPoint Obligors substantially the same as those on the part
of Buyer contained in Section 6.11; provided that if the third party transferee
makes such agreements, Buyer shall be released from any liability or obligations
under this Section 6.11 (including Section 6.11(a)) with regard to the portion
of Pollution Control Facilities so disposed of arising as a result of a breach
of such agreements by such third party transferee after the closing of such
transaction.
(g) The CenterPoint Obligors shall notify Buyer, as soon as
practicable, in writing when any issue of Revenue Bonds has been refunded, paid
in full, defeased or is no longer outstanding.
(h) The CenterPoint Obligors shall retain all of their obligations
as borrower, obligor, company or the user contained in each trust indenture,
loan agreement, installment payment and bond amortization agreement, tax
certificate, tax agreement, continuing disclosure agreement, agreement with
credit and liquidity providers or any other agreement relating to the Revenue
Bonds (the "BOND DOCUMENTS") for each issue of Revenue Bonds and any Revenue
Bonds issued to refund any Revenue Bonds and any other legal or offering
document relating to the Revenue Bonds. Buyer shall have only
74
those responsibilities specifically set forth in this Section 6.11 with respect
to the Pollution Control Facilities and the Revenue Bonds.
(i) CenterPoint, on behalf of the CenterPoint Obligors, represents
and warrants to Buyer that, except as set forth in Section 6.11(i) of the
Parents Disclosure Letter: (i) there are no Liens on the Pollution Control
Facilities that secure debt or other payment obligations of a CenterPoint
Obligor or any of their affiliates other than the Companies; (ii) each of the
Pollution Control Facilities is being, and since the initial issuance of Revenue
Bonds or tax-exempt bonds refinanced with Revenue Bonds has been, used for its
current Qualifying Uses as set forth in subsection (a)(ii) above, and for no
other purpose; (iii) they have not received any notice that there is any audit
or administrative action pending by the Internal Revenue Service as to the
exemption from federal income taxation of interest on any of the Revenue Bonds,
and they are not aware as of the date of this Agreement of any facts or
circumstances that could give rise to any challenge to such exemption from
federal income taxation of interest on any of the Revenue Bonds; and (iv) no
event of default or default which with the lapse of time could become an event
of default exists under any of the Bond Documents relating to any of the Revenue
Bonds or will occur as a result of the Public Company Merger or any other
transaction contemplated hereby.
(j) The CenterPoint Obligors agree that they will provide
information to Buyer prior to Non-STP Acquisition Closing as to any Pollution
Control Facilities, if any, the legal title to which is held by a governmental
issuer of Revenue Bonds. When all Revenue Bonds of such issue are no longer
outstanding and title is transferred to the obligor on such issue of Revenue
Bonds, the CenterPoint Obligors will promptly take all actions necessary to
transfer or cause to be transferred such title to Buyer or its designees,
successors or assigns. If CenterPoint transfers its payment obligations with
respect to the Revenue Bonds it shall require its transferee to convey or cause
such title to be conveyed to Buyer or its designees, successors or assigns.
(k) If Buyer incurs any costs or expenses, including the time of
any of its employees, in connection with the CenterPoint Obligors' refunding any
of the Revenue Bonds or a successful defense of an IRS audit, the CenterPoint
Obligors shall pay to Buyer an amount equal to its actual costs reasonably
incurred unless any such costs or expenses arise directly or indirectly out of
Buyer's breach of its obligations under this Section 6.11.
Section 6.12 NRC Approval.
(a) As promptly after the date hereof as may be feasible (and in
any event, within 45 calendar days of the date of this Agreement), Genco
Holdings and Buyer shall jointly prepare and file one or more applications (the
"NRC APPLICATION") with the NRC for approval of the indirect transfer of the NRC
license for the South Texas Project and, to the extent necessary, any conforming
amendment of the NRC license to reflect such indirect transfer. Thereafter,
Parents, Genco Holdings and Buyer shall cooperate with one another to facilitate
review of the NRC Application by the NRC staff, including but not limited to
promptly providing the NRC staff with any and all documents or
75
information that the NRC staff may reasonably request or require any of the
parties to provide or generate. In addition, Parents and Genco Holdings shall
provide Buyer with the opportunity to review and comment on any application to
be filed with the NRC relating to Genco LP's exercise of its right of first
refusal to increase its interest in STP and they shall keep Buyer reasonably
apprised as to the status of any such application and cooperate with Buyer to
the extent such application may relate to the NRC Application.
(b) The NRC Application shall identify STP Nuclear Operating
Company ("STPNOC"), Genco Holdings and Buyer as separate parties to the NRC
Application, but Genco Holdings and Buyer shall jointly direct and control the
prosecution of the NRC Application. In the event the processing of the NRC
Application by the NRC becomes subject to a hearing or other extraordinary
procedure by the NRC (a "CONTESTED PROCEEDING"), until such Contested Proceeding
becomes final and nonappealable, Genco Holdings, on the one hand, and Buyer, on
the other hand, shall separately appear therein by their own counsel, and shall
continue to cooperate with each other to facilitate a favorable result.
(c) Parents, Genco Holdings and Buyer will bear their own costs of
the preparation, submission and processing of the NRC Application, including any
Contested Proceeding that may occur in respect thereof; provided, however, that
Buyer, on the one hand, and Parents, on the other hand, shall equally share the
costs of all NRC staff fees payable in connection with the NRC Application and
costs incurred by South Texas Project Nuclear Operating Company in filing and
prosecuting the NRC Application. In the event that Parents, Genco Holdings and
Buyer agree upon the use of common counsel, they shall share equally the fees
and expenses of such counsel.
(d) Buyer will conform to the restrictions on foreign ownership,
control or domination contained in Sections 103d and 104d of the Atomic Energy
Act, 42 U.S.C. Sections 2133(d) and 2134(d), as applicable, and the NRC's
regulations in 10 C.F.R. Section 50.38 and will take, as promptly as practicable
after the date of this Agreement, commercially reasonable efforts to develop and
implement a mitigation plan to address foreign ownership concerns that is
satisfactory to the NRC. For purposes of this Section 6.12(d), commercially
reasonable efforts include the acceptance of licensing conditions similar in all
material respects to those that have been or are being imposed by the NRC on
similarly situated license applicants.
Section 6.13 Preparation of Information Statement; SEC Filings.
(a) Promptly after the execution and delivery of this Agreement,
Genco Holdings shall prepare (in consultation with Buyer and Parents) and file
with the SEC an information statement, which information statement shall relate
to the adoption of this Agreement and approval of the transactions contemplated
hereby, including the Public Company Merger, and shall comply with the
requirements of Rule 13e-3 under the Exchange Act (the "INFORMATION STATEMENT").
