EXHIBIT 10.1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
ENOVA CORPORATION,
PACIFIC ENTERPRISES,
MINERAL ENERGY COMPANY,
G MINERAL ENERGY SUB
AND
B MINERAL ENERGY SUB
DATED AS OF OCTOBER 12, 1996
TABLE OF CONTENTS
ARTICLE I
THE MERGERS
SECTION 1.01. The Mergers . . . . . . . . . . . . . . 2
SECTION 1.02. Effective Time of the Mergers; Closing . 2
SECTION 1.03. Effects of the Mergers . . . . . . . . . 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities . . . . . . . . 4
SECTION 2.02. Exchange of Certificates . . . . . . . . 5
SECTION 2.03. Dissenting Shares . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PACIFIC
SECTION 3.01. Organization and Qualification . . . . . 8
SECTION 3.02. Subsidiaries . . . . . . . . . . . . . . 9
SECTION 3.03. Capitalization . . . . . . . . . . . . . 9
SECTION 3.04. Authority; Non-Contravention; Statutory
Approvals; Compliance . . . . . . . . 10
SECTION 3.05. Reports and Financial Statements . . . . 12
SECTION 3.06. Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities . 12
SECTION 3.07. Litigation . . . . . . . . . . . . . . . 13
SECTION 3.08. Registration Statement and Proxy
Statement . . . . . . . . . . . . . . 13
SECTION 3.09. Tax Matters . . . . . . . . . . . . . . 14
SECTION 3.10. Employee Matters; ERISA . . . . . . . . 17
SECTION 3.11. Environmental Protection . . . . . . . . 19
SECTION 3.12. Regulation as a Utility . . . . . . . . 21
SECTION 3.13. Vote Required . . . . . . . . . . . . . 22
SECTION 3.14. Accounting Matters . . . . . . . . . . . 22
SECTION 3.15. Opinions of Financial Advisors . . . . . 22
SECTION 3.16. Insurance . . . . . . . . . . . . . . . 22
SECTION 3.17. Pacific Rights Agreement . . . . . . . . 22
SECTION 3.18. Brokers . . . . . . . . . . . . . . . . 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ENOVA
SECTION 4.01. Organization and Qualification . . . . . 23
SECTION 4.02. Subsidiaries . . . . . . . . . . . . . . 23
SECTION 4.03. Capitalization . . . . . . . . . . . . . 24
SECTION 4.04. Authority; Non-Contravention; Statutory
Approvals; Compliance . . . . . . . . 25
SECTION 4.05. Reports and Financial Statements . . . . 26
SECTION 4.06. Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities . 27
SECTION 4.07. Litigation . . . . . . . . . . . . . . . 27
SECTION 4.08. Registration Statement and Proxy
Statement . . . . . . . . . . . . . . . 27
SECTION 4.09. Tax Matters . . . . . . . . . . . . . . 28
SECTION 4.10. Employee Matters; ERISA . . . . . . . . 31
SECTION 4.11. Environmental Protection . . . . . . . . 33
SECTION 4.12. Regulation as a Utility . . . . . . . . 34
SECTION 4.13. Nuclear Operations . . . . . . . . . . . 34
SECTION 4.14. Vote Required . . . . . . . . . . . . . 35
SECTION 4.15. Accounting Matters . . . . . . . . . . . 35
SECTION 4.16. Opinion of Financial Advisor . . . . . . 35
SECTION 4.17. Insurance . . . . . . . . . . . . . . . 35
SECTION 4.18. Ownership of Pacific Common Stock . . . 35
SECTION 4.19. Brokers . . . . . . . . . . . . . . . . 35
SECTION 4.20. Tax-Exempt Status . . . . . . . . . . . 36
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGERS
SECTION 5.01. Conduct of Business Pending the Mergers . 36
SECTION 5.02. Transition and Strategic Opportunity
Committees. . . . . . . . . . . . . . .
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Access to Information; Confidentiality . 43
SECTION 6.02. Registration Statement; Joint Proxy
Statement . . . . . . . . . . . . . . 43
SECTION 6.03. Regulatory Matters . . . . . . . . . . . 44
SECTION 6.04. Shareholder Approvals . . . . . . . . . 45
SECTION 6.05. Directors' and Officers' Indemnification 46
SECTION 6.06. Disclosure Schedules . . . . . . . . . . 47
SECTION 6.07. Public Announcements . . . . . . . . . . 48
SECTION 6.08. Rule 145 Affiliates . . . . . . . . . . 48
SECTION 6.09. Employee Agreements and Workforce
Matters . . . . . . . . . . . . . . . 48
SECTION 6.10. Employee Benefit Plans . . . . . . . . . 49
SECTION 6.11. Stock Option and Other Stock Plans . . . 50
SECTION 6.12. No Solicitations . . . . . . . . . . . . 51
SECTION 6.13. Company Board of Directors . . . . . . . 52
SECTION 6.14. Company Officers . . . . . . . . . . . . 52
SECTION 6.15. Employment Contracts . . . . . . . . . . 52
SECTION 6.16. Post-Merger Operations . . . . . . . . . 52
SECTION 6.17. Expenses . . . . . . . . . . . . . . . . 53
SECTION 6.18. Energy Marketing Joint Venture . . . . . 53
ARTICLE VII
CONDITIONS TO THE MERGERS
SECTION 7.01. Conditions to the Obligations of
Each Party . . . . . . . . . . . . . . 53
SECTION 7.02. Conditions to the Obligations of Pacific. 54
SECTION 7.03. Conditions to the Obligations of Enova . 55
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination . . . . . . . . . . . . . . 56
SECTION 8.02. Effect of Termination . . . . . . . . . 58
SECTION 8.03. Fees and Expenses . . . . . . . . . . . 58
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations,
Warranties and Agreements . . . . . . 60
SECTION 9.02. Notices . . . . . . . . . . . . . . . . 60
SECTION 9.03. Certain Definitions . . . . . . . . . . 61
SECTION 9.04. Amendment . . . . . . . . . . . . . . . 62
SECTION 9.05. Waiver . . . . . . . . . . . . . . . . . 62
SECTION 9.06. Headings . . . . . . . . . . . . . . . . 63
SECTION 9.07. Severability . . . . . . . . . . . . . . 63
SECTION 9.08. Entire Agreement . . . . . . . . . . . . 63
SECTION 9.09. Assignment . . . . . . . . . . . . . . . 63
SECTION 9.10. Parties in Interest . . . . . . . . . . 63
SECTION 9.11. Failure or Indulgence Not Waiver;
Remedies Cumulative . . . . . . . . . 64
SECTION 9.12. Governing Law . . . . . . . . . . . . . 64
SECTION 9.13. Counterparts . . . . . . . . . . . . . . 64
SECTION 9.14. WAIVER OF JURY TRIAL . . . . . . . . . . 64
SECTION 9.15. Further Assurances . . . . . . . . . . . 64
EXHIBITS
Exhibit A Summary of Terms of Energy Marketing Joint Venture
Exhibit 1.02(a)(i) Enova Merger Agreement
Exhibit 1.02(a)(ii) Pacific Merger Agreement
Exhibit 6.08 Form of Affiliate Agreement
Exhibit 6.15 Form of Employment Contracts
INDEX OF DEFINED TERMS
Term Page
1935 Act . . . . . . . . . . . . . . . . . . . . . . . . 9
Acquisition Proposal . . . . . . . . . . . . . . . . . 53
affiliate . . . . . . . . . . . . . . . . . . . . . . . 22
Affiliate Agreement . . . . . . . . . . . . . . . . . . 50
affiliates . . . . . . . . . . . . . . . . . . . . . . 64
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1
Atomic Energy Act . . . . . . . . . . . . . . . . . . . 27
Barr Devlin . . . . . . . . . . . . . . . . . . . . . . 23
beneficial owner . . . . . . . . . . . . . . . . . . . 64
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . 37
business day . . . . . . . . . . . . . . . . . . . . . 64
California Law . . . . . . . . . . . . . . . . . . . . . 1
Certificates . . . . . . . . . . . . . . . . . . . . . . 5
Closing Agreement . . . . . . . . . . . . . . . . . . . 16
Closing . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date . . . . . . . . . . . . . . . . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Common Stock . . . . . . . . . . . . . . . . . . 4
Company Replacement Plans . . . . . . . . . . . . . . . 51
Company Shares . . . . . . . . . . . . . . . . . . . . . 6
Confidentiality Agreement . . . . . . . . . . . . . . . 45
control . . . . . . . . . . . . . . . . . . . . . . . . 64
controlled by . . . . . . . . . . . . . . . . . . . . . 64
Converted Shares . . . . . . . . . . . . . . . . . . . . 6
CPUC . . . . . . . . . . . . . . . . . . . . . . . . . 12
Disclosure Schedules . . . . . . . . . . . . . . . . . 49
Dissenting Shares . . . . . . . . . . . . . . . . . . . . 8
Effective Time . . . . . . . . . . . . . . . . . . . . . 3
Encumbrances . . . . . . . . . . . . . . . . . . . . . . 9
Energy Marketing Joint Venture . . . . . . . . . . . . . 1
Energy Marketing Joint Venture Agreement . . . . . . . . 1
Energy Marketing Required Statutory Approvals . . . . . 46
Enova . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Enova Benefit Plans . . . . . . . . . . . . . . . . . . 32
Enova Common Stock . . . . . . . . . . . . . . . . . . . 4
Enova Disclosure Schedule . . . . . . . . . . . . . . . 49
Enova Dissenting Shares . . . . . . . . . . . . . . . . . 8
Enova Effective Time . . . . . . . . . . . . . . . . . . 3
Enova Financial Statements . . . . . . . . . . . . . . 28
Enova Material Adverse Effect . . . . . . . . . . . . . 24
Enova Merger . . . . . . . . . . . . . . . . . . . . . 1, 2
Enova Merger Agreement . . . . . . . . . . . . . . . . . 2
Enova Out-of-Pocket Expenses . . . . . . . . . . . . . 61
Enova Preferred Stock . . . . . . . . . . . . . . . . . 25
Enova Ratio . . . . . . . . . . . . . . . . . . . . . . . 4
Enova Required Consents . . . . . . . . . . . . . . . . 26
Enova Required Statutory Approvals . . . . . . . . . . 27
Enova SEC Reports . . . . . . . . . . . . . . . . . . . 28
Enova Shareholders' Approval . . . . . . . . . . . . . 36
Enova Special Meeting . . . . . . . . . . . . . . . . . 47
Enova Sub . . . . . . . . . . . . . . . . . . . . . . . . 1
Enova Sub Common Stock . . . . . . . . . . . . . . . . 25
Enova Sub Par Value $20 Preferred Stock . . . . . . . . 25
Enova Sub No Par Preference Stock . . . . . . . . . . . 25
Environmental Claim . . . . . . . . . . . . . . . . . . 21
Environmental Laws . . . . . . . . . . . . . . . . . . 22
Environmental Permits . . . . . . . . . . . . . . . . . 20
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 18
Excess Shares . . . . . . . . . . . . . . . . . . . . . . 7
Exchange Act . . . . . . . . . . . . . . . . . . . . . 12
Exchange Agent . . . . . . . . . . . . . . . . . . . . . 5
Exchange Ratios . . . . . . . . . . . . . . . . . . . . . 5
FERC . . . . . . . . . . . . . . . . . . . . . . . . . 12
Final Order . . . . . . . . . . . . . . . . . . . . . . 56
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Gas Act . . . . . . . . . . . . . . . . . . . . . . . . 12
Governmental Authority . . . . . . . . . . . . . . . . 12
Hazardous Materials . . . . . . . . . . . . . . . . . . 22
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . 46
Indemnified Parties . . . . . . . . . . . . . . . . . . 48
Indemnified Party . . . . . . . . . . . . . . . . . . . 48
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Joint Proxy/Registration Statement . . . . . . . . . . 45
joint venture . . . . . . . . . . . . . . . . . . . . . 64
Joint Venture Material Adverse Effect
9knowledge . . . . . . . . . . . . . . . . . . . . . . 65
Merger Consideration . . . . . . . . . . . . . . . . . . 6
Mergers . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merrill Lynch . . . . . . . . . . . . . . . . . . . . . 23
Morgan Stanley . . . . . . . . . . . . . . . . . . . . 37
New Opportunity . . . . . . . . . . . . . . . . . . . . 44
Newco Enova Sub . . . . . . . . . . . . . . . . . . . . . 1
Newco Pacific Sub . . . . . . . . . . . . . . . . . . . . 1
NRC . . . . . . . . . . . . . . . . . . . . . . . . . . 27
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Pacific . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pacific Benefit Plans . . . . . . . . . . . . . . . . . 18
Pacific Class A Preferred Stock . . . . . . . . . . . . . 5
Pacific Common Stock . . . . . . . . . . . . . . . . . . 4
Pacific Disclosure Schedule . . . . . . . . . . . . . . 49
Pacific Dissenting Shares . . . . . . . . . . . . . . . . 8
Pacific Effective Time . . . . . . . . . . . . . . . . . 3
Pacific Financial Statements . . . . . . . . . . . . . 13
Pacific Material Adverse Effect . . . . . . . . . . . . . 9
Pacific Merger . . . . . . . . . . . . . . . . . . . . 1, 2
Pacific Merger Agreement . . . . . . . . . . . . . . . . 3
Pacific Out-of-Pocket Expenses . . . . . . . . . . . . 61
Pacific Preferred Stock . . . . . . . . . . . . . . . . . 5
Pacific Ratio . . . . . . . . . . . . . . . . . . . . . . 5
Pacific Required Consents . . . . . . . . . . . . . . . 11
Pacific Required Statutory Approvals . . . . . . . . . 12
Pacific Right . . . . . . . . . . . . . . . . . . . . . . 4
Pacific Rights Agreement . . . . . . . . . . . . . . . . 4
Pacific SEC Reports . . . . . . . . . . . . . . . . . . 13
Pacific Shareholders' Approval . . . . . . . . . . . . 23
Pacific Special Meeting . . . . . . . . . . . . . . . . 47
Pacific Sub . . . . . . . . . . . . . . . . . . . . . . 10
Pacific Sub Common Stock . . . . . . . . . . . . . . . 10
Pacific Sub Preference Stock . . . . . . . . . . . . . 10
Pacific Sub Preferred Stock . . . . . . . . . . . . . . 10
Pacific Sub Series A Preferred . . . . . . . . . . . . 10
Pacific Sub Series Preferred . . . . . . . . . . . . . 10
Pacific Sub $25 Preferred . . . . . . . . . . . . . . . 10
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . 19
PCBs . . . . . . . . . . . . . . . . . . . . . . . . . 22
person . . . . . . . . . . . . . . . . . . . . . . . . 65
Power Act . . . . . . . . . . . . . . . . . . . . . . . 12
Proxy Statement . . . . . . . . . . . . . . . . . . . . 14
Registration Statement . . . . . . . . . . . . . . . . 14
Release . . . . . . . . . . . . . . . . . . . . . . . . 22
Representatives . . . . . . . . . . . . . . . . . . . . 44
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Securities Act . . . . . . . . . . . . . . . . . . . . 12
Shares Trust . . . . . . . . . . . . . . . . . . . . . . 7
SONGS . . . . . . . . . . . . . . . . . . . . . . . . . 36
Special Meeting . . . . . . . . . . . . . . . . . . . . 47
Stock Award . . . . . . . . . . . . . . . . . . . . . . 52
Stock Plans . . . . . . . . . . . . . . . . . . . . . . 52
Strategic Opportunity Committee . . . . . . . . . . . . 44
subsidiary or subsidiaries . . . . . . . . . . . . . . 65
subsidiary company . . . . . . . . . . . . . . . . . . 22
Tax Return . . . . . . . . . . . . . . . . . . . . . . 14
Tax Ruling . . . . . . . . . . . . . . . . . . . . . . 16
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 14
Three Year Period . . . . . . . . . . . . . . . . . . . 66
Transition Committee . . . . . . . . . . . . . . . . . 44
under common control with . . . . . . . . . . . . . . . 64
Violation . . . . . . . . . . . . . . . . . . . . . . . 11
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION,
dated as of October 12, 1996 (this "AGREEMENT"), among Enova
Corporation, a California corporation ("ENOVA"; provided,
however, that references in Article IV hereof to "Enova" prior
to January 1, 1996 shall be deemed references to San Diego Gas
& Electric, a California corporation and, since January 1,
1996, a wholly owned subsidiary of Enova ("ENOVA SUB")),
Pacific Enterprises, a California corporation ("PACIFIC"),
Mineral Energy Company, a California corporation, 50% of whose
outstanding capital stock is owned by Enova and 50% of whose
outstanding capital stock is owned by Pacific (the "COMPANY"),
G Mineral Energy Sub, a California corporation and wholly
owned subsidiary of the Company ("NEWCO ENOVA SUB"), and B
Mineral Energy Sub , a California corporation and wholly owned
subsidiary of the Company ("NEWCO PACIFIC SUB"),
W I T N E S S E T H:
WHEREAS, Enova and Pacific have each determined
that, to promote the best interests of its shareholders and
employees and those customers and communities served by its
utility subsidiaries, it wishes to compete aggressively in the
rapidly evolving energy marketplace and that it may best do so
through a combination with the other party, and therefore
Pacific and Enova have each determined to engage in a business
combination as peer firms in a strategic merger of equals and,
accordingly, have formed the Company to participate in such
business combination;
WHEREAS, in furtherance thereof the respective
Boards of Directors of Enova, Pacific, the Company, Newco
Enova Sub and Newco Pacific Sub have approved the consummation
of the reorganization provided for in this Agreement, pursuant
to which Newco Enova Sub and Newco Pacific Sub will merge with
and into Enova and Pacific, respectively, all in accordance
with the California General Corporation Law (the "CALIFORNIA
LAW") and on the terms and conditions set forth in this
Agreement (such transactions are referred to herein
individually as the "ENOVA MERGER" and the "PACIFIC MERGER",
respectively, and collectively as the "MERGERS"), as a result
of which the common shareholders of Enova and Pacific will
together own all of the outstanding shares of common stock of
the Company (which will, in turn, own all of the outstanding
shares of common stock of Pacific and Enova) and each share of
each other class of capital stock of Enova and Pacific shall
be unaffected and remain outstanding;
WHEREAS, Pacific and Enova contemplate forming a
joint venture (the "ENERGY MARKETING JOINT VENTURE") to pursue
natural gas and electricity marketing opportunities and
provide energy management and related energy services, which
joint venture will be governed by an agreement containing
substantially the terms set forth in Exhibit A hereto (the
"ENERGY MARKETING JOINT VENTURE AGREEMENT");
WHEREAS, for federal income tax purposes, it is
intended that the Mergers shall collectively qualify as a
transaction described in Section 351 of the Internal Revenue
Code of 1986, as amended (the "CODE"), and that the
shareholders of Enova and Pacific will recognize no gain or
loss for federal income tax purposes as a result of the
consummation of the Mergers, except with respect to any cash
received; and
WHEREAS, for accounting purposes, it is intended
that the transactions contemplated hereby shall be accounted
for as a pooling of interests under United States generally
accepted accounting principles applied on a consistent basis
("GAAP");
NOW, THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGERS
SECTION 1.01. The Mergers. Upon the terms and
subject to the conditions of this Agreement:
(a) At the Enova Effective Time, Newco Enova Sub
shall be merged with and into Enova (the "ENOVA MERGER") in
accordance with California Law. Enova shall be the surviving
corporation in the Enova Merger and shall continue its
corporate existence under the laws of the State of California.
As a result of the Enova Merger, Enova shall become a
subsidiary of the Company. The effects and the consequences
of the Enova Merger shall be as set forth in Section 1.03(a).
(b) At the Pacific Effective Time, Newco Pacific
Sub shall be merged with and into Pacific (the "PACIFIC
MERGER") in accordance with California Law. Pacific shall be
the surviving corporation in the Pacific Merger and shall
continue its corporate existence under the laws of the State
of California. As a result of the Pacific Merger, Pacific
shall become a subsidiary of the Company. The effects and the
consequences of the Pacific Merger shall be as set forth in
Section 1.03(b).
SECTION 1.02. Effective Time of the Mergers;
Closing. (a) On the Closing Date, (i) with respect to the
Enova Merger, the parties thereto shall file the merger
agreement in substantially the form attached as Exhibit
1.02(a)(i) with the Secretary of State of the State of
California in such form as required by, and executed in
accordance with the relevant provisions of, California Law
(the "ENOVA MERGER AGREEMENT"), and (ii) with respect to the
Pacific Merger, the parties thereto shall file the merger
agreement in substantially the form attached as Exhibit
1.02(a)(ii) with the Secretary of State of the State of
California, in such form as required by, and executed in
accordance with the relevant provisions of, California Law
(the "PACIFIC MERGER AGREEMENT"). The Enova Merger shall
become effective at the time specified in the Enova Merger
Agreement (the "ENOVA EFFECTIVE TIME"), and the Pacific Merger
shall become effective at the time specified in the Pacific
Merger Agreement (the "PACIFIC EFFECTIVE TIME"). The
effective time specified in the Enova Merger Agreement shall
also be the effective time specified in the Pacific Merger
Agreement. The term "EFFECTIVE TIME" shall mean the time and
date of the Pacific Effective Time.
