=================================================================
AGREEMENT AND PLAN OF MERGER
between
OHIO EDISON COMPANY
and
CENTERIOR ENERGY CORPORATION
Dated as of September 13, 1996
=================================================================
Defined Terms
AEA 15
Agreement 1
Blue-Sky Filings 15
Blue-Sky Laws 14
Business Combination 73
Centerior 1
Centerior 1995 Financials 22
Centerior Acquisition Corp. 1
Centerior Acquisition Corp. Common Stock 5
Centerior Advisors 23
Centerior Certificates 8
Centerior Common Stock 1
Centerior Controlled Group Plans 20
Centerior Disclosure Schedule 13
Centerior Fairness Advisor 22
Centerior Conversion Number 5
Centerior Indemnified Liabilities 42
Centerior Indemnified Parties 42
Centerior Indemnifying Party 57
Centerior Material Adverse Effect 12
Centerior Merger 1
Centerior Merger Agreement 1
Centerior Option 5
Centerior Permits 17
Centerior Preferred 12
Centerior Right 1
Centerior Rights Agreement 1
Centerior SEC Documents 15
Centerior Stock Plans 12
Centerior Subs Preferred 22
Certificate of Merger 3
Closing 3
Closing Date 3
Code 2
Confidentiality Agreement 53
Conversion Number 5
Disclosure Schedules 61
Dissenting Holder 7
DOJ 14
DRP Agent 9
Effective Time 4
Environmental Claim 26
Environmental Laws 27
Environmental Permits 24
ERISA 19
Exchange Act 14
Exchange Agent 8
Exchange Fund 8
FERC 15
FERC Approvals 15
Final Order 64
FirstEnergy 1
FirstEnergy Common Stock 2
FirstEnergy Merger 2
FirstEnergy Option 5
FPA 15
FTC 14
GAAP 27
Governmental Entity 14
Hazardous Materials 27
HSR Act 14
Injunction 65
IRS 18
Joint Proxy Statement 14
Joint venture 24
Local Approvals 15
Merger 2
NRC 15
NRC Approvals 15
Ohio Edison 1
Ohio Edison Acquisition Corp. 1
Ohio Edison Acquisition Corp. Common Stock 4
Ohio Edison Advisors 39
Ohio Edison Certificates 8
Ohio Edison Preference 29
Ohio Edison Preferred 29
Ohio Edison Class A Preferred 29
Ohio Edison Common Stock 1
Ohio Edison Controlled Group Plans 35
Ohio Edison Conversion Number 5
Ohio Edison Disclosure Schedule 30
Ohio Edison Fairness Advisor 39
Ohio Edison Indemnified Liabilities 59
Ohio Edison Indemnified Parties 59
Ohio Edison Indemnifying Party 59
Ohio Edison Material Adverse Effect 29
Ohio Edison Merger 1
Ohio Edison Merger Agreement 1
Ohio Edison Permits 33
Ohio Edison Preferred 29
Ohio Edison Right 1
Ohio Edison Rights Agreement 1
Ohio Edison SEC Documents 32
Ohio Edison Subs Preferred 39
Ohio Edison 1995 Financials 38
Ohio GCL 4
Payment Date 45
PCBs 27
PUHCA 14
Release 27
S-4 14
SEC 2
SEC PUHCA Order 14
Securities Act 15
Services 49
Significant Subsidiary 12
State Takeover Approvals 15
Subsidiary 7
Takeover Proposal 46
Target Party 73
Task Force 62
Tax 19
Taxable 19
Taxes 19
Taxing 19
Unrecorded Transfer 9
Violation 13
Voting Debt 12
TABLE OF CONTENTS
Page
ARTICLE I
FORMATION OF FIRSTENERGY AND MERGER COMPANIES
1.1 Organization of FirstEnergy.. . . . . . . . . . . . . . . 2
1.2 Directors and Officers of FirstEnergy.. . . . . . . . . . 3
(a) Prior to the Effective Time. .. . . . . . . . . . . . . . 3
(b) As of the Effective Time. . . . . . . . . . . . . . . . . 3
1.3 Organization of Merger Companies. . . . . . . . . . . . . 3
ARTICLE II
THE MERGER
2.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Effective Time of the Merger. . . . . . . . . . . . . . . 3
2.3 Effects of the Merger . . . . . . . . . . . . . . . . . . 4
2.4 Directors and Officers of the Surviving Corporation . . . 4
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
RESPECTIVE CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Manner of Converting Shares . . . . . . . . . . . . . . . 4
(a) Capital Stock of Merger Companies. . . . . . . . . . 4
(b) Capital Stock of Centerior and Ohio Edison . . . . . 5
(c) Capital Stock of Centerior . . . . . . . . . . . . . 5
(d) Stock Options of Centerior . . . . . . . . . . . . . 5
(e) Cancellation of Treasury Stock and Certain
Ohio Edison and Centerior Common Stock . . . . . . . 6
(f) Adjustment Upon Changes in Capitalization. . . . . . 7
(g) Shares of Dissenting Holders . . . . . . . . . . . . 7
(h) Capital Stock of FirstEnergy . . . . . . . . . . . . 7
3.2 Exchange of Certificates. . . . . . . . . . . . . . . . . 8
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . 8
(b) Exchange Procedures. . . . . . . . . . . . . . . . . 8
(c) Distributions with Respect to Unexchanged Shares . . 9
(d) No Further Ownership Rights in Centerior and
Ohio Edison Common Stock . . . . . . . . . . . . . 10
(e) No Fractional Shares . . . . . . . . . . . . . . . 10
(f) Application of Exchange Fund . . . . . . . . . . . 11
(g) No Liability . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CENTERIOR
4.1 Organization, Standing and Power. . . . . . . . . . . . 12
4.2 Capital Structure . . . . . . . . . . . . . . . . . . . 12
4.3 Corporate Authority . . . . . . . . . . . . . . . . . . 13
4.4 No Violation. . . . . . . . . . . . . . . . . . . . . . 14
4.5 Consents and Approvals. . . . . . . . . . . . . . . . . 14
4.6 Centerior SEC Documents . . . . . . . . . . . . . . . . 16
4.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . 16
4.8 Information Supplied. . . . . . . . . . . . . . . . . . 17
4.9 Compliance with Applicable Laws . . . . . . . . . . . . 17
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . 18
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Employee Matters . . . . . . . . . . . . . . . . . . . 19
4.13 Absence of Certain Changes or Events . . . . . . . . . 22
4.14 Opinion of Centerior Financial Advisor . . . . . . . . 23
4.15 Vote Required . . . . . . . . . . . . . . . . . . . . . 23
4.16 Accounting Matters . . . . . . . . . . . . . . . . . . 23
4.17 No Change in Capital Structure . . . . . . . . . . . . 23
4.18 Ownership of Ohio Edison Stock . . . . . . . . . . . . 24
4.19 Centerior Subsidiaries . . . . . . . . . . . . . . . . 24
4.20 Environmental Protection . . . . . . . . . . . . . . . 25
(a) Compliance . . . . . . . . . . . . . . . . . . . . 25
(b) Environmental Permits. . . . . . . . . . . . . . . 25
(c) Environmental Claims . . . . . . . . . . . . . . . 25
(d) Releases . . . . . . . . . . . . . . . . . . . . . 26
(e) Predecessors . . . . . . . . . . . . . . . . . . . 26
(f) Disclosure . . . . . . . . . . . . . . . . . . . . 26
4.21 Regulation as a Utility . . . . . . . . . . . . . . . . 28
4.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF OHIO EDISON
5.1 Organization, Standing and Power. . . . . . . . . . . . 29
5.2 Capital Structure . . . . . . . . . . . . . . . . . . . 29
5.3 Corporate Authority . . . . . . . . . . . . . . . . . . 30
5.4 No Violation. . . . . . . . . . . . . . . . . . . . . . 31
5.5 Consents and Approvals. . . . . . . . . . . . . . . . . 31
5.6 Ohio Edison SEC Documents . . . . . . . . . . . . . . . 32
5.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . 33
5.8 Information Supplied. . . . . . . . . . . . . . . . . . 33
5.9 Compliance with Applicable Laws . . . . . . . . . . . . 34
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . 34
5.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.12 Employee Matters . . . . . . . . . . . . . . . . . . . 36
5.13 Absence of Certain Changes or Events . . . . . . . . . 39
5.14 Opinion of Ohio Edison Financial Advisor . . . . . . . 39
5.15 Vote Required . . . . . . . . . . . . . . . . . . . . . 40
5.16 Accounting Matters . . . . . . . . . . . . . . . . . . 40
5.17 No Change in Capital Structure . . . . . . . . . . . . 40
5.18 Ownership of Centerior Stock . . . . . . . . . . . . . 40
5.19 Ohio Edison Subsidiaries . . . . . . . . . . . . . . . 40
5.20 Environmental Protection . . . . . . . . . . . . . . . 41
(a) Compliance . . . . . . . . . . . . . . . . . . . . 41
(b) Environmental Permits. . . . . . . . . . . . . . . 41
(c) Environmental Claims . . . . . . . . . . . . . . . 41
(d) Releases . . . . . . . . . . . . . . . . . . . . . 42
(e) Predecessors . . . . . . . . . . . . . . . . . . . 42
(f) Disclosure . . . . . . . . . . . . . . . . . . . . 42
5.21 Regulation as a Utility . . . . . . . . . . . . . . . . 42
5.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . 43
6.2 Dividends; Changes in Stock . . . . . . . . . . . . . . 44
6.3 Issuance of Securities. . . . . . . . . . . . . . . . . 46
6.4 Constituent Documents . . . . . . . . . . . . . . . . . 46
6.5 No Solicitations. . . . . . . . . . . . . . . . . . . . 46
6.6 Acquisitions. . . . . . . . . . . . . . . . . . . . . . 47
6.7 Dispositions. . . . . . . . . . . . . . . . . . . . . . 47
6.8 Indebtedness. . . . . . . . . . . . . . . . . . . . . . 47
6.9 No Actions. . . . . . . . . . . . . . . . . . . . . . . 48
6.10 Cooperation, Notification . . . . . . . . . . . . . . . 48
6.11 Rights Agreements . . . . . . . . . . . . . . . . . . . 48
6.12 Collective Bargaining Agreements . . . . . . . . . . . 49
6.13 Employee Benefit Covenant . . . . . . . . . . . . . . . 49
6.14 Tax Covenant . . . . . . . . . . . . . . . . . . . . . 50
6.15 Capital Expenditures . . . . . . . . . . . . . . . . . 50
6.16 Transmission, Generation . . . . . . . . . . . . . . . 50
6.17 Modifications to Facilities . . . . . . . . . . . . . . 51
6.18 Accounting . . . . . . . . . . . . . . . . . . . . . . 51
6.19 Tax-Free Status . . . . . . . . . . . . . . . . . . . . 51
6.20 Affiliate Transactions . . . . . . . . . . . . . . . . 51
6.21 Rate Matters . . . . . . . . . . . . . . . . . . . . . 51
6.22 Third-Party Consents . . . . . . . . . . . . . . . . . 52
6.23 Tax-Exempt Status . . . . . . . . . . . . . . . . . . . 52
6.24 FirstEnergy Actions . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Preparation of S-4 and the Joint Proxy Statement. . . . 52
7.2 Letters of Centerior's Accountants. . . . . . . . . . . 53
7.3 Letters of Ohio Edison's Accountants. . . . . . . . . . 53
7.4 Access to Information . . . . . . . . . . . . . . . . . 53
7.5 Shareholder Approvals . . . . . . . . . . . . . . . . . 54
7.6 Satisfaction of Conditions to the Merger. . . . . . . . 54
7.7 Rule 145 Affiliates . . . . . . . . . . . . . . . . . . 55
7.8 Stock Exchange Listing. . . . . . . . . . . . . . . . . 55
7.9 Employee Benefit Plans. . . . . . . . . . . . . . . . . 56
7.10 Expenses . . . . . . . . . . . . . . . . . . . . . . . 56
7.11 Brokers or Finders . . . . . . . . . . . . . . . . . . 57
7.12 FirstEnergy Board of Directors and Officers . . . . . . 57
7.13 Indemnification; Directors' and Officers' Insurance . . 58
7.14 Further Assurances . . . . . . . . . . . . . . . . . . 61
7.15 Tax Treatment . . . . . . . . . . . . . . . . . . . . . 61
7.16 Accounting Treatment . . . . . . . . . . . . . . . . . 61
7.17 Disclosure Schedules . . . . . . . . . . . . . . . . . 62
7.18 Public Announcements . . . . . . . . . . . . . . . . . 62
7.19 Employee Agreements . . . . . . . . . . . . . . . . . . 63
7.20 Transition Management . . . . . . . . . . . . . . . . . 63
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect
the Merger. . . . . . . . . . . . . . . . . . . . . . . 64
(a) Shareholder Approvals. . . . . . . . . . . . . . . 64
(b) NYSE Listing . . . . . . . . . . . . . . . . . . . 64
(c) Regulatory Approvals . . . . . . . . . . . . . . . 64
(d) S-4 Effective. . . . . . . . . . . . . . . . . . . 65
(e) No Injunctions or Restraints . . . . . . . . . . . 65
(f) Letter from Rule 145 Affiliates. . . . . . . . . . 65
(g) Regulatory Order . . . . . . . . . . . . . . . . . 66
8.2 Conditions to Obligations of Ohio Edison. . . . . . . . 66
(a) Representations and Warranties . . . . . . . . . . 66
(b) Performance of Obligations of Centerior. . . . . . 66
(c) Tax Opinion. . . . . . . . . . . . . . . . . . . . 66
(d) No Amendments to Resolutions . . . . . . . . . . . 67
(e) Rights Agreement.. . . . . . . . . . . . . . . . . 67
(f) Consents Under Agreements. . . . . . . . . . . . . 67
(g) Centerior Material Adverse Effect. . . . . . . . . 68
(h) Ohio Edison Fairness Opinion . . . . . . . . . . . 68
8.3 Conditions to Obligations of Centerior. . . . . . . . . 68
(a) Representations and Warranties . . . . . . . . . . 68
(b) Performance of Obligations of Ohio Edison. . . . . 68
(c) Tax Opinion. . . . . . . . . . . . . . . . . . . . 68
(d) No Amendments to Resolutions . . . . . . . . . . . 69
(e) Rights Agreement . . . . . . . . . . . . . . . . . 69
(f) Consents Under Agreements. . . . . . . . . . . . . 69
(g) Ohio Edison Material Adverse Effect. . . . . . . . 69
(h) Centerior Fairness Opinion . . . . . . . . . . . . 69
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . 69
9.2 Effect of Termination . . . . . . . . . . . . . . . . . 71
9.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . 71
9.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . 72
9.5 Termination Fee; Expenses . . . . . . . . . . . . . . . 72
(a) Termination Fee Upon Breach . . . . . . . . . . . . . . 72
(b) Additional Termination Fee. . . . . . . . . . . . . . . 73
(c) Rights; Expenses. . . . . . . . . . . . . . . . . . . . 74
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations and Warranties. . . . . 74
10.2 Further Assurances . . . . . . . . . . . . . . . . . . 74
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . 74
10.4 Interpretation . . . . . . . . . . . . . . . . . . . . 75
10.5 Descriptive Headings . . . . . . . . . . . . . . . . . 76
10.6 Counterparts . . . . . . . . . . . . . . . . . . . . . 76
10.7 Entire Agreement . . . . . . . . . . . . . . . . . . . 76
10.8 No Third Party Beneficiaries . . . . . . . . . . . . . 76
10.9 Governing Law. . . . . . . . . . . . . . . . . . . . . 76
10.10 Severability . . . . . . . . . . . . . . . . . . . . . 76
10.11 Publicity . . . . . . . . . . . . . . . . . . . . . . 77
10.12 Binding Effect . . . . . . . . . . . . . . . . . . . . 77
10.13 Assignment . . . . . . . . . . . . . . . . . . . . . . 77
10.14 Amendments; Waiver . . . . . . . . . . . . . . . . . . 77
Exhibit A Form of Ohio Edison Merger Agreement
Exhibit B Form of Centerior Merger Agreement
Exhibit C Form of initial Articles of Incorporation of
FirstEnergy
Exhibit D Form of Regulations of FirstEnergy
Exhibit E Officers of FirstEnergy Corp.
Exhibit F Form of amended Articles of Incorporation of
FirstEnergy
Exhibit G Form of amended Regulations of FirstEnergy
Exhibit H Form of amendment to Ohio Edison Rights
Agreement
Exhibit I Form of Letter Identifying Rule 145
Affiliates
Exhibit J Form of Affiliate Agreement with Form of Rule
145 Compliance Letter attached thereto as
Annex A
AGREEMENT AND PLAN OF MERGER dated as of September 13,
1996 (the "Agreement"), between OHIO EDISON COMPANY, an Ohio
corporation with its principal executive offices in Akron, Ohio
("Ohio Edison"), and CENTERIOR ENERGY CORPORATION, an Ohio
corporation with its principal executive offices in Independence,
Ohio ("Centerior").
