UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-13264
TRIGEN ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-3378939
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Water Street
White Plains, New York 10601
(Address of principal executive offices) (Zip Code)
(914) 286-6600
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
There were 11,508,223 shares of the Registrant's Common Stock outstanding
as of May 15, 1996.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
Quarter Ended March 31, 1996
Part I - Financial Information: Page
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1996 and 1995 (Unaudited) 2
Condensed Consolidated Balance Sheets as of March 31, 1996
(Unaudited)and December 31, 1995 3
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1996 and 1995 (Unaudited) 4
Notes to Condensed Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-8
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1996 and 1995
Unaudited
(All amounts in thousands, except per share data)
1996 1995
Revenues
Energy revenues $82,359 $ 63,623
Fees earned and other operating revenues 3,860 1,553
------- --------
Total revenues 86,219 65,176
Operating expenses
Fuel and consumables 47,808 32,504
Production and operating costs 13,161 12,100
Depreciation 4,193 4,043
General and administrative 8,914 6,527
------- -------
Total operating expenses 74,076 55,174
Operating income 12,143 10,002
Other income (expense):
Interest expense (4,669) (4,989)
Other income, net 419 537
------- ------
Income before minority interests and income tax
expense 7,893 5,550
Minority interests in earnings of consolidated entities (801) (37)
------ ------
Income before income tax expense 7,092 5,513
Income tax expense 2,911 2,255
------- ------
Net income $ 4,181 $3,258
======= ======
Net income per share $ .36 $ .29
======= ======
Average shares outstanding 11,470 11,373
======= ======
Dividends per share $ .035 $ .035
======= =======
See accompanying notes to condensed consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except share data)
March 31, December 31,
1996 1995
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 14,091 $ 9,984
Accounts receivable:
Trade (less allowance for doubtful
accounts of $783 in 1996 and $697
in 1995) 36,809 36,275
Other 3,254 1,922
Inventories 5,743 6,239
Prepaid costs and other current assets 4,639 6,890
------- -------
Total current assets 64,536 61,310
Non-current cash and cash equivalents 10,016 10,191
Property, plant and equipment, net 343,436 341,188
Investment in non-consolidated partnerships 8,701 6,548
Intangible assets, net 15,464 15,088
Deferred costs and other assets, net 19,669 20,581
------- -------
Total assets $ 461,822 $ 454,906
======= ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,929 $ 5,924
Accrued fuel 16,085 16,806
Accrued expenses and other current liabilities 22,923 16,718
Short-term debt 4,100 14,165
Current portion of long-term debt 14,070 7,415
------- ------
Total current liabilities 61,107 61,028
Long-term debt 222,111 223,371
Other liabilities 9,236 9,229
Deferred income tax liabilities 28,054 25,222
------- -------
Total liabilities 320,508 318,850
Minority interests in consolidated entities 16,940 17,226
Stockholders' equity:
Preferred stock-$.01 par value (authorized
and unissued 15,000,000 shares) ---- ----
Common stock-$.01 par value (authorized
60,000,000 shares; issued 11,518,815 shares
in 1996, 11,416,418 shares in 1995) 115 114
Additional paid-in capital 102,683 100,788
Retained earnings 21,848 18,070
Treasury stock, at cost (13,556 shares in
1996, 7,268 shares in 1995) (272) (142)
Total stockholders' equity 124,374 118,830
-------- --------
Total liabilities and stockholders' equity $461,822 $454,906
======== ========
See accompanying notes to condensed consolidated financial statements.
TRIGEN ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1995
Unaudited
(All amounts in thousands)
1996 1995
Increase (decrease) in cash and cash equivalents:
Net cash provided by operating activities $16,695 $12,422
-------- --------
Cash flows from investing activities:
Sale of marketable securities ---- 7,786
Capital expenditures (6,385) (2,781)
Investment in non-consolidated partnerships, net (2,153) (737)
------- -------
Net cash (used in) provided by investing activities (8,538) 4,268
------- -------
Cash flows from financing activities:
Short-term debt, net (10,065) (7,600)
Proceeds of long-term borrowings 7,000 ----
Payments of long-term borrowings (1,605) (615)
Dividends (403) (399)
Issuance of common stock 859 ----
Repurchase of common stock (130) ----
Sale of interest rate caps 1,003 ----
Distribution to minority interests (884) ----
------ ------
Net cash (used in) financing activities (4,225) (8,614)
------- -------
Net increase in cash and cash equivalents 3,932 8,076
Cash and cash equivalents at beginning of period 20,175 19,837
------ ------
Cash and cash equivalents at end of period $24,107 $27,913
======= =======
Cash and cash equivalents at end of period:
Current cash and cash equivalents $14,091 $17,083
Non-current cash and cash equivalents 10,016 10,830
------- -------
Cash and cash equivalents at end of period $24,107 $27,913
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $4,325 $4,378
====== ======
Income taxes $1,054 $2,273
====== ======
Non-cash investing activity:
Acquisition of subsidiary $1,037 $ ----
====== ======
Non-cash financing activity:
Issuance of common stock for acquisition of
subsidiary $1,037 $ ----
====== ======
See accompanying notes to condensed consolidated financial statements.
TRIGEN ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Trigen Energy Corporation (the "Company") develops, owns and operates
community energy systems and cogeneration facilities at 13 locations in the
United States and Canada. The Company believes that it is the leading
commercial owner and operator of community energy systems in North America.
A community energy system consists of a central production plant that
distributes steam, hot water and/or chilled water to customer buildings through
underground distribution pipelines. Steam, hot water and/or chilled water are
sold by the Company to over 1,500 customers, including colleges and
universities, office buildings, hotels, civic and cultural landmarks, housing
complexes, industrial plants and hospitals. Cogenerated electricity produced
by the Company is used by the Company in eight of its systems and is sold to
one steam customer and to local utilities in three communities.
The consolidated financial statements of Trigen Energy Corporation and its
subsidiaries presented herein are unaudited. However, such information
reflects all adjustments, consisting of normal recurring adjustments, which
are, in the opinion of management, necessary to present fairly the financial
position as of March 31, 1996, and the results of operations and the cash flows
for the three months ended March 31, 1996 and 1995. The results of operations
and cash flows for the three month period ended March 31, 1996 are not
indicative of those to be expected for the year ending December 31, 1996.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1995 included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company's operations are primarily the production and distribution of
steam, hot water, electricity and chilled water. Approximately 60% of total
revenue is derived from long-term contracts. The Company's heating and cooling
revenues and consequently its operating profits are subject to seasonal
fluctuation due to peak heating demand in the winter and peak cooling demand
in the summer.
For the quarter ended March 31, 1996, the Company reported net income of
$4.2 million or $0.36 per share compared to $3.3 million or $0.29 per share for
the comparable 1995 period.
Results of Operations
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Revenues
Revenues were $86.2 million for the three months ended March 31, 1996, an
increase of $21.0 million, from $65.2 million in the corresponding period in
1995, due principally to two acquisitions consummated in September 1995, which
contributed approximately half of the increase, a colder winter in 1996
compared to 1995 and the increased price of fuel.
Operating Expenses
The Company's cost of sales includes fuel and consumables, production and
operating costs and depreciation expense and is affected primarily by its costs
for fuel, chemicals, water and other commodities. Because the Company's rates
typically enable it to pass through fuel and most commodity prices, changes in
such prices have little impact on operating income. The Company's cost of
sales and its operating income are also affected by its efficiency in
converting fuel to steam, hot water, electricity and chilled water and its
ability to minimize costs through automation and enhanced process control
efforts. Cost of sales as a percentage of revenues increased from 74.6% of
revenues in 1995 to 75.6% of revenues in 1996.
Fuel and consumable costs were $47.8 million, or 55.4% of revenues in
1996, compared to $32.5 million, or 49.9 % of revenues in 1995, an increase of
$15.3 million. This increase is due to the impact of the two acquisitions, the
increased price of fuel and the use of less efficient backup production
equipment to meet demand during the periods of extreme cold.
Production and operating costs are those costs of operating the Company's
facilities other than fuel and consumables, and include labor and supervisory
personnel, repair and maintenance costs and plant operating costs.
The increase resulting from the two acquisitions was offset by cost savings and
labor productivity improvements. Production and operating costs increased to
$13.2 million in 1996 from $12.1 million in 1995, and as a percentage of
revenues decreased to 15.3% in 1996 compared to 18.6% in 1995.