(b) The closing (the "CLOSING") of the Mergers
shall take place at the offices of Shearman & Sterling, 777
South Figueroa Street, 34th Floor, Los Angeles, California
90017-5418 at 10:00 A.M., local time, on the second business
day immediately following the date on which the last of the
conditions set forth in Article VII hereof is fulfilled or
waived, or at such other time and date and place as Pacific
and Enova shall mutually agree (the "CLOSING DATE").
SECTION 1.03. Effects of the Mergers. (a) At the
Enova Effective Time, (i) the Articles of Incorporation of
Enova, as in effect immediately prior to the Enova Effective
Time, shall be the Articles of Incorporation of Enova as the
surviving corporation in the Enova Merger until thereafter
amended as provided by law and such Articles of Incorporation,
and (ii) the Bylaws of Enova, as in effect immediately prior
to the Enova Effective Time, shall be the Bylaws of Enova as
the surviving corporation in the Enova Merger, until
thereafter amended as provided by law, the Articles of
Incorporation of the surviving corporation and such Bylaws.
Subject to the foregoing, the additional effects of the Enova
Merger shall be as provided in the applicable provisions of
California Law.
(b) At the Pacific Effective Time, (i) the Articles
of Incorporation of Pacific, as in effect immediately prior to
the Pacific Effective Time, shall be the Articles of
Incorporation of Pacific as the surviving corporation in the
Pacific Merger until thereafter amended as provided by law and
such Articles of Incorporation, and (ii) the Bylaws of
Pacific, as in effect immediately prior to the Pacific
Effective Time shall be the Bylaws of Pacific as the surviving
corporation in the Pacific Merger, until thereafter amended as
provided by law, the Articles of Incorporation of the
surviving corporation and such Bylaws. Subject to the
foregoing, the additional effects of the Pacific Merger shall
be as provided in the applicable provisions of California Law.
(c) The parties shall take all appropriate action
so that at the Effective Time, (i) the Articles of
Incorporation of the Company shall be in such form as shall
mutually be agreed to by Pacific and Enova prior to the
Effective Time, and (ii) the Bylaws of the Company shall be in
such form as shall mutually be agreed to by Pacific and Enova
prior to the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. (a) At
the Enova Effective Time, by virtue of the Enova Merger and
without any action on the part of any holder of any capital
stock of Enova or Newco Enova Sub:
(i) Cancellation of Certain Enova Common
Stock. Each share of Common Stock, no par value, of
Enova (the "ENOVA COMMON STOCK") that is owned by
subsidiaries of Enova or by Pacific, the Company or any
of their subsidiaries shall be cancelled and cease to
exist.
(ii) Conversion of Enova Common Stock. Each
issued and outstanding share of Enova Common Stock (other
than shares cancelled pursuant to Section 2.01(a)(i) and
Enova Dissenting Shares) shall be converted into the
right to receive 1.00 (the "ENOVA RATIO") fully paid and
non-assessable share of Common Stock, no par value, of
the Company (the "COMPANY COMMON STOCK"). Upon such
conversion, each holder of a certificate formerly
representing any such shares shall cease to have any
rights with respect thereto, except the right to receive
the shares of Company Common Stock to be issued in
consideration therefor upon the surrender of such
certificate in accordance with Section 2.02.
(iii) Conversion of Newco Enova Sub Common
Stock. The aggregate of all shares of the capital stock
of Newco Enova Sub issued and outstanding immediately
prior to the Enova Effective Time shall be converted into
the right to receive that number of shares of Enova
Common Stock which shall be equivalent to the aggregate
number of shares of Enova Common Stock outstanding
immediately prior to the Enova Effective Time.
(b) At the Pacific Effective Time, by virtue of the
Pacific Merger and without any action on the part of any
holder of any capital stock of Pacific or Newco Pacific Sub:
(i) Cancellation of Certain Pacific Common
Stock. Each share of Common Stock of Pacific (the
"PACIFIC COMMON STOCK"), including any associated right
(the "PACIFIC RIGHT") to receive or purchase shares of
the capital stock of Pacific pursuant to the terms of a
Rights Agreement, dated as of March 7, 1989 between
Pacific and Chemical Bank, as successor Rights Agent
thereunder (the "PACIFIC RIGHTS AGREEMENT"), that is
owned by subsidiaries of Pacific or by Enova, the Company
or any of their subsidiaries shall be cancelled and cease
to exist. All references in this Agreement to Pacific
Common Stock shall be deemed to include the associated
Pacific Rights.
(ii) Conversion of Pacific Common Stock. Each
issued and outstanding share of Pacific Common Stock
(other than shares cancelled pursuant to Section
2.01(b)(i) and Pacific Dissenting Shares) shall be
converted into the right to receive 1.5038 (the "PACIFIC
RATIO", and together with the Enova Ratio, the "EXCHANGE
RATIOS") shares of fully paid and non-assessable shares
of Company Common Stock. Upon such conversion, each
holder of a certificate formerly representing any such
shares shall cease to have any rights with respect
thereto, except the right to receive the shares of
Company Common Stock to be issued in consideration
therefor upon the surrender of such certificate in
accordance with Section 2.02.
(iii) Conversion of Newco Pacific Sub
Common Stock. The aggregate of all shares of the capital
stock of Newco Pacific Sub issued and outstanding
immediately prior to the Pacific Effective Time shall be
converted into the right to receive that number of shares
of Pacific Common Stock which shall be equivalent to the
aggregate number of shares of Pacific Common Stock
outstanding immediately prior to the Pacific Effective
Time.
(iv) Pacific Preferred Stock to Remain
Unchanged. All issued and outstanding shares of Class A
Preferred Stock of Pacific (the "PACIFIC CLASS A
PREFERRED STOCK") and of Preferred Stock of Pacific (the
"PACIFIC PREFERRED STOCK") shall be unchanged and shall
remain outstanding after the Pacific Merger.
(c) At the Effective Time, by virtue of the Mergers
and without any action on the part of any holder of any
capital stock of Enova, Pacific or the Company, each share of
Company Common Stock issued and outstanding immediately prior
to the Effective Time shall be cancelled, and no consideration
shall be delivered in exchange therefor.
SECTION 2.02. Exchange of Certificates.
(a) Deposit with Exchange Agent. As soon as
practicable after the Effective Time, the Company shall
deposit with such bank or trust company mutually agreeable to
Pacific and Enova (the "EXCHANGE AGENT"), certificates
representing shares of Company Common Stock required to effect
the exchanges referred to in Sections 2.01(a)(ii) and (b)(ii).
(b) Exchange Procedures. As soon as practicable
after the Effective Time, the Exchange Agent shall mail to
each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented
outstanding shares of Enova Common Stock or Pacific Common
Stock (the "CERTIFICATES") that were converted (the "CONVERTED
SHARES") into the right to receive shares of Company Common
Stock (the "COMPANY SHARES") pursuant to Section 2.01, (i) a
letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates
shall pass, only upon actual delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates
representing Company Shares. Upon surrender of a Certificate
to the Exchange Agent for cancellation (or to such other agent
or agents as may be appointed by agreement of Pacific and
Enova), together with a duly executed letter of transmittal
and such other documents as the Exchange Agent shall require,
the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of
whole Company Shares which such holder has the right to
receive pursuant to the provisions of this Article II. In the
event of a transfer of ownership of Converted Shares which is
not registered in the transfer records of Enova or Pacific, as
the case may be, a certificate representing the proper number
of Company Shares may be issued to a transferee if the
Certificate representing such Converted Shares is presented to
the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence satisfactory
to the Exchange Agent that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to
receive upon such surrender the certificate representing
Company Shares and cash in lieu of any fractional shares of
Company Common Stock ("MERGER CONSIDERATION") as contemplated
by this Section 2.02.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions declared or made
after the Effective Time with respect to Company Shares with a
record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the
Company Shares represented thereby and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant
to Section 2.02(d) until the holder of record of such
Certificate shall surrender such Certificate. Subject to the
effect of unclaimed property, escheat and other applicable
laws, following surrender of any such Certificate, there shall
be paid to the record holder of the certificates representing
whole Company Shares issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of Company Common
Stock to which such holder is entitled pursuant to Section
2.02(d) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid
with respect to such whole Company Shares and (ii) at the
appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender
payable with respect to such whole Company Shares, as the case
may be.
(d) No Fractional Securities. Notwithstanding any
other provision of this Agreement, no certificates or scrip
representing fractional shares of Company Common Stock shall
be issued upon the surrender for exchange of Certificates and
such fractional shares shall not entitle the owner thereof to
vote or to any other rights of a holder of Company Common
Stock. Each holder of a fractional share interest shall be
paid an amount in cash representing such holder's
proportionate interest in the net proceeds from the sale by
the Exchange Agent on behalf of all such holders of the
aggregate of the fractions of shares of Company Common Stock
that would otherwise be issued to such holders ("EXCESS
SHARES"). The sale of the Excess Shares by the Exchange Agent
shall be executed on the New York Stock Exchange, Inc. (the
"NYSE") through one or more member firms of the NYSE and shall
be executed in round lots to the extent practicable. Until
the net proceeds of such sale or sales have been distributed
to the former holders of Pacific Common Stock and Enova Common
Stock, the Company will cause the Exchange Agent to hold such
proceeds in trust for the holders of such fractional share
interests (the "SHARES TRUST"). The Company shall pay all
commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of
the Exchange Agent, incurred in connection with such sale of
the Excess Shares. The Exchange Agent shall determine the
portion of the Shares Trust to which each former holder of
Pacific Common Stock or Enova Common Stock shall be entitled,
if any, by multiplying the amount of the aggregate net
proceeds comprising the Shares Trust by a fraction the
numerator of which is the amount of the fractional shares of
Company Common Stock to which such former holder of Pacific
Common Stock or Enova Common Stock is entitled and the
denominator of which is the aggregate amount of fractional
share interests to which all holders of Company Common Stock
are entitled. As soon as practicable after the determination
of the amount of cash, if any, to be paid to former holders of
Pacific Common Stock and Enova Common Stock in lieu of any
fractional shares of Company Common Stock interests, the
Exchange Agent shall make available such amounts to such
former holders of Pacific Common Stock and Enova Common Stock
without interest.
(e) Closing of Transfer Books. From and after the
Enova Effective Time or the Pacific Effective Time, as the
case may be, the stock transfer books of Enova and Pacific
shall be closed and no transfer of any capital stock of Enova
or Pacific shall thereafter be made. If, after the Effective
Time, Certificates are presented to the Company, they shall be
cancelled and exchanged for certificates representing the
appropriate Company Shares as provided in Section 2.02.
(f) Termination of Exchange Agent. Any
certificates representing Company Shares deposited with the
Exchange Agent pursuant to Section 2.02(a) and not exchanged
within one year after the Effective Time pursuant to this
Section 2.02 shall be returned by the Exchange Agent to the
Company, which shall thereafter act as Exchange Agent. All
funds held by the Exchange Agent for payment to the holders of
unsurrendered Certificates and unclaimed at the end of one
year from the Effective Time shall be returned to the Company,
after which time any holder of unsurrendered Certificates
shall look as a general creditor only to the Company for
payment of such funds to which such holder may be due, subject
to applicable law. The Company shall not be liable to any
person for such shares or funds delivered to a public official
pursuant to any applicable unclaimed property, escheat or
similar law.
SECTION 2.03. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of Pacific or Enova held
by a holder who has exercised dissenters' rights for such
shares in accordance with California Law and who, as of the
Effective Time, has not effectively withdrawn or lost such
dissenters' rights ("PACIFIC DISSENTING SHARES" or "ENOVA
DISSENTING SHARES", as the case may be, and collectively
"DISSENTING SHARES"), shall not be converted into or represent
a right to receive Company Common Stock in the Pacific Merger
(in the case of Pacific Dissenting Shares) or in the Enova
Merger (in the case of Enova Dissenting Shares), but the
holder thereof shall only be entitled to such rights as are
granted by California Law.
(b) Notwithstanding the provisions of
subsection (a), if any holder of Dissenting Shares shall
effectively withdraw or lose (through failure to perfect or
otherwise) his dissenters' rights, then, as of the later of
the Pacific Effective Time or the Enova Effective Time, as
applicable, or the occurrence of such event, such holder's
shares shall automatically be converted into and represent
only the right to receive the applicable Merger Consideration,
without interest thereon, upon surrender of the certificate or
certificates representing such Dissenting Shares.
(c) Enova shall give Pacific and Pacific shall give
Enova (i) prompt notice of any written demands received
pursuant to Section 1301 of California Law, withdrawals of
such demands, and any other instruments served pursuant to
California Law and received thereby and (ii) the opportunity
to participate in all negotiations and proceedings with
respect to such demands. Neither Pacific nor Enova shall,
except with the prior written consent of the other,
voluntarily make any payment with respect to any such demands
or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PACIFIC
Pacific represents and warrants to Enova as follows:
SECTION 3.01. Organization and Qualification.
Except as set forth in Section 3.01 of the Pacific Disclosure
Schedule, each of Pacific and its subsidiaries is a
corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, has all
requisite power and authority, and has been duly authorized by
all necessary approvals and orders, to own, lease and operate
its assets and properties and to carry on its business as it
is now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its
assets and properties makes such qualification necessary other
than in such jurisdictions where the failure to be so
qualified and in good standing will not, when taken together
with all other such failures, have a material adverse effect
on the operations, properties, assets, financial condition or
the results of operations of Pacific and its subsidiaries
taken as a whole or on the consummation of the transactions
contemplated by this Agreement (any such material adverse
effect being hereinafter referred to as a "PACIFIC MATERIAL
ADVERSE EFFECT") or a material adverse effect on the ability
of the Energy Marketing Joint Venture to achieve the business
objectives contemplated by the Summary of Terms attached as
Exhibit A (any such material adverse effect being hereinafter
referred to as a "JOINT VENTURE MATERIAL ADVERSE EFFECT").
SECTION 3.02. Subsidiaries. Section 3.02 of the
Pacific Disclosure Schedule sets forth a description as of the
date hereof of all subsidiaries and joint ventures of Pacific,
including the name of each such entity and Pacific's interest
therein, and, as to each subsidiary or joint venture
identified as a "Material Pacific Entity" in Section 3.02 of
the Pacific Disclosure Schedule, a brief description of the
principal line or lines of business conducted by each such
entity. Except as set forth in Section 3.02 of the Pacific
Disclosure Schedule, none of such entities is a "public
utility company", a "holding company", a "subsidiary company"
or an "affiliate" of any public utility company within the
meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of
the Public Utility Holding Company Act of 1935, as amended
(the "1935 ACT"), respectively, or a "public utility" within
the meaning of Section 201(e) of the Federal Power Act (the
"POWER ACT"). Except as set forth in Section 3.02 of the
Pacific Disclosure Schedule, all of the issued and outstanding
shares of capital stock of each subsidiary of Pacific are
validly issued, fully paid, nonassessable and free of
preemptive rights, are owned directly or indirectly by Pacific
free and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature
whatsoever ("ENCUMBRANCES") and there are no outstanding
subscriptions, options, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such subsidiary
to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating it
to grant, extend or enter into any such agreement or
commitment.
SECTION 3.03. Capitalization.
(a) Pacific. The authorized capital stock of
Pacific consists of (i) 600,000,000 shares of Pacific Common
Stock, (ii) 5,000,000 shares of Pacific Class A Preferred
Stock and (iii) 10,000,000 shares of Pacific Preferred Stock.
As of the close of business on September 30, 1996, there were
issued and outstanding (i) 85,034,885 shares of Pacific Common
Stock, (ii) no shares of Pacific Class A Preferred Stock and
(iii) 800,253 shares of Pacific Preferred Stock consisting of
300,000 shares of a series of $4.50 dividend preferred stock,
100,000 shares of a series of $4.40 dividend preferred stock,
200,000 shares of a series of $4.75 dividend preferred stock,
200,000 shares of a series of $4.36 dividend preferred stock
and 253 shares of a series of $4.75 dividend preferred stock
(convertible on or before October 31, 1996). All of the
issued and outstanding shares of the capital stock of Pacific
are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 3.03(a) of
the Pacific Disclosure Schedule, as of the date hereof, there
are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating Pacific or
any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of the capital
stock of Pacific or obligating Pacific or any of its
subsidiaries to grant, extend or enter into any such agreement
or commitment, other than under the Pacific Rights Agreement.
(b) Pacific Sub. The authorized capital stock of
Southern California Gas Company, a California corporation all
of whose issued and outstanding common stock is owned by
Pacific ("PACIFIC SUB"), consists of (i) 100,000,000 shares of
common stock, no par value (the "PACIFIC SUB COMMON STOCK"),
and (ii) shares of preferred and preference stock
(collectively the "PACIFIC SUB PREFERRED STOCK") consisting of
(A) 160,000 shares of Preferred Stock, par value $25 each (the
"PACIFIC SUB $25 PREFERRED"), (B) 840,000 shares of Preferred
Stock, Series A, par value $25 each (the "PACIFIC SUB SERIES A
PREFERRED"), (C) 5,000,000 shares of Series Preferred Stock,
no par value (the "PACIFIC SUB SERIES PREFERRED"), and
(D) 5,000,000 shares of Preference Stock (the "PACIFIC SUB
PREFERENCE STOCK"). As of the close of business on September
30, 1996, there were issued and outstanding 91,300,000 shares
of Pacific Sub Common Stock, 79,011 shares of Pacific Sub $25
Preferred, 783,036 shares of Pacific Sub Series A Preferred,
3,000,000 shares of Pacific Sub Series Preferred and no shares
of Pacific Sub Preference Stock. All of the issued and
outstanding shares of the capital stock of Pacific Sub are
validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 3.03(b) of
the Pacific Disclosure Schedule, as of the date hereof, there
are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating Pacific or
any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, the capital stock of Pacific Sub
or obligating Pacific or any of its subsidiaries to grant,
extend or enter into any such agreement or commitment.
SECTION 3.04. Authority; Non-Contravention;
Statutory Approvals; Compliance.
(a) Authority. Pacific has all requisite power and
authority to enter into this Agreement and the Energy
Marketing Joint Venture Agreement and, subject to the
applicable Pacific Shareholders' Approval and the applicable
Pacific Required Statutory Approvals, to consummate the
transactions contemplated hereby or thereby. The execution
and delivery of this Agreement and the Energy Marketing Joint
Venture Agreement and the consummation by Pacific of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of
Pacific, subject in the case of this Agreement to obtaining
the applicable Pacific Shareholders' Approval. This Agreement
has been, and the Energy Marketing Joint Venture Agreement
upon execution and delivery will be, duly and validly executed
and delivered by Pacific and, assuming the due authorization,
execution and delivery hereof and thereof by Enova, the
Company, Newco Enova Sub and Newco Pacific Sub, as the case
may be, constitutes or will constitute the valid and binding
obligation of Pacific enforceable against it in accordance
with its terms.
(b) Non-Contravention. Except as set forth in
Section 3.04(b) of the Pacific Disclosure Schedule, the
execution and delivery of this Agreement and the Energy
Marketing Joint Venture Agreement by Pacific do not, and the
consummation of the transactions contemplated hereby or
thereby will not (with or without notice or lapse of time or
both), violate, conflict with, or result in a breach of any
provision of, or constitute a default under, or result in the
termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or
acceleration of any obligation or the loss of a material
benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets (any such violation,
conflict, breach, default, right of termination, cancellation
or acceleration, loss or creation, a "VIOLATION") of Pacific
or any of its subsidiaries or joint ventures pursuant to any
provisions of (i) the articles of incorporation, by-laws or
similar governing documents of Pacific or any of its
subsidiaries or joint ventures, (ii) subject to obtaining the
Pacific Required Statutory Approvals and the receipt of the
Pacific Shareholders' Approval, any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any Governmental Authority applicable to
Pacific or any of its subsidiaries or joint ventures or any of
their respective properties or assets or (iii) subject to
obtaining the third-party consents set forth in Section
3.04(b) of the Pacific Disclosure Schedule (the "PACIFIC
REQUIRED CONSENTS"), any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind
to which Pacific or any of its subsidiaries or joint ventures
is now a party or by which it or any of its properties or
assets may be bound or affected, excluding from the foregoing
clauses (ii) and (iii) such Violations that would not, in the
aggregate, have a Pacific Material Adverse Effect or a Joint
Venture Material Adverse Effect.