The Information Statement shall include the recommendation of the board of
directors of Genco Holdings described in Section 4.25. Genco Holdings shall also
mail a copy of the Information Statement to
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Genco Holdings' shareholders as promptly as practicable following the date of
this Agreement.
(b) Each of Buyer, Genco Holdings and Parents (i) shall furnish
all information concerning itself and its subsidiaries to the others as may be
reasonably requested in connection with the preparation, filing and distribution
of the Information Statement and (ii) agrees, as to itself and its subsidiaries,
that none of the information supplied or to be supplied by it or its
subsidiaries (other than, in the case of Parents, the Companies) for inclusion
or incorporation by reference in the Information Statement and any amendment or
supplement thereto will, at the date of mailing to shareholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
Buyer, Genco Holdings and Parents agrees to promptly correct any information
provided by it for use in the Information Statement that shall have become false
or misleading. Genco Holdings will cause the Information Statement to comply as
to form in all material respects with the applicable provisions of the Exchange
Act and the rules and regulations thereunder.
(c) Genco Holdings shall promptly notify Buyer upon the receipt of
any comments from the SEC or its staff or any request from the SEC or its staff
for amendments or supplements to the Information Statement and shall provide
Buyer and Parents with copies of all correspondence between Genco Holdings and
its Representatives, on the one hand, and the SEC and its staff, on the other
hand. Notwithstanding the foregoing, prior to filing or mailing the Information
Statement or any amendment or supplement thereto or responding to any comments
of the SEC with respect thereto, Genco Holdings (i) shall provide Buyer and
Parents an opportunity to review and comment on such document or response and
(ii) shall include in such document or response all comments reasonably proposed
by Buyer and Parents.
(d) Each of the Genco SEC Reports to be filed by Genco Holdings
after the date of this Agreement, when filed, will comply in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, each as in effect on the date so filed. None of the Genco SEC Reports
(including any financial statements or schedules included or incorporated by
reference therein) to be filed by Genco Holdings after the date of this
Agreement, when filed, will 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 in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(e) Each of the audited and unaudited financial statements
(including any related notes) included in the Genco SEC Reports to be filed by
Genco Holdings after the date of this Agreement, when filed, will comply in all
material respects with all applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, will have been
prepared in accordance with 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 in the notes
thereto) and will fairly present the consolidated financial position of Genco
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Holdings and its subsidiaries at the respective date thereof and the
consolidated results of its and their operations and cash flows for the periods
indicated (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments, which were not and are not expected to be material
in amount).
Section 6.14 Directors' and Officers' Indemnification and Insurance.
(a) The articles of incorporation and bylaws of the Surviving Corporation shall
contain the provisions regarding liability of directors and indemnification of
directors and officers that are set forth, as of the date of this Agreement, in
the articles of incorporation and the bylaws, respectively, of Genco Holdings
and shall provide indemnification with respect to claims arising from facts or
events that occurred prior to the Public Company Merger Effective Time to the
fullest extent permitted by and in accordance with the TBCA and other applicable
Law from time to time, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Public Company Merger
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who at or at any time prior to the Public Company Merger
Effective Time were Company Employees.
(b) The Surviving Corporation shall cause to be obtained at the
Public Company Merger Effective Time "tail" insurance policies with a claims
period of at least six years from the Public Company Merger Effective Time with
respect to directors' and officers' liability insurance in amount and scope at
least as favorable as the Genco Holdings' existing policies for claims arising
from facts or events that occurred prior to the Public Company Merger Effective
Time; provided that if such "tail" insurance policies are not available at a
cost not greater than the amount set forth on Section 6.14 of the Companies
Disclosure Letter (the "INSURANCE CAP"), the Surviving Corporation shall cause
to be obtained as much comparable insurance for as long a period (not to exceed
six years from the Public Company Merger Effective Time) as is available for a
cost not to exceed the Insurance Cap.
Section 6.15 Section 16 Matters. Prior to the Public Company Merger
Closing, Genco Holdings and CenterPoint shall take all such steps as may be
required to cause to be exempt under Rule 16b-3 promulgated under the Exchange
Act any dispositions of Common Stock (including derivative securities with
respect to Common Stock) that are treated as dispositions to Genco Holdings
under such rule and result from the Public Company Merger by each individual who
is subject to the reporting requirements of Section 16(a) of the Exchange Act
with respect to Genco Holdings or CenterPoint.
Section 6.16 Intercompany Accounts and Agreements.
(a) Except as set forth in Section 6.16(a) of the Parents
Disclosure Letter and Section 6.6(m) of this Agreement, any intercompany
accounts and all amounts due under intercompany leases and other agreements
between any of the Companies, on the one hand, and Parents and their affiliates
(other than the Companies), on the other hand, related to the Non-STP Assets and
Liabilities shall be paid or otherwise settled in cash, and all such agreements
shall be terminated, as of the Non-STP Acquisition
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Closing; provided, that, any intercompany accounts between any of the Companies,
on the one hand, and Parents and their affiliates (other than the Companies), on
the other hand, relating to the Texas Genco Money Pool Agreement dated as of
October 22, 2003 (the "MONEY POOL AGREEMENT") shall be paid or otherwise settled
in cash and such agreement shall be terminated as of such date with respect to
Genco II LP and Genco Services and from such date until the STP Acquisition
Closing Date, no person other than a Company may borrow funds under the Money
Pool Agreement; provided, further, that all amounts payable under any fuel
purchase Contracts and the Current Transition Services Agreement shall be paid
in the ordinary course consistent with past practice. Such payment, settlement
or termination shall be made effective at or prior to the Non-STP Acquisition
Closing or as promptly thereafter as practicable. No adjustment shall be made to
the Non-STP Consideration as a result of any such payment, settlement or
termination.
(b) Except as set forth in Section 6.16(b) of the Parents
Disclosure Letter and Section 6.6(m) of this Agreement, any intercompany
accounts and all amounts due under intercompany leases and other agreements
between any of the Companies, on the one hand, and Parents and their affiliates
(other than the Companies), on the other hand, related to the STP Assets and
Liabilities shall be paid or otherwise settled in cash, and all such agreements
shall be terminated, as of the STP Acquisition Closing; provided, that, any
intercompany accounts between any of the Companies, on the one hand, and Parents
and their affiliates (other than the Companies), on the other hand, relating to
the Money Pool Agreement shall be paid or otherwise settled in cash and such
agreement shall be terminated as of such date with respect to all Companies;
provided, further, that all amounts payable under the Transition Services
Agreement shall be paid in the ordinary course consistent with past practice.
Such payment, settlement or termination shall be made effective at or prior to
the STP Acquisition Closing or as promptly thereafter as practicable. No
adjustment shall be made to the STP Consideration as a result of any such
payment, settlement or termination.