Depreciation expense was $4.2 million in 1996 compared to $4.0 million in
1995, an increase of $0.2 million due predominately to the two acquisitions.
General and administrative expenses represent on-site management and other
overhead costs incurred for existing operations, as well as the Company's
marketing and corporate management costs, and development expenses. General
and administrative costs increased to $8.9 million, or 10.3% of revenues in
1996 from $6.5 million or 10.0% of revenues, in 1995. This is primarily due
to additional staff and development and marketing costs and the impact of the
two acquisitions.
Operating Income
Operating income was $12.1 million, or 14.1% of revenues, in 1996 compared
to $10.0 million, or 15.3% of revenues, in 1995. Increased general and
administrative expenses offset by cost savings, primarily from efficiency and
labor productivity, higher revenues, and the impact of the two acquisitions,
resulted in improved operating income of $2.1 million.
Interest Expense; Other Income
Interest expense decreased to $4.7 million in 1996 from $5.0 million in
1995, primarily due to lower average interest rates on indebtedness.
Income Tax Expense
The Company's effective tax rate is determined primarily by the federal
statutory rate of 35%, and state and local income taxes. The effective income
tax rate of 41.0% is consistent with the rate in 1995.
Liquidity and Capital Resources
Liquidity
The Company had cash and cash equivalents of $24.1 million at March 31,
1996 and $20.2 million at December 31, 1995, an increase of $3.9 million. The
Company had short-term indebtedness outstanding of $4.1 million at March 31,
1996 compared to $14.2 million at December 31, 1995, a reduction of $10.1
million. These changes were primarily due to the use of cash on hand at
December 31, 1995 and cash generated from operations during the quarter.
Certain of the Company's debt agreements restrict payments by its
subsidiaries, which are the primary obligors, to the Company unless the
payments are for specified purposes or the subsidiary meets certain financial
covenants. Restricted cash and cash equivalents of $16.0 million at March 31,
1996 included $6.4 million for debt service and reserve funds, $2.6 million for
operations and maintenance reserves, $3.7 million available for subsidiary
operating purposes and $3.3 million for certain construction projects.
Restricted funds may be invested only in certain securities. At March 31,
1996, the Company had unused lines of credit available consisting of $10.1
million under a United Thermal Corporation ("UTC") revolving credit facility
and $39.5 million under a corporate revolving credit facility.
On February 20, 1996, the Company declared a dividend of $.035 per share
of common stock to holders of record as of March 29, 1995, payable April 15,
1996.
Cash Flow
During the three months ended March 31, 1996, cash provided by operating
activities was $16.7 million compared to $12.4 million for the comparable
period in 1995. Net cash used in investing activities was $8.5 million for the
three months ended March 31, 1996 primarily due to capital expenditures of $6.4
million and the initial equity investment of $2.0 million in the Grays Ferry
Cogeneration Facility. Net cash used in financing activities was $4.2 million
in 1996 principally reflecting debt repayments.
Debt
At March 31, 1996, the Company's long-term debt (including the current
portion) was $236.2 million or 61.9% of total capital, at a weighted
average annual interest rate of approximately 7.07% (based on 3 month LIBOR of
5.47% per year) and an average remaining maturity of 6.9 years.
Certain of the Company's debt is variable rate or rate capped. Based upon
the debt balances at March 31, 1996, a change in the LIBOR rate of .25% would
have a corresponding change in interest expense of approximately $300,000 per
year when three month LIBOR is under 6.25% ranging to approximately $100,000
per year when three month LIBOR is over 7.25%.
Future Capital Expenditures
The Company's planned capital expenditures for upgrades, expansions,
environmental matters and other improvements are material. The Company
believes that cash provided by operations net of debt service, cash balances
at March 31, 1996 and available credit facilities will be sufficient to finance
its capital program and several new development projects.
On January 18, 1996 the Company acquired Ewing Power Systems, Inc. for
$1.0 million of common stock.
On March 11, 1996, a wholly-owned subsidiary of the Company became a
one-third partner in the Grays Ferry Cogeneration Facility. Under the terms of
the Partnership Agreement, in addition to its initial equity investment, the
Company is required to contribute $10 million when construction is completed,
which is expected in the last quarter of 1997.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
10.1 - Acquisition Agreement dated March 1, 1996 among Adwin
(Schuylkill) Cogeneration, Inc., O'Brien (Schuylkill)
Cogeneration, Inc., and Trigen-Schuylkill Cogeneration,
Inc.
10.2 - Amended and Restated Partnership Agreement of
Grays Ferry Cogeneration Project dated March 1, 1996
among Adwin Schuylkill) Cogeneration, Inc., O'Brien
(Schuylkill) Cogeneration, Inc., and Trigen-Schuylkill
Cogeneration, Inc.
11 - Computation of Earnings Per Share
(b) No reports on Form 8-K were filed for the three months
ended March 31, 1996.
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 thereunto duly authorized.
TRIGEN ENERGY CORPORATION
/s/ Thomas R. Casten
Thomas R. Casten
President and Chief Executive Officer
/s/ David H. Kelly
David H. Kelly
Chief Financial Officer
/s/ Daniel J. Samela
Daniel J. Samela
Controller
Date: May 15,1996
/TEXT
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<DESCRIPTION>ACQUISITION AGREEMENT
<TEXT>
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT is entered into this 1st day of March, 1996, by
and among ADWIN (SCHUYLKILL) COGENERATION, INC., a Pennsylvania corporation
("Adwin"), O'BRIEN (SCHUYLKILL) COGENERATION, INC., a Delaware corporation
("O'Brien"), and TRIGEN-SCHUYLKILL COGENERATION, INC., a Pennsylvania
corporation (the "Purchaser"). (Adwin and O'Brien are sometimes hereinafter
referred to collectively as the "Partners.")
BACKGROUND
WHEREAS, on October 29, 1991, the Partners entered into a Partnership
Agreement to form Grays Ferry Cogeneration Partnership, a Pennsylvania general
partnership (hereinafter the "Partnership"), which Partnership Agreement was
amended by the First Amendment to Partnership Agreement, dated September 17,
1993, the Second Amendment to Partnership Agreement dated September 27, 1994,
and the Third Amendment to Partnership Agreement dated January 23, 1996; and
WHEREAS, the Partnership was formed to develop a cogeneration facility to
be located at 2600 Christian Street, Philadelphia, Pennsylvania, such facility
to be known as the "Grays Ferry Cogeneration Project" (the "Project"); and
WHEREAS, on September 17, 1993, the Partnership and Philadelphia United
Power Corporation ("PUPCO") entered into an Amended and Restated Project
Services and Development Agreement (the "Project Services Agreement"); and
WHEREAS, on September 17, 1993, PUPCO, Trigen-Philadelphia Energy
Corporation (then known as Philadelphia Thermal Energy Corporation) ("Trigen-
Philadelphia"), Adwin Equipment Company ("AEC"), and O'Brien Environmental
Energy, Inc. entered into an Amended and Restated Steam Venture Agreement (the
"Steam Venture Agreement"); and
WHEREAS, Purchaser desires to purchase a one-third interest in the
Partnership, pursuant to the terms of this Agreement; and
WHEREAS, in consideration of the Purchaser's purchase of a one-third
interest in the Partnership, PUPCO has agreed to terminate its option to
purchase an interest directly from the Partnership; and
WHEREAS, contemporaneously with the closing under this Acquisition
Agreement, the Purchaser desires to be admitted to the Partnership as an equal
partner, and Adwin and O'Brien desire that the Purchaser be so admitted, with
each of Adwin, O'Brien and the Purchaser having a one-third interest in the
Partnership following the consummation of the transactions contemplated by this
Agreement; and
WHEREAS, as a condition to the closing hereunder, the parties contemplate
that the Partnership Agreement shall be amended by an Amended and Restated
Partnership Agreement that will be executed by all of the parties hereto, which
Amended and Restated Partnership Agreement is attached as Exhibit A to this
Agreement (the "Restated Partnership Agreement"); and
WHEREAS, in connection with the execution of this Agreement, the
Partnership, the Partners, PUPCO and Trigen-Philadelphia desire to clarify
certain matters contained in the Project Services Agreement and the Steam
Venture Agreement; and
WHEREAS, the parties have agreed that the Purchaser's participation in the
Partnership shall be on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Transaction.