(c) Statutory Approvals. Except as set forth in
Section 3.04(c) of the Pacific Disclosure Schedule, no
declaration, filing or registration with, or notice to or
authorization, consent or approval of, any court, governmental
or regulatory body (including a stock exchange or other
self-regulatory body) or authority, domestic or foreign (each,
a "GOVERNMENTAL AUTHORITY") is necessary for (i) the execution
and delivery of this Agreement or the Energy Marketing Joint
Venture Agreement by Pacific or the consummation by Pacific of
the transactions contemplated hereby or thereby, the failure
to obtain, make or give which would have, in the aggregate, a
Pacific Material Adverse Effect or a Joint Venture Material
Adverse Effect, and (ii) the execution and delivery of this
Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, the failure to obtain,
make or give which would have, in the aggregate, a material
adverse effect on the operations, properties, assets,
financial condition or the results of operations of the
Company and its prospective subsidiaries taken as a whole or
on the consummation of the transactions contemplated by this
Agreement (collectively, the "PACIFIC REQUIRED STATUTORY
APPROVALS", it being understood that references in this
Agreement to "obtaining" such Pacific Required Statutory
Approvals shall mean making such declarations, filings or
registrations; giving such notice; obtaining such consents or
approvals; and having such waiting periods expire as are
necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section
3.04(d) of the Pacific Disclosure Schedule or in Section 3.11
of the Pacific Disclosure Schedule, or as disclosed in the
Pacific SEC Reports, neither Pacific nor any of its
subsidiaries nor, to the knowledge of Pacific, any of its
joint ventures, is in violation of or is under investigation
with respect to, or has been given notice or been charged with
any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any
Governmental Authority, except for violations which, in the
aggregate do not, and could not reasonably be expected to,
have a Pacific Material Adverse Effect or a Joint Venture
Material Adverse Effect. Except as set forth in Section
3.04(d) of the Pacific Disclosure Schedule or in Section 3.11
of the Pacific Disclosure Schedule, Pacific and each of its
subsidiaries and joint ventures have all permits, licenses,
franchises and other governmental authorizations, consents and
approvals necessary to conduct their businesses as presently
conducted, except those which the failure to obtain would not,
in the aggregate, have a Pacific Material Adverse Effect or a
Joint Venture Material Adverse Effect.
SECTION 3.05. Reports and Financial Statements.
The filings required to be made by Pacific and its
subsidiaries under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), the California Public Utilities
Act, the Power Act, the Natural Gas Act (the "GAS ACT") or the
1935 Act have been filed with the Securities and Exchange
Commission (the "SEC"), the California Public Utilities
Commission (the "CPUC") or the Federal Energy Regulatory
Commission (the "FERC"), as the case may be, including all
forms, statements, reports, agreements (oral or written) and
all documents, exhibits, amendments and supplements
appertaining thereto, and Pacific has complied in all material
respects with all applicable requirements of the appropriate
act and the rules and regulations thereunder. Pacific has
made available to Enova a true and complete copy of each
report, schedule, registration statement and definitive proxy
statement filed by Pacific with the SEC since January 1, 1994
(as such documents have since the time of their filing been
amended, the "PACIFIC SEC REPORTS"). As of their respective
dates, the Pacific SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial
statements of Pacific included in the Pacific SEC Reports
(collectively, the "PACIFIC FINANCIAL STATEMENTS") have been
prepared in accordance with GAAP (except as may be indicated
therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and
fairly present the financial position of Pacific as of the
dates thereof and the results of its operations and cash flows
for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal, recurring
audit adjustments. True, accurate and complete copies of the
Articles of Incorporation and Bylaws of Pacific, as in effect
on the date hereof, have previously been made available to
Enova.
SECTION 3.06. Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities. (a) Except as set forth
in the Pacific SEC Reports or Section 3.06 of the Pacific
Disclosure Schedule, from January 1, 1996 through the date
hereof each of Pacific and its subsidiaries and joint ventures
has conducted its business only in the ordinary course of
business consistent with past practice and there has not been,
and no fact or condition exists which could reasonably be
expected to have, a Pacific Material Adverse Effect or a Joint
Venture Material Adverse Effect.
(b) Neither Pacific nor any of its subsidiaries has
any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be
reflected in a consolidated corporate balance sheet, except
liabilities, obligations or contingencies that are accrued or
reserved against in the consolidated financial statements of
Pacific or reflected in the notes thereto for the year ended
December 31, 1995, or which were incurred after December 31,
1995 in the ordinary course of business and would not, in the
aggregate, have a Pacific Material Adverse Effect or a Joint
Venture Material Adverse Effect.
SECTION 3.07. Litigation. Except as disclosed in
the Pacific SEC Reports or as set forth in Section 3.07 of the
Pacific Disclosure Schedule or in Section 3.11 of the Pacific
Disclosure Schedule, (i) there are as of the date hereof no
claims, suits, actions or proceedings, pending or, to the
knowledge of Pacific, threatened, nor are there, to the
knowledge of Pacific, any investigations or reviews pending or
threatened against, relating to or affecting Pacific or any of
its subsidiaries or joint ventures, (ii) there have not been
any developments since June 30, 1996 with respect to such
disclosed claims, suits, actions, proceedings, investigations
or reviews and (iii) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority
or any arbitrator applicable to Pacific or any of its
subsidiaries or joint ventures, which, when taken together
with any other nondisclosures described in clauses (i), (ii)
or (iii), could reasonably be expected to have a Pacific
Material Adverse Effect or a Joint Venture Material Adverse
Effect.
SECTION 3.08. Registration Statement and Proxy
Statement. None of the information supplied or to be supplied
by or on behalf of Pacific for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be
filed with the SEC by the Company in connection with the
issuance of shares of Company Common Stock in the Mergers (the
"REGISTRATION STATEMENT") will, at the time the Registration
Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the joint proxy
statement in definitive form relating to the meetings of
Pacific and Enova shareholders to be held in connection with
the Mergers (the "PROXY STATEMENT") will, at the date mailed
to shareholders of Pacific and Enova and at the times of the
meetings of shareholders to be held in connection with the
Mergers, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not
misleading. The Registration Statement and the Proxy
Statement will comply as to form in all material respects with
the provisions of the Securities Act and the Exchange Act,
respectively, and the rules and regulations thereunder.
SECTION 3.09. Tax Matters. "TAXES", as used in
this Agreement, means any U.S. federal, state, county, local
or foreign taxes, charges, fees, levies, or other assessments,
including, without limitation, all net income, gross income,
sales and use, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipt, capital
stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes or charges imposed by any
governmental entity, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes and any
expenses incurred in connection with the determination,
settlement or litigation of any Tax liability. "TAX RETURN",
as used in this Agreement, means a report, return or other
information required to be supplied to any governmental entity
with respect to Taxes including, where permitted or required,
combined or consolidated returns.
(a) Filing of Timely Tax Returns. Except as set
forth in Section 3.09(a) of the Pacific Disclosure Schedule,
Pacific and each of its subsidiaries have filed (or there has
been filed on their behalf) all Tax Returns required to be
filed by each of them under applicable law. All Tax Returns
were in all material respects (and, as to Tax Returns not
filed as of the date hereof, will be) true, complete and
correct and filed on a timely basis.
(b) Payment of Taxes. Pacific and each of its
subsidiaries have, within the time and in the manner
prescribed by law, paid (and until the Closing Date will pay
within the time and in the manner prescribed by law) all Taxes
that are currently due and payable except for those contested
in good faith and for which adequate reserves have been taken.
(c) Tax Reserves. Pacific and its subsidiaries
have established (and until the Closing Date will maintain) on
their books and records reserves adequate to pay all Taxes,
all deficiencies in Taxes asserted or proposed against Pacific
or its subsidiaries and reserves for deferred income taxes in
accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the
assets of Pacific or any of its subsidiaries except liens for
Taxes not yet due.
(e) Withholding Taxes. Pacific and each of its
subsidiaries have complied (and until the Closing Date will
comply) in all respects with the provisions of the Code
relating to the payment and withholding of Taxes, including,
without limitation, the withholding and reporting requirements
under Sections 1441 through 1464, 3401 through 3406, and 6041
and 6049 of the Code, as well as similar provisions under any
other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over
to the proper governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns.
Except as set forth in Section 3.09(f) of the Pacific
Disclosure Schedule, neither Pacific nor any of its
subsidiaries has requested any extension of time within which
to file any Tax Return, which Tax Return has not since been
filed.
(g) Waivers of Statute of Limitations. Except as
set forth in Section 3.09(g) of the Pacific Disclosure
Schedule, neither Pacific nor any of its subsidiaries has
executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except
as set forth in Section 3.09(h) of the Pacific Disclosure
Schedule, the statute of limitations for the assessment of all
federal income and California franchise Taxes has expired for
all related Tax Returns of Pacific and each of its
subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any such Taxes has been
proposed, asserted or assessed against Pacific or any of its
subsidiaries that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings.
Except as set forth in Section 3.09(i) of the Pacific
Disclosure Schedule, no audits or other administrative
proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Pacific or any of its
subsidiaries, and neither Pacific nor any of its subsidiaries
has any knowledge of any threatened action, audit or
administrative or court proceeding with respect to any such
Taxes or Tax Returns.
(j) Powers of Attorney. Except as set forth in
Section 3.09(j) of the Pacific Disclosure Schedule, no power
of attorney currently in force has been granted by Pacific or
any of its subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as set forth in Section
3.09(k) of the Pacific Disclosure Schedule, neither Pacific
nor any of its subsidiaries has received a Tax Ruling or
entered into a Closing Agreement with any taxing authority
that would have a continuing adverse effect after the Closing
Date. "TAX RULING", as used in this Agreement, shall mean a
written ruling of a taxing authority relating to Taxes.
"CLOSING AGREEMENT", as used in this Agreement, shall mean a
written and legally binding agreement with a taxing authority
relating to Taxes.
(l) Availability of Tax Returns. Pacific and its
subsidiaries have made available to Enova complete and
accurate copies of (i) all Tax Returns, and any amendments
thereto, filed by Pacific or any of its subsidiaries, (ii) all
audit reports received from any taxing authority relating to
any Tax Return filed by Pacific or any of its subsidiaries and
(iii) any Closing Agreements entered into by Pacific or any of
its subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Except as set forth in
Section 3.09(m) of the Pacific Disclosure Schedule, no
agreements relating to allocating or sharing of Taxes exist
between or among Pacific and any of its subsidiaries.
(n) Code Section 341(f). Neither Pacific nor any
of its subsidiaries has filed (or will file prior to the
Closing) a consent pursuant to Section 341(f) of the Code or
has agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as that term is defined
in Section 341(f)(4) of the Code) owned by Pacific or any of
its subsidiaries.
(o) Code Section 168. No property of Pacific or
any of its subsidiaries is property that Pacific or any such
subsidiary or any party to this transaction is or will be
required to treat as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Code (as in effect
prior to its amendment by the Tax Reform Act of 1986) or is
"tax-exempt use property" within the meaning of Section 168 of
the Code.
(p) Code Section 481 Adjustments. Except as set
forth in Section 3.09(p) of the Pacific Disclosure Schedule
and except for adjustments that in the aggregate could not
reasonably be expected to have a Pacific Material Adverse
Effect, neither Pacific nor any of its subsidiaries is
required to include in income any adjustment pursuant to
Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by Pacific or any of its
subsidiaries, and to the best of the knowledge of Pacific, the
Internal Revenue Service (the "IRS") has not proposed any such
adjustment or change in accounting method.
(q) Code Sections 6661 and 6662. All transactions
that could give rise to an understatement of federal income
tax (within the meaning of Section 6661 of the Code for Tax
Returns the due date for which was on or before December 31,
1989 and within the meaning of Section 6662 of the Code for
Tax Returns the due date for which was after December 31,
1989) that could reasonably be expected to result in a Pacific
Material Adverse Effect have been adequately disclosed (or,
with respect to Tax Returns filed following the Closing, will
be adequately disclosed) on the Tax Returns of Pacific and its
subsidiaries in accordance with Section 6661(b)(2)(B) of the
Code for Tax Returns the due date for which was on or before
to December 31, 1989, and in accordance with Section
6662(d)(2)(B) of the Code for Tax Returns the due date for
which was after December 31, 1989.
(r) NOLs. As of the date hereof, Pacific and its
subsidiaries had net operating loss carryovers available to
offset future income as set forth in Section 3.09(r) of the
Pacific Disclosure Schedule. Section 3.09(r) of the Pacific
Disclosure Schedule sets forth the amount of and year of
expiration of each company's net operating loss carryovers.
(s) Credit Carryover. As of the date hereof,
Pacific and its subsidiaries had tax credit carryovers
available to offset future tax liability as set forth in
Section 3.09(s) of the Pacific Disclosure Schedule. Section
3.09(s) of the Pacific Disclosure Schedule sets forth the
amount and year of expiration of each company's tax credit
carryovers.
(t) Code Section 338 Elections. Except as set
forth in Section 3.09(t) of the Pacific Disclosure Schedule,
no election under Section 338 of the Code (or any predecessor
provision) has been made by or with respect to Pacific or any
of its subsidiaries or any of their respective assets or
properties.
(u) Acquisition Indebtedness. Except as set forth
in Section 3.09(u) of the Pacific Disclosure Schedule, no
indebtedness of Pacific or any of its subsidiaries is
"corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.
(v) Intercompany Transactions. Except as set forth
in Section 3.09(v) of the Pacific Disclosure Schedule, neither
Pacific nor any of its subsidiaries has engaged in any
intercompany transactions within the meaning of Section
1.1502-13 of the Treasury Regulations for which any income
remains unrecognized as of the close of the last taxable year
prior to the Closing Date.
(w) Code Section 280G. Except as set forth in
Section 3.09(w) of the Pacific Disclosure Schedule, neither
Pacific nor any of its subsidiaries is a party to any
agreement, contract, or arrangement that could result, on
account of the transactions contemplated hereunder, separately
or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
SECTION 3.10. Employee Matters; ERISA.
(a) Benefit Plans. Section 3.10(a) of the Pacific
Disclosure Schedule contains a true and complete list of each
material employee benefit plan, program or arrangement
currently sponsored, maintained or contributed to by Pacific
or any of its subsidiaries for the benefit of employees,
former employees or directors and their beneficiaries in
respect of services provided to any such entity, including,
but not limited to, any employee benefit plans within the
meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any material
employment, consulting, non-compete, severance or change in
control agreement (collectively, the "PACIFIC BENEFIT PLANS").
For the purposes of this Section 3.10 only, the term "Pacific"
shall be deemed to include predecessors thereof.
(b) Contributions. Except as set forth in Section
3.10(b) of the Pacific Disclosure Schedule, all material
contributions and other payments required to be made by
Pacific or any of its subsidiaries to any Pacific Benefit Plan
(or to any person pursuant to the terms thereof) have been
made or the amount of such payment or contribution obligation
has been reflected in the Pacific Financial Statements.
(c) Qualification; Compliance. Except as set forth
in Section 3.10(c) of the Pacific Disclosure Schedule, each of
the Pacific Benefit Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified, and, to the best knowledge of
Pacific, no circumstances exist that are reasonably expected
by Pacific to result in the revocation of any such
determination. Pacific is in compliance in all material
respects with, and each Pacific Benefit Plan is and has been
operated in all material respects in compliance with, all
applicable laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code. Each
Pacific Benefit Plan intended to provide for the deferral of
income, the reduction of salary or other compensation, or to
afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code or other
laws, rules and regulations required to provide such income
tax benefits.
(d) Liabilities. With respect to the Pacific
Benefit Plans individually and in the aggregate, no event has
occurred, and, to the best knowledge of Pacific, there exists
no condition or set of circumstances that could subject
Pacific or any of its subsidiaries to any liability arising
under the Code, ERISA or any other applicable law (including,
without limitation, any liability to any such plan or the
Pension Benefit Guaranty Corporation (the "PBGC")), or under
any indemnity agreement to which Pacific is a party, which
liability, excluding liability for benefit claims or PBGC
premiums and funding obligations payable in the ordinary
course, could reasonably be expected to have a Pacific
Material Adverse Effect.
(e) Welfare Plans. Except as set forth in Section
3.10(e) of the Pacific Disclosure Schedule, none of the
Pacific Benefit Plans that are "welfare plans", within the
meaning of Section 3(1) of ERISA, provides for any retiree
benefits other than coverage mandated by applicable law or
benefits the full cost of which is borne by the retiree.
(f) Documents Made Available. Pacific has made
available to Enova a true and correct copy of each collective
bargaining agreement to which Pacific or any of its
subsidiaries is a party or under which Pacific or any of its
subsidiaries has obligations and, with respect to each Pacific
Benefit Plan, (i) such plan and summary plan description, (ii)
the most recent annual report filed with the IRS, (iii) each
related trust agreement, insurance contract, service provider
or investment management agreement (including all amendments
to each such document), (iv) the most recent determination of
the IRS with respect to the qualified status of such plan and
(v) the most recent actuarial report or valuation.
(g) Payments Resulting from Mergers. Except as set
forth in Section 3.10(g) of the Pacific Disclosure Schedule or
specifically provided for herein, neither Pacific nor any of
its subsidiaries is a party to any plan, agreement or
arrangement pursuant to the terms of which the consummation or
announcement of any transaction contemplated by this Agreement
will (either alone or in connection with the occurrence of any
additional or further acts or events) result in any (A)
payment (whether of severance pay or otherwise) becoming due
from Pacific or any of its subsidiaries to any officer,
employee, former employee or director thereof or to a trustee
under any "rabbi trust" or similar arrangement, or (B) benefit
under any Pacific Benefit Plan being established or becoming
accelerated, or immediately vested or payable.
(h) Labor Agreements. As of the date hereof,
except as set forth in Section 3.10(h) of the Pacific
Disclosure Schedule, neither Pacific nor any of its
subsidiaries is a party to any collective bargaining agreement
or other labor agreement with any union or labor organization.
To the best knowledge of Pacific, as of the date hereof,
except as set forth in Section 3.10(h) of the Pacific
Disclosure Schedule, there is no current union representation
question involving employees of Pacific or any of its
subsidiaries, nor does Pacific know of any activity or
proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees.
Except as set forth in the Pacific SEC Reports or in Section
3.10(h) of the Pacific Disclosure Schedule, (i) there is no
unfair labor practice, employment discrimination or other
complaint against Pacific pending, or to the best knowledge of
Pacific, threatened, which has or could reasonably be expected
to have, a Pacific Material Adverse Effect, (ii) there is no
strike, dispute, slowdown, work stoppage or lockout pending,
or to the best knowledge of Pacific, threatened, against or
involving Pacific or any of its subsidiaries which has or
could reasonably be expected to have a Pacific Material
Adverse Effect and (iii) there is no proceeding, claim, suit,
action or governmental investigation pending or, to the best
knowledge of Pacific, threatened, in respect of which any
director, officer, employee or agent of Pacific or any of its
subsidiaries is or may be entitled to claim indemnification
from Pacific pursuant to their respective articles of
incorporation or bylaws or as provided in the Indemnification
Agreements listed in Section 3.10(h) of the Pacific Disclosure
Schedule.
SECTION 3.11. Environmental Protection.
(a) Compliance. Except as set forth in the Pacific
SEC Reports, except as set forth in Section 3.11(a) of the
Pacific Disclosure Schedule and except where the failure to be
in compliance could not reasonably be expected to have a
Pacific Material Adverse Effect, (i) each of Pacific and its
subsidiaries is in compliance with all applicable
Environmental Laws and (ii) neither Pacific nor any of its
subsidiaries has received any written communication, from any
person or Governmental Authority that alleges that Pacific or
any of its subsidiaries is not in such compliance with
applicable Environmental Laws.
(b) Environmental Permits. Except as set forth in
the Pacific SEC Reports or as set forth in Section 3.11(b) of
the Pacific Disclosure Schedule, each of Pacific and its
subsidiaries has obtained or has applied for all
environmental, health and safety permits and governmental
authorizations (collectively, the "ENVIRONMENTAL PERMITS")
necessary for the construction of their facilities or the
conduct of their operations, and all such permits are in good
standing or, where applicable, a renewal application has been
timely filed and is pending agency approval, and Pacific and
its subsidiaries are in material compliance with all terms and
conditions of the Environmental Permits, except where the
failure to obtain or be in compliance with such Environmental
Permit could not reasonably be expected to have a Pacific
Material Adverse Effect.
(c) Environmental Claims. Except as set forth in
the Pacific SEC Reports or as set forth in Section 3.11(c) of
the Pacific Disclosure Schedule, to the best knowledge of
Pacific, there is no Environmental Claim pending (i) against
Pacific or any of its subsidiaries or joint ventures, (ii)
against any person or entity whose liability for any
Environmental Claim Pacific or any of its subsidiaries or
joint ventures has retained or assumed contractually or (iii)
against any real or personal property or operations which
Pacific or any of its subsidiaries or joint ventures owns,
leases or manages, in whole or in part, which, if adversely
determined, could reasonably be expected to have, in the
aggregate, a Pacific Material Adverse Effect.
(d) Releases. Except as set forth in the Pacific
SEC Reports or as set forth in Section 3.11(c) or Section
3.11(d) of the Pacific Disclosure Schedule, Pacific has no
knowledge of any Releases of any Hazardous Material that would
be reasonably likely to form the basis of any Environmental
Claim against Pacific or any of its subsidiaries or joint
ventures, or against any person or entity whose liability for
any Environmental Claim Pacific or any of its subsidiaries or
joint ventures has retained or assumed contractually, which
could reasonably be expected to have, in the aggregate, a
Pacific Material Adverse Effect.
(e) Predecessors. Except as set forth in the
Pacific SEC Reports or as set forth in Section 3.11(e) of the
Pacific Disclosure Schedule, Pacific has no knowledge, with
respect to any predecessor of Pacific or any subsidiary or
joint venture of Pacific, of any Environmental Claim pending
or threatened, or of any Release of Hazardous Materials that
would be reasonably likely to form the basis of any
Environmental Claim, which could reasonably be expected to
have a Pacific Material Adverse Effect.