WHEREAS, the respective Boards of Directors of Ohio
Edison and Centerior deem it advisable and in the best interests
of their respective shareholders to consummate, and have
approved, the business combination transactions provided for
herein in which
(i) Ohio Edison and Centerior will form an Ohio
holding company, FirstEnergy Corp. ("FirstEnergy"),
(ii) (A) FirstEnergy will form two subsidiaries,
one of which ("Ohio Edison Acquisition Corp.") will merge
with and into Ohio Edison with Ohio Edison continuing as the
surviving corporation (the "Ohio Edison Merger") pursuant to
the Ohio Edison Merger Agreement attached hereto as Exhibit
A (the "Ohio Edison Merger Agreement"), and the other of
which ("Centerior Acquisition Corp.") will merge with and
into Centerior with Centerior continuing as the surviving
corporation (the "Centerior Merger") pursuant to the
Centerior Merger Agreement attached hereto as Exhibit B (the
"Centerior Merger Agreement"), and
(B) whereby
(I) each issued and outstanding share of
common stock, par value $9 per share, of Ohio
Edison ("Ohio Edison Common Stock"), and any
associated right (an "Ohio Edison Right") that may
be issued pursuant to the Rights Agreement, dated
as of October 16, 1990, between Ohio Edison and
Citibank, N.A., as Rights Agent (the "Ohio Edison
Rights Agreement"), and
(II) each issued and outstanding share
of common stock, without par value, of Centerior
("Centerior Common Stock"), and any associated
right (a "Centerior Right") that may be issued
pursuant to the Shareholder Rights Agreement,
dated as of June 25, 1996, between Centerior and
KeyBank National Association, as Rights Agent (the
"Centerior Rights Agreement"),
in each case not owned directly or through a wholly-owned
Subsidiary by Ohio Edison or Centerior, will be converted
- 1 -
into the right to receive common stock, par value $0.10 per
share, of FirstEnergy ("FirstEnergy Common Stock"),
(iii) immediately after the Centerior Merger,
Centerior will merge with and into FirstEnergy with
FirstEnergy continuing as the surviving corporation (the
"FirstEnergy Merger"; the Ohio Edison Merger, the Centerior
Merger and the FirstEnergy Merger together being referred to
herein as the "Merger"), and
(iv) as a result of the Merger, the respective
common shareholders of Ohio Edison and Centerior will own
all of the outstanding shares of FirstEnergy Common Stock
and each share of any other class of capital stock of Ohio
Edison and its Subsidiaries and of the Subsidiaries of
Centerior will be unaffected by the Merger and will remain
outstanding;
WHEREAS, for Federal income tax purposes, it is
intended that the Merger qualify, as to Ohio Edison, as a
tax-free transfer within the meaning of Section 351(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and, as
to Centerior, as a tax-free reorganization within the meaning of
Section 368(a) of the Code;
WHEREAS, for accounting purposes, it is intended that
the Merger will be accounted for on a purchase accounting basis
in accordance with generally accepted accounting principles
applied on a consistent basis ("GAAP") and applicable regulations
of the Securities and Exchange Commission (the "SEC");
WHEREAS, Centerior and Ohio Edison desire to make
certain representations, warranties and agreements in connection
with the Merger and also to prescribe various conditions to the
Merger;
NOW, THEREFORE, in consideration of the premises and
the respective representations, warranties, covenants and
agreements set forth in this Agreement, the parties agree as
follows:
ARTICLE I
FORMATION OF FIRSTENERGY AND MERGER COMPANIES
1.1 Organization of FirstEnergy. As promptly as
practicable following the execution of this Agreement, Ohio
Edison and Centerior shall cause FirstEnergy to be organized
under the laws of the State of Ohio. The initial Articles of
Incorporation and Regulations of FirstEnergy shall be in the
forms attached hereto as Exhibits C and D, respectively. The
authorized capital stock of FirstEnergy shall consist initially
of 100 shares of common stock, par value $0.10 per share, of
- 2 -
which 50 shares will be issued to Ohio Edison and 50 shares will
be issued to Centerior.
1.2 Directors and Officers of FirstEnergy.
(a) Prior to the Effective Time. Upon formation
of FirstEnergy, Ohio Edison and Centerior shall cause one
individual selected by each company to be elected as
directors of FirstEnergy and the individuals designated on
Exhibit E hereto to be elected as the officers of
FirstEnergy, holding the position(s) designated on Exhibit
E. Each such officer and director (or any replacement
officer or director designated as set forth above) shall
remain in office until his successor is elected.
(b) As of the Effective Time. As of the
Effective Time, the parties hereto agree that the Board of
Directors and officers of FirstEnergy shall be designated as
provided in Section 7.12 of this Agreement.
1.3 Organization of Merger Companies. As promptly as
practicable after the formation of FirstEnergy, the parties shall
cause FirstEnergy to cause Ohio Edison Acquisition Corp. and
Centerior Acquisition Corp. to be organized under the laws of the
State of Ohio. The Articles of Incorporation and Regulations of
Ohio Edison Acquisition Corp. and Centerior Acquisition Corp.
shall be in such form as shall be determined by FirstEnergy.
Upon formation of each company, FirstEnergy shall designate the
Boards of Directors and officers of each of Ohio Edison
Acquisition Corp. and Centerior Acquisition Corp.
ARTICLE II
THE MERGER
2.1 Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., on a date to be
specified by the parties, which shall be no later than the second
business day following the date on which the last of the closing
conditions set forth in Article VIII has been met or waived, at
the offices of Squire, Sanders & Dempsey, 4900 Key Tower, 127
Public Square, Cleveland, Ohio, unless another date or place is
agreed to in writing by the parties hereto (the "Closing Date").
2.2 Effective Time of the Merger. Subject to the
provisions of this Agreement, certificates of merger shall be
duly prepared, executed and acknowledged by an appropriate
officer of each of the corporations involved in the Merger (the
"Certificates of Merger") and thereafter delivered on the Closing
Date to the Secretary of State of the State of Ohio for filing,
as provided by Ohio law, as soon as practicable on or after the
Closing Date. The Merger shall become effective upon the filing
of the Certificates of Merger with the Secretary of State of the
- 3 -
State of Ohio or at such time thereafter as is provided in the
Certificates of Merger (the "Effective Time").
2.3 Effects of the Merger. At the Effective Time, and
subject to such changes as Ohio Edison and Centerior shall agree
to be necessary to secure required regulatory approvals,
(a) the separate existence of Ohio Edison
Acquisition Corp. shall cease and Ohio Edison Acquisition
Corp. shall be merged with and into Ohio Edison with Ohio
Edison continuing as the surviving corporation,
(b) the separate existence of Centerior
Acquisition Corp. shall cease and Centerior Acquisition
Corp. shall be merged with and into Centerior with Centerior
continuing as the surviving corporation,
(c) the separate existence of Centerior shall
cease and Centerior shall be merged with and into
FirstEnergy with FirstEnergy continuing as the surviving
corporation,
(d) the Merger shall have all the effects of
applicable law, including, without limitation, Section
1701.82 of the Ohio General Corporation Law (the "Ohio
GCL"), and
(e) the Articles of Incorporation and Regulations
of FirstEnergy shall be amended and restated in their
entirety in the form attached hereto as Exhibits F and G,
respectively.
2.4 Directors and Officers of the Surviving
Corporation. As of the Effective Time, the directors and
officers of the respective surviving corporations of the Merger
shall be designated as provided in Section 7.12 of this
Agreement.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
RESPECTIVE CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Manner of Converting Shares. As of the Effective
Time, by virtue of the Merger and without any action on the part
of the holder of any shares of capital stock of the corporations
involved:
(a) Capital Stock of Merger Companies. The
shares of common stock of Ohio Edison Acquisition Corp, par
value $0.10 per share ("Ohio Edison Acquisition Corp. Common
Stock"), which are issued and outstanding immediately prior
to the Effective Time, shall be converted into and become
- 4 -
shares of Ohio Edison Common Stock at a rate of one (1)
share of Ohio Edison Common Stock for each share of Ohio
Edison Acquisition Corp. Common Stock, and the shares of
common stock of Centerior Acquisition Corp., par value $0.10
per share (the "Centerior Acquisition Corp. Common Stock"),
which are issued and outstanding immediately prior to the
Effective Time, shall be converted into and become shares of
Centerior Common Stock at a rate of one (1) share of
Centerior Common Stock for each share of Centerior
Acquisition Corp. Common Stock.
(b) Capital Stock of Centerior and Ohio Edison.
(i) Subject to Section 3.1(e), (f) and (g),
each share of Centerior Common Stock issued and
outstanding immediately prior to the Effective Time,
including any Centerior Right, and each share of Ohio
Edison Common Stock issued and outstanding immediately
prior to the Effective Time, including any Ohio Edison
Right, shall be converted into and become a right to
receive fully paid and nonassessable shares of
FirstEnergy Common Stock at the rate of 0.525
(525/1000) share of FirstEnergy Common Stock for each
share of Centerior Common Stock (the "Centerior
Conversion Number") and at the rate of one share of
FirstEnergy Common Stock for each share of Ohio Edison
Common Stock (the "Ohio Edison Conversion Number" and
each, a "Conversion Number").
(ii) All shares of Centerior and Ohio Edison
Common Stock referred to in Section 3.1(b)(i) and so
converted shall no longer be outstanding and shall
automatically be canceled and retired and shall cease
to exist, and, except as provided under Section 1701.85
of the Ohio GCL, each holder of a certificate
representing any such shares shall cease to have any
rights with respect to such certificate, except the
right to receive certificates for shares of FirstEnergy
Common Stock to be issued in consideration therefor
upon the surrender of such certificate in accordance
with Section 3.2, without interest.
(c) Capital Stock of Centerior. The shares of
Centerior Common Stock which are issued and outstanding
immediately prior to the FirstEnergy Merger shall be
canceled and retired and shall cease to exist.
(d) Stock Options of Centerior.
(i) Each unexpired and unexercised option to
purchase Centerior Common Stock (each, a "Centerior
Option") under Centerior's Equity Compensation Plan
shall be deemed to be automatically converted into an
option (a "FirstEnergy Option") to purchase a number of
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shares of FirstEnergy Common Stock equal to the number
of shares of Centerior Common Stock that could have
been purchased under the Centerior Option multiplied by
the Centerior Conversion Number (with the resulting
number of shares rounded up or down to the nearest
whole share), at an exercise price per share of
FirstEnergy Common Stock equal to the option exercise
price of the Centerior Option determined pursuant to
the Centerior Option divided by the Centerior
Conversion Number (with the resulting exercise price
rounded up or down to the nearest whole cent).
(ii) Each such FirstEnergy Option shall
otherwise be subject to the same terms and conditions
as the Centerior Option.
(iii) The date of grant of the substituted
FirstEnergy Option shall be the date on which the
corresponding Centerior Option was granted.
(iv) At the Effective Time, the parties shall
cause FirstEnergy to
(A) assume all of Centerior's
obligations with respect to all Centerior Options
as contemplated by this Section 3.1(d),
(B) reserve for issuance the number of
shares of FirstEnergy Common Stock that will
become subject to FirstEnergy Options pursuant to
this Section 3.1(d),
(C) from and after the Effective Time,
upon exercise of the FirstEnergy Options in
accordance with the terms thereof, make available
for issuance all shares of FirstEnergy Common
Stock covered thereby, and
(D) as soon as practicable after the
Effective Time, issue to each holder of an
outstanding Centerior Option a document evidencing
the foregoing assumption by FirstEnergy.
(e) Cancellation of Treasury Stock and Certain
Ohio Edison and Centerior Common Stock.
(i) Any shares of Centerior or Ohio Edison
Common Stock that are owned immediately prior to the
Effective Time by any of the parties hereto or by any
other wholly-owned Subsidiary of Centerior or Ohio
Edison, including any such common stock which
constitutes treasury stock in the hands of the holder
thereof, shall be canceled and retired and shall cease
to exist, and no FirstEnergy Common Stock or other
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consideration shall be issued or delivered in exchange
therefor, and each holder of a certificate representing
any such shares shall cease to have any rights with
respect thereto.
(ii) As used in this Agreement, a
"Subsidiary" of a person means any corporation or other
organization, whether incorporated or unincorporated,
of which such person or any other Subsidiary of such
person is a general partner (excluding partnerships,
the general partnership interests of which held by such
person or any Subsidiary of such person do not have a
majority of the voting interests in such partnership)
or directly or indirectly owns or controls at least a
majority of the securities or other interests having by
their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar
functions with respect to such corporation or other
organization.
(f) Adjustment Upon Changes in Capitalization.
In the event of any change in Centerior or Ohio Edison
Common Stock by reason of stock dividends, splitups, mergers
(other than the Merger), recapitalizations, combinations,
exchange of shares or the like, the type and number of
shares or securities to be issued upon conversion of the
Centerior or Ohio Edison Common Stock, as the case may be,
and the applicable Conversion Number provided in Section
3.1(b), shall be adjusted appropriately.
(g) Shares of Dissenting Holders. Any issued and
outstanding shares of Centerior or Ohio Edison Common Stock
held by a person who objects to the applicable Merger and
complies with all provisions of applicable law concerning
the right of such person to dissent from such Merger and
demand appraisal of such shares (a "Dissenting Holder")
shall not be converted into a right to receive FirstEnergy
Common Stock as set forth in Section 3.1(b) but shall from
and after the Effective Time represent only the right to
receive such consideration as may be determined to be due to
such Dissenting Holder pursuant to such applicable laws,
Articles of Incorporation or Regulations; provided, however,
that shares of Centerior or Ohio Edison Common Stock
outstanding immediately prior to the Effective Time and held
by a Dissenting Holder who shall, after such Effective Time,
withdraw the demand for appraisal or lose the right of
appraisal, in either case pursuant to such applicable law,
of such shares, shall be deemed to be converted, as of the
Effective Time, into the right to receive the shares of
FirstEnergy Common Stock specified in Section 3.1(b),
without interest.
(h) Capital Stock of FirstEnergy. The shares of
FirstEnergy Common Stock which are issued and outstanding
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immediately prior to the Effective Time shall be canceled
and retired and shall cease to exist.
3.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time,
FirstEnergy shall have deposited with such bank or trust
company designated by Ohio Edison, with the approval of
Centerior which approval shall not be unreasonably withheld
(the "Exchange Agent"), for the benefit of the holders of
shares of Centerior or Ohio Edison Common Stock, as the case
may be, for exchange in accordance with this Article III,
through the Exchange Agent, certificates representing the
shares of FirstEnergy Common Stock (such shares of
FirstEnergy Common Stock and monies for payment in lieu of
fractional shares as hereinafter provided being hereinafter
referred to as the "Exchange Fund") issuable pursuant to
Section 3.1 in exchange for outstanding shares of Centerior
and Ohio Edison Common Stock.
(b) Exchange Procedures.
(i) As soon as reasonably practicable after
the Merger, 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 Centerior Common Stock (the
"Centerior Certificates") or Ohio Edison Common Stock
(the "Ohio Edison Certificates") whose shares were
converted into the right to receive shares of
FirstEnergy Common Stock pursuant to Section 3.1(b),
(A) a letter of transmittal (which shall
specify that delivery shall be effected, and risk
of loss and title to the Centerior Certificates or
Ohio Edison Certificates, as the case may be,
shall pass, only upon delivery of the Centerior
Certificates or Ohio Edison Certificates, as the
case may be, to the Exchange Agent and shall be in
such form and have such other provisions as
FirstEnergy may reasonably specify) and
(B) instructions for use in effecting
the surrender of the Centerior Certificates or
Ohio Edison Certificates, as the case may be, in
exchange for certificates representing shares of
FirstEnergy Common Stock.
(ii) Upon surrender of a Centerior
Certificate or an Ohio Edison Certificate, as the case
may be, for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by
FirstEnergy, together with such letter of transmittal,
duly executed, the holder of such Centerior Certificate
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or Ohio Edison Certificate, as the case may be, shall
be entitled to receive in exchange therefor a
certificate representing that number of whole shares
(except in the case of the agent for Centerior's
Dividend Reinvestment and Stock Purchase Plan (the "DRP
Agent"), which shall be entitled to whole and
fractional shares) of FirstEnergy Common Stock
(including the right to receive cash in lieu of
fractional shares as contemplated in Section 3.2(e))
which such holder has the right to receive pursuant to
the provisions of this Article III, and the Centerior
Certificate or Ohio Edison Certificate, as the case may
be, so surrendered shall forthwith be canceled.
(iii) In the event of a transfer of ownership
of Centerior Common Stock or Ohio Edison Common Stock
which is not registered in the transfer records of
Centerior or Ohio Edison, as the case may be (an
"Unrecorded Transfer"), a certificate representing the
proper number of shares of FirstEnergy Common Stock
(including the right to receive cash in lieu of
fractional shares as contemplated in Section 3.2(e))
may be issued to a transferee of an Unrecorded Transfer
if the Centerior Certificate or Ohio Edison
Certificate, as the case may be, representing such
Centerior Common Stock or Ohio Edison Common Stock is
presented to the Exchange Agent, accompanied by all
documents required to evidence and effect the
Unrecorded Transfer and by evidence that any applicable
stock transfer taxes have been paid.
(iv) Until surrendered as contemplated by
this Section 3.2, each Centerior Certificate and Ohio
Edison Certificate, as the case may be, shall be deemed
at any time after the Effective Time to represent the
number of whole (and, in the case of the DRP Agent,
fractional) shares of FirstEnergy Common Stock which
the holder of record thereof has the right to receive
upon such surrender. Cash in lieu of any fractional
shares of FirstEnergy Common Stock as contemplated by
this Section 3.2 shall only be paid upon such surrender
and shall be paid without interest or any other
accretion.
(c) Distributions with Respect to Unexchanged
Shares.
(i) Dividends or other distributions declared
or made after the Effective Time with respect to
FirstEnergy Common Stock with a record date after the
Effective Time shall be paid to the holder of any
unsurrendered Centerior Certificate or Ohio Edison
Certificate, as the case may be, with respect to the
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whole (and, in the case of the DRP Agent, fractional)
shares of FirstEnergy Common Stock represented thereby.
(ii) Subject to the effect of applicable
laws, following surrender of any such Centerior
Certificate or Ohio Edison Certificate, as the case may
be, there shall be paid to the record holder of the
certificates representing whole shares of FirstEnergy
Common stock issued in exchange therefor, without
interest, at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of
FirstEnergy Common Stock to which such holder is
entitled pursuant to Section 3.2(e).
(d) No Further Ownership Rights in Centerior and
Ohio Edison Common Stock.
(i) All shares of FirstEnergy Common Stock
issued in the Merger upon conversion of shares of
Centerior and Ohio Edison Common Stock in accordance
with the terms hereof (including any cash paid in lieu
of fractional shares pursuant to Section 3.2(e)) shall
be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Centerior and
Ohio Edison Common Stock, subject, however, to the
obligation of FirstEnergy to pay any dividends or make
any other distributions with a record date prior to the
Effective Time which may have been declared or made by
Centerior on such shares of Centerior Common Stock or
by Ohio Edison on such shares of Ohio Edison Common
Stock in accordance with the terms of this Agreement or
prior to the date hereof and which remain unpaid at the
Effective Time, and there shall be no further
registration of transfers on the stock transfer books
of Centerior or Ohio Edison, as the case may be, of the
shares of Centerior Common Stock or Ohio Edison Common
Stock which were outstanding immediately prior to the
Effective Time.
(ii) If, after the Effective Time, Centerior
Certificates or Ohio Edison Certificates are presented
to FirstEnergy for any reason, they shall be canceled
and exchanged as provided in this Article III.
(e) No Fractional Shares.
(i) Except with respect to the DRP Agent, no
certificates or scrip representing fractional shares of
FirstEnergy Common Stock shall be issued upon the
surrender for exchange of Centerior or Ohio Edison
Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights
of a shareholder of FirstEnergy.