1.1 Purchase Price; Purchaser Partnership Interest. On the Closing
Date (as hereinafter defined), the Purchaser shall pay an aggregate amount of
$2,000,000 (the "Purchase Price") for a one-third interest in the Partnership,
one-half of which shall be paid to O'Brien and one-half to Adwin. Upon paying
the Purchase Price hereunder, the Purchaser shall receive a one-third interest
in the Partnership as provided in the Restated Partnership Agreement (the
"Partnership Interest").
1.2 Certain Understandings with Regard to the Project Services
Agreement. PUPCO and the Partnership agree that the Project Services Agreement
is clarified as follows:
(a) Sections 19.1, 19.4, 19.5, 19.6 and 19.7 are no longer
effective.
(b) Section 19.2 shall be interpreted as if the Equity Purchase
Option (as defined in the Project Services Agreement) has been exercised.
(c) Section 19.3 remains in full force and effect.
1.3 Certain Payments to PUPCO Under the Steam Venture Agreement. The
Partnership shall continue to pay PUPCO the quarterly development fees of
$150,000 per month described in Section 7D(i) of the Steam Venture Agreement
through the date of commercial operation of the Project.
1.4 Fees Due PUPCO at Financial Closing. The Partnership agrees that
the following fees due PUPCO shall be paid on the Financial Closing Date (as
defined in the Restated Partnership Agreement): (a) the $600,000 fee identified
in Section 7F of the Steam Venture Agreement, (b) the reimbursement of $55,176
in legal costs and $300,000 in past due development fees due PUPCO under the
Steam Venture Agreement and, (c) development costs associated with the
alternative natural gas pipeline in the amount of $259,200.
1.5 Restated Partnership Agreement. In connection with the
consummation of the transactions contemplated hereby and as a condition
precedent thereto, the Restated Partnership Agreement shall be executed by all
of the parties hereto at Closing.
1.6 Construction Manager. The Purchaser acknowledges that the
Partnership will retain NRG Energy, Inc. ("NRG") as the Construction Manager of
the Project, pursuant to the terms of a Construction Management Agreement dated
February 20, 1996, entered into by and between the Partnership and NRG with
respect thereto.
2. Closing. The closing of the transactions contemplated by this
Agreement shall be held at the offices of Ballard Spahr Andrews & Ingersoll,
counsel for Adwin, on or before the Financial Closing Date, but in no event
later than March 9,1996 (the "Expiration Date"), or at such other place as the
parties may agree (the "Closing"). (The date of the Closing shall be referred to
herein as the "Closing Date.") Ballard Spahr Andrews & Ingersoll shall serve as
Escrow Agent for the parties pursuant to a letter agreement among Ballard Spahr
Andrews & Ingersoll, the Partners and the Purchaser dated the same date as this
Agreement (the "Escrow Agreement"). All Deliverables received from the parties
by the Escrow Agent, pursuant to Section 9 of this Agreement on the Closing
Date, shall be held in escrow until delivered or disposed of by the Escrow Agent
in accordance with the terms of the Escrow Agreement.
3. Joint Representations and Warranties of the Partners. For purposes of
the following representations and warranties which are based on the Partners'
knowledge, the knowledge of the Partners shall be deemed to include, but is not
necessarily limited to, that of Reed Wills, who was formerly employed by O'Brien
Environmental Energy, Inc. The Partners, jointly and severally, represent and
warrant to the Purchaser as follows:
3.1 Organization and Standing; Qualification. The Partnership is a
general partnership duly constituted, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania. The Partnership has all
requisite partnership power and authority under its Partnership Agreement to:
(a) own or lease its properties and assets; (b) conduct its business as
currently conducted; (c) develop, construct, own, operate and manage the
Project, as contemplated by the Restated Partnership Agreement; and (d) enter
into and perform this Agreement and all other agreements entered into in
connection with the transactions contemplated hereby. Copies of the
Partnership's Partnership Agreement, as amended or restated to date, have been
delivered by the Partnership to the Purchaser and are complete and correct. The
Partnership has not qualified to do business in any other jurisdiction and
neither the ownership of its properties nor the conduct of its business requires
such qualification.
3.2 Conflict with Partnership Documents. None of the execution,
delivery and performance of, and compliance with, this Agreement nor the
consummation of the transactions contemplated hereby will (with or without the
giving of notice or lapse of time, or both) contravene or violate the
Partnership Agreement, or, to the best knowledge of the Partners, conflict with,
result in a breach or violation of, be in conflict with, entitle any party to
terminate, or constitute a default with respect to, any contract, bond, note,
indenture or other agreement or any restriction on the Project, the Partnership,
or its properties or assets, or any judgment, decree, order, statute, rule or
regulation to which the Project, the Partnership, or its properties or assets,
are subject or by which they may be bound, or result in the creation of any
liens, mortgages, pledges, prior assignments, encumbrances, claims, charges,
restrictions or security interests of any kind or character (collectively,
"Encumbrances") upon the Project, the Partnership or any of its properties or
assets. The Partnership is not a party to, nor subject to, nor bound by any
judgment, injunction or decree of any court or governmental authority and no
judgment, action or proceeding in law is pending or, to the knowledge of the
Partners, threatened against or involving the Partnership, which may restrict or
interfere with the performance of this Agreement by the Partnership.
3.3 Investments. The Partnership does not own any material amount of
stock in and has made no material equity investment in or material acquisition
of any other interest in, nor has it made any material advances or loans to, any
corporation, association, partnership, joint venture or other entity.
3.4 Financial Statements. Attached hereto as Exhibit B are copies of
the Partnership's unaudited financial statements as of and for each of the
calendar years ended December 31, 1995, and 1994 (December 31, 1995 being
hereinafter referred to as the "Balance Sheet Date"), with each of the financial
statements consisting of a balance sheet as of December 31 of each such year, an
Income Statement as of December 31 of each such year, and a General Ledger for
the years then ended. Attached hereto as Exhibit C is a copy of an unaudited
financial statement of the Partnership for the two-month period ended February
29, 1996, and a General Ledger for the period then ended. (Exhibits B and C are
hereinafter referred to as the "Financial Statements.") To the best knowledge of
the Partners, the Financial Statements are true, correct and complete in all
material respects and, to the best knowledge of the Partners, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis for the period covered by such statements, and, to the best
knowledge of the Partners, fairly and accurately present the financial condition
and operating results of the Partnership as of the dates and for the period
thereof. To the best knowledge of the Partners, all transactions between the
Balance Sheet Date and the Closing Date shall be or have been accounted for on
the Partnership's books and records of original entry in accordance with
generally accepted accounting principles, consistently applied.
3.5 Business Condition: Absence of Certain Changes. Since February
29, 1996, there has not been:
(a) Any material adverse change in the financial condition,
properties, assets, liabilities, business operations or, to the knowledge of the
Partners, prospects of the Partnership taken as a whole (hereinafter referred to
as the Partnership's "Business or Condition");
(b) Any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the Partnership's Business
or Condition;
(c) Any declaration, setting aside, or payment of any
distribution (whether in cash, securities, property or otherwise) by the
Partnership;
(d) Any discharge or satisfaction of any Encumbrance, or any
payment or satisfaction of any liability, absolute or contingent, other than
those performed in the ordinary course of business;
(e) Any secured or unsecured borrowing or any guaranty of the
borrowing of any money by the Partnership or the issuance or creation of (or any
commitment with respect thereto) any bonds, debentures, notes or other
obligations for the payment of money by the Partnership, other than those
performed in the ordinary course of business;
(f) Any loans or advances made by the Partnership to any person
or entity;
(g) Any cancellation, modification or waiver of any evidence of
indebtedness for borrowed money held by the Partnership;
(h) Any change in any method of accounting or accounting practice
of the Partnership;
(i) Any sale, assignment, transfer, mortgage, pledge or other
Encumbrance by the Partnership of any assets (real, personal or mixed, tangible
or intangible), or waiver by the Partnership of any rights of the Partnership;
or
(j) Any agreement or commitment by the Partnership to take any
of the actions described in clauses (c) through (i) above, except those actions
required in connection with the Financial Closing.
3.6 Permits. Except as set forth in Schedule 3.6, and specifically
excluding building permits, the Partnership has, to the best of the Partners'
knowledge, all governmental permits, licenses and authorizations issued by any
federal, state or local governmental authority (hereinafter referred to,
collectively, as the "Permits") that are required to commence construction of
the Project. To the best of the Partners' knowledge, all such Permits were
validly issued and are in full force and in effect, have not been suspended or
revoked, nor are there proceedings pending or threatened to suspend or revoke
any of such Permits.