(f) Disclosure. To Pacific's best knowledge,
Pacific has disclosed to Enova all material facts which
Pacific reasonably believes form the basis of a Pacific
Material Adverse Effect arising from (i) the cost of Pacific
pollution control equipment currently required or known to be
required in the future; (ii) current Pacific remediation costs
or Pacific remediation costs known to be required in the
future; or (iii) any other environmental matter affecting
Pacific.
(g) Cost Estimates. To Pacific's best knowledge,
no environmental matter set forth in the Pacific SEC Reports
or the Pacific Disclosure Schedule could reasonably be
expected to exceed the cost estimates provided in the Pacific
SEC Reports by an amount that individually or in the aggregate
could reasonably be expected to have a Pacific Material
Adverse Effect.
(h) Certain Definitions. As used in this
Agreement:
(i) "ENVIRONMENTAL CLAIM" means any and all
written administrative, regulatory or judicial actions,
suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of
noncompliance or violation by any person or entity
(including any Governmental Authority) alleging potential
liability (including, without limitation, potential
liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of,
based on or resulting from (A) the presence, or Release
or threatened Release into the environment, of any
Hazardous Materials at any location, whether or not
owned, operated, leased or managed by Pacific or any of
its subsidiaries or joint ventures (for purposes of this
Section 3.11), or by Enova or any of its subsidiaries or
joint ventures (for purposes of Section 4.11); (B)
circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or (C) any
and all claims by any third party seeking damages,
contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the
presence or Release of any Hazardous Materials.
(ii) "ENVIRONMENTAL LAWS" means all federal,
state, local laws, rules and regulations relating to
pollution or protection of human health or the
environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws and
regulations relating to Releases or threatened Releases
of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous
Materials.
(iii) "HAZARDOUS MATERIALS" means (A) any
petroleum or petroleum products, radioactive materials,
asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, and transformers or
other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBS"); (B) any chemicals,
materials or substances which are now defined as or
included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar
import, under any Environmental Law; and (C) any other
chemical, material, substance or waste, exposure to which
is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which Pacific or
any of its subsidiaries or joint ventures operates (for
purposes of this Section 3.11) or in which Enova or any
of its subsidiaries or joint ventures operates (for
purposes of Section 4.11).
(iv) "RELEASE" means any release, spill,
emission, leaking, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
SECTION 3.12. Regulation as a Utility. Pacific Sub
is regulated as a public utility by the State of California
and by no other state. Except as set forth in Section 3.12 of
the Pacific Disclosure Schedule, neither Pacific nor any
"subsidiary company" or "affiliate" of Pacific is subject to
regulation as a public utility or public service company (or
similar designation) by any other state in the United States
or any foreign country. As used in this Section 3.12 and in
Section 4.12, the terms "SUBSIDIARY COMPANY" and "AFFILIATE"
shall have the respective meanings ascribed to them in the
1935 Act. Pacific is an exempt holding company under Section
3(a)(1) of the 1935 Act. Section 3.12 of the Pacific
Disclosure Schedule sets forth each "affiliate" and each
"subsidiary company" of Pacific which may be deemed to be a
"public utility company" or a "holding company" within the
meaning of the 1935 Act.
SECTION 3.13. Vote Required. The approval of the
Pacific Merger by the affirmative vote of (i) a majority of
the votes entitled to be cast by all holders of Pacific Common
Stock and (ii) a majority of the votes entitled to be cast by
all holders of Pacific Common Stock and Pacific Preferred
Stock, voting together as a single class (the "PACIFIC
SHAREHOLDERS' APPROVAL"), are the only votes of the holders of
any class or series of the capital stock of Pacific required
to approve this Agreement, the Mergers and the other
transactions contemplated hereby. No vote of shareholders of
Pacific is required to approve the Energy Marketing Joint
Venture Agreement.
SECTION 3.14. Accounting Matters. Neither Pacific
nor, to its best knowledge, any of its affiliates has taken or
agreed to take any action that would prevent the Company from
accounting for the transactions to be effected pursuant to
Articles I and II of this Agreement as a pooling of interests
in accordance with GAAP and applicable SEC regulations.
SECTION 3.15. Opinions of Financial Advisors.
Pacific has received the opinion of each of Barr Devlin & Co.
Incorporated ("BARR DEVLIN") and Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MERRILL LYNCH"), dated October 11,
1996, to the effect that, as of such date, the Pacific Ratio
is fair from a financial point of view to the holders of
Pacific Common Stock.
SECTION 3.16. Insurance. Except as set forth on
Section 3.16 of the Pacific Disclosure Schedule, each of
Pacific and its subsidiaries is, and has been continuously
since January 1, 1993, insured with financially responsible
insurers in such amounts and against such risks and losses as
are customary for companies conducting the business as
conducted by Pacific and its subsidiaries during such time
period. Except as set forth on Schedule 3.16 of the Pacific
Disclosure Schedule, neither Pacific nor its subsidiaries has
received any notice of cancellation or termination with
respect to any material insurance policy of Pacific or its
subsidiaries. The insurance policies of Pacific and each of
its subsidiaries are valid and enforceable policies in all
material respects.
SECTION 3.17. Pacific Rights Agreement. Pacific
has delivered to Enova a true and complete copy of the Pacific
Rights Agreement as in effect on the date hereof. Pacific has
taken all necessary action to amend the Pacific Rights
Agreement so that neither the execution of this Agreement nor
the consummation of the Mergers will (a) cause the Pacific
Rights to become exercisable, (b) cause Enova or the Company
to become an Acquiring Person (as such term is defined in the
Pacific Rights Agreement) or (c) give rise to a Distribution
Date, a Stock Acquisition Date, a Section 7(a)(iii) Event or a
Section 13 Event (as each term is defined in the Pacific
Rights Agreement).
SECTION 3.18. Brokers. No broker, finder or
investment banker (other than Barr Devlin and Merrill Lynch)
is entitled to any brokerage, finder's or other fee or
commission in connection with the Mergers based upon
arrangements made by or on behalf of Pacific. Pacific has
heretofore furnished to Enova a complete and correct copy of
all agreements between Pacific and Merrill Lynch or Barr
Devlin pursuant to which such firm would be entitled to any
payment relating to the Mergers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ENOVA
Enova represents and warrants to Pacific as follows:
SECTION 4.01. Organization and Qualification. Each
of Enova and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its
state of incorporation, has all requisite power and authority,
and has been duly authorized by all necessary approvals and
orders, to own, lease and operate its assets and properties
and to carry on its business as it is now being conducted, and
is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such
qualification necessary other than in such jurisdictions where
the failure to be so qualified and in good standing will not,
when taken together with all other such failures, have a
material adverse effect on the operations, properties, assets,
financial condition or the results of operations of Enova and
its subsidiaries taken as a whole or on the consummation of
the transactions contemplated by this Agreement (any such
material adverse effect being hereinafter referred to as a
"ENOVA MATERIAL ADVERSE EFFECT") or a Joint Venture Material
Adverse Effect.
SECTION 4.02. Subsidiaries. Section 4.02 of the
Enova Disclosure Schedule sets forth a description as of the
date hereof of all subsidiaries and joint ventures of Enova,
including the name of each such entity and Enova's interest
therein, and, as to each subsidiary or joint venture
identified as a "Material Enova Entity" in Section 4.02 of the
Enova Disclosure Schedule, a brief description of the
principal line or lines of business conducted by each such
entity. Except as set forth in Section 4.02 of the Enova
Disclosure Schedule, none of such entities is a "public
utility company", a "holding company", a "subsidiary company"
or an "affiliate" of any public-utility company within the
meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of
the 1935 Act, respectively, or a "public utility" within the
meaning of Section 201(e) of the Power Act. Except as set
forth in Section 4.02 of the Enova Disclosure Schedule, all of
the issued and outstanding shares of capital stock of each
subsidiary of Enova are validly issued, fully paid,
nonassessable and free of preemptive rights, are owned
directly or indirectly by Enova free and clear of any
Encumbrances and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating it to grant, extend
or enter into any such agreement or commitment.
SECTION 4.03. Capitalization.
(a) Enova. The authorized capital stock of Enova
consists of 300,000,000 shares of Enova Common Stock and
30,000,000 shares of Preferred Stock, no par value, of Enova
("ENOVA PREFERRED STOCK"). As of the close of business on
September 30, 1996, (i) 116,583,358 shares of Enova Common
Stock and (ii) no shares of Enova Preferred Stock were issued
and outstanding. All of the issued and outstanding shares of
the capital stock of Enova are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set
forth in Section 4.03(a) of the Enova Disclosure Schedule, as
of the date hereof, there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or other
agreement, obligating Enova or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of Enova or
obligating Enova or any of its subsidiaries to grant, extend
or enter into any such agreement or commitment.
(b) Enova Sub. The authorized capital stock of
Enova Sub consists of (i) 255,000,000 shares of common stock,
no par value, of Enova Sub ("ENOVA SUB COMMON STOCK"), (ii)
1,375,000 shares of preferred stock, par value $20 per share,
of Enova Sub (the "ENOVA SUB PAR VALUE $20 PREFERRED STOCK"),
and (iii) 10,000,000 shares of preference stock, no par value,
of Enova Sub (the "ENOVA SUB NO PAR PREFERENCE STOCK"). As of
the close of business on September 30, 1996, there were issued
and outstanding (i) 116,583,358 shares of Enova Sub Common
Stock, (ii) 1,373,770 shares of Enova Sub Par Value $20
Preferred Stock consisting of 375,000 shares of the 5% Series,
300,000 shares of the 4.50% Series, 325,000 shares of the
4.40% Series and 373,770 shares of the 4.60% Series, 1995, and
(iii) 3,190,000 shares of Enova Sub No Par Preference Stock
consisting of 150,000 shares of the $7.20 Series, 1,400,000
shares of the $1.70 Series, 640,000 shares of the $1.82 Series
and 1,000,000 shares of the $1.7625 Series. All of the issued
and outstanding shares of the capital stock of Enova Sub are
validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 4.03(b) of
the Enova Disclosure Schedule, as of the date hereof, there
are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating Enova or
any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, the capital stock of Enova Sub
or obligating Enova or any of its subsidiaries to grant,
extend or enter into any such agreement or commitment.
SECTION 4.04. Authority; Non-Contravention;
Statutory Approvals; Compliance.
(a) Authority. Enova has all requisite power and
authority to enter into this Agreement and the Energy
Marketing Joint Venture Agreement and, subject to the
applicable Enova Shareholders' Approval and the applicable
Enova Required Statutory Approvals, to consummate the
transactions contemplated hereby or thereby. The execution
and delivery of this Agreement and the Energy Marketing Joint
Venture Agreement and the consummation by Enova of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of
Enova, subject in the case of this Agreement to obtaining of
the applicable Enova Shareholders' Approval. This Agreement
has been, and the Energy Marketing Joint Venture Agreement
upon execution and delivery will be, duly and validly executed
and delivered by Enova and, assuming the due authorization,
execution and delivery hereof and thereof by Pacific, the
Company, Newco Enova Sub and Newco Pacific Sub, as the case
may be, constitutes or will constitute the valid and binding
obligation of Enova enforceable against it in accordance with
its terms.
(b) Non-Contravention. Except as set forth in
Section 4.04(b) of the Enova Disclosure Schedule, the
execution and delivery of this Agreement and the Energy
Marketing Joint Venture Agreement by Enova do not, and the
consummation of the transactions contemplated hereby or
thereby will not (with or without notice or lapse of time or
both), violate, conflict with, or result in a breach of any
provision of, or constitute a default under, or result in any
Violation by Enova or any of its subsidiaries or joint
ventures pursuant to any provisions of (i) the articles of
incorporation or by-laws or similar governing documents of
Enova or any of its subsidiaries or joint ventures, (ii)
subject to obtaining the Enova Required Statutory Approvals
and the receipt of the Enova Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental
Authority applicable to Enova or any of its subsidiaries or
joint ventures or any of their respective properties or
assets, or (iii) subject to obtaining the third-party consents
set forth in Section 4.04(b) of the Enova Disclosure Schedule
(the "ENOVA REQUIRED CONSENTS"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or
agreement of any kind to which Enova or any of its
subsidiaries or joint ventures is now a party or by which it
or any of its properties or assets may be bound or affected,
excluding from the foregoing clauses (ii) and (iii) such
Violations that would not, in the aggregate, have a Enova
Material Adverse Effect or a Joint Venture Material Adverse
Effect.
(c) Statutory Approvals. Except as set forth in
Section 4.04(c) of the Enova Disclosure Schedule, no
declaration, filing or registration with, or notice to or
authorization, consent or approval of, any Governmental
Authority is necessary for (i) the execution and delivery of
this Agreement or the Energy Marketing Joint Venture Agreement
by Enova or the consummation by Enova of the transactions
contemplated hereby or thereby, the failure to obtain, make or
give which would have, in the aggregate, a Enova Material
Adverse Effect or a Joint Venture Material Adverse Effect, and
(ii) the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby, the failure to obtain, make or give which
would have, in the aggregate, a material adverse effect on the
operations, properties, assets, financial condition or the
results of operations of the Company and its prospective
subsidiaries taken as a whole or on the consummation of the
transactions contemplated by this Agreement (collectively, the
"ENOVA REQUIRED STATUTORY APPROVALS", it being understood that
references in this Agreement to "obtaining" such Enova
Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notice;
obtaining such consents or approvals; and having such waiting
periods expire as are necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section
4.04(d) of the Enova Disclosure Schedule or in Section 4.11 of
the Enova Disclosure Schedule or as disclosed in the Enova SEC
Reports, neither Enova nor any of its subsidiaries nor, to the
knowledge of Enova, any of its joint ventures, is in violation
of or is under investigation with respect to or has been given
notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable environmental
law, ordinance or regulation) of any Governmental Authority,
except for violations which, in the aggregate do not, and
could not reasonably be expected to have a Enova Material
Adverse Effect or a Joint Venture Material Adverse Effect.
Except as set forth in Section 4.04(d) of the Enova Disclosure
Schedule or in Section 4.11 of the Enova Disclosure Schedule,
Enova and each of its subsidiaries and joint ventures have all
permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct
their businesses as presently conducted, except those which
the failure to obtain would not, in the aggregate, have a
Enova Material Adverse Effect or a Joint Venture Material
Adverse Effect.
SECTION 4.05. Reports and Financial Statements.
The filings required to be made by Enova and its subsidiaries
under the Securities Act, the Exchange Act, the California
Public Utilities Act, the Power Act, the Gas Act, the Atomic
Energy Act of 1954, as amended (the "ATOMIC ENERGY ACT"), or
the 1935 Act have been filed with the SEC, the CPUC, the
Nuclear Regulatory Commission (the "NRC") or the FERC, as the
case may be, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, and Enova has
complied in all material respects with all applicable
requirements of the appropriate act and the rules and
regulations thereunder. Enova has made available to Pacific a
true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Enova with
the SEC since January 1, 1994 (as such documents have since
the time of their filing been amended, the "ENOVA SEC
REPORTS"). As of their respective dates, the Enova SEC
Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and
unaudited interim financial statements of Enova included in
the Enova SEC Reports (collectively, the "ENOVA FINANCIAL
STATEMENTS") have been prepared in accordance with GAAP
(except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted
by Form 10-Q of the SEC) and fairly present the financial
position of Enova as of the dates thereof and the results of
its operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial
statements, to normal recurring audit adjustments. True,
accurate and complete copies of the Articles of Incorporation
and Bylaws of Enova as in effect on the date hereof, are
included (or incorporated by reference) in the Enova SEC
Reports.
SECTION 4.06. Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities. (a) Except as set forth
in the Enova SEC Reports or Section 4.06 of the Enova
Disclosure Schedule, from January 1, 1996 through the date
hereof each of Enova and its subsidiaries and joint ventures
has conducted its business only in the ordinary course of
business consistent with past practice and there has not been,
and no fact or condition exists which could reasonably be
expected to have, a Enova Material Adverse Effect or a Joint
Venture Material Adverse Effect.
(b) Neither Enova nor any of its subsidiaries has
any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be
reflected in a consolidated corporate balance sheet, except
liabilities, obligations or contingencies that are accrued or
reserved against in the consolidated financial statements of
Enova or reflected in the notes thereto for the year ended
December 31, 1995, or which were incurred after December 31,
1995 in the ordinary course of business and would not, in the
aggregate, have a Enova Material Adverse Effect or a Joint
Venture Material Adverse Effect.
SECTION 4.07. Litigation. Except as disclosed in
the Enova SEC Reports or as set forth in Section 4.11 of the
Enova Disclosure Schedule or in Section 4.07 of the Enova
Disclosure Schedule, (i) there are as of the date hereof no
claims, suits, actions or proceedings, pending or, to the
knowledge of Enova, threatened, nor are there, to the
knowledge of Enova, any investigations or reviews pending or
threatened against, relating to or affecting Enova or any of
its subsidiaries or joint ventures, (ii) there have not been
any developments since June 30, 1996 with respect to such
disclosed claims, suits, actions, proceedings, investigations
or reviews and (iii) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority
or any arbitrator applicable to Enova or any of its
subsidiaries or joint ventures, which, when taken together
with any other nondisclosures described in clause (i), (ii) or
(iii), could reasonably be expected to have a Enova Material
Adverse Effect or a Joint Venture Material Adverse Effect
.
SECTION 4.08. Registration Statement and Proxy
Statement. None of the information supplied or to be supplied
by or on behalf of Enova for inclusion or incorporation by
reference in (i) the Registration Statement will, at the time
the Registration Statement is filed with the SEC and at the
time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading and (ii) the Proxy
Statement will, at the date mailed to shareholders of Pacific
and Enova and at the times of the meetings of such
shareholders to be held in connection with the Mergers,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
The Registration Statement and the Proxy Statement will comply
as to form in all material respects with the provisions of the
Securities Act and the Exchange Act, respectively, and the
rules and regulations thereunder.
SECTION 4.09. Tax Matters.
(a) Filing of Timely Tax Returns. Enova and each
of its subsidiaries have filed (or there has been filed on
their behalf) all Tax Returns required to be filed by each of
them under applicable law. All Tax Returns were in all
material respects (and, as to Tax Returns not filed as of the
date hereof, will be) true, complete and correct and filed on
a timely basis.
(b) Payment of Taxes. Enova and each of its
subsidiaries have, within the time and in the manner
prescribed by law, paid (and until the Closing Date will pay
within the time and in the manner prescribed by law) all Taxes
that are currently due and payable except for those contested
in good faith and for which adequate reserves have been taken.
(c) Tax Reserves. Enova and its subsidiaries have
established (and until the Closing Date will maintain) on
their books and records reserves adequate to pay all Taxes,
all deficiencies in Taxes asserted or proposed against Enova
or its subsidiaries and reserves for deferred income taxes in
accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the
assets of Enova or any of its subsidiaries except liens for
Taxes not yet due.
(e) Withholding Taxes. Enova and each of its
subsidiaries have complied (and until the Closing Date will
comply) in all respects with the provisions of the Code
relating to the payment and withholding of Taxes, including,
without limitation, the withholding and reporting requirements
under Sections 1441 through 1464, 3401 through 3406, and 6041
and 6049 of the Code, as well as similar provisions under any
other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over
to the proper governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns.
Except as set forth in Section 4.09(f) of the Enova Disclosure
Schedule, neither Enova nor any of its subsidiaries has
requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as
set forth in Section 4.09(g) of the Enova Disclosure Schedule,
neither Enova nor any of its subsidiaries has executed any
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except
as set forth in Section 4.09(h) of the Enova Disclosure
Schedule, the statute of limitations for the assessment of all
federal income and California franchise Taxes has expired for
all related Tax Returns of Enova and each of its subsidiaries
or those Tax Returns have been examined by the appropriate
taxing authorities for all periods through the date hereof,
and no deficiency for any such Taxes has been proposed,
asserted or assessed against Enova or any of its subsidiaries
that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings.
Except as set forth in Section 4.09(i) of the Enova Disclosure
Schedule, no audits or other administrative proceedings or
court proceedings are presently pending with regard to any
Taxes or Tax Returns of Enova or any of its subsidiaries, and
neither Enova nor any of its subsidiaries has any knowledge of
any threatened action, audit or administrative or court
proceeding with respect to any such Taxes or Tax Returns.
(j) Powers of Attorney. Except as set forth in
Section 4.09(j) of the Enova Disclosure Schedule, no power of
attorney currently in force has been granted by Enova or any
of its subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as set forth in Section
4.09(k) of the Enova Disclosure Schedule, neither Enova nor
any of its subsidiaries has received a Tax Ruling or entered
into a Closing Agreement with any taxing authority that would
have a continuing adverse effect after the Closing Date.
(l) Availability of Tax Returns. Enova and its
subsidiaries have made available to Pacific complete and
accurate copies of (i) all Tax Returns, and any amendments
thereto, filed by Enova or any of its subsidiaries, (ii) all
audit reports received from any taxing authority relating to
any Tax Return filed by Enova or any of its subsidiaries and
(iii) any Closing Agreements entered into by Enova or any of
its subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Except as set forth in
Section 4.09(m) of the Enova Disclosure Schedule, no
agreements relating to allocating or sharing of Taxes exist
between or among Enova and any of its subsidiaries.