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(ii) To the extent a holder of Centerior
Common Stock or Ohio Edison Common Stock would
otherwise have been entitled to receive a fractional
share of FirstEnergy Common Stock, such holder shall be
entitled to receive payment in cash therefor, without
interest, in an amount equal to such fraction
multiplied by the closing price of FirstEnergy Common
Stock on the New York Stock Exchange on the date of the
Effective Time or, if such stock does not trade on such
exchange on that date, on the first day after the date
of the Effective Time that such stock trades on such
exchange. Payments in lieu of fractional shares
pursuant to this Section 3.2(e) are merely intended to
provide a mechanism for "rounding off" fractional
shares and do not constitute separately bargained for
consideration.
(iii) As soon as practicable after the
determination of the amount of cash, if any, to be paid
to holders of Centerior and Ohio Edison Common Stock in
lieu of any fractional share interests, the Exchange
Agent shall make available such amounts to such holders
of Centerior and Ohio Edison Common Stock.
(f) Application of Exchange Fund. Any
certificates for shares of FirstEnergy Common Stock and any
monies for payment in lieu of fractional shares in the
Exchange Fund which remain undistributed to the holders of
Centerior and Ohio Edison Common Stock for 12 months after
the Effective Time shall be delivered to FirstEnergy, upon
demand, and any holders of Centerior or Ohio Edison Common
Stock who have not theretofore complied with this Article
III shall thereafter look only to FirstEnergy for payment of
their claim for FirstEnergy Common Stock and any cash in
lieu of fractional shares of FirstEnergy Common Stock.
(g) No Liability. No party to this Agreement
shall be liable to any holder of shares of Centerior Common
Stock, Ohio Edison Common Stock or FirstEnergy Common Stock,
as the case may be, for such shares (or dividends or
distributions with respect thereto) or cash delivered to a
public official pursuant to any applicable abandoned
property, escheat or similar law.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CENTERIOR
Centerior represents and warrants to Ohio Edison as
follows:
4.1 Organization, Standing and Power.
(a) Each of Centerior and its Significant
Subsidiaries
(i) is a corporation or partnership duly
organized, validly existing and in good standing under
the laws of its state of incorporation or organization,
(ii) has all requisite power and authority,
and has been duly authorized by all necessary approvals
and orders of Governmental Entities (as defined in
Section 4.4), to own, lease and operate its properties
and to carry on its business as now being conducted,
and
(iii) is duly qualified and in good standing
to transact business in each jurisdiction in which the
nature of its business or the ownership or leasing of
its properties makes such qualification necessary,
other than in such jurisdictions where the failure to
be so qualified and in good standing would not, when
taken together with all other such failures, have a
material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise),
business prospects or the results of operations of
Centerior and its Subsidiaries taken as a whole or on
the consummation of the transactions contemplated
hereby (a "Centerior Material Adverse Effect").
(b) As used in this Agreement, a "Significant
Subsidiary" means any Subsidiary that would constitute a
significant subsidiary within the meaning of Rule 1-02 of
Regulation S-X of the SEC.
4.2 Capital Structure.
(a) As of the date hereof, the authorized capital
stock of Centerior consists of (i) 180,000,000 shares of
Centerior Common Stock of which, as of July 31, 1996,
148,025,928 shares were issued and outstanding and 2,673,996
shares were held by Centerior in its treasury or by any of
its wholly-owned Subsidiaries and not more than 7,700,000
shares of Centerior Common Stock were reserved for issuance
pursuant to the Equity Compensation Plan, Employee Savings
Plan, Restated Stock Purchase Plan, Dividend Reinvestment
and Stock Purchase Plan and Directors Restricted Stock Plan
(collectively, the "Centerior Stock Plans"); and (ii)
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5,000,000 shares of preferred stock, without par value (the
"Centerior Preferred"), of which, as of the date hereof, no
shares were issued and outstanding and no shares were held
by Centerior in its treasury or by any of its wholly-owned
Subsidiaries; and no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into
securities having the right to vote) on any matters on which
shareholders may vote ("Voting Debt") are issued or
outstanding.
(b) All outstanding shares of Centerior's capital
stock are validly issued, fully paid and nonassessable and
are not subject to preemptive rights.
(c) As of the date of this Agreement (except
pursuant to this Agreement or the Centerior Stock Plans),
there are no options, warrants, calls, rights, commitments
or agreements of any character to which Centerior or any
Subsidiary of Centerior is a party or by which it is bound
obligating Centerior or any Subsidiary of Centerior to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or any Voting Debt
of, or other equity interest in, Centerior or any Subsidiary
of Centerior or securities convertible or exchangeable for
such shares, Voting Debt or other equity interests, or
obligating Centerior or any Subsidiary of Centerior to
grant, extend or enter into any such option, warrant, call,
right, commitment or agreement.
4.3 Corporate Authority.
(a) Centerior has all requisite corporate power
and authority to enter into this Agreement and, subject to
the approval of this Agreement and the transactions
contemplated hereby and to the adoption of the Centerior
Merger Agreement by the shareholders of Centerior, to
consummate the transactions contemplated hereby and thereby.
(b) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action
on the part of Centerior, subject to the approval of this
Agreement and to the adoption of the Centerior Merger
Agreement by the shareholders of Centerior.
(c) This Agreement has been duly executed and
delivered by Centerior and, subject to the approval of this
Agreement and to the adoption of the Centerior Merger
Agreement by the shareholders of Centerior, constitutes a
valid and binding obligation of Centerior enforceable in
accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally, and except that the availability of equitable
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remedies, including specific performance, may be subject to
the discretion of any court before which any proceeding may
be brought.
4.4 No Violation. Except as set forth in Section 4.4
of the disclosure schedule delivered by Centerior (the "Centerior
Disclosure Schedule") or as contemplated by Section 4.5, the
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, or the
creation of a lien, pledge, security interest or other
encumbrance on assets pursuant to (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss
or creation, a "Violation"),
(a) any provision of the Articles of Incorporation
or Regulations of Centerior or any Subsidiary of Centerior,
(b) any provision of any loan or credit agreement,
note, bond, mortgage, indenture, lease, Centerior Controlled
Group Plan (as defined in Section 4.12) or other agreement,
obligation, instrument, permit, concession, franchise,
license of any kind to which Centerior or any of its
Subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound or
affected, or
(c) any judgment, order, injunction, writ, decree,
statute, law, ordinance, rule, regulation, permit or license
of any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity") applicable to Centerior or
any of its Subsidiaries or their respective properties or
assets,
which Violation, in the case of each of clauses (b) and (c),
would have a Centerior Material Adverse Effect.
4.5 Consents and Approvals. No consent, approval,
order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or with respect to
Centerior or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Centerior or the
consummation by Centerior of the transactions contemplated
hereby, the failure of which to obtain would have a Centerior
Material Adverse Effect, except for:
(a) the filing of a premerger notification report
with the Federal Trade Commission (the "FTC") and the
Department of Justice (the "DOJ") under the Hart-Scott-
- 14 -
Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"),
(b) the filing with the SEC of
(i) a proxy statement in definitive form
relating to the meeting of Centerior's and Ohio
Edison's shareholders to be held in connection with the
Merger (the "Joint Proxy Statement"),
(ii) a registration statement on Form S-4 to
be filed by FirstEnergy in connection with the issuance
of shares of FirstEnergy Common Stock in the Merger
(the "S-4") and
(iii) such reports under Sections 13(a),
13(d) and 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the transactions
contemplated hereby, and the obtaining from the SEC of
such orders as may be so required,
(c) the obtaining from the SEC of an order
pursuant to Section 10 of the Public Utility Holding Company
Act of 1935, as amended ("PUHCA"), approving the
transactions contemplated hereby (the "SEC PUHCA Order"),
(d) the filing of such documents with, and the
qualification with, the various state securities authorities
under state securities or legal investment laws (the "Blue-
Sky Laws"), that are required in connection with the
transactions contemplated by this Agreement (the "Blue-Sky
Filings"),
(e) the filing of Certificates of Merger with the
Secretary of State of the State of Ohio in accordance with
applicable law,
(f) such filings, authorizations, orders and
approvals of the Federal Energy Regulatory Commission (the
"FERC") under the Federal Power Act, as amended (the "FPA"),
that may be required in connection with the transactions
contemplated by this Agreement (the "FERC Approvals"),
(g) such filings, authorizations, orders and
approvals of the Nuclear Regulatory Commission (the "NRC")
under the Atomic Energy Act, as amended (the "AEA"), that
may be required in connection with the transactions
contemplated by this Agreement (the "NRC Approvals"),
(h) such filings, authorizations, orders and
approvals as may be required of state and local governmental
authorities, including state and local utility commissions
(the "Local Approvals"), and
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(i) such filings and approvals as may be required
pursuant to state takeover laws ("State Takeover
Approvals").
4.6 Centerior SEC Documents.
(a) Centerior has made available to Ohio Edison a
true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed
by Centerior with the SEC since January 1, 1993 (as such
documents have since the time of their filing been amended,
the "Centerior SEC Documents") which are all the documents
(other than preliminary material) that Centerior was
required to file with the SEC since such date.
(b) As of their respective dates, the Centerior
SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be,
and the rules and regulations of the SEC promulgated
thereunder applicable to such Centerior SEC Documents, and
none of the Centerior SEC Documents contained any untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) The financial statements of Centerior included
in the Centerior SEC Documents comply as to form in all
material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q
of the SEC) and fairly present (subject, in the case of the
unaudited statements, to normal, recurring adjustments) the
consolidated financial position of Centerior and its
consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for
the periods then ended.
4.7 No Undisclosed Liabilities.
(a) Except as and to the extent set forth in
Centerior's Annual Report on Form 10-K for the year ended
December 31, 1995, as of December 31, 1995, neither
Centerior nor any of its Subsidiaries had any liabilities or
obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to
be reflected on a consolidated balance sheet (including the
notes thereto) of Centerior and its Subsidiaries.
- 16 -
(b) Since December 31, 1995, except as set forth
in the Centerior SEC Documents filed by Centerior with the
SEC since December 31, 1995 and prior to the date of this
Agreement, neither Centerior nor any of its Subsidiaries has
incurred any liabilities of any nature, whether or not
accrued, contingent or otherwise, which would have,
individually or in the aggregate, a Centerior Material
Adverse Effect.
4.8 Information Supplied.
(a) None of the information supplied or to be
supplied by Centerior for inclusion or incorporation by
reference in
(i) the S-4 will, at the time it 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 will, at the
date mailed to the shareholders of Centerior and the
shareholders of Ohio Edison and at the time of the
meetings of such shareholders to be held in connection
with the Merger, 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 the light of the
circumstances under which they are made, not
misleading.
(b) The Joint Proxy Statement will comply as to
form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
4.9 Compliance with Applicable Laws.
(a) Centerior and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to
the operation of the businesses of Centerior and its
Subsidiaries, taken as a whole (the "Centerior Permits").
(b) Centerior and its Subsidiaries are in
compliance with the terms of the Centerior Permits, except
where the failure so to comply would not have a Centerior
Material Adverse Effect.
(c) Except as disclosed in the Centerior SEC
Documents filed prior to the date of this Agreement, the
businesses of Centerior and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation
- 17 -
of any Governmental Entity, except for possible violations
which individually or in the aggregate do not, and, insofar
as reasonably can be foreseen, in the future will not, have
a Centerior Material Adverse Effect.
(d) Except as disclosed in the Centerior SEC
Documents filed prior to the date of this Agreement, as of
the date of this Agreement,
(i) no investigation or review by any
Governmental Entity with respect to Centerior or any of
its Subsidiaries is pending or, to the knowledge of
Centerior, threatened, and
(ii) no Governmental Entity has indicated an
intention to conduct any such investigation or review,
other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a Centerior
Material Adverse Effect.
4.10 Litigation. As of the date of this Agreement,
except as disclosed in the Centerior SEC Documents filed prior to
the date of this Agreement,
(a) there is no suit, action or proceeding pending
or, to the knowledge of Centerior, threatened against or
affecting Centerior or any of its Subsidiaries which is
reasonably likely to have a Centerior Material Adverse
Effect, and
(b) there is no judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator
outstanding against Centerior or any of its Subsidiaries
having, or which is reasonably likely to have, a Centerior
Material Adverse Effect.
4.11 Taxes.
(a) Except as set forth in Section 4.11 of the
Centerior Disclosure Schedule, each of Centerior and its
Subsidiaries (including any predecessors) has timely filed
when due all Tax returns required to be filed by any of them
and has paid (or Centerior has paid on its behalf), or has
made adequate provision for or set up in accordance with
GAAP an adequate accrual or reserve for the payment of, all
Taxes required to be paid in respect of all periods for
which returns have been filed or are due (whether or not
shown as being due on any Tax returns), and has established
an adequate accrual or reserve for the payment of all Taxes
payable in respect of any period for which no return has
been filed or is due, and the most recent financial
statements contained in the Centerior SEC Documents reflect
in accordance with GAAP a reserve for all Taxes payable by
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Centerior and its Subsidiaries accrued through the date of
such financial statements.
(b) Except as set forth in Section 4.11 of the
Centerior Disclosure Schedule, no material deficiencies for
any Taxes have been proposed, asserted or assessed against
Centerior or any of its Subsidiaries, and no audit of the
Tax returns of Centerior or any of its Subsidiaries is
currently being conducted by any Taxing authority.
(c) Except with respect to any claims for refunds
and except as set forth in Section 4.11 of the Centerior
Disclosure Schedule, the Federal income Tax returns of
Centerior and each of its Subsidiaries consolidated in such
returns for all such periods ended on or before December 31,
1990 have been examined by and settled with the United
States Internal Revenue Service (the "IRS"), or the
applicable statute of limitations with respect to such
years, including extensions thereof, has expired.
(d) Copies of all Federal Tax returns required to
be filed by Centerior or any of its Subsidiaries (including
any predecessors) for each of the last three years, together
with all schedules and attachments thereto, have been
delivered by Centerior to Ohio Edison.
(e) Except as set forth in Section 4.11 of the
Centerior Disclosure Schedule, none of Centerior or any of
its Subsidiaries (including any predecessors) is a party to,
is bound by, or has any obligation under any Tax sharing or
similar agreement.
(f) For the purpose of this Agreement, the term
"Tax" (including, with correlative meaning, the terms
"Taxes", "Taxing", and "Taxable") shall include all Federal,
state, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, gains,
transfer, recording, license, value-added, withholding,
excise and other taxes, duties or assessments of any nature
whatsoever (whether payable directly or by withholding),
together with any and all estimated Tax interest, penalties
and additions to Tax imposed with respect to such amounts
and any obligations in respect thereof under any Tax
sharing, Tax allocation, Tax indemnity or similar agreement
as well as any obligations arising pursuant to Code
Regulation S 1.1502-6 or comparable state, local or foreign
provision.
4.12 Employee Matters.
(a) With respect to each employee benefit plan
(including, without limitation, any "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and any bonus,
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pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, insurance or other plan,
arrangement or understanding (whether or not legally
binding) (all the foregoing being herein called the
"Centerior Controlled Group Plans"), maintained or
contributed to by Centerior, any of its Subsidiaries or any
other organization which is a member of a controlled group
of organizations (within the meaning of Sections 414(b),
(c), (m) or (o) of the Code) of which Centerior is a member,
Centerior has made available to Ohio Edison, or will deliver
to Ohio Edison within 30 days after the date hereof, a true
and correct copy of
(i) the most recent annual report (Form 5500)
filed with the IRS,
(ii) any such Centerior Controlled Group
Plan,
(iii) each trust agreement and group annuity
contract, if any, relating to any such Centerior
Controlled Group Plan and
(iv) the most recent actuarial report or
valuation relating to any such Centerior Controlled
Group Plan subject to Title IV of ERISA.
(b) (i) Except as set forth in Section 4.12(b) of
the Centerior Disclosure Schedule, each of the Centerior
Controlled Group 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 Centerior, no circumstances exist that
are reasonably expected by Centerior to result in the
revocation of any such determination.
(ii) Centerior is in compliance in all
material respects with, and each Centerior Controlled
Group 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.
(iii) Each Centerior Controlled Group 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.
(c) With respect to the Centerior Controlled
Group Plans, individually and in the aggregate, no event has
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occurred, and to the knowledge of Centerior or any of its
Subsidiaries, there exists no condition or set of
circumstances in connection with which Centerior or any of its
Subsidiaries could be subject to any liability that is
reasonably likely to exceed $1,000,000 (except liability for
benefits claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other applicable
law.
(d) Except as set forth in Section 4.12(d) of the
Centerior Disclosure Schedule, with respect to each Centerior
Controlled Group Plan, there are no material funded benefit
obligations for which contributions have not been made or
properly accrued and there are no material unfunded benefit
obligations which have not been accounted for by reserves, or
otherwise properly footnoted in accordance with GAAP, on the
financial statements of Centerior or any of its Subsidiaries.
(e) Except as set forth in Section 4.12(e) of the
Centerior Disclosure Schedule or as provided for in this
Agreement, as of the date of this Agreement, neither Centerior
nor any of its Subsidiaries is a party to any union or
collective bargaining agreement.
(f) Except as set forth in Section 4.12(f) of the
Centerior Disclosure Schedule, no Centerior Controlled Group
Plan is a multiemployer plan (within the meaning of Section
3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the
Code).
(g) For each Centerior Controlled Group Plan which
is intended to be an employee stock ownership plan (within the
meaning of Section 4975(e)(7) of the Code) or a tax credit
employee stock ownership plan (within the meaning of Section
409(a) of the Code), each of the following is true:
(i) except as disclosed on Section 4.12(g) of
the Centerior Disclosure Schedule, there is no securities
acquisition loan (within the meaning of Section 133 of
the Code) outstanding with respect to the plan;
(ii) except for the transactions contemplated
in this Agreement, no event has occurred and no condition
exists which would give rise to the recapture of any Tax
credit previously claimed with respect to the plan or to
any Tax or penalties assessable against Centerior, any of
its Subsidiaries or FirstEnergy; and
(iii) except for the transactions contemplated
in this Agreement, no event has occurred and no condition
exists which would cause the termination of the plan and
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the distribution of all amounts held thereunder to give
rise to the recapture of any Tax credit previously
claimed with respect to the plan or to any Tax or
penalties assessable against Centerior, any of its
Subsidiaries or FirstEnergy.
(h) Except as set forth in Section 4.12(h) of the
Centerior Disclosure Schedule, none of the Centerior
Controlled Group Plans that are welfare plans (within the
meaning of Section 3(l) of ERISA) provides for any retiree
benefits.