3.7 Contracts.
(a) Schedule 3.7 sets out a list of the material contracts to
which the Partnership is currently a party.
(b) The Partners have delivered to the Purchaser a true, correct
and complete copy of (or, if oral, a true, correct and complete description of)
each material agreement, contract, plan, instrument, arrangement and commitment
listed on Schedule 3.7, including all amendments thereto, whether written or
oral. To the best of Partners' knowledge, all of such agreements were duly
authorized and approved by appropriate action of the Partnership and, to the
best of the Partners' knowledge, each such agreement is valid and in full force
and effect. To the best of the Partners' knowledge, neither the Partnership nor
the Partners is in default under any such agreement in a manner which could have
a material adverse effect on the Project, the Partnership or the Partnership's
future activities, and, to the best of Partners' knowledge, there exists no
condition or event which, with the lapse of time or notice, would constitute any
such default by the Partnership. To the best of the Partners' knowledge, there
is no outstanding notice of cancellation or termination in connection with any
such agreement.
3.8 Environmental Reports. To the best of the Partners' knowledge,
the Partners have delivered to the Purchaser all environmental reports
commissioned by the Partners regarding the Project.
3.9 Liabilities. Except as and to the extent reflected or reserved
against in the Financial Statements, and except those incurred subsequent to the
Balance Sheet Date that are fully recorded and reflected on the books of
original entry of the Partnership, to the best of the Partners' knowledge, the
Partnership does not have any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise.
3.10 Books and Records. The books and accounts and other records of
the Partnership relating to the Project and the Partnership's properties and
assets are complete and correct in all material respects and have been
maintained in accordance with good business practices. All transactions of the
Partnership relating to the Project and the properties and assets of the
Partnership have been recorded in all material respects in such books and
records. The Partnership's principal place of business is 300 Stevens Drive,
Lester, Pennsylvania.
3.11 Compliance with Laws. To the best of the Partners' knowledge,
the Partnership is in compliance with all existing requirements of all laws,
statutes, rules, regulations and orders, federal, state and local, and all
existing requirements of all governmental bodies or agencies having jurisdiction
over the Project, the Partnership, its properties or assets, except where such
failure to be in compliance will not have a material adverse effect on the
Partnership's Business or Condition or on its ability to perform its obligations
under this Agreement or any other agreement to which it is a party. To the best
of the Partners' knowledge, neither the Partnership nor the Project are in
violation of, nor have they received any notice of any violation or alleged
violation of, or claim under any federal, state or local law, statute, rule,
regulation or order, nor do the Partners have any knowledge of any pending or
threatened governmental proceeding or investigation.
3.12 Employees. The Partnership does not now have nor has it ever
had any employees or any commitment to hire or engage any employees.
3.13 Litigation. The Partnership is not a party to, nor, to the
knowledge of the Partners, threatened with any suit, action, arbitration or
other legal or governmental proceeding relating to or affecting the Project, the
Partnership or its properties or assets. There is no material judgment, decree,
award or order outstanding or unsatisfied against the Partnership relating to or
affecting the Project, the Partnership or its properties or assets, nor, to the
knowledge of the Partners, is there any basis for any such suit, action,
arbitration or other legal or governmental proceeding. To the best of the
Partners' knowledge, no notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed, and no investigation,
review or proceeding is pending or, to the best of the Partners' knowledge,
threatened, of any kind, by any person, firm or entity, with respect to the
Project, the Partnership or its properties or assets.
3.15 Exhibits and Schedules. To the best of the Partners' knowledge,
all exhibits, schedules and other documents relating to the Partnership which
are attached to this Agreement are accurate and shall constitute an integral
part of this Agreement with the same force and effect as if such exhibits,
schedules and documents were set forth in their entirety herein.
4. Individual Representations and Warranties of the Partners. For
purposes of the following individual representations and warranties made by
O'Brien which are based on the knowledge of O'Brien, such knowledge shall be
deemed to include, but is not necessarily limited to, the knowledge of Reed
Wills, who was formerly employed by O'Brien Environmental Energy, Inc. Each
Partner individually (but not jointly and severally) represents and warrants to
the Purchaser as follows:
4.1 Organization and Standing; Qualification. Such Partner is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation. Such Partner has all requisite corporate power
and authority to own or lease its properties and assets, to conduct its business
as currently conducted and to enter into and perform this Agreement and all
other agreements entered into by it in connection with the transactions
contemplated hereby. Copies of the Articles or Certificate of Incorporation, as
amended to date, and By-Laws, as amended to date, of such Partner have been
delivered to the Purchaser and are complete and correct. Such Partner, if such
Partner is Adwin, is not qualified to do business as a foreign corporation in
any jurisdiction and neither the ownership of its properties nor the conduct of
its business requires such qualification. If such Partner is O'Brien, it is
qualified to do business in Pennsylvania.
4.2 Authority, Binding Effect. Such Partner has the full corporate
power and authority to make, execute, deliver and perform this Agreement, and
the other instruments and documents required or contemplated hereunder to which
it is a party, to perform its obligations hereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, and all documents and instruments required to be
executed, delivered and performed hereunder or thereunder by such Partner, have
been duly and validly authorized and approved by all necessary action by it, and
have been duly and validly executed and delivered by such Partner. This
Agreement constitutes, and all other documents and instruments to be executed,
delivered, and performed hereunder by such Partner will constitute, the valid
and binding obligation of such Partner, enforceable against it in accordance
with their respective terms.
4.3 Performance of this Agreement. Such Partner is not a party to,
nor subject to, nor bound by any judgment, injunction or decree of any court or
governmental authority and no judgment, action or proceeding in law is pending
or, to the knowledge of such Partner, threatened against or involving such
Partner, which may restrict or interfere with the performance of this Agreement
by such Partner.
4.4 Compliance with Laws. To the best of such Partner's knowledge, it
is in compliance with all existing requirements of all laws, statutes, rules,
regulations and orders, federal, state and local, and all existing requirements
of all governmental bodies or agencies having jurisdiction over it or its
properties or assets, except where such failure to be in compliance will not
have a material adverse affect on such Partner's business or financial condition
or on its ability to perform its obligations under this Agreement or any other
agreement to which it is a party. To the best knowledge of such Partner, it has
received no notice of any violation of, or claim under any federal, state or
local law, statute, rule, regulation or order, nor does it have any knowledge of
any pending or threatened governmental proceeding or investigation.
4.5 No Consents. Except as set forth on Schedule 4.5, no consent of
any governmental or judicial authority or agency, or of any bank, other
financial institution or other third party, is required in connection with the
execution and delivery by such Partner of this Agreement and the other documents
and instruments required or contemplated herein or the consummation of the
transactions contemplated hereunder by such Partner.
4.6 Ownership of Partnership Interests. The only ownership interests
in the Partnership in existence on the date hereof are those owned by the
Partners, each of which owns a one-half interest in the Partnership. Upon the
consummation of the transactions contemplated hereby, each of Adwin, O'Brien and
the Purchaser shall own a one-third interest in the Partnership. The
partnership interests outstanding on the date hereof have been, and such
Partner's portion of the Partnership Interest, when delivered in accordance with
the terms of this Agreement and based upon the representations of Purchaser set
forth in Sections 5.7 and 5.8, will be issued in compliance with applicable
federal and state securities laws. No action has been taken by the Partnership,
the Partners or, to the best of the Partners' knowledge, any third party that
would cause the Partnership to be deemed to be a publicly-traded partnership
within the meaning of Section 7704(b) of the Internal Revenue Code of 1986, as
amended. Neither the Partnership nor such Partner has issued, nor is the
Partnership or such Partner bound by, any outstanding subscriptions, options,
warrants, contracts, calls, rights or commitments of any character relating to
the issuance of or granting of a right in or to acquire any interest of or in
the Partnership, whether equitable or otherwise, nor, to the knowledge of such
Partner, is there any basis for any third party making a claim to or against its
interest in the Partnership.
4.7 Partnership Contributions and Loans. Except as set forth on
Schedule 4.7 hereto, such Partner has not made any capital contributions to the
Partnership, loaned any money to the Partnership, borrowed any money from the
Partnership, guaranteed any obligation of the Partnership or been the
beneficiary of any guarantee made by the Partnership.