(c) Parents and Genco Holdings agree that, to the extent any
intercompany leases or agreements between any of the Companies, on the one hand,
and the Parents or their affiliates, on the other hand, have not been disclosed
in Section 4.22 of the Companies Disclosure Letter, to the extent and as Buyer
reasonably requests that any such lease or agreement survive the Non-STP
Acquisition Closing or the STP Acquisition Closing, as applicable, Parents
shall, or shall cause their applicable affiliate to, cause such lease or
contract to survive the Non-STP Acquisition Closing or the STP Acquisition
Closing, as applicable.
(d) Prior to the Non-STP Acquisition Closing Date, neither Genco
LP nor Genco Services shall, and Genco Holdings shall not make any payment,
incur any liability to or enter into any Contract or transaction with, Parent or
any of its affiliates (including the Companies, other than Genco LP and Genco
Services), except pursuant to Company Affiliate Contracts in effect on the date
of this Agreement or with Buyer's prior written consent.
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Section 6.17 Transition Services and Other Intercompany
Arrangements. (a) Each of Buyer and CenterPoint agree to enter into the
Transition Services Agreement on the Non-STP Acquisition Closing Date. At the
Non-STP Acquisition Closing, all data processing, accounting, insurance,
banking, personnel, legal, communications, information technology and other
products and services provided to the Companies or Genco II LP by or at the
expense of CenterPoint or any of its affiliates (other than a Company),
including any agreements or understandings (written or oral) with respect
thereto with respect to the Genco Business, will terminate, except to the extent
provided in the Transition Services Agreement or as set forth in Sections
6.16(a) and (b) of the Parents Disclosure Letter.
(b) On or prior to the Public Company Merger Closing Date, CenterPoint,
Genco Holdings, Buyer and Genco LP, as applicable, shall execute an amendment to
the Spin-off Separation Agreement substantially in the form attached as Schedule
6.17(b), which amendment shall be effective as of or after the Public Company
Merger Effective Time (the "SEPARATION AMENDMENT").
Section 1.18 Power Purchase Agreement. On or prior to the Non-STP
Acquisition Closing Date, Genco LP and Genco II LP shall enter into a power
purchase agreement on the terms set forth on Schedule 6.18 attached hereto and
otherwise on terms and conditions reasonably satisfactory to Buyer and Genco
Holdings.
Section 1.19 Decommissioning Undertakings. Buyer covenants and
agrees that following the STP Acquisition, Buyer shall cause its subsidiary that
owns the STP interest to maintain the Decommissioning Trust in compliance in all
material respects with applicable Laws, including regulations or rulings of the
IRS, NRC and the PUC (or any successor entity having jurisdiction over the
Decommissioning Trust and the collection of decommissioning funds). CenterPoint
covenants and agrees to cause its transmission and distribution subsidiary,
CenterPoint Energy Houston Electric, LLC ("CEHE") (i) to maintain in its
tariffed rates for the delivery of electricity the non-bypassable STP
decommissioning funding charge established in CEHE's most recent rate order,
with such changes to the charge as may be authorized or ordered by the PUC from
time to time, (ii) to deposit the decommissioning revenues collected by CEHE
through the decommissioning charges into Buyer's nuclear decommissioning trust
for STP (or, as applicable, into a decommissioning trust for STP maintained by
an entity succeeding to or having acquired all or part of Buyer's interest in
STP). CenterPoint and Buyer shall cooperate with the other, and shall cause each
of their subsidiaries to cooperate, at Buyer's expense with respect to
documented out-of-pocket expenses reasonably incurred, in providing information
for and otherwise supporting filings with the PUC in connection with the
decommissioning charge, including any rate proceeding filed by CEHE. Such
support shall include: (i) Buyer or its subsidiary providing decommissioning
studies and information as may be required to substantiate Buyer's proposed
decommissioning charge levels, (ii) CenterPoint causing CEHE to provide
information as may be required to substantiate Buyer's proposed decommissioning
charge levels, including any necessary testimony or information relating to
sales forecasts and rate design, (iii) Buyer and CenterPoint supporting, and
causing their subsidiaries to support, the maintenance of the decommissioning
charge and any increase to such charge proposed by Buyer or its
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subsidiary or any request by Buyer or its subsidiary that such charge be
established as a separate non-bypassable charge in CEHE's rates and (iv) Buyer
and CenterPoint opposing, and causing their subsidiaries to oppose, positions
taken by other parties to reduce, delay the recovery of or impose other terms or
conditions relating to the annual decommissioning funding amount to the extent
that Buyer or its subsidiary does not support such position. CenterPoint shall
cause CEHE to timely file proposed tariff and any other information necessary to
implement PUC orders effecting a change in the annual decommissioning funding
amount for STP included in CEHE's rates, and CenterPoint shall cooperate with
Buyer and its subsidiaries in complying with Code Section 468A and the Treasury
Regulations thereunder including filing any necessary elections or rulings with
the IRS or other authorities. Buyer and CenterPoint agree that the provisions of
this Section 6.19 shall be binding upon and shall benefit their respective
successors and assigns. CenterPoint agrees that it will not enter into any
transaction the effect of which would be to transfer, allocate, vest or assign
(whether by merger, operation of law or otherwise) all or any part of its
transmission or distribution business or the requirement to collect all or any
portion of such non-bypassable STP decommissioning fund charge to any other
person without obtaining the agreement of such person to be bound by and abide
by the terms of this Section 6.19 or substantially similar terms, and Buyer
agrees that it will not enter into any transaction the effect of which would be
to transfer, allocate, vest or assign (whether by merger, operation of law or
otherwise) its interest in STP to any other person without obtaining the
agreement of such person to be bound by and abide by the terms of this Section
6.19 or substantially similar terms. All references in this Section 6.19 to
Buyer, CenterPoint or CEHE shall include each such party's successors and
assigns.
Section 6.20 True-up Proceeds. Buyer acknowledges that it has no
claim or entitlement to any recovery or other amount resulting from any final
order issued by the PUC in the stranded cost true-up proceeding now pending
before the PUC in Docket No. 29526 or to any proceeds from any securitization
bonds that may be issued by a subsidiary of CenterPoint to recover amounts
CenterPoint and its subsidiaries may be entitled to recover as a result of that
proceeding. In the event that Buyer or any subsidiary receives any stranded cost
recovery, amount or proceeds referred to in the prior sentence, Buyer shall (or
shall cause such subsidiary to) immediately pay such recovery, amount or
proceeds over to CenterPoint.
Section 6.21 Environmental Reporting Regarding NOx Emission
Reductions. Unless CenterPoint notifies Buyer that CenterPoint is not required
to furnish such information to the PUC, within 90 days after December 31, 2004,
2005 and 2006, Buyer shall furnish or cause to be furnished to CenterPoint a
statement detailing the capital expenditures made by Buyer and its subsidiaries
for purposes of reduction of emissions of NOx during the prior year. Such
statement shall be in a form agreed by Buyer and CenterPoint in order to permit
CenterPoint to file reports required by the PUC. This provision does not require
Buyer to make any capital expenditures for these purposes or subject Buyer to
any liability with respect to CenterPoint's filings with the PUC, but is solely
a reporting obligation to enable CenterPoint to comply with its obligations.