(i) Except as set forth in Section 4.12(i) of
the Centerior Disclosure Schedule,
(i) the consummation or announcement of
any transaction contemplated by this Agreement will
not (either alone or upon the occurrence of any
additional or further acts or events) result in any
(A) payment (whether of severance pay or
otherwise) becoming due from Centerior or any of its
Subsidiaries to any officer, employee, former
employee or director thereof or to the trustee under
any "rabbi trust" or similar arrangement, or
(B) benefit under any Centerior Controlled
Group Plan being established or becoming
accelerated, vested or payable, and
(ii) neither Centerior nor any of its
Subsidiaries is a party to
(A) any management, employment, deferred
compensation, severance (including any payment,
right or benefit resulting from a change in
control), bonus or other contract for personal
services with any officer, director or employee,
(B) any consulting contract with any
person who prior to entering into such contract
was a director or officer of Centerior, or
(C) any plan, agreement, arrangement or
understanding similar to any of the foregoing.
4.13 Absence of Certain Changes or Events. Except as
disclosed in the Centerior SEC Documents filed prior to the date
of this Agreement or in the audited consolidated balance sheet of
Centerior and its Subsidiaries as at December 31, 1995, and the
related consolidated statements of income, cash flows and changes
in shareholders' equity (the "Centerior 1995 Financials"), true
and correct copies of which have been delivered to Ohio Edison,
or except as contemplated by this Agreement, since the date of
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the Centerior 1995 Financials, Centerior and its Subsidiaries
have conducted their respective businesses only in the ordinary
and usual course, and, as of the date of this Agreement, there
has not been
(a) any damage, destruction or loss, whether
covered by insurance or not, which has, or insofar as
reasonably can be foreseen in the future is reasonably
likely to have, a Centerior Material Adverse Effect;
(b) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock
or property) with respect to any of Centerior's or its
Subsidiaries' capital stock, except for regular quarterly
cash dividends of $0.20 per share on Centerior Common Stock
and regular dividends on Centerior Subsidiaries' preferred
stock (the "Centerior Subs Preferred") with usual record and
payment dates for such dividends and dividends on common
stock paid by a wholly-owned Subsidiary of Centerior; or
(c) any transaction, commitment, dispute or other
event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business)
individually or in the aggregate having, or which, insofar
as reasonably can be foreseen, in the future is reasonably
likely to have, a Centerior Material Adverse Effect.
4.14 Opinion of Centerior Financial Advisor.
Centerior has received the opinion of Barr Devlin & Co.
Incorporated (hereinafter referred to as "Centerior Fairness
Advisor" and collectively with Morgan Stanley & Co. Incorporated,
as "Centerior Advisors"), dated the date hereof, to the effect
that, as of such date, the Centerior Conversion Number is fair to
holders of Centerior Common Stock from a financial point of view,
and copies of such opinion have been previously delivered to Ohio
Edison.
4.15 Vote Required. The affirmative vote of the holders
of a majority of the outstanding shares of Centerior Common Stock
is the only vote of the holders of any class or series of Centerior
capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
4.16 Accounting Matters. Neither Centerior nor, to
its best knowledge, any of its affiliates has through the date of
this Agreement taken or agreed to take any action that would
prevent FirstEnergy from accounting for the business combination
to be effected by the Centerior Merger on a purchase accounting
basis in accordance with GAAP and applicable regulations of the
SEC.
4.17 No Change in Capital Structure. There has been
no material change in the information set forth in the first
- 23 -
sentence of Section 4.2 between the close of business on July 31,
1996 and the date hereof.
4.18 Ownership of Ohio Edison Stock. As of the date
of this Agreement, Centerior and its affiliates do not
"beneficially own" (as such term is defined in the Ohio Edison
Rights Agreement) any shares of Ohio Edison Common Stock.
4.19 Centerior Subsidiaries.
(a) Section 4.19(a) of the Centerior Disclosure
Schedule sets forth a description as of the date hereof of
all Subsidiaries and joint ventures of Centerior, including
the name of each such entity, a brief description of the
principal line or lines of business conducted by each such
entity and Centerior's interest therein.
(b) Except as set forth in Section 4.19(b) of the
Centerior 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 PUHCA, respectively.
(c) Except as set forth in Section 4.19(c) of the
Centerior Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Subsidiary of
Centerior are validly issued, fully paid, nonassessable and
free of preemptive rights, are owned directly or indirectly
by Centerior free and clear of any liens, claims,
encumbrances, security interests, equities, charges and
options of any nature whatsoever, 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. As used in this Agreement, the term "wholly-owned
Subsidiary" shall include Subsidiaries the preferred stock or
similar non-voting securities of which need not be owned by
the entity as to which such Subsidiary is a subsidiary.
(d) As used in this Agreement, the term "joint
venture" of a person shall mean 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
- 24 -
passive investment purposes which are less than 5% of any
class of the outstanding voting securities or equity of any
such entity.
4.20 Environmental Protection.
(a) Compliance.
(i) Except as set forth in Section 4.20(a) of
the Centerior Disclosure Schedule, each of Centerior
and its Subsidiaries is in compliance with all applicable
Environmental Laws (as hereinafter defined), except where
the failure to be in compliance would not have a
Centerior Material Adverse Effect.
(ii) Except as set forth in Section 4.20(a)
of the Centerior Disclosure Schedule, neither Centerior
nor any of its Subsidiaries has received any
communication (written or oral) from any person or
Governmental Entity that alleges that Centerior or any
of its Subsidiaries is not in compliance with applicable
Environmental Laws, except where the failure to be in
compliance would not have a Centerior Material Adverse
Effect.
(b) Environmental Permits. Except as set forth
in Section 4.20(b) of the Centerior Disclosure Schedule,
each of Centerior 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
Centerior and each of its Subsidiaries is 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 would not have a
Centerior Material Adverse Effect.
(c) Environmental Claims. Except as set forth in
Section 4.20(c) of the Centerior Disclosure Schedule, to the
best knowledge of Centerior upon diligent review, there is
no Environmental Claim (as hereinafter defined) pending
(i) against Centerior or any of its
Subsidiaries or joint ventures,
(ii) against any person or entity whose
liability for any Environmental Claim Centerior or any
of its Subsidiaries or joint ventures has or may have
retained or assumed either contractually or by
operation of law, or
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(iii) against any real or personal property
or operations which Centerior or any of its
Subsidiaries or joint ventures owns, leases or manages,
in whole or in part,
which, if adversely determined, would have in the aggregate
a Centerior Material Adverse Effect.
(d) Releases. Except as set forth in Section
4.20(d) of the Centerior Disclosure Schedule, Centerior has
no knowledge of any Releases (as hereinafter defined) of any
Hazardous Material (as hereinafter defined) that would be
reasonably likely to form the basis of any Environmental
Claim against Centerior or any Subsidiaries or joint
ventures of Centerior, or its Subsidiaries, or against any
person or entity whose liability for any Environmental Claim
Centerior or any Subsidiaries or joint ventures of Centerior
or its Subsidiaries has or may have retained or assumed
either contractually or by operation of law, except for
Releases of Hazardous Materials the liability for which
would not have, in the aggregate, a Centerior Material
Adverse Effect.
(e) Predecessors. Except as set forth in Section
4.20(e) of the Centerior Disclosure Schedule, Centerior has
no knowledge, with respect to any predecessor of Centerior
or any Subsidiary or joint venture of Centerior, 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 would have
a Centerior Material Adverse Effect.
(f) Disclosure. To Centerior's best knowledge
upon a good faith effort, Centerior has disclosed to Ohio
Edison all material facts which Centerior reasonably
believes form the basis of a Centerior Material Adverse
Effect arising from
(i) the cost of pollution control equipment
currently required or known to be required in the
future;
(ii) current remediation costs or remediation
costs known to be required in the future; or
(iii) any other environmental matter
affecting Centerior or its Subsidiaries.
(g) As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits,
demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance
- 26 -
or violation (written or oral) by any person or entity
(including any Governmental Entity) 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
Centerior or any Subsidiary or joint venture of
Centerior or its Subsidiaries (for purposes of
this Section 4.20), or by Ohio Edison or any of
its Subsidiary or joint ventures of Ohio Edison or
its Subsidiaries (for purposes of Section 5.20);
or
(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 and 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"); and
(B) any chemicals, materials or
substances which are now defined as or included in
the definition of "hazardous substances",
- 27 -
"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
Centerior or any Subsidiary or joint venture of
Centerior operates (for purposes of this Section
4.20) or in which Ohio Edison or any Subsidiary or
joint venture of Ohio Edison operates (for
purposes of Section 5.20).
(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.
4.21 Regulation as a Utility.
(a) Except as set forth in Section 4.21 of the
Centerior Disclosure Schedule, neither Centerior nor any
"subsidiary company" or "affiliate" of Centerior is subject
to regulation as a public utility or public service company
(or similar designation) by any state in the United States
or any foreign country.
(b) Centerior is an exempt holding company under
Section 3(a)(1) of PUHCA.
(c) Section 4.21 of the Centerior Disclosure
Schedule sets forth each "affiliate" and each "subsidiary
company" of Centerior which may be deemed to be a "public
utility company" or a "holding company" within the meaning
of PUHCA.
(d) As used in this Section 4.21 and in Section
5.21, the terms "subsidiary company" and "affiliate" shall
have the respective meanings ascribed to them in PUHCA.
4.22 Insurance. Except as set forth in Section 4.22
of the Centerior Disclosure Schedule:
(a) Each of Centerior and its Subsidiaries is as
of the date hereof, and has been continuously since January 1,
1990 through the date hereof, insured with financially
responsible insurers in such amounts and against such risks
and losses as are customary for companies conducting the
businesses as conducted by Centerior and its Subsidiaries
during such time period.
- 28 -
(b) Centerior hereby covenants and agrees to
maintain all such insurance for itself and its Subsidiaries
from the date of this Agreement through the Effective Time
so long as such insurance is available on commercially
reasonable terms.
(c) (i) Neither Centerior nor its Subsidiaries
have received any notice of cancellation or termination with
respect to any material insurance policy of Centerior or its
Subsidiaries.
(ii) The insurance policies of Centerior and
each of its Subsidiaries are valid and enforceable policies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF OHIO EDISON
Ohio Edison represents and warrants to Centerior as
follows:
5.1 Organization, Standing and Power.
(a) Each of Ohio Edison and its Significant
Subsidiaries
(i) is a corporation or partnership duly
organized, validly existing and in good standing under
the laws of its state of incorporation or organization,
(ii) has all requisite power and authority,
and has been duly authorized by all necessary approvals
and orders of Governmental Entities (as defined in
Section 4.4), to own, lease and operate its properties
and to carry on its business as now being conducted,
and
(iii) is duly qualified and in good standing
to transact business in each jurisdiction in which the
nature of its business or the ownership or leasing of
its properties makes such qualification necessary,
other than in such jurisdictions where the failure to
be so qualified and in good standing would not, when
taken together with all other such failures, have a
material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise),
business prospects or the results of operations of Ohio
Edison and its Subsidiaries taken as a whole or on the
consummation of the transactions contemplated hereby (a
"Ohio Edison Material Adverse Effect").
5.2 Capital Structure.
- 29 -
(a) As of the date hereof, the authorized capital
stock of Ohio Edison consists of (i) 175,000,000 shares of
Ohio Edison Common Stock of which, as of July 31, 1996,
152,569,437 shares were issued and outstanding and no shares
were held by Ohio Edison in its treasury or by any of its
wholly-owned Subsidiaries and no shares of Ohio Edison
Common Stock were reserved for any purpose; (ii) 6,000,000
shares of Preferred Stock, $100 par value (the "Ohio Edison
Preferred") of which, as of the date hereof, 859,650 shares
were issued and outstanding and no shares were held by Ohio
Edison in its treasury or by any of its wholly-owned
Subsidiaries; (iii) 8,000,000 shares of Class A Preferred
Stock, $25 par value (the "Ohio Edison Class A Preferred")
of which, as of the date hereof, 4,000,000 shares were
issued and outstanding and no shares were held by Ohio
Edison in its treasury or by any of its wholly-owned
Subsidiaries; and (iv) 8,000,000 shares of Preference Stock,
without par value (the "Ohio Edison Preference") of which,
as of the date hereof, no shares were issued and outstanding
and no shares were held by Ohio Edison in its treasury or by
any of its wholly-owned Subsidiaries; and no Voting Debt is
issued or outstanding.
(b) All outstanding shares of Ohio Edison's
capital stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights.
(c) As of the date of this Agreement (except
pursuant to this Agreement or the Ohio Edison Dividend
Reinvestment Plan), there are no options, warrants, calls,
rights, commitments or agreements of any character to which
Ohio Edison or any Subsidiary of Ohio Edison is a party or
by which it is bound obligating Ohio Edison or any
Subsidiary of Ohio Edison to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of
capital stock or any Voting Debt of, or other equity
interest in, Ohio Edison or any Subsidiary of Ohio Edison or
securities convertible or exchangeable for such shares,
Voting Debt or other equity interests, or obligating Ohio
Edison or any Subsidiary of Ohio Edison to grant, extend or
enter into any such option, warrant, call, right, commitment
or agreement.
5.3 Corporate Authority.
(a) Ohio Edison has all requisite corporate power
and authority to enter into this Agreement and, subject to
the approval of this Agreement and the transactions
contemplated hereby and to the adoption of the Ohio Edison
Merger Agreement by the shareholders of Ohio Edison, to
consummate the transactions contemplated hereby and thereby.
(b) The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby
- 30 -
have been duly authorized by all necessary corporate action
on the part of Ohio Edison, subject to the approval of this
Agreement and to the adoption of the Ohio Edison Merger
Agreement by the shareholders of Ohio Edison.
(c) This Agreement has been duly executed and
delivered by Ohio Edison and, subject to the approval of
this Agreement and to the adoption of the Ohio Edison Merger
Agreement by the shareholders of Ohio Edison, constitutes a
valid and binding obligation of Ohio Edison enforceable in
accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally, and except that the availability of equitable
remedies, including specific performance, may be subject to
the discretion of any court before which any proceeding may
be brought.
5.4 No Violation. Except as set forth in Section 5.4
of the disclosure schedule delivered by Ohio Edison (the "Ohio
Edison Disclosure Schedule") or as contemplated by Section 5.5,
the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not,
result in a Violation under or pursuant to,
(a) any provision of the Articles of Incorporation
or Regulations of Ohio Edison or any Subsidiary of Ohio
Edison,
(b) any provision of any loan or credit agreement,
note, bond, mortgage, indenture, lease, Ohio Edison
Controlled Group Plan (as defined in Section 5.12) or other
agreement, obligation, instrument, permit, concession,
franchise, license of any kind to which Ohio Edison or any
of its Subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound or
affected, or
(c) any judgment, order, injunction, writ, decree,
statute, law, ordinance, rule, regulation, permit or license
of any Governmental Entity applicable to Ohio Edison or any
of its Subsidiaries or their respective properties or
assets,
which Violation, in the case of each of clauses (b) and (c), would
have a Ohio Edison Material Adverse Effect.
5.5 Consents and Approvals. No consent, approval,
order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or with respect to
Ohio Edison or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Ohio Edison or the
consummation by Ohio Edison of the transactions contemplated
- 31 -
hereby, the failure of which to obtain would have a Ohio Edison
Material Adverse Effect, except for:
(a) the filing of a premerger notification report
with the FTC and the DOJ under the HSR Act,
(b) the filing with the SEC of
(i) the Joint Proxy Statement,
(ii) the S-4 and
(iii) such reports under Sections 13(a),
13(d) and 16(a) of the Exchange Act as may be required
in connection with this Agreement and the transactions
contemplated hereby, and the obtaining from the SEC of
such orders as may be so required,
(c) the SEC PUHCA Order,
(d) the Blue-Sky Filings,
(e) the filing of Certificates of Merger with the
Secretary of State of the State of Ohio in accordance with
applicable law,
(f) the FERC Approvals,
(g) the NRC Approvals,
(h) the Local Approvals, and
(i) State Takeover Approvals.
5.6 Ohio Edison SEC Documents.
(a) Ohio Edison has made available to Centerior a
true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed
by Ohio Edison with the SEC since January 1, 1993 (as such
documents have since the time of this filing been amended,
the "Ohio Edison SEC Documents") which are all the documents
(other than preliminary material) that Ohio Edison was
required to file with the SEC since such date.
(b) As of their respective dates, the Ohio Edison
SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Ohio Edison SEC
Documents, and none of the Ohio Edison SEC Documents
contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of
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the circumstances under which they were made, not
misleading.
(c) The financial statements of Ohio Edison
included in the Ohio Edison SEC Documents comply as to form
in all material respects with applicable accounting
requirements and with the published rules and regulations of
the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to
normal, recurring adjustments) the consolidated financial
position of Ohio Edison and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
5.7 No Undisclosed Liabilities.
(a) Except as and to the extent set forth in Ohio
Edison's Annual Report on Form 10-K for the year ended
December 31, 1995, as of December 31, 1995, neither Ohio
Edison nor any of its Subsidiaries had any liabilities or
obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to
be reflected on a consolidated balance sheet (including the
notes thereto) of Ohio Edison and its Subsidiaries.
(b) Since December 31, 1995, except as set forth
in the Ohio Edison SEC Documents filed by Ohio Edison with
the SEC since December 31, 1995 and prior to the date of
this Agreement, neither Ohio Edison nor any of its
Subsidiaries has incurred any liabilities of any nature,
whether or not accrued, contingent or otherwise, which would
have, individually or in the aggregate, a Ohio Edison
Material Adverse Effect.
5.8 Information Supplied.
(a) None of the information supplied or to be
supplied by Ohio Edison for inclusion or incorporation by
reference in
(i) the S-4 will, at the time it 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 will, at the
date mailed to the shareholders of Ohio Edison and the
shareholders of Centerior and at the time of the
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meetings of such shareholders to be held in connection
with the Merger, 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 the light of the
circumstances under which they are made, not
misleading.
(b) The Joint Proxy Statement will comply as to
form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
5.9 Compliance with Applicable Laws.
(a) Ohio Edison and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are material to
the operation of the businesses of Ohio Edison and its
Subsidiaries, taken as a whole (the "Ohio Edison Permits").
(b) Ohio Edison and its Subsidiaries are in
compliance with the terms of the Ohio Edison Permits, except
where the failure so to comply would not have a Ohio Edison
Material Adverse Effect.
(c) Except as disclosed in the Ohio Edison SEC
Documents filed prior to the date of this Agreement, the
businesses of Ohio Edison and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation
of any Governmental Entity, except for possible violations
which individually or in the aggregate do not, and, insofar
as reasonably can be foreseen, in the future will not, have
a Ohio Edison Material Adverse Effect.