4.8 Partnership Interest. Following the consummation of the
transactions contemplated hereby, such Partner shall have transferred to the
Purchaser title to one-half (1/2) of the Partnership Interest conveyed
hereunder, free and clear of any liens, claims or encumbrances, excepting only
those created or granted by or arising through the Purchaser.
4.9 Litigation. Such Partner is not a party to, nor to its knowledge,
threatened with any suit, action, arbitration or other legal or governmental
proceeding relating to or affecting the Project, the Partnership or its
properties or assets. There is no material judgment, decree, award or order
outstanding or unsatisfied against such Partner relating to, or affecting, the
Project, the Partnership, or its properties or assets, nor to the knowledge of
such Partner, is there any basis for any such suit, action, arbitration or other
legal or governmental proceeding. To the best knowledge of such Partner, no
notice, citation, summons or order has been issued, no complaint has been filed,
no penalty has been assessed, and no investigation, review or proceeding is
pending, or to the best of such Partner's knowledge, threatened, of any kind, by
any person, firm or entity, with respect to the Project, the Partnership or its
properties or assets.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Partners as follows:
5.1 Organization; Existence and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. The Purchaser has all requisite corporate
power and authority to own or lease its properties and assets, to conduct its
business as currently conducted and to enter into and perform this Agreement and
all other agreements entered into in connection with the transactions
contemplated hereby. Copies of the Purchaser's Articles of Incorporation, as
amended to date, and By-Laws, as amended to date, have been delivered by the
Purchaser to the Partners, and are complete and correct.
5.2 Authority; Binding Effect. The Purchaser has the full
corporate power and authority to make, execute, deliver and perform this
Agreement, and the other instruments and documents required or contemplated
hereunder, to perform its obligations hereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement, and all documents and instruments required to be
executed, delivered and performed hereunder or thereunder by the Purchaser, have
been duly and validly authorized and approved by all necessary action by it, and
have been duly and validly executed and delivered by the Purchaser. This
Agreement constitutes, and all other documents and instruments to be executed,
delivered and performed hereunder or thereunder by the Purchaser shall
constitute, the valid and binding obligation of the Purchaser, enforceable
against it in accordance with its terms.
5.3 Conflict with Documents. Neither the execution, delivery and
performance of, and compliance with, this Agreement nor the consummation of the
transactions contemplated hereby will (with or without the giving of notice of
lapse of time, or both) contravene or violate the Articles of Incorporation or
By-Laws of the Purchaser, or, to the best knowledge of Purchaser, conflict with,
result in a breach or violation of, entitle any party to terminate, or
constitute a default with respect to any contract, bond, notice, indenture or
other agreement or any restriction on the Purchaser or its properties or assets,
or any judgment, decree, order, statute, rule or regulation to which the
Purchaser or its properties or assets are subject or by which they may be bound
or result in the creation of any Encumbrance upon the Purchaser or any of its
properties or assets. The Purchaser is not a party to, nor subject to, nor
bound by any judgment, injunction or decree of any court or governmental
authority and no judgment, action or proceeding in law is pending or, to the
knowledge of the Purchaser, threatened against or involving the Purchaser, which
may restrict or interfere with the performance of this Agreement by the
Purchaser.
5.4 Litigation. The Purchaser is not a party to nor, to its
knowledge, threatened with any suit, action, arbitration or other legal or
governmental proceeding relating to or affecting it or its properties or assets.
There is no material judgment, decree, award or order outstanding or unsatisfied
against the Purchaser relating to or affecting it or its properties or assets,
nor, to the knowledge of the Purchaser, is there any basis for any such suit,
action, arbitration or other legal or governmental proceeding. To the best of
Purchaser's knowledge, no notice, citation, summons or order has been issued, no
complaint has been filed, no penalty has been assessed, and no investigation,
review or proceeding is pending or, to the best of the Purchaser's knowledge,
threatened, of any kind, by any person, firm or entity, with respect to the
Purchaser, its properties or assets.
5.5 Compliance with Laws. To the best knowledge of Purchaser's
knowledge, Purchaser is in compliance with all existing requirements of all
laws, statutes, rules, regulations and orders, federal, state and local, and all
existing requirements of all governmental bodies or agencies having jurisdiction
over it or its properties or assets, except where such failure to be in
compliance will not have a material adverse affect on the Purchaser's business
or financial condition or on its ability to perform its obligations under this
Agreement or any other agreement to which it is a party. To the best knowledge
of Purchaser, the Purchaser has received no notice of any violation or alleged
violation of, or claim under any federal, state or local law, statute, rule,
regulation or order, nor does the Purchaser have knowledge of any pending or
threatened governmental proceeding or investigation.
5.6 No Consents. Except as set forth on Schedule 5.6, no consent
of any governmental or judicial authority or agency, or of any bank, other
financial institution or other third party, is required in connection with the
execution and delivery by the Purchaser of this Agreement and the other
documents and instruments required or contemplated herein or the consummation of
the transactions contemplated hereunder by the Purchaser.
5.7 No Distribution. The Partnership Interest being acquired by
the Purchaser hereunder is being acquired for its own account for investment and
not with a view to distribution or resale of such Partnership Interest to
others, and Purchaser recognizes that it may not transfer such Partnership
Interest in violation of securities laws.
5.8 Requisite Knowledge, Undertaking of Risks. The Purchaser
possesses the requisite knowledge and experience in business and financial
matters to be capable of evaluating the merits and risks of investment in the
Partnership, and is not relying on any representations and warranties of the
Partners except those explicitly set out herein. The Purchaser recognizes that
participation in the Partnership involves a substantial degree of risk, and that
it may lose some or all of its investment in the Partnership.
6. Covenants of the Partners. The Partners covenant to and with the
Purchaser as follows:
6.1 Conduct of Business. From the date hereof through the
Financial Closing Date, the Partnership and each of the Partners will conduct
their operations according to their normal course of business, including without
limitation their reasonable efforts to preserve intact their respective business
organizations, and to maintain satisfactory relationships with third parties
having business relationships with them. The Partners shall confer on a regular
and frequent basis with the Purchaser to report operational matters of a
material nature and to report the general status of the ongoing operations of
the business of the Partnership. The Partners shall promptly notify the
Purchaser of: (a) any fact or event, the existence or occurrence of which would
render any of the Partners' representations or warranties untrue or inaccurate;
(b) any fact or event, the existence or occurrence of which would have a
material adverse impact on the Project, the Partnership or the Partnership's
future activities; (c) any unexpected emergency or other material change in the
normal course of business or in the operations of the business of the
Partnership or the Partners; and (d) any investigation or review, pending or
threatened, by any governmental entity involving any material business, asset or
property of the Partnership or the Partners. The Partners shall keep the
Purchaser fully informed of all developments with respect to any such facts and
events and shall permit the Purchaser's representatives access to all materials
prepared in connection therewith or relevant thereto.
6.2 Forbearance by the Partnership. Prior to the Financial Closing
Date, the Partners shall be required to obtain the Purchaser's approval of major
decisions affecting the Partnership. These "Major Decisions" shall include, but
are not necessarily limited to, a decision to do any of the following:
(a) Issue additional partnership interests or any options,
warrants or other rights to acquire an interest in the Partnership;
(b) Declare or pay any distribution;
(c) Sell any of its properties or assets;
(d) Extend credit, or issue, incur or prepay any indebtedness for
borrowed money;
(e) Mortgage, pledge or otherwise encumber any of its properties
or assets;
(f) Make any investment in third parties of a capital nature
either by purchasing stock or securities, contributing to capital, transferring
property or otherwise;
(g) Enter into any employment agreement or any incentive
compensation, profit sharing, partnership interest purchase, option, savings,
consulting, deferred compensation, retirement, pension or other employee benefit
plan or arrangement with or for the benefit of any Partner, officer, employee or
other person;
(h) Terminate or voluntarily allow to lapse any insurance policy
naming the Partnership as a beneficiary or a loss payee unless, simultaneously
with such termination or lapse, replacement policies providing substantially the
same coverage are in full force and effect;
(i) Amend the Partnership Agreement; or
(j) Enter into any agreement to do any of the things described in
clauses (a) through (i) above.
6.3 Investigations and Purchaser Due Diligence. Purchaser
acknowledges that it has had the opportunity to conduct due diligence regarding
the proposed acquisition of the Partnership Interest, and to investigate the
business and properties of the Partnership, as well as its financial and legal
condition. Purchaser has satisfied itself with respect to such investigations.