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Section 6.22 Leases. Prior to the Genco LP Division, CenterPoint
shall (or shall cause its applicable subsidiary to) enter into one or more lease
agreements with Genco LP or its designated affiliate on the terms set forth in
Section 6.22 of the Companies Disclosure Letter and otherwise on terms and
conditions reasonably acceptable to Buyer.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE PUBLIC COMPANY MERGER
Section 7.1 Conditions to Genco Holdings and Merger Sub's
Obligations to Consummate the Public Company Merger. The respective obligations
of Genco Holdings and Merger Sub to consummate the Public Company Merger are
subject to the satisfaction on or prior to the Public Company Merger Closing
Date of each of the following conditions:
(a) No Law or Order shall exist or shall have been enacted,
entered, promulgated or enforced by any Governmental Authority which
prohibits or makes illegal consummation of the Public Company Merger or
the Non-STP Acquisition or any of the other transactions related thereto;
(b) Any waiting period applicable to the Public Company Merger or
the Non-STP Acquisition, under applicable U.S. antitrust or trade
regulation laws and regulations, including under the HSR Act, shall have
expired or been terminated;
(c) The consummation of the Public Company Merger is permitted by
Rule 14c-2 promulgated under the Exchange Act;
(d) The Companies shall have access to immediately available funds
under the Overnight Bridge Loan as contemplated by the Public Company
Merger Debt Term Sheet, the Buyer shall have received proceeds from the
Debt Financing in an amount equal to the Non-STP Consideration (or such
amount shall have been funded into escrow as contemplated by the Debt
Financing Letter) and the Delayed Draw Term Facility shall be in full
force and effect, in each case on the terms and conditions set forth in
the Debt Financing Letter or the Public Company Merger Debt Term Sheet, as
applicable, or upon terms and conditions which are, in the judgment of
Buyer, comparable or more favorable (to Buyer) in the aggregate thereto,
and to the extent that any terms and conditions are not set forth in the
Debt Financing Letter, on terms and conditions reasonably satisfactory to
Buyer and, with respect to the Public Company Merger Debt Term Sheet,
Genco Holdings;
(e) Buyer shall have delivered to Parents a certificate, dated as
of the date scheduled for the Public Company Merger Closing and effective
so long as the Public Company Merger is consummated on such date, to the
effect that, in reliance on the certificates referred to in Section
8.3(d), and based on the
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satisfaction or waiver by Buyer of the conditions precedent set forth in
Section 8.3(e) and 8.3(f), Buyer is prepared to consummate the Non-STP
Acquisition on the following business day (subject to the satisfaction of
the conditions set forth in Section 8.1 and 8.5), and upon delivery of
such certificate, all the conditions in Section 8.3 shall be deemed
satisfied or waived, so long as the Public Company Merger is consummated
on the date scheduled for the Public Company Merger, and the Non-STP
Acquisition occurs on the following business day or as soon as possible
thereafter;
(f) The conditions in Section 8.2 shall have been satisfied; and
(g) Genco II LP shall have been certified as an EWG by the FERC.
Genco Holdings shall not waive the conditions set forth in subsection (a), (b)
or (c) of this Section 7.1 without Buyer's consent.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE NON-STP ACQUISITION
Section 8.1 Conditions to Buyer, Genco Holdings and CenterPoint's
Obligations to Consummate the Non-STP Acquisition. The respective obligations of
Buyer, Genco Holdings and CenterPoint to consummate the Non-STP Acquisition are
subject to the satisfaction on or prior to the Non-STP Acquisition Closing Date
of each of the following conditions:
(a) No Law or Order shall exist or shall have been enacted,
entered, promulgated or enforced by any Governmental Authority which
prohibits or makes illegal consummation of the Non-STP Acquisition or any
of the other transactions related thereto.
(b) Any waiting period applicable to the Non-STP Acquisition under
applicable U.S. antitrust or trade regulation laws and regulations,
including under the HSR Act, shall have expired or been terminated.
(c) The Public Company Merger shall have been consummated.
Section 8.2 Further Conditions to Genco Holdings and CenterPoint's
Obligations. The obligation of Genco Holdings and CenterPoint to consummate the
Non-STP Acquisition is further subject to satisfaction or, if permitted by
applicable Law, waiver by Genco LP and CenterPoint, on or prior to the Public
Company Merger Closing Date of each of the following conditions:
(a) Representations and Warranties. Each of the representations
and warranties of Buyer set forth in Article V of this Agreement shall be
true and correct as of the date of this Agreement and on and as of the
Public Company Merger Closing Date as though such representations and
warranties were made on and as of such date, except for representations
and warranties which speak as of
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an earlier date or period which shall be true and correct as of such date
or period; provided, however, that for purposes of this clause, such
representations and warranties shall be deemed to be true and correct
unless the failure or failures of all such representations and warranties
to be so true and correct, without giving effect to any qualification as
to materiality or Buyer Material Adverse Effect set forth in such
representations or warranties, would reasonably be expected, in the
aggregate, to have a Buyer Material Adverse Effect.
(b) Performance Obligations of Buyer. Buyer shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Public Company Merger Closing.
(c) Officer's Certificate. Genco LP and CenterPoint shall have
received a certificate, dated the Public Company Merger Closing Date,
signed on behalf of Buyer by an officer of Buyer certifying as to the
matters described in Sections 8.2(a) and 8.2(b).
Section 8.3 Further Conditions to Buyer's Obligations. The
obligation of Buyer to consummate the Non-STP Acquisition shall be further
subject to the satisfaction or, if permitted by applicable Law, waiver by Buyer,
on or prior to the Public Company Merger Closing Date, of each of the following
conditions:
(a) Representations and Warranties. Each of the representations
and warranties of Parents and Genco Holdings (i) set forth in Articles III
and IV of this Agreement shall be true and correct as of the date of this
Agreement and as of the Public Company Merger Closing Date as though such
representations and warranties were made on and as of such date, except
for representations and warranties that speak as of an earlier date or
period which shall be true and correct as of such date or period;
provided, however, that for purposes of this clause, such representations
and warranties shall be deemed to be true and correct unless the failure
or failures of all such representations and warranties to be so true and
correct, without giving effect to any qualification as to materiality or
Companies Material Adverse Effect set forth in such representations or
warranties, would reasonably be expected, in the aggregate, to have a
Companies Material Adverse Effect and (ii) set forth in Sections 3.3 and
4.3 shall be true and correct in all material respects as of the date of
this Agreement and as of the Public Company Merger Closing Date as though
made on and as of the Public Company Merger Closing Date, except for
representations and warranties which speak as of an earlier date or period
which shall be true and correct as of such date or period.