(d) Except as disclosed in the Ohio Edison SEC
Documents filed prior to the date of this Agreement, as of
the date of this Agreement,
(i) no investigation or review by any
Governmental Entity with respect to Ohio Edison or any
of its Subsidiaries is pending or, to the knowledge of
Ohio Edison, threatened, and
(ii) no Governmental Entity has indicated an
intention to conduct any such investigation or review,
other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a Ohio Edison
Material Adverse Effect.
5.10 Litigation. As of the date of this Agreement,
except as disclosed in the Ohio Edison SEC Documents filed prior
to the date of this Agreement,
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(a) there is no suit, action or proceeding pending
or, to the knowledge of Ohio Edison, threatened against or
affecting Ohio Edison or any of its Subsidiaries which is
reasonably likely to have a Ohio Edison Material Adverse
Effect, and
(b) there is no judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator
outstanding against Ohio Edison or any of its Subsidiaries
having, or which is reasonably likely to have, a Ohio Edison
Material Adverse Effect.
5.11 Taxes.
(a) Except as set forth in Section 5.11 of the
Ohio Edison Disclosure Schedule, each of Ohio Edison and its
Subsidiaries (including any predecessors) has timely filed
when due all Tax returns required to be filed by any of them
and has paid (or Ohio Edison has paid on its behalf), or has
made adequate provision for or set up in accordance with
GAAP an adequate accrual or reserve for the payment of, all
Taxes required to be paid in respect of all periods for
which returns have been filed or are due (whether or not
shown as being due on any Tax returns), and has established
an adequate accrual or reserve for the payment of all Taxes
payable in respect of any period for which no return has
been filed or is due, and the most recent financial
statements contained in the Ohio Edison SEC Documents
reflect in accordance with GAAP a reserve for all Taxes
payable by Ohio Edison and its Subsidiaries accrued through
the date of such financial statements.
(b) Except as set forth in Section 5.11 of the
Ohio Edison Disclosure Schedule, no material deficiencies
for any Taxes have been proposed, asserted or assessed
against Ohio Edison or any of its Subsidiaries, and no audit
of the Tax returns of Ohio Edison or any of its Subsidiaries
is currently being conducted by any Taxing authority.
(c) Except with respect to any claims for refunds
and except as set forth in Section 5.11 of the Ohio Edison
Disclosure Schedule, the Federal income Tax returns of Ohio
Edison and each of its Subsidiaries consolidated in such
returns for all such periods ended on or before December 31,
1990 have been examined by and settled with the IRS or the
applicable statute of limitations with respect to such
years, including extensions thereof, has expired.
(d) Copies of all Federal Tax returns required to
be filed by Ohio Edison or any of its Subsidiaries
(including any predecessors) for each of the last three
years, together with all schedules and attachments thereto,
have been delivered by Ohio Edison to Centerior.
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(e) Except as set forth in Section 5.11 of the
Ohio Edison Disclosure Schedule, none of Ohio Edison or any
of its Subsidiaries (including any predecessors) is a party
to, is bound by, or has any obligation under any Tax sharing
or similar agreement.
5.12 Employee Matters.
(a) With respect to each employee benefit plan
(including, without limitation, any "employee benefit plan,"
as defined in Section 3(3) of the ERISA, and any bonus,
pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option,
phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, insurance or other plan,
arrangement or understanding (whether or not legally
binding) (all the foregoing being herein called the "Ohio
Edison Controlled Group Plans"), maintained or contributed
to by Ohio Edison, any of its Subsidiaries or any other
organization which is a member of a controlled group of
organizations (within the meaning of Sections 414(b), (c),
(m) or (o) of the Code) of which Ohio Edison is a member,
Ohio Edison has made available to Centerior, or will deliver
to Centerior within 30 days after the date hereof, a true
and correct copy of
(i) the most recent annual report (Form 5500)
filed with the IRS,
(ii) any such Ohio Edison Controlled Group
Plan,
(iii) each trust agreement and group annuity
contract, if any, relating to any such Ohio Edison
Controlled Group Plan and
(iv) the most recent actuarial report or
valuation relating to any such Ohio Edison Controlled
Group Plan subject to Title IV of ERISA.
(b) (i) Except as set forth in Section 5.12(b) of
the Ohio Edison Disclosure Schedule, each of the Ohio
Edison Controlled Group 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 Ohio Edison, no circumstances exist
that are reasonably expected by Ohio Edison to result in
the revocation of any such determination.
(ii) Ohio Edison is in compliance in all
material respects with, and each Ohio Edison Controlled
Group Plan is and has been operated in all material
respects in compliance with, all applicable laws, rules
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and regulations governing such plan, including, without
limitation, ERISA and the Code.
(iii) Each Ohio Edison Controlled Group 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.
(c) With respect to the Ohio Edison Controlled
Group Plans, individually and in the aggregate, no event has
occurred, and to the knowledge of Ohio Edison or any of its
Subsidiaries, there exists no condition or set of
circumstances in connection with which Ohio Edison or any of
its Subsidiaries could be subject to any liability that is
reasonably likely to exceed $1,000,000 (except liability for
benefits claims and funding obligations payable in the
ordinary course) under ERISA, the Code or any other
applicable law.
(d) Except as set forth in Section 5.12(d) of the
Ohio Edison Disclosure Schedule, with respect to each Ohio
Edison Controlled Group Plan, there are no material funded
benefit obligations for which contributions have not been
made or properly accrued and there are no material unfunded
benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with
GAAP, on the financial statements of Ohio Edison or any of
its Subsidiaries.
(e) Except as set forth in Section 5.12(e) of the
Ohio Edison Disclosure Schedule and except as provided for
in this Agreement, as of the date of this Agreement, neither
Ohio Edison nor any of its Subsidiaries is a party to any
union or collective bargaining agreement.
(f) Except as set forth in Section 5.12(f) of the
Ohio Edison Disclosure Schedule, no Ohio Edison Controlled
Group Plan is a multiemployer plan (within the meaning of
Section 3(37) or Section 4001(a)(3) of ERISA or Section
414(f) of the Code).
(g) For each Ohio Edison Controlled Group Plan
which is intended to be an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or a
tax credit employee stock ownership plan (within the meaning
of Section 409(a) of the Code), each of the following is
true:
(i) except as disclosed on Section 5.12(g) of
the Ohio Edison Disclosure Schedule, there is no
securities acquisition loan (within the meaning of
- 37 -
Section 133 of the Code) outstanding with respect to
the plan;
(ii) except for the transactions contemplated
in this Agreement, no event has occurred and no
condition exists which would give rise to the recapture
of any Tax credit previously claimed with respect to
the plan or to any Tax or penalties assessable against
Ohio Edison, any of its Subsidiaries or FirstEnergy;
and
(iii) except for the transactions contemplated
in this Agreement, no event has occurred and no
condition exists which would cause the termination of
the plan and the distribution of all amounts held
thereunder to give rise to the recapture of any Tax
credit previously claimed with respect to the plan or
to any Tax or penalties assessable against Ohio Edison,
any of its Subsidiaries or FirstEnergy.
(h) Except as set forth in Section 5.12(h) of the
Ohio Edison Disclosure Schedule, none of the Ohio Edison
Controlled Group Plans that are welfare plans (within the
meaning of Section 3(l) of ERISA) provides for any retiree
benefits.
(i) Except as set forth in Section 5.12(i) of
the Ohio Edison Disclosure Schedule,
(i) the consummation or announcement of any
transaction contemplated by this Agreement will not
(either alone or upon the occurrence of any additional
or further acts or events) result in any
(A) payment (whether of severance pay or
otherwise) becoming due from Ohio Edison or any of
its Subsidiaries to any officer, employee, former
employee or director thereof or to the trustee
under any "rabbi trust" or similar arrangement, or
(B) benefit under any Ohio Edison
Controlled Group Plan being established or
becoming accelerated, vested or payable, and
(ii) neither Ohio Edison nor any of its
Subsidiaries is a party to
(A) any management, employment, deferred
compensation, severance (including any payment,
right or benefit resulting from a change in
control), bonus or other contract for personal
services with any officer, director or employee,
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(B) any consulting contract with any
person who prior to entering into such contract
was a director or officer of Ohio Edison, or
(C) any plan, agreement, arrangement or
understanding similar to any of the foregoing.
5.13 Absence of Certain Changes or Events. Except as
disclosed in the Ohio Edison SEC Documents filed prior to the
date of this Agreement or in the audited consolidated balance
sheet of Ohio Edison and its Subsidiaries as at December 31,
1995, and the related consolidated statements of income, cash
flows and changes in shareholders' equity (the "Ohio Edison 1995
Financials"), true and correct copies of which have been
delivered to Centerior, or except as contemplated by this
Agreement, since the date of the Ohio Edison 1995 Financials,
Ohio Edison and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course, and, as of the
date of this Agreement, there has not been
(a) any damage, destruction or loss, whether
covered by insurance or not, which has, or insofar as
reasonably can be foreseen in the future is reasonably
likely to have, a Ohio Edison Material Adverse Effect;
(b) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock
or property) with respect to any of Ohio Edison's or its
Subsidiaries' capital stock, except for regular quarterly
cash dividends of $ 0.375 per share on Ohio Edison Common
Stock and regular dividends on Ohio Edison's Preferred, Ohio
Edison's Class A Preferred and Ohio Edison Subsidiaries'
preferred securities (the "Ohio Edison Subs Preferred") with
usual record and payment dates for such dividends and
dividends on common stock paid by wholly-owned Subsidiaries
of Ohio Edison; or
(c) any transaction, commitment, dispute or other
event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business)
individually or in the aggregate having, or which, insofar
as reasonably can be foreseen, in the future is reasonably
likely to have, a Ohio Edison Material Adverse Effect.
5.14 Opinion of Ohio Edison Financial Advisor. Ohio
Edison has received the opinion of McDonald & Company Securities,
Inc. (hereinafter referred to as "Ohio Edison Fairness Advisor"
and collectively with Morgan Stanley & Co. Incorporated, as "Ohio
Edison Advisors"), dated the date hereof, to the effect that, as
of such date, the Ohio Edison Conversion Number is fair to
holders of Ohio Edison Common Stock from a financial point of
view, and copies of such opinion have been previously delivered
to Centerior.
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5.15 Vote Required. The affirmative vote of the
holders of two-thirds of the outstanding shares of Ohio Edison
Common Stock is the only vote of the holders of any class or
series of Ohio Edison capital stock necessary to approve this
Agreement and the transactions contemplated hereby.
5.16 Accounting Matters. Neither Ohio Edison nor, to
its best knowledge, any of its affiliates has through the date of
this Agreement taken or agreed to take any action that would
prevent FirstEnergy from accounting for the business combination
to be effected by the Centerior Merger on a purchase accounting
basis in accordance with GAAP and applicable regulations of the
SEC.
5.17 No Change in Capital Structure. There has been
no material change in the information set forth in the first
sentence of Section 5.2 between the close of business on July 31,
1996 and the date hereof.
5.18 Ownership of Centerior Stock. As of the date of
this Agreement, Ohio Edison and its affiliates do not
"beneficially own" (as such term is defined in the Centerior
Rights Agreement) any shares of Centerior Common Stock.
5.19 Ohio Edison Subsidiaries.
(a) Section 5.19(a) of the Ohio Edison Disclosure
Schedule sets forth a description as of the date hereof of
all Subsidiaries and joint ventures of Ohio Edison,
including the name of each such entity, a brief description
of the principal line or lines of business conducted by each
such entity and Ohio Edison's interest therein.
(b) Except as set forth in Section 5.19(b) of the
Ohio Edison 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 PUHCA, respectively.
(c) Except as set forth in Section 5.19(c) of the
Ohio Edison Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Subsidiary of
Ohio Edison are validly issued, fully paid, nonassessable
and free of preemptive rights, are owned directly or
indirectly by Ohio Edison free and clear of any liens,
claims, encumbrances, security interests, equities, charges
and options of any nature whatsoever, 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,
- 40 -
delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such
agreement or commitment.
5.20 Environmental Protection.
(a) Compliance.
(i) Except as set forth in Section 5.20(a) of
the Ohio Edison Disclosure Schedule, each of Ohio
Edison and its Subsidiaries is in compliance with all
applicable Environmental Laws, except where the failure
to be in compliance would not have a Ohio Edison
Material Adverse Effect.
(ii) Except as set forth in Section 5.20(a)
of the Ohio Edison Disclosure Schedule, neither Ohio
Edison nor any of its Subsidiaries has received any
communication (written or oral) from any person or
Governmental Entity that alleges that Ohio Edison or
any of its Subsidiaries is not in compliance with
applicable Environmental Laws, except where the failure
to be in compliance would not have a Ohio Edison
Material Adverse Effect.
(b) Environmental Permits. Except as set forth
in Section 5.20(b) of the Ohio Edison Disclosure
Schedule, each of Ohio Edison 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
Ohio Edison and each of its Subsidiaries is 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 would
not have a Ohio Edison Material Adverse Effect.
(c) Environmental Claims. Except as set forth in
Section 5.20(c) of the Ohio Edison Disclosure Schedule, to
the best knowledge of Ohio Edison upon diligent review,
there is no Environmental Claim (as hereinafter defined)
pending
(i) against Ohio Edison or any of its
Subsidiaries or joint ventures,
(ii) against any person or entity whose
liability for any Environmental Claim Ohio Edison or
any of its Subsidiaries or joint ventures has or may
have retained or assumed either contractually or by
operation of law, or
- 41 -
(iii) against any real or personal property
or operations which Ohio Edison or any of its
Subsidiaries or joint ventures owns, leases or manages,
in whole or in part,
which, if adversely determined, would have in the aggregate
a Ohio Edison Material Adverse Effect.
(d) Releases. Except as set forth in Section
5.20(d) of the Ohio Edison Disclosure Schedule, Ohio Edison
has no knowledge of any Releases of any Hazardous Material
that would be reasonably likely to form the basis of any
Environmental Claim against Ohio Edison or any Subsidiaries
or joint ventures of Ohio Edison, or its Subsidiaries, or
against any person or entity whose liability for any
Environmental Claim Ohio Edison or any Subsidiaries or joint
ventures of Ohio Edison or its Subsidiaries has or may have
retained or assumed either contractually or by operation of
law, except for Releases of Hazardous Materials the
liability for which would not have, in the aggregate, a Ohio
Edison Material Adverse Effect.
(e) Predecessors. Except as set forth in Section
5.20(e) of the Ohio Edison Disclosure Schedule, Ohio Edison
has no knowledge, with respect to any predecessor of Ohio
Edison or any Subsidiary or joint venture of Ohio Edison, 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
would have a Ohio Edison Material Adverse Effect.
(f) Disclosure. To Ohio Edison's best knowledge
upon a good faith effort, Ohio Edison has disclosed to
Centerior all material facts which Ohio Edison reasonably
believes form the basis of a Ohio Edison Material Adverse
Effect arising from
(i) the cost of pollution control equipment
currently required or known to be required in the
future;
(ii) current remediation costs or remediation
costs known to be required in the future; or
(iii) any other environmental matter
affecting Ohio Edison or its Subsidiaries.
5.21 Regulation as a Utility.
(a) Except as set forth in Section 5.21 of the
Ohio Edison Disclosure Schedule, neither Ohio Edison nor any
"subsidiary company" or "affiliate" of Ohio Edison is
subject to regulation as a public utility or public service
- 42 -
company (or similar designation) by any state in the United
States or any foreign country.
(b) Ohio Edison is an exempt holding company under
Section 3(a)(2) of PUHCA.
(c) Section 5.21 of the Ohio Edison Disclosure
Schedule sets forth each "affiliate" and each "subsidiary
company" of Ohio Edison which may be deemed to be a "public
utility company" or a "holding company" within the meaning
of PUHCA.
5.22 Insurance. Except as set forth in Section 5.22
of the Ohio Edison Disclosure Schedule:
(a) Each of Ohio Edison and its Subsidiaries is
as of the date hereof, and has been continuously since
January 1, 1990 through the date hereof, insured with
financially responsible insurers in such amounts and against
such risks and losses as are customary for companies
conducting the businesses as conducted by Ohio Edison and
its Subsidiaries during such time period.
(b) Ohio Edison hereby covenants and agrees to
maintain all such insurance for itself and its Subsidiaries
from the date of this Agreement through the Effective Time
so long as such insurance is available on commercially
reasonable terms.
(c) (i) Neither Ohio Edison nor its Subsidiaries
has received any notice of cancellation or termination with
respect to any material insurance policy of Ohio Edison or
its Subsidiaries.
(ii) The insurance policies of Ohio Edison
and each of its Subsidiaries are valid and enforceable
policies.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
During the period from the date of this Agreement and
continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or to the extent that
the other party shall otherwise consent in writing), Centerior
and Ohio Edison each agree that:
6.1 Ordinary Course.
(a) Each party hereto shall, and shall cause its
respective Subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in
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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.
(b) Except as set forth in Section 6.1 of the
Centerior or Ohio Edison Disclosure Schedule, 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 investment of assets or resources or any
exposure to liability or loss, in excess of $5 million, in
each case inclusive of their respective Subsidiaries, taken
as a whole.
6.2 Dividends; Changes in Stock. No party shall, nor
shall any party permit any of its Subsidiaries to,
(a) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except
that
(i) Centerior may continue the declaration
and payment of regular quarterly cash dividends not in
excess of $0.20 per share of Centerior Common Stock,
(ii) Centerior Subs may continue the
declaration and payment of regularly scheduled
dividends on the Centerior Subs Preferred,
(iii) Ohio Edison may continue the
declaration and payment of regular quarterly cash
dividends not in excess of $0.40 per share of Ohio
Edison Common Stock and regularly scheduled dividends,
on Ohio Edison Class A Preferred, Ohio Edison Preferred
Stock and Ohio Edison Preference Stock,
(iv) Ohio Edison Subsidiaries may continue
the declaration and payment of regularly scheduled
dividends on the Ohio Edison Subs Preferred,
in each case with usual record and payment dates for such
dividends in accordance with such parties' past dividend
practice, and except for dividends on common stock by a
wholly-owned Subsidiary of such party or such Subsidiary,
(b) split, combine or reclassify any of its
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, or
- 44 -
(c) repurchase, redeem or otherwise acquire, or
permit any Subsidiary to purchase or otherwise acquire, any
shares of its capital stock, other than
(i) redemptions, purchases or acquisitions
required by the respective terms of any series of
Centerior Preferred, Centerior Subs Preferred, Ohio
Edison Preferred, Ohio Edison Class A Preferred, or
Ohio Edison Subs Preferred,
(ii) in connection with refunding of such
Preferred Stocks with preferred stock or debt at a
lower cost of funds (calculating such cost on an
after-tax basis),
(iii) in connection with intercompany
purchases,
(iv) for the purpose of funding employee
stock ownership or dividend reinvestment and stock
purchase plans in accordance with past practice, or
(v) as set forth on Section 6.2(c) of the
Centerior or Ohio Edison Disclosure Schedules.