Notwithstanding completion of Purchaser's due diligence, no investigation by or
on behalf of the Purchaser heretofore or hereafter made shall affect the
representations and warranties of the Partners contained herein, and such
representations and warranties shall survive any such investigation as and to
the extent provided in this Agreement.
6.4 Negotiations with Others. From the date hereof through the
Financial Closing Date, the Partners shall not, directly or indirectly, without
the prior written consent of the Purchaser, initiate or engage in discussions or
negotiations with any corporation, partnership, person or other entity (other
than the Purchaser) concerning any sale of an interest in the Partnership or any
merger, sale of assets, or similar transaction involving the Partnership.
7. Conditions of the Purchaser to the Breaking of Escrow. The
obligations of the Purchaser under this Agreement, and the authority of the
Escrow Agent to break escrow, are subject to the satisfaction and fulfillment,
or waiver by the Purchaser, at or before the Expiration Date, of each of the
following conditions:
7.1 Bankruptcy Court Approval Opinion. The Purchaser shall have
received from counsel to O'Brien reasonably satisfactory to the Purchaser an
opinion to the effect that the approval of the bankruptcy court is not necessary
or required for the execution, delivery and/or performance by O'Brien of this
Agreement or the other instruments and documents required or contemplated
hereunder to perform O'Brien's obligations hereunder or to consummate the
transactions contemplated hereby, or, if required, any necessary approval has
been obtained.
7.2 Financial Closing. The Financial Closing shall have been
consummated on terms satisfactory to Purchaser.
7.3 Deliverables. Escrow Agent shall have received, on behalf of
Purchaser, the documents required to be delivered to Purchaser under Section 9.1
below.
7.4 Payments Due PUPCO. PUPCO shall have received at Financial
Closing those payments due PUPCO under Section 1.4 hereof.
7.5 Letter of Credit or Corporate Guaranty. The Escrow Agent shall
have received a letter of credit or a corporate guaranty securing the Project
Equity Contribution under the Restated Partnership Agreement of each of the
Partners in a form satisfactory to the Lenders under the Credit Agreement.
7.6 Certain Consents. The Lender shall have received Consents
executed by the Partners and other necessary parties with respect to the Steam
Purchase Agreement, the Steam Venture Agreement, the Project Services Agreement,
and the Dock Facility Services Agreement in form satisfactory to Lender.
7.7 Opinion. Insofar as counsel to O'Brien delivers an opinion to
the Lenders on the Financial Closing Date (as each such term is defined in the
Restated Partnership Agreement) which addresses matters of law which are also
addressed directly or by implication in the opinion delivered at the Closing by
O'Brien's general counsel, Purchaser shall receive the permission of counsel
delivering such opinion to the Lenders to rely on the portions of such opinion
addressing such matters of law.
7.8 Lien Searches. To the extent lien searches are received prior
to the Financial Closing, they shall not reveal anything inconsistent with the
representations and warranties made by the Partners herein.
8. Conditions of the Partners to the Breaking of Escrow. The
obligations of the Partners under this Agreement, and the authority of the
Escrow Agent to break escrow, are subject to the satisfaction and fulfillment,
or waiver by the Partners, at or before the Expiration Date, of each of the
following conditions:
8.1 Financial Closing. The Financial Closing shall have been
consummated on terms satisfactory to each of the Partners.
8.2 Deliverables. The Escrow Agent shall have received, on behalf
of the Partners, documents required to be delivered to the Partners under
Section 9.2 below.
8.3 Letter of Credit. The Escrow Agent shall have received a
letter of credit from Purchaser in a form satisfactory to the Lenders under the
Credit Agreement guaranteeing the Project Equity Contribution of Purchaser under
the Restated Partnership Agreement.
8.4 Certain Consents. The Lender shall have received Consents
executed by the Purchaser and other necessary parties with respect to the Steam
Purchase Agreement, the Steam Venture Agreement, the Project Services Agreement,
and the Dock Facility Services Agreement in form satisfactory to Lender.
8.5 Opinion. Insofar as counsel to O'Brien delivers an opinion
to the Lenders on the Financial Closing Date (as each such term is defined in
the Restated Partnership Agreement) which addresses matters of law which are
also addressed directly or by implication in the opinion delivered at the
Closing by O'Brien's general counsel, Adwin shall receive the permission of
counsel delivering such opinion to the Lenders to rely on the portions of such
opinion addressing such matters of law.
9. Closing; Deliverables at Closing. All Deliverables required of the
Purchaser and the Partners set out below shall be delivered on or before the
Closing to Escrow Agent and Escrow Agent shall hold the Deliverables in escrow
until such time as the conditions to the breaking of escrow set out in
Paragraphs 7 and 8 herein have been fulfilled. If the conditions to the
breaking of escrow set out in Paragraphs 7 and 8 have not been satisfied by the
Expiration Date, or if this Agreement is terminated by mutual consent of the
Purchaser and the Partners under Section 10 hereof, Escrow Agent shall return
all Deliverables to the parties, pursuant to the terms of the Escrow Agreement,
and the rights and obligations of the parties shall be determined in accordance
with Paragraph 11 herein. Upon satisfaction of all of the conditions to the
breaking of escrow set out in Paragraphs 7 and 8 or upon such termination,
Escrow Agent shall deliver or dispose of the Deliverables in accordance with the
terms of the Escrow Agreement.
9.1 Deliverables from the Partners. At or prior to the Closing,
the Partners shall execute and/or deliver to the Escrow Agent:
(a) Restated Partnership Agreement. The Restated Partnership
Agreement, in the form of Exhibit A hereto, duly executed by the Partners.
(b) PUPCO Side Letter. A side letter agreement dated date the
hereof, duly executed by the Partnership, the Partners, the Purchaser and PUPCO
(the "PUPCO Side Letter").
(c) Acknowledgment. An acknowledgment letter dated the date
hereof duly executed by Trigen-Philadelphia, PUPCO, AEC, O'Brien and the
Partnership.
(d) Updated Balance Sheet. An updated, unaudited balance
sheet of the Partnership, effective as of February 29, 1996.
(e) Opinion Letter. An opinion of counsel to each of the
Partners, dated the Closing Date, in the form set forth in Exhibit D hereto.
(f) Certificate Regarding Continuous Validity of
Representations and Warranties. A certificate executed by the respective
President or Chief Executive Officer of each of the Partners certifying that all
representations and warranties of such Partner made in or pursuant to this
Agreement are true and correct at and as of the Closing Date.
(g) Certificate Regarding Fulfillment of Obligations and
Conditions. A certificate from each of the Partners signed by its respective
President or Chief Executive Officer certifying that such Partner has performed,
observed, and complied with all the obligations and conditions required of it by
this Agreement to be performed, observed or completed at or prior to the Closing
Date.
(h) Other Documents. (i) A Certificate of Good Standing with
respect to each of the Partners from the Secretary of State of its
incorporation; (ii) certified copies of resolutions duly adopted by the Board of
Directors of each of the Partners respectively authorizing the execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein by such Partner; (iii) certified copies of the Articles of Incorporation
and by-laws, as amended, of each of the Partners; and (iv) the Escrow Agreement
in a form satisfactory to the Escrow Agent, Purchaser, and the Partners.
(i) Consents of Third Parties. The consents or approvals of
any third parties whose consent is required for each of the Partners to
consummate the transactions contemplated by this Agreement.
(j) Governmental Approvals. All necessary consents,
authorizations and approvals of all governmental agencies, commissions and
similar bodies, the consent, authorization or approval of which is required
under any applicable law, rule, order or regulation for the consummation by each
of the Partners of the transactions contemplated by this Agreement.
9.2 Deliverables from the Purchaser. At or prior to the Closing,
the Purchaser shall execute and/or deliver to the Escrow Agent:
(a) Restated Partnership Agreement. The Restated Partnership
Agreement, in the form of Exhibit A hereto, duly executed by the Purchaser.
(b) Purchase Price. The sum of $2,000,000, $1,000,000 of
which shall be represented by a cashier's check, payable to O'Brien, drawn on a
bank reasonably acceptable to O'Brien, and $1,000,000 of which shall be
represented by a cashier's check payable to Adwin, drawn on a bank reasonably
acceptable to Adwin, representing the amount of the Purchase Price to be paid by
the Purchaser under Section 1. 1.
(c) PUPCO Side Letter. The PUPCO Side Letter, duly executed
by the Partnership, the Partners, the Purchaser and PUPCO.