(b) Performance Obligations. Each of Parents and Genco Holdings
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Public Company
Merger Closing Date, including, without limitation, causing the
consummation of the Genco LP Division.
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(c) No Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred any state of facts, change, development,
event, effect, condition or occurrence that, individually or in the
aggregate, has had or would reasonably be expected to have a Companies
Material Adverse Effect.
(d) Officer's Certificate. Buyer shall have received a
certificate, dated the Public Company Merger Closing Date, signed on
behalf of (i) the Parents by the Chief Executive Officer or Chief
Financial of CenterPoint and (ii) Genco Holdings by the Chief Executive
Officer or Chief Financial of Genco Holdings, in each case certifying as
to the matters described in Section 8.3(a), 8.3(b) and 8.3(c).
(e) Receipt of Debt Financing. Genco Holdings shall have access to
immediately available funds under the Overnight Bridge Loan as
contemplated by the Public Company Merger Debt Term Sheet, Buyer shall
have received proceeds from the Debt Financing in an amount equal to the
Non-STP Consideration (or such amount shall have been funded into escrow
as contemplated by the Debt Financing Letter) and the Delayed Draw Term
Facility shall be in full force and effect, in each case on the terms and
conditions set forth in the Debt Financing Letter or the Public Company
Merger Debt Term Sheet, as applicable, or upon terms and conditions which
are, in the judgment of Buyer, comparable or more favorable (to Buyer) in
the aggregate thereto, and to the extent that any terms and conditions are
not set forth in the Debt Financing Letter, on terms and conditions
reasonably satisfactory to Buyer and, with respect to the Public Company
Merger Debt Term Sheet, Genco Holdings.
(f) Ancillary Agreements. At the request of Buyer delivered prior
to the Public Company Merger Closing Date, (i) CenterPoint and Buyer shall
have entered into a Transition Services Agreement, dated as of the Non-STP
Acquisition Closing Date, between CenterPoint and Buyer, in substantially
the form attached as Exhibit E to this Agreement (the "TRANSITION SERVICES
AGREEMENT"), and (ii) the parties thereto shall have entered into the
Separation Amendment, and each such agreement shall not have been revoked,
terminated or amended.
(g) EWG Certification. Genco II LP shall have been certified as an
EWG by the FERC.
(h) Genco II LP and Genco Services shall hold all Permits
necessary to operate the Non-STP Assets and Liabilities consistent with
past practice, except where the failure to hold such Permits would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 8.4 Additional Conditions to Genco Holdings and
CenterPoint's Obligations. The obligation of Genco Holdings and CenterPoint to
consummate the Non-STP Acquisition shall be further subject to the satisfaction
or, if permitted by applicable Law, waiver by Genco Holdings and CenterPoint, on
or prior to
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the Non-STP Acquisition Closing Date, of the following conditions with respect
to the Power Purchase Agreement:
(a) All Bonds (as defined in the Phase I Lien Annex to the Power
Purchase Agreement) issued by Genco LP under the Phase I Lien Annex to the
Power Purchase Agreement shall have been cancelled and returned to the
Trustee (as defined in the Phase I Lien Annex to the Power Purchase
Agreement).
Section 8.5 Additional Conditions to Buyer's Obligations. The
obligation of Buyer to consummate the Non-STP Acquisition shall be further
subject to the satisfaction or, if permitted by applicable Law, waiver by Buyer,
on or prior to the Non-STP Acquisition Closing Date, of the following
conditions:
(a) Performance Obligations. Each of Parents and Genco Holdings
shall have performed in all material respects all obligations required to
be performed by it under this Agreement in order to consummate the Non-STP
Acquisition and all obligations required to be performed by it under this
Agreement from the Public Company Merger Closing Date through and prior to
the Non-STP Acquisition Closing.
(b) Officer's Certificate. Buyer shall have received a
certificate, dated the Non-STP Acquisition Closing Date, signed on behalf
of (i) the Parents by the Chief Executive Officer or Chief Financial of
CenterPoint and (ii) Genco Holdings by the Chief Executive Officer or
Chief Financial of Genco Holdings, in each case certifying as to the
matters described in Section 8.5(a).
(c) Provided that Buyer has satisfied the condition set forth in
Section 8.4(a), (i) the Indenture (as defined in the Phase I Lien Annex to
the Power Purchase Agreement) shall have been satisfied and discharged or
(ii) (A) Genco II LP shall have been released and discharged from all
obligations and covenants under such Indenture and on and under all
Securities (as defined in the Indenture) then Outstanding (as defined in
the Indenture) and (B) all assets (including all property, real, personal
and mixed) of Genco II LP shall have been released from all liens under
the Indenture.
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE STP ACQUISITION
Section 9.1 Conditions to CenterPoint and Buyer's Obligations to
Consummate the STP Acquisition. The respective obligations of CenterPoint and
Buyer to consummate the STP Acquisition are subject to the satisfaction on or
prior to the STP Acquisition Closing Date of each of the following conditions:
(a) No Law or Order shall exist or shall have been enacted,
entered, promulgated or enforced by any Governmental Authority which
prohibits or makes illegal consummation of the STP Acquisition or any of
the other transactions related thereto;
86
(b) Any waiting period applicable to the STP Acquisition under
applicable U.S. antitrust or trade regulation laws and regulations,
including under the HSR Act, shall have expired or been terminated;
(c) The NRC Approval shall have been obtained and shall be in full
force and effect, any waiting period prescribed by Law before the STP
Acquisition may be consummated shall have expired, no rehearing or appeal
of such NRC Approval shall be pending or to Genco Holdings' or Buyer's
knowledge threatened; and
(d) The Non-STP Acquisition shall have been consummated.
Section 9.2 Further Conditions to Buyer's Obligations. The
obligation of Buyer to consummate the STP Acquisition shall be further subject
to the satisfaction or, if permitted by applicable Law, waiver by Buyer, on or
prior to the STP Acquisition Closing Date, of each of the following conditions:
(a) Representations and Warranties. Each of the representations
and warranties of Parents and Genco Holdings (i) set forth in Articles III
and IV of this Agreement relating to the Companies (excluding the Non-STP
Assets and Liabilities transferred in the Non-STP Acquisition) shall be
true and correct as of the date of this Agreement and as of the STP
Acquisition Closing Date as though such representations and warranties
were made on and as of such date, except for representations and
warranties that speak as of an earlier date or period which shall be true
and correct as of such date or period; provided, however, that for
purposes of this clause, such representations and warranties shall be
deemed to be true and correct unless the failure or failures of all such
representations and warranties to be so true and correct, without giving
effect to any qualification as to materiality or Companies Material
Adverse Effect set forth in such representations or warranties, would
reasonably be expected, in the aggregate, to have a Companies Material
Adverse Effect and (ii) set forth in Section 3.3(b) of this Agreement
shall be true and correct as of the STP Acquisition Closing Date as though
such representation was made on and as of such date. For purposes of this
Section 9.2, in the definition of "Companies Material Adverse Effect", the
words "Companies taken as a whole" shall be deemed to be followed by the
phrase "(including the Non-STP Assets and Liabilities as in effect as of
the date hereof)", so that the only items relevant shall be any state of
facts, changes, developments, events, effects, conditions and occurrences
affecting the STP Assets and Liabilities, which shall be compared to the
Companies taken as a whole as of the date of this Agreement, ignoring any
such item thereafter affecting the Non-STP Assets and Liabilities.