(d) notwithstanding Section 6.2(a), each of Ohio
Edison and Centerior shall declare a dividend on each share
of its Common Stock to holders of record of such shares as
of the close of business on the business day next preceding
the Effective Time in an amount equal to the product of
(i) a fraction,
(A) the numerator of which equals the
number of days between the payment date with
respect to the most recent regular dividend
paid by Ohio Edison and Centerior, as the
case may be, and the Effective Time, and
(B) the denominator of which equals 91,
and
(ii) the amount of the regular cash dividend
most recently paid by Ohio Edison or Centerior, as the
case may be;
provided, however, that if either Ohio Edison or Centerior
has declared a regular quarterly dividend on shares of its
Common Stock with a payment date (the "Payment Date") after
the Effective Time, then no dividend as provided for in this
Section 6.2(d) shall be declared or paid with respect to
such shares and the dividend of the other party or parties
- 45 -
shall be calculated by substituting "Payment Date" for
"Effective Time" in clause (i)(A) of this Section 6.2(d).
6.3 Issuance of Securities. Except as set forth in
Section 6.3 of the Ohio Edison Disclosure Schedule, no party
shall, nor shall any party permit any of its Subsidiaries to,
issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any
class, any Voting Debt or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, Voting
Debt or convertible securities, other than
(a) the issuance of common stock or stock
appreciation or similar rights, as the case may be, pursuant
to the Centerior Stock Plans or the Ohio Edison Dividend
Reinvestment Plan, in each case consistent in kind and
amount with past practice and in the ordinary course of
business under such Plans in accordance with their present
terms,
(b) issuances of Preferred Stocks in connection
with refundings as contemplated by Section 6.2(c)(iii),
(c) the issuance and reservation of Ohio Edison
and Centerior capital stock pursuant to any rights plan in
accordance with Section 6.11.
6.4 Constituent Documents. No party shall amend or
propose to amend its articles of incorporation or its
regulations.
6.5 No Solicitations.
(a) No party shall, nor shall any party permit any
of its Subsidiaries to, nor shall it authorize or permit any
of its officers, directors or employees or any investment
banker, financial advisor (including the Centerior Advisors
and the Ohio Edison Advisors), attorney, accountant or other
representative retained by it or any of its Subsidiaries to,
solicit or encourage (including by way of furnishing
information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes,
or may reasonably be expected to lead to, any Takeover
Proposal, or agree to, endorse, recommend or approve any
Takeover Proposal.
(b) Each party shall promptly advise the other
party orally and in writing of any such inquiries or
Takeover Proposals.
(c) As used in this Agreement, "Takeover Proposal"
shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination
involving a party hereto or any Significant Subsidiary of
- 46 -
such party or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion
of the assets of, such party or any of its Significant
Subsidiaries other than the transactions contemplated by
this Agreement.
(d) Notwithstanding anything in this Section 6.5
to the contrary, unless the approvals of the shareholders of
Ohio Edison and Centerior have been obtained, a party may,
to the extent that the Board of Directors of such party
determines in good faith with the written advice of outside
counsel that a failure to do so would result in a breach of
its fiduciary duties under applicable law, participate in
discussions or negotiations with, furnish information to,
and afford access to the properties, books and records of
such party and its Subsidiaries to any person in connection
with a possible Takeover Proposal with respect to such party
by such person.
6.6 Acquisitions. Except as set forth in Section 6.6
of the Centerior or Ohio Edison Disclosure Schedule, other than
acquisitions by a party and its Subsidiaries not in excess of $25
million, no party shall, nor shall any party permit any of its
Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity
interest in or substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division thereof
that would constitute a Significant Subsidiary of such party or
otherwise acquire or agree to acquire any assets not in the
ordinary course of business. Centerior further agrees that
unless approved by Ohio Edison, Centerior shall not consummate
the merger of The Cleveland Electric Illuminating Company and The
Toledo Edison Company.
6.7 Dispositions. Other than dispositions by a party
and its affiliates of less than $10 million singularly or in the
aggregate or as set forth in Section 6.7 of the Centerior or Ohio
Edison Disclosure Schedule, no party shall, nor shall any party
permit any of its Subsidiaries to, sell, lease, license, encumber
or otherwise dispose of, or agree to sell, lease, license,
encumber or otherwise dispose of, any of its assets, other than
dispositions, including, without limitation, dispositions of
accounts receivable, in the ordinary course of business of such
party or such Subsidiary consistent with past practices.
6.8 Indebtedness. Except as set forth in Section 6.8
of the Centerior or Ohio Edison Disclosure Schedule, or as
permitted in Section 6.2 in connection with the refunding of
Preferred Stock, no party shall, nor shall any party permit any
of its Subsidiaries to, incur (which shall not be deemed to
include entering into credit agreements, lines of credit or
similar arrangements until borrowings are made under such
arrangements) any indebtedness for borrowed money or guarantee
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any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of such party
or any of its Subsidiaries or guarantee any debt securities of
others other than
(a) for short-term indebtedness in the ordinary
course of business consistent with prior practice,
(b) as may be necessary in connection with
acquisitions permitted by Section 6.6 or new lines of
business permitted by Section 6.1,
(c) the incurrence of long-term indebtedness,
issuances of debt securities or guarantees not aggregating
in excess of $50 million, or
(d) indebtedness incurred to refund or refinance
outstanding indebtedness of such party or such Subsidiary so
long as the amount of such indebtedness so incurred does not
exceed the amount of indebtedness so refunded or refinanced
and any accrued interest and premium, if any, thereon.
6.9 No Actions. 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) any of its representations and warranties set
forth in this Agreement being untrue as of the date made (to
the extent so limited),
(b) any of the conditions to the Merger set forth
in Article VIII not being satisfied, or
(c) a material breach of any provision of this
Agreement.
6.10 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; (ii) promptly notify the other
party of any significant changes in its business, properties,
assets, condition (financial or other), results of operations or
prospects; (iii) advise the other party of any change or event
which has had or, insofar as reasonably can be foreseen, is
reasonably likely to result in, a material adverse effect on the
party so advising or any of its Subsidiaries; and (iv) promptly
provide the other party (or the other party's counsel) with
copies of all filings made by such party or any of its
Subsidiaries with any state or Federal court, administrative
agency, commission or other Governmental Entity in connection
with this Agreement and the transactions contemplated hereby.
6.11 Rights Agreements.
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(a) As promptly as practicable after the date
hereof but in any event before the "Distribution Date" (as
defined in the Ohio Edison Rights Agreement), Ohio Edison
shall cause to be amended the Ohio Edison Rights Agreement
to effect the changes contemplated by the form of amendment
attached hereto as Exhibit H, which amendment has been
authorized as of the date hereof by Ohio Edison.
(b) Except as otherwise provided in this Section
6.11, Ohio Edison shall not redeem the Ohio Edison Rights,
or amend (other than to delay the "Distribution Date" (as
defined therein) or to render the Ohio Edison Rights
inapplicable to the Merger) or terminate the Ohio Edison
Rights Agreement prior to the Effective Time unless required
to do so by order of a court of competent jurisdiction.
(c) Ohio Edison shall take all action so that the
Ohio Edison Rights will no longer be outstanding upon the
Merger.
(d) Except as otherwise provided in this Section
6.11, Centerior shall not redeem the Centerior Rights, or
amend (other than to delay the "Distribution Date" (as
defined therein) or to render the Centerior Rights
inapplicable to the Merger) or terminate the Centerior
Rights Agreement prior to the Effective Time unless required
to do so by order of a court of competent jurisdiction.
(e) Centerior shall take all action so that the
Centerior Rights will no longer be outstanding upon the
Merger.
6.12 Collective Bargaining Agreements. During the
period from the date of this Agreement and continuing until the
Effective Time, each party agrees, as to itself and its
Subsidiaries, that each of them will consult with the other party
prior to entering into any substantive negotiations with respect
to any collective bargaining agreement, or the modification or
amendment thereof.
6.13 Employee Benefit Covenant. During the period
from the date of this Agreement and continuing until the
Effective Time, except as set forth in Section 6.13 of the
Centerior Disclosure Schedule, as may be required by applicable
law or as contemplated by this Agreement, Centerior agrees as to
itself and its Subsidiaries that it will not, and will not permit
any of its Subsidiaries to, without the prior written consent of
Ohio Edison,
(a) enter into, adopt, amend (except as may be
required by law) or terminate any Centerior Controlled Group
Plan or any other agreement, arrangement, plan or policy
between Centerior or Centerior Services Company ("Services")
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and one or more of the directors or officers of Centerior or
Services or
(b) except for normal increases 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 Centerior or Services,
as the case may be, increase in any manner the compensation
or fringe benefits of any director or officer of Centerior
or Services or
(c) pay any benefit not required by any Centerior
Controlled Group Plan or arrangement as in effect as of the
date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock
or performance units) to any director or officer of
Centerior or Services or
(d) enter into any contract, agreement, commitment
or arrangement to do any of the foregoing, or enter into or
amend any employment, severance or special pay arrangement
with respect to the termination of employment or other
similar contract, agreement or arrangement with any director
or officer or other employee of Centerior or any of its
Subsidiaries; or
(e) make any change in any defined benefit Plan
of Centerior or any of its Subsidiaries which accelerates or
increases benefits thereunder (except as may be required by
law).
6.14 Tax Covenant. During the period from the date of
this Agreement and continuing until the Effective Time, each
party agrees, as to itself and its Subsidiaries, that each of
them will not, except in the ordinary course of business
consistent with prior practice, make any Tax election or settle
or compromise any Tax liability.
6.15 Capital Expenditures. Except as set forth in
Section 6.15 of the Centerior or Ohio Edison Disclosure Schedule
or as required by law, no party shall, nor shall any party permit
any of its Subsidiaries to make any annual capital expenditures,
including expenditures for sulfur dioxide emission allowances as
provided for by the Clean Air Act Amendments of 1990, in excess
of each company's respective aggregate capital budget for 1996.
Ohio Edison and Centerior agree to endeavor mutually to reduce
their capital expenditures to the extent practicable.
6.16 Transmission, Generation. Except as required
pursuant to tariffs on file with the FERC as of the date hereof
or as set forth in Section 6.16 of the Centerior or Ohio Edison
Disclosure Schedule, no party shall, nor shall any party permit
any of its Subsidiaries to,
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(a) commence construction of any additional
generating capacity or transmission or delivery capacity,
except for such projects ongoing or mandated by a binding
legal commitment existing on the date hereof or, in the case
of transmission or delivery capacity, required to satisfy
such party's obligation to serve, or
(b) obligate itself to purchase or otherwise
acquire, or to sell or otherwise dispose of, or to share,
any additional generation (including, without limitation,
the energy produced by generating facilities), transmission
or delivery capacity, other than in the ordinary course of
business consistent with past practice.
6.17 Modifications to Facilities. Except as set forth
in Section 6.17 of the Centerior or Ohio Edison Disclosure
Schedule, no party shall, nor shall any party permit any of its
Subsidiaries to, enter into any binding commitment to make any
modification to any of its or its Subsidiaries' existing
facilities that would require any material investment or
expenditure.
6.18 Accounting. No party shall, nor shall any party
permit any of its Subsidiaries to, make any changes in its
accounting methods, except as required by law, rule, regulation
or GAAP.
6.19 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 Merger as a tax-free transaction (except as to
dissenters' rights and fractional shares) under the Code.
6.20 Affiliate Transactions. Except as set forth in
Section 6.20 of the Centerior or Ohio Edison Disclosure Schedule,
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 (other than wholly-owned
Subsidiaries of such party or Subsidiary) on terms to such party
or its Subsidiaries materially less favorable than could be
reasonably expected to have been obtained with an unaffiliated
third party on an arm's length basis.
6.21 Rate Matters. Each party shall, and shall cause
its Subsidiaries to, discuss with the other party any changes in
its or its Subsidiaries' rates or charges (other than pass-
through fuel rates or charges), standards of service or
accounting from those in effect on the date of this Agreement 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, and no party will make, or permit
any Subsidiary to make, any filing to change its rates on file
with the FERC or any other regulatory commission that would have
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a material adverse effect on the benefits associated with the
business combination provided herein. Notwithstanding the
foregoing, however, each party and its Subsidiaries shall be
permitted to enter into arrangements with customers in the
ordinary course of business consistent with past practices.
6.22 Third-Party Consents.
(a) Each party shall, and shall cause its
Subsidiaries to, use all commercially reasonable efforts to
obtain any third-party consents necessary to consummate the
Merger.
(b) Each party shall promptly notify the other of
any failure or prospective failure to obtain any such
consents and, if requested, shall provide copies of all
consents obtained to the other party.
6.23 Tax-Exempt Status. No party shall, nor shall any
party permit any Subsidiary to, take any action that would likely
jeopardize the qualification of the outstanding revenue bonds
issued for the benefit of such party or any of its Subsidiaries
which qualify on the date hereof under Code Section 142(a) as
"exempt facility bonds" or as tax-exempt industrial development
bonds under Section 103(b)(4) of the Internal Revenue Code of
1954, as amended prior to the Tax Reform Act of 1986.
6.24 FirstEnergy Actions. Ohio Edison and Centerior
shall cause FirstEnergy 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 FirstEnergy,
including, without limitation, the declaration, filing or
registration with, or notice to or authorization, consent or
approval of, any Governmental Entity, to obtain the consents or
approvals contemplated by Sections 4.5 and 5.5 of this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Preparation of S-4 and the Joint Proxy Statement.
(a) Ohio Edison and Centerior shall promptly
prepare and file with the SEC the Joint Proxy Statement and
shall cause FirstEnergy to prepare and file with the SEC the
S-4, in which the Joint Proxy Statement will be included as
a prospectus.
(b) Each of Ohio Edison and Centerior shall use
its best efforts to have the S-4 declared effective under
the Securities Act as promptly as practicable after such
filing.
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(c) Ohio Edison and Centerior shall also cause
FirstEnergy to take any action required to be taken under
any applicable Blue-Sky Law in connection with the issuance
of FirstEnergy Common Stock pursuant to the Merger and Ohio
Edison and Centerior shall furnish all information
concerning themselves and the holders of their common stock
as may be reasonably requested in connection with any such
action.
7.2 Letters of Centerior's Accountants. Centerior
shall use its best efforts to cause to be delivered to
FirstEnergy and Ohio Edison a "comfort" letter of Arthur Andersen
LLP, Centerior's independent auditors, addressed to FirstEnergy
and Ohio Edison, dated a date within two business days before the
date on which the S-4 shall become effective, and confirmed in
writing as of the Effective Time, in form and substance
reasonably satisfactory to FirstEnergy and Ohio Edison and
customary in scope and substance for letters delivered by
independent public accountants in connection with registration
statements similar to the S-4.
7.3 Letters of Ohio Edison's Accountants. Ohio Edison
shall use its best efforts to cause to be delivered to
FirstEnergy and Centerior a "comfort" letter of Arthur Andersen
LLP, Ohio Edison's independent auditors, addressed to FirstEnergy
and Centerior, dated a date within two business days before the
date on which the S-4 shall become effective and confirmed in
writing as of the Effective Time, in form and substance
reasonably satisfactory to FirstEnergy and Centerior and
customary in scope and substance for letters delivered by
independent public accountants in connection with registration
statements similar to the S-4.
7.4 Access to Information.
(a) Upon reasonable notice, Centerior and Ohio
Edison shall each (and shall cause each of their respective
Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of the other,
reasonable access, during normal business hours during the
period prior to the Effective Time, to all its properties,
books, contracts, commitments and records (including, but
not limited to, Tax returns but excluding any documents with
respect to which an attorney-client privilege is available)
and, during such period, each of Centerior and Ohio Edison
shall (and shall cause each of their respective Subsidiaries
to) furnish promptly to the other
(i) a copy of each report, schedule,
registration statement and other document filed or
received by it during such period pursuant to the
requirements of Federal securities laws, or filed with
or sent to the SEC, the FERC, the NRC, the DOE, the
Department of Justice, the FTC, the Public Utilities
- 53 -
Commission of Ohio or any other Federal or state
regulatory agency or commission, and
(ii) all other information concerning its
business, properties and personnel as such other party
may reasonably request.
(b) Any information delivered by Centerior to Ohio
Edison, or by Ohio Edison to Centerior, shall be subject to
the Confidentiality Agreement, dated June 1, 1996, between
Centerior and Ohio Edison (the "Confidentiality Agreement"),
which agreement shall be extended hereby through the
Effective Time.
7.5 Shareholder Approvals.
(a) Ohio Edison and Centerior shall each call a
meeting of their respective shareholders to be held as
promptly as practicable for the purpose of voting upon this
Agreement and the transactions contemplated hereby.
(b) Ohio Edison and Centerior will, through their
respective Boards of Directors, recommend to their
respective shareholders approval of such matters; provided,
however, that neither Board of Directors shall be obligated
to recommend approval of this Agreement and the Merger to
its respective shareholders if such Board of Directors,
acting with the advice of counsel and financial advisors,
determines that such recommendation would be contrary to
their legal obligations as Directors.
(c) Centerior and Ohio Edison will coordinate and
cooperate with respect to the timing of such shareholder
approvals and shall use their best efforts to hold such
meetings on the same day and to secure such approvals as
soon as practicable after the date on which the S-4 becomes
effective.
7.6 Satisfaction of Conditions to the Merger.
(a) Each of Ohio Edison and Centerior will take
all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on itself with
respect to this Agreement.
(b) Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated
by this Agreement (subject to the appropriate vote of
shareholders of Ohio Edison and Centerior, respectively,
described in Section 7.5), including full cooperation with
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the other party and including the provision of information
and making of all necessary filings in connection with,
among other things, the approvals under the HSR Act, the
Securities Act and the Exchange Act, the FERC Approvals, the
NRC Approvals, the SEC PUHCA Order, the Blue-Sky Filings,
the Local Approvals and the State Takeover Approvals.
(c) In connection therewith, the parties agree
that, as between them,
(i) Ohio Edison shall be primarily
responsible for the preparation and processing of the
filings necessary to obtain the approvals required for
the consummation of the transactions contemplated
hereby under the Securities Act and the Exchange Act,
the FERC Approvals, the SEC PUHCA Order and the Local
Approvals required from the State of Ohio or any other
State, as well as the Blue-Sky Filings, and
(ii) Centerior shall be primarily responsible
for the preparation and processing of the filings
necessary to obtain the NRC Approvals.