(d) Opinion Letter. An opinion of counsel to the Purchaser,
dated the Closing Date, in the form set forth in Exhibit I hereto.
(e) Certificate Regarding Continuing Validity of Purchaser's
Representations and Warranties. A Certificate executed by the President of
Purchaser certifying that all representations and warranties of the Purchaser
made in or pursuant to this Agreement are true and correct at and as of the
Closing Date.
(f) Certificate Regarding Fulfillment of Obligations and
Conditions. A Certificate signed by the President of Purchaser certifying that
Purchaser has performed, observed and complied with all the obligations and
conditions required by this Agreement to be performed, observed, or complied
with prior to the Closing Date.
(g) Other Documents. Purchaser shall have delivered to the
Escrow Agent:
(i) A certificate of Good Standing with respect to the
Purchaser from the Secretary of the Commonwealth of Pennsylvania;
(ii) Certified copies of resolutions duly adopted by the
Board of Directors of the Purchaser, authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein;
(iii) Certified copies of the Articles of Incorporation
and by-laws, as amended, of the Purchaser; and
(iv) The Escrow Agreement in a form satisfactory to the
Escrow Agent, Purchaser and the Partners.
(h) Consents of Third Parties. The consents or approvals of
any third parties whose consent is required for the Purchaser to consummate the
transactions contemplated by this Agreement.
(i) Governmental Approvals. All necessary consents,
authorizations and approvals of all governmental agencies, commissions and
similar bodies, the consent, authorization or approval of which is required
under any applicable law, rule, order or regulation for the consummation by the
Purchaser of the transactions contemplated by this Agreement.
10. Termination. This Agreement and the transactions contemplated
hereby may be terminated as follows:
10.1 Mutual Termination. By written mutual consent of the
Purchaser and the Partners on or prior to the Expiration Date.
10.2 Expiration Date. By the Purchaser, on the one hand, or by the
Partners, on the other hand, if the conditions to the breaking of escrow set out
in Sections 7 and 8 hereby have not been satisfied by the Expiration Date.
11. Effect of Termination. If this Agreement and the transactions
contemplated hereby are terminated on or before the Expiration Date, then,
except as set forth in this Section 11, no party hereto shall be liable to any
other party hereto under this Agreement or otherwise and this Agreement shall
become void and be without any force of effect. Notwithstanding the foregoing,
upon any such termination, the rights and obligations of the parties shall be
governed by the other agreements in effect between and among them, including,
without limitation, the Project Services Agreement, the Steam Venture Agreement,
and the Escrow Agreement.
12. Survival. The right to make a claim for breach of the
representations and warranties made as of the Closing Date shall survive the
Closing Date for a period of three years from and after the Closing Date, with
the exception of those representations and warranties set out in Sections 3.1,
3.2, 4.1, 4.2, 4.8, 5. 1, and 5.2, as to which the right to make a claim shall
survive for a period as is provided under applicable Pennsylvania law. Any
claim by the Purchaser for indemnification under Section 13 for a breach of any
representation or warranty made as of the Closing Date, or by the Partners under
Section 14 for a breach of any representation or warranty made as of the Closing
Date, must be made on or prior to the date on which the survival period for such
representation or warranty expires, it being understood that the indemnity
obligations of the Purchaser and the Partners, as the case may be, with respect
to claims that are asserted on or prior to such expiration date shall survive
such expiration date.
13. Indemnification of the Purchaser.
13.1 Indemnification of the Purchaser. The Partners shall, up to an
aggregate maximum of $3,000,000 per Partner, indemnify, defend and hold harmless
Purchaser (and its directors, officers, employees and affiliates) from and
against any and all "Purchaser Losses" as hereafter defined. "Purchaser Losses"
means any and all claims, liabilities, losses, damages, reasonable costs and
expenses, including reasonable attorneys' fees and court costs incurred (i) by
the Partnership where the result is a diminution of the Fair Value (as defined
in the Restated Partnership Agreement) of the Purchaser's interest in the
Partnership including, without limitation, a diminution in cash distributions,
or (ii) by the Purchaser, that results in either case, from the breach of a
representation or warranty of a Partner under this Agreement. The $3,000,000
limit per Partner shall apply even if the aggregate indemnity obligation of such
Partner for joint representations and warranties made under Section 3 herein,
plus its liability for individual representations and warranties made under
Section 4, exceeds $3,000,000. Notwithstanding the foregoing, no
indemnification obligation of any Partner for Purchaser Losses shall arise under
this Section 13.1 until such time as the Purchaser Losses, in the aggregate,
exceed $300,000.
13.2 Notice of Claims by the Purchaser. Within ten business days
after the Purchaser receives notice of any claim, in respect of which the
Partners may be liable under this Section 13, the Purchaser shall give written
notice thereof to the Partners. The Purchaser may at its option give notice and
claim indemnity under this Section 13 as soon as a claim has been threatened by
a third party, regardless of whether a loss has been suffered, so long as the
Purchaser shall in good faith determine that such claim is not frivolous and
that the Purchaser may be liable or otherwise incur a loss as a result thereof
and shall give notice of such determination to the Partners. The Purchaser
shall permit the Partners, at the sole option and expense of the Partners, to
assume the defense of any such claim by counsel satisfactory to the Purchaser
and to settle or otherwise dispose of the same. In any such event, the
Purchaser will cooperate with the Partners and may at all times participate in
such defense, at its own expense; provided, however, that the Partners shall
not, in defense of any such claim, except with the prior written consent of the
Purchaser, consent to the entry of any judgment or enter into any settlement
that does not include the giving by the claimant or plaintiff in question to the
Purchaser a release of all liabilities in respect of such claims, or that does
not result solely in the payment of money damages by the Partners.
13.3 Purchaser's Remedy Upon Dissolution. As Purchaser's
exclusive remedy for Purchaser Losses under Section 13.1, Purchaser shall have
the right, upon liquidation of the assets of the Partnership pursuant to Section
24 of the Restated Partnership Agreement, to receive priority payment of any Net
Indemnity Obligations, as defined below, which are owed to it by either Adwin
and/or O'Brien pursuant to the provisions of Section 13.1. For purposes of this
Section, "Net Indemnity Obligations" shall mean all Purchaser Losses under
Section 13.1, the amount of which shall have been established by mutual
agreement or a final, nonappealable judgment of a court of competent
jurisdiction, and which shall represent the excess of the indemnity obligations
of Adwin and/or O'Brien owed Purchaser under Section 13.1, over any indemnity
obligations owed by Purchaser to Adwin and/or O'Brien pursuant to Section 14.1.
Such "Net Indemnity Obligations" shall be deducted from the Unreimbursed
Development Costs otherwise due Adwin and/or O'Brien under Section 24 of the
Restated Partnership Agreement, and shall be paid prior to the reimbursement of
such Unreimbursed Development Costs due Adwin and/or O'Brien, pursuant to the
provisions of Section 24 of the Restated Partnership Agreement. The indemnity
cap, calculation of Net Indemnity Obligation, and calculation of Net Indemnity
Amount shall be applied and made on a per Partner basis, and neither Partner
shall be liable for the other Partners' indemnity obligation. In the event of a
dispute over any indemnity claims of Purchaser, the parties agree to mediate the
dispute initially pursuant to the Commercial Mediation Rules of the American
Arbitration Association, but if such mediation efforts have not produced a
settlement within ninety (90) days, any party may refer the matter to a court of
competent jurisdiction for resolution.
14. Indemnification of the Partners.
14.1 Indemnification of the Partners. The Purchaser shall, up to
an aggregate maximum of $3,000,000, indemnify, defend and hold harmless the
Partners (and their respective directors, officers, employees and affiliates)
from and against any and all "Partner Losses" as hereafter defined. "Partner
Losses" means any and all claims, liabilities, losses, damages, reasonable costs
and expenses, including reasonable attorneys' fees and court costs and expenses
incurred (i) by the Partnership where the result is a diminution of the Fair
Value (as defined in the Restated Partnership Agreement) of the Partners'
interest in the Partnership including, without limitation, a diminution in cash
distributions, or (ii) by the Partners, that results in either case, from the
breach of a representation or warranty of the Purchaser under this Agreement.
Notwithstanding the foregoing, no indemnification obligation of the Purchaser
for Partner Losses shall arise under this Section 14.1 until such time as the
Partner Losses, in the aggregate, exceed $300,000.