(b) Performance Obligations. From the Non-STP Acquisition Closing
Date through the STP Acquisition Closing Date, each of Parents and Genco
Holdings shall have performed in all material respects all obligations
relating to the Companies (excluding the Non-STP Assets and Liabilities
transferred in the
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Non-STP Acquisition) required to be performed by it under this Agreement
at or prior to the STP Acquisition Closing.
(c) No STP Assets Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any state of facts, change,
development, event, effect, condition or occurrence with respect to the
Companies (for the avoidance of doubt excluding the Non-STP Assets and
Liabilities transferred in the Non-STP Acquisition) that, individually or
in the aggregate, has had or would reasonably be expected to have a
Companies Material Adverse Effect.
(d) Officer's Certificate. Buyer shall have received a
certificate, dated the STP Acquisition Closing Date, signed on behalf of
CenterPoint by the Chief Executive Officer or Chief Financial of
CenterPoint certifying as to the matters described in Section 9.2(a),
9.2(b) and 9.2(c).
ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the STP
Acquisition Closing Date, as follows (the date of any such termination, the
"TERMINATION DATE"):
(a) by mutual written consent of CenterPoint, Genco Holdings and
Buyer;
(b) by CenterPoint, Genco Holdings or Buyer if the STP Acquisition
Closing shall not have been consummated on or before April 30, 2005 (such
date, as it may be extended under clause (a) of this paragraph, the
"OPTIONAL TERMINATION DATE"); provided, however, that (a) either
CenterPoint, Genco Holdings or Buyer may, in its sole discretion, elect to
extend the Optional Termination Date for up to two consecutive 90-day
extension periods if, in each case, (i) the conditions set forth in
Sections 7.1(b), 9.1(b) or 9.1(c) have not been satisfied, (ii) all other
conditions to consummation of the Public Company Merger, in the case of
Section 7.1(b), or the STP Acquisition Closing, in the case of Section
9.1(b) or 9.1(c), are satisfied or capable of then being satisfied (other
than the condition in Section 9.1(d) in the case of the STP Acquisition
Closing), and (iii) the sole reason that the Public Company Merger or the
STP Acquisition Closing, as applicable, has not been consummated by such
date is that the conditions set forth in Sections 7.1(b), 9.1(b) or
9.1(c), as applicable, have not been satisfied due to the failure to
obtain the necessary consents and Approvals under applicable Laws or a
judgment, injunction, order or decree of a court or governmental or
regulatory entity of competent jurisdiction shall be in effect and Parents
and Genco Holdings, on the one hand, or Buyer, on the other hand, as
applicable, are still attempting to obtain such necessary consents and
Approvals under applicable Laws, or are contesting (x) the refusal of such
court or
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governmental or regulatory entity to give such consents or Approvals or
(y) the entry of any such judgment, injunction, order or decree, in court
or through other applicable proceedings; and (b) the right to terminate
this Agreement pursuant to this Section 10.1(b) shall not be available to
either of CenterPoint or Genco Holdings, if either of their failure to
perform, or Buyer, if its failure to perform, its obligations under this
Agreement has been the cause of, or resulted in, the failure of the Public
Company Merger or STP Acquisition Closing to have been consummated on or
before the Termination Date or Optional Termination Date, as applicable;
(c) by CenterPoint or Genco Holdings, on the one hand, or Buyer,
on the other hand, if there shall have been a material breach of any of
the covenants or agreements or any of the representations or warranties
set forth in this Agreement on the part of any of Buyer, in the case of
termination by CenterPoint or Genco Holdings, or the Parents or Genco
Holdings, in the case of a termination by Buyer, which breach,
individually or together with all other such breaches, would constitute,
if occurring or continuing on the Non-STP Acquisition Closing Date or the
STP Acquisition Closing Date, the failure of any of the conditions set
forth in Section 8.2, 8.3 or 9.2, as the case may be, and which is not
cured within 30 days following written notice to the party committing such
breach or by its nature or timing cannot be cured prior to the Non-STP
Acquisition Closing Date or the STP Acquisition Closing Date, as the case
may be;
(d) by CenterPoint, Genco Holdings or Buyer if (i) a Governmental
Authority shall have issued an Order or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such Order shall have become final and
non-appealable or (ii) a Governmental Authority of competent jurisdiction
shall have denied or otherwise failed to grant a Required Approval and
such failure or denial shall have become final and non-appealable, a
result of which the conditions set forth in Section 7.1 or, if the Public
Company Merger has occurred, Section 8.1 or, if the Non-STP Acquisition
Closing has occurred, Section 9.1, shall become incapable of being
satisfied; or
(e) by Buyer if the Non-STP Acquisition has not occurred within
three calendar days after the Public Company Merger Closing Date.
Section 10.2 Procedure for and Effect of Termination. In the event
of termination of this Agreement and abandonment of the transactions
contemplated by this Agreement by either party as provided under Section 10.1 of
this Agreement, written notice thereof shall be given by a party so terminating
to the other party and this Agreement shall forthwith become void and have no
effect, and the transactions contemplated by this Agreement shall be abandoned
without further action by Parents, Genco Holdings or Buyer, without any
liability or obligation on the part of Buyer, Genco Holdings or Parents, other
than the provisions of Section 6.2(b), this Section 10.2 and Article XI. If this
Agreement is terminated under Section 10.1 of this Agreement:
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(a) each party shall redeliver all documents, work papers and
other materials of the other parties relating to the transactions
contemplated by this Agreement which have not been consummated as of the
date of termination, whether obtained before or after the execution of
this Agreement, to the party furnishing the same, and all confidential
information received by any party hereto with respect to the other party
shall be treated in accordance with the Confidentiality Agreement and
Section 6.2(b) of this Agreement;
(b) all filings, applications and other submissions made pursuant
hereto shall, to the extent practicable, be withdrawn from the agency or
other person to which made, to the extent the applicable transaction has
not been consummated; and
(c) there shall be no liability or obligation under this Agreement
on the part of Parents, Genco Holdings or Buyer or any of their respective
Representatives, except that nothing contained in this Section 10.2 shall
relieve any party from liability for its breach of representations,
warranties, covenants or agreements set forth in this Agreement; and
except that the obligations provided for in this Section 10.2 shall
survive any such termination.