(n) Code Section 341(f). Neither Enova nor any of
its subsidiaries has filed (or will file prior to the Closing)
a consent pursuant to Section 341(f) of the Code or has agreed
to have Section 341(f)(2) of the Code apply to any disposition
of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by Enova or any of its
subsidiaries.
(o) Code Section 168. No property of Enova or any
of its subsidiaries is property that Enova or any such
subsidiary or any party to this transaction is or will be
required to treat as being owned by another person pursuant to
the provisions of Section 168(f)(8) of the Code (as in effect
prior to its amendment by the Tax Reform Act of 1986) or is
"tax-exempt use property" within the meaning of Section 168 of
the Code.
(p) Code Section 481 Adjustments. Other than
adjustments that in the aggregate could not reasonably be
expected to have a Enova Material Adverse Effect, neither
Enova nor any of its subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the Code
by reason of a voluntary change in accounting method initiated
by Enova or any of its subsidiaries, and to the best of the
knowledge of Enova, the IRS has not proposed any such
adjustment or change in accounting method.
(q) Code Sections 6661 and 6662. All transactions
that could give rise to an understatement of federal income
tax (within the meaning of Section 6661 of the Code for Tax
Returns the due date for which was on or before December 31,
1989, and within the meaning of Section 6662 of the Code for
Tax Returns the due date for which was after December 31,
1989) that could reasonably be expected to result in a Enova
Material Adverse Effect have been adequately disclosed (or,
with respect to Tax Returns filed following the Closing, will
be adequately disclosed) on the Tax Returns of Enova and its
subsidiaries in accordance with Section 6661(b)(2)(B) of the
Code for Tax Returns the due date for which was on or before
December 31, 1989, and in accordance with Section
6662(d)(2)(B) of the Code for Tax Returns the due date for
which was after December 31, 1989.
(r) NOLs. As of the date hereof, Enova and its
subsidiaries had net operating loss carryovers available to
offset future income as set forth in Section 4.09(r) of the
Enova Disclosure Schedule. Section 4.09(r) of the Enova
Disclosure Schedule sets forth the amount of and year of
expiration of each company's net operating loss carryovers.
(s) Credit Carryover. As of the date hereof, Enova
and its subsidiaries had tax credit carryovers available to
offset future tax liability as set forth in Section 4.09(s) of
the Enova Disclosure Schedule. Section 4.09(s) of the Enova
Disclosure Schedule sets forth the amount and year of
expiration of each company's tax credit carryovers.
(t) Code Section 338 Elections. Except as set
forth in Section 4.09(t) of the Enova Disclosure Schedule, no
election under Section 338 of the Code (or any predecessor
provision) has been made by or with respect to Enova or any of
its subsidiaries or any of their respective assets or
properties.
(u) Acquisition Indebtedness. Except as set forth
in Section 4.09(u) of the Enova Disclosure Schedule, no
indebtedness of Enova or any of its subsidiaries is "corporate
acquisition indebtedness" within the meaning of Section 279(b)
of the Code.
(v) Intercompany Transactions. Except as set forth
in Section 4.09(v) of the Enova Disclosure Schedule, neither
Enova nor any of its subsidiaries has engaged in any
intercompany transactions within the meaning of Section
1.1502-13 of the Treasury Regulations for which any income
remains unrecognized as of the close of the last taxable year
prior to the Closing Date.
(w) Code Section 280G. Except as set forth in
Section 4.09(w) of the Enova Disclosure Schedule, neither
Enova nor any of its subsidiaries is a party to any agreement,
contract, or arrangement that could result, on account of the
transactions contemplated hereunder, separately or in the
aggregate, in the payment of any "excess parachute payments"
within the meaning of the Section 280G of the Code.
SECTION 4.10. Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the Enova
Disclosure Schedule contains a true and complete list of each
material employee benefit plan, program or arrangement
currently sponsored, maintained or contributed to by Enova or
any of its subsidiaries for the benefit of employees, former
employees or directors and their beneficiaries in respect of
services provided to any such entity, including, but not
limited to, any employee benefit plans within the meaning of
Section 3(3) of ERISA and any material employment, consulting,
non-compete, severance or change in control agreement
(collectively, the "ENOVA BENEFIT PLANS"). For the purposes
of this Section 4.10, the term "Enova" shall be deemed to
include predecessors thereof.
(b) Contributions. Except as set forth in Section
4.10(b) of the Enova Disclosure Schedule, all material
contributions and other payments required to be made by Enova
or any of its subsidiaries to any Enova Benefit Plan (or to
any person pursuant to the terms thereof) have been made or
the amount of such payment or contribution obligation has been
reflected in the Enova Financial Statements.
(c) Qualification; Compliance. Each of the Enova
Benefit Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined by the IRS to
be so qualified, and, to the best knowledge of Enova, no
circumstances exist that are reasonably expected by Enova to
result in the revocation of any such determination. Enova is
in compliance in all material respects with, and each Enova
Benefit Plan is and has been operated in all material respects
in compliance with, all applicable laws, rules and regulations
governing such plan, including, without limitation, ERISA and
the Code. Each Enova Benefit Plan intended to provide for the
deferral of income, the reduction of salary or other
compensation or to afford other income tax benefits complies
with the requirements of the applicable provisions of the Code
or other laws, rules and regulations required to provide such
income tax benefits.
(d) Liabilities. With respect to the Enova Benefit
Plans individually and in the aggregate, no event has
occurred, and, to the best knowledge of Enova, there exists no
condition or set of circumstances that could subject Enova or
any of its subsidiaries to any liability arising under the
Code, ERISA or any other applicable law (including, without
limitation, any liability to any such plan or the PBGC), or
under any indemnity agreement to which Enova is a party, which
liability, excluding liability for benefit claims, PBGC
premiums and funding obligations payable in the ordinary
course could reasonably be expected to have a Enova Material
Adverse Effect.
(e) Welfare Plans. Except as set forth in Section
4.10(e) of the Enova Disclosure Schedule, none of the Enova
Benefit Plans that are "welfare plans", within the meaning of
Section 3(1) of ERISA, provides for any retiree benefits other
than coverage mandated by applicable law or benefits the full
cost of which is borne by the retiree.
(f) Documents Made Available. Enova has made
available to Pacific a true and correct copy of each
collective bargaining agreement to which Enova or any of its
subsidiaries is a party or under which Enova or any of its
subsidiaries has obligations, and with respect to each Enova
Benefit Plan, (i) such plan and summary plan description, (ii)
the most recent annual report filed with the IRS, (iii) each
related trust agreement, insurance contract, service provider
or investment management agreement (including all amendments
to each such document), (iv) the most recent determination of
the IRS with respect to the qualified status of such plan, and
(v) the most recent actuarial report or valuation.
(g) Payments Resulting from Mergers. Except as set
forth in Section 4.10(g) of the Enova Disclosure Schedule or
specifically provided for herein, neither Enova nor any of its
subsidiaries is a party to any plan, agreement or arrangement
pursuant to the terms of which the consummation or
announcement of any transaction contemplated by this Agreement
will (either alone or in connection with the occurrence of any
additional or further acts or events) result in any (A)
payment (whether of severance pay or otherwise) becoming due
from Enova or any of its subsidiaries to any officer,
employee, former employee or director thereof or to a trustee
under any "rabbi trust" or similar arrangement, or (B) benefit
under any Enova Benefit Plan being established or becoming
accelerated, or immediately vested or payable.
(h) Labor Agreements. As of the date hereof,
except as set forth in Section 4.10(h) of the Enova Disclosure
Schedule, neither Enova nor any of its subsidiaries is a party
to any collective bargaining agreement or other labor
agreement with any union or labor organization. To the best
knowledge of Enova, as of the date hereof, there is no current
union representation question involving employees of Enova or
any of its subsidiaries, nor does Enova know of any activity
or proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees.
Except as set forth in the Enova SEC Reports or in Section
4.10(h) of the Enova Disclosure Schedule, (i) there is no
unfair labor practice, employment discrimination or other
complaint against Enova pending, or to the best knowledge of
Enova, threatened, which has or could reasonably be expected
to have a Enova Material Adverse Effect, (ii) there is no
strike, dispute, slowdown, work stoppage or lockout pending,
or, to the best knowledge of Enova, threatened, against or
involving Enova or any of its subsidiaries which has or could
reasonably be expected to have, a Enova Material Adverse
Effect and (iii) there is no proceeding, claim, suit, action
or governmental investigation pending or, to the best
knowledge of Enova, threatened, in respect of which any
director, officer, employee or agent of Enova or any of its
subsidiaries is or may be entitled to claim indemnification
from Enova pursuant to their respective articles of
incorporation or by-laws or as provided in the Indemnification
Agreements listed in Section 4.10(h) of the Enova Disclosure
Schedule.
SECTION 4.11. Environmental Protection.
(a) Compliance. Except as set forth in the Enova
SEC Reports, except as set forth in Section 4.11(a) of the
Enova Disclosure Schedule and except where the failure to be
in compliance could not reasonably be expected to have a Enova
Material Adverse Effect, (i) each of Enova and its
subsidiaries is in compliance with all applicable
Environmental Laws, and (ii) neither Enova nor any of its
subsidiaries has received any written communication from any
person or Governmental Authority that alleges that Enova or
any of its subsidiaries is not in such compliance with
applicable Environmental Laws.
(b) Environmental Permits. Except as set forth in
the Enova SEC Reports or as set forth in Section 4.11(b) of
the Enova Disclosure Schedule, each of Enova and its
subsidiaries has obtained or has applied for all Environmental
Permits necessary for the construction of their facilities or
the conduct of their operations, and all such permits are in
good standing or, where applicable, a renewal application has
been timely filed and is pending agency approval, and Enova
and its subsidiaries are in material compliance with all terms
and conditions of the Environmental Permits, except where the
failure to obtain or be in compliance with the Environmental
Permit could not reasonably be expected to have a Enova
Material Adverse Effect.
(c) Environmental Claims. Except as set forth in
the Enova SEC Reports or as set forth in Section 4.11(c) of
the Enova Disclosure Schedule, to the best knowledge of Enova,
there is no Environmental Claim pending (i) against Enova or
any of its subsidiaries or joint ventures, (ii) against any
person or entity whose liability for any Environmental Claim
Enova or any of its subsidiaries or joint ventures has
retained or assumed contractually, or (iii) against any real
or personal property or operations which Enova or any of its
subsidiaries or joint ventures owns, leases or manages, in
whole or in part, which if adversely determined, could
reasonably be expected to have in the aggregate a Enova
Material Adverse Effect.
(d) Releases. Except as set forth in the Enova SEC
Reports or as set forth in Section 4.11(c) or Section 4.11(d)
of the Enova Disclosure Schedule, Enova has no knowledge of
any Releases of any Hazardous Material that would be
reasonably likely to form the basis of any Environmental Claim
against Enova or any of its subsidiaries or joint ventures, or
against any person or entity whose liability for any
Environmental Claim Enova or any of its subsidiaries or joint
ventures has retained or assumed contractually, which could
reasonably be expected to have, in the aggregate, a Enova
Material Adverse Effect.
(e) Predecessors. Except as set forth in the Enova
SEC Reports or as set forth in Section 4.11(e) of the Enova
Disclosure Schedule, Enova has no knowledge, with respect to
any predecessor of Enova or any subsidiary or joint venture of
Enova, of any Environmental Claim pending or threatened, or of
any Release of Hazardous Materials that would be reasonably
likely to form the basis of any Environmental Claim, which
could reasonably be expected to have a Enova Material Adverse
Effect.
(f) Disclosure. To Enova's best knowledge, Enova
has disclosed to Pacific all material facts which Enova
reasonably believes form the basis of a Enova Material Adverse
Effect arising from (i) the cost of Enova pollution control
equipment currently required or known to be required in the
future; (ii) current Enova remediation costs or Enova
remediation costs known to be required in the future; or (iii)
any other environmental matter affecting Enova.
(g) Cost Estimates. To Enova's best knowledge, no
environmental matter set forth in the Enova SEC Reports or the
Enova Disclosure Schedule could be reasonably expected to
exceed the cost estimates provided in the Enova SEC Reports by
an amount that individually or in the aggregate could
reasonably be expected to have a Enova Material Adverse
Effect.
SECTION 4.12. Regulation as a Utility. Enova Sub
is regulated as a public utility by the State of California
and by no other state. Except as set forth in Section 4.12 of
the Enova Disclosure Schedule, neither Enova nor any
"subsidiary company" or "affiliate" of Enova is subject to
regulation as a public utility or public service company (or
similar designation) by any other state in the United States
or any foreign country. Enova is an exempt holding company
under Section 3(a)(1) of the 1935 Act. Section 4.12 of the
Enova Disclosure Schedule sets forth each "affiliate" and each
"subsidiary company" of Enova which may be deemed to be a
"public utility company" or a "holding company" within the
meaning of the 1935 Act.
SECTION 4.13. Nuclear Operations. Except as set
forth in Section 4.13 of the Enova Disclosure Schedule, to the
best knowledge of Enova, the operations of the San Onofre
Nuclear Generating Stations ("SONGS") are and have at all
times been conducted in material compliance with applicable
health, safety, regulatory and other legal requirements. To
the best knowledge of Enova, SONGS maintains emergency plans
designed to respond to an unplanned release therefrom of
radioactive materials into the environment and liability
insurance to the extent required by law, which is consistent
with Enova's view of the risks inherent in the operation of a
nuclear power facility. To the best knowledge of Enova, plans
for the decommissioning of each of the SONGS facilities and
for the short-term storage of spent nuclear fuel conform with
the requirements of applicable regulatory or other legal
requirement, and such plans have at all times been funded to
the extent required by law, which is consistent with Enova's
reasonable budget projections for such plans.
SECTION 4.14. Vote Required. The approval of the
Enova Merger by the affirmative vote of a majority of the
votes entitled to be cast by all holders of Enova Common Stock
(the "ENOVA SHAREHOLDERS' APPROVAL") is the only vote of the
holders of any class or series of the capital stock of Enova
required to approve this Agreement, the Mergers and the other
transactions contemplated hereby. No vote of shareholders of
Enova is required to approve the Energy Marketing Joint
Venture Agreement.
SECTION 4.15. Accounting Matters. Neither Enova
nor, to its best knowledge, any of its affiliates has taken or
agreed to take any action that would prevent the Company from
accounting for the transactions to be effected pursuant to
Articles I and II of this Agreement as a pooling of interests
in accordance with GAAP and applicable SEC regulations.
SECTION 4.16. Opinion of Financial Advisor. Enova
has received the opinion of Morgan Stanley & Co. Incorporated
("MORGAN STANLEY"), dated October 12, 1996, to the effect
that, as of such date the Enova Exchange Ratio is fair to the
holders of Enova Common Stock.
SECTION 4.17. Insurance. Except as set forth on
Section 4.17 of the Enova Disclosure Schedule, each of Enova
and its subsidiaries is, and has been continuously since
January 1, 1993, insured with financially responsible insurers
in such amounts and against such risks and losses as are
customary for companies conducting the business as conducted
by Enova and its subsidiaries during such time period. Except
as set forth on Schedule 4.17 of the Enova Disclosure
Schedule, neither Enova nor its subsidiaries has received any
notice of cancellation or termination with respect to any
material insurance policy of Enova or its subsidiaries. The
insurance policies of Enova and each of its subsidiaries are
valid and enforceable policies in all material respects.
SECTION 4.18. Ownership of Pacific Common Stock.
Enova does not "beneficially own" (as such term is defined in
the Pacific Rights Agreement) any shares of Pacific Common
Stock.
SECTION 4.19. Brokers. No broker, finder or
investment banker (other than Morgan Stanley) is entitled to
any brokerage, finder's or other fee or commission in
connection with the Mergers based upon arrangements made by or
on behalf of Enova. Enova has heretofore furnished to Pacific
a complete and correct copy of all agreements between Enova
and Morgan Stanley pursuant to which such firm would be
entitled to any payment relating to the Mergers.
SECTION 4.20. Tax-Exempt Status. Except as
described in Section 4.20(a) of the Enova Disclosure Schedule,
the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not
jeopardize the tax-exempt status of the outstanding revenue
bonds of Enova or its subsidiaries used to finance electric
facilities under Section 142(a) of the Code or under Section
103(b)(4)(E) of the Internal Revenue Code of 1954, as amended,
prior to the Tax Reform Act of 1986 (the "BONDS"). Except as
described in Section 4.20(b) of the Enova Disclosure Schedule,
the execution and delivery of the Energy Marketing Joint
Venture Agreement and the consummation of the transactions
contemplated thereby will not jeopardize the tax-exempt status
of the Bonds. As of the date hereof, except as set forth in
Section 4.20(c) of the Enova Disclosure Schedule, Enova is not
aware of any pending or enacted law, rule, regulation,
administrative order or court decision that upon its
implementation would jeopardize such tax-exempt status.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGERS
SECTION 5.01. Conduct of Business Pending the
Mergers. Pacific and Enova have each determined to enter
into the transactions contemplated hereby in order to compete
as aggressively as possible in the rapidly evolving energy
marketplace. Consistent with their mutual objectives Pacific
and Enova each intend to pursue, jointly or independently,
strategic opportunities that may arise between the date of
this Agreement and the Effective Time in accordance with the
terms of this Article V. Consistent with the foregoing, but
for the purpose of assuring that strategic opportunities are
pursued that are consistent with each party's objectives,
after the date hereof and prior to the Effective Time or
earlier termination of this Agreement, Pacific and Enova each
agrees as to itself and its subsidiaries, except (x) as
expressly contemplated or permitted in this Agreement or the
Energy Marketing Joint Venture Agreement, (y) to the extent
required by rule, regulation statute or other law in
connection with California Assembly Bill 1890 (Public
Utilities: electrical restructuring) or in connection with
the CPUC and the FERC industry restructuring proceedings, and
(z) to the extent the other parties hereto shall otherwise
consent in writing, to the following:
(a) Ordinary Course of Business. Each party hereto
shall, and shall cause its respective subsidiaries to, carry
on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to
preserve intact their present business organizations and
goodwill, preserve the goodwill and relationships with
customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and
ongoing programs currently in force, keep available the
services of their present officers and employees. Except as
set forth in Section 5.01(a) of the Pacific Disclosure
Schedule or the Enova Disclosure Schedule, respectively, no
party shall, nor shall any party permit any of its
subsidiaries to, enter into a new line of business, or make
any change in the line of business it engages in as of the
date hereof involving any material investment of assets or
resources or any material exposure to liability or loss, in
the case of Pacific, to Pacific and its subsidiaries taken as
a whole, and in the case of Enova, to Enova and its
subsidiaries taken as a whole.
(b) Dividends. No party shall, nor shall any party
permit any of its subsidiaries to (i) declare or pay any
dividends on or make other distributions in respect of any of
their capital stock other than to such party or its
wholly-owned subsidiaries and other than dividends required to
be paid on any series of Pacific Preferred Stock, Pacific Sub
Preferred Stock, Enova Sub Preferred Stock or Califia Company
preferred stock in accordance with the respective terms
thereof, regular quarterly dividends on Pacific Common Stock
with usual record and payment dates not during any fiscal year
in excess of 110% of the dividends for the prior fiscal year
and regular quarterly dividends on Enova Common Stock with
usual record and payment dates not during any fiscal year in
excess of 110% of the dividends for the prior fiscal year;
(ii) split, combine or reclassify any of their capital stock
or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for,
shares of its capital stock, except as otherwise provided in
this Section 5.01; or (iii) redeem, repurchase or otherwise
acquire any shares of their capital stock, other than (A)
redemptions, purchases or acquisitions required by the
respective terms of any series of Pacific Preferred Stock,
Pacific Sub Preferred Stock or Enova Sub Preferred Stock, (B)
in connection with refunding of Pacific Preferred Stock,
Pacific Sub Preferred Stock or Enova Sub Preferred Stock with
preferred stock or debt at a lower cost of funds or in
connection with intercompany purchases of capital stock, (C)
in connection with employee benefit plans, (D) by Pacific,
subject to paragraph (l) below, the repurchase of up to
4,250,000 shares of Pacific Common Stock and the expenditure
of up to $50,000,000 for the redemption, repurchase or other
acquisition of shares of Pacific Preferred Stock and Pacific
Sub Preferred Stock and (E) by Enova, subject to paragraph (1)
below, the repurchase of up to 4,250,000 shares of Enova
Common Stock and the expenditure of up to $50,000,000 for the
redemption, repurchase or other acquisition of shares of Enova
Sub Preferred Stock or Califia preferred stock. The last
record date of each of Pacific and Enova on or prior to the
Effective Time which relates to a regular quarterly dividend
on Pacific Common Stock or Enova Common Stock, as the case may
be, shall be the same date and be other than the Effective
Time.