14.2 Notice of Claims by the Partners. Within ten business days
after the Partners receive notice of any claim, in respect of which the
Purchaser may be liable under this Section 14, the Partners shall give written
notice thereof to the Purchaser. The Partners and the Partnership may at their
option give notice and claim indemnity under this Section 14 as soon as a claim
has been threatened by a third party, regardless of whether an actual loss has
been suffered, so long as the Partners shall in good faith determine that such
claim is not frivolous and that the Partners may be liable or otherwise incur a
loss as a result thereof and shall give notice of such determination to the
Purchaser. The Partners shall permit the Purchaser, at its sole option and
expense, to assume the defense of any such claim by counsel satisfactory to the
Partners and to settle or otherwise dispose of the same. In any such event, the
Partners will cooperate with the Purchaser and may at all times participate in
such defense, at its own expense; provided, however, that the Purchaser shall
not, in defense of any such claim, except with the prior written consent of the
Partners, consent to the entry of any judgment or enter into any settlement that
does not include the giving by the claimant or plaintiff in question to the
Partners a release of all liabilities in respect of such claims, or that does
not result solely in the payment of money damages by the Purchaser.
14.3 The Partners' Remedy Upon Dissolution. As the Partners'
exclusive remedy for Partner Losses under Section 14.1, the Partners shall have
the right, upon liquidation of the assets of the Partnership pursuant to Section
24 of the Restated Partnership Agreement, to collect from Purchaser's share of
distributions under Section 24.01(e) of the Restated Partnership Agreement any
"Net Indemnity Amounts Owed by Purchaser," as defined below, owed to the
Partners by Purchaser pursuant to the provisions of Section 14.1. For the
purposes of this Section, "Net Indemnity Amounts Owed by Purchaser" shall mean
the excess of all Partner Losses under Section 14.1 owed to the Partners by
Purchaser over any indemnity amounts owed by the Partners to Purchaser pursuant
to the provisions of Section 13.1. Such "Net Indemnity Amounts Owed by
Purchaser" shall be established through either mutual consent of the parties, or
by a final, nonappealable order of a court of competent jurisdiction, and once
established, shall be deducted from the Capital Account of Purchaser, pursuant
to the provisions of Section 24.01(e) of the Restated Partnership Agreement. In
the event of a dispute over any indemnity claims of the Partners, the parties
agree to mediate the dispute initially pursuant to the Commercial Mediation
Rules of the American Arbitration Association, but if such mediation efforts
have not produced a settlement within ninety (90) days, any party may refer the
matter to a court of competent jurisdiction for resolution.
15. Agreement to Consummate, Further Assurances. Subject to the terms
and conditions herein provided, including the termination rights under Section
10 hereof, each of the parties hereto agrees to use commercially reasonable
efforts to do all things necessary, proper or advisable under this Agreement
(including satisfaction of the conditions set forth in Sections 7 and 8 hereof),
applicable laws and regulations to consummate and make effective, as soon as
reasonably practicable, the transactions contemplated by this Agreement,
including without limitation the acquisition of all consents, authorizations,
orders and approvals of any governmental commission, board of other regulatory
body required in connection therewith. The parties hereto shall execute and
deliver all such other instruments and take all such other actions as any party
may reasonably request from time-to-time, before or after the date hereof and
without any further consideration, in order to effectuate the transactions
provided for herein. The parties shall cooperation fully with each other and
with their respective counsel in connection with any steps required to be taken
as part of their respective obligations under this Agreement.
16. Miscellaneous.
16.1 Amendments. No change, amendment, waiver or modification of
any provisions of this Agreement will be effective unless it is in writing and
signed by the party against whom enforcement of the waiver, change or amendment
is sought.
16.2 Waiver. No waiver of any right under this Agreement will be
deemed effective unless contained in writing signed by the party charged with
such waiver, and no waiver of any right arising from any breach or failure to
perform will be deemed to be a waiver of any future such right or of any right
arising under this Agreement.
16.3 Successors and Assigns. None of the parties hereto may assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of all of the other parties hereto. Except as otherwise
expressly provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives,
successors and permitted assigns.
16.4 Titles. The titles of the Sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in
construing the terms and provisions hereof.
16.5 Notices. All notices, requests, demands and other
communications required or permitted to be made hereunder shall be in writing
and shall be deemed duly given if hand delivered against a signed receipt
therefor, sent by registered or certified mail, return receipt requested, first
class postage prepaid, or sent by nationally recognized overnight delivery
service, in each case addressed to the party entitled to receive the same at the
address specified below:
(a) If to Adwin, then to:
William J. Brady, Vice President
Adwin (Schuylkill) Cogeneration, Inc.
300 Stevens Drive
Suite 155
Lester, PA 19113
With a copy, sent in the manner prescribed above, to:
John Halderman, Esquire
PECO Energy Company
2301 Market Street
Philadelphia, PA 19101
(b) If to O'Brien, then to:
Peter Ford
O'Brien (Schuylkill) Cogeneration, Inc.
225 South Eighth Street
Philadelphia, PA 19106
With a copy, sent in the manner prescribed above, to:
Robert J. Rauch, Esquire
17 Glen Andrew Road
White Sulphur Springs, WV 24986
(c) If to the Purchaser, then to:
Steve Smith, President
Trigen-Schuylkill Cogeneration, Inc.
2600 Christian Street Schuylkill Station
Philadelphia, PA 19146
With a copy, sent in the manner prescribed above, to:
Barnett Satinsky, Esquire
Fox, Rothschild, O'Brien & Frankel
2000 Market Street
10th Floor
Philadelphia, PA 19103
And, with an additional copy, sent in the manner prescribed above, to:
Eugene E. Murphy, Esquire
Trigen Energy Corporation
1 Water Street
White Plains, NY 10601
Any party may alter the address to which communications are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section providing for the giving of notice. Notice shall be deemed to be
effective, if personally delivered, when delivered; if mailed, at midnight on
the third business day after being sent by registered or certified mail; and if
sent by nationally recognized overnight delivery service, on the next business
day following delivery to such delivery service.
16.6 Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
16.7 Exhibits; Schedules. All exhibits and schedules to this
Agreement are hereby incorporated by reference into, and made a part of, this
Agreement.
16.8 Execution; Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories hereto.
16.9 Expenses. Whether or not the transactions contemplated by this
Agreement shall be consummated and except as otherwise provided herein, each
party shall pay its own expenses incident to the negotiation, execution and
performance of this Agreement and the transactions contemplated hereby. The
Partnership shall each be solely responsible for, and shall timely pay in
accordance with applicable law, all transfer taxes and other similar taxes, in
either case, imposed by any taxing authority, federal, state or local, with
respect to the Partnership Interest issued to the Purchaser under this Agreement
(if any).
16.10 Entire Agreement. This Agreement and the other documents
delivered pursuant hereto shall constitute the full and entire understanding and
agreement among the parties with regard to the subject matter hereof and
thereof, and supersede all prior agreements, understandings, inducements or
conditions, express or implied, oral or written, except as herein contained.
The express terms hereof shall control and supersede any course of performance
and/or usage of trade inconsistent with any of the terms hereof.
16.11 Governing Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania.
16.12 Conflict Among Documents. In the event of any conflict
between or among the terms of this Agreement and the terms of the Project
Services Agreement or the Steam Venture Agreement, such conflict shall be
controlled and governed by the terms of this Agreement. In the event of any
conflict between any other documents, the later dated document shall control and
govern. All terms and provisions of the Project Services Agreement and the
Steam Venture Agreement that are not expressly amended or modified by this
Agreement or any other document entered into by the parties after the date
thereof shall remain in full force and effect.
IN WITNESS WHEREOF, the authorized representatives of each party hereby
executes this Agreement as of the date first set forth above.
ADWIN (SCHUYLKILL) O'BRIEN (SCHUYLKILL)
COGENERATION, INC. COGENERATION, INC.
By:______________________ By:________________________________
Date:____________________ Date: ______________________________
TRIGEN-SCHUYLKILL
COGENERATION, INC.
By:_______________________
Date:_____________________
Agreeing and intending to be legally bound only with respect to Sections 1.2
through 1.4 of this Agreement as of the date of this Agreement:
PHILADELPHIA UNITED POWER GRAYS FERRY COGENERATION
CORPORATION PARTNERSHIP
By: ________________________ By: Adwin (Schuylkill)
Cogeneration, Inc.
By:____________________