Notwithstanding anything to the contrary in this Agreement, in the event of a
termination of this Agreement pursuant to Article X following the consummation
of the Non-STP Acquisition, the provisions of this Agreement shall remain in
effect in accordance with their terms, except for the obligations relating
solely to the STP Assets and Liabilities, including the obligation to consummate
the STP Acquisition.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Representations and Warranties. All representations and
warranties in Articles IV and V of this Agreement or in any instrument delivered
pursuant to this Agreement shall not survive and shall terminate at the Public
Company Merger Effective Time (as such representations and warranties relate to
the Non-STP Assets and Liabilities) or at the STP Acquisition Closing
(otherwise) or, subject to Section 10.2(c), upon termination of this Agreement
pursuant to Article X, as the case may be. The representations and warranties
contained in Article III (other than Section 3.4) and Section 6.11(i) of this
Agreement shall survive indefinitely.
Section 11.2 Amendment and Modification. This Agreement may be
amended, modified or supplemented at any time by the parties to this Agreement,
under an instrument in writing signed by all parties.
Section 11.3 Entire Agreement; Assignment. This Agreement (including
the Parents Disclosure Letter, Companies Disclosure Letter and Buyer Disclosure
Letter), the Confidentiality Agreement and the Parent Written Consent (a)
constitute the entire agreement between the parties concerning the subject
matter of this Agreement and
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supersede other prior agreements and understandings, both written and oral,
between the parties concerning the subject matter of this Agreement, and (b)
shall not be assigned, by operation of Law or otherwise, by a party, without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void, except that Buyer may assign its
rights or obligations hereunder to any affiliate or a lender (or agent therefor)
for security purposes, provided that no such assignment shall relieve Buyer of
its obligations hereunder.
Section 11.4 Severability. The invalidity or unenforceability of any
term or provision of this Agreement in any situation or jurisdiction shall not
affect the validity or enforceability of the other terms or provisions of this
Agreement or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction and the remaining terms and
provisions shall remain in full force and effect, unless doing so would result
in an interpretation of this Agreement which is manifestly unjust.
Section 11.5 Notices. Unless otherwise provided in this Agreement,
all notices and other communications under this Agreement shall be in writing
and may be given by any of the following methods: (a) personal delivery; (b)
facsimile transmission; (c) registered or certified mail, postage prepaid,
return receipt requested; or (d) overnight delivery service. Such notices and
communications shall be sent to the appropriate party at its address or
facsimile number given below or at such other address or facsimile number for
such party as shall be specified by notice given under this Agreement (and shall
be deemed given upon receipt by such party or upon actual delivery to the
appropriate address, or, in case of a facsimile transmission, upon transmission
by the sender and issuance by the transmitting machine of a confirmation slip
that the number of pages constituting the notice have been transmitted without
error; in the case of notices sent by facsimile transmission, the sender shall
contemporaneously mail a copy of the notice to the addressee at the address
provided for above; provided, however, that such mailing shall in no way alter
the time at which the facsimile notice is deemed received):
(a) if to Genco Holdings, to
Texas Genco Holdings, Inc.
1111 Louisiana Street
Houston, Texas 77002
Telecopy: (713) 207-0141
Attention: David G. Tees
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with a copy to
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
Telecopy: (713) 229-7701
Attention: J. David Kirkland, Jr.
(b) if to Parents, to
CenterPoint Energy, Inc,
1111 Louisiana Street
Houston, Texas 77002
Telecopy: (713) 207-0141
Attention: Gary Whitlock
Utility Holding LLC
1011 Centre Road
Suite 324
Wilmington, Delaware 19805
Telecopy: (302) 225-1485
Attention: Patricia F. Genzel
President and Secretary
with a copy to
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
Telecopy: (713) 229-7701
Attention: J. David Kirkland, Jr.
(c) if to Buyer, to
GC Power Acquisition LLC
c/o Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2502
Attention: David J. Sorkin
Brian M. Stadler
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with a copy to
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2502
Attention: David J. Sorkin
Brian M. Stadler
Section 11.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (except to the
extent that mandatory provisions of Texas Law are applicable). All Actions
arising out of or relating to this Agreement shall be heard and determined in
any state or federal court sitting in the City of New York, and the parties
hereby irrevocably submit to the exclusive jurisdiction of such courts in any
such Action and irrevocably waive the defense of an inconvenient forum to the
maintenance of any such Action. Each party irrevocably consents to the service
of any and all process in any such Action by the mailing of copies of such
process to such party at its address specified in Section 11.5. The parties
agree that a final judgment in any such Action shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. Nothing in this Section 11.6 shall affect the right of any
party to serve legal process in any other manner permitted by Law. The consents
to jurisdiction set forth in this Section 11.6 shall not constitute general
consents to service of process in the State of New York and shall have no effect
for any purpose except as provided in this Section 11.6 and shall not be deemed
to confer rights on any person other than the parties. EACH PARTY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.7 Descriptive Headings. The table of contents and
descriptive headings used in this Agreement are inserted for convenience of
reference only and shall in no way be construed to define, limit, describe,
explain, modify, amplify, or add to the interpretation, construction or meaning
of any provision of, or scope or intent of, this Agreement nor in any way affect
this Agreement.
Section 11.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but any of which
together shall constitute one and the same instrument.
Section 6.9 Fees and Expenses. Whether or not this Agreement and the
transactions contemplated by this Agreement are consummated, and except as
otherwise expressly set forth in this Agreement, all costs and expenses
(including legal and financial advisory fees and expenses) incurred in
connection with, or in anticipation of, this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses. Each of the Parents and Genco Holdings, on the one hand,
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and Buyer, on the other hand, shall indemnify and hold harmless the other party
from and against any and all claims or liabilities for financial advisory and
finders' fees incurred by reason of any action taken by such party or otherwise
arising out of the transactions contemplated by this Agreement by any person
claiming to have been engaged by such party.
Section 11.10 Interpretation.
(a) The phrase "TO THE KNOWLEDGE OF" any person or any similar
phrase shall mean such facts and other information which as of the date of
determination are actually known to any executive officer of such person, after
due inquiry. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement. When a
reference is made in this Agreement to Sections, Schedules or Exhibits, such
reference shall be to a Section, Schedule or Exhibit of this Agreement,
respectively, unless otherwise indicated. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The term "or" is not exclusive. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms. References to a person are also to its permitted successors and assigns.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms.