(c) Issuance of Securities. No party shall, nor
shall any party permit any of its subsidiaries to, issue,
agree to issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of their capital
stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to
acquire, any such shares or convertible or exchangeable
securities, other than: (i) intercompany issuances of capital
stock, (ii) issuances in connection with transactions
contemplated by paragraph (e) or paragraph (h) below, (iii) in
the case of Pacific and its subsidiaries (x) of Pacific Rights
issued pursuant to the Pacific Rights Agreement in form and
substance reasonably satisfactory to Enova, provided that the
Pacific Rights Agreement will be amended to provide that the
consummation of the transactions contemplated by this
Agreement will not result in the triggering of any rights or
entitlements of Pacific shareholders under such Pacific Rights
Agreement; (y) in connection with refunding existing Pacific
Preferred Stock and Pacific Sub Preferred Stock (or Pacific
Preferred Stock and Pacific Sub Preferred Stock retired after
January 1, 1996 and prior to the date hereof and not
subsequently refunded) with preferred stock or preference
stock or debt at a lower cost of funds; and (z) subject to
Section 5.01(i), shares of Pacific Common Stock to be issued
pursuant to employee benefit plants, stock option and other
incentive compensation plans, director plans and stock
purchase and dividend reinvestment plans; (iv) in the case of
Enova and its subsidiaries (x) in connection with refunding of
existing Enova Sub Preferred Stock (or Enova Sub Preferred
Stock retired after January 1, 1996 and prior to the date
hereof and not subsequently refunded) with preferred stock or
debt at a lower cost of funds; (y) subject to Section 5.01(i),
shares of Enova Common Stock pursuant to employee benefit
plans, stock option and other incentive compensation plans,
director plans and stock purchase and dividend reinvestment
plans or (z) rights issued pursuant to a shareholders rights
plan of Enova (if the provisions of such rights plan comport
with terms analogous to those of Section 3.17 (substituting
Pacific for Enova therein) and are customary for shareholder
rights plans); and (v) the issuance of capital stock under the
Pacific Rights Agreement if required by the respective terms
thereof. The parties shall promptly furnish to each other
such information as may be reasonably requested including
financial information and take such action as may be
reasonably necessary and otherwise fully cooperate with each
other in the preparation of any registration statement under
the Securities Act and other documents necessary in connection
with issuance of securities as contemplated by this Section
5.01(c), subject to obtaining customary indemnities.
(d) Charter Documents. Except as set forth in
Section 5.01(d) of the Pacific Disclosure Schedule or the
Enova Disclosure Schedule, no party shall amend or propose to
amend its respective articles of incorporation or by-laws,
except as contemplated herein.
(e) No Acquisitions. Except as set forth in
Section 5.01(e) of the Pacific Disclosure Schedule or the
Enova Disclosure Schedule, and except for acquisitions by a
party and its subsidiaries of less than $10 million in any
transaction or series of related transactions, no party shall,
nor shall any party permit any of its subsidiaries to,
acquire, or publicly propose to acquire, or agree to acquire,
by merger or consolidation with, or by purchase or otherwise,
a substantial equity interest in or a substantial portion of
the assets of, any business or any corporation, partnership,
association or other business organization or division thereof
or otherwise acquire or agree to acquire a material amount of
assets, other than in the ordinary course of business
consistent with past practice.
(f) Capital Expenditures (including Emission
Allowances). Except as set forth in Section 5.01(f) of the
Pacific Disclosure Schedule or the Enova Disclosure Schedule
or as required by law, no party shall, nor shall any party
permit any of its subsidiaries to, (i) make capital
expenditures in excess of $20 million over the amount budgeted
by such party for capital expenditures on the date hereof (as
reflected on the capital expenditure budgets previously
provided by such party to the other) through the Effective
Time or (ii) enter into written commitments with respect to
sulfur dioxide emission allowances as provided for by the
Clean Air Act Amendments of 1990, in excess of $100,000.
(g) No Dispositions. Except (i) as set forth in
Section 5.01(g) of the Pacific Disclosure Schedule or the
Enova Disclosure Schedule and (ii) for dispositions by a party
and its affiliates of less than $10 million in any transaction
or series of related transactions, no party shall, nor shall
any party permit any of its subsidiaries to, sell, lease,
license, encumber or otherwise dispose of, any of its assets,
other than dispositions in the ordinary course of their
business consistent with past practice.
(h) Indebtedness. Except (i) as set forth in
Section 5.01(h) of the Basalt Disclosure Schedule or the
Granite Disclosure Schedule, (ii) as contemplated by this
Agreement, (iii) as budgeted by Enova Financial, Inc. on the
date hereof through December 31, 1997 or (iv) as required by
any order, law or regulation of any Governmental Authority, no
party shall, nor shall any party permit any of its
subsidiaries to, incur or guarantee any indebtedness
(including any debt borrowed or guaranteed or otherwise
assumed, including, without limitation, the issuance of debt
securities or warrants or rights to acquire debt) other than
(u) guarantees in favor of wholly owned subsidiaries of
Pacific or Enova in connection with the conduct of the
business of such wholly owned subsidiaries; (v) short-term
indebtedness in the ordinary course of business consistent
with past practice (such as the issuance of commercial paper
or the use of existing credit facilities); (w) long-term
indebtedness not aggregating more than $100,000,000 in the
case of either party and its subsidiaries; (x) in connection
with the refunding of Pacific Preferred Stock, Pacific Sub
Preferred Stock or Enova Sub Preferred Stock as permitted in
Section 5.01(b); (y) in connection with the refunding of
existing indebtedness at maturity or at a lower cost of funds
or indebtedness retired after January 1, 1996 and prior to the
date hereof and not subsequently refunded; or (z) refinancing
of industrial development bonds for which Enova is unable to
obtain an opinion of outside counsel as to the continuing tax-
exempt status of such industrial development bonds.
(i) Compensation, Benefits. Except (i) as set
forth in Section 5.01(i) of the Pacific Disclosure Schedule or
the Enova Disclosure Schedule, (ii) as may be required by
applicable law or (iii) as expressly contemplated by this
Agreement, no party shall, nor shall any party permit any of
its subsidiaries to, (A) enter into, adopt or amend or
increase the amount or accelerate the payment or vesting of
any benefit or amount payable, or grant any discretionary
awards or benefits, under, any employee benefit plan or other
contract, agreement, commitment, arrangement, plan or policy
maintained by, contributed to or entered into by such party or
any of its subsidiaries, or increase, or enter into any
contract, agreement, commitment or arrangement to increase in
any manner, the compensation or fringe benefits, or otherwise
to extend, expand or enhance the engagement, employment or any
related rights, of any director, officer or other employee of
such party or any of its subsidiaries, except for normal
promotion and compensation increases, hiring and discretionary
award grants in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to such
party or any of its subsidiaries or (B) enter into or amend
any employment, severance, special pay arrangement with
respect to termination of employment or other similar
contract, agreement or arrangement with any director or
officer other than in the ordinary course of business
consistent with past practice.
(j) 1935 Act. No party shall, nor shall any party
permit any of its subsidiaries, except as required or
contemplated by this Agreement, to engage in any activities
which would cause a change in its status, or that of its
subsidiaries, under the 1935 Act, or that would impair the
ability of Pacific or Enova, respectively, to claim an
exemption as of right under Rule 2 of the 1935 Act prior to
the Mergers, or that would impair the ability of the Company
to claim an exemption as of right under Rule 2 of the 1935 Act
following the Mergers, other than the application to the SEC
under the 1935 Act contemplated by this Agreement for approval
to the extent required of the transactions contemplated
hereby.
(k) Accounting. No party shall, nor shall any
party permit any of its subsidiaries to, make any changes in
their accounting methods, except as required by law, rule,
regulation or GAAP.
(l) Pooling. No party shall, nor shall any party
permit any of its subsidiaries to, take any actions which
would, or would be reasonably likely to, prevent the Company
from accounting for the transactions to be effected pursuant
to Articles I and II of this Agreement as a pooling of
interests in accordance with GAAP and applicable SEC
regulations.
(m) Tax-Free Status. No party shall, nor shall any
party permit any of its subsidiaries to, take any actions
which would, or would be reasonably likely to, adversely
affect the status of the Mergers as tax-free transactions
(except as to dissenters' rights and fractional shares) under
Sections 351 of the Code.
(n) Affiliate Transactions. Except as set forth in
Section 5.01(n) of the Pacific Disclosure Schedule or the
Enova Disclosure Schedule and except with respect to
agreements or arrangements entered into between a party and
its wholly owned subsidiaries or between wholly owned
subsidiaries of a party (it being agreed that, for purposes of
this Section 5.01(n), Pacific Sub shall be deemed to be a
wholly owned subsidiary of Pacific and Enova Sub shall be
deemed to be a wholly owned subsidiary of Enova), no party
shall, nor shall any party permit any of its subsidiaries to,
enter into any agreement or arrangement with any of their
respective affiliates on terms to such party or its
subsidiaries materially less favorable than could reasonably
be expected to have been obtained with an unaffiliated third
party on an arm's length basis.
(o) Cooperation, Notification. Each party shall,
and shall cause its subsidiaries to, (i) confer on a regular
and frequent basis with one or more representatives of the
other party to discuss material operational matters and the
general status of its ongoing operations (including, without
limitation, the status of the matters set forth in Section
5.01(e) of the Pacific Disclosure Schedule and the Enova
Disclosure Schedule); (ii) promptly notify the other party of
any significant changes in its properties, assets, financial
condition or results of operations; (iii) advise the other
party of any change or event which has had or, could
reasonably be expected to result in, a Pacific Material
Adverse Effect or a Enova Material Adverse Effect, as the case
may be, or a Joint Venture Material Adverse Effect; and (iv)
promptly provide the other party with copies of all material
filings made by such party or any of its subsidiaries with any
state or federal court, administrative agency, commission or
other Governmental Authority in connection with this Agreement
and the transactions contemplated hereby.
(p) Regulatory Matters. Except as set forth in
Section 5.01(p) of the Pacific Disclosure Schedule or the
Enova Disclosure Schedule, except with regard to those
specific geographic regions where the parties provide
overlapping service, and except for filings contemplated by
the applications filed in FERC Docket Nos. EC96-19-000, EL96-
48-000 and ER96-1663-000 and CPUC A.96-06-029, each party
shall, and shall cause its subsidiaries to, discuss with the
other party any material changes in its or its subsidiaries'
material rates or charges (other than pass-through fuel and
gas rates or charges), standards of service or accounting from
those in effect on the date hereof and consult with the other
party prior to making any filing (or any amendment thereto),
or effecting any agreement, commitment, arrangement or
consent, whether written or oral, formal or informal, with
respect thereto.
(q) Third-Party Consents. Pacific shall, and shall
cause its subsidiaries to, use all commercially reasonable
efforts to obtain all Pacific Required Consents. Pacific
shall promptly notify Enova of any failure or prospective
failure to obtain any such consents and, if requested by
Enova, shall provide copies of all Pacific Required Consents
obtained by Pacific to Enova. Enova shall, and shall cause
its subsidiaries to, use all commercially reasonable efforts
to obtain all Enova Required Consents. Enova shall promptly
notify Pacific of any failure or prospective failure to obtain
any such consents and, if requested by Pacific, shall provide
copies of all Enova Required Consents obtained by Enova to
Pacific.
(r) No Breach, Etc. No party shall, nor shall any
party permit any of its subsidiaries to, take any action that
would or is reasonably likely to result in a material breach
of any provision of this Agreement or in any of its
representations and warranties set forth in this Agreement
being untrue on and as of the Closing Date.
(s) Company Actions. Enova and Pacific shall cause
the Company to take only those actions, from the date hereof
until the Effective Time, that are required or contemplated by
this Agreement to be so taken by the Company, including,
without limitation, the declaration, filing or registration
with, or notice to or authorization, consent or approval of,
any Governmental Authority, as set forth in Section 3.04(b) of
the Pacific Disclosure Schedule, Section 3.04(c) of the
Pacific Disclosure Schedule, Section 4.04(b) of the Enova
Disclosure Schedule and Section 4.04(c) of the Enova
Disclosure Schedule.
SECTION 5.02. Transition and Strategic Opportunity
Committees. (a) Transition Committee. A committee comprised
of Stephen L. Baum, President and Chief Executive Officer of
Enova, Donald E. Felsinger, President and Chief Executive
Officer of Enova Sub, Richard D. Farman, President and Chief
Operating Officer of Pacific, and Warren Mitchell, President
of Pacific Sub (the "TRANSITION COMMITTEE") has been
established as of the date of this Agreement to examine
various alternatives regarding the manner in which to best
organize, manage and integrate the business of the Company
after the Effective Time. Stephen L. Baum, the President and
Chief Executive Officer of Enova, shall chair the Transition
Committee and coordinate the day-to-day activities of the
Transition Committee with the concurrence of Richard D.
Farman, the President and Chief Operating Officer of Pacific.
From time to time, the Transition Committee shall report its
findings to the Board of Directors of each of Pacific and
Enova. After the date that each of the Pacific Shareholders'
Approval and the Enova Shareholders' Approval has been
obtained and prior to the Effective Time, Richard D. Farman,
President and Chief Operating Officer of Pacific, shall attend
meetings of Enova's Board of Directors and Stephen L. Baum,
President and Chief Executive Officer of Enova, shall attend
meetings of Pacific's Board of Directors as they deem
appropriate in consultation with each other and to the extent
permitted by applicable law.
(b) Strategic Opportunity Committee. A committee
comprised of Willis B. Wood, Jr., the Chairman and Chief
Executive Officer of Pacific, Richard D. Farman, the President
and Chief Operating Officer of Pacific, Stephen L. Baum, the
President and Chief Executive Officer of Enova, and Donald E.
Felsinger, the Chief Executive Officer of Enova Sub, (the
"STRATEGIC OPPORTUNITY COMMITTEE") also has been established
to facilitate the parties' ability to pursue strategic
opportunities that would otherwise violate Sections 5.01 (a),
(c), (e), (f), (g), (h) or (k) (a "NEW OPPORTUNITY") in a
manner consistent with both the objectives of this Agreement
and the parties' desires to compete as aggressively as
possible in the rapidly evolving energy marketplace. If the
Strategic Opportunity Committee unanimously approves the
pursuit of a New Opportunity by Pacific or Enova or the two
parties acting jointly (no member of the Strategic Opportunity
Committee to unreasonably withhold such approval), then the
pursuit of such New Opportunity shall not be deemed a breach
of such party's or parties' obligations under Section 5.01.
The approval of the pursuit of a New Opportunity by the
Strategic Opportunity Committee as provided herein shall be
evidenced in writing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Access to Information;
Confidentiality. (a) Upon reasonable notice and subject to
restrictions contained in confidentiality agreements to which
such party is subject (from which such party shall use
reasonable efforts to be released), Pacific and Enova each
shall (and shall cause each of their subsidiaries to) afford
to the officers, employees, accountants, counsel, financial
advisors and other representatives of the other (collectively,
"REPRESENTATIVES"), reasonable access, during the period prior
to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period,
Pacific and Enova each shall (and shall cause each of their
subsidiaries to) furnish promptly to the other (i) all
information concerning its business, properties, directors,
subsidiaries, officers, shareholders, personnel and such other
matters as such other party may reasonably request and (ii) a
copy of each material report, schedule and other document
filed or received by it or any of its subsidiaries pursuant to
the requirements of the FERC or the CPUC and a copy of each
report, schedule and other document filed or received by it or
any of its subsidiaries pursuant to the requirements of
federal or state securities laws or filed with the SEC, the
Department of Justice, the Federal Trade Commission, the NRC,
or any other federal, state or local regulatory agency or
commission, and each party shall make available to the other
party the appropriate individuals (including attorneys,
accountants and other professionals) for discussion of such
party's business, properties, tax situation and personnel as
the other party may reasonably request.
(b) Each party shall, and shall cause its
subsidiaries and Representatives to, keep such information
confidential in accordance with the terms of the
Confidentiality Agreement, dated April 4, 1996, between
Pacific and Enova (the "CONFIDENTIALITY AGREEMENT").
SECTION 6.02. Registration Statement; Joint Proxy
Statement.
(a) Preparation and Filing. The parties will
prepare and file with the SEC as soon as reasonably
practicable after the date hereof the Registration Statement
and the Proxy Statement (together, the "JOINT
PROXY/REGISTRATION STATEMENT"). The parties hereto shall each
use reasonable efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as
practicable after such filing. Each party hereto shall also
take such action as may be reasonably required to cause the
shares of Company Common Stock issuable in connection with the
Mergers to be registered or to obtain an exemption from
registration under applicable state "blue sky" or securities
laws; provided, however, that no party shall be required to
register or qualify as a foreign corporation or to take other
action which would subject it to service of process in any
jurisdiction where it will not be, following the Mergers, so
subject. Each of the parties hereto shall furnish all
information concerning itself which is required or customary
for inclusion in the Joint Proxy/Registration Statement. The
parties shall use their best efforts to cause the shares of
Company Common Stock issuable in the Mergers to be approved
for listing on the NYSE upon official notice of issuance. The
information provided by any party hereto for use in the Joint
Proxy/Registration Statement shall be true and correct in all
material respects without omission of any material fact which
is required to make such information not false or misleading.
No representation, covenant or agreement is made by any party
hereto with respect to information supplied by any other party
for inclusion in the Joint Proxy Statement/Registration
Statement.
(b) Amendments and Supplements. No amendment or
supplement to the Proxy Statement or the Registration
Statement will be made without the approval of all parties.
Each party will advise the others, promptly after it receives
notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension, if
applicable, of the qualification of such party's common stock
for sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement or the Registration Statement
or comments thereon and responses thereto or requests by the
SEC for additional information.
(c) Letter of Enova's Accountants. Enova shall use
best efforts to cause to be delivered to the Company, Pacific,
Newco Enova Sub and Newco Pacific Sub a letter of Deloitte
Touche LLP, dated a date within two business days before the
date of the Joint Proxy/Registration Statement, and addressed
to the Company, Pacific, Newco Enova Sub and Newco Pacific
Sub, in form and substance reasonably satisfactory to the
Company and Pacific and customary in scope and substance for
"cold comfort" letters delivered by independent public
accountants in connection with registration statements on Form
S-4.
(d) Letter of Pacific's Accountants. Pacific shall
use best efforts to cause to be delivered to the Company,
Enova, Newco Enova Sub and Newco Pacific Sub a letter of
Deloitte Touche LLP, dated a date within two business days
before the date of the Joint Proxy/Registration Statement, and
addressed to the Company, Enova, Newco Enova Sub and Newco
Pacific Sub in form and substance satisfactory to the Company
and Enova and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants
in connection with registration statements on Form S-4.
SECTION 6.03. Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or
cause to be filed with the Federal Trade Commission and the
Department of Justice any notifications required to be filed
by their respective "ultimate parent" companies under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), and the rules and regulations
promulgated thereunder with respect to the transactions
contemplated hereby. Such parties will use all commercially
reasonable efforts to make such filings promptly and to
respond promptly to any requests for additional information
made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto
shall cooperate and use its best efforts to promptly prepare
and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents,
and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of
all Governmental Authorities necessary or advisable to (i)
consummate the transactions contemplated by this Agreement,
including, without limitation, the Enova Required Statutory
Approvals and the Pacific Required Statutory Approvals; and
(ii) allow the Energy Marketing Joint Venture and, at and
after the Effective Time, the Company's subsidiaries, to
market and sell electricity and natural gas and related
products and services as contemplated by the Summary of Terms
attached as Exhibit A or, after the execution thereof, the
Energy Marketing Joint Venture Agreement (the "ENERGY
MARKETING REQUIRED STATUTORY APPROVALS"), such commercially
reasonable efforts to include, in the case of Pacific, the
filing of a notice of cancellation of any rate schedule or
tariffs applicable to sales of electricity by Pacific, or by
any affiliate of Pacific, that are subject to the jurisdiction
of the FERC under the Power Act, provided that such notice of
cancellation shall be filed concurrently with, and the
cancellation requested therein shall be subject to the grant
of, the request for approval of the Energy Marketing Required
Statutory Approvals. Enova shall have the right to review and
approve in advance all characterizations of the information
relating to Enova, on the one hand, and Pacific shall have the
right to review and approve in advance all characterizations
of the information relating to Pacific, on the other hand, in
either case, which appear in any filing made in connection
with the transactions contemplated by this Agreement or the
Mergers. Enova and Pacific agree that they will consult with
each other with respect to the obtaining of all such necessary
permits, consents, approvals and authorizations of
Governmental Authorities. Pacific and Enova shall jointly
assist the Company in its efforts to obtain any necessary
approvals from any Governmental Authority.
SECTION 6.04. Shareholder Approvals.
(a) Approval of Pacific Shareholders. Subject to
the terms of Section 6.04(d), Pacific shall, as soon as
reasonably practicable after the date hereof, (i) take all
steps necessary duly to call, give notice of, convene and hold
a special meeting of its shareholders (the "PACIFIC SPECIAL
MEETING") for the purpose of securing the Pacific
Shareholders' Approval, (ii) distribute to its shareholders
the Joint Proxy Statement in accordance with applicable
Federal and state law and with its articles of incorporation
and by-laws, (iii) subject to the fiduciary duties of its
board of directors, recommend to its shareholders the approval
of the Pacific Merger, this Agreement and the transactions
contemplated hereby and (iv) cooperate and consult with Enova
with respect to each of the foregoing matters.
(b) Approval of Enova Shareholders. Subject to the
terms of Section 6.04(d), Enova shall, as soon as reasonably
practicable after the date hereof, (i) take all steps
necessary to call, give notice of, convene and hold a special
meeting of its shareholders (the "ENOVA SPECIAL MEETING" and,
together with the Pacific Special Meeting, the "SPECIAL
MEETING") for the purpose of securing the Enova Shareholders'
Approval, (ii) distribute to its shareholders the Joint Proxy
Statement in accordance with applicable Federal and state law
and its articles of incorporation, (iii) subject to the
fiduciary duties of the board of directors of Enova, recommend
to its shareholders the approval of the Enova Merger, this
Agreement and the transactions contemplated hereby and (iv)
cooperate and consult with Pacific with respect to each of the
foregoing matters.