(d) Each of Ohio Edison and Centerior will, and
will cause its Subsidiaries and FirstEnergy and its
Subsidiaries to, take all reasonable actions necessary to
obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any
exemption by, any Governmental Entity required to be
obtained or made by Ohio Edison, FirstEnergy, Centerior or
any of their Subsidiaries in connection with the Merger or
the taking of any action contemplated thereby or by this
Agreement.
7.7 Rule 145 Affiliates.
(a) Prior to the date of the meetings of their
respective shareholders referred to in Section 7.5, Ohio
Edison and Centerior shall deliver to FirstEnergy a letter
substantially in the form attached hereto as Exhibit I,
identifying all persons who may be, at the time this
Agreement is submitted for approval to such shareholders,
"affiliates" of Ohio Edison or Centerior, as the case may
be, for purposes of Rule 145 under the Securities Act and
the SEC's Accounting Series Release 135.
(b) Ohio Edison and Centerior shall use their best
efforts to cause each such person to deliver to FirstEnergy
on or prior to the date of the applicable meeting of
shareholders referred to in Section 7.5 a written agreement
substantially in the form attached hereto as Exhibit J.
7.8 Stock Exchange Listing. Centerior and Ohio Edison
shall use their best efforts to cause the shares of FirstEnergy
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Common Stock to be issued in the Merger and, if necessary under
the Benefit Plans referred to in Section 7.9, after the Merger,
to be approved for listing on the NYSE and such other national
securities exchanges as may be selected by FirstEnergy, subject
to official notice of issuance, prior to the Closing.
7.9 Employee Benefit Plans.
(a) Ohio Edison and Centerior agree that the Ohio
Edison Controlled Group Plans and the Centerior Controlled
Group Plans in effect at the date of this Agreement shall,
to the extent practicable, remain in effect until otherwise
determined after the Effective Time.
(b) In the case of Ohio Edison Controlled Group
Plans and Centerior Controlled Group Plans which are
continued and under which the employees' interests are based
upon or valued in relation to Ohio Edison Common Stock or
Centerior Common Stock, as the case may be, Ohio Edison and
Centerior agree that such interests shall be based on
FirstEnergy Common Stock in an equitable manner (and in the
case of any such interests existing at the Effective Time,
on the basis of the applicable Conversion Number); provided,
however, that nothing contained herein shall be construed as
requiring FirstEnergy to continue any specific plans.
(c) Except as set forth in Section 7.9(c) of the
Ohio Edison Disclosure Schedule, Centerior and Ohio Edison
agree not to make any changes in severance benefits for
officers of Centerior, Services or Ohio Edison, as the case
may be, from those disclosed in Section 4.12(i) of the
Centerior Disclosure Schedule or Section 5.12(i) of the Ohio
Edison Disclosure Schedule, as the case may be.
7.10 Expenses. Except as set forth in Section 9.5,
whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expense, and, in connection therewith, each of Ohio Edison and
Centerior shall pay, with its own funds and not with funds
provided by the other party, any and all property or transfer
taxes imposed on such party resulting from the Merger, except
that
(a) expenses incurred in connection with printing
and mailing the Joint Proxy Statement and the S-4 shall be
shared equally by Ohio Edison and Centerior,
(b) all out-of-pocket costs of the parties
(including attorneys' fees) incurred to obtain the FERC
Approvals, the SEC PUHCA Order, the NRC Approvals
(including, without limitation, all such costs incurred for
all filings and proceedings relating thereto) and the Local
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Approvals shall be shared equally by Ohio Edison and
Centerior, and
(c) all other out-of-pocket expenses of a joint
nature incurred in connection with the transactions
contemplated by this Agreement shall be shared equally by
Ohio Edison and Centerior.
7.11 Brokers or Finders. Each of Ohio Edison and
Centerior represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to
any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this
Agreement, except for Centerior Advisors, whose fees and expenses
will be paid by Centerior in accordance with Centerior's
agreements with such firms (copies of which have been delivered
by Centerior to Ohio Edison prior to the date of this Agreement),
and except for Ohio Edison Advisors, whose fees and expenses will
be paid by Ohio Edison in accordance with Ohio Edison's
agreements with such firms (copies of which have been delivered
by Ohio Edison to Centerior prior to the date of this Agreement),
and each of Ohio Edison and Centerior agree to indemnify and hold
the other harmless from and against any and all claims,
liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of
any act or statement alleged to have been made by such party or
its affiliate.
7.12 FirstEnergy Board of Directors and Officers.
(a) Ohio Edison's and Centerior's Boards of
Directors shall take such actions as may be necessary to
cause the number of Directors comprising the full Board of
Directors of FirstEnergy at the Effective Time to be such
number and such individuals as are designated by Ohio Edison
prior to the Effective Time.
(b) From the Effective Time until otherwise
determined by the FirstEnergy Board of Directors, Mr.
Willard R. Holland shall serve as Chairman of the Board,
President and Chief Executive Officer of FirstEnergy.
(c) From the Effective Time until otherwise
determined by the FirstEnergy Board of Directors, Mr. Robert
J. Farling shall serve as Vice Chairman of FirstEnergy.
(d) All other officers of FirstEnergy will be
designated by the FirstEnergy Board of Directors.
(e) Directors and officers of FirstEnergy's
Subsidiaries will be designated by the FirstEnergy Board of
Directors.
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7.13 Indemnification; Directors' and Officers'
Insurance.
(a) Centerior and, from and after the Effective
Time, FirstEnergy (each of Centerior and FirstEnergy, as the
case may be, is referred to herein as a "Centerior
Indemnifying Party") shall indemnify, defend, and hold
harmless each person who is now, or has been at any time
prior to the date of this Agreement or who becomes prior to
the Effective Time, an officer, director, or employee of
Centerior or any of its Subsidiaries (the "Centerior
Indemnified Parties") against
(i) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are
paid in settlement with the approval of the Centerior
Indemnifying Party (which approval shall not be
unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based
in whole or in part on or arising in whole or in part
out of the fact that such person is or was a director,
officer or employee of Centerior or any of its
Subsidiaries, whether pertaining to any matter existing
or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after,
the Effective Time (the "Centerior Indemnified
Liabilities"), and
(ii) all Centerior Indemnified Liabilities
based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the
full extent a corporation is permitted under applicable
law to indemnify its own directors, officers, and
employees, as the case may be (and the applicable
Centerior Indemnifying Party will pay expenses as
incurred in advance of the final disposition of any
such action or proceeding to each Centerior Indemnified
Party to the full extent permitted by applicable law).
(b) (i) Without limiting the foregoing, in the
event any such claim, action, suit, proceeding, or
investigation is brought against any Centerior Indemnified
Party (whether arising before or after the Effective Time),
(A) the Centerior Indemnified Parties
may retain counsel satisfactory to them and
approved by the Centerior Indemnifying Party,
which approval shall not be unreasonably withheld,
(B) the Centerior Indemnifying Party
shall pay all reasonable fees and expenses of such
counsel for the Centerior Indemnified Parties
promptly as statements therefor are received, and
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(C) the Centerior Indemnifying Party
will use all reasonable efforts to assist in the
vigorous defense of any such matter.
(ii) However, no Centerior Indemnifying Party
shall be liable for any settlement of any claim effected
without its written consent, which consent shall not be
unreasonably withheld.
(iii) Any Centerior Indemnified Party wishing
to claim indemnification under this Section 7.13, upon
learning of any such claim, action, suit, proceeding, or
investigation, shall notify the applicable Centerior
Indemnifying Party (but the failure so to notify a
Centerior Indemnifying Party shall not relieve it from
any liability which it may have under this Section 7.13
except to the extent such failure prejudices such party).
(iv) The Centerior Indemnified Parties as a
group may retain only one law firm to represent them with
respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two
or more Centerior Indemnified Parties.
(c) For a period of six years after the Effective
Time, FirstEnergy shall cause to be maintained in effect the
current policies of directors' and officers' liability
insurance maintained by Centerior (provided that FirstEnergy
may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which,
in the aggregate, are no less advantageous than the current
policies maintained by Centerior with respect to its
directors and officers) with respect to claims arising from
facts or events which occurred before the Effective Time to
the extent available on commercially reasonable terms;
provided, however, that in no event shall FirstEnergy be
required to expend, in order to maintain or procure
insurance coverage pursuant to this Section 7.13(c), any
amount per annum in excess of 200% of the aggregate premiums
paid by Centerior in 1995 on an annualized basis for such
purpose.
(d) Ohio Edison and, from and after the Effective
Time, FirstEnergy (each of Ohio Edison and FirstEnergy, as
the case may be, is referred to herein as an "Ohio Edison
Indemnifying Party") shall indemnify, defend, and hold
harmless each person who is now, or has been at any time
prior to the date of this Agreement or who becomes prior to
the Effective Time, an officer, director, or employee of
Ohio Edison or any of its Subsidiaries (the "Ohio Edison
Indemnified Parties") against
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(i) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are
paid in settlement with the approval of the Ohio Edison
Indemnifying Party (which approval shall not be
unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based
in whole or in part on or arising in whole or in part
out of the fact that such person is or was a director,
officer or employee of Ohio Edison or any of its
Subsidiaries, whether pertaining to any matter existing
or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after,
the Effective Time (the "Ohio Edison Indemnified
Liabilities"), and
(ii) all Ohio Edison Indemnified Liabilities
based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the
full extent a corporation is permitted under applicable
law to indemnify its own directors, officers, and
employees, as the case may be (and the applicable Ohio
Edison Indemnifying Party will pay expenses as incurred
in advance of the final disposition of any such action
or proceeding to each Ohio Edison Indemnified Party to
the full extent permitted by applicable law).
(e) (i) Without limiting the foregoing, in the
event any such claim, action, suit, proceeding, or
investigation is brought against any Ohio Edison
Indemnified Party (whether arising before or after the
Effective Time),
(A) the Ohio Edison Indemnified Parties
may retain counsel satisfactory to them and
approved by the Ohio Edison Indemnifying Party,
which approval shall not be unreasonably withheld,
(B) the Ohio Edison Indemnifying Party
shall pay all reasonable fees and expenses of such
counsel for the Ohio Edison Indemnified Parties
promptly as statements therefor are received, and
(C) the Ohio Edison Indemnifying Party
will use all reasonable efforts to assist in the
vigorous defense of any such matter.
(ii) However, no Ohio Edison Indemnifying
Party shall be liable for any settlement of any claim
effected without its written consent, which consent shall
not be unreasonably withheld.
(iii) Any Ohio Edison Indemnified Party
wishing to claim indemnification under this Section 7.13,
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upon learning of any such claim, action, suit,
proceeding, or investigation, shall notify the applicable
Ohio Edison Indemnifying Party (but the failure so to
notify a Ohio Edison Indemnifying Party shall not relieve
it from any liability which it may have under this
Section 7.13 except to the extent such failure prejudices
such party).
(iv) The Ohio Edison Indemnified Parties as a
group may retain only one law firm to represent them with
respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two
or more Ohio Edison Indemnified Parties.
(f) For a period of six years after the Effective
Time, FirstEnergy shall cause to be maintained in effect the
current policies of directors' and officers' liability
insurance maintained by Ohio Edison (provided that
FirstEnergy may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions
which, in the aggregate, are no less advantageous than the
current policies maintained by Ohio Edison with respect to
its directors and officers) with respect to claims arising
from facts or events which occurred before the Effective
Time to the extent available on commercially reasonable
terms; provided, however, that in no event shall FirstEnergy
be required to expend, in order to maintain or procure
insurance coverage pursuant to this Section 7.13(f), any
amount per annum in excess of 200% of the aggregate premiums
paid by Ohio Edison in 1995 on an annualized basis for such
purpose.
(g) The provisions of this Section 7.13 are
intended to be for the sole benefit of, and shall be
enforceable by, each Indemnified Party and his or her heirs
and representatives.
7.14 Further Assurances. In case at any time after
the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement or to vest
FirstEnergy or its Subsidiaries with full title to all
properties, assets, rights, approvals, immunities and franchises
of Ohio Edison and Centerior, the proper officers and directors
of Ohio Edison and Centerior shall take all such necessary
action.
7.15 Tax Treatment. Ohio Edison and Centerior each
agree to treat the Merger, as to Ohio Edison, as a transfer
within the meaning of Section 351(a) of the Code and, as to
Centerior, as a reorganization within the meaning of Section
368(a) of the Code.
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7.16 Accounting Treatment. Ohio Edison and Centerior
each agree to, and to cause FirstEnergy to, account for the
Centerior Merger on a purchase accounting basis in accordance
with GAAP and applicable SEC regulations.
7.17 Disclosure Schedules.
(a) On the date hereof,
(i) Centerior has delivered to Ohio Edison a
Centerior Disclosure Schedule, accompanied by a
certificate signed by the chief financial officer of
Centerior stating the Centerior Disclosure Schedule is
being delivered pursuant to this Section 7.17(a), and
(ii) Ohio Edison has delivered to Centerior a
Ohio Edison Disclosure Schedule, accompanied by a
certificate signed by the chief financial officer of
Ohio Edison stating the Ohio Edison Disclosure Schedule
is being delivered pursuant to this Section 7.17(a).
(b) The Centerior Disclosure Schedule and the Ohio
Edison Disclosure Schedule are collectively referred to
herein as the "Disclosure Schedules."
(c) (i) The Disclosure Schedules constitute an
integral part of this Agreement and 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.
(ii) 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 shall
be deemed to have been made on and as of the date hereof.
Disclosure of any matters in one part of the Centerior
Disclosure Schedule or the Ohio Edison Disclosure Schedule, any
other Schedule hereto or in this Agreement shall be deemed to be
a disclosure of such matters in response to any other provision
of this Agreement (including any other part of Centerior or Ohio
Edison Disclosure Schedule, as the case may be) to which such
matter may be applicable.
7.18 Public Announcements. Subject to each party's
disclosure obligations imposed by law, Ohio Edison and Centerior
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 public
announcement or statement prior to consultation with the other
party.
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7.19 Employee Agreements. Ohio Edison and Centerior
shall cause FirstEnergy and its Subsidiaries, following the
Effective Time, to honor, without modification, all contracts,
agreements, collective bargaining agreements and commitments of
the parties prior to or at the date hereof or made herein 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 FirstEnergy or its
Subsidiaries 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.
7.20 Transition Management.
(a) As promptly as practicable after the date
hereof, Centerior and Ohio Edison shall create a special
transition management task force (the "Task Force") headed
by Mr. Holland (or an individual designated by him or by the
Board of Directors of Ohio Edison) as Chairman with Mr.
Farling (or an individual designated by him or by the Board
of Directors of Centerior) as Vice Chairman. Members of the
Task Force shall consist of representatives of Ohio Edison
and Centerior as designated by the Chairman in consultation
with the Vice Chairman.
(b) The functions of the Task Force shall include
(i) to serve as a conduit for the flow of
information and documents between the companies and
their subsidiaries as contemplated by Section 6.10,
(ii) to review and evaluate proposed
exceptions to the restrictions on the conduct of
business pending the Merger set forth in Article VI,
provided, however, that a consent by either Centerior
or Ohio Edison to an exception to the restrictions set
forth in Article VI shall be effective only if set
forth in a writing that describes in reasonable detail
the actions proposed to be taken and that is signed by
Mr. Holland (or his designee) and Mr. Farling (or his
designee),
(iii) development of regulatory plans and
proposals, corporate organizational and management
plans, workforce combination proposals, and such other
matters as they deem appropriate, and
(iv) to evaluate and recommend the manner in
which best to organize and manage the business of
FirstEnergy after the Effective Time.
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(c) The Chairman of the Task Force, or his
designee, shall be responsible for directing all activities
of the Task Force contemplated by this Section 7.20.
(d) From time to time, Mr. Holland shall report
on such matters as he deems appropriate to the respective
board of directors of Centerior and Ohio Edison. After the
date hereof and prior to the Effective Time, Mr. Holland may
attend meetings of Centerior's Board of Directors and Mr.
Farling may attend meetings of Ohio Edison's Board of
Directors.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect
the Merger shall be subject to the satisfaction prior to the
Closing Date of each of the following conditions:
(a) Shareholder Approvals. This Agreement, and
the transactions contemplated hereby, shall have been
approved and adopted by the affirmative vote of the holders
of a majority of the outstanding shares of Centerior Common
Stock and by the affirmative vote of the holders of two-
thirds of the outstanding shares of Ohio Edison Common
Stock.
(b) NYSE Listing. The shares of FirstEnergy
Common Stock issuable to holders of Centerior Common Stock
and Ohio Edison Common Stock pursuant to this Agreement and
such other shares required to be reserved for issuance in
connection with the Merger shall have been authorized for
listing on the NYSE upon official notice of issuance.
(c) Regulatory Approvals.
(i) Other than the filings provided for by
Section 2.2, all authorizations, consents, orders or
approvals of, or declarations or filings with, or
expirations of waiting periods imposed by, any
Governmental Entity the failure to obtain which would
have a material adverse effect on FirstEnergy and its
Subsidiaries taken as a whole, shall have been filed,
occurred or been obtained, as the case may be,
including but not limited to the FERC Approvals, the
NRC Approvals, the SEC PUHCA Order, the Local
Approvals, and the State Takeover Approvals and all
applicable waiting periods, if any, including any
extensions thereof, under any applicable law, statute,
regulations or rule, including but not limited to the
HSR Act, shall have expired or terminated.
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(ii) (A) All such authorizations, consents,
orders and approvals shall have become Final Orders (as
hereinafter defined) and such Final Orders (unless Ohio
Edison and Centerior shall have agreed, by way of
stipulation or otherwise, to the terms of such Final
Order) shall not impose terms or conditions which, in
the aggregate, would have, or insofar as reasonably can
be foreseen, could have, a material adverse effect on
the business, operations, properties, assets or
condition (financial or other) or results of operations
or prospects of FirstEnergy and its prospective
subsidiaries taken as a whole or which would be
inconsistent with the agreements of the parties
contained herein. It is agreed that any condition that
would require changes in the conduct of the respective
retail businesses in the retail service areas of The
Cleveland Electric Illuminating Company, The Toledo
Edison Company or Ohio Edison will be considered
material and adverse, unless waived in writing by
Centerior and Ohio Edison, which waiver shall not be
unreasonably withheld.
(B) 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.
(iii) FirstEnergy shall have received all
permits and other authorizations necessary under the
Blue-Sky Laws to issue the FirstEnergy Common Stock in
exchange for the Centerior Common Stock and the Ohio
Edison Common Stock and to consummate the Merger.
(d) S-4 Effective. The S-4 shall have become
effective under the Securities Act and shall not be the
subject of any stop order, or proceedings seeking a stop
order, under Section 8 of the Securities Act.