(b) For purposes of this Agreement, the term: (i) "AFFILIATE"
means, unless otherwise indicated, any person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with the person specified; (ii) "COMPANY IP" means all
Intellectual Property owned, held or used by any Company, all material patent,
copyright, trademark and service mark registrations and applications, domain
names issued to, assigned to and filed by any Company (or, to the extent
applicable, any affiliate of Parents engaged in the Genco Business who
transferred, directly or indirectly, assets or liabilities to any Company in the
Separation Transactions) and all IP Contracts; (iii) "GOOD UTILITY PRACTICES"
means with respect to each generation facility, any of the practices, methods
and acts generally engaged in or approved by a significant portion of the
electric utility industry in the United States for facilities of similar size,
technology and age in the United States during a particular time period, or any
of such practices, methods, and acts, which, in the exercise of reasonable
judgment in light of the facts known or that reasonably should be known at the
time a decision is made, could have been expected to accomplish the desired
result at a reasonable cost consistent with good business practices,
reliability, safety and expedition; (iv) "INTELLECTUAL PROPERTY" means all U.S.
and foreign intellectual property, including: (a) patents, inventions,
discoveries, processes, designs, techniques, developments, technology, and
related improvements and know-how, whether or not patented or patentable; (b)
copyrights and works of authorship in any media, including computer hardware,
software, firmware, applications, files, systems, networks, databases and
94
compilations, documentation and related textual works, graphics, advertising,
marketing and promotional materials, photographs, artwork, drawings, articles,
textual works, and Internet site content; (c) trademarks, service marks, trade
names, brand names, corporate names, domain names, logos trade dress and other
source indicators and the goodwill of any business symbolized thereby; (d) trade
secrets, drawings, blueprints and all non-public, confidential or proprietary
information, documents, materials, analyses, reach and lists; (e) all
registrations, applications and recordings and licenses and other agreements
related thereto; and (f) all rights to obtain renewals, extensions,
continuations, continuations-in-part, reissues, divisions or similar legal
protections related thereto; (v) "PERSON" means any individual, corporation,
partnership, limited liability company, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, representative office,
branch, Governmental Authority or other similar entity such determination; and
(vi) "SUBSIDIARY" means, with respect to any person, any other person of which
such person (either alone or through or together with any other subsidiary)
owns, directly or indirectly, 50% or more of the outstanding equity securities
or securities carrying 50% or more of the voting power in the election of the
board of directors or other governing body of such person; provided that STPNOC
shall be deemed to be a "subsidiary" of Genco Holdings for purposes of the
following Sections of this Agreement: 3.5, 4.1 (other than the last sentence),
4.3, 4.5, 4.6(a) (first sentence only), 4.8 (first sentence only), 4.9, 4.10,
4.14 (first sentence only), 4.15, 4.21, 4.22, 6.1, 6.2, 6.3, 6.6, 6.7 and 6.16;
and provided, further, that the parties acknowledge that Genco Holdings does not
control STPNOC, and accordingly (i) the representations and warranties referred
to above in Article IV are made to the Company's knowledge and (ii) with respect
to the obligations of Genco Holdings to cause the Companies to take various
actions under Sections 6.1, 6.2, 6.3, 6.6, 6.7 and 6.16, Genco Holdings'
obligations under such Sections shall be to cause Genco LP not to approve or
take any other action that would permit STPNOC to take actions under such
Sections that could not be taken by Companies.
Section 11.11 Third-Party Beneficiaries. This Agreement is solely
for the benefit of Parents, Genco Holdings, CEHE (with respect to Section 6.11
only) and their respective successors and permitted assigns, with respect to the
obligations of Buyer under this Agreement, and for the benefit of Buyer, and its
successors and permitted assigns, with respect to the obligations of Parents and
Genco Holdings, under this Agreement. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
Section 11.12 No Waivers. Except as otherwise expressly provided in
this Agreement, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between the parties, shall constitute a waiver of any such right, power
or remedy. No waiver by a party of any default, misrepresentation, or breach of
warranty or covenant under this Agreement, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant under this Agreement or affect in any way any
rights arising by virtue of any prior or subsequent such occurrence.
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No waiver shall be valid unless in writing and signed by the party against whom
such waiver is sought to be enforced.
Section 11.13 Specific Performance. The parties to this Agreement
agree that if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached, irreparable
damage would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled to specific
performance of the terms of this Agreement and immediate injunctive relief,
without the necessity of proving the inadequacy of money damages as a remedy, in
addition to any other remedy at law or in equity.
Section 11.14 Acknowledgments. Notwithstanding anything else that
may be expressed or implied in this Agreement, CenterPoint, Utility Holding and
Genco Holdings covenant, agree and acknowledge that no recourse under this
Agreement or any documents or instruments delivered in connection with this
Agreement or any of the transactions contemplated hereby shall be had against
any current or future director, officer, employee, general or limited partner,
member or Affiliate (including the Investors) of Buyer or any of the foregoing,
whether by the enforcement of any assessment or by any legal or equitable
proceeding, or by virtue of any statute, regulation or other applicable Law, it
being expressly agreed and acknowledged that no personal liability whatsoever
shall attach to, be imposed on or otherwise be incurred by any current or future
officer, agent or employee of Buyer or any current or future shareholder of
Buyer or any current or future director, officer, employee, general or limited
partner, member or Affiliate (including the Investors) of any of the foregoing,
as such, for any obligation of Buyer under this Agreement or any documents or
instruments delivered in connection with this Agreement or any of the
transactions contemplated hereby or for any claim based on, in respect of or by
reason of such obligations of Buyer or their creation.
Section 11.15 Parent Undertaking. CenterPoint agrees to cause
Utility Holding to, and subject to Section 11.16 to use its best efforts to
cause Genco Holdings to, perform the actions required of it under this Agreement
and guarantees the performance of the obligations of Utility Holding and, after
the Public Company Merger, of Genco Holdings.
Section 11.16 Special Committee. Prior to the Public Company Merger
Effective Time, any action by Genco Holdings to terminate this Agreement
pursuant to Section 10.1, any agreement by Genco Holdings to amend this
Agreement pursuant to Section 11.2 or any waiver by Genco Holdings pursuant to
Section 7.1, 8.1, or 8.2 shall be made, taken or given, as the case may be, only
with the concurrence, or at the direction, of the Special Committee of the Board
of Directors of Genco Holdings which was appointed to act in connection with
this Agreement and related matters.
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IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly signed as of the date first above written.
TEXAS GENCO HOLDINGS, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
GC POWER ACQUISITION LLC
By:__________________________________
Name:_____________________________
Title:____________________________
HPC MERGER SUB, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
NN HOUSTON SUB, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
PARENTS:
CENTERPOINT ENERGY, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
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UTILITY HOLDING, LLC
By:__________________________________
Name:_____________________________
Title:____________________________
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