(c) Meeting Dates. Pacific and Enova shall use
their reasonable best efforts to hold the Special Meetings on
the same date and at the same time on such date.
(d) Fairness Opinions. It shall be a condition to
Pacific's obligation to distribute the Joint
Proxy/Registration Statement to its shareholders and to hold
the Pacific Special Meeting that the opinions of Barr Devlin
and Merrill Lynch referred to in Section 3.15 shall have been
reaffirmed as of the date of the Joint Proxy/Registration
Statement and shall not have been withdrawn on or prior to the
date of the Pacific Special Meeting. It shall be a condition
to Enova's obligation to distribute the Joint
Proxy/Registration Statement to its shareholders and to hold
the Enova Special Meeting that the opinion of Morgan Stanley
referred to in Section 4.16 shall have been reaffirmed as of
the date of the Joint Proxy/Registration Statement and shall
not have been withdrawn on or prior to the date of the Enova
Special Meeting.
SECTION 6.05. Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not
provided by an existing right of indemnification or other
agreement or policy, from and after the Effective Time, the
Company shall, to the fullest extent not prohibited by
applicable law, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, an officer
or director of any of the parties hereto or any of their
subsidiaries (each an "INDEMNIFIED PARTY" and collectively,
the "INDEMNIFIED PARTIES") against all losses, expenses
(including reasonable attorney's fees), claims, damages or
liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement arising out of actions or
omissions occurring at or prior to the Effective Time (whether
or not asserted or claimed prior to, at or after the Effective
Time) that are in whole or in part based on, or arising out of
the fact that such person is or was a director or officer of
such party or based on or arising out of or pertaining to the
transactions contemplated by this Agreement. In the event of
any such loss, expense, claim, damage or liability (whether or
not arising before the Effective Time), (i) the Company shall
pay the reasonable fees and expenses of counsel selected by
the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company, promptly after statements
therefor are received and otherwise advance to such
Indemnified Party upon request reimbursement of documented
expenses reasonably incurred, in either case to the extent not
prohibited by California Law (which consent shall not be
unreasonably withheld), (ii) the Company will cooperate in the
defense of any such matter and (iii) any determination
required to be made with respect to whether an Indemnified
Party's conduct complies with the standards set forth under
California law and the Company's Articles of Incorporation or
By-Laws shall be made by independent counsel mutually
acceptable to the Company and the Indemnified Party; provided,
however, that the Company shall not be liable for any
settlement effected without its written consent (which consent
shall not be unreasonably withheld). The Indemnified Parties
as a group may retain only one law firm with respect to each
related matter except to the extent there is, in the sole
opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict on any
significant issue between positions of any two or more
Indemnified Parties.
(b) Insurance. For a period of six years after the
Effective Time, the Company shall cause to be maintained in
effect the policies of directors' and officers' liability
insurance maintained by Pacific and Enova; provided, however,
that in no event shall the Company be required to expend in
any one year an amount in excess of 200% of the annual
premiums currently paid by Enova and Pacific for such
insurance; and provided further that if the annual premiums of
such insurance coverage exceed such amount, the Company shall
be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount.
(c) Successors. Neither the Company nor any of its
successors or assigns shall (i) consolidate with or merge into
any other person so as not to be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfer all or substantially all of its properties and assets
to any person unless, in either such case, proper provisions
shall be made so that the successors and assigns of the
Company shall assume the obligations set forth in this Section
6.05.
(d) Survival of Indemnification. To the fullest
extent not prohibited by law, from and after the Effective
Time, all rights to indemnification as of the date hereof in
favor of the employees, agents, directors or officers of
Pacific, Enova and their respective subsidiaries with respect
to their activities as such prior to the Effective Time, as
provided in their respective Articles of Incorporation or
By-laws, in effect on the date thereof or otherwise in effect
on the date hereof, shall survive the Mergers and shall
continue in full force and effect for a period of not less
than six years from the Effective Time.
(e) Indemnification Agreements. Enova, Pacific and
the Company shall honor and fulfill in all respects the
obligations of Enova and Pacific pursuant to indemnification
agreements with Enova's and Pacific's officers and directors
existing at the Effective Time.
SECTION 6.06. Disclosure Schedules. On or before
the date hereof, (i) Pacific shall deliver to Enova a schedule
(the "PACIFIC DISCLOSURE SCHEDULE"), which shall be
accompanied by a certificate signed by the chief financial
officer of Pacific stating the Disclosure Schedule is being
delivered pursuant to this Section 6.06(i) and (ii) Enova
shall deliver to Pacific a schedule (the "ENOVA DISCLOSURE
SCHEDULE"), which shall be accompanied by a certificate signed
by the chief financial officer of Enova stating the Enova
Disclosure Schedule is being delivered pursuant to this
Section 6.06(ii). The Pacific Disclosure Schedule and the
Enova Disclosure Schedule are collectively referred to herein
as the "DISCLOSURE SCHEDULES". The Disclosure Schedules, when
so delivered, shall be deemed to constitute an integral part
of this Agreement and to modify the respective
representations, warranties, covenants or agreements of the
parties hereto contained herein to the extent that such
representations, warranties, covenants or agreements expressly
refer to the Disclosure Schedules. Anything to the contrary
contained herein or in the Disclosure Schedules
notwithstanding, any and all statements, representations,
warranties or disclosures set forth in the Disclosure
Schedules delivered on or before the date hereof shall be
deemed to have been made on and as of the date hereof. From
time to time prior to the Closing, the parties shall promptly
supplement or amend the Disclosure Schedules with respect to
any matter, condition or occurrence hereafter arising which,
if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in the
Disclosure Schedules. No supplement or amendment shall be
deemed to cure any breach of any representation or warranty
made in this Agreement or have any effect for the purpose of
determining satisfaction of the conditions set forth in
Section 7.02(b) or Section 7.03(b).
SECTION 6.07. Public Announcements. Subject to
each party's disclosure obligations imposed by law, Enova and
Pacific will cooperate with each other in the development and
distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any such
public announcement or statement without the consent of the
other party (which consent shall not be unreasonably
withheld).
SECTION 6.08. Rule 145 Affiliates. Pacific shall
identify in a letter to Enova, and Enova shall identify in a
letter to Pacific, all persons who are, at the Closing Date,
"affiliates" of Pacific and Enova, respectively, as such term
is used in Rule 145 under the Securities Act. Pacific and
Enova shall use their respective best efforts to cause their
respective affiliates to deliver to the Company on or prior to
the Closing Date a written agreement substantially in the form
attached as Exhibit 6.08 (each, an "AFFILIATE AGREEMENT").
SECTION 6.09. Employee Agreements and Workforce
Matters.
(a) Certain Employee Agreements. Subject to
Section 6.10 and Section 6.15, the Company and its
subsidiaries shall honor, without modification, all contracts,
agreements, collective bargaining agreements and commitments
of the parties prior to the date hereof which apply to any
current or former employee or current or former director of
the parties hereto; provided, however, that this undertaking
is not intended to prevent the Company from enforcing such
contracts, agreements, collective bargaining agreements and
commitments in accordance with their terms, including, without
limitation, any reserved right to amend, modify, suspend,
revoke or terminate any such contract, agreement, collective
bargaining agreement or commitment.
(b) Workforce Matters. Subject to the terms of any
applicable collective bargaining agreements, for a period of
three years following the Effective Time, any reductions in
workforce in respect of employees of the Company shall be made
on a fair and equitable basis, in light of the circumstances
and the objectives to be achieved, giving consideration to
previous work history, job experience, and qualifications,
without regard to whether employment was with Pacific or its
subsidiaries or Enova or its subsidiaries, and any employees
whose employment is terminated or jobs are eliminated by the
Company or any of its subsidiaries during such period shall be
entitled to participate on a fair and equitable basis in the
job opportunity and employment placement programs offered by
the Company or any of its subsidiaries.
SECTION 6.10. Employee Benefit Plans.
(a) Maintenance of Pacific and Enova Benefit Plans.
Each of the Pacific Benefit Plans and Enova Benefit Plans in
effect as of the Effective Time, except as provided in Section
6.10(b) and Section 6.11, shall be maintained in effect with
respect to the employees or former employees of Pacific and
any of its subsidiaries, on the one hand, and of Enova and any
of its subsidiaries, on the other hand, respectively, who are
covered by any such benefit plan immediately prior to the
Closing Date until the Company otherwise determines after the
Effective Time; provided, however, that nothing herein
contained shall limit any reserved right contained in any such
Pacific Benefit Plan or Enova Benefit Plan to amend, modify,
suspend, revoke or terminate any such plan. Any person hired
by the Company or any of its subsidiaries after the Closing
Date who was not employed by any party hereto or its
subsidiaries immediately prior to the Closing Date shall be
eligible to participate in such benefit plans maintained, or
contributed to, by the subsidiary, division or operation by
which such person is employed, provided that such person meets
the eligibility requirements of the applicable plan.
(b) Incentive Compensation Plans. Prior to the
Effective Time, a committee will be formed for the purposes of
developing short- and long-term incentive compensation
arrangements for the Company which are to be implemented after
the Effective Time and making the appropriate adjustments, if
any, to the performance goals, target awards and any other
relevant criteria under the incentive compensation plans of
Pacific and Enova that are in effect as of the Effective Time
to take the Mergers into account. In addition, such committee
shall conduct a review of Enova's and Pacific's respective
benefit plans following the signing of this Agreement in order
to coordinate the provision of benefits after the Effective
Time and to eliminate duplicative benefits, including, without
limitation, through the establishment by the Company of
replacement benefit plans (the "COMPANY REPLACEMENT PLANS").
Each participant in any Pacific Benefit Plan or Enova Benefit
Plan that is replaced by a Company Replacement Plan shall
receive credit for purposes of eligibility to participate,
vesting, benefit accrual and eligibility to receive benefits
under any Company Replacement Plan for service credited for
the corresponding purpose under such benefit plan; provided,
however, that such crediting of service shall not operate to
duplicate any benefit to any such participant or the funding
for any such benefit.
(c) Separate Plans. Pacific and Enova each agrees
that even in the event that the Pacific and Pacific Sub
pension plan shares a common or master trust with the Enova
and Enova Sub pension plan and even if Enova and Pacific
provide identical benefits the plans shall remain legally
separate whereby the assets of one plan cannot be applied to
the liabilities of the other plan.
SECTION 6.11. Stock Option and Other Stock Plans.
(a) Amendment of Stock Option Plans and
Agreements. (i) Prior to the Effective Time, Pacific shall
use its reasonable best efforts to cause each individual award
agreement entered into under the Pacific Employee Stock Option
Plan, the Pacific Stock Incentive Plan and the Pacific 1979
Stock Option Plan to be amended so as to eliminate the rights
of the award recipients thereunder to receive cash in exchange
for such award upon a Change in Control (as such term is
defined in such plans) that are triggered, directly or
indirectly, in whole or in part, by the Mergers or any
transaction or event consummated or occurring in connection
therewith.
(ii) Effective as of the Effective Time, Pacific
shall amend the Pacific Employee Stock Option Plan, the
Pacific Stock Incentive Plan and the Pacific 1979 Stock Option
Plan and Enova shall amend the 1986 Long-Term Incentive Plan
(as amended and restated effective April 25, 1995) and each of
Pacific and Enova shall amend each underlying award agreement
to provide that each outstanding award with respect to shares
of Pacific Common Stock and Enova Common Stock, respectively
(each, a "STOCK AWARD"), along with any tandem stock
appreciation right, shall constitute an award with respect
shares of Company Common Stock, on the same terms and
conditions as were applicable under such Stock Award, based
on the same number of shares of the Company Common Stock as
the holder of such Stock Award would have been entitled to
receive pursuant to the Mergers in accordance with Article II
had such holder exercised such award in full immediately prior
to the Effective Time. The number of shares, the award price,
and the terms and conditions of exercise of such award, shall
be determined in a manner that preserves both (i) the
aggregate gain (or loss) on the Stock Award immediately prior
to the Effective Time and (ii) the ratio of the exercise price
per share subject to the Stock Award to the fair market value
(determined immediately prior to the Effective Time) per share
subject to such award; provided, however, that in the case of
any option to which Section 421 of the Code applies by reason
of its qualification under any of Sections 422-424 of the
Code, option price, the number of shares purchasable pursuant
to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with
Section 424(a) of the Code. Prior to the Effective Time, each
of Pacific and Enova shall take such actions, including using
its reasonable best efforts to obtain the consent of the
awardees, as may be necessary to carry out the substitution
and exchange contemplated in this Section 6.11(a). At the
Effective Time, the Company shall assume each award agreement
relating to a Stock Award, each as amended as previously
provided. As soon as practicable after the Effective Time,
the Company shall deliver to the holders of Stock Awards
appropriate notices setting forth such holders' rights
pursuant to the Company stock incentive plan and each
underlying award agreement, each as assumed by the Company.
(b) Company Action. With respect to any other
Pacific Benefit Plan, Enova Benefit Plan or benefit plan of
the Company under which the delivery of Pacific Common Stock,
Enova Common Stock or Company Common Stock, as the case may
be, is required upon payment of benefits, grant of awards or
exercise of options (the "STOCK PLANS"), the Company shall
take all corporate action necessary or appropriate to (i)
obtain shareholder approval with respect to such plan to the
extent such approval is required for purposes of the Code or
other applicable law, or to enable such plan to comply with
Rule 16b-3 promulgated under the Exchange Act, (ii) reserve
for issuance under such plan or otherwise provide a sufficient
number of shares of Company Common Stock for delivery upon
payment of benefits, grant of awards or exercise of options
under such plan and (iii) as soon as practicable after the
Effective Time, file registration statements on Form S-3 or
Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the shares of Company
Common Stock subject to such plan to the extent such
registration statement is required under applicable law, and
the Company shall use its best efforts to maintain the
effectiveness of such registration statements (and maintain
the current status of the prospectuses contained therein) for
so long as such benefits and grants remain payable and such
options remain outstanding. With respect to those individuals
who subsequent to the Mergers will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, the
Company shall administer the Stock Plans, where applicable, in
a manner that complies with Rule 16b-3 promulgated under the
Exchange Act.
SECTION 6.12. No Solicitations. No party hereto
shall, and each such party shall cause its subsidiaries not
to, permit any of its Representatives to, and shall use its
best efforts to cause such persons not to, directly or
indirectly: initiate, solicit or encourage, or take any
action to facilitate the making of any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition
Proposal (as defined below), or, in the event of an
unsolicited Acquisition Proposal, except prior to the receipt
of the Enova Shareholders' Approval and of the Pacific
Shareholders' Approval to the extent the Board of Directors of
the party receiving such unsolicited Acquisition Proposal
determines in good faith after consultation with outside
counsel that such action is reasonably necessary for such
Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law, engage in negotiations
or provide any confidential information or data to any person
relating to any Acquisition Proposal. Each party hereto shall
notify the other party orally and in writing of any such
inquiries, offers or proposals, within 48 hours of the receipt
thereof, shall keep the other party informed of the status of
any such inquiry, offer or proposal, and shall give the other
party three days' advance notice of any agreement to be
entered into with or any information to be supplied to any
person making such inquiry, offer or proposal. Each party
hereto shall immediately cease and cause to be terminated all
existing discussions and negotiations, if any, with any
parties conducted heretofore with respect to any Acquisition
Proposal. As used in this Section 6.12, "ACQUISITION
PROPOSAL" shall mean any tender or exchange offer, proposal
for a merger, consolidation or other business combination
involving any party or any of its material subsidiaries, or
any proposal or offer (in each case, whether or not in writing
and whether or not delivered to the shareholders of a party
generally) to acquire in any manner, directly or indirectly, a
substantial equity interest in, or a substantial portion of
the assets of any party or any of its material subsidiaries,
other than any of the foregoing transactions among the parties
hereto or pursuant to the transactions contemplated by this
Agreement. Nothing contained herein shall prohibit a party
from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) under the Exchange Act with
respect to a Acquisition Proposal by means of a tender offer.
SECTION 6.13. Company Board of Directors. Enova's
and Pacific's Boards of Directors will take such action as may
be necessary to cause the Board of Directors of the Company at
the Effective Time to be constituted of an equal number of
directors designated by each of Enova and Pacific. Among the
directors of the Company at the Effective Time shall be
Richard D. Farman, President and Chief Operating Officer of
Pacific, who shall be designated by Pacific, and Stephen L.
Baum, President and Chief Executive Officer of Enova, who
shall be designated by Enova. Neither Pacific nor Enova shall
designate any other officer as a director of the Company at
the Effective Time. The initial designation of such directors
among the three classes of the Board of Directors of the
Company shall be agreed among the parties, the designees of
each party to be divided as equally as is feasible among such
classes; provided, however, that if, prior to the Effective
Time, any of such designees shall decline or be unable to
serve, the party which designated such person shall designate
another person to serve in such person's stead. Enova's and
Pacific's Boards of Directors will also take such action as
may be necessary to cause the committees of the Board of
Directors of the Company at the Effective Time to be
constituted of an equal number of directors of the Company
designated by Enova and Pacific.
SECTION 6.14. Company Officers. At the Effective
Time, pursuant to and in accordance with the terms hereof and
of the employment contracts referred to in Section 6.15,
Richard D. Farman, President and Chief Operating Officer of
Pacific, shall become Chairman of the Board and Chief
Executive Officer of the Company, and Stephen L. Baum,
President and Chief Executive Officer of Enova, shall become
Vice-Chairman, President and Chief Operating Officer of the
Company. If either of such persons is unable or unwilling to
hold such offices for the period set forth in his employment
contract, his successor shall be selected by the Board of
Directors of the Company in accordance with its Bylaws. The
Chairman of the Board and Chief Executive Officer and the
President and Chief Operating Officer of the Company shall
comprise the Office of the Chairman of the Company to which
all other officers of the Company and, after the Effective
Time, the Chief Executive Officers of Pacific, Pacific Sub,
Enova and Enova Sub shall report. Richard D. Farman,
President and Chief Operating Officer of Pacific, and Stephen
L. Baum, President and Chief Executive Officer of Enova, shall
unanimously recommend to the Board of Directors of the Company
candidates to serve as the officers of the Company who are not
otherwise designated by this Agreement. Such officers shall
be appointed by the Board of Directors of the Company in
accordance with its By-Laws.
SECTION 6.15. Employment Contracts. The Company
shall on the date hereof enter into four employment contracts
in the forms set forth in Exhibit 6.15.
SECTION 6.16. Post-Merger Operations. Following
the Effective Time, the Company shall conduct its operations
in accordance with the following:
(a) Principal Corporate Offices. The Company and
Enova Sub shall maintain their principal corporate offices in
San Diego and Pacific Sub shall maintain its principal
corporate offices in Los Angeles.
(b) Maintenance of Enova Sub and Pacific Sub.
Pacific Sub, on the one hand, and Enova Sub, on the other
hand, shall continue their separate corporate existences,
operating under the names of "Southern California Gas Company"
and "San Diego Gas & Electric", respectively.
(c) Charities. After the Effective Time, the
Company shall provide charitable contributions and community
support within the service areas of the parties and each of
their respective subsidiaries at levels substantially
comparable to the levels of charitable contributions and
community support provided by the parties and their respective
subsidiaries within their service areas within the two-year
period immediately prior to the Effective Time.
SECTION 6.17. Expenses. Subject to Section 8.03,
all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, except that those
expenses incurred in connection with printing the Joint Proxy
Statement and the Registration Statement, as well as the
filing fees relating thereto, and any such filing fees for
applications to the FERC, the CPUC, the NRC or the SEC shall
be shared equally by Enova, on the one hand, and Pacific, on
the other.
SECTION 6.18. Energy Marketing Joint Venture. As
promptly as practicable following the date hereof, each of
Pacific and Enova shall use their best efforts to negotiate
the terms of, and enter into, the Energy Marketing Joint
Venture Agreement, which agreement shall contain substantially
the terms contemplated by the Summary of Terms attached as
Exhibit A.
ARTICLE VII
CONDITIONS TO THE MERGERS
SECTION 7.01. Conditions to the Obligations of Each
Party. The respective obligations of each party to effect the
Mergers shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions, except, to the
extent permitted by applicable law, that such conditions may
be waived in writing pursuant to Section 9.05 by the joint
action of the parties hereto:
(a) Shareholder Approvals. The Pacific
Shareholders' Approval and the Enova Shareholders' Approval
shall have been obtained.
(b) No Injunction. No temporary restraining order
or preliminary or permanent injunction or other order by any
federal or state court preventing consummation of the Mergers
shall have been issued and continuing in effect, and the
Mergers and the other transactions contemplated hereby shall
not have been prohibited under any applicable federal or state
law or regulation.
(c) Registration Statement. The Registration
Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order suspending
such effectiveness shall have been issued and remain in
effect.
(d) Listing of Shares. The shares of Company
Common Stock issuable in the Mergers pursuant to Article II
shall have been approved for listing on the NYSE upon official
notice of issuance.