(e) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or
other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger, or materially
changing the transactions contemplated hereby, shall be in
effect.
(f) Letter from Rule 145 Affiliates. FirstEnergy
shall have received from each person named in the letters
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from Centerior and Ohio Edison referred to in Section 7.7,
an executed copy of an agreement substantially in the form
of Exhibit J hereto.
(g) Regulatory Order. Centerior Subsidiaries
shall have received formal written approval, or assurance of
such approval, in a form reasonably acceptable to Ohio
Edison and Centerior, from the Public Utilities Commission
of Ohio, with respect to the Regulatory Plan described in
Section 8.1(g) of the Centerior Disclosure Schedule.
(h) Dissentors' Rights. The number of shares
held by Dissenting Holders shall not constitute more than
10% of the number of issued and outstanding shares of Ohio
Edison Common Stock in the case of Ohio Edison shareholders
or more than 10% of the number of issued and outstanding
shares of Centerior Common Stock in the case of Centerior
shareholders.
8.2 Conditions to Obligations of Ohio Edison. The
obligation of Ohio Edison to effect the Merger is subject to the
satisfaction of each of the following conditions unless waived by
Ohio Edison:
(a) Representations and Warranties. Except as
otherwise contemplated by this Agreement, the
representations and warranties of Centerior set forth in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement (except to the
extent such representations and warranties speak as of an
earlier date) and as of the Closing Date as though made on
and as of the Closing Date, and FirstEnergy and Ohio Edison
shall have received a certificate signed on behalf of
Centerior by its chief executive officer and chief financial
officer to such effect.
(b) Performance of Obligations of Centerior.
Centerior shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and FirstEnergy
and Ohio Edison shall have received a certificate signed on
behalf of Centerior by its chief executive officer to such
effect.
(c) Tax Opinion. Ohio Edison shall have received
an opinion, dated on or about the date of, and referred to
in, the S-4 and the Proxy Statement of Winthrop, Stimson,
Putnam & Roberts, counsel to Ohio Edison, which opinion may
be based on appropriate representations of Centerior, Ohio
Edison and FirstEnergy which are in form and substance
satisfactory to such counsel, and in form and substance
reasonably satisfactory to Ohio Edison, to the effect that
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(i) the Merger will be treated for Federal
income tax purposes, as to Ohio Edison, as a transfer
within the meaning of Section 351(a) of the Code and,
as to Centerior, as a reorganization within the meaning
of Section 368(a) of the Code,
(ii) FirstEnergy and Centerior will each be a
party to such reorganization within the meaning of
Section 368(b) of the Code, and
(iii) no gain or loss will be recognized by
Ohio Edison or Centerior shareholders that exchange
Ohio Edison Common Stock or Centerior Common Stock for
FirstEnergy Common Stock in the Merger (except as to
fractional shares and dissenters).
(d) No Amendments to Resolutions. Neither the
Board of Directors of Centerior nor any committee thereof
shall have amended, modified, rescinded or repealed the
resolutions adopted by them on September 13, 1996 (accurate
and complete copies of which have been provided to Ohio
Edison) and shall not have adopted any other resolutions in
connection with this Agreement and the transactions
contemplated hereby inconsistent with such resolutions.
(e) Rights Agreement. Under the Centerior Rights
Agreement, no "flip-in" or "flip-over" or similar event
commonly described in rights plans, or a Trigger Event as
defined therein, shall have occurred with respect to the
Centerior Rights Agreement that would increase the number of
shares of FirstEnergy Common Stock to be issued under the
Merger, or the rights issued thereunder shall not have
become nonredeemable.
(f) Consents Under Agreements. Centerior shall
have obtained the consent or approval of each person (other
than the Government Entities referred to in Section 8.1(c)),
whose consent or approval shall be required in order to
permit Centerior to consummate the transactions contemplated
hereby, except those for which failure to obtain such
consents and approvals would not, individually or in the
aggregate, have a material adverse effect on
(i) the business, operations, properties,
assets, condition (financial or otherwise), business
prospects or the results of operations of FirstEnergy
and its Subsidiaries taken as a whole or
(ii) the consummation of the transactions
contemplated hereby
(any such material adverse effect being referred to as a
"FirstEnergy Material Adverse Effect".
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(g) Centerior Material Adverse Effect. Since
June 30, 1996, there shall not have been any event which
constitutes a Centerior Material Adverse Effect.
(h) Ohio Edison Fairness Opinion. The fairness
opinion letter delivered by Ohio Edison Fairness Advisor to
Ohio Edison shall not, in good faith, have been withdrawn by
Ohio Edison Fairness Advisor.
8.3 Conditions to Obligations of Centerior. The
obligation of Centerior to effect the Merger is subject to the
satisfaction of each of the following conditions unless waived by
Centerior:
(a) Representations and Warranties. Except as
otherwise contemplated by this Agreement, the
representations and warranties of Ohio Edison set forth in
this Agreement shall be true and correct in all material
respects as of the date of this Agreement (except to the
extent such representations and warranties speak as of an
earlier date) and as of the Closing Date as though made on
and as of the Closing Date, and FirstEnergy and Centerior
shall have received a certificate signed on behalf of Ohio
Edison by its chief executive officer and chief financial
officer to such effect.
(b) Performance of Obligations of Ohio Edison.
Ohio Edison shall have performed in all material respects
all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and FirstEnergy
and Centerior shall have received a certificate signed on
behalf of Ohio Edison by its chief executive officer to such
effect.
(c) Tax Opinion. Centerior shall have received an
opinion, dated on or about the date of, and referred to in,
the S-4 and the Proxy Statement of Squire, Sanders &
Dempsey, counsel to Centerior, which opinion may be based on
appropriate representations of Ohio Edison, Centerior and
FirstEnergy which are in form and substance satisfactory to
such counsel, and in form and substance reasonably
satisfactory to Centerior, to the effect that
(i) the Merger will be treated for Federal
income tax purposes, as to Ohio Edison, as a transfer
within the meaning of Section 351(a) of the Code and,
as to Centerior, as a reorganization within the meaning
of Section 368(a) of the Code,
(ii) FirstEnergy and Centerior will each be a
party to such reorganization within the meaning of
Section 368(b) of the Code, and
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(iii) no gain or loss will be recognized by
Ohio Edison or Centerior shareholders that exchange
Ohio Edison Common Stock or Centerior Common Stock for
FirstEnergy Common Stock in the Merger (except as to
fractional shares or dissenters).
(d) No Amendments to Resolutions. Neither the
Board of Directors of Ohio Edison nor any committee thereof
shall have amended, modified, rescinded or repealed the
resolutions adopted by the Ohio Edison Board of Directors at
a meeting duly called and held on September 13, 1996
(accurate and complete copies of which have been provided to
Centerior), and shall not have adopted any other resolutions
in connection with this Agreement and the transactions
contemplated hereby inconsistent with such resolutions.
(e) Rights Agreement. Under the Ohio Edison
Rights Agreement, no -flip-in- or -flip-over- or similar
event commonly described in rights plans, or a Trigger Event
as defined therein, shall have occurred with respect to the
Ohio Edison Rights Agreement that would increase the number
of shares of FirstEnergy Common Stock to be issued under the
Merger, or the rights issued thereunder shall not have
become nonredeemable.
(f) Consents Under Agreements. Ohio Edison shall
have obtained the consent or approval of each person (other
than the Government Entities referred to in Section 8.1(c)),
whose consent or approval shall be required in order to
permit Ohio Edison to consummate the transactions
contemplated hereby, except those for which failure to
obtain such consents and approvals would not, individually
or in the aggregate, have a FirstEnergy Material Adverse
Effect.
(g) Ohio Edison Material Adverse Effect. Since
June 30, 1996, there shall not have been any event which
constitutes a Ohio Edison Material Adverse Effect.
(h) Centerior Fairness Opinion. The fairness
opinion letter delivered by Centerior Fairness Advisor to
Centerior shall not, in good faith, have been withdrawn by
Centerior Fairness Advisor.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. At any time prior to the Effective
Time, whether before or after approval of the matters presented
in connection with the Merger by the holders of Ohio Edison
Common Stock or by the holders of Centerior Common Stock, this
Agreement may be terminated:
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(a) by mutual written consent of Ohio Edison and
Centerior;
(b) by either Ohio Edison or Centerior
(i) if there has been a material breach of
any representation, warranty, covenant or agreement on
the part of the other set forth in this Agreement which
breach has not been cured within ten (10) business days
following receipt by the breaching party of notice of
such breach or adequate assurance of such cure shall
not have been given by or on behalf of the breaching
party within such ten (10) business day period, or
(ii) if any permanent Injunction or other
order of a court or other competent authority
preventing the consummation of the Merger shall have
become final and nonappealable;
(c) by Ohio Edison, upon two days' prior notice
to Centerior, if, as a result of a Takeover Proposal
involving Ohio Edison or any of its Significant
Subsidiaries, the Board of Directors of Ohio Edison
determines in good faith that its fiduciary obligations
under applicable law require that such Takeover Proposal be
accepted; provided, however, that
(i) the Board of Directors of Ohio Edison
shall have been advised in writing by outside counsel
that notwithstanding a binding commitment to consummate
an agreement of the nature of this Agreement entered
into in the proper exercise of its applicable fiduciary
duties, such fiduciary duties would also require the
Board to reconsider such commitment as a result of such
Takeover Proposal; and
(ii) prior to any such termination, Ohio
Edison shall, and shall cause its respective financial
and legal advisors to, negotiate with Centerior to make
such adjustments in the terms and conditions of this
Agreement as would enable Ohio Edison to proceed with
the transactions contemplated herein;
(d) by Centerior, upon two days' prior notice to
Ohio Edison, if, as a result of a Takeover Proposal
involving Centerior or any of its Significant Subsidiaries,
the Board of Directors of Centerior determines in good faith
that its fiduciary obligations under applicable law require
that such Takeover Proposal be accepted; provided, however,
that
(i) the Board of Directors of Centerior shall
have been advised in writing by outside counsel that
notwithstanding a binding commitment to consummate an
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agreement of the nature of this Agreement entered into
in the proper exercise of its applicable fiduciary
duties, such fiduciary duties would also require the
Board to reconsider such commitment as a result of such
Takeover Proposal; and
(ii) prior to any such termination, Centerior
shall, and shall cause its respective financial and
legal advisors to, negotiate with Ohio Edison to make
such adjustments in the terms and conditions of this
Agreement as would enable Centerior to proceed with the
transactions contemplated herein;
(e) by either Ohio Edison or Centerior if the
Merger shall not have been consummated before June 30, 1998;
provided, however, that the right to terminate the Agreement
under this Section 9.1(e) 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;
(f) by either Ohio Edison or Centerior if the
required approval of the holders of Ohio Edison Common Stock
or the holders of Centerior Common Stock shall not have been
obtained by reason of the failure to obtain the required
approval upon a vote taken at a duly held meeting of
shareholders or at any adjournment thereof; or
(g) by either Ohio Edison or Centerior 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 Merger.
9.2 Effect of Termination.
In the event of termination of this Agreement by
either Centerior or Ohio Edison as provided in Section 9.1,
this Agreement shall forthwith become void and there shall
be no liability or obligation on the part of Ohio Edison or
Centerior or their respective officers or directors, except
(i) with respect to Sections 7.4(b), 7.10,
7.11 and 9.5, and
(ii) to the extent that such termination
results from the willful breach by a party hereto of
any of its representations, warranties, covenants or
agreements set forth in this Agreement.
9.3 Amendment.
This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective
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Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the
holders of Ohio Edison Common Stock or the holders of
Centerior Common Stock but, after any such approval, no
amendment shall be made which by law or applicable rule of
the NYSE requires further approval by such shareholders
without such further approval.
9.4 Extension; Waiver.
(a) At any time prior to the Effective Time, the
parties hereto, by action duly taken, may, to the extent
legally allowed,
(i) extend the time for the performance of
any of the obligations or other acts of the other
parties hereto,
(ii) waive any inaccuracies in the
representations and warranties contained herein or in
any document delivered pursuant hereto, and
(iii) waive compliance with any of the
agreements or conditions contained herein.
(b) Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set
forth in a written instrument signed on behalf of such
party.
9.5 Termination Fee; Expenses
(a) Termination Fee Upon Breach. If this
Agreement is terminated at such time that this Agreement is
terminable pursuant to Section 9.1(b)(i) (other than solely
pursuant to a non-curable breach of a representation or
warranty unless such breach was willful) by one of the
parties but not the other, then the breaching party shall
promptly (but not later than five business days after
receipt of notice from the non-breaching party) pay, in
addition to its own expenses, to the non-breaching party in
cash an amount equal to $10 million, plus cash in an amount
equal to all documented out-of-pocket expenses and fees
incurred by the non-breaching party (including, without
limitation, fees and expenses payable to all legal,
accounting, financial, public relations and other
professional advisors) arising out of, in connection with or
related to the Merger or the transactions contemplated by
this Agreement.
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(b) Additional Termination Fee.
(i) If
(A) this Agreement
(I) is terminated by any party
pursuant to Section 9.1(c) or Section 9.1(d),
or
(II) is terminated by any party
pursuant to Section 9.1(f) or is terminated
as a result of a party's material breach of
Section 6.5, and
(B) at the time of such termination or
prior to the meeting of such party's shareholders
there shall have been a Takeover Proposal with
respect to such party or any of its Significant
Subsidiaries which at the time of such termination
or of the meeting of such party's shareholders
shall not have been
(I) rejected by such party and its
board of directors, and
(II) withdrawn by the third-party
offeror, and
(C) within two and one-half years of any
such termination described in clause (A) above,
the party or its Significant Subsidiary which is
the subject of the Takeover Proposal (the "Target
Party") becomes a subsidiary of such third-party
offeror or a subsidiary of an affiliate of such
third-party offeror or accepts a written offer to
consummate or consummates a Business Combination
with such third-party offeror or affiliate
thereof,
then such third-party offeror, together with its
affiliates, on the one hand, will, at the closing (and
as a condition to the closing) of such Target Party so
becoming a subsidiary or of such Business Combination,
pay to the other party hereto a termination fee equal
to $55,000,000 in cash, plus cash in an amount equal to
all documented out-of-pocket expenses and fees incurred
by such other party (including, without limitation,
fees and expenses payable to all legal, accounting,
financial, public relations and other professional
advisors) arising out of, in connection with or related
to the Merger or the transactions contemplated by this
Agreement.
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(ii) For purposes of this Agreement, a
"Business Combination" shall mean any merger, sale of a
material portion of assets or other business
combination.
(c) Rights; Expenses.
(i) The successful exercise of the rights
under this Section 9.5 shall constitute an election of
remedies, but the existence of such rights shall not
constitute an election of remedies or in any way limit
or impair a party's right to pursue any other remedy
against the other party to which it may be entitled
under this Agreement, at law or in equity, or
otherwise.
(ii) The parties agree that the agreements
contained in this Section 9.5 are an integral part of
the transactions contemplated by the Agreement, that
the damages that would be suffered by a party upon
breach of this Agreement by the other party are
inherently insusceptible of calculation, and that the
agreements contained in this Section 9.5 therefore
constitute liquidated damages and not a penalty.
(iii) If one party fails to pay promptly 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 at the publicly announced
prime rate of Citibank, N.A. from the date such fee was
required to be paid.
ARTICLE X
GENERAL PROVISIONS
10.1 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or
in any instrument delivered pursuant to this Agreement shall
survive the Effective Time.
10.2 Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all
such further action as may be necessary in order to consummate
the transactions contemplated hereby.
10.3 Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered
personally or telecopied (with confirmation of receipt) or sent
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by certified or registered mail, postage prepaid, and shall be
deemed to be given, dated and received when so delivered
personally or telecopied (with confirmation of receipt) or, if
mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice
given hereunder.
(a) if to Ohio Edison, to
Ohio Edison Company
76 South Main Street
Akron, OH 44308
Telecopy: (330) 384-5922
Telephone: (330) 384-5973
Attention: Anthony J. Alexander
with a copy to
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Telecopy: (212) 858-1500
Telephone: (212) 858-1000
Attention: John H. Byington, Jr.
(b) if to Centerior, to
Centerior Energy Corporation
P.O. Box 94661
Cleveland, Ohio 44101-4661
Telecopy: (216) 447-2592
Telephone: (216) 447-3121
Attention: Terrence G. Linnert
with a copy to
Squire, Sanders & Dempsey
4900 Key Tower
Cleveland, OH 44114
Telecopy: (216) 479-8780
Telephone: (216) 479-8500
Attention: Gordon S. Kaiser
10.4 Interpretation.
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(a) When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated.
(b) Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation".
(c) The phrase "made available" in this Agreement
shall mean that the information referred to has been made
available if requested by the party to whom such information
is to be made available.
10.5 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation
of this Agreement.
10.6 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when two or
more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.7 Entire Agreement. This Agreement (including the
documents and the instruments referred to herein) and the
Confidentiality Agreement constitute the entire agreement and
supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter
hereof.
10.8 No Third Party Beneficiaries. Except as provided
in Section 7.13 (which covenants shall be enforceable by the
persons affected thereby following the Effective Time), this
Agreement (including the documents and the instruments referred
to herein) is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
10.9 Governing Law. This Agreement shall be governed
and construed in accordance with the internal substantive laws of
the State of Ohio without regard to any applicable conflicts of
law.
10.10 Severability.
(a) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement,
which shall remain in full force and effect.
(b) In the event any court or other competent
authority holds any provision of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in
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good faith the execution and delivery of an amendment to
this Agreement in order, as nearly as possible, to
effectuate, to the extent permitted by law, the intent of
the parties hereto with respect to such provision.
10.11 Publicity. Except as otherwise required by law
or the rules of the NYSE, so long as this Agreement is in effect,
neither Centerior nor Ohio Edison shall, or shall permit any of
their respective Subsidiaries to, issue or cause the publication
of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be
unreasonably withheld.
10.12 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted
assigns.
10.13 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned
by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other
parties.
10.14 Amendments; Waiver. This Agreement may be
amended by the parties hereto and the terms and conditions hereof
may be waived only by an instrument in writing signed on behalf
of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
IN WITNESS WHEREOF, Ohio Edison and Centerior have
caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first above
written.
CENTERIOR ENERGY CORPORATION OHIO EDISON COMPANY
By /s/ Robert J. Farling By /s/ Willard R. Holland
--------------------------- --------------------------
Name: Robert J. Farling Name: Willard R. Holland
Title: Chairman, President Title: President and Chief
and Chief Executive Executive Officer
Officer
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