(e) Statutory Approvals. The Enova Required
Statutory Approvals and the Pacific Required Statutory
Approvals shall have been obtained at or prior to the
Effective Time, such approvals shall have become Final Orders
and neither such Final Orders nor any order, law or regulation
of any Governmental Authority imposes terms or conditions
which, in the aggregate, could reasonably be expected to have
a material adverse effect on (i) the ability of the Energy
Marketing Joint Venture to achieve the business objectives
contemplated by the Summary of Terms attached as Exhibit A or
(ii) the operations, properties, assets or financial condition
or results of operations of the Company and its prospective
subsidiaries taken as a whole or which would be materially
inconsistent with the agreements of the parties contained
herein. A "FINAL ORDER" means action by the relevant
regulatory authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to
which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has
expired, and as to which all conditions to the consummation of
such transactions prescribed by law, regulation or order have
been satisfied.
(f) HSR Act. All applicable waiting periods under
the HSR Act shall have expired.
(g) Pooling. Each of Enova and Pacific shall have
received a letter of its independent public accountants, dated
the Closing Date, in form and substance reasonably
satisfactory to Pacific and Enova, stating that the
transactions effected pursuant to Articles I and II of this
Agreement will qualify as a pooling of interests transaction
under GAAP and applicable SEC regulations.
SECTION 7.02. Conditions to the Obligations of
Pacific. The obligation of Pacific to effect the Pacific
Merger shall be further subject to the satisfaction, on or
prior to the Closing Date, of the following conditions, except
as may be waived by Pacific in writing pursuant to Section
9.05:
(a) Performance of Obligations of Enova. Enova
will have performed in all material respects its agreements
and covenants contained in or contemplated by this Agreement
required to be performed by it at or prior to the Effective
Time.
(b) Representations and Warranties. The
representations and warranties of Enova set forth in this
Agreement shall be true and correct in all material respects
as of the date hereof (representations and warranties made as
of a specified date which shall be true and correct as of such
date) and as of the Closing Date as if made on and as of the
Closing Date, except as otherwise contemplated by this
Agreement.
(c) Closing Certificates. Pacific shall have
received a certificate signed by an executive officer of
Enova, dated the Closing Date, to the effect that, to the best
of each such officer's knowledge, the conditions set forth in
Section 7.02(a) and Section 7.02(b) have been satisfied.
(d) Enova Material Adverse Effect. No Enova
Material Adverse Effect shall have occurred and there shall
exist no fact or circumstance which could reasonably be
expected to have a material adverse effect on the operations,
properties, assets, financial condition, results of operations
or prospects of Enova and its subsidiaries taken as a whole or
on the consummation of the transactions contemplated by this
Agreement or the ability of the Energy Marketing Joint Venture
to achieve the business objectives contemplated by the Summary
of Terms attached as Exhibit A.
(e) Tax Opinion. Pacific shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom, in form and
substance satisfactory to Pacific, dated the Closing Date, to
the effect that the Enova Merger, taken together with the
Pacific Merger, will be treated as an exchange under Section
351 of the Code.
(f) Enova Required Consents. The Enova Required
Consents the failure of which to obtain would have a Enova
Material Adverse Effect or a Joint Venture Material Adverse
Effect shall have been obtained.
SECTION 7.03. Conditions to the Obligations of
Enova. The obligations of Enova to effect the Enova Merger
shall be further subject to the satisfaction, prior to the
Closing Date, of the following conditions, except as may be
waived by Enova in writing pursuant to Section 9.05:
(a) Performance of Obligations of Pacific. Pacific
will have performed in all material respects its agreements
and covenants contained in or contemplated by this Agreement
required to be performed at or prior to the Effective Time.
(b) Representations and Warranties. The
representations and warranties of Pacific set forth in this
Agreement shall be true and correct in all material respects
as of the date hereof (representations and warranties made as
of a specified date which shall be true and correct as of such
date) and as of the Closing Date as if made on and as of the
Closing Date, except as otherwise contemplated by this
Agreement.
(c) Closing Certificates. Enova shall have
received certificates signed by the chief executive officer
and chief financial officer of Pacific, dated the Closing
Date, to the effect that, to the best of such officer's
knowledge, the conditions set forth in Section 7.03(a) and
Section 7.03(b) have been satisfied.
(d) Pacific Material Adverse Effect. No Pacific
Material Adverse Effect shall have occurred and there shall
exist no fact or circumstance which could reasonably be
expected to have a material adverse effect on the operations,
properties, assets, financial condition, results of operations
or prospects of Pacific and its subsidiaries taken as a whole
or on the consummation of the transactions contemplated by
this Agreement or the ability of the Energy Marketing Joint
Venture to achieve the business objectives contemplated by the
Summary of Terms attached as Exhibit A.
(e) Tax Opinion. Enova shall have received an
opinion of Shearman & Sterling, in form and substance
satisfactory to Enova, dated the Closing Date, to the effect
that the Enova Merger, taken together with the Pacific Merger,
will be treated as an exchange under Section 351 of the Code.
(f) Pacific Required Consents. The Pacific
Required Consents the failure of which to obtain would have a
Pacific Material Adverse Effect or a Joint Venture Material
Adverse Effect shall have been obtained.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be
terminated at any time prior to the Closing Date, whether
before or after approval by the shareholders of the respective
parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of
Directors of Enova and Pacific;
(b) by Pacific or Enova, by written notice to the
other, if the Effective Time shall not have occurred on or
before April 30, 1998; provided, however, that the right to
terminate the Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or
before this date;
(c) by Pacific or Enova, by written notice to the
other, if, either the Enova Shareholders' Approval or the
Pacific Shareholders' Approval, or both, shall not have been
obtained on or before June 30, 1997; provided, however, the
right to terminate this Agreement under this Section 8.01(c)
shall not be available to any party whose failure to fulfill
any obligations under this Agreement has been the cause of, or
resulted in, the failure of either of such approvals to have
been obtained on or before such date;
(d) by Pacific or Enova, if any state or federal
law, order, rule or regulation is adopted or issued, which has
the effect, as supported by the written opinion of outside
counsel for such party, of prohibiting the Pacific Merger or
the Enova Merger, or by any party hereto, if any court of
competent jurisdiction in the United States or any State shall
have issued an order, judgement or decree permanently
restraining, enjoining or otherwise prohibiting the Pacific
Merger or the Enova Merger, and such order, judgement or
decree shall have become final and nonappealable;
(e) by Enova, by written notice to Pacific, if
there shall have been any material breach of any material
representation or warranty, or any material breach of any
covenant or agreement of Pacific hereunder and such breach
shall not have been remedied within 60 days after receipt by
Pacific of notice in writing from Enova, specifying the nature
of such breach and requesting that it be remedied;
(f) by Pacific, by written notice to Enova, if
there shall have been any material breach of any material
representation or warranty, or any material breach of any
covenant or agreement of Enova hereunder and such breach shall
not have been remedied within 60 days after receipt by Enova
of notice in writing from Pacific, specifying the nature of
such breach and requesting that it be remedied;
(g) by Enova, by written notice to Pacific, if,
prior to the Pacific Special Meeting, the Board of Directors
of Pacific or any committee thereof (i) shall withdraw or
modify in any manner adverse to Enova its approval or
recommendation of this Agreement or the Pacific Merger, (ii)
shall approve or recommend any Acquisition Proposal by a party
other than Enova or any of its affiliates, or (iii) shall
resolve to take any of the actions specified in clause (i) or
(ii);
(h) by Pacific, by written notice to Enova, if,
prior to the Enova Special Meeting, the Board of Directors of
Enova or any committee thereof (i) shall withdraw or modify in
any manner adverse to Pacific its approval or recommendation
of this Agreement or the Enova Merger, (ii) shall approve or
recommend any Acquisition Proposal by a party other than
Pacific or any of its affiliates, or (iii) shall resolve to
take any of the actions specified in clause (i) or (ii);
(i) by Enova at any time prior to the Enova Special
Meeting, upon two days' prior notice to Pacific, if, as a
result of an Acquisition Proposal by a party other than
Pacific or any of its affiliates, the Board of Directors of
Enova determines in good faith after consultation with outside
counsel (and after giving effect to all concessions which may
be offered by Pacific pursuant to the proviso set forth below)
that acceptance of the Acquisition Proposal is reasonably
necessary for such Board of Directors to act in a manner
consistent with its fiduciary duties under applicable law;
provided, however, prior to any such termination, Enova shall,
and shall cause its respective financial and legal advisors
to, negotiate with Pacific to make such adjustments in the
terms and conditions of this Agreement as would enable Enova
to proceed with the transactions contemplated herein on such
adjusted terms; or
(j) by Pacific at any time prior to the Pacific
Special Meeting, upon two days' prior notice to Pacific, if,
as a result of an Acquisition Proposal by a party other than
Enova or any of its affiliates, the Board of Directors of
Pacific determines in good faith after consultation with
outside counsel (and after giving effect to all concessions
which may be offered by Enova pursuant to the proviso set
forth below) that acceptance of the Acquisition Proposal is
reasonably necessary for such Board of Directors to act in a
manner consistent with its fiduciary duties under applicable
law; provided, however, prior to any such termination, Pacific
shall, and shall cause its respective financial and legal
advisors to, negotiate with Enova to make such adjustments in
the terms and conditions of this Agreement as would enable
Pacific to proceed with the transactions contemplated herein
on such adjusted terms.
SECTION 8.02. Effect of Termination. In the event
of termination of this Agreement by either Enova or Pacific
pursuant to Section 8.01, there shall be no liability on the
part of either Enova or Pacific or their respective officers
or directors hereunder, except (a) Sections 6.01(b), 6.17 and
8.03 shall survive the termination and (b) nothing herein
shall relieve any party from liability for any willful breach
hereof.
SECTION 8.03. Fees and Expenses.
(a) Expense Reimbursement by Enova. If this
Agreement is terminated pursuant to (i) Section 8.01(c) as a
result of the Enova Shareholders' Approval not being obtained
and on or prior to the date of the Enova Special Meeting Enova
has been the subject of a publicly announced Acquisition
Proposal, (ii) Section 8.01(f), (iii) Section 8.01(h) or (iv)
Section 8.01(i), then Enova, shall promptly (but not later
than five business days after receipt or delivery of notice of
such termination, as applicable) pay to Pacific cash in an
amount equal to the greater of (x) $3 million or (y) the
lesser of (A) all documented out-of-pocket expenses and fees
incurred by Pacific (including, without limitation, fees and
expenses payable to all legal, accounting, financial, public
relations and other professional advisers) arising out of, in
connection with or related to this Agreement and the Energy
Marketing Joint Venture Agreement and the transactions
contemplated herein and therein and (B) $5 million, in the
case of termination on or before February 12, 1997, or $10
million in the case of termination after February 12, 1997
(the "PACIFIC OUT-OF-POCKET EXPENSES"); provided, however,
that if this Agreement is terminated by Pacific pursuant to
Section 8.01(f) as a result of a willful breach by Enova,
Pacific may pursue any remedies available to it at law or in
equity and shall, in addition to the Pacific Out-of-Pocket
Expenses, be entitled to retain such additional amounts as
Pacific may be entitled to receive at law or in equity.
(b) Expense Reimbursement by Pacific. If this
Agreement is terminated pursuant to (i) Section 8.01(c) as a
result of the Pacific Shareholders' Approval not being
obtained and on or prior to the date of the Pacific Special
Meeting Pacific has been the subject of a publicly announced
Acquisition Proposal, (ii) Section 8.01(e), (iii) Section
8.01(g) or (iv) Section 8.01(j), then Pacific, shall promptly
(but not later than five business days after receipt or
delivery of notice of such termination, as applicable), pay to
Enova cash in an amount equal to the greater of (x) $3 million
or (y) the lesser of (A) all documented out-of-pocket expenses
and fees incurred by Enova (including, without limitation,
fees and expenses payable to all legal, accounting, financial,
public relations and other professional advisers) arising out
of, in connection with or related to this Agreement and the
Energy Marketing Joint Venture Agreement and the transactions
contemplated herein and therein and (B) $5 million in the case
of termination on or before February 12, 1997, or $10 million
in the case of termination after February 12, 1997 (the "ENOVA
OUT-OF-POCKET EXPENSES"); provided, however, that if this
Agreement is terminated by Enova pursuant to Section 8.01(e)
as a result of a willful breach by Pacific, Enova may pursue
any remedies available to it at law or in equity and shall, in
addition to the Enova Out-of-Pocket Expenses, be entitled to
retain such additional amounts as Enova may be entitled to
receive at law or in equity.
(c) Enova Termination Fee. If (i) this Agreement
is terminated pursuant to (1) Section 8.01(c) as a result of
the Enova Shareholders' Approval not being obtained and on or
prior to the date of the Enova Special Meeting Enova has been
the subject of a publicly announced Acquisition Proposal, (2)
Section 8.01(h) or (3) Section 8.01(i) and (ii) within one
year of any such termination described in clause (i) above,
Enova or any of its material subsidiaries accepts a written
offer to consummate or consummates an Acquisition Proposal,
then Enova, will, upon the earlier of such acceptance or
consummation, pay to Pacific a termination fee equal to $72
million in cash.
(d) Pacific Termination Fee. If (i) this Agreement
is terminated pursuant to (1) Section 8.01(c) as a result of
the Pacific Shareholders' Approval not being obtained and on
or prior to the date of the Pacific Special Meeting Pacific
has been the subject of a publicly announced Acquisition
Proposal, (2) Section 8.01(g) or (3) Section 8.01(j) and (ii)
within one year of any such termination described in clause
(i) above, Pacific or any of its material subsidiaries accepts
a written offer to consummate or consummates an Acquisition
Proposal, then Pacific, will, upon the earlier of such
acceptance or consummation, pay to Enova a termination fee
equal to $72 million in cash.
(e) Expenses. The parties agree that the
agreements contained in this Section 8.03 are an integral part
of the transactions contemplated by the Agreement and
constitute liquidated damages and not a penalty. If one party
fails to promptly pay to the other any fee due hereunder, the
defaulting party shall pay the costs and expenses (including
legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount
of any unpaid fee from the date such fee was required to be
paid at a rate per annum equal at all times to 2% per annum
above the rate per annum that is the publicly announced prime
rate of Citibank, N.A.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations,
Warranties and Agreements. Except as otherwise provided in
this Section 9.01, the representations, warranties and
agreements of each party hereto shall remain operative and in
full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling
any such party or any of their officers or directors, whether
prior to or after the execution of this Agreement. The
representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination
of this Agreement pursuant to Section 8.01, as the case may
be, except that the agreements set forth in Articles I and II
and Sections 6.05, 6.09, 6.10, 6.11, 6.13, 6.14, 6.15 and 6.16
shall survive the Effective Time indefinitely.
SECTION 9.02. Notices. All notices and other
communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as
of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by
registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
change of address) or sent by electronic transmission, with
confirmation received, to the telecopy number specified below:
(a) If to Enova:
Enova Corporation
101 Ash Street
San Diego, California 92112
Telecopier No.: (619) 696-4611
Attention: Stephen L. Baum
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention: David W. Heleniak, Esq.
and
Shearman & Sterling
555 California Street
San Francisco, California 94104
Telecopier No.: (415) 616-1199
Attention: Michael J. Kennedy, Esq.
(b) If to Pacific:
Pacific Enterprises
555 W. 5th Street
Los Angeles, California 90013
Telecopier No.: (213) 244-8292
Attention: Willis B. Wood, Jr.
Richard D. Farman
With copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopier No. (212) 735-2000
Attention: Peter Allan Atkins, Esq.
Sheldon Adler, Esq.
SECTION 9.03. Certain Definitions. For purposes of
this Agreement, the term:
(a) "AFFILIATES" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first
mentioned person; including, without limitation, any
partnership or joint venture in which the person (either
alone, or through or together with any other subsidiary) has,
directly or indirectly, an interest of 5% or more;
(b) "BENEFICIAL OWNER" with respect to any shares,
means a person who shall be deemed to be the beneficial owner
of such shares (i) which such person or any of its affiliates
or associates beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates
(as such term is defined in Rule 12b-2 of the Exchange Act)
has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B) the
right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned, directly
or indirectly, by any other persons with whom such person or
any of its affiliates or person with whom such person or any
of its affiliates or associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares;
(c) "BUSINESS DAY" means any day other than a day
on which banks in San Diego or Los Angeles are required or
authorized to be closed;
(d) "CONTROL" (including the terms "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means the possession,
directly or indirectly or as trustee or executor, of the power
to direct or cause the direction of the management or policies
of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or
otherwise;
(e) "JOINT VENTURE" of a person means any
corporation or other entity (including partnerships and other
business associations and joint ventures) in which such person
or one or more of its subsidiaries owns an equity interest
that is less than a majority of any class of the outstanding
voting securities or equity, other than equity interests held
for passive investment purposes which are less than 5% of any
class of the outstanding voting securities or equity of any
such entity;
(f) "KNOWLEDGE" of any person means the actual
knowledge of the executive officers of such person and each
subsidiary of such person.
(g) "PERSON" means an individual, corporation,
partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the
Exchange Act); and
(h) "SUBSIDIARY" or "SUBSIDIARIES" of any person
means any corporation, partnership, joint venture or other
legal entity of which such person (either alone or through or
together with any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing
body of such corporation or other legal entity.
SECTION 9.04. Amendment. This Agreement may be
amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to
the Effective Time; provided, however, that, after approval
hereof by the shareholders of Enova and Pacific, no amendment
may be made which by law requires further approval by such
shareholders. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 9.05. Waiver. At any time prior to the
Effective Time, any party hereto may (a) extend the time for
the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be
bound thereby.
SECTION 9.06. Headings. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
SECTION 9.07. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the
end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 9.08. Entire Agreement. This Agreement
(including the documents and instruments referred to herein)
constitutes the entire agreement and supersedes all prior
agreements and undertakings (other than the Confidentiality
Agreement), both written and oral, among the parties, or any
of them, with respect to the subject matter hereof and, except
as otherwise expressly provided herein, is not intended to
confer upon any other person any rights or remedies hereunder.
SECTION 9.09. Assignment. This Agreement shall not
be assigned by operation of law or otherwise.
SECTION 9.10. Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person
any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement, other than Section 6.05 (which is
intended to be for the benefit of the Indemnified Parties and
may be enforced by such Indemnified Parties). Notwithstanding
the foregoing and any other provision of this Agreement, and
in addition to any other required action of the Board of
Directors of the Company (a) a majority of the directors (or
their successors) serving on the Board of Directors of the
Company who are designated by Pacific pursuant to Section 6.13
shall be entitled during the three year period commencing at
the Effective Time (the "THREE YEAR PERIOD") to enforce the
provision of Sections 6.05, 6.09, 6.10, 6.11, 6.13, 6.14, 6.15
and 6.16 on behalf of the Pacific officers, directors and
employees, as the case may be, and (b) a majority of the
directors (or their successors) serving on the Board of
Directors of the Company who are designated by Enova pursuant
to Section 6.13 shall be entitled during the Three Year Period
to enforce the provisions of Sections 6.05, 6.09, 6.10, 6.11,
6.13, 6.14, 6.15 and 6.16 on behalf of the Enova officers,
directors and employees, as the case may be. Such directors'
right and remedies under the preceding sentence are cumulative
and are in addition to any other rights and remedies they may
have at law or in equity, but in no event shall this Section
9.10 be deemed to impose any additional duties on any such
directors. The Company shall pay, at the time they are
incurred, all costs, fees and expenses of such directors
incurred in connection with the assertion of any rights on
behalf of the persons set forth above pursuant to this
Section.
SECTION 9.11. Failure or Indulgence Not Waiver;
Remedies Cumulative. No failure or delay on the part of any
party hereto in the exercise of any right hereunder shall
impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or
agreement herein, nor shall any single or partial exercise of
any such right preclude other or further exercise thereof or
of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
SECTION 9.12. Governing Law. This Agreement shall
governed by, and construed in accordance with, the laws of the
State of California.
SECTION 9.13. Counterparts. This Agreement may be
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.14. WAIVER OF JURY TRIAL. EACH OF Enova,
Pacific, THE COMPANY, NEWCO Enova SUB AND NEWCO Pacific SUB
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 9.15. Further Assurances. Each party will
execute such further documents and instruments and take such
further actions as may reasonably be requested by any other
party in order to consummate the transactions contemplated by
this Agreement and the Energy Marketing Joint Venture
Agreement in accordance with the terms hereof and thereof.
IN WITNESS WHEREOF, Enova, Pacific, the Company,
Newco Enova Sub and Newco Pacific Sub have caused this
Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
ENOVA CORPORATION
By: /s/ STEPHEN L. BAUM
Name: Stephen L. Baum
Title: President & Chief
Executive Officer
PACIFIC ENTERPRISES
By: /s/ WILLIS B. WOOD, JR.
Name: Willis B. Wood, Jr.
Title: Chairman & Chief
Executive Officer
MINERAL ENERGY COMPANY
By: /s/ KEVIN C. SAGARA
Name: Kevin C. Sagara
Title: President
G MINERAL ENERGY SUB
By: /s/ KEVIN C. SAGARA
Name: Kevin C. Sagara
Title: President
B MINERAL ENERGY SUB
By: /s/ GARY W. KYLE
Name: Gary W. Kyle
Title: President